<PAGE> 1
Filed Pursuant To Rule 424(b)(2)
Registration No. 333-19801
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 4, 1997)
3,000,000 SHARES
Health Care REIT Logo
COMMON STOCK
------------------
The shares of Common Stock (the "Shares") of Health Care REIT, Inc. (the
"Company") are listed on the New York Stock Exchange ("NYSE") under the symbol
"HCN." On March 5, 1997, the last reported sale price of the Shares on the NYSE
was $24 3/8 per share. The Company pays regular quarterly distributions. See
"Price Range of Shares and Distribution History."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
==================================================================================================
Per Share.......................... $24.375 $1.270 $23.105
- -----------------------------------
Total(3)........................... $73,125,000 $3,810,000 $69,315,000
==================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting expenses of the offering estimated at $300,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
450,000 additional Shares solely to cover over-allotments, if any. To the
extent the option is exercised, the Underwriters will offer the additional
Shares at the Price to Public shown above. If the option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions, and
Proceeds to Company will be $84,093,750, $4,381,500 and $79,712,250,
respectively. See "Underwriting."
------------------
The Shares are offered by the several Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, and subject to the right of
the Underwriters to reject any order in whole or in part, and to certain other
conditions. It is expected that delivery of the Shares will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland on or about
March 11, 1997.
ALEX. BROWN & SONS
INCORPORATED
NATWEST SECURITIES LIMITED
SMITH BARNEY INC.
EVEREN SECURITIES, INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MARCH 6, 1997
<PAGE> 2
THE HEALTH CARE REIT, INC. PORTFOLIO
(as of December 31, 1996)
[Graphic depicting the following: (i) a map of the United States
indicating the states where Health Care Reit, Inc. (the "Company") has
facilities; (ii) a pie chart indicating the Company's portfolio asset mix of
45.4% nursing homes, 31.8% assisted living facilities, 12.6% specialty care
facilities, 7.9% retirement centers and 2.3% behavioral care facilities; and
(iii) a pie chart indicating the Company's percentage of investments by owner
type as 34.4% public, 33.3% Key private and 32.3% private.]
------------------------------------------------------
For United Kingdom Purchasers: The Shares offered hereby may not be offered
or sold in the United Kingdom other than to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments,
whether as principal or agent (except in circumstances that do not constitute an
offer to the public within the meaning of the Public Offers of Securities
Regulations 1995 or the Financial Services Act 1986) and this Prospectus
Supplement may only be issued or passed on to any person in the United Kingdom
if that person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to
whom the Prospectus Supplement may otherwise lawfully be issued or passed on.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF THE
COMPANY AT A LEVEL ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 3
THE COMPANY
Health Care REIT, Inc. (the "Company") is a self-administered real estate
investment trust that invests in health care facilities, primarily nursing
homes, assisted living facilities and retirement centers. The Company also
invests in specialty care facilities. As of December 31, 1996, nursing homes,
assisted living facilities and retirement centers comprised approximately 85% of
the investment portfolio. Founded in 1970, the Company was the first real estate
investment trust to invest exclusively in health care facilities.
As of December 31, 1996, the Company had $541,496,000 of real estate
related investments, including credit enhancements, in 137 facilities located in
28 states and managed by 51 different operators. At that date, the portfolio
included 56 nursing homes, 63 assisted living facilities, 11 retirement centers,
five specialty care facilities and two behavioral care facilities. At December
31, 1996, the Company had approximately $236,277,000 in unfunded commitments.
The Company seeks to increase funds from operations and enhance shareholder
value through relationship investing with public and emerging health care
chains. The primary components of this strategy are set forth below.
Relationship Investing. The Company establishes relationships with
emerging health care companies and seeks to provide financing throughout their
growth cycles. The Company targets companies with experienced management teams,
substantial inside ownership interests, venture capital backing and significant
growth potential.
By maintaining close ties to health care operators, the Company is able to
provide value added services and monitor its investments on an ongoing basis.
Investments are designed to support the operator's business plan. Features
typically include a two to three year, multi-facility financing with common
terms and maturities and periodic review of the program's continued efficacy.
Economic terms typically include annual rate increases and fair market value
based purchase options in operating leases, and may include contingent interest
for mortgage loans. For certain investments, the Company receives warrants or
other similar equity instruments that provide the Company with the opportunity
to share in the operator's enterprise value. In connection with the Company's
initial investment in Sterling House Corporation in June 1994, the Company
received warrants that were converted into 87,823 shares of Sterling House
Corporation stock at the time of its initial public offering. As of December 31,
1996, the Sterling House Corporation shares were recorded on the Company's
balance sheet at a value of $768,451.
By maintaining relationships within the health care venture capital
community, management identifies potential new investment opportunities. In
turn, because of management's experience, knowledge and contacts within various
sectors of the health care industry, they are able to assist venture capital
firms in identifying new portfolio company investment opportunities.
Portfolio Management. Portfolio strength is derived from diversity by
investment type, health care sector, operator and geographic location. The
Company emphasizes investment structures that result in a predictable asset base
with attendant recurring income and funds from operations. Generally, operating
leases extend for a minimum ten-year period and mortgage loans provide five to
seven years of prepayment protection. Portfolio strength is also evidenced by an
operator base that includes an increasing percentage of public companies and
emerging privately held health care chains. At December 31, 1996, approximately
34% of the Company's net real estate related investments were with publicly held
companies.
In addition, the Company believes that the portfolio has been strengthened
by management's ability to identify early trends in the health care sector. In
1991, the Company initiated a review and analysis of the assisted living
industry and made its first investment in this sector in 1992. The Company's
investment portfolio currently includes such leading assisted living operators
as Alternative Living Services, Inc., ARV Assisted Living, Inc., Emeritus
Corporation, Kapson Senior Quarters and Sterling House Corporation.
S-3
<PAGE> 4
Depth of Management. The management team is comprised of six individuals
who have an aggregate of over 80 years of experience in health care real estate
finance. George L. Chapman has been a member of senior management for five years
and in 1996 became Chairman and Chief Executive Officer of the Company. Mr.
Chapman and the management team have successfully implemented the Company's
investment strategy of emphasizing relationship financings with established and
emerging health care operators. This strategy has resulted in gross investments
of over $600,000,000 during the past five years.
THE PORTFOLIO
The following table reflects the Company's portfolio as of December 31,
1996.
<TABLE>
<CAPTION>
NUMBER
PERCENTAGE NUMBER OF INVESTMENT NUMBER NUMBER
TYPE OF INVESTMENTS OF OF BEDS/ PER BED/ OF OF
FACILITY (1)(2)(3) PORTFOLIO FACILITIES UNITS UNIT(4) OPERATORS STATES(5)
- ----------------- -------------- ---------- ---------- ------ ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Nursing Homes.... $245,987 45.43% 56 7,651 $ 34,027 27 18
Assisted Living
Facilities..... 172,189 31.80 63 4,152 56,990 16 10
Retirement
Centers........ 42,483 7.84 11 1,366 39,637 6 9
Specialty Care
Facilities..... 68,109 12.58 5 459 151,523 3 5
Behavioral Care
Facilities..... 12,728 2.35 2 294 43,292 1 1
-------- ----- --- ------
Totals........... $541,496 100.0% 137 13,922
======== ===== === ======
</TABLE>
- ---------------
(1) Investments include real estate investments and credit enhancements which
amounted to $522,681,000 and $18,815,000, respectively.
(2) Investments do not include $144,389,000 in commitments for financings for
which the Company has not yet commenced funding.
(3) Due to a number of factors, it is possible that some portion of the
commitments for financings will not result in permanent financing.
(4) Investment Per Bed/Unit was computed by using the total investment amount of
$633,384,000 which is composed of $522,681,000 in real estate related
investments, $91,888,000 in unfunded commitments for which initial funding
has commenced, and $18,815,000 in credit enhancements.
(5) The Company has investments in properties located in 28 states.
From December 31, 1995 to December 31, 1996, the Company's net real estate
investments increased 46%, to $512,894,000 from $351,924,000. During the same
period, operating leases increased 162%, to $153,623,000 from $58,628,000 and
mortgage loans increased 24%, to $353,455,000 from $285,219,000. The Company
provides construction financing in conjunction with permanent financing.
In determining whether to finance a facility, the Company places primary
emphasis on the experience of the operator, the feasibility of the project, the
financial strength of the borrower or lessee, the amount of security available
to support the financing and the amount of capital that is being committed to
the project by the borrower or lessee. In addition, the Company considers a
variety of other factors, including the site's suitability, facility appraisal
and environmental reports and the existence of certificate of need procedures or
other barriers that limit the entry of competing facilities into the community.
S-4
<PAGE> 5
The Company regularly monitors its investments through a variety of methods
depending on the operator and type of facility. These procedures include the
receipt and review of facility and guarantor financial statements, periodic site
visits, property reviews and conferences with operators. Such reviews of
operators and facilities generally encompass licensure and regulatory compliance
materials and reports, contemplated building improvements and other material
developments.
Investments are typically structured using mortgage loans or operating
leases which are normally secured by guarantees and/or letters of credit. The
Company typically finances up to 90% of the appraised value of the property.
The Company's executive offices are located at One SeaGate, Suite 1500,
Toledo, Ohio, 43604, and the telephone number is (419) 247-2800.
RECENT DEVELOPMENTS
January 1997 investment activity totaled $62,819,000, which included
$35,197,000 of operating leases and $27,622,000 of mortgage loans. These
investments were comprised of $18,026,000 for 22 assisted living facilities,
$12,779,000 for five nursing homes, $22,940,000 for two specialty care
facilities and $9,074,000 for two retirement centers. Funding was provided to 15
operators in 12 states. Investment activity during that period included funding
in the amount of $8,013,000 that related to recurring construction activity.
Fourth quarter 1996 investment activity totaled $78,554,000, which included
$32,644,000 of operating leases and $45,910,000 of mortgage loans. These
investments were comprised of $49,377,000 for 31 assisted living facilities,
$14,766,000 for nine nursing homes, $13,418,000 for three specialty care
facilities and $993,000 for one retirement center. Funding was provided to 17
operators in 13 states. Investment activity during that period included funding
in the amount of $36,637,000 that related to recurring construction activity.
The Company, KeyBank and Fleet Bank have recently agreed in principle on
the terms relating to a new unsecured revolving credit agreement for $150
million, with an option for an additional $25 million. The three year agreement
will bear interest at 100 to 150 basis points over LIBOR. The closing on the new
unsecured line is subject to standard terms and conditions, the release of
collateral securing the Company's existing Senior Notes aggregating $82 million
and the signing of a definitive agreement. Management believes that all terms
and conditions to close the new unsecured line will be satisfied on or about
March 31, 1997.
On January 21, 1997, the Company announced that Raymond W. Braun, Vice
President of the Company, had been appointed Chief Operating Officer of the
Company.
USE OF PROCEEDS
The net proceeds from the sale of the 3,000,000 Shares offered hereby are
estimated to be $69,015,000 ($79,412,250 if the Underwriters' over-allotment
option is exercised in full). The proceeds will be used to invest in additional
health care property investments. At December 31, 1996, the Company had
approximately $236,277,000 in unfunded commitments. Pending such use, the
proceeds will be invested on a short-term basis and used to reduce bank debt
under the Company's revolving lines of credit arrangements bearing interest at
an average rate of 7.54% at December 31, 1996. Borrowings under these lines were
used to invest in health care facilities.
S-5
<PAGE> 6
PRICE RANGE OF SHARES AND DISTRIBUTION HISTORY
The Shares are traded on the NYSE under the symbol "HCN." As of December
31, 1996, there were approximately 5,446 holders of record of the Shares. The
following table sets forth for the periods shown the high and low sale prices
for the Shares as reported on the NYSE composite tape and the distributions paid
by the Company during the periods shown. On March 5, 1997, the last reported
sale price of the shares as reported by the NYSE was $24 3/8 per share.
<TABLE>
<CAPTION>
PRICE OF SHARES
--------------------------- DISTRIBUTIONS
HIGH LOW PER SHARE
----------- ----------- -----------
<S> <C> <C> <C>
1995
First Quarter................................... $22 3/8 $19 7/8 $.515
Second Quarter.................................. 23 1/8 20 3/8 .52
Third Quarter................................... 21 1/2 15 1/2 .52
Fourth Quarter.................................. 19 1/8 15 3/4 .52
1996
First Quarter................................... $22 5/8 $17 7/8 $.52
Second Quarter.................................. 23 20 1/2 .52
Third Quarter................................... 23 1/4 20 7/8 .52
Fourth Quarter.................................. 25 1/8 23 .52
1997
First Quarter (through March 5)................. $25 1/2 $23 5/8 $.52 *
</TABLE>
- ---------------
* The current annualized dividend rate is $2.08. The most recent quarterly
dividend was paid on February 20, 1997 to shareholders of record as of
February 3, 1997 and represents the 103rd consecutive quarterly dividend of
the Company.
Under the real estate investment trust rules of the Internal Revenue Code,
the Company is required to pay at least 95% of its ordinary taxable income as
dividends in order to avoid taxation as a corporation. The declaration of
dividends is discretionary with the Board of Directors and depends upon the
Company's distributable funds, financial requirements, tax considerations and
other factors. Decisions with respect to the distribution of capital gains are
made on a case-by-case basis. A portion of the Company's dividends paid may be
deemed either capital gain income or a return of capital, or both, to its
shareholders. The Company annually provides its shareholders a statement as to
its designation of the taxability of its dividends.
The Company has a dividend reinvestment plan under which shareholders of
record may invest all or a portion of their dividends and up to an additional
$5,000 per quarter to purchase additional shares.
S-6
<PAGE> 7
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 and as adjusted to give effect to the sale of the Shares
offered hereby at a public offering price of $24 3/8:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Borrowings under line of credit arrangements (1)................... $ 92,125 $ 23,110
Senior Notes....................................................... 82,000 82,000
Other long-term obligations........................................ 10,270 10,270
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 --
18,320,291 and 21,320,291 as adjusted (2).................... 18,320 21,320
Capital in excess of par value..................................... 298,281 364,296
Undistributed net income........................................... 8,167 8,167
Unrealized gains on investment securities available for sale....... 768 768
-------- --------
Total shareholders' equity............................... 325,536 394,551
-------- --------
Total capitalization................................... $ 509,931 $ 509,931
======== ========
</TABLE>
- ---------------
(1) The Company has a $150,000,000 secured line of credit arrangement with a
consortium of ten banks and $35,000,000 of unsecured commercial lines of
credit with two other banks.
(2) Excludes: (i) 167,268 Shares reserved for issuance pursuant to the Company's
1985 Incentive Stock Option Plan; (ii) 582,000 Shares reserved for issuance
pursuant to the Company's 1995 Stock Incentive Plan; and (iii) 59,113 Shares
reserved for issuance under the Company's dividend reinvestment plan.
S-7
<PAGE> 8
SELECTED FINANCIAL INFORMATION
The following selected financial data for the five years ended December 31,
1996 are derived from the audited consolidated financial statements of Health
Care REIT, Inc. The data should be read in conjunction with the consolidated
financial statements, related notes and other financial information incorporated
by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues.......................... $ 28,908 $ 36,018 $ 42,732 $ 44,596 $ 54,402
Expenses:
Interest expense................ 8,160 10,817 9,684 12,752 14,635
Provision for depreciation...... 382 790 1,385 1,580 2,427
General and administrative
expenses (1)................. 3,851 4,356 6,710 10,835 6,664
Settlement of management
contract (2)................. -- -- -- 5,794 --
------- ------- ------- ------- -------
Total expenses.................... 12,393 15,963 17,779 30,961 23,726
------- ------- ------- ------- -------
Net income........................ $ 16,515 $ 20,055 $ 24,953 $ 13,635 $ 30,676
======= ======= ======= ======= =======
OTHER DATA
Average number of shares
outstanding..................... 8,629 9,339 11,519 11,710 14,093
Cash available for distribution
(3)............................. $ 18,654 $ 22,780 $ 31,697 $ 27,938 $ 37,075
PER SHARE
Net income........................ $ 1.91 $ 2.15 $ 2.17 $ 1.16 $ 2.18
Cash distributions................ $ 1.85 $ 1.93 $ 2.01 $ 2.075 $ 2.08
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Real estate investments, net...... $ 223,126 $ 276,858 $ 318,433 $ 351,924 $ 512,894
Total assets...................... 226,207 285,024 324,102 358,092 519,831
Total debt........................ 103,719 96,311 128,273 162,760 184,395
Total liabilities................. 107,259 100,892 134,922 170,494 194,295
Total shareholders' equity........ 118,948 184,132 189,180 187,598 325,536
</TABLE>
- ---------------
(1) General and administrative expenses include loan expense, management fees
through November 30, 1995, provision for losses, expenses related to
disposition of investments and other operating expenses.
(2) On November 30, 1995, the Company's advisor merged into the Company.
Consideration for this transaction totaled approximately $5,048,000 which
was solely comprised of 282,407 shares of Common Stock. In addition, the
Company acquired approximately $46,000 in net assets and incurred
approximately $792,000 of related transaction expenses. The consideration,
plus related transaction expenses, were accounted for as a settlement of a
management contract.
(3) Cash available for distribution is defined as net cash provided from
operating activities, but does not consider the effects of changes in
operating assets and liabilities such as other receivables and accrued
expenses. The Company uses cash available for distribution in evaluating
investments and the Company's operating performance. Cash available for
distribution does not represent cash generated from operating activities in
accordance with generally accepted accounting principles, is not necessarily
indicative of cash available to fund cash needs, and should not be
considered as an alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flow as a measure of
liquidity.
S-8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company's net real estate investments totaled
approximately $512,894,000, which included 56 nursing facilities, 63 assisted
living facilities, 11 retirement centers, five specialty care facilities and two
behavioral care facilities. The Company funds its investments through a
combination of long-term and short-term financing, utilizing both debt and
equity.
During 1996, the Company provided permanent mortgage financings of
$69,970,000, invested $31,900,000 in operating leases and made construction
advances of $93,993,000. During 1996, the Company received principal payments on
real estate mortgages of $3,080,000, net repayments on working capital loans of
$2,053,000 and proceeds of $52,047,000 from the prepayment of mortgage loans.
Also during 1996, 16 of the above-mentioned construction loans completed
the construction phase of the Company's investment process and were converted to
investments in operating leases, with an aggregate investment of $26,418,000,
and four construction loans converted to permanent mortgage loans with an
aggregate investment balance of $24,298,000.
As of December 31, 1996, the Company had shareholders' equity of
$325,536,000 and a total outstanding debt balance of approximately $184,395,000,
which represents a debt to equity ratio of 0.57 to 1.00.
In April 1996, the Company issued Senior Notes in the aggregate principal
amount of $30,000,000 which mature in 2001 and 2003, and have a weighted average
interest rate of 7.18%. The notes are secured by approximately $40,000,000 of
assets.
In May 1996, the Company issued 2,322,200 shares of Common Stock, $1.00 par
value per share, at the price of $22.00 per share, which generated net proceeds
of $48,103,000 to the Company.
In September 1996, the Company issued 1,587,800 shares of Common Stock,
$1.00 par value per share, at the price of $22.00 per share, which generated net
proceeds to the Company of $34,111,000.
In December 1996, the Company issued 2,200,000 shares of Common Stock,
$1.00 par value per share, at the price of $23.875 per share, which generated
net proceeds to the Company of $49,898,000.
As of December 31, 1996, the Company had a secured revolving line of credit
expiring March 31, 1997 in the amount of $150,000,000 bearing interest at the
lender's prime rate or LIBOR plus 1.50%. In addition, the Company had unsecured
revolving lines of credit in the amounts of $25,000,000 and $10,000,000 bearing
interest at the lenders' prime rate and expiring May 31, 1997 and April 30,
1997, respectively. At December 31, 1996, under the Company's line of credit
arrangements, available funding totaled $92,875,000.
As of February 4, 1997, the Company has effective shelf registrations on
file with the Securities and Exchange Commission under which the Company may
issue up to $353,576,250 of securities including debt, convertible debt, common
and preferred stock. The Company anticipates issuing securities under such shelf
registrations to invest in additional health care facilities and to repay
borrowings under the Company's line of credit arrangements.
As of December 31, 1996, the Company had approximately $236,277,000 in
unfunded commitments. The Company believes its liquidity and various sources of
available capital are sufficient to fund operations, finance future investments,
and meet debt service and dividend requirements.
S-9
<PAGE> 10
RESULTS OF OPERATIONS DECEMBER 31, 1996 VS. DECEMBER 31, 1995
Revenues for the year ended December 31, 1996, were $54,402,000 compared to
$44,596,000 for the year ended December 31, 1995, an increase of $9,806,000 or
22%. Revenue growth resulted primarily from increased interest income of
$5,457,000, operating lease income of $3,496,000 and loan and commitment fees of
$941,000 resulting primarily from additional real estate investments made during
the past twelve to fifteen months.
Expenses for the year ended December 31, 1996, totaled $23,726,000, a
decrease of $7,235,000 from expenses of $30,961,000 for the year ended December
31, 1995. Expenses for the year ended December 31, 1995, were negatively
influenced by nonrecurring charges, primarily related to a $4,800,000 provision
for losses and a $5,794,000 charge for the settlement of the management
contract, an expense associated with the merger of the Company's advisor into
the Company.
The provision for depreciation for the year ended December 31, 1996,
totaled $2,427,000, an increase of $848,000 over the year ended 1995 as a result
of additional operating lease investments.
Interest expense for the year ended December 31, 1996, was $14,635,000
compared to $12,752,000 for the year ended December 31, 1995. The increase in
interest expense during 1996 was primarily due to the issuance of $30,000,000
Senior Notes in April 1996 and higher average borrowings under the Company's
line of credit arrangements, which were offset by lower interest rates.
General and administrative expense for the year ended December 31, 1996
totaled $4,448,000 as compared to $5,284,000 for the year ended December 31,
1995. The expenses for the year ended December 31, 1996 were 8.18% of revenues
as compared to 11.85% for the year ended December 31, 1995.
It is the Company's intention to systematically eliminate its investments
in behavioral care facilities. As a result, at September 30, 1996, the Company
declared a disposition of investment associated with its behavioral care
portfolio. As a result, any gains realized through the repayment or sale of
investments associated with the Company's behavioral care facilities will be
added to the Company's general allowance for losses and applied against any
losses incurred through the repayment or sale of behavioral care related
investments. During the year ended December 31, 1996, the Company recorded an
$808,000 disposition of investment expense as an offset to an $808,000
prepayment fee received from the repayment of two behavioral care related
mortgage loans. Additionally, the Company's general allowance for losses was
reduced by $481,000, resulting from the repayment of these loans.
As a result of the various factors mentioned above, net income for the year
ended December 31, 1996, was $30,676,000 as compared to $13,635,000 for the year
ended December 31, 1995. Net income per share for the year ended December 31,
1996, was $2.18 versus $1.16 for the year ended December 31, 1995. The per share
increase resulted from an increase in net income offset by an increase in
average shares outstanding during 1996.
RESULTS OF OPERATIONS DECEMBER 31, 1995 VS. DECEMBER 31, 1994
Revenues for the year ended December 31, 1995, were $44,596,000 compared to
$42,732,000 for the year ended December 31, 1994, an increase of $1,864,000 or
4.4%. Revenue growth resulted primarily from increased interest income of
$6,731,000 and increased operating lease income of $872,000 resulting primarily
from additional real estate investments made during the previous twelve months.
The growth in interest income and rental income was offset by a high incidence
of prepayment fees and gains on the exercise of purchase options earned during
1994, which totaled $6,982,000 as compared to $4,082,000 for 1995.
Expenses for the year ended December 31, 1995, totaled $30,961,000, an
increase of $13,182,000 from expenses of $17,779,000 for the year ended December
31, 1994. Expenses for the
S-10
<PAGE> 11
year ended December 31, 1995, were negatively influenced by nonrecurring
charges, primarily related to a $4,800,000 provision for losses and a $5,794,000
charge for the settlement of the management contract, an expense associated with
the merger of the Company's advisor into the Company.
The provision for depreciation for the year ended December 31, 1995,
totaled $1,580,000, an increase of $194,000 over the year ended December 31,
1994 as a result of additional operating lease investments.
Interest expense for the year ended December 31, 1995, was $12,752,000
compared to $9,684,000 for the year ended December 31, 1994. The increase in
interest expense during 1995 was primarily due to higher average borrowings
under the Company's line of credit arrangements and higher costs of borrowing.
General and administrative expense for the year ended December 31, 1995
totaled $5,284,000 as compared to $5,072,000 for the year ended December 31,
1994. The expenses for the year ended December 31, 1995 were 11.85% of revenues
as compared to 11.87% for the year ended December 31, 1994.
As a result of the various factors mentioned above, net income for the year
ended December 31, 1995, was $13,635,000 as compared to $24,953,000 for the year
ended December 31, 1994. Net income per share for the year ended December 31,
1995 was $1.16 versus $2.17 for the year ended December 31, 1994. The per share
decrease resulted from a decrease in net income.
IMPACT OF INFLATION
During the past three years, inflation has not significantly affected the
earnings of the Company because of the moderate inflation rate. Additionally,
earnings of the Company are primarily long-term investments with fixed interest
rates. These investments are mainly financed with a combination of equity,
senior notes and borrowings under the revolving lines of credit, of which a
portion is hedged with interest rate swaps. During inflationary periods, which
generally are accompanied by rising interest rates, the Company's ability to
grow may be adversely affected because the yield on new investments may increase
at a slower rate than new borrowing costs. Presuming the current inflation rate
remains moderate and long-term interest rates do not increase significantly, the
Company believes that equity and debt financing will be available.
S-11
<PAGE> 12
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following table sets forth certain information regarding the Executive
Officers and Directors of the Company:
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ------------------------------------- --------------------------------------------------------
<S> <C> <C>
George L. Chapman........... 49 Chairman of the Board, Chief Executive Officer and
President
Raymond W. Braun............ 39 Vice President, Chief Operating Officer
Edward F. Lange, Jr. ....... 37 Vice President, Chief Financial Officer and Treasurer
Erin C. Ibele............... 35 Vice President and Corporate Secretary
</TABLE>
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME AGE OCCUPATION
- ------------------------------------- --------------------------------------------------------
<S> <C> <C>
William C. Ballard, Jr. .... 56 Of Counsel, Greenebaum, Doll & McDonald PLLC and
Director, United HealthCare Corporation, Atria
Communities, Inc., Vencor, Inc., Mid-America Bancorp.,
LG&E Energy Corp. and American Safety Razor Co.
Pier C. Borra............... 57 Chairman, President and Chief Executive Officer of Arbor
Health Care Company, Lima, Ohio
George L. Chapman........... 49 Chairman of the Board, Chief Executive Officer and
President of the Company
Bruce Douglas............... 64 Chairman and Chief Executive Officer of The Douglas
Company, Toledo, Ohio
Richard C. Glowacki......... 64 President of The Danberry Management Company, Toledo,
Ohio
Sharon M. Oster............. 48 Professor of Management, Yale School of Management, Yale
University
Bruce G. Thompson........... 67 President and Director of First Toledo Corporation,
Toledo, Ohio
Richard A. Unverferth....... 73 Chairman of Unverferth Manufacturing Company, Inc. and
Chairman of the Board of H.C.F. Inc., Kalida, Ohio
Frederic D. Wolfe........... 67 Chairman of the Board and Director of First Toledo
Corporation, Toledo, Ohio
</TABLE>
TAXATION
Since its inception, the Company has elected to be taxed as a real estate
investment trust ("REIT") under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the "Code"). Based upon representations made by
officers of the Company with respect to relevant factual matters, and subject to
the limitations and qualifications herein, it is the opinion of Shumaker, Loop &
Kendrick, LLP, counsel for the Company, based upon current law, including
relevant statutes, regulations, judicial and administrative precedent (which law
is subject to change on a retroactive basis) and upon the assumption that the
Company will operate in the manner described in this Prospectus, that the
Company was organized and continues to be organized in conformity with the
requirements for qualification as a REIT under the Code, that it has for the
years
S-12
<PAGE> 13
1993, 1994 and 1995 met the requirements for qualification and taxation as a
REIT and that its method of operation during 1996 and its proposed method of
operation during 1997 will enable it to meet the requirements for qualification
and taxation as a REIT for 1996 and 1997. The Company's continued qualification
as a REIT will depend upon its ability to meet, through actual annual operating
results, the various qualification tests imposed under the Code. No assurance
can be given that the actual results of the Company's operations will satisfy
such requirements.
If the Company meets the requirements to be taxed as a REIT, it will not
generally be subject to federal income tax on taxable income and gains that are
currently distributed to its shareholders. Any undistributed taxable income or
gain, however, will be taxed to the Company at regular corporate rates. In
addition, the Company may be subject to special taxes on net income derived from
certain sales or other dispositions of property (other than foreclosure
property) held primarily for sale to customers in the ordinary course of
business by the Company and on certain income derived from foreclosure
properties.
As long as the Company qualifies for taxation as a REIT, distributions out
of current or accumulated earnings and profits will be taxable to the
shareholders as ordinary income, except that distributions of net capital gains
designated by the Company as capital gain dividends will be taxed as long-term
capital gains. None of the distributions from the Company will qualify for the
dividends received deduction generally available to corporations.
If the Company were to fail to qualify as a REIT for any taxable year, and
certain relief provisions did not apply, the Company would be subject to federal
income tax (including the alternative minimum tax) on its taxable income at
regular corporate rates and it would not receive a deduction for dividends paid
to its shareholders. Distributions to shareholders would then be eligible,
subject to certain limitations, for the corporate dividends received deduction,
but there can be no assurance that any such distributions would be made. Failure
to qualify as a REIT could result in the Company significantly reducing its
distributions and incurring substantial indebtedness or liquidating substantial
investments in order to pay the resulting taxes.
The preceding is only a summary of the complex federal income tax rules
governing the taxation of the Company and its shareholders. Moreover, in order
to qualify to be taxed as a REIT, the Company must elect to be taxed as a REIT
and satisfy a variety of complex tests relating to its share ownership, income,
assets and distributions. A summary of these tests and a more detailed
discussion of the federal income taxation of the Company and its shareholders is
provided in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. In addition, prospective investors should consult their own
tax advisors with respect to the tax consequences of such an investment under
federal, state or municipal law or the laws of any other taxing jurisdiction. In
particular, foreign investors should consult with their tax advisors concerning
the tax consequences of an investment in the shares of a REIT including the
possibility that distributions with respect to the shares will be subject to
federal income tax withholding.
S-13
<PAGE> 14
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, NatWest Securities Limited, Smith Barney Inc.
and EVEREN Securities, Inc., have severally agreed to purchase from the Company
the following respective number of Shares at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus Supplement:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
--------------------------------------------------------------------- ---------
<S> <C>
Alex. Brown & Sons Incorporated...................................... 750,000
NatWest Securities Limited........................................... 750,000
Smith Barney Inc. ................................................... 750,000
EVEREN Securities, Inc. ............................................. 750,000
---------
Total...................................................... 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the Shares offered hereby if any such Shares
are purchased.
The Company has been advised by the Representatives of the Underwriters
that the Underwriters propose to offer the Shares to the public at the public
offering price set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not in excess of $.72 per Share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $.10 per Share to certain other dealers. After the public offering,
the public offering price and other selling terms may be changed by the
Representatives of the Underwriters.
The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of the Prospectus Supplement, to purchase up to
450,000 additional Shares at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus
Supplement. To the extent that the Underwriters exercise this option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of Shares to be purchased by it shown in the
foregoing table bears to 3,000,000, and the Company will be obligated, pursuant
to the option, to sell such Shares to the Underwriters. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the Shares offered hereby. If purchased, the Underwriters will offer
such additional Shares on the same terms as those on which the 3,000,000 shares
are being offered.
NatWest Securities Limited, a United Kingdom broker-dealer and a member of
the Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the Shares offered hereby and subject to certain exceptions, it
will not offer any Shares within the United States, its territories or
possessions, or to persons who are citizens thereof or residents therein. The
Underwriting Agreement does not limit sale of the Shares offered hereby outside
of the United States.
NatWest Securities Limited has further represented and agreed that (a) it
has not offered or sold and will not offer or sell any Shares to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (whether as principal
or agent) for the purposes of their businesses or otherwise in circumstances
that have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities Regulations
1995 or the Financial Services Act 1986 (the "Act"); (b) it has complied and
will comply with all applicable provisions of the Act with respect to anything
done by it in relation to the Shares in, from, or otherwise involving the United
Kingdom; and (c) it has only issued or passed on and will only issue or pass on,
in the United Kingdom, any document that consists of or any part of listing
particulars, supplementary listing particulars, or any other document required
or permitted to be published by listing rules under Part IV of the Act, to a
S-14
<PAGE> 15
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
the document may otherwise lawfully be issued or passed on.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Company and each of its Executive Officers and Directors have agreed
not to offer, sell, contract to sell or otherwise issue or dispose of any Shares
or options to purchase Shares (except for issuances by the Company pursuant to
the Company's 1985 Incentive Stock Option Plan and the 1995 Stock Incentive
Plan) for a period of 90 days after the date of this Prospectus Supplement
without the prior written consent of Alex. Brown & Sons Incorporated.
The Representatives have from time to time conducted investment banking
services on behalf of the Company for which they have received customary fees.
LEGAL MATTERS
The validity of the issuance of the shares offered hereby is being passed
upon for the Company by Shumaker, Loop & Kendrick, LLP, Toledo, Ohio. In
addition, Shumaker, Loop & Kendrick, LLP has passed upon certain federal income
tax matters relating to the Company. Calfee, Halter & Griswold LLP, Cleveland,
Ohio will pass upon certain legal matters for the Underwriters.
S-15
<PAGE> 16
(This page intentionally left blank)
<PAGE> 17
PROSPECTUS
- -------------------
HEALTH CARE REIT, INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
------------------
Health Care REIT, Inc. (the "Company") intends to issue from time to time,
in one or more series, its (i) unsecured and senior or subordinated debt
securities ("Debt Securities"); (ii) shares or fractional shares of preferred
stock, $1.00 par value ("Preferred Stock"); (iii) shares of common stock, $1.00
par value ("Common Stock"); and (iv) warrants ("Warrants") to purchase Debt
Securities, Preferred Stock or Common Stock ("Warrants"). The Debt Securities,
the Preferred Stock, the Common Stock and the Warrants offered hereby
(collectively, the "Offered Securities") may be offered, separately or as units
with other offered securities, in separate series and amounts at prices and on
terms to be determined at the time of sale and to be set forth in a supplement
to this Prospectus (a "Prospectus Supplement"), at an aggregate initial public
offering price not to exceed $300,000,000, on terms to be determined at the time
of sale.
The specific terms of the Offered Securities will be set forth in the
applicable Prospectus Supplement and will include, where applicable, (i) in the
case of Debt Securities, the specific designation, aggregate principal amount,
denomination, maturity, priority, interest rate, time of interest, terms of
redemption at the option of the Company or repayment at the option of the holder
or for sinking fund payments, terms for conversion into or exchange for other
Offered Securities and the initial public offering price; (ii) in the case of
Preferred Stock, the series designation, the number of shares, the dividend,
liquidation, redemption, conversion, voting and other rights and the initial
public offering price; (iii) in the case of Common Stock, the specific number of
shares and the initial public offering price; (iv) in the case of Warrants, the
number and terms thereof, the designation and the number of Offered Securities
issuable upon their exercise, the exercise price, any listing of the Warrants or
the underlying Offered Securities on a securities exchange and any other terms
in connection with the offering, sale and exercise; and, (v) in the case of all
Offered Securities, whether such Offered Securities will be offered separately
or as a unit with other Offered Securities. In addition, such specific terms may
include limitations on direct or beneficial ownership and restrictions on
transfer of the Offered Securities, in each case as may be appropriate to
preserve the status of the Company as a qualified real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). The
applicable Prospectus Supplement will contain information, where applicable,
concerning certain United States Federal income tax considerations relating to,
and any listing on a securities exchange of, the Offered Securities.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any designated agents or underwriters are involved in the sale of the Offered
Securities, they will be identified and their compensation will be described in
the applicable Prospectus Supplement. See "Plan of Distribution." Also, the net
proceeds to the Company from such sale will be set forth in the Prospectus
Supplement. No Offered Securities may be sold without the delivery of the
applicable Prospectus Supplement describing such Offered Securities and the
method and terms of the offering thereof.
The shares of Common Stock of the Company are listed on the New York Stock
Exchange under the symbol "HCN." On January 28, 1997, the reported last sale
price of the shares of Common Stock on the New York Stock Exchange was $24.75
per share.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONER NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 4, 1997
<PAGE> 18
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at
its Regional Offices at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Suite 1300, Seven World Trade
Centre, New York, New York 10048, and can also be inspected and copied at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York,
10005. Copies of such material can be obtained from the public reference section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the prescribed fees. The Commission also
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the Commission.
This Prospectus is part of a Registration Statement on Form S-3 (together
with all amendments and all exhibits, the "Registration Statement"), filed by
the Company with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules of the Commission. For further information, reference
is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1995.
2. Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1996.
3. Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1996.
4. Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1996.
5. Current Reports on Form 8-K filed with the Commission on May 16, 1996,
September 5, 1996 and December 12, 1996.
6. All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Securities
shall be deemed to be incorporated herein by reference and to be a part of this
Prospectus from the date of filing of each such document.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
and any accompanying Prospectus Supplement relating to a specific offering of
Offered Securities or in any other subsequently filed document, as the case may
be, which also is or is deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any accompanying Prospectus Supplement. The Company will provide
on request and without charge to each person to whom this Prospectus is
delivered, upon the oral or written request of such person, a copy (without
exhibits) of any or all documents incorporated by reference to this Prospectus.
Requests for such copies should be directed to Erin C. Ibele, Vice President and
Corporate Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500, Toledo,
Ohio 43604, telephone number (419) 247-2800.
2
<PAGE> 19
THE COMPANY
Health Care REIT, Inc. (the "Company") is a self-administered real estate
investment trust ("REIT") that invests in health care facilities, primarily
nursing homes, assisted living facilities and retirement centers. As of
September 30, 1996, nursing homes, assisted living facilities and retirement
centers comprised approximately 84% of the investment portfolio. Founded in
1970, the Company was the first real estate investment trust to invest
exclusively in health care facilities.
The Company's objective is to enable stockholders to participate in health
care investments that produce income and preserve principal. Since its
inception, the Company has paid 102 consecutive quarterly dividends.
The shares of the common stock of the Company are listed on the New York
Stock Exchange under the symbol "HCN." The Company's executive offices are
located at One SeaGate, Suite 1500, Toledo, Ohio, 43604, and the telephone
number is (419) 247-2800.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used to finance, either
directly or indirectly, the Company's investments in health care facilities and
will allow the Company to pursue additional health care property investments and
complete unfunded commitments.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated. For purposes of calculating such ratio,
"earnings" includes net income plus fixed charges reduced by the amount of
interest capitalized. "Fixed charges" consists of interest whether expensed or
capitalized and the amortization of loan expenses. The Company did not have any
Preferred Stock outstanding for any period presented. Accordingly, the ratio of
earnings to combined fixed charges and preferred stock dividends is identical to
the ratio of earnings to fixed charges for the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------
1996 1995 1994 1993 1992 1991
----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to fixed
charges (unaudited)...................... 2.80 2.01 3.42 2.80 2.97 2.17
</TABLE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities may be issued in one or more series under an Indenture
to be executed by the Company and a trustee (the "Trustee"), a form of which is
included as an exhibit to the Registration Statement of which this Prospectus is
a part (the "Indenture"). The terms of the Debt Securities may include those
stated in the Indenture and those made a part of the Indenture (before any
supplements) by reference to the Trust Indenture Act of 1939, as amended (the
"TIA").
The following is a summary of certain provisions of the Indenture and does
not purport to be complete and is qualified in its entirety by reference to the
detailed provisions of the Indenture, including the definitions of certain terms
therein to which reference is hereby made for a complete statement of such
provisions. Wherever particular provisions or sections of the Indenture or terms
defined therein are referred to herein, such provisions or definitions are
incorporated herein by reference.
3
<PAGE> 20
TERMS
The Debt Securities will be direct, unsecured obligations of the Company.
The Indenture provides that the Debt Securities may be issued without limit
as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Company or as established in one or
more indentures supplemental to such Indenture. Debt Securities may be issued
with terms different from those of Debt Securities previously issued. All Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the Holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series.
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as Trustee with
respect to different series of Debt Securities, each such Trustee shall be a
Trustee of a trust under the applicable Indenture separate and apart from the
trust administered by any other Trustee and, except as otherwise indicated
herein, any action described herein to be taken by the Trustee may be taken by
each such Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Trustee under the applicable
Indenture.
The Prospectus Supplement will describe certain terms of any Debt
Securities offered hereby, including:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities that is convertible into Capital
Stock of the Company or the method by which any such portion will be
determined;
(4) if convertible, in connection with the preservation of the
Company's status as a REIT, any applicable limitations on the ownership or
transferability of the Capital Stock of the Company into which such Debt
Securities are convertible;
(5) the date or dates, or the method by which such date or dates will
be determined, on which the principal of such Debt Securities will be
payable and the amount of principal payable thereon;
(6) the rate or rates (which may be fixed or variable) at which such
Debt Securities will bear interest, if any, or the method by which such
rate or rates will be determined, the date or dates from which such
interest will accrue or the method by which such date or dates will be
determined, the Interest Payment Dates on which any such interest will be
payable and the Regular Record Dates for such Interest Payment Dates, or
the method by which such Dates will be determined, and the basis upon which
interest will be calculated if other than that of a 360-day year consisting
of twelve 30-day months;
(7) the place or places where the principal of (and premium or
Make-Whole Amount as defined in the Indenture, if any), interest, if any,
and Additional Amounts, if any, payable in respect of, such Debt Securities
will be payable, where such Debt Securities may be surrendered for
registration of, transfer or exchange and where notices or demands to or
upon the Company in respect of such Debt Securities and the applicable
Indenture may be served;
4
<PAGE> 21
(8) the period or periods within which, the price or prices (including
premium or Make-Whole Amount, if any) at which, the currency or currencies,
currency unit or units or composite currency or currencies in which and
other terms and conditions upon which such Debt Securities may be redeemed
in whole or in part, at the option of the Company, if the Company is to
have the option;
(9) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which or the date or dates on which, the price or prices at which,
the currency or currencies, currency unit or units or composite currency or
currencies in which, and other terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(10) whether such Debt Securities will be in registered or bearer form
and terms and conditions relating thereto, and, if other than $1,000 and
any integral multiple thereof, the denominations in which any registered
Debt Securities will be issuable and, if other than $1,000 the denomination
or denominations in which any bearer Debt Securities will be issuable;
(11) if other than United States dollars, the currency or currencies
in which such Debt Securities will be denominated and payable, which may be
a foreign currency or units of two or more foreign currencies or a
composite currency or currencies;
(12) whether the amount of payments of principal (and premium or
Make-Whole Amount, if any) or interest, if any, on such Debt Securities may
be determined with reference to an index, formula or other method (which
index, formula or method may be based, without limitation, on one or more
currencies, currency units, composite currencies, commodities, equity
indices or other indices), and the manner in which such amounts will be
determined;
(13) whether the principal of (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts, if any, on such Debt Securities are
to be payable, at the election of the Company or a Holder thereof, in a
currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are denominated or
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are to be so payable;
(14) provisions, if any, granting special rights to the Holders of
such Debt Securities upon the occurrence of such events as may be
specified;
(15) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company with respect to such Debt
Securities, whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set forth in the
applicable Indenture;
(16) whether such Debt Securities will be issued in certificated or
book-entry form;
(17) the applicability, if any, of the defeasance provisions of the
applicable Indenture;
(18) whether and under what circumstances the Company will pay
Additional Amounts as contemplated in the applicable Indenture on such Debt
Securities in respect of any tax, assessment or governmental charge and, if
so, whether the Company will have the option to redeem such Debt Securities
rather than pay such Additional Amounts (and the terms of any such option);
and
(19) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
5
<PAGE> 22
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special United States federal income
tax, accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
CONVERSION RIGHTS
(1) The terms, if any, on which Debt Securities of any series may be
converted into shares of Common Stock or Debt Securities of another series will
be set forth in the Prospectus Supplement relating thereto. To protect the
Company's status as a REIT, the holders of Debt Securities of any series
("Holders") may not convert any Debt Security, and such Debt Security shall not
be convertible by any Holder, if as a result of such conversion any person would
then be deemed to beneficially own, directly or indirectly, 9.8% or more of the
then outstanding shares of Common Stock.
(2) The conversion price will be subject to adjustment under certain
conditions, including (a) the payment of dividends (and other distributions) in
shares of Common Stock; (b) subdivisions, combinations and reclassifications of
shares of Common Stock; (c) the issuance to all or substantially all holders of
shares of Common Stock of rights or warrants entitling them to subscribe for or
purchase shares of Common Stock at a price per share (or having a conversion
price per share of Common Stock) less than the then current market price; and
(d) distributions to all or substantially all holders of shares of Common Stock
or shares of any other class, of evidences of indebtedness or assets (including
securities, but excluding those rights, warrants, dividends and distributions
referred to above and dividends and distributions not prohibited under the terms
of the Indenture) of the Company, subject to the limitation that all adjustments
by reason of any of the foregoing would not be made until they result in a
cumulative change in the conversion price of at least 1%. In the event the
Company shall effect any capital reorganization or reclassification of its
shares of Common Stock or shall consolidate or merge with or into any trust or
corporation (other than a consolidation or merger in which the Company is the
surviving entity) or shall sell or transfer substantially all its assets to any
other trust or corporation, the Holders shall, if entitled to convert such Debt
Securities at any time after such transaction, receive upon conversion thereof,
in lieu of each share of Common Stock into which the Debt Securities of such
series would have been convertible prior to such transaction, the same kind and
amount of stock and other securities, cash or property as shall have been
issuable or distributable in connection with such transaction with respect to
each share of Common Stock.
(3) A conversion price adjustment made according to the provisions of the
Debt Securities of any series (or the absence of provision for such an
adjustment) might result in a constructive distribution to the Holders of Debt
Securities of such series or holders of shares of Common Stock that would be
subject to taxation as a dividend. The Company may, at its option, make such
reductions in the conversion price, in addition to those set forth above, as the
Board of Directors of the Company deems advisable to avoid or diminish any
income tax to holders of shares of Common Stock resulting from any dividend or
distribution of shares of Common Stock (or rights to acquire shares of Common
Stock) or from any event treated as such for income tax purposes or for any
other reason. The Board of Directors will also have the power to resolve any
ambiguity or correct any error in the provisions relating to the adjustment of
the conversion price of the Debt Securities of such series and its actions in so
doing shall be final and conclusive.
(4) Fractional shares of Common Stock will not be issued upon conversion,
but, in lieu thereof, the Company will pay a cash adjustment based upon market
price.
(5) The Holders of Debt Securities of any series at the close of business
on an interest payment record date shall be entitled to receive the interest
payable on such Debt Securities on the corresponding interest payment date
notwithstanding the conversion thereof. However, Debt Securities surrendered for
conversion during the period from the close of business on any record
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date for the payment of interest to the opening of business on the corresponding
interest payment date must be accompanied by payment of an amount equal to the
interest payable on such interest payment date. Holders of Debt Securities of
any series who convert Debt Securities of such series on an interest payment
date will receive the interest payable by the Company on such date and need not
include payment in the amount of such interest upon surrender of such Debt
Securities for conversion.
CERTAIN COVENANTS
Merger, Consolidation or Sale
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that (a) either the Company shall be the continuing entity, or the
successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets is a Person organized and existing under the laws of the United States or
any State thereof and shall expressly assume payment of the principal of (and
premium or Make-Whole Amount, if any) and interest on all of the Debt Securities
and the due and punctual performance and observance of all of the covenants and
conditions contained in each Indenture; (b) immediately after giving effect to
such transaction and treating any indebtedness which becomes an obligation of
the Company or any Subsidiary as a result thereof as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default
under an Indenture, and no event which, after notice or the lapse of time, or
both, would become such an Event of Default, shall have occurred and be
continuing; and (c) an Officers' Certificate and legal opinion covering such
conditions shall be delivered to the Trustee.
Optional Redemption
The Debt Securities of any series that are convertible into shares of
Common Stock will be subject to redemption, in whole or from time to time in
part, at any time for certain reasons intended to protect the Company's status
as a REIT at the option of the Company on at least 30 days' prior notice by mail
at a redemption price equal to 100% of the principal amount, plus interest
accrued to the date of redemption. See DESCRIPTION OF CAPITAL
STOCK -- "Redemption and Restrictions on Transfer."
Dividends, Distributions and Acquisitions
The Indenture provides that the Company will not (a) declare or pay any
dividend or make any distribution on its shares of Common Stock or to holders of
its shares of Common Stock (other than dividends or distributions payable in its
shares of Common Stock or other than as the Company determines is necessary to
maintain its status as a REIT) or (b) purchase, redeem or otherwise acquire or
retire for value any of its shares of Common Stock or permit any subsidiary to
do so, if at the time of such action an Event of Default (as defined in the
Indenture) has occurred and is continuing or would exist immediately after
giving effect to such action.
Additional Covenants
Any additional covenants of the Company with respect to a series of the
Debt Securities will be set forth in the Prospectus Supplement relative thereto.
MODIFICATION OF THE INDENTURES
Modifications and amendments of the Indenture may be made with the consent
of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under such Indenture that are affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each such Debt Security
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<PAGE> 24
affected thereby, (a) change the Stated Maturity of the principal of (or premium
or Make-Whole Amount, if any), or any installment of principal of or interest or
Additional Amounts payable on, any such Debt Security; (b) reduce the principal
amount of, or the rate or amount of interest on, or any premium or Make-Whole
Amount payable on redemption of, or any Additional Amounts payable with respect
to, any such Debt Security, or reduce the amount of principal of an Original
Issue Discount Security or Make-Whole Amount, if any, that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the Holder
of any such Debt Security; (c) change the Place of Payment, or the coin or
currency, for payment of principal of (and premium or Make-Whole Amount, if
any), or interest on, or any Additional Amounts payable with respect to, any
such Debt Security; (d) impair the right to institute suit for the enforcement
of any payment on or with respect to any such Debt Security; (e) reduce the
percentage of Outstanding Debt Securities of any series necessary to modify or
amend the applicable Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (f) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Debt Security.
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under the Indenture have the right to waive compliance by
the Company with certain covenants in the Indenture.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest or Additional Amounts
payable on any Debt Security of such series; (b) default in the payment of the
principal of (or premium or Make-Whole Amount, if any, on) any Debt Security of
such series at its Maturity; (c) default in making any sinking fund payment as
required for any Debt Security of such series; (d) default in the performance of
any other covenant of the Company contained in the Indenture (other than a
covenant added to the Indenture solely for the benefit of a series of Debt
Securities issued thereunder other than such series), continued for 60 days
after written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor) having an aggregate principal amount outstanding
of at least $10,000,000, whether such indebtedness now exists or shall hereafter
be created, which default shall have resulted in such indebtedness being
declared due and payable prior to the date on which it would otherwise have
become due and payable, without such acceleration having been rescinded or
annulled within 10 days after written notice as provided in the Indenture; (f)
the entry by a court of competent jurisdiction of one or more judgments, orders
or decrees against the Company or any Subsidiary in an aggregate amount
(excluding amounts fully covered by insurance) in excess of $10,000,000 and such
judgments, orders or decrees remain undischarged, unstayed and unsatisfied in an
aggregate amount (excluding amounts fully covered by insurance) in excess of
$10,000,000 for a period of 30 consecutive days; (g) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Company or any Significant Subsidiary or for all or
substantially all of either of its property; and (h) any other Event of Default
provided with respect to such series of Debt Securities. The term "Significant
Subsidiary" means each significant subsidiary as defined in Regulation S-X
promulgated under the Securities Act of the Company.
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<PAGE> 25
If an event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the Trustees or Holders of not less than 25% in principal amount of
the Outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount as may be
specified in the terms thereof) of, and premium or Make-Whole Amount, if any,
on, all of the Debt Securities of that series to be due and payable immediately
by written notice thereof to the Company and to the Trustee if given by the
Holders. However, at any time after such declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) has been made,
but before a judgment or decree for payment of the money due has been obtained
by the Trustee, the Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) may rescind and
annul such declaration and its consequences if (a) the Company shall have
deposited with the Trustee all required payments of the principal of (and
premium or Make-Whole Amount, if any) and interest, and any Additional Amounts,
on the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the Trustee and (b) all Events of
Default, other than the nonpayment of accelerated principal (or specified
portion thereof and the premium or Make-Whole Amount, if any) or interest, with
respect to the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) have been cured
or waived as provided in the Indenture. The Indenture also provides that the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) may waive any past default with
respect to such series and its consequences, except a default (i) in the payment
of the principal of (or premium or Make-Whole Amount, if any) or interest or
Additional Amounts payable on any Debt Security of such series or (ii) in
respect of a covenant or provision contained in the applicable Indenture that
cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security affected thereby.
A Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture; provided, however,
that a Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium or Make-Whole Amount, if any) or
interest or Additional Amounts payable on any Debt Security of such series or in
the payment of any sinking fund installment in respect of any Debt Security of
such series) if the Responsible Officers of such Trustee consider such
withholding to be in the interest of such Holders.
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of reasonable indemnity. This provision will not prevent, however, any
Holder of Debt Securities from instituting suit for the enforcement of payment
of the principal of (and premium or Make-Whole Amount, if any), interest on and
Additional Amounts payable with respect to, such Debt Securities at the
respective due dates thereof.
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities may be
issued in fully registered form and may be issued in either temporary or
permanent form.
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Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred except
as a whole by the Depository for such Global Security to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by such Depository or any nominee of such
Depository to a successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company expects that unless otherwise indicated in the
applicable Prospectus Supplement, the following provisions will apply to
depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depository for such Global Security or its nominee (with respect to
beneficial interests of Participants) and records of Participants (with respect
to beneficial interests of persons who hold through Participants). The laws of
some states require that certain purchasers of securities take physical delivery
of such securities in definitive form. Such limits and laws may impair the
ability to own, pledge or transfer beneficial interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described below or in the applicable Prospectus
Supplement, owners of beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture.
Payments of principal of, any premium or Make-Whole Amount and any interest
on, or any Additional Amounts payable with respect to, individual Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner of the Global Security. None of the
Company, the Trustee, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depository for any Debt Securities or its
nominee, upon receipt of any payment of principal, premium, Make-Whole Amount,
interest or Additional Amounts in respect of the Global Security representing
such Debt Securities will immediately credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depository or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in street name. Such payments will be the
responsibility of such Participants.
If a Depository for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by the Company within 90 days, the
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Company will issue individual Debt Securities in exchange for the Global
Security representing such Debt Securities. In addition, the Company may at any
time and in its sole discretion, subject to any limitations described in the
Prospectus Supplement relating to such Debt Securities, determine not to have
any of such Debt Securities represented by one or more Global Securities and in
such event will issue individual Debt Securities in exchange for the Global
Security or Securities representing such Debt Securities. Individual Debt
Securities so issued will be issued in denominations of $1,000 and integral
multiples thereof.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of Ohio.
DESCRIPTION OF WARRANTS
The Company may issue, together with any other series of Securities offered
or separately, Warrants entitling the holder to purchase from or sell to the
Company, or to receive from the Company the cash value of the right to purchase
or sell, Debt Securities, shares of Preferred Stock or Common Stock. The
Warrants are to be issued under a Warrant Agreement (each a "Warrant Agreement")
to be entered into between the Company and a bank or trust company, as warrant
agent (the "Warrant Agent"), all as set forth in the applicable Prospectus
Supplement relating to the particular issue of Warrants. Copies of the form of
Warrant Agreement, including the form of Warrant Certificate representing the
Warrants (the "Warrant Certificates"), are filed as exhibits to the Registration
Statement of which this Prospectus forms a part.
In the case of each series of Warrants, the applicable Prospectus
Supplement will describe the terms of the Warrants being offered thereby,
including the following, if applicable: (a) the offering price; (b) the
currencies in which such Warrants are being offered; (c) the number of Warrants
offered; (d) the securities underlying the Warrants; (e) the exercise price, the
procedures for exercise of the Warrants and the circumstances, if any, that will
cause the Warrants to be deemed to be automatically exercised; (f) the date on
which the right to exercise the Warrants shall commence and the date on which
such right shall expire; (g) U.S. federal income tax consequences; and (h) other
terms of the Warrants.
Warrants may be exercised at the appropriate office of the Warrant Agent or
any other office indicated in the applicable Prospectus Supplement. Prior to the
exercise of Warrants entitling the holder to purchase any securities, holders of
such Warrants will not have any of the rights of holders of the securities
purchasable upon such exercise and will not be entitled to payments made to
holders of such securities.
The Warrant Agreements may be amended or supplemented without the consent
of the holders of the Warrants issued thereunder to effect changes that are not
inconsistent with the provisions of the Warrants and that do not adversely
affect the interests of the holders of the Warrants.
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DESCRIPTION OF COMMON STOCK
AND PREFERRED STOCK
GENERAL
The Company is authorized to issue 40,000,000 shares of Common Stock, $1.00
par value per share. The Company had outstanding 16,079,931 shares of common
stock, $1.00 par value per share (the "Common Stock"), on September 30, 1996.
The shares constitute the only class of outstanding voting securities of the
Company.
The Company is authorized to issue 10,000,000 shares of Preferred Stock,
$1.00 par value per share. No shares of Preferred Stock (the "Preferred Stock")
were outstanding on September 30, 1996. The Company has authorized the issuance
of 13,000 shares of Junior Participating Stock, Series A ("Series A Preferred
Stock") which is discussed below.
The following statements with respect to the capital stock of the Company
are subject to detailed provisions of the Company's Certificate of
Incorporation, as amended (the "Certificate"), and the Company's By-Laws (the
"By-Laws") as currently in effect. These statements do not purport to be
complete, or to give full effect of the terms of the provisions of statutory or
common law, and are subject to, and are qualified in their entirety by reference
to, the terms of the Certificate and By-Laws which are filed as exhibits to the
registration statement.
SERIES A PREFERRED STOCK
On July 19, 1994, the Board of Directors of the Company authorized the
issuance of one preferred share purchase right (a "Right") for each outstanding
share of Common Stock. Under certain conditions, each Right may be exercised to
purchase one one-thousandth of a share of Junior Participation Preferred Stock,
Series A, par value $1.00 per share ("Series A Preferred Stock"), of the Company
at a price of $48. The number of Rights outstanding and Series A Preferred Stock
issuable upon exercise, as well as the Series A Preferred Stock purchase price,
are subject to customary antidilution adjustments.
The Rights are evidenced by the certificates for shares of Common Stock,
and in general are not transferable apart from the Common Stock or exercisable
until after a party has acquired beneficial ownership of, or made a tender offer
for 15% or more of the outstanding Common Stock of the Company (an "Acquiring
Person"), or the occurrence of other events as specified in a Rights Agreement
between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent. Under certain conditions as specified in the Rights Agreement, including
but not limited to, the acquisition by a party of 15% or more of the outstanding
Common Stock of the Company, or the acquisition of the Company in a merger or
other business combination, each holder of a Right (other than an Acquiring
Person, whose Rights will be void) will receive upon exercise thereof and
payment of the exercise price that number of shares of Common Stock of the
Company, or of the other party, as applicable, having a market value of two
times the exercise price of the Right.
The Rights expire on August 5, 2004, and until exercised, the holder
thereof, as such, will have no rights as a stockholder of the Company. At the
Company's option, the Rights may be redeemed in whole at a price of $.01 per
Right at any time prior to becoming exercisable. In general, the Company may
also exchange the Rights at a ratio of one share of Common Stock per Right after
becoming exercisable but prior to the acquisition of 50% or more of the
outstanding shares of Common Stock by any party.
Series A Preferred Stock issuable upon exercise of the Rights will not be
redeemable. Each share of Series A Preferred Stock will have 1,000 votes and
will be entitled to (a) a minimum preferential quarterly dividend payment equal
to the greater of $25.00 per share or 1,000 times the amount of the dividends
per share paid on the Common Stock, (b) a liquidation preference in an amount
equal to the greater of $100 or 1,000 times the amount per share paid on the
Common Stock, and (c) a
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payment in connection with a business combination (in which shares of Common
Stock are exchanged) equal to 1,000 times the amount per share paid on the
Common Stock.
COMMON STOCK
Holders of the shares of Common Stock are entitled to receive dividends
when declared by the Board of Directors and after payment of, or provision for,
full cumulative dividends on and any required redemptions of shares of Preferred
Stock then outstanding. Holders of the shares of Common Stock have one vote per
share and noncumulative voting rights, which means that holders of more than 50%
of the shares of voting Common Stock can elect all the directors if they choose
to do so, and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of any voluntary or
involuntary liquidation or dissolution of the Company, holders of the shares of
Common Stock are to share ratably in the distributable assets of the Company
remaining after the satisfaction of the prior preferential rights of the holders
of the shares of Preferred Stock and the satisfaction of all debts and
liabilities of the Company. Holders of the shares of Common Stock do not have
preemptive rights. The transfer agent for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which a
Prospectus Supplement may relate. Specific terms of any series of Preferred
Stock offered by a Prospectus Supplement will be described in that Prospectus
Supplement. The description set forth below is subject to and qualified in its
entirety by reference to the Certificate fixing the preferences, limitations and
relative rights of a particular series of Preferred Stock.
General
Under the Certificate, the Board of Directors of the Company is authorized,
without further stockholder action, to provide for the issuance of up to
10,000,000 shares of Preferred Stock, in one or more series, with such voting
powers and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions, as the Board of Directors shall approve.
The Preferred Stock will have the dividend, liquidation, redemption,
conversion and voting rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Stock offered thereby for specific terms, including: (a) the title
and liquidation preference per share of such Preferred Stock and the number of
shares offered; (b) the price at which such series will be issued; (c) the
dividend rate (or method of calculation), the dates on which dividends shall be
payable and the dates from which dividends shall commence to accumulate; (d) any
redemption or sinking fund provisions of such series; (e) any conversion
provisions of such series; and (f) any additional dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions of such series.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Stock, each series will rank on a parity as to dividends and
distributions in the event of a liquidation with each other series of Preferred
Stock and, in all cases, will be senior to the shares of Common Stock.
Dividend Rights
Holders of the shares of Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors, out of assets of
the Company legally available therefor, cash dividends at such rates and on such
dates as are set forth in the Prospectus Supplement relating to
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<PAGE> 30
such series of Preferred Stock. Such rate may be fixed or variable or both and
may be cumulative, noncumulative or partially cumulative.
If the applicable Prospectus Supplement so provides, as long as any shares
of Preferred Stock are outstanding, no dividends will be declared or paid or any
distributions be made on the Common Stock, other than a dividend payable in
shares of Common Stock, unless the accrued dividends on each series of Preferred
Stock have been fully paid or declared and set apart for payment and the Company
shall have set apart all amounts, if any, required to be set apart for all
sinking funds, if any, for each series of Preferred Stock.
If the applicable Prospectus Supplement so provides, when dividends are not
paid in full upon any series of Preferred Stock and any other series of
Preferred Stock ranking on a parity as to dividends with such series of
Preferred Stock, all dividends declared upon such series of Preferred Stock and
any other series of Preferred Stock ranking on a parity as to dividends will be
declared pro rata so that the amount of dividends declared per share on such
series of Preferred Stock and such other series will in all cases bear to each
other the same ratio that accrued in dividends per share on such series of
Preferred Stock and such other series bear to each other.
Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of Preferred Stock may be
entitled to dividends at different dividend rates or based upon different
methods of determination. Except as provided in the applicable Prospectus
Supplement, no series of Preferred Stock will be entitled to participate
generally in the earnings or assets of the Company.
Rights Upon Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of the assets of the Company available for distribution
to stockholders the amount stated or determined on the basis set forth in the
Prospectus Supplement relating to such series, which may include accrued
dividends, if such liquidation, dissolution or winding up is involuntary or may
equal the current redemption price per share (otherwise than for the sinking
fund, if any, provided for such series) provided for such series set forth in
such Prospectus Supplement, if such liquidation, dissolution or winding up is
voluntary, and on such preferential basis as is set forth in such Prospectus
Supplement. If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the amounts payable with respect to Preferred Stock
of any series and any other shares of stock of the Company ranking as to any
such distribution on a parity with such series of Preferred Stock are not paid
in full, the holders of shares of Preferred Stock of such series and of such
other shares will share ratably in any such distribution of assets of the
Company in proportion to the full respective preferential amounts to which they
are entitled or on such other basis as is set forth in the applicable Prospectus
Supplement. The rights, if any, of the holders of any series of Preferred Stock
to participate in the assets of the Company remaining after the holders of other
series of Preferred Stock have been paid their respective specified liquidation
preferences upon any liquidation, dissolution or winding up the Company will be
described in the Prospectus Supplement relating to such series.
Redemption
A series of Preferred Stock may be redeemable, in whole or in part, at the
option of the Company, and may be subject to mandatory redemption pursuant to a
sinking fund, in each case upon terms, at the times, the redemption prices and
for the types of consideration set forth in the Prospectus Supplement relating
to such series. The Prospectus Supplement relating to a series of Preferred
Stock which is subject to mandatory redemption shall specify the number of
shares of such series that shall be redeemed by the Company in each year
commencing after a date to be specified,
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at a redemption price per share to be specified, together with an amount equal
to any accrued and unpaid dividends thereon to the date of redemption.
If, after giving notice of redemption to the holders of a series of
Preferred Stock, the Company deposits with a designated bank funds sufficient to
redeem such shares of Preferred Stock, then from and after such deposit, all
shares called for redemption will no longer be outstanding for any purpose,
other than the right to receive the redemption price and the right to convert
such shares into other classes of capital stock of the Company. The redemption
price will be stated in the Prospectus Supplement relating to a particular
series of Preferred Stock.
Except as indicated in the applicable Prospectus Supplement, the Preferred
Stock is not subject to any mandatory redemption at the option of the holder.
Sinking Fund
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, of a sinking fund for the purchase or redemption of that series.
Conversion Rights
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
Common Stock or another series of Preferred Stock. The Preferred Stock will have
no preemptive rights.
Voting Rights
Except as indicated in the Prospectus Supplement relating to a particular
series of Preferred Stock, or except as expressly required by Delaware law, a
holder of Preferred Stock will not be entitled to vote. Except as indicated in
the Prospectus Supplement relating to a particular series of Preferred Stock, in
the event the Company issues full shares of any series of Preferred Stock, each
such share will be entitled to one vote on matters on which holders of such
series of Preferred Stock are entitled to vote.
Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of all series of Preferred Stock, voting as a separate
voting group, will be required for (a) the authorization of any class of stock
ranking prior to or on parity with shares of Preferred Stock or the increase in
the number of authorized shares of any such stock, (b) any increase in the
number of authorized shares of shares of Preferred Stock, and (c) certain
amendments to the Articles that may be adverse to the rights of Preferred Stock
outstanding.
Transfer Agent and Registrar
The transfer agent, registrar and dividend disbursement agent for a series
of Preferred Stock will be selected by the Company and be described in the
applicable Prospectus Supplement. The registrar for shares of Preferred Stock
will send notices to stockholders of any meetings at which holders of the shares
of Preferred Stock have the right to vote on any matter.
REDEMPTION AND RESTRICTIONS ON TRANSFER
In order to preserve the Company's status as a REIT as defined in the Code,
the Company can redeem or stop the transfer of its shares. The Company's
Certificate of Incorporation provides that the Company is organized to qualify
as a REIT. Because the Code provides that the concentration of more than 50% in
value of the direct or indirect ownership of its shares in five or fewer
individual stockholders during the last six months of any year would result in
the disqualification of the Company as a REIT, the Company's Certificate of
Incorporation provides that the Company has the power to treat any transfer or
issuance resulting in the 9.8% to be exceeded as null and void and treat the
stockholder as holding the securities on behalf of the Company.
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REIT QUALIFICATION
Generally, for each taxable year during which the Company qualifies as a
real estate investment trust, it will not be taxed on the portion of its taxable
income (including capital gains) that is distributed to stockholders. Any
undistributed income or gains will be taxed to the Company at regular corporate
tax rates. The Company will be subject to tax at the highest corporate rate on
its net income from foreclosure property, regardless of the amount of its
distributions. The highest corporate tax rate is currently 35%. Failure to
qualify could result in the Company's incurring indebtedness and perhaps
liquidating investments in order to pay the resulting taxes.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities to or through underwriters or may
sell Offered Securities to investors directly or through designated agents. Any
such underwriter or agent involved in the offer or sale of the Offered
Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as agents to offer and sell the Offered Securities upon the
terms and conditions set forth in the Prospectus Supplement. In connection with
the sale of the Offered Securities, underwriters may be deemed to have received
compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions (which may be changed from
time to time) from the underwriters and or from the purchasers for whom they may
act as agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities and any discounts,
concessions, or commissions allowed by the underwriters to participating dealers
would be set forth in the applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Offered Securities
may be deemed to be underwriters and any discounts and commissions received by
them and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each contract will be for an
amount not less than, and the principal amount of Offered Securities sold
pursuant to Contracts shall not be less or more than the respective amount
stated in such Prospectus Supplement. Institutions with which Contracts, when
authorized, may be made with commercial and savings banks, insurance companies,
pension funds, investment companies, education and charitable institutions and
other institutions, but will in all cases be subject to the approval of the
Company. Contracts will not be subject to any conditions except (a) the purchase
by an institution of the Offered Securities covered by its Contract shall not at
the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject; and (b) the Company shall
have sold to such underwriters the total principal amount of the Offered
Securities less the principal amount thereof covered by Contracts. The
commission indicated in the Prospectus Supplement will be paid to agents and
underwriters soliciting purchases of Offered Securities pursuant to Contracts
accepted by the Company. Agents and underwriters shall have no responsibility in
respect to this delivery or performance of Contracts.
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Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, the Company in the
ordinary course of business.
LEGAL OPINIONS
The validity of the Offered Securities will be passed upon by Shumaker,
Loop & Kendrick, LLP, Toledo, Ohio.
EXPERTS
The consolidated financial statements of Health Care REIT, Inc. appearing
in Health Care REIT, Inc.'s Annual Report (Form 10-K) for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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No person has been authorized in connection with the offering made hereby
to give any information or to make any representations, other than those
contained herein and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or the Underwriters.
This Prospectus Supplement and the Prospectus do not constitute an offer to sell
or the solicitation of an offer to buy any of these securities in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The delivery of this Prospectus Supplement
and the Prospectus at any time does not imply that the information in the
Prospectus Supplement and the Prospectus is correct as of any time subsequent to
its date.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PROSPECTUS SUPPLEMENT
The Company........................... S-3
Recent Developments................... S-5
Use of Proceeds....................... S-5
Price Range of Shares and Distribution
History............................. S-6
Capitalization........................ S-7
Selected Financial Information........ S-8
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-9
Management............................ S-12
Underwriting.......................... S-14
Legal Matters......................... S-15
PROSPECTUS DATED FEBRUARY 4, 1997
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 3
Description of Warrants............... 11
Description of Common Stock and
Preferred Stock..................... 12
Plan of Distribution.................. 16
Legal Opinions........................ 17
Experts............................... 17
</TABLE>
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3,000,000 SHARES
Health Care REIT Logo
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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ALEX. BROWN & SONS
INCORPORATED
NATWEST SECURITIES LIMITED
SMITH BARNEY INC.
EVEREN SECURITIES, INC.
March 6, 1997
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