Exhibit 10.1

 

REALTY INCOME CORPORATION

2012 INCENTIVE AWARD PLAN

 

PERFORMANCE SHARE AWARD GRANT NOTICE

 

 

Realty Income Corporation, a Maryland corporation, (the “Company”), pursuant to
the Realty Income Corporation 2012 Incentive Award Plan, as amended from time to
time (the “Plan”), hereby grants to the individual listed below (the
“Participant”), in consideration of the mutual agreements set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, a Performance Share Award (the “Performance Shares”). 
Each Performance Share represents the right to receive one share of Common Stock
(as defined in the Plan) upon the achievement of certain performance goals (the
“Shares”).  This award is subject to all of the terms and conditions set forth
herein and in the Performance Share Award Agreement attached hereto as Exhibit A
(the “Performance Share Award Agreement”) and the Plan, each of which are
incorporated herein by reference.  Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Performance
Share Award Grant Notice (the “Grant Notice”) and the Performance Share Award
Agreement.

 

Participant:

 

[__________________________]

 

 

 

Grant Date:

 

[_____________]

 

 

 

Target Number of Performance Shares:

 

[_____________]

 

 

 

Maximum Number of Performance Shares:

 

[_____________]1

 

 

 

Performance Period:

 

January 1, 2015 – December 31, 2017

 

 

 

Performance Goals:

 

Except as otherwise set forth in the Performance Share Award Agreement, the
Participant is eligible to vest in and receive Shares based upon the Company’s
attainment, during the Performance Period, of the Performance Goals, and
satisfaction of continued employment requirements, as set forth in Sections 2.2
- 2.4 of the Performance Share Award Agreement.

 

 

 

Termination:

 

Except as otherwise set forth in the Performance Share Award Agreement, the
Participant shall forfeit all Performance Shares upon the Participant’s
termination of employment prior to the Vesting Date.

 

By his or her signature and the Company’s signature below, the Participant
agrees to be bound by the terms and conditions of the Plan, the Performance
Share Award Agreement and this Grant Notice.  The Participant has reviewed the
Performance Share Award Agreement, the Plan and this Grant Notice in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Grant Notice and fully understands all provisions of this Grant
Notice, the Performance Share Award Agreement and the Plan.  The Participant
hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator of the Plan upon any questions arising
under the Plan, this Grant Notice and/or the Performance Share Award Agreement. 
In addition, by signing below, the Participant

 

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1  Will equal 150% of the Target Number of Performance Shares.

 

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also agrees that the Company or any Affiliate, in its sole discretion, may
satisfy any withholding obligations in accordance with Section 3.5 of the
Performance Share Award Agreement by (i) withholding shares of Common Stock
otherwise issuable to the Participant in connection with the vesting or payment
of the Performance Shares, (ii) instructing a broker on the Participant’s behalf
to sell shares of Common Stock otherwise issuable to the Participant in
connection with the vesting or payment of the Performance Shares and remit the
proceeds of such sale to the Company, or (iii) using any other method permitted
by Section 3.5 of the Performance Share Award Agreement or the Plan.  If the
Participant is married, his or her spouse has signed the Consent of Spouse
attached to this Grant Notice as Exhibit B.

 

 

 

REALTY INCOME CORPORATION:

PARTICIPANT:

 

 

By:

 

 

By:

 

Print Name:

 

 

Print Name:

 

Title:

 

 

 

 

Address:

 

 

Address:

 

 

 

 

 

 

 

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EXHIBIT A

TO PERFORMANCE SHARE AWARD GRANT NOTICE

 

PERFORMANCE SHARE AWARD AGREEMENT

 

Pursuant to the Performance Share Award Grant Notice (the “Grant Notice”) to
which this Performance Share Award Agreement (this “Agreement”) is attached,
Realty Income Corporation, a Maryland corporation (the “Company”), has granted
to the Participant a performance share award (the “Performance Shares”) under
the Realty Income Corporation 2012 Incentive Award Plan, as amended from time to
time (the “Plan”).

 

ARTICLE 1.

 

GENERAL

 

1.1                            Defined Terms.  Wherever the following terms are
used in this Agreement they shall have the meanings specified below, unless the
context clearly indicates otherwise.  Capitalized terms not specifically defined
herein shall have the meanings specified in the Plan and the Grant Notice.

 

(a)                               “Cause” shall have the meaning provided in an
applicable employment or other service agreement between the Company (or an
Affiliate) and the Participant if such an agreement exists and contains a
definition of Cause, or, if no such agreement exists or such agreement does not
contain a definition of Cause, then Cause shall mean

 

(i)                                  the Participant’s theft, dishonesty or
falsification of any employment or Company records;

 

(ii)                              the Participant’s malicious or reckless
disclosure of the Company’s confidential or proprietary information;

 

(iii)                          the Participant’s commission of any immoral or
illegal act or any gross or willful misconduct, where the Company reasonably
determines that such act or misconduct has (A) seriously undermined the ability
of the Company’s management to entrust the Participant with important matters or
otherwise work effectively with the Participant, (B) contributed to the
Company’s loss of significant revenues or business opportunities, or
(C) significantly and detrimentally effected the business or reputation of the
Company or any of its subsidiaries; and/or

 

(iv)                          the Participant’s failure or refusal to work
diligently to perform tasks or achieve goals reasonably requested by the Board,
provided such breach, failure or refusal continues after the receipt of
reasonable notice in writing of such failure or refusal and an opportunity to
correct the problem.

 

(b)                              “Change in Control” shall mean “Change in
Control”, as defined in an applicable employment or other service agreement
between the Company (or an Affiliate) and the Participant if such an agreement
exists and contains a definition of Change in Control, or, if no such agreement
exists or such agreement does not contain a definition of Change in Control,
then Change in Control shall have the meaning provided in the Plan; provided,
however, that notwithstanding anything to the contrary contained in the Plan or
this Agreement [(or the Employment Agreement)]2, if a Change in Control
constitutes a payment event with respect to the Award (or any portion of the
Award) which

 

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2  NTD:  Include for Case only.

 

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provides for the deferral of compensation that is subject to Section 409A of the
Code, to the extent required to avoid the imposition of additional taxes under
Section 409A of the Code, the transaction or event with respect to the Award (or
portion thereof) shall only constitute a Change in Control for purposes of the
payment timing of the Award if such transaction also constitutes a “change in
control event” (within the meaning of Code Section 409A).

 

(c)                               “Commencement Date” shall mean January 1,
2015.

 

(d)                              “Disability” shall mean the Participant’s
absence for a period of 120 consecutive business days or 180 days in a 365 day
period as a result of incapacity due to a physical or mental condition, illness
or injury, such determination to be made by a physician mutually acceptable to
the Company and the Participant or the Participant’s legal representative (such
acceptance not to be unreasonably withheld) after such physician has completed
an examination of the Participant.

 

(e)                               “Dividend Equivalents Period” shall mean, with
respect to a Dividend Equivalent Right, the period commencing on the
Commencement Date and ending on the day immediately preceding the date on which
the Share underlying the Performance Share with respect to which such Dividend
Equivalent was granted is issued to the Participant pursuant to Sections 2.2 -
2.4 hereof.

 

(f)                                [“Employment Agreement” shall mean that
certain employment agreement between the Participant and the Company, dated
September 3, 2013, as may be amended from time to time.]3

 

(g)                               “End Date” shall mean December 31, 2017.

 

(h)                              “Good Reason” shall mean “Good Reason” or
“Constructive Termination”, as applicable, as defined in an applicable
employment or other service agreement between the Company (or an Affiliate) and
the Participant if such an agreement exists and contains a definition of Good
Reason or Constructive Termination, or, if no such agreement exists or such
agreement does not contain a definition of Good Reason or Constructive
Termination, then Good Reason shall mean the Participant’s resignation of
employment within thirty (30) days of one or more of the following events which
remains uncured thirty (30) days after the Participant’s delivery of written
notice to the Company:

 

(i)                                  a material diminution by the Company in
Employee’s authority, duties or responsibilities from those in effect
immediately prior to such diminution;

 

(ii)                              a material reduction by the Company in
Employee’s base salary in effect immediately prior to such reduction;

 

(iii)                          a material relocation by the Company of
Employee’s principal office location; provided, that a change to a location
which is not more than forty (40) miles from the Company’s present headquarters
location shall in no event be deemed “material” for purposes of this definition
(and, for the avoidance of doubt, reasonably required travel on the Company’s
business shall not be considered a relocation).

 

(i)                                  “Performance Goals” shall mean the goals
described on Schedule A attached hereto, each of which shall be measured with
respect to the Performance Period.

 

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3  NTD:  Include for Case only.

 

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(j)                                  “Performance Period” shall mean the period
beginning on the Commencement Date and ending on the Valuation Date.

 

(k)                              “Performance Share Award Change in Control”
shall mean, notwithstanding the definition of “Change in Control” for purposes
of this Agreement, the occurrence of any of the following events:

 

(i)                                  An acquisition in one transaction or a
series of related transactions (other than directly from the Company or pursuant
to Awards (as defined in the Plan) granted under the Plan or compensatory
options or other similar awards granted by the Company) of the Company’s voting
securities by any individual or entity (a “Person”), immediately after which
such Person has beneficial ownership of fifty percent (50%) or more of the
combined voting power of the Company’s then outstanding voting securities (other
than a Non-Control Transaction, as defined below);

 

(ii)                              The consummation of a merger, consolidation or
reorganization involving the Company unless:

 

(A)                           The stockholders of the Company, immediately
before such merger, consolidation or reorganization, own, directly or
indirectly, immediately following such merger, consolidation or reorganization,
more than fifty percent (50%) of the combined voting power of the outstanding
voting securities of the corporation resulting from such merger or consolidation
or reorganization (the “Surviving Corporation”) in substantially the same
proportion as their ownership of the Company’s voting securities immediately
before such merger, consolidation or reorganization,

 

(B)                            The individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization constitute at least a majority of the
members of the board of directors of the Surviving Corporation, or a corporation
beneficially owning, directly or indirectly, a majority of the voting securities
of the Surviving Corporation, and

 

(C)                            No Person, other than (I) the Company, (II) any
employee benefit plan (or any trust forming a part thereof) that, immediately
prior to such merger, consolidation or reorganization, was maintained by the
Company, the Surviving Corporation, or any related entity or (III) any Person
who, together with its affiliates, immediately prior to such merger,
consolidation or reorganization had beneficial ownership of fifty percent (50%)
or more of the Company’s then outstanding voting securities, owns, together with
its affiliates, beneficial ownership of fifty percent (50%) or more of the
combined voting power of the Surviving Corporation’s then outstanding voting
securities;

 

(A transaction described in clauses (A) through (C) above is referred to herein
as a “Non-Control Transaction”).

 

(iii)                          A complete liquidation or dissolution of the
Company; or

 

(iv)                          The consummation of a sale or other disposition of
all or substantially all of the assets or business of the Company to any Person.

 

(l)                                  “Performance-Vest” means that, with respect
to a Performance Share, the applicable Performance Goal has been achieved.

 

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(m)                          “Qualifying Termination” shall mean a Separation
from Service by reason of a termination of employment (i) by the Company without
Cause[, (ii) pursuant to Section 10(c) of the Employment Agreement],4 [(iii)] by
the Participant for Good Reason, [(iv)] by the Participant due to Retirement or
[(v)] due to the Participant’s death or Disability.

 

(n)                              “Retirement” shall mean the Participant’s
Separation from Service, other than as a result of Executive’s death or
termination by the Company for Cause, at a time when the Participant has
(i) attained at least 60 years of age, and (ii) completed at least ten
(10) consecutive years of service as an employee of the Company.

 

(o)                              “Separation from Service” shall mean the
Participant’s “separation from service” from the Company within the meaning of
Section 409A(a)(2)(A)(i) of the Code.

 

(p)                              “Valuation Date” shall mean the earlier to
occur of (i) the End Date, (ii) the date on which a Change in Control occurs or
(iii) the date on which the Participant incurs a Qualifying Termination.

 

(q)                              “Vest” or “Vested” means that, with respect to
a Performance Share, both (i) such Performance Share has Performance-Vested and
(ii) the continued employment condition has been satisfied.

 

(r)                                 “Vesting Date” shall mean, with respect to a
Performance Share, the date on which the Performance Share becomes Vested.

 

1.2                            Incorporation of Terms of Plan.  The Performance
Shares are subject to the terms and conditions of the Plan, which are
incorporated herein by reference.  Except as expressly indicated herein, in the
event of any inconsistency between the Plan and this Agreement, the terms of the
Plan shall control.

 

ARTICLE 2.

 

PERFORMANCE SHARES AND DIVIDEND EQUIVALENTS

 

2.1                            Grant of Performance Shares.  In consideration of
the Participant’s past and/or continued employment with the Company or an
Affiliate and for other good and valuable consideration, effective as of the
Grant Date set forth in the Grant Notice (the “Grant Date”), the Company grants
to the Participant an award of Performance Shares (this “Award”) as set forth in
the Grant Notice, upon the terms and conditions set forth in the Plan and this
Agreement.

 

2.2                            Performance-Based Right to Payment.

 

(a)                               Subject to Sections 2.3 and 2.4 hereof, the
number of Performance Shares that Performance-Vest and become eligible to Vest
shall be determined as of the Valuation Date based on the Company’s achievement
of the Performance Goals, as set forth on Schedule A attached hereto.

 

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4  NTD:  Include for Case only.

 

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(b)                              Subject to Sections 2.3 and 2.4 hereof, [and
notwithstanding Section 5(b) of the Employment Agreement,]5 the number of
Performance Shares that Performance-Vest in accordance with
Section 2.2(a) hereof shall Vest with respect to 50% of such Performance Shares
on each of (i) the date on which the Committee determines the achievement of the
Performance Goals, which shall occur no earlier than January 1, 2018 and no
later than January 30, 2018, subject to the Participant’s continued employment
through January 1, 2018 and (ii) January 1, 2019, subject to the Participant’s
continued employment through such date.

 

2.3                            Change in Control.

 

(a)                               Notwithstanding any contrary provision of this
Agreement, in the event that a Change in Control occurs at any time prior to the
End Date and the Participant remains continuously employed as of immediately
prior to such Change in Control, then the number of Performance Shares that Vest
and become payable hereunder as of such Change in Control shall equal the
product of (i) the number of Performance Shares that Performance-Vest pursuant
to Section 2.2(a) hereof, based on the Company’s achievement of the Performance
Goals as of the date on which the Change in Control occurs, multiplied by (ii) a
fraction, the numerator of which is the number of days elapsed from the first
day of the Performance Period through and including the date of the Change in
Control, and the denominator of which is 1,096.

 

(b)                              Notwithstanding any contrary provision of this
Agreement, in the event that a Change in Control occurs after the End Date, and
the Participant remains continuously employed as of immediately prior to such
Change in Control, then any Performance Shares that Performance-Vest in
accordance with Section 2.2(a) hereof that have not previously Vested shall Vest
and become payable hereunder immediately prior to such Change in Control.

 

2.4                            Termination.  [Notwithstanding any accelerated
vesting provisions contained in the Employment Agreement, which accelerated
vesting provisions are hereby expressly superseded and replaced with respect to
this Award, the following provisions, as applicable, shall govern the
accelerated vesting of the Award (if any) in connection with a termination of
employment:]6

 

(a)                                 In the event that the Participant
experiences a Qualifying Termination, other than due to the Participant’s death
or Disability [or due to the Participant’s Retirement pursuant to
Section 10(d)(ii) of the Employment Agreement]7, prior to the end of the
Performance Period, then the number of Performance Shares that Vest and become
payable hereunder as of the termination date shall equal the product of (i) the
number of Performance Shares that Performance-Vest pursuant to
Section 2.2(a) hereof, based on the Company’s achievement of the Performance
Goals as of the termination date, multiplied by (ii) a fraction, the numerator
of which is the number of days elapsed from the first day of the Performance
Period through and including the date of the Participant’s Qualifying
Termination, and the denominator of which is 1,096[; provided, however, that if
the Participant experiences a Qualifying Termination pursuant to
Section 10(c) of the Employment Agreement during the Performance Period, then
the number of Performance Shares that Vest and become payable hereunder as of
the termination date shall equal the number of Performance Shares that
Performance-Vest pursuant to Section 2.2(a) hereof, based on the Company’s
achievement of the Performance Goals as of the termination date (without regard
to pro-ration)]8.

 

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6  NTD:  Include for Case only.

 

7  NTD:  Include for Case only.

 

8  NTD:  Include for Case only.

 

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(b)                              In the event that the Participant experiences a
Qualifying Termination due to the Participant’s death or Disability [or due to
the Participant’s Retirement pursuant to Section 10(d)(ii) of the Employment
Agreement],9 in each case, prior to the end of the Performance Period, then 100%
of the Target Number of Performance Shares shall Vest and become payable
hereunder.

 

(c)                               Subject to Section 2.3(a) hereof, in the event
that the Participant experiences a Qualifying Termination following the end of
the Performance Period but prior to January 1, 2018, then any Performance Shares
that Performance-Vest in accordance with Section 2.2(a) that have not previously
Vested shall Vest and become payable hereunder as of the termination date.

 

2.5                            Forfeiture.

 

(a)                               Termination of Employment.

 

(i)                                  In the event that the Participant
experiences a termination of employment prior to the Vesting Date that is not a
Qualifying Termination, all of the Performance Shares that have not Vested as of
such termination of employment shall thereupon automatically be forfeited by the
Participant as of the date of termination, and the Participant’s rights in any
such Performance Shares and such portion of the Award, including without
limitation any Dividend Equivalents (as defined below), shall thereupon lapse
and expire.

 

(ii)                              Any Performance Shares that do not become
Vested in connection with a Qualifying Termination shall thereupon automatically
be forfeited by the Participant as of the date of termination, and the
Participant’s rights in any such Performance Shares and such portion of the
Award, including without limitation any Dividend Equivalents (as defined below),
shall thereupon lapse and expire.

 

(b)                              Failure to Achieve Performance Goals.  Except
as set forth in Section 2.3(a), any outstanding Performance Shares that do not
Performance-Vest due to the failure by the Company to achieve the Performance
Goals (in whole or in part) shall automatically be forfeited by the Participant
as of the Valuation Date, and the Participant’s rights in any such Performance
Shares and such portion of the Award, including without limitation any Dividend
Equivalents, shall thereupon lapse and expire.

 

2.6                            Dividend Equivalents.  Each Performance Share
granted pursuant to this Award is granted in tandem with a Dividend Equivalents
award (a “Dividend Equivalent”), which Dividend Equivalent shall remain
outstanding from the Grant Date until the earlier of the payment or forfeiture
of the underlying Performance Share.

 

(a)                               Pursuant to the Dividend Equivalents, the
Participant shall be entitled to receive a cash payment in an amount equal to
the aggregate dividends paid by the Company with a record date that occurs
during the Dividend Equivalents Period that would have been payable to the
Participant had the Participant held a number of Shares on such record date
equal to the number of Performance Shares that Vest in accordance with Sections
2.2 - 2.4 hereof (if any).  Such payment shall be paid in a single lump sum no
later than sixty (60) days following the applicable Vesting Date, provided that
the exact payment date shall be determined by the Company in its sole discretion
(and the Participant shall not have a right to designate the time of payment).

 

(b)                              Dividend Equivalents shall not entitle the
Participant to any payments relating to dividends with a record date that occurs
after the earlier of the payment or forfeiture of the Performance Share
underlying such Dividend Equivalent, and the Participant shall not be entitled
to any Dividend Equivalent payment with respect to any Performance Share that
does not Vest in accordance with Sections 2.2 - 2.4 hereof.

 

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(c)                               The Dividend Equivalents and any amounts that
may become payable in respect thereof shall be treated separately from the
Performance Shares and the rights arising in connection therewith for purposes
of Section 409A (as defined below).

 

2.7                            Payment of Shares.  The Company shall deliver to
the Participant a number of Shares equal to the number of Performance Shares
subject to this Award that Vest pursuant to Sections 2.2, 2.3 and/or 2.4 hereof
within forty-five (45) days following the applicable Vesting Date (either by
delivering one or more certificates for such Shares or by entering such Shares
in book entry form, as determined by the Administrator in its sole discretion),
provided that the exact payment date shall be determined by the Company in its
sole discretion (and the Participant shall not have a right to designate the
time of payment) and provided, further, that any such payment made pursuant to
Section 2.3 above in the event of a Change in Control shall be made or deemed
made immediately preceding and effective upon the occurrence of such Change in
Control.

 

2.8                            Rights as Stockholder.  The holder of the
Performance Shares shall not be, nor have any of the rights or privileges of, a
stockholder of the Company, including, without limitation, voting rights and
rights to dividends, in respect of the Performance Shares or any Shares
underlying the Performance Shares and deliverable hereunder unless and until
such Shares shall have been issued by the Company and held of record by such
holder (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company).

 

ARTICLE 3.

 

OTHER PROVISIONS

 

3.1                            Administration.  The Administrator shall have the
power to interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan and this Agreement as
are consistent therewith and to interpret, amend or revoke any such rules. 
Without limiting the generality of the foregoing, all determinations,
interpretations and assumptions relating to the calculation and payment of the
Performance Shares (including, without limitation, determinations,
interpretations and assumptions with respect to TSR, shareholder returns and
DEBT/EBITDA ratio) shall be made by the Administrator.  All actions taken and
all interpretations and determinations made by the Administrator in good faith
shall be final and binding upon the Participant, the Company and all other
interested persons.  No member of the Committee or the Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, this Agreement or the Performance Shares.

 

3.2                            Grant is Not Transferable.  During the lifetime
of the Participant, the Performance Shares may not be sold, pledged, assigned or
transferred in any manner other than by will or the laws of descent and
distribution, unless and until the Shares underlying the Performance Shares have
been issued.  Neither the Performance Shares nor any interest or right therein
shall be liable for the debts, contracts or engagements of the Participant or
his or her successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.

 

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3.3                            Entire Agreement; Binding Agreement.  [Without
limiting the generality of the foregoing, this Agreement supersedes the
provisions of any employment agreement, employment offer letter or similar
agreement between the Participant and the Company with respect to the vesting
schedule (including the acceleration of vesting) of the Award, and any provision
in such agreement or letter which would otherwise determine the vesting schedule
(including the acceleration of such vesting) of the Award shall have no force or
effect with respect to the Award.]10  Subject to the limitation on the
transferability of the Performance Shares contained herein, this Agreement shall
be binding upon and inure to the benefit of the heirs, legatees, legal
representatives, successors and assigns of the parties hereto.

 

3.4                            Adjustments Upon Specified Events.  This Award,
the Performance Shares and the Dividend Equivalents may be subject to
adjustments pursuant to Section 14.2 of the Plan in connection with the
occurrence of certain events relating to the shares of the Common Stock.  The
Participant acknowledges that this Award, the Performance Shares and the
Dividend Equivalents are subject to amendment, modification and termination in
certain events as provided in this Agreement and Section 14.2 of the Plan.

 

3.5                            Tax Withholding.  The Company or its Affiliates
shall be entitled to require a cash payment (or to elect, or permit the
Participant to elect, such other form of payment determined in accordance with
Section 11.2 of the Plan) by or on behalf of the Participant and/or to deduct
from other compensation payable to the Participant any sums required by federal,
state or local tax law to be withheld with respect to the grant, vesting or
payment of the Award (including any Dividend Equivalents).  In satisfaction of
the foregoing requirement with respect to the grant, vesting or payment of the
Award, unless otherwise determined by the Company, the Company or its Affiliates
shall withhold Shares otherwise issuable under the Award having a fair market
value equal to the sums required to be withheld by federal, state and/or local
tax law.  The number of Shares which shall be so withheld in order to satisfy
such federal, state and/or local withholding tax liabilities shall be limited to
the number of shares which have a fair market value on the date of withholding
equal to the aggregate amount of such liabilities based on the minimum statutory
withholding rates for federal, state and/or local tax purposes that are
applicable to such supplemental taxable income.  Notwithstanding any other
provision of this Agreement, the Company shall not be obligated to deliver any
certificate representing Shares to the Participant or the Participant’s legal
representative or to enter any such Shares in book entry form unless and until
the Participant or the Participant’s legal representative, as applicable, shall
have paid or otherwise satisfied in full the amount of all federal, state and
local taxes applicable to the taxable income of the Participant resulting from
the grant or vesting of the Award or the issuance of Shares hereunder. To the
extent that any Federal Insurance Contributions Act tax withholding obligations
arise in connection with the Award prior to the applicable Vesting Date, the
Administrator shall accelerate the payment of a portion of the Award sufficient
to satisfy (but not in excess of) such tax withholding obligations and any tax
withholding obligations associated with any such accelerated payment, and the
Administrator shall withhold such amounts in satisfaction of such withholding
obligations.

 

3.6                            Conditions to Delivery of Shares.  The Shares
deliverable under this Award may be either previously authorized but unissued
Shares, treasury Shares or Shares purchased on the open market.  Such Shares
shall be fully paid and nonassessable.  The Company shall not be required to
issue or deliver any Shares under this Award prior to fulfillment of the
conditions set forth in Section 11.4 of the Plan.

 

3.7                            Ownership Limits.  To ensure compliance with
Section 14.8 of the Plan, any other provision of Section 7.2(a) of the Company’s
charter, and/or Applicable Law and for other proper purposes, the Company may
issue appropriate “stop transfer” and other instructions to its transfer agent
with respect to the Performance Shares.

 

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10  NTD:  Include for Case only.

 

A-8

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3.8                            Not a Contract of Service Relationship.  Nothing
in this Agreement or in the Plan shall confer upon the Participant any right to
continue to serve as an Employee or other service provider of the Company or any
of its Affiliates or shall interfere with or restrict in any way the rights of
the Company and its Affiliates, which rights are hereby expressly reserved, to
discharge or terminate the services of the Participant at any time for any
reason whatsoever, with or without Cause, except to the extent expressly
provided otherwise in a written agreement between the Company or an Affiliate
and the Participant.

 

3.9                            Governing Law.  The laws of the State of Maryland
shall govern the interpretation, validity, administration, enforcement and
performance of the terms of this Agreement regardless of the law that might be
applied under principles of conflicts of laws.

 

3.10                    Conformity to Securities Laws.  The Participant
acknowledges that the Plan and this Agreement are intended to conform to the
extent necessary with all provisions of the Securities Act and the Exchange Act,
and Applicable Law.  Notwithstanding anything herein to the contrary, the Plan
shall be administered, and the Award (including any Dividend Equivalents) is
granted, only in such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by Applicable Law, the Plan and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

 

3.11                    Amendment, Suspension and Termination.  To the extent
permitted by the Plan, this Agreement may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Administrator or the Board; provided, however, that, except as may otherwise
be provided by the Plan, no amendment, modification, suspension or termination
of this Agreement shall adversely affect the Award (including any Dividend
Equivalents) in any material way without the prior written consent of the
Participant.

 

3.12                    Notices.  Any notice to be given under the terms of this
Agreement shall be addressed to the Company in care of the Secretary of the
Company at the Company’s principal office, and any notice to be given to the
Participant shall be addressed to the Participant at the Participant’s last
address reflected on the Company’s records.  Any notice shall be deemed duly
given when sent via email or when sent by reputable overnight courier or by
certified mail (return receipt requested) through the United States Postal
Service.

 

3.13                    Successors and Assigns.  The Company or any Affiliate
may assign any of its rights under this Agreement to single or multiple
assignees, and this Agreement shall inure to the benefit of the successors and
assigns of the Company and its Affiliates.  Subject to the restrictions on
transfer set forth in Section 3.2 hereof, this Agreement shall be binding upon
the Participant and his or her heirs, executors, administrators, successors and
assigns.

 

3.14                    Section 409A.

 

(a)                               General.  To the extent applicable, this
Agreement shall be interpreted in accordance with Section 409A of the Code and
Department of Treasury regulations and other interpretive guidance issued
thereunder (“Section 409A”), including without limitation any such regulations
or other guidance that may be issued after the effective date of this
Agreement.  Notwithstanding any other provision of the Plan, the Grant Notice or
this Agreement, if at any time the Administrator determines that the Performance
Shares or the Dividend Equivalents (or, in each case,

 

A-9

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any portion thereof) may be subject to Section 409A, the Administrator shall
have the right in its sole discretion (without any obligation to do so or to
indemnify the Participant or any other person for failure to do so) to adopt
such amendments to the Plan, the Grant Notice or this Agreement, or adopt other
policies and procedures (including amendments, policies and procedures with
retroactive effect), or take any other actions, as the Administrator determines
are necessary or appropriate either for the Performance Shares and/or Dividend
Equivalents to be exempt from the application of Section 409A or to comply with
the requirements of Section 409A.

 

(b)                              Potential Six-Month Delay.  Notwithstanding
anything to the contrary in this Agreement, no amounts shall be paid to the
Participant under this Agreement during the six (6)-month period following the
Participant’s Separation from Service to the extent that the Administrator
determines that the Participant is a “specified employee” (within the meaning of
Section 409A) at the time of such Separation from Service and that paying such
amounts at the time or times indicated in this Agreement would be a prohibited
distribution under Section 409A(a)(2)(B)(i) of the Code.  If the payment of any
such amounts is delayed as a result of the previous sentence, then on the first
business day following the end of such six (6)-month period (or such earlier
date upon which such amount can be paid under Section 409A without being subject
to such additional taxes), the Company shall pay to the Participant in a
lump-sum all amounts that would have otherwise been payable to the Participant
during such six (6)-month period under this Agreement.

 

3.15                    Limitations Applicable to Section 16 Persons. 
Notwithstanding any other provision of the Plan or this Agreement, if the
Participant is subject to Section 16 of the Exchange Act, then the Plan, the
Award (including any Dividend Equivalents) and this Agreement shall be subject
to any additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the
Exchange Act) that are requirements for the application of such exemptive rule. 
To the extent permitted by Applicable Law, this Agreement shall be deemed
amended to the extent necessary to conform to such applicable exemptive rule.

 

3.16                    Limitation on the Participant’s Rights.  Participation
in the Plan confers no rights or interests other than as herein provided.  This
Agreement creates only a contractual obligation on the part of the Company as to
amounts payable and shall not be construed as creating a trust.  The Plan, in
and of itself, has no assets.  The Participant shall have only the rights of a
general unsecured creditor of the Company and its Affiliates with respect to
amounts credited and benefits payable, if any, with respect to the Shares
issuable hereunder.

 

A-10

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SCHEDULE A

 

Target Number of Performance Shares per Performance Goal

 

 

 

Target Number of Debt/EBITDA Performance Shares

 

[_______]11

 

 

 

 

 

 

 

Target Number of Dividend Growth Rate Performance Shares

 

[_______]12

 

 

 

 

 

 

 

Target Number of MSCI REIT Performance Shares

 

[_______]13

 

 

 

 

 

 

 

Target Number of NAREIT Freestanding Performance Shares

 

[_______]14

 

 

 

 

 

 

 

 

Performance Vesting

 

The number of Performance Shares that Performance-Vest and become eligible to
Vest shall be determined as of the Valuation Date based on the achievement of
the Performance Goals during the Performance Period, as set forth below.  If the
Company’s achievement of the applicable Performance Goal falls between 50-150%
then the number of Performance Shares that shall Performance-Vest and become
eligible to Vest with respect to such Performance Goal shall be determined by
means of linear interpolation.  Capitalized terms are defined below.

 

MSCI REIT Performance Shares.  The number of Performance Shares that
Performance-Vest and become eligible to Vest based on the Company’s TSR
achieved, as a percentile (determined in accordance with standard statistical
methodology) with respect to the range of total shareholder returns during the
Performance Period of the companies included in the MSCI US REIT Index
(calculated in a manner consistent with TSR calculation methodology under this
Agreement), shall be determined as follows:

 

 

Percentile of Company TSR with respect to MSCI US
REIT Index companies during Performance Period

 

Target Number of MSCI Performance
Shares that Performance-Vest

 

 

 

 

 

<35th percentile

 

0%

 

 

 

 

 

35th percentile

 

50%

 

 

 

 

 

55th percentile

 

100%

 

 

 

 

 

>75th percentile

 

150%

 

 

 

 

 

 

 

 

 

 

11  Target Number of Shares in Grant Notice x 0.10.

 

12  Target Number of Shares in Grant Notice x 0.20.

 

13  Target Number of Shares in Grant Notice x 0.50.

 

14  Target Number of Shares in Grant Notice x 0.20.

 

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NAREIT Freestanding Performance Shares.  The number of Performance Shares that
Performance-Vest and become eligible to Vest based on the NAREIT Freestanding
Index Relative Performance achieved during the Performance Period shall be
determined as follows:

 

NAREIT Freestanding Index
Relative Performance during
Performance Period

 

Target Number of NAREIT
Freestanding Performance Shares
that Performance-Vest

 

 

 

< -150 basis points

 

0%

 

 

 

- 150 basis points

 

50%

 

 

 

+ 75 basis points

 

100%

 

 

 

> + 300 basis points

 

150%

 

 

 

 

 

Debt/EBITDA Performance Shares.  The number of Performance Shares that
Performance-Vest and become eligible to Vest based on the Debt/EBITDA Ratio
achieved during the Performance Period shall be determined as follows:

 

 

Debt/EBITDA
Ratio

 

Target Number of Debt/EBITDA Performance Shares that
Performance-Vest

 

 

 

> 6.3

 

0%

 

 

 

6.3

 

50%

 

 

 

6.0

 

100%

 

 

 

< 5.5

 

150%

 

 

 

 

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Dividend Growth Rate Performance Shares.  The number of Performance Shares that
Performance-Vest and become eligible to Vest based on the Growth Rate achieved
during the Performance Period, shall be determined as follows:

 

Growth Rate

 

Target Number of Growth
Rate Performance Shares
that Performance-Vest

 

 

 

< 2.0%

 

0%

 

 

 

2.0%

 

50%

 

 

 

6.0%

 

100%

 

 

 

> 10.0%

 

150%

 

 

 

 

 

Defined Terms

 

(a)        “Adjusted EBITDA” shall mean, for the most recent quarter, annualized
earnings (net income) before (i) interest expense, (ii) income and franchise
taxes, (iii) depreciation and amortization, (iv) impairment losses (and
reversals of previous impairments), (v) loss (gain) on swaps, (vi) gain on sales
(Realty Income properties) and (vii) merger related costs.

 

(b)        “Debt” shall mean the total outstanding debt of the Company per the
consolidated balance sheet as of the end of the Performance Period, inclusive of
outstanding senior notes (net of original issuance discounts), term loans,
mortgages (net of net mortgage premiums) and credit facility borrowings.

 

(c)        “Debt/EBITDA Ratio” shall mean the product obtained by dividing
(i) Debt by (ii) Adjusted EBITDA.

 

(d)        “Dividends Per Share” shall mean, with respect to an applicable
period, the sum of all dividends (including special or extraordinary dividends)
paid, on a per share basis, by the Company with respect to the Common Stock
during an applicable period.

 

(e)        “Growth Rate” shall mean negative one plus (i) the aggregate
Dividends Per Share with respect to the final 12 months of the Performance
Period, divided by (ii) the aggregate Dividends Per Share with respect to the
Company’s 2014 fiscal year.

 

(f)        “Index” shall mean either the MSCI US REIT Index or the NAREIT
Freestanding Index, or, in each case, any successor or replacement index
thereto.

 

(g)        “NAREIT Freestanding Index Relative Performance” means, with respect
to the Performance Period, the Company TSR less the NAREIT Freestanding Index
TSR, expressed in basis points.

 

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(h)        “NAREIT Freestanding Index TSR” means the NAREIT Freestanding Index
compound annual total shareholder return for the Performance Period, calculated
in a manner consistent with TSR calculation methodology under this Agreement.
“Share Value” shall mean, as of a particular date, the average of the closing
trading prices of a share of Common Stock on the principal exchange on which
such shares are then traded for each trading day during the twenty (20)
consecutive trading days ending on the applicable date; provided, however, that
in the event that a Performance Share Award Change in Control occurs prior to
the End Date, Share Value shall mean the price per share of Common Stock paid by
the acquiror in the Performance Share Award Change in Control transaction.

 

(i)         “Total Shareholder Return” or “TSR” shall mean the Company’s
compound annual total shareholder return for the Performance Period, calculated
based on the Fair Market Value as of December 31, 2014 as the beginning stock
price and the Share Value as of the Valuation Date as the ending stock price,
and otherwise in accordance with the total shareholder return calculation
methodology used in the applicable Index (and, for the avoidance of doubt,
assuming the reinvestment of all dividends paid on Common Stock).  If the total
shareholder return calculation methodology used in the applicable Index changes,
then the Company’s total shareholder return calculation methodology shall remain
consistent with that of the applicable Index. Additionally, as set forth in, and
pursuant to, Section 3.4 of the Agreement, appropriate adjustments to the Total
Shareholder Return shall be made to take into account all stock dividends, stock
splits, reverse stock splits and the other events set forth in Section 3.4 of
the Agreement that occur prior to the Valuation Date.

 

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EXHIBIT B
TO PERFORMANCE SHARE AWARD GRANT NOTICE

 

CONSENT OF SPOUSE

 

I, _______________, spouse of _________, have read and approve the Performance
Share Award Grant Notice (the “Grant Notice”) to which this Consent of Spouse is
attached and the Performance Share Award Agreement (the “Agreement”) attached to
the Grant Notice.  In consideration of issuing to my spouse the shares of the
common stock of Realty Income Corporation set forth in the Grant Notice, I
hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares of
the common stock of Realty Income Corporation issued pursuant thereto under the
community property laws or similar laws relating to marital property in effect
in the state of our residence as of the date of the signing of the foregoing
Agreement.

 

 

 

Dated:

 

 

 

 

 

Signature of Spouse

 

B-1

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