<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
HEALTH CARE REIT, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
PRELIMINARY PROXY AS FILED
VIA EDGAR 3/3/99
HEALTH CARE REIT, INC.
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
AND
PROXY STATEMENT
MEETING DATE
APRIL 20, 1999
YOUR VOTE IS IMPORTANT!
YOU ARE URGED TO SIGN, DATE, AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
HEALTH CARE REIT, INC.
One SeaGate
Suite 1500
Toledo, Ohio 43604
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 20, 1999
TO THE SHAREHOLDERS OF HEALTH CARE REIT, INC.:
The Annual Meeting of Shareholders of Health Care REIT, Inc. will be
held on April 20, 1999 at 10:00 a.m. in the Auditorium of One SeaGate, Toledo,
Ohio, for the purpose of considering and acting upon:
1. The election of three Directors for a term of three years;
2. The approval of an amendment to the Company's Restated
Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 40,000,000 to
75,000,000;
3. The ratification of the appointment of Ernst & Young LLP as
independent auditors for the fiscal year 1999; and
4. The transaction of such other business as may properly come
before the meeting or any adjournment thereof.
Shareholders of record at the close of business on March 2, 1999 will
be entitled to notice of, and to vote at, such Annual Meeting or any adjournment
thereof. Information relating to the matters to be considered and voted on at
the Annual Meeting is set forth in the Proxy Statement accompanying this Notice.
BY ORDER OF THE BOARD OF DIRECTORS
Erin C. Ibele
Vice President and Corporate Secretary
Toledo, Ohio
March ___, 1999
PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. THE
PROXY MAY BE REVOKED BY YOU AT ANY TIME, AND GIVING YOUR PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING.
2
<PAGE> 4
HEALTH CARE REIT, INC.
ONE SEAGATE
SUITE 1500
TOLEDO, OHIO 43604
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 1999
GENERAL
This Proxy Statement is furnished to the shareholders of Health Care
REIT, Inc. (the "Company") by its Management and the Board of Directors in
connection with the solicitation of proxies in the enclosed form to be used in
voting at the Annual Meeting of Shareholders (the "Annual Meeting"), which is
scheduled to be held on Tuesday, April 20, 1999 at 10:00 a.m. as set forth in
the foregoing notice. At the Annual Meeting, the shareholders will be asked to
elect three Directors, approve an amendment to the Company's Restated
Certificate of Incorporation, ratify the appointment of Ernst & Young LLP as
independent auditors and transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
A share cannot be voted at the Annual Meeting unless the holder thereof
is present or represented by proxy. When proxies in the accompanying form are
returned properly executed and dated, the shares represented thereby will be
voted at the Annual Meeting. If a choice is specified in the proxy, the shares
represented thereby will be voted in accordance with such specification. If no
specification is made, the proxy will be voted FOR the action proposed. Any
shareholder giving a proxy has the right to revoke it any time before it is
voted by filing with the Vice President/Corporate Secretary of the Company a
written revocation, or by filing a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person. The revocation of a proxy
will not be effective until notice thereof has been received by the Vice
President/Corporate Secretary of the Company.
The cost of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, Directors and officers of the Company may
solicit proxies in writing, by telephone, fax or personal interview. The Company
will reimburse Directors and officers for their reasonable out-of-pocket
expenses in connection with such solicitation. The Company will request brokers
and nominees who hold shares in their names to furnish this proxy material to
the persons for whom they hold shares and will reimburse such brokers and
nominees for their reasonable out-of-pocket expenses in connection therewith.
The Company has hired ChaseMellon Shareholder Services, L.L.C. to solicit
proxies for a fee not to exceed $5,000, plus expenses and other customary
charges.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the total number of shares of voting securities
outstanding on the record date shall constitute a quorum for the transaction of
business by such holders at the Annual Meeting. The three nominees for election
as Directors who receive the highest number of votes therefor at the Annual
Meeting shall be elected as Directors. The proposed amendment to the Restated
Certificate of Incorporation shall require the affirmative vote by the holders
of a majority of the outstanding shares of voting securities. Approval of all
other matters shall require the affirmative vote of a majority of the shares of
voting securities present in person or represented by proxy.
The executive offices of the Company are located at One SeaGate, Suite
1500, Toledo, Ohio 43604, and its mailing address is One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio 43603-1475. The telephone number is (419) 247-2800.
The approximate date on which this material was first sent to shareholders was
March 15, 1999. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1998, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES
AND EXHIBITS THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, MAY
BE OBTAINED WITHOUT CHARGE BY WRITING TO THE VICE PRESIDENT/CORPORATE SECRETARY,
HEALTH CARE REIT, INC. AT THE ABOVE ADDRESS.
3
<PAGE> 5
VOTING SECURITIES OUTSTANDING
The Company had outstanding 28,317,335 shares of common stock, $1.00
par value per share (the "shares of common stock") and 3,000,000 shares of
Series C cumulative convertible preferred stock, $1.00 par value per share (the
"shares of preferred stock") on March 12, 1999. These shares constitute the only
classes of outstanding voting securities of the Company. Shareholders of record
at the close of business on March 2, 1999 are entitled to notice of, and to vote
at, the Annual Meeting and any adjournments thereof. On all matters to come
before the Annual Meeting, each share of common stock is entitled to one vote
and each share of preferred stock is entitled to .97561 of one vote, the
percentage of common shares into which a preferred share is currently
convertible.
PROPOSAL 1--ELECTION OF THREE DIRECTORS
The Company is currently authorized to have ten Directors. Effective
with the retirement of Messrs. Douglas and Wolfe from the Board of Directors as
of the Annual Meeting and the anticipated election of the individuals below,
there will be nine directors, leaving one position vacant. The By-Laws divide
the Board into three classes: Class I, Class II, and Class III. The Directors
are elected for a three-year term or until the election and qualification of
their respective successors. Proxies received will be voted to elect the three
Directors named below to serve for a three-year term until their respective
successors are elected and have qualified or until their earlier resignation or
removal.
If any nominee declines or is unable to accept such nomination to serve
as a Director, events which Management does not now expect, the proxy reserves
the right to substitute another person as a Management nominee, or to reduce the
number of Management nominees, as they shall deem advisable. The Proxy solicited
hereby will not be voted to elect more than three Directors.
CLASS I
DIRECTORS TO BE ELECTED
WILLIAM C. BALLARD, JR., AGE 58. Mr. Ballard is Of Counsel to
Greenebaum, Doll & McDonald PLLC (law firm) and has held this position since
1992. From 1972 to 1992, Mr. Ballard was the Executive Vice President, Chief
Financial Officer and Director of Humana Inc. (provider of integrated health
care services). Mr. Ballard also serves as a Director of American Safety Razor
Co. (manufacturer of health and beauty aids), LG&E Energy Corp. (utility
company), Mid-America Bancorp (commercial bank), Healthcare Recoveries, Inc.
(healthcare subrogation and recovery services) and United HealthCare Corp.
(managed care company). Mr. Ballard has served as a Director of the Company
since 1996 and is a member of the Board's Investment, Nominating and Planning
Committees.
PETER J. GRUA, AGE 45. Mr. Grua is a Principal and President of HLM
Management Company, Inc. (registered investment adviser). From 1986 until 1992,
Mr. Grua was a Managing Director and Senior Analyst of Alex. Brown & Sons,
Incorporated (brokerage services). Mr. Grua was appointed as a Director of the
Company in January 1999 and is a member of the Board's Investment, Nominating
and Planning Committees.
R. SCOTT TRUMBULL, AGE 50. Mr. Trumbull is the Executive Vice President
International Operations & Corporate Development of Owens-Illinois, Inc.
(manufacturer of glass and plastic packaging products) and has held this
position since 1993. Mr. Trumbull is a member of the Board of Franklin Electric
Company (manufacturer of electric motors). Mr. Trumbull will serve as a member
of the Board's Audit, Investment and Planning Committees.
THE MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMEND THAT YOU VOTE "FOR" THE ELECTION OF THE ABOVE NOMINEES. The nominees
who receive the highest number of votes at the Annual Meeting shall be elected
as Directors.
4
<PAGE> 6
CLASS II
DIRECTORS WHOSE TERMS CONTINUE (1)
PIER C. BORRA, AGE 59. Mr. Borra is the Chairman, President and Chief
Executive Officer of CORA Health Services, Inc. (outpatient rehabilitation
services), a position he has held since January 1998. From April 1985 to
December 1997, Mr. Borra served as Chairman, President and Chief Executive
Officer of Arbor Health Care Company (operator of nursing homes). Mr. Borra also
serves as a Director of Balanced Care Corporation (developer and operator of
long-term health care facilities). Mr. Borra has served as a Director of the
Company since 1991 and is a member of the Board's Compensation, Investment and
Planning Committees.
GEORGE L. CHAPMAN, AGE 51. Mr. Chapman became Chairman, Chief Executive
Officer and President of the Company in October 1996. From 1992 to October 1996,
Mr. Chapman served in various capacities, including Executive Vice President,
General Counsel and President of the Company. Mr. Chapman has served as a
Director of the Company since 1994 and is a member of the Board's Executive,
Investment, Nominating and Planning Committees.
SHARON M. OSTER, AGE 50. Ms. Oster is Professor of Management at the
Yale School of Management, Yale University. Ms. Oster also serves as a Director
of Aristotle Corporation (holding company for a manufacturer and designer of
women's apparel) and Transpro, Inc. (designer and manufacturer of precision
transportation products). Ms. Oster has served as a Director of the Company
since 1994 and is a member of the Board's Audit, Investment and Planning
Committees.
(1) The terms of Messrs. Borra and Chapman and Ms. Oster expire in
2000.
CLASS III
DIRECTORS WHOSE TERMS CONTINUE (2)
JEFFREY H. DONAHUE, AGE 52. Mr. Donahue is Executive Vice President and
Chief Financial Officer of The Rouse Company (real estate development and
operations), a position he has held since December 1998. From September 1993 to
December 1998, Mr. Donahue served as Senior Vice President and Chief Financial
Officer of The Rouse Company. He has served as a Director of the Company since
1997 and is a member of the Board's Compensation, Investment and Planning
Committees.
BRUCE G. THOMPSON, AGE 69. Mr. Thompson served as a consultant to the
Company in 1997 and 1998. From 1970 to October 1996, Mr. Thompson was the
Chairman and Chief Executive Officer of the Company. In addition, Mr. Thompson
serves as President and a Director of First Toledo Corporation (developer of
health care facilities), a position he has held since June 1994. Mr. Thompson is
also a Director of Kingston HealthCare Company (manager of health care
facilities). Mr. Thompson has served as a Director of the Company since 1971 and
is a member of the Board's Executive, Investment and Planning Committees.
RICHARD A. UNVERFERTH, AGE 75. Mr. Unverferth is Chairman of Unverferth
Manufacturing, Inc. (agricultural equipment manufacturer). In addition, Mr.
Unverferth is Chairman of H.C.F., Inc. (operator of a nursing home chain). Mr.
Unverferth has served as a Director of the Company since 1971 and is a member of
the Board's Audit, Executive, Compensation, Investment, Nominating and Planning
Committees.
(2) The terms of Messrs. Donahue, Thompson and Unverferth expire in
2001.
5
<PAGE> 7
BOARD AND COMMITTEES
The Board met four times during the year ended December 31, 1998. The
Board has standing Audit, Executive, Compensation, Investment, Nominating and
Planning Committees. In 1997, the Board appointed a subcommittee of the
Investment Committee to meet between Investment Committee meetings. In 1998,
each incumbent Director attended at least 75% of the aggregate of the meetings
of the Board and the committees on which they served.
The Audit Committee met twice during the year ended December 31, 1998.
The Audit Committee makes recommendations to the Board of Directors as to the
engagement or discharge of the independent auditors, reviews the plan and
results of the auditing engagement with the independent auditors; reviews the
adequacy of the Company's system of internal accounting controls; and directs
and supervises investigations into matters within the scope of its duties.
The function of the Executive Committee is to exercise all the powers
of the Board (except any powers specifically reserved to the Board) during
intervals between meetings of the Board.
The Compensation Committee, which met two times during 1998, is
generally responsible for determining the nature and amount of compensation for
Executive Officers.
The Investment Committee and its subcommittee met four and three times
during the year ended December 31, 1998, respectively.
The function of the Nominating Committee, which met two times during
1998, is to select and recommend to the full Board nominees for election as
Directors. The Committee may, in its discretion, consider nominees proposed by
shareholders of the Company for the 2000 Annual Meeting of Shareholders,
provided such recommendations are in writing, contain a description of the
nominee's qualifications and his consent to serve, and are received by the
Company by November ____, 1999.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth, as of February 1, 1999, unless
otherwise specified, certain information with respect to the beneficial
ownership of the Company's shares of common stock by each person who is a
Director of the Company, a nominee for the Board, each Executive Officer, and by
the Directors and Executive Officers of the Company as a group. Unless noted
below, each person has sole voting and investment power regarding the Company's
shares. Also, unless noted below, the beneficial ownership of each person
represents less than 1% of the outstanding common shares of the Company. No
member of the group below owns any shares of the Class C cumulative convertible
preferred stock. The Company's Management is not aware of any person who, as of
December 31, 1998, was the beneficial owner of more than 5% of the outstanding
shares of the Company.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------------------------------------------------
OPTIONS EXERCISABLE
NAME OF BENEFICIAL OWNER SHARES HELD OF RECORD (1) WITHIN 60 DAYS TOTAL SHARES BENEFICIALLY OWNED
- ------------------------ ------------------------- -------------- -------------------------------
<S> <C> <C> <C>
William C. Ballard, Jr. 11,800 11,667 23,467
Pier C. Borra 50,070(2) 11,667 61,737
Raymond W. Braun 46,196 111,000 157,196
George L. Chapman 91,389 271,654 363,043(3)
Jeffrey H. Donahue 2,250 11,667 13,917
Bruce Douglas 16,638 11,667 28,305
Peter J. Grua 1,000 -0- 1,000
Erin C. Ibele 22,239 54,175 76,414
Edward F. Lange, Jr. 41,775 76,000 117,775
</TABLE>
6
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
Sharon M. Oster 2,000 11,667 13,667
Bruce G. Thompson 209,149 11,667 220,816
R. Scott Trumbull -0- -0- -0-
Richard A. Unverferth 5,066(2) 10,000 15,066
Frederic D. Wolfe 275,279 11,667 286,946(3)(4)
All Directors and Executive 774,851 604,498 1,379,349(5)
Officers as a group (14 persons)
</TABLE>
(1) Includes all restricted shares granted under the Company's 1995 Stock
Incentive Plan or Stock Plan for Non-Employee Directors beneficially
owned by such Directors and Executive Officers as of February 1, 1999.
(2) Mr. Borra disclaims beneficial ownership of 2,570 shares held by his
spouse as trustee for their son and Mr. Unverferth disclaims beneficial
ownership of 3,816 shares held in his sons' names.
(3) As of February 1, 1999, Messrs. Chapman and Wolfe beneficially owned
1.29% and 1.02% of the outstanding shares of the Company, respectively.
(4) Includes an aggregate of 115,610 shares owned by Mr. Wolfe's spouse and
a family foundation over which Mr. Wolfe has shared voting and
investment powers.
(5) Total beneficial ownership represents approximately 4.88% of the
outstanding shares of the Company.
EXECUTIVE OFFICERS OF THE COMPANY
The following information is furnished as to the Executive Officers of
the Company:
GEORGE L. CHAPMAN, AGE 51. Since October 1996, Mr. Chapman has served
as Chairman, Chief Executive Officer and President of the Company. As described
above, since 1992 Mr. Chapman has served in various executive capacities with
the Company.
RAYMOND W. BRAUN, AGE 41. Mr. Braun has served as Vice President and
Chief Operating Officer of the Company since January 1997 and from January 1993
through January 1997, Mr. Braun served in various roles, including Assistant
Vice President, Vice President and Assistant General Counsel of the Company.
EDWARD F. LANGE, JR., AGE 39. Mr. Lange has served as Vice President,
Chief Financial Officer and Treasurer of the Company since March 1996. Prior to
that date, Mr. Lange was Senior Vice President of Finance of The CarePlex Group,
Inc., a long-term care operating company, holding that position from January
1995 through March 1996. From 1994 through 1995, Mr. Lange was Vice
President--Finance of Meditrust, a real estate investment trust. He was Senior
Vice President--Finance of The MediPlex Group, Inc., also a long-term care
operating company, from 1993 through 1994.
ERIN C. IBELE, AGE 37. Ms. Ibele has served as Vice President and
Corporate Secretary of the Company since January 1993. Since 1986, Ms. Ibele has
served in various capacities with the Company.
7
<PAGE> 9
REMUNERATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents the total compensation awarded to, earned
by, or paid to, the Chief Executive Officer of the Company during 1996, 1997 and
1998, and the total compensation awarded, earned, or paid during 1996, 1997 and
1998 to the Company's most highly compensated Executive Officers who were
serving at the end of 1998, and whose total annual salary and bonus exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
---------
COMPENSATION
------------
Restricted
----------
Stock Securities All Other
----- ---------- ---------
Name and Annual Compensation Awards Underlying Compensation
-------- ------------------- ------ ---------- ------------
Principal Position Year Salary($) Bonus($) ($)(1) Options (#) ($)(2)
- --------------------------------- --------- ----------------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
George L. Chapman, 1998 $400,000 $467,288 $587,500 125,000 $13,725
Chairman, Chief Executive 1997 350,000 335,000 1,439,953 140,000 19,839
Officer and President 1996 275,000 200,000 -0- 180,000 16,976
Raymond W. Braun, 1998 200,000 198,210 293,750 62,500 13,725
Vice President, 1997 175,000 135,000 696,218 70,000 19,839
Chief Operating Officer 1996 146,538 85,000 -0- 75,000 16,976
Edward F. Lange, Jr., 1998 200,000 198,210 293,750 62,500 13,725
Vice President, Chief 1997 170,000 125,000 680,731 67,500 19,839
Financial Officer and Treasurer 1996(3) 121,154 75,000 -0- 100,000 -0-
Erin C. Ibele, 1998 92,500 48,750 117,500 25,000 11,357
Vice President, 1997 80,000 35,000 313,649 33,875 13,477
Corporate Secretary 1996 67,000 26,800 -0- 35,000 9,277
</TABLE>
(1) The restricted stock awards vest ratably over periods ranging from five
to ten years. The restricted stock awards set forth above are valued at
the time of grant. The table below shows the aggregate amounts of
restricted stock held at December 31, 1998, and the value of such
restricted stock (calculated by multiplying the amount of restricted
stock by the closing market price of $25.875 on the last trading day of
1998). Dividends are paid on the restricted shares at the same rate as
on all other shares of common stock of the Company. Such dividends are
not included in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF RESTRICTED STOCK
RESTRICTED STOCK AT VALUE OF RESTRICTED STOCK GRANTS WITH
DECEMBER 31, 1998 AT DECEMBER 31, 1998 RESPECT TO 1998
----------------- -------------------- ---------------
<S> <C> <C> <C>
George L. Chapman 75,067 $1,942,359 25,000
Raymond W. Braun 36,873 954,089 12,500
Edward F. Lange, Jr. 36,192 936,468 12,500
Erin C. Ibele 16,150 417,881 5,000
</TABLE>
(2) Includes contributions that were or will be made in connection with the
Company's Retirement Plan and Trust.
(3) Mr. Lange was not appointed as an Executive Officer of the Company
until March 1996.
8
<PAGE> 10
EMPLOYMENT AGREEMENTS
Pursuant to an Employment and Consulting Agreement entered into in
1995, Mr. Thompson served as the Company's Chief Executive Officer until October
14, 1996, and thereafter served as an employee of the Company through December
31, 1996. Mr. Thompson served as a consultant to the Company, performing such
services as was requested of him by the Board of Directors or Management,
through December 31, 1997. Mr. Thompson provided additional consulting services
to the Company in 1998 and was paid $12,000 for his services.
The Company and Mr. Chapman have entered into a three-year employment
agreement effective January 1, 1997, subject to optional successive three-year
renewal terms. Mr. Chapman will serve as the Company's Chairman, Chief Executive
Officer and President and receive a minimum annual base salary of $350,000, as
well as discretionary annual bonuses and stated fringe benefits. Mr. Chapman's
annual base salary was increased to $420,000, effective January 1, 1999. If Mr.
Chapman is terminated without cause, or resigns during the twelve months
following a "change in corporate control" (as defined in the employment
agreement), he would receive severance pay for the remaining term of the
agreement or for twenty-four months, whichever is greater. These severance
benefits would be made in a series of monthly payments, in an amount equal to
one-twelfth of the sum of his annual base salary and the greater of the average
of his annual bonuses for the two fiscal years immediately preceding the
termination or change in corporate control or a minimum bonus equal to fifty
percent of his annual base salary. At Mr. Chapman's election, the Company would
instead make an immediate lump sum payment equal to the present value of such
monthly payments, calculated using a discount rate equal to the interest rate on
90-day treasury bills reported at the date the election is delivered. Mr.
Chapman's stock option and restricted stock awards under the 1995 Stock
Incentive Plan would become vested and immediately exercisable in the event of a
change in corporate control, or upon his death, disability or termination
without cause. In addition, if it is determined that any payment by the Company
to Mr. Chapman would be a golden parachute subject to excise tax, the amount of
the payments to him would be increased to cover such excise tax.
The Company has entered into similar employment agreements with the
Company's other Executive Officers, which provide for two-year terms, minimum
annual salaries, stated benefits, and severance payments in the event of a
termination without cause or a change in corporate control.
STOCK INCENTIVE PLAN
The Company's 1995 Stock Incentive Plan (the "Stock Incentive Plan")
authorizes the Compensation Committee of the Board to grant eligible officers
and key employees of the Company awards consisting of options to purchase shares
of common stock, stock appreciation rights, dividend equivalent rights, shares
of restricted stock or performance shares. The Compensation Committee has the
discretion to select the particular officers and key employees who will receive
awards. At February 1, 1999, twelve officers and key employees of the Company
were eligible to participate.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED(#) IN FISCAL PRICE EXPIRATION GRANT DATE
NAME (1),(2) YEAR ($/SH) DATE VALUE ($)(3)
---- -------- ---- ------ ---- -------------
<S> <C> <C> <C> <C> <C>
George L. Chapman 125,000 35% $23.50 11/19/08 $195,000
Raymond W. Braun 62,500 17% 23.50 11/19/08 97,500
Edward F. Lange, Jr. 62,500 17% 23.50 11/19/08 97,500
Erin C. Ibele 25,000 7% 23.50 11/19/08 39,000
</TABLE>
(1) All of the options granted vest between the years 1999 and 2003.
9
<PAGE> 11
(2) The terms of the options granted permit cashless exercises and payment
of the option exercise price by delivery of previously owned shares.
(3) Calculated using the Black-Scholes option valuation methodology. In
using such methodology, the following variables were used: risk-free
interest rate of 5.2%, dividend yields of 9.0%, expected lives of seven
years, and expected volatility of .225%. The actual value, if any, that
an Executive Officer may realize will depend upon the excess of the
closing market price over the exercise price on the date the option is
exercised so that there is no assurance that the value realized by an
Executive Officer will be at or near the value estimated by the
Black-Scholes model.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
UNDERLYING VALUE OF UNEXERCISED
---------- --------------------
SHARES VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
------ ----- ------------------- --------------------
ACQUIRED ON REALIZED AT FISCAL YEAR END AT FISCAL YEAR END($)(2)
----------- -------- ------------------ ------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
---- ----------- ------ -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
George L. Chapman 22,500 $207,571 215,135 360,633 $1,294,631 $1,239,499
Raymond W. Braun 26,000 216,594 84,832 161,668 445,808 530,318
Edward F. Lange, Jr. 5,000 40,516 48,500 176,500 236,750 602,938
Erin C. Ibele 13,000 106,130 43,175 70,500 171,325 232,575
</TABLE>
(1) Value at exercise is the difference between the closing market price on
the date of exercise less the exercise price per share, multiplied by
the number of shares acquired on exercise.
(2) Calculated based on the closing market price on the last trading day of
1998 multiplied by the number of applicable shares covered by
in-the-money options, less the total exercise price for such shares.
COMPENSATION OF DIRECTORS
In 1998, each Director received a fee of $18,000 for his or her
services as such, which fee increased to $20,000 in 1999. In addition, each
Director received a fee of $1,500 for each Board meeting attended. For 1998 and
1999, members of the Audit and Compensation Committees received or will receive
$1,000 for each meeting attended, and for the same time period, members of the
Investment and Planning Committees will receive $1,200 and $1,500, respectively,
for each such committee meeting attended.
Director's fees are not paid to Mr. Chapman. The fees paid to all other
Directors totaled $237,200 in 1998.
During 1997, the Company adopted the Stock Plan for Non-Employee
Directors. Pursuant to this Plan, in 1998 each Director not employed by the
Company was granted stock options to purchase 5,000 shares and 250 shares of
restricted stock. In future years, each eligible Director will receive
additional stock options to purchase 5,000 shares and annual grants of 1,000
shares of restricted stock. All of the options have an option exercise price
equal to the fair value of the shares at the time the options were granted. The
options granted to a Director under this Plan may not be exercised more than ten
years after the date the options are granted. Each option award granted in
January 1998 became exercisable on January 19, 1999. Future option awards
generally will become exercisable in three equal installments on the first three
anniversaries of the date of grant, so that one-third of the shares subject to
the options will first become available for purchase by the Director on each of
these anniversaries. The other terms of these awards are set forth in detail in
the Stock Plan for Non-Employee Directors.
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<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board is generally responsible for
determining the nature and amount of compensation for Executive Officers. The
Committee currently consists of three non-employee directors, Pier C. Borra,
Jeffrey H. Donahue and Richard A. Unverferth. During the year ended December 31,
1998, the Compensation Committee of the Board met two times. The Compensation
Committee utilizes the services of FPL Advisory Group, a nationally recognized
executive compensation consulting firm, to assist the Compensation Committee in
reviewing and developing the Company's executive compensation criteria. Based
largely on the information provided by this consulting firm, which included a
detailed survey of the compensation practices of other REITs in the health care
industry, the Compensation Committee believes that the Company's executive
compensation program is within the market range for the Company's peer group of
companies, and is well-designed to support the Company's incentive-based
compensation philosophy.
The Compensation Committee believes that compensation for the Chief
Executive Officer and other Executive Officers should be generally competitive
with other healthcare REITs, in order to retain and attract top management. The
three key components of the Company's Executive Officer compensation system are
annual salaries, annual incentive bonuses and long-term incentives. In
determining compensation for each of these three components, the Compensation
Committee reviewed and considered data compiled by the Company's compensation
consultants on salary, bonus and incentive compensation paid to executive
officers by a number of peer groups with which the Company was compared.
The Executive Officers' base salaries are established in their
employment agreements and the Compensation Committee may adjust those base
salaries from time to time, as it deems appropriate. For 1998, following
discussions with the Chief Executive Officer and the Company's compensation
consultant, the Compensation Committee approved salary increases for each
Executive Officer, making compensation consistent with the other peer-group
REITs for similar executive officer positions.
Annual bonus compensation payments are based on attaining certain
financial and non-financial business objectives of the Company on an annual
basis. The 1998 bonuses for the Executive Officers were in part formula driven,
based on the 1998 program of performance goals approved by the Compensation
Committee. For 1998, these goals related in part to growth in the Company's
funds from operations as well as the Committee's subjective appraisal of each
officer's satisfaction of certain individual non-financial goals.
Long-term incentives are primarily based on more closely aligning
incentives with increasing shareholder value, individual performance and an
individual's potential contributions to the Company's profitability and
long-term growth. The Company's 1995 Stock Incentive Plan is the Company's
primary vehicle for providing long-term incentive compensation, and is intended
to enable the Company to continue to provide its Executive Officers and other
key employees with competitive equity-based compensation in order to create
appropriate long-term incentives. Under the terms of the Company's 1995 Stock
Incentive Plan, the Compensation Committee has authority to approve stock option
awards, restricted stock or other equity-based incentive awards to Executive
Officers and key employees and to determine the terms of these awards.
In November 1998, the Compensation Committee granted Executive Officers
of the Company stock options to purchase an aggregate of 275,000 shares, as well
as an aggregate of 55,000 shares of restricted stock. The Compensation
Committee's decision to grant these stock options and restricted stock awards
was based on, among other things, the Company's success during the fiscal year
ended December 31, 1998, the Compensation Committee's subjective evaluation of
the individuals' past and expected future contributions to the Company's
achievement of its long-term performance goals, and the Compensation Committee's
goal of increased stock retention by Executive Officers.
At its November 1997 meeting, the Compensation Committee increased Mr.
Chapman's annual base salary for 1998 to $400,000, based upon the recommendation
of the Committee's consultant, in light of the base salaries paid to CEOs of
similarly situated REITs, and in recognition of the Company's performance in
1997 under his leadership. In addition to his base salary, Mr. Chapman was
eligible in 1998 to receive an annual bonus based on a percentage of his annual
base salary, with the percentage earned to depend on achievement of certain
financial and non-financial goals established by the Committee. For 1998, these
goals related in part to growth in the Company's funds from operations as well
as the Committee's subjective appraisal of Mr. Chapman's
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<PAGE> 13
satisfaction of certain individual non-financial goals. Based upon Mr. Chapman's
achievement of the targeted goals and his overall performance in 1998, he was
awarded an annual bonus of $467,288. The Compensation Committee believes that
the amount of Mr. Chapman's compensation is consistent with general compensation
levels within the healthcare REIT industry and appropriate in view of the
Company's substantial accomplishments in 1998.
The Company has considered the anticipated tax treatment to the Company
regarding the compensation and benefits paid to the Executive Officers of the
Company in light of Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Compensation Committee will strive to provide Executive Officers
with attractive, well-designed compensation packages which will generally
preserve the deductibility of such payments for the Company. However, certain
types of compensation payments and their deductibility depend upon the timing of
an Executive Officer's vesting or exercise of previously granted rights.
Moreover, interpretations of any changes in the tax laws and other factors
beyond the Company's control may affect the deductibility of certain
compensation payments. The Compensation Committee will consider various
alternatives to preserve the deductibility of compensation payments to executive
officers and benefits to the extent reasonably practical and to the extent
consistent with its other compensation objectives, but reserves the right to
make incentive-based awards not exempt from these limits where such awards are
appropriate and will not have material impact on shareholder value.
The Compensation Committee is committed to maintaining a compensation
program that appropriately aligns the Company's executive compensation with
corporate performance and the interests of its shareholders. The Compensation
Committee periodically reviews its program in order to make any further changes
it considers necessary to achieve such objectives.
Compensation Committee of the Board of Directors
Health Care REIT, Inc.
Pier C. Borra
Jeffrey H. Donahue
Richard A. Unverferth
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change
and the cumulative total shareholder return on the Company's shares against the
cumulative total return of the S & P Composite-500 Stock Index and the NAREIT
Hybrid Index. Nine companies comprise the NAREIT Hybrid Index. The Index
consists of REITs identified by NAREIT as hybrid (those REITs which have both
mortgage and equity investments). Upon written request to the Vice
President/Corporate Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio, 43603-1475, the Company will provide shareholders
with the names of the component issuers. The data are based on the last closing
prices as of December 31 for each of the five years. 1993 equals $100 and
dividends are assumed to be reinvested.
<TABLE>
<CAPTION>
BOWNE TO INSERT GRAPH
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
S & P 500 100.00 101.31 139.23 171.19 228.32 293.57
Company 100.00 95.33 90.35 134.67 167.99 168.84
Hybrid 100.00 104.00 127.91 165.46 183.25 120.90
</TABLE>
Except to the extent the Company specifically incorporates this
information by reference, the foregoing Report of the Compensation Committee and
Shareholder Return Performance Presentation shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
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<PAGE> 14
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934. This information shall not otherwise be deemed
filed under such Acts.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's Directors and Executive Officers, and persons who own beneficially
more than ten percent (10%) of the shares of common stock of the Company, to
file reports of ownership and changes of ownership with the Securities and
Exchange Commission and The New York Stock Exchange. Copies of all filed reports
are required to be furnished to the Company pursuant to Section 16(a). Based
solely on the reports received by the Company and on written representations
from reporting persons, the Company believes that the Directors and Executive
Officers complied with all applicable filing requirements during the fiscal year
ended December 31, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PARTNERSHIP FINANCINGS
The Company has provided direct loans and credit enhancements to five
partnerships in connection with four assisted living and retirement facilities
and two nursing homes. First Toledo Corporation, which is wholly owned by
Messrs. Thompson and Wolfe, serves or served as a general partner in each
partnership. The partnership structures facilitated industrial development bond
financing in five of the projects. Credit enhancements were provided in the form
of the Company's agreement to purchase the facilities or the bonds in the event
of default by the partnerships. The Company has contingent obligations under the
agreements to purchase which currently total $9,365,000. For the years ended
1998, 1997 and 1996 the Company received $253,000, $317,000, and $383,000,
respectively, in connection with its contingent obligations pursuant to the
agreements to purchase. An affiliate of Messrs. Thompson and Wolfe, Kingston
HealthCare Company ("Kingston") operates four of the facilities.
OTHER RELATIONSHIPS
For the years ended 1998, 1997 and 1996, the Company recorded lease and
interest income from Kingston in the amounts of $83,000, $204,000, and $204,000,
respectively.
GENERAL
All of the related party matters were approved by a majority of
Directors unaffiliated with the transactions. For the years ended December 31,
1998, 1997 and 1996, revenues from related parties totaled $1,236,000, $980,000,
and $3,089,000, or 1.26%, 1.34%, and 5.68%, respectively, of the revenues of the
Company.
PROPOSAL 2--AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors proposes that the Company's Restated
Certificate of Incorporation be amended to increase the number of authorized
shares of common stock, $1.00 par value per share ("Common Stock"), from
40,000,000 shares to 75,000,000 shares. Currently, the Restated Certificate of
Incorporation authorizes 40,000,000 shares of Common Stock. As of March 12, 1999
the Company had 28,317,335 Common Stock shares outstanding, leaving 11,682,665
authorized shares available for further issuance, of which 476,056 shares have
been reserved for issuance under the Company's Dividend Reinvestment and Stock
Purchase Plan, 2,238,459 shares for issuance under the Company's Stock
Incentive Plans and 2,926,830 shares for issuance upon conversion of the shares
of preferred stock. The Board of Directors proposes that the number of
authorized shares of Common Stock be increased from 40,000,000 to 75,000,000.
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<PAGE> 15
The Board of Directors believes that the availability of additional
shares will enhance the Company's flexibility in connection with possible future
actions, such as equity offerings, stock dividends, acquisitions or mergers, and
other corporate purposes. The Board of Directors will determine whether, when,
and on what terms the issuance of shares may be warranted in connection with any
of the foregoing purposes.
The availability for issuance of additional shares of Common Stock
could enable the Board of Directors to render more difficult or discourage an
attempt to obtain control of the Company. For example, by increasing the number
of outstanding shares, the interest of the party attempting to gain control of
the Company could be diluted. Also, the additional shares could be used to
render more difficult a merger or similar transaction. It is noted, however,
that in order to protect the Company's status as a real estate investment trust,
the By-Laws and the Certificate of Incorporation limit ownership of the
Company's voting securities by any person or entity to not more than 9.8% of the
Company's voting securities outstanding. Consequently, the approval of the
proposed amendment should have little incremental effect in discouraging
unsolicited takeover attempts.
If the proposed amendment is approved, all or any of the authorized
shares of Common Stock may be issued without further action by the stockholders
and without first offering such shares to the stockholders for subscription. The
issuance of shares otherwise than on a pro-rata basis to all current
stockholders would reduce current stockholders' proportionate interests.
However, in any such event, stockholders wishing to maintain their interests may
be able to do so through normal market purchases.
MANAGEMENT AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU
VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENT. The proposed amendment is set
forth in Exhibit A to this Proxy Statement. The affirmative vote of a majority
of the outstanding shares of voting securities of the Company is required for
approval of the proposed amendment. If the proposed amendment is adopted by the
shareholders, it will become effective upon filing and recording a Certificate
of Amendment as required by the Delaware General Corporation Law.
PROPOSAL 3--RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as independent auditors of the
Company for the year ended December 31, 1998 and has been selected by the
Company to serve as its independent auditors for the year ending December 31,
1999. Ernst & Young LLP has served as independent auditors of the Company since
the Company's inception in 1970. Although the submission of this matter for
approval by shareholders is not legally required, the Board believes that such
submission follows sound business practice and is in the best interests of the
shareholders. If this appointment is not ratified by the holders of a majority
of the shares of voting securities present in person or by proxy at the Annual
Meeting, the Directors will consider the selection of another accounting firm.
If such a selection were made, it may not become effective until 2000 because of
the difficulty and expense of making a substitution. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting and will be available
to respond to appropriate questions. Those representatives will have the
opportunity to make a statement if they desire to do so.
Audit services of Ernst & Young LLP for the year ended December 31,
1998 included the audit of the financial statements of the Company included in
the Annual Report to Shareholders for 1998, services related to filings with the
Securities and Exchange Commission, and consultation and assistance on
accounting and related matters.
The services furnished by Ernst & Young LLP have been at customary
rates and terms. There are no existing direct or indirect understandings or
agreements that place a limit on future years' audit fees.
THE MANAGEMENT AND BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMEND THAT YOU VOTE "FOR" THE RATIFICATION OF ERNST & YOUNG LLP. The
affirmative vote of the holders of a majority of the shares of voting securities
present in person or by proxy at the Annual Meeting will be required for such
ratification.
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<PAGE> 16
VOTING PROCEDURES
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 for
whom 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 matters).
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<PAGE> 17
OTHER MATTERS
Management is not aware of any matters to be presented for action at
the Annual Meeting other than the matters set forth above. If any other matters
do properly come before the meeting or any adjournment thereof, it is intended
that the person named in the proxy will vote in accordance with his judgment on
such matters.
SHAREHOLDER PROPOSALS FOR PRESENTATION AT THE 2000 ANNUAL MEETING
The Board of Directors requests that any shareholder proposals intended
for inclusion in the Company's proxy materials for the 2000 Annual Meeting be
submitted to Erin C. Ibele, Vice President and Corporate Secretary of the
Company, in writing no later than November ____, 1999. Unless the Company has
been given written notice by February ___, 2000 of a shareholder proposal to be
presented at the 2000 Annual Meeting other than by means of inclusion in the
Company's proxy materials for the Meeting, persons named in the proxies
solicited by the Board of Directors for the Meeting may use their discretionary
voting authority to vote against the proposal.
BY THE ORDER OF THE BOARD OF DIRECTORS
Erin C. Ibele
Vice President and Corporate Secretary
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<PAGE> 18
EXHIBIT A
PROPOSAL TO AMEND
THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
-------------------------------------------
Section 4 of the Restated Certificate of Incorporation shall be amended
in its entirety to read as follows:
4. The number of shares that the Corporation is authorized to
issue and have outstanding is 85,000,000, consisting of
75,000,000 shares of common stock with par value of $1.00 per
share (hereinafter referred to as the "Common Stock"), and
10,000,000 shares of preferred stock with par value of $1.00
per share (hereinafter referred to as the "Preferred Stock"),
which Preferred Stock shall have the terms and conditions as
specified in a resolution or resolutions to be adopted by the
Board of Directors of the Corporation.
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<PAGE> 19
PRELIMINARY PROXY: FOR THE INFORMATION OF THE
SECURITIES AND EXCHANGE COMMISSION
PROXY
HEALTH CARE REIT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints G. L. Chapman with full power of
substitution, to vote all shares of voting securities of Health Care REIT, Inc.
(the "Company") that the undersigned is entitled to vote at the Annual Meeting
of the Shareholders of the Company to be held on Tuesday, April 20, 1999 or any
adjournments thereof.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE
TAKING OF A VOTE ON THE MATTERS HEREIN.
Returned proxy cards will be voted: (1) as specified on the matters listed
below; (2) in accordance with the Directors' recommendations where a choice is
not specified; and (3) in accordance with the judgment of the proxies on any
other matters that may properly come before the meeting.
THE MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMEND VOTES "FOR" ALL OF THE FOLLOWING.
1. Election of three Directors for a term of three years: William C.
Ballard, Jr., Peter J. Grua and R. Scott Trumbull
[ ] FOR ALL NOMINEES LISTED (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees
To withhold authority to vote for any individual nominee, please write the
person's name in the following space:_____________________________________
2. The approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
40,000,000 to 75,000,000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the appointment of Ernst & Young LLP as independent
auditors for the fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 20
4. With discretionary authority on any other business that may properly
come before the meeting or any adjournment thereof.
Dated:_______________,1999
-------------------------------
Signature
-------------------------------
Signature if Held Jointly
PLEASE MARK, SIGN Please sign exactly as your name appears
DATE AND RETURN THE herein. Joint owners should each sign. When
PROXY CARD PROMPTLY signing as attorney, executor, administrator,
USING THE ENCLOSED trustee or guardian, please give full title as
ENVELOPE. PLEASE such. Corporate or partnership proxies should
MARK YOUR CHOICE be signed by an authorized person with the
LIKE THIS X IN BLUE OR person's title indicated.
BLACK INK.