April 2,
2009
Dear
Stockholder:
You are cordially invited to attend the
Annual Meeting of Stockholders of Home Properties, Inc. The
Annual Meeting will be held on Tuesday, May 5, 2009, at 2:30 p.m. at the Dryden
Theatre of the International Museum of Photography at George Eastman House,
900 East Avenue, Rochester, New York 14607.
A Notice of Annual Meeting and a Proxy
Statement are attached. They describe the matters to be acted upon at
the Annual Meeting.
I hope
that you will join us at the meeting. Whether you attend or not, your
vote on all of the matters described in the Proxy Statement is very
important. Please sign, date and return the enclosed proxy card in
the envelope provided. Alternatively, you may choose to vote by
telephone or internet. Voting by any of these methods before the
meeting will insure that your shares are represented at the
meeting.
I look forward to seeing you at the
meeting.
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Sincerely,
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HOME
PROPERTIES, INC.
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Edward
J. Pettinella
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President
and Chief Executive Officer
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HOME
PROPERTIES, INC.
Suite
850
Clinton
Square
Rochester,
New York 14604
_______________________________________
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE
HELD ON MAY 5, 2009
_______________________________________
NOTICE IS HEREBY GIVEN that the 2009
Annual Meeting of Stockholders (the “Annual Meeting”) of Home Properties, Inc.
(the "Company") will be held on Tuesday, May 5, 2009 at 2:30 p.m. at the Dryden
Theatre of the International Museum of Photography at George Eastman House, 900
East Avenue, Rochester, New York 14607 for the following purposes:
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1.
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To
elect ten directors of the Company to serve until the 2010 Annual Meeting
of Stockholders and until their respective successors are
elected;
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2.
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To
ratify the appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for 2009;
and
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3.
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To
consider and act upon any other matters that are properly brought before
the Annual Meeting and at any adjournments or postponements
thereof.
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The Board
of Directors of the Company (the “Board” or the “Board of Directors”) set the
close of business on March 9, 2009 as the record date for the Annual
Meeting. Only stockholders whose names appear on the stock register
of the Company at the close of business on the record date will be entitled to
notice of and to vote at the Annual Meeting and at any adjournments or
postponements. (If you hold your stock in the name of a brokerage
firm, bank or other nominee, only that entity can vote your
shares. Please give instructions for your shares to be voted to the
person responsible for your account.)
There are four ways to
vote:
- by completing the enclosed
proxy card and returning it in the enclosed postage prepaid
envelope;
- by internet at
http://www.proxyvoting.com/hme;
- by toll-free telephone at
1-866-540-5760; or
- by written ballot at the
meeting.
If you vote by internet or telephone,
your vote must be received before 11:59 p.m. Eastern Standard Time on May 4,
2009, the day before the Annual Meeting. You may change your vote or
revoke your proxy at any time before the Annual Meeting:
- by returning a later dated
proxy card;
- by sending written notice
to Ann M. McCormick, Secretary of the Company at 850 Clinton
Square,
Rochester, New York
14604;
- by entering a new vote by
internet or telephone; or
- by completing a written
ballot at the Annual Meeting.
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Rochester,
New York
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By
Order of the Board of Directors
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April
2, 2009
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Ann
M. McCormick
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Secretary
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EVEN IF
YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE BY ONE OF THE ABOVE
METHODS. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF
YOU WISH, EVEN IF YOU HAVE PREVIOUSLY VOTED.
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General
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Board
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PROPOSAL 2: Ratification of Appointment
of the Company’s Independent Registered Public Accounting Firm for
2009
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HOME
PROPERTIES, INC.
Suite
850
Clinton
Square
Rochester,
New York 14604
_______________________________________
PROXY
STATEMENT
_______________________________________
FOR 2009
ANNUAL MEETING OF STOCKHOLDERS
To Be
Held on May 5, 2009
April 2,
2009
GENERAL
INFORMATION
This
Proxy Statement is delivered to you in connection with the solicitation of
proxies by the Board of Directors of Home Properties, Inc. (the "Company") for
use at the 2009 Annual Meeting of Stockholders of the Company (the "Annual
Meeting"). The Annual Meeting will be held on Tuesday, May 5, 2009 at
2:30 p.m. at the Dryden Theatre of the International Museum of Photography at
George Eastman House, 900 East Avenue, Rochester, New York
14607. The approximate date on which the enclosed form of proxy and
this Proxy Statement are first being sent to stockholders is April 2,
2009. The principal executive offices of the Company are located at
850 Clinton Square, Rochester, New York 14604.
Who
May Vote?
Stockholders
of the Company as of the Company’s record date, March 9, 2009, may
vote. On March 9, 2009, there were 32,858,614 shares of the Company’s
Common Stock outstanding. Each share of Common Stock has one
vote.
How
Do I Vote?
There are
four ways to vote:
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1.
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by
completing the enclosed proxy card and returning it in the enclosed
postage prepaid envelope;
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2.
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by
internet at
http://www.proxyvoting.com/hme;
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3.
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by
toll-free telephone at (866) 540-5760;
or
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4.
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by
written ballot at the Annual
Meeting.
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How
Does a Proxy Work?
The
Company’s Board of Directors is asking for your proxy. By giving us
your proxy, you authorize the proxy holders (Edward J. Pettinella, the Company’s
Chief Executive Officer and David P. Gardner, the Company’s Chief Financial
Officer) to vote your shares at the Annual Meeting in the manner you
direct.
If you
vote by any of the above methods but do not specify how you wish to vote your
shares, your shares will be voted “for” the election of all nominees for
director and “for” the ratification of the appointment of PriceWaterhouseCoopers
LLP as the Company’s independent registered accounting firm for
2009. The proxy holder will also vote shares according to his
discretion on any other matter properly brought before the meeting.
Important
Notice Regarding the Availability of Proxy Materials
for
the Annual Stockholders Meeting to Be Held on May 5, 2009
This
Proxy Statement and the 2008 Annual Report are available at
www.homeproperties.com/Investors
You may receive more than one proxy
card depending on how you hold your shares. For example, if you hold
shares through someone else, such as a stockbroker, you may get proxy material
from them. In order for you to vote those shares, you must provide
instructions to the record holder as provided in their instructions to
you. Even though you have not provided instructions to your record
holder, they may vote your shares “for” the election of the nominees for
director and “for” the ratification of the independent registered public
accounting firm.
What
Constitutes a Quorum?
The presence, in person or by proxy, of
holders of a majority of all of the shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Votes withheld, abstentions and “broker non-votes” will be
counted for purposes of determining whether a quorum is present. A
“broker non-vote” refers to a share represented at the Annual Meeting which is
held by a broker or other nominee who has not received instructions from the
beneficial owner or person entitled to vote such share and with respect to
which, on one or more but not all proposals, such broker or nominee does not
have discretionary voting power to vote such share.
What
Vote is Required to Approve Each Proposal?
Proposal 1: The affirmative
vote of a plurality of all of the votes cast at the Annual Meeting is required
for the election of directors. For purposes of the election of
directors, abstentions will not be counted as votes cast and will have no effect
on the result of the vote. Withhold votes are counted as votes
cast.
Proposal 2: The affirmative vote of a
majority of all of the votes cast at the Annual Meeting is required for
ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for 2009. For purposes
of the vote on Proposal 2, abstentions will not be counted as votes cast and
will have no effect on the vote.
Can
I Change My Vote?
You may
revoke your proxy before it is voted at the meeting by entering a new vote by
internet or telephone, by submitting a new proxy with a later date, by voting in
person at the Annual Meeting or by notifying the Company’s Secretary in writing
prior to the Annual Meeting as follows: Ann M. McCormick, 850 Clinton
Square, Rochester, New York 14604.
Can
I Access the Notice of Annual Meeting, Proxy Statement, Annual Report on Form
10-K and the Annual Report on the Internet?
The
Notice of Annual Meeting, Proxy Statement, Annual Report on Form 10-K for the
fiscal year ended December 31, 2008 and 2008 Annual Report are available on the
Company’s website at www.homeproperties.com under the heading
“Investors”.
ELECTION
OF DIRECTORS
At the
Annual Meeting, ten individuals will be elected to serve as directors until the
2010 Annual Meeting and until their successors are elected.
The Board
of Directors has nominated Stephen R. Blank, Josh E. Fidler, Alan L. Gosule,
Leonard F. Helbig, III, Nelson B. Leenhouts, Norman P. Leenhouts, Edward J.
Pettinella, Clifford W. Smith, Jr., Paul L. Smith, and Amy L. Tait to serve as
directors (the "Nominees"). Each of the Nominees is currently serving
as a director of the Company. The Board of Directors anticipates that
each of the Nominees will serve as a director if elected.
If the
Nominees are all elected, the size of the Board of Directors will decrease from
eleven members to ten members. Roger W. Kober, who has been a member
of the Board of Directors since 1994, is not eligible to stand for re-election
to the Board because he is 75 years old. The retirement policy for
Board members contained in the Company’s Corporate Governance Guidelines
provides that a director may not stand for re-election after they have reached
the age of 75. No successor is currently being nominated to replace
Mr. Kober.
The
affirmative vote of a plurality of the votes cast at the Annual Meeting is
required for the election of the Nominees as directors.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
Information
Regarding Nominees for Director
Brief
biographical descriptions of the Nominees follow. The information was
furnished to the Company by the Nominees. The information is up to
date through March 9, 2009.
Stephen R. Blank, age 63,
became a director of the Company on January 1, 2009. Since 1998, Mr.
Blank has been a Senior Fellow of Finance of the Urban Land Institute, a
non-profit education and research institute, which studies land use and real
estate development policy and practice. Prior to his association with
the Urban Land Institute, he was Managing Director, Real Estate Investment
Banking at Kidder, Peabody & Co., Inc., Cushman & Wakefield, Inc. and,
most recently, at CIBC Oppenheimer Corp. where he participated in Home
Properties' 1994 Initial Public Offering. Mr. Blank is a Trustee of
Ramco-Gershenson Properties Trust, a Director of MFA Financial, Inc. and a
member of the Urban Land Institute and National Association of Real Estate
Investment Trusts. He is a graduate of Syracuse University and holds
an MBA from Adelphi University.
Josh E. Fidler, age 53, has
been a director of the Company since August, 2004. Mr. Fidler is a
Founding Partner of Boulder Ventures, Ltd., a manager of venture capital funds,
which has been in operation since 1995. Since 1985, he has also been
a principal in a diversified real estate development business known as The Macks
Group. In 1999, the Company acquired 3,297 apartment units from
affiliates of The Macks Group. Mr. Fidler was also a principal of the
entity which owned a 240 unit apartment community which the Company purchased in
2004. He is a graduate of Brown University and received a law degree
from New York University. Mr. Fidler is a member of the Maryland
Region Advisory Board of SunTrust Bank, the Board of Johns Hopkins Medicine and
President of the Board of Trustees of The Park School.
Alan L. Gosule, age 68, has
been a director of the Company since 1996. Mr. Gosule is a partner in
the New York Office of Clifford Chance. Prior to August 2005, Mr.
Gosule was the Regional Head of Clifford Chance US LLP's Real Estate Department
for the Americas. Prior to 2002, Mr. Gosule was Regional Head of
Clifford Chance Tax, Pension and Employment Department for the
Americas. Prior to joining Clifford Chance in 1991, Mr. Gosule was a
partner of Gaston & Snow, where he was a member of the Management Committee
and Chairman of the Tax Department. He also served in the Office of
Chief Counsel of the Internal Revenue Service from 1966 to 1970. Mr.
Gosule serves on the Boards of Directors of MFA Financial, Inc., F.L. Putnam
Investment Management Company and Pioneer GP, the general partner of Pioneer
Southwest Energy Partners, L.P. Mr. Gosule also serves on the Board
of Trustees of the Ursuline Academy. Mr. Gosule is a graduate of
Boston University and received a law degree from Boston University Law
School. In addition, he received an LLM in Taxation from Georgetown
University.
Leonard F. Helbig,
III, age 63, has been a director of the Company since
1994. Since September 2002 he has served as a Director of Integra
Realty Advisors in Philadelphia. Between 1980 and 2002 he was
employed with Cushman & Wakefield, Inc. From 1990 until 2002,
Mr. Helbig served as President, Financial Services for Cushman &
Wakefield, Inc. Prior to that and since 1984, Mr. Helbig was the
Executive Managing Director of the Asset Services and Financial Services
Groups. He was a member of that firm's Board of Directors and
Executive Committee. Mr. Helbig is a member of the Urban Land
Institute, the Pension Real Estate Association and the International Council of
Shopping Centers. Mr. Helbig is a graduate of LaSalle University
and holds the MAI designation of the American Institute of Real Estate
Appraisers.
Nelson B. Leenhouts, age 73,
has served as Board Co-Chair since his retirement as Co-Chief Executive Officer
effective January 1, 2004. He had served as Co-Chief Executive
Officer, President and a director of the Company since its inception in
1993. Since its formation, he has also served as a director of Home
Properties Resident Services, Inc. (“HPRS”), for which he had also served in
various officer capacities prior to his retirement. Mr. Leenhouts
also served as a Senior Advisor to the Company pursuant to an Employment
Agreement with a term that expired on December 31, 2006. In
addition, Nelson Leenhouts was employed by the Company to fulfill additional
responsibilities with respect to the Company's development activities pursuant
to a Development Agreement, the term of which also expired on December 31,
2006. Mr. Leenhouts subsequently entered into an Employment Agreement
with a term that expired on December 31, 2007. Until December
31, 2008, he continued as an employee of the Company working as a liaison to the
development team, but he did not have an employment agreement. Nelson
Leenhouts was the founder, and a co-owner, together with Norman Leenhouts, of
Home Leasing, and is currently the sole owner. Nelson Leenhouts
is a graduate of the University of Rochester. He is the twin brother
of Norman Leenhouts and the uncle of Amy L. Tait.
Norman P. Leenhouts, age 73,
has served as Board Co-Chair since his retirement as Co-Chief Executive Officer
effective January 1, 2004. He had served as Board Chair, Co-Chief
Executive Officer and a director of the Company since its inception in
1993. Since its formation, he has also served as a director of
HPRS. Mr. Leenhouts also served as a Senior Advisor to the
Company pursuant to an Employment Agreement with a term that expired on
December 31, 2006. Prior to January 1, 2006, Norman Leenhouts
was a co-owner, together with Nelson Leenhouts, of Home Leasing, where he had
served as Board Chair since 1971. He is currently the Chairman of
Broadstone Ventures, LLC and Broadstone Real Estate, LLC, formed to contain the
property management business of Home Leasing and of Broadstone Net Lease, Inc.,
which is a private REIT that invests in net lease properties, as well as
Broadstone Asset Management, LLC. Mr. Leenhouts and his wife are also
the sole owners of Knollwood Ventures, Inc., a spin-off from Home Leasing as of
January 1, 2006. He is a member of the Board of Trustees of the
University of Rochester, Roberts Wesleyan College and The Charles E. Finney
School, where he also serves as Board Chair. He is a graduate of the
University of Rochester and is a certified public accountant. He is
the twin brother of Nelson Leenhouts and the father of Amy L. Tait.
Edward J. Pettinella, age 57,
has served as President and Chief Executive Officer of the Company since January
1, 2004. He is also a director. He joined the Company in
2001 as an Executive Vice President and director. He is also the
President and Chief Executive Officer of HPRS. From 1997 until
February 2001, Mr. Pettinella served as President, Charter One Bank of New York
and Executive Vice President of Charter One Financial, Inc. From 1980
through 1997, Mr. Pettinella served in several managerial capacities for
Rochester Community Savings Bank, Rochester, NY, including the positions of
Chief Operating Officer and Chief Financial
Officer. Mr. Pettinella serves on the Board of Directors of
Rochester Business Alliance, United Way of Greater Rochester, The Lifetime
Healthcare Companies, National Multi Housing Council, Syracuse University School
of Business and the Geneseo Foundation Board. He is also a member of
Urban Land Institute. Mr. Pettinella is a graduate of the State
University at Geneseo and holds an MBA Degree in finance from Syracuse
University.
Clifford W. Smith, Jr., age
62, has been a director of the Company since 1994. Mr. Smith is the
Epstein Professor of Finance of the William E. Simon Graduate School of Business
Administration of the University of Rochester, where he has been on the faculty
since 1974. He has written numerous books and articles on a variety
of financial, capital markets and risk management topics and has held editorial
positions for a variety of journals. Mr. Smith is a graduate of Emory
University and has a PhD from the University of North Carolina at Chapel
Hill.
Paul L. Smith, age 73, has
been a director of the Company since 1994. Mr. Smith was a director,
Senior Vice President and the Chief Financial Officer of the Eastman Kodak
Company from 1983 until he retired in 1993. He was a member of the
Financial Accounting Standards Advisory Council. He is currently a
director of Constellation Brands, Inc. He is also a member of the
Board of Trustees of the George Eastman House and Ohio Wesleyan
University. Mr. Smith is a graduate of Ohio Wesleyan University and
holds an MBA Degree in finance from Northwestern University.
Amy L. Tait, age 50, has
served as a director of the Company since its inception in
1993. Effective February 15, 2001, Mrs. Tait resigned her
full-time position as Executive Vice President of the Company and as a director
of Home Properties Management, Inc. She continued as a consultant to
the Company pursuant to a consulting agreement that terminated on February 15,
2002. She founded Tait Realty Advisors, LLC in 2001, and is currently
the Chief Executive Officer and a director of Broadstone Ventures, LLC,
Broadstone Real Estate, LLC, Broadstone Net Lease, Inc. and Broadstone Asset
Management, LLC where she also serves as Secretary. Mrs. Tait joined
Home Leasing in 1983 and held several positions with the Company, including
Senior and Executive Vice President and Chief Operating Officer. She
currently serves on the M & T Bank Regional Advisory Board and the boards of
the United Way of Rochester, Center for Governmental Research, Allendale
Columbia School, Monroe County Center for Civic Entrepreneurship and the Simon
School Executive Advisory Committee. Mrs. Tait is a graduate of
Princeton University and holds an MBA from the William E. Simon Graduate School
of Business Administration of the University of Rochester. She is the
daughter of Norman Leenhouts and the niece of Nelson B. Leenhouts.
BOARD
MATTERS
The
Company is managed by its Board of Directors. If all of the Nominees
are elected, the Board will have ten members. With Roger W. Kober not
eligible to stand for re-election pursuant to the Board’s retirement policy, the
Board decided, at least for the current time, to reduce the size of the Board
from eleven members to ten.
The Board
holds regular meetings on a quarterly basis. Pursuant to the
Company’s By-Laws, the Board Chair, President or a majority of the Board of
Directors may call for a special meeting of the Board. During 2008,
the full Board of Directors met four times, including regular and special
meetings. Each director attended at least 75% of the Board’s
meetings.
Ten of
the Company’s eleven current Board members are not employed by the
Company. The Board of Directors has determined that seven of the ten
non-employee directors are “independent” within the meaning of the Securities
and Exchange Commission (“SEC”) and the New York Stock Exchange (“NYSE”) current
director independence standards. The independent directors are:
Stephen Blank, Josh Fidler, Alan Gosule, Leonard Helbig, Roger Kober, Clifford
Smith and Paul Smith. Assuming all of the Nominees are re-elected,
six of the ten directors will be independent. This represents more
than a majority of the members of the Board of Directors. The
directors determined by the Board not to be independent under the above
standards were Nelson Leenhouts, Norman Leenhouts, Edward Pettinella and Amy
Tait.
In
determining the independence of each director, the Corporate
Governance/Nominating Committee of the Board considered any relationships
between the Company and the individual director and the director’s immediate
family members as required under the applicable standards. The Board,
consistent with the view of the NYSE, determined that the ownership of even a
significant amount of stock in the Company is not a bar to a finding of
independence. Consistent with this view of the NYSE, the Board also
has determined that ownership of limited partnership units in Home Properties,
L.P. (“UPREIT Units”) does not bar the Board from determining that a director is
independent. Messrs. Gosule, Helbig, Kober, C. Smith and P. Smith
have no relationship with the Company other than their compensation and benefits
as members of the Board and its Committees and ownership of the Company’s Common
Stock.
In
evaluating the independence of Mr. Fidler, the Corporate Governance/Nominating
Committee and the full Board considered the additional relationships between Mr.
Fidler and the Company and determined that none of them was material and that
Mr. Fidler is independent. Specifically, Mr. Fidler is a principal in
a diversified real estate development business known as The Macks
Group. In 1999, the Company acquired 3,297 apartment units from
affiliates of The Macks Group. As partial consideration for the
purchase, Mr. Fidler and members of his family acquired approximately 800,000
UPREIT Units. Pursuant to the purchase agreement, the Company agreed
for a period of ten years not to sell or refinance the apartments in a
transaction which would require the sellers to recognize taxable income deferred
in connection with the sale. In addition, the Company agreed to
register with the SEC shares of its Common Stock for which the UPREIT Units
could be exchanged, to pay dividends on the UPREIT Units comparable to those
paid on the Company’s Common Stock, and to provide the holders of the UPREIT
Units certain rights to protect their tax and economic interests in the event of
a “going private” transaction involving the Company. The Board
determined that these rights are not material to the Company and do not impair
Mr. Fidler’s independence from management. In addition, in 2004, the
Company acquired a 240-unit apartment community for $29,496,000 in cash from an
entity owned by Mr. Fidler and members of his family. Certain customary
representations and warranties by both the Company and the sellers continue to
survive, including related indemnity obligations for any
breaches. The Board determined that since no breaches have occurred
in the almost five years since the acquisition and since any breaches by either
the Company or the sellers would not be material to the Company, the ongoing
contractual provisions are not material to the Company and do not impair Mr.
Fidler’s independence from management.
Norman
Leenhouts is not an independent director because he was employed by the Company
until December 31, 2006 and his brother Nelson was employed until December 31,
2008. Amy Tait was determined not to be an independent director
because of her and her family members’ interests in and control over Clinton
Square, the building in which the Company has its headquarters as disclosed in
“Transactions with Related Persons, Promoters and Certain Control
Persons”. Edward Pettinella is not independent as he is currently
employed by the Company.
In 2008,
each Board member participated in a written self-evaluation of their performance
as a Board member as well as an evaluation of the Board as a
whole. The Board and members of senior management also participated
in a written evaluation of the Chief Executive Officer.
The Board
has established certain minimum qualifications for prospective Board
members. These include a successful professional career as well as
the potential to contribute to the effectiveness of the Board as a
whole. Specific qualifications or skills that a prospective Board
member must possess include candor, trustworthiness, high ethical standards,
dedication and the desire to contribute. Specific expertise must
include one of the following: successful financial, legal, academic,
mergers and acquisitions, or business operating/technological
experience.
The
Corporate Governance/Nominating Committee utilizes a variety of methods for
identifying and evaluating nominees for director. The Committee
develops and updates a list of potential Board candidates that meet the Board
qualifications. Candidates may come to the attention of the Committee
through current Board members, stockholders, management or other
persons. To date, the Committee has not utilized the services of a
professional service firm to identify potential candidates, but it may do so in
the future. If a vacancy on the Board occurs or is anticipated, the
Committee selects candidates to have personal meetings with members of the
Committee, the Co-Chairs of the Board and the Chief Executive
Officer. Selected candidates would then be invited to interact with
other Board members and management. A candidate, if acceptable, would
then be elected by the Board (in the event of a mid-term vacancy) or be
nominated to stand for election at the next annual stockholders’
meeting.
The
Corporate Governance/Nominating Committee will consider director candidates
proposed by stockholders on the same basis as it considers other potential
candidates for Board membership. Stockholders may submit nominations,
which should include the name and address of the proposed candidate as well as
biographical information evidencing that the proposed candidate meets the
minimum qualifications and possesses the skills and expertise as required by the
Board and as described above under “Director Qualifications.” The
submission must also include the candidate’s written consent to the nomination
and to serve if elected. To be considered for nomination for election
at the 2010 Annual Meeting and inclusion in the Proxy Statement for the 2010
Annual Meeting of the Stockholders, stockholder submissions for nomination must
be received at the office of the Company in care of Secretary, Home Properties,
Inc., 850 Clinton Square, Rochester, New York 14604, on or prior to December 3,
2009.
Stockholders
and other interested parties may communicate with the Board of Directors by
sending written materials to the Board or any of the directors, including the
non-employee directors as a group and the Chair of the Corporate
Governance/Nominating Committee, in care of Secretary, Home Properties, Inc.,
850 Clinton Square, Rochester, New York 14604. They may also
communicate confidentially or anonymously through use of the Company’s hotline
at 1-877-888-0002. The Company’s Secretary will relay all written
communications to the Board of Directors or individual members designated by the
stockholder or other interested party.
None of the members of the Compensation
Committee is or has been an officer or employee of the Company or had any
relationship that is required to be disclosed as a transaction with a related
party.
BOARD
COMMITTEES
The Company has a separately designated
standing Audit Committee. The Audit Committee operates under a
written charter approved by the Committee and the Board. A copy of
the charter is available on the Company’s website at www.homeproperties.com
under the heading “Investors/Governance Documents Highlights.” In
addition, the Company will provide a copy of the charter to anyone, without
charge, upon written request addressed to the Corporate Secretary at Home
Properties, 850 Clinton Square, Rochester, New York 14604.
The Audit
Committee currently consists of Stephen Blank, Alan Gosule, Roger Kober and Paul
Smith. Paul Smith chairs this Committee. Following the
Annual Meeting, and contingent upon their re-election to the Board, the Audit
Committee will consist of Stephen Blank, Alan Gosule and Paul Smith with Paul
Smith continuing as Chair. Mr. Blank was added as a member of the
Audit Committee on January 1, 2009.
The Audit
Committee assists the Board in fulfilling its responsibility for general
oversight of the integrity of the Company’s financial statements, the Company’s
compliance with applicable laws and regulations including the Company’s own Code
of Business Conduct and Ethics, and the Company’s internal and disclosure
controls and procedures. The Audit Committee also selects and
oversees the Company’s independent registered public accounting
firm.
The Audit Committee has adopted
procedures for the receipt, retention and treatment of concerns and complaints
about accounting, internal controls and auditing matters. The Audit
Committee oversees the existence of a “hot line” (1-877-888-0002) where such
concerns and complaints can be anonymously reported.
The Board of Directors has reviewed the
qualifications of each member of the Audit Committee and has determined that
each member is independent as required by applicable securities laws and by the
listing standards of the NYSE. No Audit Committee member serves on
the audit committee of more than two other public companies. In the
exercise of its business judgment, the Board of Directors has also determined
that each member of the Audit Committee is financially
literate. Finally, the Board has determined that each of Stephen
Blank, Roger Kober and Paul Smith qualifies as an “audit committee financial
expert” as defined by applicable SEC rules, although Mr. Kober is retiring and
will no longer serve as a Board member and as a member of the Audit Committee
following the Annual Meeting.
The Audit Committee works closely with
management and the Company’s independent registered public accounting
firm. It meets quarterly to review the Company’s financial
statements, and on other occasions, on an as needed basis. The Audit
Committee met five times in 2008. Each of the members of the Audit
Committee (except for Mr. Blank who did not become a member of the Audit
Committee until 2009) attended at least 75% of the Committee’s
meetings. In 2008, the Audit Committee conducted a
self-evaluation.
The Company has a separately designated
Compensation Committee. The Compensation Committee operates under a
written charter approved by the Committee and the Board. A copy of
the charter is available on the Company’s website at www.homeproperties.com
under the heading “Investors/Governance Documents Highlights.” In
addition, the Company will provide a copy of the charter to anyone, without
charge, upon written request addressed to the Corporate Secretary at Home
Properties, 850 Clinton Square, Rochester, New York 14604.
The
Compensation Committee currently consists of Josh Fidler, Leonard Helbig, Roger
Kober and Clifford Smith, each of whom has been determined by the Board to be an
independent director. Leonard Helbig chairs this
Committee. Following the Annual Meeting, and contingent upon their
re-election to the Board, the Compensation Committee will consist of Josh
Fidler, Leonard Helbig and Clifford Smith, with Mr. Helbig continuing as
Chair.
The
Compensation Committee reviews and approves, at least annually, the Company’s
goals and objectives relevant to compensation of the Company’s executive
officers, including the Chief Executive Officer, reviews on an annual basis the
performance of the Chief Executive Officer in light of those goals and
objectives, recommends to the other directors for approval the Chief Executive
Officer’s annual compensation, approves the compensation levels of the other
executive officers, reviews significant employee benefit programs, and
establishes and administers executive compensation programs.
The
agenda for meetings of the Compensation Committee is determined by its Chair
with the assistance of the Senior Vice President of Human Resources and the
Company’s General Counsel. Compensation Committee meetings are
regularly attended by the Co-Chairs of the Board, the Chief Executive Officer,
the Senior Vice President of Human Resources and the General
Counsel. At each meeting, the Compensation Committee meets in
executive session. The Compensation Committee’s Chair reports the
Committee’s recommendation on executive compensation to the Board.
Independent
advisors and the Company’s human resources department support the Compensation
Committee in its duties and, along with the Chief Executive Officer and Senior
Vice President of Human Resources, may be delegated authority by the
Compensation Committee to fulfill certain administrative duties regarding the
compensation programs. The Compensation Committee has sole authority
under its charter to retain, approve fees for and terminate advisors,
consultants and agents as it deems necessary to assist in the fulfillment of its
responsibilities. It reviews the total fees paid to outside
consultants by the Company to ensure that the consultants maintain their
objectivity and independence when rendering advice to the Compensation
Committee.
In 2008,
the Compensation Committee retained the services of First Niagara Consulting
Group and Mercer (US) Inc. First Niagara Consulting Group was
retained by the Compensation Committee to assist with benchmarking activities as
well as to conduct a compensation analysis for all positions below the executive
group. Mercer was retained by the Compensation Committee to provide
advice on the structure and terms of the 2008 Stock Benefit Plan and to critique
the Compensation Discussion and Analysis included in the 2008 Proxy
Statement.
The
Compensation Committee also consults with senior management and, in particular,
the Chief Executive Officer and Senior Vice President of Human Resources in
making determinations about the executive compensation program and the
compensation of individual executive officers.
The Compensation Committee met five
times in 2008. Each of the members of the Compensation Committee
attended at least 75% of the Committee’s meetings. In 2008, the
Compensation Committee conducted a self-evaluation.
The Company has a separately designated
Corporate Governance/Nominating Committee. The Corporate Governance/Nominating
Committee operates under a written charter approved by the Committee and the
Board. A copy of the charter is available on the Company’s website at
www.homeproperties.com under the heading “Investors/Governance Documents
Highlights.” In addition, the Company will provide a copy of the
charter to anyone, without charge, upon written request addressed to the
Corporate Secretary at Home Properties, 850 Clinton Square, Rochester, New York
14604.
Pursuant
to its charter, the Corporate Governance/Nominating Committee at all times
consists of at least three directors, all of whom are independent directors and
two of whom are the Chairs of the Audit and Compensation
Committees. This Committee currently consists of Alan Gosule,
Leonard Helbig, Clifford Smith and Paul Smith, each of whom has been determined
by the Board to be an independent director. Clifford Smith chairs the
Corporate Governance/Nominating Committee. Following the Annual Meeting, and
contingent upon their re-election to the Board, the Corporate
Governance/Nominating Committee will continue to consist of Alan Gosule, Leonard
Helbig, Clifford Smith and Paul Smith, with Clifford Smith continuing as
Chair.
The
Corporate Governance/Nominating Committee identifies individuals qualified to
become Board members consistent with criteria approved by the Board, evaluates
the size, composition and organization of the Board, monitors implementation of
specific corporate governance initiatives, reviews any stockholder proposals
submitted to the Company and oversees the evaluation of the Board and the Chief
Executive Officer.
The Corporate Governance/Nominating
Committee met four times in 2008. Each of the members of this
Committee attended at least 75% of the Committee’s meetings. In 2008,
the Corporate Governance/Nominating Committee conducted a
self-evaluation.
The Company has a separately designated
Real Estate Investment Committee. The Real Estate Investment
Committee operates under a written charter approved by the Committee and the
Board. A copy of the charter is available on the Company’s website at
www.homeproperties.com under the heading “Investors/Governance Documents
Highlights.” In addition, the Company will provide a copy of the Charter to
anyone, without charge, upon written request addressed to the Corporate
Secretary at Home Properties, 850 Clinton Square, Rochester, New York
14604. The charter for the Real Estate Investment Committee requires
that it consist of at least three directors, at least a majority of whom shall
be non-employee directors.
Josh
Fidler, Leonard Helbig, Nelson Leenhouts, Edward Pettinella and Amy Tait are the
current members of the Real Estate Investment Committee. Amy Tait
chairs this Committee. Following the Annual Meeting, and contingent
upon their re-election to the Board, the Committee will continue to consist of
Josh Fidler, Leonard Helbig, Nelson Leenhouts, Edward Pettinella and Amy Tait,
with Amy Tait continuing as Chair.
The
purpose of the Real Estate Investment Committee is to review potential
acquisitions, dispositions and developments and to approve, or to recommend to
the full Board for approval, acceptable transactions pursuant to the
authorization parameters established by the Board.
The Real Estate Investment Committee
met six times in 2008. Each of the members of this Committee attended
at least 75% of the Committee’s meetings. In 2008, the Real Estate
Investment Committee conducted a self-evaluation.
In 2008,
the Company paid its non-employee directors an annual stipend of
$30,000. An additional stipend in the amount of $10,000 was paid to
the Chair of each of the committees. Norman Leenhouts was paid an
additional annual stipend of $100,000 for his services as Co-Chair and for
additional services to be rendered in connection with the Company’s property
acquisition and disposition activities. Non-employee directors were
also paid $1,400 for attendance (in person or by telephone) at each Board and
committee meeting. All of the amounts are paid
quarterly. In addition, in 2008, each of the non-employee directors
was issued 1,098 shares of restricted stock and 3,957 options pursuant to the
Company’s 2008 Stock Benefit Plan. The options were issued at an
exercise price of $52.56 per share, which was the closing price of a share of
the Company’s Common Stock on the date of grant, which was the date of the 2008
Annual Meeting.
In 2009,
the non-employee directors continue to be paid the same stipend, additional
Chair stipend and meeting fees as they were paid in 2008. Since he is
no longer an employee of the Company, commencing January 1, 2009, Nelson B.
Leenhouts is being paid compensation as a director on the same basis as Norman
Leenhouts, the other Co-Chair, including the additional $100,000 annual stipend,
which Nelson Leenhouts will receive for his services as Co-Chair and for
additional services to be rendered in connection with the Company’s development
activities. It is expected that the Board will consider whether to
make any changes to Board compensation at its May 2009 meeting. At
that time, it will also evaluate and approve any additional equity awards for
the non-employee directors. For 2009, the Board has approved the
payment of an additional annual allowance in the amount of $30,000 to each of
Nelson Leenhouts and Norman Leenhouts to reimburse them for costs associated
with offices and administrative support that were previously provided by the
Company.
Under the
Second Amended and Restated Director Deferred Compensation Plan (the “Director
Deferred Compensation Plan”) approved by the stockholders at the 2005 Annual
Meeting, the non-employee directors can defer up to 100% of their total annual
cash compensation (including meeting fees) for three, five or ten years and
their compensation in the form of restricted stock for five or ten
years. The Company matches 10% of the deferred cash amount, which
amount vests after three years. A "phantom" stock account is
established for each of the director and the Company contribution
amounts. Each deferral and the Company contribution is reflected by
crediting those accounts with the phantom equivalent of the number of shares of
the Company's Common Stock that could be purchased with the amounts deferred and
contributed at the Common Stock's fair market value as of the day before the
compensation would otherwise have been paid, or with the number of shares of
restricted stock deferred. Participants' accounts are also credited
with the number of shares of the Company's Common Stock that could be purchased
with hypothetical dividends that would be paid with respect to shares previously
allocated to the accounts on the same date and at the same price that shares are
purchased for participants in the dividend reinvestment feature of the Company's
Dividend Reinvestment and Direct Stock Purchase Plan (the
“DRIP”). Payments out of the deferred accounts, upon vesting or
otherwise, are made by issuance of Common Stock, except in the event of payment
by reason of a change in control in which event payment may be made in cash or
by issuance of Common Stock at the election of the Compensation
Committee. The Director Deferred Compensation Plan is designed to
provide substantially the same benefits to the non-employee directors as are
provided to eligible employees under the Company's Deferred Bonus Plan (the
“Deferred Bonus Plan”).
Directors
of the Company who are employees of the Company do not receive any compensation
for their services as directors. All directors are reimbursed for their expenses
incurred in attending directors' meetings.
The following table summarizes the
compensation paid by the Company to non-employee directors for the year ended
December 31, 2008. There are no amounts to report in the Non-Equity
Incentive Plan Compensation and the Change in Pension Value and Nonqualified
Deferred Compensation Earnings columns so these have not been included on the
table.
2008
DIRECTOR COMPENSATION TABLE
|
Name(1)
|
Fees
Earned or
Paid in Cash ($)
|
Stock Awards ($)(2)
|
Option Awards ($)(3)
|
All
Other
Compensation ($)(4)
|
Total ($)
|
|||||||||||||||
|
Josh
E. Fidler
|
51,000 | 82,946 | 17,460 | 13,800 | 165,206 | |||||||||||||||
|
Alan
L. Gosule
|
52,400 | 86,506 | 22,895 | 16,780 | 178,581 | |||||||||||||||
|
Leonard
F. Helbig III
|
70,800 | 94,002 | 22,895 | 18,253 | 205,950 | |||||||||||||||
|
Roger
W. Kober
|
51,000 | 84,250 | 30,175 | 17,124 | 182,549 | |||||||||||||||
|
Norman
P. Leenhouts(5)
|
155,200 | 87,032 | 14,562 | 9,193 | 265,987 | |||||||||||||||
|
Clifford
W. Smith Jr.
|
65,200 | 93,442 | 22,895 | 20,417 | 201,954 | |||||||||||||||
|
Paul
L. Smith
|
63,800 | 91,753 | 22,895 | 15,401 | 193,849 | |||||||||||||||
|
Thomas
S. Summer
|
28,700 | 92,424 | 2,898 | 7,460 | 131,482 | |||||||||||||||
|
Amy
L. Tait
|
55,400 | 86,506 | 22,895 | 15,058 | 179,859 | |||||||||||||||
(1) Thomas
Summer is listed on this table since he served as a director until the 2008
Annual Stockholders’ Meeting on May 1, 2008. Mr. Summer did not stand
for re-election as a director at the 2008 Annual Meeting because of
responsibilities associated with a new employment position. Nelson
Leenhouts is not listed on this table since he was an employee of the Company in
2008 as described in “Transactions with Related Persons, Promoters and Certain
Control Persons” on page 36. Mr. Leenhouts did not receive any
compensation for his services as a director in 2008.
(2) Each
of the listed directors, except for Mr. Thomas Summer, was granted 1,098 shares
of restricted stock in 2008. This column represents the dollar amount
recognized for financial statement reporting purposes with respect to 2008 for
the fair value of restricted stock granted in 2008 as well as prior years, in
accordance with Statement of Financial Accounting Standards No. 123R (“SFAS
123R”). The amounts represent the Company’s accounting expense for
2008 for these awards and do not equal the value that will be received by the
directors. The grant date fair value for the restricted stock issued
in 2008 was $54,999, which was calculated using the closing price of the
Company’s Common Stock on the date of grant. For additional
information, refer to Note 9 of the Company’s financial statements in the Form
10-K for the year ended December 31, 2008, as filed with the SEC. To
the extent that a director has elected to participate in the Deferred
Compensation Plan, this column also includes the value of the 10% Company match
as recorded on the Company’s financial statements in 2008. Of the
amounts listed in this column, the following amounts represent the value of the
Company match: Mr. Leonard Helbig $7,496; Mr. Norman Leenhouts
$15,936; Mr. Clifford Smith $6,936.
(3) Each
of the listed directors, except for Mr. Thomas Summer, was granted options to
purchase 3,957 shares of the Company’s Common Stock in 2008. This
column represents the dollar amount recognized for financial statement reporting
purposes with respect to 2008 for the fair value of stock options granted to
each of the directors in 2008 as well as prior years, in accordance with SFAS
123R. These amounts represent the Company’s accounting expense for
2008 for these awards and do not equal the value that will be received by the
directors. The grant date fair value of these options was $5.52 per
share or $21,843 in the aggregate per director. This value was
calculated using the Black-Scholes formula. For additional
information on the valuation assumptions with respect to the 2008 grants as well
as the grants made prior to 2008, refer to Note 9 of the Company’s financial
statements in the Form 10-K for the year ended December 31, 2008, as filed with
the SEC.
(4) This
column includes: (a) dividends paid on all shares of restricted stock
held by each of the listed directors whether receipt of the restricted stock was
deferred or not; plus (b) value of all hypothetical dividends paid in 2008 on
the 10% Company match shares in the listed director’s deferred compensation
account. In addition, this column includes $4,155 for each of the
directors, except for Mr. Thomas Summer. This amount represents
compensation for the difference between the approved option value of $26,000 and
the value of the options actually issued using the Black-Scholes
formula.
(5) In
addition to the above amounts, Norman Leenhouts received $30,678 in dividends
paid in 2008 on shares of restricted stock issued to him when he was still an
employee of the Company.
The following table shows the aggregate
number of outstanding shares of restricted stock and options held by each
non-employee director at December 31, 2008.
|
Name
|
Restricted Shares(1)
|
Unvested Options
|
Vested Options
|
|||||||||
|
Josh
E. Fidler
|
3,913 | 10,954 | 750 | |||||||||
|
Alan
L. Gosule
|
4,313 | 12,354 | 17,350 | |||||||||
|
Leonard
F. Helbig III
|
4,613 | 12,354 | 10,350 | |||||||||
|
Roger
W. Kober
|
4,313 | 12,354 | 10,350 | |||||||||
|
Norman
P. Leenhouts
|
3,704 | 33,619 | 50,748 | |||||||||
|
Clifford
W. Smith Jr.
|
4,613 | 12,354 | 17,350 | |||||||||
|
Paul
L. Smith
|
4,313 | 12,354 | 3,150 | |||||||||
|
Amy
L. Tait
|
4,313 | 12,354 | 4,750 | |||||||||
(1) Some
of the directors deferred receipt of their restricted stock pursuant to the
Director Deferred Compensation Plan. This column includes those
shares as follows: Alan Gosule 1,275 shares; Leonard Helbig 3,673
shares; Roger Kober 2,275 shares; Norman Leenhouts 1,098 shares and Clifford
Smith 3,673 shares.
A
significant part of the Company’s culture is the focus on “doing the right
thing.” The Company has adopted a Code of Business Conduct and Ethics
(“Code of Ethics”) to embody the Company’s commitment to continue to conduct
business in accordance with the highest ethical standards. That Code
of Ethics was recently revised. The Code of Ethics applies to all
employees and directors of the Company. The Code of Ethics covers
such topics as conflicts of interest, proper use of Company property, complete
and accurate reporting and disclosure of its business and financial results and
compliance with laws. Each employee and each member of the Board of
Directors is required on an annual basis to acknowledge that they have received
a copy of and reviewed the Code of Ethics and to disclose any situation that may
conflict with the provisions of the Code of Ethics.
The
Company has also adopted a Code of Ethics for Senior Financial Officers (“Senior
Financial Officer Code of Ethics”) that applies to the Chief Executive Officer,
Chief Financial Officer, Treasurer and Controller. These individuals
also are required to comply with the Code of Ethics.
The Code of Ethics and Senior Financial
Officer Code of Ethics meet the definition of “Code of Ethics” under the rules
and regulations of the SEC and the listing standards of the
NYSE. Both Codes are available on the Company’s website at
www.homeproperties.com under the heading “Investors/Governance Documents
Highlights.” In addition, the Company will provide a copy of the
Codes to anyone, without charge, upon written request addressed to the Corporate
Secretary at Home Properties, Inc., 850 Clinton Square, Rochester, NY
14604. Amendments to the Code of Ethics and Senior Financial Officer
Code of Ethics that apply to the executive officers and directors of the Company
and any waivers granted thereunder to those individuals will be posted on the
Company’s website. The Audit Committee of the Board of Directors
monitors the implementation and enforcement of both Codes.
The Board
of Directors has adopted corporate governance guidelines (the “Guidelines”)
which meet the requirements of the listing standards of the NYSE and cover such
topics as director qualifications and responsibilities, director access to
management, and director orientation and continuing education. Some
specific policies included in the Guidelines follow.
Retirement
Age. The retirement age for directors is 75.
Change
of Employment. Any director who changes jobs or employers or
otherwise experiences a significant change in job responsibilities is to submit
a letter to the Board offering to resign as a Board member.
Other
Boards. Without the approval of the Corporate
Governance/Nominating Committee, directors may not serve on the boards of more
than two additional public companies.
Stock
Ownership. Within five years of becoming a director of the
Company, directors are required to have equity in the Company having a then
current value of not less than $100,000.
Meeting
Attendance. Directors are expected to attend each annual
stockholders’ meeting, all Board meetings and meetings of the Committees on
which they serve. All of the then current directors attended the 2008
Annual Meeting of Stockholders.
Executive
Sessions. The non-management directors are to meet at least
quarterly in executive sessions and, at least once per year, without any
directors who are not independent directors. The Chair of the
Corporate Governance/ Nominating Committee presides at the executive
sessions.
A copy of the Guidelines is available
on the Company’s website at www.homeproperties.com under the heading
“Investors/Governance Documents Highlights.” In addition, the Company
will provide a copy of the Guidelines to anyone, without charge, upon written
request addressed to the Corporate Secretary at Home Properties, Inc., 850
Clinton Square, Rochester, NY 14604.
The 2003
Stock Benefit Plan and the 2008 Stock Benefit Plan include some features that
are designed to closely align the interests of management with those of the
stockholders. Options may not be repriced. Options granted
to directors and executive officers do not vest automatically upon retirement
but continue to vest as scheduled. Directors and the executive
officers of the Company may receive cash on an exercise only in an amount
sufficient to pay the exercise price and related taxes and must hold an
equivalent number of shares as were issued on an option exercise for a one-year
period.
The
Company's mission is to maximize long-term stockholder value by acquiring,
repositioning, developing, and managing market-rate apartment communities while
enhancing the quality of life for its residents and providing employees with
opportunities for growth and accomplishment. The Company’s vision is to be a
prominent owner and manager of market-rate apartment communities located in
selected high barrier, high growth markets.
The
Company's long-term business strategies include: (i) aggressively managing and
improving its communities to achieve increased net operating income; (ii)
acquiring additional apartment communities with attractive returns at prices
that provide a positive spread over the Company's long-term cost of capital;
(iii) developing new apartment communities on entitled land, on land adjacent to
existing owned communities and where there are density opportunities to replace
existing garden apartments with mid- or high-rise structures; (iv) disposing of
properties that have reached their potential, are less efficient to operate, or
are located in markets where growth has slowed to a pace below the markets
targeted for acquisition; and (v) maintaining a strong and flexible capital
structure with cost-effective access to the capital markets.
The
Company's executive compensation philosophy supports its mission of creating
long-term value for stockholders and rewards successful execution of its vision
and business strategies outlined above. The Company believes that its
success in achieving these goals is, in large part, attributable to the
performance and dedication of its employees and, in particular, to the
leadership efforts of its executive officers. It is therefore
important that the interests of executives be aligned closely with the interests
of stockholders.
The
Company’s executive compensation program for its chief executive officer, chief
financial officer and the three other most highly compensated executive officers
(our “Named Executive Officers”) has the following key objectives:
|
·
|
Attraction
and Retention: The Company seeks to
attract and retain highly capable executives both from within and outside
the multifamily REIT industry by offering a competitive total compensation
package.
|
|
·
|
Motivation: The Company endeavors
to motivate its executives to maximize the long-term value of the Company
by achieving certain operational and financial
goals.
|
|
·
|
Linkage: The Company’s
executive compensation program is tied directly to the operating,
financial and stock performance of the Company since the payout under the
bonus plan and the value of equity awards are directly impacted by that
performance. By so ensuring that executives are rewarded in
step with the Company’s performance, their interests are aligned with the
interests of the Company’s
stockholders.
|
Oversight
of the Executive Compensation Program
The
Compensation Committee (the “Committee”) is responsible for, among other things,
establishing, administering and reviewing compensation plans and policies for
executive officers and ensuring that these executive officers are compensated in
a manner consistent with the philosophy and objectives outlined
above. The Committee also administers the Company's stock option
plans (including reviewing and approving stock option grants and other awards to
executive officers), reviews and approves the Company's goals and objectives
relevant to compensation of the executive officers and considers the structure
of the Company's compensation program as it applies to all
employees. When appropriate, the Committee recommends to the full
Board changes to the executive and the general compensation plans. In
addition, on an annual basis, the Committee makes specific compensation
recommendations to the Board relating to the Company's Chief Executive Officer
and approves the compensation for the other executive officers.
For
additional information on the members of the Committee and on the structure,
scope of authority, and operation of the Committee, see “Compensation Committee”
on page 8.
Setting
Executive Compensation
Guiding
Principles
It is the
Committee's practice to provide a balanced mix of fixed compensation, in the
form of salary and 401(k) savings plan match, and incentive compensation both
short-term, in the form of the annual incentive (bonus), and long-term, in the
form of options and restricted stock in order to align the current and long-term
interests of executives with that of stockholders and to encourage executives to
act in the interest of stockholders. The Committee takes into account the
aggregate amount and mix of all components of compensation, when considering
compensation decisions affecting the Chief Executive Officer and the other
executive officers. In addition, when reviewing executive
compensation, the Committee also takes into account the appreciation or loss due
to options and restricted stock granted by the Company. Although the
Committee does not target a specific level of compensation relative to industry
peers, for a typical year it generally seeks to provide total compensation
(consisting of base salary, annual incentives and equity incentives)
between the 50th and
75th
percentile of the market with factors such as market capitalization of the
peers, an individual’s job performance and length of service, the current
recruiting or retention market for the position and the value of the position
impacting where the compensation for a particular executive falls within that
range.
The
Committee believes it is necessary to appropriately balance the total package
and ensure that each component of the package contributes appropriately to the
achievement of the objectives of the executive compensation program in order to
provide a market-competitive level of compensation and benefits, as well as to
ensure the health of the Company, which benefits employees and stockholders
alike. It is the Committee's practice to discuss and evaluate data
and make the most significant compensation decisions in a multi-step process
over more than one meeting, so that Committee members have the ability to
consider and discuss alternative courses of action, to request additional
information as necessary and to raise and discuss related
questions.
As part
of its annual review process, the Committee reviews three tally sheets outlining
the Chief Executive Officer’s compensation: (1) a three-year computation of
total compensation broken down by each individual compensation component; (2)
equity grants and stock ownership; and (3) compensation payable as a result of
the CEO’s termination under various scenarios. Each component of
compensation is evaluated first separately and then as a whole against
achievement of established financial performance measures, corporate objectives
and peer group market data described below (see “Competitive
Benchmarking”). All tally sheets are considered and influence the
final recommendation regarding CEO compensation made by the Compensation
Committee to the full Board for approval. The full Board also
considers written evaluations of the Chief Executive Officer’s performance
completed by each member of the Board as well as each of the executive officers
who report directly to the CEO. The Board meets in executive session
to approve each element of the compensation package for the Chief Executive
Officer.
Role
and Responsibilities
The
Compensation Committee has sole authority under its Charter to retain advisors
and consultants as it deems appropriate. In 2008, the Committee
retained First Niagara Consulting to assist it with its benchmarking activities
as described below as well as to conduct a compensation analysis for all
positions below the executive group. The Committee also retained
Mercer (US) Inc. to critique the Company’s Compensation Discussion &
Analysis disclosed in its 2008 Proxy Statement and to provide advice on the
structure and terms of the Company’s 2008 Stock Benefit Plan.
In
addition to considering input provided by its outside advisors and consultants,
the Committee also considers input from senior management in making
determinations regarding the overall executive compensation program and the
individual compensation of the executive officers. In particular, the
Chief Executive Officer annually reviews the performance of each of the
executive officers. He also works with the Company’s human resources
team to evaluate each component of compensation paid to the other executive
officers separately and then as a whole against industry data, achievement of
corporate and personal objectives and financial performance. The
conclusions reached and recommendations for each compensation component for each
of the executive officers are presented to the Committee. The
Committee can exercise its discretion in modifying any recommended component of
the executives’ compensation.
The
Company's human resources team supports the Committee and its work and, in some
cases, acts pursuant to delegated authority to fulfill various functions in
administering the Company's compensation programs.
Competitive
Benchmarking
As part
of its consideration as to the appropriateness of the executive officers'
compensation, the Committee reviews market data for executives in the
residential sector classification of real estate companies and for executives in
comparably-sized companies in the services industry. The primary
benchmark used in 2008 by the Committee for the Chief Executive Officer's
compensation, as well as the compensation of the other Named Executive Officers,
was the peer group in the multifamily REIT industry (the “Industry Peer
Group”). This is substantially the same peer group that is used to
calculate the Net Operating Income component of the bonus payable pursuant to
the Company's Incentive Compensation Plan. See “Annual Incentive
Awards” beginning on page 17. The Industry Peer Group consists of
companies against which the Committee believes it competes for talent and for
stockholder investment. The Committee recognizes that the members of the
Industry Peer Group vary in terms of the size of their market capitalization and
takes this variation into account in its use of related data. In
connection with compensation decisions made in 2008, the Industry Peer Group was
comprised of the following companies:
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Apartment
Investment & Management Company
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AvalonBay
Communities, Inc.
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BRE
Properties, Inc.
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Camden
Property Trust
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Equity
Residential
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Essex
Property Trust, Inc.
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Mid-America
Apartment Communities, Inc.
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UDR,
Inc.
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Industry
Peer Group compensation data is taken from their most recently available proxy
statements and analyzed by the Company’s human resources team under the
direction of the Committee with the assistance of First Niagara
Consulting. In order to have available more current data, the
Compensation Committee decided that for 2009 and beyond it would delay all
compensation decisions, except for the amount of the bonus payable with respect
to service the prior year, for the Company’s executive officers and the
directors from its February meeting, when those decisions had historically been
made, until its May meeting. By May, the Industry Peer Group should
have issued their annual proxy statements. The amount of the bonus
for the prior year’s service will continue to be determined at the Committee’s
February meeting when actual results for the prior year are
available.
Industry
Peer Group compensation data is supplemented by survey data (collectively, the
“Survey Data”) obtained from the National Association of Real Estate Investment
Trusts (“NAREIT”), which is the trade association for REITs and publicly traded
real estate companies with an interest in U.S. property and investment markets
and from Watson Wyatt and Mercer, global human resource consulting and survey
firms. The compensation data from NAREIT reflects the real property
sector classification (including multifamily and other real estate sectors) and
the compensation data from Watson Wyatt and Mercer reflects services industry
companies with comparable revenue within the New York/Northeast and Mid-Atlantic
regions.
In 2008,
for the Chief Executive Officer and the Chief Financial Officer, the Committee
primarily used the Industry Peer Group data to determine the appropriate level
of compensation. For the other Named Executive Officers, peer group
data is not as readily available as positions and the responsibilities
associated with the positions vary from company to
company. Therefore, with respect to other Named Executive Officers,
the Committee and the Chief Executive Officer relied more heavily on the Survey
Data in their compensation deliberations. In certain instances, some
interpolation between market data points was made as the responsibilities
associated with a Named Executive Officer’s position did not match the
responsibilities described as being associated with the data point.
Based on
the data reviewed by the Committee, the Chief Executive Officer’s total
compensation for 2008 was set at approximately 70% of the average amount paid to
the CEOs of the Industry Peer Group and at the 55th
percentile of that paid to CEOs according to the Survey Data. Also,
according to the Survey Data, the total compensation paid to the remaining Named
Executive Officers in 2008 ranged between the 80th and
90th
percentile of that paid to similar executives (after some interpolation as
described above). Based on the very favorable financial and
operational performance of the Company in 2008, the Compensation Committee was
comfortable with the amount, balance and structure of the compensation provided
to the Named Executive Officers in 2008.
In
addition to the decision to defer some of the executive and director
compensation decisions until later in the year when more current proxy data is
available during 2008, the Committee also decided to broaden the group of
companies against which it benchmarks compensation decisions. The
Committee recognized that a number of consolidations and other events had
reduced the size of its industry peer group to a level that might not provide an
adequate data base. The Committee examined industry best practices
relative to peer group size and composition to guide selection of a broader more
robust peer group. After extensive study, with the assistance of
First Niagara Consulting, the Committee concluded that for 2009 and beyond, its
compensation deliberations would include comparisons to the compensation
programs of the Industry Peer Group plus 14 additional non-multifamily REITs
considered reasonably comparable in size and business scope. The
companies selected represented a cross-section of business strategies,
management structures, asset class, and geographic footprints. These
additional companies are:
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Brandywine
Realty Trust
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CBL
& Associates & Properties
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Colonial
Properties Trust
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Corporate
Office Properties Trust
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Cousins
Properties
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Duke
Realty Corp.
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Federal
Realty Investment Trust
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First
Industrial Realty Trust
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Highwoods
Properties
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Liberty
Property Trust
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MACK-CALI
Realty Corporation
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Regency
Centers Corp.
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Taubman
Centers
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Weingarten
Realty Investors
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The
Compensation Committee will periodically review and update the companies that
comprise its benchmarking group.
2008
Executive Compensation Components
For 2008, the primary elements of
compensation for the Named Executive Officers were:
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base
salary,
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annual
incentive awards,
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long-term
equity incentive awards,
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deferred
compensation, and
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retirement
and other benefits
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The
amount of cash compensation paid in 2008 in the form of salary and bonus in
proportion to total compensation for the Named Executive Officers ranges from
53% to 62%, with the Chief Executive Officer receiving the lowest percentage of
his total compensation in the form of cash. The Chief Executive
Officer also received a higher percentage of his cash compensation in the form
of bonus rather than salary. This is consistent with the Committee’s
philosophy that the proportion of an individual’s total compensation that varies
with Company performance should increase as the individual’s total compensation
and business responsibilities increase.
Base
Salary
The
Company provides Named Executive Officers and other employees with base salary
to compensate them for services rendered during the fiscal year. Base
salaries for the executive officers, including the Named Executive Officers, are
established based on the individual’s job responsibilities, performance and
experience, including specific experience in the position, the Company’s overall
budget for merit increases and the competitive environment. On an
annual basis, the Committee reviews and approves salary adjustments for the
executive officers, other than the Chief Executive Officer, based on a review of
competitive market data, an assessment of Company performance, as well as
recommendations of the Chief Executive Officer. With respect to salary
adjustments for the Chief Executive Officer, the Committee reviews competitive
market data, assesses the annual performance reviews for the Chief Executive
Officer completed by each member of the Board of Directors and his direct
reports, assesses Company performance, and, after extensive discussion at a
Committee executive session, makes a recommendation to the full Board for
approval during a Board executive session.
While the
individual performances of the Named Executive Officers in 2007 as well as the
Company’s financial performance were very favorable, the Committee and Named
Executive Officers mutually agreed to forego base salary increases in 2008 in
light of the then current as well as anticipated adverse economic
conditions. The approved annual base salaries for the Named Executive
Officers for 2008 are listed on the “Summary Compensation Table” on page
24.
Annual
Incentive Awards
The
Company’s Amended and Restated Annual Incentive Plan (the “Bonus Plan”) was
approved by the Board in February 2005 and is an annual cash incentive program
that motivates executive officers and certain other full-time employees to
maximize the Company's annual operating and financial performance and reward
participants based on the Company’s annual performance. The Committee annually
reviews the Bonus Plan to ensure it continues to provide the appropriate level
and type of motivation consistent with the Company’s strategic, operational and
financial objectives.
Bonus
Plan participants are eligible to earn a cash incentive award based upon the
Company’s performance on two measures: (1) growth in the Company’s funds from
operations (“FFO”) on a per share diluted basis from the previous year, and (2)
growth in “same store” (for 2008, this was properties owned since January 1,
2007) net operating income (“NOI”) from the previous year as compared to the NOI
growth for the companies in the Industry Peer Group. When evaluating
the appropriate metrics to use in the Bonus Plan, the Committee considered the
Company’s strategic, operational and financial objectives, as well as
industry-specific metrics typically used by peers, investors and analysts for
measuring financial success. FFO is considered by the Committee to be
an important indicator of the Company’s overall financial performance and is
therefore given a 75% weighting in determining incentive
payments. The Committee has discretion in determining the calculation
of FFO for purposes of the Bonus plan and may approve the exclusion, (in whole
or in part) of certain non-recurring items from the Company’s published FFO
results based on extraordinary events such as catastrophic natural disasters or
other adverse events outside of the control of management as well as the receipt
of income not related to the operations of the Company’s
business. The Bonus Plan specifically provides that gains and losses
on sale and impairment charges are not to be included in the calculation of
FFO. Any item excluded from the calculation of FFO in any year is
also excluded from the base for purposes of calculating FFO growth the following
year. Same store NOI relative to the Industry Peer Group, which is
considered by the Committee to be an important driver of real estate property
values and thus stockholder value, receives a 25% weighting. The
Committee periodically reviews the Bonus Plan metrics and their respective
weightings to ensure consistency with the Company’s business
objectives.
When
designing the Bonus Plan, the Committee identified a range of financial
performance for both FFO and NOI that reflected expected revenue growth and
economic conditions inherent in the Company’s strategic plan. Unlike
bonus plans adopted by many of the Industry Peer Group, the Company’s Bonus Plan
includes a range of possible outcomes rather than performance
targets. In consideration of the degree of difficulty associated with
achieving that range of FFO and NOI performance, the Committee specified that
4.0-12.0 bonus units could be earned. The Committee also established
a ceiling and a floor of expected financial performance for both the FFO and NOI
metrics. At the beginning of each year, the Committee reviews the
ceiling and the floor of the Bonus Plan. If industry conditions
merit, the Committee recommends to the Board that the ceiling or floor be
revised. The ceiling is intended to represent a difficult to achieve
level of performance and the floor to represent a modest (but not poor) level of
performance. In the event the Company experiences financial
performance in either FFO or NOI below the floor or above the ceiling, the
Committee has complete discretion in determining bonus unit award levels that it
will recommend for the Board’s approval. In such an event, the issues
the Committee considers, among others, are economic conditions, the Company’s
performance relative to the Industry Peer Group and extraordinary
events.
At the
beginning of each year, the Committee assigns a bonus factor to the Chief
Executive Officer and, with input from the Chief Executive Officer, assigns a
bonus factor to each of the other Named Executive Officers. It is the
Committee's philosophy that the proportion of an individual's total compensation
that varies with individual and Company performance should increase as the
individual's business responsibilities increase. Bonus factors
therefore range from 1% to 13%, depending on an individual’s role and
responsibility. The bonus factor assigned to each of the Named
Executive Officers for 2008 can be found on page 25 in footnote 5 to the
“Summary Compensation Table”. The annual bonus earned is equal
to a participant’s salary times the participant’s bonus factor times bonus units
earned, plus or minus discretionary performance factors as described
below. The Committee expects that, under normal economic conditions,
the Named Executive Officers will earn bonus payments equal to approximately 50%
to 75% of their base salaries and the Chief Executive Officer will earn bonus
payments approximating equal to 100% of his base salary. There is no
target bonus for any executive. By basing the bonus on year-over-year
change in FFO, rather than absolute FFO, the Company’s bonus payments are
sensitive to performance, which may cause the amount of the payments to vary
significantly from year to year. For 2008, because of extraordinary
operational and financial performance, the bonuses paid exceeded typical
expectations.
For 2008, the Company reported FFO
(calculated as provided for in the Bonus Plan) of $3.65 per
share. For 2007, the Company had reported FFO (calculated as provided
for in the Bonus Plan) of $3.24 per share. This represents growth of
12.7%. The Bonus Plan provides that for FFO growth of 7% and above,
there is a ceiling of 9 bonus units that may be awarded.
For 2008, the Company reported same
store NOI growth of 3.3%. This exceeded the Industry Peer Group’s
reported results and, pursuant to the formulas included in the Bonus Plan,
resulted in the award of 1.31 bonus units relating to the NOI growth
metric. This is above the floor and below the ceiling for the NOI
metric. Adding the FFO-related bonus units (9.0) to the NOI related
bonus units (1.31) resulted in a total bonus payout of 10.31 bonus
units.
The
Committee has discretion for determining and recommending to the Board what
portion of the annual cash bonus otherwise earned should be paid to the Chief
Executive Officer. In making its determination as to what portion of
the 2008 annual incentive (payable in 2009) should be paid to the Chief
Executive Officer, the Committee considered a variety of factors including
leadership and managerial competencies, execution of the Company’s business plan
and overall business strategy, the Company’s absolute and relative financial
performance as well as results from the performance appraisals completed by
directors and the Chief Executive Officer’s direct
reports. Specifically for 2008, the Committee considered the
following:
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Management
achieved all of the Board-sanctioned financial objectives for 2008
relating to FFO and NOI growth, narrowing the difference between the
Company’s stock price multiple and that of the Industry Peer Group,
acquisitions and dispositions and growth of the development
pipeline.
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The
Company ranked second in the Industry Peer Group in terms of total return
to stockholders for 2008, 2007 and for the three-year period ended on
December 31, 2008.
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Several
important initiatives led by the Chief Executive Officer and the senior
management team were successfully completed in 2008, including significant
expense reduction, implementation of a new web-based property management
system, growth in unencumbered assets and reduction in employee
turnover.
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Based on
the Committee’s consideration of all of these factors, in February 2009, the
Committee recommended and the Board approved payment to the Chief Executive
Officer of 100% of his 2008 annual incentive. With respect to
determination of final annual incentive awards to other executive officers,
including the Named Executive Officers other than the Chief Executive Officer,
up to 50% of the award payment is discretionary. The Chief Executive
Officer determines what portion of the annual incentive otherwise earned should
be paid to the executive officers through the evaluation of three performance
criteria: (1) results of the participant’s department, (2) the participant’s
performance, and (3) the participant’s relative influence on the Company’s
performance. Based on the Chief Executive Officer’s consideration of
all of these criteria, each of the other Named Executive Officers received 100%
of their 2008 annual incentive. From time to time, the Committee may
decide to provide in excess of 100% of the incentive award calculated under the
Bonus Plan in recognition of extraordinary efforts. Reasons for this
extra payment could include successful completion of a special project, singular
leadership on an important initiative and a temporary or short-term significant
increase in job responsibilities. No amounts in excess of 100% were
awarded to the Named Executive Officers with respect to their 2008 annual
incentive.
On an
annual basis, the Company enters into a Bonus Repayment Agreement with each of
the Named Executive Officers and all other executive officers, which states that
the Company may recover cash incentive compensation in the event of a
restatement of financial results. Under the Agreement, each executive
is required to return to the Company so much of the cash bonus paid to them for
services rendered during the restated period that would not have been paid if
the restated financial results had been originally stated
correctly.
Awards
made to the Named Executive Officers under the Bonus Plan in 2009 for
performance in 2008 are reflected in the Summary Compensation Table on page
24.
Long-Term
Equity Incentive Awards
Equity
incentive awards are provided to the Company’s Named Executive Officers, as well
as other key employees, in order to increase their personal stake in the
Company’s success and motivate them to enhance the long-term value of the
Company. Although the Committee does not target a specific mix of equity versus
cash compensation when setting awards each year, it does strive to deliver a
relatively large portion of the Named Executive Officers’ overall compensation
in the form of equity. The “Summary Compensation Table” demonstrates
that most of the increase in total compensation paid to the Named Executive
Officers over the prior three years has been in the form of increased equity
grants.
By using
a mix of stock options and restricted stock, the Company is able to encourage
employees to seek long-term appreciation in the value of the Company's Common
Stock and retain key employees. On an annual basis, the Committee
reviews and approves the equity incentives to be issued to each of the Named
Executive Officers for that year. At the same time, it makes a
recommendation relating to the Chief Executive Officer to the full Board for
approval at an executive session.
In
determining equity incentive awards for 2008, the Committee reviewed stock
compensation of the Chief Executive Officer and each of the other executive
officers in light of various factors including both Company and individual
performance for the prior year, the other elements of their compensation, their
overall equity interest in the Company, a comparison to the Industry Peer Group
and the value of long-term compensation paid to other executive officers of the
Company. For 2008, the Committee determined that a mix of 55% restricted stock
and 45% options was appropriate for the senior executives.
The level
of stock awards to be granted is based on the value of the grant rather than a
fixed number of shares. The Committee adjusts the value and the mix
on an annual basis depending on various factors including the competitiveness of
the executive’s overall total compensation and the executive’s
performance. There is no established target for long-term equity
incentive awards for any of the Named Executive Officers either as a dollar
value or as a percentage of their total compensation. Rather the
Compensation Committee reviews this component of each Named Executive Officer’s
total compensation on an annual basis.
Equity
incentive awards made to the Named Executive Officers in 2008 are described in
the 2008 Grants of Plan-Based Awards Table on page 26.
In 2009,
the Committee formalized its grant practice policy. As has always
been the case, the value of restricted shares awarded and the exercise price of
options granted is the price of a share of the Company’s Common Stock as of the
close of business on the grant date. With respect to the annual
issuance of options and restricted stock, the grant date will be set by the
Compensation Committee at its first meeting each year and must: (1) be a
business day on or after the date that the grant is approved by the Compensation
Committee or the Board of Directors, as applicable; and (2) must occur during
the trading window (pursuant to the Company’s Procedures and Guidelines
Governing Insider Trading and Tipping) next following the approval
date. With respect to equity issuances to new employees, the grant
date will be the first day of the trading window following the date of the next
regularly scheduled Compensation Committee meeting to occur following the hire
date. This policy ensures that grants are made shortly after earnings
announcements so that the market has fully adjusted for the results before the
grants are made.
Deferred
Compensation
The
Company also has a Deferred Bonus Plan which permits certain employees,
including the Named Executive Officers, to defer up to 100% of their annual cash
bonus awarded under the Bonus Plan for three, five or ten years. As
additional incentive for deferring the receipt of annual cash bonuses, the
Company matches 10% of the amount deferred. The Company match vests
after three years. The purpose of the Deferred Bonus Plan is to
assist key employees with their individual tax and financial planning and to
permit the Company to remain competitive in attracting, retaining, motivating
and rewarding key employees who can directly influence the Company’s operating
results.
Further
details with respect to the Deferred Bonus Plan and voluntary deferrals under
that Plan are provided in the “Introduction to 2008 Summary Compensation”
beginning on page 22 and in the 2008 Nonqualified Deferred Compensation Table on
page 29.
Retirement
and Other Benefits
All
employees of the Company are eligible to participate in the Company’s 401(k)
Savings Plan and the Company’s disability plan. In addition, the
Named Executive Officers, and certain other employees, are eligible to
participate in the Company’s Supplemental Income Protection Plan.
401(k) Savings
Plan
Under the
401(k) Savings Plan, all Company employees, including the Named Executive
Officers, earn the right to receive certain benefits upon
retirement. The Company matches employee contributions into the
401(k) Savings Plan seventy-five cents for every dollar up to 3% of the
employee’s gross wages.
The
Company believes that it is has an appropriately competitive 401(k) Savings Plan
for all of its employees and therefore does not provide any additional
retirement benefits to executives.
Supplemental Income
Protection Plan
The
Supplemental Income Protection Plan is a long-term disability plan that
provides, among other things, 75% income replacement for total disability and
return-to-work benefits such as rehabilitation services and recovery benefits to
employees who earn over $60,000, and who have been assigned a bonus factor under
the Bonus Plan of 3% or higher. The Company affords this benefit to
its key employees, including the Named Executive Officers, in order to provide
competitive employee benefit programs and to help mitigate any loss of income by
a key employee due to a long-term disability.
Health and Life
Insurance
Health and life insurance benefits are
provided to the Named Executive Officers on the same basis as they are provided
to other employees of the Company.
Perquisites and Other
Personal Benefits
The
Committee has adopted and the Board has approved a policy of not providing
perquisites to its executives unless they are also available to all other
full-time employees of the Company. For example, the Company does not
provide payment or reimbursement for costs associated with the use of Company
vehicles, aircraft, country club memberships, tax preparation and financial
consulting fees or similar benefits frequently provided by other
companies. The Company believes that other elements of its
compensation program sufficiently attract and retain superior employees for key
positions and there is no present need to provide perquisites and other personal
benefits frequently provided by other companies.
Employment
Agreements
In
general, it is the Company’s policy not to enter into employment agreements
with, or provide executive severance benefits (other than change in control
arrangements described below) to its executive officers. As a result,
the Named Executive Officers serve at the will of the Board of
Directors. The only exception to this policy is the individual
employment agreement with Mr. Pettinella, which was originally entered into on
May 17, 2004 and which was amended and restated effective January 1,
2007. The amended and restated agreement provided that Mr. Pettinella
would continue to serve as President and Chief Executive Officer of the Company
until December 31, 2008. Since neither party exercised their
termination right, the agreement automatically renewed for an additional
one-year term that ends on December 31, 2009. No additional renewals
are provided for under the agreement. While Mr. Pettinella
participates in the Company’s salary, annual and long-term incentive
compensation programs under his agreement, the level of compensation, including
stock option grants and restricted stock awards, are at the discretion of the
Compensation Committee of the Board of Directors.
Mr.
Pettinella, therefore, is not guaranteed any specific level of compensation
during the term of his agreement. However, he is assured of the
payment of a multiple of his salary and bonus in the event that the agreement is
terminated by the Company without cause or by Mr. Pettinella with good
reason. He also is to receive additional benefits under the Company’s
Executive Retention Plan (described below) in the event his employment is
terminated following a change in control. The Committee and the full
Board believe that Mr. Pettinella’s agreement is in the best interest of the
Company and its stockholders in order to provide stability to the Company and
that it is an appropriate expression of their confidence in Mr. Pettinella and
represents a level of commitment to Mr. Pettinella that is necessary in order to
retain the services of a talented executive in a competitive
market. Mr. Pettinella’s agreement also includes non-compete and
confidentiality provisions, and the Committee and the full Board also believe
that these commitments are of significant value to the Company and its
stockholders.
Change
in Control Arrangements
In 1999,
the Committee and the full Board determined that it was in the best interest of
the Company and its stockholders to assure that the Company will have the
continued dedication of its key executives and employees in the event of a
threat or occurrence of a change in control. They continue to believe
that it is in the best interests of the stockholders to diminish the inevitable
distraction of these individuals because of personal uncertainties and risks
created by the ongoing consolidation in the REIT industry and to encourage the
executives’ full attention and dedication to the Company’s business currently
and in the event of any threatened or pending change in control. As a
result, the Company adopted an Executive Retention Plan that provides for
severance benefits to the Company’s officers, including the Named Executive
Officers, and certain employees, upon a change in control. The
Committee and the full Board believe that the triggering events stipulated in
the Executive Retention Plan for equity acceleration are appropriate so that key
executives and employees remain with the Company despite a climate of industry
consolidation. The Committee and the full Board also have reviewed
the change in control plans of the Industry Peer Group described above and
determined that the arrangements under the Executive Retention Plan are
competitive with those of other companies in the REIT industry. This
Plan provides the executives and other employees with compensation and benefits
arrangements upon a change in control that are designed to assure that such
attention and dedication are likely. Severance benefits for the Named
Executive Officers under the Executive Retention Plan provide that if within two
years following a change in control, an executive’s employment is terminated by
the Company other than for cause, or by the executive with good reason, or by
the executive for any reason during a 30-day window following the one-year
anniversary of the change in control, the executive is eligible to
receive: (1) two times base salary and two times the last bonus paid
to the executive, (2) payment of accrued/deferred bonus amounts, and (3) a
gross-up payment if the executive is subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code, but only in the amount necessary to
pay any excise tax due on the severance payment. In addition, all
stock options and restricted stock outstanding become fully vested.
Pursuant
to his employment agreement, the benefits to be paid to the Chief Executive
Officer under the Executive Retention Plan are the same as those provided in the
Executive Retention Plan to other Named Executive Officers, except that the
Chief Executive Officer is paid three times his base salary and three times his
last bonus. The Committee believes that this level of change in
control severance benefit is appropriate to ensure Mr. Pettinella’s full
attention to the Company’s business and the stockholders’ best interests in
light of the active consolidation environment in the REIT industry and in order
to be competitive with the benefits provided by other companies in the REIT
industry.
A more
detailed description of the Executive Retention Plan and a schedule showing the
amount of estimated payments and benefits payable to the Named Executive
Officers upon various termination scenarios and a change in control are
disclosed under “Potential Payments upon Termination or Change in Control”
beginning on page 29.
Tax
and Accounting Implications
Deductibility
of Executive Compensation
Section
162(m) of the Internal Revenue Code of 1986, as amended, limits the
deductibility on the Company’s tax return of compensation over $1 million to any
of the Named Executive Officers of the Company unless, in general, the
compensation is paid pursuant to a plan which is performance-related,
non-discretionary and has been approved by the Company’s
stockholders. The Company believes that, because it qualifies as a
REIT under the Code and pays dividends sufficient to minimize federal income
taxes, the payment of compensation that does not satisfy the requirements of
Section 162(m) will generally not affect the Company’s net
income. The Compensation Committee’s compensation policy and
practices therefore are not directly guided by considerations relating to
Section 162(m).
Accounting
for Stock-Based Compensation
Beginning
on January 1, 2006, the Company began accounting for stock-based payments in
accordance with the requirements of Statement of Financial Accounting Standards
No. 123R, Share Based Payments.
The
Compensation Committee of the Company has reviewed and discussed the above
Compensation Discussion and Analysis with management and based on such review
and discussions, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
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Submitted
by the Compensation Committee,
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Leonard
F. Helbig, III, Chair
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Josh
E. Fidler
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Roger
W. Kober
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Clifford
W. Smith, Jr.
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Introduction
As described in the Compensation
Discussion and Analysis, the Named Executive Officers are compensated with a
combination of salary, bonus, stock, non-equity incentive compensation and
certain other benefits. Perquisites are not provided to executives
unless they are also available to all other full-time employees of the
Company.
Of the
Named Executive Officers, only Edward Pettinella has an Employment
Agreement. The level of salary, incentive compensation and equity
grants are, pursuant to the terms of his Employment Agreement, to be determined
by the Compensation Committee and approved by the Board. There are no
minimum or maximum levels provided in the Agreement.
Prior to 2009, the Compensation
Committee (and, in the case of the Chief Executive Officer, the Board of
Directors) approved salary adjustments at their February
meetings. The adjustments were effective in mid-March of each
year. The salaries listed therefore reflect the salary level approved
the prior February for the period from January 1 to March 15 of the following
year and the salary level approved in February of the relevant year for the
period from March 16 to December 31 of that year.
Beginning in 2009, the Compensation
Committee (and in the case of the Chief Executive Officer, the Board of
Directors) will approve salary adjustments at their May
meetings. This will give the Compensation Committee the opportunity
to review more current data for the peer companies. It will also
result in salary adjustments and equity grants being considered and approved at
the same time.
The amounts listed in the table as the
value of the stock awards and option awards reflect the
Company’s expense recognized for financial statement reporting
purposes as described in footnotes (2) and (3) to the table.
Amounts
listed in the table under Non-Equity Incentive Plan Compensation represent
payments received by the Named Executive Officers under the Bonus Plan for
services rendered in 2006, 2007 and 2008. Payment of the 2008 amounts
was approved by the Compensation Committee (and, in the case of the Chief
Executive Officer, the Board of Directors) at their February 2009 meetings and
payment was made on February 19, 2009.
Pursuant
to the Deferred Bonus Plan, eligible employees, including the Named Executive
Officers, can elect to defer up to 100% of their bonus under the Bonus Plan for
three, five or ten years. The Company matches 10% of the amount
deferred (referred to as the “10% Company Match”), which amount vests after
three years. A "phantom" stock account is established for both
amounts. Each deferral and 10% Company Match is reflected by
crediting those accounts with the number of shares of the Company's Common Stock
that could be purchased with the amounts deferred and contributed at the Common
Stock's fair market value as of the day before the bonus would otherwise have
been paid. The equivalent of dividends on those shares is also
credited to the accounts at the time dividends are paid on the Company's Common
Stock. Shares that could be purchased with the hypothetical dividends
are credited to accounts at the same price that shares are purchased for
participants under the dividend reinvestment feature of the Company's
DRIP. Payments out of deferred accounts, upon vesting or otherwise,
are made by issuance of Common Stock, except in the event of payment by reason
of a change in control in which event payment may be made in cash or by issuance
of Common Stock at the election of the Compensation Committee.
The
following table sets forth the compensation paid to or earned by the Named
Executive Officers during 2006, 2007 and 2008. There are no amounts
to report in the Bonus and Change in Pension Value and Nonqualified Deferred
Compensation Earnings columns so they have not been included. Annual
cash incentives under the Company’s Bonus Plan are listed below under the
Non-Equity Incentive Plan Compensation column.
|
Name and Principal Position
|
Year
|
Salary
($)(1)
|
Stock
Awards
($)(2)(4)
|
Option
Awards
($)(3)(4)
|
Non-Equity
Incentive Plan Compensation
($)(5)
|
All
Other Compensation
($)(6)
|
Total ($)
|
||||||||||||||||||
|
Edward
J. Pettinella,
|
2008
|
550,000 | 665,502 | 409,938 | 737,187 | 83,201 | 2,445,828 | ||||||||||||||||||
|
President
and
|
2007
|
544,792 | 553,875 | 274,833 | 640,947 | 105,085 | 2,119,532 | ||||||||||||||||||
|
Chief
Executive Officer
|
2006
|
519,792 | 426,535 | 187,650 | 680,459 | 102,617 | 1,917,053 | ||||||||||||||||||
|
David
P. Gardner,
|
2008
|
320,000 | 307,897 | 135,766 | 296,943 | 43,018 | 1,103,624 | ||||||||||||||||||
|
Executive
Vice President
|
2007
|
315,833 | 258,632 | 97,283 | 281,246 | 48,293 | 1,001,287 | ||||||||||||||||||
|
and
Chief Financial Officer
|
2006
|
292,292 | 197,487 | 63,712 | 264,904 | 47,651 | 866,046 | ||||||||||||||||||
|
Ann
M. McCormick,
|
2008
|
272,000 | 256,411 | 112,611 | 252,404 | 37,356 | 930,782 | ||||||||||||||||||
|
Executive
Vice President,
|
2007
|
269,583 | 215,851 | 82,100 | 240,576 | 41,539 | 849,649 | ||||||||||||||||||
|
General
Counsel & Secretary
|
2006
|
257,817 | 164,859 | 55,768 | 233,659 | 41,208 | 753,311 | ||||||||||||||||||
|
Scott
A. Doyle,
|
2008
|
250,000 | 161,834 | 79,134 | 180,437 | 26,015 | 697,420 | ||||||||||||||||||
|
Senior
Vice President
|
2007
|
247,917 | 133,707 | 59,390 | 157,055 | 27,136 | 625,205 | ||||||||||||||||||
|
2006
|
238,542 | 101,017 | 41,491 | 168,148 | 27,098 | 576,296 | |||||||||||||||||||
|
John
E. Smith,
|
2008
|
240,000 | 196,562 | 135,215 | 173,220 | 25,971 | 770,968 | ||||||||||||||||||
|
Senior
Vice President
|
2007
|
236,875 | 126,879 | 78,394 | 150,060 | 25,775 | 617,983 | ||||||||||||||||||
|
2006
|
220,833 | 80,638 | 44,076 | 155,665 | 23,892 | 525,104 | |||||||||||||||||||
(1) Each
of the Named Executive Officers contributed a portion of their salary to the
Company’s 401(k) Savings Plan.
(2) This
column represents the dollar amount recognized for financial statement reporting
purposes with respect to the year indicated for the fair value of restricted
stock granted in the year indicated as well as prior years, in accordance with
SFAS 123R except, pursuant to SEC rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. These amounts represent the Company’s accounting expense
for these awards and do not equal the value that will be received by the
officers. Fair value for restricted stock is calculated using the
closing price of the Company’s Common Stock on the date of grant. For
additional information, refer to Note 9 of the Company’s financial statements in
the Form 10-K for the year ended December 31, 2008, as filed with the
SEC. See the 2008 Grants of Plan-Based Awards Table on page 26 for
information on restricted stock awards made in 2008. To the extent
that a Named Executive Officer has elected to participate in the Deferred Bonus
Plan, this column also includes the value of the 10% Company Match as recorded
on the Company’s financial statements. Of the amounts listed in this
column, the following amounts represent that Match for 2006, 2007 and 2008
respectively: Mr. Gardner $2,928, $2,003 and $0; Mrs. McCormick
$2,413, $3,378 and $2,275 and Mr. Doyle $2,172, $4,414 and $2,242.
(3) This
column represents the dollar amount recognized for financial statement reporting
purposes with respect to the year indicated for stock options granted to each of
the Named Executive Officers, in accordance with SFAS 123R except, pursuant to
SEC rules, the amounts shown exclude the impact of estimated forfeitures related
to service-based vesting conditions. These amounts represent the
Company’s accounting expense for these awards, adjusted in accordance with the
SEC rules, and do not equal the value that will be received by the
officers. For additional information on the valuation assumptions
with respect to the 2008 grants as well as the grants made prior to 2008, refer
to Note 9 of the Company’s financial statements in the Form 10-K for the year
ended December 31, 2008, as filed with the SEC. See the Grants of
Plan-Based Awards Table for information on options granted in 2008.
(4) Under
SFAS 123R, the Company recognizes expense for the restricted stock and option
awards based on the expected service period of the grantee. For grant
recipients that have met or exceeded the retirement eligible age, the expense is
recognized upon grant. For recipients approaching retirement eligible
age, the expense is recognized ratably over the lesser of the term between the
grant date and the expected retirement date or the vesting
period. The vesting period for restricted stock and option awards is
4 and 5 years, respectively, which is the expected service period assumption
used for Mr. Gardner, Mrs. McCormick and Mr. Doyle. Based on
their ages, the expected service period assumption for Mr. Pettinella and Mr.
Smith is 2.9 and 1.8 years, respectively. A shorter vesting period
results in more expense being recorded in the current period.
(5) This
column represents the payments received by the Named Executive Officers for
services rendered in the year indicated pursuant to the Company’s Bonus
Plan. The bonus factors assigned to the Named Executive Officers for
each year are as follows: Mr. Pettinella – 13%; Mr. Gardner – 9%; Mrs. McCormick
– 9%; Mr. Doyle – 7% and Mr. Smith – 7%. The following Named
Executive Officer deferred a portion of the 2006, 2007 and 2008 payment pursuant
to the Company’s Deferred Bonus Plan as follows: Mrs. McCormick $46,732, $0 and
$0; and Mr. Doyle $67,259, $0 and $90,219. The gross payment (before
deferral) is listed in this column.
(6) This
column represents (a) $6,600, $6,750 and $6,900 for 2006, 2007 and 2008,
respectively for each of the Named Executive Officers as the Company’s
contribution under the Company’s 401(k) Savings Plan plus (b) dividends paid in
2006, 2007 and 2008, respectively on all shares of restricted stock held by each
of the Named Executive Officers as follows: Mr. Pettinella $96,017,
$98,335 and $76,301; Mr. Gardner $40,171, $40,770 and $35,577; Mrs. McCormick
$33,744, $33,737 and $29,293; Mr. Doyle $20,054, $19,697 and $18,302; and Mr.
Smith $17,292, $19,025 and $19,071 plus (c) the value of all hypothetical
dividends paid in 2006, 2007 and 2008, respectively on the 10% Company Match
shares in the accounts of the following Named Executive Officers pursuant to the
Company’s Deferred Bonus Plan: Mr. Gardner $880, $773 and $541; Mrs.
McCormick $864, $1,052 and $1,163; and Mr. Doyle $444, $689 and
$813.
|
|
Introduction
|
All stock
options and shares of restricted stock were issued pursuant to the Company’s
2008 Stock
Benefit
Plan.
Prior to
the exercise of an option, the holder has no rights as a stockholder with
respect to the shares subject to such option, including voting rights and the
right to receive dividends or dividend equivalents. Individuals
receiving restricted stock awards have voting rights and are entitled to receive
dividends or dividend equivalents prior to vesting.
To
further enforce the Company’s focus on long-term stock appreciation and support
retention of key executive talent, stock options generally vest 20% per year
over the first five years of the ten-year option term and restricted stock
grants generally vest 25% per year over a four-year period. However,
in the event of termination of employment due to total disability, death, or
retirement, stock options vest immediately and are exercisable for the lesser of
one year or the remaining option term, except that for executive officers, stock
options do not vest automatically upon retirement but continue to vest as
scheduled. Additionally, in the event the Company terminates the
employment of an option holder for any reason except “good cause,” stock options
held for more than one year prior to the termination date vest immediately and
are exercisable for the lesser of one year or the remaining option term.
Restricted stock vests upon termination of employment due to total disability or
death. In the event of retirement, restricted stock awards continue
to vest as scheduled. Upon a change in control, stock options and
restricted stock outstanding as of the change in control date vest
immediately.
The
following table provides information about plan-based awards granted to the
Named Executive Officers in 2008. These awards consist of stock
options, restricted stock, cash paid pursuant to the Bonus Plan and, if
applicable, the value of the 10% Company Match made pursuant to the Deferred
Bonus Plan. There are no amounts to be reported in the Estimated
Future Payouts Under Equity Incentive Plan Awards column so it has not been
included.
The stock
options granted to the Named Executive Officers have the same term (ten years)
and vesting (20% per year) as the options granted to other employees in
2008. Restricted shares granted to the Named Executive Officers vest
on the same terms as the restricted shares granted to other employees in 2008
(25% per year).
The
phantom shares issued in connection with the 10% Company Match vest after three
years. The only criteria for vesting is continued
employment.
2008
GRANTS OF PLAN-BASED AWARDS TABLE
|
All
Other
|
All
Other
|
|||||||||||||||||||||||||||||
|
Stock
|
Option
|
|||||||||||||||||||||||||||||
|
Awards:
|
Awards:
|
|||||||||||||||||||||||||||||
|
Estimated
Future
|
Number
of
|
Number
of
|
Exercise
or
|
Grant
Date Fair
|
||||||||||||||||||||||||||
|
Payouts
Under Non-Equity
|
Shares
of
|
Securities
|
Base
Price
|
Value
of Stock
|
||||||||||||||||||||||||||
|
Incentive Plan Awards(1)
|
Stock
or
|
Underlying
|
of
Option
|
and
Option
|
||||||||||||||||||||||||||
|
Threshold
|
Target
|
Maximum
|
Units
|
Options
|
Awards
|
Awards
|
||||||||||||||||||||||||
|
Name
|
Plan Name
|
Grant Date
|
($)
|
($)
|
($)
|
(#)(2)
|
(#)(3)
|
($/Sh)(4)
|
($)(5)
|
|||||||||||||||||||||
|
Edward
J. Pettinella
|
Bonus
Plan
|
286,000 | 572,000 | 858,000 | ||||||||||||||||||||||||||
|
Stock
Plan-
Options
|
5/1/2008
|
81,929 | 52.56 | 481,497 | ||||||||||||||||||||||||||
|
Restricted
|
5/9/2008
|
11,748 | 588,457 | |||||||||||||||||||||||||||
|
David
P. Gardner
|
Bonus
Plan
|
115,200 | 230,400 | 345,600 | ||||||||||||||||||||||||||
|
Stock
Plan-
Options
|
5/1/2008
|
38,514 | 52.56 | 226,347 | ||||||||||||||||||||||||||
|
Restricted
|
5/9/2008
|
5,523 | 276,647 | |||||||||||||||||||||||||||
|
Ann
M. McCormick
|
Bonus
Plan
|
97,920 | 195,840 | 293,760 | ||||||||||||||||||||||||||
|
Stock
Plan-
Options
|
5/1/2008
|
31,546 | 52.56 | 185,396 | ||||||||||||||||||||||||||
|
Restricted
|
5/9/2008
|
4,523 | 226,557 | |||||||||||||||||||||||||||
|
Scott
A. Doyle
|
Bonus
Plan
|
70,000 | 140,000 | 210,000 | ||||||||||||||||||||||||||
|
Stock
Plan-
Options
|
5/1/2008
|
20,520 | 52.56 | 120,596 | ||||||||||||||||||||||||||
|
Restricted
|
5/9/2008
|
2,942 | 147,365 | |||||||||||||||||||||||||||
|
Deferred
Bonus Plan
|
2/19/2009
|
341 | 9,016 | |||||||||||||||||||||||||||
|
John
E. Smith
|
Bonus
Plan
|
67,200 | 134,400 | 201,600 | ||||||||||||||||||||||||||
|
Stock
Plan-
Options
|
5/1/2008
|
21,056 | 52.56 | 123,746 | ||||||||||||||||||||||||||
|
Restricted
|
5/9/2008
|
3,019 | 151,222 | |||||||||||||||||||||||||||
(1) These
columns represent amounts that could have been paid to the Named Executive
Officers under the Company’s Bonus Plan for services rendered in
2008. That Plan is described in more detail in the “Compensation
Discussion and Analysis” beginning on page 13 of this Proxy
Statement. The Bonus Plan does not provide for a “target”
payout. The median between the threshold and maximum is therefore
included as the target. The actual amounts paid in February 2009 for
services rendered in 2008 are listed under 2008 in the Summary Compensation
Table on page 24.
(2) This
column represents restricted stock awarded to each of the Named Executive
Officers in 2008 and phantom shares credited to the deferred bonus account of
Mr. Doyle, in connection with the 2008 10% Company Match under the Deferred
Bonus Plan. While the shares were credited in 2009 when the bonus
relating to the 2008 service was paid, they are included in the table since they
relate to 2008 compensation. Only Mr. Doyle deferred any portion of
his 2008 bonus.
(3) This
column represents options granted to the Named Executive Officers in
2008.
(4) The
exercise price is the closing price ($52.56) on the grant date (May 1, 2008) as
provided in the 2008 Stock Benefit Plan.
(5) For
stock options, grant date fair value is calculated using the Black-Scholes
formula. For additional information on the valuation assumptions,
refer to Note 9 of the Company’s financial statements in the Form 10-K for the
year ended December 31, 2008. For restricted stock, the grant date
fair value is calculated using the closing price ($50.09) of a share of the
Company’s Common Stock on the award date (May 9, 2008). The grant
date fair value for both the option grants and restricted stock awards are
computed in accordance with SFAS 123R. For Mr. Doyle, the value of
the phantom shares is equal to the actual amount of 10% Company
Match.
The following table provides
information about unexercised options and restricted stock that has not vested,
both of which were issued under the 2008 Stock Benefit Plan or previous stock
benefit plans. It also includes all phantom shares in the Named
Executive Officers’ accounts under the Deferred Bonus Plan that were credited to
the accounts as a result of the 10% Company Match but only to the extent that
the phantom shares have not vested. There are no unearned options or
shares under the Company’s equity incentive plans so related columns are not
included.
|
Option Awards(1)
|
Stock Awards
|
||||||||||||||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options (Exercisable)
(#)
|
Number
of Securities Underlying Unexercised Options
(Unexercisable)
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
|||||||||||||||
|
Edward
J. Pettinella
|
100,000 | - | 27.010 |
02/07/11
|
27,179 | (2) | 1,103,467 | ||||||||||||||
| 50,000 | - | 30.150 |
07/31/11
|
||||||||||||||||||
| 50,000 | - | 34.650 |
08/05/12
|
||||||||||||||||||
| 50,000 | - | 36.850 |
08/05/13
|
||||||||||||||||||
| 44,000 | 11,000 | 38.830 |
08/03/14
|
||||||||||||||||||
| 39,000 | 26,000 | 41.950 |
05/06/15
|
||||||||||||||||||
| 26,000 | 39,000 | 51.060 |
05/04/16
|
||||||||||||||||||
| 12,973 | 51,891 | 55.500 |
05/01/17
|
||||||||||||||||||
| - | 81,929 | 52.560 |
05/01/18
|
||||||||||||||||||
|
David
P. Gardner
|
15,000 | - | 31.375 |
08/01/10
|
13,390 | (3) | 543,634 | ||||||||||||||
| 15,000 | - | 30.150 |
07/31/11
|
||||||||||||||||||
| 15,000 | - | 34.650 |
08/05/12
|
||||||||||||||||||
| 15,000 | - | 36.850 |
08/05/13
|
||||||||||||||||||
| 12,000 | 3,000 | 38.830 |
08/03/14
|
||||||||||||||||||
| 15,000 | 10,000 | 41.950 |
05/06/15
|
||||||||||||||||||
| 10,000 | 15,000 | 51.060 |
05/04/16
|
||||||||||||||||||
| 6,098 | 24,388 | 55.500 |
05/01/17
|
||||||||||||||||||
| - | 38,514 | 52.560 |
05/01/18
|
||||||||||||||||||
|
Ann
M. McCormick
|
12,599 | - | 31.375 |
08/01/10
|
11,142 | (4) | 452,365 | ||||||||||||||
| 15,000 | - | 30.150 |
07/31/11
|
||||||||||||||||||
| 15,000 | - | 34.650 |
08/05/12
|
||||||||||||||||||
| 15,000 | - | 36.850 |
08/05/13
|
||||||||||||||||||
| 12,000 | 3,000 | 38.830 |
08/03/14
|
||||||||||||||||||
| 12,000 | 8,000 | 41.950 |
05/06/15
|
||||||||||||||||||
| 8,000 | 12,000 | 51.060 |
05/04/16
|
||||||||||||||||||
| 4,995 | 19,977 | 55.500 |
05/01/17
|
||||||||||||||||||
| - | 31,546 | 52.560 |
05/01/18
|
||||||||||||||||||
|
Scott
A. Doyle
|
920 | - | 31.375 |
08/01/10
|
7,169 | (5) | 291,061 | ||||||||||||||
| 9,080 | - | 30.150 |
07/31/11
|
||||||||||||||||||
| 10,000 | - | 34.650 |
08/05/12
|
||||||||||||||||||
| 10,000 | - | 36.850 |
08/05/13
|
||||||||||||||||||
| 10,000 | 2,500 | 38.830 |
08/03/14
|
||||||||||||||||||
| 9,000 | 6,000 | 41.950 |
05/06/15
|
||||||||||||||||||
| 6,000 | 9,000 | 51.060 |
05/04/16
|
||||||||||||||||||
| 3,244 | 12,972 | 55.500 |
05/01/17
|
||||||||||||||||||
| - | 20,520 | 52.560 |
05/01/18
|
||||||||||||||||||
|
John
E. Smith
|
855 | - | 34.650 |
08/05/12
|
7,312 | (6) | 296,867 | ||||||||||||||
| 10,000 | - | 36.850 |
08/05/13
|
||||||||||||||||||
| 8,000 | 2,000 | 38.830 |
08/03/14
|
||||||||||||||||||
| 9,000 | 6,000 | 41.950 |
05/06/15
|
||||||||||||||||||
| 6,000 | 9,000 | 51.060 |
05/04/16
|
||||||||||||||||||
| 3,568 | 14,269 | 55.500 |
05/01/17
|
||||||||||||||||||
| - | 21,056 | 52.560 |
05/01/18
|
||||||||||||||||||
(1) All
option grants have a ten-year term. With the exception of Edward Pettinella's
grant issued 2/7/01, which vested immediately, all option grants vest pro rata
as to 20% of the option grant beginning on the first anniversary of grant date,
thus the vesting dates for each of the option awards in this table can be
calculated accordingly.
(2) Mr.
Pettinella's restricted stock will vest as follows: 2,477 shares on
each of 5/1/2009, 5/1/2010 and 5/1/2011; 2,750 shares on each of 5/4/2009 and
5/4/2010 and 2,937 shares on each of 5/9/2009, 5/9/2010, 5/9/2011 and
5/9/2012. Since the date of the table, December 31, 2008, 2,500
shares of restricted stock vested on 2/16/2009.
(3) Mr.
Gardner's restricted stock will vest as follows: 1,164 shares on each of
5/1/2009, 5/1/2010 and 5/1/2011; 1,500 shares on each 5/4/2009 and 5/4/2010;
1,381 shares on each of 5/9/2009, 5/9/2010 and 5/9/2011 and 1,380 shares on
5/9/2012. Since the date of the table, December 31, 2008, 1,375 share
of restricted stock vested on 2/16/2009.
(4) Mrs.
McCormick's restricted stock will vest as follows: 954 shares on each
of 5/1/2009 and 5/1/2010; 1,250 shares on each of 5/4/2009 and 5/4/2010; 953 on
5/1/2011; 1,131 shares on each of 5/9/2009, 5/9/2010 and 5/9/2011 and 1,130
shares on 5/9/2012. Since the date of the table, December 31, 2008,
1,125 shares of restricted stock vested on 2/16/2009. Shares in Mrs.
McCormick's deferred bonus account representing the 10% Company Match and
hypothetical dividends on those shares have/will vest as follows: 50
shares on 2/22/2009 and 83 shares on 2/22/2010.
(5) Mr.
Doyle's restricted stock will vest as follows: 619 shares each on
5/1/2009, 5/1/2010 and 5/1/2011; 750 shares on each of 5/4/2009 and 5/4/2010;
736 shares on each of 5/9/2009 and 5/9/2011 and 735 shares on each of 5/9/2010
and 5/9/2012. Since the date of the table, December 31, 2008, 750
shares of restricted stock vested on 2/16/2009. Shares in Mr. Doyle's deferred
bonus account representing the 10% Company Match and hypothetical dividends on
those shares will vest as follows: 120 shares on
2/22/2010.
(6) Mr.
Smith's restricted stock will vest as follows: 681 shares on each of
5/1/2009, 5/1/2010 and 5/1/2011; 875 shares on each of 5/4/2009 and 5/4/2010;
755 shares on each of 5/9/2009, 5/9/2010 and 5/9/2011 and 754 shares on
5/9/2012. Since the date of the table, December 31, 2008, 500 shares
of restricted stock vested on 2/16/2009.
The following table provides
information for each of the Named Executive Officers concerning the following
events that occurred during 2008: exercises of stock options, vesting
of restricted stock and vesting of the phantom shares deposited in certain of
the Named Executive Officer’s deferred bonus accounts as the 10% Company Match
and dividends on the 10% Company Match. The table reports the number
of securities for which the options were exercised, the aggregate dollar value
realized upon exercise of options, the number of shares of stock (including
phantom shares) that have vested and the aggregate dollar value realized upon
vesting of stock (including phantom shares).
|
Option Awards
|
Stock Awards
|
|||||||||||||||
|
Name
|
Number
of
Shares
Acquired
on Exercise (#)
|
Value
Realized
on Exercise ($)(1)
|
Number
of
Shares
Acquired
on Vesting (#)
|
Value
Realized
on Vesting ($)(2)
|
||||||||||||
|
Edward
J. Pettinella
|
- | - | 24,028 | 1,152,685 | ||||||||||||
|
David
P. Gardner
|
960 | 23,467 | 8,717 | 422,182 | ||||||||||||
|
Ann
M. McCormick
|
- | - | 7,176 | 347,471 | ||||||||||||
|
Scott
A. Doyle
|
10,000 | 258,277 | 4,062 | 197,629 | ||||||||||||
|
John
E. Smith
|
8,385 | 186,507 | 3,457 | 170,037 | ||||||||||||
(1) The
dollar amount realized upon exercise was computed by multiplying the number of
shares times the difference between the market price of the underlying
securities and the exercise price of the options.
(2) The
aggregate dollar amount realized upon vesting was computed by multiplying the
number of shares of stock by the market value of the underlying shares on the
vesting date.
The Company does not maintain a defined
benefit pension plan or supplemental pension plan.
A description of the Company’s Deferred
Bonus Plan is included in the “Introduction to 2008 Summary Compensation”
beginning on page 22.
|
Name
|
Executive
Contributions
in 2008($)(1)
|
Company
Contributions
in 2008($)(2)
|
Aggregate
Earnings
in 2008($)(3)
|
Aggregate
Withdrawals/ Distributions
in 2008 ($)(4)
|
Aggregate
Balance
at 12/31/2008($)(5)
|
|||||||||||||||
|
Edward
J. Pettinella
|
- | - | - | - | - | |||||||||||||||
|
David
P. Gardner
|
- | 541 | 5,411 | 58,677 | 81,673 | |||||||||||||||
|
Ann
M. McCormick
|
- | 1,163 | 11,632 | - | 203,520 | |||||||||||||||
|
Scott
A. Doyle
|
90,219 | 9,835 | 8,129 | - | 142,230 | |||||||||||||||
|
John
E. Smith
|
- | - | - | - | - | |||||||||||||||
(1) This
column represents deferral of a portion of the bonus paid under the Bonus Plan
in February 2009 for services rendered in 2008. The amount deferred
was also reported in the Summary Compensation Table as a portion of the amount
in the “Non-Equity Incentive Plan Compensation” column.
(2) This
column represents the amount of the 10% Company Match made in February 2009
relating to the amounts deferred as described in footnote (1) above (Mr. Doyle
only) and the value of all hypothetical dividends paid in 2008 on all shares in
the Named Executive Officer’s deferred bonus account as a result of a 10%
Company Match. Of the amounts listed above, the following amounts
were also reported in the Summary Compensation Table for 2008: Mr.
Gardner $541; Mrs. McCormick $1,163 and Mr. Doyle $813.
(3) This
column represents the value of all hypothetical dividends on all shares in the
Named Executive Officer’s deferred bonus accounts except for the shares related
to the 10% Company Match which are already included as described in footnote (2)
above.
(4) The
amounts listed in this column represent the value of the phantom stock on the
issue date, which includes the value of the deferred amount, the 10% Company
Match, hypothetical dividends reinvested and appreciation.
(5) The
total includes the following amounts also reported on the Summary Compensation
Table for 2008: Mr. Gardner $541; Mrs. McCormick $3,438; and Mr.
Doyle $3,055. It also includes the following amounts that were listed
as “bonus” in prior years’ proxy statements: Mr. Gardner $60,086;
Mrs. McCormick $147,955; and Mr. Doyle $132,434.
Other than Mr. Pettinella, none of the
Named Executive Officers have employment agreements which provide for any cash
payment or other benefits in the event of the termination of
employment. Any rights that any of the Named Executive Officers have
to such payments and benefits are the result of provisions in the various
compensation plans that are available to certain other salaried employees of the
Company. Those compensation plans and the Named Executive Officers’
rights thereunder are described below.
In addition
to the rights available under those plans, Mr. Pettinella has contractual rights
pursuant to the terms of his employment agreement. Mr. Pettinella’s
employment agreement provides that, if his employment is terminated by the
Company without cause or by Mr. Pettinella for good reason, he is entitled to
receive a lump sum amount equal to 2.9 times his base salary and incentive
compensation for the year preceding the termination plus, in the year following
termination, the amount of incentive compensation that he would have earned if
he had been an employee on December 31 of the year of termination. In
addition, all options become exercisable and remain so for one year and all
restricted shares held by Mr. Pettinella vest. He also is entitled to
the continuation of his fringe benefits until the earlier of: (1)
December 31, 2010, or (2) he receives equivalent benefits from a new
employer. In the event of a change in control, Mr. Pettinella is
entitled to receive the benefits provided under the Executive Retention Plan
(described below), except he would receive three times his base salary and bonus
instead of two times as provided to certain other beneficiaries of that
plan. In the case of disability, death or retirement, Mr. Pettinella
is only entitled to benefits generally provided to other salaried employees as
described below.
Change
in Control
The Company’s Executive Retention Plan
provides for severance benefits and other compensation to virtually all of the
corporate staff of the Company in the event of a change in control of the
Company and a subsequent termination of their employment, either by the Company
without cause or by the employee with good reason. Certain officers
of the Company, including the Named Executive Officers, have the right to
receive benefits under the Executive Retention Plan if they elect to terminate
their employment for any reason during a 30-day window following the one-year
anniversary of the change in control.
The level of benefits to be received
under the Executive Retention Plan varies depending on the bonus factor applied
to the individual pursuant to the Company’s Bonus Plan. In all cases,
regardless of bonus factor, upon a change in control with termination of
employment, either by the Company without cause or by the employee with good
reason, or by certain officers during the 30-day window, all stock options and
restricted stock vest. In addition, in all cases, regardless of bonus
factor, employees are entitled to receive in a lump sum their base
salary accrued through the termination date and to be paid in a lump sum all
other amounts earned, accrued or deferred under the Bonus Plan and other
compensation plans.
In addition to the above, upon a
termination following a change in control, employees are entitled to receive in
a lump sum a multiple of their current cash compensation ranging from a minimum
of one month’s salary for every year employed (with a minimum of two months and
a maximum of 24 months) up to a maximum of two times their current annual
salary. In addition, certain employees are entitled to receive two
times the amount of the last paid bonus under the Bonus Plan. The
Named Executive Officers, along with approximately 40 other employees, are
entitled to the maximum cash benefits. Mr. Pettinella is entitled to
three times salary and bonus pursuant to his employment agreement as described
above. In addition, the Named Executive Officers and other members of
senior management are entitled to a gross-up payment, but only in the amount
necessary to pay any excise tax due on the severance payment.
Stock
Benefit Plans
Under the terms of the 2008 Stock
Benefit Plan, in the event of the termination of employment by the Company
without good cause, any options held for more than one year become fully
exercisable and remain so for one year. Upon disability, death or
retirement, all options become fully exercisable and remain so for one year,
except that options held by the executive officers, including the Named
Executive Officers, do not vest upon retirement but continue to vest on their
original terms. Restricted shares, including those held by the Named
executive officers, vest upon disability or death but remain in place on their
original terms upon retirement.
No additional grants are being made
under the Company’s prior three stock benefit plans, but there are awards still
outstanding under those plans. Under those plans, options held for
more than six months by the Named Executive Officers become fully exercisable
and remain so for three months (one year with respect to the 2003 Stock Benefit
Plan) following a termination by the Company without good cause. Upon
death, disability or retirement, all options become fully exercisable and remain
so for a period of one year in the case of disability and death and three months
in the case of retirement. Options and restricted stock issued under
the 2003 Stock Benefit Plan and held upon retirement by executive officers,
including the Named Executive Officers, receive the same treatment as under the
2008 Stock Benefit Plan.
Miscellaneous
Benefits
The termination of employment for any
reason also triggers certain events under the Company’s Deferred Bonus Plan and
401(k) Savings Plan. In addition, the termination of employment, by
reason of disability or death, triggers benefits under disability and life
insurance plans provided by the Company. The benefits payable to the
Named Executive Officers under those plans are the same as those available to
other salaried employees, so no amount in respect to those plans is reported on
the table below.
The following table provides
information about the estimated amounts to be paid to the Named Executive
Officers upon termination or change in control. The Named Executive
Officers would not receive any payment in the event of a voluntary termination
on their part or a termination for cause by the Company.
|
Executive
Benefits and Payments Upon
Termination
|
Voluntary
Termination
($)
|
Involuntary
Not for Cause Termination
($)
|
For
Cause Termination
($)
|
Involuntary,
Voluntary or
Good
Reason
Termination
(Change
in Control)
($)
|
Retirement
($)
|
Death
or Disability
($)
|
||||||||||||||||||
|
Edward
J. Pettinella
|
||||||||||||||||||||||||
|
Severance
|
- | 3,453,746 | (1) | - | 3,572,841 | - | - | |||||||||||||||||
|
Accelerated
Vesting of Long-Term
Incentives(2)
|
- | 19,470 | - | 1,122,937 | 101,500 | 1,122,937 | ||||||||||||||||||
|
Other
Benefits
|
- | 30,820 | (3) | - | - | - | - | |||||||||||||||||
|
David
P. Gardner
|
||||||||||||||||||||||||
|
Severance
|
- | - | - | 1,202,492 | - | - | ||||||||||||||||||
|
Accelerated
Vesting of Long-Term
Incentives(2)
|
- | 5,310 | - | 548,944 | 55,825 | 548,944 | ||||||||||||||||||
|
Other
Benefits
|
- | - | - | - | - | - | ||||||||||||||||||
|
Ann
M. McCormick
|
||||||||||||||||||||||||
|
Severance
|
- | - | - | 1,025,150 | - | - | ||||||||||||||||||
|
Accelerated
Vesting of Long-Term
Incentives(2)
|
- | 5,310 | - | 452,275 | 45,675 | 452,275 | ||||||||||||||||||
|
Other
Benefits
|
- | - | - | - | - | - | ||||||||||||||||||
|
Scott
A. Doyle
|
||||||||||||||||||||||||
|
Severance
|
- | - | - | 814,110 | - | - | ||||||||||||||||||
|
Accelerated
Vesting of Long-Term
Incentives(2)
|
- | 4,425 | - | 171,169 | 30,450 | 171,169 | ||||||||||||||||||
|
Other
Benefits
|
- | - | - | - | - | - | ||||||||||||||||||
|
John
E. Smith
|
||||||||||||||||||||||||
|
Severance
|
- | - | - | 780,120 | - | - | ||||||||||||||||||
|
Accelerated
Vesting of Long-Term
Incentives(2)
|
- | 3,540 | - | 300,407 | 20,300 | 300,407 | ||||||||||||||||||
|
Other
Benefits
|
- | - | - | - | - | - | ||||||||||||||||||
(1) This
payment would be made pursuant to Mr. Pettinella’s employment agreement and is
based on his 2008 salary and 2007 bonus paid in 2008. This does not
include the amount Mr. Pettinella would receive in the year following
termination, which would equal the amount of incentive compensation that he
would have earned if he had been employed on December 31 of the year of
termination.
(2) The
vesting of options and restricted stock upon the occurrence of certain
termination triggers is made in accordance with the terms of the 2008 Stock
Benefit Plan, the Company’s prior stock benefit plans, or the Executive
Retention Plan, as applicable. For options, the amount listed
represents the gain realized for unvested stock option grants as of December 31,
2008, using a year-end closing stock price of $40.60. For restricted
stock, the amount listed represents the number of unvested restricted shares as
of December 31, 2008 multiplied by $40.60.
(3) Under
his employment agreement, Mr. Pettinella is entitled to a continuation of his
fringe benefits until the earlier of: (a) December 31, 2010; or (b)
he receives equivalent benefits from a new employer. This amount
represents the estimated cost to the Company for continuing health, dental,
executive long-term disability, standard long-term disability, life insurance
and accidental death and dismemberment coverage for Mr. Pettinella from December
31, 2008 until December 31, 2010.
The
following table sets forth information as of February 28, 2009 regarding the
beneficial ownership of shares of Common Stock by: (i) directors and Named
Executive Officers of the Company; and (ii) directors and executive officers of
the Company as a group. The table also includes information relating
to the number and percentage of shares of Common Stock and UPREIT Units
beneficially owned by the persons included in (i) and (ii) above (such UPREIT
Units are exchangeable into shares of Common Stock or cash at the election of
the Company). In preparing this table, the Company has relied on
information supplied by its officers and directors and upon information
contained in filings with the SEC.
|
Name of Owner
|
#
of Shares
Beneficially
Owned(1)
|
%
of
Shares
Outstanding(1)
|
#of
Shares/
UPREIT
Units
Owned(2)
|
%
of Shares/
UPREIT
Units
Outstanding(2)
|
||||||||||||
|
Edward
J. Pettinella(3)
|
577,834 | 1.739 | % | 577,834 | 1.267 | % | ||||||||||
|
Stephen
R. Blank(4)
|
0 | * | 0 | * | ||||||||||||
|
Josh
E. Fidler(5)
|
8,663 | * | 525,770 | 1.162 | % | |||||||||||
|
Alan
L. Gosule(6)
|
33,245 | * | 33,245 | * | ||||||||||||
|
Leonard
F. Helbig, III(7)
|
67,063 | * | 67,063 | * | ||||||||||||
|
Roger
W. Kober(8)
|
25,379 | * | 25,379 | * | ||||||||||||
|
Nelson
B. Leenhouts(9)
|
106,379 | * | 310,603 | * | ||||||||||||
|
Norman
P. Leenhouts(10)
|
78,131 | * | 282,603 | * | ||||||||||||
|
Clifford
W. Smith, Jr.(11)
|
54,492 | * | 54,492 | * | ||||||||||||
|
Paul
L. Smith(12)
|
12,559 | * | 12,559 | * | ||||||||||||
|
Amy
L. Tait(13)
|
58,042 | * | 71,855 | * | ||||||||||||
|
David
P. Gardner(14)
|
171,346 | * | 174,852 | * | ||||||||||||
|
Ann
M. McCormick(15)
|
157,618 | * | 159,920 | * | ||||||||||||
|
Scott
A. Doyle(16)
|
89,382 | * | 89,382 | * | ||||||||||||
|
John
E. Smith(17)
|
66,567 | * | 66,567 | * | ||||||||||||
|
All
executive officers and
|
||||||||||||||||
|
directors
as a group (18 persons)
|
1,596,500 | (18) | 4.728 | %(19) | 2,541,924 | 5.507 | (20) | |||||||||
*Less
than 1%
(1) Assumes
that all currently exercisable options or options exercisable within 60 days
(“Currently Exercisable Options”) issued to the person have been exercised and
all shares of restricted stock issued to the person have vested. The
total number of shares outstanding used in calculating the percentage assumes
that none of the options held by any other person have been exercised and that
all of the shares of restricted stock issued to any other person have
vested. Does not include shares in certain of the listed individuals’
accounts pursuant to the Company’s Deferred Bonus Plan and the Director Deferred
Compensation Plan. Shares of Common Stock are issued on a one-for-one
basis upon the expiration of the deferral periods. None of the
deferral periods expire within 60 days.
(2) Same
assumptions as footnote (1) plus assumes that UPREIT Units issued to the person
have been exchanged for shares of Common Stock (on a one-for-one basis) and that
for purposes of calculating the percentage the total number of shares assumes
that all of the UPREIT Units issued to any other person have been exchanged for
shares of Common Stock.
(3) Includes
371,973 shares which may be acquired upon the exercise of Currently Exercisable
Options and 24,679 shares of restricted stock. Of the scheduled
shares owned by Mr. Pettinella, 178,862 have been pledged as
collateral.
(4) Mr.
Blank became a director of the Company on January 1, 2009.
(5) Includes
750 shares which may be acquired upon the exercise of Currently Exercisable
Options and 3,913 shares of restricted stock. The Shares/UPREIT Units
owned include 101,126 UPREIT Units held by Mr. Fidler’s wife as to which he
disclaims beneficial ownership and 343,442 UPREIT Units owned by Morton J. Macks
Family Limited Partnership (the “FLP”). Mr. Fidler is the president
of the corporate general partner of the FLP and has the authority in this
capacity to buy and sell securities on behalf of the FLP. Mr.
Fidler’s proportionate interest in the FLP is 687 UPREIT Units. He
disclaims beneficial ownership of the balance of the UPREIT Units owed by
FLP.
(6) Includes
17,350 shares which may be acquired upon the exercise of Currently Exercisable
Options and 3,038 shares of restricted stock. There are 4,183
additional shares in Mr. Gosule’s account pursuant to the Director Deferred
Compensation Plan.
(7) Includes
10,350 shares which may be acquired upon the exercise of Currently Exercisable
Options and 940 shares of restricted stock. There are 12,241
additional shares in Mr. Helbig’s account pursuant to the Director Deferred
Compensation Plan. Mr. Helbig shares voting and dispositive power
with his wife with respect to 4,532 shares. Of the shares owned by
Mr. Helbig, 18,000 have been pledged as collateral.
(8) Includes
10,350 shares which may be acquired upon the exercise of Currently Exercisable
Options and 2,038 shares of restricted stock. There are 3,551
additional shares in Mr. Kober’s account pursuant to the Director Deferred
Compensation Plan.
(9) Includes
71,501 shares which may be acquired upon the exercise of Currently Exercisable
Options and 2,764 shares of restricted stock. There are 3,793
additional shares in Mr. Nelson Leenhouts’ account pursuant to the Deferred
Bonus Plan. The fourth column also includes 150,000 UPREIT
Units owned by Home Leasing. Nelson Leenhouts is a director, officer
and sole stockholder of Home Leasing. The fourth column also includes
50,000 UPREIT Units owned by Nelson Leenhouts’ spouse as to which he disclaims
beneficial ownership.
(10) Includes
50,748 shares which may be acquired upon the exercise of Currently Exercisable
Options, 600 shares in custodial accounts for the benefit of Mr. Norman
Leenhouts' grandchildren (as to which he disclaims beneficial ownership) and
2,606 shares of restricted stock. There are 7,215 additional shares
in Mr. Leenhouts’ account pursuant to the Director Deferred Compensation
Plan. The fourth column also includes 150,000 UPREIT Units
owned by Knollwood Ventures, Inc. Norman Leenhouts is a director,
officer and stockholder of Knollwood Ventures, Inc. Of the UPREIT
Units owned by Knollwood Ventures, Inc., 140,000 have been pledged as
collateral. The fourth column also includes 50,000 UPREIT Units owned
by Norman Leenhouts’ spouse as to which he disclaims beneficial
ownership.
(11) Includes
17,350 shares which may be acquired upon the exercise of Currently Exercisable
Options and 940 shares of restricted stock. Also includes 2,100
shares owned by Mr. Clifford Smith's children as to which he disclaims
beneficial ownership. There are 21,689 additional shares in Mr.
Smith’s account pursuant to the Director Deferred Compensation
Plan.
(12) Includes
3,150 shares which may be acquired upon the exercise of Currently Exercisable
Options and 3,913 shares of restricted stock Of the shares owned,
5,096 have been pledged as collateral.
(13) Includes
4,750 shares which may be acquired by Mrs. Tait upon the exercise of Currently
Exercisable Options and 3,913 shares of restricted stock. Also
includes 5,036 shares held in a custodial account for Mrs. Tait’s minor children
and 2,115 shares owned by Mrs. Tait's spouse as to which she disclaims
beneficial ownership. Mrs. Tait shares voting and dispositive power
with respect to 15,000 shares with her spouse. The fourth column also
includes 11,195 UPREIT Units that Mrs. Tait owns individually, 2,548 UPREIT
Units with respect to which she shares voting and dispositive power with her
spouse and 70 UPREIT Units that her spouse owns and as to which Mrs. Tait
disclaims beneficial ownership. All of the jointly held
shares and UPREIT Units have been pledged as collateral, as have 1,400 shares
and 70 UPREIT Units owned by Mrs. Tait’s spouse and 26,821 shares and 11,195
UPREIT Units that Mrs. Tait owns individually.
(14) Includes
103,098 shares which may be acquired upon the exercise of Currently Exercisable
Options and 12,015 shares of restricted stock. Mr. Gardner shares
voting and dispositive power with his spouse with respect to 56,233 shares, all
of which have been pledged as collateral. The fourth column also
includes 3,506 UPREIT Units owned by Mr. Gardner. There are 2,061
additional shares in Mr. Gardner’s account pursuant to the Deferred Bonus
Plan.
(15) Includes
94,594 shares which may be acquired upon the exercise of Currently Exercisable
Options and 9,884 shares of restricted stock. Mrs. McCormick shares
voting and dispositive power with her spouse with respect to 53,140 shares, all
of which have been pledged as collateral. The fourth column also
includes 565 UPREIT Units that Mrs. McCormick owns individually and 1,737 UPREIT
Units with respect to which she shares voting and dispositive power with her
spouse. There are 4,481 additional shares in Mrs. McCormick’s account
pursuant to the Deferred Bonus Plan.
(16) Includes
58,244 shares which may be acquired upon exercise of Currently Exercisable
Options, 6,299 shares of restricted stock and 1,925 shares held in Mr. Doyle’s
account under the Company’s 401(k) Savings Plan. Of the shares owned
by Mr. Doyle, 16,181 have been pledged as collateral. There are 7,436
additional shares in Mr. Doyle’s account pursuant to the Deferred Bonus
Plan.
(17) Includes
37,423 shares which may be acquired upon exercise of Currently Exercisable
Options, 6,812 shares of restricted stock and 937 shares held in Mr. John
Smith’s account under the Company’s 401(k) Savings Plan. Of the
shares owned by Mr. Smith, 3,484 have been pledged as collateral.
(18) Includes
910,096 shares which may be acquired upon the exercise of Currently Exercisable
Options and 92,494 shares of restricted stock. In addition to the
shares pledged as collateral as indicated in the footnotes above, 21,255 shares
have been pledged as collateral by other executive officers of the
Company.
(19) Assumes
that all Currently Exercisable Options issued to all listed persons have been
exercised and all shares of restricted stock issued to such persons have
vested.
(20) Same
assumptions as footnote (19) plus assumes that all UPREIT Units issued to all
listed persons have been exchanged for shares of Common Stock.
The following table sets forth
information regarding the beneficial ownership of Common Stock by each person or
entity known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock as of December 31, 2008. In preparing this
table, the Company has relied on information contained in filings with the
Securities and Exchange Commission.
|
Name and Address of Beneficial
Owner
|
Amount
and Nature of
Beneficial Ownership
|
Percentage
of Outstanding
Common Stock(1)
|
|
FMR,
LLC
82
Devonshire Street
Boston,
MA 02109
|
3,886,761(2)
|
11.98%
|
|
The
Vanguard Group, Inc.
100
Vanguard Blvd.
Malvern,
PA 19355
|
2,791,995(3)
|
8.61%
|
|
Barclays
Global Investors, N.A.
45
Howard Street
San
Francisco, CA 94105
|
2,716,257(4)
|
8.38%
|
|
Stichting
Pensioenfonds ABP
Oude
Lindestraat 70
Postbus
2889
6401
DL Heerlen
The
Kingdom of the Netherlands
|
2,110,620(5)
|
6.51%
|
(1) Percentage
is based on actual number of shares outstanding as of December 31, 2008 and may
be different than the percentage referenced in the reports described
below.
(2) Based
on a report on Schedule 13G (Amendment No. 2) filed by FMR LLC on February 17,
2009 reflecting that FMR LLC beneficially owns and has sole dispositive power
with respect to 3,886,761 shares and has sole voting power with respect to
1,085,270 shares.
(3) Based
on a report on Schedule 13G (Amendment No. 4) filed by The Vanguard Group, Inc.
on February 13, 2009, reflecting that The Vanguard Group, Inc. beneficially owns
and has sole dispositive power with respect to 2,791,995 shares and has sole
voting power with respect to 39,532 shares.
(4) Based
on a report on Schedule 13G filed jointly by Barclays Global Investors, N.A.,
Barclays Global Fund Advisors, Barclays Global Investors, Ltd., Barclays Global
Investors Japan Limited, Barclays Global Investors Canada Limited, Barclays
Global Investors Australia Limited and Barclays Global Investors (Deutschland)
AG, on February 5, 2009, reflecting that: (a) Barclays Global
Investors, N.A. beneficially owns and has sole dispositive power with respect to
988,847 shares and has sole voting power with respect to 885,330 shares; (b)
Barclays Global Fund Advisors beneficially owns and has sole dispositive power
with respect to 1,677,205 shares and has sole voting power with respect to
1,309,726 shares; (c) Barclays Global Investors, Ltd beneficially owns and has
sole dispositive power with respect to 38,314 shares and has sole voting power
with respect to 17,670 shares; and (d) Barclays Global Investors Japan Limited
beneficially owns and has sole voting and dispositive power with respect to
11,891 shares.
(5) Based
on a report on Schedule 13G filed by Stichting Pensioenfonds ABP
(“SP”) on February 13, 2009 reflecting that SP beneficially owns and has sole
voting and dispositive power with respect to 2,110,620 shares.
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's
executive officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC and the
NYSE. Officers, directors and greater than 10% stockholders are
required to furnish the Company with copies of all Section 16(a) forms
they file.
To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required during the fiscal year ended December 31, 2008, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were satisfied, except as follows: the
vesting of some shares of restricted stock held by Donald Hague, an executive
officer of the Company, was inadvertently left off of a filing made on his
behalf for another reportable event. This was subsequently reported
on a Form 4.
The
Company’s corporate headquarters are located in Clinton Square, a building that
is owned by an entity in which Amy Tait, Nelson Leenhouts, Norman Leenhouts and
members of their immediate families collectively have approximately a 75%
interest. The Operating Partnership and the building owner have
entered into various leases for approximately 75,000 square feet. The
base rent payable by the Operating Partnership under the leases for 2008 was
approximately $895,000, which remains unchanged for 2009. The leases
also require the Operating Partnership to pay its pro-rata portion of property
improvements, real estate taxes and common area maintenance. The
leases were approved by the Corporate Governance/Nominating Committee and the
Board of Directors. The building is managed by Broadstone Real
Estate, LLC, which receives a management fee from the building
owner. Norman Leenhouts is an owner of and Chairman of Broadstone
Real Estate, LLC. Amy Tait and her husband, Robert Tait, are both
owners and directors of Broadstone Real Estate, LLC, as well as the Chief
Executive Officer and President, respectively, of that entity.
The Board
of Directors, in February 2007, approved the terms of an Employment Agreement
with Nelson Leenhouts in which he agreed to continue in his leadership role in
connection with the development activities of the Company. During
2008, Mr. Leenhouts continued as an employee of the Company working as a liaison
to the development team, but he did not have an employment
agreement. The base salary paid to Mr. Leenhouts for the period from
January 1, 2008 to December 31, 2008 was $292,000. In addition, Mr.
Leenhouts was paid a bonus in the amount of $360,871 in February 2009 for
services performed in 2008. His salary and the amount of his bonus
were approved by the Corporate Governance/Nominating Committee and the Board of
Directors. Mr. Leenhouts retains the right to receive a bonus in the
amount of $61,250 in the event that certain municipal approvals are received in
connection with one of the development projects.
On an annual basis, each employee of
the Company and each of the directors is required to provide a written
acknowledgement that they have reviewed the Company’s Code of Business Conduct
and Ethics. If an employee or director, or member of their immediate
family, is involved in any transaction or arrangement in which the Company is a
participant, that individual is to provide a written disclosure of that
transaction or arrangement. Pursuant to the Company’s Related Party
Transaction Policies and Procedures, any such disclosure provided by an
executive officer or director is reviewed by the Corporate Governance/Nominating
Committee of the Board and approved or disapproved. In determining
whether to approve such a transaction, the Committee takes into account, among
other factors, whether the transaction was on terms no less favorable to the
Company than terms generally available to third parties and the extent of the
executive officer’s or director’s involvement.
All related party transactions which
are required to be reported in this Proxy Statement were approved by the
Corporate Governance/Nominating Committee pursuant to that
policy.
RATIFICATION
OF APPOINTMENT OF THE COMPANY’S
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR 2009
The Audit Committee has appointed and
the Board of Directors has ratified the appointment of the accounting firm of
PricewaterhouseCoopers LLP to serve as the Company’s independent registered
public accounting firm for the fiscal year ending December 31,
2009. PricewaterhouseCoopers LLP (and its predecessor, Coopers &
Lybrand, L.L.P.) has served as the Company’s independent registered public
accounting firm since commencement of the Company’s operations and is considered
by the Audit Committee, the Board of Directors and management of the Company to
be well qualified. The stockholders are being asked to ratify the
Audit Committee’s appointment of PricewaterhouseCoopers LLP. If the
stockholders fail to ratify this appointment, the Audit Committee may, but is
not required to, reconsider whether to retain that firm. Even if the
appointment is ratified, the Audit Committee in its discretion may direct the
appointment of a different accounting firm at any time during the year if it
determines that such a change would be in the best interests of the Company and
its stockholders. A representative of PricewaterhouseCoopers LLP will
be present at the Annual Meeting and will be given the opportunity to make a
statement if he or she so desires and will be available to respond to
appropriate questions.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM OF THE COMPANY FOR THE 2009 FISCAL YEAR.
The Audit
Committee of the Board of Directors of the Company is composed entirely of
independent directors as required by applicable securities laws and the current
listing standards of the NYSE. Its members are identified at the end
of this report. The Audit Committee operates under a written charter
adopted by the Committee and the Board.
As described more fully in its Charter,
the Audit Committee assists the Board in fulfilling its responsibility for
oversight of the quality and integrity of the accounting, auditing and financial
reporting practices of the Company. Among other matters, the Audit
Committee is responsible for the selection and oversight of the Company’s
independent registered public accounting firm.
The management of the Company is
responsible for the preparation and integrity of the financial reporting
information and related systems of internal controls. The independent
registered public accounting firm is responsible for performing an integrated
audit on the Company’s consolidated financial statements as well as on the
effectiveness of the Company’s internal control over financial reporting in
accordance with generally accepted auditing standards and for issuing a report
thereon. The Committee, in carrying out its role, relies on the
Company’s senior management and its independent public accountants.
During
2008, the Committee met five times. The Committee’s meetings include,
no less frequently than quarterly, executive sessions with the Company’s
independent registered public accounting firm without the presence of the
Company’s management and executive sessions with the Company’s management
without the presence of the Company’s independent registered public accounting
firm. The Committee also meets in executive session with the
Company’s Vice President, Internal Audit without the presence of the Company’s
management.
As part
of its oversight responsibility, the Audit Committee reviewed and discussed with
both management and the Company’s independent registered public accounting firm,
all annual and quarterly financial statements prior to their
issuance. Management advised the Committee that each set of the
Company’s financial statements was prepared in accordance with generally
accepted accounting principles and significant accounting and disclosure issues
were reviewed with the Committee. In addition, the Committee
continued to monitor the scope and adequacy of the Company’s internal audit
program.
The
Committee also discussed with the Company’s independent registered public
accounting firm the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended (Communication With Audit
Committees). In addition, the Company’s independent registered public
accounting firm provided to the Committee the written disclosures and the letter
required by applicable requirements of the Public Company Accounting Oversight
Board regarding the independent accountant’s communications with the Audit
Committee concerning independence. The Committee discussed with the
independent registered public accounting firm their independence from management
and the Company.
All audit
and non-audit services provided by PricewaterhouseCoopers LLP and the fees paid
by the Company with respect to such services have been reviewed and pre-approved
by the Audit Committee, which has also considered whether the provision of any
non-audit services is compatible with maintaining the independent registered
public accounting firm’s independence.
In
reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, that the
Company’s audited financial statements be included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008, for filing with the
Securities and Exchange Commission.
|
Submitted
by the Audit Committee,
|
|
|
Paul
L. Smith, Chair
|
|
|
Stephen
R. Blank
|
|
|
Alan
L. Gosule
|
|
|
Roger
W. Kober
|
The Audit Committee’s policy is to
pre-approve all audit and permissible non-audit services provided by the
Company’s independent registered public accounting firm. The
Committee pre-approves on an annual basis the provision of certain audit,
audit-related and tax services specifically described to the
Committee. Any additional engagements require separate
pre-approval. As permitted by the SEC’s rules, the Audit Committee
has authorized its Chair, Paul Smith, to approve any additional non-audit
services to be provided by the independent registered public accounting firm,
provided that such service is permitted under applicable regulations and
reported to the full Audit Committee at its next meeting.
All of the services described below for
2008 and 2007 were pre-approved by the Audit Committee. The Audit
Committee considered whether the provision of non-audit services by
PricewaterhouseCoopers LLP was compatible with maintenance of the firm’s
independence in the conduct of its audit function and determined that such
services were compatible with the maintenance of independence.
Aggregate fees for professional
services rendered to the Company by PricewaterhouseCoopers LLP as of or for the
years ended December 31, 2008 and 2007, were:
|
2008
|
2007
|
|||||||
|
Audit
fees(1)
|
$ | 840,597 | $ | 893,450 | ||||
|
Audit-related
fees(2)
|
9,000 | 55,000 | ||||||
|
Tax
fees(3)
|
161,166 | 182,160 | ||||||
|
All
other fees(4)
|
50,000 | 51,825 | ||||||
|
Total
fees
|
$ | 1,060,763 | $ | 1,182,435 | ||||
(1) Audit
fees consisted of professional services rendered for the audits of the
consolidated financial statements of the Company.
(2) Audit-related
fees consisted of assurance and related services related to SEC Regulation S-X
Rule 3-14 audits performed in connection with property acquisitions, issuance of
comfort letters, consents and assistance with review of documents filed with the
SEC.
(3) Tax
fees consisted of services related to preparation of tax returns and claims for
refunds $118,176 for 2008 and $102,760 for 2007 and tax planning and tax advice
$42,990 for 2008 and $79,400 for 2007.
(4) All
other fees consisted of license fees for software developed by
PricewaterhouseCoopers LLP that assisted with partner allocations for the
Operating Partnership.
The cost of solicitation of proxies in
the form enclosed herewith will be paid by the Company. In addition
to the solicitation of proxies by mail, the directors, officers and employees of
the Company may also solicit proxies personally or by telephone without
additional compensation for such activities. The Company will also
request persons, firms and corporations holding shares in their names or in the
names of their nominees, which are beneficially owned by others, to send proxy
materials to and obtain proxies from such beneficial owners. The
Company will reimburse such holders for their reasonable expenses.
A stockholder proposal submitted
pursuant to Rule 14a-8 under the Exchange Act for inclusion in the Company’s
Proxy Statement and form of proxy for the 2010 Annual Meeting of Stockholders
must be received by the Company by the close of business on December 3,
2009. Any proposal received after January 4, 2010 will not, under the
rules of the SEC, be considered timely for presentation at the 2010 Annual
Meeting. A proposal must comply with the requirements as to form and
substance established by the SEC for such a proposal to be included in the Proxy
Statement and form of proxy, and the proponent or a representative of the
proponent must attend the annual meeting to present the proposal.
Copies
of the Form 10-K may be obtained without charge from Shareholder Services, Home
Properties, Inc., 850 Clinton Square, Rochester, New York 14604. A
copy of the Form 10-K is also available through the Company’s Web site at
www.homeproperties.com or from the SEC at its Web site at
www.sec.gov.
The Board
of Directors does not know of any matters other than those described in this
Proxy Statement which will be presented for action at the Annual
Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
REGARDLESS
OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE VOTE
BY INTERNET, TELEPHONE OR COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD TODAY.
