Document:

EXHIBIT 10.1

 

(CONFORMED)

 

CONSULTING AGREEMENT

 

This Consulting Agreement made this 5th
day of July, 2005, by and between Kenilworth Systems Corporation, a New York
Corporation (hereinafter “Kenilworth” or the “Company”) with offices at 185
Willis Avenue, Suite # 4, Mineola, NY 
11501 and Al Luciani (hereinafter “Consultant”)  residing at 201 West Seaview Avenue, Linwood,
NJ 08221.

 

R
E  C  I  T  A  L  S

 

Consultant has developed a significant
expertise in operating, organizing, constructing and financing CASINOS in the
United States, including Indian Reservations.  
Kenilworth desires to retain the services of Consultant as Consultant so
that Consultant will be available to advise Kenilworth on all aspects of its
business.  Consultant desires to enter
into such a relationship with Kenilworth.

 

1.             Terms of Employment.  
Kenilworth hereby retains Consultant as an independent contractor, and
Consultant hereby accepts such relationship with Kenilworth for a period of one
(1) year (the “Term”).

 

2.             Duties of Consultant.  During
the term, Consultant shall render services to Kenilworth as Consultant and
Advisor in the operation of its business at the address indicated above.  The nature and extent of the services to be
provided shall be in the sole and absolute discretion and determination of
Consultant and Kenilworth shall have no right to contest, in any manner, the
nature and extent of same.  Similarly,
the time and manner in which the services are provided shall be at the sole determination
of the Consultant.

 

Consultant shall not be required to attend at the place of business of
Kenilworth or  at any other place
designated by Kenilworth.

 

The services to be performed by Consultant,
to the extent determined by him, shall be deemed sufficient if performed by
telephone consultation.

 

3.             Compensation
to Consultant.  Kenilworth shall pay to Consultant  an annual Fee of one hundred twenty thousand
dollars ($120,000) as follows: sixty thousand dollars ($60,000) payable in
increments of five thousand dollars ($5,000) monthly and an additional sixty
thousand dollars ($60,000) accrued in increments of five thousand dollars
($5,000) monthly until the Company can obtain a planned ten million dollars
($10,000,000) in a Private Placement, when the accruals will be paid in full
and the entire payments are made monthly for the terms of this agreement.  In addition, the Company will cause to be
issued to the Consultant  one million

 

 

(1,000,000) shares of its
Common Stock par value $0.01 per share for each six (6) month period the Consulting
Agreement is in full force and effect.

 

The Consultant agrees to accept the Stock for
investment only. Kenilworth further elects to engage the services of the
Consultant beyond the consulting services provided herein and the Consultant
shall be entitled to additional compensation on terms acceptable to
Kenilworth.  If the Consultant is
directly involved in obtaining capital for the Company we will pay a Finder’s
Fee or Commission of five percent (5%) in cash and five percent (5%) of the
total number of shares or bonds being issued to the investors, or by separate
negotiations between Kenilworth, the investors and the Consultant.

 

Consultant represents to Kenilworth that the
Common Stock being acquired by Consultant is being acquired for investment and
the Consultant’s own accounts and that he has no present intention of reselling
or distributing the Common Stock to others, except as directed.

 

Consultant agrees that none of
the Common Stock will be transferred or distributed without having presented to
Kenilworth either (i) a written legal opinion of legal counsel, satisfactory to
Kenilworth, in form and substance satisfactory to Kenilworth’s counsel
indicating that the proposed transfer will not be in violation of any of the
provisions of the Securities Act of 1933 as amended (the “Securities Act”) and
the rules and regulations promulgated there under or (ii) an effective
Registration Statement.  (The shares to
be issued to the Consultant, may be resold without registration one [1] year
after the agreed upon issuance date pursuant to an exemption provided under SEC
Rule 144).

 

Consultant represents that he
has adequate means of providing for his current living expenses and
contingencies and that he has no need for liquidity of this investment.  Consultant represents that he can afford the
risk of loss of the entire investment.

 

Consultant fully understands that in
connection with the issuance of the Common Stock, that Kenilworth is relying to
a material degree on the representations, warranties and covenants contained
therein.  Consultant realizes that sales
by him of Common Stock may be deemed evidence of his present intention and thus
tend to bring into question the truth of the representations made in this
agreement.

 

Consultant agrees that a legend
reading substantially as follows or such other legend as may be utilized by
Kenilworth transfer agent, American Stock Transfer & Trust Company, may be
placed on the Common Stock:

 

“THE
SECURITIES WHICH ARE REPRESENTED ITSEIN HAVE NOT BEEN REGISTERED UNDER THE
SECURTITES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS AND
NEITITS SUCH SECURITIES NOR ANY INTEREST TITSEIN MAY BE OFFERED, SOLD, PLEGED,
OR ASSIGNED OR OTITSWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT TITSETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL, WHICH

 

 

OPINION AND
COUNSEL ARE SATIFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFCTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS.”

 

4.             Independent Contractor.  In
the performance of his service hereunder, Consultant shall at all times be an
independent contractor.  Consequently,
Kenilworth will not withhold income or social security taxes or provide
unemployment, disability, or any other similar benefits to the Consultant
unless required to do so by law.

 

5.             Expenditures.  Consultant
shall not be authorized to make or authorize any expenditure on behalf of
Kenilworth in excess of out-of-pocket expenses without obtaining prior written
approval from a duly authorized officer of Kenilworth.

 

6.             Defaults.  In
the event of any default by Kenilworth in its obligations there under,
Consultant, in addition to any remedies provided under the terms of the
payments of the consulting fee in Kenilworth Common Stock, shall be free of any
restrictions on their activities as contained in this Agreement between
Kenilworth and the Consultant.

 

7.             Restrictive
Covenant.

 

(a)           As an inducement to and material
consideration for the Consultant, Consultant covenants that it shall not at any
time during the term of this Agreement and for a period of five (5) years
thereafter in any manner participate or engage in any business endeavor,
directly or indirectly, by itself or with the assistance of others, offering
substantially similar services as provided by the Company, in any locality,
jurisdiction or territory whatsoever, whether as owner, Consultant, manager,
consultant, advisor, agent, officer, director, shareholder (or the equivalent)
or in any other capacity whatsoever.

 

The Consultant agrees that given the nature of the business of the
Company and the fact that the Company’s business endeavors are worldwide in
nature, the restrictions herein contained are reasonable in duration and
geographic limitation.

 

(b)           In
the course of Consultant’s employment and because of the nature of its
responsibilities, it will acquire valuable and confidential information and
trade secrets with respect to the Company’s business contacts and associations
(the “clients”), which information, as to the latter, may constitute the
Consultant’s only contact with such clients. 
In consideration of the Consultant’s retention and in view of the
foregoing position of trust occupied by Consultant, and in consideration of the
covenants attendant to this Agreement, 
Consultant agrees it is reasonable and necessary for the protection of the
goodwill and business of the Company that it make the covenants contained in
the within Agreement, and that the Company will suffer irreparable injury
if  Consultant  engages in conduct prohibited hereby.  Consultant represents that its experience
and/or abilities are such that the observance of the aforementioned covenants
will not cause its undue hardship nor will it unreasonably interfere with its
ability to earn a livelihood.

 

 

(c)           The
aforementioned covenants shall each be construed as a separate independent
agreement, and the existence of any claim of Consultant against the Company
shall not constitute a defense to the enforcement by the Company of any of such
covenants.

 

8.            
Restriction On Use of Confidential Information.         

 

(a)           Except
as required by any Court or other agency having jurisdiction over the  Consultant, Consultant will, at all times,
both during and after the term hereof, keep secret all Information made known
to Consultant by Company or any of its officers, employees or agents, or Information
learned while working for the Company. 
Consultant will not, directly or indirectly, disclose, divulge or use at
any time, except for the benefit and only at the request of the Company, either
during or after termination of Consultant’s employment, any Information
obtained by Consultant at any time by, or as a result of, Consultant’s
assignments with the Company.

 

(b)           “Information”
as used herein, means any confidential information or knowledge relating
directly or indirectly to the business or businesses of Company, including any
information or knowledge pertaining to actual or potential clients of Company,
including the financial affairs of such client. 
“Information” also means documents and information regarding Company’s
methods of operation, marketing strategy, lists, specialized training
procedures, forms, computer programs, secret or confidential techniques, patent
applications and information relating thereto, methods, processes, equipment,
books, notes, drawings, tapes, prints, profit and loss information and other
related internal business information and documents pertaining to the affairs
of Company.

 

9.  Solicitation of Independent Contractors or Employees.  Consultant agrees that during the period it
is retained by Company, and for a period of five (5) years thereafter and regardless
of the reasons therefore,  Consultant
will not hire, offer to hire, entice away or solicit or in any other manner
persuade or attempting to persuade any:

 

(a)           then
current officer, employee, consultant, contractor or agent of Company or any of
same who have been employed by or associated with Company within one (1) year
preceding the termination of Consultant’s retention; or

 

(b)           referral
source of business or other  provider of
business to Company to discontinue his, his and/or it not to renew said
relationship.

 

(c)           The
Consultant acknowledges that (i) in the event its retention with Company
terminates for any reason it will be able to earn a livelihood without
violating the foregoing restrictions and (ii) its ability to earn a livelihood
without violating such restrictions is a material condition to its retention by
the Company.

 

(d)           Consultant
acknowledges and agrees that, in the event of an actual or threatened violation
by Consultant of any of the restrictions of this Agreement, Company will suffer
irreparable harm and will be without adequate remedy at law.  Consultant understands

 

 

Company may seek restraint of
said violation or threatened violation by obtaining injunctive relief, which
shall include, but not be limited to, a temporary restraining order and
preliminary injunction without the posting of a bond of any kind.  Nothing contained herein shall be construed
as prohibiting Company from pursuing any other remedies available to Company
for breach or threatened breach of the provisions of this Agreement, including
the right to seek and recover an award for its legal fees and expenses
necessarily incurred in pursuing such remedies.

 

10.           Return of Property.  Consultant agrees that upon termination of
its retention by the Company, for any reason, Consultant will deliver to
Company all  records,  lists, marketing strategy, specialized
training procedures, forms, computer programs, keys, pass cards, identification
cards, listings, policy procedure manuals, memos, letters, profit and loss
information and other related business information concerning Company or other
documents or materials of any nature whatsoever in Consultant’s possession or
control that was obtained by Consultant during its course of its retention by
Company.

 

11.           Notices.  All
notices and other communications between the parties shall be deemed to have
been given five (5) business days after mailing hereof by United States Post
Office registered mail, return receipt requested, postage prepaid, to such
parties at the following addresses:

 

	
  If to:

  	
  Kenilworth
  Systems Company

  
	
   

  	
  185 Willis
  Avenue – Suite # 4

  
	
   

  	
  Mineola, NY 11501

  
	
   

  	
  Attention: Gino Scotto, CEO

  
	
   

  	
   

  
	
  cc:

  	
  Miles R.
  Jacobson, Esq.

  
	
   

  	
  Jacobson
  Goldberg & Kulb, LLP

  
	
   

  	
  585 Stewart
  Avenue, Suite 720

  
	
   

  	
  Garden City,
  NY 11530

  
	
   

  	
   

  
	
  If to
  Consultant:

  	
  Al Luciani

  
	
   

  	
  201 West
  Seaview Avenue

  
	
   

  	
  Linwood, NJ
  08221

  
	
   

  	
   

  
	
  cc:

  	
   

  

 

12.           Entire Agreement.  This agreement supersedes any
and all other agreements, either oral or in writing, between the parties hereto
with respect to the employment of the Consultant by Kenilworth, and contains
all the covenants and agreements between the parties with respect to such
employment in any manner whatsoever. Any modification of this agreement will be
effective only if it is in writing and signed by both parties.

 

 

13.           Severability.  The provisions of this agreement
are agreed to be severable; i.e., if any provision of this agreement or the
application thereof is held to be invalid or unenforceable, that invalidity or
unenforceability shall not be construed to affect any other provisions or
application.

 

14.           Governing Law.  The validity, interpretation and
performance of this agreement shall be controlled by and construed under the
laws of the State of New York.  The
parties hereto hereby consent to the jurisdiction of the New York courts in the
event any dispute arises in conjunction herewith.

 

15.           Successors and Assigns.  This agreement is binding
on the  successors  and assigns of the Company.  The Consultant shall have no right to assign
any of its rights or benefits hereunder.

 

IN WITNESS WHEREOF, the parties have executed
this agreement on the day and year first above written.

 

	
   

  	
   

  	
  KENILWORTH
  SYSTEMS CORPORATION

  
	
   

  	
   

  	
   

  
	
  /s/ Al Luciani

  	
   

  	
   

  	
   By:

  	
  /s/ Gino Scotto

  	
   

  	
   

  
	
  Al Luciani

  	
   

  	
  Gino Scotto, CEOExhibit 4.2

 

PRINCIPAL AMOUNT

$175,000,000

 

REGISTERED NO.:  R-1

 

CUSIP NO.:  756109 AH 7

ISIN
NO.:  US756109AH73

 

REALTY INCOME CORPORATION

5 3/8% SENIOR NOTES DUE 2017

 

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 Seventy-Five Million
Dollars on September 15, 2017, and to pay interest thereon from September 15,
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 March 15, 2006, at
the rate of 5 3/8% 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 Note (or one or more Predecessor Securities) is registered in the
Security Register applicable to the Notes 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
Note (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 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 5 3/8%
per annum.

 

Payments of principal, premium, if any,
and interest in respect of this Note will be made by the Company in Dollars. If
this Note is a Global Security, all payments of principal, premium, if any, and
interest in respect of this Note will be made by wire transfer of immediately
available funds to an account maintained by the payee located in the United
States.  If this Note is not a Global
Security (a “Certificated Note”), payments of interest on this Note 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 Notes
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 Notes 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 Notes 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 Notes.

 

Payments of principal of and premium, if any, and
interest on Certificated Notes that are due and payable on the Final Maturity
Date, any Redemption Date or any other date on which principal of such Notes 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 Notes, against surrender of such Notes to the Trustee
or a Paying Agent for the Notes; provided that installments of interest on
Certificated Notes 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 Notes is payable will be paid in the manner
described in the preceding paragraph to the Persons who were the Holders of
such Notes (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 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 October 28, 1998 (herein called,
together with all indentures supplemental thereto, the “Indenture”), between
the Company and The Bank of New York Trust Company, N.A. (successor trustee to
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 “5 3/8% Senior Notes due 2017,” 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 $175,000,000.  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.

 

 

The Notes 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 Notes to
be redeemed, and

 

(b) the sum of the present values of the remaining scheduled
payments of principal of and interest on the Notes 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 Notes being redeemed to such Redemption
Date.  Notwithstanding the foregoing,
installments of interest on Notes whose Stated Maturity is on or prior to the
relevant Redemption Date will 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 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 Notes 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”).

 

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
Notes, the United States Treasury security selected by the Independent
Investment Banker as having a maturity comparable to the remaining term of the
Notes 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
Notes to be redeemed.

 

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

 

(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 September 15, 2017.

 

 

“Independent
Investment Banker” means, with respect to any Redemption Date for
the Notes, 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 Notes, 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 Notes, 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 Notes, 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 Notes:

 

 

(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 Notes, 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 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.

 

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 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 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.

 

 

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
TRUST COMPANY, N.A., as Trustee

 

 

	
  By:

  	
   

  	
   

  
	
  Authorized Signatory

  

 

 

Dated:  September 15, 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 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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