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 6, 2004
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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 6, 2004
TO THE STOCKHOLDERS OF HEALTH CARE REIT, INC.:
The Annual Meeting of Stockholders of Health Care REIT, Inc. will be held
on May 6, 2004 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 ratification of the appointment of Ernst & Young LLP as independent
auditors for the fiscal year 2004; and
3. 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 11, 2004 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 26, 2004
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 YOUR PROXY CARD, YOU MAY CHOOSE TO SEND IN A PROXY VIA THE INTERNET
OR 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.
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, 2004
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, 2004 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 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 form are
returned properly executed and dated or the appropriate procedures for
submitting a proxy via the Internet or by telephone are followed, the shares
represented thereby will be voted at the Annual Meeting. If a choice is
specified in the proxy, the shares represented thereby will be voted in
accordance with such specification. If no specification is made, the proxy will
be voted FOR the action proposed. Any stockholder giving a proxy has the right
to revoke it any time before it is voted by filing a written revocation with the
Vice President and Corporate Secretary of the Company, 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 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, personal interview,
or by other means of communication. The Company will reimburse Directors and
officers for their reasonable out-of-pocket expenses in connection with such
solicitation. The Company will request brokers and nominees who hold shares in
their names to furnish this proxy material to the persons for whom they hold
shares and will reimburse such brokers and nominees for their reasonable
out-of-pocket expenses in connection therewith. The Company has hired Mellon
Investor Services LLC to solicit proxies for a fee not to exceed $5,500, plus
expenses and other customary charges.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the total number of shares of voting securities outstanding on
the record date shall constitute a quorum for the transaction of business by
such holders at the Annual Meeting.
The executive offices of the Company are located at One SeaGate, Suite
1500, Toledo, Ohio 43604, and its mailing address is One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio 43603-1475. The telephone number is (419) 247-2800.
The approximate date on which this material was first sent to stockholders was
March 31, 2004. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2003, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES
THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE ON
OUR WEB SITE AT www.hcreit.com OR MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO
THE VICE PRESIDENT AND CORPORATE SECRETARY, HEALTH CARE REIT, INC., AT THE ABOVE
ADDRESS.
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VOTING SECURITIES OUTSTANDING
As of March 11, 2004, the Company had outstanding 51,098,962 shares of
common stock, $1.00 par value per share. The common stock constitutes the only
class of voting securities of the Company. Stockholders of record at the close
of business on March 11, 2004 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 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 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 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 proxies reserve the
right to substitute another person as a Board nominee, or to reduce the number
of Board nominees, as they shall deem advisable. The proxy solicited hereby will
not be voted to elect more than three Directors.
CLASS III
DIRECTORS TO BE ELECTED (1)
THOMAS J. DEROSA, AGE 46. Mr. DeRosa is the Vice-Chairman and Chief
Financial Officer of The Rouse Company (real estate development and operations),
a position he has held since September 2002. From 1992 to September 2002, Mr.
DeRosa held various positions at Deutsche Bank and Alex. Brown & Sons (Deutsche
Bank AG), including Global Co-Head of the Health Care Investment Banking Group
of Deutsche Bank and Managing Director in the Real Estate Investment Banking
Group of Alex. Brown & Sons. Mr. DeRosa has served as a Director of the Company
since January 2004 and is a member of the Board's Audit, Investment, Nominating/
Corporate Governance and Planning Committees.
JEFFREY H. DONAHUE, AGE 57. Since January 2003, Mr. Donahue has been
President and Chief Executive Officer of The Enterprise Social Investment
Corporation (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 74. Mr. Thompson serves as President 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 Investment and Planning
Committees.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE ELECTION OF THE ABOVE NOMINEES. The three nominees who receive the
highest number of votes at the Annual Meeting shall be elected as Directors.
CLASS I
DIRECTORS WHOSE TERMS CONTINUE (2)
WILLIAM C. BALLARD, JR., AGE 63. Mr. Ballard is Of Counsel to Greenebaum
Doll & McDonald PLLC (law firm), a position he has held since 1992. From 1970 to
1992, Mr. Ballard was Executive Vice President, Chief Financial Officer and
Director of Humana Inc. (provider of integrated health care services). Mr.
Ballard also serves as a Director of Trover Solutions, Inc. (healthcare
subrogation and recovery services) and UnitedHealth
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Group (managed care company). Mr. Ballard has served as a Director of the
Company since 1996 and is a member of the Board's Compensation, Executive,
Investment, Nominating/Corporate Governance and Planning Committees.
PETER J. GRUA, AGE 50. Mr. Grua is a Managing Partner of HLM Venture
Partners (registered investment adviser), an affiliate of HLM Management
Company, Inc., 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.
Mr. Grua also serves as a Director of Renal Care Group, Inc. (specialized
dialysis services company). Mr. Grua has served as a Director of the Company
since 1999 and is a member of the Board's Executive, Investment, Nominating/
Corporate Governance and Planning Committees.
R. SCOTT TRUMBULL, AGE 55. 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.
CLASS II
DIRECTORS WHOSE TERMS CONTINUE (3)
PIER C. BORRA, AGE 64. 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 56. 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
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 55. Ms. Oster is Professor of Management and
Entrepreneurship, Yale University School of Management. Ms. Oster also serves as
a Director of Aristotle Corporation (holding company for a manufacturer and
distributor of educational, health and agricultural 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.
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(1) Mr. DeRosa was appointed to the Board of Directors on January 7, 2004. Mr.
DeRosa replaced Richard A. Unverferth, who retired from the Board of
Directors and its committees on January 7, 2004.
(2) The terms of Messrs. Ballard, Grua and Trumbull expire in 2005.
(3) The terms of Messrs. Borra and Chapman and Ms. Oster expire in 2006.
BOARD AND COMMITTEES
INDEPENDENCE AND MEETINGS
In March 2004, the Board adopted its Corporate Governance Guidelines. The
Guidelines adopted by the Board meet the new listing standards adopted by the
New York Stock Exchange and are available on our Web site at www.hcreit.com and
from the Company upon written request sent to the Vice President and Corporate
Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500, P.O. Box 1475,
Toledo, Ohio, 43603-1475.
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Pursuant to the Guidelines, the Board undertook a review of Director
independence in March 2004. 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, including
those reported under "Certain Relationships and Related Transactions." 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 Mr. Chapman, all of the Directors of
the Company (Ms. Oster and Messrs. Ballard, Borra, DeRosa, Donahue, Grua,
Thompson and Trumbull) meet the specific minimum independence requirements of
the New York Stock Exchange. The Board also determined that other than Messrs.
Chapman and Thompson, all of the Directors of the Company (Ms. Oster and Messrs.
Ballard, Borra, DeRosa, Donahue, Grua 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 also determined that all of the members of the Audit Committee
(Ms. Oster and Messrs. DeRosa and Trumbull) are independent under the above
standards and under the separate independence standards for audit committee
members under Rule 10A-3 of the Securities Exchange Act of 1934. Additionally,
the Board determined that all of the members of the Compensation Committee
(Messrs. Ballard, Borra and Donahue) are independent, non-employee and outside
directors, as the case may be, under the rules of the New York Stock Exchange,
Securities and Exchange Commission and Internal Revenue Service. Finally, the
Board determined that all of the members of the Nominating/Corporate Governance
Committee (Messrs. Ballard, DeRosa and Grua) are independent under the rules of
the New York Stock Exchange.
The Board also determined that two of the three Directors nominated for
election at the Annual Meeting, Messrs. DeRosa and Donahue, are independent from
the Company and its Management under the standards set forth in the Corporate
Governance Guidelines. Although Mr. Thompson meets the minimum independence
requirements of the New York Stock Exchange, the Board determined that he is not
independent under the general independence standards of the New York Stock
Exchange. The loan and credit enhancement provided to First Toledo Corporation
by the Company (as described in the section "Certain Relationships and Related
Transactions") could be considered as evidence of a material relationship
between Mr. Thompson and the Company. Since Mr. Thompson's relationship with the
Company (through First Toledo Corporation and otherwise) could be viewed as
"material," a finding that he is not independent under the general independence
standards of the NYSE was determined to be appropriate.
The Board met five times during the year ended December 31, 2003. It is our
policy to schedule a meeting of the Board on the date of the annual meeting of
stockholders and we encourage all of our Directors to attend that meeting. Six
Directors attended last year's annual meeting of stockholders.
The Board has standing Audit, Executive, Compensation, Investment,
Nominating/Corporate Governance and Planning Committees. In 2003, except for Mr.
Thompson, each incumbent Director attended at least 75% of the aggregate of the
meetings of the Board and the committees on which they served.
Executive sessions of non-Management Directors are held after regularly
scheduled meetings of the Board. Effective March 2004, the presiding Director of
these executive sessions will be the Chair of the Nominating/Corporate
Governance Committee, currently Mr. Ballard.
AUDIT COMMITTEE
The Audit Committee has the authority and responsibility to engage and
discharge the independent auditors, pre-approve all audit and non-audit services
to be provided by the independent auditors, review the plan and results of the
auditing engagement with the independent auditors, review Management's
evaluation of the adequacy of the Company's system of internal accounting
controls, 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.
During 2003, the members of the Audit Committee were Ms. Oster and Messrs.
Trumbull and Unverferth, with Ms. Oster serving as Chair. The Audit
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Committee met five times during the year ended December 31, 2003. The current
members of the Audit Committee are Ms. Oster and Messrs. DeRosa and Trumbull,
with Ms. Oster serving as Chair.
The Audit Committee is comprised solely of Directors who are not officers
or employees of the Company and whom we believe have the requisite financial
literacy to serve on the Audit Committee. Additionally, they have no
relationship to us that might interfere with the exercise of their independence
from Management and they meet the standards of independence for members of an
audit committee published 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, circumstances and
attributes, has determined that Mr. Trumbull is the designated "audit committee
financial expert" on the Audit Committee.
The Audit Committee is governed by a written charter approved by the Board
of Directors, a copy of which is attached as Appendix A to this Proxy Statement.
The charter is also available on our Web site at www.hcreit.com and from the
Company upon written request sent to the Vice President and Corporate Secretary,
Health Care REIT, Inc., One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio,
43603-1475.
COMPENSATION COMMITTEE
The Compensation Committee is generally responsible for determining the
nature and amount of compensation for Executive Officers. During 2003, the
members of the Compensation Committee were Messrs. Borra, Donahue and
Unverferth, with Mr. Borra serving as Chair. The Compensation Committee met six
times during the year ended December 31, 2003. The current members of the
Compensation Committee are Messrs. Ballard, Borra and Donahue, with Mr. Borra
serving as Chair. The Compensation Committee is governed by a written charter
approved by the Board of Directors. The charter is available on our Web site at
www.hcreit.com and from the Company upon written request sent to the Vice
President and Corporate Secretary, Health Care REIT, Inc., One SeaGate, Suite
1500, P.O. Box 1475, Toledo, Ohio, 43603-1475.
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. During 2003, the members of the Executive Committee were
Messrs. Chapman, Thompson and Unverferth. The Executive Committee met once
during the year ended December 31, 2003. The current members of the Executive
Committee are Messrs. Ballard, Chapman and Grua. Effective January 7, 2004, the
Executive Committee is also responsible for reviewing and approving the
Company's investments between meetings of the Investment Committee.
INVESTMENT COMMITTEE
The function of the Investment Committee is to review and approve the
Company's investments in health care facilities. During the year ended December
31, 2003, the Investment Committee met four times and its subcommittee met
twice. Each member of the Board is a member of the Investment Committee.
Effective January 7, 2004, the Executive Committee is responsible for reviewing
and approving the Company's 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 our Board, to make nominations to fill vacancies on our Board and to
select the nominees for the Directors to be elected by our stockholders at each
annual meeting. In addition, the Committee is responsible for evaluating,
implementing and overseeing the standards and guidelines for the governance of
the Company, including monitoring compliance with those standards and
guidelines, as well as evaluating the performance of our Board. During 2003, the
members of the Nominating/Corporate Governance Committee were Messrs. Ballard,
Grua and Unverferth, with Mr. Ballard serving as Chair. The Nominating/Corporate
Governance Committee met three times during the year ended December 31, 2003.
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The current members of the Nominating/Corporate Governance Committee are Messrs.
Ballard, DeRosa and Grua, with Mr. Ballard serving as Chair.
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 member's exercise of his independent judgment. The Board has also
determined 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 our Web
site at www.hcreit.com and from the Company upon written request sent to the
Vice President and Corporate Secretary, Health Care REIT, Inc., One SeaGate,
Suite 1500, P.O. Box 1475, Toledo, Ohio, 43603-1475.
Consideration of Director Nominees. Our Board believes that a nominee for
Director should be or have been a senior manager, chief operating officer, chief
financial officer or chief executive officer of a complex organization such as a
corporation, university, foundation or governmental entity or unit or, if in a
professional capacity, be accustomed to dealing with complex problems, or
otherwise have obtained and excelled in a position of leadership. In addition,
Directors and nominees for Director should have the education, experience,
intelligence, independence, fairness, reasoning ability, practical wisdom and
vision to exercise sound business judgment and should have high personal and
professional ethics, strength of character, integrity and values. Also,
Directors and nominees for Director should be available and willing to attend
regularly scheduled meetings of our Board and its committees and otherwise able
to contribute a reasonable amount of time to our affairs, with participation on
other boards of directors encouraged to provide breadth of experience to our
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 our Board each year to determine the
need to add or remove Directors. Second, taking into consideration the
characteristics mentioned above, the Committee determines if there are any
specific qualities or skills that would complement the existing strengths of the
Board.
The Committee uses multiple sources for identifying and evaluating nominees
for Directors including referrals from our current Directors and Management, as
well as input from third party executive search firms retained at the Company's
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 resume and qualifications of
each candidate and determine whether the candidate would add value to the Board.
With respect to candidates that are determined by the Committee to be potential
nominees, the Committee will obtain such background and reference checks as it
deems necessary, and the Chair of the Committee and the Chairman of the Board
will interview qualified candidates. Once it is determined that a candidate is a
good prospect, the candidate will be invited to meet the other members of the
Committee. If the candidate is approved by the Committee, the candidate will
have an opportunity to meet with the remaining Directors and the senior
Management team. 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.
With respect to Mr. DeRosa, who is being submitted to our stockholders for
election as a Director for the first time at the Annual Meeting, Mr. DeRosa was
recommended by the members of the Committee.
The Committee will consider qualified nominees recommended by stockholders
who may submit recommendations to the Committee in care of our Vice President
and Corporate Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500, P.O.
Box 1475, Toledo, Ohio, 43603-1475. To be considered by the Committee for
inclusion in the Company's proxy materials for the 2005 Annual Meeting,
stockholder nominations must be submitted by November 26, 2004 and must be
accompanied by: (1) the name, age, business address and, if known, residence
address of the nominee; (2) the principal occupation or employment of the
nominee for at least the last five years and a description of the qualifications
of the nominee; (3) the number of shares of our stock that
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are beneficially owned 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 Exchange Act, 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
number of shares of our stock that are beneficially owned by the stockholder
making the nomination and by any other supporting stockholders. Nominees for
Director who are recommended by our stockholders will be evaluated in the same
manner as any other nominee for Director.
Also, nominations by stockholders may be made at an annual meeting of
stockholders in the manner provided in our By-Laws. Our By-Laws provide that a
stockholder entitled to vote for the election of Directors may make nominations
of persons for election to our Board at a meeting of stockholders by complying
with required notice procedures. Those procedures include, but are not limited
to, making the nomination by written notice and delivering it to our Vice
President and Corporate Secretary not less than 14 nor more than 90 days before
any annual meeting of stockholders.
We may require that the proposed nominee furnish us with other information
as we may reasonably request to assist us 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
one time during the year ended December 31, 2003. Each member of the Board is a
member of the Planning Committee.
COMMUNICATIONS WITH OUR BOARD
Stockholders and other parties interested in communicating with our Board
of Directors or any specific Directors, including non-Management Directors, 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. Effective March 12, 2004,
the Nominating/Corporate Governance Committee approved a process for handling
letters received by the Company and addressed to members of the Board. Under
that process, the Vice President 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 Vice President 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 accounting controls and
auditing matters, it will be summarized and forwarded to the Chair of the Audit
Committee for review). Directors may at any time review a log of all
correspondence received by the Company that is addressed to members of the Board
and request copies of any such correspondence.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth, as of March 11, 2004, 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 Named Executive Officer (as defined below in the section
"Remuneration -- Compensation of Executive Officers"), 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,
unless noted below, the beneficial ownership of each person represents less than
1% of the outstanding shares of common stock of the Company.
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COMMON STOCK
---------------------------------------------------------
SHARES HELD OPTIONS EXERCISABLE TOTAL SHARES
NAME OF BENEFICIAL OWNER OF RECORD(1) WITHIN 60 DAYS BENEFICIALLY OWNED
------------------------ ------------ ------------------- ------------------
William C. Ballard, Jr. ...................... 23,300 5,001 28,301(2)
Pier C. Borra................................. 46,326 25,001 71,327
Raymond W. Braun.............................. 106,782 86,031 192,813(3)
George L. Chapman............................. 219,637 188,379 408,016(4)
Michael A. Crabtree........................... 35,435 40,171 75,606
Thomas J. DeRosa.............................. 2,600 0 2,600
Jeffrey H. Donahue............................ 14,750 0 14,750
Scott A. Estes................................ 10,028 0 10,028
Peter J. Grua................................. 15,000 21,667 36,667
Charles J. Herman, Jr......................... 24,252 23,130 47,382
Sharon M. Oster............................... 10,000 5,001 15,001
Bruce G. Thompson............................. 194,703 35,001 229,704
R. Scott Trumbull............................. 20,743 16,667 37,410
All Directors and Executive Officers as a
group (14 persons).......................... 767,870 480,221 1,248,091(5)
---------------
(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 Named Executive Officers and all Directors and
Executive Officers as a group as of March 11, 2004.
(2) Mr. Ballard's total shares beneficially owned include 5,000 shares owned by
his spouse.
(3) Mr. Braun's total shares beneficially owned include 29,320 shares owned by
his spouse's revocable trust.
(4) Mr. Chapman's total shares beneficially owned include 7,178 shares held in
his sons' names.
(5) Total beneficial ownership represents 2.44% of the outstanding shares of
common stock of the Company.
Based upon filings made with the Securities and Exchange Commission in
February 2004, the only stockholders known to the Company to be the beneficial
owners of more than 5% of the Company's common stock at March 11, 2004, are set
forth below:
PERCENT OF
COMMON STOCK OUTSTANDING
BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK(3)
---------------- ------------------ ------------------
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, NY 10017 4,486,525(1) 8.78%
Clarion CRA Securities, L.P.
259 N. Radnor-Chester Road, Suite 205
Radnor, PA 19087 2,833,023(2) 5.54%
---------------
(1) Includes 4,454,625 shares over which Cohen & Steers has sole voting power
and 4,486,525 shares over which Cohen & Steers has sole dispositive power.
(2) Includes 2,106,211 shares over which Clarion CRA Securities has sole voting
power, 2,804,822 shares over which Clarion CRA Securities has sole
dispositive power and 28,201 shares over which Clarion CRA Securities has
shared dispositive power.
(3) The percentages set forth in the filings of these beneficial owners have
been revised to reflect their percentage ownership as of March 11, 2004.
8
EXECUTIVE OFFICERS OF THE COMPANY
The following information is furnished as to the Executive Officers of the
Company:
GEORGE L. CHAPMAN, AGE 56. 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 46. 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 38. 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 a founder and Chief
Operating Officer of Capital Valuation Group, a health care consulting firm
founded in 1991.
MICHAEL A. CRABTREE, AGE 47. 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.
SCOTT A. ESTES, AGE 33. Mr. Estes has served as Vice President of Finance
since April 2003. From January 2000 to April 2003, Mr. Estes served as a Senior
Research Analyst and Vice President with Deutsche Bank Securities. From January
1998 to December 1999, Mr. Estes served as a Senior Equity Analyst and Vice
President with Bank of America Securities.
ERIN C. IBELE, AGE 42. 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 2001, 2002 and
2003 and the total compensation awarded, earned, or paid during 2001, 2002 and
2003 to the Company's four other most highly compensated Executive Officers who
were serving at the end of 2003, and whose total annual salary and bonus
exceeded $100,000 (together with the Chief Executive Officer, the "Named
Executive Officers"). Long-Term Compensation includes long-term incentives,
consisting of an aggregate of 45,936 shares of restricted stock and stock
options to purchase 77,503 shares, which were granted on January 26, 2004 to the
Named Executive Officers for performance during the fiscal year ended December
31, 2003.
9
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
--------------------------
RESTRICTED
ANNUAL COMPENSATION STOCK SECURITIES
NAME AND --------------------- AWARDS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#) COMPENSATION($)
------------------ ---- --------- -------- ------------ ---------- ---------------
George L. Chapman.................. 2003 $481,893 $534,667 $950,109 42,262 $137,075(2)
Chairman and Chief Executive 2002 467,857 502,122 963,189 104,395 128,221
Officer 2001 454,230 454,230 610,500 175,000 69,380
Raymond W. Braun................... 2003 277,089 281,814 408,847 18,187 82,094(3)
President and 2002 269,018 264,660 512,191 60,779 78,167
Chief Financial Officer 2001 252,865 233,900 335,775 96,250 46,342
Charles J. Herman, Jr.............. 2003 212,180 165,058 149,558 6,653 28,000(4)
Vice President, Operations 2002 206,000 109,945 175,499 29,397 29,000
2001 200,000 75,000 183,150 52,500 0
Michael A. Crabtree................ 2003 138,599 65,982 98,618 4,386 43,405(5)
Treasurer 2002 134,562 63,744 153,009 20,352 43,813
2001 130,643 65,322 146,520 42,000 30,824
Scott A. Estes..................... 2003 91,558(6) 100,000 339,970 6,015 0
Vice President, Finance 2002 N/A N/A N/A N/A N/A
2001 N/A N/A N/A N/A N/A
---------------
(1) The restricted stock awards vest ratably over five years. The restricted
stock awards set forth in the table are valued at the time of grant. The
table below shows the aggregate number of shares of restricted stock held at
December 31, 2003 plus those granted on January 26, 2004 for performance
during the fiscal year ended December 31, 2003. The value of the restricted
stock held at December 31, 2003 is calculated by multiplying the number of
shares thereof by the closing market price of $36.00 on the last trading day
of 2003, and the value of the restricted stock granted on January 26, 2004
is calculated by multiplying the number of shares thereof by the closing
market price of $37.93 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. With respect to Mr. Estes, the value of restricted stock granted in
2003 includes 7,000 shares of restricted stock that were granted to Mr.
Estes on May 19, 2003. The value of such shares is calculated by multiplying
the number of shares by the closing market price of $29.25 on May 19, 2003.
VALUE OF
JANUARY 26, 2004
NUMBER OF SHARES OF VALUE OF RESTRICTED RESTRICTED STOCK RESTRICTED STOCK
RESTRICTED STOCK AT STOCK AT GRANTS ON AWARDS AT
DECEMBER 31, 2003 DECEMBER 31, 2003 JANUARY 26, 2004 TIME OF GRANT
------------------- ------------------- ---------------- ----------------
George L. Chapman............ 82,117 $2,956,212 25,049 $950,109
Raymond W. Braun............. 43,494 1,565,784 10,779 408,847
Charles J. Herman, Jr........ 14,297 514,692 3,943 149,558
Michael A. Crabtree.......... 14,778 532,008 2,600 98,618
Scott A. Estes............... 7,000 252,000 3,565 135,220
(2) "All Other Compensation" includes $28,000 that is estimated to be
contributed in connection with the Company's Retirement Plan and Trust
("RPT") and $109,075 of principal otherwise payable to the Company that was
forgiven in 2003 pursuant to the terms of the Company's Executive Loan
Program ("ELP") established in connection with the Stock Incentive Plan. See
"Certain Relationships and Related Transactions -- Executive Loan Program."
10
(3) "All Other Compensation" includes $28,000 that is estimated to be
contributed in connection with the RPT and $54,094 of principal otherwise
payable to the Company that was forgiven in 2003 pursuant to the terms of
the ELP. See "Certain Relationships and Related Transactions -- Executive
Loan Program."
(4) "All Other Compensation" includes $28,000 that is estimated to be
contributed in connection with the RPT.
(5) "All Other Compensation" includes $26,680 that is estimated to be
contributed in connection with the RPT and $16,725 of principal otherwise
payable to the Company that was forgiven in 2003 pursuant to the terms of
the ELP. See "Certain Relationships and Related Transactions -- Executive
Loan Program."
(6) Mr. Estes joined the Company as Vice President of Finance in April 2003 at
an annual base salary of $135,000.
EMPLOYMENT AGREEMENTS
The Company and Mr. Chapman have entered into an employment agreement that
expires January 31, 2006, 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 $496,350, effective January 1,
2004, 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 60% 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 certain
other Executive Officers of the Company that expire January 31, 2005, and
provide for optional successive two-year renewal 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.
11
OPTION GRANTS
The following table provides information regarding options to purchase
shares of common stock granted to the Named Executive Officers. These option
grants consist of stock options to purchase 77,503 shares that were granted on
January 26, 2004 to the Named Executive Officers for performance during the
fiscal year ended December 31, 2003.
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(3) ($/SH) DATE VALUE($)(4)
---------------------------------- ---------- ---------- -------- ---------- -----------
George L. Chapman................. 42,262 41% $37.00 1/26/14 $548,561
Raymond W. Braun.................. 18,187 18% 37.00 1/26/14 236,067
Charles J. Herman, Jr............. 6,653 7% 37.00 1/26/14 86,356
Michael A. Crabtree............... 4,386 4% 37.00 1/26/14 56,930
Scott A. Estes.................... 6,015 6% 37.00 1/26/14 78,075
---------------
(1) All of the options granted vest in five, substantially equal installments,
commencing in January 2005 and ending in January 2009.
(2) The options were granted on January 26, 2004. The terms of the options
permit broker assisted cashless exercises and payment of the option exercise
price by delivery of previously owned shares. The options include dividend
equivalent rights ("DERs") which provide for the accrual of deferred cash
payments equivalent to dividends on the shares covered by such options, at
the same rate as dividends are paid on the Company's common stock for each
dividend payment date between the date the options were granted and the date
the options are exercised or expire. Such DERs will be paid out in cash only
after the corresponding option has become vested. At December 31, 2003, no
DERs were held by the Named Executive Officers.
(3) Option grants consist of stock options to purchase 77,503 shares that were
granted on January 26, 2004 to the Named Executive Officers for performance
during the fiscal year ended December 31, 2003.
(4) The options were granted on January 26, 2004 and the Black-Scholes option
valuation methodology was used based on estimates as of January 22, 2004. In
using such methodology, the following variables were used: risk-free
interest rate of 4.34%, dividend yields of 0.00%, expected lives of seven
years, and expected volatility of 22.40%. The actual value, if any, that a
Named 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 and, because the options include DERs, the total dividends paid by
the Company. There is no assurance that the value realized by a Named
Executive Officer will be at or near the value estimated by this
calculation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES*
The following table provides information regarding option exercises with
respect to shares of common stock by each of the Named Executive Officers and
the values of such Named Executive Officers' unexercised options.
12
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..... 164,519 $1,679,948 215,000 313,433 $2,699,750 $4,150,468
Raymond W. Braun...... 42,000 644,793 115,000 169,529 1,401,268 2,227,853
Charles J. Herman, Jr. 16,000 199,480 31,250 81,897 485,538 1,067,021
Michael A. Crabtree... 14,500 89,105 48,100 67,352 734,436 902,016
Scott A. Estes........ 0 0 0 0 0 0
---------------
(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 2003
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 77,503
shares that were granted on January 26, 2004 to the Named Executive Officers
for performance during the fiscal year ended December 31, 2003.
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.
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 L. Chapman and Raymond W. Braun to participate in the SERP. The
table below illustrates, for
13
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 2003,
Mr. Chapman and Mr. Braun would have been eligible for an annual benefit of
$47,866 and $0, respectively, prior to any offset from their qualified
retirement plan accounts.
COMPENSATION OF DIRECTORS
Each Director receives an annual fee of $20,000 for his or her services. In
addition, each Director receives a fee of $1,500 for each Board meeting
attended. Members of the Audit, Compensation and Nominating/Corporate Governance
Committees receive $1,000 for each meeting attended and members of the
Investment and Planning Committees receive $1,200 and $1,500, respectively, for
each such committee meeting attended. The Chairs of the Audit and Compensation
Committees receive an additional fee of $5,000 per year and the Chair of the
Nominating/Corporate Governance Committee receives an additional fee of $2,500
per year, which fee increased to $5,000 in 2004.
Director's fees are not paid to Mr. Chapman. The fees paid to all other
Directors totaled $334,600 in 2003.
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 options to purchase
5,000 shares of common stock. In 2003, each non-employee Director received stock
options to purchase 5,000 shares and a grant of 1,500 shares of restricted
stock. In accordance with the terms of the Stock Plan for Non-Employee
Directors, Mr. DeRosa, a new non-employee Director, received an option to
purchase 10,000 shares of common stock upon joining the Board. In addition, on
January 26, 2004, each non-employee Director received a grant of 2,000 shares of
restricted stock and no stock options. 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.
14
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information, as of March 11, 2004,
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....... 1,388,920 $24.48 1,166,028(1)
Equity compensation plans not
approved by stockholders....... None N/A None
--------- ------ ---------
Totals........................... 1,388,920 $24.48 1,166,028(1)
---------------
(1) This number includes 1,066,278 shares of common stock reserved for future
issuance under the 1995 Stock Incentive Plan, as amended, and 99,750 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 1995 Stock Incentive Plan may increase automatically each
year if the total number of outstanding shares of common stock increases by
more than 5% during any 12 calendar months by reason of equity offerings.
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 responsible for determining the
nature and amount of compensation for the Company's six Executive Officers. The
Committee currently consists of three non-employee Directors, Pier C. Borra,
Jeffrey H. Donahue and William C. Ballard, Jr. Mr. Ballard became a member of
the Compensation Committee in January 2004 after Richard A. Unverferth's
retirement from the Board and the Compensation Committee. During the year ended
December 31, 2003, the Compensation Committee of the Board met six times, and
also met once in January 2004.
The Compensation Committee has developed the Company's executive
compensation program to have a strong pay-for-performance foundation. 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 talent, and should be
linked to the achievement of the Company's short and long-term financial and
strategic goals. The Compensation Committee utilizes the services of Frederic W.
Cook & Co., a nationally recognized executive compensation consulting firm, to
assist the Compensation Committee in reviewing and developing the Company's
executive compensation program.
The Compensation Committee annually assesses the competitiveness of
compensation for the Company's Executive Officers by reviewing competitive
market data compiled by the independent consultant from companies in multiple
peer groups. This year, the compensation of the Executive Officers was compared
to executive compensation practices within a group of REITs focusing in the
health care industry, as well as a group of REITs in a variety of asset classes
of similar size to the Company. The Compensation Committee confirmed that the
Company's executive compensation program is appropriate relative to the market.
The three key components of the Company's Executive Officer compensation
program are annual base salaries, annual incentive compensation and long-term
incentive awards under the Company's 1995 Stock Incentive Plan.
15
Base Salaries. 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 2004, following
discussions with the Chief Executive Officer and the Company's compensation
consultant, the Compensation Committee approved three percent salary increases
for the Executive Officers, with larger increases for Mr. Estes and Ms. Ibele,
to keep the compensation levels of the Executive Officers competitive with the
pay levels that other peer-group REITs provide for similar executive officer
positions.
Incentive Compensation. Annual and long-term incentive compensation
payments to Executive Officers are based on the achievement of pre-established
corporate and individual goals for the performance year. Eighty percent of the
incentive compensation opportunity for Messrs. Chapman and Braun, and 60% of the
incentive compensation opportunity for the other Executive Officers, are based
on objective corporate performance goals, such as the Company's overall
performance against its business plan and changes in stockholder value. The
remainder of each executive's incentive compensation opportunity is based on
other pre-established performance factors. For each executive, a range of
earnings opportunity is established at the beginning of the performance period
corresponding to three levels of performance (a threshold, target and high
performance level) for both the annual cash bonus and long-term incentive
awards. In January 2003, the Compensation Committee approved a set of corporate
performance goals to be used in setting incentive compensation for Executive
Officers. The 2003 performance goals set by the Compensation Committee related
to (1) funds from operations (FFO) per share (a standard measure of financial
earnings performance for REITs); (2) net real estate investments; (3) FFO payout
ratio; and (4) three-year total stockholder return relative to the NAREIT Index.
The Company's 2003 performance exceeded the target level for each of these
performance measures.
The Company's 1995 Stock Incentive Plan is the Company's primary vehicle
for providing long-term incentive compensation to Executive Officers, 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 align
Management and stockholder interests, enhance focus on the creation of
stockholder value, and support the long-term retention of key contributors.
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.
At its January 2004 meeting, the Board approved long-term incentive awards
for Executive Officers of the Company. The Compensation Committee based these
awards on the same corporate performance measures described above. The
Compensation Committee determined that 75% of the value of the long-term
incentive compensation earned by each Executive Officer for 2003 should be
granted in the form of shares of restricted stock, with the remainder delivered
as stock options with dividend equivalent rights, valued at $12.98 per share.
Dividend equivalent rights entitle the holder to receive a cash payment equal to
the dividend paid on a share of the Company's stock. Options with dividend
equivalent rights are effective long-term incentives and are especially
appropriate for a REIT, since they reward total stockholder return, not just
share price appreciation. Based on the attainment of performance goals during
the year, the Committee granted 45,887 options with dividend equivalent rights,
valued at $12.98 per share, to the Executive Officers. Due to the Company's
extraordinary performance during the year, an additional pool of 36,709 options
with dividend equivalent rights, also valued at $12.98 per share, were approved
for allocation to the Executive Officers. In total for the performance year, the
Committee granted an aggregate of 82,596 options with dividend equivalent
rights, and an aggregate of 48,955 shares of restricted stock to Executive
Officers. Both the options and restricted shares vest ratably over five years,
and cash payments attributable to dividend equivalent rights will accrue and be
paid out only when the corresponding option has vested.
CEO Compensation. The Compensation Committee increased Mr. Chapman's
annual base salary for 2004 from $481,893 to $496,350 effective January 1, 2004.
In addition to his base salary, Mr. Chapman was eligible to receive an annual
bonus for 2003 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 at its January 2003 meeting. As described above, these goals
related primarily to FFO per share, net real estate investments, FFO payout
ratio and three-year total stockholder return relative to the NAREIT Index.
Based upon the Company's achievement of these goals, as well as the achievement
of individual goals, Mr. Chapman was awarded an annual bonus of $534,667 (111.0%
of his 2003 annual base salary), 42,262 options with dividend equivalent rights
and 25,049
16
restricted shares. The Compensation Committee believes that the amount of Mr.
Chapman's compensation is consistent with general compensation levels within the
health care REIT sector, as well as the broader public REIT industry, and
appropriate in view of the Company's performance in 2003.
Section 162(m). 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. Although the Company does not pay corporate income
taxes because it is a real estate investment trust, the Compensation Committee
will strive to provide Executive Officers with attractive, well-designed
compensation packages that will generally preserve the deductibility of such
payments for the Company. Certain types of compensation payments and their
deductibility depend upon the timing of an Executive 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. As mentioned
above, however, since the Company does not pay corporate income taxes, the loss
of this deduction would not have adverse consequences for the Company. If
deductibility becomes an issue, the Compensation Committee will consider various
alternatives to preserve the deductibility of compensation payments to Executive
Officers and benefits to the extent reasonably practical and to the extent
consistent with its other compensation objectives, but reserves the right to
make incentive-based awards not exempt from these limits where such awards are
appropriate and will not have a material impact on stockholder value.
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
William C. Ballard, Jr., Compensation Committee Member
Jeffrey H. Donahue, Compensation Committee Member
March 15, 2004
17
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 seven 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 sent to the
Vice President and 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. 1998 equals $100
and dividends are assumed to be reinvested.
[PERFORMANCE GRAPH]
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
S & P 500 100.00 121.04 110.02 96.94 75.52 97.18
Company 100.00 65.03 80.74 134.24 162.13 233.37
NAREIT Equity 100.00 95.38 120.53 137.32 142.57 195.51
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, 2003, except that
one Form 4 was not timely filed by Mr. Trumbull.
18
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 11, 2004, the balance of the loans made to Messrs. Chapman, Braun
and Crabtree and Ms. Ibele were $255,431, $127,264, $40,639 and $51,878,
respectively. The highest amount due during 2003 by each of Messrs. Chapman,
Braun and Crabtree and Ms. Ibele, was $387,133, $192,671, $59,973 and $79,719,
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% to 6.21% and interest is payable annually no later than
30 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 90 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 2003, $202,078 was forgiven pursuant to the terms of the Executive
Officers' existing loans.
OTHER RELATIONSHIPS AND RELATED TRANSACTIONS
In 1984, the Company provided a direct loan and a credit enhancement to a
partnership in connection with an assisted living facility. Mr. Thompson, a
Director of the Company, owns 50% of First Toledo Corporation, which serves as a
general partner in the partnership. An affiliate of Mr. Thompson, Kingston
HealthCare Company, operates the facility. The partnership structure facilitated
industrial development bond financing, and a credit enhancement was provided in
the form of the Company's agreement to purchase the facility or the bonds in the
event of default by the partnership. At December 31, 2003, the Company's
contingent obligation under the agreement to purchase totaled $3,195,000. For
the fiscal year ended 2003, the Company received $72,000 in connection with its
contingent obligation pursuant to the agreement to purchase. For the fiscal year
ended 2003, the Company recorded $36,500 of interest income.
At the time this transaction was entered into, it was approved by a
majority of Directors unaffiliated with the transaction. For the fiscal year
ended December 31, 2003, revenues from related parties totaled $108,500, or
0.05%, of the revenues (including the revenues from discontinued operations) of
the Company.
19
PROPOSAL 2 -- 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, 2003 and has been selected by the Company to
serve as its independent auditors for the year ending December 31, 2004. 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 2005 because of
the difficulty and expense of making a substitution. Representatives of the firm
of Ernst & Young LLP are expected to be present at the Annual Meeting and will
have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
Fees for professional services provided by Ernst & Young LLP in each of the
last two fiscal years, in each of the following categories, are as follows:
YEAR ENDED DECEMBER 31
-----------------------
2003 2002
---------- ----------
Audit Fees.............................................. $271,945 $207,500
Audit-Related Fees...................................... 35,705 0
Tax Fees................................................ 216,083 246,523
All Other Fees.......................................... 0 0
-------- --------
Totals.................................................. $523,733 $454,023
Audit Fees include fees associated with the annual audit, the review of the
Company's quarterly reports on Form 10-Q and services that generally only the
independent auditors 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, including advisory services related to readiness for
Sarbanes-Oxley Section 404 internal control requirements and consultations
concerning financial accounting and reporting standards. Tax Fees include fees
for tax compliance and tax planning and tax advice services. Tax compliance
involves the preparation of original and amended tax returns, claims for refund
and tax payment-planning services. Tax planning and tax advice encompass a
diverse range of services, including assistance with tax audits and appeals, tax
advice related to mergers and acquisitions, and requests for rulings or
technical advice from taxing authorities. None of the foregoing fees were paid
for services, the sole business purpose of which was tax avoidance, or the tax
treatment of which would not be supported by the Internal Revenue Code and
related regulations.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE RATIFICATION OF ERNST & YOUNG LLP. The affirmative vote of a majority
of the shares of voting securities present in person or by proxy at the Annual
Meeting will be required for such ratification.
PRE-APPROVAL POLICIES AND PROCEDURES FOR AUDIT AND NON-AUDIT SERVICES
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 planning meeting, the Audit
Committee gives its prior approval and establishes annual fee limits for the
following categories of services that it desires the independent auditors to
undertake: audit services, audit-related services, tax compliance services and
tax planning and tax advice services. Further, particular subcategories of
audit-related services, tax compliance services and tax planning and tax advice
services, by type of activity, are identified and annual fee estimates specified
for each activity. Subcategories of service and annual fee limits may also be
20
specified for subcategories of audit services if desired by the Committee. To
the extent that the limits established for any of these categories or
subcategories of service are not sufficient, the Audit Committee reviews and
approves additional services as necessary or appropriate in advance of the
service being provided. 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 auditors 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, 2003 were pre-approved by the Audit
Committee.
Where specific Audit Committee approval of services is required, for
services with a cost of less than $25,000, 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. For such services with a cost exceeding
$25,000, the full Audit Committee is required to pre-approve the services in
advance of the activity.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee 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 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 auditors, who are responsible
for expressing an opinion on the conformity of the 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 (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 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 non-audit services with the auditors' independence.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their audit. The Committee met 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 the year ended December 31, 2003.
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, 2003 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 Company's
independent auditors.
Sharon M. Oster, Audit Committee Chair
Thomas J. DeRosa, Audit Committee Member
R. Scott Trumbull, Audit Committee Member
March 15, 2004
21
VOTING PROCEDURES
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted as present or
represented for purposes of determining the presence or absence of a quorum for
the Annual Meeting and will be included in vote totals. Accordingly, abstentions
will have the same effect as negative votes. A "broker non-vote" occurs when a
broker or other nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the broker does not have
discretionary voting power for the other proposal and has not received
instructions from the beneficial owner. Broker non-votes will be counted as
present or represented for purposes of determining the presence or absence of a
quorum for the Annual Meeting, but will not be counted for purposes of
determining the number of shares entitled to vote with respect to any proposal
for which the broker lacks discretionary authority.
OTHER MATTERS
Management is not aware of any matters to be presented for action at the
Annual Meeting other than the matters set forth above. If any other matters do
properly come before the meeting or any adjournment thereof, it is intended that
the persons named in the proxy will vote in accordance with their judgment on
such matters.
STOCKHOLDERS SHARING THE SAME ADDRESS
In accordance with a notice sent to stockholders who share a single
address, we are sending only one Annual Report and one Notice of Meeting and
Proxy Statement to that address unless we receive contrary instructions from any
stockholder at that address. This procedure, known as "householding," is
designed to reduce our 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 Vice President 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 Company's Web site
at www.hcreit.com.
STOCKHOLDER PROPOSALS FOR PRESENTATION AT THE 2005 ANNUAL MEETING
The Board of Directors requests that any stockholder proposals intended for
inclusion in the Company's proxy materials for the 2005 Annual Meeting be
submitted to Erin C. Ibele, Vice President and Corporate Secretary of the
Company, in writing no later than November 26, 2004. Unless the Company has been
given written notice by February 14, 2005 of a stockholder proposal to be
presented at the 2005 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
22
APPENDIX A
HEALTH CARE REIT, INC.
AUDIT COMMITTEE CHARTER
PURPOSES
The Audit Committee (the "Committee") is appointed by the Board of
Directors ("Board") to assist the Board in monitoring (1) the integrity of the
financial statements of Health Care REIT, Inc. ("HCN"), (2) the independent
auditor's qualifications and independence, (3) the performance of HCN's internal
audit function and independent auditor, and (4) the compliance by HCN with legal
and regulatory requirements. Furthermore, the Committee shall prepare the report
required by proxy rules of the Securities and Exchange Commission (the
"Commission") to be included in HCN's annual proxy statement.
COMMITTEE MEMBERSHIP
The Committee shall consist of no fewer than three members of the Board.
The Committee members shall not simultaneously serve on the audit committees of
more than two other public companies. The members of the Committee and its
Chairman shall be appointed by the Board on the recommendation of the
Nominating/Corporate Governance Committee. The Committee members may be
replaced by the Board.
Each member of the Committee shall meet the independence requirements of
the New York Stock Exchange ("NYSE"), Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Commission. Furthermore, each member of the Committee must be financially
literate, as such qualification is interpreted by the Board in its business
judgment, or must become financially literate within a reasonable period of time
after his or her appointment to the Committee. In addition, at least one member
of the Committee shall be a financial expert as defined by the Commission and
the NYSE. Further, at least one member of the Committee must have accounting or
related financial management expertise, as the Board interprets such
qualification in its business judgment, provided that the Board may presume that
a person who satisfies the Commission's definition of a financial expert has the
requisite accounting or related financial management expertise.
MEETINGS
The Committee shall meet as often as it determines necessary, but not less
frequently than quarterly. The Committee shall meet periodically with
Management, the personnel responsible for the internal audit function, and the
independent auditor, each in separate executive sessions. The Committee may
request any officer or employee of HCN or HCN's outside counsel or independent
auditor to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee. A majority of the Committee members shall
constitute a quorum for the transaction of business. The action of a majority of
those present at a meeting at which a quorum is present shall be the action of
the Committee. The Committee shall keep a record of its actions and proceedings
and make a report thereof from time to time to the Board.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
GENERAL
1. The Committee shall have the sole authority to directly appoint, retain,
compensate, evaluate and terminate HCN's independent auditor. Further,
the Committee shall have the sole authority to approve all audit
engagement fees and terms, as well as all non-audit engagements with the
independent auditor. Also, the Committee shall be directly responsible
for oversight of the independent auditor, including the resolution of
disagreements between Management and the independent auditor. The
independent auditor shall report directly to the Committee.
2. The Committee shall pre-approve all auditing services and permitted
non-audit services (including the fees and terms thereof) to be
performed for HCN by its independent auditor, subject to the de minimus
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exceptions for non-audit services described in Section 10A(i)(1)(B) of
the Exchange Act which are approved by the Committee prior to the
completion of the audit.
3. The Committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the
authority to grant preapprovals of audit and permitted non-audit
services, provided that decisions of such subcommittee to grant
preapprovals shall be presented to the full Committee at its next
scheduled meeting.
4. The Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting or other
advisors.
5. HCN shall provide for appropriate funding, as determined by the
Committee, for payment of compensation to the independent auditor for
the purpose of rendering or issuing an audit report and to any advisors
(including outside legal, accounting or other advisors) employed by the
Committee.
6. The Committee shall make regular reports to the Board.
7. The Committee shall review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval.
The Committee shall annually review the performance of the Committee.
8. The Committee shall perform such other functions as it may be delegated
by either the Board or by the Commission or NYSE rules.
FINANCIAL STATEMENTS AND DISCLOSURE MATTERS
1. The Committee shall review and discuss with Management and the
independent auditor the annual audited financial statements, including
disclosures made in HCN's Form 10-K under "Management's Discussion and
Analysis of Financial Condition and Results of Operations," prior to the
filing of its Form 10-K and recommend to the Board whether the audited
financial statements should be included in HCN's Form 10-K.
2. The Committee shall review and discuss with Management and the
independent auditor HCN's quarterly financial statements, including
disclosures made in HCN's Form 10-Q under "Management's Discussion and
Analysis of Financial Condition and Results of Operations," prior to the
filing of its Form 10-Q, and the results of the independent auditor's
reviews of the quarterly financial statements.
3. The Committee shall discuss with Management and the independent auditor
significant financial reporting issues and judgments made in connection
with the preparation of HCN's financial statements, including any
significant changes in HCN's selection or application of accounting
principles, any major issues as to the adequacy of HCN's internal
controls and any special steps adopted in light of material control
deficiencies.
4. The Committee shall review and discuss annual reports from the
independent auditor on:
a. critical accounting policies and practices to be used;
b. alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
Management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
independent auditor; and
c. other material written communications between the independent
auditor and Management, such as any management letter or schedule
of unadjusted differences.
To the extent necessary, the Committee shall review and discuss the
foregoing items with the independent auditor on a quarterly basis.
5. The Committee shall review and discuss with Management the type and
presentation of information to be included in HCN's earnings press
releases, including the use of pro forma or adjusted non-GAAP
information, as well as review any financial information and earnings
guidance provided to analysts and
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rating agencies. Such discussion may be done generally (consisting of
consideration of the types of information to be disclosed and the types
of presentations to be made).
6. The Committee shall discuss with Management and the independent auditor
the effect of regulatory and accounting initiatives as well as
off-balance sheet structures on HCN's financial statements.
7. The Committee shall discuss with Management HCN's major financial risk
exposures and the steps Management has taken to monitor and control such
exposures, including HCN's risk assessment and risk management policies.
8. The Committee shall discuss with the independent auditor the matters
required to be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit, including any difficulties
encountered in the course of the audit work, any restrictions on the
scope of activities or access to requested information, and any
significant disagreements with Management.
9. The Committee shall review disclosures made to the Committee by HCN's
CEO and CFO during their certification process for the Form 10-K and
each Form 10-Q about any significant deficiencies in the design or
operation of internal controls or material weaknesses therein and any
fraud involving Management or other employees who have a significant
role in HCN's internal controls.
OVERSIGHT OF HCN'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR
1. The Committee shall review and evaluate the lead partner of the
independent auditor team.
2. The Committee shall obtain and review a report from the independent
auditor at least annually regarding: (a) the independent auditor's
internal quality-control procedures, (b) any material issues raised by
the most recent internal quality-control review, or peer review, of the
audit firm, or by any inquiry or investigation by governmental or
professional authorities within the preceding five years respecting one
or more independent audits carried out by the audit firm, and any steps
taken to deal with any such issues, and (c) all relationships between
the independent auditor and HCN (in order to assess the auditor's
independence).
3. The Committee shall evaluate the qualifications, performance and
independence of the independent auditor, including considering whether
the auditor's quality controls are adequate and the provision of
permitted non-audit services is compatible with maintaining the
auditor's independence, and taking into account the opinions of
Management and the internal auditors. The Committee shall present its
conclusions with respect to the independent auditor to the Board.
4. The Committee shall ensure the rotation of the lead (or coordinating)
audit partner having primary responsibility for the audit and the audit
partner responsible for reviewing the audit as required by law. The
Committee shall also consider whether, in order to assure continuing
auditor independence, it is appropriate to adopt a policy of rotating
the independent auditing firm on a regular basis.
5. The Committee shall recommend to the Board policies for HCN's hiring of
employees or former employees of the independent auditor who
participated in any capacity in the audit of HCN.
6. The Committee shall have direct access to the independent auditor's Area
Managing Partner to discuss issues on which the Committee was consulted
by the independent auditor and matters of audit quality and consistency.
7. The Committee shall meet with the independent auditor prior to the audit
to discuss the planning and staffing of the audit.
OVERSIGHT OF HCN'S INTERNAL AUDIT FUNCTION
1. The Committee shall review the appointment, qualifications,
independence, performance and replacement of the internal auditor,
including whether the internal auditor's quality controls are adequate.
The Committee shall present its conclusions with respect to the internal
auditor to the Board.
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2. The Committee shall review the significant reports to Management
prepared by the internal auditing department and Management's responses.
3. The Committee shall discuss with the independent auditor and Management
the internal audit department responsibilities, budget and staffing and
any recommended changes in the planned scope of the internal audit, it
being understood that HCN must maintain an internal audit function to
provide Management and the Committee with ongoing assessments of HCN's
risk management processes and system of internal control.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
1. The Committee shall obtain from the independent auditor assurance that
Section 10A(b) of the Exchange Act has not been implicated.
2. The Committee shall obtain a report from the independent auditor that
the financial statements in all material respects are in conformity with
accounting principles generally accepted in the United States, and shall
obtain reports from Management and HCN's internal auditor that HCN and
its subsidiaries are in conformity with applicable requirements and
HCN's Code of Business Conduct & Ethics. The Committee shall also review
reports and disclosures of insider and affiliated party transactions and
advise the Board with respect to HCN's policies and procedures regarding
compliance with applicable laws and regulations and with HCN's Code of
Business Conduct & Ethics.
3. The Committee shall establish procedures for the receipt, retention and
treatment of complaints regarding accounting, internal accounting
controls or auditing matters, as well as the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
4. The Committee shall discuss with Management and the independent auditor
any correspondence with regulators or governmental agencies and any
published reports that raise material issues regarding HCN's financial
statements or accounting policies.
5. The Committee shall obtain advice and assistance from outside legal,
accounting or other advisors as the Committee deems necessary to carry
out its duties.
LIMITATION OF COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that HCN's financial statements and disclosures are complete and
accurate and are in accordance with generally accepted accounting principles and
applicable rules and regulations. These are the responsibilities of Management
and the independent auditor.
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Please [ ]
Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE FOLLOWING.
FOR AGAINST ABSTAIN
1. Election of three Directors for a term of three years: 2. Ratification of the appointment of [ ] [ ] [ ]
Ernst & Young LLP as independent auditors
for the fiscal year 2004.
01 Thomas J. DeRosa, 02 Jeffrey H. Donahue and
03 Bruce G. Thompson.
3. With discretionary authority on any other business that may
properly come before the meeting or any adjournment thereof.
FOR ALL WITHHOLD
FOR ALL
[ ] [ ]
Consenting to receive all future annual meeting materials and
stockholder communications electronically is simple and fast!
Enroll today at www.melloninvestor.com/isd for secure online access
to your proxy materials, statements, tax documents and other
important stockholder correspondence.
To withhold authority to vote for any
individual nominee, please write the
person's name in the following space:
______________________________________
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.
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.
Dated: _______________________________________,2004
___________________________________________________
Signature
___________________________________________________
Signature if Held Jointly
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VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 P.M.
EASTERN TIME THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
http://www.eproxy.com/hcn 1-800-435-6710 Mark, sign and date
Use the Internet to vote your proxy. Use any touch-tone telephone to your proxy card
Have your proxy card in hand when OR vote your proxy. Have your proxy OR and
you access the Web site. card in hand when you call. return it in the
enclosed postage-paid
envelope.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
PROXY FOR COMMON STOCK
P HEALTH CARE REIT, INC.
R PROXY SOLICITED BY THE BOARD OF DIRECTORS
O The undersigned hereby appoints George L. Chapman and William C. Ballard,
Jr., and each of them, as proxies for the undersigned, with full power of
X 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
Y entitled to vote at the Annual Meeting of the Stockholders of the Company
to be held on Thursday, May 6, 2004, 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)
Address Change/Comments (Mark the corresponding box on the reverse side)
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