EXHIBIT 1.1
REALTY INCOME CORPORATION
(a Maryland corporation)
372,093 Shares of Common Stock
(Par Value $1.00 Per Share)
UNDERWRITING AGREEMENT
Dated: March 25, 1998
EVEREN Securities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601-1694
Ladies and Gentlemen:
Realty Income Corporation, a Maryland corporation (the
"Company"), confirms its agreement with EVEREN Securities, Inc. ("you"
or the "Underwriter") with respect to the sale by the Company and the
purchase by you of 372,093 shares of Common Stock, par value $1.00 per
share, of the Company ("Common Stock") The aforesaid 372,093 shares
of Common Stock purchased by you are hereinafter called, the
"Securities".
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (No. 333-
34311) (the "Registration Statement") covering the registration of,
among other things, the Securities under the Securities Act of 1933,
as amended (the "1933 Act"), in each case including the related
preliminary prospectus or prospectuses. Promptly after execution and
delivery of this Agreement, the Company will either (i) prepare and
file a prospectus supplement, and a prospectus in accordance with the
provisions of Rule 415 ("Rule 415") of the rules and regulations of
the Commission under the 1933 Act (the "1933 Act Regulations") and
paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations
or (ii) if the Company has elected to rely upon Rule 434 ("Rule 434")
of the 1933 Act Regulations, prepare and file a term sheet (a "Term
Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
The information included in such Term Sheet that was omitted from the
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". The prospectus,
together with the related prospectus supplement, relating to the
Securities used before the Registration Statement became effective,
and the prospectus, together with any 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
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effectiveness and prior to the execution and delivery of this
Agreement, is herein called, together with the documents incorporated
by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, a "preliminary prospectus". The 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, 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
the Registration Statement and any Rule 462(b) Registration Statement
are herein referred to collectively as the "Registration Statement".
The final Form of Prospectus Supplement, including the prospectus
dated October 1, 1997 and the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the
forms first furnished to you for use in connection with the offering
of the Securities is herein called the "Prospectus". For purposes of
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 any Prospectus (or other references of like
import) shall be deemed to mean and include all such financial
statements and schedules and other information which is incorporated
or deemed to be incorporated by reference in the Registration
Statement, any preliminary prospectus or any Prospectus, as the case
may be; and all references in this Agreement to amendments or
supplements to the Registration Statement, any preliminary prospectus
or any Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which is incorporated or deemed to be incorporated
by reference in the Registration Statement, such preliminary
prospectus or such Prospectus, as the case may be.
All references in this Agreement to properties or improvements
"owned by" or "of" the Company or any of its subsidiaries shall be
deemed to mean and include all properties and improvements which are
leased by the Company or any of its subsidiaries, as lessee.
As used in this Agreement, the term "Consolidation" means the
merger of 25 limited partnerships (the "Partnerships") and RIC
Properties Ltd., a California limited partnership ("RIC Properties"),
into the Company on August 15, 1994; "Merger" means the merger of
R.I.C. Advisor, Inc., a California corporation (the "Advisor"), into
the Company on August 17, 1995; and "Reincorporation" means the
reincorporation of the Company in the State of Maryland, which was
effectuated by merging Realty Income Corporation, a Delaware
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corporation, into the Company (formally known as Realty Income of
Maryland, Inc., which changed its name to Realty Income Corporation),
with the Company as the surviving corporation of such merger.
Section 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to you as of the date hereof and as of the
Closing Time referred to in Section 2(b) hereof, and agrees with you,
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, the Registration Statement, any Rule 462(b) Registration
Statement and any amendments and supplements thereto complied and
will comply in all material respects with the applicable
requirements of the 1933 Act and the 1933 Act Regulations and did
not and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, at
the date hereof and at the Closing Time, 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 you expressly
for use in the Registration Statement or Prospectus.
Each preliminary prospectus and the Prospectus filed as part
of the Registration Statement or any Rule 462(b) Registration
Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
and the 1933 Act Regulations and, if applicable, each preliminary
prospectus and the Prospectus delivered to you for use in
connection with this offering was identical to the electronically
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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 Prospectuses, at the date hereof and at the Closing Time,
did not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(iii) Independent Accountants. The accountants who
certified the financial statements and supporting schedules
included in the Registration Statements are independent public
accountants as required by the 1933 Act and the 1933 Act
Regulations.
(iv) Financial Statements. The consolidated financial
statements of the Company included in the Registration Statement
and the Prospectuses, together with the related schedule and
notes, present fairly the financial position of the Company and
its subsidiaries at the dates indicated and the consolidated
statements of income, stockholders' equity and cash flows of the
Company and its subsidiaries for the periods specified; said
consolidated financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved.
The supporting schedules included in the Registration Statement
present fairly in accordance with GAAP the information required
to be stated therein. The selected financial data, if any, and
summary financial information, if any, included in the
Prospectuses present fairly the information shown therein and
have been compiled on a basis consistent with that of the audited
financial statements included in the Registration Statement. The
Company's ratios of earnings to fixed charges (actual and, if
any, pro forma) included in the Prospectus have been calculated
in compliance with Item 503(d) of Regulation S-K of the
Commission.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the
Registration Statement and the 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
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Effect"), whether or not arising in the ordinary course of
business, (B) there have been no transactions entered into by the
Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to
the Company and its subsidiaries considered as one enterprise,
and (C) except for regular monthly distributions on the Common
Stock in amounts per share that are consistent with past
practice, there have 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 equity 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 of the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the
issued and outstanding partnership interests and shares of
capital stock, as the case may be, of each such subsidiary have
been duly authorized (if applicable) and validly issued and are
fully paid and are non-assessable (except to the extent that the
general partners of subsidiaries which are partnerships may be
liable for the obligations of such partnerships) and are owned by
the Company, directly or through subsidiaries, free and clear of
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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
is as set forth in "Description of Common Stock" and "Description
of Preferred Stock" in the Prospectus and the issued and
outstanding stock of the Company is as set forth in the Company's
Form 10-Q for the quarter ended September 30, 1997 (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 and Description of Securities. The
shares of issued and outstanding Common Stock have been duly
authorized and validly issued and are fully paid and non-
assessable; none of the outstanding shares of Common Stock was
issued in violation of the preemptive or other similar rights
arising by operation of law, under the charter or bylaws of the
Company, under any agreement or instrument to which the Company
or any of its subsidiaries is a party or otherwise. The
Securities to be purchased from the Company by you have been duly
authorized for issuance and sale to the you pursuant to this
Agreement and, when issued and delivered by the Company pursuant
to this Agreement, against payment of the consideration set forth
herein, will be validly issued, fully paid and non-assessable;
the Common Stock conforms to all statements relating thereto
contained or incorporated by reference in the Prospectus and such
description conforms to the rights set forth in the instruments
defining the same; and the issuance of the Securities is not
subject to preemptive or other similar rights arising by
operation of law, under the charter and bylaws of the Company,
under any agreement or instrument to which the Company or any of
its subsidiaries is a party or otherwise.
(xi) Absence of Defaults and Conflicts. Neither the
Company nor any of its subsidiaries is in violation of its
charter or bylaws or its partnership agreement, as the case may
be, or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which any
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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
consummation of the transactions contemplated herein (including
the use of the proceeds from the sale of the Securities to repay
borrowings under the Amended and Restated Revolving Credit
Agreement dated as of November 29, 1994 and amended and restated
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 (the "Acquisition
Credit Agreement"), as described in the Prospectus under the
caption "Use of Proceeds" but excluding any use of proceeds to
fund any property acquisitions or for other general corporate
purposes for which specific corporate authorization may be
required) and compliance by the Company with its obligations
hereunder and thereunder have been duly authorized by all
necessary corporate action and do not and will not, whether with
or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any subsidiary pursuant to, any
Agreement or Instrument, except for such conflicts, breaches or
defaults or liens, charges or encumbrances that, individually or
in the aggregate, would not have a Material Adverse Effect, nor
will such action result in any violation of the provisions of the
charter or 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,
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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 hereunder; 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 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, in connection
with the offering, issuance or sale of the Securities under this
Agreement or the consummation of the other transactions
contemplated by this Agreement, except such as have been already
made or obtained under the 1933 Act or the 1933 Act Regulations
or as may be required under state securities laws.
(xvii) Possession of Licenses and Permits. The Company
and its subsidiaries possess such permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental
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Licenses") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the
business now operated by them and the Company and its
subsidiaries are in compliance with the terms and conditions of
all such Governmental Licenses, except where the failure so to
possess or comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are
valid and in full force and effect, except where the invalidity
of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not, singly or in
the aggregate, have a Material Adverse Effect; and neither the
Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any
such Governmental Licenses which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Effect.
(xviii) Investment Company Act. The Company is not, and
upon the issuance and sale of the Securities as contemplated in
this Agreement and the application of the net proceeds therefrom
as described in the Prospectus will not be, an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(xix) Partnership Agreements. Each of the partnership
and, if applicable, joint venture agreements to which the Company
or any of its subsidiaries is a party has been duly authorized,
executed and delivered by the Company or the relevant subsidiary,
as the case may be, and constitutes the valid and binding
agreement of the Company or such subsidiary, as the case may be,
enforceable in accordance with its terms, except as the
enforcement thereof may be limited by (A) the effect of
bankruptcy, insolvency or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally or
(B) the effect of general principles of equity, and the
execution, delivery and performance of such agreements did not,
at the time of execution and delivery, and does not constitute a
breach of or default under the charter or bylaws or partnership
agreement, as the case may be, of the Company or any of its
subsidiaries or any of the Agreements and Instruments or any law,
administrative regulation or administrative or court order or
decree.
(xx) Properties. Except as otherwise disclosed in the
Prospectus: (i) the Company and its subsidiaries have good and
marketable title (either in fee simple or pursuant to a valid
leasehold interest) to all properties and assets described in the
Prospectus as being owned or leased, as the case may be, by them
and to all properties reflected in the Company's most recent
consolidated financial statements included in the Prospectus, and
neither the Company nor any of its subsidiaries has received
notice of any claim that has been or may be asserted by anyone
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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 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 lease 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
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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
its subsidiaries' respective properties are located), and the
Company and its subsidiaries carry comprehensive general
liability insurance and 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 subsidiarie's respective properties
are located) and the Company or one of its subsidiaries is named
as an additional insured on all policies required under the
leases for such properties.
(xxii) Environmental Matters. Except as otherwise
disclosed in the Prospectus: (i) all real property and
improvements owned or leased by the Company or any of its
subsidiaries, including, without limitation, the Environment (as
defined below) associated with such real property and
improvements, is free of any Contaminant (as defined below),
except such Contaminants which, individually or in the aggregate,
would not have a Material Adverse Effect; (ii) neither the
Company, nor any of its subsidiaries nor any Partnership has
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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 in 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 (iv) 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, 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
Page 12
Safety and Health Act, 29 U.S.C. 651, et seq., and all other
federal, state and local laws, ordinances, regulations, rules,
orders, decisions, permits, and the like, which are directed at
the protection of human health or the Environment. "Lien" means,
with respect to any asset, any mortgage, deed of trust, lien,
pledge, encumbrance, charge or security interest in or on such
asset. "Environment" means any surface water, drinking water,
ground water, land surface, subsurface strata, river sediment,
buildings, structures, and ambient, workplace and indoor air.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, emanating or disposing of any Contaminant into the
Environment, including, without limitation, the abandonment or
discard of barrels, containers, tanks or other receptacles
containing or previously containing any Contaminant or any
release, emission or discharge as those terms are defined or used
in any Environment 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, except for rights arising under the
Registration Rights Agreement dated as of April 28, 1995 (the
"RRA") among the Company and certain former shareholders of the
Advisory party thereto (the "Shareholders"). The names of the
Shareholders and each other person, if any, who holds any
Registrable Securities (as defined in the RRA) are set forth in
Schedule B hereto. Each of the Shareholders has received a
letter from you regarding your belief that inclusion of the
Shareholders' Registrable Securities would interfere with the
successful completion of the Shares to be distributed 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
Page 13
the Company, treated as a partnership (rather than as an
association taxable as a corporation) for federal income tax
purposes. The Company's ownership interests in three properties
held through tenancies in common with unrelated third parties
(which are the only properties which, since the Consolidation,
have been held in tenancies in common with unrelated third
parties) have not been, since the Consolidation, and will not be
treated as ownership interests in associations taxable as
corporations for federal income tax purposes. Realty Income
Texas Properties, L.P., a Delaware limited partnership, is not
and has never been treated as an association taxable as a
corporation for federal income tax purposes. Realty Income Texas
Properties, Inc., a Delaware corporation, is and has been at all
times treated as a "qualified REIT subsidiary" within the meaning
of Section 856(i) of the Code.
(xxvi) Reincorporation. The Reincorporation (a) qualified
as a reorganization under Section 368(a)(1)(F) of the Code or
(b) was a non-event for federal income tax purposes, and no gain
or loss was or will be recognized by the Company for federal
income tax purposes as a result of the Reincorporation.
SECTION 2. SALE AND DELIVERY TO THE UNDERWRITER; 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 you and
you, agree to purchase from the Company, at the price set forth in
Schedule A, 372,093 Securities.
(b) Payment. Payment of the purchase price for, and delivery
of certificates for, the Securities shall be made at the office of
EVEREN Securities, Inc., 77 West Wacker Drive, Chicago, Illinois, or
at such other place as shall be agreed upon by you and the Company, at
9:00 A.M. (Chicago time) on the third (fourth, if the pricing occurs
after 3:30 P.M. Chicago time, on any given day) business day after the
date hereof, or such other time not later than ten business days after
such date as shall be agreed upon by you and the Company (such time
and date of payment and delivery being herein called "Closing Time").
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 you for your account of certificates for
the Securities to be purchased by you.
(c) Denominations; Registration. Certificates for the
Securities, shall be in such denominations and registered in such
names as you may request in writing at least one full business day
before the Closing Time. The certificates for the Securities will be
made available for examination and packaging by you in the City of
Chicago not later than 2:00 P.M. (Chicago time) on the business day
prior to the Closing Time.
Page 14
SECTION 3. COVENANTS OF THE COMPANY.
The Company covenants with each U.S. Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will notify you
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 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 each form of prospectus supplement,
prospectus or term sheet transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that
it was not, it will promptly file such prospectus supplement,
prospectus or term sheet, as the case may be. The Company will
make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give you
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 the
Prospectus, whether pursuant to the 1933 Act, the 1934 Act or
otherwise, will furnish you 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 you or your counsel 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 you and your counsel, 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
Page 15
by reference therein) as you and your counsel may reasonably
request. If applicable, the copies of the Registration Statement
and each amendment thereto furnished to you 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
you, without charge, as many copies of each preliminary
prospectus as you 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 you, 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 you may reasonably
request. If applicable, the Prospectus and any amendments or
supplements thereto furnished to you will be identical to the
electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, if any, except to the extent
permitted by Regulation S-T.
(f) Continued Compliance with Securities Laws. The
Company will comply with the 1933 Act and the 1933 Act
Regulations and the 1934 Act and the 1934 Act Regulations so as
to permit the completion of the distribution of the Securities as
contemplated in this Agreement and 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 your counsel or counsel 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
you such number of copies of such amendment or supplement as you
may reasonably request.
(g) Blue Sky Qualifications. The Company will use its
best efforts, in cooperation with you to qualify the Securities
for offering and sale under the applicable securities laws of
such states and other jurisdictions of the United States as you
may designate and to maintain such qualifications in effect for a
Page 16
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 on the New York Stock
Exchange.
(k) Reporting Requirements. The Company, during the
period when the Prospectus is required to be delivered under the
1933 Act or the 1934 Act, will file all documents required to be
filed with the Commission pursuant to the 1934 Act within the
time periods required by the 1934 Act and the 1934 Act
Regulations.
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 preparation, issuance
and delivery of the certificates for the Securities to you, including
any transfer taxes or other duties payable upon the sale of the
Securities to you (iii) the fees and disbursements of the Company's
counsel, accountants and other advisors, (iv) 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 your counsel in connection therewith and in
connection with the preparation of the Blue Sky Survey and any
supplement thereto, (v) the printing and delivery to you of copies of
each preliminary prospectus, any Term Sheets and of the Prospectus and
any amendments or supplements thereto, (vi) the preparation, printing
Page 17
and delivery to you of copies of the Blue Sky Survey and any
supplement thereto, (vii) the fees and expenses of any transfer agent
or registrar for the Securities, (viii) 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 (ix) the fees and expenses incurred in connection with
the listing of the Securities on the New York Stock Exchange.
(b) Termination of Agreement. If this Agreement is terminated
by you in accordance with the provisions of Section 5 or
Section 9(a)(i) or 9(a)(v) hereof, the Company shall reimburse you for
all of their out-of-pocket expenses, including the reasonable fees and
disbursements of your counsel for.
SECTION 5. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS.
Your obligations 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,
the performance by the Company of its covenants and other obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement The
Registration Statement, including any Rule 462(b) Registration
Statement, has become effective not later than 5:30 P.M. on the
date hereof and at Closing Time no stop order suspending the
effectiveness of 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 U.S. 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, you
shall have received the favorable opinions, dated as of Closing
Time, of Latham & Watkins, counsel for the Company, and Ballard
Spahr Andrews & Ingersoll, special Maryland counsel to the
Company, each in form and substance satisfactory to counsel for
the U.S. Underwriters, to the effect set forth in Exhibit A and B
hereto, respectively, and to such further effect as your counsel
may reasonably request pursuant to Section 5(j).
(c) Opinion of Your Counsel. At Closing Time, you shall
have received the favorable opinion, dated as of Closing Time, of
Page 18
Chapman and Cutler, your counsel, with respect to the matters as
you may reasonably require. 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 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 you.
Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they
deem proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
(d) Officers' Certificate. At Closing Time, there shall
not have been, since the date hereof or since the respective
dates as of which information is given in the Prospectuses, any
material adverse change in the condition, financial or otherwise,
or 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
you 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 of
the Underwriting Agreement are true and correct with the same
force and effect as though expressly made at and as of Closing
Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
at or prior to Closing Time, and (iv) no stop order suspending
the effectiveness of either of the 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 our knowledge, threatened by the Commission.
(e) Accountant's Comfort Letter. At the time of the
execution of this Agreement, you shall have received from KPMG
Peat Marwick LLP a letter dated such date, in form and substance
satisfactory to you 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, you shall
have received from KPMG Peat Marwick LLP a letter, dated as of
Closing Time, to the effect that they reaffirm the statements
made in the letter furnished pursuant to subsection (e) of this
Section, except that the specified date referred to shall be a
date not more than three business days prior to Closing Time.
Page 19
(g) Approval of Listing. At the Closing Time, the
Securities shall have been approved for listing on the New York
Stock Exchange, subject only to official notice of issuance.
(h) Additional Documents. At Closing Time, your counsel
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 you and your counsel.
(i) Termination of Agreement. If any condition specified
in this Section shall not have been fulfilled when and as
required to be fulfilled, this Agreement may be terminated by you
by notice to the Company at any time at or prior to Closing Time,
as the case may be, and such termination shall be without
liability of any party to any other party except as provided in
Section 4 and except that Sections 6 and 7 shall survive any such
termination and remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) Indemnification of The Underwriters. The Company
agrees to indemnify and hold harmless you and each person, if any, who
controls you within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment
thereto), including the Rule 434 Information, if applicable, or
the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact included in any
preliminary prospectus or any Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
Page 20
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 you),
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 you expressly for use in the
Registration Statement (or any amendment thereto) or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto);
and provided further that this indemnity agreement with respect to any
preliminary prospectus shall not inure to your benefit from whom the
person asserting any such losses, liabilities, claims, damages or
expenses purchased Securities, or any person controlling you, 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 you or on your behalf 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. You
agree to indemnify and hold harmless the Company, its directors, each
of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act against any
and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred,
but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or
any amendment thereto), including the Rule 434 Information, if
applicable, or any preliminary prospectus or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity
with written information furnished to the Company by you expressly for
Page 21
use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or Prospectus (or any amendment or supplement
thereto).
(c) Actions against Parties; Notification. Each indemnified
party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of
which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any
liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any
liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to
Section 6(a) above, counsel to the indemnified parties shall be
selected by you, 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, 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.
Page 22
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
Underwriter 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 Underwriter 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 Underwriter 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 Underwriter, 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
Underwriter 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 Underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriter 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 Underwriter were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this Section 7. The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
Page 23
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, you shall not
be required to contribute any amount in excess of the amount by which
the total price at which the Securities underwritten by you and
distributed to the public were offered to the public exceeds the
amount of any damages which you have 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
you 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 you, 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.
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 you or on your behalf or by or
on behalf of a controlling person, or by or on behalf of the Company,
and shall survive delivery of the Securities to you.
SECTION 9. TERMINATION OF AGREEMENT.
(a) Termination; General. You may terminate this Agreement, by
notice to the Company, at any time at or prior to Closing Time (i) if
there has been, since the time of execution of this Agreement or since
the respective dates as of which 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 your
Page 24
judgment, impracticable to market the Securities or to enforce
contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or limited by the
Commission, the New York Stock Exchange or the NASDAQ National Market,
or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the NASDAQ National Market has been suspended or
limited, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices have been required, by any of said exchanges
or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by either
Federal, California or New York authorities, or (v) if since the date
of this Agreement, there has occurred a downgrading in the rating
assigned to the Securities or any of the Company's other debt
securities by any nationally recognized securities rating agency, or
such securities rating agency has publicly announced that it has under
surveillance or review, with possible negative implications, its
rating of the Securities or any of the Company's other debt
securities.
(b) Liabilities. If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party
to any other party except as provided in Section 4 hereof, and
provided further that Sections 6 and 7 shall survive such termination
and remain in full force and effect,
SECTION 10. 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
Underwriter shall be directed to EVEREN Securities, Inc. at 77 West
Wacker Drive, Chicago, Illinois 60601-1694, Attention: Syndicate,
facsimile number (314) 289-7387; and notices to the Company shall be
directed to it at Realty Income Corporation, 220 West Crest Street,
Escondido, California 92025-1707, Attention: Legal Department.
SECTION 11. PARTIES.
This Agreement shall inure to the benefit of and be binding upon
the Underwriter 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
Underwriter 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 Underwriter and the Company and their
respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the
Page 25
benefit of no other person, firm or corporation. No purchaser of
Securities from the Underwriter shall be deemed to be a successor by
reason merely of such purchase.
SECTION 12. GOVERNING LAW AND TIME.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois applicable to Agreements made
and to be performed in said State.
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 Underwriter and the Company in
accordance with its terms.
Very truly yours,
REALTY INCOME CORPORATION
By: /s/ RICHARD J. VANDERHOFF
-------------------------------------
Richard J. VanDerhoff
President and Chief Operating Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
EVEREN Securities, Inc.
By: /s/ Jon K. Haahr
-------------------------------
Authorized Signatory
Jon K. Haahr
Managing Director
Page 26
Schedule A
Price Schedule
1. The initial public offering price per share for the
Securities shall be $25.53125.
SCHEDULE A-1
Page 27
Schedule B
Persons and Entities who hold Registrable Securities:
William E. Clark
William E. Clark and Evelyn J. Clark
Family Trust dated June 19, 1981
Thomas A. Lewis
Richard J. VanDerhoff
Gary M. Malino
Donald K. Cooke
Robert Caffey
Lawrence Stephenson
John H. Wolfe
SCHEDULE B-1
Page 28
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) None of the outstanding shares of stock of the Company was
issued, to such counsel's knowledge, 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 known to such
counsel.
(iii) The issuance of the Securities is not subject to preemptive
or other similar rights arising under any agreement or instrument to
which the Company or any of its subsidiaries is a party.
(iv) The Registration Statement has been declared effective under
the 1933 Act; to such counsel's knowledge, 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
such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission.
(v) The Registration Statement and the Prospectus, and each
amendment or supplement to any of the foregoing (in each case
excluding the documents incorporated or deemed to be incorporated by
reference therein and the financial statements, supporting schedules
and other financial data included or incorporated by reference therein
and excluding any Statement of Eligibility on Form T-1 (a "Form T-1"),
as to which no opinion need be rendered), as of their respective
effective or issue dates complied as to form in all material respects
with the applicable requirements of the 1933 Act and the 1933 Act
Regulations.
(vi) The documents incorporated or deemed to be incorporated by
reference in the 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.
(vii) To the extent that it constitutes matters of law, summaries
of legal matters or legal conclusions, (i) the information in the Base
Prospectus under "Certain Federal Income Tax Considerations" has been
reviewed by you and was, as of October 1, 1997, correct in all
material respects, (ii) the information in the Prospectus Supplement
under "Certain U.S. Federal Income Tax Considerations to Holders of
Common Stock" has been reviewed by you and is, as of the date hereof,
Page A-29
correct in all material respects, and (iii) the information in the
Company's annual report on Form 10-K for the fiscal year ended
December 31, 1997 (the "1997 10-K") under "Business - Other Items -
Taxation of the Company" and "Business - Other Items - Effect of
Distribution Requirements" has been reviewed by you and was, as of the
filing date of the 1997 10-K, correct in all material respects.
(viii) No authorization, approval, consent or order of any federal
or California state governmental authority or agency (other than under
the 1933 Act and the 1933 Act Regulations, which have been obtained,
or as may be required under the securities or blue sky laws of the
various states, as to which no opinion need be rendered) is required
in connection with the due authorization, execution or delivery of the
Underwriting Agreement or for the offering, issuance or sale of the
Securities.
(ix) The execution, delivery and performance of the Underwriting
Agreement by the Company (including the issuance and sale of the
Securities to the Underwriter 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 or the Indenture dated as of
May 6, 1997, as amended, between the Company and The Bank of New York,
as trustee, nor will such action result in any violation of any
applicable provision of any federal or State of California law,
statute, administrative regulation or administrative or court decree
applicable to the Company.
(x) The Company is not an "investment company" or, to the best
of our knowledge and information, an entity "controlled" by an
"investment company", as any such terms are defined in the 1940 Act.
(xi) Commencing with the Company's taxable year ended
December 31, 1994, the Company has been organized in conformity with
the requirements for qualification and taxation as a real estate
investment trust under the Code and its proposed method of operation
will enable the Company to meet the requirements for qualification and
taxation as a real estate investment trust under the Code.
(xii) Realty Income Texas Properties, L.P., a Delaware limited
partnership, is not and has never been treated as an association
taxable as a corporation for federal income tax purposes. Realty
Income Texas Properties, Inc., a Delaware corporation, is and has, at
all times during its existence, been treated as a "qualified REIT
subsidiary" within the meaning of Section 856(i) of the Code.
Although we are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the
Page A-30
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 (vii), (xi) and (xii) hereof), we have, however,
participated in conferences with certain officers and other
representatives of the Company, representatives of KPMG Peat Marwick
LLP and your representatives at which the 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 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
or any Rule 462(b) Registration Statement or any amendment thereto
(except for the financial statements, supporting schedules and other
financial data included therein and any Form T-1, as to which we
express no belief), as of the time such registration statement or any
post-effective or other amendment thereto became effective, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus or any amendment or
supplement thereto (except for the financial statements, supporting
schedules and other financial data included therein, as to which such
counsel express no belief), as of March 30, 1998 or as of the Closing
Time, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading.
In rendering such opinion, such counsel may rely insofar as such
opinion involves factual matters, to the extent they deem proper, on
certificates of responsible officers of the Company and public
officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
The matters set forth in (vii), (xi) and (xii) 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 Underwriter. In particular, the
opinions set forth in paragraphs (vii), (xi) and (xii) 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
Page A-31
the applicability thereto, or the effect thereon, of other federal
laws, the laws of any 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, 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.
Page A-32
EXHIBIT B
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.
(ii) The Company has corporate power to own, lease and operate
its properties and to conduct its business substantially as described
under the heading "The Company" in the Prospectus and to enter into
and perform its obligations under the Underwriting Agreement.
(iii) The shares of issued and outstanding Common Stock have been
duly authorized and validly issued and are fully paid and non-
assessable; and none of the outstanding shares of stock of the Company
was issued in violation of preemptive rights arising under the
Maryland General Corporation laws or under the charter or bylaws of
the Company.
(iv) The Securities have been duly authorized by all necessary
corporate action on the part of the Company for issuance and sale to
the Underwriter pursuant to the Underwriting Agreement and, when
issued and delivered by the Company pursuant to the Underwriting
Agreement against payment of the consideration set forth therein, will
be validly issued, fully paid and non-assessable.
(v) The issuance of the Securities is not subject to preemptive
or other similar rights arising under the Maryland General Corporation
laws or under the charter or bylaws of the Company.
(vi) The Underwriting 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.
(vii) The form of certificate used to represent the Common Stock
complies in all material respects with the applicable requirements of
the Maryland General Corporation law and the charter and bylaws of the
Company.
(viii) The information in the Prospectus under "Description of
Common Stock", "Description of Preferred Stock" and "Restrictions on
Ownership and Transfers of Capital Stock" and in the Company's proxy
statement dated March 28, 1997 under "Proposal 1 - Reincorporation of
the Company in Maryland and Related Changes to Rights of Stockholders -
Comparison of Rights of Stockholders of the Company and Stockholders
of the Maryland Company", in each case to the extent that it
constitutes matters of Maryland law, summaries of Maryland legal
matters, summaries of certain provisions of the Company's charter or
bylaws or other instruments or agreements governed by Maryland law, or
Page B-33
legal conclusions with respect to matters of Maryland law, has been
reviewed by them and is correct in all material respects.
(ix) 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, as to which no opinion
need be rendered) is required in connection with the due
authorization, execution or delivery of the Underwriting Agreement or
for the offering, issuance or sale of the Securities.
(x) The execution, delivery and performance of the Underwriting
Agreement by the Company (including the issuance and sale of the
Securities to the Underwriter 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 result in any violation of the
provisions of the charter or bylaws of the Company or, so far as is
known to such counsel, any applicable provision of any Maryland law,
statute, administrative regulation or administrative or court decree
applicable to the Company.
In rendering such opinion, such counsel shall state that Chapman
and Cutler, in rendering their opinion pursuant to the Underwriting
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).
Page B-34