<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
HEALTHCARE REALTY TRUST INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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
3310 WEST END AVENUE
NASHVILLE, TENNESSEE 37203
April 16, 1999
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 1999 annual meeting of shareholders
of Healthcare Realty Trust Incorporated, to be held on Tuesday, May 11, 1999, at
10:00 a.m. (local time) at the Company's executive offices at 3310 West End
Avenue, Suite 700, Nashville, Tennessee.
Please read the enclosed 1998 Annual Report to Shareholders and Proxy
Statement for the 1999 annual meeting. Whether or not you plan to attend the
meeting, please sign, date and return the enclosed proxy, which is being
solicited by the Board of Directors, as soon as possible so that your vote will
be recorded. If you attend the meeting, you may withdraw your proxy and vote
your shares personally.
Sincerely,
/s/ DAVID R. EMERY
David R. Emery
Chairman and Chief Executive Officer
IMPORTANT
COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY
AND RETURN IT PROMPTLY.
<PAGE> 3
3310 WEST END AVENUE
NASHVILLE, TENNESSEE 37203
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 1999
TO OUR SHAREHOLDERS:
The annual meeting of shareholders of Healthcare Realty Trust Incorporated
(the "Company") will be held on Tuesday, May 11, 1999, at 10:00 a.m. (local
time) at 3310 West End Avenue, Suite 700, Nashville, Tennessee, for the
following purposes:
(1) To elect three nominees as Class 3 directors;
(2) To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal 1999; and
(3) To transact any other business that properly comes before the
meeting or any adjournment thereof.
Holders of the Company's Common Stock and 8 7/8% Series A Voting Cumulative
Preferred Stock of record at the close of business on March 11, 1999 are
entitled to vote at the meeting or at any adjournment of the meeting.
Dated: April 16, 1999
By order of the Board of Directors
/s/ David R. Emery
David R. Emery
Chairman and Chief Executive Officer
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, TO ASSURE THE
PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY AS
SOON AS POSSIBLE. IF YOU ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES
PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
<PAGE> 4
HEALTHCARE REALTY TRUST
3310 WEST END AVENUE
NASHVILLE, TENNESSEE 37203
PROXY STATEMENT
This Proxy Statement contains information related to the annual meeting of
shareholders to be held at 3310 West End Avenue, Suite 700, Nashville,
Tennessee, on Tuesday, May 11, 1999, at 10:00 a.m. (local time) for the purposes
set forth in the accompanying notice, and at any adjournment thereof. This Proxy
Statement and the accompanying proxy are first being mailed or given to
shareholders on or about April 16, 1999.
If the enclosed proxy is properly executed, returned and not revoked, it
will be voted in accordance with the instructions, if any, given by the
shareholder, and if no instructions are given, it will be voted (a) FOR the
election as directors of the nominees described in this Proxy Statement, (b) FOR
ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors, and (c) FOR the recommendation of the Board of Directors
on any other proposal that may properly come before the meeting. The persons
named as proxies in the enclosed proxy were selected by the Company's Board of
Directors.
Shareholders who sign proxies have the right to revoke them at any time
before they are voted by written request to the Company, and the giving of the
proxy will not affect the right of a shareholder to attend the meeting and vote
in person.
The close of business on March 11, 1999 has been fixed as the record date
for the determination of shareholders entitled to vote at the meeting. As of the
close of business on such date, the Company had 150,000,000 authorized shares of
common stock, $.01 par value (the "Common Stock"), of which 39,806,032 shares
were outstanding and entitled to vote and 50,000,000 authorized shares of
preferred stock, of which 3,000,000 shares designated as the 8 7/8% Series A
Voting Cumulative Preferred Stock (the "Preferred Stock") were outstanding and
entitled to vote. The Common Stock and the Preferred Stock are the Company's
only outstanding classes of voting stock.
Each share of Common Stock and Preferred Stock (together, the "Voting
Stock") will have one vote, voting as a single class, on each matter to be voted
upon at the meeting.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes having three-year
terms that expire in successive years. The current three-year term of the Class
3 directors expires at the 1999 annual meeting. The Board of Directors proposes
that the nominees described below, all of whom are currently serving as Class 3
directors, be re-elected to Class 3 to serve until the annual meeting of
shareholders in 2002 or until their successors have been elected. Each nominee
has consented to be a candidate and to serve, if elected.
According to Maryland law, directors are elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present. The Company's Articles of Incorporation do not provide for
cumulative voting and, accordingly, each shareholder may cast one vote per share
of Voting Stock for each nominee.
Unless a proxy shall specify otherwise, the persons named in the proxy
shall vote the shares covered thereby for the nominees designated by the Board
of Directors listed below. Should any nominee become unavailable for election,
shares covered by a proxy will be voted for a substitute nominee selected by the
current Board of Directors.
<PAGE> 5
CLASS 3 NOMINEES
The nominees for election as Class 3 directors are:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ---- --- -------------------- --------
<S> <C> <C> <C>
CLASS 3 -- 2002
David R. Emery......................... 54 Chairman of the Board of Directors, 1993
President and Chief Executive Officer
of Healthcare Realty Trust
Incorporated
Thompson S. Dent....................... 48 President, Chief Operating Officer and 1993
a Director, PhyCor, Inc. (physician
management company), Nashville,
Tennessee
Batey M. Gresham, Jr................... 64 Founder, Gresham, Smith & Partners 1993
(architects), Nashville, Tennessee
</TABLE>
CONTINUING DIRECTORS
The persons named below will continue to serve as directors until the
annual meeting of shareholders in the year indicated and until their successors
are elected and take office. Shareholders are not voting on the election of the
Class 1 and Class 2 directors.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ---- --- -------------------- --------
<S> <C> <C> <C>
CLASS 1 -- 2000
Charles Raymond Fernandez, M.D......... 55 Medical Director, Nalle Clinic, 1993
Charlotte, North Carolina
Errol L. Biggs, Ph.D................... 58 Director-Center for Health 1993
Administration and Professor
and Director-Programs in Health
Administration, University of
Colorado; President, Biggs &
Associates (consulting company),
Castle Rock, Colorado
CLASS 2 -- 2001
Marliese E. Mooney..................... 69 Independent healthcare consultant, Fort 1993
Myers, Florida
Edwin B. Morris III.................... 59 Managing Director, Morris & Morse 1993
Company, Inc. (real estate financial
consulting firm), Boston,
Massachusetts
John Knox Singleton.................... 50 President and Chief Executive Officer, 1993
Inova Health Systems, Falls Church,
Virginia
</TABLE>
Each of the nominees and continuing directors has had the principal
occupation indicated for more than five years.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1998, the Board of Directors of the Company held seven regularly
scheduled and special meetings and acted six times by unanimous written consent.
During 1998, each director attended at least 75% of the meetings of the Board
and committees on which such director served. The Board of Directors has
established the standing committees described below.
2
<PAGE> 6
The Executive Committee acts on behalf of the Board of Directors on all
matters concerning the management and conduct of the business and affairs of the
Company except those matters that cannot by law be delegated by the Board. The
current members of the Executive Committee are Messrs. Emery, Dent and
Singleton. The Executive Committee did not meet during 1998.
The Audit Committee selects and engages on behalf of the Company, subject
to the consent of the shareholders, and fixes the compensation of, a firm of
certified public accountants whose duty it is to audit the books and accounts of
the Company and its subsidiaries for the fiscal year in which it is appointed,
and which also reports to the Audit Committee. The Audit Committee confers with
the auditors and determines the scope of the auditing of the books and accounts
of the Company and its subsidiaries. The Audit Committee is also responsible for
determining that the business practices and conduct of employees and other
representatives of the Company and its subsidiaries comply with the Company's
policies and procedures. None of the members of the Audit Committee may be an
officer or employee of the Company. The Audit Committee is currently composed of
Ms. Mooney and Messrs. Biggs and Fernandez. The Audit Committee held two
meetings during 1998.
The Compensation Committee establishes a general compensation policy for
the Company and has the responsibility for the approval of increases in
directors' fees and salaries paid to officers and senior employees earning in
excess of an annual base salary of $200,000. The Compensation Committee also
administers all of the Company's employee benefit plans, including any stock
option and restricted stock plans, bonus plans, retirement plans, stock purchase
plans and medical, dental and insurance plans. In connection therewith, the
Compensation Committee determines, subject to the provisions of the Company's
plans, the directors, officers and employees of the Company 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 is presently comprised of Messrs. Dent, Gresham and
Morris. The Compensation Committee held two meetings during 1998.
The Company's Board of Directors has no standing nominating committee.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no additional
compensation for their services as directors. Each non-employee director
receives an annual retainer of $12,000; a meeting fee of $1,000 for each Board
or committee meeting attended (but only one fee in the event that more than one
such meeting is held on a single day); and reimbursement for necessary travel
expenses incurred in attending such meetings.
The Company's retirement plan for non-employee directors provides that when
an eligible director reaches age 65 and has completed five years of service with
the Company, such director shall receive an annual amount equal to the
director's compensation immediately preceding retirement from the Board of
Directors for a period of not more than 15 years. A director who dies will
receive benefits as if the director retired from the Board of Directors on the
day before his or her death. If a retired director dies before the end of his or
her payment period, his or her beneficiary will receive the remaining benefits
for the balance of the payment period.
Each non-employee director receives an automatic grant, at the conclusion
of each annual meeting, of 150 restricted shares of the Company's Common Stock.
Such shares are subject to forfeiture upon the occurrence of certain events.
Shares subject to the risk of forfeiture may not be sold, assigned, pledged or
otherwise transferred. Subject to the risk of forfeiture and transfer
restrictions, directors shall have all rights as shareholders with respect to
restricted shares, including the right to vote and receive dividends or other
distributions on such shares. As of February 14, 1999, non-employee directors
had received an aggregate of 12,003 restricted shares.
3
<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION
OF ALL OF THE PROPOSED NOMINEES TO THE BOARD OF DIRECTORS.
SELECTION OF AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Ernst & Young LLP, Certified Public Accountants, as the Company's
independent auditors for fiscal 1999, subject to the approval of the
shareholders. This firm has served as the independent auditors of the Company
since the Company's formation in 1992. Representatives of this firm are expected
to be present at the meeting and will have an opportunity to make a statement if
they desire and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast at the meeting is
needed to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal 1999. If the appointment is not approved, the
matter will be referred to the Audit Committee for further review.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR RATIFICATION OF THE
APPOINTMENT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table shows the amount of Common Stock beneficially owned
(unless otherwise indicated) as of January 31, 1999, by the Company's directors,
the executive officers named in the Summary Annual Compensation table on page
five (the "Named Executive Officers") and the directors and executive officers
as a group. Unless otherwise indicated, each of the shareholders listed below
has sole voting and investment power with respect to the shares beneficially
owned. None of these persons owns any Preferred Stock. The Company knows of no
single person or group that is the beneficial owner of more than 5% of the
Company's Common Stock or Preferred Stock.
<TABLE>
<CAPTION>
PERCENT OF
SHARES SHARES
NAME BENEFICIALLY BENEFICIALLY
OF BENEFICIAL OWNER OWNED(1) OWNED
------------------- ------------ ------------
<S> <C> <C>
David R. Emery(2)......................................... 391,440(3) 1.0%
Timothy G. Wallace........................................ 155,217(4) *
Roger O. West............................................. 127,293(5) *
Charles Raymond Fernandez, M.D............................ 2,415(6) *
Errol L. Biggs, Ph.D...................................... 1,971(7) *
Marliese E. Mooney........................................ 2,589(8) *
Edwin B. Morris III....................................... 2,248(9) *
John Knox Singleton....................................... 18,724(9)(10) *
Thompson S. Dent.......................................... 13,357(9) *
Batey M. Gresham, Jr...................................... 2,807(9) *
All executive officers and directors as a group (10
persons)................................................ 718,061 1.8%
</TABLE>
- ---------------
* Less than 1%
(1) Pursuant to the rules of the Securities and Exchange Commission (the
"SEC"), restricted shares of Common Stock that the recipient does not have
the ability to vote or to receive dividends on are not included.
(2) Includes 143,352 shares owned by the Emery Family Limited Partnership and
1,448 shares owned by the Emery Family 1993 Irrevocable Trust. Mr. Emery is
a limited partner of the partnership and a beneficiary of the trust, but
has no voting or investment power with respect to the shares owned by such
partnership or trust.
(3) Includes 246,640 shares of restricted stock granted pursuant to the 1993
Employees Stock Incentive Plan.
(4) Reflects 123,224 shares of restricted stock granted pursuant to the 1993
Employees Stock Incentive Plan.
4
<PAGE> 8
(5) Reflects 125,000 shares of restricted stock granted pursuant to the
Company's 1993 Employees Stock Incentive Plan.
(6) Includes 1,716 shares of restricted stock granted pursuant to the Company's
Restricted Stock Plan.
(7) Includes 1,706 shares of restricted stock granted pursuant to the Company's
Restricted Stock Plan.
(8) Includes 1,589 shares of restricted stock granted pursuant to the Company's
Restricted Stock Plan.
(9) Includes 1,748 shares of restricted stock granted pursuant to the Company's
Restricted Stock Plan.
(10) Of these shares, 2,117 are held in trust by Mr. Singleton for the benefit
of his minor children, 322 are held jointly with Peggy T. Singleton, Mr.
Singleton's wife, 13,072 shares are owned by Mr. Singleton's wife, and
1,465 are owned in an IRA.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock or Preferred Stock, to file with the SEC initial reports
of ownership and reports of changes in ownership of the Common Stock. These
officers, directors and greater than 10% shareholders of the Company are
required by SEC rules to furnish the Company with copies of all Section 16(a)
reports they file. There are specific due dates for these reports and the
Company is required to report in this Proxy Statement any failure to file
reports as required during 1998.
Based upon a review of these filings and written representations from the
Company's directors and executive officers that no other reports were required,
the Company believes that the reporting and filing requirements relating to
ownership of Common Stock and Preferred Stock were complied with during 1998 and
prior years, except that Messrs. Emery, Wallace and West each sent one report on
the due date by overnight courier which the SEC received the following day.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table reflects the compensation of the Named Executive
Officers:
SUMMARY ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------------
-------------------------------------- RESTRICTED SECURITIES ALL
OTHER ANNUAL AWARDS UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) ($) ($) COMPENSATION
- --------------------------- ---- --------- -------- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Emery..................... 1998 332,800 630,500 4,400(1) 0 0 1,100(2)
Chairman of the Board and 1997 328,500 189,000 4,040(1) 0 0 0
Chief Executive Officer 1996 316,500 161,000 3,780(1) 0 0 0
Timothy G. Wallace................. 1998 210,800 395,300 3,050(1) 0 0 0
Executive Vice President 1997 208,100 99,800 3,050(1) 0 0 0
and Chief Financial Officer 1996 200,500 85,000 3,050(1) 0 0 0
Roger O. West...................... 1998 210,800 395,300 3,040(1) 0 0 0
Executive Vice President 1997 208,100 99,800 3,040(1) 0 0 0
and General Counsel.............. 1996 200,500 85,000 3,040(1) 0 0 15,628(3)
</TABLE>
- ---------------
(1) Reflects cost of life insurance premium paid by the Company.
(2) Represents certain financial and tax planning services paid on behalf of Mr.
Emery.
(3) Represents certain relocation expenses paid as part of Mr. West's employment
agreement.
5
<PAGE> 9
STOCK OPTION GRANTS
The Company did not have any stock options or stock appreciation rights
outstanding, granted, or exercised during 1998.
PENSION OR RETIREMENT PLANS
The Company adopted an Executive Retirement Plan for its senior executives.
Because it is a defined benefit plan, the amount of a retiree's pension is
calculated using pay and years of service as an employee, rather than by the
market value of the plan's assets as in defined contribution plans.
Upon retirement, a participant receives an annual pension from the plan
equal to 60% of the participant's Final Average Annual Compensation, as defined
below, plus 6% for each year of service after age 60 (90% for retirement at age
65 with at least five years of service). The plan provides for an offset of the
participant's primary Social Security benefits. The annual pension benefit is
payable to the participant's spouse upon the participant's death.
"Final Average Annual Compensation," which is calculated as the average of
the three highest, not necessarily consecutive, years' earnings, is based upon
compensation that would appear under the "Salary" and "Bonus" columns of the
Summary Annual Compensation table.
The plan is unfunded and will be paid from earnings of the Company. The
Compensation Committee selects eligible participants in the plan. As of March
31, 1999, the Compensation Committee has selected the following persons as the
participants for this plan:
<TABLE>
<CAPTION>
YEARS OF SERVICE
NAME AS OF DECEMBER 31, 1998
- ---- -----------------------
<S> <C>
David R. Emery.............................................. 6
Timothy G. Wallace.......................................... 6
Roger O. West............................................... 4
Kenneth D. Stach............................................ 6
Fredrick M. Langreck........................................ 6
Rita Hicks Todd............................................. 6
</TABLE>
The following table illustrates the annual pension benefits calculated
before any offset of the employee's primary Social Security benefits:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FINAL
AVERAGE YEARS OF SERVICES
ANNUAL -------------------------------------
COMPENSATION 5 10 15 20
- ------------------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
50,000.............................................. 45,000 45,000 45,000 45,000
100,000.............................................. 90,000 90,000 90,000 90,000
150,000.............................................. 135,000 135,000 135,000 135,000
200,000.............................................. 180,000 180,000 180,000 180,000
250,000.............................................. 225,000 225,000 225,000 225,000
300,000.............................................. 270,000 270,000 270,000 270,000
350,000.............................................. 315,000 315,000 315,000 315,000
</TABLE>
The Company has also adopted a Deferred Compensation Plan, which allows
eligible participants to defer and invest a portion of their compensation. The
deferrals are credited to a participant's account and invested in various
securities designated by the Company selected by the participants. These
investment options may be amended from time to time by the Company. Participants
are 100% vested in their accounts. No matching funds are provided. Participants
may elect benefit payments to commence either in the year 2010 or upon
retirement. The participant can specify that his or her benefits be paid as a
single lump sum or in annual installments over a period of between five and ten
years. In the event of an employee's termination, benefits are paid in a lump
sum within 90 days following termination. The plan allows disabled employees to
receive
6
<PAGE> 10
hardship withdrawals. The plan is administered by a committee consisting of
three or more officers selected by the Compensation Committee. The plan
committee has broad powers to interpret and administer the plan, including
designating participants and investment options.
The Company adopted the 1995 Employee Stock Purchase Plan (the "Purchase
Plan"), which allows eligible employees of the Company and its subsidiaries to
purchase shares of the Company's Common Stock through regular payroll deductions
and voluntary contributions at a price equal to the lesser of (i) 85% of the
market price of the Company's Common Stock on the first day of the grant year or
(ii) 85% of the market price of the Company's Common Stock on the purchase date.
The Company has reserved 1,000,000 shares of Common Stock for issuance pursuant
to the Purchase Plan, subject to adjustment resulting from (i) a stock dividend,
split or combination, (ii) recapitalization or reclassification, (iii) a
reorganization, merger or consolidation in which the Company is the surviving
corporation or (iv) another similar change affecting the Company's Common Stock.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
David R. Emery
Mr. Emery's employment agreement, pursuant to which he serves as Chairman,
President and Chief Executive Officer of the Company, has a five-year term that
is automatically extended on January 1 of each year for an additional year.
Under this agreement, Mr. Emery receives a 1999 base salary of $425,000 (which
includes a cost of living adjustment) and annual increases at the discretion of
the Compensation Committee of the Board of Directors, and is entitled to
participate in the Company's restricted stock plan and all other benefit
programs generally available to executive officers of the Company. Mr. Emery is
also entitled to receive an annual bonus in the discretion of the Compensation
Committee.
If the Company terminates Mr. Emery's employment without cause, he is
entitled to receive his accrued salary, earned bonus, vested deferred
compensation (other than plan benefits which will be paid in accordance with the
applicable plan), and other benefits through the date of termination. In
addition, Mr. Emery will receive as severance compensation his base salary for a
period of three years following the date of termination and an amount equal to
twice his average annual bonus during the two years immediately preceding his
termination. Mr. Emery may elect to receive a lump sum severance amount equal to
the present value of such severance payments (using a discount rate equal to the
90-day treasury bill interest rate in effect on the date of delivery of such
election notice).
If a "change-in-control" (as defined in the employment agreement) occurs,
Mr. Emery may terminate his agreement and receive his accrued base salary and
other benefits described above through the remaining term of the agreement and
an amount equal to twice his average annual bonus during the two years
immediately preceding the termination. In addition, Mr. Emery may elect to
receive from the Company a lump sum severance payment (calculated as provided
above) which may not be greater than three times his base salary.
Notwithstanding the foregoing, the Company is not required to pay to Mr. Emery
any amount which is not deductible for federal income tax purposes.
The Company may terminate Mr. Emery's agreement for "cause," which is
defined to include material, substantial and willful dishonesty towards, fraud
upon, or deliberate injury or attempted injury to, the Company or Mr. Emery's
material, substantial and willful breach of the employment agreement which has
resulted in material injury to the Company. In the event of Mr. Emery's
termination for cause, he shall receive all accrued salary, earned bonus
compensation, vested deferred compensation (other than plan benefits which will
be payable in accordance with the applicable plan), and other benefits through
the date of termination, but shall receive no other severance benefits. Mr.
Emery's agreement may also be terminated if Mr. Emery dies or becomes disabled
and his disability continues for a period of 12 consecutive months. In the event
of termination of the employment agreement because of Mr. Emery's death or
disability, Mr. Emery (or his estate) shall receive these same payments but no
additional severance except that, if Mr. Emery becomes disabled, the Company
will maintain his insurance benefits for the remaining term of his employment
agreement.
7
<PAGE> 11
The Company has agreed to indemnify Mr. Emery for certain liabilities
arising from actions taken within the scope of his employment. Mr. Emery's
employment agreement contains restrictive covenants pursuant to which Mr. Emery
has agreed not to compete with the Company during the period of Mr. Emery's
employment and any period following termination of his employment during which
he is receiving severance payments.
Timothy G. Wallace
The employment agreement with Mr. Wallace is similar in scope to Mr.
Emery's agreement. Mr. Wallace's agreement has a five-year term that is
automatically extended on January 1 of each year for an additional year. Under
the agreement, Mr. Wallace receives a 1999 base salary of $275,000 (which
includes a cost of living adjustment), and annual bonuses and salary increases
at the discretion of the Compensation Committee. Mr. Wallace is entitled to
participate in the Company's executive incentive compensation plan as well as
the restricted stock plan and other generally available benefit programs. The
agreement provides that if Mr. Wallace's employment is terminated, he will
receive compensation similar to Mr. Emery's. In the employment agreement, the
Company has agreed to indemnify Mr. Wallace for certain liabilities arising from
actions taken within the scope of his employment. Mr. Wallace has also agreed
not to compete with the Company during the period of his employment and any
period during which he is receiving severance payments.
Roger O. West
The Company's employment agreement with Mr. West contains terms similar to
those contained in the employment agreements for Mr. Emery and Mr. Wallace. Mr.
West's agreement has a five-year term that is automatically extended on January
1 of each year for an additional year. Mr. West's 1999 base salary is $275,000
(which includes a cost of living adjustment). Mr. West is also entitled to
receive annual bonuses and salary increases at the discretion of the
Compensation Committee. In addition, Mr. West is eligible to participate in the
applicable restricted stock and other benefit and compensation plans instituted
by the Company.
Mr. West's employment agreement also contains indemnification, covenants
not to compete, termination, change of control and severance provisions similar
to those contained in the employment agreements for Mr. Emery and Mr. Wallace.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are
Thompson S. Dent, Batey M. Gresham, Jr. and Edwin B. Morris III. There are no
interlocks among the members of the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the performance
graph included elsewhere in this Proxy Statement do not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
Report or the performance graph by reference therein.
The Compensation Committee establishes a general compensation policy for
the Company and is responsible for approving increases in compensation paid to
the executive officers of the Company within the framework of the Company's
compensation philosophy. The Compensation Committee administers the Company's
employee benefit plans, including restricted stock plans and annual and
long-term incentive plans. In addition, the Compensation Committee evaluates the
performance of the executive officers of the Company and related matters. The
Compensation Committee reviews its decisions with the full Board of Directors.
8
<PAGE> 12
COMPREHENSIVE EXECUTIVE COMPENSATION POLICY
The Company's compensation program for executives consists of three key
elements:
- Base salaries competitive with those paid to the executive officers of
comparable real estate investment companies;
- Variable annual incentives which would reflect executive contribution to
the Company's short-term objectives; and
- A variable long-term incentive program utilizing share ownership in the
Company reflecting executive contribution to the achievement of the
Company's long-term goals.
The Compensation Committee, in consultation with Ernst & Young, LLP ("Ernst
& Young"), regularly reviews the executive compensation policies and practices
of selected comparable real estate investment companies, establishes base
salaries, incentive target guidelines and equity grant practices for senior
executive positions, and monitors share ownership guidelines for the senior
executive officers of the Company. The following is a summary of the
compensation policy of the Company established by the Compensation Committee:
Base Salary. The base salary of each of the Company's executive officers
should be approximately 50% of the combined base salary and targeted annual and
long-term incentive compensation. Salary increases consist of two components.
The employment agreements with the executive officers require increases based on
adjustments in the consumer price index. In addition, the Compensation
Committee, in its discretion, can recommend additional salary increases. The
Compensation Committee bases all recommendations for increases to base salaries
upon an assessment, reflecting competitive market practices, of experience,
tenure in position and individual and corporate performance. The President will
review all salary recommendations for executive officers, except the
recommendation for himself, with the Compensation Committee, which will be
responsible for approving or disapproving these recommendations. The
Compensation Committee will be solely responsible for determining the salary of
Mr. Emery. In reviewing the President's recommendations and determining base
salaries, the Compensation Committee generally will continue to seek outside
data and recommendations of independent compensation consultants.
In considering additional increases in 1998 above the CPI adjustments for
the executive officers, the Compensation Committee considered the salary and
bonus information of comparable companies. However, in light of the other
components of compensation described herein, the Compensation Committee
determined only to increase the base salary of the executive officers by the
increase in the cost of living. Accordingly, base salaries for 1998 were
generally at the lower end of the comparable range recommended by Ernst & Young.
In January 1999, after reviewing recommended salary ranges and supporting data,
the Compensation Committee increased base salaries to a level generally at the
median of the comparable company range.
Annual Incentive Compensation. An executive's annual incentive
compensation takes the form of cash bonuses. Such compensation will reflect the
degree to which the executive contributes to the realization of established
short-term objectives of the Company and is intended to be a substantial
incentive for the executive officers to achieve those objectives. This at-risk
pay policy provides annual incentive compensation that is substantially measured
as a percentage of base salary, thus enhancing the performance based component
of the total cash compensation. Annual incentive compensation and the total
annual cash compensation are intended to be competitive with prevailing market
practices.
The Compensation Committee has established the Executive Variable Incentive
Plan (the "Bonus Incentive Plan"). The Compensation Committee allocated the
determination of target annual incentive awards between two factors: corporate
performance and individual performance.
At the inception of the Bonus Incentive Plan, the Compensation Committee
established a performance index to evaluate the Company's corporate performance
during each plan year. Corporate performance is measured in terms of the
percentage of funds from operations available for the targeted dividend
distributions during the plan year. The corporate performance index assumes that
the Company has not successfully undertaken a public offering of its Common
Stock or accomplished other significant additions to its capital which could
lower funds from operations. In the event of such additions to capital, the
Compensation
9
<PAGE> 13
Committee retains the authority to undertake adjustments to the awards to be
delivered for such year. The individual performance index measures the degree
the individual achieved performance objectives established by Mr. Emery, for
executives other than himself, and, in the case of Mr. Emery, as established by
the Compensation Committee. In 1998, the Company achieved the targeted dividend
payout and, based upon the percentage of funds from operations required to pay
the targeted dividend, the executive officers received bonuses pursuant to the
Bonus Incentive Plan of between 45% and 54% of base salary. Bonuses awarded
pursuant to the Bonus Incentive Plan for 1998, together with base salaries for
1998, were at the lower end of the comparable company range for annual cash
compensation. In recognition of the foregoing and the significant change in the
asset, liability and equity position of the Company resulting from the
acquisition of Capstone Capital Corporation, the Compensation Committee enhanced
the bonus awards made to the executive officers in 1998 and 1999. The
Compensation Committee is presently reviewing the Bonus Incentive Plan to
determine if adjustments to the Bonus Incentive Plan are appropriate to bring
total annual cash compensation to the median of the comparable company range.
Long-Term Incentive Compensation. Under the Company's 1993 Employees Stock
Incentive Plan, the Compensation Committee makes grants of restricted stock as a
means of delivering long-term incentive to the Company's executives to induce
them to direct their efforts toward maximizing total returns to shareholders as
measured over an extended period of time. In consultation with Ernst & Young,
the Compensation Committee has prepared long-term target objectives for the
Company and has determined the long-term incentive awards to be made to
designated executive officers, relating to the attainment of these objectives.
Target objectives are measured by the cumulative total shareholder return, which
is the current price for a share of the Company's Common Stock, plus the
cumulative dividends paid to date with respect to a share of Common Stock,
adjusted to include the cumulative effect of per share dividend reinvestment,
less the Company's initial public offering share price of $19.50. The
Compensation Committee has the sole authority to designate the recipients of the
grants. Pursuant to grants under the Stock Incentive Plan, an aggregate of
445,000 restricted shares were reserved for the executive officers in 1994. All
of such shares were granted to the executives upon attainment of the target
objectives, which shares will fully vest without restriction if the executives
remain employees of the Company for specified periods. In 1998, an additional
445,000 shares were reserved for future grants of restricted stock to the
executive officers. None of these additional shares has been granted.
Stock Ownership Guidelines. In connection with the development of the
executive long-term incentive compensation, Ernst & Young recommended the
incorporation of target stock ownership guidelines for designated senior
executives. The Company implemented target share ownership guidelines for
executive officers to promote share ownership and further align executive and
shareholder interests. The guidelines state that within five years from the date
of employment of the executive, it is expected that the executive would possess
qualifying shares of the Company's stock having an aggregate acquisition value
equal to a multiple of base salary, generally determined as of the date of
employment. Qualifying shares include (i) shares of the Company owned by the
executive or the executive's immediate family, or family entities and trusts and
shares held for the executive's benefit pursuant to a qualified plan and (ii)
restricted stock of the Company regardless of the method of grant or
acquisition. The Compensation Committee retains the authority to make exceptions
to the target guidelines based upon changes in circumstances or otherwise to
amend or alter the guidelines as the Compensation Committee may determine. A
written report of the share ownership of the executive shall be delivered
annually to the Compensation Committee.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Under David R. Emery's employment agreement, Mr. Emery's annual base salary
is subject to cost of living adjustments and annual increases at the discretion
of the Compensation Committee. Mr. Emery is entitled to participate in the Stock
Incentive Plan, executive retirement plan and all other benefit programs
generally available to executive officers of the Company. The Company does not
provide Mr. Emery with incidental perquisites such as club memberships, company
vehicles, or other similar items, although it does provide limited financial and
tax planning assistance to Mr. Emery. The Compensation Committee considers a
number of factors for establishing the base salary of the Chief Executive
Officer of the Company, including
10
<PAGE> 14
growth, asset quality, competitive position, and profitability of the Company as
compared with those companies in the peer group selected by Ernst & Young. The
Compensation Committee established Mr. Emery's 1998 base salary, as the Chief
Executive Officer, at $332,800, which represented the CPI increase required by
his employment agreement over his base salary on December 31, 1997. As Chief
Executive Officer, Mr. Emery is entitled to earn a bonus on the same basis as
all other executive officers of the Company. Based upon the Company's bonus
criteria described above, Mr. Emery received a 1998 bonus of $180,500 pursuant
to the Bonus Incentive Plan. In addition, based upon the recommendations of
Ernst & Young as to aggregate compensation paid to comparable executives of
comparable companies, in light of the significant changes in the asset,
liability and equity position of the Company resulting from the acquisition of
Capstone Capital Corporation, the Compensation Committee enhanced the bonus
award to be made to Mr. Emery with an additional bonus payment of $450,000. The
long-term incentive component of Mr. Emery's compensation was provided by the
reservation of 225,000 shares of restricted stock in 1994. All of such shares
have been granted to Mr. Emery as a result of attaining the target objectives,
which shares will fully vest without restriction if Mr. Emery remains an
employee of the Company for specified periods. In 1998, an additional 225,000
shares were reserved for future grants of restricted stock to Mr. Emery, none of
which shares has been granted.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code generally disallows a tax deduction to public
companies for compensation over $1 million paid to the corporation's Chief
Executive Officer and the four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. The Company currently intends to
structure the performance-based portion of the compensation of its executive
officers in a manner that complies with this statute.
Members of the Compensation Committee
Thompson S. Dent (Chairman)
Batey M. Gresham, Jr.
Edwin B. Morris III
11
<PAGE> 15
COMPARATIVE PERFORMANCE GRAPH
The SEC requires the Company to include in this Proxy Statement a line
graph which compares the yearly percentage change in cumulative total
shareholder return on the Company's Common Stock with (a) the performance of a
broad equity market indicator and (b) the performance of a published industry
index or peer group. The following graph compares the monthly percentage change
in the return on the Company's Common Stock since January 1, 1994 with the
cumulative total return on the Total Return Index for Equity REITs, published by
the National Association of Real Estate Investment Trusts, Inc. and the Standard
and Poor's 500 Index. The graph assumes the investment on January 1, 1994 of
$100 and that all dividends were reinvested at the time they were paid.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG HEALTHCARE REALTY TRUST,
S&P 500 INDEX AND NAREIT EQUITY REIT INDEX
<TABLE>
<CAPTION>
PERIOD ENDING
-----------------------------------------------------------------------------
INDEX 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>
Healthcare Realty Trust, Inc. 100.00 101.42 121.84 152.74 179.06 147.84
S&P 500 100.00 101.32 139.39 171.26 228.42 293.69
NAREIT All Equity REIT Index 100.00 103.70 119.48 164.04 198.75 165.71
</TABLE>
12
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thompson S. Dent, a director of the Company, is a founder and President of
PhyCor, Inc. The Company owns 11 properties which relate to doctor's practices
or clinics managed by PhyCor. The Company received revenues of $8.9 million in
1998 from its leases of these facilities. Mr. Dent, however, receives no
personal benefit as a result of these transactions.
GENERAL INFORMATION
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2000 annual meeting
of shareholders must be received by the Company at its executive offices at 3310
West End Avenue, Suite 700, Nashville, Tennessee 37203 not later than December
1, 1999, in order to be included in the Proxy Statement and proxy for that
meeting.
COUNTING OF VOTES
All matters specified in this Proxy Statement will be voted on at the
annual meeting by written ballot. Inspectors of election will be appointed,
among other things, to determine the number of shares of Voting Stock
outstanding, the shares of Voting Stock represented at the annual meeting, the
existence of a quorum and the authenticity, validity and effect of proxies, to
receive votes of ballots, to hear and determine all challenges and questions in
any way arising in connection with the right to vote, to count and tabulate all
votes and to determine the result. Each item presented herein to be voted on at
the annual meeting must be approved by a majority of the votes cast at such
meeting. The inspectors of election will treat shares represented by proxies
that reflect abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. Abstentions, however, do not
constitute a vote "for" or "against" any matter and thus will be disregarded in
the calculation of a plurality or of "votes cast."
Inspectors of election 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 owners or persons entitled to vote that the broker
or nominee does not have discretionary power to vote on a particular matter) as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. However, 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).
MISCELLANEOUS
The Company will bear the cost of printing, mailing and other expenses in
connection with this solicitation of proxies and will also reimburse brokers and
other persons holding shares in their names or in the names of nominees for
their expenses in forwarding this proxy material to the beneficial owners of
such shares. Certain of the directors, officers and employees of the Company
may, without any additional compensation, solicit proxies in person or by
telephone.
Management of the Company is not aware of any matters other than those
described in this Proxy Statement which may be presented for action at the
meeting. If any other matters properly come before the meeting, it is intended
that the proxies will be voted with respect thereto in accordance with the
judgment of the person or persons voting such proxies subject to the direction
of the Board of Directors.
13
<PAGE> 17
A copy of the Company's Annual Report has been mailed to all shareholders
entitled to notice of and to vote at this meeting.
HEALTHCARE REALTY TRUST
INCORPORATED
/s/David R. Emery
David R. Emery
Chairman and Chief Executive Officer
April 16, 1999
14
<PAGE> 18
Proxy Statement 1188-PS-99
<PAGE> 19
Appendix A
[FORM OF COMMON STOCK PROXY]
HEALTHCARE REALTY TRUST INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints David R. Emery and Timothy G. Wallace, and
either of them, as proxies, with full power of substitution and resubstitution,
to vote all of the shares of Common Stock which the undersigned is entitled to
vote at the annual meeting of shareholders of Healthcare Realty Trust
Incorporated, to be held at 3310 West End Avenue, Suite 700, Nashville,
Tennessee, on Tuesday, May 11, 1999, at 10:00 a.m., and at any adjournment
thereof.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED AS
SPECIFIED. IF NOT OTHERWISE SPECIFIED, THE ABOVE NAMED PROXIES WILL VOTE (A) FOR
THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED BELOW, (B) FOR THE RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS,
AND (C) IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS ON ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
1. Election of Class 3 Directors.
[ ] FOR all nominees listed (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
Nominees: David R. Emery, Thompson S. Dent, and Batey M. Gresham, Jr.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
HIS NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Proposal to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
Dated: , 1999
----------------------
----------------------------------
Signature
----------------------------------
Signature if held jointly
IMPORTANT
Please sign exactly as your name
or names appear on this proxy and
mail promptly in the enclosed
envelope. If you sign as agent or
in any other capacity, please
state the capacity in which you
sign.
<PAGE> 20
Appendix B
[FORM OF PREFERRED STOCK PROXY]
HEALTHCARE REALTY TRUST INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints David R. Emery and Timothy G. Wallace, and
either of them, as proxies, with full power of substitution and resubstitution,
to vote all of the shares of 8 7/8% Series A Voting Cumulative Preferred Stock
which the undersigned is entitled to vote at the annual meeting of shareholders
of Healthcare Realty Trust Incorporated, to be held at 3310 West End Avenue,
Suite 700, Nashville, Tennessee, on Tuesday, May 11, 1999, at 10:00 a.m., and at
any adjournment thereof.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED AS
SPECIFIED. IF NOT OTHERWISE SPECIFIED, THE ABOVE NAMED PROXIES WILL VOTE (A) FOR
THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED BELOW, (B) FOR THE RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS,
AND (C) IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS ON ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
1. Election of Class 3 Directors.
[ ] FOR all nominees listed (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
Nominees: David R. Emery, Thompson S. Dent, and Batey M. Gresham, Jr.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
HIS NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Proposal to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
Dated: , 1999
----------------------
----------------------------------
Signature
----------------------------------
Signature if held jointly
IMPORTANT
Please sign exactly as your name
or names appear on this proxy and
mail promptly in the enclosed
envelope. If you sign as agent or
in any other capacity, please
state the capacity in which you
sign.
