def14a
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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for Use of the Commission Only (as permitted by
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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 6, 2010
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 6, 2010
To
The Stockholders of Health Care REIT, Inc.:
The Annual Meeting of Stockholders of Health Care REIT, Inc.
will be held on May 6, 2010 at 10:00 a.m. in the
Auditorium of Fifth Third Center at 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 2010; 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 11, 2010 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 19, 2010
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 6,
2010
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 6, 2010 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 (1) filing a written revocation with
the Senior Vice President-Administration and Corporate Secretary
of the Company, (2) filing a duly executed proxy bearing a
later date, or (3) attending the Annual Meeting and voting
in person. A written revocation, as described in (1) above,
will not be effective until the notice thereof has been received
by the Senior Vice President-Administration and Corporate
Secretary of the Company.
The cost of solicitation of proxies will be borne by the
Company. In addition to solicitation by mail, Directors and
officers of the Company may solicit proxies in writing or by
telephone, electronically, by personal interview, or by other
means of communication. The Company will reimburse Directors and
officers for their reasonable
out-of-pocket
expenses in connection with such solicitation. The Company will
request brokers and nominees who hold shares in their names to
furnish this proxy material to the persons for whom they hold
shares and will reimburse such brokers and nominees for their
reasonable
out-of-pocket
expenses in connection therewith. The Company has hired 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 will be March 26, 2010. A COPY OF THE
COMPANYS ANNUAL REPORT ON
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2009, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE ON THE
COMPANYS WEBSITE AT www.hcreit.com OR MAY BE OBTAINED
WITHOUT CHARGE BY WRITING TO THE SENIOR VICE
PRESIDENT-ADMINISTRATION AND CORPORATE SECRETARY, HEALTH CARE
REIT, INC., AT THE ABOVE MAILING ADDRESS.
1
VOTING
SECURITIES OUTSTANDING
As of March 11, 2010, the Company had outstanding
123,839,489 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 11, 2010 are entitled to notice of, and to vote at,
the Annual Meeting and any adjournments thereof. Each share of
common stock is entitled to one vote on all matters to come
before the Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Companys By-Laws provide that the Board of Directors
shall have nine members unless changed by the Board. The Board
has increased the number of Directors from nine to 10. The Board
is divided into three classes: Class I, Class II and
Class III. The Directors are elected to serve for a
three-year term and until the election and qualification of
their respective successors.
Proxies received will be voted to elect the three Class III
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.
As discussed in more detail below under Board and
Committees, the Board believes that its Directors and
nominees for Director should, among other things, (1) have
significant leadership experience at a complex organization,
(2) be accustomed to dealing with complex problems, and
(3) have the education, experience and skills to exercise
sound business judgment. In evaluating its Directors and
nominees for Director, the Nominating/Corporate Governance
Committee looks at the overall size and structure of the Board
and strives to assemble a Board that is skilled, diverse,
well-rounded and experienced. The specific experiences,
qualifications, skills and attributes of each of the
Class I, Class II and Class III Directors are
described below. These experiences, along with the
Directors honesty, sound judgment and commitment to the
Company, led the Board to conclude that the Class III
Directors should be elected to serve on the Board and that the
Class I and Class II Directors should continue to
serve on the Board.
CLASS III
Directors to be Elected
Thomas J. DeRosa, age 52. Mr. DeRosa
is former Vice Chairman and Chief Financial Officer of The Rouse
Company (real estate development and operations), a position he
held from September 2002 until November 2004 when The Rouse
Company merged with General Growth Properties, Inc. From 1992 to
September 2002, Mr. DeRosa held various positions at
Deutsche Bank (Deutsche Bank AG) and Alex. Brown &
Sons, including Global Co-Head of the Health Care Investment
Banking Group of Deutsche Bank and Managing Director in the Real
Estate Investment Banking Group of Alex. Brown & Sons.
Mr. DeRosa also serves as a Director of Dover Corporation
(global provider of equipment, specialty systems and services
for various industrial and commercial markets), Value Retail PLC
(a U.K.-based owner, operator and developer of luxury outlet
shopping villages in Europe) and Georgetown University (where he
also serves on the Audit Committee). Mr. DeRosa has served
as a Director of the Company since 2004 and is a member of the
Boards Audit, Investment, Nominating/Corporate Governance
and Planning Committees. Mr. DeRosa serves as the Chair of
the Audit Committee. Mr. DeRosa has extensive knowledge of
the real estate industry and capital markets from his experience
as Vice Chairman and Chief Financial Officer of The Rouse
Company and his leadership roles at Deutsche Bank and Alex.
Brown & Sons.
Jeffrey H. Donahue,
age 63. Mr. Donahue is former President
and Chief Executive Officer of Enterprise Community Investment,
Inc. (provider of affordable housing), a position he held from
January 2003 to April 2009. Mr. Donahue was Executive Vice
President and Chief Financial Officer of The Rouse Company (real
estate development and operations) from December 1998 to
September 2002. Mr. Donahue serves as a Director of T. Rowe
Price Savings Bank. Mr. Donahue has served as a Director of
the Company since 1997 and is a member of the
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Boards Compensation, Investment and Planning Committees.
Mr. Donahue serves as the Chair of the Compensation
Committee. Mr. Donahue has extensive knowledge of the real
estate industry from his experience as President and Chief
Executive Officer of Enterprise Community Investment, Inc. and
Executive Vice President and Chief Financial Officer of The
Rouse Company.
Fred S. Klipsch, age 68. Mr. Klipsch
is Chairman of the Board and Chief Executive Officer of Klipsch
Group, Inc. (global speaker manufacturer), a position he has
held since 1989. Since 1990, Mr. Klipsch also has served as
Chairman of the Board 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 served as Vice Chairman of the Company from
December 2006 until May 2009. Mr. Klipsch has served as a
Director of the Company since December 2006 and is a member of
the Boards Investment and Planning Committees.
Mr. Klipsch has extensive knowledge of the medical office
building sector from his experience as Chairman of the Board and
Chief Executive Officer of Windrose Medical Properties Trust and
extensive leadership experience as Chairman of the Board and
Chief Executive Officer of Klipsch Group, Inc.
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 I
Directors Whose Terms Continue (1)
William C. Ballard, Jr.,
age 69. Mr. Ballard is former Of
Counsel to Greenebaum Doll & McDonald PLLC (law firm),
a position he held from 1992 to June 2008. From 1970 to 1992,
Mr. Ballard was Executive Vice President, Chief Financial
Officer and Director of Humana Inc. (provider of integrated
health care services). Mr. Ballard also serves as a
Director of UnitedHealth Group Incorporated (diversified health
and well-being company). Mr. Ballard has served as a
Director of the Company since 1996 and is a member of the
Boards Compensation, Executive, Investment and Planning
Committees. Mr. Ballards background as an attorney
and his extensive experience in the health care industry through
his long-time service to Humana Inc. and his current director
role with UnitedHealth Group Incorporated give him a unique
perspective.
Peter J. Grua, age 56. Mr. Grua is a
Partner of HLM Venture Partners (provider of venture capital),
where he has held various positions since 1992. Mr. Grua
also serves as a Director of The Advisory Board Company
(provider of best practices research and analysis to the health
care industry). Mr. Grua served as a Director of
Familymeds, Inc. (an operator of apothecary pharmacies) until
2007 and Renal Care Group, Inc. (an operator of kidney dialysis
facilities) until 2006. Mr. Grua has served as a Director
of the Company since 1999 and is a member of the Boards
Executive, Investment, Nominating/Corporate Governance and
Planning Committees. Mr. Grua serves as the Chair of the
Nominating/Corporate Governance Committee and the presiding
Director of executive sessions of non-employee Directors and
independent Directors. Mr. Gruas entrepreneurial and
leadership experience with HLM Venture Partners and his
expertise in the health care industry through directorships with
a variety of public and private companies are valuable assets to
the Board.
R. Scott Trumbull,
age 61. Mr. Trumbull is Chairman and
Chief Executive Officer of Franklin Electric Co., Inc.
(manufacturer of water and fuel pumping systems), a position he
has held since January 2003. From October 2001 through December
2002, Mr. Trumbull was Executive Vice President and Chief
Financial Officer of Owens-Illinois, Inc. (manufacturer of glass
containers). From 1993 to October 2001, Mr. Trumbull served
as Executive Vice President, International
Operations & Corporate Development of Owens-Illinois,
Inc. Mr. Trumbull also serves as Non-Executive Chairman of
the Board of Schneider National, Inc. (privately-held leader in
freight delivery and logistics). Mr. Trumbull has served as
a Director of the Company since 1999 and is a member of the
Boards Audit, Investment and Planning Committees.
Mr. Trumbulls leadership experience as Chairman and
Chief Executive Officer of Franklin Electric Co., Inc. and in
various capacities at Owens-Illinois, Inc. provide the Board
with a global perspective.
3
CLASS II
Directors Whose Terms Continue (2)
Pier C. Borra, age 70. Mr. Borra is
Chairman of CORA Health Services, Inc. (outpatient
rehabilitation services), a position he has held since January
1998. From April 1985 to December 1997, Mr. Borra served as
Chairman, President and Chief Executive Officer of Arbor Health
Care Company (provider of subacute medical services).
Mr. Borra has served as a Director of the Company since
1991 and is a member of the Boards Audit, Investment,
Nominating/Corporate Governance and Planning Committees.
Mr. Borra brings a wealth of knowledge and experience in
the health care industry to the Board as Chairman of CORA Health
Services, Inc. and previously as Chairman, President and Chief
Executive Officer of Arbor Health Care Company.
George L. Chapman,
age 62. Mr. Chapman is Chairman, Chief
Executive Officer and President of the Company. Mr. Chapman
served as Chairman and Chief Executive Officer of the Company
from October 1996 to January 2009 and assumed the additional
title of President of the Company in January 2009.
Mr. Chapman previously served as President of the Company
from September 1995 to May 2002. From January 1992 to September
1995, Mr. Chapman served as Executive Vice President and
General Counsel of the Company. Mr. Chapman has served as a
Director of the Company since 1994 and is a member of the
Boards Executive, Investment and Planning Committees.
Mr. Chapmans
day-to-day
leadership of the Company, as Chairman, Chief Executive Officer
and President, provides him with intimate knowledge of the
Companys business and operations.
Sharon M. Oster, age 61. Ms. Oster
is the Dean of the Yale University School of Management.
Ms. Oster has served as a Director of the Company since
1994 and is a member of the Boards Compensation,
Investment and Planning Committees. Ms. Oster served as a
Director of The Aristotle Corporation (holding company for a
manufacturer and distributor of educational, health and
agricultural products) until 2005 and Transpro, Inc. (designer
and manufacturer of precision transportation products) until
2005. Ms. Osters expertise in competitive strategy,
economic theory and management, leadership role at the Yale
University School of Management and directorships with a variety
of public companies give her a unique perspective.
Jeffrey R. Otten, age 59. Mr. Otten
is the President of JRO Ventures Inc. (management consulting
firm), a position he has held since 2002. From January 2004 to
August 2005, Mr. Otten served as Chief Executive Officer of
Stentor Corporation (provider of digital medical imaging). From
1994 to 2002, Mr. Otten served as Chief Executive Officer
of Brigham and Womens Hospital, a teaching affiliate of
Harvard Medical School. Mr. Otten has served as a Director
of the Company since January 2008 and is a member of the
Boards Audit, Investment, Nominating/Corporate Governance
and Planning Committees. Mr. Otten has extensive knowledge
of the hospital sector and health care industry from his service
as Chief Executive Officer of Brigham and Womens Hospital
and entrepreneurial and leadership experience from his work as
President of JRO Ventures Inc. and Chief Executive Officer of
Stentor Corporation.
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The terms of Messrs. Ballard, Grua and Trumbull expire in
2011. |
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The terms of Ms. Oster and Messrs. Borra, Chapman and
Otten expire in 2012. |
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BOARD AND
COMMITTEES
Leadership
Structure
The Board is responsible for the selection of the Chairman of
the Board and the Chief Executive Officer. The Board believes it
is in the best interests of the Company for the Board to make a
determination regarding whether to separate the roles of
Chairman and Chief Executive Officer based upon the
circumstances. Accordingly, these roles may be filled by one
individual or by two different individuals (and during the
course of its history, the Company has utilized each leadership
model). Currently, Mr. Chapman serves as the Chairman,
Chief Executive Officer and President of the Company. The Board
has determined that this leadership structure is appropriate for
the Company given the background, skills and experience of
Mr. Chapman and the sustained growth and performance of the
Company under Mr. Chapmans leadership. The Board
periodically reviews and assesses the Companys leadership
structure in connection with its review of succession planning.
During this review, Mr. Chapman and the Board discuss
future candidates for senior leadership positions, succession
timing for those positions, and development plans for the
highest-potential candidates. This process ensures continuity of
leadership over the long term, and it forms the basis on which
the Company makes ongoing leadership assignments. See
Executive Officers below for a description of the
roles, background and experience of the Executive Officers of
the Company.
Mr. Chapman presides at all meetings of the stockholders
and of the Board of Directors (except as noted below) and
generally supervises the business of the Company. The Board met
four times during the year ended December 31, 2009.
Executive sessions of non-employee Directors are held after
regularly scheduled meetings of the Board and an executive
session of independent Directors is held at least once each
year. The presiding Director of these sessions is the Chair of
the Nominating/Corporate Governance Committee, currently
Mr. Grua. As presiding Director, Mr. Grua acts as a
liaison between the independent Directors and the Chairman,
coordinates the activities of the independent Directors,
communicates with the independent Directors between meetings as
needed and performs such other functions as designated from time
to time by the Board. The Board believes the current leadership
structure provides an appropriate balance between strategic
development and independent oversight of Management.
Independence
and Meetings
The Board has adopted Corporate Governance Guidelines that meet
the listing standards adopted by the New York Stock Exchange and
a Code of Business Conduct and Ethics that meets the New York
Stock Exchanges listing standards and complies with the
rules of the Securities and Exchange Commission. The Corporate
Governance Guidelines and Code of Business Conduct and Ethics
are available on the Companys website at www.hcreit.com.
Pursuant to the Corporate Governance Guidelines, the Board
undertook a review of Director independence in January 2010.
During this review, the Board considered transactions and
relationships between each Director, or any member of his or her
immediate family, and the Company and its subsidiaries and
affiliates. The purpose of this review was to determine whether
any relationships or transactions were inconsistent with a
determination that a Director is independent.
The Board determined that other than Messrs. Chapman and
Klipsch, all of the Directors (Ms. Oster and
Messrs. Ballard, Borra, DeRosa, Donahue, Grua, Otten and
Trumbull) meet the specific minimum independence requirements of
the New York Stock Exchange. The Board also determined that,
other than Messrs. Chapman and Klipsch, all of the
Directors (Ms. Oster and Messrs. Ballard, Borra,
DeRosa, Donahue, Grua, Otten and Trumbull) have no material
relationship with the Company (either directly or as a partner,
stockholder or officer of an organization that has a
relationship with the Company) and are therefore independent
under the general independence standards of the New York Stock
Exchange and the Corporate Governance Guidelines.
The Board determined that all of the members of the Audit
Committee (Messrs. Borra, DeRosa, Otten and Trumbull) are
independent under the general independence standards of the New
York Stock Exchange and the Corporate Governance Guidelines and
under the separate independence standards for audit committee
members under
Rule 10A-3
of the Securities Exchange Act of 1934, as amended.
Additionally, the Board determined that all of the members of
the Compensation Committee (Ms. Oster and
Messrs. Ballard and Donahue) are independent, non-employee
and outside Directors, as the case may be, under the rules of
the New York Stock Exchange,
5
Securities and Exchange Commission and Internal Revenue Service.
Finally, the Board determined that all of the members of the
Nominating/Corporate Governance Committee (Messrs. Borra,
DeRosa, Grua and Otten) are independent under the rules of the
New York Stock Exchange.
The Board also determined that of the three nominees for
election at the Annual Meeting (Messrs. DeRosa, Donahue and
Klipsch), Messrs. DeRosa and Donahue are independent from
the Company and its Management under the standards set forth in
the Corporate Governance Guidelines.
The Companys policy is to schedule a meeting of the Board
on the date of the annual meeting of stockholders and all of the
Directors are encouraged to attend that meeting. Nine Directors
attended last years annual meeting of stockholders.
The Board has standing Audit, Compensation, Executive,
Investment, Nominating/Corporate Governance and Planning
Committees. In 2009, all incumbent Directors attended at least
75% of the aggregate of the meetings of the Board and the
committees on which they served.
Risk
Management
The Board of Directors, as a whole and at the committee level,
plays an important role in overseeing the management of the
Companys risks. The Board regularly reviews the
Companys material risks and exposures, including
operational, strategic, financial, legal and regulatory risks.
The Audit Committee reviews the management of financial risk and
the Companys policies regarding risk assessment and risk
management. The Compensation Committee reviews the management of
risks relating to the Companys compensation plans and
arrangements. The Nominating/Corporate Governance Committee
reviews the management of risks relating to compliance and the
Companys corporate governance policies. While each
committee is responsible for monitoring certain risks and the
management of such risks, the entire Board of Directors is
regularly informed about such risks through committee reports.
Management is responsible for identifying the Companys
significant risks, developing risk management strategies and
policies and integrating risk management into the Companys
decision-making process. To that end, the Company has
implemented an enterprise risk management program and created an
internal risk management steering committee charged with
identifying, monitoring and controlling such risks and
exposures. This risk management structure helps ensure that
necessary information regarding significant risks and exposures
is transmitted to the Companys leadership, including
Management, the appropriate Board committees and the Board of
Directors.
Audit
Committee
The Audit Committee has the authority and responsibility to
engage and discharge the independent registered public
accounting firm, pre-approve all audit and non-audit services to
be provided by such firm, review the plan and results of the
auditing engagement, review Managements evaluation of the
adequacy of the Companys system of internal control over
financial reporting, direct and supervise investigations into
matters within the scope of its duties, and perform the duties
set forth in its written charter and such other duties as are
required by applicable laws or securities exchange rules. The
members of the Audit Committee are Messrs. Borra, DeRosa,
Otten and Trumbull, with Mr. DeRosa serving as Chair. The
Audit Committee met five times during the year ended
December 31, 2009.
The Audit Committee is comprised solely of Directors who are not
officers or employees of the Company and who the Board has
determined have the requisite financial literacy to serve on the
Audit Committee. Additionally, the Board determined that no
member of the Committee has any material relationship with the
Company that might interfere with the exercise of the
members independent judgment and that each member meets
the standards of independence established by the Securities and
Exchange Commission and the New York Stock Exchange. See
Independence and Meetings above for a discussion of
independence determinations.
The Board, after reviewing all of the relevant facts and
circumstances, determined that Messrs. Borra, DeRosa and
Trumbull are audit committee financial experts.
6
The Audit Committee is governed by a written charter approved by
the Board of Directors. The charter is available on the
Companys website at www.hcreit.com.
Compensation
Committee
The Compensation Committee is responsible for determining the
nature and amount of compensation for Executive Officers. The
members of the Compensation Committee are Ms. Oster and
Messrs. Ballard and Donahue, with Mr. Donahue serving
as Chair. The Compensation Committee met seven times during the
year ended December 31, 2009. The Board determined that the
members of the Compensation Committee are independent,
non-employee and outside directors, as the case may be, under
the rules of the New York Stock Exchange, Securities and
Exchange Commission and Internal Revenue Service. The
Compensation Committee is governed by a written charter approved
by the Board of Directors. The charter is available on the
Companys website at www.hcreit.com. See Executive
Compensation Compensation Discussion and
Analysis for additional information regarding the
Compensation Committee.
Executive
Committee
The function of the Executive Committee is to exercise all the
powers of the Board (except any powers specifically reserved to
the Board) between meetings of the Board. The Executive
Committee is also responsible for reviewing and approving the
Companys investments between meetings of the Investment
Committee. The members of the Executive Committee are
Messrs. Ballard, Chapman and Grua. The Executive Committee
met once during the year ended December 31, 2009.
Investment
Committee
The function of the Investment Committee is to review and
approve the Companys investments in health care and senior
housing real estate. During the year ended December 31,
2009, the Investment Committee met four times. Each member of
the Board is a member of the Investment Committee. The Executive
Committee is responsible for reviewing and approving the
Companys investments between meetings of the Investment
Committee.
Nominating/Corporate
Governance Committee
Responsibilities and Members. The
Nominating/Corporate Governance Committee is responsible for
reviewing and interviewing qualified candidates to serve on the
Board, to make nominations to fill vacancies on the Board and to
select the nominees for the Directors to be elected by the
stockholders at each annual meeting. In addition, the Committee
is responsible for evaluating, implementing and overseeing the
standards and guidelines for the governance of the Company,
including monitoring compliance with those standards and
guidelines, developing and implementing succession plans and
evaluating the performance of the Board. The members of the
Nominating/Corporate Governance Committee are
Messrs. Borra, DeRosa, Grua and Otten, with Mr. Grua
serving as Chair. The Nominating/Corporate Governance Committee
met five times during the year ended December 31, 2009.
The Committee is comprised solely of Directors who are not
officers or employees of the Company. The Board has determined
that no member of the Committee has any material relationship
with the Company that might interfere with the members
exercise of his independent judgment and that each member meets
the standards of independence established by the New York Stock
Exchange.
The Nominating/Corporate Governance Committee is governed by a
written charter approved by the Board of Directors. The charter
is available on the Companys website at www.hcreit.com.
Consideration of Director Nominees. The Board
believes that a nominee for Director should be or have been a
senior manager, chief operating officer, chief financial officer
or chief executive officer of a complex organization such as a
corporation, university, foundation or governmental entity or
unit or, if in a professional capacity, be accustomed to dealing
with complex problems, or otherwise have obtained and excelled
in a position of leadership. In addition, Directors and nominees
for Director should have the education, experience,
intelligence, independence,
7
fairness, reasoning ability, practical wisdom and vision to
exercise sound business judgment and should have high personal
and professional ethics, strength of character, integrity and
values. Also, Directors and nominees for Director should be
available and willing to attend regularly scheduled meetings of
the Board and its committees and otherwise able to contribute a
reasonable amount of time to the Companys affairs, with
participation on other boards of directors encouraged to provide
breadth of experience to the Board. The age at the time of
election of any nominee for Director should be such to assure a
minimum of three years of service as a Director.
In identifying and evaluating nominees for Director, the
Committee first looks at the overall size and structure of the
Board each year to determine the need to add or remove
Directors. Second, taking into consideration the characteristics
mentioned above, the Committee determines if there are any
specific qualities or skills that would complement the existing
strengths of the Board. The Committee takes diversity into
account in identifying and evaluating nominees for Director. The
Committee considers diversity in terms of (1) professional
experience, including experience in the Companys primary
business segments and in areas of possible future expansion,
(2) educational background and (3) age, race, gender
and national origin.
The Committee uses multiple sources for identifying and
evaluating nominees for Director, including referrals from
current Directors and Management, and may seek input from third
party executive search firms retained at the Companys
expense. If the Committee retains one or more search firms, such
firms may be asked to identify possible nominees, interview and
screen such nominees and act as a liaison between the Committee
and each nominee during the screening and evaluation process.
The Committee will review the résumé and
qualifications of each candidate based on the criteria described
above, and determine whether the candidate would add value to
the Board. With respect to candidates that are determined by the
Committee to be potential nominees, the Committee will obtain
such background and reference checks as it deems necessary, and
the Chair of the Committee and the Chairman of the Board will
interview qualified candidates. Once it is determined that a
candidate is a good prospect, the candidate will be invited to
meet the other members of the Committee. If the candidate is
approved by the Committee, the candidate will have an
opportunity to meet with the remaining Directors and Management.
At the end of this process, if the Committee determines that the
candidate will be able to add value to the Board and the
candidate expresses his or her interest in serving on the Board,
the Committee will then recommend to the Board that the
candidate stand for election by the stockholders or fill a
vacancy or newly created position on the Board. Each year, the
Board and the Committee evaluate the size, composition and
diversity of the Board as part of the Board and Committee
self-evaluation process. These self-evaluations help the
Committee assess the effectiveness of the foregoing procedures
for identifying and evaluating nominees for Director.
The Committee will consider qualified nominees recommended by
stockholders who may submit recommendations to the Committee in
care of the Senior Vice President-Administration and Corporate
Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio
43603-1475.
The Committee requires that stockholder recommendations for
Director nominees be submitted by November 26, 2010 and be
accompanied by (1) the name, age, business address and, if
known, residence address of the nominee, (2) the principal
occupation or employment of the nominee for at least the last
five years and a description of the qualifications of the
nominee, (3) the class or series and number of shares of
the Companys stock that are owned beneficially or of
record by the nominee and (4) any other information
relating to the nominee that is required to be disclosed in
solicitations for proxies for election of Directors under
Regulation 14A of the Securities Exchange Act of 1934, as
amended, together with a written statement from the nominee that
he or she is willing to be nominated and desires to serve, if
elected. Also, the stockholder making the nomination should
include (1) his or her name and record address, together
with the name and address of any other stockholder known to be
supporting the nominee and (2) the class or series and
number of shares of the Companys stock that are owned
beneficially or of record by the stockholder making the
nomination and by any other supporting stockholders. Nominees
for Director who are recommended by stockholders will be
evaluated in the same manner as any other nominee for Director.
In addition to the right of stockholders to recommend Director
nominees to the Committee, the By-Laws provide that a
stockholder entitled to vote for the election of Directors may
make nominations at a meeting of stockholders of persons for
election to the Board if the stockholder has complied with
specified prior notice requirements. To be timely, a
stockholders notice of an intent to nominate a Director at
a meeting of stockholders must be in writing and delivered to
the Senior Vice President-Administration and Corporate Secretary
not more than 120 days prior to the meeting and not less
than 45 days before the date on which the Company first
mailed or
8
otherwise gave notice for the prior years annual meeting
of stockholders. With respect to the 2011 Annual Meeting, such a
notice must be received by the Senior Vice
President-Administration and Corporate Secretary by
February 9, 2011. The By-Laws further require that such a
notice include all of the information specified in the preceding
paragraph for stockholder recommendations to the Committee for
Director nominees.
The Company may require that the proposed nominee furnish other
information as the Company may reasonably request to assist in
determining the eligibility of the proposed nominee to serve as
a Director. At any meeting of stockholders, the Chairman of the
Board may disregard the purported nomination of any person not
made in compliance with these procedures.
Planning
Committee
The function of the Planning Committee is to assist Management
with identifying strategic opportunities for the Company. The
Planning Committee met once during the year ended
December 31, 2009. Each member of the Board is a member of
the Planning Committee.
COMMUNICATIONS
WITH THE BOARD
Stockholders and other parties interested in communicating with
the Board of Directors or any specific Directors, including the
presiding Director of executive sessions of non-employee
Directors and independent Directors, or the non-employee or
independent Directors as a group, may do so by writing to the
Board of Directors, Health Care REIT, Inc., 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 such correspondence.
EXECUTIVE
OFFICERS
The following information is furnished as to the Executive
Officers of the Company:
George L. Chapman,
age 62. Mr. Chapman has served as
Chairman and Chief Executive Officer of the Company since
October 1996. Mr. Chapman assumed the additional title of
President of the Company in January 2009. As described above,
Mr. Chapman has served in various executive capacities with
the Company since 1992.
Scott A. Estes, age 39. Mr. Estes
has served as Senior Vice President and Chief Financial Officer
of the Company since March 2006 and was promoted to Executive
Vice President and Chief Financial Officer in January 2009.
Mr. Estes served as Vice President of Finance of the
Company from April 2003 to March 2006. From January 2000 to
April 2003, Mr. Estes served as a Senior Research Analyst
and Vice President with Deutsche Bank Securities.
Charles J. Herman, Jr.,
age 44. 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 50. Mr. Miller has served as
Executive Vice President and General Counsel of the Company
since March 2006 and assumed the additional title of Executive
Vice President-Operations in January
9
2009. Mr. Miller 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.
John T. Thomas, age 43. Mr. Thomas
has served as Executive Vice President-Medical Facilities since
January 2009. Mr. Thomas served as President and Chief
Development Officer of Cirrus Health, an owner and operator of
hospitals, ambulatory surgery centers and other health care
facilities, from July 2005 to January 2009. Mr. Thomas
served as Senior Vice President/General Counsel for Baylor
Health Care System from October 2000 to July 2005 and as General
Counsel/Secretary for the St. Louis division of the Sisters
of Mercy Health System from April 1997 to October 2000.
Michael A. Crabtree,
age 53. Mr. Crabtree has served as Vice
President and Treasurer of the Company since March 2006 and was
promoted to Senior Vice President and Treasurer in January 2009.
Mr. Crabtree served as Treasurer from July 2000 to March
2006 and served as Controller of the Company from 1996 to
September 2002. From July 1993 to July 1996, Mr. Crabtree
was Chief Financial Officer of Westhaven Services Co., a
provider of pharmaceutical services to nursing homes.
Erin C. Ibele, age 48. 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 59. Mr. Loftus
has served as Senior Vice President of the Company since
December 2006. Mr. Loftus served as Secretary and General
Counsel of Windrose Medical Properties Trust from March 2002
until December 2006, when Windrose Medical Properties Trust
merged with the Company. Mr. Loftus was Of Counsel to Bone
McAllester Norton PLLC during 2002 and Wyatt,
Tarrant & Combs, LLP in Nashville, Tennessee from late
1997 to March 2002.
10
SECURITY
OWNERSHIP OF DIRECTORS AND MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The table below sets forth, as of March 11, 2010, unless
otherwise specified, certain information with respect to the
beneficial ownership of the Companys shares of common
stock by each Director of the Company, each Named Executive
Officer (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.
|
|
|
29,267
|
|
|
|
0
|
|
|
|
29,267
|
(5)
|
Pier C. Borra
|
|
|
65,482
|
|
|
|
0
|
|
|
|
65,482
|
|
Raymond W. Braun
|
|
|
110,111
|
|
|
|
0
|
|
|
|
110,111
|
(6)
|
George L. Chapman
|
|
|
361,964
|
|
|
|
233,492
|
|
|
|
595,456
|
|
Thomas J. DeRosa
|
|
|
12,076
|
|
|
|
10,000
|
|
|
|
22,076
|
|
Jeffrey H. Donahue
|
|
|
22,026
|
|
|
|
0
|
|
|
|
22,026
|
|
Scott A. Estes
|
|
|
49,675
|
|
|
|
33,860
|
|
|
|
83,535
|
|
Peter J. Grua
|
|
|
22,276
|
|
|
|
1,666
|
|
|
|
23,942
|
|
Charles J. Herman, Jr.
|
|
|
65,324
|
|
|
|
36,692
|
|
|
|
102,016
|
|
Fred S. Klipsch
|
|
|
42,745
|
|
|
|
0
|
|
|
|
42,745
|
|
Jeffrey H. Miller
|
|
|
44,934
|
|
|
|
27,845
|
|
|
|
72,779
|
|
Sharon M. Oster
|
|
|
17,276
|
|
|
|
0
|
|
|
|
17,276
|
|
Jeffrey R. Otten
|
|
|
5,742
|
|
|
|
0
|
|
|
|
5,742
|
(7)
|
John T. Thomas
|
|
|
17,462
|
|
|
|
0
|
|
|
|
17,462
|
|
R. Scott Trumbull
|
|
|
50,231
|
|
|
|
0
|
|
|
|
50,231
|
|
All Directors and Executive Officers as a group (17 persons)
|
|
|
924,212
|
|
|
|
410,352
|
|
|
|
1,334,564
|
(8)
|
|
|
|
(1) |
|
Includes all restricted shares granted under the Companys
1995 Stock Incentive Plan, Stock Plan for Non-Employee Directors
or Amended and Restated 2005 Long-Term Incentive Plan
(2005 Long-Term Incentive Plan) beneficially owned
by such Directors and Named Executive Officers and all Directors
and Executive Officers as a group as of March 11, 2010. |
|
(2) |
|
Does not include 571 deferred stock units granted to each
non-employee Director (other than Messrs. Klipsch and
Otten) in 2008 that have not yet been converted into shares of
common stock. These deferred stock units will be converted into
shares of common stock on the next anniversary of the date of
grant. |
|
(3) |
|
Does not include 1,351 deferred stock units granted to each
non-employee Director in 2009 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 1,733 deferred stock units granted to each
non-employee Director in 2010. These deferred stock units will
be converted into shares of common stock in three equal
installments on the next three anniversaries of the date of
grant. |
|
(5) |
|
Mr. Ballards total shares beneficially owned include
5,000 shares owned by his spouse. |
|
(6) |
|
Mr. Braun must be included in this table under the rules of
the Securities and Exchange Commission because he is a Named
Executive Officer. Mr. Brauns total shares
beneficially owned are reported as of January 31, 2009, his
last day as an employee of the Company, and include
29,551 shares owned by his spouses revocable trust.
Mr. Brauns right to exercise all or any portion of
his stock options expired on December 31, 2009. |
11
|
|
|
(7) |
|
Does not include 833 deferred stock units granted to
Mr. Otten on March 6, 2008 that have not yet been
converted into shares of common stock. These deferred stock
units will be converted into shares of common stock on the next
anniversary of the date of grant. |
|
(8) |
|
Total beneficial ownership represents 1.08% of the outstanding
shares of common stock of the Company. This percentage does not
include the shares beneficially owned by Mr. Braun because
he is no longer an Executive Officer or Director of the Company. |
Based upon filings made with the Securities and Exchange
Commission in 2010, the only stockholders known to the Company
to be the beneficial owners of more than 5% of the
Companys common stock at March 11, 2010 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
Common Stock
|
|
|
Outstanding
|
|
Beneficial Owner
|
|
Beneficially Owned
|
|
|
Common Stock(3)
|
|
|
The Vanguard Group, Inc.
|
|
|
11,605,453
|
(1)
|
|
|
9.37
|
%
|
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
|
|
|
9,986,380
|
(2)
|
|
|
8.06
|
%
|
40 East 52nd Street
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 175,239 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 195,539 shares, sole dispositive power over
11,430,214 shares and shared dispositive power over
175,239 shares. |
|
(2) |
|
In the aggregate, BlackRock, Inc. and its affiliates have sole
voting power and sole dispositive power over
9,986,380 shares. |
|
(3) |
|
The percentages set forth in the table reflect percentage
ownership as of March 11, 2010. The actual filings of these
beneficial owners provide percentage ownership as of
December 31, 2009. |
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, 2009.
EXECUTIVE
COMPENSATION
An overview and analysis of the Companys compensation
programs and policies, the material compensation decisions made
under those programs and policies with respect to the Executive
Officers, and the material factors considered in making those
decisions are set forth below. Following this Compensation
Discussion and Analysis is a series of tables containing
specific data about the compensation earned in 2009 by the
following individuals, referred to as the Named Executive
Officers:
|
|
|
|
|
George L. Chapman Chairman, Chief Executive Officer
and President
|
|
|
|
Scott A. Estes Executive Vice President and Chief
Financial Officer
|
|
|
|
Jeffrey H. Miller Executive Vice
President-Operations and General Counsel
|
|
|
|
Charles J. Herman, Jr. Executive Vice
President and Chief Investment Officer
|
|
|
|
John T. Thomas Executive Vice President-Medical
Facilities
|
|
|
|
Raymond W. Braun Former President
|
12
On January 31, 2009, Mr. Braun resigned from the Board
of Directors and as the President of the Company, and entered
into a consulting agreement. See Employment and Consulting
Agreements below for additional information regarding this
consulting arrangement with Mr. Braun.
Compensation
Discussion and Analysis
Executive
Compensation Program Objectives
The Companys compensation programs are designed to achieve
the following objectives:
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|
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|
|
Attract and retain top Management talent. The
executive compensation programs are structured to provide
market-competitive compensation opportunities for the
Companys Executive Officers. Target total compensation is
generally positioned at the median of the Companys
competitive market in order to attract and retain talented
executives who have the necessary experience and skills to do
their jobs successfully. Each year, the Compensation Committee
conducts a comprehensive review of the Companys executive
compensation programs, including a comparative analysis of its
compensation practices versus those of the Companys peers,
a review of the five-year history of the compensation paid to
each Executive Officer and an assessment of each Executive
Officers experience, role in the organization and
individual performance. Following this review, the Committee
establishes target total compensation opportunities, which may
be above or below the market median. As described in more detail
below, multi-year vesting of long-term incentive compensation is
used to help achieve the Companys retention objectives.
|
|
|
|
Link compensation realized to the achievement of the
Companys short- and long-term financial and strategic
goals. A majority of each Executive
Officers total direct compensation opportunity is in the
form of annual and long-term incentive compensation. Actual
compensation may be above or below the targeted level, depending
on achievement relative to pre-established performance goals, at
both the corporate and individual levels, that are designed to
support the Companys short- and long-term business plans.
|
|
|
|
Align Management and stockholder interests by encouraging
long-term stockholder value creation. The
long-term incentive component of compensation is granted in the
form of Company equity, which aligns Managements interests
with those of the Companys stockholders. The value
realized by the Executive Officer from equity compensation is
directly linked to the value created for the Companys
stockholders.
|
Compensation
Committee Procedures
The Compensation Committee is responsible for determining the
nature and amount of compensation for the Companys Chief
Executive Officer and for reviewing and approving the
compensation for the Companys other seven Executive
Officers. The Committee consists of three non-employee
Directors. Jeffrey H. Donahue is the Compensation Committee
Chair and William C. Ballard, Jr. and Sharon M. Oster are
Committee members.
Compensation
Consultant
The Compensation Committee engages Frederic W. Cook &
Co., Inc. (Cook & Co.) as its independent
compensation consultant to advise the Committee on compensation
program design, the components of the Companys executive
compensation programs and the amounts the Company should pay its
Executive Officers. Cook & Co. also provides the
Committee with information on executive compensation trends and
best practices and advice for potential improvements to the
executive compensation programs. Cook & Co. also
advises the Committee on the design and amount of compensation
for non-employee Directors.
Cook & Co. performs no services for Management unless
requested by and on behalf of the Compensation Committee Chair,
receives no compensation from the Company other than for its
work in advising the Committee and maintains no other economic
relationships with the Company. The consultant generally attends
meetings of the Committee, and the Chair of the Committee
frequently interacts with the consultant between meetings to
define the nature of work to be conducted, to review materials
to be presented at Committee meetings and to obtain the
consultants opinion and perspective on proposals prepared
by Management. As part of the process of assessing the
effectiveness of the Companys compensation programs and
assisting with implementation, the consultant also
13
interacts with members of Management. The consultants
primary contacts with Management are the Executive Vice
President and Chief Financial Officer and the Senior Vice
President-Administration and Corporate Secretary.
Input
of Executive Officers on Compensation
The Compensation Committee receives input from certain Executive
Officers on a variety of issues related to compensation.
|
|
|
|
|
The Chairman, Chief Executive Officer and President provides an
assessment of the individual performance achievement of the
other Executive Officers. This individual performance assessment
determines a portion of each Executive Officers annual and
long-term incentive compensation. In addition, the Chairman,
Chief Executive Officer and President provides input on salary
increases and increases to incentive compensation opportunities
for the Executive Officers. The Committee takes these
recommendations into consideration when determining earned
incentive compensation and when setting compensation
opportunities for the coming year.
|
|
|
|
Each year, Management establishes an annual plan for the
Boards review, which includes financial budgets and key
strategic objectives for the Company. The Committee has designed
the compensation programs to reward the achievement of certain
financial and strategic objectives included in the annual plan.
Because members of Management prepare the initial plan, they
have input into the performance measures and goals used in the
incentive programs.
|
|
|
|
The Companys Executive 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
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 first presented and discussed at the
Committee meeting held on May 7, 2009.
The 2009 review first examined the appropriateness of the peer
group used for compensation and performance comparisons. Given
the Companys growth, it became apparent that the
Compensation Committee needed to change some of the companies in
the peer group so that the Company would be positioned in the
median range in terms of various size measures. As a result, the
Compensation Committee eliminated some of the smaller REITs from
the peer group and added some larger REITs.
The comparative peer group used in 2009 included three REITs in
the health care sector and seven other REITs of similar size to
the Company in terms of market and total capitalization. These
REITs were:
|
|
|
Alexandria Real Estate Equities, Inc.
|
|
Host Hotels & Resorts, Inc.
|
AMB Property Corporation
|
|
Kimco Realty Corporation
|
AvalonBay Communities, Inc.
|
|
Nationwide Health Properties, Inc.
|
Boston Properties, Inc.
|
|
UDR, Inc.
|
HCP, Inc.
|
|
Ventas, Inc.
|
Companies from the 2008 peer group that were not included in the
2009 peer group include: Developers Diversified Realty Corp.,
Duke Realty Corporation, Federal Realty Investment Trust,
Healthcare Realty Trust Incorporated, Liberty Property
Trust, The Macerich Company, Regency Centers Corporation and
Weingarten Realty Investors. Peers that were in both the 2008
and 2009 peer groups include: Alexandria Real Estate Equities,
Inc., AMB Property Corporation, HCP, Inc., Nationwide Health
Properties, Inc., UDR, Inc. and Ventas, Inc. Companies
14
new to the peer group in 2009 include: AvalonBay Communities,
Inc., Boston Properties, Inc., Host Hotels & Resorts,
Inc. and Kimco Realty Corporation.
This review included a competitive analysis of the
Companys compensation practices versus those of its peers.
The comprehensive review included a competitive benchmarking
analysis for the Companys top-five Executive Officers,
including Messrs. Chapman, Estes, Miller, Herman and
Thomas. 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 non-qualified deferred compensation, etc.)
and total compensation. 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 enabled the Committee to identify those
Executive Officers whose target compensation levels deviated
from the desired median competitive positioning, to examine the
link between pay and performance in the Companys
compensation programs, and to plan compensation adjustments
accordingly. The Committee used the benchmarking data and the
tally sheet in assessing internal pay relationships among
Executive Officers and in making decisions regarding adjustments
to each Executive Officers compensation opportunities.
Findings from this review indicated that Mr. Chapmans
target total direct compensation approximated the market median
of the peer group, and his actual total direct compensation for
the prior year was between the median and 75th percentile,
despite the fact that the Companys performance was near
the peer group maximum in terms of one, three, and five-year
total shareholder return. The findings also indicated that both
target and actual total direct compensation for
Messrs. Estes, Miller, Herman and Thomas were below the
25th
percentile of the peer group average of the second through fifth
highest paid executives, which was in contrast with the
Companys upper-quartile historical performance.
May 7, 2009 Meeting. Based on the results
of the competitive review discussed at the May meeting, the
Compensation Committee decided to adjust annual and long-term
incentive opportunities for Messrs. Chapman, Estes, Miller,
Herman and Thomas to bring target pay opportunities closer to
the market median. The Compensation Committee did not adjust
base salaries at the May 7, 2009 meeting.
January 28, 2010 Meeting. At the
January 28, 2010 meeting, the Committee reviewed the
Companys performance for 2009 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 2009
performance were approved by the Committee and made on
January 28, 2010. Cash bonuses for the Executive Officers
for 2009 performance were approved by the Committee on
January 28, 2010 and paid in February 2010. At the
January 28, 2010 meeting, the Committee also reviewed and
approved adjustments to base salaries for 2010 for each of the
Executive Officers.
Compensation
Elements
The Companys executive compensation programs have the
following elements:
|
|
|
|
|
Base salary
|
|
|
|
Annual incentives (cash bonuses)
|
|
|
|
Long-term incentives
|
|
|
|
Benefits and perquisites
|
Base
Salary
Base salaries are paid because some minimum level of fixed
compensation is necessary to attract and retain executive
talent. Base salaries are generally targeted to the competitive
market median, but may deviate from this competitive position
based on the scope of the individuals role in the
organization, his or her level of experience in the current
position and individual performance. Base salaries are reviewed
annually and may be adjusted to better
15
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
|
|
2009
|
|
|
2010
|
|
|
% Increase
|
|
|
George L. Chapman
|
|
$
|
640,338
|
|
|
$
|
653,145
|
|
|
|
2.0
|
%
|
Scott A. Estes
|
|
|
325,000
|
|
|
|
331,500
|
|
|
|
2.0
|
%
|
Jeffrey H. Miller
|
|
|
325,000
|
|
|
|
331,500
|
|
|
|
2.0
|
%
|
Charles J. Herman, Jr.
|
|
|
304,876
|
|
|
|
315,000
|
|
|
|
3.3
|
%
|
John T. Thomas
|
|
|
290,000
|
(1)
|
|
|
315,000
|
|
|
|
8.6
|
%
|
Raymond W. Braun
|
|
|
837,045
|
(2)
|
|
|
N/A
|
|
|
|
N/
|
A
|
|
|
|
(1) |
|
Mr. Thomas joined the Company as Executive Vice
President-Medical Facilities on January 19, 2009 at an
annual base salary of $290,000. Mr. Thomas received
$276,987 in salary in 2009. |
|
(2) |
|
Mr. Braun received $37,045 in salary for the first month of
2009. On January 31, 2009, Mr. Braun resigned from the
Board of Directors and as the President of the Company, and
entered into a consulting agreement. Under the consulting
agreement, Mr. Braun received a base consulting fee of
$800,000 in 2009. See Employment and Consulting
Agreements below for additional information regarding this
consulting arrangement with Mr. Braun. |
Salary increases for Messrs. Chapman, Estes and Miller of
2.0% were consistent with base salary for all other employees.
The salaries of Messrs. Herman and Thomas were increased by
more than 2.0% in order to bring their salaries closer to those
of Messrs. Estes and Miller. The Compensation Committee
wanted target pay opportunities for these four executives to be
fairly equivalent because the Committee believes the roles and
responsibilities of each executive, while different, are of
generally equal importance to the Company.
Mr. Chapmans base salary, on the other hand, is
higher than the other executives because, as Chairman, Chief
Executive Officer and President, Mr. Chapman has greater
overall responsibility for setting strategy and ensuring the
Companys success.
Annual
Incentives
In 2009, Messrs. Chapman, Estes, Miller, Herman and Thomas
participated in the annual incentive program, which provides
rewards for the achievement of certain performance objectives
tied to the Companys annual business plan, as well as
achievement of individual performance objectives. Under this
program, a range of earnings opportunity is established for each
executive at the beginning of the performance period, expressed
as percentages of base salary and corresponding to three levels
of performance (threshold, target and high). Annual incentives
are paid in cash in the first quarter of the year following the
performance year (e.g., 2009 bonuses were paid in the first
quarter of 2010).
The corporate performance measures were adjusted slightly in
2009 to better support the Companys strategic objectives
for the year.
|
|
|
|
|
Funds from Operations (FFO) per share (weighted
40%). As in prior years, normalized FFO per share was
a significant component, but the weighting was 40% in 2009 as
compared to 65% in 2008, in order to enable the program to also
focus on other measures important to the Companys business
strategy for the year. 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. For purposes of
calculating incentive compensation, FFO per share is adjusted
for unusual and non-recurring items. If the Company achieves a
level of FFO per share as a result of inappropriate amounts of
leverage, the Committee may determine that bonuses should not be
paid for this goal.
|
|
|
|
Strategic Repositioning (weighted 15%). This
new measure was included to provide incentives to successfully
execute the Companys strategy of increasing the percentage
of the real estate portfolio categorized as combination
facilities, which provide multiple levels of service, and
medical facilities, which include medical office buildings and
hospitals.
|
16
|
|
|
|
|
Core MOB NOI (weighted 10%). This new measure
focused Management on increasing net operating income (NOI) of
the core medical office building (MOB) assets. NOI is defined as
total revenues, including tenant reimbursements, less property
operating expenses, which exclude depreciation and amortization,
general and administrative expenses, impairments and interest
expense.
|
|
|
|
Liquidity Preservation (weighted 25%). Given
the tight credit markets in 2009, the Company wanted to ensure
it had sufficient liquidity to cover its debt obligations.
Therefore, a liquidity preservation measure was added, which was
calculated (as of the end of each quarter in 2009) as the
value of cash and line of credit availability less debt
maturities and unfunded development over the next
24 months. In addition, if the quarterly net liquidity
score was greater than $0, then the face amount of
2011-2012
debt maturities that was retired in the quarter was added to the
score. The net liquidity score (from below threshold to maximum)
for each of the four quarters was averaged to determine the
overall score for this measure for 2009.
|
|
|
|
Maintain Credit Ratings (weighted 10%). This
measure, which refers to the Companys credit ratings by
Moodys Investors Service and Standard &
Poors Ratings Services, its weighting, and its goals
remained the same in 2009 as in prior years. Maintenance of
credit ratings by both Moodys Investors Service and
Standard & Poors Ratings Services represented
high performance.
|
|
|
|
Net Real Estate Investments. A net real estate
investment goal was not included in 2009 because increasing net
investments was not one of the Companys primary objectives
for the year.
|
The corporate performance measures and weightings set by the
Compensation Committee for 2009 under the annual incentive
program, as well as the Companys achievement for each
goal, were as follows:
2009
Annual Incentive Corporate Performance Measures
|
|
|
|
|
|
|
|
|
|
|
Measure
|
|
Weighting
|
|
Threshold
|
|
Target
|
|
High
|
|
Actual
|
|
Normalized FFO per Share
|
|
40%
|
|
$2.98
|
|
$3.14
|
|
$3.30
|
|
$3.13
|
|
|
|
|
|
|
|
|
|
|
|
Strategic Repositioning
(% of Combination/ Medical Facilities in Portfolio)
|
|
15%
|
|
69.6%
|
|
70.1%
|
|
71.1%
|
|
69.3%(1)
|
|
|
|
|
|
|
|
|
|
|
|
Core MOB NOI
|
|
10%
|
|
$80.5 Million
|
|
$84.7 Million
|
|
$88.9 Million
|
|
$84.3 Million
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity Preservation
|
|
25%
|
|
$(100 Million)
|
|
$0 Million
|
|
$200 Million
|
|
$466 Million
|
|
|
|
|
|
|
|
|
|
|
|
Maintain Credit Ratings
|
|
10%
|
|
N/A
|
|
Maintain
One
|
|
Maintain
Both
|
|
Maintained
Both
|
|
|
|
(1) |
|
Combination/medical facilities comprised only 69.3% of the
Companys portfolio at the end of 2009 in part because the
Company made the strategic decision to sell certain
underperforming medical office buildings and hospitals during
the year. The Committee considered the fact that Management took
such action because it was in the best long-term interests of
the Company, even though it hurt the score on this performance
measure. As a result, the Committee decided to rate the
Companys performance at the threshold level for this
measure. |
For Mr. Chapman, 80% of the bonus was determined by
corporate performance, as defined above, and 20% by individual
performance. The corporate component was set at 80% because the
Committee believes that almost all of the Chairman, Chief
Executive Officer and Presidents annual incentive
compensation should be based on overall corporate performance
given his high level of responsibility for the Companys
performance. For Messrs. Estes, Miller, Herman and Thomas,
60% of the bonus is determined by corporate performance and 40%
by individual performance. The Committee believes that overall
corporate performance should be the primary basis for
determining annual incentives for these four executives, but
gave individual performance a heavier weighting (as compared to
Mr. Chapman) to reflect the importance of several strategic
initiatives for which each of these executives is primarily
responsible.
Factors considered in the assessment of individual performance
include: implementation of targeted investment strategies,
including initiatives relating to combination senior housing
properties, continuing care retirement
17
communities and modern medical facilities, professional
development of and succession planning for Management,
accountability with rating agencies and effective capital
raising and communication with investors. The Chairman, Chief
Executive Officer and President provides recommendations for
individual performance scores for the Executive Officers who
report to him, based on his assessment of performance versus the
individual factors. The Committee assesses the Chairman, Chief
Executive Officer and Presidents performance against his
individual factors to determine his individual performance
score. For 2009, the Committee determined that each of
Messrs. Chapman, Estes, Miller, Herman and Thomas achieved
between the target and high level of individual performance. For
Mr. Chapman, as Chairman, Chief Executive Officer and
President, important factors included the direction and
performance of the Company, the effectiveness of his leadership
and the implementation of investment strategies. For
Mr. Estes, as Executive Vice President and Chief Financial
Officer, important factors included maintaining adequate
liquidity, strategic positioning in equity and debt markets,
overseeing enterprise risk management and maintaining credit
ratings. For Mr. Miller, as Executive Vice
President-Operations and General Counsel, important factors
included recruiting high quality personnel and operational and
legal support and transitioning under-performing assets. For
Mr. Herman, as Executive Vice President and Chief
Investment Officer, important factors included maintaining
effective marketing, investing at attractive rates, strategic
repositioning to combination/medical facilities and exploring
joint venture opportunities. For Mr. Thomas, as Executive
Vice President-Medical Facilities, important factors included
overseeing the medical facilities group, recruiting high quality
personnel, exploring joint venture opportunities and maintaining
effective marketing.
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 2009 performance that were
approved at the Committees January 28, 2010 meeting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Annual Incentive Opportunity
|
|
|
|
|
|
|
(as a % of Base Salary)
|
|
|
2009 Bonus Earned
|
|
|
|
Threshold
|
|
|
Target
|
|
|
High
|
|
|
% of Base Salary
|
|
|
Amount
|
|
|
Chapman
|
|
|
75
|
%
|
|
|
150
|
%
|
|
|
300
|
%
|
|
|
196
|
%
|
|
$
|
1,254,452
|
|
Estes
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
115
|
%
|
|
|
373,595
|
|
Miller
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
115
|
%
|
|
|
373,595
|
|
Herman
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
115
|
%
|
|
|
350,462
|
|
Thomas
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
115
|
%
|
|
|
333,362
|
|
Long-Term
Incentives
In 2009, Messrs. Chapman, Estes, Miller, Herman and Thomas
participated in the Companys long-term incentive program.
The objectives of the long-term incentive program are to promote
achievement of performance goals, to focus Executive Officers on
creating long-term value for the Companys stockholders,
and to assist the Company in attracting and retaining key
executives. Similar to the annual incentive program, long-term
incentive awards for the year are based on the achievement of
pre-established corporate and individual goals for the
performance year. For each executive, a range of earnings
opportunity, expressed in dollar values, is established at the
beginning of the performance period corresponding to three
levels of performance (threshold, target and high) for long-term
incentive compensation. Seventy-five percent of the value of the
long-term incentive compensation award is based on corporate
performance goals set by the Compensation Committee (15% based
on the Companys total stockholder return relative to the
NAREIT index, 15% based on the Companys total stockholder
return versus a peer index of health care REITs, and 45% based
on the corporate performance score under the annual incentive
18
program), and the remaining 25% is based on individual
performance. The corporate performance goals for 2009, as well
as the achievement level for each goal, were as follows:
2009
Long-Term Incentive Performance Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighting
|
|
Threshold
|
|
Target
|
|
High
|
|
Actual
|
|
Three-Year Annualized Total Stockholder Return vs. NAREIT
Index(1)
|
|
15%
|
|
Index − 4%
(−16.8%)
|
|
At Index
(−12.8%)
|
|
Index + 4%
(−8.8%)
|
|
7.4%
|
Three-Year Annualized Total Stockholder Return vs. LTIP Peer
Group(1)(2)
|
|
15%
|
|
Peer Group − 4%
(0.7%)
|
|
Peer Group
(4.7%)
|
|
Peer Group + 4%
(8.7%)
|
|
7.4%
|
Annual Incentive Corporate Measures
|
|
45%
(in the
aggregate)
|
|
Based on corporate performance measures and actual
performance under the annual incentive program,
utilizing the following weightings:
|
|
|
|
|
Normalized FFO per Share = 18%
|
|
See page 17
|
|
|
|
|
Strategic Repositioning = 6.75%
Core MOB NOI = 4.5%
Liquidity Preservation = 11.25%
Maintain Credit Ratings = 4.5%
|
|
|
Qualitative/Individual Performance
|
|
25%
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
If absolute total stockholder return is at least 8% on a
compound annualized basis, the Executive Officers receive the
threshold payout for these measures. Total stockholder return
represents share price appreciation over the specified period
plus dividends (assuming reinvestment of dividends in additional
shares), on a compound, annualized basis. |
|
(2) |
|
LTIP peer group included HCP, Inc., Healthcare Realty
Trust Incorporated, Nationwide Health Properties, Inc.,
Senior Housing Properties Trust and Ventas, Inc. |
Each of Messrs. Chapman, Estes, Miller, Herman and Thomas
achieved between the target and high level of individual
performance. The assessment of individual performance was based
on the same factors as used to determine individual performance
in the annual incentive program.
Long-term incentive amounts earned are delivered through equity
grants from the 2005 Long-Term Incentive Plan. Consistent with
the grant-type mix used in prior years, the Committee determined
that 75% of the value of long-term incentive compensation earned
for 2009 should be granted in the form of shares of restricted
stock and 25% should be granted in the form of stock options.
The long-term incentive mix is heavily weighted toward
restricted stock because restricted stock provides a strong
incentive to create and preserve long-term stockholder value.
Stock options are used to add share price performance leverage
into the program. Stock options have no value to the holder
unless value is created for the Companys stockholders
through share price appreciation. Generally, equity grants made
on an annual basis vest ratably over five years. This multi-year
vesting creates a retention mechanism for the Executive Officers
and subjects them to the same share price risk over a long-term
period as other investors, thereby aligning their interests with
those of the Companys stockholders.
19
The 2009 long-term incentive earnings opportunities are
reflected in the 2009 Grants of Plan-Based Awards
Table below as dollar amounts. Amounts reflected as
2009 LTI Earned are not included in the
Summary Compensation Table because they were granted
in restricted shares and stock options in 2010. They will be
included in the Summary Compensation Table for the proxy
statement filed in 2011 which will show equity grants made in
2010. The table below outlines the long-term incentive earnings
opportunities for 2009 and the amounts that were approved at the
Committees January 28, 2010 meeting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 LTI Earned
|
|
|
|
2009 Long-Term Incentive (LTI)
|
|
|
Grant
|
|
|
Number of Shares/Options
|
|
|
|
Opportunities
|
|
|
Date
|
|
|
Restricted
|
|
|
Stock
|
|
|
|
Threshold
|
|
|
Target
|
|
|
High
|
|
|
Fair Value
|
|
|
Shares(1)
|
|
|
Options(2)
|
|
|
Chapman
|
|
$
|
1,000,000
|
|
|
$
|
2,000,000
|
|
|
$
|
4,000,000
|
|
|
$
|
2,985,770
|
|
|
|
51,729
|
|
|
|
95,453
|
|
Estes
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
743,705
|
|
|
|
12,885
|
|
|
|
23,776
|
|
Miller
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
743,705
|
|
|
|
12,885
|
|
|
|
23,776
|
|
Herman
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
743,705
|
|
|
|
12,885
|
|
|
|
23,776
|
|
Thomas
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
|
|
743,705
|
|
|
|
12,885
|
|
|
|
23,776
|
|
|
|
|
(1) |
|
Based on a per share grant price of $43.29, the closing price of
the Companys common stock on January 28, 2010, the
date of grant. |
|
(2) |
|
The grant date fair value of each option was $7.82, calculated
using the Black-Scholes option valuation methodology and the
following assumptions: exercise price and current price of
$43.29, 34.08% volatility,
7-year
expected term, 6.28% dividend yield and 3.23% risk-free interest
rate. |
Stock Options with DERs. From 2004 through
2008, the stock option component was split evenly between stock
options with dividend equivalent rights (DERs) and
stock options without DERs (plain vanilla stock
options). Options with DERs entitle the optionholder to receive
a cash payment equal to the dividend paid on a share of the
Companys common stock. Options with DERs are used because
they reward total stockholder return, in the form of both share
price appreciation and dividends. As a REIT, the Company has a
high dividend distribution requirement, so a significant portion
of stockholder return is provided in the form of dividends.
Upon vesting, the holder of each DER receives a lump sum cash
payment equal to all the dividends paid on a share of common
stock from the date the DER was granted to the date the DER
vested. After vesting, unless otherwise specified in the award
agreement, the holder of each DER receives a cash payment equal
to the value of the dividends paid on a share of common stock at
the same time dividends are paid to the common stockholders.
Originally, the DERs were to terminate on the earlier of the
10th anniversary of the grant of the DER or the date that the
underlying stock option was exercised. However, based on
informal statements from the Internal Revenue Service (the
IRS) suggesting that DERs that terminate upon
exercise of the underlying stock option will cause the
underlying stock option to become subject to, and automatically
violate, Section 409A of the Internal Revenue Code of 1986,
as amended (the Code), the stock option agreements
were amended on December 29, 2008 to provide for DER
payments for a fixed term, regardless of whether the underlying
stock option had been exercised. The fixed term for each grant
of DERs was chosen so that the fair value of the award was the
same before and after the modification, resulting in no
incremental expense to the Company. The table below sets forth
the termination dates of the DERs on each of the outstanding
grants, as a result of these amendments.
|
|
|
|
|
Termination Date
|
Stock Option with DER Grant Date
|
|
of DERs
|
|
January 26, 2004
|
|
June 30, 2013
|
January 24, 2005
|
|
September 30, 2013
|
January 23, 2006
|
|
December 31, 2014
|
January 22, 2007
|
|
September 30, 2016
|
January 21, 2008
|
|
March 31, 2017
|
The preferred design would be for the DERs to terminate upon
exercise of the underlying stock option because upon exercise of
the stock option, the employee will hold the common shares and
be entitled to receive actual
20
dividends. Continuation of the DER payments after exercise of
the underlying stock options will result in the payment of
double dividends. Because of the IRS statements
described above, the Compensation Committee decided not to make
any further grants of stock options with DERs unless the IRS
clarifies that DERs that terminate upon exercise of the
underlying stock option will not cause the underlying stock
option to be subject to Section 409A.
Timing of
Awards
Under the equity granting policy, grants to the Named Executive
Officers and other employees are approved by the Compensation
Committee on the date of the January Board meeting, or if later,
as soon as possible following the calculation of the corporate
performance measures and the completion of annual reviews of the
Named Executive Officers and review and consideration of
compensation recommendations. Grant values are converted to
shares based on the closing price of the Companys common
stock on the date of grant. The exercise price of stock options
is the closing price of the Companys common stock on the
date of grant.
Benefits
and Perquisites
Executive Officers participate in the same benefit programs as
all other Company employees, including health and dental
insurance, group life insurance, short- and long-term disability
coverage, partial reimbursement of health club/gym membership
fees and participation in the Companys tax-qualified
retirement plan and trust (the 401(k) Plan). In
addition, Messrs. Chapman and Braun (until January 31,
2009, when his employment agreement expired) each received
certain perquisites in 2009, 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 survivor in the event
of the executives death
|
|
|
|
Supplemental Executive Retirement Plan
(SERP) the SERP provides long-term
financial security and retirement savings for the executive (see
2009 Pension Benefits Table below for additional
information)
|
The Committee reviews the Companys policies with respect
to perquisites on a regular basis. Mr. Chapman is entitled
to receive these perquisites in 2010. See Note 7 to the
Summary Compensation Table for additional
information regarding perquisites, including the dollar values
of the perquisites provided by the Company in 2009.
Supplemental
Executive Retirement Plan
The SERP is a non-qualified defined benefit pension plan adopted
by the Compensation Committee on January 1, 2001. During
2009, Messrs. Chapman and Braun were the only participants
in the SERP. Mr. Brauns employment ceased as of
January 31, 2009, so Mr. Chapman was the only
participant in the SERP for the remainder of 2009 and will be
the only participant in the SERP for 2010. The SERP benefit is
designed to provide a benefit payable at retirement at
age 65 or older equal to 35% of the participants
average compensation at retirement, offset by the actuarial
equivalent of the benefit provided by the Companys 401(k)
Plan. Since the SERP benefit accrues over the career of the
participant, if the participant retires before his 65th
birthday, the benefit will be subject to a reduction for
proration of length of participation and a further reduction
based upon the number of months the participants
retirement occurs prior to his or her 65th birthday.
Average compensation is defined under the SERP to
mean the average of the three highest years of salary and bonus
compensation considering all years completed prior to the date
of retirement. The actuarial equivalent of the benefit provided
by the Companys 401(k) Plan represents the value of
Company contributions to the participants plan accounts
projected to age 65 and expressed as a monthly benefit
payable for life. The projected value of Company contributions
is determined by using all contributions made on behalf of the
participant for plan years completed prior to the date of
retirement and a 7.5% interest rate compounded annually.
In the event of a change in corporate control of the Company, if
Mr. Chapmans employment is terminated, either
voluntarily or involuntarily for any reason, he will be entitled
to receive the full retirement benefit, unreduced by the
proration for length of participation or the early retirement
reduction.
21
Total
Compensation Compared to the Market Median
When examining comparisons to external data, it is important to
understand the dynamic executive compensation environment the
Company has faced over the past several years. Executive
compensation levels among REITs have increased significantly,
and as the Company has grown and is now included in the S&P
500 Index, its relevant comparative peer group has included
larger companies with higher levels of executive compensation.
The combination of these two factors has resulted in dramatic
year-over-year
changes in competitive medians. Although the Committees
intention is to generally provide market-competitive levels of
compensation, which it has defined as median compensation, the
Committee has also been prudent in granting
year-over-year
increases in compensation to the Executive Officers. As a
result, the actual increases in target compensation
opportunities, while substantial, have not brought all Executive
Officers target pay opportunities to the peer group
median. In addition, as previously discussed, the Committee
considers many other factors besides external market data when
setting target compensation opportunities.
Mr. Chapmans compensation was compared to other chief
executive officers within the peer group. His actual total
direct compensation earned for 2009 was above the 75th
percentile of the peer group, which was due to above-target
corporate performance and his strong individual performance.
Mr. Estes compensation was compared to other chief
financial officers as well as the average of the second through
fifth highest paid executives within the peer group. As compared
to other chief financial officers, Mr. Estes actual
total direct compensation earned for 2009 was slightly above the
peer group median. As compared to the average of the second
through fifth highest paid executives, his actual total direct
compensation was in the lower quartile. Mr. Millers
compensation was compared to other general counsel as well as to
the average of the second through fifth highest paid executives
within the peer group. As compared to other general counsel,
Mr. Millers actual total direct compensation earned
for 2009 was at the peer group median. As compared to the
average of the second through fifth highest paid executives, his
actual total direct compensation was in the lower quartile. The
compensation of Messrs. Herman and Thomas was compared to
the average of the second through fifth highest paid executives
within the peer group. Actual total direct compensation earned
by Messrs. Herman and Thomas for 2009 was in the lower
quartile of the peer group.
As discussed above, the Committee adjusted the annual and
long-term incentive opportunities for Messrs. Estes,
Miller, Herman and Thomas in May 2009 to bring target pay
opportunities closer to the market median. However, at the time
these target opportunities were established, they remained below
the market median as compared to the average of the second
through fifth highest paid executives within the peer group.
This reflects the Committees prudence in granting
year-over-year
increases in compensation to the Executive Officers and the
generally high levels of executive compensation paid by the peer
group, particularly to the second highest paid executives within
the peer group.
Ownership
Guidelines
Executive Officers are required to own shares of the
Companys common stock with a fair market value of at least
three times their base salary (five times for the Chief
Executive Officer). Non-employee Directors are required to own
shares of the Companys common stock with a fair market
value of at least $150,000. Shares owned directly and
indirectly, restricted shares and deferred stock units count
towards the ownership requirement, but unexercised stock options
do not. Executive Officers and non-employee Directors have five
years from their date of hire or appointment, as applicable, to
achieve the required ownership level. As of December 31,
2009, each of Messrs. Chapman, Estes, Miller, Herman and
Thomas and each of the non-employee Directors were in compliance
with the ownership requirement.
Tax
Deductibility of Executive Compensation
The Compensation Committee has considered the anticipated tax
treatment to the Company regarding the compensation and benefits
paid to the Named Executive Officers under Section 162(m)
of the Code. Although the Company does not pay corporate federal
income taxes (except with respect to its taxable REIT
subsidiaries) because it is a real estate investment trust, the
Compensation Committee will strive to provide Executive Officers
with attractive, well-designed compensation packages that will
generally preserve the deductibility of such payments for the
Company. Certain types of compensation payments and their
deductibility depend upon the
22
timing of an Executive Officers vesting or exercise of
previously granted rights. Moreover, interpretations of any
changes in the tax laws and other factors beyond the
Compensation Committees control may affect the
deductibility of certain compensation payments. As mentioned
above, however, since the Company does not pay corporate federal
income taxes (except with respect to its taxable REIT
subsidiaries), the loss of this deduction would not have adverse
consequences for the Company. If deductibility becomes an issue,
the Compensation Committee will consider various alternatives to
preserve the deductibility of compensation payments to Executive
Officers and benefits to the extent reasonably practical and to
the extent consistent with its other compensation objectives,
but the Committee reserves the right to make incentive-based
awards not exempt from these limits where such awards are
appropriate and will not have a material impact on stockholder
value.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis of the Company with
Management. Based on the review and discussions, the
Compensation Committee recommended to the Board of Directors,
and the Board has approved, that the Compensation Discussion and
Analysis be included in this Proxy Statement.
Submitted by
the Compensation Committee
Jeffrey H. Donahue, Compensation Committee Chair
William C. Ballard, Jr., Compensation Committee Member
Sharon M. Oster, Compensation Committee Member
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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|
Changes in
|
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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
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Compensation
|
Principal Position
|
|
(1)
|
|
($)
|
|
($)(3)
|
|
($)(4)
|
|
($)(5)
|
|
($)
|
|
($)
|
|
($)(8)
|
|
($)
|
|
George L. Chapman
|
|
|
2009
|
|
|
$
|
640,338
|
|
|
$
|
0
|
|
|
$
|
1,444,258
|
|
|
$
|
481,423
|
|
|
$
|
1,254,452
|
|
|
$
|
808,600
|
(7)
|
|
$
|
41,831
|
|
|
$
|
4,670,902
|
|
Chairman, Chief
|
|
|
2008
|
|
|
|
624,720
|
|
|
|
0
|
|
|
|
1,369,112
|
|
|
|
456,372
|
|
|
|
866,821
|
|
|
|
582,177
|
|
|
|
29,716
|
|
|
|
3,928,918
|
|
Executive Officer and President
|
|
|
2007
|
|
|
|
570,000
|
|
|
|
0
|
|
|
|
6,546,981
|
|
|
|
353,130
|
|
|
|
738,671
|
|
|
|
370,745
|
|
|
|
51,566
|
|
|
|
8,631,093
|
|
Scott A. Estes
|
|
|
2009
|
|
|
|
325,000
|
|
|
|
0
|
|
|
|
444,296
|
|
|
|
148,101
|
|
|
|
373,595
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,303,242
|
|
Executive Vice President and Chief
|
|
|
2008
|
|
|
|
297,000
|
|
|
|
0
|
|
|
|
342,278
|
|
|
|
114,088
|
|
|
|
306,794
|
|
|
|
0
|
|
|
|
11,500
|
|
|
|
1,071,660
|
|
Financial Officer
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|
|
2007
|
|
|
|
270,000
|
|
|
|
0
|
|
|
|
297,519
|
|
|
|
56,562
|
|
|
|
254,571
|
|
|
|
0
|
|
|
|
29,500
|
|
|
|
908,152
|
|
Jeffrey H. Miller
|
|
|
2009
|
|
|
|
325,000
|
|
|
|
0
|
|
|
|
444,296
|
|
|
|
148,101
|
|
|
|
373,595
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,303,242
|
|
Executive Vice President-Operations
|
|
|
2008
|
|
|
|
312,000
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|
|
|
0
|
|
|
|
342,278
|
|
|
|
114,088
|
|
|
|
322,288
|
|
|
|
0
|
|
|
|
11,500
|
|
|
|
1,102,154
|
|
and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles J. Herman, Jr.
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|
|
2009
|
|
|
|
304,876
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|
|
|
0
|
|
|
|
518,148
|
|
|
|
172,721
|
|
|
|
350,462
|
|
|
|
0
|
|
|
|
12,250
|
|
|
|
1,358,457
|
|
Executive Vice President and Chief
|
|
|
2008
|
|
|
|
297,440
|
|
|
|
0
|
|
|
|
475,914
|
|
|
|
158,643
|
|
|
|
351,141
|
|
|
|
0
|
|
|
|
11,500
|
|
|
|
1,294,638
|
|
Investment Officer
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|
|
2007
|
|
|
|
286,000
|
|
|
|
0
|
|
|
|
281,240
|
|
|
|
93,754
|
|
|
|
275,000
|
|
|
|
0
|
|
|
|
29,500
|
|
|
|
965,494
|
|
John T. Thomas
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|
|
2009
|
|
|
|
276,987
|
(2)
|
|
|
0
|
|
|
|
195,008
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|
|
|
0
|
|
|
|
333,362
|
|
|
|
0
|
|
|
|
3,625
|
|
|
|
808,982
|
|
Executive Vice President-Medical
Facilities
|
|
|
|
|
|
|
|
|
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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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|
Raymond W. Braun
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2009
|
|
|
|
837,045
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|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,352,165
|
(6)
|
|
|
0
|
(7)
|
|
|
42,506
|
|
|
|
2,231,716
|
|
Former President
|
|
|
2008
|
|
|
|
444,538
|
|
|
|
0
|
|
|
|
893,197
|
|
|
|
297,729
|
|
|
|
566,367
|
|
|
|
55,162
|
|
|
|
22,341
|
|
|
|
2,279,334
|
|
|
|
|
2007
|
|
|
|
405,600
|
|
|
|
0
|
|
|
|
3,075,068
|
|
|
|
153,117
|
|
|
|
461,058
|
|
|
|
0
|
|
|
|
41,372
|
|
|
|
4,136,215
|
|
|
|
|
(1) |
|
No compensation information is provided for the years in which
Messrs. Miller and Thomas were not Named Executive Officers. |
|
(2) |
|
Mr. Thomas joined the Company as Executive Vice
President-Medical Facilities on January 19, 2009 at an
annual base salary of $290,000. |
23
|
|
|
(3) |
|
The cash annual incentive awards are included in
Non-Equity Incentive Plan Compensation because the
performance goals were established and communicated at the
beginning of the year. |
|
(4) |
|
Amounts set forth in this column represent the grant-date fair
value calculated in accordance with FASB ASC Topic 718 for
restricted stock grants to the Named Executive Officer and are
based on the share prices on the respective dates of grant (or,
if the date of grant was not a trading day, the last trading day
prior to the date of grant), which were $37.00, $40.83, and
$45.73 for grants on January 29, 2009, January 21,
2008, and January 22, 2007, respectively. The grant-date
fair value excludes the effect of possible forfeitures (in
accordance with SEC rules) for awards subject to time-based
vesting and awards subject to performance conditions. |
|
(5) |
|
Amounts set forth in this column represent the grant-date fair
value calculated in accordance FASB ASC Topic 718 for stock
option grants to the Named Executive Officers. The Black-Scholes
option valuation methodology was used based on estimates as of
the grant date. In using such methodology, the following
assumptions were used: |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
(Share Price at
|
|
Expected
|
|
Estimated
|
|
Dividend
|
|
|
Grant Date
|
|
Grant Date)
|
|
Term (Years)
|
|
Volatility
|
|
Yield
|
|
Risk-Free Rate
|
|
1/29/09
|
|
$
|
37.00
|
|
|
|
7
|
|
|
|
29.36
|
%
|
|
|
7.35
|
%
|
|
|
2.33
|
%
|
1/21/08
|
|
|
40.83
|
|
|
|
6.5
|
|
|
|
20.52
|
%
|
|
|
6.47
|
%
|
|
|
3.42
|
%
|
1/22/07
|
|
|
45.73
|
|
|
|
5
|
|
|
|
19.90
|
%
|
|
|
5.60
|
%
|
|
|
4.74
|
%
|
The fair value of options with DERs granted in 2008 and 2007
also includes the net present value of projected future dividend
payments over the expected life of the option discounted at the
dividend yield rate.
|
|
|
(6) |
|
Includes $1,284,808 in compensation earned under the long-term
incentive program paid in the form of cash in connection with
the expiration of his employment agreement on January 31,
2009. The Committee decided to pay Mr. Braun this amount
because the Companys corporate and Mr. Brauns
individual performance goals had been achieved. The Committee
determined that cash was a more appropriate vehicle by which to
pay the earned amount, as opposed to equity, given that
Mr. Braun would serve as a consultant to the Company for
the remainder of 2009. Also includes $67,357 in payment of
accrued benefits in connection with stock options with DERs. |
|
(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. |
|
|
(8) |
|
All Other Compensation includes the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
Term Life
|
|
Club
|
|
|
|
|
|
|
Contribution to
|
|
Insurance
|
|
Membership
|
|
Payments under
|
|
|
Name
|
|
401(k) Plan
|
|
Premiums(a)
|
|
Dues(a)
|
|
the SERP(b)
|
|
Total
|
|
Chapman
|
|
$
|
12,250
|
|
|
$
|
5,100
|
|
|
$
|
24,481
|
|
|
$
|
0
|
|
|
$
|
41,831
|
|
Estes
|
|
|
12,250
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,250
|
|
Miller
|
|
|
12,250
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,250
|
|
Herman
|
|
|
12,250
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,250
|
|
Thomas
|
|
|
3,625
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,625
|
|
Braun
|
|
|
12,250
|
|
|
|
0
|
|
|
|
495
|
|
|
|
29,761
|
|
|
|
42,506
|
|
|
|
|
(a) |
|
See Executive Compensation Compensation
Discussion and Analysis Compensation
Elements Benefits and Perquisites for
additional information regarding the term life insurance
premiums and club membership dues paid by the Company on behalf
of Messrs. Chapman and Braun. |
|
(b) |
|
See Executive Compensation 2009 Pension
Benefits Table for additional information regarding the
payment to Mr. Braun under the SERP in connection with the
cessation of his employment with the Company. |
24
2009
Grants of Plan-Based Awards Table
The table below provides information regarding grants of awards
to the Named Executive Officers under the Companys
long-term incentive plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payments Under
|
|
Estimated Future Payments Under
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
Equity Incentive Plan Awards
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
Name
|
|
Grant Date
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
George L. Chapman
|
|
|
1/29/09(1)
|
|
|
$
|
480,254
|
|
|
$
|
960,507
|
|
|
$
|
1,921,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/29/09(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,000,000
|
|
|
$
|
2,000,000
|
|
|
$
|
4,000,000
|
|
Scott A. Estes
|
|
|
1/29/09(1)
|
|
|
$
|
162,500
|
|
|
$
|
325,000
|
|
|
$
|
487,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/29/09(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
Jeffrey H. Miller
|
|
|
1/29/09(1)
|
|
|
$
|
162,500
|
|
|
$
|
325,000
|
|
|
$
|
487,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/29/09(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
Charles J. Herman, Jr.
|
|
|
1/29/09(1)
|
|
|
$
|
152,438
|
|
|
$
|
304,876
|
|
|
$
|
457,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/29/09(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
John T. Thomas
|
|
|
1/29/09(1)
|
|
|
$
|
145,000
|
|
|
$
|
290,000
|
|
|
$
|
435,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/29/09(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
900,000
|
|
Raymond W. Braun(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents annual incentive program earnings opportunity. The
actual amount earned by each of the Named Executive Officers
under the annual incentive program in 2009 is shown in the
Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table. |
|
(2) |
|
Represents long-term incentive earnings opportunity for 2009.
Based on 2009 performance, actual awards were granted on
January 28, 2010 in a combination of restricted shares and
options, according to the table on page 20. |
|
(3) |
|
The Company entered into a consulting agreement with
Mr. Braun that expired on December 31, 2009.
Mr. Braun received a base consulting fee of $800,000 but
did not receive a discretionary bonus. |
Employment
and Consulting Agreements
The Company has employment agreements with each of
Messrs. Chapman, Estes, Miller, Herman and Thomas. The
Company had a consulting agreement with Mr. Braun that
expired December 31, 2009.
George L.
Chapman Employment Agreement
The Company has entered into an employment agreement with George
L. Chapman, Chairman, Chief Executive Officer and President of
the Company, that will expire on January 31, 2011.
Mr. Chapman receives a base salary that is reviewed and
adjusted each year by the Compensation Committee and he is
eligible to receive discretionary annual bonuses and equity
awards under the Companys long-term incentive plans. 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 each year and the costs required to maintain
a disability insurance policy on Mr. Chapman. The Company
also provides Mr. Chapman with 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 corporate
control, see Potential Payments Upon Termination or Change
in Corporate Control below.
Special Retention and Incentive Award. On
January 22, 2007, Mr. Chapman received a grant of
60,000 shares of restricted stock as a special retention
and incentive award. The restrictions on these shares lapsed on
January 31, 2010 because Mr. Chapman remained employed
by the Company through that date. Mr. Chapman also received
a grant of 60,000 shares in performance awards with DERs,
which were paid in shares of common stock on January 31,
2010 because Mr. Chapman remained employed by the Company
through that date and the Company met certain strategic
objectives. Mr. Chapman received DER payments with respect
to 30,000 of the performance awards as dividends were paid on
shares of common stock during the vesting period, and DER
payments on the remaining 30,000 performance awards were paid in
the form of shares of common stock on January 31, 2010, the
date when the underlying shares of common stock were earned by
Mr. Chapman.
25
Scott A.
Estes Employment Agreement
The Company has entered into an employment agreement with Scott
A. Estes, Executive Vice President and Chief Financial Officer
of the Company, that expires January 31, 2011, and provides
for optional successive two-year renewal terms. Mr. Estes
receives a base salary that is reviewed and adjusted each year
by the Compensation Committee and he is eligible to receive
discretionary annual bonuses and equity awards under the
Companys long-term incentive plans. For a description of
the provisions of the agreement regarding compensation and
benefits payable to Mr. Estes upon his termination or a
change in corporate control, see Potential Payments Upon
Termination or Change in Corporate Control below.
Jeffrey
H. Miller Employment Agreement
The Company has entered into an employment agreement with
Jeffrey H. Miller, Executive Vice President-Operations and
General Counsel of the Company, that expires January 31,
2011, and provides for optional successive two-year renewal
terms. Mr. Miller receives a base salary that is reviewed
and adjusted each year by the Compensation Committee and he is
eligible to receive discretionary annual bonuses and equity
awards under the Companys long-term incentive plans. For a
description of the provisions of the agreement regarding
compensation and benefits payable to Mr. Miller upon his
termination or a change in corporate control, see
Potential Payments Upon Termination or Change in Corporate
Control below.
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,
2011, and provides for optional successive two-year renewal
terms. Mr. Herman receives a base salary that is reviewed
and adjusted each year by the Compensation Committee and he is
eligible to receive discretionary annual bonuses and equity
awards under the Companys long-term incentive plans. For a
description of the provisions of the agreement regarding
compensation and benefits payable to Mr. Herman upon his
termination or a change in corporate control, see
Potential Payments Upon Termination or Change in Corporate
Control below.
John T.
Thomas Employment Agreement
The Company has entered into an employment agreement with John
T. Thomas, Executive Vice President-Medical Facilities of the
Company, that expires January 31, 2011, and provides for
optional successive two-year renewal terms. Mr. Thomas
receives a base salary that is reviewed and adjusted each year
by the Compensation Committee and he is eligible to receive
discretionary annual bonuses and equity awards under the
Companys long-term incentive plans. For a description of
the provisions of the agreement regarding compensation and
benefits payable to Mr. Thomas upon his termination or a
change in corporate control, see Potential Payments Upon
Termination or Change in Corporate Control below.
Raymond
W. Braun Consulting Agreement
The employment agreement between the Company and Raymond W.
Braun, formerly the President of the Company, expired on
January 31, 2009. Mr. Braun received a cash bonus for
his performance in 2008 and his long-term incentive compensation
award for performance in 2008 was paid in cash. In connection
with such expiration, all stock options and restricted stock
granted to Mr. Braun under the Companys stock
incentive plans became fully vested and, in the case of stock
options, exercisable in full. Mr. Braun had the right to
exercise all or any portion of such stock options until
December 31, 2009. See Executive
Compensation 2009 Pension Benefits Table for
information regarding the payment to Mr. Braun under the
SERP in connection with the cessation of his employment with the
Company.
The Company entered into a consulting agreement with
Mr. Braun that expired on December 31, 2009.
Mr. Braun received a base consulting fee of $800,000 during
2009. For a description of the provisions of the consulting
agreement regarding compensation and benefits payable to
Mr. Braun upon his termination, see Potential
Payments Upon Termination or Change in Corporate Control
below.
26
2009
Outstanding Equity Awards at Fiscal Year-End Table
The table below provides information regarding outstanding
equity-based awards granted to the Named Executive Officers
under the Companys long-term incentive plans.
|
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Awards: # of
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
Unearned
|
|
|
Payout Value
|
|
|
|
# of
|
|
|
# of
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares,
|
|
|
of Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
# of Shares
|
|
|
Units of
|
|
|
Units or
|
|
|
Shares, Units
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
or Units of
|
|
|
Stock That
|
|
|
Other
|
|
|
or Other
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
Stock That
|
|
|
Have Not
|
|
|
Rights That
|
|
|
Rights That
|
|
|
|
Options
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Vested
|
|
|
Have Not
|
|
|
Have Not
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
Vested
|
|
|
($)
|
|
|
Vested (#)
|
|
|
Vested ($)
|
|
|
George L. Chapman
|
|
|
0
|
|
|
|
109,914
|
|
|
$
|
37.00
|
|
|
|
1/29/19(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,469
|
|
|
|
9,872
|
|
|
|
40.83
|
|
|
|
1/21/18(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,138
|
|
|
|
48,550
|
|
|
|
40.83
|
|
|
|
1/21/18(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,292
|
|
|
|
6,435
|
|
|
|
45.73
|
|
|
|
1/22/17(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,703
|
|
|
|
19,053
|
|
|
|
45.73
|
|
|
|
1/22/17(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
4,444
|
|
|
|
36.50
|
|
|
|
1/23/16(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,524
|
|
|
|
18,348
|
|
|
|
36.50
|
|
|
|
1/23/16(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,559
|
|
|
|
4,639
|
|
|
|
34.88
|
|
|
|
1/24/15(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,262
|
|
|
|
0
|
|
|
|
37.00
|
|
|
|
1/26/14(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,758
|
|
|
|
0
|
|
|
|
25.82
|
|
|
|
1/27/13(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
24.42
|
|
|
|
12/12/11(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,598
|
|
|
$
|
6,851,783(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
$
|
2,659,200(3
|
)
|
Scott A. Estes
|
|
|
0
|
|
|
|
33,813
|
|
|
$
|
37.00
|
|
|
|
1/29/19(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
617
|
|
|
|
2,468
|
|
|
|
40.83
|
|
|
|
1/21/18(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,035
|
|
|
|
12,137
|
|
|
|
40.83
|
|
|
|
1/21/18(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
688
|
|
|
|
1,030
|
|
|
|
45.73
|
|
|
|
1/22/17(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,036
|
|
|
|
3,051
|
|
|
|
45.73
|
|
|
|
1/22/17(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
959
|
|
|
|
638
|
|
|
|
36.50
|
|
|
|
1/23/16(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,957
|
|
|
|
2,637
|
|
|
|
36.50
|
|
|
|
1/23/16(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,512
|
|
|
|
627
|
|
|
|
34.88
|
|
|
|
1/24/15(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,015
|
|
|
|
0
|
|
|
|
37.00
|
|
|
|
1/26/14(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,827
|
|
|
|
1,188,973(3
|
)
|
|
|
|
|
|
|
|
|
Jeffrey H. Miller
|
|
|
0
|
|
|
|
33,813
|
|
|
$
|
37.00
|
|
|
|
1/29/19(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
617
|
|
|
|
2,468
|
|
|
|
40.83
|
|
|
|
1/21/18(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,035
|
|
|
|
12,137
|
|
|
|
40.83
|
|
|
|
1/21/18(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
688
|
|
|
|
1,030
|
|
|
|
45.73
|
|
|
|
1/22/17(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,036
|
|
|
|
3,051
|
|
|
|
45.73
|
|
|
|
1/22/17(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
959
|
|
|
|
638
|
|
|
|
36.50
|
|
|
|
1/23/16(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,957
|
|
|
|
2,637
|
|
|
|
36.50
|
|
|
|
1/23/16(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,512
|
|
|
|
627
|
|
|
|
34.88
|
|
|
|
1/24/15(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,712
|
|
|
|
1,095,236(3
|
)
|
|
|
|
|
|
|
|
|
Charles J. Herman, Jr.
|
|
|
0
|
|
|
|
39,434
|
|
|
$
|
37.00
|
|
|
|
1/29/19(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
858
|
|
|
|
3,432
|
|
|
|
40.83
|
|
|
|
1/21/18(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,220
|
|
|
|
16,876
|
|
|
|
40.83
|
|
|
|
1/21/18(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,140
|
|
|
|
1,708
|
|
|
|
45.73
|
|
|
|
1/22/17(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,373
|
|
|
|
5,058
|
|
|
|
45.73
|
|
|
|
1/22/17(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,251
|
|
|
|
832
|
|
|
|
36.50
|
|
|
|
1/23/16(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,161
|
|
|
|
3,440
|
|
|
|
36.50
|
|
|
|
1/23/16(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,848
|
|
|
|
713
|
|
|
|
34.88
|
|
|
|
1/24/15(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,653
|
|
|
|
0
|
|
|
|
37.00
|
|
|
|
1/26/14(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,420
|
|
|
|
1,436,854(3
|
)
|
|
|
|
|
|
|
|
|
John T. Thomas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,957
|
|
|
|
219,694(3
|
)
|
|
|
|
|
|
|
|
|
Raymond W. Braun(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents options with DERs. Cash payments attributable to DERs
will accrue and be paid out only when the corresponding option
has vested. These options vest ratably over five years on the
first five anniversaries of the date of grant and expire on the
tenth anniversary of the date of grant. See Executive
Compensation Compensation Discussion and
Analysis Compensation Elements Long-Term
Incentives Stock Options with DERs for
information regarding changes to the structure of DER payments
that were made in December 2008. |
27
|
|
|
(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 $44.32, the closing price of the
Companys common stock on December 31, 2009, the last
trading day of 2009. |
|
(4) |
|
In connection with the expiration of Mr. Brauns
employment agreement on January 31, 2009, all stock options
and restricted stock granted to Mr. Braun under the
Companys stock incentive plans became fully vested and, in
the case of stock options, exercisable in full.
Mr. Brauns options were exercisable until
December 31, 2009, at which time any unexercised options
expired. |
2009
Option Exercises and Stock Vested Table
The table below provides information regarding the dollar
amounts realized pursuant to the vesting or exercise of
equity-based awards during 2009 for the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
# of Shares
|
|
Value Realized Upon
|
|
# of Shares
|
|
Value Realized on
|
|
|
Acquired on
|
|
Exercise
|
|
Acquired on
|
|
Vesting
|
Name
|
|
Exercise
|
|
($)
|
|
Vesting
|
|
($)
|
|
George L. Chapman
|
|
|
0
|
|
|
$
|
0
|
|
|
|
26,260
|
|
|
$
|
980,811
|
|
Scott A. Estes
|
|
|
0
|
|
|
|
0
|
|
|
|
6,133
|
|
|
|
226,386
|
|
Jeffrey H. Miller
|
|
|
0
|
|
|
|
0
|
|
|
|
5,594
|
|
|
|
208,936
|
|
Charles J. Herman, Jr.
|
|
|
0
|
|
|
|
0
|
|
|
|
7,812
|
|
|
|
289,510
|
|
John T. Thomas
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Raymond W. Braun
|
|
|
92,732
|
|
|
|
682,434
|
|
|
|
98,591
|
|
|
|
3,721,155
|
|
2009
Pension Benefits Table
The table below provides information regarding the SERP adopted
by the Compensation Committee of the Board of Directors
effective January 1, 2001. The SERP is a non-qualified
defined benefit pension plan that provides certain executives
selected by the Compensation Committee with supplemental
deferred retirement benefits. The SERP provides an opportunity
for participants to receive retirement benefits that cannot be
paid under the Companys 401(k) Plan because of the
restrictions imposed by ERISA and the Code. During 2009, George
L. Chapman and Raymond W. Braun participated in the SERP.
Mr. Brauns employment ceased as of January 31,
2009, so Mr. Chapman was the only participant in the SERP
for the remainder of 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
9
|
|
|
$
|
2,637,879
|
|
|
$
|
0
|
|
Raymond W. Braun
|
|
|
SERP
|
|
|
|
8
|
|
|
|
0
|
|
|
|
29,761
|
|
|
|
|
(1) |
|
Represents the number of years of employment after
January 1, 2001. |
|
(2) |
|
Calculated by discounting the currently accumulated benefit
payable at normal retirement age under the elected optional form
of a single lump sum distribution. This discounting uses a 3.5%
discount rate. |
The 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
28
behalf of the participant for plan years completed prior to the
date of retirement and a 7.5% interest rate compounded annually.
The SERP is unfunded and all benefits will be paid from the
general assets of the Company. Eligibility is limited to a
select group of Management or highly compensated employees whose
qualified plan benefits are limited by ERISA and the Code. See
Executive Compensation Compensation Discussion
and Analysis Compensation Elements
Supplemental Executive Retirement Plan above for
additional information regarding the SERP.
Potential
Payments Upon Termination or Change in Corporate
Control
Pursuant to their respective employment 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 a
lump sum severance payment equal to the present value of a
series of monthly severance payments for each month during the
remaining term of the agreement or for 24 months, whichever
is greater (the Severance Period). If
Mr. Chapman resigns or is terminated without cause during
the 12 months following a change in corporate
control (as defined in the agreement), he would receive a
lump sum severance payment equal to the present value of a
series of monthly severance payments for 36 months. The
monthly severance payments would be calculated using an amount
equal to the sum of one-twelfth of the sum of his annual base
salary and the greater of the 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. The present value would be calculated
using a discount rate equal to the interest rate on
90-day
Treasury Bills reported on the date of termination or change in
corporate control. 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 (but not less than 12 months and not
more than the period during which he would be entitled to
continuation coverage under Section 4980 of the Code, if he
elected such coverage and paid the applicable premiums), or
until the date he obtains comparable coverage from a new
employer. If Mr. Chapman is terminated without cause and he
obtains a replacement position with a new employer,
Mr. Chapman would be obligated to repay to the Company an
amount equal to all amounts he receives as compensation for
services performed during the Severance Period; provided that
the aggregate repayment obligation will not exceed the amount of
the lump sum severance payment. If it is determined that any
payment by the Company to Mr. Chapman in connection with a
change in corporate control would be a golden parachute subject
to excise tax, the Company would be obligated to make an
additional payment to him 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 involuntary termination
following a Board determination that he is disabled,
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.
29
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 execution of his employment
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 have
become earned and payable. In the event of a termination without
cause, 30,000 of the performance awards would have become earned
and payable and the remaining 30,000 may have become earned and
payable if the Board determined that the strategic objectives
described in the agreement had been attained. See
Employment and Consulting Agreements above for
information regarding the lapse of restrictions on the
60,000 shares of restricted stock and the payment of the
60,000 of performance awards in shares of common stock on
January 31, 2010.
Non-Competition and Non-Solicitation. In the
event of a voluntary termination by Mr. Chapman or a
termination for cause by the Company, Mr. Chapman would be
subject to a one-year non-competition agreement. In addition,
upon the termination of the agreement for any reason,
Mr. Chapman would be subject to a non-solicitation
agreement for a period of one year from the time the agreement
ceases, or if later, during the Severance Period (in the event
of an involuntary termination by the Company) or for a period of
24 months after an involuntary termination or voluntary
resignation following a change in corporate control.
Scott
A. Estes
Severance Payments and Benefits. If
Mr. Estes is terminated without cause, he would receive a
lump sum severance payment equal to the present value of a
series of monthly severance payments for each month during the
remaining term of the agreement or for 12 months, whichever
is greater (the Severance Period). If Mr. Estes
resigns or is terminated without cause during the 12 months
following a change in corporate control (as defined
in the agreement), he would receive a lump sum severance payment
equal to the present value of a series of monthly severance
payments for 24 months. The monthly severance payments
would be calculated using an amount equal to the sum of
one-twelfth of the sum of his annual base salary and the greater
of the annual bonus for the fiscal year immediately preceding
the termination or change in corporate control or a minimum
bonus equal to 35% of his annual base salary. The present value
would be calculated using a discount rate equal to the interest
rate on
90-day
Treasury Bills reported on the date of termination or change in
corporate control. Mr. Estes also would be entitled to
continued benefits under any life, health and disability
insurance programs maintained by the Company for the remaining
term of the agreement (but not less than six months and not more
than the period during which he would be entitled to
continuation coverage under Section 4980 of the Code, if he
elected such coverage and paid the applicable premiums), or
until the date he obtains comparable coverage from a new
employer. If Mr. Estes is terminated without cause and he
obtains a replacement position with a new employer,
Mr. Estes would be obligated to repay to the Company an
amount equal to all amounts he receives as compensation for
services performed during the Severance Period; provided that
the aggregate repayment obligation will not exceed the amount of
the lump sum severance payment. If it is determined that any
payment by the Company to Mr. Estes in connection with a
change in corporate control would be a golden parachute subject
to excise tax, the Company would be obligated to make an
additional payment to him to cover such excise tax.
In the event of Mr. Estes death, his beneficiary
would receive a lump sum payment equal to the present value of a
series of monthly payments for each month during the remainder
of the term of the agreement (but not less than 12 months),
each in an amount equal to one-twelfth of the sum of his annual
base salary and the greater of the annual bonus for the fiscal
year immediately preceding the date of death or a minimum bonus
equal to 35% of his annual base salary. In addition, the death
benefits payable under any retirement, deferred compensation,
life insurance or other employee benefit maintained by the
Company will be paid to the beneficiary designated by
Mr. Estes.
In the event of Mr. Estes involuntary termination
following a Board determination that he is disabled,
Mr. Estes would receive monthly payments for each month
during the remainder of the term of the agreement (but
30
not less than 12 months), each in an amount equal to
one-twelfth of the sum of his annual base salary and the greater
of the annual bonus for the fiscal year immediately preceding
the date of disability or a minimum bonus equal to 35% of his
annual base salary. These payments would terminate if
Mr. Estes returns to active employment, either with the
Company or otherwise. In addition, these payments would be
reduced by any amounts paid to Mr. Estes under any
long-term disability plan or other disability program or
insurance policies maintained by the Company.
If Mr. Estes voluntarily terminates his employment or is
terminated for cause, Mr. Estes only would be entitled to
accrued but unpaid base salary and vacation pay, any bonuses
earned but unpaid and any nonforfeitable benefits under the
Companys deferred compensation, incentive and other
benefit plans.
Vesting of Incentive
Awards. Mr. Estes stock option and
restricted stock awards granted under the Companys
incentive plans would become vested and immediately exercisable
in the event of a change in corporate control, or upon his
death, disability or termination without cause.
Non-Competition and Non-Solicitation. In the
event of a voluntary termination by Mr. Estes, the election
by Mr. Estes not to extend the term of the agreement or a
termination for cause by the Company, Mr. Estes would be
subject to a one-year non-competition agreement. In addition,
upon the termination of the agreement for any reason,
Mr. Estes would be subject to a non-solicitation agreement
for a period of one year from the time the agreement ceases, or
if later, during the Severance Period (in the event of an
involuntary termination by the Company) or for a period of
24 months after an involuntary termination or voluntary
resignation following a change in corporate control.
Jeffrey
H. Miller
Severance Payments and Benefits. If
Mr. Miller is terminated without cause, he would receive a
lump sum severance payment equal to the present value of a
series of monthly severance payments for each month during the
remaining term of the agreement or for 12 months, whichever
is greater (the Severance Period). If
Mr. Miller resigns or is terminated without cause during
the 12 months following a change in corporate
control (as defined in the agreement), he would receive a
lump sum severance payment equal to the present value of a
series of monthly severance payments for 24 months. The
monthly severance payments would be calculated using an amount
equal to the sum of one-twelfth of the sum of his annual base
salary and the greater of the annual bonus for the fiscal year
immediately preceding the termination or change in corporate
control or a minimum bonus equal to 30% of his annual base
salary. The present value would be calculated using a discount
rate equal to the interest rate on
90-day
Treasury Bills reported on the date of termination or change in
corporate control. Mr. Miller also would be entitled to
continued benefits under any life, health and disability
insurance programs maintained by the Company for the remaining
term of the agreement (but not less than six months and not more
than the period during which he would be entitled to
continuation coverage under Section 4980 of the Code, if he
elected such coverage and paid the applicable premiums), or
until the date he obtains comparable coverage from a new
employer. If Mr. Miller is terminated without cause and he
obtains a replacement position with a new employer,
Mr. Miller would be obligated to repay to the Company an
amount equal to all amounts he receives as compensation for
services performed during the Severance Period; provided that
the aggregate repayment obligation will not exceed the amount of
the lump sum severance payment. If it is determined that any
payment by the Company to Mr. Miller in connection with a
change in corporate control would be a golden parachute subject
to excise tax, the Company would be obligated to make an
additional payment to him to cover such excise tax.
In the event of Mr. Millers 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. Miller.
In the event of Mr. Millers involuntary termination
following a Board determination that he is disabled,
Mr. Miller 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
31
30% of his annual base salary. These payments would terminate if
Mr. Miller returns to active employment, either with the
Company or otherwise. In addition, these payments would be
reduced by any amounts paid to Mr. Miller under any
long-term disability plan or other disability program or
insurance policies maintained by the Company.
If Mr. Miller voluntarily terminates his employment or is
terminated for cause, Mr. Miller 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. Millers stock option and
restricted stock awards granted under the Companys
incentive plans would become vested and immediately exercisable
in the event of a change in corporate control, or upon his
death, disability or termination without cause.
Non-Competition and Non-Solicitation. In the
event of a voluntary termination by Mr. Miller, the
election by Mr. Miller not to extend the term of the
agreement or a termination for cause by the Company,
Mr. Miller would be subject to a one-year non-competition
agreement. In addition, upon the termination of the agreement
for any reason, Mr. Miller would be subject to a
non-solicitation agreement for a period of one year from the
time the agreement ceases, or if later, during the Severance
Period (in the event of an involuntary termination by the
Company) or for a period of 24 months after an involuntary
termination or voluntary resignation following a change in
corporate control.
Charles
J. Herman, Jr.
Severance Payments and Benefits. If
Mr. Herman is terminated without cause, he would receive a
lump sum severance payment equal to the present value of a
series of monthly severance payments for each month during the
remaining term of the agreement or for 12 months, whichever
is greater (the Severance Period). If
Mr. Herman resigns or is terminated without cause during
the 12 months following a change in corporate
control (as defined in the agreement), he would receive a
lump sum severance payment equal to the present value of a
series of monthly severance payments for 24 months. The
monthly severance payments would be calculated using an amount
equal to the sum of one-twelfth of the sum of his annual base
salary and the greater of the annual bonus for the fiscal year
immediately preceding the termination or change in corporate
control or a minimum bonus equal to 30% of his annual base
salary. The present value would be calculated using a discount
rate equal to the interest rate on
90-day
Treasury Bills reported on the date of termination or change in
corporate control. 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 (but not less than six months and not more
than the period during which he would be entitled to
continuation coverage under Section 4980 of the Code, if he
elected such coverage and paid the applicable premiums), or
until the date he obtains comparable coverage from a new
employer. If Mr. Herman is terminated without cause and he
obtains a replacement position with a new employer,
Mr. Herman would be obligated to repay to the Company an
amount equal to all amounts he receives as compensation for
services performed during the Severance Period; provided that
the aggregate repayment obligation will not exceed the amount of
the lump sum severance payment. If it is determined that any
payment by the Company to Mr. Herman in connection with a
change in corporate control would be a golden parachute subject
to excise tax, the Company would be obligated to make an
additional payment to him to cover such excise tax.
In the event of Mr. 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 involuntary termination
following a Board determination that he is disabled,
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
32
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. In the
event of a voluntary termination by Mr. Herman, the
election by Mr. Herman not to extend the term of the
agreement or a termination for cause by the Company,
Mr. Herman would be subject to a one-year non-competition
agreement. In addition, upon the termination of the agreement
for any reason, Mr. Herman would be subject to a
non-solicitation agreement for a period of one year from the
time the agreement ceases, or if later, during the Severance
Period (in the event of an involuntary termination by the
Company) or for a period of 24 months after an involuntary
termination or voluntary resignation following a change in
corporate control.
John
T. Thomas
Severance Payments and Benefits. If
Mr. Thomas is terminated without cause, he would receive a
series of monthly severance payments for each month during the
remaining term of the agreement or for 12 months, whichever
is greater. If Mr. Thomas is terminated without cause
during the 12 months following a change in corporate
control (as defined in the agreement), he would receive a
lump sum severance payment equal to the present value of a
series of monthly severance payments for 24 months. The
monthly severance payments would be calculated using an amount
equal to the sum of one-twelfth of the sum of his annual base
salary and the average of the annual bonuses paid to
Mr. Thomas for the prior three fiscal years immediately
preceding the termination or change in corporate control. The
present value would be calculated using a discount rate equal to
the interest rate on
90-day
Treasury Bills reported on the date of the change in corporate
control. Mr. Thomas also would be entitled to continued
benefits under any life, health and disability insurance
programs maintained by the Company for the remaining term of the
agreement (but not less than six months and not more than the
period during which he would be entitled to continuation
coverage under Section 4980 of the Code, if he elected such
coverage and paid the applicable premiums), or until the date he
obtains comparable coverage from a new employer. If
Mr. Thomas is terminated without cause and he obtains a
replacement position with a new employer, the severance payments
described above will be reduced by all amounts he receives as
compensation for services performed during such period. If it is
determined that any payment by the Company to Mr. Thomas in
connection with a change in corporate control would be a golden
parachute subject to excise tax, the Company would be obligated
to make an additional payment to him to cover such excise tax.
However, the amount paid to Mr. Thomas may be reduced by up
to 10% if such reduction would result in the payment of no
excise tax.
In the event of Mr. Thomas death, his beneficiary
would receive a lump sum payment equal to the present value of a
series of monthly payments for each month during the remainder
of the term of the agreement (but not less than 12 months),
each in an amount equal to one-twelfth of the sum of his annual
base salary and the average of the annual bonuses paid to
Mr. Thomas for the prior three fiscal years immediately
preceding the date of death. In addition, the death benefits
payable under any retirement, deferred compensation, life
insurance or other employee benefit maintained by the Company
will be paid to the beneficiary designated by Mr. Thomas.
In the event of Mr. Thomas involuntary termination
following a Board determination that he is disabled,
Mr. Thomas would receive monthly payments for each month
during the remainder of the term of the agreement (but not less
than 12 months), each in an amount equal to one-twelfth of
the sum of his annual base salary and the average of the annual
bonuses paid to Mr. Thomas for the prior three fiscal years
immediately preceding the date of disability. These payments
would terminate if Mr. Thomas returns to active employment,
either with the Company or otherwise. In addition, these
payments would be reduced by any amounts paid to Mr. Thomas
under any long-term disability plan or other disability program
or insurance policies maintained by the Company.
33
If Mr. Thomas voluntarily terminates his employment or is
terminated for cause, Mr. Thomas only would be entitled to
accrued but unpaid base salary and vacation pay, any bonuses
earned but unpaid and any nonforfeitable benefits under the
Companys deferred compensation, incentive and other
benefit plans.
Vesting of Incentive
Awards. Mr. Thomas stock option and
restricted stock awards granted under the Companys
incentive plans would become vested and immediately exercisable
in the event of a change in corporate control, or upon his
death, disability or termination without cause.
Non-Competition and Non-Solicitation. Upon the
termination of the agreement for any reason, Mr. Thomas
will be subject to (1) a one-year non-competition
agreement, and (2) a non-solicitation agreement for a
period of one year from the later of the time the agreement
ceases or when monthly severance payments under the agreement
cease (or would have ceased had such payments not been offset by
compensation received from a new employer).
Raymond
W. Braun
The employment agreement between the Company and Mr. Braun
expired on January 31, 2009. Mr. Braun received a cash
bonus for his performance in 2008 (in the amount of $566,367)
and his long-term incentive compensation award for performance
in 2008 was paid in cash (in the amount of $1,284,808). In
connection with the expiration of his employment agreement, all
stock options and restricted stock granted to Mr. Braun
under the Companys stock incentive plans became fully
vested and, in the case of stock options, exercisable in full.
Mr. Braun had the right to exercise all or any portion of
such stock options until December 31, 2009.
Mr. Brauns participation in the SERP ceased on
January 31, 2009. He received a lump sum payment of $29,761
in 2009 in connection with the cessation of his participation.
The Company entered into a consulting agreement with
Mr. Braun that expired on December 31, 2009.
Mr. Braun received a base consulting fee of $800,000.
Mr. Braun had the right to terminate the consulting
agreement at any time after May 1, 2009 upon 30 days
notice to the Company. In addition, the agreement would have
terminated if Mr. Braun became employed by another entity.
Upon such an event, the Company would have had no obligation to
pay the remaining portion of the base consulting fee.
Mr. Braun was subject to a non-competition agreement until
December 31, 2009.
34
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, 2009,
including Mr. Braun, whose consulting agreement expired on
December 31, 2009. The actual amounts to be paid to a Named
Executive Officer can only be determined at the time of such
executives separation from the Company. See
Potential Payments Upon Termination or Change in Corporate
Control above for a description of the actual benefits
received by Mr. Braun in connection with the expiration of
his employment agreement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested
|
|
|
Incremental
|
|
|
|
|
|
|
|
Name/
|
|
Cash
|
|
|
Continued
|
|
|
Equity
|
|
|
Pension
|
|
|
Excise Tax
|
|
|
|
|
Type of Termination
|
|
Severance(1)
|
|
|
Benefits(2)
|
|
|
Compensation(3)
|
|
|
Benefit(4)
|
|
|
Gross-Up(5)
|
|
|
Total
|
|
|
George L. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
n/a
|
|
|
$
|
0
|
|
Death or Disability
|
|
|
2,884,365
|
|
|
|
0
|
|
|
|
11,233,498
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
14,117,863
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
2,884,365
|
|
|
|
15,867
|
|
|
|
11,233,498
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
14,133,730
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
4,325,250
|
|
|
|
15,867
|
|
|
|
11,233,498
|
|
|
|
1,217,940
|
|
|
$
|
0
|
|
|
|
16,792,555
|
|
Scott A. Estes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death or Disability
|
|
|
684,204
|
|
|
|
0
|
|
|
|
1,555,280
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,239,484
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
684,204
|
|
|
|
21,649
|
|
|
|
1,555,280
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,261,133
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
1,262,799
|
|
|
|
21,649
|
|
|
|
1,555,280
|
|
|
|
0
|
|
|
|
669,044
|
|
|
|
3,508,772
|
|
Jeffrey H. Miller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death or Disability
|
|
|
700,983
|
|
|
|
0
|
|
|
|
1,461,543
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,162,526
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
700,983
|
|
|
|
21,620
|
|
|
|
1,461,543
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,184,146
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
1,293,767
|
|
|
|
21,620
|
|
|
|
1,461,543
|
|
|
|
0
|
|
|
|
628,222
|
|
|
|
3,405,152
|
|
Charles J. Herman, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death or Disability
|
|
|
710,436
|
|
|
|
0
|
|
|
|
1,886,439
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,596,875
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
710,436
|
|
|
|
21,620
|
|
|
|
1,886,439
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
2,618,495
|
|
Involuntary Termination without Cause or Resignation following a
Change in Corporate Control
|
|
|
1,311,214
|
|
|
|
21,620
|
|
|
|
1,886,439
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,219,273
|
|
John T. Thomas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause or Resignation without Good Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
Death or Disability
|
|
|
314,057
|
|
|
|
0
|
|
|
|
219,694
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
533,751
|
|
Involuntary Termination without Cause or Resignation for Good
Reason
|
|
|
314,057
|
|
|
|
21,620
|
|
|
|
219,694
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
555,371
|
|
Involuntary Termination without Cause following a Change in
Corporate Control
|
|
|
579,638
|
|
|
|
21,620
|
|
|
|
219,694
|
|
|
|
0
|
|
|
|
0
|
|
|
|
820,952
|
|
Raymond W. Braun
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration of Consulting Agreement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
n/a
|
|
|
|
0
|
|
|
|
|
(1) |
|
Cash Severance |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Miller, Herman and Thomas, as of December 31, 2009, these
executives would be entitled to a lump sum severance payment
equal to the present value of a series of monthly severance
payments, calculated using a discount rate equal to the
90-day
treasury rate. For Mr. Chapman, the monthly payment used to
calculate the lump sum is equal to 1/12 of the sum of his base
salary plus the greater of (a) the average annual bonus
paid during the last two years or (b) a minimum bonus as a
percent of his base salary, as specified in the employment
agreement. The average annual bonuses |
35
|
|
|
|
|
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, Miller and Herman, the monthly payment used
to calculate the lump sum is equal to 1/12 of the sum of the
executives base salary plus the greater of (a) the
annual bonus paid during the last year or (b) a minimum
bonus as a percent of base salary, as specified for each
executive in the employment agreement. The annual bonuses paid
during the last year have been in excess of the minimums
specified in the agreement; thus the annual bonuses are used to
calculate potential severance. For Mr. Thomas, the monthly
payment used to calculate the lump sum is equal to 1/12 of the
sum of his base salary plus the average of the annual bonuses
paid during the last three years. As of December 31, 2009,
Mr. Thomas had not been paid any annual bonuses, so
severance would be based solely on his base salary. |
|
|
|
For Messrs. Chapman, Estes, Miller, Herman and Thomas, the
number of monthly payments used to calculate the lump sum varies
depending on the termination scenario: |
|
|
|
If the termination is for cause by the Company
or without good reason by the executive, no severance would be
paid.
|
|
|
|
For Messrs. Chapman, Estes, Herman and
Miller, upon the death of the executive or the involuntary
termination without cause by the Company or voluntary
termination by the executive for good reason, not related to a
change in corporate control, and for Mr. Thomas, upon his
death, the calculation will be based on the number of months
remaining in the term of the agreement, but not less than
24 months for Mr. Chapman and not less than
12 months for Messrs. Estes, Miller, Herman and
Thomas. As of December 31, 2009, the remaining terms of the
agreements of Messrs. Chapman, Estes, Miller, Herman and
Thomas was 13 months. Therefore, the figures in the above
table assume the lump sum will be based on monthly payments for
24 months for Mr. Chapman and for 13 months for
Messrs. Estes, Miller, Herman and Thomas.
|
|
|
|
Upon involuntary termination without cause by
the Company or voluntary termination by the executive for any
reason within 12 months of a change in corporate control,
the lump sum will be based on monthly payments for
36 months for Mr. Chapman and for 24 months for
Messrs. Estes, Herman and Miller. For Mr. Thomas, upon
involuntary termination without cause by the Company within
12 months of a change in corporate control, the lump sum
will be based on monthly payments for 24 months.
|
|
|
|
The amounts reflected in the table above represent the
discounted present value of the monthly payments assuming a
0.06% annual discount rate (the
90-day
treasury rate as of December 31, 2009, the assumed date of
termination). |
|
|
|
For Mr. Thomas, upon an involuntary termination without
cause by the Company or his voluntary termination for good
reason, not related to a change in corporate control,
Mr. Thomas would be entitled to receive cash severance
payable in a series of monthly severance payments. Each monthly
payment is equal to 1/12 of the sum of his base salary plus the
average of the annual bonuses paid during the last three years.
Payments would be made for each month during the remaining term
of the agreement, but not for less than 12 months. Based on
the remaining term of his agreement, the figures in the above
table assume payments would be provided for 13 months for
Mr. Thomas. |
|
|
|
Upon a termination by the Company following a Board
determination that the executive is disabled, as of
December 31, 2009, Messrs. Chapman, Estes, Miller,
Herman and Thomas would be entitled to cash severance payable in
a series of monthly severance payments. For Mr. Chapman,
each monthly payment is equal to 1/12 of the sum of his base
salary plus the greater of (a) the average annual bonus
paid during the last two years or (b) a minimum bonus as a
percent of his base salary, as specified in the employment
agreement. For Messrs. Estes, Herman and Miller, each
monthly payment is equal to 1/12 of the sum of the
executives base salary plus the greater of (a) the
annual bonus paid during the last year or (b) a minimum
bonus as a percent of base salary, as specified for each
executive in the employment agreement. For Mr. Thomas, each
monthly payment is equal to 1/12 of the sum of his base salary
plus the average of the annual bonuses paid during the last
three years. Payments would be made for each month during the
remaining term of the agreement, but not for less than
24 months for Mr. Chapman and not for less than
12 months for Messrs. Estes, Miller, Herman and
Thomas. Based on the remaining terms of their agreements, the
figures in the above table assume payments would be provided for
24 months for Mr. Chapman and for 13 months for
Messrs. Estes, Miller, Herman and Thomas. |
36
|
|
|
(2) |
|
Continued Benefits |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Miller, Herman and Thomas, as of December 31, 2009, these
executives would be entitled to continued coverage at the
Companys expense under life, health and disability
insurance programs in which the executive participated at the
time of involuntary termination without cause by the Company or
voluntary termination by the executive for good reason, for the
remaining term of the agreement, but not less than
12 months for Mr. Chapman and not less than six months
for Messrs. Estes, Miller, Herman and Thomas and for each
executive not more than the period during which the executive
would be entitled to continuation coverage under
Section 4980 of the Code, if he elected such coverage and
paid the applicable premiums. As of December 31, 2009, the
remaining terms of the agreements of Messrs. Chapman,
Estes, Miller, Herman and Thomas 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 current
2010 monthly costs. |
|
(3) |
|
Accelerated Vesting of Unvested Equity Compensation |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Miller, Herman and Thomas, as of December 31, 2009, upon
involuntary termination without cause by the Company or
voluntary termination for good reason by the executive, all
unvested stock awards would become fully vested. The numbers in
this column represent the
in-the-money
value of unvested stock options and the full value of unvested
restricted stock awards as of December 31, 2009 (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 $44.32, which was the closing price as
of December 31, 2009, the last trading day of the year. |
|
(4) |
|
Incremental Pension Benefit |
|
|
|
Messrs. Chapman and Braun participated in the SERP in 2009. |
|
|
|
In the event of a change in corporate control
of the Company, if Mr. Chapmans employment is
terminated, either voluntarily or involuntarily for any reason,
he will be entitled to receive the full retirement benefit,
unreduced by the proration for length of participation or the
early retirement reduction. The amounts shown in the above table
represent the present value of the incremental benefit to
Mr. Chapman upon termination related to a change in
corporate control.
|
|
|
|
In connection with all other termination
events (other than retirement at age 65 or older), the
retirement benefit will be subject to a reduction for proration
of length of participation and a further reduction based upon
the number of months Mr. Chapmans retirement occurs
prior to his 65th birthday. The amounts shown in the above table
represent the present value of the incremental benefit to
Mr. Chapman upon such a termination as of December 31,
2009.
|
|
|
|
Mr. Brauns participation in the
SERP ceased on January 31, 2009. He received a lump sum
payment of $29,761 in 2009 in connection with the cessation of
his participation.
|
|
(5) |
|
Excise Tax
Gross-Up |
|
|
|
Under the employment agreements for Messrs. Chapman, Estes,
Miller, Herman and Thomas, as of December 31, 2009, if any
payments constitute excess parachute payments under
Section 280G of the Code such that the executive incurs an
excise tax under Section 4999 of the Code, the Company
would provide an excise tax
gross-up
payment in an amount such that after payment of the excise tax
and all income and excise taxes applicable to the
gross-up
payment, the executive would receive the same amount of
severance had the excise tax not applied. For Mr. Thomas,
the amount paid in connection with a change in corporate control
may be reduced by up to 10% if such reduction would result in
the payment of no excise tax. |
|
|
|
If a change in corporate control had occurred December 31,
2009 and each of the Named Executive Officers was terminated as
a result, none of the Named Executive Officers (except for
Messrs. Estes and Miller) would have been subject to excise
tax. In arriving at this conclusion, the following assumptions
were used: |
|
|
|
Each officers base amount was calculated
by taking the average
W-2 income
(box 1) from the past five years
(2004-2008).
For Mr. Thomas, the annualized 2009
W-2 amount,
which included only base salary, was used.
|
|
|
|
The stock award parachute calculations for
purposes of Code Section 280G were based on Black-Scholes
valuation methodology using the most recent GAAP ASC Topic
718 option valuation assumptions (volatility
|
37
|
|
|
|
|
34.08%, risk-free interest rate 3.23%, dividend yield 6.28%,
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 total parachute for each Named Executive
Officer (except for Messrs. Estes and Miller) 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 Messrs. Estes and Miller)
would not have incurred any excise tax.
|
Risk
Management and Compensation
As described above in Executive Compensation
Compensation Discussion and Analysis, the Companys
compensation programs are designed, among other things, to
encourage long-term stockholder value creation, rather than
short-term stockholder value maximization. Performance is
evaluated along both quantitative and qualitative factors and
there is a review of not only what is achieved, but
also how it is achieved. Consistent with this
long-term focus, the compensation policies and practices for the
Named Executive Officers and other employees do not encourage
excessive risk-taking. In fact, many elements of the executive
compensation program serve to mitigate excessive risk-taking.
|
|
|
|
|
Balanced pay mix. A balanced mix of base
salary, annual cash incentives and long-term equity compensation
is provided. Incentives tied to annual performance are balanced
with incentives tied to multi-year performance, as measured by
total stockholder return relative to two indices in the
long-term incentive program. In this way, the Executive Officers
are motivated to consider the impact of decisions over the
short, intermediate and long terms.
|
|
|
|
Balanced performance measurements. The
performance measures used in the annual and long-term incentive
programs were chosen to provide appropriate safeguards against
maximization of a single performance goal at the expense of the
overall health of the Companys business. The incentive
programs are not completely quantitative. Various individual and
qualitative objectives are incorporated, and the Compensation
Committee has the discretion to adjust earned bonuses based on
the quality of the results as well as individual
performance and behaviors.
|
|
|
|
Incentive payments are capped. The annual and
long-term incentive programs do not have unlimited upside
potential.
|
|
|
|
Balanced mix of long-term incentive grant
types. Long-term incentive programs that
over-emphasize stock options could contribute to risk-taking
because executives would have no downside risk, only upside
opportunity. In this light, stock options make up only 25% of
the total value of the long-term incentive compensation program.
Restricted shares, which are more aligned with stockholders
because they have both upside potential and downside risk, make
up 75% of total long-term incentives.
|
|
|
|
Stock ownership requirements. As discussed in
Executive Compensation Compensation Discussion and
Analysis Ownership Guidelines above, the Executive
Officers are subject to stock ownership guidelines based on a
multiple of base salary. These stock ownership guidelines align
the interests of Management with long-term stockholder interests.
|
38
DIRECTOR
COMPENSATION
The table below summarizes the compensation paid in 2009 to the
Companys non-employee Directors. Directors who are also
employees or consultants of the Company do not receive
additional compensation for being members of the Board.
2009 Director
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
Stock
|
|
|
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
|
|
|
|
in Cash
|
|
|
Awards
|
|
|
Option
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(5)
|
|
|
Awards($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
William C. Ballard, Jr.
|
|
$
|
78,000
|
|
|
$
|
74,999
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
152,999
|
|
Pier C. Borra
|
|
|
76,000
|
|
|
|
74,999
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
150,999
|
|
Thomas J. DeRosa
|
|
|
91,000
|
(1)
|
|
|
74,999
|
|
|
|
0
|
(6)
|
|
|
0
|
|
|
|
0
|
|
|
|
165,999
|
|
Jeffrey H. Donahue
|
|
|
88,000
|
(2)
|
|
|
74,999
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
162,999
|
|
Peter J. Grua
|
|
|
86,000
|
(3)
|
|
|
74,999
|
|
|
|
0
|
(7)
|
|
|
0
|
|
|
|
0
|
|
|
|
160,999
|
|
Fred S. Klipsch
|
|
|
75,000
|
(4)
|
|
|
74,999
|
|
|
|
0
|
|
|
|
0
|
|
|
|
300,000
|
(8)
|
|
|
449,999
|
|
Sharon M. Oster
|
|
|
78,000
|
|
|
|
74,999
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
152,999
|
|
Jeffrey R. Otten
|
|
|
75,000
|
|
|
|
74,999
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
149,999
|
|
R. Scott Trumbull
|
|
|
75,000
|
|
|
|
74,999
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
149,999
|
|
|
|
|
(1) |
|
Includes $15,000 additional retainer for serving as Audit
Committee Chair. |
|
(2) |
|
Includes $10,000 additional retainer for serving as Compensation
Committee Chair. |
|
(3) |
|
Includes $7,500 additional retainer for serving as
Nominating/Corporate Governance Committee Chair and $2,500 for
serving as the presiding Director of executive sessions of
non-employee Directors and independent Directors. |
|
(4) |
|
Mr. Klipsch received compensation under the compensation
program for non-employee Directors in 2009 because he is no
longer a consultant to the Company. Mr. Klipsch did not
receive any compensation under such program in 2008. |
|
(5) |
|
Amounts set forth in this column represent the grant-date fair
value calculated in accordance with FASB ASC Topic 718 for
awards granted to the non-employee Directors and are based on
the share prices on the respective dates of grant (or, if the
date of grant was not a trading day, the last trading day prior
to the date of grant), which were $37.00, $40.83, and $45.73 for
grants on January 29, 2009, January 21, 2008, and
January 22, 2007, respectively. As of December 31,
2009, (a) each non-employee Director (other than
Messrs. Klipsch and Otten) held an aggregate of 3,680
deferred stock units that have not yet been converted into
shares of common stock, (b) Mr. Klipsch held an
aggregate of 2,027 deferred stock units that have not yet been
converted into shares of common stock and
(c) Mr. Otten held an aggregate of 3,693 deferred
stock units that have not yet been converted into shares of
common stock. |
|
(6) |
|
As of December 31, 2009, Mr. DeRosa held an aggregate
of 10,000 unexercised stock options. |
|
(7) |
|
As of December 31, 2009, Mr. Grua held an aggregate of
1,666 unexercised stock options. |
|
(8) |
|
All Other Compensation paid to Mr. Klipsch consists of
non-compete payments in the aggregate amount of $300,000. See
Fred S. Klipsch Consulting Agreement
below for additional information regarding the compensation paid
to Mr. Klipsch in 2009. |
The compensation program for non-employee Directors for the 2009
calendar year consisted of:
Cash
Compensation
|
|
|
|
|
$75,000 annual cash retainer
|
|
|
|
Additional Committee Chair retainers of $15,000 per year for the
Chair of the Audit Committee, $10,000 for the Chair of the
Compensation Committee and $7,500 for the Chair of the
Nominating/Corporate Governance Committee
|
39
|
|
|
|
|
Additional retainer of $2,500 for the presiding Director of
executive sessions of non-employee Directors and independent
Directors
|
|
|
|
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, $75,000 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 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 $75,000 annual grant plus an
additional $25,000 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.
Fred
S. Klipsch Consulting Agreement
The consulting agreement between the Company and Fred S. Klipsch
expired on December 19, 2008. Each year during the term of
the agreement, Mr. Klipsch was 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. Mr. Klipsch received a bonus of $262,500 in
2009 for his performance in 2008. In addition, Mr. Klipsch
will receive an aggregate of $600,000, payable in eight
quarterly payments of $75,000, in exchange for a two-year
agreement not to compete with the Company and not to solicit
Company employees, with a few exceptions. The first quarterly
payment was made on December 22, 2008.
The Company has agreed to indemnify Mr. Klipsch for excise
taxes that may be assessed against him in connection with
certain payments and benefits provided to him.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Policies
and Procedures for Review, Approval or Ratification of Related
Party Transactions
The Company has a written policy requiring all material
transactions with related parties to be approved or ratified by
the Nominating/Corporate Governance Committee. The policy covers
any transaction, arrangement or relationship or series of
similar transactions, arrangements or relationships (including
any indebtedness or guarantee of indebtedness) in which
(1) the aggregate amount involved will or may be expected
to exceed $100,000 in any calendar year, (2) the Company is
a participant and (3) any related party has or will have a
direct or indirect interest (other than solely as a result of
being a Director or a less than 10% beneficial owner of another
entity).
In determining whether to approve or ratify a transaction, the
Committee will take into account, among other factors it deems
appropriate, whether the transaction is on terms no less
favorable than terms generally available to an unaffiliated
third-party under the same or similar circumstances and the
extent of the related partys interest in the transaction.
The Board has determined that transactions that involve any
employment by the Company of an Executive Officer of the Company
shall be deemed to be pre-approved if the related compensation
is required to be reported in the Companys proxy statement
under Item 402 of
Regulation S-K
because the person is a Named Executive Officer, or if the
Executive Officer is not a Named Executive Officer and the
compensation would have
40
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.
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth certain information, as of
December 31, 2009, concerning shares of common stock
authorized for issuance under all of the Companys equity
compensation plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
(a)
|
|
|
(b)
|
|
|
Future Issuance Under
|
|
|
|
Number of Securities to
|
|
|
Weighted Average
|
|
|
Equity Compensation Plans
|
|
|
|
be Issued Upon Exercise
|
|
|
Exercise Price of
|
|
|
(Excluding Securities
|
|
|
|
of Options
|
|
|
Outstanding Options
|
|
|
Reflected in Column (a))
|
|
|
Equity compensation plans approved by stockholders
|
|
|
1,062,220
|
(1)
|
|
$
|
37.71
|
|
|
|
4,743,943
|
(2)
|
Equity compensation plans not approved by stockholders
|
|
|
None
|
|
|
|
N/A
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
1,062,220
|
(1)
|
|
$
|
37.71
|
|
|
|
4,743,943
|
(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 6,200,000 shares of common stock
reserved for future issuance under the 2005 Long-Term Incentive
Plan, as reduced by awards issued under the 2005 Long-Term
Incentive Plan, and as increased by shares withheld to satisfy
tax liabilities arising from vesting of awards under the 1995
Stock Incentive Plan that are available for future issuance
under the 2005 Long-Term Incentive Plan. |
PROPOSAL 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, 2009 and has been selected by
the Company to serve in such capacity for the year ending
December 31, 2010. 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 2011
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.
41
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,
|
|
|
|
2009
|
|
|
2008
|
|
|
Audit Fees
|
|
$
|
1,357,535
|
|
|
$
|
1,337,525
|
|
Audit-Related Fees
|
|
|
2,130
|
|
|
|
1,948
|
|
Tax Fees:
|
|
|
|
|
|
|
|
|
Tax Compliance
|
|
|
400,110
|
|
|
|
323,975
|
|
Tax Planning and Tax Advice
|
|
|
48,245
|
|
|
|
34,458
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
1,808,020
|
|
|
$
|
1,697,906
|
|
Audit fees include fees associated with the annual audit, the
review of the Companys quarterly reports on
Form 10-Q
and services that generally only the independent registered
public accounting firm can provide such as comfort letters,
consents and assistance with review of documents to be filed
with or furnished to the Securities and Exchange Commission.
Audit-related fees include fees associated with assurance and
related services that are traditionally performed by an
independent accountant, and include access to research databases
and consultations concerning financial accounting and reporting
standards. Tax fees include fees for tax compliance and tax
planning and tax advice services. Tax compliance involves the
preparation of original and amended tax returns, claims for
refund and tax payment-planning services. Tax planning and tax
advice encompass a diverse range of services, including
assistance with tax audits and appeals, tax advice related to
acquisitions, and requests for rulings or technical advice from
taxing authorities. None of the foregoing fees were paid for
services, the sole business purpose of which was tax avoidance,
or the tax treatment of which would not be supported by the Code
and related regulations.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE RATIFICATION OF
ERNST & YOUNG LLP. The affirmative vote
of a majority of the shares of voting securities present in
person or by proxy at the Annual Meeting will be required for
such ratification.
PRE-APPROVAL
POLICIES AND PROCEDURES
The Audit Committee has developed policies and procedures
concerning its pre-approval of the performance of audit and
non-audit services for the Company by Ernst & Young
LLP. At its annual January meeting, the Audit Committee gives
its prior approval for particular audit and non-audit services
within the following categories of services that it desires the
independent registered public accounting firm to undertake:
audit services, audit-related services, tax compliance services
and tax planning and tax advice services. Prior to giving its
approval, the Committee reviews the written descriptions of
these services provided by Ernst & Young LLP and the
estimated fees for these services. All other non-audit services
must be pre-approved on an individual engagement basis. If there
is any question as to whether a proposed service has been
pre-approved, Management and the independent registered public
accounting firm together must contact the Audit Committee to
obtain clarification or, if necessary, pre-approval.
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, 2009 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.
42
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee oversees the Companys financial
reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial
statements and the reporting process, including the system of
internal controls. In fulfilling its oversight responsibilities
this past year, the Committee reviewed the audited financial
statements with Management, including a discussion of the
quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent registered public
accounting firm, which is responsible for expressing an opinion
on the conformity of the audited financial statements with
generally accepted accounting principles, its judgments as to
the quality, not just the acceptability, of the Companys
accounting principles and such other matters as are required to
be discussed with the Committee under generally accepted
auditing standards (including Statement on Auditing Standards
No. 61, as amended by Statement on Auditing Standards Nos.
89 and 90). In addition, the Committee has discussed with the
independent registered public accounting firm such firms
independence from Management and the Company, including the
matters in the written disclosures required by the Independence
Standards Board (including Independence Standards Board Standard
No. 1), the predecessor requirements to Public Company
Accounting Oversight Board Rule 3600T, and considered the
compatibility of non-audit services with such firms
independence.
The Committee discussed with the Companys independent
registered public accounting firm the overall scope and plans
for its audit. The Committee met with such firm, with and
without Management present, to discuss the results of its
examinations, its evaluations of the Companys internal
controls, and the overall quality of the Companys
financial reporting. The Committee held five meetings during the
year ended December 31, 2009.
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, 2009 for filing with the
Securities and Exchange Commission. The Committee and the Board
have also recommended, subject to stockholder ratification, the
selection of Ernst & Young LLP as the Companys
independent registered public accounting firm.
Submitted by the Audit Committee
Thomas J. DeRosa, Audit Committee Chair
Pier C. Borra, Audit Committee Member
Jeffrey R. Otten, Audit Committee Member
R. Scott Trumbull, Audit Committee Member
VOTING
PROCEDURES
All votes will be tabulated by the inspector of election
appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker
non-votes. Abstentions will be counted as present or represented
for purposes of determining the presence or absence of a quorum
for the Annual Meeting 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. Brokers do not have discretionary
authority with respect to the election of three Directors
(Proposal 2).
43
OTHER
MATTERS
Management is not aware of any matters to be presented for
action at the Annual Meeting other than the matters set forth
above. If any other matters do properly come before the meeting
or any adjournment thereof, it is intended that the persons
named in the proxy will vote in accordance with their judgment
on such matters.
STOCKHOLDERS
SHARING THE SAME ADDRESS
In accordance with a notice sent to stockholders who share a
single address, the Company is sending only one Annual Report
and one Notice of Meeting and Proxy Statement to that address
unless it receives contrary instructions from any stockholder at
that address. This procedure, known as householding,
is designed to reduce printing costs, mailing costs and fees.
Stockholders residing at such an address who wish to receive
separate copies of the Annual Report or Proxy Statement in the
future and stockholders who are receiving multiple copies of
these materials now and wish to receive just one set of
materials in the future, should write to the Senior Vice
President-Administration and Corporate Secretary, Health Care
REIT, Inc., 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.
STOCKHOLDER
PROPOSALS FOR PRESENTATION AT THE 2011 ANNUAL
MEETING
Any stockholder proposals intended for inclusion in the
Companys proxy materials for the 2011 Annual Meeting must
be submitted to Erin C. Ibele, Senior Vice
President-Administration and Corporate Secretary of the Company,
in writing no later than November 26, 2010. In addition,
under the Companys By-Laws, in order for a stockholder to
present a proposal for consideration at an annual meeting other
than by means of inclusion in the Companys proxy materials
for such meeting, the stockholder must provide a written notice
to the Senior Vice President-Administration and Corporate
Secretary not more than 120 days prior to the meeting and
not less than 45 days before the date on which the Company
first mailed or otherwise gave notice for the prior years
annual meeting. For purposes of the 2011 Annual Meeting, such a
written notice must be received by the Senior Vice
President-Administration and Corporate Secretary by
February 9, 2011. If a stockholder does not meet this
deadline, (1) the officer presiding at the meeting may
declare that the proposal will be disregarded because it was not
properly brought before the meeting and (2) the persons
named in the proxies solicited by the Board of Directors for the
meeting may use their discretionary voting authority to vote
against the proposal.
BY ORDER OF THE BOARD OF DIRECTORS
Erin C. Ibele
Senior Vice President-Administration and
Corporate Secretary
44
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YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to annual meeting day.
Health Care REIT, Inc.
INTERNET
http://www.proxyvoting.com/hcn
Use the Internet to vote your proxy.
Have your proxy card in hand when you
access the website.
OR
TELEPHONE
1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card
and return it in the enclosed postage-paid envelope.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
WO#
71509
FOLD AND DETACH HERE
Please mark your votes as
indicated in this example X
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE FOLLOWING.
1. Election of three Directors for a term of three years:
Nominees:
01 Thomas J. DeRosa,
02 Jeffrey H. Donahue, and
03 Fred S. Klipsch
FOR ALL WITHHOLD FOR ALL *EXCEPTIONS o o o
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the Exceptions box and write that nominees name in the space provided below.)
*Exceptions
FOR AGAINST ABSTAIN o o o
2. Ratification of the appointment of Ernst & Young LLP as Independent Registered Public Accounting Firm for the fiscal year 2010.
3. With discretionary authority on any other business that may properly come before the meeting or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Mark Here for
Address Change
or Comments
SEE REVERSE
Signature Signature Date
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. |
You can now access your Health Care REIT, Inc. account online.
Access your Health Care REIT, Inc. account online via Investor ServiceDirect® (ISD).
BNY Mellon Shareowner Services, the transfer agent for Health Care REIT, Inc., now makes it easy
and convenient to get current information on your stockholder account.
View account status
View certificate history
View book-entry information
View payment history for dividends
Make address changes
Obtain a duplicate 1099 tax form
Establish/change your PIN
Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-888-216-7206
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.
FOLD AND DETACH HERE
PROXY
PROXY FOR COMMON STOCK
HEALTH CARE REIT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints George L. Chapman and Peter J. Grua, and each of them, as
proxies for the undersigned, with full power of substitution, to vote all shares of common stock,
$1.00 par value per share, of Health Care REIT, Inc. (the Company), that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be held on Thursday, May 6, 2010, or any adjournments thereof.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE
TAKING OF A VOTE ON THE MATTERS HEREIN.
Returned proxy cards will be voted: (1) as specified on the matters listed; (2) in accordance with
the Directors recommendations where a choice is not specified; and (3) in accordance with the
judgment of the proxies on any other matters that may properly come before the meeting.
(Over)
Address Change/Comments
(Mark the corresponding box on the reverse side)
BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
WO#
71509 |