<PAGE> 1
Filed pursuant to Rule 424(b)(2)
File No. 333-43177
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 7, 1998)
913,242 SHARES
HEALTH CARE REIT
COMMON STOCK
-----------
The shares of Common Stock, $1.00 par value per share (the "Shares") of
Health Care REIT, Inc. (the "Company") are listed on the New York Stock Exchange
("NYSE") under the symbol "HCN." On March 25, 1998, the last reported sale price
of the Shares on the NYSE was $27.375 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.
EVEREN Securities, Inc. (the "Underwriter") has agreed to purchase the
Shares from the Company at a price of $26.00625 per share, resulting in
aggregate proceeds to the Company of $23,750,000 before payment of expenses by
the Company estimated at $50,000, subject to the terms and conditions of an
Underwriting Agreement. The Underwriter intends to sell the Shares to the
sponsor of a newly-formed unit investment trust (the "Trust") at an aggregate
purchase price of $24,175,000, resulting in an aggregate underwriting discount
of $1,250,000. See "Underwriting." Such sponsor intends to deposit the Shares
into the Trust in exchange for units in the Trust. The units of the Trust will
be sold to investors at a price based upon the net asset value of the securities
in the Trust. For purposes of this calculation, the value of the Shares as of
the evaluation time for units of the Trust on March 25, 1998 was $27.375 per
Share.
-----------
The Shares are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by it, and subject to the right of the
Underwriter 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 in Chicago,
Illinois on or about March 30, 1998.
EVEREN SECURITIES, INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MARCH 25, 1998
<PAGE> 2
PROPERTIES
The following table sets forth certain information regarding the facilities
that comprise the Company's investments as of December 31, 1997.
<TABLE>
<CAPTION>
Number Number
Of of Beds/ Total Annualized
Facility Location Facilities Units Investment(1) Income(2)
----------------- ---------- ----- ------------- ---------
(In Thousands)
<S> <C> <C> <C> <C>
NURSING FACILITIES:
Arizona............................ 3 351 $ 16,959 $ 2,025
California......................... 1 122 3,872 444
Colorado........................... 1 180 6,346 680
Connecticut........................ 2 240 14,956 1,462
Florida............................ 2 240 9,332 1,088
Idaho.............................. 3 404 19,857 2,174
Indiana............................ 1 50 1,058 168
Kentucky........................... 1 92 4,488 514
Massachusetts...................... 12 1,726 67,301 7,188
Michigan........................... 2 250 4,735 576
Missouri........................... 2 220 9,873 1,066
New York........................... 1 200 7,354 800
Ohio............................... 7 762 27,650 3,243
Oregon............................. 1 121 5,307 580
Pennsylvania....................... 2 287 12,877 1,610
Texas.............................. 7 1,120 19,868 2,305
West Virginia...................... 1 65 1,270 224
--- ------ -------- -------
Total............................. 49 6,430 233,103 26,147
ASSISTED LIVING FACILITIES:
Connecticut........................ 1 80 2,880 315
Florida............................ 16 1,008 42,390 4,598
Georgia............................ 3 292 7,024 688
Idaho.............................. 1 48 2,669 267
Indiana............................ 1 60 1,120 120
Maryland........................... 3 261 5,670 616
Massachusetts...................... 1 131 5,185 555
Montana............................ 1 44 1,501 161
New Jersey......................... 1 264 17,187 1,770
New Mexico......................... 2 159 8,068 894
New York........................... 5 606 41,970 4,524
North Carolina..................... 14 748 25,706 2,613
Ohio............................... 4 327 17,656 1,856
Oklahoma........................... 16 540 23,651 2,520
Pennsylvania....................... 5 541 30,877 3,522
Texas.............................. 38 2,466 107,213 11,590
Virginia........................... 4 237 9,392 1,049
--- ------ -------- -------
Total............................. 116 7,812 350,159 37,658
RETIREMENT CENTERS:
Arizona............................ 1 164 2,396 299
California......................... 1 92 2,396 299
Illinois........................... 2 320 11,991 244
Indiana............................ 2 111 2,502 268
New Mexico......................... 1 150 7,420 171
North Carolina..................... 2 159 16,091 1,666
Texas.............................. 1 58 4,536 480
--- ------ -------- -------
Total............................. 10 1,054 47,332 3,427
SPECIALTY CARE FACILITIES:
Arkansas........................... 1 117 29,000 3,347
California......................... 2 416 32,149 3,824
Minnesota.......................... 1 n/a 530 66
Texas.............................. 1 70 13,750 1,431
Washington D.C. ................... 1 110 17,162 2,061
--- ------ -------- -------
Total............................. 6 713 92,591 10,729
BEHAVIORAL CARE FACILITIES:
Florida............................ 2 294 10,324 1,084
--- ------ -------- -------
TOTAL ALL FACILITIES:............. 183 16,303 $733,509 $79,045
=== ====== ======== =======
</TABLE>
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(1) Investments include real estate investments and credit enhancements which
amounted to $717,944,000 and $15,565,000, respectively.
(2) Reflects contract rate of annual base rent or interest received or to be
received upon completion of construction.
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING
STABILIZING AND SYNDICATE COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
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<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, 1997, long-term care
facilities, which include nursing homes, assisted living facilities and
retirement centers comprised approximately 86% 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, 1997, the Company had $733,509,000 of real estate
investments, inclusive of credit enhancements, in 183 facilities located in 29
states and managed by 49 different operators. At that date, the portfolio
included 116 assisted living facilities, 49 nursing homes, 10 retirement
centers, six specialty care facilities, and two behavioral care facilities. At
December 31, 1997, the Company had approximately $275,017,000 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 insider 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 additional economic benefits
in the form of warrants or other similar equity instruments which provide the
Company with the opportunity to share in an operator's enterprise value. In
connection with an investment in Sterling House Corporation ("Sterling"), for
example, the Company received warrants which were converted into 87,823 shares
of Sterling stock at the time of its initial public offering. Sterling was
subsequently acquired by Alternative Living Services ("ALS"), and the Company's
shares in Sterling were converted into 96,605 shares of ALS. As of December 31,
1997, the ALS shares were recorded on the Company's balance sheet at a value of
$2,856,000.
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. At
December 31, 1997, approximately 44% of the Company's 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., Atria
Communities, Inc., CareMatrix Corporation, Emeritus Corporation, Greenbriar
Corporation and Kapson Senior Quarters Corp.
S-3
<PAGE> 4
Depth of Management. The management team is comprised of seven individuals
who have an aggregate of over 90 years of experience in health care real estate
finance. George L. Chapman has been a member of senior management for over six
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 more than $845,000,000 during the past five years.
THE PORTFOLIO
The following table reflects the Company's portfolio as of December 31,
1997.
<TABLE>
<CAPTION>
Number
Percentage Number of Investment Number Number
Type of Investments (1) of of Beds/ Per Bed/ of of
Facility (In thousands) Portfolio Facilities Units Unit(2) Operators States(3)
-------- -------------- --------- ---------- ----- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Assisted Living
Facilities ........... $350,159 48% 116 7,812 $ 66,732 19 17
Nursing Homes ........... 233,103 32% 49 6,430 38,223 23 17
Specialty Care
Facilities ........... 92,591 13% 6 713 129,861 3 5
Retirement
Centers .............. 47,332 6% 10 1,054 49,807 6 7
Behavioral Care
Facilities ........... 10,324 1% 2 294 35,115 1 1
-------- --- --- ------ -------- -- --
Totals ................. $733,509 100% 183 16,303
======== === === ======
</TABLE>
- ----------
(1) Investments include real estate investments and credit enhancements which
amounted to $717,944,000 and $15,565,000, respectively.
(2) Investment Per Bed/Unit was computed by using the total investment amount
of $922,500,000 which includes real estate investments, unfunded
commitments for which initial funding has commenced, and credit
enhancements which total $717,944,000, $188,991,000 and $15,565,000,
respectively.
(3) The Company has investments in properties located in 29 states, managed by
49 different operators.
From December 31, 1996 to December 31, 1997, the Company's net real estate
investments increased 39%, to $713,557,000 from $512,894,000. During the same
period, real property owned increased 94%, to $297,275,000 from $153,623,000 and
mortgage and construction loans increased 15%, to $405,336,000 from
$353,455,000. 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.
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.
S-4
<PAGE> 5
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
On March 13, 1998, the Company sold $100 million of 7.625% senior unsecured
notes due March 15, 2008. The Company's estimated proceeds from the sale of the
Notes are $98,815,000. The proceeds were used primarily to repay borrowings
under the Company's revolving lines of credit arrangements. The Notes are rated
"Ba1" by Moody's Investors Service, "BBB-" by Standard & Poor's Corporation and
"BBB-" by Duff & Phelps Credit Rating Co.
On February 17, 1998, the Company announced that it has agreed to
participate in the formation of a joint venture to invest in health care
facilities in the United Kingdom (UK) and continental Europe. Currently, the
joint venture participants include Westminster Health Care, a UK based publicly
owned nursing home operator and an entity affiliated with Holiday Retirement
Corp. It is anticipated that during the joint venture's initial phase, the
Company's funding commitment will total approximately $20 million.
USE OF PROCEEDS
The net proceeds from the sale of the 913,242 Shares offered hereby are
estimated to be approximately $23.7 million after deduction of the estimated
offering expenses. The proceeds will be used primarily to repay borrowings under
the Company's revolving lines of credit arrangements, which had an outstanding
balance of $31 million at March 17, 1998.
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<PAGE> 6
PRICE RANGE OF SHARES AND DISTRIBUTION HISTORY
The shares of Common Stock of the Company, $1.00 par value per share (the
"Shares"), are traded on the New York Stock Exchange (the "NYSE") under the
symbol "HCN." As of December 31, 1997, there were 5,722 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. On March 25, 1998, the last reported sale
price of the Shares as reported by the NYSE was $27.375 per Share.
<TABLE>
<CAPTION>
PRICE OF SHARES DISTRIBUTIONS
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
1996
First Quarter....................... $22.625 $17.875 $0.520
Second Quarter...................... 23.000 20.500 0.520
Third Quarter....................... 23.250 20.875 0.520
Fourth Quarter...................... 25.250 23.000 0.520
1997
First Quarter....................... $25.500 $23.625 $0.520
Second Quarter...................... 25.000 22.250 0.525
Third Quarter....................... 27.625 24.250 0.530
Fourth Quarter...................... 28.750 25.500 0.535
1998
First Quarter.......................
(through March 25) $29.250 $26.625 *
</TABLE>
- --------------
* The current annualized dividend rate is $2.16. The most recent quarterly
dividend was paid on February 20, 1998 to shareholders of record as of
February 3, 1998 and represents the 107th 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 statements 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, 1997, as adjusted to give effect to the sale of $100 million of
7.625% Senior Notes on March 13, 1998 and as further adjusted to give effect to
the sale of the Shares offered hereby at a public offering price of $ 27.375.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Borrowings under line of credit arrangements (1)........................ $78,400 $ --
Senior Notes Due 1998, 2000 and 2003................................... 52,000 52,000
Senior Notes Due 2001 and 2003.......................................... 30,000 30,000
Senior Notes Due 2000, 2002 and 2004................................... 80,000 80,000
Senior Notes Due 2008................................................... -- 100,000
Other long-term obligations............................................. 8,670 8,670
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 -- 24,341,030
and 25,254,272 as adjusted (2).................................... 24,341 25,254
Capital in excess of par value...................................... 435,603 458,390
Undistributed net income............................................ 8,841 8,841
Unrealized gains on investment securities available for sale........ 4,671 4,671
Unamortized restricted stock........................................ (3,532) (3,532)
-------- --------
Total shareholders' equity......................................... 469,924 493,624
-------- --------
Total capitalization............................................. $718,994 764,294
======== ========
</TABLE>
(1) The Company has a $175,000,000 unsecured line of credit arrangement with a
consortium of 12 banks and a $10,000,000 of unsecured line of credit with
one other bank. At March 17, 1998, the Company had an outstanding balance
of $31 million under its line of credit arrangements.
(2) Excludes: (i) 122,268 Shares reserved for issuance pursuant to the
Company's 1985 Incentive Stock Option Plan; (ii) 1,985,887 Shares reserved
for issuance pursuant to the Company's 1995 Stock Incentive Plan; (iii)
8,000 Shares reserved for issuance under the Company's Stock Incentive Plan
for Non-Employee Directors; and (iv) 845,075 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,
1997 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,
---------------------------------------------------------
(In thousands, except per share data)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues ...................................... $ 73,308 $ 54,402 $ 44,596 $ 42,732 $ 36,018
Expenses:
Interest expense ............................ 15,365 14,635 9,684 12,752 10,817
Provision for depreciation .................. 5,287 2,427 1,385 1,580 790
General and administrative
and other expenses (1) .................... 6,178 6,664 6,710 10,835 4,356
Settlement of management
contract (2) .............................. -- -- 5,794 -- --
-------- -------- -------- -------- --------
Total expenses ................................ 23,726 17,779 15,963 26,830 30,961
-------- -------- -------- -------- --------
Net income .................................... $ 46,478 $ 30,676 $ 13,635 $ 24,953 $ 20,055
======== ======== ======== ======== ========
OTHER DATA
Average number of shares outstanding (3):
Basic .................................... 21,594 14,093 11,710 11,519 9,339
Diluted .................................. 21,929 14,150 11,728 11,548 9,373
Cash available for distribution (4) ........... $ 56,856 $ 36,705 $ 27,938 $ 31,697 $ 22,780
PER SHARE
Net income (3):
Basic .................................... $ 2.15 $ 2.18 $ 1.16 $ 2.17 $ 2.15
Diluted .................................. 2.12 2.17 2.16 1.16 2.14
Cash distributions ............................ 2.11 2.08 2.01 2.075 1.93
BALANCE SHEET DATA
Real estate investments, net .................. $713,557 $512,894 $351,924 $318,433 $276,858
Total assets .................................. 734,327 519,831 358,092 324,102 285,024
Total debt .................................... 249,070 184,395 162,760 128,273 96,311
Total liabilities ............................. 264,403 194,295 170,494 134,922 100,892
Total shareholders' equity .................... 469,924 325,536 187,598 189,180 184,132
</TABLE>
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(1) General and administrative and other 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. 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) The earnings per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Accounting Standards No. 128,
Earnings Per Share. For further discussion of earnings per share and the
impact of Statement No. 128, see the notes to the consolidated financial
statements incorporated by reference herein.
(4) 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, 1997, the Company's net real estate investments totaled
approximately $713,557,000, which included 116 assisted living facilities, 49
nursing facilities, 10 retirement centers, six 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 1997, the Company provided permanent mortgage financings of
$46,231,000, invested $66,779,000 in operating leases, made construction
advances of $144,672,000, and funded $4,964,000 of equity related investments.
During 1997, the Company received principal payments on real estate mortgages of
$8,487,000, net draws on working capital loans of $1,529,000 and proceeds of
$41,263,000 from the prepayment of mortgage loans.
During 1997, eight of the above-mentioned construction projects completed
the construction phase of the Company's investment process and were converted to
investments in operating leases, with an aggregate investment of $37,664,000,
and 14 construction loans converted to permanent mortgage loans with an
aggregate investment balance of $104,173,000.
As of December 31, 1997, the Company had shareholders' equity of
$469,924,000 and a total outstanding debt balance of $249,070,000, which
represents a debt to equity ratio of 0.53 to 1.0.
In January 1997, in connection with the underwriters' exercise of an
over-allotment option associated with the Company's December 18, 1996 offering
of 2,200,000 shares of common stock, the Company issued 330,000 shares of Common
Stock, $1.00 par value per share, at the price of $23.875 per share, which
generated net proceeds of $7,485,000 to the Company.
In March 1997, the Company issued 3,150,000 shares of Common Stock, $1.00
par value per share, at the price of $24.375 per share, which generated net
proceeds to the Company of $72,261,000.
In March 1997, the Company closed a $175 million unsecured credit facility
which replaced the Company's then existing secured credit facility. Simultaneous
with the closing of the new credit facility, all senior noteholders released
collateral which had served as security for the Company's then outstanding $82
million of senior indebtedness.
In April 1997, the Company completed the sale of $80 million of Senior
Unsecured Notes. The Company priced $20 million of notes due 2000, $20 million
of notes due 2002 and $40 million of notes due 2004. The notes have a weighted
average interest rate of 7.91%.
In October 1997, the Company issued 2,085,500 shares of Common Stock, $1.00
par value per share, at the price of $26.625 per share, which generated net
proceeds to the Company of $52,963,000.
As of December 31, 1997, the Company had an unsecured revolving line of
credit expiring March 31, 2000 in the amount of $175,000,000 bearing interest at
the lender's prime rate or LIBOR plus 1.125%. In addition, the Company had an
unsecured revolving line of credit in the amount of $10,000,000 bearing interest
at the lenders' prime rate expiring January 31, 1999. At December 31, 1997,
under the Company's line of credit arrangements, available funding totaled
$106,600,000.
As of February 5, 1998, the Company has effective shelf registrations on
file with the Securities and Exchange Commission under which the Company may
issue up to $641,269,000 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, 1997, the Company had approximately $275,017,000 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, 1997 VS. DECEMBER 31, 1996
Revenues for the year ended December 31, 1997 were $73,308,000 compared to
$54,402,000 for the year ended December 31, 1996, an increase of $18,906,000 or
35%. Revenue growth resulted primarily from increased operating lease income of
$12,330,000, interest income of $9,264,000, and loan and commitment fees of
$429,000 from additional real estate investments made during the past twelve to
fifteen months.
The growth in interest and rental income for the year ended December 31,
1997 was offset by prepayment fees and gains on the exercise of purchase options
earned during 1996, which totaled $3,059,000 and $576,000 respectively, as
compared with prepayment fees of $529,000 earned during 1997.
Expenses for the year ended December 31, 1997, totaled $26,830,000, an
increase of $3,104,000 from expenses of $23,726,000 for the year ended December
31, 1996. The increase in total expenses for the year ended December 31, 1997
was primarily related to an increase in interest expense, additional expense
associated with the provision for depreciation, and an increase in general and
administrative expenses. Expenses for the year ended December 31, 1996 were
negatively influenced by an $808,000 disposition of investment expense
associated with the Company's elimination of certain investments in behavioral
care facilities.
Interest expense for the year ended December 31, 1997 was $15,365,000
compared with $14,635,000 for the year ended December 31, 1996. The increase in
interest expense during 1997 was primarily due to the issuance of $80,000,000
Senior Notes in April 1997. The increase in the 1997 period was offset by the
amount of capitalized interest recorded in 1997.
The Company capitalizes certain interest costs associated with funds used
to finance the construction of properties owned directly by the Company. The
amount capitalized is based upon the borrowings outstanding during the
construction period using the rate of interest which approximates the Company's
cost of financing. The Company's interest expense is reduced by the amount
capitalized. Capitalized interest for the year ended December 31, 1997 totaled
$2,306,000, as compared with $287,000 for the same period in 1996.
The provision for depreciation for the year ended December 31, 1997 totaled
$5,287,000, an increase of $2,860,000 over the year ended 1996 as a result of
additional operating lease investments.
General and administrative expense for the year ended December 31, 1997
totaled $4,858,000 as compared with $4,448,000 for the year ended December 31,
1996. The expenses for the year ended December 31, 1997 were 6.63% of revenues
as compared with 8.18% for the year ended December 31, 1996.
As a result of the various factors mentioned above, net income for the year
ended December 31, 1997 was $46,478,000, or $2.12 per share, as compared with
$30,676,000, or $2.17 per share for the year ended December 31, 1996. Net income
for the year ended December 31, 1996 included $3,635,000, or $0.26 per share, of
prepayment fees and gains on the exercise of purchase options, as compared with
$529,000, or $0.02 per share, for the year ended December 31, 1997. All per
share amounts represent diluted earnings per share.
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.
S-10
<PAGE> 11
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.
During 1996 the Company stated its 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
were 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 $2.17 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. All per share amounts represent diluted
earnings per share.
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. 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 longterm interest rates do not
increase significantly, the Company believes that equity and debt financing will
continue to be available.
OTHER INFORMATION
This document and supporting schedules may contain "forward-looking"
statements as defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties,
which may cause the Company's actual results in the future to differ materially
from expected results. These risks and uncertainties include, among others,
competition in the financing of health care facilities, the availability of
capital, and regulatory and other changes in the health care sector, as
described in the Company's filings with the Securities and Exchange Commission.
The Company has assessed its current computer software for proper
functioning with respect to dates in the year 2000 and thereafter. The year 2000
issue and related costs are not expected to have a material impact on the
operations of the Company.
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:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS
- ------------------
NAME AGE OFFICE
- ---- --- ------
<S> <C>
George L. Chapman............... 50 Chairman of the Board, Chief Executive Officer and President
Raymond W. Braun................ 40 Vice President, Chief Operating Officer
Edward F. Lange, Jr............. 38 Vice President, Chief Financial Officer and Treasurer
Erin C. Ibele................... 36 Vice President and Corporate Secretary
BOARD OF DIRECTORS
- ------------------
NAME AGE OCCUPATION
- ---- --- ----------
William C. Ballard, Jr.......... 57 Of Counsel, Greenebaum, Doll & McDonald PLLC and Director, United HealthCare
Corporation, Atria Communities, Inc., Mid-America Bancorp., LG&E Energy Corp.
and American Safety Razor Co.
Pier C. Borra................... 58 Chairman, President and CEO of CORA Health Services, Inc., Lima, Ohio, and
former Chairman, President and Chief Executive Officer of Arbor Health Care
Company, Lima, Ohio
George L. Chapman............... 50 Chairman of the Board, Chief Executive Officer and President of the Company
Jeffrey H. Donahue.............. 51 Senior Vice President and Chief Financial Officer of The Rouse Company
Bruce Douglas................... 65 Chairman and Chief Executive Officer of The Douglas Company, Toledo, Ohio
Richard C. Glowacki............. 65 President of The Danberry Management Company, Toledo, Ohio
Sharon M. Oster................. 49 Professor of Management, Yale School of Management, Yale University and Director
of the Aristotle Corporation and Transpro, Inc.
Bruce G. Thompson............... 68 President and Director of First Toledo Corporation, Toledo, Ohio
Richard A. Unverferth........... 74 Chairman of Unverferth Manufacturing Company, Inc. and Chairman of the Board of
H.C.F. Inc., Kalida, Ohio
Frederic D. Wolfe............... 68 Chairman of the Board and Director of First Toledo Corporation, Toledo, Ohio
</TABLE>
S-12
<PAGE> 13
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"). The Company believes that it was
organized and has operated in such a manner as to qualify for taxation as a REIT
under the Code, and the Company intends to continue to operate in such a manner,
but no assurance can be given that it will operate in a manner so as to qualify
or remain qualified.
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. Beginning in 1998 any net capital gains retained by the Company
will be taxable to the shareholders as if the Company distributed those gains
and the shareholders will receive a tax credit for a proportionate amount of tax
paid by the Company. 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 a material adverse effect upon shareholder
and 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, 1997.
EACH INVESTOR IS ADVISED TO CONSULT SUCH INVESTOR'S OWN TAX ADVISOR
REGARDING THE TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP
AND SALE OF THE SHARES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
S-13
<PAGE> 14
UNDERWRITING
Pursuant to the terms and subject to the conditions of the Underwriting
Agreement (the "Underwriting Agreement") between the Company and EVEREN
Securities, Inc. (the "Underwriter"), the Underwriter has agreed to purchase
from the Company, and the Company has agreed to sell to the Underwriter,
913,242 shares.
The Underwriter intends to sell the Shares to Nike Securities L.P., which
intends to deposit such shares, together with Shares of common stock of other
entities also acquired from the Underwriter, into a newly-formed unit investment
trust (the "Trust") registered under the Investment Company Act of 1940, as
amended, in exchange for units in the Trust. The Underwriter is not an affiliate
of Nike Securities L.P. or the Trust. The Underwriter intends to sell the Shares
to Nike Securities L.P. at an aggregate purchase price of $24,175,000. It is
anticipated that the Underwriter will also participate as sole underwriter in
the distribution of units of the Trust and will receive compensation therefor.
Pursuant to the Underwriting Agreement, the Company has agreed to indemnify
the Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the Underwriter
may be required to make in respect thereof.
Until the distribution of the Shares is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriter to bid for and
purchase shares of the Company's Common Stock. As an exception to these rules,
the Underwriter is permitted to engage in certain transactions that stabilize
the price of the Company's Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Shares. It is not currently anticipated that the Underwriter will engage in any
such transactions in connection with this offering.
If the Underwriter creates a short position in the Shares in connection
with this offering, i.e., if it sells more Shares than are set forth on the
cover page of this Prospectus Supplement, the Underwriter may reduce that short
position by purchasing Shares in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above might have on the price of the Shares. In addition, neither the
Company nor the Underwriter makes any representation that the Underwriter will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
In the ordinary course of business, the Underwriter and its affiliates have
engaged, and may in the future engage, in investment banking transactions with
the Company.
LEGAL MATTERS
The validity of the Shares offered hereby, as well as certain legal matters
relating to the Company, will be passed upon for the Company by Shumaker, Loop &
Kendrick, LLP, Toledo, Ohio. Certain legal matters related to the offering will
be passed upon for the Underwriter by Chapman and Cutler, Chicago, Illinois.
Chapman and Cutler will rely on the opinion of Shumaker, Loop & Kendrick, LLP as
to certain matters of Delaware law.
S-14
<PAGE> 15
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 $500,000,000, 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 6, 1998, the reported last
sale price of the shares of Common Stock on the New York Stock Exchange was $28
1/4 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 JANUARY 7, 1998
<PAGE> 16
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith files reports, proxy statements and
other information with the SEC. Such reports, proxy statements and other
information filed by the Company with the SEC can be inspected and copied at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Room 1024, Washington, DC 20549, and at the SEC's regional offices at 7 World
Trade Center, 13th Floor, NY, NY 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, DC, 20549 upon payment of the prescribed fees, or at the Web
site maintained by the SEC (http://www.sec.gov), that contains reports, proxy
statements and other information regarding firms (including the Company) that
file electronically with the Commission. In addition, such materials may also be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, NY, NY
10005.
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, 1996.
2. Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1997.
3. Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1997.
4. Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1997.
5. Current Reports on Form 8-K filed with the Commission on March 6, 1997,
April 8, 1997 April 21, 1997 and October 24, 1997.
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> 17
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, 1997, 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 105 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,
SEPT. 30, --------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to fixed
charges (unaudited) . . . . . . . . . . . . . . 3.39 2.93 2.01 3.42 2.80 2.97
</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> 18
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> 19
(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
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(19) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
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
(iv) 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
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during the period from the close of business on any record 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 to avoid paying any excise taxes)
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
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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 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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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. Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a Global Security may not be
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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.
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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 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 24,124,633 shares of
common stock, $1.00 par value per share (the "Common Stock"), on October 31,
1997. 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
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1,000 times the amount per share paid on the Common Stock, and (c) a 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 such
series of
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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, at a redemption price per share to
be
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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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<PAGE> 30
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
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<PAGE> 31
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.
Certain of the underwriters and their affiliates may be customers of,
engaged in transaction 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, 1996, 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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<PAGE> 32
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 Underwriter. 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>
<CAPTION>
TABLE OF CONTENTS
Page
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PROSPECTUS SUPPLEMENT
<S> <C>
Properties................................................S-2
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
Taxation.................................................S-13
Underwriting.............................................S-14
Legal Matters............................................S-14
PROSPECTUS DATED JANUARY 7, 1998
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..........................................11
Plan of Distribution.......................................15
Legal Opinions.............................................16
Experts....................................................17
</TABLE>
913,242 SHARES
--------
HEALTH CARE REIT
COMMON STOCK
--------------------------
PROSPECTUS SUPPLEMENT
----------------------------
EVEREN SECURITIES, INC.
March 25, 1998
