-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ACIdpt0K/oMDe+suS8TX5AIqA1HZIj3vH5XJc8hZo5rY7KU9zmLfgyk7MgpLpC4G AD8OscZ81SShsJnLsLwAow== 0001017062-99-000404.txt : 19990309 0001017062-99-000404.hdr.sgml : 19990309 ACCESSION NUMBER: 0001017062-99-000404 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONWIDE HEALTH PROPERTIES INC CENTRAL INDEX KEY: 0000780053 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 953997619 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09028 FILM NUMBER: 99559753 BUSINESS ADDRESS: STREET 1: 610 NEWPORT CENTER DR STREET 2: STE 1150 CITY: NEWPORT BEACH STATE: CA ZIP: 92660-6429 BUSINESS PHONE: 9497184400 MAIL ADDRESS: STREET 1: 610 NEWPORT CENTER DR STREET 2: STE 1150 CITY: NEWPORT BEACH STATE: CA ZIP: 92660-6429 FORMER COMPANY: FORMER CONFORMED NAME: BEVERLY INVESTMENT PROPERTIES INC DATE OF NAME CHANGE: 19890515 10-K 1 FOR FISCAL YEAR ENDED DECEMBER 31, 1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 (I.R.S. Employer incorporation or organization) Identification No.) 610 Newport Center Drive, Suite 1150 Newport Beach, California 92660 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 718-4400 Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, $.10 Par Value New York Stock Exchange 7.677% Series A Cumulative Preferred None 6.25% Convertible Debentures Due 1999 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE 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 [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the voting stock held by non-affiliates of the Company is approximately $824,999,000 as of February 28, 1999. 46,216,484 (Number of shares of common stock outstanding as of February 28, 1999) Part III is incorporated by reference from the registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1999. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS. Nationwide Health Properties, Inc., a Maryland corporation organized in October 1985 (the "Company"), is a real estate investment trust ("REIT") which invests primarily in health care related facilities and provides financing to health care providers. As of December 31, 1998, the Company had investments in 346 facilities located in 34 states and operated by 59 healthcare providers. The facilities include 203 skilled nursing facilities, 107 assisted living facilities, 14 continuing care retirement communities, 17 residential care facilities for the elderly, 2 rehabilitation hospitals and 3 medical clinics. As of December 31, 1998, the Company had direct ownership of 161 skilled nursing facilities, 99 assisted living facilities, 9 continuing care retirement communities, 17 residential care facilities for the elderly, 2 rehabilitation hospitals and 3 medical clinics (the "Properties"). Substantially all of the Company's owned facilities are leased under "net" leases (the "Leases"), which are accounted for as operating leases, to 45 healthcare providers (the "Lessees") including Alternative Living Services, American Retirement Corporation, ARV Assisted Living, Inc., Assisted Living Concepts, Inc., Beverly Enterprises, Inc. ("Beverly"), Harborside Healthcare Corporation, HEALTHSOUTH Corporation, Integrated Health Services, Lexington Healthcare Group, Inc., Mariner Post-Acute Network, Newcare Health Corporation and Sun Healthcare Group, Inc. Of the Lessees, only Beverly and Alternative Living Services are expected to account for more than 10% of the Company's revenues in 1999. The Leases have initial terms ranging from 9 to 19 years, and the Leases generally 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 194 facilities are backed by irrevocable letters of credit or security deposits that cover 2 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 December 31, 1998, the Company held 33 mortgage loans secured by 42 skilled nursing facilities, 8 assisted living facilities, and 5 continuing care retirement communities. Such loans had an aggregate outstanding principal balance of approximately $214,765,000 and a net book value of approximately $206,613,000 at December 31, 1998. The mortgage loans have individual outstanding balances ranging from approximately $541,000 to $21,500,000 and have maturities ranging from 2003 to 2025. During 1998, the Company acquired 17 skilled nursing facilities, 16 assisted living facilities, 2 continuing care retirement communities and 9 residential care facilities for the elderly in 26 separate transactions for an aggregate investment of approximately $123,840,000. The Company also completed the construction of 1 skilled nursing facility, 11 assisted living facilities, 1 continuing care retirement community and 2 clinics, in which the Company's total aggregate investment was $103,155,000. Additionally, the Company provided 3 mortgage loans, secured by 1 skilled nursing facility and 2 assisted living facilities in the aggregate amount of $11,615,000. The Company anticipates providing lease or mortgage financing for healthcare facilities to qualified operators and acquiring additional healthcare related facilities, including skilled nursing facilities, assisted living facilities, acute care hospitals and medical office buildings. 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. 1 Taxation of the Company The Company believes that it has operated in such a manner as to qualify for taxation as a "real estate investment trust" under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ending December 31, 1985, and the Company intends to continue to operate in such a manner. If the Company qualifies for taxation as a real estate investment trust, it will generally not be subject to federal corporate income taxes on its net income that is currently distributed to stockholders. This treatment substantially eliminates the "double taxation" (e.g. at the corporate and stockholder levels) that generally results from investment in stock of a corporation. Properties Of the 346 facilities in which the Company has investments, the Company has direct ownership of 161 skilled nursing facilities, 99 assisted living facilities, 9 continuing care retirement communities, 17 residential care facilities for the elderly, 2 rehabilitation hospitals and 3 medical clinics. Substantially all of the properties are leased to other parties under terms which require the lessee, in addition to paying rent, to pay all additional charges, taxes, assessments, levies and fees incurred in the operation of the leased properties. Skilled Nursing Facilities Skilled nursing facilities provide rehabilitative, restorative, skilled nursing and medical treatment for patients and residents who do not require the high-technology, care-intensive, high-cost setting of an acute-care or rehabilitative hospital. Treatment programs include physical, occupational, speech, respiratory and other therapeutic programs, including sub-acute clinical protocols such as wound care and intravenous drug treatment. Assisted Living Facilities Assisted living facilities provide services to aid in everyday living, such as bathing, routine or special meals, security, transportation, recreation, medication supervision and limited therapeutic programs. More intensive medical needs of the residents are often met within the Company's assisted living facilities by home health providers, close coordination with the individual's physician and skilled nursing facilities. Assisted living facilities are increasingly successful as lower cost, less institutional alternatives to the health problems of the elderly or medically frail. Continuing Care Retirement Communities Continuing care retirement communities provide a broad continuum of care. At the most basic level, services are provided which aid in everyday living, much like in an assisted living facility. At the other end of the spectrum, skilled nursing, rehabilitation and medical treatment is provided to residents who need those services. This type of facility offers residents the ability to have the most independent lifestyle possible while providing a wide range of social, health and nursing services tailored to meet individual needs. Residential Care Facilities for the Elderly Residential care facilities for the elderly offer similar services to an assisted living facility, except they are provided in a residential home setting. These facilities are generally three to four bedroom houses in residential neighborhoods, which are slightly modified to enable adequate access and care for the residents. There is generally one 24-hour caregiver at each location to provide meals and assistance with activities such as bathing, dressing, laundry and cleaning. Rehabilitation Hospitals Rehabilitation hospitals provide inpatient and outpatient medical care to patients requiring high intensity physical, respiratory, neurological, orthopedic and other treatment protocols and for intermediate periods in their 2 recovery. These programs are often the most effective in treating severe skeletal or neurological injuries and traumatic diseases such as stroke or acute arthritis. The following table sets forth certain information regarding the Company's owned facilities as of December 31, 1998.
Number Annual 1998 Number of of Beds/ Minimum Additional Facility Location Facilities Units(1) Investment Rent(2) Rent(2) - ----------------- ---------- -------- ---------- ------- ---------- (Dollars in Thousands) Skilled Nursing Facilities: Arizona..................... 1 130 $ 3,540 $ 481 $ 122 Arkansas.................... 10 1,220 39,972 3,601 295 California.................. 8 963 26,481 3,228 926 Connecticut................. 3 359 7,864 783 177 Florida..................... 9 1,293 29,476 3,064 971 Georgia..................... 1 163 7,343 867 -- Idaho....................... 1 64 792 81 38 Illinois.................... 2 224 5,549 701 196 Indiana..................... 11 1,244 36,070 4,228 826 Kansas...................... 10 732 13,978 1,415 185 Maryland.................... 4 749 22,057 2,634 1,426 Massachusetts............... 17 1,820 68,299 7,074 557 Minnesota................... 10 1,242 37,690 4,392 1,020 Mississippi................. 1 120 4,267 388 -- Missouri.................... 1 108 2,740 337 153 Nevada...................... 1 140 4,034 480 105 New Jersey.................. 1 180 6,809 749 206 North Carolina.............. 1 150 2,360 294 204 Ohio........................ 6 811 29,551 3,304 167 Oklahoma.................... 3 253 3,939 404 154 Oregon...................... 4 326 6,760 833 219 Tennessee................... 10 1,120 35,491 3,631 369 Texas....................... 26 2,953 57,801 6,155 1,793 Virginia.................... 4 605 18,568 2,291 867 Washington.................. 7 717 29,463 3,037 315 Wisconsin................... 9 936 21,169 2,301 1,024 --- ------ -------- ------- ------- Subtotals................. 161 18,622 522,063 56,753 12,315 --- ------ -------- ------- ------- Assisted Living Facilities: Alabama..................... 2 166 5,952 515 7 Arizona..................... 2 142 7,868 743 9 Arkansas.................... 1 28 1,660 144 -- California.................. 13 1,622 78,830 8,164 771 Colorado.................... 4 419 21,777 2,143 31 Florida..................... 18 1,135 65,241 6,266 190 Idaho....................... 1 158 11,800 1,175 19 Illinois.................... 1 178 11,077 1,037 -- Indiana..................... 1 50 4,648 458 -- Kansas...................... 4 231 13,470 1,196 4 Kentucky.................... 1 44 2,654 273 -- Massachusetts............... 2 185 17,297 1,544 -- Michigan.................... 1 144 7,305 817 109
3
Number Annual 1998 Number of of Beds/ Minimum Additional Facility Location Facilities Units(1) Investment Rent(2) Rent(2) - ----------------- ---------- -------- ---------- --------- ---------- (Dollars in Thousands) Missouri................ 1 31 $ 2,529 $ 222 $ -- Nevada.................. 2 155 13,616 1,254 -- New Jersey.............. 1 52 4,085 353 -- North Carolina.......... 1 42 2,916 257 2 Ohio.................... 10 553 29,486 2,772 51 Oklahoma................ 3 188 8,100 771 33 Oregon.................. 6 536 28,831 2,851 29 South Carolina.......... 4 162 11,038 943 2 Tennessee............... 2 98 8,270 766 7 Texas................... 12 601 37,545 3,432 55 Washington.............. 4 341 22,927 2,347 27 Wisconsin............... 2 422 29,062 1,922 46 --- ------ ---------- --------- -------- Subtotals............. 99 7,683 447,984 42,365 1,392 --- ------ ---------- --------- -------- Continuing Care Retirement Communities: California.............. 1 279 12,173 1,184 197 Colorado................ 1 119 3,116 307 26 Georgia................. 1 187 11,492 809 -- Kansas.................. 1 199 13,201 1,267 8 Massachusetts........... 1 168 11,744 561 -- Texas................... 2 550 35,541 3,161 19 Wisconsin............... 2 942 64,351 5,844 89 --- ------ ---------- --------- -------- Subtotals............. 9 2,444 151,618 13,133 339 --- ------ ---------- --------- -------- Residential Care Facilities for the Elderly: California.............. 17 102 5,575 606 1 --- ------ ---------- --------- -------- Rehabilitation Hospitals: Arizona................. 2 116 16,826 1,770 446 --- ------ ---------- --------- -------- Medical Clinics: Alabama................. 1 -- 2,431 -- 5 Texas................... 2 -- 6,493 -- -- --- ------ ---------- --------- -------- Subtotals............. 3 -- 8,924 -- 5 --- ------ ---------- --------- -------- Construction in Progress.. -- -- 90,398 -- -- --- ------ ---------- --------- -------- Total All Owned Facilities............... 291 28,967 $1,243,388 $ 114,627 $ 14,498 === ====== ========== ========= ========
- -------- (1) Assisted living facilities are measured in units, continuing care retirement communities are measured in beds and units and all other facilities are measured by bed count. (2) Annual Minimum Rent (as defined in the Leases) for each of the Company's owned properties. Additional rent, generally contingent upon increases in the facility net patient revenues in excess of a base amount or increases in the Consumer Price Index, may also be paid. The 1998 additional rent amounts reflect additional rent accrued in 1998. As of December 31, 1998, 48 of the Company's 291 owned facilities were being leased to and operated by subsidiaries of Beverly. Beverly has guaranteed certain obligations of its subsidiaries and of certain parties unaffiliated with Beverly in connection with 27 properties operated by such parties. For additional financial information regarding Beverly, see Appendix 1 attached as part of this Annual Report on Form 10-K. 4 As of December 31, 1998, 54 of the owned facilities are leased to and operated by subsidiaries of Alternative Living Services, Inc. Competition The Company generally competes with other REITs, real estate partnerships, health care providers and other investors, including, but not limited to, banks and insurance companies, in the acquisition, leasing and financing of health care facilities. The operators of the health care facilities compete on a local and regional basis with operators of facilities that provide comparable services. Operators compete for patients based on quality of care, reputation, physical appearance of facilities, services offered, family preferences, physicians, staff and price. Regulation Payments for health care services provided by the operators of the Company's facilities are received principally from four sources: private funds; Medicaid, a medical assistance program for the indigent, operated by individual states with the financial participation of the federal government; Medicare, a federal health insurance program for the aged and certain chronically disabled individuals; and health and other insurance plans. Government revenue sources, particularly Medicaid programs, are subject to statutory and regulatory changes, administrative rulings, and government funding restrictions, all of which may materially increase or decrease the rates of payment to nursing facilities and the amount of additional rents payable to the Company under the Leases. Effective for cost reporting years beginning after July 1, 1998, the payment methodology for nursing homes under the Medicare program has been changed. Under the new methodology, Medicare will reimburse nursing home operators for nursing care, ancillary services and capital costs at a flat per diem rate. In the past, a cost-based system of reimbursement was used. This new reimbursement methodology is being phased in over four years. There is no assurance that payments under such programs will remain at levels comparable to the present levels or be sufficient to cover all the operating and fixed costs allocable to Medicaid and Medicare patients. Any changes in reimbursement levels could have an adverse impact on the revenues of the operators of the Company's facilities, which could in turn adversely impact their abilities to make their monthly lease or debt payments to the Company. Health care facilities in which the Company invests are also generally subject to state licensure statutes and regulations and statutes which may require regulatory approval, in the form of a certificate of need ("CON"), prior to the addition or construction of new beds, the addition of services or certain capital expenditures. CON requirements generally do not apply to assisted living facilities. CON requirements are not uniform throughout the United States and are subject to change. The Company cannot predict the impact of regulatory changes with respect to licensure and CON's on the operations of the Company's lessees and mortgagees. 5 Executive Officers of the Company The table below sets forth the name, position and age of each executive officer of the Company. Each executive officer of the Company is appointed by its Board of Directors, serves at the pleasure of the Board and holds office until a successor is elected, or until the earliest of death, resignation or removal. There is no "family relationship" between any of the named executive officers and/or any director of the Company. All information is given as of February 28, 1999.
Name Position Age ---- -------- --- R. Bruce Andrews...... President and Chief Executive Officer 58 Mark L. Desmond....... Senior Vice President and Chief Financial Officer 40 T. Andrew Stokes...... Senior Vice President of Corporate Development 51 Steven J. Insoft...... Vice President of Development 35 John J. Sheehan, Jr... Vice President of Development 41 Gary E. Stark......... Vice President and General Counsel 43
R. Bruce Andrews--President and Chief Executive Officer of the Company since September 1989 and a director of the Company since October 1989. Mr. Andrews had previously served as a director of American Medical International, Inc., a hospital management company, and served as its Chief Financial Officer from 1970 to 1985 and its Chief Operating Officer in 1985 and 1986. From 1986 through 1989, Mr. Andrews was engaged in various private investments. Mr. Andrews is also a director of CenterTrust Retail Properties, Inc. Mark L. Desmond--Senior Vice President and Chief Financial Officer of the Company since January 1996. Mr. Desmond was Vice President and Treasurer of the Company from May 1990 to December 1995 and Controller, Chief Accounting Officer and Assistant Treasurer of the Company from June 1988 to April 1990. From 1986 until joining the Company, Mr. Desmond held various accounting positions with Beverly, an operator of nursing facilities, pharmacies and pharmacy related outlets. T. Andrew Stokes--Senior Vice President of Corporate Development of the Company since January 1996. Mr. Stokes was Vice President of Development of the Company from August 1992 to December 1995. From 1984 to 1988, Mr. Stokes served as Vice President, Corporate Development for American Medical International, Inc., a hospital management company. From 1989 until joining the Company, Mr. Stokes was Healthcare Group Director of Houlihan, Lokey, Howard & Zukin, a national financial advisory firm. Steven J. Insoft--Vice President of Development of the Company since February 1998. From 1991 to 1997, Mr. Insoft served as President of CMI Senior Housing & Healthcare, Inc., an operator of nursing facilities. From 1988 to 1991, Mr. Insoft was an Associate in the Capital Markets Group of Prudential Insurance Company of America. John J. Sheehan, Jr.--Vice President of Development of the Company since February 1996. From September 1987 through April 1990, Mr. Sheehan served as Director of Asset Management for Southmark Corporation, a real estate syndication company. From April 1990 until joining the Company, Mr. Sheehan was Vice President, Mortgage Finance for Life Care Centers of America, an operator and manager of nursing facilities. Gary E. Stark--Vice President and General Counsel of the Company since January 1993. From January 1988 to December 1989, Mr. Stark held the position of General Counsel with Care Enterprises, Inc., an operator of nursing facilities, pharmacies and other ancillary health care services, and served as its Corporate Counsel from April 1985 through December 1987. From January 1990 through August 1991, Mr. Stark was engaged in the private practice of law. Mr. Stark served as Vice President of Legal Services of Life Care Centers of America, Inc., an operator and manager of nursing facilities and retirement centers from July 1992 to December 1992 and served as General Counsel from September 1991 to July 1992. 6 Employees As of February 28, 1999, the Company employed fourteen full-time employees. Item 2. Properties. See Item 1 for details. Item 3. Legal Proceedings. There are various legal proceedings pending to which the Company is a party or to which some of its properties are subject arising in the normal course of business. The Company does not believe that the ultimate resolution of these proceedings will have a material adverse effect on the Company's consolidated financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders. None. 7 PART II Item 5. Market for the Company's Common Equity and Related Stockholder Matters. The Company's common stock is listed on the New York Stock Exchange. It has been the Company's policy to declare quarterly dividends to holders of the Company's common stock so as to comply with applicable sections of the Internal Revenue Code governing real estate investment trusts. Set forth below are the high and low sales prices of the Company's common stock from January 1, 1997 to December 31, 1998 as reported by the New York Stock Exchange and the cash dividends per share paid with respect to such periods.
High Low Dividend --------- -------- -------- 1998 First quarter.................................. $26 15/16 $24 1/4 $.42 Second quarter................................. 25 7/8 23 3/16 .42 Third quarter.................................. 25 3/8 19 3/8 .42 Fourth quarter................................. 23 1/4 20 .42 1997 First quarter.................................. $23 3/8 $21 1/4 $.39 Second quarter................................. 23 1/2 19 7/8 .39 Third quarter.................................. 24 3/4 22 1/16 .39 Fourth quarter................................. 25 7/8 21 3/16 .39
As of February 28, 1999 there were approximately 1,500 holders of record of the Company's common stock. 8 Item 6. Selected Financial Data. The following table presents selected financial data with respect to the Company. Certain of this financial data has been derived from the Company's audited financial statements included elsewhere in this Annual Report on Form 10-K and should be read in conjunction with those financial statements and accompanying notes and with "Management's Discussion and Analysis of Financial Condition and Results of Operations." Reference is made to Note 4 of Notes to Consolidated Financial Statements for information regarding the Company's acquisitions.
Years ended December 31, ---------------------------------------------------- 1998 1997 1996 1995 1994 ---------- ---------- -------- -------- -------- (In thousands, except per share data) Operating Data: Total revenues........... $ 142,584 $ 115,705 $ 95,776 $ 81,039 $ 69,985 Income from operations... 67,427 62,988 54,944 49,382 44,813 Gain on sale of facilities.............. 2,321 829 -- 989 -- Net income............... 69,748 63,817 54,944 50,371 44,813 Preferred stock dividends............... (7,677) (1,962) -- -- -- Net income available to common stockholders..... 62,071 61,855 54,944 50,371 44,813 Dividends paid on common stock................... 75,128 65,734 59,581 53,182 47,751 Per Share Data: Basic/diluted income from continuing operations available to common stockholders (1)........ $ 1.34 $ 1.45 $ 1.36 $ 1.30 $ 1.23 Basic/diluted net income available to common stockholders............ 1.39 1.47 1.36 1.33 1.23 Dividends paid on common stock................... 1.68 1.56 1.48 1.41 1.31 Balance Sheet Data Investments in real estate, net............. $1,316,685 $1,053,273 $722,506 $652,231 $501,862 Total assets............. 1,357,303 1,077,394 744,984 670,111 513,809 Senior unsecured notes due 2000-2038........... 545,150 355,000 190,000 100,000 -- Bank borrowings.......... 42,000 19,600 32,300 93,900 80,200 Convertible debentures... 57,431 64,512 64,920 65,000 67,690 Notes and bonds payable.. 64,623 58,297 9,229 23,364 20,520 Stockholders' equity..... 605,558 553,046 428,588 371,822 336,106 Other Data: Net cash provided by operating activities.... $ 106,067 $ 86,010 $ 74,129 $ 66,972 $ 56,756 Net cash used in investing activities.... (282,968) (267,302) (85,034) (151,476) (83,185) Net cash provided by financing activities.... 182,891 179,775 14,677 88,699 26,544 Funds from operations available to common stockholders (2)........ 92,726 80,851 71,667 63,267 57,057 Weighted average shares outstanding............. 44,637 42,164 40,373 37,808 36,356
- -------- (1) For per share purposes, income from continuing operations is defined as income before the effect of any gains or losses on sales of properties. (2) Industry analysts generally consider funds from operations to be an alternative measure of the performance of an equity REIT. The Company therefore discloses funds from operations, although it is a measurement that is not defined by generally accepted accounting principles. The Company uses the NAREIT measure of funds from operations, which is generally defined as income before extraordinary items plus certain non- cash items, primarily real estate depreciation, less gains on sales of facilities. The NAREIT measure may not be comparable to similarly titled measures used by other REITs. Consequently, the Company's funds from operations may not provide a meaningful measure of the Company's performance as compared to that of other REITs. Funds from operations does not represent cash generated from operating activities as defined by generally accepted accounting principles (funds from operations does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity. 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 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, the amount of any additional investments, access to capital markets and changes in the ratings of the Company's debt securities. Operating Results Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 Minimum rent increased $24,618,000 or 31% in 1998 as compared to 1997. The increase was primarily due to minimum rent resulting from investments in 57 net additional leased facilities in 1998, combined with a full year of revenues earned by investments in additional facilities in 1997. Interest and other income increased by $405,000 or 2% in 1998 as compared to 1997. The increase was primarily due to the increase in mortgage loans during 1998. Additional rent and additional interest increased by $1,856,000 or 14% in 1998 as compared to 1997. 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 $8,632,000 or 30% in 1998 as compared to 1997. The increase was primarily due to the issuance of $190,150,000 in medium-term notes during 1998 and a full year of interest expense related to the issuance of $165,000,000 of medium-term notes in 1997. Depreciation and non-cash charges increased $8,151,000 or 41% in 1998 as compared to 1997. The increase was attributable to increased depreciation due to the acquisition of additional facilities in 1998 and a full year of depreciation related to facilities acquired in 1997. General and administrative costs increased $657,000 or 16% in 1998 as compared to 1997. The increase was due in part to adding two additional employees, increased wages and increases in other general expenses. The impairment of long-lived assets was due to recording a provision of $5,000,000 as a reduction in the carrying amount of the Company's investment in three medical clinics that were leased to a company that has declared bankruptcy. 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. 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 at least partially offset by rents or interest income associated with the investments. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 Revenues increased $19,929,000 or 21% in 1997 as compared to 1996. The increase was primarily due to increased minimum rent and interest income resulting from investments in 60 net additional facilities in 1997, combined with a full year of revenues earned by investments in additional facilities in 1996. The increase was also 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. 10 Total expenses increased $11,885,000 or 29% in 1997 as compared to 1996. The increase was primarily due to an increase in interest expense due to the issuance of $165,000,000 in medium-term notes during 1997 and the issuance of $90,000,000 in medium-term notes in 1996. The increase in total expenses was also attributable to increased depreciation due to the acquisition of additional facilities in 1997 and 1996. Liquidity and Capital Resources During 1998, the Company acquired 17 skilled nursing facilities, 16 assisted living facilities, 2 continuing care retirement communities and 9 residential care facilities for the elderly in 26 separate transactions for an aggregate investment of approximately $123,840,000. During 1998, the Company provided new construction financing of approximately $143,853,000. Construction of 1 skilled nursing facility, 11 assisted living facilities, 1 continuing care retirement community and 2 clinics was completed in 1998, in which the Company's total aggregate investment was $103,155,000; $57,179,000 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. The Company also funded approximately $19,715,000 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 on these facilities. The acquisitions, construction advances and capital improvements were funded by bank borrowings on the Company's bank line of credit and cash on hand. The acquisitions were also funded by approximately $4,137,000 of debt assumption and the issuance of 201,190 shares of the Company's common stock. During 1998, the Company provided 3 mortgage loans secured by 1 skilled nursing facility and 2 assisted living facilities in the aggregate amount of $11,615,000. Such mortgages were funded by bank borrowings on the Company's bank line of credit and cash on hand. In addition, the Company funded an additional $7,096,000 on existing mortgage loans. Such additional amounts funded will result in an increase in interest income earned by the Company on these loans. The additional amounts funded were financed by borrowings on the Company's bank line of credit and by cash on hand. During 1998, the Company sold 2 skilled nursing facilities in 2 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 1998, 2 of the Company's mortgage loans, each secured by a skilled nursing facility, matured and were repaid in full in an aggregate principal amount of approximately $5,382,000. During the same period, another mortgage loan with a principal balance of approximately $2,150,000, secured by two skilled nursing facilities, was also repaid in full. The proceeds were used to repay borrowings on the Company's bank line of credit. During 1998, the Company issued $190,150,000 in aggregate principal amount of medium-term notes. The notes bear fixed interest at a weighted average interest rate of 7.2% and have a weighted average maturity of 18.2 years. The proceeds were used to repay borrowings on the Company's bank line of credit. At December 31, 1998, the Company had $58,000,000 available under its $100,000,000 bank line of credit. The Company also had effective shelf registrations on file with the Securities and Exchange Commission under which the Company may issue (a) up to $54,850,000 in aggregate principal amount of medium-term notes and (b) up to $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, for the financing of additional investments and for general corporate purposes. On April 29, 1998, the Company issued 1,048,128 shares of common stock resulting in aggregate net proceeds 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 net proceeds of approximately 11 $30,000,000 before expenses related to the offering. The net proceeds from the offerings were used to repay borrowings under the Company's bank line of credit. At December 31, 1998, the Company had $57,431,000 of convertible debentures due January 1, 1999 outstanding. Subsequent to year end, $8,000 of such debentures were converted into 356 shares of common stock and the remaining debentures, totaling $57,423,000, were repaid. The repayment was funded by bank borrowings on the Company's bank line of credit and cash on hand. 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, 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 is reviewing the risks of the Year 2000 Issue with regard to the Company's own internal operations, information systems and software applications and 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 likely to be compliant or will be compliant by mid-1999 based upon reasonable assurance by vendors and the Company's information systems consultant. The Company's computer information system currently consists of 16 personal computers and 1 network server. The Company anticipates replacing its entire computer system during the first half of 1999 to enable it to upgrade its accounting software unrelated to the Year 2000 Issue. The cost to remediate the Year 2000 Issues 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 health care 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 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 is currently reviewing 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. The Company plans to complete the assessment by mid- 1999. However, 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, 12 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. 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. Impact of New Accounting Pronouncements The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130 Reporting Comprehensive Income in 1998. This Statement requires that all items that meet the definition of components of comprehensive income be reported in a financial statement for the period in which they are recognized. Components of comprehensive income include revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but excluded from net income. There are no differences between the Company's net income, as reported, and comprehensive income, as defined, for the periods presented, or as of December 31, 1998. The Company has also adopted SFAS No. 131 Disclosures about Segments of an Enterprise and Related Information in 1998. 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. Market Risk Exposure 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 purpose of the following analyses is to provide a framework to understand the Company's sensitivity to hypothetical changes in interest rates as of December 31, 1998. 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 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 in the table and analysis below. 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 fund 13 its acquisitions until market conditions were appropriate, based on management's judgment, to issue stock or fixed rate debt to provide long-term financing. The Company holds variable rate debt in the form of housing revenue bonds, which were assumed in connection with certain healthcare facility acquisitions because of the favorable interest rates, which in turn provided favorable lease rates to the sellers/lessees. Pursuant to the associated lease arrangements, increases or decreases in the interest rates on the housing revenue bonds would be substantially offset by increases or decreases in the associated rent received by the Company on the properties securing this debt. Therefore, there is substantially no market risk associated with the Company's variable rate debt. For fixed rate debt, changes in interest rates generally affect the fair market value, but not earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact fair market value, but do affect the future earnings and cash flows. The Company generally cannot prepay fixed rate debt prior to maturity, therefore, interest rate risk and changes in fair market value should not have a significant impact on the fixed rate debt until the Company would be required to refinance such debt. Holding the variable rate debt balance constant, and including the bank borrowings as variable rate debt due to its nature, each one percentage point increase in interest rates would result in an increase in interest expense for the coming year of approximately $544,000. The table below details the principal amount and the average interest rates for the mortgage loans receivable and debt for each category based on the final maturity dates. Certain of the mortgage loans receivable and certain items in the various categories of debt, excluding the convertible debentures, require periodic principal payments prior to the final maturity date. The fair value estimates for the mortgage loans receivable are based on the estimates of management and on rates currently prevailing for comparable loans. The fair market value estimates for debt securities are based on discounting future cash flows utilizing current rates offered to the Company for debt of the same type and remaining maturity.
Maturity Date ---------------------------------------------------------------------------- 1999 2000 2001 2002 2003 Thereafter Total Fair Value ------- ------- ------- ------- ------- ---------- -------- ---------- (Dollars in thousands) Assets Mortgage loans receivable............. -- -- -- -- $ 2,759 $203,854 $206,613 $212,448 Average interest rate.. -- -- -- -- 10.15% 10.27% 10.27% Liabilities Debt Fixed rate............. -- $30,000 $78,150 $50,000 $66,000 $373,270 $597,420 $582,408 Average interest rate................. -- 7.43% 6.89% 7.35% 7.49% 7.32% 7.29% Variable rate.......... -- -- -- -- -- $ 12,353 $ 12,353 $ 12,353 Average interest rate................. -- -- -- -- -- 4.23% 4.23% Bank borrowings........ -- -- $42,000 -- -- -- $ 42,000 $ 42,005 Average interest rate................. -- -- 7.05% -- -- -- 7.05% Convertible debentures............ $57,431 -- -- -- -- -- $ 57,431 $ 57,431 Average interest rate................. 6.25% -- -- -- -- -- 6.25%
The Company does not believe that the future market rate risks related to the above securities will have a material impact on the Company or the results of its future operations. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. See Item 7 for details. Item 8. Financial Statements and Supplementary Data. Report of Independent Public Accountants................................. 15 Consolidated Balance Sheets.............................................. 16 Consolidated Statements of Operations.................................... 17 Consolidated Statements of Stockholders' Equity.......................... 18 Consolidated Statements of Cash Flows.................................... 19 Notes to Consolidated Financial Statements............................... 20
14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Directors of Nationwide Health Properties, Inc. We have audited the accompanying consolidated balance sheets of Nationwide Health Properties, Inc. (a Maryland corporation) and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nationwide Health Properties, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Orange County, California January 22, 1999 15 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS
December 31, ---------------------- 1998 1997 ---------- ---------- (In thousands) ASSETS Investments in real estate Real estate properties: Land............................................... $ 148,388 $ 120,236 Buildings and improvements......................... 1,024,637 809,217 Construction in progress........................... 70,363 31,078 ---------- ---------- 1,243,388 960,531 Less accumulated depreciation...................... (133,316) (107,077) ---------- ---------- 1,110,072 853,454 Mortgage loans receivable, net....................... 206,613 199,819 ---------- ---------- 1,316,685 1,053,273 Cash and cash equivalents.............................. 16,182 10,192 Receivables............................................ 6,712 4,362 Other assets........................................... 17,724 9,567 ---------- ---------- $1,357,303 $1,077,394 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Bank borrowings........................................ $ 42,000 $ 19,600 Senior notes due 2000-2038............................. 545,150 355,000 Convertible debentures................................. 57,431 64,512 Notes and bonds payable................................ 64,623 58,297 Accounts payable and accrued liabilities............... 42,541 26,939 Commitments and contingencies Stockholders' equity: Preferred stock $1.00 par value; 5,000,000 shares authorized; issued and outstanding: 1,000,000 as of December 31, 1998 and 1997; 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: 46,206,128 and 43,128,889 as of December 31, 1998 and 1997, respectively........................................ 4,621 4,313 Capital in excess of par value......................... 555,998 490,737 Cumulative net income.................................. 433,644 363,896 Cumulative dividends................................... (488,705) (405,900) ---------- ---------- Total stockholders' equity............................. 605,558 553,046 ---------- ---------- $1,357,303 $1,077,394 ========== ==========
See accompanying notes. 16 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts)
Years ended December 31, -------------------------- 1998 1997 1996 -------- ------- ------- Revenues: Minimum rent...................................... $104,205 $79,587 $66,536 Interest and other income......................... 22,859 22,454 17,104 Additional rent and additional interest........... 15,520 13,664 12,136 -------- ------- ------- 142,584 115,705 95,776 -------- ------- ------- Expenses: Interest and amortization of deferred financing costs............................................ 37,531 28,899 20,797 Depreciation and non-cash charges................. 27,976 19,825 16,723 General and administrative........................ 4,650 3,993 3,312 Impairment of long-lived assets................... 5,000 -- -- -------- ------- ------- 75,157 52,717 40,832 -------- ------- ------- Income before gain on sale of facilities............ 67,427 62,988 54,944 Gain on sale of facilities.......................... 2,321 829 -- -------- ------- ------- Net income.......................................... 69,748 63,817 54,944 Preferred stock dividends........................... (7,677) (1,962) -- -------- ------- ------- Net income available to common stockholders......... $ 62,071 $61,855 $54,944 ======== ======= ======= Per share amounts: Basic/diluted income from continuing operations available to common stockholders................. $ 1.34 $ 1.45 $ 1.36 ======== ======= ======= Basic/diluted net income available to common stockholders..................................... $ 1.39 $ 1.47 $ 1.36 ======== ======= ======= Weighted average shares outstanding................. 44,637 42,164 40,373 ======== ======= =======
See accompanying notes. 17 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands)
Common Stock Preferred Stock Capital in Total -------------- --------------- Excess of Cumulative Cumulative Stockholders' Shares Amount Shares Amount Par Value Net Income Dividends Equity ------- ------ ------ -------- ---------- ---------- ---------- ------------- Balances at December 31, 1995................... 38,720 $3,872 -- $ -- $401,438 $245,135 $(278,623) $371,822 Issuance of common stock................. 3,058 307 -- -- 60,998 -- -- 61,305 Exercise of common stock options......... 3 -- -- -- 19 -- -- 19 Conversion of debentures............ 4 -- -- -- 79 -- -- 79 Net income............. -- -- -- -- -- 54,944 -- 54,944 Common dividends....... -- -- -- -- -- -- (59,581) (59,581) ------- ------ ----- -------- -------- -------- --------- -------- Balances at December 31, 1996................... 41,785 4,179 -- -- 462,534 300,079 (338,204) 428,588 Issuance of common stock................. 1,326 132 -- -- 30,551 -- -- 30,683 Issuance of preferred stock................. -- -- 1,000 100,000 (2,750) -- -- 97,250 Conversion of debentures............ 18 2 -- -- 402 -- -- 404 Net income............. -- -- -- -- -- 63,817 -- 63,817 Preferred dividends.... -- -- -- -- -- -- (1,962) (1,962) Common dividends....... -- -- -- -- -- -- (65,734) (65,734) ------- ------ ----- -------- -------- -------- --------- -------- Balances at December 31, 1997................... 43,129 4,313 1,000 100,000 490,737 363,896 (405,900) 553,046 Issuance of common stock................. 2,761 276 -- -- 58,248 -- -- 58,524 Conversion of debentures............ 316 32 -- -- 7,013 -- -- 7,045 Net income............. -- -- -- -- -- 69,748 -- 69,748 Preferred dividends.... -- -- -- -- -- -- (7,677) (7,677) Common dividends....... -- -- -- -- -- -- (75,128) (75,128) ------- ------ ----- -------- -------- -------- --------- -------- Balances at December 31, 1998 $46,206 $4,621 1,000 $100,000 $555,998 $433,644 $(488,705) $605,558 ======= ====== ===== ======== ======== ======== ========= ========
See accompanying notes. 18 NATIONWIDE HEALTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Years ended December 31, ---------------------------- 1998 1997 1996 -------- -------- -------- Cash flows from operating activities: Net income..................................... $ 69,748 $ 63,817 $ 54,944 Depreciation and non-cash charges.............. 27,976 19,825 16,723 Gain on sale of properties..................... (2,321) (829) -- Impairment of long-lived assets................ 5,000 -- -- Amortization of deferred financing costs....... 980 801 772 Net change in other assets and liabilities..... 4,684 2,396 1,690 -------- -------- -------- Net cash provided by operating activities.... 106,067 86,010 74,129 -------- -------- -------- Cash flows from investing activities: Investment in real estate properties........... (279,384) (239,775) (59,282) Disposition of real estate properties.......... 5,496 4,812 -- Investment in mortgage loans receivable........ (18,711) (44,947) (31,430) Principal payments on mortgage loans receivable.................................... 9,631 12,608 5,678 -------- -------- -------- Net cash used in investing activities.......... (282,968) (267,302) (85,034) -------- -------- -------- Cash flows from financing activities: Bank borrowings................................ 308,800 263,700 132,450 Repayment of bank borrowings................... (286,400) (276,400) (194,050) Issuance of common stock, net.................. 53,062 -- 60,903 Issuance of preferred stock, net............... -- 97,250 -- Issuance of senior unsecured debt.............. 190,150 165,000 90,000 Issuance of notes and bonds.................... 4,507 -- -- Principal payments on notes and bonds payable.. (2,729) (474) (14,135) Dividends paid................................. (82,805) (67,696) (59,581) Deferred financing costs....................... (1,694) (1,605) (910) -------- -------- -------- Net cash provided by financing activities.... 182,891 179,775 14,677 -------- -------- -------- Increase (decrease) in cash and cash equivalents..................................... 5,990 (1,517) 3,772 Cash and cash equivalents, beginning of period... 10,192 11,709 7,937 -------- -------- -------- Cash and cash equivalents, end of period......... $ 16,182 $ 10,192 $ 11,709 ======== ======== ======== Supplemental schedule of cash flow information: Cash interest paid............................. $ 38,402 $ 22,467 $ 12,721 ======== ======== ========
See accompanying notes. 19 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 1998, 1997 and 1996 1. Organization Nationwide Health Properties, Inc. (the "Company") was incorporated on October 14, 1985 in the State of Maryland. The Company operates as a real estate investment trust specializing in investments in health care related properties and as of December 31, 1998 had investments in 346 health care facilities, including 203 skilled nursing facilities, 107 assisted living facilities, 14 continuing care retirement communities, 17 residential care facilities for the elderly, 2 rehabilitation hospitals and 3 medical clinics. At December 31, 1998, the Company owned 161 skilled nursing facilities, 99 assisted living facilities, 9 continuing care retirement communities, 17 residential care facilities for the elderly, 2 rehabilitation hospitals and 3 medical clinics. The Company also held 33 mortgage loans secured by 42 skilled nursing facilities, 8 assisted living facilities and 5 continuing care retirement communities. In addition, at December 31, 1998, the Company had 26 assisted living facilities under construction. The Company has no foreign facilities or operations. 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its investment in its majority owned and controlled joint ventures. All material intercompany accounts and transactions have been eliminated. Stock Split On January 19, 1996, the Board of Directors of Nationwide Health Properties, Inc. authorized a two-for-one split of the Company's common stock effective on March 8, 1996. The financial statements included herein have been restated to reflect the stock split. Land, Buildings and Improvements The Company records properties at cost and uses the straight-line method of depreciation for buildings and improvements over their estimated remaining useful lives of up to 40 years. The Company provides accelerated depreciation on certain of its investments based primarily on an estimation of net realizable value of such investments at the end of the primary lease terms. Cash and Cash Equivalents Cash in excess of daily requirements is invested in money market mutual funds, commercial paper and repurchase agreements with original maturities of three months or less. Such investments are deemed to be cash equivalents for purposes of presentation in the financial statements. Federal Income Taxes 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 95% of its real estate investment trust taxable income to its stockholders. Accordingly, the Company will not be subject to Federal income taxes on its income which is distributed to stockholders. Therefore, no provisions for Federal income taxes have been made in the Company's financial statements. The net difference in the tax basis and the reported amounts of the Company's assets and liabilities as of December 31, 1998 is approximately $2,829,000. 20 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Revenue Recognition Rental income from operating leases is accrued as earned over the life of the lease agreements in accordance with generally accepted accounting principles. There are no step rent provisions in any of the lease agreements. Additional rent is 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 rent is generally calculated and payable monthly or quarterly. Interest income on real estate mortgages is recognized using the effective interest method based upon the expected payments over the lives of the mortgages. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Impact of New Accounting Pronouncements The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130 Reporting Comprehensive Income in 1998. This Statement requires that all items that meet the definition of components of comprehensive income be reported in a financial statement for the period in which they are recognized. Components of comprehensive income include revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but excluded from net income. There are no differences between the Company's net income, as reported, and comprehensive income, as defined, for the periods presented, or as of December 31, 1998. The Company has also adopted SFAS No. 131 Disclosures about Segments of an Enterprise and Related Information in 1998. 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. 3. Earnings Per Share Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of 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 convertible debentures were not dilutive in 1998, 1997 or 1996. The table below details the components of the basic and diluted earnings per share from continuing operations calculations.
Years Ended December 31, ---------------------------------------------- 1998 1997 1996 --------------- --------------- -------------- Income Shares Income Shares Income Shares ------- ------ ------- ------ ------- ------ (Amounts in thousands) Income before gain on sale of facility...................... $67,427 $62,988 $54,944 Less: preferred stock dividends..................... (7,677) (1,962) -- ------- ------- ------- Basic EPS...................... 59,750 44,637 61,026 42,164 54,944 40,373 Effect of dilutive securities: Stock options................ -- 8 -- 9 -- 4 ------- ------ ------- ------ ------- ------ Diluted EPS.................... $59,750 44,645 $61,026 42,173 $54,944 40,377 ======= ====== ======= ====== ======= ======
21 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 4. Real Estate Properties Substantially all of the Company's owned facilities are leased under "net" 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. Certain of the leases contain provisions such that the percentage of further revenue increases due to the Company as additional rent is limited to 1% at such time as additional rent exceeds 41% of minimum rent. 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 194 facilities are backed by irrevocable letters of credit or security deposits that cover 2 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. Minimum future rentals on non-cancelable leases as of December 31, 1998 are as follows:
Minimum Year Rentals ---- -------------- (In thousands) 1999............ $112,955 2000............ 100,913 2001............ 93,978 2002............ 89,439 2003............ 86,713 2004............ 83,033 2005............ 79,452 2006............ 72,268 2007............ 59,063 2008............ 48,808 Thereafter...... $128,934
During 1998, the Company acquired 17 skilled nursing facilities, 16 assisted living facilities, 2 continuing care retirement communities and 9 residential care facilities for the elderly in 26 separate transactions for an aggregate investment of approximately $123,840,000. During 1998, the Company provided new construction financing of approximately $143,853,000. Construction of 1 skilled nursing facility, 11 assisted living facilities, 1 continuing care retirement community and 2 clinics was completed in 1998, in which the Company's total aggregate investment was $103,155,000; $57,179,000 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. The Company also funded approximately $19,715,000 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 on these facilities. The acquisitions, construction advances and capital improvements were funded by bank borrowings on the Company's bank line of credit and cash on hand. The acquisitions were also funded by approximately $4,137,000 of debt assumption and the issuance of 201,190 shares of the Company's common stock. During 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. 22 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table lists the Company's real estate properties as of December 31, 1998:
Buildings Notes and Number of and Total Accumulated Bonds Facility Location Facilities Land Improvements Investment(1) Depreciation Payable ----------------- ---------- ------- ------------ ------------- ------------ --------- (Dollar amounts in thousands) Skilled Nursing Facilities: Arizona............... 1 $ 650 $ 2,890 $ 3,540 $ 713 $ -- Arkansas.............. 10 2,900 37,072 39,972 2,551 2,255 California............ 8 7,053 19,428 26,481 4,207 -- Connecticut........... 3 1,044 6,820 7,864 1,598 -- Florida............... 9 4,187 25,289 29,476 6,229 -- Georgia............... 1 801 6,542 7,343 997 -- Idaho................. 1 15 777 792 233 -- Illinois.............. 2 157 5,392 5,549 1,333 -- Indiana............... 11 2,044 34,026 36,070 7,121 -- Kansas................ 10 767 13,211 13,978 2,444 -- Maryland.............. 4 845 21,212 22,057 7,481 -- Massachusetts......... 17 7,488 60,811 68,299 7,218 -- Minnesota............. 10 2,559 35,131 37,690 12,514 -- Mississippi........... 1 750 3,517 4,267 25 -- Missouri.............. 1 51 2,689 2,740 999 -- Nevada................ 1 740 3,294 4,034 597 -- New Jersey............ 1 360 6,449 6,809 3,303 -- North Carolina........ 1 116 2,244 2,360 834 -- Ohio.................. 6 1,316 28,235 29,551 7,553 -- Oklahoma.............. 3 98 3,841 3,939 1,147 -- Oregon................ 4 435 6,325 6,760 2,350 -- Tennessee............. 10 2,354 33,137 35,491 3,912 -- Texas................. 26 4,817 52,984 57,801 11,467 -- Virginia.............. 4 1,036 17,532 18,568 6,515 -- Washington............ 7 2,973 26,490 29,463 2,896 -- Wisconsin............. 9 1,621 19,548 21,169 6,941 -- --- ------- -------- -------- -------- ------- Subtotals........... 161 47,177 474,886 522,063 103,178 2,255 --- ------- -------- -------- -------- ------- Continuing Care Retirement Communities: California............ 1 1,600 10,573 12,173 1,111 -- Colorado.............. 1 400 2,716 3,116 430 -- Georgia............... 1 723 10,769 11,492 26 -- Kansas................ 1 687 12,514 13,201 496 2,700 Massachusetts......... 1 1,351 10,393 11,744 293 -- Texas................. 2 2,681 32,860 35,541 989 -- Wisconsin............. 2 11,057 53,294 64,351 1,941 24,359 --- ------- -------- -------- -------- ------- Subtotals........... 9 18,499 133,119 151,618 5,286 27,059 --- ------- -------- -------- -------- -------
23 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Notes Buildings and Number of and Total Accumulated Bonds Facility Location Facilities Land Improvements Investment(1) Depreciation Payable ----------------- ---------- -------- ------------ ------------- ------------ ------- (Dollar amounts in thousands) Assisted Living Facilities: Alabama............... 2 $ 1,681 $ 4,271 $ 5,952 $ 260 $ -- Arizona............... 2 1,024 6,844 7,868 357 -- Arkansas.............. 1 182 1,478 1,660 25 -- California............ 13 15,105 63,725 78,830 5,862 -- Colorado.............. 4 2,146 19,631 21,777 1,640 -- Florida............... 18 9,143 56,098 65,241 2,586 -- Idaho................. 1 544 11,256 11,800 687 -- Illinois.............. 1 603 10,474 11,077 524 -- Indiana............... 1 805 3,843 4,648 64 -- Kansas................ 4 1,885 11,585 13,470 268 -- Kentucky.............. 1 110 2,544 2,654 67 -- Massachusetts......... 2 3,463 13,834 17,297 173 -- Michigan.............. 1 300 7,005 7,305 760 -- Missouri.............. 1 414 2,115 2,529 55 -- Nevada................ 2 1,219 12,397 13,616 328 6,888 New Jersey............ 1 655 3,430 4,085 21 -- North Carolina........ 1 385 2,531 2,916 47 -- Ohio.................. 10 2,971 26,515 29,486 936 -- Oklahoma.............. 3 745 7,355 8,100 807 -- Oregon................ 6 2,078 26,753 28,831 2,117 9,057 South Carolina........ 4 779 10,259 11,038 102 -- Tennessee............. 2 1,355 6,915 8,270 245 -- Texas................. 12 3,541 34,004 37,545 1,414 -- Washington............ 4 1,840 21,087 22,927 889 -- Wisconsin............. 2 4,843 24,219 29,062 756 19,364 --- -------- ---------- ---------- -------- ------- Subtotals........... 99 57,816 390,168 447,984 20,990 35,309 --- -------- ---------- ---------- -------- ------- Residential Care Facilities for the Elderly: California............ 17 1,228 4,347 5,575 125 -- --- -------- ---------- ---------- -------- ------- Rehabilitation Hospitals: Arizona............... 2 1,517 15,309 16,826 3,097 -- --- -------- ---------- ---------- -------- ------- Medical Clinics: Alabama............... 1 248 2,183 2,431 246 -- Texas................. 2 1,868 4,625 6,493 394 -- --- -------- ---------- ---------- -------- ------- Subtotals........... 3 2,116 6,808 8,924 640 -- --- -------- ---------- ---------- -------- ------- Construction In Progress............... -- 20,035 70,363 90,398 -- -- --- -------- ---------- ---------- -------- ------- Total Owned Facilities.. 291 $148,388 $1,095,000 $1,243,388 $133,316 $64,623 === ======== ========== ========== ======== =======
- -------- (1) Also represents the approximate aggregate cost for Federal income tax purposes. 24 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 5. Mortgage Loans Receivable During 1998, the Company provided three mortgage loans secured by 1 skilled nursing facility and 2 assisted living facilities in the aggregate amount of $11,615,000. In addition, the Company funded an additional $7,096,000 on existing mortgage loans. Such additional amounts funded will result in an increase in interest income earned by the Company. Additionally, 2 of the Company's mortgage loans, each secured by a skilled nursing facility, matured and were repaid in full in an aggregate principal amount of approximately $5,382,000. During the same period, another mortgage loan with a principal balance of approximately $2,150,000, secured by 2 skilled nursing facilities, was also repaid in full. At December 31, 1998, the Company had 33 mortgage loans receivable secured by 42 skilled nursing facilities, 8 assisted living facilities and 5 continuing care retirement communities. The loans have an aggregate principal balance of approximately $214,765,000 and are reflected in the Company's financial statements net of an aggregate discount of approximately $8,152,000. The principal balances of mortgage loans receivable as of December 31, 1998 mature approximately as follows: $2,653,000 in 1999, $2,324,000 in 2000, $2,586,000 in 2001, $2,784,000 in 2002, $6,156,000 in 2003 and $198,262,000 thereafter. The following table lists the Company's mortgage loans receivable at December 31, 1998:
Final Estimated Original Face Carrying Number of Interest Maturity Balloon Amount of Amount of Location of Facilities Facilities Rate Date Payment(1) Mortgages Mortgages(2) ---------------------- ---------- -------- -------- ---------- ------------- ------------ (Dollar amounts in thousands) Skilled Nursing Facilities: Arkansas.............. 3 10.00% 12/06 $ 4,946 $ 5,500 $ 5,071 California............ 1 10.00% 05/25 1,489 8,200 8,174 California............ 2 9.50% 03/09 5,336 7,841 7,403 Connecticut........... 2 10.00% 06/22 -- 8,862 5,661 Florida............... 1 10.75% 07/03 -- 4,400 975 Florida............... 1 11.25% 07/06 4,400 4,400 4,400 Florida............... 2 11.03% 06/09 4,082 4,082 4,082 Georgia............... 1 11.03% 06/09 2,818 2,818 2,818 Illinois.............. 1 9.00% 01/24 -- 9,500 8,037 Indiana............... 1 10.75% 07/03 -- 785 541 Kansas................ 1 9.00% 09/03 1,169 1,550 1,243 Louisiana............. 1 10.89% 04/15 2,407 3,850 3,829 Maryland.............. 1 10.90% 06/21 -- 7,800 7,497 Massachusetts......... 1 8.75% 02/24 -- 9,000 7,303 Michigan.............. 3 12.61% 12/06 6,904 7,817 7,036 Michigan.............. 2 12.17% 01/05 2,506 3,000 2,645 Michigan.............. 1 11.25% 01/05 1,501 1,800 1,638 Missouri.............. 7 10.87% 08/11 17,725 17,725 17,725 South Dakota.......... 1 10.35% 05/05 -- 4,275 865 Tennessee............. 1 9.99% 01/07 8,550 8,550 8,550 Texas................. 1 12.00% 03/08 -- 1,460 915 Texas................. 1 9.50% 09/13 5,760 5,760 5,760 Virginia.............. 1 10.50% 04/13 10,192 16,250 15,934 Washington............ 4 11.00% 10/19 112 6,000 5,762 Wisconsin............. 1 10.35% 05/05 - 1,350 560 --- ------- -------- -------- Subtotals........... 42 79,897 152,575 134,424 --- ------- -------- --------
25 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Final Estimated Original Face Carrying Number of Maturity Balloon Amount of Amount of Location of Facilities Facilities Interest Date Payment(1) Mortgages Mortgages(2) ---------------------- ---------- -------- -------- ---------- ------------- ------------ (Dollar amounts in thousands) Assisted Living Facilities: Florida............... 1 10.39% 11/06 $ 5,500 $ 5,500 $ 5,500 Florida............... 2 10.31% 09/20 -- 7,230 7,230 North Carolina........ 2 10.44% 05/07 2,841 2,841 2,841 Pennsylvania.......... 1 8.79% 09/08 2,900 2,900 2,900 South Carolina........ 1 8.79% 09/08 2,955 2,955 2,955 Washington............ 1 9.95% 12/15 6,403 6,557 6,557 --- -------- -------- -------- Subtotals........... 8 20,599 27,983 27,983 --- -------- -------- -------- Continuing Care Retirement Communities: California............ 1 9.50% 03/09 2,831 4,159 3,927 Florida............... 1 11.03% 06/09 14,600 14,600 14,600 Massachusetts......... 1 9.52% 06/23 -- 12,350 12,301 Oklahoma.............. 1 9.55% 03/24 2,250 11,200 10,378 Tennessee............. 1 10.20% 02/07 3,000 3,000 3,000 --- -------- -------- -------- Subtotals........... 5 22,681 45,309 44,206 --- -------- -------- -------- Total............. 55 $123,177 $225,867 $206,613 === ======== ======== ========
- -------- (1) Most loans require monthly principal and interest payments at level amounts over life to maturity. Some loans are adjustable rate mortgages with varying principal and interest payments over life to maturity, in which case the balloon payments reflected are an estimate. Five of the loans have decreasing principal and interest payments over the life of the loans. Most loans require a prepayment penalty based on a percentage of principal outstanding or a penalty based upon a calculation maintaining the yield the Company would have earned if prepayment had not occurred. Seven loans have a provision that no prepayments are acceptable. (2) Also represents the approximate aggregate cost for Federal income tax purposes. The following table summarizes the changes in mortgage loans receivable during 1998, 1997 and 1996:
1998 1997 1996 -------- -------- -------- (In thousands) Balance at January 1,.......................... $199,819 $160,464 $133,226 New mortgage loans........................... 18,711 50,134 31,430 Accretion of discount on loans............... 1,214 1,829 1,486 Reclassification of loan..................... (3,500) -- -- Collection of principal...................... (9,631) (12,608) (5,678) -------- -------- -------- Balance at December 31,........................ $206,613 $199,819 $160,464 ======== ======== ========
26 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. Bank Borrowings The Company has a $100,000,000 unsecured credit agreement with certain banks which matures on March 31, 2001. The terms of the bank line of credit include an option to automatically extend the bank line of credit by one year with concurrence of the bank group. At the option of the Company, borrowings under the agreement bear interest at prime (7.75% at December 31, 1998) or LIBOR plus 50 basis points (5.6125% at December 31, 1998). The Company pays a facility fee of .25% per annum on the total commitment under the agreement. Under covenants contained in the credit agreement, the Company is required to maintain, among other things: (i) a minimum net worth of $500,000,000; (ii) a ratio of cash flow before interest expense and non-cash expenses to regularly scheduled debt service payments on all debt of at least 2.0 to 1.0; and (iii) a ratio of total liabilities to net worth of not more than 1.3 to 1.0. 7. Notes and Bonds Payable Notes and bonds payable are due through the year 2035, at interest rates ranging from 3.5% to 10.9% and are secured by real estate properties with an aggregate net book value as of December 31, 1998 of approximately $114,225,000. The principal balances of the notes and bonds payable as of December 31, 1998 mature approximately as follows: $942,000 in 1999, $988,000 in 2000, $1,051,000 in 2001, $1,117,000 in 2002, $1,187,000 in 2003, and $59,338,000 thereafter. 8. Senior Unsecured Notes Due 2000-2038 During 1998, the Company issued $190,150,000 in aggregate principal amount of medium term notes. The aggregate principal amount of Senior Notes outstanding at December 31, 1998 was $545,150,000. The weighted average interest rate on the Senior Notes was 7.3% and the weighted average maturity was 15.3 years. The principal balances of the Senior Notes as of December 31, 1998 mature approximately as follows: $30,000,000 in 2000, $78,150,000 in 2001, $50,000,000 in 2002, $66,000,000 in 2003 and $321,000,000 thereafter. There are $55,000,000 of medium term notes due in 2037 which may be put back to the Company at their face amount at the option of the holder on October 1st of any of the following years: 2004, 2007, 2009, 2012, 2017, or 2027. There are $41,500,000 of medium term notes due in 2028 which may be put back to the Company at their face amount at the option of the holder on November 20th of any of the following years: 2003, 2008, 2013, 2018, or 2023. There are $40,000,000 of medium term notes due in 2038 which may be put back to the Company at their face amount at the option of the holder on July 7th of any of the following years: 2003, 2008, 2013, 2018, 2023, or 2028. 9. Convertible Debentures During 1993, the Company issued $65,000,000 of 6.25% unsecured convertible debentures due January 1, 1999. The debentures are convertible at any time prior to maturity into shares of the Company's common stock at a conversion price of $22.4125 per share. During 1998, $7,081,000 of such debentures converted into 315,921 shares of common stock. During 1997, $408,000 of such debentures converted into 18,202 shares of common stock. Subsequent to year end, $8,000 of such debentures were converted into 356 shares of common stock and the remaining debentures, totaling $57,423,000, were repaid. 10. Preferred Stock During 1997, the Company sold 1,000,000 shares of 7.677% Series A Cumulative Preferred Step-Up REIT securities ("Preferred Stock") with a liquidation preference of $100 per share. Dividends on the Preferred Stock are cumulative from the date of original issue and are payable quarterly in arrears, commencing December 31, 27 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 1997 at the rate of 7.677% per annum of the liquidation preference per share (equivalent to $7.677 per annum per share) through September 30, 2012 and at a rate of 9.677% of the liquidation preference per annum per share (equivalent to $9.677 per annum per share) thereafter. The Preferred Stock is not redeemable prior to September 30, 2007. On or after September 30, 2007, the Preferred Stock may be redeemed for cash at the option of the Company, in whole or in part, at a redemption price of $100 per share, plus accrued and unpaid dividends, if any, thereon. 11. STOCK INCENTIVE PLAN Under the terms of a stock incentive plan (the "Plan"), the Company has reserved for issuance 1,600,000 shares of common stock. Under the Plan, as amended, the Company may issue stock options, restricted stock, dividend equivalents and stock appreciation rights. The Company accounts for the Plan under Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees. Had compensation cost for the Plan been determined consistent with SFAS No. 123 Accounting for Stock-Based Compensation, the Company's net income and net income per share in 1998, 1997 and 1996 would have been the following pro forma amounts:
1998 1997 1996 ----------- ----------- ----------- Net income available to common stockholders: As reported......................... $62,071,000 $61,855,000 $54,944,000 Pro forma........................... 61,840,000 61,712,000 54,867,000 Basic/diluted net income per share: As reported......................... $ 1.39 $ 1.47 $ 1.36 Pro forma........................... 1.39 1.46 1.36
Because the pro forma calculation reflects only amounts attributable to options granted since January 1, 1995, future pro forma affects may not be comparable to those above. A summary of the status of the Plan at December 31, 1998, 1997 and 1996 and changes during the years then ended are as follows:
1998 1997 1996 ----------------- ----------------- ----------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------- -------- ------- -------- ------- -------- Options: Outstanding at beginning of year.... 179,000 $21.89 89,000 $20.78 3,400 $5.625 Granted............... 100,000 26.14 90,000 23.00 89,000 20.78 Exercised............. -- -- -- -- (3,400) 5.625 Forfeited............. -- -- -- -- -- -- Expired............... -- -- -- -- -- -- ------- ------- ------- Outstanding at end of year................... 279,000 23.42 179,000 21.89 89,000 20.78 ======= ======= ======= Exercisable at end of year................... 89,328 21.52 29,667 20.78 -- -- Weighted average fair value of options granted................ $ 2.69 $ 2.14 $ 2.77 Restricted Stock: Outstanding at beginning of year.... 94,900 109,100 103,900 Awarded............... 12,000 10,000 10,000 Vested................ (33,500) (24,200) (4,800) Forfeited............. -- -- -- ------- ------- ------- Outstanding at end of year................... 73,400 94,900 109,100 ======= ======= ======= Weighted average fair value of restricted stock awarded.......... $26.12 $23.19 $20.88
28 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Stock options granted under the Plan become exercisable each year following the date of grant in annual increments of one-third and are exercisable at the market price of the Company's common stock on the date of grant. Options at December 31, 1998 have a weighted average contractual life of 8 years. The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model with the following weighted average assumptions:
1998 1997 1996 ----- ----- ----- Risk free rate of return.......... 6.30% 6.30% 6.43% Dividend yield.................... 6.43% 6.78% 7.13% Option Term....................... 10 10 10 Volatility........................ 16.45% 16.45% 22.78%
The restricted stock awards are granted at no cost. Restricted stock awards vest at the third anniversary of the award date with respect to non-employee directors and at the fifth anniversary with respect to officers and employees. The restricted stock awards are amortized over their respective vesting periods. Expense is determined based upon the market value at the date of award of the restricted stock and is recognized over the vesting period. Expense recorded in 1998, 1997 and 1996 related to restricted stock awards was approximately $440,000, $368,000 and $372,000, respectively. Awards of dividend equivalents accompany the 1998, 1997 and 1996 stock option grants on a one-for-one basis. Such dividend equivalents are payable in cash until such time as the corresponding stock option is exercised, based upon a formula approved by the Compensation Committee of the Board of Directors. That formula depends on the Company's performance measured for a minimum of a three-year period and up to a five-year period by total return to stockholders (increase in stock price and dividends paid) compared to peer companies and other companies comprising a general index of real estate investment trusts, in each case as selected by the Compensation Committee. Dividend equivalents may be earned in all or part depending upon the actual total return to shareholders as compared to peer groups of other real estate investment trusts. Due to the uncertainty of the ultimate payment of dividend equivalents, no compensation expense was recorded during 1997 or 1996 with respect to dividend equivalents. During 1998, compensation expense in the amount of $210,000 was recorded related to the 1996 awards. No stock appreciation rights have been issued under the Plan. 12. Pension Plan During 1991, the Company adopted an unfunded benefit pension plan covering the current non-employee members of its Board of Directors upon completion of five years of service on the Board. The benefits, limited to the number of years of service on the Board, are based upon the then current annual retainer in effect. The following tables set forth the amounts recognized in the Company's financial statements at December 31, 1998 and 1997:
1998 1997 -------- -------- Actuarial present value of benefit obligations: Vested benefit obligation.............................. $723,000 $789,000 ======== ======== Accumulated benefit obligation......................... $730,000 $834,000 ======== ======== Projected benefit obligation............................. $814,000 $887,000 Unrecognized prior service cost.......................... (74,000) (101,000) Unrecognized net gain.................................... 163,000 10,000 -------- -------- Accrued pension cost..................................... $903,000 $796,000 ======== ========
29 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Net pension cost for the year included the following components:
1998 1997 1996 -------- -------- -------- Current service cost........................... $ 43,000 $ 47,000 $ 87,000 Interest cost.................................. 61,000 58,000 53,000 Amortization of prior service cost............. 27,000 27,000 27,000 -------- -------- -------- Net periodic pension cost...................... $131,000 $132,000 $167,000 ======== ======== ========
Discount rates of 7.0%, 7.5% and 7.0% in 1998, 1997 and 1996, respectively and a 5.0% increase in the annual retainer every other year were used in determining the actuarial present value of the projected benefit obligation. 13. Transactions with Beverly Enterprises, Inc. and Alternative Living Services, Inc. As of December 31, 1998, 48 of the owned facilities are leased to and operated by subsidiaries of Beverly Enterprises, Inc. ("Beverly"). Beverly has guaranteed certain obligations of its subsidiaries and of certain parties unaffiliated with Beverly in connection with 27 properties operated by such parties. Additionally, Beverly is the borrower on four of the Company's mortgage loans. Revenues from Beverly were approximately $21,161,000, $19,712,000 and $21,837,000 for the years ended December 31, 1998, 1997 and 1996, respectively. As of December 31, 1998, 54 of the owned facilities are leased to and operated by subsidiaries of Alternative Living Services, Inc. ("ALS"). Additionally, ALS is the borrower on one of the Company's mortgage loans. Revenues from ALS were approximately $17,114,000, $10,274,000 and $6,292,000 for the years ended December 31, 1998, 1997 and 1996, respectively. One of the directors of the Company is also an officer and director of Beverly. 14. Impairment of Long-lived Assets During 1998, the Company recorded a provision of $5,000,000 as a reduction in the value of the Company's investment in three medical clinics constructed for and leased to a company that declared bankruptcy. The Company is currently in the process of finding another party to whom it may lease or sell these facilities. The fair value of the medical clinics was determined based on discounted estimated future cash flows. 15. Dividends Dividend payments by the Company to the common stockholders were characterized in the following manner for tax purposes:
1998 1997 1996 ----- ------ ----- Ordinary income........................................... $1.63 $1.505 $1.48 Capital gain.............................................. .05 .055 -- Return of capital......................................... -- -- -- ----- ------ ----- Total dividends paid.................................... $1.68 $1.560 $1.48 ===== ====== =====
30 NATIONWIDE HEALTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 16. Quarterly Financial Data (unaudited)
Three months ended, --------------------------------------------- March 31, June 30, September 30, December 31, --------- -------- ------------- ------------ (In thousands except per share amounts) 1998: Revenues................... $33,158 $34,491 $36,625 $38,310 Net income available to common stockholders....... 17,971 16,227 16,407 11,467 Basic/diluted net income per share................. .42 .37 .37 .25 Dividends per share........ .42 .42 .42 .42 1997: Revenues................... $26,302 $27,198 $29,296 $32,909 Net income available to common stockholders....... 14,755 14,914 16,499 15,687 Basic/diluted net income per share................. .35 .36 .39 .36 Dividends per share........ .39 .39 .39 .39
17. Disclosures About Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and Cash Equivalents The carrying amount approximates fair value because of the short maturity of those instruments. Mortgage Loans Receivable Fair values are based upon the estimates of management and on rates currently prevailing for comparable loans. Long-Term Debt The fair value of long-term debt is estimated based on discounting future cash flows utilizing current rates offered to the Company for debt of the same type and remaining maturity. The estimated fair values of the Company's financial instruments are as follows:
1997 1996 ----------------- ----------------- Carrying Fair Carrying Fair Amount Value Amount Value -------- -------- -------- -------- (In thousands) Cash and cash equivalents............... $ 16,182 $ 16,182 $ 10,192 $ 10,192 Mortgage loans receivable............... 206,613 212,448 199,819 225,997 Long-term debt.......................... 709,204 694,197 497,409 513,034
31 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Directors of Nationwide Health Properties, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Nationwide Health Properties, Inc.'s annual report to shareholders included in this Form 10-K, and have issued our report thereon dated January 22, 1999. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index of consolidated financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP Orange County, California January 22, 1999 32 SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION NATIONWIDE HEALTH PROPERTIES, INC. DECEMBER 31, 1998
Initial Cost Cost Gross Amount at which to Company Capitalized Carried at Close of Period(1) Life on ------------ Subsequent --------------------------------- Original which Facility Type Building and to Building and Accum. Construction Date Depr. is and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired Computed - ------------- ------------ ----------- --------- ------------ ---------- --------- ------------ -------- -------- Skilled Nursing Facilities: Benton AR $4,531,579 $ 0 $ 685,000 $4,531,579 $5,216,579 $ 75,526 1992 1998 35 Bryant AR 4,693,350 0 320,000 4,693,350 5,013,350 78,222 1989 1998 35 Hot Springs AR 2,320,549 0 53,647 2,320,549 2,374,196 823,242 1972 1986 35 Jacksonville AR 3,452,650 0 155,206 3,452,650 3,607,856 1,224,868 1962 1986 35 Lake Village AR 3,872,414 0 261,000 3,872,414 4,133,414 56,473 1997 1998 40 Monticello AR 3,242,420 0 300,000 3,242,420 3,542,420 47,285 1993 1998 40 Morrilton AR 3,635,054 0 250,000 3,635,054 3,885,054 60,584 1988 1998 35 Morrilton AR 5,092,367 0 308,000 5,092,367 5,400,367 74,264 1996 1998 40 Wilmot AR 2,217,201 0 240,000 2,217,201 2,457,201 43,112 1964 1998 30 Wynne(10) AR 4,015,013 0 327,000 4,015,013 4,342,013 66,917 1990 1998 35 Scottsdale AZ 2,790,266 100,000 650,000 2,890,266 3,540,266 713,427 1963 1991 30 Chowchilla CA 1,119,040 0 108,996 1,119,040 1,228,036 314,730 1964 1987 40 Gilroy CA 1,891,735 0 714,000 1,891,735 2,605,735 457,169 1968 1991 30 Hayward CA 1,221,698 220,882 795,000 1,442,580 2,237,580 332,057 1967 1991 30 Orange CA 5,059,079 0 1,140,921 5,059,079 6,200,000 811,560 1987 1992 40 Pomona CA 1,247,000 0 365,000 1,247,000 1,612,000 463,367 1963 1985 35 San Diego CA 4,925,213 0 842,000 4,925,213 5,767,213 998,724 1965 1992 30 San Jose CA 1,136,353 571,191 1,595,000 1,707,544 3,302,544 369,817 1968 1991 30 Santa Cruz CA 1,595,864 439,900 1,492,000 2,035,764 3,527,764 458,983 1967 1991 30 Bloomfield CT 2,826,635 0 670,000 2,826,635 3,496,635 400,440 1967 1994 30 Torrington CT 2,555,400 0 140,000 2,555,400 2,695,400 766,620 1969 1987 40 West Haven CT 1,437,616 0 234,521 1,437,616 1,672,137 431,285 1965 1986 40 Ft. Pierce FL 2,758,000 0 125,000 2,758,000 2,883,000 1,024,832 1965 1985 35 Jacksonville FL 1,759,151 0 1,503,375 1,759,151 3,262,526 69,633 1997 1997 40 Jacksonville FL 1,852,616 0 160,748 1,852,616 2,013,364 524,908 1964 1987 40 Jacksonville FL 2,787,093 0 498,000 2,787,093 3,285,093 224,515 1965 1996 30 Lakeland FL 5,028,699 0 1,000,000 5,028,699 6,028,699 712,399 1982 1994 30 Live Oak FL 3,217,008 0 50,390 3,217,008 3,267,398 1,141,272 1983 1986 35 Pensacola FL 1,833,333 0 76,923 1,833,333 1,910,256 527,083 1969 1987 40 Tampa FL 2,726,244 0 563,461 2,726,244 3,289,705 823,554 1971 1986 40 Winter Park FL 3,326,824 0 208,935 3,326,824 3,535,759 1,180,231 1983 1986 35 Lawrenceville GA 3,993,005 2,549,381 800,619 6,542,386 7,343,005 996,864 1988 1991 40 Buhl ID 777,353 0 14,754 777,353 792,107 233,206 1913 1986 40 Lasalle IL 2,702,896 0 127,000 2,702,896 2,829,896 668,216 1975 1991 30 Litchfield IL 2,688,920 0 30,000 2,688,920 2,718,920 664,760 1972 1991 30 Brookville IN 4,119,500 0 80,500 4,119,500 4,200,000 635,090 1987 1992 40 Evansville IN 5,324,304 0 280,000 5,324,304 5,604,304 1,316,286 1968 1991 30 Gas City IN 3,082,041 0 147,000 3,082,041 3,229,041 205,475 1976 1996 30 Ligonier IN 1,668,811 0 54,000 1,668,811 1,722,811 111,254 1976 1997 30 Muncie IN 888,187 0 109,000 888,187 997,187 59,213 1975 1997 30 Muncie IN 1,141,065 662,030 983,000 1,803,095 2,786,095 66,785 1989 1997 35 New Castle IN 5,172,887 0 43,000 5,172,887 5,215,887 1,278,853 1972 1991 30 Petersburg IN 2,351,555 0 32,654 2,351,555 2,384,209 834,242 1968 1986 35 Richmond IN 2,519,523 0 114,022 2,519,523 2,633,545 893,831 1974 1986 35 Rochester IN 4,055,338 250,000 161,000 4,305,338 4,466,338 1,030,439 1969 1991 30 Wabash IN 2,789,896 0 40,000 2,789,896 2,829,896 689,724 1974 1991 30 Belleville KS 1,886,682 0 213,318 1,886,682 2,100,000 361,614 1977 1993 30 Colby KS 599,074 0 49,863 599,074 648,937 182,219 1974 1986 40 Derby KS 2,481,763 0 132,800 2,481,763 2,614,563 558,397 1978 1992 30 Hiawatha KS 787,337 0 150,000 787,337 937,337 5,624 1974 1998 30 Hutchinson KS 1,855,444 160,594 75,000 2,016,038 2,091,038 323,751 1964 1994 30 Kensington KS 638,627 0 6,241 638,627 644,868 226,561 1965 1986 35 Oakley KS 414,311 0 7,123 414,311 421,434 126,020 1964 1986 40 Onaga KS 651,993 0 5,811 651,993 657,804 231,303 1959 1986 35 Salina KS 2,463,266 134,986 27,000 2,598,252 2,625,252 420,231 1981 1994 30 Topeka KS 1,137,152 0 100,000 1,137,152 1,237,152 8,123 1973 1998 30
33
Initial Cost Cost Gross Amount at which to Company Capitalized Carried at Close of Period(1) Life on ------------ Subsequent ---------------------------------- Original which Facility Type Building and to Building and Accum. Construction Date Depr. is and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired Computed - ------------- ------------ ----------- ---------- ------------ ---------- ---------- ------------ -------- -------- Amesbury MA $4,240,946 $ 523,656 $ 229,000 $4,764,602 $4,993,602 $ 204,807 1971 1997 30 Beverly MA 3,608,000 0 392,000 3,608,000 4,000,000 0 1998 1998 40 Brighton MA 2,211,935 0 300,000 2,211,935 2,511,935 313,357 1969 1994 30 Brockton MA 3,591,375 0 525,000 3,591,375 4,116,375 618,515 1971 1993 30 Buzzards Bay MA 4,815,000 0 415,000 4,815,000 5,230,000 1,789,183 1911 1985 35 Danvers MA 3,210,977 1,082,295 327,000 4,293,272 4,620,272 161,014 1966 1997 30 Danvers MA 2,890,770 331,685 305,000 3,222,455 3,527,455 139,384 1969 1997 30 Danvers MA 4,108,000 0 392,000 4,108,000 4,500,000 0 1998 1998 40 Haverhill MA 1,414,339 0 775,000 1,414,339 2,189,339 243,581 1962 1993 30 Haverhill MA 5,707,175 65,550 660,000 5,772,725 6,432,725 982,903 1973 1993 30 Melrose MA 4,029,329 0 432,000 4,029,329 4,461,329 89,541 1965 1998 30 New Bedford MA 2,357,000 0 93,000 2,357,000 2,450,000 875,863 1889 1985 35 N. Billerica MA 3,137,206 300,000 800,000 3,437,206 4,237,206 520,561 1969 1994 30 Northborough MA 2,509,494 0 300,000 2,509,494 2,809,494 27,883 1969 1998 30 Saugus MA 5,262,295 395,974 374,000 5,658,269 6,032,269 251,931 1967 1997 30 Sharon MA 1,096,678 1,486,259 844,000 2,582,937 3,426,937 94,436 1975 1996 30 Wellesley MA 2,435,000 0 325,000 2,435,000 2,760,000 904,810 1962 1985 35 Clinton MD 5,016,873 0 399,794 5,016,873 5,416,667 1,463,255 1965 1987 40 Cumberland MD 5,260,000 0 150,000 5,260,000 5,410,000 1,954,537 1968 1985 35 Hagerstown MD 4,140,000 0 215,000 4,140,000 4,355,000 1,538,362 1972 1985 35 Westminster MD 6,795,000 0 80,000 6,795,000 6,875,000 2,524,921 1974 1985 35 Duluth MN 7,047,082 0 1,014,000 7,047,082 8,061,082 293,628 1971 1997 30 Faribault MN 2,785,000 0 90,000 2,785,000 2,875,000 1,321,579 1967 1985 35 Minneapolis MN 3,833,000 0 322,000 3,833,000 4,155,000 1,878,904 1962 1985 35 Minneapolis MN 2,934,000 0 141,000 2,934,000 3,075,000 1,848,000 1914 1985 35 Minneapolis MN 5,752,000 0 333,000 5,752,000 6,085,000 2,419,848 1973 1985 35 Minneapolis MN 4,184,000 0 436,000 4,184,000 4,620,000 1,716,270 1961 1985 35 Osseo MN 2,927,000 0 123,000 2,927,000 3,050,000 1,087,630 1957 1985 35 Ostrander MN 947,229 0 8,560 947,229 955,789 286,142 1968 1986 40 Owatonna MN 2,140,014 0 58,680 2,140,014 2,198,694 642,004 1965 1986 40 Willmar MN 2,582,000 0 33,000 2,582,000 2,615,000 1,020,273 1905 1985 35 Maryville MO 2,689,000 0 51,000 2,689,000 2,740,000 999,192 1979 1985 35 Columbus MS 3,517,219 0 750,000 3,517,219 4,267,219 25,123 1976 1998 30 Hendersonville NC 2,244,000 0 116,000 2,244,000 2,360,000 833,837 1979 1985 35 Lakewood NJ 6,448,340 0 360,357 6,448,340 6,808,697 3,302,818 1966 1987 40 Sparks NV 3,294,261 0 740,000 3,294,261 4,034,261 597,085 1988 1991 40 Alliance OH 1,861,961 0 83,000 1,861,961 1,944,961 459,749 1962 1991 30 Boardman OH 7,046,082 0 60,000 7,046,082 7,106,082 1,741,235 1962 1991 30 Columbus OH 4,332,851 0 342,550 4,332,851 4,675,401 1,346,976 1985 1988 40 Galion OH 3,419,603 0 24,000 3,419,603 3,443,603 844,741 1967 1991 30 Warren OH 7,488,606 0 450,000 7,488,606 7,938,606 1,850,597 1967 1991 30 Wash Ct House OH 4,085,813 0 356,047 4,085,813 4,441,860 1,309,912 1983 1988 40 Maud OK 802,731 0 12,464 802,731 815,195 242,491 1960 1986 40 Sapulpa OK 2,243,607 0 67,961 2,243,607 2,311,568 673,082 1970 1986 40 Tonkawa OK 794,801 0 17,838 794,801 812,639 231,817 1962 1987 40 Corvallis OR 1,710,000 0 115,000 1,710,000 1,825,000 635,415 1962 1985 35 Eugene OR 2,280,000 0 140,000 2,280,000 2,420,000 847,219 1969 1985 35 Eugene OR 1,220,000 0 80,000 1,220,000 1,300,000 453,334 1965 1985 35 Portland OR 1,115,000 0 100,000 1,115,000 1,215,000 414,318 1954 1985 35 Brownsville TN 2,957,367 0 100,000 2,957,367 3,057,367 509,324 1970 1993 30 Celina TN 853,001 0 150,000 853,001 1,003,001 146,905 1972 1993 30 Clarksville TN 3,479,066 0 350,000 3,479,066 3,829,066 599,172 1970 1993 30 Columbia TN 2,240,415 0 225,000 2,240,415 2,465,415 330,728 1984 1993 35 Decatur TN 3,328,429 0 193,000 3,328,429 3,521,429 47,549 1981 1998 35 Jonesborough TN 2,550,682 0 65,000 2,550,682 2,615,682 439,283 1981 1993 30 Hohenwald TN 3,732,032 0 90,000 3,732,032 3,822,032 642,739 1975 1993 30 Madison TN 6,412,137 0 1,120,000 6,412,137 7,532,137 45,801 1967 1998 35 Martin TN 4,121,244 0 32,500 4,121,244 4,153,744 709,770 1977 1993 30 Selmer TN 2,262,811 1,200,000 28,000 3,462,811 3,490,811 440,904 1985 1993 35 Baytown TX 1,902,063 0 61,000 1,902,063 1,963,063 392,300 1966 1990 40 Baytown TX 2,388,042 0 90,000 2,388,042 2,478,042 492,534 1975 1990 40 Bogota TX 1,820,005 0 13,463 1,820,005 1,833,468 645,669 1963 1986 35 Bridge City TX 2,212,743 0 60,000 2,212,743 2,272,743 456,378 1970 1990 40 Center TX 1,424,387 0 22,000 1,424,387 1,446,387 293,780 1970 1990 40
34
Initial Cost Cost Gross Amount at which to Company Capitalized Carried at Close of Period(1) Life on ------------ Subsequent ----------------------------------- Original which Facility Type Building and to Building and Construction Date Depr. is and Location Improvements Acquisition Land(2) Improvements Total Accum. Depr. Date Acquired Computed - ------------- ------------ ----------- ---------- ------------ ----------- ------------ ------------ -------- -------- Eagle Lake TX $ 1,833,093 $ 0 $ 25,000 $ 1,833,093 $ 1,858,093 $ 378,075 1972 1990 40 El Paso TX 1,888,156 0 166,027 1,888,156 2,054,183 574,817 1980 1988 40 Garland TX 1,619,329 0 238,000 1,619,329 1,857,329 333,986 1970 1990 40 Gilmer TX 2,065,000 0 750,000 2,065,000 2,815,000 767,323 1970 1985 35 Gilmer TX 3,032,875 0 248,000 3,032,875 3,280,875 28,885 1990 1998 35 Gladewater TX 2,017,965 0 124,642 2,017,965 2,142,607 375,565 1971 1993 30 Houston TX 4,154,533 0 408,300 4,154,533 4,562,833 784,745 1986 1993 35 Humble TX 1,821,123 0 140,000 1,821,123 1,961,123 375,607 1973 1990 40 Huntsville TX 1,929,525 0 135,000 1,929,525 2,064,525 397,964 1968 1990 40 Linden TX 2,519,626 0 24,909 2,519,626 2,544,535 468,930 1968 1993 30 Marshall TX 864,650 0 19,300 864,650 883,950 262,998 1964 1986 40 McKinney TX 1,455,904 0 1,318,310 1,455,904 2,774,214 427,672 1967 1987 40 Mount Pleasant TX 2,504,551 0 39,960 2,504,551 2,544,511 466,124 1970 1993 30 Nacogdoches TX 1,103,814 0 135,000 1,103,814 1,238,814 227,662 1973 1990 40 New Boston TX 2,366,334 0 44,246 2,366,334 2,410,580 440,401 1966 1993 30 Omaha TX 1,579,149 0 27,907 1,579,149 1,607,056 293,897 1970 1993 30 San Antonio TX 2,033,293 0 32,000 2,033,293 2,065,293 419,367 1963 1990 40 San Antonio TX 1,635,932 0 221,000 1,635,932 1,856,932 337,411 1965 1990 40 Sherman TX 2,075,495 0 67,200 2,075,495 2,142,695 386,272 1971 1993 30 Texarkana TX 1,243,520 0 87,270 1,243,520 1,330,790 441,154 1983 1986 35 Waxahachie TX 3,493,338 0 318,798 3,493,338 3,812,136 997,057 1976 1987 40 Annandale VA 7,752,000 0 487,000 7,752,000 8,239,000 2,880,528 1961 1985 35 Charlottesville VA 4,620,250 0 362,000 4,620,250 4,982,250 1,716,817 1966 1985 35 Petersburg VA 2,214,500 0 93,000 2,214,500 2,307,500 822,876 1973 1985 35 Petersburg VA 2,944,750 0 94,000 2,944,750 3,038,750 1,094,225 1977 1985 35 Battleground WA 2,225,787 0 84,100 2,225,787 2,309,887 667,736 1963 1986 40 Kennewick WA 4,459,371 0 297,000 4,459,371 4,756,371 198,194 1959 1997 30 Moses Lake WA 2,384,662 0 164,000 2,384,662 2,548,662 344,451 1988 1994 30 Moses Lake WA 4,306,902 1,325,841 304,000 5,632,743 5,936,743 578,833 1972 1994 35 Seattle WA 5,752,182 0 1,222,737 5,752,182 6,974,919 647,120 1993 1994 40 Shelton WA 4,531,761 0 326,528 4,531,761 4,858,289 9,085 1998 1998 40 Tacoma WA 1,503,190 0 575,000 1,503,190 2,078,190 450,957 1939 1987 40 Chilton WI 2,275,183 0 54,953 2,275,183 2,330,136 807,148 1964 1986 35 Florence WI 1,529,108 0 14,984 1,529,108 1,544,092 542,469 1971 1986 35 Green Bay WI 2,254,673 0 299,765 2,254,673 2,554,438 799,872 1969 1986 35 Oconto WI 2,070,879 0 49,976 2,070,879 2,120,855 734,669 1972 1986 35 Sheboygan WI 1,696,673 0 219,243 1,696,673 1,915,916 597,875 1969 1986 35 Shorewood WI 5,743,643 0 705,880 5,743,643 6,449,523 2,023,950 1971 1986 35 St. Francis WI 535,325 0 79,725 535,325 615,050 188,637 1968 1986 35 Tomah WI 1,745,000 0 115,000 1,745,000 1,860,000 648,416 1975 1985 35 Wisconsin Dells WI 1,697,231 0 81,432 1,697,231 1,778,663 598,072 1972 1986 35 ----------- ---------- ---------- ----------- ----------- ------------ 463,085,685 11,800,224 47,177,234 474,885,909 522,063,143 103,177,921 ----------- ---------- ---------- ----------- ----------- ------------ Assisted Living Facilities: Decatur AL 1,824,028 0 1,484,000 1,824,028 3,308,028 117,254 1987 1996 35 Hanceville AL 2,447,169 0 197,000 2,447,169 2,644,169 142,751 1996 1996 40 Benton AR 1,478,123 0 182,000 1,478,123 1,660,123 24,635 1988 1998 35 Chandler AZ 2,752,714 0 505,000 2,752,714 3,257,714 30,418 1998 1998 40 Mesa AZ 1,391,652 2,700,025 519,000 4,091,677 4,610,677 326,437 1985 1996 35 Capistrano CA 3,833,162 117,529 1,225,000 3,950,691 5,175,691 401,569 1985 1995 35 Capistrano CA 6,344,458 75,362 700,000 6,419,820 7,119,820 543,811 1985 1995 35 Carmichael CA 7,928,799 755,452 1,500,000 8,684,251 10,184,251 1,009,407 1983 1995 30 Chula Vista CA 6,280,839 72,030 950,000 6,352,869 7,302,869 568,266 1989 1995 35 Encinitas CA 5,016,511 126,382 1,000,000 5,142,893 6,142,893 557,885 1984 1995 35 Mission Viejo CA 3,544,429 17,267 900,000 3,561,696 4,461,696 362,882 1985 1995 35 Novato CA 3,657,065 144,759 2,500,000 3,801,824 6,301,824 386,023 1978 1995 30 Placentia CA 3,800,106 183,501 1,320,000 3,983,607 5,303,607 453,902 1983 1995 30 Rancho Cucamonge CA 4,155,552 148,626 610,000 4,304,178 4,914,178 425,449 1987 1995 35 San Dimas CA 3,576,323 224,786 1,700,000 3,801,109 5,501,109 377,501 1975 1995 30 San Jose CA 7,251,670 0 850,000 7,251,670 8,101,670 135,969 1998 1998 40 Santa Maria CA 2,649,424 37,789 1,500,000 2,687,213 4,187,213 279,661 1977 1995 30 Vista CA 3,700,603 82,037 350,000 3,782,640 4,132,640 359,781 1980 1996 30
35
Initial Cost Cost Gross Amount at which to Company Capitalized Carried at Close of Period(1) Life on ------------ Subsequent ---------------------------------- Original which Facility Type Building and to Building and Accum. Construction Date Depr. is and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired Computed - ------------- ------------ ----------- --------- ------------ ----------- -------- ------------ -------- -------- Aurora CO $ 7,922,586 $ 0 $ 919,116 $ 7,922,586 $ 8,841,702 $792,259 1983 1995 30 Boulder CO 4,738,529 0 184,356 4,738,529 4,922,885 406,160 1992 1995 40 Boulder CO 4,811,336 0 832,530 4,811,336 5,643,866 360,850 1985 1995 35 Brighton CO 2,158,078 0 210,000 2,158,078 2,368,078 80,928 1997 1997 40 Gainesville FL 2,699,035 0 356,000 2,699,035 3,055,035 95,591 1997 1997 40 Gainesville FL 3,308,524 0 310,047 3,308,524 3,618,571 0 1998 1998 40 Hudson FL 8,137,951 549,771 1,665,000 8,687,722 10,352,722 678,224 1987 1996 35 Jacksonville FL 2,375,479 0 366,000 2,375,479 2,741,479 103,927 1997 1997 40 Jacksonville FL 2,770,454 0 226,000 2,770,454 2,996,454 86,577 1997 1997 40 LeHigh Acres FL 2,599,506 0 307,000 2,599,506 2,906,506 75,819 1997 1997 40 Naples FL 4,083,955 0 1,182,453 4,083,955 5,266,408 144,640 1997 1997 40 North Miami FL 3,467,124 0 261,000 3,467,124 3,728,124 404,498 1970 1995 30 Palm Coast FL 2,579,797 0 406,000 2,579,797 2,985,797 64,495 1997 1997 40 Panama City FL 2,658,760 0 353,000 2,658,760 3,011,760 27,695 1998 1998 40 Pensacola FL 1,580,083 400,000 170,000 1,980,083 2,150,083 156,416 1979 1996 30 Port Charlotte FL 2,655,252 0 245,000 2,655,252 2,900,252 88,508 1997 1997 40 Punta Gorda FL 2,691,405 0 210,000 2,691,405 2,901,405 95,321 1997 1997 40 Rotunda FL 2,628,072 0 267,000 2,628,072 2,895,072 65,702 1997 1997 40 St. Petersburg FL 2,396,070 984,802 2,000,000 3,380,872 5,380,872 242,408 1993 1995 40 Travares FL 2,466,463 0 156,000 2,466,463 2,622,463 102,771 1997 1997 40 Venice FL 2,534,967 0 376,000 2,534,967 2,910,967 73,937 1997 1997 40 Winter Haven FL 2,530,512 0 287,000 2,530,512 2,817,512 79,079 1997 1997 40 Boise ID 5,586,258 5,670,090 543,691 11,256,348 11,800,039 687,232 1978 1995 30 Oak Park IL 10,473,486 0 603,000 10,473,486 11,076,486 523,674 1993 1997 40 Carmel IN 3,843,258 0 804,659 3,843,258 4,647,917 64,054 1998 1998 40 Lawrence KS 3,821,694 0 932,000 3,821,694 4,753,694 63,695 1995 1998 40 Salina KS 1,921,388 0 200,000 1,921,388 2,121,388 84,061 1997 1997 40 Salina KS 2,886,947 0 329,000 2,886,947 3,215,947 54,989 1989 1998 35 Topeka KS 2,955,082 0 424,000 2,955,082 3,379,082 65,669 1986 1998 30 Murray KY 2,544,039 0 110,000 2,544,039 2,654,039 66,738 1998 1998 40 Centerville MA 4,782,428 0 1,704,760 4,782,428 6,487,188 59,780 1998 1998 40 Pittsfield MA 9,051,893 0 1,758,084 9,051,893 10,809,977 113,149 1998 1998 40 Riverview MI 6,938,730 66,611 300,000 7,005,341 7,305,341 759,956 1987 1995 35 Jackson MO 2,114,938 0 414,000 2,114,938 2,528,938 55,391 1990 1998 35 Hickory NC 2,531,199 0 385,000 2,531,199 2,916,199 47,460 1997 1998 40 Deptford NJ 3,429,878 0 655,000 3,429,878 4,084,878 21,437 1998 1998 40 Sparks(3) NV 5,119,174 0 505,000 5,119,174 5,624,174 146,262 1991 1997 40 Sparks(4) NV 7,277,602 0 714,000 7,277,602 7,991,602 181,940 1993 1997 40 Dayton OH 1,916,264 0 270,000 1,916,264 2,186,264 51,899 1997 1997 40 Dublin OH 5,789,013 0 355,975 5,789,013 6,144,988 60,302 1998 1998 40 Fairfield OH 1,917,248 0 270,000 1,917,248 2,187,248 67,903 1997 1997 40 Greenville OH 2,310,800 0 215,000 2,310,800 2,525,800 81,841 1997 1997 40 Lancaster OH 2,083,762 0 350,000 2,083,762 2,433,762 17,365 1998 1998 40 Newark OH 2,047,242 0 225,000 2,047,242 2,272,242 76,772 1997 1997 40 Sharonville OH 4,012,894 37,045 225,000 4,049,939 4,274,939 439,507 1987 1995 35 Springdale OH 2,091,938 0 440,000 2,091,938 2,531,938 65,373 1997 1997 40 Urbana OH 2,117,731 0 150,000 2,117,731 2,267,731 61,767 1997 1997 40 Youngstown OH 2,190,692 0 470,000 2,190,692 2,660,692 13,692 1998 1998 40 Broken Arrow OK 1,444,901 0 178,000 1,444,901 1,622,901 72,245 1996 1997 40 Oklahoma City OK 3,897,246 481,666 392,000 4,378,912 4,770,912 658,501 1982 1994 30 Oklahoma City OK 1,531,497 0 175,000 1,531,497 1,706,497 76,575 1996 1997 40 Albany(5) OR 2,465,356 0 92,160 2,465,356 2,557,516 246,536 1984 1995 35 Albany OR 3,656,555 4,530,805 511,290 8,187,360 8,698,650 578,870 1968 1995 30 Forest Grove(6) OR 3,151,903 0 401,187 3,151,903 3,553,090 270,163 1994 1995 40 Gresham OR 4,646,900 0 0 4,646,900 4,646,900 398,306 1988 1995 35 McMinnville(7) OR 3,975,918 0 760,000 3,975,918 4,735,918 298,194 1989 1995 35 Medford OR 4,325,518 0 313,389 4,325,518 4,638,907 324,414 1990 1995 35 Clinton SC 2,558,952 0 87,000 2,558,952 2,645,952 15,993 1997 1998 40 Columbia SC 2,664,229 0 210,000 2,664,229 2,874,229 49,954 1997 1998 40 Greenwood SC 2,646,418 0 107,000 2,646,418 2,753,418 16,540 1998 1998 40 Greer SC 2,388,964 0 375,000 2,388,964 2,763,964 19,908 1998 1998 40 Brentwood TN 2,301,599 0 600,000 2,301,599 2,901,599 206,185 1995 1995 40 Germantown TN 4,614,050 0 754,839 4,614,050 5,368,889 38,450 1998 1998 40 Corsicana TX 1,494,497 0 117,000 1,494,497 1,611,497 77,838 1996 1996 40
36
Initial Cost Cost Gross Amount at which to Company Capitalized Carried at Close of Period(1) Life on ------------ Subsequent ------------------------------------- Original which Facility Type Building and to Building and Accum. Construction Date Depr. is and Location Improvements Acquisition Land(2) Improvements Total Depr. Date Acquired Computed - ------------- ------------ ----------- ----------- ------------ ------------ ----------- ------------ -------- -------- Dallas TX 3,499,928 718,334 308,000 4,218,262 4,526,262 622,376 1982 1994 30 Denton TX 1,425,035 0 185,000 1,425,035 1,610,035 74,221 1996 1996 40 Ennis TX 1,408,954 0 119,000 1,408,954 1,527,954 73,383 1996 1996 40 Houston TX 7,190,231 0 1,235,468 7,190,231 8,425,699 89,878 1998 1998 40 Lewisville TX 1,891,780 0 260,000 1,891,780 2,151,780 74,883 1997 1997 40 Mansfield TX 1,574,961 0 225,000 1,574,961 1,799,961 78,748 1996 1997 40 Paris TX 1,464,890 0 166,000 1,464,890 1,630,890 76,296 1996 1996 40 Pearland TX 7,919,696 0 492,656 7,919,696 8,412,352 98,996 1998 1998 40 Richland Hills TX 1,616,047 0 223,000 1,616,047 1,839,047 80,802 1996 1997 40 Richland Hills TX 2,204,105 0 65,000 2,204,105 2,269,105 0 1998 1998 40 Weatherford TX 1,595,983 0 145,000 1,595,983 1,740,983 66,499 1996 1997 40 Bellevue WA 4,460,365 0 765,960 4,460,365 5,226,325 43,205 1998 1998 40 Richland WA 6,051,886 118,689 172,102 6,170,575 6,342,677 522,620 1990 1995 35 Tacoma WA 5,207,688 0 402,500 5,207,688 5,610,188 195,288 1997 1997 40 Yakima WA 5,247,778 0 500,000 5,247,778 5,747,778 128,057 1997 1997 40 Menomonee Falls(8) WI 13,190,259 0 4,161,000 13,190,259 17,351,259 471,081 1990 1997 30 West Allis(9) WI 8,117,356 2,911,035 682,000 11,028,391 11,710,391 284,636 1996 1997 30 ------------ ----------- ----------- ------------ ------------ ----------- 369,013,588 21,154,393 57,816,222 390,167,981 447,984,203 20,990,955 ------------ ----------- ----------- ------------ ------------ ----------- CCRCs: Palm Desert CA 9,099,576 1,473,653 1,600,000 10,573,229 12,173,229 1,111,116 1989 1994 40 Sterling CO 2,715,537 0 400,000 2,715,537 3,115,537 429,960 1979 1994 30 Lawrenceville GA 10,769,289 0 722,850 10,769,289 11,492,139 25,708 1998 1998 40 Andover(11) KS 12,514,390 0 687,000 12,514,390 13,201,390 496,282 1987 1997 35 Norton MA 8,270,820 2,121,943 1,350,659 10,392,763 11,743,422 292,698 1968 1996 30 College Station TX 6,007,214 0 833,000 6,007,214 6,840,214 62,575 1994 1998 40 Corpus Christi TX 14,923,859 11,928,630 1,848,000 26,852,489 28,700,489 926,539 1985 1997 40 Glendale(12) WI 22,905,471 0 3,824,000 22,905,471 26,729,471 788,969 1988 1997 30 Waukesha(13) WI 28,561,890 1,826,824 7,233,000 30,388,714 37,621,714 1,151,931 1973 1997 30 ------------ ----------- ----------- ------------ ------------ ----------- 115,768,046 17,351,050 18,498,509 133,119,096 151,617,605 5,285,778 ------------ ----------- ----------- ------------ ------------ ----------- Residential Care Facilities for the Elderly: Costa Mesa CA 229,483 0 60,000 229,483 289,483 9,562 1970 1997 30 Irvine CA 338,141 0 78,000 338,141 416,141 11,253 1976 1997 30 Irvine CA 340,515 0 90,000 340,515 430,515 14,188 1975 1997 30 Laguna Hills CA 208,481 0 72,000 208,481 280,481 8,687 1977 1997 30 Laguna Niguel CA 347,937 0 86,000 347,937 433,937 3,866 1973 1998 30 Lake Forest CA 167,492 0 160,000 167,492 327,492 6,979 1975 1997 30 Lake Forest CA 186,473 0 64,000 186,473 250,473 7,770 1973 1997 30 Murieta CA 201,704 0 49,694 201,704 251,398 4,802 1990 1998 35 Murieta CA 154,296 0 37,842 154,296 192,138 3,673 1990 1998 35 Murieta CA 201,704 0 49,694 201,704 251,398 4,802 1990 1998 35 Murieta CA 144,172 0 35,311 144,172 179,483 3,432 1990 1998 35 Murieta CA 127,461 0 31,133 127,461 158,594 3,034 1990 1998 35 Murieta CA 117,307 0 28,326 117,307 145,633 838 1988 1998 35 Newport Beach CA 302,170 0 69,000 302,170 371,170 10,930 1962 1997 30 Newport Beach CA 444,731 0 111,000 444,731 555,731 14,824 1965 1997 30 Newport Beach CA 518,572 0 128,000 518,572 646,572 14,404 1964 1998 30 Yorba Linda CA 316,419 0 78,000 316,419 394,419 1,507 1982 1998 30 ------------ ----------- ----------- ------------ ------------ ----------- 4,347,058 0 1,228,000 4,347,058 5,575,058 124,551 ------------ ----------- ----------- ------------ ------------ ----------- Rehabilitation Hospitals: Scottsdale AZ 5,874,213 0 241,762 5,874,213 6,115,975 1,554,219 1986 1988 40 Tucson AZ 9,434,562 0 1,275,438 9,434,562 10,710,000 1,542,944 1992 1992 40 ------------ ----------- ----------- ------------ ------------ ----------- 15,308,775 0 1,517,200 15,308,775 16,825,975 3,097,163 ------------ ----------- ----------- ------------ ------------ -----------
37
Initial Cost Cost Gross Amount at which to Company Capitalized Carried at Close of Period(1) -------------- Subsequent ------------------------------------------ Original Facility Type Building and to Building and Construction Date and Location Improvements Acquisition Land(2) Improvements Total Accum. Depr. Date Acquired - ------------- ------------ ----------- ------------ -------------- -------------- ------------ ------------ -------- Clinics: Heflin AL $ 2,099,598 $ 83,012 $ 248,000 $ 2,182,610 $ 2,430,610 $ 246,136 1997 1997 Cedar Park TX 2,406,154 0 872,915 2,406,154 3,279,069 204,414 1998 1998 Pflugerville TX 2,219,447 0 995,000 2,219,447 3,214,447 189,102 1998 1998 -------------- ----------- ------------ -------------- -------------- ------------ 6,725,199 83,012 2,115,915 6,808,211 8,924,126 639,652 -------------- ----------- ------------ -------------- -------------- ------------ Construction in Progress: 70,363,033 0 20,034,562 70,363,033 90,397,595 0 -------------- ----------- ------------ -------------- -------------- ------------ GRAND TOTAL $1,044,611,384 $50,388,679 $148,387,642 $1,095,000,063 $1,243,387,705 $133,316,020 ============== =========== ============ ============== ============== ============ Life on which Facility Type Depr. is and Location Computed - ------------- -------- Clinics: Heflin 40 Cedar Park 40 Pflugerville 40 Construction in Progress: GRAND TOTAL
- ------- (1) Also represents the approximate cost for Federal income tax purposes. (2) Gross amount at which land is carried at close of period also represents initial cost to the Company. (3) Real estate is security for notes payable in the aggregate of $3,683,218 at 12/31/98. (4) Real estate is security for notes payable in the aggregate of $3,204,878 at 12/31/98. (5) Real estate is security for notes payable in the aggregate of $2,088,948 at 12/31/98. (6) Real estate is security for notes payable in the aggregate of $3,366,783 at 12/31/98. (7) Real estate is security for notes payable in the aggregate of $3,601,226 at 12/31/98. (8) Real estate is security for notes payable in the aggregate of $11,035,786 at 12/31/98. (9) Real estate is security for notes payable in the aggregate of $8,328,342 at 12/31/98. (10) Real estate is security for notes payable in the aggregate of $2,255,000 at 12/31/98. (11) Real estate is security for notes payable in the aggregate of $2,700,000 at 12/31/98. (12) Real estate is security for notes payable in the aggregate of $13,124,316 at 12/31/98. (13) Real estate is security for notes payable in the aggregate of $11,234,408 at 12/31/98.
Real Estate Accumulated Properties Depreciation ----------- ------------ (in thousands) Balances at December 31, 1995: $ 592,727 $ 73,722 Acquisitions.................................. 48,963 15,797 Improvements.................................. 10,319 448 Sales......................................... -- -- ---------- -------- Balances at December 31, 1996: 652,009 89,967 ---------- -------- Acquisitions.................................. 304,213 18,665 Improvements.................................. 15,608 574 Sales......................................... (11,299) (2,129) ---------- -------- Balances at December 31, 1997: 960,531 107,077 ---------- -------- Acquisitions.................................. 261,702 26,193 Improvements.................................. 26,800 1,016 Reclassifications............................. 3,500 -- Impairment of long-lived assets............... (5,000) -- Sales......................................... (4,145) (970) ---------- -------- Balances at December 31, 1998: $1,243,388 $133,316 ========== ========
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. 38 PART III Item 10. Directors and Executive Officers of the Registrant. See Item 1 for details regarding executive officers. Details regarding directors are incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1999, filed or to be filed pursuant to Regulation 14A. Item 11. Executive Compensation. Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1999, filed or to be filed pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management. Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1999, filed or to be filed pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions. Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 1999, filed or to be filed pursuant to Regulation 14A. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a)(1) Financial Statements. Report of Independent Public Accountants Consolidated Balance Sheets at December 31, 1998 and 1997 Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996. Notes to Consolidated Financial Statements (2) Financial Statement Schedules Report of Independent Public Accountants Schedule III Real Estate and Accumulated Depreciation (b) Reports on Form 8-K A Form 8-K dated September 22, 1998 was filed on October 8, 1998 with respect to the direct placement of 1,500,000 shares of common stock issued and sold on September 25, 1998 which resulted in net proceeds of approximately $30,000,000. A Form 8-K dated October 16, 1998 was filed with respect to the acquisition of assets during the period January 1, 1998 through October 1, 1998, including audited proforma statements of income for the acquired facilities and unaudited proforma financial statements for the Company giving effect to the acquisitions. 39 (c) Exhibits
Exhibit No. Description ----------- ----------- 2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession 2.1 Agreement to Merge, dated August 19, 1997, among the Company, Laureate Investments, Inc. and Laureate Properties, Inc., filed as Exhibit 2.1 to the Company's Form 8-K dated October 7, 1997, and incorporated herein by this reference. 3. Articles of Incorporation and Bylaws 3.1(a) Restated Articles of Incorporation, filed as Exhibit 3.1 to the Company's Registration Statement on Form S-11 (No. 33-1128), effective December 19, 1985, and incorporated herein by this reference. 3.1(b) Articles of Amendment of Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended March 31, 1989, and incorporated herein by this reference. 3.1(c) Articles of Amendment of Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1(c) to the Company's Registration Statement on Form S-11 (No. 33-32251), effective January 23, 1990, and incorporated herein by this reference. 3.1(d) Articles of Amendment of Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1(d) to the Company's Form 10-K for the year ended December 31, 1994, and incorporated herein by this reference. 3.1(e) Articles Supplementary to the Registrant's Amended and Restated Articles of Incorporation, dated September 24, 1997, filed as Exhibit 3.1 to the Company's Form 8-K dated September 24, 1997, and incorporated herein by this reference. 3.2 Bylaws of the Company as amended January 19, 1996, filed as Exhibit 3.2 to the Company's Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference. 3.3 Amended and Restated Bylaws of the Company, filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended September 30, 1998, and incorporated herein by this reference. 4. Instruments Defining Rights of Security Holders, Including Indentures 4.1 Indenture dated as of November 16, 1992, between Nationwide Health Properties, Inc., Issuer to The Chase Manhattan Bank (National Association), Trustee, filed as Exhibit 4.1 to the Company's Form S-3 (No. 33-54870) dated November 24, 1992, and incorporated herein by this reference. 4.2 Indenture dated as of June 30, 1993, between the Company and First Interstate Bank of California, as Trustee, filed as Exhibit 4.2 to the Company's Registration Statement on Form S-3 (No. 33-64798), effective July 12, 1993, and incorporated herein by this reference. 4.3 First Supplemental Indenture dated November 15, 1993, between the Company and First Interstate Bank of California, as Trustee, filed as Exhibit 4.1 to the Company's Form 8-K dated November 15, 1993, and incorporated by reference herein. 4.4 Indenture dated as of January 12, 1996, between the Company and The Bank of New York, as Trustee, filed as Exhibit 4.1 to the Company's Registration Statement on Form S-3 (No 33-65423) dated December 27, 1995, and incorporated herein by this reference. 10. Material Contracts 10.1 Master Lease Document--General Terms and Conditions dated December 30, 1985, for Leases between various subsidiaries of Beverly as Lessees and the Company as Lessor, filed as Exhibit 10.3 to the Company's Form 10-K for the year ended December 31, 1985, and incorporated herein by this reference.
40
Exhibit No. Description ----------- ----------- 10.2 Guaranty by and between the Company and Beverly filed as Exhibit 10.7 to the Company's Registration Statement on Form S-11 (No. 33- 1128), effective December 19, 1985, and incorporated herein by this reference. 10.3 Corporate Guaranty of Obligations of Subsidiaries pursuant to Leases and Contract of Acquisition, dated as of August 1, 1986, of Beverly as Guarantor in favor of the Company filed as Exhibit 10.3 to the Company's Registration Statement on Form S-11 (No. 33- 32251), effective January 23, 1990, and incorporated herein by this reference. 10.4 Corporate Guaranty of Obligations of Subsidiaries pursuant to Leases and Contract of Acquisition, dated as of November 1, 1986, of Beverly as Guarantor in favor of the Company filed as Exhibit 10.4 to the Company's Registration Statement on Form S-11 (No. 33- 32251), effective January 23, 1990, and incorporated herein by this reference. 10.5 Corporate Guaranty of Obligations of Subsidiaries pursuant to Leases, dated as of July 31, 1987, of Beverly as Guarantor in favor of the Company filed as Exhibit 10.5 to the Company's Registration Statement on Form S-11 (No. 33-32251), effective January 23, 1990, and incorporated herein by this reference. 10.6 1989 Stock Option Plan of the Company as Amended and Restated January 19, 1996, filed as Exhibit 10.6 to the Company's 10-K for the year ended December 31, 1996, and incorporated herein by this reference. 10.7 The Company's Retirement Plan for Directors effective July 26, 1991 filed as Exhibit 10.13 to the Company's Form 10-K for the year ended December 31, 1991, and incorporated herein by this reference. 10.8 Deferred Compensation Plan of the Company effective September 1, 1991 filed as Exhibit 10.14 to the Company's Form 10-K for the year ended December 31, 1991, and incorporated herein by this reference. 10.9 Commercial and Multi-family Mortgage Loan Sale Agreement dated as of June 5, 1992 by and between Resolution Trust Corporation, as Receiver, and Nationwide Health Properties, Inc. filed as Exhibit A to the Company's Form 8-K dated May 29, 1992, and incorporated herein by this reference. 10.10 Credit Agreement dated as of May 20, 1993 between the Company and Wells Fargo Bank National Association, National Westminster Bank USA, The Daiwa Bank Limited and Sanwa Bank of California filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 1993, and incorporated herein by this reference. 10.10(a) Amendment Number One to Credit Agreement dated as of May 20, 1993 between the Company and Wells Fargo Bank, National Association, National Westminster Bank USA, The Daiwa Bank, Limited, and Sanwa Bank California filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended March 31, 1994, and incorporated herein by this reference. 10.10(b) Amendment Number Two to Credit Agreement dated as of May 20, 1993 between the Company and Wells Fargo Bank, National Association, National Westminster Bank USA, The Daiwa Bank, Limited and Sanwa Bank California, filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 1995, and incorporated herein by this reference. 10.10(c) Amendment Number Three to Credit Agreement dated as of January 22, 1996 between the Company and Wells Fargo Bank, National Association, National Westminster Bank USA, The Daiwa Bank, Limited and Sanwa Bank California, filed as Exhibit 10.10 (c) to the Company's Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference.
41
Exhibit No. Description ----------- ----------- 10.10(d) Amendment Number Four and Waiver to Credit Agreement dated December 10, 1996 between the Company and Wells Fargo Bank, National Association, The Sumitomo Bank Limited, The Bank of New York, Sanwa Bank California and BHF-Bank Aktiengesellschaft, filed as Exhibit 10.10 (d) to the Company's Form 10-K for the year ended December 31, 1996, and incorporated herein by this reference. 10.10(e) Amendment Number Five to Credit Agreement dated April 1, 1997 between the Company and Wells Fargo Bank, National Association, The Sumitomo Bank Limited, The Bank of New York, Sanwa Bank California and BHF-Bank Aktiengesellschaft, filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended March 31, 1997, and incorporated herein by this reference. 10.10(f) Amendment Number Six to Credit Agreement dated August 15, 1997 between the Company and Wells Fargo Bank, National Association, the Sumitomo Bank Limited, The Bank of New York, Sanwa Bank California and BHF-Bank Aktiengesellschaft, filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended September 30, 1997, and incorporated herein by this reference. 10.10(g) Amendment Number Seven and Restatement of Amendments One through Six to Credit Agreement dated as of April 6, 1997 between the Company and Wells Fargo Bank, National Association, The Bank of New York, Sanwa Bank California, the Sumitomo Bank Limited and BHF-Bank Aktiengesellschaft, filed as Exhibit 10.1 to the Company's 10-Q for the quarter ended June 30, 1998, and incorporated herein by this reference. 10.10(h) Assumption Agreement dated as of May 28, 1998 between the Company and Wells Fargo Bank, National Association, The Bank of New York, Sanwa Bank California and Nationsbank, N.A., filed as Exhibit 10.2 to the Company's Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by this reference. 10.10(i) Amendment Number Eight to Credit Agreement dated as of January 29, 1999 between the Company and Wells Fargo Bank, National Association, The Bank of New York, Nationsbank, N.A. and Sanwa Bank of California. 10.11 Form of Indemnity Agreement between officers and directors of the Company including John C. Argue, David R. Banks, Milton J. Brock, Jr., Sam A. Brooks, Jr., Charles D. Miller and Jack D. Samuelson, R. Bruce Andrews, Mark L. Desmond, Stephen J. Insoft, Don M. Pearson, Gary E. Stark, and T. Andrew Stokes, and John J. Sheehan, Jr., filed as Exhibit 10.11 to the Company's Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference. 10.12 Executive Employment Security Policy, filed as Exhibit 10.12 to the Company's Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference. 10.13 Employment agreement entered into by and between Nationwide Health Properties, Inc. and R. Bruce Andrews dated as of February 25, 1998. 10.14 Employment agreement entered into by and between Nationwide Health Properties, Inc. and T. Andrew Stokes dated as of February 25, 1998. 10.15 Employment agreement entered into by and between Nationwide Health Properties, Inc. and Mark L. Desmond dated as of February 25, 1998. 21. Subsidiaries of the Company 23. Consents of Experts and Counsel 23.1 Consent of Arthur Andersen LLP 27. Financial Data Schedule
42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. NATIONWIDE HEALTH PROPERTIES, INC. By: /s/ R. Bruce Andrews ----------------------------------- R. Bruce Andrews President and Chief Executive Officer Dated: March 8, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Charles D. Miller Chairman and Director March 8, 1999 ____________________________________ Charles D. Miller /s/ R. Bruce Andrews President, Chief Executive March 8, 1999 ____________________________________ Officer and Director R. Bruce Andrews (Principal Executive Officer) /s/ Mark L. Desmond Senior Vice President and March 8, 1999 ____________________________________ Chief Financial Officer Mark L. Desmond (Principal Financial and Accounting Officer) /s/ John C. Argue Director March 8, 1999 ____________________________________ John C. Argue /s/ David R. Banks Director March 8, 1999 ____________________________________ David R. Banks /s/ Sam A. Brooks Director March 8, 1999 ____________________________________ Sam A. Brooks /s/ Jack D. Samuelson Director March 8, 1999 ____________________________________ Jack D. Samuelson
43 APPENDIX 1 BEVERLY ENTERPRISES, INC. SET FORTH BELOW IS CERTAIN CONDENSED FINANCIAL DATA OF BEVERLY ENTERPRISES, INC. ("BEVERLY") WHICH IS TAKEN FROM BEVERLY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND THE BEVERLY QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998 AS FILED WITH THE COMMISSION. The information and financial data contained herein concerning Beverly was obtained and has been condensed from Beverly's public filings under the Exchange Act. The Beverly financial data presented includes only the most recent interim and fiscal year end reporting periods. The Company can make no representation as to the accuracy and completeness of Beverly's public filings but has no reason not to believe the accuracy and completeness of such filings. It should be noted that Beverly has no duty, contractual or otherwise, to advise the Company of any events subsequent to such dates which might affect the significance or accuracy of such information. Beverly is subject to the information filing requirements of the Exchange Act, and in accordance therewith, is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Such reports, proxy statements and other information may be inspected at the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available at the following Regional Offices of the Commission: 7 World Trade Center, New York, N.Y. 10048, and 500 West Madison Street, Suite 1400, Chicago, IL 60661. Such reports and other information concerning Beverly can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, Room 1102, New York, New York 10005. A-1-1 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 30, December 31, 1998 1997 ------------- ------------ Total current assets................................. $ 599,820 $ 626,318 Property and equipment, net.......................... 1,148,711 1,158,329 Total other assets................................... 450,422 288,822 ---------- ---------- Total assets......................................... $2,198,953 $2,073,469 ========== ========== Total current liabilities............................ $ 335,952 $ 344,017 Long-term obligations................................ 818,775 686,941 Other liabilities and deferred items................. 175,680 180,006 Total stockholders' equity........................... 868,546 862,505 ---------- ---------- Total liabilities and stockholders' equity........... $2,198,953 $2,073,469 ========== ==========
A-1-2 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share amounts)
Years ended December Nine months ended 31, September 30, --------------------- 1998 1997 1996 ----------------- ---------- ---------- Revenues............................. $2,115,710 $3,230,300 $3,281,028 Costs and expenses: Operating and administrative....... 1,899,295 2,888,021 2,958,942 Interest........................... 48,869 82,713 91,111 Depreciation and amortization...... 69,947 107,060 105,468 Transaction costs.................. -- 44,000 -- Year 2000 remediation.............. 3,875 -- -- ---------- ---------- ---------- 2,021,986 3,121,794 3,155,521 Income (loss) before provision for income taxes and extraordinary charge.............................. 93,724 108,506 125,507 Provision for income taxes........... 32,803 49,913 73,481 Extraordinary charge, net of income taxes............................... -- -- (1,726) ---------- ---------- ---------- Net income (loss).................... $ 60,921 $ 58,593 $ 50,300 ========== ========== ========== Income (loss) per share of common stock: Basic: Before extraordinary charge........ $ .58 $ .57 $ .53 Extraordinary charge............... -- -- (.02) ---------- ---------- ---------- Net income per share................. $ .58 $ .57 $ .51 ========== ========== ========== Shares used to compute per share amounts............................. $ 104,225 102,060 98,574 ========== ========== ========== Diluted: Before extraordinary charge........ $ .58 $ .57 $ .50 Extraordinary change............... -- -- (.01) ---------- ---------- ---------- Net income per share................. $ .58 $ .57 $ .49 ========== ========== ========== Shares used to compute per share amounts............................. $ 105,391 $ 103,422 $ 110,726 ========== ========== ==========
A-1-3 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine months ended Years ended December 31, September 30, -------------------------- 1998 1997 1996 ----------------- ------------ ------------ Cash flows from operating activities: Net income...................... $ 60,921 $ 58,593 $ 50,300 --------- ------------ ----------- Adjustments to reconcile net income to net cash provided by operating activities........... (28,649) 85,611 82,880 --------- ------------ ----------- Net cash provided by operating activities....................... 32,272 144,204 133,180 --------- ------------ ----------- Net cash provided by (used for) investing activities............. (189,788) 230,853 (91,501) --------- ------------ ----------- Net cash provided by (used for) financing activities............. 75,824 (339,588) (28,221) --------- ------------ ----------- Net increase (decrease) in cash and cash equivalents............. (81,692) 35,469 13,458 Cash and cash equivalents at beginning of period.............. 105,230 69,761 56,303 --------- ------------ ----------- Cash and cash equivalents at end of period........................ $ 23,538 $ 105,230 $ 69,761 ========= ============ ===========
A-1-4 EX-10.10.(I) 2 AMENDMENT #8 TO CREDIT AGREEMENT EXHIBIT 10.10(i) AMENDMENT NUMBER EIGHT TO CREDIT AGREEMENT ------------------------------------------ This AMENDMENT NUMBER EIGHT TO CREDIT AGREEMENT, dated as of January 29, 1999 (this "Amendment"), is entered into among NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (the "Borrower"), the financial institutions which are signatories to the Credit Agreement (each a "Bank" and, collectively, the "Banks"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as agent for the Banks thereunder (in such capacity, the "Agent"). WHEREAS, the Borrower has requested that the Banks amend certain provisions of the Credit Agreement to provide for, among other things, the revision of covenants in connection with the incurrence of indebtedness by the Borrower. WHEREAS, subject to the terms and conditions contained herein, the Banks are willing to amend such provisions of the Credit Agreement. NOW, THEREFORE, in consideration of the mutual covenants, conditions, and provisions hereinafter set forth, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS FOR THIS AMENDMENT; ------------------------------ AMENDMENT OF ARTICLE I OF THE CREDIT AGREEMENT ---------------------------------------------- 1.1 Definitions for this Amendment. Any and all initially ------------------------------ capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement unless specifically defined herein. For purposes of this Amendment, the following initially capitalized terms shall have the following meanings: "Agent" shall have the meaning set forth in the introduction to this ----- Amendment. "Amendment" means this Amendment Number Eight to Credit Agreement --------- among the Borrower, the Banks, and the Agent. "Bank" and "Banks" shall have the respective meanings set forth in the ---- ----- introduction to this Amendment. "Borrower" shall have the meaning set forth in the introduction to -------- this Amendment. "Credit Agreement" means that certain Credit Agreement, dated as of ---------------- May 20, 1993, among the Borrower, the Banks, and the Agent, as amended by that certain Amendment Number One to Credit Agreement dated as of April 28, 1994, that certain Amendment Number Two to Credit Agreement dated as of July 11, 1995, that certain Amendment Number Three to Credit Agreement dated as of January 22, 1996, that certain Amendment Number Four and Waiver to Credit Agreement dated as of December 10, 1996, that certain Amendment Number Five to Credit 1 Agreement dated as of April 1, 1997, that certain Amendment Number Six and Waiver to Credit Agreement dated as of August 15, 1997, and that certain Amendment Number Seven and Restatement of Amendments One Through Six to Credit Agreement dated as of April 6, 1998. 1.2 Amendment of Section 1.1 of the Credit Agreement. Section 1.1 of ------------------------------------------------ the Credit Agreement is hereby amended by inserting the following defined terms: "1999 Indenture" means that certain Indenture, dated as of January 13, -------------- 1999, from the Borrower to Chase Manhattan Bank and Trust Company, National Association, as Trustee, providing for the issuance from time to time of unsecured and unsubordinated debentures, notes or other evidences of indebtedness of the Borrower. "1999 Indenture Indebtedness" means Indebtedness of the Borrower --------------------------- incurred under or pursuant to the 1999 Indenture. ARTICLE 2 AMENDMENT OF CERTAIN PROVISIONS ------------------------------- OF THE CREDIT AGREEMENT ----------------------- 2.1 Amendment of Section 4.3(b) of the Credit Agreement. Section --------------------------------------------------- 4.3(b) of the Credit Agreement is amended by deleting clause (i) therefrom in its entirety and substituting therefor the following clause: (i) If the Borrower shall create or incur Indenture Indebtedness, 1996 Indenture Indebtedness, 1997 Indenture Indebtedness or 1999 Indenture Indebtedness or, with the prior written consent of the Majority Banks, shall create, incur or assume Indebtedness pursuant to Sections -------- 9.4(a)(v) or 9.4(a)(vii), the Borrower shall pay to the Agent as a ------------------------ prepayment in whole or ratably in part of the outstanding amount of the Loans, an amount equal to the Net Cash Proceeds received by the Borrower from such Indebtedness as created, incurred or assumed (to the extent of the amount of the Loans then outstanding). 2.2 Amendment of Section 8.1 of the Credit Agreement. Section 8.1 of ------------------------------------------------ the Credit Agreement is amended by deleting clause (u) therefrom in its entirety and substituting therefor the following clause (u): (u) Compliance with Securities Laws. Each of the Borrower and its ------------------------------- Subsidiaries is in compliance in all material respects with all applicable federal and state securities laws, rules, regulations and orders of any Governmental Authority with respect to the 1997 Indenture and the Indebtedness issued and to be issued pursuant to the 1997 Indenture, and with respect to the 1999 Indenture and the Indebtedness issued and to be issued pursuant to the 1999 Indenture. 2 2.3 Amendment of Section 9.1(b) of the Credit Agreement. Section --------------------------------------------------- 9.1(b) of the Credit Agreement is amended by deleting clause (xi) therefrom in its entirety and substituting therefor the following clause (xi): (xi) as soon as reasonably practical and, in any event, not less than two days prior to the consummation thereof, written notice of (A) the proposed incurrence or issuance of Indenture Indebtedness, 1996 Indenture Indebtedness, 1997 Indenture Indebtedness or 1999 Indenture Indebtedness or (B) any proposed supplement or amendment to the Indenture, the 1996 Indenture, the 1997 Indenture or the 1999 Indenture; 2.4 Amendment of Section 9.4(a) of the Credit Agreement. Section --------------------------------------------------- 9.4(a) of the Credit Agreement is amended by deleting the "." at the end of clause (xii) thereof and inserting in place thereof ";" and by inserting immediately thereafter the following new clause (xiii); (xiii) 1999 Indenture Indebtedness; provided, however, that: (a) the -------- ------- maximum aggregate principal amount of 1999 Indenture Indebtedness at any time outstanding shall not exceed $500,000,000; (b) without the prior written consent of the Majority Banks, no regularly scheduled principal payment on any 1999 Indenture Indebtedness shall be required prior to the fifth (5th) anniversary of the issuance of the debenture, note or other evidence of indebtedness evidencing such 1999 Indenture Indebtedness (without regard to the effect of the acceleration provisions set forth in Section 502 of the 1999 Indenture); (c) all 1999 Indenture Indebtedness shall be unsecured; (d) in connection with the incurrence or issuance of any 1999 Indenture Indebtedness, no covenant (financial or otherwise) shall be imposed upon, or agreed to by, the Borrower that is more restrictive (in the judgment of the Majority Banks) than the covenants set forth in this Agreement; and (e) prior to the effectiveness thereof, the Majority Banks shall have approved, in their sole discretion, each supplement or amendment to the 1999 Indenture. ARTICLE 3 MISCELLANEOUS ------------- 3.1 Loan Documents. This Amendment shall be one of the Loan -------------- Documents. 3.2 Execution. This Amendment may be executed in any number of --------- counterparts, each of which when so executed and delivered shall be deemed an original. All of such counterparts shall constitute but one and the same instrument. Delivery of an executed counterpart of the signature pages of this Amendment by telecopier shall be equally effective as delivery of a manually executed counterpart. Any party delivering an executed counterpart of the signature pages of this Amendment by telecopier shall thereafter also promptly deliver a manually executed counterpart, but the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment. 3 3.3 Effectiveness. This Amendment shall be effective as of the date ------------- first written above, when (a) one or more counterparts hereof shall have been executed by the Borrower, the Banks, and the Agent and shall have been delivered to the Agent and (b) the Borrower shall have delivered to the Banks and the Agent an executed copy of the 1999 Indenture. 3.4 No Other Amendment. Except as expressly amended hereby, the ------------------ Credit Agreement shall remain unchanged and in full force and effect. To the extent any terms or provisions of this Amendment conflict with those of the Credit Agreement, the terms and provisions of this Amendment shall control. This Amendment shall be deemed a part of and is hereby incorporated in the Credit Agreement. 3.5 Governing Law. This Amendment shall be governed by, and ------------- construed and enforced in accordance with, the laws of the State of California. [SIGNATURE PAGE FOLLOWS] 4 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered as of the date first above written. WELLS FARGO BANK, NATIONAL ASSOCIATION, in its individual capacity and as Agent By: ____________________________ Title: _____________________ SANWA BANK CALIFORNIA By: ____________________________ Title: _____________________ By: ____________________________ Title: _____________________ NATIONSBANK, N.A. By: ____________________________ Title: _____________________ By: ____________________________ Title: _____________________ THE BANK OF NEW YORK By: ____________________________ Title: _____________________ By: ____________________________ Title: _____________________ NATIONWIDE HEALTH PROPERTIES, INC. By: ____________________________ Title: _____________________ 5 EX-10.13 3 EMPLOYMENT AGREEMENT - BRUCE ANDREWS EXHIBIT 10.13 EMPLOYMENT AGREEMENT -------------------- (R. Bruce Andrews) This EMPLOYMENT AGREEMENT is entered into by and between Nationwide Health Properties, Inc., a Maryland corporation (the "Company") and R. Bruce Andrews (the "Executive") as of February 25, 1998. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to enter into this Employment Agreement with Executive to assure that the Company will have the continued service and dedication of Executive. This Employment Agreement contains the entire agreement between the parties with respect to the matters specified herein, and supersedes any prior oral and written employment agreements, understandings and commitments between the Company and Executive, and any severance or employment security policy of the Company which may cover Executive. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: I. Definitions. ----------- (1) "Cause" shall mean (a) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) which is not remedied promptly by Executive after a written demand for substantial performance is delivered to Executive by the Board which specifically 1 identifies the manner in which the Board believes that Executive has not substantially performed his duties, or (b) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this definition, no act or failure to act on the part of Executive shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based on the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. (2) "Disability" shall mean the absence of Executive from his duties with the Company on a full-time basis for a period of (a) ninety (90) consecutive calendar days or (b) an aggregate of one hundred fifty (l50) or more calendar days in any fiscal year as a result of mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive. (3) "Effective Date" shall mean the date hereof, which is set forth in the first paragraph of this Agreement. (4) "Employment Period" shall mean the period commencing on the Effective Date and ending on the third anniversary of the Effective Date; provided, however, that commencing on the first day of the month next following the Effective Date and on the first day of each month thereafter (the most recent of such dates is hereinafter referred to as the "Renewal Date"), the Employment Period shall be automatically extended so as to terminate on the third anniversary of such Renewal Date (but not later than the date when Executive attains age 65), unless the 2 Company or Executive shall give notice to the other that the Employment Period shall not be further extended prior to any such Renewal Date. II. Conditions of Employment. ------------------------ (1) Position and Duties. Executive is currently employed as President and ------------------- Chief Executive Officer of the Company. During the Employment Period, (a) Executive's position (including titles), authority, duties and responsibilities shall be at least commensurate with the most significant of those held, exercised and assigned to Executive immediately preceding the Effective Date, and (b) Executive's services shall be performed at the location where Executive was employed immediately preceding the Effective Date or any office or location within 25 miles from such location. During the Employment period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company, and, to the extent necessary to discharge the responsibilities assigned to Executive hereunder, to use Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for Executive to serve on corporate, civic or charitable boards or committees so long as such activities do not interfere with the performance of Executive's responsibilities as an employee of the Company in accordance with this Agreement. (2) Compensation ------------ 3 (a) Base Salary. As of the Effective Date, Executive shall receive an ----------- annual base salary (the "Annual Base Salary") of $425,000, payable in twice monthly installments (except if deferred by Executive under a Company-sponsored deferral plan). Executive's Annual Base Salary shall be reviewed by the Compensation Committee of the Board (the "Committee") each January during the Employment Period. Any increase in Annual Base Salary approved by the Committee shall not serve to limit or reduce any other obligation to Executive under this Agreement. Executive's Annual Base Salary may not be reduced during the Employment Period except as part of a general, across the board salary reduction which applies in a comparable manner to all other senior executives of the Company. As it applies to Executive, such reduction shall be limited to a maximum of 10% in any calendar year unless Executive agrees to accept a larger reduction. (b) Annual Bonus. In addition to Annual Base Salary, Executive shall ------------ be eligible to receive, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus"). Such Annual Bonus may range from 0% to 120% (with a target of 60%) of the Annual Base Salary earned by Executive during the fiscal year, with the specific amount determined by the Committee based on its assessment of the Company's and Executive's performance for the fiscal year. In assessing such performance, the Committee shall take into account the growth and income of the Company relative to its annual financial plan, the quality of the Company's assets, Executive's performance in terms of implementing the Company's business strategy, and other considerations deemed by the Committee to be relevant to the current and future success of the Company. Annual Bonus earned by Executive shall be paid to Executive no later than ninety 4 (90) days following the end of the fiscal year to which the Annual Bonus applies, unless such Annual Bonus is voluntarily deferred by Executive in accordance with a Company sponsored deferral program. (c) Stock Options. In addition to Annual Base Salary and Annual Bonus, ------------- Executive shall be eligible to receive, for each fiscal year of the Employment Period, a grant of Stock Options (the "Stock Options). Such Stock Options shall (i) be granted to Executive each January during the Employment Period, (ii) have a ten-year term, (iii) carry an exercise price equal to the market price of the Company's common stock on the date of grant (as such price is defined in the Company's Stock Option Plan), and (iv) be granted in conjunction with the right to earn a cash payment equal to the amount of dividends paid by the Company from the date of grant of the Stock Option to the date the Stock Option is exercised on an equivalent number of common shares to the shares represented by the Stock Option (the "Performance-Based Dividend Equivalents"). The specific number of shares represented by Stock Options granted annually to Executive, the specific performance objectives associated with earning the Performance-Based Dividend Equivalents for each grant of Stock Options, and any vesting restrictions placed on the exercise of such Stock Options and Performance-Based Dividend Equivalents shall be determined by the Committee. 5 Notwithstanding the above, the Committee may, in its discretion, replace future grants of Stock Options and Performance-Based Dividend Equivalents for Executive during the Employment Period with another form of long-term incentive compensation of similar value and risk as determined by outside experts acceptable to Executive and the Committee. (d) Benefit Plans. During the Employment Period, Executive and/or ------------- Executive's beneficiaries, as the case may be, shall participate in and shall receive all benefits under Company-sponsored retirement plans, savings plans, deferral plans, medical plans (including dental, vision and drug prescription plans), life insurance plans, disability plans, and accidental death and travel accident insurance plans provided to Executive as of the Effective Date, and any benefit plans or programs that may be introduced by the Company during the Employment Period for other senior executives of the Company which are not already provided to Executive. (e) Fringe Benefits. During the Employment Period, Executive shall --------------- be entitled to annual paid vacation time of four (4) weeks and a monthly car allowance of $675. In addition, Executive shall be entitled to receive any fringe benefits or perquisites introduced by the Company during the Employment Period for other senior executives of the Company which are not already provided to Executive. III. Termination of Employment ------------------------- 6 (1) Death or Disability. Executive's employment with the Company shall ------------------- terminate automatically upon Executive's death during the Employment Period. In the event of Executive's Disability during the Employment Period (pursuant to the definition of Disability set forth in Section I(2) of this Agreement), the Company may, at the discretion of the Board, give Executive written notice in accordance with Section IX(2) of this Agreement of its intention to terminate Executive's employment with the Company. In such event, Executive's employment with the Company shall terminate effective on the 30/th/ day after receipt of such notice by Executive (the "Effective Disability Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of his duties. (2) Cause. The Company may terminate Executive's employment during the ----- Employment Period for Cause. The termination of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a notice that Executive is guilty of the conduct described in Section I(1) specifying the particulars thereof in reasonable detail. (3) Good Reason. Executive's employment with the Company may be ----------- terminated by Executive during the Employment Period for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (a) without the express written consent of Executive, the assignment to Executive of any duties or any other action by the Board which results in a material diminution in Executive's position (including titles), authority, duties or responsibilities from those contemplated in Section II(1) of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Board promptly after receipt of notice thereof given by Executive; (b) any failure by the Company to comply with any of the provisions of Section II(2) of this Agreement, other than an isolated, 7 insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (c) a requirement by the Board that the primary business location of Executive be relocated more than 25 miles from the location where Executive was employed immediately preceding the Effective Date; (d) any purported termination by the Company of Executive's employment other than as expressly permitted by this Agreement; or (e) any failure by the Company to comply with and satisfy Section VIII(3) of this Agreement. (4) Notice of Termination. Any termination of employment of Executive --------------------- during the Employment Period by the Company for Cause, or by Executive for Good Reason, shall be communicated to the other party hereto in accordance with Section IX(2) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment with the Company under the provision so indicated, and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall not be more than thirty days after giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause 8 shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (5) Date of Termination. "Date of Termination" means (a) if Executive's ------------------- employment is terminated by the Company for Cause, or by Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (b) if Executive's employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies Executive of such termination, and (c) if Executive's employment is terminated by reason of death or Disability, the date of death of Executive or the Effective Disability Date, as the case may be. IV. Obligations of the Company upon Termination of Executive's Employment --------------------------------------------------------------------- (1) Good Reason; Other than for Cause, Death or Disability. ------------------------------------------------------ (a) Prior to Executive's 63rd Birthday. Except as provided for in Section ----------------------------------- VI of this Agreement, if during the Employment Period and prior to the Executive's 63rd birthday, the Company shall terminate Executive's employment other than for Cause or Disability, or Executive shall terminate his employment with the Company for Good Reason, the Company shall pay to Executive (i) any Annual Base Salary owed to Executive through the Date of Termination to the extent not previously paid, (ii) an amount equal to three (3) times Executive's 9 highest Annual Base Salary during any of the last three full fiscal years prior to the Date of Termination, and (iii) an amount equal to three (3) times the average Annual Bonus earned by Executive over the last three full fiscal years prior to the Date of Termination. In addition to the payments described in subparagraphs (i), (ii), and (iii) above, the Company also shall (A) arrange to provide to Executive for a period of three years from the Date of Termination, medical (including dental, vision and prescription drug coverage) and life insurance with terms no less favorable, in the aggregate, than the most favorable of those provided to Executive during the year immediately preceding the Date of Termination, (B) immediately vest all previously unvested shares of Restricted Stock and Stock Options held by Executive, (C) provide Executive with any Performance-Based Dividend Equivalents that would have been earned by Executive during the three years following the Date of Termination, and (D) pay any compensation previously deferred by Executive in accordance with the provisions of the plan under which such compensation was deferred. Payments pursuant to subparagraph (i) above shall be made within thirty (30) days following the Date of Termination. Payments pursuant to subparagraph (ii) above shall be made in equal monthly installments over the three-year period following the Date of Termination. Payments pursuant to subparagraph (iii) above shall be made in equal annual installments over the three-year period following the Date of Termination on each anniversary following the Date of Termination. Payments pursuant to subparagraph (C) above shall be made at the time such payments would have been made had Executive remained in the employment of the Company. 10 (b) On or After Executive's 63rd Birthday but Prior to Executive's 64th ------------------------------------------------------------------- Birthday. Except as provided for in Section VI of this Agreement, if during the - --------- Employment Period and on or after Executive's 63rd birthday but prior to the Executive's 64th birthday, the Company shall terminate Executive's employment other than for Cause or Disability, or Executive shall terminate his employment with the Company for Good Reason, the Company shall pay to Executive (i) any Annual Base Salary owed to Executive through the Date of Termination to the extent not previously paid, (ii) an amount equal to two (2) times Executive's highest Annual Base Salary during any of the last three full fiscal years prior to the Date of Termination, and (iii) an amount equal to two (2) times the average Annual Bonus earned by Executive over the last three full fiscal years prior to the Date of Termination. In addition to the payments described in subparagraphs (i), (ii), and (iii) above, the Company also shall (A) arrange to provide to Executive for a period of two years from the Date of Termination, medical (including dental, vision and prescription drug coverage) and life insurance with terms no less favorable, in the aggregate, than the most favorable of those provided to Executive during the year immediately preceding the Date of Termination, (B) immediately vest all previously unvested shares of Restricted Stock and Stock Options held by Executive, (C) provide Executive with any Performance-Based Dividend Equivalents that would have been earned by Executive during the two years following the Date of Termination, and (D) 11 pay any compensation previously deferred by Executive in accordance with the provisions of the plan under which such compensation was deferred. Payments pursuant to subparagraph (b)(i) above shall be made within thirty (30) days following the Date of Termination. Payments pursuant to subparagraph (b)(ii) above shall be made in equal monthly installments over the two-year period following the Date of Termination. Payments pursuant to subparagraph (b)(iii) above shall be made in equal annual installments over the two-year period following the Date of Termination on each anniversary following the Date of Termination. Payments pursuant to subparagraph (C) above shall be made at the time such payments would have been made had Executive remained in the employment of the Company. (c) On or after Executive's 64th Birthday but Prior to Executive's -------------------------------------------------------------- 65th Birthday. Except as provided for in Section VI of this Agreement, if - -------------- during the Employment Period and on or after Executive's 64th birthday but prior to Executive's 65th birthday, the Company shall terminate Executive's employment other than for Cause or Disability, or Executive shall terminate his employment with the Company for Good Reason, the Company shall pay to Executive (i) any Annual Base Salary owed to Executive through the Date of Termination to the extent not previously paid, (ii) an amount equal to the Executive's highest Annual Base Salary during any of the last three fiscal years prior to the Date of Termination, and (iii) an amount equal to the average Annual Bonus earned by Executive over the last three full fiscal years prior to the Date of Termination. 12 In addition to the payments described in subparagraphs (i), (ii), and (iii) above, the Company also shall (A) arrange to provide to Executive for a period of one year from the Date of Termination, medical (including dental, vision and prescription drug coverage) and life insurance with terms no less favorable, in the aggregate, than the most favorable of those provided to Executive during the year immediately preceding the Date of Termination, (B) immediately vest all previously unvested shares of Restricted Stock and Stock Options held by Executive, (C) provide Executive with any Performance-Based Dividend Equivalents that would have been earned by Executive during the one year following the Date of Termination, and (D) pay any compensation previously deferred by Executive in accordance with the provisions of the plan under which such compensation was deferred. Payments pursuant to subparagraph (c)(i) above shall be made within thirty (30) days following the Date of Termination. Payments pursuant to subparagraph (c)(ii) above shall be made in equal monthly installments over the twelve-month period following the Date of Termination. Payments pursuant to subparagraph (c)(iii) above shall be made in one installment on the date of the first anniversary of the Date of Termination. Payments pursuant to subparagraph (C) above shall be made at the time such payments would have been made had Executive remained in the employment of the Company. If Executive should die while receiving payments pursuant to this Section IV(1)(a), (b), or (c), the remaining payments which would have been made to Executive if he had lived shall be paid to the beneficiary designated in writing by Executive, or if there is no effective written designation, then to his spouse, or if there is neither an effective written designation nor a surviving spouse, then to Executive's estate. Designation of a beneficiary or beneficiaries to 13 receive the balance of any such payments shall be made by written notice to the Company, and Executive may revoke or change any such designation of beneficiary at any time by a later written notice to the Company. (2) Death. If Executive's employment with the Company is terminated by ----- reason of Executive's death during the Employment Period, this Agreement shall terminate without further obligations to Executive's legal representatives under this Agreement, other than for (a) payment of any Base Salary previously earned by Executive but as yet unpaid, (b) payment of any Annual Bonus previously awarded to Executive for a fiscal year completed prior to the Date of Termination but as yet unpaid, and (c) the continuation of any existing rights Executive may have following death under the provisions of any benefit, stock option, deferral or compensation plan provided to Executive by the Company. (3) Disability. If Executive's employment with the Company is terminated ---------- by reason of Executive's Disability during the Employment Period in accordance with Section III(1) of this Agreement, this Agreement shall terminate without further obligations to Executive other than for (a) payment of any Base Salary previously earned by Executive but as yet unpaid, (b) payment of any Annual Bonus previously awarded to Executive for a fiscal year completed prior to the Date of Termination but as yet unpaid, and (c) the continuation of any existing rights Executive may have following Disability under any benefit, stock option, deferral or compensation plan provided to Executive by the Company. 14 (4) Cause; Other than for Good Reason. If, during the Employment Period, --------------------------------- Executive's employment shall be terminated for Cause or if Executive voluntarily terminates his employment with the Company other than for Good Reason, this Agreement shall terminate without further obligations to Executive other than for (a) payment of any Base Salary previously earned by Executive but as yet unpaid, (b) payment of any Annual Bonus previously awarded to Executive for a fiscal year completed prior to the Date of Termination but as yet unpaid, and (c) the continuation of any existing rights Executive may have following termination for Cause or voluntary termination other than for Good Reason under any benefit, stock option, deferral or compensation plan provided to Executive by the Company. 15 V. Non-Exclusivity of Rights. ------------------------- Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested or which Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement (other than this Agreement) with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. Executive shall no longer be covered by any prior employment agreement, security policy or understanding thereof after the Effective date of this Agreement and shall not be covered by any severance policy, practice or program of the Company. VI. Full Settlement; Offsets. ------------------------ Except as provided for in this Section VI, the Company's obligations to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, defense or other claim, right or action which the Company may have against Executive or others. 16 Executive shall not be obligated to seek other employment or to take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. However, the amount of any payments and benefits provided for in this Agreement shall be reduced by one hundred percent (100%) of any benefits and earned income (within the meaning of section 911 (d) (2) (A) of the Internal Revenue Code, as amended) which are earned by Executive for services rendered to persons or entities other than the Company during or with respect to the 36-month period after the Date of Termination (24-month period if the Date of Termination falls on or after Executive's 63th birthday and before Executive's 64th birthday, and the 12-month period if the Date of Termination falls after Executive's 64th birthday). In the event Executive becomes eligible for any medical (including dental, vision, and prescription drug) benefits from another employer during or with respect to any period after the Date of Termination, any medical (including dental, vision, and prescription drug) benefits provided for in this Agreement shall be secondary to those provided by the other employer. Not less frequently than on each anniversary of the Termination Date (the "Reporting Date"), Executive shall account to the Company with respect to all benefits and earned income earned by Executive which are required hereunder to be offset against payments or benefits received by Executive from the Company under this Agreement. If the Company has paid amounts in excess of those to which Executive is entitled, Executive shall reimburse the Company for such excess within thirty (30) days following the Reporting Date. The requirements imposed by this paragraph shall terminate following the next Reporting Date after the third anniversary of the Date of Termination. 17 VII. Confidential Information. ------------------------ Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential business information and knowledge or data relating to the Company and its business which shall have been obtained during Executive's employment by the Company and which shall not be or become public knowledge (other than by acts of Executive or representatives of Executive in violation of this Agreement). After termination of Executive's employment with the Company, Executive shall not, without the prior written consent of the Board, or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company or those designated by it. Upon Executive's violation of the provisions of this Section VII, the Company shall be relieved of all future obligations to Executive under this Agreement. However, in no event shall an asserted or alleged violation of the provisions of this Section VII constitute a basis for deferring or withholding any amounts otherwise payable to Executive until such asserted or alleged violation is reasonably confirmed by the Board. VIII. Successors. ---------- (1) This Agreement is personal to Executive and without the prior written consent of the Board shall not be assignable by Executive otherwise than by will or by the laws of descent and 18 distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (2) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (3) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined, and any successor to its business and/or assets as aforesaid, which assumes and agrees to perform this Agreement by operation of law or otherwise. IX. Miscellaneous. ------------- (1) This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles or conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. 19 (2) All notices and other communications hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Executive: --------------- R. Bruce Andrews, President and Chief Executive Officer 610 Newport Center Drive Suite 1150 Newport Beach, CA 92660 With a copy to: R. Bruce Andrews (Home Address) If to the Company: ----------------- Nationwide Health Properties 610 Newport Center Drive Suite 1150 Newport Beach, CA 92660 Attention: Chairman With a copy to: Mr. Charles D. Miller, Chairman 150 North Orange Grove Boulevard Pasadena, CA 91103 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. 20 (3) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (4) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (5) Any failure by Executive or the Company to insist upon strict compliance with any provision hereof or any other provision of this Agreement, or the failure to assert any right Executive or the Company may have hereunder, including, without limitation, the right of Executive to terminate employment with the Company for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. I. Arbitration. ----------- (1) The parties agree that any disputes, controversies or claims which arise out of or are related to this Agreement, Executive's employment or termination of employment, including, but not limited to, any claim relating to the purported validity, interpretation, enforceability or breach of this Agreement, and/or any other claim or controversy arising out of the relationship between Executive and the Company (or the nature of the relationship) or the continuation or termination of that relationship, including, but not limited to, claims that a termination was for Cause or for Good Reason, claims for breach of covenant, breach of an implied covenant of good faith and 21 fair dealing, wrongful termination, breach of contract, intentional infliction of emotional distress, defamation, breach of right of privacy, interference with advantageous or contractual relations, fraud, conspiracy or other tort or property claims of any kind, which are not settled between the parties, shall be settled by arbitration in accordance with the then-current Rules of Practice and Procedure for Employment Arbitration (the "Rules") of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"). (2) The arbitration shall be before a single arbitrator selected in accordance with the JAMS Rules or otherwise by mutual agreement of the parties. The Arbitration shall take place in Orange County, California, unless the parties mutually agree to hold the arbitration at another location. Depositions and other discovery shall be allowed in accordance with the JAMS Rules. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of California or Federal law, or both, as applicable to the claim(s) asserted. (3) In consideration of the parties' agreement to submit to arbitration all disputes with regard to this Agreement and/or with regard to any alleged contract, or any other claim arising out of their conduct, the relationship existing hereunder or the continuation or termination of that relationship, and in further consideration of the anticipated expedition and the minimizing of expense of this arbitration remedy, the arbitration provisions of this Agreement shall provide the exclusive remedy, and each party expressly waives any right he or it may have to seek redress in another forum. The arbitrator, and not any Federal, state, or local court or agency shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, 22 enforceability or formation of this Agreement, including but not limited to, any claim that all or any part of this Agreement is void or voidable. The arbitration shall be final and binding upon the parties. (4) Either party may bring an action in any court of competent jurisdiction to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided for in this Agreement, both the Company and Executive agree that neither of them shall initiate or prosecute any lawsuit or administrative action in any way related to any claim covered by this Agreement. (5) Any claim which either party has against the other party that could be submitted for resoluton pursuant to this Section IX must be presented in writing by the claiming party to the other party within one year of the date the claiming party knew or should have known of the facts giving rise to the claim, except that claims arising out of or related to the termination of Executive's employment must be presented by Executive within one year of the Date of Termination. Unless the party against whom any claim is asserted waives the time limits set forth above, any claim not brought within the time periods specified herein shall be waived and forever barred, even if there is a Federal or state statute of limitations which would have given more time to pursue the claim. (6) The Company shall advance the costs and expenses of the arbitrator. In any arbitration to enforce any of the provisions or rights under this Agreement, the unsuccessful party 23 in such arbitration, as determined by the arbitrator, shall pay to the successful party all costs, expenses and reasonable attorneys' fees incurred therein by such party (including without limitation such costs, expenses and fees on any appeals), and if such successful party shall recover an award in any such arbitration proceeding, such costs, expenses and attorneys' fees shall be included as part of such award. Notwithstanding the foregoing provision, in no event shall the successful party be entitled to recover an amount from the unsuccessful party for costs, expenses and attorneys' fees that exceeds the unsuccessful party's costs, expenses and attorneys' fees incurred in connection with the action or proceeding. (7) Any decision and award or order of the arbitrator shall be final and binding upon the parties hereto and judgment thereon may be entered in the Superior Court of the State of California or any other court having jurisdiction. (8) Each of the above terms and conditions shall have separate validity, and the invalidity of any part thereof shall not affect the remaining parts. (9) Any decision and award or order of the arbitrator shall be final and binding between the parties as to all claims which were or could have been raised in connection with the dispute to the full extent permitted by law. In all other cases the parties agree that the decision of the arbitrator shall be a condition precedent to the institution or maintenance of any legal, equitable, administrative, or other formal proceeding by Executive or the Company in connection with the 24 dispute, and that the decision and opinion of the arbitrator may be presented in any other forum on the merits of the dispute. IN WITNESS WHEREOF, Executive has hereunto set Executive's hand, and pursuant to the authorization from the Board, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. Nationwide Health Properties By _______________________________ Title ____________________________ Executive ___________________________________ Title Executive R. Bruce Andrews 25 EX-10.14 4 EMPLOYMENT AGREEMENT - T. ANDREW STOKES EXHIBIT 10.14 EMPLOYMENT AGREEMENT -------------------- (T. Andrew Stokes) THIS EMPLOYMENT AGREEMENT is entered into by and between Nationwide Health Properties, Inc., a Maryland corporation (the "Company") and T. Andrew Stokes (the "Executive") as of February 25, 1998. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to enter into this Employment Agreement with Executive to assure that the Company will have the continued service and dedication of Executive. Except for the Company's Executive Employment Security Policy, which remains in full force and effect and is fully operative between Executive and Company in accordance with its terms, this Employment Agreement contains the entire agreement between the parties with respect to the matters specified herein, and supersedes any prior oral and written employment agreements, understandings and commitments between the Company and Executive. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: I. Definitions. ----------- A. "Cause" shall mean (a) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) which is not remedied promptly by Executive after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed his duties, or (b) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this definition, no act or failure to act on the part of Executive shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based on the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. B. "Change of Control" shall mean a change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A, Regulation 240.14a-101, promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Policy or, if Item 6(e) is no longer in effect, any regulation issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serves similar purposes; provided that, without limitation, a Change of Control shall be deemed to have occurred if and 1 when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities or (b) individuals who are members of the Board immediately prior to a meeting of the shareholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board following such election. Notwithstanding the above, this change of control provision is applicable only to a merger, takeover, or corporate combination not approved by the then Company's Board of Directors in advance of such merger, takeover, or corporate combination. C. "Disability" shall mean the absence of Executive from his duties with the Company on a full-time basis for a period of (a) ninety (90) consecutive calendar days or (b) an aggregate of one hundred fifty (l50) or more calendar days in any fiscal year as a result of mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive. D. "Effective Date" shall mean the date hereof, which is set forth in the first paragraph of this Agreement. E. "Employment Period" shall mean the period commencing on the Effective Date and ending on February 28, 2001. II. Conditions of Employment. ------------------------ A. Position and Duties. Executive is currently employed as Senior Vice- ------------------- President of Corporate Development of the Company. Executive shall have such duties as are assigned to him by the Board of Directors of the Company or by the President and Chief Executive Officer. During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote reasonable attention and time to the business and affairs of the Company, and, to the extent necessary to discharge the responsibilities assigned to Executive hereunder, to use Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. Subject to the approval of the President and Chief Executive Officer of the Company, during the Employment Period, it shall not be a violation of this Agreement for Executive to serve on corporate, civic or charitable boards or committees so long as such activities do not interfere with the performance of Executive's responsibilities as an employee of the Company in accordance with this Agreement. B. Compensation. ------------ 1. Base Salary. As of the Effective Date, Executive shall ----------- receive an annual base salary (the "Annual Base Salary") of $220,000, payable in bi-weekly installments (except if deferred by Executive under a Company-sponsored 2 deferral plan). Executive's Annual Base Salary shall be reviewed by the Compensation Committee of the Board (the "Committee") each January during the Employment Period. Any increase in Annual Base Salary approved by the Committee shall not serve to limit or reduce any other obligation to Executive under this Agreement. Executive's Annual Base Salary may not be reduced during the Employment Period except as part of a general, across the board salary reduction which applies in a comparable manner to all other senior executives of the Company. As it applies to Executive, such reduction shall be limited to a maximum of 10% in any calendar year unless Executive agrees to accept a larger reduction. 2. Annual Bonus. In addition to Annual Base Salary, Executive ------------ shall be eligible to receive, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus"). Such Annual Bonus may range from 0% to 80% (with a target of 40%) of the Annual Base Salary earned by Executive during the fiscal year, with the specific amount determined by the Committee based on its assessment of the Company's and Executive's performance for the fiscal year. In assessing such performance, the Committee shall take into account the growth and income of the Company relative to its annual financial plan, the quality of the Company's assets, Executive's performance in terms of implementing the Company's business strategy, and other considerations deemed by the Committee to be relevant to the current and future success of the Company. Annual Bonus earned by Executive shall be paid to Executive no later than ninety (90) days following the end of the fiscal year to which the Annual Bonus applies, unless such Annual Bonus is voluntarily deferred by Executive in accordance with a Company sponsored deferral program. 3. Stock Options. In addition to Annual Base Salary and Annual ------------- Bonus, Executive shall be eligible to receive, for each fiscal year of the Employment Period, a grant of Stock Options (the "Stock Options"). Such Stock Options shall (i) be granted to Executive each January during the Employment Period, (ii) have not less than a ten-year term, (iii) carry an exercise price equal to the market price of the Company's common stock on the date of grant (as such price is defined in the Company's Stock Option Plan), and (iv) be granted in conjunction with the right to earn a cash payment equal to the amount of dividends paid by the Company from the date of grant of the Stock Option to the date the Stock Option is exercised on an equivalent number of common shares to the shares represented by the Stock Option (the "Performance-Based Dividend Equivalents"). The specific number of shares represented by Stock Options granted annually to Executive, the specific performance objectives associated with earning the Performance-Based Dividend Equivalents for each grant of Stock Options, and any vesting restrictions placed on the exercise of such Stock Options and 3 Performance-Based Dividend Equivalents shall be determined by the Committee. Notwithstanding the above, the Committee may, in its discretion, replace future grants of Stock Options and Performance-Based Dividend Equivalents for Executive during the Employment Period with another form of long-term incentive compensation of similar value and risk as determined by outside experts acceptable to Executive and the Committee. 4. Benefit Plans. During the Employment Period, Executive and/or ------------- Executive's beneficiaries, as the case may be, shall participate in and shall receive all benefits under Company-sponsored retirement plans, savings plans, deferral plans, medical plans (including dental, vision and drug prescription plans), life insurance plans, disability plans, and accidental death and travel accident insurance plans provided to Executive as of the Effective Date, and any benefit plans or programs that may be introduced by the Company during the Employment Period for other senior executives of the Company which are not already provided to Executive. 5. Fringe Benefits. During the Employment Period, Executive --------------- shall be entitled to annual paid vacation time of four (4) weeks. In addition, Executive shall be entitled to receive any fringe benefits or perquisites introduced by the Company during the Employment Period for other senior executives of the Company which are not already provided to Executive. III. Termination of Employment ------------------------- A. Death or Disability. Executive's employment with the Company shall ------------------- terminate automatically upon Executive's death during the Employment Period. In the event of Executive's Disability during the Employment Period (pursuant to the definition of Disability set forth in Section I(C) of this Agreement), the Company may, at the discretion of the Board, give Executive written notice in accordance with Section IX(B) of this Agreement of its intention to terminate Executive's employment with the Company. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by Executive (the "Effective Disability Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of his duties. B. Cause. The Company may terminate Executive's employment during the ----- Employment Period for Cause. The termination of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a notice that Executive is guilty of the conduct described in Section I(A) specifying the particulars thereof in reasonable detail. 4 C. Within Three Years After Change of Control. Any termination of ------------------------------------------- Executive's employment with the Company, whether by Executive or by the Company, within three years after a Change of Control of Company shall be subject to the provisions of and governed by the Company's Executive Employment Security Policy, as the same may be amended from time to time. D. Notice of Termination. Any termination of employment of Executive --------------------- during the Employment Period by the Company or by Executive shall be communicated to the other party hereto in accordance with Section IX(B) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment with the Company under the provision so indicated, and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall not be more than thirty days after giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. E. Date of Termination. "Date of Termination" means (a) if Executive's ------------------- employment is terminated by the Company for Cause, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (b) if Executive's employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies Executive of such termination, and (c) if Executive's employment is terminated by reason of death or Disability, the date of death of Executive or the Effective Disability Date, as the case may be. IV. Obligations of the Company Upon Termination of Executive's Employment --------------------------------------------------------------------- A. Termination by Company Other than for Cause, Death or Disability. ---------------------------------------------------------------- Except within three years after a Change of Control of Company in which case any termination of Executive's employment shall be governed by the Company's Executive Employment Security Policy, and except as provided for in Section VI of this Agreement, if during the Employment Period, the Company shall terminate Executive's employment other than for Cause or Disability, the Company shall pay to Executive (a) any Annual Base Salary owed to Executive through the Date of Termination to the extent not previously paid, (b) an amount equal to 150% of Executive's highest Annual Base Salary during any of the last three full fiscal years prior to the Date of Termination, and (c) an amount equal to 150% of the average Annual Bonus earned by Executive over the last three full fiscal years prior to the Date of Termination. 5 In addition to the payments described in subparagraphs (a), (b), and (c) above, the Company also shall (i) arrange to provide to Executive for a period of eighteen months from the Date of Termination, medical (including dental, vision and prescription drug coverage) and life insurance with terms no less favorable, in the aggregate, than the most favorable of those provided to Executive during the year immediately preceding the Date of Termination, (ii) immediately vest all previously unvested shares of Restricted Stock and Stock Options held by Executive, (iii) provide Executive with any Performance-Based Dividend Equivalents that would have been earned by Executive during the eighteen months following the Date of Termination, and (iv) pay any compensation previously deferred by Executive in accordance with the provisions of the plan under which such compensation was deferred. Payments pursuant to subparagraph (a) above shall be made within thirty (30) days following the Date of Termination. Payments pursuant to subparagraph (b) above shall be made in equal monthly installments over the eighteen- month period following the Date of Termination. Payments pursuant to subparagraph (c) above shall be made in equal annual installments over the eighteen-month period following the Date of Termination. Payments pursuant to subparagraph (iii) above shall be made at the time such payments would have been made had Executive remained in the employment of the Company. To the extent that any of the payments and benefits provided for in this Agreement or otherwise payable to Executive constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and but for this subparagraph of this Section IV(1), would be subject to the excise tax imposed by Section 4999 of the Code or any similar or successor provision, the aggregate amount of such payments and benefits shall be reduced, but only to the extent necessary so that none of such payments and benefits are subject to excise tax pursuant to Section 4999 of the Code. If Executive should die while receiving payments pursuant to this Section IV(A), the remaining payments which would have been made to Executive if he had lived shall be paid to the beneficiary designated in writing by Executive, or if there is no effective written designation, then to his spouse, or if there is neither an effective written designation nor a surviving spouse, then to Executive's estate. Designation of a beneficiary or beneficiaries to receive the balance of any such payments shall be made by written notice to the Company, and Executive may revoke or change any such designation of beneficiary at any time by a later written notice to the Company. B. Death. Except within three years after a Change of Control of ----- Company in which case any termination of Executive's employment shall be governed by the Company's Executive Employment Security Policy, if Executive's employment with the Company is terminated by reason of Executive's death during the 6 Employment Period, this Agreement shall terminate without further obligations to Executive's legal representatives under this Agreement, other than for (a) payment of any Base Salary previously earned by Executive but as yet unpaid, (b) payment of any Annual Bonus previously awarded to Executive for a fiscal year completed prior to the Date of Termination but as yet unpaid, and (c) the continuation of any existing rights Executive may have following death under the provisions of any benefit, stock option, deferral or compensation plan provided to Executive by the Company. C. Disability. Except within three years after a Change of Control of ---------- Company in which case any termination of Executive's employment shall be governed by the Company's Executive Employment Security Policy, if Executive's employment with the Company is terminated by reason of Executive's Disability during the Employment Period in accordance with Section III(A) of this Agreement, this Agreement shall terminate without further obligations to Executive other than for (a) payment of any Base Salary previously earned by Executive but as yet unpaid, (b) payment of any Annual Bonus previously awarded to Executive for a fiscal year completed prior to the Date of Termination but as yet unpaid, and (c) the continuation of any existing rights Executive may have following Disability under any benefit, stock option, deferral or compensation plan provided to Executive by the Company. D. Cause or Voluntary Termination by Executive. Except within three -------------------------------------------- years after a Change of Control of Company in which case any termination of Executive's employment shall be governed by the Company's Executive Employment Security Policy, if, during the Employment Period, Executive's employment shall be terminated for Cause, or if Executive voluntarily terminates his employment with the Company, this Agreement shall terminate without further obligations to Executive other than for (a) payment of any Base Salary previously earned by Executive but as yet unpaid, (b) payment of any Annual Bonus previously awarded to Executive for a fiscal year completed prior to the Date of Termination but as yet unpaid, and (c) the continuation of any existing rights Executive may have following termination for Cause or voluntary termination under any benefit, stock option, deferral or compensation plan provided to Executive by the Company. V. Non-Exclusivity of Rights. ------------------------- Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested or which Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement (other than this Agreement) with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this 7 Agreement. Except for the Company's Executive Employment Security Policy, which remains in full force and effect and is fully operative between Executive and Company in accordance with its terms, Executive shall no longer be covered by any prior employment agreement, security policy or understanding thereof after the Effective date of this Agreement and shall not be covered by any severance policy, practice or program of the Company. VI. Full Settlement; Offsets. ------------------------ Except as provided for in this Section VI, the Company's obligations to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, defense or other claim, right or action which the Company may have against Executive or others. Executive shall not be obligated to seek other employment or to take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. However, the amount of any payments and benefits provided for in this Agreement shall be reduced by one hundred percent (100%) of any benefits and earned income (within the meaning of section 911 (d) (2) (A) of the Internal Revenue Code, as amended) which are earned by Executive for services rendered to persons or entities other than the Company during or with respect to the 18-month period after the Date of Termination. In the event Executive becomes eligible for any medical (including dental, vision, and prescription drug) benefits from another employer during or with respect to the 18-month period after the Date of Termination, any medical (including dental, vision, and prescription drug) benefits provided for in this Agreement shall be secondary to those provided by the other employer. Not less frequently than on each anniversary of the Termination Date (the "Reporting Date"), Executive shall account to the Company with respect to all benefits and earned income earned by Executive which are required hereunder to be offset against payments or benefits received by Executive from the Company under this Agreement. If the Company has paid amounts in excess of those to which Executive is entitled, Executive shall reimburse the Company for such excess within thirty (30) days following the Reporting Date. The requirements imposed by this paragraph shall terminate following the next Reporting Date after the third anniversary of the Date of Termination. VII. Confidential Information. ------------------------ Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential business information and knowledge or data relating to the Company and its business which shall have been obtained during Executive's employment by the Company and which shall not be or become public knowledge (other than by acts of Executive or representatives of Executive in violation of this Agreement). After termination of Executive's employment with the Company, Executive shall not, without the prior written consent of the Board, or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company or those designated by it. Upon Executive's violation of the provisions of this Section VII, the Company shall be relieved of all future obligations to Executive under this Agreement. 8 However, in no event shall an asserted or alleged violation of the provisions of this Section VII constitute a basis for deferring or withholding any amounts otherwise payable to Executive until such asserted or alleged violation is reasonably confirmed by the Board. VIII. Successors. ---------- A. This Agreement is personal to Executive and without the prior written consent of the Board shall not be assignable by Executive otherwise than by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. B. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. C. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined, and any successor to its business and/or assets as aforesaid, which assumes and agrees to perform this Agreement by operation of law of otherwise. IX. Miscellaneous. ------------- A. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles or conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. B. All notices and other communications hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Executive: --------------- T. Andrew Stokes, Senior Vice-President of Corporate Development 610 Newport Center Drive Suite 1150 Newport Beach, California 92660 9 With a copy to: --------------- T. Andrew Stokes 1727 Park Street Huntington Beach, California 92648 If to the Company: ----------------- Nationwide Health Properties, Inc. 610 Newport Center Drive Suite 1150 Newport Beach, California 92660 Attention: President With a copy to: --------------- Mr. Charles D. Miller, Chairman 150 North Orange Grove Boulevard Pasadena, California 91103 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. C. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. D. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. E. Any failure by Executive or the Company to insist upon strict compliance with any provision hereof or any other provision of this Agreement, or the failure to assert any right Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. X. Arbitration. ----------- A. The parties agree that any disputes, controversies or claims which arise out of or are related to this Agreement, Executive's employment or termination of employment, including, but not limited to, any claim relating to the purported validity, interpretation, enforceability or breach of this Agreement, and/or any other claim or controversy arising out of the relationship between Executive and the Company (or the nature of the relationship) or the continuation or termination of that relationship, including, but not limited to, claims that a termination was for Cause or for Good 10 Reason, claims for breach of covenant, breach of an implied covenant of good faith and fair dealing, wrongful termination, breach of contract, intentional infliction of emotional distress, defamation, breach of right of privacy, interference with advantageous or contractual relations, fraud, conspiracy or other tort or property claims of any kind, which are not settled between the parties, shall be settled by arbitration in accordance with the then-current Rules of Practice and Procedure for Employment Arbitration (the "Rules") of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"). B. The arbitration shall be before a single arbitrator selected in accordance with the JAMS Rules or otherwise by mutual agreement of the parties. The Arbitration shall take place in Orange County, California, unless the parties mutually agree to hold the arbitration at another location. Depositions and other discovery shall be allowed in accordance with the JAMS Rules. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of California or Federal law, or both, as applicable to the claim(s) asserted. C. In consideration of the parties' agreement to submit to arbitration all disputes with regard to this Agreement and/or with regard to any alleged contract, or any other claim arising out of their conduct, the relationship existing hereunder or the continuation or termination of that relationship, and in further consideration of the anticipated expedition and the minimizing of expense of this arbitration remedy, the arbitration provisions of this Agreement shall provide the exclusive remedy, and each party expressly waives any right he or it may have to seek redress in another forum. The arbitrator, and not any Federal, state, or local court or agency shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement, including but not limited to, any claim that all or any part of this Agreement is void or voidable. The arbitration shall be final and binding upon the parties. D. Either party may bring an action in any court of competent jurisdiction to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided for in this Agreement, both the Company and Executive agree that neither of them shall initiate or prosecute any lawsuit or administrative action in any way related to any claim covered by this Agreement. E. Any claim which either party has against the other party that could be submitted for resolution pursuant to this Section X must be presented in writing by the claiming party to the other party within one year of the date the claiming party knew or should have known of the facts giving rise to the claim, except that claims arising out of or related to the termination of Executive's employment must be presented by Executive within one year of the Date of Termination. Unless the party against whom any claim is asserted waives the time limits set forth above, any claim not brought within the time periods specified herein shall be waived and forever barred, 11 even if there is a Federal or state statute of limitations which would have given more time to pursue the claim. F. The Company shall advance the costs and expenses of the arbitrator. In any arbitration to enforce any of the provisions or rights under this Agreement, the unsuccessful party in such arbitration, as determined by the arbitrator, shall pay to the successful party all costs, expenses and reasonable attorneys' fees incurred therein by such party (including without limitation such costs, expenses and fees on any appeals), and if such successful party shall recover an award in any such arbitration proceeding, such costs, expenses and attorneys' fees shall be included as part of such award. Notwithstanding the foregoing provision, in no event shall the successful party be entitled to recover an amount from the unsuccessful party for costs, expenses and attorneys' fees that exceeds the unsuccessful party's costs, expenses and attorneys' fees incurred in connection with the action or proceeding. G. Any decision and award or order of the arbitrator shall be final and binding upon the parties hereto and judgment thereon may be entered in the Superior Court of the State of California or any other court having jurisdiction. H. Each of the above terms and conditions shall have separate validity, and the invalidity of any part thereof shall not affect the remaining parts. I. Any decision and award or order of the arbitrator shall be final and binding between the parties as to all claims which were or could have been raised in connection with the dispute to the full extent permitted by law. In all other cases the parties agree that the decision of the arbitrator shall be a condition precedent to the institution or maintenance of any legal, equitable, administrative, or other formal proceeding by Executive or the Company in connection with the dispute, and that the decision and opinion of the arbitrator may be presented in any other forum on the merits of the dispute. 12 IN WITNESS WHEREOF, Executive has hereunto set Executive's hand, and pursuant to the authorization from the Board, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. NATIONWIDE HEALTH PROPERTIES, INC. By:_____________________________________ R. Bruce Andrews, President Executive: ________________________________________ T. Andrew Stokes 13 EX-10.15 5 EMPLOYMENT AGREEMENT - MARK L. DESMOND EXHIBIT 10.15 EMPLOYMENT AGREEMENT -------------------- (Mark L. Desmond) THIS EMPLOYMENT AGREEMENT is entered into by and between Nationwide Health Properties, Inc., a Maryland corporation (the "Company") and Mark L. Desmond (the "Executive") as of February 25, 1998. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to enter into this Employment Agreement with Executive to assure that the Company will have the continued service and dedication of Executive. Except for the Company's Executive Employment Security Policy, which remains in full force and effect and is fully operative between Executive and Company in accordance with its terms, this Employment Agreement contains the entire agreement between the parties with respect to the matters specified herein, and supersedes any prior oral and written employment agreements, understandings and commitments between the Company and Executive. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: I. Definitions. ----------- A. "Cause" shall mean (a) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) which is not remedied promptly by Executive after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed his duties, or (b) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this definition, no act or failure to act on the part of Executive shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based on the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. B. "Change of Control" shall mean a change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A, Regulation 240.14a-101, promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Policy or, if Item 6(e) is no longer in effect, any regulation issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serves similar purposes; provided that, without limitation, a Change of Control shall be deemed to have occurred if and 1 when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities or (b) individuals who are members of the Board immediately prior to a meeting of the shareholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board following such election. Notwithstanding the above, this change of control provision is applicable only to a merger, takeover, or corporate combination not approved by the then Company's Board of Directors in advance of such merger, takeover, or corporate combination. C. "Disability" shall mean the absence of Executive from his duties with the Company on a full-time basis for a period of (a) ninety (90) consecutive calendar days or (b) an aggregate of one hundred fifty (l50) or more calendar days in any fiscal year as a result of mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive. D. "Effective Date" shall mean the date hereof, which is set forth in the first paragraph of this Agreement. E. "Employment Period" shall mean the period commencing on the Effective Date and ending on February 28, 2001. II. Conditions of Employment. ------------------------ A. Position and Duties. Executive is currently employed as Senior Vice- ------------------- President and Chief Financial Officer of the Company. Executive shall have such duties as are assigned to him by the Board of Directors of the Company or by the President and Chief Executive Officer. During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote reasonable attention and time to the business and affairs of the Company, and, to the extent necessary to discharge the responsibilities assigned to Executive hereunder, to use Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. Subject to the approval of the President and Chief Executive Officer of the Company, during the Employment Period, it shall not be a violation of this Agreement for Executive to serve on corporate, civic or charitable boards or committees so long as such activities do not interfere with the performance of Executive's responsibilities as an employee of the Company in accordance with this Agreement. B. Compensation. ------------ 1. Base Salary. As of the Effective Date, Executive shall ----------- receive an annual base salary (the "Annual Base Salary") of $195,000, payable in bi-weekly installments (except if deferred by Executive under a Company-sponsored 2 deferral plan). Executive's Annual Base Salary shall be reviewed by the Compensation Committee of the Board (the "Committee") each January during the Employment Period. Any increase in Annual Base Salary approved by the Committee shall not serve to limit or reduce any other obligation to Executive under this Agreement. Executive's Annual Base Salary may not be reduced during the Employment Period except as part of a general, across the board salary reduction which applies in a comparable manner to all other senior executives of the Company. As it applies to Executive, such reduction shall be limited to a maximum of 10% in any calendar year unless Executive agrees to accept a larger reduction. 2. Annual Bonus. In addition to Annual Base Salary, Executive ------------ shall be eligible to receive, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus"). Such Annual Bonus may range from 0% to 80% (with a target of 40%) of the Annual Base Salary earned by Executive during the fiscal year, with the specific amount determined by the Committee based on its assessment of the Company's and Executive's performance for the fiscal year. In assessing such performance, the Committee shall take into account the growth and income of the Company relative to its annual financial plan, the quality of the Company's assets, Executive's performance in terms of implementing the Company's business strategy, and other considerations deemed by the Committee to be relevant to the current and future success of the Company. Annual Bonus earned by Executive shall be paid to Executive no later than ninety (90) days following the end of the fiscal year to which the Annual Bonus applies, unless such Annual Bonus is voluntarily deferred by Executive in accordance with a Company sponsored deferral program. 3. Stock Options. In addition to Annual Base Salary and Annual ------------- Bonus, Executive shall be eligible to receive, for each fiscal year of the Employment Period, a grant of Stock Options (the "Stock Options"). Such Stock Options shall (i) be granted to Executive each January during the Employment Period, (ii) have not less than a ten-year term, (iii) carry an exercise price equal to the market price of the Company's common stock on the date of grant (as such price is defined in the Company's Stock Option Plan), and (iv) be granted in conjunction with the right to earn a cash payment equal to the amount of dividends paid by the Company from the date of grant of the Stock Option to the date the Stock Option is exercised on an equivalent number of common shares to the shares represented by the Stock Option (the "Performance-Based Dividend Equivalents"). The specific number of shares represented by Stock Options granted annually to Executive, the specific performance objectives associated with earning the Performance-Based Dividend Equivalents for each grant of Stock Options, and any vesting restrictions placed on the exercise of such Stock Options and 3 Performance-Based Dividend Equivalents shall be determined by the Committee. Notwithstanding the above, the Committee may, in its discretion, replace future grants of Stock Options and Performance-Based Dividend Equivalents for Executive during the Employment Period with another form of long-term incentive compensation of similar value and risk as determined by outside experts acceptable to Executive and the Committee. 4. Benefit Plans. During the Employment Period, Executive and/or ------------- Executive's beneficiaries, as the case may be, shall participate in and shall receive all benefits under Company-sponsored retirement plans, savings plans, deferral plans, medical plans (including dental, vision and drug prescription plans), life insurance plans, disability plans, and accidental death and travel accident insurance plans provided to Executive as of the Effective Date, and any benefit plans or programs that may be introduced by the Company during the Employment Period for other senior executives of the Company which are not already provided to Executive. 5. Fringe Benefits. During the Employment Period, Executive --------------- shall be entitled to annual paid vacation time of four (4) weeks. In addition, Executive shall be entitled to receive any fringe benefits or perquisites introduced by the Company during the Employment Period for other senior executives of the Company which are not already provided to Executive. III. Termination of Employment ------------------------- A. Death or Disability. Executive's employment with the Company shall ------------------- terminate automatically upon Executive's death during the Employment Period. In the event of Executive's Disability during the Employment Period (pursuant to the definition of Disability set forth in Section I(C) of this Agreement), the Company may, at the discretion of the Board, give Executive written notice in accordance with Section IX(B) of this Agreement of its intention to terminate Executive's employment with the Company. In such event, Executive's employment with the Company shall terminate effective on the 30/th/ day after receipt of such notice by Executive (the "Effective Disability Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of his duties. B. Cause. The Company may terminate Executive's employment during the ----- Employment Period for Cause. The termination of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a notice that Executive is guilty of the conduct described in Section I(A) specifying the particulars thereof in reasonable detail. 4 C. Within Three Years After Change of Control. Any termination of ------------------------------------------- Executive's employment with the Company, whether by Executive or by the Company, within three years after a Change of Control of Company shall be subject to the provisions of and governed by the Company's Executive Employment Security Policy, as the same may be amended from time to time. D. Notice of Termination. Any termination of employment of Executive --------------------- during the Employment Period by the Company or by Executive shall be communicated to the other party hereto in accordance with Section IX(B) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment with the Company under the provision so indicated, and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall not be more than thirty days after giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. E. Date of Termination. "Date of Termination" means (a) if Executive's ------------------- employment is terminated by the Company for Cause, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (b) if Executive's employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies Executive of such termination, and (c) if Executive's employment is terminated by reason of death or Disability, the date of death of Executive or the Effective Disability Date, as the case may be. IV. Obligations of the Company Upon Termination of Executive's Employment --------------------------------------------------------------------- A. Termination by Company Other than for Cause, Death or Disability. ---------------------------------------------------------------- Except within three years after a Change of Control of Company in which case any termination of Executive's employment shall be governed by the Company's Executive Employment Security Policy, and except as provided for in Section VI of this Agreement, if during the Employment Period, the Company shall terminate Executive's employment other than for Cause or Disability, the Company shall pay to Executive (a) any Annual Base Salary owed to Executive through the Date of Termination to the extent not previously paid, (b) an amount equal to 150% of Executive's highest Annual Base Salary during any of the last three full fiscal years prior to the Date of Termination, and (c) an amount equal to 150% of the average Annual Bonus earned by Executive over the last three full fiscal years prior to the Date of Termination. 5 In addition to the payments described in subparagraphs (a), (b), and (c) above, the Company also shall (i) arrange to provide to Executive for a period of eighteen months from the Date of Termination, medical (including dental, vision and prescription drug coverage) and life insurance with terms no less favorable, in the aggregate, than the most favorable of those provided to Executive during the year immediately preceding the Date of Termination, (ii) immediately vest all previously unvested shares of Restricted Stock and Stock Options held by Executive, (iii) provide Executive with any Performance-Based Dividend Equivalents that would have been earned by Executive during the eighteen months following the Date of Termination, and (iv) pay any compensation previously deferred by Executive in accordance with the provisions of the plan under which such compensation was deferred. Payments pursuant to subparagraph (a) above shall be made within thirty (30) days following the Date of Termination. Payments pursuant to subparagraph (b) above shall be made in equal monthly installments over the eighteen- month period following the Date of Termination. Payments pursuant to subparagraph (c) above shall be made in equal annual installments over the eighteen-month period following the Date of Termination. Payments pursuant to subparagraph (iii) above shall be made at the time such payments would have been made had Executive remained in the employment of the Company. To the extent that any of the payments and benefits provided for in this Agreement or otherwise payable to Executive constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and but for this subparagraph of this Section IV(1), would be subject to the excise tax imposed by Section 4999 of the Code or any similar or successor provision, the aggregate amount of such payments and benefits shall be reduced, but only to the extent necessary so that none of such payments and benefits are subject to excise tax pursuant to Section 4999 of the Code. If Executive should die while receiving payments pursuant to this Section IV(A), the remaining payments which would have been made to Executive if he had lived shall be paid to the beneficiary designated in writing by Executive, or if there is no effective written designation, then to his spouse, or if there is neither an effective written designation nor a surviving spouse, then to Executive's estate. Designation of a beneficiary or beneficiaries to receive the balance of any such payments shall be made by written notice to the Company, and Executive may revoke or change any such designation of beneficiary at any time by a later written notice to the Company. B. Death. Except within three years after a Change of Control of ----- Company in which case any termination of Executive's employment shall be governed by the Company's Executive Employment Security Policy, if Executive's employment with the Company is terminated by reason of Executive's death during the 6 Employment Period, this Agreement shall terminate without further obligations to Executive's legal representatives under this Agreement, other than for (a) payment of any Base Salary previously earned by Executive but as yet unpaid, (b) payment of any Annual Bonus previously awarded to Executive for a fiscal year completed prior to the Date of Termination but as yet unpaid, and (c) the continuation of any existing rights Executive may have following death under the provisions of any benefit, stock option, deferral or compensation plan provided to Executive by the Company. C. Disability. Except within three years after a Change of Control of ---------- Company in which case any termination of Executive's employment shall be governed by the Company's Executive Employment Security Policy, if Executive's employment with the Company is terminated by reason of Executive's Disability during the Employment Period in accordance with Section III(A) of this Agreement, this Agreement shall terminate without further obligations to Executive other than for (a) payment of any Base Salary previously earned by Executive but as yet unpaid, (b) payment of any Annual Bonus previously awarded to Executive for a fiscal year completed prior to the Date of Termination but as yet unpaid, and (c) the continuation of any existing rights Executive may have following Disability under any benefit, stock option, deferral or compensation plan provided to Executive by the Company. D. Cause or Voluntary Termination by Executive. Except within three -------------------------------------------- years after a Change of Control of Company in which case any termination of Executive's employment shall be governed by the Company's Executive Employment Security Policy, if, during the Employment Period, Executive's employment shall be terminated for Cause, or if Executive voluntarily terminates his employment with the Company, this Agreement shall terminate without further obligations to Executive other than for (a) payment of any Base Salary previously earned by Executive but as yet unpaid, (b) payment of any Annual Bonus previously awarded to Executive for a fiscal year completed prior to the Date of Termination but as yet unpaid, and (c) the continuation of any existing rights Executive may have following termination for Cause or voluntary termination under any benefit, stock option, deferral or compensation plan provided to Executive by the Company. V. Non-Exclusivity of Rights. ------------------------- Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested or which Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement (other than this Agreement) with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this 7 Agreement. Except for the Company's Executive Employment Security Policy, which remains in full force and effect and is fully operative between Executive and Company in accordance with its terms, Executive shall no longer be covered by any prior employment agreement, security policy or understanding thereof after the Effective date of this Agreement and shall not be covered by any severance policy, practice or program of the Company. VI. Full Settlement; Offsets. ------------------------ Except as provided for in this Section VI, the Company's obligations to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, defense or other claim, right or action which the Company may have against Executive or others. Executive shall not be obligated to seek other employment or to take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. However, the amount of any payments and benefits provided for in this Agreement shall be reduced by one hundred percent (100%) of any benefits and earned income (within the meaning of section 911 (d) (2) (A) of the Internal Revenue Code, as amended) which are earned by Executive for services rendered to persons or entities other than the Company during or with respect to the 18-month period after the Date of Termination. In the event Executive becomes eligible for any medical (including dental, vision, and prescription drug) benefits from another employer during or with respect to the 18-month period after the Date of Termination, any medical (including dental, vision, and prescription drug) benefits provided for in this Agreement shall be secondary to those provided by the other employer. Not less frequently than on each anniversary of the Termination Date (the "Reporting Date"), Executive shall account to the Company with respect to all benefits and earned income earned by Executive which are required hereunder to be offset against payments or benefits received by Executive from the Company under this Agreement. If the Company has paid amounts in excess of those to which Executive is entitled, Executive shall reimburse the Company for such excess within thirty (30) days following the Reporting Date. The requirements imposed by this paragraph shall terminate following the next Reporting Date after the third anniversary of the Date of Termination. VII. Confidential Information. ------------------------ Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential business information and knowledge or data relating to the Company and its business which shall have been obtained during Executive's employment by the Company and which shall not be or become public knowledge (other than by acts of Executive or representatives of Executive in violation of this Agreement). After termination of Executive's employment with the Company, Executive shall not, without the prior written consent of the Board, or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company or those designated by it. Upon Executive's violation of the provisions of this Section VII, the Company shall be relieved of all future obligations to Executive under this Agreement. 8 However, in no event shall an asserted or alleged violation of the provisions of this Section VII constitute a basis for deferring or withholding any amounts otherwise payable to Executive until such asserted or alleged violation is reasonably confirmed by the Board. VIII. Successors. ---------- A. This Agreement is personal to Executive and without the prior written consent of the Board shall not be assignable by Executive otherwise than by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. B. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. C. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined, and any successor to its business and/or assets as aforesaid, which assumes and agrees to perform this Agreement by operation of law of otherwise. IX. Miscellaneous. ------------- A. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles or conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. B. All notices and other communications hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Executive: --------------- Mark L. Desmond, Senior Vice-President and Chief Financial Officer 610 Newport Center Drive Suite 1150 Newport Beach, California 92660 9 With a copy to: --------------- Mark L. Desmond 353 Calle Chueca San Clemente, California 92673 If to the Company: ----------------- Nationwide Health Properties, Inc. 610 Newport Center Drive Suite 1150 Newport Beach, California 92660 Attention: President With a copy to: --------------- Mr. Charles D. Miller, Chairman 150 North Orange Grove Boulevard Pasadena, California 91103 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. C. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. D. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. E. Any failure by Executive or the Company to insist upon strict compliance with any provision hereof or any other provision of this Agreement, or the failure to assert any right Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. X. Arbitration. ----------- A. The parties agree that any disputes, controversies or claims which arise out of or are related to this Agreement, Executive's employment or termination of employment, including, but not limited to, any claim relating to the purported validity, interpretation, enforceability or breach of this Agreement, and/or any other claim or controversy arising out of the relationship between Executive and the Company (or the nature of the relationship) or the continuation or termination of that relationship, including, but not limited to, claims that a termination was for Cause or for Good 10 Reason, claims for breach of covenant, breach of an implied covenant of good faith and fair dealing, wrongful termination, breach of contract, intentional infliction of emotional distress, defamation, breach of right of privacy, interference with advantageous or contractual relations, fraud, conspiracy or other tort or property claims of any kind, which are not settled between the parties, shall be settled by arbitration in accordance with the then-current Rules of Practice and Procedure for Employment Arbitration (the "Rules") of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"). B. The arbitration shall be before a single arbitrator selected in accordance with the JAMS Rules or otherwise by mutual agreement of the parties. The Arbitration shall take place in Orange County, California, unless the parties mutually agree to hold the arbitration at another location. Depositions and other discovery shall be allowed in accordance with the JAMS Rules. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of California or Federal law, or both, as applicable to the claim(s) asserted. C. In consideration of the parties' agreement to submit to arbitration all disputes with regard to this Agreement and/or with regard to any alleged contract, or any other claim arising out of their conduct, the relationship existing hereunder or the continuation or termination of that relationship, and in further consideration of the anticipated expedition and the minimizing of expense of this arbitration remedy, the arbitration provisions of this Agreement shall provide the exclusive remedy, and each party expressly waives any right he or it may have to seek redress in another forum. The arbitrator, and not any Federal, state, or local court or agency shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement, including but not limited to, any claim that all or any part of this Agreement is void or voidable. The arbitration shall be final and binding upon the parties. D. Either party may bring an action in any court of competent jurisdiction to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided for in this Agreement, both the Company and Executive agree that neither of them shall initiate or prosecute any lawsuit or administrative action in any way related to any claim covered by this Agreement. E. Any claim which either party has against the other party that could be submitted for resolution pursuant to this Section X must be presented in writing by the claiming party to the other party within one year of the date the claiming party knew or should have known of the facts giving rise to the claim, except that claims arising out of or related to the termination of Executive's employment must be presented by Executive within one year of the Date of Termination. Unless the party against whom any claim is asserted waives the time limits set forth above, any claim not brought within the time periods specified herein shall be waived and forever barred, 11 even if there is a Federal or state statute of limitations which would have given more time to pursue the claim. F. The Company shall advance the costs and expenses of the arbitrator. In any arbitration to enforce any of the provisions or rights under this Agreement, the unsuccessful party in such arbitration, as determined by the arbitrator, shall pay to the successful party all costs, expenses and reasonable attorneys' fees incurred therein by such party (including without limitation such costs, expenses and fees on any appeals), and if such successful party shall recover an award in any such arbitration proceeding, such costs, expenses and attorneys' fees shall be included as part of such award. Notwithstanding the foregoing provision, in no event shall the successful party be entitled to recover an amount from the unsuccessful party for costs, expenses and attorneys' fees that exceeds the unsuccessful party's costs, expenses and attorneys' fees incurred in connection with the action or proceeding. G. Any decision and award or order of the arbitrator shall be final and binding upon the parties hereto and judgment thereon may be entered in the Superior Court of the State of California or any other court having jurisdiction. H. Each of the above terms and conditions shall have separate validity, and the invalidity of any part thereof shall not affect the remaining parts. I. Any decision and award or order of the arbitrator shall be final and binding between the parties as to all claims which were or could have been raised in connection with the dispute to the full extent permitted by law. In all other cases the parties agree that the decision of the arbitrator shall be a condition precedent to the institution or maintenance of any legal, equitable, administrative, or other formal proceeding by Executive or the Company in connection with the dispute, and that the decision and opinion of the arbitrator may be presented in any other forum on the merits of the dispute. 12 IN WITNESS WHEREOF, Executive has hereunto set Executive's hand, and pursuant to the authorization from the Board, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. NATIONWIDE HEALTH PROPERTIES, INC. By:_______________________________________________ R. Bruce Andrews, President Executive: _________________________________________________ Mark L. Desmond 13 EX-21 6 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1998
STATE OF NAME INCORPORATION ---- ------------- Nationwide Health Properties Finance Corporation................. Delaware MLD Financial Capital Corporation................................ Delaware MLD Wisconsin SNF, Inc. ......................................... Wisconsin
EX-23.1 7 CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our report dated January 22, 1999 included in the previously filed Registration Statement File No. 33-35276, Registration Statement File No. 33-64798, Registration Statement File No. 333-32135, Registration Statement File No. 333-17061, Registration Statement File No. 333-20589, and Registration Statement File No. 333-70707. /s/ ARTHUR ANDERSEN LLP Orange County, California January 22, 1999 1 EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 16,182 0 6,712 0 0 40,618 1,243,388 133,316 1,357,303 42,541 709,204 0 100,000 4,621 500,937 1,357,303 0 142,584 0 32,626 5,000 0 37,531 67,427 0 67,427 0 2,321 0 69,748 1.39 1.39
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