United States
Securities and Exchange Commission

Washington, D.C. 20549

 

Form 8-K

 

Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of report:  January 31, 2012

 

REALTY INCOME CORPORATION

(Exact name of registrant as specified in its charter)

 

Maryland

 

1-13374

 

33-0580106

(State or Other Jurisdiction of
Incorporation or Organization)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

600 La Terraza Boulevard, Escondido, California 92025-3873
(Address of principal executive offices)

 

(760) 741-2111
(Registrant’s telephone number, including area code)

 

N/A
(former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 8.01              Other Events

 

On January 31, 2012, Realty Income Corporation (the “Company”) entered into a purchase agreement with Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and UBS Securities LLC, as representatives of the underwriters listed therein (the “Underwriters”), pursuant to which the Company agreed to issue and sell 13,000,000 shares of the Company’s 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Class F Preferred Stock”), plus up to an additional 1,950,000 shares of Class F Preferred Stock if the Underwriters exercise their overallotment option in full.

 

The Class F Preferred Stock will not be redeemable by the Company before February 15, 2017, except under circumstances intended to preserve the Company’s status as a real estate investment trust for federal and/or state income tax purposes and except as described below upon the occurrence of a change of control (as defined). On and after February 15, 2017, the Company may, at its option, redeem shares of the Class F Preferred Stock, in whole or from time to time in part, at a redemption price of $25.00 per share plus, subject to exceptions, any accrued and unpaid dividends to the date fixed for redemption. In addition, upon the occurrence of a change of control, the Company may, at its option, redeem shares of the Class F Preferred Stock, in whole or in part, within 120 days after the first date on which such change of control occurred, at a redemption price of $25.00 per share plus, subject to exceptions, any accrued and unpaid dividends to the date fixed for redemption. Upon the occurrence of a change of control, each holder of Class F Preferred Stock will have the right (unless, prior to the change of control conversion date (as defined), the Company has provided or provides notice of its election to redeem some or all of the shares of Class F Preferred Stock as provided in either of the two preceding sentences, in which case such holder will have the right only with respect to shares of Class F Preferred Stock that are not called for redemption) to convert some or all of the shares of Class F Preferred Stock into the Company’s common stock (or, in specified circumstances, certain alternative consideration). The shares of Class F Preferred Stock have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company redeems or otherwise repurchases them or they become convertible and are converted into common stock (or, if applicable, alternative consideration).

 

Item 9.01                                Financial Statements and Exhibits

 

(d)  Exhibits

 

1.1

 

 

Purchase Agreement, dated January 31, 2012, between the Underwriters and the Company.

3.1

 

 

Articles Supplementary to the Articles of Incorporation of the Company classifying and designating the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock.

4.1

 

 

Specimen Stock Certificate representing the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock.

5.1

 

 

Opinion of Venable LLP.

23.1

 

 

Consent of Venable LLP (contained in the opinion filed as Exhibit 5.1 hereto).

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: February 3, 2012

REALTY INCOME CORPORATION

 

 

 

 

By:

/s/ Michael R. Pfeiffer

 

 

Michael R. Pfeiffer

 

 

Executive Vice President, General Counsel and Secretary

 

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INDEX TO EXHIBITS

 

Exhibit No.

 

Description

 

 

 

1.1

 

 

Purchase Agreement, dated January 31, 2012, between the Underwriters and the Company.

3.1

 

 

Articles Supplementary to the Articles of Incorporation of the Company classifying and designating the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock.

4.1

 

 

Specimen Stock Certificate representing the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock.

5.1

 

 

Opinion of Venable LLP.

23.1

 

 

Consent of Venable LLP (contained in the opinion filed as Exhibit 5.1 hereto).

 

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Exhibit 1.1

 

REALTY INCOME CORPORATION
(a Maryland Corporation)

 

13,000,000 Shares of 6.625% Monthly Income Class F Cumulative Redeemable

Preferred Stock

(Par Value $0.01 Per Share)

(Liquidation Preference $25.00 Per Share)

 

 

PURCHASE AGREEMENT

 

 

January 31, 2012

 



 

Table of Contents

 

 

 

Page

 

 

 

SECTION 1.

REPRESENTATIONS AND WARRANTIES

3

 

 

 

SECTION 2.

SALE AND DELIVERY TO THE UNDERWRITERS; CLOSING

17

 

 

 

SECTION 3.

COVENANTS OF THE COMPANY

18

 

 

 

SECTION 4.

PAYMENT OF EXPENSES

23

 

 

 

SECTION 5.

CONDITIONS OF UNDERWRITERS’ OBLIGATIONS

24

 

 

 

SECTION 6.

INDEMNIFICATION

27

 

 

 

SECTION 7.

CONTRIBUTION

29

 

 

 

SECTION 8.

REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY

30

 

 

 

SECTION 9.

TERMINATION OF AGREEMENT

30

 

 

 

SECTION 10.

DEFAULT BY ONE OR MORE OF THE UNDERWRITERS

31

 

 

 

SECTION 11.

NOTICES

32

 

 

 

SECTION 12.

PARTIES

32

 

 

 

SECTION 13.

NO ADVISORY OR FIDUCIARY RESPONSIBILITY; TAX DISCLOSURE

32

 

 

 

SECTION 14.

INTEGRATION

33

 

 

 

SECTION 15.

GOVERNING LAW AND TIME

33

 

 

 

SECTION 16.

EFFECT OF HEADINGS AND TABLE OF CONTENTS; COUNTERPARTS

33

 

 

Schedule A — List of Underwriters

Sch A-1

Schedule B — Pricing Schedule

Sch B-1

Schedule C — Pricing Related Information

Sch C-1

Schedule D — Issuer General Use Free Writing Prospectuses

Sch D-1

Schedule E — Pricing Term Sheet

Sch E-1

Schedule F — Subsidiaries of the Company

Sch F-1

Exhibit A — Form of Opinion of Latham & Watkins LLP

A-1

Exhibit B — Form of Opinion of Michael R. Pfeiffer

B-1

Exhibit C — Form of Opinion of Venable LLP

C-1

 

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REALTY INCOME CORPORATION
(a Maryland corporation)

 

13,000,000 Shares of

6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock
(Par Value $0.01 Per Share)

(Liquidation Preference $25.00 Per Share)

 

PURCHASE AGREEMENT

 

January 31, 2012

 

Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

 

Morgan Stanley & Co. LLC
1585 Broadway

New York, New York 10036

 

RBC Capital Markets, LLC

200 Vesey Street

Three World Financial Center, 8 th  Floor

New York, New York 10281

 

UBS Securities LLC

677 Washington Blvd.

Stamford, Connecticut 06901

 

As Representatives of the several Underwriters

 

Ladies and Gentlemen:

 

Realty Income Corporation, a Maryland corporation (the “Company”), confirms its agreement with the underwriters named in Schedule A hereto (the “Underwriters” which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Citigroup Global Markets Inc. (“Citigroup”), Morgan Stanley & Co. LLC (“Morgan Stanley”), RBC Capital Markets, LLC (“RBC”) and UBS Securities LLC (“UBS”) are acting as representatives (Citigroup, Morgan Stanley, RBC and UBS, in such capacities, the “Representatives”), with respect to the sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of shares of the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock, par value $0.01 per share, of the Company (the “Class F Preferred Stock”) set forth in said Schedule A and with respect to the grant by the Company to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of 1,950,000 additional shares of Class F Preferred Stock to cover over-allotments, if any.  The aforesaid 13,000,000 shares of

 



 

Class F Preferred Stock (the “Initial Securities”) to be purchased by the Underwriters and all or any part of the 1,950,000 shares of Class F Preferred Stock subject to the option described in Section 2(b) hereof (the “Option Securities”) are hereinafter called, collectively, the “Securities.”  The terms of the Securities will be set forth in articles supplementary (the “Articles Supplementary”) to be filed by the Company with the State Department of Assessments and Taxation of Maryland (the “SDAT”).

 

The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representatives deem advisable after this Agreement has been executed and delivered.

 

The Company has filed with the Securities and Exchange Commission (the “Commission”) an automatic shelf registration statement on Form S-3 (No. 333-158169) (the “Current Registration Statement”) for the registration of shares of its common stock, par value $0.01 per share (the “Common Stock”), shares of its preferred stock (including the Securities), par value $0.01 per share (the “Preferred Stock”), and its debt securities under the Securities Act of 1933, as amended (the “1933 Act”), including the related preliminary prospectus or prospectuses.  Promptly after execution and delivery of this Agreement, the Company will prepare and file a final prospectus supplement and the Base Prospectus (as hereinafter defined) in accordance with the provisions of Rule 430B (“Rule 430B”) of the rules and regulations of the Commission under the 1933 Act (the “1933 Act Regulations”) and paragraph (b) of Rule 424 (“Rule 424(b)”) of the 1933 Act Regulations.  Any information included in such final prospectus supplement or the Base Prospectus that was omitted from the Current Registration Statement at the time it became effective but that is deemed to be part of and included in the Current Registration Statement pursuant to paragraph (f) of Rule 430B under the 1933 Act Regulations is referred to as the “Rule 430B Information.”  Each prospectus, together with the related prospectus supplement, relating to the Securities that omitted the Rule 430B Information or that was captioned “Subject to Completion” or “Preliminary” (or a similar caption) that was used after the date on which the Current Registration Statement first became effective and prior to the execution and delivery of this Agreement is herein called, together with the documents incorporated or deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, a “preliminary prospectus” and all references herein to any “preliminary prospectus” shall be deemed to include the Statutory Prospectus (as hereinafter defined).  The Current Registration Statement, at any given time, including the amendments thereto at such time, the exhibits and any schedules thereto at such time, if any, and documents incorporated and deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act at such time, and the documents and information (including, without limitation, any 430B Information) otherwise deemed to be a part thereof or included therein by the 1933 Act Regulations at such time, are hereinafter called, collectively, the “Registration Statement.”  The prospectus dated March 24, 2009 (the “Base Prospectus”) and the final prospectus supplement relating to the offering of the Securities, including the documents incorporated and deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the form first furnished (electronically or otherwise) to the Underwriters for use in connection with the offering of the Securities (whether to meet the requests of purchasers pursuant to Rule 173 under the 1933 Act Regulations or otherwise) or, if not furnished to the Underwriters, in the form first filed by the Company pursuant to Rule 424(b), are herein called, collectively, the “Prospectus.”  For purposes of this Agreement, all references to the Registration Statement, any

 

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preliminary prospectus, the Statutory Prospectus, the Prospectus or any Issuer Free Writing Prospectus (as hereinafter defined) or any amendment or supplement to any of the foregoing shall be deemed to include any copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”).

 

All references in this Agreement to financial statements and schedules and other information which is “described,” “disclosed,” “contained,” “included” or “stated” in the Registration Statement, any preliminary prospectus, the Statutory Prospectus or the Prospectus (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated or deemed to be incorporated by reference in, or otherwise deemed by the 1933 Act Regulations (including, without limitation, Rule 430B(f) of the 1933 Act Regulations) to be a part of or included in, the Registration Statement, such preliminary prospectus, the Statutory 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, the Statutory 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, the Statutory 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.

 

SECTION 1.  Representations and Warranties .

 

(a)           Representations and Warranties by the Company.  The Company represents and warrants to each Underwriter as of the date hereof, as of the Applicable Time referred to in Section 1(a)(i) hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees with each Underwriter, as follows:

 

(i)         Compliance with Registration Requirements .  (A) At the time that the Registration Statement was originally filed, (B) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the 1933 Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the 1934 Act or form of prospectus), (C) at the time the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163(c) of the 1933 Act Regulations) made any offer relating to the Securities in reliance on the exemption of Rule 163 of the 1933 Act Regulations and (D) at the date hereof, the Company (x) was and is a “well-known seasoned issuer” as defined in Rule 405 of the 1933 Act Regulations (“Rule 405”) and (y) was not and is not an “ineligible issuer” as defined in Rule 405.   The Registration Statement is an “automatic shelf registration statement,” as defined in Rule 405, and the Securities, since their registration on the Registration Statement, have been and remain eligible for registration by the Company on an “automatic shelf registration statement” as defined in Rule 405.  The Company has not received from the Commission any notice pursuant to

 

3



 

Rule 401(g)(2) of the 1933 Act Regulations (“Rule 401(g)(2)”) objecting to the use of the automatic shelf registration statement form.  At the earliest time after the original filing of the Registration Statement that the Company or another offering participant (with respect to the offering contemplated hereby) made a bona fide offer (within the meaning of Rule 164(h)(2) of the 1933 Act Regulations) of the Securities, the Company was not an “ineligible issuer,” as defined in Rule 405.

 

The Registration Statement became effective upon filing under Rule 462(e) of the 1933 Act Regulations (“Rule 462(e)”) on March 24, 2009, and any post-effective amendment thereto also became effective upon filing under Rule 462(e).  No stop order suspending the effectiveness of the 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 contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with.

 

Any offer that was a written communication relating to the Securities made by the Company or any person acting on its behalf (within the meaning, for this paragraph only, of Rule 163(c) of the 1933 Act Regulations) prior to the time that the Registration Statement was originally filed has been filed with the Commission in accordance with the exemption provided by Rule 163 of the 1933 Act Regulations (“Rule 163”) and otherwise complied with the requirements of Rule 163, including without limitation the legending requirement, to qualify such offer for the exemption from Section 5(c) of the 1933 Act provided by Rule 163.

 

At the respective times the Registration Statement originally became effective and any amendment thereto became effective, at the time the Company’s most recent Annual Report on Form 10-K was filed with the Commission, at each “new effective date” with respect to the Underwriters pursuant to Rule 430B(f)(2) of the 1933 Act Regulations, and at the Closing Time (and, if any Option Securities are purchased, at each Date of Delivery), the Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the applicable requirements of the 1933 Act, the 1933 Act Regulations, the Trust Indenture Act of 1939, as amended (the “1939 Act”), and the rules and regulations of the Commission under the 1939 Act (the “1939 Act Regulations”), and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and, at the date hereof and at the Closing Time (and, if any Option Securities are purchased, at each Date of Delivery), neither the Prospectus nor any amendments or supplements thereto contained or will contain any untrue statement of a material fact or 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.

 

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 Underwriters for use in connection with this offering

 

4



 

was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T of the Commission.

 

As of the Applicable Time, neither (x) all Issuer General Use Free Writing Prospectuses (as defined below) issued at or prior to the Applicable Time and the Statutory Prospectus and the information included on Schedule C hereto, considered together (collectively, the “General Disclosure Package”), nor (y) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package, included or will include any untrue statement of a material fact or omitted or will omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

As used in this subsection and elsewhere in this Agreement:

 

“Applicable Time” means  12:30 P.M. (New York time) on January 31, 2012 or such other time as agreed by the Company and the Representatives.

 

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), relating to the Securities that (i) is required to be filed with the Commission by the Company, (ii) is a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

 

“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its being specified in Schedule D hereto.

 

“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

 

“Statutory Prospectus” means the Base Prospectus and the preliminary prospectus dated January 30, 2012 relating to the Securities, including the documents incorporated and deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the form first furnished (electronically or otherwise) to the Underwriters for use in connection with the offering of the Securities.

 

Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Securities or until any earlier date that the Company notified or notifies the Representatives as described in Section 3(f), did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, the Statutory Prospectus or the Prospectus, including any document incorporated by reference therein that has not been superseded or modified.

 

5



 

The representations and warranties in this subsection 1(a)(i) shall not apply to statements in or omissions from the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives expressly for use therein.

 

(ii)        Incorporated Documents .  The documents incorporated or deemed to be incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the “1934 Act Regulations”), and, when read together with the other information in the General Disclosure Package and the Prospectus, (a) at the time the Registration Statement first became effective, (b) at the time the Company’s most recent Annual Report on Form 10-K was filed with the Commission, (c) at each “new effective date” with respect to the Underwriters pursuant to Rule 430B(f)(2) of the 1933 Act Regulations, (d) at the date hereof, and (e) at the Closing Time (and, if any Option Securities are purchased, at each Date of Delivery), did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(iii)       Independent Accountants .  The accountants who certified the financial statements and supporting schedules included in the Registration Statement, the Statutory Prospectus and the Prospectus 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, the General Disclosure Package 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 General Disclosure Package and the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement.  The Company’s ratios of earnings to fixed charges and, if applicable, ratios of earnings to combined fixed charges and preferred stock dividends (actual and, if any, pro forma) included in the General Disclosure Package and the Prospectus have been calculated in compliance with Item 503(d) of Regulation S-K of the Commission.  All disclosures contained in the Registration Statement, the General Disclosure Package and the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G under the 1934 Act

 

6



 

and Item 10 of Regulation S-K of the 1933 Act Regulations, to the extent applicable.  The interactive data in eXtensible Business Reporting Language incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto.

 

(v)        No Material Adverse Change in Business .  Since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package 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, financial prospects or business prospects of the Company and its subsidiaries considered as one enterprise (a “Material Adverse Effect”), whether or not arising in the ordinary course of business, (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) except for regular monthly distributions on the Common Stock in amounts per share that are consistent with past practice and regular monthly dividends on the Company’s 7.375% Monthly Income Class D Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Class D Preferred Stock”) and the Company’s 6.75% Monthly Income Class E Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Class E Preferred Stock”), there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its stock.

 

(vi)       Good Standing of the Company .  The Company is a corporation duly organized and validly existing under the laws of the State of Maryland and is in good standing with the State Department of Assessments and Taxation of Maryland and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the General Disclosure Package and the Prospectus and to enter into and perform its obligations under this Agreement and the Articles Supplementary; 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 the subsidiaries listed on Schedule F hereto and Schedule F accurately sets forth whether each such subsidiary is a corporation, limited or general partnership or limited liability company and the jurisdiction of organization of each such subsidiary, and the Company does not hold any equity interest in any corporation, limited liability company, partnership, business trust, joint venture or entity other than such subsidiaries.  The limited liability companies listed on Schedule F are hereinafter called the “LLC Subsidiaries.”  Each subsidiary of the Company has been duly organized and is validly existing as a partnership, limited liability company, business trust 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, limited liability company, business trust or corporation, as the case may be, to own, lease and operate its properties and to conduct its

 

7



 

business as described in the General Disclosure Package and the Prospectus; each such subsidiary is duly qualified as a foreign partnership, limited liability company, business trust 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 General Disclosure Package and the Prospectus, all of the issued and outstanding partnership interests, limited liability company interests, business trust interests and shares of capital stock, as the case may be, of each such subsidiary have been duly authorized (if applicable) and validly issued and are fully paid and are non-assessable (except to the extent that the general partners of subsidiaries which are partnerships may be liable for the obligations of such partnerships) and are owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding partnership interests, limited liability company interests, business trust 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, declaration of trust or trust agreement, limited liability company agreement (or other similar 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.  Except for the subsidiaries identified with an asterisk on Schedule F hereto, as of the date of the Company’s most recent balance sheet included or incorporated by reference in the Registration Statement and the Prospectus, no direct or indirect subsidiary of the Company had (on an unconsolidated basis) total assets in excess of 5% of the Company’s consolidated assets as of that date or, for the quarter then ended, annualized rental revenue in excess of 5% of the Company’s annualized consolidated rental revenue for such quarter. The Company is the sole and managing member of Realty Income Texas Properties 1, LLC, a Delaware limited liability company.

 

(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 paid in capital” and “Common stock and paid in capital” set forth in the consolidated balance sheet as of September 30, 2011 contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to employee benefit plans or the Company’s dividend reinvestment plan 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 Capital Stock .  The shares of issued and outstanding Common Stock, Class D Preferred Stock and Class E Preferred Stock have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of Common Stock, Class D Preferred Stock or Class E Preferred Stock was issued in violation of preemptive or other similar rights arising by operation of law, under the charter or bylaws of the Company, under any agreement or instrument to which

 

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the Company or any of its subsidiaries is a party or otherwise, and the Common Stock, the Class D Preferred Stock and the Class E Preferred Stock conform to all statements relating thereto contained or incorporated by reference in the General Disclosure Package and the Prospectus and such statements conform to the rights set forth in the instruments defining the same.

 

(xi)                               Absence of Defaults and Conflicts .  Neither the Company nor any of its subsidiaries is in violation of its charter or bylaws, its partnership agreement, declaration of trust or trust agreement, or its limited liability company agreement (or other similar agreement), as the case may be, or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which any of them may be bound or to which any of the respective properties or assets of the Company or any subsidiary is subject (collectively, “Agreements and Instruments”), except for such defaults that would not have a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the Articles Supplementary and the consummation of the transactions contemplated herein and therein (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Statutory Prospectus and the Prospectus under the caption “Use of Proceeds” and compliance by the Company with its obligations hereunder and thereunder), and the issuance of shares of Common Stock (the “Conversion Shares”) upon conversion of the Securities in accordance with the Articles Supplementary 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.  Neither the Company nor any of its subsidiaries is subject to any governmental or court judgment, order, writ or decree that is material with respect to the Company and its subsidiaries considered as one enterprise. As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary of the Company or any of its subsidiaries.

 

(xii)                            Absence of Labor Dispute .  No labor dispute with the employees of the Company or any subsidiary of the Company exists or, to the best knowledge of the Company, is imminent; and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary’s tenants, which, in either case, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

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(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 there is no such proceeding now pending or, to the best knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries, which is required to be disclosed in the Registration Statement, the Statutory Prospectus or the Prospectus (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 Securities or the Articles Supplementary; 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, the Statutory Prospectus or the Prospectus, 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 Statutory Prospectus or the Prospectus or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and/or filed as required.

 

(xv)                           Possession of Intellectual Property .  The Company and its subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, “Intellectual Property”) necessary to carry on the business now operated by them, and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect.

 

(xvi)                        Absence of Further Requirements .  No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations under this Agreement, the Securities or the Articles Supplementary or in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the other transactions contemplated by this Agreement, the Securities or the Articles Supplementary, except such as have been already made or obtained under the 1933 Act or the 1933 Act Regulations or as may be required under state securities laws and except for the filing with, and acceptance for record by, the SDAT of the Articles Supplementary.

 

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(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 Statutory Prospectus and the Prospectus under “Use of Proceeds” will not be, an “investment company” as such term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”).

 

(xix)                        Partnership Agreements .  Each of the partnership agreements, declarations of trust or trust agreements, limited liability company agreements (or other similar agreements) 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, partnership agreement, declaration of trust or trust agreement, or limited liability company agreement (or other similar 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 General Disclosure Package and 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 Statutory Prospectus and 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 Statutory Prospectus and 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

 

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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, the Statutory Prospectus or the Prospectus are disclosed therein, and all such liens, charges, encumbrances, claims or restrictions which are not disclosed in the Statutory Prospectus and the Prospectus could not reasonably be expected, singly or in the aggregate, to have a Material Adverse Effect; (iii) no person or entity, including, without limitation, any tenant under any of the leases pursuant to which the Company or any of its subsidiaries leases (as lessor) any of its properties (whether directly or indirectly through other partnerships, limited liability companies, business trusts, 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)  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)  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)  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) there is no pending or, to the best knowledge of the Company, threatened condemnation, zoning change, or other proceeding or action that could in any manner affect the size of, use of, improvements on, construction on or access to the properties of the Company or any of its subsidiaries, except such proceedings or actions that, either singly or in the aggregate, would not have a Material Adverse Effect; and (ix) neither the Company nor any of its subsidiaries nor any lessee of any of the real property or improvements of the Company or any of its subsidiaries is in default in the payment of any amounts due or in any other default under any of the leases pursuant to which the Company or any of its subsidiaries leases (as lessor) any of its real property or improvements (whether directly or indirectly through partnerships, limited liability companies, 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

 

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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 General Disclosure Package and 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 General Disclosure Package and 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 General Disclosure Package and the Prospectus: (i) all real property and improvements owned or leased by the Company or any of its subsidiaries, including, without limitation, the Environment (as defined below) associated with such real property and improvements, is free of any Contaminant (as defined below), except such Contaminants which, individually or in the aggregate, would not have a Material Adverse Effect; (ii) neither the Company, nor any of its subsidiaries has caused or suffered to exist or occur any Release (as defined below) of any Contaminant into the Environment or any other condition that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or could result in any violation of any Environmental Laws (as defined below) or constitute a health, safety or environmental hazard to any person or property except for such violations or hazards that could not reasonably be expected to have a Material Adverse Effect; (iii) neither the Company nor any of its subsidiaries is aware of any notice from any governmental body claiming any violation of any Environmental Laws or requiring or calling attention to the need for any work, repairs, construction, alterations, removal or remedial action or installation on or in connection with such real property or improvements, whether in connection with the presence of asbestos-containing materials in such properties or otherwise, except for such violations, work, repairs, construction, alterations, removal or remedial actions or installations as would not, individually or in the aggregate, have a Material Adverse Effect; (iv) any such work, repairs, construction, alterations, removal or remedial action or installation, if required, would not result in the incurrence of liabilities, which, individually or in the aggregate, would have a Material Adverse Effect; (v) neither the Company nor any of its subsidiaries has caused or suffered to exist or occur any condition on any of the

 

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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)  no real property or improvements owned or leased by the Company or any of its subsidiaries is being used or has been used for manufacturing or for any other operations that involve or involved the use, handling, transportation, storage, treatment or disposal of any Contaminant, where such operations require or required permits or are or were otherwise regulated pursuant to the Environmental Laws and where such permits have not been or were not obtained or such regulations are not being or were not complied with, except in all instances where any failure to obtain a permit or comply with any regulation could not reasonably be expected, singly or in the aggregate, to have a Material Adverse Effect.  “Contaminant” means any pollutant, hazardous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos or asbestos-containing materials, PCBs, lead, pesticides or radioactive materials or any constituent of any such substance or waste, including any such substance identified or regulated under any Environmental Law.  “Environmental Laws” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq. , the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et seq. , the Clean Air Act, 42 U.S.C. 7401, et seq. , the Clean Water Act, 33 U.S.C. 1251, et seq. , the Toxic Substances Control Act, 15 U.S.C. 2601, et seq. , the Occupational Safety and Health Act, 29 U.S.C. 651, et seq. , and all other federal, state and local laws, ordinances, regulations, rules, orders, decisions, permits, and the like, which are directed at the protection of human health or the Environment.  “Lien” means, with respect to any asset, any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset.  “Environment” means any surface water, drinking water, ground water, land surface, subsurface strata, river sediment, buildings, structures, and ambient, workplace and indoor air.  “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, emanating or disposing of any Contaminant into the Environment, including, without limitation, the abandonment or discard of barrels, containers, tanks or other receptacles containing or 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.

 

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(xxv)                    Tax Treatment of Certain Entities .  Each of R.I.C. Trade Center, Ltd., Empire Business Center, Ltd., and Silverton Business Center, Ltd., each a California limited partnership (the “Sub-Limited Partnerships”), was, from the time of the Consolidation (as defined herein) 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 and, from the time of the Consolidation through and including the time of its merger into the Company, no Sub-Limited Partnership was ever treated as a publicly traded partnership taxable as a corporation for federal income tax purposes.  The Company’s ownership interests in two properties held through tenancies in common with unrelated third parties (which are the only properties which, since the Consolidation, have been held in tenancies in common with unrelated third parties) have not been, since the Consolidation, and will not be (or, in the case of properties which have been sold, were not until the time of the sale of such properties), treated as ownership interests in associations taxable as corporations for federal income tax purposes or treated as ownership interests in publicly traded partnerships taxable as corporations for federal income tax purposes.  Each of the LLC Subsidiaries, Realty Income Pennsylvania Properties Trust, a Maryland statutory trust, Realty Income Pennsylvania Properties Trust 2, a Maryland statutory trust, and Natick Beacon Fifth Realty, a Maryland statutory trust, has been 100% owned by the Company at all times since its respective formation dates and has not elected to be taxed as a corporation for tax purposes.  As used herein, the term “Consolidation” means the merger of 25 limited partnerships and RIC Properties Ltd., a California limited partnership, into the Company on August 15, 1994.

 

(xxvi)                 Securities .  The Securities have been duly authorized by the Company for issuance and sale to the Underwriters pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement against payment of the purchase price therefor specified in this Agreement, will be validly issued, fully paid and non-assessable; the Securities, the Common Stock and the Articles Supplementary conform and will conform to the statements relating thereto contained in the General Disclosure Package and the Prospectus and such statements conform and will conform to the rights set forth in the instruments defining the same; and the issuance of the Securities is not subject to preemptive or other similar rights arising by operation of law, under the charter or bylaws of the Company, under any agreement or instrument to which the Company or any of its subsidiaries is a party or otherwise.  The Conversion Shares issuable upon conversion of the Securities have been duly authorized and reserved for issuance upon such conversion by all necessary corporate action and, when issued and delivered upon such conversion in accordance with the Articles Supplementary, will be validly issued, fully paid and nonassessable. The issuance of the Conversion Shares upon conversion of the Securities in accordance with the Articles Supplementary will not be subject to preemptive or other similar rights arising by operation of law, under the charter or bylaws of the Company, under any agreement or instrument to which the Company or any of its subsidiaries is a party or otherwise.

 

(xxvii)              Pending Proceedings and Examinations .  The Registration Statement is not the subject of a pending proceeding or examination under Section 8(d) or 8(e) of the 1933 Act, and the Company is not the subject of a pending proceeding under Section 8A of the 1933 Act in connection with the offering of the Securities.

 

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(xxviii)           Articles Supplementary .  The Articles Supplementary, including their filing with the SDAT, have been duly authorized by the Company.  The Articles Supplementary will have been duly executed and delivered by the Company, and filed with, and accepted for record by, the SDAT, prior to the Closing Time.  The preferences, rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption and conversion of the Securities are as set forth in the Articles Supplementary and none of such provisions is prohibited by, or conflicts with, the laws of the State of Maryland or the rules and requirements of the NYSE (as defined below) or the Company’s charter or bylaws.

 

(xxix)                 OFAC .   Neither the Company nor any of the subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of the subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering of the Securities contemplated hereby, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

(xxx)                    Sarbanes-Oxley .   The Company has established and maintains and evaluates “disclosure controls and procedures” (as such term is defined in Rule 13a-15 and 15d-15 under the 1934 Act) and “internal control over financial reporting” (as such term is defined in Rule 13a-15 and 15d-15 under the 1934 Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s chief executive officer and its chief financial officer by others within those entities, such disclosure controls and procedures are effective to perform the functions for which they were established, and such disclosure controls and procedures are designed to provide reasonable assurance that the interactive data in eXtensible Business Reporting Language incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus fairly presents the information called for in all material respects and is prepared in accordance with the Commission’s rules and guidelines applicable thereto; the Company’s independent auditors and the audit committee of the board of directors of the Company have been advised of (i) all significant deficiencies, if any, in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data; and (ii) all fraud, if any, whether or not material, that involves management or other employees who have a role in the Company’s internal controls; all material weaknesses, if any, in internal controls have been identified to the Company’s independent auditors; since the date of the most recent evaluation of such disclosure controls and procedures and internal controls, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses; the principal executive officer (or equivalent) and principal financial officer (or equivalent) of the Company have made all certifications required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and any related rules and regulations promulgated by the Commission, and the statements contained in

 

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each such certification are complete and correct; and the Company, its subsidiaries and the Company’s directors and officers are each in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and the rules and regulations of the Commission and the New York Stock Exchange promulgated thereunder.

 

(b)                                  Officer’s Certificates.  Any certificate signed by any officer of the Company and delivered to the Representatives or to counsel for the Underwriters shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby.

 

SECTION 2.  Sale and Delivery to the Underwriters; Closing .

 

(a)                                  Initial Securities.  On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price set forth in Schedule B, the aggregate number of Initial Securities set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof.

 

(b)                                  Option Securities .  In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional 1,950,000 shares of Class F Preferred Stock at the price set forth in Schedule B; provided that the purchase price for any Option Securities shall be reduced by an amount per share equal to any dividends or distributions paid or payable on the Initial Securities but not payable on such Option Securities.  The option hereby granted may be exercised through and including the 30 th  day after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial Securities upon notice by the Representatives to the Company setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities.  Any such time and date of delivery (a “Date of Delivery”) shall be determined by the Representatives, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time.  If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the aggregate number of Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the aggregate number of all of the Initial Securities, subject in each case to such adjustments as the Representatives in their discretion shall make to eliminate any sales or purchases of fractional shares.

 

(c)                                   Payment.  Payment of the purchase price for, and delivery of certificates for, the Initial Securities shall be made at the office of Latham & Watkins LLP, 650 Town Center Drive, 20th Floor, Costa Mesa, California 92626-1925, or at such other place as shall be agreed upon by the Representatives and the Company, at 7:00 A.M. (California time) on February 7, 2012 (unless postponed in accordance with the provisions of Section 10) or such other time not later

 

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than ten business days after such date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery being herein called “Closing Time”).

 

In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representatives and the Company, on each Date of Delivery as specified in the notice from the Representatives to the Company.

 

Payment shall be made to the Company by wire transfer of immediately available funds to an account at a bank designated by the Company, against delivery to the Representatives for the respective accounts of the Underwriters of certificates for the Securities to be purchased by them.  It is understood that each Underwriter has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase.  Citigroup, individually and not as a Representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities and the Option Securities, if any, to be purchased by any Underwriter whose payment therefor has not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.

 

(d)                                  Denominations; Registration.  Certificates for the Initial Securities and the Option Securities, if any, shall be in such denominations and registered in such names as the Representatives may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be.  The certificates for the Initial Securities and the Option Securities, if any, will be made available for examination and packaging by the Representatives in The City of New York not later than 2:00 P.M. (New York City time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be.

 

SECTION 3.  Covenants of the Company .  The Company covenants with each Underwriter as follows:

 

(a)                                  Compliance with Securities Regulations and Commission Requests.  The Company, subject to Section 3(b), will comply with the requirements of Rule 430B and will notify the Representatives immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement or new registration statement relating to the Securities shall become effective, or any supplement to the Prospectus or any amended Prospectus or any Issuer Free Writing 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 the filing of a new registration statement or any amendment or supplement to the Prospectus or any document incorporated or deemed to be incorporated by reference or otherwise deemed to be a part of or included in any of the foregoing (including, without limitation, pursuant to Rule 430B) or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or such new 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

 

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in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(e) of the 1933 Act concerning the Registration Statement or any such new registration statement, or (v) if the Company becomes the subject of a proceeding under Section 8A of the 1933 Act in connection with the offering of the Securities.  The Company will effect the filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and, if applicable, will take such steps as it deems necessary to ascertain promptly whether the form of prospectus supplement or prospectus 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 or prospectus, 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 Representatives notice of its intention to file or prepare any amendment to the Registration Statement or new registration statement relating to the Securities or any amendment, supplement or revision to either any preliminary prospectus (including any prospectus included in the Registration Statement or amendment thereto at the time it became effective) or to the Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall object.  The Company has given the Representatives notice of any filings made pursuant to the 1934 Act or 1934 Act Regulations within 48 hours prior to the Applicable Time; the Company will give the Representatives notice of its intention to make any such filing from the Applicable Time through the Closing Time and will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing and will not file or use any such document to which the Representatives or counsel for the Underwriters shall object.

 

(c)            Issuer Free Writing Prospectuses.   The Company represents and agrees that, unless it obtains the prior consent of the Representatives, and each Underwriter, severally and not jointly, represents and agrees that, unless it obtains the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Securities or the Conversion Shares that would constitute an “issuer free writing prospectus,” as defined in Rule 433, or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405, required to be filed with the Commission, other than the issuer free writing prospectus containing the information contained in the final Pricing Term Sheet (as defined below) prepared and filed pursuant to Section 3(o).  Any such free writing prospectus consented to by the Company and the Representatives is hereinafter referred to as a “Permitted Free Writing Prospectus” and, for purposes of clarity, the parties hereby agree that each Issuer General Use Free Writing Prospectus listed on Schedule D hereto (if any) is a Permitted Free Writing Prospectus.  The Company represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule 433,  and has complied and will comply with the requirements of Rule 433 applicable to any

 

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Permitted Free Writing Prospectus, including timely filing with the Commission where required, legending and record keeping.

 

(d)            Delivery of Registration Statement.  The Company has furnished or will deliver to the Representatives and counsel for the Underwriters, without charge, as many signed and conformed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) as the Representatives and counsel for the Underwriters may reasonably request.  The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, if any, except to the extent permitted by Regulation S-T.

 

(e)            Delivery of Prospectuses.  The Company has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus, if any, as such Underwriter reasonably requested, and the Company has delivered to each Underwriter, without charge, as many copies of each Issuer Free Writing Prospectus, if any, as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act.  The Company will furnish to each Underwriter, without charge, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act (or would be required to be delivered upon request by a purchaser pursuant to Rule 173 under the 1933 Act), such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request.  The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, 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 General Disclosure Package and the Prospectus.  If at any time when a prospectus is required by the 1933 Act to be delivered (or would be required to be delivered upon request by a purchaser pursuant to Rule 173 under the 1933 Act) in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of any such counsel, at any such time to amend the Registration Statement or to file a new registration statement relating to the Securities 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, supplement or new registration statement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus

 

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comply with such requirements, the Company will use its best efforts to have such amendment or new registration statement declared effective as soon as practicable (if it is not an automatic shelf registration statement with respect to the Securities), and the Company will furnish to the Underwriters such number of copies of such amendment, supplement or new registration statement as the Underwriters may reasonably request.  If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement (or any other registration statement relating to the Securities) or the Statutory Prospectus or any other preliminary prospectus, the Company will promptly notify the Representatives and will promptly cease use of such Issuer Free Writing Prospectus or amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict.  If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly cease use of such Issuer Free Writing Prospectus and amend or supplement, at its own expense, either (a) such Issuer Free Writing Prospectus or (b) the Statutory Prospectus and the Prospectus, to eliminate or correct such conflict, untrue statement or omission.

 

(g)            Blue Sky Qualifications.  The Company will use its best efforts, in cooperation with the Underwriters, to qualify the Securities and the Conversion Shares issuable upon conversion of the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as the Representatives may designate and to maintain such qualifications in effect for a period of not less than one year from the date hereof; provided , however , that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.  In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the date hereof.

 

(h)            Rule 158.  The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its security holders as soon as practicable an earnings statement for the purposes of, and to provide to the Underwriters 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.”

 

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(j)             Listing .  The Company will use its best efforts to effect the listing of the Securities in the New York Stock Exchange (the “NYSE”).

 

(k)            Reporting Requirements.  The Company, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations.

 

(l)             Notice of Inability to Use Automatic Shelf Registration Statement Form .  If at any time when Securities remain unsold by the Underwriters the Company receives from the Commission a notice pursuant to Rule 401(g)(2) or otherwise ceases to be eligible to use the automatic shelf registration statement form, the Company will (i) promptly notify the Representatives, (ii) promptly file a new registration statement or post-effective amendment to the Registration Statement on the proper form relating to the Securities, in a form satisfactory to the Representatives, (iii) use its best efforts to cause such new registration statement or post-effective amendment to be declared effective and (iv) promptly notify the Representatives of such effectiveness.  The Company will take all other action necessary or appropriate to permit the public offering and sale of the Securities to continue as contemplated in the registration statement that was the subject of the Rule 401(g)(2) notice or for which the Company has otherwise become ineligible.  References herein to the Registration Statement shall include such new registration statement or post-effective amendment, as the case may be.

 

(m)           Filing Fees .  The Company shall pay the required Commission filing fees relating to the Securities within the time required by Rule 456(b)(1) of the 1933 Act Regulations without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) of the 1933 Act Regulations (including, if applicable, by updating the “Calculation of Registration Fee” table in accordance with Rule 456(b)(1)(ii) either in a post-effective amendment to the Registration Statement or on the cover page of the Prospectus filed pursuant to Rule 424(b)).

 

(n)            Restriction on Sale of Securities.  During the period beginning on the date of this Agreement through and including the 30 th  day after the date of this Agreement, the Company will not, without the prior written consent of Citigroup, Morgan Stanley, RBC and UBS, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Class F Preferred Stock, any other shares of Preferred Stock, any securities of the Company substantially similar to the Class F Preferred Stock or any depositary shares or depositary receipts representing or evidencing any of the foregoing 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 Class F Preferred Stock, other Preferred Stock or other securities, depositary shares or depositary receipts referred to in clause (i) above, whether any such swap, agreement or transaction

 

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described in clause (i) or (ii) above is to be settled by delivery of Class F Preferred Stock, other securities, in cash or otherwise, other than the Securities to be sold hereunder.

 

(o)            Pricing Term Sheet.  The Company will prepare a final pricing term sheet containing a description of the final terms of the Securities, in a form approved by the Representatives and containing the information set forth on Schedule E hereto, and will file such term sheet pursuant to Rule 433(d) under the 1933 Act within the time period required by such rule (such term sheet, the “Pricing Term Sheet”).

 

(p)            Reservation of Conversion Shares.   The Company has reserved and will reserve and keep available at all times, free of any preemptive or other similar rights arising by operation of law, under the charter or bylaws of the Company, under any agreement or instrument to which the Company or any of its subsidiaries is a party or otherwise, the maximum number of Conversion Shares issuable upon conversion of the Securities until such time as all of the Securities have been converted, repurchased and retired or redeemed and retired.

 

SECTION 4.  Payment of Expenses .

 

(a)            Expenses.  The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the word processing, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the printing and delivery to the Underwriters of this Agreement, a Canadian “wrapper” (if applicable) and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, including any transfer taxes or other duties payable upon the sale of the Securities to the Underwriters, (iv) the fees and disbursements of the Company’s counsel, accountants and other advisors, (v) the qualification of the Securities and any Conversion Shares issued upon conversion of the Securities under securities laws in accordance with the provisions of Section 3(g) hereof and, if applicable, the preparation of a Canadian “wrapper,” including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto and, if applicable, such Canadian “wrapper,” (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Permitted Free Writing Prospectus and the Prospectus and any amendments or supplements thereto and any costs associated with the electronic delivery of any of the foregoing to the Underwriters, (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of any transfer agent or registrar for the Securities, (ix) if required, the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters (such fees and disbursements not to exceed $10,000) in connection with, the review, if any, by the Financial Industry Regulatory Authority, Inc. (the “FINRA”) of the terms of the sale of the Securities and (x) any fees payable in connection with the rating of the Securities and the fees and expenses incurred in connection with the listing of the Securities on the NYSE.

 

(b)            Termination of Agreement.  If this Agreement is terminated by the Representatives in accordance with the provisions of Section 5 or Section 9(a)(i) or 9(a)(v)

 

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hereof, the Company shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters.

 

SECTION 5.  Conditions of Underwriters’ Obligations .  The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company contained in Section 1 hereof and 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 has become effective and at Closing Time (and, if any Option Securities are purchased, at the relevant Date of Delivery) no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the Underwriters. The Company shall not have received from the Commission any notice pursuant to Rule 401(g)(2) objecting to the use of the automatic shelf registration statement form.  The Prospectus containing the Rule 430B Information shall have been filed with the Commission in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)).  The Pricing Term Sheet and all other Issuer General Use Free Writing Prospectuses, if any, have been filed, and all Issuer Limited Use Free Writing Prospectuses, if any, have, if required by the 1933 Act Regulations, also been filed, with the Commission in the manner and within the time period required by Rule 433. The Company shall have paid the required Commission filing fees relating to the Securities within the time period required by Rule 456(b)(1) of the 1933 Act Regulations without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) of the 1933 Act Regulations and, if applicable, shall have updated the “Calculation of Registration Fee” table in accordance with Rule 456(b)(1)(ii) either in a post-effective amendment to the Registration Statement or on the cover page of the Prospectus filed pursuant to Rule 424(b).

 

(b)            Opinions of Counsel for Company.  At Closing Time, (i) the Representatives shall have received the favorable opinions, dated as of Closing Time, of Latham & Watkins LLP, counsel for the Company, Michael R. Pfeiffer, Executive Vice President, General Counsel and Secretary of the Company, and Venable LLP, special Maryland counsel to the Company, each in form and substance satisfactory to counsel for the Underwriters, to the effect set forth in Exhibits A, B and C hereto, respectively, and to such further effect as counsel to the Underwriters may reasonably request pursuant to Section 5(j); and (ii) if such special Maryland counsel shall deliver a Separate Opinion (as defined in the last paragraph of Exhibit C hereto), the Representatives shall have received such Separate Opinion, which shall comply with the requirements of the last paragraph of Exhibit C.

 

(c)            Opinion of Counsel for the Underwriters.  At Closing Time, the Representatives shall have received the favorable opinion, dated as of Closing Time, of Sidley Austin LLP, counsel for the Underwriters, with respect to this Agreement, the

 

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Securities, the Registration Statement, the General Disclosure Package and the Prospectus and such other matters as you may reasonably request.  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 Venable LLP delivered pursuant to Section 5(b) and, as to all matters governed by the laws of other jurisdictions (other than the law of the State of New York and the federal law of the United States) upon the opinions of counsel satisfactory to the Representatives.

 

(d)            Officers’ Certificate.  At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, financial prospects or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Representatives shall have received a certificate of the Chairman or the President of the Company and of the chief financial or chief accounting officer of the Company, dated as of Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1 hereof are true and correct with the same force and effect as though expressly made at and as of Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied under this Agreement at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement nor any notice pursuant to Rule 401(g)(2) objecting to the use of the automatic shelf registration statement form 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.  (i) At the time of the execution of this Agreement, the Representatives shall have received from KPMG LLP a letter, dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the Underwriters, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Statutory Prospectus and the Prospectus; and (ii) at the Closing Time the Representatives shall have received from KPMG LLP a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to clause (i) of this subsection (e) of this Section, except that the specified date referred to therein shall be a date not more than three business days prior to Closing Time.

 

(f)             Approval of Listing .  At the Closing Time, the Securities shall have been approved for listing on the NYSE, subject only to official notice of issuance.

 

(g)            Rating Requirement .  The Securities shall have the same or better credit ratings from Moody’s Investors Service Inc. (“Moody’s”), Standard & Poor’s (“S&P”) and Fitch, Inc. (“Fitch”) at the Closing Time than the respective ratings set forth in the Pricing Term Sheet filed with the Commission on the date hereof, and the Company shall have delivered to the Representatives a letter, dated the Closing Time, from each such

 

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rating agency, or other evidence satisfactory to the Representatives, confirming that the Securities have such ratings.

 

(h)            Articles Supplementary .  Prior to the Closing Time, the Representatives shall have received evidence, in form and substance satisfactory to them, that the Articles Supplementary have been duly filed with, and accepted for record by, SDAT.

 

(i)             Conditions to Purchase of Option Securities.  In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representatives shall have received:

 

(i)             Officers’ Certificate .  A certificate, dated such Date of Delivery, of the Chairman or President of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery.

 

(ii)            Opinions of Counsel for Company .  The favorable opinions of Latham & Watkins LLP, counsel for the Company, Michael R. Pfeiffer, Executive Vice President, General Counsel and Secretary of the Company, and Venable LLP, special Maryland counsel to the Company, each in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the respective opinions required by Section 5(b) hereof, and including, if applicable, the Separate Opinion (as defined in the last paragraph of Exhibit C hereto) of such special Maryland counsel which shall comply with the requirements of the last paragraph of Exhibit C.

 

(iii)           Opinion of Counsel for Underwriters .  The favorable opinion of Sidley Austin LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof.

 

(iv)           Bring-down Comfort Letter .  A letter from KPMG LLP, in form and substance satisfactory to the Representatives and dated such Date of Delivery, to the effect that they reaffirm the statements made in the letter furnished pursuant to Section 5(e)(i) hereof, except that the specified date referred to shall be a date not more than three business days prior to such Date of Delivery.

 

(v)            Approval of Listing At such Date of Delivery, the Option Securities shall have been approved for listing on the NYSE.

 

(j)             Additional Documents.  At the Closing Time and at each Date of Delivery, counsel for the Underwriters shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the

 

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issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Representatives and counsel for the Underwriters.

 

(k)            Termination of Agreement.  If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which occurs after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representatives by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 6, 7, 13 and 15 shall survive any such termination and remain in full force and effect.

 

SECTION 6.  Indemnification .

 

(a)            Indemnification of Underwriters.  The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

 

(i)         against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including, without limitation, the Rule 430B Information, 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, any Issuer Free Writing Prospectus, the General Disclosure Package (or any part thereof) 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 Citigroup, Morgan Stanley, RBC and UBS), 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,

 

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or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;

 

provided , however , that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives expressly for use in the Registration Statement (or any amendment thereto) or any preliminary prospectus, any Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto).

 

(b)            Indemnification of Company, Directors and Officers.  Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including, without limitation, the Rule 430B Information, or any preliminary prospectus, any Issuer Free Writing Prospectus, the General Disclosure Package (or any part thereof) or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representatives expressly for use therein.

 

(c)            Actions against Parties; Notification.  Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement.  In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Citigroup, Morgan Stanley, RBC and UBS, 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

 

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(ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

(d)                                  Settlement without Consent if Failure to Reimburse.  If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 45 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

 

SECTION 7.  Contribution .  If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

 

The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total underwriting discount received by the Underwriters, in each case as set forth on the cover of the Prospectus bear to the aggregate initial public offering price of the Securities as set forth on such cover.

 

The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7.  The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or

 

29



 

other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

 

Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission.

 

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

For purposes of this Section 7, each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company.  The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.

 

SECTION 8.  Representations, Warranties and Agreements to Survive Delivery .  All representations, warranties and agreements contained in this Agreement and in certificates of officers of the Company submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or any controlling person, or by or on behalf of the Company, and shall survive delivery of the Securities to the Underwriters.

 

SECTION 9.  Termination of Agreement .

 

(a)                                  Termination; General.  Citigroup, Morgan Stanley, RBC and UBS may terminate this Agreement, by notice to the Company, at any time at or prior to Closing Time (and, if any Option Securities are to be purchased on a Date of Delivery which occurs after the Closing Time, Citigroup, Morgan Stanley, RBC and UBS may terminate the obligations of the several Underwriters to purchase such Option Securities, by notice to the Company, at any time on or prior to such Date of Delivery) (i) if in the reasonable judgment of Citigroup, Morgan Stanley, RBC and UBS 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 or the General Disclosure Package, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, financial prospects 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

 

30



 

international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of Citigroup, Morgan Stanley, RBC and UBS, impracticable or inadvisable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or limited by the Commission, the New York Stock Exchange or the Nasdaq Global Market, or if trading generally on the NYSE Amex Equities or the New York Stock Exchange or in the Nasdaq Global 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 FINRA or any other governmental authority, or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, 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, any other class or series of Preferred Stock or any of the Company’s debt securities by any nationally recognized securities rating agency, or any such securities rating agency has publicly announced that it has under surveillance or review, with possible negative implications or without indicating the direction of the possible change, its rating of the Securities, any other class or series of Preferred Stock or any of the Company’s 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, 7, 13 and 15 shall survive such termination and remain in full force and effect.

 

SECTION 10.  Default by One or More of the Underwriters .  If one or more of the Underwriters shall fail at the Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement at such time (the “Defaulted Securities”), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then:

 

(a)                                  if the number of Defaulted Securities does not exceed 10% of the total number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or

 

(b)                                  if the number of Defaulted Securities exceeds 10% of the total number of Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligations of the Underwriters to purchase and of the Company to sell the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.

 

31



 

No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.

 

In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligations of the Underwriters to purchase and the Company to sell the relevant Option Securities, as the case may be, either the Representatives or the Company shall have the right to postpone the Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements.  As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.

 

SECTION 11.  Notices .  All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication.  Notices to the Underwriters shall be directed to them c/o Citigroup Global Markets Inc. at 388 Greenwich Street, New York, New York 10013, attention of General Counsel; Morgan Stanley & Co. LLC at 1585 Broadway, 29th Floor, New York, NY 10036, attention of Investment Banking Division; RBC Capital Markets, LLC at 200 Vesey Street, Three World Financial Center, 8th Floor, New York, NY 10281, attention of Scott Primrose, Transaction Management and UBS Securities LLC at 677 Washington Blvd., Stamford, CT 06901, attention of Fixed Income Syndicate; and notices to the Company shall be directed to it at Realty Income Corporation, 600 La Terraza Boulevard, Escondido, California 92025-3873, attention of Legal Department.

 

SECTION 12.  Parties .  This Agreement shall inure to the benefit of and be binding upon the Underwriters and the Company and their respective successors.  Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained.  This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation.  No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.

 

SECTION 13.  No Advisory or Fiduciary Responsibility; Tax Disclosure .  (a) The Company acknowledges and agrees that (i) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the public offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other hand, and the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (ii) in connection with each transaction contemplated hereby and the process leading to such transaction each Underwriter is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary of the Company or its affiliates, stockholders, creditors or employees or any other party; (iii) no

 

32



 

Underwriter has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Company with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) and no Underwriter has any obligation to the Company with respect to the offering contemplated hereby except the obligations expressly set forth in this Agreement; (iv) the several Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and the several Underwriters have no obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.

 

(b) Notwithstanding any other provision of this Agreement, immediately upon commencement of discussions with respect to the transactions contemplated hereby, the Company (and each employee, representative or other agent of the Company) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and tax structure.  For purposes of the foregoing, the term “tax treatment” is the purported or claimed federal income tax treatment of the transactions contemplated hereby, and the term “tax structure” includes any fact that may be relevant to understanding the purported or claimed federal income tax treatment of the transactions contemplated hereby.

 

SECTION 14.  Integration .  This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the several Underwriters, or any of them, with respect to the subject matter hereof.  The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the several Underwriters with respect to any breach or alleged breach of agency or fiduciary duty.

 

SECTION 15.  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 16.  Effect of Headings and Table of Contents; Counterparts .  The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement.

 

[Signature Page Follows]

 

33



 

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Underwriters and the Company in accordance with its terms.

 

 

Very truly yours,

 

 

 

REALTY INCOME CORPORATION

 

 

 

 

 

By:

/s/ Paul M. Meurer

 

 

Paul M. Meurer

 

 

Executive Vice President, Chief Financial

 

 

Officer and Treasurer

 

 

CONFIRMED AND ACCEPTED,
as of the date first above written:

 

 

By:

CITIGROUP GLOBAL MARKETS INC.

 

 

 

 

 

 

 

By:

/s/ Scott Eisen

 

 

Name: Scott Eisen

 

 

Title: Managing Director

 

 

 

 

By:

MORGAN STANLEY & CO. LLC

 

 

 

 

 

 

 

By:

/s/ Yurij Slyz

 

 

Authorized Signatory

 

 

 

 

 

 

 

By:

RBC CAPITAL MARKETS, LLC

 

 

 

 

 

 

 

By:

/s/ Scott Primrose

 

 

Authorized Signatory

 

 

 

 

 

 

 

By:

UBS SECURITIES LLC

 

 

 

 

 

 

 

By:

/s/ Christopher Forshner

 

 

Name: Christopher Forshner

 

 

Title: Managing Director

 

 

 

 

 

 

 

By:

/s/ Mark Spadaccini

 

 

Name: Mark Spadaccini

 

 

Title: Director

 

 

For themselves and as Representatives of the
Underwriters named in Schedule A hereto.

 

[Signature Page to Purchase Agreement]

 



 

SCHEDULE A

 

Name of Underwriter

 

Number of 
Initial Securities

 

Citigroup Global Markets Inc.

 

2,275,000

 

Morgan Stanley & Co. LLC

 

2,275,000

 

RBC Capital Markets, LLC

 

2,275,000

 

UBS Securities LLC

 

2,275,000

 

Credit Suisse Securities (USA) LLC

 

650,000

 

Raymond James & Associates, Inc.

 

650,000

 

Barclays Capital Inc.

 

390,000

 

BB&T Capital Markets, a division of Scott & Stringfellow, LLC

 

390,000

 

Jefferies & Company, Inc.

 

390,000

 

J.P. Morgan Securities LLC

 

390,000

 

Stifel, Nicolaus & Company, Incorporated

 

390,000

 

BNY Mellon Capital Markets, LLC

 

130,000

 

Janney Montgomery Scott LLC

 

130,000

 

Mitsubishi UFJ Securities (USA), Inc.

 

130,000

 

Morgan Keegan & Company, Inc.

 

130,000

 

Piper Jaffray & Co.

 

130,000

 

Total:

 

13,000,000

 

 

Sch A-1



 

SCHEDULE B

 

Pricing Schedule

 

1.                                       The initial public offering price per share for the Securities shall be $25.00 (the “Public Offering Price”), plus accrued and unpaid dividends, if any, from February 7, 2012.

 

2.                                       The purchase price per share for the Securities to be paid by the several Underwriters shall be $24.2125 (being an amount equal to the Public Offering Price set forth above less underwriting discounts of $0.7875 per share), provided that the purchase price for any Option Securities purchased upon exercise of the over-allotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions paid or payable on the Initial Securities but not payable on such Option Securities.

 

Sch B-1



 

SCHEDULE C

 

PRICE RELATED INFORMATION

 

 

[Not Applicable]

 

Sch C-1



 

SCHEDULE D

 

Issuer General Use Free Writing Prospectuses

 

1.                     Free Writing Prospectus dated January 31, 2012

 

Sch D-1



 

SCHEDULE E

 

Pricing Term Sheet

 

Issuer Free Writing Prospectus

Filed Pursuant to Rule 433

Registration No. 333-158169

January 31, 2012

 

REALTY INCOME CORPORATION

 

PRICING TERM SHEET

 

6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock
(Liquidation Preference $25.00 Per Share)

 

This free writing prospectus relates only to the securities described below and should be read together with Realty Income Corporation’s preliminary prospectus supplement dated January 30, 2012 (the “Preliminary Prospectus Supplement”), the accompanying prospectus dated March 24, 2009 (the “Base Prospectus”) and the documents incorporated and deemed to be incorporated by reference therein.  As used in this free writing prospectus, references to “Realty Income,” “us,” “our” and “we” mean Realty Income Corporation excluding its subsidiaries, unless otherwise expressly stated or the context otherwise requires.

 

This free writing prospectus supplements and, in certain cases, supersedes certain provisions of, the Preliminary Prospectus Supplement.  In particular, the provisions described below under “Optional Redemption” supersede and replace the first two paragraphs under the caption “Description of Class F Preferred Stock — Optional Redemption” in the Preliminary Prospectus Supplement, as well as any corresponding discussion of the optional redemption provisions set forth elsewhere in the Preliminary Prospectus Supplement; the provisions described below under “Special Optional Redemption,” “Change of Control,” “Redemption Procedures” and “Conversion Rights” are added to and supplement the description of the Class F preferred stock (as defined below) set forth in the Preliminary Prospectus Supplement; the matters discussed below under “Risk Factors Associated with the Change of Control Feature of the Class F Preferred Stock” supplement the information appearing under “Risk Factors” in the Preliminary Prospectus Supplement; and the matters discussed below under “Additional United States Federal Income Tax Considerations Relating to the Change of Control Provisions” supplement the information appearing under “Supplemental United States Federal Income Tax Considerations” in the Preliminary Prospectus Supplement and “United States Federal Income Tax Considerations” in the Base Prospectus.

 

Issuer:

 

Realty Income Corporation

 

 

 

Security:

 

6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock (the “Class F preferred stock”)

 

Sch E-1



 

Size:

 

13,000,000 shares

 

 

 

Over-allotment Option

 

1,950,000 shares

 

 

 

Price to Public:

 

$25.00 per share, plus accrued dividends from February 7, 2012 if settlement occurs after that date

 

 

 

Net Proceeds to Realty Income (after estimated expenses)

 

Approximately $314.5 million (or approximately $361.7 million if the underwriters’ overallotment option is exercised in full), after deducting estimated offering expenses payable by Realty Income

 

 

 

Dividend Rate:

 

6.625% of the $25.00 liquidation preference per share per annum (equivalent to $1.65625 per share per annum), accruing from February 7, 2012

 

 

 

Dividend Payment Dates

 

15 th  day of each month, commencing March 15, 2012

 

 

 

Expected Settlement Date:

 

February 7, 2012 (T + 5)

 

 

 

Optional Redemption:

 

The Class F preferred stock is not redeemable by us prior to February 15, 2017, except as described below under “Special Optional Redemption” and except that, as provided in the Articles Supplementary (as defined in the Preliminary Prospectus Supplement) creating and establishing the terms of our Class F preferred stock, we may purchase or redeem shares of the Class F preferred stock prior to that date in order to preserve our status as a real estate investment trust (a “REIT”) for federal and/or state income tax purposes. See “Description of Class F Preferred Stock — Restrictions on Ownership and Transfer” in the Preliminary Prospectus Supplement.

 

 

 

 

 

On and after February 15, 2017, we may, at our option, upon not less than 30 nor more than 60 days’ written notice, redeem shares of the Class F preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus, subject to exceptions described in the Base Prospectus under “General Description of Preferred Stock—Redemption,” any accrued and unpaid dividends thereon to the date fixed for redemption. If we elect to redeem any shares of Class F preferred stock as described in this paragraph, we may use any available cash to pay the redemption price, and we will not be required to pay the redemption price only out of the proceeds from the issuance of other equity securities or any other specific source.

 

Sch E-2



 

Special Optional Redemption:

 

Upon the occurrence of a Change of Control (as defined below), we may, at our option, upon not less than 30 nor more than 60 days’ written notice, redeem shares of Class F preferred stock, in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at a redemption price of $25.00 per share, plus, subject to exceptions described in the Base Prospectus under “General Description of Preferred Stock — Redemption,” any accrued and unpaid dividends thereon to the date fixed for redemption. If, prior to the Change of Control Conversion Date (as defined below), we have provided or provide notice of our election to redeem some or all of the shares of Class F preferred stock (whether pursuant to our optional redemption right described above under “Optional Redemption” or this special optional redemption right), the holders of Class F preferred stock will not have the Conversion Right (as defined) described below under “Conversion Rights” with respect to the shares called for redemption. If we elect to redeem any shares of our Class F preferred stock as described in this paragraph, we may use any available cash to pay the redemption price, and we will not be required to pay the redemption price only out of the proceeds from the issuance of other equity securities or any other specific source

 

 

 

Change of Control:

 

A “Change of Control” is when, after the original issuance of the Class F preferred stock, the following have occurred and are continuing:

 

 

 

 

 

·                                           the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of stock of our company entitling that person to exercise more than 50% of the total voting power of all stock of our company entitled to vote generally in the election of our directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

 

 

 

 

 

·                                           following the closing of any transaction referred

 

Sch E-3



 

 

 

to in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the New York Stock Exchange (the “NYSE”), the NYSE Amex Equities (the “NYSE Amex”) or the NASDAQ Stock Market (“NASDAQ”) or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE Amex or NASDAQ.

 

 

 

Redemption Procedures:

 

In the event we elect to redeem Class F preferred stock, the notice of redemption mailed to each holder of record of a share of Class F preferred stock called for redemption will state, in addition to the matters described in the Base Prospectus under “General Description of Preferred Stock — Redemption,” the following:

 

 

 

 

 

·                                           whether such redemption is being made pursuant to the provisions described above under “Optional Redemption” or “Special Optional Redemption”;

 

 

 

 

 

·                                           if applicable, that such redemption is being made in connection with a Change of Control and, in that case, a brief description of the transaction or transactions constituting such Change of Control; and

 

 

 

 

 

·                                           if such redemption is being made in connection with a Change of Control, that the holders of the shares of Class F preferred stock being so called for redemption will not be able to tender such shares of Class F preferred stock for conversion in connection with the Change of Control and each share of Class F preferred stock tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date.

 

 

 

Conversion Rights:

 

Upon the occurrence of a Change of Control, each holder of Class F preferred stock will have the right (unless, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem some or all of the shares of Class F preferred stock held by such holder as described

 

Sch E-4



 

 

 

above under “Optional Redemption” or “Special Optional Redemption,” in which case such holder will have the right only with respect to shares of Class F preferred stock that are not called for redemption) to convert some or all of the Class F preferred stock held by such holder (the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number of shares of our common stock per share of Class F preferred stock (the “Common Stock Conversion Consideration”) equal to the lesser of:

 

 

 

 

 

·                                           the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference per share of Class F preferred stock plus the amount of any accrued and unpaid dividends thereon to the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a record date for a Class F preferred stock dividend payment and prior to the corresponding dividend payment date for the Class F preferred stock, in which case no additional amount for such accrued and unpaid dividends will be included in this sum) by (ii) the Common Stock Price, as defined below (such quotient, the “Conversion Rate”); and

 

 

 

 

 

·                                           1.3759 (the “Share Cap”).

 

 

 

 

 

Anything in the Articles Supplementary to the contrary notwithstanding and except as otherwise required by law, the persons who are the holders of record of shares of Class F preferred stock at the close of business on a record date for the payment of dividends will be entitled to receive the dividend payable on the corresponding dividend payment date notwithstanding the conversion of those shares after such record date and on or prior to such dividend payment date and, in such case, the full amount of such dividend shall be paid on such dividend payment date to the persons who were the holders of record at the close of business on such record date.

 

 

 

 

 

The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of our common stock), subdivisions or combinations (in each case, a “Share Split”) with respect to our common stock as follows: the adjusted Share Cap as the result of a Share Split will be the number of shares of our common stock that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Share Split by (ii) a fraction, the

 

Sch E-5



 

 

 

numerator of which is the number of shares of our common stock outstanding immediately after giving effect to such Share Split and the denominator of which is the number of shares of our common stock outstanding immediately prior to such Share Split.

 

 

 

 

 

For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of shares of our common stock (or equivalent Alternative Conversion Consideration (as defined below), as applicable) issuable or deliverable, as applicable, in connection with the exercise of the Change of Control Conversion Right will not exceed 17,886,700 shares of common stock (or equivalent Alternative Conversion Consideration, as applicable), subject to proportionate increase to the extent the underwriters’ overallotment option to purchase additional shares of Class F preferred stock is exercised, not to exceed 20,569,705 shares of common stock in total (or equivalent Alternative Conversion Consideration, as applicable) (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap.

 

 

 

 

 

In the case of a Change of Control pursuant to which our common stock is or will be converted into cash, securities or other property or assets (including any combination thereof) (the “Alternative Form Consideration”), a holder of Class F preferred stock will receive upon conversion of such Class F preferred stock the kind and amount of Alternative Form Consideration which such holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of shares of our common stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration”; the Common Stock Conversion Consideration or the Alternative Conversion Consideration, whichever shall be applicable to a Change of Control, is referred to as the “Conversion Consideration”).

 

 

 

 

 

If the holders of our common stock have the opportunity to elect the form of consideration to be received in the Change of Control, the Conversion Consideration in respect of such Change of Control will be deemed to be the kind and amount of consideration actually received by holders of a majority of the outstanding shares of our common stock that made or voted for such an election (if electing between two types of consideration) or holders of a plurality of the outstanding shares of our common stock that made or voted for such an election (if electing between more than two types of consideration), as the case may

 

Sch E-6



 

 

 

be, and will be subject to any limitations to which all holders of our common stock are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in such Change of Control.

 

 

 

 

 

We will not issue fractional shares of common stock upon the conversion of the Class F preferred stock in connection with a Change of Control. Instead, we will make a cash payment equal to the value of such fractional shares based upon the Common Stock Price used in determining the Common Stock Conversion Consideration for such Change of Control.

 

 

 

 

 

Within 15 days following the occurrence of a Change of Control, we will provide to holders of Class F preferred stock a notice of occurrence of the Change of Control that describes the resulting Change of Control Conversion Right. This notice will state the following:

 

 

 

 

 

·                                          the events constituting the Change of Control;

 

 

 

 

 

·                                           the date of the Change of Control;

 

 

 

 

 

·                                           the last date on which the holders of Class F preferred stock may exercise their Change of Control Conversion Right;

 

 

 

 

 

·                                           the method and period for calculating the Common Stock Price;

 

 

 

 

 

·                                           the Change of Control Conversion Date;

 

 

 

 

 

·                                           that if, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem all or any shares of Class F preferred stock, holders will not be able to convert the shares of Class F preferred stock called for redemption and such shares will be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right;

 

 

 

 

 

·                                           if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Class F preferred stock;

 

 

 

 

 

·                                           the name and address of the paying agent, transfer agent and conversion agent for the Class F

 

Sch E-7



 

 

 

preferred stock;

 

 

 

 

 

·                                           the procedures that the holders of Class F preferred stock must follow to exercise the Change of Control Conversion Right (including procedures for surrendering shares for conversion through the facilities of a Depositary (as defined below)), including the form of conversion notice to be delivered by such holders as described below; and

 

 

 

 

 

·                                           the last date on which holders of Class F preferred stock may withdraw shares surrendered for conversion and the procedures that such holders must follow to effect such a withdrawal.

 

 

 

 

 

We will issue a press release containing such notice for publication on Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if these organizations are not in existence at the time of issuance of the press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), and post a notice on our website, in any event prior to the opening of business on the first business day following any date on which we provide the notice described above to the holders of Class F preferred stock.

 

 

 

 

 

To exercise the Change of Control Conversion Right, the holders of Class F preferred stock will be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) representing the shares of Class F preferred stock to be converted, duly endorsed for transfer (or, in the case of any shares of Class F preferred stock held in book-entry form though a Depositary, to deliver, on or before the close of business on the Change of Control Conversion Date, the shares of Class F preferred stock to be converted through the facilities of such Depositary), together with a written conversion notice in the form provided by us, duly completed, to our transfer agent. The conversion notice must state:

 

 

 

 

 

·                                           the relevant Change of Control Conversion Date;

 

 

 

 

 

·                                           the number of shares of Class F preferred stock to be converted; and

 

 

 

 

 

·                                           that the Class F preferred stock is to be converted pursuant to the applicable provisions of the Class

 

Sch E-8



 

 

 

F preferred stock.

 

 

 

 

 

The “Change of Control Conversion Date” is the date the Class F preferred stock is to be converted, which will be a business day selected by us that is no fewer than 20 days nor more than 35 days after the date on which we provide the notice described above to the holders of Class F preferred stock.

 

 

 

 

 

The “Common Stock Price” is (i) if the consideration to be received in the Change of Control by the holders of our common stock is solely cash, the amount of cash consideration per share of our common stock or (ii) if the consideration to be received in the Change of Control by holders of our common stock is other than solely cash (x) the average of the closing sale prices per share of our common stock (or, if no closing sale price is reported, the average of the closing bid and ask prices per share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which our common stock is then traded, or (y) the average of the last quoted bid prices for our common stock in the over-the-counter market as reported by Pink Sheets LLC or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if our common stock is not then listed for trading on a U.S. securities exchange.

 

Holders of Class F preferred stock may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to our transfer agent prior to the close of business on the business day prior to the Change of Control Conversion Date. The notice of withdrawal delivered by any holder must state:

 

·                                           the number of withdrawn shares of Class F preferred stock;

 

·                                           if certificated Class F preferred stock has been surrendered for conversion, the certificate numbers of the withdrawn shares of Class F preferred stock; and

 

·                                           the number of shares of Class F preferred stock, if any, which remain subject to the holder’s conversion notice.

 

Sch E-9



 

 

 

Notwithstanding the foregoing, if any Class F preferred stock is held in book-entry form through The Depository Trust Company or a similar depositary (each, a “Depositary”), the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures of the applicable Depositary.

 

Class F preferred stock as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless prior to the Change of Control Conversion Date we have provided or provide notice of our election to redeem some or all of the shares of Class F preferred stock, as described under “Optional Redemption” or “Special Optional Redemption,” in which case only the shares of Class F preferred stock properly surrendered for conversion and not withdrawn that are not called for redemption will be converted as aforesaid.  If we elect to redeem shares of Class F preferred stock that would otherwise be converted into the applicable Conversion Consideration on a Change of Control Conversion Date, such shares of Class F preferred stock will not be so converted and the holders of such shares will be entitled to receive on the applicable redemption date the redemption price described above under “Optional Redemption” or “Special Optional Redemption,” as applicable.

 

We will deliver all securities, cash and any other property owing upon conversion no later than the third business day following the Change of Control Conversion Date.  Notwithstanding the foregoing, the persons entitled to receive any shares of our common stock or other securities delivered on conversion will be deemed to have become the holders of record thereof as of the Change of Control Conversion Date.

 

In connection with the exercise of any Change of Control Conversion Right, we will comply with all federal and state securities laws and stock exchange rules in connection with any conversion of Class F preferred stock into shares of our common stock or other property.  Notwithstanding any other provision of the Class F preferred stock, no holder of Class F preferred stock will be entitled to convert such Class F preferred stock into shares of our common stock to the extent that receipt of such common stock would cause such holder (or any other person) to exceed the applicable share ownership limits contained in our charter, including the Articles Supplementary, unless we provide an exemption from this limitation for such holder. See “Description of Class F Preferred Stock — Restrictions on

 

Sch E-10



 

 

 

Ownership and Transfer” in the Preliminary Prospectus Supplement and “Restrictions on Ownership and Transfers of Stock” in the Base Prospectus.

 

 

 

 

 

Except as provided above in connection with a Change of Control, the Class F preferred stock is not convertible into or exchangeable for any other securities or property.

 

 

 

Risk Factors Associated with the Change of Control Feature of the Class F Preferred Stock

 

Our acquisition credit facility contains provisions that could limit or prohibit conversion of the Class F Preferred Stock.

 

Our acquisition credit facility contains provisions that could limit or, in certain cases, prohibit the conversion of Class F preferred stock into common stock (or Alternative Conversion Consideration, as applicable) upon the occurrence of a Change of Control.  In particular, our acquisition credit facility provides that, if an event of default (as defined in the credit facility) exists, neither we nor any of our subsidiaries may make any distributions on (except distributions payable in shares of a given class of our stock to the shareholders of that class), or repurchase, redeem or convert, among other things, any shares of our common stock or preferred stock, including the Class F preferred stock, during any period of four consecutive fiscal quarters in an aggregate amount in excess of the greater of:

 

·       the sum of (a) 95% of our adjusted funds from operations (as defined in the credit facility) for that period plus (b) the aggregate amount of cash distributions on our preferred stock for that period, and

 

·       the minimum amount of cash distributions required to be made to our shareholders in order to maintain our status as a REIT for federal income tax purposes,

 

except that we may repurchase or redeem our preferred stock, including the Class F preferred stock, with the net proceeds from the issuance of our common stock or preferred stock. The acquisition credit facility further provides that, in the event of a failure to pay principal, interest or any other amounts payable thereunder when due or upon the occurrence of certain events of bankruptcy, insolvency or reorganization with respect to us or with respect to any of our subsidiaries that has guaranteed amounts payable under the credit facility or that meets a significance test set forth in the credit facility, we and our subsidiaries may not, among other things, convert any shares of

 

Sch E-11



 

 

 

our preferred stock, including the Class F preferred stock.  If any event of default under our acquisition credit facility were to occur, it could limit or prohibit us from delivering common stock (or Alternative Conversion Consideration, as applicable) upon conversion of Class F preferred stock following a Change of Control as described above under “Conversion Rights.”

 

The Change of Control conversion provisions may not adequately compensate you and may make a takeover of Realty Income less likely.

 

Upon the occurrence of a Change of Control, each holder of the Class F preferred stock will have the right (unless, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem some or all of the shares of Class F preferred stock held by such holder as described above under “Optional Redemption” or “Special Optional Redemption,” in which case such holder will have the right only with respect to shares of Class F preferred stock that are not called for redemption) to convert some or all of their Class F preferred stock into shares of our common stock (or under specified circumstances certain Alternative Conversion Consideration).  See “Conversion Rights” above.  Upon such a conversion, the holders will be limited to a maximum number of shares of our common stock (or, if applicable, specified Alternative Conversion Consideration) equal to the Share Cap (as defined) multiplied by the number of shares of Class F preferred stock converted. If the Common Stock Price (as defined) is less than $18.17 (which is 50% of the per share closing sale price of our common stock reported on the NYSE on January 30, 2012), subject to possible adjustment, the holders will receive a maximum of 1.3759 shares of our common stock per share of Class F preferred stock, which may result in a holder receiving  shares of common stock (or Alternative Conversion Consideration, as applicable) with a value that is less than the liquidation preference of the Class F preferred stock plus any accrued and unpaid dividends. In addition, the Change of Control conversion feature of the Class F preferred stock may have the effect of discouraging a third party from making an acquisition proposal for our company or of delaying, deferring or preventing certain Change of Control transactions of our company under circumstances that otherwise could provide the holders of our common stock and Class F preferred stock with the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.

 

If our common stock is delisted, your ability to transfer or sell

 

Sch E-12



 

 

 

your shares of the Class F preferred stock may be limited and the market value of the Class F preferred stock will likely be materially adversely affected.

 

Other than in connection with a Change of Control, the Class F preferred stock does not contain provisions that are intended to protect you if our common stock is delisted from the NYSE. Since the Class F preferred stock has no stated maturity date, you may be forced to hold your shares of the Class F preferred stock and receive stated dividends on the stock when, as and if authorized by our board of directors and paid by us with no assurance as to ever receiving the liquidation preference. In addition, if our common stock is delisted, it is likely that the Class F preferred stock will be delisted as well. Accordingly, if our common stock is delisted, your ability to transfer or sell your shares of the Class F preferred stock may be limited and the market value of the Class F preferred stock will likely be materially adversely affected.

 

Additional United States Federal Income Tax Considerations Relating to the Change of Control Provisions

 

Upon the occurrence of a Change of Control, each holder of Class F preferred stock will have the right (unless, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem some or all of the shares of the Class F preferred stock held by such holder as described above under “Optional Redemption” or “Special Optional Redemption,” in which case such holder will have the right only with respect to shares of Class F preferred stock that are not called for redemption ) to convert some or all of such holder’s Class F preferred stock into shares of our common stock (or the Alternative Conversion Consideration (as defined above under “Conversion Right”), as applicable).  See “Conversion Rights” above. Except as provided below, a U.S. holder (as defined in the Base Prospectus under “United States Federal Income Tax Considerations”) generally will not recognize gain or loss upon the conversion of Class F preferred stock into shares of our common stock. A U.S. holder’s tax basis and holding period in the shares of common stock received upon conversion generally will be the same as those of the converted Class F preferred stock (but the tax basis will be reduced by the portion of adjusted tax basis allocated to any fractional share of common stock exchanged for cash).

 

Cash received upon conversion in lieu of a fractional share of common stock generally will be treated as a payment in a taxable exchange for such fractional share of common stock, and gain or loss will be recognized on the receipt of cash in an

 

 

Sch E-13



 

 

 

amount equal to the difference between the amount of cash received and the adjusted tax basis allocable to the fractional common share deemed exchanged. This gain or loss will be long-term capital gain or loss if the U.S. holder has held the Class F preferred stock for more than one year.

 

Any common stock received on conversion in exchange for accrued and unpaid dividends on the Class F preferred stock generally will be treated as a distribution by us, and subject to tax treatment as described in the Base Prospectus under “United States Federal Income Tax Considerations—United States Federal Income Tax Considerations for Holders of Our Capital Stock—Taxation of Taxable U.S. Holders Generally—Distributions Generally.”

 

In addition, if a U.S. holder receives the Alternative Conversion Consideration (in lieu of shares of our common stock) in connection with the conversion of the U.S. holder’s shares of Class F preferred stock, the tax treatment of the receipt of any such other consideration will depend on the nature of the consideration and the structure of the transaction that gives rise to the Change of Control, and it may be a taxable exchange. U.S. holders converting their shares of Class F preferred stock should consult their tax advisors regarding the U.S. federal income tax consequences of any such conversion and of the ownership and disposition of the consideration received upon any such conversion.

 

CUSIP/ISIN:

 

756109807/US7561098077

 

 

 

Joint Book-Running Managers:

 

Citigroup Global Markets Inc.

Morgan Stanley & Co. LLC

RBC Capital Markets, LLC

UBS Securities LLC

 

 

 

Lead Managers:

 

Credit Suisse Securities (USA) LLC

Raymond James & Associates, Inc.

 

 

 

Senior Co-Managers

 

Barclays Capital Inc.

BB&T Capital Markets, a division of Scott & Stringfellow, LLC

Jefferies & Company, Inc.

J.P. Morgan Securities LLC

Stifel, Nicolaus & Company, Incorporated

 

 

 

Co-Managers:

 

BNY Mellon Capital Markets, LLC

Janney Montgomery Scott LLC

 

Sch E-14



 

 

 

Mitsubishi UFJ Securities (USA), Inc.

Morgan Keegan & Company, Inc.

Piper Jaffray & Co.

 

The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and the related prospectus supplement and prospectus and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus and related prospectus supplement if you request it by contacting Citigroup Global Markets Inc. by telephone (toll free) at 1-800-831-9146, Morgan Stanley & Co. LLC by telephone (toll free) at 1-866-718-1649, RBC Capital Markets, LLC by telephone (toll free) at 1-866-375-6829, or UBS Securities LLC by telephone (toll free) at 1-877-827-6444, ext. 561 3884.

 

Sch E-15



 

SCHEDULE F
Subsidiaries of the Company

 

Name

 

Jurisdiction of
 Organization

 

Type of Entity

 

 

 

 

 

Crest Net Lease, Inc.

 

Delaware

 

Corporation

O CHK, Inc.

 

Delaware

 

Corporation

CRG-CS, LLC

 

Missouri

 

Limited Liability Company

CRG-CS 2, LLC

 

Missouri

 

Limited Liability Company

CRG-CS Services, LLC

 

Delaware

 

Limited Liability Company

Realty Income Illinois Properties 1, LLC

 

Delaware

 

Limited Liability Company

Realty Income Illinois Properties 2, LLC

 

Delaware

 

Limited Liability Company

Realty Income Illinois Properties 3, LLC

 

Delaware

 

Limited Liability Company

Realty Income Illinois Properties 4, LLC

 

Delaware

 

Limited Liability Company

Realty Income Texas Properties 1, LLC*

 

Delaware

 

Limited Liability Company

Realty Income Properties 1, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 2, LLC*

 

Delaware

 

Limited Liability Company

Realty Income Properties 3, LLC*

 

Delaware

 

Limited Liability Company

Realty Income Properties 4, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 5, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 6, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 7, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 8, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 9, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 10, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 11, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 12, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 13, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 14, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 15, LLC

 

Delaware

 

Limited Liability Company

Realty Income Properties 16, LLC

 

Delaware

 

Limited Liability Company

Realty Income Raphine, LLC

 

Delaware

 

Limited Liability Company

Realty Income Regent Blvd, LLC

 

Delaware

 

Limited Liability Company

 

Sch F-1



 

Realty Income Salem, LLC

 

Delaware

 

Limited Liability Company

RI GA 1, LLC

 

Delaware

 

Limited Liability Company

RI TN 1, LLC

 

Delaware

 

Limited Liability Company

RI TN 2, LLC

 

Delaware

 

Limited Liability Company

RI CS 1, LLC

 

Delaware

 

Limited Liability Company

RI CS 2, LLC

 

Delaware

 

Limited Liability Company

RI CS 3, LLC

 

Delaware

 

Limited Liability Company

RI CS 4, LLC

 

Delaware

 

Limited Liability Company

RI CS 5, LLC

 

Delaware

 

Limited Liability Company

RI SE, LLC

 

Delaware

 

Limited Liability Company

O ICE, LLC

 

Delaware

 

Limited Liability Company

Realty Income Pennsylvania Properties Trust

 

Maryland

 

Statutory trust

Realty Income Pennsylvania Properties Trust 2

 

Maryland

 

Statutory trust

Natick Beacon Fifth Realty

 

Maryland

 

Statutory trust

 

Sch F-2


Exhibit 3.1

 

REALTY INCOME CORPORATION

 

ARTICLES SUPPLEMENTARY

 

6.625% MONTHLY INCOME CLASS F CUMULATIVE REDEEMABLE
PREFERRED STOCK

 

Realty Income Corporation, a Maryland corporation (the “Corporation”), certifies to the State Department of Assessments and Taxation of Maryland (the “Department”) that:

 

FIRST:  Pursuant to the authority expressly vested in the Board of Directors of the Corporation (the “Board of Directors”) by Article VI of the charter of the Corporation and Section 2-208 of the Maryland General Corporation Law, a pricing committee of the Board of Directors of the Corporation (the “Pricing Committee”),  pursuant to power delegated to the Pricing Committee by the Board of Directors, has, by resolution adopted by the written consent of the sole member of the Pricing Committee, reclassified and designated 14,950,000 shares of authorized but unissued common stock of the Corporation, $0.01 par value per share, as shares of 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock, par value $0.01 per share, with the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption, which, upon any restatement of the charter of the Corporation, shall become part of Article VI of the charter of the Corporation, with any necessary or appropriate renumbering or relettering of the sections or subsections hereof:

 

6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock

 

A.                                    Designation and Number.  A class of preferred stock of the Corporation, $0.01 par value per share (“Preferred Stock”), designated the 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock (the “Class F Preferred Stock”), is hereby established.  The number of shares of the Class F Preferred Stock shall be 14,950,000.

 

B.                                      Maturity.  The Class F Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption.

 

C.                                      Rank.  The Class F Preferred Stock ranks, with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation, (i) senior to all classes or series of common stock of the Corporation, (the “Common Stock”), senior to the Corporation’s Class A Junior Participating Preferred Stock, par value $0.01 per share (the “Class A Preferred Stock”), and senior to all other equity securities of the Corporation other than equity securities referred to in clauses (ii) and (iii) of this sentence; (ii) on a parity with the Corporation’s 7.375% Monthly Income Class D Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Class D Preferred Stock”), and the Corporation’s 6.75% Monthly Income Class E Cumulative Redeemable Preferred Stock,

 



 

par value $0.01 per share (the “Class E Preferred Stock”), and with all equity securities of the Corporation the terms of which specifically provide that such equity securities rank on a parity with the Class F Preferred Stock with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation; and (iii) junior to all equity securities of the Corporation the terms of which specifically provide that such equity securities rank senior to the Class F Preferred Stock with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation.  The term “equity securities” does not include convertible debt securities.

 

D.            Dividends.

 

(1)           Holders of shares of the Class F Preferred Stock are entitled to receive, when, as, and if authorized by the Board of Directors and declared by the Corporation, out of funds of the Corporation legally available for the payment of dividends, cumulative cash dividends at the rate of 6.625% of the Liquidation Preference (as defined below) per annum per share (equivalent to an annual rate of $1.65625 per share).  Dividends on the Class F Preferred Stock shall accrue daily, shall accrue and be cumulative from February 7, 2012 (the “Original Issue Date”) and shall be payable monthly in arrears on the 15th day of each month (each a “Dividend Payment Date”) commencing March 15, 2012; provided that if any Dividend Payment Date is not a Business Day (as defined below), then the dividend which would otherwise have been payable on such Dividend Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Dividend Payment Date and no interest or additional dividends or other sum shall accrue on the amount so payable for the period from and after such Dividend Payment Date to such next succeeding Business Day.  The period from and including the Original Issue Date to but excluding the first Dividend Payment Date, and each subsequent period from and including a Dividend Payment Date to but excluding the next succeeding Dividend Payment Date, is hereafter called a “Dividend Period.”  Any dividend payable on the Class F Preferred Stock, including dividends payable for any partial dividend period, will be computed on the basis of a 360-day year consisting of twelve 30-day months; provided that the dividend per share payable on the first Dividend Payment Date, which shall be March 15, 2012, will be equal to the sum of (1) the regular monthly dividend per share plus (2) the pro rated portion of the regular monthly dividend per share which shall be calculated based on the number of days from and including the Original Issue Date to but excluding February 15, 2012 (computed on the basis of a 360-day year consisting of twelve 30-day months).  Dividends will be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date, which shall be the first day of the calendar month, whether or not a Business Day, in which the applicable Dividend Payment Date falls (each, a “Dividend Record Date”).  Notwithstanding any provision to the contrary contained in these terms of the Class F Preferred Stock, each outstanding share of Class F Preferred Stock shall be entitled to receive, and shall receive, a dividend with respect to any Dividend Record Date equal to the greatest amount payable as a dividend with respect to any other share of Class F Preferred Stock which is outstanding on such date.  The dividends payable on any Dividend Payment Date shall include dividends accrued to but excluding such Dividend Payment Date.

 

2



 

“Business Day” shall mean any day, other than a Saturday or Sunday, that is not a day on which banking institutions in The City of New York are authorized or required by law, regulation or executive order to close.  All references herein to “accrued and unpaid” dividends or “accumulated and unpaid” dividends on the Class F Preferred Stock (and all references of like import) shall include, unless otherwise expressly stated or the context otherwise requires, both accrued dividends and accumulated dividends, if any, on the Class F Preferred Stock; and all references herein to “accrued and unpaid” dividends or “accumulated and unpaid” dividends on any other class or series of stock of the Corporation shall include, if (and only if) such class or series of stock provides for cumulative dividends and unless otherwise expressly stated or the context otherwise requires, accumulated dividends, if any, on such class or series of stock.

 

(2)                                   No dividends on shares of Class F Preferred Stock shall be authorized by the Board of Directors or paid or set apart for payment by the Corporation at any time when the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibit such authorization, payment or setting apart for payment or provide that such authorization, payment or setting apart for payment would constitute a breach of or a default under any such agreement, or if such authorization, payment or setting apart for payment shall be restricted or prohibited by law.

 

(3)                                   Anything in these terms of the Class F Preferred Stock to the contrary notwithstanding, dividends on the Class F Preferred Stock will accrue and be cumulative from the Original Issue Date, whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared.  No interest, or sum in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class F Preferred Stock which may be in arrears, and holders of the Class F Preferred Stock will not be entitled to any dividends, whether payable in cash, securities or other property, in excess of full cumulative dividends described above.  Any dividend payment made on the Class F Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to the Class F Preferred Stock.

 

(4)                                   If, for any taxable year, the Corporation elects to designate as a “capital gain dividend” (as defined in Section 857 of the Internal Revenue Code of 1986, as amended (the “Code”)) any portion (the “Capital Gains Amount”) of the dividends (as determined for federal income tax purposes) paid or made available for the year to holders of all classes of the Corporation’s stock (the “Total Dividends”), then, except as otherwise required by applicable law, that portion of the Capital Gains Amount that shall be allocable to the holders of Class F Preferred Stock shall be in proportion to the amount that the total dividends (as determined for federal income tax purposes) paid or made available to the holders of the Class F Preferred Stock for the year bears to the Total Dividends.  Except as otherwise required by applicable law, the Corporation will make a similar allocation with respect to any undistributed long-term capital gains of the Corporation which are to be included in its stockholders’ long-term capital gains, based on the allocation of the Capital Gains Amount which would have resulted if such undistributed long-term capital gains had been distributed as “capital gains dividends” by the Corporation to its stockholders.

 

3



 

(5)                                   No full dividends will be declared or paid or set apart for payment on any class or series of Preferred Stock ranking, as to dividends, on a parity with or junior to the Class F Preferred Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Class F Preferred Stock for all past Dividend Periods and the then current Dividend Period.  When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Class F Preferred Stock and the shares of any other class or series of Preferred Stock ranking on a parity as to dividends with the Class F Preferred Stock, all dividends declared upon the Class F Preferred Stock and any other class or series of Preferred Stock ranking on a parity as to dividends with the Class F Preferred Stock shall be declared pro rata so that the amount of dividends declared per share of Class F Preferred Stock and such other class or series of Preferred Stock shall in all cases bear to each other the same ratio that accrued and unpaid dividends per share on the Class F Preferred Stock and such other class or series of Preferred Stock (which, in the case of any such other class or series of Preferred Stock, shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such other class or series of Preferred Stock does not have a cumulative dividend) bear to each other.

 

(6)                                   Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Class F Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment for all past Dividend Periods and the then current Dividend Period, no dividends (other than in shares of Common Stock or other shares of stock of the Corporation ranking junior to the Class F Preferred Stock as to dividends and as to the distribution of assets upon liquidation, dissolution and winding up of the Corporation) shall be declared or paid or set aside for payment nor shall any other distribution be declared or made on the Common Stock or any other class or series of stock of the Corporation ranking junior to or on a parity with the Class F Preferred Stock as to dividends or as to the distribution of assets upon liquidation, dissolution or winding up of the Corporation nor shall any shares of Common Stock or shares of any other class or series of stock of the Corporation ranking junior to or on a parity with the Class F Preferred Stock as to dividends or as to the distribution of assets upon liquidation, dissolution or winding up of the Corporation be redeemed, purchased or otherwise acquired for any consideration (or any amounts be paid to or made available for a sinking fund for the redemption of any such shares of any such stock) by the Corporation (except by conversion into or exchange for other stock of the Corporation ranking junior to the Class F Preferred Stock as to dividends and as to the distribution of assets upon liquidation, dissolution and winding up of the Corporation and except for purchases of stock of the Corporation pursuant to Paragraph J hereof for the purpose of preserving the Corporation’s qualification as a REIT (as defined below) for federal and/or state income tax purposes, or pursuant to comparable provisions of the charter of the Corporation (the “Charter”) with respect to other classes or series of the Corporation’s stock).

 

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E.             Liquidation Preference.

 

Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the outstanding shares of Class F Preferred Stock shall be entitled to receive and to be paid out of the assets of the Corporation legally available for distribution to its shareholders a liquidation preference of $25.00 per share (the “Liquidation Preference”), plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets or payment is made to holders of Common Stock or any other class or series of stock of the Corporation that ranks junior to the Class F Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or winding up of the Corporation, but subject to the preferential rights of the holders of shares of any class or series of stock of the Corporation ranking senior to the Class F Preferred Stock with respect to such distribution of assets upon liquidation, dissolution or winding up.  If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets of the Corporation legally available therefor are insufficient to pay the full amount of liquidating distributions payable on all outstanding shares of Class F Preferred Stock and the full amount of the liquidating distributions payable on all outstanding shares of any other classes or series of stock of the Corporation ranking on a parity with the Class F Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or winding up of the Corporation, then the holders of the Class F Preferred Stock and all such other classes or series of stock will share ratably in any such distribution of assets in proportion to the full liquidating distributions (including, if applicable, accrued and unpaid dividends) to which they would otherwise respectively be entitled.

 

If liquidating distributions shall have been made in full to all holders of Class F Preferred Stock, the remaining assets of the Corporation shall be distributed among the holders of any other classes or series of stock of the Corporation ranking junior to the Class F Preferred Stock as to the distribution of assets upon liquidation, dissolution or winding up, according to their respective rights and preferences and, in each case, according to their respective number of shares.

 

For purposes of these terms of the Class F Preferred Stock, neither the consolidation or merger of the Corporation with or into any other company, trust or other entity, nor the sale, lease, transfer or conveyance of all or substantially all of the property or business of the Corporation, shall be deemed to constitute a liquidation, dissolution or winding up of the Corporation.

 

After payment to the holders of the Class F Preferred Stock of the full liquidating distributions to which they are entitled, the holders of the Class F Preferred Stock, as such, shall have no right or claim to any of the remaining assets of the Corporation.

 

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In determining whether a distribution (other than upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation) by dividend, redemption or other acquisition of shares of stock of the Corporation or otherwise is permitted under the MGCL (as defined below), no effect shall be given to amounts that would be needed, if the Corporation would be dissolved at the time of the distribution, to satisfy the preferential rights upon distribution of holders of Class F Preferred Stock.

 

F.             Redemption.

 

(1)           The Class F Preferred Stock is not redeemable prior to February 15, 2017 except as set forth in Subparagraph F(2) below; provided that the foregoing shall not prevent or limit the right of the Corporation to redeem Class F Preferred Stock pursuant to these terms of the Class F Preferred Stock in order to preserve the qualification of the Corporation as a REIT for federal and/or state income tax purposes as provided in Subparagraph J(4) hereof or otherwise affect the application of such terms to the Class F Preferred Stock.  On and after February 15, 2017, the Corporation may, at its option, upon not less than 30 nor more than 60 days’ written notice, redeem shares of the Class F Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus, subject to the provisions set forth in the first sentence of the second paragraph of Subparagraph F(3) below, accrued and unpaid dividends thereon to the date fixed for redemption.

 

(2)           Upon the occurrence of a Change of Control (as defined below), the Corporation may, at its option, upon not less than 30 nor more than 60 days’ written notice, redeem shares of the Class F Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at a redemption price of $25.00 per share, plus, subject to the provisions set forth in the first sentence of the second paragraph of Subparagraph F(3) below, accrued and unpaid dividends thereon to the date fixed for redemption.  If, prior to the Change of Control Conversion Date (as defined below), the Corporation has provided or provides notice of its election to redeem some or all of the shares of Class F Preferred Stock (whether pursuant to Subparagraph F(1) above or this Subparagraph F(2)), the holders of Class F Preferred Stock shall not have the Change of Control Conversion Right (as defined below) set forth in Paragraph I below with respect to the shares called for redemption.

 

A “Change of Control” is when, after the Original Issue Date, the following have occurred and are continuing:

 

(i)            the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of stock of the Corporation entitling that person to exercise more than 50% of the total voting power of all stock of the Corporation entitled to vote generally in the election of the Corporation’s directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

 

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(ii)           following the closing of any transaction referred to in (i) above, neither the Corporation nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the New York Stock Exchange (the “NYSE”), the NYSE Amex Equities (the “NYSE Amex”), or the NASDAQ Stock Market (“NASDAQ”), or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE Amex or NASDAQ.

 

(3)           Holders of Class F Preferred Stock to be redeemed shall surrender certificates representing such Class F Preferred Stock at the place designated in such notice (or, in the case of shares of Class F Preferred Stock held in book-entry form through a Depositary (as defined below), shall deliver the shares to be redeemed through the facilities of such Depositary) and shall thereafter be entitled to receive the redemption price and any accrued and unpaid dividends payable upon such redemption.  If notice of redemption of any shares of Class F Preferred Stock has been given and if the funds necessary for such redemption have been irrevocably set aside by the Corporation, separate and apart from its other funds, in trust for the benefit of the holders of the shares of Class F Preferred Stock so called for redemption, then from and after the redemption date (unless default shall be made by the Corporation in providing for the payment of the redemption price plus accrued and unpaid dividends, if any), dividends will cease to accrue on such shares of Class F Preferred Stock, such shares of Class F Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price plus accrued and unpaid dividends, if any. In the event that any redemption date shall not be a Business Day, then payment of the redemption price plus, if applicable, accrued and unpaid dividends, if any, need not be made on such redemption date but may be made on the next succeeding Business Day with the same force and effect as if made on such redemption date and no interest, additional dividends or other sums shall accrue on the amount so payable for the period from and after such redemption date to such next succeeding Business Day.  If less than all of the outstanding shares of Class F Preferred Stock are to be redeemed, the shares of Class F Preferred Stock to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares) or by any other equitable method determined by the Corporation that will not result in the automatic transfer of any shares of Class F Preferred Stock to a Trust (as hereinafter defined) pursuant to Paragraph J of these terms of the Class F Preferred Stock.

 

Anything herein to the contrary notwithstanding, and except as otherwise required by law, the persons who were the holders of record of shares of Class F Preferred Stock at the close of business on a Dividend Record Date will be entitled to receive the dividend payable on the corresponding Dividend Payment Date notwithstanding the redemption of those shares after such Dividend Record Date and on or prior to such Dividend Payment Date or the default by the Corporation in the payment of the dividend due on that Dividend Payment Date, in which case the amount payable upon redemption of such shares of Class F Preferred Stock will not include such dividend, and the full

 

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amount of the dividend payable for the applicable Dividend Period shall instead be paid on such Dividend Payment Date to the holders of record at the close of business on such Dividend Record Date as aforesaid.  Except as provided in this paragraph and except to the extent that accrued and unpaid dividends are payable upon redemption pursuant to the foregoing provisions of this Paragraph F, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on shares of Class F Preferred Stock called for redemption.

 

(4)           Unless full cumulative dividends on all outstanding shares of Class F Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no shares of Class F Preferred Stock shall be redeemed unless all outstanding shares of Class F Preferred Stock are simultaneously redeemed; provided, however , that the foregoing shall not prevent the purchase or acquisition by the Corporation of shares of Class F Preferred Stock pursuant to Paragraph J of these terms of the Class F Preferred Stock in order to preserve the qualification of the Corporation as a REIT for federal and/or state income tax purposes, or the purchase or acquisition by the Corporation of shares of Class F Preferred Stock pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding shares of Class F Preferred Stock. In addition, unless full cumulative dividends on all outstanding shares of Class F Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, the Corporation shall not purchase or otherwise acquire, directly or indirectly, any shares of Class F Preferred Stock (except by conversion into or exchange for stock of the Corporation ranking junior to the Class F Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution and winding up of the Corporation); provided, however , that the foregoing shall not prevent the purchase or acquisition by the Corporation of shares of Class F Preferred Stock pursuant to Paragraph J of these terms of the Class F Preferred Stock in order to preserve the qualification of the Corporation as a REIT for federal and/or state income tax purposes, or the purchase or acquisition by the Corporation of shares of Class F Preferred Stock pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding shares of Class F Preferred Stock.  So long as no dividends are in arrears and subject to the limitations set forth in the Charter (including these terms of the Class F Preferred Stock), the Corporation shall be entitled at any time and from time to time to repurchase shares of Class F Preferred Stock in open-market transactions, by tender or by private agreement, in each case as duly authorized by the Board of Directors and effected in compliance with applicable laws.

 

(5)           Notice of redemption will be furnished by the Corporation and will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of the Class F Preferred Stock to be redeemed at their addresses as they appear on the stock transfer records of the Corporation.  No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Class F Preferred Stock except as to the holder to whom notice was defective or not given.  Each notice shall state: (i) the

 

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redemption date; (ii) the number of shares of Class F Preferred Stock to be redeemed; (iii) the redemption price and whether or not accrued and unpaid dividends will be payable to holders surrendering shares of Class F Preferred Stock or to the persons who were holders of record at the close of business on the relevant Dividend Record Date; (iv) the place or places where the Class F Preferred Stock is to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; (vi) whether such redemption is being made pursuant to Subparagraph F(1) or Subparagraph F(2), (vii) if applicable, that such redemption is being made in connection with a Change of Control and, in that case, a brief description of the transaction or transactions constituting such Change of Control; and (viii) if such redemption is being made in connection with a Change of Control, that the holders of the shares of Class F Preferred Stock being so called for redemption will not be able to tender such shares of Class F Preferred Stock for conversion in connection with the Change of Control and that each share of Class F Preferred Stock tendered for conversion that is called, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date.  If less than all of the shares of Class F Preferred Stock held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares of Class F Preferred Stock held by such holder to be redeemed.

 

(6)            Upon surrender, in accordance with such notice, of the certificates representing any shares of Class F Preferred Stock to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state) (or, in the case of shares of Class F Preferred Stock held in book-entry form through a Depositary, upon delivery of such shares in accordance with such notice and the procedures of such Depositary), such shares of Class F Preferred Stock shall be redeemed by the Corporation at the redemption price plus, except as provided in the first sentence of the second paragraph of Subparagraph F(3) above, accrued and unpaid dividends, if any.  In case fewer than all the shares of Class F Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Class F Preferred Stock without cost to the holder thereof.

 

G.             [Reserved.]

 

H.             Voting Rights.

 

(1)            Holders of the Class F Preferred Stock will not have any voting rights, except as set forth below and except as may be required by applicable law.

 

(2)            Whenever dividends on any shares of Class F Preferred Stock shall be in arrears for 18 or more Dividend Periods, whether or not such Dividend Periods are consecutive, the number of directors then constituting the Board of Directors shall be automatically increased by two (if not already increased by two by reason of the election of directors by the holders of any other class or series of Preferred Stock upon which like voting rights have been conferred and are exercisable and with which the Class F Preferred Stock is entitled to vote as a class with respect to the election of such two directors) and the holders of shares of Class F Preferred Stock (voting separately as a

 

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class with all other classes or series of Preferred Stock upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Class F Preferred Stock in the election of such two directors) will be entitled to vote for the election of such two directors to the Board of Directors at a special meeting called by an officer of the Corporation at the request of the holders of record of at least 10% of the outstanding shares of Class F Preferred Stock or by the holders of any other class or series of Preferred Stock upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Class F Preferred Stock in the election of such two directors (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of stockholders, in which case the vote for such two directors shall be held at the earlier of the next such annual or special meeting of stockholders), and at each subsequent annual meeting of stockholders until all dividends accumulated on the Class F Preferred Stock for all past Dividend Periods and the then current Dividend Period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the right of the holders of Class F Preferred Stock to elect such two directors shall cease and (unless there are one or more other classes or series of Preferred Stock of the Corporation upon which like voting rights have been conferred and are exercisable) the term of office of the two directors so elected as directors shall automatically terminate and the authorized number of directors constituting the Board of Directors shall thereupon be reduced accordingly, but subject always to the same provisions for the reinstatement and divestment of the right to elect such two additional directors in the case of any such future dividend arrearage.

 

For purposes of this Subparagraph H(2), it is hereby confirmed that the Class D Preferred Stock and the Class E Preferred Stock are each a class of Preferred Stock of the Corporation upon which like voting rights have been conferred and which are entitled, during such time as such voting rights are exercisable pursuant to the terms of the Class D Preferred Stock or Class E Preferred Stock (as the case may be) as set forth in the Charter, to vote as a class with the Class F Preferred Stock with respect to the election of the two directors described above.

 

In the case of any such request for a special meeting (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of stockholders), such meeting shall be held on the earliest practicable date at the place within the United States designated by the holders of Class F Preferred Stock requesting such meeting or, if none, at a place within the United States designated by the Secretary of the Corporation, upon notice similar to that required for an annual meeting of stockholders.  If such special meeting is not called by an officer of the Corporation within 30 days after such request, then the holders of record of at least 10% of the outstanding shares of Class F Preferred Stock may designate in writing a holder of Class F Preferred Stock to call such meeting at the expense of the Corporation and such meeting may be called by the holder so designated upon notice similar to that required for annual meetings of stockholders and shall be held at the place within the United States designated by the holder calling such meeting.  At all times that the voting rights conferred by this Subparagraph H(2) are exercisable, the holders of Class F Preferred Stock shall have reasonable access to the preferred stock transfer records of the

 

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Corporation.  The Corporation shall pay all costs and expenses of calling and holding any meeting and of electing directors pursuant to this Subparagraph H(2), including, without limitation, the cost of preparing, reproducing and mailing the notice of such meeting, the cost of renting a room for such meeting to be held, and the cost of collecting and tabulating votes.

 

The provisions of this Subparagraph H(2) supersede anything inconsistent contained in the Charter or Bylaws of the Corporation.

 

If, at any time when the voting rights conferred upon the Class F Preferred Stock pursuant to this Subparagraph H(2) are exercisable, any vacancy in the office of a director elected pursuant to this Subparagraph H(2) shall occur, then such vacancy may be filled only by the remaining such director or by vote of the holders of record of the outstanding Class F Preferred Stock and any other classes or series of Preferred Stock of the Corporation upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Class F Preferred Stock in the election of directors pursuant to this Subparagraph H(2).  Any director elected or appointed pursuant to this Subparagraph H(2) may be removed only by the affirmative vote of holders of the outstanding Class F Preferred Stock and any other classes or series of Preferred Stock of the Corporation upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Class F Preferred Stock in the election of directors pursuant to this Subparagraph H(2), such removal to be effected by the affirmative vote of a majority of the votes entitled to be cast by the holders of the outstanding Class F Preferred Stock and any such other classes or series of Preferred Stock, and may not be removed by the holders of the Common Stock.

 

(3)                                   So long as any shares of Class F Preferred Stock remain outstanding, the Corporation shall not, without the consent or the affirmative vote of the holders of at least two-thirds of the shares of the Class F Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (with the Class F Preferred Stock voting separately as a class), (i) authorize, create or issue, or increase the number of authorized or issued shares of, any class or series of stock of the Corporation ranking senior to the Class F Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation, or reclassify any authorized stock of the Corporation into any such shares, or create, authorize or issue any obligation or security convertible into, exchangeable or exercisable for, or evidencing the right to purchase, any such shares or (ii) amend, alter or repeal any of the provisions of the Charter, including without limitation, any of these terms of the Class F Preferred Stock, so as to materially and adversely affect any right, preference, privilege or voting power of the Class F Preferred Stock or (iii) enter into any share exchange that affects shares of Class F Preferred Stock, or consolidate with or merge into any other entity, or permit any other entity to consolidate with or merge into the Corporation, unless in each such case described in this clause (iii) each share of Class F Preferred Stock then outstanding remains outstanding without a material adverse change to its terms and rights or is converted into or exchanged for preferred stock of the surviving or resulting entity having preferences, conversion and other rights, dividends, voting powers, restrictions, limitations as to dividends, qualifications and terms and

 

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conditions of redemption substantially identical to, and in any event without any material adverse change to, those of the Class F Preferred Stock; provided, however , that any amendment to the Charter to authorize any increase in the number of authorized shares of Preferred Stock or Common Stock or the creation or issuance of any other class or series of Preferred Stock or any increase in the number of authorized or outstanding shares of Class F Preferred Stock or any other class or series of Preferred Stock, in each case ranking on a parity with or junior to the Class F Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution and winding up of the Corporation, shall not be deemed to materially and adversely affect any right, preference, privilege or voting power of the Class F Preferred Stock.  For purposes of this paragraph, the filing in accordance with applicable law of articles supplementary or any similar document setting forth or changing the designations, preferences, conversion or other rights, voting powers, restrictions, limitation as to dividends and other distributions, qualifications or other terms of any class or series of stock of the Corporation shall be deemed an amendment to the Charter.

 

(4)                                   The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Class F Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been irrevocably deposited in trust to effect such redemption in accordance with the provisions of Subparagraph F(3) hereof.

 

(5)                                   Except as expressly stated in these terms of the Class F Preferred Stock or as may be required by applicable law, the Class F Preferred Stock will not have any relative, participating, optional or other special voting rights or powers, and the consent of the holders thereof shall not be required for the taking of any corporate action.

 

(6)                                   On each matter submitted to a vote of the holders of Class F Preferred Stock or on which the holders of Class F Preferred Stock are otherwise entitled to vote, including any action by written consent, each share of Class F Preferred Stock shall be entitled to one vote, except that when shares of any other class or series of Preferred Stock of the Corporation have the right to vote with the Class F Preferred Stock as a single class on any matter, the Class F Preferred Stock and the shares of each such other class or series will have one vote for each $25.00 of liquidation preference (excluding accrued and unpaid dividends).

 

(7)                                   The Class A Preferred Stock shall not be entitled to vote as a class with the Class F Preferred Stock on any matter described in this Paragraph H.

 

I.                                          Conversion . The shares of Class F Preferred Stock are not convertible into or exchangeable for any other property or securities of the Corporation, except as provided in this Paragraph I.

 

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(1)                                   Upon the occurrence of a Change of Control, each holder of shares of Class F Preferred Stock shall have the right (unless, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem some or all of the shares of Class F Preferred Stock held by such holder pursuant to Subparagraph F(1) or F(2) above, in which case such holder shall have the right only with respect to shares of Class F Preferred Stock that are not called for redemption) to convert some or all of the Class F Preferred Stock held by such holder (the “ Change of Control Conversion Right ”) on the Change of Control Conversion Date into a number of shares of Common Stock per share of Class F Preferred Stock (the “ Common Stock Conversion Consideration ”) equal to the lesser of

 

(A) the quotient obtained by dividing (i) the sum of the $25.00 Liquidation Preference per share of Class F Preferred Stock plus the amount of any accrued and unpaid dividends thereon to the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case no additional amount for such accrued and unpaid dividends will be included in such sum) by (ii) the Common Stock Price (as defined below) (such quotient, the “ Conversion Rate ”) and

 

(B) 1.3759 (the “ Share Cap ”).

 

Anything in these terms of the Class F Preferred Stock to the contrary notwithstanding and except as otherwise required by law, the persons who are the holders of record of shares of Class F Preferred Stock at the close of business on a Dividend Record Date will be entitled to receive the dividend payable on the corresponding Dividend Payment Date notwithstanding the conversion of those shares after such Dividend Record Date and on or prior to such Dividend Payment Date and, in such case, the full amount of such dividend shall be paid on such Dividend Payment Date to the persons who were the holders of record at the close of business on such Dividend Record Date.

 

The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of the Common Stock), subdivisions or combinations (in each case, a “ Share Split ”) with respect to the Common Stock as follows: the adjusted Share Cap as the result of a Share Split shall be the number of shares of Common Stock that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after giving effect to such Share Split and the denominator of which is the number of shares of Common Stock outstanding immediately prior to such Share Split.

 

For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of shares of Common Stock (or equivalent Alternative Conversion Consideration (as defined below), as applicable) issuable or deliverable, as applicable, in connection with the exercise of the Change of Control Conversion Right shall not exceed 17,886,700 shares of Common Stock (or equivalent Alternative Conversion Consideration, as applicable), subject to proportionate increase to the extent the underwriters’ overallotment option to purchase additional shares of Class F Preferred Stock in the initial public offering of Class F Preferred Stock is exercised, not to exceed 20,569,705 shares of Common Stock in total (or equivalent Alternative Conversion Consideration, as applicable) (the “ Exchange Cap ”).  The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap.

 

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In the case of a Change of Control pursuant to which Common Stock is or will be converted into cash, securities or other property or assets (including any combination thereof) (the “ Alternative Form Consideration ”), a holder of Class F Preferred Stock shall receive upon conversion of such Class F Preferred Stock the kind and amount of Alternative Form Consideration which such holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of shares of Common Stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control (the “ Alternative Conversion Consideration ”; the Common Stock Conversion Consideration or the Alternative Conversion Consideration, whichever shall be applicable to a Change of Control, is referred to herein as the “ Conversion Consideration ”).

 

If the holders of Common Stock have the opportunity to elect the form of consideration to be received in the Change of Control, the Conversion Consideration in respect of such Change of Control will be deemed to be the kind and amount of consideration actually received by holders of a majority of the outstanding shares of Common Stock that made or voted for such an election (if electing between two types of consideration) or holders of a plurality of the outstanding shares of Common Stock that made or voted for such an election (if electing between more than two types of consideration), as the case may be, and will be subject to any limitations to which all holders of Common Stock are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in such Change of Control.

 

(2)                                   The Corporation will not issue fractional shares of Common Stock upon the conversion of Class F Preferred Stock in connection with a Change of Control.  Instead, the Corporation will make, and the holders of Class F Preferred Stock shall be entitled to receive, a cash payment equal to the value of such fractional shares based upon the Common Stock Price used in determining the Common Stock Conversion Consideration for such Change of Control.

 

(3)                                   Within 15 days following the occurrence of a Change of Control, the Corporation will provide to holders of Class F Preferred Stock a notice of the occurrence of the Change of Control that describes the resulting Change of Control Conversion Right, which notice shall be delivered to the holders of record of the shares of Class F Preferred Stock at their addresses as they appear on the Corporation’s share transfer records and notice shall also be provided to the Corporation’s transfer agent. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the conversion of any share of Class F Preferred Stock except as to the holder to whom notice was defective or not given. Each notice shall state: (i) the events constituting the Change of Control; (ii) the date of the Change of Control; (iii) the

 

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last date on which the holders of Class F Preferred Stock may exercise their Change of Control Conversion Right; (iv) the method and period for calculating the Common Stock Price; (v) the Change of Control Conversion Date; (vi) that if, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem all or any shares of the Class F Preferred Stock, the holders will not be able to convert the shares of Class F Preferred Stock called for redemption and such shares of Class F Preferred Stock shall be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vii) if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Class F Preferred Stock; (viii) the name and address of the paying agent, transfer agent and conversion agent for the Class F Preferred Stock; (ix) the procedures that the holders of Class F Preferred Stock must follow to exercise the Change of Control Conversion Right (including procedures for surrendering shares for conversion through the facilities of a Depositary), including the form of conversion notice to be delivered by such holders as described below; and (x) the last date on which holders of Class F Preferred Stock may withdraw shares surrendered for conversion and the procedures such holders must follow to effect such a withdrawal.

 

(4)                                   The Corporation shall issue a press release containing such notice for publication on Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), and post notice on the Corporation’s website, in any event prior to the opening of business on the first Business Day following any date on which the Corporation provides notice pursuant to Subparagraph I(3) above to the holders of Class F Preferred Stock.

 

(5)                                   To exercise the Change of Control Conversion Right, the holders of shares of Class F Preferred Stock shall be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) representing the shares of Class F Preferred Stock to be converted, duly endorsed for transfer (or, in the case of any shares of Class F Preferred Stock held in book-entry form through a Depositary, to deliver, on or before the close of business on the Change of Control Conversion Date, the shares of Class F Preferred Stock to be converted through the facilities of such Depositary), together with a written conversion notice in the form provided by the Corporation, duly completed, to the Corporation’s transfer agent. Such notice shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of shares of Class F Preferred Stock to be converted; and (iii) that the shares of Class F Preferred Stock are to be converted pursuant to the applicable terms of the Class F Preferred Stock.

 

(6)                                   The “ Change of Control Conversion Date ” is the date the Class F Preferred Stock is to be converted, which will be a Business Day selected by the Corporation that is no fewer than 20 days nor more than 35 days after the date on which the Corporation provides the notice to holders of Class F Preferred Stock pursuant to Subparagraph I(3) above.

 

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The “ Common Stock Price ” shall be (i) if the consideration to be received in the Change of Control by the holders of Common Stock is solely cash, the amount of cash consideration per share of Common Stock or (ii) if the consideration to be received in the Change of Control by holders of Common Stock is other than solely cash (x) the average of the closing sale prices per share of Common Stock (or, if no closing sale price is reported, the average of the closing bid and ask prices per share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which the Common Stock is then traded, or (y) the average of the last quoted bid prices for the Common Stock in the over-the-counter market as reported by Pink Sheets LLC or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if the Common Stock is not then listed for trading on a U.S. securities exchange.

 

(7)                                   Holders of Class F Preferred Stock may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the Corporation’s transfer agent prior to the close of business on the Business Day prior to the Change of Control Conversion Date. The notice of withdrawal delivered by any holder must state: (i) the number of withdrawn shares of Class F Preferred Stock; (ii) if certificated shares of Class F Preferred Stock have been surrendered for conversion, the certificate numbers of the withdrawn shares of Class F Preferred Stock; and (iii) the number of shares of Class F Preferred Stock, if any, which remain subject to the holder’s conversion notice.

 

Notwithstanding the foregoing, if any Class F Preferred Stock is held in book-entry form through The Depository Trust Company or a similar depositary (each, a “Depositary”), the conversion notice and/or the notice of withdrawal as applicable shall comply with applicable procedures, if any, of the applicable Depositary.

 

(8)                                   Shares of Class F Preferred Stock as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn shall be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem some or all of the shares of Class F Preferred Stock as described above under Subparagraph F(1) or F(2), in which case only the shares of Class F Preferred Stock properly surrendered for conversion and not properly withdrawn that are not called for redemption will be converted as aforesaid.  If the Corporation elects to redeem shares of Class F Preferred Stock that would otherwise be converted into the applicable Conversion Consideration on a Change of Control Conversion Date, such shares of Class F Preferred Stock shall not be so converted and the holders of such shares shall be entitled to receive on the applicable redemption date the redemption price set forth above in Subparagraph F(1) or F(2), as applicable.

 

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(9)                                   The Corporation will deliver all securities, cash (including, without limitation, cash in lieu of fractional shares of Common Stock) and any other property owing upon conversion no later than the third Business Day following the Change of Control Conversion Date.  Notwithstanding the foregoing, the persons entitled to receive any shares of Common Stock or other securities delivered upon conversion will be deemed to have become the holders of record thereof as of the Change of Control Conversion Date.

 

(10)                             In connection with the exercise of any Change of Control Conversion Right, the Corporation will comply with all federal and state securities laws and stock exchange rules in connection with any conversion of Class F Preferred Stock into shares of Common Stock or other property.  Notwithstanding any other provision contained in these terms of the Class F Preferred Stock, no holder of shares of Class F Preferred Stock will be entitled to convert such shares of Class F Preferred Stock into shares of Common Stock to the extent that receipt of such shares of Common Stock would cause such holder (or any other person) to have Beneficial Ownership or Constructive Ownership (each as defined in Section 7.1 of the Charter or in Subparagraph J(1) below, as applicable) in excess of the Ownership Limit (as defined in Section 7.1 of the Charter or in Subparagraph J(1) below, as applicable).

 

(11)                             The Corporation has reserved and will reserve and keep available at all times, free of any preemptive rights arising by operation of law, under the Charter or bylaws of the Corporation, under any agreement or instrument to which the Corporation or any of its subsidiaries is a party or otherwise, out of its authorized but unissued shares the maximum number of shares of Common Stock issuable upon conversion of the outstanding shares of Class F Preferred Stock until such time as all of the outstanding shares of Class F Preferred Stock shall have been converted, repurchased and retired or redeemed and retired.  The Corporation covenants that all Common Stock, if any, issued upon conversion of the Class F Preferred Stock will upon issue be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof.

 

J.                                         Restrictions on Ownership and Transfer to Preserve Tax Benefit.

 

(1)                                   Definitions.  For the purposes of Paragraph J of these terms of the Class F Preferred Stock, the following terms shall have the following meanings:

 

“Beneficial Ownership” shall mean ownership of Class F Preferred Stock by a Person who is or would be treated as an owner of such Class F Preferred Stock either actually or constructively through the application of Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3)of the Code.  The terms “Beneficial Owner,” “Beneficially Own,” “Beneficially Owns” and “Beneficially Owned” shall have correlative meanings.

 

“Charitable Beneficiary” shall mean one or more beneficiaries of a Trust, as determined pursuant to Subparagraph J(3)(f) of these terms of the Class F Preferred Stock, each of which shall be an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.

 

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“Code” shall mean the Internal Revenue Code of 1986, as amended.  All section references to the Code shall include any successor provisions thereof as may be adopted from time to time.

 

“Constructive Ownership” shall mean ownership of Class F Preferred Stock by a Person who is or would be treated as an owner of such Class F Preferred Stock either actually or constructively through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code.  The terms “Constructive Owner,” “Constructively Own,” “Constructively Owns” and “Constructively Owned” shall have correlative meanings.

 

“Individual” means an individual, a trust qualified under Section 401(a) or 501(c)(17) of the Code, a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, or a private foundation within the meaning of Section 509(a) of the Code, provided that a trust described in Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code shall be excluded from this definition.

 

“IRS” means the United States Internal Revenue Service.

 

“Market Price” shall mean the last reported sales price reported on the New York Stock Exchange of the Class F Preferred Stock on the trading day immediately preceding the relevant date, or if the Class F Preferred Stock is not then traded on the New York Stock Exchange, the last reported sales price of the Class F Preferred Stock on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which the Class F Preferred Stock may be traded, or if the Class F Preferred Stock is not then traded over any exchange or quotation system, then the market price of the Class F Preferred Stock on the relevant date as determined in good faith by the Board of Directors.

 

“MGCL” shall mean the Maryland General Corporation Law, as amended from time to time, and any successor statute hereafter enacted.

 

“Ownership Limit” shall mean 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding Class F Preferred Stock.  The number of shares and value of the outstanding Class F Preferred Stock shall be determined by the Board of Directors in good faith, which determination shall be conclusive for all purposes hereof absent manifest error.

 

“Person” shall mean an Individual, corporation, partnership, limited liability company, estate, trust, joint stock company or other entity; but does not include an underwriter acting in a capacity as such in a public offering of shares of Class F Preferred Stock provided that the ownership of such shares of Class F Preferred Stock by such underwriter would not result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code, or otherwise result in the Corporation failing to qualify as a REIT.

 

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“Prohibited Owner” shall mean, with respect to any purported Transfer, any Person who, but for the provisions of Subparagraph J(2), would have acquired Beneficial or Constructive Ownership of shares of Class F Preferred Stock, and if appropriate in the context, shall also mean any Person who would have been the record owner of the shares that the Prohibited Owner would have so owned.

 

“Purported Beneficial Transferee” shall mean, with respect to any purported Transfer (or other event) which results in a transfer to a Trust, as provided in Subparagraph J(2)(b) of these terms of the Class F Preferred Stock, the Purported Record Transferee, unless the Purported Record Transferee would have acquired or owned shares of Class F Preferred Stock for another Person who is the beneficial transferee or owner of such shares, in which case the Purported Beneficial Transferee shall be such other Person.

 

“Purported Record Transferee” shall mean, with respect to any purported Transfer (or other event) which results in a transfer to a Trust, as provided in Subparagraph J(2)(b) of these terms of the Class F Preferred Stock, the record holder of the Class F Preferred Stock if such Transfer had been valid under Subparagraph J(2)(a) of these terms of the Class F Preferred Stock.

 

“REIT” shall mean a real estate investment trust under Sections 856 through 860 of the Code, and, for purposes of taxation of the Corporation under applicable state law, comparable provisions of the law of such state.

 

“Restriction Termination Date” shall mean the first day after the date hereof on which the Board of Directors determines that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify as a REIT.

 

“Transfer” shall mean any sale, issuance, transfer, gift, assignment, devise or other disposition of Class F Preferred Stock, as well as any other event that causes any Person to Beneficially Own or Constructively Own Class F Preferred Stock, including (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Class F Preferred Stock or (ii) the sale, transfer, assignment or other disposition of any securities (or rights convertible into or exchangeable for Class F Preferred Stock), whether voluntary or involuntary, whether such transfer has occurred of record or through a change in beneficial ownership, Beneficial Ownership or Constructive Ownership (including but not limited to transfers of interests in other entities which result in changes in Beneficial or Constructive Ownership of Class F Preferred Stock), and whether such transfer has occurred by operation of law or otherwise.

 

“Trust” shall mean each of the trusts provided for in Subparagraph J(3) of these terms of the Class F Preferred Stock.

 

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“Trustee” shall mean any Person unaffiliated with the Corporation, a Purported Beneficial Transferee or a Purported Record Transferee, that is appointed by the Corporation to serve as trustee of a Trust.

 

(2)                                   Restriction on Ownership and Transfers.

 

(a)                                   Prior to the Restriction Termination Date:

 

(i)                                      except as provided in Subparagraph J(9) of these terms of the Class F Preferred Stock, no Person shall Beneficially Own Class F Preferred Stock in excess of the Ownership Limit;

 

(ii)                                   except as provided in Subparagraph J(9) of these terms of the Class F Preferred Stock, no Person shall Constructively Own Class F Preferred Stock in excess of the Ownership Limit;

 

(iii)                                no Person shall Beneficially or Constructively Own Class F Preferred Stock which, taking into account any other stock of the Corporation Beneficially or Constructively Owned by such Person, would result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code, or otherwise failing to qualify as a REIT for federal income tax purposes or, at the election of the Board of Directors, comparable provisions of any applicable state law (including but not limited to Beneficial or Constructive Ownership that would result in the Corporation owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation (either directly or indirectly through one or more subsidiaries) from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

 

(b)                                  If prior to the Restriction Termination Date, any Transfer (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE) or other event occurs that, if effective, would result in any Person Beneficially or Constructively Owning Class F Preferred Stock in violation of Subparagraph J(2)(a) of these terms of the Class F Preferred Stock, (1) then that number of shares of Class F Preferred Stock that otherwise would cause such Person to violate Subparagraph J(2)(a) of these terms of the Class F Preferred Stock (rounded up to the nearest whole share) shall be automatically transferred to a Trust for the benefit of a Charitable Beneficiary, as described in Subparagraph J(3), effective as of the close of business on the Business Day prior to the date of such Transfer or other event, and such Purported Beneficial Transferee shall thereafter have no rights in such shares or (2) if, for any reason, the transfer to the Trust described in clause (1) of this sentence is not automatically effective as provided therein to prevent any Person from Beneficially or Constructively Owning Class F Preferred Stock in violation of Subparagraph J(2)(a) of these terms of the Class F Preferred Stock, then the Transfer of that number of shares of Class F Preferred Stock that otherwise would cause any Person to violate Subparagraph J(2)(a) shall be void ab initio , and the Purported Beneficial Transferee shall have no rights in such shares.

 

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(c)           Notwithstanding any other provisions contained herein, prior to the Restriction Termination Date, any Transfer of Class F Preferred Stock (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE) that, if effective, would result in the stock of the Corporation being beneficially owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio , and the intended transferee shall acquire no rights in such Class F Preferred Stock.

 

(3)           Transfers of Class F Preferred Stock in Trust.

 

(a)           Upon any purported Transfer or other event described in Subparagraph J(2)(b) of these terms of the Class F Preferred Stock, such Class F Preferred Stock shall be deemed to have been automatically transferred to the Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries.  Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in a transfer to the Trust pursuant to Subparagraph J(2)(b).  The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation, any Purported Beneficial Transferee, or any Purported Record Transferee.  Each Charitable Beneficiary shall be designated by the Corporation as provided in Subparagraph J(3)(f) of these terms of the Class F Preferred Stock.

 

(b)           Class F Preferred Stock held by the Trustee shall be issued and outstanding Class F Preferred Stock of the Corporation.  The Purported Beneficial Transferee or Purported Record Transferee shall have no rights in the shares of Class F Preferred Stock held by the Trustee.  The Purported Beneficial Transferee or Purported Record Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares of Class F Preferred Stock held in the Trust.

 

(c)           The Trustee shall have all voting rights and rights to dividends with respect to Class F Preferred Stock held in the Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary.  Any dividend or distribution paid to the Purported Record Transferee after the deemed transfer of shares of Class F Preferred Stock, but prior to the discovery by the Corporation that such shares of Class F Preferred Stock have been transferred, to the Trustee shall be paid to the Trustee upon demand (and, if any such dividend or distribution has not been paid to the Trustee prior to the distribution of net sale proceeds to the Purported Record Transferee from the sale of such shares by the Trustee pursuant to Subparagraph J(3)(d) or Subparagraph J(3)(e) below, the Trustee shall be permitted to reduce the amount of such net sale proceeds paid to the Purported Record Transferee by the amount of any such dividend or distribution which has not been paid to the Trustee as aforesaid), and any dividend or distribution declared but unpaid shall be paid when due to the Trustee with respect to such Class F Preferred Stock.  Any dividends or distributions so paid over to the Trustee shall be held in trust for the Charitable Beneficiary.

 

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The Purported Record Transferee and Purported Beneficial Transferee shall have no voting rights with respect to the Class F Preferred Stock held in the Trust and, subject to Maryland law, effective as of the date the Class F Preferred Stock has been transferred to the Trust, the Trustee shall have the authority (at the Trustee’s sole discretion) (i) to rescind as void any vote cast by a Purported Record Transferee with respect to such Class F Preferred Stock prior to the discovery by the Corporation that the Class F Preferred Stock has been transferred to the Trust and (ii) to recast such vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided, however , that if the Corporation has already taken irreversible corporate action, then the Trustee shall not have the authority to rescind and recast such vote.  Notwithstanding any other provision of these terms of the Class F Preferred Stock to the contrary, until the Corporation has received notification that the Class F Preferred Stock has been transferred into a Trust, the Corporation shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of stockholders.

 

(d)           Within 20 days of receiving notice from the Corporation that shares of Class F Preferred Stock have been transferred to the Trust, the Trustee of the Trust shall sell the shares of Class F Preferred Stock held in the Trust to a Person, designated by the Trustee, whose ownership of the shares of Class F Preferred Stock will not violate the ownership limitations set forth in Subparagraph J(2)(a).  Upon such sale, the interest of the Charitable Beneficiary in the shares of Class F Preferred Stock sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Purported Record Transferee and to the Charitable Beneficiary as provided in this Subparagraph J(3)(d).  The Purported Record Transferee shall receive the lesser of (1) the price paid by the Purported Record Transferee or Purported Beneficial Transferee, as the case may be, for the shares of Class F Preferred Stock in the transaction that resulted in such transfer to the Trust (or, if the event which resulted in the transfer to the Trust did not involve a purchase of such shares of Class F Preferred Stock for fair value, the Market Price of such shares of Class F Preferred Stock on the day of the event which resulted in the transfer of such shares of Class F Preferred Stock to the Trust) and (2) the price per share received by the Trustee (net of any commissions and other expenses of sale) from the sale or other disposition of the shares of Class F Preferred Stock held in the Trust.  Any net sales proceeds in excess of the amount payable to the Purported Record Transferee shall be immediately paid to the Charitable Beneficiary together with any dividends or other distributions thereon.  If, prior to the discovery by the Corporation that shares of such Class F Preferred Stock have been transferred to the Trust, such shares of Class F Preferred Stock are sold by a Purported Record Transferee then (i) such shares of Class F Preferred Stock shall be deemed to have been sold on behalf of the Trust and (ii) to the extent that the Purported Record Transferee or Purported Beneficial Transferee, as the case may be, received an amount for such shares of Class F Preferred Stock that exceeds the amount that such Purported Record Transferee or Purported Beneficial Transferee, as the case may be, was entitled to receive pursuant to this Subparagraph J(3)(d), such excess shall be paid to the Trustee upon demand.

 

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(e)           Class F Preferred Stock transferred to the Trust shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price paid by the Purported Record Transferee or Purported Beneficial Transferee, as the case may be, for the shares of Class F Preferred Stock in the transaction that resulted in such transfer to the Trust (or, if the event which resulted in the transfer to the Trust did not involve a purchase of such shares of Class F Preferred Stock for fair value, the Market Price of such shares of Class F Preferred Stock on the day of the event which resulted in the transfer of such shares of Class F Preferred Stock to the Trust) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer.  The Corporation shall have the right to accept such offer until the Trustee has sold the shares of Class F Preferred Stock held in the Trust pursuant to Subparagraph J(3)(d).  Upon such a sale to the Corporation, the interest of the Charitable Beneficiary in the shares of Class F Preferred Stock sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Purported Record Transferee and any dividends or other distributions held by the Trustee with respect to such Class F Preferred Stock shall thereupon be paid to the Charitable Beneficiary.

 

(f)            By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust such that the Class F Preferred Stock held in the Trust would not violate the restrictions set forth in Subparagraph J(2)(a) in the hands of such Charitable Beneficiary.  Neither the failure of the Corporation to make such designation nor the failure of the Corporation to appoint the Trustee before the automatic transfer provided for in Subparagraph J(2)(b) shall make such transfer ineffective, provided that the Corporation thereafter makes such designation and appointment.

 

(4)           Remedies for Breach.  If the Board of Directors or, if permitted by the MGCL, a committee thereof or other designees shall at any time determine in good faith that a Transfer or other event has taken place in violation of Subparagraph J(2)(a) or (c) of these terms of the Class F Preferred Stock or that a Person intends to acquire, has attempted to acquire or may acquire beneficial ownership (determined without reference to any rules of attribution), Beneficial Ownership or Constructive Ownership of any shares of Class F Preferred Stock of the Corporation in violation of Subparagraph J(2)(a) or (c) of these terms of the Class F Preferred Stock, the Board of Directors or, if permitted by the MGCL, a committee thereof or other designees, shall take such action as it deems necessary or advisable to refuse to give effect or to prevent such Transfer or to preserve the Corporation’s status as a REIT, including, but not limited to, causing the Corporation to redeem shares of Class F Preferred Stock for cash at a redemption price of $25.00 per share plus (except as otherwise provided in the first sentence of the second paragraph of Subparagraph F(3) above) accrued and unpaid dividends thereon to the date fixed for redemption, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer; provided, however , that any Transfers (or, in the case of events other than a Transfer, ownership or Constructive Ownership or Beneficial Ownership) in violation of Subparagraph J(2)(a) of these terms of the Class F Preferred Stock shall automatically result in the transfer to a Trust as described in Subparagraph J(2)(b) and any Transfer in violation of Subparagraph J(2)(c) shall automatically be void ab initio irrespective of any action (or non-action) by the Board of Directors.

 

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(5)           Notice of Restricted Transfer.  Any Person who acquires or attempts or intends to acquire shares of Class F Preferred Stock in violation of Subparagraph J(2)(a) or (c) of these terms of the Class F Preferred Stock, or any Person who is a Purported Beneficial Transferee such that an automatic transfer to a Trust results under Subparagraph J(2)(b) of these terms of the Class F Preferred Stock, shall immediately give notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer on the Corporation’s status as a REIT.

 

(6)           Owners Required to Provide Information.  Prior to the Restriction Termination Date each Person who is a beneficial owner or Beneficial Owner or Constructive Owner of Class F Preferred Stock and each Person (including the shareholder of record) who is holding Class F Preferred Stock for a beneficial owner or Beneficial Owner or Constructive Owner shall provide to the Corporation such information that the Corporation may request, in good faith, in order to determine the Corporation’s status as a REIT.

 

(7)           Remedies Not Limited.  Nothing contained in these terms of the Class F Preferred Stock (but subject to Subparagraph J(13) of these terms of the Class F Preferred Stock) shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its shareholders by preservation of the Corporation’s status as a REIT.

 

(8)           Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Paragraph J of these terms of the Class F Preferred Stock, including any definition contained in Subparagraph J(1), the Board of Directors shall have the power to determine the application of the provisions of this Paragraph J with respect to any situation based on the facts known to it (subject, however, to the provisions of Subparagraph J(13) of these terms of the Class F Preferred Stock).  In the event this Paragraph J requires an action by the Board of Directors and these terms of the Class F Preferred Stock fail to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of this Paragraph J. Absent a decision to the contrary by the Board of Directors (which the Board of Directors may make in its sole and absolute discretion), if a Person would have (but for the remedies set forth in Subparagraph J(2)) acquired Beneficial or Constructive Ownership of Class F Preferred Stock in violation of Subparagraph J(2)(a), such remedies (as applicable) shall apply first to the shares of Class F Preferred Stock which, but for such remedies, would have been actually owned by such Person, and second to shares of Class F Preferred Stock which, but for such remedies, would have been Beneficially Owned or Constructively Owned (but not actually owned) by such Person, pro rata among the Persons who actually own such shares of Class F Preferred Stock based upon the relative number of the shares of Class F Preferred Stock held by each such Person.

 

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(9)           Exceptions.

 

(a)           Subject to Subparagraph J(2)(a)(iii), the Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a Person from the limitation on a Person Beneficially Owning shares of Class F Preferred Stock in violation of Subparagraph J(2)(a)(i) if the Board of Directors determines that such exemption will not jeopardize the Corporation’s status as a REIT under the Code and the Board of Directors otherwise decides the action would be in the Corporation’s best interests.

 

(b)           Subject to Subparagraph J(2)(a)(iii), the Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a Person from the limitation on a Person Constructively Owning shares of Class F Preferred Stock in violation of Subparagraph J(2)(a)(ii) if the Board of Directors determines that such exemption will not jeopardize the Corporation’s status as a REIT under the Code and the Board of Directors otherwise decides the action would be in the Corporation’s best interests.

 

(c)           Prior to granting an exception to any Person pursuant to Subparagraph J(9)(a) or (b) of these terms of the Class F Preferred Stock, the Board of Directors may, as it may deem necessary or advisable in order to determine or ensure the Corporation’s status as a REIT, (i) require such Person to make such representations or undertakings as are necessary to ascertain that such Person’s Beneficial Ownership or Constructive Ownership, as the case may be, will not violate Subparagraph J(2)(a)(i) or (ii) above, as the case may be, or agree that any violation or attempted violation of such representations or undertakings (or other action that is contrary to the restrictions contained in Subparagraph J(2)(a) above) will result in the Class F Preferred Stock being transferred to a Trust in accordance with Subparagraph J(2)(b) above; and/or (ii) require a ruling from the Internal Revenue Service and/or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors in its sole discretion.

 

(10)         Legends.  Each certificate for Class F Preferred Stock shall bear substantially the following legends:

 

“CLASSES OF STOCK”

 

“THE COMPANY IS AUTHORIZED TO ISSUE TWO CLASSES OF STOCK WHICH ARE DESIGNATED AS COMMON STOCK AND PREFERRED STOCK.  THE PREFERRED STOCK MAY BE ISSUED IN ONE OR MORE SERIES OR CLASSES.  THE BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE THE PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF EACH SERIES OR CLASS OF PREFERRED STOCK BEFORE THE ISSUANCE OF ANY SUCH SERIES OR CLASS OF PREFERRED STOCK.  THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO ANY SHAREHOLDER MAKING A REQUEST THEREFOR, A COPY OF THE COMPANY’S CHARTER AND A FULL STATEMENT OF THE INFORMATION REQUIRED BY SECTION 2-211(b) OF THE CORPORATIONS AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND WITH RESPECT TO THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,

 

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RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE COMPANY HAS THE AUTHORITY TO ISSUE AND, SINCE THE COMPANY IS AUTHORIZED TO ISSUE PREFERRED STOCK IN SERIES OR CLASSES, (i) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES OR CLASS TO THE EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES OR CLASSES.  REQUEST FOR SUCH WRITTEN STATEMENT MUST BE DIRECTED TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE.  THE FOREGOING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CHARTER OF THE COMPANY.”

 

“RESTRICTION ON OWNERSHIP AND TRANSFER”

 

“THE SHARES OF 6.625% MONTHLY INCOME CLASS F CUMULATIVE REDEEMABLE PREFERRED STOCK (“CLASS F PREFERRED STOCK”) REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE, AMONG OTHERS, OF THE COMPANY’S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”).  SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE CHARTER, (i) NO PERSON MAY BENEFICIALLY OWN SHARES OF THE COMPANY’S CLASS F PREFERRED STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING CLASS F PREFERRED STOCK OF THE COMPANY; (ii) NO PERSON MAY CONSTRUCTIVELY OWN SHARES OF THE COMPANY’S CLASS F PREFERRED STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING CLASS F PREFERRED STOCK OF THE COMPANY; (iii) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN CLASS F PREFERRED STOCK THAT, TAKING INTO ACCOUNT ANY OTHER STOCK OF THE COMPANY BENEFICIALLY OR CONSTRUCTIVELY OWNED BY SUCH PERSON, WOULD RESULT IN THE COMPANY BEING “CLOSELY HELD” UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE COMPANY TO FAIL TO QUALIFY AS A REIT; AND (iv) NO PERSON MAY TRANSFER CLASS F PREFERRED STOCK IF SUCH TRANSFER WOULD RESULT IN THE STOCK OF THE COMPANY BEING BENEFICIALLY OWNED BY FEWER THAN 100 PERSONS.  ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN CLASS F PREFERRED STOCK WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN CLASS F PREFERRED STOCK IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE COMPANY.  IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP REFERRED TO IN CLAUSE (i), (ii) OR (iii) ABOVE ARE

 

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VIOLATED, THE CLASS F PREFERRED STOCK REPRESENTED HEREBY IN EXCESS OF SUCH RESTRICTIONS WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES.  IN ADDITION, THE COMPANY MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED IN THE TERMS OF THE CLASS F PREFERRED STOCK AND AS OTHERWISE SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE.  FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO.  ALL TERMS IN THIS LEGEND WHICH ARE DEFINED IN THE TERMS OF THE CLASS F PREFERRED STOCK SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN SUCH TERMS, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, AND ANY OTHER INFORMATION REQUIRED BY SECTION 2-211(d) OF THE CORPORATIONS AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND, WILL BE FURNISHED TO EACH HOLDER OF CLASS F PREFERRED STOCK ON REQUEST AND WITHOUT CHARGE.  REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE COMPANY AT THE COMPANY’S PRINCIPAL OFFICE.  THE FOREGOING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CHARTER OF THE COMPANY.”

 

Instead of the foregoing legend, the certificate may state that the Class F Preferred Stock is subject to certain restrictions on ownership and transfer and that the Corporation will furnish a full statement about the restrictions on transferability and ownership of the Class F Preferred Stock to any stockholder of the Corporation on request and without charge.  Such request must be made to the Secretary of the Corporation at the Corporation’s principal office.

 

(11)         Severability.  Without limitation to Subparagraph K(5), if any provision of this Paragraph J or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, then, to the extent permitted by law, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.

 

(12)         NYSE.  Nothing in this Paragraph J shall preclude the settlement of any transaction entered into through the facilities of the NYSE.  The shares of Class F Preferred Stock that are the subject of such transaction shall continue to be subject to the provisions of this Paragraph J after such settlement

 

(13)         Applicability of Paragraph J.  The provisions set forth in this Paragraph J shall apply to the Class F Preferred Stock notwithstanding any contrary provisions of the Class F Preferred Stock provided for elsewhere in these terms of the Class F Preferred Stock.

 

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K.            Miscellaneous.

 

(1)           Conversion.  Except as provided in Paragraph I, the Class F Preferred Stock is not convertible into or exchangeable for any other property or securities of the Corporation.

 

(2)           Preemptive Rights.  No holder of shares of Class F Preferred Stock, as such, shall have any preemptive or preferential right to subscribe for or to purchase any additional shares of any class or series of stock of the Corporation or any securities convertible into or exercisable or exchangeable for shares of any class or series of stock of the Corporation.

 

(3)           Office or Agency.  The Corporation will at all times maintain an office or agency in one of the 48 contiguous States of the United States of America where shares of Class F Preferred Stock may be surrendered for payment (including upon redemption), registration of transfer or exchange.

 

(4)           Status of Redeemed, Converted and Reacquired Class F Preferred Stock.  In the event any shares of Class F Preferred Stock shall be redeemed, converted as provided in Paragraph I or otherwise reacquired by the Corporation, the shares so redeemed, converted or reacquired shall become authorized but unissued shares of Class F Preferred Stock, available for future issuance and reclassification by the Corporation.

 

(5)           Severability.  If any preference, conversion or other right, voting power, restriction, limitation as to dividends or other distributions, qualification, term or condition of redemption or other term of the Class F Preferred Stock is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, then, to the extent permitted by law, all other preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms or conditions of redemption and other terms of the Class F Preferred Stock which can be given effect without the invalid, unlawful or unenforceable preference, conversion or other right, voting power, restriction, limitation as to dividends or other distributions, qualification, term or condition of redemption or other term of the Class F Preferred Stock shall remain in full force and effect and shall not be deemed dependent upon any other such preference, conversion or other right, voting power, restriction, limitation as to dividends or other distributions, qualification, term or condition of redemption or other term of the Class F Preferred Stock unless so expressed herein; provided that Paragraph J shall be governed by Subparagraph J(11) and not this Subparagraph K(5).

 

(6)           Terms of the Class F Preferred Stock.  All references to the “terms” of the Class F Preferred Stock (and all similar references) shall include all of the preferences, conversion and other rights, voting powers, restrictions and limitations as to dividends and other distributions, qualifications, terms and conditions of redemption and other terms and provisions set forth in Paragraphs A through K, inclusive, hereof.

 

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SECOND:  The shares have been reclassified by the Board of Directors, or a duly authorized committee thereof, under the authority contained in the Charter.

 

THIRD:  These Articles Supplementary have been approved by the Board of Directors or a duly authorized committee thereof in the manner and by the vote required by law.

 

FOURTH:  The undersigned Vice Chairman and Chief Executive Officer of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Vice Chairman and Chief Executive Officer of the Corporation acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

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IN WITNESS WHEREOF, REALTY INCOME CORPORATION has caused these Articles Supplementary to be executed under seal in its name and on its behalf by its Vice Chairman and Chief Executive Officer and attested to by its Secretary on this 3 rd  day of February, 2012.

 

 

REALTY INCOME CORPORATION

 

 

 

 

 

By:

/s/ Thomas A. Lewis

 (SEAL)

 

 

Thomas A. Lewis

 

 

Vice Chairman and Chief Executive Officer

 

 

 

 

 

Attest:

 

 

 

 

 

/s/ Michael R. Pfeiffer

 

Michael R. Pfeiffer

 

Executive Vice President,

 

General Counsel and Secretary

 

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Exhibit 4.1

CERTIFICATE OF STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND SEE REVERSE FOR CERTAIN DEFINITIONS AND IMPORTANT NOTICE OF TRANSFER RESTRICTIONS AND OTHER INFORMATION CUSIP 756109 80 7 THIS CERTIFIES THAT is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF 6.625% MONTHLY INCOME CLASS F CUMULATIVE REDEEMABLE PREFERRED STOCK, $0.01 PAR VALUE, OF REALTY INCOME CORPORATION transferable on the books of the Company by the holder hereof in person or by Attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. This certificate and the shares represented hereby are issued and are subject to all of the provisions of the Charter and the Bylaws of the Company and any amendments thereto. IN WITNESS WHEREOF, the said Company has caused this certificate to be signed by facsimile signatures of its duly authorized officers. Dated: COUNTERSIGNED AND REGISTERED: WELLS FARGO BANK, N.A. TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE PF AMERICAN FINANCIAL PRINTING INCORPORATED – MINNEAPOLIS SECRETARY CHAIRMAN

 


IMPORTANT NOTICE CLASSES OF STOCK THE COMPANY IS AUTHORIZED TO ISSUE TWO CLASSES OF STOCK WHICH ARE DESIGNATED AS COMMON STOCK AND PREFERRED STOCK. THE PREFERRED STOCK MAY BE ISSUED IN ONE OR MORE SERIES OR CLASSES. THE BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE THE PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF EACH SERIES OR CLASS OF PREFERRED STOCK BEFORE THE ISSUANCE OF ANY SUCH SERIES OR CLASS OF PREFERRED STOCK. THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO ANY SHAREHOLDER MAKING A REQUEST THEREFOR, A COPY OF THE COMPANY’S CHARTER AND A FULL STATEMENT OF THE INFORMATION REQUIRED BY SECTION 2-211(b) OF THE CORPORATIONS AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND WITH RESPECT TO THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE COMPANY HAS THE AUTHORITY TO ISSUE AND, SINCE THE COMPANY IS AUTHORIZED TO ISSUE PREFERRED STOCK IN SERIES OR CLASSES, (i) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES OR CLASS TO THE EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES OR CLASSES. REQUEST FOR SUCH WRITTEN STATEMENT MUST BE DIRECTED TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE. THE FOREGOING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CHARTER OF THE COMPANY. RESTRICTION ON OWNERSHIP AND TRANSFER THE SHARES OF 6.625% MONTHLY INCOME CLASS F CUMULATIVE REDEEMABLE PREFERRED STOCK (“CLASS F PREFERRED STOCK”) REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE, AMONG OTHERS, OF THE COMPANY’S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE CHARTER, (i) NO PERSON MAY BENEFICIALLY OWN SHARES OF THE COMPANY’S CLASS F PREFERRED STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING CLASS F PREFERRED STOCK OF THE COMPANY; (ii) NO PERSON MAY CONSTRUCTIVELY OWN SHARES OF THE COMPANY’S CLASS F PREFERRED STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING CLASS F PREFERRED STOCK OF THE COMPANY; (iii) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN CLASS F PREFERRED STOCK THAT, TAKING INTO ACCOUNT ANY OTHER STOCK OF THE COMPANY BENEFICIALLY OR CONSTRUCTIVELY OWNED BY SUCH PERSON, WOULD RESULT IN THE COMPANY BEING “CLOSELY HELD” UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE COMPANY TO FAIL TO QUALIFY AS A REIT; AND (iv) NO PERSON MAY TRANSFER CLASS F PREFERRED STOCK IF SUCH TRANSFER WOULD RESULT IN THE STOCK OF THE COMPANY BEING BENEFICIALLY OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN CLASS F PREFERRED STOCK WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN CLASS F PREFERRED STOCK IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE COMPANY. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP REFERRED TO IN CLAUSE (i), (ii) OR (iii) ABOVE ARE VIOLATED, THE CLASS F PREFERRED STOCK REPRESENTED HEREBY IN EXCESS OF SUCH RESTRICTIONS WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE COMPANY MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED IN THE TERMS OF THE CLASS F PREFERRED STOCK AND AS OTHERWISE SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN THIS LEGEND WHICH ARE DEFINED IN THE TERMS OF THE CLASS F PREFERRED STOCK SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN SUCH TERMS, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, AND ANY OTHER INFORMATION REQUIRED BY SECTION 2-211(d) OF THE CORPORATIONS AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND, WILL BE FURNISHED TO EACH HOLDER OF CLASS F PREFERRED STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE COMPANY AT THE COMPANY’S PRINCIPAL OFFICE. THE FOREGOING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CHARTER OF THE COMPANY. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM – as tenants in common UTMA – Custodian (Cust) (Minor) TEN ENT – as tenants by the entireties under Uniform Transfers/Gifts to Minors JT TEN – as joint tenants with right of survivorship Act and not as tenants in common (State) Additional abbreviations may also be used though not in above list. For value received hereby sell, assign, and transfer unto (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE) Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated X X NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. SIGNATURE GUARANTEED ALL GUARANTEES MUST BE MADE BY A FINANCIAL INSTITUTION (SUCH AS A BANK OR BROKER) WHICH IS A PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM (“STAMP”), THE NEW YORK STOCK EXCHANGE, INC. MEDALLION SIGNATURE PROGRAM (“MSP”), OR THE STOCK EXCHANGES MEDALLION PROGRAM (“SEMP”) AND MUST NOT BE DATED. GUARANTEES BY A NOTARY PUBLIC ARE NOT ACCEPTABLE. PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

 

 

Exhibit 5.1

 

February 3, 2012

 

Realty Income Corporation

600 La Terraza Boulevard

Escondido, California  92025

 

Re:          Registration Statement on Form S-3 (File No. 333-158169)

 

Ladies and Gentlemen:

 

We have served as Maryland counsel to Realty Income Corporation, a Maryland corporation (the “Company”), in connection with certain matters of Maryland law arising out of the sale and issuance by the Company of up to 14,950,000 shares (the “Shares”) of 6.625% Monthly Income Class F Cumulative Redeemable Preferred Stock, par value $0.01 per share, of the Company (including 1,950,000 Shares that may be purchased by the Underwriters (as defined herein) solely to cover overallotments) pursuant to a Purchase Agreement, dated January 31, 2012 (the “Purchase Agreement”), by and among the Company and Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, RBC Capital Markets, LLC  and UBS Securities LLC , as representatives of the several underwriters named in Schedule A thereto (collectively, the “Underwriters”).  This firm did not participate in the drafting or negotiation of the Purchase Agreement.

 

In connection with our representation of the Company, and as a basis for the opinion hereinafter set forth, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (hereinafter collectively referred to as the “Documents”):

 

1.             The Registration Statement, filed by the Company with the Commission under the 1933 Act;

 

2.             The prospectus, dated March 24, 2009, as supplemented by a prospectus supplement, dated January 31, 2012, filed with the Commission pursuant to Rule 424(b) of the General Rules and Regulations promulgated under the 1933 Act;

 

3.             The Company’s Current Report on Form 8-K in connection with the Purchase Agreement (the “Form 8-K”), to be filed with the Commission under the 1933 Act on or about the date hereof;

 



 

4.             The charter of the Company (the “Charter”), including the Articles Supplementary for the Shares, certified by the State Department of Assessments and Taxation of Maryland (the “SDAT”);

 

5.             The Amended and Restated Bylaws of the Company, certified as of the date hereof by an officer of the Company;

 

6              A certificate of the SDAT as to the good standing of the Company, dated as of a recent date;

 

7.             Resolutions adopted by the Board of Directors of the Company (the “Board of Directors”), relating to (a) the registration, sale and issuance of the Shares, (b) the execution, delivery and performance by the Company of the Purchase Agreement and (c) the appointment of a Pricing Committee of the Board of Directors (the “Pricing Committee”) and the delegation to the Pricing Committee of all of the powers of the Board of Directors that may be delegated to the Pricing Committee with respect to the sale and issuance of the Shares, certified as of the date hereof by an officer of the Company;

 

8.             Resolutions adopted by the Pricing Committee, (a) fixing the terms for the issuance and sale of the Shares, including the number and price thereof, and (b) authorizing the execution, delivery and performance of the Purchase Agreement, certified as of the date hereof by an officer of the Company;

 

9.             The Purchase Agreement;

 

10.           A certificate executed by an officer of the Company, dated as of the date hereof; and

 

11.           Such other documents and matters as we have deemed necessary or appropriate to express the opinion set forth below, subject to the assumptions, limitations and qualifications stated herein.

 

In expressing the opinion set forth below, we have assumed the following:

 

1.             Each individual executing any of the Documents, whether on behalf of such individual or another person, is legally competent to do so.

 

2.             Each individual executing any of the Documents on behalf of a party (other than the Company) is duly authorized to do so.

 

2



 

3.             Each of the parties (other than the Company) executing any of the Documents has duly and validly executed and  delivered each of the Documents to which such party is a signatory, and such party’s obligations set forth therein are legal, valid and binding and are enforceable in accordance with all stated terms.

 

4.             All Documents submitted to us as originals are authentic.  The form and content of all Documents submitted to us as unexecuted drafts do not differ in any respect relevant to this opinion from the form and content of such Documents as executed and delivered.  All Documents submitted to us as certified or photostatic copies conform to the original documents.  All signatures on all such Documents are genuine.  All public records reviewed or relied upon by us or on our behalf are true and complete.  All representations, warranties, statements and information contained in the Documents are true and complete.  There has been no oral or written modification of or amendment to any of the Documents, and there has been no waiver of any provision of any of the Documents, by action or omission of the parties or otherwise, other than written modifications, amendments and waivers reviewed by us.

 

5.             The Shares will not be issued in violation of any restriction or limitation contained in Article VII of the Charter.

 

6.             Upon the issuance of any of the Conversion Shares (as hereinafter defined), the total number of shares of the Company’s common stock, par value $0.01 per share (“Common Stock”)  issued and outstanding will not exceed the total number of shares of Common Stock that the Company is then authorized to issue under the Charter.

 

Based upon the foregoing, and subject to the assumptions, limitations and qualifications stated herein, it is our opinion that:

 

1.             The Company is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with the SDAT.

 

2.             The issuance of the Shares has been duly authorized and, when issued and delivered by the Company pursuant to the Purchase Agreement against payment of the purchase price therefor specified in the Purchase Agreement, the Shares will be validly issued, fully paid and nonassessable.

 

3.             The issuance of shares of Common Stock (“Conversion Shares”) upon conversion of the Shares has been duly authorized for issuance upon conversion of the Shares by all necessary corporate action on the part of the Company and, when issued and delivered upon

 

3



 

conversion of the Shares in accordance with the Articles Supplementary the Conversion Shares will be validly issued, fully paid and nonassessable.

 

The foregoing opinion is limited to the laws of the State of Maryland and we do not express any opinion herein concerning any other law.  We express no opinion as to compliance with any federal or state securities laws, including the securities laws of the State of Maryland.  To the extent that any matter as to which our opinion is expressed herein would be governed by the laws of any jurisdiction other than the State of Maryland, we do not express any opinion on such matter.  The opinion expressed herein is subject to the effect of any judicial decision which may permit the introduction of parol evidence to modify the terms or the interpretation of agreements.

 

The opinion expressed herein is limited to the matters specifically set forth herein and no other opinion shall be inferred beyond the matters expressly stated.  We assume no obligation to supplement this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof.

 

This opinion is being furnished to you for submission to the Commission as an exhibit to the Form 8-K.

 

We hereby consent to the filing of this opinion as an exhibit to the Form 8-K.  In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act.

 

 

Very truly yours,

 

 

 

 

 

/s/ Venable LLP

 

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