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REALTY INCOME CORPORATION
(a Maryland corporation)
2,160,000 Shares of Common Stock
U.S. PURCHASE AGREEMENT
Dated: October 8, 1997
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TABLE OF CONTENTS
U.S. PURCHASE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Representations and Warranties . . . . . . . . . . . . . . . 4
(a) Representations and Warranties by the Company. . . . . . . . 4
(i) Compliance with Registration Requirements . . . . . . . 4
(ii) Incorporated Documents . . . . . . . . . . . . . . . . 5
(iii) Independent Accountants . . . . . . . . . . . . . . . 6
(iv) Financial Statements . . . . . . . . . . . . . . . . . 6
(v) No Material Adverse Change in Business. . . . . . . . . 6
(vi) Good Standing of the Company . . . . . . . . . . . . . 6
(vii) Good Standing of Subsidiaries . . . . . . . . . . . . 7
(viii) Capitalization . . . . . . . . . . . . . . . . . . . 7
(ix) Authorization of Agreement . . . . . . . . . . . . . . 7
(x) Authorization of and Description of Securities. . . . . 7
(xi) Absence of Defaults and Conflicts. . . . . . . . . . . 8
(xii) Absence of Labor Dispute. . . . . . . . . . . . . . . 9
(xiii) Absence of Proceedings . . . . . . . . . . . . . . . 9
(xiv) Accuracy of Exhibits. . . . . . . . . . . . . . . . . 9
(xv) Possession of Intellectual Property. . . . . . . . . . 9
(xvi) Absence of Further Requirements . . . . . . . . . . . 10
(xvii) Possession of Licenses and Permits . . . . . . . . . 10
(xviii) Investment Company Act. . . . . . . . . . . . . . . 10
(xix) Partnership Agreements. . . . . . . . . . . . . . . . 10
(xx) Properties . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Insurance . . . . . . . . . . . . . . . . . . . . . . 12
(xxii) Environmental Matters. . . . . . . . . . . . . . . . 12
(xxiii) Qualification as a Real Estate Investment Trust . . 14
(xxiv) Registration Rights. . . . . . . . . . . . . . . . . 14
(xxv) Tax Treatment of Certain Entities . . . . . . . . . . 14
(xxvi) Reincorporation. . . . . . . . . . . . . . . . . . . 15
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing. . . . . . . 15
(a) Initial Securities . . . . . . . . . . . . . . . . . . . . . 15
(b) Option Securities. . . . . . . . . . . . . . . . . . . . . . 15
(c) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Denominations; Registration. . . . . . . . . . . . . . . . . 16
SECTION 3. Covenants of the Company . . . . . . . . . . . . . . . . . . 17
(a) Compliance with Securities Regulations and Commission
Requests . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Filing of Amendments.. . . . . . . . . . . . . . . . . . . . 17
(c) Rule 434 . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Delivery of Registration Statements. . . . . . . . . . . . . 17
(e) Delivery of Prospectuses . . . . . . . . . . . . . . . . . . 18
(f) Continued Compliance with Securities Laws. . . . . . . . . . 18
(g) Blue Sky Qualifications. . . . . . . . . . . . . . . . . . . 18
(h) Rule 158 . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 19
(j) Listing . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(k) Restriction on Sale of Securities. . . . . . . . . . . . . . 19
(l) Reporting Requirements . . . . . . . . . . . . . . . . . . . 19
SECTION 4. Payment of Expenses . . . . . . . . . . . . . . . . . . . . 19
(a) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Termination of Agreement . . . . . . . . . . . . . . . . . . 20
SECTION 5 Conditions of U.S. Underwriters' Obligations . . . . . . . . 20
(a) Effectiveness of Registration Statement. . . . . . . . . . . 20
(b) Opinions of Counsel for Company. . . . . . . . . . . . . . . 21
(c) Opinion of Counsel for U.S. Underwriters . . . . . . . . . . 21
(d) Officers' Certificate. . . . . . . . . . . . . . . . . . . . 21
(e) Accountant's Comfort Letter. . . . . . . . . . . . . . . . . 21
(f) Bring-down Comfort Letter. . . . . . . . . . . . . . . . . . 22
(g) Approval of Listing. . . . . . . . . . . . . . . . . . . . . 22
(h) Waiver of Registration Rights. . . . . . . . . . . . . . . . 22
(i) Purchase of Initial International Securities . . . . . . . . 22
(j) Additional Documents . . . . . . . . . . . . . . . . . . . . 22
(k) Conditions to Purchase of U.S. Option Securities . . . . . . 22
(i) Officers' Certificate.. . . . . . . . . . . . . . . . . 23
(ii) Opinions of Counsel for Company. . . . . . . . . . . . 23
(iii) Opinion of Counsel for U.S. Underwriters. . . . . . . 23
(iv) Bring-down Comfort Letter. . . . . . . . . . . . . . . 23
(l) Termination of Agreement . . . . . . . . . . . . . . . . . . 23
SECTION 6. Indemnification. . . . . . . . . . . . . . . . . . . . . . . 23
(a) Indemnification of the U.S. Underwriters.. . . . . . . . . . 23
(b) Indemnification of Company, Directors and Officers . . . . . 25
(c) Actions against Parties; Notification. . . . . . . . . . . . 25
(d) Settlement without Consent if Failure to Reimburse . . . . . 25
SECTION 7. Contribution . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery. . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9. Termination of Agreement . . . . . . . . . . . . . . . . . . 27
(a) Termination; General . . . . . . . . . . . . . . . . . . . . 27
(b) Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 10. Default by One or More of the U.S. Underwriters. . . . . . . 28
SECTION 11. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12. Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 13. GOVERNING LAW AND TIME . . . . . . . . . . . . . . . . . . . 29
SECTION 14. Effect of Headings and Table of Contents . . . . . . . . . . 29
REALTY INCOME CORPORATION
(a Maryland corporation)
2,160,000 Shares of Common Stock
(Par Value $1.00 Per Share)
U.S. PURCHASE AGREEMENT
Dated: October 8, 1997
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇.▇. ▇▇▇▇▇▇▇ & SONS, INC.
PAINEWEBBER INCORPORATED
SUTRO & CO. INCORPORATED
WHEAT, FIRST SECURITIES, INC.
as U.S. Representatives of the several U.S. Underwriters
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
Realty Income Corporation, a Maryland corporation (the "Company"), confirms
its agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and each of the other underwriters named in
Schedule A hereto (collectively, the "U.S. Underwriters" which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc., PaineWebber
Incorporated, Sutro & Co. Incorporated and Wheat, First Securities, Inc. are
acting as representatives (in such capacity, the "U.S. Representatives"), with
respect to the sale by the Company and the purchase by the U.S. Underwriters,
acting severally and not jointly, of the respective numbers of shares of Common
Stock, par value $1.00 per share, of the Company ("Common Stock") set forth in
said Schedule A, and with respect to the grant by the Company to the U.S.
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of 324,000 additional shares of
Common Stock to cover over-allotments, if any. The aforesaid 2,160,000 shares
of Common Stock (the "Initial U.S. Securities") to be purchased by the U.S.
Underwriters and all or any part of the 324,000 shares of Common Stock subject
to the option described in Section 2(b) hereof (the "U.S. Option Securities")
are hereinafter called, collectively, the "U.S. Securities".
1
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by the Company of an aggregate of 540,000 shares of
Common Stock (the "Initial International Securities") through arrangements with
certain underwriters outside the United States and Canada (the "International
Managers") for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇ International, ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc.,
PaineWebber International (U.K.) Ltd., Sutro & Co. Incorporated and Wheat, First
Securities, Inc. are acting as lead managers (the "Lead Managers") and the grant
by the Company to the International Managers, acting severally and not jointly,
of an option to purchase all or any part of the International Managers' pro rata
portion of up to 81,000 additional shares of Common Stock solely to cover
overallotments, if any (the "International Option Securities" and, together with
the U.S. Option Securities, the "Option Securities"). The Initial International
Securities and the International Option Securities are hereinafter called the
"International Securities". It is understood that the Company is not obligated
to sell and the U.S. Underwriters are not obligated to purchase, any Initial
U.S. Securities unless all of the Initial International Securities are
contemporaneously purchased by the International Managers.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters," the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities," and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities."
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated (in
such capacity, the "Global Coordinator").
The Company understands that the U.S. Underwriters propose to make a public
offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-95374) (the "First
Registration Statement"), Amendment No. 1 thereto, and Amendment No. 2 (which
constitutes Post-Effective Amendment No. 1 (the "Post-Effective Amendment") to
the First Registration Statement) thereto and a registration statement on Form
S-3 (No. 333-34311) (the "Second Registration Statement") and Amendment No. 1
thereto (which also constituted Post-Effective Amendment No. 2 to the First
Registration Statement) covering the registration of, among other things, the
Securities under the Securities Act of 1933, as amended (the "1933 Act"), in
each case including the related preliminary prospectus or prospectuses. Promptly
after execution and delivery of this Agreement, the Company will either (i)
prepare and file a U.S. prospectus supplement, an international prospectus
supplement and a prospectus in accordance with the provisions of Rule 415 ("Rule
415") of the rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the
1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434
("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term
Sheet")
2
in accordance with the provisions of Rule 434 and Rule 424(b). Two forms of
prospectus supplement are to be used in connection with the offering and sale of
the Securities: one relating to the U.S. Securities (the "Form of U.S.
Prospectus Supplement") and one relating to the International Securities (the
"Form of International Prospectus Supplement"). The Form of International
Prospectus Supplement is identical to the Form of U.S. Prospectus Supplement,
except for the front cover and back cover pages and the information under the
caption "Underwriting." The information included in such Term Sheet that was
omitted from the Second Registration Statement at the time it became effective
but that is deemed to be part of such registration statement at the time the
Term Sheet is filed with the Commission pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus, together with any
related U.S. or International prospectus supplement, relating to the Securities
used before the Second Registration Statement became effective, and each
prospectus, together with the related U.S. or International prospectus
supplement, relating to the Securities that omitted the Rule 434 Information or
that was captioned "Subject to Completion" that was used after such
effectiveness and prior to the execution and delivery of this Agreement, is
herein called, together with the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, a "preliminary U.S.
prospectus" or "preliminary international prospectus", as the case may be, or,
in either such case, a "preliminary prospectus." The First Registration
Statement as amended and including the exhibits thereto, schedules, if any, and
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time that the Post-Effective Amendment became
effective, and the Second Registration Statement, as amended and including the
exhibits thereto, schedules, if any, and the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the time the
Second Registration Statement became effective, and in each case including, if
applicable, the Rule 434 Information, are herein called, collectively, the
"Original Registration Statements" and, individually, an "Original Registration
Statement." Any registration statement filed pursuant to Rule 462(b) of the
1933 Act Regulations is herein referred to as the "Rule 462(b) Registration
Statement," and the Original Registration Statements and any Rule 462(b)
Registration Statement are herein referred to collectively as the "Registration
Statement." The final Form of U.S. Prospectus Supplement and the final Form of
International Prospectus Supplement, in each case including the prospectus dated
October 1, 1997 and the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the 1933 Act, in the forms first furnished to the
U.S. Underwriters and the International Managers, respectively, for use in
connection with the offering of the Securities are herein called the "U.S.
Prospectus" and the "International Prospectus," respectively. The U.S.
Prospectus and the International Prospectus are hereafter sometimes referred to
as, individually, a "Prospectus," and collectively, the "Prospectuses." If Rule
434 is relied on, the terms "U.S. Prospectus" and "International Prospectus"
shall refer to the preliminary U.S. prospectus supplement dated October 1, 1997
and the preliminary international prospectus supplement dated October 1, 1997,
together in each case with the prospectus dated October 1, 1997 and the Term
Sheet and all documents incorporated by reference therein pursuant to Item 12 of
Form S-3, respectively, and all references in this Agreement to the date of such
Prospectuses shall mean the date of the Term Sheet. For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, the U.S. Prospectus, the International Prospectus or any Term Sheet
or any amendment or supplement to any of the foregoing shall be deemed to
include any copy
3
filed with the Commission pursuant to its Electronic Data Gathering, Analysis
and Retrieval system ("▇▇▇▇▇").
All references in this Agreement to financial statements and schedules and
other information which is "described," "disclosed," "contained," "included" or
"stated" in the Registration Statement, any preliminary prospectus or any
Prospectus (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which
is incorporated or deemed to be incorporated by reference in the Registration
Statement, any preliminary prospectus or any Prospectus, as the case may be; and
all references in this Agreement to amendments or supplements to the
Registration Statement, any preliminary prospectus or any Prospectus shall be
deemed to mean and include the filing of any document under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), which is incorporated or
deemed to be incorporated by reference in the Registration Statement, such
preliminary prospectus or such Prospectus, as the case may be.
All references in this Agreement to properties or improvements "owned by"
or "of" the Company or any of its subsidiaries shall be deemed to mean and
include all properties and improvements which are leased by the Company or any
of its subsidiaries, as lessee.
As used in this Agreement, the term "Consolidation" means the merger of 25
limited partnerships (the "Partnerships") and RIC Properties Ltd., a California
limited partnership ("RIC Properties"), into the Company on August 15, 1994;
"Merger" means the merger of R.I.C. Advisor, Inc., a California corporation (the
"Advisor"), into the Company on August 17, 1995; and "Reincorporation" means the
reincorporation of the Company in the State of Maryland, which was effectuated
by merging the Company into Realty Income of Maryland, Inc., a Maryland
corporation (the "Maryland Corporation") which subsequently changed its name to
Realty Income Corporation, with the Maryland Corporation as the surviving
corporation of such merger.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company represents
and warrants to each U.S. Underwriter as of the date hereof, as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b) hereof, and agrees with each U.S. Underwriter,
as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company meets the
requirements for use of Form S-3 under the 1933 Act. Each of the Original
Registration Statements, the Post-Effective Amendment and any Rule 462(b)
Registration Statement has become effective under the 1933 Act and no stop
order suspending the effectiveness of any Original Registration Statement
or any Rule 462(b) Registration Statement has been issued under the 1933
Act and no proceedings for that purpose have been instituted or are pending
or, to the knowledge of the Company, are threatened by the Commission, and
any request on the part of the Commission for additional information has
been complied with.
4
At the respective times the Original Registration Statements, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective, at the date hereof and at the Closing Time (and, if any
U.S. Option Securities are purchased, at each Date of Delivery), the
Original Registration Statements, any Rule 462(b) Registration Statement
and any amendments and supplements thereto complied and will comply in all
material respects with the applicable requirements of the 1933 Act and the
1933 Act Regulations and did not and 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, and, at
the date hereof and at the Closing Time (and, if any U.S. Option Securities
are purchased, at each Date of Delivery), neither the Prospectuses nor any
amendments or supplements thereto contained or will contain any untrue
statement of a material fact or omitted or will omit 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; PROVIDED,
HOWEVER, that the representations and warranties in this paragraph shall
not apply to statements in or omissions from the Registration Statement or
Prospectuses made in reliance upon and in conformity with information
furnished to the Company in writing by any U.S. Underwriter through the
U.S. Representatives expressly for use in the Registration Statement or
U.S. Prospectus.
Each preliminary prospectus and the Prospectuses filed as part of any
Original Registration Statement or Rule 462(b) Registration Statement as
originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the 1933 Act, complied when so filed in all material
respects with the 1933 Act and the 1933 Act Regulations and, if applicable,
each preliminary prospectus and the Prospectuses delivered to the U.S.
Underwriters and the International Managers for use in connection with this
offering was identical to the electronically transmitted copies thereof
filed with the Commission pursuant to ▇▇▇▇▇ except to the extent permitted
by Regulation S-T.
(ii) INCORPORATED DOCUMENTS. The documents incorporated or deemed to
be incorporated by reference in the Registration Statement and the
Prospectuses, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read together
with the other information in the Prospectuses, at the date hereof and at
the Closing Time (and, if any U.S. Option Securities are purchased, at each
Date of Delivery), did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(iii) INDEPENDENT ACCOUNTANTS. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
5
(iv) FINANCIAL STATEMENTS. The consolidated financial statements of
the Company included in the Registration Statement and the Prospectuses,
together with the related schedule and notes, present fairly the financial
position of the Company and its subsidiaries at the dates indicated and the
consolidated statements of income, stockholders' equity and cash flows of
the Company and its subsidiaries for the periods specified; said
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules included
in the Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data, if
any, and summary financial information, if any, included in the
Prospectuses present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement. The Company's ratios of
earnings to fixed charges (actual and, if any, pro forma) included in the
Prospectus have been calculated in compliance with Item 503(d) of
Regulation S-K of the Commission.
(v) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise (a "Material Adverse Effect"),
whether or not arising in the ordinary course of business, (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) except for regular monthly distributions on the
Common Stock in amounts per share that are consistent with past practice,
there has been no dividend or distribution of any kind declared, paid or
made by the Company on any class of its stock.
(vi) GOOD STANDING OF THE COMPANY. The Company is a corporation duly
organized and validly existing under the laws of the State of Maryland and
is in good standing with the State Department of Assessments and Taxation
of Maryland and has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectuses
and to enter into and perform its obligations under this Agreement; and the
Company is duly qualified as a foreign corporation to transact business and
is in good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vii) GOOD STANDING OF SUBSIDIARIES. The only subsidiaries of the
Company are Realty Income Texas Properties, L.P., a Delaware limited
partnership, Realty Income Texas Properties, Inc., a Delaware corporation,
and the Company does not hold any equity interest in any corporation,
limited liability company, partnership, joint venture or entity other than
such subsidiaries. Each subsidiary of the Company has
6
been duly organized and is validly existing as a partnership or
corporation, as the case may be, in good standing under the laws of the
state of its organization and has power and authority as a partnership or
corporation, as the case may be, to own, lease and operate its properties
and to conduct its business as described in the Prospectuses; each such
subsidiary is duly qualified as a foreign partnership or corporation, as
the case may be, to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding partnership
interests and shares of capital stock, as the case may be, of each such
subsidiary have been duly authorized (if applicable) and validly issued and
are fully paid and are non-assessable (except to the extent that the
general partners of subsidiaries which are partnerships may be liable for
the obligations of such partnerships) and are owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding partnership interests or shares of capital stock, as the case
may be, of such subsidiaries were issued in violation of preemptive or
other similar rights arising by operation of law, under the partnership
agreement or charter or bylaws, as the case may be, of any such subsidiary
or under any agreement or instrument to which the Company or any such
subsidiary is a party.
(viii) CAPITALIZATION. The authorized stock of the Company and the
issued and outstanding stock of the Company are as set forth in the line
items "Preferred Stock" and "Common Stock" under the caption
"Capitalization" in the Prospectuses (except for subsequent issuances, if
any, pursuant to this Agreement, pursuant to employee benefit plans
referred to in the Prospectuses or pursuant to the exercise of options
referred to in the Prospectuses).
(ix) AUTHORIZATION OF AGREEMENT. This Agreement and the International
Purchase Agreement have been duly authorized, executed and delivered by the
Company.
(x) AUTHORIZATION OF AND DESCRIPTION OF SECURITIES. The shares of
issued and outstanding Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable; none of the outstanding
shares of Common Stock was issued in violation of the preemptive or other
similar rights arising by operation of law, under the charter or bylaws of
the Company, under any agreement or instrument to which the Company or any
of its subsidiaries is a party or otherwise. The Securities to be
purchased from the Company by the U.S. Underwriters and the International
Managers have been duly authorized for issuance and sale to the U.S.
Underwriters pursuant to this Agreement and the International Managers
pursuant to the International Purchase Agreement, respectively, and, when
issued and delivered by the Company pursuant to this Agreement and the
International Purchase Agreement, respectively, against payment of the
consideration set forth herein and in the International Purchase Agreement
respectively, will be validly issued, fully paid and non-assessable; the
7
Common Stock conforms to all statements relating thereto contained or
incorporated by reference in the Prospectuses and such description conforms
to the rights set forth in the instruments defining the same; and the
issuance of the Securities is not subject to preemptive or other similar
rights arising by operation of law, under the charter and bylaws of the
Company, under any agreement or instrument to which the Company or any of
its subsidiaries is a party or otherwise.
(xi) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company nor any
of its subsidiaries is in violation of its charter or bylaws or its
partnership agreement, as the case may be, or in default in the performance
or observance of any obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which any of them may
be bound, or to which any of the respective properties or assets of the
Company or any subsidiary is subject (collectively, "Agreements and
Instruments"), except for such defaults that would not have a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the International Purchase Agreement and the consummation of
the transactions contemplated herein and therein (including the use of the
proceeds from the sale of the Securities to repay borrowings under the
Revolving Credit Agreement dated as of November 29, 1994, among the
Company, the banks named therein and The Bank of New York, as agent, as
amended by the First Amendment to the Revolving Credit Agreement, dated as
of January 26, 1995, the Second Amendment to the Revolving Credit
Agreement, dated as of December 4, 1995, the Third Amendment to the
Revolving Credit Agreement, dated as of March 7, 1997, and the Fourth
Amendment to the Revolving Credit Agreement dated April 28, 1997 (as so
amended, the "Acquisition Credit Agreement"), as described in the
Prospectuses under the caption "Use of Proceeds" but excluding any use of
proceeds to fund any property acquisitions or for other general corporate
purposes for which specific corporate authorization may be required) and
compliance by the Company with its obligations hereunder and thereunder
have been duly authorized by all necessary corporate action and do not and
will not, whether with or without the giving of notice or passage of time
or both, conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to, any Agreement or Instrument, except for such
conflicts, breaches or defaults or liens, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect,
nor will such action result in any violation of the provisions of the
charter or by-laws of the Company or any applicable law, rule, regulation,
or governmental or court judgment, order, writ or decree. As used herein,
a "Repayment Event" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person acting
on such holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any
subsidiary of the Company or any of its subsidiaries.
8
(xii) ABSENCE OF LABOR DISPUTE. No labor dispute with the employees
of the Company or any subsidiary of the Company exists or, to the best
knowledge of the Company, is imminent; and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its or
any subsidiary's tenants, which, in either case, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect.
(xiii) ABSENCE OF PROCEEDINGS. The Company has not received any
notice of any action, suit, proceeding, inquiry or investigation before or
by any court or governmental agency or body, domestic or foreign, and, to
the best knowledge of the Company, there is no such proceeding now pending
or threatened, against or affecting the Company or any of its subsidiaries,
which is required to be disclosed in the Registration Statement (other than
as disclosed therein), or which could reasonably be expected to result in a
Material Adverse Effect, or which could reasonably be expected to
materially and adversely affect the consummation of this Agreement or the
International Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a party
or of which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xiv) ACCURACY OF EXHIBITS. There are no contracts or documents which
are required to be described in the Registration Statement, the
Prospectuses or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described and filed as
required.
(xv) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and neither the Company nor any of its subsidiaries
has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
(xvi) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations under this Agreement or the International Purchase Agreement,
in connection with the offering, issuance or sale of the Securities under
9
this Agreement or the International Purchase Agreement or the consummation
of the other transactions contemplated by this Agreement and the
International Purchase Agreement, except such as have been already made or
obtained under the 1933 Act or the 1933 Act Regulations or as may be
required under state securities laws.
(xvii) POSSESSION OF LICENSES AND PERMITS. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them and the Company and
its subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to possess or
comply would not, singly or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force and
effect, except where the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect would
not, singly or in the aggregate, have a Material Adverse Effect; and
neither the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xviii) INVESTMENT COMPANY ACT. The Company is not, and upon the
issuance and sale of the Securities as contemplated in this Agreement and
the International Purchase Agreement and the application of the net
proceeds therefrom as described in the Prospectuses will not be, an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended (the "1940 Act").
(xix) PARTNERSHIP AGREEMENTS. Each of the partnership and, if
applicable, joint venture agreements to which the Company or any of its
subsidiaries is a party has been duly authorized, executed and delivered by
the Company or the relevant subsidiary, as the case may be, and constitutes
the valid and binding agreement of the Company or such subsidiary, as the
case may be, enforceable in accordance with its terms, except as the
enforcement thereof may be limited by (A) the effect of bankruptcy,
insolvency or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally or (B) the effect of general
principles of equity, and the execution, delivery and performance of such
agreements did not, at the time of execution and delivery, and does not
constitute a breach of or default under the charter or bylaws or
partnership agreement, as the case may be, of the Company or any of its
subsidiaries or any of the Agreements and Instruments or any law,
administrative regulation or administrative or court order or decree.
(xx) PROPERTIES. Except as otherwise disclosed in the Prospectuses:
(i) the Company and its subsidiaries have good and marketable title (either
in fee simple or pursuant to a valid leasehold interest) to all properties
and assets described in the Prospectuses as being owned or leased, as the
case may be, by them and to all properties reflected in the Company's most
recent consolidated financial statements included in the Prospectuses, and
neither the Company nor any of its subsidiaries has received
10
notice of any claim that has been or may be asserted by anyone adverse to
the rights of the Company or any subsidiary with respect to any such
properties or assets (or any such lease) or affecting or questioning the
rights of the Company or any such subsidiary to the continued ownership,
lease, possession or occupancy of such property or assets, except for such
claims that would not, singly or in the aggregate, have a Material Adverse
Effect; (ii) all liens, charges, encumbrances, claims or restrictions on or
affecting the properties and assets of the Company or any of its
subsidiaries which are required to be disclosed in the Registration
Statement or the Prospectuses are disclosed therein, and all such liens,
charges, encumbrances, claims or restrictions which are not disclosed in
the Prospectuses could not reasonably be expected, singly or in the
aggregate, to have a Material Adverse Effect; (iii) no person or entity,
including, without limitation, any tenant under any of the leases pursuant
to which the Company or any of its subsidiaries leases (as lessor) any of
its properties (whether directly or indirectly through other partnerships,
joint ventures or otherwise) has an option or right of first refusal or any
other right to purchase any of such properties, except for such options,
rights of first refusal or other rights to purchase which, individually or
in the aggregate, are not material with respect to the Company and its
subsidiaries considered as one enterprise; (iv) to the Company's best
knowledge, each of the properties of the Company or any of its subsidiaries
has access to public rights of way, either directly or through insured
easements, except where the failure to have such access would not, singly
or in the aggregate, have a Material Adverse Effect; (v) to the Company's
best knowledge, each of the properties of the Company or any of its
subsidiaries is served by all public utilities necessary for the current
operations on such property in sufficient quantities for such operations,
except where the failure to have such public utilities would not, singly or
in the aggregate, have a Material Adverse Effect; (vi) to the best
knowledge of the Company, each of the properties of the Company or any of
its subsidiaries complies with all applicable codes and zoning and
subdivision laws and regulations, except for such failures to comply which
would not, either individually or in the aggregate, have a Material Adverse
Effect; (vii) all of the leases under which the Company or any of its
subsidiaries holds or uses any real property or improvements or any
equipment relating to such real property or improvements are in full force
and effect, except where the failure to be in full force and effect would
not, singly or in the aggregate, have a Material Adverse Effect, and
neither the Company nor any of its subsidiaries is in default in the
payment of any amounts due under any such leases or in any other default
thereunder and the Company knows of no event which, with the passage of
time or the giving of notice or both, would constitute a default under any
such lease, except such defaults that would not, individually or in the
aggregate, have a Material Adverse Effect; (viii) to the best knowledge of
the Company, there is no pending or threatened condemnation, zoning change,
or other proceeding or action that could in any manner affect the size of,
use of, improvements on, construction on or access to the properties of the
Company or any of its subsidiaries, except such proceedings or actions
that, either singly or in the aggregate, would not have a Material Adverse
Effect; and (ix) neither the Company nor any of its subsidiaries nor any
lessee of any of the real property or improvements of the Company or any of
its subsidiaries is in default in the payment of any amounts due or in any
other default under any of the leases pursuant to which the Company or
11
any of its subsidiaries leases (as lessor) any of its real property or
improvements (whether directly or indirectly through partnerships, joint
ventures or otherwise), and the Company knows of no event which, with the
passage of time or the giving of notice or both, would constitute such a
default under any of such leases, except such defaults as would not,
individually or in the aggregate, have a Material Adverse Effect.
(xxi) INSURANCE. With such exceptions as would not, individually or
in the aggregate, have a Material Adverse Effect, the Company and its
subsidiaries have title insurance on all real property and improvements
described in the Prospectuses as being owned or leased under a ground
lease, as the case may be, by them and to all real property and
improvements reflected in the Company's most recent consolidated financial
statements included in the Prospectuses in an amount at least equal to the
original cost of acquisition and the Company and its subsidiaries are
entitled to all benefits of the insured thereunder, and each such property
is insured by extended coverage hazard and casualty insurance in amounts
and on such terms as are customarily carried by lessors of properties
similar to those owned by the Company and its subsidiaries (in the markets
in which the Company's and its subsidiaries' respective properties are
located), and the Company and its subsidiaries carry comprehensive general
liability insurance and such other insurance as is customarily carried by
lessors of properties similar to those owned by the Company and its
subsidiaries in amounts and on such terms as are customarily carried by
lessors of properties similar to those owned by the Company and its
subsidiaries (in the markets in which the Company's and its subsidiaries'
respective properties are located) and the Company or one of its
subsidiaries is named as an additional insured on all policies required
under the leases for such properties.
(xxii) ENVIRONMENTAL MATTERS. Except as otherwise disclosed in the
Prospectuses: (i) all real property and improvements owned or leased by
the Company or any of its subsidiaries, including, without limitation, the
Environment (as defined below) associated with such real property and
improvements, is free of any Contaminant (as defined below), except such
Contaminants which, individually or in the aggregate, would not have a
Material Adverse Effect; (ii) neither the Company, nor any of its
subsidiaries nor any Partnership has caused or suffered to exist or occur
any Release (as defined below) of any Contaminant into the Environment or
any other condition that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or could result in
any violation of any Environmental Laws (as defined below) or constitute a
health, safety or environmental hazard to any person or property except for
such violations or hazards that could not reasonably be expected to have a
Material Adverse Effect; (iii) neither the Company nor any of its
subsidiaries is aware of any notice from any governmental body claiming any
violation of any Environmental Laws or requiring or calling attention to
the need for any work, repairs, construction, alterations, removal or
remedial action or installation on or in connection with such real property
or improvements, whether in connection with the presences of
asbestos-containing materials in such properties or otherwise, except for
such violations, work, repairs, construction, alterations, removal or
remedial actions or installations as would not, individually or in the
aggregate, have a Material Adverse
12
Effect; (iv) any such work, repairs, construction, alterations, removal or
remedial action or installation, if required, would not result in the
incurrence of liabilities, which, individually or in the aggregate, would
have a Material Adverse Effect; (v) neither the Company nor any of its
subsidiaries has caused or suffered to exist or occur any condition on any
of the properties or improvements of the Company or any of its subsidiaries
that could give rise to the imposition of any Lien (as defined below) under
any Environmental Laws, except such Liens which, individually or in the
aggregate, would not have a Material Adverse Effect; and (vi) to the
Company's best knowledge, no real property or improvements owned or leased
by the Company or any of its subsidiaries is being used or has been used
for manufacturing or for any other operations that involve or involved the
use, handling, transportation, storage, treatment or disposal of any
Contaminant, where such operations require or required permits or are or
were otherwise regulated pursuant to the Environmental Laws and where such
permits have not been or were not obtained or such regulations are not
being or were not complied with, except in all instances where any failure
to obtain a permit or comply with any regulation could not reasonably be
expected, singly or in the aggregate, to have a Material Adverse Effect.
"Contaminant" means any pollutant, hazardous substance, toxic substance,
hazardous waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos or asbestos-containing materials, PCBs, lead, pesticides or
radioactive materials or any constituent of any such substance or waste,
including any such substance identified or regulated under any
Environmental Law. "Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601
ET SEQ., the Resource Conservation and Recovery Act, 42 U.S.C. 6901,
ET SEQ., the Clean Air Act, 42 U.S.C. 7401, ET SEQ., the Clean Water Act,
33 U.S.C. 1251, ET SEQ., the Toxic Substances Control Act, 15 U.S.C. 2601,
ET SEQ., the Occupational Safety and Health Act, 29 U.S.C. 651, ET SEQ.,
and all other federal, state and local laws, ordinances, regulations,
rules, orders, decisions, permits, and the like, which are directed at the
protection of human health or the Environment. "Lien" means, with respect
to any asset, any mortgage, deed of trust, lien, pledge, encumbrance,
charge or security interest in or on such asset. "Environment" means any
surface water, drinking water, ground water, land surface, subsurface
strata, river sediment, buildings, structures, and ambient, workplace and
indoor air. "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
emanating or disposing of any Contaminant into the Environment, including,
without limitation, the abandonment or discard of barrels, containers,
tanks or other receptacles containing or previously containing any
Contaminant or any release, emission or discharge as those terms are
defined or used in any Environmental Law.
(xxiii) QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST. The Company
was and is organized in conformity with the requirements for qualification
and taxation as a "real estate investment trust" under the Internal Revenue
Code of 1986, as amended (the "Code"); the Company at all times has met and
continues to meet all the requirements of the Code for qualification and
taxation as a "real estate investment trust"; the Company's method of
operation will enable it to meet the requirements for qualification and
taxation as a "real estate investment trust" under the Code; and the
Company
13
is qualified as a "real estate investment trust" under the Code and will be
so qualified for the taxable year in which sales of the Securities occur.
(xxiv) REGISTRATION RIGHTS. There are no persons with registration or
other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act or included in the offering contemplated hereby, except for rights
arising under the Registration Rights Agreement dated as of April 28, 1995
(the "RRA") among the Company and certain former shareholders of the
Advisor party thereto (the "Shareholders"). Each of the Shareholders has
delivered to the Company a written waiver (a "Shareholder Waiver"), signed
by such Shareholder, of any and all of its rights under the RRA to have
Registrable Securities (as defined in the RRA) registered pursuant to the
Registration Statement or included in the offering contemplated hereby.
The names of the Shareholders and each other person, if any, who holds any
Registrable Securities (as defined in the RRA) are set forth in Schedule C
hereto.
(xxv) TAX TREATMENT OF CERTAIN ENTITIES. Each of R.I.C. Trade Center,
Ltd., Empire Business Center, Ltd., and Silverton Business Center, Ltd.,
each a California limited partnership (the "Sub-Limited Partnerships"),
was, from the time of the Consolidation through and including the time of
its merger into the Company, treated as a partnership (rather than as an
association taxable as a corporation) for federal income tax purposes. The
Company's ownership interests in three properties held through tenancies in
common with unrelated third parties (which are the only properties which,
since the Consolidation, have been held in tenancies in common with
unrelated third parties) have not been, since the Consolidation, and will
not be treated as ownership interests in associations taxable as
corporations for federal income tax purposes. Realty Income Texas
Properties, L.P., a Delaware limited partnership, is not and has never been
treated as an association taxable as a corporation for federal income tax
purposes. Realty Income Texas Properties, Inc., a Delaware corporation, is
and has been at all times treated as a "qualified REIT subsidiary" within
the meaning of Section 856(i) of the Code.
(xxvi) REINCORPORATION. The Reincorporation (a) qualified as a
reorganization under Section 368(a)(1)(F) of the Code or (b) was a
non-event for federal income tax purposes, and no gain or loss was or will
be recognized by the Company for federal income tax purposes as a result of
the Reincorporation.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of the
Company delivered to the Global Coordinator, the U.S. Representatives or to
counsel for the U.S. Underwriters shall be deemed a representation and warranty
by the Company to each U.S. Underwriter as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO U.S. UNDERWRITERS; CLOSING.
(a) INITIAL SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell
14
to each U.S. Underwriter, severally and not jointly, and each U.S. Underwriter,
severally and not jointly, agrees to purchase from the Company, at the price set
forth in Schedule B, the number of Initial U.S. Securities set forth in Schedule
A opposite the name of such U.S. Underwriter, plus any additional number of
Initial U.S. Securities which such U.S. Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
(b) OPTION SECURITIES. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the U.S. Underwriters,
severally and not jointly, to purchase up to an additional 324,000 shares of
Common Stock at the price per share set forth in Schedule B, less an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial U.S. Securities but not payable on the U.S. Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised in whole or in part from time to time only for the purpose
of covering over-allotments which may be made in connection with the offering
and distribution of the Initial U.S. Securities upon notice by the Global
Coordinator to the Company setting forth the number of U.S. Option Securities as
to which the several U.S. Underwriters are then exercising the option and the
time and date of payment and delivery for such U.S. Option Securities. Any such
time and date of delivery for the U.S. Option Securities (a "Date of Delivery")
shall be determined by the Global Coordinator, but shall not be later than seven
full business days after the exercise of said option, nor in any event prior to
the Closing Time. If the option is exercised as to all or any portion of the
U.S. Option Securities, each of the U.S. Underwriters, acting severally and not
jointly, will purchase that proportion of the total number of U.S. Option
Securities then being purchased which the number of Initial U.S. Securities set
forth in Schedule A opposite the name of such U.S. Underwriter bears to the
total number of Initial U.S. Securities, subject in each case to such
adjustments as the Global Coordinator in its discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial U.S. Securities shall be made at the office of
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, or at such other place as shall be agreed upon by the Global
Coordinator and the Company, at 6:00 A.M. (California time) on the third
(fourth, if the pricing occurs after 4:30 P.M. New York City time, on any given
day) business day after the date hereof (unless postponed in accordance with the
provisions of Section 10), or such other time not later than ten business days
after such date as shall be agreed upon by the Global Coordinator and the
Company (such time and date of payment and delivery being herein called "Closing
Time").
In addition, in the event that any or all of the U.S. Option Securities are
purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Global Coordinator and the Company, on each Date of Delivery as specified in the
notice from the Global Coordinator to the Company.
15
Payment shall be made to the Company by wire transfer of immediately
available funds to an account at a bank designated by the Company, against
delivery to the U.S. Representatives for the respective accounts of the U.S.
Underwriters of certificates for the Securities to be purchased by them. It is
understood that each U.S. Underwriter has authorized the U.S. Representatives,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Initial U.S. Securities and the U.S. Option Securities,
if any, which it has agreed to purchase. ▇▇▇▇▇▇▇ ▇▇▇▇▇, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose payment
therefor has not been received by the Closing Time or the relevant Date of
Delivery, as the case may be, but such payment shall not relieve such U.S.
Underwriter from its obligations hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 2:00 P.M. (New York City time) on the business day prior to
the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with
each U.S. Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS.
The Company, subject to Section 3(b), will notify the Global Coordinator
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to any Original Registration Statement or Rule 462(b)
Registration Statement shall become effective or any supplement to any
Prospectus, any Term Sheet or any amended Prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to any Original Registration
Statement or Rule 462(b) Registration Statement or any amendment or
supplement to any Prospectus or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness
of any Original Registration Statement or Rule 462(b) Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceedings for any of such purposes. The Company
will promptly effect the filings necessary pursuant to Rule 424(b) and, if
applicable, will take such steps as it deems necessary to ascertain
promptly whether each form of prospectus supplement, prospectus or term
sheet transmitted for filing under Rule 424(b) was received for filing by
the Commission and, in the event that it was not, it will promptly file
such prospectus supplement, prospectus or term sheet, as the case may be.
The Company will make every reasonable effort to prevent the issuance of
any stop order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible moment.
16
(b) FILING OF AMENDMENTS. The Company will give the Global
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Second Registration Statement at the time it became
effective or to any Prospectus, whether pursuant to the 1933 Act, the 1934
Act or otherwise, will furnish the Global Coordinator with copies of any
such documents a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file or use any such document to
which the Global Coordinator or counsel for the U.S. Underwriters shall
object.
(c) RULE 434. If the Company uses Rule 434, it will comply with the
requirements of such Rule.
(d) DELIVERY OF REGISTRATION STATEMENTS. The Company has furnished
or will deliver to the U.S. Underwriters and counsel for the U.S.
Underwriters, without charge, as many signed and conformed copies of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein
and documents incorporated or deemed to be incorporated by reference
therein) as the U.S. Representatives and counsel for the U.S. Underwriters
may reasonably request. If applicable, the copies of the Registration
Statement and each amendment thereto furnished to the U.S. Underwriters
will be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to ▇▇▇▇▇, if any, except to the extent
permitted by Regulation S-T.
(e) DELIVERY OF PROSPECTUSES. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus
as such U.S. Underwriter reasonably requested, and the Company hereby
consents to the use of such copies for purposes permitted by the 1933 Act.
The Company will furnish to each U.S. Underwriter, without charge, during
the period when the U.S. Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the U.S. Prospectus (as
amended or supplemented) as such U.S. Underwriter may reasonably request.
If applicable, the U.S. Prospectus and any amendments or supplements
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, if any, except to the extent permitted by Regulation
S-T.
(f) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and
the 1934 Act Regulations so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement, the International
Purchase Agreement and the Prospectuses. If at any time when a prospectus
is required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the U.S. Underwriters
or for the Company, to amend the Registration Statement or amend or
supplement any Prospectus in order that such Prospectus will not include
any untrue statements of a material fact or omit to state a material fact
necessary in order to make
17
the statements therein not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, or if it shall be
necessary, in the opinion of any such counsel, at any such time to amend
the Registration Statement or amend or supplement any Prospectus in order
to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or such Prospectus comply with such requirements, and the Company
will furnish to the U.S. Underwriters such number of copies of such
amendment or supplement as the U.S. Underwriters may reasonably request.
(g) BLUE SKY QUALIFICATIONS. The Company will use its best efforts,
in cooperation with the U.S. Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and
other jurisdictions of the United States as the Global Coordinator may
designate and to maintain such qualifications in effect for a period of not
less than one year from the date hereof; PROVIDED, HOWEVER, that the
Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Securities
have been so qualified, the Company will file such statements and reports
as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
date hereof.
(h) RULE 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
security holders as soon as practicable an earning statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(i) USE OF PROCEEDS. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds."
(j) LISTING. The Company will use its best efforts to effect the
listing of the Securities on the New York Stock Exchange.
(k) RESTRICTION ON SALE OF SECURITIES. During a period of 90 days
from the date of this Agreement, the Company will not, without the prior
written consent of the Global Coordinator, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
or otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under the
1933 Act with respect to any of the foregoing, or (ii) enter into any swap
or any other agreement or transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of any Common
Stock, whether any such swap, agreement or transaction
18
described in clause (i) or (ii) above is to be settled by delivery of
Common Stock, other securities, in cash or otherwise. Clauses (i) and (ii)
of the foregoing sentence shall not apply to (A) the Securities to be sold
hereunder or under the International Purchase Agreement, (B) any shares of
Common Stock issued by the Company upon the exercise of an option
outstanding on the date hereof referred to in the Registration Statement,
(C) any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to existing employee benefit plans of the Company referred
to in the Registration Statement, or (D) any shares of Common Stock issued
pursuant to any non-employee director stock plan referred to in the
Registration Statement.
(l) REPORTING REQUIREMENTS. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant
to the 1934 Act within the time periods required by the 1934 Act and the
1934 Act Regulations.
SECTION 4. PAYMENT OF EXPENSES. (a) EXPENSES. The Company will pay all
expenses incident to the performance of its obligations under this Agreement
and the International Purchase Agreement, including (i) the word processing,
printing and filing of the Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment thereto,
(ii) the printing and delivery to the Underwriters of this Agreement, the
International Purchase Agreement, any Agreement among Underwriters, any
Agreement among Managers and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates
for the Securities to the Underwriters, including any transfer taxes or other
duties payable upon the sale of the Securities to the Underwriters and the
transfer of the Securities between the U.S. Underwriters and the
International Managers, (iv) the fees and disbursements of the Company's
counsel, accountants and other advisors, (v) the qualification of the
Securities under securities laws in accordance with the provisions of Section
3(g) hereof, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection therewith and in connection
with the preparation of the Blue Sky Survey and any supplement thereto, (vi)
the printing and delivery to the Underwriters of copies of each preliminary
prospectus, any Term Sheets and of the Prospectuses and any amendments or
supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the
Securities, (ix) if required, the filing fees incident to, and the reasonable
fees and disbursements of counsel to the Underwriters (such fees and
disbursements not to exceed $10,000) in connection with, the review, if any,
by the National Association of Securities Dealers, Inc. (the "NASD") of the
terms of the sale of the Securities and (x) the fees and expenses incurred in
connection with the listing of the Securities on the New York Stock Exchange.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the U.S.
Representatives in accordance with the provisions of Section 5 or
Section 9(a)(i) or 9(a)(v) hereof, the Company shall reimburse the U.S.
Underwriters for all of their out-of-pocket expenses, including the reasonable
fees and disbursements of counsel for the U.S. Underwriters.
19
SECTION 5. CONDITIONS OF U.S. UNDERWRITERS' OBLIGATIONS. The
obligations of the several U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective not later than 5:30 P.M. on the date hereof and at Closing Time
no stop order suspending the effectiveness of any of the Original
Registration Statements or any Rule 462(b) Registration Statement shall
have been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission, and any request on the part of the Commission
for additional information shall have been complied with to the reasonable
satisfaction of counsel to the U.S. Underwriters. If required by the 1933
Act or the 1933 Act Regulations, the Prospectuses shall have been filed
with the Commission in accordance with Rule 424(b) and, if the Company has
elected to rely upon Rule 434, a Term Sheet shall have been filed with the
Commission in accordance with Rule 434 and Rule 424(b).
(b) OPINIONS OF COUNSEL FOR COMPANY. At Closing Time, the U.S.
Representatives shall have received the favorable opinions, dated as of
Closing Time, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Company, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Senior Vice President, General Counsel and Secretary of the
Company, and ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special Maryland counsel to
the Company, each in form and substance satisfactory to counsel for the
U.S. Underwriters, to the effect set forth in Exhibit A, B and C hereto,
respectively, and to such further effect as counsel to the U.S.
Underwriters may reasonably request pursuant to Section 5(j).
(c) OPINION OF COUNSEL FOR U.S. UNDERWRITERS. At Closing Time,
the U.S. Representatives shall have received the favorable opinion, dated
as of Closing Time, of ▇▇▇▇▇ & Wood LLP, counsel for the U.S. Underwriters,
with respect to the matters set forth in clauses (iv), (v) and the
antepenultimate paragraph of Exhibit A hereto and clauses (i), (iv) and
(vi) of Exhibit C hereto. In giving such opinion such counsel may rely, as
to all matters arising under or governed by the laws of the State of
Maryland, upon the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ delivered
pursuant to Section 5(b) and, as to all matters governed by the laws of
other jurisdictions (other than the law of the State of New York and the
federal law of the United States), upon the opinions of counsel
satisfactory to the U.S. Representatives. Such counsel may also state
that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the
Company and its subsidiaries and certificates of public officials.
(d) OFFICERS' CERTIFICATE. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in
the condition, financial or otherwise, or
20
in the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and the U.S. Representatives shall have
received a certificate of the Chairman or the President of the Company and
of the chief financial or chief accounting officer of the Company, dated as
of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Section 1 hereof
are true and correct with the same force and effect as though expressly
made at and as of Closing Time, (iii) the Company has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending
the effectiveness of either of the Original Registration Statements or any
Rule 462(b) Registration Statement has been issued and no proceedings for
that purpose have been initiated or, to the best of their knowledge,
threatened by the Commission.
(e) ACCOUNTANT'S COMFORT LETTER. At the time of the execution
of this Agreement, the U.S. Representatives shall have received from KPMG
Peat Marwick LLP a letter dated such date, in form and substance
satisfactory to the U.S. Representatives, together with signed or
reproduced copies of such letter for each of the other U.S. Underwriters,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectuses.
(f) BRING-DOWN COMFORT LETTER. At Closing Time, the U.S.
Representatives shall have received from KPMG Peat Marwick LLP a letter,
dated as of Closing Time, to the effect that they reaffirm the statements
made in the letter furnished pursuant to subsection (e) of this Section,
except that the specified date referred to shall be a date not more than
three business days prior to Closing Time.
(g) APPROVAL OF LISTING. At the Closing Time, the Securities
shall have been approved for listing on the New York Stock Exchange,
subject only to official notice of issuance.
(h) WAIVER OF REGISTRATION RIGHTS. On or before the date of
this Agreement, the U.S. Representative shall have received a Shareholder
Waiver, in form and substance reasonably satisfactory to the U.S.
Representatives, signed by each of the persons listed in Schedule C hereto.
(i) PURCHASE OF INITIAL INTERNATIONAL SECURITIES.
Contemporaneously with the purchase by the U.S. Underwriters of the Initial
U.S. Securities under this Agreement, the International Managers shall have
purchased the Initial International Securities under the International
Purchase Agreement.
(j) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of
Delivery counsel for the U.S. Underwriters shall have been furnished with
such documents and opinions as they may reasonably require for the purpose
of enabling them to pass upon
21
the issuance and sale of the Securities as herein contemplated, or in order
to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all
proceedings taken by the Company in connection with the issuance and sale
of the Securities as herein contemplated shall be satisfactory in form and
substance to the U.S. Representatives and counsel for the U.S.
Underwriters.
(k) CONDITIONS TO PURCHASE OF U.S. OPTION SECURITIES. In the
event that the U.S. Underwriters exercise their option provided in
Section 2(b) hereof to purchase all or any portion of the U.S. Option
Securities, the representations and warranties of the Company contained
herein and the statements in any certificates furnished by the Company
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the U.S. Representatives shall have received:
(i) OFFICERS' CERTIFICATE. A certificate, dated such Date of
Delivery, of the Chairman or President of the Company and of the chief
financial or chief accounting officer of the Company confirming that
the certificate delivered at the Closing Time pursuant to Section 5(d)
hereof remains true and correct as of such Date of Delivery.
(ii) OPINIONS OF COUNSEL FOR COMPANY. The favorable opinions of
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Company, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior
Vice President, General Counsel and Secretary of the Company and
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special Maryland counsel to the
Company, each in form and substance satisfactory to counsel for the
U.S. Underwriters, dated such Date of Delivery, relating to the U.S.
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the respective opinions required by
Section 5(b) hereof.
(iii) OPINION OF COUNSEL FOR U.S. UNDERWRITERS. The favorable opinion
of ▇▇▇▇▇ & Wood LLP, counsel for the U.S. Underwriters, dated such
Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(c) hereof.
(iv) BRING-DOWN COMFORT LETTER. A letter from KPMG Peat Marwick LLP,
in form and substance satisfactory to the U.S. Representatives and
dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the U.S. Representatives pursuant
to Section 5(f) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than
three business days prior to such Date of Delivery.
(l) TERMINATION OF AGREEMENT. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the purchase
of U.S. Option Securities on a Date of Delivery which occurs after the
Closing Time, the obligations of the several U.S.
22
Underwriters to purchase the relevant U.S. Option Securities, may be
terminated by the U.S. Representatives by notice to the Company at any time
at or prior to Closing Time or such Date of Delivery, as the case may be,
and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 6 and 7
shall survive any such termination and remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF THE U.S. UNDERWRITERS. The Company agrees to
indemnify and hold harmless each U.S. Underwriter and each person, if any, who
controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 434 Information,
if applicable, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact included in any preliminary prospectus
or any Prospectus (or any amendment or supplement thereto), or the omission
or alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by ▇▇▇▇▇▇▇ ▇▇▇▇▇),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or (ii)
above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto) or any preliminary U.S.
prospectus or the U.S. Prospectus (or any amendment or supplement thereto); and
23
PROVIDED FURTHER that this indemnity agreement with respect to any preliminary
U.S. prospectus shall not inure to the benefit of any U.S. Underwriter from whom
the person asserting any such losses, liabilities, claims, damages or expenses
purchased U.S. Securities, or any person controlling such U.S. Underwriter, if a
copy of the U.S. Prospectus (as then amended or supplemented if the Company
shall have furnished any such amendments or supplements thereto, but excluding
documents incorporated or deemed to be incorporated by reference therein) was
not sent or given by or on behalf of such U.S. Underwriter to such person, if
such is required by law, at or prior to the written confirmation of the sale of
such U.S. Securities to such person and if the U.S. Prospectus (as so amended or
supplemented, if applicable) would have corrected the defect giving rise to such
loss, liability, claim, damage or expense, except that this proviso shall not be
applicable if such defect shall have been corrected in a document which is
incorporated or deemed to be incorporated by reference in the U.S. Prospectus.
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 434 Information, if
applicable, or any preliminary prospectus or any Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by such U.S. Underwriter through the U.S.
Representatives expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or Prospectus (or any
amendment or supplement thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by ▇▇▇▇▇▇▇ ▇▇▇▇▇, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or
24
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 60 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 45 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 7. CONTRIBUTION. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the U.S. Underwriters on the other hand from the
offering of the U.S. Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the U.S. Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the U.S.
Underwriters on the other hand in connection with the offering of the U.S.
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the U.S.
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of the U.S. Prospectus (or,
if Rule 434 is used, the corresponding location on the Term Sheet), bear to the
aggregate initial public offering price of the U.S. Securities as set forth on
such cover (or corresponding location on the Term Sheet, as the case may be).
The relative fault of the Company on the one hand and the U.S. Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such 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 by the U.S. Underwriters and
25
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company and the U.S. Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the U.S. Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the U.S. Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
U.S. Underwriter has otherwise been required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a U.S.
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company submitted pursuant
hereto shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any U.S. Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
U.S. Securities to the U.S. Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The U.S. Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which
26
information is given in the Prospectuses, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the financial markets
in the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the U.S. Representatives, impracticable
to market the Securities or to enforce contracts for the sale of the Securities,
or (iii) if trading in any securities of the Company has been suspended or
limited by the Commission, the New York Stock Exchange or the Nasdaq National
Market, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or limited,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal, California or New York authorities, or (v) if since
the date of this Agreement, there has occurred a downgrading in the rating
assigned to the Securities or any of the Company's other debt securities by any
nationally recognized securities rating agency, or such securities rating agency
has publicly announced that it has under surveillance or review, with possible
negative implications, its rating of the Securities or any of the Company's
other debt securities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
6 and 7 shall survive such termination and remain in full force and effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE U.S. UNDERWRITERS. If one or
more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery
to purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the U.S. Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting U.S. Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of U.S. Securities to be purchased on such date, each of the
non-defaulting U.S. Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of U.S. Securities to be purchased on such date, this Agreement or,
with respect to any
27
Date of Delivery which occurs after the Closing Time, the obligations of
the U.S. Underwriters to purchase and of the Company to sell the U.S.
Option Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting U.S.
Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which occurs after the
Closing Time, in a termination of the obligations of the U.S. Underwriters to
purchase and the Company to sell the relevant U.S. Option Securities, as the
case may be, either the U.S. Representatives or the Company shall have the right
to postpone the Closing Time or the relevant Date of Delivery, as the case may
be, for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectuses or in any other documents
or arrangements. As used herein, the term "U.S. Underwriter" includes any
person substituted for a U.S. Underwriter under this Section 10.
SECTION 11. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇ ▇.
▇▇▇▇▇▇; and notices to the Company shall be directed to it at Realty Income
Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, attention
of Legal Department.
SECTION 12. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the U.S. Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the U.S.
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of U.S. Securities from any U.S.
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. EXCEPT AS OTHERWISE SET
FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
28
SECTION 14. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
29
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
REALTY INCOME CORPORATION
By
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Operating Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
▇.▇. ▇▇▇▇▇▇▇ & SONS, INC.
PAINEWEBBER INCORPORATED
SUTRO & CO. INCORPORATED
WHEAT, FIRST SECURITIES, INC.
By: ▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By:
-----------------------------------------
Authorized Signatory
For themselves and as U.S. Representatives of the U.S. Underwriters named in
Schedule A hereto.
30
SCHEDULE A
Number
Name of U.S. Underwriter of Securities
------------------------ -------------
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated . . . . . . . . . . . . . . . . . . . . . . . 432,000
▇.▇. ▇▇▇▇▇▇▇ & Sons . . . . . . . . . . . . . . . . . . . . . . . 432,000
PaineWebber Incorporated . . . . . . . . . . . . . . . . . . . . . 432,000
Sutro & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . 432,000
Wheat, First Securities, Inc. . . . . . . . . . . . . . . . . . . 432,000
---------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160,000
---------
---------
Sch A-1
SCHEDULE B
PRICE SCHEDULE
1. The initial public offering price per share for the U.S. Securities
shall be $27.00.
2. The purchase price per share for the U.S. Securities to be paid by the
several U.S. Underwriters shall be $25.585, being an amount equal to the initial
public offering price set forth above less $1.415 per share; PROVIDED that the
purchase price per share for any U.S. Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall be reduced
by an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial U.S. Securities but not payable on the U.S.
Option Securities.
Sch B-1
SCHEDULE C
Persons and Entities from Whom a Waiver of Registration Rights is Required
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Family Trust dated June 19, 1981
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇
Sch C-1
Exhibit A
FORM OF OPINION OF ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) Based solely on certificates from public officials, the Company
is duly qualified as a foreign corporation to transact business and is in good
standing in the State of California.
(ii) None of the outstanding shares of stock of the Company was
issued, to the best of our knowledge and information, in violation of
preemptive rights or other similar rights arising under any agreement or
instrument to which the Company or any of its subsidiaries is a party.
(iii) The issuance of the Securities is not subject, to the best of
our knowledge and information, to preemptive or other similar rights arising
under any agreement or instrument to which the Company or any of its
subsidiaries is a party.
(iv) Each of the Original Registration Statements, and the
Post-Effective Amendment has been declared effective under the 1933 Act; to
the best of our knowledge and information, Prospectuses have been filed
pursuant to Rule 424(b) under the 1933 Act in the manner and within the time
period required by Rule 424(b); and, to the best of our knowledge and
information, no stop order suspending the effectiveness of either of the
Original Registration Statements or any Rule 462(b) Registration Statement
has been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission.
(v) Each of the Original Registration Statements, and the
Prospectuses (in each case excluding the documents incorporated or deemed to
be incorporated by reference therein and the financial statements, supporting
schedules and other financial data included or incorporated by reference
therein and excluding any Statement of Eligibility on Form T-1 (a "Form
T-1"), as to which no opinion need be rendered), as of their respective
effective or issue dates and, in the case of the First Registration
Statement, as of the effective date of the Post-Effective Amendment, complied
as to form in all material respects with the applicable requirements of the
1933 Act and the 1933 Act Regulations.
(vi) The documents incorporated or deemed to be incorporated by
reference in the Prospectuses (other than the financial statements, supporting
schedules and other financial data therein, as to which no opinion need be
rendered), when they were filed with the Commission, complied as to form in all
material respects with the applicable requirements of the 1934 Act and the 1934
Act Regulations.
A-1
(vii) The information in the Prospectuses under "Certain U.S. Federal
Income Tax Considerations to Holders of Common Stock," "Certain Federal Income
Tax Considerations" and in the Company's 1996 Form 10-K under "Business--Other
Items--Taxation of the Company" and "Business--Other Items--Effect of
Distribution Requirements," in each case to the extent that it constitutes
matters of law, summaries of legal matters, or legal conclusions, has been
reviewed by them and is correct in all material respects.
(viii) No authorization, approval, consent or order of any federal or
California state governmental authority or agency (other than under the 1933 Act
and the 1933 Act Regulations, which have been obtained, or as may be required
under the securities or blue sky laws of the various states, as to which no
opinion need be rendered) is required in connection with the due authorization,
execution or delivery of the U.S. Purchase Agreement or the International
Purchase Agreement or for the offering, issuance or sale of the Securities;
(ix) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement by the Company (including
the issuance and sale of the Securities to the U.S. Underwriters and the
International Underwriters and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use of
Proceeds") will not, whether with or without the giving of notice or lapse of
time or both, constitute a breach or violation of, or default or Repayment
Event under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, the Acquisition Credit Agreement or the Indenture
dated as of May 6, 1997, as amended between the Company and The Bank of New
York, as trustee, nor to the best of their knowledge and information, will
such action result in any violation of any applicable provision of any
federal or State of California law, statute, administrative regulation or
administrative or court decree applicable to the Company.
(x) The Company is not an "investment company" or, to the best of our
knowledge and information, an entity "controlled" by an "investment company," as
any such terms are defined in the ▇▇▇▇ ▇▇▇.
(xi) Commencing with the Company's taxable year ended December 31,
1994, the Company has been organized in conformity with the requirements for
qualification and taxation as a real estate investment trust under the Code and
its proposed method of operation will enable the Company to meet the
requirements for qualification and taxation as a real estate investment trust
under the Code.
(xii) Realty Income Texas Properties, L.P., a Delaware limited
partnership, is not and has never been treated as an association taxable as a
corporation for federal income tax purposes. Realty Income Texas Properties,
Inc., a Delaware corporation, is and has, at all times during its existence,
been treated as a "qualified REIT subsidiary" within the meaning of Section
856(i) of the Code.
(xiii) The Reincorporation (a) qualified as a reorganization under
Section 368(a)(1)(F) of the Code or (b) was a non-event for federal income tax
purposes, and
A-2
no gain or loss was or will be recognized by Realty Income Corporation, a
Delaware corporation and the predessor to the Company, or the Company for
federal income tax purposes as a result of the Reincorporation.
Although 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 or the Prospectuses and have not made any independent
judgment, check or verification thereof (except with respect to the opinion set
forth in paragraphs (vii), (xi), (xii) and (xiii) hereof), we have, however,
participated in conferences with certain officers and other representatives of
the Company, representatives of KPMG Peat Marwick LLP and your representatives
at which the Original Registration Statements, any Rule 462(b) Registration
Statement and the Prospectuses (including, in each case, the documents
incorporated or deemed to be incorporated by reference therein) and related
matters were discussed, and in the course of such conferences (relying in
connection with questions of materiality on representations of factual matters
of officers and other representatives of the Company), nothing has come to our
attention which has led us to believe that either of the Original Registration
Statements or any Rule 462(b) Registration Statement or any amendment thereto
(except for the financial statements, supporting schedules and other financial
data included therein and any Form T-1, as to which we express no belief), as of
the time such registration statement or any post-effective or other amendment
thereto 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, or that the Prospectuses or any
amendment or supplement thereto (except for the financial statements, supporting
schedules and other financial data included therein, as to which such counsel
express no belief), as of October 8, 1997 or as of the Closing Time (or, if
applicable, as of the relevant Date of Delivery), 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.
In rendering such opinion, such counsel may rely insofar as such opinion
involves factual matters, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. Such opinion shall
not state that it is to be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
The matters set forth in (vii), (xi), (xii) and (xiii) above may be covered
in one or more separate legal opinions, which may be subject to such
assumptions, limitations and qualifications as shall be satisfactory to counsel
for the U.S. Underwriters. In particular, the opinions set forth in paragraphs
(vii), (xi), (xii) and (xiii) above (the "Tax Opinions") may be conditioned upon
certain representations made by the Company as to factual matters through a
certificate of an officer of the Company (the "Officer's Certificate"). In
addition, the Tax Opinions may be based upon the factual representations of the
Company concerning its business and properties as set forth in the Original
Registration Statements and Prospectuses. The Tax Opinions may state that they
relate only to the federal income tax laws of the United States and such counsel
need not express any opinion with respect to the applicability thereto,
A-3
or the effect thereon, of other federal laws, the laws of any state or other
jurisdiction or as to any matters of municipal law or the laws of any other
local agencies within any state. The Tax Opinions may state that they are based
on various statutory provisions, regulations promulgated thereunder and
interpretations thereof by the Internal Revenue Service and the courts having
jurisdiction over such matters, all of which are subject to change either
prospectively or retroactively, that any such charge may affect the conclusions
stated therein, and that any variation or difference in the facts from those set
forth in the Original Registration Statements, the Prospectuses or the Officer's
Certificate may affect the conclusions stated therein. Moreover, the Tax
Opinions may state that the Company's qualification and taxation as a real
estate investment trust depends upon the Company's ability to meet (through
actual annual operating results, distribution levels and diversity of stock
ownership) the various qualification tests imposed under the Code, the results
of which have not been and will not be reviewed by such counsel, and,
accordingly, no assurance can be given that the actual results of the Company's
operation for any one taxable year will satisfy such requirements.
A-4
Exhibit B
FORM OF OPINION OF ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not have a Material Adverse Effect.
(ii) The only subsidiaries of the Company are Realty Income Texas
Properties, L.P., a Delaware limited partnership and Realty Income Texas
Properties, Inc., a Delaware corporation. Each of Realty Income Texas
Properties, L.P. and Realty Income Texas Properties, Inc. has been duly
organized and is validly existing as a partnership or corporation, as the
case may be, in good standing under the laws of the State of Delaware, has
power and authority as a partnership or corporation, as the case may be, to
own, lease and operate its properties and to conduct its business as
described in the Registration Statement and each such subsidiary is duly
qualified as a foreign partnership or corporation, as the case may be, to
transact business and is in good standing in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where failure so to qualify or
to be in good standing would not result in a Material Adverse Effect; and all
of the issued and outstanding partnership interests and shares of capital
stock, as the case may be, of each of Realty Income Texas Properties, L.P.
and Realty Income Texas Properties, Inc. have been duly authorized (if
applicable) and validly issued, are fully paid and non-assessable (except to
the extent that the general partners of Realty Income Texas Properties, L.P.
may be liable for the obligations of such partnership) and, to the best of my
knowledge and information, are owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity.
(iii) The information in the Company's annual report on Form 10-K for
the fiscal year ended December 31, 1996 under "Business--Other
Items--Environmental Matters," to the extent that it constitutes matters of
law, summaries of legal matters, instruments or agreements or legal
proceedings, or legal conclusions, has been reviewed by me and is correct in
all material respects.
(iv) To the best of my knowledge and information, there is not pending
or threatened any action, suit, proceeding, inquiry or investigation to which
the Company or any subsidiary is a party, or to which the property of the
Company or any subsidiary is subject, before or brought by any court or
governmental agency or authority, which could reasonably be expected to
result in a Material Adverse Effect, or which could reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of the U.S. Purchase Agreement or the International Purchase
Agreement or the performance by the Company of its obligations under the U.S.
Purchase Agreement or the International Purchase Agreement.
B-1
(v) All descriptions in the Prospectuses of leases, contracts and
other documents to which the Company or any subsidiary is a party are
accurate in all material respects.
(vi) To the best of my knowledge and information, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases
or other instruments required to be described in the Registration Statement
or to be filed as exhibits thereto other than those described therein or
filed or incorporated by reference as exhibits thereto, and the descriptions
thereof or references thereto are correct in all material respects.
(vii) To the best of my knowledge and information, neither the Company
nor any of its subsidiaries is in violation of its charter or bylaws or its
partnership agreement, as applicable, and no default by the Company or any of
its subsidiaries exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or
the Prospectuses or filed or incorporated by reference as an exhibit to the
Registration Statement.
(viii) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement by the Company (including
the issuance and sale of the Securities to the U.S. Underwriters and the
International Managers and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use of
Proceeds") and compliance by the Company with its obligations under the U.S.
Purchase Agreement and the International Purchase Agreement will not, whether
with or without the giving of notice or lapse of time or both, constitute a
breach or violation of, or default or Repayment Event under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to, any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument, known to me, to which the Company
or any of its subsidiaries is a party or by which it or any of them may be
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, except for such breaches, violations or defaults or
liens, charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or the
partnership agreement or charter or bylaws, as the case may be, of any of its
subsidiaries, or, to the best of my knowledge and information, any applicable
provision of any law, statute or administrative regulation of the State of
California, or, to the best of my knowledge and information, any judgment,
order, writ or decree of any government instrumentality or court, domestic or
foreign, applicable to the Company or any of its subsidiaries or any of their
respective properties, assets or operations.
In rendering such opinion, such counsel may rely as to matters of fact (but
not as to legal conclusions), to the extent he deems proper, on certificates of
responsible officers of the Company and public officials. Such opinion shall
not state that it is to be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
B-2
Exhibit C
FORM OF OPINION OF ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing
under the laws of the State of Maryland and is in good standing with the
State Department of Assessments and Taxation of Maryland. The Company has
the corporate power to own, lease and operate its current properties and to
conduct its business as described in the Prospectuses and to enter into and
perform its obligations under the U.S. Purchase Agreement and the
International Purchase Agreement (the "Purchase Agreements").
(ii) The authorized, issued and outstanding stock of the Company is
as set forth in the line items "Preferred Stock" and "Common Stock" under the
caption "Capitalization" in the Prospectuses (except for subsequent
issuances, if any, pursuant to the Purchase Agreements or pursuant to
employee benefit plans or the exercise of options referred to in the
Prospectuses). The shares of issued and outstanding Common Stock (the
"Outstanding Shares") have been duly authorized and validly issued and are
fully paid and non-assessable; and none of the Outstanding Shares was issued
in violation of preemptive rights arising under the Maryland General
Corporation Law (the "MGCL"), the charter or bylaws of the Company.
(iii) The U.S. Securities and the International Securities have been
duly authorized by all necessary corporate action on the part of the Company
for issuance and sale to the U.S. Underwriters and the International Managers
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement, respectively, and, when issued and delivered by the Company
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement against payment of the consideration set forth therein, will be
validly issued, fully paid and non-assessable.
(iv) The issuance of the Securities is not subject to preemptive
rights arising by operation of the laws of the State of Maryland or under the
charter or bylaws.
(v) The U.S. Purchase Agreement and the International Purchase
Agreement have been duly authorized by the Company, and each has been duly
executed and delivered by the Company.
(vi) The form of certificate used to represent shares of Common Stock
complies in all material respects with the applicable requirements of the laws
of the State of Maryland and the charter and bylaws.
C-1
(vii) Such counsel has reviewed the information in the Prospectuses
under "Description of Common Stock," "Description of Preferred Stock" and
"Restrictions on Ownership and Transfers of Capital Stock" and in the
Company's proxy statement dated March 28, 1997 under the caption "Proposal
1--Reincorporation of the Company in Maryland and Related Changes to Rights
of Stockholders--Comparison of Rights of Stockholders of the Company and
Stockholders of the Maryland Company," and in each case to the extent that
such information constitutes matters of Maryland law, summaries of Maryland
legal matters, summaries of certain provisions of the Company's charter or
bylaws or other instruments or agreements governed by Maryland law, or legal
conclusions with respect to matters of Maryland law, such information is
correct in all material respects.
(viii) No authorization, approval, consent or order of any Maryland
state government authority or agency (other than as may be required under
Maryland securities or blue sky laws) is required in connection with the due
authorization, execution or delivery of the U.S. Purchase Agreement or the
International Purchase Agreement or for the offering, issuance or sale of the
Securities;
(ix) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement by the Company (including
the issuance and sale of the Securities to the U.S. Underwriters and the
International Managers and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use of
Proceeds") do not result in any violation of the provisions of the charter or
bylaws or, so far as is known to such counsel, any applicable provision of
any Maryland law, statute, administrative regulation or administrative or
court decree applicable to the Company.
In rendering such opinion, such counsel shall state that each of ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ and ▇▇▇▇▇ & ▇▇▇▇ LLP, in rendering their opinions pursuant to the U.S.
Purchase Agreement and the International Purchase Agreement, may rely upon such
opinion of special Maryland counsel as to all matters arising under or governed
by the laws of the State of Maryland. In addition, in rendering such opinion,
such counsel may rely insofar as such opinion involves factual matters, to the
extent they deem proper, on certificates of responsible officers of the Company
and public officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991).
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