Document:

ck0001437958-ex101_316.htm

Exhibit 10.1

COASTAL FINANCIAL CORPORATION
COASTAL COMMUNITY BANK

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (“Agreement”) is entered into by and between COASTAL FINANCIAL CORPORATION, a Washington corporation (“Company”), its wholly-owned subsidiary, COASTAL COMMUNITY BANK, a Washington state-chartered bank (“Bank”), and __________ (“Executive”), as of __________.

The Company, the Bank, and Executive agree as follows:

	
1.
	
Commitment of Executive. In the event that any person extends any proposal or offer that is intended to or may result in a Change in Control (defined below), Executive shall, at the Company’s or the Bank’s request, assist the Company and/or the Bank in evaluating such proposal or offer. Further, subject to the additional terms and conditions of this Agreement, in order to receive the Change in Control Payment (defined below), Executive cannot resign without Good Reason (as defined below) from the Company or the Bank during any period from the receipt of a specific Change in Control proposal up to the consummation of the transaction contemplated by such proposal.

	
2.
	
Change in Control. For purposes of this Agreement, “Change in Control” means a change in control event as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the rules, regulations and guidance promulgated thereunder and issued by the Department of the Treasury, that is one or more of the following events: 

	
 
	
a.
	
Merger. The Company merges into or consolidates with another entity, or merges another entity into the Company and, as a result, less than a majority of the combined voting power of the resulting entity or, if applicable, the ultimate parent thereof, immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;

	
 
	
b.
	
Acquisition of Significant Share Ownership. The acquisition by any person (within the meaning of Section 13(d) of the Securities Exchange Act, as amended), other than any employee benefit plan or trust maintained by the Company, of fifty percent (50%) or more of the combined voting power entitled to vote generally in the election of directors of the Company’s then outstanding voting securities;

	
 
	
c.
	
Change in Board Composition. During any period of twelve consecutive months, individuals who constitute the Company’s Board of Directors at the beginning of the twelve-month period cease for any reason to constitute at least a majority of the Company’s Board of Directors; provided, however, that for purposes of this clause (c), each director who is first elected by the Board of Directors (or first nominated by the Board of Directors for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the twelve-month period shall be deemed to have also been a director at the beginning of such period; or

	
 
	
d.
	
Sale of Assets. A sale, transfer, or other disposition of all or substantially all of the assets of the Company which is consummated and immediately following which the persons who were the owners of the Company immediately prior to such sale, transfer, or disposition, do not own, directly or indirectly and in substantially the same proportions as their ownership immediately prior to the sale, transfer, or disposition, more than fifty percent (50%) of the combined voting power entitled to vote generally in the election of directors of (i) the entity or entities to which such assets or ownership interest are sold or transferred or (ii) an entity that, directly or indirectly, owns more than fifty percent (50%) of the 

DC: 7271923-3

 
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combined voting power entitled to vote generally in the election of directors of the entities described in clause (i).

	
3.
	
Payment Obligations.

	
 
	
3.1
	
Termination Following Change in Control. If, consistent with Section 1, Executive remains employed with the Company and the Bank through the closing of a Change in Control and concurrent with or within twenty-four (24) months after the closing of the Change in Control either the Company and the Bank terminate Executive’s employment for reasons other than for Cause, or Executive terminates Executive’s employment with the Company and the Bank for Good Reason, then, subject to Section 11: 

	
 
	
a.
	
within ten (10) days following the effective date of Executive’s termination of employment, the Bank shall pay to Executive, a single lump sum cash payment (“Change in Control Payment”) in an amount equal to one (1) times, the sum of: (i) Executive’s base salary as then in effect (but disregarding any reduction that gave rise to Good Reason), and (ii) the cash bonus earned by Executive for the  year prior to the year in which the Change in Control occurs; and

	
 
	
b.
	
Executive will fully vest in all unvested stock options and/or other equity incentive compensation awards previously granted to Executive that would have vested based solely on the continued employment of Executive.

	
 
	
3.2
	
Termination Prior to Change in Control. If (i) the Company or the Bank terminates Executive’s employment without Cause before a Change in Control, and (ii) prior to such termination or within ninety (90) days thereafter the Company and/or the Bank entered or enters into an agreement for a Change in Control or any party announced, announces or is required by law to announce a prospective Change in Control, which Change in Control is consummated, then within ten (10) days following the consummation of such Change in Control the Bank shall pay to Executive the Change in Control Payment in a single lump sum. 

	
4.
	
MANDATORY REDUCTION OF PAYMENTS IN CERTAIN EVENTS.

	
 
	
4.1
	
Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any benefit, payment or distribution by the Company, the Bank or the acquirer in a Change in Control, or any of their respective successors or affiliates, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (such benefits, payments or distributions are hereinafter referred to as “Payments”) would, if paid, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then, prior to the making of any Payments to Executive, a calculation shall be made comparing (i) the net after-tax benefit to Executive of the Payments after payment by Executive of the Excise Tax, to (ii) the net after-tax benefit to Executive if the Payments had been limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (i) above is less than the amount calculated under (ii) above, then the Payments shall be limited to the extent necessary to avoid being subject to the Excise Tax (the “Reduced Amount”). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments against the latest amounts to be paid and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the Change in Control, reducing the latest amounts to be paid first, as determined by a nationally recognized accounting firm or compensation consulting firm mutually acceptable to the Company, the Bank and Executive (the “Determination Firm”). For purposes of this Section 4.1, present value shall be determined in good faith in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 4, the “Parachute Value” of a Payment means the present value as of the date of the Change in Control of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of 

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the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

	
 
	
4.2
	
All determinations required to be made under this Section 4, including whether an Excise Tax would otherwise be imposed, whether the Payments shall be reduced, the amount of the Reduced Amount, and the assumptions to be utilized in arriving at such determinations, shall be made in writing in good faith by the Determination Firm which shall provide detailed supporting calculations to the Company, the Bank and Executive within fifteen (15) business days after the receipt of notice from Executive that a Payment is due to be made, or such earlier time as is requested by the Company or the Bank. All fees and expenses of the Determination Firm shall be borne solely by the Company or the Bank. Any determination by the Determination Firm shall be binding upon the Company, the Bank and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Determination Firm hereunder, it is possible that Payments which Executive was entitled to, but did not receive pursuant to Section 4.1, could have been made without the imposition of the Excise Tax (“Underpayment”), consistent with the calculations required to be made hereunder. In such event, the Determination Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company or the Bank to or for the benefit of Executive but no later than March 15 of the year after the year in which the Underpayment is determined to exist, which is when the legally binding right to such Underpayment arises.

	
5.
	
Termination of Agreement. This Agreement terminates immediately if, at any time before the Change in Control transaction closes, (i) the Company or the Bank terminates Executive’s employment for Cause, (ii) Executive resigns from the Company or the Bank without Good Reason, (iii) Executive dies, or (iv) Executive is unable to perform Executive’s duties and obligations to the Company or the Bank for a period of ninety (90) consecutive days as a result of a physical or mental disability, unless with reasonable accommodation Executive could continue to perform such duties and making these accommodations would not pose an undue hardship on the Company or the Bank. If no Change in Control has occurred, this Agreement will terminate ninety (90) days after Executive’s employment is terminated by the Company or the Bank without Cause or by Executive for Good Reason, unless prior to or during such ninety-day period, the Company or the Bank entered into or enters into an agreement for a Change in Control, or a Change in Control is announced or required by law to be announced, in which case this Agreement will terminate upon payment of the Change in Control Payment pursuant to Section 3.2 or the abandonment of such Change in Control.

	
6.
	
Definitions.

	
 
	
6.1
	
Cause. “Cause” means any one of the following:

	
 
	
a.
	
Removal or discharge of Executive pursuant to order of, or consent order or written agreement with any federal or state banking authority;

	
 
	
b.
	
Willful misfeasance or gross negligence in the performance of Executive’s duties, including without limitation the concealment from or knowing failure to disclose to, any federal or state banking authority or the Board of Directors any material matters affecting the safety and soundness  of the Company or the Bank;

	
 
	
c.
	
Indictment (or equivalent under applicable law) with respect to, the conviction of, or a plea of guilty or no contest to, a felony, or any other crime involving moral turpitude, fraud, theft, embezzlement, or dishonesty, or other crime that results in Executive’s incarceration, with the exclusion of traffic violations;

	
 
	
d.
	
Misconduct or illegal conduct, including, without limitation, moral turpitude, fraud, theft, embezzlement, or sexual or other harassment; or

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e.
	
A violation of any employment policy or code of conduct of the Company or Bank as may be in effect from time to time, if such violation causes or is reasonably expected to cause, material reputational or financial harm, or is otherwise injurious, or reasonably expected to be injurious, to the Company or to any entity in control of, controlled by or under common control with the Company.

	
 
	
6.2
	
Good Reason. “Good Reason” means any one or more of the following:

	
 
	
a.
	
Material reduction of Executive’s base salary or elimination of any significant compensation or benefit plan benefiting Executive (without replacement with a plan with materially similar aggregate value or opportunity), unless the reduction or elimination is generally applicable to substantially all similarly situated employees (or similarly situated employees of a successor or controlling entity of the Company or the Bank) who formerly benefited;

	
 
	
b.
	
The assignment to Executive without Executive’s consent of materially diminished authority or duties that are materially inconsistent with Executive’s position as of the date of this Agreement; or

	
 
	
c.
	
A relocation or transfer of Executive’s principal place of employment that would increase Executive’s commute on a regular basis by more than thirty (30) miles each way .

The Company, the Bank and Executive agree that “Good Reason” shall not exist unless and until Executive provides the Company and the Bank with written notice of the acts alleged to constitute Good Reason within ninety (90) days of Executive’s knowledge of the occurrence of such event, and the Bank and the Company fail to cure such acts within thirty (30) days of receipt of such notice, if curable. Executive must terminate Executive’s employment within sixty (60) days following the expiration of such cure period for the termination to be on account of Good Reason.

	
7.
	
Arbitration. At either the Company’s, the Bank’s, or Executive’s request, the parties must submit any dispute, controversy, or claim arising out of or in connection with, or relating to, this Agreement or any breach or alleged breach of this Agreement, to arbitration under the American Arbitration Association’s rules then in effect (or under any other form of arbitration mutually acceptable to the parties). A single arbitrator agreed on by the parties will conduct the arbitration. If the parties cannot agree on a single arbitrator, each party must select one arbitrator and those two arbitrators will select a third arbitrator. This third arbitrator will hear the dispute. The arbitrator’s decision is final (except as otherwise specifically provided by law) and binds the parties, and any party may request any court having jurisdiction to enter a judgment and to enforce the arbitrator’s decision. The arbitrator will provide the parties with a written decision naming the substantially prevailing party in the action. In any arbitration, if Executive is the prevailing party, the Company and Bank shall pay all reasonable attorney’s fees of Executive, as well as the expenses and administrative fees related to the arbitration. If the Company and Bank are the prevailing party at the arbitration, each party shall pay its own attorney’s fees and expenses and its share of the administrative fees and expenses related to the arbitration. All proceedings will be held at a place designated by the arbitrator in Snohomish County, Washington. The arbitrator, in rendering a decision as to any state law claims, will apply Washington law.

	
8.
	
Withholding. All payments required to be made by the Company or the Bank hereunder to Executive shall be subject to the withholding of such amounts, if any, relating to tax or other payroll deductions as the Company or the Bank may reasonably determine should be withheld pursuant to any applicable law or regulation.

	
9.
	
Other Compensation and Terms of Employment. This Agreement is not an employment agreement. Accordingly, except with respect to the Change in Control Payment, this Agreement shall have no effect on the determination of any compensation payable by the Company or the Bank to Executive, or upon any of the other terms of Executive’s employment with the Company or the Bank. The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to Executive upon a 

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termination of employment with the Company or the Bank pursuant to employee benefit plans of the Company or the Bank or otherwise.

	
10.
	
Miscellaneous Provisions.

	
 
	
10.1
	
Entire Agreement. This Agreement constitutes the entire understanding and agreement between the parties concerning its subject matter and supersedes all prior agreements, correspondence, representations, or understandings between the parties relating to its subject matter.

	
 
	
10.2
	
Binding Effect. This Agreement will bind and inure to the benefit of the Company’s, the Bank’s, and Executive’s heirs, legal representatives, successors, and assigns.

	
 
	
10.3
	
Waiver. Any waiver by a party of its rights under this Agreement must be written and signed by the party waiving its rights. A party’s waiver of the other party’s breach of any provision of this Agreement will not operate as a waiver of any other breach by the breaching party.

	
 
	
10.4
	
Amendment. This Agreement may be modified only through a written instrument signed by all parties.

	
 
	
10.5
	
Severability. The provisions of this Agreement are severable. The invalidity of any provision will not affect the validity of other provisions of this Agreement.

	
 
	
10.6
	
Counsel Review. Executive acknowledges that Executive has had the opportunity to consult with independent counsel with respect to the negotiation, preparation, and execution of this Agreement.

	
 
	
10.7
	
Governing Law and Venue. This Agreement will be governed by and construed in accordance with Washington law, except to the extent that federal law may govern certain matters. The parties must bring any legal proceeding arising out of this Agreement in Snohomish County, Washington.

	
 
	
10.8
	
Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which taken together will constitute one and the same document.

	
 
	
10.9
	
Compliance with Section 409A of the Internal Revenue Code.

	
 
	
(a)
	
General. It is the Company’s and the Bank’s intent that the payments and benefits provided under this Agreement shall be exempt from the application of, or otherwise comply with, the requirements of Section 409A of the Code (“Section 409A”).

Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible, and to the extent they do not so qualify, are intended to qualify for the involuntary separation pay exceptions to the maximum extent possible. This Agreement shall be construed, administered, and governed in a manner that effects such intent, and the Bank shall not take any action that would be inconsistent with such intent. Without limiting the foregoing, the payments and benefits provided under this Agreement may not be deferred, accelerated, extended, paid out or modified in a manner that would result in the imposition of an additional tax under Section 409A upon Executive.

If neither the “short-term deferral” nor the involuntary separation pay exceptions to Section 409A described above applies to a benefit, payment, or reimbursement under this Agreement, then notwithstanding any provision in this Agreement to the contrary, it is intended that any payment or benefit which is provided pursuant to, or in connection with, this Agreement shall be provided and paid in a manner, and at such time and in such form as complies with the applicable requirements of Section 409A of the Code to avoid the 

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unfavorable tax consequences provided therein for non-compliance. Any reference in this Agreement to “involuntary termination,” “involuntarily terminate,” “termination of employment” or similar terms or phrases shall be interpreted as a “separation from service” within the meaning of Section 409A. For purposes of Section 409A, any installment payment provided under this Agreement shall be treated as a separate payment. Any provision in this Agreement that is determined to violate the requirements of Section 409A shall be void and without effect. To the extent permitted under Section 409A, the parties shall reform the provision, provided such reformation shall not subject Executive to additional tax or interest and Executive shall not be required to incur any additional compensation as a result of the reformation. In addition, any provision that is required to appear in this Agreement that is not expressly set forth shall be deemed to be set forth herein, and this Agreement shall be administered in all respects as if such provision were expressly set forth. References in this Agreement to Section 409A include rules, regulations, and guidance of general application issued by the Department of the Treasury under Section 409A.

	
 
	
(b)
	
Delay of Payments. If Executive is deemed to be a “specified employee” within the meaning of Section 409A, then payment of benefits under this Agreement that are on account of a separation from service shall be delayed until six (6) months and one day after the date the benefit under such provisions is payable, to the extent required by Section 409A(a)(2)(B)(i), unless Executive dies between such date and the payment date, at which time all such benefits shall then commence. 

	
11.
	
Regulatory Provisions. In no event shall the Bank or the Company be obligated to make any payment pursuant to this Agreement that is prohibited by Section 18(k) of the Federal Deposit Insurance Act (codified at 12 U.S.C. § 1828(k)), 12 C.F.R. Part 359, or any other applicable law. 

 

 

 

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Effective as of the date first set forth above.

COMPANY:

COASTAL FINANCIAL CORPORATION

By:

Printed Name:Eric Sprink 

Title:President & CEO

BANK:

COASTAL COMMUNITY BANK

By:

Printed Name:Eric Sprink

Title:President & CEO

EXECUTIVE:

 

Printed Name:

Title:

7Exhibit 4.2

 

PRINCIPAL AMOUNT

                    $                                    

REGISTERED NO.: R-

 

CUSIP NO.: 756109 AX2

ISIN NO.: US756109AX24

 

REALTY INCOME CORPORATION

3.250% NOTES DUE 2031

 

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                     ,
or registered assigns, the principal sum of                                                       
Dollars on January 15, 2031, and to pay interest thereon from and including May 8, 2020, or from and including the most recent
date to which interest has been paid or duly provided for, semi-annually in arrears on January 15 and July 15 of each year (the
 “Interest Payment Dates”), commencing July 15, 2020, at the rate of 3.250% 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 (as defined below) (or one or more
Predecessor Securities) is registered in the Security Register applicable to the Notes at the close of business on January 1 or
July 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 3.250% 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 the Company 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 in 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 instructions 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.

 

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Payments of principal of and premium, if any,
and interest on Certificated Notes that are due and payable on the Final Maturity Date (as defined below), 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 Mellon 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 “3.250% Notes due 2031.” 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.

 

Prior to October 15, 2030 (the “Par
Call Date”), the Notes may be redeemed at any time in whole or from time to time in part at the option of the Company 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), assuming that the Notes matured and that accrued and unpaid interest on the Notes was payable
on the Par Call 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 40 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.

 

On and after the Par Call Date, the Notes
may be redeemed at any time in whole or from time to time in part at the option of the Company at a Redemption Price equal to 100%
of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest on the principal amount of the Notes being
redeemed to the applicable Redemption Date.

 

Notwithstanding the foregoing, installments
of interest on Notes whose Stated Maturity is on or prior to a 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.

 

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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 are 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 have the meanings set forth below:

 

    3

     

    

 

“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.

 

“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 (assuming that
the Notes matured on the Par Call Date) 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
(assuming that the Notes matured on the Par Call Date).

 

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

 

(a)          
if the Company obtains five or more Reference Treasury Dealer Quotations for such Redemption Date, the average of such Reference
Treasury Dealer Quotations after excluding the highest and lowest such Reference Treasury Dealer Quotations, or

 

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

 

(c)        
if the Company 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
finance 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 finance lease or as indebtedness 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).

 

    4

     

    

 

“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 January 15, 2031.

 

 “Independent Investment
Banker” means, with respect to any Redemption Date for the Notes, Citigroup Global Markets Inc. and its successors, BofA
Securities, Inc. and its successors, Barclays Capital Inc. and its successors, J.P. Morgan Securities LLC and its successors, or
Wells Fargo Securities, LLC and its successors (whichever shall be appointed by the Company) or, if all 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 Company.

 

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

 

“New York 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.

 

 “Reference Treasury
Dealers” means, with respect to any Redemption Date for the Notes, Citigroup Global Markets Inc., BofA Securities, Inc.,
Barclays Capital Inc., J.P. Morgan Securities LLC and Wells Fargo Securities, LLC and their respective successors (or their respective
affiliates that are Primary Treasury Dealers, as defined below); provided, however, that if any such firm or its successor (or,
if applicable, any such affiliate), as the case may be, ceases to be a primary U.S. Government securities dealer in the United
States (a “Primary Treasury Dealer”), the Company shall substitute therefor another Primary Treasury Dealer.

 

“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 Company, 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 Company by such Reference Treasury Dealer at 5:00 p.m., New York City time, on
the third New York 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, finance 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. The foregoing definition of
 “Subsidiary” shall only be applicable with respect to 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,” this definition, 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 that term is 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).

 

    5

     

    

 

 “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, or available through, the most recently published statistical release designated “H.15”
or any successor publication which is published at least weekly by the Board of Governors of the Federal Reserve System (the “Federal
Reserve”) (or, in each case, any companion online data resource published at least weekly by the Federal Reserve) and which
establishes yields on actively traded United States Treasury securities adjusted to constant maturity for the maturity corresponding
to the Comparable Treasury Issue (if no maturity is within three months before or after the Par Call Date, 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 publication or 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.

 

 For purposes of the immediately preceding sentence,
information shall be deemed “published” by the Federal Reserve if it is made available to the public generally, whether
in physical form, on the Federal Reserve’s website or by other means. The Treasury Rate shall be calculated by the Company
on the third New York 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; provided, however, that, in determining Total Unencumbered
Assets as a percentage of outstanding Unsecured Debt for purposes of the covenant set forth above under "Maintenance of Total
Unencumbered Assets," all investments in any Person that is not consolidated with the Company for financial reporting purposes
in accordance with GAAP shall be excluded from Total Unencumbered Assets to the extent that such investment would otherwise have
been included. 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.

 

    6

     

    

 

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 indemnity reasonably satisfactory to it 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 $2,000 and integral multiples of $1,000 in excess 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.

 

    7

     

    

 

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.

 

[Signature page follows]

 

    8

     

    

 

IN WITNESS WHEREOF, the Company has caused
this instrument to be duly executed.

 

	 	 	REALTY INCOME CORPORATION
	 	 	 	 
	 	 	By:	 
	 	 	 	Sumit Roy
 President and Chief Executive Officer
	 	 	 	 
	Attest:	 	 	 
	 	 	 	 	 
	By:	 	 	 	 
	 	Michael R. Pfeiffer	 	 	 
	 	Executive Vice President, Chief Administrative Officer, 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 MELLON TRUST COMPANY, N.A., as Trustee
	 
	By:	 	 
	 	Authorized Signatory	 
	 
	Dated:  
	 	 	 

 

     

     

    

 

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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