UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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NATIONWIDE HEALTH PROPERTIES, INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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SEC 1913 (3-99)
[LOGO] NHP
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 22, 2002
To the Stockholders:
The annual meeting of stockholders of Nationwide Health Properties, Inc.
will be held at the Conference Center at 610 Newport Center Drive, Newport
Beach, California on April 22, 2002 at 2:00 p.m. local time. At the meeting,
stockholders will act on the following matters:
(1) Election of two directors, each for a term of three years;
(2) Any other matters that may properly come before the meeting.
Stockholders of record at the close of business on March 1, 2002 are
entitled to vote at the meeting or any postponement or adjournment.
By order of the Board of Directors
R. Bruce Andrews
President and Chief Executive Officer
March 20, 2002
Newport Beach, California
TABLE OF CONTENTS
ABOUT THE MEETING......................................................... 1
What is the purpose of the annual meeting?............................. 1
Who is entitled to vote?............................................... 1
What constitutes a quorum?............................................. 1
How do I vote?......................................................... 1
Can I change my vote after I return my proxy card?..................... 1
What are the Board's recommendations?.................................. 1
What vote is required to approve each item?............................ 2
STOCK OWNERSHIP........................................................... 2
Who are the largest owners of the Company's stock?..................... 2
How much stock do the Company's directors and executive officers own?.. 2
ITEM 1--ELECTION OF DIRECTORS............................................. 4
Directors Standing for Election........................................ 4
Directors Continuing in Office......................................... 4
Certain Relationships and Related Transactions......................... 6
Report of the Audit Committee.......................................... 7
Executive Compensation................................................. 8
Report of the Compensation Committee on Executive Compensation..... 8
Compensation Committee Interlocks and Insider Participation........ 10
Employment Agreements.............................................. 10
Executive Compensation Summary Table............................... 11
Option Grants for 2001............................................. 12
Option Exercises and Values for 2001............................... 13
Comparison of Five-Year Cumulative Total Returns................... 14
INDEPENDENT ACCOUNTANTS................................................... 15
Audit Fees............................................................. 15
Financial Information Systems Design and Implementation Fees........... 15
All Other Fees......................................................... 15
OTHER MATTERS............................................................. 15
ADDITIONAL INFORMATION.................................................... 16
NATIONWIDE HEALTH PROPERTIES, INC.
610 Newport Center Drive, Suite 1150
Newport Beach, California 92660
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PROXY STATEMENT
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This proxy statement contains information related to the annual meeting of
stockholders of Nationwide Health Properties, Inc. to be held on Monday, April
22, 2002, beginning at 2:00 p.m., at the Conference Center, 610 Newport Center
Drive, Newport Beach, California, and at any postponement or adjournments.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At the Company's annual meeting, stockholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
directors. In addition, the Company's management will report on the performance
of the Company during 2001 and respond to questions from the stockholders.
Who is entitled to vote?
Only stockholders of record at the close of business on the record date,
March 1, 2002, are entitled to receive notice of the annual meeting and to vote
the shares of common stock that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 49,120,216 shares of common stock of the Company were outstanding.
Proxies received but marked as abstentions and broker non-votes will be
included in the calculation of the number of shares considered to be present at
the meeting.
How do I vote?
If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct. If you are a registered
stockholder and attend the meeting, you may deliver your completed proxy card
in person. "Street name" stockholders who wish to vote at the meeting will need
to obtain a proxy form from the institution that holds their shares.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
Company, either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not
by itself revoke a previously granted proxy.
What are the Board's recommendations?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board's recommendation is set
forth together with the description of each item in this proxy statement. In
summary, the Board recommends a vote:
. for election of the nominated slate of directors (see page 4);
1
With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
What vote is required to approve each item?
Election of Directors. The affirmative vote of a majority of the votes cast
at the meeting is required for the election of directors. A properly executed
proxy marked "WITHHOLD AUTHORITY" with respect to the election of one or more
directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether
there is a quorum.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
STOCK OWNERSHIP
Who are the largest owners of the Company's stock?
The following table sets forth the only stockholders known to the Company to
be the beneficial owner of more than 5% of the Company's outstanding common
stock at December 31, 2001:
Common Stock Percent of
Beneficial Owner Beneficially Owned Outstanding Shares
Cohen & Steers Capital Management, Inc....... 7,529,070 (1) 15.94%
757 Third Avenue
New York, NY 10017
European Investors, Inc...................... 3,146,805 (2) 6.61%
717 5th Avenue
New York, NY 10022
(1) Cohen & Steers Capital Management, Inc. had sole dispositive power with
respect to 7,529,070 shares and sole voting power with respect to 6,611,670
shares.
(2) European Investors, Inc. along with its wholly-owned subsidiary, EII Realty
Securities Inc., had sole voting power with respect to 2,708,365 shares,
shared voting power with respect 128,900 shares, sole dispositive power
with respect to 3,064,105 shares and shared dispositive power with respect
to 82,700 shares.
How much stock do the Company's directors and executive officers own?
The following table shows the amount of common stock of the Company
beneficially owned (unless otherwise indicated) by the Company's directors, the
executive officers of the Company named in the Summary Compensation Table below
and the directors and executive officers of the Company as a group. Except as
otherwise indicated, all information is as of February 28, 2002.
2
STOCK OWNERSHIP
Aggregate Number
of Shares Acquirable Percent of
Beneficially within Shares
Name Owned(1) 60 Days(2) Outstanding(3)
R. Bruce Andrews....................................... 155,366 220,001 0.8
John C. Argue.......................................... 45,705 -- 0.1
David R. Banks......................................... 19,700 -- --
Donald D. Bradley...................................... 0 5,833 --
Mark L. Desmond........................................ 31,600 76,999 0.2
William K. Doyle....................................... 9,734 -- --
Charles D. Miller...................................... 97,000 -- 0.2
Jack D. Samuelson...................................... 40,590 -- 0.1
John J. Sheehan, Jr.................................... 1,157 55,001 0.1
T. Andrew Stokes....................................... 12,990 87,001 0.2
All current directors and executive officers as a group
(12 persons)......................................... 414,502 479,834 1.8%
(1) The number of shares shown includes shares that are individually or jointly
owned, as well as shares which the individual has either some or shared
investment or voting authority. Certain of the Company's directors and
executive officers disclaim beneficial ownership of some of the shares
included in the table, as follows:
. Mr. Argue - 12,592 shares held by a pension plan of which Mr. Argue votes
and makes investment decisions; and 11,295 shares held by trusts of which
Mr. Argue is trustee.
. Mr. Miller - 10,000 shares held in the Carolyn and Chuck Miller Foundation
as to which Mr. Miller has no pecuniary interest and disclaims beneficial
ownership.
. Mr. Sheehan - 1,157 shares that his wife holds as custodian for the
benefit of his children.
(2) Reflects shares that could be purchased by exercise of options on February
28, 2002 or within 60 days thereafter under the Company's stock option plan.
(3) Based on the number of shares outstanding at or acquirable within 60 days
of February 28, 2002.
Based upon a review of the filings with the Securities and Exchange
Commission, the Company believes that all of the Company's directors and
executive officers complied during 2001 with the reporting requirements of
Section 16(a) of the Securities Act of 1934, with the following exceptions: (i)
Mr. Doyle filed five late reports related to purchases of 868.8084 shares.
3
ITEM 1--ELECTION OF DIRECTORS
Directors Standing for Election
The Board of Directors is currently divided into three classes, having
three-year terms that expire in successive years.
The current three-year term of directors in Class III expires at the 2002
annual meeting. The Board of Directors proposes that the nominees described
below, both of whom are currently serving as Class III directors, be elected to
Class III for a new term of three years and until their successors are duly
elected and qualified.
Both of the nominees have consented to serve three-year terms. If either of
them should become unavailable to serve as a director, the Board may designate
a substitute nominee. In that case, the persons named as proxies will vote for
the substitute nominee designated by the Board.
Class III Directors. The following Class III directors were elected at the
Company's 1999 Annual Meeting for terms ending in 2002:
R. Bruce Andrews Director since 1989
Mr. Andrews, 61, has served as President and Chief Executive Officer of the
Company since September 1989 and a director of the Company since October
1989. He had previously served as a director of American Medical
International, Inc., a hospital management company, and served as its Chief
Financial Officer from 1970 to 1985 and its Chief Operating Officer in 1985
and 1986. From 1986 through 1989, Mr. Andrews was engaged in various private
investments. He is also a director of CenterTrust Retail Properties, Inc.
Charles D. Miller Director since 1985
Mr. Miller, 74, has served as Chairman of the Board of the Company since
February 1998 and a Director of the Company since its inception. He had
served as the Chairman of Avery Dennison Corporation, a manufacturer of
self-adhesive materials, labels and office products, from May 1998 to April
2000. Mr. Miller joined Avery Dennison in 1964 and was elected President and
Chief Operating Officer in 1975, President and Chief Executive Officer in
1977, Chairman and Chief Executive in 1983 and Chairman in May 1998. He had
been a Director of Avery Dennison since 1975. He is a member of the Board of
Directors of The Air Group, the Amateur Athletic Foundation of Los Angeles,
Edison International, Korn/Ferry International, Los Angeles Business
Advisors and a Trustee Emeritus of Johns Hopkins University and Occidental
College. He is a member of the Advisory Board of the Mellon Financial
Group--West Coast, and the Autry Museum of Western Heritage.
Directors Continuing in Office
Class I Directors. The following Class I directors were elected at the
Company's 2000 annual meeting for terms ending in 2003.
William K. Doyle Director since 2000
Mr. Doyle, 55, is the Managing Partner of Kerlin Capital Group, LLC, a
private investment bank founded in 1994 that is based in Los Angeles. Mr.
Doyle has been an investment banker for 29 years, has been affiliated with
major investment banking firms as a managing director including Lehman
Brothers and Smith Barney where he was involved in capital raising
transactions for ten different REITs. Mr. Doyle is also a Trustee of the
Orthopedic Hospital Foundation.
4
Jack D. Samuelson Director since 1994
Mr. Samuelson, 77, co-founded Samuelson Brothers, a real estate developer
and contracting firm, in 1946 and has served as its President and Board
Chairman since 1957. Mr. Samuelson is also a director of Westaff, an
international temporary help company. He is a Trustee of the educational
institutions Occidental College and Fuller Seminary. He is a past Chairman
of Hollywood Medical Center and the Institute of Critical Care Medicine. He
serves several non-profit housing companies: Director and Chairman of
Presbyterian Homes of the West, SCPH Senior Continuum Housing Communities,
and Beacon Affordable Housing Enterprises.
Class II Directors. The following Class II directors were elected at the
Company's 2001 annual meeting for terms ending in 2004:
John C. Argue Director since 1998
Mr. Argue, 70, has been Chairman of the Rose Hills Foundation since 1996.
Formerly he was Senior Partner of the law firm of Argue Pearson Harbison &
Myers. Mr. Argue is Chairman of the Board of Trustees of the University of
Southern California. Mr. Argue is also a member of the Boards of Directors
of Avery Dennison Corporation, Apex Mortgage Capital, Inc., TCW Convertible
Securities Fund, Inc., Silver Lake Corp., and The TCW Galileo Family of
Mutual Funds. He is on the Advisory Board of Mellon Financial Group--West
Coast.
David R. Banks Director since 1985
Mr. Banks, 66, is the retired Chairman of Beverly Enterprises, Inc., an
operator of nursing facilities and rehabilitation clinics. He joined Beverly
Enterprises, Inc. as President and Chief Operating Officer in October 1979,
was elected President and Chief Executive Officer in May 1989 and was
elected Chairman, President and Chief Executive Officer in March 1990 and
served as Chairman from March 1990 to December 2001. He has been a director
of Beverly Enterprises, Inc. since September 1979. Mr. Banks is a director
of Ralcorp Holdings.
How are directors compensated?
Base Compensation. Each non-employee director receives a retainer based on
an annualized rate of $25,000 together with a fee of $1,500 per Board meeting
or $1,000 per Committee meeting attended. The Chairman receives an additional
$15,000 per year. Committee Chairmen receive additional compensation for their
Board Committee Service in the amount of $5,000 per year.
Restricted Stock. Each non-employee director receives an automatic award,
in January of each year, of 2,000 shares of common stock. Each award vests
three years after the date of issuance. Dividends are paid on the restricted
stock at the same rate that the Company pays dividends on all of its common
stock.
Retirement Plan. Non-employee directors are eligible to participate in the
Retirement Plan for Directors whereby individuals who terminate their service
as a director with at least five years of service are entitled to receive an
annual retirement benefit from the Company equal to the aggregate annual
director retainer in effect at the time of the eligible director's termination
from the Board. The current retainer amount is $25,000 per year. Any increases
in the annual retainer which take effect after an eligible director's
termination from the Board will automatically increase the annual retirement
benefit.
Benefits will be paid for a period equal to the number of years of service
that the eligible director served on the Board. Upon death of an eligible
director, any benefits will be paid to his or her surviving spouse in
accordance with the same payment schedule above until receipt of the maximum
benefit to which the eligible director would have been entitled had he or she
survived or until the death of the eligible spouse, whichever occurs first.
How often did the Board meet during fiscal 2001?
The Board of Directors met five times during 2001. Each director attended
more than 75% of the total number of meetings of the Board and Committees on
which he served.
5
What committees has the Board established?
The Board of Directors has standing Investment, Compensation, Audit and
Nominating Committees.
BOARD COMMITTEE MEMBERSHIP
Investment Compensation Audit Nominating
Name Committee Committee Committee Committee
R. Bruce Andrews........... * *
John C. Argue.............. ** *
David R. Banks............. * * ** *
William K. Doyle........... * *
Charles D. Miller.......... * * **
Jack D. Samuelson.......... ** * *
*Member
**Chair
Investment Committee. The Investment Committee has the power to approve the
Company's investments and reviews the Company's investment policies. The
Investment Committee met once in 2001.
Compensation Committee. The Compensation Committee has been delegated the
functions of the Board with respect to the compensation of the Company's key
management personnel and administration of the Company's Stock Option Plan and
Deferred Compensation Plan. The Compensation Committee met twice in 2001.
Audit Committee. The Audit Committee selects the Company's independent
accountants, fixes the compensation to be paid to such accountants, reports to
the Board with respect to the scope of audit procedures and reviews the
compliance with certain policies and procedures of the Company. The Audit
Committee has adopted a charter. Our common stock is listed on the New York
Stock Exchange and is governed by its listing standards. All members of the
Audit Committee meet the independence standards of the New York Stock Exchange.
The Audit Committee met twice in 2001.
Nominating Committee. The Nominating Committee reviews candidates for
director suggested by management, directors, stockholders and others and makes
recommendations to the Board of Directors regarding the composition of the
Board of Directors and selection of individual candidates for election to the
Board of Directors. Any stockholder wishing to propose a nominee should submit
a recommendation in writing to the Company's President, indicating the
nominee's qualifications and other relevant biographical information and
providing confirmation of the nominee's consent to serve as a director. The
Nominating Committee did not meet in 2001.
Certain Relationships and Related Transactions
Steven J. Insoft joined the Company as its Vice President of Development in
February 1998. Mr. Insoft's parents own entities that were provided mortgage
financing by the Company prior to Mr. Insoft joining the Company. During 2001,
the total amount of mortgage payments made by these entities to the Company was
approximately $2,347,447. The Company believes that the foregoing transactions
among Mr. Insoft's family members and the Company are on terms and conditions
which are similar to those between the Company and unrelated third parties.
6
Report of the Audit Committee
The following Report of the Audit Committee does 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 by reference therein.
The Audit Committee has met and held discussion with management and the
independent accountants. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee has reviewed and
discussed the consolidated financial statements with management and the
independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
The Company's independent accountants also provided to the Committee the
written disclosures required by Independent Standards Board Standard No. 1
(Independent Discussions with Audit Committees), and the Committee discussed
with the independent accountants that firm's independence.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to
issue a report thereon. The Committee's responsibility is to monitor and
oversee these processes.
Based upon Committee's discussions with management and the independent
accountants and the Committee's review of the representation of management and
the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001 filed with the Securities and Exchange Commission.
March 20, 2002
Audit Committee
David R. Banks (Chairman)
John C. Argue
William K. Doyle
Charles D. Miller
Jack D. Samuelson
7
Executive Compensation
The following Report of the Compensation Committee and the performance
graphs 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 that the Company specifically
incorporates this Report or the performance graphs by reference therein.
Report of the Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for 2001.
What is the Company's philosophy of executive officer compensation?
The Company's compensation program for executives consists of three key
elements:
. A base salary,
. A performance-based annual bonus, and
. Periodic grants of stock options and dividend equivalents.
The Compensation Committee believes that this three-part approach best
serves the interests of the Company and its stockholders. It enables the
Company to meet the requirements of the highly competitive environment in which
the Company operates while ensuring that executive officers are compensated in
a way that advances both the short- and long-term interests of stockholders.
Under this approach, compensation for these officers involves a high proportion
of pay that is "at risk"--namely, the annual bonus, stock options and dividend
equivalents. The variable annual bonus permits individual performance to be
recognized on an annual basis, and is based, in significant part, on an
evaluation of the contribution made by the officer to the Company's
performance. Stock options and dividend equivalents relate a significant
portion of long-term remuneration directly to stock price appreciation realized
by all of the Company's stockholders.
Since 1995, the Compensation Committee has retained the services of an
executive compensation consulting firm (the "Compensation Consultant") to
assist the Committee in its assessment of the Company's compensation programs
for its executive officers.
Base Salary. Base salaries for the Company's executive officers, as well as
changes in such salaries, are based upon recommendations by the Chief Executive
Officer, taking into account such factors as competitive industry salaries; a
subjective assessment of the nature of the position; the contribution and
experience of the officer; and the length of the officer's service. Under the
Chief Executive Officer's direction, the Compensation Consultant reviews all
salary recommendations with the Compensation Committee, which then approves or
adjusts such recommendations.
Annual Bonus. Annual bonuses are based upon recommendations by the Chief
Executive Officer, taking into consideration an evaluation of the performance
of the Company as a whole together with a subjective evaluation of each
executive officer. Under the Chief Executive Officer's direction, the
Compensation Consultant reviews all bonus recommendations with the Compensation
Committee, which then approves or adjusts such recommendations.
Stock Options and Dividend Equivalents. All of the executive officers
participate in the Company's Stock Option and Restricted Stock Plan. That
plan's primary purpose is to offer an incentive for long-term performance of
the Company. The plan provides for awards of restricted stock, grants of stock
options and stock appreciation rights and awards of dividend equivalents.
In 1996, at the recommendation of the Compensation Consultant, grants of
stock options and awards of dividend equivalents related to stock options
replaced awards of restricted stock. The stock options vest ratably over a
three-year period and are exercisable at the market price of the Company's
common stock on the date of grant. Dividend equivalents are paid in cash based
upon a formula recommended by the Compensation Consultant.
8
50% of the dividend equivalent award depends upon the Company's performance
measured by total return to stockholders (increase in stock price and dividends
paid) over a three-to-five year period, compared to a peer group of healthcare
real estate investment trusts as selected by the Compensation Committee and the
Compensation Consultant. The other 50% of the dividend equivalent award depends
on performance standards of (1) growth percentage of funds from operations, (2)
multiple of funds from operations, (3) dividend growth, (4) dividend yield, and
(5) amount and quality of new investments, and each of these five factors is
reviewed against the peer group; however, the determination as to whether this
50% test is met in whole or in part is based on an overall judgment on the part
of the members of the Committee as to whether the Company's performance as
measured by these performance standards merits satisfying this 50% of the
dividend equivalents test. Dividend equivalents may be earned in their entirety
or in part depending upon whether the criteria are fully met at the time of
measurement. In 2001, the Compensation Consultant recommended and the Committee
determined that: for stock options granted in 1996 12.5% of the dividend
equivalents had been earned, for stock options granted in 1997 21.5% of the
dividend equivalents had been earned and for stock options granted in 1998 95%
of the dividend equivalents had been earned.
In January 2001, for executive officers, other than the Chief Executive
Officer, stock option grants ranged from 12,500 to 20,000, and dividend
equivalent awards ranged from 12,500 to 20,000. The levels of such awards were
based upon the recommendation of the Compensation Consultant. The awards are
intended to provide incentives for the long-term performance of the Company.
How is the Company's Chief Executive Officer compensated?
The Compensation Committee set Mr. Andrews' salary for 2001 at its January
2001 meeting. Mr. Andrews' base salary increased $19,750 to $466,000 based upon
the recommendation of the Compensation Consultant and in light of salaries
being paid to other similarly situated Chief Executive Officers as determined
based on the business experience of the members of the Compensation Committee
and in recognition of the Company's performance in 2000 under his leadership.
Mr. Andrews' bonus with respect to 2001 was 279,600, or 60% of his base
salary for 2001, and was awarded based on the recommendation of the
Compensation Consultant as well as a subjective evaluation by the Committee of
Mr. Andrews' performance and of the performance of the Company as a whole.
Mr. Andrews was granted 50,000 stock options and awarded 50,000 dividend
equivalents in January 2001. The purpose of this award was to provide a
long-term incentive to Mr. Andrews as options vest ratably over three years and
the dividend equivalents can be earned depending upon the Company's performance
measured for a minimum of a three-year period up to a five-year period as
described above. The award was based upon the recommendation of the
Compensation Consultant and the subjective evaluation of Mr. Andrews'
performance and that of the Company as a whole.
How is the Company Addressing Internal Revenue code limits on deductibility of
compensation?
The Compensation Committee has considered the anticipated tax treatment to
the Company regarding the compensation and benefits paid to the executive
officers of the Company in light of the enactment of Section-162(m) of the
Internal Revenue Code of 1986, as amended. The basic philosophy of the
Compensation Committee is to strive to provide such executive officers with a
compensation package which will preserve the deductibility of such payments for
the Company. However, certain types of compensation payments and their
deductibility depend upon the timing of an executive officer's vesting or
exercise of previously granted rights. Moreover, interpretations of and changes
in the tax laws and other factors beyond the Compensation Committee's control
may affect the deductibility of certain compensation payments. The Compensation
Committee will consider various alternatives to preserve the deductibility of
compensation payments and benefits to the extent reasonably practicable and to
the extent consistent with its other compensation objectives.
March 20, 2002
Compensation Committee
John C. Argue (Chairman)
David R. Banks
Charles D. Miller
Jack D. Samuelson
9
Compensation Committee Interlocks and Insider Participation
During 2001 Mr. Banks served as Chairman of Beverly Enterprises, Inc. Mr.
Banks is a member of the Company's Compensation Committee and was Chairman of
the Board of Directors of the Company from its inception until June 1988. At
December 31, 2001, Beverly Enterprises, Inc. or its subsidiaries ("Beverly")
leased and operated 28 of the Company's 268 owned facilities, operated 3 of the
41 facilities securing the Company's mortgage loans receivable and was the
obligor on a note to the Company. Beverly paid aggregate rent, including
additional rent, and interest payments of approximately $14,793,000 to the
Company in 2001. The aggregate minimum rent payable in 2002 by Beverly to the
Company for the 28 facilities leased and operated as of December 31, 2001 will
be approximately $13,022,000. Additional rent, based upon increased net patient
revenues of such facilities, may also be payable by Beverly to the Company in
2001. The aggregate interest payable in 2002 by Beverly to the Company for the
mortgage loans will be approximately $250,500 and the interest payable on the
note to the Company will be approximately $303,000.
Employment Agreements
The Company has entered into employment agreements with R. Bruce Andrews,
President and Chief Executive Officer, Mark L. Desmond, Senior Vice President
and Chief Financial Officer, and T. Andrew Stokes, Senior Vice President of
Corporate Development, pursuant to which Mr. Andrews received base compensation
for 2001 of $466,000, Mr. Desmond received base compensation of $224,000, and
Mr. Stokes received base compensation of $256,000. Annual bonuses and annual
grants of stock options with performance-based dividend equivalents, as well as
annual increases in base compensation, are determined by the Company's
Compensation Committee, subject to provisions of the employment agreements. Mr.
Andrews' employment agreement provides for a three-year employment period and
automatically renews on the first day of each month for a new three-year
period, unless the Company gives Mr. Andrews notice that the agreement will not
be further extended. Mr. Andrews' employment agreement provides for a final
termination date not later than his 65th birthday. The employment agreements
for Messrs. Desmond and Stokes each provide for an employment period ending
February 28, 2004, and automatically extend one year on each February 28th
thereafter unless the Company or the Executive gives notice that the agreement
will not be further extended.
In the event of a termination in Mr. Andrews' employment other than for
cause, disability, death or by him for good reason, he is entitled to a
severance payment equal to three times his highest annual base compensation and
three times his average annual bonus over the last three years. Under such
circumstances, any shares of restricted stock and options held by him that are
not then vested will vest. The Company will provide Mr. Andrews with any
performance-based dividend equivalents that would have been earned by Mr.
Andrews during the three years following termination. Mr. Andrews will continue
to be covered by the Company's health plan for a three-year period.
In the event of a termination of employment of either Mr. Desmond or Mr.
Stokes, other than for cause, disability, death or within three years following
a change of control, such officer is entitled to a severance payment equal to
150% of his highest annual base compensation and 150% of his average annual
bonus over the last three years. In addition, shares of restricted stock and
stock options held by such officer that are not then vested will vest. The
Company will provide such officer with any performance-based dividend
equivalents that would have been earned by such executive during the eighteen
months following termination. Such officer will continue to be covered by the
Company's health plan for a period of 18 months following termination.
The Company has adopted an executive employment security policy. The policy
provides generally that if, within three years following a change of control of
the Company, the employment of any plan participant is terminated, except under
defined circumstances, the participant is entitled to receive payments equal to
the participant's highest compensation for a period of twelve to thirty-six
months following termination, depending upon the participant's length of
employment. These payments would be reduced by one-half of any compensation
received from any new employment. Mark L. Desmond, T. Andrew Stokes, John J.
Sheehan, Jr. and Donald D. Bradley have been designated as plan participants.
10
Executive Compensation Summary Table
The following table sets forth information concerning total compensation
earned or paid to the Chief Executive Officer and the four other most highly
compensated executive officers of the Company who served in such capacities as
of December 31, 2001 (the "named executive officers") for services rendered to
the Company during each of the last three years.
EXECUTIVE COMPENSATION SUMMARY TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------
Name and Fiscal Stock Options LTIP All Other
Principal Position Year Salary Bonus Awarded Payouts ($) Compensation(1)
R. Bruce Andrews 2001 $466,000 $279,600 50,000 $574,685 $28,840
President and Chief 2000 446,250 267,750 50,000 326,800 17,850
Executive Officer 1999 446,250 150,000 50,000 130,400 17,850
T. Andrew Stokes 2001 256,000 102,400 20,000 227,219 20,428
Senior Vice President of 2000 245,000 98,000 20,000 127,710 9,800
Corporate Development 1999 234,000 55,000 20,000 48,900 9,360
Mark L. Desmond 2001 224,000 89,600 17,500 201,140 19,160
Senior Vice President and 2000 214,000 85,600 17,500 114,380 8,560
Chief Financial Officer 1999 204,000 50,000 17,500 45,640 8,160
Donald D. Bradley 2001 161,644(2) 63,500 17,500 -- 15,810
Senior Vice President 2000 -- -- -- -- --
and General Counsel 1999 -- -- -- -- --
John J. Sheehan, Jr. 2001 179,000 53,700 12,500 143,671 17,352
Vice President of 2000 171,000 51,300 12,500 81,700 6,831
Development 1999 163,000 48,900 12,500 32,600 6,520
(1) The Company provides the named executive officers with certain group
health, medical and other non-cash benefits generally available to all
salaried employees and not included in this column pursuant to SEC rules.
The amounts shown in this column include the following:
. The Company's matching contributions under the Company's deferred
compensation account and the Company's contribution under the Company's
401(K) plan.
(2) This amount is for the period from March 12, 2001 (commencement of Mr.
Bradley's employment with the Company).
11
Option Grants for 2001
The following table sets forth information with respect to option grants to
the named executive officers during fiscal 2001 and the potential realizable
value of such option grants:
. The number of shares of common stock underlying options granted during the
year;
. The percentage that such options represent of all options granted to
employees during the year;
. The exercise price;
. The expiration date; and
. The hypothetical present value, as of the grant date, of the options under
the option-pricing model discussed below.
The Company calculated the hypothetical value of the options as of their
date of grant using the Black-Scholes option pricing model, as permitted by SEC
rules, based upon a set of assumptions set forth in the footnote to the table.
This model is only one method of valuing options, and the reader should not
interpret the Company's use of the model as an endorsement of its accuracy. The
actual value of the options may be significantly different, and the value
actually realized, if any, will depend upon the excess of the market value of
the common stock over the option exercise price at the time of the exercise.
OPTION GRANTS DURING 2001
% of Total
Options
Granted to Hypothetical
Number of Employee Exercise Value at
Options in Price Expiration Grant
Name Granted(1) Fiscal Year ($/Share)(2) Date Date(3)
R. Bruce Andrews................................. 50,000 38% $14.875 1/19/11 $29,500
T. Andrew Stokes................................. 20,000 15% $14.875 1/19/11 11,800
Mark L. Desmond.................................. 17,500 13% $14.875 1/19/11 10,325
Donald D. Bradley................................ 17,500 13% $15.280 3/12/11 11,025
John J. Sheehan, Jr.............................. 12,500 10% $14.875 1/19/11 7,375
(1) Awards of dividend equivalents accompany the 2001 stock option grants on a
one-for-one basis. Such dividend equivalents are payable in cash until such
time as the corresponding stock option is exercised, based upon a formula
approved by the Compensation Committee. 50% of the dividend equivalent
award depends upon the Company's performance measured by total return to
stockholders (increase in stock price and dividends paid) over a
three-to-five year period, compared to a peer group of healthcare real
estate investment trusts as selected by the Compensation Committee. The
other 50% of the dividend equivalent award depends on performance standards
of (1) growth percentage of funds from operations, (2) multiple of funds
from operations, (3) dividend growth, (4) dividend yield, and (5) amount
and quality of new investments, and each of these five factors is reviewed
against the peer group; however, the determination as to whether this 50%
test is met in whole or in part is based on an overall judgment on the part
of the members of the Compensation Committee as to whether the Company's
performance as measured by these performance standards merits satisfying
this 50% of the dividend equivalents test.
(2) The market prices on the dates of the grants were the same as the exercise
prices.
(3) Calculated using the Black Scholes option valuation methodology. In using
this methodology, the Company utilized the following variables for Messrs.
Andrews, Stokes, Desmond and Sheehan: risk free rate of return of 5.17%;
.2721 three-year volatility factor; 12.37% dividend yield; and ten-year
option term, which yields a Black Scholes value for such stock options of
$0.59.
The Company utilized the following variables for Mr. Bradley: risk free rate
of return of 4.89%; .2721 three-year volatility factor; 12.04% dividend
yield; and ten-year option term, which yields a Black Scholes value for such
stock options of $.63.
12
Option Exercises and Values for 2001
The table below sets forth the following information with respect to option
exercises during fiscal 2001 by each of the named executive officers and the
status of their options at December 31, 2001:
. The number of shares of common stock acquired upon exercise of options
during 2001;
. The aggregate dollar value realized upon the exercise of such options;
. The total number of exercisable and non-exercisable stock options held at
December 31, 2001;
. The aggregate dollar value of in-the-money exercisable options at December
31, 2001.
AGGREGATE OPTION EXERCISES DURING 2001
AND OPTION VALUES ON DECEMBER 31, 2001
Number of Value of Unexercised
Shares Number of Unexercised In-the-Money Options
Acquired Upon Value Options 12/31/01 12/31/01(1)
Exercise of Realized Upon ------------------------- -------------------------
Name Option Exercise Exercisable Unexercisable Exercisable Unexercisable
R. Bruce Andrews -- $ -- 220,001 49,999 $71,918 $334,582
T. Andrew Stokes -- -- 87,001 19,999 28,768 133,832
Mark L. Desmond -- -- 76,999 17,501 25,169 117,106
Donald D. Bradley -- -- -- 17,500 -- 59,675
John J. Sheehan, Jr. -- -- 55,001 12,499 17,981 83,645
(1) In accordance with SEC rules, The Company calculates the values by
subtracting the exercise price from the fair market value of the underlying
common stock. For purposes of this table, fair market value is deemed to be
$18.69, the closing common stock price reported from the New York Stock
Exchange on December 31, 2001.
13
PERFORMANCE GRAPHS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
The following graph demonstrates the performance of the cumulative total
return to the stockholders of the Company's Common Stock during the previous
five years in comparison to the cumulative total return on the National
Association of Real Estate Investment Trusts (NAREIT) Equity Index and the
Standard & Poor's 500 Stock Index. The NAREIT Equity Index is comprised of all
tax-qualified, equity oriented, real estate investment trusts listed on the New
York Stock Exchange, the American Stock Exchange or the NASDAQ National Market.
[CHART]
NHP S&P 500 NAREIT Equity Index
------ ------ -----------------------
12/96 100.00 100.00 100.00
12/97 112.67 133.36 122.36
12/98 102.39 171.48 119.25
12/99 72.50 207.56 144.60
12/00 77.87 188.66 140.89
12/01 125.50 166.24 144.40
IT SHOULD BE NOTED THAT THIS GRAPH REPRESENTS HISTORICAL STOCK PERFORMANCE
AND IS NOT NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE PERFORMANCE.
14
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen") has served as the Company's
independent accountants since the inception of the Company in 1985. Arthur
Andersen provided various services to the Company in 2001 including the
examination of the Company's consolidated financial statements, limited reviews
of quarterly reports, services related to filings with the Securities and
Exchange Commission, and consultations on various tax matters.
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of the Company's financial statements for 2001 and the reviews of the financial
statements included in the Company's Forms 10-Q for 2001 was $90,500.
Financial Information Systems Design and Implementation Fees
None.
All Other Fees
The aggregate fees billed for all other professional services rendered
during 2001 was $160,000. The Audit Committee has concluded that the provision
of professional non-audit services is compatible with maintaining
Arthur Andersen's independence.
On March 13, 2002, the Board of Directors and the Audit Committee of the
Company decided to no longer engage Arthur Andersen as the Company's
independent public accountants and engaged Ernst & Young LLP ("Ernst & Young")
to serve as the Company's independent public accountants for the calendar year
2002.
Arthur Andersen's reports on the Company's consolidated financial statements
for each of the years ended 2001 and 2000 did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.
During the years ended December 31, 2001 and 2000, and through March 13,
2002, there were no disagreements with Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to Arthur Andersen's satisfaction,
would have caused Arthur Andersen to make reference to the subject matter in
connection with its report on the Company's consolidated financial statements
for such years; and there were no reportable events as defined in
Item 304(a)(1)(v) of Regulation S-K.
During the years ended December 31, 2001 and 2000 and through March 13,
2002, the Company did not consult Ernst & Young with respect to the application
of accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the Company's
consolidated financial statements, or any other matters or reportable events as
set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
The Company does not expect representatives of Arthur Andersen nor Ernst &
Young to be present at the annual meeting.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the annual meeting other than the
items referred to above. If any other matter is properly brought before the
meeting for action by stockholders, proxies in the enclosed form returned to
the Company will be voted in accordance with the recommendation of the Board of
Directors or, in the absence of such a recommendation, in accordance with the
judgment of the proxy holder.
15
ADDITIONAL INFORMATION
Stockholder Proposals for the 2003 Annual Meeting. Stockholders interested
in presenting a proposal for consideration at the Company's annual meeting of
stockholders in 2003 may do so by following the procedures prescribed in Rule
14a-8 under the Securities Exchange Act of 1934 and the Company's by-laws. To
be eligible for inclusion in the proxy statement, the Company's President must
receive the stockholder proposals no later than November 20, 2002.
Stockholders interested in presenting a proposal at the Company's annual
meeting of stockholders outside the procedures prescribed in Rule 14a-8 (i.e.,
a proposal to be presented at the annual meeting of stockholders in 2003 but
not included in the Company's proxy statement) must be received by the
Company's President no later than February 3, 2003 to be considered timely.
Under the SEC's proxy voting rules, the Company may exercise discretionary
voting authority on stockholder's proposal received after such date.
Proxy Solicitation Costs. The total cost of this solicitation will be borne
by the Company. In addition to use of the mails, proxies may be solicited by
directors and officers of the Company personally and by telephone or facsimile.
The Company may reimburse persons holding shares in their own names or in the
names of the nominees for expenses they incur in obtaining instructions from
beneficial owners of such shares. The Company has also engaged D.F. King, Inc.
to deliver proxies for a fee of approximately $750 plus out-of-pocket expenses.
By order of the Board of Directors,
R. Bruce Andrews
President and Chief Executive Officer
March 20, 2002
16
NATIONWIDE HEALTH PROPERTIES, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mark L. Desmond, Donald D. Bradley and Don
M. Pearson and each of them, as proxies, each with the power to appoint his
substitute, to represent and to vote as designated below, all the shares of
Common Stock of Nationwide Health Properties, Inc. held of record by the
undersigned on March 1, 2002, at the Annual Meeting of Stockholders to be held
on April 22, 2002 and at any adjournment thereof.
1. ELECTION OF DIRECTORS
[_] FOR each nominee listed below [_] WITHHOLD AUTHORITY
(except as marked to the To vote for each nominee below
contrary below)
R. Bruce Andrews and Charles D. Miller
(INSTRUCTION): To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below)
--------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any adjournment thereof.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned. If no specification is made, the Proxy will be voted
FOR proposal 1.
If any nominee named above declines or is unable to serve as a
director, the persons named as proxies, and each of them, shall have full
discretion to vote for any other person who may be nominated.
NOTE: Please sign exactly as name appears on this Proxy. When shares
are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 2002
---------------------------
---------------------------
Signature of Stockholder(s)
Please sign, date and return today in the enclosed envelope. This Proxy
will not be used if you attend the meeting in person and so request.