AGREEMENT AND PLAN OF MERGER
BETWEEN
HEALTH CARE PROPERTY INVESTORS, INC.
AND
AMERICAN HEALTH PROPERTIES, INC.
DATED AS OF AUGUST 4, 1999
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 4,
1999, by and between HEALTH CARE PROPERTY INVESTORS, INC., a Maryland
corporation ("HCPI") and AMERICAN HEALTH PROPERTIES, INC., a Delaware
corporation (the "Company"). HCPI and the Company are sometimes referred to
herein, individually, as a "Party," and, collectively, as the "Parties."
RECITALS
WHEREAS, the Board of Directors of the Company has declared that this
Agreement is advisable and determined that the merger of the Company with and
into HCPI (the "Merger") is advisable and in the best interests of the Company,
has approved this Agreement and authorized the Company to enter into this
Agreement and accordingly has directed that this Agreement be submitted for
consideration by the stockholders of the Company;
WHEREAS, the Board of Directors of HCPI has adopted resolutions which
declare the Merger to be advisable substantially on the terms and conditions set
forth in this Agreement, has approved this Agreement and authorized HCPI to
enter into this Agreement and accordingly has directed that the Merger be
submitted for consideration by the stockholders of HCPI;
WHEREAS, the Board of Directors of the Company and the Board of Directors
of HCPI have each agreed to effect the Merger upon the terms and subject to the
conditions set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder
(the "Code"); and
WHEREAS, HCPI and the Company desire to make certain representations,
warranties and agreements in connection with the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, HCPI
and the Company hereby agree as follows:
ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the term:
"Acquisition Proposal" shall mean, with respect to the Company, any
inquiry, proposal or offer from any Person (other than HCPI or any of its
Subsidiaries) relating to any (i) direct or indirect acquisition or purchase of
a business of the Company or any of its
Subsidiaries that constitutes 15% or more of the consolidated net revenues, net
income or Assets of the Company and its Subsidiaries, (ii) direct or indirect
acquisition or purchase of 15% or more of any class of equity securities of (A)
the Company or (B) any of its Subsidiaries whose business constitutes 15% or
more of the consolidated net revenues, net income or Assets of the Company and
its Subsidiaries, (iii) tender offer or exchange offer that if consummated would
result in any Person being the Beneficial Owner of 15% or more of any class of
equity securities of the capital stock of the Company, or (iv) merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving (A) the Company or (B) any of its Subsidiaries
whose business constitutes 15% or more of the consolidated net revenues, net
income or Assets of the Company and its Subsidiaries.
"Acquisition Transaction" shall mean each of the transactions referred to
in clauses (i) - (iv) of the definition of Acquisition Proposal, other than any
such transaction to which HCPI or any of its Subsidiaries is a party.
"Action" shall mean any action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, arbitration, audit or
investigation by or before any Governmental Entity or any other Person.
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act.
"Affiliate Agreement" shall mean an agreement to be executed by each
Affiliate of the Company in the form attached hereto as Exhibit A.
"Assets" shall mean, with respect to any Person, all land, buildings,
improvements, leasehold interests, Fixtures and Equipment and other assets, real
or personal, tangible or intangible, owned or leased by such Person or any of
its Subsidiaries.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act.
"Benefit Arrangement" shall mean, with respect to any Person, any
employment, consulting, severance, change in control or other similar contract,
arrangement or policy and each plan, arrangement (written or oral), program,
agreement or commitment providing for insurance coverage (including without
limitation any self-insured arrangements), workers' compensation, disability
benefits, life, health, disability or accident benefits (including without
limitation any "voluntary employees' beneficiary association" as defined in
Section 501(c)(9) of the Code providing for the same or other benefits) or for
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive compensation
(other than a Welfare Plan, Pension Plan or Multiemployer Plan), in each case
with respect to which such Person or any ERISA Affiliate thereof has or may have
any obligation or liability (accrued, contingent or otherwise).
"Business Day" shall mean each day other than Saturdays, Sundays, days when
commercial banks are authorized to be closed for business in New York, New York,
and days
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when the SDAT or the office of the Secretary of State of the State of Delaware
are authorized to be closed.
"Certificates" shall mean outstanding certificates which immediately prior
to the Effective Time represented shares of Company Common Stock or Company
Series B Preferred Stock, as the case may be.
"Company Affiliate" shall mean an "affiliate" of the Company within the
meaning of Rule 145 promulgated under the Securities Act.
"Company Common Holder" shall mean a holder of record of Company Common
Stock immediately prior to the Effective Time.
"Company Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company.
"Company Contract" shall mean any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their Assets may be
bound, and which either (i) has a term of more than one year or is not otherwise
terminable within one year, (ii) involves the payment or receipt of money in
excess of $2,500,000, (iii) contains covenants limiting the freedom of the
Company or any of its Subsidiaries to engage in any line of business or compete
with any Person or operate at any location or (iv) any other contract, whether
similar or dissimilar to the foregoing, which is material to the Company and its
Subsidiaries taken as a whole, but, in each case, excluding any Company Leases.
"Company Deferred Directors Fees" shall mean all rights to receive shares
of Company Common Stock (or cash or other distributions in lieu thereof) in
satisfaction of deferred directors fees pursuant to the Company's Nonqualified
Stock Option Plan for Nonemployee Directors, including, without limitation,
Company Dividend Equivalent Rights appurtenant thereto.
"Company Dividend Equivalent Rights" shall mean all rights to receive
shares of Company Common Stock (or cash or other distributions in lieu thereof)
determined by amounts equivalent to dividends distributed or to be distributed
to holders of Company Common Stock that are appurtenant to Company Options or
Company Deferred Directors Fees.
"Company Employment Contracts" shall mean each of the Amended and Restated
Executive Employment Agreements between the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, C.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, each dated as of July
16, 1999, each as amended.
"Company Lease" shall mean any agreement relating to the use or occupancy
of any Company Real Property or any portion thereof.
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"Company Material Adverse Effect" shall mean any change in or effect (i)
that is or would be likely to be materially adverse to the business, Assets,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole, (ii) that will
or would be likely to materially impair or materially delay the ability of the
Parties to consummate the Merger or (iii) that would prevent or materially
impair the ability of HCPI to operate its and its Subsidiaries' business, taken
as a whole (including the business of the Surviving Corporation and its
Subsidiaries, taken as a whole), or to own the Assets material to HCPI and its
Subsidiaries, taken as a whole (including the Assets material to the Surviving
Corporation and its Subsidiaries, taken as whole), or qualify for taxation as a
REIT following the Effective Time.
"Company Options" shall mean all stock options and stock purchase rights to
acquire shares of Company Common Stock granted, awarded, earned or purchased
under any Company Stock Plan.
"Company Preferred Holder" shall mean a record holder of Company Series B
Preferred Stock immediately prior to the Effective Time.
"Company Rights" shall mean the Company Series A Preferred Stock purchase
rights issued under the Company Rights Plan.
"Company Rights Plan" shall mean the Rights Agreement, dated as of April
10, 1990, between the Company and Manufacturers Hanover Trust Company of
California, as Rights Agent.
"Company Series A Preferred Stock" shall mean the Preferred Stock, Series
A, par value $0.01 per share, of the Company.
"Company Series B Preferred Stock" shall mean the 8.60% Cumulative
Redeemable Preferred Stock, Series B, par value $0.01 per share, of the Company.
"Company Stock" shall mean the Company Common Stock, the Company Series A
Preferred Stock and the Company Series B Preferred Stock.
"Company Stock Plans" shall mean the Company's Nonqualified Stock Option
Plan for Nonemployee Directors, the Company's 1988 Stock Option Plan, the
Company's 1990 Stock Incentive Plan, the Company's 1994 Stock Incentive Plan and
the Company's 1999 Equity Incentive Plan.
"Company Stock Rights" shall mean all outstanding stock options, restricted
stock awards, performance awards, dividend equivalent rights, deferred stock,
stock payments, stock appreciation rights or other rights to or with respect to
shares of capital stock granted, awarded, earned or purchased pursuant to any
Company Stock Plan.
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"Company Stockholder Meeting" shall mean a meeting of the holders of
Company Common Stock duly noticed and held to consider a proposal to approve the
Agreement.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"Employee Plans" shall mean, with respect to any Person, all Benefit
Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans of such
Person.
"Encumbrances" shall mean (i) any claim, lien, pledge, option, right of
first refusal, charge, easement, security interest, deed of trust, mortgage,
covenant, condition, restriction, right of way, reservation of an interest in
title, encumbrance or other similar rights of third parties and (ii) all laws,
ordinances and regulations affecting the use or occupancy of real property.
"Environmental Laws" shall mean any federal, state or local law, statute,
ordinance, order, decree, rule or regulation relating (i) to releases,
discharges, emissions or disposals of Hazardous Materials to air, water, land or
groundwater; (ii) to the use, handling or disposal of polychlorinated biphenyls,
asbestos or urea formaldehyde or any other Hazardous Material; (iii) to the
treatment, storage, disposal or management of Hazardous Materials; (iv) to
exposure to toxic, hazardous or other controlled, prohibited or regulated
substances; or (v) to the transportation, release or any other use of Hazardous
Materials, including the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601, et seq. ("CERCLA"), the Resource Conservation and
Recovery Act, 42 U.S.C. 6901, et seq. ("RCRA"), the Toxic Substances Control
Act, 15 U.S.C. 2601, et seq. ("TSCA"), those portions of the Occupational,
Safety and Health Act, 29 U.S.C. 651, et seq. relating to Hazardous Materials
exposure and compliance, the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal
Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe Drinking ▇▇▇▇▇
▇▇▇, ▇▇ ▇.▇.▇. ▇▇▇▇, et seq., the Hazardous Materials Transportation Act, 49
U.S.C. 1802 et seq. ("HMTA") and the Emergency Planning and Community Right to
▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. ▇▇▇▇▇, et seq. ("EPCRA"), and other comparable state and
local laws and all rules and regulations promulgated pursuant thereto or
published thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean, with respect to any Person, any entity which
is (or, at any relevant time, was) considered one employer with such Person
under Section 4001 of ERISA or Section 414 of the Code.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Executive Company Dividend Equivalent Rights" shall mean the Company
Dividend Equivalent Rights held by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
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"Fixtures and Equipment" shall mean, with respect to any Person, all of the
furniture, fixtures, furnishings, machinery and equipment owned or leased by
such Person and located in, at or upon the facilities of such Person.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time, consistently applied.
"Governmental Entities" shall mean all domestic courts, regulatory or
administrative agencies, commissions or other governmental authorities, bodies
or instrumentalities.
"Hazardous Materials" shall mean each and every element, compound, chemical
mixture, contaminant, pollutant, material, waste or other substance which is
defined, determined or identified as hazardous or toxic under applicable
Environmental Laws or the release of which is regulated under Environmental
Laws. Without limiting the generality of the foregoing, the term includes:
"hazardous substances" as defined in CERCLA; "extremely hazardous substances" as
defined in EPCRA; "hazardous waste" as defined in RCRA; "hazardous materials" as
defined in HMTA; a "chemical substance or mixture" as defined in TSCA; medical,
biohazardous or infectious waste; crude oil, petroleum products or any fraction
thereof; radioactive materials, including source, byproduct or special nuclear
materials; asbestos or asbestos-containing materials; chlorinated fluorocarbons;
and radon.
"HCPI Common Stock" shall mean the Common Stock, par value $1.00 per share,
of HCPI.
"HCPI Contract" shall mean any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which HCPI or any of its Subsidiaries is a party or
by which any of them or any of their Assets may be bound, and which either (i)
has a term of more than one year or is not otherwise terminable within one year,
(ii) involves the payment or receipt of money in excess of $2,500,000, (iii)
contains covenants limiting the freedom of HCPI or any of its Subsidiaries to
engage in any line of business or compete with any Person or operate at any
location, or (iv) any other contract, whether similar or dissimilar to the
foregoing which is material to the Company and its Subsidiaries taken as a
whole, but, in each case, excluding any HCPI Leases.
"HCPI Lease" shall mean any agreement relating to the use or occupancy of
any HCPI Real Property or any portion thereof.
"HCPI Material Adverse Effect" shall mean any change in or effect (i) that
is or would be likely to be materially adverse to the business, Assets,
liabilities, results of operations, condition (financial or otherwise) or
prospects of HCPI and its Subsidiaries taken as a whole, (ii) that will or would
be likely to prevent or materially impair or materially delay the ability of the
Parties to consummate the Merger or (iii) that would materially impair the
ability of HCPI to operate its and its Subsidiaries' business, taken as a whole
(including the business of the Surviving Corporation and its Subsidiaries, taken
as a whole), or to own the Assets material to HCPI and its Subsidiaries, taken
as a whole (including the Assets material to the Surviving
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Corporation and its Subsidiaries, taken as a whole), or qualify for taxation as
a REIT following the Effective Time.
"HCPI Rights" shall mean the HCPI Common Stock purchase rights issued under
the HCPI Rights Plan.
"HCPI Rights Plan" shall mean the Rights Agreement dated as of July 5,
1990, as amended, between HCPI and Manufacturers Hanover Trust Company of
California, as Rights Agent.
"HCPI Series A Preferred Stock" shall mean the 7 7/8% Series A Cumulative
Redeemable Preferred Stock, par value $1.00 per share, of HCPI.
"HCPI Series B Preferred Stock" shall mean the 8.70% Series B Cumulative
Redeemable Preferred Stock, par value $1.00 per share, of HCPI.
"HCPI Series C Preferred Stock" shall mean the 8.60% Series C Cumulative
Redeemable Preferred Stock, par value $1.00 per share, of HCPI to be issued in
the Merger.
"HCPI Stock" shall mean the HCPI Common Stock, the HCPI Series A Preferred
Stock, the HCPI Series B Preferred Stock and the HCPI Series C Preferred Stock,
collectively.
"HCPI Stockholders Meeting" shall mean a meeting of the holders of HCPI
Common Stock duly noticed and held to consider a proposal to approve the Merger.
"HCPI Stock Plans" shall mean HCPI's Second Amended and Restated Directors
Stock Incentive Plan, HCPI's Second Amended and Restated Stock Incentive Plan
and HCPI's Second Amended and Restated Directors Deferred Compensation Plan.
"HCPI Stock Rights" shall mean all outstanding stock options, restricted
stock awards, performance awards, dividend equivalent rights, deferred stock,
stock payments, stock appreciation rights or other rights to or with respect to
shares of capital stock granted, awarded, earned or purchased pursuant to any
HCPI Stock Plan or under which HCPI or any Affiliate thereof has any obligation
or liability (accrued, contingent or otherwise).
"Intellectual Property" shall mean any patent, trademarks, trade names,
service marks, copyrights, any applications for and registrations for patents,
trademarks, trade names, service marks or copyrights, or any processes,
formulae, methods, schematics, technology, computer software programs or
applications, tangible or intangible proprietary information or material,
waivers or licenses of publicity or privacy rights or any other third party
licenses.
"Joint Proxy Statement/Prospectus" shall mean the joint proxy statement/
prospectus to be prepared by the Company and HCPI pursuant to Section 6.1 and
sent to stockholders of the Company and HCPI in connection with the Company
Stockholders Meeting and HCPI Stockholders Meeting.
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"Knowledge" shall mean with respect to (i) the Company, the actual
knowledge after reasonable inquiry of those individuals listed in Section 1.1(a)
of the Company Disclosure Schedule, and (ii) HCPI, the actual knowledge after
reasonable inquiry of those individuals listed in Section 1.1(b) of the HCPI
Disclosure Schedule.
"Lien" shall mean any lien, pledge, option, security interest, claim,
encumbrance, restriction, preemptive right or any similar other claims of third
parties.
"Merger Consideration" shall mean the Common Merger Consideration and the
Series B Preferred Merger Consideration.
"MGCL" shall mean the Maryland General Corporation Law, as amended.
"Multiemployer Plan" shall mean, with respect to any Person, any
"multiemployer plan" thereof, within the meaning of Section 3(37) or 4001(a)(3)
of ERISA, which such Person or any ERISA Affiliate thereof contributed to or is
or was required to contribute to, or under which such Person or any ERISA
Affiliate thereof has or may have any obligation or liability (accrued,
contingent or otherwise).
"NYSE" shall mean The New York Stock Exchange, Inc.
"Pension Plan" shall mean, with respect to any Person, any "employee
pension benefit plan," as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan), which such Person or any ERISA Affiliate thereof
contributed to or is or was required to contribute to, or under which such
Person or any ERISA Affiliate thereof has or may have any obligation or
liability (accrued, contingent or otherwise).
"Permitted Encumbrances" shall mean (i) those Encumbrances that result from
all statutory or other Liens for Taxes or assessments (including any such Liens
for which a tenant is responsible under a Lease for real property) (A) which are
not yet due or delinquent or (B) the validity of which is being contested in
good faith by appropriate proceedings and for which adequate reserves are being
maintained in accordance with GAAP; (ii) those Encumbrances that result from any
cashiers', landlords', workers', mechanics', carriers', materialmen's,
suppliers' and repairers' Lien and other similar Encumbrances imposed by law or
incurred in the ordinary course of business; (iii) those Encumbrances imposed by
any law, rule, regulation, ordinance or restriction promulgated by any
Governmental Entity; (iv) those Encumbrances that result from all leases,
subleases or licenses to which any Person or any of its Subsidiaries is a party;
(v) Encumbrances which are identified on title policies or preliminary title
reports or other documents or writings which are in the possession or control of
the Person holding title to the property that is subject to such Encumbrances;
and (vi) all other Encumbrances which, individually, or in the aggregate, would
not otherwise cause a Company Material Adverse Effect with respect to
Encumbrances affecting the Company or a HCPI Material Adverse Effect with
respect to Encumbrances affecting HCPI.
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"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, other organization (whether incorporated or
unincorporated) governmental agency or instrumentality, or any other legal
entity.
"REIT" shall mean a real estate investment trust within the meaning of the
Code.
"Registration Statement" shall mean the registration statement on Form S-4
pursuant to which the shares of HCPI Common Stock issued in the Merger will be
registered under the Securities Act.
"Representative" shall mean, with respect to any Person, that Person's
officers, directors, employees, financial advisors, agents or other
representatives.
"SDAT" shall mean the State Department of Assessments and Taxation of
Maryland.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership, limited liability company, joint venture, or other organization,
whether incorporated or unincorporated, or other legal entity of which (i) such
Person directly or indirectly owns or controls at least a majority of the
capital stock or other equity interests having by their terms ordinary voting
power to elect a majority of the board of directors or others performing similar
functions; (ii) such Person has control whether contractually or otherwise;
(iii) such Person is a general partner, manager or managing member; or (iv) such
Person holds a majority of the equity economic interest.
"Tax" or "Taxes" shall mean all federal, state, local, foreign and other
taxes, levies, imposts, assessments, impositions or other similar government
charges, including, without limitation, income, estimated income, business,
occupation, franchise, real property, payroll, personal property, sales,
transfer, stamp, use, employment, commercial rent or withholding, occupancy,
premium, gross receipts, profits, windfall profits, deemed profits, license,
lease, severance, capital, production, corporation, ad valorem, excise, duty or
other taxes, including interest, penalties and additions (to the extent
applicable) thereto, whether disputed or not.
"Tax Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
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"Welfare Plan" shall mean, with respect to any Person, any "employee
welfare benefit plan," as defined in Section 3(1) of ERISA, which such Person or
any ERISA Affiliate thereof contributed to or is or was required to contribute
to, or under which such Person or any ERISA Affiliate thereof has or may have
any obligation or liability (accrued, contingent or otherwise).
Table of Other Defined Terms
Cross Reference
Terms in Agreement
----- ----------------
Agreement ................................................... Preamble
Articles of Merger........................................... Section 2.3
Base Amount ................................................. Section 8.2(d)
Blue Sky Laws ............................................... Section 3.6(b)
Bylaws ...................................................... Section 2.5(b)
Charter ..................................................... Section 2.5(a)
Certificate of Merger ....................................... Section 2.3
Closing ..................................................... Section 2.2
Closing Date ................................................ Section 2.2
Code ........................................................ Recitals
Common Merger Consideration ................................. Section 2.7(a)
Company ..................................................... Preamble
Company Board ............................................... Section 2.8(a)
Company Disclosure Schedule ................................. Article III
Company Financial Advisor ................................... Section 3.18
Company Leased Property ..................................... Section 3.13(a)
Company Owned Property ...................................... Section 3.13(a)
Company Real Property ....................................... Section 3.13(a)
Company SEC Reports ......................................... Section 3.8(a)
Confidentiality Agreement ................................... Section 6.4
Effective Time .............................................. Section 2.3
Excess Shares ............................................... Section 2.9
Exchange Agent .............................................. Section 2.10(a)
Exchange Ratio .............................................. Section 2.7(a)
Executive DER Consideration.................................. Section 2.8(e)
Final Company Dividend....................................... Section 5.3
Fractional Securities Fund .................................. Section 2.9
Governmental Approvals ...................................... Section 6.5
HCPI ........................................................ Preamble
HCPI Board .................................................. Section 2.8(c)
HCPI Disclosure Schedule .................................... Article IV
HCPI Financial Advisor....................................... Section 4.18
HCPI Leased Property ........................................ Section 4.13(a)
HCPI Owned Property ......................................... Section 4.13(a)
HCPI Real Property .......................................... Section 4.13(a)
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HCPI SEC Reports ............................................ Section 4.8(a)
Indemnified Parties ......................................... Section 6.8(a)
Intermediary................................................. Section 5.2(a)
Merger ...................................................... Recitals
Minimum Distribution Dividend ............................... Section 5.3
Notifying Party ............................................. Section 6.5(a)
Option Consideration......................................... Section 2.8(b)
Other Stock Rights........................................... Section 6.20
Party or Parties ............................................ Preamble
Qualifying Income ........................................... Section 8.2(d)
Registration Statement ...................................... Section 3.18
REIT Requirements ........................................... Section 8.2(d)
Remaining Options............................................ Section 2.8(c)
Series B Preferred Merger Consideration ..................... Section 2.7(b)
Superior Proposal ........................................... Section 6.3(b)
Surviving Corporation ....................................... Section 2.1
Tax Guidance ................................................ Section 8.2(d)
Termination Fee ............................................. Section 8.2(d)
Voting Debt.................................................. Section 3.3(b)
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ARTICLE II.
THE MERGER
Section 2.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement and in accordance with Subtitle 1 of Title 3 of the MGCL and in
accordance with Sections 251 and 252 of the DGCL, at the Effective Time, the
Company shall be merged with and into HCPI. As a result of the Merger, the
separate corporate existence of the Company shall cease, and HCPI shall continue
as the surviving corporation of the Merger (the "Surviving Corporation").
Section 2.2 CLOSING AND CLOSING DATE. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to the provisions of Section 8.1, the closing (the "Closing") of the
Merger shall take place (a) at 10:00 a.m., Los Angeles time, on the second
Business Day after the last of all of the conditions to the respective
obligations of the Parties set forth in Article VII hereof shall have been
satisfied or waived (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) or (b) at such other time and date as HCPI and the Company shall
agree (such date and time on and at which the Closing occurs being referred to
herein as the "Closing Date"). The Closing shall take place at the offices of
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Costa Mesa, California or such other place as is agreed to by
the Parties. At the Closing the documents, certificates, opinions and
instruments referred to in Article VII shall be executed and delivered.
Section 2.3 EFFECTIVE TIME. Subject to the provisions of this Agreement,
the Parties shall (i) cause articles of merger (the "Articles of Merger") to be
executed, acknowledged and filed with and accepted for record by the SDAT in
accordance with Sections 3-109, 3-110 and 1-301 of the MGCL and (ii) cause a
certificate of merger (the "Certificate of Merger") to be executed, acknowledged
and filed with the Secretary of State of the State of Delaware in accordance
with Sections 103 and 251 of the DGCL and (iii) make all other filings or
records required to effectuate the Merger under the MGCL and the DGCL as soon as
practical on or after the Closing Date. The Certificate of Merger shall provide
that the Merger shall become effective in the State of Delaware as of the later
of (i) the time at which the Articles of Merger have been accepted for record by
the SDAT or (ii) such later time agreed to by the Parties and specified in the
Articles of Merger and the Certificate of Merger, but not exceeding 30 days
after the date the Articles of Merger are accepted for record by the SDAT. The
Merger shall become effective as of the date on which the latest of the
following actions shall have been completed: (i) the time at which the SDAT
accepts the Articles of Merger for record, (ii) the Certificate of Merger has
been duly filed with the Secretary of State of the State of Delaware or (iii)
the time agreed to by the Parties and specified in the Articles of Merger and
the Certificate of Merger, but not exceeding 30 days after the date the Articles
of Merger are accepted for record by the SDAT (the "Effective Time").
Section 2.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the applicable provisions of the MGCL and the DGCL. Without limiting
the generality of the
12
foregoing, and subject thereto, at the Effective Time of the Merger, (a) the
Surviving Corporation shall possess all assets and property of every
description, and every interest therein, wherever located, and the rights,
privileges, immunities, powers, franchises and authority, of a public as well as
of a private nature, of each of HCPI and the Company, (b) all debts, liabilities
and obligations belonging to or due each of HCPI and the Company shall be vested
in, and become the obligations of, the Surviving Corporation without further act
or deed, (c) title to any real estate or any interest therein vested in either
of HCPI or the Company shall not revert, or in any way be impaired by, reason of
the Merger, (d) all Encumbrances upon any property of either of HCPI or the
Company shall be preserved unimpaired, and (e) the Surviving Corporation shall
be liable for all of the debts and obligations of each of HCPI or the Company,
and any Action pending, by or against either HCPI or the Company may be
prosecuted to judgment against the Surviving Corporation with right of appeal as
if the Merger had not taken place.
Section 2.5 CHARTER; BYLAWS.
(a) At the Effective Time and without any further action on the part of the
Company or HCPI, the charter, as amended, of HCPI as in effect at the Effective
Time shall be the charter (the "Charter") of the Surviving Corporation until
duly amended as provided for therein or under the MGCL.
(b) At the Effective Time and without any further action on the part of the
Company or HCPI, the bylaws, as amended, of HCPI as in effect at the Effective
Time shall be the bylaws (the "Bylaws") of the Surviving Corporation until duly
amended as provided for therein and under the MGCL.
Section 2.6 DIRECTORS AND OFFICERS. The directors of HCPI at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Charter and Bylaws of the Surviving Corporation,
and the officers of HCPI at the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified or until their
earlier death, resignation or removal in accordance with the Charter and Bylaws.
Section 2.7 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of HCPI, the Company or the holder
of any of the following securities:
(a) Subject to Section 2.9, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock to be canceled in accordance with Section 2.7(c) hereof)
together with the Company Rights attached thereto or associated therewith, shall
be converted into 0.78 fully paid and nonassessable shares (rounded to the
nearest ten-thousandth of a share) (as adjusted as set forth in subsection (e)
of this Section 2.7, the "Exchange Ratio") of HCPI Common Stock (the "Common
Merger Consideration"). Pursuant to the HCPI Rights Plan, one HCPI Right will be
attached to each share of HCPI Common Stock issued upon conversion of Company
Common Stock in accordance with this Section 2.7(a), and, prior to the
Distribution Date (as defined in the HCPI Rights Plan) all references in this
Agreement to HCPI Common Stock shall be deemed to
13
include the HCPI Rights. As of the Effective Time, all such shares of Company
Common Stock and all Company Rights shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a Certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except, subject to Section 2.10,
rights as a holder of HCPI Common Stock and the right to receive (i)
certificates representing the Common Merger Consideration, and (ii) any cash in
lieu of fractional shares of HCPI Common Stock to be paid in consideration
therefor upon surrender of such Certificate in accordance with Section 2.9.
(b) Subject to Section 2.9, each share of Company Series B Preferred Stock
issued and outstanding immediately prior to the Effective Time (other than
shares of Company Series B Preferred Stock to be canceled in accordance with
Section 2.7(c) hereof) shall be converted into one share of HCPI Series C
Preferred Stock, having substantially the same rights and preferences as the
Company Series B Preferred Stock, as set forth on Exhibit B attached hereto (the
"Series B Preferred Merger Consideration"). As of the Effective Time, all such
shares of Company Series B Preferred Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a Certificate representing any such shares of Company Series B
Preferred Stock shall cease to have any rights with respect thereto, except,
subject to Section 2.10, rights as a holder of HCPI Series C Preferred Stock and
the right to receive certificates representing the Series B Preferred Merger
Consideration.
(c) Each share of Company Common Stock and Company Series B Preferred Stock
that is (i) held in the treasury of the Company or owned by any Subsidiary of
the Company (other than shares of Company Common Stock and Company Series B
Preferred Stock held or owned on behalf of third parties) or (ii) owned by HCPI
or any Subsidiary of HCPI, in each case immediately prior to the Effective Time,
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be canceled and retired without any conversion thereof and no payment
or distribution of any consideration shall be made with respect thereto.
(d) Each share of HCPI Stock or other capital stock of HCPI issued and
outstanding immediately prior to the Effective Time shall remain outstanding and
shall be unchanged after the Merger.
(e) The Exchange Ratio shall be adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into HCPI Common Stock, but expressly
excluding any dividends or distributions payable on HCPI Common Stock in cash),
reorganization, recapitalization or other like change with respect to HCPI
Common Stock occurring after the date hereof and prior to the Effective Time.
Section 2.8 TREATMENT OF COMPANY OPTIONS, COMPANY DIVIDEND EQUIVALENT
RIGHTS AND COMPANY DEFERRED DIRECTORS FEES.
(a) The Board of Directors of the Company (the "Company Board"), or, if
appropriate, any committee thereof, shall adopt appropriate resolutions and take
all other
14
necessary actions (including plan amendments) to cause prior to the Effective
Time each outstanding Company Option which has not vested immediately prior to
the Effective Time to become vested and fully exercisable.
(b) Prior to the Effective Time, the Company and the Company Board (or, if
appropriate, any committee thereof) shall use its reasonable efforts to cause
each then outstanding Company Option, whether vested or unvested, to be canceled
immediately prior to the Effective Time, with the holder thereof becoming
entitled to receive an amount of cash from the Company equal to the product of
(x) the amount, if any, by which (1) the product of (a) the closing price per
share of HCPI Common Stock on the NYSE on the most recent trading day
immediately preceding the Effective Time, and (b) the Exchange Ratio, exceeds
(2) the exercise price per share of Company Common Stock subject to such Company
Option (whether vested or unvested), and (y) the number of shares of Company
Common Stock issuable pursuant to the unexercised portion of such Company
Option, less any required withholding of taxes (such amount being hereinafter
referred to as the "Option Consideration"). The Option Consideration shall be
paid by the Company immediately prior to the Effective Time. The cancellation of
a Company Option in exchange for the Option Consideration shall be deemed a
release of any and all rights the holder had or may have had in respect of such
Company Option, and any required consents received from Company Option holders
shall so provide.
(c) In the event that any Company Options are not canceled in accordance
with the provisions of Section 2.8(b), such Company Options (the "Remaining
Options") shall be subject to the following provisions of this Section 2.8(c).
Prior to the Effective Time, the Company Board (or, if appropriate, any
committee thereof) and the Board of Directors of HCPI (the "HCPI Board") (or, if
appropriate, any committee thereof) shall adopt appropriate resolutions and take
all other actions necessary to provide that effective at the Effective Time,
each outstanding Remaining Option shall be assumed by HCPI and shall continue in
effect on the same terms and conditions as in effect immediately prior to the
Effective Time (subject to the provisions of Section 2.8(a) and the adjustments
in this Section 2.8(c)) and each such Remaining Option shall be converted
automatically into an option (a "New Option") to purchase the number of shares
of HCPI Common Stock, determined as provided below, at the exercise price,
determined as provided below:
(i) The number of shares of HCPI Common Stock to be subject to the New
Option shall be equal to the product of (x) the number of shares of Company
Common Stock remaining subject (as of immediately prior to the Effective
Time) to the Remaining Option multiplied by (y) the Exchange Ratio,
provided that the number of shares of HCPI Common Stock resulting therefrom
shall be rounded to the nearest whole share of HCPI Common Stock.
(ii) The exercise price per share of HCPI Common Stock under the New
Option shall be equal to (x) the exercise price per share of the Company
Common Stock under the Remaining Option, divided by (y) the Exchange Ratio,
provided that such exercise price shall be rounded to the nearest whole
cent.
15
The adjustment provided herein with respect to any Remaining Option which is an
"incentive stock option" (as defined in Section 422 of the Code) shall be, and
is intended to be, effected in a manner which is consistent with Section 424(a)
of the Code. Except as provided in this Section 2.8, after the Effective Time,
each New Option shall be exercisable upon the same terms and conditions as were
applicable to the related Remaining Option immediately prior to the Effective
Time (except that with regard to such New Option, any references to the Company
shall be deemed, as appropriate, to mean HCPI). HCPI shall take all action
necessary, on or prior to the Effective Time, to authorize and reserve a number
of shares of HCPI Common Stock sufficient for issuance upon the exercise of New
Options as contemplated by this Section 2.8.
(d) HCPI shall file on or prior to the Effective Time, a registration
statement on Form S-8 (or any successor or other appropriate form) registering a
number of shares of HCPI Common Stock to be issued in connection with the
exercise of the New Options as determined in this Section 2.8.
(e) Prior to the Effective Time, the Company and the Company Board (or, if
appropriate, any committee thereof) shall cause each then outstanding Executive
Company Dividend Equivalent Right to be canceled prior to the Effective Time,
with the holder thereof receiving in consideration of such cancellation an
amount of cash as determined pursuant to the terms of his Company Employment
Contract, less any required withholding of taxes (such amount being hereinafter
referred to as the "Executive DER Consideration"). The Executive DER
Consideration shall be paid by the Company prior to the Effective Time. The
cancellation of an Executive Company Dividend Equivalent Right in exchange for
the Executive DER Consideration shall be deemed a release of any and all rights
the holder had or may have had in respect of such Executive Company Dividend
Equivalent Right.
(f) Prior to the Effective Time, the Company and the Company Board (or, if
appropriate, any committee thereof) and the HCPI Board (or, if appropriate, any
committee thereof) shall adopt appropriate resolutions and take all other
actions necessary to provide that effective at the Effective Time, all
outstanding Company Deferred Directors Fees shall be assumed by HCPI on the same
terms and conditions as in effect immediately prior to the Effective Time
(subject to adjustments in this Section 2.8(f)) (except that any references to
the Company shall be deemed, as appropriate, to mean HCPI) and the right to
receive Company Common Stock in respect of each such Company Deferred Directors
Fees shall be converted automatically into a right to acquire or receive HCPI
Common Stock; provided that the number of shares of HCPI Common Stock to be
subject to such Company Deferred Directors Fees (including any Company Dividend
Equivalent Rights appurtenant thereto) accumulated immediately prior to the
Effective Time shall be equal to the product of (x) the number of shares of
Company Common Stock subject (as of immediately prior to the Effective Time) to
the Company Deferred Directors Fees (and accumulated Company Dividend Equivalent
Rights appurtenant thereto) multiplied by (y) the Exchange Ratio; provided that
any fractional shares of HCPI Common Stock resulting therefrom shall be rounded
to the nearest whole share of HCPI Common Stock; provided, further, that, solely
with respect to each holder of Company Deferred Directors Fees who is not a
director of the Surviving Corporation immediately following the Effective Time,
HCPI shall distribute promptly following the Effective Time shares of HCPI
16
Common Stock subject to said Company Deferred Directors Fees (and accumulated
Company Dividend Equivalent Rights appurtenant thereto) in accordance with the
terms and conditions thereof as in effect immediately prior to the Effective
Time, and such Company Deferred Directors Fees (and accumulated Company Dividend
Equivalent Rights appurtenant thereto) shall thereupon terminate.
Section 2.9 FRACTIONAL INTERESTS. Notwithstanding any other provision of
this Agreement, no certificates or scrip representing fractional shares of HCPI
Common Stock shall be issued in connection with the Merger, and such fractional
interests will not entitle the owner thereof to any rights of a stockholder of
HCPI. In lieu of any such fractional interests, each Company Common Holder
exchanging Certificates pursuant to Section 2.7(a) who would otherwise have been
entitled to receive a fraction of a share of HCPI Common Stock (after taking
into account all shares of Company Common Stock then held of record by such
Company Common Holder) shall receive cash (without interest) in an amount equal
to such Company Common Holder's proportionate interest in the net proceeds from
the sale or sales in the open market by the Exchange Agent, on behalf of all
such Company Common Holders, of the aggregate fractional HCPI Common Stock that
would have been otherwise issuable pursuant to Section 2.7. As soon as
practicable following the Effective Time, the Exchange Agent shall determine the
excess of (i) the number of full shares of HCPI Common Stock delivered to the
Exchange Agent by HCPI over (ii) the aggregate number of full shares of HCPI
Common Stock to be distributed to Company Common Holders (such excess being
herein called the "Excess Shares"), and the Exchange Agent, as agent for the
former Company Common Holders, shall sell the Excess Shares at the prevailing
prices on the NYSE. The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. HCPI shall pay all
commissions, transfer Taxes and other out-of-pocket transaction costs, including
the expenses and compensation of the Exchange Agent, incurred in connection with
such sale of Excess Shares. Until the net proceeds of such sale have been
distributed to the former Company Common Holders, the Exchange Agent will hold
such proceeds in trust for such former stockholders (the "Fractional Securities
Fund"). As soon as practicable after the determination of the amount of cash to
be paid to former Company Common Holders in lieu of any fractional interests,
the Exchange Agent shall make available in accordance with this Agreement such
amounts to such former Company Common Holders. The Exchange Agent shall invest
the Fractional Securities Fund as directed by HCPI, on a daily basis. Any
interest and other income resulting therefrom shall be paid to HCPI.
Section 2.10 SURRENDER OF SHARES OF COMPANY STOCK; STOCK TRANSFER BOOKS.
(a) Prior to the Closing Date, HCPI shall designate a bank or trust company
reasonably acceptable to the Company to act as agent for the Company Common
Holders and Company Preferred Holders in connection with the Merger (the
"Exchange Agent"). The Exchange Agent shall (i) receive certificates
representing the Merger Consideration to which Company Common Holders and
Company Preferred Holders shall become entitled pursuant to Sections 2.7(a) and
(b) and (ii) receive and thereafter sell the Excess Shares pursuant to Section
2.9. Prior to the Effective Time, HCPI will make available to the Exchange Agent
sufficient
17
certificates representing shares of HCPI Common Stock and HCPI Series C
Preferred Stock to make all exchanges pursuant to Section 2.10(b). The Exchange
Agent shall cause the certificates representing shares of HCPI Common Stock and
HCPI Series C Preferred Stock deposited by HCPI to be (i) held for the benefit
of the Company Common Holders and Company Preferred Holders and (ii) promptly
applied to making the exchanges and payments provided for in Section 2.10(b).
Such shares of HCPI Common Stock, HCPI Series C Preferred Stock and cash
resulting from the Fractional Securities Fund shall not be used for any purpose
that is not provided for herein.
(b) Promptly after the Effective Time, HCPI shall mail, or shall cause the
Surviving Corporation to mail, to each Company Common Holder and each Company
Preferred Holder (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration and any cash in lieu of fractional shares
pursuant to Section 2.9. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor, (i) with respect
to Certificates formerly representing Company Common Stock, a certificate
representing that number of whole shares of HCPI Common Stock which such holder
has the right to receive pursuant to the provisions of Section 2.7(a), (ii) with
respect to Certificates formerly representing Company Series B Preferred Stock,
a certificate representing that number of whole shares of HCPI Series C
Preferred Stock which such holder has the right to receive pursuant to Section
2.7(b), (iii) cash in lieu of any fractional shares of HCPI Common Stock to
which such holder is entitled pursuant to Section 2.9, after giving effect to
any required Tax withholdings, and (iv) any dividends or distributions to which
such holder is entitled pursuant to Section 2.10(e), and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered and exchanged,
each Certificate shall represent the Merger Consideration into which the Company
Stock it theretofore represented shall have been converted pursuant to Sections
2.7(a) or (b), the right to receive certificates representing such Merger
Consideration and cash in lieu of any fractional shares pursuant to Section 2.9.
If the exchange of certificates representing shares of HCPI Common Stock or HCPI
Series C Preferred Stock is to be made to a Person other than the Person in
whose name the surrendered Certificate is registered, it shall be a condition of
exchange that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the Person requesting such
exchange shall have paid any transfer and other Taxes required by reason of the
exchange of Certificates representing shares of HCPI Common Stock or HCPI Series
C Preferred Stock, as the case may be, to a Person other than the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of the Surviving Corporation that such Tax either has been paid or
is not applicable.
(c) At any time after the one-year anniversary of the Effective Time, HCPI
shall be entitled to require the Exchange Agent to deliver to HCPI all cash then
in the Fractional Securities Fund together with any other cash and any other
instruments (including shares of HCPI Common Stock and HCPI Preferred Series C
Preferred Stock) in its possession relating to
18
the transactions contemplated by this Agreement which had been made available to
the Exchange Agent and which have not been distributed to holders of
Certificates. Thereafter, each holder of a Certificate, subject to Section
2.7(c), may surrender such Certificate to the Surviving Corporation and (subject
to applicable abandoned property, escheat or other similar laws) receive in
exchange therefor the consideration payable in respect thereto pursuant to
Sections 2.7(a) or (b) and Section 2.9, without interest, but shall have no
greater rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation under the MGCL. Notwithstanding the
foregoing, none of HCPI, the Surviving Corporation or the Exchange Agent shall
be liable to any Company Common Holder for shares of HCPI Common Stock (and any
cash payable in lieu of any fractional shares of HCPI Common Stock) or Company
Preferred Holder for shares of HCPI Series C Preferred Stock whose Certificates
have been delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(d) At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Company Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of shares of
Company Common Stock or shares of Company Series B Preferred Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Stock or Company Series B Preferred Stock, as
the case may be, except as otherwise provided for herein or by applicable law.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to shares of HCPI Common Stock or HCPI Series C
Preferred Stock shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of HCPI Common Stock or HCPI Series C Preferred Stock
the holder is entitled to receive and no cash in lieu of fractional shares
pursuant to Section 2.9, shall be paid to such holder until the holder of such
Certificate shall surrender such Certificate in accordance with the provisions
of this Agreement. Upon such surrender, HCPI shall cause to be paid to the
Person in whose name the Certificates shall be issued, any dividends or
distributions with respect to such shares of HCPI Common Stock or HCPI Series C
Preferred Stock which have a record date after the Effective Time and shall have
become payable between the Effective Time and the time of such surrender. In no
event shall the Person entitled to receive such dividends or distributions be
entitled to receive interest thereon.
(f) HCPI shall take all commercially reasonable action so that each holder
of Company Common Stock at the Effective Time which is converted into HCPI
Common Stock as set forth in Section 2.7(a) shall be entitled to vote on all
matters subject to the vote of holders of HCPI Common Stock with a record date
on or after the date of the Effective Time, whether or not such holder shall
have surrendered Certificates in accordance with the provisions of this
Agreement. For purposes of the immediate foregoing sentence, HCPI may rely
conclusively on the stockholder records of the Company in determining the
identity of and the number of shares of Company Common Stock held by each holder
of Company Common Stock at the Effective Time.
19
(g) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights or Assets of the
Company as a result of, or in connection with, the Merger or otherwise to carry
out this Agreement, the officers of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf the Company or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in such names and on such behalves or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights or Assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
Section 2.11 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of HCPI
Common Stock or HCPI Series C Preferred Stock, as applicable (and cash in lieu
of any fractional shares of HCPI Common Stock), and dividends or distributions
in respect thereof, if any, as may be required pursuant to Section 2.7(a),
Section 2.7(b), Section 2.9 and Section 2.10(e); provided, however, that HCPI
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificates to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against HCPI or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
Section 2.12 TAX CONSEQUENCES. It is intended by the Parties that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code. The Parties hereby adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Treasury Regulations.
Section 2.13 WITHHOLDING RIGHTS. HCPI or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration, or cash in lieu
of fractional shares, if any, otherwise payable pursuant to this Agreement to
any Company Common Holder or Company Preferred Holder such amounts as HCPI or
the Exchange Agent is required to deduct and withhold with respect to the making
of such payment under the Code or any provision of state, local, or foreign Tax
law. To the extent that amounts are so withheld by HCPI or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the Company Common Holder or Company Preferred Holder, as
the case may be, in respect of which such deduction and withholding was made by
HCPI or the Exchange Agent. HCPI hereby agrees to comply with all requirements
of law, including any notice to the holders of Company Common Stock or Company
Series B Preferred Stock, as the case may be, in connection with such
withholding.
20
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to HCPI that the statements contained
in this Article III are true and correct except as set forth herein or in the
disclosure schedule delivered by the Company to HCPI on or before the date of
this Agreement (the "Company Disclosure Schedule"). The Company Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Agreement and the disclosure in any
paragraph shall qualify other paragraphs in this Agreement only to the extent
that such disclosure specifically references the fact that it also qualifies or
applies to such other specified paragraphs.
Section 3.1 ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with the corporate power and
authority to own and operate its business as presently conducted. The Company
and each of its Subsidiaries is duly qualified as a foreign corporation or other
entity to do business and is in good standing in each jurisdiction where the
ownership or operation of its properties or the nature of its activities makes
such qualification necessary, except for such failures of the Company and any of
its Subsidiaries to be so qualified as would not, when taken together with all
such other failures, cause a Company Material Adverse Effect. The Company has
previously made available to HCPI true and correct copies of its certificate of
incorporation and bylaws as currently in effect.
Section 3.2 AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT. The Company
has the requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby subject to the adoption and approval of this Agreement by
the requisite vote of the holders of Company Common Stock. The execution and
delivery of this Agreement by the Company and the performance by the Company of
its obligations hereunder and the consummation of the transactions contemplated
hereby have been duly authorized by the Company Board and all other necessary
corporate action on the part of the Company, other than the adoption and
approval of this Agreement by the requisite vote of the holders of the Company
Common Stock, and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws of general applicability relating to or affecting creditors'
rights generally and general equitable principles (whether considered in a
proceeding in equity or at law).
Section 3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of (i) 100,000,000
shares of Company Common Stock, and (ii) 1,000,000 shares of preferred stock,
par value $.01 per share, of which 350,000 shares have been designated as
Company Series A Preferred Stock,
21
46,000 shares have been designated as Company Series B Preferred Stock and
220,000 shares have been designated as Psychiatric Group Preferred Stock. As of
July 16, 1999, there were issued and outstanding (i) 24,984,422 shares of
Company Common Stock (none of which is held in the Company treasury), (ii) no
shares of Company Series A Preferred Stock, (iii) 40,000 shares of Company
Series B Preferred Stock (none of which is held in the Company treasury), and
(iv) no shares of Psychiatric Group Preferred Stock. Section 3.3(a) of the
Company Disclosure Schedule sets forth the number of shares of Company Stock and
each other class of capital stock of the Company reserved for future issuance as
of July 16, 1999 under each of the Company Stock Plans or otherwise and the
Company Stock Plan or other agreement pursuant to which they have been reserved.
Since July 16, 1999, no shares of Company Stock or any other capital stock of
the Company have been issued or reserved for issuance, except for shares of
Company Stock issued in respect of the exercise, conversion or exchange of
Company Options, Company Dividend Equivalent Rights or Company Deferred
Directors Fees outstanding as of July 16, 1999. Section 3.3(a) of the Company
Disclosure Schedule also sets forth as of the date hereof the date on which each
Company Stock Right currently outstanding was issued, the dates on which each
such outstanding and unvested Company Stock Right vests, the class and number of
shares of Company Stock or other capital stock of the Company for or into which
each such Company Stock Right is exercisable, convertible or exchangeable and
the exercise price thereof. Except as set forth in this Section 3.3(a) or
Section 3.3(a) to the Company Disclosure Schedule, there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of Company Stock or any other capital stock of the
Company or its Subsidiaries or other voting securities of the Company or its
Subsidiaries, or obligating the Company or its Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking, and neither the Company nor
its Subsidiaries have granted any stock appreciation rights or any other
contractual rights the value of which is derived from the financial performance
of the Company or the value of shares of Company Stock or any other capital
stock of the Company. There are no obligations, contingent or otherwise, of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of Company Stock or any other capital stock of the Company or the
capital stock or ownership interests of any Subsidiary of the Company or to
provide funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any other entity, other than guarantees of bank
obligations or indebtedness for borrowed money of Subsidiaries entered into in
the ordinary course of business. Neither the Company nor any of its Subsidiaries
is holding or owns any shares of Company Stock on behalf of third parties.
(b) There are no issued and outstanding bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities having such
rights) ("Voting Debt") of the Company or any of its Subsidiaries. Except as
reserved for future grants of options under the Company Stock Plans as of the
date hereof or for issuance pursuant to the Company Rights Plan, (i) there are
no shares of capital stock of any class of, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding; (ii) there are no options, warrants, equity securities, calls,
rights, commitments or agreements of
22
any character to which the Company or any of its Subsidiaries is a party or by
which it is bound, in each case, obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other ownership interests (including
Voting Debt) of the Company or any of its Subsidiaries or obligating the Company
or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement; and (iii) there are no voting trusts, proxies or other voting
agreements or understandings currently in effect with respect to the shares of
capital stock of the Company to which the Company or any of its Subsidiaries is
currently a party or of which the Company has Knowledge. All shares of Company
Common Stock subject to issuance as specified in this Section 3.3(b) or in
Section 3.3(b) of the Company Disclosure Schedule are duly authorized and, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be validly issued, fully paid and nonassessable.
Section 3.4 SUBSIDIARIES. Other than Subsidiaries of Company formed or
acquired after the date hereof in accordance with the terms of Section 5.2 (of
which the Company has provided notice to HCPI prior to any such formation or
acquisition), Section 3.4 of the Company Disclosure Schedule sets forth all
Subsidiaries of the Company. All of the outstanding shares of capital stock
(including shares which may be issued upon exercise of outstanding options) or
other ownership interests of each of the Company's Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and all such shares and
ownership interests are owned by the Company or a Subsidiary of the Company free
and clear of all Liens. The Company owns, directly or indirectly, all of the
issued and outstanding capital stock and other ownership interests of each of
its Subsidiaries, free and clear of all Liens, and there are no existing
options, warrants, calls, subscriptions, convertible securities or other
securities, agreements, commitments or obligations of any character relating to
the outstanding capital stock or other securities of any Subsidiary of the
Company or which would require any Subsidiary of the Company to issue or sell
any shares of its capital stock, ownership interests or securities convertible
into or exchangeable for shares of its capital stock or ownership interests.
Section 3.5 OTHER INTERESTS. Neither the Company nor any of the Company's
Subsidiaries owns or has the right or option to acquire, directly or indirectly,
any interest or investment in (whether equity or debt) any business or Person
(other than the Company's Subsidiaries and other than the rights held by the
Company or its Subsidiaries identified in Section 3.4 of the Company Disclosure
Schedule or as permitted, after the date hereof, under Section 5.2 (of which the
Company will have provided notice to HCPI prior to any such acquisition)).
Without limiting the generality of the foregoing sentence, neither the Company
nor any "Affiliate" or "Associate" (as such terms are defined in Section 3-601
of the MGCL) of the Company, is, or was at any time, the "Beneficial Owner" (as
defined in Section 3-601 of the MGCL), directly or indirectly, of 5% or more of
the voting power of the outstanding voting stock of HCPI. To the Knowledge of
the Company, no Person owns or has owned, actually or constructively (as such
term is used for purposes of the not closely held requirement set forth in
Section 856(a)(6) of the Code or as set forth in Section 856(d)(5) of the Code)
in excess of 9.8% in value of the outstanding stock of the Company.
23
Section 3.6 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Neither the execution and delivery of this Agreement nor the
performance by the Company of its obligations hereunder, nor the consummation of
the transactions contemplated hereby, will: (i) conflict with the Company's
certificate of incorporation or bylaws or the comparable charter or
organizational documents of any of its Subsidiaries; (ii) assuming satisfaction
of the requirements set forth in Section 3.6(b) below, violate any statute, law,
ordinance, rule or regulation, applicable to the Company or any of its
Subsidiaries or any of their Assets; or (iii) violate, breach, be in conflict
with or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, permit the termination of any provision
of, result in the termination of, the acceleration of the maturity of, or the
acceleration of the performance of any obligation of the Company or any of its
Subsidiaries under, result in the creation or imposition of any Lien upon any
Assets of the Company or any of its Subsidiaries under, or give rise to any
third party's right of first refusal, or other similar right, under any note,
bond, indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or commitment or
any order, judgment or decree to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries or any of their
respective Assets are bound or encumbered, or give any Person the right to
require the Company or any of its Subsidiaries to purchase or repurchase any
notes, bonds or instruments of any kind except, in the case of clauses (ii) and
(iii), for such violations, breaches, conflicts, defaults or other occurrences
which, individually or in the aggregate, would not cause a Company Material
Adverse Effect.
(b) Except (i) for applicable requirements, if any, of the Exchange Act,
the Securities Act, and state securities or "blue sky" laws ("Blue Sky Laws"),
(ii) for the filing of the Certificate of Merger pursuant to the DGCL and the
filing of the Articles of Merger pursuant to the MGCL, (iii) for other
governmental approvals required under the applicable laws of any foreign
jurisdiction, (iv) for the approval of this Agreement by the requisite vote of
the holders of Company Common Stock, and (v) with respect to matters set forth
in Sections 3.6(a) or 3.6(b) of the Company Disclosure Schedule, no consent,
approval or authorization of, permit from, or declaration, filing or
registration with, any Governmental Entity, or any other Person is required to
be made or obtained by the Company or any of its Subsidiaries in connection with
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, except where the failure to obtain such
consent, approval, authorization, permit or declaration or to make such filing
or registration would not, individually or in the aggregate, cause a Company
Material Adverse Effect.
Section 3.7 COMPLIANCE. The Company and each of its Subsidiaries is in
compliance with all foreign, federal, state and local laws and regulations
applicable to its operations or with respect to which compliance is a condition
of engaging in the business thereof, except to the extent that failure to comply
would not, individually or in the aggregate, cause a Company Material Adverse
Effect. Neither the Company nor any of its Subsidiaries has received any written
notice asserting a failure, or possible failure, to comply with any such law or
regulation, the subject of which written notice has not been resolved as
required thereby or
24
otherwise to the satisfaction of the party sending the notice, except for such
failures as would not, individually or in the aggregate, cause a Company
Material Adverse Effect.
Section 3.8 SEC REPORTS.
(a) The Company has filed with the SEC and made available to HCPI true and
complete copies of each registration statement, proxy or information statement,
form, report and other document required to be filed by the Company or any of
its Subsidiaries with the SEC since January 1, 1996 (collectively, the "Company
SEC Reports"). As of their respective dates, with respect to Company SEC Reports
filed pursuant to the Exchange Act, and as of their respective effective dates,
as to Company SEC Reports filed pursuant to the Securities Act, the Company SEC
Reports and any registration statements, reports, forms, proxy or information
statements and other documents filed by the Company with the SEC after the date
of this Agreement (i) complied, or, with respect to those not yet filed, will
comply, in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, and (ii) did not, or, with respect to those
not yet filed, will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated balance sheets included in or incorporated by
reference into the Company SEC Reports (including the related notes and
schedules) presents fairly, in all material respects, the consolidated financial
position of the Company and its consolidated Subsidiaries as of its date, and
each of the consolidated statements of income, retained earnings and cash flows
of the Company included in or incorporated by reference into the Company SEC
Reports (including any related notes and schedules) presents fairly, in all
material respects, the results of operations, retained earnings or cash flows,
as the case may be, of the Company and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal year-end
audit adjustments), in each case in accordance with GAAP consistently applied
during the periods involved, except as may be noted therein.
(c) Except as set forth in the Company SEC Reports, neither the Company nor
any of its Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of the Company or in
the notes thereto, prepared in accordance with GAAP consistently applied, except
for (i) liabilities or obligations that were so reserved on, or reflected in
(including the notes to), the consolidated balance sheet of the Company as of
▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) liabilities or obligations arising in the ordinary course
of business (including trade indebtedness and liabilities, obligations and
secured debt assumed in connection with the acquisition of properties by the
Company or its Subsidiaries) since March 31, 1999, and (iii) liabilities or
obligations which would not, individually or in the aggregate, cause a Company
Material Adverse Effect.
Section 3.9 ABSENCE OF CERTAIN CHANGES. Except as set forth in the Company
SEC Reports and except for the transactions expressly contemplated hereby, since
March 31,
25
1999, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course consistent with past practices
(including the incurrence of trade indebtedness and liabilities, obligations and
secured debt assumed in connection with the acquisition of properties by the
Company or its Subsidiaries) and there has not been any change in the Company's
business, operations, condition (financial or otherwise), results of operations,
Assets or liabilities, except for changes expressly contemplated hereby or
changes which, individually or in the aggregate, have not caused or will not
cause a Company Material Adverse Effect.
Section 3.10 LITIGATION. Except as set forth in the Company SEC Reports,
there is no Action instituted, pending or, to the Knowledge of the Company,
threatened, in each case against the Company, any of its Subsidiaries or any of
their respective Assets which, individually or in the aggregate, directly or
indirectly, would have a Company Material Adverse Effect, nor is there any
outstanding judgment, decree or injunction, in each case against the Company,
any of its Subsidiaries or any of their respective Assets or any statute, rule
or order of any Governmental Entity applicable to the Company or any of its
Subsidiaries which, individually or in the aggregate, has caused, or would
cause, a Company Material Adverse Effect.
Section 3.11 TAXES.
(a) The Company and its Subsidiaries have (i) duly filed (or there have
been filed on their behalf) or have duly filed for an appropriate extension with
the appropriate Governmental Entities all Tax Returns required to be filed by
them and such Tax Returns are true, correct and complete in all material
respects, and (ii) duly paid in full all Taxes required to have been paid by
them, whether or not shown to be due on such Tax Returns, provided, however, to
the extent the foregoing clauses (i) or (ii) relate to Taxes for which a tenant
is responsible pursuant to a Company Lease, to the Knowledge of the Company,
such clauses (i) and (ii) are true with respect to such tenant;
(b) No written claim is pending by an authority in a jurisdiction where any
of the Company and its Subsidiaries does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction;
(c) No federal income Tax Returns of the Company or its Subsidiaries have
been audited for the Company's taxable years beginning on or after January 1,
1990, and no federal or state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns of the Company or its Subsidiaries, and neither the Company nor
any of its Subsidiaries has received a written notice of any threatened audits
with respect to Taxes or Tax Returns of the Company or any of its Subsidiaries,
and neither the Company nor any of its Subsidiaries has waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency;
(d) Section 3.11(d) of the Company Disclosure Schedule sets forth, with
respect to those taxable years for which Tax Returns have not yet been filed,
the taxable years of
26
the Company and its Subsidiaries as to which extensions to file Tax Returns have
been requested or any waiver of the applicable statute of limitations has been
executed;
(e) The Internal Revenue Service has not asserted against the Company or
any of its Subsidiaries any deficiency or claim for Taxes with respect to the
Company's taxable years beginning on or after January 1, 1990, and no other
taxing authority (whether domestic or foreign) has asserted against the Company
or any of its Subsidiaries any deficiency or claim for Taxes in excess of
$100,000 for any of the Company's taxable years beginning on or after January 1,
1990;
(f) There are no Liens for Taxes upon any Assets of the Company or any
Subsidiary thereof, except for Liens for Taxes not yet due or delinquent or for
which a tenant is responsible under a lease for real property. With respect to
any such Taxes for which a tenant is responsible, to the Knowledge of the
Company, no such Taxes are delinquent. No written power of attorney that has
been granted by the Company or any of its Subsidiaries (other than to the
Company or a Subsidiary) currently is in force with respect to any matter
relating to Taxes;
(g) Neither the Company nor any of its Subsidiaries has, with regard to any
Assets held by any of them, agreed to have Section 341(f)(2) of the Code apply
to any disposition of a "subsection (f) asset" (as such term is defined in
Section 341(f)(4) of the Code) owned by the Company or any of its Subsidiaries;
(h) None of the Company and its Subsidiaries is a party to any Tax
allocation or sharing agreement;
(i) None of the Company and its Subsidiaries (i) has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or (ii) has any liability for
the Taxes of any Person (other than any of the Company and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise;
(j) Since the Company's taxable year ending December 31, 1987, the Company
has not incurred and does not expect to incur through the Closing Date any
liability for Taxes under Section 857(b), 860(c) or 4981 of the Code, and
neither the Company nor any of its Subsidiaries has incurred any material
liability for Taxes other than in the ordinary course of business. To the
Knowledge of the Company, no event has occurred and no condition or circumstance
exists which presents a material risk that any material Tax described in the
preceding sentence will be imposed upon the Company.
(k) The Company (i) for all taxable years commencing with 1987 through the
most recent December 31, has been subject to taxation as a REIT and has
satisfied all requirements to qualify as a REIT for such years, (ii) has
operated in such a manner as to qualify as a REIT, and will continue to operate
through the Closing Date in such a manner as to qualify as a REIT, (iii) has not
taken or omitted to take any action which would reasonably be expected to result
in a challenge to its status as a REIT, and, to the Knowledge of the Company, no
such
27
challenge is pending or threatened, and (iv) has not granted any exception to
its stock ownership limits set forth in its certificate of incorporation or
other governing document(s) relating to its tax status as a REIT. Each
Subsidiary of the Company that is a state law partnership or limited liability
company has been since its formation and continues to be treated for federal
income tax purposes as a partnership (or a disregarded entity) and not as a
corporation or an association or publicly traded partnership taxable as a
corporation. Each other Subsidiary of the Company has been since its formation,
and continues to be treated for federal income purposes as a "qualified REIT
subsidiary" as defined in Section 856(i) of the Code. Neither the Company nor
any Subsidiary of the Company holds any Asset the disposition of which would be
subject to rules similar to Section 1374 of the Code as a result of an election
under IRS Notice 88-19.
Section 3.12 EMPLOYEE BENEFIT PLANS.
(a) Section 3.12 of the Company Disclosure Schedule contains a complete
list of all Employee Plans of the Company and its Subsidiaries as of the date
hereof. True and complete copies or descriptions of the Employee Plans of the
Company and its Subsidiaries, including, without limitation, trust instruments,
if any, that form a part thereof, and all amendments thereto, have been
furnished or made available to HCPI and its counsel.
(b) Each of the Employee Plans of the Company and its Subsidiaries (other
than any Multiemployer Plan) has been administered and is in substantial
compliance with the terms of such Employee Plan and all applicable laws, rules
and regulations. Each Pension Plan of the Company or its Subsidiaries which is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service with respect to
"TRA" (as defined in Section 1 of Rev. Proc. 93-39) (except with respect to the
amendment to the Company's Money Purchase Pension Plan referred to in Section
5.1(e)), and the Company is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. All contributions
required to be made under the terms of any Employee Plan of the Company or its
Subsidiaries have been timely made or have been reflected in the consolidated
balance sheets included in or incorporated by reference in the Company SEC
Reports. Neither the Company nor any of its Subsidiaries has provided, or is
required to provide, security to any Pension Plan of the Company or its
Subsidiaries pursuant to Section 401(a)(29) of the Code.
(c) No "reportable event" (as such term is used in Section 4043 of ERISA)
for which the notice requirements to the Pension Benefit Guaranty Corporation
have not been waived, or "accumulated funding deficiency" (as such term is used
in Section 412 of the Code or Section 302 of ERISA), whether or not waived, has
heretofore occurred with respect to any Pension Plan (other than any
Multiemployer Plan) of the Company or its Subsidiaries. Neither the Company nor
any of its Subsidiaries has engaged in a transaction in violation of Section 406
or 407 of ERISA or any transaction with respect to any Employee Plan that, in
either case, assuming the taxable period of such transaction expired as of the
date hereof, could subject the Company or any Subsidiary to a tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an
amount which would be material.
28
(d) There is no material Action relating to or seeking benefits under any
Employee Plan of the Company or any of its Subsidiaries that is pending or, to
the Company's Knowledge, threatened against the Company, any of its
Subsidiaries, any of their ERISA Affiliates, or any of the Employee Plans of the
Company or any of its Subsidiaries, other than routine claims for benefits.
(e) The Company has not incurred any withdrawal or other liability with
respect to any Multiemployer Plan of the Company or any of its Subsidiaries
under Title IV of ERISA which remains unsatisfied.
(f) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by the Company, any of its Subsidiaries or their ERISA
Affiliates with respect to any ongoing, frozen or terminated "single-employer
plan," within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them.
(g) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in the
acceleration or creation of any rights of any current or former employee of the
Company or any of its Subsidiaries to benefits under any Employee Plan
(including, without limitation, the acceleration of the vesting or
exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(h) Under each Pension Plan of the Company or its Subsidiaries which is a
single-employer plan, as of the last day of the most recent plan year ended
prior to the date hereof, the actuarially determined present value of all
"benefit liabilities," within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in the Plan's
most recent actuarial valuation), did not exceed the then current value of the
assets of such Pension Plan, and there has been no material change in the
financial condition of such Pension Plan since the last day of the most recent
plan year.
(i) Neither the Company nor any of its Subsidiaries has any obligations for
retiree health and life insurance benefits under any Employee Plan of the
Company or its Subsidiaries, except as required under Section 4980B of the Code
or Title I, Subtitle B, Part 6 of ERISA.
Section 3.13 PROPERTIES.
(a) Section 3.13(a) of the Company Disclosure Schedule lists all real
properties owned in fee simple by the Company and its Subsidiaries (the "Company
Owned Property") and all real properties leased by the Company and its
Subsidiaries as lessee (the "Company Leased Property"), which are all of the
real properties owned or leased by them. The Company Owned Property and the
Company Leased Property is referred to herein collectively as the "Company Real
Property."
29
(b) The Company and its Subsidiaries have fee simple title to the Company
Owned Property, and a valid leasehold interest in the Company Leased Property,
sufficient to allow the Company and its Subsidiaries, taken as a whole, to
conduct its business of leasing property to third parties as currently
conducted. The Company Real Property is not subject to any Encumbrances, except
for any Permitted Encumbrances.
(c) Except as set forth on Section 3.14(a) of the Company Disclosure
Schedule or as disclosed in the Company SEC Reports, the Company Real Property
is not encumbered by any material debt.
(d) Valid policies of title insurance have been issued insuring the
Company's or its applicable Subsidiary's fee simple title to the Company Owned
Property or the Company's or its applicable Subsidiary's leasehold interest in
the Company Leased Property, as appropriate, in an amount at least equal to the
original purchase price thereof, subject only to the matters disclosed in
Sections 3.13(a), (b) and (c) above together with the corresponding provisions
of the Company Disclosure Schedule, and, to the Knowledge of the Company, such
policies are, at the date hereof, in full force and effect and no material claim
has been made against any such policy.
(e) To the Knowledge of the Company all (i) certificates, permits or
licenses from any Governmental Entity having jurisdiction over any Company Real
Property and (ii) agreements, easements or other rights, necessary to permit the
lawful use and operation of the buildings and improvements on any of the Company
Real Property have been obtained and are in full force and effect, except where
the failure to maintain the same would not cause a Company Material Adverse
Effect, and the Company does not have any Knowledge of any pending threat or
modification or cancellation of the same. No Company Real Property is located
outside of the United States and neither the Company nor any of its Subsidiaries
conducts its business of owning, leasing or operating properties outside of the
United States. All work to be performed, payments to be made and actions to be
taken by the Company or its Subsidiaries prior to the date hereof pursuant to
any agreement entered into with a Governmental Entity in connection with a site
approval, zoning reclassification or other similar action relating to a Company
Real Property has been performed, paid or taken, as the case may be, and the
Company has no Knowledge of any planned or proposed work, payments or actions
that may be required after the date hereof pursuant to such agreements in each
such case, which is, individually or in the aggregate, material to the Company
and its Subsidiaries taken as a whole.
(f) The Company has not received any written notice or written notices of
any violation of any federal, state or municipal law, ordinance, order,
regulation or requirement affecting any portion of any Company Real Property
issued by any Governmental Entity except for such notice or notices which would
not have, individually or in the aggregate, a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has received any written notice
to the effect that any condemnation or rezoning proceedings are pending or
threatened with respect to any Company Real Property, except where any such
written notice of such a proceeding would not, individually or in the aggregate,
cause a Company Material Adverse Effect.
30
(g) Except as would not, individually or in the aggregate, cause a Company
Material Adverse Effect, there is no (i) material structural defect relating to
the Company Real Property, (ii) Company Real Property whose building systems are
not in working order in any material respect or (iii) physical damage to any
Company Real Property in excess of $100,000 or current renovation or restoration
of Company Real Property the remaining cost of which exceeds $100,000 for which
there is no insurance in effect covering the cost of such damage, renovation or
restoration, except for the payment by the Company of a deductible under the
applicable insurance policy.
(h) Each copy of any Company Lease which has been delivered to, or made
available for review by, HCPI as of the date hereof has been a true and correct
copy of such Company Lease as amended to date. True and correct copies of all
other Company Leases, as amended, will be delivered to, or made available for
review by, HCPI reasonably promptly after the date hereof. Section 3.13(h) of
the Company Disclosure Schedule lists the following information with respect to
each Company Lease that covers more than 7,500 square feet of space:
(i) the name of the lessee;
(ii) the expiration date;
(iii) the term of any options by the lessee to renew (exclusive of any
Company Leases relating to multi-tenant medical office space); and
(iv) the amount of periodic fixed rentals due under the Company Lease.
(i) All regularly scheduled rent payments due under each Company Lease have
been paid during the period March 31, 1999 through the date hereof, and to the
Company's Knowledge, no lessee is in material default, and no condition or event
exists which with the giving of notice or the passage of time, or both, would
constitute a material default by any lessee or contracting party, under any
Company Lease.
(j) The Company Leases are in full force and effect except where the
failure of the foregoing to be true would not have a material affect on the
ability of the Company and its Subsidiaries, taken as a whole, to operate their
businesses. None of the Company nor any of its Subsidiaries is in material
default under any Company Lease, and, to the Knowledge of the Company, no
material defaults (unless subsequently cured) by the Company or its Subsidiaries
have been alleged thereunder.
Section 3.14 CONTRACTS.
(a) Section 3.14(a) of the Company Disclosure Schedule contains a complete
and accurate list of all Company Contracts, other than the Company Contracts
which have been filed as an exhibit to the Company SEC Reports. Each copy of a
Company Contract which has been delivered to, or made available for review by,
HCPI is a true and correct copy of such Company Contract as amended to date.
31
(b) As of the date of this Agreement, (i) each of the Company Contracts is
valid and binding upon the Company or the applicable Subsidiary of the Company
in accordance with its terms and is in full force and effect, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally or general equitable principles (whether
considered in a proceeding in equity or at law), (ii) there is no material
breach or violation of or default by the Company or any of its Subsidiaries
under any of the Company Contracts, except if such breach, violation or default
has been waived, and (iii) no event has occurred with respect to the Company or
any of its Subsidiaries which, with notice or lapse of time or both, would
constitute a material breach, violation or default, or give rise to a right of
termination, modification, cancellation, foreclosure, imposition of a Lien,
prepayment or acceleration under any of the Company Contracts, which breach,
violation, default or other occurrence referred to in clauses (ii) or (iii),
individually or in the aggregate with other such breaches, violations, defaults
or other occurrences referred to in clauses (ii) or (iii), would cause a Company
Material Adverse Effect.
Section 3.15 LABOR RELATIONS. Except as would not cause a Company Material
Adverse Effect, (i) there are no controversies pending or, to the Knowledge of
the Company, threatened between the Company or any of its Subsidiaries and any
of their respective employees; (ii) neither the Company nor any of its
Subsidiaries is a party, or otherwise subject, to any collective bargaining
agreement or similar contract; (iii) there are no proceedings asserting unfair
labor practice charges pending against the Company or any of its Subsidiaries
before the National Labor Relations Board, or any similar foreign labor
relations governmental bodies; and (iv) there is no strike, slowdown, work
stoppage or lockout, or, to the Knowledge of the Company, threat thereof, by or
with respect to any employees of the Company or any of its Subsidiaries.
Section 3.16 INTELLECTUAL PROPERTY. The Company and each of its
Subsidiaries has good title to, or is validly licensed to use, all of the
Intellectual Property material to the business of the Company and its
Subsidiaries, taken as a whole, free of all material Liens. The consummation of
the Merger will not result in the loss of any rights by the Company or any of
its Subsidiaries in any Intellectual Property material to the business of the
Company and its Subsidiaries, taken as a whole.
Section 3.17 ENVIRONMENTAL MATTERS. Except as set forth in the Company SEC
Reports, and except as, individually or in the aggregate, has not had, and would
not cause, a Company Material Adverse Effect, the Company, each of its
Subsidiaries and, to the Knowledge of the Company, each tenant or operator of
Company Real Property (a) have obtained all applicable permits, licenses and
other authorizations which are required to be obtained under all applicable
Environmental Laws by the Company or its Subsidiaries; (b) are in material
compliance with all terms and conditions of such required permits, licenses and
authorizations, and also are in material compliance with all other applicable
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in applicable Environmental
Laws; (c) have not received a written notice of any uncured past or present
violations of Environmental Laws, or of any event, incident or Action preventing
32
continued compliance with such Environmental Laws, or giving rise to any common
law environmental liability, or forming the basis of any Action against the
Company or any of its Subsidiaries based on or resulting from the manufacture,
processing, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any Hazardous Material;
and (d) have taken all actions required under applicable Environmental Laws to
register any products or materials required to be registered by the Company or
its Subsidiaries thereunder. This Section 3.17 constitutes the sole
representation of the Company concerning any Environmental Law or Hazardous
Substance.
Section 3.18 OPINION OF FINANCIAL ADVISOR. The Company Board has received
an opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. (the "Company Financial Advisor") to the
effect that, as of the date hereof, Exchange Ratio is fair to the holders of
shares of Company Common Stock from a financial point of view. As of the date of
the filing of the Joint Proxy Statement/Prospectus with the SEC, and as of the
effective date of the Registration Statement, the Company will have been
authorized by the Company Financial Advisor to permit, subject to prior review
and consent by such Company Financial Advisor, the inclusion of such fairness
opinion (or a reference thereto) in the Joint Proxy Statement/Prospectus and in
the Registration Statement, respectively.
Section 3.19 BROKERS. No broker, finder or investment banker (other than
the Company Financial Advisor, the fees and expenses of which will be paid by
the Company) is entitled to any brokerage, finder's or other fee or commission
in connection with the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its
Subsidiaries. The Company has heretofore furnished to HCPI a complete and
correct copy of all agreements between the Company and the Company Financial
Advisor pursuant to which such firm would be entitled to any such payment.
Section 3.20 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve the Merger. The Company Board, at a meeting
duly called and held, by vote, subject to its right to withdraw its support of
the Merger and the transactions contemplated by this Agreement and recommend an
Acquisition Proposal or Acquisition Transaction pursuant to Section 6.3 hereof,
(a) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are advisable and in the best interests of the Company,
(b) approved this Agreement and the transactions contemplated hereby, including
the Merger, (c) declared that this Agreement is advisable, and (d) resolved to
recommend that the holders of the shares of the Company Common Stock approve
this Agreement and the transactions contemplated hereby, including the Merger.
Section 3.21 ACCOUNTING AND TAX MATTERS. None of the Company, its
Subsidiaries, directors, officers or agents has taken or agreed to take any
action, nor does any executive officer know of any circumstances, that (without
regard to any action taken or agreed to be taken by HCPI or any of its
Affiliates) would prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
33
Section 3.22 INSURANCE. All fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by the Company or any of its Subsidiaries with coverage of
loss payouts in excess of $15,000,000 are with reputable insurance carriers,
provide full and adequate coverage for all normal risks incident to the business
of the Company and its Subsidiaries and their respective Assets, and are in
character and amount at least equivalent to that carried by Persons engaged in
similar businesses and substantially equivalent to that carried by Persons
engaged in similar businesses and subject to the same or similar perils or
hazards except for any such failures to carry or maintain insurance policies
that, individually or in the aggregate, would not cause a Company Material
Adverse Effect.
Section 3.23 TAKEOVER PROVISIONS INAPPLICABLE. The Company has taken all
action necessary, if any, to exempt the transactions contemplated by this
Agreement from the operation of any "fair price," "moratorium," "control share
acquisition" or any other anti-takeover statute enacted under the laws of the
State of Delaware.
Section 3.24 NO MATERIAL ADVERSE EFFECT. Except as disclosed in the Company
SEC Reports, to the Knowledge of the Company, no current fact alone or together
with another current fact would cause a Company Material Adverse Effect.
Section 3.25 RIGHTS PLAN. The entering into of this Agreement and the
consummation of the transactions contemplated hereby (whether or not in
combination with the existing ownership of shares of Company Common Stock by
HCPI or its Subsidiaries as described in Section 4.26) do not and will not
result in the grant of any rights to any Person under the Company Rights Plan or
enable or require the Company Rights to be exercised, distributed or triggered
and there has been no event which has enabled or required the Company Rights to
be exercised, distributed or triggered.
Section 3.26 ▇▇▇▇▇▇▇ REPLACEMENT PROPERTIES. Section 3.26 of the Company
Disclosure Schedule lists certain properties that have been identified as
potential replacement properties in accordance with Treasury Regulation Section
1.1031(k)-1(c) and sets forth, for each such property, (a) the purchase price
reflected in a letter of intent or purchase agreement relating thereto (or, if
there is no letter of intent or purchase agreement reflecting a purchase price,
a good faith reasonable estimate of the price at which the Company believes such
property could be purchased) and (b) a good faith reasonable estimate of the
first 12 months' cash return on investment based on such purchase price or
estimated purchase price (calculated in a manner consistent with the manner in
which the Company customarily calculates returns on investment for similar
acquisitions).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF HCPI
HCPI represents and warrants to the Company that the statements contained
in this Article IV are true and correct except as set forth herein and in the
disclosure schedule delivered by HCPI to the Company on or before the date of
this Agreement (the "HCPI Disclosure Schedule"). The HCPI Disclosure Schedule
shall be arranged in paragraphs
34
corresponding to the numbered and lettered paragraphs contained in this
Agreement and the disclosure in any paragraph shall qualify other paragraphs in
this Agreement only to the extent that such disclosure specifically references
the fact that it also qualifies or applies to such other specified paragraphs.
Section 4.1 ORGANIZATION AND QUALIFICATION. HCPI and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with the corporate power and
authority to own and operate its businesses as presently conducted. HCPI and
each of its Subsidiaries is duly qualified as a foreign corporation or other
entity to do business and is in good standing in each jurisdiction where the
ownership or operation of its properties or the nature of its activities makes
such qualification necessary, except for such failures of HCPI and any of its
Subsidiaries to be so qualified as would not, when taken with all other such
failures, cause a HCPI Material Adverse Effect. HCPI has previously made
available to the Company true and correct copies of its articles of restatement
and bylaws as currently in effect.
Section 4.2 AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENt. HCPI has the
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby subject to the adoption and approval of this Agreement by the requisite
vote of the holders of HCPI Common Stock. The execution and delivery of this
Agreement by HCPI and the performance by HCPI of its obligations hereunder and
the consummation of the transactions contemplated hereby have been duly
authorized by the HCPI Board and all other necessary corporate action on the
part of HCPI, other than the adoption and approval of this Agreement by the
requisite vote of the holders of HCPI Common Stock, and no other corporate
proceedings on the part of HCPI are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by HCPI and constitutes a legal, valid and binding
obligation of HCPI, enforceable against it in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law).
Section 4.3 CAPITALIZATION.
(a) The authorized capital stock of HCPI consists of (i) 100,000,000 shares
of HCPI Common Stock and (ii) 50,000,000 shares of preferred stock, par value
$1.00 per share, of which 2,760,000 shares have been designated as HCPI Series A
Preferred Stock, 5,750,000 shares have been designated HCPI Series B Preferred
Stock, and 40,000 shares have been designated HCPI Series C Preferred Stock. As
of July 16, 1999, there were issued and outstanding (i) 32,044,176 shares of
HCPI Common Stock, (ii) 2,760,000 shares of HCPI Series A Preferred Stock and
(iii) 5,385,000 shares of HCPI Series B Preferred Stock. HCPI have reserved for
issuance a sufficient number of shares of HCPI Stock to consummate the Merger.
Section 4.3(a) of the HCPI Disclosure Schedule sets forth the number of shares
of HCPI Stock and each other class of capital stock of HCPI reserved for future
issuance as of July 16, 1999 under each of the HCPI Stock Plans or otherwise and
the HCPI Stock Plan or other
35
agreement pursuant to which they have been reserved. Since July 16, 1999, no
shares of HCPI Stock or any other capital stock of HCPI have been issued or
reserved for issuance, except for shares of HCPI Stock issued in respect of the
exercise, conversion or exchange of HCPI Stock Rights outstanding as of July 16,
1999. Section 4.3(a) of the HCPI Disclosure Schedule also sets forth as of the
date hereof, the date on which each HCPI Stock Right currently outstanding was
issued, the dates on which each such outstanding and unvested HCPI Stock Right
vests, the class and number of shares of HCPI Stock or other capital stock of
HCPI for or into which each such HCPI Stock Right is exercisable, convertible or
exchangeable and the exercise price thereof. Except as set forth in this Section
4.3(a) or Section 4.3(a) of the HCPI Disclosure Schedule, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which HCPI or any of its
Subsidiaries is a party or by which any of them is bound obligating HCPI or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of HCPI Stock or any other capital stock of HCPI or
its Subsidiaries or other voting securities of HCPI or its Subsidiaries, or
obligating HCPI or its Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking, and neither HCPI and its Subsidiaries have granted any stock
appreciation rights or any other contractual rights the value of which is
derived from the financial performance of HCPI or the value of shares of HCPI
Stock or any other capital stock of HCPI. There are no obligations, contingent
or otherwise, of HCPI or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of HCPI Stock or any other capital stock of HCPI or
the capital stock or ownership interests of any Subsidiary of HCPI or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any other entity, other than guarantees of bank
obligations or indebtedness for borrowed money of Subsidiaries entered into in
the ordinary course of business. Neither HCPI nor any of its Subsidiaries is
holding or owns any shares of HCPI Stock on behalf of third parties.
(b) There is no issued and outstanding Voting Debt of HCPI or any of its
Subsidiaries. Except as reserved for future grants of options under the HCPI
Stock Plans as of the date hereof, (i) there are no shares of capital stock of
any class of, or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding; (ii) there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which HCPI or any of its Subsidiaries is a party or by which
it is bound obligating HCPI or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other ownership interests (including Voting Debt) of HCPI or any of its
Subsidiaries or obligating HCPI or any of its Subsidiaries to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement; and (iii) there are no voting
trusts, proxies or other voting agreements or understandings currently in effect
with respect to the shares of capital stock of HCPI to which HCPI or any of its
Subsidiaries is currently a party or of which HCPI currently has Knowledge. All
shares of HCPI Common Stock subject to issuance as specified in this Section
4.3(b) or in Section 4.3(b) of the HCPI Disclosure Schedule are duly authorized
and, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be validly issued, fully paid and
nonassessable.
36
Section 4.4 SUBSIDIARIES. Other than Subsidiaries of HCPI formed or
acquired after the date hereof in connection with the acquisition of real
property in the ordinary course of business (of which HCPI has provided notice
to the Company prior to any such formation or acquisition), Section 4.4 of the
HCPI Disclosure Schedule sets forth all Subsidiaries of HCPI. All of the
outstanding shares of capital stock (including shares which may be issued upon
exercise of outstanding options) or other ownership interests of each of HCPI's
Subsidiaries are duly authorized, validly issued, fully paid and non-assessable
and all such shares and ownership interests are owned by HCPI or a Subsidiary of
HCPI free and clear of all Liens. HCPI owns, directly or indirectly, all of the
issued and outstanding capital stock and other ownership interests of each of
its Subsidiaries, free and clear of all Liens, and there are no existing
options, warrants, calls, subscriptions, convertible securities or other
securities, agreements, commitments or obligations of any character relating to
the outstanding capital stock or other securities of any Subsidiary of HCPI or
which would require any Subsidiary of HCPI to issue or sell any shares of its
capital stock, ownership interests or securities convertible into or
exchangeable for shares of its capital stock or ownership interests.
Section 4.5 OTHER INTERESTS. Neither HCPI nor any of HCPI's Subsidiaries
owns or has the right or option to acquire, directly or indirectly, any interest
or investment in (whether equity or debt) any business or Person (other than
HCPI's Subsidiaries and other than rights held by HCPI or its Subsidiaries
identified in Section 4.4 of the HCPI Disclosure Schedule or, after the date
hereof, acquisitions of real property in the ordinary course of business, and
Persons owning real property, in the ordinary course of business (of which HCPI
will have provided notice to the Company prior to any such acquisition)). To the
Knowledge of HCPI, no Person owns or has owned, actually or constructively (as
such term is used for purposes of the not closely held requirement set forth in
Section 856(a)(6) of the Code or Section 856(d)(5) of the Code) in excess of
9.9% in value of the outstanding stock of HCPI.
Section 4.6 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Neither the execution and delivery of this Agreement nor the
performance by HCPI of its obligations hereunder, nor the consummation of the
transactions contemplated hereby, will: (i) conflict with HCPI's charter or
bylaws or the comparable charter or organizational documents of any of its
Subsidiaries; (ii) assuming satisfaction of the requirements set forth in
Section 4.6(b) below, violate any statute, law, ordinance, rule or regulation,
applicable to HCPI or any of its Subsidiaries or any of their Assets; or (iii)
violate, breach, be in conflict with or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, permit
the termination of any provision of, result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of HCPI or any of its Subsidiaries under, result in the creation or
imposition of any Lien upon any Assets of HCPI or any of its Subsidiaries under,
or give rise to any third party's right of first refusal, or other similar
right, under any note, bond, indenture, mortgage, deed of trust, lease,
franchise, permit, authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which HCPI or any of
its Subsidiaries is a party or by which HCPI or any of its Subsidiaries or any
of their respective Assets are bound or encumbered, or give any Person the right
to require HCPI or any of its
37
Subsidiaries to purchase or repurchase any notes, bonds or instruments of any
kind except, in the case of clauses (ii) and (iii), for such violations,
breaches, conflicts, defaults or other occurrences which, individually or in the
aggregate, would not cause a HCPI Material Adverse Effect.
(b) Except (i) for applicable requirements, if any, of the Exchange Act,
the Securities Act, and Blue Sky Laws, (ii) for the filing of the Certificate of
Merger pursuant to the DGCL and the filing of the Articles of Merger pursuant to
the MGCL, (iii) for other governmental approvals required under the applicable
laws of any foreign jurisdiction, (iv) for the approval of this Agreement by the
requisite vote of the holders of HCPI Common Stock, and (v) with respect to
matters set forth in Sections 4.6(a) or 4.6(b) of the HCPI Disclosure Schedule,
no consent, approval or authorization of, permit from, or declaration, filing or
registration with, any Governmental Entity, or any other Person is required to
be made or obtained by HCPI or any of its Subsidiaries in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, except where the failure to obtain such
consent, approval, authorization, permit or declaration or to make such filing
or registration would not, individually or in the aggregate, cause a HCPI
Material Adverse Effect.
Section 4.7 COMPLIANCE. HCPI and each of its Subsidiaries is in compliance
with all foreign, federal, state and local laws and regulations applicable to
its operations or with respect to which compliance is a condition of engaging in
the business thereof, except to the extent that failure to comply would not,
individually or in the aggregate, cause a HCPI Material Adverse Effect. Neither
HCPI nor any of its Subsidiaries has received any written notice asserting a
failure, or possible failure, to comply with any such law or regulation, the
subject of which written notice has not been resolved as required thereby or
otherwise to the satisfaction of the party sending the notice, except for such
failure as would not, individually or in the aggregate, cause a HCPI Material
Adverse Effect.
Section 4.8 SEC REPORTS.
(a) HCPI has filed with the SEC and made available to the Company true and
complete copies of each registration statement, proxy or information statement,
form, report and other document required to be filed by HCPI or any of its
Subsidiaries with the SEC since January 1, 1996 (collectively, the "HCPI SEC
Reports"). As of their respective dates, with respect to HCPI SEC Reports filed
pursuant to the Exchange Act, and as of their respective effective dates, as to
HCPI SEC Reports filed pursuant to the Securities Act, the HCPI SEC Reports and
any registration statements, reports, forms, proxy or information statements and
other documents filed by HCPI with the SEC after the date of this Agreement (i)
complied, or, with respect to those not yet filed, will comply, in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, and (ii) did not, or, with respect to those not yet filed, will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated balance sheets included in or incorporated by
reference into HCPI SEC Reports (including the related notes and schedules)
presents fairly, in
38
all material respects, the consolidated financial position of HCPI and its
consolidated Subsidiaries as of its date, and each of the consolidated
statements of income, retained earnings and cash flows of HCPI included in or
incorporated by reference into HCPI SEC Reports (including any related notes and
schedules) presents fairly, in all material respects, the results of operations,
retained earnings or cash flows, as the case may be, of HCPI and its
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments), in each case in
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein.
(c) Except as set forth in the HCPI SEC Reports, neither HCPI nor any of
its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of HCPI or in the notes
thereto, prepared in accordance with GAAP consistently applied, except for (i)
liabilities or obligations that were so reserved on, or reflected in (including
the notes to), the consolidated balance sheet of HCPI as of ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇)
liabilities or obligations arising in the ordinary course of business (including
trade indebtedness and liabilities, obligations and secured debt assumed in
connection with the acquisition of properties by HCPI or its Subsidiaries) since
March 31, 1999, and (iii) liabilities or obligations which would not,
individually or in the aggregate, cause a HCPI Material Adverse Effect.
Section 4.9 ABSENCE OF CERTAIN CHANGES. Except as set forth in the HCPI SEC
Reports and except for the transactions expressly contemplated hereby, since
March 31, 1999, HCPI and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course consistent with past practices
(including the incurrence of trade indebtedness and liabilities, obligations and
secured debt assumed in connection with the acquisition of properties by HCPI or
its Subsidiaries) and there has not been any change in HCPI's business,
operations, condition (financial or otherwise), results of operations, Assets or
liabilities, except for changes expressly contemplated hereby or changes which,
individually or in the aggregate, have not caused or will not cause a HCPI
Material Adverse Effect.
Section 4.10 LITIGATION. Except as set forth in the HCPI SEC Reports, there
is no Action instituted, pending or, to the Knowledge of HCPI, threatened, in
each case against HCPI, any of its Subsidiaries or any of their respective
Assets which, individually or in the aggregate, directly or indirectly, would
have a HCPI Material Adverse Effect, nor is there any outstanding judgment,
decree or injunction, in each case against HCPI, any of its Subsidiaries or any
of their respective Assets, or any statute, rule or order of any Governmental
Entity applicable to HCPI or any of its Subsidiaries which, individually or in
the aggregate, has caused, or would cause, a HCPI Material Adverse Effect.
Section 4.11 TAXES.
(a) HCPI and its Subsidiaries have (i) duly filed (or there have been filed
on their behalf) or have duly filed for an appropriate extension, with the
appropriate Governmental Entities all Tax Returns required to be filed by them
and such Tax Returns are true, correct and complete in all material respects,
and (ii) duly paid in full all Taxes required to have been paid by
39
them, whether or not shown to be due on such Tax Returns, provided, however, to
the extent the foregoing clauses (i) or (ii) relate to Taxes for which a tenant
is responsible pursuant to a HCPI Lease, to the Knowledge of HCPI, such clauses
(i) and (ii) are true with respect to such tenant;
(b) No written claim is pending by an authority in a jurisdiction where any
of HCPI and its Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction;
(c) No federal income Tax Returns of HCPI or its Subsidiaries have been
audited for HCPI's taxable years beginning on or after January 1, 1990, and no
federal or state, local or foreign audits or other administrative proceedings or
court proceedings are presently pending with regard to any Taxes or Tax Returns
of HCPI or its Subsidiaries, and neither HCPI nor any of its Subsidiaries has
received a written notice of any threatened audits with respect to Taxes or Tax
Returns of HCPI or any of its Subsidiaries, and neither HCPI nor any of its
Subsidiaries has waived any statute of limitations with respect to Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency;
(d) Section 4.11(d) of the HCPI Disclosure Schedule sets forth , with
respect to those taxable years for which Tax Returns have not yet been filed,
the taxable years of HCPI and its Subsidiaries as to which extensions to file
Tax Returns have been requested or any waiver of the applicable statute of
limitations has been executed;
(e) The Internal Revenue Service has not asserted against HCPI or any of
its Subsidiaries any deficiency or claim for Taxes with respect to HCPI's
taxable years beginning on or after January 1, 1990, and no other taxing
authority (whether domestic or foreign) has asserted against HCPI or any of its
Subsidiaries any deficiency or claim for Taxes in excess of $100,000 for any of
HCPI's taxable years beginning on or after January 1, 1990;
(f) There are no Liens for Taxes upon any Assets of HCPI or any Subsidiary
thereof, except for Liens for Taxes not yet due or delinquent or for which a
tenant is responsible under a lease for real property. With respect to any such
Taxes for which a tenant is responsible, to the Knowledge of HCPI no such Taxes
are delinquent. No written power of attorney that has been granted by HCPI or
any of its Subsidiaries (other than to HCPI or a Subsidiary) currently is in
force with respect to any matter relating to Taxes;
(g) Neither HCPI nor any of its Subsidiaries has, with regard to any Assets
held by any of them, agreed to have Section 341(f)(2) of the Code apply to any
disposition of a "subsection (f) asset" (as such term is defined in Section
341(f)(4) of the Code) owned by HCPI or any of its Subsidiaries;
(h) None of HCPI and its Subsidiaries is a party to any Tax allocation or
sharing agreement;
(i) None of HCPI and its Subsidiaries (i) has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was HCPI) or (ii) has any liability for the
Taxes of any Person (other than any of HCPI
40
and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise;
(j) Since HCPI's taxable year ending December 31, 1985, HCPI has not
incurred and does not expect to incur through the Closing Date any liability for
Taxes under Section 857(b), 860(c) or 4981 of the Code, and neither HCPI nor any
of its Subsidiaries has incurred any material liability for Taxes other than in
the ordinary course of business. To the Knowledge of HCPI, no event has occurred
and no condition or circumstance exists which presents a material risk that any
material Tax described in the preceding sentence will be imposed upon HCPI.
(k) HCPI (i) for all taxable years commencing with 1985 through the most
recent December 31, has been subject to taxation as a REIT and has satisfied all
requirements to qualify as a REIT for such years, (ii) has operated in such a
manner as to qualify as a REIT, and will continue to operate through the Closing
Date in such a manner as to qualify as a REIT, (iii) has not taken or omitted to
take any action which would reasonably be expected to result in a challenge to
its status as a REIT, and, to the Knowledge of HCPI, no such challenge is
pending or threatened, and (iv) has not granted any exception to its stock
ownership limits set forth in its charter or other governing document(s)
relating to its tax status as a REIT. Each Subsidiary of HCPI that is a state
law partnership or limited liability company has been since its formation and
continues to be treated for federal income tax purposes as a partnership (or a
disregarded entity) and not as a corporation or an association or publicly
traded partnership taxable as a corporation. Each other Subsidiary of HCPI has
been since its formation, and continues to be treated for federal income Tax
purposes as a "qualified REIT subsidiary" as defined in Section 856(i) of the
Code. Neither HCPI nor any Subsidiary of HCPI holds any Asset the disposition of
which would be subject to rules similar to Section 1374 of the Code as a result
of an election under IRS Notice 88-19.
Section 4.12 EMPLOYEE BENEFIT PLANS.
(a) Section 4.12 of the HCPI Disclosure Schedule contains a complete list
of all Employee Plans of HCPI and its Subsidiaries as of the date hereof. True
and complete copies or descriptions of the Employee Plans of HCPI and its
Subsidiaries, including, without limitation, trust instruments, if any, that
form a part thereof, and all amendments thereto, have been furnished or made
available to the Company and its counsel.
(b) Each of the Employee Plans of HCPI and its Subsidiaries (other than any
Multiemployer Plan) has been administered and is in substantial compliance with
the terms of such Employee Plan and all applicable laws, rules and regulations.
Each Pension Plan of HCPI or its Subsidiaries which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service with respect to "TRA" (as defined in Section 1
of Rev. Proc. 93-39), and HCPI is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. All
contributions required to be made under the terms of any Employee Plan of HCPI
or its Subsidiaries have been timely made or have been reflected in the
consolidated balance sheets
41
included in or incorporated by reference in the HCPI SEC Reports. Neither HCPI
nor any of its Subsidiaries has provided, or is required to provide, security to
any Pension Plan of HCPI or its Subsidiaries pursuant to Section 401(a)(29) of
the Code.
(c) No "reportable event" (as such term is used in Section 4043 of ERISA)
for which the notice requirements to the Pension Benefit Guaranty Corporation
have not been waived, or "accumulated funding deficiency" (as such term is used
in section 412 of the Code or Section 302 of ERISA), whether or not waived, has
heretofore occurred with respect to any Pension Plan (other than any
Multiemployer Plan) of HCPI or its Subsidiaries. Neither HCPI nor any of its
Subsidiaries has engaged in a transaction in violation of Section 406 or 407 of
ERISA or any transaction with respect to any Employee Plan that, in either case,
assuming the taxable period of such transaction expired as of the date hereof,
could subject HCPI or any Subsidiary to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA in an amount which would be
material.
(d) There is no material Action relating to or seeking benefits under any
Employee Plan of HCPI or any of its Subsidiaries that is pending or, to HCPI's
Knowledge, threatened against HCPI, any of its Subsidiaries, any of their ERISA
Affiliates, or any of the Employee Plans of HCPI or any of its Subsidiaries,
other than routine claims for benefits.
(e) HCPI has not incurred any withdrawal or other liability with respect to
any Multiemployer Plan of HCPI or any of its Subsidiaries under Title IV of
ERISA which remains unsatisfied.
(f) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by HCPI, any of its Subsidiaries or their ERISA
Affiliates with respect to any ongoing, frozen or terminated "single-employer
plan," within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them.
(g) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in the
acceleration or creation of any rights of any current or former employee of HCPI
or any of its Subsidiaries to benefits under any Employee Plan (including,
without limitation, the acceleration of the vesting or exercisability of any
stock options, the acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any severance, parachute or
change in control agreement).
(h) Under each Pension Plan of HCPI or its Subsidiaries which is a
single-employer plan, as of the last day of the most recent plan year ended
prior to the date hereof, the actuarially determined present value of all
"benefit liabilities," within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in the Plan's
most recent actuarial valuation), did not exceed the then current value of the
assets of such Pension Plan, and there has been no material change in the
financial condition of such Pension Plan since the last day of the most recent
plan year.
42
(i) Neither HCPI nor any of its Subsidiaries has an obligations for retiree
health and life insurance benefits under any Employee Plan of HCPI or its
Subsidiaries, except as required under Section 4980B of the Code of Title I,
Subtitle B, Part 6 of ERISA.
Section 4.13 PROPERTIES.
(a) Section 4.13(a) of the HCPI Disclosure Schedule lists all real
properties owned in fee simple by HCPI and its Subsidiaries (the "HCPI Owned
Property") and all real properties leased by HCPI and its Subsidiaries as lessee
(the "HCPI Leased Property"), which are all of the real properties owned or
leased by them. The HCPI Owned Property and the HCPI Leased Property is referred
to herein collectively as the "HCPI Real Property."
(b) HCPI and its Subsidiaries have fee simple title to the HCPI Owned
Property, and a valid leasehold interest in the HCPI Leased Property, sufficient
to allow HCPI and its Subsidiaries, taken as a whole, to conduct its business of
leasing properties to third parties as currently conducted. The HCPI Real
Property is not subject to any Encumbrances, except for any Permitted
Encumbrances.
(c) Except as set forth on Section 4.14(a) of the HCPI Disclosure Schedule
or as disclosed in the HCPI SEC Reports, the HCPI Real Property is not
encumbered by any material debt.
(d) Valid policies of title insurance have been issued insuring HCPI's or
its applicable Subsidiary's fee simple title to the HCPI Owned Property or
HCPI's or its applicable Subsidiary's leasehold interest in the HCPI Leased
Property, as appropriate, in an amount at least equal to the original purchase
price thereof, subject only to the matters disclosed in Sections 4.13(a), (b)
and (c) above together with the corresponding provisions of the HCPI Disclosure
Schedule, and, to the Knowledge of HCPI, such policies are, at the date hereof,
in full force and effect and no material claim has been made against any such
policy.
(e) To the Knowledge of HCPI all (i) certificates, permits or licenses from
any Governmental Entity having jurisdiction over any HCPI Real Property and (ii)
agreements, easements or other rights, necessary to permit the lawful use and
operation of the buildings and improvements on any of the HCPI Real Property
have been obtained and are in full force and effect, except where the failure to
maintain the same would not cause a HCPI Material Adverse Effect and HCPI does
not have any Knowledge of any pending threat or modification or cancellation of
the same. No HCPI Real Property is located outside of the United States and
neither HCPI nor any of its Subsidiaries conducts its business of owning,
leasing or operating properties outside of the United States. All work to be
performed, payments to be made and actions to be taken by HCPI or its
Subsidiaries prior to the date hereof pursuant to any agreement entered into
with a Governmental Entity in connection with a site approval, zoning
reclassification or other similar action relating to a HCPI Real Property has
been performed, paid or taken, as the case may be, and HCPI has no Knowledge of
any planned or proposed work, payments or actions that may be required after the
date hereof pursuant to such agreements in each such case, which is,
individually or in the aggregate, material to HCPI and its Subsidiaries taken as
a whole.
43
(f) HCPI has not received any written notice or written notices of any
violation of any federal, state or municipal law, ordinance, order, regulation
or requirement affecting any portion of any HCPI Real Property issued by any
Governmental Entity except for such notice or notices which would not have,
individually or in the aggregate, a HCPI Material Adverse Effect. Neither HCPI
nor any of its Subsidiaries has received any written notice to the effect that
any condemnation or rezoning proceedings are pending or threatened with respect
to any HCPI Real Property, except where any such written notice of such a
proceeding would not, individually or in the aggregate, cause a HCPI Material
Adverse Effect.
(g) Except as would not, individually or in the aggregate, cause a HCPI
Material Adverse Effect, there is no (i) material structural defect relating to
the HCPI Real Property, (ii) HCPI Real Property whose building systems are not
in working order in any material respect or (iii) physical damage to any HCPI
Real Property in excess of $100,000 or current renovation or restoration to any
HCPI Real Property the remaining cost of which exceeds $100,000 for which there
is no insurance in effect covering the cost of such damage, renovation or
restoration except for the payment by HCPI of a deductible under the applicable
insurance policy.
(h) Each copy of any HCPI Lease which has been delivered to, or made
available for review by, the Company as of the date hereof has been a true and
correct copy of such HCPI Lease as amended to date. True and correct copies of
all other HCPI Leases, as amended, will be delivered to, or made available for
review by, the Company reasonably promptly after the date hereof. Section
4.13(h) of the HCPI Disclosure Schedule lists the following information with
respect to each HCPI Lease that covers more than 7,500 square feet of space:
(i) the name of the lessee;
(ii) the expiration date;
(iii) the term of any options by the lessee to renew (exclusive of any
HCPI's Leases relating to multi-tenant medical office space); and
(iv) the amount of periodic fixed rentals due under the HCPI Lease.
(i) All regularly scheduled rent payments due under each HCPI Lease have
been paid during the period March 31, 1999 through the date hereof, and to
HCPI's Knowledge, no lessee is in material default, and no condition or event
exists which with the giving of notice or the passage of time, or both, would
constitute a material default by any lessee or contracting party, under any HCPI
Lease.
(j) The HCPI Leases are in full force and effect, except where the failure
of the foregoing to be true would not have a material effect on the ability of
HCPI and its Subsidiaries, taken as a whole, to operate their businesses. None
of HCPI nor any of its Subsidiaries is in material default under any HCPI Lease,
and, to the Knowledge of HCPI, no
44
material defaults (unless subsequently cured) by HCPI or its Subsidiaries have
been alleged thereunder.
Section 4.14 CONTRACTS.
(a) Section 4.14(a) of HCPI Disclosure Schedule contains a complete and
accurate list of all HCPI Contracts, other than the HCPI Contracts which have
been filed as an exhibit to the HCPI SEC Reports. Each copy of a HCPI Contract
which has been delivered to, or made available for review by, the Company is a
true and correct copy of such HCPI Contract as amended to date.
(b) As of the date of this Agreement, (i) each of the HCPI Contracts is
valid and binding upon HCPI or the applicable Subsidiary of HCPI in accordance
with its terms and is in full force and effect, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws of general applicability relating to or affecting creditors'
rights generally or general equitable principles (whether considered in a
proceeding in equity or at law), (ii) there is no material breach or violation
of or default by HCPI or any of its Subsidiaries under any of the HCPI
Contracts, except if such breach, violation or default has been waived, and
(iii) no event has occurred with respect to HCPI or any of its Subsidiaries
which, with notice or lapse of time or both, would constitute a material breach,
violation or default, or give rise to a right of termination, modification,
cancellation, foreclosure, imposition of a Lien, prepayment or acceleration
under any of the HCPI Contracts, which breach, violation, default or other
occurrence referred to in clauses (ii) or (iii), individually or in the
aggregate with other such breaches, violations, defaults or other occurrences
referred to in clauses (ii) or (iii), would cause a HCPI Material Adverse
Effect.
Section 4.15 LABOR RELATIONS. Except as would not cause a HCPI Material
Adverse Effect, (i) there are no controversies pending or, to the Knowledge of
HCPI, threatened between HCPI or any of its Subsidiaries and any of their
respective employees; (ii) neither HCPI nor any of its Subsidiaries is a party,
or otherwise subject, to any collective bargaining agreement or similar
contract; (iii) there are no proceedings asserting unfair labor practice charges
pending against HCPI or any of its Subsidiaries before the National Labor
Relations Board, or any similar foreign labor relations governmental bodies; and
(iv) there is no strike, slowdown, work stoppage or lockout, or, to the
Knowledge of HCPI, threat thereof, by or with respect to any employees of HCPI
or any of its Subsidiaries.
Section 4.16 INTELLECTUAL PROPERTY. HCPI and each of its Subsidiaries has
good title to, or is validly licensed to use, all of the Intellectual Property
material to the business of HCPI and its Subsidiaries, taken as a whole, free of
all material Liens. The consummation of the Merger will not result in the loss
of any rights by HCPI or any of its Subsidiaries in any Intellectual Property
that is material to the businesses of HCPI and its Subsidiaries, taken as a
whole.
Section 4.17 ENVIRONMENTAL MATTERS. Except as set forth in the HCPI SEC
Reports, and except, individually or in the aggregate, as has not had, and would
not cause, a HCPI Material Adverse Effect, HCPI, each of its Subsidiaries and,
to the Knowledge of HCPI,
45
each tenant or operator of HCPI Real Property (a) have obtained all applicable
permits, licenses and other authorizations which are required to be obtained
under all applicable Environmental Laws by HCPI or its Subsidiaries; (b) are in
material compliance with all terms and conditions of such required permits,
licenses and authorizations, and also are in material compliance with all other
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (c) have not received a written notice of any uncured past
or present violations of Environmental Laws, or of any event, incident or Action
preventing continued compliance with such Environmental Laws, or giving rise to
any common law environmental liability, or forming the basis of any Action
against HCPI or any of its Subsidiaries based on or resulting from the
manufacture, processing, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge or release into the environment, of any
Hazardous Material; and (d) have taken all actions required under applicable
Environmental Laws to register any products or materials required to be
registered by HCPI or its Subsidiaries thereunder. This Section 4.17 constitutes
the sole representation of HCPI concerning any Environmental Law or Hazardous
Substance.
Section 4.18 OPINION OF FINANCIAL ADVISOR. HCPI has received the opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., Inc., (the "HCPI Financial Advisor"), as of the date of
this Agreement, to the effect that the consideration to be paid by HCPI in
connection with the Merger is fair to HCPI from a financial point of view. As of
the date of the filing of the Joint Proxy Statement/Prospectus with the SEC, and
as of the date of the effectiveness of the Registration Statement, HCPI will
have been authorized by the HCPI Financial Advisor to permit, subject to prior
review and consent by such HCPI Financial Advisor, the inclusion of such
fairness opinion (or a reference thereto) in the Joint Proxy
Statement/Prospectus and in the Registration Statement, respectively.
Section 4.19 BROKERS. No broker, finder or investment banker (other than
the HCPI Financial Advisor the fees and expenses of which shall be paid by HCPI)
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of HCPI or any of its subsidiaries. HCPI has
heretofore furnished to the Company a complete and correct copy of all
agreements between HCPI and the HCPI Financial Advisor pursuant to which such
firm would be entitled to any such payment.
Section 4.20 VOTE REQUIRED. The affirmative vote of the holders of
two-thirds of the outstanding shares of HCPI Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of HCPI's capital
stock necessary to approve the Merger. The HCPI Board, at a meeting duly called
and held, by vote (a) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are in the best interests of HCPI,
(b) approved this Agreement and the transactions contemplated hereby, including
the Merger, (c) declared that the Merger is advisable on the terms and
conditions set forth in this Agreement, and (d) resolved to submit for
consideration, and recommend that the holders of the shares of the HCPI Common
Stock approve, the Merger, substantially in the form set forth by this
Agreement, and the transactions contemplated hereby.
46
Section 4.21 ACCOUNTING AND TAX MATTERS. None of HCPI, its Subsidiaries,
directors, officers or agents, has taken or agreed to take any action, nor does
any executive officer know of any circumstances, that (without regard to any
action taken or agreed to be taken by the Company or any of its Affiliates)
would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
Section 4.22 INSURANCE. All fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by HCPI or any of its Subsidiaries with coverage of loss
payouts in excess of $15,000,000 are with reputable insurance carriers, provide
full and adequate coverage for all normal risks incident to the business of HCPI
and its Subsidiaries and their respective Assets, and are in character and
amount at least equivalent to that carried by Persons engaged in similar
businesses and substantially equivalent to that carried by Persons engaged in
similar businesses and subject to the same or similar perils or hazards except
for any such failures to carry or maintain insurance policies that, individually
or in the aggregate, would not cause a HCPI Material Adverse Effect.
Section 4.23 TAKEOVER PROVISIONS INAPPLICABLE. HCPI has taken all action
necessary, if any, to exempt the transactions contemplated by this Agreement
from the operation of any "fair price," "moratorium," "control share
acquisition" or any other anti-takeover statute enacted under the laws of the
State of Maryland.
Section 4.24 NO MATERIAL ADVERSE EFFECT. Except as disclosed in the HCPI
SEC Reports, to the Knowledge of HCPI, no current fact alone or together with
another current fact would cause a HCPI Material Adverse Effect.
Section 4.25 RIGHTS PLAN. Other than as Merger Consideration pursuant to
this Agreement, the entering into of this Agreement and the consummation of the
transactions contemplated hereby do not and will not result in the grant of any
rights to any Person under the HCPI Rights Plan or enable or require the HCPI
Rights to be exercised, distributed or triggered and there has been no event
which has enabled or required the HCPI Rights to be exercised, distributed or
triggered.
Section 4.26 OWNERSHIP OF COMPANY COMMON STOCK. To the Knowledge of HCPI,
none of HCPI or any of its Affiliates, is the Beneficial Owner or record owner
of any shares of Company Stock, other than HCPI's ownership of approximately
52,900 shares of Company Common Stock and such securities, if any, held by, or
for the account of employees or former employees of, HCPI or any of its
Affiliates.
ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, the Company agrees as
to itself and each of its Subsidiaries (except to the extent that HCPI shall
otherwise consent in writing or as expressly contemplated by this Agreement) to
carry on its business in the ordinary course in substantially
47
the same manner as previously conducted, to pay its debts and Taxes when due,
subject to good faith disputes over such debts or Taxes, in the ordinary course
in substantially the same manner as previously paid, to pay or perform its other
material obligations when due in the ordinary course in substantially the same
manner as previously paid or performed, to maintain insurance coverages and its
books, accounts and records in the usual manner consistent with past practices,
to comply in all material respects with all applicable laws, ordinances and
regulations of Governmental Entities, to maintain and keep its properties and
equipment in good repair, working order and condition (except ordinary wear and
tear), and, to the extent consistent with such business, use all reasonable
efforts, consistent with past practices and policies, to preserve intact its
present business organization, and preserve its relationships with officers,
employees and others having business dealings with it. Without limiting the
generality of the foregoing and except as expressly contemplated by this
Agreement, or in the Company Disclosure Schedule, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, without the written consent of HCPI, the
Company shall not and shall not permit any of its Subsidiaries to:
(a) adopt or propose any amendment to (i) its certificate of incorporation,
its bylaws, the Certificate of Designation dated October 24, 1997 which relates
to the Company Series B Preferred Stock or comparable charter or organizational
documents or (ii) the Company Rights Plan (except as contemplated by Section
6.15 hereof) and the Company Board shall not take any action with respect to the
Company Rights Plan to facilitate an Acquisition Proposal;
(b) (i) except for the payment of Company Deferred Directors Fees (and
Company Dividend Equivalent Rights appurtenant thereto), issue, pledge or sell,
or propose or authorize the issuance, pledge or sale of additional shares of
capital stock of any class (other than upon exercise of Company Stock Rights
outstanding on the date of this Agreement upon payment of the exercise price
thereof), or securities convertible into capital stock of any class, or any
subscriptions, rights, warrants or options to acquire any convertible securities
or capital stock, or any other securities in respect of, in lieu of, or in
substitution for, shares of Company Stock outstanding on the date hereof, (ii)
except as permitted by Section 5.1(e), amend, waive or otherwise modify any of
the terms of any option, warrant or stock option plan of the Company or any of
its Subsidiaries, including without limitation, the Company Stock Rights and the
Company Stock Plans, or authorize cash payments in exchange for any options
granted under any of such plans, or (iii) adopt or implement any stockholder
rights plan;
(c) except as set forth in and subject to Sections 5.4 and 5.5, declare,
set aside or pay any dividend or make any other distribution or payment with
respect to any shares of its capital stock (including any dividend distribution
payable in, or otherwise make a distribution of, shares of capital stock of any
existing or subsequently formed Subsidiary of the Company), except, (i) the
regular quarterly dividend paid by the Company in an amount not to exceed $.565
per share of Company Common Stock; (ii) the regular quarterly dividend paid by
the Company per share of Series B Preferred Stock or (iii) dividends or
distributions to the Company or one of its Subsidiaries;
48
(d) split (including reverse split), combine, subdivide, reclassify or
redeem, purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its other
securities except as permitted by Section 5.1(e);
(e) increase the compensation or fringe benefits payable or to become
payable to its directors, officers or employees (whether from the Company or any
of its Subsidiaries), or pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units) or grant
any severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or employee of the Company or any of its
Subsidiaries or establish, adopt, enter into, or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, savings, welfare, deferred compensation,
employment, termination, severance or other employee benefit plan, agreement,
trust, fund, policy or arrangement for the benefit or welfare of any directors,
officers or current or former employees, including any Benefit Arrangement,
Pension Plan or Welfare Plan, except, in any case referred to in this Section
5.1(e) (i) to the extent required by applicable law or regulation, (ii) pursuant
to any collective bargaining agreements or Employee Plan as in effect on the
date of this Agreement consistent with past practices, (iii) for salary and
benefit increases in the ordinary course of business consistent with past
practice to employees other than executive officers of the Company, (iv)
pursuant to Section 2.8, (v) pursuant to existing agreements or policies
previously disclosed in writing to HCPI, which shall be interpreted and
implemented in a manner consistent with past practice, (vi) that the Company
shall be permitted to amend the Company's Money Purchase Pension Plan effective
as of January 1, 1994, to provide that severance pay shall be excluded from the
definition of "compensation" under the Company's Money Purchase Pension Plan;
and (vii) that the Company shall be permitted to amend the Company's Retirement
Plan for Outside Directors effective as of July 1, 1991, to provide for an
actuarially equivalent lump sum payment election upon termination of service as
a director provided, however, such amendment shall provide that actuarial
equivalence is to be determined using a discount rate equal to the annual rate
of interest on United States Treasury Securities with a 10-year maturity, as
specified by the Secretary of the Treasury (or his or her delegate) for the last
month of the calendar quarter immediately preceding the payment date, and the
1983 Group Annuity Mortality Tables (blended 50% males and 50% females);
(f) (i) sell, pledge, lease, dispose of, grant, encumber, transfer or
otherwise authorize the sale, pledge, disposition, grant, encumbrance or
transfer of any of the material Assets of the Company or any of its Subsidiaries
(including stock, partnership or equity interests of Subsidiaries), including by
operation of law, or (ii) acquire any real property, any other material Assets
or any material interest (including, without limitation, by merger,
consolidation or acquisition of stock or Assets) in a corporation, partnership,
other business organization or any division thereof (or a substantial portion of
the Assets thereof); provided that the Company shall notify HCPI of any
immaterial interest in a corporation, partnership, other business organization
or any division thereof (or a substantial portion of the Assets thereof) prior
to any such acquisition;
49
(g) (i) incur, assume or pre-pay any debt for borrowed money, other than
pursuant to credit agreements in effect as of the date hereof consistent with
past practice, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person, (iii) make any loans, advances (including advances to
employees) or capital contributions to, or investments in, any other Person or
with respect to any other material Assets, except for loans, advances, capital
contributions or investments between any wholly-owned Subsidiary of the Company
and the Company or another wholly-owned Subsidiary of the Company and those made
pursuant to existing commitments, which if material have been listed in Section
5.1(g) of the Company Disclosure Schedule; provided that the Company shall
notify HCPI of any loans, advances, capital contributions or investments prior
to the funding of the same and those made pursuant to existing commitments, or
(iv) enter into any "keep well" or other agreement to maintain the financial
condition of another entity (other than the Company or any of its wholly-owned
Subsidiaries);
(h) make or rescind any material express or deemed election relating to
Taxes, settle or compromise any material Action relating to Taxes, amend any
material Tax Return except in each case in the ordinary course of business
consistent with past practice or as required by law, or except as may be
required by applicable law, make any change to any of its material methods of
reporting income or deductions (including, without limitation, any change to its
methods or basis or write-offs of accounts receivable) for federal income Tax
purposes from those employed in the preparation of its federal income Tax return
for the taxable year ending December 31, 1997;
(i) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted, unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or reserved
against in the consolidated financial statements of the Company;
(j) other than in the ordinary course of business and consistent with past
practice, waive any rights of substantial value or make any payment, direct or
indirect, of any material liability of the Company or of any of its Subsidiaries
before the same comes due in accordance with its terms;
(k) fail to maintain any material existing insurance coverage of all types
in effect or, in the event any such coverage shall be terminated or lapse, to
the extent available at reasonable cost, procure substantially similar
substitute insurance policies which in all material respects are in at least
such amounts and against such risks as are currently covered by such policies;
(l) change its methods of accounting as in effect on March 31, 1999 except
as required by GAAP, or take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice, with
respect to accounting policies or procedures, unless required by GAAP or the
SEC;
50
(m) modify, amend or terminate any of the Company Contracts or waive,
release or assign any rights or claims in connection therewith, except for such
modifications, amendments, terminations, waivers, releases or assignments that
are not, individually or in the aggregate, material to the Company and its
Subsidiaries, taken as a whole;
(n) take, or agree to commit to take, any action that would cause the
representations and warranties of the Company contained herein, individually or
in the aggregate, not to be true and correct in all material respects;
(o) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any Company
Affiliates, other than a Company Subsidiary, which involves the transfer of
consideration or has a financial impact on the Company, other than pursuant to
such agreements, arrangements, or understandings existing on the date of this
Agreement or disclosed on the Company Disclosure Schedule;
(p) consent to the closure, shut down or other elimination of any facility
or office except where such closures, shut downs or eliminations are not,
individually or in the aggregate, material to the Company and its Subsidiaries,
taken as a whole;
(q) take or agree to take or cause to be taken any action that would
prevent the Merger from qualifying as a reorganization as described in Section
368(a) of the Code;
(r) make or commit to make any capital expenditures other than as required
pursuant to commitments existing on the date hereof or made without violation of
this Section 5.1, or other than capital expenditures or tenant improvements in
the ordinary course of business;
(s) initiate, compromise, or settle any material litigation or arbitration
proceeding; and
(t) enter into an agreement, contract, commitment or arrangement to do any
of the foregoing, or to authorize, recommend, propose or announce an intention
to do any of the foregoing.
Section 5.2 PERMITTED CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
MERGER. Notwithstanding anything to the contrary set forth in Section 5.1, the
Company shall be permitted, without the prior consent of HCPI:
(a) to use the equity balance (including interest or other amounts paid
thereon) held by BancOne Colorado, N.A. ("Intermediary"), in its capacity as
qualified intermediary for the Company and its qualified REIT Subsidiaries
pursuant to the Exchange Agreement between Intermediary and the Company and
AMIREIT (▇▇▇▇▇▇▇), Inc., dated April 7, 1999, and Treasury Regulation Section
1.1031(k)-1(g)(4), or cash of the Company, and to assume debt and take other
reasonable actions, in order to acquire any or all of the properties identified
in Section 3.26 of the Company Disclosure Schedule; provided, however, that the
Company may not enter into or amend a purchase agreement for the purchase of any
such property if (i) the purchase price for such property would be materially
greater than the purchase price (or estimated purchase price)
51
set forth for such property in Section 3.26 of the Company Disclosure Schedule
or (ii) the expected first 12 months' cash return on investment for such
property (as reasonably estimated in good faith in a manner consistent with the
manner in which the Company customarily calculates returns on investment for
similar acquisitions) would be materially less than the estimated 12 months'
cash return on investment set forth for such property in Section 3.26 of the
Company Disclosure Schedule, unless in any case referred to in this proviso the
Company is acting in a reasonable manner consistent with its past practice for
similar acquisitions (ignoring for this purpose the fact that such acquisition
is in the context of a like-kind exchange);
(b) to complete the acquisition, development and/or funding and assumption
of debt of any property for which the Company has entered into a binding
agreement relating to the same and which are described in Section 5.2(b) of the
Company Disclosure Schedule;
(c) in addition to any properties acquired in accordance with the
restrictions of Sections 5.2(a) and (b) above, to acquire up to $25,000,000 of
additional properties, provided that each such acquired property has an initial
cash on cash annual return of at least 9.99% based on leases in place, and the
Company and its Subsidiaries use credit underwriting parameters to assess the
credit profile of tenants at such properties consistent with the credit
underwriting parameters used by the Company and its Subsidiaries during the past
three years;
(d) to assume any existing secured debt in connection with the acquisition
of any properties acquired in accordance with the restrictions of section (c)
above if such debt cannot otherwise be prepaid without a substantial premium or
penalty, and provided that the consummation of the Merger will not (i) require
any further consent of the lender thereunder, (ii) cause an acceleration of the
outstanding principal amount of such loan or (iii) give rise to the payment of
any assumption fee, prepayment or other charge under such debt.
(e) to dispose of any Company Real Property which is subject to a tenant
purchase option pursuant to a Company Lease, which is identified in Section
5.2(e) of the Company Disclosure Schedule upon the exercise by such tenant of
such purchase option in accordance with the terms of such Company Lease;
(f) to sell the Sunrise Regional Medical Center in Sunrise, Florida for not
less than $2 million or the Anclote Manor Facility (Northpointe Behavioral
Health) in Tarpon Springs, Florida for a price of not less than $1 million (but
not both) and, in any case, only if necessary to meet the conditions set forth
in Section 7.3(i); provided, however, that if HCPI consents in writing to the
terms of the sale of the Anclote Manor Facility, the Company shall also be
permitted, without the additional consent of HCPI, to sell the Sunrise Regional
Medical Center for a price of not less than $2 million if necessary to meet the
condition set forth in Section 7.3(i).
(g) to modify, amend, renew, extend any of the Company Leases, and to
waive, release or assign rights or claims, provided that such modifications,
amendments, renewals, extensions, waivers, releases or assignments are
consistent with past practices and in the ordinary course of business and not,
individually or in the aggregate, material to the Company and its Subsidiaries,
taken as a whole.
52
Section 5.3 CONDUCT OF BUSINESS OF HCPI PENDING THE MERGER. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, HCPI agrees as to itself
and each of its Subsidiaries (except to the extent that the Company shall
otherwise consent in writing or as expressly contemplated in this Agreement) to
carry on its business in the ordinary course in substantially the same manner as
previously conducted, to pay its debts and Taxes when due, subject to good faith
disputes over such debts or Taxes, in the ordinary course in substantially the
same manner as previously paid, to pay or perform its other material obligations
when due in the ordinary course in substantially the same manner as previously
paid or performed, to maintain insurance coverages and its books, accounts and
records in the usual manner consistent with past practices, to comply in all
material respects with all applicable laws, ordinances and regulations of
Governmental Entities, to maintain and keep its properties and equipment in good
repair, working order and condition (except ordinary wear and tear), and, to the
extent consistent with such business, use all reasonable efforts consistent with
past practices and policies to preserve intact its present business
organization, and preserve its relationships with officers, employees and
customers, suppliers, distributors, and others having business dealings with it.
Without limiting the generality of the foregoing and except as expressly
contemplated by this Agreement or in the HCPI Disclosure Schedule, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, without the written consent
of the Company, HCPI shall not and shall not permit any of its Subsidiaries to:
(a) except for the adoption of articles supplementary relating to the HCPI
Series C Preferred Stock in the form attached hereto as Exhibit B, adopt or
propose any amendment to (i) its charter or comparable charter or organizational
documents or (ii) the HCPI Rights Plan;
(b) except as set forth in and subject to Sections 5.4 and 5.5, declare,
set aside or pay any dividend or make any other distribution or payment with
respect to any shares of its capital stock (including any dividend distribution
payable in, or otherwise make a distribution of, shares of capital stock of any
existing or subsequently formed Subsidiary of HCPI), except (i) any regular
quarterly dividend or distribution paid by HCPI or any of its Subsidiaries on
capital stock or other equity interests in the ordinary course of business,
consistent with past practices (including any increases in such dividends as are
consistent with HCPI's past practice of increasing dividends) or (ii) dividends
or distributions to HCPI or one of its Subsidiaries;
(c) split (including reverse split), combine, subdivide, reclassify or
redeem, purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its other
securities; and
(d) enter into an agreement, contract, commitment or arrangement to do any
of the foregoing, or to authorize, recommend, propose or announce an intention
to do any of the foregoing.
Section 5.4 CONTINUED QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST;
FINAL COMPANY DIVIDEND. From and after the date hereof through the Effective
Time, each of
53
Company and HCPI will maintain its respective qualification as a "real estate
investment trust" under the Code and the rules and regulations thereunder.
Without limiting the generality of the foregoing, if necessary to enable the
Company to make aggregate dividend distributions during its final taxable period
equal to the Minimum Distribution Dividend, Company shall declare and pay a
dividend (the "Final Company Dividend") to holders of Company Common Stock in an
amount equal to the minimum dividend sufficient to permit Company to make
aggregate dividend distributions during its final taxable period equal to the
Minimum Distribution Dividend. If Company determines it is necessary to declare
the Final Company Dividend, it shall notify HCPI at least ten days prior to the
date for the Company Stockholder Meeting so that HCPI may, at its option,
declare and pay a dividend per share to holders of HCPI Common Stock in an
amount per share equal to the quotient obtained by dividing (x) the Final
Company Dividend per share of Company Common Stock by (y) the Exchange Ratio.
For purposes of this paragraph, the term "Minimum Distribution Dividend" shall
mean a distribution with respect to Company's taxable year ending at the
Effective Time which is sufficient to allow Company to (i) satisfy the
distribution requirements set forth in Section 857(a) of the Code, and (ii)
avoid, to the extent possible, the imposition of income tax under Section 857(b)
of the Code and the imposition of excise tax under Section 4981 of the Code.
Section 5.5 DIVIDEND PAYMENT COORDINATION. Each of HCPI and Company shall
coordinate with the other the declaration of any dividends in respect of HCPI
Common Stock and Company Common Stock and the record and payment dates therefor,
it being the intention of the Parties that holders of Company Common Stock shall
not receive (i) dividends for any period with respect to both shares of Company
Common Stock and shares of HCPI Common Stock received in exchange therefor in
connection with the Merger or (ii) fail to receive dividends for any period on
shares of Company Common Stock or shares of HCPI Common Stock received in
exchange therefor in connection with the Merger.
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.1 PREPARATION OF FORM S-4 AND THE PROXY STATEMENT; STOCKHOLDER
MEETING.
(a) As promptly as practicable after the execution of this Agreement, the
Company and HCPI shall cooperate with each other regarding, and, prepare and
file with the SEC, the Joint Proxy Statement/Prospectus and HCPI shall prepare
and file the Registration Statement, provided that HCPI may delay the filing of
the Registration Statement until approval of the Joint Proxy
Statement/Prospectus by the SEC. The Company and HCPI will cause the Joint Proxy
Statement/Prospectus and the Registration Statement to comply as to form in all
material respects with the applicable provisions of the Securities Act, the
Exchange Act and the rules and regulations thereunder. Each of HCPI and the
Company shall use all reasonable efforts to have or cause the Joint Proxy
Statement/Prospectus to be cleared by the SEC and to cause the Registration
Statement to become effective as promptly as practicable. Without limiting the
generality of the foregoing, each of the Company and HCPI shall cause its
respective Representatives to fully cooperate with the other Party and its
respective Representatives in the
54
preparation of the Joint Proxy Statement/Prospectus and the Registration
Statement, and shall, upon request, furnish the other Party with all information
concerning it and its Affiliates, as the other as may be reasonably necessary or
advisable in connection with the preparation of the Joint Proxy
Statement/Prospectus and the Registration Statement. The Company hereby agrees
that the recommendations of the Company Board described in Section 3.20 with
respect to the transactions contemplated hereby (subject to the right of the
Company Board to withdraw, amend or modify such recommendation in accordance
with Section 6.3) may be included in the Registration Statement and the Joint
Proxy Statement/Prospectus. HCPI hereby agrees that the recommendation of HCPI
Board described in Section 4.20 may be included in the Registration Statement
and the Joint Proxy Statement/Prospectus. HCPI shall use its commercially
reasonable best efforts to take all actions required under any applicable
federal or state securities or Blue Sky Laws in connection with the issuance of
shares of HCPI Common Stock pursuant to the Merger and will pay all filing fees
incident thereto. As promptly as practicable after the Registration Statement
becomes effective, the Company and HCPI shall cause the Joint Proxy
Statement/Prospectus to be mailed to their respective stockholders.
(b) The Company and HCPI each agrees that none of the information supplied
by it or its Subsidiaries to be included or incorporated by reference in the
Joint Proxy Statement/Prospectus or any amendment thereof or supplement thereto,
will, on the date of the mailing of the Joint Proxy Statement/Prospectus or any
amendment or supplement thereto, and at the time of the Company Stockholder
Meeting and the HCPI Stockholder Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company and HCPI
each agrees that none of the information supplied by it or its Subsidiaries to
be included or incorporated by reference in the Registration Statement will, at
the time the Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(c) Without limiting the generality of the foregoing, prior to the
Effective Time (i) the Company and HCPI shall notify each other as promptly as
practicable upon becoming aware of any event or circumstance which should be
described in an amendment of, or supplement to, the Joint Proxy
Statement/Prospectus or the Registration Statement, and (ii) the Company and
HCPI shall each notify the other as promptly as practicable after the receipt by
it of any written or oral comments of the SEC on, or of any written or oral
request by the SEC for amendments or supplements to, the Joint Proxy
Statement/Prospectus or the Registration Statement, and shall promptly supply
the other with copies of all correspondence between it or any of its
Representatives and the SEC with respect to any of the foregoing filings.
(d) The Company and HCPI shall each take all action necessary to duly call
the Company Stockholders Meeting and the HCPI Stockholders Meeting,
respectively, each to be held as promptly as practicable for the purpose of
voting upon the approval of this Agreement and the Merger. Subject to the right
of the Company Board to withdraw, amend or modify such recommendation in
accordance with Section 6.3, each of the Company and HCPI shall, through
55
its respective board of directors, (i) recommend to their respective
stockholders adoption of this Agreement and approval of the Merger and related
matters, (ii) coordinate and cooperate with respect to the timing of the Company
Stockholders Meeting and HCPI Stockholders Meeting, and (iii) use their
reasonable best efforts to hold the Company Stockholders Meeting and HCPI
Stockholders Meeting on the same day. Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to this Section
6.1(d) to call for and conduct the Company Stockholders Meeting shall not be
affected by the commencement, public proposal or communication to the Company of
any Acquisition Proposal.
Section 6.2 COOPERATION; NOTICE; CURE. Subject to compliance with
applicable law, including any law regarding the exchange of information, from
the date hereof and until the Effective Time, each of HCPI and the Company shall
confer on a regular basis with one or more Representatives of the other Party to
report on the general status of ongoing operations. Each of HCPI and the Company
shall promptly notify the other in writing of, and will use all commercially
reasonable efforts to cure before the Closing Date, any event, transaction or
circumstance, as soon as practical after it becomes known to such Party, that
causes or will, with the passage of time, cause any covenant or agreement of
HCPI or the Company, as the case may be, under this Agreement to be breached in
any material respect or that renders or will, with the passage of time, render
untrue in any material respect any representation or warranty of HCPI or the
Company contained in this Agreement. No notice given pursuant to this paragraph
shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein. The Company will reasonably cooperate with
HCPI and, immediately prior to the Merger, take any commercially reasonable
actions (including restructuring their ownership of Texas properties) reasonably
requested by HCPI, to minimize HCPI's Texas tax liabilities arising subsequent
to the Merger.
Section 6.3 NO SOLICITATION.
(a) The Company shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any Persons conducted heretofore by the Company, its Subsidiaries or any of
their respective Representatives with respect to any proposed, potential or
contemplated Acquisition Proposal.
(b) From and after the date hereof, without the prior written consent of
HCPI, the Company will not, will not authorize or permit any of its Subsidiaries
to, and shall use its reasonable best efforts to cause any of its or their
respective Representatives not to, directly or indirectly, (i) solicit, initiate
or encourage (including by way of furnishing information) or take any other
action to facilitate any inquiries or the making of any proposal which
constitutes or may reasonably be expected to lead to an Acquisition Proposal
from any Person, or (ii) engage in any discussion or negotiations with, or
provide any non-public information to, any Person (or group of Persons) other
than HCPI or its Representatives concerning an Acquisition Proposal, or (iii)
enter into any agreement with respect to any Acquisition Proposal; provided,
however, that nothing contained in this Section 6.3(b) shall prevent the Company
or the Company Board from furnishing non-public information to, or entering into
discussions or negotiations with, any
56
Person in connection with an unsolicited, bona fide written proposal for an
Acquisition Proposal by such Person or recommending such Acquisition Proposal to
its stockholders, if and only to the extent that (1) such Person has made a
written proposal to the Company Board to consummate an Acquisition Proposal, (2)
the Company Board determines in good faith, after consultation with a financial
advisor of nationally recognized reputation, that such Acquisition Proposal if
accepted is reasonably capable of being consummated on substantially the terms
proposed, and after taking into account the strategic benefits anticipated to be
derived from the Merger and the long term prospects of HCPI and the Company as a
combined company, would, if consummated, result in a transaction that would be
more favorable to the holders of Company Common Stock than the transaction
contemplated by this Agreement (a "Superior Proposal"), (3) the failure to take
such action would, in the reasonable good faith judgment of the Company Board,
after consultation with outside legal counsel, be inconsistent with its
fiduciary duties to the Company's stockholders under applicable law, and (4)
prior to furnishing such non-public information to, or entering into discussions
or negotiations with, such Person, the Company Board receives from such Person
an executed confidentiality and standstill agreement with material terms no less
favorable to the Company than those contained in the Confidentiality Agreement.
The Company agrees not to release any Person from, or waive any provision of,
any standstill agreement to which it is a party or any confidentiality agreement
between it and another Person who has made, or who may reasonably be considered
likely to make, an Acquisition Proposal, unless the failure to take such action
would, in the reasonable good faith judgment of the Company Board, after
consultation with outside legal counsel, be inconsistent with its fiduciary
duties to the Company's stockholders under applicable law.
(c) The Company shall notify HCPI in writing of any such inquiries, offers
or proposals (including, without limitation, the terms and conditions of any
such offers or proposals, any amendments or revisions, and the identity of the
Person making it), as promptly as practicable following the receipt thereof, and
shall keep HCPI informed of the status and material terms of any such inquiry,
offer or proposal.
(d) The Company shall notify HCPI promptly after receipt by the Company or,
to the Company's Knowledge, any of its Representatives of any Acquisition
Proposal or any request for non-public information in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company by a Person that informs such party that is considering making or has
made an Acquisition Proposal. Such notice shall be in writing and shall indicate
the identity of the offeror and the terms and conditions of such proposal,
inquiry or contact. The Company shall keep HCPI informed of the status
(including any change to the material terms) of any such Acquisition Proposal or
request for non-public information.
(e) Neither the Company Board nor any committee thereof shall withdraw or
modify, or propose to withdraw or modify, in a manner adverse to HCPI the
approval or recommendation by the Company Board of this Agreement or the Merger
unless, following the receipt of a Superior Proposal, failing to withdraw or
modify such approval or recommendation in the reasonable good faith judgment of
the Company Board, after the receipt of advice from outside legal counsel, would
be inconsistent with its fiduciary duties to the Company's stockholders under
applicable law; provided, however, that, the Company Board shall submit this
57
Agreement to the Company's stockholders for approval, whether or not the Company
Board at any time subsequent to the date hereof determines that this Agreement
is no longer advisable or recommends that the stockholders of the Company reject
it or otherwise modifies or withdraws its recommendation. Unless the Company
Board has withdrawn its recommendation of this Agreement in compliance herewith,
the Company shall use all lawful efforts to solicit from stockholders of the
Company proxies in favor of the approval and adoption of this Agreement and the
Merger and to secure the vote or consent of stockholders required by the DGCL
and its certificate of incorporation and bylaws to approve and adopt this
Agreement and the Merger.
(f) Nothing contained in this Agreement shall prohibit the Company from
complying with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer or from making any other disclosures to its
stockholders to the extent required by law.
Section 6.4 ACCESS TO INFORMATION. Upon reasonable notice, each of HCPI and
the Company (and each of their respective Subsidiaries) shall afford to the
other Party and its Representatives reasonable access, during normal business
hours during the period prior to the Effective Time, to all its personnel,
properties, books, contracts, commitments and records and, during such period,
each of HCPI and the Company shall, and shall cause each of its respective
Subsidiaries to, furnish promptly to the other (a) copies of monthly financial
reports and development reports relating to the business of the Company or the
business of HCPI, as the case may be, that are normally prepared by the Company
or HCPI, as the case may be, in its ordinary course of business, (b) a copy of
each report, schedule, registration statement and other documents filed or
received by it during such period pursuant to the requirements of federal or
state securities laws and (c) all other information concerning its business,
Assets, personnel and tax status as the other Party may reasonably request;
provided, however the foregoing shall not require the Company or HCPI to permit
any inspection or disclose any information that would result in the disclosure
of confidential information of third parties or violate a confidentiality
obligation of such party. Each Party making such requests will hold any such
information furnished to it by the other Party or Parties which is nonpublic in
confidence in accordance with the Confidentiality Agreement dated as of June 30,
1999, between HCPI and the Company (the "Confidentiality Agreement"). All
requests for information made pursuant to this Section shall be directed to an
executive officer of the Company or HCPI, as the case may be, or such Person
designated by such officers. No information or knowledge obtained in any
investigation pursuant to this Section 6.4 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the Parties to consummate the Merger.
Section 6.5 GOVERNMENTAL APPROVALS.
(a) The Parties shall cooperate with each other and use their reasonable
best efforts to promptly prepare and file all necessary documentation, to effect
all applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, registrations, licenses, consents, variances,
exemptions, orders, approvals and authorizations of all third parties and
Governmental Entities which are necessary to consummate the transactions
contemplated by
58
this Agreement ("Governmental Approvals"), and to comply with the terms and
conditions of all such Governmental Approvals. Each of the Parties shall use
their reasonable best efforts to, and shall use their reasonable best efforts to
cause their respective Representatives and other Affiliates to, file within 30
days after the date hereof, and in all events shall file within 60 days after
the date hereof, all required initial applications and documents in connection
with obtaining the Governmental Approvals and shall act reasonably and promptly
thereafter in responding to additional requests in connection therewith. HCPI
and the Company shall have the right to review in advance, and to the extent
practicable, each will consult the other on, in each case subject to applicable
laws relating to the exchange of information, all the information relating to
HCPI and the Company, as the case may be, and any of their respective
Subsidiaries, directors, officers and stockholders which appear in any filing
made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement. Without limiting the foregoing, each of HCPI and the Company (the
"Notifying Party") will notify the other promptly of the receipt of comments or
requests from Governmental Entities relating to Governmental Approvals, and will
supply the other Party with copies of all correspondence between the Notifying
Party or any of its Representatives and Governmental Entities with respect to
Governmental Approvals.
(b) HCPI and the Company shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such Party to believe that there is a reasonable likelihood that
any approval needed from a Governmental Entity will not be obtained or that the
receipt of any such approval will be materially delayed. HCPI and the Company
shall take any and all actions reasonably necessary to vigorously defend, lift,
mitigate and rescind the effect of any litigation or administrative proceeding
adversely affecting this Agreement or the transactions contemplated hereby or
thereby, including, without limitation, promptly appealing any adverse court or
administrative order or injunction to the extent reasonably necessary for the
foregoing purposes.
Section 6.6 PUBLICITY. HCPI and the Company shall agree on the form and
content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing any press
release or other public statement with respect to any of the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
obligations pursuant to any listing agreement with, or rules of any national
securities exchange.
Section 6.7 BENEFIT PLANS. Except as provided in Section 2.8 and Section
6.20 hereof, HCPI shall, and shall cause the Surviving Corporation to, from and
after the Effective Time, (i) comply with the Employee Plans of the Company in
accordance with their terms, (ii) provide former employees of the Company who
remain as employees of the Surviving Corporation with employee benefit plans no
less favorable in the aggregate than those provided to similarly situated
employees of HCPI, (iii) provide employees of the Company who remain as
employees of the Surviving Corporation credit for years of service with the
Company or any of its Subsidiaries prior to the Effective Time for (A) the
purpose of eligibility and vesting but not
59
benefit accrual under the Employee Plans of HCPI, and (B) any and all
pre-existing condition limitations and eligibility waiting periods under group
health plans of HCPI, and (iv) cause to be credited to any deductible
out-of-pocket expense under any Employee Plans of HCPI any deductibles or
out-of-pocket expenses incurred by employees of the Company and their
beneficiaries and dependents during the portion of the calendar year prior to
their participation in Employee Plans of HCPI. HCPI shall, and shall cause the
Surviving Corporation to, honor in accordance with their terms, all Employee
Plans of the Company and its Subsidiaries, vested or accrued benefit obligations
to, and contractual rights of, current and former employees of the Company and
its Subsidiaries.
Section 6.8 INDEMNIFICATION.
(a) From and after the Effective Time, HCPI agrees that it will, and will
cause the Surviving Corporation to, indemnify and hold harmless each present and
former director and officer of the Company (the "Indemnified Parties"), against
any costs or expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities or amounts paid in settlement incurred in
connection with any Action whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that HCPI is permitted under
applicable law.
(b) For a period of six years after the Effective Time, HCPI shall maintain
or shall cause the Surviving Corporation to maintain in effect a directors' and
officers' liability insurance policy covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy
(copies of which have been heretofore delivered by the Company to HCPI) with
coverage in amount and scope at least as favorable as the Company's existing
coverage; provided that in no event shall HCPI or the Surviving Corporation be
required to expend, in the aggregate, in excess of $360,000 per year in payment
of the annual premium for such coverage; and if such premium would at any time
exceed $360,000 per year, then HCPI or the Surviving Corporation shall maintain
insurance policies which provide the maximum and best coverage available at an
annual premium equal to $360,000 per year.
(c) If the Surviving Corporation or any of its successors or assigns (i)
shall consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) shall transfer all or substantially all of its Assets to any
Person, then, and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation shall assume all of the
obligations of the Surviving Corporation set forth in this Section 6.8.
(d) The provisions of this Section 6.8 are intended to be an addition to
the rights otherwise available to the current officers and directors of the
Company by law, charter, statute, bylaw or agreement, and shall operate for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their Representatives.
Section 6.9 AFFILIATE AGREEMENTS. No later than 45 days prior to the
Closing the Company shall deliver to HCPI a list identifying, in the view of the
Company, each person
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who may be, at the time of the Company Stockholder Meeting, a Company Affiliate.
The Company shall provide to HCPI such information and documents as HCPI shall
reasonably request for purposes of reviewing such list and shall notify HCPI in
writing regarding any change in the identity of the Company Affiliates prior to
the Closing Date; provided, however, that no such Person identified to HCPI
shall be added to the list of Company Affiliates if HCPI shall receive from the
Company, on or before the date of the Company Stockholder Meeting, an opinion of
counsel reasonably satisfactory to HCPI to the effect that such Person is not a
Company Affiliate. The Company shall use its reasonable best efforts to deliver
or cause to be delivered to HCPI as promptly as practicable but in no event
later than 35 days prior to the Closing (and in any case prior to the Effective
Time) an Affiliate Agreement from each of its Affiliates.
Section 6.10 TAX TREATMENT OF REORGANIZATION.
(a) The Parties intend the Merger to qualify as a reorganization under
Section 368(a) of the Code and shall use their best efforts (and shall cause
their respective Subsidiaries to use their best efforts) to cause the Merger to
so qualify. Neither the Company, HCPI, nor any of their respective Subsidiaries
or other Affiliates shall take any action, or fail to take any action, that is
not specifically provided for by this Agreement that would or would be
reasonably likely to adversely affect the treatment of the Merger as a
reorganization under Section 368(a) of the Code. HCPI and the Company shall, and
shall cause their respective Subsidiaries to, take the position for all purposes
that the Merger qualifies as a reorganization under that Section of the Code.
(b) HCPI and the Company shall cooperate and use their best efforts in
obtaining the opinions of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Company, and
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to HCPI, dated as of the Closing Date, to the effect
that the Merger will qualify for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code.
Section 6.11 FURTHER ASSURANCES AND ACTIONS.
(a) Subject to the terms and conditions herein, each of the Parties agrees
to use its reasonable efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable on its part under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, (i) using their respective reasonable efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to contracts with each Party as are
necessary for consummation of the transactions contemplated by this Agreement,
and (ii) to fulfill all conditions precedent applicable to such Party pursuant
to this Agreement. HCPI further agrees to make all necessary filings in
connection with the issuance of the HCPI Series C Preferred Stock.
Notwithstanding anything to the contrary set forth in this Agreement, neither
the Company nor HCPI shall be precluded from complying with federal securities
laws.
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Section 6.12 STOCK EXCHANGE LISTING. HCPI shall use its best efforts to
list on the NYSE prior to the Effective Time, subject to official notice
issuance, the shares of HCPI Common Stock to be issued in the Merger.
Section 6.13 LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall use all
reasonable efforts to cause to be delivered to HCPI a letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
LLP, the Company's independent auditors, dated (a) a date within two Business
Days before the date on which the Registration Statement shall become effective
and (b) the Closing Date, in each case addressed to HCPI and its directors, in
form reasonably satisfactory to HCPI and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
Section 6.14 LETTER OF HCPI'S ACCOUNTANTS. HCPI shall use all reasonable
efforts to cause to be delivered to the Company a letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
LLP, HCPI's independent auditors, dated (a) a date within two Business Days
before the date on which the Registration Statement shall become effective and
(b) the Closing Date, in each case addressed to the Company and its directors,
in form reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
Section 6.15 RIGHTS PLAN. Prior to the Effective Time, the Company Board
shall take all action reasonably necessary in order to render the Company Rights
Plan inapplicable to the Merger and the other transactions contemplated by this
Agreement.
Section 6.16 COMPANY REIT STATUS. Notwithstanding anything to the contrary
set forth in this Agreement, nothing in this Agreement shall prohibit the
Company from taking, and the Company hereby agrees to take any action at any
time or from time to time that in the reasonable judgment of the Company Board,
upon advice of counsel, is legally necessary for the Company to maintain its
qualification as a REIT within the meaning of Sections 856-860 of the Code for
any period or portion thereof ending on or prior to the Effective Time,
including without limitation, making dividend or distribution payments to
stockholders of the Company in accordance with Section 5.4 or otherwise.
Section 6.17 HCPI REIT STATUS. Notwithstanding anything to the contrary set
forth in this Agreement, nothing in this Agreement shall prohibit HCPI from
taking, and HCPI hereby agrees to take any action at any time or from time to
time that in the reasonable judgment of HCPI Board, upon advice of counsel, is
legally necessary for HCPI to maintain its qualification as a REIT within the
meaning of Sections 856-860 of the Code for any period or portion thereof ending
on or prior to the Effective Time, including without limitation, making dividend
or distribution payments to stockholders of HCPI.
Section 6.18 OBTAINING CONSENTS. Each of HCPI and the Company shall give
(or shall cause their respective Subsidiaries to give) any notices to third
parties, and use, and cause their respective Subsidiaries to use, their
commercially reasonable efforts to obtain any third party consents related to or
required in connection with the Merger that are (a) necessary to consummate the
transactions contemplated hereby, (b) disclosed or required to be disclosed in
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the Company Disclosure Schedule or the HCPI Disclosure Schedule, as the case may
be, or (c) required to prevent a Company Material Adverse Effect or a HCPI
Material Adverse Effect from occurring prior to or after the Effective Time.
Section 6.19 EXEMPTION FROM SECTION 16(B) OF THE EXCHANGE ACT. Prior to the
Effective Time, the HCPI Board will pass an appropriate resolution exempting the
securities and derivative securities owned by any officer or director of the
Company (as defined for purposes of Section 16 of the Exchange Act), from the
application of Section 16(b) of the Exchange Act, according to Rule 16b-3, as
interpreted by the staff of the SEC.
Section 6.20 TERMINATION OF OTHER STOCK RIGHTS. Except with respect to
Company Stock Rights disclosed in Section 3.3(a) of the Company Disclosure
Schedule and subject to Section 2.8, the Company and the Company Board (or, if
appropriate, any committee thereof) shall take all actions necessary such that
there shall be no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its Subsidiaries is a party or by which any of them is bound, obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of Company Common Stock or HCPI
Common Stock or any other capital stock of the Company or HCPI or other voting
securities of the Company or HCPI, or obligating the Company or HCPI to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking ("Other Stock Rights")
outstanding at or after the Effective Time, and no holder thereof will have any
right to acquire any interest in the Company or HCPI as a result of the exercise
of any such rights or awards at or after the Effective Time.
ARTICLE VII.
CONDITIONS OF MERGER
Section 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each Party to effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of the following conditions:
(a) this Agreement and the Merger shall have been approved by the
stockholders of the Company in the manner required under the DGCL and the
certificate of incorporation of the Company;
(b) this Agreement and the Merger shall have been approved by the
stockholders of HCPI in the manner required under the MGCL and the charter of
HCPI.
(c) no statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any Governmental Entity
of competent jurisdiction and no other legal restraint or prohibition shall be
in effect which prohibits, restrains, enjoins or restricts the consummation of
the Merger; provided, however, that the Parties shall use their reasonable best
efforts to cause any such decree, ruling, injunction or other order to be
vacated or lifted;
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(d) the Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order suspending the
effectiveness of the Registration Statement nor shall proceedings for that
purpose have been threatened, and any material Blue Sky Law permits and
approvals applicable to the registration of the HCPI Common Stock to be
exchanged for Company Stock shall have been obtained;
(e) all filings required to be made prior to the Closing by any Party or
any of its respective Subsidiaries with, and all consents, approvals and
authorizations required to be obtained prior to the Closing by any Party or any
of its respective Subsidiaries from, any Governmental Entity in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been made or obtained, except where
the failure to obtain such consents would not cause a Company Material Adverse
Effect or a HCPI Material Adverse Effect and could not reasonably be expected to
subject the Parties or their Affiliates or any directors, trustees, officers,
agents or advisors of any of the foregoing to the risk of criminal liability;
(f) all consents or approvals of all Persons (other than Governmental
Entities) required for, in connection with, or as a result of the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby shall have been obtained and shall be in full
force and effect, except for those the failure of which to obtain would not
cause a Company Material Adverse Effect or a HCPI Material Adverse Effect; and
(g) the shares of HCPI Common Stock issuable to the holders of Company
Stock pursuant to this Agreement shall have been approved for listing on the
NYSE upon official notice of issuance.
Section 7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Each representation and warranty of HCPI contained in this Agreement
that is qualified by materiality shall be true and correct at and as of the
Effective Time as if made at and as of the Effective Time and each
representation and warranty of HCPI that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made as
of the Effective Time, in each case, except (i) as contemplated or permitted by
this Agreement and (ii) to the extent that any such representation or warranty
shall have been expressly made as of an earlier date, in which case such
representation and warranty shall have been true and correct, or true and
correct in all material respects, as the case may be, as of such earlier date;
(b) HCPI shall have performed or complied in all material respects with all
obligations required by this Agreement to be performed or complied with by it at
or prior to the Closing Date;
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(c) The Company shall have received a certificate executed on behalf of
HCPI by the Chief Executive Officer or Chief Financial Officer of HCPI to the
effect set forth in clauses (a) and (b) of this Section 7.2;
(d) The Company shall have received an opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
dated as of the Closing Date, in form and substance reasonably satisfactory to
the Company, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that are consistent
with the state of facts existing as of such time, for federal income tax
purposes, (i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and (ii) Company and HCPI will each be a party to
that reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinion, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ may receive and rely upon
representations including those contained in this Agreement or in certificates
of officers of the Parties and others;
(e) The Company shall have received the opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ in the
form attached as Exhibit C hereto (based upon customary representations
including those contained in this Agreement or in certificates of officers of
the Parties and others), dated the Closing Date, to the effect that, (i)
commencing with its taxable year ended December 31, 1985, HCPI was organized in
conformity with the requirements for qualification and taxation as a REIT under
the Code, and (ii) its method of operation has enabled it and its proposed
method of operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code; and
(f) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP shall have delivered to the Company the letter
described in clause (a) of Section 6.14 at the time provided in clause (a) of
Section 6.14.
Section 7.3 CONDITIONS TO OBLIGATIONS OF HCPI TO EFFECT THE MERGER. The
obligations of HCPI to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following additional conditions:
(a) Each representation and warranty of the Company contained in this
Agreement that is qualified by materiality shall be true and correct at and as
of the Effective Time as if made at and as of the Effective Time and each
representation and warranty of the Company that is not so qualified shall be
true and correct in all material respects at and as of the Effective Time as if
made as of the Effective Time, in each case, except (i) as contemplated or
permitted by this Agreement and (ii) to the extent that any such representation
or warranty shall have been expressly made as of an earlier date, in which case
such representation and warranty shall have been true and correct, or true and
correct in all material respects, as the case may be, as of such earlier date;
(b) The Company shall have performed or complied in all material respects
with all obligations required by this Agreement to be performed or complied with
by it at or prior to the Closing Date;
65
(c) HCPI shall have received a certificate executed on behalf of the
Company by the Chief Executive Officer or Chief Financial Officer of the Company
to the effect set forth in clauses (a) and (b) of this Section 7.3;
(d) HCPI shall have received an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, dated as of
the Closing Date, in form and substance reasonably satisfactory to HCPI,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion that are consistent with the state of
facts existing as of such time, for federal income tax purposes, (i) the Merger
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code, and (ii) Company and HCPI will each be a party to that reorganization
within the meaning of Section 368(b) of the Code. In rendering such opinion,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ may receive and rely upon representations including those
contained in this Agreement or in certificates of officers of the Parties or
others;
(e) HCPI shall have received the opinion of ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP and
the opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ in the forms attached hereto as Exhibit D and
Exhibit E, respectively (based upon customary representations including those
contained in this Agreement or in certificates of officers of the Parties and
others), dated the Closing Date, that, taken together, are to the effect that,
commencing with its taxable year ended December 31, 1987, the Company was
organized in conformity with the requirements for qualification and taxation as
a REIT under the Code, and its method of operation has enabled it to meet,
through the Effective Time, the requirements for qualification and taxation as a
REIT under the Code;
(f) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP shall have delivered to HCPI the letters described
in clause (a) of Section 6.13, at the time provided in clause (a) of Section
6.13;
(g) The amount of the equity balance held by the Intermediary used to
acquire properties during the period from June 30, 1999 to the Effective Date
plus the amount of cash the Company uses to acquire other properties, in
accordance with the provisions of this Agreement, during that period shall have
totaled at least $40 million;
(h) The Company shall not have declared, set aside or paid any dividends or
other distributions or payments with respect to any shares of its capital stock
with respect to its 1999 taxable year except as specifically permitted in
clauses (i) and (ii) of Section 5.1(c); and
(i) Based on the Company's taxable income for its 1999 short taxable year
ending on the Effective Date (as reasonably estimated in good faith by the
Company and set forth in a certificate executed on behalf of the Company by a
senior officer of the Company), the Company will not owe any federal income or
Code Section 4981 excise taxes in respect of such short taxable year.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 TERMINATION. This Agreement may be terminated at any time
before the Effective Time (except as otherwise provided), whether before or
after the approval of
66
the stockholders of the Company and HCPI referred to in Sections 7.1(a) and (b),
as the case may be, as follows:
(a) by mutual written consent of each of HCPI and the Company;
(b) by either the Company or HCPI, if the Effective Time shall not have
occurred on or before January 31, 2000 (the "Termination Date"); provided
however, that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any Party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date;
(c) by either the Company or HCPI, if a Governmental Entity shall have
issued an order, decree or injunction having the effect of making the Merger
illegal or permanently prohibiting the consummation of the Merger, and such
order, decree or injunction shall have become final and nonappealable;
(d) by either the Company or HCPI, if there shall have been a breach by the
other of any of its (i) representations or warranties contained in this
Agreement, which breach would result in the failure to satisfy one or more of
the conditions set forth in Section 7.2(a) (in the case of a breach by HCPI) or
Section 7.3(a) (in the case of a breach by the Company), or (ii) covenants or
agreements contained in this Agreement, which breach would result in the failure
to satisfy one or more of the conditions set forth in Section 7.2(b) (in the
case of a breach by HCPI) or Section 7.3(b) (in the case of a breach by the
Company), and in any such case such breach shall be incapable of being cured or,
if capable of being cured, shall not have been cured within 30 days after
written notice thereof shall have been received by the Party alleged to be in
breach;
(e) by HCPI, if the Company Board or any committee of the Company Board (i)
shall withdraw or modify in any manner adverse to HCPI, its approval or
recommendation of this Agreement or the Merger, (ii) shall fail to reaffirm such
approval or recommendation within five Business Days of HCPI's request, (iii)
shall approve or recommend any Acquisition Proposal or Acquisition Transaction
or (iv) shall resolve to take any of the actions specified in clauses (i), (ii)
or (iii) above; or
(f) by either the Company or HCPI, if the stockholders' meetings to
consider the Merger shall have been held by the Company and HCPI, as the case
may be, and the required approval of the stockholders of the Company or HCPI
shall not have been obtained at any such stockholders' meetings, including any
adjournments or postponements.
Section 8.2 EFFECT OF TERMINATION.
(a) In the event that:
(i) any Person shall have made an Acquisition Proposal to the Company
or to its stockholders and thereafter this Agreement is terminated (A) by
HCPI pursuant to Sections 8.1(b) or 8.1(d) or (B) by either Party pursuant
to Section 8.1(f) as a result of the required approval of the Company
stockholders having not been obtained; or
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(ii) this Agreement is terminated by HCPI pursuant to Section 8.1(e),
then, in any such case, if the Company is not also entitled to terminate
this Agreement by reason of Section 8.1(b), Section 8.1(d) or Section
8.1(f) as a result of the required approval of HCPI's stockholders having
not been obtained, the Company shall in no event later than two days after
such termination pay HCPI the Termination Fee by wire transfer of same day
funds to a bank account designated by HCPI.
(b) Unless the Company would be entitled to terminate this Agreement
pursuant to Sections 8.1(b) or 8.1(d) or pursuant to Section 8.1(f) as a result
of the required vote of HCPI's stockholders having not been obtained, in the
event that this Agreement is terminated (i) by HCPI pursuant to Sections 8.1(b),
8.1(d), or 8.1(e) or (ii) by either Party pursuant to Section 8.1(f) as a result
of the required approval of the Company's stockholders having not been obtained,
then, after any such termination, the Company shall reimburse HCPI, promptly
after being requested to do so by HCPI, for up to $2,000,000 toward the payment
of the out-of-pocket costs and expenses incurred by HCPI in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, fees and expenses of accountants, attorneys, financial advisors
(except for any contingent fee of a financial advisor for which a contingency
has not been satisfied), commercial banks, experts and consultants and fees and
expenses otherwise allocated to HCPI pursuant to this Agreement. If a payment is
due under Section 8.2(a), the payment to HCPI of the amount set forth in this
Section 8.2(b) shall be made in addition to the payment required to be made
pursuant to Section 8.2(a).
(c) Unless HCPI would be entitled to terminate this Agreement pursuant to
Sections 8.1(b) or 8.1(d) or pursuant to Section 8.1(f) as a result of the
required vote of the Company's stockholders having not been obtained, in the
event that this Agreement is terminated (i) by the Company pursuant to Sections
8.1(b) or 8.1(d), or (ii) by either Party pursuant to Section 8.1(f) as a result
of the required approval of the HCPI's stockholders having not been obtained,
then, after any such termination, HCPI shall reimburse the Company, promptly
after being requested to do so by the Company, for up to $2,000,000 toward the
payment of the out-of-pocket costs and expenses incurred by the Company in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, fees and expenses of accountants, attorneys,
financial advisors (except for any contingent fee of a financial advisor for
which a contingency has not been satisfied), commercial banks, experts and
consultants and fees and expenses otherwise allocated to the Company pursuant to
this Agreement.
(d) As used in this Agreement, "Termination Fee" shall be an amount equal
to the lesser of (i) $18,700,000 (the "Base Amount") and (ii) the maximum
amount, if any, that can be paid to HCPI without causing it to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code for such year determined
as if (a) the payment of such amount did not constitute income described in
Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code ("Qualifying
Income"), and (b) HCPI has $1,000,000 of income from unknown sources during such
year which was not Qualifying Income (in addition to any known or anticipated
income of HCPI which was not Qualifying Income), in each case as determined by
independent accountants to HCPI. Notwithstanding the foregoing, in the event
HCPI receives a reasoned opinion from outside counsel or a ruling from the IRS
(the "Tax Guidance") providing that HCPI's receipt of
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the Base Amount would either constitute Qualifying Income or would be excluded
from gross income within the meaning of Sections 856(c)(2) and (3) of the Code
(the "REIT Requirements"), the Termination Fee shall be an amount equal to the
Base Amount and the Company shall, upon receiving notice that HCPI has received
the Tax Guidance, pay to HCPI the unpaid Base Amount within five business days.
In the event that HCPI is not able to receive the full Base Amount due to the
above limitations, the Company shall place the unpaid amount in escrow by wire
transfer within three days of termination and shall not release any portion
thereof to HCPI unless and until HCPI receives either one or a combination of
the following once or more often: (i) a letter from HCPI's independent
accountants indicating the maximum amount that can be paid at that time to HCPI
without causing HCPI to fail to meet the REIT Requirements (calculated as
described above) or (ii) the Tax Guidance, in either of which events the Company
shall pay to HCPI the lesser of the unpaid Base Amount or the maximum amount
stated in the letter referred to in (i) above within five business days after
the Company has been notified thereof. The payment of the amount required to be
paid pursuant to Section 8.2(a) in connection with the circumstances described
therein, together with the amount required to be paid pursuant to Section 8.2(b)
(but only to the extent such amount is paid together with the amount set forth
in Section 8.2(a)), shall be compensation and liquidated damages for the loss
suffered by HCPI as a result of the failure of the Merger to be consummated and
to avoid the difficulty of determining damages under such circumstances. Neither
Party shall have any other liability to the other for damages after the payment
of such amounts. The obligation of Company to pay any unpaid portion of the
Termination Fee shall terminate on the December 31 following the date which is
three years from the date of this Agreement. Amounts remaining in escrow after
the obligation of the Company to pay the Termination Fee terminates shall be
released to the Company.
(e) The Parties acknowledge that the agreements contained in this Section
8.2 are an integral part of the transactions contemplated in this Agreement, and
that, without these agreements, the Parties would not enter into this Agreement;
accordingly, if the Company fails to promptly pay the Termination Fee or the
fees and expenses of HCPI or if HCPI fails to pay the fees and expenses of the
Company, each as required by this Section 8.2, and in order to obtain such
payment the non-defaulting Party commences a suit which results in a judgment
against the defaulting Party for any amount of the fees and expenses set forth
in this Section 8.2, the defaulting Party shall pay to the non-defaulting Party
its costs and expenses (including attorneys' fees) in connection with such suit
together with interest on such amount in respect of the period from the date
such amount became due until the date such amount is paid at the prime rate of
The Chase Manhattan Bank in effect from time to time during such period.
(f) In the event of termination of this Agreement pursuant to this Article
VIII, this Agreement (other than as set forth in Section 9.1) shall become void
and of no effect with no liability under the terms of the Agreement (other than
as set forth in this Section 8.2) on the part of any Party; provided, however,
no such termination shall relieve any Party from any liability for breach of
this Agreement.
Section 8.3 EXPENSES. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions
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contemplated in Article II. Except as otherwise specifically provided herein,
each Party shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
Section 8.4 AMENDMENT. This Agreement may be amended by the Parties by
action taken by or on behalf of their respective Boards of Directors at any time
before or after any required approval of matters presented in connection with
the Merger by the stockholders of the Company and HCPI; provided, however, that
after any such approval, there shall be made no amendment that by law requires
further approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed by the Parties.
Section 8.5 WAIVER. At any time prior to the Closing Date, any Party may
(a) extend the time for the performance of any of the obligations or other acts
of the other Parties hereto, (b) waive any inaccuracies in the representations
and warranties of the other Parties contained herein or in any document
delivered pursuant hereto and (c) waive compliance by any other Party with any
of the agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the Party or
Parties to be bound thereby. The failure of any Party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
ARTICLE IX.
GENERAL PROVISIONS
Section 9.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Section
8.1, as the case may be, except that (a) the agreements set forth in Sections
2.8, 2.9, 2.10(b), 2.10(c), 2.10(e), 2.10(f), 2.11, 2.13, 2.14, 6.7, 6.8, 6.10,
6.11, 6.12, 6.19, 9.5, 9.6 and 9.7 shall survive the Effective Time and (b) the
agreements set forth in the Confidentiality Agreement and in Sections 8.1, 8.2
and 8.3, this Section 9.1, Section 9.6 and Section 9.7 shall survive termination
indefinitely.
Section 9.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex, by registered or certified mail (postage prepaid,
return receipt requested), or by overnight courier, to the respective Parties at
the following addresses (or at such other address for a Party as shall be
specified by like notice):
If to HCPI:
Health Care Property Investors, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
70
with an additional copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
American Health Properties, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.3 SEVERABILITY. If any term or other provision of this agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
Section 9.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
Company Disclosure Schedule and the HCPI Disclosure Schedule), together with the
Confidentiality Agreement, constitute the entire agreement among the Parties
with respect to the
71
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, among the Parties, or any of them, with respect to the subject
matter hereof. This Agreement shall not be assigned by any Party by operation of
law or otherwise without the express written consent of each of the other
Parties.
Section 9.5 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each Party hereto, and, except for Sections 2.8,
6.7, 6.8 and 6.19, nothing in this Agreement, express or implied, is intended to
or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
Section 9.6 GOVERNING LAW. EXCEPT TO THE EXTENT TO WHICH THE MERGER IS
SUBJECT TO THE MGCL AND THE DGCL, THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD,
TO THE FULLEST EXTENT PERMITTED BY LAW, TO THE CONFLICTS OF LAWS PROVISIONS
THEREOF WHICH MIGHT RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION. EACH OF THE PARTIES SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS OF THE UNITED STATES LOCATED IN THE COUNTY OF
ORANGE, CALIFORNIA WITH RESPECT TO ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.7 NO TRIAL BY JURY. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN CONNECTION
WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
CONFIDENTIALITY AGREEMENT, THE MERGER OR ANY OF THE OTHER TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
Section 9.8 ACTION BY SUBSIDIARIES AND BOARDS. Whenever this Agreement
requires or purports to require any Subsidiary of the Company or the Company
Board or any Subsidiary of HCPI or the HCPI Board to take any action, such
purported requirement shall be deemed to include an undertaking on the part of
the Company or HCPI to cause such Subsidiary or the Company Board or the HCPI
Board, as applicable, to take such action.
Section 9.9 HEADINGS. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 9.10 SPECIFIC PERFORMANCE. Each of the Parties hereto acknowledges
and agrees that the other Parties would be irreparably damaged in the event any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, each of the Parties
agrees that they each shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and conditions hereof in any Action instituted in
any court of the United States or any state having competent jurisdiction, in
addition to any other remedy to which such Party may be entitled, at law or in
equity.
72
Section 9.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[Signature page follows.]
73
IN WITNESS WHEREOF, HCPI and the Company have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation
By:___________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman, President and Chief Executive
Officer
AMERICAN HEALTH PROPERTIES, INC.,
a Delaware corporation
By:___________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman, President and Chief Executive
Officer
EXHIBIT A
FORM OF AFFILIATE LETTER
Health Care Property Investors, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter it may
be deemed to be an "affiliate" of American Health Properties, Inc., a Delaware
corporation (the "Company"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of August __, 1999 (the "Agreement"),
between Health Care Property Investors, Inc., a Maryland corporation ("HCPI")
and the Company, the Company will be merged with and into HCPI (the "Merger").
As a result of the Merger, the undersigned may receive shares (the
"Shares") of common stock, par value $1.00 per share, of HCPI (the "HCPI Common
Stock") in exchange for shares of common stock, par value $.01 per share, of the
Company (the "Company Common Stock").
1. The undersigned represents, warrants and covenants to HCPI that in the
event it receives Shares as a result of the Merger:
A. It shall not make any sale, transfer or other disposition of the
Shares in violation of the Act or the Rules and Regulations.
B. It has carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon
its ability to sell, transfer or otherwise dispose of the Shares to the
extent it determines necessary, with its counsel or counsel of the Company.
C. It has been advised that the issuance of the Shares pursuant to the
Merger has been registered with the Commission under the Act on a
Registration Statement on Form S-4. The undersigned has also been advised
that, since at the time the Merger was submitted for a vote of the
stockholders of the Company, it may be deemed to have been an affiliate of
the Company and any subsequent distribution by it of the Shares has not
been registered under the Act, it may not sell, transfer or otherwise
dispose of the Shares unless (i) such sale, transfer or other disposition
has been registered under the Act, (ii) such sale, transfer or other
disposition is made in conformity with Rule 145 promulgated by the
Commission under the Act or (iii) in the opinion of counsel reasonably
acceptable to HCPI or a "no action" letter
obtained by the undersigned from the staff of the Commission, such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. The undersigned does not own in excess of 9.8% of the outstanding
the Company Common Stock and, upon consummation of the Merger, will not own
in excess of 9.8% of the outstanding HCPI Common Stock.
E. The undersigned understands that HCPI is under no obligation to
register the sale, transfer or other disposition of the Shares by it or on
its behalf under the Act, or except as expressly set forth in the
Agreement, to take any other action necessary in order to make compliance
with an exemption from such registration available.
F. The undersigned also understands that HCPI may give stop transfer
instructions to its transfer agent with respect to the Shares to enforce
the restrictions on the undersigned set forth herein and that it reserves
the right to place on the certificates for HCPI Common Stock issued to the
undersigned, or any substitutions therefor, a legend stating in substance:
"The securities represented by this certificate have been
issued in a transaction to which Rule 145 promulgated under
the Securities Act of 1933 applies and may be sold or
otherwise transferred only in compliance with the
requirements of Rule 145 or pursuant to a registration
statement under said Act or an exemption from such
registration."
G. The undersigned also understands that unless the transfer by it of
the Shares has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, HCPI reserves the right to put
the following legend on the certificates issued to transferees of the
undersigned:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933 and were
acquired from a person who received such shares in a
transaction to which Rule 145, promulgated under the
Securities Act of 1933, applies. The securities have been
acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof within the meaning
of the Securities Act of 1933 and may not be sold, pledged
or otherwise transferred except in accordance with an
exemption from the registration requirements of the
Securities Act of 1933."
Execution of this letter should not be considered an admission on the part
of the undersigned that it is an "affiliate" of the Company as described in the
first paragraph of this
A-2
letter or as a waiver of any rights it may have to object to any claim that it
is such an affiliate on or after the date of this letter.
2. By HCPI's acceptance of this letter, HCPI hereby agrees with
the undersigned to the extent applicable as follows:
A. For so long as and to the extent necessary to permit the
undersigned to sell HCPI Common Stock pursuant to Rule 145 and, to the
extent applicable, Rule 144 under the Act, HCPI shall (a) use its
reasonable efforts to (i) file, on a timely basis, all reports and data
required to be filed with the Commission by it pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
(ii) furnish to the undersigned upon request a written statement as to
whether HCPI complied with such reporting requirements during the 12 months
preceding any proposed sale of HCPI Common Stock by the undersigned under
Rule 145, and (b) otherwise use its reasonable efforts to permit such sales
pursuant to Rule 145 and Rule 144. HCPI has filed all reports required to
be filed with the Commission under Section 13 of the Exchange Act during
the preceding 12 months.
B. It is understood and agreed that certificates with the legend set
forth in subparagraphs F and G of Paragraph 1 above will be substituted by
delivery of certificates without such legend if (i) transfer by the
undersigned of HCPI Common Stock of the undersigned has been registered
under the Act or is a sale made in conformity with the provisions of Rule
145, (ii) one year shall have elapsed from the date the undersigned
acquired the Shares and the provisions of Rule 145(d)(2) are then available
to the undersigned, (iii) two years shall have elapsed from the date the
undersigned acquired HCPI Common Stock received in the Merger and the
provisions of Rule 145(d)(3) are then available to the undersigned, or (iv)
HCPI has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to it, or a "no-action" or interpretive
letter obtained by the undersigned from the staff of the Commission, to the
effect that the restrictions imposed by Rule 144 and Rule 145 under the Act
no longer apply to the undersigned.
Very truly yours,
---------------------------
Name:
Accepted this ________ day of
___________________, 1999 by
HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
A-3
EXHIBIT B
ARTICLES SUPPLEMENTARY
EXHIBIT C
FORM OF REIT OPINION
TO BE DELIVERED BY
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
[Month] [day], 1999
American Health Properties, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel to Health Care Property Investors, Inc., a
Maryland corporation (the "Company"), in connection with the merger (the
"Merger") of American Health Properties, Inc., a Delaware corporation ("AHP")
with and into the Company, with the Company as the surviving corporation,
pursuant to that certain Agreement and Plan of Merger between the Company and
AHP dated as of August __, 1999 (together with all exhibits and amendments
thereto, the "Merger Agreement"). This opinion is being rendered to you pursuant
to Section 7.2(e) of the Merger Agreement.
In formulating our opinion, we examined, and with your consent relied upon,
such documents as we deemed appropriate, including (i) the Merger Agreement,
(ii) the Joint Proxy Statement/Prospectus filed by the Company and AHP with the
Securities and Exchange Commission (the "Commission") on [Month] [day], 1999
(the "Joint Proxy Statement"), and (iii) the Registration Statement on Form S-4,
registration number [___________], as filed by the Company with the Commission
on [Month] [day], 1999, in which the Joint Proxy Statement is included as a
prospectus (with all amendments and exhibits thereto, the "Registration
Statement"). In addition, we have obtained such additional information as we
deemed relevant and necessary through consultation with various officers and
representatives of the Company and AHP.
This opinion is based on various facts and assumptions, including the facts
set forth in the Registration Statement concerning the business, properties, and
governing documents of the Company and its subsidiaries. We have also been
furnished with, and with your consent have relied upon, certain representations
made by the Company with respect to factual matters through a certificate of an
officer of the Company (the "Officer's Certificate").
In our capacity as such counsel, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction of such documents,
corporate records and other instruments, as we have deemed necessary or
appropriate for purposes of this opinion. In our examination, we have assumed
the authenticity of all documents submitted to us as originals, the genuineness
of all signatures thereon, the legal capacity of natural persons executing such
documents and the conformity to authentic original documents of all documents
submitted to us as copies.
We are opining herein as to the effect on the subject transaction only of
the federal income tax laws of the United States and we express no opinion with
respect to the applicability thereto, or the effect thereon, of other federal
laws, the laws of any state or other jurisdiction or as to any matters of
municipal law or the laws of any other local agencies with any state.
Based upon such facts, assumptions, and representations, including the
facts set forth in the Registration Statement and the Officer's Certificate, it
is our opinion that (i) commencing with the Company's taxable year ending
December 31, 1985, the Company has been organized in conformity with the
requirements for qualification and taxation as a "real estate investment trust"
under the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) its
method of operation has enabled it to meet, and its proposed method of operation
will enable it to continue to meet the requirements for qualification and
taxation as a "real estate investment trust" under the Code.
No opinion is expressed as to any matter not discussed herein.
This opinion is only being rendered to you as of the date of this letter,
and we undertake no obligation to update this opinion subsequent to the date
hereof. This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement or
the Officer's Certificate may affect the conclusions stated herein.
This opinion is rendered to you solely in connection with the satisfaction
of Section 7.2(e) of the Merger Agreement. This opinion may not be relied upon
by you for any other purpose, or furnished to, quoted to or relied upon by any
other person, firm or corporation for any purpose, without our prior written
consent.
Very truly yours,
C-2
EXHIBIT D
FORM OF REIT OPINION
TO BE DELIVERED BY
▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
[Month] [day], 1999
Health Care Property Investors, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel to American Health Properties, Inc., a Delaware
corporation (the "Company"), in connection with the merger (the "Merger") of the
Company with and into Health Care Property Investors, Inc., a Maryland
corporation ("Parent"), with Parent as the surviving corporation, pursuant to
that certain Agreement and Plan of Merger between Parent and the Company dated
as of August __, 1999, (together with all exhibits and amendments thereto, the
"Merger Agreement"). This opinion is being rendered to you pursuant to Section
7.3(e) of the Merger Agreement.
In formulating our opinion, we examined, and with your consent relied upon,
such documents as we deemed appropriate, including (i) the Merger Agreement,
(ii) the Joint Proxy Statement/Prospectus filed by Parent and the Company with
the Securities and Exchange Commission (the "Commission") on [Month] [day], 1999
(the "Joint Proxy Statement"), and (iii) the Registration Statement on Form S-4,
registration number [___________], as filed by Parent with the Commission on
[Month] [day], 1999, in which the Joint Proxy Statement/Prospectus is included
as a prospectus (with all amendments and exhibits thereto, the "Registration
Statement"). In addition, we have obtained such additional information as we
deemed relevant and necessary through consultation with various officers and
representatives of Parent and the Company.
This opinion is based on various facts and assumptions, including the facts
set forth in the Registration Statement concerning the business, properties, and
governing documents of the Company and its subsidiaries. We have also been
furnished with, and with your consent have relied upon, certain representations
made by the Company with respect to factual matters through a certificate of an
officer of the Company (the "Officer's Certificate"). In addition, we have
assumed, with your consent, the accuracy of the opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
dated the date hereof, addressed to Parent, with respect to the federal income
tax treatment of the Psychiatric Group Preferred Stock (as such term is defined
in the Merger Agreement) previously issued by
the Company (the "▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Opinion"). In rendering this opinion, we
express no opinion concerning the matters addressed in the ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Opinion.
In our capacity as such counsel, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction of such documents,
corporate records and other instruments, as we have deemed necessary or
appropriate for purposes of this opinion. In our examination, we have assumed
the authenticity of all documents submitted to us as originals, the genuineness
of all signatures thereon, the legal capacity of natural persons executing such
documents and the conformity to authentic original documents of all documents
submitted to us as copies.
We are opining herein as to the effect on the subject transaction only of
the federal income tax laws of the United States and we express no opinion with
respect to the applicability thereto, or the effect thereon, of other federal
laws, the laws of any state or other jurisdiction or as to any matters of
municipal law or the laws of any other local agencies with any state.
Based upon such facts, assumptions, and representations, including the
facts set forth in the Registration Statement and the Officer's Certificate, and
our assumption concerning the accuracy of the ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Opinion, it is
our opinion that (i) commencing with the Company's taxable year ending December
31, 1987, the Company has been organized in conformity with the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) its method of
operation has enabled it to meet the requirements for qualification and taxation
as a "real estate investment trust" under the Code through the Effective Time
(as such term is defined in the Merger Agreement).
No opinion is expressed as to any matter not discussed herein.
This opinion is only being rendered to you as of the date of this letter,
and we undertake no obligation to update this opinion subsequent to the date
hereof. This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement or
the Officer's Certificate may affect the conclusions stated herein.
This opinion is rendered to you solely in connection with the satisfaction
of Section 7.3(e) of the Merger Agreement. This opinion may not be relied upon
by you for any other purpose, or furnished to, quoted to or relied upon by any
other person, firm or corporation for any purpose, without our prior written
consent.
Very truly yours,
C-2
EXHIBIT E
FORM OF REIT OPINION
TO BE DELIVERED BY
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
[▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Letterhead]
Health Care Property Investors, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs:
We acted as counsel to American Health Properties, Inc., a Delaware
corporation (the "Company"), in connection with its issuance of Psychiatric
Group Preferred Stock (the "Psychiatric Group Stock") to holders of record on
July 14, 1995 of its Common Stock, as more fully described in the Information
Statement dated June 29, 1995. In that transaction, each holder of Common Stock
of the Company received as a dividend one share of Psychiatric Group Stock for
every ten shares of Common Stock the holder owned. The Psychiatric Group Stock
was redeemed by the Company in May of 1999.
You have asked whether, in our opinion, the issuance of the Psychiatric
Group Stock and the payment of dividends thereon during the period it was
outstanding affected the qualification of the Company as a real estate
investment trust (a "REIT") within the meaning of Section 856 of the Internal
Revenue Code (the "Code"). In rendering this opinion, we have reviewed such
documents and other factual matters and such matters of law as we have
considered necessary or appropriate. In our opinion, the Psychiatric Group Stock
was equity for federal income tax purposes, because the holders of the
Psychiatric Group Stock had no creditor or other non-equity type rights against
the Company and possessed all three rights that are the cornerstone of an equity
interest: (i) the right to vote in the election of directors and other matters
put to the shareholders of the Company, (ii) the right to participate in the
earnings of the Company through the payment of dividends and (iii) the right to
share in the net assets of the Company upon its liquidation.
Although there is no authority bearing directly on the treatment of
"targeted stock" such as the Psychiatric Group Stock, in our opinion the
Psychiatric Group Stock was a class of equity of the Company for federal income
tax purposes because (i) as a matter of Delaware law, the Psychiatric Group
Stock was stock of the Company, (ii) the holders of such stock had rights only
against the Company and had no direct rights with respect to the Psychiatric
Group assets or subsidiaries, (iii) the holders of such stock had no voting
rights with
Health Care Property Investors
Page 2
respect to the Psychiatric Group subsidiaries and voted only on matters put to
the shareholders of the Company, (iv) the economic expectations of such holders
represented only the intentions of the Board of Directors of the Company, and
not legally enforceable rights of the holders, (v) the Psychiatric Group assets
were available to satisfy creditors of the Company and (vi) the Psychiatric
Group assets were not isolated in a separate subsidiary but were held in
significant part directly by the Company.
Under Section 562(c) of the Code and Treasury Regulations Section
1.562-2(a), distributions by the Company with respect to its Psychiatric Group
Stock or Common Stock were not "preferential dividends" as long as the
distributions (i) were without preference among shares in any given class and
(ii) were without preference among shares of different classes except to the
extent a class is entitled to a preference.
In our opinion, the Psychiatric Group Stock and Common Stock were separate
classes of stock of the Company for purposes of Section 562(c) because (i) the
Psychiatric Group Stock and the Common Stock were separate classes of stock for
corporate law purposes, (ii) the economic expectations of the holders of each
class were different and (iii) the voting and liquidation rights of the holders
of each class were different.
Although there is no authority bearing directly on the application of
preferential dividends under Section 562(c) of the Code to "targeted stock" such
as the Psychiatric Group Stock, in our opinion dividends paid on the Psychiatric
Group Stock and Common Stock were not "preferential" under Section 562(c) of the
Code because (i) the dividends paid by the Company did not deprive either class
of a dividend to which that class was entitled and neither class received a
dividend to which it was not entitled and (ii) concluding that the dividends
paid on the Psychiatric Group Stock and Common Stock of the Company were not
preferential is consistent with the purpose of Section 562(c) and not
inconsistent with any policy underlying the REIT distribution, income, asset or
shareholder tests.
Very truly yours,
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS ......................................................... 1
ARTICLE II. THE MERGER ......................................................... 12
Section 2.1 The Merger ............................................... 12
Section 2.2 Closing and Closing Date ................................. 12
Section 2.3 Effective Time ........................................... 12
Section 2.4 Effects of the Merger .................................... 12
Section 2.5 Charter; Bylaws .......................................... 13
Section 2.6 Directors and Officers ................................... 13
Section 2.7 Conversion of Securities ................................. 13
Section 2.8 Treatment of Company Options, Company Dividend Equivalent
Rights and Company Deferred Directors Fees ........... 14
Section 2.9 Fractional Interests ..................................... 17
Section 2.10 Surrender of Shares of Company Stock; Stock Transfer Books 17
Section 2.11 Lost, Stolen or Destroyed Certificates ................... 20
Section 2.12 Tax Consequences ......................................... 20
Section 2.13 Withholding Rights ....................................... 20
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ..................... 21
Section 3.1 Organization and Qualification ........................... 21
Section 3.2 Authorization; Validity and Effect of Agreement .......... 21
Section 3.3 Capitalization ........................................... 21
Section 3.4 Subsidiaries ............................................. 23
Section 3.5 Other Interests .......................................... 23
Section 3.6 No Conflict; Required Filings and Consents ............... 24
Section 3.7 Compliance ............................................... 24
Section 3.8 SEC Reports .............................................. 25
Section 3.9 Absence of Certain Changes ............................... 25
Section 3.10 Litigation ............................................... 26
Section 3.11 Taxes .................................................... 26
Section 3.12 Employee Benefit Plans ................................... 28
Section 3.13 Properties ............................................... 29
Section 3.14 Contracts ................................................ 31
Section 3.15 Labor Relations .......................................... 32
Section 3.16 Intellectual Property .................................... 32
Section 3.17 Environmental Matters .................................... 32
Section 3.18 Opinion of Financial Advisor ............................. 33
Section 3.19 Brokers .................................................. 33
Section 3.20 Vote Required ............................................ 33
Section 3.21 Accounting and Tax Matters ............................... 33
Section 3.22 Insurance ................................................ 34
Section 3.23 Takeover Provisions Inapplicable ......................... 34
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Section 3.24 No Material Adverse Effect ..................................................... 34
Section 3.25 Rights Plan .................................................................... 34
Section 3.26 ▇▇▇▇▇▇▇ Replacement Properties ................................................. 34
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF HCPI ................................................... 34
Section 4.1 Organization and Qualification ................................................. 35
Section 4.2 Authorization; Validity and Effect of Agreement ................................ 35
Section 4.3 Capitalization ................................................................. 35
Section 4.4 Subsidiaries ................................................................... 37
Section 4.5 Other Interests ................................................................ 37
Section 4.6 No Conflict; Required Filings and Consents ..................................... 37
Section 4.7 Compliance ..................................................................... 38
Section 4.8 SEC Reports .................................................................... 38
Section 4.9 Absence of Certain Changes ..................................................... 39
Section 4.10 Litigation ..................................................................... 39
Section 4.11 Taxes .......................................................................... 39
Section 4.12 Employee Benefit Plans ......................................................... 41
Section 4.13 Properties ..................................................................... 43
Section 4.14 Contracts ...................................................................... 45
Section 4.15 Labor Relations ................................................................ 45
Section 4.16 Intellectual Property .......................................................... 45
Section 4.17 Environmental Matters .......................................................... 45
Section 4.18 Opinion of Financial Advisor ................................................... 46
Section 4.19 Brokers ........................................................................ 46
Section 4.20 Vote Required .................................................................. 46
Section 4.21 Accounting and Tax Matters ..................................................... 47
Section 4.22 Insurance ...................................................................... 47
Section 4.23 Takeover Provisions Inapplicable ............................................... 47
Section 4.24 No Material Adverse Effect ..................................................... 47
Section 4.25 Rights Plan .................................................................... 47
Section 4.26 Ownership of Company Common Stock .............................................. 47
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER .................................................... 47
Section 5.1 Conduct of Business of the Company Pending the Merger ........................... 47
Section 5.2 Permitted Conduct of Business by the Company Pending the Merger ................. 51
Section 5.3 Conduct of Business of HCPI Pending the Merger .................................. 53
Section 5.4 Continued Qualification as a Real Estate Investment Trust; Final Company Dividend 53
Section 5.5 Dividend Payment Coordination ................................................... 54
ARTICLE VI. ADDITIONAL AGREEMENTS .................................................................... 54
Section 6.1 Preparation of Form S-4 and the Proxy Statement; Stockholder Meeting ........... 54
Section 6.2 Cooperation; Notice; Cure ...................................................... 56
Section 6.3 No Solicitation ................................................................ 56
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Section 6.4 Access to Information ...................................... 58
Section 6.5 Governmental Approvals ..................................... 58
Section 6.6 Publicity .................................................. 59
Section 6.7 Benefit Plans .............................................. 59
Section 6.8 Indemnification ............................................ 60
Section 6.9 Affiliate Agreements ....................................... 60
Section 6.10 Tax Treatment of Reorganization ............................ 61
Section 6.11 Further Assurances and Actions ............................. 61
Section 6.12 Stock Exchange Listing ..................................... 62
Section 6.13 Letter of the Company's Accountants ........................ 62
Section 6.14 Letter of HCPI's Accountants ............................... 62
Section 6.15 Rights Plan ................................................ 62
Section 6.16 Company REIT Status ........................................ 62
Section 6.17 HCPI REIT Status ........................................... 62
Section 6.18 Obtaining Consents ......................................... 62
Section 6.19 Exemption from Section 16(b) of the Exchange Act ........... 63
Section 6.20 Termination of Other Stock Rights .......................... 63
ARTICLE VII. CONDITIONS OF MERGER ................................................ 63
Section 7.1 Conditions to Obligation of each Party to Effect the Merger . 63
Section 7.2 Conditions to Obligations of the Company to Effect the Merger 64
Section 7.3 Conditions to Obligations of HCPI to Effect the Merger ...... 65
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER .................................. 66
Section 8.1 Termination ................................................. 66
Section 8.2 Effect of Termination ....................................... 67
Section 8.3 Expenses .................................................... 69
Section 8.4 Amendment ................................................... 70
Section 8.5 Waiver ...................................................... 70
ARTICLE IX. GENERAL PROVISIONS ................................................... 70
Section 9.1 Non-Survival of Representations, Warranties and Agreements . 70
Section 9.2 Notices .................................................... 70
Section 9.3 Severability ............................................... 71
Section 9.4 Entire Agreement; Assignment ............................... 71
Section 9.5 Parties in Interest ........................................ 72
Section 9.6 Governing Law .............................................. 72
Section 9.7 No Trial by Jury ........................................... 72
Section 9.8 Action by Subsidiaries and Boards .......................... 72
Section 9.9 Headings ................................................... 72
Section 9.10 Specific Performance ....................................... 72
Section 9.11 Counterparts ............................................... 73
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Exhibits
--------
Exhibit A Form of Affiliate Letter
Exhibit B Articles Supplementary of Series C Preferred Stock
Exhibit C Form of REIT Opinion to be delivered by ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Exhibit D Form of REIT Opinion to be delivered by ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
Exhibit E Form of REIT Opinion to be delivered by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
iv