EXHIBIT 1.2
COMMERCIAL NET LEASE REALTY, INC.
$50,000,000
7.75% Notes due 2012
UNDERWRITING AGREEMENT
Charlotte, North Carolina
May 30, 2002
First Union Securities, Inc.
One Wachovia Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Commercial Net Lease Realty, Inc., a Maryland corporation (the
"Company"), proposes to issue and sell to you (the "Underwriter") an aggregate
principal amount of $50,000,000 7.75% notes due 2012 (the "Securities"), to be
issued under an indenture (as the same has been and may be amended and
supplemented, the "Indenture") dated as of March 25, 1998, as amended and
supplemented by a Fourth Supplemental Indenture (the "Fourth Supplemental
Indenture") dated as of May 30, 2002, between the Company and Wachovia Bank,
National Association, as successor trustee (the "Trustee").
The Company wishes to confirm as follows its agreement with you in
connection with the purchase of the Securities.
1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 (file number
333-53796) under the Act ("Registration Statement 333-53796") and a
post-effective amendment number 2 to Registration Statement Number 333-64511
("Registration Statement 333-64511," and together with Registration Statement
333-53796, the "Registration Statement"), which Registration Statement
included a combined prospectus dated May 1, 2001 relating to an aggregate of
$200,000,000 of the Company's securities (as described therein), and has filed
with, or transmitted for filing to, or shall promptly hereafter file with or
transmit for filing to, the Commission a supplement to the prospectus included
in such Registration Statement (the "Prospectus Supplement") specifically
relating to the Securities and the plan of distribution thereof pursuant to
Rule 424 under the Act. As of the date hereof an aggregate of $60,363,500
securities have been sold under the Registration Statement.
The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits), as
amended to the date of this Agreement. If it is contemplated, at the time this
Agreement is executed, that a post-effective amendment to the
registration statement will be filed and must be declared effective before the
offering of the Securities may commence, the term "Registration Statement" as
used in this Agreement means the registration statement as amended by said
post-effective amendment. The term "Basic Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement. The term "Prospectus" means the Basic Prospectus, as amended or
supplemented by the Prospectus Supplement. If applicable, the term
"Preliminary Prospectus" as used in this Agreement means a prospectus
supplement, subject to completion, that specifically relates to the Securities
and which has heretofore been filed with the Commission, together with the
Basic Prospectus. If the Company has filed an abbreviated registration
statement to register Securities pursuant to Rule 462(b) under the Act
(including the exhibits thereto, the "Rule 462(b) Registration Statement"),
then any reference herein to the Registration Statement shall also be deemed
to include such Rule 462(b) Registration Statement. Any reference in this
Agreement to the registration statement, the Registration Statement, the Basic
Prospectus, the Preliminary Prospectus, if any, or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, and any reference to any
amendment or supplement to the registration statement, the Registration
Statement, the Basic Prospectus, the Preliminary Prospectus, if any, or the
Prospectus shall be deemed to refer to and include any documents filed by the
Company with the Commission after the date of the Basic Prospectus under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") which, upon
filing, are incorporated by reference therein, as required by paragraph (b) of
Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means
the documents which are incorporated by reference in the registration
statement, the Registration Statement, the Basic Prospectus, the Preliminary
Prospectus, if any, the Prospectus, or any amendment or supplement thereto.
2. Agreement to Sell and Purchase. The Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
the Underwriter and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, the Underwriter agrees to purchase from the
Company, at the purchase price set forth in Schedule I hereto the principal
amount of Securities.
3. Offering by Underwriter. It is understood that the
Underwriter proposes to offer the Securities for sale to the public as soon
after this Agreement has become effective as in their judgment is advisable
and initially to offer the Securities as set forth in the Prospectus.
4. Delivery of the Securities and Payment Therefor. Delivery of
and payment for the Securities shall be made at 10:00 AM, New York City time,
on June 4, 2002, or at such time on such later date not more than three
Business Days after the foregoing date as the Underwriter shall designate,
which date and time may be postponed by mutual written agreement of the
Underwriter and the Company (such date and time of delivery and payment for
the Securities being herein called the "Closing Date"). Delivery of the
Securities shall be made for the account of the Underwriter, against payment
by the Underwriter of the purchase price thereof, to or upon the order of the
Company by wire transfer payable in same-day funds to an account specified by
the Company. Delivery of the Securities shall be made through the facilities
of The Depository Trust Company unless the Underwriter shall otherwise
instruct the Company in writing.
2
5. Agreements of the Company. The Company agrees with the
Underwriter as follows:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for a post-effective amendment to the registration
statement to be declared effective before the offering of the Securities may
commence, the Company will use its best efforts to cause such post-effective
amendment to become effective as soon as possible and will advise the
Underwriter promptly and, if requested by the Underwriter, will confirm such
advice in writing, immediately after such post-effective amendment has become
effective.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs as a
result of which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein in the light of the circumstances under which they
were made not misleading, or if it shall be necessary to amend the
Registration Statement or supplement the Prospectus to comply with the Act or
the Exchange Act or the respective rules thereunder, the Company promptly
will: (1) notify the Underwriter of such event; (2) prepare, and file with the
Commission, an amendment or supplement which will correct such statement or
omission or effect such compliance; and (3) supply any supplemented Prospectus
to you in such quantities as you may reasonably request.
(c) The Company will advise the Underwriter promptly
and, if requested by the Underwriter, will confirm such advice in writing: (i)
of any review, issuance of comments, or request by the Commission or its staff
on or for an amendment of or a supplement to the Registration Statement, any
Preliminary Prospectus or the Prospectus or for additional information
regarding the Company, its affiliates or its filings with the Commission,
whether or not such filings are incorporated by reference into the
Registration Statement, any Preliminary Prospectus or the Prospectus; (ii) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or of the suspension of qualification of the
Securities for offering or sale in any jurisdiction or the initiation of any
proceeding for such purpose; and (iii) within the period of time referred to
in the first sentence in subsection (f) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations, or of the happening of any event, which results in any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) being untrue or which requires
the making of any additions to or changes in the Registration Statement or the
Prospectus (as then amended or supplemented) in order to state a material fact
required by the Act to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.
(d) The Company will furnish to the Underwriter and
counsel to the Underwriter, without charge: (i) ten signed copies of the
registration statement and any Rule 462(b) Registration Statement as
originally filed with the Commission and of each amendment thereto, including
financial statements and all exhibits to the registration statement and Rule
3
462(b) Registration Statement; (ii) such number of conformed copies of the
registration statement as originally filed and of each amendment thereto, but
without exhibits, as the Underwriter may request; (iii) such number of copies
of the Incorporated Documents, without exhibits, as the Underwriter may
request; and (iv) ten copies of the exhibits to the Incorporated Documents.
The Company will pay all of the expenses of printing or other production of
all documents relating to the offering.
(e) The Company will not file any amendment to the
Registration Statement (including any filing under Rule 462(b)) or make any
amendment or supplement to the Prospectus or, prior to the end of the period
of time referred to in the first sentence in subsection (f) below, file any
document which upon filing becomes an Incorporated Document, of which the
Underwriter shall not previously have been advised or to which, after the
Underwriter shall have received a copy of the document proposed to be filed,
the Underwriter shall reasonably object; and no such further document, when it
is filed, will contain an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in
the opinion of counsel for the Underwriter a prospectus is required by the Act
to be delivered in connection with sales by the Underwriter or dealer, the
Company will expeditiously deliver to the Underwriter and each dealer, without
charge, as many copies of the Prospectus (and of any amendment or supplement
thereto) as the Underwriter may request. The Company consents to the use of
the Prospectus (and of any amendment or supplement thereto) in accordance with
the provisions of the Act and with the securities or blue sky laws of the
jurisdictions in which the Securities are offered by the several Underwriter
and by all dealers to whom Securities may be sold, both in connection with the
offering and sale of the Securities and for such period of time thereafter as
the Prospectus is required by the Act to be delivered in connection with sales
by any Underwriter or dealer. If during such period of time: (i) any event
shall occur that in the judgment of the Company, or in the opinion of counsel
for the Underwriter, is required to be set forth in the Prospectus (as then
amended or supplemented) or should be set forth therein in order to make the
statements therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading; or (ii) if it is necessary to
supplement or amend the Prospectus (or to file under the Exchange Act any
document which, upon filing, becomes an Incorporated Document) in order to
comply with the Act or any other law, the Company will forthwith prepare and,
subject to the provisions of paragraph (e) above, file with the Commission an
appropriate supplement or amendment thereto (or to such document), and will
expeditiously furnish to the Underwriter and dealers a reasonable number of
copies thereof. In the event that the Company and the Underwriter agree that
the Prospectus should be amended or supplemented, the Company, if requested by
the Underwriter, will promptly issue a press release announcing or disclosing
the matters to be covered by the proposed amendment or supplement.
(g) The Company will: (i) cooperate with the
Underwriter and with counsel for the Underwriter in connection with the
registration or qualification of the Securities for offering and sale by the
Underwriter and by dealers under the securities or blue sky laws of such
jurisdictions as the Underwriter may designate; (ii) maintain such
qualifications in effect so long as required for the distribution of the
Securities; (iii) pay any fee of the National Association of
4
Securities Dealers, Inc., in connection with its review of the offering; and
(iv) file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided
that in no event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not now so qualified or to take any action which
would subject it to service of process in suits, other than those arising out
of the offering or sale of the Securities, in any jurisdiction where it is not
now so subject.
(h) The Company will make generally available to its
security holders and to the Underwriter a consolidated earnings statement,
which need not be audited, covering a 12-month period commencing after the
effective date of this Agreement and ending not later than 15 months
thereafter, as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of Section 11(a)
of the Act and Rule 158 under the Act.
(i) During the period commencing on the date hereof and
ending on the date occurring three years hereafter, the Company will furnish
to the Underwriter: (i) as soon as available, if requested, a copy of each
report of the Company mailed to stockholders or filed with the Commission; and
(ii) from time to time such other information concerning the Company as the
Underwriter may request.
(j) If this Agreement shall terminate or shall be
terminated after execution pursuant to any provisions hereof, or if this
Agreement shall be terminated by the Underwriter because of any inability,
failure or refusal on the part of the Company to comply with the terms or
fulfill any of the conditions of this Agreement, the Company shall reimburse
the Underwriter for all out-of-pocket expenses (including fees and expenses of
counsel for the Underwriter) incurred by the Underwriter in connection
herewith.
(k) The Company will apply the net proceeds from the
sale of the Securities substantially in accordance with the description set
forth in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company
will timely file the Prospectus pursuant to Rule 424(b) under the Act and will
advise the Underwriter of the time and manner of such filing.
(m) The Company has not taken, nor will it take,
directly or indirectly, any action designed to, or that might reasonably be
expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.
(n) The Company will comply and will use its best
efforts to cause its tenants to comply in all material respects with all
applicable Environmental Laws (as hereinafter defined).
(o) The Company will use its best efforts to continue
to qualify as a real estate investment trust (a "REIT") under the Internal
Revenue Code of 1986, as amended (the "Code"), and to continue to have each of
its corporate subsidiaries (other than its taxable REIT subsidiary) comply
with all applicable laws and regulations necessary to maintain a status as a
"qualified REIT subsidiary" under the Code.
5
(p) The Company will use all reasonable best efforts to
do or perform all things required to be done or performed by the Company prior
to the Closing Date to satisfy all conditions precedent to the delivery of the
Securities pursuant to this Agreement.
(q) The Company will not, without the prior written
consent of the Underwriter, offer, sell, contract to sell, pledge, or
otherwise dispose of, or enter into any transaction which is designed to, or
might reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company, directly or
indirectly, including the filing (or participation in the filing) of a
registration statement with the Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Exchange Act, any debt
securities issued or guaranteed by the Company (other than the Securities) or
publicly announce an intention to effect any such transaction, until the
Closing Date.
6. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Underwriter:
(a) The Basic Prospectus and each Preliminary
Prospectus, if any, included as part of the registration statement as
originally filed or as part of any amendment or supplement thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the provisions of the Act.
(b) The Company and the transactions contemplated by
this Agreement meet all of the requirements for using Form S-3 under the Act.
The Registration Statement has become effective for the registration under the
Act of the Securities. No stop order suspending the effectiveness of the
Registration Statement is in effect, and, to the best of the Company's
knowledge, no proceedings for such purpose are pending before or threatened by
the Commission. The Registration Statement meets the requirements set forth in
Rule 415(a)(1)(x) under the Act and complies in all other material respects
with such Rule. The registration statement, in the form in which it became
effective, and also in such form as it may be when any post-effective
amendment thereto shall become effective, and the Prospectus and any
supplement or amendment thereto, each when filed with the Commission under
Rule 424(b) under the Act, complied or will comply in all material respects
with the provisions of the Act, the Exchange Act and the Trust Indenture Act
of 1939, as amended, and the rules and regulations promulgated thereunder (the
"Trust Indenture Act") and did not and will not at any such times 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 made therein not
misleading. On the date that the registration statement, any post-effective
amendment or amendments thereto and any Rule 462(b) Registration became or
become effective, the Indenture did or will comply in all material respects
with the applicable requirements of the Trust Indenture Act and the rules
thereunder. The Indenture has been qualified under the Trust Indenture Act.
The representation and warranty contained in this Section 6(b) does not apply
to (i) that part of the registration statement which shall constitute the
Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of the Trustee or (ii) statements in or omissions from the
registration statement or the Prospectus made in reliance upon and in
conformity with information relating to the
6
Underwriter furnished to the Company in writing by or on behalf of the
Underwriter expressly for use therein.
(c) The Incorporated Documents heretofore filed, when
they were filed (or, if any amendment with respect to any such document was
filed, when such amendment was filed), conformed in all material respects with
the requirements of the Exchange Act and the rules and regulations of the
Commission thereunder. No such document when it was filed (or, if an amendment
with respect to any such document was filed, when such amendment was filed),
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(d) Upon the delivery of the Securities pursuant to
Section 4 of this Agreement, the Securities will be validly issued pursuant to
the Indenture, will be valid and legally binding obligations of the Company,
and will conform in all material respects to the description of the Securities
contained in the Prospectus.
(e) Each of the Company and each of its subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its formation, as set forth on Schedule II hereto, with
full corporate, partnership or trust power, as applicable, and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement and the Prospectus, and each is duly registered
and qualified to conduct its business, and is in good standing, in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify does not have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company and its subsidiaries. Neither the Company nor any of
its subsidiaries does any business in Cuba.
(f) The Company has no subsidiary or subsidiaries other
than as set forth on Schedule II hereto, and does not control, directly or
indirectly, any corporation, partnership, joint venture, association or other
business association (other than the general partner interest of Net Lease
Realty III, Inc. in Net Lease Institutional Funding, L.P.). The issued shares
of capital stock of each of the Company's subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable and are owned
legally and beneficially by the Company free and clear of any security
interests, liens, encumbrances, equities or claims.
(g) There are no legal or governmental actions, suits
or proceedings pending or, to the knowledge of the Company, threatened,
against the Company or any of its subsidiaries, or to which the Company or any
properties of the Company or any of its subsidiaries is subject, that (A) are
required to be described in the Registration Statement or the Prospectus but
are not described as required; (B) could reasonably be expected to have a
material adverse effect on the performance of this Agreement or the
consummation of any of the transactions contemplated hereby; or (C) could
reasonably be expected to have a material adverse effect on the condition
(financial or other), prospects, earnings, business or properties of the
Company and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto). There
are no statutes, regulations, capital expenditures, contingencies or
agreements,
7
contracts, indentures, leases or other instruments or documents of a character
that are required to be described in the Registration Statement or the
Prospectus or to be filed or incorporated by reference as an exhibit to the
Registration Statement or any Incorporated Document that are not described,
filed or incorporated as required by the Act or the Exchange Act. The
statements in the Prospectus under the heading "Certain Federal Income Tax
Considerations" fairly summarize the matters therein described.
(h) Neither the Company nor any of its subsidiaries is:
(A) in violation of (i) its respective articles of incorporation or by-laws,
(ii) any law, ordinance, administrative or governmental rule or regulation
applicable to the Company or its subsidiaries, which violation would have a
material adverse effect on the Company and its subsidiaries, or (iii) any
decree of any court or governmental agency or body having jurisdiction over
the Company or its subsidiaries; or (B) in default in any material respect in
the performance of any obligation, agreement, condition or covenant (financial
or other) contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or its subsidiaries or any of their respective properties
may be bound, and no such default is foreseeable.
(i) (A) As of the date of this Agreement, the Company
owned 360 properties ("Properties"). To the best of the Company's knowledge,
neither the Company nor any of its subsidiaries is in violation of any
municipal, state or federal law, rule or regulation concerning any of their
Properties, which violation would have a material adverse effect on the
Company and/or its subsidiaries; (B) to the best of the Company's knowledge,
each of the Properties complies with all applicable zoning laws, ordinances
and regulations in all material respects and, if and to the extent there is a
failure to comply, such failure does not materially impair the value of any of
such Properties and will not result in a forfeiture or reversion of title
thereof; (C) neither the Company nor any of its subsidiaries has received from
any governmental authority any written notice of any condemnation of, or
zoning change affecting any of, the Properties, and the Company does not know
of any such condemnation or zoning change which is threatened and which if
consummated would have a material adverse effect on the Company or any of such
Properties; (D) the leases under which the Company leases the Properties as
lessor (the "Leases") are in full force and effect and have been entered into
in the ordinary course of business of the Company; (E) the Company and each of
its subsidiaries has complied with its respective obligations under the Leases
in all material respects and the Company does not know of any default by any
other party to the Leases which, alone or together with other such defaults,
would have a material adverse effect on the Company or its subsidiaries or any
of the properties subject to a Lease; and (F) all liens, charges,
encumbrances, claims or restrictions on or affecting the Properties and assets
(including the Properties) of the Company and its subsidiaries that are
required to be disclosed in the Prospectus are disclosed therein.
(j) Neither the issuance and sale of the Securities,
the execution, delivery or performance of this Agreement by the Company, nor
the consummation by the Company of the transactions contemplated hereby
(including the application of the proceeds from the sale of the Securities),
nor the fulfillment of the terms hereof or of the Indenture: (A) requires any
consent, approval, authorization or other order of, or registration or filing
with, any court, regulatory body, administrative agency or other governmental
body, agency or official (except such as may
8
be required for the registration of the Securities under the Act and
compliance with the securities or blue sky laws of various jurisdictions), or
conflicts or will conflict with or constitutes or will constitute a breach or
violation of, or a default under, the articles of incorporation or by-laws of
the Company or any of its subsidiaries; or (B) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, any
agreement, indenture, lease or other instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any properties of the
Company or any of its subsidiaries may be bound, or violates or will violate
any statute, law, regulation or filing or judgment, injunction, order or
decree applicable to the Company or any of its subsidiaries or any properties
of the Company or any of its subsidiaries, or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to the terms of any agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries may be bound, or to which any
property or assets of the Company or any of its subsidiaries is subject.
(k) To the Company's knowledge, the accountants, KPMG
LLP, who have certified or shall certify the financial statements and
schedules included or incorporated by reference in the Registration Statement
and the Prospectus (or any amendment or supplement thereto), are independent
public accountants with respect to the Company as required by the Act and the
applicable published rules and regulations thereunder.
The financial statements, together with related schedules
and notes, included or incorporated by reference in the Registration Statement
and the Prospectus (and any amendment or supplement thereto), present fairly
in all material respects the financial position, results of operations and
changes in financial position of the Company and its subsidiaries on the basis
stated in the Registration Statement and the Incorporated Documents at the
respective dates or for the respective periods to which they apply. Such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein. The other financial and
statistical information and data included or incorporated by reference in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company and its
subsidiaries. The pro forma financial statements and other pro forma financial
information included, or incorporated by reference in, the Registration
Statement and the Prospectus include assumptions that provide a reasonable
basis for presenting the significant effects directly attributable to the
transactions and events described therein, the related pro forma adjustments
give appropriate effect to those assumptions, and the pro forma adjustments
reflect the proper application of those adjustments to the historical
financial statement amounts in the pro forma financial statements included in
the Prospectus and the Registration Statement. The pro forma financial
statements included in the Prospectus and the Registration Statement comply as
to form in all material respects with the applicable accounting requirements
of Regulation S-X under the Act and the pro forma adjustments have been
properly applied to the historical amounts in the compilation of those
statements.
(l) The execution and delivery of, and the performance
by the Company of its obligations under, this Agreement and the Indenture
(including the Fourth Supplemental Indenture thereto) have been duly and
validly authorized by the Company, and this Agreement
9
and the Indenture (including the Fourth Supplemental Indenture thereto) have
been duly executed and delivered by the Company and constitute the valid and
legally binding agreements of the Company, enforceable against the Company in
accordance with their terms, except only to the extent that rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws.
(m) Except as disclosed in the Registration Statement
and the Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), neither
the Company nor any of its subsidiaries has incurred any liability or
obligation (financial or other), direct or contingent, or entered into any
transaction (including any off-balance sheet activities), not in the ordinary
course of business, that is material to the Company and its subsidiaries, and
there has not been any change in the capital stock, or material increase in
the short-term debt or long-term debt (including any off-balance sheet
activities), of either the Company or its subsidiaries, or any material
adverse change, or any development involving or which may reasonably be
expected to involve, a prospective material adverse change, in the condition
(financial or other), business, prospects, net worth or results of operations
of either the Company or its subsidiaries.
(n) The Company and each of its subsidiaries has good
and marketable title to all property (real and personal) described in the
Prospectus as being owned by each of them (including the Properties), free and
clear of all liens, claims, security interests or other encumbrances except
such as are described in the Registration Statement and the Prospectus, or in
any document filed as an exhibit to the Registration Statement, and each
property described in the Prospectus as being held under lease by the Company
or any of its subsidiaries is held by it under a valid, subsisting and
enforceable lease.
(o) The Company does not have any "significant
subsidiaries" as defined in Section 1-02(w) of Regulation S-X.
(p) The Company has not distributed and, prior to the
later to occur of (x) the Closing Date and (y) completion of the distribution
of the Securities, will not distribute, any offering material in connection
with the offering and sale of the Securities other than the Registration
Statement, the Preliminary Prospectus, if any, the Prospectus or other
materials, if any, permitted by the Act. The Company has not, directly or
indirectly: (i) taken any action designed to cause or to result in, or that
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities; or (ii) since the filing of
the Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Securities or (B) paid or agreed
to pay to any person any compensation for soliciting another to purchase any
other securities of the Company.
(q) The Company and each of its subsidiaries possess
all certificates, permits, licenses, franchises and authorizations of
governmental or regulatory authorities ("permits") as are necessary to own
their respective properties and to conduct their respective businesses in the
manner described in the Prospectus, subject to such qualifications as may be
set forth in the Prospectus. The Company and each of its subsidiaries has
fulfilled and performed all of their
10
respective material obligations with respect to such permits, and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or which would result in any other material
impairment of the rights of the holder of any such permit, subject in each
case to such qualification as may be set forth in the Prospectus. Except as
described in the Prospectus, none of the permits contains any restriction that
is materially burdensome to the Company and/or its subsidiaries. Except as
described in the Prospectus, exclusive of any supplement thereto, neither the
revocation or modification of any permit singly or in the aggregate, nor the
announcement of an unfavorable decision, ruling or finding with respect to any
permit, would have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole.
(r) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to the financial and corporate books and records and assets is
permitted only in accordance with management's general or specific
authorization; (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences; and (v) management is made aware of the nature and
significance of all transactions that are not reflected in the Company's
financial statements, if any.
(s) To the Company's knowledge, neither the Company,
its subsidiaries nor any employee or agent of the Company or its subsidiaries
has made any payment of funds of the Company or its subsidiaries or received
or retained any funds in violation of any law, rule or regulation, which
payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.
(t) No labor problem or dispute with the employees of
the Company and/or any of its subsidiaries or any of the Company's or its
subsidiaries' principal suppliers, contractors or customers, exists, is
threatened or imminent that could result in a material adverse change in the
condition (financial or other), business, net worth or results of operations
of the Company and/or its subsidiaries. To the Company's knowledge, no labor
problem or dispute with the Company's or its subsidiaries' tenants exists, is
threatened or imminent that could result in a material adverse change in the
condition (financial or other), business, net worth or results of operations
of the Company and/or its subsidiaries.
(u) The Company has filed all foreign, federal, state
and local tax returns that are required to be filed, which returns are
complete and correct, or has requested extensions thereof (except in any case
in which the failure so to file would not have a material adverse effect on
the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole, whether or
not arising from transactions in the ordinary course of business, except as
set forth in the Prospectus (exclusive of any supplement thereto)) and has
paid all taxes required to be paid by it and any other assessment, fine or
penalty levied against it, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is currently
being contested in good faith or as would not have a
11
material adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries, taken as
a whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in the Prospectus (exclusive of any supplement
thereto).
(v) No holder of any security of the Company has any
right to require registration of the Securities or any other security of the
Company because of the filing of the registration statement or consummation of
the transactions contemplated by this Agreement, which right has not been
waived in connection with the transactions contemplated by this Agreement.
(w) The Company and its subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights described in the Prospectus as being owned by them or necessary for
the conduct of their respective businesses. The Company is not aware of any
claim to the contrary or any challenge by any other person to the rights of
the Company and its subsidiaries with respect to the foregoing.
(x) The Company is not now, and after sale of the
Securities to be sold by the Company hereunder and the application of the net
proceeds from such sale as described in the Prospectus under the caption "Use
of Proceeds," will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(y) (i) To the best of the Company's knowledge,
the Company, its subsidiaries, the Properties and the operations conducted
thereon comply and heretofore have complied with all applicable Environmental
Laws, and no expenditures are required or advisable to maintain or achieve
such compliance and except as is disclosed in the Environmental Reports
(defined below) and except for circumstances and expenditures that have not
and will not likely to have a material adverse effect on the relevant
Property.
(ii) Neither the Company nor any of its
subsidiaries has at any time and, to the best of the
Company's knowledge, no other party has at any time,
handled, buried, stored, retained, refined, transported,
processed, manufactured, generated, produced, spilled,
allowed to seep, leak, escape or ▇▇▇▇▇, or be pumped,
poured, emitted, emptied, discharged, injected, dumped,
transferred or otherwise disposed of or dealt with,
Hazardous Materials (as defined below) on, to, under or from
the Properties, except as is disclosed in the environmental
site assessment reports obtained by the Company on or before
the date hereof in connection with the purchase of any of
the Properties and provided to the Underwriter or its
counsel (collectively, the "Environmental Reports") and
except for those circumstances not likely to have a material
adverse effect on the relevant Property. Neither the Company
nor any of its subsidiaries intends to use the Properties or
any subsequently acquired properties for the purpose of
handling, burying, storing, retaining, refining,
transporting, processing, manufacturing, generating,
producing, spilling, seeping, leaking, escaping, leaching,
pumping, pouring, emitting, emptying, discharging,
injecting, dumping, transferring or otherwise disposing of
or dealing with Hazardous Materials.
12
(iii) To the best of the Company's knowledge, no
seepage, leak, escape, ▇▇▇▇▇, discharge, injection, release,
emission, spill, pumping, pouring, emptying or dumping of
Hazardous Materials into waters on or adjacent to the
Properties has occurred, is occurring or is reasonably
expected to occur, except as is disclosed in the
Environmental Reports and except for those circumstances not
likely to have a material adverse effect on the relevant
Property.
(iv) Neither the Company nor any of its
subsidiaries has received notice from any Governmental
Authority or other person of, or has knowledge of, any
occurrence or circumstance which, with notice, passage of
time, or failure to act, would give rise to any claim under
or pursuant to any Environmental Law or under common law
pertaining to Hazardous Materials on or originating from the
existing Properties or arising out of the conduct of any
party with respect to the existing Properties, except as
disclosed in the Environmental Reports.
(v) To the best of the Company's knowledge,
none of the Properties is included or proposed for inclusion
on any federal, state, or local lists of sites which require
or might require environmental cleanup, including, but not
limited to, the National Priorities List or CERCLIS List
issued pursuant to CERCLA (as defined below) by the United
States Environmental Protection Agency.
As used herein, "Hazardous Material" shall include, without
limitation, any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances, or related
materials, asbestos, polychlorinated biphenyls ("PCBs"), petroleum products
and by-products and substances defined or listed as "hazardous substances,"
"toxic substances," "hazardous waste," or "hazardous materials" in any
Federal, state or local Environmental Law.
As used herein, "Environmental Law" shall mean all laws,
regulations or ordinances (including any orders or agreements) of any Federal,
state or local governmental authority having or claiming jurisdiction over any
of the Properties (a "Governmental Authority") that are designed to protect
the public health and the environment or to regulate the handling of Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Section 9601 et seq.) ("CERCLA"), the Hazardous Material Transportation Act,
as amended (49 U.S.C. Section 1801 et seq.), the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Section 6901 et seq.), the Federal Water
Pollution Control Act, as amended (33 U.S.C. Section 1251 et seq.), and the
Clean Air Act, as amended (42 U.S.C. Section 7401 et seq.), and any and all
analogous future federal or present or future state or local laws.
(z) The Company is organized in conformity with the
requirements for qualification as a real estate investment trust under
Sections 856 through 860 of the Code and the rules and regulations thereunder.
As of the close of every taxable year during the Company's existence, the
Company has had no earnings and profits accumulated in a non-REIT year within
the meaning of Section 857(a)(3)(B) of the Code. The Company's past and
proposed method of operation have enabled it, and will enable it, to meet the
requirements for taxation as a REIT under the Code.
13
(aa) The Company has only one "taxable REIT subsidiary"
within the meaning of Section 856(l) of the Code and the election under
Section 856(l)(1) has been timely made and not revoked. Each of the Company's
corporate subsidiaries, except its taxable REIT subsidiary, is in compliance
with all requirements applicable to a "qualified REIT subsidiary" within the
meaning of Section 856(i) of the Code and all applicable regulations under the
Code, and the Company is not aware of any fact that would negatively impact
such qualifications.
(bb) The Company and each of its subsidiaries is insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which they are engaged and the value of their properties. All policies of
insurance and fidelity or surety bonds insuring the Company or any of its
subsidiaries or their respective businesses, assets, employees, officers and
directors are in full force and effect. The Company and its subsidiaries are
in compliance with the terms of such policies and instruments in all material
respects and there are no claims by the Company or any of its subsidiaries
under any such policy or instrument as to which any insurance company is
denying liability or defending under a reservation of rights clause. Neither
the Company nor any of its subsidiaries has been refused any insurance
coverage sought or applied for, and the Company does not have any reason to
believe that the Company and each of its subsidiaries will not be able to
renew its respective existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue their respective businesses at a cost that would not
materially and adversely affect the condition (financial or otherwise),
business, prospects, net worth or results of operations of the Company and its
subsidiaries taken as a whole, whether or not arising from transactions in the
ordinary course of business, except as set forth in the Prospectus.
(cc) The Company and its subsidiaries have title
insurance on each of the Properties in an amount at least equal to the cost of
acquisition of such property.
(dd) No subsidiary of the Company is currently
prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring and of such subsidiary's assets or property to
the Company or any other subsidiary of the Company, except as described in the
Prospectus.
(ee) [Intentionally omitted]
(ff) There are no transfer taxes or other similar fees
or charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the execution and
delivery of this Agreement or the issuance by the Company or sale by the
Company of the Securities.
(gg) Each of the Company and its subsidiaries has
fulfilled its obligations, if any, under the minimum funding standards of
Section 302 of the United States Employee Retirement Income Security Act of
1974 ("ERISA") and the regulations and published interpretations thereunder
with respect to each "plan" (as defined in Section 3(3) of ERISA and such
regulations and published interpretations) in which employees of the Company
and its subsidiaries are eligible to participate. Each such plan is in
compliance in all material respects
14
with the presently applicable provisions of ERISA and such regulations and
published interpretations. Neither the Company nor any of its subsidiaries has
incurred any unpaid liability to the Pension Benefit Guaranty Corporation
(other than for the payment of premiums in the ordinary course) or to any such
plan under Title IV of ERISA.
7. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Underwriter, the directors, officers,
employees and agents of each Underwriter and each person who controls the
Underwriter, within the meaning of either the Act or the Exchange Act, against
any and all losses, claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or
otherwise, insofar as: (i) such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Securities as originally
filed or in any amendment thereof, or in the Basic Prospectus, the Preliminary
Prospectus, if any, or the Prospectus, or in any amendment thereof or
supplement thereto; (ii) arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; or (iii)
arise out of or are based upon a breach of the representations and warranties
of this Agreement. The Company agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case arising in connection with this Section 7 to the
extent that any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Underwriter specifically for inclusion therein. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(a) The Underwriter agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs
the Registration Statement, and each person who controls the Company within
the meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Underwriter, but only with
reference to written information relating to the Underwriter furnished to the
Company by or on behalf of the Underwriter in writing specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have. The Company acknowledges that the only information
furnished in writing by or on behalf of the Underwriter for inclusion in the
Prospectus is the (i) third full paragraph, (ii) the first sentence of the
fourth paragraph, (iii) the second sentence of the sixth paragraph, and (iv)
the last two sentences of the last paragraph under the heading "Underwriting."
(b) Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section 7, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the
indemnifying party: (i) will not relieve it from liability under paragraph (a)
or (b) above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture
15
by the indemnifying party of substantial rights and defenses; and (ii) will not,
in any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if: (i)
the use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest; (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party; (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action; or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise, or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(c) In the event that the indemnity provided in
paragraph (a) or (b) of this Section 7 is unavailable to, or insufficient to
hold harmless, an indemnified party for any reason, the Company and the
Underwriter agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which the Company and the Underwriter may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the
one hand, and by the Underwriter, on the other, from the offering of the
Securities; provided, however, that in no case shall the Underwriter be
responsible for any amount in excess of the underwriting discount or
commission applicable to the Securities purchased by the Underwriter
hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Underwriter shall contribute
in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company, on the one hand, and of
the Underwriter, on the other, in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal
to the total net proceeds from the offering (before deducting expenses)
received by it, and benefits received by the Underwriter shall be deemed to be
equal to the total underwriting discounts and commissions, in each case as set
forth on the cover page of the Prospectus. Relative fault shall be determined
by reference to, among other things: (i) whether any untrue or
16
any alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information provided by the
Company, on the one hand, or the Underwriter, on the other; (ii) the intent of
the parties and their relative knowledge; (iii) access to information; and
(iv) the opportunity to correct or prevent such untrue statement or omission.
The Company and the Underwriter agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 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 who controls the Underwriter within the meaning of either the
Act or the Exchange Act and each director, officer, employee and agent of an
Underwriter shall have the same rights to contribution as the Underwriter, and
each person who controls the Company within the meaning of either the Act or
the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).
8. Conditions of Underwriter's Obligations. The obligations of
the Underwriters to purchase the Securities hereunder are subject to the
following conditions:
(a) (i) If, at the time this Agreement is executed and
delivered, it is necessary for a post-effective amendment to the registration
statement to be declared effective before the offering of the Securities may
commence, such post-effective amendment shall have become effective not later
than 5:30 P.M., New York City time, on the date hereof, or at such later date
and time as shall be consented to in writing by the Underwriter; (ii) no stop
order suspending the effectiveness of the registration statement shall have
been issued and no proceeding for that purpose shall have been instituted or,
to the knowledge of the Company or the Underwriter, threatened by the
Commission; and (iii) any request of the Commission for additional information
(to be included in the Registration Statement or the Prospectus or otherwise)
shall have been complied with to the satisfaction of the Underwriter.
(b) Subsequent to the effective date of this Agreement,
or, if earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereto) and the Prospectus (exclusive
of any amendment thereof), there shall not have occurred: (i) any change, or
any development involving a prospective change, in or affecting the condition
(financial or otherwise), earnings, business, properties, net worth, or
results of operations of the Company and its subsidiaries, whether or not
arising from transactions in the ordinary course of business, except as set
forth in the Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), the effect of which, in the sole
judgment of the Underwriter, is so material and adverse as to make it
impractical or inadvisable to proceed with the offering or delivery of the
Securities as contemplated by the Registration Statement (exclusive of any
amendments thereto) and the Prospectus (exclusive of any supplement thereto);
or (ii) any event or development relating to or involving the Company and its
subsidiaries or any officer or director of the Company and its subsidiaries
which makes any statement made in the Prospectus untrue or which, in the
opinion of the Company and its counsel or the Underwriter and its counsel,
requires the making of any addition to or change in the Prospectus in order to
state a material fact required by the Act or any other law to be stated
therein, or necessary in
17
order to make the statements therein not misleading, if amending or
supplementing the Prospectus to reflect such event or development would, in
the opinion of the Underwriter, adversely affect the market for the
Securities.
(c) The Underwriter shall have received on the Closing
Date, an opinion of ▇▇▇▇ ▇▇▇▇▇▇▇, counsel for the Company, dated the Closing
Date and addressed to the Underwriter, to the effect that:
(i) The Company and each of its subsidiaries,
as set forth on Schedule II hereto: (x) is a corporation
duly incorporated and validly existing in good standing
under the laws of its state of formation, with full
corporate, partnership or trust power, as applicable, and
authority to own, lease and operate its properties and to
conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or
supplement thereto); and, (y) based solely on certificates
of public officials and officers of the Company and each of
its subsidiaries, are duly registered and qualified to
conduct their business; and (z) are in good standing in each
jurisdiction or place where the nature of its properties or
the conduct of its business requires such registration or
qualification, except where the failure so to register or
qualify does not have a material adverse effect on the
condition (financial or other), business, properties, net
worth or results of operations of the Company and its
subsidiaries;
(ii) To the knowledge of such counsel, the
Company has no subsidiary or subsidiaries other than as set
forth on Schedule II hereto, and does not control, directly
or indirectly, any corporation, partnership, joint venture,
association or other business association (other than the
general partner interest of Net Lease Realty III, Inc. in
Net Lease Institutional Funding, L.P.). The issued shares of
capital stock of each of the Company's subsidiaries have
been duly authorized and validly issued, are fully paid and
non-assessable and are owned legally and beneficially by the
Company and, to the knowledge of such counsel, after due
inquiry, free and clear of any security interests, liens,
encumbrances, equities or claims;
(iii) The authorized capital stock of the
Company conforms in all material respects as to legal
matters to the description thereof contained in the
Prospectus under the captions "Description of Debt
Securities," "Description of Preferred Stock," "Description
of Depositary Shares", "Description of Common Stock" and
"Description of Common Stock Warrants" in the Base
Prospectus and under the caption "Description of Notes" in
the Prospectus Supplement; and, except as set forth in the
Prospectus, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or
rights to convert any obligations into or exchange any
securities for, shares of capital stock of or ownership
interests in the Company are outstanding;
(iv) All the shares of capital stock of the
Company outstanding prior to the issuance of the Securities
have been duly authorized and validly issued, and are fully
paid and nonassessable;
18
(v) The Indenture has been duly authorized,
executed and delivered, has been duly qualified under the
Trust Indenture Act, the Indenture (including the Fourth
Supplemental Indenture thereto) constitutes a legal, valid
and binding instrument enforceable against the Company in
accordance with its terms (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors'
rights generally from time to time in effect and to general
principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in
equity or at law);
(vi) The Securities have been duly authorized
and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by
the Underwriter pursuant to this Agreement, will constitute
legal, valid and binding obligations of the Company entitled
to the benefits of the Indenture;
(vii) Upon the delivery of the Securities to the
Underwriter pursuant to the terms of the Indenture, the
Securities will conform in all material respects to the
description of the Securities contained in the Indenture;
(viii) To the knowledge of such counsel, based
upon such inquiry as such counsel deems appropriate, no
holder of securities of the Company is entitled to have such
securities registered under the Registration Statement which
right has not been waived in connection with the
transactions contemplated by this Agreement;
(ix) The forms of certificates for the
Securities conform to the requirements of the Maryland
General Corporation Law, if any;
19
(x) The Registration Statement has become
effective under the Act; any required filing of the Basic
Prospectus, any Preliminary Prospectus or the Prospectus,
and any supplements thereto, pursuant to Rule 424(b) has
been made in the manner and within the time period required
by Rule 424(b); to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration
Statement has been issued, no proceedings for that purpose
have been instituted or threatened and the Registration
Statement and the Prospectus (other than the financial
statements and other financial information contained
therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the
applicable requirements of the Act, the Exchange Act and the
Trust Indenture Act and the respective rules thereunder; and
such counsel has no reason to believe: (A) that on the
effective date of the registration statement, or as of the
date hereof, the Registration Statement contained any untrue
statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading; or (B) that the
Prospectus as of its date and on the Closing Date included
or includes any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances
under which they were made, not misleading (in each case,
other than the financial statements and other financial
information, contained therein, as to which such counsel
need express no opinion);
(xi) The Company has the corporate power and
authority to enter into this Agreement, and the Indenture
and to issue, sell and deliver the Securities to the
Underwriter as provided herein. This Agreement and the
Indenture (including the Fourth Supplemental Indenture
thereto) have been duly authorized, executed and delivered
by the Company and are valid, legal and binding agreements
of the Company, enforceable against the Company in
accordance with their respective terms, except as
enforcement of rights to indemnity and contribution
hereunder may be limited by Federal or state securities laws
or principles of public policy and subject to the
qualification that the enforceability of the Company's
obligations hereunder and thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or
affecting creditors' rights generally, and by general
equitable principles when applied by a court of law or
equity;
(xii) To the knowledge of such counsel, neither
the Company nor any of its subsidiaries is: (A) in violation
of its respective articles of incorporation or by-laws; or
(B) in default in the performance of any material
obligation, agreement or condition contained in any bond,
debenture, note or other evidence of indebtedness set forth
on Schedule A attached to such opinion, except as disclosed
in the Prospectus;
20
(xiii) Neither the issue, offer, sale or delivery
of the Securities, the execution, delivery or performance by
the Company of this Agreement or the Indenture, compliance
by the Company with the provisions hereof nor consummation
by the Company of the transactions contemplated hereby
(including the application of the proceeds from the sale of
the Securities): (A) conflicts or will conflict with or
constitutes or will constitute or result in a breach of, or
a default under, (1) the articles of incorporation or
by-laws of the Company or any of its subsidiaries or (2) any
agreement, indenture, lease or other instrument to which the
Company or any of its subsidiaries is a party or by which
the Company or any properties of the Company or any of its
subsidiaries is bound (x) that is an exhibit to the
Registration Statement or (y) which is known to such
counsel; or (B) results or will result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or its subsidiaries,
pursuant to any agreement, indenture, lease, mortgage, deed
of trust or other instrument, agreement, obligation,
condition or covenant to which the Company or any of its
subsidiaries is bound or a party or to which any properties
of the Company or any of its subsidiaries is subject; or (C)
violates or will violate any statute, law, rule, regulation,
judgment, order or decree applicable to the Company or any
of its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or any
of its subsidiaries or any of its or their properties;
(xiv) No consent, approval, authorization or
other order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental
body, agency, or official is required on the part of the
Company (except as have been obtained under the Act or such
as may be required under state securities or blue sky laws
governing the purchase and distribution of the Securities)
for the valid issuance and sale of the Securities to the
Underwriters as contemplated by this Agreement;
(xv) (A) The Registration Statement and the
Prospectus, and any supplements or amendments thereto
(except for the financial statements and the notes thereto
and the schedules and other financial and statistical data
included therein, as to which such counsel need not express
any opinion), comply as to form in all material respects
with the requirements of the Act; and (B) each of the
Incorporated Documents (except for the financial statements
and the notes thereto and the schedules and other financial
and statistical data included therein, as to which counsel
need not express any opinion) complies as to form in all
material respects with the Exchange Act and the rules and
regulations of the Commission thereunder;
(xvi) To the knowledge of such counsel, after
due inquiry, there is no action, suit or proceeding pending
or threatened by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or
any of its subsidiaries or any of its or their property of a
character required to be described in the Registration
Statement or Prospectus (or any amendment or supplement
thereto), and there are no agreements, contracts,
indentures, leases or
21
other instruments or documents that are required to be
described in the Registration Statement or the Prospectus
(or any amendment or supplement thereto) or to be filed or
incorporated by reference as an exhibit to the Registration
Statement or any Incorporated Document that are not
described, filed or incorporated as required, as the case
may be;
(xvii) To the knowledge of such counsel, neither
the Company nor any of its subsidiaries is in violation of
any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or its subsidiaries or
of any decree of any court or governmental agency or body
having jurisdiction over the Company or its subsidiaries;
(xviii) Such counsel is not aware of any
certificates, authorizations, licenses or permits required
by any federal regulatory authority which are necessary for
the Company and/or its subsidiaries to conduct their
respective businesses other than any such certificates,
authorizations, licenses or permits which have been
obtained. To the knowledge of such counsel, neither the
Company nor any of its subsidiaries has received any notice
of proceedings relating to the revocation or modification of
any certificate, authorization, license or permit issued by
any federal, state, municipal or foreign regulatory
authority which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result
in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of
operations of the Company or its subsidiaries;
(xix) The Company is not subject to registration
as an investment company under the Investment Company Act of
1940, as amended, and the transactions contemplated by this
Agreement (including the application of the proceeds from
the sale of the Securities), will not cause the Company to
become an investment company subject to registration under
the Investment Company Act of 1940, as amended;
(xx) Commencing with the Company's initial
taxable year, the Company has qualified as a REIT under the
Code for all taxable years ending on or before December 31,
2001, and its past and proposed method of operation will
enable it to qualify as a REIT under the Code for its
taxable year ending on December 31, 2002; and each of the
Company's corporate subsidiaries (other than its taxable
REIT Subsidiary) is a "qualified REIT subsidiary" within the
meaning of Section 856(i) of the Code;
(xxi) To the knowledge of such counsel: (A)
neither the Company nor any of its subsidiaries is in
violation of any federal law or regulation relating to
occupational safety and health or to the environment,
including, without limitation, the storage, handling,
transportation or disposal of hazardous or toxic materials;
(B) the Company and its subsidiaries have received all
permits, registrations, licenses and other approvals
required of them under applicable federal occupational
safety and health and environmental laws and regulations to
22
conduct their respective businesses; and (C) the Company and
each of its subsidiaries is in compliance with all terms and
conditions of any such permit, registration, license or
approval, except any such violation of law or regulation,
failure to receive required permits, registrations, licenses
or other approvals or failure to comply with the terms and
conditions of such permits, registrations, licenses or
approvals which would not, singly or in the aggregate,
result in a material adverse change in the condition
(financial or otherwise), business prospects, net worth or
results of operations of the Company or its subsidiaries;
(xxii) The statements in the Prospectus, insofar
as they are descriptions of contracts or agreements or
constitute statements of law or legal conclusions, are
accurate and present fairly the information required to be
shown in all material respects; and
(xxiii) Although counsel has not undertaken,
except as otherwise indicated in its opinion, to determine
independently, and does not assume any responsibility for,
the accuracy or completeness of the statements in the
Registration Statement, such counsel has participated in the
preparation of the Registration Statement and the
Prospectus, including review and discussion of the contents
thereof (including review and discussion of the contents of
all Incorporated Documents), and nothing has come to the
attention of such counsel that has caused it to believe that
the Registration Statement (including the Incorporated
Documents), at the time the Registration Statement became
effective, or the Prospectus, as of its date and as of the
Closing Date contained an untrue statement of a material
fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein
not misleading or that any amendment or supplement to the
Prospectus, as of its respective date, and as of the Closing
Date contained any untrue statement of a material fact or
omitted 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 (it being
understood that such counsel need express no opinion with
respect to the financial statements and the notes thereto
and the schedules and other financial data included in the
Registration Statement or the Prospectus or any Incorporated
Document).
(d) The Underwriter shall have received on the Closing
Date an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Underwriters, dated the
Closing Date and addressed to the Underwriter, with respect to such matters as
the Underwriter may request.
(e) The Underwriter shall have received a letter
addressed to the Underwriter and dated as of the Closing Date from KPMG LLP,
independent certified public accountants, substantially in the forms
heretofore approved by the Underwriter.
(f) (A) No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (B) there
shall not have been any change in the capital stock of the Company nor
23
any material increase in the short-term or long-term debt (including any
off-balance sheet activities) of the Company and its subsidiaries (other than
in the ordinary course of business) from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto); (C) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus
(or any amendment or supplement thereto), except as may otherwise be stated in
the Registration Statement and Prospectus (or any amendment or supplement
thereto), any material adverse change in the condition (financial or other),
business, prospects, properties, net worth or results of operations of the
Company or its subsidiaries; (D) neither the Company nor any of its
subsidiaries shall have any liabilities or obligations (financial or other),
direct or contingent (whether or not in the ordinary course of business), that
are material to the Company or its subsidiaries, other than those reflected in
the Registration Statement or the Prospectus (or any amendment or supplement
thereto); and (E) all the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the date
hereof and on and as of the Closing Date as if made on and as of the Closing
Date, and the Underwriter shall have received a certificate, dated the Closing
Date and signed by the chief executive officer and the chief financial officer
of the Company (or such other officers as are acceptable to the Underwriter),
to the effect set forth in this Section 8(f) and in Section 8(g) hereof.
(g) The Company shall not have failed at or prior to
the Closing Date to have performed or complied with any of its agreements
herein contained and required to be performed or complied with by it hereunder
or under the Indenture, at or prior to the Closing Date.
(h) The Company shall have furnished or caused to be
furnished to the Underwriter such further certificates and documents as the
Underwriter shall have requested.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are satisfactory
in form and substance to the Underwriter and its counsel.
Any certificate or document signed by any officer of the
Company and delivered to the Underwriter, or to counsel for the Underwriter,
shall be deemed a representation and warranty by the Company to the
Underwriter as to the statements made therein.
(i) Subsequent to the effective date of this Agreement,
there shall not have been any decrease in the rating of any of the Company's
debt securities by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act) or any notice given of
any intended or potential decrease in any such rating or of a possible change
in any such rating that does not indicate the direction of the possible
change.
If any of the conditions specified in this Section 8 shall
not have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Underwriter and counsel for the
Underwriter, this Agreement and all obligations of the Underwriter hereunder
may be canceled by the Underwriter at, or at any time prior to, the Closing
Date. Notice of such cancellation shall be given to the Company in writing or
by telephone or facsimile confirmed in writing.
24
The documents required to be delivered by this Section 8
shall be delivered at the offices of Hunton & ▇▇▇▇▇▇▇▇, counsel for the
Underwriter, at ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on the Closing
Date.
9. Expenses. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by the
Company of its obligations hereunder: (i) the preparation, printing or
reproduction, and filing with the Commission of the registration statement
(including financial statements and exhibits thereto), each Preliminary
Prospectus, if any, the Prospectus, and each amendment or supplement to any of
them; (ii) the printing (or reproduction) and delivery (including postage, air
freight charges and charges for counting and packaging) of such copies of the
registration statement, each Preliminary Prospectus, the Prospectus, the
Incorporated Documents, and all amendments or supplements to any of them, as
may be reasonably requested for use in connection with the offering and sale
of the Securities; (iii) the preparation, printing, authentication, issuance
and delivery of certificates for the Securities, including any stamp or other
taxes in connection with the original issuance and sale of the Securities;
(iv) the printing (or reproduction) and delivery of this Agreement, the
preliminary and supplemental blue sky memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection with the
offering of the Securities; (v) the registration or qualification of the
Securities for offer and sale under the securities or blue sky laws of the
several states as provided in Section 5(g) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Underwriters relating to
the preparation, printing or reproduction, and delivery of the preliminary and
supplemental blue sky memoranda and such registration and qualification); (vi)
the filing fees and the fees and expenses of counsel for the Underwriter in
connection with any filings required to be made with the National Association
of Securities Dealers, Inc.; (vii) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Securities; and (viii) the fees
and expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company.
10. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto;
or (ii) if, at the time this Agreement is executed and delivered, it is
necessary for a post-effective amendment to the registration statement to be
declared effective before the offering of the Securities may commence, when
notification of the effectiveness of such post-effective amendment has been
released by the Commission. Until such time as this Agreement shall have
become effective, it may be terminated by the Company, by notifying the
Underwriter, or by the Underwriter, by notifying the Company.
Any notice under this Section 10 may be given by telegram, telecopy
or telephone but shall be subsequently confirmed by letter.
11. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Underwriter, without liability
on the part of the Underwriter to the Company, by notice to the Company, if,
prior to the Closing Date (if different from the Closing Date and then only as
to the Securities): (i) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market shall have
been suspended or materially limited; (ii) a general moratorium on commercial
banking activities in
25
New York, North Carolina or Florida shall have been declared by either federal
or state authorities; (iii) the Company or any of its subsidiary shall have
sustained a substantial loss by fire, flood, accident or other calamity which
renders it impracticable, in the reasonable judgment of the Underwriter, to
consummate the sale of the Securities and the delivery of the Securities by
the Underwriter at the initial public offering price; or (iv) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States
is such as to make it, in the judgment of the Underwriter, impracticable or
inadvisable to commence or continue the offering of the Securities at the
offering price to the public set forth on the cover page of the Prospectus or
to enforce contracts for the resale of Securities by the Underwriter. Notice
of such termination may be given to the Company by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
12. Information Furnished by the Underwriter. The statements in
the (i) third full paragraph, (ii) the first sentence of the fourth paragraph,
(iii) the second sentence of the sixth paragraph, and (iv) the last two
sentences of the last paragraph under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus Supplement, constitute the only
information furnished by or on behalf of the Underwriters as such information
is referred to in Sections 6(b)(ii) and 7(a) hereof.
13. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of
the Company or its officers and of the Underwriter set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Underwriter or the Company or
any of the officers, directors, employees, agents or controlling persons
referred to in Section 7 hereof, and will survive delivery of and payment for
the Securities. The provisions of Sections 7 and 9 hereof shall survive the
termination or cancellation of this Agreement.
14. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Underwriter, will be
mailed, delivered or telefaxed to First Union Securities, Inc., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (fax no.: ▇▇▇-▇▇▇-▇▇▇▇),
Attention: Debt Syndicate Desk; or, if sent to the Company, will be mailed,
delivered or telefaxed to the office of the Company at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, (fax no.: ▇▇▇-▇▇▇-▇▇▇▇), Attention: ▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇., Chairman and Chief Executive Officer.
15. Successors. This Agreement has been made solely for the
benefit of the Underwriters, the Company, its directors and officers, and the
other controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein. This Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and controlling persons
referred to in Section 7 hereof, and no other person shall acquire or have any
right under or by virtue of this Agreement. Neither the term "successor" nor
the term "successors and assigns" as used in this Agreement shall include a
purchaser from the Underwriter of any of the Securities in his status as such
purchaser.
26
16. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York without giving
effect to the conflict or choice of laws principles thereof.
17. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original, and all of which
together shall constitute one and the same agreement.
18. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.
19. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Business Day" shall mean any day other than a Saturday, a Sunday or
a legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City.
27
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the Underwriter.
Very truly yours,
COMMERCIAL NET LEASE REALTY, INC.
By
--------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
The foregoing Agreement is hereby confirmed and accepted as of the date on the
first page hereof.
FIRST UNION SECURITIES, INC.
By
--------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
28
SCHEDULE I
COMMERCIAL NET LEASE REALTY, INC.
Principal Amount of
Underwriter Securities to be Purchased Purchase Price
First Union Securities, Inc. $50,000,000 $49,388,000
SCHEDULE II
LIST OF SUBSIDIARIES
NAME OF SUBSIDIARY
Net Lease Realty I, Inc.
Net Lease Realty II, Inc.
Net Lease Realty III, Inc.
Net Lease Realty IV, Inc.
CNLR Ster Florida, LLC
CNLR Ster Texas L.P.
CNLR Ster Richmond Virginia, LLC
CNLR Ster Glendale Arizona, LLC
CNLR Ster Paradise Valley Arizona, LLC
Net Lease Funding, Inc.
Hollywood CNLR, LLC
Commercial Net Lease Realty Trust
CNLR Ster Toledo Ohio, LLC
CNLR Texas Opportunity, L.P.
CNLR GP Corp.
CNLR LP Corp.
CNLR Texas GP Corp.
▇▇▇▇▇-▇▇▇▇▇▇▇ FL, LLC
Jared-Lithonia GA, LLC
Commercial Net Lease Realty Services, Inc.
RE-Stores, Inc.
CNLRS Funding, Inc.
CNLRS Exchange I, Inc.
NorthStar Brokerage Services, Inc.
LHC-Memphis/Germantown, LLC
CNLRS Equity Ventures, Inc.
Forks-Easton, LLC
▇▇▇-St. ▇▇▇▇▇▇ MO, LLC
30
