formdef14a.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of
1934
Filed by
the Registrant [X]
Filed by
a Party other than the Registrant [ ]
Check the
appropriate box:
[ ] Preliminary
Proxy Statement
[ ] Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive
Proxy Statement
[ ] Definitive
Additional Materials
[ ] Soliciting
Material Pursuant to § 240.14a-12
Douglas Emmett,
Inc.
(Name of
Registrant as Specified in its Charter)
__________________________________________________________
(Name of
Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of filing fee (Check the appropriate box):
¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1) Title
of each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
(3) Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11
(set forth
the amount on which the filing fee is calculated and state how it was
determined):
(4) Proposed
maximum aggregate value of transaction:
(5) Total fee paid:
¨
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Fee
paid previously with preliminary
materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its
filing.
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(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
DOUGLAS
EMMETT, INC.
808
Wilshire Blvd., Suite 200, Santa Monica, California 90401
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on Thursday, May 27, 2010
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Stockholders (our “Annual Meeting”) of
Douglas Emmett, Inc. will be held at the Sheraton Delfina, located at 530 Pico
Boulevard, Santa Monica, California 90405 on May 27, 2010 at 9:00 a.m. local
time for the following purposes as more fully described in the accompanying
Proxy Statement:
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1.
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To
elect directors to serve on the Board of Directors until the 2011 annual
meeting of stockholders.
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2.
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To
ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm for
2010.
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3.
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To
transact such other business as may properly come before our Annual
Meeting or any adjournment thereof.
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Our Board
of Directors has fixed the close of business on April 1, 2010 as the record date
for determining the stockholders entitled to notice of and to vote at our Annual
Meeting, or at any adjournment thereof. Only stockholders at the close of
business on the record date are entitled to vote at our Annual
Meeting.
Accompanying
this Notice are a Proxy Card and a Proxy Statement. If you will not be able to
attend our Annual Meeting and vote your shares of Common Stock in person, please
mark, sign, date and promptly return the enclosed proxy card in the postage-paid
envelope. If your shares of Common Stock are held by a bank, broker
or other nominee, please follow the instructions you receive from your bank,
broker or other nominee to have your shares of Common Stock voted.
The proxy
may be revoked at any time prior to its exercise at our Annual
Meeting.
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By
Order of the Board of Derictors |
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/s/
Jordan L. Kaplan |
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Jordan L. Kaplan |
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President and Chief Executive Officer |
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April 26,
2010
Important
Notice Regarding the Availability of Proxy Materials for
the
Stockholder Meeting To Be Held on May 27, 2010
This
proxy statement and our 2009 annual report to stockholders
are available at http://www.douglasemmett.com/DEI/proxy_materials_2010.html.
DOUGLAS
EMMETT, INC.
808
Wilshire Blvd., Suite 200, Santa Monica, California 90401
PROXY
STATEMENT
Annual
Meeting of Stockholders
This
Proxy Statement is furnished to the stockholders of Douglas Emmett, Inc., a
Maryland corporation, in connection with the solicitation of proxies on behalf
of our Board of Directors (our “Board”). The proxies solicited hereby are to be
voted at the Annual Meeting of Stockholders to be held at the Sheraton Delfina,
located at 530 Pico Boulevard, Santa Monica, California 90405 on May 27, 2010 at
9:00 a.m. local time and at any and all adjournments thereof (our “Annual
Meeting”).
At our
Annual Meeting, stockholders will be asked to consider and vote upon the
following proposals:
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1.
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To
elect directors to serve on our Board until the 2011 annual meeting of
stockholders.
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2.
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To
ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm for
2010.
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3.
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To
transact such other business as may properly come before our Annual
Meeting or any adjournment thereof.
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A form of
proxy is enclosed. The shares represented by each properly executed unrevoked
proxy will be voted as directed by the stockholder executing the proxy. Our
Board recommends that stockholders vote “FOR” the election of the nominees for
our Board named below and “FOR” the ratification of the appointment of
Ernst & Young LLP as our independent registered public accounting firm.
Unless a proxy directs otherwise, the shares represented by each properly
executed unrevoked proxy will be voted in accordance with these recommendations.
With respect to any other item of business that may come before our Annual
Meeting, the proxy holders will vote the proxy in accordance with their best
judgment.
For
stockholders of record, if you will not be able to attend our Annual Meeting and
vote your shares of Common Stock in person, please mark, sign, date and promptly
return the enclosed proxy card in the postage-paid envelope. If your shares of
Common Stock are held by a bank, broker or other nominee, please follow the
instructions you receive from your bank, broker or other nominee to have your
shares of Common Stock voted. If your shares are held by a broker,
the broker will ask you how you want your shares to be voted. If you
give the broker instructions, then your shares will be voted as you direct. If
you do not give instructions, then for the ratification of the independent
registered public accounting firm, the broker may vote your shares in its
discretion, but for the election of directors, the broker may not vote your
shares at all.
Any proxy
given may be revoked at any time prior to its exercise by filing, with our
Secretary, an instrument revoking such proxy or by the filing of a duly executed
proxy bearing a later date. Any stockholder present at the meeting who has given
a proxy may withdraw it and vote his or her shares in person if such stockholder
so desires.
This
Proxy Statement and the accompanying form of proxy are first being mailed to
stockholders on or about April 26, 2010. We intend to solicit proxies primarily
by mail. However, directors, officers, agents and employees may communicate with
stockholders, banks, brokerage houses and others by telephone, e-mail, in person
or otherwise to solicit proxies. Additionally, we intend to post this Proxy
Statement and 2009 Annual Report on our website for public review and on the
website address set forth on the Notice accompanying this Proxy Statement. We
have no present plans to hire special employees or paid solicitors to assist in
obtaining proxies, but reserve the option to do so. All expenses incurred in
connection with this solicitation will be borne by us. We request that brokerage
houses, nominees, custodians, fiduciaries and other similar parties forward the
soliciting materials to the underlying beneficial owners of our Common Stock. We
will reimburse reasonable charges and expenses incurred in doing
so.
VOTING
SECURITIES AND PRINCIPAL STOCKHOLDERS
Outstanding
Shares; Record Date; and Quorum
Only
holders of record of our Common Stock at the close of business on April 1, 2010
(the “Record Date”) are entitled to notice of and to vote at our Annual Meeting
and any adjournments thereof. As of the Record Date, 122,029,198 shares of our
Common Stock were issued and outstanding. Holders are entitled to one
vote at our Annual Meeting for each share of our Common Stock held that was
issued and outstanding as of the Record Date.
The
presence, in person or by proxy, of stockholders holding at least a majority of
our outstanding Common Stock will constitute a quorum for the transaction of
business at our Annual Meeting.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth the beneficial ownership of our Common Stock as of
April 1, 2010, by (i) each person or entity known by us to own beneficially
more than 5% of our outstanding Common Stock (based upon review of 13D and 13G
filings as of April 1, 2010), (ii) each of our directors, (iii) each
of our named executive officers (as defined below) and (iv) all of our
directors and executive officers as a group. Except as otherwise
noted, the persons or entities named have sole voting and investment power with
respect to all shares shown as beneficially owned by them, and the address of
each of these individuals is c/o Douglas Emmett, Inc., 808 Wilshire Blvd., Suite
200, Santa Monica, California 90401.
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Common
Stock(1)
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Name
and Address of Owner(2)
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Number of
Shares
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Percent of
Class
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Dan
A. Emmett(3)
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18,319,548
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13.5
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Jordan
L. Kaplan
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12,355,052
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9.4
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Kenneth
M. Panzer
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10,932,137
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8.4
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Leslie
E. Bider
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160,930
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*
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Ghebre
Selassie Mehreteab
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18,430
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*
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Thomas
E. O’Hern
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30,930
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*
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Dr. Andrea
Rich
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23,430
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*
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William
Wilson III
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110,930
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*
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William
Kamer
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792,563
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*
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Christopher
H. Anderson(4)
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7,284,247
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5.8
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The
Vanguard Group, Inc. (5)
100
Vanguard Place, Malvern, PA 19355
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9,211,536
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7.6
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Wellington
Management Company, LLP(6)
75
State Street, Boston, MA 02109
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8,840,224
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7.2
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All
officers and directors as a group (9 persons)
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42,743,949
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27.6
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(1)
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Pursuant
to Item 403 of Regulation S-K, the number of shares listed for each
individual reflects their beneficial ownership. For purposes of this
table, a person or group of persons is deemed to have “beneficial
ownership” of any shares that such person or group has the right to
acquire within 60 days after April 1, 2010 as
follows:
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Name
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Options
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OP
Units
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Dan
A. Emmett
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232,681 |
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13,255,860 |
Jordan
L. Kaplan
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4,224,771 |
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5,356,713 |
Kenneth
M. Panzer
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4,224,771 |
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4,783,798 |
William
Kamer
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611,379 |
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85,984 |
Leslie
E. Bider
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0 |
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10,930 |
Ghebre
Selassie Mehreteab
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0 |
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10,930 |
Thomas
E. O’Hern
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0 |
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5,930 |
Dr.
Andrea L. Rich
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0 |
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10,930 |
William
Wilson III
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0 |
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10,930 |
Christopher
H. Anderson
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0 |
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4,388,174 |
All
directors and executive officers as a group
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9,293,602 |
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27,920,179 |
These
shares are deemed to be outstanding for purposes of computing the percentage of
outstanding shares held by each person or group on that date, but are not deemed
to be outstanding for the purpose of computing the percentage ownership of any
other person. “OP Units” refers to limited partnership interests of
Douglas Emmett Properties, LP, our operating partnership, of which we are the
general partner, and which are redeemable by the holder for an equivalent number
of shares of our Common Stock or for the cash value of such shares, at our
election.
(2)
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Mr. Emmett
is our Chairman of the Board of Directors, Mr. Kaplan is our Chief
Executive Officer and President and a Director, Mr. Panzer is our
Chief Operating Officer and a Director, and Mr. Kamer is our Chief
Financial Officer. Messrs. Bider, Mehreteab, O’Hern and Wilson and
Dr. Rich are members of our
Board.
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(3)
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Mr. Emmett
disclaims beneficial ownership of (i) 172,500 shares of Common Stock
owned by the Emmett Foundation, a California tax-exempt charitable
organization, of which Mr. Emmett is the president, (ii) 88,000
shares of Common Stock owned by certain trusts for Mr. Emmett’s children
of which Mr. Emmett is the sole trustee, (iii) 382,425 OP Units owned
by trusts for Mr. Emmett’s spouse and children, and (iv) except
to the extent of his pecuniary interest therein, 3,017,288 OP Units owned
by Rivermouth Partners, a California limited
partnership.
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(4)
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Based
solely on information disclosed in the Schedule 13G filed by Mr. Anderson
on June 8, 2009.
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(5)
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Based
on information disclosed in the Schedule 13G/A filed February 4, 2010 by
The Vanguard Group, Inc. (“Vanguard”). Of such shares, Vanguard
has sole dispositive power with respect to 9,136,615
shares. Vanguard Fiduciary Trust Company, a wholly-owned
subsidiary of Vanguard, is the beneficial owner of and has sole voting
power over an additional 74,921 shares as a result of its serving as
investment manager of collective trust
accounts.
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(6)
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Based
on information disclosed in the Schedule 13G/A filed February 12, 2010 by
Wellington Management Company, LLP (“Wellington”), in its capacity as
investment adviser. Of such shares, Wellington has shared
voting power with respect to 5,893,707 shares and shared dispositive power
with respect to 8,840,224 shares.
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ELECTION
OF DIRECTORS
(Proposal
1)
Information
Concerning Nominees
Our Board
has eight members, all of whose terms expire at our Annual Meeting and who are
nominated for election to a term that will expire at our 2011 annual meeting of
stockholders.
Each of
our Board members was nominated based on the assessment of our Nominating and
Corporate Governance Committee (our “Governance Committee”) and our Board that
the nominees have demonstrated an ability to make meaningful contributions to
the oversight of our business and affairs, have a reputation for honesty and
ethical conduct in their personal and professional activities and share
independence, experience and strong communication and analytical
skills. Our Board seeks, and consists of, persons whose diversity of
skills, experience and background are complementary to those of our other Board
members.
Name
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Age
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Title
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Dan
A. Emmett
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70 |
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Chairman
of our Board of Directors
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Jordan
L. Kaplan
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49 |
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Director,
Chief Executive Officer and President
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Kenneth
M. Panzer
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50 |
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Director
and Chief Operating Officer
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Leslie
E. Bider(1)(4)
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59 |
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Director
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Ghebre
Selassie Mehreteab(4)(6)
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60 |
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Director
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Thomas
E. O’Hern (2)
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54 |
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Director
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Dr. Andrea
Rich(3)(5)
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66 |
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Director
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William
Wilson III(6)
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73 |
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Director
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_________________________________
(1)
Chairman of our Compensation Committee.
(2)
Chairman of our Audit Committee.
(3)
Chairman of our Governance Committee.
(4)
Member of our Audit Committee.
(5)
Member of our Compensation Committee.
(6)
Member of our Governance Committee.
Dan A. Emmett.
Mr. Emmett has served as the Chairman of our Board since our
inception. In 1971, Mr. Emmett co-founded our original predecessor and our
immediate predecessor in 1991. Mr. Emmett received his bachelor’s degree
from Stanford University in 1961 and his J.D. from Harvard University in
1964. Mr. Emmett was nominated as a result of his position as Chief
Executive Officer of our predecessor entities and his extensive knowledge of our
operations and our market.
Jordan L. Kaplan.
Mr. Kaplan has served as our Chief Executive Officer and President, and a
member of our Board, since our inception. Mr. Kaplan joined our predecessor
operating companies in 1986, co-founded our immediate predecessor in 1991 and
served as the Chief Financial Officer for our predecessor operating companies
from 1991 to 2006. Mr. Kaplan received his bachelor’s degree from the
University of California, Santa Barbara in 1983 and his M.B.A. from the
University of California, Los Angeles in 1986. Mr. Kaplan was nominated
as a result of his position as our Chief Executive Officer and his extensive
knowledge of our operations and our market.
Kenneth M. Panzer.
Mr. Panzer has served as our Chief Operating Officer and a member of our
Board since 2006. Mr. Panzer joined our predecessor operating companies in
1984, co-founded our immediate predecessor in 1991 and served as the Chief
Operating Officer of our predecessor operating companies from 1991 to 2006.
Mr. Panzer received his bachelor’s degree from Penn State University in
1982. Mr. Panzer was nominated as a result of his position as our Chief
Operating Officer and his extensive knowledge of our operations and our
market.
Leslie E. Bider.
Mr. Bider has served as a member of our Board since 2006. Since June
2008, he has been the Chief Executive Officer of PinnacleCare, a Private Health
Advisory firm. From 2007 to 2008, he was the Chief Strategist at ITU Ventures, a
Los Angeles based Venture Capital firm. From 2005 to 2007 Mr. Bider served
as an executive in residence at Elevation Partners. Mr. Bider was the
Chairman/Chief Executive Officer of Warner Chappell Music, Inc., one of the
world’s largest music publishing companies, from 1987 to 2005. Prior to that,
Mr. Bider served as Chief Financial Officer and Chief Operating Officer of
Warner Bros. Music, and was a principal in an accounting firm specializing in
the entertainment industry. Mr. Bider is currently a member of the board of
directors of OSI Systems, Inc. (NASDAQ: “OSIS”) and California Pizza Kitchen
(NASDAQ – “CPKI”). He served on the board of directors of Arden Realty Inc.
(NYSE: “ARI”) from 2004 until it was merged with a wholly-owned subsidiary of
General Electric Capital Corporation in 2006. He also was a director
of 1st Century Bancshares (NASDAQ: “FCTY”) from 2008 to 2009. He serves on the
board of a number of civic organizations and has been the recipient of
prestigious civic and music industry awards. Mr. Bider holds a bachelor’s
degree in accounting from University of Southern California and an M.S. from the
Wharton School. Mr. Bider was nominated
based on the entirety of his experience and skills, although the Governance
Committee and Board specifically noted his experience in real estate, including
his prior service as a director at a large commercial real estate firm, his
knowledge of financial and accounting matters, and his operating
experience in several industries.
Ghebre Selassie Mehreteab.
Mr. Mehreteab has served as a member of our Board since
2006. Mr. Mehreteab is an advisor to foundations and financial
institutions on affordable housing. Mr. Mehreteab served as Chief Executive
Officer of the NHP Foundation, a non-profit corporation that owns and operates
affordable multifamily housing in many cities across the United States, from its
inception in 1989 until 2009. Previously Mr. Mehreteab was Vice President
of the National Corporation for Housing Partnerships and a program officer at
the Ford Foundation. Mr. Mehreteab is a board member of the Council on
Foreign Relations. Mr. Mehreteab received his bachelor’s degree and LL.D.
(honorary) from Haverford College. Mr. Mehreteab was nominated based on the
entirety of his experience and skills, although the Governance Committee and
Board specifically noted his experience in real estate.
Thomas E. O’Hern.
Mr. O’Hern has served as a member of our Board since 2006. Mr. O’Hern
is Senior Executive Vice President, Chief Financial Officer, and Treasurer of
Macerich Company (NYSE: “MAC”), a REIT specializing in retail real estate. Prior
to joining Macerich in 1993, Mr. O’Hern served as Chief Financial Officer
of several commercial real estate companies. Mr. O’Hern worked as a
Certified Public Accountant for Arthur Andersen & Co. from 1978 through
1984. Mr. O’Hern is a trustee for Little Company of Mary Hospital
Foundation and is a board member of several other educational and philanthropic
organizations. Mr. O’Hern holds a bachelor’s degree from California
Polytechnic University, San Luis Obispo. Mr. O’Hern was nominated based on the
entirety of his experience and skills, although the Governance Committee and
Board specifically noted his experience in real estate, including his service as
an executive at other large commercial real estate firms, and his knowledge of
financial and accounting matters.
Dr. Andrea L. Rich.
Dr. Rich has served as a member of our Board since 2006. Dr. Rich
retired from the Los Angeles County Museum of Art in 2005 where she served for
ten years as President and Chief Executive Officer. During the second half of
her career at the Museum, she also served as the Wallis Annenberg Director.
Prior to her tenure at the Los Angeles County Museum of Art, Dr. Rich had a
long academic and administrative career at UCLA, culminating in her service as
Executive Vice Chancellor and Chief Operating Officer from 1991 to 1995.
Dr. Rich serves as a director of Mattel Inc. and The Private Bank of
California. Dr. Rich earned her bachelor’s degree, master’s degree and
Ph.D. from UCLA. Dr. Rich was nominated based on the entirety of her
experience and skills, although the Governance Committee and Board specifically
noted her experience in administration and as a director of public companies in
other areas outside of real estate.
William Wilson III.
Mr. Wilson has served as a member of our Board since 2006. Mr. Wilson
is currently Advisor to Wilson Meany Sullivan, LLC, a real estate investment,
development and management firm in San Francisco. Mr. Wilson was founder of
William Wilson and Associates, which merged with Cornerstone Properties, Inc., a
public REIT specializing in office properties. Mr. Wilson served as
Chairman of Cornerstone until it was acquired by Equity Office Properties Trust
in 2000 and served on the board of directors of Equity Office Properties until
2004. Mr. Wilson is active in numerous civic organizations including
service on the boards of the California Academy of Science, Lawrenceville School
and the Presidio Trust. Mr. Wilson earned his bachelor’s degree in
engineering from Stanford University. Mr. Wilson was nominated
based on the entirety of his experience and skills, although the Governance
Committee and Board noted specifically his experience in real estate, including
his service as an executive and board member at other large real estate firms,
and his operating experience.
Required
Vote
Nominees
will be elected as directors by a plurality of the votes cast (assuming a quorum
is present). The shares of each properly executed unrevoked proxy will be voted
FOR the election of all of the nominees, unless the proxy otherwise directs.
Abstentions and broker non-votes will have no effect on the outcome of this
proposal. All of the nominees have indicated a willingness to serve as
directors, but if any of them should decline or be unable to act as a director,
the proxy holders will vote for the election of another person or persons as our
Board recommends.
Board
Recommendation
OUR
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
ABOVE-NAMED NOMINEES.
THE
RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP
AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal
2)
Our Audit
Committee has approved the appointment of Ernst & Young LLP as our
independent registered public accounting firm to audit our consolidated
financial statements for 2010. We are seeking our stockholders’ ratification of
such action.
A
representative of Ernst & Young LLP will be available at our Annual
Meeting to respond to appropriate questions or make any other statements such
representative deems appropriate.
Required
Vote
Proposal
2 requires the affirmative vote of a majority of the votes cast on the
proposal (assuming
a quorum is present). Stockholders may vote “for” or “against” the proposal, or
they may abstain from voting on the proposal. Abstentions will not have any
effect on the outcome of this proposal. In the event the stockholders do not
approve this proposal, our Audit Committee will reconsider the appointment of
Ernst & Young LLP as our independent registered public accounting
firm.
Board
Recommendation
OUR
BOARD AND ITS AUDIT COMMITTEE RECOMMEND THAT STOCKHOLDERS VOTE FOR THE RATIFICATION
OF APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
EXECUTIVE OFFICERS
Name
|
|
Age |
|
Title
|
Dan
A. Emmett
|
|
70 |
|
Chairman
of the Board of Directors
|
Jordan
L. Kaplan
|
|
49 |
|
Chief
Executive Officer and President
|
Kenneth
M. Panzer
|
|
50 |
|
Chief
Operating Officer
|
William
Kamer
|
|
59 |
|
Chief
Financial Officer
|
Biographical
information regarding Messrs. Emmett, Kaplan and Panzer is set forth above under
“Election of Directors (Proposal 1)—Information Concerning
Nominees.”
William Kamer. Mr. Kamer
has served as our Chief Financial Officer since 2006. From 2000 to 2006,
Mr. Kamer served as Senior Vice President in the Capital Markets Division
and General Counsel of our predecessor operating companies. Prior to that time,
Mr. Kamer was an attorney for 22 years focusing exclusively on real estate
and real estate finance matters. He was a partner at the law firm of Cox,
Castle & Nicholson LLP from 1986 through 1999. Mr. Kamer received
his bachelor’s degree from Vassar College in 1973, his master’s degree in city
and regional planning from Harvard University in 1978, and his J.D. from Boston
University in 1978.
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines
We have
adopted Corporate Governance Guidelines, which are available at http://www.douglasemmett.com, under
the headings Investor
Relations, Corporate Governance, Governance Documents, Corporate Governance
Guidelines. These guidelines were adopted by our Board to assist our
Board in the exercise of its responsibilities. The guidelines describe such
matters as the role of directors, the selection of new directors, Board
membership criteria, independence requirements, self-evaluation by our Board and
Board and committee procedural matters. Under our guidelines, our Board reviews
management’s long-range planning for executive development and
succession.
Code
of Business Conduct and Ethics
Our Code
of Business Conduct and Ethics, which is our code of ethics applicable to our
directors, officers and employees (including our Chief Executive Officer and
Chief Financial Officer), embodies our principles and practices relating to the
ethical conduct of our business and our commitment to honesty, fair dealing and
full compliance with laws. Our Code of Business Conduct and Ethics is available
at http://www.douglasemmett.com under the headings Investor Relations, Corporate
Governance, Governance Documents, Code of Business Conduct &
Ethics. If we make any amendments to this code other than
technical, administrative or other non-substantive amendments, or grant any
waivers, including implicit waivers, from a provision of this code to our Chief
Executive Officer, Chief Financial Officer or Principal Accounting Officer, we
will disclose the nature of any such amendment or waiver to the code, its
effective date and to whom it applies, on our website or in a report on Form 8-K
filed with the Securities and Exchange Commission (“SEC”).
Equity
Ownership Guidelines
Our Board
has adopted a policy to encourage our executive officers and directors to reach
target equity ownership levels (through a combination of Common Stock, OP Units,
and/or Long Term Incentive Plan units (“LTIP Units”)) within 5 years of adoption
of such policy (which was adopted in 2009) or their becoming subject to the
policy, whichever occurs first, equal to the lesser of a multiple (based on fair
market value of the equity at each year end) of annual salary/retainer at the
previous year-end or a fixed share amount, as follows:
Title |
|
Share Equivalents
|
|
Multiple
of Salary/retainer
|
|
Chief
Executive Officer |
|
200,000
|
|
4x
|
|
Other
executive officers |
|
50,000
|
|
3x
|
|
Directors |
|
7,500
|
|
2x
|
Director
Independence
Our Board
annually reviews and determines the independence of each director and nominee
for election as a director in accordance with our Corporate Governance
Guidelines, which incorporates all elements of the independence standards set
forth in the New York Stock Exchange (“NYSE”) rules. Our director independence
standards are available at http://www.douglasemmett.com under the headings Investor Relations, Corporate
Governance, Governance Documents, Corporate Governance
Guidelines. Based on these standards, our Board
determined that each of Leslie E. Bider, Ghebre Selassie Mehreteab, Thomas E.
O’Hern, Dr. Andrea Rich and William Wilson III is independent and has no
material relationship with us and that Victor J. Coleman was
independent and had no material relationship with us during the time he was a
member of our Board.
Board
Leadership Structure
Our Board
currently separates the role of Chairman of the Board from the role of our Chief
Executive Officer. In addition, our Corporate Governance
Guidelines provide that the Chairperson of our Governance Committee is
responsible for chairing the meetings of our independent
directors. Our Board believes that this structure combines
accountability with effective oversight. This structure also gives us
the continued benefits of the experience and knowledge of our Chairman, who has
been overseeing our operations and those of our predecessor for over 35 years,
while reflecting the current responsibilities and contributions of the team of
our Chief Executive Officer and Chief Operating Officer.
Board
Role in Risk Oversight
Our Board
is actively involved in overseeing our risk management through our Audit
Committee. Under its charter, our Audit Committee is responsible for
discussing guidelines and policies governing the process by which our senior
management and our relevant departments assess and manage our exposure to risk,
as well as our major financial risk exposures and the steps management has taken
to monitor and control such exposures.
Stockholder
and Interested Party Communications
Communications
to our Board, any of its committees or the chairperson of our Governance
Committee (who chairs the quarterly executive sessions of our non-management
directors) may be addressed to Corporate Secretary, Douglas Emmett, Inc., 808
Wilshire Blvd., Suite 200, Santa Monica, CA 90401, marked to the attention of
the appropriate recipient. Copies of all communications so addressed will be
promptly forwarded to the chairperson of the committee involved or, in the case
of communications addressed to our Board as a whole, to the chairperson of our
Governance Committee.
Annual
Meeting Attendance
We expect
that all of our Board members will attend our annual meetings of stockholders in
the absence of a showing of good cause for failure to do so. Seven of the then
nine members of our Board attended our 2009 annual meeting of
stockholders.
BOARD
MEETINGS AND COMMITTEES
During
2009, our Board held four meetings and acted by written consent once jointly
with our Compensation Committee. Our Board has three separately designated
standing committees: our Governance Committee, our Audit Committee and our
Compensation Committee. Each member of these standing committees has been
determined to meet the standards for “director independence” under the rules of
the SEC and the rules and regulations of the NYSE. Each incumbent director
attended at least 75% of the aggregate number of meetings of our Board and
meetings of committees of our Board on which she or he served during
2009.
Nominating
and Corporate Governance Committee
The
members of our Governance Committee are Dr. Andrea L. Rich,
Chairperson, Ghebre Selassie Mehreteab and William Wilson III.
Our Governance Committee has adopted a charter that is posted on our website at
http://www.douglasemmett.com under the headings Investor Relations, Corporate
Governance, Committee Charters. The principal functions of our Governance
Committee include responsibility for (i) identifying and recommending qualified
individuals to serve as directors and to serve on our Board’s committees, (ii)
advising our Board on its composition, procedures and committees, (iii) the
corporate governance practices and policies of our Board and (iv) overseeing the
evaluation of our Board and management. Under our Corporate Governance
Guidelines, the chairperson of our Governance Committee also chairs the
executive sessions of non-management directors. Our Governance Committee met
three times during 2009 and acted by written consent three times.
Our
Governance Committee manages the process for evaluating current Board members at
the time they are considered for re-nomination. After considering the
appropriate skills and characteristics required on our Board, the current makeup
of our Board, the results of the evaluations, and the wishes of our Board
members to be re-nominated, our Governance Committee recommends to our Board
whether those individuals should be re-nominated.
On at
least an annual basis, our Governance Committee reviews with our Board whether
it believes our Board would benefit from adding a new member(s), and if so, the
appropriate skills and characteristics required for the new member(s). If our
Board determines that a new member would be beneficial, our Governance Committee
solicits and receives recommendations for candidates and manages the process for
evaluating candidates. All potential candidates, regardless of their source
(including candidates recommended by stockholders), are reviewed under the same
process. Our Governance Committee (or its chairman) screens the available
information about the potential candidates. Based on the results of the initial
screening, interviews with viable candidates are scheduled with Governance
Committee members, other members of our Board and senior members of our
management. Upon completion of these interviews and other due diligence, our
Governance Committee may recommend to our Board the election or nomination of a
candidate.
All Board
nominees must demonstrate an ability to make meaningful contributions to the
oversight of our business and affairs and also must have a reputation for
honesty and ethical conduct in their personal and professional activities. Our
Governance Committee also believes that all directors should share qualities
such as independence, experience and strong communication and analytical
skills. Our Governance Committee may also consider additional
factors, including a candidate’s specific experiences and skills, relevant
industry background and knowledge, time availability in light of other
commitments (such as service on other public company boards or on other
governing boards), potential conflicts of interest, material relationships with
us and independence from our management. Our Governance Committee does not have
a formal policy with respect to diversity; however, our Board and our Governance
Committee believe that it is important that we have Board members whose
diversity of skills, experience and background are complementary to those of our
other Board members. In considering candidates for our Board, the Governance
Committee considers the entirety of each candidate’s credentials.
We expect
that candidates for independent Board members will typically be found through
recommendations from directors or others associated with us or with the help of
executive search firms (which receive a fee for their services). In
any given search, our Governance Committee may also define particular
characteristics for candidates to balance the overall skills and characteristics
of our Board and our perceived needs. However, during any search, our Governance
Committee reserves the right to modify its stated search criteria for
exceptional candidates. Our stockholders may also recommend candidates by
sending the candidate’s name and resume to our Governance Committee under the
provisions set forth above for communication with our Board. No such suggestions
from our stockholders were received in time for the Annual Meeting.
We
require specific approval by our Governance Committee of service by any of our
directors on more than three boards of directors of public companies (including
service on our Board) or on more than two audit committees of other public
companies if such director also serves on our Audit Committee. We also intend to
limit service of independent directors on our Board to seven years, unless that
limit is waived by our Governance Committee. Finally, our policy requires our
directors to submit a letter of resignation upon a material change in their
current employment status or job responsibilities, which our Governance
Committee may accept or reject in its sole discretion.
Audit
Committee
The
members of our Audit Committee are Thomas E. O’Hern, Chairman, Leslie E. Bider
and Ghebre Selassie Mehreteab. Our Audit Committee has adopted a charter, which
is posted on our website at http://www.douglasemmett.com under the headings Investor Relations, Corporate
Governance, Committee Charters. The information contained in this
paragraph shall not be deemed incorporated by reference in any filing under the
Securities Act of 1933, as amended (the “Securities Act”) or the Securities
Exchange Act of 1934 as amended (the “Exchange Act”), whether made before or
after the date hereof and irrespective of any general incorporation language in
any such filing (except to the extent that we specifically incorporate this
information by reference) and shall not otherwise be deemed “soliciting
material” or “filed” with the SEC or subject to Regulation 14A or 14C, or to the
liabilities of Section 18 of the Exchange Act (except to the extent that we
specifically incorporate this information by reference).
The
principal functions of our Audit Committee include to (i) review the plan and
results of our independent audit with our independent registered public
accounting firm and management, (ii) review our systems of internal control over
financial reporting, and (iii) engage or discharge our independent registered
public accounting firm. Our Audit Committee must approve any decision to hire
any person who served as a senior member of the audit team of our independent
auditor within the prior two years. Our Audit Committee met five times during
2009.
As
required in our Audit Committee Charter, our Board has determined that each
member of our Audit Committee is “independent,” as defined under the rules and
regulations of the SEC the NYSE, and that Thomas E. O’Hern, Chairman of our
Audit Committee, is an audit committee financial expert as defined under the
rules of the SEC.
Compensation
Committee
The
members of our Compensation Committee are Leslie E. Bider, Chairman, and
Dr. Andrea L. Rich. Victor J. Coleman served on our
Compensation Committee as its Chairman until his resignation from our Board on
December 7, 2009. Our Compensation Committee has adopted a charter,
which is posted on our website at http://www.douglasemmett.com under the headings Investor Relations, Corporate
Governance, Committee Charters. The principal functions of our
Compensation Committee include to (i) review our general compensation plans,
executive compensation plans and other employee benefit plans, and their goals
and objectives, and make any appropriate recommendations to the Board
with respect to, or make amendments to, these plans and their goals and
objectives, (ii) review the performance of our Chief Executive Officer and Chief
Operating Officer and determine and approve their compensation, (iii) review the
performance of our other executive officers and their compensation, (iv) review
and approve any employment, change of control, severance or termination
agreement with any of our executive officers, and (v) review perquisites and
personal benefits of our executive officers and directors and recommend changes
to our Board. Our Compensation Committee has the authority to
delegate to its subcommittees such power and authority as it deems appropriate
to the extent consistent with laws, regulations or listing standards, but has
not done so. Our Compensation Committee met three times during 2009
and acted by written consent once jointly with our Board.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
of Compensation Program
Our
Compensation Committee is responsible for oversight of our compensation and
employee benefit plans and practices, including our executive compensation,
incentive compensation and equity-based plans. Our Compensation Committee also
establishes our policies with respect to compensation of executive officers,
including our named executive officers (as defined below) and reviews and
presents to our Board for its approval our executive compensation disclosures
required by the SEC. Throughout this Proxy Statement, we refer to our Chief
Executive Officer and Chief Financial Officer, as well as the other individuals
included in the Summary Compensation Table below, as our “named executive
officers.”
Compensation
Philosophy and Objectives
We seek
to maintain a competitive total compensation package that aligns the economic
interest of our named executive officers with that of our stockholders and
rewards individual and corporate performance, while also considering multiple
factors, including the expenditure required and accounting, tax and share
dilution impacts. Subject to our existing contractual obligations, our
Compensation Committee also compares compensation levels and structures with
that of other employers, based on a benchmark analysis of 2008 actual
compensation prepared by our Compensation Committee’s outside compensation
consultants, The Schonbraun McCann Group LLC (“SMG”), a nationally recognized
firm specializing in the real estate industry. Our benchmark group
for 2009 was the same as that for 2008 and consisted of 14 REITs in three
sectors including office, industrial and diversified: Alexandria Real Estate
Equities, Inc., AMB Property Corporation, Boston Properties, Inc., Brandywine
Realty Trust, Digital Realty Trust, Inc., Duke Realty Corporation, iStar
Financial, Kilroy Realty Corporation, Liberty Property Trust, Mack-Cali Realty
Corporation, ProLogis, PS Business Parks, Inc., SL Green Realty Corp. and
Vornado Realty Trust.
Role
of Compensation Consultants
In 2009,
our Compensation Committee retained SMG to assist in our Compensation
Committee’s determination of executive compensation for 2009 and
2010. SMG had been retained in prior years (including in 2008 with
respect to our decisions in early 2009) to make recommendations concerning the
structure and amount of compensation for our named executive officers and our
Board. However, because our Compensation Committee did not intend to
change the basic structure of our compensation methods or philosophy, in 2009
SMG’s role was limited to comparing the compensation of our named executive
officers to the comparable officers at our benchmark companies.
Compensation
Components
The
principal components of compensation for our named executive officers for 2009
were:
·
|
incentive
compensation; and
|
·
|
perquisites
and other personal benefits.
|
Salary. Our general approach
to compensating executives is to pay cash salaries that are commensurate with
the executive’s experience and expertise and, where relevant, are comparable to
the salaries paid to executives in competitive businesses. We
establish salary levels for our named executive officers annually as part of
their total compensation package based on matters including (i) the
responsibilities of the position, (ii) the individual’s salary history,
performance and perceived ability to influence our financial performance in the
short and long-term, (iii) the compensation of our other employees, and
(iv) an evaluation of salaries for similar positions in our benchmark group
and other competitive factors. Each of the salaries of Messrs. Kaplan, Panzer,
and Kamer was originally set in his employment agreement with us, which was
negotiated prior to our initial public offering and the establishment of our
Compensation Committee. Mr. Emmett’s salary was set by negotiation prior to
our initial public offering and the establishment of our Compensation Committee.
Subject to their employment agreements, we consider salary levels for our named
executive officers annually as part of our performance review process as well as
upon any promotion or other change in job responsibility. Changes in salary may
reflect changes in the cost of living, changes in compensation paid by our
benchmark group and other employers, or our Compensation Committee’s assessment
of the individual’s performance.
Based on
current economic conditions, our Compensation Committee did not increase the
salaries of our named executive officers for 2010. For information concerning
the value of the salaries of each of our named executive officers during 2009,
see “—Summary Compensation Table” below.
Incentive Compensation. Most
of the compensation for our named executive officers has been paid in the form
of discretionary compensation based on our Compensation Committee’s assessment
of the executive’s individual performance and our overall performance during the
year. Our Compensation Committee has not set criteria in advance, but
rather has retained the discretion to award amounts based on its assessment of
performance at the end of the year. Commencing with 2007, we have
considered annual bonuses and annual equity grants under our 2006 Plan (defined
below) for our officers and key managers, including our named executive
officers, as a single integrated process. We believe that awarding
much of the incentive compensation of our named executive officers and other
senior employees in the form of equity, particularly LTIP Units, much of which
vests over time, has the effect of aligning their interests with those of our
stockholders with respect to the risks and rewards of our
business. We also believe that the policy of using discretion to set
incentive compensation, rather than fixed formulas, which can result in
unintended consequences, allows our Compensation Committee to determine
compensation at the end of each year based on its perception of the totality of
the situation, including our risk profile. We have not adopted any
specific policies regarding adjustments to our compensation policies and
practices to address changes in our risk profile, although we expect to take
those into account on an annual basis in accessing compensation
and may make changes to overall approach if our Compensation
Committee determines them to be necessary.
In
determining aggregate 2009 incentive compensation at its meeting in December
2009, our Compensation Committee considered our operating performance in
2009. Although our stock price rose during 2009 and our management
was able to reduce operating expenses significantly so
that our same property net operating income for 2009 declined
by less than 1% from 2008, we continue to deal with the effects of the
current slowdown in economic activity. Based on these and other
considerations, our Compensation Committee determined to keep 2009 aggregate
incentive compensation (cash and equity) unchanged from 2008 for Mr.
Kaplan, Mr. Panzer, and Mr. Kamer. We did not have any comparison
data with respect to 2009, but this placed Mr. Kaplan and Mr. Panzer’s total
compensation (including salary, cash bonus and equity grants) for 2009 at the
approximate 70th
percentile of chief executive officers at our benchmark group for 2008 and at
the approximate 75th
percentile of those entities with a chief operating officer or equivalent for
2008, although we believe that Mr. Panzer’s responsibilities exceed those of
most of these persons, and placed Mr. Kamer’s total compensation (including
salary, cash bonus and equity grants for 2009) at the approximate 50th
percentile of chief financial officers at our benchmark group in
2008.
For 2009,
our named executive officers received one-third of their aggregate 2009
incentive compensation in cash and the remaining two-thirds in
equity. The equity was valued based on the value of the Common Stock
on the date of the award in the case of LTIP Units, and in the case of options
the aggregate value to be recognized for financial statement reporting purposes
in accordance with Accounting Standards Codification (“ASC”) 718 over the life
of the award. The value of the equity awards to our named executive officers was
divided 50% in LTIP Units and 50% in options. One half of the options and
one-half of the LTIP Units were vested on grant, and the remainder vests in
three equal annual installments.
For
information concerning the cash bonus of and equity awards granted to each of
our named executive officers in 2009, see “—Summary Compensation Table”
below. Please note that, in accordance with applicable SEC rules, the
table reflects cash compensation with respect to 2009, but equity granted with
respect to 2008. This occurs because our equity grants for one year
are made in January of the next year after completion of the individual
reviews.
Perquisites and Other Personal
Benefits. Our named executive officers participate in our employee plans
on the same basis as other employees, including vacation, medical and health
benefits and our retirement savings plan under Section 401(k) of the
Internal Revenue Code. In addition, we provide our named executive officers with
limited perquisites and other personal benefits that we believe are reasonable
and consistent with our overall compensation program to better enable us to
attract and retain superior employees for key positions: (i) each of
Messrs. Kaplan and Panzer is entitled to the use of an automobile, reimbursement
of certain tax and financial services fees, a personal umbrella insurance policy
and family health insurance; (ii) Mr. Kamer is entitled to
reimbursement for family health insurance costs, since he does not participate
in our medical plans, and a car allowance; and (iii) Mr. Emmett receives an
automobile allowance. The benefits for Messrs. Kaplan, Panzer and Kamer are
required pursuant to their employment agreements. Messrs. Emmett, Kaplan and
Panzer are also entitled to use their secretaries for personal matters, which we
believe can increase the efficiency of their efforts for us. These benefits are
considered by our Compensation Committee in its review of compensation for our
named executive officers, and no changes were made with respect to 2009 or 2010.
We believe these perquisites, while not representing a significant portion of
our named executive officers’ total compensation, reflect our intent to create
overall market comparable compensation packages. For information concerning the
value of the perquisites of each of our named executive officers during 2009,
see “—Summary Compensation Table” below.
Tax
and Accounting Implications
Our
Compensation Committee considers the deductibility of executive compensation
under Section 162(m) of the Internal Revenue Code, which provides that we
may not deduct compensation of more than $1,000,000 that is paid to certain
individuals under certain circumstances. Our Compensation Committee’s policy
with respect to Section 162(m) is to make every reasonable effort to make
that compensation deductible while simultaneously providing the executives with
appropriate compensation for their performance. We believe that the compensation
paid to our named executive officers in 2009 should generally be fully
deductible for federal income tax purposes.
We
account for stock-based payments, including awards under our 2006 Plan (defined
below), in accordance with the requirements of ASC 718.
Role
of Executive Officers in Compensation Decisions
Under its
charter, our Compensation Committee makes all compensation decisions with
respect to our Chief Executive Officer and our other named executive officers
and all other elected officers, although it may consult with other advisors,
including our Chief Executive Officer and other officers, as it deems
appropriate. In determining the appropriate compensation levels for our Chief
Executive Officer and our Chief Operating Officer, our Compensation Committee
meets outside the presence of all of our executive officers. Our Chief Executive
Officer and our Chief Operating Officer recommended that the incentive
compensation for all named executive officers for 2009 be capped at their
incentive compensation in 2008, and that no salary increases be given to any of
our named executive officers for 2010.
Change
of Control Payments
As
described below under “—Principal Compensation Agreements and Plans—Employment
Agreements,” we are obligated under our employment contracts with Messrs.
Kaplan, Panzer and Kamer to make severance payments to them in the event they
terminate their employment within 18 months after a change of control as defined
in those agreements. In addition, the awards we have made under our 2006 Plan
(defined below) provide that if following a change of control either the
employment of a participant (including any of our named executive officers) is
terminated without cause by us or for good reason by the participant, or our
Common Stock is no longer publicly traded, then any unvested options or LTIP
Units will immediately vest.
Principal
Compensation Agreements and Plans
2006
Omnibus Stock Incentive Plan
The
Douglas Emmett, Inc. 2006 Omnibus Stock Incentive Plan (our “2006 Plan”) was
adopted by our Board and approved by our stockholders prior to the consummation
of our initial public offering in 2006 and was amended with the approval of our
stockholders in 2009. Our 2006 Plan is designed to be an important component of
overall compensation for our key employees, directors and other persons by
permitting participation by these key persons in our long-term growth and
profitability. This summary of our 2006 Plan does not purport to be exhaustive
and is expressly qualified in its entirety by reference to the full text of our
2006 Plan, as amended, which was filed as Annex A and Annex B to the Proxy
Statement for our 2009 annual meeting of stockholders.
Our 2006
Plan is administered and interpreted by our Compensation
Committee. All full-time and part-time officers, employees, directors
and other key persons (including consultants and prospective employees) are
eligible to participate in our 2006 Plan. We have reserved a total of 27,600,000
shares (subject to adjustment for stock splits, stock dividends or similar
changes in our capitalization) of our Common Stock for the issuance of awards
under our 2006 Plan. Subject to certain exceptions, shares that are forfeited or
canceled from awards under our 2006 Plan become available for future
awards. Our 2006 Plan is a “Fungible Share” plan, under which so
called “full value” awards made after the date of the 2009 amendment (such as
Deferred Stock Awards, Restricted Stock Awards and LTIP Unit awards) count
against our 2006 Plan overall limits as two shares (rather than one), while
options and stock appreciation rights (“SARs”) are counted as one share (0.9
shares for options or SARs with five year terms).
Our 2006
Plan provides our Compensation Committee with the authority to grant a variety
of types of equity awards:
·
|
Incentive Stock Options or
Non-Qualified Stock Options. Options entitle the
participant to purchase shares of our Common Stock over time for an
exercise price fixed on the date of the grant. The exercise
price may not be less than 100% of the fair market value of our Common
Stock on the date of the grant, and may be paid in cash, or by the
transfer of shares of our Common Stock meeting certain criteria or by a
combination thereof. Although we expect to grant only
non-qualified stock options, our 2006 Plan permits the grant of options
that qualify as an “incentive stock option” under the Internal Revenue
Code.
|
·
|
Stock Appreciation
Rights. SARs entitle the participant to receive the appreciation in
the fair market value of our Common Stock between the date of grant and
the exercise date in the form of shares of our Common
Stock.
|
·
|
Restricted Stock and Deferred
Stock Awards. Restricted stock awards are shares of our
Common Stock that vest in accordance with terms and conditions established
by our Compensation Committee. Deferred stock awards are stock
units entitling the participant to receive shares of our Common Stock paid
out on a deferred basis. Shares of restricted stock or deferred
stock awards that do not satisfy any vesting conditions are subject to our
right of repurchase or forfeiture.
|
·
|
Dividend Equivalent
Rights. Dividend equivalent rights entitle the
participant to receive credits for dividends that would be paid if the
participant had held specified shares of our Common
Stock.
|
·
|
Other Stock-based
Awards. Other stock-based awards permitted under our
2006 Plan include awards that are valued in whole or in part by reference
to shares of our Common Stock, including convertible preferred stock,
convertible debentures and other convertible or exchangeable securities,
partnership interests in a subsidiary or our operating partnership, awards
valued by reference to book value, fair value or performance of a
subsidiary, and any class of profits interest or limited liability company
membership interest.
|
·
|
LTIP
Units. LTIP Units are a separate series of units of
limited partnership interests in Douglas Emmett Properties, LP, our
operating partnership, valued by reference to the value of our Common
Stock. LTIP Unit awards, whether vested or unvested, entitle
the participant to receive, currently or on a deferred or contingent
basis, dividends or dividend equivalent payments with respect to the
number of shares of our Common Stock underlying the LTIP Unit award or
other distributions from our operating partnership. LTIP Unit
awards that do not satisfy any vesting conditions are subject to our right
of repurchase or forfeiture. LTIP Units are structured as
“profits interests” for federal income tax purposes, and we do not expect
the grant, vesting or conversion of LTIP Units to produce a tax deduction
for us. As profits interests, LTIP Units initially will not have full
parity with our operating partnership’s common units with respect to
liquidating distributions. Upon the occurrence of specified
events, LTIP Units can achieve full parity with those common units with
respect to liquidating distributions. If full parity is
achieved, LTIP Units may be converted, subject to the satisfaction of
applicable vesting conditions, on a one-for-one basis into common units,
which in turn are redeemable by the holder for shares of our Common Stock
or for the cash value of such shares, at our election. Until
full parity is reached, the value that a participant could realize for a
given number of LTIP Units will be less than the value of an equal number
of shares of our Common Stock and may be
zero.
|
Our 2006
Plan is not an “evergreen” plan and has a ten-year term ending in October 2016,
so that awards may not be made under our 2006 Plan after October
2016. Any awards made under our 2006 Plan that remain outstanding
after that date will continue to be governed by the terms of our 2006
Plan. Our 2006 Plan generally prohibits the transfer of awards, and
only allows the participant to exercise an award during his or her lifetime,
although our Compensation Committee may allow certain transfers to family
members or entities. If we experience a change-in-control, our Board and the
board of directors of the surviving or acquiring entity must make appropriate
provisions for the continuation or assumption of awards outstanding under our
2006 Plan, and may provide for the acceleration of vesting with respect to
existing awards. We may amend, suspend or terminate our 2006 Plan at
any time, but we will obtain stockholder approval of any such action if it is
required to comply with applicable law or NYSE regulations. Further,
we will need the holder’s consent if in doing so we adversely affect any rights
under outstanding awards.
Employment
Agreements
Kaplan, Panzer and Kamer Employment
Agreements. On October 23, 2006, we and our operating partnership
entered into employment agreements with Messrs. Kaplan, Panzer and Kamer with
the following principal terms:
·
|
Salary: Each of Messrs.
Kaplan and Panzer is entitled to receive a salary of not less than
$950,000, and Mr. Kamer is entitled to receive a salary of not less
than $575,000.
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·
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Bonus: Under the terms
of their employment agreements, each of Messrs. Kaplan and Panzer is
entitled to receive an annual bonus of up to 200% of salary, and
Mr. Kamer is entitled to receive an annual bonus of up to 120% of
salary, based upon meeting reasonable criteria to be established by our
Compensation Committee in consultation with the officer. As
noted above, since our initial public offering we have not been following
this approach and have instead applied the same integrated approach to
cash bonuses and equity grants with respect to each year as we do for our
other officers and key managers, with the amount of the incentive
compensation for our named executive officers based on our benchmark
group.
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·
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Perquisites and Other
Benefits: Mr. Kaplan and Mr. Panzer are entitled to the
use of an automobile, reimbursement of tax and financial services fees, a
personal umbrella insurance policy and family health insurance.
Mr. Kamer is entitled to reimbursement for family health insurance
costs, since he does not participate in our medical plans, and a car
allowance.
|
·
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Term: The term of each
employment agreement ends December 31, 2010, subject to one year
extensions if no notice is given at least 60 days prior to the end of the
then current term, and earlier termination with or without cause (although
30-days’ prior notice is required where the termination is by us without
“cause” or by the officer for “good reason”). Good reason includes a
termination by the officer within 18 months after the occurrence of a
change of control.
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·
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Severance Payments: If
we terminate the officer’s employment without cause or if the officer
terminates his employment for good reason, he will receive severance equal
to (a) compensation equal to three (two in the case of
Mr. Kamer) times the average of his total compensation over the last
three full calendar years ending prior to the termination date, including
(i) his salary, (ii) his annual bonus and (iii) the value
(based on the Black-Scholes value in the case of options and the value of
the underlying grants in the case of LTIP Unit awards or outperformance
plans) of any equity or other compensation plans granted or awarded to the
officer; and (b) continued coverage under our medical and dental
plans for himself and his eligible dependents for a three-year period
(two-year period for Mr. Kamer) following his termination. Any
payments made to the officer if we experience a change of control will be
grossed-up as necessary to adjust for the imposition of any excise taxes
under Section 280G of the Internal Revenue
Code.
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·
|
Other Termination
Payments: Upon the officer’s death or disability, he will receive
continued medical benefits for himself and his eligible dependents for a
period of twelve months plus a pro-rated portion of his annual
bonus.
|
·
|
Non-competition: Each
of these employment agreements also contains confidentiality and
non-solicitation provisions effective through the term of the agreement
and for a period of two years (confidentiality) and one year
(non-solicitation) thereafter, as well as a non-competition provision that
applies during the term of the agreement, and under which the officer
covenants that he will not: (i) for his own account engage in any
business that invests in or deals with large and mid-size office buildings
and multifamily properties in Los Angeles County and Hawaii (larger than
50,000 square feet for office properties and 50 units for apartment
buildings); (ii) enter the employ of, or render any consulting or any
other services to, any such entities that so compete, directly or
indirectly, with any business carried on by us or any of our subsidiaries;
or (iii) become interested in any such competing entity in any
capacity, including, without limitation, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or consultant;
provided, however, that the officer may own, directly or indirectly,
solely as a passive investment, 5% or less of any class of securities of
any entity traded on any national securities exchange and any assets
acquired in compliance with the requirements of the aforementioned
non-competition provisions.
|
Summary
Compensation Table
The
following table sets forth the salary and other compensation earned for 2007,
2008 and 2009 by our President and Chief Executive Officer, Chief Financial
Officer and our two other executive officers who for 2009 received more than
$100,000 in aggregate compensation.
Name
& Principal Position
|
|
Year
|
|
Salary
$
|
|
Bonus
$(1)
|
|
LTIP
Unit
Awards
$(2)
|
|
Option
Awards
$(2)
|
|
All
Other
Compensation
$(3)
|
|
Total
$
|
|
Dan
A. Emmett
|
|
2009
|
|
$ |
100,000 |
|
$ |
0 |
|
$ |
46,257 |
|
$ |
50,000 |
|
$ |
60,848 |
|
$ |
257,105 |
|
Chairman
of the Board
|
|
2008
|
|
$ |
100,000 |
|
$ |
0 |
|
$ |
46,264 |
|
$ |
50,000 |
|
$ |
59,705 |
|
$ |
255,969 |
|
|
|
2007
|
|
$ |
100,000 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
76,144 |
|
$ |
176,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jordan
L. Kaplan
|
|
2009
|
|
$ |
1,000,000 |
|
$ |
1,666,667 |
|
$ |
1,156,259 |
|
$ |
1,250,000 |
|
$ |
82,146 |
|
$ |
5,155,072 |
|
President
and CEO
|
|
2008
|
|
$ |
1,000,000 |
|
$ |
2,500,000 |
|
$ |
1,850,010 |
|
$ |
2,000,000 |
|
$ |
89,117 |
|
$ |
7,439,127 |
|
|
|
2007
|
|
$ |
950,000 |
|
$ |
1,500,000 |
|
$ |
0 |
|
$ |
0 |
|
$ |
106,152 |
|
$ |
2,556,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth
M. Panzer
|
|
2009
|
|
$ |
1,000,000 |
|
$ |
1,666,667 |
|
$ |
1,156,259 |
|
$ |
1,250,000 |
|
$ |
45,988 |
|
$ |
5,118,914 |
|
Chief
Operating Officer
|
|
2008
|
|
$ |
1,000,000 |
|
$ |
2,500,000 |
|
$ |
1,850,010 |
|
$ |
2,000,000 |
|
$ |
38,694 |
|
$ |
7,388,704 |
|
|
|
2007
|
|
$ |
950,000 |
|
$ |
1,500,000 |
|
$ |
0 |
|
$ |
0 |
|
$ |
53,000 |
|
$ |
2,503,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Kamer
|
|
2009
|
|
$ |
600,000 |
|
$ |
366,667 |
|
$ |
254,378 |
|
$ |
275,000 |
|
$ |
23,400 |
|
$ |
1,519,445 |
|
Chief
Financial Officer
|
|
2008
|
|
$ |
600,000 |
|
$ |
550,000 |
|
$ |
265,941 |
|
$ |
287,500 |
|
$ |
23,400 |
|
$ |
1,726,841 |
|
|
|
2007
|
|
$ |
575,000 |
|
$ |
287,500 |
|
$ |
0 |
|
$ |
0 |
|
$ |
23,400 |
|
$ |
885,900 |
|
____________________
(1)
|
Bonuses
are cash amounts paid to each officer with respect to the year in
question, whether paid in that year or the
next.
|
(2)
|
The
amounts in these columns represent the aggregate grant date fair value of
equity grants issued in each year, calculated in accordance with ASC 718,
under the assumptions included in Note 12 to our audited financial
statements for the year ended December 31, 2009 included in our
Annual Report to Stockholders. As noted above, our Compensation
Committee determines a single integrated bonus for each year, which is
paid partly in cash and partly in equity grants in January of the next
year. However, the above table includes the cash and equity
portions of the bonus in different years, since applicable SEC rules
stipulate that cash bonuses are included in the year for which they are
earned (even if paid after year end) and the equity awards in the year
they are granted (even if representing compensation for a prior
year). We believe that reflecting both the cash and the equity
portion of the bonus in the year with respect to which they were earned
provides a better picture of our named executive’s compensation for that
year. Doing so would change the following columns in the above
table:
|
Name
& Principal Position
|
|
Year
|
|
LTIP
Unit
Awards
$
|
|
Option
Awards
$
|
|
Total
$
|
|
Dan
A. Emmett
|
|
2009
|
|
$ |
44,175 |
|
$ |
50,000 |
|
$ |
255,023 |
|
Chairman
of the Board
|
|
2008
|
|
$ |
46,257 |
|
$ |
50,000 |
|
$ |
255,962 |
|
|
|
2007
|
|
$ |
46,264 |
|
$ |
50,000 |
|
$ |
272,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jordan
L. Kaplan
|
|
2009
|
|
$ |
1,472,223 |
|
$ |
1,666,669 |
|
$ |
5,887,705 |
|
President
and CEO
|
|
2008
|
|
$ |
1,156,259 |
|
$ |
1,250,000 |
|
$ |
5,995,376 |
|
|
|
2007
|
|
$ |
1,850,010 |
|
$ |
2,000,000 |
|
$ |
6,406,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth
M. Panzer
|
|
2009
|
|
$ |
1,472,223 |
|
$ |
1,666,669 |
|
$ |
5,851,547 |
|
Chief
Operating Officer
|
|
2008
|
|
$ |
1,156,259 |
|
$ |
1,250,000 |
|
$ |
5,944,953 |
|
|
|
2007
|
|
$ |
1,850,010 |
|
$ |
2,000,000 |
|
$ |
6,353,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Kamer
|
|
2009
|
|
$ |
323,899 |
|
$ |
366,668 |
|
$ |
1,680,634 |
|
Chief
Financial Officer
|
|
2008
|
|
$ |
254,378 |
|
$ |
275,000 |
|
$ |
1,702,778 |
|
|
|
2007
|
|
$ |
265,941 |
|
$ |
287,500 |
|
$ |
1,439,341 |
|
(3)
|
The
amount shown for each named executive officer reflects: (i) $3,000 in
matching contributions under our 401K Plan allocated to each of Mr. Kamer
and Panzer for each of the years shown; (ii) any estimated aggregate
incremental cost to us attributable to personal use of administrative
assistance services provided by us for that named executive officer; (iii)
the cost of financial planning services reimbursed by us; and (iv) any
auto allowances and any reimbursement of medical insurance premiums paid
to that named executive officer.
|
Grants
of Plan-based Awards
The
following table sets forth the grants of plan-based awards during fiscal 2009 to
our named executive officers:
Name
|
|
|
|
Approval
Date(1)
|
|
Non-incentive
Stock Awards or
LTIP
Units (#)
|
|
Non-incentive
Awards:
Number
of
Securities
Underlying
Options
(#)
|
|
Exercise
or
Base
Price
of
Option
Awards
($/sh)
|
|
Grant
Date
Fair
Value of
LTIP
Unit Awards
and
Option
Awards(2)
($/sh or Unit)
|
|
Dan
A. Emmett
|
|
1/12/09 |
|
1/5/09
|
|
|
4,379 |
|
|
|
|
|
$ |
46,257 |
|
|
|
1/12/09 |
|
1/5/09
|
|
|
|
|
|
54,348 |
|
$ |
11.42 |
|
$ |
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jordan
L. Kaplan
|
|
1/12/09 |
|
1/5/09
|
|
|
109,458 |
|
|
|
|
|
|
|
$ |
1,156,259 |
|
|
|
1/12/09 |
|
1/5/09
|
|
|
|
|
|
1,358,696 |
|
$ |
11.42 |
|
$ |
1,250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth
M. Panzer
|
|
1/12/09 |
|
1/5/09
|
|
|
109,458 |
|
|
|
|
|
|
|
$ |
1,156,259 |
|
|
|
1/12/09 |
|
1/5/09
|
|
|
|
|
|
1,358,696 |
|
$ |
11.42 |
|
$ |
1,250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Kamer
|
|
1/12/09 |
|
1/5/09
|
|
|
24,081 |
|
|
|
|
|
|
|
$ |
254,378 |
|
|
|
1/12/09 |
|
1/5/09 |
|
|
|
|
|
298,914 |
|
$ |
11.42 |
|
$ |
275,000 |
|
____________________
(1)
|
In
accordance with SEC rules, these awards are included in the table above
because they were made in 2009, even though they were part of each
executive’s compensation for 2008. Consistent with our annual
practice, our Compensation Committee approved the dollar value of these
grants on January 5, 2009, stipulating that they be issued on January 12,
2009, with the number of shares and option exercise price to be based on
the closing price on that date ($11.42). Our Compensation
Committee did so because we wish to inform our employees of the grants in
their reviews, which are then scheduled to occur between the date of
approval and the date of grant.
|
(2)
|
The
amounts in this column represent the aggregate grant date fair value of
the options and LTIP Units calculated in accordance with ASC 718, under
the assumptions included in Note 12 to our audited financial statements
for the year ended December 31, 2009 included in our Annual Report to
Stockholders.
|
Outstanding
Equity Awards at Fiscal Year-end
The
following table reflects outstanding vested and unvested stock options and
unvested LTIP Units held by our named executive officers as of December 31,
2009:
|
|
Option
Awards
|
|
LTIP Unit
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
|
Number of
LTIP Units
That
Have
Not Vested(2)
|
|
|
Market
Value
of
LTIP
Units
That
Have
Not Vested(2)
|
|
Dan
A. Emmett
|
|
|
177,778 |
|
|
0 |
|
$ |
21.00 |
|
10/30/2016
|
|
|
2,760 |
|
|
$ |
39,330 |
|
|
|
|
19,842 |
|
|
6,614 |
|
$ |
21.87 |
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
27,174 |
|
|
27,174 |
|
$ |
11.42 |
|
12/31/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jordan
L. Kaplan
|
|
|
2,488,889 |
|
|
0 |
|
$ |
21.00 |
|
10/30/2016
|
|
|
77,590 |
|
|
$ |
1,105,658 |
|
|
|
|
793,652 |
|
|
264,550 |
|
$ |
21.87 |
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
679,348 |
|
|
679,348 |
|
$ |
11.42 |
|
12/31/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth
M. Panzer
|
|
|
2,488,889 |
|
|
0 |
|
$ |
21.00 |
|
10/30/2016
|
|
|
77,590 |
|
|
$ |
1,105,658 |
|
|
|
|
793,652 |
|
|
264,550 |
|
$ |
21.87 |
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
679,348 |
|
|
679,348 |
|
$ |
11.42 |
|
12/31/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Kamer
|
|
|
193,334 |
|
|
193,333 |
|
$ |
21.00 |
|
10/30/2016
|
|
|
40,702 |
|
|
$ |
580,004 |
|
|
|
|
114,088 |
|
|
38,029 |
|
$ |
21.87 |
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
149,457 |
|
|
149,457 |
|
$ |
11.42 |
|
12/31/2018
|
|
|
|
|
|
|
|
|
____________________
(1)
|
Our
options become exercisable when they vest. Unvested options
having an expiration date of October 30, 2016 vest one-half on January 1,
2010 and one-half after January 1, 2011. Unvested options
having an expiration date of December 31, 2017 vest on December 31,
2010. Unvested options having an expiration date of December
31, 2018 vest one half on December 31, 2010 and one half on December 31,
2011.
|
(2)
|
Unvested
LTIP Units vest as follows: (a) for Mr. Emmett, 1,666 vest on December 31,
2010 and 1,094 vest on December 31, 2011; (b) for Messrs. Kaplan and
Panzer, 50,226 vest on December 31, 2010 and 27,364 vest on December 31,
2011; and (c) for Mr. Kamer, 34,682 vest on December 31, 2010 and 6,020
vest on December 31, 2011; their value is based on the closing price of
our Common Stock of $14.25 on December 31, 2009 at the rate of one share
for each LTIP Unit.
|
Option
Exercises and Equity Vested
None of
our named executive officers exercised any stock options during the year ended
December 31, 2009.
The
following table sets forth the LTIP Units held by our named executive officers
that vested during 2009:
Name |
|
Number
of LTIP Units Vested(1)
|
|
|
Value
Realized on Vesting
|
|
Dan
A. Emmett |
|
|
2,762 |
|
|
$ |
36,260 |
|
Jordan
L. Kaplan |
|
|
77,593 |
|
|
$ |
1,028,257 |
|
Kenneth
M. Panzer |
|
|
77,593 |
|
|
$ |
1,028,257 |
|
William
Kamer |
|
|
40,702 |
|
|
$ |
562,964 |
|
_________________
(1)
|
Amounts
represent market value as of the vesting of the award, based on the
closing price for our Common Stock on the date of vesting of the LTIP
Units at the rate of one share for each LTIP
Unit.
|
Potential
Payments Upon Termination or Change of Control
The
section below provides information concerning the amount of compensation payable
to each of our named executive officers in the event of termination of such
executive’s employment, including certain estimates of the amount that would
have been paid on certain dates under what we believe to be reasonable
assumptions. However, the actual amounts to be paid out can only be determined
at the time of such executive’s termination.
Payments
Made Upon Termination
Regardless
of the manner in which any of our employees (including any of our named
executive officers) is terminated, the employee is entitled to receive certain
amounts due during such employee’s term of employment. Such amounts
include:
·
|
any
unpaid salary from the date of the last payroll to the date of
termination;
|
·
|
reimbursement
for any properly incurred unreimbursed business expenses;
and
|
·
|
unpaid,
accrued and unused personal time off through the date of
termination.
|
In
addition, the officer will retain certain rights:
·
|
any
existing rights to indemnification for prior acts through the date of
termination; and
|
·
|
any
options and LTIP Units awarded pursuant to our 2006 Plan to the extent
provided in that Plan and the grant or
award.
|
The
awards we have made under the 2006 Plan provide that if a participant’s
(including any of our named executive officers who have unvested options or LTIP
Units) employment is terminated without cause by us or for good reason by the
participant, or if our Common Stock is no longer publicly traded following a
change of control, then any unvested options or LTIP Units will immediately
vest.
Mr.
Emmett. Mr. Emmett does not have any contractual severance
arrangements on termination, except that under the terms of our standard
agreements, Mr. Emmett’s unvested options and LTIP Units would become vested if
his employment is terminated without cause by us or for good reason by him, or
if our Common Stock is no longer publicly traded following a change of control.
As a result, based on our Common Stock closing price on December 31, 2009,
we estimate that the approximate value of these severance payments in the case
of a termination without cause or with good reason immediately following
December 31, 2009 would have been $77,781.
Messrs. Kaplan,
Panzer and Kamer. As noted above
under “—Principal Compensation Agreements and Plans—Employment Agreements,” each
of Messrs. Kaplan, Panzer and Kamer has an employment agreement with us. In
addition to those payments made upon termination noted immediately above, these
agreements provide for the following additional benefits on certain
terminations:
Payments Made Upon Termination by Us
Without Cause or by the Officer for Good Reason. If we terminate Messrs.
Kaplan, Panzer or Kamer’s employment without cause or if the officer terminates
his employment for good reason, he will receive severance equal to
(a) compensation equal to three (two in the case of Mr. Kamer) times
the average of his total compensation over the last three full calendar years
ending prior to the termination date, including (i) his salary,
(ii) his annual bonus and (iii) the value (based on the Black-Scholes
value in the case of options and the value of the underlying grants in the case
of LTIP Unit awards) of any equity or other compensation granted or awarded to
him; and (b) continued coverage under our medical and dental plans for
himself and his eligible dependents for a three-year period (two-year period for
Mr. Kamer) following his termination. Under the applicable
employment agreements for Messrs. Kaplan, Panzer and Kamer, good reason includes
a termination by the officer within 18 months after the occurrence of a change
of control. In order to receive such severance, the officer must execute a
release of all claims and comply with the remaining confidentiality and
non-solicitation provisions.
Based on the compensation
paid, and the grants of options and LTIP Units, in 2007, 2008 and 2009, and
using medical insurance premiums and the price of our Common Stock as of
December 31, 2009, we estimate that the approximate value of these
severance payments and benefits in the case of a termination without cause or
with good reason immediately following December 31, 2009 would have been
$18,516,884 for Mr. Kaplan, $18,488,864 for Mr. Panzer and $3,253,815
for Mr. Kamer. In addition, the unvested option and LTIP Units of each
executive would vest immediately, which we estimate would result in additional
value of $3,028,212 for Mr. Kaplan, $3,028,212 for Mr. Panzer and
$1,002,967 for Mr. Kamer, based on the price of our Common Stock as of
December 31, 2009.
Payments on Termination following a
Change of Control. As noted above, under the applicable employment
agreements for Messrs. Kaplan, Panzer and Kamer, good reason includes a
termination by the officer within 18 months after the occurrence of a change of
control. As a result, on any such termination, the officer involved would be
entitled to the severance payment outlined above. In addition, any payments made
to the officer if we experience a change of control will be grossed up as
necessary to adjust for the imposition of excise taxes under Section 280G
of the Internal Revenue Code. The exact calculation of the amount of such gross
up payments is complex, but we estimate that had a termination in connection
with a change of control occurred immediately after December 31, 2009 and
had Messrs. Kaplan, Panzer and Kamer terminated their employment on such date,
we estimate that the total approximate value of these severance payments
(including the gross up payment) would have been $28,650,280 for Mr. Kaplan,
$28,619,628 for Mr. Panzer and $5,070,808 for Mr. Kamer. In addition, the
unvested option and LTIP Units of each executive would vest immediately, which
we estimate would result in additional value of $3,028,212 for Mr. Kaplan
and for Mr. Panzer and approximately $1,002,967 for Mr. Kamer, based
on the price of our Common Stock as of December 31, 2009.
Payments Made Upon Death or
Disability. In the event of the death or disability of Messrs. Kaplan,
Panzer or Kamer, the officer (or his estate) will receive continued medical
benefits for himself and his eligible dependents for a period of 12 months, plus
a pro-rated portion of the officer’s annual bonus that he otherwise would have
been paid based upon actual performance for the year and the percentage of the
year that elapsed through the date of his termination of employment. Using
current medical insurance premiums, we estimate that the approximate value of
the continued medical benefit payments in the case of a termination for death or
disability immediately following December 31, 2009 would have been $22,434
for Mr. Kaplan, $13,014 for Mr. Panzer and $14,400 for
Mr. Kamer.
COMPENSATION
COMMITTEE REPORT
The
information contained in this Compensation Committee Report shall not be deemed
incorporated by reference in any filing under the Securities Act or the Exchange
Act, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing (except to the extent that we
specifically incorporate this information by reference) and shall not otherwise
be deemed “soliciting material” or “filed” with the SEC or subject to Regulation
14A or 14C, or to the liabilities of Section 18 of the Exchange Act (except to
the extent that we specifically incorporate this information by
reference).
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, the Compensation Committee recommended to
our Board that the Compensation Discussion and Analysis be included in this
Proxy Statement.
COMPENSATION
COMMITTEE
Leslie E.
Bider, Chairman
Dr. Andrea L.
Rich
Director
compensation is determined by our Board, after recommendation from our
Governance Committee, and is reviewed periodically as
appropriate. Our directors who are employees of our company or our
subsidiaries are not entitled to receive additional compensation for their
services as directors. Our non-employee directors receive an annual fee of
$75,000, any or all of which may be paid in cash or in LTIP Units awarded under
our 2006 Plan at the election of the director. Any LTIP Units are
awarded at the beginning of each calendar year and vest on a quarterly basis
over the year in question. Any non-employee director who also serves as chairman
of our Audit Committee receives an additional annual fee of $20,000, and any
non-employee director who also serves as chairman of our Compensation Committee
or our Governance Committee receives an additional annual fee of $12,500, each
paid in cash on a quarterly basis. We also provide each of our non-employee
directors with a grant once every three years of $150,000 of LTIP Units under
our 2006 Plan, vesting over the next three years (directors elected to the Board
for the first time between such grants will receive a pro rata grant on
election). We also reimburse all directors for their reasonable
expenses.
The table below summarizes the
compensation we paid to our non-employee directors in 2009:
Name
(1) |
|
Fees
Earned or Paid in Cash ($)
|
|
|
LTIP Unit Awards ($)(3)
|
|
|
Total ($)
|
|
Leslie
E. Bider |
|
$ |
0 |
|
|
$ |
74,995 |
|
|
$ |
74,995 |
|
Victor
J. Coleman (2) |
|
$ |
12,500 |
|
|
$ |
74,995 |
|
|
$ |
87,495 |
|
Ghebre
Selassie Mehreteab |
|
$ |
75,000 |
|
|
$ |
0 |
|
|
$ |
75,000 |
|
Thomas
E. O'Hern |
|
$ |
20,000 |
|
|
$ |
74,995 |
|
|
$ |
94,995 |
|
Dr.
Andrea L. Rich |
|
$ |
12,500 |
|
|
$ |
74,995 |
|
|
$ |
87,495 |
|
William
Wilson III |
|
$ |
37,500 |
|
|
$ |
37,503 |
|
|
$ |
75,003 |
|
(1)
|
Messrs.
Emmett, Kaplan and Panzer are not included in this table as they are our
employees and thus receive no additional compensation for their services
as directors. The compensation received by Messrs. Emmett, Kaplan and
Panzer as our employees is shown in the Summary Compensation
Table.
|
(2)
|
Mr.
Coleman resigned from our Board on December 7,
2009.
|
(3)
|
The
amounts in this column represent the aggregate grant date fair value of
awards made in 2009, calculated in accordance with ASC 718, under the
assumptions included in Note 12 to our audited financial statements for
the year ended December 31, 2009 included in our Annual Report to
Stockholders. On December 31, 2009, no
non-management director held any options or unvested LTIP
Units. The aggregate grant date fair values in this column are
equal to the individual grant date fair values of the 6,567 LTIP Units
granted to each of Mr. Bider, Mr. Coleman, Mr. O’Hern and Dr. Rich, and
the 3,284 LTIP Units granted to Mr. Wilson, in January 2009. Directors
received only one grant of LTIP Units during
2009.
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
members of our Compensation Committee are Leslie E. Bider, Chairman, and Dr.
Andrea L. Rich. No member of our Compensation Committee is or was one of our
officers or employees, or is related to any other member of our Compensation
Committee or any member of our Board, or any of our executive officers by blood,
marriage or adoption or had any other relationships requiring disclosure under
SEC rules. None of our executive officers has served on the board of directors
or on the compensation committee of any other entity that had an officer who
served on our Board or our Compensation Committee.
TRANSACTIONS
WITH RELATED PERSONS
Mr.
Kaplan, our Chief Executive Officer, in his individual capacity, and Messrs.
Emmett and Panzer, our Chairman of the Board and Chief Operating Officer,
respectively, through an affiliated limited partnership and living trust,
respectively, each committed $750,000 to our institutional real estate fund
(“Fund X”) on the same basis as we committed approximately $150 million and
third party investors committed another approximately $150 million. During the
life of Fund X, we are entitled to certain additional cash based on committed
capital and on any profits that exceed certain specified cash returns to the
investors. Certain of our wholly-owned affiliates provide property
management and other services to Fund X, for which we are paid fees and/or
reimbursed our costs. Fund X contemplates an investment period of up
to four years from the initial closing, followed by a value creation period of
up to ten years. With limited exceptions, Fund X will be our
exclusive investment vehicle during its investment period, using the same
underwriting and leverage principles and focusing primarily on the same markets
as we have.
We have
no material proceedings to which any of our directors, officers or affiliates,
any owner of record or beneficially of more than 5% of any class of our voting
securities, or any associate of any such director, officer, affiliate or
security holder is a party adverse to us or any of our subsidiaries or has a
material interest adverse to us or any of our subsidiaries.
Our Code
of Business Conduct and Ethics defines a conflict of interest as any situation
in which a director, officer or employee has competing professional or personal
interests, which could possibly make it difficult to fulfill his or her duties
and responsibilities in an impartial manner. Our Code of Business Conduct and
Ethics specifically requires that all of our officers, directors and employees
(i) fully disclose to the appropriate parties all actual or perceived
conflicts of interest and (ii) ensure that their duties and
responsibilities are handled in such a manner that ensures
impartiality.
Under our
Code of Business Conduct and Ethics conflicts of interest involving our
directors and executive officers must be approved by a majority of disinterested
directors on our Board, with any interested members abstaining. If such a waiver
is granted, a written authorization will be provided indicating that the
individual may proceed with the proposed activity.
REPORT
OF THE AUDIT COMMITTEE
The
information contained in this Report of the Audit Committee shall not be deemed
incorporated by reference in any filing under the Securities Act or the Exchange
Act, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing (except to the extent that we
specifically incorporate this information by reference) and shall not otherwise
be deemed “soliciting material” or “filed” with the SEC or subject to Regulation
14A or 14C, or to the liabilities of Section 18 of the Exchange Act (except to
the extent that we specifically incorporate this information by
reference).
Although
the Audit Committee oversees our financial reporting process on behalf of our
Board consistent with the Audit Committee’s written charter, management has the
primary responsibility for preparation of our consolidated financial statements
in accordance with generally accepted accounting principles and the reporting
process, including disclosure controls and procedures and the system of internal
control over financial reporting. Our independent registered public accounting
firm is responsible for auditing the annual financial statements prepared by
management.
The Audit
Committee has reviewed and discussed with management and our independent
registered public accounting firm, Ernst & Young LLP, our December 31, 2009
audited financial statements and management’s assessment of the effectiveness of
our internal control over financial reporting as of December 31, 2009.
Prior to the commencement of the audit, the Audit Committee discussed with our
management and independent registered public accounting firm the overall scope
and plans for the audit. Subsequent to the audit and each of the quarterly
reviews, the Audit Committee discussed with the independent registered public
accounting firm, with and without management present, the results of their
examinations or reviews, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of specific
judgments and the clarity of disclosures in the consolidated financial
statements.
In
addition, the Audit Committee discussed with the independent registered public
accounting firm the matters required to be discussed by Statements on Auditing
Standards No. 114, “Communication with Audit Committees,” as amended. The
Audit Committee has also received the written disclosures and the letter from
the independent registered public accounting firm required by applicable
requirements of the Public Company Accounting Oversight Board regarding the
independent accountant’s communications with the Audit Committee concerning
independence. The Audit Committee discussed with the independent registered
public accounting firm its independence from us and considered the compatibility
of non-audit services with its independence.
Based
upon the reviews and discussions referred to in the foregoing paragraphs, the
Audit Committee recommended to our Board that the audited financial statements
be included in our Annual Report on Form 10-K for the year ended
December 31, 2009 filed with the Securities and Exchange
Commission.
AUDIT
COMMITTEE
Thomas E.
O’Hern, Chairperson
Leslie E.
Bider
Ghebre
Selassie Mehreteab
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
For
2008 and 2009, our independent registered public accounting firm was
Ernst & Young, LLP, an Independent Registered Public Accounting Firm.
The following table presents fees for professional services rendered by
Ernst & Young LLP for 2008 and 2009:
|
|
2008
|
|
|
2009
|
|
Audit
Fees |
|
$ |
968,000 |
|
|
$ |
901,000 |
|
Audit-Related
Fees |
|
$ |
0 |
|
|
$ |
0 |
|
Tax
Fees(1) |
|
$ |
873,000 |
|
|
$ |
782,000 |
|
All
Other Fees |
|
$ |
0 |
|
|
$ |
0 |
|
(1) Tax
fees include fees principally incurred for assistance with tax compliance
matters.
Audit
Committee Authorization of Audit and Non-Audit Services
Our Audit
Committee has the sole authority to authorize all audit and non-audit services
to be provided by the independent registered public accounting firm engaged to
conduct the annual audit of our consolidated financial statements. In addition,
our Audit Committee has adopted pre-approval policies and procedures that are
detailed as to each particular service to be provided by the independent
registered public accounting firm and require our Audit Committee to be informed
of each service provided by the independent registered public accounting firm.
Such policies and procedures do not permit our Audit Committee to delegate its
responsibilities under the Exchange Act to management.
Our Audit
Committee’s policy is to pre-approve all audit and permissible non-audit
services provided by Ernst & Young LLP, and did so in the case of all of the
fees for 2009. Pre-approval is generally provided by our Audit Committee for up
to one year, as detailed as to the particular service or category of services to
be rendered, as is generally subject to a specific budget. Our Audit Committee
may also pre-approve additional services of specific engagements on a
case-by-case basis. Our Audit Committee considered and determined that the
provision of non-audit services by Ernst & Young LLP was compatible
with maintaining their independence.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934 requires our directors and executive
officers, as well as persons who own more than ten percent of our Common Stock,
to file with the SEC initial reports of beneficial ownership and reports of
changes in beneficial ownership of our Common Stock. Directors, executive
officers and greater-than-ten percent stockholders are required by the SEC
regulations to furnish us with copies of all Section 16(a) forms they
file.
Based
solely on a review of copies of reports submitted to us and on written
representations by certain directors and executive officers received by us that
we will maintain for two years, we believe that all of our directors and
executive officers, as well as persons who own more than ten percent of our
Common Stock, filed all required reports on a timely basis during
2009.
STOCKHOLDERS’
NOMINATIONS AND OTHER PROPOSALS FOR 2011
ANNUAL
MEETING OF STOCKHOLDERS
Pursuant
to Rule 14a-8 of the SEC, nominations and other proposals by eligible
stockholders, which are intended to be presented at our Annual Meeting of
Stockholders in 2011, must be received by us by December 27, 2010 in order to be
considered for inclusion in our proxy materials.
A
stockholder wishing to submit a nomination or other proposal for consideration
at the 2011 annual meeting other than for inclusion in our proxy materials is
required to give written notice addressed to the Corporate Secretary, Douglas
Emmett, Inc., 808 Wilshire Blvd., Suite 200, Santa Monica, CA 90401, of his or
her intention to make such a proposal. The notice of a nomination or other
proposal must be received by our Corporate Secretary no later than 5:00 p.m.,
Eastern Standard Time on December 27, 2010.
FORWARD-LOOKING
STATEMENTS
This proxy statement contains
“forward-looking statements” within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. These statements relate to expectations
concerning matters that are not historical facts. You can find many (but not
all) of these statements by looking for words such as “approximates,”
“believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,”
“may” or other similar expressions in this proxy statement. We claim the
protection of the safe harbor contained in the Private Securities Litigation
Reform Act of 1995. We caution you that any forward-looking statements presented
in this proxy statement, or that we may make orally or in writing from time to
time, are based on beliefs and assumptions made by, and information currently
available to us. Such statements are based on assumptions, and the actual
outcome will be affected by known and unknown risks, trends, uncertainties and
factors that are beyond our control or ability to predict. Although we believe
that our assumptions are reasonable, they are not guarantees of future
performance and some will inevitably prove to be incorrect. As a result, our
actual future results may differ from our expectations, and those differences
may be material. We are not undertaking any obligation to update any
forward-looking statements. Accordingly, you should use caution in relying on
past forward-looking statements, which are based on known results and trends at
the time they are made, to anticipate future results or trends.
Please
refer to the risk factors under “Item 1A. Risk Factors” of our Annual Report on
Form 10-K for 2009 as well as those described elsewhere in our public filings.
The risks included are not exhaustive, and additional factors could adversely
affect our business and financial performance. We operate in a very competitive
and rapidly changing environment. New risk factors emerge from time to time, and
it is not possible for management to predict all such risk factors, nor can it
assess the impact of all such risk factors on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
OTHER
MATTERS
Our Board
is not aware of any matter to be acted upon at our Annual Meeting other than as
described in this Proxy Statement. If any other matter properly comes before the
meeting, however, the proxy holders are authorized to vote on that matter or
matters in accordance with their best judgments.
ANNUAL
REPORT TO STOCKHOLDERS
Our
Annual Report for the year ended December 31, 2009 is being mailed to
Stockholders along with this Proxy Statement. Our Annual Report shall not be
deemed incorporated by reference in any filing under the Securities Act or the
Exchange Act, whether made before or after the date hereof and irrespective of
any general incorporation language in any such filing (except to the extent that
we specifically incorporate this information by reference) and shall not
otherwise be deemed “soliciting material” or “filed” with the SEC or subject to
Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act
(except to the extent that we specifically incorporate this information by
reference).
By Order
of the Board of Directors,
/s/ Jordan L.
Kaplan
Jordan
L. Kaplan
President
and Chief Executive Officer
April 26,
2010