RESOLUTIONS OF THE PRICING COMMITTEE
OF THE BOARD OF DIRECTORS OF
REALTY INCOME CORPORATION
WHEREAS, in resolutions adopted on July 19, 1995 (the "Resolutions"),
the Board of Directors authorized the registration, issuance and sale of up to
$200 million of securities, such securities to be either debt securities, common
stock or preferred stock (collectively, the "Securities"); and
WHEREAS, pursuant to the Resolutions, the Company filed with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-3 (File No. 33-95374) (as amended, the "Registration Statement")
relating to the Securities and the Commission declared the Registration
Statement effective on September 15, 1995;
WHEREAS, the Board of Directors has determined to issue a series of
debt securities due 2007 (the "Notes") pursuant to an indenture dated as of May
6, 1997 (the "Indenture"), between the Company and The Bank of New York, as
Trustee (the "Trustee"), and to offer and sell the Notes to Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation, J.P. Morgan Securities Inc. and Salomon Brothers Inc (the
"Underwriters"), pursuant to a purchase agreement (the "Underwriting Agreement")
between the Company and the Underwriters for reoffering by the Underwriters to
the public; and
WHEREAS, pursuant to Resolutions adopted by the Board of Directors on
March 10, 1997, the Board of Directors established a Pricing Committee of the
Board of Directors for the purpose of approving, among other things, the amount,
manner and terms of the issuance and sale of the Notes and appointed William E.
Clark, Richard J. VanDerhoff, Thomas A. Lewis and Donald R. Cameron to serve on
such committee.
NOW THEREFORE, BE IT RESOLVED, that in accordance with Section 301 of
the Indenture, the following terms of the Notes are hereby established
(capitalized terms used in these resolutions and not otherwise defined herein
having the same definitions as in the Indenture):
(1) The Notes shall constitute a series of Securities having the
title "7 3/4% Notes due 2007."
(2) The aggregate principal amount of Notes that may be authenticated
and delivered under the Indenture (except for Notes authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Notes pursuant to Sections 304, 305, 306, 906 1107 or 1305 of the
Indenture) shall be limited in aggregate principal amount to $110,000,000.
Such series may not be reopened for the issuance of additional Securities
of such series.
(3) The entire outstanding principal of the Notes shall be payable on
May 6, 2007 (the "Maturity Date").
(4) The rate at which the Notes shall bear interest shall be 7 3/4%
per annum; the date from which such interest shall accrue shall be May 6,
1997; the Interest Payment Dates on which such interest will be payable
shall be May 6 and November 6 of each year, beginning November 6, 1997; the
Regular Record Dates for the interest payable on the Notes on any Interest
Payment Date shall be April 21 or October 22, as the case may be,
immediately preceding the applicable Interest Payment Date; and the basis
upon which interest shall be calculated shall be that of a 360-day year
consisting of twelve 30-day months. If any principal of or premium, if
any, or interest on any of the Notes is not paid when due, then such
overdue principal and, to the extent permitted by law, such overdue premium
or interest, as the case may be, shall bear interest, until paid or until
such payment is duly provided for, at the rate of 7 3/4% per annum.
(5) The place where the principal of, premium, if any, and interest
on the Notes shall be payable, where Notes may be surrendered for the
registration of transfer or exchange, and where notices or demands to or
upon the Company in respect of the Notes and the Indenture may be served
shall be the office or agency maintained by the Company for such purpose in
the Borough of Manhattan, The City of New York, which shall initially be
the Corporate Trust Office of the Trustee at 101 Barclay St., Floor 21
West, New York, New York 10286.
(6) The Notes shall be redeemable at any time at the option of the
Company, in whole or from time to time in part, at a Redemption Price
(payable in Dollars) equal to the sum of (i) the principal amount of the
Notes being redeemed plus accrued interest thereon to the Redemption Date
and (ii) the Make-Whole Amount (as defined in the form of Note attached
hereto as Exhibit A), if any, with respect to such Notes; provided that
installments of interest on Notes whose Stated Maturity is on or prior to
the relevant Redemption Date shall be payable to the Holders of such Notes
(or one or more Predecessor Securities) registered as such at the close of
business on the relevant record dates according to their terms and the
provisions of Section 307 of the Indenture. As used in the Indenture and
these resolutions, all references to "premium" and "premium, if any" on the
Notes, and all similar references with respect to the Notes, shall be
deemed to refer to and include the Make-Whole Amount, if any.
(7) The Notes shall not be redeemable at the option of any Holder
thereof, upon the occurrence of any particular circumstances or otherwise.
The Notes will not have the benefit of any sinking fund.
(8) The Notes shall be issued in denominations of $1,000 and any
integral multiple thereof.
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(9) The Trustee shall be the initial Security Registrar, transfer
agent and Paying Agent for the Notes.
(10) The entire outstanding principal amount of the Notes shall be
payable upon declaration of acceleration of the maturity of the Notes
pursuant to Section 502 of the Indenture.
(11) Payments of the principal of, premium, if any, and interest on
the Notes shall be made in Dollars, and the Notes shall be denominated in
Dollars.
(12) The amount of payments of principal of, premium, if any, and
interest on the Notes shall not be determined with reference to an index,
formula or other similar method.
(13) Payments of the principal of, premium, if any, and interest on
the Notes shall be made in Dollars, and the Holders have no right to elect
the currency in which such payments are made.
(14) In addition to the covenants of the Company set forth in the
Indenture, the covenants set forth in the form of Note attached hereto as
Exhibit A under the captions "Limitation on Incurrence of Total Debt,"
"Limitation on Incurrence of Secured Debt," "Debt Service Coverage Ratio"
and "Maintenance of Total Unencumbered Assets" (collectively, the
"Additional Covenants") shall be and hereby are added to the Indenture for
the benefit of the Notes, and the Additional Covenants, together with the
defined terms (the "Additional Definitions") set forth in such form of Note
under the caption "Certain Definitions," are hereby incorporated by
reference in and made a part of these resolutions and the Indenture as if
set forth in full herein and therein; provided that the Additional
Covenants shall only be effective for so long as any of the Notes is
Outstanding; and provided, further, that, except as set forth in (23)
below, the definition of "Subsidiary" set forth in the form of Note
attached hereto as Exhibit A shall only be applicable with respect to the
Additional Covenants and the Additional Definitions.
(15) The Notes shall be issuable only as Registered Securities without
coupons and shall initially be issued in permanent global form (the "Global
Note"). Beneficial owners of interests in the Global Note may exchange
such interests for Notes of like tenor of any authorized denomination only
under the circumstances provided in Section 305 of the Indenture. The
Depository Trust Company ("DTC") shall be the initial depository with
respect to the Global Note.
(16) The Notes will not be issuable as Bearer Securities, and a
temporary global certificate will not be issued.
(17) Except as otherwise provided in the Indenture and in these
resolutions with respect to the payment of Defaulted Interest and interest
payable on any Redemption Date, interest on any Note shall be payable only
to the Person in whose
3
name that Note (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest. Payments
of principal, premium, if any, and interest in respect of the Notes will be
made by the Company by wire transfer of immediately available funds;
provided that, in the event that any Notes are issued in definitive
certificated form, the Holders thereof shall have given appropriate wire
transfer instructions to the Company and, in the event that such wire
transfer instructions shall not have been given to the Company by the
Holder of any Note issued in definitive certificated form, payments of
interest on such Note may be made by mailing a check for such interest to
the address of such Holder as it appears on the Security Register.
(18) Sections 1402 and 1403 of the Indenture shall be applicable to
the Notes, and the provisions of Section 1403 shall also be applicable with
respect to the Company's obligations under the Additional Covenants;
provided that the Company shall be entitled to effect defeasance or
covenant defeasance only with respect to all, and not less than all, of the
Notes.
(19) The Notes will be authenticated and delivered as provided in
Section 303 of the Indenture.
(20) The Company shall not be required to pay Additional Amounts with
respect to the Notes as contemplated by Section 1010 of the Indenture.
(21) The Notes shall not be convertible into Common Stock or Preferred
Stock.
(22) The Notes will be direct, senior unsecured obligations of the
Company and will rank equally with all other senior unsecured indebtedness
of the Company from time to time outstanding.
(23) Insofar as Section 801 of the Indenture is applicable to the
Notes, the term "Subsidiary," as used in Section 801(2) of the Indenture,
shall have the meaning set forth in the form of Note attached hereto as
Exhibit A (instead of the meaning set forth in Section 101 of the
Indenture), and the term "indebtedness," as used in Section 801(2), shall
be deemed to include "Debt" and "Secured Debt" (as such terms are defined
in the form of Note attached hereto as Exhibit A).
(24) The provisions of Section 1011 of the Indenture shall be
applicable with respect to any term, provision or condition set forth in
the Additional Covenants, in addition to any term, provision and condition
set forth in Sections 1004 to 1008, inclusive, of the Indenture.
(25) The Notes shall have such additional terms as are set forth in
the form of Note attached hereto as Exhibit A, which terms are hereby
incorporated by reference in and made a part of these resolutions and the
Indenture as if set forth in full herein and therein.
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RESOLVED, that the public offering price of the Notes shall be 99.929%
of the principal amount thereof plus accrued interest from May 6, 1997, and the
Notes shall be sold to the Underwriters at a price equal to 99.229% of the
principal amount thereof.
RESOLVED, that the forms of Indenture and Underwriting Agreement
presented to and reviewed by this committee, and the form of Note attached
hereto as Exhibit A, be, and each of them hereby is, approved (it being
understood that, in the event that Notes are ever issued in definitive
certificated form, the legends appearing as the first two paragraphs on the
first page of such form of Note may be removed).
RESOLVED, that each of the Chairman of the Board, Chief Executive
Officer, President, any Vice President, Secretary and Treasurer of the Company
be, and each of the acting singly, hereby is, authorized and directed, in the
name and on behalf of the Company and where appropriate under its corporate
seal, attested by its Secretary or Treasurer, to execute and deliver the
Indenture, the Notes and the Underwriting Agreement in substantially the forms
approved hereby, with such changes as shall have been approved by the executing
officer, such approval to be conclusively evidenced by the execution thereof (it
being understood that any signatures, attestations and corporate seals appearing
on the Notes may be facsimiles thereof).
RESOLVED, that the preliminary prospectus supplement dated April 18,
1997, prospectus dated April 18, 1997 and final prospectus supplement relating
to the Notes be, and the same hereby are, ratified and approved in all respects.
RESOLVED, that all officers of the Company are authorized, in the name
and on behalf of the Company, to make, execute and deliver or cause to be made,
executed and delivered, and to evidence the approval of the Board of Directors
of, all such officers' certificates, depository agreements, letters of
representation or other agreements or arrangements necessary or appropriate in
connection with the administration of any book-entry arrangements for the Notes,
and such other agreements, undertakings, documents or instruments, and to
perform all such acts and make all such payments, as may, in the judgment of
such officers, be necessary, appropriate or desirable to effectuate the purpose
of these resolutions, including the performance of the obligations of the
Company under the Indenture, the Notes, the Underwriting Agreement and any other
agreement, undertaking, document or instrument referred to herein or therein.
RESOLVED, that any and all action heretofore taken by the officers of
the Company pursuant to the authority conferred by the preceding resolutions and
consistent therewith is ratified, approved and confirmed.
5
EXHIBIT A
PRINCIPAL AMOUNT
$110,000,000
REGISTERED NO.: R-1
CUSIP NO.: 756109 AC8
-----------------------
REALTY INCOME CORPORATION
7 3/4% NOTE DUE 2007
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING SET FORTH IN THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND, UNLESS AND UNTIL
IT IS EXCHANGED FOR SECURITIES IN DEFINITIVE FORM AS AFORESAID, MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ITS NOMINEE TO A SUCCESSOR DEPOSITARY OR ITS
NOMINEE.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY ("DTC"), 55 WATER STREET, NEW YORK, NEW YORK TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SUCH SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME
AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
Realty Income Corporation, a Delaware corporation (the "Company,"
which term shall include any successor under the Indenture hereinafter referred
to), for value received, hereby promises to pay to Cede & Co., or registered
assigns, the principal sum of One Hundred and Ten Million Dollars on May 6,
2007, and to pay interest thereon from May 6, 1997, or from the most recent date
to which interest has been paid or duly provided for, semi-annually in arrears
on May 6 and November 6 of each year (each, an "Interest Payment Date"),
commencing November 6, 1997, at the rate of 7 3/4% per annum, until the entire
principal amount hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in the Indenture, be paid to the Person in whose name this
Note (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be April 21
or October 22, as the case may be, immediately preceding the applicable Interest
Payment Date. Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and may either be paid to the Person in whose name this Note (or one or more
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Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Notes of this series not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. If any principal of or premium, if any, or interest on any of the Notes
is not paid when due, then such overdue principal and, to the extent permitted
by law, such overdue premium or interest, as the case may be, shall bear
interest, until paid or until such payment is duly provided for, at the rate of
7 3/4% per annum.
Payments of principal, premium, if any, and interest in respect of this
Note will be made by the Company in Dollars by wire transfer of immediately
available funds; provided that, in the event that this Note is issued in
definitive certificated form, the Holder hereof shall have given appropriate
wire transfer instructions to the Company and, in the event that such wire
transfer instructions shall not have been given to the Company by the Holder of
any Note issued in definitive certificated form, payments of interest on such
Note may be made by mailing a check for such interest to the address of such
Holder as it appears on the Security Register. The place where the principal
of, premium, if any, and interest on this Note shall be payable, where this Note
may be surrendered for the registration of transfer or exchange and where
notices or demands to or upon the Company in respect of the Notes and the
Indenture may be served shall be the office or agency maintained by the Company
for such purpose in the Borough of Manhattan, The City of New York, which shall
initially be the Corporate Trust Office of the Trustee at 101 Barclay St., Floor
21 West, New York, New York 10286.
This Note is one of a duly authorized issue of Securities of the
Company (herein called the "Notes"), issued as a series of Securities under an
indenture dated as of May 6, 1997 (the "Indenture"), between the Company and The
Bank of New York, as trustee (the "Trustee," which term includes any successor
trustee under the Indenture with respect to the Notes), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Notes and of the terms upon
which the Notes are, and are to be, authenticated and delivered. This Note is
one of the duly authorized series designated as the "7 3/4% Notes due 2007,"
limited (subject to exceptions provided in the Indenture) in aggregate principal
amount to $110,000,000. All terms used in this Note which are defined in the
Indenture and not defined herein shall have the meanings assigned to them in the
Indenture.
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The Notes may be redeemed at any time at the option of the Company, in
whole or from time to time in part, at a Redemption Price equal to the sum of
(i) the principal amount of the Notes being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Notes (the "Redemption Price"); provided that installments of
interest on Notes whose Stated Maturity is on prior to the relevant Redemption
Date shall be payable to the Holders of such Notes (or one or more Predecessor
Securities) registered as such at the close of business on the relevant record
dates according to their terms and the Indenture.
If notice has been given as provided in the Indenture and funds for
the redemption of any Notes called for redemption shall have been made available
on the Redemption Date referred to in such notice, such Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the Holders of such Notes will be to receive payment of the
Redemption Price.
Notice of any optional redemption of any Notes will be given to
Holders at their addresses, as shown in the Security Register for the Notes, not
more than 60 nor less than 30 days prior to the date fixed for redemption. The
notice of redemption will specify, among other items, the Redemption Price and
the principal amount of the Notes held by such Holder to be redeemed.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company on the Notes and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Note.
In addition to the covenants of the Company contained in the
Indenture, the Company makes the following covenants with respect to, and for
the benefit of the Holders of, the Notes:
LIMITATION ON INCURRENCE OF TOTAL DEBT. The Company will not, and
will not permit any Subsidiary to, incur any Debt, other than Intercompany Debt,
if, immediately after giving effect to the incurrence of such additional Debt
and the application of the proceeds therefrom on a pro forma basis, the
aggregate principal amount of all outstanding Debt of the Company and its
Subsidiaries on a consolidated basis determined in accordance with GAAP is
greater than 60% of the sum of (i) the Company's Total Assets as of the end of
the latest fiscal quarter covered in the Company's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
Commission (or, if such filing is not required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") with the Trustee) prior to the
incurrence of such additional Debt and (ii) the increase, if any, in Total
Assets from the end of such quarter including, without limitation, any increase
in Total Assets caused by the application of the proceeds of such additional
Debt (such increase together with the Company's Total Assets is referred to as
the "Adjusted Total Assets").
A-3
LIMITATION ON INCURRENCE OF SECURED DEBT. The Company will not, and
will not permit any Subsidiary to, incur any Secured Debt, other than
Intercompany Debt, if, immediately after giving effect to the incurrence of such
additional Secured Debt and the application of the proceeds therefrom on a pro
forma basis, the aggregate principal amount of all outstanding Secured Debt of
the Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP is greater than 40% of the Company's Adjusted Total Assets.
DEBT SERVICE COVERAGE. The Company will not, and will not permit any
Subsidiary to, incur any Debt, other than Intercompany Debt, if the ratio of
Consolidated Income Available for Debt Service to the Annual Debt Service Charge
for the period consisting of the four consecutive fiscal quarters most recently
ended prior to the date on which such additional Debt is to be incurred is less
than 1.5 to 1.0, on a pro forma basis after giving effect to the incurrence of
such Debt and the application of the proceeds therefrom, and calculated on the
assumption that (i) such Debt and any other Debt incurred by the Company or any
of its Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom (including to refinance other Debt since
the first day of such four-quarter period) had occurred on the first day of such
period, (ii) the repayment or retirement of any other Debt of the Company or any
of its Subsidiaries since the first day of such four-quarter period had occurred
on the first day of such period (except that, in making such computation, the
amount of Debt under any revolving credit facility, line of credit or similar
facility shall be computed based upon the average daily balance of such Debt
during such period), and (iii) in the case of any acquisition or disposition by
the Company or any Subsidiary of any asset or group of assets since the first
day of such four-quarter period, including, without limitation, by merger, stock
purchase or sale, or asset purchase or sale, such acquisition or disposition had
occurred on the first day of such period with the appropriate adjustments with
respect to such acquisition or disposition being included in such pro forma
calculation. If the Debt giving rise to the need to make the foregoing
calculation or any other Debt incurred after the first day of the relevant
four-quarter period bears interest at a floating rate then, for purposes of
calculating the Annual Debt Service Charge, the interest rate on such Debt shall
be computed on a pro forma basis as if the average interest rate which would
have been in effect during the entire such four-quarter period had been the
applicable rate for the entire such period.
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Company will maintain
at all times Total Unencumbered Assets of not less than 150% of the aggregate
outstanding principal amount of the Unsecured Debt of the Company and its
Subsidiaries, computed on a consolidated basis in accordance with GAAP.
CERTAIN DEFINITIONS. As used herein, the following terms will have
the meanings set forth below:
"ANNUAL DEBT SERVICE CHARGE" as of any date means the amount which is
expensed in any 12-month period for interest on Debt of the Company and its
Subsidiaries.
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"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income plus, without duplication, amounts which have been
deducted in determining Consolidated Net Income during such period for
(i) Consolidated Interest Expense, (ii) provisions for taxes of the Company
and its Subsidiaries based on income, (iii) amortization (other than
amortization of debt discount) and depreciation, (iv) provisions for losses
from sales or joint ventures, (v) provisions for impairment losses, (vi)
increases in deferred taxes and other non-cash charges, (vii) charges
resulting from a change in accounting principles, and (viii) charges for
early extinguishment of debt, and less, without duplication, amounts which
have been added in determining Consolidated Net Income during such period
for (a) provisions for gains from sales or joint ventures, and (b)
decreases in deferred taxes and other non-cash items.
"CONSOLIDATED INTEREST EXPENSE" for any period, and without
duplication, means all interest (including the interest component of
rentals on capitalized leases, letter of credit fees, commitment fees and
other like financial charges) and all amortization of debt discount on all
Debt (including, without limitation, payment-in-kind, zero coupon and other
like securities) but excluding legal fees, title insurance charges, other
out-of-pocket fees and expenses incurred in connection with the issuance of
Debt and the amortization of any such debt issuance costs that are
capitalized, all determined for the Company and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the amount of
consolidated net income (or loss) of the Company and its Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP.
"DEBT" means any indebtedness of the Company or any Subsidiary,
whether or not contingent, in respect of (i) money borrowed or evidenced by
bonds, notes, debentures or similar instruments, (ii) indebtedness secured
by any mortgage, pledge, lien, charge, encumbrance, trust deed, deed of
trust, deed to secure debt, security agreement or any security interest
existing on property owned by the Company or any Subsidiary, (iii) letters
of credit or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable or (iv) any lease of property by the
Company or any Subsidiary as lessee that is reflected on the Company's
consolidated balance sheet as a capitalized lease in accordance with GAAP,
in the case of items of indebtedness under (i) through (iii) above to the
extent that any such items (other than letters of credit) would appear as
liabilities on the Company's consolidated balance sheet in accordance with
GAAP, and also includes, to the extent not otherwise included, any
obligation of the Company or any Subsidiary to be liable for, or to pay, as
obligor, guarantor or otherwise (other than for purposes of collection in
the ordinary course of business), indebtedness of another person (other
than the Company or any Subsidiary) of the type referred to in (i), (ii),
(iii) or (iv) above (it being understood that Debt shall be deemed to be
incurred by the Company or any Subsidiary whenever the
A-5
Company or such Subsidiary shall create, assume, guarantee or otherwise
become liable in respect thereof).
"EXECUTIVE GROUP" means, collectively, those individuals holding the
offices of Chairman, President, Chief Executive Officer, Chief Operating
Officer or any Vice President of the Company.
"INTERCOMPANY DEBT" means indebtedness owed by the Company or any
Subsidiary solely to the Company or any Subsidiary.
"MAKE-WHOLE AMOUNT" means, in connection with any optional redemption
of any Notes, the excess, if any, of (i) the aggregate present value as of
the date of such redemption of each dollar of principal being redeemed and
the amount of interest (exclusive of interest accrued to the date of
redemption) that would have been payable in respect of each such dollar if
such redemption had not been made, determined by discounting, on a
semi-annual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given) from the respective dates on which such principal and
interest would have been payable if such redemption had not been made to
the date of redemption over (ii) the aggregate principal amount of the
Notes being redeemed. All references herein and in the Indenture to
"premium, if any" on the Notes, and all similar references with respect to
the Notes, shall be deemed to refer to and include the Make-Whole Amount,
if any.
"REINVESTMENT RATE" means .25% plus the arithmetic mean of the yields
under the heading "Week Ending" published in the most recent Statistical
Release under the caption "Treasury Constant Maturities" for the maturity
(rounded to the nearest month) corresponding to the remaining life to
maturity of the Note, as of the payment date of the principal being
redeemed. If no maturity exactly corresponds to such maturity, yields for
the two published maturities most closely corresponding to such maturity
shall be calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used.
"SECURED DEBT" means Debt secured by any mortgage, lien, charge,
encumbrance, trust deed, deed of trust, deed to secure debt, security
agreement, pledge, conditional sale or other title retention agreement,
capitalized lease or other security interest or agreement granting or
conveying security title to or a security interest in real property or
other tangible assets.
"STATISTICAL RELEASE" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which reports yields on actively traded U.S.
government securities adjusted to
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constant maturities, or, if such statistical release is not published at
the time of any determination under the Indenture, then such other
reasonably comparable index which shall be designated by the Company.
"SUBSIDIARY" means (i) any corporation, partnership, joint venture,
limited liability company or other entity the majority of the shares, if
any, of the non-voting capital stock or other equivalent ownership
interests of which (except directors' qualifying shares) are at the time
directly or indirectly owned by the Company, and the majority of the shares
of the voting capital stock or other equivalent ownership interests of
which (except for directors' qualifying shares) are at the time directly or
indirectly owned by the Company, any other Subsidiary or Subsidiaries,
and/or one or more individuals of the Executive Group (or, in the event of
death or disability of any of such individuals, his/her respective legal
representative(s), or such individuals' successors in office as an officer
of the Company), and (ii) any other entity the accounts of which are
consolidated with the accounts of the Company. This definition shall apply
only for purposes of the covenants set forth above under the captions
"Limitation on Incurrence of Total Debt," "Limitation on Incurrence of
Secured Debt," "Debt Service Coverage," and "Maintenance of Total
Unencumbered Assets," the other definitions set forth herein under the
caption "Certain Definitions," and insofar as Section 801 of the Indenture
is applicable to the Notes, the term "Subsidiary," and, as used in Section
801(2) of the Indenture, shall have the meaning set forth in this and
definition (instead of the meaning set forth in Section 101 of the
Indenture).
"TOTAL ASSETS" as of any date means the sum of (i) Undepreciated Real
Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined on a consolidated basis in accordance with GAAP (but excluding
accounts receivable and intangibles).
"TOTAL UNENCUMBERED ASSETS" as of any date means Total Assets minus
the value of any properties of the Company and its Subsidiaries that are
encumbered by any mortgage, charge, pledge, lien, security interest, trust
deed, deed of trust, deed to secure debt, security agreement or other
encumbrance of any kind (other than those relating to Intercompany Debt),
including the value of any stock of any Subsidiary that is so encumbered
determined on a consolidated basis in accordance with GAAP. For purposes
of this definition, the value of each property shall be equal to the
purchase price or cost of each such property and the value of any stock
subject to any encumbrance shall be determined by reference to the value of
the properties owned by the issuer of such stock as aforesaid.
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the amount of
real estate assets of the Company and its Subsidiaries on such date, before
depreciation and amortization, determined on a consolidated basis in
accordance with GAAP.
"UNSECURED DEBT" means Debt of the Company or any Subsidiary that is
not Secured Debt.
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If an Event of Default with respect to the Notes shall occur and be
continuing, the principal of the Notes may be declared due and payable in the
manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Notes, the Holders of not less than 25% in principal amount of the Notes at the
time Outstanding shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity and the Trustee shall not have received from the
Holders of a majority in principal amount of the Notes at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute any
such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Note for the enforcement of any payment of principal of, or premium, if
any, or interest on, this Note on or after the respective due dates therefor.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of not less
than a majority in aggregate principal amount of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of not less than a
majority in principal amount of the Notes at the time Outstanding, on behalf of
the Holders of all Notes, to waive compliance by the Company with certain
provisions of the Indenture. Furthermore, provisions in the Indenture permit
the Holders of not less than a majority of the aggregate principal amount of the
Outstanding Notes to waive, in certain circumstances, on behalf of all Holders
of the Notes, certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof, whether or not notation of such consent or waiver is made upon
this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and premium, if any, and
interest on, this Note at the times, places and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Security
Register, upon surrender of this Note for registration of transfer at the office
or agency of the Company in any Place of Payment for the Notes, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar for the Notes duly executed by, the
Holder hereof or his or her attorney duly authorized in writing, and thereupon
one or more new Notes of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
A-8
As provided in the Indenture and subject to certain limitations
therein set forth, Notes of this series are exchangeable for a like aggregate
principal amount of Notes of this series of different authorized denominations,
as requested by the Holder surrendering the same.
The Notes of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse shall be had for the payment of the principal of, or
premium, if any, or the interest on this Note, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture or any
indenture supplemental thereto, against any past, present or future stockholder,
employee, officer or director, as such, of the Company or of any successor,
either directly or through the Company or any successor, whether by virtue of
any constitution, statute or rule of law or by the enforcement of any assessment
or penalty or otherwise, all such liability being, by the acceptance hereof and
as part of the consideration for the issue hereof, expressly waived and
released.
THE INDENTURE AND THE NOTES, INCLUDING THIS NOTE, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the correctness or accuracy of such CUSIP numbers
as printed on the Notes, and reliance may be placed only on the other
identification numbers printed hereon.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature of one of its authorized signatories, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
The headings included in this Note are for convenience only and shall
not affect the construction hereof.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
REALTY INCOME CORPORATION
[SEAL] By:
--------------------------------
Name: William E. Clark, Chairman of
the Board and Chief Executive
Officer
Attest:
By:
--------------------------------------
Name: Michael R. Pfeiffer, Vice President
General Counsel and Secretary
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By:
---------------------------
Authorized Signatory
Dated: May ___, 1997
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ASSIGNMENT FORM
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY
SELLS, ASSIGNS AND TRANSFERS TO
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address
including Zip Code of Assignee)
the within Note of REALTY INCOME CORPORATION, and -----------------------------
hereby does irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer said Note on the books of the within-named Company with
full power of substitution in the premises.
Dated:------------------------ ---------------------------------------------
---------------------------------------------
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Note in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranty
-------------------------------
(Signature must be guaranteed by
a participant in a signature
guarantee medallion program)
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