Exhibit 4.2


 


PRINCIPAL AMOUNT


$100,000,000


REGISTERED NO.: R-1


 


CUSIP NO.: 756109 AG 9


ISIN NO.: US756109AG90


 


REALTY INCOME CORPORATION


5 7/8% SENIOR DEBENTURES
DUE 2035


 


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 Maryland 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 Million Dollars on March 15, 2035, and to pay interest
thereon from March 11, 2005, or from the most recent date to which interest has
been paid or duly provided for, semi-annually in arrears on March 15 and September
15 of each year (the “Interest Payment Dates”), commencing September 15, 2005,
at the rate of 5 7/8% 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 Debenture (or one or
more Predecessor Securities) is registered in the Security Register applicable
to the Debentures at the close of business on March 1 or September 1 (the “Regular
Record Dates”), as the case may be, immediately preceding the applicable
Interest Payment Date regardless of whether the Regular Record Date is a
Business Day. 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 Debenture (or one or
more 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 Debentures 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 Debentures 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 Debentures 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 5 7/8% per
annum.


Payments of principal, premium, if any,
and interest in respect of this Debenture will be made by the Company in
Dollars. If this Debenture is a Global Security, all payments of principal, premium,
if any, and interest in respect of this Debenture will be made by wire transfer
of immediately available funds to an account maintained by the payee located in
the United States. If this Debenture is not a Global Security (a “Certificated Debenture”),
payments of interest on this Debenture may, at the Company’s option, be made by
mailing a check to the address of the Person entitled thereto as such address
appears in the Security Register for the Debentures or by wire transfer to an
account maintained by the payee located inside the United States, all on the
terms set forth in the Indenture; provided, however, that a Holder of $5
million or more in aggregate principal amount of Certificated Debentures will
be entitled to receive payments of interest due on any Interest Payment Date by
wire transfer of immediately available funds to an account maintained by such
Holder in the United States so long as such Holder has given appropriate wire
transfer instructions to the Trustee or a Paying Agent for the Debentures at
least 15 calendar days prior to the applicable Interest Payment Date. Any such
wire transfer instruction will remain in effect until revoked by such Holder or
until such Person ceases to be a Holder of $5 million or more in aggregate
principal amount of Certificated Debentures.


Payments of principal of and premium, if any, and
interest on Certificated Debentures that are due and payable on the Final
Maturity Date, any Redemption Date or any other date on which principal of such
Debentures is due and payable will be made by wire transfer of immediately
available funds to accounts maintained by the Holders thereof in the United
States, so long as such Holders have given appropriate wire transfer
instructions to the Trustee or a Paying Agent for the Debentures, against
surrender of such Debentures to the Trustee or a Paying Agent for the Debentures;
provided that installments of interest on Certificated Debentures that are due
and payable on any Interest Payment Date falling on or prior to such Final Maturity
Date, Redemption Date or other date on which principal of such Debentures is
payable will be paid in the manner described in the preceding paragraph to the
Persons who were the Holders of such Debentures (or one or more Predecessor
Securities) registered as such at the close of business on the relevant Regular
Record Dates according to their terms and the provisions of the Indenture.


This Debenture is
one of a duly authorized issue of Securities of the Company (herein called the “Debentures”),
issued as a series of Securities under an indenture dated as of October 28,
1998 (herein called, together with all indentures supplemental thereto, 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 Debentures),
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 Debentures
and of the terms upon which the Debentures are, and are to be, authenticated
and delivered. This Debenture is one of the duly authorized series designated
as the “5 7/8% Senior Debentures due 2035,” limited (subject to exceptions
provided in the Indenture and subject to the right of the Company to reopen
such series for the issuance of additional Securities of such series on the
terms and subject to the conditions specified in the Indenture) in aggregate
principal amount to $100,000,000. All terms used in this Debenture which are
defined in the Indenture and not defined herein shall have the meanings
assigned to them in the Indenture.


 





















 


The Debentures may be redeemed at any time at the
option of the Company, in whole at any time or from time to time in part, at a
Redemption Price equal to the greater of:


(a) 100% of the principal amount of the Debentures to
be redeemed, and


(b) the sum of the
present values of the remaining scheduled payments of principal of and interest
on the Debentures to be redeemed (exclusive of interest accrued to the
applicable Redemption Date) discounted to such Redemption Date on a semiannual
basis, assuming a 360-day year consisting of twelve 30-day months, at the
Treasury Rate plus 25 basis points,


plus, in the case of both clauses (a) and (b)
above, accrued and unpaid interest on the principal amount of the Debentures
being redeemed to such Redemption Date. Notwithstanding the foregoing,
installments of interest on Debentures whose Stated Maturity is on or prior to
the relevant Redemption Date will be payable to the Holders of such Debentures
(or one or more Predecessor Securities) registered as such at the close of
business on the relevant Regular Record Dates according to their terms and the
provisions of the Indenture.


Notice of any redemption by the Company will be mailed
at least 30 days but not more than 60 days before the applicable Redemption
Date to each Holder of Debentures to be redeemed.


The Indenture contains provisions for defeasance at
any time of (a) the entire indebtedness of the Company on the Debentures 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 Debenture.


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 Debentures:


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”).


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.


“Business Day” means any day, other than a Saturday or a Sunday, that is not a day on which banking institutions in
The City of New York are authorized or required by law, regulation or executive
order to close.


“Comparable Treasury Issue” means, with
respect to any Redemption Date for the Debentures, the United States Treasury
security selected by the Independent Investment Banker as having a maturity
comparable to the remaining term of the Debentures to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Debentures to be redeemed.


“Comparable Treasury Price” means, with
respect to any Redemption Date for the Debentures:


(a)           the average of four Reference
Treasury Dealer Quotations for such Redemption Date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or


(b)           if the Trustee obtains fewer than
four but more than one such Reference Treasury Dealer Quotations for such
Redemption Date, the average of all such quotations, or


 





















 


(c)         if the Trustee
obtains only one such Reference Treasury Dealer Quotation for such Redemption
Date, that Reference Treasury Dealer Quotation.


“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 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, Vice-Chairman, Chief Executive Officer, President, Chief
Operating Officer or any Vice President of the Company.


“Final Maturity Date” means March 15, 2035.


 





















 


“Independent Investment Banker” means, with
respect to any Redemption Date for the Debentures, Banc of America Securities
LLC and its successors or Citigroup Global Markets Inc. and its successors
(whichever shall be appointed by the Trustee after consultation with the
Company) or, if both such firms or the respective successors, if any, to such
firms, as the case may be, are unwilling or unable to select the Comparable
Treasury Issue, an independent investment banking institution of national
standing appointed by the Trustee after consultation with the Company.


“Intercompany Debt” means indebtedness owed by the Company or any
Subsidiary solely to the Company or any Subsidiary.


 “Reference
Treasury Dealer” means with respect to any Redemption Date for the Debentures,
Banc of America Securities LLC and Citigroup Global Markets Inc. and their
respective successors (provided, however, that if any such firm or any such
successor, as the case may be, ceases to be a primary U.S. Government securities
dealer in The City of New York (a “Primary Treasury Dealer”), the Trustee,
after consultation with the Company, shall substitute therefor another Primary
Treasury Dealer) and two other Primary Treasury Dealers selected by the Trustee
after consultation with the Company.


“Reference Treasury Dealer Quotations”
means, with respect to each Reference Treasury Dealer and any Redemption Date
for the Debentures, the average, as determined by the Trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
Business Day preceding such Redemption Date.


“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.


“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 this caption “Certain Definitions,” and,
insofar as Section 801 of the Indenture is applicable to the Debentures, the
term “Subsidiary,” as used in Section 801(2) of the Indenture, shall have the
meaning set forth in this definition (instead of the meaning set forth in
Section 101 of the Indenture).


 





















 


“Treasury
Rate” means, with
respect to any Redemption Date for the Debentures:


                                                (a)           the
yield, under the heading that represents the average for the immediately
preceding week, appearing in the most recently published statistical release
designated “H.15(519)” or any successor publication which is published weekly
by the Board of Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities adjusted to
constant maturity under the caption “Treasury Constant Maturities,” for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the Final Maturity Date of the Debentures,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding to the nearest month), or


 


                                                (b)           if
such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date.


 


The Treasury Rate shall be calculated on the third
Business Day preceding the applicable Redemption Date.


“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.


If an Event of Default with respect to the Debentures
shall occur and be continuing, the principal of the Debentures 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 Debenture 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


 





















 


Debentures, the Holders of not less than 25% in principal
amount of the Debentures 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 Debentures 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 Debenture for the
enforcement of any payment of principal of, or premium, if any, or interest on,
this Debenture 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 Debentures
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 Debentures. The Indenture also contains provisions permitting the
Holders of not less than a majority in principal amount of the Debentures at
the time Outstanding, on behalf of the Holders of all Debentures, 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 Debentures to waive, in
certain circumstances, on behalf of all Holders of the Debentures, certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Debenture shall be conclusive and binding upon such
Holder and upon all future Holders of this Debenture and of any Debenture
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 Debenture.


No reference herein to the Indenture and no provision
of this Debenture 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 Debenture 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 Debenture is registrable in
the Security Register, upon surrender of this Debenture for registration of
transfer at the office or agency of the Company in any Place of Payment for the
Debentures, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar for the
Debentures duly executed by, the Holder hereof or his or her attorney duly
authorized in writing, and thereupon one or more new Debentures of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees.


As provided in the Indenture and subject to certain
limitations therein set forth, Debentures of this series are exchangeable for a
like aggregate principal amount of Debentures of this series of different
authorized denominations, as requested by the Holder surrendering the same.


The Debentures of this series are issuable only in
registered form without interest 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 Debenture 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 Debenture is registered as the owner hereof for all purposes,
whether or not this Debenture 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 Debenture, 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 DEBENTURES, INCLUDING THIS DEBENTURE,
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 Debentures as a convenience to the Holders
of the Debentures. No representation is made as to the correctness or accuracy
of such CUSIP numbers as printed on the Debentures, 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 Debenture shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.


The headings
included in this Debenture are for convenience only and shall not affect the
construction hereof.


 





















 


IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.


 


	
   

  	
   

  	
  REALTY INCOME CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Thomas A. Lewis

  
	
   

  	
   

  	
   

  	
  Vice Chairman of the Board and

  
	
   

  	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Michael R. Pfeiffer

  	
   

  	
   

  	
   

  
	
   

  	
  Executive Vice President, General Counsel

  	
   

  	
   

  	
   

  
	
   

  	
  and Secretary

  	
   

  	
   

  	
   

  



 





















 


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: March 11, 2005

  	
   

  
				



 





















 


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 Debenture of REALTY INCOME CORPORATION,
  and

  
	
  hereby does irrevocably constitute and appoint 

  	
   

  



 


Attorney to transfer said Debenture 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 Debenture 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)