<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF COMMISSION ONLY
[X] Definitive Proxy Statement (AS PERMITTED BY RULE 14A-6(E)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
- -------------------------------------------------------------------------------
Realty Income Corporation
(Name of Registrant as Specified in its Charter)
- -------------------------------------------------------------------------------
Realty Income Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 14a-6(i)(1).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE>
REALTY INCOME CORPORATION
220 West Crest Street
Escondido, California 92025-1725
April 3, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Realty Income Corporation to be held at 9:00 a.m., local time, on May 14,
1996 at the California Center for the Arts Escondido, 340 North Escondido
Boulevard, Escondido, California.
At the Annual Meeting, you will be asked to consider and vote upon the
election of five directors to the Board of Directors of the Company. The
election of members of the Board of Directors of the Company is more
completely described in the accompanying Proxy Statement. We urge you to
review carefully the Proxy Statement.
The Company's Board of Directors recommends a VOTE FOR the election of each
nominee to the Board of Directors named in the accompanying Proxy Statement.
YOUR VOTE IS IMPORTANT TO THE COMPANY, WHETHER YOU OWN FEW OR MANY SHARES!
Please complete, date and sign the enclosed proxy card and return it in the
accompanying postage paid envelope, even if you plan to attend the Annual
Meeting. If you attend the Annual Meeting, you may if you wish, withdraw
your proxy and vote in person.
Sincerely,
WILLIAM E. CLARK
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
<PAGE>
REALTY INCOME CORPORATION
220 WEST CREST STREET
ESCONDIDO, CALIFORNIA 92025-1725
----------------------
NOTICE OF ANNUAL MEETING TO BE HELD ON
MAY 14, 1996
----------------------
TO THE STOCKHOLDERS OF
REALTY INCOME CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Realty Income Corporation, a Delaware corporation (the
"Company" or "Realty Income"), will be held at the California Center for the
Arts Escondido, 340 North Escondido Boulevard, Escondido, California, 92025
at 9:00 a.m., local time, on May 14, 1996, to consider and act upon:
1. The election of members of the Board of the Directors of the Company.
2. Such other business as may properly come before the Annual Meeting or
any adjournment or postponement thereof.
The election of directors is more fully described in the accompanying
Proxy Statement, which forms a part of this Notice.
During the course of the Annual Meeting, management will report on the
current activities of Realty Income and comment on its future plans. A
discussion period is planned so that stockholders will have an opportunity to
ask questions and present their comments.
The Board of Directors has fixed the close of business on March 19, 1996
as the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting or adjournment or
postponement thereof. Only stockholders of record on the Record Date will be
entitled to notice of and to vote at the Annual Meeting or any adjournments
or postponements thereof. A list of such stockholders will be available for
inspection at the offices of the Company at 220 West Crest Street, Escondido,
California, at least ten days prior to the Annual Meeting.
If you plan to be present, please notify the undersigned so that
identification can be prepared for you. Whether or not you plan to attend
the Annual Meeting, please execute, date and return promptly the enclosed
proxy. A return envelope is enclosed for your convenience and requires no
postage for mailing in the United States. If you are present at the Annual
Meeting you may, if you wish, withdraw your proxy and vote in person. Thank
you for your interest and consideration.
Sincerely,
MICHAEL R. PFEIFFER
April 3, 1996 VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND
MAIL IT IN THE ENCLOSED RETURN ENVELOPE
<PAGE>
REALTY INCOME CORPORATION
220 WEST CREST STREET
ESCONDIDO, CALIFORNIA 92025-1725
-----------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1996
PROXY STATEMENT
-----------------
This Proxy Statement is being furnished to stockholders of Realty Income
Corporation, a Delaware Corporation ("Realty Income" or the "Company"), in
connection with the solicitation of proxies by the Company's Board of
Directors for use at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held on May 14, 1996, at 9:00 a.m., local time, at
the California Center for the Arts Escondido, 340 North Escondido Boulevard,
Escondido, California, 92025 and any adjournments or postponements thereof.
This Proxy Statement and the accompanying form of proxy are first being
mailed or delivered to the stockholders of the Company on or about April 3,
1996.
At the Annual Meeting, holders of record of shares of Realty Income Common
Stock will consider and vote upon (i) the election of members of the Board of
Directors of the Company and (ii) such other business as may properly come
before the Annual Meeting or any adjournment or postponement thereof. The
Board of Directors recommends a vote FOR each person nominated to be elected
to the Board of Directors. See "Proposal to Elect Directors."
The Board of Directors has fixed the close of business on March 19, 1996
as the record date (the "Record Date") for determining the holders of shares
of Realty Income Common Stock who are entitled to notice of and to vote at
the Annual Meeting. As of the Record Date, 22,976,237 shares of Realty
Income Common Stock were outstanding. The holders of record on the Record
Date of shares of Realty Income Common Stock are entitled to one vote per
share of Realty Income Common Stock. The presence in person or by properly
executed proxy of the holders of shares representing a majority of the
outstanding shares of Realty Income Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the
Annual Meeting.
Shares of Realty Income Common Stock represented by properly executed
proxies received at or prior to the Annual Meeting that have not been revoked
will be voted at the Annual Meeting in accordance with the instructions
indicated on the proxies. Shares of Realty Income Common Stock represented
by properly executed proxies for which no instruction is given will be voted
FOR election of the persons nominated to the Board of Directors.
Stockholders are requested to complete, sign, date and promptly return the
enclosed proxy card in the postage-prepaid envelope provided for this purpose
to ensure that their shares are voted.
As of the date of this Proxy Statement, the Board of Directors does not
know of any other matters which are to come before the Annual Meeting. If
any other matters are properly
<PAGE>
presented at the Annual Meeting for consideration, including, among other
things, consideration of a motion to adjourn the Annual Meeting to another
time or place, the persons named in the enclosed form of proxy and acting
thereunder will have discretion to vote on such matters in accordance with
their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i)
filing with the Secretary of the Company, at or before the taking of the vote
at the Annual Meeting, a written notice of revocation bearing a later date
than the proxy, (ii) duly executing a later dated proxy relating to the same
shares of Realty Income Common Stock and delivering it to the Secretary of
the Company before the taking of the vote at the Annual Meeting or (iii)
attending the Annual Meeting and voting in person (although attendance at the
Annual Meeting will not in and of itself constitute a revocation of a proxy).
Any written notice of revocation or subsequent proxy should be sent so as to
be delivered to Realty Income Corporation, 220 West Crest Street, Escondido,
California 92025, Attention: Corporate Secretary, or hand delivered to the
Secretary of the Company at or before the taking of the vote at the Annual
Meeting.
The election inspector will treat shares represented by properly signed
and returned proxies that reflect abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum and for
purposes of determining the outcome of any matter submitted to the
stockholders for a vote. Abstentions do not constitute a vote "for" or
"against" any matter and thus will be disregarded in the calculation of
"votes cast." For the purposes of determining the outcome of any matter,
"broker non-votes" (I.E., shares held by brokers or nominees that are
represented at the meeting by properly signed and returned proxies but with
respect to which the broker or nominee is not empowered to vote on a
particular matter) will be treated by the election inspector as not present
and not entitled to vote with respect to that matter (although such shares
may be entitled to vote on other matters), and will be deemed to be present
and entitled to vote for quorum purposes.
If the Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Annual Meeting all proxies will be voted in the
same manner as such proxies would have been voted at the original convening
of the Annual Meeting (except for any proxies that have theretofore
effectively been revoked or withdrawn), notwithstanding that they may have
been effectively voted on the same or any other matter at a previous meeting.
The Company will bear the cost of soliciting proxies from its
stockholders. In addition to solicitation by mail, directors, officers and
employees of the Company may solicit proxies by telephone, telegram or
otherwise. Such directors, officers and employees of the Company will not be
additionally compensated for such solicitation, but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Brokerage firms,
fiduciaries and other custodians who forward soliciting material to the
beneficial owners of shares of Realty Income Common Stock held of record by
them will be reimbursed for their reasonable expenses incurred in forwarding
such material.
<PAGE>
No person is authorized to make any representation with respect to the
matters described in this Proxy Statement other than those contained herein
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or any other person.
-----------------
THE DATE OF THIS PROXY STATEMENT IS APRIL 3, 1996.
<PAGE>
PROPOSAL TO ELECT DIRECTORS
GENERAL
Five directors, comprising the entire membership of the Board of Directors
of the Company, are to be elected at the Annual Meeting. Unless otherwise
instructed, proxies representing shares of Realty Income Common Stock will be
voted for the five nominees shown below for a term of one year and until
their successors are duly elected and qualified.
If at the time of the Annual Meeting any of such nominees should be unable
or decline to serve, the authority provided in the proxy to vote for the
election of directors will be exercised to vote for a substitute or
substitutes. Management has no reason to believe that any substitute nominee
or nominees will be required.
Stockholders of the Company are not entitled to cumulative voting rights
in the election of directors.
VOTE REQUIRED; BOARD RECOMMENDATION
The affirmative vote of a plurality of the shares of the Realty Income
Common Stock represented in person or by properly executed proxy and entitled
to vote at the Annual Meeting will be required to elect each director.
Accordingly, abstentions or broker non-votes as to the election of directors
will not affect the election of the nominees receiving the plurality of votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NAMED NOMINEE.
DIRECTOR NOMINEES
The following table sets forth certain information regarding the Director
nominees all of whom are current directors of Realty Income:
NAME AGE TITLE
William E. Clark 58 Chairman of the Board and Chief Executive
Officer
Thomas A. Lewis 43 Vice Chairman of the Board and Vice
President Capital Markets
Donald R. Cameron 56 Director
Roger P. Kuppinger 55 Director
Michael D. McKee 50 Director
WILLIAM E. CLARK has been the Chairman of the Board of Directors and Chief
Executive Officer and a Director of the Company since September 1993 and has
been involved as a
1
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principal in commercial real estate acquisition, development, management and
sales for over 30 years. His involvement includes land acquisition, tenant
lease negotiations, construction and sales of prime commercial properties for
regional and national fast-food restaurant, automotive and retail chain store
operations throughout the United States. He had been a director and an
officer of R.I.C. Advisor, Inc. ("R.I.C. Advisor") since 1969 until it was
merged with the Company on August 17, 1995 (the "Merger").
THOMAS A. LEWIS has been the Vice Chairman of the Board of Directors, Vice
President, Capital Markets and a Director of the Company since September 1993
and had been with R.I.C. Advisor from 1987 until the Merger. Prior to
joining R.I.C. Advisor, he served in various capacities, including Senior
Vice President with Johnstown Capital, a real estate management and
syndication company (1982-1987), and Investment Specialist with Sutro & Co.,
a member of the New York Stock Exchange (1979-1982), and was employed by the
Procter & Gamble Company (1974-1979). He graduated from Chaminade University
of Hawaii, B.A., and holds NASD General Securities (Series 7) and Registered
Principal (Series 24) licenses.
DONALD R. CAMERON has been a Director of the Company since August 1994 and
is a co-founder and President of Cameron, Murphy & Spangler, Inc., a
securities broker-dealer firm located in Pasadena, California. He graduated
from the University of Glasgow, Scotland, B.Sc. Prior to founding Cameron,
Murphy & Spangler in 1975, he worked at the securities brokerage firm of
Glore Forgan Staats, Inc. and its successors (1969-1975). He is currently a
director of Ayr United Football and Athletic Club, Ltd. Mr. Cameron is
chairman of the Compensation Committee and a member of the Audit Committee.
ROGER P. KUPPINGER has been a Director of the Company since August 1994
and is a self-employed investment banker and financial advisor and is an
active investor in both private and public companies. Prior to March 1994,
he was a Managing Director at the investment banking firm Sutro & Co. Inc.
He graduated from Northwestern University, B.S. and M.B.A., and from LaSalle
University in Chicago, L.L.B. Prior to joining Sutro in 1969, he worked at
First Interstate Bank, formerly named United California Bank (1964-1969). He
has served on over ten boards of directors for both public and private
companies, and currently serves on the board of directors of Harlyn Products,
Inc. and REIT of California. Mr. Kuppinger is chairman of the Audit
Committee and a member of the Compensation Committee.
MICHAEL D. MCKEE has been a Director of the Company since August 1994 and
has been Executive Vice President of The Irvine Company since March 1994.
Prior thereto, he was a partner in the law firm of Latham & Watkins. He
graduated from Pacific College, B.A., University of Southern California, M.A.
and University of California at Los Angeles, J.D. His business and legal
experience includes numerous acquisition and disposition transactions, as
well as a variety of public and private offerings of equity and debt
securities. He is currently a member of the board of directors of Health
Care Property Investors, Inc. and Irvine Apartment Communities, Inc. Mr.
McKee is a member of the Compensation Committee and the Audit Committee.
2
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors is comprised of Messrs.
Cameron, Kuppinger (chairman) and McKee. The Audit Committee's principal
responsibilities include recommending the selection of the Company's
independent auditors to the Board of Directors, approving any special
assignments given to the independent auditors and reviewing (i) the scope and
results of the audit engagement with the independent auditors and management,
including the accountant's letter of comments and management's responses
thereto, (ii) the independence of the independent auditors, (iii) the
effectiveness and efficiency of the Company's internal accounting staff and
(iv) any proposed significant accounting changes.
The Compensation Committee of the Board of Directors is comprised of
Messrs. Cameron (chairman), Kuppinger and McKee. The Compensation
Committee's principal responsibilities include establishing remuneration
levels for officers of the Company, reviewing management organization and
development, reviewing significant employee benefits programs and
establishing and administering executive compensation programs, including
bonus plans, stock option and other equity-based programs, deferred
compensation plans and any other cash or stock incentive programs.
The Special Committee of the Board of Directors is comprised of Messrs.
Cameron, Kuppinger and McKee (chairman). The Special Committee was formed in
August 1994 to explore the advisability of the combination of the Company and
R.I.C. Advisor. On behalf of Realty Income, the Special Committee negotiated
the terms of the Merger on behalf of Realty Income which was consummated on
August 17, 1995.
The Board of Directors may from time to time establish certain other
committees to facilitate the management of the Company.
MEETINGS AND ATTENDANCE
The Board of Directors met thirteen times during the fiscal year ended
December 31, 1995. Of the three standing committees, the Audit Committee,
the Compensation Committee and the Special Committee met 3, 4, and 19 times
in 1995, respectively. All directors attended at least 75% of the aggregate
of (i) the total number of meetings of the Board and (ii) the total number of
meetings of the committees of the Board on which such directors served.
COMPENSATION OF THE COMPANY'S DIRECTORS
No officer of the Company receives or will receive any compensation for
serving the Company as a member of the Board of Directors or any of its
committees. Directors who are not officers of the Company receive an annual
fee of $15,000 for serving on the Board of Directors. Such directors also
receive fees of $1,000 for attending Board of Directors meetings in person,
$500 ($750 for the chairman of the committee) for attending Board of
Directors committee meetings in person, $200 for attending Board of Directors
meetings by telephone and $200 ($450 for the chairman of the committee) for
attending Board of Director committee meetings by telephone. Directors
serving on the Special Committee received $1,000 ($1,500
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<PAGE>
for the chairman of the committee) for all meetings of the Special Committee
whether attended in person or by telephone. The Company may also reimburse
such directors for travel expenses incurred in connection with their
activities on behalf of the Company. In addition, under the Company's stock
incentive plan, upon his or her initial appointment to the Board of Directors
(and every four years after the date of such appointment if the Director is
still serving as a Director), each Director who is not an officer of the
Company is automatically granted options to purchase 10,000 shares of Realty
Income Common Stock at the then current market price. These options vest
during the Directors' continued service period at a rate of 2,500 shares per
year. As of April 3, 1996, each of Messrs. Cameron, Kuppinger and McKee held
options to purchase 10,000 shares of Realty Income Common Stock at an
exercise price of $20 per share, of which options to purchase 2,500 shares of
Realty Income Common Stock are currently exercisable.
4
<PAGE>
OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the officers
of the Company:
NAME AGE TITLE
William E. Clark 58 Chairman of the Board and Chief Executive
Officer
Richard J. VanDerhoff 42 President and Chief Operating Officer
Thomas A. Lewis 43 Vice Chairman of the Board and
Vice President Capital Markets
John H. Wolfe 47 Vice President, Portfolio Acquisitions
Gary M. Malino 38 Vice President, Chief Financial Officer
and Treasurer
Michael R. Pfeiffer 35 Vice President, General Counsel and
Secretary
Richard G. Collins 47 Vice President, Portfolio Management
Biographical information with respects to Messrs. Clark and Lewis is set
forth above under "Proposal to Elect Directors -- Director Nominees."
RICHARD J. VANDERHOFF has been President and Chief Operating Officer of
Realty Income since November 1994 and had been with R.I.C. Advisor from 1987
until the Merger. From August 1994 to November 1994, he served as general
counsel of the Company. Prior to 1987, he was in private law practice
specializing in real property and business law (1980 - 1984) and was employed
as Vice President, General Counsel and Secretary of FNCO Corporation, an
owner and operator of community newspaper companies located throughout the
midwest United States. He graduated from Jacksonville University, B.S., and
the University of San Diego School of Law, J.D. He is a licensed attorney
and member of the State Bar of California.
GARY M. MALINO has been Chief Financial Officer of the Company since
August 1994 and the Vice President, Chief Financial Officer and Treasurer of
the Company since August 1995 and had been with R.I.C. Advisor from 1985
until the Merger. Prior to joining R.I.C. Advisor in 1985, he was a
Certified Public Accountant ("CPA") with Kendall & Forman, an accountancy
corporation (1981-1985) and Assistant Controller with McMillin Development
Company, a real estate development company (1979-1981). He graduated from
San Diego State University, B.S.
JOHN H. WOLFE has been Vice President, Portfolio Acquisitions of the
Company since August 1995 and had been with R.I.C. Advisor from 1983 until
the Merger. Prior to joining R.I.C. Advisor, he was the Director of
Development for Black Angus Restaurants (1978-1983) and owned and operated a
real estate investment company (1975 - 1978). He graduated from San Diego
State University, B.S.
5
<PAGE>
MICHAEL R. PFEIFFER has been Vice President, General Counsel and Secretary
of the Company since August 1995 and had been with R.I.C. Advisor from 1990
until the Merger. Prior to joining R.I.C. Advisor he was in private practice
specializing in real estate transactional law (1987-1990), and was employed
as Associate Counsel with First American Title Insurance Company (1986-1987).
He graduated from the University of Rhode Island, B.S., and the University
of San Diego School of Law, J.D. He is a licensed attorney and member of the
State Bar of California and the State Bar of Florida. He also holds NASD
General Securities (Series 7) and Registered Principal (Series 24) licenses.
RICHARD G. COLLINS has been Vice President, Portfolio Management of the
Company since August 1995 and had been with R.I.C. Advisor from 1990 until
the Merger. Prior to joining R.I.C. Advisor, he was involved as a principal
in the acquisition and sale of land and commercial real estate and a general
partner for land and commercial real estate partnerships (1979-1990) and a
leasing and sales specialist in the Office Properties Division for Grubb &
Ellis Commercial Real Estate Services (1974-1979). He graduated from San
Diego State University, B.S.
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EXECUTIVE COMPENSATION
Prior to August 17, 1995, no executive officer of the Company, including
the Chief Executive Officer, received any compensation from the Company, but
rather received compensation from R.I.C. Advisor for services as an employee
and officer of R.I.C. Advisor. Subsequent to the Merger, all officers and
employees of the Company were compensated directly by the Company.
Accordingly, the following table sets forth the compensation for the Chief
Executive Officer and the other four most highly compensated executive
officers of the Company for fiscal year 1995 (collectively, the "Named
Executive Officers").
NAME AND PRINCIPAL POSITION 1995 SALARY (1)
- --------------------------- ---------------
William E. Clark $98,958.37
Chairman of the Board
and Chief Executive Officer
Richard J. VanDerhoff 89,062.50
President and Chief
Operating Officer
Thomas A. Lewis 79,166.73
Vice Chairman of the Board
and Vice President Capital
Markets
John H. Wolfe 79,166.73
Vice President Property
Acquisitions
Gary M. Malino 69,270.87
Vice President, Chief
Financial Officer and
Treasurer
(1) Salary figures are for period from August 17, 1995 through December 31,
1995 and are based on annualized salaries of $250,000; $225,000; $200,000;
$200,000 and $175,000 for each of Messrs. Clark, VanDerhoff, Lewis, Wolfe
and Malino, respectively.
None of the Named Executive Officers received any other compensation from
the Company in 1995 for their services as officers of the Company. In
connection with the Merger, each of the Named Executive Officers received
common stock of the Company. See "--Certain Transactions".
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
For the fiscal year ended December 31, 1995, no executive officer of the
Company, including the Chief Executive Officer, received any compensation
directly from the Company prior to the Merger, but rather were paid for their
services by R.I.C. Advisor. The compensation received by the executive
officers (including the Named Executive Officers) after the Merger for the
remainder of 1995 was based on negotiations in connection with and prior to
the Merger. Accordingly, the following report of the Compensation Committee
focuses on the philosophies and policies that will be established to
determine the appropriate levels of executive compensation on a going forward
basis.
The compensation policies of the Company will be structured to link the
compensation of the executive officers of the Company with enhanced
stockholder value. Through the establishment of short- and long-term
incentive plans, the Company will align the financial interests of the
executive officers with those of its stockholders.
EXECUTIVE COMPENSATION PHILOSOPHY
In designing its compensation programs, the Company will follow its belief
that compensation should reflect the value created for stockholders while
supporting the business strategies and long-range plans of the Company and
the markets the Company serves. In doing so, the compensation programs will
reflect the following themes:
A compensation program that stresses the Company's financial
performance and the executive officers' individual performance.
A compensation program that strengthens the relationship between pay
and performance by providing variable, at-risk compensation that is
reflective of current market practices and comparable executive rates and is
dependent upon the level of success in meeting specified Company and
individual performance goals.
An annual incentive plan, that supports a performance-oriented
environment and which generates a portion of compensation based on the
achievement of specific performance goals, with superior performance
resulting in total annual compensation above competitive levels.
A long-term incentive plan that is designed to reward executive
officers for long-term strategic management of the Company and the
enhancement of stockholder value.
The Compensation Committee will review and determine the compensation of
the executive officers of the Company with this philosophy on compensation as
its basis.
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EXECUTIVE COMPENSATION COMPONENTS
The Company's executive compensation is based on two components, each of
which is intended to serve the overall compensation philosophy.
BASE SALARY. Base salary is intended to be set at a level competitive
with amounts paid to executive officers of comparable companies with similar
business structure, size and marketplace orientation. In determining
appropriate salary levels, the Compensation Committee will consider the
individual's scope of responsibility, experience and performance. In
addition, the Compensation Committee will review competitive market and
industry data compiled by independent compensation consultants. The data
provided will compare the Company's compensation practices to a group of
comparable companies which tend to have similar business structure, size and
marketplace orientation.
Salaries for executive officers will be reviewed by the Compensation
Committee on an annual basis. Increases to base salaries will be driven
primarily by individual performance. Base salaries allow executives to be
rewarded for individual performance based on the Company's evaluation process
which encourages the development of executives and sustained levels of
contribution to the Company. Base salaries also offer security to executives
and allow the Company to attract competent executive talent and maintain a
stable management team.
EXECUTIVE INCENTIVE COMPENSATION. The Compensation Committee will
determine executive incentive compensation based on three factors: (a) growth
in the Company's funds from operations, which is a common statistical
benchmark in the real estate investment trust ("REIT") industry, (b) the
Company's performance compared to a peer group of comparable companies and
(c) the executive's individual performance. In connection with incentive
compensation, the Company provides a stock incentive plan that is linked to
the long-term performance of the Company. Executive officers are eligible to
receive annual grants of non-qualified stock options or other awards pursuant
to the Company's stock incentive plan. In keeping with the Company's
commitment to provide a total compensation package which emphasizes at-risk
components of compensation, any awards will be intended to retain and
motivate executive officers to improve long-term stock market performance.
The Compensation Committee is considering the possible adoption of a
management incentive plan, with annual incentive awards granted upon the
achievement by the executive officers of annual financial criteria
established by the Compensation Committee at the beginning of the fiscal
year. The financial measures would be determined and stated in terms of
target and maximum goals as determined by the Compensation Committee.
RULE 162(M). The 1993 Omnibus Budget Reconciliation Act ("OBRA") became
law in August 1993. Under the new law, income tax deductions of
publicly-traded companies in tax years beginning on or after January 1, 1994
may be limited to the extent total compensation (including base salary,
annual bonus, stock option exercises, and non-qualified benefits) for certain
executive officers exceeds $1 million (less the amount of any "excess
parachute-payments" as defined in Section 280G of the Code) in any one year.
Under OBRA, the deduction limit does not apply to payments which qualify as
"performance-based." To qualify
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as "performance-based," compensation payments must be based solely upon the
achievement of objective performance goals and made under a plan that is
administered by a committee of outside directors. In addition, the material
terms of the plan must be disclosed to and approved by stockholders, and the
compensation committee must certify that the performance goals were achieved
before payments can be made.
The Compensation Committee intends to design the Company's compensation to
conform with the OBRA legislation and related regulations so that total
compensation paid to any employee will not exceed $1 million in any one year,
except for compensation payments which qualify as "performance-based." The
Company may, however, pay compensation which is not deductible in limited
circumstances when sound management of the Company so requires.
Donald R. Cameron, Chairman
Roger P. Kuppinger
Michael D. McKee
Date: April 3, 1996
THE ABOVE REPORT OF THE COMPENSATION COMMITTEE WILL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT
THE COMPANY SPECIFICALLY INCORPORATES THE SAME BY REFERENCE.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee are executive officers
of the Company.
COMPANY PERFORMANCE GRAPH
As a part of the rules concerning executive compensation disclosure,
Realty Income is obligated to provide a chart comparing the yearly percentage
change in the cumulative total stockholder return on Realty Income Common
Stock over a five-year period. However, since Realty Income Common Stock has
been publicly traded only since October 18, 1994, such information is
provided from this date through December 31, 1995.
The chart below compares the performance of Realty Income Common Stock
with the performance of an index including all securities for U.S. companies
list on Standard & Poor's 500 Total Return Index (the "S&P 500 Total Return
Index") and of a peer group of companies, measuring the changes in common
stock prices from October 18, 1994 through December 31, 1995. The chart
assumes an investment of $100 on October 18, 1994, and as required by the
Commission, all values shown assume the reinvestment of all distributions, if
any, and, in the case of the peer group, are weighted to reflect the market
capitalization of the component companies. The peer group consists of
Franchise Finance Corporation of America, Lexington Corporate Properties,
Inc., Commercial Net Lease Realty and Tri-Net Corporate Realty Trust.
10
<PAGE>
TOTAL RETURN PERFORMANCE
[GRAPH]
<TABLE>
<CAPTION>
PERIOD ENDING
--------------------------------------------------------
10/18/94 12/31/94 3/31/95 6/30/95 9/30/95 12/31/95
-------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Realty Income Corp 100.00 108.41 119.39 142.36 144.66 161.50
Realty Income Peers 100.00 102.75 108.75 122.14 124.37 130.80
S&P 500 Total Return 100.00 98.83 107.25 115.32 123.61 131.06
</TABLE>
CERTAIN TRANSACTIONS
During the period from January 1, 1995 through August 17, 1995, R.I.C.
Advisor advised the Company with respect to the Company's investments and
assumed day-to-day management of the Company. The Company paid to R.I.C.
Advisor an advisor fee totaling $3,660,794 for such services pursuant to an
advisory agreement. Each of Messrs. Clark, VanDerhoff, Lewis, Wolfe and
Malino was a shareholder and executive officer of R.I.C. Advisor and each of
Messrs. Clark, Lewis and Wolfe was a director of R.I.C. Advisor. Messrs.
Clark, VanDerhoff, Lewis, Wolfe and Malino beneficially owned 51.2%, 7.5%,
7.5%, 7.5% and 6.2%, respectively, of the outstanding shares of common stock
of R.I.C. Advisor.
In order to create a fully-integrated company and more closely align the
interests of management with the interests of the Company's stockholders,
R.I.C. Advisor was merged with and into the Company on August 17, 1995.
Pursuant to the Agreement and Plan of Merger dated April 28, 1995 (the
"Merger Agreement"), the outstanding shares of R.I.C. Advisor's common stock
were converted into 990,704 shares of Realty Income Common Stock. As a
result of the Merger, the employees of R.I.C. Advisor became employees of the
Company and the Company became a fully-integrated, self-administered and
self-managed REIT.
As noted above, certain of the Company's executive officers and directors
were shareholders of R.I.C. Advisor and received shares of Realty Income
Common Stock as consideration in the Merger. Messrs. Clark (by way of the
Clark Family Trust of which he is trustee), VanDerhoff, Lewis, Wolfe and
Malino received 507,105, 74,738, 74,738, 74,738 and 61,549, respectively,
shares of Realty Income Common Stock in connection with the Merger.
11
<PAGE>
The shares issued in the Merger were not registered under the Securities
Act of 1933, as amended. Under the Merger Agreement and a related
Registration Rights Agreement dated April 28, 1995 among the Company and the
R.I.C. Advisor shareholders, the Company agreed to file a "shelf"
registration statement covering the resale of up to 25% of the Company's
Common Stock issued in the Merger and to cause such registration statement to
be declared effective by the Securities and Exchange Commission not earlier
than August 17, 1996.
COMPLIANCE WITH FEDERAL SECURITIES LAWS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities
(collectively, "Insiders"), to file with the Commission initial reports of
ownership and reports of changes in ownership of Realty Income Common Stock
and other equity securities of the Company. Insiders are required by
regulation of the Commission to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company or written representations that no other
reports were required, during the year ended December 31, 1995, all Insiders
complied with all Section 16(a) filing requirements applicable to them.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OF REALTY INCOME CORPORATION
The following table sets forth as of March 15, 1996 certain information
with respect to the beneficial ownership of shares of Realty Income Common
Stock by (i) each director and Named Executive Officer and (ii) all directors
and executive officers of the Company as a group. The Company does not know
of any person who beneficially owns 5% or more of the outstanding shares of
Realty Income Common Stock. Except as otherwise noted, the Company believes
that the beneficial owners of shares of Realty Income Common Stock listed
below, based on information furnished by such owners, have sole voting and
investment power with respect to such shares.
<TABLE>
<CAPTION>
Shares of Realty Income
Common Stock
Beneficially Owned
-------------------------
Name Number Percent
- ---- -------- -------
<S> <C> <C>
William E. Clark(1) 564,088 2.5
Richard J. VanDerhoff(2) 78,278 *
Thomas A. Lewis 77,053 *
John H. Wolfe (3) 112,629 *
Gary Malino(4) 63,169 *
Donald R. Cameron(5)(6) 12,181 *
Michael D. McKee(6) 4,500 *
Roger P. Kuppinger(6) 3,000 *
All directors and executive officers
of the Company, as a group
(10 persons)(7) 914,998 4.0%
</TABLE>
- -----------------
*Less than one percent
(1) Mr. Clark's total includes 544,881 shares owned of record by The William
E. Clark, Jr. and Evelyn J. Clark Family Trust (the "Clark Family Trust"),
of which he is a trustee, 18,329 shares owned of record by the Realty Income
Corporation Defined Benefit Pension Plan, of which he is the trustee, and
449 shares owned of record by his wife. Mr. Clark disclaims beneficial
ownership of the shares owned of record by his wife.
(2) Mr. VanDerhoff's total includes 2,440 shares owned of record by his wife, as
to which he disclaims beneficial ownership.
(3) Mr. Wolfe's total includes 12,835 shares owned by J.H. Wolfe Properties,
Inc. and 10,976 shares owned by J.H. Wolfe Properties, Inc. Pension and
Profit Sharing Plan and 14,080 shares owned of record by the Wolfe Family
Trust of which he is the trustee.
(4) Mr. Malino's total includes 206 shares owned of record by his wife, as to
which he disclaims beneficial ownership, and 1,043 shares owned of record
jointly by he and his wife, as to which he shares voting and disposition
power with his wife.
13
<PAGE>
(5) Mr. Cameron's total includes 8,000 shares owned of record by the Trust dated
April 1, 1984 FBO Cameron, Murphy and Spangler, Inc. Amended and Restated
Pension Trust account of Donald R. Cameron, of which he is a trustee, 695
shares owned of record by his wife, and 749 shares owned of record by his
son. Mr. Cameron disclaims beneficial ownership of the shares owned by his
wife and son.
(6) For each of Messrs. Cameron, McKee and Kuppinger the total includes 2,500
shares subject to options that became exercisable on August 24, 1995.
(7) See notes (1) through (6).
AUDITORS
Subject to its discretion to appoint alternative auditors if it deems such
action appropriate, the Board of Directors has retained KPMG Peat Marwick LLP
as the Company's auditors for the current fiscal year. The Board of
Directors has been advised that KPMG Peat Marwick LLP is independent with
respect to the Company and its subsidiaries within the meaning of the
Securities Act and the applicable published rules and regulations thereunder.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting and will have the opportunity to make statements if they
desire and to respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
All proposals of stockholders intended to be presented at the Company's
1997 Annual Meeting of Stockholders must be received by the Secretary of the
Company by December 3, 1996 to be considered for possible inclusion in the
proxy statement and form of proxy used in connection with such annual
meeting.
YOUR PROXY IS IMPORTANT
WHETHER YOU OWN FEW OR MANY SHARES
PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD TODAY.
14
<PAGE>
REALTY INCOME CORPORATION
220 WEST CREST STREET
ESCONDIDO, CALIFORNIA 92025-1725
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard J. VanDerhoff and Michael R. Pfeiffer
as Proxies, each with the power to appoint his substitutes, and hereby
authorizes each of them to represent and to vote as designated below, all the
shares of Common Stock of Realty Income Corporation (the "Company") held of
record by the undersigned on March 19, 1996, at the Annual Meeting of
Stockholders to be held on May 14, 1996, and at any adjournment or
postponement thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark /X/
your votes
as indicated
in this example
The Board of Directors recommends a vote FOR Items 1 and 2.
Item 1. - Election of Directors
Nominees:
FOR WITHHOLD AUTHORITY
For all (except as indicated to the contrary)
/ / / /
William E. Clark, Thomas A. Lewis, Donald R. Cameron, Roger P. Kuppinger and
Michael D. McKee
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
- ------------------------------------------------------------------------------
Item 2. - In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting or any
adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
PLEASE DATE THIS PROXY AND SIGN IT EXACTLY AS YOUR NAME OR NAMES APPEAR
BELOW. WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING
AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH. IF SHARES ARE HELD BY A CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY THE PRESIDENT OR OTHER AUTHORIZED OFFICER. IF SHARES ARE
HELD BY A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AN AUTHORIZED
PERSON.
All other proxies heretofore given by the undersigned to vote shares of stock
of the Company, which the undersigned would be entitled to vote if personally
present at the Annual Meeting or any adjournment or postponement thereof, are
hereby expressly revoked.
Signatures(s)______________________________________________ Dated _______, 1996
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE ENCLOSED
ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
