<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, 1999
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)
<TABLE>
<S> <C>
Maryland 95-3997619
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
</TABLE>
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
31, 1999--46,216,484.
================================================================================
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
FORM 10-Q
September 30, 1999
TABLE OF CONTENTS
Part I--Financial Information
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
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............................... 13
</TABLE>
1
<PAGE>
PART I
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
ASSETS
------
Investments in real estate
Real estate properties:
Land............................................ $ 147,459 $ 148,388
Buildings and improvements...................... 1,131,541 1,024,637
Construction in progress........................ 43,898 70,363
---------- ----------
1,322,898 1,243,388
Less accumulated depreciation................... (155,975) (133,316)
---------- ----------
1,166,923 1,110,072
Mortgage loans receivable, net.................... 198,879 206,613
---------- ----------
1,365,802 1,316,685
Cash and cash equivalents........................... 15,090 16,182
Receivables......................................... 6,686 6,712
Other assets........................................ 36,754 17,724
---------- ----------
$1,424,332 $1,357,303
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Bank borrowings..................................... $ 55,300 $ 42,000
Senior notes due 2000-2038.......................... 657,900 545,150
Convertible debentures.............................. -- 57,431
Notes and bonds payable............................. 64,553 64,623
Accounts payable and accrued liabilities............ 56,498 42,541
Stockholders' equity:
Preferred stock $1.00 par value; 5,000,000 shares
authorized; Issued and outstanding: 1999-
1,000,000; 1998-1,000,000, 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: 1999-
46,216,484; 1998-46,206,128...................... 4,622 4,621
Capital in excess of par value.................... 556,292 555,998
Cumulative net income............................. 486,292 433,644
Cumulative dividends.............................. (557,125) (488,705)
---------- ----------
Total stockholders' equity...................... 590,081 605,558
---------- ----------
$1,424,332 $1,357,303
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months
Ended September Nine Months Ended
30, September 30,
---------------- ------------------
1999 1998 1999 1998
------- ------- -------- --------
(Unaudited)
(In thousands except per share
amounts)
<S> <C> <C> <C> <C>
Revenues:
Minimum rent........................... $31,382 $27,000 $ 91,938 $ 75,536
Interest and other income.............. 5,850 5,613 17,494 17,009
Additional rent and additional
interest.............................. 4,293 4,012 12,273 11,729
------- ------- -------- --------
41,525 36,625 121,705 104,274
Expenses:
Interest and amortization of deferred
financing costs....................... 13,004 9,909 37,412 26,745
Depreciation and non-cash charges...... 9,130 7,232 26,962 20,035
General and administrative............. 1,697 1,158 4,348 3,453
------- ------- -------- --------
23,831 18,299 68,722 50,233
------- ------- -------- --------
Net income before gain (loss) on sale of
properties.............................. 17,694 18,326 52,983 54,041
Gain (loss) on sale of properties........ -- -- (335) 2,321
------- ------- -------- --------
Net income............................... 17,694 18,326 52,648 56,362
Preferred stock dividends................ (1,919) (1,919) (5,758) (5,758)
------- ------- -------- --------
Net income available to common
stockholders............................ $15,775 $16,407 $ 46,890 $ 50,604
======= ======= ======== ========
Per share amounts:
Basic/diluted income from continuing
operations available to common
stockholders.......................... $ .34 $ .37 $ 1.02 $ 1.09
======= ======= ======== ========
Basic/diluted net income available to
common stockholders................... $ .34 $ .37 $ 1.01 $ 1.15
======= ======= ======== ========
Dividends paid per share............... $ .45 $ .42 $ 1.35 $ 1.26
======= ======= ======== ========
Weighted average shares outstanding...... 46,216 44,793 46,216 44,108
======= ======= ======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1999 1998
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash flow from operating activities:
Net income............................................. $ 52,648 $ 56,362
Gain (loss) on sale of properties...................... 335 (2,321)
Depreciation and non-cash charges...................... 26,962 20,035
Amortization of deferred financing costs............... 684 692
Net increase (decrease) in other assets and
liabilities........................................... (5,435) 14,493
--------- ---------
Net cash provided by operating activities............ 75,194 89,261
Cash flow from investing activities:
Investment in real estate properties................... (93,298) (210,885)
Disposition of real estate properties.................. 17,180 5,496
Investment in mortgage loans receivable................ (280) (17,767)
Principal payments on mortgage loans receivable........ 1,627 6,950
--------- ---------
Net cash used in investing activities................ (74,771) (216,206)
Cash flow from financing activities:
Bank borrowings........................................ 204,200 219,600
Repayment of bank borrowings........................... (190,900) (208,800)
Issuance of senior unsecured debt...................... 112,750 125,150
Issuance of common stock............................... -- 53,062
Dividends paid......................................... (68,420) (61,479)
Issuance of notes and bonds............................ -- 3,981
Principal payments on convertible debentures, notes and
bonds................................................. (57,796) (301)
Other, net............................................. (1,349) (1,307)
--------- ---------
Net cash provided by (used in) financing activities.. (1,515) 129,906
--------- ---------
Increase (decrease) in cash and cash equivalents......... (1,092) 2,961
Cash and cash equivalents, beginning of period........... 16,182 10,192
--------- ---------
Cash and cash equivalents, end of period................. $ 15,090 $ 13,153
========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(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, 1999 and 1998 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 1998 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, 1999 and 1998 are not
necessarily indicative of the results for a full year.
(ii) The Company invests in healthcare related real estate and, as of
September 30, 1999, had investments in 344 facilities located in 35 states. The
facilities include 200 skilled nursing facilities, 122 assisted living
facilities, 14 continuing care retirement communities, 5 residential care
facilities for the elderly, 2 rehabilitation hospitals and 1 medical clinic.
The Company's facilities are operated by 57 different operators, including the
following publicly traded companies: Alterra Healthcare Corporation, American
Retirement Corporation, ARV Assisted Living, Inc., Balanced Care Corporation,
Beverly Enterprises, Inc., Harborside Healthcare Corporation, HEALTHSOUTH
Corporation, Integrated Health Services, Mariner Post-Acute Network and
Sun Healthcare Group, Inc. Of the operators of the facilities, only Alterra
Healthcare Corporation and Beverly Enterprises, Inc. account for more than 10%
of the Company's revenues. They accounted for 12% and 13%, respectively, of the
Company's total revenues for the nine months ended September 30, 1999.
As of September 30, 1999, the Company had direct ownership of 162 skilled
nursing facilities, 114 assisted living facilities, 9 continuing care
retirement communities, 5 residential care facilities for the elderly,
2 rehabilitation hospitals and 1 medical clinic. Substantially 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 of the Leases contain provisions such that the total
rent cannot decrease from one year to the next. In addition, most of the 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
the Leases covering 187 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, 1999, the Company held 33 mortgage loans secured by 38
skilled nursing facilities, 8 assisted living facilities and 5 continuing care
retirement communities. As of September 30, 1999, the mortgage loans had a net
book value of approximately $198,879,000 with individual outstanding balances
ranging from approximately $452,000 to $17,725,000 and maturities ranging from
2003 to 2025.
(iii) Basic earnings per share is computed by dividing income from
continuing operations available to common stockholders by the weighted average
common shares outstanding. Income available to common stockholders is
5
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
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 1999 and 1998.
<TABLE>
<CAPTION>
Three months ended September
30,
-----------------------------
1999 1998
-------------- --------------
Income Shares Income Shares
------- ------ ------- ------
(In thousands)
<S> <C> <C> <C> <C>
Income before gain (loss)
on sale of properties.... $17,694 $18,326
Less: preferred stock
dividends................ 1,919 1,919
------- -------
Amounts used to calculate
Basic EPS................ 15,775 46,216 16,407 44,793
Effect of dilutive
securities:
Stock options........... -- -- -- 7
------- ------ ------- ------
Amounts used to calculate
Diluted EPS.............. $15,775 46,216 $16,407 44,800
======= ====== ======= ======
<CAPTION>
Nine months ended September
30,
-----------------------------
1999 1998
-------------- --------------
Income Shares Income Shares
------- ------ ------- ------
(In thousands)
<S> <C> <C> <C> <C>
Income before gain (loss)
on sale of properties.... $52,983 $54,041
Less: preferred stock
dividends................ 5,758 5,758
------- -------
Amounts used to calculate
Basic EPS................ 47,225 46,216 48,283 44,108
Effect of dilutive
securities:
Stock options........... -- -- -- 9
------- ------ ------- ------
Amounts used to calculate
Diluted EPS.............. $47,225 46,216 $48,283 44,117
======= ====== ======= ======
</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, 1999, the Company
acquired 7 residential care facilities for the elderly in 1 transaction for an
aggregate investment of approximately $2,304,000. During 1999, the Company has
provided new construction financing of approximately $82,850,000. Construction
of 16 assisted living facilities has been completed in 1999, in which the
Company's total aggregate investment was approximately $118,208,000;
$45,059,000 of this amount was a current year investment included in the new
construction financing amount above. 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, 1999, the Company also funded approximately
$7,771,000 in capital improvements at certain facilities in accordance with
certain existing lease provisions. Such capital improvements will result in an
increase in the minimum rents earned by the Company on these facilities.
6
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
During the nine-month period ended September 30, 1999, the Company disposed
of 24 facilities in 23 separate transactions for aggregate proceeds of
approximately $17,010,000. The Company recognized an aggregate loss of $335,000
related to the disposal of these facilities. The Company has deferred
recognition of payments received totaling approximately $2,566,000 related to
several facilities pending resolution of renewal negotiations of the master
lease relating to such facilities.
During the nine months ended September 30, 1999, the Company issued
$112,750,000 in aggregate principal amount of medium-term notes. The notes bear
fixed interest at a weighted average rate of 8.62% and have a weighted average
maturity of 7 years.
During the nine-month period ended September 30, 1999, $57,431,000 of the
Company's 6.25% convertible debentures were repaid and the remaining $8,000
were converted into 356 shares of the Company's common stock.
(vi) The adoption of Statement of Financial Account Standards ("SFAS") No.
133 Accounting for Derivative Instruments and Hedging Activities does not have
an impact on the Company's financial statements as the Company doesn't utilize
derivatives or engage in any hedging activities.
During 1999, the Company adopted the accounting provisions of SFAS No. 123
Accounting for Stock-Based Compensation. This Statement establishes a fair
value based method of accounting for stock based compensation. Accounting for
stock based compensation under this Statement causes the fair value of stock
options granted to be amortized into expense over the vesting period of the
stock and causes any dividend equivalents earned to be treated as dividends for
financial reporting purposes. Previously, the Company provided footnote
disclosure of the pro-forma effect of options granted as calculated under the
provisions of SFAS No. 123. The impact of the adoption of this pronouncement is
expected to be immaterial to the Company's financial position and results of
operations.
7
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
September 30, 1999
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 healthcare industry, deterioration of the operating
results or financial condition of the Company's tenants, the amount of any
additional investments, access to capital markets and changes in the ratings of
the Company's debt securities.
Operating Results
Nine Months 1999 Compared to Nine Months 1998
Minimum rent increased $16,402,000 or 22% over the same period in 1998. The
increase was primarily due to minimum rent resulting from investments in
additional leased facilities during the last twelve months. Interest and other
income increased by $485,000 or 3% over the same period in 1998. The increase
was primarily due to an increase in working capital loans to two operators of
facilities owned by the Company, partially offset by the conversion of three
mortgaged facilities to leases. Additional rent and additional interest
increased by $544,000 or 5% over the same period in 1998. The increase was
attributable to increased additional rent and additional interest as provided
in the Company's existing leases and mortgage loans receivable based on
increases in the facility revenues or the Consumer Price.
Interest and amortization of deferred financing costs increased $10,667,000
or 40% over the same period in 1998. The increase was primarily due to the
issuance of $177,750,000 in fixed rate medium-term notes during the last twelve
months and increases in the average interest rates on the Company's
$100,000,000 bank line of credit. Depreciation and non-cash charges increased
$6,927,000 or 35% over the same period in 1998. The increase was primarily
attributable to increased depreciation due to the acquisition of additional
facilities over the last twelve months. General and administrative costs
increased $895,000 or 26% over the same period in 1998. The increase was due to
the write off of third party costs related to due diligence for mergers and
major portfolio acquisitions which will not be finalized by the Company and
increases in compensation and other general expenses.
Third Quarter 1999 Compared to Third Quarter 1998
Minimum rent increased $4,382,000 or 16% over the same period in 1998. The
increase was primarily due to minimum rent resulting from investments in
additional leased facilities during the last twelve months. Interest and other
income increased by $237,000 or 4% over the same period in 1998. The increase
was primarily due to an increase in working capital loans to two operators of
facilities owned by the Company, partially offset by the conversion of three
mortgaged facilities to leases during the prior quarter. Additional rent and
additional interest increased by $281,000 or 7% over the same period in 1998.
The increase was attributable to increased additional rent and additional
interest as provided in the Company's existing leases and mortgage loans
receivable based on increases in the facility revenues or the Consumer Price
Index.
Interest and amortization of deferred financing costs increased $3,095,000
or 31% over the same period in 1998. The increase was primarily due to the
issuance of $177,750,000 in fixed rate medium-term notes during the last twelve
months and increases in the average interest rates on the Company's
$100,000,000 bank line of credit. Depreciation and non-cash charges increased
$1,898,000 or 26% over the same period in 1998. The
8
<PAGE>
increase was primarily attributable to increased depreciation due to the
acquisition of additional facilities over the last twelve months. General and
administrative costs increased $539,000 or 47% over the same period in 1998.
The increase was due to the write off of third party costs related to due
diligence for mergers and major portfolio acquisitions which will not be
finalized by the Company and increases in compensation and other general
expenses.
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 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.
Beginning in the year 2000, the Company expects that the additional rent and
additional interest figure will decrease due to lease renewals which will
result in a shift in the revenue classification from additional rent to minimum
rent. The aggregate impact may be a slight decrease in the total rent received
by the Company. Additional investments in healthcare 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 at least partially offset by rents or
interest income associated with the investments.
The adoption of Statement of Financial Account Standards No. 133 Accounting
for Derivative Instruments and Hedging Activities does not have an impact on
the Company's financial statements as the Company doesn't utilize derivatives
or engage in any hedging activities.
During 1999, the Company adopted the accounting provisions of SFAS No. 123
Accounting for Stock-Based Compensation. This Statement establishes a fair
value based method of accounting for stock based compensation. Accounting for
stock based compensation under this Statement causes the fair value of stock
options granted to be amortized into expense over the vesting period of the
stock and causes any dividend equivalents earned to be treated as dividends for
financial reporting purposes. Previously, the Company provided footnote
disclosure of the pro-forma effect of options granted as calculated under the
provisions of SFAS No. 123. The impact of the adoption of this pronouncement is
expected to be immaterial to the Company's financial position and results of
operations.
Liquidity and Capital Resources
During the nine-month period ended September 30, 1999, the Company acquired
7 residential care facilities for the elderly in 1 transaction for an aggregate
investment of approximately $2,304,000. During 1999, the Company has provided
new construction financing of approximately $82,850,000. Construction of 16
assisted living facilities has been completed in 1999, in which the Company's
total aggregate investment was $118,208,000; $45,059,000 of this amount was a
current year investment included in the new construction financing amount
above. 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,
1999, the Company also funded approximately $7,771,000 in capital improvements
at certain facilities in accordance with certain existing lease provisions.
Such capital improvements will result in an increase in the minimum rents
earned by the Company on these facilities. The acquisitions, construction
advances and capital improvement advances were funded by borrowings on the
Company's bank line of credit and by cash on hand.
During the nine-month period ended September 30, 1999, the Company disposed
of 24 facilities in 23 separate transactions for aggregate proceeds of
approximately $17,010,000. The Company recognized an aggregate loss of $335,000
related to the disposal of these facilities. The Company has deferred
recognition of payments received totaling approximately $2,566,000 related to
several facilities pending resolution of renewal negotiations of the master
lease relating to such facilities.
9
<PAGE>
During the nine-month period ended September 30, 1999, the Company issued
$112,750,000 in aggregate principal amount of medium-term notes. The notes bear
fixed interest at a weighted average rate of 8.62% and have a weighted average
maturity of 7 years.
At September 30, 1999, the Company had $44,700,000 available under its
$100,000,000 bank line of credit which expires on March 31, 2002. The Company
has shelf registrations on file with the Securities and Exchange Commission
under which the Company may issue (a) up to $442,100,000 in aggregate principal
amount of medium term notes and (b) up to approximately $178,247,000 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.
The Company anticipates making additional investments in healthcare related
facilities, although the level of new investments is decreasing and the Company
may not continue making additional investments beyond its current commitments
until such time as access to long-term capital is under more favorable terms.
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.
Year 2000 Readiness Disclosure
All statements contained in the following section are "Year 2000 Readiness
Disclosures" within the meaning of the Year 2000 Information and Disclosure
Act.
The Year 2000 issue (the "Year 2000 Issue") in computers arises from the
common industry practice of using two digits to represent a date in computer
software code and databases to enhance both processing time and save storage
space. Therefore, when dates in the year 2000 and beyond are indicated and
computer programs read the date "00," the computer may default to the year
"1900" rather than the correct "2000." This could result in incorrect
calculations, faulty data and computer shutdowns, which would cause disruptions
of operations.
The Company has reviewed the risks of the Year 2000 Issue with regard to the
Company's own internal operations, information systems and software
applications and continues to review the impact on the Company of its outside
vendors', lessees' and borrowers' ability to operate. The Company believes its
own internal operations, information systems and software applications are
compliant based upon reasonable assurance by vendors and the Company's
information systems consultants. During the second quarter of 1999, unrelated
to the Year 2000 Issue, the Company replaced its entire computer system, which
consists of a local area network of twelve personal computers and three
servers, to enable it to upgrade its accounting software. The cost to remediate
the Year 2000 Issue with regard to the Company's internal operations,
information systems and software applications is not believed to be material.
The Company's vendors that provide banking, communications and payroll
services and the Company's lessees and borrowers will also likely be affected
by the Year 2000 Issue. If the Company's vendors, lessees and borrowers are not
Year 2000 compliant, or if they face disruptions in their operations or cash
flows due to Year 2000 Issues, the Company could face significant temporary
disruptions in rent and mortgage payments and, therefore, cash flows after that
date.
The Company's lessees and borrowers generally rely extensively on
information systems, including systems for capturing patient and cost
information and for billing and collection of reimbursement for healthcare
services provided. Furthermore, the Company's lessees and borrowers likewise
are dependent on a variety of third parties, including, but not limited to,
Medicare and Medicaid programs, insurance companies, HMO's and other private
payors, governmental agencies, fiscal intermediaries that process claims and
make payments for the Medicare and Medicaid programs, utilities that provide
electricity, water, natural gas and
10
<PAGE>
communications services, and vendors of medical supplies and pharmaceuticals
used in patient care, all of whom must also adequately address the Year 2000
Issue. The Company continues to review publicly filed information of its
lessees, borrowers and vendors regarding their state of readiness with respect
to identifying and remediating their Year 2000 Issues. In January of 1999, the
Company began sending questionnaires to and/or contacting its lessees,
borrowers and vendors regarding their state of readiness with respect to
identifying and remediating their Year 2000 Issues. A second round of
questionnaires was mailed during September of 1999 to the lessees, borrowers
and vendors that did not respond to the first questionnaire. The responses
received and filings reviewed to date by the Company have generally indicated
that the respondents anticipate their remediation plans will be completed
before the end of 1999. Most respondents have indicated that they do not have
assurances that the third parties on which they depend, many of whom are noted
above, will accomplish adequate remediation of their Year 2000 Issues. It is
not possible for the Company to determine or be assured that adequate
remediation of the Year 2000 Issue will be accomplished by such lessees,
borrowers and vendors. Furthermore, it is not possible for the Company to
determine or be assured that third parties upon which the Company's lessees,
borrowers and vendors are dependent, will accomplish adequate remediation of
their Year 2000 Issues.
The Company will also have risks associated with Year 2000 Issues in non-
information technology areas as it relates to owned properties. There is a risk
that embedded chips in elevators, security systems, electrical systems and
similar technology-driven devices may stop functioning due to Year 2000 Issues.
Substantially all of the Company's owned properties are leased under triple-net
leases and as such, the cost to remediate any of these items will be paid by
the lessees.
Based on currently available information, the Company believes that the
impact of the Year 2000 Issue, as it relates to its internal operations,
information systems and software applications will not be material. However,
there can be no assurance that the Year 2000 Issues of its vendors, lessees,
borrowers and third parties upon which they are dependent will not have a
material impact on the future operations and/or financial results of the
Company. The Company is in the process of developing a contingency plan to
mitigate the risks associated with its lessees, borrowers and vendors.
Readers are cautioned that most of the statements contained in the "Year
2000 Readiness Disclosure" paragraphs are forward looking and should be read in
conjunction with the Company's disclosures under the heading "Statement
Regarding Forward Looking Disclosure" set forth above.
Market Risk Exposure
The "Market Risk Exposure" paragraphs are presented to provide an update
about material changes to the "Market Risk Exposure" paragraphs included in the
Company's 1998 Annual Report on Form 10-K filed with the Securities and
Exchange Commission and should be read in conjunction with those paragraphs.
Readers are cautioned that many of the statements contained in the "Market Risk
Exposure" paragraphs are forward looking and should be read in conjunction with
the Company's disclosures under the heading "Statement Regarding Forward
Looking Disclosure" set forth above.
The Company is exposed to market risks related to fluctuations in interest
rates on its mortgage loans receivable and debt. The Company does not utilize
interest rate swaps, forward or option contracts on foreign currencies or
commodities, or other types of derivative financial instruments.
The Company provides mortgage loans to operators of healthcare facilities as
part of its normal operations. The majority of the loans have fixed rates. Four
of the mortgage loans have adjustable rates, however, the rates adjust only
once or twice over the loan lives and the minimum adjusted rate is equal to the
current rate. Therefore, all mortgage loans receivable are treated as fixed
rate notes.
The Company utilizes debt financing primarily for the purpose of making
additional investments in healthcare facilities. Historically, the Company has
made short-term borrowings on its bank line of credit to
11
<PAGE>
fund its acquisitions until market conditions were appropriate, based on
management's judgment, to issue stock or fixed rate debt to provide long-term
financing.
During the nine months ended September 30, 1999, the Company issued an
additional $112,750,000 of fixed rate debt maturing on the following dates with
the following interest rates: $67,750,000 maturing in 2004 at an average rate
of 9.07% and $45,000,000 maturing in 2009 at an average rate of 7.94%. In
addition, the bank borrowings under the Company's bank line of credit have
increased to $55,300,000 from $42,000,000. In January of 1999, $57,431,000 of
the Company's 6.25% convertible debentures were repaid and the remaining $8,000
were converted into 356 shares of the Company's common stock.
The Company does not believe that the future market risks related to the
above securities or those detailed in the 1998 Annual Report on Form 10-K will
have a material impact on the Company or the results of its future operations.
12
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1Amended Stock Option Plan
27.Financial Data Schedule
(b) Reports on Form 8-K
None.
13
<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: November 2, 1999
NATIONWIDE HEALTH PROPERTIES, INC.
/s/ Mark L. Desmond
By __________________________________
Mark L. Desmond
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
14
<PAGE>
EXHIBIT 10.1
NATIONWIDE HEALTH PROPERTIES, INC.
1989 STOCK OPTION PLAN
AS AMENDED AND RESTATED OCTOBER 14, 1999
1. Purpose
-------
The purpose of the Nationwide Health Properties, Inc. 1989 Stock
Option Plan (the "Plan") is to strengthen Nationwide Health Properties, Inc.
(the "Corporation") and those corporations which are or hereafter become
subsidiary corporations (the "Subsidiary" or "Subsidiaries") by providing
additional means of attracting and retaining competent managerial personnel and
by providing to participating directors, officers and employees added incentives
for high levels of performance and for unusual efforts to increase the earnings,
value and distributions of the Corporation and any subsidiaries. The Plan seeks
to accomplish these purposes and achieve these results by providing a means
whereby such directors, officers and employees may receive shares of Restricted
Stock, and/or Stock Options and/or Stock Appreciation Rights in accordance with
this Plan.
Stock Options granted pursuant to this Plan are intended to be
Incentive Stock Options or Non-Qualified Stock Options, as shall be determined
and designated by the Plan Committee upon the grant of each Stock Option
hereunder.
2. Definitions
-----------
For purposes of this Plan, the following terms shall have the
following meanings:
(a) Common Stock. This term shall mean shares of the
------------
Corporation's common stock, $.10 par value, subject to adjustment pursuant to
Section 18 (Adjustment Upon Changes in Capitalization) hereunder.
(b) Corporation. This term shall mean Nationwide Health
-----------
Properties, Inc., a Maryland Corporation.
(c) Eligible Participants. This term shall mean all directors of
---------------------
the Corporation or any Subsidiary, and all officers or employees (whether or not
they are also directors) of the Corporation or any Subsidiary.
(d) Fair Market Value. This term shall mean the fair market
-----------------
value of the Common Stock as determined in accordance with any reasonable
valuation method selected by the Plan Committee, including the valuation methods
described in Treasury Regulations Section 20.2031-1. Unless determined otherwise
by the Plan Committee, "fair market value" shall be as applied to any date
specified in the Plan, the closing price of a share of Common Stock on the New
York Stock Exchange's composite tape on such date, or, if no such sales were
made on such date, the closing price of such share on the New York Stock
Exchange's composite tape on the next preceding date on which there were such
sales.
(e) Grantee. This term shall mean any Eligible Participant to
-------
whom Restricted Stock or Stock Appreciation Rights have been granted pursuant to
this Plan.
(f) Incentive Stock Option. This term shall mean a Stock Option
----------------------
which is an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
(g) Non-Qualified Stock Option. This term shall mean a Stock
--------------------------
Option which is not an Incentive Stock Option.
<PAGE>
(h) Option Shares. This term shall mean Common Stock covered by
-------------
and subject to any outstanding unexercised Stock Option granted pursuant to this
Plan.
(i) Optionee. This term shall mean any Eligible Participant to
--------
whom a Stock Option has been granted pursuant to this Plan, provided that at
least part of the Stock Option is outstanding and unexercised.
(j) Plan. This term shall mean the Nationwide Health Properties,
----
Inc. 1989 Stock Option Plan, as amended and restated October 14, 1999, and as
embodied herein and as may be further amended from time to time in accordance
with the terms hereof and applicable law.
(k) Plan Committee. The Compensation Committee of the Board of
--------------
Directors of the Corporation shall constitute the Plan Committee and have full
authority to act in the matter. The Plan Committee shall consist at all times
of a committee of two or more non-employee directors. All references in the
Plan to the "Plan Committee" shall be deemed to refer to the Compensation
Committee of the Board of Directors. The Board of Directors of the Corporation
shall have the right, in its sole and absolute discretion, to remove or replace
any person from or on the Compensation Committee at any time for any reason
whatsoever.
(l) Restricted Stock. This term shall mean shares of Common
----------------
Stock of the Company granted without cost to the Participant pursuant to either
Section 6 or 7, and subject to the terms of Section 8.
(m) Stock Appreciation Right. This term shall mean a stock
------------------------
appreciation right as described in Section 12 of this Plan.
(n) Stock Option. This term shall mean the right to purchase
------------
Common Stock under this Plan in a specified number of shares, at a price and
upon the terms and conditions as specified in this Plan or as determined by the
Plan Committee.
(o) Subsidiary. This term shall mean each "subsidiary
----------
corporation" (treating the Corporation as the employer corporation) as defined
in Section 425(f) of the Internal Revenue Code of 1986, as amended.
3. Administration.
--------------
(a) Administration of the Plan. This Plan shall be administered
--------------------------
by the Plan Committee. Any action of the Plan Committee with respect to the
administration of the Plan shall be taken pursuant to a majority vote, or
pursuant to the unanimous written consent, of its members. Any such action taken
by the Plan Committee in the administration of this Plan shall be valid and
binding, so long as the same is not inconsistent with the terms and conditions
of this Plan. To the extent consistent with the availability to the Plan of Rule
16b-3 under the Securities Exchange Act of 1934 as amended, and subject to
compliance with the terms, conditions and restrictions set forth in this Plan,
the Plan Committee shall have the exclusive right, in its sole and absolute
discretion, to establish the terms and conditions of all Restricted Stock, Stock
Options and Stock Appreciation Rights granted under the Plan, including, without
limitation, the power to determine the duration and purposes, if any, of leaves
of absence which may be permitted to holders of unexercised, unexpired Stock
Options without such constituting a termination under the Plan, and to prescribe
and amend the terms, provisions ad form of each instrument and agreement setting
forth the terms and conditions of Restricted Stock, Stock Options and Stock
Appreciation Rights granted hereunder.
(b) Decisions and Determinations. To the extent consistent with
----------------------------
the availability to the Plan of Rule 16b-3 under the Securities Exchange Act of
1934 as amended, and subject to the express provisions of this Plan, the Plan
Committee shall have the authority to construe and interpret this Plan, to
define the terms used herein, to prescribe, amend, and rescind rules and
regulations relating to the administration of the
<PAGE>
rules and regulations relating to the administration of the Plan, and to make
all other determinations necessary or advisable for administration of the Plan.
Determinations of the Plan Committee on matters referred to in this Section 3
shall be final and conclusive so long as the same are not inconsistent with the
terms of this Plan.
4. Shares subject to the Plan
--------------------------
Subject to adjustments as provided in Section 18 hereof, the
maximum number of shares of Common Stock which may be issued as Restricted Stock
or upon exercise of all Stock Options or pursuant to Stock Appreciation Rights
granted under this Plan is limited to One Million Six Hundred Thousand
(1,600,000) shares in the aggregate.
If for any reason, unreleased shares of Restricted Stock do not
vest, said shares shall again be available for grants of Restricted Stock, Stock
Options or Stock Appreciation Rights under this Plan. If any Stock Option and/or
Stock Appreciation Rights shall be canceled, surrendered, or expire for any
reason without having been exercised in full, the Shares represented thereby
shall again be available for grants of Restricted Stock, Stock Options or Stock
Appreciation Rights under this Plan.
5. Eligibility
-----------
Only Eligible Participants shall be eligible to receive grants of
Restricted Stock, Stock Options or Stock Appreciation Rights under this Plan.
6. Formula Awards of Restricted Stock and Stock Options to Non-
-----------------------------------------------------------
Employee Directors
- ------------------
Initial grants of Restricted Stock made to non-employee directors
who first become eligible after January 1, 1996 shall be in the amount of 2,000
shares. Additional grants of 2,000 shares shall be made to each non-employee
director on or after each anniversary of the initial grant made heretofore under
the Plan, commencing January 1, 1996.
Initial grants of Stock Options covering 30,000 shares each were
made to non-employee directors on November 13, 1989.
Non-employee directors are not eligible for further grants of
Stock Options nor for any grants of Stock Appreciation Rights.
7. Discretionary Awards of Restricted Stock, Stock Options and Stock
-----------------------------------------------------------------
Appreciation Rights
- -------------------
The Plan Committee, in its sole and absolute discretion, subject
to the provisions of the Plan, may grant Restricted Stock, Stock Options and/or
Stock Appreciation Rights to any Eligible Participant other than a non-employee
director (whose Awards of Restricted Stock and Stock Options are specifically
provided in Section 6 hereof) at such times and in such amounts and on such
terms and conditions as it deems advisable and specifies in the respective
grants.
8. Restricted Stock and Forfeiture Restrictions
--------------------------------------------
(a) Certain Terms. The shares of Restricted Stock granted to a
-------------
Participant shall be released to him in accordance with such schedule as the
Plan Committee, in its sole discretion, shall determine at the time of grant;
except for non-employee directors whose shares shall be released three years
after the date of grant, provided that any such shares shall be fully released
upon normal retirement from the Board of Directors. All shares of Restricted
Stock shall be fully released not later than ten years from the date of grant.
Except for normal retirement, or pursuant to the terms of the written agreement
with an officer and/or employee of the Company, the Grantee shall have no vested
interest in the unreleased stock of any grant in the event of his termination
with the Corporation for any reason (including failure of re-election, unless
the Plan Committee in its sole discretion decides to terminate the forfeiture
restrictions following the termination of such Grantee) and the
<PAGE>
unreleased stock certificates shall be canceled. During the Grantee's continued
employment or affiliation, however, he shall have the right to vote all shares
and to receive all dividends as though all shares granted were his without
restrictions.
(b) Written Agreement. The details of each grant regarding shares
-----------------
of Restricted Stock shall be evidenced by a written agreement covering terms and
conditions, not inconsistent with the Plan, as the Plan Committee shall approve.
Such agreement shall be promptly delivered by Management of the Corporation to
each Grantee.
9. Stock Options
-------------
(a) Designation as Incentive or Nonqualified Options. The Plan
------------------------------------------------
Committee shall designate in each grant of a Stock Option whether the Stock
Option is an Incentive Stock Option or a Non-Qualified Stock Option. The terms
upon which and the times at which, or the periods within which, the Option
Shares subject to such Stock Option may become acquired or such Stock Options
may be acquired and exercised shall be as set forth in the Plan and the related
Stock Option Agreements.
(b) Date of Grant and Rights of Optionee. The determination of
------------------------------------
the Plan Committee to grant a Stock Option shall not in any way constitute or be
deemed to constitute an obligation of the Corporation, or a right of the
Eligible Participant who is the proposed subject of the grant, and shall not
constitute the grant of a Stock Option hereunder unless and until both the
Corporation and the Eligible Participant have executed and delivered to the
other a Stock Option Agreement in the form then required by the Plan Committee
as evidencing the grant of the Stock Option, together with such other instrument
or instruments as may be required by the Plan Committee pursuant to this Plan;
provided, however, that the Plan Committee may fix the date of grant as any date
on or after the date of its final determination to grant the Stock Option (or if
no such date is fixed, then the date of grant shall be the date on which the
determination was finally made by the Plan Committee to grant the Stock Option),
and such date shall be set forth in the Stock Option Agreement. The date of
grant as so determined shall be deemed the date of grant of the Stock Option for
purposes of this plan.
(c) 10% Shareholder. A Stock Option granted hereunder to an
---------------
Eligible Participant who owns, directly or indirectly, at the date of the grant
of the Stock Option, more than ten percent (10%) of the total combined voting
power of all classes of capital stock of the Corporation or a Subsidiary shall
not qualify as an Incentive Stock Option unless: (i) the purchase price of the
Option Shares subject to said Stock Option is at least one hundred and ten
percent (110%) of the Fair Market Value of the Option Shares, determined as of
the date said Stock Option is granted; and (ii) the Stock Option by its terms is
not exercisable after five (5) years from the date that it is granted. The
attribution rules of Section 425(d) of the Internal Revenue Code of 1996, as
amended, shall apply in the determination of indirect ownership of stock.
(d) Maximum Value of Stock Options. No grant of Incentive Stock
------------------------------
Options hereunder may be made when the aggregate fair market value of Option
Shares with respect to which Incentive Stock Options (pursuant to this Plan or
any other Incentive Stock Option Plan of the Corporation or any Subsidiary) are
exercisable for the first time by the Eligible Participant during any calendar
year exceeds $100,000.
(e) Non-Qualified Stock Options. Stock Options granted by the
---------------------------
Plan Committee shall be deemed Non-Qualified Stock Options under this Plan if
they: (i) are designated at the time of grant as Incentive Stock Options but do
not so qualify under the provisions of Section 422 of the Code or any
regulations or rulings issued by the Internal Revenue Service for any reason;
(ii) are not granted in accordance with the provisions of Section 9(c); (iii)
are in excess of the fair market value limitations set forth in Section 9(d);
(iv) are granted to an Eligible Participant who is not an employee of the
Corporation or any subsidiary; or (v) are designated at the time of grant as
Non-Qualified Stock Options. Non-Qualified Stock Options granted hereunder shall
be so designated in the Stock Option Agreement entered into between the
Corporation and the Optionee.
<PAGE>
(f) Dividend Equivalents. In addition to Stock Options granted
--------------------
under this Plan, "Dividend Equivalents" may be granted under this Plan. The
Dividend Equivalents shall be based on the dividends declared on the Common
Stock and shall be credited as of dividend payment dates, during the period
between the date of grant and the date the Stock Option is exercised or expires,
as determined by the Plan Committee. Such Dividend Equivalents shall be payable
in cash or additional shares of Common Stock by such formula and at such time
and subject to such conditions as may be determined by the Plan Committee.
Sections 13 through 21, Sections 24 through 26 and Section 29 of the Plan, as
such sections apply to stock options, also shall apply to Dividend Equivalents.
10. Stock Option Exercise Price
---------------------------
The exercise price of Option Shares shall be determined by the
Committee at the date of grant, except that the exercise price of any Option
Shares designated as Incentive Stock Options shall be one hundred percent (100%)
of the Fair Market value of the Common Stock represented by the Option Shares on
the date of grant of the related Incentive Stock Option
11. Exercise of Stock Options
-------------------------
(a) Exercise. Except as otherwise provided elsewhere herein, if
--------
an Optionee shall not in any given period exercise any part of a Stock Option
which has become exercisable during that period, the Optionee's right to
exercise such part of the Stock Option shall continue until expiration of the
Stock Option or any part thereof as may be provided in the related Stock Option
Agreement. No Stock Option shall, except as provided in Section 11(g) hereof,
become exercisable until one (1) year following the date of grant, and (i) as to
non-employee directors, a Stock Option first becomes exercisable as to one-third
(1/3) of the Option Shares called for thereby during the second year following
the date of the grant, as to an additional one-third (1/3) during the third year
and as to the remaining one-third (1/3) during the fourth year, and (ii) as to
all other Eligible Participants, Stock Options shall be exercisable as set forth
by the Committee. No Stock Option or part thereof shall be exercisable except
with respect to whole shares of Common Stock, and fractional share interests
shall be disregarded except that they may be accumulated.
(b) Prior Outstanding Incentive Stock Options. Incentive Stock
-----------------------------------------
Options granted to an Optionee under the Plan shall be exercisable even while
such Optionee has outstanding and unexercised any Incentive Stock Option
previously granted to him or her pursuant to this Plan or any other Incentive
Stock Option Plan of the Corporation or any Subsidiary. An Incentive Stock
Option shall be treated as outstanding until it is exercised in full or expires
by reason of lapse of time, or is otherwise canceled by mutual action of the
Optionee and the Corporation.
(c) Notice of Payment. Stock Options granted hereunder shall be
-----------------
exercised by written notice delivered to the Corporation specifying the number
of Option Shares with respect to which the Stock Option is being exercised,
together with concurrent payment in full of the exercise price as hereinafter
provided. If the Stock Option is being exercised by any person or persons other
than the Optionee, said notice shall be accompanied by proof, satisfactory to
the counsel for the Corporation, of the right of such person or persons to
exercise the Stock Option.
(d) Payment of Exercise Price. The exercise price of any Option
-------------------------
Shares purchased upon the proper exercise of a Stock Option shall be paid in
full at the time of each exercise of a Stock Option in cash or check and/or in
Common Stock of the Corporation which, when added to the cash payment, if any,
has an aggregate Fair Market Value equal to the full amount of the exercise
price of the Stock Option, or part thereof, then being exercised. Payment by an
Optionee as provided herein shall be made in full concurrently with the
Optionee's notification to the Corporation of his intention to exercise all or
part of a Stock Option. If all or any part of a payment is made in shares of
Common Stock as heretofore provided, such payment shall be deemed to have been
made only upon receipt by the Corporation of all required share certificates,
and all stock powers and all other required transfer documents necessary to
transfer the shares of Common Stock to the Corporation. In addition, Options may
be exercised and payment made by delivering a properly executed exercise
<PAGE>
notice together with irrevocable instructions to a broker or bank to promptly
deliver to the Corporation the amount of sale proceeds necessary to pay the
exercise price and any applicable tax withholding. The date of exercise shall be
deemed to be the date the Corporation receives the notice.
(e) Minimum Exercise. Not less than ten (10) Option Shares may
----------------
be purchased at any one time upon exercise of a Stock Option unless the number
of shares purchased is the total number which remains to be purchased under the
Stock Option.
12. Stock Appreciation Rights
-------------------------
(a) Grant of Stock Appreciation Rights. A Stock Appreciation
----------------------------------
Right may be granted to any Class II or Class III Participant selected by the
Plan Committee to whom Option Shares may be granted under this Plan. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with the
grant of an Option, (b) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with this Plan as
the Plan Committee shall impose and shall be evidenced by a written Stock
Appreciation Right Agreement, which shall be executed by the Grantee and an
authorized officer of the Corporation.
(b) Coupled Stock Appreciation Rights.
---------------------------------
(i) A Coupled Stock Appreciation Right ("CSAR") shall be
related to a particular Option and shall be exercisable only when and to the
extend the related Option is exercisable.
(ii) A CSAR may be granted to the Grantee for not more than
the number of shares subject to the simultaneously granted Option to which it is
coupled.
(iii) A CSAR shall entitle the Grantee to surrender to the
Company unexercised a portion of the Option to which the CSAR relates and to
receive from the Company in exchange therefor an amount determined by
multiplying the difference obtained by subtracting the Option exercise price of
the Option from the Fair Market Value of a share of Common Stock on the date of
exercise of the CSAR by the number of shares of Common Stock with respect to
which the CSAR shall have been exercised, subject to any limitations the
Committee may impose.
(c) Independent Stock Appreciation Rights.
-------------------------------------
(i) An Independent Stock Appreciation Right ("ISAR") shall
be unrelated to any Option and shall have a term set by the Committee. Except as
otherwise set forth in this Plan, an ISAR shall be exercisable at such times and
in such installments as the Committee may determine, and shall cover such number
of shares of Common Stock as the Committee may determine. The exercise price per
share of Common Stock subject to each ISAR shall be set by the Committee.
(ii) An ISAR shall entitle the Grantee to exercise all or a
specified portion of the ISAR (to the extent then exercisable pursuant to its
terms) and to receive from the Company an amount determined by multiplying the
difference obtained by subtracting the exercise price per share of the ISAR from
the Fair Market Value of a share of Common Stock on the date of exercise of the
ISAR by the number of shares of Common Stock with respect to which the ISAR
shall have been exercised, subject to any limitations the Committee may impose.
(d) Payment and Limitations on Exercise.
-----------------------------------
(i) Payment of the amount determined under this Section 12
shall be in cash, in Common Stock or a combination of both, as determined by the
Committee.
<PAGE>
(ii) So long as Rule 16b-3 under the Exchange Act, or any
successor thereto, so provides, no CSAR shall be exercisable during the first
six months after it is granted with respect to an outstanding Option, except to
the extent that the Committee in its discretion permits such exercise in the
event of the Grantee's death or disability within the meaning of Section
105(d)(4) of the Code.
(iii) So long as Rule 16b-3 under the Exchange Act, or any
successor thereto, so provides, cash payment upon exercise of a Stock
Appreciation Right may only be made if such Stock Appreciation Right is
exercised during the period beginning on the third business day following the
date of the Company's release of its quarterly or annual summary statements of
sales and earnings and ending on the twelfth business day following such date.
13. Nontransferability
------------------
Except as otherwise provided herein each Stock Option and Stock
Appreciation Right and all unreleased shares of Restricted Stock shall, by their
terms, be nontransferable by the Options or Grantee other than by will or the
laws of descent and distribution, or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code of 1986, as amended, or Title I of
the Employee Retirement Income Security Act, or the rules thereunder. Stock
Options and Stock Appreciation Rights shall be exercisable during the lifetime
of the Optionee or Grantee only by the Optionee or Grantee.
14. Affiliation
-----------
Nothing contained in this Plan (or in any Stock Option, Stock
Appreciation Rights or Restricted Stock Agreement) shall obligate the
Corporation or any Subsidiary to employ or continue to employ or remain
affiliated with any Participant for any period of time or interfere in any way
with the right of the Corporation or a Subsidiary to reduce or increase the
Participant's compensation.
Except as provided in Section 15 hereof, if, for any reason other
than disability or death, an Optionee ceases to be affiliated with the
Corporation or a Subsidiary, the Stock Options and/or Stock Appreciation Rights
granted to such Optionee shall expire on the expiration dates specified for said
Stock Options and or Stock Appreciation Rights at the time of their grant, or
three (3) months after the Optionee ceases to be so affiliated, whichever is
earlier. During such period after cessation of affiliation, such Stock Options
and/or Stock Appreciation Rights shall be exercisable only as to those
increments, if any, which had become exercisable as of the date on which such
Optionee ceased to be affiliated with the Corporation or the Subsidiary, and any
Stock Options and/or Stock Appreciation Rights or increments which had not
become exercisable as of such date shall expire automatically on such date.
15. Termination for Cause
---------------------
If the Stock option and/or Stock Appreciation Rights Agreement so
provides and if an Optionee's or Grantee's employment by or affiliation with the
Corporation or a Subsidiary is terminated for cause, the Stock Option and/or
Stock Appreciation Rights granted to such Optionee or Grantee shall
automatically expire and terminate in their entirety immediately upon such
termination; provided, however, that the Plan Committee may, in its sole
discretion, within thirty (30) days of such termination, reinstate such Stock
Options and/or Stock Appreciation Rights by giving written notice of such
reinstatement to the Optionee or Grantee. In the event of such reinstatement,
the Optionee or Grantee may exercise the Stock Options and/or Stock Appreciation
Rights only to such extent, for such time, and upon such terms and conditions as
if the Optionee or Grantee had ceased to be employed by or affiliated with the
Corporation or a Subsidiary upon the date of such termination for a reason other
than cause, disability or death. Termination for cause shall include, but shall
not be limited to, termination for malfeasance or gross misfeasance in the
performance of duties or conviction of illegal activity in connection therewith
and, in any event, the termination of the Plan Committee with respect thereto
shall be final and conclusive.
16. Death of Optionee or Grantee
----------------------------
<PAGE>
If an Optionee or Grantee dies while employed by or affiliated
with the Corporation or a Subsidiary, or during the three-month period referred
to in Section 14 hereof, the Stock Options and/or Stock Appreciation Rights
granted to such Optionee or Grantee shall expire on the expiration dates
specified for said Stock Options and/or Stock Appreciation Rights at the time of
their grant, or one (1) year after the date of such death, whichever is earlier.
After such death, but before such expiration, subject to the terms and
provisions of the Plan and the related Stock Option and/or Stock Appreciation
Rights Agreements, the person or persons to whom such Optionee's or Grantee's
rights under the Stock Options and/or Stock Appreciation Rights shall have
passed by will or by the applicable laws of descent and distribution, or the
executor or administrator of the Optionee's or Grantee's estate, shall have the
right to exercise such Stock Options and/or Stock Appreciation Rights to the
extent that increments, if any, had become exercisable as of the date on which
the Optionee or Grantee died.
17. Disability Optionee or Grantee
------------------------------
If any Optionee or Grantee is disabled while employed by or
affiliated with the Corporation or a Subsidiary or during the three-month period
referred to in Section 14 hereof, the Stock Options and/or Stock Appreciation
Rights granted to such Optionee or Grantee shall expire on the expiration dates
specified for said Stock Options and/or Stock Appreciation Rights at the time of
their grant, or one (1) year after the date such disability occurred, whichever
is earlier. After such disability occurs, but before such expiration, the
Optionee or Grantee or the guardian or conservator or the Optionee's or
Grantee's estate, as duly appointed by a court of competent jurisdiction, shall
have the right to exercise such Stock Options and/or Stock Appreciation Rights
to the extent that increments, if any, had become exercisable as of the date on
which the Optionee or Grantee became disabled or cased to be employed by or
affiliated with the Corporation or a Subsidiary as a result of the disability.
An Optionee or Grantee shall be deemed to be "disabled" if it shall appear to
the Plan Committee, upon written certification delivered to the Corporation of a
qualified licensed physician, that the Optionee or Grantee has become
permanently and totally unable to engage in any substantial gainful activity by
reason of a medically determinable physical or mental impairment which can be
expected to result in the Optionee's or Grantee's death, or which has lasted or
can be expected to last for a continuous period of not less than 12 months.
18. Adjustment Upon Changes in Capitalization
-----------------------------------------
If the outstanding shares of Common Stock of the Corporation and
increased, decreased, or changed into or exchanged for a different number or
kind of shares or securities of the Corporation, through a reorganization,
merger, recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Corporation, or if
there is a spin-off or other distribution of stock or property with respect to
the holders of the Common Stock other than normal cash dividends, an appropriate
and proportionate adjustment shall be made in the number and kind of shares as
to which Stock Options and Stock Appreciation Rights may be granted. A
corresponding adjustment changing the number or kind of Option Shares and the
exercise prices per share allocated to unexercised Stock Options, or portions
thereof, and/or with respect to Stock Appreciation Rights which shall have been
granted prior to any such change, shall likewise be made. Such adjustments shall
be made without change in the total price applicable to the unexercised portion
of the Stock Option and/or Stock Appreciation Rights, but with a corresponding
adjustment in the price for each share subject to the Stock Option and/or Stock
Appreciation Rights. Adjustments under this Section shall be made by the Plan
Committee, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final and conclusive. No fractional shares of stock
shall be issued or made available under the Plan on account of such adjustments,
and fractional share interests shall be disregarded, except that they may be
accumulated.
19. Terminating Events
------------------
Upon consummation of a plan of dissolution or liquidation of the
corporation, or upon consummation of a plan of reorganization, merger or
consolidation of the Corporation with one or more
<PAGE>
corporations, as a result of which the Corporation is not the surviving entity,
or upon the sale of all or substantially all the assets of the Corporation to
another corporation, the Plan shall automatically terminate and all unreleased
shares of Restricted Stock shall be released under such circumstances, and all
Stock Options and/or Stock Appreciation Rights theretofore granted shall be
terminated, subject to provisions of the immediately following paragraph in this
Section 19, unless provision is made in connection with such transaction for
assumption of Stock Options and/or Stock Appreciation Rights theretofore
granted, or substitution for such Stock Options and/or Stock Appreciation
Rights with new options covering stock of a successor employer corporation, or a
parent or subsidiary corporation thereof, solely at the discretion of such
successor corporation, or parent or subsidiary corporation, with appropriate
adjustments as to number and kind of shares and prices.
Notwithstanding the immediately preceding paragraph and/or any
provision in any Stock Option or Stock Appreciation Right Agreement pertaining
to the time of exercise of a Stock Option or Stock Appreciation Right, or part
thereof, upon adoption by the requisite holders of the outstanding shares of
Common Stock of any plan of dissolution, liquidation, reorganization, merger,
consolidation or sale of all or substantially all of the assets of the
Corporation to another corporation which would, upon consummation, result in
termination of a Stock Option or Stock Appreciation Right, all Stock Options or
Stock Appreciation Rights previously granted shall become immediately
exercisable as to all unexercised Shares for such period of time as may be
determined by the Plan Committee, but in any event not less than 30 days, on the
condition that the terminating event is consummated. If such terminating event
is not consummated, Stock Options or Stock Appreciation Rights granted pursuant
to the Plan shall be exercisable in accordance with the terms of their
respective Stock Option or Stock Appreciation Right Agreements.
20. Amendment and Termination
-------------------------
The Board of Directors of the Corporation may at any time and from
time to time suspend, amend, or terminate the Plan; provided that, except as
permitted under the provisions of Section 18 hereof, no amendment or
modification may be adopted without the Corporation having first obtained the
approval of the holders of a majority of the Corporation's outstanding shares of
Common Stock present, or represented, and entitled to vote at a duly held
meeting of shareholders of the Corporation, or by written consent, if the
amendment or modification would:
(a) increase the number of securities which may be issued under the Plan;
(b) materially modify the requirements as to eligibility for
participation in the Plan;
(c) increase or decrease the exercise price of any Incentive Stock Option
granted under the Plan;
(d) increase the maximum term of Stock Options or Stock Appreciation
Rights provided for herein or increase the maximum period during which shares of
Restricted Stock may be released;
(e) permit Stock Options or Stock Appreciation Rights or Restricted Stock
to be granted to any person who is not an Eligible Participant; or
(f) change any provision of the Plan which would affect the qualification
as an Incentive Stock Option under the internal revenue laws then applicable of
any Stock Option granted as an Incentive Stock Option under the Plan.
The provisions of this Plan shall not be amended more than once every
six months, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules thereunder.
No Stock Option or Stock Appreciation Right and no shares of
Restricted Stock may be granted during any suspension of the Plan or after
termination of the Plan. Amendment, suspension, or
<PAGE>
termination of the Plan shall not (except as otherwise provided in Section 19
hereof), without the consent of the Participant, alter or impair any rights or
obligations theretofore granted.
21. Rights of Eligible Participants
-------------------------------
No Eligible Participant or other person shall have any claim or right
to be granted Restricted Stock or Stock Options or Stock Appreciation Rights
under this Plan, and neither this Plan nor any action taken hereunder shall be
deemed to give or be construed as giving any Eligible Participant or other
person any right to be retained in the employ of the Corporation or any
Subsidiary. Without limiting the generality of the foregoing, no person shall
have any rights as a result of his or her classification as an Eligible
Participant, such classification being made solely to describe, define and limit
those persons who are eligible for consideration for privileges under the Plan.
22. Privileges of Stock Ownership; Regulatory Law Compliance; Notice
----------------------------------------------------------------
of Sale
- -------
No Optionee or Grantee shall be entitled to the privileges of stock
ownership as to any shares not actually issued and delivered. No shares may be
purchased upon the exercise of a Stock Option or Stock Appreciation Right unless
and until all then applicable requirements of all regulatory agencies having
jurisdiction and all applicable requirements of the securities exchanges upon
which securities of the Corporation are listed (if any) shall have been fully
complied with.
23. Effective Date of the Plan
--------------------------
The Plan, prior to any amendments, was adopted by the Board of
Directors on November 13, 1989, and was approved by the shareholders on April
27, 1990. Amendments to the Plan have been adopted on January 24, 1992, January
19, 1996, and October 14, 1999.
24. Termination
-----------
Unless previously terminated as aforesaid, the Plan shall terminate on
January 18, 2006. No Stock Options or Stock Appreciation Rights or shares of
Restricted Stock shall be granted under the Plan thereafter, but such
termination shall not affect any Stock Option or Appreciation Right or grant of
Restricted Stock theretofore granted.
25. Stock Option and Stock Appreciation Right Period
------------------------------------------------
Each Stock Option and Stock Appreciation Right and all rights and
obligations thereunder shall expire on such date as the Plan Committee may
determine, but not later than ten (10) years from the date such Stock Option is
granted in the case of Incentive Stock Options and eleven (11) years from the
date of grant in the case of Non-Qualified Stock Options and Stock Appreciation
Rights, and each Stock Option and Stock Appreciation Right shall be subject to
earlier termination as provided elsewhere in this Plan.
26. Exculpation and Indemnification of Plan Committee
-------------------------------------------------
The present, former and future members of the Plan Committee, and each
of them, who is or was a director, officer or employee of the Corporation shall
be indemnified by the Corporation to the extent authorized in and permitted by
the Corporation's Certificate of Incorporation, and/or Bylaws in connection with
all actions, suits and proceedings to which they or any of them may be a party
by reason of any act or omission of any member of the Plan Committee under or in
connection with the Plan or any Stock Option or Stock Appreciation Right granted
thereunder.
27. Compliance with Law and Representations of Participant
------------------------------------------------------
<PAGE>
No shares of Common Stock shall be issued upon exercise of any Stock
Option or Stock Appreciation Rights, and an Optionee or Grantee shall have no
right or claim to such shares, unless and until: (i) payment in full has been
received by the Corporation with respect to the exercise of any Stock Option;
(ii) in the opinion of the counsel for the Corporation, all applicable
requirements of law and of regulatory bodies having jurisdiction over such
issuance and delivery have been fully complied with; and (iii) if required by
federal or state law or regulation, the Optionee or Grantee shall have paid to
the Corporation the amount, if any, required to be withheld on the amount deemed
to be compensation to the Optionee or Grantee as a result of the exercise of his
or her Stock Option or Stock Appreciation Rights, or made other arrangements
satisfactory to the Corporation, in its sole discretion, to satisfy applicable
income tax withholding requirements.
Unless the shares of Common Stock covered by this Plan have been
registered with the Securities and Exchange Commission pursuant to the
registration requirements under the Securities Act of 1933, each participant
shall: (i) by and upon accepting shares of Restricted Stock or a Stock Option or
a Stock Appreciation Right, represent and agree in writing, that the Stock
Option or Stock Appreciation Right will be acquired for investment purposes and
not for resale or distribution; and (ii) by and upon the exercise of a Stock
Option or Stock Appreciation Right, or a part thereof, furnish evidence
satisfactory to counsel for the Corporation, including written and signed
representations to the effect that the Shares are being acquired for investment
purposes and not for resale or distribution, and that the Shares being acquired
shall not be sold or otherwise transferred by the Participant except in
compliance with the registration provisions under the Securities Act of 1933, as
amended, or an applicable exemption therefrom. Further- more, the Corporation,
at its sole discretion, to assure itself that any sale or distribution by the
Participant complies with this Plan and any applicable federal or state
securities laws, may take all reasonable steps, including placing stop transfer
instructions with the Corporation's transfer agent prohibiting transfers in
violation of the Plan and affixing the following legend (and/or such other
legend or legends as the Plan Committee shall require) on certificates
evidencing the shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED, OR OTHERWISE TRANS-
FERRED OR OFFERED FOR SALE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT TO THEM UNDER THE ACT OR A WRITTEN
OPINION OF COUNSEL FOR THE HOLDER THEREOF,
WHICH OPINION SHALL BE ACCEPTABLE TO NATION-
WIDE HEALTH PROPERTIES, INC., THAT REGISTRATION
IS NOT REQUIRED."
28. Notices
-------
All notices and demands of any kind which the Plan Committee, or any
Participant, or other person may be required or desires to give under the terms
of this Plan shall be in writing and shall be delivered in hand to the person or
persons to whom addressed (in the case of the Plan Committee, with the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, Treasurer,
any Vice President, or Secretary or any Assistant Secretary of the Corporation),
by leaving a copy of such notice or demand at the address of such person or
persons as may be reflected in the records of the Corporation, or by mailing a
copy thereof, properly addressed as above, by certified or registered mail,
postage prepaid, with return receipt requested. Delivery by mail shall be
deemed made upon receipt by the notifying party of the return receipt request
acknowledging receipt of the notice or demand.
29. Limitation on Obligations of the Corporation
--------------------------------------------
All obligations of the Corporation arising under or as a result of
this Plan or Stock Options, Restricted Stock or Stock Appreciation Rights
granted hereunder shall con-
<PAGE>
stitute the general unsecured obligations of the Corporation, and not of the
Board of Directors of the Corporation, any member thereof, the Plan Committee,
any member thereof, any officer of the Corporation, or any other person or any
Subsidiary, and none of the foregoing, except the Corporation, shall be liable
for any debt, obligation, cost or expense hereunder.
30. Limitation of Rights
--------------------
Except as otherwise provided by the terms of the Plan, the Plan
Committee, in its sole and absolute discretion, is entitled to determine who, if
anyone, is an Eligible Participant under this Plan and which, if any, Eligible
Participant shall receive any grant. No oral or written agreement by any other
person not acting on the behalf of the Plan Committee relating to this Plan is
authorized, and such may not bind the Corporation or the Plan Committee to make
any grant to any person.
31. Severability
------------
If any provision of this Plan as applied to any person or to any
circumstance shall be adjudged by a court of competent jurisdiction to be
void, invalid, or unenforceable, the same shall in no way affect any other
provision hereof, the application of any such provision in any other
circumstances, or the validity or enforceability hereof.
32. Construction
------------
Where the context or construction requires, all words applied in the
plural herein shall be deemed to have been used in the singular and vice versa,
and the masculine gender shall include the feminine and the neuter and vice
versa.
33. Headings
--------
The headings of the several paragraphs herein are inserted solely for
convenience of reference and are not intended to form a part of and are not
intended to govern, limit or aid in the construction of any term or provision
hereof.
34. Successors
----------
This Plan shall be binding upon the respective successors, assigns,
heirs, executors, administrators, guardians and personal representatives of the
Corporation and Participants.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 15,090
<SECURITIES> 0
<RECEIVABLES> 6,686
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 58,530
<PP&E> 1,322,898
<DEPRECIATION> 155,975
<TOTAL-ASSETS> 1,424,332
<CURRENT-LIABILITIES> 56,498
<BONDS> 777,753
0
100,000
<COMMON> 4,622
<OTHER-SE> 485,459
<TOTAL-LIABILITY-AND-EQUITY> 1,424,332
<SALES> 0
<TOTAL-REVENUES> 121,705
<CGS> 0
<TOTAL-COSTS> 31,310
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,412
<INCOME-PRETAX> 52,983
<INCOME-TAX> 0
<INCOME-CONTINUING> 52,983
<DISCONTINUED> 0
<EXTRAORDINARY> (335)
<CHANGES> 0
<NET-INCOME> 52,648
<EPS-BASIC> 1.01
<EPS-DILUTED> 1.01
</TABLE>
