<PAGE> 1
HEALTH CARE REIT, INC.
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
AND
PROXY STATEMENT
MEETING DATE
MAY 18, 1994
YOUR VOTE IS IMPORTANT!
YOU ARE URGED TO SIGN, DATE, AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE> 2
HEALTH CARE REIT, INC.
ONE SEAGATE
SUITE 1950
TOLEDO, OHIO 43604
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1994
To The Stockholders of Health Care REIT, Inc.:
The Annual Meeting of Stockholders of Health Care REIT, Inc. will be held on
Wednesday, May 18, 1994 at 3:00 p.m. in the Corinthian Room of The Toledo Club,
Madison Avenue and 14th Street, Toledo, Ohio, for the purpose of considering
and acting upon:
1. Election of two Directors for a term of three years;
2. Approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 15,000,000 to 40,000,000, and to authorize 10,000,000 shares of
Preferred Stock;
3. Approval of amendments to the Company's Restated Certificate of
Incorporation and By-Laws which would provide that stockholder proposals
may only be adopted at stockholders' meetings called by the Board of
Directors;
4. Approval of an amendment to the Company's Incentive Stock Option Plan to
increase the number of shares available for issuance by 150,000;
5. Ratification of the Management Agreement;
6. Ratification of the appointment of Ernst & Young as auditors for the
fiscal year 1994; and
7. Transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 24, 1994 will be
entitled to notice of and to vote at such Annual Meeting or any adjournment
thereof. Information relating to the matters to be considered and voted on at
the Annual Meeting is set forth in the Proxy Statement accompanying this
Notice.
BY ORDER OF THE BOARD OF DIRECTORS
Erin C. Ibele
Vice President and Corporate Secretary
Toledo, Ohio
April ___, 1994
PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. THE
PROXY MAY BE REVOKED BY YOU AT ANY TIME, AND GIVING YOUR PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE> 3
HEALTH CARE REIT, INC.
ONE SEAGATE
SUITE 1950
TOLEDO, OHIO 43604
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1994
GENERAL
This Proxy Statement is furnished to the stockholders of Health Care REIT,
Inc. (the "Company") by the Company's Management and the Board of Directors in
connection with the solicitation of proxies in the enclosed form to be used in
voting at the Annual Meeting of Stockholders (the "Annual Meeting"), which is
to be held on Wednesday, May 18, 1994 at 3:00 p.m. as set forth in the
foregoing notice. At the Annual Meeting, the stockholders will be asked to
elect two (2) Directors, increase the Company's number of authorized shares,
amend the Company's Restated Certificate of Incorporation and By-Laws to change
the manner of stockholder actions, amend the Company's Incentive Stock Option
Plan, ratify the Management Agreement with First Toledo Corporation or its
assignee, ratify the appointment of Ernst & Young as auditors, and transact
such other business as may properly come before the Annual Meeting.
A share cannot be voted at the Annual Meeting unless the holder thereof is
present or represented by proxy. When proxies in the accompanying form are
returned properly executed and dated, the shares represented thereby will be
voted at the Annual Meeting. If a choice is specified in the proxy, the shares
represented thereby will be voted in accordance with such specification. If no
specification is made, the proxy will be voted FOR the action proposed. Any
stockholder giving a proxy has the right to revoke it any time before it is
voted by filing with the Vice President/Corporate Secretary of the Company a
written revocation, or by filing a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person. The revocation of a
proxy will not be effective until notice thereof has been received by the Vice
President/Corporate Secretary of the Company.
The cost of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, Directors and officers of the Company may
solicit proxies by telephone, telegraph or personal interview. The Company
will reimburse Directors and officers for their reasonable out-of-pocket
expenses in connection with such solicitation. The Company will request
brokers and nominees who hold shares in their names to furnish this proxy
material to the persons for whom they hold shares and will reimburse such
brokers and nominees for their reasonable out-of-pocket expenses in connection
therewith. The Company has hired Chemical Bank to solicit proxies for a fee
not to exceed $7,000, plus expenses and other customary charges.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the total number of shares outstanding on the record
date shall constitute a quorum for the transaction of business by such holders
at the Annual Meeting. The two nominees for election as Directors who receive
the highest number of votes therefor at the Annual Meeting shall be elected as
Directors. Approval of all other matters, other than the proposed amendments
to the Restated Certificate of Incorporation to increase the authorized shares
and eliminate stockholder action without a meeting, shall require the
affirmative vote of a majority of the shares
1
<PAGE> 4
present in person or represented by proxy. The two proposed amendments to the
Restated Certificate of Incorporation shall require an affirmative vote by the
holders of a majority of the outstanding shares of Common Stock.
The executive offices of the Company are located at One SeaGate,
Suite 1950, Toledo, Ohio 43604, and its mailing address is One
SeaGate, Suite 1950, P. O. Box 1475, Toledo, Ohio 43603-1475. The telephone
number is (419) 247-2800. The approximate date on which this material was
first sent to stockholders was April 4, 1994. A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1993, INCLUDING THE
FINANCIAL STATEMENTS AND THE SCHEDULES AND EXHIBITS THERETO, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY WRITING
TO THE VICE PRESIDENT/CORPORATE SECRETARY, HEALTH CARE REIT, INC. AT THE ABOVE
ADDRESS.
VOTING SECURITIES OUTSTANDING
The Company had outstanding 11,494,229 shares of Common Stock, $1.00 par
value per share (the "shares") on February 28, 1994. The shares constitute the
only class of outstanding voting securities of the Company. Stockholders of
record at the close of business on March 24, 1994 are entitled to notice of and
to vote at the Annual Meeting and any adjournments thereof. Each share is
entitled to one vote on all matters to come before the Annual Meeting.
ELECTION OF DIRECTORS
The By-Laws provide for nine Directors and divide them into three classes:
Class I, Class II, and Class III. Currently, there are eight Directors. The
Directors are elected for a three-year term or until the election and
qualification of their respective successors.
It is intended by Management that proxies received will be voted
to elect the two Directors named below to serve for a three-year term until
their respective successors are elected and have qualified or until their
earlier resignation or removal. Management is currently considering a
candidate for the third seat in Class III.
Should any nominee decline or be unable to accept such nomination
to serve as a Director, events which Management does not now expect, the
proxies reserve the right to substitute another person as a Management nominee,
or to reduce the number of Management nominees, as they shall deem advisable.
The Proxy solicited hereby will not be voted to elect more than two Directors.
2
<PAGE> 5
<TABLE>
CLASS III (1)
DIRECTORS TO BE ELECTED
<CAPTION>
DIRECTOR BOARD COMMITTEE
NAME AGE PRINCIPAL OCCUPATION (2) SINCE MEMBERSHIP
---- --- ------------------------ -------- ----------------
<S> <C> <C> <C> <C>
Pier C. Borra 54 Chairman, President and 1991 Incentive Stock Option,
Chief Executive Officer of Investment and Planning
Arbor Health Care Company Committees
(developer and operator of
nursing homes)
George L. Chapman 46 Executive Vice President N/A N/A
and General Counsel of
the Company; Executive Vice
President and General
Counsel of First Toledo
Corporation (Manager of the
Company); and prior to January
1992, Attorney-at-Law, Shumaker,
Loop & Kendrick (law firm)
</TABLE>
<TABLE>
CLASS I (1)
DIRECTORS WHOSE TERMS CONTINUE
<CAPTION>
DIRECTOR BOARD COMMITTEE
NAME AGE PRINCIPAL OCCUPATION (2) SINCE MEMBERSHIP
---- --- ------------------------ -------- ----------------
<S> <C> <C> <C> <C>
Richard C. Glowacki 61 President of The Danberry 1981 Audit, Executive
Management Company (real Incentive Stock Option,
estate brokerage and Nominating and Planning
investment activities) Committees
Bruce G. Thompson 64 Chairman and Chief Executive 1971 Executive, Investment
Officer of the Company; and Planning Committees
President and Director of
First Toledo Corporation
(Manager of the Company);
Director of WT Management
Company (affiliate of the
Company); Director of
Kingston HealthCare Company
(affiliate of the Company);
Director of Society National
Bank, Toledo (commercial bank);
Director of The Douglas Company
(general contractor); and
Director of Arbor Health
Care Company (developer
and operator of nursing
homes)
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTOR BOARD COMMITTEE
NAME AGE PRINCIPAL OCCUPATION (2) SINCE MEMBERSHIP
- ---- --- ----------------------- ------- ----------------
<S> <C> <C> <C> <C>
Richard A. Unverferth 70 Chairman of Unverferth 1971 Audit, Executive,
Manufacturing Company, Inc. Investment, Nominating and
(agricultural equipment Planning Committee
manufacturer); and Chairman
of the Board of H.C.F.,
Inc. (operator of a nursing
home chain)
</TABLE>
<TABLE>
CLASS II (1)
DIRECTORS WHOSE TERMS CONTINUE
<CAPTION>
DIRECTOR BOARD COMMITTEE
NAME AGE PRINCIPAL OCCUPATION (2) SINCE MEMBERSHIP
- ---- --- ----------------------- ------- ----------------
<S> <C> <C> <C> <C>
George Chopivsky, Jr. 47 Chairman of United 1984 Investment, Nominating
Psychiatric Corporation and Planning Committees
(psychiatric hospitals);
and Director of Franklin
National Bank (commercial
bank)
Bruce Douglas 61 Chairman of the Board of 1975 Investment and Planning
The Douglas Company Committees
(general contractor)
Frederic D. Wolfe 64 President of the Company; 1971 Executive, Investment
Chairman of the Board and and Planning Committees
Director of First Toledo
Corporation (Manager of
the Company); Director of
WT Management Company
(affiliate of the Company);
Director of Kingston
HealthCare Company
(affiliate of the
Company); and Director of
National City Bank,
Northwest (commercial bank)
<FN>
- ----------------
(1) The terms of Messrs. Alexander and Borra expire in 1994. Mr. Alexander
is retiring from the Board of Directors as of the Annual Meeting of
Stockholders and therefore, is not seeking election. The terms of Messrs.
Glowacki, Thompson and Unverferth expire in 1995. The terms of Messrs.
Chopivsky, Douglas and Wolfe expire in 1996.
(2) Unless otherwise noted, each person has had the same principal
occupation and employment during the last five years.
</TABLE>
4
<PAGE> 7
MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMEND THAT YOU VOTE "FOR" THE ELECTION OF THE ABOVE NOMINEES. The nominees
who receive the highest number of votes at the Annual Meeting shall be elected
as Directors.
BOARD AND COMMITTEES
The Board of Directors met four times during the year ended December 31,
1993. The Board has appointed standing Audit, Executive, Incentive
Stock Option, Investment, Nominating and Planning Committees to assist it in
the discharge of its responsibilities. In 1993, each incumbent Director attended
at least 75% of the aggregate of the meetings of the Board of Directors and the
committees on which he served.
The Audit Committee met once during the year ended December 31,
1993. The purpose of the Audit Committee is to review the external audit
function and the operations of the principal accounting officer of the Company
to make recommendations to the Board of Directors with respect thereto and with
respect to the formulation and development of the auditing policies of the
Company. The Audit Committee may also make recommendations to the Board
with respect to the selection of the independent auditing firm to audit
the Company's records.
The function of the Executive Committee is to exercise all the
powers of the Board of Directors (except any powers specifically reserved to
the Board) during intervals between meetings of the Board of Directors.
The Company does not have a standing Compensation Committee since
the officers of the Company are principally employed and compensated by First
Toledo Corporation, the Manager of the Company. To the extent the
officers of the Company are compensated by the Company, the Board considers
the Incentive Stock Option Committee to be the functional equivalent of a
Compensation Committee. The Incentive Stock Option Committee, which met once
during 1993, has the authority to determine which officers and key employees of
the Company will receive option awards under the Company's 1985 Incentive Stock
Option Plan and the terms of such awards.
The Investment Committee met five times during the year ended
December 31, 1993.
The function of the Nominating Committee, which did not meet
during the year ended December 31, 1993, is to select and recommend to the full
Board nominees for election as Directors. The Committee may, in its
discretion, consider nominees proposed by stockholders of the Company for the
1995 Annual Meeting of Stockholders, provided such recommendations are in
writing, contain a description of the nominee's qualifications and his consent
to serve, and are received by the Company by December , 1994.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of January 31, 1994, unless otherwise
specified, certain information with respect to the beneficial ownership of the
Company's shares by each person who is a Director of the Company or a nominee
for the Board of Directors, and by the Directors and officers of the Company as
a group. The Company's Management is not aware of any person who, as of
December 31, 1993, was the beneficial owner of more than 5% of the outstanding
shares of the Company.
5
<PAGE> 8
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF OF BENEFICIAL OWNERSHIP OF PERCENT
BENEFICIAL OWNER COMMON STOCK AS OF JANUARY 31, 1994 OF CLASS
- ---------------- ------------------------------------- --------
<S> <C> <C> <C>
Gregory G. Alexander Sole voting power 5,475 .05%
Shared voting power 3,525 .03%
Sole investment power 5,475 .05%
Shared investment power 3,525 .03%
Pier C. Borra Sole voting power 0 N/A
Shared voting power 0 N/A
Sole investment power 0 N/A
Shared investment power 5,140 .04%
George L. Chapman Sole voting power 16,602(1) .14%
Shared voting power 0 N/A
Sole investment power 16,602(1) .14%
Shared investment power 0 N/A
George Chopivsky, Jr. Sole voting power 3,076 .03%
Shared voting power 0 N/A
Sole investment power 3,076 .03%
Shared investment power 0 N/A
Bruce Douglas Sole voting power 36,976 .32%
Shared voting power 0 N/A
Sole investment power 36,976 .32%
Shared investment power 0 N/A
Richared C. Glowacki Sole voting power 16,202 .14%
Shared voting power 0 N/A
Sole investment power 16,202 .14%
Shared investment power 0 N/A
Bruce G. Thompson Sole voting power 57,155(1) .49%
Shared voting power 0 N/A
Sole investment power 57,155(1) .49%
Shared investment power 555 .00%
Richard A. Unverferth Sole voting power 0 N/A
Shared voting power 0 N/A
Sole investment power 0 N/A
Shared investment power 3,816 .03%
Frederic D. Wolfe Sole voting power 132,044(1) 1.14%
Shared voting power 10,000 .09%
Sole investment power 132,044(1) 1.14%
Shared investment power 10,000 .09%
- ----------------
<FN>
(1) Includes shares not actually owned by such individuals as of January 31,
1994, but of which beneficial ownership could be acquired currently by such
individuals upon the exercise of outstanding options.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF OF BENEFICIAL OWNERSHIP OF PERCENT
BENEFICIAL OWNER COMMON STOCK AS OF JANUARY 31, 1994 OF CLASS
- ---------------- ----------------------------------- --------
<S> <C> <C> <C>
All Directors and
Officers as a group
(12 persons) Sole voting power 315,111(2) 2.71%
Shared voting power 13,525 .12%
Sole investment power 315,111(2) 2.71%
Shared investment power 23,036 .20%
(FN>
- -------------------
(2) Includes an aggregate of 114,676 shares not actually owned by such Directors and officers as of January 31, 1994, but of which
beneficial ownership could be acquired currently by such Directors and officers upon the exercise of outstanding options
</TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
The following information is furnished as to the Executive Officers of
the Company, each of whom has a term of office of one year or until their
successors are chosen and qualified or until their earlier resignation or
removal:
<TABLE>
<CAPTION>
YEAR
APPOINTED
EXECUTIVE
NAME AGE OFFICE AND BUSINESS EXPERIENCE OFFICER
----- --- ------------------------------ ---------
<S> <C> <C> <C>
Bruce G. Thompson 64 Chairman and Chief Executive Officer 1971
of the Company; President and Director
of First Toledo Corporation (Manager
of the Company); Director of WT
Management Company (affiliate of the
Company); Director of Kingston HealthCare
Company (affiliate of the
Company); Director of Society National
Bank, Toledo (commercial bank); Director
of the Douglas Company (general
contractor); and Director of Arbor
Health Care Company (developer and
operator of nursing homes)
Frederic D. Wolfe 64 President of the Company; Chairman of 1971
the Board and Director of First
Toledo Corporation (Manager of the
Company); Director of WT Management
Company (affiliate of the Company);
Director of Kingston HealthCare
Company (affiliate of the Company);
and Director of National City Bank,
Northwest (commercial bank)
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
YEAR
APPOINTED
EXECUTIVE
NAME AGE OFFICE AND BUSINESS EXPERIENCE OFFICER
---- --- ------------------------------ ---------
<S> <C> <C> <C>
George L. Chapman 46 January 1992 - Present Executive Vice 1992
President and General Counsel of
the Company and Executive Vice
President and General Counsel of
First Toledo Corporation (Manager
of the Company); and 1979-1991
Attorney-at-Law, Shumaker, Loop &
Kendrick (law firm)
Erin C. Ibele 32 January 1993 - Present Vice President 1987
and Corporate Secretary of the
Company; 1987 - January 1993
Corporate Secretary of the Company; and
Vice President, Corporate Secretary
and Director of First Toledo Corporation
(Manager of the Company)
Kathleen S. Prephan 28 January 1993 - Present Controller of the 1993
Company; July 1991 - January 1993
Assistant Controller of the Company;
and June 1987 - July 1991 Accountant,
Ernst & Young (accounting firm)
Robert J. Pruger 45 Chief Financial Officer and Treasurer of 1986
the Company; 1986 - January 1993
Controller of the Company; and Treasurer
and Director of First Toledo Corporation
(Manager of the Company)
</TABLE>
REMUNERATION
COMPENSATION OF EXECUTIVE OFFICERS
Each Executive Officer of the Company is employed and compensated by
First Toledo Corporation, the Manager of the Company. See "Ratification of the
Management Agreement" and "Certain Relationships and Related Transactions --
The Manager". No officer of the Company was paid cash compensation by the
Company in excess of $100,000 in 1993. Cash compensation paid to all Executive
Officers of the Company as a group during the year ended December 31, 1993
(five persons) equalled $16,500. The information set forth below regarding
Mr. Thompson must be disclosed because Mr. Thompson is the Chief Executive
Officer of the Company, even though his annual salary and bonus did not
exceed $100,000.
8
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND --------------------- ------------
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
- ------------------ ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
Bruce G. Thompson 1993 $4,000 -0- 10,000
Chairman and Chief 1992 4,000 -0- 10,000
Executive Officer 1991 4,000 -0- 9,500
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
NUMBER REALIZABLE VALUE
OF SHARES % OF TOTAL AT ASSUMED ANNUAL
UNDERLYING OPTIONS RATE OF STOCK PRICE
OPTIONS GRANTED TO APPRECIATION FOR
GRANTED EMPLOYEES EXERCISE OPTION TERM (3)
(#) IN FISCAL PRICE EXPIRATION ------------------
NAME (1), (2) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Bruce G. 10,000 21.3% $21.5625 1/17/2003 135,605 343,651
Thompson
<FN>
(1) Of the options granted, no shares are currently exercisable and options
for 4,123 shares, 4,637 shares and 1,240 shares vest in 1995, 1996 and
1997, respectively.
(2) The terms of the options granted permit cashless exercises and payment of
the option exercise price by delivery of previously owned shares.
(3) Gains are reported net of the exercise price, but before taxes associated
with the exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the shares, as well as the
optionee's continued employment through the vesting period. The amount
reflected in this Table may not necessarily be achieved.
</TABLE>
INCENTIVE STOCK OPTION PLAN
On July 24, 1985, the Board of Directors unanimously adopted the 1985
Incentive Stock Option Plan of Health Care REIT, Inc. (the "Plan") which became
effective on that date. The Plan was subsequently approved by the Company's
stockholders at its June 25, 1986 Annual Meeting. The Plan was amended by the
Board of Directors on July 22, 1987, effective January 1, 1987, to take into
account certain changes made to incentive stock options under the Tax Reform Act
of 1986 (the "1986 Act") and was further amended on June 5, 1991 to increase the
number of shares available under the Plan by 150,000 shares.
The purpose of the Plan is to secure the advantages of stock ownership for
the present and future key employees and officers of the Company (7 persons at
present) in order to provide incentives for such individuals to remain with the
Company and
9
<PAGE> 12
devote their energies to promote and maintain the continued success of the
Company. The Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The options
granted under the Plan are intended to be "incentive" stock options as defined
in the Internal Revenue Code of 1986, as amended (the "Code").
The Plan is administered by the Incentive Stock Option Committee of
the Board of Directors. The Incentive Stock Option Committee has authority to
select the employees to be granted options; to determine the number of shares
to be subject to each option; to determine the option price and the time or
times at which an option shall be granted or exercised under the Plan; and to
make, amend and rescind rules and regulations relating to the Plan. Options
will generally be granted as compensation for past or future services, and no
cash payment (other than payment of the option price upon exercise) would be
required.
The shares to be issued upon the exercise of options granted under
the Plan are shares of the Company's Common Stock, par value $1.00 per
share. Currently, the aggregate number of shares that may be issued under the
Plan is 300,000. Under the Plan, the shares issued upon the exercise of
options may be authorized but unissued shares or Treasury shares. If an option
granted under the Plan expires or terminates for any reason without having been
exercised in full, the unpurchased shares subject to the Plan (unless the Plan
shall have terminated) will again be available for other options to be granted
under the Plan. The exercise price is determined by the Incentive Stock Option
Committee and cannot be less than 100% of the fair market value of the shares on
the date of the option grant. The method of determining the fair market value
of the Company's shares currently used by the Incentive Stock Option
Committee is the average of the high and low sales prices of the Company's
shares on the New York Stock Exchange on the date that the option is granted.
The market value of the Company's shares on March 16, 1994 was $25.00
per share.
Subject to the right of the Board of Directors to amend or terminate
the Plan, the Plan will terminate on July 24, 1995, and no options may be
granted after that date. Options granted before July 24, 1995 may extend
beyond that date in accordance with their terms. The terms of the options
granted under the Plan are determined by the Incentive Stock Option Committee
but may not exceed ten years from the date of the grant. Under the Plan, the
Incentive Stock Option Committee may grant options that are exercisable on a
lump-sum basis or in installments.
The Board of Directors may amend or terminate the Plan with respect
to any shares as to which options have not been granted, provided that any
modification or amendment will not, without the approval of the stockholders
of the Company, change the Plan so as to cause any of the options to fail to
meet the requirements of an incentive stock option under the Code.
An employee granted incentive stock options under the Plan will
generally not realize any taxable income either at the time of the grant of the
incentive stock options or at the time the incentive stock options are
exercised. However, the amount by which the fair market value of the shares
purchased on the date of exercise exceeds the exercise price paid by the
employee will be a tax preference item for purposes of the alternative minimum
tax rules and may be subject to alternative minimum tax, depending on the
employee's individual tax circumstances.
If the employee holds the shares acquired upon exercise of the
incentive stock options for at least two years after the date the incentive
stock options were granted and for at least one year after the date the shares
are issued pursuant to the exercise of the incentive stock options, any gain
realized by the employee on a
10
<PAGE> 13
subsequent sale of the shares will be taxed as a capital gain to the extent it
exceeds the option price paid by the employee.
If the shares acquired through the exercise of incentive stock
options are resold or disposed of before the expiration of the one-year and
two-year holding periods described in the preceding paragraph, the employee
will recognize ordinary income in the year of the resale. The amount of the
ordinary income recognized will be equal to the amount of the gain realized
through the sale, or, if less, the excess of the fair market value of the
shares on the exercise date over the exercise price paid. Any additional gain
recognized upon such resale will be taxed as capital gain, either long-term or
short-term depending upon how long the shares were held.
In general, the Company will not be entitled to a tax deduction for
federal income tax purposes with respect to the grant or exercise of an
incentive stock option. However, if the shares acquired upon exercise of an
incentive stock option are resold or transferred prior to the expiration of the
requisite one-year and two-year holding periods, the Company will be entitled
to a federal income tax deduction equal to the amount of ordinary income
realized by the employee as a result of the premature disposition.
To date, the Incentive Stock Option Committee has granted incentive
stock options with respect to 77,500 shares to Mr. Thompson, the Company's
Chairman and Chief Executive Officer, incentive stock options with
respect to 75,500 shares to Mr. Wolfe, the Company's President, incentive
stock options with respect to 24,000 shares to Mr. Chapman, the Company's
Executive Vice President and General Counsel and a nominee for election to the
Board of Directors, incentive stock options with respect to 248,000 shares to
all current executive officers as a group, and incentive stock options with
respect to 285,000 shares to all employees (including all current officers who
are not executive officers) as a group.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<CAPTION>
NUMBER OF VALUE OF
SHARES UNDERLYING UNEXERCISED IN-
UNEXERCISED OPTIONS THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR END FISCAL YEAR END ($)
ACQUIRED VALUE ----------------------- ------------------------
ON REALIZED EXERCIS- UNEXERCIS- EXERCIS- UNEXERCIS-
NAME EXERCISE ($) ABLE ABLE ABLE ABLE
---- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bruce G. Thompson 21,000 170,313 29,179 15,321 246,202 23,767
</TABLE>
COMPENSATION OF DIRECTORS
In 1993, each Director received a fee of $8,000 for his service as
such, which fee was increased to $10,000 effective January 1, 1994. In
addition, each Director received a fee of $1,200 for each Board meeting
attended. The schedule set forth below indicates the fees paid to each
Director for each committee meeting attended in 1993 and fees to be paid
effective January 1, 1994:
11
<PAGE> 14
<TABLE>
<CAPTION>
FEES
-----------------
COMMITTEE 1993 1994
--------- ------ ------
<S> <C> <C>
Audit $ 500 $ 750
Executive 0 0
Incentive Stock Option 350 400
Investment, no quarterly board meetings 700 1,000
Investment, quarterly board meetings 350 500
Nominating 100 0
Planning 1,200 1,200
</TABLE>
Messrs. Thompson and Wolfe are not paid fees for Board or committee
meetings. The fees paid to the other Directors totalled $101,050 in
1993.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ending December 31, 1993, the Incentive
Stock Option Committee of the Board of Directors consisted of Gregory G.
Alexander, Pier C. Borra, and Richard C. Glowacki. The Incentive Stock Option
Committee of the Board has the authority to determine which officers and key
employees of the Company will receive option awards under the Company's 1985
Incentive Stock Option Plan (the "Plan") and the terms of any options granted
under the Plan.
Mr. Alexander is a partner in the law firm of Shumaker, Loop &
Kendrick, which the Company has retained with respect to various legal
matters. Mr. Borra is the Chairman, President and Chief Executive Officer of
Arbor Health Care Company ("Arbor"). During the fiscal year ending December
31, 1993, Bruce G. Thompson, the Chairman and Chief Executive Officer of the
Company and a participant in the Plan, served as a member of the Board of
Directors of Arbor. For a discussion of transactions between Arbor and the
Company, see "Certain Relationships and Related Transactions -- Other
Relationships."
REPORT OF THE INCENTIVE STOCK OPTION COMMITTEE
With the exception of incentive stock options awarded under the
Company's Plan, the officers of the Company receive only nominal compensation
from the Company. The aggregate amount of salary payments made by the Company
to officers in 1993 was limited to $16,500. Although the officers of the
Company are principally employed and compensated by First Toledo Corporation,
the Manager of the Company, the Board of Directors and the stockholders of the
Company adopted the Plan in order to reward individual performance and to
provide long-term incentives. Under the terms of the Plan, the Incentive
Stock Option Committee has authority to approve stock option awards to officers
of the Company and to determine the terms and conditions of such awards. The
Incentive Stock Option Committee meets in January of each year.
On January 18, 1993, the Incentive Stock Option Committee granted to
officers of the Company options to purchase shares. Such grants included
options to Mr. Thompson, the Chief Executive Officer of the Company, to acquire
10,000 shares. The criteria considered by the Incentive Stock Option Committee
in deciding whether to grant stock options included the Company's financial
performance during the prior year, individual performance and potential
contributions to the Company's profitability and long term growth. The
Incentive Stock Option Committee's decision to grant Mr. Thompson an option
to acquire 10,000 shares was based on, among other things, Mr.
Thompson's role in the Company's success during the fiscal year
ending
12
<PAGE> 15
December 31, 1992, as well as the Incentive Stock Option Committee's perception
of his past and expected future contributions to the Company's achievement of
its long-term performance goals.
The Incentive Stock Option Committee believes that stock options provide
a desirable set of incentives to retain and encourage future efforts by the
Company's officers. Since the options are granted at prevailing market value,
the options will only have value if the stock price increases.
Although the Company does not anticipate that the $1,000,000
compensation limit on federal tax deductions for executive compensation added
to the Code by the 1993 tax legislation will apply to Mr. Thompson or other
executive officers at this time, the Company is studying the issue and whether
any changes to the Company' s compensation policies will be necessary or
desirable as a result.
The foregoing report was prepared by Messrs. Alexander (Chairman),
Borra and Glowacki, the members of the Incentive Stock Option Committee.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change
and the cumulative total stockholder return on the Company's shares against
the cumulative total return of the S & P Composite-500 Stock Index and the
Mortgage REIT Index prepared by NAREIT. The graph also presents data for the
NAREIT Hybrid REIT Index because NAREIT includes the Company's stock
performance in the Hybrid REIT Index. The data are based on the last closing
prices as of December 31 for each of the five years. 1988 equals $100 and
dividends are assumed to be reinvested.
(Graph to be inserted)
The foregoing Report of the Incentive Stock Option Committee and Stock
Price Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this
information by reference. This information shall not otherwise be deemed filed
under such Acts.
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
The Board of Directors proposes that the Company's Restated
Certificate of Incorporation be amended to increase the total number of
authorized shares from 15,000,000 shares to 50,000,000 shares. Currently, the
Restated Certificate of Incorporation authorizes 15,000,000 shares of common
stock, $1.00 par value per share. As of December 31, 1993, the Company had
11,494,229 shares outstanding, leaving 3,505,771 authorized shares available
for further issuance, of which approximately 675,748 shares have been reserved
for issuance under the Company's
13
<PAGE> 16
Incentive Stock Option and Dividend Reinvestment and Stock Purchase Plans. The
Board of Directors proposes that the number of authorized shares of common stock
be increased from 15,000,000 to 40,000,000 (the "Common Stock"). The Board of
Directors also proposes that 10,000,000 shares of preferred stock be authorized
(the "Preferred Stock").
The Board of Directors believes that the availability of additional
shares will enhance the Company' s flexibility in connection with possible
future actions, such as equity offerings, stock dividends, acquisitions or
mergers, and other corporate purposes. The Board of Directors will determine
whether, when, and on what terms the issuance of shares may be warranted in
connection with any of the foregoing purposes.
The Preferred Stock may be issued from time to time in one or more
series, and the Board of Directors is authorized to fix the dividend rights,
dividend rates, any conversion or exchange rights, any voting rights, rights
and terms of redemption (including sinking fund provisions), the redemption
price or prices, the liquidation preferences and any other rights, preferences,
privileges and restrictions of any series of Preferred Stock and the number of
shares constituting such series and the designation thereof. The authority of
the Board of Directors to determine the precise terms of each series of
Preferred Stock would give it the flexibility to tailor each series to meet the
particular requirements of the persons to whom the shares of such series are to
be issued. To the extent that shares of Preferred Stock may be issued, funds
available for dividends on the Common Stock could be reduced by the amount of
any dividends paid or accrued on the Preferred Stock. The Company has no
present plans to issue, or authorize the issuance of, any shares of Preferred
Stock.
The availability for issuance of additional shares of Common Stock and
shares of Preferred Stock could enable the Board of Directors to render more
difficult or discourage an attempt to obtain control of the Company. For
example, by increasing the number of outstanding shares, the interest of the
party attempting to gain control of the Company could be diluted. Also, the
additional shares could be used to render more difficult a merger or similar
transaction. If the Board so authorizes, the holders of any series of Preferred
Stock may be entitled to vote separately as a class in connection with the
approval of certain extraordinary corporate transactions in circumstances where
the Delaware General Corporation Law would not require separate voting by
class. In addition, certain companies have adopted rights plans that typically
involve the distribution of rights or warrants that entitle the holder thereof
to purchase additional stock at a specified exercise price. The exercise price
is typically adjusted in a manner that could dilute the equity and voting
interests of a party attempting to obtain control of the Company in a
transaction that has not been approved by the Board. Accordingly, a rights plan
could have certain anti-takeover effects and could require a party attempting
to obtain control of the Company to negotiate with the Board. The Board of
Directors has reviewed and is considering the advisability of a rights plan and
may decide to implement such a plan at any time in the future. The Company is
not aware, however, of any pending efforts to obtain control of the Company.
If the proposed amendment is approved, all or any of the authorized
shares of Common Stock and shares of Preferred Stock may be issued without
further action by the stockholders and without first offering such shares to
the stockholders for subscription. The issuance of shares otherwise than on a
pro-rata basis to all current stockholders would reduce current stockholders'
proportionate interests. However, in any such event, stockholders wishing to
maintain their interests may be able to do so through normal market purchases.
14
<PAGE> 17
MANAGEMENT AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU
VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENT. The proposed amendment is set
forth in Exhibit A to this Proxy Statement. The affirmative vote of a majority
of the outstanding shares of Common Stock of the Company is required for
approval of the proposed amendment. If the proposed amendment is adopted by the
stockholders, it will become effective upon filing and recording a Certificate
of Amendment as required by the Delaware General Corporation Law.
AMENDMENTS TO COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION AND BY-LAWS REGARDING
CERTAIN ACTIONS BY STOCKHOLDERS
The Delaware General Corporation Law provides that special meetings of
stockholders may be called by the Board of Directors or such person or persons
as may be authorized by the Certificate of Incorporation or by the By-Laws.
Currently, Section 3 of Article II of the Company's By-Laws provides that
Special Meetings of Stockholders may be called at the request in writing of a
majority of the Board of Directors, a majority of Independent Directors, or
holders of capital stock representing not less than 25% of the voting power of
all outstanding capital stock of the Company. The Board of Directors believes
that eliminating the provision permitting special meetings to be called by
stockholders may prevent persons who might acquire 25% or more of the voting
stock of the Company from forcing premature stockholder consideration of their
proposals over the opposition of the Board of Directors, prior to the time when
the Board might believe that such consideration is in the best interests of the
Company and its stockholders.
The Company's By-Laws provide in Section 6 of Article II that unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken by stockholders at any Annual or Special Meeting of
Stockholders also may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action to be taken,
is signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting. The Company's Restated Certificate of Incorporation is silent on the
topic. The ability to undertake fundamental corporate actions without a
stockholders' meeting through this written consent procedure has sometimes been
used in takeover situations to permit a person who has acquired a majority of
the common stock of a company to simply "meet" with itself and unilaterally
replace the directors and officers of that company or take other fundamental
corporate action which may not be in the best interest of the company and all
its stockholders.
On March 15, 1994, the Board of Directors adopted a resolution to
delete Sections 3 and 6 of Article II of the By-Laws and to amend the Restated
Certificate of Incorporation to provide that any action required or permitted
to be taken by the stockholders of the Company must be effected at a duly
called annual or special meeting of such holders and may not be effected by any
consent in writing by such holders. The amendment also provides that, except as
otherwise required by law and subject to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation, Special Meetings of Stockholders of the Company may be called
only by the Board of Directors pursuant to a resolution approved by a majority
of the entire Board of Directors. This provision will give all the
stockholders of the Company an opportunity to participate in determining
whether any proposed stockholder action is adopted, and
15
<PAGE> 18
will prevent the holders of a majority of the voting power of the Company from
using the written consent procedure to take stockholder action.
The proposed amendments concerning the calling of Special Meetings and
the prohibition of stockholder action by written consent are intended to assure
continuity and stability in the management of the Company. These amendments may
have the effect of making more difficult and time-consuming changes in majority
control of the Board. Although takeovers or changes in management of the
Company that are proposed and effected without prior consultation and
negotiation with the Company's management would not necessarily be detrimental
to the Company and its stockholders, the Board feels that the benefits of
seeking to protect its ability to negotiate with the proponent of an
unsolicited or unilateral proposal to take over or restructure the Company
outweigh the disadvantages of discouraging such proposals. The Company is not
aware, however, of any pending efforts to obtain control of the Company.
MANAGEMENT AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU
VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENTS. The proposed amendments are set
forth in Exhibits B-1 and B-2 to this Proxy Statement. The affirmative vote of
a majority of the outstanding shares of Common Stock of the Company is required
for approval of the proposed amendments. If the proposed amendments are adopted
by the stockholders, they will become effective upon filing and recording a
Certificate of Amendment as required by the Delaware General Corporation Law.
AMENDMENT OF THE STOCK OPTION PLAN
As discussed above, the Company' s Incentive Stock Option Plan, as
originally approved, authorized 150,000 shares to be issued. An amendment in
1991 approved an additional 150,000 shares to be issued. As of January 17,
1994, options to purchase approximately all 300,000 shares had either been
granted or granted and exercised. In order to continue to provide incentives
to eligible employees, the Board of Directors believes it is necessary to
amend the Plan to increase the number of shares that may be issued under the
Plan by an additional 150,000 shares.
MANAGEMENT AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU
VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENT TO THE PLAN. The affirmative vote
of the holders of a majority of the shares present in person or represented by
proxy at the Annual Meeting will be required for such approval.
RATIFICATION OF THE MANAGEMENT AGREEMENT
The Company renewed its Management Agreement (the "Agreement") on
January 17, 1994 with First Toledo Corporation or its assignee (the "Manager"),
an Ohio corporation with offices at One SeaGate, Suite 1950, Toledo, Ohio,
whose principal business is to administer and manage the daily affairs of the
Company and advise the Company with respect to investments, subject to the
supervision of the Directors. Bruce G. Thompson, Chairman of the Company, and
Frederic D. Wolfe, President of the Company, are Directors of the Manager, own
all of the shares of the Manager, and serve as its President and Chairman of
the Board, respectively. George L. Chapman, Executive Vice President and
General Counsel of the Company, also serves as Executive Vice President and
General Counsel of the Manager. Robert J. Pruger, the Chief Financial Officer
and Treasurer of the Company, and Erin C. Ibele, Vice President and Corporate
Secretary of the Company, are also Directors and officers of the Manager. This
proposal consists of ratifying the Agreement in its present form.
16
<PAGE> 19
The Agreement sets forth the following services to be furnished by the
Manager or through arrangements that the Manager has with others: (a) execute
the business and investment transactions of the Company by receiving, managing,
and transferring securities, real property, leaseholds, real estate mortgages
and other assets or liabilities of the Company; (b) provide investment and
financial advice, research, and economic and statistical data pertinent to
investment policy and electronic data processing services; (c) select
consultants, accountants, mortgage bankers, technical advisors, attorneys,
attorneys-in-fact, brokers, underwriters, corporate fiduciaries, escrow
agents, depositories, insurers and other persons, firms or corporations; (d)
negotiate and conclude contractual matters with such persons, firms and
corporations; (e) manage or operate any assets or properties held by the
Company directly or through affiliates or independent contractors; (f) act as
attorney-in-fact or agent in the purchase or sale or other disposition of
investments and in handling, prosecuting or settling any claims of the Company;
(g) invest or reinvest the moneys of the Company; (h) provide office space,
equipment and administrative, secretarial and clerical personnel to the
Company; (i) review each property, mortgage or commitment offered to the
Company; (j) report on the performance of the foregoing services to the
Company; and (k) provide such other services of a managerial or advisory nature
as the Directors may deem within the purview of the Agreement. Some of the
Manager's functions may be assigned to employees of the Company. The Manager
may, upon request, perform such other services of an executive or advisory
nature as the Directors may deem to be in the best interest of the Company.
The Agreement provides that the Manager is to be compensated for its
services at the monthly rate of one-tenth of 1% of the average invested assets
of the Company less long and short-term debt obligations (excluding accrued
expenses and other liabilities). Average invested assets are defined as the
average of the aggregate book value of the assets of the Company invested,
directly or indirectly, in "real estate assets," as defined in Section 856(c)
(6) (B) of the Code, or in equity interests in and loans secured by real estate
before allowances for doubtful amounts or allowances to reduce certain leases
to option prices or other similar non-cash allowances, on an accounting basis
used for income tax purposes, computed by taking the average of such values at
the end of each month. The Manager is also entitled to receive an incentive fee
equal to 10% of the amount of net profits which exceed 10% of the average net
worth of the Company. For the purpose of computing the incentive fee, "net
profits" means the net profits of the Company for the fiscal year determined in
accordance with generally accepted accounting principles after all proper
charges (including compensation to the Manager), but excluding the Manager's
incentive fee to be paid for such fiscal year and all depreciation expenses
from operating leases that do not have guarantees. Also, for the purpose of
computing the incentive fee, "net worth" means an average of the monthly
shareholders' equity determined in accordance with generally accepted
accounting principles, but adjusted by increasing such equity for the
depreciation that is excluded. The exclusion of depreciation and gain from sale
(attributable to accumulated depreciation) from "net income" in the operating
lease context is to more closely equate "net income" with the recognition of
net income on direct financing leases. Management fees were $2,426,639 for 1993
which does not include $22,500 that was paid directly by the Company to its
employees for certain management services.
The Agreement also provides that the aggregate annual expenses of every
character paid or incurred by the Company, excluding interest, taxes, expenses
in connection with the issuance of securities, stockholder relations and
acquisition, operation, maintenance, protection and disposition of Company
properties, but including advisory fees, incentive fees and mortgage servicing
fees and all other expenses, shall not exceed the greater of 2% of the average
invested assets, as
17
<PAGE> 20
defined, or 25% of the net income of the Company, excluding provision
for depreciation, additions to allowances for doubtful amounts or allowances to
reduce certain leases to option prices or other similar non-cash allowances and
realized capital gains and losses and extraordinary items, and before deducting
advisory and servicing fees and expenses, calculated at least quarterly on a
basis consistently applied. The Manager is required to reimburse the Company
annually for any expenses in excess of these limits.
The Manager pays all charges, including salaries, wages, payroll taxes,
costs of employee benefit plans and charges for incidental help, attributable
to its own operations. The Manager also pays its own accounting fees and
related expenses, legal fees, and insurance, rent, telephone and utility
expenses.
Provisions contained in the Agreement and the By-Laws of the Company
provide that, if requested by the Manager or its successor by reorganization,
the Company will change its name to one which does not include the words
"Health Care REIT, Inc." or "Health Care Fund" in the event First Toledo
Corporation or its successor by reorganization ceases to act as the Manager of
the Company. The Agreement may be terminated without penalty by a majority of
the Company's Directors or by the Manager, on not less than sixty (60) days
written notice, and is assignable only with the written consent of the Company.
The Agreement was authorized on the part of the Company by a majority
of the Company's Directors at the Directors' meeting on January 17, 1994.
Additionally, the Directors authorized the Agreement to be assigned to First
Toledo Advisory Company, a company wholly owned by Messrs. Thompson and Wolfe.
MANAGEMENT AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU
VOTE "FOR" THE RATIFICATION OF THE MANAGEMENT AGREEMENT. Although the
submission for this matter for ratification by stockholders is not legally
required, the Board of Directors believes that such submission follows sound
business practice and is in the best interests of the stockholders. If the
Agreement is not ratified by the holders of a majority of the shares present in
person or represented by proxy at the Annual Meeting, the Directors will
consider the selection of another Manager. If such a selection could be made,
it might not become effective until the 1995 fiscal year because of the
difficulty and expense of making a substitution; during the interim period
First Toledo Corporation would continue to serve as the Manager. The
affirmative vote of the holders of a majority of the shares of common stock
present in person or represented by proxy at the Annual Meeting will be
required for such ratification.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PARTNERSHIP FINANCINGS
The Company utilized five partnerships in financing the development
projects described below. While the Company provided the financing for each
partnership through both direct loans and credit enhancements, the Manager
served as a general partner in each partnership in order to monitor and manage
the affairs of the partnerships and the development and operations of the
projects. The structures also facilitated industrial development bond financing
in four of the projects and credit enhancements were provided in the form of
the Company's agreement to purchase the facilities or the bonds in the event
of default by the partnerships. Over time, the Company has also made commitments
to provide working capital loans to these related partnerships. Some of the
working capital loan commitments have expired. As of December 31, 1993, the
Company had loaned $5,484,000 of working capital to three of these partnerships
and was obligated to make additional working capital loans
18
<PAGE> 21
aggregating $205,000. The Company has contingent obligations under the
agreements to purchase which currently total $20,760,000.
In return for its loans or credit, the Company has a contractual right to
receive interest, loan and commitment fees and agreement to purchase fees at
levels that the Company believes are generally at or above market levels.
Moreover, because of the developmental nature of these projects, the Company
has the right to receive a portion of the proceeds from a sale or refinancing
of the projects.
The following table presents certain information relating to each of the
five projects, including a summary of the fees and benefits to the Manager and
the involvement of other Company affiliates.
<TABLE>
<CAPTION>
MANAGER'S INVOLVEMENT OF
PROJECT STATUS FINANCING PARTICIPATION OTHER AFFILIATES
--------- ------ --------- ------------- ----------------
<S> <C> <C> <C> <C>
West Park Place Completed and Provided by Company: Annual Fee of $5,000. Affiliate of Bruce Douglas,
Limited Partnership, approximately $2,194,367 Mortgage Director of the Company,
205-Unit retirement 86% occupied Working Capital Loan .5% of profits, losses and serves as general partner.
facility, Toledo, Ohio was repaid to the cash flow until the limited
Company in 1987; partners have received
since April 1987, the certain cash distributions;
Company has provided thereafter, 6.25% of profits,
a variety of Mortgage losses and cash flow; 12.5%
Working Capital and of net proceeds from sale or
Short-Term Loans; the refinancing after the limited
maximum advanced was partners have received certain
$368,000 and at cash contributions.
January 31, 1994, $0
was outstanding.
The Company provided
construction loans
for Phase I and II of
the Project which
were converted into
permanent loans.
Subsequently, these
loans, which
currently aggregate
$9,415,302, were
restructured to
include, among other
things, an interest
rate of 11.5% and a
5-year term with
monthly payments
made on a 25-year
amortization schedule.
Additionally, the
Company is entitled to
receive a one-time
payment of $600,000
upon the happening of
certain events.
Independence Village Completed and Provided by Company: Annual Fee of $10,000. Frederic D. Wolfe and
Associates, Ltd., 160- approximately $1,563,192 Mortgage Bruce G. Thompson are
unit retirement center, 89% occupied Working Capital Loan - 6% of profits and losses; two of the six limited
Naperville, Illinois $1,580,476 advanced at 5% of cash flow; 6% of partners.
January 31, 1994. net capital proceeds
from sale or refinancing. An affiliate of Messrs.
The Company has an Wolfe and Thompson has
open-ended commitment managed the facility
to loan 60% of the since November 1, 1992.
additional cash Fees for 1992 and 1993
requirements in excess totalled $19,281 and
of the Mortgage Working $94,864, respectively.
Capital Loans - $681,000
advanced at January 31,
1994.
$5,800,000 of industrial
development bonds, secured
by bank letter of credit,
in turn secured by Company's
agreement to purchase.
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
INVOLVEMENT OF
PROJECT STATUS FINANCING MANAGER'S PARTICIPATION OTHER AFFILIATES
------- ------ --------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
Landver Properties, Completed and $4,540,000 of industrial Annual Management Fee Messrs. Wolfe and Thompson
Ltd., Two 100-bed approximately development bonds secured of $10,000. are two of the ten limited
nursing homes, 92% occupied by project and Company's partners.
Ashland, Ohio; agreement to purchase. 1.5% of profits and
Vermilion, Ohio losses; 30% of cash An affiliate of Messrs. Wolfe
Effective February 4, 1994, flow after the limited and Thompson manages the
the industrial development partners have received homes. Fees for 1991,
bonds also became secured a preferential cash 1992 and 1993 totalled
by a bank letter of distribution equal $320,745, $338,738 and
credit. to 8% of their cumulative $352,136, respectively.
capital contributions;
65.8% of general
partners' net capital
proceeds from sale
or refinancing.
The Partnership has agreed
to pay the Manager
$30,000 for services
rendered regarding re-
funding of the industrial
development revenue bonds,
provided the limited
partners approve.
Independence Village Completed and Provided by Company: Annual Management Fee Messrs. Wolfe and Thompson
of Rockford Limited approximately $861,578 Mortgage of $10,000. are two of the four limited
Partnership, 96% occupied Working Capital Loan partners.
160-unit retirement - $843,905 advanced 5.985% of profits and
facility, Rockford, at January 31, 1994. losses; 5% of cash
Illinois flow; 6% of net capital
The Company has an proceeds from sale or
open-ended commit- refinancing after the
ment to loan 60% of limited partners have
the additional cash received certain cash
requirements in excess distributions.
of the Mortgage Working
Capital Loan - $196,500
advanced at January 31,
1994.
$6,000,000 in economic
development bonds,
secured by project,
bank letter of credit
and Company mortgage
purchase agreement.
Ponce de Leon Completed and Provided by Company: Fees of $158,134 from Affiliates of Messrs. Wolfe
Partnership, approximately Working Capital Loans inception of the Part- and Thompson have managed
150-unit inde- 93% occupied of $1,700,000; $800,000 nership, through January the facility since 1988.
pendent and advanced and repaid - 31, 1994. The Manager No fees were received
assisted living $900,000 advanced at could have received, in 1989. Fees for 1990
facility, Santa Fe, January 31, 1994. based upon available cash, totalled $87,135 of
New Mexico fees up to $17,508, $17,500 which $32,675 was
First Additional Mortgage and $17,500 for 1991, 1992 received and $54,460
Working Capital Loan of and 1993, respectively, was accrued. Fees for
$1,100,000 - $1,314,669 but received $10,000 in 1991 totalled $96,785
advanced at January fees in each of those of which $36,294 was
31, 1994. Second years. The Manager may received and $60,491
Additional Mortgage receive $15,000 in fees was accrued. Effective
Working Capital Loan for 1994. Commencing 1992, fees are generally
of $400,000 advanced at March 1, 1988, 1% of paid as earned. Fees
January 31, 1994. An profits and losses earned were $104,770
additional working until limited partners for 1992 and $103,708
capital loan of receive capital plus for 1993.
$228,000 advanced at return - thereafter,
January 31, 1994. 1.875% of profits and
losses; and 20% of cash
On February 25, 1992, flow and net capital
the Company and the proceeds from sale or
Partnership entered into refinancing after
an agreement in which the limited partners have
Partnership agreed, among received a preferential
other things, to transfer cash distribution equal
the project to the Company to 8% of their cumulative
upon the satisfaction of capital contributions.
certain conditions and
payments in consideration
for the Company's agree-
ment not to foreclose
upon the property in
certain situations. As of
the date of this Proxy
Statement, the project
has not been transferred
to the Company.
$6,300,000 in industrial
revenue housing bonds,
secured by the leasehold
interest in the project
and Company's agreement
to purchase.
20
</TABLE>
<PAGE> 23
WT MANAGEMENT COMPANY AND KINGSTON HEALTHCARE COMPANY
In 1987 and 1988, respectively, the Company contracted with WT
Management Company ("WT"), a company wholly owned by Messrs. Wolfe and
Thompson, to manage a nursing home in Camp Verde, Arizona and three facilities
in Indiana. All four facilities had been relinquished to the Company by their
previous owners, due to, among other reasons, various loan, lease and bond
defaults. In 1989, Landver Properties, Ltd., a related party, contracted with
WT to manage two nursing homes in Ashland and Vermilion, Ohio. In 1990, the
facilities were managed by either WT or Kingston HealthCare Company
("Kingston"). During 1990, two of the Indiana facilities, a nursing home and a
retirement center, were leased to Kingston with options to purchase. Kingston
exercised the option to purchase one of the facilities in 1992 and obtained
financing in the amount of $1,850,000 from the Company. Also in 1992,
Independence Village Associates, Ltd., a related party, contracted with
Kingston to manage a retirement center in Naperville, Illinois. For the years
ended December 31, 1992 and 1991, WT and Kingston received (or accrued)
management fees totalling $28,000 and $59,000, respectively, for managing
properties owned by the Company. It is possible that the Company will contract
with WT or Kingston in the future to manage and/or lease facilities.
At December 31, 1993, Kingston continued to manage four nursing homes or
retirement facilities, all of which are owned by related partnerships.
For the years ended 1993, 1992 and 1991, the Company recorded lease
income from WT or Kingston in the amounts of $272,000, $439,000, and $422,000,
respectively.
THE MANAGER
Messrs. Thompson and Wolfe, Chairman, Chief Executive Officer and
Director and President and Director of the Company, respectively, each own 50%
of First Toledo Corporation, the Manager of the Company. See "Ratification of
the Management Agreement." In 1993, the Manager was paid $2,427,000 in
management fees by the Company.
OTHER RELATIONSHIPS
Pier C. Borra, a Director of the Company, is Chairman, President and
Chief Executive Officer of Arbor Health Care Company ("Arbor") . The Company
previously provided $13,000,000 to Arbor for the financing of three
facilities prior to Mr. Borra's election as a Director of the Company. In 1992,
Arbor exercised its options to purchase or repaid loans relating to the three
facilities.
George Chopivsky, Jr., a Director of the Company, and his affiliates
have interests in two psychiatric hospitals for which the Company is providing
financing in the total amount of $12,442,000.
Bruce G. Thompson, Chairman, Chief Executive Officer and Director of the
Company, is a Director of Society National Bank, Toledo, with which the Company
has a line of credit.
21
<PAGE> 24
Frederic D. Wolfe, President and a Director of the Company, is a
Director of National City Bank, Northwest (NCB), which is a participant in the
Company's revolving line of credit. NCB is an affiliate of National City Bank
of Cleveland, which is agent for, and a participant in, the Company's revolving
line of credit.
GENERAL
All of the related party matters were approved by a majority of
Directors unaffiliated with the transactions. For the years ended December 31,
1993, 1992 and 1991, gross income from related parties totalled $3,612,000,
$4,783,000, and $4,903,000 or 10.03%, 16.55% and 16.76%, respectively, of the
gross income of the Company. Of the $4,783,000 of related party income in 1992,
$941,000 related to gains on exercises by Arbor of options to purchase two
facilities financed by the Company.
RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT AUDITORS
The firm of Ernst & Young served as independent auditors of the Company
for the year ended December 31, 1993 and has been selected by the Company to
serve as its independent auditors for the year ending December 31, 1994. Ernst
& Young has served as independent auditors of the Company since the Company's
inception in 1970. Although the submission for this matter for approval by
stockholders is not legally required, the Board of Directors believes that such
submission follows sound business practice and is in the best interests of the
stockholders. If this appointment is not ratified by the holders of a majority
of the shares present in person or represented by proxy at the Annual Meeting,
the Directors will consider the selection of another accounting firm. If such a
selection were made, it might not become effective until the 1995 fiscal year
because of the difficulty and expense of making a substitution. Management does
not expect that a representative of Ernst & Young will attend the Annual
Meeting.
Audit services of Ernst & Young for the fiscal year ended December 31,
1993 included the audit of the financial statements of the Company included in
the Annual Report to Stockholders for 1993, services related to filings with
the Securities and Exchange Comission, and consultation and assistance on
accounting and related matters.
The services furnished by Ernst & Young have been at customary rates and
terms. There are no existing direct or indirect understandings or agreements
that place a limit on current or future years' audit fees.
MANAGEMENT AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU
VOTE "FOR" THE RATIFICATION OF ERNST & YOUNG. The affirmative vote of the
holders of a majority of shares of common stock present in person or
represented by proxy at the Annual Meeting will be required for such
ratification.
22
<PAGE> 25
OTHER MATTERS
Management is not aware of any matters to be presented for action at the
Annual Meeting other than the matters set forth above. If any other matters do
properly come before the meeting or any adjournment thereof, it is intended
that the persons named in the proxy will vote in accordance with their
judgment on such matters.
STOCKHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders' proposals intended to be presented at the 1995 Annual
Meeting of Stockholders must be received by the Company no later than December
, 1994 for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
BY THE ORDER OF THE BOARD OF DIRECTORS
Erin C. Ibele
Vice President and Corporate Secretary
23
<PAGE> 26
<TABLE>
S & P 500 COMPANY HYBRID MORTGAGE
<S> <C> <C> <C> <C>
12/31/88 $100.00 $100.00 $100.00 $100.00
12/31/89 $131.49 $138.79 $87.86 $ 84.10
12/31/90 $127.32 $144.62 $63.07 $ 68.65
12/31/91 $166.21 $251.34 $87.77 $ 90.50
12/31/92 $178.96 $281.43 $102.33 $ 92.24
12/31/93 $196.84 $326.51 $124.01 $105.66
</TABLE>
<PAGE> 27
EXHIBIT A
PROPOSAL TO AMEND
THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
-------------------------------------------
Section 4 of the Restated Certificate of Incorporation shall be
amended in its entirety to read as follows:
4. The number of shares that the Corporation is authorized to issue
and have outstanding is 50,000,000, consisting of 40,000,000 shares of
common stock with par value of $1.00 per share (hereinafter referred to as
the "Common Stock"), and 10,000,000 shares of preferred stock (hereinafter
referred to as the "Preferred Stock"), which Preferred Stock shall have the
terms and conditions as specified in a resolution or resolutions to be
adopted by the Board of Directors of the Corporation.
<PAGE> 28
EXHIBIT B-1
PROPOSAL TO AMEND BY-LAWS TO DELETE
SECTIONS 3 AND 6 OF ARTICLE II
-----------------------------------
Sections 3 and 6 of Article II of the Company's By-Laws shall be deleted in
their entirety and any renumbering changes so required by the By-Laws in
connection with such deletions be so made.
<PAGE> 29
EXHIBIT B-2
PROPOSAL TO AMEND
THE RESTATED CERTIFICATE OF INCORPORATION
REGARDING CERTAIN ACTIONS BY STOCKHOLDERS
-----------------------------------------
The Company's Restated Certificate of Incorporation be amended as follows:
8. Any action required or permitted to be taken by the stockholders
of the Company must be effected at a duly called annual or special
meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise required by law and subject
to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
special meetings of stockholders of the Company may be called only by the
Board of Directors pursuant to a resolution approved by a majority of the
entire Board of Directors.
<PAGE> 30
1985 INCENTIVE STOCK OPTION PLAN
OF
HEALTH CARE REIT, INC.
----------------------
The terms and conditions of the 1985 Incentive Stock Option Plan
(hereinafter referred to as the "Plan") of Health Care REIT, Inc. (hereinafter
referred to as the "Company"), a Delaware corporation, is set forth below:
1. PURPOSE OF THE PLAN. The purpose of the Plan is to encourage
ownership of shares of the Common Stock, par value $1.00 per share, of the
Company (said shares are hereinafter referred to as "Company Common Stock") by
an Eligible Employee (as said term is hereinafter defined in paragraph 3 of
this Plan) and to encourage each of them to remain in the employ of the
Company. It is also intended that any option granted pursuant to the terms of
this Plan (an option granted under this Plan is hereinafter referred to as an
"Option" and all options granted under this Plan are hereinafter collectively
referred to as the "Options") shall be an "incentive stock option" within the
meaning of Section 422A of the Internal Revenue Code of 1954, as amended
(hereinafter referred to as the "Code").
2. ADMINISTRATION OF PLAN. The Board of Directors of the Company
(hereinafter referred to as the "Board") shall appoint a Stock Option Committee
(hereinafter referred to as the "Committee") which shall consist of not less
than three members of the Board. Subject to the provisions of this Plan, the
Committee shall have authority to supervise, administer and interpret this Plan
including, but not limited to, the authority to (i) determine the Eligible
Employee to whom an Option shall be granted, (ii) determine the number of
shares of Company Common Stock to be the subject of each Option, (iii)
determine the time or times at which
<PAGE> 31
an Option shall be granted and/or places,
as it shall deem advisable, and (iv) determine the time or times at which an
Option shall be exercised and/or places, as it shall deem advisable. A
majority of its members shall constitute a quorum. All action of the Committee
may be taken by a written instrument signed by a majority of the members and
action so taken shall be fully as effective as if it had been taken by a vote
of a majority of the members at a meeting duly called and held. The Committee
may appoint a secretary who shall keep minutes of its meetings. The Committee
shall make such rules and regulations for the conduct of its business as it
shall deem advisable.
3. ELIGIBLE EMPLOYEE DEFINED. For purposes of this Plan, the term
"Eligible Employee" shall be defined to mean an individual who is an officer or
key employee of either the Company, a Parent of the Company (as that term is
defined in Section 425(e) of the Code) or a Subsidiary of the Company (as that
term is defined in Section 425(e) of the Code). Notwithstanding anything
contained in this Plan to the contrary, no Option shall be granted to an
individual (i) who, at the time such Option is granted, "owns" (as defined in
Section 425(d) of the Code) stock possessing 10% or more of the total combined
voting power of all classes of stock of the Company, a Parent of the Company or
a Subsidiary of the Company, unless at the time such Option is granted the
option price is at least 110% of the fair market value of the Company Common
Stock (as defined in paragraph 3 herein) subject to the Option and such Option
by its terms is not exercisable after the expiration of five (5) years from the
date such Option is granted and (ii) unless such individual is an employee of
the Company, a Parent of the Company or a Subsidiary of the Company at the time
of
-2-
<PAGE> 32
the granting of the Option. For the purposes of this Agreement, fair market
value shall mean the average of the high and low sales prices of the Company's
Common Stock on the American Stock Exchange on the date that the Option is
granted.
4. COMPANY COMMON STOCK SUBJECT TO THE PLAN. Subject to adjustment
as provided in paragraph 14 of this Plan, the aggregate number of shares of
Company Common Stock which shall be reserved and which may be issued upon the
exercise of all Options to be granted from time to time under this Plan is
150,000 shares of Company Common Stock, whether or not such shares of Company
Common Stock are (i) treasury shares, (ii) authorized but unissued shares or
(iii) both. In the event that an Option expires or terminates without having
been exercised as to the full number of shares of Company Common Stock subject
thereto, the shares of Company Common Stock as to which such Option was not
exercised shall be available for Options which may thereafter be granted under
this Plan.
5. GRANT OF OPTION. Each Option shall be granted within ten (10)
years from (i) the date this Plan is adopted by the Board or (ii) the date this
Plan is approved by the shareholders of the Company, as required by Section
422A(b)(2) of the Code, whichever date is earlier.
6. TERM OF OPTION. The term of each Option shall be for a period not
to exceed ten (10) years from the date the Option is granted.
7. EXERCISE OF OPTION. Except as otherwise provided in this Plan, an
Option shall be exercisable only by the individual to whom it is granted during
his lifetime and only if such individual was an employee of either the Company,
a Parent of the Company or
-3-
<PAGE> 33
a Subsidiary of the Company, or a corporation or a parent or subsidiary of such
corporation issuing or assuming a stock option in a transaction to which
Section 425(a) of the Code applies, at all times during the period beginning on
the date of the granting of the Option and ending on the date which is three
(3) months before the date of such exercise (including the date of such
exercise); provided, however, in the case of an employee who is disabled
(within the meaning of Section 105(d)(4) of the Code), the ending date of the
period shall be one (1) year before the date of such exercise. An Option shall
be deemed exercised only if written notice of its exercise is delivered to the
Company prior to the expiration of the term of the Option. Notwithstanding
anything contained in this Plan to the contrary, no Option may be exercised
unless and until this Plan is approved by the shareholders of the Company in
the manner and within the time required by Section 422A of the Code.
8. OPTION PRICE. The purchase price of Company Common Stock which
shall be the subject of an Option shall be not less than the fair market value
of Company Common Stock at the time such Option is granted. For the purposes
of this Agreement, fair market value shall mean the average of the high and low
sales prices of the Company's Common Stock on the American Stock Exchange on
the date that the Option is granted.
9. PRIOR OUTSTANDING OPTIONS. No Option shall be exercisable while
there is outstanding (within the meaning of Section 422A(c)(7) of the Code) any
incentive stock option (as said term is defined in Section 422A of the Code)
which was granted, before the granting of such Option, to the individual to
whom the Option was granted to purchase stock in the Company or in a
-4-
<PAGE> 34
corporation which, at the time the Option is granted, is a Parent of the
Company or a Subsidiary of the Company, or in a predecessor corporation of any
such corporations. In the event an Option has been cancelled and is no longer
outstanding, no Option, granted to an Eligible Employee after the date the
cancelled Option was granted, shall be exercised prior to the time that the
cancelled Option would have expired under its terms if it had not been
cancelled.
10. ANNUAL LIMIT ON OPTIONS. Notwithstanding anything contained in
this Plan to the contrary, the aggregate fair market value (determined as of
the time the Option is granted) of Company Common Stock for which an Eligible
Employee may be granted an Option in any calendar year (under all such plans of
his employer corporation and its Parent and Subsidiary) shall not exceed
$100,000 plus any unused limit carry-over to such year as determined in
accordance with the provisions of Section 422A(c)(4) of the Code.
11. NONTRANSFERABILITY OF OPTION. An Option shall not be
transferable by the individual to whom it is granted except by (i) will or (ii)
the laws of descent and distribution.
12. TERMINATION OF EMPLOYMENT. In the event that an individual to
whom an Option is granted under this Plan (hereinafter referred to as an
"Optionee") shall cease to be employed by the Company, a Parent of the Company
or a Subsidiary of the Company, whether voluntarily or involuntarily, for any
reason other than death or disability (within the meaning of Section 105(d)(4)
of the Code) and shall no longer be employed by any of them, such Option and
all of the Optionee's rights to further exercise of his Option shall expire as
of the date that is three
-5-
<PAGE> 35
(3) months after the date the employment of such individual is terminated;
provided, however, that no Option shall be exercisable after the expiration of
ten (10) years from the date such Option is granted. Nothing in this Plan
shall confer upon any Optionee the right to be continued in the employment of
the Company, a Parent of the Company or a Subsidiary of the Company, or
interfere in any way with the right of the Company, a Parent of the Company or
a Subsidiary of the Company to terminate the employment of the Optionee,
whether for cause or otherwise. A leave of absence with the express written
consent of the Company shall not be considered termination of employment for
purposes of this paragraph.
13. DEATH OR DISABILITY OF OPTIONEE. In the event of the death or
disability of an Optionee while employed by the Company, a Parent of the
Company or a Subsidiary of the Company, his Option may be exercised by him or,
in the case of the death of Optionee, by his personal representative or by any
persons or persons who shall have acquired the Option directly from the
Optionee by will or by the laws of descent and distribution at any time within
three (3) months after the date of his death or within one (1) year after the
date of his disability; provided, however, that no Option shall be exercisable
after the expiration of ten (10) years from the date such Option is granted.
14. ADJUSTMENTS IN COMPANY COMMON STOCK. In the event of any changes
in the issued and outstanding shares of Company Common Stock by reason of (i)
share dividends, (ii) split-ups, or (iii) reclassifications, the aggregate
number and class of shares available under this Plan shall be correspondingly
adjusted by the Committee; provided, however, that neither this Plan nor an
Option shall be adjusted in a manner that causes an Option not to qualify
-6-
<PAGE> 36
as an incentive stock option within the meaning of Section 422A of the Code.
15. TIME OF GRANTING OPTIONS. Nothing contained in the Plan or in
any resolution adopted or to be adopted by the Board or the shareholders of the
Company nor any action taken by the Committee shall constitute the granting of
an Option. The granting of an Option shall take place only when the written
option agreement referred to in paragraph 23 of this Plan shall have been duly
executed and delivered by or on behalf of the Company and the Optionee.
16. RIGHTS AS A SHAREHOLDER. Except as otherwise provided by the
laws of the State of Delaware, an Optionee shall have no rights as a
shareholder of the Company with respect to any shares covered by his Option
until the date of the issuance of a share certificate to him for such shares.
Except as otherwise provided in paragraph 14 of this Plan and by the laws of
the State of Delaware, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights on Company Common Stock for which the record date is prior to
the date such certificate is issued.
17. AMENDMENT OF PLAN. To the extent permitted by law, the Board may
at any time and from time to time modify or amend the Plan in such respects as
it shall deem advisable; provided, however, that such modification or amendment
shall not change any rights under any outstanding Option without the written
consent of the Optionee; provided further, however, that such modification or
amendment shall not, without the approval of the shareholders of the Company,
change the Plan so as to cause any of the Options to fail to meet the
requirements of an incentive stock option under
-7-
<PAGE> 37
Section 422A of the Code.
18. TERMINATION OF PLAN. Notwithstanding anything contained in this
Plan to the contrary, the Board may at any time terminate or discontinue this
Plan or any Option granted hereunder provided that such action shall not,
without the written consent of the Optionee affected, impair the rights of such
Optionee under any Option previously granted under the Plan.
19. GOVERNMENTAL REGULATIONS. This Plan and the granting and
exercise of any Option and the obligations of the Company to sell and deliver
shares of Company Common Stock under any such Option shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
governmental agencies as may be required.
20. COMPLIANCE WITH SECURITIES LAWS. Options granted and shares of
Company Common Stock issued by the Company upon the exercise of Options shall
be granted and issued only in full compliance with all applicable securities
laws including, but not limited to, the Securities Act of 1993, as amended, and
the general rules and regulations promulgated thereunder by the Securities and
Exchange Commission and applicable state blue sky laws. In connection with
such compliance, the Committee may impose such conditions on transfer of the
shares of Company Common Stock subject to an Option and other restrictions,
conditions and limitations as it may deem necessary and appropriate.
21. PROCEEDS FROM SALE OF COMPANY COMMON. The proceeds to be
received by the Company upon the exercise of any Option shall be used for
general corporate purposes.
-8-
<PAGE> 38
22. OBLIGATIONS OF OPTIONEE. The granting of an Option shall impose
no obligation upon the Optionee to exercise such Option.
23. OPTION AGREEMENT. Options granted under this Plan shall be
evidenced by written agreements in such form as the Committee shall from time
to time approve, which agreements (i) shall comply with and be subject to the
terms and conditions of this Plan, (ii) may contain such other provisions not
inconsistent with this Plan as the Committee shall deem advisable including,
without limitation, restrictions upon exercise of an Option and (iii) shall
contain such other limitations and restrictions upon the exercise of an Option
as shall be necessary in order that such Option will be an incentive stock
option as defined in Section 422A of the Code and that the granting of such
Option shall be in compliance with federal and state securities laws.
24. EFFECTIVENESS OF PLAN. This Plan shall become effective on the
date this Plan is approved by the Board; provided, however, that the Plan shall
be submitted to the shareholders of the Company in the manner and within the
time required by Section 422A of the Code. In the event this Plan is not
approved by the shareholders of the Company as aforesaid, then this Plan shall
be terminated, null and void and all Options granted under this Plan shall
terminate.
25. DETERMINATION OF DISABILITY. For purposes of this Plan, the
determination as to whether an Optionee's employment is terminated because of
"disability" shall be vested solely in the Committee and its determination
shall be final and conclusive on all parties.
-9-
<PAGE> 39
26. PRIORITY. To the extent that any of the provisions of Sections
421 and 422A of the Code are inconsistent with the provisions of this Plan and
such inconsistency would cause this Plan or any Option granted hereunder not to
be treated for federal income tax purposes as an incentive stock option plan,
the provisions of this Plan and of Options granted hereunder shall be deemed to
be amended in a manner to comply with the provisions of Section 421 or 422A of
the Code, as the case may be.
IN WITNESS WHEREOF, the undersigned, being the duly elected and
authorized Secretary of the Company, hereby certifies that this Plan was
legally and validly approved by the Board at a meeting thereof on July 24,
1985, in Toledo, Lucas County, Ohio.
HEALTH CARE REIT, INC.
By /s/ Veronica L. Conley
-----------------------
Veronica L. Conley, Secretary
-10-
<PAGE> 40
AMENDMENT TO THE 1985 INCENTIVE STOCK OPTION PLAN
OF
HEALTH CARE REIT, INC.
-----------------------
The terms and conditions of the Amendment (the "Amendment") to the 1985
Incentive Stock Option Plan (the "Plan") of Health Care REIT, Inc. (the
"Company"), a Delaware corporation, are set forth below. Capitalized terms
used herein and not otherwise defined herein shall have the respective
definition prescribed thereto in the Plan.
1. PURPOSES OF THE AMENDMENT. The purposes of this Amendment are to
give effect to the Tax Reform Act of 1986 (the "Act") that was signed into law
by President Reagan on October 22, 1986. The Act significantly affects the
taxation of options under the Plan; namely the Act makes two changes in the
qualification rules for incentive stock options granted after 1986. First, the
sequential exercise rule set forth in paragraph 9 of the Plan has been repealed
and incentive stock options granted after 1986 no longer must be exercised in
the order granted and pre-1987 incentive stock options will not block the
exercise of post-1986 incentive stock options. Second, an employer may grant
an employee incentive stock options for shares of any value, provided that the
value of the shares subject to one or more incentive stock options exercisable
in any calendar year does not exceed $100,000 (determined at the grant date).
2. AUTHORITY FOR AMENDMENT. Paragraph 17 of the Plan provides that,
to the extent permitted by law, the Board may at any time and from time to time
modify or amend the Plan in such respects as it shall deem advisable.
Paragraph 17 provides, however, that such modification or amendment shall not
change any rights under any outstanding Option without the written consent of
the Optionee nor shall such modification or amendment, without the approval of
the shareholders of the Company, change the Plan so as to cause any of the
Options to fail to meet the requirements of an incentive stock option under
Section 422A of the Code. The changes effected by this Amendment are to
conform the Plan to changes made to incentive stock
<PAGE> 41
options pursuant to the Act and the Company believes that such changes do not
change any rights under any outstanding Options nor cause any of the Options
to fail to meet the requirements of the Code.
3. AMENDMENTS. Paragraphs 9 and 10 of the Plan shall be amended in
their entirety to read as follows:
9. PRIOR OUTSTANDING OPTIONS. No Option granted before 1987 (a
"pre-1987 Option") shall be exercisable while there is outstanding any
incentive stock option (as said term is defined in Section 422A of the
Code) which was granted, before the granting of such pre-1987 Option, to
the individual to whom the pre-1987 Option was granted to purchase stock in
the Company or in a corporation which, at the time the pre-1987 Option was
granted, was a Parent of the Company or a Subsidiary of the Company, or in
a predecessor corporation of any such corporations. In the event a
pre-1987 Option has been cancelled and is no longer outstanding, no Option,
granted to an Eligible Employee before 1987 but after the date the
cancelled pre-1987 Option was granted, shall be exercised prior to the time
the cancelled pre-1987 Option would have expired under its terms if it had
not been cancelled. Nothing in this section shall be construed to require
that any Option granted after 1986 must be exercised in the order granted
or that a pre-1987 Option shall block the exercise of a post-1986 Option.
10. ANNUAL LIMIT ON OPTIONS. Notwithstanding anything contained in
this Plan to the contrary, (a) the aggregate fair market value (determined
as of the time the Option is granted) of Company Common Stock for which an
Eligible Employee may be granted an Option in any calendar year prior to
1987 (under all such plans of his employer corporation and its Parent and
Subsidiary) shall not exceed $100,000 plus any unused limit carry-over to
such year; and (b) the aggregate fair market value (determined as of the
time the Option is granted) of Company Common Stock with respect to which
Option(s) are exercisable for the first time by an Eligible Employee during
any calendar year after 1986 (under all plans of his employer corporation
and its Parent and Subsidiary) shall not exceed $100,000.
4. RATIFICATION OF THE PLAN. In all respects, the Plan as amended by
this Amendment is hereby ratified, approved and confirmed.
<PAGE> 42
IN WITNESS WHEREOF, the undersigned, being the duly elected and
authorized Secretary of the Company, hereby certifies that this Plan was
legally and validly approved by the Board at a meeting thereof on July 22,
1987, in Toledo, Lucas County, Ohio.
HEALTH CARE REIT, INC.
By /s/ Erin C. Ibele
------------------
Erin C. Ibele, Secretary
<PAGE> 43
SECOND AMENDMENT TO THE
1985 INCENTIVE STOCK OPTION PLAN
OF HEALTH CARE REIT, INC.
--------------------------------------------------
The terms and conditions of this Second Amendment (the "Second
Amendment") to the 1985 Incentive Stock Option Plan (the "Plan") of Health Care
REIT, Inc. (the "Company"), a Delaware corporation, are set below. Capitalized
terms used herein and not otherwise defined shall have the definitions set
forth in the Plan.
1. PURPOSE OF THE SECOND AMENDMENT. The purpose of the Second
Amendment is to increase the number of shares of the Company's common stock
reserved for issuance under the Plan from 150,000 to 300,000 shares.
2. AUTHORITY FOR THE SECOND AMENDMENT. Paragraph 17 of the Plan
provides that, to the extent permitted by law, the Board of Directors of the
Company may at any time and from time to time modify or amend the Plan in such
respects as it shall deem advisable. Although paragraph 17 provides that any
such modification or amendment may not change rights under any outstanding
Option without the written consent of the affected Optionee nor change the Plan
so as to cause any of the Options to fail to meet the requirements of an
incentive stock option under Section 422 of the Code, the changes effected by
this Amendment will not change any rights under any outstanding Options nor
cause any of the Options to fail to meet the requirements of the Code.
3. AMENDMENT. Paragraph 4 of the Plan shall be amended and restated
in its entirety, to read as follows:
4. COMPANY COMMON STOCK SUBJECT TO THE PLAN. Subject to adjustment as
provided in paragraph 14 of this Plan, the aggregate number of shares of
Company Common Stock which shall be reserved and which may be issued upon
the exercise of all Options to be granted from time to time under this Plan
is 300,000 shares of Company Common Stock, whether or not such shares of
Company Common Stock are (i) treasury shares, (ii) authorized but unissued
shares or (iii) both. In the event that an Option expires or terminates
without having been exercised as to the full number of shares of Company
Common Stock subject thereto, the shares of Company Common Stock as to
which such Option was not exercised shall be available for Options which
may thereafter be granted under this Plan.
<PAGE> 44
4. EFFECTIVENESS OF SECOND AMENDMENT. This Second Amendment will be
effective as of June 5, 1991, the date of the Annual Meeting of Stockholders
at which the Company's stockholders approved the foregoing increase in the
number of shares of Common Stock available for issuance under the Plan.
5. RATIFICATION OF THE PLAN. In all other respects, the Plan, as
amended to date, is hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned, being the duly elected and
authorized Secretary of the Company, hereby certifies that this Plan was
legally and validly approved by the Board of Directors of Health Care REIT,
Inc. at a meeting held on June 5, 1991, in Toledo, Lucas County, Ohio.
HEALTH CARE REIT, INC.
By /s/ Erin C. Ibele
------------------------
Erin C. Ibele, Secretary
-2-
<PAGE> 45
PRELIMINARY PROXY: FOR THE INFORMATION OF THE
----------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
PROXY
-----
HEALTH CARE REIT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints B. G. Thompson, F. D. Wolfe and R. C.
Glowacki (to act by majority decision if more than one shall act), and each of
them, with full power of substitution, to vote all shares of Common Stock,
$1.00 par value, of Health Care REIT, Inc. (the "Company") that the undersigned
is entitled to vote at the Annual Meeting of the Stockholders of the Company to
be held on Wednesday, May 18, 1994, or any adjournments thereof.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE
TAKING OF A VOTE ON THE MATTERS HEREIN.
Returned proxy cards will be voted: (1) as specified on the matters listed
below; (2) in accordance with the Directors' recommendations where a choice is
not specified; and (3) in accordance with the judgment of the proxies on any
other matters that may properly come before the meeting.
MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY RECOMMEND VOTES "FOR"
ALL OF THE FOLLOWING:
1. Election of two Directors for a term of three years: Pier C. Borra and
George L. Chapman.
____ FOR ALL NOMINEES LISTED (except as marked to the contrary)
____ WITHHOLD AUTHORITY to vote for all nominees
To withhold authority to vote for any individual nominee, please write the
person's name in the following space: ___________________
2. Approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
15,000,000 to 40,000,000, and to authorize 10,000,000 shares of Preferred
Stock.
______ FOR ______ AGAINST ______ ABSTAIN
(Continued and to be signed on the reverse side)
<PAGE> 46
3. Approval of amendments to the Company's Restated Certificate of
Incorporation and By-Laws which would provide that stockholder proposals may
only be adopted at stockholders' meetings called by the Board of Directors.
______ FOR ______ AGAINST ______ ABSTAIN
4. Approval of an amendment to the Company's Incentive Stock Option Plan to
increase the number of shares of Common Stock available for issuance by
150,000.
______ FOR ______ AGAINST ______ ABSTAIN
5. Ratification of the Management Agreement between Health Care REIT, Inc.
and First Toledo Corporation.
______ FOR ______ AGAINST ______ ABSTAIN
6. Ratification of the appointment of Ernst & Young as auditors for the
fiscal year 1994.
______ FOR ______ AGAINST ______ ABSTAIN
7. With discretionary authority on any other business that may properly
come before the meeting or any adjournment thereof.
Dated:_______________, 1994
___________________________________
Signature
___________________________________
Signature if Held Jointly
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<PAGE> 47
PLEASE MARK, SIGN, DATE AND RETURN Please sign exactly as your name
THE PROXY CARD PROMPTLY USING THE appears hereon. Joint owners should
ENCLOSED ENVELOPE. PLEASE MARK each sign. When signing as
YOUR CHOICE LIKE THIS __ IN BLUE attorney, executor, administrator,
OR BLACK INK. trustee or guardian, please give
full title as such. Corporate or
partnership proxies should be
signed by an authorized person
with the person's title indicated.
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