<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number 1-9028
NATIONWIDE HEALTH PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 95-3997619
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
610 Newport Center Drive, Suite 1150
Newport Beach, California 92660
(Address of principal executive offices)
(949) 718-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Shares of registrant's common stock, $.10 par value, outstanding at October
15, 1998 - 46,205,013.
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<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
FORM 10-Q
September 30, 1998
TABLE OF CONTENTS
Part I--Financial Information
Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets.................. 2
Condensed Consolidated Statements of Operations........ 3
Condensed Consolidated Statements of Cash Flows........ 4
Notes to Condensed Consolidated Financial Statements... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8
Part II--Other Information
Item 6. Exhibits and Reports on Form 8-K....................... 11
1
<PAGE>
PART I
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Investments in real estate
Real estate properties:
Land...................................................... $ 143,792 $ 120,236
Buildings and improvements................................ 982,299 809,217
Construction in progress.................................. 53,798 31,078
---------- ----------
1,179,889 960,531
Less accumulated depreciation............................. (125,559) (107,077)
---------- ----------
1,054,330 853,454
Mortgage loans receivable, net............................... 208,094 199,819
---------- ----------
1,262,424 1,053,273
Cash and cash equivalents....................................... 13,153 10,192
Receivables..................................................... 5,945 4,362
Other assets.................................................... 14,036 9,567
---------- ----------
$1,295,558 $1,077,394
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank borrowings................................................. $ 30,400 $ 19,600
Senior notes due 2000-2038...................................... 480,150 355,000
Convertible debentures.......................................... 57,456 64,512
Notes and bonds payable......................................... 66,584 58,297
Accounts payable and accrued liabilities........................ 47,589 26,939
Stockholders' equity:
Preferred stock $1.00 par value; 5,000,000 shares authorized;
Issued and outstanding: 1998-1,000,000; 1997-1,000,000,
stated at liquidation preference of $100 per share........ 100,000 100,000
Common stock $.10 par value; 100,000,000 shares authorized;
Issued and outstanding: 1998-46,205,013; 1997-43,128,889.. 4,621 4,313
Capital in excess of par value............................... 555,879 490,737
Cumulative net income........................................ 420,258 363,896
Cumulative dividends......................................... (467,379) (405,900)
---------- ----------
Total stockholders' equity............................. 613,379 553,046
---------- ----------
$1,295,558 $1,077,394
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Minimum rent.......................................... $27,000 $19,876 $ 75,536 $56,623
Interest and other income............................. 5,613 5,891 17,009 15,986
Additional rent and additional interest............... 4,012 3,529 11,729 10,187
------- ------- -------- -------
36,625 29,296 104,274 82,796
Expenses:
Interest and amortization of deferred financing costs. 9,909 7,873 26,745 20,639
Depreciation and non-cash charges..................... 7,232 4,749 20,035 14,001
General and administrative............................ 1,158 961 3,453 2,774
------- ------- -------- -------
18,299 13,583 50,233 37,414
------- ------- -------- -------
Net income before gain on sale of properties........... 18,326 15,713 54,041 45,382
Gain on sale of properties............................. -- 829 2,321 829
------- ------- -------- -------
Net income............................................. 18,326 16,542 56,362 46,211
Preferred stock dividends.............................. (1,919) (43) (5,758) (43)
------- ------- -------- -------
Net income available to common stockholders............ $16,407 $16,499 $ 50,604 $46,168
======= ======= ======== =======
Per share amounts:
Basic/diluted income from continuing operations
available to common stockholders.................... $ .37 $ .37 $ 1.09 $ 1.08
======= ======= ======== =======
Basic/diluted net income available to common
stockholders........................................ $ .37 $ .39 $ 1.15 $ 1.10
======= ======= ======== =======
Dividends paid per share.............................. $ .42 $ .39 $ 1.26 $ 1.17
======= ======= ======== =======
Weighted average shares outstanding.................... 44,793 41,910 44,108 41,838
======= ======= ======== =======
</TABLE>
See accompanying notes.
3
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net income.......................................... $ 56,362 $ 46,211
Gain on sale of properties.......................... (2,321) (829)
Depreciation and non-cash charges................... 20,035 14,001
Amortization of deferred financing costs............ 692 581
Net decrease in other assets and liabilities........ 14,493 6,951
--------- ---------
Net cash provided by operating activities....... 89,261 66,915
Cash flow from investing activities:
Acquisition of real estate properties............... (210,885) (182,656)
Disposition of real estate properties............... 5,496 4,827
Investment in mortgage loans receivable............. (17,767) (43,898)
Principal payments on mortgage loans receivable..... 6,950 1,542
--------- ---------
Net cash used in investing activities........... (216,206) (220,185)
Cash flow from financing activities:
Bank borrowings..................................... 219,600 244,100
Repayment of bank borrowings........................ (208,800) (276,400)
Issuance of senior unsecured debt................... 125,150 165,000
Issuance of common stock............................ 53,062 1
Issuance of preferred stock......................... -- 97,250
Dividends paid...................................... (61,479) (48,957)
Issuance of notes and bonds......................... 3,981 --
Principal payments on notes and bonds............... (301) (60)
Other, net.......................................... (1,307) (1,454)
--------- ---------
Net cash provided by financing activities....... 129,906 179,480
--------- ---------
Increase in cash and cash equivalents................... 2,961 26,210
Cash and cash equivalents, beginning of period.......... 10,192 11,709
--------- ---------
Cash and cash equivalents, end of period................ $ 13,153 $ 37,919
========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
(i) The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, and include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results of operations for the three-month and nine-month periods ended September
30, 1998 and 1997 pursuant to the rules and regulations of the Securities and
Exchange Commission. All such adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. Although
the Company believes that the disclosures in such financial statements are
adequate to make the information presented not misleading, these condensed
consolidated financial statements should be read in conjunction with the
Company's financial statements and the notes thereto included in the Company's
1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the three-month and nine-month periods
ended September 30, 1998 and 1997 are not necessarily indicative of the results
for a full year.
(ii) The Company invests in health care related real estate and, as of
September 30, 1998, had investments in 337 facilities located in 33 states. The
facilities include 198 skilled nursing facilities, 104 assisted living
facilities, 14 continuing care retirement communities, 16 residential care
facilities for the elderly, 2 rehabilitation hospitals and 3 medical clinics.
The Company's facilities are operated by 60 different operators, including the
following publicly traded companies: Alternative Living Services, Inc., American
Retirement Corporation, ARV Assisted Living, Inc., Assisted Living Concepts,
Inc., Beverly Enterprises, Inc., Extendicare Health Services, Inc., Harborside
Healthcare Corporation, HEALTHSOUTH Corporation, Integrated Health Services,
Inc., Lexington Healthcare Group, Inc., Mariner Post-Acute Network, Inc.,
NewCare Health Corporation, Res-Care, Inc., Sun Healthcare Group, Inc. and
UNISON HealthCare Corporation. Of the operators of the facilities, only
Alternative Living Services, Inc. and Beverly Enterprises, Inc. account for more
than 10% of the Company's revenues. They accounted for 12% and 15%,
respectively, of the Company's total revenues for the nine months ended
September 30, 1998.
As of September 30, 1998, the Company had direct ownership of 154
skilled nursing facilities, 96 assisted living facilities, 9 continuing care
retirement communities, 16 residential care facilities for the elderly, 2
rehabilitation hospitals and 3 medical clinics. All of the Company's owned
facilities are leased under "net" leases (the "Leases"), which are accounted for
as operating leases.
The Leases have initial terms ranging from 9 to 19 years, and generally
the Leases have two or more multiple-year renewal options. The Company earns
fixed monthly minimum rents and may earn periodic additional rents. The
additional rent payments are generally computed as a percentage of facility net
patient revenues in excess of base amounts or as a percentage of the increase in
the Consumer Price Index. Additional rents are generally calculated and payable
monthly or quarterly. Most leases contain provisions such that the total rent
cannot decrease from one year to the next. Most Leases contain cross-
collateralization and cross-default provisions tied to other Leases with the
same lessee, as well as grouped lease renewals and grouped purchase options.
Obligations under the Leases have corporate guarantees, and Leases covering 176
facilities are backed by irrevocable letters of credit or security deposits that
cover 1 to 12 months of monthly minimum rents. Under the terms of the Leases,
the lessee is responsible for all maintenance, repairs, taxes and insurance on
the leased properties.
As of September 30, 1998, the Company held 34 mortgage loans secured by
44 skilled nursing facilities, 8 assisted living facilities and 5 continuing
care retirement communities. As of September 30, 1998, the mortgage loans had a
net book value of approximately $208,094,000 with individual outstanding
balances ranging from approximately $571,000 to $21,500,000 and maturities
ranging from 1999 to 2031.
5
<PAGE>
(iii) Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average common shares outstanding. Income
available to common stockholders is calculated by deducting dividends declared
on preferred stock from income from continuing operations and net income.
Diluted earnings per share includes the effect of the potential shares
outstanding: dilutive stock options and dilutive convertible debentures. The
effect of convertible debentures was not dilutive in 1998 and 1997.
<TABLE>
<CAPTION>
Three months ended September 30,
1998 1997
---------------- ----------------
Income Shares Income Shares
------- ------ ------- ------
(in thousands)
<S> <C> <C> <C> <C>
Income before gain on sale of properties $18,326 $15,713
Less: preferred stock dividends 1,919 43
------- -------
Amounts used to calculate Basic EPS 16,407 44,793 15,670 41,910
Effect of dilutive securities:
Stock options -- 7 -- 14
6.25% Convertible debentures -- -- -- --
------- ------ ------- ------
Amounts used to calculate Diluted EPS $16,407 44,800 $15,670 41,924
======= ====== ======= ======
<CAPTION>
Nine months ended September 30,
1998 1997
---------------- ----------------
Income Shares Income Shares
------- ------ ------- ------
(in thousands)
<S> <C> <C> <C> <C>
Income before gain on sale of properties $54,041 $45,382
Less: preferred stock dividends 5,758 43
------- -------
Amounts used to calculate Basic EPS 48,283 44,108 45,339 41,838
Effect of dilutive securities:
Stock options -- 9 -- 7
6.25% Convertible debentures -- -- -- --
------- ------ ------- ------
Amounts used to calculate Diluted EPS $48,283 44,117 $45,339 41,845
======= ====== ======= ======
</TABLE>
(iv) The Company qualifies as a real estate investment trust under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended. The Company
intends to continue to qualify as such and therefore to distribute at least
ninety-five percent (95%) of its taxable income to its stockholders.
Accordingly, no provision has been made for federal income taxes.
(v) During the nine-month period ended September 30, 1998, the Company
acquired 11 skilled nursing facilities, 14 assisted living facilities, 2
continuing care retirement communities and 8 residential care facilities for the
elderly in 20 separate transactions for an aggregate investment of approximately
$98,582,000. Construction of 10 assisted living facilities, 1 continuing care
retirement community and 2 clinics was also completed, in which the Company's
total aggregate investment was $82,886,000, $42,771,000 of which was a current
year investment included in the new construction financing amount below. Upon
acquisition or completion of construction, as applicable, the facilities were
concurrently leased under terms generally similar to the Company's existing
leases. During the nine-month period ended September 30, 1998, the Company
provided new construction financing of approximately $107,096,000. The Company
also funded approximately $13,239,000 in capital improvements in
6
<PAGE>
accordance with certain existing lease provisions. Such capital improvements
will result in an increase in the minimum rents earned by the Company.
During the nine-month period ended September 30, 1998, the Company
provided three mortgage loans, secured by one skilled nursing facility and two
assisted living facilities, in an aggregate amount of $11,615,000.
During the nine months ended September 30, 1998, the Company funded an
additional $6,142,000 on existing mortgage loans. Such additional amounts
funded will result in an increase in interest income earned by the Company.
During the nine-month period ended September 30, 1998, the Company sold
two skilled nursing facilities in two separate transactions for an aggregate
price of approximately $5,512,000, less transaction costs, resulting in an
aggregate gain of approximately $2,321,000.
During the nine months ended September 30, 1998, two of the Company's
mortgage loans matured and were repaid in full in an aggregate principal amount
of approximately $5,382,000.
During the nine-month period ended September 30, 1998, the Company
issued $125,150,000 in aggregate principal amount of medium-term notes. The
notes bear fixed interest at a weighted average rate of 6.89% and have a
weighted average maturity of 16.2 years.
(vi) On April 29, 1998, the Company issued 1,048,128 shares of common stock
resulting in aggregate proceeds, net of the underwriter's fee, of approximately
$23,214,000 before expenses related to the offering.
On September 25, 1998, the Company issued 1,500,000 shares of common
stock resulting in aggregate proceeds, net of the underwriter's fee, of
approximately $30,000,000 before expenses related to the offering.
(vii) The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130 Reporting Comprehensive Income and SFAS No. 131 Disclosures
about Segments of an Enterprise and Related Information which were issued in
June 1997. The adoption of SFAS No. 130 and SFAS No. 131 is required in 1998.
There are no differences between the Company's net income, as reported, and
comprehensive income, as defined, for the periods presented. The Company
believes it operates in only one business segment.
EITF Issue No. 97-11 Accounting for Internal Costs Relating to Real
Estate Property Acquisitions released by the Emerging Issues Task Force of the
Financial Accounting Standards Board which prohibits the capitalization of
internal costs related to the acquisition of operating property was issued
during the first quarter of 1998. The impact of this pronouncement is immaterial
to the Company's financial statements.
EITF Issue 98-9 Accounting for Contingent Rent in Interim Financial
Periods released by the Emerging Issues Task Force of the Financial Accounting
Standards Board requires lessors to defer recognition of contingent rental
income in interim periods until the specific target that triggers the contingent
rental income is achieved. Under most of the Company's Leases the specific
targets that trigger contingent rental income are met either monthly or
quarterly and, therefore, EITF Issue 98-9 would not impact the Company's
quarterly accounting for those Leases. The impact of the deferral of rental
income recognition related to the Company's Leases under which the specific
targets are annual is not material to the Company's financial condition or
results of operations.
7
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
September 30, 1998
Statement Regarding Forward Looking Disclosure
Certain information contained in this report includes forward looking
statements, which can be identified by the use of forward looking terminology
such as "may," "will," "expect," "should" or comparable terms or the negative
thereof. These statements involve risks and uncertainties that could cause
actual results to differ materially from those described in the statements.
These risks and uncertainties include (without limitation) the following: the
effect of economic and market conditions and changes in interest rates,
government regulations, including changes in Medicare and Medicaid payment
levels, changes in the health industry, the amount of any additional
investments, access to capital markets and changes in the ratings of the
Company's debt securities or preferred stock.
Operating Results
Nine Months 1998 Compared to Nine Months 1997
Revenues for the nine months ended September 30, 1998 increased $21,478,000 or
26% over the same period in 1997. The increase is due to increased minimum rent
and interest income resulting from additional investments in real estate
properties and mortgage loans receivable during the last twelve months. The
increase was also attributable to increased additional rent and additional
interest earned under the Company's existing leases and mortgage loans
receivable based on increases in the facility revenues and the Consumer Price
Index.
Total expenses for the nine-month period ended September 30, 1998 increased
$12,819,000 or 34% over the same period in 1997. The increase is due to
increased interest expense as a result of the issuance of fixed rate medium-term
notes during the last twelve months and to increased depreciation in connection
with the acquisition of additional facilities during the last twelve months.
In addition, during the nine months ended September 30, 1998, the Company
recognized a gain of approximately $2,321,000 from the sale of two skilled
nursing facilities.
Third Quarter 1998 Compared to Third Quarter 1997
Revenues for the three months ended September 30, 1998 increased $7,329,000 or
25% over the same period in 1997. The increase is due to increased minimum rent
and interest income resulting from additional investments in real estate
properties and mortgage loans receivable during the last twelve months,
partially offset by the payoff of certain mortgage loans during the same period.
The increase was also attributable to increased additional rent and additional
interest earned under the Company's existing leases and mortgage loans
receivable based on increases in the facility revenues and the Consumer Price
Index.
Total expenses for the three-month period ended September 30, 1998 increased
$4,716,000 or 35% over the same period in 1997. The increase is primarily due
to increased interest expense as a result of the issuance of fixed rate medium-
term notes during the last twelve months and to increased depreciation in
connection with the acquisition of additional facilities during the last twelve
months.
The Company expects increased rental revenues and interest income due to
the addition of facilities to its property base and mortgage loans receivable
over the last twelve months. The Company also expects increased additional rent
and additional interest because the Company's leases and mortgages generally
contain provisions under which additional rents or interest income increase with
increases in facility revenues and/or increases in the
8
<PAGE>
Consumer Price Index. Historically, revenues at the Company's facilities and the
Consumer Price Index generally have increased; although, there are no assurances
that they will continue to increase in the future. Sales of facilities or
repayments of mortgages would serve to offset the aforementioned revenue
increases. Additional investments in health care facilities would also increase
rental and/or interest income. As additional investments in facilities are made,
depreciation and/or interest expense could also increase. Any such increases,
however, are expected to be more than offset by rents or interest income
associated with the investments.
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130 Reporting Comprehensive Income and SFAS No. 131 Disclosures
about Segments of an Enterprise and Related Information which were issued in
June 1997. The adoption of SFAS No. 130 and SFAS No. 131 is required in 1998.
There are no differences between the Company's net income, as reported, and
comprehensive income, as defined, for the periods presented. The Company
believes it operates in only one business segment.
Issue No. 97-11 Accounting for Internal Costs Relating to Real Estate
Property Acquisitions released by the Emerging Issues Task Force of the
Financial Accounting Standards Board which prohibits the capitalization of
internal costs related to the acquisition of operating property was issued
during the first quarter of 1998. The impact of this pronouncement is
immaterial to the Company's financial statements.
EITF Issue 98-9 Accounting for Contingent Rent in Interim Financial Periods
released by the Emerging Issues Task Force of the Financial Accounting Standards
Board requires lessors to defer recognition of contingent rental income in
interim periods until the specific target that triggers the contingent rental
income is achieved. Under most of the Company's Leases the specific targets
that trigger contingent rental income are met either monthly or quarterly and,
therefore, EITF Issue 98-9 would not impact the Company's quarterly accounting
for those Leases. The impact of the deferral of rental income recognition
related to the Company's Leases under which the specific targets are annual is
not material to the Company's financial condition or results of operations.
Liquidity and Capital Resources
During the nine-month period ended September 30, 1998, the Company acquired
11 skilled nursing facilities, 14 assisted living facilities, 2 continuing care
retirement communities and 8 residential care facilities for the elderly in 20
separate transactions for an aggregate investment of approximately $98,582,000.
Construction of 10 assisted living facilities, 1 continuing care retirement
community and 2 clinics was also completed, in which the Company's total
aggregate investment was $82,886,000, $42,771,000 of which was a current year
investment included in the new construction financing amount below. Upon
acquisition or completion of construction, as applicable, the facilities were
concurrently leased under terms generally similar to the Company's existing
leases. During the nine-month period ended September 30, 1998, the Company
provided new construction financing of approximately $107,096,000. The Company
also funded approximately $13,239,000 in capital improvements in accordance with
certain existing lease provisions. Such capital improvements will result in an
increase in the minimum rents earned by the Company. The acquisitions,
construction advances and capital improvement advances were funded by borrowings
on the Company's bank line of credit, approximately $4,137,000 of debt
assumption, the issuance of $3,981,000 of debt, the issuance of 201,190 shares
of the Company's common stock and by cash on hand.
During the nine-month period ended September 30, 1998, the Company provided
three mortgage loans secured by one skilled nursing facility and two assisted
living facilities in an aggregate amount of $11,615,000. The mortgage loans
were funded by borrowings on the Company's bank line of credit and by cash on
hand.
During the nine months ended September 30, 1998, the Company funded an
additional $6,142,000 on existing mortgage loans. Such additional amounts
funded will result in an increase in interest income earned by the Company. The
additional amounts funded were financed by borrowings on the Company's bank line
of credit and by cash on hand.
9
<PAGE>
During the nine-month period ended September 30, 1998, the Company sold two
skilled nursing facilities in two separate transactions for an aggregate price
of approximately $5,512,000, less transaction costs, resulting in an aggregate
gain of approximately $2,321,000. The proceeds of the sales were used to repay
borrowings on the Company's bank line of credit.
During the nine months ended September 30, 1998, two of the Company's
mortgage loans matured and were repaid in full in an aggregate principal amount
of approximately $5,382,000. The proceeds were used to repay borrowings on the
Company's bank line of credit.
During the nine months ended September 30, 1998, the Company issued
$125,150,000 in aggregate principal amount of medium-term notes. The notes bear
fixed interest at a weighted average rate of 6.89% and have a weighted average
maturity of 16.2 years. The proceeds were used to repay borrowings on the
Company's bank line of credit.
At September 30, 1998, the Company had $69,600,000 available under its
$100,000,000 bank line of credit. The Company has shelf registrations on file
with the Securities and Exchange Commission under which the Company may issue
(a) up to $119,850,000 in aggregate principal amount of medium term notes and
(b) up to approximately $208,622,000 of securities including debt, convertible
debt, common and preferred stock. The Company anticipates issuing securities
under such shelf registrations to repay borrowings under the Company's bank line
of credit.
On April 29, 1998, the Company issued 1,048,128 shares of common stock
resulting in aggregate proceeds, net of the underwriter's fee, of approximately
$23,214,000 before expenses related to the offering. The net proceeds were used
to repay borrowings under the Company's bank line of credit.
On September 25, 1998, the Company issued 1,500,000 shares of common stock
resulting in aggregate proceeds, net of the underwriter's fee, of approximately
$30,000,000 before expenses related to the offering. The net proceeds were used
to repay borrowings under the Company's bank line of credit.
The Company anticipates making additional investments in health care
related facilities. Financing for such future investments may be provided by
borrowings under the Company's bank line of credit, private placements or public
offerings of debt or equity, and the assumption of secured indebtedness. The
Company believes it has sufficient liquidity and financing capability to finance
future investments as well as repay borrowings at or prior to their maturity.
10
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Amended and Restated Bylaws of the Company
27. Financial Data Schedule
(b) Reports on Form 8-K
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 16, 1998
NATIONWIDE HEALTH PROPERTIES, INC.
By /s/ MARK L. DESMOND
----------------------------------------
Mark L. Desmond
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
12
<PAGE>
Exhibit 3.1
BYLAWS
OF
NATIONWIDE HEALTH PROPERTIES, INC.
AS AMENDED AND RESTATED JANUARY 16, 1998
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
-----------------
corporation shall be established and maintained at the office of THE CORPORATION
TRUST INCORPORATED, 32 South Street, Baltimore, Maryland 21202, and said THE
CORPORATION TRUST INCORPORATED be the registered agent of this corporation in
charge thereof.
Section 2. Other Offices. The corporation may establish such other
-------------
offices, within or without the State of Maryland, at such place or places as the
Board of Directors from time to time may designate, or which the business of the
corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meetings. Annual meetings of stockholders for the
---------------
election of Directors and for such other business as may be stated in the notice
of the meeting, shall be held on a date and at a time designated by the Board of
Directors at such place, within or without the State of Maryland, as the Board
of Directors by resolution shall determine, and as set forth in the notice of
the meeting.
If the date of the annual meeting shall fall on a legal holiday of the
state in which the meeting is to be held, the meeting shall be held on the next
succeeding business day.
Section 2. Special Meetings. Special meetings of the stockholders,
----------------
for any purpose or purposes, may be called by the Chairman, the Chief Executive
Officer, the President, by a majority of the Board of Directors or by a majority
of the Independent Directors and shall be called by an officer upon written
request of stockholders holding in the aggregate not less than 10% of the
outstanding shares entitled to vote on the business proposed to be transacted
thereat. Such meetings may be held at such time and place, within or without
the State of Maryland, as shall be stated in the notice of the meeting. The
call of a special meeting shall state the nature of the business to be
transacted and no other business shall be considered at the meeting. A special
meeting may be called for the purpose of removing a Director.
Section 3. Notice of Meetings. Written or printed notice, stating
------------------
the place, date and time of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered to
each stockholder entitled to vote thereat at his address as it appears on the
records of the corporation, by United States mail, postage prepaid, not less
than twenty (20) nor more than sixty (60) days before the date of the meeting.
No business other than that stated in the notice shall be transacted at any
meeting without the unanimous consent of all stockholders entitled to vote
thereat.
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Section 4. Voting. At each annual meeting the stockholders entitled
------
to vote shall elect a Board of Directors, and they may transact such other
corporate business as shall be stated in the notice of the meeting. The vote
for Directors, and, upon the demand of any stockholder, the vote upon any
question before the meeting, shall be by ballot. All elections of Directors
shall be by a plurality of the votes cast, and all questions shall be decided by
a majority vote, except as otherwise provided by the Articles of Incorporation
or by the laws of the State of Maryland.
The Directors may fix a day not more than sixty (60) days prior to the
holding of any such meeting as the date as of which stockholders entitled to
notice of and to vote at such meeting shall be determined; and only stockholders
of record on such day shall be entitled to notice of or to vote at any such
meeting.
Each stockholder entitled to vote, in accordance with the terms of the
Articles of Incorporation and the provisions of these Bylaws, shall be entitled
to one vote, in person or by proxy, for each share of stock entitled to vote
held by such stockholder, but no proxy shall be voted after eleven (11) months
from its date unless such proxy provides for a longer period. In no case shall
any proxy be given for a period in excess of ten (10) years from the date of its
execution.
Section 5. Quorum. Except as provided in the next section hereof,
------
any number of stockholders together holding a majority of the stock issued and
outstanding and entitled to vote thereat, who shall be present in person or
represented by proxy at any meeting duly called, shall constitute a quorum for
the transaction of business. If, at any meeting, less than a quorum shall be
present or represented, those present, either in person or by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock shall be
present, at which time any business may be transacted which might have been
transacted at the meeting as originally noticed.
Section 6. Action Without Meeting. Except for the election of
----------------------
Directors, any action to be taken by the stock- holders may be taken without a
meeting, if, prior to such action, all stockholders entitled to vote thereon
shall consent in writing to such action being taken, and such consent shall be
treated for all purposes as a vote at a meeting.
ARTICLE III
DIRECTORS
Section 1. Number and Term. The number of Directors shall not be
---------------
less than five (5) nor more than nine (9) until changed by amendment of these
Bylaws. The exact number of Directors shall be seven (7) until changed, within
the limit specified, by a Bylaw amending this section duly adopted by the Board
of Directors or stockholders. The Directors shall be elected at the annual
meeting of stockholders, and each Director shall be elected to serve until his
successor shall be elected and shall have qualified. In no case shall the
number of Directors be less than five (5), unless changed by an amendment to the
Articles of Incorporation.
The Board of Directors of this corporation shall be classified into
three groups. Each group of Directors shall be elected for successive terms
ending at the annual meeting of stockholders the third year after election.
Directors need not be stockholders.
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Section 2. Independent Directors. At least a majority of the entire
---------------------
Board of Directors shall be Independent Directors. An Independent Director
shall mean a Director who is not, directly or indirectly, an Affiliate of the
Advisor of the corporation. An Affiliate of the Advisor shall mean a person
who: (a) is an officer or director or employee of the Advisor; (b) beneficially
owns 5% or more of any class of equity securities of the Advisor because of the
power to vote, sell, or exercise a right to acquire such securities; (c) is an
officer, director or employee of, or beneficially owns 5% or more of any class
of equity securities of, an entity that controls, is controlled by or is under
common control with the Advisor; or (d) has a member of his or her immediate
family who has one of the foregoing relationships with the Advisor.
Section 3. Quorum. A majority of the Directors shall constitute a
------
quorum for the transaction of business. If, at any meeting of the Board, there
shall be less than a quorum present, a majority of those present may adjourn the
meeting, from time to time, until a quorum is obtained, and no further notice
thereof need be given other than by announcement at said meeting which shall be
so adjourned.
Section 4. First Meeting. The newly elected Directors may hold their
-------------
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after the annual meeting of stockholders or
the time and place of such meeting may be fixed by written consent of the entire
Board.
Section 5. Election of Officers. At the first meeting, or at any
--------------------
subsequent meeting called for that purpose, the Directors shall elect the
officers of the corporation, as more specifically set forth in ARTICLE V of
these Bylaws. Such officers shall hold office until the next annual election of
officers, or until their successors are elected and shall have qualified.
Section 6. Regular Meetings. Regular meetings of the Board of
----------------
Directors shall be held, without notice, at such places and times as shall be
determined, from time to time, by resolution of the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by the Chairman, the Chief Executive Officer, the
President, or by the Secretary on four (4) days' notice to each Director. In
case such notice is delivered personally, or by telephone or telegram, it shall
be delivered at least twenty-four (24) hours prior to the time of the holding of
the meeting.
Section 8. Place of Meetings. The Directors may hold their meetings,
-----------------
and have one or more offices, and keep the books of the corporation outside the
State of Maryland at any office or offices of the corporation, or at any other
place as they from time to time by resolution may determine.
Section 9. Dispensing With Notice. The transactions of any meeting
----------------------
of the Board of Directors, however called and noticed or wherever held, shall be
as valid as though had at a meeting duly held after regular call and notice if a
quorum be present and if, either before or after the meeting, each of the
Directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes thereof. The waiver of notice or consent
need not specify the purpose of the meeting. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting need not be given to any Director
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such Director.
Section 10. Action Without Meeting. Any action required or permitted
----------------------
to be taken at any meeting of the Board of Directors, or any committee thereof,
may be taken without a meeting if, prior to such action, a written consent
thereto is signed by all members of the Board or of such committee, as the case
may be, and such written consent is filed with the minutes of the proceedings of
the Board of Directors or committee.
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Section 11. Telephonic Meetings. Unless otherwise restricted by the
-------------------
Articles of Incorporation or these Bylaws, members of the Board of Directors, or
any committee designated by the Board of Directors, may participate in a meeting
of the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
Section 12. Approval By Independent Directors. For all purposes, a
---------------------------------
transaction which is subject to approval by a majority of the Independent
Directors shall be approved if such transaction is approved by a majority of the
Directors present and entitled to vote at a meeting at which a quorum is
present, provided that the Independent Directors voting to approve the
transaction constitute an absolute majority of all Independent Directors serving
at such time.
Section 13. Duties of Independent Directors and/or Investment
-------------------------------------------------
Committee. The Independent Directors and/or the Investment Committee of the
- ---------
corporation shall have the special duties described in this section.
(a) The Independent Directors and/or the Investment Committee shall
supervise the relationship of the corporation with the Advisor and shall
evaluate the capability and performance of the Advisor before entering into or
renewing any advisory agreement ("Advisory Agreement"). The criteria used to
evaluate the performance of the Advisor shall be set forth in the minutes of a
meeting of the Board of Directors. The Independent Directors and/or the
Investment Committee shall supervise the performance of the Advisor and the
compensation paid to it by the corporation to determine that the provisions of
any Advisory Agreement between the corporation and the Advisor are being carried
out. The Independent Directors and/or the Investment Committee shall determine
at least annually that the compensation which the corporation agrees to pay to
the Advisor is reasonable in relation to the nature and the quality of services
performed. In connection with the duties set forth in this subsection 13(a),
the Independent Directors shall evaluate any competitive relationship among the
Company, Beverly Enterprises and the Company's officers and directors affiliated
with Beverly Enterprises.
(b) The Independent Directors and/or the Investment Committee shall
review the corporation's investment policies at least annually to determine that
the policies are being followed by the corporation and are in the best interests
of its stock- holders. The findings of the Independent Directors and/or the
Investment Committee shall be set forth in the minutes of meetings of the Board
of Directors. Such investment policies may be altered from time to time by the
Board of Directors with the consent of a majority of the Independent Directors
and/or the Investment Committee and without approval of the stock- holders upon
a determination that such a change is in the best interests of the corporation
and the stockholders.
(c) The Independent Directors and/or the Investment Committee shall
determine, from time to time, but at least annually, that the total fees and
expenses of the corporation are reasonable in light of the investment experience
of the corporation, its net assets, its net income, and the fees and expenses of
other comparable advisers in real estate. The findings of the Independent
Directors and/or the Investment Committee shall be set forth in the minutes of
meetings of the Board of Directors.
(d) A majority of the Independent Directors must approve all matters
in which a Beverly Enterprises related entity is involved, and must approve any
acquisition from or sale to any director, officer or employee of the Company, or
of the Advisor or any affiliate thereof, of any of the assets or other property
of the Company.
Section 14. General Powers of Directors. The Board of Directors
---------------------------
shall have the management of the business of the corporation, and, subject to
the restrictions imposed by law exercise all the powers of the corporation.
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Section 15. Specific Powers of Directors. Without prejudice to such
----------------------------
general powers, it hereby is expressly declared that the Directors shall have
the following powers:
(1) To make and change regulations, not inconsistent with these
Bylaws, for the management of the business and affairs of the
corporation.
(2) To purchase or otherwise acquire for the corporation any
property, rights or privileges which the corporation is authorized to
acquire.
(3) To pay for any property purchased for the corporation, either
wholly or partly in money, stock, bonds, debentures or other
securities of the corporation.
(4) To borrow money and make and issue notes, bonds and other
negotiable and transferable instruments, mortgages, deeds of trust and
trust agreements, and to do every act and thing necessary to
effectuate the same.
(5) To remove any officer for cause, or any officer, other than
the President, summarily, without cause, and, in their discretion,
from time to time to devolve the powers and duties of any officer upon
any other person for the time being.
(6) To appoint and remove or suspend subordinate officers or
agents as they may deem necessary, and to determine their duties, and
to fix and from time to time to change their salaries or remuneration,
and to require security as and when they think fit.
(7) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers and agents.
(8) To determine who shall be authorized, on behalf of the
corporation, to make and sign bills, notes, acceptances, endorsements,
contracts and other instruments.
(9) To determine who shall be entitled, in the name and on behalf
of the corporation, to vote upon or to assign and transfer any shares
of stock, bonds or other securities of other corporations held by this
corporation.
(10) To delegate any of the powers of the Board, in relation to
the ordinary business of the corporation, to any standing or special
committee, or to any officer or agent (with power to sub-delegate),
upon such terms as they deem fit.
(11) To call special meetings of the stockholders for any purpose
or purposes.
(12) To appoint the accountants and attorneys for the corporation.
Section 16. Compensation. Directors shall receive a stated salary
------------
for their services as Directors and, by resolution of the Board, a fixed fee and
expenses of attendance for attendance at each meeting.
Nothing herein contained shall be construed to preclude any Director
from serving the corporation in any other capacity as an officer, agent, or
otherwise, and as to Independent Directors, receiving compensation therefor.
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ARTICLE IV
COMMITTEES
Section 1. Appointments and Powers. The Board of Directors may, by
-----------------------
resolution or resolutions passed by a majority of the whole Board, designate one
or more committees. The Board of Directors may designate one or more Directors
as alternative members of a committee who may replace any absent or disqualified
member at any meeting of the committee. Such alternate members shall not be
counted for purposes of determining a quorum unless so appointed, in which case
they shall be counted in the place of the absent or disqualified member. The
committee, to the extent provided in said resolution or resolutions or in these
Bylaws, shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the corporation and may have power to
authorize the seal of the corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may
be stated in these Bylaws or as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 2. Minutes. Committees shall keep regular minutes of their
-------
proceedings, and report the same to the Board of Directors when required.
Section 3. Audit Committee. The Audit Committee shall select and
---------------
engage in behalf of the corporation, subject to the consent of the stockholders,
and fix the compensation of, a firm of certified public accountants whose duty
it shall be to audit the books and accounts of the corporation and its
subsidiaries for the fiscal year in which they are appointed, and who shall
report to such Committee. The Audit Committee shall confer with the auditors
and shall determine, and from time to time shall report to the Board of
Directors upon the scope of the auditing of the books and accounts of the
corporation and its subsidiaries. The Audit Committee shall also be responsible
for determining that the business practices and conduct of employees and other
representatives of the corporation and its subsidiaries comply with the policies
and procedures of the corporation. None of the members of the Audit Committee
shall be officers or employees of the corporation.
Section 4. Investment Committee. The Investment Committee shall
--------------------
consist solely of Independent Directors and shall have the power to approve real
estate acquisition and other investments in the best interests of the
corporation. The Investment Committee shall have such other powers as may be
delegated by the Board of Directors from time to time. The Investment Committee
shall also have the special duties described in ARTICLE III, SECTION 13.
ARTICLE V
OFFICERS
Section 1. Officers. The officers shall be elected at the first
--------
meeting of the Board of Directors after each annual meeting of stockholders.
The Directors shall elect a Chairman, a Chief Executive Officer, a President, a
Secretary and a Treasurer and one or more Vice Presidents as they may deem
proper. Any person may hold two or more offices.
The Board of Directors may appoint such other officers and agents as
it may deem advisable, who shall hold office for such terms and shall exercise
such powers and perform such duties as shall from time to time be determined by
the Board of Directors.
Section 2. Chairman. The Chairman, if one be elected, shall preside
--------
at all meetings of the Board of Directors and stockholders, and he shall have
and perform such other duties as from time to time may be assigned to him by the
Board of Directors.
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Section 3. Chief Executive Officer. The Chief Executive Officer
-----------------------
shall have the general powers and duties of supervision and management usually
vested in the office of Chief Executive Officer of a corporation. He shall have
general supervision, direction and control of the business of the corporation.
Except as the Board of Directors shall authorize the execution thereof in some
other manner, he shall execute bonds, mortgages and other contracts on behalf of
the corporation, and he shall cause the corporate seal to be affixed to any
instrument requiring it, and when so affixed the seal shall be attested by the
Secretary or Treasurer, or an Assistant Secretary or an Assistant Treasurer.
Section 4. President. The President shall have the general powers
---------
and duties of supervision and management usually vested in the office of
President of a corporation. He shall have general supervision, direction and
control of the business of the corporation. Except as the Board of Directors
shall authorize the execution thereof in some other manner, he shall execute
bonds, mortgages and other contracts on behalf of the corporation, and he shall
cause the corporate seal to be affixed to any instrument requiring it, and when
so affixed the seal shall be attested by the Secretary or the Treasurer, or an
Assistant Secretary or an Assistant Treasurer.
Section 5. Vice Presidents. Each Vice President shall have such
---------------
powers and shall perform such duties as are usually vested in the office of Vice
President of a corporation. Except as the Board of Directors shall authorize
the execution thereof in some other manner, he shall execute bonds, mortgages
and other contracts on behalf of the corporation, and he shall cause the
corporate seal to be affixed to any instrument requiring it, and when so affixed
the seal shall be attested by the Secretary or the Treasurer, or an Assistant
Secretary or an Assistant Treasurer.
Section 6. Secretary. The Secretary shall give, or cause to be
---------
given, notice of all meetings of stockholders and Directors, and all other
notices required by law or by these Bylaws, and, in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the Chairman, the Chief Executive Officer, the President,
the Board of Directors, or the stockholders, upon whose requisition the meeting
is called as provided in these Bylaws. He shall record all proceedings of
meetings of the stockholders and of the Board of Directors in a book to be kept
for that purpose, and shall perform such other duties as may be assigned to him
by the Directors or the President. He shall have custody of the corporate seal,
and shall affix said seal to all instruments requiring it, when authorized by
the Board of Directors or the President, and shall attest the same.
Section 7. Treasurer. The Treasurer shall have the custody of the
---------
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation. He shall
deposit all monies and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors or the President, taking proper vouchers for
such disbursements. He shall render to the President and the Board of
Directors, at the regular meetings of the Board, or whenever they may request
it, an accounting of all his transactions as Treasurer, and of the financial
condition of the corporation.
If required by the Board of Directors, he shall give the corporation a
bond for the faithful discharge of his duties, in such amount and with such
surety as the Board shall prescribe.
Section 8. Assistant Secretaries and Assistant Treasurers. Assistant
----------------------------------------------
Secretaries and Assistant Treasurers, if any, shall be appointed by the Chief
Executive Officer, the President or Vice President and shall have such powers
and shall perform such duties as shall be assigned to them, respectively, by the
Secretary and by the Treasurer.
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ARTICLE VI
RESIGNATIONS; FILLING OF VACANCIES;
INCREASE IN NUMBER OF DIRECTORS;
REMOVAL FROM OFFICE
Section 1. Resignations. Any Director, member of a committee, or
------------
other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and, if no time be
specified, at the time of its receipt by the Board of Directors, the President
or the Secretary. The acceptance of a resignation shall not be necessary to
make it effective.
Section 2. Filling of Vacancies. If the office of any officer,
--------------------
Director or member of a committee becomes vacant, the remaining Directors in
office, although less than a quorum, may appoint, by a majority vote, any
qualified person to fill such vacancy, who shall hold office for the unexpired
term of his predecessor, or until his successor is elected and shall have
qualified. Independent Directors shall fill vacancies among the Independent
Directors' positions. Each Independent Director shall hold office for the
unexpired term of his predecessor, or until his successor is elected and
qualified.
Any vacancy occurring by reason of an increase in the number of
Directors may be filled by action of a majority of the entire Board, for a term
of office continuing only until the next election by the stockholders of
Directors within the Group to which the new Director is appointed, or may be
filled by the affirmative vote of the holders of a majority of the shares then
entitled to vote at an election of Directors.
Section 3. Removal From Office. At a meeting of stockholders
-------------------
expressly called for such purpose, any or all members of the Board of Directors
may be removed, with or without cause, by a vote of the holders of not less than
two-thirds (2/3) of the issued and outstanding capital stock entitled to vote
thereon or by a unanimous vote of all other members of the Board of Directors,
and said stockholders may elect a successor or successors to fill any resulting
vacancies, for the unexpired terms of the removed Directors.
Any officer or agent, or member of a committee elected or appointed by
the Board of Directors, may be removed by said Board whenever, in its judgment,
the best interests of the corporation shall be served thereby.
ARTICLE VII
CAPITAL STOCK
Section 1. Certificates of Stock. Certificates of stock, numbered,
---------------------
and with the seal of the Corporation affixed, signed by the Chairman, the Chief
Executive Officer, the President or a Vice President, and the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, shall be issued
to each stockholder, certifying to the number of shares owned by him in the
corporation. Whenever any certificate is countersigned, or otherwise
authenticated by a transfer agent or registrar, the signatures of such Chairman,
Chief Executive Officer, President, Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer may be facsimiles.
In case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issue.
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Section 2. Lost Certificates. A new certificate of stock may be
-----------------
issued in place of any certificate theretofore issued by the corporation and
alleged to have been lost or destroyed, and the Directors may, at their
discretion, request the owner of the lost or destroyed certificate, or his legal
representative, to give the corporation a bond, in such sum as they may direct,
but not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
any such certificate.
Section 3. Transfer of Shares. Subject to the restrictions that may
------------------
be contained in the Articles of Incorporation, the shares of stock of the
corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized representatives.
Section 4. Dividends. Subject to the provisions of the Articles of
---------
Incorporation and the laws of the State of Maryland, the Board of Directors may,
at any regular or special meeting, declare dividends upon the capital stock of
the corporation, as and when they may deem expedient.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 1. Corporate Seal. The Board of Directors shall adopt a
--------------
common seal of the corporation. Said seal shall be circular in form and shall
contain the name of the corporation, Nationwide Health Properties, Inc., the
date of its organization, and the words: "Incorporated-Maryland." It may be
used by causing it or a facsimile thereof to be impressed, affixed, or otherwise
reproduced.
Section 2. Fiscal Year. The fiscal year of the corporation shall end
-----------
on the 31st day of December of each calendar year.
Section 3. Checks, Drafts, Notes. All checks, drafts, or other
---------------------
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation, and in such manner as from time to time
shall be determined by resolution of the Board of Directors.
Section 4. Corporate Records. The corporation shall keep correct and
-----------------
complete books of account and minutes of the proceedings of its stockholders and
Directors.
The corporation shall keep and maintain at its principal offices a
certified copy of its Articles of Incorporation and all amendments thereto, a
certified copy of its Bylaws and all amendments thereto, a stock ledger or
duplicate stock ledger, revised annually, containing the names, alphabetically
arranged, of all stockholders, their residence addresses, and the number of
shares held by them, respectively. In lieu of the stock ledger or duplicate
stock ledger, a statement may be filed in the principal office stating the name
of the custodian of the stock ledger or duplicate stock ledger, and the present
and complete cost office address (including street and number, if any) where
such stock ledger or duplicate stock ledger is kept.
The Independent Directors shall take all reasonable steps to assure
that a full and correct annual statement of the affairs of the corporation is
prepared annually, including a balance sheet and a financial statement of
operations for the preceding fiscal year which shall be certified by independent
certified Public accountants, and distributed to stockholders within 120 days
after the close of the corporation's fiscal year and a reasonable period of time
prior to the annual meeting of stockholders. Such annual statement shall also
be submitted at the annual meeting and shall be filed within twenty (20) days
thereafter at the principal office of the corporation. The Independent
Directors shall also be responsible for scheduling the annual meeting of
stockholders.
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Section 5. Notice and Waiver of Notice. Whenever, pursuant to the
---------------------------
laws of the State of Maryland or these Bylaws, any notice is required to be
given, personal notice is not meant unless expressly so stated, and any notice
so required shall be deemed to be sufficient if given by depositing the same in
the United States mail, postage prepaid, addressed to the person entitled
thereto at his address as it appears on the records of the corporation, and such
notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive notice of any
meetings except as otherwise provided by statute.
Any notice required to be given may be waived, in writing, by the
person or persons entitled thereto, whether before or after the time stated
therein.
Section 6. Inspectors. The Board of Directors may, in advance of any
----------
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any stockholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartially and according to the best of his ability.
The inspectors shall determine the number of shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them.
No Director or candidate for the office of Director shall act as inspector of an
election of Directors. Inspectors need not be stockholders.
Section 7. Certain Policies of the Corporation. Notwithstanding any
-----------------------------------
other provisions of these Bylaws, the corporation shall not engage in any of the
following activities:
(i) investing in any junior mortgage loan unless by appraisal or
other method the Independent Directors determine that (a) capital invested in
any such loan is adequately secured on the basis of the equity of the borrower
in the property underlying such investment and the ability of the borrower to
repay the mortgage loan or (b) such loan is a financing device entered into by
the Company to establish the priority of its capital investment over the capital
invested by others investing with the Company in a real estate project;
(ii) investing in commodities or commodity future contracts (other than
interest rate futures, when used solely for hedging purposes);
(iii) investing more than 1% of the Company's total assets in contracts for
the sale of real estate unless such contracts are recordable in the chain of
title;
(iv) issuing securities that are redeemable at the option of the holders
thereof;
(v) granting warrants or options to purchase voting capital stock of
the Company unless such warrants or options (a) are issued at an exercise price
greater than or equal to the fair market value of the voting capital stock of
the Company on the date of the grant and for consideration (including services)
that in the judgment of a majority of the Independent Directors has a market
value at least equal to the value of the warrant or option on the date of grant,
(b) are exercisable within five years from the date of grant and (c) when
aggregated with all other outstanding options and warrants are less than 10% of
the then outstanding shares of the Company's voting capital stock on the date of
grant; provided that terms of warrants or options that are issued ratably to the
holders of all voting capital stock or as part of a financing arrangement need
not meet the above restrictions;
10
<PAGE>
(vi) holding equity investments in unimproved, non-income producing real
property, except such properties as are currently undergoing development or are
presently intended to be developed within one year, together with mortgage loans
on such property (other than first mortgage development loans), aggregating to
more than 10% of the Company's assets;
(vii) engaging in trading (as compared with investment activities) or
engaging in the underwriting of or distributing as agent the securities issued
by others;
(viii) making secured and unsecured borrowings which in the aggregate exceed
300% of the net assets of the Company, unless such borrowing is approved by a
majority of the Independent Directors;
(ix) undertaking any activity that would disqualify the Company as a real
estate investment trust under the provisions of the Code as long as a real
estate investment trust is accorded substantially the same treatment or benefits
under the United States tax laws from time to time in effect as under Sections
856-860 of the Code at the date of adoption of the Company's By-laws; and
(x) acquiring any real property unless the consideration paid for
such real property is based on the fair market value of the property as
determined by a majority of the directors.
ARTICLE IX
AMENDMENTS TO BYLAWS
Section 1. Amendment of Shareholders. New Bylaws may be adopted or these
-------------------------
Bylaws may be amended or repealed by the vote or written consent of holders of a
majority of the outstanding shares entitled to vote.
Section 2. Amendment by Directors. Subject to the right of the shareholders
----------------------
as provided in Section 1 of this Article IX, to adopt, amend, or repeal Bylaws,
Bylaws may be adopted, amended, or repealed by the Board of Directors; provided,
however, that the provisions of Sections 2, 12 and 13 of Article III and of
Section 4 of Article IV with respect to Independent Directors may not be amended
by the Board of Directors, and provided further that the Board of Directors may
adopt an amendment of a Bylaw changing the authorized number of directors only
within the limits specified in the Articles of Incorporation or in Section 1 of
Article III of these Bylaws.
11
<PAGE>
ARTICLE X
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. Indemnification. The corporation shall indemnify and hold
---------------
harmless, and shall pay expenses incurred by or satisfy a judgment or fine
levied against, each officer, director and other person, in the manner and to
the full extent permitted by the General Corporation Law of the State of
Maryland.
Section 2. Provisions Not Exclusive. This Article shall not be
------------------------
construed as a limitation upon the power of the corporation to enter into
contracts or undertakings of indemnity with a director, officer, employee or
agent of the corporation, nor shall it be construed as a limitation upon any
other rights to which a person seeking indemnification may be entitled under any
agreement, vote of stockholders or disinterested directors or otherwise, both as
to actions in his official capacity and as to action in another capacity while
holding office.
12
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