def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
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þ Definitive
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o Definitive
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Health Care REIT, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
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TABLE OF CONTENTS
HEALTH
CARE REIT, INC.
NOTICE OF
ANNUAL MEETING OF
STOCKHOLDERS
and
Meeting Date
May 5, 2011
YOUR VOTE IS
IMPORTANT!
You are urged to sign, date and
return your proxy in the enclosed envelope.
HEALTH CARE REIT,
INC.
4500
Dorr Street
Toledo, Ohio 43615
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
AND
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE ANNUAL MEETING
To Be
Held on May 5, 2011
To
The Stockholders of Health Care REIT, Inc.:
The Annual Meeting of Stockholders of Health Care REIT, Inc.
will be held on May 5, 2011 at 10:00 a.m. in the Bruce
G. Thompson Auditorium at Health Care REIT, Inc.s
headquarters, 4500 Dorr Street, Toledo, Ohio, for the purpose of
considering and acting upon:
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1.
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The election of three Directors for a term of three years;
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2.
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The advisory vote on executive compensation;
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3.
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The advisory vote on the frequency of holding future advisory
votes on executive compensation;
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4.
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The approval of an amendment to the Second Restated Certificate
of Incorporation to increase the number of authorized shares of
common stock from 225,000,000 to 400,000,000 for general
corporate purposes;
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5.
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The ratification of the appointment of Ernst & Young
LLP as independent registered public accounting firm for the
fiscal year 2011; and
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6.
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The transaction of such other business as may properly come
before the meeting or any adjournment thereof.
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The Board of Directors of Health Care REIT, Inc. unanimously
recommends that you vote (1) for each of the
nominees for election to the Board, (2) for the
approval of the compensation of Health Care REIT, Inc.s
Named Executive Officers (as defined in the Proxy Statement),
(3) for the approval of an annual advisory vote
on executive compensation, (4) for the approval
of an amendment to the Second Restated Certificate of
Incorporation to increase the number of authorized shares of
common stock for general corporate purposes, and
(5) for the ratification of the appointment of
Ernst & Young LLP as independent registered public
accounting firm. Stockholders of record at the close of business
on March 8, 2011 will be entitled to notice of, and to vote
at, the Annual Meeting or any adjournment thereof. Information
relating to the matters to be considered and voted on at the
Annual Meeting is set forth in the Proxy Statement accompanying
this Notice. In addition, the Proxy Statement, Annual Report
and a form of Proxy Card are available on the Internet at
www.hcreit.com/proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Erin C. Ibele
Senior Vice President-Administration and
Corporate Secretary
Toledo, Ohio
March 25, 2011
PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN
IT PROMPTLY IN THE ENVELOPE PROVIDED WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING. In lieu of mailing your Proxy Card,
you may choose to submit a proxy via the Internet or by
telephone by following the procedures provided on your Proxy
Card. The proxy may be revoked by you at any time, and giving
your proxy will not affect your right to vote in person if you
attend the Annual Meeting. If you plan to attend the Annual
Meeting and require directions, please call
(419) 247-2800
or write to the Senior Vice President-Administration and
Corporate Secretary, Health Care REIT, Inc., 4500 Dorr Street,
Toledo, Ohio 43615.
HEALTH CARE REIT,
INC.
4500
Dorr Street
Toledo, Ohio 43615
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
May 5,
2011
GENERAL
This Proxy Statement is furnished to the stockholders of Health
Care REIT, Inc. (the Company) by its Board of
Directors in connection with the solicitation of proxies in the
enclosed form to be used in voting at the Annual Meeting of
Stockholders (the Annual Meeting), which is
scheduled to be held on Thursday, May 5, 2011 at
10:00 a.m. as set forth in the foregoing notice. At the
Annual Meeting, the stockholders will be asked to elect three
Directors, approve the compensation of the Companys Named
Executive Officers (as defined below in the section
Executive Compensation), approve an annual advisory
vote on executive compensation, approve an amendment to the
Companys Second Restated Certificate of Incorporation to
increase the number of authorized shares of common stock from
225,000,000 to 400,000,000, ratify the appointment of
Ernst & Young LLP as the Companys independent
registered public accounting firm, and transact such other
business as may properly come before the Annual Meeting or any
adjournment thereof.
A share cannot be voted at the Annual Meeting unless the holder
thereof is present or represented by proxy. When proxies in the
accompanying form are returned properly executed and dated or
the appropriate procedures for submitting a proxy via the
Internet or by telephone are followed, the shares represented
thereby will be voted at the Annual Meeting. If a choice is
specified in the proxy, the shares represented thereby will be
voted in accordance with such specification. If no specification
is made, the proxy will be voted for the action
proposed. Any stockholder giving a proxy has the right to revoke
it any time before it is voted by (1) filing a written
revocation with the Senior Vice President-Administration and
Corporate Secretary of the Company, (2) filing a duly
executed proxy bearing a later date, or (3) attending the
Annual Meeting and voting in person. A written revocation, as
described in (1) above, will not be effective until the
notice thereof has been received by the Senior Vice
President-Administration and Corporate Secretary of the Company.
The cost of solicitation of proxies will be borne by the
Company. In addition to solicitation by mail, Directors and
officers of the Company may solicit proxies in writing or by
telephone, electronically, by personal interview, or by other
means of communication. The Company will reimburse Directors and
officers for their reasonable
out-of-pocket
expenses in connection with such solicitation. The Company will
request brokers and nominees who hold shares in their names to
furnish this proxy material to the persons for whom they hold
shares and will reimburse such brokers and nominees for their
reasonable
out-of-pocket
expenses in connection therewith. The Company has hired Phoenix
Advisory Partners to solicit proxies for a fee not to exceed
$6,500, plus expenses and other customary charges.
The presence at the Annual Meeting, in person or by proxy, of
the holders of a majority of the total number of shares of
voting securities outstanding on the record date shall
constitute a quorum for the transaction of business by such
holders at the Annual Meeting.
The Companys mailing address and the location of its
executive offices is 4500 Dorr Street, Toledo, Ohio 43615. The
telephone number is
(419) 247-2800.
The approximate date on which this material was first sent to
stockholders will be March 31, 2011. A COPY OF THE
COMPANYS ANNUAL REPORT ON
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2010, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE ON THE
COMPANYS WEBSITE AT www.hcreit.com OR MAY BE OBTAINED
WITHOUT CHARGE BY WRITING TO THE SENIOR VICE
PRESIDENT-ADMINISTRATION AND CORPORATE SECRETARY, HEALTH CARE
REIT, INC., AT THE ABOVE MAILING ADDRESS.
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VOTING
SECURITIES OUTSTANDING
As of March 8, 2011, the Company had outstanding
176,497,932 shares of common stock, $1.00 par value
per share. The common stock constitutes the only class of voting
securities of the Company entitled to vote at the Annual
Meeting. Stockholders of record at the close of business on
March 8, 2011 are entitled to notice of, and to vote at,
the Annual Meeting and any adjournments thereof. Each share of
common stock is entitled to one vote on all matters to come
before the Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Companys By-Laws provide that the Board of Directors
shall have nine members unless changed by the Board. The Board
has increased the number of Directors from nine to 10. The Board
is divided into three classes: Class I, Class II and
Class III. The Directors are elected to serve for a
three-year term and until the election and qualification of
their respective successors.
The shares represented by the proxies will be voted
for the election of each of the nominees named
below, unless you indicate in the proxy that your vote should be
cast against any or all of them or that you
abstain. Each nominee elected as a Director will
continue in office until his or her successor has been duly
elected and qualified, or until the earliest of his or her
resignation, removal or death. If any nominee declines or is
unable to accept such nomination to serve as a Director, events
which the Board does not now expect, the proxies reserve the
right to substitute another person as a Board nominee, or to
reduce the number of Board nominees, as they shall deem
advisable. The proxy solicited hereby will not be voted to elect
more than three Directors.
Except in a contested election, each Board nominee will be
elected only if the number of votes cast for the
nominees election exceed the number of votes cast
against such nominees election. In a contested
election (where a determination is made that the number of
Director nominees is expected to exceed the number of Directors
to be elected at a meeting), the vote standard will be a
plurality of the votes cast with respect to such Director.
Under the Companys By-Laws, any incumbent Director nominee
who receives a greater number of votes against his
or her election than votes for such election will
tender his or her resignation for consideration by the
Nominating/Corporate Governance Committee. The
Nominating/Corporate Governance Committee will recommend to the
Board the action to be taken with respect to such offer of
resignation. The Board will then act on the Nominating/Corporate
Governance Committees recommendation within 90 days
from the date of the certification of election results and
publicly disclose its decision and the rationale behind it.
As discussed in more detail below under Board and
Committees, the Board believes that its Directors and
nominees for Director should, among other things, (1) have
significant leadership experience at a complex organization,
(2) be accustomed to dealing with complex problems, and
(3) have the education, experience and skills to exercise
sound business judgment. In evaluating its Directors and
nominees for Director, the Nominating/Corporate Governance
Committee looks at the overall size and structure of the Board
and strives to assemble a Board that is skilled, diverse,
well-rounded and experienced. The specific experiences,
qualifications, skills and attributes of each of the
Class I, Class II and Class III Directors are
described below. These experiences, along with the
Directors honesty, sound judgment and commitment to the
Company, led the Board to conclude that the Class I
Directors should be elected to serve on the Board and that the
Class II and Class III Directors should continue to
serve on the Board.
CLASS I
Directors to be Elected
William C. Ballard, Jr.,
age 70. Mr. Ballard is former Of
Counsel to Greenebaum Doll & McDonald PLLC (law firm),
a position he held from 1992 to June 2008. From 1970 to 1992,
Mr. Ballard was Executive Vice President, Chief Financial
Officer and Director of Humana Inc. (provider of integrated
health care services). Mr. Ballard also serves as a
Director of UnitedHealth Group Incorporated (diversified health
and well-being company). Mr. Ballard has served as a
Director of the Company since 1996 and is a member of the
Boards Compensation, Executive, Investment and Planning
Committees. Mr. Ballards background as an attorney
and his
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extensive experience in the health care industry through his
long-time service to Humana Inc. and his current director role
with UnitedHealth Group Incorporated give him a unique
perspective.
Peter J. Grua, age 57. Mr. Grua is a
Partner of HLM Venture Partners (provider of venture capital),
where he has held various positions since 1992. Mr. Grua
also serves as a Director of The Advisory Board Company
(provider of best practices research and analysis to the health
care industry). Mr. Grua served as a Director of
Familymeds, Inc. (an operator of apothecary pharmacies) until
2007 and Renal Care Group, Inc. (an operator of kidney dialysis
facilities) until 2006. Mr. Grua has served as a Director
of the Company since 1999 and is a member of the Boards
Executive, Investment, Nominating/Corporate Governance and
Planning Committees. Mr. Grua serves as the Chair of the
Nominating/Corporate Governance Committee and the presiding
Director of executive sessions of non-employee Directors and
independent Directors. Mr. Gruas entrepreneurial and
leadership experience with HLM Venture Partners and his
expertise in the health care industry through directorships with
a variety of public and private companies are valuable assets to
the Board.
R. Scott Trumbull,
age 62. Mr. Trumbull is Chairman and
Chief Executive Officer of Franklin Electric Co., Inc.
(manufacturer of water and fuel pumping systems), a position he
has held since January 2003. From October 2001 through December
2002, Mr. Trumbull was Executive Vice President and Chief
Financial Officer of Owens-Illinois, Inc. (manufacturer of glass
containers). From 1993 to October 2001, Mr. Trumbull served
as Executive Vice President, International
Operations & Corporate Development of Owens-Illinois,
Inc. Mr. Trumbull also serves as Non-Executive Chairman of
the Board of Schneider National, Inc. (privately-held leader in
freight delivery and logistics). Mr. Trumbull has served as
a Director of the Company since 1999 and is a member of the
Boards Audit, Investment and Planning Committees.
Mr. Trumbulls leadership experience as Chairman and
Chief Executive Officer of Franklin Electric Co., Inc. and in
various capacities at Owens-Illinois, Inc. provide the Board
with a global perspective.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES. Each nominee receiving more votes
for his or her election than votes
against his or her election will be elected. If an
incumbent Director nominee receives a greater number of votes
against his or her election than votes
for such election, he or she is required to tender
his or her resignation for consideration by the
Nominating/Corporate Governance Committee in accordance with the
Companys By-Laws.
CLASS II
Directors Whose Terms Continue (1)
Pier C. Borra, age 71. Mr. Borra is
Chairman of CORA Health Services, Inc. (outpatient
rehabilitation services), a position he has held since January
1998. From April 1985 to December 1997, Mr. Borra served as
Chairman, President and Chief Executive Officer of Arbor Health
Care Company (provider of subacute medical services).
Mr. Borra has served as a Director of the Company since
1991 and is a member of the Boards Audit, Investment,
Nominating/Corporate Governance and Planning Committees.
Mr. Borra brings a wealth of knowledge and experience in
the health care industry to the Board as Chairman of CORA Health
Services, Inc. and previously as Chairman, President and Chief
Executive Officer of Arbor Health Care Company.
George L. Chapman,
age 63. Mr. Chapman is Chairman, Chief
Executive Officer and President of the Company. Mr. Chapman
served as Chairman and Chief Executive Officer of the Company
from October 1996 to January 2009 and assumed the additional
title of President of the Company in January 2009.
Mr. Chapman previously served as President of the Company
from September 1995 to May 2002. From January 1992 to September
1995, Mr. Chapman served as Executive Vice President and
General Counsel of the Company. Mr. Chapman has served as a
Director of the Company since 1994 and is a member of the
Boards Executive, Investment and Planning Committees.
Mr. Chapmans
day-to-day
leadership of the Company, as Chairman, Chief Executive Officer
and President, provides him with intimate knowledge of the
Companys business and operations.
Sharon M. Oster, age 62. Ms. Oster
is the Dean of the Yale University School of Management.
Ms. Oster has served as a Director of the Company since
1994 and is a member of the Boards Compensation,
Investment and Planning Committees. Ms. Oster served as a
Director of The Aristotle Corporation (holding company for a
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manufacturer and distributor of educational, health and
agricultural products) until 2005 and Transpro, Inc. (designer
and manufacturer of precision transportation products) until
2005. Ms. Osters expertise in competitive strategy,
economic theory and management, leadership role at the Yale
University School of Management and directorships with a variety
of public companies give her a unique perspective.
Jeffrey R. Otten, age 60. Mr. Otten
is the President of JRO Ventures Inc. (management consulting
firm), a position he has held since 2002. From January 2004 to
August 2005, Mr. Otten served as Chief Executive Officer of
Stentor Corporation (provider of digital medical imaging). From
1994 to 2002, Mr. Otten served as Chief Executive Officer
of Brigham and Womens Hospital, a teaching affiliate of
Harvard Medical School. Mr. Otten has served as a Director
of the Company since January 2008 and is a member of the
Boards Audit, Investment, Nominating/Corporate Governance
and Planning Committees. Mr. Otten has extensive knowledge
of the hospital sector and health care industry from his service
as Chief Executive Officer of Brigham and Womens Hospital
and entrepreneurial and leadership experience from his work as
President of JRO Ventures Inc. and Chief Executive Officer of
Stentor Corporation.
CLASS III
Directors Whose Terms Continue (2)
Thomas J. DeRosa, age 53. Mr. DeRosa
is former Vice Chairman and Chief Financial Officer of The Rouse
Company (real estate development and operations), a position he
held from September 2002 until November 2004 when The Rouse
Company merged with General Growth Properties, Inc. From 1992 to
September 2002, Mr. DeRosa held various positions at
Deutsche Bank (Deutsche Bank AG) and Alex. Brown &
Sons, including Global Co-Head of the Health Care Investment
Banking Group of Deutsche Bank and Managing Director in the Real
Estate Investment Banking Group of Alex. Brown & Sons.
Mr. DeRosa also serves as a Director of CBL &
Associates Properties, Inc. (owner and developer of malls and
shopping centers), Value Retail PLC (a U.K.-based owner,
operator and developer of luxury outlet shopping villages in
Europe) and Georgetown University (where he also serves on the
Audit Committee). Mr. DeRosa served as a Director of Dover
Corporation (global provider of equipment, specialty systems and
services for various industrial and commercial markets) until
2010. Mr. DeRosa has served as a Director of the Company
since 2004 and is a member of the Boards Audit,
Investment, Nominating/Corporate Governance and Planning
Committees. Mr. DeRosa serves as the Chair of the Audit
Committee. Mr. DeRosa has extensive knowledge of the real
estate industry and capital markets from his experience as Vice
Chairman and Chief Financial Officer of The Rouse Company and
his leadership roles at Deutsche Bank and Alex.
Brown & Sons.
Jeffrey H. Donahue,
age 64. Mr. Donahue is former President
and Chief Executive Officer of Enterprise Community Investment,
Inc. (provider of affordable housing), a position he held from
January 2003 to April 2009. Mr. Donahue was Executive Vice
President and Chief Financial Officer of The Rouse Company (real
estate development and operations) from December 1998 to
September 2002. Mr. Donahue serves as a Director of
T. Rowe Price Savings Bank and Bentall Kennedy (real estate
investment advisor). Mr. Donahue has served as a Director
of the Company since 1997 and is a member of the Boards
Compensation, Investment and Planning Committees.
Mr. Donahue serves as the Chair of the Compensation
Committee. Mr. Donahue has extensive knowledge of the real
estate industry from his experience as President and Chief
Executive Officer of Enterprise Community Investment, Inc. and
Executive Vice President and Chief Financial Officer of The
Rouse Company.
Fred S. Klipsch, age 69. Mr. Klipsch
is Chairman of the Board and Chief Executive Officer of Klipsch
Group, Inc. (global speaker manufacturer), a position he has
held since 1989. Since 1990, Mr. Klipsch also has served as
Chairman of the Board and Chief Executive Officer of Klipsch
Lanham Investments. Mr. Klipsch served as Chairman of the
Board and Chief Executive Officer of Windrose Medical Properties
Trust from its formation in 2002 until December 2006, when
Windrose Medical Properties Trust merged with the Company.
Mr. Klipsch served as Vice Chairman of the Company from
December 2006 until May 2009. Mr. Klipsch has served as a
Director of the Company since December 2006 and is a member of
the Boards Investment and Planning Committees.
Mr. Klipsch has extensive knowledge of the medical office
building sector from his experience as Chairman of the Board and
Chief Executive Officer of Windrose Medical Properties Trust and
extensive leadership experience as Chairman of the Board and
Chief Executive Officer of Klipsch Group, Inc.
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(1) |
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The terms of Ms. Oster and Messrs. Borra, Chapman and
Otten expire in 2012. |
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The terms of Messrs. DeRosa, Donahue and Klipsch expire in
2013. |
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BOARD AND
COMMITTEES
Leadership
Structure
The Board is responsible for the selection of the Chairman of
the Board and the Chief Executive Officer. The Board believes it
is in the best interests of the Company for the Board to make a
determination regarding whether to separate the roles of
Chairman and Chief Executive Officer based upon the
circumstances. Accordingly, these roles may be filled by one
individual or by two different individuals (and during the
course of its history, the Company has utilized each leadership
model). Currently, Mr. Chapman serves as the Chairman,
Chief Executive Officer and President of the Company. The Board
has determined that this leadership structure is appropriate for
the Company given the background, skills and experience of
Mr. Chapman and the sustained growth and performance of the
Company under Mr. Chapmans leadership. The Board
periodically reviews and assesses the Companys leadership
structure in connection with its review of succession planning.
During this review, Mr. Chapman and the Board discuss
future candidates for senior leadership positions, succession
timing for those positions, and development plans for the
highest-potential candidates. This process ensures continuity of
leadership over the long term, and it forms the basis on which
the Company makes ongoing leadership assignments. See
Executive Officers below for a description of the
roles, background and experience of the Executive Officers of
the Company.
Mr. Chapman presides at all meetings of the stockholders
and of the Board of Directors (except as noted below) and
generally supervises the business of the Company. The Board met
five times during the year ended December 31, 2010.
Executive sessions of non-employee Directors are held after
regularly scheduled meetings of the Board and an executive
session of independent Directors is held at least once each
year. The presiding Director of these sessions is the Chair of
the Nominating/Corporate Governance Committee, currently
Mr. Grua. As presiding Director, Mr. Grua acts as a
liaison between the independent Directors and the Chairman,
coordinates the activities of the independent Directors,
communicates with the independent Directors between meetings as
needed and performs such other functions as designated from time
to time by the Board. The Board believes the current leadership
structure provides an appropriate balance between strategic
development and independent oversight of Management.
Independence
and Meetings
The Board has adopted Corporate Governance Guidelines that meet
the listing standards adopted by the New York Stock
Exchange and a Code of Business Conduct and Ethics that meets
the New York Stock Exchanges listing standards and
complies with the rules of the Securities and Exchange
Commission. The Corporate Governance Guidelines and Code of
Business Conduct and Ethics are available on the Companys
website at www.hcreit.com.
Pursuant to the Corporate Governance Guidelines, the Board
undertook a review of Director independence in January 2011.
During this review, the Board considered transactions and
relationships between each Director, or any member of his or her
immediate family, and the Company and its subsidiaries and
affiliates. The purpose of this review was to determine whether
any relationships or transactions were inconsistent with a
determination that a Director is independent.
The Board determined that other than Messrs. Chapman and
Klipsch, all of the Directors (Ms. Oster and
Messrs. Ballard, Borra, DeRosa, Donahue, Grua, Otten and
Trumbull) meet the specific minimum independence requirements of
the New York Stock Exchange. The Board also determined that,
other than Messrs. Chapman and Klipsch, all of the
Directors (Ms. Oster and Messrs. Ballard, Borra,
DeRosa, Donahue, Grua, Otten and Trumbull) have no material
relationship with the Company (either directly or as a partner,
stockholder or officer of an organization that has a
relationship with the Company) and are therefore independent
under the general independence standards of the New York Stock
Exchange and the Corporate Governance Guidelines.
The Board determined that all of the members of the Audit
Committee (Messrs. Borra, DeRosa, Otten and Trumbull) are
independent under the general independence standards of the New
York Stock Exchange and the Corporate Governance Guidelines and
under the separate independence standards for audit committee
members under
Rule 10A-3
of the Securities Exchange Act of 1934, as amended.
Additionally, the Board determined that all of the members of
the Compensation Committee (Ms. Oster and
Messrs. Ballard and Donahue) are independent,
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non-employee and outside Directors, as the case may be, under
the rules of the New York Stock Exchange, Securities and
Exchange Commission and Internal Revenue Service. Finally, the
Board determined that all of the members of the
Nominating/Corporate Governance Committee (Messrs. Borra,
DeRosa, Grua and Otten) are independent under the rules of the
New York Stock Exchange.
The Board also determined that all of the nominees for election
at the Annual Meeting (Messrs. Ballard, Grua and Trumbull)
are independent from the Company and its Management under the
standards set forth in the Corporate Governance Guidelines.
The Companys policy is to schedule a meeting of the Board
on the date of the annual meeting of stockholders and all of the
Directors are encouraged to attend that meeting. All Directors
attended last years annual meeting of stockholders.
The Board has standing Audit, Compensation, Executive,
Investment, Nominating/Corporate Governance and Planning
Committees. In 2010, all incumbent Directors attended at least
75% of the aggregate of the meetings of the Board and the
committees on which they served.
Risk
Management
The Board of Directors, as a whole and at the committee level,
plays an important role in overseeing the management of the
Companys risks. The Board regularly reviews the
Companys material risks and exposures, including
operational, strategic, financial, legal and regulatory risks.
The Audit Committee reviews the management of financial risk and
the Companys policies regarding risk assessment and risk
management. The Compensation Committee reviews the management of
risks relating to the Companys compensation plans and
arrangements. The Nominating/Corporate Governance Committee
reviews the management of risks relating to compliance and the
Companys corporate governance policies. While each
committee is responsible for monitoring certain risks and the
management of such risks, the entire Board of Directors is
regularly informed about such risks through committee reports.
Management is responsible for identifying the Companys
significant risks, developing risk management strategies and
policies and integrating risk management into the Companys
decision-making process. To that end, the Company has
implemented an enterprise risk management program and created an
internal risk management steering committee charged with
identifying, monitoring and controlling such risks and
exposures. This risk management structure helps ensure that
necessary information regarding significant risks and exposures
is transmitted to the Companys leadership, including
Management, the appropriate Board committees and the Board of
Directors.
Audit
Committee
The Audit Committee has the authority and responsibility to
engage and discharge the independent registered public
accounting firm, pre-approve all audit and non-audit services to
be provided by such firm, review the plan and results of the
auditing engagement, review Managements evaluation of the
adequacy of the Companys system of internal control over
financial reporting, direct and supervise investigations into
matters within the scope of its duties, and perform the duties
set forth in its written charter and such other duties as are
required by applicable laws or securities exchange rules. The
members of the Audit Committee are Messrs. Borra, DeRosa,
Otten and Trumbull, with Mr. DeRosa serving as Chair. The
Audit Committee met six times during the year ended
December 31, 2010.
The Audit Committee is comprised solely of Directors who are not
officers or employees of the Company and who the Board has
determined have the requisite financial literacy to serve on the
Audit Committee. Additionally, the Board determined that no
member of the Committee has any material relationship with the
Company that might interfere with the exercise of the
members independent judgment and that each member meets
the standards of independence established by the Securities and
Exchange Commission and the New York Stock Exchange. See
Independence and Meetings above for a discussion of
independence determinations.
The Board, after reviewing all of the relevant facts and
circumstances, determined that Messrs. Borra, DeRosa and
Trumbull are audit committee financial experts.
6
The Audit Committee is governed by a written charter approved by
the Board of Directors. The charter is available on the
Companys website at www.hcreit.com.
Compensation
Committee
The Compensation Committee is responsible for determining the
nature and amount of compensation for Executive Officers. The
members of the Compensation Committee are Ms. Oster and
Messrs. Ballard and Donahue, with Mr. Donahue serving
as Chair. The Compensation Committee met eight times during the
year ended December 31, 2010. The Board determined that the
members of the Compensation Committee are independent,
non-employee and outside directors, as the case may be, under
the rules of the New York Stock Exchange, Securities and
Exchange Commission and Internal Revenue Service. The
Compensation Committee is governed by a written charter approved
by the Board of Directors. The charter is available on the
Companys website at www.hcreit.com. See Executive
Compensation Compensation Discussion and
Analysis for additional information regarding the
Compensation Committee.
Executive
Committee
The function of the Executive Committee is to exercise all the
powers of the Board (except any powers specifically reserved to
the Board) between meetings of the Board. The Executive
Committee is also responsible for reviewing and approving the
Companys investments between meetings of the Investment
Committee. The members of the Executive Committee are
Messrs. Ballard, Chapman and Grua. The Executive Committee
did not meet during the year ended December 31, 2010.
Investment
Committee
The function of the Investment Committee is to review and
approve the Companys investments in health care and senior
housing real estate. During the year ended December 31,
2010, the Investment Committee met four times. Each member of
the Board is a member of the Investment Committee. The Executive
Committee is responsible for reviewing and approving the
Companys investments between meetings of the Investment
Committee.
Nominating/Corporate
Governance Committee
Responsibilities and Members. The
Nominating/Corporate Governance Committee is responsible for
reviewing and interviewing qualified candidates to serve on the
Board, to make nominations to fill vacancies on the Board and to
select the nominees for the Directors to be elected by the
stockholders at each annual meeting. In addition, the Committee
is responsible for evaluating, implementing and overseeing the
standards and guidelines for the governance of the Company,
including monitoring compliance with those standards and
guidelines, developing and implementing succession plans and
evaluating the performance of the Board. The members of the
Nominating/Corporate Governance Committee are
Messrs. Borra, DeRosa, Grua and Otten, with Mr. Grua
serving as Chair. The Nominating/Corporate Governance Committee
met five times during the year ended December 31, 2010.
The Committee is comprised solely of Directors who are not
officers or employees of the Company. The Board has determined
that no member of the Committee has any material relationship
with the Company that might interfere with the members
exercise of his independent judgment and that each member meets
the standards of independence established by the New York Stock
Exchange.
The Nominating/Corporate Governance Committee is governed by a
written charter approved by the Board of Directors. The charter
is available on the Companys website at www.hcreit.com.
Consideration of Director Nominees. The Board
believes that a nominee for Director should be or have been a
senior manager, chief operating officer, chief financial officer
or chief executive officer of a complex organization such as a
corporation, university, foundation or governmental entity or
unit or, if in a professional capacity, be accustomed to dealing
with complex problems, or otherwise have obtained and excelled
in a position of leadership. In addition, Directors and nominees
for Director should have the education, experience,
intelligence, independence,
7
fairness, reasoning ability, practical wisdom and vision to
exercise sound business judgment and should have high personal
and professional ethics, strength of character, integrity and
values. Also, Directors and nominees for Director should be
available and willing to attend regularly scheduled meetings of
the Board and its committees and otherwise able to contribute a
reasonable amount of time to the Companys affairs, with
participation on other boards of directors encouraged to provide
breadth of experience to the Board. The age at the time of
election of any nominee for Director should be such to assure a
minimum of three years of service as a Director.
In identifying and evaluating nominees for Director, the
Committee first looks at the overall size and structure of the
Board each year to determine the need to add or remove
Directors. Second, taking into consideration the characteristics
mentioned above, the Committee determines if there are any
specific qualities or skills that would complement the existing
strengths of the Board. The Committee takes diversity into
account in identifying and evaluating nominees for Director. The
Committee considers diversity in terms of (1) professional
experience, including experience in the Companys primary
business segments and in areas of possible future expansion,
(2) educational background and (3) age, race, gender
and national origin.
The Committee uses multiple sources for identifying and
evaluating nominees for Director, including referrals from
current Directors and Management, and may seek input from third
party executive search firms retained at the Companys
expense. If the Committee retains one or more search firms, such
firms may be asked to identify possible nominees, interview and
screen such nominees and act as a liaison between the Committee
and each nominee during the screening and evaluation process.
The Committee will review the résumé and
qualifications of each candidate based on the criteria described
above, and determine whether the candidate would add value to
the Board. With respect to candidates that are determined by the
Committee to be potential nominees, the Committee will obtain
such background and reference checks as it deems necessary, and
the Chair of the Committee and the Chairman of the Board will
interview qualified candidates. Once it is determined that a
candidate is a good prospect, the candidate will be invited to
meet the other members of the Committee. If the candidate is
approved by the Committee, the candidate will have an
opportunity to meet with the remaining Directors and Management.
At the end of this process, if the Committee determines that the
candidate will be able to add value to the Board and the
candidate expresses his or her interest in serving on the Board,
the Committee will then recommend to the Board that the
candidate stand for election by the stockholders or fill a
vacancy or newly created position on the Board. Each year, the
Board and the Committee evaluate the size, composition and
diversity of the Board as part of the Board and Committee
self-evaluation process. These self-evaluations help the
Committee assess the effectiveness of the foregoing procedures
for identifying and evaluating nominees for Director.
The Committee will consider qualified nominees recommended by
stockholders who may submit recommendations to the Committee in
care of the Senior Vice President-Administration and Corporate
Secretary, Health Care REIT, Inc., 4500 Dorr Street, Toledo,
Ohio 43615. The Committee requires that stockholder
recommendations for Director nominees be submitted by
December 2, 2011 and be accompanied by (1) the name,
age, business address and, if known, residence address of the
nominee, (2) the principal occupation or employment of the
nominee for at least the last five years and a description of
the qualifications of the nominee, (3) the class or series
and number of shares of the Companys stock that are owned
beneficially or of record by the nominee and (4) any other
information relating to the nominee that is required to be
disclosed in solicitations for proxies for election of Directors
under Regulation 14A of the Securities Exchange Act of
1934, as amended, together with a written statement from the
nominee that he or she is willing to be nominated and desires to
serve, if elected. Also, the stockholder making the nomination
should include (1) his or her name and record address,
together with the name and address of any other stockholder
known to be supporting the nominee and (2) the class or
series and number of shares of the Companys stock that are
owned beneficially or of record by the stockholder making the
nomination and by any other supporting stockholders. Nominees
for Director who are recommended by stockholders will be
evaluated in the same manner as any other nominee for Director.
In addition to the right of stockholders to recommend Director
nominees to the Committee, the By-Laws provide that a
stockholder entitled to vote for the election of Directors may
make nominations at a meeting of stockholders of persons for
election to the Board if the stockholder has complied with
specified prior notice requirements. To be timely, a
stockholders notice of an intent to nominate a Director at
a meeting of stockholders must be in writing and delivered to
the Senior Vice President-Administration and Corporate Secretary
not more than 120 days prior to the meeting and not less
than 45 days before the date on which the Company first
mailed or
8
otherwise gave notice for the prior years annual meeting
of stockholders. With respect to the 2012 Annual Meeting, such a
notice must be received by the Senior Vice
President-Administration and Corporate Secretary by
February 15, 2012. The By-Laws further require that such a
notice include all of the information specified in the preceding
paragraph for stockholder recommendations to the Committee for
Director nominees.
The Company may require that the proposed nominee furnish other
information as the Company may reasonably request to assist in
determining the eligibility of the proposed nominee to serve as
a Director. At any meeting of stockholders, the Chairman of the
Board may disregard the purported nomination of any person not
made in compliance with these procedures.
Planning
Committee
The function of the Planning Committee is to assist Management
with identifying strategic opportunities for the Company. The
Planning Committee met once during the year ended
December 31, 2010. Each member of the Board is a member of
the Planning Committee.
COMMUNICATIONS
WITH THE BOARD
Stockholders and other parties interested in communicating with
the Board of Directors or any specific Directors, including the
presiding Director of executive sessions of non-employee
Directors and independent Directors, or the non-employee or
independent Directors as a group, may do so by writing to the
Board of Directors, Health Care REIT, Inc., 4500 Dorr Street,
Toledo, Ohio 43615. The Nominating/Corporate Governance
Committee has approved a process for handling letters received
by the Company and addressed to members of the Board. Under that
process, the Senior Vice President-Administration and Corporate
Secretary of the Company reviews all such correspondence and
regularly forwards to the Board a summary of the correspondence
(with copies of the correspondence attached) that, in the
opinion of the Senior Vice President-Administration and
Corporate Secretary, relates to the functions of the Board or
committees thereof or that she otherwise determines requires
their attention (for example, if the communication received
relates to questions, concerns or complaints regarding
accounting, internal control over financial reporting and
auditing matters, it will be summarized and forwarded to the
Chair of the Audit Committee for review). Directors may at any
time review a log of all correspondence received by the Company
that is addressed to members of the Board and request copies of
such correspondence.
EXECUTIVE
OFFICERS
The following information is furnished as to the Executive
Officers of the Company:
George L. Chapman,
age 63. Mr. Chapman has served as
Chairman and Chief Executive Officer of the Company since
October 1996. Mr. Chapman assumed the additional title of
President of the Company in January 2009. As described above,
Mr. Chapman has served in various executive capacities with
the Company since 1992.
Scott A. Estes, age 40. Mr. Estes
has served as Senior Vice President and Chief Financial Officer
of the Company since March 2006 and was promoted to Executive
Vice President and Chief Financial Officer in January 2009.
Mr. Estes served as Vice President of Finance of the
Company from April 2003 to March 2006. From January 2000 to
April 2003, Mr. Estes served as a Senior Research Analyst
and Vice President with Deutsche Bank Securities.
Charles J. Herman, Jr.,
age 45. Mr. Herman has served as
Executive Vice President and Chief Investment Officer of the
Company since March 2006. Mr. Herman served as Vice
President and Chief Investment Officer of the Company from May
2004 to March 2006 and served as Vice President of Operations
from August 2000 to May 2004. From 1998 to August 2000,
Mr. Herman was a founding member and President of
Herman/Turner Group, LLC, a health care consulting company.
Prior to that date, Mr. Herman was a founder and Chief
Operating Officer of Capital Valuation Group, a health care
consulting firm founded in 1991.
Jeffrey H. Miller,
age 51. Mr. Miller has served as
Executive Vice President and General Counsel of the Company
since March 2006 and assumed the additional title of Executive
Vice President-Operations in January 2009. Mr. Miller
served as Vice President and General Counsel of the Company from
July 2004 to March 2006.
9
From 1996 to June 2004, Mr. Miller was a partner in the
real estate practice group of the law firm of Shumaker,
Loop & Kendrick, LLP.
John T. Thomas, age 44. Mr. Thomas
has served as Executive Vice President-Medical Facilities since
January 2009. Mr. Thomas served as President and Chief
Development Officer of Cirrus Health, an owner and operator of
hospitals, ambulatory surgery centers and other health care
facilities, from July 2005 to January 2009. Mr. Thomas
served as Senior Vice President/General Counsel for Baylor
Health Care System from October 2000 to July 2005 and as General
Counsel/Secretary for the St. Louis division of the Sisters
of Mercy Health System from April 1997 to October 2000.
Michael A. Crabtree,
age 54. Mr. Crabtree has served as Vice
President and Treasurer of the Company since March 2006 and was
promoted to Senior Vice President and Treasurer in January 2009.
Mr. Crabtree served as Treasurer from July 2000 to March
2006 and served as Controller of the Company from 1996 to
September 2002. From July 1993 to July 1996, Mr. Crabtree
was Chief Financial Officer of Westhaven Services Co., a
provider of pharmaceutical services to nursing homes.
Erin C. Ibele, age 49. Ms. Ibele has
served as Senior Vice President-Administration and Corporate
Secretary of the Company since March 2006 and served as Vice
President-Administration and Corporate Secretary of the Company
from January 1993 to March 2006. Since 1986, Ms. Ibele has
served in various capacities with the Company.
Daniel R. Loftus, age 60. Mr. Loftus
has served as Senior Vice President of the Company since
December 2006. Mr. Loftus served as Secretary and General
Counsel of Windrose Medical Properties Trust from March 2002
until December 2006, when Windrose Medical Properties Trust
merged with the Company. Mr. Loftus was Of Counsel to Bone
McAllester Norton PLLC during 2002 and Wyatt,
Tarrant & Combs, LLP in Nashville, Tennessee from late
1997 to March 2002.
10
SECURITY
OWNERSHIP OF DIRECTORS AND MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The table below sets forth, as of March 8, 2011, unless
otherwise specified, certain information with respect to the
beneficial ownership of the Companys shares of common
stock by each Director of the Company, each Named Executive
Officer, and the Directors and Executive Officers of the Company
as a group. Unless noted below, each person has sole voting and
investment power regarding the Companys shares. Also,
unless noted below, the beneficial ownership of each person
represents less than 1% of the outstanding shares of common
stock of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
Total Shares
|
|
|
Shares Held
|
|
Options Exercisable
|
|
Beneficially
|
Name of Beneficial Owner
|
|
of Record(1)
|
|
Within 60 Days
|
|
Owned(2)(3)(4)(5)
|
|
William C. Ballard, Jr.
|
|
|
31,092
|
|
|
|
0
|
|
|
|
31,092
|
(6)
|
Pier C. Borra
|
|
|
67,307
|
|
|
|
0
|
|
|
|
67,307
|
|
George L. Chapman
|
|
|
310,003
|
|
|
|
147,107
|
|
|
|
457,110
|
|
Thomas J. DeRosa
|
|
|
13,901
|
|
|
|
10,000
|
|
|
|
23,901
|
|
Jeffrey H. Donahue
|
|
|
23,851
|
|
|
|
0
|
|
|
|
23,851
|
|
Scott A. Estes
|
|
|
57,737
|
|
|
|
52,027
|
|
|
|
109,764
|
|
Peter J. Grua
|
|
|
24,101
|
|
|
|
1,666
|
|
|
|
25,767
|
|
Charles J. Herman, Jr.
|
|
|
73,038
|
|
|
|
36,482
|
|
|
|
109,520
|
|
Fred S. Klipsch
|
|
|
63,999
|
|
|
|
0
|
|
|
|
63,999
|
|
Jeffrey H. Miller
|
|
|
53,741
|
|
|
|
33,512
|
|
|
|
87,253
|
|
Sharon M. Oster
|
|
|
19,101
|
|
|
|
0
|
|
|
|
19,101
|
|
Jeffrey R. Otten
|
|
|
7,829
|
|
|
|
0
|
|
|
|
7,829
|
|
John T. Thomas
|
|
|
27,283
|
|
|
|
4,756
|
|
|
|
32,039
|
|
R. Scott Trumbull
|
|
|
55,299
|
|
|
|
0
|
|
|
|
55,299
|
|
All Directors and Executive Officers as a group (17 persons)
|
|
|
954,421
|
|
|
|
362,552
|
|
|
|
1,316,973
|
(7)
|
|
|
|
(1) |
|
Includes all restricted shares granted under the Companys
1995 Stock Incentive Plan, Stock Plan for Non-Employee Directors
or Amended and Restated 2005 Long-Term Incentive Plan
(2005 Long-Term Incentive Plan) beneficially owned
by such Directors and Named Executive Officers and all Directors
and Executive Officers as a group as of March 8, 2011. |
|
(2) |
|
Does not include 675 deferred stock units granted to each
non-employee Director in January 2009 that have not yet been
converted into shares of common stock. These deferred stock
units will be converted into shares of common stock on the next
anniversary of the date of grant. |
|
(3) |
|
Does not include 1,155 deferred stock units granted to each
non-employee Director in January 2010 that have not yet been
converted into shares of common stock. These deferred stock
units will be converted into shares of common stock in two equal
installments on the next two anniversaries of the date of grant. |
|
(4) |
|
Does not include 491 deferred stock units granted to each
non-employee Director in May 2010. These deferred stock units
will be converted into shares of common stock in three equal
installments on the next three anniversaries of the date of
grant. |
|
(5) |
|
Does not include 1,933 deferred stock units granted to each
non-employee Director in January 2011. These deferred stock
units will be converted into shares of common stock in three
equal installments on the next three anniversaries of the date
of grant. |
|
(6) |
|
Mr. Ballards total shares beneficially owned include
5,000 shares owned by his spouse. |
|
(7) |
|
Total beneficial ownership represents 0.75% of the outstanding
shares of common stock of the Company. |
11
Based upon filings made with the Securities and Exchange
Commission in February 2011 (with respect to holdings as of
December 31, 2010), the only stockholders known to the
Company to be the beneficial owners of more than 5% of the
Companys common stock are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
Common Stock
|
|
|
Outstanding
|
|
Beneficial Owner
|
|
Beneficially Owned
|
|
|
Common Stock(5)
|
|
|
The Vanguard Group, Inc.
|
|
|
14,875,288
|
(1)
|
|
|
8.43
|
%
|
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
|
|
|
11,419,049
|
(2)
|
|
|
6.47
|
%
|
40 East 52nd Street
New York, NY 10022
|
|
|
|
|
|
|
|
|
Invesco Ltd.
|
|
|
9,893,503
|
(3)
|
|
|
5.61
|
%
|
1555 Peachtree Street NE
Atlanta, GA 30309
|
|
|
|
|
|
|
|
|
Vanguard Specialized Funds
|
|
|
7,667,586
|
(4)
|
|
|
4.34
|
%(6)
|
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 181,624 shares beneficially owned by Vanguard
Fiduciary Trust Company, a wholly-owned subsidiary of The
Vanguard Group, Inc. In the aggregate, The Vanguard Group, Inc.
and Vanguard Fiduciary Trust Company have sole voting power
over 181,624 shares, sole dispositive power over
14,693,664 shares and shared dispositive power over
181,624 shares. |
|
(2) |
|
In the aggregate, BlackRock, Inc. and its affiliates have sole
voting power and sole dispositive power over
11,419,049 shares. |
|
(3) |
|
In the aggregate, Invesco Ltd. and its affiliates have sole
voting power over 5,551,677 shares, shared voting power
over 62,100 shares, sole dispositive power over
9,857,758 shares and shared dispositive power over
35,745 shares. |
|
(4) |
|
Vanguard Specialized Funds has sole voting power over
7,667,586 shares. |
|
(5) |
|
The percentages set forth in the table reflect percentage
ownership as of March 8, 2011. The actual filings of these
beneficial owners provide percentage ownership as of
December 31, 2010. |
|
(6) |
|
Vanguard Specialized Funds reported beneficial ownership of
5.23% of the Companys common stock as of December 31,
2010. |
Section 16(a)
Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Companys Directors and Executive
Officers, and persons who own beneficially more than 10% of the
shares of common stock of the Company, to file reports of
ownership and changes of ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Copies of
all filed reports are required to be furnished to the Company
pursuant to Section 16(a). Based solely on the reports
received by the Company and on written representations from
reporting persons, the Company believes that the Directors and
Executive Officers complied with all applicable filing
requirements during the fiscal year ended December 31, 2010.
12
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The recently enacted Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (the Dodd-Frank Act) enables
the Companys stockholders to vote to approve, on an
advisory or non-binding basis, the compensation of the Named
Executive Officers as disclosed in this Proxy Statement in
accordance with SEC rules.
The Companys compensation programs are designed to reward
the Named Executive Officers for the achievement of short-term
and long-term strategic and operational goals and the
achievement of increased stockholder returns. This compensation
philosophy, and the program structure approved by the
Compensation Committee, is central to the Companys ability
to attract, retain and motivate individuals who can achieve
superior financial results. This approach, which has been used
consistently over the years, has resulted in the Companys
ability to attract and retain the executive talent necessary to
guide the Company during a period of tremendous growth. Please
refer to Executive Compensation Compensation
Discussion and Analysis Executive Summary for
an overview of the compensation of the Named Executive Officers
and the Companys key financial and strategic achievements
in 2010 that drove compensation decisions.
Resolved, that the compensation paid to the Companys Named
Executive Officers as disclosed in accordance with SEC rules,
which disclosures include the disclosures under Executive
Compensation Compensation Discussion and
Analysis, the compensation tables and the narrative
discussion following the compensation tables, is hereby approved.
This vote is not intended to address any specific item of
compensation, but rather the overall compensation of the Named
Executive Officers and the policies and practices described in
this Proxy Statement. This vote is advisory and therefore not
binding on the Company, the Board of Directors or the
Compensation Committee. The Board and the Compensation Committee
value the opinions of the Companys stockholders and to the
extent there is any significant vote against the Named Executive
Officer compensation as disclosed in this Proxy Statement, the
Company will consider stockholders concerns, and the
Compensation Committee will evaluate whether any actions are
necessary to address those concerns.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE APPROVAL OF THE COMPENSATION
OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY
STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF
THE SEC. The affirmative vote of a majority of the shares of
voting securities present in person or by proxy at the Annual
Meeting will be required for advisory approval of this proposal.
PROPOSAL 3
ADVISORY VOTE ON THE FREQUENCY OF HOLDING FUTURE
ADVISORY VOTES ON EXECUTIVE COMPENSATION
The Dodd-Frank Act also enables the Companys stockholders
to vote, on an advisory or non-binding basis, on how frequently
they would like to cast an advisory vote on the compensation of
the Named Executive Officers. By voting on this proposal,
stockholders may indicate whether they would prefer an advisory
vote on Named Executive Officer compensation once every one,
two, or three years.
After careful consideration of the frequency alternatives, the
Board believes that conducting an advisory vote on executive
compensation on an annual basis is appropriate for the Company
and its stockholders at this time. This will allow the
stockholders to provide timely, direct input on the
Companys executive compensation philosophy, policies and
practices as disclosed in the proxy statement each year. The
Board will carefully consider the outcome of the vote when
making future decisions regarding the frequency of advisory
votes on executive compensation. However, because this vote is
advisory and not binding, the Board may decide that it is in the
best interests of the Company and its stockholders to hold an
advisory vote more or less frequently than the alternative that
has been selected by the stockholders.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR APPROVAL OF AN ANNUAL ADVISORY
VOTE ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS.
The affirmative vote of a majority of the shares of voting
securities present in person or by proxy at the Annual Meeting
will be required for advisory approval of this proposal.
13
EXECUTIVE
COMPENSATION
An overview and analysis of the Companys compensation
programs and policies, the material compensation decisions made
under those programs and policies with respect to the Executive
Officers, and the material factors considered in making those
decisions are set forth below. Following this Compensation
Discussion and Analysis is a series of tables containing
specific data about the compensation earned in 2010 by the
following individuals, referred to as the Named Executive
Officers:
|
|
|
|
|
George L. Chapman Chairman, Chief Executive Officer
and President
|
|
|
|
Scott A. Estes Executive Vice President and Chief
Financial Officer
|
|
|
|
Jeffrey H. Miller Executive Vice
President-Operations and General Counsel
|
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Charles J. Herman, Jr. Executive Vice President
and Chief Investment Officer
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John T. Thomas Executive Vice President-Medical
Facilities
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Compensation
Discussion and Analysis
EXECUTIVE
SUMMARY
The primary goals of our compensation program are to link pay to
Company performance, align the interests of Management with
those of the stockholders, and retain top Management talent. Key
financial and strategic achievements that drove compensation
decisions in 2010 include the following:
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The Company completed an unprecedented $3.2 billion in
gross new investments in 2010 with leading senior housing
operators and health systems. These investments position the
Company to deliver substantial returns to stockholders into the
future and far exceeded the maximum performance objective for
2010.
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The Company raised nearly $3 billion in equity and debt
capital in 2010, including $1 billion in the fourth
quarter. The fourth quarter capital raising activity had a
dilutive effect on normalized FFO per share. The Company
believes that the enhanced growth potential resulting from the
investments noted above more than offsets the near-term
dilution, which occurred as a result of raising the capital
early and completing the majority of the investments during the
last week of December.
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The Company added 23 new partnerships in 2010 with premier
senior housing operators and health systems. Through these
partnerships and other investments, the Company has exceeded its
strategic repositioning goals for 2010. The balance between
operating and triple next lease investments, along
with operator and property type diversification, has produced
one of the best risk-adjusted returns in the sector.
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The Company generated a three-year total stockholder return of
9.0% on a compound, annualized basis. This return compares
favorably to the NAREIT All Equity Index (+0.7%) and a
market-cap weighted index of our five closest health care REIT
peers (+8.9%).
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The dividend paid in February 2011 represents the Companys
159th consecutive dividend payment. The Company has also
announced a 3.6% increase to the quarterly cash dividend to
$0.715 per share, commencing with the May 2011 dividend.
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14
Highlighted below are the key components of our executive
compensation programs and the rationale for the key actions and
decisions made with respect to our executive compensation
program for 2010.
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Compensation
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Description and Principal Contribution to
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Component
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Compensation Objectives
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2010 Highlights
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Base Salary
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Minimum level of fixed compensation
necessary to attract and retain executive talent.
Salaries are set based on a variety of
factors including competitive market data, scope of the
individuals role in the organization, the
individuals level of experience, and individual
performance and potential.
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The Committee approved 2010 base
salaries at the January 2010 Compensation Committee meeting.
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Annual Cash
Incentives
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Performance-based cash incentives that
reward achievement of performance objectives tied to the
Companys annual business plan as well as achievement of
individual performance objectives.
A range of earnings opportunity,
expressed as percentages of base salary and corresponding to
three levels of performance (threshold, target and high), is
established for each executive. Actual bonuses depend on
achievement relative to the corporate and individual performance
objectives described on pages 21 and 22.
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As described in more detail on
page 21, actual performance for the year was as follows for
each of the corporate performance measures in the annual
incentive program:
Normalized FFO per
share between threshold and target
Strategic Repositioning of
Portfolio exceeded high
Core Medical Office Building
Net Operating Income between threshold and target
Net Investments
substantially exceeded high
Maintenance of Credit
Rating high
Individual performance varied for each
executive, as described in more detail on page 22.
Based on this assessment of performance,
actual bonuses for 2010 performance were between target and
high.
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Compensation
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Description and Principal Contribution to
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Component
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Compensation Objectives
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2010 Highlights
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Long-Term
Incentives
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Grants of equity where the total
grant-date fair value of each executives award is
determined by achievement of pre-established corporate and
individual goals for the performance year.
Promotes achievement of performance
goals tied to the Companys business strategies, focuses
executives on creating long-term value for stockholders, and
assists the Company in retaining key executives.
A range of earnings opportunity,
expressed in dollar values corresponding to three levels of
performance (threshold, target and high), is established for
each executive. The actual grant-date fair value of the awards
depends on achievement versus the corporate performance goals
set by the Compensation Committee. Fifteen percent of each
executives award is based on our three-year total
shareholder return (TSR) versus the NAREIT All Equity Index, 15%
is based on our TSR relative to a market-cap weighted index of
the five other largest health-care REITs (HCP, HR, NHP, SNH, and
VTR), 45% is based on the Companys blended score on the
same measures as used in the annual incentive program, and 25%
is based on individual performance.
Seventy-five percent of earned amounts
are awarded in the form of restricted stock and 25% in the form
of stock options, each vesting in five equal annual installments
from the grant date.
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As described in more detail on
page 23, actual performance for the year was as follows for
each of the corporate performance measures in the long-term
incentive program:
HCNs three-year
cumulative annual TSR versus the NAREIT All Equity
Index exceeded high
HCNs three-year
cumulative annual TSR versus a market-cap weighted
index between target and high
Blended score against annual
incentive program measures between target and
high
As previously discussed, individual
performance varied for each executive, as described in more
detail on page 22.
Based on this assessment of performance,
actual bonuses for 2010 performance were between target and high.
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Special Long-
Term Incentive
Award
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Special awards of performance-based
vesting restricted stock to recognize the significant
transaction volume in 2010 and create an incentive tied to the
future profitability of those investments.
These awards will vest in three equal
annual installments only if certain performance hurdles
associated with these investments are achieved in each of 2011,
2012, and 2013.
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The Committee awarded special grants of
performance-based vesting restricted stock ranging from $200,000
$350,000 to each of the Named Executive Officers. See
page 24 for additional detail.
One-third of these restricted shares
will vest in each of the next three years only if the 2011,
2012, and 2013 net operating income or rent is at least 75%
of budget for all deals above $25 million that closed in 2010
(representing 82% of total 2010 investment volume).
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Other Long-
Term Incentive
Awards
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As part of securing Mr. Chapmans
services for the next three years, the Committee agreed to
provide additional awards of restricted stock in each year.
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The Committee awarded a special grant of
$1 million in restricted stock to Mr. Chapman in consideration
of his agreement to extend his service to the Company and in an
effort to bridge the gap between his historical compensation and
that of the CEOs in the peer group.
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Compensation
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Description and Principal Contribution to
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Component
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Compensation Objectives
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2010 Highlights
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Benefits and
Perquisites
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To attract and retain talented
executives, the Company provides benefits comparable to those
offered by companies in our peer group and other companies with
whom we compete for talent.
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There were no changes to the benefits
and perquisites provided to the Named Executive Officers in 2010.
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Executive Officers participate in the
same benefit programs as all other Company employees.
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In addition, Mr. Chapman receives
certain perquisites, such as membership dues for two
dining/country clubs frequently used for business purposes, a
term life insurance policy, and a supplemental executive
retirement plan (SERP).
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Employment
Agreements
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The Company has entered into employment
agreements with each of the Named Executive Officers to provide
severance benefits upon certain termination events, including a
change-in-control. Change-in-control severance protection
provides for stability and continuity in the event of a
change-in-control by ensuring our Executive Officers are able to
devote their full attention to the Company even if there is a
risk they may be terminated.
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On December 2, 2010, the Company entered
into an amended and restated employment agreement, effective as
of January 31, 2011, with Mr. Chapman, Chairman, CEO and
President. The initial term of the agreement expires January
31, 2014, but provides for one optional three-year renewal
term.
The provisions of the agreement are
generally the same as the provisions of Mr. Chapmans prior
agreement, with two important exceptions:
The amended and restated
agreement does not provide an excise tax gross-up
The amended and restated
agreement does not enable Mr. Chapman to terminate employment
for any reason after a change in corporate control and receive
severance
The Committee believes these changes
were important to ensure the agreement was consistent with
recognized corporate governance best practice.
The employment agreements for the other
Named Executive Officers were not amended during 2010.
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In summary, the Committee concluded that the 2010
performance-based compensation together with 2010 base salary
levels are well aligned with the Company performance for the
year and that the linkage between pay and performance is strong.
Executive
Compensation Program Objectives
The Companys compensation programs are designed to achieve
the following objectives:
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Attract and retain top Management talent. The
executive compensation programs are structured to provide
market-competitive compensation opportunities for the
Companys Executive Officers. Each year, the Compensation
Committee conducts a competitive review of the Companys
executive compensation programs versus those of the
Companys peers to understand market-competitive
compensation levels. In addition, the Compensation Committee
assesses each Executive Officers experience, role in the
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organization and individual performance. Following this review,
the Committee establishes target total compensation
opportunities, which may be above or below the market median. As
described in more detail below, multi-year vesting of long-term
incentive compensation is used to help achieve the
Companys retention objectives.
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Link compensation realized to the achievement of the
Companys short- and long-term financial and strategic
goals. A majority of each Executive
Officers total direct compensation opportunity is in the
form of annual and long-term incentive compensation. Actual
compensation may be above or below the targeted level, depending
on achievement relative to pre-established performance goals, at
both the corporate and individual levels, that are designed to
support the Companys short- and long-term business plans.
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Align Management and stockholder interests by encouraging
long-term stockholder value creation. The
long-term incentive component of compensation is granted in the
form of Company equity, which aligns Managements interests
with those of the Companys stockholders. The value
realized by the Executive Officer from equity compensation is
directly linked to the value created for the Companys
stockholders.
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Compensation
Committee Procedures
The Compensation Committee is responsible for determining the
nature and amount of compensation for the Companys Chief
Executive Officer and for reviewing and approving the
compensation for the other seven Executive Officers listed on
pages 9 and 10. The Committee consists of three
non-employee Directors. Jeffrey H. Donahue is the Compensation
Committee Chair and William C. Ballard, Jr. and Sharon M.
Oster are Committee members.
Compensation
Consultant
The Compensation Committee engages Frederic W. Cook &
Co., Inc. (Cook & Co.) as its independent
compensation consultant to advise the Committee on compensation
program design, the components of the Companys executive
compensation programs and the amounts the Company should pay its
Executive Officers. Cook & Co. also provides the
Committee with information on executive compensation trends and
best practices and advice for potential improvements to the
executive compensation programs. Cook & Co. also
advises the Committee on the design and amount of compensation
for non-employee Directors.
Cook & Co. performs no services for Management unless
requested by and on behalf of the Compensation Committee Chair,
receives no compensation from the Company other than for its
work in advising the Committee and maintains no other economic
relationships with the Company. The consultant generally attends
meetings of the Committee, and the Chair of the Committee
frequently interacts with the consultant between meetings to
define the nature of work to be conducted, to review materials
to be presented at Committee meetings and to obtain the
consultants opinion and perspective on proposals prepared
by Management. As part of the process of assessing the
effectiveness of the Companys compensation programs and
assisting with implementation, the consultant also interacts
with members of Management. The consultants primary
contacts with Management are the Executive Vice President and
Chief Financial Officer and the Senior Vice
President-Administration and Corporate Secretary.
Input
of Executive Officers on Compensation
The Compensation Committee receives input from certain Executive
Officers on a variety of issues related to compensation.
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The Chairman, Chief Executive Officer and President provides an
assessment of the individual performance achievement of the
other Executive Officers. This individual performance assessment
determines a portion of each Executive Officers annual and
long-term incentive compensation. In addition, the Chairman,
Chief Executive Officer and President provides input on salary
increases and increases to incentive compensation opportunities
for the Executive Officers. The Committee takes these
recommendations into consideration when determining earned
incentive compensation and when setting compensation
opportunities for the coming year.
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Each year, Management establishes an annual plan for the
Boards review, which includes financial budgets and key
strategic objectives for the Company. The Committee has designed
the compensation programs to reward the achievement of certain
financial and strategic objectives included in the annual plan.
Because members of Management prepare the initial plan, they
have input into the performance measures and goals used in the
incentive programs.
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The Companys Executive Vice President and Chief Financial
Officer assists the Compensation Committee in assessing the
financial impact of compensation decisions.
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The Companys Senior Vice President-Administration and
Corporate Secretary assists the Committee in administering the
compensation programs, including the Companys 2005
Long-Term Incentive Plan, and ensuring that all relevant
documentation and disclosures are completed (e.g., filings with
the Securities and Exchange Commission, legal documents, etc.).
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Annual
Review of Executive Compensation
Each year, with the assistance of its independent consultant,
the Compensation Committee conducts a comprehensive review of
the executive compensation programs in terms of compensation
levels versus a relevant peer group of REITs. This year, the
results of the competitive review were presented and discussed
at the Committee meeting held on October 28, 2010.
When examining comparisons to external data, it is important to
understand the dynamic executive compensation environment the
Company has faced over the past several years. Executive
compensation levels among REITs have increased significantly,
and as the Company has grown and is now included in the S&P
500 Index, its relevant comparative peer group has included
larger companies with higher levels of executive compensation.
The combination of these two factors has resulted in dramatic
year-over-year
changes in competitive medians. Although the Committees
intention is to generally provide market-competitive levels of
compensation, which it has defined as median compensation, the
Committee has also been prudent in granting
year-over-year
increases in compensation to the Executive Officers. As a
result, the actual increases in target compensation
opportunities, while substantial, have not brought all Executive
Officers target pay opportunities to the peer group
median. In addition, as discussed further in this Compensation
Discussion and Analysis, the Committee considers many other
factors besides external market data when setting target
compensation opportunities.
The 2010 review used the same comparative peer group that was
used in 2009. The peer group included three REITs in the health
care sector and seven other REITs of similar size to the Company
in terms of market and total capitalization. These REITs were:
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Alexandria Real Estate Equities, Inc.
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Host Hotels & Resorts, Inc.
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AMB Property Corporation
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Kimco Realty Corporation
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AvalonBay Communities, Inc.
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Nationwide Health Properties, Inc.
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Boston Properties, Inc.
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UDR, Inc.
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HCP, Inc.
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Ventas, Inc.
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The review included a competitive compensation analysis for the
Companys top-five Executive Officers, including
Messrs. Chapman, Estes, Miller, Herman and Thomas. The
analysis compared all components of pay: base salary, annual
incentive compensation, total annual compensation (base salary
plus annual incentive compensation), long-term incentive
compensation, total direct compensation (total annual
compensation plus long-term incentive compensation), other
compensation (perquisites, change in pension values and
non-qualified deferred compensation, etc.) and total
compensation.
Findings from this review indicated that the current
compensation structure would generally provide
75th
percentile compensation to Mr. Chapman as compared to Chief
Executive Officers in the peer group companies, but
Mr. Chapmans base salary was below the market median.
The Committee believes the 75th percentile is an appropriate
competitive position for Mr. Chapman given his significant
experience and consistently strong performance as CEO. The study
also indicated that the current compensation structure for
Messrs. Estes, Miller, Herman, and Thomas would provide
compensation below the 25th percentile as compared to the other
named
19
executive officers in the peer group. As a result, the
Compensation Committee decided to adjust base salaries for all
the Named Executive Officers and to adjust the annual and
long-term incentive opportunities for Messrs. Estes,
Miller, Herman and Thomas to bridge the significant gap between
their current compensation and market median, which is the
desired competitive position for these executives. These
adjustments were approved at the January 27, 2011
Compensation Committee meeting, to be effective for fiscal 2011.
Also approved at the January 27, 2011 Compensation
Committee meeting were annual cash bonuses and long-term
incentive awards for 2010 performance.
Compensation
Elements
The Companys executive compensation programs have the
following elements:
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Base salary
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Annual incentives (cash bonuses)
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Long-term incentives
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Benefits and perquisites
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Base
Salary
Base salaries are paid because some minimum level of fixed
compensation is necessary to attract and retain executive
talent. Base salaries are generally targeted to the competitive
market median, but may deviate from this competitive position
based on the scope of the individuals role in the
organization, his or her level of experience in the current
position and individual performance. Base salaries are reviewed
annually and may be adjusted to better match market competitive
levels
and/or to
recognize an individuals growth and development in his or
her position. The base salaries for the Named Executive Officers
are as follows:
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Executive
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2010
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2011
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% Increase
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George L. Chapman
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$
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653,145
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$
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700,000
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7.2
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%
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Scott A. Estes
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331,500
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400,000
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20.7
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%
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Jeffrey H. Miller
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331,500
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400,000
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20.7
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%
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Charles J. Herman, Jr.
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315,000
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400,000
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27.0
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%
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John T. Thomas
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315,000
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400,000
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27.0
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%
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The Committee decided to increase Mr. Chapmans salary
to $700,000 and base salaries for the other Named Executive
Officers to $400,000 to approximate the projected market median
and 40th percentile, respectively, from the competitive
compensation review. The Compensation Committee wanted target
pay opportunities for Messrs. Estes, Miller, Herman, and
Thomas to be fairly equivalent because the Committee believes
the roles and responsibilities of each executive, while
different, are of generally equal importance to the Company.
Mr. Chapmans base salary, on the other hand, is
higher than the other executives because, as Chairman, Chief
Executive Officer and President, Mr. Chapman has greater
overall responsibility for setting strategy and ensuring the
Companys success.
Annual
Incentives
In 2010, the Named Executive Officers participated in the annual
incentive program, which provides rewards for the achievement of
certain performance objectives tied to the Companys annual
business plan, as well as achievement of individual performance
objectives. Under this program, a range of earnings opportunity
is established for each executive at the beginning of the
performance period, expressed as percentages of base salary and
corresponding to three levels of performance (threshold, target
and high). Annual incentives are paid in cash in the first
quarter of the year following the performance year (e.g., 2010
bonuses were paid in the first quarter of 2011).
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The corporate performance measures and weightings set by the
Compensation Committee for 2010 under the annual incentive
program were as follows:
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Normalized Funds from Operations (FFO) per share
(weighted 40%). FFO, as defined by NAREIT, means
net income, computed in accordance with U.S. GAAP,
excluding gains (or losses) from sales of real estate, plus real
estate depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. This measure is
included in the compensation program because it is the measure
most commonly used by analysts to assess the performance of
REITs. For purposes of calculating incentive compensation, FFO
per share is adjusted for unusual and non-recurring items. If
the Company achieves a level of FFO per share as a result of
inappropriate amounts of leverage, the Committee may determine
that bonuses should not be paid for this goal. The weighting for
this measure in 2010 remained the same as in 2009.
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Strategic Repositioning (weighted 20%). This
measure was included to provide incentives to successfully
execute the Companys strategy of increasing the percentage
of the real estate portfolio categorized as combination
facilities, which provide multiple levels of service, and
medical facilities, which include medical office buildings and
hospitals. The weighting for this measure was increased in 2010
to 20% (from 15% in 2009).
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Core MOB NOI (weighted 10%). This measure
focused Management on increasing net operating income (NOI) of
the core medical office building (MOB) assets. NOI is defined as
total revenues, including tenant reimbursements, less property
operating expenses, which exclude depreciation and amortization,
general and administrative expenses, impairments and interest
expense. The weighting for this measure in 2010 remained the
same as in 2009.
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Net Real Estate Investments (weighted 20%). A
net real estate investment goal was not included in 2009 because
increasing net investments was not one of the Companys
primary objectives for 2009. In 2010, however, the capital
markets stabilized and investment opportunities again became
available. We included net real estate investment objectives as
a performance measure for 2010 because net investments are
important to our growth and future profitability. Net real
estate investments means gross real estate investments less
sales of properties and loan repayments.
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Maintain Credit Ratings (weighted 10%). This
measure, which refers to the Companys credit ratings by
Moodys Investors Service and Standard &
Poors Ratings Services, its weighting, and its goals
remained the same in 2010 as in prior years. Maintenance of
credit ratings by both Moodys Investors Service and
Standard & Poors Ratings Services, which are
critical to our ability to raise capital in an efficient and
affordable manner, represent high performance.
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Liquidity Preservation. Liquidity preservation
was not one of the Companys primary objectives for 2010
(given the Companys liquidity preservation efforts in 2009
and the stabilization of the credit markets), so a liquidity
measure was not included in the annual incentive program.
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The corporate performance measures and weightings set by the
Compensation Committee for 2010 under the annual incentive
program, as well as the Companys achievement for each
goal, were as follows:
2010
Annual Incentive Corporate Performance Measures
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Measure
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Weighting
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Threshold
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Target
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High
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Actual
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Normalized FFO per Share
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40%
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$2.97
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$3.13
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$3.29
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$3.08
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Strategic Repositioning (% of Combination/Medical
Facilities in Portfolio)
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20%
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74.5%
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76.5%
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78.5%
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80.7%
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Core MOB NOI
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10%
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$93.5 Million
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$98.4 Million
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$103.3 Million
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$97.0 Million
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Net Real Estate Investments
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20%
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$700 Million
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$1,000 Million
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$1,300 Million
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$2,954 Million
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Maintain Credit Ratings
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10%
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N/A
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Maintain
One
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Maintain
Both
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Maintained
Both
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For Mr. Chapman, 80% of the bonus was determined by
corporate performance, as defined above, and 20% by individual
performance. The corporate component was set at 80% because the
Committee believes that almost all of the Chairman, Chief
Executive Officer and Presidents annual incentive
compensation should be based on overall corporate performance
given his high level of responsibility for the Companys
performance. For Messrs. Estes, Miller, Herman and Thomas,
60% of the bonus is determined by corporate performance and 40%
by individual performance. The Committee believes that overall
corporate performance should be the primary basis for
determining annual incentives for these four executives, but
gave individual performance a heavier weighting (as compared to
Mr. Chapman) to reflect the importance of several strategic
initiatives for which each of these executives is primarily
responsible.
Factors considered in the assessment of individual performance
include: implementation of targeted investment strategies,
including initiatives relating to combination senior housing
properties, continuing care retirement communities and modern
medical facilities, professional development of and succession
planning for Management, accountability with rating agencies and
effective capital raising and communication with investors. The
Chairman, Chief Executive Officer and President provides
recommendations for individual performance scores for the
Executive Officers who report to him, based on his assessment of
performance versus the individual factors. The Committee
assesses the Chairman, Chief Executive Officer and
Presidents performance against his individual factors to
determine his individual performance score. For 2010, the
Committee rated the individual performance of
Messrs. Chapman, Estes, and Thomas between the target and
high level and Messrs. Miller and Herman at the high level
for individual performance. Each Named Executive Officer
received an annual bonus for the individual component equal to
target plus the following percentage of the difference between
high and target: Mr. Chapman 90%,
Mr. Estes 75%, Mr. Miller
100%, Mr. Herman 100% and Mr. Thomas
87.5%. For Mr. Chapman, as Chairman, Chief Executive
Officer and President, important factors included the direction
and performance of the Company, the effectiveness of his
leadership and the implementation of investment strategies. For
Mr. Estes, as Executive Vice President and Chief Financial
Officer, important factors included maintaining adequate
liquidity, strategic positioning in equity and debt markets,
overseeing enterprise risk management and maintaining credit
ratings. For Mr. Miller, as Executive Vice
President-Operations and General Counsel, important factors
included providing executive support and oversight for major
transactions and transitioning of under-performing assets and
developing and implementing initiatives for continuous
improvement of corporate operations. For Mr. Herman, as
Executive Vice President and Chief Investment Officer, important
factors included ensuring targeted, coordinated and effective
marketing to meet investment and disposition goals and earnings
guidance, investing at attractive rates and exploring joint
venture opportunities. For Mr. Thomas, as Executive Vice
President-Medical Facilities, important factors included
overseeing the medical facilities group and meeting acquisition,
self-development and joint venture development goals for such
group.
The table below illustrates each executives total annual
incentive earnings opportunity, taking into consideration both
corporate and individual performance, under the annual incentive
program, and the actual bonuses for 2010 performance that were
approved at the Committees January 27, 2011 meeting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Annual Incentive Opportunity
|
|
|
|
|
(as a % of Base Salary)
|
|
2010 Bonus Earned
|
|
|
Threshold
|
|
Target
|
|
High
|
|
% of Base Salary
|
|
Amount
|
|
Chapman
|
|
|
75
|
%
|
|
|
150
|
%
|
|
|
300
|
%
|
|
|
228
|
%
|
|
$
|
1,486,317
|
|
Estes
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
125
|
%
|
|
|
415,308
|
|
Miller
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
130
|
%
|
|
|
431,883
|
|
Herman
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
130
|
%
|
|
|
410,387
|
|
Thomas
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
128
|
%
|
|
|
402,512
|
|
Long-Term
Incentives
In 2010, the Named Executive Officers participated in the
Companys long-term incentive program. The objectives of
the long-term incentive program are to promote achievement of
performance goals, to focus Executive Officers on creating
long-term value for the Companys stockholders, and to
assist the Company in attracting and retaining key executives.
Similar to the annual incentive program, long-term incentive
awards for the year are based
22
on the achievement of pre-established corporate and individual
goals for the performance year. For each executive, a range of
earnings opportunity, expressed in dollar values, is established
at the beginning of the performance period corresponding to
three levels of performance (threshold, target and high) for
long-term incentive compensation. Seventy-five percent of the
value of the long-term incentive compensation award is based on
corporate performance goals set by the Compensation Committee
(15% based on the Companys total stockholder return
relative to the NAREIT All Equity index, 15% based on the
Companys total stockholder return versus a market-cap
weighted peer index of health care REITs, and 45% based on the
corporate performance score under the annual incentive program),
and the remaining 25% is based on individual performance. The
corporate performance goals for 2010, as well as the achievement
level for each goal, were as follows:
2010
Long-Term Incentive Performance Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighting
|
|
Threshold
|
|
Target
|
|
High
|
|
Actual
|
|
Three-Year Annualized Total Stockholder Return vs. NAREIT
Index(1)
|
|
15%
|
|
Index − 4%
(-3.4)%
|
|
At Index
(+0.7)%
|
|
Index + 4%
(+4.7)%
|
|
9.0%
|
Three-Year Annualized Total Stockholder Return vs. market-cap
weighted index of five health care REITs(1)(2)
|
|
15%
|
|
Peer Group − 4%
(+4.9)%
|
|
Peer Group
(+8.9)%
|
|
Peer Group + 4%
(+12.9)%
|
|
9.0%
|
Annual Incentive Corporate Measures
|
|
45%
(in the
aggregate)
|
|
Based on corporate performance measures and actual
performance under the annual incentive program,
utilizing the following weightings:
|
|
|
|
|
Normalized FFO per Share = 18%
|
|
See page 21
|
|
|
|
|
Strategic Repositioning = 9%
Core MOB NOI = 4.5%
Net Real Estate Investments =
9%
Maintain Credit Ratings = 4.5%
|
|
|
Qualitative/Individual Performance
|
|
25%
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
If absolute total stockholder return is at least 8% on a
compound annualized basis, the Executive Officers receive the
threshold payout for these measures. Total stockholder return
represents share price appreciation over the specified period
plus dividends (assuming reinvestment of dividends in additional
shares), on a compound, annualized basis. |
|
(2) |
|
Health care REITs included in the market-cap weighted index:
HCP, Inc., Healthcare Realty Trust Incorporated, Nationwide
Health Properties, Inc., Senior Housing Properties Trust and
Ventas, Inc. |
Each of Messrs. Chapman, Estes, Miller, Herman and Thomas
achieved between the target and high level of individual
performance. The assessment of individual performance was based
on the same factors as used to determine individual performance
in the annual incentive program.
Long-term incentive amounts earned are delivered through equity
grants from the 2005 Long-Term Incentive Plan. Consistent with
the grant-type mix used in prior years, the Committee determined
that 75% of the value of long-term incentive compensation earned
for 2010 should be granted in the form of shares of restricted
stock and 25% should be granted in the form of stock options.
The long-term incentive mix is heavily weighted toward
restricted stock because restricted stock provides a strong
incentive to create and preserve long-term stockholder value.
Stock options are used to add share price performance leverage
into the program. Stock options have no value to the holder
unless value is created for the Companys stockholders
through share price appreciation. Generally, equity grants made
on an annual basis vest ratably over five years. This multi-year
vesting creates a retention
23
mechanism for the Executive Officers and subjects them to the
same share price risk over a long-term period as other
investors, thereby aligning their interests with those of the
Companys stockholders.
The 2010 long-term incentive earnings opportunities are
reflected in the 2010 Grants of Plan-Based Awards
Table below as dollar amounts. Amounts reflected as
2010 LTI Earned are not included in the
Summary Compensation Table because they were granted
in restricted shares and stock options in 2011. They will be
included in the Summary Compensation Table for the proxy
statement filed in 2012 which will show equity grants made in
2011. The table below outlines the long-term incentive earnings
opportunities for 2010 and the amounts that were approved at the
Committees January 27, 2011 meeting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 LTI Earned
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
2010 Long-Term Incentive (LTI)
|
|
Grant
|
|
Shares/Options
|
|
|
Opportunities
|
|
Date
|
|
Restricted
|
|
Stock
|
|
|
Threshold
|
|
Target
|
|
High
|
|
Fair Value
|
|
Shares(1)
|
|
Options(2)
|
|
Chapman
|
|
$
|
1,000,000
|
|
|
$
|
2,000,000
|
|
|
$
|
4,000,000
|
|
|
$
|
3,062,456
|
|
|
|
46,712
|
|
|
|
79,751
|
|
Estes
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
748,118
|
|
|
|
11,411
|
|
|
|
19,482
|
|
Miller
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
766,868
|
|
|
|
11,697
|
|
|
|
19,971
|
|
Herman
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
766,868
|
|
|
|
11,697
|
|
|
|
19,971
|
|
Thomas
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
757,493
|
|
|
|
11,554
|
|
|
|
19,726
|
|
|
|
|
(1) |
|
Based on a per share grant price of $49.17, the closing price of
the Companys common stock on January 27, 2011, the
date of grant. |
|
(2) |
|
The grant date fair value of each option was $9.60, calculated
using the Black-Scholes option valuation methodology and the
following assumptions: exercise price and current price of
$49.17, 34.8% volatility,
7-year
expected term, 5.74% dividend yield and 2.87% risk-free interest
rate. |
Special Performance-Vesting Restricted
Shares. As previously discussed, we generated a
record of $3.2 billion ($2.95 billion, net of dispositions)
in new investments in 2010. This far exceeded the maximum
performance objective for 2010 of $1.3 billion. These
investments position the Company for enhanced earnings and
dividend growth in future years. To recognize the significant
volume of investments and reward management if these investments
perform as anticipated, the Compensation Committee awarded
special grants of performance-vesting restricted stock to the
Executive Officers, including the Named Executive Officers.
These awards will vest in three equal annual installments only
if certain performance hurdles are achieved in each of 2011,
2012, and 2013. Each year, the performance shares will vest only
if the Company has achieved at least 75% of the aggregate
budgeted net operating income or rent for that year with respect
to all investments that closed in 2010 and had an initial
investment amount of at least $25 million.
|
|
|
|
|
|
|
|
|
|
|
Special Performance-Vested Awards
|
|
|
|
Grant Date
|
|
|
# of Performance-Vesting
|
|
|
|
Fair Value
|
|
|
Restricted Shares(1)
|
|
|
Chapman
|
|
$
|
350,000
|
|
|
|
7,119
|
|
Estes
|
|
|
200,000
|
|
|
|
4,068
|
|
Miller
|
|
|
200,000
|
|
|
|
4,068
|
|
Herman
|
|
|
250,000
|
|
|
|
5,085
|
|
Thomas
|
|
|
200,000
|
|
|
|
4,068
|
|
|
|
|
(1) |
|
Based on a per share grant price of $49.17, the closing price of
the Companys common stock on January 27, 2011, the
date of grant. |
Stock Options with DERs. From 2004 through
2008, the stock option component was split evenly between stock
options with dividend equivalent rights (DERs) and
stock options without DERs (plain vanilla stock
options). Options with DERs entitle the optionholder to receive
a cash payment equal to the dividend paid on a share of the
Companys common stock. Originally, the DERs were to
terminate on the earlier of the 10th anniversary of the grant of
the DER or the date that the underlying stock option was
exercised. However, based on informal
24
statements from the Internal Revenue Service (the
IRS) suggesting that DERs that terminate upon
exercise of the underlying stock option will cause the
underlying stock option to become subject to, and automatically
violate, Section 409A of the Internal Revenue Code of 1986,
as amended (the Code), the stock option agreements
were amended on December 29, 2008 to provide for DER
payments for a fixed term, regardless of whether the underlying
stock option had been exercised. The fixed term for each grant
of DERs was chosen so that the fair value of the award was the
same before and after the modification, resulting in no
incremental expense to the Company.
Timing of Awards. Under the equity granting
policy, grants to the Named Executive Officers and other
employees are approved by the Compensation Committee on the date
of the January Board meeting, or if later, as soon as possible
following the calculation of the corporate performance measures
and the completion of annual reviews of the Named Executive
Officers and review and consideration of compensation
recommendations. Grant values are converted to shares based on
the closing price of the Companys common stock on the date
of grant. The exercise price of stock options is the closing
price of the Companys common stock on the date of grant.
Benefits
and Perquisites
Executive Officers participate in the same benefit programs as
all other Company employees, including health and dental
insurance, group life insurance, short- and long-term disability
coverage, partial reimbursement of health club/gym membership
fees and participation in the Companys tax-qualified
retirement plan and trust (the 401(k) Plan). In
addition, Mr. Chapman received certain perquisites in 2010,
including:
|
|
|
|
|
Membership dues for two dining/country clubs these
memberships are frequently used by the executive for business
purposes
|
|
|
|
Term life insurance policy this policy provides
financial security to the executives survivor in the event
of the executives death
|
|
|
|
Supplemental Executive Retirement Plan
(SERP) the SERP provides long-term
financial security and retirement savings for Mr. Chapman
(see 2010 Pension Benefits Table below for
additional information)
|
The Committee reviews the Companys policies with respect
to perquisites on a regular basis. Mr. Chapman is entitled
to receive these perquisites in 2011. See Note 7 to the
Summary Compensation Table for additional
information regarding perquisites, including the dollar values
of the perquisites provided by the Company in 2010.
Supplemental
Executive Retirement Plan
The SERP is a non-qualified defined benefit pension plan adopted
by the Compensation Committee on January 1, 2001. During
2010, Mr. Chapman was the only participant in the SERP. The
SERP benefit is designed to provide a benefit payable at
retirement at age 65 or older equal to 35% of the
participants average compensation at retirement, offset by
the actuarial equivalent of the benefit provided by the
Companys 401(k) Plan. Since the SERP benefit accrues over
the career of the participant, if the participant retires before
his 65th birthday, the benefit will be subject to a reduction
for proration of length of participation and a further reduction
based upon the number of months the participants
retirement occurs prior to his or her 65th birthday.
Average compensation is defined under the SERP to
mean the average of the three highest years of salary and bonus
compensation considering all years completed prior to the date
of retirement. The actuarial equivalent of the benefit provided
by the Companys 401(k) Plan represents the value of
Company contributions to the participants plan accounts
projected to age 65 and expressed as a monthly benefit
payable for life. The projected value of Company contributions
is determined by using all contributions made on behalf of the
participant for plan years completed prior to the date of
retirement and a 7.5% interest rate compounded annually.
In the event of a change in corporate control of the Company, if
Mr. Chapmans employment is terminated, either
voluntarily or involuntarily for any reason, he will be entitled
to receive the full retirement benefit, unreduced by the
proration for length of participation or the early retirement
reduction.
25
Ownership
Guidelines
Executive Officers are required to own shares of the
Companys common stock with a fair market value of at least
three times their base salary (five times for the Chief
Executive Officer). Non-employee Directors are required to own
shares of the Companys common stock with a fair market
value of at least $150,000. Shares owned directly and
indirectly, restricted shares and deferred stock units count
towards the ownership requirement, but unexercised stock options
do not. Executive Officers and non-employee Directors have five
years from their date of hire or appointment, as applicable, to
achieve the required ownership level. As of December 31,
2010, each of Messrs. Chapman, Estes, Miller, Herman and
Thomas and each of the non-employee Directors were in compliance
with the ownership requirement.
Tax
Deductibility of Executive Compensation
The Compensation Committee has considered the anticipated tax
treatment to the Company regarding the compensation and benefits
paid to the Named Executive Officers under Section 162(m)
of the Code. Although the Company does not pay corporate federal
income taxes (except with respect to its taxable REIT
subsidiaries) because it is a real estate investment trust, the
Compensation Committee will strive to provide Executive Officers
with attractive, well-designed compensation packages that will
generally preserve the deductibility of such payments for the
Company. Certain types of compensation payments and their
deductibility depend upon the timing of an Executive
Officers vesting or exercise of previously granted rights.
Moreover, interpretations of any changes in the tax laws and
other factors beyond the Compensation Committees control
may affect the deductibility of certain compensation payments.
As mentioned above, however, since the Company does not pay
corporate federal income taxes (except with respect to its
taxable REIT subsidiaries), the loss of this deduction would not
have adverse consequences for the Company. If deductibility
becomes an issue, the Compensation Committee will consider
various alternatives to preserve the deductibility of
compensation payments to Executive Officers and benefits to the
extent reasonably practical and to the extent consistent with
its other compensation objectives, but the Committee reserves
the right to make incentive-based awards not exempt from these
limits where such awards are appropriate and will not have a
material impact on stockholder value.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis of the Company with
Management. Based on the review and discussions, the
Compensation Committee recommended to the Board of Directors,
and the Board has approved, that the Compensation Discussion and
Analysis be included in this Proxy Statement.
Submitted by the Compensation Committee
Jeffrey H. Donahue, Compensation Committee Chair
William C. Ballard, Jr., Compensation Committee Member
Sharon M. Oster, Compensation Committee Member
26
Summary
Compensation Table
The table below presents the total compensation awarded to,
earned by, or paid to the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
& Non-Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
Total
|
Name and
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Compensation
|
Principal Position
|
|
(1)
|
|
($)
|
|
($)(3)
|
|
($)(4)
|
|
($)(5)
|
|
($)
|
|
($)
|
|
($)(7)
|
|
($)
|
|
George L. Chapman
|
|
|
2010
|
|
|
$
|
653,145
|
|
|
$
|
0
|
|
|
$
|
2,239,348
|
|
|
$
|
746,442
|
|
|
$
|
1,486,317
|
|
|
$
|
1,058,056
|
(6)
|
|
$
|
327,517
|
|
|
$
|
6,510,825
|
|
Chairman, Chief
|
|
|
2009
|
|
|
|
640,338
|
|
|
|
0
|
|
|
|
1,444,258
|
|
|
|
481,423
|
|
|
|
1,254,452
|
|
|
|
808,600
|
|
|
|
123,431
|
|
|
|
4,752,502
|
|
Executive Officer and President
|
|
|
2008
|
|
|
|
624,720
|
|
|
|
0
|
|
|
|
1,369,112
|
|
|
|
456,372
|
|
|
|
866,821
|
|
|
|
582,177
|
|
|
|
110,716
|
|
|
|
4,009,918
|
|
Scott A. Estes
|
|
|
2010
|
|
|
|
331,500
|
|
|
|
0
|
|
|
|
557,792
|
|
|
|
185,928
|
|
|
|
415,308
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,502,778
|
|
Executive Vice President and Chief
|
|
|
2009
|
|
|
|
325,000
|
|
|
|
0
|
|
|
|
444,296
|
|
|
|
148,101
|
|
|
|
373,595
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,303,242
|
|
Financial Officer
|
|
|
2008
|
|
|
|
297,000
|
|
|
|
0
|
|
|
|
342,278
|
|
|
|
114,088
|
|
|
|
306,794
|
|
|
|
0
|
|
|
|
11,500
|
|
|
|
1,071,660
|
|
Jeffrey H. Miller
|
|
|
2010
|
|
|
|
331,500
|
|
|
|
0
|
|
|
|
557,792
|
|
|
|
185,928
|
|
|
|
431,883
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,519,353
|
|
Executive Vice President-Operations
|
|
|
2009
|
|
|
|
325,000
|
|
|
|
0
|
|
|
|
444,296
|
|
|
|
148,101
|
|
|
|
373,595
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,303,242
|
|
and General Counsel
|
|
|
2008
|
|
|
|
312,000
|
|
|
|
0
|
|
|
|
342,278
|
|
|
|
114,088
|
|
|
|
322,288
|
|
|
|
0
|
|
|
|
11,500
|
|
|
|
1,102,154
|
|
Charles J. Herman, Jr.
|
|
|
2010
|
|
|
|
315,000
|
|
|
|
0
|
|
|
|
557,792
|
|
|
|
185,928
|
|
|
|
410,387
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,481,357
|
|
Executive Vice President and Chief
|
|
|
2009
|
|
|
|
304,876
|
|
|
|
0
|
|
|
|
518,148
|
|
|
|
172,721
|
|
|
|
350,462
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,358,457
|
|
Investment Officer
|
|
|
2008
|
|
|
|
297,440
|
|
|
|
0
|
|
|
|
475,914
|
|
|
|
158,643
|
|
|
|
351,141
|
|
|
|
0
|
|
|
|
11,500
|
|
|
|
1,294,638
|
|
John T. Thomas
|
|
|
2010
|
|
|
|
315,000
|
|
|
|
0
|
|
|
|
557,792
|
|
|
|
185,928
|
|
|
|
402,512
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,473,482
|
|
Executive Vice President-Medical Facilities
|
|
|
2009
|
|
|
|
276,987
|
(2)
|
|
|
0
|
|
|
|
195,008
|
|
|
|
0
|
|
|
|
333,362
|
|
|
|
0
|
|
|
|
3,625
|
|
|
|
808,982
|
|
|
|
|
(1) |
|
No compensation information is provided for the year in which
Mr. Thomas was not a Named Executive Officer. |
|
(2) |
|
Mr. Thomas joined the Company as Executive Vice
President-Medical Facilities on January 19, 2009 at an
annual base salary of $290,000. |
|
(3) |
|
The cash annual incentive awards are included in
Non-Equity Incentive Plan Compensation because the
performance goals were established and communicated at the
beginning of the year. |
|
(4) |
|
Amounts set forth in this column represent the grant-date fair
value calculated in accordance with FASB ASC Topic 718 for
restricted stock grants to the Named Executive Officer and are
based on the share prices on the respective dates of grant (or,
if the date of grant was not a trading day, the last trading day
prior to the date of grant), which were $43.29, $37.00 and
$40.83 for grants on January 28, 2010, January 29,
2009 and January 21, 2008, respectively. The grant-date
fair value excludes the effect of possible forfeitures (in
accordance with SEC rules) for awards subject to time-based
vesting and awards subject to performance conditions. |
|
(5) |
|
Amounts set forth in this column represent the grant-date fair
value calculated in accordance FASB ASC Topic 718 for stock
option grants to the Named Executive Officers. The Black-Scholes
option valuation methodology was used based on estimates as of
the grant date. In using such methodology, the following
assumptions were used: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
(Share Price at
|
|
Expected
|
|
Estimated
|
|
Dividend
|
|
|
Grant Date
|
|
Grant Date)
|
|
Term (Years)
|
|
Volatility
|
|
Yield
|
|
Risk-Free Rate
|
|
1/28/10
|
|
$
|
43.29
|
|
|
|
7
|
|
|
|
34.08
|
%
|
|
|
6.28
|
%
|
|
|
3.23
|
%
|
1/29/09
|
|
|
37.00
|
|
|
|
7
|
|
|
|
29.36
|
%
|
|
|
7.35
|
%
|
|
|
2.33
|
%
|
1/21/08
|
|
|
40.83
|
|
|
|
6.5
|
|
|
|
20.52
|
%
|
|
|
6.47
|
%
|
|
|
3.42
|
%
|
The fair value of options with DERs granted in 2008 also
includes the net present value of projected future dividend
payments over the life of the DERs.
(6) Amount represents the change in lump-sum present value
of the SERP benefit, offset by the actuarial equivalent of the
benefit provided by the Companys 401(k) Plan.
27
(7) All Other Compensation includes the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of DER
|
|
|
|
|
Company
|
|
Term Life
|
|
Club
|
|
Payments on
|
|
|
|
|
Contribution to
|
|
Insurance
|
|
Membership
|
|
Performance
|
|
|
Name
|
|
401(k) Plan
|
|
Premiums(a)
|
|
Dues(a)
|
|
Shares(b)
|
|
Total
|
|
Chapman
|
|
$
|
12,250
|
|
|
$
|
17,589
|
|
|
$
|
24,948
|
|
|
$
|
272,730
|
|
|
$
|
327,517
|
|
Estes
|
|
|
12,250
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,250
|
|
Miller
|
|
|
12,250
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,250
|
|
Herman
|
|
|
12,250
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,250
|
|
Thomas
|
|
|
12,250
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
|
(a) |
|
See Executive Compensation Compensation
Discussion and Analysis Compensation
Elements Benefits and Perquisites for
additional information regarding the term life insurance
premiums and club membership dues paid by the Company on behalf
of Mr. Chapman. |
|
(b) |
|
Represents DER payments on 30,000 performance awards that were
paid to Mr. Chapman in the form of shares of common stock
on January 31, 2010 in connection with the vesting of the
underlying performance awards. The value of such DER payments
was not included in the grant date fair value of the performance
awards. The DER payments on 30,000 performance awards that were
paid quarterly to Mr. Chapman during the vesting period of
the underlying performance awards are included in Other
Compensation in 2008 and 2009. See Footnote 1 to the 2010
Option Exercises and Stock Vested Table for additional
information regarding the performance awards. |
2010
Grants of Plan-Based Awards Table
The table below provides information regarding grants of awards
to the Named Executive Officers under the Companys
long-term incentive plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payments Under
|
|
Estimated Future Payments Under
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
Equity Incentive Plan Awards
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
Name
|
|
Grant Date
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
George L. Chapman
|
|
|
1/28/10(1)
|
|
|
$
|
489,859
|
|
|
$
|
979,717
|
|
|
$
|
1,959,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/28/10(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,000,000
|
|
|
$
|
2,000,000
|
|
|
$
|
4,000,000
|
|
Scott A. Estes
|
|
|
1/28/10(1)
|
|
|
|
165,750
|
|
|
|
331,500
|
|
|
|
497,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/28/10(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
Jeffrey H. Miller
|
|
|
1/28/10(1)
|
|
|
|
165,750
|
|
|
|
331,500
|
|
|
|
497,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/28/10(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
Charles J. Herman, Jr.
|
|
|
1/28/10(1)
|
|
|
|
157,500
|
|
|
|
315,000
|
|
|
|
472,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/28/10(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
John T. Thomas
|
|
|
1/28/10(1)
|
|
|
|
157,500
|
|
|
|
315,000
|
|
|
|
472,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/28/10(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
|
(1) |
|
Represents annual incentive program earnings opportunity. The
actual amount earned by each of the Named Executive Officers
under the annual incentive program in 2010 is shown in the
Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table. |
|
(2) |
|
Represents long-term incentive earnings opportunity for 2010.
Based on 2010 performance, actual awards were granted on
January 27, 2011 in a combination of restricted shares and
options, according to the table on page 24. |
Employment
Agreements
The Company has employment agreements with each of
Messrs. Chapman, Estes, Miller, Herman and Thomas.
28
Employment
Agreement with George L. Chapman
The Company entered into an amended and restated employment
agreement with George L. Chapman, Chairman, Chief Executive
Officer and President of the Company, on December 2, 2010
that is effective as of January 31, 2011, will expire on
January 31, 2014, and provides for an optional three-year
renewal term. Mr. Chapman receives a base salary that is
reviewed and adjusted each year by the Compensation Committee
and he is eligible to receive discretionary annual bonuses and
equity awards under the Companys long-term incentive
plans. The Company also provides Mr. Chapman with
reimbursement for the cost of an annual physical examination.
Mr. Chapman received a grant of $1,000,000 in shares of the
Companys common stock on January 31, 2011 in
consideration of his agreement to extend his service to the
Company and will receive a grant of $1,000,000 in shares of the
Companys common stock on an annual basis for calendar each
year during the term of the agreement (the Extension
Shares). For a description of the provisions of the
agreement regarding compensation and benefits payable to
Mr. Chapman upon his termination or a change in corporate
control, see Potential Payments Upon Termination or Change
in Corporate Control below.
During 2010, an employment agreement was in place between
Mr. Chapman and the Company that provided some of the same
benefits as described above. In terms of benefits, the key
differences between the agreement that was in effect during 2010
and the agreement that became effective as of January 31,
2011 are as follows:
|
|
|
|
|
Mr. Chapman is no longer entitled to an excise tax
gross-up in
connection with a change in corporate control.
|
|
|
|
Mr. Chapman may receive severance after a change in
corporate control only if he terminates his employment for good
reason or is terminated without cause by the Company during the
24 months following such change in corporate control.
|
|
|
|
Vesting of stock options and restricted stock is no longer
triggered by a change in corporate control under the terms of
the employment agreement. Rather, such vesting is triggered by a
resignation by Mr. Chapman for good reason or a termination
without cause by the Company within 24 months following a
change in corporate control.
|
|
|
|
Mr. Chapman or his beneficiary (as applicable) is no longer
entitled to receive severance payments upon his disability or
death.
|
|
|
|
Mr. Chapman has received and will receive during the term
of the agreement the Extension Shares. Upon any termination
scenario other than voluntary termination by Mr. Chapman or
termination for cause by the Company, Mr. Chapman will be
entitled to receive a pro-rated portion of the Extension Shares
that he would have earned if he had remained employed for the
entire year.
|
|
|
|
Upon any termination scenario, Mr. Chapman will be entitled
to receive a pro-rated portion of the annual bonus that he would
have earned if he had remained employed for the entire year.
|
Employment
Agreements with Scott A. Estes, Jeffrey H. Miller, Charles J.
Herman, Jr. and John T. Thomas
The Company has entered into employment agreements with each of
Scott A. Estes, Executive Vice President and Chief Financial
Officer of the Company, Jeffrey H. Miller, Executive Vice
President-Operations and General Counsel of the Company, Charles
J. Herman, Jr., Executive Vice President and Chief
Investment Officer of the Company, and John T. Thomas, Executive
Vice President-Medical Facilities of the Company, that expire on
January 31, 2013, and provide for optional successive
two-year renewal terms. Each of these Named Executive Officers
receives a base salary that is reviewed and adjusted each year
by the Compensation Committee and is eligible to receive
discretionary annual bonuses and equity awards under the
Companys long-term incentive plans. For a description of
the provisions of the agreements regarding compensation and
benefits payable upon termination or a change in corporate
control, see Potential Payments Upon Termination or Change
in Corporate Control below.
29
2010
Outstanding Equity Awards at Fiscal Year-End Table
The table below provides information regarding outstanding
equity-based awards granted to the Named Executive Officers
under the Companys long-term incentive plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
# of
|
|
# of
|
|
|
|
|
|
|
|
Shares or
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
# of Shares
|
|
Units of
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
or Units of
|
|
Stock That
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Stock That
|
|
Have Not
|
|
|
Options
|
|
Options
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Vested
|
|
($)(3)
|
|
George L. Chapman
|
|
|
0
|
|
|
|
95,453
|
|
|
$
|
43.29
|
|
|
|
1/28/20
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
21,983
|
|
|
|
87,931
|
|
|
|
37.00
|
|
|
|
1/29/19
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
4,937
|
|
|
|
7,404
|
|
|
|
40.83
|
|
|
|
1/21/18
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
24,276
|
|
|
|
36,412
|
|
|
|
40.83
|
|
|
|
1/21/18
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
6,437
|
|
|
|
4,290
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
19,054
|
|
|
|
12,702
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
8,889
|
|
|
|
2,222
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
36,698
|
|
|
|
9,174
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
23,198
|
|
|
|
0
|
|
|
|
34.88
|
|
|
|
1/24/15
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
38,036
|
|
|
|
0
|
|
|
|
37.00
|
|
|
|
1/26/14
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
17,879
|
|
|
|
0
|
|
|
|
25.82
|
|
|
|
1/27/13
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
0
|
|
|
|
24.42
|
|
|
|
12/12/11
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,271
|
|
|
$
|
5,586,790
|
|
Scott A. Estes
|
|
|
0
|
|
|
|
23,776
|
|
|
$
|
43.29
|
|
|
|
1/28/20
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
6,763
|
|
|
|
27,050
|
|
|
|
37.00
|
|
|
|
1/29/19
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,234
|
|
|
|
1,851
|
|
|
|
40.83
|
|
|
|
1/21/18
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
6,070
|
|
|
|
9,102
|
|
|
|
40.83
|
|
|
|
1/21/18
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,032
|
|
|
|
686
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
3,053
|
|
|
|
2,034
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,278
|
|
|
|
319
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
5,276
|
|
|
|
1,318
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
3,139
|
|
|
|
0
|
|
|
|
34.88
|
|
|
|
1/24/15
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
6,015
|
|
|
|
0
|
|
|
|
37.00
|
|
|
|
1/26/14
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,890
|
|
|
$
|
1,519,240
|
|
Jeffrey H. Miller
|
|
|
0
|
|
|
|
23,776
|
|
|
$
|
43.29
|
|
|
|
1/28/20
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
4,263
|
|
|
|
27,050
|
|
|
|
37.00
|
|
|
|
1/29/19
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,234
|
|
|
|
1,851
|
|
|
|
40.83
|
|
|
|
1/21/18
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
6,070
|
|
|
|
9,102
|
|
|
|
40.83
|
|
|
|
1/21/18
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,032
|
|
|
|
686
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
3,053
|
|
|
|
2,034
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,278
|
|
|
|
319
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
5,276
|
|
|
|
1,318
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
3,139
|
|
|
|
0
|
|
|
|
34.88
|
|
|
|
1/24/15
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,833
|
|
|
|
1,468,884
|
|
Charles J. Herman, Jr.
|
|
|
0
|
|
|
|
23,776
|
|
|
$
|
43.29
|
|
|
|
1/28/20
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
31,547
|
|
|
|
37.00
|
|
|
|
1/29/19
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,716
|
|
|
|
2,574
|
|
|
|
40.83
|
|
|
|
1/21/18
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
4,219
|
|
|
|
12,657
|
|
|
|
40.83
|
|
|
|
1/21/18
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,710
|
|
|
|
1,138
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
5,059
|
|
|
|
3,372
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,667
|
|
|
|
416
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
1,720
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,479
|
|
|
|
1,690,220
|
|
John T. Thomas
|
|
|
0
|
|
|
|
23,776
|
|
|
$
|
43.29
|
|
|
|
1/28/20
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,850
|
|
|
|
802,734
|
|
|
|
|
(1) |
|
Represents options with DERs. Cash payments attributable to DERs
will accrue and be paid out only when the corresponding option
has vested. These options vest ratably over five years on the
first five anniversaries of the date of grant and expire on the
tenth anniversary of the date of grant. See Executive
Compensation Compensation Discussion and
Analysis Compensation Elements Long-Term
Incentives Stock |
30
|
|
|
|
|
Options with DERs for information regarding changes to the
structure of DER payments that were made in December 2008. |
|
(2) |
|
Represents options without DERs. These options vest ratably over
five years on the first five anniversaries of the date of grant
and expire on the tenth anniversary of the date of grant. |
|
(3) |
|
Based on a share price of $47.64, the closing price of the
Companys common stock on December 31, 2010, the last
trading day of 2010. The restrictions on restricted stock lapse
ratably over five years on the first five anniversaries of the
date of grant. |
2010
Option Exercises and Stock Vested Table
The table below provides information regarding the dollar
amounts realized pursuant to the vesting or exercise of
equity-based awards during 2010 for the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
# of Shares
|
|
Value Realized Upon
|
|
# of Shares
|
|
Value Realized on
|
|
|
Acquired on
|
|
Exercise
|
|
Acquired on
|
|
Vesting
|
Name
|
|
Exercise
|
|
($)
|
|
Vesting
|
|
($)
|
|
George L. Chapman
|
|
|
27,105
|
|
|
$
|
545,148
|
|
|
|
155,398
|
(1)
|
|
$
|
6,719,887
|
|
Scott A. Estes
|
|
|
0
|
|
|
|
0
|
|
|
|
7,822
|
|
|
|
348,582
|
|
Jeffrey H. Miller
|
|
|
2,500
|
|
|
|
29,743
|
|
|
|
6,764
|
|
|
|
299,645
|
|
Charles J. Herman, Jr.
|
|
|
29,202
|
|
|
|
340,341
|
|
|
|
9,826
|
|
|
|
433,526
|
|
John T. Thomas
|
|
|
0
|
|
|
|
0
|
|
|
|
992
|
|
|
|
43,946
|
|
|
|
|
(1) |
|
Includes regular vesting of restricted stock on January 15,
2010 and vesting of the special retention and incentive award on
January 31, 2010. On January 22, 2007,
Mr. Chapman received a grant of 60,000 shares of
restricted stock as a special retention and incentive award. The
restrictions on these shares lapsed on January 31, 2010
because Mr. Chapman remained employed by the Company
through that date. Mr. Chapman also received a grant of
60,000 shares in performance awards with DERs, which were
paid in shares of common stock on January 31, 2010 because
Mr. Chapman remained employed by the Company through that
date and the Company met certain strategic objectives.
Mr. Chapman received DER payments with respect to 30,000 of
the performance awards as dividends were paid on shares of
common stock during the vesting period, and DER payments on the
remaining 30,000 performance awards were paid in the form of
shares of common stock on January 31, 2010, the date when
the underlying shares of common stock were earned by
Mr. Chapman. |
2010
Pension Benefits Table
The table below provides information regarding the SERP adopted
by the Compensation Committee of the Board of Directors
effective January 1, 2001. The SERP is a non-qualified
defined benefit pension plan that provides certain executives
selected by the Compensation Committee with supplemental
deferred retirement benefits. The SERP provides an opportunity
for participants to receive retirement benefits that cannot be
paid under the Companys 401(k) Plan because of the
restrictions imposed by ERISA and the Code. During 2010, George
L. Chapman was the only participant in the SERP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years of
|
|
Present Value of
|
|
Payments During
|
Name
|
|
Plan Name
|
|
Credited Service(1)
|
|
Accumulated Benefit($)(2)
|
|
Last Fiscal Year
|
|
George L. Chapman
|
|
|
SERP
|
|
|
|
10
|
|
|
$
|
3,695,935
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
Represents the number of years of employment after
January 1, 2001. |
|
(2) |
|
Calculated by discounting the currently accumulated benefit
payable at normal retirement age under the elected optional form
of a single lump sum distribution. This discounting uses a 3.5%
discount rate. |
The participants benefit under the SERP is subject to a
pending Domestic Relations Order. The likely result of such
order is the settlement of a substantial portion of the
participants benefit during the 2011 fiscal year. The
participants final benefit upon termination or retirement
will reflect the pending distribution.
31
The SERP benefit is designed to provide a benefit payable at
retirement at age 65 or older equal to 35% of the
participants average compensation at retirement, offset by
the actuarial equivalent of the benefit provided by the
Companys 401(k) Plan. Since the SERP benefit accrues over
the career of the participant, if the participant retires before
his or her 65th birthday, the benefit will be subject to a
reduction for proration of length of participation and a further
reduction based upon the number of months the participants
retirement occurs prior to his or her 65th birthday. Average
compensation is defined under the SERP to mean the average of
the three highest years of salary and bonus compensation
considering all years completed prior to the date of retirement.
The actuarial equivalent of the benefit provided by the
Companys 401(k) Plan represents the value of Company
contributions to the participants plan accounts projected
to age 65 and expressed as a monthly benefit payable for
life. The projected value of Company contributions is determined
by using all contributions made on behalf of the participant for
plan years completed prior to the date of retirement and a 7.5%
interest rate compounded annually.
The SERP is unfunded and all benefits will be paid from the
general assets of the Company. Eligibility is limited to a
select group of Management or highly compensated employees whose
qualified plan benefits are limited by ERISA and the Code. See
Executive Compensation Compensation Discussion
and Analysis Compensation Elements
Supplemental Executive Retirement Plan above for
additional information regarding the SERP.
Potential
Payments Upon Termination or Change in Corporate
Control
Pursuant to their respective employment agreements, each of the
Named Executive Officers would be entitled to the following
benefits upon termination or change in corporate control.
George
L. Chapman
Severance Payments and Benefits. If
Mr. Chapman terminates his employment for good
reason (as defined in the agreement) or is terminated
without cause by the Company, he would receive a lump sum
severance payment equal to the present value of a series of
monthly severance payments for each month during the remaining
term of the agreement or for 24 months, whichever is
greater (the Severance Period). If Mr. Chapman
terminates his employment for good reason or is terminated
without cause by the Company during the 24 months following
a change in corporate control (as defined in the
agreement) and during the term of the agreement, he would
receive a lump sum severance payment equal to the present value
of a series of monthly severance payments for 36 months.
The monthly severance payments would be calculated using an
amount equal to the sum of one-twelfth of the sum of his annual
base salary and the greater of the highest of the annual bonuses
paid to Mr. Chapman for the three fiscal years immediately
preceding the termination or change in corporate control or a
minimum bonus equal to 100% of his annual base salary.
Mr. Chapman also would be entitled to receive a pro-rated
portion of the Extension Shares and the annual bonus that he
would have earned if he had remained employed for the entire
year and continued benefits under any life, health and
disability insurance programs maintained by the Company for the
remaining term of the agreement (but not less than
12 months and not more than the period during which he
would be entitled to continuation coverage under
Section 4980 of the Code, if he elected such coverage and
paid the applicable premiums), or until the date he obtains
comparable coverage from a new employer. If Mr. Chapman
terminates his employment for good reason or is terminated
without cause (but not following a change in corporate control)
and he obtains a replacement position with a new employer,
Mr. Chapman would be obligated to repay to the Company an
amount equal to all amounts he receives as compensation for
services performed during the Severance Period; provided that
the aggregate repayment obligation will not exceed the amount of
the lump sum severance payment. If it is determined that any
payment by the Company to Mr. Chapman in connection with a
change in corporate control would be a golden parachute subject
to excise tax, the amount of such payment may be reduced to
maximize the benefits received by Mr. Chapman on an
after-tax basis.
In the event of Mr. Chapmans death or his involuntary
termination following a Board determination that he is disabled,
Mr. Chapman or his beneficiary (as applicable) would
receive a pro-rated portion of the Extension Shares and the
annual bonus that Mr. Chapman would have earned if he had
remained employed for the entire year.
32
If Mr. Chapman voluntarily terminates his employment or is
terminated for cause, Mr. Chapman would receive a pro-rated
portion of the Extension Shares that he would have earned if he
had remained employed for the entire year, as well as accrued
but unpaid base salary and vacation pay, any bonuses earned but
unpaid and any nonforfeitable benefits under the Companys
deferred compensation, incentive and other benefit plans.
Vesting of Incentive
Awards. Mr. Chapmans stock option and
restricted stock awards granted under the Companys
incentive plans would become vested and immediately exercisable
(except as provided above with respect to the Extension Shares)
in the event that Mr. Chapman terminates his employment for
good reason or is terminated without cause by the Company
(whether or not following a change in corporate control) or upon
his disability.
Non-Competition and Non-Solicitation. In the
event of a voluntary termination by Mr. Chapman or a
termination for cause by the Company, Mr. Chapman would be
subject to a one-year non-competition agreement. In addition,
upon the termination of the agreement for any reason,
Mr. Chapman would be subject to a non-solicitation
agreement for a period of one year from the time the agreement
ceases, or if later, during any period in which he is receiving
any severance or change in control payments.
Scott
A. Estes
Severance Payments and Benefits. If
Mr. Estes is terminated without cause, he would receive a
lump sum severance payment equal to the present value of a
series of monthly severance payments for each month during the
remaining term of the agreement or for 12 months, whichever
is greater (the Severance Period). If Mr. Estes
resigns or is terminated without cause during the 12 months
following a change in corporate control (as defined
in the agreement), he would receive a lump sum severance payment
equal to the present value of a series of monthly severance
payments for 24 months. The monthly severance payments
would be calculated using an amount equal to the sum of
one-twelfth of the sum of his annual base salary and the greater
of the annual bonus for the fiscal year immediately preceding
the termination or change in corporate control or a minimum
bonus equal to 35% of his annual base salary. Mr. Estes
also would be entitled to continued benefits under any life,
health and disability insurance programs maintained by the
Company for the remaining term of the agreement (but not less
than six months and not more than the period during which he
would be entitled to continuation coverage under
Section 4980 of the Code, if he elected such coverage and
paid the applicable premiums), or until the date he obtains
comparable coverage from a new employer. If Mr. Estes is
terminated without cause and he obtains a replacement position
with a new employer, Mr. Estes would be obligated to repay
to the Company an amount equal to all amounts he receives as
compensation for services performed during the Severance Period;
provided that the aggregate repayment obligation will not exceed
the amount of the lump sum severance payment. If it is
determined that any payment by the Company to Mr. Estes in
connection with a change in corporate control would be a golden
parachute subject to excise tax, the Company would be obligated
to make an additional payment to him to cover such excise tax.
In the event of Mr. Estes death, his beneficiary
would receive a lump sum payment equal to the present value of a
series of monthly payments for each month during the remainder
of the term of the agreement (but not less than 12 months),
each in an amount equal to one-twelfth of the sum of his annual
base salary and the greater of the annual bonus for the fiscal
year immediately preceding the date of death or a minimum bonus
equal to 35% of his annual base salary. In addition, the death
benefits payable under any retirement, deferred compensation,
life insurance or other employee benefit maintained by the
Company will be paid to the beneficiary designated by
Mr. Estes.
In the event of Mr. Estes involuntary termination
following a Board determination that he is disabled,
Mr. Estes would receive monthly payments for each month
during the remainder of the term of the agreement (but not less
than 12 months), each in an amount equal to one-twelfth of
the sum of his annual base salary and the greater of the annual
bonus for the fiscal year immediately preceding the date of
disability or a minimum bonus equal to 35% of his annual base
salary. These payments would terminate if Mr. Estes returns
to active employment, either with the Company or otherwise. In
addition, these payments would be reduced by any amounts paid to
Mr. Estes under any long-term disability plan or other
disability program or insurance policies maintained by the
Company.
If Mr. Estes voluntarily terminates his employment or is
terminated for cause, Mr. Estes only would be entitled to
accrued but unpaid base salary and vacation pay, any bonuses
earned but unpaid and any nonforfeitable benefits under the
Companys deferred compensation, incentive and other
benefit plans.
33
Vesting of Incentive
Awards. Mr. Estes stock option and
restricted stock awards granted under the Companys
incentive plans would become vested and immediately exercisable
in the event of a change in corporate control, or upon his
death, disability or termination without cause.
Non-Competition and Non-Solicitation. In the
event of a voluntary termination by Mr. Estes, the election
by Mr. Estes not to extend the term of the agreement or a
termination for cause by the Company, Mr. Estes would be
subject to a one-year non-competition agreement. In addition,
upon the termination of the agreement for any reason,
Mr. Estes would be subject to a non-solicitation agreement
for a period of one year from the time the agreement ceases, or
if later, during the Severance Period (in the event of an
involuntary termination by the Company) or for a period of
24 months after an involuntary termination or voluntary
resignation following a change in corporate control.
Jeffrey
H. Miller and Charles J. Herman, Jr.
The Companys employment agreements with
Messrs. Miller and Herman are virtually identical to the
Companys employment agreement with Mr. Estes. The
only difference is that the minimum bonus that may be used to
calculate severance payments owed in the event of a change in
corporate control, or upon death, disability or termination
without cause is equal to 30% of annual base salary, rather than
35%.
John
T. Thomas
Severance Payments and Benefits. If
Mr. Thomas is terminated without cause, he would receive a
series of monthly severance payments for each month during the
remaining term of the agreement or for 12 months, whichever
is greater. If Mr. Thomas is terminated without cause
during the 12 months following a change in corporate
control (as defined in the agreement), he would receive a
lump sum severance payment equal to the present value of a
series of monthly severance payments for 24 months. The
monthly severance payments would be calculated using an amount
equal to the sum of one-twelfth of the sum of his annual base
salary and the average of the annual bonuses paid to
Mr. Thomas for the prior three fiscal years immediately
preceding the termination or change in corporate control.
Mr. Thomas also would be entitled to continued benefits
under any life, health and disability insurance programs
maintained by the Company for the remaining term of the
agreement (but not less than six months and not more than the
period during which he would be entitled to continuation
coverage under Section 4980 of the Code, if he elected such
coverage and paid the applicable premiums), or until the date he
obtains comparable coverage from a new employer. If
Mr. Thomas is terminated without cause and he obtains a
replacement position with a new employer, the severance payments
described above will be reduced by all amounts he receives as
compensation for services performed during such period. If it is
determined that any payment by the Company to Mr. Thomas in
connection with a change in corporate control would be a golden
parachute subject to excise tax, the Company would be obligated
to make an additional payment to him to cover such excise tax.
However, the amount paid to Mr. Thomas may be reduced by up
to 10% if such reduction would result in the payment of no
excise tax.
In the event of Mr. Thomas death, his beneficiary
would receive a lump sum payment equal to the present value of a
series of monthly payments for each month during the remainder
of the term of the agreement (but not less than 12 months),
each in an amount equal to one-twelfth of the sum of his annual
base salary and the average of the annual bonuses paid to
Mr. Thomas for the prior three fiscal years immediately
preceding the date of death. In addition, the death benefits
payable under any retirement, deferred compensation, life
insurance or other employee benefit maintained by the Company
will be paid to the beneficiary designated by Mr. Thomas.
In the event of Mr. Thomas involuntary termination
following a Board determination that he is disabled,
Mr. Thomas would receive monthly payments for each month
during the remainder of the term of the agreement (but not less
than 12 months), each in an amount equal to one-twelfth of
the sum of his annual base salary and the average of the annual
bonuses paid to Mr. Thomas for the prior three fiscal years
immediately preceding the date of disability. These payments
would terminate if Mr. Thomas returns to active employment,
either with the Company or otherwise. In addition, these
payments would be reduced by any amounts paid to Mr. Thomas
under any long-term disability plan or other disability program
or insurance policies maintained by the Company.
34
If Mr. Thomas voluntarily terminates his employment or is
terminated for cause, Mr. Thomas only would be entitled to
accrued but unpaid base salary and vacation pay, any bonuses
earned but unpaid and any nonforfeitable benefits under the
Companys deferred compensation, incentive and other
benefit plans.
Vesting of Incentive
Awards. Mr. Thomas stock option and
restricted stock awards granted under the Companys
incentive plans would become vested and immediately exercisable
in the event of a change in corporate control, or upon his
death, disability or termination without cause.
Non-Competition and Non-Solicitation. Upon the
termination of the agreement for any reason, Mr. Thomas
will be subject to (1) a one-year non-competition
agreement, and (2) a non-solicitation agreement for a
period of one year from the later of the time the agreement
ceases or when monthly severance payments under the agreement
cease (or would have ceased had such payments not been offset by
compensation received from a new employer).
35
Quantification
of Benefits
The table below reflects estimates of the amounts of
compensation that would be paid to the Named Executive Officers
in the event of their termination. The amounts assume that such
termination was effective as of December 31, 2010. The
actual amounts to be paid to a Named Executive Officer can only
be determined at the time of such executives separation
from the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Unvested
|
|
|
Incremental
|
|
|
|
|
|
|
|
Name/
|
|
Cash
|
|
|
Continued
|
|
|
Equity
|
|
|
Pension
|
|
|
Excise Tax
|
|
|
|
|
Type of Termination
|
|
Severance(2)
|
|
|
Benefits(3)
|
|
|
Compensation(4)
|
|
|
Benefit(5)
|
|
|
Gross-Up(6)
|
|
|
Total
|
|
|
George L. Chapman(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
n/a
|
|
|
$
|
0
|
|
Death or Disability
|
|
|
3,422,570
|
|
|
|
0
|
|
|
|
7,530,445
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
10,953,015
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
3,422,570
|
|
|
|
21,307
|
|
|
|
7,530,445
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
10,974,322
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
5,130,264
|
|
|
|
21,307
|
|
|
|
7,530,445
|
|
|
|
789,985
|
|
|
$
|
0
|
|
|
|
13,472,001
|
|
Scott A. Estes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death or Disability
|
|
|
704,561
|
|
|
|
0
|
|
|
|
2,035,061
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,739,622
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
704,561
|
|
|
|
10,653
|
|
|
|
2,035,061
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,750,275
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
1,408,136
|
|
|
|
10,653
|
|
|
|
2,035,061
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,453,850
|
|
Jeffrey H. Miller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death or Disability
|
|
|
704,561
|
|
|
|
0
|
|
|
|
1,984,705
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,689,266
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
704,561
|
|
|
|
10,653
|
|
|
|
1,984,705
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,699,919
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
1,408,136
|
|
|
|
10,653
|
|
|
|
1,984,705
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,403,494
|
|
Charles J. Herman, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death or Disability
|
|
|
664,958
|
|
|
|
0
|
|
|
|
2,303,933
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,968,891
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
664,958
|
|
|
|
10,544
|
|
|
|
2,303,933
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,979,435
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
1,328,985
|
|
|
|
10,544
|
|
|
|
2,303,933
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,643,462
|
|
John T. Thomas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death or Disability
|
|
|
647,871
|
|
|
|
0
|
|
|
|
906,160
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
1,554,031
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
647,871
|
|
|
|
10,653
|
|
|
|
906,160
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
1,564,684
|
|
Involuntary Termination without Cause following a Change in
Corporate Control
|
|
|
1,294,835
|
|
|
|
10,653
|
|
|
|
906,160
|
|
|
|
0
|
|
|
|
734,347
|
|
|
|
2,945,995
|
|
36
|
|
|
(1) |
|
Amounts are based on the employment agreement between
Mr. Chapman and the Company that was in effect on
December 31, 2010. As described above under
Employment Agreements, the Company entered into an
amended and restated employment agreement with Mr. Chapman
effective as of January 31, 2011. |
|
(2) |
|
Cash Severance |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Miller, Herman and Thomas, as of December 31, 2010, these
executives would be entitled to a lump sum severance payment
equal to the present value of a series of monthly severance
payments, calculated using a discount rate equal to the
90-day
treasury rate. For Mr. Chapman, the monthly payment used to
calculate the lump sum is equal to 1/12 of the sum of his base
salary plus the greater of (a) the average annual bonus
paid during the last two years or (b) a minimum bonus as a
percent of his base salary, as specified in the employment
agreement. The average annual bonuses paid during the past two
years have been in excess of the minimum specified in the
agreement; thus the average annual bonuses are used to calculate
potential severance. For Messrs. Estes, Miller and Herman,
the monthly payment used to calculate the lump sum is equal to
1/12 of the sum of the executives base salary plus the
greater of (a) the annual bonus paid during the last year
or (b) a minimum bonus as a percent of base salary, as
specified for each executive in the employment agreement. The
annual bonuses paid during the last year have been in excess of
the minimums specified in the agreement; thus the annual bonuses
are used to calculate potential severance. For Mr. Thomas,
the monthly payment used to calculate the lump sum is equal to
1/12 of the sum of his base salary plus the average of the
annual bonuses paid during the last three years. |
|
|
|
For Messrs. Chapman, Estes, Miller, Herman and Thomas, the
number of monthly payments used to calculate the lump sum varies
depending on the termination scenario: |
|
|
|
If the termination is for cause by the Company
or without good reason by the executive, no severance would be
paid.
|
|
|
|
For Messrs. Chapman, Estes, Herman and
Miller, upon the death of the executive or the involuntary
termination without cause by the Company or voluntary
termination by the executive for good reason, not related to a
change in corporate control, and for Mr. Thomas, upon his
death, the calculation will be based on the number of months
remaining in the term of the agreement, but not less than
24 months for Mr. Chapman and not less than
12 months for Messrs. Estes, Miller, Herman and
Thomas. As of December 31, 2010, the remaining terms of the
agreements of Messrs. Chapman, Estes, Miller, Herman and
Thomas was one month. Therefore, the figures in the above table
assume the lump sum will be based on monthly payments for
24 months for Mr. Chapman and for 12 months for
Messrs. Estes, Miller, Herman and Thomas.
|
|
|
|
Upon involuntary termination without cause by
the Company or voluntary termination by the executive for any
reason within 12 months of a change in corporate control,
the lump sum will be based on monthly payments for
36 months for Mr. Chapman and for 24 months for
Messrs. Estes, Herman and Miller. For Mr. Thomas, upon
involuntary termination without cause by the Company within
12 months of a change in corporate control, the lump sum
will be based on monthly payments for 24 months.
|
|
|
|
The amounts reflected in the table above represent the
discounted present value of the monthly payments assuming a
0.14% annual discount rate (the
90-day
treasury rate as of December 31, 2010, the assumed date of
termination). |
|
|
|
For Mr. Thomas, upon an involuntary termination without
cause by the Company or his voluntary termination for good
reason, not related to a change in corporate control,
Mr. Thomas would be entitled to receive cash severance
payable in a series of monthly severance payments. Each monthly
payment is equal to 1/12 of the sum of his base salary plus the
average of the annual bonuses paid during the last three years.
Payments would be made for each month during the remaining term
of the agreement, but not for less than 12 months. Based on
the remaining term of his agreement, the figures in the above
table assume payments would be provided for 12 months for
Mr. Thomas. |
|
|
|
Upon a termination by the Company following a Board
determination that the executive is disabled, as of
December 31, 2010, Messrs. Chapman, Estes, Miller,
Herman and Thomas would be entitled to cash severance payable in
a series of monthly severance payments. For Mr. Chapman,
each monthly payment is equal to 1/12 of the sum of his base
salary plus the greater of (a) the average annual bonus
paid during the last two years or (b) a minimum bonus as a
percent of his base salary, as specified in the employment
agreement. For Messrs. Estes, |
37
|
|
|
|
|
Herman and Miller, each monthly payment is equal to 1/12 of the
sum of the executives base salary plus the greater of
(a) the annual bonus paid during the last year or
(b) a minimum bonus as a percent of base salary, as
specified for each executive in the employment agreement. For
Mr. Thomas, each monthly payment is equal to 1/12 of the
sum of his base salary plus the average of the annual bonuses
paid during the last three years. Payments would be made for
each month during the remaining term of the agreement, but not
for less than 24 months for Mr. Chapman and not for
less than 12 months for Messrs. Estes, Miller, Herman
and Thomas. Based on the remaining terms of their agreements,
the figures in the above table assume payments would be provided
for 24 months for Mr. Chapman and for 12 months
for Messrs. Estes, Miller, Herman and Thomas. |
|
(3) |
|
Continued Benefits |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Miller, Herman and Thomas, as of December 31, 2010, these
executives would be entitled to continued coverage at the
Companys expense under life, health and disability
insurance programs in which the executive participated at the
time of involuntary termination without cause by the Company or
voluntary termination by the executive for good reason, for the
remaining term of the agreement, but not less than
12 months for Mr. Chapman and not less than six months
for Messrs. Estes, Miller, Herman and Thomas and for each
executive not more than the period during which the executive
would be entitled to continuation coverage under
Section 4980 of the Code, if he elected such coverage and
paid the applicable premiums. As of December 31, 2010, the
remaining terms of the agreements of Messrs. Chapman,
Estes, Miller, Herman and Thomas was one month. Therefore, the
figures in the above table assume continued benefits would be
provided for 12 months for Mr. Chapman and for six
months for Messrs. Estes, Miller, Herman and Thomas. The
monthly cost of such benefits is estimated to be the current
2011 monthly costs. |
|
(4) |
|
Accelerated Vesting of Unvested Equity Compensation |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Miller, Herman and Thomas, as of December 31, 2010, upon
involuntary termination without cause by the Company or
voluntary termination for good reason by the executive, all
unvested stock awards would become fully vested. The numbers in
this column represent the
in-the-money
value of unvested stock options and the full value of unvested
restricted stock awards as of December 31, 2010 (the
assumed termination date) where vesting would be accelerated
upon termination under these scenarios. Note that these amounts
are different than the Companys compensation expense for
granting these awards. The assumed share price upon each
termination scenario is $47.64, which was the closing price as
of December 31, 2010, the last trading day of the year. |
|
(5) |
|
Incremental Pension Benefit |
|
|
|
Mr. Chapman participated in the SERP in 2010. |
|
|
|
In the event of a change in corporate control
of the Company, if Mr. Chapmans employment is
terminated, either voluntarily or involuntarily for any reason,
he will be entitled to receive the full retirement benefit,
unreduced by the proration for length of participation or the
early retirement reduction. The amounts shown in the above table
represent the present value of the incremental benefit to
Mr. Chapman upon termination related to a change in
corporate control.
|
|
|
|
In connection with all other termination
events (other than retirement at age 65 or older), the
retirement benefit will be subject to a reduction for proration
of length of participation and a further reduction based upon
the number of months Mr. Chapmans retirement occurs
prior to his 65th birthday. The amounts shown in the above table
represent the present value of the incremental benefit to
Mr. Chapman upon such a termination as of December 31,
2010.
|
|
(6) |
|
Excise Tax
Gross-Up |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Miller, Herman and Thomas, as of December 31, 2010, if any
payments constitute excess parachute payments under
Section 280G of the Code such that the executive incurs an
excise tax under Section 4999 of the Code, the Company
would provide an excise tax
gross-up
payment in an amount such that after payment of the excise tax
and all income and excise taxes applicable to the
gross-up
payment, the executive would receive the same amount of
severance had the excise tax not applied. For Mr. Thomas,
the amount paid in connection with a change in corporate control
may be reduced by up to 10% if such reduction would result in
the payment of no excise tax. |
38
|
|
|
|
|
If a change in corporate control had occurred December 31,
2010 and each of the Named Executive Officers was terminated as
a result, none of the Named Executive Officers (except for
Mr. Thomas) would have been subject to excise tax. In
arriving at this conclusion, the following assumptions were used: |
|
|
|
Each officers base amount was calculated
by taking the average
W-2 income
(box 1) from the past five years
(2005-2009).
For Mr. Thomas, the annualized 2009
W-2 amount,
which included only base salary, was used.
|
|
|
|
The stock award parachute calculations for
purposes of Code Section 280G were based on Black-Scholes
valuation methodology using the most recent GAAP ASC Topic
718 option valuation assumptions (volatility 34.8%, risk-free
interest rate 2.87%, dividend yield 5.74%, expected remaining
term of seven years). Under the Code Section 280G rules,
the cost included in the parachute for the accelerated vesting
of stock options, restricted shares and unvested dividend
equivalent rights is the sum of (1) the excess of the
aggregate accelerated benefit over the present value of the
accelerated benefit and (2) the lapse of service obligation
(1% times the number of months of vesting accelerated times the
aggregate accelerated benefit).
|
|
|
|
The total parachute for each Named Executive
Officer (except for Mr. Thomas) did not exceed the Code
Section 280G safe harbor, which is three times
the base amount minus $1. As a result, the Named Executive
Officers (except for Mr. Thomas) would not have incurred
any excise tax.
|
Risk
Management and Compensation
As described above in Executive Compensation
Compensation Discussion and Analysis, the Companys
compensation programs are designed, among other things, to
encourage long-term stockholder value creation, rather than
short-term stockholder value maximization. Performance is
evaluated based on quantitative and qualitative factors and
there is a review of not only what is achieved, but
also how it is achieved. Consistent with this
long-term focus, the compensation policies and practices for the
Named Executive Officers and other employees do not encourage
excessive risk-taking. In fact, many elements of the executive
compensation program serve to mitigate excessive risk-taking.
|
|
|
|
|
Balanced pay mix. A balanced mix of base
salary, annual cash incentives and long-term equity compensation
is provided. Incentives tied to annual performance are balanced
with incentives tied to multi-year performance, as measured by
total stockholder return relative to two indices in the
long-term incentive program. In this way, the Executive Officers
are motivated to consider the impact of decisions over the
short, intermediate and long terms.
|
|
|
|
Balanced performance measurements. The
performance measures used in the annual and long-term incentive
programs were chosen to provide appropriate safeguards against
maximization of a single performance goal at the expense of the
overall health of the Companys business. The incentive
programs are not completely quantitative. Various individual and
qualitative objectives are incorporated, and the Compensation
Committee has the discretion to adjust earned bonuses based on
the quality of the results as well as individual
performance and behaviors.
|
|
|
|
Incentive payments are capped. The annual and
long-term incentive programs do not have unlimited upside
potential.
|
|
|
|
Balanced mix of long-term incentive grant
types. Long-term incentive programs that
over-emphasize stock options could contribute to risk-taking
because executives would have no downside risk, only upside
opportunity. In this light, stock options make up only 25% of
the total value of the long-term incentive compensation program.
Restricted shares, which are more aligned with stockholders
because they have both upside potential and downside risk, make
up 75% of total long-term incentives.
|
|
|
|
Stock ownership requirements. As discussed in
Executive Compensation Compensation Discussion
and Analysis Ownership Guidelines above, the
Executive Officers are subject to stock ownership guidelines
based on a multiple of base salary. These stock ownership
guidelines align the interests of Management with long-term
stockholder interests.
|
To confirm the effectiveness of its approach to compensation,
from time to time the Company reviews the potential risks
associated with the structure and design of its various
compensation plans and programs for all employees. In conducting
this assessment, the Company inventories its material plans and
programs, with particular emphasis on incentive compensation
plans.
39
DIRECTOR
COMPENSATION
The table below summarizes the compensation paid in 2010 to the
Companys non-employee Directors. Directors who are also
employees or consultants of the Company do not receive
additional compensation for being members of the Board.
2010 Director
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
or Paid
|
|
Stock
|
|
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
in Cash
|
|
Awards
|
|
Option
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name
|
|
($)
|
|
($)(5)
|
|
Awards($)
|
|
($)
|
|
($)
|
|
($)
|
|
William C. Ballard, Jr.
|
|
$
|
80,500
|
|
|
$
|
95,025
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
175,525
|
|
Pier C. Borra
|
|
|
75,000
|
|
|
|
95,025
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
170,025
|
|
Thomas J. DeRosa
|
|
|
93,500
|
(1)
|
|
|
95,025
|
|
|
|
0
|
(6)
|
|
|
0
|
|
|
|
0
|
|
|
|
188,525
|
|
Jeffrey H. Donahue
|
|
|
95,500
|
(2)
|
|
|
95,025
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
190,525
|
|
Peter J. Grua
|
|
|
92,500
|
(3)
|
|
|
95,025
|
|
|
|
0
|
(7)
|
|
|
0
|
|
|
|
0
|
|
|
|
187,525
|
|
Fred S. Klipsch
|
|
|
75,000
|
(4)
|
|
|
95,025
|
|
|
|
0
|
|
|
|
0
|
|
|
|
225,000
|
(8)
|
|
|
395,025
|
|
Sharon M. Oster
|
|
|
80,500
|
|
|
|
95,025
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
175,525
|
|
Jeffrey R. Otten
|
|
|
79,500
|
|
|
|
95,025
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
174,525
|
|
R. Scott Trumbull
|
|
|
75,000
|
|
|
|
95,025
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
170,025
|
|
|
|
|
(1) |
|
Includes $15,000 additional retainer for serving as Audit
Committee Chair. |
|
(2) |
|
Includes $15,000 additional retainer for serving as Compensation
Committee Chair. |
|
(3) |
|
Includes $15,000 additional retainer for serving as
Nominating/Corporate Governance Committee Chair. |
|
(4) |
|
Mr. Klipsch received compensation under the compensation
program for non-employee Directors in 2010 because he is no
longer a consultant to the Company. |
|
(5) |
|
Amounts set forth in this column represent the grant-date fair
value calculated in accordance with FASB ASC Topic 718 for
awards granted to the non-employee Directors and are based on
the share prices on the respective dates of grant (or, if the
date of grant was not a trading day, the last trading day prior
to the date of grant), which were $40.74, $43.29, $37.00 and
$40.83 for grants on May 6, 2010, January 28, 2010,
January 29, 2009 and January 21, 2008, respectively.
As of December 31, 2010, (a) each non-employee
Director (other than Messrs. Klipsch and Otten) held an
aggregate of 4,146 deferred stock units that have not yet been
converted into shares of common stock, (b) Mr. Klipsch
held an aggregate of 3,575 deferred stock units that have not
yet been converted into shares of common stock and
(c) Mr. Otten held an aggregate of 4,408 deferred
stock units that have not yet been converted into shares of
common stock. |
|
(6) |
|
As of December 31, 2010, Mr. DeRosa held an aggregate
of 10,000 unexercised stock options. |
|
(7) |
|
As of December 31, 2010, Mr. Grua held an aggregate of
1,666 unexercised stock options. |
|
(8) |
|
All Other Compensation paid to Mr. Klipsch consists of
non-compete payments in the aggregate amount of $225,000. See
Fred S. Klipsch Consulting Agreement
below for additional information regarding the payments to
Mr. Klipsch in 2010. |
The form and amount of non-employee Director compensation is
determined by the Board of Directors upon the recommendation of
the Compensation Committee. Generally, the Boards policy
is to pay its non-employee Directors appropriate and competitive
compensation so as to ensure the Companys ability to
attract and retain highly-qualified Directors in a manner
consistent with recognized corporate governance best practices.
Directors who are also employees do not receive additional
compensation for their Board service. The Compensation Committee
generally reviews non-employee Director compensation on an
annual basis with its independent compensation consultant,
Cook & Co., which advises the Compensation Committee
on the design and amount of compensation for non-employee
Directors. In 2010, Cook & Co. conducted a competitive
analysis of non-employee Director compensation levels and
structures among companies in the same peer group that was used
for executive compensation purposes. As a result of this review,
the Compensation Committee recommended, and the Board approved,
a modest increase to the annual cash retainer for 2011, as
described below.
40
The compensation program for non-employee Directors for the 2010
calendar year consisted of:
Cash
Compensation
|
|
|
|
|
$75,000 annual cash retainer (for 2011, the cash retainer is
$80,000)
|
|
|
|
Additional Committee Chair retainers of $15,000 per year for the
Chairs of the Audit Committee, Compensation Committee and
Nominating/Corporate Governance Committee
|
|
|
|
If the Board of Directors holds more than four meetings in a
year, each Director will receive $1,500 for each meeting
attended in excess of four meetings
|
|
|
|
If any of the Audit, Compensation, Nominating/Corporate
Governance, or Executive Committees holds more than four
meetings in a year, each member will receive $1,000 for each
meeting attended in excess of four meetings
|
Equity
Compensation
In 2010, the non-employee Directors each received grants of
deferred stock units with a value of $95,000, pursuant to the
2005 Long-Term Incentive Plan. The deferred stock units are
fully vested at grant, but are converted into shares of common
stock in three equal installments on the first three
anniversaries of the date of grant. Recipients of the deferred
stock units also are entitled to DERs.
Fred
S. Klipsch Consulting Agreement
The consulting agreement between the Company and Fred S. Klipsch
expired on December 19, 2008. Mr. Klipsch agreed not
to compete with the Company and not to solicit Company
employees, with a few exceptions, for a period of two years
following the expiration of the agreement. In exchange for
complying with these covenants, Mr. Klipsch received an
aggregate of $600,000, payable in eight quarterly payments of
$75,000. The first payment was made in December 2008 and the
final payment in September 2010. Mr. Klipsch received an
aggregate of $225,000 in 2010.
The Company has agreed to indemnify Mr. Klipsch for excise
taxes that may be assessed against him in connection with
certain payments and benefits provided to him.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Policies
and Procedures for Review, Approval or Ratification of Related
Party Transactions
The Company has a written policy requiring all material
transactions with related parties to be approved or ratified by
the Nominating/Corporate Governance Committee. The policy covers
any transaction, arrangement or relationship or series of
similar transactions, arrangements or relationships (including
any indebtedness or guarantee of indebtedness) in which
(1) the aggregate amount involved will or may be expected
to exceed $100,000 in any calendar year, (2) the Company is
a participant, and (3) any related party has or will have a
direct or indirect interest (other than solely as a result of
being a Director or a less than 10% beneficial owner of another
entity).
In determining whether to approve or ratify a transaction, the
Committee will take into account, among other factors it deems
appropriate, whether the transaction is on terms no less
favorable than terms generally available to an unaffiliated
third-party under the same or similar circumstances and the
extent of the related partys interest in the transaction.
The Board has determined that transactions that involve any
employment by the Company of an Executive Officer of the Company
shall be deemed to be pre-approved if the related compensation
is required to be reported in the Companys proxy statement
under Item 402 of
Regulation S-K
because the person is a Named Executive Officer, or if the
Executive Officer is not a Named Executive Officer and the
compensation would have been reported in the Companys
proxy statement if the Executive Officer had been a Named
Executive Officer (and the Companys Compensation Committee
approved or recommended that the Board approve such
compensation). The Board also has pre-approved certain
transactions that involve any compensation paid to a Director if
the
41
compensation is required to be reported in the Companys
proxy statement under Item 402 of
Regulation S-K,
certain charitable contributions by the Company if the related
party is an employee or a director of the charitable
institution, and any transaction where the related partys
interest arises solely from the ownership of the Companys
common stock and all holders of the Companys common stock
receive the same benefit on a pro rata basis.
Acquisition
of a Medical Office Building
In December 2010, the Company acquired a medical office building
located in Tennessee from Sumner Medical Plaza, L.L.C.
(Sumner). The purchase price for the building was
$19,500,000. A portion of the purchase price was used to pay off
approximately $12,287,000 of indebtedness of Sumner. Fred S.
Klipsch, a Class III Director, directly and indirectly,
owns a 16.2% ownership interest in Sumner and he is the chairman
of the managing member of Sumner. Mr. Klipsch has received
an aggregate of approximately $1,251,000 in cash in connection
with the transaction and expects to receive an additional
$100,000.
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth certain information, as of
December 31, 2010, concerning shares of common stock
authorized for issuance under all of the Companys equity
compensation plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
(a)
|
|
|
(b)
|
|
|
Future Issuance Under
|
|
|
|
Number of Securities to
|
|
|
Weighted Average
|
|
|
Equity Compensation Plans
|
|
|
|
be Issued Upon Exercise
|
|
|
Exercise Price of
|
|
|
(Excluding Securities
|
|
|
|
of Options
|
|
|
Outstanding Options
|
|
|
Reflected in Column (a))
|
|
|
Equity compensation plans approved by stockholders
|
|
|
1,207,372
|
(1)
|
|
$
|
39.45
|
|
|
|
4,308,233
|
(2)
|
Equity compensation plans not approved by stockholders
|
|
|
None
|
|
|
|
N/A
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
1,207,372
|
(1)
|
|
$
|
39.45
|
|
|
|
4,308,233
|
(2)
|
|
|
|
(1) |
|
This number reflects the options granted under the 1995 Stock
Incentive Plan, as amended, the Stock Plan for Non-Employee
Directors, as amended, the 2005 Long-Term Incentive Plan and the
Windrose Medical Properties Trust 2002 Stock Incentive
Plan. There are 9,084 options outstanding under the Windrose
Medical Properties Trust 2002 Stock Incentive Plan at a
weighted average exercise price of $30.89. |
|
(2) |
|
This number reflects the 6,200,000 shares of common stock
reserved for future issuance under the 2005 Long-Term Incentive
Plan, as reduced by awards issued under the 2005 Long-Term
Incentive Plan, and as increased by shares withheld to satisfy
tax liabilities arising from vesting of awards under the 1995
Stock Incentive Plan that are available for future issuance
under the 2005 Long-Term Incentive Plan. |
PROPOSAL 4
AMENDMENT TO THE SECOND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors proposes that the Companys Second
Restated Certificate of Incorporation be amended to increase the
number of authorized shares of common stock, $1.00 par
value per share, from 225,000,000 shares to
400,000,000 shares. As of March 8, 2011, the Company
had 176,497,932 shares of common stock outstanding, leaving
48,502,068 authorized shares available for further issuance, of
which (1) 8,038,546 shares have been reserved for
future issuance under the Companys Third Amended and
Restated Dividend Reinvestment and Stock Purchase Plan,
(2) 1,486,541 shares have been reserved for future
issuance relating to outstanding options under the 1995 Stock
Incentive Plan, as amended, the Stock Plan for Non-Employee
Directors, as amended, the 2005 Long-Term Incentive Plan and the
Windrose Medical Properties Trust 2002 Stock Incentive
Plan, (3) 3,823,187 shares have been reserved for
future issuance under the Companys 2005 Long-Term
Incentive Plan, (4) 349,854 shares have been reserved
for issuance upon conversion of the shares of Series H
Preferred Stock, (5) 12,161,250 shares
42
have been reserved for issuance upon conversion of the shares of
Series I Preferred Stock, and
(6) 15,684,397 shares have been reserved for issuance
upon conversion of the Companys outstanding convertible
senior notes.
Over the past several years, the Company has issued common stock
primarily in underwritten public offerings and through its
equity distribution program and the Third Amended and Restated
Dividend Reinvestment and Stock Purchase Plan. The proceeds of
these issuances have been used to invest in health care and
senior housing properties, including the investments highlighted
in Executive Compensation Compensation
Discussion and Analysis Executive Summary. The
Company has also issued common stock (in the form of restricted
stock, stock options, deferred stock units and special
performance awards) under the 2005 Long-Term Incentive Plan to
reward officers, directors and employees for the Companys
strong performance and to attract and retain top management
talent.
The Board of Directors believes that the availability of
additional shares is essential for the Company to successfully
pursue its investment strategy. It will also enhance the
Companys flexibility in connection with general corporate
purposes, such as equity offerings, stock dividends and
acquisitions or mergers. At the same time, the Board recognizes
the potential dilutive impact issuing additional shares will
have on the outstanding shares. The Board believes that a 78%
increase in the authorized shares of common stock strikes an
appropriate balance between these important interests. The Board
of Directors will determine whether, when, and on what terms the
issuance of shares may be warranted in connection with any of
the foregoing purposes.
Capital-raising is an essential part of the Companys
investment strategy. If the Company is unable to issue
additional shares of common stock, or securities convertible
into common stock, (1) it may have difficulty raising funds
to complete future investments or meet obligations and
commitments as they mature (depending on its access to other
sources of capital),
and/or
(2) it may be forced to limit future investments or alter
its capitalization structure and increase leverage in order to
finance future investments and obligations. These adjustments to
the Companys investment strategy may limit the
Companys ability to generate earnings growth and increase
stockholder value.
The availability for issuance of additional shares of common
stock could enable the Board of Directors to render more
difficult or discourage an attempt to obtain control of the
Company. For example, by increasing the number of outstanding
shares, the interest of the party attempting to gain control of
the Company could be diluted. Also, the additional shares could
be used to render more difficult a merger or similar
transaction. However, in order to protect the Companys
status as a real estate investment trust, the Companys
By-Laws (with respect to the common stock and preferred stock)
and the certificates of designation (for the preferred stock)
provide that no person may acquire securities that would result
in the direct or indirect beneficial ownership of more than 9.8%
of the Companys common stock or more than 9.8% in value of
the Companys outstanding capital stock by such person
(unless an exemption is granted to such person by the Board of
Directors). Consequently, the approval of the proposed amendment
should have little incremental effect in discouraging
unsolicited takeover attempts.
If the proposed amendment is approved, all or any of the
authorized shares of common stock may be issued without further
action by the stockholders and without first offering such
shares to the stockholders for subscription. The issuance of
shares otherwise than on a pro-rata basis to all current
stockholders would reduce current stockholders
proportionate interests. However, in any such event,
stockholders wishing to maintain their interests may be able to
do so through normal market purchases.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT. The affirmative vote of a majority of
the outstanding shares of common stock of the Company is
required for approval of the proposed amendment. If the proposed
amendment is adopted by the stockholders, it will become
effective upon the filing and recording of a Certificate of
Amendment with the Secretary of State of the State of Delaware,
as required by the Delaware General Corporation Law.
PROPOSAL 5
RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firm of Ernst & Young LLP served as the
Companys independent registered public accounting firm for
the year ended December 31, 2010 and has been selected by
the Company to serve in such capacity for the year ending
43
December 31, 2011. Ernst & Young LLP has served
as the Companys independent registered public accounting
firm since the Companys inception in 1970. Although the
submission of this matter for approval by stockholders is not
legally required, the Board believes that such submission
follows sound business practice and is in the best interests of
the stockholders. If this appointment is not ratified by the
holders of a majority of the shares of voting securities present
in person or by proxy at the Annual Meeting, the Directors will
consider the selection of another accounting firm. If such a
selection were made, it may not become effective until 2012
because of the difficulty and expense of making a substitution.
Representatives of the firm of Ernst & Young LLP are
expected to be present at the Annual Meeting and will have an
opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
Fees for professional services provided by Ernst &
Young LLP in each of the last two fiscal years, in each of the
following categories, are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Audit Fees
|
|
$
|
1,755,950
|
|
|
$
|
1,357,535
|
|
Audit-Related Fees
|
|
|
2,130
|
|
|
|
2,130
|
|
Tax Fees:
|
|
|
|
|
|
|
|
|
Tax Compliance
|
|
|
387,773
|
|
|
|
400,110
|
|
Tax Planning and Tax Advice
|
|
|
413,971
|
|
|
|
48,245
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
2,559,824
|
|
|
$
|
1,808,020
|
|
Audit fees include fees associated with the annual audit, the
review of the Companys quarterly reports on
Form 10-Q
and services that generally only the independent registered
public accounting firm can provide such as comfort letters,
consents and assistance with review of documents to be filed
with or furnished to the Securities and Exchange Commission.
Audit-related fees include fees associated with assurance and
related services that are traditionally performed by an
independent accountant, and include access to research databases
and consultations concerning financial accounting and reporting
standards. Tax fees include fees for tax compliance and tax
planning and tax advice services. Tax compliance involves the
preparation of original and amended tax returns, claims for
refund and tax payment-planning services. Tax planning and tax
advice encompass a diverse range of services, including
assistance with tax audits and appeals, tax advice related to
acquisitions, and requests for rulings or technical advice from
taxing authorities. None of the foregoing fees were paid for
services, the sole business purpose of which was tax avoidance,
or the tax treatment of which would not be supported by the Code
and related regulations.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE RATIFICATION OF
ERNST & YOUNG LLP. The affirmative vote
of a majority of the shares of voting securities present in
person or by proxy at the Annual Meeting will be required for
such ratification.
PRE-APPROVAL
POLICIES AND PROCEDURES
The Audit Committee has developed policies and procedures
concerning its pre-approval of the performance of audit and
non-audit services for the Company by Ernst & Young
LLP. At its annual January meeting, the Audit Committee gives
its prior approval for particular audit and non-audit services
within the following categories of services that it desires the
independent registered public accounting firm to undertake:
audit services, audit-related services, tax compliance services
and tax planning and tax advice services. Prior to giving its
approval, the Committee reviews the written descriptions of
these services provided by Ernst & Young LLP and the
estimated fees for these services. All other non-audit services
must be pre-approved on an individual engagement basis. If there
is any question as to whether a proposed service has been
pre-approved, Management and the independent registered public
accounting firm together must contact the Audit Committee to
obtain clarification or, if necessary, pre-approval.
44
All of the audit services, audit-related services, tax
compliance services and tax planning and tax advice services
provided to the Company by Ernst & Young LLP during
the year ended December 31, 2010 were pre-approved by the
Audit Committee.
Where specific Audit Committee approval of non-audit services is
required, the Chair of the Audit Committee may pre-approve the
engagement subject to a presentation to the full Audit Committee
at its next regularly scheduled meeting.
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee oversees the Companys financial
reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial
statements and the reporting process, including the system of
internal controls. In fulfilling its oversight responsibilities
this past year, the Committee reviewed the audited financial
statements with Management, including a discussion of the
quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent registered public
accounting firm, which is responsible for expressing an opinion
on the conformity of the audited financial statements with
generally accepted accounting principles, its judgments as to
the quality, not just the acceptability, of the Companys
accounting principles and such other matters as are required to
be discussed with the Committee under generally accepted
auditing standards (including Statement on Auditing Standards
No. 61, as amended by Statement on Auditing Standards Nos.
89 and 90). In addition, the Committee has discussed with the
independent registered public accounting firm such firms
independence from Management and the Company, including the
matters in the written disclosures required by the Independence
Standards Board (including Independence Standards Board Standard
No. 1), the predecessor requirements to Public Company
Accounting Oversight Board Rule 3600T, and considered the
compatibility of non-audit services with such firms
independence.
The Committee discussed with the Companys independent
registered public accounting firm the overall scope and plans
for its audit. The Committee met with such firm, with and
without Management present, to discuss the results of its
examinations, its evaluations of the Companys internal
controls, and the overall quality of the Companys
financial reporting. The Committee held six meetings during the
year ended December 31, 2010.
In reliance on the reviews and discussions referred to above,
the Committee recommended to the Board of Directors (and the
Board has approved) that the audited financial statements be
included in the Annual Report on
Form 10-K
for the year ended December 31, 2010 for filing with the
Securities and Exchange Commission. The Committee and the Board
have also recommended, subject to stockholder ratification, the
selection of Ernst & Young LLP as the Companys
independent registered public accounting firm.
Submitted by the Audit Committee
Thomas J. DeRosa, Audit Committee Chair
Pier C. Borra, Audit Committee Member
Jeffrey R. Otten, Audit Committee Member
R. Scott Trumbull, Audit Committee Member
VOTING
PROCEDURES
All votes will be tabulated by the inspector of election
appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker
non-votes. Abstentions will be counted as present or represented
for purposes of determining the presence or absence of a quorum
for the Annual Meeting. In the election of three Directors
(Proposal 1), you may vote for,
against or abstain with respect to each
of the nominees. If you elect to abstain in the election of
Directors, the abstention will not impact the election of
Directors. In tabulating the voting results for the election of
Directors, only for and against votes
are counted. With respect to the advisory vote on the frequency
of holding future advisory votes on executive compensation
(Proposal 3), you
45
may vote 1 year, 2 years,
3 years or abstain. If you abstain
from voting on Proposal 3, the abstention will not have an
effect on the outcome of the vote. For the other items of
business, you may vote for, against or
abstain. If you elect to abstain, the abstention
will have the same effect as an against vote.
A broker non-vote occurs when a broker or other
nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the
broker does not have discretionary voting power for the other
proposal and has not received instructions from the beneficial
owner. Broker non-votes will be counted as present or
represented for purposes of determining the presence or absence
of a quorum for the Annual Meeting, but will not be counted for
purposes of determining the number of shares entitled to vote
with respect to any proposal for which the broker lacks
discretionary authority. Brokers do not have discretionary
authority with respect to the election of three Directors
(Proposal 1), the advisory vote on executive compensation
(Proposal 2) or the advisory vote on the frequency of
holding future advisory votes on executive compensation
(Proposal 3).
OTHER
MATTERS
Management is not aware of any matters to be presented for
action at the Annual Meeting other than the matters set forth
above. If any other matters do properly come before the meeting
or any adjournment thereof, it is intended that the persons
named in the proxy will vote in accordance with their judgment
on such matters.
STOCKHOLDERS
SHARING THE SAME ADDRESS
In accordance with a notice sent to stockholders who share a
single address, the Company is sending only one Annual Report
and one Notice of Meeting and Proxy Statement to that address
unless it receives contrary instructions from any stockholder at
that address. This procedure, known as householding,
is designed to reduce printing costs, mailing costs and fees.
Stockholders residing at such an address who wish to receive
separate copies of the Annual Report or Proxy Statement in the
future and stockholders who are receiving multiple copies of
these materials now and wish to receive just one set of
materials in the future, should write to the Senior Vice
President-Administration and Corporate Secretary, Health Care
REIT, Inc., 4500 Dorr Street, Toledo, Ohio 43615 or call
(419) 247-2800
to request a change. The Annual Report and Proxy Statement are
also available on the Companys website at
www.hcreit.com/proxy.
STOCKHOLDER
PROPOSALS FOR PRESENTATION AT THE 2012 ANNUAL
MEETING
Any stockholder proposals intended for inclusion in the
Companys proxy materials for the 2012 Annual Meeting must
be submitted to Erin C. Ibele, Senior Vice
President-Administration and Corporate Secretary of the Company,
in writing no later than December 2, 2011. In addition,
under the Companys By-Laws, in order for a stockholder to
present a proposal for consideration at an annual meeting other
than by means of inclusion in the Companys proxy materials
for such meeting, the stockholder must provide a written notice
to the Senior Vice President-Administration and Corporate
Secretary not more than 120 days prior to the meeting and
not less than 45 days before the date on which the Company
first mailed or otherwise gave notice for the prior years
annual meeting. For purposes of the 2012 Annual Meeting, such a
written notice must be received by the Senior Vice
President-Administration and Corporate Secretary by
February 15, 2012. If a stockholder does not meet this
deadline, (1) the officer presiding at the meeting may
declare that the proposal will be disregarded because it was not
properly brought before the meeting and (2) the persons
named in the proxies solicited by the Board of Directors for the
meeting may use their discretionary voting authority to vote
against the proposal.
BY ORDER OF THE BOARD OF DIRECTORS
Erin C. Ibele
Senior Vice President-Administration and
Corporate Secretary
46
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone
voting. Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to
annual meeting day.
INTERNET
http://www.proxyvoting.com/hcn
Use the Internet to vote your
proxy. Have your proxy card in
hand when you access the
website.
Health Care REIT, Inc.
OR
TELEPHONE
1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
If you vote your
proxy by Internet or by
telephone, you do NOT need to
mail back your proxy card.
To vote by mail, mark, sign and
date your proxy card and return
it in the enclosed postage-paid
envelope.
Your Internet or telephone vote
authorizes the named proxies to
vote your shares in the same
manner as if you marked, signed
and returned your proxy card.
WO#
95751 -1
FOLD AND DETACH HERE
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
PROPOSALS 1, 2, 4 AND 5 AND 1 YEAR FOR PROPOSAL 3.
Please mark your votes as indicated in this example
FOR AGAINST ABSTAIN
1. Election of three Directors for a term of three years: 2. Approval of the compensation of
the Named Executive
Officers as disclosed in the Proxy Statement pursuant
to the compensation disclosure rules of the SEC.
Nominees: FOR AGAINST ABSTAIN 1YEAR
2 YEARS 3 YEARS ABSTAIN
1.1 William C. Ballard, Jr.
1.2 Peter J. Grua
1.3 R. Scott Trumbull
3. Frequency of advisory vote on the compensation of the Named Executive Officers.
4. Approval of an amendment to the Second Restated
Certificate of Incorporation to increase the number of
authorized shares of common stock from 225,000,000
to 400,000,000 for general corporate purposes.
5. Ratification of the appointment of Ernst & Young LLP as
Independent Registered Public Accounting Firm for the
fiscal year 2011.
FOR AGAINST ABSTAIN
FOR AGAINST ABSTAIN
6. With discretionary
authority on any other
business that may properly
come before the meeting or any
adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING tljc cmpi
Mark Here for Address Change or Comments SEE REVERSE
Please sign exactly as your name appears herein. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full title
as such. Corporate or partnership proxies should be signed by an authorized person with the
persons title indicated.
Signature
Signature |
You can now access your Health Care REIT, Inc. account online.
Access your Health Care REIT, Inc. account online via Investor ServiceDirect
(ISD).
BNY Mellon Shareowner Services, the transfer agent for Health Care REIT,
Inc., now makes it easy and convenient to get current information on your
stockholder account.
View account status View payment history for dividends
View certificate history Make address changes
View book-entry information Obtain a duplicate 1099 tax form
Visit us on the web at www.bnymellon.com/shareowner/equityaccess
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose MLink for fast, easy and
secure 24/7 online access to your future proxy materials,
investment plan statements, tax documents and more. Simply
log on to Investor ServiceDirect at
www.bnymellon.com/shareowner/equityaccesswhere
step-by-step instructions will prompt you through
enrollment.
The proxy materials for Health Care REIT, Inc. also are available at
www.hcreit.com/proxy.
P R O X Y
FOLD AND DETACH HERE
PROXY FOR COMMON STOCK
HEALTH CARE REIT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints George L. Chapman and Peter J. Grua, and each of them, as
proxies for the undersigned, with full power of substitution, to vote all shares of common stock,
$1.00 par value per share, of Health Care REIT, Inc. (the Company), that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be held on Thursday, May
5, 2011, or any adjournments thereof.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE TAKING OF A VOTE ON THE MATTERS HEREIN.
Returned proxy cards will be voted: (1) as specified on the matters listed; (2) in accordance
with the Directors recommendations where a choice is not specified; and (3) in accordance with
the judgment of the proxies on any other matters that may properly come before the meeting.
Address Change/Comments
(Mark the corresponding box on the reverse side)
(Over)
BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
(Continued and to be marked, dated and signed, on the other side)
WO#
95751-1 |