Health Care REIT, Inc. DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
No. )
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o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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þ Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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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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HEALTH
CARE REIT, INC.
NOTICE OF
ANNUAL MEETING OF
STOCKHOLDERS
and
PROXY STATEMENT
Meeting Date
May 1, 2008
YOUR VOTE IS
IMPORTANT!
You are urged to sign, date,
and return your proxy in the enclosed envelope.
TABLE OF CONTENTS
HEALTH CARE REIT,
INC.
One
SeaGate
Suite 1500
P.O. Box 1475
Toledo, Ohio
43603-1475
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
AND
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE ANNUAL MEETING
To Be
Held on May 1, 2008
To
The Stockholders of Health Care REIT, Inc.:
The Annual Meeting of Stockholders of Health Care REIT, Inc.
will be held on May 1, 2008 at 10:00 a.m. in the
Auditorium of One SeaGate, 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 ratification of the appointment of Ernst & Young
LLP as independent registered public accounting firm for the
fiscal year 2008; and
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3.
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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 for Proposals 1 and 2.
Stockholders of record at the close of business on March 7,
2008 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 20, 2008
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., One SeaGate,
Suite 1500, P.O. Box 1475, Toledo, Ohio
43603-1475.
HEALTH CARE REIT,
INC.
One
SeaGate
Suite 1500
P.O. Box 1475
Toledo, Ohio
43603-1475
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
May 1, 2008
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 1, 2008 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, 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 filing a written revocation with the
Senior Vice President-Administration and Corporate Secretary of
the Company, by filing a duly executed proxy bearing a later
date, or by attending the Annual Meeting and voting in person.
The revocation of a proxy will not be effective until 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 Mellon Investor Services LLC to solicit
proxies for a fee not to exceed $5,500, 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 executive offices of the Company are located at One SeaGate,
Suite 1500, Toledo, Ohio 43604, and its mailing address is
One SeaGate, Suite 1500, P.O. Box 1475, Toledo,
Ohio
43603-1475.
The telephone number is
(419) 247-2800.
The approximate date on which this material was first sent to
stockholders was March 26, 2008. A COPY OF THE
COMPANYS ANNUAL REPORT ON
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2007, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE ON OUR 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.
1
VOTING
SECURITIES OUTSTANDING
As of March 7, 2008, the Company had outstanding
86,020,404 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 7, 2008 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. In January
2007, the Board increased the number of Directors from nine to
ten. In January 2008, the number of Directors was increased from
ten to 11 upon the appointment of Jeffrey R. Otten as a
Class II Director. 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.
Proxies received will be voted to elect the three Class I
Directors named below to serve for a three-year term and until
their respective successors are elected and qualified or until
their earlier resignation or removal. 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.
CLASS I
Directors to be Elected
William C. Ballard, Jr.,
age 67. Mr. Ballard is Of Counsel to
Greenebaum Doll & McDonald PLLC (law firm), a position
he has held since 1992. 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.
Peter J. Grua, age 54. Mr. Grua is a
Managing 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 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.
R. Scott Trumbull,
age 59. Mr. Trumbull is Chairman and
Chief Executive Officer of Franklin Electric Co., Inc.
(manufacturer of electric motors), 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 has served as a Director of the Company
since 1999 and is a member of the Boards Audit, Investment
and Planning Committees.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES. The three nominees who receive the highest number
of votes at the Annual Meeting shall be elected as Directors.
CLASS II
Directors Whose Terms Continue (1)
Pier C. Borra, age 68. Mr. Borra is
Chairman of CORA Health Services, Inc. (outpatient
rehabilitation services), a position he has held since January
1998. 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.
2
George L. Chapman,
age 60. Mr. Chapman is Chairman and
Chief Executive Officer of the Company, positions he has held
since October 1996, and 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.
Sharon M. Oster, age 59. Ms. Oster
is Professor of Management and Entrepreneurship, 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.
Jeffrey R. Otten, age 57. 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 Investment and Planning Committees.
CLASS III
Directors Whose Terms Continue (2)
Raymond W. Braun, age 50. Mr. Braun
is President of the Company, a position he has held since May
2002, and served as Chief Financial Officer of the Company from
July 2000 to March 2006. Since January 1993, Mr. Braun has
served in various capacities, including Chief Operating Officer,
Executive Vice President, Assistant Vice President and Assistant
General Counsel of the Company. Mr. Braun has served as a
Director of the Company since 2007 and is a member of the
Boards Investment and Planning Committees.
Thomas J. DeRosa, age 50. Mr. DeRosa
is the 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 and Alex. Brown & Sons
(Deutsche Bank AG), 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 Dover Corporation (global provider of equipment,
specialty systems and services for various industrial and
commercial markets). 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.
Jeffrey H. Donahue,
age 61. Mr. Donahue is President and
Chief Executive Officer of Enterprise Community Investment, Inc.
(provider of affordable housing), a position he has held since
January 2003. 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 has served as a Director of the Company
since 1997 and is a member of the Boards Compensation,
Investment and Planning Committees.
Fred S. Klipsch, age 66. Mr. Klipsch
is Vice Chairman of the Company, a position he has held since
December 2006, and Chairman of the Board and Chief Executive
Officer of Klipsch Group, Inc., a position he has held since
1989. Since 1990, Mr. Klipsch also has served as Chairman
of the Board of Klipsch Audio Technologies and 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 has
served as a Director of the Company since December 2006 and is a
member of the Boards Investment and Planning Committees.
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The terms of Messrs. Borra, Chapman and Otten and
Ms. Oster expire in 2009. |
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The terms of Messrs. Braun, DeRosa, Donahue and Klipsch
expire in 2010. |
3
BOARD AND
COMMITTEES
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 our website at www.hcreit.com and from the
Company upon written request sent to the Senior Vice
President-Administration and Corporate Secretary, Health Care
REIT, Inc., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio
43603-1475.
Pursuant to the Corporate Governance Guidelines, the Board
undertook a review of Director independence in January 2008.
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. Braun, 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. Braun, 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.
In evaluating the independence of Mr. DeRosa, the Board
considered Mr. DeRosas former employment relationship
with Deutsche Bank and its affiliates from 1992 to 2002 and that
Mr. DeRosa received a deferred payment in 2005 from
Deutsche Bank relating to services provided in the past.
Although Deutsche Bank provided investment banking services to
the Company during this period, and continues to provide such
services, the Board determined that this prior relationship is
not material to Mr. DeRosa, the Company, or Deutsche Bank
because Mr. DeRosa has not been affiliated with Deutsche
Bank since 2002. The Board has determined that this former
relationship will not affect the ability of Mr. DeRosa to
exercise independent judgment.
The Board determined that all of the members of the Audit
Committee (Messrs. Borra, DeRosa 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, 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 and Grua) are independent
under the rules of the New York Stock Exchange.
The Board also determined that all three 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 Board met four times during the year ended December 31,
2007. It is our policy to schedule a meeting of the Board on the
date of the annual meeting of stockholders and all of our
Directors are encouraged to attend that meeting. All of our
Directors attended last years annual meeting of
stockholders.
The Board has standing Audit, Executive, Compensation,
Investment, Nominating/Corporate Governance and Planning
Committees. In 2007, all incumbent Directors attended at least
75% of the aggregate of the meetings of the Board and the
committees on which they served.
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 executive sessions is the
Chair of the Nominating/Corporate Governance Committee,
currently Mr. Grua.
4
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. From
January 2007 through April 2007, Ms. Oster was the Audit
Committee Chair and Messrs. DeRosa and Trumbull were
Committee members. In May 2007, Mr. Borra replaced
Ms. Oster on the Committee and Mr. DeRosa became the
Committee Chair. Accordingly, the current members of the
Committee are Messrs. Borra, DeRosa and Trumbull, with
Mr. DeRosa serving as Chair. The Audit Committee met eight
times during the year ended December 31, 2007.
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, has determined that Messrs. Borra, DeRosa
and Trumbull are audit committee financial experts.
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 and from the Company
upon written request sent to the Senior Vice
President-Administration and Corporate Secretary, Health Care
REIT, Inc., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio
43603-1475.
Compensation
Committee
The Compensation Committee is responsible for determining the
nature and amount of compensation for Executive Officers. From
January 2007 through April 2007, Mr. Borra was the
Compensation Committee Chair and Messrs. Ballard and
Donahue were Committee members. In May 2007, Ms. Oster
replaced Mr. Borra on the Committee and Mr. Donahue
became the Committee Chair. Accordingly, the current members of
the Compensation Committee are Ms. Oster and
Messrs. Ballard and Donahue, with Mr. Donahue serving
as Chair. The Compensation Committee met six times during the
year ended December 31, 2007. 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 and from the Company upon written
request sent to the Senior Vice President-Administration and
Corporate Secretary, Health Care REIT, Inc., One SeaGate,
Suite 1500, P.O. Box 1475, Toledo, Ohio
43603-1475.
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
met once during the year ended December 31, 2007.
Investment
Committee
The function of the Investment Committee is to review and
approve the Companys investments in health care and senior
housing properties. During the year ended December 31,
2007, 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.
5
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 our
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, as well as evaluating the performance of the Board.
From January 2007 through April 2007, Mr. Ballard was the
Nominating/Corporate Governance Committee Chair and
Messrs. DeRosa and Grua were Committee members. In May
2007, Mr. Borra replaced Mr. Ballard on the Committee
and Mr. Grua became the Committee Chair. Accordingly, the
current members of the Nominating/Corporate Governance Committee
are Messrs. Borra, DeRosa and Grua, with Mr. Grua
serving as Chair. The Nominating/Corporate Governance Committee
met seven times during the year ended December 31, 2007.
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 and
from the Company upon written request sent to the Senior Vice
President-Administration and Corporate Secretary, Health Care
REIT, Inc., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio
43603-1475.
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, 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 our 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 uses multiple sources for identifying and
evaluating nominees for Directors, 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 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.
6
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., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio
43603-1475.
To be considered by the Committee for inclusion in the
Companys proxy materials for the 2008 Annual Meeting,
stockholder nominations must be submitted by November 20, 2008
and must 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 our 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 our 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, the By-Laws provide that a stockholder entitled to
vote for the election of Directors may make nominations of
persons for election to the Board at a meeting of stockholders
by complying with required notice procedures. Those procedures
include, but are not limited to, making the nomination by
written notice and delivering it to our 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 of stockholders.
We may require that the proposed nominee furnish other
information as we 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, 2007. 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, or the non-employee
Directors as a group, may do so by writing to the Board of
Directors, Health Care REIT, Inc., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio
43603-1475.
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 any such
correspondence.
7
EXECUTIVE
OFFICERS
The following information is furnished as to the Executive
Officers of the Company:
George L. Chapman,
age 60. Mr. Chapman has served as
Chairman and Chief Executive Officer of the Company since
October 1996 and served as President of the Company from
September 1995 to May 2002. As described above, since 1992,
Mr. Chapman has served in various executive capacities with
the Company.
Fred S. Klipsch, age 66. Mr. Klipsch
has served as Vice Chairman of the Company since December 2006.
As described above, Mr. Klipsch also serves in various
capacities for Klipsch Group, Inc., Klipsch Audio Technologies
and Klipsch Lanham Investments and served as Chairman of the
Board and Chief Executive Officer of Windrose Medical Properties
Trust until December 2006.
Raymond W. Braun, age 50. Mr. Braun
has served as President of the Company since May 2002 and served
as Chief Financial Officer of the Company from July 2000 to
March 2006. As described above, since January 1993,
Mr. Braun has served in various capacities, including Chief
Operating Officer, Executive Vice President, Assistant Vice
President and Assistant General Counsel of the Company.
Frederick L. Farrar,
age 51. Mr. Farrar has served as
Executive Vice President of the Company since December 2006.
Since 2000, Mr. Farrar has served as President of Klipsch
Lanham Investments. Mr. Farrar served as President, Chief
Operating Officer and Treasurer of Windrose Medical Properties
Trust from March 2002 until December 2006, when Windrose Medical
Properties Trust merged with the Company. Mr. Farrar served
as Chief Financial Officer of Hospital Affiliates Development
Corporation, formerly a subsidiary of Windrose Medical
Properties Trust and now a subsidiary of the Company (now known
as HCN Development Services Group, Inc.), from 1990 until March
2002.
Charles J. Herman, Jr.,
age 42. 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 48. Mr. Miller has served as
Executive Vice President and General Counsel of the Company
since March 2006 and served as Vice President and General
Counsel of the Company from July 2004 to March 2006. 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.
Scott A. Estes, age 37. Mr. Estes
has served as Senior Vice President and Chief Financial Officer
of the Company since March 2006 and 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.
Erin C. Ibele, age 46. 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 57. 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.
Michael A. Crabtree,
age 51. Mr. Crabtree has served as Vice
President and Treasurer of the Company since March 2006 and
served as Treasurer from July 2000 to March 2006.
Mr. Crabtree 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.
8
SECURITY
OWNERSHIP OF DIRECTORS AND MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The table below sets forth, as of March 7, 2008, unless
otherwise specified, certain information with respect to the
beneficial ownership of the Companys shares of common
stock by each person who is a Director of the Company, each
Named Executive Officer (as defined below in the section
Executive Compensation), 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)
|
|
|
William C. Ballard, Jr.
|
|
|
25,788
|
|
|
|
0
|
|
|
|
25,788
|
(5)
|
Pier C. Borra
|
|
|
65,799
|
|
|
|
0
|
|
|
|
65,799
|
|
Raymond W. Braun
|
|
|
169,220
|
|
|
|
46,363
|
|
|
|
215,583
|
(6)
|
George L. Chapman
|
|
|
298,823
|
|
|
|
132,281
|
|
|
|
431,104
|
(7)
|
Thomas J. DeRosa
|
|
|
6,397
|
|
|
|
10,000
|
|
|
|
16,397
|
|
Jeffrey H. Donahue
|
|
|
18,547
|
|
|
|
0
|
|
|
|
18,547
|
|
Scott A. Estes
|
|
|
30,584
|
|
|
|
11,336
|
|
|
|
41,920
|
|
Peter J. Grua
|
|
|
18,797
|
|
|
|
1,666
|
|
|
|
20,463
|
|
Charles J. Herman, Jr.
|
|
|
51,020
|
|
|
|
19,870
|
|
|
|
70,890
|
|
Fred S. Klipsch
|
|
|
103,571
|
|
|
|
0
|
|
|
|
103,571
|
|
Sharon M. Oster
|
|
|
13,797
|
|
|
|
0
|
|
|
|
13,797
|
|
Jeffrey R. Otten
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
(8)
|
R. Scott Trumbull
|
|
|
40,736
|
|
|
|
0
|
|
|
|
40,736
|
|
All Directors and Executive Officers as a group (18 persons)
|
|
|
1,049,213
|
|
|
|
302,210
|
|
|
|
1,351,423
|
(9)
|
|
|
|
(1) |
|
Includes all restricted shares granted under the Companys
1995 Stock Incentive Plan, Stock Plan for Non-Employee Directors
or 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 7, 2008. |
|
(2) |
|
Does not include 639 deferred stock units granted to each
non-employee Director in 2006 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 anniversary of the
date of grant. |
|
(3) |
|
Does not include 1,020 deferred stock units granted to each
non-employee Director in 2007 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 1,715 deferred stock units granted to each
non-employee Director (other than Mr. Otten) in 2008. 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) |
|
Mr. Ballards total shares beneficially owned include
5,000 shares owned by his spouse. |
|
(6) |
|
Mr. Brauns total shares beneficially owned include
37,698 shares owned by his spouses revocable trust. |
|
(7) |
|
Mr. Chapmans total shares beneficially owned include
4,080 shares held in a sons name. |
|
(8) |
|
Does not include 2,499 deferred stock units granted to
Mr. Otten on March 6, 2008. 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. |
|
(9) |
|
Total beneficial ownership represents 1.57% of the outstanding
shares of common stock of the Company. |
9
Based upon filings made with the Securities and Exchange
Commission in 2008, the only stockholders known to the Company
to be the beneficial owners of more than 5% of the
Companys common stock at March 7, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
Common Stock
|
|
|
Outstanding
|
|
Beneficial Owner
|
|
Beneficially Owned
|
|
|
Common Stock(3)
|
|
|
The Vanguard Group, Inc.
|
|
|
5,039,305
|
(1)
|
|
|
5.86
|
%
|
100 Vanguard Blvd.
|
|
|
|
|
|
|
|
|
Malvern, PA 19355
|
|
|
|
|
|
|
|
|
Cohen & Steers Capital Management, Inc.
|
|
|
4,383,785
|
(2)
|
|
|
5.10
|
%
|
280 Park Avenue, 10th Floor
|
|
|
|
|
|
|
|
|
New York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 36,660 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 31,843 shares and sole dispositive power over
5,039,305 shares. |
|
(2) |
|
Includes 4,354,356 shares over which Cohen &
Steers Capital Management, Inc., a wholly-owned subsidiary of
Cohen & Steers, Inc., has sole voting power and
4,383,785 shares over which it has sole dispositive power.
Cohen & Steers Capital Management, Inc. and
Cohen & Steers, Inc. made a joint filing with the
Securities and Exchange Commission. |
|
(3) |
|
The percentages set forth in the filings of these beneficial
owners have been revised to reflect their percentage ownership
as of March 7, 2008. |
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, 2007.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Executive
Compensation Program Objectives
Our compensation programs are designed to achieve the following
objectives:
|
|
|
|
|
Attract and retain top Management talent. Our
executive compensation programs are structured to provide
market-competitive compensation opportunities for our
executives. Our compensation philosophy is to position target
total compensation at the median of our competitive market. We
believe targeting the market median is necessary to attract and
retain talented executives who have the necessary experience and
skills to do their jobs successfully. We may deviate from this
median philosophy if, in the Compensation Committees
judgment, it is necessary to attract
and/or
retain a particular executive. We also achieve our retention
objectives through multi-year vesting of our long-term incentive
compensation, described in more detail below.
|
|
|
|
Link compensation realized to the achievement of the
Companys short and long-term financial and strategic
goals. A majority of each executives total
direct compensation opportunity is in the form of annual and
long-term incentive compensation. As previously mentioned, we
generally structure our compensation programs to provide median
compensation levels for target performance. However, actual
compensation
|
10
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|
|
|
|
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 set to
support our short and long-term business plans.
|
|
|
|
|
|
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 our stockholders. The value realized by the
executive from equity compensation is directly linked to the
value created for our stockholders.
|
Compensation
Committee Procedures
The Compensation Committee of the Board is responsible for
determining the nature and amount of compensation for the
Companys ten Executive Officers, including the Chief
Executive Officer, Chief Financial Officer, and the three other
most highly compensated Executive Officers of the Company who
were serving at the end of 2007 (collectively, the Named
Executive Officers). The Committee consists of three
non-employee Directors. From January 2007 through April 2007,
Pier C. Borra was the Compensation Committee Chair and William
C. Ballard, Jr. and Jeffrey H. Donahue were Committee
members. From May 2007 through December 2007, Mr. Donahue
was the Compensation Committee Chair and Mr. Ballard and
Sharon M. Oster were Committee members.
Compensation
Consultant
The Compensation Committee engages Frederic W. 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 to its executives. Frederic W.
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. Frederic W. Cook & Co. also
advises the Committee on the design and amount of compensation
for non-employee Directors. While the Committee values the
advice of its independent consultant, the Committee, for various
reasons, retains the latitude to deviate from the approach
recommended by the consultant.
Frederic W. Cook & Co. does no work for Management
unless requested by 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 Senior 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 executives on a
variety of issues related to compensation.
|
|
|
|
|
The Chairman and Chief Executive Officer and the President each
provide an assessment of the individual performance achievement
of the executives who report to them. This individual
performance assessment determines a portion of each
executives annual and long-term incentive compensation. In
addition, the Chairman and Chief Executive Officer and the
President provide input on salary increases and increases to
incentive compensation opportunities for the executives (other
than themselves). The Committee takes these recommendations into
consideration when determining earned incentive compensation and
when setting compensation opportunities for the coming year.
|
|
|
|
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 do
have input into the performance measures and goals used in the
incentive programs.
|
11
|
|
|
|
|
The Companys Senior Vice President and Chief Financial
Officer assists the Compensation Committee in assessing the
financial impact of compensation decisions.
|
|
|
|
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.).
|
Annual
Review of Executive Compensation
September Meeting. Each year, with the
assistance of its independent consultant, the Compensation
Committee conducts a comprehensive review of the executive
compensation programs in terms of program design and
compensation levels. This year, the results of the competitive
review were presented and discussed at the Committee meeting
held on September 10, 2007.
This review for 2007 included a competitive analysis of our
compensation practices versus those of our peers. The
comparative peer group used in 2007 included four REITs in the
health care sector and ten other REITs of similar size to the
Company in terms of market and total capitalization. These REITs
were:
|
|
|
Alexandria Real Estate Equities, Inc.
|
|
Liberty Property Trust
|
Brandywine Realty Trust
|
|
Mack-Cali Realty Corporation
|
BRE Properties, Inc.
|
|
Nationwide Health Properties, Inc.
|
Camden Property Trust
|
|
Regency Centers Corporation
|
Federal Realty Investment Trust
|
|
Taubman Centers, Inc.
|
HCP, Inc.
|
|
Ventas, Inc.
|
Healthcare Realty Trust Incorporated
|
|
Weingarten Realty Investors
|
The comprehensive review included a competitive benchmarking
analysis for the Companys ten Executive Officers,
including the five Named Executive Officers. The competitive
benchmarking included 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
nonqualified deferred compensation, etc.) and total
compensation. In addition, the review included a competitive
analysis of peer company aggregate long-term incentive
practices, including annual share usage and fair value transfer
from long-term incentive compensation, and potential share
dilution from equity compensation plans. Finally, the Committee
reviewed a five-year history of each compensation component
individually and annualized compensation in total, as a form of
tally sheet to track compensation earned over time.
This annual comprehensive review enables the Committee to
identify those executives whose target compensation levels
deviate from our desired median competitive positioning and to
plan compensation adjustments accordingly. The Committee uses
the benchmarking data and the tally sheet in assessing internal
pay relationships among executives and in making decisions
regarding adjustments to each executives compensation
opportunities.
Discussions October through
January. Based on the results of the competitive
review discussed at the September meeting, the Compensation
Committee engaged in a dialogue over the next several months to
discuss preliminary recommendations for changes to the programs
for the upcoming year. These changes included potential
adjustments to base salaries and annual and long-term incentive
opportunity ranges; changes to the performance measures and
weightings (if any) for the annual and long-term incentive
programs; and changes (if any) to the long-term incentive grant
types.
January Meeting. At the January 21, 2008
meeting, the Committee reviewed the Companys performance
for 2007 against the pre-established performance measures and
goals and approved the dollar amount of annual and long-term
incentive compensation earned for each Executive Officer.
Long-term incentive grants for 2007 performance were approved by
the Committee and made on January 21, 2008. Cash bonuses
for the Executive Officers for 2007 performance were approved by
the Committee on January 21, 2008 and paid on
January 25, 2008.
At the January meeting, the Committee also reviewed and approved
adjustments to base salaries and changes to the annual and
long-term incentive earnings opportunities for 2008 for each of
the Executive Officers. The
12
Committee considered the input of the Chairman and Chief
Executive Officer and the President when determining these
adjustments for the other Executive Officers. These changes are
discussed in detail in the discussion of Compensation
Elements below.
Compensation
Elements
Our compensation programs have the following elements:
|
|
|
|
|
Base salary
|
|
|
|
Annual incentives (cash bonuses)
|
|
|
|
Long-term incentives
|
|
|
|
Benefits and perquisites
|
Base
Salary
We pay base salaries because some minimum level of fixed
compensation is necessary to attract and retain executive
talent. Our 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
2007
|
|
|
2008
|
|
|
% Increase
|
|
|
George L. Chapman
|
|
$
|
570,000
|
|
|
$
|
624,720
|
|
|
|
9.6%
|
|
Scott A. Estes
|
|
|
270,000
|
|
|
|
297,000
|
|
|
|
10.0%
|
|
Raymond W. Braun
|
|
|
405,600
|
|
|
|
444,538
|
|
|
|
9.6%
|
|
Fred S. Klipsch
|
|
|
350,000
|
(1)
|
|
|
250,000
|
(1)
|
|
|
N/A
|
|
Charles J. Herman, Jr.
|
|
|
286,000
|
|
|
|
297,440
|
|
|
|
4.0%
|
|
|
|
|
(1) |
|
Represents the base consulting fees for 2007 and 2008 under the
consulting agreement with Mr. Klipsch. |
Annual
Incentives
In 2007, all of the Named Executive Officers participated in our
annual incentive program, which provides rewards for the
achievement of certain performance objectives tied to our 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 performance levels). Annual incentives are paid in cash
in the first quarter of the year following the performance year
(e.g., 2007 bonuses were paid in the first quarter of 2008).
The corporate performance measures and weightings set by the
Compensation Committee for 2007 under the annual incentive
program, as well as our achievement for each goal, were as
follows:
2007
Annual Incentive Corporate Performance Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
Measure
|
|
Weighting
|
|
|
Threshold
|
|
Target
|
|
High
|
|
Actual
|
|
FFO per Share(1)
|
|
|
65
|
%
|
|
$3.007
|
|
$3.100
|
|
$3.193
|
|
$3.12
|
Net Real Estate Investments
|
|
|
25
|
%
|
|
$800
Million
|
|
$900
Million
|
|
$1
Billion
|
|
$1.064
Billion
|
Maintain Credit Rating(2)
|
|
|
10
|
%
|
|
N/A
|
|
Maintain
One
|
|
Maintain
Both
|
|
Maintained
Both
|
13
|
|
|
(1) |
|
Funds from operations (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. FFO per share
has been adjusted for unusual and non-recurring items. If the
Company achieves such 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. |
|
(2) |
|
Refers to the Companys credit ratings by Moodys
Investors Service and Standard & Poors Ratings
Services. |
For Messrs. Chapman and Braun, 80% of the bonus is
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 Chief
Executive Officers and the Presidents annual
incentive compensation should be based on overall corporate
performance given their high levels of responsibility for our
performance. For Messrs. Estes and Klipsch, 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 executives, but gave
individual performance a heavier weighting (as compared to
Messrs. Chapman and Braun) to reflect the importance of
several strategic initiatives for which the executive is
primarily responsible. For Mr. Herman, 30% of the bonus is
determined by corporate performance, 30% is based on his direct
contribution to the investment activity of the Company, and 40%
is based on individual performance. Mr. Hermans bonus
is tied in part to his contribution to investment performance
because he bears a high degree of responsibility for that part
of our business.
Factors considered in the assessment of individual performance
include: implementation of targeted investment strategies,
professional development of and succession planning for
Management, successful integration of our Windrose Medical
Properties Trust (Windrose), Paramount Real Estate
Services, Inc., Rendina Companies, and other acquisitions, and
effective capital raising and communication with investors. The
Chairman and Chief Executive Officer and the President each
provide recommendations for individual performance scores for
the executives who report to them, based on their assessment of
performance versus the individual factors. The Committee
assesses the Chairman and Chief Executive Officers
performance against his individual factors to determine his
individual performance score. For 2007, the Committee determined
that each of Messrs. Chapman, Estes, Braun, Klipsch and
Herman achieved the high level of individual performance.
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 2007 performance that were
approved at the Committees January 21, 2008 meeting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Annual Incentive Opportunity
|
|
|
|
|
|
|
(as a % of Base Salary)
|
|
|
2007 Bonus Earned
|
|
|
|
Threshold
|
|
|
Target
|
|
|
High
|
|
|
% of Base Salary
|
|
|
Amount
|
|
|
Chapman
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
129.6
|
%
|
|
$
|
738,671
|
|
Estes
|
|
|
35
|
%
|
|
|
70
|
%
|
|
|
105
|
%
|
|
|
94.3
|
%
|
|
|
254,571
|
|
Braun
|
|
|
50
|
%
|
|
|
90
|
%
|
|
|
130
|
%
|
|
|
113.7
|
%
|
|
|
461,058
|
|
Klipsch(1)
|
|
|
60
|
%
|
|
|
90
|
%
|
|
|
120
|
%
|
|
|
110.8
|
%
|
|
|
387,856
|
|
Herman
|
|
|
40
|
%
|
|
|
80
|
%
|
|
|
120
|
%
|
|
|
96.2
|
%
|
|
|
275,000
|
|
|
|
|
(1) |
|
Annual incentive opportunities and bonuses earned are as a
percentage of base consulting fee. |
For 2008, the Company is using the same corporate performance
measures and weightings. The specific goals for threshold,
target and high performance levels for 2008 for FFO per share
and net real estate investments have not yet been determined,
but we expect they will correspond to the Companys
internal budgetary goals and that the target levels will be
within the ranges publicly disclosed as investor guidance for
2008. At the January 21, 2008 meeting, the Committee
approved the 2008 annual incentive earnings opportunities for
the Named Executive Officers, which are determined using the
same percentage of base salary (or in the case of
Mr. Klipsch, the same percentage of base consulting fee) as
was used for 2007.
14
Long-Term
Incentives
In 2007, Messrs. Chapman, Estes, Braun and Herman
participated in the Companys long-term incentive program.
Under the terms of his consulting agreement with the Company,
Mr. Klipsch does not participate in the long-term incentive
program. Our long-term incentive program is used to promote
long-term corporate goals, provide our executives with an
opportunity to acquire equity interests in the Company and
assist us in attracting and retaining key executives. Similar to
the annual incentive program, long-term incentive awards for the
Named Executive Officers (other than Mr. Klipsch) are based
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
performance levels) for long-term incentive compensation.
For each executive participating in the program, 75% of the
value of the long-term incentive compensation award is based on
corporate performance goals set by the Compensation Committee
and 25% is based on individual performance. The corporate
performance goals for 2007, as well as our achievement for each
goal, were as follows:
2007
Long-Term Incentive Corporate Performance Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighting
|
|
|
Threshold
|
|
Target
|
|
High
|
|
Actual
|
|
Three-Year Total Stockholder
Return vs. NAREIT Index(1)
|
|
|
10
|
%
|
|
Index − 4%
(5.5%)
|
|
At Index
(9.5%)
|
|
Index + 4%
(13.5%)
|
|
12.6%
|
One-Year Total Stockholder
Return vs. LTIP Peer
Group(1)(2)
|
|
|
15
|
%
|
|
Peer Group − 4%
(−.6%)
|
|
Peer Group
(3.4%)
|
|
Peer Group + 4%
(7.4%)
|
|
9.5%
|
Net Real Estate Investments
|
|
|
25
|
%
|
|
$800 Million
|
|
$900 Million
|
|
$1 Billion
|
|
$1.064 Billion
|
Dividend Payout Ratio(3)
|
|
|
25
|
%
|
|
87.1%
|
|
84.5%
|
|
82.1%
|
|
84.0%
|
|
|
|
(1) |
|
If absolute total stockholder return is at least 8% on a
compound annualized basis, participants 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). |
|
(2) |
|
LTIP peer group included HCP, Inc., Healthcare Realty Trust
Incorporated, Nationwide Health Properties, Inc., Senior Housing
Properties Trust and Ventas, Inc. |
|
(3) |
|
Represents common dividends per share divided by FFO per diluted
share. |
Each of Messrs. Chapman, Estes, Braun and Herman achieved
the 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 (the
Plan). The Committee determined that 75% of the
value of long-term incentive compensation earned for 2007 should
be granted in the form of shares of restricted stock, 12.5%
should be granted as stock options with dividend equivalent
rights (DERs) and 12.5% should be granted as stock
options without DERs (plain vanilla stock options).
This mix of long-term incentives was also used for 2006.
|
|
|
|
|
Our long-term incentive mix is heavily weighted toward
restricted stock because we believe that restricted stock
provides a strong incentive to create and preserve long-term
stockholder value.
|
|
|
|
We use stock options to add share price performance leverage
into the program. Options with DERs entitle the optionholder to
receive a cash payment equal to the dividend paid on a share of
the Companys common stock. We use options with DERs
because it is a vehicle that rewards total stockholder return,
in the form of both share price appreciation and dividends. As a
REIT, we have a high dividend distribution requirement, so a
significant portion of our stockholder return is provided in the
form of dividends.
|
15
Generally, equity grants made on an annual basis vest ratably
over five years. Cash payments attributable to DERs will accrue
and be paid out only when the corresponding option has vested.
This multi-year vesting creates a retention mechanism for our
executives and subjects them to the same share price risk over a
long-term period as other investors, thereby aligning their
interests with those of our stockholders.
The table below outlines the long-term incentive earnings
opportunities for 2007 and the amounts that were approved at the
Committees January 21, 2008 meeting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 LTI Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares/Options(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
|
2007 Long-Term Incentive (LTI)
|
|
|
Grant
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
|
Opportunities
|
|
|
Date
|
|
|
Restricted
|
|
|
without
|
|
|
with
|
|
|
|
Threshold
|
|
|
Target
|
|
|
High
|
|
|
Fair Value
|
|
|
Shares
|
|
|
DERs(2)
|
|
|
DERs(3)
|
|
|
Chapman
|
|
$
|
600,000
|
|
|
$
|
1,200,000
|
|
|
$
|
2,000,000
|
|
|
$
|
1,825,489
|
|
|
|
33,532
|
|
|
|
60,688
|
|
|
|
12,341
|
|
Estes
|
|
|
150,000
|
|
|
|
300,000
|
|
|
|
500,000
|
|
|
|
456,372
|
|
|
|
8,383
|
|
|
|
15,172
|
|
|
|
3,085
|
|
Braun
|
|
|
400,000
|
|
|
|
800,000
|
|
|
|
1,300,000
|
|
|
|
1,190,931
|
|
|
|
21,876
|
|
|
|
39,592
|
|
|
|
8,051
|
|
Herman
|
|
|
200,000
|
|
|
|
400,000
|
|
|
|
700,000
|
|
|
|
634,558
|
|
|
|
11,656
|
|
|
|
21,096
|
|
|
|
4,290
|
|
|
|
|
(1) |
|
Based on a per share grant price of $40.83, the closing price of
the Companys common stock on January 18, 2008, the
last trading day prior to the date of grant. The date of grant
was January 21, 2008, which was a holiday, and therefore
not a trading day. |
|
(2) |
|
The grant date fair value of each option without DERs was $3.76,
calculated using the Black-Scholes option valuation methodology
and the following assumptions: exercise price and current price
of $40.83, 20.52% volatility,
6.5-year
expected term, 6.47% dividend yield and 3.42% risk-free interest
rate. |
|
(3) |
|
The grant date fair value of each option with DERs was $18.49,
based on the same Black-Scholes valuation and assumptions
described above plus the net present value of projected future
dividend payments over the expected life of the option
discounted at the dividend yield rate. |
The 2007 long-term incentive earnings opportunities are
reflected in the Grants of Plan-Based Awards Table
below as dollar amounts.
For 2008, the Company is using the same corporate performance
measures and weightings for the long-term incentive program. The
goals for the total stockholder return metrics will be the same
as those used in 2007. The specific goals for threshold, target
and high performance levels for 2008 for net real estate
investments and for dividend payout ratio have not yet been
determined, but we expect that they will correspond to the
Companys internal budgetary goals and that the target
levels will be within the ranges publicly disclosed as investor
guidance for 2008.
At the January 21, 2008 meeting, the Committee approved the
2008 long-term incentive earnings opportunities for
Messrs. Chapman, Estes, Braun and Herman. For
Messrs. Chapman, Braun and Herman, the long-term incentive
earnings opportunities are the same as they were for 2007. For
Mr. Estes, threshold, target and high levels of performance
were increased to $175,000, $350,000 and $600,000, respectively.
Timing of
Awards
Under our equity granting policy, grants to our Named Executive
Officers are approved by the Compensation Committee on the date
of our 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.
Windrose
Merger Compensation
In connection with our merger with Windrose, Mr. Klipsch
received the following awards on January 2, 2007:
|
|
|
|
|
Retention bonus of $975,538 in cash and $929,962 in shares of
the Companys common stock. Mr. Klipsch was prohibited
from selling any of these shares until after the first
anniversary of the grant date and can sell no more than 50% of
these shares between the first and second anniversaries of the
grant date.
|
16
|
|
|
|
|
Cash payment of $1,680,000 in lieu of amounts payable under his
change in control severance agreement with Windrose.
|
|
|
|
Excise tax indemnification payment of $2,238,385
(gross-up
payment).
|
|
|
|
Tax payment of $799,625 to cover the value of the units of
Windroses operating partnership that were converted into
shares of the Companys common stock. On July 18,
2007, Mr. Klipsch received an additional tax payment of
$35,481 to cover the difference between the projected taxes and
the actual taxes owed by Mr. Klipsch.
|
Special
Retention and Incentive Awards to the Chairman and Chief
Executive Officer and President
On January 22, 2007, the Committee approved an amended
employment agreement for Mr. Chapman (see Employment
and Consulting Agreements below) along with a special
retention and incentive award of 120,000 shares. This award
was granted to retain Mr. Chapman as Chairman and Chief
Executive Officer and to provide him with an incentive to
achieve certain strategic objectives. Half of the shares are in
the form of restricted stock that will vest on January 31,
2010, subject to Mr. Chapmans continued employment.
The other 60,000 shares are in the form of performance
awards with DERs that will vest on January 31, 2010, based
on Mr. Chapmans continued employment and the
Boards determination that the Company, under
Mr. Chapmans leadership, has successfully achieved
its strategic initiatives. The 60,000 restricted shares would
become vested in the event of a change in corporate control, or
upon Mr. Chapmans death, disability or termination
without cause. With respect to the performance awards, in the
event of a change in corporate control, or upon
Mr. Chapmans death or disability, all 60,000 of the
performance awards would become earned and payable. In the event
of a termination without cause, 30,000 of the performance awards
would become earned and payable and the remaining 30,000 would
be earned and payable if the Board determines that the strategic
objectives have been attained. Dividends are paid on the 60,000
restricted shares on a current basis. With respect to 30,000 of
the performance awards, Mr. Chapman receives DER payments
on a current basis. For the other 30,000 performance awards, DER
payments accumulate and are deemed reinvested in additional
shares, and are only paid out if the underlying shares are
earned.
Also on January 22, 2007, the Committee approved a special
retention and incentive award of 50,000 shares of
restricted stock to Mr. Braun. Half of these shares vest on
January 31, 2010, subject to Mr. Brauns
continued employment. The remaining 25,000 shares will vest
on either: (1) January 31, 2010, if Mr. Braun
remains employed through January 31, 2010 and
Mr. Chapman does not serve as Chairman and Chief Executive
Officer until January 31, 2011, or
(2) January 31, 2011, if Mr. Braun remains
employed through January 31, 2011 and Mr. Chapman
serves as Chairman and Chief Executive Officer until
January 31, 2011. Dividends are paid on a current basis on
these shares. Vesting of the shares accelerates in the event of
Mr. Brauns death, disability, involuntary termination
without cause or upon a change in corporate control.
Special
Windrose Transaction Bonuses
Also on January 22, 2007, the Committee approved special
awards to certain executives and other employees for their
contribution to the success of the merger with Windrose.
Messrs. Braun and Estes were among the recipients of
special awards. The awards were provided in the form of
restricted shares that vest ratably over five years, consistent
with the vesting schedule of our annual equity compensation
grants. The per share grant price was $45.73, the closing price
on January 22, 2007. The table below illustrates the dollar
value and number of shares granted to Messrs. Braun and
Estes with respect to these special awards.
|
|
|
|
|
|
|
|
|
|
|
Windrose Bonuses
|
|
|
|
(Restricted Shares)
|
|
|
|
No. Shares
|
|
|
Grant Value
|
|
|
Braun
|
|
|
7,199
|
|
|
$
|
329,210
|
|
Estes
|
|
|
2,795
|
|
|
|
127,815
|
|
Benefits
and Perquisites
The Named Executive Officers (other than Mr. Klipsch)
participate in the same benefits programs as all other Company
employees, including health and dental insurance, group life
insurance, short-term and long-term
17
disability coverage, payment of health club/gym membership fees
and participation in the Companys tax-qualified 401(k)
plan. In addition, Messrs. Chapman and Braun are entitled
to certain perquisites, including:
|
|
|
|
|
Membership dues for two dining/country clubs for
Mr. Chapman and one club for Mr. Braun
these memberships are frequently used by the executives for
business purposes
|
|
|
|
Term life insurance policies these policies provide
financial security to the executives family in the event
of the executives death
|
|
|
|
Supplemental Executive Retirement Plan
(SERP) the SERP provides long-term
financial security and retirement savings for the executives
(see 2007 Pension Benefits Table for additional
information)
|
The Committee reviews the Companys policies with respect
to perquisites on a regular basis. See Note 8 to the
Summary Compensation Table for additional
information regarding perquisites, including the dollar values
of the perquisites provided by the Company in 2007.
Supplemental
Executive Retirement Plan
The SERP is a non-qualified defined benefit pension plan adopted
by the Compensation Committee on January 1, 2001.
Messrs. Chapman and Braun are the only two participants 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 tax-qualified retirement plan and trust (the
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. If Mr. Brauns employment is terminated
after a change in corporate control, either voluntarily or
involuntarily for any reason, he will be entitled to receive his
early retirement benefits as of the date of termination
calculated by adding an additional five years of participation
(up to but not beyond age 65) to the length of his
participation proration, but with no reduction for early
retirement.
Executive
Loan Program
In 1999, the Company instituted an Executive Loan Program,
pursuant to which the Company made six recourse loans to each of
four Executive Officers, including Messrs. Chapman and
Braun. The purpose of these loans was to assist the executives
with paying taxes related to the vesting of restricted stock
awards made under the 1995 Stock Incentive Plan. Each loan was
evidenced by a promissory note, was secured by a pledge of the
shares of the common stock of the Company that vested and gave
rise to the tax liability with respect to which the loan was
made to the Executive Officers, and bore interest at the
mid-term applicable federal rate established by the Internal
Revenue Service at the time of the loan. The interest rates for
the six loans ranged from 3.94% to 6.21% and interest was
payable annually. Each note became due and payable five years
after the date of the note; however, on each anniversary date of
each note, if the executive continued to be employed by the
Company, one-fifth of the original principal amount due under
the note was forgiven.
The highest amount due during 2007 from each of
Messrs. Chapman and Braun were $9,853 and $4,927,
respectively. On January 15, 2007, $9,853 and $4,927 were
forgiven pursuant to the terms of Mr. Chapmans and
Mr. Brauns existing loans, respectively. The
Executive Loan Program was discontinued on July 30, 2002 as
a result
18
of the passage of the Sarbanes-Oxley Act of 2002. As of
March 7, 2008, there were no loans outstanding for any
executive and no additional loans will be made to the executives.
Ownership
Guidelines
We require our executives to own shares of our common stock with
a fair market value of at least three times their base salary
(five times for the Chief Executive Officer). Our non-employee
Directors are required to own shares of our 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, while unexercised stock
options do not. Executives 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,
2007, each of the Named Executive Officers and each of our
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 Internal Revenue Code of 1986, as amended. Although the
Company does not pay corporate income taxes because it is a real
estate investment trust, the Compensation Committee will strive
to provide executives 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 income
taxes, 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 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
19
Summary
Compensation Table
The table below presents the total compensation awarded to,
earned by, or paid to the Named Executive Officers.
|
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|
|
|
|
|
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|
|
|
|
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|
|
|
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|
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|
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|
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Changes in
|
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|
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|
|
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|
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Pension Value
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& Non-Qualified
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Non-Equity
|
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Deferred
|
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|
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|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
Total
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Compensation
|
Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(4)
|
|
($)(6)
|
|
($)
|
|
($)
|
|
($)(8)
|
|
($)
|
|
George L. Chapman
|
|
|
2007
|
|
|
$
|
570,000
|
|
|
$
|
0
|
(2)
|
|
$
|
2,525,642
|
|
|
$
|
556,482
|
|
|
$
|
738,671
|
|
|
$
|
370,745
|
(7)
|
|
$
|
51,566
|
|
|
$
|
4,813,106
|
|
Chairman and
Chief Executive Officer
|
|
|
2006
|
|
|
|
536,852
|
|
|
|
0
|
|
|
|
1,659,889
|
|
|
|
503,835
|
|
|
|
639,928
|
|
|
|
301,532
|
|
|
|
106,880
|
|
|
|
3,748,916
|
|
Scott A. Estes
|
|
|
2007
|
|
|
|
270,000
|
|
|
|
0
|
(2)
|
|
|
216,216
|
|
|
|
42,943
|
|
|
|
254,571
|
|
|
|
0
|
|
|
|
29,500
|
|
|
|
813,230
|
|
Senior Vice President and
Chief Financial Officer
|
|
|
2006
|
|
|
|
217,106
|
|
|
|
0
|
|
|
|
150,044
|
|
|
|
31,990
|
|
|
|
142,144
|
|
|
|
0
|
|
|
|
28,848
|
|
|
|
570,132
|
|
Raymond W. Braun
|
|
|
2007
|
|
|
|
405,600
|
|
|
|
0
|
(2)
|
|
|
1,255,695
|
|
|
|
111,858
|
|
|
|
461,058
|
|
|
|
0
|
(7)
|
|
|
41,372
|
|
|
|
2,275,583
|
|
President
|
|
|
2006
|
|
|
|
338,000
|
|
|
|
0
|
|
|
|
440,862
|
|
|
|
121,656
|
|
|
|
352,872
|
|
|
|
0
|
|
|
|
67,837
|
|
|
|
1,321,227
|
|
Fred S. Klipsch
|
|
|
2007
|
|
|
|
350,000
|
(1)
|
|
|
1,200,000
|
(3)
|
|
|
0
|
|
|
|
0
|
|
|
|
387,856
|
|
|
|
0
|
|
|
|
35,481
|
|
|
|
1,973,337
|
|
Vice Chairman
|
|
|
2006
|
|
|
|
10,769
|
|
|
|
0
|
|
|
|
929,962
|
(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,693,548
|
|
|
|
6,634,279
|
|
Charles J. Herman, Jr.
|
|
|
2007
|
|
|
|
286,000
|
|
|
|
0
|
(2)
|
|
|
246,935
|
|
|
|
76,492
|
|
|
|
275,000
|
|
|
|
0
|
|
|
|
29,500
|
|
|
|
913,927
|
|
Executive Vice President and Chief Investment Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
(1) |
|
Mr. Klipsch joined the Company as Vice Chairman in December
2006. His base salary for 2006 was $350,000. His base consulting
fee was $350,000 for 2007 and is $250,000 for 2008. |
|
(2) |
|
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. |
|
(3) |
|
Represents a one-time finders fee paid to Mr. Klipsch
in connection with the completion of the acquisition of 17
medical office buildings and Paramount Real Estate Services from
affiliates of Rendina Companies. |
|
(4) |
|
Amounts set forth in this column represent the FAS 123(R)
stock-based compensation expense recognized in 2007 for
restricted stock grants to the Named Executive Officer and are
based on the share prices on the respective dates of grant,
which were $25.82, $37.00, $34.88, $36.50 and $45.73 for grants
on January 27, 2003, January 26, 2004,
January 24, 2005, January 23, 2006 and
January 22, 2007, respectively. With respect to the 7,000
and 5,299 shares granted to Mr. Estes on May 19,
2003 and March 23, 2006, respectively, the share prices on
the dates of grant were $29.25 and $37.75, respectively, with
respect to the 3,808 shares granted to Mr. Herman on
July 1, 2005, the share price on the date of grant was
$38.08. |
|
(5) |
|
Represents the special retention award made in connection with
the Windrose merger. The per share grant price was $41.00, the
closing price of the Companys shares on December 19,
2006, which was the effective date of the Windrose merger under
the terms of the consulting agreement between Mr. Klipsch
and the Company. |
|
(6) |
|
Amounts set forth in this column represent the FAS 123(R)
stock-based compensation expense recognized in 2007 for stock
option grants to the Named Executive Officer. 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: |
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Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Share Price at
|
|
|
Expected
|
|
|
Estimated
|
|
|
|
|
|
|
|
Grant Date
|
|
Grant Date)
|
|
|
Term (Years)
|
|
|
Volatility
|
|
|
Dividend Yield
|
|
|
Risk-Free Rate
|
|
|
1/27/03
|
|
$
|
25.82
|
|
|
|
7
|
|
|
|
24.60
|
%
|
|
|
8.66
|
%
|
|
|
4.06
|
%
|
1/26/04
|
|
|
37.00
|
|
|
|
7
|
|
|
|
22.40
|
%
|
|
|
6.32
|
%
|
|
|
4.34
|
%
|
1/24/05
|
|
|
34.88
|
|
|
|
7
|
|
|
|
22.82
|
%
|
|
|
6.88
|
%
|
|
|
4.25
|
%
|
1/23/06
|
|
|
36.50
|
|
|
|
5
|
|
|
|
20.30
|
%
|
|
|
6.79
|
%
|
|
|
4.35
|
%
|
1/22/07
|
|
|
45.73
|
|
|
|
5
|
|
|
|
19.90
|
%
|
|
|
5.60
|
%
|
|
|
4.74
|
%
|
|
|
|
|
|
The fair value of options with DERs also includes the net
present value of projected future dividend payments over the
expected life of the option discounted at the dividend yield
rate. |
|
(7) |
|
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. |
20
|
|
|
(8) |
|
All Other Compensation includes the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Term Life
|
|
|
|
|
|
Club
|
|
|
|
|
|
|
|
|
|
Contribution to
|
|
|
Insurance
|
|
|
Loan
|
|
|
Membership
|
|
|
OP Unit
|
|
|
|
|
Name
|
|
401(k) Plan
|
|
|
Premiums(a)
|
|
|
Forgiveness(a)
|
|
|
Dues
|
|
|
Indemnification(b)
|
|
|
Total
|
|
|
Chapman
|
|
$
|
29,500
|
|
|
$
|
5,100
|
|
|
$
|
9,853
|
|
|
$
|
7,113
|
|
|
$
|
0
|
|
|
$
|
51,566
|
|
Estes
|
|
|
29,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
29,500
|
|
Braun
|
|
|
29,500
|
|
|
|
2,260
|
|
|
|
4,927
|
|
|
|
4,685
|
|
|
|
0
|
|
|
|
41,372
|
|
Klipsch
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
35,481
|
|
|
|
35,481
|
|
Herman
|
|
|
29,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
29,500
|
|
|
|
|
(a) |
|
See Executive Compensation Compensation
Discussion and Analysis Compensation
Elements Benefits and Perquisites and
Executive Loan Program for additional
information regarding the term life insurance premiums paid by
the Company on behalf of Messrs. Chapman and Braun and the
amounts forgiven in 2007 pursuant to the Companys
Executive Loan Program. |
|
(b) |
|
See Executive Compensation Compensation
Discussion and Analysis Compensation
Elements Windrose Merger Consideration for
additional information regarding the tax payment made to
Mr. Klipsch to cover the value of the units of
Windroses operating partnership that were converted into
shares of the Companys common stock. |
2007
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Value of
|
|
|
|
|
|
|
Estimated Future Payments Under
|
|
|
Estimated Future Payments Under
|
|
|
Stock
|
|
|
Stock and
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
|
Equity Incentive Plan Awards
|
|
|
Awards: #
|
|
|
Option
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
of Shares
|
|
|
Awards
|
|
Name
|
|
Grant Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
of Stock
|
|
|
($)
|
|
|
George L. Chapman
|
|
|
1/22/07
|
(1)
|
|
$
|
285,000
|
|
|
$
|
570,000
|
|
|
$
|
855,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/22/07
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
600,000
|
|
|
$
|
1,200,000
|
|
|
$
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
1/22/07
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
60,000
|
|
|
$
|
2,743,800
|
|
Scott A. Estes
|
|
|
1/22/07
|
(1)
|
|
|
94,500
|
|
|
|
189,000
|
|
|
|
283,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/22/07
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
|
|
$
|
300,000
|
|
|
$
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
1/22/07
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,795
|
|
|
|
127,815
|
|
Raymond W. Braun
|
|
|
1/22/07
|
(1)
|
|
|
202,800
|
|
|
|
365,040
|
|
|
|
527,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/22/07
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
400,000
|
|
|
$
|
800,000
|
|
|
$
|
1,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
1/22/07
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
2,286,500
|
|
|
|
|
1/22/07
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,199
|
|
|
|
329,210
|
|
Fred S. Klipsch
|
|
|
1/22/07
|
(1)
|
|
|
210,000
|
|
|
|
315,000
|
|
|
|
420,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles J. Herman, Jr.
|
|
|
1/22/07
|
(1)
|
|
|
114,400
|
|
|
|
228,800
|
|
|
|
343,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/22/07
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
200,000
|
|
|
$
|
400,000
|
|
|
$
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents annual incentive program earnings opportunity. The
actual amounts earned by each of the Named Executive Officers
under the annual incentive program in 2007 is shown in the
Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table. |
|
(2) |
|
Represents long-term incentive earnings opportunity for 2007.
Based on 2007 performance, actual awards were granted
January 21, 2008 in a combination of restricted shares and
options with and without DERs, according to the table on
page 16. |
|
(3) |
|
Represents the special retention and incentive awards granted to
Messrs. Chapman and Braun on January 22, 2007. The per
share grant price was $45.73, the closing price on
January 22, 2007. See Employment and Consulting
Agreements below for additional information. |
|
(4) |
|
Represents a special grant of restricted stock to reward certain
executives for their contribution to the success of the merger
with Windrose. The awards were provided in the form of
restricted shares that vest ratably over five years, consistent
with the vesting schedule of our annual equity compensation
grants. The per share grant price was $45.73, the closing price
on January 22, 2007. |
21
Employment
and Consulting Agreements
We have employment agreements with each of Messrs. Chapman,
Estes, Braun and Herman and we have a consulting agreement with
Mr. Klipsch.
George L.
Chapman Employment Agreement
On January 22, 2007, the Company entered into an employment
agreement with George L. Chapman, Chairman and Chief Executive
Officer of the Company. The agreement expires on
January 31, 2010; however, Mr. Chapman has the option
to extend the term for an additional year. Mr. Chapman
receives an annual base salary of not less than $570,000 and he
is eligible to receive discretionary annual bonuses and equity
awards under the Companys long-term incentive plans. In
addition, the Company pays the initiation fees and membership
dues for two dining/country clubs, costs relating to up to three
business-related conferences, conventions or seminars attended
by Mr. Chapman and his spouse each year and the costs
required to maintain a disability insurance policy on
Mr. Chapman. The Company also provides Mr. Chapman
with health insurance, paid vacation and reimbursement for the
costs of physical examinations. For a description of the
provisions of the agreement regarding compensation and benefits
payable to Mr. Chapman upon his termination or a change in
control, see Potential Payments Upon Termination or Change
in Corporate Control below.
Special Retention and Incentive Award. Upon
execution of the agreement, Mr. Chapman received a grant of
60,000 shares of restricted stock as a special retention
and incentive award. The restrictions on these shares will lapse
if Mr. Chapman remains employed by the Company through
January 31, 2010. Mr. Chapman also received a grant of
60,000 shares in performance awards with DERs, which will
be paid in shares of common stock if Mr. Chapman remains
employed by the Company through January 31, 2010 and the
Company meets certain strategic objectives. Mr. Chapman
receives DER payments with respect to 30,000 of the performance
awards as dividends are paid on shares of common stock, and DER
payments on the remaining 30,000 performance awards will be paid
if the underlying shares of common stock are earned by
Mr. Chapman.
Scott A.
Estes Employment Agreement
The Company has entered into an employment agreement with Scott
A. Estes, Senior Vice President and Chief Financial Officer of
the Company, that expires January 31, 2009, and provides
for optional successive two-year renewal terms. Mr. Estes
receives an annual base salary of not less than $225,000 and he
is eligible to receive discretionary annual bonuses and equity
awards under the Companys long-term incentive plans. In
addition, the Company provides Mr. Estes with health
insurance and paid vacation. For a description of the provisions
of the agreement regarding compensation and benefits payable to
Mr. Estes upon his termination or a change in control, see
Potential Payments Upon Termination or Change in Corporate
Control below.
Raymond
W. Braun Employment Agreement
The Company has entered into an employment agreement with
Raymond W. Braun, President of the Company, that expires
January 31, 2009, and provides for optional successive
two-year renewal terms. Mr. Braun receives an annual base
salary of not less than $285,402 and he is eligible to receive
discretionary annual bonuses and equity awards under the
Companys long-term incentive plans. In addition, the
Company pays the initiation fees and membership dues for one
dining/country club and provides Mr. Braun with health
insurance and paid vacation. For a description of the provisions
of the agreement regarding compensation and benefits payable to
Mr. Braun upon his termination or a change in control, see
Potential Payments Upon Termination or Change in Corporate
Control below.
Special Retention and Incentive Award. On
January 22, 2007, Mr. Braun received a grant of
50,000 shares of restricted stock as a special retention
and incentive award. The restrictions on 25,000 of these shares
will lapse if Mr. Braun remains employed by the Company
through January 31, 2010. The restrictions on the remaining
25,000 shares will lapse: (1) on January 31,
2010, if Mr. Braun remains employed by the Company through
January 31, 2010 and Mr. Chapman does not serve as
Chairman and Chief Executive Officer of the Company during the
period from February 1, 2010 until January 31, 2011,
or (2) on January 31, 2011, if Mr. Braun remains
employed
22
by the Company through January 31, 2011 and
Mr. Chapman serves as Chairman and Chief Executive Officer
of the Company until January 31, 2011.
Charles
J. Herman, Jr. Employment Agreement
The Company has entered into an employment agreement with
Charles J. Herman, Jr., Executive Vice President and Chief
Investment Officer of the Company, that expires January 31,
2009, and provides for optional successive two-year renewal
terms. Mr. Herman receives an annual base salary of not
less than $218,545 and he is eligible to receive discretionary
annual bonuses and equity awards under the Companys
long-term incentive plans. In addition, the Company provides
Mr. Herman with health insurance and paid vacation. For a
description of the provisions of the agreement regarding
compensation and benefits payable to Mr. Herman upon his
termination or a change in control, see Potential Payments
Upon Termination or Change in Corporate Control below.
Fred S.
Klipsch Consulting Agreement
The Company has entered into a consulting agreement with Fred S.
Klipsch, Vice Chairman of the Company, that expires
December 20, 2008. Mr. Klipsch received a base
consulting fee of $350,000 in 2007 and will receive $250,000 in
2008. Each year during the term of the agreement,
Mr. Klipsch will be eligible to receive a performance bonus
based on the achievement of performance measures to be
determined by the Compensation Committee, with the targeted
amount of such bonus being 60% to 120% of his base consulting
fee. For a description of the provisions of the agreement
regarding compensation and benefits payable to Mr. Klipsch
upon his termination or a change in control, see Potential
Payments Upon Termination or Change in Corporate Control
below.
Bonus Payments. A retention bonus of $975,538
in cash and $929,962 in common stock was paid to
Mr. Klipsch on January 2, 2007. Mr. Klipsch
agreed not to sell any of these shares until after the first
anniversary of the grant date and can sell no more than 50% of
these shares between the first and second anniversaries of the
grant date. He also received a payment of $1,680,000 in cash in
lieu of amounts payable to him upon a change in control under a
change in control severance agreement and an employment
agreement between Mr. Klipsch, Windrose and Windroses
operating partnership.
Indemnification by the Company. The Company
will indemnify Mr. Klipsch for any excise taxes assessed
against him under Section 4999 of the Code as a result of
payments or benefits provided under the agreement or any other
plan, agreement or arrangement with the Company, Windrose,
Windroses operating partnership or their affiliates. The
Company also will indemnify Mr. Klipsch for any liability
with respect to the guarantees executed by Mr. Klipsch in
favor of Wells Fargo, as trustee, regarding the loan on the
Mount Vernon, Georgia facility.
23
2007
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.
|
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|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Equity
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Equity
|
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Incentive
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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Incentive
|
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Plan
|
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|
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|
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|
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|
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|
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Plan
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Awards:
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|
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|
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Market
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Awards: # of
|
|
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Market or
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|
|
|
|
|
|
|
|
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|
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|
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|
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|
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Value of
|
|
|
Unearned
|
|
|
Payout Value
|
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|
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# of
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# of
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|
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|
|
|
|
|
|
|
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|
Shares or
|
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|
Shares,
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|
of Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
# of Shares
|
|
|
Units of
|
|
|
Units or
|
|
|
Shares, Units
|
|
|
|
Underlying
|
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|
Underlying
|
|
|
Option
|
|
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|
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or Units of
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Stock That
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|
Other
|
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|
or Other
|
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|
|
Unexercised
|
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|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
Stock That
|
|
|
Have Not
|
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|
Rights That
|
|
|
Rights That
|
|
|
|
Options
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Vested
|
|
|
Have Not
|
|
|
Have Not
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
Vested
|
|
|
($)
|
|
|
Vested (#)
|
|
|
Vested ($)
|
|
|
George L. Chapman
|
|
|
0
|
|
|
|
10,727
|
|
|
$
|
45.73
|
|
|
|
1/22/17
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
31,756
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,223
|
|
|
|
8,888
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,175
|
|
|
|
36,697
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,280
|
|
|
|
13,918
|
|
|
|
34.88
|
|
|
|
1/24/15
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,358
|
|
|
|
16,904
|
|
|
|
37.00
|
|
|
|
1/26/14
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,879
|
|
|
|
20,879
|
|
|
|
25.82
|
|
|
|
1/27/13
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
0
|
|
|
|
24.42
|
|
|
|
12/12/11
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,307
|
|
|
$
|
6,046,870
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
$
|
2,681,400
|
(3)
|
Scott A. Estes
|
|
|
0
|
|
|
|
1,718
|
|
|
$
|
45.73
|
|
|
|
1/22/17
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
5,087
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
320
|
|
|
|
1,277
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,319
|
|
|
|
5,275
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,256
|
|
|
|
1,883
|
|
|
|
34.88
|
|
|
|
1/24/15
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,609
|
|
|
|
2,406
|
|
|
|
37.00
|
|
|
|
1/26/14
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,427
|
|
|
|
823,503
|
(3)
|
|
|
|
|
|
|
|
|
Raymond W. Braun
|
|
|
0
|
|
|
|
4,651
|
|
|
$
|
45.73
|
|
|
|
1/22/17
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
13,770
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
973
|
|
|
|
3,888
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,014
|
|
|
|
16,055
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
6,000
|
|
|
|
34.88
|
|
|
|
1/24/15
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,913
|
|
|
|
7,274
|
|
|
|
37.00
|
|
|
|
1/26/14
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
12,155
|
|
|
|
25.82
|
|
|
|
1/27/13
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,591
|
|
|
|
4,048,512
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fred S. Klipsch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles J. Herman, Jr.
|
|
|
0
|
|
|
|
2,848
|
|
|
$
|
45.73
|
|
|
|
1/22/17
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
8,431
|
|
|
|
45.73
|
|
|
|
1/22/17
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
417
|
|
|
|
1,666
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,721
|
|
|
|
6,880
|
|
|
|
36.50
|
|
|
|
1/23/16
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,424
|
|
|
|
2,137
|
|
|
|
34.88
|
|
|
|
1/24/15
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,993
|
|
|
|
2,660
|
|
|
|
37.00
|
|
|
|
1/26/14
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
5,879
|
|
|
|
25.82
|
|
|
|
1/27/13
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,415
|
|
|
|
957,036
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
|
(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 $44.69, the closing price of the
Companys common stock on December 31, 2007, the last
trading day of 2007. |
24
2007
Option Exercises and Stock Vested Table
The table below provides information regarding the dollar
amounts realized pursuant to the vesting or exercise of
equity-based awards during 2007 for the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
# of Shares
|
|
|
Value Realized Upon
|
|
|
# of Shares
|
|
|
Value Realized on
|
|
|
|
Acquired on
|
|
|
Exercise
|
|
|
Acquired on
|
|
|
Vesting
|
|
Name
|
|
Exercise
|
|
|
($)
|
|
|
Vesting
|
|
|
($)
|
|
|
George L. Chapman
|
|
|
23,500
|
|
|
$
|
453,735
|
|
|
|
26,085
|
|
|
$
|
1,168,347
|
|
Scott A. Estes
|
|
|
0
|
|
|
|
0
|
|
|
|
4,556
|
|
|
|
204,784
|
|
Raymond W. Braun
|
|
|
31,406
|
|
|
|
630,139
|
|
|
|
12,278
|
|
|
|
549,932
|
|
Fred S. Klipsch
|
|
|
93,333
|
|
|
|
1,317,233
|
|
|
|
0
|
|
|
|
0
|
|
Charles J. Herman, Jr.
|
|
|
16,379
|
|
|
|
313,202
|
|
|
|
5,613
|
|
|
|
248,031
|
|
2007
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 Internal Revenue Code of
1986, as amended. The Compensation Committee has selected George
L. Chapman and Raymond W. Braun to participate 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
|
|
|
|
7
|
|
|
$
|
1,326,071
|
|
|
|
0
|
|
Raymond W. Braun
|
|
|
SERP
|
|
|
|
7
|
|
|
|
0
|
|
|
|
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 6.0%
discount rate. |
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 Internal
Revenue Code of 1986, as amended. See Executive
Compensation - Compensation Discussion and Analysis
Compensation Elements Supplemental Executive
Retirement Plan above for more information regarding the
SERP.
25
2007
Non-Qualified Deferred Compensation Table
As a result of the merger with Windrose Medical Properties
Trust, the Company assumed Windroses obligations under the
Windrose Medical Properties Trust Deferred Compensation
Plan (the Windrose Plan). Fred S. Klipsch is the
only Named Executive Officer who participated in the Windrose
Plan, which became effective on January 1, 2006 and was
terminated in connection with the merger. The table below
provides information regarding the amounts paid to
Mr. Klipsch by the Company in 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Executive
|
|
Company
|
|
Earnings
|
|
Aggregate
|
|
Aggregate Balance
|
|
|
Contributions in
|
|
Contributions in
|
|
in Last
|
|
Withdrawals/
|
|
at Last Fiscal
|
|
|
Last Fiscal Year
|
|
Last Fiscal Year
|
|
Fiscal Year
|
|
Distributions
|
|
Year End
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Fred S. Klipsch
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
75,434
|
|
|
$
|
0
|
|
Following completion of the merger, Mr. Klipsch received a
single payment of $75,434, which was the balance of his deferred
compensation account under the Windrose Plan.
Potential
Payments Upon Termination or Change in Corporate
Control
Pursuant to their respective employment or consulting
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 is terminated without cause, he would receive
severance pay for the remaining term of the agreement or for
24 months, whichever is greater. If Mr. Chapman
resigns during the 12 months following a change in
corporate control (as defined in the agreement), he would
receive severance pay for 36 months. These severance
benefits would be made in a series of monthly payments, in an
amount equal to one-twelfth of the sum of his annual base salary
and the greater of the average of his annual bonuses for the two
fiscal years immediately preceding the termination or change in
corporate control or a minimum bonus equal to 100% of his annual
base salary. At Mr. Chapmans election, the Company
may instead be required to make an immediate lump sum payment
equal to the present value of such monthly payments, calculated
using a discount rate equal to the interest rate on
90-day
Treasury Bills reported at the date the election is received by
the Company. Mr. Chapman 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, or six months, whichever is greater, or
until the date he obtains comparable coverage from a new
employer. If Mr. Chapman 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 Mr. Chapman receives as compensation for services
performed during such period. 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 the payments to him would be
increased to cover such excise tax.
In the event of Mr. Chapmans 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 24 months),
each in an amount equal to one-twelfth of the sum of his annual
base salary and the greater of the average of his annual bonuses
for the two fiscal years immediately preceding the date of death
or a minimum bonus equal to 100% 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. Chapman.
In the event of Mr. Chapmans termination as a result
of disability, Mr. Chapman would receive monthly payments
for each month during the remainder of the term of the agreement
(but not less than 24 months), each in an amount equal to
one-twelfth of the sum of his annual base salary and the greater
of the average of his annual bonuses for the two fiscal years
immediately preceding the date of disability or a minimum bonus
equal to 100% of his annual base salary. These payments would
terminate if Mr. Chapman returns to active employment,
either with the Company or otherwise. In addition, these
payments would be reduced by any amounts paid to
Mr. Chapman under any long-term disability plan or other
disability program or insurance policies maintained by the
Company.
26
If Mr. Chapman voluntarily terminates his employment or is
terminated for cause, Mr. Chapman 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. Chapmans stock option and
restricted stock awards granted under the Companys
incentive plans (including the 60,000 shares of restricted
stock granted in connection with the agreement) would become
vested and immediately exercisable in the event of a change in
corporate control, or upon his death, disability or termination
without cause. With respect to the performance awards granted in
connection with the agreement, in the event of a change in
corporate control, or upon his death or disability, all 60,000
of the performance awards would become earned and payable. In
the event of a termination without cause, 30,000 of the
performance awards would become earned and payable and the
remaining 30,000 may be earned and payable if the Board
determines that the strategic objectives described in the
agreement have been attained.
Non-Competition and Non-Solicitation. Upon the
termination of the agreement for any reason, Mr. Chapman
will be subject to a non-solicitation agreement for one year
from the later of the termination of the agreement or when
severance payments under the agreement cease (or would have
ceased if Mr. Chapman had not elected to receive a lump sum
payment or had such payments not been offset by compensation
received from a new employer). In the event of a voluntary
termination by Mr. Chapman or termination for cause by the
Company, Mr. Chapman also would be subject to a one-year
non-competition agreement.
Scott
A. Estes
Severance Payments and Benefits. If
Mr. Estes is terminated without cause, he would receive
severance pay for the remaining term of the agreement or for
12 months, whichever is greater. If Mr. Estes resigns
during the 12 months following a change in corporate
control (as defined in the agreement), he would receive
severance pay for 24 months. These severance benefits would
be made in a series of monthly payments, 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 termination or change in corporate control or a minimum
bonus equal to 35% of his annual base salary. At
Mr. Estes election, the Company may instead be
required to make an immediate lump sum payment equal to the
present value of such monthly payments, calculated using a
discount rate equal to the interest rate on
90-day
Treasury Bills reported at the date the election is received by
the Company. 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, or six months, whichever is greater, 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, the severance payments
described above will be reduced by all amounts Mr. Estes
receives as compensation for services performed during such
period. 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 amount of
the payments to him would be increased 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 termination as a result of
disability, 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.
27
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.
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. Upon the
termination of the agreement for any reason, Mr. Estes will
be subject to a non-solicitation agreement for one year from the
later of the termination of the agreement or when severance
payments under the agreement cease (or would have ceased if
Mr. Estes had not elected to receive a lump sum payment or
had such payments not been offset by compensation received from
a new employer). 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 also would be subject to a one-year
non-competition agreement.
Raymond
W. Braun
Severance Payments and Benefits. If
Mr. Braun is terminated without cause, he would receive
severance pay for the remaining term of the agreement or for
12 months, whichever is greater. If Mr. Braun resigns
during the 12 months following a change in corporate
control (as defined in the agreement), he would receive
severance pay for 24 months. These severance benefits would
be made in a series of monthly payments, 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 termination or change in corporate control or a minimum
bonus equal to 55% of his annual base salary. At
Mr. Brauns election, the Company may instead be
required to make an immediate lump sum payment equal to the
present value of such monthly payments, calculated using a
discount rate equal to the interest rate on
90-day
Treasury Bills reported at the date the election is received by
the Company. Mr. Braun 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, or six months, whichever is greater, or until the
date he obtains comparable coverage from a new employer. If
Mr. Braun 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 Mr. Braun
receives as compensation for services performed during such
period. If it is determined that any payment by the Company to
Mr. Braun in connection with a change in corporate control
would be a golden parachute subject to excise tax, the amount of
the payments to him would be increased to cover such excise tax.
In the event of Mr. Brauns 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 55% 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. Braun.
In the event of Mr. Brauns termination as a result of
disability, Mr. Braun 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 55% of his
annual base salary. These payments would terminate if
Mr. Braun returns to active employment, either with the
Company or otherwise. In addition, these payments would be
reduced by any amounts paid to Mr. Braun under any
long-term disability plan or other disability program or
insurance policies maintained by the Company.
If Mr. Braun voluntarily terminates his employment or is
terminated for cause, Mr. Braun 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. Brauns stock option and
restricted stock awards granted under the Companys
incentive plans (including the 50,000 shares of restricted
stock granted as a special retention and
28
incentive award) 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. Braun will
be subject to a non-solicitation agreement for one year from the
later of the termination of the agreement or when severance
payments under the agreement cease (or would have ceased if
Mr. Braun had not elected to receive a lump sum payment or
had such payments not been offset by compensation received from
a new employer). In the event of a voluntary termination by
Mr. Braun, the election by Mr. Braun not to extend the
term of the agreement or a termination for cause by the Company,
Mr. Braun also would be subject to a one-year
non-competition agreement.
Charles
J. Herman, Jr.
Severance Payments and Benefits. If
Mr. Herman is terminated without cause, he would receive
severance pay for the remaining term of the agreement or for
12 months, whichever is greater. If Mr. Herman resigns
during the 12 months following a change in corporate
control (as defined in the agreement), he would receive
severance pay for 24 months. These severance benefits would
be made in a series of monthly payments, 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 termination or change in corporate control or a minimum
bonus equal to 30% of his annual base salary. At
Mr. Hermans election, the Company may instead be
required to make an immediate lump sum payment equal to the
present value of such monthly payments, calculated using a
discount rate equal to the interest rate on
90-day
Treasury Bills reported at the date the election is received by
the Company. Mr. Herman 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, or six months, whichever is greater, or until the
date he obtains comparable coverage from a new employer. If
Mr. Herman 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 Mr. Herman
receives as compensation for services performed during such
period. If it is determined that any payment by the Company to
Mr. Herman in connection with a change in corporate control
would be a golden parachute subject to excise tax, the amount of
the payments to him would be increased to cover such excise tax.
In the event of Mr. Hermans 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 30% 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. Herman.
In the event of Mr. Hermans termination as a result
of disability, Mr. Herman 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 30% of his
annual base salary. These payments would terminate if
Mr. Herman returns to active employment, either with the
Company or otherwise. In addition, these payments would be
reduced by any amounts paid to Mr. Herman under any
long-term disability plan or other disability program or
insurance policies maintained by the Company.
If Mr. Herman voluntarily terminates his employment or is
terminated for cause, Mr. Herman 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. Hermans 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. Herman
will be subject to a non-solicitation agreement for one year
from the later of the termination of the agreement or when
severance payments under the agreement cease (or would have
ceased if Mr. Herman had not elected to
29
receive a lump sum payment or had such payments not been offset
by compensation received from a new employer). In the event of a
voluntary termination by Mr. Herman, the election of
Mr. Herman not to extend the term of the agreement or a
termination for cause by the Company, Mr. Herman also would
be subject to a one-year non-competition agreement.
Fred
S. Klipsch
Severance Payments and Benefits. If
Mr. Klipschs service is terminated by him or the
Company before the end of the two-year term for any reason, he
will be entitled to receive his base consulting fee and
performance bonus amounts accrued or earned but unpaid as of
such date. He also will be entitled to receive a monthly
severance payment (or, in the case of termination for
disability, monthly disability payments) equal to his monthly
base consulting fee for the remainder of the term (or, in the
case of termination for disability, until he returns to active
service to the Company, if applicable). In the event of
disability, Mr. Klipsch may be entitled to additional
payments under the Companys disability plans and policies,
and any such payments will reduce the payments due under the
agreement. In addition, in exchange for not competing with the
Company for the two-year period following the termination of
Mr. Klipschs service for any reason, Mr. Klipsch
will receive $600,000, payable in eight quarterly payments of
$75,000. If Mr. Klipschs service terminates due to
his death, his surviving spouse or other designated beneficiary
will be entitled to receive a lump sum payment equal to the
present value of the amounts which would have been payable to
Mr. Klipsch as a result of the termination of his service
and for not competing with the Company.
Vesting of Incentive
Awards. Mr. Klipschs stock option and
restricted stock awards granted under the Companys
incentive plans would become vested and immediately exercisable
in the event of his death.
Non-Competition and Non-Solicitation. Upon the
termination of the agreement for any reason, Mr. Klipsch
will be subject to a two-year non-competition and
non-solicitation agreement, except that Mr. Klipsch may
solicit or hire Daniel R. Loftus, in his capacity as an
attorney, at any time, and may solicit or hire either
Mr. Loftus or Paula Conroy at any time after they cease to
be employed by the Company.
30
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, 2007. The
actual amounts to be paid to an executive can only be determined
at the time of such executives separation from the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested
|
|
|
Incremental
|
|
|
|
|
|
|
|
|
|
|
Name/
|
|
Cash
|
|
|
Continued
|
|
|
Equity
|
|
|
Pension
|
|
|
Non-Compete
|
|
|
Excise Tax
|
|
|
|
|
Type of Termination
|
|
Severance(1)
|
|
|
Benefits(2)
|
|
|
Compensation(3)
|
|
|
Benefit(4)
|
|
|
Payments(5)
|
|
|
Gross-Up(6)
|
|
|
Total
|
|
|
George L. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause/Resignation without Good Reason
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
n/a
|
|
|
$
|
0
|
|
Death, Disability, Involuntary Termination without Cause,
Resignation for Good Reason
|
|
|
2,434,326
|
|
|
|
9,955
|
|
|
|
10,176,666
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
12,620,946
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
3,592,761
|
|
|
|
9,955
|
|
|
|
10,176,666
|
|
|
|
1,994,449
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,773,830
|
|
Scott A. Estes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause/Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death, Disability, Involuntary Termination without Cause,
Resignation for Good Reason
|
|
|
557,527
|
|
|
|
12,040
|
|
|
|
963,160
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
1,532,727
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
1,014,026
|
|
|
|
12,040
|
|
|
|
963,160
|
|
|
|
0
|
|
|
|
0
|
|
|
|
484,345
|
|
|
|
2,473,571
|
|
Raymond W. Braun
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause/Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death, Disability, Involuntary Termination without Cause,
Resignation for Good Reason
|
|
|
921,105
|
|
|
|
12,040
|
|
|
|
4,705,463
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
5,638,608
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
1,675,300
|
|
|
|
12,040
|
|
|
|
4,705,463
|
|
|
|
709,533
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,102,336
|
|
Fred S. Klipsch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Any termination
|
|
|
245,601
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
578,523
|
|
|
|
0
|
|
|
|
824,124
|
|
Charles J. Herman, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause/Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death, Disability, Involuntary Termination without Cause,
Resignation for Good Reason
|
|
|
596,244
|
|
|
|
12,040
|
|
|
|
1,237,482
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
1,845,766
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
1,084,445
|
|
|
|
12,040
|
|
|
|
1,237,482
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,333,967
|
|
|
|
|
(1) |
|
Cash Severance |
|
|
|
Chapman, Estes, Braun and Herman. Under the
employment agreements for Messrs. Chapman, Estes, Braun and
Herman, these executives are entitled to cash severance payable
in a series of monthly severance payments upon certain
termination events. 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. The average
annual bonuses paid during the past two years have been in
excess of the minimums specified in the agreement; thus the
average annual bonuses are used to calculate potential
severance. For Messrs. Estes, Braun and Herman, 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. The annual bonuses paid
during the last year have been in excess of the minimums |
31
|
|
|
|
|
specified in the agreement; thus the annual bonuses are used to
calculate potential severance. For Messrs. Chapman, Estes,
Braun and Herman, the number of months for which the severance
will be paid 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.
|
|
|
|
Upon involuntary termination without cause by
the Company or voluntary termination by the executive for good
reason, not related to a change in corporate control, payments
will be made for each month during the remaining agreement term,
but not for less than 24 months for Mr. Chapman and
not for less than 12 months for Messrs. Estes, Braun
and Herman. As of December 31, 2007, the remaining terms of
the agreements of Messrs. Chapman, Estes, Braun and Herman
were 13 months. Therefore, the figures in the above table
assume payments would be provided for 24 months for
Mr. Chapman and for 13 months for Messrs. Estes,
Braun and Herman.
|
|
|
|
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,
payments will be made for 36 months for Mr. Chapman
and for 24 months for Messrs. Estes, Braun and Herman.
|
|
|
|
The executive may elect to receive these payments in a lump sum,
with the lump sum equal to the present value of the monthly
payments calculated using a discount rate equal to the
90-day
treasury rate. The amounts reflected in the table above
represent the discounted present value of the monthly payments
assuming a 3.29% annual discount rate (the
90-day
treasury rate as of December 31, 2007, the assumed date of
termination). |
|
|
|
Klipsch. Under the consulting agreement for
Mr. Klipsch, upon termination for any reason,
Mr. Klipsch is entitled to receive monthly severance equal
to his base consulting fee for the balance of the agreement
term. Assuming a termination occurred December 31, 2007,
the balance of the agreement term would be 12 months.
Mr. Klipschs annual base fee for the remaining year
of the agreement term is $250,000. The figures in the table
above represent the present value of these monthly payments
using the same 3.29% discount rate
(90-day
treasury rate as of December 31, 2007). Note, however, that
Mr. Klipsch may only receive these payments in a lump sum
upon termination due to death. Otherwise, he will receive
monthly payments. |
|
(2) |
|
Continued Benefits |
|
|
|
Chapman, Estes, Braun and Herman. Under the
employment agreements for Messrs. Chapman, Estes, Braun and
Herman, these executives are entitled to continued coverage at
the Companys expense under life, health and disability
insurance programs in which the executive participated at the
time of termination 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, Braun and Herman. As of
December 31, 2007, the remaining term of each of these
executives agreements was 13 months. Therefore, the
figures in the above table assume continued benefits would be
provided for 13 months for each executive. The monthly cost
of such benefits is estimated to be the 2007 monthly costs,
increased by 2%, assuming such benefits are provided through
COBRA. |
|
|
|
Klipsch. The consulting agreement for
Mr. Klipsch does not provide continued benefits under any
termination scenario. |
|
(3) |
|
Accelerated Vesting of Unvested Equity Compensation |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Braun and Herman, upon involuntary termination without cause by
the Company or voluntary termination for good reason by the
executive, all unvested stock awards will become fully vested.
No provision for vesting acceleration is provided in
Mr. Klipschs agreement because it is currently
expected that he will not participate in the Companys
equity compensation programs. 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, 2007 (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
$44.69, which was the closing price as of December 31,
2007, the last trading day of the year. As of December 31,
2007, Mr. Klipsch did not have any unvested equity
compensation awards. |
32
|
|
|
(4) |
|
Incremental Pension Benefit |
|
|
|
Messrs. Chapman and Braun participate in the SERP. 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. If Mr. Brauns employment is terminated
after a change in corporate control, either voluntarily or
involuntarily for any reason, he will be entitled to receive his
early retirement benefits as of the date of termination
calculated by adding an additional five years of participation
(up to but not beyond age 65) to the length of his
participation proration, but with no reduction for early
retirement. The amounts shown in the above table represent the
present value of the enhanced benefit to each executive upon
termination related to a change in corporate control. |
|
(5) |
|
Non-Compete Payments |
|
|
|
Under the consulting agreement for Mr. Klipsch, at the
expiration of the two-year consulting term, or earlier upon
termination for any other reason, he will receive quarterly
payments of $75,000 for a two-year period in exchange for an
agreement not to compete with the Company and not to solicit
certain Company employees. The numbers in the above table
represent the present value of these payments discounted by
3.29%, the
90-day
treasury rate as of December 31, 2007. Note, however, that
Mr. Klipsch may only receive these payments in a lump sum
upon termination due to death. Otherwise, he will receive
quarterly payments. |
|
(6) |
|
Excise Tax
Gross-Up |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Braun and Herman and the consulting agreement for
Mr. Klipsch, if any payments constitute excess
parachute payments under Section 280G of the Internal
Revenue Code (the Code) such that the executive or
consultant incurs an excise tax under Section 4999 of the
Code, the Company will 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. If a change in
corporate control had occurred December 31, 2007 and each
of the Named Executive Officers was terminated as a result, none
of the Named Executive Officers (except for Mr. Estes)
would have been subject to excise tax. The Company would have
been required to provide an excise-tax
gross-up
payment for Mr. Estes only. 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
(2003-2007).
|
|
|
|
The stock award parachute calculations for
purposes of Code Section 280G were based on Black-Scholes
valuation methodology using the most recent
GAAP FAS 123(R) option valuation assumptions
(volatility 20.5%, risk-free interest rate 3.42%, dividend yield
6.47%, expected remaining term of 90 days). 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 non-compete payments to Mr. Klipsch
were not included in the parachute calculation because they are
considered reasonable compensation for services after a change
in corporate control.
|
|
|
|
The total parachute for each Named Executive
Officer (except for Mr. Estes) did not exceed the Code
Section 280G safe harbor, which is three times the
base amount minus $1. As a result, the Named Executive Officers
(except for Mr. Estes) would not have incurred any excise
tax.
|
33
DIRECTOR
COMPENSATION
The following table summarizes the compensation paid to our
non-employee Directors with respect to 2007. Our Directors who
are also employees do not receive additional compensation for
being members of our Board.
2007 Director
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
Stock
|
|
|
|
|
|
|
in Cash
|
|
|
Awards
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(8)
|
|
|
($)
|
|
|
William C. Ballard, Jr.
|
|
$
|
55,500
|
(1)(2)
|
|
$
|
93,347
|
|
|
$
|
148,847
|
|
Pier C. Borra
|
|
|
57,333
|
(1)(3)
|
|
|
93,347
|
|
|
|
150,680
|
|
Thomas J. DeRosa
|
|
|
56,667
|
(4)
|
|
|
93,347
|
|
|
|
150,014
|
|
Jeffrey H. Donahue
|
|
|
61,667
|
(1)(5)
|
|
|
93,347
|
|
|
|
155,014
|
|
Peter J. Grua
|
|
|
53,000
|
(6)
|
|
|
93,347
|
|
|
|
146,347
|
|
Sharon M. Oster
|
|
|
48,333
|
(7)
|
|
|
93,347
|
|
|
|
141,680
|
|
R. Scott Trumbull
|
|
|
48,000
|
|
|
|
93,347
|
|
|
|
141,347
|
|
|
|
|
(1) |
|
Includes fees relating to Compensation Committee meetings held
in 2006 but paid in 2007. |
|
(2) |
|
Includes $2,500 additional retainer for serving as
Nominating/Corporate Governance Committee Chair from January
through April. |
|
(3) |
|
Includes $3,333 additional retainer for serving as Compensation
Committee Chair from January through April. |
|
(4) |
|
Includes $6,667 additional retainer for serving as Audit
Committee Chair from May through December. |
|
(5) |
|
Includes $6,667 additional retainer for serving as Compensation
Committee Chair from May through December. |
|
(6) |
|
Includes $5,000 additional retainer for serving as
Nominating/Corporate Governance Committee Chair from May through
December. |
|
(7) |
|
Includes $3,333 additional retainer for serving as Audit
Committee Chair from January through April. |
|
(8) |
|
Amounts set forth in this column represent the FAS 123(R)
stock-based compensation expense recognized in 2007 for awards
granted to the non-employee Directors and are based on the share
prices on the respective dates of grant, which were $34.88,
$36.50 and $45.73 for grants on January 24, 2005,
January 23, 2006 and January 22, 2007, respectively. |
Our compensation program for non-employee Directors for the 2007
calendar year consisted of:
Cash
Compensation
|
|
|
|
|
$45,000 annual cash retainer, payable in equal quarterly
installments
|
|
|
|
Additional Committee Chair retainers of $10,000 per year for the
Chairs of the Audit and Compensation Committees and $7,500 for
the Chair of the Nominating/Corporate Governance Committee
|
|
|
|
If the Board of Directors holds more than four meetings per
year, each Director will receive $1,500 for each meeting
attended in excess of four per year
|
|
|
|
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
Each year, $70,000 worth of deferred stock units are granted to
each non-employee Director under the 2005 Long-Term Incentive
Plan. The deferred stock units are fully vested at grant, but
are converted into shares of
34
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.
Non-employee Directors who are appointed or elected to the Board
of Directors for the first time will receive a grant of $100,000
worth of deferred stock units following their appointment or
election. This grant includes the $70,000 annual grant plus an
additional $30,000 initial grant. Similar to the annual grants,
the deferred stock units will convert into shares of common
stock in three equal installments on the first three
anniversaries of the date of grant and recipients will be
entitled to DERs. Jeffrey R. Otten was appointed to the Board of
Directors in January 2008. Pursuant to the foregoing policy,
Mr. Otten received a grant of $100,000 worth of deferred
stock units following his appointment. Mr. Otten is not
included in the 2007 Director Compensation Table because he
did not receive any compensation from the Company in 2007.
For the 2008 calendar year, the presiding Director of executive
sessions of non-employee Directors will receive an additional
retainer of $2,500.
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 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.
Agreements
Regarding Office Space
The Company, through one of its subsidiaries, has an overhead
sharing agreement with Klipsch Audio, Inc. Fred S. Klipsch, who
is a Director of the Company and the Vice Chairman of the
Company, also serves as Chairman of the Board of Klipsch Audio,
Inc. The Companys Executive Vice President, Frederick L.
Farrar, is Executive Vice President of Klipsch Audio, Inc.
Messrs. Klipsch and Farrar have an ownership interest in
Klipsch Audio, Inc. Under this agreement, Klipsch Audio, Inc.
provides the Company with executive office space and certain
office support services for $8,500 per month. The agreement is
terminable by either party on 30 days notice.
The Company also has a lease agreement with Woodview, LLC, a
limited liability company, for approximately 7,000 square
feet of office space. Messrs. Klipsch and Farrar are two of
the three managing members of Woodview, LLC and have an
ownership interest in it. The Company currently pays $10,967 per
month to Woodview, LLC for use of this office space. The
agreement expires on January 31, 2011 and is cancellable in
part upon the occurrence of certain specified events.
35
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth certain information, as of
December 31, 2007, 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
|
|
|
637,332
|
(1)
|
|
$
|
35.54
|
|
|
|
1,605,318
|
(2)
|
Equity compensation plans not approved by stockholders
|
|
|
None
|
|
|
|
N/A
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
637,332
|
(1)
|
|
$
|
35.54
|
|
|
|
1,605,318
|
(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, and the 2005 Long-Term Incentive Plan. |
|
(2) |
|
This number reflects the 2,200,000 shares of common stock
initially 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 2
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, 2007 and has been selected by
the Company to serve in such capacity for the year ending
December 31, 2008. 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 2009
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,
|
|
|
|
2007
|
|
|
2006
|
|
|
Audit Fees
|
|
$
|
1,245,540
|
|
|
$
|
879,250
|
|
Audit-Related Fees
|
|
|
1,601
|
|
|
|
21,601
|
|
Tax Fees:
|
|
|
|
|
|
|
|
|
Tax Compliance
|
|
|
238,155
|
|
|
|
287,619
|
|
Tax Planning and Tax Advice
|
|
|
19,865
|
|
|
|
10,343
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
1,505,161
|
|
|
$
|
1,198,813
|
|
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
36
Exchange Commission. Audit-related fees include fees associated
with assurance and related services that are traditionally
performed by an independent accountant, including access to
research databases and due diligence 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 mergers and
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
Internal Revenue 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.
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, 2007 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), and considered the compatibility of non-audit
services with such firms independence.
37
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 eight meetings during
the year ended December 31, 2007.
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, 2007 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
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 and will be included in vote totals.
Accordingly, abstentions will have the same effect as negative
votes. 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.
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, we are sending only one Annual Report and one
Notice of Meeting and Proxy Statement to that address unless we
receive 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., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio,
43603-1475
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.
38
STOCKHOLDER
PROPOSALS FOR PRESENTATION AT THE 2009 ANNUAL
MEETING
The Board of Directors requests that any stockholder proposals
intended for inclusion in the Companys proxy materials for
the 2009 Annual Meeting be submitted to Erin C. Ibele, Senior
Vice President-Administration and Corporate Secretary of the
Company, in writing no later than November 20, 2008. Unless the
Company has been given written notice by February 9, 2009
of a stockholder proposal to be presented at the 2009 Annual
Meeting other than by means of inclusion in the Companys
proxy materials for the Meeting, 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
39
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THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE FOLLOWING.
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Please
Mark Here
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c |
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for Address
Change or
Comments
SEE REVERSE SIDE
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1. Election of three Directors for a term of three
years: |
01 William C. Ballard, Jr.,
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02
Peter J. Grua, and
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03
R. Scott Trumbull.
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FOR ALL
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WITHHOLD |
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FOR ALL |
c |
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c |
To withhold authority to vote for any
individual nominee,
please write the persons name in the following space:
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FOR |
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AGAINST |
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ABSTAIN |
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2.
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Ratification of the appointment of
Ernst & Young LLP as Independent
Registered Public Accounting Firm for the fiscal year 2008.
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c |
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c |
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3.
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With discretionary authority on any other business that may
properly come before the meeting or any adjournment thereof. |
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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.
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Dated: |
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, 2008 |
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Signature |
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PLEASE
MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. PLEASE MARK YOUR CHOICE LIKE THIS X IN BLUE OR BLACK INK.
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Signature if Held
Jointly |
5
FOLD AND DETACH HERE 5
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.
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.
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INTERNET
http://www.proxyvoting.com/hcn
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TELEPHONE
1-866-540-5760 |
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Use the Internet to vote your proxy. Have your proxy
card in hand when you access the website.
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OR |
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Use any touch-tone telephone to vote your proxy. Have
your proxy card in hand when you call.
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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.
Choose
MLinkSM 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/isd where 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.
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PROXY FOR COMMON STOCK
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P |
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HEALTH CARE REIT, INC.
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R |
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PROXY SOLICITED BY THE BOARD OF DIRECTORS
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O
X
Y |
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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 1, 2008, or any adjournments thereof.
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YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE TAKING OF A VOTE ON THE MATTERS HEREIN.
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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.
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(Over)
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Address Change/Comments (Mark the corresponding
box on the reverse side) |
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5
FOLD AND DETACH HERE 5 |
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You can now access your HEALTH CARE REIT, INC.
account online. |
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Access your Health Care REIT, Inc.
stockholder account online via Investor ServiceDirect® (ISD). |
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The transfer agent for Health Care REIT, Inc.
now makes it easy and convenient to get current information on your
stockholder
account. |
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View account status |
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View payment history for dividends |
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View certificate history |
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Make address changes |
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View book-entry information |
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Obtain a duplicate 1099 tax form |
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Establish/change your PIN |
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Visit us on the Internet at
http://www.bnymellon.com/shareowner/isd
For
Technical Assistance Call 1-877-978-7778 between 9:00 AM and 7:00 PM Eastern Time Monday-Friday
Investor ServiceDirect®
is a registered trademark of Mellon Investor Services LLC
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