HEALTH CARE PROPERTY INVESTORS, INC.
________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 21, 1994
The Annual Meeting of Stockholders of Health Care Property Investors, Inc.
(the "Company") will be held in the Marquis Room of the Westwood Marquis Hotel,
930 Hilgard Avenue, Los Angeles, California 90024 on Thursday, April 21, 1994,
at 9:30 a.m., Los Angeles time, for the purposes of (1) electing three
Directors, (2) amending the Company's Amended Stock Incentive Plan, (3)
ratifying the selection of Arthur Andersen & Co. as independent accountants for
the fiscal year ending December 31, 1994, and (4) transacting such other
business as may properly come before the meeting.
Only Stockholders whose names appear of record on the books of the Company
at the close of business on February 22, 1994 are entitled to notice of, and
to vote at, such Annual Meeting or any adjournment or adjournments thereof.
You are cordially invited to attend the meeting in person. Whether or not
you expect to attend this meeting, please sign and date the enclosed proxy and
return it as promptly as possible in the enclosed self-addressed, postage-
prepaid envelope. If you attend the Annual Meeting and wish to vote in person,
your proxy will not be used.
By Order of the Board of Directors
Lorna M. Mellies
Corporate Secretary
Los Angeles, California
March 15, 1994
<PAGE>
HEALTH CARE PROPERTY INVESTORS, INC.
____________
PROXY STATEMENT
This proxy statement is furnished to the Stockholders of Health Care
Property Investors, Inc., a Maryland corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at the Annual Meeting of Stockholders to be held on April 21, 1994, and at
any and all adjournments thereof. The principal executive offices of the
Company are located at 10990 Wilshire Boulevard, Suite 1200, Los Angeles,
California 90024. The approximate date on which this proxy statement and form
of proxy solicited on behalf of the Board of Directors will be sent to the
Company's Stockholders is March 15, 1994.
On February 22, 1994, the record date for the determination of
Stockholders entitled to notice of, and to vote at, the Annual Meeting, the
Company had __________ shares of Common Stock, par value $1.00 per share (the
"Shares" or the "Common Stock") outstanding. Each such Share is entitled to
one vote on all matters properly brought before the meeting. Stockholders are
not permitted to cumulate their Shares for the purpose of electing Directors
or otherwise.
A person giving the enclosed proxy has the power to revoke it at any time
before it is exercised. The power of the proxy is suspended if the person
giving it attends the meeting and elects to vote in person.
PRINCIPAL STOCKHOLDERS
As of February 1, 1994, the Company has not been notified of any holders
that might beneficially own more than 5% of its Shares. Additionally, as of
February 1, 1994, all Directors and executive offers as a group beneficially
owned 524,197 Shares of Common Stock, which includes 198,620 Shares of Common
Stock purchasable within 60 days upon exercise of stock options. Such
beneficial ownership constitutes 1.95% of the total number of Shares
outstanding. For purposes of computing the foregoing percentage, the number
of Shares outstanding includes Shares purchasable by such group within 60 days
upon exercise of stock options.
ELECTION OF DIRECTORS
Pursuant to the Company's Articles of Amendment and Restatement (the
Company's Articles of Incorporation) (the "Articles of Incorporation"), the
Directors have been divided into three classes, each being elected to hold
office for a term of three years and until their respective successors have
been duly elected and qualified. At the Annual Meeting, three Directors will
be elected in one class to hold office for terms of three years and, in each
case, until their respective successors have been duly elected and qualified.
The remaining Directors shall continue in office until their respective terms
expire and until successors have been duly elected and qualified.
The nominees for election to the three positions of Director to be voted
upon at the Annual Meeting are Robert R. Fanning, Jr., Michael D. McKee and
Harold M. Messmer, Jr. Unless authority to vote for the election of Directors
has been specifically withheld, the persons named in the accompanying proxy
intend to vote for the election of Messrs. Fanning, McKee and Messmer to hold
office as Directors for terms of three years each and until their respective
successors have been duly elected and qualified.
<PAGE>
If any nominee becomes unavailable for any reason (which event is not
anticipated), the Shares represented by the enclosed proxy may (unless such
proxy contains instructions to the contrary) be voted for such other person or
persons as may be determined by the holders of such proxies. In no event will
the proxy be voted for more than three nominees.
BOARD OF DIRECTORS AND OFFICERS
The executive officers of the Company, nominees for election as Directors
of the Company and the other persons whose terms as Directors continue after
the meeting, and their principal occupations for the past five years or more,
their ages, their positions and offices with the Company (other than that of
Director), information as to their terms in office as Directors, and the number
of Shares of the Company owned beneficially by them on February 1, 1994, are
as follows:
<TABLE>
<CAPTION>
Shares Beneficially Owned <F1>
----------------------------------
Number of Percent
First Term Number Options of
Name Age Elected Expires of Shares Shares <F2> Class
---- --- ------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Paul V. Colony 54 1988 1995 7,700 -- <F5>
Robert R. Fanning, Jr. 51 1985 1994 725 18,000 <F5>
Devasis Ghose 40 -- -- 8,550 9,440 <F5>
Stephen R. Maulbetsch 36 -- -- 4,920 11,120 <F5>
Michael D. McKee 48 1989 1994 2,200 6,000 <F5>
Orville E. Melby 72 1985 1996 20,000 7,500 <F5>
Lorna M. Mellies 38 -- -- 5,080 6,800 <F5>
Harold M. Messmer, Jr. 47 1985 1994 20,100 <F3> -- <F5>
James G. Reynolds 42 -- -- 32,300 53,600 <F5>
Peter L. Rhein 52 1985 1995 34,600 <F4> -- <F5>
Kenneth B. Roath 58 1986 1996 178,460 62,160 <F5>
David A. Young -- -- -- 7,900 9,000 <F5>
Thomas J. Zarse 60 -- -- 3,042 15,000 <F5>
<FN>
______________
<F1> Except as otherwise noted below all Shares are owned beneficially by the
individual listed with sole voting and/or investment power.
<F2> Consists of Shares purchasable within 60 days upon exercise of outstanding
stock options.
<F3> 7,600 shares held as custodian or trustee for his children.
<F4> Includes 2,600 Shares held as custodian for one of his children.
<F5> Less than 1%. For purposes of computing the percentages, the number of
Shares outstanding includes Shares purchasable by such individual within 60
days upon exercise of outstanding stock options.
</TABLE>
Mr. Colony has been associated in various capacities with the insurance
firm of Alexander & Alexander, Inc. for the past 27 years. He is presently
Senior Vice President of Alexander & Alexander, Inc. and Chairman of the Board
of Alexander & Alexander of California, Inc.
Mr. Fanning has been President of Northeast Health Systems, Inc. since
1983 and Chief Executive Officer of its principal operating subsidiary, Beverly
Hospital Corporation, since June 1980. Mr. Fanning has been a member of the
Massachusetts Health and Educational Facilities Authority since 1985; he has
been Vice Chairman of the Authority since 1987. Mr. Fanning currently serves
as a Director of Warren Bancorp, Inc. Mr. Fanning is Chairman of the American
College of Healthcare Executives.
<PAGE>
Mr. Ghose is Vice President Finance and Treasurer of the Company and has
been with the Company since 1986.
Mr. Maulbetsch has been employed by the Company since September 1985. He
became Vice President-Property and Acquisition Analysis in May 1988.
Mr. McKee is a partner with the law firm of Latham & Watkins and has been
associated with the firm since 1979. Mr. McKee is a Director of Oasis
Residential, Inc., a real estate investment trust.
Mr. Melby is a retired Vice Chairman of Rainier National Bank (which was
subsequently acquired by Bank of America) where he served from 1974 through
1986. Prior to his service with Rainier, Mr. Melby was Treasurer and later
Vice President of Sales and Contracts of the Boeing Company.
Ms. Mellies is Vice President-Legal and Corporate Secretary of the Company
and has been with the Company since February 1989. Ms. Mellies was an attorney
with the law firm of Cox, Castle & Nicholson in Los Angeles from 1984 to 1988.
Mr. Messmer has been President and Chief Executive Officer of Robert Half
International, Inc. since July 1986 and assumed the additional role of Chairman
of the Board in November 1988. He served as President and Chief Operating
Officer of its predecessor corporation from October 1985 until July 1987. Mr.
Messmer is a Director of NationsBank of North Carolina, N.A., Pacific
Enterprises, Airborne Freight Corporation, and Spieker Properties.
Mr. Reynolds became Senior Vice President of the Company in 1988 and also
serves as its Chief Financial Officer. He has been employed with the Company
since its inception in 1985.
Mr. Rhein has been a general partner of Sarlot and Rhein, a real estate
investment and development partnership, since 1967. Mr. Rhein is a Director
of Oasis Residential, Inc., a real estate investment trust.
Mr. Roath became President and Chief Executive Officer of the Company in
May 1988, having previously served as President and Chief Operating Officer
since inception of the Company in 1985. Mr. Roath is Vice Chairman and a
member of the Board of Governors and Executive Committee of the National
Association of Real Estate Investment Trusts. Mr. Roath is a member of the
Boards of Orthopaedic Hospital of Los Angeles and Los Angeles Orthopaedic
Foundation. He also serves as a Trustee for the La Jolla Cancer Research
Foundation.
Mr. Young has been employed by the Company since 1990 and is a former
corporate executive of American Hospital Supply Corp., Hospital Corporation of
America, and HealthTrust, Inc. - The Hospital Company. He also served as an
operations executive with Vanderbilt University Medical Center.
Mr. Zarse joined the Company in 1987 and became Vice President-
Construction and Development of the Company in 1988. He was employed as Vice
President for First Toledo Corporation, an advisor to a real estate investment
trust, from September 1982 to July 1987.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held six meetings during 1993. During that period,
no incumbent Director attended fewer than 75% of the total number of meetings
of the Board and of committees of the Board on which he served.
<PAGE>
The Company currently pays each independent Director a fee of $18,000 per
year for services as a Director plus $1,000 for attendance in person at each
meeting of the Board of Directors or any committee meeting on a day on which
the Board of Directors does not meet, $400 for attendance in person at any
committee meeting held on a day on which the Board of Directors also meets, and
$400 for participation in any telephonic Board of Directors meeting or
committee meeting, when such meetings last longer than a specified time period.
In addition, the Company reimburses the Directors for travel expenses incurred
in connection with their duties as Directors of the Company.
The Company has adopted a Deferred Compensation Plan for Directors of the
Company which permits the Directors to elect to defer fees and retainers to be
paid in the future. The participating Director will be paid at retirement or
such earlier date as he may designate in such election. Each deferred
compensation account will accrue interest at a rate equal to the prime rate of
Chemical Bank minus one percent.
The Board of Directors has an Audit Committee, an Investment Committee and
a Compensation Committee.
The Audit Committee is comprised of Messrs. Colony, Messmer and Rhein.
The Audit Committee held two meetings during 1993. The Audit Committee is
authorized to select the independent accountants to serve the Company for the
ensuing year, subject to Stockholder approval, review with the independent
accountants the scope and results of the audit, review management's evaluation
of the Company's system of internal controls, and review non-audit professional
services provided by the independent accountants and the range of audit and
non-audit fees. To ensure independence of the audit, the Audit Committee
consults separately and jointly with the independent accountants and
management.
The Investment Committee is comprised of Messrs. Fanning, Melby, Rhein and
Roath. The Investment Committee held five meetings during 1993. The
Investment Committee is authorized to approve all real estate acquisitions and
other investments.
The Compensation Committee is comprised of Messrs. McKee, Melby and
Messmer. The Compensation Committee held two meetings during 1993. The
Compensation Committee is responsible for the administration of the Company's
employee benefit plans. The Compensation Committee is authorized to determine
the persons eligible to participate in any of the plans, the extent of such
participation and the terms and conditions under which benefits may be vested,
received or exercised. The Compensation Committee also reviews and approves
the compensation of the Company's executive officers and determines the general
compensation policy for the Company.
DIRECTORS STOCK INCENTIVE PLAN
In 1988, the Company's Stockholders approved the Directors Stock Incentive
Plan (the "Directors Plan"). Directors who are not employees of the Company
participate in the Directors Plan. Such Directors are not eligible to
participate in the Stock Incentive Plan that was approved by Stockholders in
1985 and amended in 1988. See "Executive Compensation-Compensation Pursuant
to Plans-Amended Stock Incentive Plan." Under the Directors Plan, on the last
Thursday of April each year, all non-employee members of the Board of Directors
are granted an option as of that date to acquire 6,000 shares of the Company's
Common Stock. The maximum number of shares of Common Stock that may be issued
or transferred under the Directors Plan is 5% of the number of shares of Common
Stock then outstanding. During 1993, outside Directors Colony, Fanning, McKee,
Melby, Messmer and Rhein were each granted options for 6,000 shares of Common
<PAGE>
Stock with a fair market value per share of $27.75 on the date of grant.
Each option granted under the Directors Plan is a nonqualified option to
purchase shares of Common Stock (an "Option"). Options expire not later than
ten years from the date of grant. An Option becomes exercisable one year after
the date of grant. The Option exercise price is the fair market value of a
share of Common Stock on the date of the grant. The Option exercise price may
be paid in cash, by delivering to the Company shares of Common Stock owned by
the optionee, by a promissory note secured by shares of Common Stock bearing
interest at a rate equal to the minimum rate permitted by the Internal Revenue
Service plus one percent, or by a combination of the above. The Compensation
Committee also may, in its discretion and upon the request of the optionee,
issue shares of Common Stock upon the exercise of an Option directly to a
brokerage firm or firms to be selected by the Compensation Committee, without
payment of the exercise price by the optionee but upon delivery of an
irrevocable guarantee by such brokerage firm or firms of the payment of such
exercise price.
Except as set forth below, Options expire at the time the optionee ceases
to be an outside Director. If an optionee ceases to be an outside Director of
the Company other than for cause or due to death, disability, or retirement,
the Option will expire eight months after the date of termination. If the
optionee ceases to be a Director due to retirement, the Option will expire
three years after the date of termination. If the optionee dies or becomes
permanently disabled while serving as an outside Director of the Company, the
Option will expire three years after the date of such death or disability. The
latest date upon which Options may be granted under the Directors Plan is April
28, 1998, unless the Directors Plan is terminated prior to that date by the
Board of Directors or the Compensation Committee.
In the event of any change in the capitalization of the Company, such as
a stock dividend or stock split, the Compensation Committee will make an
appropriate adjustment in the number of shares of Common Stock that could be
issued or transferred in the future under the Directors Plan and in the number
of shares of Common Stock and exercise price of all outstanding Options granted
before the event.
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
Effective January 1, 1991, the Company adopted its Retirement Plan for
Outside Directors (the "RPOD") which provides each eligible, non-employee
Director with retirement benefits upon his retirement from the Board. A
Director becomes eligible to receive benefits under the RPOD when he reaches
either age 60, provided he has served as a Director for fifteen full years, or
age 65, provided he has served as a Director for five full years, and ceases
to serve on the Board. If a Director terminates service on the Board after
completing at least five full years as a Director, but before meeting the age
and service requirements set forth above, the Director will become eligible to
receive a deferred retirement benefit beginning at age 65.
The annual retirement benefits payable to an eligible Director equal (i)
the Director's annual retainer for the twelve months preceding his retirement,
resignation or death plus (ii) the fee in effect on the date of retirement,
resignation or death for attending a regularly scheduled Board meeting
multiplied by four. Benefits under the RPOD will be paid for a period, not to
exceed fifteen years, equal to the period during which the Director served on
the Board, excluding service, if any, while an employee of the Company. If a
Director dies after becoming eligible to receive benefits under the RPOD, his
beneficiary will receive benefits under the RPOD as though the Director had
retired from the Board on the day preceding his death and had met the
<PAGE>
applicable age requirements. If a Director is terminated during the term in
which a change of control (as defined in the RPOD) occurs or is not re-elected
immediately following the expiration of such term, he is entitled to the lump
sum actuarial equivalent of the benefits he would have received had he retired
immediately, without regard to whether he meets the age and service
requirements, on the date of such termination or expiration of the Director's
term.
EXECUTIVE COMPENSATION
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
----------------------------------
Annual Compensation<F1> Restricted
Name and ------------------------- Stock Stock All Other
Principal Position Salary Bonus Awards<F2><F3> Options Compensation<F4>
- ---------------------- ------ ----- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth B. Roath <F5> 1993 $373,000 $360,000 $291,300 100,000 $20,000
Chairman and Chief 1992 347,500 308,500 477,000 100,000
Executive Officer 1991 319,000 270,000 347,000 92,400
James G. Reynolds 1993 196,800 122,000 113,400 40,000 20,000
Senior Vice President 1992 183,000 105,000 159,000 35,000
and Chief Financial 1991 171,700 88,300 142,100 34,000
Officer
Devasis Ghose 1993 104,600 20,000 24,800 8,000 11,300
Vice President 1992 99,300 20,900 34,500 8,000
Finance and Treasurer 1991 94,800 18,200 30,800 8,000
Lorna M. Mellies 1993 90,800 15,000 20,400 7,000 9,500
Vice President-Legal 1992 86,500 16,800 29,200 7,000
and Corporate 1991 82,700 14,500 26,100 7,000
Secretary
David A. Young 1993 101,400 20,000 20,900 7,000 12,800
Vice President- 1992 97,100 32,000 29,100 7,000
Business Development 1991 92,900 14,500 26,100 7,000
Thomas J. Zarse 1993 85,700 25,000 17,500 5,500 9,400
Vice President- 1992 82,100 30,500 19,900 4,000
Construction and 1991 79,000 27,500 17,800 4,000
Development
<FN>
___________________
<F1> The table excludes amounts of personal benefits derived from the personal
use of club memberships paid for by the Company, automobiles for which officers
are given automobile allowances and financial consulting services, which
amounts do not exceed for any officer named in the table, the lesser of $50,000
or 10% of such officer's total cash compensation, or in the case of all
executive officers as a group, the lesser of $50,000 times the number of
persons in the group or 10% of the total cash compensation reported for the
group.
<F2> Restricted stock awards vest ratably over five years. The table below
shows the amounts of restricted stock held at December 31, 1993 and total
restricted stock awards granted by year of grant. Dividends are paid on the
restricted shares at the same rate as all other shares of Common Stock of the
Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Grants
Restricted Stock ---------------------
at December 31, 1993 1991 1992 1993
-------------------- ------ ------ ------
<S> <C> <C> <C> <C>
Kenneth B. Roath 55,320 24,000 14,650 18,000
James G. Reynolds 17,800 7,000 6,000 6,000
Devasis Ghose 4,320 2,000 1,300 1,300
Lorna M. Mellies 3,580 1,600 1,100 1,100
David A. Young 4,180 1,000 1,000 1,000
Thomas J. Zarse 2,350 1,000 750 750
<FN>
<F3> Long-term incentive stock award amounts have been calculated based upon
fair market value as of the date of grant.
<F4> These amounts represent the Company's contributions to the Company's
401(k) Retirement Plan. See "Executive Compensation-Compensation Pursuant to
Plans-Section 401(k) Plan." Information for years prior to 1993 is not required
to be disclosed.
<F5> The table excludes the value of $9,480 of premiums paid in 1993 by the
Company for term life insurance of which the Company is not the beneficiary and
which premiums are taxable income to Mr. Roath.
</TABLE>
EMPLOYMENT AGREEMENT. On April 28, 1988, the Company entered into an
employment agreement (the "Agreement") with Kenneth B. Roath which was amended
as of January 31, 1991. The Agreement is for a term of three years and will
automatically be extended for an additional year on the last day of January of
each year unless earlier terminated pursuant to the terms of the Agreement.
The Agreement provides for a base salary for the twelve calendar months
beginning February 1, 1991 at the annual rate of $320,000 to be adjusted
annually at the discretion of the Board of Directors, but at a minimum to
reflect increases in the Consumer Price Index. The Agreement provides for
bonus compensation. Mr. Roath is also entitled to the payment by the Company
for the term of the Agreement of premiums for a term life insurance policy in
the amount of $2,000,000 insuring Mr. Roath's life with a beneficiary named by
Mr. Roath. In the event Mr. Roath's employment is terminated by a change in
control or without cause, he is entitled to receive in severance pay either (i)
his base salary at the time of termination plus an amount equal to 2 times the
average annual bonus earned by Mr. Roath in the two years immediately preceding
the date of termination, subject to a reduction by the amount of compensation
that he receives from a new employer during what would have been the remainder
of his term of employment with the Company, or (ii) upon thirty (30) days'
written notice, a lump sum equal to the present value of the flow of cash
payments that he would otherwise have been paid, but in no event shall payment
be less than 2.5 or 1.5 times base salary for the applicable period for
termination due to change in control or without cause, respectively.
COMPENSATION PURSUANT TO PLANS
SECTION 401(k) PLAN. In 1988, the Company adopted a tax-qualified cash
or deferred profit-sharing plan (the "401(k) Plan"). Under the 401(k) Plan,
which covers all Company employees after they have completed one year of
service, employees may elect to reduce their current compensation by up to 25%
of their total salary, up to a maximum of $8,994 for the 1993 calendar year and
$9,240 for the 1994 calendar year, and have the amount of the reduction
contributed to the 401(k) Plan. The Company also contributes to the 401(k)
Plan an additional amount equal to 4% of such employee's compensation if the
employee's contribution is at least the lesser of 3% of his compensation or the
maximum contribution allowable by law. The employee's right to retain the
Company's contributions vests at the rate of 20% per year, beginning after the
employee has been with the Company for two years. The 401(k) Plan is intended
to qualify under Section 401 of the Internal Revenue Code so that contributions
<PAGE>
by employees or by the Company are not taxable to employees until withdrawn
from the 401(k) Plan, and so that contributions by the Company will be
deductible by the Company when made, according to the vesting percentage. For
the fiscal year ended December 31, 1993 the Company made contributions pursuant
to the 401(k) Plan including Section 401(a) contributions discussed further
below as follows: $83,000 on behalf of its six most highly compensated
executive officers each of whose total remuneration exceeded $60,000 during
such fiscal year; $92,000 on behalf of all current executive officers as a
group; and $131,000 on behalf of all employees as a group. At December 31,
1993, a total of 18 of the Company's employees were participants in the 401(k)
Plan.
On December 17, 1993, the Compensation Committee adopted an amendment to
the Company's 401(k) Plan to provide for a Section 401(a) profit sharing
contribution as provided for and set forth in the Internal Revenue Code which
will permit the Company to contribute a defined percentage of each employee's
wage base, with the percentages for 1993 being set at 3.5% for wages to the
extent of a Social Security base and 7% for wages in excess of such base.
Maximum combined 401(k) and 401(a) contributions were limited to $20,000 per
person in 1993.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Effective May 1, 1988, the Board
of Directors adopted a Supplemental Executive Retirement Plan (the "SERP")
which provides certain executives selected by the Compensation Committee with
supplemental deferred benefits in the form of retirement payments for life.
Currently, the Committee has selected Kenneth B. Roath to be a participant.
The annual retirement benefit available to a participant under the SERP
varies according to (i) the age of the participant at retirement, with the
youngest retirement age being 55, and (ii) the number of years the participant
has served the Company, with minimum service being five years. The SERP
benefit is reduced by 100% of any retirement benefit received from any other
Company retirement plan available to a participant and Social Security. In the
event of death of a participant after retirement, 50% of the benefit earned by
the participant will be paid to the surviving spouse for life and if survived
by dependent children, each such child will receive a benefit equal to $1,500
per month until age 18, or age 25 if a full time student. In the event of a
participant's death prior to retirement, the participant's surviving spouse
will be paid the participant's retirement benefit as if the participant had
retired the day before his or her death.
A life insurance policy has been purchased on the life of Mr. Roath naming
the Company as sole beneficiary to provide for substantially all obligations
under the SERP. The SERP is designed so that the Company will recover all its
SERP payments plus a factor for the use of its money if its original
assumptions as to interest rates, mortality rates, tax rates and certain other
factors are accurate.
The Company believes that the SERP aids in the ability to attract, retain,
motivate and provide financial security to management employees who render
valuable services to the Company.
AMENDED STOCK INCENTIVE PLAN. For a description of the Company's Amended
Stock Incentive Plan, see "Adoption of Amendments to the Amended Stock
Incentive Plan".
<PAGE>
<TABLE>
OPTION GRANTS IN DECEMBER 1993 AND JANUARY 1994
<CAPTION>
Average Percentage
Exercise of Total
Options Price<F1> Stock Options Expiration
Name Granted ($/SH) Granted Date Valuation<F2>
- --------------- ------- --------- ----------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Kenneth B. Roath 100,000 $25.89 54.50% 12/17/03 - 01/27/04 $265,000
James G. Reynolds 40,000 $26.29 21.80% 12/17/03 - 01/27/04 $ 92,750
Devasis Ghose 8,000 $25.89 4.36% 12/17/03 - 01/27/04 $ 21,200
Lorna M. Mellies 7,000 $25.89 3.82% 12/17/03 - 01/27/04 $ 18,550
David A. Young 7,000 $25.89 3.82% 12/17/03 - 01/27/04 $ 18,550
Thomas J. Zarse 5,500 $26.77 3.00% 12/17/03 - 01/27/04 $ 14,575
<FN>
__________________
<F1> Exercise Price is 95% of the closing price of stock on the date of the
grant for options granted in December 1993, and 100% of the closing price of
the stock on the date of the grant for options granted in January 1994.
<F2> Calculated using the Black Scholes option valuation methodology, as
recommended by The Wyatt Company, an executive compensation consulting firm.
In using such methodology, the following variables were utilized: risk-free
rate of 5.75%; .18 volatility; 6.8% dividend yield; which yields a discount
Black Scholes value for stock options of $2.65.
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN 1993 AND OPTION VALUES AT DECEMBER 31, 1993
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options at
At December 31, 1993 December 31, 1993<F2>
----------------------- -----------------------
Shares Acquired Value
on At
Name Exercise Exercise<F1> Exercisable Unexercisable Exercisable Unexercisable
- ----------- ---------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth B. 102,100 $3,115,000 2,980 310,820 $ 14,000 $1,175,000
Roath
James G. 0 $ 0 31,000 114,500 $328,000 $ 467,000
Reynolds
Devasis 3,000 $ 92,000 2,640 30,000 $ 20,000 $ 150,000
Ghose
Lorna M. 3,600 $ 108,000 1,400 24,500 $ 6,000 $ 112,000
Mellies
David A. 0 $ 0 5,400 22,900 $ 52,000 $ 91,000
Young
Thomas J. 6,400 $ 194,000 10,600 16,600 $129,000 $ 95,000
Zarse
<FN>
__________________
<F1> Value at exercise is the difference between the closing price on the date
of exercise less the exercise price per share of common stock, multiplied by
the number of shares acquired on exercise.
<F2> Calculated based on the closing price at December 31, 1993 multiplied by
the number of applicable shares in the money, less the total exercise price for
such shares.
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
report and the Stock Performance Graph shall not be incorporated by reference
into any such filings.
<PAGE>
COMMITTEE REPORT TO STOCKHOLDERS
Compensation and benefit practices of Health Care Property Investors, Inc.
(the "Company") are established and governed by the Compensation Committee made
up of independent members of the Board of Directors. The Compensation
Committee establishes the general compensation policy of the Company, reviews
and approves compensation of the senior executive officers of the Company and
administers all of the Company's employee benefit plans. The Compensation
Committee reviews the overall compensation program of the Company to assure
that it (i) is reasonable and consistent with practices of comparably sized
REITs and real estate development organizations ("Competitive Practices"), (ii)
adequately recognizes performance tied to creating shareholder values, (iii)
is responsive to current tax, accounting and SEC guidelines, and (iv) meets
overall Company compensation and business objectives.
As in years past, the Compensation Committee has retained the services of
The Wyatt Company ("Wyatt"), a nationally-recognized executive compensation
consulting firm, to assist the Committee in its evaluation of all elements of
the Company's compensation program. Wyatt provides advice to the Committee
with respect to Competitive Practices and the reasonableness of compensation
paid to executive officers of the Company. The Committee reviews survey and
other data supplied by Wyatt in the course of its deliberations relating to
compensation proposals.
Among other information, Wyatt reported and the Compensation Committee
noted that the Company had an average 25% total return to Stockholders for the
past three to five years, which approximates the 75th to 90th percentiles of
similar results of competitive companies. In addition, growth in cash flow per
share for 1993 exceeded the 90th percentile and has also significantly exceeded
the 90th percentile for the average of the past three to five years.
COMPENSATION PHILOSOPHY
The Compensation Committee believes that the primary focus of the
Company's compensation program should be to reward performance as measured by
the creation of value for Stockholders. To this end, the Compensation
Committee has committed to a highly leveraged program that focuses 75% of total
direct compensation in incentives tied directly to shareholder value creation.
The Committee attempts to promote financial and operational success by
attracting, motivating and assisting in the retention of key employees with
outstanding talent and ability. In addition, the compensation program is
designed to promote teamwork, initiative and resourcefulness on the part of key
employees whose performance and responsibilities directly affect Company
profits. In this regard, the compensation program is designed to balance short
and long-term incentive compensation to achieve desired results and above all
to reward performance.
COMPENSATION MIX
The Company's executive compensation is based on three components designed
in each case to accomplish the Company's compensation philosophy.
BASE SALARY. Salaries for executives are reviewed by the Compensation
Committee on an annual basis. The Compensation Committee generally targets
base salary levels within the range of the 50th to 75th percentile of
Competitive Practices. Salaries may be increased based upon an assessment of
competitive pay levels or the individual's contribution to the asset and
financial growth of the Company. However, achievement is generally rewarded
through incentive compensation consistent with the Company's pay-for-
performance philosophy.
<PAGE>
The Compensation Committee has reviewed the base salary for each of the
five highest paid officers for 1993 and believes that such compensation is
reasonable in view of Competitive Practices, the Company's performance and the
contribution of those officers to that performance.
ANNUAL CASH INCENTIVE AWARDS. Annual cash bonus incentive awards
generally are designed to protect Stockholder interests by establishing a cash
available for distribution or reinvestment performance target (the "Performance
Target") which must be satisfied before any awards are paid to all officers
other than the Chief Executive Officer. The weighing between cash available
for distribution and the Performance Target will vary depending on the level
of an officer's position and the responsibilities and duties involved in their
office. The Performance Target is established by the Compensation Committee
at the beginning of each year at a level considered to provide Stockholders
with an acceptable rate of return. In addition to satisfying the Performance
Target, bonus awards also are based on personal performance measured by the
extent to which personal goals are achieved. Personal performance goals
necessarily vary between officers based upon their specific roles within the
Company and specific objectives established each year for each officer by the
Company's Chief Executive Officer.
A target award is established for each officer based on the level of his
or her position, the responsibilities and duties involved therein and on
Competitive Practices. The Compensation Committee approves each officer's
target award. The target award is expressed as a percentage of salary and as
a corresponding dollar amount. No actual award can exceed 150% of an officer's
target award. The Performance Target was achieved in 1993 and target awards
were approved by the Compensation Committee. See "Summary Compensation Table."
LONG-TERM INCENTIVES. The Compensation Committee administers the
Company's Amended Stock Incentive Plan (the "Plan"). Pursuant to the Plan,
annual stock grants and stock options have been awarded in order to retain and
motivate executives to improve long-term stock market performance. Stock
options generally are granted at 100% of the current fair market value of the
Company's stock and will only be of value to the executive if the stock price
increases over time. Generally, stock option grant and restricted stock awards
vest over a five-year period, and the executive must be employed by the Company
at the time of vesting in order to exercise the options. Each of the six
highest paid officers received stock options which were based on his or her
responsibilities and relative position in the Company. The Compensation
Committee did not consider the amount of options and restricted shares
currently held by the officers in determining the size of current awards. See
"Summary Compensation Table." The value of all outstanding restricted stock
grants is set forth at page ___.
In addition, to provide further incentive to key employees the
Compensation Committee voted this year to amend the Plan to provide for
Dividend Shares whereby Plan Participants would receive the benefit of
dividends granted on Common Stock on which they held an option, between the
time the option is granted and when it is exercised. The benefit of the
dividends would come in the form of a number of shares of Common Stock derived
through the following formula:
(Number of Shares on Amount of
which Participant X Quarterly Dividend
holds Option Declared)
-------------------------------------------------
Fair Market Value of Shares at
date of dividend payout
<PAGE>
These dividend shares would only be collectible if an option is exercised, and
then only once the Participant has held the shares for two years.
CHIEF EXECUTIVE COMPENSATION
Mr. Roath received a base salary of $375,000 in 1993 which represents an
increase of approximately 7.1% over his 1992 base salary. This base salary is
in approximately the 70th percentile of competitive practice. The Compensation
Committee believes that this level properly leverages Mr. Roath's compensation
toward incentive pay, reflecting the Company's pay-for-performance philosophy.
The Compensation Committee also awarded Mr. Roath a cash bonus incentive award
of $372,000, restricted stock grants of 10,000 shares of Common Stock and
100,000 stock option grants at an average exercise price of $25.89. These
awards reflect both the increases attributable to Competitive Practices during
the period and the Committee's recognition of Mr. Roath's contribution to
expansion of the Company's investment portfolio and superior financial
performances.
Mr. Roath received 49.1% of his cash compensation for 1993 from
incentives. When the value of the restricted stock grants and stock option
grants for the period are included, 72% of total direct compensation is from
incentives which are directly related to Stockholder value creation. The
perquisites and other benefits received by Mr. Roath that are reported in the
Summary Compensation Table are provided pursuant to his Employment Agreement.
Based upon the foregoing, the Compensation Committee has reviewed and
approved the total compensation for 1993 of the six most highly compensated
executive officers of the Company.
Compensation Committee
Orville E. Melby Harold M. Messmer, Jr. Michael D. McKee
Chairman
[date]
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return of the Company, the S&P
500 Index and the Equity REIT Index of the National Association of Real Estate
Investment Trusts ("NAREIT") from January 1, 1989 to December 31, 1993. Total
return assumes quarterly reinvestment of dividends before consideration of
income taxes. The Company believes that this information demonstrates that the
compensation earned by its executive officers compares very favorably to the
Company's stockholder value.
<TABLE>
(December 31, 1988=100)
<CAPTION>
NAREIT
EQUITY
S&P REITS HCPI
DATE INDEX INDEX INDEX
- ---- ----- ----- -----
<C> <C> <C> <C>
12/31/88 100.00 100.00 100.00
03/31/89 107.03 102.39 102.22
06/30/89 116.44 108.32 121.20
09/30/89 128.84 112.30 128.76
12/31/89 131.49 108.84 135.18
03/31/90 127.52 104.63 128.31
06/30/90 135.54 104.50 139.95
09/30/90 116.86 89.30 143.35
12/31/90 127.32 92.13 156.17
03/31/91 145.86 113.08 182.61
06/30/91 145.55 113.96 190.70
09/30/91 153.39 118.63 209.56
12/31/91 166.21 125.02 249.58
03/31/92 161.97 125.85 217.61
06/30/92 165.16 129.17 252.26
09/30/92 170.28 137.98 279.64
12/31/92 178.96 143.26 277.81
03/31/93 186.63 174.26 350.98
06/30/93 187.59 169.26 332.42
09/30/93 192.39 185.09 359.30
12/31/93 196.84 171.42 318.32
</TABLE>
CERTAIN TRANSACTIONS
Since 1985, the Company has been insured through Alexander & Alexander,
Inc. insurance brokers for general liability, workmen's compensation, and
other insurance. Paul V. Colony, a Director of the Company since April 1988,
is Senior Vice President of Alexander & Alexander, Inc. and Chairman of the
Board of Alexander & Alexander of CA, Inc., an affiliate of Alexander &
Alexander, Inc. The terms of such insurance policies were established after
evaluation of market rates, and were no less favorable to the Company than
might have been negotiated with an unrelated party. The premiums paid to
Alexander & Alexander, Inc. for the fiscal year ending December 31, 1993 were
$271,880.
Since December 1985, the Company has owned a 50% interest in a limited
partnership of real estate equity projects involving an aggregate of
$24,971,000 of equity investments, with aggregate annual rental income of
approximately $3,136,000. The Company is the sole general partner of the
limited partnership. Harold M. Messmer, Jr., a Director of the Company, owns
a 15.2% interest as a limited partner of the partnership.
During 1993, the following Officers and Directors of the Company borrowed
money from the Company in connection with the purchase of Shares for which
<PAGE>
Options were granted pursuant to the Plan or the Directors Plan: Devasis Ghose
($44,918); Stephen R. Maulbetsch ($25,304); Lorna M. Mellies ($54,880); Michael
D. McKee ($71,670); Peter L. Rhein ($129,000); Kenneth B. Roath ($1,616,089);
and Thomas J. Zarse ($77,792). Interest on these loans was charged at rates
ranging from 5.37% to 6.88%. All of the foregoing loans have been paid in
full, except Mr. Rhein's loan and Mr. Roath's loan, on which there were
balances due as of December 31, 1993 of $129,000 and $473,576 respectively.
These loans are due on July 22, 1998 and November 19, 1996 respectively. In
addition, Mr. Orville E. Melby has a $51,965 remaining balance on a $101,965
loan in connection with the purchase of shares, which loan is due on June 22,
1994.
ADOPTION OF AMENDMENTS TO THE
AMENDED STOCK INCENTIVE PLAN
On January 27, 1994, the Compensation Committee (the "Committee")
unanimously adopted, subject to stockholder approval, amendments to the Health
Care Property Investors, Inc. Amended Stock Incentive Plan (the "Plan") to (i)
increase the number of shares reserved for issuance thereunder from 5% of the
number of all shares of Common Stock then outstanding to a stated number of
shares eligible to be issued under the Plan of 2,500,000 shares, (ii) provide
for the accrual, crediting, and disbursement of dividend shares and (iii)
provide for a per person limit on the number of stock options that may be
granted to any participant in the Plan during any calendar year. The
Stockholders are asked to approve the adoption of the amendments at the
Meeting.
Under the Company's current Plan, which was first approved by Stockholders
in March 1985, amended by the Stockholders in 1988, and expires in accordance
with its terms on February 15, 1998, the aggregate number of shares of Common
Stock that may be issued pursuant to incentive awards cannot exceed 5% of the
number of all shares of the Common Stock then outstanding. Due to the
outstanding performance of the Company in recent years as well as the Company's
efforts to attract, retain and reward its key employees for their achievements,
the number of shares issued pursuant to the Plan is approaching the 5% cap.
The Company's Board of Directors believes that, in order to retain, motivate,
and attract key personnel essential to the continued success of the Company it
is necessary to maintain its current practice of providing meaningful incentive
awards on an annual basis. The Board believes that incentive awards have
played a critical role in recent years in motivating Company management to
build a growing, highly competitive business, while also delivering a
consistently strong financial performance record with corresponding stock price
appreciation. The Board also believes that the Company's stock incentive
program has helped to stimulate a deeper commitment to the Company, minimize
management turnover and reward continuous improvement in financial performance.
Also under the Company's current Plan, participants receive no benefit
from the dividends declared on Common Stock during the time period during which
the participants hold an Option but before it is exercised. Under the proposed
amendments to the Plan, participants will, subject to certain conditions, be
entitled to the benefit of those dividends in the form of dividend shares.
Dividend shares will be calculated each time a dividend on Common Stock is
granted by multiplying the total number of shares on which a participant holds
an Option (as later defined) by the dividend award and dividing that number by
the fair market value of the shares at the time of the dividend award.
However, dividend shares will be paid out only (i) if the underlying stock
Option is exercised, and (ii) if the shares which are purchased pursuant to the
Option are held a minimum of two years. The Board of Directors believes that
dividend shares are in the best interests of the Company because they will (i)
focus management on both stock price growth and dividends thereby more closely
<PAGE>
aligning the interests of Stockholders and management, (ii) encourage the
holding of stock after exercise of Options, (iii) strengthen retention of key
employees, (iv) acknowledge REIT stock as a dividend as well as a growth stock,
and (v) moderately reduce the number of shares required to deliver competitive
awards thereby reducing dilution.
In order to be brought into compliance with recently issued Internal
Revenue Service and Treasury Department regulations, it is now encouraged that
stock incentive plans contain a specific, Stockholder approved per-person limit
on the number of options which may be granted during a specified time period.
The Company's Plan in its current form does not have such a limitation.
Accordingly, the Plan as it is proposed to be amended limits the number of
shares of Common Stock with respect to which Options may be granted to any
single participant during any calendar year to 400,000 shares.
The Board believes that the Plan as it is proposed to be amended will
further the purposes of the Plan and promote the interest of the Company and
its Stockholders by strengthening the Company's ability to attract, motivate
and retain employees of training, experience and ability, and to provide a
means to encourage stock ownership and proprietary interest in the Company to
valued employees upon whose judgment, initiative, and efforts the continued
financial success and growth of the business of the Company largely depend.
The following is a description of the material provisions of the Plan as
proposed to be amended. In order to accomplish the proposed changes to the
Plan, the amendments have been incorporated therein and the Plan as restated
is set forth in Appendix "A" to this proxy statement. The summary which
follows is not intended to be complete and reference should be made to the Plan
as it is proposed to be amended for a complete statement of its terms and
provisions.
SECURITIES SUBJECT TO THE RESTATED PLAN
Under the Plan as presently in effect, incentive awards may be granted
covering up to 5% of the number of outstanding shares of Common Stock. Under
the Plan as it currently exists, approximately 211,000 shares remain available
for grant. The proposed amendments to the Plan provide that an additional
2,500,000 shares of Common Stock may be issued pursuant to existing or newly
granted incentive awards. The Plan provides for appropriate adjustments in the
number and kind of shares subject to the Plan in the event of a stock split,
stock dividend or certain other similar changes in the Common Stock, and in the
event of a merger, consolidation or certain other types of recapitalization of
the Company. The Committee may, with the consent of the participant, cancel
all or part of an Option and substitute a new Option or require voluntary
surrender as a condition of a new Option. In addition, the Company may, if
authorized by the Committee and with the consent of the participant, cancel all
or a portion of any Option and make payment in cash, Common Stock or a
combination of cash and Common Stock in an amount equal to the excess, if any,
of the fair market value of the shares subject to the Option so cancelled over
the aggregate exercise price specified in the Option. Shares subject to
outstanding Options that are surrendered will, upon surrender, no longer be
charged against the maximum number of shares of Common Stock available for
issuance under the Plan, thereby permitting the grant of new Options for the
shares that were subject to the surrendered grants.
ELIGIBILITY TO PARTICIPATE
Only key employees of the Company are eligible to receive incentive
awards under the Plan, as determined by the Committee.
<PAGE>
ADMINISTRATION OF THE RESTATED PLAN
The Plan is administered by a committee comprised of three or more persons
who (i) are not eligible to receive Incentive Awards under the Plan and (ii)
who have not been eligible at any time within one year before appointment to
the Committee for selection as persons to whom Incentive Awards may be granted
pursuant to the Plan.
The Committee has the authority to establish rules and regulations as they
deem appropriate for the proper administration of the Plan, to make
determinations under and interpretations of the Plan and to take such steps in
connection with the Plan or the Incentive Awards granted thereunder as the
Committee may deem necessary or advisable. The Committee is authorized to
determine the number of shares subject to incentive awards granted to Plan
participants, to determine the eligible persons to whom, and the time or times
at which Incentive Awards may be granted. Incentive awards granted under the
Plan are evidenced by written instruments and may include other terms and
conditions consistent with the Plan, as the Committee may determine.
EXERCISE OF OPTIONS; VESTING
Subject to the limitations contained in the Plan, Options become
exercisable and incentive stock grants vest at such times and in such
installments as the Committee provides in the terms of each individual written
agreement. In no event may Options be exercised after ten years from the date
of grant.
Incentive Awards which may be granted under the Plan include (i) non-
qualified non-statutory options to purchase shares of Common Stock (an
"Option"), (ii) incentive stock awards and (iii) cash bonus awards. An Option
entitles the optionee to acquire shares of the Company's Common Stock upon
exercise of such Option under the Plan. The Committee has the discretion to
grant Options at a price which is not less than 50% of the fair market value
of the Common Stock on the date of grant. As of ____________, 1994, the fair
market value of the Common Stock was $_____________. An Option may be
exercised by payment in full of the Option exercise price at the time of
exercise and may be paid in cash or, in the discretion of the Committee, by
delivering shares of Common Stock owned by the optionee or by a promissory note
secured by shares of Common Stock bearing interest at a rate determined by the
Committee, or by a combination of any of the above. The Committee may also,
in its discretion and upon the request of the optionee, issue shares of Common
Stock upon the exercise of an Option directly to a brokerage firm or firms to
be selected by the Committee without payment of the exercise price by the
optionee but upon delivery of a new revocable guarantee by such brokerage firm
or firms of the payment of such exercise price. Proceeds received by the
Company from the sale of Common Stock pursuant to the exercise of Options under
the Plan have been and will be used for general corporate purposes.
DIVIDEND SHARES
Under the proposed amendments to the Plan, optionees will accrue dividend
shares based on those dividends that would have been awarded on those shares
of Common Stock for which the optionees hold outstanding and unexercised
Options. The number of dividend shares will be calculated by (i) multiplying
the dividend rate declared on each share of Common Stock by the number of
shares of Common Stock which the optionee has outstanding an unexercised
Options on as of the record date of a cash dividends, and then (ii) dividing
that figure by the fair market value of a share of Common Stock on the record
date. The calculation of dividend shares will be undertaken at each record
date for cash dividends between the time which the Option is granted and it is
<PAGE>
exercised. Participants can collect the accrued dividend shares only on those
Options which are exercised and only in proportion to the number of shares
purchased through the Option that the participant holds for a period of two
years, at which time the optionee will receive that number of shares of Common
Stock equal to the number of dividend shares that were allocable to those
exercised Options, or parts thereof, on the exercise date. No dividend shares
will be distributed for unexercised Options, and upon expiration of Options,
all rights and claims to dividend shares allocable thereto will be terminated.
For the year ended December 31, 1993, if the six highest paid executive
officers had exercised stock options and had held such shares for a period of
two years, the following numbers of dividend shares would have accrued to each
executive officer in 1995:
<TABLE>
<CAPTION>
Executive Officer Number of Dividend Shares
- ----------------- -------------------------
<S> <C>
Kenneth B. Roath 2,314
James G. Reynolds 1,969
Devasis Ghose 201
Lorna M. Mellies 141
David A. Young 325
Thomas J. Zarse 757
-----
5,707
=====
</TABLE>
As of February 1, 1994, no executive officer has exercised stock options
and held such stock for a minimum of two years.
RIGHTS AS STOCKHOLDER
No optionee will have any rights as a Stockholder or any title or interest
in or to any shares of Common Stock subject to an Option unless and except as
shares of Common Stock, if any, that have been issued or transferred to such
optionee.
PLAN AMENDMENTS
The Committee has the power, in its discretion, to amend, suspend or
terminate the Plan at any time. However, no such amendment will, without the
approval of the Stockholders of the Company: (i) change the class of persons
eligible to receive incentive awards under the Plan, (ii) materially increase
the benefits accruing to eligible persons under the Plan, (iii) increase the
number of shares of Common Stock subject to the Plan, or (iv) transfer the
administration of the Plan to any person who is not a disinterested person
under the Securities Exchange Act of 1934.
FEDERAL INCOME TAX CONSEQUENCES
The Plan is neither a qualified pension, profit sharing or stock bonus
plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") nor an "employee benefit plan" subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended. The following
discussion is a general summary of the material U.S. federal income tax
consequences to U.S. participants in the Plan. The discussion is based on the
Code, regulations thereunder, rulings and decisions now in effect, all of which
are subject to change. The summary does not discuss all aspects of federal
income taxation that may be relevant to a particular participant in light of
such participant's personal investment circumstances nor does it discuss tax
consequences under state or local laws.
<PAGE>
The grant of a non-qualified stock option will not result in taxable
income to the optionee at the time of grant, and ordinary income will be
realized by an optionee at the time of exercise of an Option in the amount by
which the fair market value of the Common Stock on the date of exercise exceeds
the exercise price. The Company will be entitled to a deduction from income
for federal income tax purposes in an amount equal to the ordinary income
recognized by the optionee in such case. Any subsequent disposition of the
shares acquired pursuant to a non-qualified option will result in gain or loss
to the optionee in an amount equal to the difference between the sale price and
the market price at date of exercise.
An optionee's basis for the stock for purposes of determining his gain or
loss on his subsequent disposition of the shares generally will be the fair
market value of the stock on the date of exercise of the non-qualified stock
option.
NON-TRANSFERABILITY OF INCENTIVE AWARDS
No incentive award and no right under the Plan will be assignable or
subject to any encumbrance, pledge or charge of any nature except that the
Company may establish rules and regulations whereby a beneficiary may be
designated with respect to an incentive award in the event of death of a
participant.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of the
Company's Common Stock present or represented at the annual meeting is
necessary to amend the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED
AMENDMENTS TO THE AMENDED STOCK INCENTIVE PLAN.
RATIFICATION OF THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co. audited the Company's financial statements for the
year ended December 31, 1993 and have been the Company's auditors since the
Company's organization.
The Directors have selected the firm of Arthur Andersen & Co. as
independent accountants for the Company for the fiscal year ending December 31,
1994, it being intended that such selection would be submitted for ratification
by Stockholders. The proxy holders named in the accompanying form of proxy
will vote the Shares represented by the proxy for ratification of the selection
of Arthur Andersen & Co., unless a contrary choice has been specified on the
proxy. If Stockholders do not ratify the selection of Arthur Andersen & Co.,
the selection of independent accountants will be considered by the Directors,
although the Directors would not be required to select different independent
accountants for the Company. The Directors retain the power to select another
firm as independent accountants for the Company to replace the firm whose
selection was ratified by Stockholders in the event the Directors determine
that the best interest of the Company warrants a change of its independent
accountants. A representative of Arthur Andersen & Co. is expected to be
present at the April 21, 1994 Annual Meeting with an opportunity to make a
statement if he desires to do so, and such representative is expected to be
available to respond to appropriate questions.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN & CO. AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE SUCCEEDING YEAR.
VOTING PROCEDURES
The Inspector of Elections will treat shares represented by properly
signed and returned proxies that reflect abstentions as shares that are present
and entitled to vote for purposes of determining the presence of a quorum and
for purposes of determining the outcome of any matter submitted for the
Stockholders for a vote. Except as otherwise noted herein, abstentions do not
constitute a vote "for" or "against" any matter and thus will be disregarded
in the calculation of "votes cast".
The Inspector of Elections will treat shares referred to as "broker non-
votes" (i.e., shares held by brokers or nominees as to which instructions have
not been received from the beneficial owner or persons entitled to vote that
the broker or nominee does not have the discretionary power to vote on a
particular matter) as shares that are present and entitled to vote for purposes
of establishing a quorum. For purposes of determining the outcome of any
matter as to which the broker has physically indicated on the proxy that it
does not have discretionary authority to vote, those shares will be treated as
not present and not entitled to vote with respect to that matter (even though
those shares are considered entitled to vote for quorum purposes and may be
entitled to vote on other matter).
DEADLINE FOR SUBMISSION OF STOCKHOLDER
PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
The proxy rules adopted by the Securities and Exchange Commission provide
that certain Stockholder proposals must be included in the proxy statement for
the Company's Annual Meeting. For a proposal to be considered for inclusion
in next year's proxy statement, it must be received by the Company no later
than November 15, 1994.
OTHER MATTERS
The Board of Directors of the Company knows of no matters to be presented
at the Annual Meeting other than those described in this proxy statement.
Other business may properly come before the meeting, and in that event it is
the intention of the persons named in the accompanying proxy to vote in
accordance with their judgment on such matters.
The cost of the solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, Directors and officers of the Company,
without receiving any additional compensation, may solicit proxies personally
or by telephone or telegraph. The Company will request brokerage houses,
banks, and other custodians or nominees holding stock in their names for others
to forward proxy materials to their customers or principals who are the
beneficial owners of Shares and will reimburse them for their expenses in doing
so. The Company has retained the services of Kissel-Blake Inc., for a fee of
$7,000 plus out-of-pocket expenses, to assist in the solicitation of proxies
from brokerage houses, banks, and other custodians or nominees holding stock
in their names for others.
<PAGE>
The Company's Annual Report to Stockholders, including the Company's
audited financial statements for the year ended December 31, 1993, is being
mailed herewith to all Stockholders of record. THE COMPANY WILL PROVIDE
WITHOUT CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN REQUEST OF ANY
SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1993 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
SUCH REQUESTS SHOULD BE DIRECTED TO JAMES G. REYNOLDS, SENIOR VICE PRESIDENT
OF THE COMPANY, AT 10990 WILSHIRE BOULEVARD, SUITE 1200, LOS ANGELES,
CALIFORNIA 90024.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
Lorna M. Mellies
Corporate Secretary
Los Angeles, California
March 15, 1994
<PAGE>
HEALTH CARE PROPERTY INVESTORS, INC.
REVOCABLE PROXY
Annual Meeting of Stockholders
April 21, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, as a holder of Common Stock of Health Care Property
Investors, Inc. (the "Company"), hereby appoints Kenneth B. Roath and Peter
L. Rhein as Proxies, with the full power of substitution, to represent and to
vote as designated on this card all of the shares of Common Stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held on April 21, 1994 at 9:30 A.M. (PST), or any
adjournment thereof.
Unless otherwise marked, this Proxy will be voted FOR the election of the
Board of Directors' nominees to the Board of Directors, FOR the Company's
Amended Stock Incentive Plan, and FOR the ratification of Arthur Andersen & Co.
as independent auditors. If any other business is presented at the Annual
Meeting of Stockholders, the Proxy will be voted in accordance with the
discretion of the Proxies named above.
1. ELECTION OF DIRECTORS: Robert R. Fanning, Jr., Michael D. McKee and
Harold M. Messmer, Jr.
___ FOR all three nominees listed above (except as marked to the contrary
hereon)
___ WITHHOLD AUTHORITY to vote for all three nominees listed above
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
______________________________________________________________________________
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE
___________________ ___________________
ACCOUNT NUMBER COMMON
___________________
D.R.S.
2. Amending the Company's Amended Stock Incentive Plan
___ FOR ___ AGAINST ___ ABSTAIN
3. Ratification of Arthur Andersen & Co. as independent auditors for the
year ending December 31, 1994.
___ FOR ___ AGAINST ___ ABSTAIN
4. In their discretion, upon any other matter that may properly come
before the Annual Meeting of Stockholders or any adjournment thereof.
___ FOR ___ AGAINST ___ ABSTAIN
<PAGE>
Important: Please sign your name exactly as it appears hereon. When signing
as an attorney, executor, administrator, trustee or guardian, add such title
to your signature.
NOTE: If you receive more than one proxy card, please date and sign each card
and return all proxy cards in the enclosed envelope.
Dated: __________________________, 1994
Signature: _________________________________
Signature: _________________________________
PLEASE DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
APPENDIX "A"
HEALTH CARE PROPERTY INVESTORS, INC.
AMENDED STOCK INCENTIVE PLAN
1. Purpose of the Plan.
The purpose of the Amended Stock Incentive Plan of Health Care Property
Investors, Inc. is to promote the interests of the Company and its stockholders
by strengthening the Company's ability to attract, motivate and retain
employees of training, experience and ability, and to provide a means to
encourage stock ownership and proprietary interest in the Company to valued
employees of the Company upon whose judgment, initiative, and efforts the
continued financial success and growth of the business of the Company largely
depend.
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the Compensation Committee of the Company, which
shall be made up of at least three persons not eligible to participate in the
Plan.
(c) "Common Stock" means the $1.00 par value Common Stock of the Company.
(d) "Company" means Health Care Property Investors, Inc.
(e) "Dividend Shares" means those shares of Common Stock credited to a
Participant based on dividends declared on outstanding and unexercised Options
held by the Participant which can be collected only upon exercise of the Option
and after holding the shares purchased pursuant to the exercise of the Option
for a period of two years, as determined pursuant to Section 6(d) hereto.
(f) "Eligible Person" means any full-time employee of the Company or of
any of its present or future parent or subsidiary corporations.
(g) "Fair Market Value" means the average of the high and low quoted
sales prices of a share of Common Stock on the Composite Tape on the date as
of which fair market value is to be determined, or if no such sales were made
on such date, the closing price of such shares on any stock exchange on which
the Common Stock is then listed on the next preceding date on which there were
such sales.
(h) "Participant" means any Eligible Person selected to participate in
an Incentive Award pursuant to Section 5.
(i) "Incentive Award" means an Option, Dividend Share, Incentive Stock
Award, or cash bonus award granted under the Plan.
(j) "Option" means a nonqualified or nonstatutory stock option.
(k) "Plan" means the Amended Stock Incentive Plan as set forth herein,
which may be further amended from time to time.
(l) "Incentive Stock Award" means a right to the grant or purchase, at
a price determined by the Committee, of Common Stock of the Company which is
nontransferable and subject to substantial risk of forfeiture until specific
conditions are met. Conditions may be based on continuing employment or
achievement of preestablished financial objectives or both.
<PAGE>
3. Shares of Common Stock Subject to the Plan.
(a) Subject to the provisions of Section 3(c) and Section 8 of the Plan,
the number of shares of Common Stock that may be issued or transferred or
exercised pursuant to Incentive Awards under the Plan after the effective date
of the Plan will not exceed 2,500,000 shares.
(b) The maximum number of shares of Common Stock with respect to which
options or rights may be granted to any Participant during any one calendar
year is 400,000 shares.
(c) The shares of Common Stock to be delivered under the Plan will be
made available, at the discretion of the Board of Directors or the Committee,
either from authorized but unissued shares of Common Stock or from previously
issued shares of Common Stock reacquired by the Company, including shares
purchased on the open market.
(d) If any Incentive Award is not issued or transferred and ceases to be
issuable or transferable for any reason, such Incentive Award will no longer
be charged against the limitations provided for in Section 3(a) and may again
be made subject to Incentive Awards.
4. Administration of the Plan.
(a) The Plan will be administered by the Committee, which will consist
of three or more persons (i) who are not eligible to receive Incentive Awards
under the Plan and (ii) who have not been eligible at any time within one year
before appointment to the Committee for selection as persons to whom Incentive
Awards may be granted pursuant to the Plan.
(b) The Committee has and may exercise such powers and authority of the
Board as may be necessary or appropriate for the Committee to carry out its
functions as described in the Plan. The Committee has authority in its
discretion to determine the Eligible Persons to whom, and the time or times at
which, Incentive Awards may be granted and the number of shares subject to each
Incentive Award. The Committee also has authority to interpret the Plan, and
to determine the terms and provisions of the respective Incentive Awards
agreements and to make all other determinations necessary or advisable for Plan
administration. The Committee has authority to prescribe, amend, and rescind
rules and regulations relating to the Plan. All interpretations,
determinations, and actions by the Committee will be final, conclusive, and
binding upon all parties.
(c) No member of the Board or the Committee will be liable for any action
or determination made in good faith by the Board or the Committee with respect
to the Plan or any Incentive Award under it.
5. Eligibility.
All full-time salaried employees of the Company who have been determined
by the Committee to be key employees are eligible to receive Incentive Awards
under the Plan. The Committee has authority, in its sole discretion, to
determine and designate from time to time those Eligible Persons who are to be
granted Incentive Awards, and the type and amount of Incentive Award to be
granted. Each Incentive Award will be evidenced by a written instrument and
may include any other terms and conditions consistent with the Plan, as the
Committee may determine.
<PAGE>
6. Terms and Conditions of Stock Options and Dividend Shares.
(a) The purchase price of Common Stock under each Option will be
determined by the Committee, and may not be less than 50% of the Fair Market
Value of the Common Stock on the date of grant.
(b) Options may be exercised as determined by the Committee but in no
event after ten years from the date of grant.
(c) Except as set forth below, upon the exercise of an Option, the
purchase price will be payable in full in cash, or, in the discretion of the
Committee, by the assignment and delivery to the Company of shares of Common
Stock owned by the optionee; or in the discretion of the Committee, by a
promissory note secured by shares of Common Stock bearing interest at a rate
determined by the Committee but not less than the minimum rate permitted by the
Internal Revenue Service; or by a combination of any of the above. Any shares
so assigned and delivered to the Company in payment or partial payment of the
purchase price will be valued at their Fair Market Value on the exercise date.
The Committee may, in its discretion and upon the request of the optionee,
issue shares of Common Stock upon the exercise of an Option directly to a
brokerage firm or firms to be selected by the Committee, without payment of the
purchase price by the optionee but upon delivery of an irrevocable guarantee
by such brokerage firm or firms of the payment of such purchase price. No
payment by an assignment of shares, by a promissory note or by any combination
thereof, or by the guarantee of a brokerage firm or firms as described above,
will be allowed unless such payments are allowed under applicable requirements
of Federal and state tax, securities and other laws, rules and regulations and
by any regulatory authority having jurisdiction.
(d) Dividend Shares will be credited as of the dividend record date for
cash dividends declared on Common Stock in the amount derived by (i)
multiplying the dividend rate declared per share of Common Stock by the number
of shares of Common Stock subject to all outstanding and unexercised Options
held by an optionee pursuant to the Plan as of the dividend record date, and
then (ii) dividing the resulting figure by the Fair Market Value of a share of
Common Stock on such dividend record date, or by such formulas and at such
times, and subject to such limitations as may be determined by the Committee.
Dividend Shares will be credited as of the dividend record date for Common
Stock dividends declared on Common Stock in the amount equal to the number of
shares declared. Dividend Shares will be credited as of the dividend record
date for dividends declared on Common Stock in any security other than Common
Stock by converting that other security into an equal number of shares of
Common Stock based on the Fair Market Value of the security and the Common
Stock at the dividend record date. On that date two years following the
exercise of any Option, in whole or in part, subject to the condition that the
optionee has held the shares of Common Stock purchased pursuant to the exercise
of the Option, or portion thereof, for the entire two-year period, the
optionee will receive the total number of shares of Common Stock equal to the
number of Dividend Shares that were allocable to the exercised Option, or
portion thereof, on the exercise date. Upon expiration of any Option, all
Dividend Shares allocable thereto will also terminate.
(e) No fractional shares will be issued pursuant to the exercise of an
Option or the determination of Dividend Shares nor will any cash payment be
made in lieu of fractional shares.
<PAGE>
(f) At the time a Participant exercises an Option, the Committee may
grant a cash bonus award in such amount as the Committee may determine. The
Committee may make such a determination at the time of grant or exercise. The
cash bonus award may be subject to any condition imposed by the Committee,
including a reservation of the right to revoke a cash bonus award at any time
before it is paid.
7. Terms and Conditions of Incentive Stock Awards.
(a) All shares of Incentive Stock Awards granted or sold pursuant to the
Plan will be subject to the following conditions:
(i) The shares may not be sold, transferred or otherwise alienated
or hypothecated until the restrictions are removed or expire.
(ii) The Committee may require the Participant to enter into an
agreement providing that the certificates representing Incentive Stock Awards
granted or sold pursuant to the Plan will remain in the physical custody of the
Company until all restrictions are removed or expire.
(iii) Each certificate representing Incentive Stock Awards granted
pursuant to the Plan will bear a legend making appropriate reference to the
restrictions imposed.
(iv) The Committee may impose other conditions on any shares granted
or sold pursuant to the Plan as it may deem advisable, including, without
limitation, restrictions under the Securities Act of 1933, as amended, under
the requirements of any stock exchange upon which such shares or shares of the
same class are then listed and under any blue sky or other securities laws
applicable to such shares.
(b) The restrictions imposed under subparagraph (a) above upon Incentive
Stock Awards will lapse in accordance with a schedule or other conditions as
determined by the Committee, subject to the provisions of Section 10
subparagraph (e).
(c) Subject to the provisions of subparagraph (a) above and Section 10
subparagraph (e), the holder will have all rights of a stockholder with respect
to the Incentive Stock Awards granted or sold, including the right to vote the
shares and receive all dividends and other distributions paid or made with
respect thereto.
(d) Except as set forth below, the purchase price (if any) for shares of
Incentive Stock Awards will be payable in full in cash; or by the assignment
and delivery to the Company of shares of Common Stock owned by the holder of
the Incentive Stock Awards; or by a promissory note secured by shares of Common
Stock bearing interest at a rate equal to the minimum rate permitted by the
Internal Revenue Service; or by a combination of any of the above. Any shares
so assigned and delivered to the Company in payment or partial payment of the
purchase price will be valued at their Fair Market Value on the purchase date.
The Committee may, in its discretion and upon the request of the holder, issue
shares of the Incentive Stock Award directly to a brokerage firm or firms to
be selected by the Committee, without payment of the purchase price by the
holder but upon delivery of an irrevocable guarantee by such brokerage firm or
firms of the payment of such purchase price. No payment by an assignment of
shares, by a promissory note or by any combination thereof, or by the guarantee
of a brokerage firm or firms as described above, will be allowed unless such
payments are allowed under applicable requirements of Federal and state tax,
securities and other laws, rules and regulations and by any regulatory
authority having jurisdiction.
<PAGE>
8. Adjustment Provisions.
(a) Subject to Section 8(b), if the outstanding shares of Common Stock
of the Company are increased, decreased, or exchanged for a different number
or kind of shares or other securities, or if additional shares or new or
different shares or other securities are distributed with respect to such
shares of Common Stock or other securities, through merger, consolidation, sale
of all or substantially all the property of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to such shares of Common Stock, or
other securities an appropriate and proportionate adjustment may be made in (i)
the maximum number and kind of shares provided in Section 3, (ii) the number
and kind of shares or other securities subject to the then outstanding
Incentive Awards, and (iii) the price for each share or other unit of any other
securities subject to then outstanding Incentive Awards without change in the
aggregate purchase price or value as to which such Incentive Awards remain
exercisable or subject to restrictions.
(b) Despite the provisions of Section 8(a), upon dissolution or
liquidation of the Company or upon a reorganization, merger, or consolidation
of the Company with one or more corporations as a result of which the Company
is not surviving corporation, or upon the sale of all or substantially all of
the property of the Company, all Incentive Awards then outstanding under the
Plan will be fully vested and exercisable and all restrictions will immediately
cease, unless provisions are made in connection with such transaction for the
continuance of the Plan and the assumption or the substitution for such
Incentive Awards of new incentive awards covering the stock of a successor
employer corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices.
(c) Adjustments under Section 8(a) and 8(b) will be made by the
Committee, whose determination as to what adjustments will be made and the
extent thereof will be final, binding, and conclusive. No fractional interest
will be issued under the Plan on account of any such adjustments.
(d) In the event of a pending or threatened takeover bid or tender offer
and pursuant to which 10% or more of the outstanding securities of the company
is acquired, whether or not deemed a tender offer under applicable state or
Federal laws, or in the event that any person makes any filing under sections
13(d) or 14(d) of the Securities Exchange Act of 1934 with respect to the
Company, the Committee may in its sole discretion, without obtaining
stockholder approval, at the time of any one or more of the following actions
to the extent permitted in Section 10 with respect to all Eligible Persons and
Participants:
(i) Accelerate the exercise dates of any outstanding Option or
Dividend Share, or make all outstanding Options and Dividend Shares fully
vested and exercisable;
(ii) Determine all or any portion of conditions associated with an
Incentive Stock Award have been met;
(iii) Grant a cash bonus award to any of the holders of outstanding
Options;
(iv) Pay cash to any or all Option or Dividend Share holders in
exchange for the cancellation of their outstanding nonstatutory Options or
Dividend Shares;
<PAGE>
(v) Make any other adjustments or amendments to the Plan and
outstanding Incentive Awards and substitute new Incentive Awards.
9. General Provisions.
(a) Nothing in the Plan or in any instrument executed pursuant to the
Plan will confer upon any Participant any right to continue in the employ of
the Company or any of its subsidiaries or affect the right of the Company to
terminate the employment of any Participant at any time with or without cause.
(b) No shares of Common Stock will be issued or transferred pursuant to
an Incentive Award unless and until all then applicable requirements imposed
by Federal and state securities and their laws, rules and regulations and by
any regulatory agencies having jurisdiction, and by any stock exchanges upon
which the Common Stock may be listed, having been fully met. As a condition
precedent to the issuance of shares pursuant to the grant or exercise of an
Incentive Award, the Company may require the Participant to take any reasonable
action to meet such requirements.
(c) No Participant and no beneficiary or other person claiming under or
through such Participant will have any right, title or interest in or to any
shares of Common Stock allocated or reserved under the Plan or subject to any
Incentive Award except as to such shares of Common Stock, if any, that have
been issued or transferred to such Participant.
(d) The Company may make such provisions as they deem appropriate to
withhold any taxes the Company determines it is required to withhold in
connection with any Incentive Award.
(e) No Incentive Award and no right under the Plan, contingent or
otherwise, will be assignable or subject to any encumbrance, pledge or charge
of any nature except that, under such rules and regulations as the Company may
establish pursuant to the terms of the Plan, a beneficiary may be designated
with respect to an Incentive Award in the event of death of a Participant. If
such beneficiary is the executor or administrator of the estate of the
Participant, any rights with respect to such Incentive Award may be transferred
to the person or persons or entity (including a trust) entitled thereto under
the will of the holder of such Incentive Award.
(f) The Company may make a loan to a Participant in connection with (i)
the exercise of an Option in an amount not to exceed the aggregate exercise
price of the Option being exercised and the grossed up amount of any Federal
and state taxes payable in connection with such exercise for the purpose of
assisting such optionee to exercise such Option and (ii) the vesting of an
Incentive Stock Award in an amount equal to the grossed up amount of any
Federal and state taxes payable as a result of such vesting. Any such loan may
be secured by shares of Common Stock or other collateral deemed adequate by the
Committee and will comply in all respects with all applicable laws and
regulations. The Committee may adopt policies regarding eligibility for such
loans, the maximum amounts thereof and any terms and conditions not specified
in the Plan upon which such loans will be made. In no event will the interest
rate be less than the minimum rate established by the Internal Revenue Service
for the purpose of the purchase and sale of property.
<PAGE>
(g) The Committee may cancel, with the consent of the Participant, all
or a portion of any Option and/or Dividend Share granted under the Plan to be
conditioned upon the granting to the Participant as a new Option and/or
Dividend Share for the same or a different number of shares as the Option
and/or Dividend Share surrendered, or may require such voluntary surrender as
a condition to a grant of a new Option and/or Dividend Share to such
Participant. Such Option and/or Dividend Share shall be exercisable at the
price, during the period, and in accordance with any other terms or conditions
specified by the Committee at the time the new Option and/or Dividend Share is
granted, all determined in accordance with the provisions of the Plan without
regard to the price, period of exercise, or any other terms or conditions of
the Option and/or Dividend Share surrendered.
(h) The forms of Options and/or Dividend Shares granted under the Plan
may contain such other provisions as the Committee may deem advisable. Without
limiting the foregoing and if so authorized by the Committee, the Company may,
with the consent of the Participant, and at any time or from time to time,
cancel all or a portion of any Option and/or Dividend Share granted under the
Plan then subject to exercise and discharge its obligation in respect of the
Option and/or Dividend Share either by payment to the Participant of an amount
of cash equal to the excess, if any, of the Fair Market Value, at such time,
of the shares subject to the portion of the Option and/or Dividend Share so
cancelled over the aggregate purchase price specified in the Option and/or
Dividend Share covering such shares, or by issuance or transfer to the
Participant of shares of Common Stock with a Fair Market Value, at such time,
equal to any such excess, or by a combination of cash and shares. Upon any
such payment of cash or issuance of shares, (i) there shall be charged against
the aggregate limitations set forth in Section 3(a) a number of shares equal
to the number of shares so issued plus the number of shares purchasable with
the amount of any cash paid to the Participant on the basis of the Fair Market
Value as of the date of payment, and (ii) the number of shares subject to the
portion of the Option and/or Dividend Share so cancelled, less the number of
shares so charged against such limitations, shall thereafter be available for
other grants.
10. Amendment and Termination.
(a) The Committee will have the power, in its discretion, to amend,
suspend or terminate the Plan at any time. No such amendment will, without
approval of the stockholders of the Company, except as provided in Section 8
of the Plan:
(i) Change the class of persons eligible to receive Incentive Awards
under the Plan;
(ii) Materially increase the benefits accruing to Eligible Persons
under the Plan;
(iii) Increase the number of shares of Common Stock subject to the
Plan; or
(iv) Transfer the administration of the Plan to any person who is
not a Disinterested Person under the Securities Exchange Act of 1934.
(b) The Committee may, with the consent of a Participant, make such
modifications in the terms and conditions of an Incentive Award agreement as
it deems advisable.
<PAGE>
(c) No amendment, suspension or termination of the Plan will, without the
consent of the Participant, alter, terminate, impair or adversely affect any
right or obligation under any Incentive Award previously granted under the
Plan.
(d) An Option and those Dividend Shares held by a person who was an
Eligible Person at the time such Option and Dividend Shares were granted will
expire immediately if and when the Participant ceases to be an Eligible Person,
except as follows:
(i) If the employment of a Participant is terminated by the Company
or any subsidiary thereof other than for cause, for which the Company will be
the sole judge, then the Options and/or Dividend Shares will expire eight
months thereafter unless by their terms they expire sooner. During said
period, the Options and/or Dividend Shares may be exercised in accordance with
their terms, but only to the extent exercisable on the date of termination of
employment or directorship.
(ii) If the Participant retires at normal retirement age or retires
with the consent of the Company or any subsidiary thereof at an earlier date,
the Options and/or Dividend Shares of the Participant will expire eight years
thereafter unless by their terms they expire sooner. During said period, the
Options and/or Dividend Shares may be exercised in accordance with their terms,
but only to the extent exercisable on the date of retirement.
(iii) If the Participant dies or becomes permanently and totally
disabled while employed by the Company, the Options and/or Dividend Shares of
the Participant will expire three years after the date of death or permanent
and total disability unless by their terms they expire sooner. If the
Participant dies or becomes permanently and totally disabled within the eight
months referred to in subparagraph (i) above, the Options and/or Dividend
Shares will expire one year after the date of death or permanent and total
disability, unless by their terms they expire sooner. If the Participant dies
or becomes permanently and totally disabled within the three-year period
referred to in subparagraph (ii) above, the Options and/or Dividend Shares will
expire upon the later of three years after retirement or one year after the
date of death or permanent and total disability, unless by their terms they
expire sooner.
(e) The Committee may in its sole discretion determine, (i) with respect
to an Incentive Award, that any Participant who is on leave of absence for any
reason will be considered as still in the employ of the Company, provided that
rights to such Incentive Award during a leave of absence will be limited to the
extent to which such right was earned or vested at the commencement of such
leave of absence, or (ii) with respect to any Options and/or Dividend Shares
of any Participant who is retiring at normal retirement age or with the consent
of the Company or any subsidiary thereof at an earlier age, that the Options
and/or Dividend Shares of such Participant will accelerate and become fully
exercisable on a date specified by the Committee which is not later than the
effective date of such retirement.
11. Effective Date of Plan and Duration of Plan.
This Plan will become effective upon adoption by the Board and the holders
of all of the outstanding shares at a meeting of stockholders of the Company.
Unless previously terminated, the Plan will terminate on February 15, 1998.
