Exhibit 10.11
NONQUALIFIED STOCK OPTION AGREEMENT
FOR INDEPENDENT DIRECTORS
THIS AGREEMENT, dated June 12, 1997, is made by and between
Realty Income Corporation, a Maryland corporation hereinafter referred
to as "Company," and ____________________, an independent director of
the Company, hereinafter referred to as "Optionee":
WHEREAS, the Company wishes to afford the Optionee the
opportunity to purchase shares of its $1.00 par value Common Stock;
and
WHEREAS, the Company wishes to carry out the Plan (the terms
of which are hereby incorporated by reference and made a part of this
Agreement);
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall
have the meaning specified below unless the context clearly indicates
to the contrary. The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so indicates.
SECTION 1.1 - BOARD
"Board" shall mean the Board of Directors of the Company.
SECTION 1.2 - CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.3 - COMMITTEE
"Committee" shall mean the Compensation Committee of the Board, or a
subcommittee of the Board, appointed as provided in Section 9.1 of the
Plan
SECTION 1.4 - COMMON STOCK
"Common Stock" shall mean the common stock of the Company, par value
$1.00 per share, and any equity security of the Company issued or
authorized to be issued in the future, but excluding any warrants,
options or other rights to purchase Common Stock. Debt securities of
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the Company convertible into Common Stock shall be deemed equity
securities of the Company.
SECTION 1.5 - COMPANY
"Company" shall mean Realty Income Corporation, a Maryland
corporation.
SECTION 1.6 - DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.7 - EMPLOYEE
"Employee" shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.
SECTION 1.8 - EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
SECTION 1.9 - FAIR MARKET VALUE
"Fair Market Value" of a share of Common Stock as of a given date
shall be the daily market price for the trading day on which the
purchase of such share by the exercising party is consummated. The
market price for each such trading day shall be: (i) if the shares of
Common Stock are listed or admitted to trading on any national
securities exchange or the NASDAQ-National Market System, the closing
price, regular way, on such day, or if no such sale takes place on
such day, the average of the closing bid and asked prices on such day,
(ii) if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange or the NASDAQ-National
Market System, the last reported sale price on such day or, if no sale
takes place on such day, the average of the closing bid and asked
prices on such day, as reported by a reliable quotation source
designated by the Company, or (iii) if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange
or the NASDAQ-National Market System and no such last reported sale
price or closing bid and asked prices are available, the average of
the reported high bid and low asked prices on such day, as reported by
a reliable quotation source designated by the Company, or if there
shall be no bid and asked prices on such day, the average of the high
bid and low asked prices, as so reported, on the most recent day (not
more than 10 days prior to the date in question) for which prices have
been so reported; provided that if there are no bid and asked prices
reported during the 10 days prior to the date in question, the Fair
Market Value of the shares of Common Stock shall be determined by the
Company acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.
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SECTION 1.10 - INDEPENDENT DIRECTOR
"Independent Director" shall mean a member of the Board who is not an
Employee of the Company.
SECTION 1.11 - OPTION
"Option" shall mean a non-qualified stock option granted under this
Agreement and Article III of the Plan.
SECTION 1.12 - OPTIONEE
"Optionee" shall mean an Independent Director granted an Option under
this Agreement and the Plan.
SECTION 1.13 - PLAN
"Plan" shall mean The 1994 Stock Option and Incentive Plan for Key
Employees of Realty Income Corporation and R.I.C. Advisor, Inc., as
amended by the First Amendment dated as of June 12, 1997, and the
Second Amendment dated as of December 16, 1997.
SECTION 1.14 - RULE 16B-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended from time to time.
SECTION 1.15 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.16 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.17 - SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock
possessing 50 percent or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
SECTION 1.18 - TERMINATION OF DIRECTORSHIP
"Termination of Directorship" shall mean the time when the Optionee
ceases to be a Director for any reason, including, but not by way of
limitation, a termination by resignation, failure to be elected, death
or retirement. The Board, in its sole and absolute discretion, shall
determine the effect of all matters and questions relating to
Termination of Directorship.
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ARTICLE II
GRANT OF OPTION
SECTION 2.1 - GRANT OF OPTION
In consideration of the Optionee's agreement to serve as an
Independent Director of the Company or its Subsidiaries until the next
annual meeting of stockholders of the Company and for other good and
valuable consideration, on the date hereof the Company irrevocably
grants to the Optionee the option to purchase any part or all of an
aggregate of 5,000 shares of its $1.00 par value Common Stock upon the
terms and conditions set forth in this Agreement.
SECTION 2.2 - PURCHASE PRICE
The purchase price of the shares of stock covered by the Option shall
be $25.375 per share (which is the Fair Market Value of a share of
Common Stock on the date of the granting of this Option) without
commission or other charge.
SECTION 2.3 - CONSIDERATION TO COMPANY
In consideration of the granting of this Option by the Company, the
Optionee agrees to render faithful and efficient services to the
Company or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, until the next annual
meeting of stockholders of the Company. Nothing in the Plan or this
Agreement shall confer upon any Optionee any right to continue as a
director of the Company, or shall interfere with or restrict in any
way the rights of the Company and any Subsidiary, which are hereby
expressly reserved, to discharge the Optionee at any time for any
reason whatsoever, with or without good cause.
SECTION 2.4 - ADJUSTMENTS IN OPTION
(a) In the event that the outstanding shares of the
stock subject to the Option are changed into or exchanged
for a different number or kind of shares of the Company or
other securities of the Company, or of another corporation,
by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock splitup, stock
dividend or combination of shares, the Board shall make an
appropriate and equitable adjustment in the number and kind
of shares as to which the Option, or portions thereof then
unexercised, shall be exercisable, to the end that after
such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such
adjustment in the Option may include any necessary
corresponding adjustment in the Option price per share, but
shall be made without change in the total price applicable
to the unexercised portion of the Option (except for any
change in the aggregate price resulting from rounding-off of
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share quantities or prices). Any such adjustment made by
the Board shall be final and binding upon the Optionee, the
Company and all other interested persons.
(b) Notwithstanding the foregoing, in the event of such
a reorganization, merger, consolidation, recapitalization,
reclassification, stock splitup, stock dividend or
combination, or other adjustment or event which results in
shares of Common Stock being exchanged for or converted into
cash, securities or other property, the Company will have
the right to terminate the Plan as of the date of the
exchange or conversion, in which case all options, rights
and other awards under this Plan shall become the right to
receive such cash, securities or other property, net of any
applicable exercise price.
(c) In the event of a "spin-off" or other substantial
distribution of assets of the Company which has a material
diminutive effect upon the Fair Market Value of the
Company's Common Stock, the Board may in its discretion make
an appropriate and equitable adjustment to the Option to
reflect such diminution.
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) Subject to Section 5.6, the Option shall become
exercisable one (1) year after the date the Option is
granted.
(b) No portion of the Option which is unexercisable at
Termination of Directorship shall thereafter become
exercisable.
SECTION 3.2 - DURATION OF EXERCISABILITY
Each Option shall remain exercisable until it becomes unexercisable
under Section 3.3.
SECTION 3.3 - EXPIRATION OF OPTION
The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(a) The expiration of 10 years from the date the Option
was granted; or
(b) The expiration of one year from the date of the
Optionee's Termination of Directorship; or
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(c) The effective date of either the merger or
consolidation of the Company with or into another
corporation, the exchange of all or substantially all of the
assets of the Company for the securities of another
corporation, the acquisition by another corporation or
person of all or substantially all of the Company's assets
or 80% or more of the Company's then outstanding voting
stock, or the liquidation or dissolution of the Company,
unless the Board waives this provision in connection with
such transaction and such waiver is consistent with Rule
16b-3. At least 10 days prior to the effective date of such
merger, consolidation, exchange, acquisition, liquidation or
dissolution, the Committee or the Board shall give the
Optionee notice of such event if the Option has then neither
been fully exercised nor become unexercisable under this
Section 3.3.
SECTION 3.4 - ACCELERATION OF EXERCISABILITY
To the extent consistent with the requirements of Rule 16b-3, in the
event of the merger or consolidation of the Company with or into
another corporation, the exchange of all or substantially all of the
assets of the Company for the securities of another corporation, the
acquisition by another corporation or person of all or substantially
all of the Company's assets or 80% or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the
Company, the Board may, in its absolute discretion and upon such terms
and conditions as it deems appropriate, provide by resolution, adopted
prior to such event and incorporated in the notice referred to in
Section 3.3(f), that at some time prior to the effective date of such
event this Option shall be exercisable as to all the shares covered
hereby, notwithstanding that this Option may not yet have become fully
exercisable under Section 3.1(a); provided, however, that this
acceleration of exercisability shall not take place if:
(a) This Option becomes unexercisable under Section 3.3
prior to said effective date; or
(b) In connection with such an event, provision is made
for an assumption of this Option or a substitution therefor
of a new option by an employer corporation or a parent or
subsidiary of such corporation; and
provided, further, that nothing in this Section 3.4 shall make this
Option exercisable if it is otherwise unexercisable by reason of
Section 5.6.
The Board may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in
connection with such acceleration of exercisability, including, but
not by way of limitation, provisions to ensure that any such
acceleration and resulting exercise shall be conditioned upon the
consummation of the contemplated corporate transaction.
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None of the foregoing discretionary terms of this Section shall be
permitted to the extent that such discretion would be inconsistent
with the requirements of Rule 16b-3.
SECTION 3.5 - ACCELERATION OF EXERCISABILITY UPON RETIREMENT
To the extent consistent with the requirements of Rule 16b-3, this
Option shall be exercisable as to all the shares covered hereby,
notwithstanding that this Option may not yet have become fully
exercisable under Section 3.1(a), upon the retirement of the Optionee
in accordance with the Company's retirement policy applicable to
Directors.
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
Unless the Option has been transferred in accordance with the
provisions of Section 5.2 herein, during the lifetime of the Optionee,
only he (or, in the event of a disability or incapacity, his legal
representative) may exercise the Option or any portion thereof, unless
it has been disposed of pursuant to a qualified domestic relations
order as defined by the Code or Title 1 of Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder ("QDRO"), in
which case the Option shall be exercisable only by the beneficiary of
the QDRO to the same extent it would have been exercisable by the
Optionee. After the death of the Optionee, any exercisable portion of
the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3, be exercised by his personal
representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and
distribution.
SECTION 4.2 - PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.3; provided, however, that each partial
exercise shall be for not less than 100 shares or the remaining number
of shares if less than 100 and shall be for whole shares only.
SECTION 4.3 - MANNER OF EXERCISE
The Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his office of all of the
following prior to the time when the Option or such portion becomes
unexercisable under Section 3.3:
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(a) Notice in writing signed by the Optionee or the
other person then entitled to exercise the Option or
portion, stating that the Option or portion is thereby
exercised, such notice complying with all applicable rules
established by the Committee or the Board; and
(b) (i) Full payment (in cash) for the shares with
respect to which such Option or portion is exercised;
(ii) With the consent of the Board, payment delayed
for up to thirty (30) days from the date the Option, or
portion thereof, is exercised; or
(iii) With the consent of the Board, (A) shares of the
Company's Common Stock owned by the Optionee duly endorsed
for transfer to the Company or (B) subject to the timing
requirements of Section 4.4, shares of the Company's Common
Stock issuable to the Optionee upon exercise of the Option,
with a Fair Market Value on the date of Option exercise
equal to the aggregate purchase price of the shares with
respect to which such Option or portion is exercised; or
(iv) With the consent of the Board, property of any
kind which constitutes good and valuable consideration; or
(v) With the consent of the Board, a full recourse
promissory note bearing interest (at no less than such rate
as shall then preclude the imputation of interest under the
Code or successor provision) and payable upon such terms as
may be prescribed by the Committee or the Board. The
Committee or the Board may also prescribe the form of such
note and the security to be given for such note. The Option
may not be exercised, however, by delivery of a promissory
note or by a loan from the Company when or where such loan
or other extension of credit is prohibited by law; or
(vi) With the consent of the Board, any combination of
the consideration provided in the foregoing subparagraphs
(iii), (iv) and (v); and
(c) A bona fide written representation and agreement, in
a form satisfactory to the Committee or the Board, signed by
the Optionee or other person then entitled to exercise such
Option or portion, stating that the shares of stock are
being acquired for his own account, for investment and
without any present intention of distributing or reselling
said shares or any of them except as may be permitted under
the Securities Act and then applicable rules and regulations
thereunder, and that the Optionee or other person then
entitled to exercise such Option or portion will indemnify
the Company against and hold it free and harmless from any
loss, damage, expense or liability resulting to the Company
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if any sale or distribution of the shares by such person is
contrary to the representation and agreement referred to
above. The Committee or the Board may, in its absolute
discretion, take whatever additional actions it deems
appropriate to insure the observance and performance of such
representation and agreement and to effect compliance with
the Securities Act and any other federal or state securities
laws or regulations. Without limiting the generality of the
foregoing, the Committee or the Board may require an opinion
of counsel acceptable to it to the effect that any
subsequent transfer of shares acquired on an Option exercise
does not violate the Securities Act, and may issue
stop-transfer orders covering such shares. Share
certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the
provisions of this subsection (c) and the agreements herein.
The written representation and agreement referred to in the
first sentence of this subsection (c) shall, however, not be
required if the shares to be issued pursuant to such
exercise have been registered under the Securities Act, and
such registration is then effective in respect of such
shares; and
(d) Full payment to the Company (or other employer
corporation) of all amounts which, under federal, state or
local tax law, it is required to withhold upon exercise of
the Option; with the consent of the Board, (i) shares of the
Company's Common Stock owned by the Optionee duly endorsed
for transfer, or (ii) subject to the timing requirements of
Section 4.4, shares of the Company's Common Stock issuable
to the Optionee upon exercise of the Option, having a Fair
Market Value at the date of Option exercise equal to the
sums required to be withheld, may be used to make all or
part of such payment; and
(e) In the event the Option or portion shall be
exercised pursuant to Section 4.1 by any person or persons
other than the Optionee, appropriate proof of the right of
such person or persons to exercise the Option.
SECTION 4.4 - CERTAIN TIMING REQUIREMENTS
Shares of the Company's Common Stock issuable to the Optionee upon
exercise of the Option may be used to satisfy the Option price or the
tax withholding consequences of such exercise only (i) during the
period beginning on the third business day following the date of
release of the quarterly or annual summary statement of sales and
earnings of the Company and ending on the twelfth business day
following such date or (ii) pursuant to an irrevocable written
election by the Optionee to use shares of the Company's Common Stock
issuable to the Optionee upon exercise of the Option to pay all or
part of the Option price or the withholding taxes (subject to the
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approval of the Board) made at least six months prior to the payment
of such Option price or withholding taxes.
SECTION 4.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock deliverable upon the exercise of the Option, or
any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the
Company. Such shares shall be fully paid and nonassessable. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of the
Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed; and
(b) The completion of any registration or other
qualification of such shares under any state or federal law
or under rulings or regulations of the Securities and
Exchange Commission or of any other governmental regulatory
body, which the Committee or Board shall, in its absolute
discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance
from any state or federal governmental agency which the
Committee or Board shall, in its absolute discretion,
determine to be necessary or advisable; and
(d) The receipt by the Company of full payment for such
shares, including payment of all amounts which, under
federal, state or local tax law, it is required to withhold
upon exercise of the Option; and
(e) The lapse of such reasonable period of time
following the exercise of the Option as the Committee or
Board may from time to time establish for reasons of
administrative convenience; and
(f) The restrictions on ownership and transfer of Common
Stock set forth in the Company's charter and bylaws.
SECTION 4.6 - RIGHTS AS SHAREHOLDER
The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by
the Company to such holder.
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ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
With respect to this Option, the full Board, acting by a majority of
its members in office, shall have the power to interpret the Plan and
this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith
and to interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Board in good faith
shall be final and binding upon the Optionee, the Company and all
other interested persons. No member of the Board shall be personally
liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Option.
SECTION 5.2 - NON-TRANSFERABILITY
The Option may not be sold, pledged, assigned or transferred in any
manner other than by a qualified domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder ("QDRO") or by will or
the laws of descent and distribution; provided, however, the Optionee
may transfer the Option to a Permitted Transferee (as defined below)
to the extent permitted by any applicable law or regulations and
subject to the following terms and conditions:
(a) An Option transferred to a Permitted Transferee
shall not be assignable or transferable by the Permitted
Transferee other than by a QDRO or by will or the laws of
descent and distribution.
(b) Any Option which is transferred to a Permitted
Transferee shall continue to be subject to all the terms and
conditions of the Option as applicable to the original
holder (other than the ability to further transfer the
Option).
(c) The Optionee and the Permitted Transferee shall
execute any and all documents reasonably requested by the
Board, including without limitation documents to (i) confirm
the status of the transferee as a Permitted Transferee, (ii)
satisfy any requirements for an exemption for the transfer
under applicable federal and state securities laws and (iii)
evidence the transfer.
(d) Shares of Common Stock acquired by a Permitted
Transferee through exercise of an Option have not been
registered under the Securities Act or any state securities
act and may not be transferred, nor will any assignee or
transferee thereof be recognized as an owner of such shares
of Common Stock for any purpose, unless a registration
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statement under the Securities Act and any applicable state
securities act with respect to such shares shall then be in
effect or unless the availability of an exemption from
registration with respect to any proposed transfer or
disposition of such shares shall be established to the
satisfaction of counsel for the Company.
As used in this Section 5.2, "Permitted Transferee" shall mean (i) one
or more of the following family members of an Optionee: spouse, child
(whether natural or adopted), stepchild, any other lineal descendant
of the Optionee, (ii) a trust, partnership or other entity established
and existing for the sole benefit of, or under the sole control of,
one or more of the above family members of the Optionee, or (iii) any
other transferee specifically approved by the Board after taking into
account any state or federal tax or securities laws applicable to
transferable Options.
Neither the Option nor any interest or right therein or part thereof
shall be liable for the debts, contracts or engagements of the
Optionee or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy).
SECTION 5.3 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option reserve
and keep available such number of shares of stock as will be
sufficient to satisfy the requirements of this Agreement.
SECTION 5.4 - NOTICES
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary,
and any notice to be given to the Optionee shall be addressed to him
at the address given beneath his signature hereto. By a notice given
pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to him. Any notice which is
required to be given to the Optionee shall, if the Optionee is then
deceased, be given to the Optionee's personal representative if such
representative has previously informed the Company of his status and
address by written notice under this Section 5.4. Any notice shall be
deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in a
post office or branch post office regularly maintained by the United
States Postal Service.
SECTION 5.5 - TITLES
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
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SECTION 5.6 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced under
the laws of the State of Maryland.
SECTION 5.7 - CONFORMITY TO SECURITIES LAWS
The Optionee acknowledges that the Plan is intended to conform to the
extent necessary with all provisions of the Securities Act and the
Exchange Act and any and all regulations and rules promulgated by the
Securities and Exchange Commission thereunder, including without
limitation Rule 16b-3. Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Option is granted
and may be exercised, only in such a manner as to conform to such
laws, rules and regulations. To the extent permitted by applicable
law, the Plan and this Agreement shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
REALTY INCOME CORPORATION
By: ___________________________
Thomas A. Lewis
Chief Executive Officer
By: ___________________________
Michael R. Pfeiffer
Secretary
____________________________
__________________, Optionee
____________________________
____________________________
Address
Optionee's Taxpayer
Identification Number:
____________________________
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