EXHIBIT 1.1
REALTY INCOME CORPORATION
(a Maryland Corporation)
2,850,000 Shares of Common Stock
PURCHASE AGREEMENT
May 1, 2001
Table of Contents
PAGE
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SECTION 1. Representations and Warranties..................................................................3
(a) Representations and Warranties by the Company. .................................................3
(i) Compliance with Registration Requirements. ............................................3
(ii) Incorporated Documents. ...............................................................4
(iii) Independent Accountants. ..............................................................4
(iv) Financial Statements. .................................................................4
(v) No Material Adverse Change in Business. ...............................................5
(vi) Good Standing of the Company. .........................................................5
(vii) Good Standing of Subsidiaries. ........................................................5
(viii) Capitalization. .......................................................................6
(ix) Authorization of Agreement. ...........................................................6
(x) Authorization of Common Stock. ........................................................6
(xi) Absence of Defaults and Conflicts. ....................................................6
(xii) Absence of Labor Dispute. .............................................................7
(xiii) Absence of Proceedings. ...............................................................7
(xiv) Accuracy of Exhibits. .................................................................7
(xv) Possession of Intellectual Property. ..................................................8
(xvi) Absence of Further Requirements. ......................................................8
(xvii) Possession of Licenses and Permits. ...................................................8
(xviii) Investment Company Act. ...............................................................8
(xix) Partnership Agreements. ...............................................................8
(xx) Properties.............................................................................9
(xxi) Insurance. ...........................................................................10
(xxii) Environmental Matters. ...............................................................10
(xxiii) Qualification as a Real Estate Investment Trust.......................................12
(xxiv) Registration Rights. .................................................................12
(xxv) Tax Treatment of Certain Entities.....................................................12
(xxvi) Securities. ..........................................................................12
(b) Officer's Certificates. .......................................................................13
SECTION 2. Sale and Delivery to Underwriters; Closing.....................................................13
(a) Initial Securities.............................................................................13
(b) Option Securities..............................................................................13
(c) Payment. ......................................................................................13
(d) Denominations; Registration....................................................................14
SECTION 3. Covenants of the Company. .....................................................................14
(a) Compliance with Securities Regulations and Commission Requests. ...............................14
(b) Filing of Amendments. .........................................................................15
(c) Rule 434. .....................................................................................15
(d) Delivery of Registration Statements. ..........................................................15
(e) Delivery of Prospectuses.......................................................................15
(f) Continued Compliance with Securities Laws. ....................................................15
(g) Blue Sky Qualifications........................................................................16
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(h) Rule 158. .....................................................................................16
(i) Use of Proceeds. ..............................................................................16
(j) Listing........................................................................................16
(k) Reporting Requirements. .......................................................................16
(l) Restriction on Sale of Securities. ............................................................16
SECTION 4. Payment of Expenses............................................................................17
(a) Expenses. .....................................................................................17
(b) Termination of Agreement. .....................................................................18
SECTION 5. Conditions of Underwriters' Obligations. ......................................................18
(a) Effectiveness of Registration Statement. ......................................................18
(b) Opinions of Counsel for Company. ..............................................................18
(c) Opinion of Counsel for Underwriters. ..........................................................18
(d) Officers' Certificate. ........................................................................18
(e) Accountant's Comfort Letter....................................................................19
(f) [Intentionally omitted]........................................................................19
(g) Approval of Listing............................................................................19
(h) Conditions to Purchase of Option Securities....................................................19
(i) Additional Documents. .........................................................................20
(j) Termination of Agreement. .....................................................................20
SECTION 6. Indemnification................................................................................20
(a) Indemnification of Underwriters. ..............................................................20
(b) Indemnification of Company, Directors and Officers.............................................21
(c) Actions against Parties; Notification. ........................................................22
(d) Settlement without Consent if Failure to Reimburse. ...........................................22
SECTION 7. Contribution. .................................................................................22
SECTION 8. Representations, Warranties and Agreements to Survive Delivery. ...............................24
SECTION 9. Termination of Agreement.......................................................................24
(a) Termination; General. .........................................................................24
(b) Liabilities. ..................................................................................24
SECTION 10. Default by One or More of the Underwriters. ...................................................24
SECTION 11. Notices. ......................................................................................25
SECTION 12. Parties. ......................................................................................25
SECTION 13. GOVERNING LAW AND TIME. .......................................................................26
SECTION 14. Effect of Headings and Table of Contents. .....................................................26
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Schedule A - List of Underwriters...........................................................................Sch A-1
Schedule B - Price Schedule.................................................................................Sch B-1
Exhibit A - Form of Opinion of Latham & Watkins.................................................................A-1
Exhibit B - Form of Opinion of Michael R. Pfeiffer..............................................................B-1
Exhibit C - Form of Opinion of Ballard Spahr Andrews & Ingersoll................................................C-1
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REALTY INCOME CORPORATION
(a Maryland corporation)
2,850,000 Shares of Common Stock
(Par Value $1.00 Per Share)
PURCHASE AGREEMENT
May 1, 2001
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Smith Barney Inc.
Credit Suisse First Boston Corporation
A.G. Edwards & Sons, Inc.
First Union Securities, Inc.
Tucker Anthony Incorporated
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Realty Income Corporation, a Maryland corporation (the "Company"),
confirms its agreement with the Underwriters named in Schedule A hereto (the
"Underwriters" which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Salomon
Smith Barney Inc., Credit Suisse First Boston Corporation, A.G. Edwards & Sons,
Inc., First Union Securities, Inc. and Tucker Anthony Incorporated are acting as
representatives (the "Representatives"), with respect to the sale by the Company
and the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of the Common Stock, par value $1.00 per share, of
the Company (the "Common Stock"), set forth in said Schedule A, and with respect
to the grant by the Company to the Underwriters, acting severally and not
jointly, of the option described in Section 2(b) hereof to purchase all or any
part of 427,500 additional shares of Common Stock to cover over-allotments, if
any. The aforesaid 2,850,000 shares of Common Stock (the "Initial Securities")
to be purchased by the Underwriters and all or any part of the 427,500 shares of
Common Stock subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities."
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-80821) and Amendment
No. 1 thereto covering the registration of, among other things, the Securities
under the Securities Act of 1933, as amended (the "1933 Act"), in each case
including the related preliminary prospectus or prospectuses. Promptly after
execution and delivery of this Agreement, the Company will either (i) prepare
and file a prospectus supplement and, if required by Rule 424(b) (as defined
below), a prospectus in accordance with the provisions of Rule 415 ("Rule 415")
of the rules and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act
Regulations or (ii) if the Company has elected to rely upon Rule 434 ("Rule
434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term
Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such Term Sheet that was omitted from such registration
statement at the time it became effective but that is deemed to be part of such
registration statement at the time the Term Sheet is filed with the Commission
pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information."
Each prospectus, together with any related prospectus supplement, relating to
the Securities used before such registration statement became effective, and
each prospectus, together with the related prospectus supplement, relating to
the Securities that omitted the Rule 434 Information or that was captioned
"Subject to Completion" that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called, together with the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, a "preliminary prospectus." Such registration statement, as
amended and including the exhibits thereto, schedules, if any, and the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, at the time that it became effective and including, if applicable, the Rule
434 Information, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The prospectus dated July 14, 1999 and the final prospectus
supplement relating to the offering of the Securities, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, in the form first furnished to the Underwriters for use in connection with
the offering of the Securities are herein called, collectively, the
"Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to the
prospectus dated July 14, 1999, the preliminary prospectus supplement relating
to the Securities and the Term Sheet and all documents incorporated by reference
therein pursuant to Item 12 of Form S-3, and all references in this Agreement to
the date of the Prospectus shall mean the date of the Term Sheet. For purposes
of this Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any Term Sheet or any amendment or supplement to
any of the foregoing shall be deemed to include any copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "described," "disclosed," "contained," "included"
or "stated" in the Registration Statement, any preliminary prospectus or the
Prospectus (or other references of like import) shall
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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, such preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to any Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934, as amended (the "1934
Act"), which is incorporated or deemed to be incorporated by reference in the
Registration Statement, such preliminary prospectus or the Prospectus, as the
case may be.
All references in this Agreement to properties or improvements "owned
by" or "of" the Company or any of its subsidiaries shall be deemed to mean and
include all properties and improvements which are leased by the Company or any
of its subsidiaries, as lessee.
As used in this Agreement, the term "Consolidation" means the merger of
25 limited partnerships and RIC Properties Ltd., a California limited
partnership, into the Company on August 15, 1994; and "Merger" means the merger
of R.I.C. Advisor, Inc., a California corporation (the "Advisor"), into the
Company on August 17, 1995.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company
meets the requirements for use of Form S-3 under the 1933 Act. Each of
the Registration Statement and any Rule 462(b) Registration Statement
has become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are threatened by the Commission, and any
request on the part of the Commission for additional information has
been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective, at the date hereof and at the Closing Time (and, if
any Option Securities are purchased, at each Date of Delivery), the
Registration Statement, any Rule 462(b) Registration Statement and any
amendments and supplements thereto complied and will comply in all
material respects with the applicable requirements of the 1933 Act and
the 1933 Act Regulations and the Trust Indenture Act of 1939, as amended
(the "1939 Act"), and the rules and regulations of the Commission under
the 1939 Act (the "1939 Act Regulations"), and did not and will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and, at the date hereof and at the
Closing Time (and, if any Option Securities are purchased, at each Date
of Delivery), neither the Prospectus nor any amendments or supplements
thereto contained or will contain any untrue statement of a material
fact or
3
omitted or will omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that the
representations and warranties in this paragraph shall not apply to
statements in or omissions from the Registration Statement or Prospectus
made in reliance upon and in conformity with information furnished to
the Company in writing by any Underwriter through Merrill Lynch
expressly for use in the Registration Statement or Prospectus.
Each preliminary prospectus and Prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when
so filed in all material respects with the 1933 Act and the 1933 Act
Regulations and, if applicable, each preliminary prospectus and the
Prospectus delivered to the Underwriter for use in connection with this
offering was identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR except to the extent
permitted by Regulation S-T.
(ii) INCORPORATED DOCUMENTS. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement and
the Prospectus, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read
together with the other information in the Prospectus, at the date
hereof and at the Closing Time (and, if any Option Securities are
purchased, at each Date of Delivery), did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(iii) INDEPENDENT ACCOUNTANTS. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
(iv) FINANCIAL STATEMENTS. The consolidated financial
statements of the Company included in the Registration Statement and the
Prospectus, together with the related schedule and notes, present fairly
the financial position of the Company and its subsidiaries at the dates
indicated and the consolidated statements of income, stockholders'
equity and cash flows of the Company and its subsidiaries for the
periods specified; said consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved.
The supporting schedules included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data, if any, and summary financial
information, if any, included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent
with that of the audited financial statements included in the
Registration Statement. The Company's ratios of earnings to fixed
charges and, if applicable, ratios of earnings to combined fixed charges
and preferred stock dividends
4
(actual and, if any, pro forma) included in the Prospectus have been
calculated in compliance with Item 503(d) of Regulation S-K of the
Commission.
(v) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise (a
"Material Adverse Effect"), whether or not arising in the ordinary
course of business, (B) there have been no transactions entered into by
the Company or any of its subsidiaries, other than those in the ordinary
course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) except for
regular monthly distributions on the Common Stock in amounts per share
that are consistent with past practice and regular quarterly or monthly,
as the case may be, dividends on the Company's 9 3/8% Class B Cumulative
Redeemable Preferred Stock, par value $1.00 per share (the "Class B
Preferred Stock"), and the Company's 9 1/2% Class C Cumulative
Redeemable Preferred stock, par value $1.00 per share (the "Class C
Preferred Stock"), there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its stock.
(vi) GOOD STANDING OF THE COMPANY. The Company is a
corporation duly organized and validly existing under the laws of the
State of Maryland and is in good standing with the State Department of
Assessments and Taxation of Maryland and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing in
each other jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(vii) GOOD STANDING OF SUBSIDIARIES. The only subsidiaries of
the Company are Realty Income Texas Properties, L.P., a Delaware limited
partnership, Realty Income Texas Properties, Inc., a Delaware
corporation, and Crest Net Lease, Inc., a Delaware corporation, and the
Company does not hold any equity interest in any corporation, limited
liability company, partnership, joint venture or entity other than such
subsidiaries. Each subsidiary of the Company has been duly organized and
is validly existing as a partnership or corporation, as the case may be,
in good standing under the laws of the state of its organization and has
power and authority as a partnership or corporation, as the case may be,
to own, lease and operate its properties and to conduct its business as
described in the Prospectus; each such subsidiary is duly qualified as a
foreign partnership or corporation, as the case may be, to transact
business and is in good standing in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure
so to qualify or to be in good standing would not result in a Material
Adverse Effect; except as otherwise disclosed in the Registration
Statement, all of the issued and outstanding partnership interests and
shares of capital stock, as the case may be, of each such subsi-
5
diary have been duly authorized (if applicable) and validly issued and
are fully paid and are non-assessable (except to the extent that the
general partners of subsidiaries which are partnerships may be liable
for the obligations of such partnerships) and are owned by the Company,
directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding partnership interests or shares of capital stock, as the
case may be, of such subsidiaries were issued in violation of preemptive
or other similar rights arising by operation of law, under the
partnership agreement or charter or bylaws, as the case may be, of any
such subsidiary or under any agreement or instrument to which the
Company or any such subsidiary is a party.
(viii) CAPITALIZATION. The authorized stock of the Company and
the issued and outstanding stock of the Company are as set forth in the
line items "Preferred Stock" and "Common Stock" under the caption
"Capitalization " in the Prospectus (except for subsequent issuances, if
any, pursuant to this Agreement, pursuant to employee benefit plans
referred to in the Prospectus or pursuant to the exercise of options
referred to in the Prospectus).
(ix) AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) AUTHORIZATION OF COMMON STOCK. The shares of issued and
outstanding Common Stock, Class B Preferred Stock and Class C Preferred
Stock have been duly authorized and validly issued and are fully paid
and non-assessable; none of the outstanding shares of Common Stock,
Class B Preferred Stock or Class C Preferred Stock was issued in
violation of preemptive or other similar rights arising by operation of
law, under the charter or bylaws of the Company, under any agreement or
instrument to which the Company or any of its subsidiaries is a party or
otherwise; and the Company's authorized but unissued Class A Junior
Participating Preferred Stock, par value $1.00 per share (the "Class A
Preferred Stock"), the Class B Preferred Stock, the Class C Preferred
Stock and the Rights Agreement dated as of June 25, 1998 (the "Rights
Agreement") between the Company and The Bank of New York conform to all
statements relating thereto contained or incorporated by reference in
the Prospectus and such statements conform to the rights set forth in
the instruments defining the same.
(xi) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company
nor any of its subsidiaries is in violation of its charter or bylaws or
its partnership agreement, as the case may be, or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which
any of them may be bound, or to which any of the respective properties
or assets of the Company or any subsidiary is subject (collectively,
"Agreements and Instruments"), except for such defaults that would not
have a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein (including the use of the proceeds from the sale of
the Securities to repay borrowings under the Revolving Credit Agreement
dated as of December 14, 1999 among the Company, the
6
banks named therein, The Bank of New York, as agent and swing line bank,
First Union National Bank, as syndication agent, Wells Fargo Bank,
National Association, as documentation agent, Bank of Montreal as
co-agent and BNY Capital Markets, Inc., as arranger, as amended by
Amendment No. 1 thereto dated as of January 21, 2000 and extended
pursuant to the Extension Agreement dated April 25, 2001 (as so amended
and extended, the "Acquisition Credit Agreement"), as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the
Company with its obligations hereunder have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, any Agreement or Instrument, except for such
conflicts, breaches or defaults or liens, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse
Effect, nor will such action result in any violation of the provisions
of the charter or bylaws of the Company or any applicable law, rule,
regulation, or governmental or court judgment, order, writ or decree. As
used herein, a "Repayment Event" means any event or condition which
gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Company or any subsidiary of the Company or any
of its subsidiaries.
(xii) ABSENCE OF LABOR DISPUTE. No labor dispute with the
employees of the Company or any subsidiary of the Company exists or, to
the best knowledge of the Company, is imminent; and the Company is not
aware of any existing or imminent labor disturbance by the employees of
any of its or any subsidiary's tenants, which, in either case, could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
(xiii) ABSENCE OF PROCEEDINGS. The Company has not received any
notice of any action, suit, proceeding, inquiry or investigation before
or by any court or governmental agency or body, domestic or foreign,
and, to the best knowledge of the Company, there is no such proceeding
now pending or threatened, against or affecting the Company or any of
its subsidiaries, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which could reasonably
be expected to result in a Material Adverse Effect, or which could
reasonably be expected to materially and adversely affect the
consummation of this Agreement or the performance by the Company of its
obligations under this Agreement; 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.
7
(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 hereunder 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 Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them and the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to possess or comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except where the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to be
in full force and effect would not, singly or in the aggregate, have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xviii) INVESTMENT COMPANY ACT. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
(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
8
subsidiary, as the case may be, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by (A) the
effect of bankruptcy, insolvency or other similar laws now or hereafter
in effect relating to or affecting creditors' rights generally or (B)
the effect of general principles of equity, and the execution, delivery
and performance of such agreements did not, at the time of execution and
delivery, and does not constitute a breach of or default under the
charter or bylaws or partnership agreement, as the case may be, of the
Company or any of its subsidiaries or any of the Agreements and
Instruments or any law, administrative regulation or administrative or
court order or decree.
(xx) PROPERTIES. Except as otherwise disclosed in the
Prospectus: (i) the Company and its subsidiaries have good and
marketable title (either in fee simple or pursuant to a valid leasehold
interest) to all properties and assets described in the Prospectus as
being owned or leased, as the case may be, by them and to all properties
reflected in the Company's most recent consolidated financial statements
included in the Prospectus, and neither the Company nor any of its
subsidiaries has received notice of any claim that has been or may be
asserted by anyone adverse to the rights of the Company or any
subsidiary with respect to any such properties or assets (or any such
lease) or affecting or questioning the rights of the Company or any such
subsidiary to the continued ownership, lease, possession or occupancy of
such property or assets, except for such claims that would not, singly
or in the aggregate, have a Material Adverse Effect; (ii) all liens,
charges, encumbrances, claims or restrictions on or affecting the
properties and assets of the Company or any of its subsidiaries which
are required to be disclosed in the Registration Statement or the
Prospectus are disclosed therein, and all such liens, charges,
encumbrances, claims or restrictions which are not disclosed in the
Prospectus could not reasonably be expected, singly or in the aggregate,
to have a Material Adverse Effect; (iii) no person or entity, including,
without limitation, any tenant under any of the leases pursuant to which
the Company or any of its subsidiaries leases (as lessor) any of its
properties (whether directly or indirectly through other partnerships,
joint ventures or otherwise) has an option or right of first refusal or
any other right to purchase any of such properties, except for such
options, rights of first refusal or other rights to purchase which,
individually or in the aggregate, are not material with respect to the
Company and its subsidiaries considered as one enterprise; (iv) to the
Company's best knowledge, each of the properties of the Company or any
of its subsidiaries has access to public rights of way, either directly
or through insured easements, except where the failure to have such
access would not, singly or in the aggregate, have a Material Adverse
Effect; (v) to the Company's best knowledge, each of the properties of
the Company or any of its subsidiaries is served by all public utilities
necessary for the current operations on such property in sufficient
quantities for such operations, except where the failure to have such
public utilities would not, singly or in the aggregate, have a Material
Adverse Effect; (vi) to the best knowledge of the Company, each of the
properties of the Company or any of its subsidiaries complies with all
applicable codes and zoning and subdivision laws and regulations, except
for such failures to comply 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
9
effect would not, singly or in the aggregate, have a Material Adverse
Effect, and neither the Company nor any of its subsidiaries is in
default in the payment of any amounts due under any such leases or in
any other default thereunder and the Company knows of no event which,
with the passage of time or the giving of notice or both, would
constitute a default under any such lease, except such defaults that
would not, individually or in the aggregate, have a Material Adverse
Effect; (viii) to the best knowledge of the Company, there is no pending
or threatened condemnation, zoning change, or other proceeding or action
that could in any manner affect the size of, use of, improvements on,
construction on or access to the properties of the Company or any of its
subsidiaries, except such proceedings or actions that, either singly or
in the aggregate, would not have a Material Adverse Effect; and (ix)
neither the Company nor any of its subsidiaries nor any lessee of any of
the real property or improvements of the Company or any of its
subsidiaries is in default in the payment of any amounts due or in any
other default under any of the leases pursuant to which the Company or
any of its subsidiaries leases (as lessor) any of its real property or
improvements (whether directly or indirectly through partnerships, joint
ventures or otherwise), and the Company knows of no event which, with
the passage of time or the giving of notice or both, would constitute
such a default under any of such leases, except such defaults as would
not, individually or in the aggregate, have a Material Adverse Effect.
(xxi) INSURANCE. With such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect, the
Company and its subsidiaries have title insurance on all real property
and improvements described in the Prospectus as being owned or leased
under a ground lease, as the case may be, by them and to all real
property and improvements reflected in the Company's most recent
consolidated financial statements included in the Prospectus in an
amount at least equal to the original cost of acquisition and the
Company and its subsidiaries are entitled to all benefits of the insured
thereunder, and each such property is insured by extended coverage
hazard and casualty insurance in amounts and on such terms as are
customarily carried by lessors of properties similar to those owned by
the Company and its subsidiaries (in the markets in which the Company's
and subsidiaries' respective properties are located), and the Company
and its subsidiaries carry comprehensive general liability insurance and
such other insurance as is customarily carried by lessors of properties
similar to those owned by the Company and its subsidiaries in amounts
and on such terms as are customarily carried by lessors of properties
similar to those owned by the Company and its subsidiaries (in the
markets in which the Company's and its subsidiaries' respective
properties are located) and the Company or one of its subsidiaries is
named as an additional insured on all policies required under the leases
for such properties.
(xxii) ENVIRONMENTAL MATTERS. Except as otherwise disclosed in
the Prospectus: (i) all real property and improvements owned or leased
by the Company or any of its subsidiaries, including, without
limitation, the Environment (as defined below) associated with such real
property and improvements, is free of any Contaminant (as defined
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 has caused or suffered to exist or
occur any Release (as defined below) of any Contaminant into the
Environment or any other condition that, individually or in the
aggregate, could
10
reasonably be expected to have a Material Adverse Effect or could result
in any violation of any Environmental Laws (as defined below) or
constitute a health, safety or environmental hazard to any person or
property except for such violations or hazards that could not reasonably
be expected to have a Material Adverse Effect; (iii) neither the Company
nor any of its subsidiaries is aware of any notice from any governmental
body claiming any violation of any Environmental Laws or requiring or
calling attention to the need for any work, repairs, construction,
alterations, removal or remedial action or installation on or in
connection with such real property or improvements, whether in
connection with the presence of asbestos-containing materials in such
properties or otherwise, except for such violations, work, repairs,
construction, alterations, removal or remedial actions or installations
as would not, individually or in the aggregate, have a Material Adverse
Effect; (iv) any such work, repairs, construction, alterations, removal
or remedial action or installation, if required, would not result in the
incurrence of liabilities, which, individually or in the aggregate,
would have a Material Adverse Effect; (v) neither the Company nor any of
its subsidiaries has caused or suffered to exist or occur any condition
on any of the properties or improvements of the Company or any of its
subsidiaries that could give rise to the imposition of any Lien (as
defined below) under any Environmental Laws, except such Liens which,
individually or in the aggregate, would not have a Material Adverse
Effect; and (vi) to the Company's best knowledge, no real property or
improvements owned or leased by the Company or any of its subsidiaries
is being used or has been used for manufacturing or for any other
operations that involve or involved the use, handling, transportation,
storage, treatment or disposal of any Contaminant, where such operations
require or required permits or are or were otherwise regulated pursuant
to the Environmental Laws and where such permits have not been or were
not obtained or such regulations are not being or were not complied
with, except in all instances where any failure to obtain a permit or
comply with any regulation could not reasonably be expected, singly or
in the aggregate, to have a Material Adverse Effect. "Contaminant" means
any pollutant, hazardous substance, toxic substance, hazardous waste,
special waste, petroleum or petroleum-derived substance or waste,
asbestos or asbestos-containing materials, PCBs, lead, pesticides or
radioactive materials or any constituent of any such substance or waste,
including any such substance identified or regulated under any
Environmental Law. "Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601
ET SEQ., the Resource Conservation and Recovery Act, 42 U.S.C. 6901, ET
SEQ., the Clean Air Act, 42 U.S.C. 7401, ET SEQ., the Clean Water Act,
33 U.S.C. 1251, ET SEQ., the Toxic Substances Control Act, 15 U.S.C.
2601, ET SEQ., the Occupational Safety and Health Act, 29 U.S.C. 651, ET
SEQ., and all other federal, state and local laws, ordinances,
regulations, rules, orders, decisions, permits, and the like, which are
directed at the protection of human health or the Environment. "Lien"
means, with respect to any asset, any mortgage, deed of trust, lien,
pledge, encumbrance, charge or security interest in or on such asset.
"Environment" means any surface water, drinking water, ground water,
land surface, subsurface strata, river sediment, buildings, structures,
and ambient, 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
11
previously containing any Contaminant or any release, emission or
discharge as those terms are defined or used in any Environmental Law.
(xxiii) QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST. The
Company was and is organized in conformity with the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended (the "Code"); the Company at
all times has met and continues to meet all the requirements of the Code
for qualification and taxation as a "real estate investment trust"; the
Company's method of operation will enable it to meet the requirements
for qualification and taxation as a "real estate investment trust" under
the Code; and the Company is qualified as a "real estate investment
trust" under the Code and will be so qualified for the taxable year in
which sales of the Securities occur.
(xxiv) REGISTRATION RIGHTS. There are no persons with
registration or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act, or included in the offering contemplated
hereby.
(xxv) TAX TREATMENT OF CERTAIN ENTITIES. Each of R.I.C. Trade
Center, Ltd., Empire Business Center, Ltd., and Silverton Business
Center, Ltd., each a California limited partnership (the "Sub-Limited
Partnerships"), was, from the time of the Consolidation through and
including the time of its merger into the Company, treated as a
partnership (rather than as an association taxable as a corporation) for
federal income tax purposes. The Company's ownership interests in three
properties held through tenancies in common with unrelated third parties
(which are the only properties which, since the Consolidation, have been
held in tenancies in common with unrelated third parties) have not been,
since the Consolidation, and will not be (or, in the case of properties
which have been sold, were not until the time of the sale of such
properties), treated as ownership interests in associations taxable as
corporations for federal income tax purposes. Realty Income Texas
Properties, L.P., a Delaware limited partnership, is not and has never
been treated as an association taxable as a corporation for federal
income tax purposes. Realty Income Texas Properties, Inc., a Delaware
corporation, is and has been at all times treated as a "qualified REIT
subsidiary" within the meaning of Section 856(i) of the Code and is not
required to be qualified as a foreign corporation in the State of Texas.
(xxvi) SECURITIES. The Securities have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and,
when issued and delivered by the Company pursuant to this Agreement
against payment of the consideration therefor set forth in this
Agreement, will be validly issued, fully paid and non-assessable; the
Securities conform and will conform to the statements relating thereto
contained in the Prospectus and such statements conform and will conform
to the rights set forth in the instruments defining the same; and the
issuance of the Securities is not subject to preemptive or other similar
rights arising by operation of law, under the charter or bylaws of the
Company, under any agreement or instrument to which the Company or any
of its subsidiaries is a party or otherwise.
12
(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of
the Company and delivered to the Representatives or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING.
(a) INITIAL SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price set forth in Schedule B, the aggregate number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) OPTION SECURITIES. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional 427,500
shares of Common Stock at the price set forth in Schedule B, less an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial Securities but not payable on the Option Securities. The
option hereby granted may be exercised through and including the 30th day after
the date hereof and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection with
the offering and distribution of the Initial Securities upon notice by the
Representatives to the Company setting forth the number of Option Securities as
to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for such Option Securities. Any such time and
date of delivery (a "Date of Delivery") shall be determined by the
Representatives, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time. If the
option is exercised as to all or any portion of the Option Securities, each of
the Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of Option Securities then being purchased which
the aggregate number of Initial Securities set forth in Schedule A opposite the
name of such Underwriter bears to the aggregate number of all of the Initial
Securities, subject in each case to such adjustments as the Representatives in
their discretion shall make to eliminate any sales or purchases of fractional
shares.
(c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the office of Latham &
Watkins, 650 Town Center Drive, 20th Floor, Costa Mesa, California 92626-1925,
or at such other place as shall be agreed upon by the Representatives and the
Company, at 6:00 A.M. (California time) on the third (fourth, if the pricing
occurs after 4:30 P.M. New York City time, on any given day) business day after
the date hereof (unless postponed in accordance with the provisions of Section
10), or such other time not later than ten business days after such date as
shall be agreed upon by the Representatives and the Company (such time and date
of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed
13
upon by the Representatives and the Company, on each Date of Delivery as
specified in the notice from the Representatives to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to an account at a bank designated by the Company, against
delivery to the Representatives for the respective accounts of the Underwriters
of certificates for the Securities to be purchased by them. It is understood
that each Underwriter has authorized the Representatives, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities and the Option Securities, if any, to be
purchased by any Underwriter whose payment therefor has not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 2:00 P.M. (New York City
time) on the business day prior to the Closing Time or the relevant Date of
Delivery, as the case may be.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each
Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION
REQUESTS. The Company, subject to Section 3(b), will notify the
Representatives immediately, and confirm the notice in writing, (i) when
any post-effective amendment to the Registration Statement or any Rule
462(b) Registration Statement shall become effective or any supplement
to the Prospectus, any Term Sheet or any amended Prospectus shall have
been filed, (ii) of the receipt of any comments from the Commission,
(iii) of any request by the Commission for any amendment to the
Registration Statement or any Rule 462(b) Registration Statement or any
amendment or supplement to the Prospectus or for additional information,
and (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus, or of the suspension of the qualification
of the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes.
The Company will promptly effect the filings necessary pursuant to Rule
424(b) and, if applicable, will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus supplement, prospectus
or term sheet transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will
promptly file such prospectus supplement, prospectus or term sheet, as
the case may be. The Company will make every reasonable effort to
prevent the issuance of any stop order and, if any stop order is issued,
to obtain the lifting thereof at the earliest possible moment.
14
(b) FILING OF AMENDMENTS. The Company will give the
Representatives notice of its intention to file or prepare any amendment
to the Registration Statement (including any filing under Rule 462(b)),
any Term Sheet or any amendment, supplement or revision to either the
prospectus included in the Registration Statement at the time it became
effective or to the Prospectus, whether pursuant to the 1933 Act, the
1934 Act or otherwise, will furnish the Representatives with copies of
any such documents a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file or use any such
document to which the Representatives or counsel for the Underwriters
shall object.
(c) RULE 434. If the Company uses Rule 434, it will comply
with the requirements of such Rule.
(d) DELIVERY OF REGISTRATION STATEMENTS. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, as many signed and conformed copies of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein
and documents incorporated or deemed to be incorporated by reference
therein) as the Representatives and counsel for the Underwriters may
reasonably request. The copies of the Registration Statement and each
amendment thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, if any, except to the extent permitted by Regulation
S-T.
(e) DELIVERY OF PROSPECTUSES. The Company has delivered to
each Underwriter, without charge, as many copies of each preliminary
prospectus, if any, as such Underwriter reasonably requested, and the
Company hereby consents to the use of such copies for purposes permitted
by the 1933 Act. The Company will furnish to each Underwriter, without
charge, during the period when the Prospectus is required to be
delivered under the 1933 Act or the 1934 Act, such number of copies of
the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements
thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, if any, except to the extent permitted by Regulation
S-T.
(f) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company
will comply with the 1933 Act and the 1933 Act Regulations and the 1934
Act and the 1934 Act Regulations so as to permit the completion of the
distribution of the Securities as contemplated in this Agreement and in
the Prospectus. If at any time when a prospectus is required by the 1933
Act to be delivered in connection with sales of the Securities, any
event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the Underwriters or for the
Company, to amend the Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include any untrue
statements of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of
the circumstances existing at the time it is delivered to a purchaser,
or if it shall be necessary, in the opinion
15
of any such counsel, at any such time to amend the Registration
Statement or amend or supplement the Prospectus in order to comply with
the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to
correct such statement or omission or to make the Registration Statement
or the Prospectus comply with such requirements, and the Company will
furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(g) BLUE SKY QUALIFICATIONS. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Securities
for offering and sale under the applicable securities laws of such
states and other jurisdictions of the United States as the
Representatives may designate and to maintain such qualifications in
effect for a period of not less than one year from the date hereof;
PROVIDED, HOWEVER, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In
each jurisdiction in which the Securities have been so qualified, the
Company will file such statements and reports as may be required by the
laws of such jurisdiction to continue such qualification in effect for a
period of not less than one year from the date hereof.
(h) RULE 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its security holders as soon as practicable an earning
statement for the purposes of, and to provide the benefits contemplated
by, the last paragraph of Section 11(a) of the 1933 Act.
(i) USE OF PROCEEDS. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified
in the Prospectus under "Use of Proceeds."
(j) LISTING. The Company will use its best efforts to effect
the listing of the Securities in the New York Stock Exchange.
(k) REPORTING REQUIREMENTS. The Company, during the period
when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by
the 1934 Act and the 1934 Act Regulations.
(l) RESTRICTION ON SALE OF SECURITIES. During the period
beginning on the date of this Agreement through and including the 90th
day after the date of this Agreement, the Company will not, without the
prior written consent of Merrill Lynch, directly or indirectly, (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or file
any registration statement under the 1933 Act with respect to any of the
foregoing, or
16
(ii) enter into any swap or any other agreement or transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of any Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock,
whether any such swap, agreement or transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock, other
securities, in cash or otherwise, other than (A) the Securities to be
sold hereunder, (B) any shares of Common Stock issued by the Company
upon the exercise of an option outstanding on the date hereof referred
to in the Registration Statement, (C) any shares of Common Stock issued
or options to purchase Common Stock granted pursuant to existing
employee benefit plans of the Company referred to in the Registration
Statement, (D) any shares of Common Stock issued pursuant to any
existing non-employee director stock plan referred to in the
Registration Statement and (E) any shares of Common Stock which may be
issued by the Company to acquire other businesses or in connection with
the Company's entering into joint ventures or similar arrangements, in
each case so long as those shares are issued directly to the
stockholders or other owners of those businesses or to the other equity
owners of such joint ventures or similar arrangements, as the case may
be, and, prior to the issuance of any such shares, each recipient of any
such shares executes and delivers to the Representatives an agreement
substantially to the effect set forth in this paragraph, which agreement
shall be in form and substance satisfactory to the Representatives and
which agreement shall be applicable through and including the 90th day
after the date of this Agreement, but which agreement (x) shall apply
only to the shares of Common Stock issued to such persons pursuant to
this clause (E) and (y) shall not include the exceptions set forth in
clauses (A) through (E) of this paragraph.
SECTION 4. PAYMENT OF EXPENSES
(a) EXPENSES. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the word
processing, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the printing and delivery to the Underwriters of this Agreement
and such other documents as may be required in connection with the offering,
purchase, sale, issuance or delivery of the Securities, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the
Underwriters, including any transfer taxes or other duties payable upon the sale
of the Securities to the Underwriters, (iv) the fees and disbursements of the
Company's counsel, accountants and other advisors, (v) the qualification of the
Securities under securities laws in accordance with the provisions of Section
3(g) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus, any
Term Sheet and the Prospectus and any amendments or supplements thereto, (vii)
the preparation, printing and delivery to the Underwriters of copies of the Blue
Sky Survey and any supplement thereto, (viii) the fees and expenses of any
transfer agent or registrar for the Securities, (ix) if required, the filing
fees incident to, and the reasonable fees and disbursements of counsel to the
Underwriters (such fees and disbursements not to exceed $10,000) in connection
with, the review, if any, by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Securities, and (x) the fees
and expenses incurred in connection with the listing of the Securities on the
New York Stock Exchange (the "NYSE").
17
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) or 9(a)(v) hereof, the Company shall reimburse the Underwriters for all
of their out-of-pocket expenses, including the reasonable fees and disbursements
of counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any subsidiary of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The
Registration Statement, including any Rule 462(b) Registration
Statement, shall have become effective not later than 5:30 P.M. on the
date hereof and at Closing Time (and, if any Option Securities are
purchased, at the relevant Date of Delivery) no stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of counsel to the
Underwriters. If required by the 1933 Act or the 1933 Act Regulations,
the Prospectus shall have been filed with the Commission in accordance
with Rule 424(b) and, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance
with Rule 434 and Rule 424(b).
(b) OPINIONS OF COUNSEL FOR COMPANY. At Closing Time, the
Representatives shall have received the favorable opinions, dated as of
Closing Time, of Latham & Watkins, counsel for the Company, Michael R.
Pfeiffer, Executive Vice President, General Counsel and Secretary of the
Company, and Ballard Spahr Andrews & Ingersoll, LLP, special Maryland
counsel to the Company, each in form and substance satisfactory to
counsel for the Underwriters, to the effect set forth in Exhibits A, B
and C hereto, respectively, and to such further effect as counsel to the
Underwriters may reasonably request pursuant to Section 5(i).
(c) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time,
the Representatives shall have received the favorable opinion, dated as
of Closing Time, of Sidley Austin Brown & Wood LLP, counsel for the
Underwriters, with respect to the matters set forth in clauses 6 and 7
and the antepenultimate paragraph of Exhibit A and the first sentence of
clause 1 and clauses 3, 4 and 5. In giving such opinion such counsel may
rely, as to all matters arising under or governed by the laws of the
State of Maryland, upon the opinion of Ballard Spahr Andrews &
Ingersoll, LLP delivered pursuant to Section 5(b) and, as to all matters
governed by the laws of other jurisdictions (other than the law of the
State of New York and the federal law of the United States) upon the
opinions of counsel satisfactory to the Representatives.
(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
18
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether
or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the Chairman or the
President of the Company and of the chief financial or chief accounting
officer of the Company, dated as of Closing Time, to the effect that (i)
there has been no such material adverse change, (ii) the representations
and warranties in Section 1 hereof are true and correct with the same
force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has
been issued and no proceedings for that purpose have been initiated or,
to the best of their knowledge, threatened by the Commission.
(e) ACCOUNTANT'S COMFORT LETTER. At the Closing Time, the
Representatives shall have received from KPMG LLP a letter dated the
Closing Time, in form and substance satisfactory to the Representatives,
together with signed or reproduced copies of such letter for each of the
Underwriters, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(f) [INTENTIONALLY OMITTED].
(g) APPROVAL OF LISTING. At the Closing Time, the Securities
shall have been approved for listing on the NYSE, subject only to
official notice of issuance.
(h) CONDITIONS TO PURCHASE OF OPTION SECURITIES. In the
event that the Underwriters exercise their option provided in Section
2(b) hereof to purchase all or any portion of the Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company hereunder shall
be true and correct as of each Date of Delivery and, at the relevant
Date of Delivery, the Representatives shall have received:
(i) OFFICERS' CERTIFICATE. A certificate, dated such
Date of Delivery, of the Chairman or President of the Company
and of the chief financial or chief accounting officer of the
Company confirming that the certificate delivered at the Closing
Time pursuant to Section 5(d) hereof remains true and correct as
of such Date of Delivery.
(ii) OPINIONS OF COUNSEL FOR COMPANY. The favorable
opinions of Latham & Watkins, counsel for the Company, Michael
R. Pfeiffer, Executive Vice President, General Counsel and
Secretary of the Company, and Ballard Spahr Andrews & Ingersoll,
LLP, special Maryland counsel to the Company, each in form and
substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be
purchased on such Date
19
of Delivery and otherwise to the same effect as the respective
opinions required by Section 5(b) hereof.
(iii) OPINION OF COUNSEL FOR UNDERWRITERS. The
favorable opinion of Sidley Austin Brown & Wood LLP, counsel for
the Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section
5(c) hereof.
(iv) BRING-DOWN COMFORT LETTER. A letter from KPMG
LLP, in form and substance satisfactory to the Representatives
and dated such Date of Delivery, to the effect that they
reaffirm the statements made in the letter furnished pursuant to
Section 5(e) hereof, except that the specified date referred to
shall be a date not more than three business days prior to such
Date of Delivery.
(v) APPROVAL OF LISTING. At such Date of Delivery,
the Option Securities shall have been approved for listing on
the NYSE.
(i) ADDITIONAL DOCUMENTS. At the Closing Time and at each
Date of Delivery, counsel for the Underwriters shall have been furnished
with such documents and opinions as they may reasonably require for the
purpose of enabling them to pass upon the issuance and sale of the
Securities as herein contemplated, or in order to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Securities as
herein contemplated shall be satisfactory in form and substance to the
Representatives and counsel for the Underwriters.
(j) TERMINATION OF AGREEMENT. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities on a Date of Delivery which occurs after
the Closing Time, the obligations of the several Underwriters to
purchase the relevant Option Securities, may be terminated by the
Representatives by notice to the Company at any time at or prior to
Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 6 and 7 shall
survive any such termination and remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF UNDERWRITERS. The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary
to make the statements therein not
20
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, provided that (subject to
Section 6(d) below) any such settlement is effected with the written
consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and PROVIDED FURTHER that
this indemnity agreement with respect to any preliminary prospectus shall not
inure to the benefit of any Underwriter, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any such amendments or supplements thereto, but
excluding documents incorporated or deemed to be incorporated by reference
therein) was not sent or given by or on behalf of such Underwriter to such
person, if such is required by law, at or prior to the written confirmation of
the sale of such Securities to such person and if the Prospectus (as so amended
or supplemented, if applicable) would have corrected the defect giving rise to
such loss, liability, claim, damage or expense, except that this proviso shall
not be applicable if such defect shall have been corrected in a document which
is incorporated or deemed to be incorporated by reference in the Prospectus.
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 434 Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with
21
written information furnished to the Company by such Underwriter through Merrill
Lynch expressly for use in the Registration Statement (or any amendment thereto)
or such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section 6(a)
above, counsel to the indemnified parties shall be selected by Merrill Lynch,
and, in the case of parties indemnified pursuant to Section 6(b) above, counsel
to the indemnified parties shall be selected by the Company. An indemnifying
party may participate at its own expense in the defense of any such action;
PROVIDED, HOWEVER, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 45 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
SECTION 7. CONTRIBUTION. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to
22
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and of the Underwriters on the
other hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the Securities
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Securities
pursuant to this Agreement (before deducting expenses) received by the Company
and the total underwriting discount received by the Underwriters, in each case
as set forth on the cover of the Prospectus (or, if Rule 434 is used, the
corresponding location on the Term Sheet) bear to the aggregate initial public
offering price of the Securities as set forth on such cover (or corresponding
location on the Term Sheet, as the case may be).
The relative fault of the Company on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
23
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company submitted pursuant
hereto shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Company, and shall survive delivery of the Securities to
the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(and, if any Option Securities are purchased, at any time at or prior to the
relevant Date of Delivery, with respect to the obligation of the Underwriters to
purchase such Option Securities) (i) if there has been, since the time of
execution of this Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Representatives, impracticable to
market the Securities or to 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 any of the Company's preferred stock or debt securities by any
nationally recognized securities rating agency, or any such securities rating
agency has publicly announced that it has under surveillance or review, with
possible negative implications or without indicating the direction of the
possible change, its rating of any of the Company's preferred stock or debt
securities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
6 and 7 shall survive such termination and remain in full force and effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more
of the Underwriters shall fail at the Closing Time or a Date of Delivery to
purchase the Securities
24
which it or they are obligated to purchase under this Agreement on such date
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed
10% of the total number of Securities to be purchased on such date, each
of the non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Securities to be purchased on such date, this Agreement
or, with respect to any Date of Delivery which occurs after the Closing
Time, the obligations of the Underwriters to purchase and of the Company
to sell the Option Securities to be purchased and sold on such Date of
Delivery shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligations of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the Representatives or the Company shall have the
right to postpone the Closing Time or the relevant Date of Delivery, as the case
may be, for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.
SECTION 11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at 10877 Wilshire
Boulevard, Suite 1900, Los Angeles, California 90024, Attention of Paul M.
Meurer; and notices to the Company shall be directed to it at Realty Income
Corporation, 220 West Crest Street, Escondido, California 92025-1725, attention
of Legal Department.
SECTION 12. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the Underwriters and the Company and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the Underwriters
and the Company and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters and the Company
25
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. EXCEPT AS OTHERWISE SET FORTH
HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
26
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
REALTY INCOME CORPORATION
By:
-------------------------------------
Michael R. Pfeiffer
Executive Vice President, General
Counsel and Secretary
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SALOMON SMITH BARNEY INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
A.G. EDWARDS & SONS, INC.
FIRST UNION SECURITIES, INC.
TUCKER ANTHONY INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ----------------------------------------
Authorized Signatory
For themselves and as Representatives of the
Underwriters named in Schedule A hereto.
SCHEDULE A
NUMBER OF
INITIAL
NAME OF UNDERWRITER SECURITIES
------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................................. 570,000
Salomon Smith Barney Inc................................................................ 570,000
Credit Suisse First Boston Corporation.................................................. 427,500
A.G. Edwards & Sons, Inc................................................................ 427,500
First Union Securities, Inc............................................................. 427,500
Tucker Anthony Incorporated............................................................. 427,500
---------------------
Total: 2,850,000
=====================
Sch A-1
SCHEDULE B
PRICE SCHEDULE
1. The initial public offering price per share for the Securities
shall be $27.80 (the "Public Offering Price").
2. The purchase price per share for the Securities to be paid by
the several Underwriters shall be $26.375 (being an amount equal to the Public
Offering Price set forth above less $1.425 per share), PROVIDED that the
purchase price for any Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial Securities but not payable on the Option Securities.
Sch B-1