Exhibit 1.1
$20,000,000
REALTY INCOME CORPORATION
8% Notes due 2009
PURCHASE AGREEMENT
January 15, 1999
Table of Contents
Page
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THE PURCHASE AGREEMENT 1
SECTION 1. Representations and Warranties 3
(a) Representations and Warranties by the Company 3
(i) Compliance with Registration Requirements 3
(ii) Incorporated Documents 4
(iii) Independent Accountants 5
(iv) Financial Statements 5
(v) No Material Adverse Change in Business 5
(vi) Good Standing of the Company 6
(vii) Good Standing of Subsidiaries 6
(viii) Capitalization 7
(ix) Authorization of Agreement 7
(x) Authorization of Common Stock 7
(xi) Absence of Defaults and Conflicts 7
(xii) Absence of Labor Dispute 8
(xiii) Absence of Proceedings 9
(xiv) Accuracy of Exhibits 9
(xv) Possession of Intellectual Property 9
(xvi) Absence of Further Requirements 10
(xvii) Possession of Licenses and Permits 10
(xviii) Investment Company Act 10
(xix) Partnership Agreements 11
(xx) Properties 11
(xxi) Insurance 13
(xxii) Environmental Matters 13
(xxiii) Qualification as a Real Estate Investment Trust 15
(xxiv) Registration Rights 15
(xxv) Tax Treatment of Certain Entities 16
(xxvi) Indenture 16
(xxvii) Securities 16
(xxviii) Description of Indenture and Securities 17
(xxix) Ranking of Securities 17
(xxx) Prior Registration Statement 17
(b) Officer's Certificates 17
SECTION 2. Sale and Delivery to Underwriter; Closing 17
(a) Securities 17
(b) Payment 17
(c) Denominations; Registration 18
SECTION 3. Covenants of the Company 18
(a) Compliance with Securities Regulations and Commission
Requests 18
(b) Filing of Amendments 18
(c) Rule 434 19
(d) Delivery of Registration Statements 19
(e) Delivery of Prospectuses 19
(f) Continued Compliance with Securities Laws 19
(g) Blue Sky Qualifications 20
(h) Rule 158 20
(i) Use of Proceeds 20
(j) Reporting Requirements 20
(k) Restriction on Sale of Securities 20
SECTION 4. Payment of Expenses 21
(a) Expenses 21
(b) Termination of Agreement 22
SECTION 5. Conditions of Underwriter's Obligations 22
(a) Effectiveness of Registration Statement 22
(b) Opinions of Counsel for Company 22
(c) Opinion of Counsel for Underwriter 22
(d) Officers' Certificate 23
(e) Accountant's Comfort Letter 23
(f) Rating Requirement 24
(g) Letter Regarding Compliance with the Acquisition
Credit Agreement 24
(h) Letter Regarding Waiver from Lock-Up 24
(i) Additional Documents 24
(j) Termination of Agreement 24
SECTION 6. Indemnification 25
(a) Indemnification of Underwriter 25
(b) Indemnification of Company, Directors and Officers 26
(c) Actions against Parties; Notification 26
(d) Settlement without Consent if Failure to Reimburse 27
SECTION 7. Contribution 27
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery 29
SECTION 9. Termination of Agreement 29
(a) Termination; General 29
(b) Liabilities 30
SECTION 10. Notices 30
SECTION 11. Parties 30
SECTION 12. GOVERNING LAW AND TIME 31
SECTION 13. Effect of Headings and Table of Contents 31
$20,000,000
REALTY INCOME CORPORATION
(a Maryland corporation)
8% Notes due 2009
PURCHASE AGREEMENT
January 15, 1999
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation
as Representative of the Underwriter
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Realty Income Corporation, a Maryland corporation (the
"Company"), confirms its agreement with the Underwriter named in
Schedule A hereto (the "Underwriter"), for whom ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ Securities Corporation ("▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇") is acting as representative (in such capacity, the
"Representative"), with respect to the sale by the Company and
the purchase by the Underwriter of $20,000,000 aggregate
principal amount of the Company's 8% Notes due 2009 (the "Notes"
or the "Securities"). The Securities are to be issued pursuant
to an indenture dated as of October 28, 1998 (the "Indenture")
between the Company and The Bank of New York, as trustee (the
"Trustee").
The Company understands that the Underwriter proposes to
make a public offering of the Securities as soon as the
Representative deems advisable after this Agreement has been
executed and delivered.
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-
3 (No. 333-34311) and Amendment No. 1 thereto covering the
registration of, among other things, the Securities under the
Securities Act of 1933, as amended (the "1933 Act"), in each case
including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the
Company will either (i) prepare and file a prospectus supplement
and, if required by Rule 424(b) (as defined below), a prospectus
in accordance with the provisions of Rule 415 ("Rule 415") of the
rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
Page 1
424(b)") of the 1933 Act Regulations or (ii) if the Company has
elected to rely upon Rule 434 ("Rule 434") of the 1933 Act
Regulations, prepare and file a term sheet (a "Term Sheet") in
accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such Term Sheet that was omitted from
such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the
time the Term Sheet is filed with the Commission pursuant to
paragraph (d) of Rule 434 is referred to as "Rule 434
Information." Each prospectus, together with any related
prospectus supplement, relating to the Securities used before
such registration statement became effective, and each
prospectus, together with the related prospectus supplement,
relating to the Securities that omitted the Rule 434 Information
or that was captioned "Subject to Completion" that was used after
such effectiveness and prior to the execution and delivery of
this Agreement, is herein called, together with the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, a "preliminary prospectus." Such
registration statement, as amended and including the exhibits
thereto, schedules, if any, and the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, at the time it became effective and including, if
applicable, the Rule 434 Information, is herein called the
"Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and
after such filing the term "Registration Statement" shall include
the Rule 462(b) Registration Statement. The prospectus dated
October 1, 1997 and the final prospectus supplement relating to
the offering of the Securities, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, in the form first furnished to the
Underwriter for use in connection with the offering of the
Securities are herein called, collectively, the "Prospectus." If
Rule 434 is relied on, the term "Prospectus" shall refer to the
prospectus dated October 1, 1997 and the Term Sheet and all
documents incorporated by reference therein pursuant to Item 12
of Form S-3, and all references in this Agreement to the date of
the Prospectus shall mean the date of the Term Sheet. For
purposes of this Agreement, all references to the Registration
Statement, any preliminary prospectus, the Prospectus or any Term
Sheet or any amendment or supplement to any of the foregoing
shall be deemed to include any copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("▇▇▇▇▇").
All references in this Agreement to financial statements and
schedules and other information which is "described,"
"disclosed," "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the
Prospectus (or other references of like import) shall be deemed
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to mean and include all such financial statements and schedules
and other information which is incorporated or deemed to be
incorporated by reference in the Registration Statement, any
preliminary prospectus or the Prospectus, as the case may be; and
all references in this Agreement to amendments or supplements to
the Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to mean and include the filing of any
document under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which is incorporated or deemed to be
incorporated by reference in the Registration Statement, such
preliminary prospectus or the Prospectus, as the case may be.
All references in this Agreement to properties or
improvements "owned by" or "of" the Company or any of its
subsidiaries shall be deemed to mean and include all properties
and improvements which are leased by the Company or any of its
subsidiaries, as lessee.
As used in this Agreement, the term "Consolidation" means
the merger of 25 limited partnerships (the "Partnerships") and
RIC Properties Ltd., a California limited partnership ("RIC
Properties"), into the Company on August 15, 1994; "Merger" means
the merger of R.I.C. Advisor, Inc., a California corporation (the
"Advisor"), into the Company on August 17, 1995; and
"Reincorporation" means the reincorporation of the Company in the
State of Maryland, which was effectuated by merging the Company
into Realty Income of Maryland, Inc., a Maryland corporation (the
"Maryland Corporation") which subsequently changed its name to
Realty Income Corporation, with the Maryland Corporation as the
surviving corporation of such merger.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The
Company represents and warrants to the Underwriter as of the date
hereof and as of the Closing Time referred to in Section 2(b)
hereof, and agrees with the Underwriter, as follows:
(i) Compliance with Registration
Requirements. The Company meets the requirements for
use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration
Statement has become effective under the 1933 Act and
no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or
are pending or, to the knowledge of the Company, are
threatened by the Commission, and any request on the
part of the Commission for additional information has
been complied with. The Indenture has been duly
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qualified under the Trust Indenture Act of 1939, as
amended (the "1939 Act"), and the Trustee has duly
filed with the Commission a Statement of Eligibility on
Form T-1 as part of the Registration Statement.
At the respective times the Registration Statement, any
Rule 462(b) Registration Statement and any post-effective
amendments thereto became effective, at the date hereof and
at the Closing Time, the Registration Statement, any Rule
462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material
respects with the applicable requirements of the 1933 Act
and the 1933 Act Regulations and the 1939 Act and the rules
and regulations of the Commission under the 1939 Act (the
"1939 Act Regulations"), and did not and will not contain an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading, and, at the date
hereof and at the Closing Time, neither the Prospectus nor
any amendments or supplements thereto contained or will
contain any untrue statement of a material fact or omitted
or will omit to state a material fact necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided, however, that the representations and warranties
in this paragraph shall not apply to statements in or
omissions from the Registration Statement or Prospectus made
in reliance upon and in conformity with information
furnished to the Company in writing by ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ expressly for use in the Registration Statement or
Prospectus.
Each preliminary prospectus and Prospectus filed as
part of the Registration Statement as originally filed or as
part of any amendment thereto, or filed pursuant to Rule 424
under the 1933 Act, complied when so filed in all material
respects with the 1933 Act and the 1933 Act Regulations and,
if applicable, each preliminary prospectus and the
Prospectus delivered to the Underwriter for use in
connection with this offering was identical to the
electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇ except to the extent permitted
by Regulation S-T.
(ii) Incorporated Documents. The documents
incorporated or deemed to be incorporated by reference
in the Registration Statement and the Prospectus, at
the time they were or hereafter are filed with the
Commission, complied and will comply in all material
respects with the requirements of the 1934 Act and the
rules and regulations of the Commission thereunder (the
"1934 Act Regulations"), and, when read together with
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the other information in the Prospectus, at the date
hereof and at the Closing Time, did not and will not
contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein
or necessary in order to make the statements therein,
in the light of the circumstances under which they were
made, not misleading.
(iii) Independent Accountants. The accountants
who certified the financial statements and supporting
schedules included in the Registration Statement are
independent public accountants as required by the 1933
Act and the 1933 Act Regulations.
(iv) Financial Statements. The consolidated
financial statements of the Company included in the
Registration Statement and the Prospectus, together
with the related schedule and notes, present fairly the
financial position of the Company and its subsidiaries
at the dates indicated and the consolidated statements
of income, stockholders' equity and cash flows of the
Company and its subsidiaries for the periods specified;
said consolidated financial statements have been
prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting
schedules included in the Registration Statement
present fairly in accordance with GAAP the information
required to be stated therein. The selected financial
data, if any, and summary financial information, if
any, included in the Prospectus present fairly the
information shown therein and have been compiled on a
basis consistent with that of the audited financial
statements included in the Registration Statement. The
Company's ratios of earnings to fixed charges (actual
and, if any, pro forma) included in the Prospectus have
been calculated in compliance with Item 503(d) of
Regulation S-K of the Commission.
(v) No Material Adverse Change in Business. Since
the respective dates as of which information is given
in the Registration Statement and the Prospectus,
except as otherwise stated therein, (A) there has been
no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries
considered as one enterprise (a "Material Adverse
Effect"), whether or not arising in the ordinary course
of business, (B) there have been no transactions
entered into by the Company or any of its subsidiaries,
other than those in the ordinary course of business,
which are material with respect to the Company and its
Page 5
subsidiaries considered as one enterprise, and
(C) except for regular monthly distributions on the
Common Stock, par value $1.00 per share, of the Company
(the "Common Stock") in amounts per share that are
consistent with past practice, there has been no
dividend or distribution of any kind declared, paid or
made by the Company on any class of its stock.
(vi) Good Standing of the Company. The Company is
a corporation duly organized and validly existing under
the laws of the State of Maryland and is in good
standing with the State Department of Assessments and
Taxation of Maryland and has corporate power and
authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus
and to enter into and perform its obligations under
this Agreement; and the Company is duly qualified as a
foreign corporation to transact business and is in good
standing in each other jurisdiction in which such
qualification is required, whether by reason of the
ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to
be in good standing would not result in a Material
Adverse Effect.
(vii) Good Standing of Subsidiaries. The only
subsidiaries of the Company are Realty Income Texas
Properties, L.P., a Delaware limited partnership, and
Realty Income Texas Properties, Inc., a Delaware
corporation, and the Company does not hold any equity
interest in any corporation, limited liability
company, partnership, joint venture or entity other
than such subsidiaries. Each subsidiary of the
Company has been duly organized and is validly existing
as a partnership or corporation, as the case may be, in
good standing under the laws of the state of its
organization and has power and authority as a
partnership or corporation, as the case may be, to own,
lease and operate its properties and to conduct its
business as described in the Prospectus; each such
subsidiary is duly qualified as a foreign partnership
or corporation, as the case may be, to transact
business and is in good standing in each other
jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of
property or the conduct of business, except where the
failure so to qualify or to be in good standing would
not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all
of the issued and outstanding partnership interests and
shares of capital stock, as the case may be, of each
such subsidiary have been duly authorized (if
Page 6
applicable) and validly issued and are fully paid and
are non-assessable (except to the extent that the
general partners of subsidiaries which are partnerships
may be liable for the obligations of such partnerships)
and are owned by the Company, directly or through
subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity;
none of the outstanding partnership interests or shares
of capital stock, as the case may be, of such
subsidiaries were issued in violation of preemptive or
other similar rights arising by operation of law, under
the partnership agreement or charter or bylaws, as the
case may be, of any such subsidiary or under any
agreement or instrument to which the Company or any
such subsidiary is a party.
(viii) Capitalization. The authorized stock of
the Company and the issued and outstanding stock of the
Company are as set forth in the line items "Preferred
Stock" and "Common Stock" under the caption
"Consolidated Balance Sheets" in the Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998
(except for subsequent issuances, if any, pursuant to
employee benefit plans referred to in the Prospectus or
pursuant to the exercise of options referred to in the
Prospectus).
(ix) Authorization of Agreement. This Agreement
has been duly authorized, executed and delivered by the
Company.
(x) Authorization of Common Stock. The shares of
issued and outstanding Common Stock have been duly
authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of
Common Stock was issued in violation of preemptive or
other similar rights arising by operation of law, under
the charter or bylaws of the Company, under any
agreement or instrument to which the Company or any of
its subsidiaries is a party or otherwise.
(xi) Absence of Defaults and Conflicts. Neither
the Company nor any of its subsidiaries is in violation
of its charter or bylaws or its partnership agreement,
as the case may be, or in default in the performance or
observance of any obligation, agreement, covenant or
condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by
which any of them may be bound, or to which any of the
respective properties or assets of the Company or any
Page 7
subsidiary is subject (collectively, "Agreements and
Instruments"), except for such defaults that would not
have a Material Adverse Effect; and the execution,
delivery and performance of this Agreement, the
Indenture and the Securities and the consummation of
the transactions contemplated herein and therein
(including the use of the proceeds from the sale of the
Securities to repay borrowings under the Amended and
Restated Revolving Credit Agreement dated as of
December 30, 1997 among the Company, the banks named
therein and The Bank of New York, as agent and swing
line bank and BNY Capital Markets, Inc., as arranger,
as amended by that certain letter agreement dated as of
November 13, 1998 extending the termination date and
increasing the commitments for certain lenders therein
(as so amended, the "Acquisition Credit Agreement"), as
described in the Prospectus under the caption "Use of
Proceeds" but excluding any use of proceeds for other
general corporate purposes for which specific corporate
authorization may be required) and compliance by the
Company with its obligations hereunder and thereunder
have been duly authorized by all necessary corporate
action and do not and will not, whether with or without
the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in
the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
or any subsidiary pursuant to, any Agreement or
Instrument, except for such conflicts, breaches or
defaults or liens, charges or encumbrances that,
individually or in the aggregate, would not have a
Material Adverse Effect, nor will such action result in
any violation of the provisions of the charter or
bylaws of the Company or any applicable law, rule,
regulation, or governmental or court judgment, order,
writ or decree. As used herein, a "Repayment Event"
means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness
(or any person acting on such holder's behalf) the
right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by
the Company or any subsidiary of the Company or any of
its subsidiaries.
(xii) Absence of Labor Dispute. No labor dispute
with the employees of the Company or any subsidiary of
the Company exists or, to the best knowledge of the
Company, is imminent; and the Company is not aware of
any existing or imminent labor disturbance by the
employees of any of its or any subsidiary's tenants,
which, in either case, could reasonably be expected,
Page 8
individually or in the aggregate, to result in a
Material Adverse Effect.
(xiii) Absence of Proceedings. The Company has
not received any notice of any action, suit,
proceeding, inquiry or investigation before or by any
court or governmental agency or body, domestic or
foreign, and, to the best knowledge of the Company,
there is no such proceeding now pending or threatened,
against or affecting the Company or any of its
subsidiaries, which is required to be disclosed in the
Registration Statement (other than as disclosed
therein), or which could reasonably be expected to
result in a Material Adverse Effect, or which could
reasonably be expected to materially and adversely
affect the consummation of this Agreement or the
performance by the Company of its obligations under
this Agreement, the Indenture or the Securities; the
aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a
party or of which any of their respective property or
assets is the subject which are not described in the
Registration Statement, including ordinary routine
litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse
Effect.
(xiv) Accuracy of Exhibits. There are no
contracts or documents which are required to be
described in the Registration Statement, the Prospectus
or the documents incorporated by reference therein or
to be filed as exhibits thereto which have not been so
described and filed as required.
(xv) Possession of Intellectual Property. The
Company and its subsidiaries own or possess, or can
acquire on reasonable terms, adequate patents, patent
rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks,
trade names or other intellectual property
(collectively, "Intellectual Property") necessary to
carry on the business now operated by them, and neither
the Company nor any of its subsidiaries has received
any notice or is otherwise aware of any infringement of
or conflict with asserted rights of others with respect
to any Intellectual Property or of any facts or
circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest
of the Company or any of its subsidiaries therein, and
which infringement or conflict (if the subject of any
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unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result
in a Material Adverse Effect.
(xvi) Absence of Further Requirements. No filing
with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any
court or governmental authority or agency is necessary
or required for the performance by the Company of its
obligations under this Agreement, the Indenture or the
Securities, in connection with the offering, issuance
or sale of the Securities hereunder or the consummation
of the other transactions contemplated by this
Agreement, the Indenture or the Securities, except such
as have been already made or obtained under the 1933
Act, the 1933 Act Regulations, the 1939 Act and the
1939 Act Regulations or as may be required under state
securities laws.
(xvii) Possession of Licenses and Permits. The
Company and its subsidiaries possess such permits,
licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business
now operated by them and the Company and its
subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except
where the failure so to possess or comply would not,
singly or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses are valid and
in full force and effect, except where the invalidity
of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect
would not, singly or in the aggregate, have a Material
Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such
Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse
Effect.
(xviii) Investment Company Act. The Company is
not, and upon the issuance and sale of the Securities
as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus will
not be, an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended (the
"1940 Act").
Page 10
(xix) Partnership Agreements. Each of the
partnership and, if applicable, joint venture
agreements to which the Company or any of its
subsidiaries is a party has been duly authorized,
executed and delivered by the Company or the relevant
subsidiary, as the case may be, and constitutes the
valid and binding agreement of the Company or such
subsidiary, as the case may be, enforceable in
accordance with its terms, except as the enforcement
thereof may be limited by (A) the effect of bankruptcy,
insolvency or other similar laws now or hereafter in
effect relating to or affecting creditors' rights
generally or (B) the effect of general principles of
equity, and the execution, delivery and performance of
such agreements did not, at the time of execution and
delivery, and does not constitute a breach of or
default under the charter or bylaws or partnership
agreement, as the case may be, of the Company or any of
its subsidiaries or any of the Agreements and
Instruments or any law, administrative regulation or
administrative or court order or decree.
(xx) Properties. Except as otherwise disclosed in
the Prospectus: (i) the Company and its subsidiaries
have good and marketable title (either in fee simple or
pursuant to a valid leasehold interest) to all
properties and assets described in the Prospectus as
being owned or leased, as the case may be, by them and
to all properties reflected in the Company's most
recent consolidated financial statements included in
the Prospectus, and neither the Company nor any of its
subsidiaries has received notice of any claim that has
been or may be asserted by anyone adverse to the rights
of the Company or any subsidiary with respect to any
such properties or assets (or any such lease) or
affecting or questioning the rights of the Company or
any such subsidiary to the continued ownership, lease,
possession or occupancy of such property or assets,
except for such claims that would not, singly or in the
aggregate, have a Material Adverse Effect; (ii) all
liens, charges, encumbrances, claims or restrictions on
or affecting the properties and assets of the Company
or any of its subsidiaries which are required to be
disclosed in the Registration Statement or the
Prospectus are disclosed therein, and all such liens,
charges, encumbrances, claims or restrictions which are
not disclosed in the Prospectus could not reasonably be
expected, singly or in the aggregate, to have a
Material Adverse Effect; (iii) no person or entity,
including, without limitation, any tenant under any of
the leases pursuant to which the Company or any of its
subsidiaries leases (as lessor) any of its properties
Page 11
(whether directly or indirectly through other
partnerships, joint ventures or otherwise) has an
option or right of first refusal or any other right to
purchase any of such properties, except for such
options, rights of first refusal or other rights to
purchase which, individually or in the aggregate, are
not material with respect to the Company and its
subsidiaries considered as one enterprise; (iv) to the
Company's best knowledge, each of the properties of the
Company or any of its subsidiaries has access to
public rights of way, either directly or through
insured easements, except where the failure to have
such access would not, singly or in the aggregate, have
a Material Adverse Effect; (v) to the Company's best
knowledge, each of the properties of the Company or any
of its subsidiaries is served by all public utilities
necessary for the current operations on such property
in sufficient quantities for such operations, except
where the failure to have such public utilities would
not, singly or in the aggregate, have a Material
Adverse Effect; (vi) to the best knowledge of the
Company, each of the properties of the Company or any
of its subsidiaries complies with all applicable codes
and zoning and subdivision laws and regulations, except
for such failures to comply which would not, either
individually or in the aggregate, have a Material
Adverse Effect; (vii) all of the leases under which the
Company or any of its subsidiaries holds or uses any
real property or improvements or any equipment relating
to such real property or improvements are in full force
and effect, except where the failure to be in full
force and effect would not, singly or in the aggregate,
have a Material Adverse Effect, and neither the Company
nor any of its subsidiaries is in default in the
payment of any amounts due under any such leases or in
any other default thereunder and the Company knows of
no event which, with the passage of time or the giving
of notice or both, would constitute a default under any
such lease, except such defaults that would not,
individually or in the aggregate, have a Material
Adverse Effect; (viii) to the best knowledge of the
Company, there is no pending or threatened
condemnation, zoning change, or other proceeding or
action that could in any manner affect the size of, use
of, improvements on, construction on or access to the
properties of the Company or any of its subsidiaries,
except such proceedings or actions that, either singly
or in the aggregate, would not have a Material Adverse
Effect; and (ix) neither the Company nor any of its
subsidiaries nor any lessee of any of the real property
or improvements of the Company or any of its
subsidiaries is in default in the payment of any
Page 12
amounts due or in any other default under any of the
leases pursuant to which the Company or any of its
subsidiaries leases (as lessor) any of its real
property or improvements (whether directly or
indirectly through partnerships, joint ventures or
otherwise), and the Company knows of no event which,
with the passage of time or the giving of notice or
both, would constitute such a default under any of such
leases, except such defaults as would not, individually
or in the aggregate, have a Material Adverse Effect.
(xxi) Insurance. With such exceptions as would
not, individually or in the aggregate, have a Material
Adverse Effect, the Company and its subsidiaries have
title insurance on all real property and improvements
described in the Prospectus as being owned or leased
under a ground lease, as the case may be, by them and
to all real property and improvements reflected in the
Company's most recent consolidated financial statements
included in the Prospectus in an amount at least equal
to the original cost of acquisition and the Company and
its subsidiaries are entitled to all benefits of the
insured thereunder, and each such property is insured
by extended coverage hazard and casualty insurance in
amounts and on such terms as are customarily carried by
lessors of properties similar to those owned by the
Company and its subsidiaries (in the markets in which
the Company's and subsidiaries' respective properties
are located), and the Company and its subsidiaries
carry comprehensive general liability insurance and
such other insurance as is customarily carried by
lessors of properties similar to those owned by the
Company and its subsidiaries in amounts and on such
terms as are customarily carried by lessors of
properties similar to those owned by the Company and
its subsidiaries (in the markets in which the Company's
and its subsidiaries' respective properties are
located) and the Company or one of its subsidiaries is
named as an additional insured on all policies required
under the leases for such properties.
(xxii) Environmental Matters. Except as otherwise
disclosed in the Prospectus: (i) all real property and
improvements owned or leased by the Company or any of
its subsidiaries, including, without limitation, the
Environment (as defined below) associated with such
real property and improvements, is free of any
Contaminant (as defined below), except such
Contaminants which, individually or in the aggregate,
would not have a Material Adverse Effect; (ii) neither
the Company, nor any of its subsidiaries nor any
Partnership has caused or suffered to exist or occur
Page 13
any Release (as defined below) of any Contaminant into
the Environment or any other condition that,
individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or could
result in any violation of any Environmental Laws (as
defined below) or constitute a health, safety or
environmental hazard to any person or property except
for such violations or hazards that could not
reasonably be expected to have a Material Adverse
Effect; (iii) neither the Company nor any of its
subsidiaries is aware of any notice from any
governmental body claiming any violation of any
Environmental Laws or requiring or calling attention to
the need for any work, repairs, construction,
alterations, removal or remedial action or installation
on or in connection with such real property or improve
ments, whether in connection with the presence of
asbestos-containing materials in such properties or
otherwise, except for such violations, work, repairs,
construction, alterations, removal or remedial actions
or installations as would not, individually or in the
aggregate, have a Material Adverse Effect; (iv) any
such work, repairs, construction, alterations, removal
or remedial action or installation, if required, would
not result in the incurrence of liabilities, which,
individually or in the aggregate, would have a Material
Adverse Effect; (v) neither the Company nor any of its
subsidiaries has caused or suffered to exist or occur
any condition on any of the properties or improvements
of the Company or any of its subsidiaries that could
give rise to the imposition of any Lien (as defined
below) under any Environmental Laws, except such Liens
which, individually or in the aggregate, would not have
a Material Adverse Effect; and (vi) to the Company's
best knowledge, no real property or improvements owned
or leased by the Company or any of its subsidiaries is
being used or has been used for manufacturing or for
any other operations that involve or involved the use,
handling, transportation, storage, treatment or
disposal of any Contaminant, where such operations
require or required permits or are or were otherwise
regulated pursuant to the Environmental Laws and where
such permits have not been or were not obtained or such
regulations are not being or were not complied with,
except in all instances where any failure to obtain a
permit or comply with any regulation could not
reasonably be expected, singly or in the aggregate, to
have a Material Adverse Effect. "Contaminant" means
any pollutant, hazardous substance, toxic substance,
hazardous waste, special waste, petroleum or
petroleum-derived substance or waste, asbestos or
asbestos-containing materials, PCBs, lead, pesticides
Page 14
or radioactive materials or any constituent of any such
substance or waste, including any such substance
identified or regulated under any Environmental Law.
"Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act,
42 U.S.C. 9601 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. 6901, et seq., the Clean Air
Act, 42 U.S.C. 7401, et seq., the Clean Water Act, 33
U.S.C. 1251, et seq., the Toxic Substances Control Act,
15 U.S.C. 2601, et seq., the Occupational Safety and
Health Act, 29 U.S.C. 651, et seq., and all other
federal, state and local laws, ordinances, regulations,
rules, orders, decisions, permits, and the like, which
are directed at the protection of human health or the
Environment. "Lien" means, with respect to any asset,
any mortgage, deed of trust, lien, pledge, encumbrance,
charge or security interest in or on such asset.
"Environment" means any surface water, drinking water,
ground water, land surface, subsurface strata, river
sediment, buildings, structures, and ambient, workplace
and indoor air. "Release" means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, emanating or
disposing of any Contaminant into the Environment,
including, without limitation, the abandonment or
discard of barrels, containers, tanks or other
receptacles containing or previously containing any
Contaminant or any release, emission or discharge as
those terms are defined or used in any Environmental
Law.
(xxiii) Qualification as a Real Estate Investment
Trust. The Company was and is organized in conformity
with the requirements for qualification and taxation as
a "real estate investment trust" under the Internal
Revenue Code of 1986, as amended (the "Code"); the
Company at all times has met and continues to meet all
the requirements of the Code for qualification and
taxation as a "real estate investment trust"; the
Company's method of operation will enable it to meet
the requirements for qualification and taxation as a
"real estate investment trust" under the Code; and the
Company is qualified as a "real estate investment
trust" under the Code and will be so qualified for the
taxable year in which sales of the Securities occur.
(xxiv) Registration Rights. There are no persons
with registration or other similar rights to have any
securities registered pursuant to the Registration
Statement or otherwise registered by the Company under
the 1933 Act, or included in the offering contemplated
hereby.
Page 15
(xxv) Tax Treatment of Certain Entities. Each of
R.I.C. Trade Center, Ltd., Empire Business Center,
Ltd., and Silverton Business Center, Ltd., each a
California limited partnership (the "Sub-Limited
Partnerships"), was, from the time of the ▇▇▇▇▇▇▇
dation through and including the time of its merger
into the Company, treated as a partnership (rather than
as an association taxable as a corporation) for federal
income tax purposes. The Company's ownership interests
in three properties held through tenancies in common
with unrelated third parties (which are the only
properties which, since the Consolidation, have been
held in tenancies in common with unrelated third
parties) have not been, since the Consolidation, and
will not be treated as ownership interests in
associations taxable as corporations for federal income
tax purposes. Realty Income Texas Properties, L.P., a
Delaware limited partnership, is not and has never been
treated as an association taxable as a corporation for
federal income tax purposes. Realty Income Texas
Properties, Inc., a Delaware corporation, is and has
been at all times treated as a "qualified REIT
subsidiary" within the meaning of Section 856(i) of the
Code.
(xxvi) Indenture. The Indenture has been duly
qualified under the 1939 Act. The Indenture has been
duly authorized, executed and delivered by the Company
and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance
with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or
affecting creditor's rights generally or by general
equitable principles.
(xxvii) Securities. The Securities have been duly
authorized by the Company and, at the Closing Time,
will have been duly executed by the Company and, when
authenticated in the manner provided for in the
Indenture and delivered against payment of the purchase
price therefor specified in this Agreement, will
constitute valid and binding obligations of the
Company, enforceable against the Company in accordance
with their terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or
affecting creditors' rights generally or by general
equitable principles, and will be entitled to the
benefits of the Indenture.
Page 16
(xxviii) Description of Indenture and Securities.
The Securities and the Indenture will conform in all
material respects to the respective statements relating
thereto contained in the Prospectus and will be in
substantially the respective forms filed or
incorporated by reference, as the case may be, as
exhibits to the Registration Statement.
(xxix) Ranking of Securities. The Securities rank
and will rank on a parity with all unsecured
indebtedness of the Company (other than subordinated
indebtedness of the Company) that is outstanding on the
date hereof or that may be incurred hereafter, and
senior to all subordinated indebtedness of the Company
that is outstanding on the date hereof or that may be
incurred hereafter.
(xxx) Prior Registration Statement. All of the
securities previously registered by the Company under
its registration statement on Form S-3 (No. 33-95374),
as amended, have been issued and sold.
(b) Officer's Certificates. Any certificate signed by any
officer of the Company and delivered to the Representative or to
counsel for the Underwriter shall be deemed a representation and
warranty by the Company to the Underwriter as to the matters
covered thereby.
SECTION 2. Sale and Delivery to Underwriter; Closing.
(a) Securities. On the basis of the representations and
warranties herein contained and subject to the terms and
conditions herein set forth, the Company agrees to sell to the
Underwriter and the Underwriter agrees to purchase from the
Company, at the price set forth in Schedule B, the aggregate
principal amount of Securities set forth in Schedule A opposite
the name of the Underwriter.
(b) Payment. Payment of the purchase price for, and
delivery of certificates for, the Securities shall be made at the
office of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-1925, or at such other place as
shall be agreed upon by the Representative and the Company, at
6:00 A.M. (California time) on the third (fourth, if the pricing
occurs after 4:30 P.M. New York City time, on any given day)
business day after the date hereof, or such other time not later
than ten business days after such date as shall be agreed upon by
the Representative and the Company (such time and date of payment
and delivery being herein called "Closing Time").
Payment shall be made to the Company by wire transfer of
immediately available funds to an account at a bank designated by
the Company, against delivery to the Representative for the
Page 17
account of the Underwriter of certificates for the Securities to
be purchased by it.
(c) Denominations; Registration. Certificates for the
Securities shall be in such denominations and registered in such
names as the Representative may request in writing at least one
full business day before the Closing Time. The certificates for
the Securities will be made available for examination and
packaging by the Representative in The City of New York not later
than 2:00 P.M. (New York City time) on the business day prior to
the Closing Time.
SECTION 3. Covenants of the Company. The Company covenants
with the Underwriter as follows:
(a) Compliance with Securities Regulations and
Commission Requests. The Company, subject to Section 3(b), will
notify the Representative immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the
Registration Statement or any Rule 462(b) Registration Statement
shall become effective or any supplement to the Prospectus, any
Term Sheet or any amended Prospectus shall have been filed, (ii)
of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration
Statement or any Rule 462(b) Registration Statement or any
amendment or supplement to the Prospectus or for additional
information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement or of any
order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such
purposes. The Company will promptly effect the filings necessary
pursuant to Rule 424(b) and, if applicable, will take such steps
as it deems necessary to ascertain promptly whether the form of
prospectus supplement, prospectus or term sheet transmitted for
filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly
file such prospectus supplement, prospectus or term sheet, as the
case may be. The Company will make every reasonable effort to
prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible
moment.
(b) Filing of Amendments. The Company will give the
Representative notice of its intention to file or prepare any
amendment to the Registration Statement (including any filing
under Rule 462(b)), any Term Sheet or any amendment, supplement
or revision to either the prospectus included in the Registration
Statement at the time it became effective or to the Prospectus,
whether pursuant to the 1933 Act, the 1934 Act or otherwise, ▇▇▇▇
▇▇▇▇ 18
furnish the Representative with copies of any such documents a
reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file or use any such document to
which the Representative or counsel for the Underwriter shall
object.
(c) Rule 434. If the Company uses Rule 434, it will
comply with the requirements of such Rule.
(d) Delivery of Registration Statements. The Company
has furnished or will deliver to the Representative and counsel
for the Underwriter, without charge, as many signed and conformed
copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated or
deemed to be incorporated by reference therein) as the
Representative and counsel for the Underwriter may reasonably
request. If applicable, the copies of the Registration Statement
and each amendment thereto furnished to the Underwriter will be
identical to the electronically transmitted copies thereof filed
with the Commission pursuant to ▇▇▇▇▇, if any, except to the
extent permitted by Regulation S-T.
(e) Delivery of Prospectuses. The Company has
delivered to the Underwriter, without charge, as many copies of
each preliminary prospectus as such Underwriter reasonably
requested, and the Company hereby consents to the use of such
copies for purposes permitted by the 1933 Act. The Company will
furnish to the Underwriter, without charge, during the period
when the Prospectus is required to be delivered under the 1933
Act or the 1934 Act, such number of copies of the Prospectus (as
amended or supplemented) as such Underwriter may reasonably
request. If applicable, the Prospectus and any amendments or
supplements thereto furnished to the Underwriter will be
identical to the electronically transmitted copies thereof filed
with the Commission pursuant to ▇▇▇▇▇, if any, except to the
extent permitted by Regulation S-T.
(f) Continued Compliance with Securities Laws. The
Company will comply with the 1933 Act and the 1933 Act
Regulations and the 1934 Act and the 1934 Act Regulations so as
to permit the completion of the distribution of the Securities as
contemplated in this Agreement and in the Prospectus. If at any
time when a prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities, any event
shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the Underwriter or for
the Company, to amend the Registration Statement or amend or
supplement the Prospectus in order that the Prospectus will not
include any untrue statements of a material fact or omit to state
a material fact necessary in order to make the statements therein
not misleading in the light of the circumstances existing at the
Page 19
time it is delivered to a purchaser, or if it shall be necessary,
in the opinion of any such counsel, at any such time to amend the
Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the 1933
Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or
omission or to make the Registration Statement or the Prospectus
comply with such requirements, and the Company will furnish to
the Underwriter such number of copies of such amendment or
supplement as the Underwriter may reasonably request.
(g) Blue Sky Qualifications. The Company will use its
best efforts, in cooperation with the Underwriter, to qualify the
Securities for offering and sale under the applicable securities
laws of such states and other jurisdictions of the United States
as the Representative may designate and to maintain such
qualifications in effect for a period of not less than one year
from the date hereof; provided, however, that the Company shall
not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or
to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the
Company will file such statements and reports as may be required
by the laws of such jurisdiction to continue such qualification
in effect for a period of not less than one year from the date
hereof.
(h) Rule 158. The Company will timely file such
reports pursuant to the 1934 Act as are necessary in order to
make generally available to its security holders as soon as
practicable an earning statement for the purposes of, and to
provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act.
(i) Use of Proceeds. The Company will use the net
proceeds received by it from the sale of the Securities in the
manner specified in the Prospectus under "Use of Proceeds."
(j) Reporting Requirements. The Company, during the
period when the Prospectus is required to be delivered under the
1933 Act or the 1934 Act, will file all documents required to be
filed with the Commission pursuant to the 1934 Act within the
time periods required by the 1934 Act and the 1934 Act
Regulations.
(k) Restriction on Sale of Securities. During the
period from the date of this Agreement through and including the
Closing Time, the Company will not, without the prior written
consent of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, (i) offer, pledge, sell,
Page 20
contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right
or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any Securities or substantially similar
securities of the Company or any securities convertible into, or
exercisable or exchangeable for, any of the foregoing, or file
any registration statement under the 1933 Act with respect to any
of the foregoing, or (ii) enter into any swap or any other
agreement or transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of
any Securities or substantially similar securities of the
Company, whether any such swap, agreement or transaction
described in clause (i) or (ii) above is to be settled by
delivery of Securities, other securities, in cash or otherwise,
other than the Securities sold to the Underwriter pursuant to
this Agreement.
SECTION 4. Payment of Expenses
(a) Expenses. The Company will pay all expenses incident to
the performance of its obligations under this Agreement,
including (i) the word processing, printing and filing of the
Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii)
the printing and delivery to the Underwriter of this Agreement,
the Indenture and such other documents as may be required in
connection with the offering, purchase, sale, issuance or
delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the
Underwriter, including any transfer taxes or other duties payable
upon the sale of the Securities to the Underwriter, (iv) the fees
and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(g)
hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriter in connection
therewith, (vi) the printing and delivery to the Underwriter of
copies of each preliminary prospectus, any Term Sheet and the
Prospectus and any amendments or supplements thereto, (vii) the
fees and expenses of any transfer agent or registrar for the
Securities, (viii) if required, the filing fees incident to, and
the reasonable fees and disbursements of counsel to the
Underwriter (such fees and disbursements not to exceed $10,000)
in connection with, the review, if any, by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms
of the sale of the Securities, (ix) the fees and expenses of the
Trustee, including, if required, the fees and disbursements of
counsel for the Trustee in connection with the Indenture and the
Securities, (x) any fees payable in connection with the rating of
the Securities or in connection with any listing of the
Securities on a securities exchange and (xi) and the fees and
Page 21
expenses of any depositary in connection with holding the
Securities in book-entry form.
(b) Termination of Agreement. If this Agreement is
terminated by the Representative in accordance with the
provisions of Section 5 or Section 9(a)(i) or 9(a)(v) hereof, the
Company shall reimburse the Underwriter for all of its out-of-
pocket expenses, including the reasonable fees and disbursements
of counsel for the Underwriter.
SECTION 5. Conditions of Underwriter's Obligations. The
obligations of the Underwriter hereunder are subject to the
accuracy of the representations and warranties of the Company
contained in Section 1 hereof or in certificates of any officer
of the Company or any subsidiary of the Company delivered
pursuant to the provisions hereof, to the performance by the
Company of its covenants and other obligations hereunder, and to
the following further conditions:
(a) Effectiveness of Registration Statement. The
Registration Statement, including any Rule 462(b)
Registration Statement, has become effective not later than
5:30 P.M. on the date hereof and at Closing Time no stop
order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement shall
have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request
on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction
of counsel to the Underwriter. If required by the 1933 Act
or the 1933 Act Regulations, the Prospectus shall have been
filed with the Commission in accordance with Rule 424(b)
and, if the Company has elected to rely upon Rule 434, a
Term Sheet shall have been filed with the Commission in
accordance with Rule 434 and Rule 424(b).
(b) Opinions of Counsel for Company. At Closing Time,
the Representative shall have received the favorable
opinions, dated as of Closing Time, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
counsel for the Company, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice
President, General Counsel and Secretary of the Company, and
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special Maryland counsel
to the Company, each in form and substance satisfactory to
counsel for the Underwriter, to the effect set forth in
Exhibits A, B and C hereto, respectively, and to such
further effect as counsel to the Underwriter may reasonably
request pursuant to Section 5(i).
(c) Opinion of Counsel for Underwriter. At Closing
Time, the Representative shall have received the favorable
opinion, dated as of Closing Time, of ▇▇▇▇▇ & Wood llp,
counsel for the Underwriter, with respect to the matters set
Page 22
forth in clauses (iii), (iv), (xii), (xiii), (xiv), (xv) and
the antepenultimate paragraph of Exhibit A and the first
sentence of clause (i) of Exhibit C. In giving such opinion
such counsel may rely, as to all matters arising under or
governed by the laws of the State of Maryland, upon the
opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ delivered
pursuant to Section 5(b) and, as to all matters governed by
the laws of other jurisdictions (other than the law of the
State of New York and the federal law of the United States)
upon the opinions of counsel satisfactory to you. Such
counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent
they deem proper, upon certificates of officers of the
Company and its subsidiaries and certificates of public
officials.
(d) Officers' Certificate. At Closing Time there shall
not have been, since the date hereof or since the respective
dates as of which information is given in the Prospectus,
any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary
course of business, and the Representative shall have
received a certificate of the Chairman or the President of
the Company and of the chief financial or chief accounting
officer of the Company, dated as of Closing Time, to the
effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 1
hereof are true and correct with the same force and effect
as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop
order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been
issued and no proceedings for that purpose have been
initiated or, to the best of their knowledge, threatened by
the Commission.
(e) Accountant's Comfort Letter. At the Closing Time,
the Representative shall have received from KPMG LLP a
letter dated as of the Closing Time, in form and substance
satisfactory to the Representative, together with signed or
reproduced copies of such letter for the Underwriter,
containing statements and information of the type ordinarily
included in accountants' "comfort letters" to Underwriter
with respect to the financial statements, and certain
financial information contained in the Registration
Statement and the Prospectus.
Page 23
(f) Rating Requirement. At the date of this Agreement
and at the Closing Time, the Securities shall be rated at
least Baa3 by ▇▇▇▇▇'▇ Investor's Service Inc., BBB- by
Standard & Poor's Corporation and BBB by Duff & ▇▇▇▇▇▇, and
the Company shall have delivered to the Representative a
letter, dated the Closing Time, from each such rating
agency, or other evidence satisfactory to the
Representative, confirming that the Securities have such
ratings.
(g) Letter Regarding Compliance with the Acquisition
Credit Agreement. Prior to the Closing Time, the
Representative shall have received a letter, executed by
Agent (as defined in the Acquisition Credit Agreement) to
the effect that the Agent has reviewed the preliminary
prospectus relating to the Securities or the Prospectus and
has determined that the agreements and covenants entered
into the connection with the Securities and the Indenture
are no more restrictive on the Company than the agreements
and covenants in the Acquisition Credit Agreement.
(h) Letter Regarding Waiver from Lock-Up. Prior to
the Closing Time, the Representative shall have received a
written waiver executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇
Lynch, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇")
to the effect that ▇▇▇▇▇▇▇ ▇▇▇▇▇ consents to offering hereby
and has waived the 90 day prohibition on the sale of debt
securities contained in the Purchase Agreement dated
October 23, 1998 among the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇ & Sons, Inc., PaineWebber Incorporated, ▇▇▇▇▇▇▇▇▇,
Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation, EVEREN Securities,
Inc., Sutro & Co. Incorporated and Wheat First Securities,
Inc., as representatives of the several underwriters named
in Schedule A thereto.
(i) Additional Documents. At Closing Time, counsel for
the Underwriter shall have been furnished with such
documents and opinions as they may reasonably require for
the purpose of enabling them to pass upon the issuance and
sale of the Securities as herein contemplated, or in order
to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company
in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and
substance to the Representative and counsel for the
Underwriter.
(j) Termination of Agreement. If any condition
specified in this Section shall not have been fulfilled when
and as required to be fulfilled, this Agreement may be
terminated by the Representative by notice to the Company at
Page 24
any time at or prior to Closing Time and such termination
shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 6
and 7 shall survive any such termination and remain in full
force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriter. The Company agrees to
indemnify and hold harmless the Underwriter and each person, if
any, who controls the Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any
amendment thereto), including the Rule 434 Information, if
applicable, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary
to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a
material fact included in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any governmental agency
or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, provided that
(subject to Section 6(d) below) any such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel
chosen by ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇), reasonably incurred
in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i) or
(ii) above;
Page 25
provided, however, that this indemnity agreement shall not apply
to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity
with written information furnished to the Company by the
Underwriter through Donaldson, Lufkfin & ▇▇▇▇▇▇▇▇ expressly for
use in the Registration Statement (or any amendment thereto) or
any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided further that this indemnity
agreement with respect to any preliminary prospectus shall not
inure to the benefit of the Underwriter, or any person
controlling the Underwriter, if a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any
such amendments or supplements thereto, but excluding documents
incorporated or deemed to be incorporated by reference therein)
was not sent or given by or on behalf of the Underwriter to such
person, if such is required by law, at or prior to the written
confirmation of the sale of such Securities to such person and if
the Prospectus (as so amended or supplemented, if applicable)
would have corrected the defect giving rise to such loss,
liability, claim, damage or expense, except that this proviso
shall not be applicable if such defect shall have been corrected
in a document which is incorporated or deemed to be incorporated
by reference in the Prospectus.
(b) Indemnification of Company, Directors and Officers.
The Underwriter agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or
any amendment thereto), including the Rule 434 Information, if
applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by
the Underwriter through ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ expressly
for use in the Registration Statement (or any amendment thereto)
or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified
party shall give notice as promptly as reasonably practicable to
each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have
Page 26
otherwise than on account of this indemnity agreement. In the
case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, and, in the case of parties
indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the
indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified
parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the
same general allegations or circumstances. No indemnifying party
shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii)
does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If
at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees
and expenses of counsel, such indemnifying party agrees that it
shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by
such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of
such settlement at least 45 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request
prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided
for in Section 6 hereof is for any reason unavailable to or
insufficient to hold harmless an indemnified party in respect of
any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and
expenses incurred by such indemnified party, as incurred, (i) in
Page 27
such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the
Underwriter on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the Underwriter on the other
hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one
hand and the Underwriter on the other hand in connection with the
offering of the Securities pursuant to this Agreement shall be
deemed to be in the same respective proportions as the total net
proceeds from the offering of the Securities pursuant to this
Agreement (before deducting expenses) received by the Company and
the total underwriting discount received by the Underwriter, in
each case as set forth on the cover of the Prospectus (or, if
Rule 434 is used, the corresponding location on the Term Sheet)
bear to the aggregate initial public offering price of the
Securities as set forth on such cover (or corresponding location
on the Term Sheet, as the case may be).
The relative fault of the Company on the one hand and the
Underwriter on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the
Company or by the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriter agree that it would not be
just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above
in this Section 7 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or
any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon
any such untrue or alleged untrue statement or omission or
alleged omission.
Notwithstanding the provisions of this Section 7, the
Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price at which the
Page 28
Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which the
Underwriter has otherwise been required to pay by reason of any
such untrue or alleged untrue statement or omission or alleged
omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who
controls the Underwriter within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights
to contribution as the Underwriter, and each director of the
Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the
Company.
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements
contained in this Agreement or in certificates of officers of the
Company submitted pursuant hereto shall remain operative and in
full force and effect, regardless of any investigation made by or
on behalf of the Underwriter or controlling person, or by or on
behalf of the Company, and shall survive delivery of the
Securities to the Underwriter.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representative may terminate
this Agreement, by notice to the Company, at any time at or prior
to Closing Time (i) if there has been, since the time of
execution of this Agreement or since the respective dates as of
which information is given in the Prospectus, any material
adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the
financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development
involving a prospective change in national or international
political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the
Representative, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if
trading in any securities of the Company has been suspended or
limited by the Commission, the New York Stock Exchange or the
Page 29
Nasdaq National Market, or if trading generally on the American
Stock Exchange or the New York Stock Exchange or in the Nasdaq
National Market has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such
system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or
(iv) if a banking moratorium has been declared by either Federal,
California or New York authorities, or (v) if since the date of
this Agreement, there has occurred a downgrading in the rating
assigned to the Securities or any of the Company's other debt
securities by any nationally recognized securities rating agency,
or such securities rating agency has publicly announced that it
has under surveillance or review, with possible negative
implications or without indicating the direction of the possible
change, its rating of the Securities or any of the Company's
other debt securities.
(b) Liabilities. If this Agreement is terminated pursuant
to this Section, such termination shall be without liability of
any party to any other party except as provided in Section 4
hereof, and provided further that Sections 6 and 7 shall survive
such termination and remain in full force and effect.
SECTION 10. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed
to the Representative at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, attention of ▇▇▇▇ ▇▇▇▇▇▇▇▇; and notices to the Company
shall be directed to it at Realty Income Corporation, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇▇▇ of
Legal Department.
SECTION 11. Parties. This Agreement shall inure to the
benefit of and be binding upon the Underwriter and the Company
and their respective successors. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Underwriter and the
Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and
7 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriter and the Company and
their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation. No
purchaser of Securities from the Underwriter shall be deemed to
be a successor by reason merely of such purchase.
Page 30
SECTION 12. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN SAID STATE. EXCEPT AS OTHERWISE SET FORTH HEREIN,
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 13. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction
hereof.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a
counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement between the
Underwriter and the Company in accordance with its terms.
Very truly yours,
REALTY INCOME CORPORATION
By:
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President,
General Counsel and
Secretary
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
By:
-------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
As Representative of the Underwriter named in
Schedule A hereto.
SCHEDULE A
Name of Underwriter Aggregate
------------------- Principal
Amount of
Securities
----------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation $20,000,000
===========
Page 31
SCHEDULE B
Price Schedule
--------------
1. The initial public offering price for the Securities
shall be 98.757% of the principal amount thereof, plus accrued
interest from January 21, 1999.
2. The underwriting discount for the Securities shall be
0.65% of the principal amount thereof. Accordingly, the purchase
price to be paid for the Securities by the Underwriter shall be
98.107% of the principal amount thereof.
Page 32
Exhibit A
FORM OF OPINION OF ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) Based solely on certificates from public
officials, the Company is duly qualified as a foreign corporation
to transact business and is in good standing in the State of
California.
(ii) None of the outstanding shares of stock of
the Company was issued, to the best of our knowledge and
information, in violation of preemptive rights or other similar
rights arising under any agreement or instrument to which the
Company or any of its subsidiaries is a party.
(iii) Each of the Registration Statement and any
Rule 462(b) Registration Statement has been declared effective
under the 1933 Act; to the best of our knowledge and information,
the Prospectus has been filed pursuant to Rule 424(b) under the
1933 Act in the manner and within the time period required by
Rule 424(b); and, to the best of our knowledge and information,
no stop order suspending the effectiveness of either the
Registration Statement or any Rule 462(b) Registration Statement
has been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission.
(iv) Each of the Registration Statement, any
Rule 462(b) Registration Statement and the Prospectus (in each
case excluding the documents incorporated or deemed to be
incorporated by reference therein and the financial statements,
supporting schedules and other financial data included or
incorporated by reference therein and excluding any Statement of
Eligibility on Form T-1 (a "Form T-1"), as to which no opinion
need be rendered), as of their respective effective or issue
dates, complied as to form in all material respects with the
applicable requirements of the 1933 Act and the 1933 Act
Regulations.
(v) The documents incorporated or deemed to be
incorporated by reference in the Prospectus (other than the
financial statements, supporting schedules and other financial
data therein, as to which no opinion need be rendered), when they
were filed with the Commission, complied as to form in all
material respects with the applicable requirements of the 1934
Act and the 1934 Act Regulations.
(vi) The information in the Prospectus under
"Certain Federal Income Tax Considerations" and the information
Page 33
in the Company's 1997 Form 10-K under "Business--Other Items--
Taxation of the Company" and "Business--Other Items--Effect of
Distribution Requirements," in each case to the extent that it
constitutes matters of law, summaries of legal matters or legal
conclusions, has been reviewed by us and is correct in all
material respects.
(vii) No authorization, approval, consent or
order of any federal, New York or California state governmental
authority or agency (other than under the 1933 Act, the 1933 Act
Regulations, the 1939 Act and 1939 Act Regulations, which have
been obtained, or as may be required under the securities or blue
sky laws of the various states, as to which we express no
opinion) is required in connection with the due authorization,
execution or delivery of the Purchase Agreement, the Indenture or
the Securities or for the offering, issuance or sale of the
Securities;
(viii) The execution, delivery and performance on
or prior to the date hereof of the Purchase Agreement, the
Indenture and the Securities by the Company (including the
issuance and sale of the Securities to the Underwriter and the
use of the proceeds from the sale of the Securities as described
in the Prospectus under the caption "Use of Proceeds") will not,
whether with or without the giving of notice or lapse of time or
both, constitute a breach or violation of, or default or
Repayment Event under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, the
Acquisition Credit Agreement, or the indenture dated as of May 6,
1997 between the Company and the Bank of New York, as trustee
(the "1997 Indenture"), or any securities outstanding under the
1997 Indenture, nor to the best of our knowledge and information,
any applicable provision of any federal, State of New York or
State of California law, statute, administrative regulation or
administrative or court decree applicable to the Company. The
execution, delivery and performance on or prior to the date
hereof of the Purchase Agreement and the Securities by the
Company (including the issuance and sale of the Securities to the
Underwriter and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use
of Proceeds") will not, whether with or without the giving of
notice or lapse of time or both, constitute a breach or violation
of, or default or Repayment Event under, or result in the
creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of its subsidiaries
pursuant to the Indenture or any securities outstanding under the
Indenture.
(ix) The Company is not an "investment company"
as such term is defined in the 1940 Act.
Page 34
(x) Commencing with the Company's taxable year
ended December 31, 1994, the Company has been organized in
conformity with the requirements for qualification and taxation
as a real estate investment trust under the Code and its proposed
method of operation will enable the Company to meet the
requirements for qualification and taxation as a real estate
investment trust under the Code.
(xi) Realty Income Texas Properties, L.P., a
Delaware limited partnership, is not and has never been treated
as an association taxable as a corporation for federal income tax
purposes. Realty Income Texas Properties, Inc., a Delaware
corporation, is and has, at all times during its existence, been
treated as a "qualified REIT subsidiary" within the meaning of
Section 856(i) of the Code.
(xii) Assuming the due authorization, execution
and delivery of the Indenture by the Company under the laws of
the State of Maryland and the due authorization, execution and
delivery of the Indenture by the Trustee, the Indenture
constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by
general equitable principles.
(xiii) Assuming the due authorization and
execution of the Securities by the Company under the laws of the
State of Maryland, the Securities, when authenticated by the
Trustee in the manner provided in the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the
Trustee) and delivered against payment of the purchase price
therefor specified in the Purchase Agreement, will constitute
valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, and will be entitled
to the benefits of the Indenture, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting
creditor's rights generally or by general equitable principles,
and will be entitled to the benefits of the Indenture.
(xiv) The Indenture has been qualified under the
1939 Act.
(xv) The Securities and the Indenture conform
in all material respects to the descriptions thereof contained in
the Prospectus.
Although we are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the
Page 35
Prospectus and have not made any independent judgment, check or
verification thereof (except with respect to the opinion set
forth in paragraphs (vi), (x), (xi), and (xv) hereof), we have,
however, participated in conferences with certain officers and
other representatives of the Company, representatives of KPMG LLP
and your representatives at which the Registration Statement, any
Rule 462(b) Registration Statement and the Prospectus (including,
in each case, the documents incorporated or deemed to be
incorporated by reference therein) and any amendments or
supplements to any of the foregoing and related matters were
discussed, and in the course of such conferences (relying in
connection with questions of materiality on representations of
factual matters of officers and other representatives of the
Company), nothing has come to our attention which has led us to
believe that the Registration Statement, any Rule 462(b)
Registration Statement or any amendment thereto (except for the
financial statements, supporting schedules and other financial
data included therein and any Form T-1, as to which we express no
belief), as of the time the Registration Statement, any such Rule
462(b) Registration Statement or any such post-effective or other
amendment thereto became effective, contained an untrue statement
of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus or any amendment or
supplement thereto (except for the financial statements,
supporting schedules and other financial data included therein,
as to which we express no belief), as of January 15, 1999 or as
of the Closing Time, contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely insofar as
such opinion involves factual matters, to the extent they deem
proper, on certificates of responsible officers of the Company
and public officials. Such opinion shall not state that it is to
be governed or qualified by, or that it is otherwise subject to,
any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord
of the ABA Section of Business Law (1991). Such opinion shall
state that, insofar as it concerns the Indenture and the
Securities, such counsel has assumed that the Indenture and the
Securities are governed by the laws of the State of California.
The matters set forth in (vi), (x) and (xi) above may be
covered in one or more separate legal opinions, which may be
subject to such assumptions, limitations and qualifications as
shall be satisfactory to counsel for the Underwriter. In
particular, the opinions set forth in paragraphs (vi), (x) and
(xi) above (the "Tax Opinions") may be conditioned upon certain
representations made by the Company as to factual matters through
a certificate of an officer of the Company (the "Officer's
Page 36
Certificate"). In addition, the Tax Opinions may be based upon
the factual representations of the Company concerning its
business and properties as set forth in the Registration
Statement and Prospectus. The Tax Opinions may state that they
relate only to the federal income tax laws of the United States
and such counsel need not express any opinion with respect to the
applicability thereto, or the effect thereon, of other federal
laws, the laws of any state or other jurisdiction or as to any
matters of municipal law or the laws of any other local agencies
within any state. The Tax Opinions may state that they are based
on various statutory provisions, regulations promulgated
thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all
of which are subject to change either prospectively or
retroactively, that any such change may affect the conclusions
stated therein, and that any variation or difference in the facts
from those set forth in the Registration Statement, the
Prospectus or the Officer's Certificate may affect the
conclusions stated therein. Moreover, the Tax Opinions may state
that the Company's qualification and taxation as a real estate
investment trust depends upon the Company's ability to meet
(through actual annual operating results, distribution levels and
diversity of stock ownership) the various qualification tests
imposed under the Code, the results of which have not been and
will not be reviewed by such counsel, and, accordingly, no
assurance can be given that the actual results of the Company's
operation for any one taxable year will satisfy such
requirements.
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Exhibit B
FORM OF OPINION OF ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) The Company is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not have a Material Adverse Effect.
(ii) The only subsidiaries of the Company are Realty
Income Texas Properties, L.P., a Delaware limited partnership and
Realty Income Texas Properties, Inc., a Delaware corporation.
Each of Realty Income Texas Properties, L.P. and Realty Income
Texas Properties, Inc. has been duly organized and is validly
existing as a partnership or corporation, as the case may be, in
good standing under the laws of the State of Delaware, has power
and authority as a partnership or corporation, as the case may
be, to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and each such
subsidiary is duly qualified as a foreign partnership or corpora-
tion, as the case may be, to transact business and is in good
standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where failure to so
qualify or to be in good standing would not result in a Material
Adverse Effect; and all of the issued and outstanding partnership
interests and shares of capital stock, as the case may be, of
each of Realty Income Texas Properties, L.P. and Realty Income
Texas Properties, Inc. have been duly authorized (if applicable)
and validly issued, are fully paid and non-assessable (except to
the extent that the general partners of Realty Income Texas
Properties, L.P. may be liable for the obligations of such
partnership) and, to the best of my knowledge and information,
are owned by the Company, directly or through subsidiaries, free
and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(iii) The information in the Company's annual report on
Form 10-K for the fiscal year ended December 31, 1997 under
"Business--Other Items--Environmental Liabilities," to the extent
that it constitutes matters of law, summaries of legal matters,
instruments or agreements or legal proceedings, or legal
conclusions, has been reviewed by me and is correct in all
material respects.
(iv) To the best of my knowledge and information, there
is not pending or threatened any action, suit, proceeding,
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inquiry or investigation to which the Company or any subsidiary
is a party, or to which the property of the Company or any
subsidiary is subject, before or brought by any court or
governmental agency or authority, which could reasonably be
expected to result in a Material Adverse Effect, or which could
reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the Purchase
Agreement or the performance by the Company of its obligations
under the Purchase Agreement, the Indenture or the Securities.
(v) All descriptions in the Prospectus of leases,
contracts and other documents to which the Company or any
subsidiary is a party are accurate in all material respects.
(vi) To the best of my knowledge and information, there
are no franchises, contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments required to be
described in the Registration Statement or to be filed as
exhibits thereto other than those described therein or filed or
incorporated by reference as exhibits thereto, and the
descriptions thereof or references thereto are correct in all
material respects.
(vii) To the best of my knowledge and information, neither
the Company nor any of its subsidiaries is in violation of its
charter or bylaws or its partnership agreement, as applicable,
and no default by the Company or any of its subsidiaries exists
in the due performance or observance of any material obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated
by reference as an exhibit to the Registration Statement.
(viii) The execution, delivery and performance of the
Purchase Agreement, the Indenture and the Securities by the
Company (including the issuance and sale of the Securities to the
Underwriter and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use
of Proceeds") and compliance by the Company with its obligations
under the Purchase Agreement, the Indenture and the Securities
will not, whether with or without the giving of notice or lapse
of time or both, constitute a breach or violation of, or default
or Repayment Event under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, any contract,
indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or any other agreement or instrument, known to me, to
which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, except for such breaches, violations or defaults or
Page 39
liens, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect, nor will
such action result in any violation of the provisions of the
charter or bylaws of the Company or the partnership agreement or
charter or bylaws, as the case may be, of any of its
subsidiaries, or, to the best of my knowledge and information,
any applicable provision of any law, statute or administrative
regulation of the State of California, or, to the best of my
knowledge and information, any judgment, order, writ or decree of
any government instrumentality or court, domestic or foreign,
applicable to the Company or any of its subsidiaries or any of
their respective properties, assets or operations.
In rendering such opinion, such counsel may rely as to
matters of fact (but not as to legal conclusions), to the extent
he deems proper, on certificates of responsible officers of the
Company and public officials. Such opinion shall not state that
it is to be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991).
Page 40
Exhibit C
FORM OF OPINION OF ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) The Company has been duly incorporated and
is validly existing under the laws of the State of Maryland and
is in good standing with the State Department of Assessments and
Taxation of Maryland. The Company has the corporate power to
own, lease and operate its current properties and to conduct its
business as described in the Prospectus and to enter into and
perform its obligations under the Purchase Agreement, the
Indenture and the Securities.
(ii) The authorized, issued and outstanding
stock of the Company is as set forth in the line items "Preferred
Stock" and "Common Stock" under the caption "Consolidated Balance
Sheets" in the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998 (except for subsequent issuances
pursuant to employee benefit plans or the exercise of options
referred to in the Prospectus and the forfeiture of 82 shares of
Common Stock by a terminated employee). The shares of issued and
outstanding Common Stock (the "Outstanding Shares") have been
duly authorized and validly issued and are fully paid and non-
assessable and none of the Outstanding Shares was issued in
violation of preemptive rights arising under the Maryland General
Corporation Law (the "MGCL") or the charter or bylaws of the
Company.
(iii) The Purchase Agreement and the Indenture
have been duly authorized, executed and delivered by the Company.
(iv) No authorization, approval, consent or
order of any Maryland state government authority or agency (other
than as may be required under Maryland securities or blue sky
laws) is required in connection with the due authorization,
execution or delivery of the Purchase Agreement, the Indenture or
the Securities or for the offering, issuance or sale of the
Securities.
(v) The execution, delivery and performance of
the Purchase Agreement, the Indenture and the Securities by the
Company (including the issuance and sale of the Securities to the
Underwriter and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use
of Proceeds") do not result in any violation of the provisions of
the charter or bylaws or, so far as is known to such counsel, any
applicable provision of any Maryland law, statute,
Page 41
administrative regulation or administrative or court decree
applicable to the Company.
(vi) The Securities have been duly authorized
and executed by the Company and, when duly authenticated by the
Trustee in the manner provided in the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the
Trustee) and delivered against payment of the purchase price
therefor specified in the Purchase Agreement.
(vii) In rendering such opinion, such counsel
shall state that each of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ and Brown & Wood LLP,
in rendering their opinions pursuant to the Purchase Agreement,
may rely upon such opinion of special Maryland counsel as to all
matters arising under or governed by the laws of the State of
Maryland. In addition, in rendering such opinion, such counsel
may rely insofar as such opinion involves factual matters, to the
extent they deem proper, on certificates of responsible officers
of the Company and public officials. Such opinion shall not
state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
Page 42
