FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Health Care REIT, Inc.
(Exact name of registrant as specified in its charter)
Delaware 34-1096634
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One SeaGate, Suite 1950, Toledo, Ohio 43604
(Address of principal executive office) (Zip Code)
(Registrant's telephone number, including area code) (419) 247-2800
___________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X. No ___.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes _____. No _____.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class: Shares of Common Stock, $1.00 par value
Outstanding 11,695,832 shares
<PAGE>
HEALTH CARE REIT, INC.
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30,
1995 and December 31, 1994. 3
Consolidated Statements of Income --- Three
months ended June 30, 1995 and 1994; six
months ended June 30, 1995 and 1994. 4
Consolidated Statements of Cash Flows ---
Six months ended June 30, 1995 and 1994. 5
Consolidated Statements of Shareholders' Equity
--- Six months ended June 30, 1995 and 1994. 6
Notes to Consolidated Financial Statements. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8
Part II. OTHER INFORMATION
Item 5. Other Information. 10
Item 6. Exhibits and Reports on Form 8-K. 10
SIGNATURES 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS (Unaudited)
HEALTH CARE REIT, INC. AND SUBSIDIARY
<TABLE>
December 31
June 30 1994
1995 (Note)
------------ ------------
<C> <C>
<S>
ASSETS
Real Estate Related Investments:
Loans receivable:
Mortgage loans $271,079,427 $230,781,805
Construction and other short-term loans 24,017,966 17,073,652
Working capital loans to related parties 6,662,331 7,068,254
------------ ------------
301,759,724 254,923,711
Investment in operating-lease properties 57,777,576 57,231,651
Investment in direct financing leases 11,332,340 11,427,721
------------ ------------
370,869,640 323,583,083
Less allowance for losses 5,150,000 5,150,000
------------ ------------
NET REAL ESTATE RELATED INVESTMENTS 365,719,640 318,433,083
Other Assets:
Deferred loan expenses 2,656,444 2,469,260
Investments 532,000
Cash and cash equivalents 658,717 935,449
Receivables and other assets 2,601,203 2,264,197
------------ ------------
6,448,364 5,668,906
------------ ------------
$372,168,004 $324,101,989
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Borrowings under line of credit arrangements $119,100,000 $ 70,900,000
Other long-term obligations 57,050,699 57,372,790
Accrued expenses and other liabilities 7,329,543 6,649,424
------------ ------------
TOTAL LIABILITIES 183,480,242 134,922,214
Shareholders' Equity:
Preferred Stock, $1.00 par value:
Authorized - 10,000,000 shares
Issued and outstanding - none
Common Stock, $1.00 par value:
Authorized - 40,000,000 shares
Issued and outstanding - 11,695,832
in 1995 and 11,595,115 in 1994 11,695,832 11,595,115
Capital in excess of par value 163,028,571 161,086,758
Undistributed net income 13,963,359 16,497,902
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 188,687,762 189,179,775
------------ ------------
$372,168,004 $324,101,989
============ ============
</TABLE>
NOTE: The balance sheet at December 31, 1994 has been derived from the
audited consolidated financial statements of that date, but does
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
See consolidated notes to financial statements
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
HEALTH CARE REIT, INC. AND SUBSIDIARY
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
------------------------- -------------------------
<C> <C> <C> <C>
<S>
Gross Income:
Interest and other
income $ 7,510,558 $ 6,208,096 $15,036,808 $11,444,192
Operating leases:
Rents 1,582,870 1,375,147 3,124,479 2,524,900
Gain on exercise of
options 100,029 100,029
Direct financing
leases:
Lease income 382,164 1,330,081 764,328 3,015,823
Gain on exercise of
options 3,429,493 3,621,768
Loan and commitment
fees 201,934 287,869 376,904 465,242
----------- ----------- ----------- -----------
9,677,526 12,730,715 19,302,519 21,171,954
Expenses:
Interest:
Senior notes and
other long-term
obligations 1,301,758 1,600,887 2,757,734 3,146,096
Line of credit
arrangements 1,855,710 897,361 3,524,083 1,426,315
Loan expenses 186,779 286,355 372,468 360,598
Management fees 615,076 948,574 1,260,734 1,591,628
Provision for
depreciation 390,337 347,093 780,075 649,030
Provision for losses 250,000 250,000
Other operating
expenses 690,676 600,588 1,105,270 964,180
----------- ----------- ----------- -----------
5,040,336 4,930,858 9,800,364 8,387,847
----------- ----------- ----------- -----------
NET INCOME $ 4,637,190 $ 7,799,857 $ 9,502,155 $12,784,107
=========== =========== =========== ===========
Average number of
shares outstanding 11,673,998 11,504,848 11,646,843 11,486,049
Net income per share $ .40 $ .68 $ .82 $ 1.11
Dividends per share $ .52 $ .50 $ 1.035 $ .995
</TABLE>
See consolidated notes to financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
HEALTH CARE REIT, INC. AND SUBSIDIARY
<TABLE>
Six Months Ended
June 30
1995 1994
----------------------------
<C> <C>
<S>
OPERATING ACTIVITIES
Net income $ 9,502,155 $ 12,784,107
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of loan and organization
expenses 373,546 361,676
Provision for losses 250,000
Provision for depreciation 780,075 649,030
Loan and commitment fees earned less
than cash received 649,041 327,677
Direct financing lease income less
than cash received 95,381 634,178
Interest income (in excess of)
less than cash received (104,670) 800,810
Increase in accrued expenses and
other liabilities 31,078 402,202
Increase in other receivables and
prepaid items (338,084) (793,562)
------------ ------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 10,988,522 15,416,118
INVESTING ACTIVITIES
Proceeds from exercise of lease
purchase options 26,879,323
Increase in investments (532,000)
Investment in operating-lease
properties (1,326,000) (10,541,786)
Investment in loans receivable (51,227,784) (53,942,568)
Investment in direct financing leases (1,300,000)
Principal collected on loans 4,496,441 11,110,206
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (48,589,343) (27,794,825)
FINANCING ACTIVITIES
Long-term borrowings under line of
credit arrangements 112,900,000 97,800,000
Principal payments on long-term
borrowings under line of credit
arrangements (64,700,000) (77,500,000)
Net proceeds from the issuance of shares 2,042,530 1,655,007
Principal payments on other long-term
obligations (322,091) (2,755,696)
(Increase) decrease in deferred loan
expense (559,652) 19,714
Cash distributions to shareholders (12,036,698) (11,413,012)
------------ ------------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 37,324,089 7,806,013
------------ ------------
Decrease in cash and cash equivalents (276,732) (4,572,694)
Cash and cash equivalents at beginning
of period 935,449 4,896,314
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 658,717 $ 323,620
============ ============
Supplemental Cash Flow Information--
Interest Paid $ 6,439,192 $ 4,512,401
============ ============
</TABLE>
See consolidated notes to financial statements
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
HEALTH CARE REIT, INC. AND SUBSIDIARY
<TABLE>
Six Months Ended
June 30
1995 1994
----------------------------
<C> <C>
<S>
Balances at beginning of period $189,179,775 $184,131,828
Net income 9,502,155 12,784,107
Proceeds from issuance of shares under the
dividend reinvestment plan - 86,577 in
1995 and 70,988 in 1994 1,833,141 1,655,007
Proceeds from issuance of shares under the
employee stock incentive plan - 14,140
in 1995 209,389
Cash dividend paid (12,036,698) (11,413,012)
------------ ------------
Balances at end of period $188,687,762 $187,157,930
============ ============
</TABLE>
( ) Denotes deduction
See consolidated notes to financial statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HEALTH CARE REIT, INC.
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered for a fair
presentation have been included. Operating results for the six
months ended June 30, 1995 are not necessarily an indication of the
results that may be expected for the year ended December 31, 1995.
For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1994.
Net income per share has been computed by dividing net income
by the average number of shares outstanding.
Note B - Investments
During the first quarter of 1995, the Company purchased common
stock in a privately held company. This investment does not have
a readily determinable fair value. Accordingly, this investment is
recorded at the lower of cost or estimated net realizable value.
Note C - Management Agreement
The Company is continuing its efforts to consummate the merger
of First Toledo Advisory Company with and into the Company.
Through June 30, 1995, the Company has incurred $660,000 of costs
which it will expense in the third quarter, along with any
additional costs.
Note D - Contingencies
As disclosed in the financial statements for the year ended
December 31, 1994, the Company was contingently liable for certain
obligations amounting to approximately $20,175,000. No significant
change in these contingencies has occurred as of June 30, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
During the first half of 1995, the Company financed five
mortgage loans for a total of $30,468,000. These loans included
two community hospitals and three nursing homes. In addition, the
Company advanced approximately $18,843,000 for 14 construction
loans, most of which are for new facilities. During the first half
of 1995, two of the construction loans were converted to permanent
financings. The above loan activity, plus changes in working
capital loans and principal repayments, were the reasons net loans
increased approximately $46,836,000.
The Company's working capital loans, all to related parties,
are expected to continue to slowly decline as the underlying
projects continue to improve their financial performance and
thereby pay down these loans.
In the first quarter of 1995, the Company paid $532,000 for
common stock in a privately held company with which the Company has
several mortgage loans and operating-lease transactions. The
investment was made as a result of warrants granted to the Company
when it provided the mortgage loan and operating-lease financing.
Since December 31, 1994, borrowings under line of credit
arrangements increased $48,200,000 due to the investment activity
discussed above. As of June 30, 1995, the Company had
approximately $132,400,000 in unfunded commitments and total
available funding sources of $60,900,000. The Company believes
that funds provided from operating activities, together with funds
from loan repayments and equity and debt issuances, will be
sufficient to meet current operating requirements.
During the first half of 1995, the Company received
approximately $2,043,000 from the sale of its shares under the
dividend reinvestment and incentive stock option plans.
Results of Operations
Gross income for the first half of 1995 was $19,302,519 or
8.8% less than the first half of 1994. Interest income on loans
receivable and operating lease rents increased while direct
financing lease income and gain on exercise of options declined.
The increase in interest income on loans receivable and operating
lease rents is attributable to the growth in the loan and
operating-lease portfolios, a trend which the Company anticipates
will continue. The decrease in direct financing lease income and
gain on exercise of options is a reflection of other long-term
trends which should also continue due to the greater market
acceptance of mortgage loans and operating leases.
In the first half of 1994, gross income included $3,721,797 in
gains on exercise of options. However, there were no such gains
for the comparable period in 1995. Future gains on exercise of
options are anticipated to be modest since the Company has only six
remaining direct financing lease investments which total
approximately $11,332,000.
Net income totalled $9,502,155 in the first half of 1995,
versus $12,784,107 for the comparable period in 1994. The decrease
in net income was reflected in the $.82 per share earned in the
first half of 1995 versus $1.11 per share earned in the first half
of 1994. Major contributing factors for the decrease were the
absence of gains on exercise of options in 1995 (discussed above)
and a tightening of the Company's net interest margin, as explained
below.
During the first six months of 1995, average earnings on
assets increased 13 basis points versus the first half of 1994
excluding gains. However, in the second quarter, average earnings
on assets declined 19 basis points versus the second quarter of
1994. The decline in average earnings on assets was caused by
placing three loans on non-accrual status (discussed below) during
the first quarter of 1995 and the general decline in interest rates
during the last three quarters. During the same six-month periods,
the Company experienced a 98 basis point increase in its average
cost of borrowing. This was primarily due to new borrowings
predominantly at the prime rate which has not declined as quickly
as U.S. Treasury rates used for new investments. However, the
Company's average cost of borrowing declined in the second quarter
of 1995 over the first quarter of 1995, a trend that is expected to
continue through 1995. These trends resulted in a tightening of
its interest rate margin, both for the second quarter and on a
year-to-date basis.
The Company is increasing the use of its LIBOR interest rate
pricing option, which is available on its primary line of credit.
This interest rate pricing option has historically been less
expensive than prime interest rate. Therefore, the greater
utilization of LIBOR should favorably affect the average cost of
debt.
Lastly, the Company's net income was affected by the average
quarter-end debt to equity ratio of .81 to 1 in 1995 versus .63 to
1 in the first half of 1994. The increase in debt had the effect
of increasing the Company's interest related expense.
The Company is continuing its efforts to consummate the merger
of First Toledo Advisory Company with and into the Company.
Through June 30, 1995, the Company has incurred $660,000 of costs
which it will expense in the third quarter, along with any
additional costs.
In January 1995, the Company filed a lawsuit for collection of
past due interest and principal of approximately $1,994,000 related
to a nursing home in Detroit, Michigan. In March of 1995, the
Company filed two lawsuits in Florida to collect past due interest
and principal on a mortgage loan secured by two behavioral care
facilities. In connection with the March filing, the Company
presented for payment and received $1,125,000 on a letter of credit
securing the Florida mortgage loan. After application of the
letter of credit proceeds, the Company's carrying value of the
Florida mortgage loan is approximately $13,468,000. Each of these
loans was put on non-accrual status effective the beginning of the
month the respective lawsuits were filed. Each of the debtors is
in Chapter 11 bankruptcy. The Company is aggressively proceeding
against the borrowers; however, bankruptcy proceedings proceed
slowly. The Company has evaluated its allowance for losses and
believes that the allowance is adequate, based on the information
presently available.
PART II. OTHER INFORMATION
Item 5. Other Information
On April 19, 1995, the Company issued a press release in which
it announced, among other things, that the Board of Directors voted
to pay a quarterly cash dividend of $.52 payable to shareholders of
record on May 5, 1995, and that net income was $.42, a decrease of
$.01 from the first quarter of 1994.
On May 9, 1995, the Company issued a press release in which it
announced, among other things, that the Board of Directors had
approved revised terms of the acquisition of First Toledo Advisory
Company, the manager of the Company. The transaction described
herein is subject to definitive agreements, stockholder approval,
other customary conditions and accounting for the acquisition under
the pooling of interests method.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4. Specimen of Note with Fifth Third Bank
4. Specimen of Note with Capital Bank
99. Press release dated April 19, 1995
99. Press release dated May 9, 1995
(b) Reports on Form 8-K
A report on Form 8-K was filed on May 12, 1995, reporting on
the revised terms of the acquisition of First Toledo Advisory
Company by the Company.
Pursuant to the requirement of the Securities and Exchange Act
of 1934, the Registrant had duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HEALTH CARE REIT, INC.
Date: July 27, 1995 By: BRUCE G. THOMPSON
--------------------------
Bruce G. Thompson, Chairman
and Chief Executive Officer
Date: July 27, 1995 By: FREDERIC D. WOLFE
----------------------------
Frederic D. Wolfe, President
Date: July 27, 1995 By: ROBERT J. PRUGER
---------------------------
Robert J. Pruger, Chief
Financial Officer
Date: July 27, 1995 By: KATHLEEN S. PREPHAN
----------------------------
Kathleen S. Prephan, Chief
Accounting Officer
EXHIBIT INDEX
The following documents are included in this Form 10-Q as Exhibits:
Designation
Number Under
Exhibit Item 601 of Page
Number Regulation S-K Exhibit Description Number
- ------ -------------- -------------------------- ------
1 4 Note with Fifth Third Bank 13
2 4 Note with Capital Bank 20
3 99 Press Release
dated April 19, 1995 22
4 99 Press Release
dated May 9, 1995 24
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 658,717
<SECURITIES> 0
<RECEIVABLES> 2,601,203
<ALLOWANCES> 5,150,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 61,350,383
<DEPRECIATION> 3,572,807
<TOTAL-ASSETS> 372,168,004
<CURRENT-LIABILITIES> 0
<BONDS> 176,150,699
<COMMON> 11,695,832
0
0
<OTHER-SE> 176,991,930
<TOTAL-LIABILITY-AND-EQUITY> 372,168,004
<SALES> 0
<TOTAL-REVENUES> 19,302,519
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,146,079
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,654,285
<INCOME-PRETAX> 9,502,155
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,502,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,502,155
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
OPEN-END DEMAND NOTE
$8,500,000.00 June 3, 1994
Sylvania, Ohio
FOR VALUE RECEIVED, the undersigned, HEALTH CARE REIT, INC. (the
"Maker"), unconditionally promises to pay to the order of Capital
Bank, N.A., a national banking association (the "Bank"), at 5520
Monroe Street, Sylvania, Ohio 43560, the principal sum of EIGHT
MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($8,500,000.00) or
so much as may have been advanced and is outstanding from time to
time plus interest at the Prime rate in effect from time to time at
Bank.
All unpaid principal and interest shall be payable upon
demand of Bank.
Until Bank demands payment, the interest owing on the
unpaid principal shall be paid quarterly commencing August 31,
1994.
All payments shall be credited first to interest accrued
but unpaid and then to the payment and reduction of principal.
Late payments will be charged a fee of 10% of the payment amount.
Interest shall be calculated by means of the 365/360 day
method.
Maker shall make all payments on this Note at the
principal offices of Bank or at such other place as the holder
hereof may designate.
Maker may prepay all or part of the this Note at any time
without penalty.
This Note is issued under and entitled to the benefits of
the provisions of a Line of Credit Agreement of even date herewith,
incorporated hereunder by reference.
In the event the Maker fails to make any payment when due
or upon the occurrence of an event of default as defined in the
Line of Credit Agreement of even date herewith, Bank at its
election may declare any and all obligations or liabilities of
Maker to Bank immediately due and payable without presentment,
demand, protest or notice upon default and may proceed against any
and all security and may enforce any and all of its remedies at law
or equity. In such event, the entire principal balance and accrued
interest then owing shall bear interest at a rate which is the
greater of sixteen percent (16%) or four percent (4%) above the
prime interest rate in effect from time to time at Bank until fully
paid, provided, however, that in no event shall the amount of
interest paid hereunder exceed the maximum rate of interest
permitted by law. Maker agrees to pay all costs of collection
hereof, including reasonable attorney's fees.
This Note shall be construed under the laws of the State
of Ohio.
Bank's acceptance of one or more late or partial payments
shall not be a course of dealing upon which the Maker may rely on
future occasions or a waiver of Bank's right to prompt full payment
when due under this Note. Bank's forbearance from exercising any
right or remedy under this Note shall not be a waiver of such
rights and remedies. Bank's forbearance from exercising any right
or remedy under this Note on any one or more occasions shall not be
a course of dealing or waiver on which the Maker may rely on any
future occasions. Bank's exercise of any rights or remedies or a
part of a right or remedy on one or more occasions shall not
preclude Bank from exercising the right or remedy at any other
time. Bank's rights and remedies under this Note and the law and
equity are cumulative to, but independent of, each other.
Maker represents and warrants that the loan evidenced by
this Note is for business purposes and not primarily for personal,
family, household or agricultural purposes.
Maker hereby authorizes any attorney in any court of
record in the State of Ohio after this Note becomes due and payable
to appear on its behalf; to waive the issuing and service of
process and its constitutional rights to due process of law; to
confess a judgment hereon against it in favor of any holder hereof
for the amount then appearing due together with cost of suit; and
thereupon to release all errors and waive all rights of appeal and
stays of execution. Maker agrees that any exercise of the
foregoing Power of Attorney shall not terminate the same but such
power shall continue until the entire balance due on this Note
including interest and costs of suit is fully paid. With full
knowledge of constitutional rights, Maker voluntarily waives all
rights to notice and hearing prior to judgment being so confessed.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE
TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A
COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU
MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON ITS PART TO COMPLY WITH THIS AGREEMENT, OR ANY
OTHER CAUSE.
MAKER: HEALTH CARE REIT, INC.
By: _________________________________________
Robert J. Pruger, Chief Financial Officer
REVOLVING COGNOVIT DEMAND NOTE
$20,000,000.00 Toledo, Ohio May 31, 1995
ON DEMAND, FOR VALUE RECEIVED, HEALTH CARE REIT, INC., a Delaware
corporation (the "Borrower"), having an address of One SeaGate,
Toledo, Ohio, 43604, hereby promises to pay to the order of THE
FIFTH THIRD BANK OF NORTHWESTERN OHIO, N.A., a national banking
association ("Lender"), having an address of 606 Madison Avenue,
Toledo, Ohio, 43604, the sum of Twenty Million Dollars
($20,000,000.00) or such lesser principal amount as may be advanced
by Lender and outstanding hereunder from time to time, plus
interest from this date until fully paid.
1. Interest. Borrower shall pay interest on the outstanding
principal balance of this Revolving Cognovit Demand Note (the
"Note") at the variable rate per annum equal to the rate of
interest announced by the Lender as its prime rate of interest.
The prime rate is not necessarily the lowest rate offered by the
Lender and the interest rate will change as and when Lender's prime
rate changes. Lender's decision as to the prime rate shall be
final and binding. Borrower shall pay interest on any amounts not
paid when due, and on any judgment on this Note, at the default
rate of interest (the "Default Rate") equal to six percent (6%) per
annum plus the rate of interest otherwise payable on this Note.
Interest shall be calculated based on the actual number of days
elapsed over a 360-day year (365/360 method).
2. Payments. Commencing June 30, 1995, and on the last day
of each consecutive month thereafter, Borrower shall make monthly
payments of interest until the earlier of (i) demand by Lender, or
(ii) May 31, 1996, at which time all outstanding principal and
accrued but unpaid interest shall be due and payable. Each payment
shall be made in U.S. Dollars, in immediately available funds
without set off or counterclaim.
3. Renewal. Provided that no event of default (as that term
is defined in Section 11 infra.) has occurred, in the event that
Lender determines that this Note will not be renewed at maturity,
Lender shall provide Borrower with not less than thirty (30) days'
prior written notice of non-renewal. Nothing in this Section 3
obligates Lender to renew or extend this Note or affects Lender's
right to demand full payment of this Note at any time.
4. Place of Payment. Borrower shall make all payments on
this Note at Lender's office at 606 Madison Avenue, Toledo, Ohio,
43604 or at such other place as the Lender may designate.
5. Purpose. Borrower shall use the proceeds of this Note
for working capital purposes in the ordinary course of business.
6. Prepayment. Borrower may prepay this note in whole or in
part without penalty, provided Borrower provides Lender with ten
(10) days' prior written notice thereof. No partial prepayment
will postpone the due date or affect the amount of the next
scheduled payment due hereunder.
7. Late Charge. Borrower acknowledges that default in any
payment due under this Note will result in loss and additional
expense to Lender in handling such delinquent payments and meeting
its other financial obligations, and to the extent such loss and
additional expense is extremely difficult and impractical to
ascertain, Borrower agrees that if any payment hereunder is not
paid within ten (10) days of the due date, Borrower shall pay to
Lender a late charge equal to five percent (5%) of the amount of
the overdue payment.
8. Application of Payments. Unless Lender elects otherwise,
all payments and other amounts received by Lender shall be credited
first to any charges, costs, expenses and fees due hereunder or
payable by Borrower in connection herewith; second, to interest on
the foregoing amounts at the Default Rate from the due date or date
of payment by Lender, as the case may be; third, to accrued but
unpaid interest on this Note; fourth, to the principal amount
outstanding; and the balance, if any, to Borrower.
9. Covenants, Etc. Run to Lender. All representations,
warranties undertakings and covenants, both financial and non-
financial, now or hereafter made, given, accepted or agreed upon by
Borrower to or in favor of any lender (including, without
limitation, those representations, warranties, undertakings and
covenants set forth in the Amended and Restated Credit Agreement
between Borrower and Seven Banks and National City Bank, As Agent,
dated September 8, 1994, together with any extensions, renewals,
amendments, restatements, modifications or refinancings thereof and
further including, without limitation, those representations,
warranties, undertakings and covenants set forth in the Note
Purchase Agreement dated as of April 8, 1993 between Borrower and
The Equitable Life Assurance Society of the United States,
Equitable Variable Life Insurance Company, Allstate Life Insurance
Company, The Life Insurance Company of Virginia, and Central Life
Assurance Company, together with any extensions, renewals,
amendments, restatements, modifications or refinancings thereof),
are hereby incorporated herein by reference. Borrower intends and
agrees that Lender shall enjoy the benefits of such representa-
tions, warranties, undertakings and covenants as if made directly
in favor of Lender by Borrower herein. Notwithstanding the
foregoing, Borrower shall furnish Lender with only the statements,
reports and information listed below at the times or intervals
specified unless Lender requests from Borrower additional
information, statements, reports, certifications, data or material
in which event Borrower shall, from time to time, satisfy Lender's
requests for such additional information, statements, certifica-
tions, data or material:
a. Within one hundred twenty (120) days after the close
of each fiscal year, audited financial statements for the year
ended prepared by independent outside accountants, satisfactory to
Lender.
b. Within one hundred twenty (120) days after the close
of each fiscal year, a copy of its 10-K report filed with the
Securities and Exchange Commission.
c. Within forty-five (45) days after the close of each
quarter, a copy of Borrower's financial statements certified by an
officer of the Borrower as of the close of that period.
d. Within forty-five (45) days after the close of each
quarter, a copy of Borrower's Delinquency Report and Unfunded
Commitment Report.
e. Within forty-five (45) days after the close of each
quarter, a statement, certified by an officer of the Borrower, to
the effect that the Borrower is in compliance with its covenants
with its lenders.
10. Furnish Copies. At all times during which (i) any amount
is outstanding under this Note, or (ii) credit is available to
Borrower under this Note, Borrower shall promptly furnish to Lender
true, correct and complete copies of any and all loan agreements,
credit agreements or other similar agreements as well as all notes,
and any other documents as may be required by the Lender from time
to time, together with all amendments and modifications to each of
them (collectively, the "Loan Documents") pursuant to or in
connection with which Borrower obtains or can obtain borrowed
funds.
11. Default. The following shall constitute events of
default ("Event of Default") under this Note:
a. If Borrower or any subsidiary of Borrower shall fail
to pay when due any amount owed to Lender of every nature or type.
b. If Borrower or any subsidiary of Borrower shall fail
to perform any obligation (other than payment obligations) to or in
favor of Lender of every nature or type (i) which failure continues
of a period of ten (10) calendar days following notice by Lender,
or (ii) if, by reason of the nature of such failure, the same
cannot be remedied within said ten (10) days, Borrower fails to
proceed with diligence satisfactory to Bank after receipt of the
notice to cure the same or, in any event, fails to cure such
default within sixty (60) days after receipt of the notice.
c. If Borrower or any subsidiary of Borrower shall fail
to pay when due any material obligation to any third party and such
third party accelerates the obligation or institutes legal
proceedings with respect to such non-payment.
d. If any representation, warranty or statement or
material information now existing or hereafter made by Borrower in
writing to Lender or to any other lender shall be false or
erroneous in any material respect.
e. If Borrower or any subsidiary of Borrower shall fail
or omit to observe or perform any material covenant or agreement
now or hereafter undertaken by Borrower in any credit agreement,
note purchase agreement, loan agreement, note, mortgage,
assignment, security agreement or other document pursuant to or in
connection with which Borrower obtains or can obtain borrowed funds
from any lender, note purchaser or the like.
f. If an event of default under any Loan Document has
occurred.
g. If Borrower becomes insolvent or generally unable to
meet its debt as they become due or fails, suspends or goes out of
business.
h. If there is a material adverse change in Borrower's
business or financial condition.
i. If a trustee, receiver or custodian is appointed
over all or any part of Borrower's property.
j. If Borrower or any subsidiary of Borrower shall
commence or consent to any law relating to bankruptcy, insolvency,
reorganization or relief of debtors.
k. If there shall be a commenced against the Company or
any subsidiary any proceeding under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors which is not
dismissed within sixty (60) days of the commencement thereof.
12. Acceleration, Remedies. Upon the occurrence of any Event
of Default, in addition to any and all other remedies at law or in
equity, at the option of Lender the outstanding principal balance
of this Note and all accrued and unpaid interest thereon and all
other amounts payable by Borrower to Lender of every nature and
type shall be immediately due and payable, and all such amounts
shall bear interest at the Default Rate from the date of the Event
of Default until paid. Lender may exercise any and all remedies
without notice or demand of any kind which are hereby waived by
Borrower.
13. Demand Feature Unconditional. Notwithstanding the Events
of Default set forth in Section 11 above, Lender's right to demand
full payment of this Note by Borrower at any time is unconditional
and does not require the existence of an Event of Default.
14. Representations. Borrower hereby represents and warrants
to Lender that (i) Borrower is a duly organized and validly
existing Delaware corporation in good standing; (ii) Borrower has
requisite corporate power and authority to execute and deliver this
Note and to incur the indebtedness reflected thereby; (iii) the
execution and deliver of this Note and the consummation of the
transactions contemplated hereby shall not result in a breach by
Borrower under any note, mortgage, loan agreement, security
agreement or other contract to which Borrower is a party or
signatory; and (iv) the officer of Borrower executing and
delivering this Note on Borrower's behalf has been duly authorized
to do so.
15. Certification of No Default. At all times during which
(i) any amount is outstanding under this Note, or (ii) credit is
available to Borrower under this Note, Borrower shall furnish to
Lender, within forty-five (45) days after each quarter end, a
certificate signed by its chief executive or chief financial
officer, to the effect that no default has occurred under any Loan
Document or, if a default has occurred, that a default has occurred
together with a description of such default.
16. Compensating Balance. At all times during which (i) any
amount is outstanding under this Note, or (ii) credit is available
to Borrower under this Note, Borrower shall maintain with Lender a
non-interest bearing deposit account with a minimum balance of
$200,000.00.
17. Time is of the Essence. Time is of the essence in the
payment of this Note.
18. Waivers. None of the following shall constitute a course
of dealing, estoppel, waiver or the like upon which Borrower may
rely: (a) Lender's acceptance of one or more late or partial
payments; (b) Lender's forbearance from exercising any right or
remedy under this Note; or (c) Lender's forbearance from exercising
any right or remedy under this Note on any one or more occasions.
Lender's exercise of any rights or remedies or a part of a right or
remedy on one or more occasions shall not preclude Lender from
exercising the right or remedy at any other time. Lender's rights
and remedies under this Note and the law and equity are cumulative
to, but independent of, each other.
19. Jury Trial Waiver. The Borrower hereby waives any right
to a trial by jury in any action to enforce or defend any matter
arising from or related to the Note, or any other document or
agreement evidencing or relating to the loan.
20. Notices. All notices, demands, requests and consents
(hereinafter "notices") given or made pursuant to this Note shall
be in writing, shall be addressed to the addresses set forth in the
introductory paragraph hereof or such other address as either party
may designate for itself by a notice complying with this Section,
and shall be served by: (a) personal delivery; (b) United States
mail, postage prepaid; or (c) nationally recognized overnight
courier service. All notices shall be deemed to be given upon the
earlier of actual receipt, three (3) days after mailing or one (1)
business day after deposit with the overnight courier. Any notices
meeting the requirements of this Section shall be effective,
regardless of whether or not actually received.
21. Representation and Warranty Regarding Business Purpose.
Borrower represents and warrants that the loan evidenced by this
Note is for business purposes and not for personal, family,
household, or agricultural purposes.
22. Security. This Note is unsecured.
23. Waiver of Demands. Borrower hereby waives presentment,
dishonor, notice of dishonor, protest, noting for protest, notice
of default all other notices, and all demands.
24. Attorneys' Fees and Expenses. After an Event of Default
has occurred or has been declared, Borrower shall pay to Lender all
reasonable costs and expenses incurred by Lender in enforcing or
preserving Lender's rights under this Note (regardless of whether
such Event of Default is subsequently cured) including but not
limited to, (a) attorneys' and paralegals' fees and disbursements;
(b) the fees and expenses of any litigation, administrative,
bankruptcy, insolvency, receivership and any other similar
proceeding; (c) court costs; (d) the expenses of Lender, its
employees, agents, attorneys and witnesses in preparing for
litigation, administrative, bankruptcy, insolvency and other
proceedings and for lodging, travel, and attendance at meetings,
hearings, depositions, and trials; and (e) consulting and witness
fees incurred by Lender in connection with any litigation or other
proceeding.
25. Governing Law. This Note shall be construed under the
laws of the State of Ohio.
26. Severability. If any clause, provision, section or
article of this Note is ruled invalid by any court of competent
jurisdiction, the invalidity of such clause, provision, section or
article shall not affect any of the remaining provisions hereof.
27. Assignment. Borrower shall neither assign its rights or
delegate its obligation under this Note.
28. Warrant of Attorney. With full knowledge of all
constitutional rights, Borrower hereby authorizes any attorney-at-
law to appear on Borrower's behalf in any court of record in the
State of Ohio after this Note becomes due and payable, whether by
demand, acceleration or otherwise; to waive the issuing and service
of process and all other constitutional rights to due process of
law; to confess a judgment against Borrower in favor of Lender for
the amount then appearing due together with the costs of suit; to
release all errors; and to waive all rights of appeal and stays of
execution. With full knowledge of all constitutional rights,
Borrower hereby voluntarily and knowingly waives all rights to
notice and hearing prior to judgment being so confessed against
Borrower.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE
TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A
COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU
MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON ITS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
HEALTH CARE REIT, INC.
By:_____________________________
Robert J. Pruger
Its: Chief Financial Officer
F O R I M M E D I A T E R E L E A S E
PRESS RELEASE
April 19, 1995
For more information contact:
Erin Ibele (419) 247-2800
Robert Pruger (419) 247-2800
HEALTH CARE REIT, INC. ANNOUNCES
FIRST QUARTER RESULTS AND DECLARES DIVIDEND
Toledo, Ohio, April 19, 1995....The Directors of Health
Care REIT, Inc. (NYSE/HCN) voted to pay a quarterly dividend at the
rate of $.52 per share, an increase of $.005 per share from the
previous dividend. The dividend will be payable May 19, 1995 to
shareholders of record on May 5, 1995. This will be the REIT's
93rd consecutive dividend distribution.
Cash flows from operating activities available for
distribution for the three months ended March 31, 1995 was
$5,694,981 ($.49 per share) compared with $6,292,422 ($.55 per
share) for the three months ended March 31, 1994. Recently, the
National Association of Real Estate Investment Trusts (NAREIT)
issued a paper which redefined the components of "funds from
operations." Accordingly, what the Company previously reported as
"funds from operations" is now reported as "cash flows from
operating activities available for distribution."
For the quarter ended March 31, 1995, net income per
share of $.42 was down $.01 or 2.3% from the first quarter of 1994.
Gross income for the three months ended March 31, 1995
was up 14.0% from the first quarter of 1994. Total assets of $331
million at March 31, 1995 reflect a 4.8% increase from a year ago.
The following chart presents the information highlighted
above.
<TABLE>
Three Months Ended
March 31 (Unaudited)
------------------------------
1995 1994
------------ ------------
<C> <C>
<S>
Gross income $ 9,624,993 $ 8,441,239
Net income $ 4,864,965 $ 4,984,250
Net income per share $ .42 $ .43
Cash flows from operating activities
available for distribution $ 5,694,981 $ 6,292,422
Cash flows from operating activities
available for distribution per share $ .49 $ .55
Average number of shares outstanding 11,619,386 11,467,040
Total assets as of March 31 $331,098,644 $315,882,574
</TABLE>
Health Care REIT, Inc. is a real estate investment trust
which invests in health care facilities, primarily nursing homes.
The Company also invests in assisted living and retirement
facilities, behavioral care facilities, specialty care hospitals,
and primary care facilities.
F O R I M M E D I A T E R E L E A S E
PRESS RELEASE
May 9, 1995
For more information contact:
Erin Ibele (419) 247-2800
Robert Pruger (419) 247-2800
Toledo, Ohio, May 9, 1995 (NYSE/HCN)....Health Care REIT,
Inc. (the "Company") announced today that its Board of Directors,
acting on a recommendation of a special committee thereof, had
approved revised terms of the acquisition of First Toledo Advisory
Company ("FTAC"). FTAC currently serves as the manager of the
Company and is owned by Bruce G. Thompson, Chairman and Chief
Executive Officer, and Frederic D. Wolfe, President of the Company.
On February 6, 1995, the Company announced that its Board
of Directors approved in principle the acquisition of FTAC. Since
that time, the Company and FTAC have revised the terms of the
agreement in principle to eliminate the previously proposed stock
purchase and loan arrangement and to decrease the overall number of
shares issuable in connection with the transaction from 383,536
shares to 282,407 shares. Such shares would be issued in
consideration of the acquisition. Under the revised agreement, the
Company intends to account for the acquisition under the pooling of
interests method of accounting.
As previously announced, each of Messrs. Thompson and
Wolfe would enter into five-year service agreements whereby Mr.
Thompson would continue for two years as Chief Executive Officer
for the Company and as a consultant for three years thereafter, and
Mr. Wolfe would serve as a consultant for five years. Each of
Messrs. Thompson and Wolfe would also enter into five-year non-
compete agreements with the Company.
The transactions described above are subject to
definitive agreements, stockholder approval and other customary
conditions. The transactions are also subject to the accounting of
the acquisition under the pooling of interests method. It is
anticipated that the revised transaction will now occur in the
third quarter of 1995.
Health Care REIT, Inc. is a real estate investment trust
which invests in health care facilities, primarily nursing homes.
The Company also invests in assisted living and retirement
facilities, behavioral care facilities, specialty care hospitals,
and primary care facilities.
