<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report: July 29, 1999
REALTY INCOME CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
Maryland 1-13318 33-0580106
-------- ------- ----------
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
220 West Crest Street, Escondido, California 92025
(Address of principal executive offices) (Zip Code)
(760) 741-2111
------------------
(Registrant's telephone number, including area code)
None
----
(former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
------------
Realty Income Corporation (the "Company") is filing this Current
Report on Form 8-K in connection with the issuance of up to 1,380,000 shares
of the Company's 9 1/2% Class C Cumulative Redeemable Preferred Stock (the
"Class C Preferred Stock"), pursuant to the shelf registration statement on
Form S-3 under the Securities Act of 1933, as amended (the "1933 Act"), filed
with the Securities and Exchange Commission (the "Commission") on June 16,
1999 (File No. 333-80821), as amended by Amendment No. 1 filed with the
Commission on July 13, 1999 (as so amended, the "Registration Statement").
The exhibits listed below are being listed herewith in lieu of filing them as
an exhibit to the Registration Statement, and, since this form is
incorporated by reference in the Registration Statement, such exhibits are
set forth in full in the Registration Statement.
Item 7. Exhibits.
--------
1.1 Purchase Agreement, dated July 27, 1999, between Merrill Lynch,
Pierce, Fenner & Smith Incorporated, A.G. Edwards & Sons, Inc.,
EVEREN Securities, Inc., First Union Capital Markets Inc., PaineWebber
Incorporated, Salomon Smith Barney Inc., and Sutro & Co. Incorporated,
and the Company.
4.1 Articles Supplementary to the Articles of Incorporation of the Company
classifying and designating the Class C Preferred Stock.
5.1 Opinion of Ballard Spahr Andrews and Ingersoll LLP
23.2 Consent of Ballard Spahr Andrews & Ingersoll LLP
(contained in the opinion filed as Exhibit 5.1
hereto).
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: July 29, 1999
REALTY INCOME CORPORATION
By: /s/ Michael R. Pfeiffer, Esq.
-----------------------------
Name: Michael R. Pfeiffer, Esq.
Title: Senior Vice President,
General Counsel and
Secretary
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C>
1.1 Purchase Agreement, dated July 27, 1999, between Merrill Lynch,
Pierce, Fenner & Smith Incorporated, A.G. Edwards & Sons, Inc.,
EVEREN Securities, Inc., First Union Capital Markets Inc.,
PaineWebber Incorporated, Salomon Smith Barney Inc., and Sutro &
Co. Incorporated, and the Company.
4.1 Articles Supplementary to the Articles of Incorporation of the Company
classifying and designating the Class C Preferred Stock.
5.1 Opinion of Ballard Spahr Andrews and Ingersoll LLP
23.2 Consent of Ballard Spahr Andrews & Ingersoll LLP
(contained in the opinion filed as Exhibit 5.1 hereto).
</TABLE>
<PAGE>
1,200,000 Shares
REALTY INCOME CORPORATION
9 1/2% Class C Cumulative Redeemable Preferred Stock
(Par Value $1.00 Per Share)
(Liquidation Preference $25.00 Per Share)
PURCHASE AGREEMENT
July 27, 1999
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
PAGE
<S> <C>
SECTION 1. Representations and Warranties.........................................................................3
(A) REPRESENTATIONS AND WARRANTIES BY THE COMPANY...................................................3
(i) Compliance with Registration Requirements..............................................3
(ii) Incorporated Documents.................................................................4
(iii) Independent Accountants................................................................4
(iv) Financial Statements...................................................................5
(v) No Material Adverse Change in Business.................................................5
(vi) Good Standing of the Company...........................................................5
(vii) Good Standing of Subsidiaries..........................................................5
(viii) Capitalization.........................................................................6
(ix) Authorization of Agreement.............................................................6
(x) Authorization of Common Stock..........................................................6
(xi) Absence of Defaults and Conflicts......................................................6
(xii) Absence of Labor Dispute...............................................................7
(xiii) Absence of Proceedings.................................................................7
(xiv) Accuracy of Exhibits...................................................................8
(xv) Possession of Intellectual Property....................................................8
(xvi) Absence of Further Requirements........................................................8
(xvii) Possession of Licenses and Permits.....................................................8
(xviii) Investment Company Act.................................................................9
(xix) Partnership Agreements.................................................................9
(xx) Properties.............................................................................9
(xxi) Insurance.............................................................................10
(xxii) Environmental Matters.................................................................11
(xxiii) Qualification as a Real Estate Investment Trust.......................................12
(xxiv) Registration Rights...................................................................12
(xxv) Tax Treatment of Certain Entities.....................................................12
(xxvi) Securities............................................................................12
(xxvii) Ranking of Securities.................................................................13
(xxviii) Articles Supplementary................................................................13
(B) OFFICER'S CERTIFICATES.........................................................................13
SECTION 2. Sale and Delivery to Underwriters; Closing............................................................13
(A) INITIAL SECURITIES.............................................................................13
(B) OPTION SECURITIES..............................................................................13
(C) PAYMENT. 14
(D) DENOMINATIONS; REGISTRATION....................................................................14
SECTION 3. Covenants of the Company..............................................................................14
(A) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS.................................14
(B) FILING OF AMENDMENTS...........................................................................15
(C) RULE 434.......................................................................................15
(D) DELIVERY OF REGISTRATION STATEMENTS............................................................15
(E) DELIVERY OF PROSPECTUSES.......................................................................15
i
<PAGE>
PAGE
(F) CONTINUED COMPLIANCE WITH SECURITIES LAWS......................................................16
(G) BLUE SKY QUALIFICATIONS........................................................................16
(H) RULE 158.......................................................................................16
(I) USE OF PROCEEDS................................................................................17
(J) LISTING........................................................................................17
(K) REPORTING REQUIREMENTS.........................................................................17
(L) RESTRICTION ON SALE OF SECURITIES..............................................................17
SECTION 4. Payment of Expenses...................................................................................17
(A) EXPENSES.......................................................................................17
(B) TERMINATION OF AGREEMENT.......................................................................18
SECTION 5. Conditions of Underwriters' Obligations...............................................................18
(A) EFFECTIVENESS OF REGISTRATION STATEMENTS.......................................................18
(B) OPINIONS OF COUNSEL FOR COMPANY................................................................18
(C) OPINION OF COUNSEL FOR UNDERWRITERS............................................................18
(D) OFFICERS' CERTIFICATE..........................................................................19
(E) ACCOUNTANT'S COMFORT LETTER....................................................................19
(F) BRING-DOWN COMFORT LETTER......................................................................19
(G) APPROVAL OF LISTING............................................................................19
(H) RATING REQUIREMENT.............................................................................19
(I) ARTICLES SUPPLEMENTARY.........................................................................20
(J) CONDITIONS TO PURCHASE OF OPTION SECURITIES....................................................20
(K) ADDITIONAL DOCUMENTS...........................................................................20
(L) TERMINATION OF AGREEMENT.......................................................................21
SECTION 6. Indemnification.......................................................................................21
(A) INDEMNIFICATION OF UNDERWRITERS................................................................21
(B) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS.............................................22
(C) ACTIONS AGAINST PARTIES; NOTIFICATION..........................................................22
(D) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE.............................................23
SECTION 7. Contribution..........................................................................................23
SECTION 8. Representations, Warranties and Agreements to Survive Delivery........................................24
SECTION 9. Termination of Agreement..............................................................................24
(A) TERMINATION; GENERAL...........................................................................24
(B) LIABILITIES....................................................................................25
ii
<PAGE>
PAGE
SECTION 10. Default by One or More of the Underwriters...........................................................25
SECTION 11. Notices..............................................................................................26
SECTION 12. Parties..............................................................................................26
SECTION 13. GOVERNING LAW AND TIME...............................................................................26
SECTION 14. Effect of Headings and Table of Contents.............................................................26
</TABLE>
iii
<PAGE>
1,200,000 Shares
REALTY INCOME CORPORATION
(a Maryland corporation)
9 1/2% Class C Cumulative Redeemable Preferred Stock
(Par Value $1.00 Per Share)
(Liquidation Preference $25.00 Per Share)
PURCHASE AGREEMENT
July 27, 1999
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
A.G. Edwards & Sons, Inc.
EVEREN Securities, Inc.
First Union Capital Markets Corp.
PaineWebber Incorporated
Salomon Smith Barney Inc.
Sutro & Co. Incorporated
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
Realty Income Corporation, a Maryland corporation (the "Company"),
confirms its agreement with the Underwriters named in Schedule A hereto (the
"Underwriters" which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), A.G.
Edwards & Sons, Inc., EVEREN Securities, Inc., First Union Capital Markets
Corp., PaineWebber Incorporated, Salomon Smith Barney Inc. and Sutro & Co.
Incorporated are acting as representatives (the "Representatives"), with respect
to the sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of shares of the Company's
Class C Cumulative Redeemable Preferred Stock, par value $1.00 per share (the
"Class C Preferred Stock"), set forth in said Schedule A, and with respect to
the grant by the Company to the Underwriters, acting severally and not jointly,
of the option described in Section 2(b) hereof to purchase all or any part of
180,000 additional shares of Preferred Stock to
<PAGE>
cover over-allotments, if any. The aforesaid 1,200,000 shares of Class C
Preferred Stock (the "Initial Securities") to be purchased by the
Underwriters and all or any part of the 180,000 shares of Preferred Stock
subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities." The
terms of the Securities will be set forth in articles supplementary (the
"Articles Supplementary") to be filed by the Company with the Maryland State
Department of Assessments and Taxation (the "SDAT").
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the 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. 333-34311) (the
"First Registration Statement") and Amendment No. 1 thereto and a
registration statement on Form S-3 (No. 333-80821) (the "Second Registration
Statement") and Amendment No. 1 thereto 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 prospectus supplement and, if
required by Rule 424(b) (as defined below), 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") in accordance
with the provisions of Rule 434 and Rule 424(b). 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 prospectus
supplement, relating to the Securities used before the Second Registration
Statement became effective, and each prospectus, together with the related
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
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 First Registration Statement 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 Statements" and, individually, a "Registration Statement." The
prospectus dated July 14, 1999 and the final prospectus supplement relating
to the offering of the Securities, including the documents incorporated by
2
<PAGE>
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the
form first furnished to the Underwriter for use in connection with the
offering of the Securities are herein called, collectively, the "Prospectus."
If Rule 434 is relied on, the term "Prospectus" shall refer to the prospectus
dated July 14, 1999, the preliminary prospectus supplement dated July 1999
and the Term Sheet and all documents incorporated by reference therein
pursuant to Item 12 of Form S-3, and all references in this Agreement to the
date of the Prospectus shall mean the date of the Term Sheet. For purposes of
this Agreement, all references to any Registration Statement, any preliminary
prospectus, the Prospectus or any Term Sheet or any amendment or supplement
to any of the foregoing shall be deemed to include any copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "described," "disclosed," "contained,"
"included" or "stated" in any Registration Statement, any preliminary
prospectus or the 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 such Registration Statement, such preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to any Registration Statement, any preliminary
prospectus or the 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 such Registration Statement, such preliminary prospectus or the
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 and RIC Properties Ltd., a California limited
partnership, into the Company on August 15, 1994; and "Merger" means the
merger of R.I.C. Advisor, Inc., a California corporation (the "Advisor"),
into the Company on August 17, 1995.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
represents and warrants to each 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
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 and any Rule 462(b) Registration
Statement have 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.
3
<PAGE>
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 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 the Trust Indenture Act of 1939, as amended (the
"1939 Act"), and the rules and regulations of the Commission under the 1939
Act (the "1939 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 Option Securities are purchased, at each Date of Delivery), neither the
Prospectus 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 Statements or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statements or Prospectus.
Each preliminary prospectus and Prospectus filed as part of any
Original 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 Prospectus delivered to the Underwriter for use in connection with this
offering was identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR 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 Statements and the
Prospectus, 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 Prospectus, at the date hereof and at the
Closing Time (and, if any 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
Statements are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iv) FINANCIAL STATEMENTS. The consolidated financial statements of
the Company included in the Registration Statements and the Prospectus,
together with the
4
<PAGE>
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 Statements 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 Prospectus
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 Statements. The Company's ratios of earnings to fixed
charges and, if applicable, ratios of earnings to combined fixed charges
and preferred stock dividends (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 Statements and
the Prospectus, 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, par value $1.00 per share, of the Company (the "Common
Stock") in amounts per share that are consistent with past practice and
regular quarterly dividends on the Company's Class B Preferred Stock (as
defined below) at the rate of 9 3/8% per annum, 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 Prospectus
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, and 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
been duly organized and is validly existing as a partnership or
corporation, as the case may be, in
5
<PAGE>
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 Prospectus; 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 Statements, 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 Prospectus (except for subsequent issuances, if
any, pursuant to this Agreement, pursuant to employee benefit plans
referred to in the Prospectus or pursuant to the exercise of options
referred to in the Prospectus).
(ix) AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) AUTHORIZATION OF COMMON STOCK. 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 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 Common Stock, the Company's authorized but
unissued Class A Junior Participating Preferred Stock, par value $1.00 per
share (the "Class A Preferred Stock"), the Company's 9 3/8% Class B
Cumulative Redeemable Preferred Stock, par value $1.00 per share (the
"Class B Preferred Stock"), and the Rights Agreement dated as of
June 25, 1998 (the "Rights Agreement") between the Company and The Bank of
New York conform to all statements relating thereto contained or
incorporated by reference in the Prospectus and such statements conform
to the rights set forth in the instruments defining the same.
(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,
6
<PAGE>
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 Articles Supplementary 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 Amended and Restated Revolving Credit Agreement dated as of
December 30, 1997 among the Company, the banks named therein and The Bank
of New York, as agent and swing line bank and BNY Capital Markets, Inc.,
as arranger, as amended by that certain letter agreement dated as of
November 13, 1998 extending the termination date and increasing the
commitments for certain lenders therein (as so amended, the "Acquisition
Credit Agreement"), as described in the Prospectus under the caption "Use
of Proceeds") 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 bylaws 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.
(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 Statements (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
performance by the Company of its obligations under this Agreement or the
Articles Supplementary; the aggregate of all pending legal or governmental
proceedings to which the Company or any
7
<PAGE>
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statements, 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 Statements, the Prospectus
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 Articles Supplementary, in
connection with the offering, issuance or sale of the Securities hereunder
or the consummation of the other transactions contemplated by this
Agreement or the Articles Supplementary, 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 and except for the filing of the
Articles Supplementary with SDAT.
(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,
8
<PAGE>
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 herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
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 Prospectus: (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 Prospectus 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 Prospectus, and
neither the Company nor any of its subsidiaries has received 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 any Registration Statement or the Prospectus
are disclosed therein, and all such liens, charges, encumbrances, claims or
restrictions which are not disclosed in the Prospectus 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,
9
<PAGE>
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 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 Prospectus 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 Prospectus 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 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
10
<PAGE>
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
Prospectus: (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 presence 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 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
11
<PAGE>
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 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 any Registration Statement or otherwise registered by the
Company under the 1933 Act, or included in the offering contemplated
hereby.
(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 and is not required to be qualified as a foreign
corporation in the State of Texas.
(xxvi) SECURITIES. The Securities have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and,
when issued and delivered by the
12
<PAGE>
Company pursuant to this Agreement against payment of the consideration
therefor set forth in this Agreement, will be validly issued, fully paid
and non-assessable; the Securities will conform to the statements
relating thereto contained in the Prospectus and such statements will
conform 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 or bylaws
of the Company, under any agreement or instrument to which the Company
or any of its subsidiaries is a party or otherwise.
(xxvii) RANKING OF SECURITIES. The Securities will rank, with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution, and winding up of the Company, senior to the
Common Stock and the Class A Preferred Stock, and on a parity with the
Class B Preferred Stock.
(xxviii) ARTICLES SUPPLEMENTARY. The Articles Supplementary will
have been duly filed with SDAT prior to the Closing Time.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of the
Company and delivered to the Representatives or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO 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 to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price set forth in Schedule B, the aggregate number
of Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
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 Underwriters,
severally and not jointly, to purchase up to an additional 180,000 shares of
Class C Preferred Stock at the price set forth in Schedule B. The option
hereby granted may be exercised through and including the 30th day 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 Securities upon notice by
the Representatives to the Company setting forth the number of Option
Securities as to which the several Underwriters are then exercising the
option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall
be determined by the Representatives, 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
Option Securities, each of the Underwriters, acting severally and not
jointly, will purchase that proportion of the total number of Option
Securities then being purchased which the aggregate number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter
bears to the aggregate number of all of the
13
<PAGE>
Initial Securities, subject in each case to such adjustments as the
Representatives in their 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 Securities shall be made at the office of
Latham & Watkins, 650 Town Center Drive, 20th Floor, Costa Mesa, California
92626-1925, or at such other place as shall be agreed upon by the
Representatives 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 Representatives
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 Option Securities
are purchased by the Underwriters, payment of the purchase price for, and
delivery of certificates for, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by
the Representatives and the Company, on each Date of Delivery as specified in
the notice from the Representatives to the Company.
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 Representatives for the respective accounts of the
Underwriters of certificates for the Securities to be purchased by them. It
is understood that each Underwriter has authorized the Representatives, for
its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Initial Securities and the Option Securities, if any,
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the Underwriters, may (but shall not be obligated to) make
payment of the purchase price for the Initial Securities and the Option
Securities, if any, to be purchased by any 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 Underwriter from
its obligations hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and
registered in such names as the 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 Securities and
the Option Securities, if any, will be made available for examination and
packaging by the 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
Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION
REQUESTS. The Company, subject to Section 3(b), will notify the
Representatives immediately, and confirm the notice in writing, (i) when
any post-effective amendment to any Original Registration Statement or
any Rule 462(b) Registration Statement shall become effective or any
supplement to the 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
14
<PAGE>
request by the Commission for any amendment to any Original Registration
Statement or any Rule 462(b) Registration Statement or any amendment or
supplement to the 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 any 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 the 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.
(b) FILING OF AMENDMENTS. The Company will give the
Representatives notice of its intention to file or prepare any amendment
to any Registration Statement (including any filing under Rule 462(b)),
any Term Sheet or any amendment, supplement or revision to either the
prospectus included in any Registration Statement at the time it became
effective or to the Prospectus, whether pursuant to the 1933 Act, the
1934 Act or otherwise, will furnish the Representatives 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 Representatives or counsel for the 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 Representatives and counsel for the Underwriters,
without charge, as many signed and conformed copies of the Registration
Statements 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 Representatives and counsel for the Underwriters may
reasonably request. The copies of the Registration Statements and each
amendment thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, if any, except to the extent permitted by Regulation
S-T.
(e) DELIVERY OF PROSPECTUSES. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary
prospectus as such 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 Underwriter, without charge,
during the period when the Prospectus is required to be delivered under
the 1933 Act or the 1934 Act, such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request.
The Prospectus and any
15
<PAGE>
amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, 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 and in
the Prospectus. 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 Underwriters or for the
Company, to amend any Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include any untrue
statements of a material fact or omit to state a material fact necessary
in order to make 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 any Registration Statement or amend or supplement the
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 such Registration Statement or the Prospectus comply with such
requirements, and the Company will furnish to the Underwriters such
number of copies of such amendment or supplement as the Underwriters may
reasonably request.
(g) BLUE SKY QUALIFICATIONS. The Company will use its best
efforts, in cooperation with the 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
Representatives 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 Prospectus under "Use of Proceeds."
16
<PAGE>
(j) LISTING. The Company will use its best efforts to effect the
listing of the Securities in the New York Stock Exchange.
(k) 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.
(l) RESTRICTION ON SALE OF SECURITIES. During the period from the
date of this Agreement through and including the Closing Time, the
Company will not, without the prior written consent of Merrill Lynch,
directly or indirectly, (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 Securities, any
other shares of the Company's preferred stock, par value $1.00 per share
("Preferred Stock"), any securities of the Company substantially similar
to the Securities or any depositary shares or depositary receipts
representing or evidencing any of the foregoing or any securities
convertible into, or exercisable or exchangeable for, any of the
foregoing, 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
Securities, Preferred Stock, other securities, depositary shares or
depositary receipts referred to clause (i) above, whether any such swap,
agreement or transaction described in clause (i) or (ii) above is to be
settled by delivery of Securities, other securities, in cash or
otherwise, other than the Securities sold to the Underwriters pursuant
to this Agreement.
SECTION 4. PAYMENT OF EXPENSES
(a) EXPENSES. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the word
processing, printing and filing of the Registration Statements (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the printing and delivery to the Underwriters of this Agreement
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, (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 Sheet and the
Prospectus 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
17
<PAGE>
"NASD") of the terms of the sale of the Securities, and (x) any fees payable
in connection with the rating of the Securities and the fees payable in
connection with the listing of the Securities on the New York Stock Exchange
(the "NYSE").
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) or 9(a)(v) hereof, the Company shall reimburse the Underwriters for
all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several 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 STATEMENTS. The Registration
Statements, including any Rule 462(b) Registration Statement, have
become effective not later than 5:30 P.M. on the date hereof and at
Closing Time (and, if any Option Securities are purchased, at the
relevant Date of Delivery) no stop order suspending the effectiveness of
any Original Registration Statement 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
Underwriters. If required by the 1933 Act or the 1933 Act Regulations,
the Prospectus 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
Representatives shall have received the favorable opinions, dated as of
Closing Time, of Latham & Watkins, counsel for the Company, Michael R.
Pfeiffer, Senior Vice President, General Counsel and Secretary of the
Company, and Ballard Spahr Andrews & Ingersoll, LLP, special Maryland
counsel to the Company, each in form and substance satisfactory to
counsel for the Underwriters, to the effect set forth in Exhibits A, B
and C hereto, respectively, and to such further effect as counsel to the
Underwriters may reasonably request pursuant to Section 5(k).
(c) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Brown & Wood LLP, counsel for the Underwriters, with
respect to the matters set forth in clauses (vi) and (vii) and the
antepenultimate paragraph of Exhibit A and the first sentence of clause
(i) and clauses (iii)(A), (iv), (v) and (vii) (solely as to the
statements under the captions "Description of Class C Preferred Stock"
and "Description of Preferred Stock") of Exhibit C. 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
Ballard Spahr Andrews & Ingersoll, LLP delivered pursuant to Section
5(b) and, as to all matters
18
<PAGE>
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 Representatives.
(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 Prospectus, 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, and the 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 Original Registration
Statement 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 Representatives shall have received from KPMG LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such
letter for each of the 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 Statements
and the Prospectus.
(f) BRING-DOWN COMFORT LETTER. At Closing Time, the
Representatives shall have received from KPMG LLP a letter, dated as of
the 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 the Closing Time.
(g) APPROVAL OF LISTING. At the Closing Time, the Securities shall
have been approved for listing on the NYSE, subject only to official
notice of issuance.
(h) RATING REQUIREMENT. At the date of this Agreement and at the
Closing Time, the Securities shall be rated at least "ba1" by Moody's
Investor's Service Inc. ("Moody's"), "BB+" by Standard & Poor's
Corporation ("S&P") and "BBB-" by Duff & Phelps ("D&P"), and the Company
shall have delivered to the Representative a letter, dated the Closing
Time, from each such rating agency, or other evidence satisfactory to
the Representative, confirming that the Securities have such ratings.
(i) ARTICLES SUPPLEMENTARY. At the Closing Time, the
Representatives shall have received evidence, in form and substance
satisfactory to them, that the Articles Supplementary shall have been
duly filed with, and accepted for record by, SDAT.
19
<PAGE>
(j) CONDITIONS TO PURCHASE OF OPTION SECURITIES. In the
event that the Underwriters exercise their option provided in Section
2(b) hereof to purchase all or any portion of the 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 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 Latham & Watkins, counsel for the Company, Michael R. Pfeiffer,
Senior Vice President, General Counsel and Secretary of the
Company, and Ballard Spahr Andrews & Ingersoll, LLP, special
Maryland counsel to the Company, each in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the 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 UNDERWRITERS. The favorable
opinion of Brown & Wood LLP, counsel for the Underwriters, dated
such Date of Delivery, relating to the 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 LLP, in
form and substance satisfactory to the Representatives and dated
such Date of Delivery, substantially in the same form and substance
as the letter furnished to the Representatives pursuant to Section
5(f) hereof, except that the specified date referred to shall be a
date not more than three business days prior to such Date of
Delivery.
(v) APPROVAL OF LISTING. At such Date of Delivery, the
Option Securities shall have been approved for listing on the NYSE.
(vi) RATING REQUIREMENT. At such Date of Delivery, the
Securities shall have been rated at least "ba1" by Moody's, at
least "BB+" by S&P and at least "BBB-" by D&P.
(k) ADDITIONAL DOCUMENTS. At the Closing Time and at each Date
of Delivery, counsel for the Underwriters shall have been furnished with
such documents and opinions as they may reasonably require for the
purpose of enabling them to pass upon 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
20
<PAGE>
with the issuance and sale of the Securities as herein contemplated
shall be satisfactory in form and substance to the Representatives and
counsel for the Underwriters.
(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 Option Securities on a Date of Delivery which occurs after
the Closing Time, the obligations of the several Underwriters to
purchase the relevant Option Securities, may be terminated by the
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 UNDERWRITERS. The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
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 any 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 the 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 Merrill
Lynch), 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
21
<PAGE>
statement or omission made in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Merrill Lynch
expressly for use in the Registration Statements (or any amendment thereto)
or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and PROVIDED FURTHER that this indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter, or any person controlling such Underwriter, if a copy of the
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 Underwriter to such person, if such is
required by law, at or prior to the written confirmation of the sale of such
Securities to such person and if the 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 Prospectus.
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS. Each Underwriter
severally agrees to indemnify and hold harmless the Company, its directors,
each of its officers who signed the Registration Statements, 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 any
Registration Statement (or any amendment thereto), including the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity
with written information furnished to the Company by such Underwriter through
Merrill Lynch expressly for use in the Registration Statements (or any
amendment thereto) or such preliminary prospectus or the 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
Merrill Lynch, 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 proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could
22
<PAGE>
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 Underwriters on the other hand from the
offering of the 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 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
Underwriters on the other hand in connection with the offering of the
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
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters,
in each case as set forth on the cover of the Prospectus (or, if Rule 434 is
used, the corresponding location on the Term Sheet) bear to the aggregate
initial public offering price of the 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 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 Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the
23
<PAGE>
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 Underwriter shall
be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which
such 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 1933 Act) 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 an
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 Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statements, 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
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial 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 Underwriter or controlling person,
or by or on behalf of the Company, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(and, if any Option Securities are purchased, at any time at or prior to the
relevant Date of Delivery, with respect to the obligation of the Underwriters
to purchase such Option Securities) (i) if there has been, since the time of
execution of this Agreement or since the respective dates as of which
information is given in the Prospectus, 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
24
<PAGE>
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
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 debt securities by any nationally
recognized securities rating agency, or any such securities rating agency has
publicly announced that it has under surveillance or review, with possible
negative implications or without indicating the direction of the possible
change, its rating of the Securities or any of the Company's 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 UNDERWRITERS. If one or more
of the Underwriters shall fail at the Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement on such date (the "Defaulted Securities"), the Representatives
shall have the right, within 24 hours thereafter, to make arrangements for
one or more of the non-defaulting 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 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 Securities to be purchased on such date, each of the
non-defaulting 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 Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligations of the Underwriters to purchase and of the and of
the Company to sell the Option Securities to be purchased and sold on
such Date of Delivery shall terminate without liability on the part of
any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
25
<PAGE>
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 is after the
Closing Time, which does not result in a termination of the obligations of
the Underwriters to purchase and the Company to sell the relevant Option
Securities, as the case may be, either the 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 Statements or Prospectus
or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an 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
Underwriters shall be directed to the Representatives at 10877 Wilshire
Boulevard, Suite 1900, Los Angeles, California 90024, Attention of Paul M.
Meurer; and notices to the Company shall be directed to it at Realty Income
Corporation, 220 West Crest Street, Escondido, California 92025-1725,
attention of Legal Department.
SECTION 12. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the 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
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 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 Securities
from any 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.
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.
26
<PAGE>
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 Underwriters and the Company in accordance with its
terms.
Very truly yours,
REALTY INCOME CORPORATION
By: /s/ Michael R. Pfeiffer
--------------------------------------
Michael R. Pfeiffer
Senior Vice President, General Counsel
and Secretary
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
A.G. EDWARDS & SONS, INC.
EVEREN SECURITIES, INC.
FIRST UNION CAPITAL MARKETS CORP.
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY INC.
SUTRO & CO. INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Paul M. Meurer
-----------------------------------
Authorized Signatory
For themselves and as Representatives of the
other Underwriters named in Schedule A hereto.
27
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
INITIAL
NAME OF UNDERWRITER SECURITIES
-------------------------- --------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................. 180,000
A.G. Edwards & Sons, Inc............................. 170,000
Everen Securities, Inc............................... 170,000
First Union Capital Markets Corp..................... 170,000
PaineWebber Incorporated............................. 170,000
Salomon Smith Barney Inc. 170,000
Sutro & Co. Incorporated............................. 170,000
==============
Total:...................................... 1,200,000
==============
</TABLE>
Sch A-1
<PAGE>
SCHEDULE B
PRICE SCHEDULE
1. The initial public offering price per share for the Securities
shall be $25.00 (the "Public Offering Price"), plus accrued dividends from July
30, 1999.
2. The purchase price per share for the Securities to be paid by
the several Underwriters shall be $24.2125 (being an amount equal to the Public
Offering Price set forth above less $0.7875 per share), plus, solely in the case
of any Option Securities which are purchased on a Date of Delivery after the
Closing Time, an amount equal to accrued and unpaid dividends on such Option
Securities to but excluding such Date of Delivery unless such Date of Delivery
is after a record date for the Class C Preferred Stock and on or prior to the
corresponding dividend payment date, in which case no additional amount will be
payable by the Underwriters in respect of accrued and unpaid dividends on such
Option Securities.
Sch B-1
<PAGE>
Exhibit A
FORM OF OPINION OF LATHAM & WATKINS
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) Realty Income Texas Properties, Inc. has been duly incorporated
under the laws of the State of Delaware and is validly existing as a
corporation and is, based solely on certificates from public officials, in
good standing under the laws of the State of Delaware and, Realty Income
Texas Properties, Inc. has power and authority as a corporation to own, lease
and operate its properties and to conduct its business as described in the
Registration Statements; and all of the issued and outstanding shares of
capital stock of Realty Income Texas Properties, Inc. have been duly
authorized and validly issued, are fully paid and non-assessable and, to the
best of our 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) Realty Income Texas Properties, L.P. has been duly formed and is
validly existing as a limited partnership under the laws of the State of
Delaware and is, based solely on certificates from public officials, in good
standing under the laws of the States of Delaware and Texas; Realty Income
Texas Properties, L.P. has power and authority as a limited partnership to
own, lease and operate its properties and to conduct its business as
described in the Registration Statements; and all of the issued and
outstanding partnership interests of Realty Income Texas Properties, L.P.
have been 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 our
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.
(iv) None of the outstanding shares of Common 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.
(v) 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.
(vi) Each of the Original Registration Statements and any Rule 462(b)
Registration Statement has been declared effective under the 1933 Act; to the
best of our knowledge and information, the Prospectus has 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.
A-1
<PAGE>
(vii) Each of the Original Registration Statements, any Rule 462(b)
Registration Statement and the Prospectus (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 we express no opinion),
as of their respective effective or issue dates, complied as to form in all
material respects with the applicable requirements of the 1933 Act and the
1933 Act Regulations.
(viii) The documents incorporated or deemed to be incorporated by
reference in the Prospectus (other than the financial statements, supporting
schedules and other financial data therein, as to which we express no
opinion), 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.
(ix) The information in the Prospectus under "Risk Factors--Adverse
Impact of Failure to Qualify as a REIT," "Risk Factors--Effect of
Distribution Requirements," "Material Federal Income Tax Considerations to
Holders of Class C Preferred Stock" and "Material Federal Income Tax
Considerations to Realty Income Corporation" and the information in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998 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 us and is correct in all material
respects.
(x) No authorization, approval, consent or order of any federal or
California state governmental authority or agency (other than under the 1933
Act, the 1933 Act Regulations, the 1939 Act and the 1939 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 we express no opinion) is
required in connection with the due authorization, execution or delivery of
the Purchase Agreement or for the offering, issuance or sale of the
Securities;
(xi) The execution, delivery and performance on or prior to the date
hereof of the Purchase Agreement and the Articles Supplementary by the
Company (including the issuance and sale of the Securities to the
Underwriters and the use of the proceeds from the sale of the Securities as
described in the Prospectus 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, the indenture dated as of May 6, 1997
between the Company and the Bank of New York ("BONY"), as trustee (the "1997
Indenture"), the indenture dated October 28, 1998 between the Company and
BONY, as trustee (the "1998 Indenture") or any securities outstanding under
the 1997 Indenture or the 1998 Indenture, nor to the best of our knowledge
and information, any applicable provision of any federal or State of
California law, statute, administrative regulation or administrative or court
decree applicable to the Company.
(xii) The Company is not an "investment company" as such term is defined
in the 1940 Act.
A-2
<PAGE>
(xiii) 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.
(xiv) 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.
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 Statements or the Prospectus and have not made any independent
judgment, check or verification thereof (except with respect to the opinion set
forth in paragraphs (ix), (xiii) and (xiv) hereof), we have, however,
participated in conferences with certain officers and other representatives of
the Company, representatives of KPMG LLP and your representatives at which the
Original Registration Statements, any Rule 462(b) Registration Statement and the
Prospectus (including, in each case, the documents incorporated or deemed to be
incorporated by reference therein) and any amendments or supplements to any of
the foregoing 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 Original Registration Statement, 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 Original Registration
Statement, any such Rule 462(b) Registration Statement or any such
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 Prospectus or any amendment or supplement thereto (except for the
financial statements, supporting schedules and other financial data included
therein, as to which we express no belief), as of July 27, 1999 or as of the
date of this opinion, 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 (ix) (with respect to the information under
the captions "Risk Factors--Adverse Impact of Failure to Qualify as a REIT,"
"Risk Factors--Effect of Distribution Requirements," "Material Federal Income
Tax Considerations to Holders of Class C
A-3
<PAGE>
Preferred Stock" and "Material Federal Income Tax Considerations to Realty
Income Corporation"), (xiii) and (xiv) 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
Underwriters. In particular, the opinions set forth in paragraphs (viii)
(with respect to the information under the captions referred to above), (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 Prospectus. 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, 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 change 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
Prospectus 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, asset
diversification, 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
<PAGE>
Exhibit B
FORM OF OPINION OF MICHAEL R. PFEIFFER
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) Realty Income Texas Properties, L.P. is not required to qualify as
a foreign partnership to transact business in any jurisdiction other than the
State of Texas and is not required to be in good standing in any jurisdiction
other than the States of Delaware and Texas; and Realty Income Texas
Properties, Inc. is not required to qualify as a foreign corporation to
transact business in any jurisdiction and is not required to be in good
standing in any jurisdiction other than the State of Delaware.
(iii) The information in the Prospectus under "Risk
Factors--Environmental Liabilities," "Risk Factors--Uninsured Loss" and "Risk
Factors--Compliance With Americans With Disabilities Act and Fire and Safety
Regulations" and in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 under "Business--Other Items--Environmental
Liabilities," 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 Purchase Agreement or the performance by the Company of
its obligations under the Purchase Agreement or the Articles Supplementary.
(v) All descriptions in the Prospectus 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 Statements
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
B-1
<PAGE>
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 any
Registration Statement or the Prospectus or filed or incorporated by
reference as an exhibit to any Registration Statement.
(viii) The execution, delivery and performance of the Purchase Agreement
and the Articles Supplementary by the Company (including the issuance and
sale of the Securities to the Underwriters and the use of the proceeds from
the sale of the Securities as described in the Prospectus under the caption
"Use of Proceeds") and compliance by the Company with its obligations under
the Purchase Agreement and the Articles Supplementary 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 bylaws 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). Such opinion shall
state that, insofar as it concerns the Articles Supplementary, such counsel
has assumed that the Articles Supplementary are governed by the laws of the
State of California.
B-2
<PAGE>
Exhibit C
FORM OF OPINION OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP
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 "SDAT"). The Company
has the corporate power to own, lease and operate its current properties and
to conduct its business as described in the Prospectus under the caption
"Business and Properties" and to enter into and perform its obligations under
the Purchase Agreement.
(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 Prospectus (except for subsequent issuances
pursuant to the Purchase Agreement or pursuant to employee benefit plans or
the exercise of options referred to in the Prospectus). 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") or the
charter or bylaws of the Company.
(iii) (A) The Securities have been duly authorized by all necessary
corporate action on the part of the Company for issuance and sale to the
Underwriters pursuant to the Purchase Agreement and, when issued and
delivered by the Company pursuant to the Purchase Agreement against payment
of the purchase price therefor specified in the Purchase Agreement, will be
validly issued, fully paid and non-assessable; and (B) the preferences,
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the Securities are
as set forth in the Articles Supplementary and none of such provisions is
prohibited by the laws of the State of Maryland or conflicts with the
Company's charter or bylaws.
(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 of the Company.
(v) The Purchase Agreement has been duly authorized, executed and, so
far as is known to us, delivered by the Company.
(vi) The form of certificate used to represent the Securities complies
in all material respects with the applicable requirements of the laws of the
State of Maryland and the charter and bylaws of the Company.
(vii) We have reviewed the information in the Prospectus under the
captions "Description of Class C Preferred Stock," "Description of Common
Stock," "Description of Preferred Stock" and "Restrictions on Ownership and
Transfers of Capital Stock", 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,
the Articles Supplementary, the Securities or other instruments or agreements
governed by Maryland
C-1
<PAGE>
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 Purchase Agreement or the
Articles Supplementary or for the offering, issuance or sale of the
Securities, except for the filing of the Articles Supplementary with, and
acceptance thereof for record by, the SDAT (which filing has been made with
and accepted for record by the SDAT in accordance with the MGCL).
(ix) The execution, delivery and performance of the Purchase Agreement
and the execution and filing of the Articles Supplementary by the Company
(including the issuance and sale of the Securities to the Underwriters and
the use of the proceeds from the sale of the Securities as described in the
Prospectus under the caption "Use of Proceeds") do not result in any
violation of the provisions of the charter or bylaws of the Company or, so
far as is known to us, 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 Latham
& Watkins and Brown & Wood LLP, in rendering their opinions pursuant to the
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).
C-2
<PAGE>
REALTY INCOME CORPORATION
ARTICLES SUPPLEMENTARY CLASSIFYING
SHARES OF
9 1/2% CLASS C CUMULATIVE REDEEMABLE PREFERRED STOCK
Realty Income Corporation, a Maryland corporation (the "Corporation"),
certifies to the State Department of Assessments and Taxation of Maryland (the
"Department") that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation (the "Board of Directors") by Article VI of the
charter of the Corporation filed with the Department on March 25, 1997 (the
"Charter") and Section 2-208 of the Maryland General Corporation Law ("MGCL"),
the Board of Directors of the Corporation has, by resolution duly adopted at
meetings duly called and held on July 14, 1999 and July 27, 1999, classified and
designated a separate class of unissued preferred stock of the Corporation,
$1.00 par value per share ("Preferred Stock"), to consist of 1,380,000 shares of
such class of Preferred Stock, and has provided for the issuance of such shares.
SECOND: The classification increases the number of shares classified as
Class C Preferred Stock from no shares immediately prior to the classification
to 1,380,000 shares immediately after the classification. The classification
decreases the number of shares classified as Preferred Stock from 16,240,000
shares immediately prior to the reclassification to 14,860,000 shares
immediately after the classification.
THIRD: The following is a description of the preferences, conversion
and other rights, voting powers, restrictions and limitations as to dividends
and other distributions, qualifications and terms and conditions of redemption,
which upon any restatement of the Charter shall be made part of Article VI of
the Charter, with any necessary or appropriate changes to the enumeration or
lettering of sections or subsections hereof:
9 1/2% CLASS C CUMULATIVE REDEEMABLE
PREFERRED STOCK
A. DESIGNATION AND NUMBER. A class of Preferred Stock, designated the
"9 1/2% Class C Cumulative Redeemable Preferred Stock" (the "Class C Preferred
Stock"), is hereby established. The number of shares of the Class C Preferred
Stock shall be 1,380,000 shares.
B. MATURITY. The Class C Preferred Stock has no stated maturity and
will not be subject to any sinking fund or mandatory redemption.
C. RANK. The Class C Preferred Stock will rank, with respect to rights
to the payment of dividends and the distribution of assets in the event of any
liquidation, dissolution or winding up of the Corporation, (i) senior to all
classes or series of common stock of the Corporation ("Common Stock"), senior to
the Corporation's Class A Junior Participating Preferred Stock, par value $1.00
per share (the "Class A Preferred Stock"), and senior to all other
<PAGE>
equity securities of the Corporation other than equity securities referred to in
clauses (ii) and (iii) of this sentence; (ii) on a parity with the Corporation's
9 3/8% Class B Cumulative Redeemable Preferred Stock and with all equity
securities of the Corporation the terms of which specifically provide that such
equity securities rank on a parity with the Class C Preferred Stock with respect
to rights to the payment of dividends and the distribution of assets in the
event of any liquidation, dissolution or winding up of the Corporation; and
(iii) junior to all equity securities of the Corporation the terms of which
specifically provide that such equity securities rank senior to the Class C
Preferred Stock with respect to rights to the payment of dividends and the
distribution of assets in the event of any liquidation, dissolution or winding
up of the Corporation. The term "equity securities" does not include convertible
debt securities.
D. DIVIDENDS.
(1) Holders of shares of the Class C Preferred Stock are entitled to
receive, when, as, and if authorized by the Board of Directors and declared by
the Corporation, out of funds of the Corporation legally available for the
payment of dividends, cumulative cash dividends at the rate of 9 1/2% of the
Liquidation Preference (as defined below) per annum (equivalent to an annual
rate of $2.375 per share). Dividends on the Class C Preferred Stock shall accrue
daily, shall accrue and be cumulative from July 30, 1999 (the "Original Issue
Date") and shall be payable monthly in arrears on the last day of each month
(each a "Dividend Payment Date"), commencing August 31, 1999; provided that if
any Dividend Payment Date is not a Business Day (as defined below), then the
dividend which would otherwise have been payable on such Dividend Payment Date
may be paid on the next succeeding Business Day with the same force and effect
as if paid on such Dividend Payment Date and no interest or additional dividends
or other sum shall accrue on the amount so payable for the period from and after
such Dividend Payment Date to such next succeeding Business Day. The period from
and including the Original Issue Date to but excluding the first Dividend
Payment Date, and each subsequent period from and including a Dividend Payment
Date to but excluding the next succeeding Dividend Payment Date, is hereafter
called a "Dividend Period." Any dividend payable on the Class C Preferred Stock,
including dividends payable for any partial dividend period, will be computed on
the basis of a 360-day year consisting of twelve 30-day months. Dividends will
be payable to holders of record as they appear in the stock records of the
Corporation at the close of business on the applicable record date, which shall
be the 15th day of the calendar month in which the applicable Dividend Payment
Date falls (each, a "Dividend Record Date"). Notwithstanding any provision to
the contrary contained herein, each outstanding share of Class C Preferred Stock
shall be entitled to receive, and shall receive, a dividend with respect to any
Dividend Record Date equal to the dividend paid with respect to each other share
of Class C Preferred Stock which is outstanding on such date. The dividends
payable on any Dividend Payment Date shall include dividends accrued to but
excluding such Dividend Payment Date.
"Business Day" shall mean any day, other than a Saturday or Sunday,
that is not a day on which banking institutions in The City of New York are
authorized or required by law, regulation or executive order to close. All
references herein to "accrued and unpaid" dividends or "accumulated and unpaid"
dividends on the Class C Preferred Stock (and all references of like import)
shall include, unless otherwise expressly stated or the context otherwise
requires, both
2
<PAGE>
accrued dividends and accumulated dividends, if any, on the Class C Preferred
Stock; and all references herein to "accrued and unpaid" dividends or
"accumulated and unpaid" dividends on any other class or series of stock of the
Corporation shall include, if (and only if) such class or series of stock
provides for cumulative dividends and unless otherwise expressly stated or the
context otherwise requires, accumulated dividends, if any, on such class or
series of stock.
(2) No dividends on shares of Class C Preferred Stock shall be
authorized by the Board of Directors or paid or set apart for payment by the
Corporation at any time when the terms and provisions of any agreement of the
Corporation, including any agreement relating to its indebtedness, prohibits
such authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a breach of
or a default under any such agreement, or if such authorization, payment or
setting apart shall be restricted or prohibited by law.
(3) Anything in these terms of the Class C Preferred Stock to the
contrary notwithstanding, dividends on the Class C Preferred Stock will accrue
and be cumulative from the Original Issue Date, whether or not the Corporation
has earnings, whether or not there are funds legally available for the payment
of such dividends and whether or not such dividends are declared. No interest,
or sum in lieu of interest, shall be payable in respect of any dividend payment
or payments on the Class C Preferred Stock which may be in arrears, and holders
of the Class C Preferred Stock will not be entitled to any dividends, whether
payable in cash, securities or other property, in excess of full cumulative
dividends described above. Any dividend payment made on the Class C Preferred
Stock shall first be credited against the earliest accrued but unpaid dividend
due with respect to the Class C Preferred Stock.
(4) If, for any taxable year, the Corporation elects to designate as a
"capital gain dividend" (as defined in Section 857 of the Internal Revenue Code
of 1986, as amended (the "Code")) any portion (the "Capital Gains Amount") of
the dividends (as determined for federal income tax purposes) paid or made
available for the year to holders of all classes of the Corporation's stock (the
"Total Dividends"), then that portion of the Capital Gains Amount that shall be
allocable to the holders of Class C Preferred Stock shall be in proportion to
the amount that the total dividends (as determined for federal income tax
purposes) paid or made available to the holders of the Class C Preferred Stock
for the year bears to the Total Dividends. The Corporation will make a similar
allocation with respect to any undistributed long-term capital gains of the
Corporation which are to be included in its stockholders' long-term capital
gains, based on the allocation of the Capital Gains Amount which would have
resulted if such undistributed long-term capital gains had been distributed as
"capital gains dividends" by the Corporation to its stockholders.
(5) No full dividends will be declared or paid or set apart for payment
on any class or series of Preferred Stock ranking, as to dividends, on a parity
with or junior to the Class C Preferred Stock for any period unless full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof is set apart for such
payment on the Class C Preferred Stock for all past Dividend Periods and the
then current Dividend Period. When dividends are not paid in full (or a sum
sufficient for such full payment
3
<PAGE>
is not so set apart) upon the Class C Preferred Stock and the shares of any
other class or series of Preferred Stock ranking on a parity as to dividends
with the Class C Preferred Stock, all dividends declared upon the Class C
Preferred Stock and any other class or series of Preferred Stock ranking on a
parity as to dividends with the Class C Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share of Class C Preferred
Stock and such other class or series of Preferred Stock shall in all cases bear
to each other the same ratio that accrued and unpaid dividends per share on the
Class C Preferred Stock and such other class or series of Preferred Stock
(which, in the case of any such other class or series of Preferred Stock, shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such other class or series of Preferred Stock does not have a
cumulative dividend) bear to each other.
(6) Except as provided in the immediately preceding paragraph, unless
full cumulative dividends on the Class C Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for such payment for all past Dividend Periods and
the then current Dividend Period, no dividends (other than in shares of Common
Stock or other shares of stock of the Corporation ranking junior to the Class C
Preferred Stock as to dividends and as to the distribution of assets upon
liquidation, dissolution and winding up of the Corporation) shall be declared or
paid or set aside for payment nor shall any other distribution be declared or
made on the Common Stock or any other class or series of stock of the
Corporation ranking junior to or on a parity with the Class C Preferred Stock as
to dividends or as to the distribution of assets upon liquidation, dissolution
or winding up of the Corporation nor shall any shares of Common Stock or shares
of any other class or series of stock of the Corporation ranking junior to or on
a parity with the Class C Preferred Stock as to dividends or as to the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation be redeemed, purchased or otherwise acquired for any consideration
(or any amounts be paid to or made available for a sinking fund for the
redemption of any such shares of any such stock) by the Corporation (except by
conversion into or exchange for other stock of the Corporation ranking junior to
the Class C Preferred Stock as to dividends and as to the distribution of assets
upon liquidation, dissolution and winding up of the Corporation and except for
purchases of stock of the Corporation pursuant to Paragraph I hereof for the
purpose of preserving the Corporation's qualification as a REIT (as defined
below) for federal and/or state income tax purposes, or pursuant to comparable
Charter provisions with respect to other classes or series of the Corporation's
stock).
E. RESERVED.
F. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of the
outstanding shares of Class C Preferred Stock shall be entitled to receive and
to be paid out of the assets of the Corporation legally available for
distribution to its shareholders a liquidation preference of $25 per share (the
"Liquidation Preference"), plus an amount equal to any accrued and unpaid
dividends to the date of payment, before any distribution of assets or payment
is made to holders of Common Stock or any other class or series of
4
<PAGE>
stock of the Corporation that ranks junior to the Class C Preferred Stock with
respect to the distribution of assets upon liquidation, dissolution or winding
up of the Corporation, but subject to the preferential rights of the holders of
shares of any class or series of stock of the Corporation ranking senior to the
Class C Preferred Stock with respect to such distribution of assets upon
liquidation, dissolution or winding up. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation legally available therefor are insufficient to pay the full amount
of liquidating distributions payable on all outstanding shares of Class C
Preferred Stock and the full amount of the liquidating distributions payable on
all outstanding shares of any other classes or series of stock of the
Corporation ranking on a parity with the Class C Preferred Stock with respect to
the distribution of assets upon liquidation, dissolution or winding up of the
Corporation, then the holders of the Class C Preferred Stock and all such other
classes or series of stock will share ratably in any such distribution of assets
in proportion to the full liquidating distributions (including, if applicable,
accrued and unpaid dividends) to which they would otherwise respectively be
entitled.
If liquidating distributions shall have been made in full to all
holders of Class C Preferred Stock, the remaining assets of the Corporation
shall be distributed among the holders of any other classes or series of stock
of the Corporation ranking junior to the Class C Preferred Stock as to the
distribution of assets upon liquidation, dissolution or winding up, according to
their respective rights and preferences and, in each case, according to their
respective number of shares.
For purposes of these terms of the Class C Preferred Stock, neither the
consolidation or merger of the Corporation with or into any other company, trust
or other entity, nor the sale, lease, transfer or conveyance of all or
substantially all of the property or business of the Corporation, shall be
deemed to constitute a liquidation, dissolution or winding up of the
Corporation.
After payment to the holders of the Class C Preferred Stock of the full
liquidating distributions to which they are entitled, the holders of the Class C
Preferred Stock, as such, shall have no right or claim to any of the remaining
assets of the Corporation.
In determining whether a distribution (other than upon voluntary or
involuntary liquidation, dissolution or winding up of the Corporation) by
dividend, redemption or other acquisition of shares of stock of the Corporation
or otherwise is permitted under the MGCL, no effect shall be given to amounts
that would be needed if the Corporation would be dissolved at the time of the
distribution, to satisfy the preferential rights upon distribution of holders of
Class C Preferred Stock.
G. REDEMPTION.
(1) The Class C Preferred Stock is not redeemable prior to July 30,
2004; provided that the foregoing shall not prevent or limit the ability of the
Corporation to purchase Class C Preferred Stock pursuant to these terms of the
Class C Preferred Stock in order to preserve the qualification of the
Corporation as a REIT for federal and/or state income tax purposes or otherwise
affect the application of such terms to the Class C Preferred Stock. On and
after July 30, 2004, the Corporation, at its option, upon not less than 30 nor
more than 60 days' written notice, may redeem shares of the Class C Preferred
Stock, in whole or in part, at any time
5
<PAGE>
or from time to time, for cash at a redemption price of $25 per share, plus
accrued and unpaid dividends thereon to the date fixed for redemption. The
redemption price (other than the portion thereof consisting of accrued and
unpaid dividends) is payable solely out of the sale proceeds of other stock of
the Corporation. For purposes of the preceding sentence, "stock" means any
common stock, Preferred Stock (other than Class C Preferred Stock), interests,
participations or other ownership interests (however designated), depositary
shares representing any of the foregoing, and any rights (other than debt
securities convertible into or exchangeable for equity securities) or options to
purchase any of the foregoing. Holders of Class C Preferred Stock to be redeemed
shall surrender certificates representing such Class C Preferred Stock at the
place designated in such notice and shall thereafter be entitled to receive the
redemption price and any accrued and unpaid dividends payable upon such
redemption. If notice of redemption of any shares of Class C Preferred Stock has
been given and if the funds necessary for such redemption have been irrevocably
set aside by the Corporation, separate and apart from its other funds, in trust
for the benefit of the holders of the shares of Class C Preferred Stock so
called for redemption, then from and after the redemption date (unless default
shall be made by the Corporation in providing for the payment of the redemption
price plus accrued and unpaid dividends, if any), dividends will cease to accrue
on such shares of Class C Preferred Stock, such shares of Class C Preferred
Stock shall no longer be deemed outstanding and all rights of the holders of
such shares will terminate, except the right to receive the redemption price
plus accrued and unpaid dividends, if any. In the event that any redemption date
shall not be a Business Day, then payment of the redemption price plus, if
applicable, accrued and unpaid dividends, if any, need not be made on such
redemption date but may be made on the next succeeding Business Day with the
same force and effect as if made on such redemption date and no interest,
additional dividends or other sums shall accrue on the amount so payable for the
period from and after such redemption date to such next succeeding Business Day.
If less than all of the outstanding shares of Class C Preferred Stock are to be
redeemed, the shares of Class C Preferred Stock to be redeemed shall be selected
pro rata (as nearly as may be practicable without creating fractional shares) or
by any other equitable method determined by the Corporation but that will not
result in the automatic transfer of any shares of Class C Preferred Stock to a
Trust (as hereinafter defined) pursuant Paragraph I of these terms of the Class
C Preferred Stock.
Anything herein to the contrary notwithstanding, and except as
otherwise required by law, the persons who were the holders of record of shares
of Class C Preferred Stock at the close of business on a Dividend Record Date
will be entitled to receive the dividend payable on the corresponding Dividend
Payment Date notwithstanding the redemption of those shares after such Dividend
Record Date and on or prior to such Dividend Payment Date or the default by the
Corporation in the payment of the dividend due on that Dividend Payment Date, in
which case the amount payable upon redemption of such shares of Class C
Preferred Stock will not include such dividend, and the full amount of the
dividend payable for the applicable Dividend Period shall instead be paid on
such Dividend Payment Date to the holders of record at the close of business on
such Dividend Record Date as aforesaid. Except as provided in this paragraph and
except to the extent that accrued and unpaid dividends are payable upon
redemption pursuant to the preceding paragraph, the Corporation will make no
payment or allowance for unpaid dividends, whether or not in arrears, on shares
of Class C Preferred Stock called for redemption.
6
<PAGE>
(2) Unless full cumulative dividends on all outstanding shares of Class
C Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past Dividend Periods and the then current Dividend Period, no shares of
Class C Preferred Stock shall be redeemed unless all outstanding shares of Class
C Preferred Stock are simultaneously redeemed and the Corporation shall not
purchase or otherwise acquire directly or indirectly any shares of Class C
Preferred Stock (except by exchange for stock of the Corporation ranking junior
to the Class C Preferred Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution and winding up of the
Corporation); PROVIDED, HOWEVER, that the foregoing shall not prevent the
purchase by the Corporation of shares of Class C Preferred Stock pursuant to
Paragraph I of these terms of the Class C Preferred Stock in order to preserve
the qualification of the Corporation as a REIT for federal and/or state income
tax purposes, or the purchase or acquisition of shares of Class C Preferred
Stock pursuant to a purchase or exchange offer made on the same terms to the
holders of all outstanding shares of Class C Preferred Stock. In addition,
unless full cumulative dividends on all outstanding shares of Class C Preferred
Stock have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past Dividend
Periods and the then current Dividend Period, the Corporation shall not purchase
or otherwise acquire, directly or indirectly, any shares of Class C Preferred
Stock (except by conversion into or exchange for stock of the Corporation
ranking junior to the Class C Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution and
winding up of the Corporation); PROVIDED, that the foregoing shall not prevent
the purchase by the Corporation of shares of Class C Preferred Stock pursuant to
Paragraph I of these terms of the Class C Preferred Stock in order to preserve
the qualification of the Corporation as a REIT for federal and/or state income
tax purposes, or the purchase or acquisition by the Corporation of shares of
Class C Preferred Stock pursuant to a purchase or exchange offer made on the
same terms to the holders of all outstanding shares of Class C Preferred Stock.
So long as no dividends are in arrears, the Corporation shall be entitled at any
time and from time to time to repurchase shares of Class C Preferred Stock in
open-market transactions duly authorized by the Board of Directors and effected
in compliance with applicable laws.
(3) Notice of redemption will be given by publication in The Wall
Street Journal or, if such newspaper is not then being published, another
newspaper of general circulation in The City of New York, such publication to be
made once a week for two successive weeks commencing not less than 30 nor more
than 60 days prior to the redemption date. A similar notice furnished by the
Corporation will be mailed, postage prepaid, not less than 30 nor more than 60
days prior to the redemption date, addressed to the holders of record of the
Class C Preferred Stock to be redeemed at their addresses as they appear on the
stock transfer records of the transfer agent. No failure to give such notice or
any defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any shares of Class C Preferred Stock except
as to the holder to whom notice was defective or not given. Each notice shall
state: (i) the redemption date; (ii) the redemption price and whether or not
accrued and unpaid dividends will be payable to holders surrendering shares of
Class C Preferred Stock or to the persons who were holders of record at the
close of business on the relevant Dividend Record Date; (iii) the number of
shares of Class C Preferred Stock to be redeemed; (iv) the place or places
(which shall include a place
7
<PAGE>
in the Borough of Manhattan, The City of New York) where the Class C Preferred
Stock is to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date. If less than all of the shares of Class C Preferred Stock held by any
holder are to be redeemed, the notice mailed to such holder shall also specify
the number of shares of Class C Preferred Stock held by such holder to be
redeemed.
Upon surrender, in accordance with such notice, of the certificates
representing any shares of Class C Preferred Stock to be so redeemed (properly
endorsed or assigned for transfer, if the Corporation shall so require and the
notice shall so state), such shares of Class C Preferred Stock shall be redeemed
by the Corporation at the redemption price plus, except as provided in the
second paragraph of Subparagraph G(1) above, accrued and unpaid dividends, if
any. In case fewer than all the shares of Class C Preferred Stock represented by
any such certificate are redeemed, a new certificate or certificates shall be
issued representing the unredeemed shares of Class C Preferred Stock without
cost to the holder thereof.
H. VOTING RIGHTS.
(1) Holders of the Class C Preferred Stock will not have any
voting rights, except as set forth below.
(2) Whenever dividends on any shares of Class C Preferred Stock shall
be in arrears for 18 or more Dividend Periods, whether or not such Dividend
Periods are consecutive, the number of directors then constituting the Board of
Directors shall be automatically increased by two (if not already increased by
two by reason of the election of directors by the holders of any other class or
series of Preferred Stock upon which like voting rights have been conferred and
are exercisable and with which the Class C Preferred Stock is entitled to vote
as a class with respect to the election of such two directors) and the holders
of shares of Class C Preferred Stock (voting separately as a class with all
other classes or series of Preferred Stock upon which like voting rights have
been conferred and are exercisable and which are entitled to vote as a class
with the Class C Preferred Stock in the election of such two directors) will be
entitled to vote for the election of such two directors to the Board of
Directors at a special meeting called by an officer of the Corporation at the
request of the holders of record of at least 10% of the outstanding shares of
Class C Preferred Stock or by the holders of any other class or series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable and which is entitled to vote as a class with the Class C Preferred
Stock in the election of such two directors (unless such request is received
less than 90 days before the date fixed for the next annual or special meeting
of stockholders, in which case the vote for such two directors shall be held at
the earlier of the next such annual or special meeting of stockholders), and at
each subsequent annual meeting of stockholders until all dividends accumulated
on the Class C Preferred Stock for all past Dividend Periods and the then
current Dividend Period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment, whereupon the right of
the holders of Class C Preferred Stock to elect such two directors shall cease
and (unless there are one or more other classes or series of Preferred Stock of
the Corporation upon which like voting rights have been conferred and remain
exercisable) the terms of office of such persons so elected as directors shall
automatically terminate and the authorized number of directors of the
Corporation shall
8
<PAGE>
thereupon be reduced accordingly, but subject always to the same provisions for
the reinstatement and divestment of the right to elect such two additional
directors in the case of any such future dividend arrearage.
In the case of any such request for a special meeting (unless such
request is received less than 90 days before the date fixed for the next annual
or special meeting of stockholders), such meeting shall be held on the earliest
practicable date at the place within the United States designated by the holders
of Class C Preferred Stock requesting such meeting or, if none, at a place
within the United States designated by the Secretary of the Corporation, upon
notice similar to that required for an annual meeting of stockholders. If such
special meeting is not called by an officer of the Corporation within 30 days
after such request, then the holders of record of at least 10% of the
outstanding shares of Class C Preferred Stock may designate in writing a holder
of Class C Preferred Stock to call such meeting at the expense of the
Corporation and such meeting may be called by the holder so designated upon
notice similar to that required for annual meetings of stockholders and shall be
held at the place within the United States designated by the holder calling such
meeting. At all times that the voting rights conferred by this Subparagraph H(2)
are exercisable, the holders of Class C Preferred Stock shall have reasonable
access to the preferred stock transfer records of the Corporation. The
Corporation shall pay all costs and expenses of calling and holding any meeting
and of electing directors pursuant to this Subparagraph H(2), including, without
limitation, the cost of preparing, reproducing and mailing the notice of such
meeting, the cost of renting a room for such meeting to be held, and the cost of
collecting and tabulating votes.
The provisions of this Subparagraph H(2) supersede anything
inconsistent contained in the Charter or Bylaws of the Corporation.
If, at any time when the voting rights conferred upon the Class C
Preferred Stock pursuant to this Subparagraph H(2) are exercisable, any vacancy
in the office of a director elected pursuant to this Subparagraph H(2) shall
occur, then such vacancy may be filled only by the remaining such director or by
vote of the holders of record of the outstanding Class C Preferred Stock and any
other classes or series of Preferred Stock of the Corporation upon which like
voting rights have been conferred and are exercisable and which are entitled to
vote as a class with the Class C Preferred Stock in the election of directors
pursuant to this Subparagraph H(2). Any director elected or appointed pursuant
to this Subparagraph H(2) may be removed only by the affirmative vote of holders
of the outstanding Class C Preferred Stock and any other classes or series of
Preferred Stock of the Corporation upon which like voting rights have been
conferred and are exercisable and which are entitled to vote as a class with the
Class C Preferred Stock in the election of directors pursuant to this
Subparagraph H(2), such removal to be effected by the affirmative vote of a
majority of the votes entitled to be cast by the holders of the outstanding
Class C Preferred Stock and any such other classes or series of Preferred Stock,
and may not be removed by the holders of the Common Stock.
(3) So long as any shares of Class C Preferred Stock remain
outstanding, the Corporation shall not, without the consent or the affirmative
vote of the holders of at least two-thirds of the shares of the Class C
Preferred Stock outstanding at the time, given in person or by
9
<PAGE>
proxy, either in writing or at a meeting (with the Class C Preferred Stock
voting separately as a class), (i) authorize, create or issue, or increase the
authorized or issued amount of, any class or series of stock of the Corporation
ranking senior to the Class C Preferred Stock with respect to the payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up of the Corporation, or reclassify any authorized stock of the Corporation
into any such shares, or create, authorize or issue any obligation or security
convertible into, exchangeable or exercisable for, or evidencing the right to
purchase, any such shares or (ii) amend, alter or repeal any of the provisions
of the Charter, including without limitation, any of these terms of the Class C
Preferred Stock, so as to materially and adversely affect any right, preference,
privilege or voting power of the Class C Preferred Stock or the holders thereof
or (iii) enter into any share exchange that affects shares of Class C Preferred
Stock, or consolidate with or merge into any other entity, or permit any other
entity to consolidate with or merge into the Corporation, unless in each such
case described in this clause (iii) each share of Class C Preferred Stock then
outstanding remains outstanding without a material adverse change to its terms
and rights or is converted into or exchanged for preferred stock of the
surviving or resulting entity having preferences, rights, dividends, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption identical to those of the Class C Preferred Stock;
PROVIDED, HOWEVER, that any amendment to the Charter to authorize any increase
in the amount of the authorized Preferred Stock or Common Stock or the creation
or issuance of any other class or series of Preferred Stock or any increase in
the amount of authorized or outstanding shares of Class C Preferred Stock or any
other class or series of Preferred Stock, in each case ranking on a parity with
or junior to the Class C Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution and
winding up of the Corporation, shall not be deemed to materially and adversely
affect any right, preference, privilege or voting power of the Class C Preferred
Stock or the holders thereof. For purposes of this paragraph, the filing in
accordance with applicable law of articles supplementary or any similar document
setting forth or changing the designations, preferences, conversion or other
rights, voting powers, restrictions, limitation as to dividends and other
distributions, qualifications or other terms of any class or series of stock of
the Corporation shall be deemed an amendment to the Charter.
(4) The foregoing voting provisions will not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of Class C Preferred Stock
shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been irrevocably deposited in trust to effect such
redemption in accordance with the provisions of Subparagraph G(1) hereof.
(5) Except as expressly stated in these terms of the Class C Preferred
Stock, the Class C Preferred Stock will not have any relative, participating,
optional or other voting rights or powers, and the consent of the holders
thereof shall not be required for the taking of any corporate action.
(6) On each matter submitted to a vote of the holders of Class C
Preferred Stock or on which the holders of Class C Preferred Stock are otherwise
entitled to vote, including any action by written consent, each share of Class C
Preferred Stock shall be entitled to one vote, except that when shares of any
other class or series of Preferred Stock of the Corporation have the right
10
<PAGE>
to vote with the Class C Preferred Stock as a single class on any matter, the
Class C Preferred Stock and the shares of each such other class or series will
have one vote for each $25.00 of liquidation preference (excluding accrued and
unpaid dividends).
(7) The Class A Preferred Stock shall not be entitled to vote as a
class with the Class C Preferred Stock on any matter described in this Paragraph
H.
I. RESTRICTIONS ON OWNERSHIP AND TRANSFER TO PRESERVE TAX BENEFIT.
(1) DEFINITIONS. For the purposes of Paragraph I of these terms of the
Class C Preferred Stock, the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Class C Preferred Stock
by a Person who is or would be treated as an owner of such Class C Preferred
Stock either actually or constructively through the application of Section 544
of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms
"Beneficial Owner," "Beneficially Own," "Beneficially Owns" and "Beneficially
Owned" shall have correlative meanings.
"Charitable Beneficiary" shall mean one or more beneficiaries of a
Trust, as determined pursuant to Subparagraph I(3)(f) of these terms of the
Class C Preferred Stock, each of which shall be an organization described in
Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended. All
section references to the Code shall include any successor provisions thereof as
may be adopted from time to time.
"Constructive Ownership" shall mean ownership of Class C Preferred
Stock by a Person who is or would be treated as an owner of such Class C
Preferred Stock either actually or constructively through the application of
Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Own," "Constructively Owns" and
"Constructively Owned" shall have correlative meanings.
"IRS" means the United States Internal Revenue Service.
"Market Price" shall mean the last reported sales price reported on the
New York Stock Exchange of the Class C Preferred Stock on the trading day
immediately preceding the relevant date, or if the Class C Preferred Stock is
not then traded on the New York Stock Exchange, the last reported sales price of
the Class C Preferred Stock on the trading day immediately preceding the
relevant date as reported on any exchange or quotation system over which the
Class C Preferred Stock may be traded, or if the Class C Preferred Stock is not
then traded over any exchange or quotation system, then the market price of the
Class C Preferred Stock on the relevant date as determined in good faith by the
Board of Directors.
"MGCL" shall mean the Maryland General Corporation Law, as amended from
time to time, and any successor statute hereafter enacted.
11
<PAGE>
"Ownership Limit" shall mean 9.8% (by value or by number of shares,
whichever is more restrictive) of the outstanding Class C Preferred Stock.
"Person" shall mean an individual, corporation, partnership, limited
liability company, estate, trust (including a trust qualified under Section
401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside
for or to be used exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company or other entity; but does not include an
underwriter acting in a capacity as such in a public offering of shares of Class
C Preferred Stock provided that the ownership of such shares of Class C
Preferred Stock by such underwriter would not result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code, or otherwise
result in the Corporation failing to qualify as a REIT.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer (or other event) which results in a transfer to a Trust, as
provided in Subparagraph I(2)(b) of these terms of the Class C Preferred Stock,
the Purported Record Transferee, unless the Purported Record Transferee would
have acquired or owned shares of Class C Preferred Stock for another Person who
is the beneficial transferee or owner of such shares, in which case the
Purported Beneficial Transferee shall be such other Person.
"Purported Record Transferee" shall mean, with respect to any purported
Transfer (or other event) which results in a transfer to a Trust, as provided in
Subparagraph I(2)(b) of these terms of the Class C Preferred Stock, the record
holder of the Class C Preferred Stock if such Transfer had been valid under
Subparagraph I(2)(a) of these terms of the Class C Preferred Stock.
"REIT" shall mean a real estate investment trust under Sections 856
through 860 of the Code, and, for purposes of taxation of the Corporation under
applicable state law, comparable provisions of the law of such state.
"Restriction Termination Date" shall mean the first day after the date
hereof on which the Board of Directors determines that it is no longer in the
best interests of the Corporation to attempt to, or continue to, qualify as a
REIT.
"Transfer" shall mean any sale, transfer, gift, assignment, devise or
other disposition of Class C Preferred Stock, including (i) the granting of any
option or entering into any agreement for the sale, transfer or other
disposition of Class C Preferred Stock or (ii) the sale, transfer, assignment or
other disposition of any securities (or rights convertible into or exchangeable
for Class C Preferred Stock), whether voluntary or involuntary, whether such
transfer has occurred of record or through a change in beneficial ownership,
Beneficial Ownership or Constructive Ownership (including but not limited to
transfers of interests in other entities which result in changes in Beneficial
or Constructive Ownership of Class C Preferred Stock), and whether such transfer
has occurred by operation of law or otherwise.
"Trust" shall mean each of the trusts provided for in Subparagraph I(3)
of these terms of the Class C Preferred Stock.
12
<PAGE>
"Trustee" shall mean any Person unaffiliated with the Corporation, a
Purported Beneficial Transferee or a Purported Record Transferee, that is
appointed by the Corporation to serve as trustee of a Trust.
(2) RESTRICTION ON OWNERSHIP AND TRANSFERS.
(a) Prior to the Restriction Termination Date:
(i) except as provided in Subparagraph I(9) of these
terms of the Class C Preferred Stock, no Person shall Beneficially Own Class C
Preferred Stock in excess of the Ownership Limit;
(ii) except as provided in Subparagraph I(9) of these
terms of the Class C Preferred Stock, no Person shall Constructively Own Class C
Preferred Stock in excess of the Ownership Limit;
(iii) no Person shall Beneficially or Constructively
Own Class C Preferred Stock which, taking into account any other stock of the
Corporation Beneficially or Constructively Owned by such Person, would result in
the Corporation being "closely held" within the meaning of Section 856(h) of the
Code, or otherwise failing to qualify as a REIT (including but not limited to
Beneficial or Constructive Ownership that would result in the Corporation owning
(actually or Constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Code if the income derived by the Corporation
(either directly or indirectly through one or more partnerships) from such
tenant would cause the Corporation to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code or comparable provisions of any
applicable state law).
(b) If prior to the Restriction Termination Date, any Transfer
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the New York Stock Exchange ("NYSE")) or other event
occurs that, if effective, would result in any Person Beneficially or
Constructively Owning Class C Preferred Stock in violation of Subparagraph
I(2)(a) of these terms of the Class C Preferred Stock, (1) then that number of
shares of Class C Preferred Stock that otherwise would cause such Person to
violate Subparagraph I(2)(a) of these terms of the Class C Preferred Stock
(rounded up to the nearest whole share) shall be automatically transferred to a
Trust for the benefit of a Charitable Beneficiary, as described in Subparagraph
I(3), effective as of the close of business on the business day prior to the
date of such Transfer or other event, and such Purported Beneficial Transferee
shall thereafter have no rights in such shares or (2) if, for any reason, the
transfer to the Trust described in clause (1) of this sentence is not
automatically effective as provided therein to prevent any Person from
Beneficially or Constructively Owning Class C Preferred Stock in violation of
Subparagraph I(2)(a) of these terms of the Class C Preferred Stock, then the
Transfer of that number of shares of Class C Preferred Stock that otherwise
would cause any Person to violate Subparagraph I(2)(a) shall be void AB INITIO,
and the Purported Beneficial Transferee shall have no rights in such shares.
13
<PAGE>
(c) Notwithstanding any other provisions contained herein,
prior to the Restriction Termination Date, any Transfer of Class C Preferred
Stock (whether or not such Transfer is the result of a transaction entered into
through the facilities of the NYSE) that, if effective, would result in the
stock of the Corporation being beneficially owned by less than 100 Persons
(determined without reference to any rules of attribution) shall be void AB
INITIO, and the intended transferee shall acquire no rights in such Class C
Preferred Stock.
(3) TRANSFERS OF CLASS C PREFERRED STOCK IN TRUST.
(a) Upon any purported Transfer or other event described in
Subparagraph I(2)(b) of these terms of the Class C Preferred Stock, such Class C
Preferred Stock shall be deemed to have been automatically transferred to the
Trustee in his capacity as trustee of a Trust for the exclusive benefit of one
or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed
to be effective as of the close of business on the business day prior to the
purported Transfer or other event that results in a transfer to the Trust
pursuant to Subparagraph I(2)(b). The Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with the Corporation, any
Purported Beneficial Transferee, or any Purported Record Transferee. Each
Charitable Beneficiary shall be designated by the Corporation as provided in
Subparagraph I(3)(f) of these terms of the Class C Preferred Stock.
(b) Class C Preferred Stock held by the Trustee shall be issued and
outstanding Class C Preferred Stock of the Corporation. The Purported Beneficial
Transferee or Purported Record Transferee shall have no rights in the shares of
Class C Preferred Stock held by the Trustee. The Purported Beneficial Transferee
or Purported Record Transferee shall not benefit economically from ownership of
any shares held in trust by the Trustee, shall have no rights to dividends and
shall not possess any rights to vote or other rights attributable to the shares
of Class C Preferred Stock held in the Trust.
(c) The Trustee shall have all voting rights and rights to dividends
with respect to Class C Preferred Stock held in the Trust, which rights shall be
exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend
or distribution paid prior to the discovery by the Corporation that shares of
Class C Preferred Stock have been transferred to the Trustee shall be paid to
the Trustee upon demand, and any dividend or distribution declared but unpaid
shall be paid when due to the Trustee with respect to such Class C Preferred
Stock. Any dividends or distributions so paid over to the Trustee shall be held
in trust for the Charitable Beneficiary.
The Purported Record Transferee and Purported Beneficial Transferee
shall have no voting rights with respect to the Class C Preferred Stock held in
the Trust and, subject to Maryland law, effective as of the date the Class C
Preferred Stock has been transferred to the Trustee, the Trustee shall have the
authority (at the Trustee's sole discretion) (i) to rescind as void any vote
cast by a Purported Record Transferee with respect to such Class C Preferred
Stock prior to the discovery by the Corporation that the Class C Preferred Stock
has been transferred to the Trustee and (ii) to recast such vote in accordance
with the desires of the Trustee acting for the benefit of the Charitable
Beneficiary; provided, however, that if the Corporation has already taken
irreversible corporate action, then the Trustee shall not have the authority to
14
<PAGE>
rescind and recast such vote. Notwithstanding any other provision of these terms
of the Class C Preferred Stock to the contrary, until the Corporation has
received notification that the Class C Preferred Stock has been transferred into
a Trust, the Corporation shall be entitled to rely on its share transfer and
other stockholder records for purposes of preparing lists of stockholders
entitled to vote at meetings, determining the validity and authority of proxies
and otherwise conducting votes of stockholders.
(d) Within 20 days of receiving notice from the Corporation that shares
of Class C Preferred Stock have been transferred to the Trust, the Trustee of
the Trust shall sell the shares of Class C Preferred Stock held in the Trust to
a Person, designated by the Trustee, whose ownership of the shares of Class C
Preferred Stock will not violate the ownership limitations set forth in
Subparagraph I(2)(a). Upon such sale, the interest of the Charitable Beneficiary
in the shares of Class C Preferred Stock sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and to the Charitable Beneficiary as provided in this Subparagraph I(3)(d). The
Purported Record Transferee shall receive the lesser of (1) the price paid by
the Purported Record Transferee or Purported Beneficial Transferee, as the case
may be, for the shares of Class C Preferred Stock in the transaction that
resulted in such transfer to the Trust (or, if the event which resulted in the
transfer to the Trust did not involve a purchase of such shares of Class C
Preferred Stock for fair value, the Market Price of such shares of Class C
Preferred Stock on the day of the event which resulted in the transfer of such
shares of Class C Preferred Stock to the Trust) and (2) the price per share
received by the Trustee (net of any commissions and other expenses of sale) from
the sale or other disposition of the shares of Class C Preferred Stock held in
the Trust. Any net sales proceeds in excess of the amount payable to the
Purported Record Transferee shall be immediately paid to the Charitable
Beneficiary together with any dividends or other distributions thereon. If,
prior to the discovery by the Corporation that shares of such Class C Preferred
Stock have been transferred to the Trustee, such shares of Class C Preferred
Stock are sold by a Purported Record Transferee then (i) such shares of Class C
Preferred Stock shall be deemed to have been sold on behalf of the Trust and
(ii) to the extent that the Purported Record Transferee or Purported Beneficial
Transferee, as the case may be, received an amount for such shares of Class C
Preferred Stock that exceeds the amount that such Purported Record Transferee or
Purported Beneficial Transferee, as the case may be, was entitled to receive
pursuant to this Subparagraph I(3)(d), such excess shall be paid to the Trustee
upon demand.
(e) Class C Preferred Stock transferred to the Trustee shall be deemed
to have been offered for sale to the Corporation, or its designee, at a price
per share equal to the lesser of (i) the price paid by the Purported Record
Transferee or Purported Beneficial Transferee, as the case may be, for the
shares of Class C Preferred Stock in the transaction that resulted in such
transfer to the Trust (or, if the event which resulted in the transfer to the
Trust did not involve a purchase of such shares of Class C Preferred Stock for
fair value, the Market Price of such shares of Class C Preferred Stock on the
day of the event which resulted in the transfer of such shares of Class C
Preferred Stock to the Trust) and (ii) the Market Price on the date the
Corporation, or its designee, accepts such offer. The Corporation shall have the
right to accept such offer until the Trustee has sold the shares of Class C
Preferred Stock held in the Trust pursuant to Subparagraph I(3)(d). Upon such a
sale to the Corporation, the interest of the Charitable
15
<PAGE>
Beneficiary in the shares of Class C Preferred Stock sold shall terminate and
the Trustee shall distribute the net proceeds of the sale to the Purported
Record Transferee and any dividends or other distributions held by the Trustee
with respect to such Class C Preferred Stock shall thereupon be paid to the
Charitable Beneficiary.
(f) By written notice to the Trustee, the Corporation shall designate
one or more nonprofit organizations to be the Charitable Beneficiary of the
interest in the Trust such that the Class C Preferred Stock held in the Trust
would not violate the restrictions set forth in Subparagraph I(2)(a) in the
hands of such Charitable Beneficiary.
(4) REMEDIES FOR BREACH. If the Board of Directors or, if permitted by
the MGCL, a committee thereof or other designees shall at any time determine in
good faith that a Transfer or other event has taken place in violation of
Subparagraph I(2) of these terms of the Class C Preferred Stock or that a Person
intends to acquire, has attempted to acquire or may acquire beneficial ownership
(determined without reference to any rules of attribution), Beneficial Ownership
or Constructive Ownership of any shares of Class C Preferred Stock of the
Corporation in violation of Subparagraph I(2) of these terms of the Class C
Preferred Stock, the Board of Directors or, if permitted by the MGCL, a
committee thereof or other designees, shall take such action as it deems
advisable to refuse to give effect or to prevent such Transfer, including, but
not limited to, causing the Corporation to redeem shares of Class C Preferred
Stock, refusing to give effect to such Transfer on the books of the Corporation
or instituting proceedings to enjoin such Transfer; PROVIDED, HOWEVER, that any
Transfers (or, in the case of events other than a Transfer, ownership or
Constructive Ownership or Beneficial Ownership) in violation of Subparagraph
I(2)(a) of these terms of the Class C Preferred Stock, shall automatically
result in the transfer to a Trust as described in Subparagraph I(2)(b) and any
Transfer in violation of Subparagraph I(2)(c) shall automatically be void AB
INITIO irrespective of any action (or non-action) by the Board of Directors.
(5) NOTICE OF RESTRICTED TRANSFER. Any Person who acquires or attempts
or intends to acquire shares of Class C Preferred Stock in violation of
Subparagraph I(2) of these terms of the Class C Preferred Stock, or any Person
who is a Purported Beneficial Transferee such that an automatic transfer to a
Trust results under Subparagraph I(2)(b) of these terms of the Class C Preferred
Stock, shall immediately give notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may request
in order to determine the effect, if any, of such Transfer or attempted Transfer
on the Corporation's status as a REIT.
(6) OWNERS REQUIRED TO PROVIDE INFORMATION. Prior to the Restriction
Termination Date each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Class C Preferred Stock and each Person (including the
shareholder of record) who is holding Class C Preferred Stock for a beneficial
owner or Beneficial Owner or Constructive Owner shall provide to the Corporation
such information that the Corporation may request, in good faith, in order to
determine the Corporation's status as a REIT.
(7) REMEDIES NOT LIMITED. Nothing contained in these terms of the Class
C Preferred Stock (but subject to Subparagraph I(13) of these terms of the Class
C Preferred Stock) shall
16
<PAGE>
limit the authority of the Board of Directors to take such other action as it
deems necessary or advisable to protect the Corporation and the interests of its
shareholders by preservation of the Corporation's status as a REIT.
(8) AMBIGUITY. In the case of an ambiguity in the application of any of
the provisions of this Paragraph I of these terms of the Class C Preferred
Stock, including any definition contained in Subparagraph I(1), the Board of
Directors shall have the power to determine the application of the provisions of
this Paragraph I with respect to any situation based on the facts known to it
(subject, however, to the provisions of Subparagraph I(13) of these terms of the
Class C Preferred Stock). In the event this Paragraph I requires an action by
the Board of Directors and these terms of the Class C Preferred Stock fail to
provide specific guidance with respect to such action, the Board of Directors
shall have the power to determine the action to be taken so long as such action
is not contrary to the provisions of this Paragraph I. Absent a decision to the
contrary by the Board of Directors (which the Board may make in its sole and
absolute discretion), if a Person would have (but for the remedies set forth in
Subparagraph I(2)) acquired Beneficial or Constructive Ownership of Class C
Preferred Stock in violation of Subparagraph I(2)(a), such remedies (as
applicable) shall apply first to the shares of Class C Preferred Stock which,
but for such remedies, would have been actually owned by such Person, and second
to shares of Class C Preferred Stock which, but for such remedies, would have
been Beneficially Owned or Constructively Owned (but not actually owned) by such
Person, pro rata among the Persons who actually own such shares of Class C
Preferred Stock based upon the relative number of the shares of Class C
Preferred Stock held by each such Person.
(9) EXCEPTIONS.
(a) Subject to Subparagraph I(2)(a)(iii), the Board of Directors, in
its sole discretion, may exempt a Person from the limitation on a Person
Beneficially Owning shares of Class C Preferred Stock in violation of
Subparagraph I(2)(a)(i) if the Board of Directors obtains such representations
and undertakings from such Person as, in the sole discretion of the Board of
Directors, are reasonably necessary to ascertain that no individual's Beneficial
Ownership of such shares of Class C Preferred Stock will violate Subparagraph
I(2)(a)(i) or that any such violation will not jeopardize the Corporation's
status as a REIT under the Code and the Board of Directors otherwise decides the
action would be in the Corporation's best interests.
(b) Subject to Subparagraph I(2)(a)(iii), the Board of Directors, in
its sole discretion, may exempt a Person from the limitation on a Person
Constructively Owning Class C Preferred Stock in violation of Subparagraph
I(2)(a)(ii), if the Board of Directors obtains such representations and
undertakings from such Person as, in the sole discretion of the Board of
Directors, are reasonably necessary to ascertain that such Person does not and
will not actually own or Constructively Own an interest in a tenant of the
Corporation (or a tenant of any entity owned in whole or in part by the
Corporation) that would cause the Corporation to actually own or Constructively
Own more than a 9.8% interest (as set forth in Section 856(d)(2)(B) of the Code)
in such tenant. Notwithstanding the foregoing, the inability of a Person to make
the certification described in this Subparagraph I(9)(b) shall not prevent the
Board of Directors, in its sole discretion, from exempting such Person from the
limitation on a Person Constructively
17
<PAGE>
Owning Class C Preferred Stock in violation of Subparagraph I(2)(a)(ii) if the
Board of Directors determines that the resulting application of Section
856(d)(2)(B) of the Code will not jeopardize the Corporation's status as a REIT
and the Board of Directors otherwise decides the action would be in the
Corporation's best interests.
(c) Prior to granting any exception pursuant to Subparagraph I(9)(a) or
(b) of these terms of the Class C Preferred Stock, the Board of Directors may
require a ruling from the Internal Revenue Service, or an opinion of counsel, in
either case in form and substance satisfactory to the Board of Directors in its
sole discretion, as it may deem necessary or advisable in order to determine or
ensure the Corporation's status as a REIT.
(10) LEGENDS. Each certificate for Class C Preferred Stock shall bear
substantially the following legends:
CLASSES OF STOCK
"THE CORPORATION IS AUTHORIZED TO ISSUE TWO CLASSES
OF STOCK WHICH ARE DESIGNATED AS COMMON STOCK AND PREFERRED
STOCK. THE PREFERRED STOCK MAY BE ISSUED IN ONE OR MORE SERIES
OR CLASSES. THE BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE
THE PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF EACH
SERIES OR CLASS OF PREFERRED STOCK BEFORE THE ISSUANCE OF ANY
SUCH SERIES OR CLASS OF PREFERRED STOCK. THE CORPORATION WILL
FURNISH, WITHOUT CHARGE, TO ANY SHAREHOLDER MAKING A REQUEST
THEREFOR, A COPY OF THE CORPORATION'S CHARTER AND A FULL
STATEMENT OF THE INFORMATION REQUIRED BY SECTION 2-211(B) OF
THE CORPORATIONS AND ASSOCIATIONS ARTICLE OF THE ANNOTATED
CODE OF MARYLAND WITH RESPECT TO THE DESIGNATIONS AND ANY
PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER
DISTRIBUTIONS, QUALIFICATIONS AND TERMS AND CONDITIONS OF
REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE CORPORATION
HAS THE AUTHORITY TO ISSUE AND, SINCE THE CORPORATION IS
AUTHORIZED TO ISSUE PREFERRED STOCK IN SERIES OR CLASSES, (i)
THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN
THE SHARES OF EACH SERIES OR CLASS TO THE EXTENT SET, AND (ii)
THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET SUCH RIGHTS AND
PREFERENCES OF SUBSEQUENT SERIES OR CLASSES. REQUEST FOR SUCH
WRITTEN STATEMENT MUST BE DIRECTED TO THE SECRETARY OF THE
CORPORATION AT ITS PRINCIPAL OFFICE.
18
<PAGE>
THE FOREGOING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS
SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
CHARTER OF THE CORPORATION."
RESTRICTION ON OWNERSHIP AND TRANSFER
"THE SHARES OF CLASS C PREFERRED STOCK REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND
CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE, AMONG
OTHERS, OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A
REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE"). SUBJECT TO CERTAIN FURTHER
RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE CHARTER,
(i) NO PERSON MAY BENEFICIALLY OWN SHARES OF THE CORPORATION'S
CLASS C PREFERRED STOCK IN EXCESS OF 9.8% (BY VALUE OR BY
NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE
OUTSTANDING CLASS C PREFERRED STOCK OF THE CORPORATION; (ii)
NO PERSON MAY CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
CLASS C PREFERRED STOCK IN EXCESS OF 9.8% (BY VALUE OR BY
NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE
OUTSTANDING CLASS C PREFERRED STOCK OF THE CORPORATION; (iii)
NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN CLASS C
PREFERRED STOCK THAT, TAKING INTO ACCOUNT ANY OTHER STOCK OF
THE CORPORATION BENEFICIALLY OR CONSTRUCTIVELY OWNED BY SUCH
PERSON, WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE
CORPORATION TO FAIL TO QUALIFY AS A REIT; AND (iv) NO PERSON
MAY TRANSFER CLASS C PREFERRED STOCK IF SUCH TRANSFER WOULD
RESULT IN THE STOCK OF THE CORPORATION BEING BENEFICIALLY
OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY
OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR
CONSTRUCTIVELY OWN CLASS C PREFERRED STOCK WHICH CAUSES OR
WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN
CLASS C PREFERRED STOCK IN VIOLATION OF THE ABOVE LIMITATIONS
MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE
RESTRICTIONS ON TRANSFER OR OWNERSHIP REFERRED TO IN CLAUSE
(i), (ii) OR (iii) ABOVE ARE VIOLATED, THE CLASS C PREFERRED
STOCK
19
<PAGE>
REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO
THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY
REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE
BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF
DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER
EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE.
FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED
TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY
BE VOID AB INITIO. ALL TERMS IN THIS LEGEND WHICH ARE DEFINED
IN THE TERMS OF THE CLASS C PREFERRED STOCK SHALL HAVE THE
MEANINGS ASCRIBED TO THEM IN SUCH TERMS, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE
RESTRICTIONS ON TRANSFER AND OWNERSHIP, AND ANY OTHER
INFORMATION REQUIRED BY SECTION 2-211(d) OF THE CORPORATIONS
AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND
WILL BE FURNISHED TO EACH HOLDER OF CLASS C PREFERRED STOCK
ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MUST
BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS
PRINCIPAL OFFICE."
Instead of the foregoing legend, the certificate may state that the
Class C Preferred Stock is subject to certain restrictions on ownership and
transfer and that the Corporation will furnish a full statement about the
restrictions on transferability and ownership of the Class C Preferred Stock to
any stockholder of the Corporation on request and without charge. Such request
must be made to the Secretary of the Corporation at the Corporation's principal
office.
(12) SEVERABILITY. Without limitation to Subparagraph I(5), if any
provision of this Paragraph I or any application of any such provision is
determined to be invalid by any federal or state court having jurisdiction over
the issues, the validity of the remaining provisions shall not be affected and
other applications of such provision shall be affected only to the extent
necessary to comply with the determination of such court.
(13) NYSE. Nothing in this Paragraph I shall preclude the settlement of
any transaction entered into through the facilities of the NYSE. The shares of
Class C Preferred Stock that are the subject of such transaction shall continue
to be subject to the provisions of this Paragraph I after such settlement
(14) APPLICABILITY OF PARAGRAPH I. The provisions set forth in this
Paragraph I shall apply to the Class C Preferred Stock notwithstanding any
contrary provisions of the Class C Preferred Stock provided for elsewhere in
these terms of the Class C Preferred Stock.
20
<PAGE>
J. MISCELLANEOUS.
(1) CONVERSION. The Class C Preferred Stock is not convertible into or
exchangeable for any other property or securities of the Corporation.
(2) PREEMPTIVE RIGHTS. No holder of shares of Class C Preferred Stock,
as such, shall have any preemptive or preferential right to subscribe for or to
purchase any additional shares of any class or series of stock of the
Corporation or any securities convertible into or exercisable or exchangeable
for shares of any class or series of stock of the Corporation.
(3) OFFICE OR AGENCY IN NEW YORK CITY. The Corporation will at all
times maintain an office or agency in the Borough of Manhattan, The City of New
York, where shares of Class C Preferred Stock may be surrendered for payment
(including upon redemption), registration of transfer or exchange.
(4) STATUS OF REDEEMED AND REACQUIRED CLASS C PREFERRED STOCK. In the
event any shares of Class C Preferred Stock shall be redeemed or otherwise
reacquired by the Corporation, the shares so redeemed or reacquired shall become
authorized but unissued shares of Class C Preferred Stock, available for future
issuance and reclassification by the Corporation.
(5) SEVERABILITY. If any preference, right, voting power, restriction,
limitation as to dividends or other distributions, qualification, term or
condition of redemption or other term of the Class C Preferred Stock is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, then, to the extent permitted by law, all other preferences, rights,
voting powers, restrictions, limitations as to dividends, qualifications, terms
or conditions of redemption and other terms of the Class C Preferred Stock which
can be given effect without the invalid, unlawful or unenforceable preference,
right, voting power, restriction, limitation as to dividends or other
distributions, qualification, term or condition of redemption or other term of
the Class C Preferred Stock shall remain in full force and effect and shall not
be deemed dependent upon any other such preference, right, voting power,
restriction, limitation as to dividends or other distributions, qualification,
term or condition of redemption or other term of the Class C Preferred Stock
unless so expressed herein; provided that Paragraph I shall be governed by
Subparagraph I(12) and not this Subparagraph J(5).
(6) TERMS OF THE CLASS C PREFERRED STOCK. All references to the "terms"
of the Class C Preferred Stock (and all similar references) shall include all of
the preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends and other distributions, qualifications, terms and
conditions of redemption and other terms and provisions set forth in Paragraphs
A through J, inclusive, hereof.
FOURTH: The shares have been classified by the Board of Directors, or a
duly authorized committee thereof, under the authority contained in the Charter.
FIFTH: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
21
<PAGE>
SIXTH: The undersigned President and Chief Operating Officer of the
Corporation acknowledges these terms of the Class C Preferred Stock to be the
corporate act of the Corporation and, as to all matters or facts required to be
verified under oath, the undersigned President and Chief Operating Officer of
the Corporation acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, REALTY INCOME CORPORATION, has caused these
Articles Supplementary to be executed under seal in its name and on its behalf
by its President and Chief Operating Officer and attested to by its Secretary on
this 28th day of July, 1999.
REALTY INCOME CORPORATION
By: (SEAL)
--------------------------------------------
Name: Richard J. VanDerhoff
Title: President and Chief Operating Officer
Attest:
By:
--------------------------------------------
Name: Michael R. Pfeiffer
Title: Senior Vice President, General
Counsel and Secretary
<PAGE>
[Letterhead of Ballard Spahr Andrews & Ingersoll]
FILE NUMBER
872800
July 29, 1999
Realty Income Corporation
220 West Crest Street
Escondido, California 92025
Re: Registration Statements on Form S-3
Registration Nos. 333-34311 and 333-80821
-----------------------------------------
Ladies and Gentlemen:
We have served as special Maryland counsel to Realty Income
Corporation, a Maryland corporation (the "Company"), in connection with certain
matters of Maryland law arising out of the Company's registration statements on
Form S-3 (Nos. 333-34311 and 333-80821), and all amendments thereto
(collectively, the "Registration Statement"), previously declared effective by
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "1933 Act"), relating to the proposed public
offering of Securities of the Company that may be offered and sold by the
Company from time to time as set forth in the prospectus dated July 14, 1999
which forms a part of the Registration Statement (the "Base Prospectus"). This
opinion is rendered in connection with the registration, sale and issuance of up
to 1,380,000 shares (including 180,000 shares subject to an over-allotment
option) of the Company's 9-1/2% Class C Cumulative Redeemable Preferred Stock,
$1.00 par value per share (the "Shares"), as described in a Prospectus
Supplement dated July 27, 1999 (the "Prospectus Supplement" and, together with
the Base Prospectus, the "Prospectus").
In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
<PAGE>
Realty Income Corporation
July 29, 1999
Page 2
1. The Registration Statement and the related form of Prospectus in
the form in which it was transmitted to the Commission, under the 1933 Act;
2. The charter of the Company (the "Charter"), certified as of a
recent date by the State Department of Assessments and Taxation of Maryland (the
"SDAT");
3. The Bylaws of the Company (the "Bylaws"), certified as of a
recent date by its Secretary;
4. Resolutions (the "Board Resolutions") adopted by the Board of
Directors of the Company (the "Board"), relating to the registration, sale and
issuance of the Shares, certified as of a recent date by the Secretary of the
Company;
5. Resolutions (the "Committee Resolutions") adopted by the
Preferred Stock Terms Committee of the Board, relating to the terms of the
Shares, including the dividend rate and price thereof, certified as of a recent
date by the Secretary of the Company;
6. Articles Supplementary for the Company's, 9-1/2% Class C
Cumulative Redeemable Preferred Stock (the "Articles Supplementary"), to be
filed with the SDAT on July 29, 1999;
7. A certificate of the SDAT as to the good standing of the Company,
dated as of a recent date; and
8. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed the
following:
1. Each individual executing any of the Documents, whether on behalf
of such individual or another person, is legally competent to do so.
2. Each individual executing any of the Documents on behalf of a
party (other than the Company) is duly authorized to do so.
<PAGE>
Realty Income Corporation
July 29, 1999
Page 3
3. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding and are enforceable in accordance with all stated
terms.
4. All Documents submitted to us as originals are authentic. The
form and content of the Documents submitted to us as unexecuted drafts do not
differ in any respect relevant to this opinion from the form and content of such
Documents as executed and delivered. All Documents submitted to us as certified
or photostatic copies conform to the original documents. All signatures on all
such Documents are genuine. All public records reviewed or relied upon by us or
on our behalf are true and complete. All statements and information contained
in the Documents are true and complete. There has been no oral or written
modification or amendment to any of the Documents, and there has been no waiver
of any provision of any of the Documents, by action or omission of the parties
or otherwise.
5. The Articles Supplementary will be filed with and accepted for
record by the SDAT before any Shares are issued.
Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and existing under
and by virtue of the laws of the State of Maryland and is in good standing with
the SDAT.
2. The issuance of the Shares has been duly authorized, and the
Shares, when sold and delivered against payment therefor in accordance with the
Board Resolutions, the Committee Resolutions and the Prospectus, will be validly
issued, fully paid and nonassessable.
The foregoing opinion is limited to the substantive laws of the State
of Maryland and we do not express any opinion herein concerning any other law.
We express no opinion as to the applicability or effect of any federal or state
securities laws, including the securities laws of the State of Maryland, or as
to federal or state laws regarding fraudulent transfers. To the extent that any
matter as to which our opinion is expressed
<PAGE>
Realty Income Corporation
July 29, 1999
Page 4
herein would be governed by any jurisdiction other than the State of Maryland,
we do not express any opinion on such matter.
We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for your submission to the
Commission as an exhibit to the report on form 8-K, to be filed by the Company
with the Commission as of the date hereof (the "8-K") and incorporation by
reference into the Registration Statement and, accordingly, may not be relied
upon by, quoted in any manner to, or delivered to any other person or entity
(other than Latham & Watkins, counsel to the Company, in connection with opinion
to be issued by it in connection with the sale of the Shares) without, in each
instance, our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
8-K and to the use of the name of our firm therein. In giving this consent, we
do not admit that we are within the category of persons whose consent is
required by Section 7 of the 1933 Act.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
