<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: May 24, 1999
REALTY INCOME CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
Maryland 1-13318 33-0580106
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(State of (Commission (IRS Employer
Identification No.) File Number) Incorporation)
220 West Crest Street, Escondido, California 92025
(Address of principal executive offices) (Zip Code)
(760) 741-740-2111
------------------
(Registrant's telephone number, including area code)
None
----
(former name or former address, if changed since last report)
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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 2,760,000 shares
of the Company's 9 3/8% Class B Cumulative Redeemable Preferred Stock (the
"Class B 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 August 25,
1997 (File No. 333-34311), as amended by Amendment No. 1 filed with the
Commission on September 16, 1997 (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.
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1.1 Purchase Agreement, dated May 20, 1999, between
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin
& Jenrette Securities Corporation, A.G. Edwards & Sons, Inc., EVEREN
Securities, Inc., First Union Capital Markets Inc., PaineWebber
Incorporated, and Sutro & Co. Incorporated (as Representatives of the
several Underwriters named on Schedule A thereto), and the Company.
4.1 Articles Supplementary to the Articles of Incorporation of the Company
classifying and designating the Class B 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).
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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: May 24, 1999
REALTY INCOME CORPORATION
By: /s/ Michael R. Pfeiffer, Esq.
-----------------------------
Name: Michael R. Pfeiffer, Esq.
Title: Senior Vice President,
General Counsel and
Secretary
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C>
1.1 Purchase Agreement, dated May 20, 1999, between Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, A.G. Edwards & Sons, Inc., EVEREN Securities,
Inc., First Union Capital Markets Inc., PaineWebber Incorporated,
and Sutro & Co. Incorporated (as Representatives of the several
Underwriters named on Schedule A thereto), and the Company.
4.1 Articles Supplementary to the Articles of Incorporation of the Company
classifying and designating the Class B 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>
2,400,000 Shares
REALTY INCOME CORPORATION
9 M% Class B Cumulative Redeemable Preferred Stock
(Par Value $1.00 Per Share)
(Liquidation Preference $25.00 Per Share)
PURCHASE AGREEMENT
May 20, 1999
<PAGE>
Table of Contents
Page
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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. . . . . . . . . . . . . . . . 4
(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. . . . . . . . . . . . . . . . 7
(xv) Possession of Intellectual Property.. . . . . . . . 8
(xvi) Absence of Further Requirements.. . . . . . . . . . 8
(xvii) Possession of Licenses and Permits. . . . . . . . . 8
(xviii) Investment Company Act. . . . . . . . . . . . . . . 8
(xix) Partnership Agreements. . . . . . . . . . . . . . . 9
(xx) Properties. . . . . . . . . . . . . . . . . . . . . 9
(xxi) Insurance.. . . . . . . . . . . . . . . . . . . . . 10
(xxii) Environmental Matters.. . . . . . . . . . . . . . . 10
(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
i
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Page
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(e) DELIVERY OF PROSPECTUSES. . . . . . . . . . . . . . . . . . . 15
(f) CONTINUED COMPLIANCE WITH SECURITIES LAWS.. . . . . . . . . . 16
(g) BLUE SKY QUALIFICATIONS.. . . . . . . . . . . . . . . . . . . 16
(h) RULE 158. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(i) USE OF PROCEEDS.. . . . . . . . . . . . . . . . . . . . . . . 16
(j) LISTING.. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(k) REPORTING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . 16
(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 STATEMENT.. . . . . . . . . . . 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. . . . . . . . . . . . . . . . . . . . 19
(j) CONDITIONS TO PURCHASE OF OPTION SECURITIES.. . . . . . . . . 19
(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
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Page
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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
iii
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2,400,000 Shares
REALTY INCOME CORPORATION
(a Maryland corporation)
9 M% Class B Cumulative Redeemable Preferred Stock
(Par Value $1.00 Per Share)
(Liquidation Preference $25.00 Per Share)
PURCHASE AGREEMENT
------------------
May 20, 1999
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
A.G. Edwards & Sons, Inc.
EVEREN Securities, Inc.
First Union Capital Markets Corp.
PaineWebber Incorporated
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"), Donaldson,
Lufkin & Jenrette Securities Corporation, A.G. Edwards & Sons, Inc., EVEREN
Securities, Inc., First Union Capital Markets Corp., PaineWebber Incorporated
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 B Cumulative Redeemable Preferred Stock, par value
$1.00 per share (the "Class B 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 360,000 additional
<PAGE>
shares of Preferred Stock to cover over-allotments, if any. The aforesaid
2,400,000 shares of Preferred Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any part of the 360,000 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) 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 such 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 such 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." Such 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 it became effective and including, if applicable, the Rule 434
Information, is herein called the "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 after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The prospectus dated October 1, 1997 and the final prospectus
supplement relating to the offering of the Securities, including the documents
incorporated by 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 October 1, 1997, the preliminary prospectus supplement
dated March 13, 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
2
<PAGE>
this Agreement, all references to the 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 the 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 the Registration
Statement, any preliminary prospectus or the Prospectus, as the case may be; and
all references in this Agreement to amendments or supplements to the
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 the 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
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the 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.
At the respective times the Registration Statement, 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 Registration
Statement, any Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
3
<PAGE>
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 Statement 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 Statement or Prospectus.
Each preliminary prospectus and Prospectus filed as part of the
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 Statement 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
Statement 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 Statement and the Prospectus,
together with the related schedule and notes, present fairly the financial
position of the Company and its subsidiaries at the dates indicated and the
consolidated statements of income, stockholders' equity and cash flows of
the Company and its subsidiaries for the periods specified; said
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules included
in the Registration
4
<PAGE>
Statement present fairly in accordance with GAAP the information
required to be stated therein. The selected financial data, if any, and
summary financial information, if any, included in the 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 Statement. 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 Statement 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, 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 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
5
<PAGE>
Registration Statement, all of the issued and outstanding partnership
interests and shares of capital stock, as the case may be, of each such
subsidiary have been duly authorized (if applicable) and validly issued and
are fully paid and are non-assessable (except to the extent that the
general partners of subsidiaries which are partnerships may be liable for
the obligations of such partnerships) and are owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding partnership interests or shares of capital stock, as the case
may be, of such subsidiaries were issued in violation of preemptive or
other similar rights arising by operation of law, under the partnership
agreement or charter or bylaws, as the case may be, of any such subsidiary
or under any agreement or instrument to which the Company or any such
subsidiary is a party.
(viii) CAPITALIZATION. The authorized stock of the Company and the
issued and outstanding stock of the Company are as set forth in the line
items "Preferred Stock" and "Common Stock" under the caption
"Capitalization " in the 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"), 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, 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
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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" but excluding any use of
proceeds for other general corporate purposes for which specific
corporate authorization may be required) and compliance by the Company
with its obligations hereunder and thereunder have been duly authorized
by all necessary corporate action and do not and will not, whether with
or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to, any Agreement or Instrument, except for
such conflicts, breaches or defaults or liens, charges or encumbrances
that, individually or in the aggregate, would not have a Material
Adverse Effect, nor will such action result in any violation of the
provisions of the charter or 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 Statement (other than
as disclosed therein), or which could reasonably be expected to result in a
Material Adverse Effect, or which could reasonably be expected to
materially and adversely affect the consummation of this Agreement or the
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 subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xiv) ACCURACY OF EXHIBITS. There are no contracts or documents
which are required to be described in the Registration Statement, the
Prospectus or the documents
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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, 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").
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(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 the 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, 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
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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 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
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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 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,
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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 the
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.
(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 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
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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 senior to the Class A 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 360,000 shares of Class B
Preferred Stock at the price set forth in Schedule B, less an amount per share
equal to any dividends or distributions declared by the Company and paid or
payable on the Initial Securities but not payable on the Option Securities. 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 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.
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(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 the 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 request by the
Commission for any amendment to the 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
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suspending the effectiveness of the 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 the
Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the 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
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein and documents
incorporated or deemed to be incorporated by reference therein) as the
Representatives and counsel for the Underwriters may reasonably request.
The copies of the Registration Statement 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 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.
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(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 the
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 the 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 the 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."
(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
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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 Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the printing and delivery to the Underwriters of this Agreement
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 "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").
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(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 STATEMENT. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective not later than 5:30 P.M. on the date hereof and at Closing Time
(and, if any Option Securities are purchased, at the relevant Date of
Delivery) no stop order suspending the effectiveness of the 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 (v) and (vi) 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 B 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
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.
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(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 the 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 Statement 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.
(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
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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
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.
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(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 the Registration Statement
(or any amendment thereto), including the Rule 434 Information, if
applicable, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact included in any preliminary prospectus
or 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 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
Statement (or any amendment thereto) or any preliminary prospectus or the
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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 Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 434 Information, if
applicable, or any preliminary prospectus or 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 Statement (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 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,
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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 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
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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 Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The 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 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
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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.
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
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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 Statement 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:
---------------------------------
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
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
A.G. EDWARDS & SONS, INC.
EVEREN SECURITIES, INC.
FIRST UNION CAPITAL MARKETS CORP.
PAINEWEBBER INCORPORATED
SUTRO & CO. INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
----------------------------------
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 . . . . . . . . . . . . . . . . . . . . 320,000
Donaldson, Lufkin & Jenrette Securities Corporation. . . . . . 305,000
A.G. Edwards & Sons, Inc.. . . . . . . . . . . . . . . . . . . 305,000
EVEREN Securities, Inc.. . . . . . . . . . . . . . . . . . . . 305,000
First Union Capital Markets Corp.. . . . . . . . . . . . . . . 305,000
PaineWebber Incorporated . . . . . . . . . . . . . . . . . . . 305,000
Sutro & Co. Incorporated . . . . . . . . . . . . . . . . . . . 305,000
Robert W. Baird & Co. Incorporated . . . . . . . . . . . . . . 25,000
CIBC World Markets Corp. . . . . . . . . . . . . . . . . . . . 25,000
Dain Rauscher Incorporated . . . . . . . . . . . . . . . . . . 25,000
Fahnestock & Co. Inc.. . . . . . . . . . . . . . . . . . . . . 25,000
Legg Mason Wood Walker, Incorporated . . . . . . . . . . . . . 25,000
Raymond James & Associates, Inc. . . . . . . . . . . . . . . . 25,000
The Robinson-Humphrey Company, LLC . . . . . . . . . . . . . . 25,000
SG Cowen Securities Corporation. . . . . . . . . . . . . . . . 25,000
Tucker Anthony Incorporated. . . . . . . . . . . . . . . . . . 25,000
U.S. Bancorp Piper Jaffray Inc.. . . . . . . . . . . . . . . . 25,000
--------------
Total: . . . . . . . . . . . . . . . . . . . . . . . 2,400,000
--------------
--------------
</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 May 25,
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; provided that the
purchase price per share for any Option Security purchased upon exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable or paid on the Initial Securities but not payable on the 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) Each of Realty Income Texas Properties, L.P. and Realty Income
Texas Properties, Inc. has been duly organized and is validly existing as a
partnership or corporation, as the case may be, based solely on certificates
from public officials, in good standing under the laws of the State of Delaware,
has power and authority as a partnership or corporation, as the case may be, to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement and based solely on certificates from public
officials, each such subsidiary is duly qualified as a foreign partnership or
corporation, as the case may be, to transact business and is in good standing in
each other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where failure to so qualify or to be in good standing would not result in
a Material Adverse Effect; and all of the issued and outstanding partnership
interests and shares of capital stock, as the case may be, of each of Realty
Income Texas Properties, L.P. and Realty Income Texas Properties, Inc. have been
duly authorized (if applicable) and validly issued, are fully paid and
non-assessable (except to the extent that the general partners of Realty Income
Texas Properties, L.P. may be liable for the obligations of such partnership)
and, to 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) 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.
(iv) 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.
(v) Each of the Registration Statement 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 the Registration Statement or any Rule
462(b) Registration Statement has been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission.
(vi) Each of the Registration Statement, 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
A-1
<PAGE>
included or incorporated by reference therein and excluding any Statement of
Eligibility on Form T-1 (a "Form T-1"), as to which no opinion need be
rendered), as of their respective effective or issue dates, complied as to
form in all material respects with the applicable requirements of the 1933
Act and the 1933 Act Regulations.
(vii) 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 no opinion need be
rendered), when they were filed with the Commission, complied as to form in all
material respects with the applicable requirements of the 1934 Act and the 1934
Act Regulations.
(viii) 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 B
Preferred Stock" and "Certain Federal Income Tax Considerations" 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.
(ix) 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;
(x) 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.
(xi) The Company is not an "investment company" as such term is
defined in the 1940 Act.
(xii) 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
A-2
<PAGE>
the Company to meet the requirements for qualification and taxation as a real
estate investment trust under the Code.
(xiii) 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 Statement or the Prospectus and have not made any independent
judgment, check or verification thereof (except with respect to the opinion set
forth in paragraphs (viii), (xii) and (xiii) 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
Registration Statement, 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 the
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 the 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 May 20, 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 (viii) (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 B Preferred Stock" and "Certain Federal
Income Tax Considerations"), (xii) and (xiii) above may be covered in one or
more separate legal opinions, which may be subject to such assumptions,
limitations and qualifications as shall be satisfactory to counsel for the
Underwriters. In particular, the opinions set forth in paragraphs (viii) (with
respect to the information under the
A-3
<PAGE>
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 Registration Statement 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 Registration Statement,
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,
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) 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.
(iii) 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.
(iv) 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.
(v) To the best of my knowledge and information, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described in the Registration Statement or to
be filed as exhibits thereto other than those described therein or filed or
incorporated by reference as exhibits thereto, and the descriptions thereof or
references thereto are correct in all material respects.
(vi) To the best of my knowledge and information, neither the Company
nor any of its subsidiaries is in violation of its charter or bylaws or its
partnership agreement, as applicable, and no default by the Company or any of
its subsidiaries exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement.
(vii) 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
B-1
<PAGE>
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-1
<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 heading "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
consideration set forth therein, 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
such provisions are not prohibited by the laws of the State of Maryland and do
not conflict 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 by the Company,
and has been duly executed and, so far as is known to us, delivered by the
Company.
(vi) The form of certificate used to represent shares of Preferred
Stock 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
"Description of Class B 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 law, or legal conclusions with respect to matters of Maryland law, such
information is correct in all material respects.
C-1
<PAGE>
(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 the SDAT (which filing has
been made in accordance with the MGCL).
(ix) 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") 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-1
<PAGE>
REALTY INCOME CORPORATION
ARTICLES SUPPLEMENTARY CLASSIFYING
SHARES OF
9 3/8% CLASS B CUMULATIVE REDEEMABLE PREFERRED STOCK
Realty Income Corporation, a Maryland corporation (the "Company"),
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 Company (the "Board of Directors") by Article VI of the charter
of the Company 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 Company has, by resolution duly adopted at meetings duly called
and held on May 5, 1999 and May 20, 1999, classified and designated a separate
class of unissued preferred stock of the Company, $1.00 par value per share
("Preferred Stock"), to consist of 2,760,000 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 B Preferred Stock from no shares immediately prior to the classification
to 2,760,000 shares immediately after the classification. The classification
decreases the number of shares classified as Preferred Stock from 19,000,000
shares immediately prior to the reclassification to 16,240,000 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 3/8% CLASS B CUMULATIVE REDEEMABLE
PREFERRED STOCK
A. DESIGNATION AND NUMBER. A class of Preferred Stock, designated the "9
3/8% Class B Cumulative Redeemable Preferred Stock" (the "Class B Preferred
Stock"), is hereby established. The number of shares of the Class B Preferred
Stock shall be 2,760,000 shares.
B. MATURITY. The Class B Preferred Stock has no stated maturity and will
not be subject to any sinking fund or mandatory redemption.
C. RANK. The Class B 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 Company, (i) senior to all classes
or series of common stock of the Company ("Common Stock"), senior to the
Company's Class A Junior Participating Preferred Stock, par
<PAGE>
value $1.00 per share (the "Class A Preferred Stock"), and senior to all
other equity securities of the Company other than equity securities referred
to in clauses (ii) and (iii) of this sentence; (ii) on a parity with all
equity securities of the Company the terms of which specifically provide that
such equity securities rank on a parity with the Class B 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 Company;
and (iii) junior to all equity securities of the Company the terms of which
specifically provide that such equity securities rank senior to the Class B
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 Company. The term "equity securities" does not include
convertible debt securities.
D. DIVIDENDS.
(1) Holders of shares of the Class B Preferred Stock are entitled to
receive, when, as, and if authorized by the Board of Directors and declared by
the Company, out of funds of the Company legally available for the payment of
dividends, cumulative cash dividends at the rate of 9 3/8% of the Liquidation
Preference (as defined below) per annum per share (equivalent to an annual rate
of $2.34375 per share). Dividends on the Class B Preferred Stock shall accrue
daily, shall accrue and be cumulative from May 25, 1999 (the "Original Issue
Date") and shall be payable quarterly in arrears on the last day of March, June,
September and December (each a "Dividend Payment Date") of each year, commencing
June 30, 1999; provided that if any Dividend Payment Date is not a Business Day
(as hereinafter defined), 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 B 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 Company 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 or such other
date designated by the Board of Directors for the payment of dividends that is
not more than 30 nor less than 10 days prior to such Dividend Payment Date
(each, a "Dividend Record Date"). Notwithstanding any provision to the contrary
contained herein, each outstanding share of Class B 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 B 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
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or executive order to close. All references herein to "accrued and unpaid"
dividends or "accumulated and unpaid" dividends on the Class B Preferred
Stock (and all references of like import) shall include, unless otherwise
expressly stated or the context otherwise requires, both accrued dividends
and accumulated dividends, if any, on the Class B 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 Company 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 B Preferred Stock shall be authorized
by the Board of Directors or paid or set apart for payment by the Company at any
time when the terms and provisions of any agreement of the Company, 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 B Preferred Stock to the contrary
notwithstanding, dividends on the Class B Preferred Stock will accrue and be
cumulative from the Original Issue Date, whether or not the Company 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 B Preferred Stock which may be in arrears, and holders of
the Class B 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 B Preferred
Stock shall first be credited against the earliest accrued but unpaid dividend
due with respect to the Class B Preferred Stock.
(4) If, for any taxable year, the Company 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 Company's stock (the
"Total Dividends"), then that portion of the Capital Gains Amount that shall be
allocable to the holders of Class B 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 B Preferred Stock
for the year bears to the Total Dividends. The Company will make a similar
allocation with respect to any undistributed long-term capital gains of the
Company 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 Company 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 B Preferred Stock for any period unless full
cumulative dividends have been or contemporaneously
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are declared and paid or declared and a sum sufficient for the payment
thereof is set apart for such payment on the Class B 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 is not so set
apart) upon the Class B Preferred Stock and the shares of any other class or
series of Preferred Stock ranking on a parity as to dividends with the Class
B Preferred Stock, all dividends declared upon the Class B Preferred Stock
and any other class or series of Preferred Stock ranking on a parity as to
dividends with the Class B Preferred Stock shall be declared pro rata so that
the amount of dividends declared per share of Class B 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
B Preferred Stock and such other class or series of Preferred Stock (which
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 B 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 Company ranking junior to the Class B
Preferred Stock as to dividends and as to the distribution of assets upon
liquidation, dissolution and winding up of the Company) shall be declared or
paid or set aside for payment nor shall any other distribution be declared or
made upon the Common Stock or any other class or series of stock of the Company
ranking junior to or on a parity with the Class B Preferred Stock as to
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up of the Company nor shall any shares of Common Stock or shares of any
other class or series of stock of the Company ranking junior to or on a parity
with the Class B Preferred Stock as to dividends or as to the distribution of
assets upon liquidation, dissolution or winding up of the Company be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any such shares of
any such stock) by the Company (except by conversion into or exchange for other
stock of the Company ranking junior to the Class B Preferred Stock as to
dividends and as to the distribution of assets upon liquidation, dissolution and
winding up of the Company and except for purchases of stock of the Company
pursuant to Paragraph I hereof for the purpose of preserving the Company'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 Company's stock).
E. RESERVED.
F. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of the
outstanding shares of Class B Preferred Stock shall be entitled to receive and
to be paid out of the assets of the Company 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
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any other class or series of stock of the Company that ranks junior to the
Class B Preferred Stock with respect to the distribution of assets upon
liquidation, dissolution or winding up of the Company, but subject to the
preferential rights of the holders of shares of any class or series of stock
of the Company ranking senior to the Class B 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 Company, the assets of the Company legally available therefor are
insufficient to pay the full amount of liquidating distributions payable on
all outstanding shares of Class B 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 Company ranking on a parity with the Class
B Preferred Stock with respect to the distribution of assets upon
liquidation, dissolution or winding up of the Company, then the holders of
the Class B 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 B Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of any other classes or series of stock of the
Company ranking junior to the Class B Preferred Stock as to the distribution of
assets upon liquidation, dissolution or winding up, according to their
respective rights and preferences.
For purposes of these terms of the Class B Preferred Stock, neither the
consolidation or merger of the Company 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 Company, shall be deemed to
constitute a liquidation, dissolution or winding up of the Company.
After payment to the holders of the Class B Preferred Stock of the full
liquidating distributions to which they are entitled, the holders of the Class B
Preferred Stock, as such, shall have no right or claim to any of the remaining
assets of the Company.
In determining whether a distribution (other than upon voluntary or
involuntary liquidation, dissolution or winding up) by dividend, redemption or
other acquisition of shares of stock of the Company or otherwise is permitted
under the MGCL, no effect shall be given to amounts that would be needed if the
Company would be dissolved at the time of the distribution, to satisfy the
preferential rights upon distribution of holders of Class B Preferred Stock.
G. REDEMPTION.
(1) The Class B Preferred Stock is not redeemable prior to May 25, 2004;
provided that the foregoing shall not prevent or limit the ability of the
Company to purchase Class B Preferred Stock pursuant to these terms of the
Class B Preferred Stock in order to preserve the qualification of the Company as
a REIT for federal and/or state income tax purposes or otherwise affect the
application of such terms to the Class B Preferred Stock. On and after May 25,
2004, the Company, at its option, upon not less than 30 nor more than 60 days'
written notice, may redeem shares of the Class B Preferred Stock, in whole or in
part, at any time or from time to
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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
Company. For purposes of the preceding sentence, "stock" means any common
stock, Preferred Stock (other than Class B 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 B Preferred Stock to be
redeemed shall surrender certificates representing such Class B 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 B
Preferred Stock has been given and if the funds necessary for such redemption
have been irrevocably set aside by the Company, separate and apart from its
other funds, in trust for the benefit of the holders of the shares of Class B
Preferred Stock so called for redemption, then from and after the redemption
date (unless default shall be made by the Company 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 B Preferred Stock,
such shares of Class B 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 B Preferred Stock are to be redeemed, the shares
of Class B 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 Company but that will not result in
the automatic transfer of any shares of Class B Preferred Stock to a Trust
(as hereinafter defined) pursuant Paragraph I of these terms of the Class B
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 B
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 Company
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 B 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 Company will make no payment or allowance for
unpaid dividends, whether or not in arrears, on shares of Class B Preferred
Stock called for redemption.
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(2) Unless full cumulative dividends on all outstanding shares of Class B
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 B Preferred Stock shall be redeemed unless all outstanding shares of
Class B Preferred Stock are simultaneously redeemed and the Company shall not
purchase or otherwise acquire directly or indirectly any shares of Class B
Preferred Stock (except by exchange for stock of the Company ranking junior to
the Class B Preferred Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution and winding up of the
Company); PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase
by the Company of shares of Class B Preferred Stock pursuant to Paragraph I of
these terms of the Class B Preferred Stock in order to preserve the
qualification of the Company as a REIT for federal and/or state income tax
purposes, or the purchase or acquisition of shares of Class B Preferred Stock
pursuant to a purchase or exchange offer made on the same terms to the holders
of all outstanding shares of Class B Preferred Stock. In addition, unless full
cumulative dividends on all outstanding shares of Class B 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 Company shall not purchase or otherwise
acquire, directly or indirectly, any shares of Class B Preferred Stock (except
by conversion into or exchange for stock of the Company ranking junior to the
Class B Preferred Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution and winding up of the
Company); PROVIDED, that the foregoing shall not prevent the purchase by the
Company of shares of Class B Preferred Stock pursuant to Paragraph I of these
terms of the Class B Preferred Stock in order to preserve the qualification of
the Company as a REIT for federal and/or state income tax purposes, or the
purchase or acquisition by the Company of shares of Class B Preferred Stock
pursuant to a purchase or exchange offer made on the same terms to the holders
of all outstanding shares of Class B Preferred Stock. So long as no dividends
are in arrears, the Company shall be entitled at any time and from time to time
to repurchase shares of Class B 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 Company 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 B 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 B 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 B
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 B Preferred Stock to be redeemed; (iv) the place or places (which shall
include a place
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in the Borough of Manhattan, The City of New York) where the Class B
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 Class B Preferred Stock held by any
holder is to be redeemed, the notice mailed to such holder shall also specify
the number of shares of Class B Preferred Stock held by such holder to be
redeemed.
Upon surrender, in accordance with such notice, of the certificates
representing any shares of Class B Preferred Stock to be so redeemed (properly
endorsed or assigned for transfer, if the Company shall so require and the
notice shall so state), such shares of Class B Preferred Stock shall be redeemed
by the Company 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 B Preferred Stock represented by any
such certificate are redeemed, a new certificate or certificates shall be issued
representing the unredeemed shares of Class B Preferred Stock without cost to
the holder thereof.
H. VOTING RIGHTS.
(1) Holders of the Class B Preferred Stock will not have any voting
rights, except as set forth below.
(2) Whenever dividends on any shares of Class B Preferred Stock shall be
in arrears for six 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 of the Company upon which like voting rights have been
conferred and are exercisable and with which the Class B 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 B Preferred Stock (voting separately as a
class with all other classes or series of Preferred Stock of the Company upon
which like voting rights have been conferred and are exercisable and which are
entitled to vote as a class with the Class B 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 Company at the request of the holders of record of at least 10% of the
outstanding shares of Class B Preferred Stock or by the holders of any other
class or series of Preferred Stock of the Company upon which like voting rights
have been conferred and are exercisable and which is entitled to vote as a class
with the Class B 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 B 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 B 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 Company upon which like voting rights have been
conferred and remain exercisable) the terms of office of such persons so elected
as directors shall automatically
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terminate and the authorized number of directors of the Company shall
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 B Preferred Stock requesting such meeting or, if none, at a place
within the United States designated by the Secretary of the Company, upon notice
similar to that required for an annual meeting of stockholders. If such special
meeting is not called by an officer of the Company within 30 days after such
request, then the holders of record of at least 10% of the outstanding shares of
Class B Preferred Stock may designate in writing a holder of Class B Preferred
Stock to call such meeting at the expense of the Company 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 B Preferred Stock shall have reasonable access to the preferred stock
transfer records of the Company. The Company 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 Company.
If, at any time when the voting rights conferred upon the Class B 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 B Preferred Stock and any
other classes or series of Preferred Stock of the Company upon which like voting
rights have been conferred and are exercisable and which are entitled to vote as
a class with the Class B 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 B Preferred Stock and any other classes or series of Preferred
Stock of the Company upon which like voting rights have been conferred and are
exercisable and which are entitled to vote as a class with the Class B 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 B 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 B Preferred Stock remain outstanding,
the Company shall not, without the consent or the affirmative vote of the
holders of at least two-thirds of the shares of the Class B Preferred Stock
outstanding at the time, given in person or by
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proxy, either in writing or at a meeting (with the Class B 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
Company ranking senior to the Class B Preferred Stock with respect to the
payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up of the Company, or reclassify any authorized stock
of the Company 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 B Preferred Stock, so as to materially and
adversely affect any right, preference, privilege or voting power of the
Class B Preferred Stock or the holders thereof or (iii) enter into any share
exchange that affects shares of Class B Preferred Stock, or consolidate with
or merge into any other entity, or permit any other entity to consolidate
with or merge into the Company, unless in each such case described in this
clause (iii) each share of Class B 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 B 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 B Preferred Stock or
any other class or series of Preferred Stock, in each case ranking on a
parity with or junior to the Class B Preferred Stock with respect to the
payment of dividends and the distribution of assets upon liquidation,
dissolution and winding up of the Company, shall not be deemed to materially
and adversely affect any right, preference, privilege or voting power of the
Class B 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 Company
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 B 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 B Preferred
Stock, the Class B 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 B Preferred
Stock or on which the holders of Class B Preferred Stock are otherwise entitled
to vote, including any action by written consent, each share of Class B
Preferred Stock shall be entitled to one vote, except that when shares of any
other class or series of Preferred Stock of the Company have the right to
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vote with the Class B Preferred Stock as a single class on any matter, the
Class B 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 B 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 B Preferred Stock, the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Class B Preferred Stock by a
Person who is or would be treated as an owner of such Class B 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 B
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 B Preferred Stock by
a Person who is or would be treated as an owner of such Class B 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 B Preferred Stock on the trading day
immediately preceding the relevant date, or if the Class B Preferred Stock is
not then traded on the New York Stock Exchange, the last reported sales price of
the Class B Preferred Stock on the trading day immediately preceding the
relevant date as reported on any exchange or quotation system over which the
Class B Preferred Stock may be traded, or if the Class B Preferred Stock is not
then traded over any exchange or quotation system, then the market price of the
Class B 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.
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"Ownership Limit" shall mean 9.8% (by value or by number of shares,
whichever is more restrictive) of the outstanding Class B 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 B Preferred Stock provided that the ownership of such shares of Class B
Preferred Stock by such underwriter would not result in the Company being
"closely held" within the meaning of Section 856(h) of the Code, or otherwise
result in the Company 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 B Preferred
Stock, the Purported Record Transferee, unless the Purported Record
Transferee would have acquired or owned shares of Class B 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 B Preferred Stock, the
record holder of the Class B Preferred Stock if such Transfer had been valid
under Subparagraph I(2)(a) of these terms of the Class B 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 Company 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 Company to attempt to, or continue to, qualify as a
REIT.
"Transfer" shall mean any sale, transfer, gift, assignment, devise or
other disposition of Class B Preferred Stock, including (i) the granting of
any option or entering into any agreement for the sale, transfer or other
disposition of Class B Preferred Stock or (ii) the sale, transfer, assignment
or other disposition of any securities (or rights convertible into or
exchangeable for Class B 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 B
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 B Preferred Stock.
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"Trustee" shall mean any Person unaffiliated with the Company, a
Purported Beneficial Transferee or a Purported Record Transferee, that is
appointed by the Company 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 B Preferred Stock, no Person shall Beneficially Own Class B
Preferred Stock in excess of the Ownership Limit;
(ii) except as provided in Subparagraph I(9) of these terms
of the Class B Preferred Stock, no Person shall Constructively Own Class B
Preferred Stock in excess of the Ownership Limit;
(iii) no Person shall Beneficially or Constructively Own
Class B Preferred Stock which, taking into account any other stock of the
Company Beneficially or Constructively Owned by such Person, would result in
the Company 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 Company 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 Company (either
directly or indirectly through one or more partnerships) from such tenant
would cause the Company 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 B Preferred Stock in violation of Subparagraph
I(2)(a) of these terms of the Class B Preferred Stock, (1) then that number
of shares of Class B Preferred Stock that otherwise would cause such Person
to violate Subparagraph I(2)(a) of these terms of the Class B 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 B Preferred Stock in
violation of Subparagraph I(2)(a) of these terms of the Class B Preferred
Stock, then the Transfer of that number of shares of Class B 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.
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(c) Notwithstanding any other provisions contained herein, prior
to the Restriction Termination Date, any Transfer of Class B 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 Company 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 B
Preferred Stock.
(3) TRANSFERS OF CLASS B PREFERRED STOCK IN TRUST.
(a) Upon any purported Transfer or other event described in
Subparagraph I(2)(b) of these terms of the Class B Preferred Stock, such
Class B 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 Company and shall be a Person unaffiliated with the
Company, any Purported Beneficial Transferee, or any Purported Record
Transferee. Each Charitable Beneficiary shall be designated by the Company
as provided in Subparagraph I(3)(f) of these terms of the Class B Preferred
Stock.
(b) Class B Preferred Stock held by the Trustee shall be issued and
outstanding Class B Preferred Stock of the Company. The Purported Beneficial
Transferee or Purported Record Transferee shall have no rights in the shares
of Class B 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 B Preferred Stock held in the Trust.
(c) The Trustee shall have all voting rights and rights to dividends
with respect to Class B 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 Company that
shares of Class B 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 B
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 B Preferred Stock held
in the Trust and, subject to Maryland law, effective as of the date the Class
B 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 B
Preferred Stock prior to the discovery by the Company that the Class B
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 Company has
already taken irreversible corporate action, then the Trustee shall not have
the authority to
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rescind and recast such vote. Notwithstanding any other provision of these
terms of the Class B Preferred Stock to the contrary, until the Company has
received notification that the Class B Preferred Stock has been transferred
into a Trust, the Company 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 Company that shares of
Class B Preferred Stock have been transferred to the Trust, the Trustee of
the Trust shall sell the shares of Class B Preferred Stock held in the Trust
to a Person, designated by the Trustee, whose ownership of the shares of
Class B 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 B 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 B
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 B Preferred Stock for fair value,
the Market Price of such shares of Class B Preferred Stock on the day of the
event which resulted in the transfer of such shares of Class B 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 B 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 Company that shares of such Class B Preferred Stock have
been transferred to the Trustee, such shares of Class B Preferred Stock are
sold by a Purported Record Transferee then (i) such shares of Class B
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 B 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 B Preferred Stock transferred to the Trustee shall be deemed
to have been offered for sale to the Company, 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 B 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 B Preferred Stock
for fair value, the Market Price of such shares of Class B Preferred Stock on
the day of the event which resulted in the transfer of such shares of Class B
Preferred Stock to the Trust) and (ii) the Market Price on the date the
Company, or its designee, accepts such offer. The Company shall have the
right to accept such offer until the Trustee has sold the shares of Class B
Preferred Stock held in the Trust pursuant to Subparagraph I(3)(d). Upon
such a sale to the Company, the interest of the Charitable
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Beneficiary in the shares of Class B 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 B Preferred Stock shall thereupon be paid
to the Charitable Beneficiary.
(f) By written notice to the Trustee, the Company shall designate one
or more nonprofit organizations to be the Charitable Beneficiary of the
interest in the Trust such that the Class B 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 B 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 B
Preferred Stock of the Company in violation of Subparagraph I(2) of these
terms of the Class B 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 Company to redeem shares of Class
B Preferred Stock, refusing to give effect to such Transfer on the books of
the Company 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 B 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 B Preferred Stock in violation of
Subparagraph I(2) of these terms of the Class B 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 B Preferred Stock, shall immediately give notice to the Company of such
event and shall provide to the Company such other information as the Company
may request in order to determine the effect, if any, of such Transfer or
attempted Transfer on the Company'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 B Preferred Stock and each Person (including the
shareholder of record) who is holding Class B Preferred Stock for a
beneficial owner or Beneficial Owner or Constructive Owner shall provide to
the Company such information that the Company may request, in good faith, in
order to determine the Company's status as a REIT.
(7) REMEDIES NOT LIMITED. Nothing contained in these terms of the
Class B Preferred Stock (but subject to Subparagraph I(13) of these terms of
the Class B Preferred Stock) shall
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limit the authority of the Board of Directors to take such other action as it
deems necessary or advisable to protect the Company and the interests of its
shareholders by preservation of the Company'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 B 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 B Preferred Stock). In the event this Paragraph I requires an
action by the Board of Directors and these terms of the Class B 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 B Preferred Stock in violation of
Subparagraph I(2)(a), such remedies (as applicable) shall apply first to the
shares of Class B Preferred Stock which, but for such remedies, would have
been actually owned by such Person, and second to shares of Class B 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 B Preferred Stock based
upon the relative number of the shares of Class B 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 B 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 B Preferred Stock
will violate Subparagraph I(2)(a)(i) or that any such violation will not
jeopardize the Company's status as a REIT under the Code and the Board of
Directors otherwise decides the action would be in the Company'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 B 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 Company (or a tenant of any entity owned in whole or in part by the
Company) that would cause the Company 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 Owning
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Class B 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 Company's status as a REIT
and the Board of Directors otherwise decides the action would be in the
Company's best interests.
(c) Prior to granting any exception pursuant to Subparagraph I(9)(a) or
(b) of these terms of the Class B 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 Company's status as a REIT.
(10) LEGENDS. Each certificate for Class B Preferred Stock shall bear
substantially the following legends:
CLASSES OF STOCK
"THE COMPANY 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 COMPANY WILL FURNISH, WITHOUT
CHARGE, TO ANY SHAREHOLDER MAKING A REQUEST THEREFOR, A COPY OF
THE COMPANY'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 COMPANY HAS THE
AUTHORITY TO ISSUE AND, SINCE THE COMPANY 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 COMPANY AT ITS PRINCIPAL OFFICE.
THE FOREGOING SUMMARY DOES NOT
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PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE CHARTER OF THE COMPANY."
RESTRICTION ON OWNERSHIP AND TRANSFER
"THE SHARES OF CLASS B PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND
CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE, AMONG
OTHERS, OF THE COMPANY'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 COMPANY'S CLASS B PREFERRED
STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING CLASS B
PREFERRED STOCK OF THE COMPANY; (ii) NO PERSON MAY CONSTRUCTIVELY
OWN SHARES OF THE COMPANY'S CLASS B PREFERRED STOCK IN EXCESS OF
9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE
RESTRICTIVE) OF THE OUTSTANDING CLASS B PREFERRED STOCK OF THE
COMPANY; (iii) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
CLASS B PREFERRED STOCK THAT, TAKING INTO ACCOUNT ANY OTHER STOCK
OF THE COMPANY BENEFICIALLY OR CONSTRUCTIVELY OWNED BY SUCH
PERSON, WOULD RESULT IN THE COMPANY BEING "CLOSELY HELD" UNDER
SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE COMPANY TO FAIL
TO QUALIFY AS A REIT; AND (iv) NO PERSON MAY TRANSFER CLASS B
PREFERRED STOCK IF SUCH TRANSFER WOULD RESULT IN THE STOCK OF THE
COMPANY BEING BENEFICIALLY OWNED BY FEWER THAN 100 PERSONS. ANY
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN CLASS B PREFERRED STOCK WHICH
CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY
OWN CLASS B PREFERRED STOCK IN VIOLATION OF THE ABOVE LIMITATIONS
MUST IMMEDIATELY NOTIFY THE COMPANY. IF ANY OF THE RESTRICTIONS
ON TRANSFER OR OWNERSHIP REFERRED TO IN CLAUSE (i), (ii) OR (iii)
ABOVE ARE VIOLATED, THE CLASS B PREFERRED STOCK REPRESENTED
HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A
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TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES.
IN ADDITION, THE COMPANY 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 B 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 B PREFERRED STOCK ON REQUEST AND WITHOUT
CHARGE. REQUESTS FOR SUCH A COPY MUST BE DIRECTED TO THE
SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE."
Instead of the foregoing legend, the certificate may state that the
Class B Preferred Stock is subject to certain restrictions on ownership and
transfer and that the Company will furnish a full statement about the
restrictions on transferability and ownership of the Class B Preferred Stock
to any stockholder of the Company on request and without charge. Such
request must be made to the Secretary of the Company at the Company'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 B 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 B Preferred Stock notwithstanding any
contrary provisions of the Class B Preferred Stock provided for elsewhere in
these terms of the Class B Preferred Stock.
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J. MISCELLANEOUS.
(1) CONVERSION. The Class B Preferred Stock is not convertible into or
exchangeable for any other property or securities of the Company.
(2) PREEMPTIVE RIGHTS. No holder of shares of Class B 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
Company or any securities convertible into or exercisable or exchangeable for
shares of any class or series of stock of the Company.
(3) OFFICE OR AGENCY IN NEW YORK CITY. The Company will at all times
maintain an office or agency in the Borough of Manhattan, The City of New
York, where shares of Class B Preferred Stock may be surrendered for payment
(including upon redemption), registration of transfer or exchange.
(4) STATUS OF REDEEMED AND REACQUIRED CLASS B PREFERRED STOCK. In the
event any shares of Class B Preferred Stock shall be redeemed or otherwise
reacquired by the Company, the shares so redeemed or reacquired shall become
authorized but unissued shares of Class B Preferred Stock, available for
future issuance and reclassification by the Company.
(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 B 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 B 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 B 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 B 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 B PREFERRED STOCK. All references to the
"terms" of the Class B 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.
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SIXTH: The undersigned President and Chief Operating Officer of the
Company acknowledges these terms of the Class B Preferred Stock to be the
corporate act of the Company and, as to all matters or facts required to be
verified under oath, the undersigned President and Chief Operating Officer of
the Company 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.
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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
____ day of _________, 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
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[Letterhead of Ballard, Spahr, Andrews & Ingersoll LLP]
FILE NUMBER
863100
May 24, 1999
Realty Income Corporation
220 West Crest Street
Escondido, California 92025
Re: Registration Statement on Form S-3
Registration No. 333-34311
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Ladies and Gentlemen:
We have served as 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 statement on Form S-3,
(No. 333-34311), and all amendments thereto (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 October 1, 1997 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 2,760,000 shares (including
360,000 shares which the underwriters have the option to purchase to cover
over-allotments, if any) of the Company's 9 3/8% Class B Cumulative
Redeemable Preferred Stock, $1.00 par value per share (the "Shares"), as
described in a Prospectus Supplement dated May 20, 1999 (the "Prospectus
Supplement" and, together with the Base Prospectus, the "Prospectus").
Capitalized terms used but not defined herein shall have the meanings given
to them in the Registration Statement.
In connection with your representation of the Company, and as a basis
for the opinion hereinafter set forth, we have
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Realty Income Corporation
May 24, 1999
Page 2
examined originals, or copies certified or otherwise identified to our
satisfaction, of the following documents (hereinafter collectively referred
to as the "Documents"):
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 3/8% Class B Cumulative
Redeemable Preferred Stock (the "Articles Supplementary");
7. A certificate of the SDAT as to the good standing of the Company,
dated as of a recent date;
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, and so far
as is known to us there are no facts inconsistent with 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.
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Realty Income Corporation
May 24, 1999
Page 3
2. Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.
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 have been filed with, and accepted for
record by, the SDAT.
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.
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 Committee Resolutions and the Prospectus (assuming that, upon issuance,
the total number of Shares of Series B Cumulative
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Realty Income Corporation
May 24, 1999
Page 4
Redeemable Preferred Stock issued and outstanding will not exceed the total
number of shares of Series B Cumulative Redeemable Preferred Stock that the
Company is then authorized to issue under the Charter), 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 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 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 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) 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 LLP
