SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
HEALTH CARE REIT, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HEALTH CARE REIT, INC.
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
AND
PROXY STATEMENT
MEETING DATE
MAY 1, 2003
------------------
YOUR VOTE IS IMPORTANT!
YOU ARE URGED TO SIGN, DATE, AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
HEALTH CARE REIT, INC.
One SeaGate
Suite 1500
P.O. Box 1475
Toledo, Ohio 43603-1475
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 1, 2003
TO THE STOCKHOLDERS OF HEALTH CARE REIT, INC.:
The Annual Meeting of Stockholders of Health Care REIT, Inc. will be held
on May 1, 2003 at 10:00 a.m. in the Auditorium of One SeaGate, Toledo, Ohio, for
the purpose of considering and acting upon:
1. The election of three Directors for a term of three years;
2. The approval of an amendment to the Company's Second Restated
Certificate of Incorporation to increase the number of authorized shares
of common stock from 75,000,000 to 125,000,000;
3. The approval of an amendment to the Company's Second Restated
Certificate of Incorporation to increase the number of authorized shares
of preferred stock from 10,000,000 to 25,000,000;
4. The ratification of the appointment of Ernst & Young LLP as independent
auditors for the fiscal year 2003; and
5. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 6, 2003 will be
entitled to notice of, and to vote at, such 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.
BY ORDER OF THE BOARD OF DIRECTORS
ERIN C. IBELE
Vice President and Corporate Secretary
Toledo, Ohio
March 28, 2003
PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IN LIEU
OF MAILING THEIR PROXY CARD, HOLDERS OF SHARES OF COMMON STOCK MAY CHOOSE TO
SEND IN A PROXY VIA THE INTERNET OR TELEPHONE, BY FOLLOWING THE PROCEDURES
PROVIDED ON THEIR 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.
HEALTH CARE REIT, INC.
ONE SEAGATE
SUITE 1500
P.O. BOX 1475
TOLEDO, OHIO 43603-1475
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 2003
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 forms to be used in voting at the Annual
Meeting of Stockholders (the "Annual Meeting"), which is scheduled to be held on
Thursday, May 1, 2003 at 10:00 a.m. as set forth in the foregoing notice. At the
Annual Meeting, the stockholders will be asked to elect three Directors, approve
amendments to the Company's Second Restated Certificate of Incorporation, ratify
the appointment of Ernst & Young LLP as independent auditors 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 forms are
returned properly executed and dated, or in the case of holders of shares of
Common Stock, by following the appropriate procedures for submitting a proxy via
the internet or by telephone, the shares represented thereby will be voted at
the Annual Meeting. If a choice is specified in the proxy, the shares
represented thereby will be voted in accordance with such specification. If no
specification is made, the proxy will be voted FOR the action proposed. Any
stockholder giving a proxy has the right to revoke it any time before it is
voted by filing with the Vice President/Corporate Secretary of the Company a
written revocation, or by filing a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person. The revocation of a proxy
will not be effective until notice thereof has been received by the Vice
President/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, 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 $9,500, plus
expenses and other customary charges.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the total number of shares of voting securities outstanding on
the record date shall constitute a quorum for the transaction of business by
such holders at the Annual Meeting.
The executive offices of the Company are located at One SeaGate, Suite
1500, Toledo, Ohio 43604, and its mailing address is One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio 43603-1475. The telephone number is (419) 247-2800.
The approximate date on which this material was first sent to stockholders was
March 31, 2003. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2002, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES
AND EXHIBITS THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, MAY
BE OBTAINED
1
WITHOUT CHARGE BY WRITING TO THE VICE PRESIDENT/CORPORATE SECRETARY, HEALTH CARE
REIT, INC. AT THE ABOVE ADDRESS.
VOTING SECURITIES OUTSTANDING
As of March 6, 2003, the Company had outstanding 40,309,776 shares of
common stock, $1.00 par value per share (the "Common Stock"), 3,000,000 shares
of Series B Cumulative Redeemable Preferred Stock, $1.00 par value per share
("Series B Preferred Stock"), and 2,100,000 shares of Series C Cumulative
Convertible Preferred Stock, $1.00 par value per share ("Series C Preferred
Stock"). Stockholders of record at the close of business on March 6, 2003 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
thereof as follows:
On all matters to come before the Annual Meeting, each share of Common
Stock is entitled to one vote.
With respect to the election of Directors (Proposal 1), Series B Preferred
Stock has no voting power and each share of Series C Preferred Stock is entitled
to .97561 of one vote, which is equivalent to the number of common shares into
which a preferred share is currently convertible.
With respect to the proposed increase in the number of authorized shares of
common stock (Proposal 2), and the proposal to ratify the appointment of the
Company's independent auditors (Proposal 4), the Series B Preferred Stock has no
voting power and each share of Series C Preferred Stock is entitled to .97561 of
one vote when voting together with the Common Stock.
With respect to Proposal 3, the increase in the number of authorized shares
of preferred stock, this proposal must be approved by the holders of the shares
of Series B Preferred Stock and the shares of Series C Preferred Stock, voting
together as a class, as well as by the holders of the shares of Common Stock and
the holders of the shares of Series C Preferred Stock, voting together. With
respect to this proposal, each share of the Series B Preferred Stock and each
share of the Series C Preferred Stock is entitled to one vote when voting
together as a class on this proposal, and each share of the Series C Preferred
Stock is entitled to .97561 of one vote when voting together with the Common
Stock on this proposal.
PROPOSAL 1 -- ELECTION OF THREE DIRECTORS
The Company is currently authorized to have nine Directors. The By-Laws
divide the Board into three classes: Class I, Class II, and Class III. The
Directors are elected for a three-year term or until the election and
qualification of their respective successors. Proxies received will be voted to
elect the three Directors named below to serve for a three-year term and until
their respective successors are elected and have 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 proxy reserves the
right to substitute another person as a Board nominee, or to reduce the number
of Board nominees, as they shall deem advisable. The proxy solicited hereby will
not be voted to elect more than three Directors.
CLASS II
DIRECTORS TO BE ELECTED
PIER C. BORRA, AGE 63. Mr. Borra is Chairman and Chief Executive Officer 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
(operator of nursing homes). Mr. Borra has served as a Director of the Company
since 1991 and is a member of the Board's Compensation, Investment and Planning
Committees.
GEORGE L. CHAPMAN, AGE 55. Mr. Chapman is currently Chairman and Chief
Executive Officer of the Company, positions he has held since October 1996, and
served as President of the Company from September 1995 to May 2002. From January
1992 to September 1995, he served as Executive Vice President and General
2
Counsel of the Company. Mr. Chapman has served as a Director of the Company
since 1994 and is a member of the Board's Executive, Investment and Planning
Committees.
SHARON M. OSTER, AGE 54. Ms. Oster is Professor of Economics,
Entrepreneurship and Management, Yale University School of Management. Ms. Oster
also serves as a Director of Aristotle Corporation (holding company for a
manufacturer of educational products) and Transpro, Inc. (designer and
manufacturer of precision transportation products). Ms. Oster has served as a
Director of the Company since 1994 and is a member of the Board's Audit,
Investment and Planning Committees.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND 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 III
DIRECTORS WHOSE TERMS CONTINUE (1)
JEFFREY H. DONAHUE, AGE 56. Since January 2003, Mr. Donahue has been
President and Chief Executive Officer of The Enterprise Social Investment
Corporation (a provider of affordable housing). 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. From
September 1993 to December 1998, Mr. Donahue served as Senior Vice President and
Chief Financial Officer of The Rouse Company. He has served as a Director of the
Company since 1997 and is a member of the Board's Compensation, Investment and
Planning Committees.
BRUCE G. THOMPSON, AGE 73. Mr. Thompson served as a consultant to the
Company in 1997 and 1998. From 1970 to October 1996, Mr. Thompson was Chairman
and Chief Executive Officer of the Company. In addition, Mr. Thompson serves as
President and a Director of First Toledo Corporation (developer of health care
facilities), a position he has held since June 1994. Mr. Thompson is also a
Director of Kingston HealthCare Company (manager of health care facilities). Mr.
Thompson has served as a Director of the Company since 1971 and is a member of
the Board's Executive, Investment and Planning Committees.
RICHARD A. UNVERFERTH, AGE 79. Mr. Unverferth is Chairman of Unverferth
Manufacturing Company, Inc. (agricultural equipment manufacturer). In addition,
Mr. Unverferth is Chairman of H.C.F., Inc. (operator of skilled nursing
facilities). Mr. Unverferth has served as a Director of the Company since 1971
and is a member of the Board's Audit, Compensation, Executive, Investment,
Nominating and Planning Committees.
CLASS I
DIRECTORS WHOSE TERMS CONTINUE (2)
WILLIAM C. BALLARD, JR., AGE 62. Mr. Ballard is Of Counsel to Greenebaum
Doll & McDonald PLLC (law firm) and has held this position since 1992. From 1972
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 Trover Solutions, Inc. (healthcare
subrogation and recovery services) and UnitedHealth Group (managed care
company). Mr. Ballard has served as a Director of the Company since 1996 and is
a member of the Board's Investment, Nominating and Planning Committees.
PETER J. GRUA, AGE 49. Mr. Grua is a Principal and President of HLM
Management Company, Inc. (registered investment adviser), where he has held
various positions since 1992. From 1986 until 1992, Mr. Grua was a Managing
Director and Senior Analyst of Alex. Brown & Sons, Incorporated (brokerage
services). Mr. Grua has served as a Director of the Company since 1999 and is a
member of the Board's Investment, Nominating and Planning Committees.
3
R. SCOTT TRUMBULL, AGE 54. Mr. Trumbull is Chairman and Chief Executive
Officer of Franklin Electric Co., Inc. (manufacturer of electric motors), a
position he has held since January 2003. From October 2001 through December
2002, Mr. Trumbull was Executive Vice President and Chief Financial Officer of
Owens-Illinois, Inc. (manufacturer of glass and plastic packaging products).
From 1993 to October 2001, Mr. Trumbull served as Executive Vice President,
International Operations & Corporate Development of Owens-Illinois, Inc. Mr.
Trumbull has served as a Director of the Company since 1999 and is a member of
the Board's Audit, Investment and Planning Committees.
---------------
(1) The terms of Messrs. Donahue, Thompson and Unverferth expire in 2004.
(2) The terms of Messrs. Ballard, Grua and Trumbull expire in 2005.
BOARD AND COMMITTEES
The Board met four times during the year ended December 31, 2002. The Board
has standing Audit, Executive, Compensation, Investment, Nominating and Planning
Committees. In 1997, the Board appointed a subcommittee of the Investment
Committee to meet between Investment Committee meetings. In 2002, each incumbent
Director attended at least 75% of the aggregate of the meetings of the Board and
the committees on which they served.
The Audit Committee met five times during the year ended December 31, 2002.
The Audit Committee has the power to engage and discharge the independent
auditors; reviews the plan and results of the auditing engagement with the
independent auditors; reviews the adequacy of the Company's system of internal
accounting controls; and directs and supervises investigations into matters
within the scope of its duties. The Audit Committee is governed by a written
charter approved by the Board of Directors.
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 Compensation Committee, which met five times during 2002, is generally
responsible for determining the nature and amount of compensation for Executive
Officers.
The function of the Investment Committee and its subcommittee is to review
and approve the Company's investments in health care facilities.
The function of the Nominating Committee, which met once during 2002, is to
select and recommend to the full Board nominees for election as Directors. The
Committee may, in its discretion, consider nominees proposed by stockholders of
the Company for the 2004 Annual Meeting of Stockholders, provided such
recommendations are in writing, contain a description of the nominee's
qualifications and his or her consent to serve, and are received by the Company
by December 2, 2003.
The function of the Planning Committee is to assist Management with
identifying strategic opportunities for the Company.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee, the members of which are independent as defined by the
New York Stock Exchange's listing standards, oversees the Company's 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, the Committee reviewed the audited financial statements in the
Annual Report 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 auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards
4
(including Statement on Auditing Standards No. 61). In addition, the Committee
has discussed with the independent auditors the auditors' independence from
Management and the Company, including the matters in the written disclosures
required by the Independence Standards Board (including Independence Standards
Board Standard No. 1), and considered the compatibility of nonaudit services
with the auditors' independence.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their audit. The Committee meets with the independent
auditors, with and without Management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting. The Committee held five
meetings during fiscal year 2002.
The Audit Committee must pre-approve all non-audit services, other than
those prohibited by the Sarbanes-Oxley Act of 2002. Examples of non-prohibited
services are: due diligence work for potential acquisitions and dispositions;
tax compliance work; tax planning work; employee benefits plan audits; certain
statutory audit work required for certain subsidiaries; and litigation support
involving disputes related to financial statements audited by the Company's
independent auditors.
The Chairman of the Audit Committee may pre-approve non-audit services with
a cost of less than $25,000. Pre-approval of the Audit Committee is required for
all non-audit services that have a cost exceeding $25,000.
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, 2002 for filing with the Securities and Exchange
Commission. The Committee and the Board have also recommended, subject to
stockholder ratification, the selection of the Company's independent auditors.
Sharon M. Oster, Audit Committee Chair
R. Scott Trumbull, Audit Committee Member
Richard A. Unverferth, Audit Committee Member
March 19, 2003
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth, as of March 6, 2003, unless otherwise
specified, certain information with respect to the beneficial ownership of the
Company's shares of Common Stock by each person who is a Director of the
Company, each Executive Officer, and the Directors and Executive Officers of the
Company as a group. Unless noted below, each person has sole voting and
investment power regarding the Company's shares. Also,
5
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
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SHARES HELD OPTIONS EXERCISABLE TOTAL SHARES
NAME OF BENEFICIAL OWNER OF RECORD(1) WITHIN 60 DAYS BENEFICIALLY OWNED
------------------------ ------------ ------------------- ----------------------
William C. Ballard, Jr................... 21,300 30,001 51,301(3)
Pier C. Borra............................ 42,000 30,001 72,001
Raymond W. Braun......................... 103,033 93,500 196,533(4)
George L. Chapman........................ 205,343 259,519 464,862(5)
Michael A. Crabtree...................... 34,852 36,300 71,152
Jeffrey H. Donahue....................... 12,750 30,001 42,751
Peter J. Grua............................ 13,000 25,001 38,001
Charles J. Herman, Jr.................... 21,797 26,250 48,047
Erin C. Ibele............................ 43,377 33,875 77,252
Sharon M. Oster.......................... 8,000 30,001 38,001
Bruce G. Thompson........................ 192,703 30,001 222,704
R. Scott Trumbull........................ 7,834 16,667 24,501
Richard A. Unverferth.................... 9,816(2) 30,001 39,817
All Directors and Executive Officers as a
group (13 persons)..................... 715,805 671,118 1,386,923(6)
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(1) Includes all restricted shares granted under the Company's 1995 Stock
Incentive Plan or Stock Plan for Non-Employee Directors beneficially owned
by such Directors and Executive Officers as of March 6, 2003.
(2) Mr. Unverferth disclaims beneficial ownership of 3,816 shares held in his
sons' names.
(3) Mr. Ballard's total shares beneficially owned include 5,000 shares owned by
his spouse.
(4) Mr. Braun's total shares beneficially owned include 13,508 shares owned by
his spouse's revocable trust.
(5) As of March 6, 2003, Mr. Chapman beneficially owned 1.15% of the outstanding
shares of Common Stock of the Company, which includes 5,100 shares held in
his sons' names.
(6) Total beneficial ownership represents 3.44% of the outstanding shares of
Common Stock of the Company.
Based upon a filing made with the Securities and Exchange Commission in
February 2003, the only stockholder known to the Company to be the beneficial
owner of more than 5% of the Company's Common Stock at March 6, 2003, is set
forth below:
PERCENT OF
COMMON STOCK OUTSTANDING COMMON
BENEFICIAL OWNER BENEFICIALLY OWNED STOCK
---------------- ------------------ ------------------
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, NY 10017 2,600,425(1) 6.5%
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(1) Includes 2,570,725 shares over which Cohen & Steers has sole voting power
and 2,600,425 shares over which Cohen & Steers has sole dispositive power.
Holders of the Company's Series B Preferred Stock and Series C Preferred
Stock will have certain voting rights at the Annual Meeting. The Company does
not know of any holder with beneficial ownership of more than 5% of the
outstanding Series B Preferred Stock. Based upon a filing made with the
Securities and Exchange
6
Commission in February 2003, the only stockholder known to the Company to be the
beneficial owner of more than 5% of the Company's outstanding Series C Preferred
Stock at March 6, 2003, is set forth below:
SERIES C PREFERRED PERCENT OF
STOCK BENEFICIALLY OUTSTANDING SERIES C
BENEFICIAL OWNER OWNED PREFERRED STOCK
---------------- ------------------ --------------------
Five Arrows Realty Securities II L.L.C.
1251 Avenue of the Americas
New York, NY 10020 2,100,000(1) 100%
---------------
(1) Schedule 13GA filed with the Securities and Exchange Commission on February
14, 2003, by (i) Five Arrows Realty Securities II L.L.C., a Delaware limited
liability company ("Five Arrows"), (ii) Rothschild Realty Investors IIA
L.L.C., a Delaware limited liability company and sole Managing Member of
Five Arrows ("Rothschild"), (iii) Matthew W. Kaplan, a manager of Five
Arrows, (iv) D. Pike Aloian, a manager of Five Arrows, (v) James E. Quigley
3rd, a manager of Five Arrows, (vi) Paul H. Jenssen, a manager of
Rothschild, and (vii) John D. McGurk, a manager of each of Five Arrows and
Rothschild. The 2,100,000 outstanding shares of Series C Preferred Stock are
convertible into 2,048,781 shares of common stock, which would represent
less than 5% of the shares of Common Stock outstanding after such
conversion.
EXECUTIVE OFFICERS OF THE COMPANY
The following information is furnished as to the Executive Officers of the
Company:
GEORGE L. CHAPMAN, AGE 55. Mr. Chapman has served as Chairman and Chief
Executive Officer of the Company since October 1996 and served as President of
the Company from September 1995 to May 2002. As described above, since 1992, Mr.
Chapman has served in various executive capacities with the Company.
RAYMOND W. BRAUN, AGE 45. Mr. Braun has served as President of the Company
since May 2002, as well as Chief Financial Officer since July 2000. Since
January 1993, he has served in various capacities, including Chief Operating
Officer, Executive Vice President, Assistant Vice President and Assistant
General Counsel of the Company.
CHARLES J. HERMAN, JR., AGE 37. Mr. Herman has served as Vice President of
Operations since August 2000. 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 also a founder and Chief
Operating Officer of Capital Valuation Group, a health care consulting firm
founded during 1991.
MICHAEL A. CRABTREE, AGE 46. Mr. Crabtree has served as Treasurer of the
Company since July 2000. He served as Controller of the Company from 1996 to
September 2002. Prior to joining the Company, Mr. Crabtree was Chief Financial
Officer of Westhaven Services Co., a provider of pharmaceutical services to
nursing homes, holding that position from July 1993 through July 1996.
ERIN C. IBELE, AGE 41. Ms. Ibele has served as Vice President and Corporate
Secretary of the Company since January 1993. Since 1986, Ms. Ibele has served in
various capacities with the Company.
REMUNERATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents the total compensation awarded to, earned by,
or paid to, the Chief Executive Officer of the Company during 2000, 2001 and
2002, and the total compensation awarded, earned, or paid during
7
2000, 2001 and 2002 to the Company's four most highly compensated Executive
Officers who were serving at the end of 2002, and whose total annual salary and
bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION*
--------------------------
RESTRICTED
ANNUAL COMPENSATION STOCK SECURITIES ALL OTHER
NAME AND --------------------- AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) (1) OPTIONS(#) ($)
------------------ ---- --------- -------- ------------ ---------- ------------
George L. Chapman, 2002 $467,857 $502,122 $ 963,189 104,395 $128,221(2)
Chairman and Chief Executive 2001 454,230 454,230 610,500 175,000 69,380
Officer 2000 441,000 418,950 420,250 175,000 33,639
Raymond W. Braun, 2002 269,018 264,660 512,191 60,779 78,167(2)
President and 2001 252,865 233,900 335,775 96,250 46,342
Chief Financial Officer 2000 231,958 209,903 231,138 96,250 26,289
Charles J. Herman, Jr. 2002 206,000 109,945 175,499 29,397 29,000(2)
Vice President, Operations 2001 200,000 75,000 183,150 52,500 0
2000 83,333 50,000 126,075 52,500 0
Michael A. Crabtree 2002 134,562 63,744 153,009 20,352 43,813(2)
Treasurer 2001 130,643 65,322 146,520 42,000 30,824
2000 116,005 60,248 100,860 42,000 21,309
Erin C. Ibele, 2002 113,344 63,894 158,483 21,482 43,551(2)
Vice President and 2001 110,043 55,022 122,100 35,000 32,591
Corporate Secretary 2000 106,838 50,748 84,050 35,000 20,571
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(1) The restricted stock awards vest ratably over five years. The restricted
stock awards set forth above are valued at the time of grant. The table
below shows the aggregate number of shares of restricted stock held at
December 31, 2002 plus those granted on January 27, 2003 for performance
during the fiscal year ended December 31, 2002. The value of the restricted
stock held at December 31, 2002 is calculated by multiplying the number of
shares thereof by the closing market price of $27.05 on the last trading day
of 2002, and the value of the restricted stock granted on January 27, 2003
is calculated by multiplying the number of shares thereof by the closing
market price of $25.82 on the date of grant. Dividends are paid on the
restricted shares at the same rate as on all other shares of Common Stock of
the Company. Such dividends are not included in the Summary Compensation
Table.
VALUE OF
RESTRICTED STOCK JANUARY 27, 2003
NUMBER OF SHARES OF VALUE OF RESTRICTED GRANTS ON RESTRICTED STOCK
RESTRICTED STOCK AT STOCK AT JANUARY 27, AWARDS AT
DECEMBER 31, 2002 DECEMBER 31, 2002 2003 TIME OF GRANT
------------------- ------------------- ---------------- ----------------
George L. Chapman............ 64,813 $1,753,192 37,304 $963,189
Raymond W. Braun............. 34,157 923,947 19,837 512,191
Charles J. Herman, Jr........ 10,500 284,025 6,797 175,499
Michael A. Crabtree.......... 13,152 355,762 5,926 153,009
Erin C. Ibele................ 13,703 370,666 6,138 158,483
(2) Includes $139,122 for 2002 that will be contributed in connection with the
Company's Retirement Plan and Trust and Money Purchase Pension Plan. "All
Other Compensation" also includes $183,630 of principal otherwise payable to
the Company that was forgiven in 2002 pursuant to the terms of the Company's
Executive Loan Program established in connection with the Stock Incentive
Plan. See "Certain Relationships and Related Transactions-Executive Loan
Program."
* Includes long-term incentives, consisting of an aggregate of 76,002 shares
of restricted stock and stock options to purchase 236,405 shares, which were
granted on January 27, 2003 to the Executive Officers for performance during
the fiscal year ended December 31, 2002.
8
EMPLOYMENT AGREEMENTS
The Company and Mr. Chapman entered into a three-year employment agreement
effective January 1, 1997, subject to optional successive three-year renewal
terms. Mr. Chapman serves as the Company's Chairman and Chief Executive Officer.
Mr. Chapman's annual base salary was increased to $481,893, effective January 1,
2003 and he is eligible for discretionary annual bonuses and stated fringe
benefits. If Mr. Chapman is terminated without cause, he would receive severance
pay for the remaining term of the agreement or for 24 months, whichever is
greater. If he resigns during the 12 months following a "change in corporate
control" (as defined in the employment agreement), he would receive severance
pay for 36 months. These severance benefits would be made in a series of monthly
payments, in an amount equal to one-twelfth of the sum of his annual base salary
and the greater of the average of his annual bonuses for the two fiscal years
immediately preceding the termination or change in corporate control or a
minimum bonus equal to 50% of his annual base salary. At Mr. Chapman's election,
the Company would instead make an immediate lump sum payment equal to the
present value of such monthly payments, calculated using a discount rate equal
to the interest rate on 90-day Treasury Bills reported at the date the election
is delivered. Mr. Chapman's stock option and restricted stock awards under the
1995 Stock Incentive Plan would become vested and immediately exercisable in the
event of a change in corporate control, or upon his death, disability or
termination without cause. In addition, if it is determined that any payment by
the Company to Mr. Chapman would be a golden parachute subject to excise tax,
the amount of the payments to him would be increased to cover such excise tax.
The Company has entered into similar employment agreements with the
Company's other Executive Officers, which provide for two-year terms, minimum
annual salaries, stated benefits, and severance payments in the event of a
termination without cause or a change in corporate control.
For those executives who have an employment agreement with the Company, if
any amounts forgiven under the Executive Loan Program are subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code, the Company will make
a gross-up payment to the executives consistent with the formula set forth in
the executive's then current employment agreement with respect to excise taxes,
if any. See "Certain Relationships and Related Transactions--Executive Loan
Program" below for additional information about these loans.
STOCK INCENTIVE PLAN
The Company's 1995 Stock Incentive Plan (the "Stock Incentive Plan")
authorizes the Compensation Committee of the Board to grant eligible officers
and key employees of the Company awards consisting of options to purchase shares
of common stock, stock appreciation rights, dividend equivalent rights, shares
of restricted stock or performance shares. The Compensation Committee has the
discretion to select the particular officers and key employees who will receive
awards.
OPTION GRANTS*
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE GRANT
GRANTED(#) IN FISCAL PRICE EXPIRATION DATE
NAME (1), (2) YEAR* ($/SH) DATE VALUE($)(3)
---------------------------------- ---------- ---------- -------- ---------- -----------
George L. Chapman................. 104,395 35% $25.82 1/27/13 $207,746
Raymond W. Braun.................. 60,779 20% 25.82 1/27/13 120,950
Charles J. Herman, Jr............. 29,397 10% 25.82 1/27/13 58,500
Michael A. Crabtree............... 20,352 7% 25.82 1/27/13 40,500
Erin C. Ibele..................... 21,482 7% 25.82 1/27/13 42,749
---------------
(1) All of the options granted vest between the years 2004 and 2008.
(2) The terms of the options granted permit cashless exercises and payment of
the option exercise price by delivery of previously owned shares.
9
(3) The options were granted on January 27, 2003 and the Black-Scholes option
valuation methodology was used based on estimates as of December 31, 2002.
In using such methodology, the following variables were used: risk-free
interest rate of 4.06%, dividend yields of 8.66%, expected lives of seven
years, and expected volatility of 24.6%. The actual value, if any, that an
Executive Officer may realize will depend upon the excess of the closing
market price over the exercise price on the date the option is exercised so
that there is no assurance that the value realized by an Executive Officer
will be at or near the value estimated by this calculation.
* Option grants consist of stock options to purchase 236,405 shares that were
granted on January 27, 2003 to the Executive Officers for performance during
the fiscal year ended December 31, 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES*
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES VALUE AT FISCAL YEAR END AT FISCAL YEAR END($)(2)
ACQUIRED ON REALIZED --------------------------------- ---------------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
--------------------- ----------- ---------- -------------- ---------------- -------------- ----------------
George L. Chapman.... 404,211 $3,310,997 255,000 333,557 $1,040,325 $1,957,668
Raymond W. Braun..... 215,750 1,501,911 93,500 172,250 409,560 1,017,620
Charles J. Herman,
Jr................. 5,250 54,810 26,250 73,500 188,895 433,020
Michael A.
Crabtree........... 41,900 269,089 36,300 73,300 169,208 434,141
Erin C. Ibele........ 77,000 453,118 37,875 64,000 156,549 378,180
---------------
(1) Value at exercise is the difference between the closing market price on the
date of exercise less the exercise price per share, multiplied by the number
of shares acquired on exercise.
(2) Calculated based on the closing market price on the last trading day of 2002
multiplied by the number of applicable shares covered by in-the-money
options, less the total exercise price for such shares.
* Options at fiscal year end do not include stock options to purchase 236,405
shares that were granted on January 27, 2003 to the Executive Officers for
performance during the fiscal year ended December 31, 2002.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective January 1, 2001, the Compensation Committee of the Board of
Directors adopted a Supplemental Executive Retirement Plan (the "SERP"), 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 Company's tax-qualified 401(k)
Profit Sharing Plan because of the restrictions imposed by ERISA and the
Internal Revenue Code of 1986, as amended.
The SERP benefit is designed to provide a benefit payable at retirement at
age 65 or older equal to 35% of the participant's average compensation at
retirement, offset by the actuarial equivalent of the benefit provided by the
Company's qualified 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 participant's
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.
10
The actuarial equivalent of the benefit provided by the Company's qualified
plan represents the value of Company contributions to the participant's
qualified retirement 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 control of the Company, if the employment of
the chief executive officer of the Company is terminated, either voluntarily or
involuntarily for any reason, he or she will be entitled to receive the full
retirement benefit, unreduced by the proration for length of participation or
the early retirement reduction. With respect to other participants, if their
employment is terminated after a change in control, either voluntarily or
involuntarily for any reason, they will be entitled to receive their early
retirement benefits as of the date of termination calculated by adding an
additional five years of participation (up to but not beyond age 65) to the
length of their participation proration, but with no reduction for early
retirement.
The SERP is unfunded and all benefits will be paid from the general assets
of the Company. Eligibility is limited to a select group of Management or highly
compensated employees whose qualified plan benefits are limited by ERISA and the
Internal Revenue Code of 1986, as amended. The Compensation Committee has
selected George Chapman and Raymond Braun to participate in the SERP. The table
below illustrates, for a range of average compensation, the anticipated annual
benefit if the participant retired and chose to receive benefits at age 65
calculated prior to any offset for the Company contributions to the
participant's qualified plan:
AVERAGE COMPENSATION AGE 65
-------------------- --------
$ 500,000........................................ $175,000
$ 600,000........................................ $210,000
$ 700,000........................................ $245,000
$ 800,000........................................ $280,000
$ 900,000........................................ $315,000
$1,000,000........................................ $350,000
$1,100,000........................................ $385,000
$1,200,000........................................ $420,000
$1,300,000........................................ $455,000
$1,400,000........................................ $490,000
Based on current compensation, ages and years of participation, if Mr.
Chapman and Mr. Braun would have elected early retirement at the end of 2002,
Mr. Chapman and Mr. Braun would have been eligible for an annual benefit of
$26,702 and $0, respectively, prior to any offset from their qualified
retirement plan accounts.
COMPENSATION OF DIRECTORS
In 2002, each Director received an annual fee of $20,000 for his or her
services as such, which fee did not increase in 2003. In addition, each Director
received a fee of $1,500 for each Board meeting attended. For 2002 and 2003,
members of the Audit, Compensation and Nominating Committees received or will
receive $1,000 for each meeting attended, and for the same time period, members
of the Investment, the subcommittee of the Investment, and Planning Committees
will receive $1,200, $1,000 and $1,500, respectively, for each such committee
meeting attended. Commencing in 2003, the Chairmen of the Audit and Compensation
Committees will receive an additional fee of $5,000 and the Chairman of the
Nominating Committee will receive an additional fee of $2,500.
11
Director's fees are not paid to Mr. Chapman. The fees paid to all other
Directors totaled $277,000 in 2002.
During 1997, the Company adopted the Stock Plan for Non-Employee Directors.
Pursuant to this Plan, in January 2002 each continuing Director not employed by
the Company was granted 1,000 shares of restricted stock and additional options
to purchase 5,000 shares of common stock. In future years, each new non-employee
Director will receive an option to purchase 10,000 shares of common stock upon
joining the Board, and each non-employee Director will receive each year
additional stock options to purchase 5,000 shares and an additional grant of
1,500 shares of restricted stock. All of the options have an option exercise
price equal to the fair value of the shares at the time the options were
granted. The options granted to a Director under this Plan may not be exercised
more than 10 years after the date the options are granted. Option awards
generally become exercisable in three equal installments on the first three
anniversaries of the date of grant, so that one-third of the shares subject to
the options will first become available for purchase by the Director on each of
these anniversaries. Restricted stock awards generally become vested on the six
month anniversary of the date of the grant. The other terms of these awards are
set forth in detail in the Stock Plan for Non-Employee Directors.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information, as of March 6, 2003,
concerning shares of common stock authorized for issuance under all of the
Company's 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....... 1,875,296 $22.52 801,117(1)
Equity compensation plans not
approved by stockholders....... None N/A None
--------- ------ -------
Totals........................... 1,875,296 $22.52 801,117(1)
---------------
(1) This number includes 723,367 shares of common stock reserved for future
issuance under the 1995 Stock Incentive Plan, as amended, and 77,750 shares
of common stock reserved for future issuance under the Stock Plan for
Non-Employee Directors, as amended. The number of shares reserved for future
issuance under the Stock Plan for Non-Employee Directors increases
automatically each year by a number of shares equal to the number of
non-employee Directors serving on the Board of Directors each January 1
times 6,000 shares (up to a maximum of 90,000 shares). There are no shares
of common stock reserved for future issuance under the Health Care REIT,
Inc. 1985 Incentive Stock Option Plan, as amended.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board is generally responsible for
determining the nature and amount of compensation for Executive Officers. The
Committee currently consists of three non-employee Directors, Pier C. Borra,
Jeffrey H. Donahue and Richard A. Unverferth. During the year ended December 31,
2002, the Compensation Committee of the Board met five times, and it met once
more in January 2003. The Compensation Committee utilizes the services of FPL
Associates, a nationally recognized executive compensation consulting firm, to
assist the Compensation Committee in reviewing and developing the Company's
executive compensation program. Based largely on comparative compensation
information provided by FPL Associates, which included a detailed survey of the
compensation practices of other REITs in the health care industry, the
Compensation Committee believes that the Company's executive compensation
program remains within the market range for the Company's peer group of
companies, and is well-designed to support the Company's incentive-based
compensation philosophy.
12
The Compensation Committee believes that compensation for the Chief
Executive Officer and other Executive Officers should be generally competitive
with other REITs in order to retain and attract top management. The three key
components of the Company's Executive Officer compensation system are annual
salaries, annual incentive bonuses and long-term incentives. In determining
compensation for each of these three components, the Compensation Committee
reviewed and considered data compiled by the Company's compensation consultants
on salary, bonus and incentive compensation paid to executive officers by a
number of peer groups with which the Company was compared.
The Executive Officers' base salaries are established in their employment
agreements and the Compensation Committee may adjust those base salaries from
time to time, as it deems appropriate. For 2003, following discussions with the
Chief Executive Officer and the Company's compensation consultants, the
Compensation Committee approved salary increases for each Executive Officer,
providing an adjustment for increased cost of living and to keep their
compensation levels consistent with the pay levels other peer-group REITs
provide for similar executive officer positions.
Annual bonus compensation payments are based on attaining certain financial
and non-financial business objectives of the Company on an annual basis. The
2002 bonuses for the Executive Officers were based on the 2002 program of
performance goals approved by the Compensation Committee. For 2002, the primary
goals related to achieving a target level of funds from operations per share (a
standard measure of financial performance for REITs), increasing the Company's
gross real estate investments, reducing the Company's funds from operations
payout ratio for the year, and achieving a total stockholder return relative to
the 3-year NAREIT Index, as well as the Committee's subjective appraisal of each
officer's satisfaction of certain individual non-financial goals.
Long-term incentives are primarily based on more closely aligning
incentives with increasing stockholder value, individual performance and an
individual's potential contributions to the Company's profitability and long-
term growth. The Company's 1995 Stock Incentive Plan is the Company's primary
vehicle for providing long-term incentive compensation, and is intended to
enable the Company to continue to provide its Executive Officers and other key
employees with competitive equity-based compensation in order to create
appropriate long-term incentives. Under the terms of the Company's 1995 Stock
Incentive Plan, the Compensation Committee has authority to approve stock option
awards, restricted shares or other equity-based incentive awards to Executive
Officers and key employees and to determine the terms of these awards. The
Compensation Committee also reviewed the Executive Loan Program that was
discontinued on July 30, 2002 as a result of the passage of the Sarbanes-Oxley
Act of 2002. Although the passage of this act did not affect any of the features
of the existing loans, no additional loans will be made to the Executive
Officers. See "Certain Relationships and Related Transactions - Executive Loan
Program."
At its January 2003 meeting, the Compensation Committee granted Executive
Officers of the Company stock options to purchase an aggregate of 236,405
shares, as well as an aggregate of 76,002 shares of restricted stock. The
Compensation Committee's decision to grant these stock options and restricted
stock awards was based on the Company's performance during the fiscal year ended
December 31, 2002, including meeting the performance goals described above.
Additionally, the Compensation Committee considered its subjective evaluation of
the individuals' past and expected future contributions to the Company's
long-term performance, and the Compensation Committee's goal of increased stock
retention by Executive Officers.
13
The Compensation Committee increased Mr. Chapman's annual base salary for
2003 from $467,857 to $481,893 effective January 1, 2003, an increase based upon
the recommendation of the Committee's consultants, in light of the base salaries
paid to CEOs of similarly situated REITs and increases in the cost of living
during the prior year. In addition to his base salary, Mr. Chapman was eligible
in 2002 to receive an annual bonus based on a percentage of his annual base
salary, with the percentage earned to depend on achievement of the performance
goals established by the Committee early in 2002. For 2002, these goals related
primarily to achieving a target level of funds from operations per share,
increasing the Company's gross real estate investments for the year, reducing
the Company's funds from operations payout ratio and achieving a total
stockholder return relative to the 3-year NAREIT Index, as well as Mr. Chapman's
satisfaction of certain individual non-financial goals. In evaluating Mr.
Chapman's performance, the Committee noted the Company's funds from operations
per share of $2.660, the 35 percent 3-year total return for stockholders
(exceeding the 15.93 percent reported by the NAREIT Index), and the Company's
gross real estate investments of $457,000,000, which exceeded the target by more
than 15 percent. Based upon Mr. Chapman's achievement of the specified goals and
his overall performance in 2002, he was awarded an annual bonus of $502,122. The
Compensation Committee believes that the amount of Mr. Chapman's compensation is
consistent with general compensation levels within the health care REIT industry
and appropriate in view of the Company's performance in 2002.
The Compensation Committee approved a minimum stock ownership policy,
requiring each Executive Officer within five years of his or her date of hire,
to own shares of the Company's common stock with a fair market value at least
three times his or her annual base salary (five times annual base salary for the
Chief Executive Officer). All shares of common stock beneficially owned by the
Executive Officer will be taken into account, including unvested shares of
restricted stock granted under the Company's 1995 Stock Incentive Plan but
excluding shares subject to unexercised stock options.
The Compensation Committee has considered the anticipated tax treatment to
the Company regarding the compensation and benefits paid to the Executive
Officers of the Company under Section 162(m) of the Internal Revenue Code of
1986, as amended. 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. However,
certain types of compensation payments and their deductibility depend upon the
timing of an Executive Officer's vesting or exercise of previously granted
rights. Moreover, interpretations of any changes in the tax laws and other
factors beyond the Compensation Committee's control may affect the deductibility
of certain compensation payments. The Compensation Committee will consider
various alternatives to preserve the deductibility of compensation payments to
Executive Officers and benefits to the extent reasonably practical and to the
extent consistent with its other compensation objectives, but reserves the right
to make incentive-based awards not exempt from these limits where such awards
are appropriate and will not have a material impact on stockholder value.
The Compensation Committee is committed to maintaining a compensation
program that appropriately aligns the Company's executive compensation with
corporate performance and the interests of its stockholders. The Compensation
Committee periodically reviews its program in order to make any further changes
it considers necessary to achieve such objectives.
Pier C. Borra, Compensation Committee Chair
Jeffrey H. Donahue, Compensation Committee Member
Richard A. Unverferth, Compensation Committee Member
March 19, 2003
14
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change and
the cumulative total stockholder return on the Company's shares against the
cumulative total return of the S & P Composite-500 Stock Index and the NAREIT
Equity Index. One hundred forty nine companies comprise the NAREIT Equity Index.
The Index consists of REITs identified by NAREIT as equity (those REITs which
have at least 75% of equity investments). Upon written request to the Vice
President/Corporate Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio, 43603-1475, the Company will provide stockholders
with the names of the component issuers. The data are based on the closing
prices as of December 31 for each of the five years. 1997 equals $100 and
dividends are assumed to be reinvested.
[PERFORMANCE GRAPH]
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
S & P 500 100.00 128.58 155.63 141.46 124.65 97.10
Company 100.00 100.14 65.40 81.68 136.39 165.30
Equity 100.00 82.50 78.69 99.43 113.29 117.61
Except to the extent the Company specifically incorporates this information
by reference, the foregoing Report of the Compensation Committee and Stockholder
Return Performance Presentation shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934. This information shall not otherwise be deemed filed under such Acts.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
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, 2002.
15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EXECUTIVE LOAN PROGRAM
Pursuant to the provisions of the Company's 1995 Stock Incentive Plan, the
Company instituted an Executive Loan Program in 1999, pursuant to which the
Company made six recourse loans to each of Messrs. Chapman, Braun and Crabtree
and Ms. Ibele, Executive Officers of the Company, to assist them with paying
taxes related to the vesting of restricted stock awards made under the 1995
Stock Incentive Plan. The Executive Loan Program was discontinued on July 30,
2002 as a result of the passage of the Sarbanes-Oxley Act of 2002. No additional
loans will be made to the Executive Officers. The passage of this act did not
affect any of the features of the existing loans.
At March 15, 2003, the balance of the loans made to Messrs. Chapman, Braun
and Crabtree and Ms. Ibele were $364,506, $181,358, $57,365 and $74,062,
respectively. The highest amount due during 2002 by each of Messrs. Chapman,
Braun and Crabtree and Ms. Ibele, was $486,354, $241,838, $75,494 and $99,440,
respectively.
Each loan is evidenced by a promissory note, is secured by a pledge of the
shares of the Common Stock of the Company that vested and gave rise to the tax
liability with respect to which the loan was made to the Executive Officer and
bears interest at the mid-term applicable federal rate established by the
Internal Revenue Service at the time of the loan. The interest rates for the six
loans range from 3.94 percent to 6.21 percent and interest is payable annually
no later than thirty days after the anniversary date of the note. Each note
becomes due and payable five years after the date of the note; however, on each
anniversary date of each note, if the Executive Officer continues to be employed
by the Company, one-fifth of the original principal amount due under the note is
forgiven. If the Executive Officer's employment is involuntarily terminated for
cause before a note is fully paid or if the Executive Officer voluntarily
terminates his or her employment with the Company (other than by reason of
death, disability or as a result of a change in control) before a note is fully
paid, the outstanding balance becomes due and payable in ninety days. The entire
outstanding amount due under the note will be forgiven in the event of a change
in control in the Company or the death, disability or involuntary termination of
the Executive Officer by the Company without cause.
Finally, if any amounts forgiven are subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code, the Company will make a gross-up
payment to the Executive Officers consistent with the formula set forth in the
Executive Officer's then current employment agreement with respect to excise
taxes. In 2002, $183,630 was forgiven pursuant to the terms of the Executive
Officers' existing loans.
OTHER RELATIONSHIPS AND RELATED TRANSACTIONS
In 2002, the Company provided a direct loan and a credit enhancement to a
partnership and a credit enhancement to a second partnership, both in connection
with assisted living facilities. Mr. Thompson, a Director of the Company, owns
50% of First Toledo Corporation, which serves as a general partner in each
partnership. An affiliate of Mr. Thompson, Kingston HealthCare Company, operates
one of the facilities. The partnership structures facilitated industrial
development bond financing, and credit enhancements were provided in the form of
the Company's agreement to purchase the facilities or the bonds in the event of
default by the partnerships. The credit enhancement to the second partnership
expired in December 2002 due to the repayment of the industrial development
bonds related to one of the assisted living facilities. At December 31, 2002,
the Company's contingent obligation under the agreement to purchase totaled
$3,195,000. For the fiscal year ended 2002, the Company received $169,500 in
connection with its contingent obligation pursuant to the agreement to purchase.
For the fiscal year ended 2002, the Company recorded $59,000 of interest income.
All of the related party matters were approved by either the Compensation
Committee, or by a majority of Directors unaffiliated with the transactions. For
the fiscal year ended December 31, 2002, revenues from related parties totaled
$273,671, or .17%, of the revenues (including the revenues from discontinued
operations) of the Company.
16
PROPOSAL 2 -- AMENDMENT TO THE SECOND
RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors proposes that the Company's Second Restated
Certificate of Incorporation be amended to increase the number of authorized
shares of common stock, $1.00 par value per share ("Common Stock"), from
75,000,000 shares to 125,000,000 shares. As of March 6, 2003, the Company had
40,309,776 Common Stock shares outstanding, leaving 34,690,224 authorized shares
available for further issuance, of which 331,397 shares have been reserved for
future issuance under the Company's Dividend Reinvestment and Stock Purchase
Plan, 723,367 shares have been reserved for future issuance under the Company's
1995 Stock Incentive Plan, 77,750 shares have been reserved for future issuance
under the Stock Plan for Non-Employee Directors and 2,048,781 shares have been
reserved for issuance upon conversion of the shares of Series C Preferred Stock.
The Board of Directors believes that the availability of additional shares
will enhance the Company's flexibility in connection with possible future
actions, such as equity offerings, stock dividends, acquisitions or mergers, and
other corporate purposes. The Board of Directors will determine whether, when,
and on what terms the issuance of shares may be warranted in connection with any
of the foregoing purposes.
The availability for issuance of additional shares of Common Stock could
enable the Board of Directors to render more difficult or discourage an attempt
to obtain control of the Company. For example, by increasing the number of
outstanding shares, the interest of the party attempting to gain control of the
Company could be diluted. Also, the additional shares could be used to render
more difficult a merger or similar transaction. It is noted, however, that in
order to protect the Company's status as a real estate investment trust, the
By-Laws limit ownership of the Company's voting securities by any person or
entity to not more than 9.8% of the Company's voting securities outstanding.
Consequently, the approval of the proposed amendment should have little
incremental effect in discouraging unsolicited takeover attempts.
If the proposed amendment is approved, all or any of the authorized shares
of Common Stock may be issued without further action by the stockholders and
without first offering such shares to the stockholders for subscription. The
issuance of shares otherwise than on a pro-rata basis to all current
stockholders would reduce current stockholders' proportionate interests.
However, in any such event, stockholders wishing to maintain their interests may
be able to do so through normal market purchases.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT YOU VOTE
"FOR" APPROVAL OF THE PROPOSED AMENDMENT. The affirmative vote of a majority of
the outstanding shares of Common Stock of the Company, voting as a separate
class, and the affirmative vote of a majority of the outstanding shares of
Common Stock and the outstanding shares of Series C Preferred Stock of the
Company, voting together, is required for approval of the proposed amendment. If
the proposed amendment is adopted by the stockholders, it will become effective
upon filing and recording a Certificate of Amendment as required by the Delaware
General Corporation Law.
PROPOSAL 3 -- AMENDMENT TO THE SECOND
RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK
The Board of Directors proposes that the Company's Second Restated
Certificate of Incorporation be amended to increase the number of authorized
shares of preferred stock from 10,000,000 shares to 25,000,000 shares.
Currently, the Second Restated Certificate of Incorporation authorizes
10,000,000 shares of preferred stock, $1.00 par value per share ("Preferred
Stock"). In 2002, 900,000 shares of Series C Preferred Stock were converted into
shares of Common Stock. As of March 6, 2003, the Company had 5,100,000 shares of
Preferred Stock outstanding, leaving 4,000,000 authorized shares of Preferred
Stock available for further issuance, of which 13,000 shares are designated as
Series A Junior Participating Preferred Stock, 450,000 shares are designated as
8 7/8% Series B Cumulative Redeemable Preferred Stock, and the remaining
3,537,000 shares are undesignated. Currently, the Company has outstanding
3,000,000 shares of Series B Preferred Stock and 2,100,000 shares of Series C
Preferred Stock.
17
The authorized, undesignated and unissued shares of Preferred Stock and the
shares of Preferred Stock to be authorized pursuant to this proposal, may be
issued from time to time in one or more series, and the Board of Directors is
authorized to fix the dividend rights, dividend rates, any conversion or
exchange rights, any voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, the liquidation
preferences and any other rights, preferences, privileges and restrictions of
any new series of Preferred Stock and the number of shares constituting such
series and the designation thereof. The authority of the Board of Directors to
determine the precise terms of each series of Preferred Stock would give it the
flexibility to tailor each series to meet the particular requirements of the
persons to whom the shares of such series are to be issued. From time to time,
the Company considers issuing Preferred Stock in connection with raising capital
and making investments in long-term health care facilities. Funds available for
dividends on the Common Stock could be reduced by the amount of any dividends
paid or accrued on the Preferred Stock.
The availability for issuance of additional shares of Preferred Stock could
enable the Board of Directors to render more difficult or discourage an attempt
to obtain control of the Company. For example, by increasing the number of
outstanding shares of Preferred Stock, the interest of the party attempting to
gain control of the Company could be diluted. Also, the additional shares of
Preferred Stock could be used to render more difficult a merger or similar
transaction. If the Board so authorizes, the holders of any series of Preferred
Stock may be entitled to vote separately as a class in connection with the
approval of certain extraordinary corporate transactions in circumstances where
the Delaware General Corporation Law would not require separate voting by class.
If the proposed amendment is approved, all or any of the authorized shares
of Preferred Stock may be issued without further action by the stockholders and
without first offering such shares to the stockholders for subscription. The
issuance of shares otherwise than on a pro-rata basis to all current
stockholders would reduce current stockholders' proportionate interests.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT YOU VOTE
"FOR" APPROVAL OF THE PROPOSED AMENDMENT. The affirmative vote of a majority of
the outstanding shares of Series B Preferred Stock and the Series C Preferred
Stock of the Company, voting together as one class, as well as the affirmative
vote of a majority of the outstanding shares of Common Stock of the Company and
the outstanding shares of Series C Preferred Stock of the Company, voting
together, is required for approval of the proposed amendment. If the proposed
amendment is adopted by the stockholders, it will become effective upon filing
and recording a Certificate of Amendment as required by the Delaware General
Corporation Law.
PROPOSAL 4 -- RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as independent auditors of the Company
for the year ended December 31, 2002 and has been selected by the Company to
serve as its independent auditors for the year ending December 31, 2003. Ernst &
Young LLP has served as independent auditors of the Company since the Company's
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 2004 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.
18
Fees for professional services provided by our independent auditors in each
of the last two fiscal years, in each of the following categories are as
follows:
YEAR ENDED DECEMBER 31
-----------------------
2002 2001
---------- ----------
Audit Fees.............................................. $207,500 $177,100
Audit-Related Fees...................................... 0 0
Tax Fees................................................ 246,523 162,775
All Other Fees.......................................... 0 0
-------- --------
Totals.................................................. $454,023 $339,875
Audit Fees include fees associated with the annual audit, the reviews of the
Company's quarterly reports on Form 10-Q and services that generally only the
independent auditor 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. Tax Fees include tax compliance, tax advice and tax
planning.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND 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.
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. 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 are counted as present or represented for
purposes of determining the presence or absence of a quorum for the Annual
Meeting, but are not counted for purposes of determining the number of shares
entitled to vote with respect to any proposal for which the broker lacks
discretionary authority.
OTHER MATTERS
Management is not aware of any matters to be presented for action at the
Annual Meeting other than the matters set forth above. If any other matters do
properly come before the meeting or any adjournment thereof, it is intended that
the person named in the proxy will vote in accordance with his judgment on such
matters.
STOCKHOLDER PROPOSALS FOR PRESENTATION AT THE 2004 ANNUAL MEETING
The Board of Directors requests that any stockholder proposals intended for
inclusion in the Company's proxy materials for the 2004 Annual Meeting be
submitted to Erin C. Ibele, Vice President and Corporate Secretary of the
Company, in writing no later than December 2, 2003. Unless the Company has been
given written notice by February 16, 2004 of a stockholder proposal to be
presented at the 2004 Annual Meeting other than by means of inclusion in the
Company's proxy materials for the Meeting, persons named in the proxies
solicited by the Board of Directors for the Meeting may use their discretionary
voting authority to vote against the proposal.
BY THE ORDER OF THE BOARD OF DIRECTORS
Erin C. Ibele
Vice President and Corporate Secretary
19
P PROXY FOR COMMON STOCK
R
O HEALTH CARE REIT, INC.
X
Y PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints G. L. Chapman, 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 the Stockholders of the Company to be held
on Thursday, May 1, 2003, 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 below; (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)
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
PLEASE MARK X
YOUR CHOICE
LIKE THIS
IN BLUE OR
BLACK INK.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT YOU
VOTE "FOR" ALL OF THE FOLLOWING.
WITHHOLD
FOR ALL FOR ALL
1. Election of three Directors for a [ ] [ ]
term of three years:
01 PIER C. BORRA
02 GEORGE L. CHAPMAN
03 SHARON M. OSTER
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, PLEASE WRITE THE PERSON'S NAME IN
THE FOLLOWING SPACE:
-----------------------------------------
FOR AGAINST ABSTAIN
2. Approval of an amendment to the [ ] [ ] [ ]
Company's Second Restated Certificate of
Incorporation to increase the number of
authorized shares of Common Stock
from 75,000,000 to 125,000,000.
FOR AGAINST ABSTAIN
3. Approval of an amendment to the [ ] [ ] [ ]
Company's Second Restated Certificate of
Incorporation to increase the number of
authorized shares of Preferred Stock
from 10,000,000 to 25,000,000.
4. Ratification of the appointment of FOR AGAINST ABSTAIN
Ernst & Young LLP as independent auditors [ ] [ ] [ ]
for the fiscal year 2003.
5. With discretionary authority on any other FOR AGAINST ABSTAIN
business that may properly come before the [ ] [ ] [ ]
meeting or any adjournment thereof.
Please disregard if you have previously
provided your consent decision.
[ ]
By checking the box to the right, I
consent to future delivery of annual
reports, proxy statements, prospectuses
and other materials and stockholder
communications electronically via the
Internet at a webpage which will be
disclosed to me. I understand that
the Company may no longer distribute
printed materials to me for any future
stockholder meeting until such consent is
revoked. I understand that I may revoke
my consent at any time by contacting the
Company's transfer agent, Mellon Investor
Services LLC, Ridgefield Park, NJ and
that costs normally associated with
electronic delivery, such as usage and
telephone charges as well as any costs
I may incur in printing documents, will
be my responsibility.
Signature _________________________ Signature if Held Jointly ___________________________ Date _________ , 2003
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 person's title indicated.
--------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11 P.M. EASTERN TIME
THE BUSINESS DAY PRIOR TO THE ANNUAL MEETING DAY.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
------------------------------------ ------------------------------------------- ---------------------------
INTERNET TELEPHONE MAIL
http://www.eproxy.com/hcn 1-800-435-6710 Mark, sign and date
Use the Internet to vote your Use any touch-tone telephone to vote your proxy card
proxy. Have your proxy card in OR your proxy. Have your proxy card in hand OR and
hand when you access the web site. when you call. You will be prompted to return it in the
You will be prompted to enter your enter your control number, located in the enclosed postage-paid
control number, located in the box box below, and then follow the directions envelope.
below, to create and submit an given.
electronic ballot.
------------------------------------ ------------------------------------------- ---------------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
P PROXY FOR SERIES B CUMULATIVE REDEEMABLE PREFERRED STOCK
R
O HEALTH CARE REIT, INC.
X
Y PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints G. L. Chapman, with full
power of substitution, to vote all shares of Series B
Cumulative Redeemable Preferred 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 the
Stockholders of the Company to be held on Thursday, May 1,
2003, 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 below; and (2) in accordance with the
Directors' recommendations where a choice is not specified.
(Over)
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
PLEASE MARK X
YOUR CHOICE
LIKE THIS
IN BLUE OR
BLACK INK.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT
YOU VOTE "FOR" THE FOLLOWING.
FOR AGAINST ABSTAIN
1. Approval of an amendment to the [ ] [ ] [ ]
Company's Second Restated Certificate of
Incorporation to increase the number of
authorized shares of Preferred Stock from
10,000,000 to 25,000,000.
Signature _________________________________ Signature if Held Jointly ____________________ Date _________________ , 2003
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 person's title indicated.
------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
PROXY FOR SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK
HEALTH CARE REIT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints G. L. Chapman, with full power of
substitution, to vote all shares of Series C Cumulative Convertible Preferred
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 the
Stockholders of the Company to be held on Thursday, May 1, 2003, 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
below; (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.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT YOU
VOTE "FOR" ALL OF THE FOLLOWING.
1. Election of three Directors for a term of three years: 01 Pier C.
Borra, 02 George L. Chapman and 03 Sharon M. Oster.
[ ] FOR ALL
[ ] WITHHOLD FOR ALL
To withhold authority to vote for any individual nominee, please write the
person's name in the following space:
--------------------------------------------------------------------------------
2. Approval of an amendment to the Company's Second Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
75,000,000 to 125,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of an amendment to the Company's Second Restated Certificate of
Incorporation to increase the number of authorized shares of Preferred Stock
from 10,000,000 to 25,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of the appointment of Ernst & Young LLP as independent
auditors for the fiscal year 2003.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. With discretionary authority on any other business that may properly
come before the meeting or any adjournment thereof.
Date: ___________________________, 2003
------------------------------------
Signature
------------------------------------
Signature if Held Jointly
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 person's
title indicated.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR CHOICE LIKE THIS X IN BLUE OR BLACK INK.