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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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 filing fee.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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(1):
(4) Proposed maximum aggregate value of transaction:
[ ] 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:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
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HEALTHCARE REALTY TRUST
3310 WEST END AVENUE
NASHVILLE, TENNESSEE 37203
March 31, 1997
TO THE SHAREHOLDERS OF
HEALTHCARE REALTY TRUST INCORPORATED:
You are cordially invited to attend the 1997 annual meeting of shareholders
of Healthcare Realty Trust Incorporated, to be held on Monday, May 12, 1997, at
10:00 a.m. (local time) at Nashville City Center, 511 Union Street, 26th Floor,
Nashville, Tennessee.
Please read the enclosed 1996 Annual Report to Shareholders and Proxy
Statement for the 1997 annual meeting of shareholders. 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.
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HEALTHCARE REALTY TRUST
3310 WEST END AVENUE
NASHVILLE, TENNESSEE 37203
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1997
TO THE SHAREHOLDERS OF
HEALTHCARE REALTY TRUST INCORPORATED:
The annual meeting of shareholders of Healthcare Realty Trust Incorporated
(the "Company") will be held on Monday, May 12, 1997, at 10:00 a.m. (local time)
at Nashville City Center, 511 Union Street, 26th Floor, Nashville, Tennessee,
for the following purposes:
(1) To elect two nominees as Class 1 directors;
(2) To ratify the appointment of the accounting firm of Ernst & Young
LLP as independent auditors of the Company and its subsidiaries for the
Company's 1997 fiscal year; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1997 as
the record date for determining shareholders entitled to notice of and to vote
at the meeting and at any adjournment thereof.
Dated: March 31, 1997
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.
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HEALTHCARE REALTY TRUST
3310 WEST END AVENUE
NASHVILLE, TENNESSEE 37203
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Healthcare Realty Trust Incorporated (the
"Company"), to be voted at the annual meeting of shareholders to be held at
Nashville City Center, 511 Union Street, 26th Floor, Nashville, Tennessee, on
Monday, May 12, 1997, 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 form of proxy are first being mailed or given to
shareholders on or about April 4, 1997.
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 the firm of Ernst & Young LLP as independent
auditors of the Company and its subsidiaries, 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 form of 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 12, 1997 has been fixed as the record date
for the determination of shareholders entitled to notice of and 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
19,227,803 shares were outstanding and entitled to vote. The Common Stock is the
Company's only outstanding voting stock.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall be
divided into three classes of as nearly equal size as possible. Approximately
one-third of the directors are elected each year. The Board of Directors has
nominated the two individuals named below under the caption "Class 1 Nominees"
for election as directors to serve until the annual meeting of shareholders in
2000 or until their successors have been elected and qualified. The Class 1
nominees are presently serving on the Board of Directors of the Company with
terms expiring at this annual meeting. 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
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.
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CLASS 1 NOMINEES
The following table shows the name, age, and principal occupation of each
nominee to become a Class 1 director and the year in which each nominee was
first elected to the Company's Board of Directors.
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
CLASS 1 -- 2000
Charles Raymond Fernandez, M.D......... 53 Medical Director, Nalle Clinic, 1993
Charlotte, North Carolina
Errol L. Biggs, Ph.D................... 56 Senior Lecturer and Director of the 1993
Programs in Health Administration,
University of Colorado; President,
Biggs & Associates (consulting
company), Castle Rock, Colorado
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 2 and Class 3 directors. The following table shows the name, age and
principal occupation of each continuing director, and the year in which each was
first elected to the Board of Directors.
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
CLASS 2 -- 1998
Marliese E. Mooney..................... 67 Independent hospital consultant, Fort 1993
Myers, Florida; between 1988 and 1992,
Ms. Mooney served as Vice President
of Hospital Operations, EPIC
Healthcare Group, Inc., Dallas, Texas
Edwin B. Morris III.................... 57 Managing Director, Morris & Morse 1993
Company, Inc. (real estate financial
consulting firm), Boston,
Massachusetts
John Knox Singleton.................... 48 President, Inova Health Systems, 1993
Fairfax, Virginia
CLASS 3 -- 1999
David R. Emery......................... 52 Chairman of the Board of Directors, 1993
President and Chief Executive Officer
of Healthcare Realty Trust
Incorporated
Thompson S. Dent....................... 46 Executive Vice President, PhyCor, Inc., 1993
Nashville, Tennessee
Batey M. Gresham, Jr................... 62 Founder, Gresham, Smith & Partners, 1993
Nashville, Tennessee
Except as noted above, each of the nominees and continuing directors has
had the principal occupation indicated for more than five years.
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MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1996, the Board of Directors of the Company held four regularly
scheduled meetings. During 1996, 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.
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 1996.
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 they are
appointed, and who also report 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
three meetings during 1996.
The Compensation Committee establishes a general compensation policy for
the Company and has the responsibility for the approval of increases in
directors' fees and in 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 four meetings during 1996.
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 serving on the Board of Directors or any committee thereof.
Non-employee directors receive an annual retainer of $12,000, and are paid a
meeting fee of $1,000 for each Board of Directors or committee meeting attended;
however, only one fee will be paid in the event that more than one such meeting
is held on a single day. All directors receive reimbursement for necessary
travel expenses incurred in attending Board of Directors or committee meetings.
The Company has adopted a retirement plan for non-employee directors of the
Company. Pursuant to the plan, an eligible director may receive upon normal
retirement (defined to be when the director reaches age 65 and has completed
five years of service with the Company) an amount, paid annually, equal to the
director's compensation immediately preceding retirement from the Board of
Directors for a period not to exceed 15 years. A director who dies while a
director will receive benefits as if he retired from the Board of Directors on
the day preceding 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.
Under the Company's 1995 Restricted Stock Plan for Non-Employee Directors
(the "Restricted Stock Plan"), the Company compensates non-employee directors
through periodic grants of restricted stock. The Restricted Stock Plan provides
that persons serving as directors at the conclusion of each annual meeting of
shareholders receive grants 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 under the Restricted
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Stock Plan 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, 1997, non-employee directors had received an aggregate of 9,903 restricted
shares pursuant to the Restricted Stock Plan.
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 the firm of Ernst & Young LLP, Certified Public Accountants, as
independent auditors of the Company for 1997, 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 auditors of the Company
for 1997. 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 sets forth information with respect to ownership of
shares of the Company's Common Stock as of January 28, 1997 by (i) each of the
Company's directors, (ii) each person known to the Company to be the beneficial
owner of more than five percent of the outstanding shares of the Common Stock,
(iii) the Company's chief executive officer and the two other executive officers
of the Company whose total annual salary and bonus exceeded $100,000 in 1996
(the "Named Executive Officers") and (iv) all directors and executive officers
(including the Named Executive Officers) of the Company 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.
SHARES PERCENT OF SHARES
NAME BENEFICIALLY BENEFICIALLY
OF BENEFICIAL OWNER OWNED(1) OWNED
------------------- ------------ -----------------
David R. Emery(2)..................................... 316,440(3) 2.3%
Timothy G. Wallace.................................... 116,256(4) *
Roger O. West......................................... 95,000(5) *
Charles Raymond Fernandez, M.D. ...................... 1,785(6) *
Errol L. Biggs, Ph.D.................................. 1,671(7) *
Marliese E. Mooney.................................... 2,289(8) *
Edwin B. Morris III................................... 1,948(9) *
John Knox Singleton................................... 11,475(9)(10) *
Thompson S. Dent...................................... 13,057(9) *
Batey M. Gresham, Jr. ................................ 2,120(9) *
All executive officers and directors as a group (10
persons)............................................ 562,041 4.1%
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* Less than 1%
(1) Pursuant to the rules of the Securities and Exchange Commission, certain
shares of the Company's Common Stock that a beneficial owner has a right to
acquire within 60 days after the record date pursuant to the exercise of
stock options are deemed to be outstanding for the purpose of computing the
ownership of that beneficial owner shown in the table. Restricted shares of
Common Stock that the recipient does not have the ability to vote or to
receive dividends on are not included.
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(2) Includes 144,800 shares owned by the Emery Family 1993 Irrevocable Trust.
Mr. Emery is a beneficiary of the trust, but has no voting or investment
power with respect to the shares owned by such trust.
(3) Includes 171,640 shares of restricted stock granted pursuant to the 1993
Employees Stock Incentive Plan.
(4) Reflects 86,556 shares of restricted stock granted pursuant to the 1993
Employees Stock Incentive Plan.
(5) Reflects (i) grant of 15,000 shares of restricted stock issued as an
inducement to enter an employment agreement with the Company and (ii)
80,000 shares of restricted stock granted pursuant to the Company's 1993
Employees Stock Incentive Plan.
(6) Includes 1,416 shares of restricted stock granted pursuant to the Company's
Restricted Stock Plan.
(7) Includes 1,406 shares of restricted stock granted pursuant to the Company's
Restricted Stock Plan.
(8) Includes 1,289 shares of restricted stock granted pursuant to the Company's
Restricted Stock Plan.
(9) Includes 1,448 shares of restricted stock granted pursuant to the Company's
Restricted Stock Plan.
(10) Of these shares, 759 are held in trust by Mr. Singleton for the benefit of
his minor children, 275 are held jointly with Peggy T. Singleton, Mr.
Singleton's wife, 7,730 shares are owned by Mr. Singleton's wife, and 1,262
are owned in an IRA.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of the Company's Common Stock, to file with the Securities and Exchange
Commission (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 1996.
Based upon a review of these filings and written representations from
certain of 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 were complied with during 1996 and prior
years.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table reflects the compensation of the Named Executive
Officers:
SUMMARY ANNUAL COMPENSATION
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- ----------------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARD(S)($) OPTIONS($) COMPENSATION
- --------------------------- ---- --------- -------- --------------- ----------- ---------- ------------
David R. Emery............. 1996 316,500 161,000 3,780(1) 0 0 0
Chairman of the Board and 1995 308,100 120,100 3,560(1) 0 0 0
Chief Executive Officer 1994 286,925 63,000 2,700(1) 4,612,500(2) 90,000(3) 0
Timothy G. Wallace......... 1996 200,500 85,000 3,050(1) 0 0 0
Executive Vice President 1995 195,150 63,400 3,050(1) 0 0 0
and Chief Financial 1994 179,950 39,000 3,050(1) 2,255,000(2) 55,000(3) 0
Officer
Roger O. West.............. 1996 200,500 85,000 3,040(1) 0 0 15,628(6)
Executive Vice President 1995 195,150 63,400 0 0 0 21,861(6)
and General Counsel 1994(4) 126,667 39,000 0 2,985,625(2)(5) 0 10,152(6)
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(1) Reflects cost of life insurance premium paid by the Company.
(2) Messrs. Emery, Wallace and West received restricted stock reservations of an
aggregate of 445,000 shares of the Company's Common Stock, valued based on
the closing sale price of the Company's Common Stock of $20.50 per share on
October 18, 1994. These reservations are targets which will require the
achievement of Company based performance criteria before shares are
released and the continued employment of the recipient before shares vest
without restriction. Until release, recipients have no voting or dividend
rights with respect to such shares. Based on the closing sales price of the
Company's Common Stock of $26.50 per share on December 31, 1996, the
aggregate value of such 445,000 restricted shares of Common Stock held by
the Named Executive Officers was $11,792,500.
(3) Such options were cancelled on January 23, 1996.
(4) Mr. West began his employment with the Company on May 1, 1994.
(5) Includes grant on May 1, 1994 of (i) 15,000 restricted shares of the
Company's Common Stock as an inducement to enter an employment agreement
with the Company and (ii) 20,000 restricted shares of the Company's Common
Stock to vest according to the Company's 1993 Employees Stock Incentive
Plan. Such shares were valued based upon the closing sale price of the
Company's Common Stock of $20.875 per share on May 2, 1994. Based upon the
closing sale price of the Company's Common Stock of $26.50 per share on
December 31, 1996, the value of such restricted shares of Common Stock was
$927,500.
(6) Represents certain relocation expenses paid as part of Mr. West's employment
agreement.
STOCK OPTION GRANTS
The Company did not grant any stock options or stock appreciation rights in
1996. No options were exercised during 1996 by the Named Executive Officers. All
options granted to the Named Executive Officers were cancelled on January 23,
1996.
PENSION OR RETIREMENT PLANS
The Company adopted an Executive Retirement Plan for its senior executives
which became effective on January 1, 1993. 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.
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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 contains a provision 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 Compensation Table.
The plan is unfunded and will be paid from earnings of the Company.
Eligibility for participants in the plan shall be limited to executives selected
by the Compensation Committee of the Board of Directors. As of March 31, 1997,
the Compensation Committee has selected David R. Emery, Timothy G. Wallace,
Roger O. West, Kenneth D. Stach, Fredrick M. Langreck and Rita Hicks Todd as the
participants for this plan. As of December 31, 1996, Ms. Todd and Messrs. Emery,
Wallace, Stach and Langreck had four years of service, and Mr. West had two
years of service to the Company.
The following table illustrates the annual pension benefits calculated
before any offset of the employee's primary Social Security benefits:
PENSION PLAN TABLE
FINAL
AVERAGE YEARS OF SERVICE
ANNUAL -------------------------------------
COMPENSATION 5 10 15 20
------------ ------- ------- ------- -------
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
The Company has also adopted a Deferred Compensation Plan which became
effective January 1, 1993. Pursuant to the plan, eligible participants may elect
to defer and invest a portion of their compensation. One-half of the deferred
amount will be matched by the Company up to 4% of a participant's gross
compensation for the plan year. The amounts credited to a participant's account
will be credited with the results of selected investment options, which
currently include funds primarily investing in debt issued by the United States
Government, equity securities, or a combination of debt and equity securities.
All amounts in an account of a participant are fully vested at all times and may
be withdrawn by a participant 30 days following such participant's termination
of employment. The participant can request that his or her benefits be paid as a
single lump sum or in annual installments over a period of between three and ten
years as specified by the participant. The plan is administered by a committee
consisting of three or more persons selected by the Compensation Committee of
the Board of Directors. The plan committee has broad powers to interpret and
administer the plan, including designating participants and investment options.
In 1995, the Company adopted the 1995 Employee Stock Purchase Plan (the
"Purchase Plan"), pursuant to which eligible employees of the Company and its
subsidiaries may 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.
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EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
David R. Emery
Mr. Emery's employment agreement, which became effective on June 3, 1993
and 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 1997 base salary of $328,500 (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 of the Board of
Directors.
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. At Mr. Emery's election, he may 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. 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 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.
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 1997 base salary of $208,100 (which
includes a cost of living adjustment), and annual bonuses and salary increases
at the discretion of the Compensation Committee of the Board of Directors. Mr.
Wallace is entitled to participate in the Company's executive incentive
compensation plan as well 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
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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. The employment agreement contains restrictive covenants
pursuant to which Mr. Wallace has 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 became effective on May 1,
1994. The terms of this Agreement are 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 1997 base salary is $208,100 (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.
In connection with his employment, Mr. West received beneficial ownership
of 15,000 shares of the Company's Common Stock and a target restricted stock
award of 20,000 shares of the Company's Common Stock. Such shares will vest and
be delivered to Mr. West in accordance with the terms of the Company's 1993
Employees Stock Incentive Plan.
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
This report is submitted by the Compensation Committee pursuant to rules
adopted by the SEC which require disclosure with respect to compensation
policies applicable to the Company's executive officers and with respect to the
basis for the compensation of David R. Emery, as the Company's Chairman of the
Board and Chief Executive Officer, for the fiscal year ending December 31, 1996.
The Compensation Committee establishes a general compensation policy for the
Company and has the responsibility 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.
COMPREHENSIVE EXECUTIVE COMPENSATION POLICY
At the direction of the Board of Directors and the Compensation Committee,
Ernst & Young LLP ("Ernst & Young") was engaged in early 1994 as an independent
compensation consultant for the purpose of assisting the Compensation Committee
in developing a comprehensive executive compensation policy which would address
the immediate and long-term goals of the Company as a publicly traded
corporation. The Company undertook to develop an executive compensation program
designed to attract, motivate and retain key executive officers which would
provide (i) base salaries competitive with those paid to the executive officers
of comparable real estate investment companies; (ii) variable annual incentives
which would reflect executive contribution to the Company's short-term
objectives; and (iii) 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.
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In its report to the Compensation Committee, Ernst & Young reviewed
compensation practices in selected comparable real estate investment companies,
recommended base salaries, annual incentive target guidelines and equity grant
practices for senior executive positions and recommended share ownership
guidelines for the senior executive officers of the Company. The
recommendations, which were discussed with Ernst & Young and approved by the
Compensation Committee, are summarized as follows:
Base Salary. The Ernst & Young 1994 report to the Compensation Committee
included the results of a study of proxy data for eight peer group companies
selected for their relevance in determining compensation practices for the
Company. Ernst & Young considered a number of factors, including growth, asset
quality, competitive position, and profitability which were compared with those
of the peer group. Ernst & Young recommended that the base salary of the
Company's executive officers be 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. All recommendations for increases to base
salaries will be based upon an assessment, reflecting competitive market
practices, experience, tenure in position and individual and corporate
performance. The President will review all salary recommendations for executive
officers, except for Mr. Emery, 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 may continue to seek outside data and
recommendations of independent compensation consultants.
In considering additional increases in 1996 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 1996 were
generally at the lower end of the range recommended by Ernst & Young.
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.
Based upon the recommendations of Ernst & Young in 1994, the Compensation
Committee 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, as recommended by Ernst & Young.
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 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 1996, 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
of between 42% and 51% of base salary.
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Long Term Incentive Compensation. Based upon the recommendations of Ernst
& Young, the Compensation Committee implemented in 1994 the First Performance
Based Restricted Stock Implementation (the "Implementation") under its 1993
Employees Stock Incentive Plan. The Implementation was established 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. With the assistance of 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, less the
Company's initial public offering share price of $19.50. The Compensation
Committee had the sole authority to designate the participants in the
Implementation. Pursuant to the Implementation, an aggregate of 445,000
restricted shares were reserved for the executive officers in 1994. No
additional shares have been reserved since 1994. During 1996, the period over
which such shares will vest was increased from four to 12 years and certain
changes were made in the related employment agreements of such officers to
ensure continuity of service.
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. In addition, 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 undertake
exceptions to the target guidelines based upon changes in circumstances or to
otherwise 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
Incentive Plans, the Implementation, 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, financial planning or other similar items. The
1994 Ernst & Young report to the Compensation Committee considered a number of
factors for establishing the base salary of the Chief Executive Officer of the
Company, including 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
1996 base salary, as the Chief Executive Officer, at $316,500, which represented
the CPI increase required by his employment agreement over his base salary on
December 31, 1995. 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 1996
bonus of $161,000. The long term incentive component of Mr. Emery's compensation
was provided by the reservation of 225,000 shares of restricted stock in 1994.
No additional shares were reserved since 1994. During 1996, the period over
which Mr. Emery's shares vest was increased and his employment agreement was
modified in the manner and for the reasons as described for all executive
officers.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code, enacted in 1993, 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
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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
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 May 27, 1993 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 May 27, 1993 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
Healthcare NAREIT S&P 500
Realty Trust Equity Index
------------ ------ -----
5/27/93 100.00 100.00 100.00
12/31/93 118.21 104.56 105.25
12/30/94 120.05 107.87 106.68
12/29/95 143.81 124.34 146.62
12/31/96 180.09 168.19 180.37
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 15, 1996, the Company acquired Lewis-Gale Building Corporation,
which included healthcare related buildings located in the Roanoke/Salem,
Virginia area, for total consideration of approximately $44 million. The
buildings are either leased to Lewis-Gale Clinic, L.L.C. (the "Clinic"), or are
under leases guaranteed by the Clinic, and are managed by the Company. PhyCor,
Inc. owns the related physician practice assets and guarantees the direct lease
obligations of the Clinic to the Company. In addition, the Company leases
another healthcare property to an entity affiliated with PhyCor, Inc., resulting
in yearly rental income of approximately $1.1 million. Thompson S. Dent, a
director of the Company, is a founder and Executive Vice President of PhyCor,
Inc. Mr. Dent, however, receives no personal benefit as a result of the
transactions described above.
GENERAL INFORMATION
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1998 annual meeting
of shareholders must be received by the Company at its executive offices at 3310
West End Avenue, Nashville, Tennessee 37203 not later than December 1, 1997, in
order to be included in the Proxy Statement and proxy for that meeting.
COUNTING OF VOTES
All matters specified in this Proxy Statement that are to be voted on at
the annual meeting will be by written ballot. Inspectors of election will be
appointed, among other things, to determine the number of shares outstanding,
the shares 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 above 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.
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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
March 31, 1997
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[FORM OF PROXY]
HEALTHCARE REALTY TRUST INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints David R. Emery and Roger O. West, 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 Nashville City Center, 511 Union Street, 26th Floor, Nashville,
Tennessee, on Monday, May 12, 1997, 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 ON THE BACK OF THIS
CARD, (B) FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANY'S 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 1 Directors.
[ ] FOR all nominees listed (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for both nominees listed
Nominees: Charles Raymond Fernandez, M.D. and Errol L. Biggs, Ph.D.
(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.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated: , 1997
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Signature
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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.