EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
Dated as of January 11, 1998
among
Meditrust Corporation,
Meditrust Operating Company.
and
Cobblestone Holdings, Inc.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 11, 1998, by and
among Meditrust Corporation, a Delaware corporation ("Reitco"), Meditrust
Operating Company, a Delaware corporation ("Opco") and Cobblestone Holdings,
Inc., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of Reitco, Opco and the Company
have approved, and have determined that it is advisable and in the best
interests of their respective stockholders to consummate, the merger of the
Company with and into Reitco (the "Merger") and the other transactions
contemplated by this Agreement, including without limitation, Section 1.3, upon
the terms and subject to the conditions set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as part of a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (collectively, the "Code") and that this
Agreement constitute a "plan of reorganization" under the Code;
WHEREAS, the shares of common stock, par value $.10 per share, of
Reitco (the "Reitco Common Stock") and the shares of common stock, par value
$.10 per share, of Opco (the "Opco Common Stock") are paired and transferable
and traded only in combination as a single unit (the "Paired Shares") on the New
York Stock Exchange (the "NYSE"); and
WHEREAS contemporaneously with the execution of this Agreement
Reitco, Opco and certain other Persons (such other Persons, collectively, the
"Principal Shareholders") have entered into a Shareholders Agreement (the
"Shareholders Agreement") pursuant to which the Principal Shareholders have
agreed, among other things, to refrain from taking certain actions and Reitco,
Opco and the Principal Shareholders have agreed, among other things, to take
certain actions on the terms and subject to the conditions set forth in the
Shareholders Agreement.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.2 hereof), the Company
shall be merged with and into Reitco, and the separate corporate existence of
the Company shall thereupon cease. Reitco shall be the surviving corporation in
the Merger (the "Surviving Corporation") and all of its rights, privileges,
powers, immunities, purposes and franchises shall continue unaffected by the
Merger. The Merger shall have the effects set forth in Section 259 of the
General Corporation Law of the State of Delaware (the "DGCL").
1.2. Effective Time of the Merger. The Merger shall become effective
when a properly executed Certificate of Merger meeting the requirements of
Section 251 of the DGCL is duly filed with the Secretary of State of the State
of Delaware or at such later time as the parties hereto shall have designated in
such filing as the Effective Time of the Merger (the "Effective Time"), which
filing shall be made as soon as practicable after the closing of the
transactions contemplated by this Agreement in accordance with Section 3.8
hereof.
1.3. Certain Transfers; Reservation of Right to Revise
Transaction. The Parties expect that the following actions will occur at the
Closing: (i) the Company will transfer all its employees to Opco (or a
Subsidiary of Opco), (ii) to the extent legally possible, the Company will
eliminate, in a manner reasonably satisfactory to Reitco, all minority interests
in all wholly-owned Subsidiaries of the Company and (iii) the Company will sell,
transfer, lease, sublease or otherwise convey to Opco (or a Subsidiary of Opco)
liquor licenses, any or all personal property leased by the Company or any of
its Subsidiaries, any or all real property leased by the Company or any of its
Subsidiaries and any assets of the Company (which the parties expect will not be
material assets) that Reitco reasonably determines are necessary or advisable to
sell, transfer and convey in order to enable Reitco to continue to qualify as a
"real estate investment trust" for federal income tax purposes (a "REIT");
provided, however, that the taking of such actions (i) shall enable the Merger
to continue to qualify as, or be treated as part of, one or more tax-free
reorganizations within the meaning of Section 368(a) of the Code, and (ii) shall
not affect the ability to satisfy the conditions set forth in Section 7.2(e) and
7.3(e). Notwithstanding anything to the contrary contained in this Agreement,
Reitco and Opco may, in their sole discretion, but following a good faith
consultation with the Company, at any time prior to the Effective Time, revise
the method of effecting the Merger, which change may include the use of a merger
subsidiary, preferred stock subsidiaries or other acquisition vehicles;
provided, however, that such revised method of effecting the Merger (i) shall
enable the Merger to continue to qualify as, or be treated as part of, one or
more tax-free reorganizations within the meaning of Section 368(a) of the Code,
and (ii) shall not affect the ability to satisfy the conditions set forth in
Section 7.2(e) and 7.3(e). The parties hereto agree that they will execute, and
will cause their respective direct and indirect Subsidiaries to execute, such
agreements and documents and such amendments to this Agreement and any related
documents as shall be appropriate in order to reflect such revised structure. As
used in this Agreement, the word "Subsidiary" means, with respect to any party,
any corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner (excluding such partnerships where such party or any Subsidiary of such
party do not have a majority of the voting interest in such partnership) or (ii)
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
1.4. Subscription Agreement. Immediately prior to the Closing (as
defined in Section 3.8), the Company, Opco and Reitco will enter into a contract
in the form previously agreed to or as such contract may be changed by the
parties hereto (the "Company/Opco Subscription Agreement") pursuant to which
consistent with this Agreement the Company will
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pay for, and Opco will issue directly to the shareholders of the Company as part
of the consideration to be paid to such shareholders in the Merger, a number of
shares (the "Subscribed Shares") of Opco Common Stock equal to the number of
shares of Reitco Common Stock to be issued to shareholders of the Company
pursuant to the Merger; provided, however, that such Company/Opco Subscription
Agreement may be amended or modified in whole or in part in connection with any
transaction contemplated by Section 1.3 hereof.
1.5. Subscribed Shares. The parties acknowledge and agree that the
Subscribed Shares will be issued in accordance with Sections 3.1 and 3.3 to the
shareholders of the Company in connection with the Merger and will be paired
with the Reitco Common Stock issued in the Merger and that neither the Company
nor Reitco will at any time become a stockholder of Opco.
ARTICLE II.
THE SURVIVING CORPORATION
2.1. Certificate of Incorporation. The Certificate of Incorporation
of the Surviving Corporation shall be the Certificate of Incorporation of Reitco
in effect immediately prior to the Effective Time until thereafter amended in
accordance with the provisions thereof and applicable law.
2.2. By-Laws. The Bylaws of the Surviving Corporation shall be the
Bylaws of Reitco in effect immediately prior to the Effective Time until
thereafter amended in accordance with the provisions thereof and applicable law.
2.3. Directors and Officers of Surviving Corporation.
(a) The directors of Reitco immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation as of the
Effective Time and shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal.
(b) The officers of Reitco immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation at the Effective
Time and shall hold office until their respective successors are duly elected
and qualified, or their earlier death, resignation or removal.
ARTICLE III.
CONVERSION OF SHARES AND REPAYMENT OF DEBT
3.1. Merger Consideration. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Conversion of Common Shares. Each share (each, a "Common
Share") of the Company's common stock, par value $.01 per share (the "Common
Stock"), issued and outstanding immediately prior to the Effective Time, other
than Dissenting Shares (as
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defined in Section 3.6) and Common Shares held in the treasury of the Company or
owned by Reitco, Opco or any Subsidiary of the Company, Reitco or Opco, will at
the Effective Time be converted into the right to receive that number of Paired
Shares that is equal to the Exchange Ratio calculated in accordance with Section
3.1(b) (the "Common Stock Consideration").
(b) Calculation of the Exchange Ratio.
(i) If the Closing Price is equal to or greater
than thirty dollars and forty cents ($30.40), but less than or equal to forty
two dollars and seventy five cents ($42.75), the Exchange Ratio will be computed
using the following formula:
((Base Price - Tender Premium) / Calculation Price) / Common Shares
= Exchange Ratio
(ii) If the Closing Price is greater than forty two
dollars and seventy five cents ($42.75), the Exchange Ratio will be computed
using the following formula:
((Base Price - Tender Premium) / 39.19) X (42.75 / Closing Price)
/ Common Shares = Exchange Ratio
(iii) If the Closing Price is less than thirty
dollars and forty cents ($30.40), the Exchange Ratio will be computed using the
following formula:
((Base Price - Tender Premium) / 32.06) X (30.40 / Closing Price)
/ Common Shares = Exchange Ratio
(iv) As used in this Agreement, the following terms
have the meanings indicated below:
"Base Price" means two hundred twelve million nine
hundred twenty-five thousand dollars ($212,925,000).
"Calculation Price" means (i) thirty nine dollars and
nineteen cents ($39.19), if the Closing Price is equal to or greater than thirty
nine dollars and nineteen cents ($39.19), but less than or equal to forty two
dollars and seventy five cents ($42.75), (ii) the Closing Price, if the Closing
Price is greater than thirty two dollars and six cents ($32.06), but less than
thirty nine dollars and nineteen cents ($39.19) and (iii) thirty two dollars and
six cents ($32.06), if the Closing Price is equal to or greater than thirty
dollars and forty cents ($30.40), but less than or equal to thirty two dollars
and six cents ($32.06).
"Closing Price" means the average per share closing
price for a Paired Share as reported on the NYSE Transactions Tape (as reported
in the Wall Street Journal or, if not reported thereby, by another authoritative
source) over the five consecutive Trading
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Day period ending the Trading Day immediately preceding the second Trading Day
prior to the Closing Date.
"Tender Premium" has the meaning given such term in
Section 3.7.
"Trading Day" means a day on which the NYSE is
open for trading.
(v) In determining the Exchange Ratio as provided
above, the final number will be rounded to three decimal places, rounding up
from 0.0005. In the event of any stock dividend or other distribution or a
subdivision, combination or modification of Reitco Common Stock or Opco Common
Stock with a record date after the date hereof and prior to the Effective Time,
the Exchange Ratio will be equitably adjusted.
(c) Preferred Stock. At the election of Reitco, which election
shall be delivered to the Company in writing no later than January 23, 1998, the
Company will either:
(i) In accordance with the terms of the Certificate
of Designation, Preferences and Relative Rights, Qualifications, Limitations and
Restrictions (the "Certificate of Designation") for the Company's Series A
Preferred Stock, par value $.01 per share (the "Preferred Stock"), each share of
Preferred Stock (each, a "Preferred Share") issued and outstanding immediately
prior to the Effective Time shall be redeemed by the Company for eight dollars
and twenty-five cents ($8.25) in cash (the "Redemption Price"). At such time as
is required under the Certificate of Designation, the Company shall provide
notice of such redemption to the holders of the Preferred Stock; or
(ii) Obtain any necessary consents of the holders of
Preferred Shares so that, at the Effective Time each Preferred Share shall,
whether through redemption, as part of the Merger or otherwise be converted into
the right to receive the Redemption Price, payable at the election of Reitco, in
either (A) Paired Shares valued at the closing price of the Paired Shares as
reported on the NYSE Transactions Tape (as reported in the Wall Street Journal,
or if not reported thereby, by another authoritative source) on the end of the
Trading Day immediately prior to the Effective Time or (B) a combination of cash
and Paired Shares (valued as provided in Section 3.1(c)(ii)(A)) (the
consideration payable pursuant to this Section 3.1(c)(ii), the "Preferred Stock
Consideration," and together with the Common Stock Consideration, the "Merger
Consideration"). As used herein, the term "Preferred Stock Election" means an
election by Reitco under this Section 3.1(c) to pay the Preferred Stock
Consideration.
(d) Cancellation of Treasury Stock and Reitco and Opco-Owned
Stock. Each Common Share and Preferred Share that is owned by the Company or by
any wholly owned Subsidiary of the Company, or by Reitco or Opco or any wholly
owned Subsidiary of Reitco or Opco, will automatically be canceled and retired
and will cease to exist, and no consideration will be delivered in exchange
therefor.
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(e) Cancellation of Other Shares. Each Common Share converted
pursuant to Section 3.1(a) and each Preferred Share redeemed or converted
pursuant to Section 3.1(c) will no longer be outstanding and will automatically
be canceled and retired and cease to exist and each holder of a certificate
representing any such Common Share or Preferred Share will cease to have any
rights with respect thereto, except (i) in the case of the Common Shares, the
right to receive the Common Stock Consideration and any additional cash in lieu
of fractional Paired Shares to be issued or paid in consideration therefor upon
surrender of the stock certificate representing such share and (ii) in the case
of the Preferred Shares, the right to receive the consideration provided for in
Section 3.1(c) and any additional cash in lieu of fractional Paired Shares to be
issued or paid in consideration therefor upon surrender of the stock certificate
representing such share.
3.2. Company Stock Plans.
(a) The Company will take all actions necessary to provide
that, upon the Effective Time, each outstanding option (each, an "Option") to
purchase Common Stock under the Company's Stock Option Plan (the "Option Plan"),
whether or not then exercisable or vested, will either (i) become fully
exercisable and vested or (ii) expire and be extinguished.
(b) As soon as practicable after the date hereof, the Company
will deliver to holders of Options appropriate notices setting forth such
holders' rights pursuant to the Option Plan, the agreements evidencing the
grants of such Options and this Agreement. Options which are exercisable
immediately prior to the Effective Time will assumed by Reitco pursuant to and
in accordance with Section 3.2(c).
(c) At the Effective Time, the Company's obligations with
respect to each Option which is exercisable immediately prior to the Effective
Time that is set forth on Section 4.2 of the Company Disclosure Schedule will be
assumed by Reitco (an "Assumed Option"). The Assumed Options will continue to
have, and be subject to, the same terms and conditions as set forth in the
Option Plan and related option agreements (as in effect immediately prior to the
Effective Time) pursuant to which the Assumed Options were issued, provided that
(i) all references to the Company will be deemed to be references to Reitco and
Opco, and all references to the Common Stock will be deemed to be references to
Paired Shares, (ii) each Assumed Option will be exercisable for that number of
whole Paired Shares equal to the product of the number of shares of the Common
Stock covered by the Assumed Option immediately prior to the Effective Time
multiplied by the Exchange Ratio and rounded to the nearest whole number of
Paired Shares, and (iii) the exercise price per share of Paired Shares under
each Assumed Option will be equal to the exercise price per share of the Common
Stock under the Assumed Option immediately prior to the Effective Time divided
by the Exchange Ratio, rounded to the nearest cent. Pursuant to this Agreement,
Reitco and Opco will (A) reserve for issuance or hold the number of Paired
Shares that will become issuable upon the exercise of such Assumed Options
pursuant to this Section 3.2(c) and (B) promptly after the Effective Time issue
to each holder of an outstanding Assumed Option a document evidencing the
assumption by Reitco of the Company's obligations with respect thereto under
this Section 3.2(c).
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3.3. Exchange of Certificates Representing Shares.
(a) Exchange Agent. Prior to the Effective Time, Reitco and
Opco will enter into an agreement with The First National Bank of Boston, N.A.,
or such other bank or trust company as may be designated by Reitco, Opco and the
Company (the "Exchange Agent"), which agreement will provide that as of the
Effective Time Reitco and Opco will deposit, or will cause to be deposited, with
the Exchange Agent, for the benefit of the holders of Common Shares (and
Preferred Shares if required pursuant to the Preferred Stock Election), for
exchange in accordance with this Article III, through the Exchange Agent, (i)
certificates representing the shares of Reitco Common Stock and Opco Common
Stock, and (ii) cash sufficient to pay for fractional Paired Shares in
accordance with Section 3.3(d), in each case payable pursuant to this Article
III in exchange for the Common Stock (and the Preferred Stock if required
pursuant to the Preferred Stock Election). Such certificates for shares of
Reitco Common Stock and Opco Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time
and any cash to be paid in lieu of any fractional Paired Shares, are hereinafter
referred to as the "Exchange Fund."
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Exchange Agent will mail to each holder of record
of a certificate which immediately prior to the Effective Time represented
outstanding Common Shares, and required pursuant to a Preferred Stock Election,
Preferred Shares (a "Certificate") converted into the right to receive the
Merger Consideration: (i) a letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to the Certificates will
pass, only upon delivery of the Certificates to the Exchange Agent and will be
in such form and have such other customary provisions as Reitco may specify
consistent with this Agreement) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
will be entitled to receive in exchange therefor the applicable Merger
Consideration and cash, if any, which such holder has the right to receive
pursuant to the provisions of this Article III, and the Certificate so
surrendered will forthwith be canceled. In the event of a transfer of ownership
of Common Shares (and Preferred Shares if required pursuant to the Preferred
Stock Election) which is not registered in the transfer records of the Company,
the Merger Consideration may be issued or paid to a person or entity (a
"Person") other than the Person in whose name the Certificate so surrendered is
registered if such Certificate is properly endorsed or otherwise in proper form
for transfer and the Person requesting such issuance or payment pays any
transfer or other taxes required by reason of the issuance or payment of the
Merger Consideration to a Person other than the registered holder of such
Certificate or establishes to the satisfaction of Reitco that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
3.3(b), each Certificate will be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the applicable Merger
Consideration which the holder thereof has the right to receive in respect of
such Certificate in the Merger and cash, if any, pursuant to the provisions of
this Article III. No interest will be paid or will accrue on any cash payable to
holders of Certificates pursuant to the provisions of this Article III, but all
payments of cash, if any, which holders have
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the right to receive pursuant to the provisions of this Article III will be made
in immediately available funds.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Reitco Common Stock or Opco
Common Stock with a record date after the Effective Time and no cash payment in
lieu of fractional shares will be paid pursuant to Section 3.3(d) to the holder
of any unsurrendered Certificate with respect to the Paired Shares represented
thereby, and all such dividends, other distributions and cash in lieu of
fractional Paired Shares will be paid by Reitco or Opco to the Exchange Agent on
the appropriate payment date and will be included in the Exchange Fund, in each
case in accordance with this Article III. Subject to the effect of applicable
escheat or similar laws, following surrender of any Certificate in accordance
herewith there will be paid to the holder of the certificates representing whole
Paired Shares issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time and which have been theretofore paid by Reitco or
Opco with respect to such whole Paired Shares and the amount of any cash payable
in lieu of fractional Paired Shares to which such holder is entitled pursuant to
Section 3.3(d) and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole Paired Shares.
(d) No Fractional Paired Shares. No fractional Paired Shares
shall be issued in connection with the Merger. In lieu of the issuance of any
fractional Paired Shares in connection with the Merger, cash adjustments will be
paid to holders of Common Stock (and Preferred Stock if required pursuant to the
Preferred Stock Election) in respect of any fractional Paired Share that would
otherwise be issuable, and the amount of such cash adjustment shall be equal to
the product of such fractional amount and the Closing Price.
(e) No Further Ownership Rights. All Paired Shares issued and
all cash paid upon the surrender for exchange of Certificates in accordance with
the terms of this Article III will be deemed to have been issued and paid in
full satisfaction of all rights pertaining to the Common Shares (and Preferred
Stock if required pursuant to the Preferred Stock Election) theretofore
represented by such Certificates. If, after the Effective Time, Certificates are
presented to Reitco, the Surviving Corporation or the Exchange Agent for any
reason, they will be canceled and exchanged as provided in this Article III.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for six
months after the Effective Time will be delivered to Reitco and/or Opco, in
accordance with Reitco's and Opco's instructions, upon demand, and any holders
of the Certificates who have not theretofore complied with this Article III will
thereafter look only to Reitco as a general unsecured creditor thereof for
payment of their claim for Merger Consideration, any cash in lieu of fractional
Paired Shares and any dividends or distributions with respect to Paired Shares.
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(g) No Liability. None of Reitco, Opco, the Company or the
Exchange Agent will be liable to any Person in respect of any Paired Shares (or
dividends or distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificate has not been surrendered prior to one
year after the Effective Time (or immediately prior to such earlier date on
which any Merger Consideration, any cash in lieu of fractional Paired Shares or
any dividends or distributions payable to the holder of such Certificate would
otherwise escheat to or become the property of any Governmental Entity), any
such Merger Consideration, cash, dividends or distributions in respect of such
Certificate will become the property of the Surviving Corporation, free and
clear of all claims or interest of any Person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent will
invest any cash included in the Exchange Fund in one or more bank accounts or in
high-quality, short-term investments, as directed by Reitco, on a daily basis.
Any interest and other income resulting from such investments will be paid to
Reitco.
3.4. Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Common
Shares or Preferred Shares shall thereafter be made. If, after the Effective
Time, certificates representing Common Shares or Preferred Shares are presented
to the Surviving Corporation, they shall be canceled and exchanged for the
applicable consideration deliverable in respect thereof pursuant to this
Agreement.
3.5. Lost Certificates. In the event any certificate evidencing
Common Shares shall have been lost, stolen or destroyed, upon the making and
delivery of an affidavit of that fact by the Person claiming such certificate to
have been lost, stolen or destroyed and, if required by Reitco, the posting by
such Person of a bond in such reasonable amount as Reitco may direct as
indemnity against any claim that would be made against the Company or Reitco
with respect to such certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed certificate the applicable Merger Consideration,
together with any cash in lieu of fractional Paired Shares and any dividends or
distributions with respect to Paired Shares, deliverable in respect thereof
pursuant to this Agreement.
3.6. Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, any issued and outstanding Common Shares or Preferred Shares
held by a stockholder (a "Dissenting Stockholder") who objects to the Merger and
complies with all the provisions of the DGCL concerning the right of holders of
Common Shares or Preferred Shares, as applicable, to dissent from the Merger and
require appraisal of the Common Shares or Preferred Shares, as applicable
("Dissenting Shares") shall not be converted as described in Section 3.1 but
shall become the right to receive such consideration as may be determined to be
due to such Dissenting Stockholder pursuant to the DGCL. If, after the Effective
Time, any Dissenting Stockholder withdraws its demand for appraisal or fails to
perfect or otherwise loses its right of appraisal, in any case pursuant to the
DGCL, or if Reitco otherwise consents thereto, such Dissenting Stockholder's
Common Shares and Preferred Shares shall be deemed to be converted
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as of the Effective Time into the right to receive the Merger Consideration
deliverable in respect of such Common Shares and Preferred Shares pursuant to
this Agreement, without interest.
3.7. Repayment of Debt. Promptly after the date of this Agreement,
the Company shall commence an offer and cause Cobblestone Golf Group, Inc.
("CGG") to commence an offer (collectively the "Offer") to purchase for cash all
of the issued and outstanding (i) 13 1/2% Series B Senior Zero-Coupon Notes due
2004 of the Company (the "Zero Coupon Notes") and (ii) 11 1/2% Series B Senior
Notes Due 2003 of CGG (the "CGG Notes," and together with the Zero Coupon Notes,
the "Notes") at such prices as may be recommended by the Company's financial
advisors, net to the sellers in cash (such prices, or such higher prices as may
be paid in the Offer, being referred to herein as the "Debt Offer Price.") The
Offer shall also include a consent solicitation for the elimination of
substantially all of the restrictive covenants in the indentures governing the
Notes (the "Covenant Elimination"). The Offer will be subject to (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer, at
least 662/3% of the principal amount of the CGG Notes and 662/3% of the
principal amount of the Zero Coupon Notes as of the expiration of the Offer (the
"Minimum Debt Condition"), (ii) the receipt of sufficient consents to the
Covenant Elimination and (iii) such other conditions as are reasonably
determined by the Company. Reitco shall provide the funds sufficient to pay for
the Notes tendered and shall cause the Surviving Corporation to, on the terms
and subject to the prior satisfaction or waiver of the conditions of the Offer,
at the Effective Time accept for payment and pay for the Notes tendered, in each
case provided that the conditions to the Offer have been satisfied. The Offer
shall be made by means of an offer to purchase (the "Offer to Purchase")
containing the terms contemplated by this Agreement. Without the written consent
of Reitco, the Company shall not amend or waive the Minimum Debt Condition or
change the number of Notes sought to an amount less than all of the outstanding
Notes; provided, however, that if on the initial scheduled expiration date of
the Offer (as they may be extended in accordance with the terms hereof), all
conditions to the Offer shall not have been satisfied or waived, the Offer may
be extended from time to time without the consent of Reitco for such period of
time as is reasonably expected to be necessary to satisfy such unsatisfied
conditions. In addition, the Debt Offer Price may be increased, in which case
the Offer may be extended to the extent required by the law in connection with
such increase without any further consent of Reitco. For purposes of this
Agreement, the term "Tender Premium" shall mean the excess of (i) the cash that
would be paid to holders of the Notes to purchase such Notes in the Offer to
Purchase if the holders of all the Notes had tendered over (ii) the aggregate at
the Effective Time of (A) the accreted value of the Zero Coupon Notes and (B)
the principal and accrued interest of the CGG Notes. Reitco shall provide funds
sufficient to repay in full at the Effective Time obligations of CGG and its
Subsidiaries under that certain Second Amended and Restated Credit Agreement,
dated as of June 4, 1996, among the Company, CGG, various financial institutions
and Bank of America National Trust & Savings Association (the "Credit
Agreement") and shall cause the Surviving Corporation to pay such obligations at
the Effective Time. Reitco shall also provide funds sufficient to pay in full at
the Effective Time all obligations under capitalized leases pursuant to which
the Company or any Subsidiary of the Company leases personal property and shall
cause the Surviving Corporation to pay in full such obligations at the Effective
Time.
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3.8. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Cravath, Swaine &
▇▇▇▇▇, Worldwide Plaza, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇, at 10:00 a.m., local
time, on the day on which all of the conditions set forth in Article VII hereof
are satisfied or waived, or at such other date, time and place as Reitco and the
Company shall agree (the "Closing Date").
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Reitco and Opco as follows:
4.1. Organization. Each of the Company and its Subsidiaries is a
corporation, partnership or other entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, and has corporate or other power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. Each
of the Company and its Subsidiaries is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to do so would
not have a material adverse effect on the Company and its Subsidiaries, taken as
a whole (a "Company Material Adverse Effect"). A true and correct copy of the
Certificate of Incorporation and Bylaws of the Company has been delivered to
Reitco and Opco. The Form 10-K filed by CGG with the Securities and Exchange
Commission (the "SEC") for CGG's fiscal year end September 30, 1997 (the "CGG
10-K") sets forth a complete list of the Company's Subsidiaries including CGG.
4.2. Capitalization.
(a) The authorized capital stock of the Company consists of
5,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. As of
the date hereof, (i) 1,722,449 shares of Common Stock are issued and
outstanding, and (ii) 5,220,376 shares of Preferred Stock are issued. All the
outstanding shares of the Company's capital stock are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except as set forth above or in the next sentence, no shares of capital stock or
other voting securities of the Company are issued, reserved for issuance or
outstanding. Except as set forth in Section 4.2 of the Company Disclosure
Schedule and except for the transactions contemplated by this Agreement, as of
the date hereof, there are no existing options, warrants, calls, pre-preemptive
rights, subscriptions or other rights, convertible securities, agreements,
arrangements or commitments of any character obligating the Company or any of
its Subsidiaries to issue, transfer or sell or cause to be issued, transferred
or sold any shares of capital stock of, or other equity interest in, the Company
or any of its Subsidiaries or securities convertible into or exchangeable for
such shares or equity interests or obligations of the Company or any of its
Subsidiaries. Section 4.2 of the Company Disclosure Schedule sets forth a
complete and correct list, as of the date hereof, of the number of voting
securities of the Company subject to employee stock options of the Company.
11
(b) Except as disclosed in Section 4.2 of the Company
Disclosure Schedule, all of the outstanding shares of capital stock or other
equity interests of each of the Subsidiaries of the Company have been validly
issued and are fully paid and nonassessable and are owned by either the Company
and/or one of its Subsidiaries free and clear of all liens, charges, security
interests, options, claims or encumbrances of any nature whatsoever.
(c) Except as disclosed in Section 4.2 of the Company
Disclosure Schedule, there are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of the capital stock of the Company or any of the
Subsidiaries. Except as disclosed in Section 4.2 of the Company Disclosure
Schedule, none of the Company or its Subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock of the Company, or any
of its Subsidiaries, respectively, as a result of the transactions contemplated
by this Agreement.
(d) Except as disclosed in Section 4.2 of the Company
Disclosure Schedule, there are no outstanding contractual obligations of the
Company or any of its Subsidiaries to issue, repurchase, redeem, exchange or
otherwise acquire, or to register (under the federal or any state securities
laws) for resale, any shares of capital stock of the Company or any of its
Subsidiaries.
(e) Except as disclosed in Section 4.2 of the Company
Disclosure Schedule, there are no outstanding contractual obligations of the
Company to vote or to dispose of any shares of the capital stock of any of its
Subsidiaries.
(f) Except as disclosed in Section 4.2 of the Company
Disclosure Schedule, there are no bonds, debentures, notes, other indebtedness
or securities of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of the Company may vote or which are to be prepaid pursuant to
Section 3.7 and which have applicable prepayment penalties in excess of one
hundred fifty thousand dollars ($150,000) in the aggregate.
4.3. Corporate Authorization; Validity of Agreement; Company Action.
The Company has corporate power and authority to execute and deliver this
Agreement and, subject to obtaining any necessary approval of its stockholders
as required by the DGCL with respect to the Merger, to consummate the
transactions contemplated hereby and perform its obligations hereunder. Prior to
the date hereof, the Board of Directors of the Company approved this Agreement,
the Merger and the other transactions contemplated by this Agreement to which
the Company is or will be a party and resolved to recommend that the holders of
Common Stock adopt this Agreement. Except for obtaining the affirmative vote or
written consent of (x) a majority of Common Shares entitled to vote thereon and
(y) all of the Preferred Shares, if Reitco makes the Preferred Stock Election
and the filing and recordation of appropriate merger documents as required by
the DGCL, no other corporate action or proceedings on the part of the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation by it of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and, assuming
this Agreement
12
constitutes a valid and binding obligation of each of Reitco and Opco,
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
4.4. Consents and Approvals; No Violations. Except as disclosed in
Section 4.4 of the Company Disclosure Schedule, and except (a) as may be
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 as
amended (the "HSR Act") or the liquor license laws, rules, regulations and
requirements of any state or other Governmental Entity (as defined below), (b)
for the approval of this Agreement by the Company's stockholders, (c) for filing
and recordation of the Certificate of Merger as required by the DGCL and (d) for
the filing with the SEC of such reports as may be required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") in connection with the
Merger and the other transactions reasonably contemplated by this Agreement,
including in particular Section 1.3 (the "Merger Transactions"), none of the
execution, delivery or performance of this Agreement by the Company, the
consummation by the Company of the transactions contemplated hereby or
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of the Certificate of Incorporation or Bylaws or
similar organizational documents of the Company or of any of its Subsidiaries,
(ii) require any filing with, or permit, authorization, consent or approval of,
any court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity"),
the failure to make or obtain would have a Company Material Adverse Effect,
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, loan or credit agreement, bond, mortgage,
indenture, guarantee, other evidence of indebtedness (collectively, the "Debt
Instruments"), 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 properties or assets may be bound and which
either (A) has a remaining term of more than one year and involves the payment
or receipt of money in excess of $250,000 and is not cancelable without penalty
on 30 days notice; (B) could reasonably be expected to have a material adverse
effect on any golf course owned, leased or managed by the Company or any of its
Subsidiaries; (C) is a lease under which the Company or any of its Subsidiaries
leases any golf course; or (D) is a management agreement under which CGG or a
Subsidiary manages a golf course or (iv) violate any judgment, order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of its Subsidiaries or any of their properties or assets. The Company does not
maintain, nor is it party to, nor is it currently contemplating adopting a
shareholder rights plan or similar arrangement customarily known as a "poison
pill."
4.5. SEC Reports and Financial Statements.
(a) The Company and CGG have each filed with the SEC, all
forms, reports, schedules, statements and other documents required to be filed
by them since January 1, 1997 (as such documents have been amended since the
time of their filing, collectively, the "Company SEC Documents"). As of their
respective dates or, if amended, as of the date of the last such amendment, the
Company SEC Documents, including, without limitation, any financial
13
statements or schedules included therein and any forms, reports and other
documents filed by the Company with the SEC after the date of this Agreement (a)
did not and does not as of the date hereof contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied or will comply in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act of 1933, as amended (the "Securities Act"), as the case may
be, and the applicable rules and regulations of the SEC thereunder.
(b) Each of the consolidated financial statements included in
the Company SEC Documents has been prepared from, and is in accordance with, the
books and records of the Company and/or its consolidated Subsidiaries, complies
as to form, as of its respective date of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, has been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly presents in all material respects the consolidated financial
position and the consolidated results of operations and cash flows (and changes
in financial position, if any) of the Company and its consolidated Subsidiaries
as at the dates thereof or for the periods presented therein. Except (i) as
reflected in such financial statements or the notes thereto, (ii) for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby and (iii) for liabilities and obligations incurred since
September 30, 1997 in the ordinary course of business consistent with past
practice or otherwise permitted by this Agreement, neither the Company nor any
of its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, known or unknown, asserted or unasserted, contingent or
otherwise), including liabilities arising under any Environmental Laws (as
herein defined), which are required by GAAP to be reflected in a consolidated
balance sheet of the Company and its consolidated Subsidiaries and which,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect.
4.6. Absence of Certain Changes. Except to the extent disclosed in
the Company SEC Documents filed prior to the date of this Agreement or as
otherwise disclosed in Section 4.6 of the Company Disclosure Schedule, since
October 1, 1997, the Company and its Subsidiaries have conducted their
respective businesses and operations in the ordinary course of business
consistent with past practice, and there has not occurred (i) any Company
Material Adverse Effect; (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the equity interests of the Company or of any of its Subsidiaries, other than
dividends paid by wholly owned Subsidiaries, or any redemption, purchase or
other acquisition by the Company or any of its Subsidiaries of any securities of
the Company or any of its Subsidiaries; (iii) any split, combination or
reclassification of any of the Company's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for, shares of the Company's capital stock; (iv) any increase
in or establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards
14
or restricted stock awards), stock purchase or other employee benefit plan, or
any other increase in the compensation payable or to become payable to any
officers or key employees of the Company or any Subsidiary; (v) any change by
the Company or any of its Subsidiaries in accounting principles or methods,
except insofar as may be required by a change in GAAP or the SEC; or (vi) any
entering into, renewal, modification or extension of, any material contract,
arrangement or agreement with any other party except for contracts, arrangements
or agreements in the ordinary course of business or as contemplated by this
Agreement.
4.7. Litigation. Except to the extent disclosed in the Company SEC
Documents filed prior to the date of this Agreement or on Section 4.7 of the
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or orders or judgments outstanding, to the best knowledge
of the Company, threatened against or affecting, the Company or any of its
Subsidiaries or any property or asset or employee, officer or director (in his
or her capacity as such) of the Company or any of its Subsidiaries, before any
court, arbitrator, or administrative, governmental or regulatory authority or
body, domestic or foreign, which should have been disclosed in any such Company
SEC Documents or which, individually or in the aggregate, could reasonably be
expected to have a Company Material Adverse Effect.
4.8. State Takeover Statutes. The Board of Directors of the Company
has approved this Agreement, the Merger Transactions and the execution of the
Shareholders Agreement. Such approval constitutes approval of the Merger
Transactions by the Board of Directors of the Company under the provisions of
the DGCL. No other takeover statutes, whether under the laws of Delaware or
otherwise, are applicable to the Merger Transactions or this Agreement.
4.9. Ownership of Paired Shares. Neither the Company nor, to its
knowledge, any of its Subsidiaries, directors, or executive officers or other
affiliates beneficially owns (as such term is defined in Rule 13d-3 under the
Exchange Act) any Paired Shares.
4.10. Taxes.
(a) Except as set forth in Section 4.10 of the Company
Disclosure Schedule or as could not reasonably be expected to have a Company
Material Adverse Effect:
(i) The Company and each of its Subsidiaries has
paid or caused to be paid all Taxes required to be so paid prior to the date
hereof and has made provision, in accordance with GAAP, for all Taxes owed or
accrued through the date hereof, except for Taxes which are not material.
(ii) The Company and its Subsidiaries have filed
with the appropriate taxing authorities all Tax Returns (as defined in Section
4.10(b)) required to be filed by it, or requests for extensions to file such Tax
Returns have been timely filed and granted and have not expired. All such filed
Tax Returns are complete and accurate in all material respects. None of the
Company or its Subsidiaries has pending any request for an extension of time
within which to file Tax Returns. The Company has made available to Reitco and
Opco complete and
15
accurate copies of the Company's federal and state Tax Returns for the years
1994, 1995 and 1996.
(iii) The Company and its Subsidiaries have complied
in all material respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and have, within the time and
the manner prescribed by law, withheld and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws.
(iv) Neither the Internal Revenue Service (the
"IRS") nor any other governmental authority is now asserting by written notice
to the Company or any of its Subsidiaries or, to the knowledge of the Company,
threatening to assert against the Company or any of its Subsidiaries, any
deficiency or claim for additional Taxes. No written claim has been made since
July 1, 1996 by a taxing authority in a jurisdiction where the Company does not
file reports and returns that the Company is or may be subject to taxation by
that jurisdiction. The Company has not since January 1, 1994 entered into a
closing agreement pursuant to Section 7121 of the Code.
(v) Neither the Company nor any of its Subsidiaries
has executed or filed with the IRS or any other taxing authority any agreement
now in effect extending the period for assessment or collection of any income or
other Taxes.
(vi) No federal, state, local or foreign audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of any of the Company or its Subsidiaries,
and none of the Company or its Subsidiaries has received a written notice of any
actual or threatened audits or proceedings or is otherwise aware of any such
audits or proceedings.
(vii) There are no material liens for Taxes upon any
property or assets of the Company or any Subsidiary thereof, except for liens
for Taxes not yet due and payable and liens for Taxes that are being contested
in good faith by appropriate proceedings as set forth in Section 4.8 of the
Company Disclosure Schedule.
(viii) Neither the Company nor any of its
Subsidiaries is a party to any material agreement providing for the allocation
or sharing of Taxes.
(ix) Neither the Company nor any of its Subsidiaries
has, with regard to any assets or property held or acquired by any of them,
filed a consent to the application of Section 341(f) of the Code, or 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.
(x) The Company estimates that as of the date
hereof, the Company has no undistributed current or accumulated earnings and
profits (as determined for federal income tax purposes) ("E&P") and will have no
E&P as of the Effective Time.
16
(xi) Neither the Company nor any of its Subsidiaries
has any liability for any Taxes of any consolidated, combined or unitary group
in which the Company or any of its Subsidiaries was previously a member or any
material liability under any tax sharing agreement or similar arrangement with
any other Person.
(b) "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding, social
security, retirement, unemployment, occupation, use, service, use, license, net
worth, payroll, franchise, transfer and recording taxes, fees and charges,
imposed by the Service or any taxing authority (whether domestic or foreign
including, without limitation, any state, county, local or foreign government or
any subdivision or taxing agency thereof (including a United States
possession)), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments. "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.
4.11. Employee Benefits. With respect to all the employee benefit
plans, programs and arrangements maintained for the benefit of any current or
former employee, officer or director of the Company or any of its Subsidiaries
(the "Company Benefit Plans"), except for such matters as, individually or in
the aggregate, could not be reasonably expected to have a Company Material
Adverse Effect and except as set forth in Section 4.11 of the Company Disclosure
Schedule, (a) each Company Benefit Plan and any related trust intended to be
qualified under Sections 401(a) and 501(a) of the Code has received or has
applied for a favorable determination letter from the Internal Revenue Service
that it is so qualified and nothing has occurred since the date of such letter
that could reasonably be expected to materially adversely affect the qualified
status of such Company Benefit Plan or related trust, (b) each Company Benefit
Plan has been operated in all material respects in accordance with the terms and
requirements of applicable law and all required returns and filings for each
Company Benefit Plan have been timely made, (c) none of the Company or any of
its Subsidiaries has incurred any direct or indirect material liability under,
arising out of or by operation of Title I or Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), in connection with any
Company Benefit Plan or other retirement plan or arrangement, and no fact or
event exists that could reasonably be expected to give rise to any such material
liability, (d) all material contributions due and payable on or before the date
hereof in respect of each Company Benefit Plan have been made in full and in
proper form, (e) none of the Company or its commonly controlled entities has
withdrawn from any "multiemployer plan" (as defined in Section 3(37) of ERISA),
"multiple employer plan" (as defined in Section 413 of the Code) or "defined
benefit plan" (as defined in Section 3(35) of ERISA) where such withdrawal would
result in any "withdrawal liability" (within the meaning of Section 4201 of
ERISA) that has not been fully paid, (f) except as otherwise required under
ERISA, the Code and applicable state laws, no
17
Company Benefit Plan currently or previously maintained by the Company or any of
its Subsidiaries provides any post-retirement health or life insurance benefits,
and none of the Company or any of its Subsidiaries maintains any obligations to
provide post-retirement health or life insurance benefits in the future, and (g)
all material reporting and disclosure obligations imposed under ERISA and the
Code have been satisfied with respect to each Company Benefit Plan.
4.12. Assets; Properties.
(a) Marketable Title. The Company and/or a Subsidiary of the
Company owns fee simple title to all of the Owned Properties, free and clear of
all liens, assessments, taxes, impositions, indebtedness, mortgages,
encumbrances, obligations and all other interests except "Permitted
Encumbrances" described in the definition of "Permitted Liens" in the indenture
governing the CGG Notes, a true and correct copy of which is attached to Section
4.12 of the Company Disclosure Schedule. For purposes of this Agreement "Owned
Properties" shall mean: (a) the real property more particularly described in
Item 3 of the CGG 10-K or purchased since the date of this Agreement
(collectively, the "Land"); (b) all existing buildings, structures and other
improvements located upon the Land, including without limitation all clubhouse
buildings, maintenance facilities, golf courses, driving ranges, practice areas,
landscaping improvements, man-made lakes, irrigation systems (including
sprinklers, pipes and fittings), lakeliners, pumps, flood control works, paving,
walkways, road improvements, parking facilities, and all other improvements of
whatever kind which have previously been made, installed or erected and are now
located on the Land (collectively, the "Improvements"); and (c) all
appurtenances, hereditaments, easements, reversionary rights, and all other
rights, privileges, and entitlements belonging to or running with the Land
(collectively, the "Appurtenances"). The Company has no direct or indirect
ownership interest in any real property as of the date hereof other than the
Owned Properties and the Leased Properties (as hereinafter defined).
(b) Improvements in Good Condition. Except as set forth in
Section 4.12 of the Company Disclosure Schedule, all Improvements and Leased
Improvements are in operable condition. "Leased Improvements" includes all
existing buildings, structures and other improvements located upon each of the
parcels of real property comprising a golf facility leased by the Company (the
"Leased Properties") as set forth in Item 2 of the CGG 10-K or leased since the
date of this Agreement, which buildings, structures and other improvements
include without limitation all clubhouse buildings, maintenance facilities, golf
courses, driving ranges, practice areas, landscaping improvements, man-made
lakes, irrigation systems (including sprinklers, pipes and fittings),
lakeliners, pumps, flood control works, paving, walkways, road improvements,
parking facilities, and all other improvements of whatever kind which have
previously been made, installed or erected and are now located on such Leased
Properties (collectively, the "Leased Improvements," and together with the
Improvements, the Owned Properties and the Leased Properties, the "Properties").
(c) Utilities; Access. Except as disclosed in Section 4.12 of
the Company Disclosure Schedule, (i) all water, sewer, gas, electric, telephone,
and drainage facilities and all other utilities required by law for the present
use and operation of each of the
18
Properties are installed across public property or valid easements to the
boundary lines of the Property, and are connected pursuant to valid permits, and
such facilities are in good operating condition; and (ii) to the Company's
knowledge, the Company has not received written notice from any governmental
agency or any other third party regarding the termination of such utility
services or the termination of access to any of the Properties.
(d) Water Rights. The Company has made available to Reitco and
Opco true, correct, and complete copies of all documents, agreements,
instruments, certifications, registrations, and permits evidencing the Company's
entitlement to a water supply with respect to the Properties (collectively the
"Water Documents"). Except as set forth in Section 4.12 of the Company
Disclosure Schedule; there are no other agreements or documents concerning the
supply of water to irrigate such golf courses; the Company is not in default
under or in breach of any of the Water Documents in any material respect; and
the Company has not previously assigned or transferred any of its rights or
interests under the Water Documents. The Company believes that the Company and
its Subsidiaries have adequate sources of water available to operate the
Properties substantially in the manner as such Properties are operated on the
date hereof.
(e) Property Restrictions. Except for such of the following
as, individually and in the aggregate, could not reasonably be expected to have
a Company Material Adverse Effect, the Properties are not subject to any
easements, rights of way, covenants, conditions, restrictions or other written
agreements, laws, ordinances and regulations affecting building use or occupancy
or reservations of an interest in title (collectively, "Property Restrictions"),
except for (i) Property Restrictions imposed or promulgated by law or any
governmental body or authority with respect to real property, including zoning
regulations that do not and as a consequence of the Merger will not adversely
affect the current use of the property, materially detract from the value of or
materially interfere with the present use of the property, (ii) Encumbrances and
Property Restrictions disclosed on existing title policies, commitments (and the
documents listed as exceptions, herein), reports certificates of title, title
opinions or current surveys (in each case copies of which title policies,
commitments (and the documents listed as exceptions therein), reports and
surveys have been, or will be prior to the Closing, delivered or made available
to, Reitco) and (iii) mechanics', carriers', suppliers, workmen's or repairmen's
liens and other Encumbrances, Property Restrictions and other limitations of any
kind, if any, which, individually or in the aggregate, are not material in
amount, do not and as a consequence of the Merger Transactions will not
materially detract from the value of or materially interfere with the present
use of any of the Properties subject thereto or affected thereby do not and as a
consequence of the Merger Transactions will not otherwise materially impair
business operations conducted by the Company and its Subsidiaries and which have
arisen or been incurred only in the ordinary course of business.
(f) Title Policies. Except for such of the following as,
individually and in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect, valid policies of title insurance have been
issued insuring the Company's or its applicable Subsidiaries fee simple (or
leasehold to the extent disclosed in Section 4.12 of the Company Disclosure
Schedule) title to each of the Properties in amounts at least equal to the
purchase price
19
thereof or, if acquired through merger, the stipulated value thereof, and such
policies are, as of the date hereof, in full force and effect and no claim has
been made against any such policy and the Company has no knowledge of any facts
or circumstances which would constitute the basis for such a claim.
(g) Other Matters. Except for such of the following as,
individually and in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect, (a) no certificate, permit or license from any
governmental authority having jurisdiction over any of the Properties or any
agreement, easement or other right which is necessary to permit the lawful use
and operation of the buildings and improvement on any of the Properties as
currently operated or which is necessary to permit the lawful use and operation
of all driveways roads, and other means of egress and ingress to and from any of
the Properties (an "REA Agreement") has not been obtained and is not in full
force and effect, and there is no pending threat of modification or cancellation
of any of same nor is the Company or any of its Subsidiaries currently in
default under any REA Agreement and the Properties are in full compliance with
all governmental permits, licenses and certificates, except for such defaults
which or where such noncompliance could not reasonably be expected to have a
Company Material Adverse Effect; (b) no written notice of any violation of any
federal, state or municipal law, ordinance, order, regulation or requirement
affecting any portion of any of the Properties has been issued by any
governmental authority; (c) there are no material structural defects relating to
any of the Properties; (d) there is no Property whose building systems are not
in working order in any material respect and (e) there is no physical damage to
any Property in excess of $250,000 for which there is no insurance in effect
(other than reasonable and customary deductibles) covering the full cost of the
restoration.
(h) Taxes. Except for such of the following as, individually
and in the aggregate, could not reasonably be expected to have a Company
Material Adverse Effect, there are no outstanding abatement proceedings or
appeals to which the Company or a Subsidiary is a party with respect to the
assessment of any of the Properties for the purpose or real property taxes, and
there are no agreements with any governmental authority to which the Company or
a Subsidiary is a party with respect to such assessments or tax rates on any of
the Properties. At the Effective Time none of the Owned Properties will be
subject to any contractual restriction on the sale or other disposition thereof
or on the financing or release of financing thereon.
(i) Condemnation; Laws and Regulations. Except for such of the
following as, individually and in the aggregate, could not reasonably be
expected to have a Company Material Adverse Effect, neither the Company nor any
of its Subsidiaries has received any written notice to the effect that (x) any
betterment assessments have been levied against, or any condemnation or rezoning
proceedings are pending or threatened with respect to any of the Properties or
(y) any zoning, building or similar law, code, ordinance, order or regulation is
or will be violated by the continued maintenance, operation or use of any
buildings or other improvements on any of the Properties or by the continued
maintenance, operation or use of the parking areas.
20
(j) Reconstruction. Except for such of the following as,
individually and in the aggregate could not reasonably be expected to have a
Company Material Adverse Effect, following a casualty, each of the Owned
Properties could be reconstructed and used for golf purposes under applicable
zoning laws and regulations, except that in certain circumstances such
reconstruction would have to comply with the dimensional requirements of
applicable zoning laws and regulations in effect at the time of reconstruction.
4.13. Other Interests. Except for such Company Other Interests that,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect, neither the Company nor any of its Subsidiaries
owns directly or indirectly any interest or investment (whether equity or debt)
in any corporation, partnership, joint venture, business, trust or other entity
(other than investments in short-term investment securities) (collectively
"Company Other Interests").
4.14. Related Party Transactions. The Company SEC Documents and/or
Section 4.14 of the Company Disclosure Schedule discloses all arrangements,
agreements and contracts entered into by the Company or any of its Subsidiaries
(which will be in effect as of the Effective Time) involving payments in excess
of $60,000 (other than employee salaries, bonuses and benefits) with any person
who is an officer, director or affiliate of the Company, any member of the
immediate family, spouse, grandchild or, to the knowledge of the Company, any
other relative of any of the foregoing or any entity of which any of the
foregoing is an affiliate. Copies of all such documents have previously been
provided or made available to Reitco and its counsel.
4.15. Labor Matters. Except as would not reasonably be expected to
have a Company Material Adverse Effect, neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization. Except as would not reasonably be expected to have Company
Material Adverse Effect, as of the date hereof, neither the Company nor any of
its Subsidiaries is the subject of any material proceeding asserting that the
Company or any of its Subsidiaries has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization nor,
as of the date of this Agreement, is there pending or, to the knowledge of the
Company, threatened, any material labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Company or any or its Subsidiaries.
4.16. Contracts and Commitments. Neither the Company nor any of its
Subsidiaries is a party to or bound by, and neither they nor any of their
properties or assets are bound or subject to, any contract or other agreement
(i) required to be disclosed in, or filed as an exhibit to, the Company SEC
Documents, or (ii) which will be required to be disclosed in or filed as an
exhibit to the Company's Form 10-K for the period ending September 30, 1997 (a
"Company Material Contract") that is not filed in the Company SEC Documents. All
Company Material Contracts are valid, existing, in full force and effect,
binding upon the Company or its Subsidiaries, as the case may be, in accordance
with their terms, and the Company and its Subsidiaries are not in default under
any of them, nor, to the best knowledge of the Company, is any other party to
any such contract or other agreement in default thereunder nor, to the best
21
knowledge of the Company, does any condition exist that with notice or lapse of
time or both would constitute a default thereunder.
4.17. Intellectual Property. The Company and each of its
Subsidiaries own or has the right to use all trademarks, trade names, service
marks, trade secrets, copyrights and other properties intellectual property
rights (collectively, the "Intellectual Property Rights"), including without
limitation the name "Cobblestone," as are necessary in connection with the
business of the Company and its Subsidiaries, taken as a whole, except (other
than in the case of the name "Cobblestone") where the failure to own or have the
right to use such Intellectual Property Rights could not reasonably be expected
to have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has infringed any Intellectual Property Rights of a third party
other than any infringements that, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect.
4.18. Environmental Matters. Except as disclosed in Section 4.18 of
the Company Disclosure Schedule and except for any matter, which if the outcome
were adverse, could not reasonably be expected to result in a Significant
Environmental Liability (as hereinafter defined), (a) the Company and its
Subsidiaries are in compliance in all material respects with all applicable
Environmental Laws, (b) there are no material Environmental Liabilities and
Costs of the Company and its Subsidiaries, (c) there are no material
Environmental Conditions on or related to the Owned Properties, the Leased
Properties, or the other assets of the Company and its Subsidiaries, (d) none of
the Company and its Subsidiaries has received any written notice from any
governmental agency or other third party regarding the existence of any
hazardous or toxic substance, material, or waste on any of the Properties or in
the Improvements or the Leased Improvements, alleging any violation of or
noncompliance with any Environmental Law, or requiring the removal, clean-up, or
remediation of any Environmental Condition whether or not on any of the
Properties relating to the Company or its Subsidiaries, and (e) the Company has
not received written notice that it is subject to any enforcement or
investigatory action by any governmental agency regarding an Environmental
Condition with respect to any Property, or any other property related in any way
to the Company or its Subsidiaries. As used herein, the terms "toxic" or
"hazardous" wastes, substances or materials shall include, without limitation,
all those so designated and all those in any way regulated by any present or
future Environmental Laws. The Company has previously made available to Reitco
copies of all of the following written materials in its possession: copies of
environmental audits or risk assessments, site assessments, documentation
regarding off-site disposal of hazardous materials, spill control plans and
material correspondence with any federal, state or local government, court,
administrative agency, commission or other governmental authority, domestic or
foreign, regarding the foregoing (the "Environmental Reports"). With respect to
all matters set forth in the Environmental Reports as constituting
non-compliance with Environmental Laws, the Company or a Subsidiary thereof has
taken remedial actions such that, to the Company's best knowledge, such matters
are currently in compliance with Environmental Laws in all material respects.
For purposes of this Section 4.18 and Section 5.20, the following
definitions shall apply:
22
"Environmental Laws" means all applicable foreign, federal, state
and local statutes or laws, common law, judgments, orders, notice requirements,
regulations, agency guidelines, policies, licenses, permits, rules and
ordinances relating to pollution or protection of health, safety or the
environment, including, but not limited to the Federal Water Pollution Control
Act (33 U.S.C. ss.1251 et seq.), Resource Conservation and Recovery Act (42
U.S.C. ss.6901 et seq.), Safe Drinking Water Act (42 U.S.C. ss.3000(f) et seq.),
Toxic Substances Control Act (15 U.S.C. ss.2601 et seq.), Clean Air Act (42
U.S.C. ss.7401 et seq.), Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss.9601 et seq.) and other similar state and local
statutes.
"Environmental Condition" means the introduction into the
environment of any pollution, including without limitation any contaminant,
pollutant, hazardous or toxic waste, substance or material (whether or not upon
the Owned Properties or the Leased Properties and whether or not such pollution
constituted at the time thereof a violation of any Environmental Law as a result
of any release of any kind of any contaminant, polutant, toxic or hazardous
waste, substance or material) as a result of which the Company with respect to
Section 4.10 and Reitco and Opco with respect to Section 5.20 (1) has or may
become liable to any Person, (2) is or was in violation of any Environmental
Law, or (3) by reason of which any of the properties or other assets of the
Company with respect to Section 4.18 and Reitco and Opco with respect to Section
5.20, may suffer or be subject to any lien.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses, damages,
deficiencies, punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, all reasonable fees, disbursements and
expenses of counsel, expert and consulting fees and costs of investigations and
feasibility studies and responding to government requests for information or
documents), fines, penalties, restitution and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any Person, whether based in
contract, tort, implied or express warranty, strict liability, joint and several
liability, criminal or civil statute, under any Environmental Law, or arising
from environmental, health or safety conditions, as a result of past or present
ownership, leasing or operation of any properties, owned, leased or operated by
the Company with respect to Section 4.18 and Reitco and Opco with respect to
Section 5.20 or any of its Subsidiaries.
"Significant Environmental Liability" shall mean a liability of the
Company or any of its Subsidiaries under any Environmental Law for response
costs, property damages, natural resource damages, fines and penalties as
defined under the Environmental Laws which, individually or in the aggregate, is
reasonably expected to exceed $10 million. The term "Significant Environmental
Liability" shall not include (i) any actual or potential threats of liability
under any Environmental Law with respect to a potential liability identified
solely due to the nature of the present or former use of any property
surrounding the Property owned by the Company or its Subsidiaries so long as the
contamination is not on the Company's or such Subsidiary's Property, (ii) any
liability for remedial activity not required to be performed pursuant to any
Environmental Law, or (iii) any liability for which the "responsible party" (as
defined under applicable Environmental Laws) is reasonably likely to be a party
other than the
23
Company or any of its Subsidiaries and for which such generator is a person who
is a financially viable party capable of implementing required remedial work.
4.19. Compliance with Laws; Permits. Except as set forth in Section
4.19 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is in violation of any judgment, order, decree statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, except such
violations as could not reasonably be expected to have a Company Material
Adverse Effect. Except as set forth in Section 4.19 of the Company Disclosure
Schedule, the Company and its Subsidiaries have obtained all material licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their business as
now or previously conducted where the failure to obtain any such license, permit
or authorization or to take any such action, individually or in the aggregate,
could reasonably be expected to have a Company Material Adverse Effect. None of
such licenses, permits or authorizations shall be terminated or canceled as a
result of the Merger, except for those licenses, permits or authorizations the
lack of which could not reasonably be expected to have a Company Material
Adverse Effect.
4.20. Insurance. Section 4.20 of the Company Disclosure Schedule
sets forth a true and correct summary of the insurance policies held by the
Company and its Subsidiaries, including the underwriter of such policies and the
amount of coverage thereunder.
4.21. Brokers. None of the Company, any of its Subsidiaries, or any
of their respective officers, directors or employees have employed any broker,
financial advisor or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement, except that the Company has retained ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ Securities Corporation as its financial advisor.
4.22. Tax Treatment. The Company has no plan or intention to take
any action that could reasonably be expected to cause the Merger not to qualify
and continue to qualify as part of a reorganization under section 368(a) of the
Code.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF REITCO AND OPCO
Each of Reitco and Opco represent and warrant to the Company as
follows:
5.1. Organization. Each of Reitco, Opco and their respective
Subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has corporate or other power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. Each of Reitco, Opco and their respective Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except where the failure to do so would not have a material adverse effect on
Reitco and its Subsidiaries and Opco and its Subsidiaries, taken as a whole (a
"Reitco Material
24
Adverse Effect"). A true and correct copy of the Certificate of Incorporation
and Bylaws of Reitco and Opco are exhibits to the Reitco SEC Documents (as
defined below).
5.2. Capitalization
(a) The authorized capital stock of Reitco consists of 306
million shares of capital stock including (i) 270 million shares of Reitco
Common Stock, (ii) 6 million shares of preferred stock, par value $.10 per share
("Reitco Preferred Stock") and (iii) 30 million shares of series common stock,
par value $.10 per share ("Reitco Series Stock"). The authorized capital stock
of Opco consists of 306 million shares of capital stock including (x) 270
million shares of Opco Common Stock, (y) 6 million shares of preferred stock,
par value $.10 per share ("Opco Preferred Stock") and (z) 30 million shares of
series common stock, par value $.10 per share ("Opco Series Stock"). At the
close of business on January 9, 1998, (i) 88,969,888 paired shares of Reitco
Common Stock and Opco Common Stock were issued and outstanding, (ii) no shares
of Reitco Preferred Stock and no shares of Opco Preferred Stock were issued and
outstanding, (iii) no shares of Reitco Series Stock and no shares or Opco Series
Stock were issued and outstanding, (iv) no shares of Reitco Common Stock and no
shares of Opco Common Stock were held by Reitco or Opco in their respective
treasuries; provided, however, that Opco currently holds approximately 1.3
million shares of Reitco Common Stock, (v) 5% of the issued and outstanding
shares of Reitco Common Stock and 5% of the issued and outstanding shares of
Opco Common Stock plus an additional 3,522,877 Paired Shares of each were
reserved for issuance pursuant to equity plans filed as exhibits to or described
in the Reitco SEC Documents (collectively, the "Reitco Stock Plans") and (vi)
3,350,746 shares of Reitco Common Stock and 3,350,746 shares of Opco Common
Stock were reserved for issuance upon the conversion or Reitco's outstanding
convertible senior notes and convertible debentures described in Section 5.2 of
the Reitco Disclosure Schedule. As of the date hereof, except as set forth above
and except for Reitco's dividend reinvestment plan (the "DRP"), there are no
outstanding stock options, stock appreciation rights or rights (other than
employee stock options or other rights ("Reitco Employee Stock Options") to
purchase or receive Reitco or Opco Common Stock granted under the Reitco Stock
Plans to receive shares of Reitco Common Stock on a deferred basis granted under
the Reitco Stock Plans or otherwise. Section 5.2 of the Reitco Disclosure
Schedule sets forth a complete and correct list, as of the date hereof, except
as set forth above, of the number of Paired Shares subject to Reitco Employee
Stock Options. All outstanding shares of capital stock of Reitco and Opco are,
and all shares which may be issued, including shares to be issued pursuant to
this Agreement, will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. As of the date
hereof, there are no bonds, debentures, notes or other indebtedness or
securities or Reitco and Opco having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matter on which
shareholders of Reitco and Opco may vote. Except as set forth above and except
for the DRP and the "La Quinta Transaction" as described in Section 5.2 of the
Reitco Disclosure Schedule (the "La Quinta Transaction"), as of the date hereof,
there are no issued or outstanding (or reserved for issuance) securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Reitco or Opco or any of their respective
Subsidiaries is a party or by which any of them is bound obligating Reitco or
Opco or any of their respective Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold,
25
additional shares of capital stock or other voting securities of Reitco or Opco
or of any of their respective Subsidiaries or obligating Reitco or Opco or any
of their respective Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking. Except for agreements entered into with respect to the Reitco Stock
Plans, the DRP, the La Quinta Transaction and except as set forth above, as of
the date hereof, and except as could not reasonably be expected to be required
to be disclosed pursuant to the Reitco SEC Documents, there are no outstanding
contractual obligations of Reitco or Opco or any of their respective
Subsidiaries to issue, repurchase, redeem, exchange or otherwise acquire, or to
register (under the federal or any state securities laws) for resale, any shares
of capital stock of Reitco or Opco or any of their respective Subsidiaries. As
of the date hereof, except as set forth above or in Section 5.2 of the Reitco
Disclosure Schedule, there are no outstanding contractual obligations of Reitco
or Opco to vote or to dispose of any shares of the capital stock of any of their
respective Subsidiaries. The Company maintains a shareholder rights plan.
(b) Except as disclosed in the Reitco SEC Documents, all of
the outstanding shares of capital stock or other equity interests of each of the
Subsidiaries of Reitco and Opco have been validly issued and are fully paid and
nonassessable and are owned by either Reitco or one of its Subsidiaries, or Opco
or one of its Subsidiaries, respectively, free and clear of all liens, charges,
security interests, options, claims or encumbrances of any nature whatsoever.
(c) Except as disclosed in the Reitco SEC Documents, there are
no voting trusts or other agreements or understandings to which Reitco, Opco or
any of their respective Subsidiaries is a party with respect to the voting of
the capital stock of Reitco, Opco or any of their respective Subsidiaries.
Except as disclosed in the Reitco SEC Documents, none of Reitco, Opco or their
respective Subsidiaries is required to redeem, repurchase or otherwise acquire
shares of capital stock of Reitco, Opco, or any of their respective
Subsidiaries, respectively, as a result of the transactions contemplated by this
Agreement.
(d) Except as disclosed in Section 5.2 of the Reitco
Disclosure Schedule, there are no outstanding contractual obligations of Reitco,
Opco or any of their respective Subsidiaries to issue, repurchase, redeem,
exchange or otherwise acquire, or to register (under the federal or any state
securities laws) for resale, any shares of capital stock of Reitco, Opco or any
of its Subsidiaries.
(e) Except as disclosed in Section 5.2 of the Reitco
Disclosure Schedule, there are no outstanding contractual obligations of Reitco
or Opco to vote or to dispose of any shares of the capital stock of any of their
Subsidiaries.
(f) Except as disclosed in Section 5.2 of the Reitco
Disclosure Schedule, there are no bonds, debentures, notes, other indebtedness
or securities of Reitco or Opco having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which shareholders of Reitco or Opco may vote.
26
5.3. Corporate Authorization; Validity of Agreement; Necessary
Action. Each of Reitco and Opco has corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
and perform its obligations hereunder. Prior to the date hereof, the Boards of
Directors of Reitco and Opco approved this Agreement, the Merger and the other
transactions contemplated by this Agreement to which Reitco or Opco is or will
be a party. Except for the filing and recordation of appropriate merger
documents as required by the DGCL, no other corporate action or proceedings on
the part of Reitco or Opco is necessary to authorize the execution and delivery
by Reitco or Opco of this Agreement and the consummation by it of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Reitco and Opco and, assuming this Agreement constitutes a valid
and binding obligation of the Company, constitutes a valid and binding
obligation of each of Reitco and Opco, enforceable against each of Reitco and
Opco in accordance with its terms.
5.4. Consents and Approvals; No Violations. Except as disclosed in
Section 5.4 of the Reitco Disclosure Schedule, and except (a) as may be required
under the HSR Act or the liquor license laws, rules, regulations and
requirements of any state or other Governmental Entity, (b) for the filing and
recordation of the Certificate of Merger as required by the DGCL, (c) for the
filing with the SEC of such reports as may be required under the Exchange Act in
connection with the transactions contemplated by this Agreement and (d) the
filings with and approvals of the NYSE to permit the Paired Shares that are to
be issued in the Merger to be listed for trading thereon, none of the execution,
delivery or performance of this Agreement by Reitco or Opco, the consummation by
Reitco and Opco of the transactions contemplated hereby or compliance by Reitco
or Opco with any of the provisions hereof will (i) conflict with or result in
any breach of the Certificate of Incorporation or Bylaws or similar
organizational documents of Reitco, Opco or of any of their Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, loan or credit agreement, bond,
mortgage, indenture, guarantee, other evidence of indebtedness (collectively,
the "Reitco Debt Instruments"), lease, license, contract, agreement or other
instrument or obligation to which Reitco, Opco or any of their respective
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound and which either has a remaining term of more than one year
or involves the payment or receipt of money in excess of $250,000 and which is
not cancelable without penalty or 30 days notice (a "Reitco Agreement") or (iv)
violate any order, judgment, writ, injunction, decree, statute, rule or
regulation applicable to Reitco, Opco, any of their respective Subsidiaries or
any of their properties or assets, in any case under clause (ii), (iii) or (iv)
that would have a Reitco Material Adverse Effect.
5.5. SEC Reports and Financial Statements.
(a) Reitco and Opco have filed with the SEC, all forms,
reports, schedules, statements and other documents required to be filed by
either of them and their respective Subsidiaries since January 1, 1997 (as such
documents have been amended since the time of their filing, collectively, the
"Reitco SEC Documents"). As of their respective dates or, if
27
amended, as of the date of the last such amendment, the Reitco SEC Documents,
including, without limitation, any financial statements or schedules included
therein and any forms, reports and other documents filed by Reitco or Opco with
the SEC after the date of this Agreement (a) did not and does not as of the date
hereof contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complied or will comply in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder.
(b) Each of the financial statements included in the Reitco
SEC Documents has been prepared from, and is in accordance with, the books and
records of Reitco and Opco and their respective consolidated Subsidiaries
complies as to form, as of its respective date of filing with the SEC, in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, has been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly presents in all
material respects the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of Reitco, Opco and their respective consolidated Subsidiaries as at the dates
thereof or for the periods presented therein. Except (i) as reflected in such
financial statements or the notes thereto, (ii) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby or in the
La Quinta Transaction and (iii) for liabilities and obligations incurred since
December 31, 1996 in the ordinary course of business consistent with past
practice, none of Reitco, Opco or any of their respective Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, known or
unknown, asserted or unasserted, contingent or otherwise), including liabilities
arising under any Environmental Laws (as herein defined), which are required by
GAAP to be reflected in a consolidated balance sheet of Reitco, Opco or their
respective consolidated Subsidiaries and which, individually or in the
aggregate, could reasonably be expected to have a Reitco Material Adverse
Effect.
5.6. Absence of Certain Changes. Except to the extent disclosed in
the Reitco SEC Documents filed prior to the date of this Agreement, since
January 1, 1997, Reitco, Opco and their respective Subsidiaries have conducted
their respective businesses and operations in the ordinary course of business
consistent with past practice, and there has not occurred (i) any Reitco
Material Adverse Effect; (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the equity interests of Reitco or Opco, other than Reitco's and Opco's
regular quarterly dividends; (iii) any split, combination or reclassification of
any of Reitco's or Opco's capital stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or in
substitution for, shares of Reitco's or Opco's capital stock; or (iv) any change
by Reitco, Opco or any of their respective Subsidiaries in accounting
principles, practices or methods, except insofar as may be required by a change
in GAAP.
5.7. Litigation. Except to the extent disclosed in the Reitco SEC
Documents filed prior to the date of this Agreement, there is no suit, claim,
action, proceeding or
28
investigation pending or orders or judgments outstanding, to the best knowledge
of Reitco or Opco, threatened against or affecting, Reitco, Opco or any of their
respective Subsidiaries or any property or asset or employee, officer or
director (in his or her capacity as such) of Reitco, Opco or any of their
respective Subsidiaries, before any court, arbitrator, or administrative,
governmental or regulatory authority or body, domestic or foreign, which should
have been disclosed in any such Reitco SEC Documents or which, individually or
in the aggregate, could reasonably be expected to have a Reitco Material Adverse
Effect.
5.8. State Takeover Statutes. The Board of Directors of each of
Reitco and Opco have approved this Agreement, the Merger, the other transactions
contemplated hereby and the execution of the Shareholders Agreement. Such
approval constitutes approval of the Merger and the other transactions
contemplated hereby by the Boards of Directors of Reitco and Opco under the
provisions of the DGCL. No other takeover statutes, whether under the laws of
Delaware or otherwise, are applicable to the Merger, this Agreement or the
transactions contemplated hereby.
5.9. REIT Status. Reitco is a REIT. The consummation of the
transactions contemplated by this Agreement will not cause Reitco to cease to
qualify as REIT.
5.10. Ownership of Common Stock. Reitco, Opco and, to their best
knowledge, their respective affiliates collectively beneficially own (as such
term is defined in Rule 13d-3 under the Exchange Act) no shares of the capital
stock of the Company. None of Reitco, Opco or any of their respective affiliates
is a party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of shares of capital stock of the
Company.
5.11. Tax Treatment. Neither Reitco nor Opco have any plan or
intention to take any action that could reasonably be expected to cause the
Merger not to qualify and continue to qualify as part of a reorganization under
Section 368(a) of the Code.
5.12. Pairing Agreement. The agreement pursuant to which the shares
of Reitco Common Stock and Opco Common Stock are paired (the "Pairing
Agreement") is duly and validly authorized and is a valid and binding agreement,
enforceable against Reitco and Opco in accordance with its terms. The Reitco
Common Stock is paired with the Opco Common Stock pursuant to the Pairing
Agreement and such pairing does not cause the activities of Opco to be
attributed to Reitco pursuant to Section 269B(a)(3) of the Code.
5.13. Taxes.
(a) Except as set forth in the Reitco SEC Documents or in
Section 5.13 of the Reitco Disclosure Schedule or as could not reasonably be
expected to have a Reitco Material Adverse Effect:
(i) Reitco, Opco and their respective Subsidiaries
have paid or caused to be paid all Taxes required to be so paid prior to the
date hereof and have made provision, in accordance with GAAP, for all Taxes owed
or accrued through the date hereof, except for Taxes which are not material.
29
(ii) Reitco, Opco and their respective Subsidiaries
have filed with the appropriate taxing authorities all Tax Returns required to
be filed by it, or requests for extensions to file such Tax Returns have been
timely filed and granted and have not expired. All such filed Tax Returns are
complete and accurate in all material respects. None of Reitco, Opco or their
respective Subsidiaries has pending any request for an extension of time within
which to file Tax Returns.
(iii) Reitco, Opco and their respective Subsidiaries
have complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and have, within
the time and the manner prescribed by law, withheld and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under applicable laws.
(iv) Neither the IRS nor any other governmental
authority is now asserting by written notice to Reitco, Opco or any of their
respective Subsidiaries or, to the knowledge of Reitco, Opco, or any of such
Subsidiaries, threatening to assert against Reitco, Opco or any of their
respective Subsidiaries, any deficiency or claim for additional Taxes. No
written claim has been made since July 1, 1996 by a taxing authority in a
jurisdiction where none of Reitco, Opco, or any of their respective Subsidiaries
files reports and returns that Reitco, Opco, or any of such Subsidiaries is or
may be subject to taxation by that jurisdiction. None of Reitco, Opco, or any of
their respective Subsidiaries has since January 1, 1994 entered into a closing
agreement pursuant to Section 7121 of the Code.
(v) No federal, state, local or foreign audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of any of Reitco, Opco or their respective
Subsidiaries, and none of Reitco, Opco or their respective Subsidiaries has
received a written notice of any actual or threatened audits or proceedings or
is otherwise aware of any such audits or proceedings.
(vi) There are no material liens for Taxes upon any
property or assets of Reitco, Opco or any Subsidiary of either Reitco or Opco,
except for liens for Taxes not yet due and payable and liens for Taxes that are
being contested in good faith by appropriate proceedings as set forth in the
Reitco SEC Documents.
(vii) None of Reitco, Opco or any of their respective
Subsidiaries is a party to any material agreement providing for the allocation
or sharing of Taxes.
(viii) None of Reitco, Opco or any of their
respective Subsidiaries has, with regard to any assets or property held or
acquired by any of them, filed a consent to the application of Section 341(f) of
the Code, or 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 Reitco, Opco or any of their respective
Subsidiaries.
(ix) None of Reitco, Opco, or any of their
respective Subsidiaries has any material liability for any Taxes of any
consolidated, combined or unitary
30
group in which Reitco, Opco or any of their respective Subsidiaries was
previously a member or any liability under any tax sharing agreement or similar
arrangement with any other Person.
5.14. Employee Benefits. With respect to all the employee benefit
plans, programs and arrangements maintained for the benefit of any current or
former employee, officer or director of Reitco, Opco or any of their respective
Subsidiaries (the "Reitco Benefit Plans"), except for such matters as,
individually or in the aggregate, could not be reasonably expected to have a
Reitco Material Adverse Effect, and except as set forth in Section 5.14 of the
Reitco Disclosure Schedule (a) each Reitco Benefit Plan and any related trust
intended to be qualified under Sections 401(a) and 501(a) of the Code has
received or has applied for a favorable determination letter from the Internal
Revenue Service that it is so qualified and nothing has occurred since the date
of such letter that could reasonably be expected to materially adversely affect
the qualified status of such Reitco Benefit Plan or related trust, (b) each
Reitco Benefit Plan has been operated in all material respects in accordance
with the terms and requirements of applicable law and all required returns and
filings for each Reitco Benefit Plan have been timely made, (c) none of Reitco,
Opco or any of their respective Subsidiaries has incurred any direct or indirect
material liability under, arising out of or by operation of ERISA, connection
with any Reitco Benefit Plan or other retirement plan or arrangement, and no
fact or event exists that could reasonably be expected to give rise to any such
material liability, (d) all material contributions due and payable on or before
the date hereof in respect of each Reitco Benefit Plan have been made in full
and in proper form, (e) none of Reitco, Opco or their respective commonly
controlled entities has withdrawn from any "multiemployer plan" (as defined in
Section 3(37) of ERISA), "multiple employer plan" (as defined in Section 413 of
the Code) or "defined benefit plan" (as defined in Section 3(35) of ERISA) where
such withdrawal would result in any "withdrawal liability" (within the meaning
of Section 4201 of ERISA) that has not been fully paid, (f) except as otherwise
required under ERISA, the Code and applicable state laws, no Reitco Benefit Plan
currently or previously maintained by Reitco, Opco or any of their respective
Subsidiaries provides any post-retirement health or life insurance benefits, and
none of Reitco, Opco or any of their respective Subsidiaries maintains any
obligations to provide post-retirement health or life insurance benefits in the
future, and (g) all material reporting and disclosure obligations imposed under
ERISA and the Code have been satisfied with respect to each Reitco Benefit Plan.
5.15. [Intentionally left blank]
5.16. Related Party Transactions. The Reitco SEC Documents and/or
Section 5.16 of the Reitco Disclosure Schedule discloses all arrangements,
agreements and contracts entered into by Reitco, Opco or any of their respective
Subsidiaries (which are or will be in effect as of the Effective Time) involving
payments in excess of $60,000 (other than employee salaries) with any person who
is an officer, director or affiliate of Reitco or Opco , any member of the
immediate family, spouse, grandchild or, to the knowledge of Reitco or Opco, any
other relative of any of the foregoing or any entity of which any of the
foregoing is an affiliate. Copies of all such documents have previously been
provided or made available to the Company and its counsel.
31
5.17. Labor Matters. Except as would not reasonably be expected to
have a Reitco Material Adverse Effect, none of Reitco, Opco nor any of their
respective Subsidiaries is a party to or otherwise bound by any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization. Except as would not reasonably be expected to have
Reitco Material Adverse Effect, as of the date hereof, none of Reitco, Opco nor
any of their respective Subsidiaries is the subject of any material proceeding
asserting that Reitco, Opco or any of their respective Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization nor, as of the date of this Agreement, is
there pending or, to the knowledge of Reitco and Opco, threatened, any material
labor strike, dispute, walkout, work stoppage, slow-down or lockout involving
Reitco, Opco or any or their respective Subsidiaries.
5.18. Contracts and Commitments. None of Reitco, Opco or any of
their respective Subsidiaries is a party to or bound by, and neither they nor
any of their properties or assets are bound or subject to, any contract or other
agreement (i) required to be disclosed in, or filed as an exhibit to, the Reitco
SEC Documents, or (ii) which will be required to be disclosed in or filed as an
exhibit to Reitco's or Opco's Form 10-K for the period ending December 31, 1996
(a "Reitco Material Contract") that is not filed in the Reitco SEC Documents.
All Reitco Material Contracts are valid, existing, in full force and effect,
binding upon Reitco, Opco or one of their respective Subsidiaries, as the case
may be, in accordance with their terms, and none of Reitco, Opco or any of their
respective Subsidiaries is in default under any of them, nor, to the best
knowledge of Reitco and Opco, is any other party to any such contract or other
agreement in default thereunder nor, to the best knowledge of Reitco and Opco,
does any condition exist that with notice or lapse of time or both would
constitute a default thereunder.
5.19. Intellectual Property. Reitco, Opco and each of their
respective Subsidiaries own or have the right to use all Intellectual Property
Rights including without limitation the names "Meditrust" and "Santa ▇▇▇▇▇," as
are necessary in connection with the business of Reitco, Opco and their
respective Subsidiaries, taken as a whole, except (other than in the case of the
names "Meditrust" and "Santa ▇▇▇▇▇") where the failure to own or have the right
to use such Intellectual Property Rights, could not reasonably be expected to
have a Reitco Material Adverse Effect. None of Reitco, Opco or any of their
respective Subsidiaries has infringed any Intellectual Property Rights of a
third party other than any infringements that, individually or in the aggregate,
could not reasonably be expected to have a Reitco Material Adverse Effect.
5.20. [Intentionally left blank]
5.21. Environmental Matters. Except as disclosed in the Reitco SEC
Documents or as could not reasonably be expected to have a Reitco Material
Adverse Effect, (a) Reitco and its Subsidiaries are in compliance in all
material respects with all applicable Environmental Laws, (b) there are no
material Environmental Liabilities and Costs of Reitco and its Subsidiaries, (c)
there are no material Environmental Conditions on or related to the assets and
properties of Reitco and its Subsidiaries, (d) none of Reitco and its
Subsidiaries has received any written notice from any governmental agency or
other third party regarding the existence of
32
any hazardous or toxic substance, material, or waste on any of its assets or
properties, alleging any violation of or noncompliance with any Environmental
Law, or requiring the removal, clean-up, or remediation of any Environmental
Condition relating to Reitco or its Subsidiaries, and (e) Reitco has not
received written notice that it is subject to any enforcement or investigatory
action by an governmental agency regarding an Environmental Condition with
respect to any of its assets and properties, or any other property related in
any way to Reitco or its Subsidiaries. As used herein, the terms "toxic" or
"hazardous" wastes, substances, or materials shall include, without limitation,
all those so designated and all those in any way regulated by any present or
future Environmental Laws.
5.22. Compliance with Laws; Permits. Except as set forth in Section
5.22 of the Reitco Disclosure Schedule, none of Reitco, Opco or any of their
respective Subsidiaries is in violation of any judgment, order, decree statute,
law, ordinance, rule or regulation applicable to Reitco, Opco or any of their
respective Subsidiaries or any of their respective properties or assets, except
such violations as could not reasonably be expected to have a Reitco Material
Adverse Effect. Except as set forth in Section 5.22 of the Reitco Disclosure
Schedule, Reitco, Opco and their respective Subsidiaries have obtained all
material licenses, permits and other authorizations and have taken all actions
required by applicable law or governmental regulations in connection with their
business as now or previously conducted where the failure to obtain any such
license, permit or authorization or to take any such action, individually or in
the aggregate, could reasonably be expected to have a Reitco Material Adverse
Effect. None of such licenses, permits or authorizations shall be terminated or
canceled as a result of the transactions contemplated by this Agreement, except
for those licenses, permits or authorizations the lack of which could not
reasonably be expected to have a Reitco Material Adverse Effect.
5.23. Brokers. None of Reitco, Opco any of their respective
Subsidiaries, or any of their respective officers, directors or employees have
employed any broker, financial advisor, or finder or incurred any liability for
any brokerage fees, commissions or finder's fees in connection with the
transaction contemplated by this Agreement, except that Reitco has retained
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ as its financial advisor.
5.24. Other Consideration. The fair market value of the Opco Shares
to be received by holders of Common Stock in the Merger will not exceed seven
and one-half percent (7 1/2%) of the fair market value of the total Common Stock
Consideration.
ARTICLE VI.
COVENANTS
6.1. Interim Operations of the Company. Except as contemplated by
this Agreement, the Company Disclosure Schedule, or with the prior written
consent of Reitco, during the period from the date of this Agreement to the
Effective Time, the Company will, and will cause each of its Subsidiaries to,
conduct its operations in all material respects only in the ordinary and usual
course of business consistent with past practice and in compliance in all
material respects with all applicable law and, to the extent consistent
therewith, will use its reasonable efforts, and will cause each of its
Subsidiaries to use its best efforts, to preserve intact
33
the business organization of the Company and each of its Subsidiaries, to keep
available the services of their present officers and key employees, and to
preserve the goodwill of those having business relationships with it. Without
limiting the generality of the foregoing and except as otherwise contemplated by
this Agreement or Section 6.1 of the Company Disclosure Schedule, the Company
will not, and will not permit any of its Subsidiaries to, prior to the Effective
Time, without the prior written consent of Reitco:
(a) adopt any amendment to its Certificate of Incorporation
or Bylaws or comparable organizational documents;
(b) (i) issue, pledge or sell, or authorize the issuance,
pledge or sale of additional shares of capital stock of any class (except upon
exercise of outstanding Options), or securities convertible into capital stock
of any class, or any 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 Common Stock outstanding on the date
hereof or (ii) 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 Options or the Option Plan;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock other than
between any wholly-owned Subsidiary of the Company and the Company or any other
wholly-owned Subsidiary of the Company;
(d) 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;
(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 (except pursuant
to existing agreements or policies), 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, except in each case (i) to the extent
required by applicable law or regulation, or (ii) for annual raises and/or
bonuses consistent with past practice;
(f) (i) except for sales of inventory, sell, pledge, lease,
dispose of, grant, encumber, or otherwise authorize the sale, pledge,
disposition, grant or encumbrance of any assets of the Company or any of the
Subsidiaries, except for sales in the ordinary course of business of the Company
or (ii) except for (A) purchases of inventory and supplies in the ordinary
course of business, (B) capital expenditures in accordance with the Company's
1998
34
capital expenditure budget and (C) completion of pending acquisitions identified
in writing to Reitco in connection with the execution of this Agreement on terms
substantially as set forth in the applicable letter of intent or definitive
agreement, as the case may be, acquire (including, without limitation, by
merger, consolidation, lease or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof (or a
substantial portion of the assets thereof) or any other assets, except for such
acquisitions which, individually or in the aggregate, do not exceed $50,000;
(g) (i) incur, assume or pre-pay any debt, except that the
Company and its Subsidiaries may incur or pre-pay debt in the ordinary course of
business consistent with past practice under existing lines of credit and may
incur indebtedness to fund the acquisitions described in Section 6.1(f), (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, continentally or otherwise) for the obligations of any other Person
except in the ordinary course of business consistent with past practice, or
(iii) make any loans, advances or capital contributions to, or investments in,
any other Person except in the ordinary course of business consistent with past
practice and 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;
(h) authorize, recommend, propose or announce an intention
to adopt a plan of complete or partial liquidation or dissolution of the Company
or any of its Subsidiaries;
(i) make any tax elections or settle or compromise any
federal or state income tax liability with Tax authorities;
(j) 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;
(k) enter into any collective bargaining agreement;
(l) 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;
(m) modify, amend or terminate any of the Company Material
Contracts or waive, release or assign any material rights or claims, except in
the ordinary course of business consistent with past practice;
(n) take, or agree to commit to take, any action that would
make any representation or warranty of the Company contained herein inaccurate
in any respect at, or as of any time prior to, the Effective Time;
35
(o) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
the Company's affiliates 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 (which
are set forth on Section 6.1 of the Company Disclosure Schedule);
(p) close, shut down, or otherwise eliminate any of the
Company's golf courses located on any of the Properties, except for such
closures, shutdowns or eliminations which are (i) required by action, order,
writ, injunction, judgment or decree or otherwise required by law, or (ii) due
to acts of God or other force majeure events; or
(q) 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.
(r) take any other action (or fail to take any action) that
would be inconsistent with Reitco's continued qualification as a REIT after the
Effective Time under the Code and the rules and regulations promulgate
thereunder; or
(s) directly or indirectly through a Subsidiary enter into
any agreement, or participate in active negotiations with any third party,
relating to any business transaction the reasonably foreseeable effect of which
would be to delay the Effective Time beyond June 15, 1998, prevent the Effective
Time from occurring or result in the Merger not being treated as, or as part of,
a tax-free reorganization for federal income tax purposes.
6.2. Interim Operations of Reitco and Opco. Except as contemplated
by this Agreement, Section 6.2 of the Reitco Disclosure Schedule or with the
prior written consent of the Company, during the period from the date of this
Agreement to the Effective Time, each of Reitco and Opco will, and will cause
each of their respective Subsidiaries to, conduct its operations in all material
respects only in the ordinary and usual course of business consistent with past
practice and in compliance in all material respects with all applicable law and,
to the extent consistent therewith, will use its reasonable efforts, and will
cause each of its Subsidiaries to use its best efforts, to preserve intact the
business organization of Reitco, Opco and each of their respective Subsidiaries,
to keep available the services of their present officers and key employees, and
to preserve the goodwill of those having business relationships with it;
provided, however, that the forgoing shall not restrict the ability of Reitco,
Opco and their respective Subsidiaries to engage in any acquisition, merger,
exchange offer, equity or debt financing or other similar corporate transaction
except to the extent prohibited by Sections 6.2 (a), (b), (c), (d) or (e) below.
Without limiting the generality of the foregoing and except as otherwise
contemplated by this Agreement or Section 6.2 of the Reitco Disclosure Schedule,
Reitco will not, and will not permit any of its Subsidiaries to, prior to the
Effective Time, without the prior written consent of the Company:
(a) other than (i) dividends and distributions (including
liquidating distributions) by a direct or indirect Subsidiary of Reitco or Opco
to its parent, (ii) dividends required in the reasonable judgment of Reitco in
order to preserve Reitco's status as a REIT or to
36
avoid federal income or excise taxes on its undistributed income or (iii)
Regular Reitco Quarterly Dividends, (A) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital stock, (B)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (C) purchase or offer to purchase any
capital stock of either of Reitco or Opco, other than purchases (w) made in the
open market in accordance with Regulation M under the Exchange Act, (x) in
accordance with any agreement filed or matter described in the Reitco SEC
Documents, (y) by either of Reitco or Opco of its capital stock held by the
other, and (z) by either of Reitco or Opco of newly issued common stock of the
other for the purposes of pairing shares of Reitco Common Stock and Opco Common
Stock. For purposes of this Agreement, "Regular Reitco Quarterly Dividends"
means any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
Reitco's or Opco's capital stock, other than regular quarterly cash dividends at
the rate in effect for the four quarters of 1997, as increased by the Boards of
Directors of Reitco and Opco in the ordinary course;
(b) incur or guarantee any Indebtedness, issue or sell any
debt securities or warrants or other rights to acquire any debt securities or
enter into any arrangement having the economic effect of any of the foregoing
(any such event, an "Incurrence"), such that the consolidated Indebtedness of
Reitco and Opco, giving effect to such Incurrence, would exceed an amount equal
to 50% of the combined market capitalization of Reitco and Opco. For purposes of
this Agreement, "Indebtedness" means, with respect to any Person, all
obligations of such Person (including the current portion thereof) that would be
required to be reflected as indebtedness on a consolidated balance sheet for
such Person prepared in accordance with GAAP;
(c) directly or indirectly through a Subsidiary enter into
any agreement, or participate in active negotiations with any third party,
relating to (A) any tender or exchange offer, merger, consolidation, or sale of
all or substantially all of the capital stock or assets of Reitco or Opco or (B)
any business transaction the reasonably foreseeable effect of which would be to
delay the Effective Time beyond June 15, 1998, prevent the Effective Time from
occurring, or result in the Merger not being treated as a tax-free
reorganization for federal income tax purposes;
(d) take any action or fail to take any action which could
reasonably be expected to terminate Reitco's status as a REIT; or
(e) 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.
6.3. Access to Information.
(a) To the extent permitted by applicable law, the Company
shall (and shall cause each of its Subsidiaries to) afford to the officers,
employees, accountants, counsel and other representatives of Reitco, access, at
reasonable times during the period prior to the
37
Effective Time, to all of its and its Subsidiaries' properties, books,
contracts, commitments and records (including any Tax Returns or other Tax
related information pertaining to the party providing such information and its
Subsidiaries) as they shall require. During such period, the Company shall (and
shall cause each of its Subsidiaries to) furnish promptly to Reitco (i) a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws and (ii) all other information concerning its business,
properties and personnel as such party may reasonably request and shall make its
officers, employees, accountants, financial advisors, counsel and other
representatives reasonably available for consultation with Reitco. Without
limiting the generality of the foregoing, the Company will, and will cause each
of its respective Subsidiaries to, afford Reitco and Opco and their respective
officers, employees, counsel and other advisors and representatives with access
to conduct such investigations and inquiries as Reitco and Opco may reasonably
deem necessary or desirable and to otherwise assist in such investigations and
inquiries.
(b) To the extent permitted by applicable law, each of
Reitco and Opco shall (and shall cause each of their respective Subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the Company, access, at reasonable times during the period
prior to the Effective Time, to all of its and its Subsidiaries' properties,
books, contracts, commitments and records as they shall require. During such
period, each of Reitco and Opco shall (and shall cause each of their respective
Subsidiaries to) furnish promptly to the Company (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(ii) all other information concerning its business, properties and personnel as
such party may reasonably request and shall make its officers, employees,
accountants, financial advisors, counsel and other representatives reasonably
available for consultation with the Company. Without limiting the generality of
the foregoing, Reitco and Opco will, and will cause each of their respective
Subsidiaries to, afford the Company and its officers, employees, counsel and
other advisors and representatives with access to conduct such investigations
and inquiries the Company may reasonably deem necessary or desirable and to
otherwise assist in such investigations and inquiries.
(c) Each party will hold any such information which is
nonpublic in confidence in accordance with the provisions of the existing
confidentiality agreement between the Company and Reitco (the "Confidentiality
Agreement"). By executing this Agreement the Company, Reitco and Opco agree that
Opco shall be bound by the terms and conditions of the Confidentiality Agreement
as if it were an original party thereto.
6.4. Consents.
(a) The Company, Reitco and Opco will, and each such party
will cause their respective Subsidiaries to, (i) promptly make their respective
filings, and will thereafter use their best efforts promptly to make any
required submissions, under the HSR Act with respect to the Merger and the other
transactions contemplated by this Agreement and (ii) cooperate with one another
(A) in promptly determining whether any filings are required to be
38
made or consents, approvals, permits or authorizations are required to be
obtained under any other federal, state or foreign law or regulation or from any
other Person and (B) in promptly making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such consents,
approvals, permits or authorizations.
(b) If any objections are asserted with respect to the
Merger under the antitrust laws, the parties shall attempt to resolve such
objections. Reitco, Opco and the Company will request early termination of the
waiting period under the HSR Act with respect to the transactions contemplated
hereby. Reitco, Opco and the Company will, and will cause their respective
Subsidiaries to, use their reasonable best efforts to resolve such objections,
including using their reasonable best efforts to take such action as may be
required (i) by the Antitrust Division of the Department of Justice or the
Federal Trade Commission in order to resolve such objections as either of them
may have to the Merger under the antitrust laws or (ii) by any federal or state
court of the United States, in any suit brought by a private party or
Governmental Entity challenging the Merger as violative of the antitrust laws,
in order to avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order or other order which has the effect of preventing
the consummation of the Merger on terms consistent with the terms of this
Agreement. Notwithstanding the foregoing, none of the Company, Reitco or Opco
shall be obligated hereby to enter into any consent decree or settlement
agreement in order to resolve any such actions.
6.5. No Solicitation.
(a) The Company and its Subsidiaries will not, and the
Company and its Subsidiaries will use their best efforts to ensure that their
respective officers, directors, employees, investment bankers, attorneys,
accountants and other agents do not, directly or indirectly: (i) initiate,
solicit or encourage, or take any action to facilitate the making of, any offer
or proposal which constitutes or is reasonably likely to lead to any Acquisition
Proposal (as defined below) of the Company or any Subsidiary or an inquiry with
respect thereto, or (ii) in the event of an unsolicited Acquisition Proposal for
the Company or any Subsidiary or affiliate of the Company, engage in
negotiations or discussions with, or provide any information or data to, any
corporation, partnership, Person or other entity or group (other than Reitco,
Opco or any of their respective affiliates or representatives) relating to any
Acquisition Proposal. The Company shall promptly notify Reitco and Opco orally
and in writing of any such offers, proposals, inquiries or Acquisition Proposals
(including, without limitation, the material terms and conditions thereof and
the identity of the Person making it). The Company shall, and shall cause its
Subsidiaries, and will use its best efforts to ensure their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents to, immediately cease and cause to be terminated all discussions and
negotiations that have taken place prior to the date hereof, if any, with any
parties conducted heretofore with respect to any Acquisition Proposal relating
to the Company.
(b) As used in this Agreement, "Acquisition Proposal" shall
mean any tender or exchange offer involving the capital stock of the Company,
any proposal for a merger, consolidation or other business combination involving
the Company or any of its Subsidiaries,
39
any proposal or offer to acquire in any manner a substantial equity interest in,
or a substantial portion of the business or assets of, the Company or any
Subsidiary of the Company, any proposal or offer with respect to any
recapitalization or restructuring with respect to the Company or any Subsidiary
of the Company or any proposal or offer with respect to any other transaction
similar to any of the foregoing with respect to the Company or any Subsidiary of
the Company other than pursuant to the transactions to be effected pursuant to
this Agreement.
6.6. Additional Agreements.
(a) Subject to the terms and conditions herein provided
(including, but not limited to, Section 6.4) each of the parties hereto agrees
to use its best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable, whether under
applicable laws and regulations or otherwise, or to remove any injunctions or
other impediments or delays, legal or otherwise, to consummate and make
effective the Merger and the other transactions contemplated by this Agreement
as soon as possible. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of the Company, Reitco and Opco shall use
their best efforts to take, or cause to be taken, all such necessary actions.
(b) Except as required by law or permitted by Section 1.3 or
6.2, neither the Company, on the one hand, nor Reitco or Opco, on the other
hand, will, nor will they permit any of their respective Subsidiaries to,
voluntarily take any action that could reasonably be expected to result in (i)
any of the representations and warranties of such party set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect, or (iii) any of the conditions to the Merger set forth in
Article VII not being satisfied.
6.7. Publicity. So long as this Agreement is in effect, none of the
Company, Reitco, Opco, nor affiliates which any of them control, shall issue or
cause the publication of any press release or other public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby without the prior consultation of the other parties hereto, except as may
be required by law or by obligations pursuant to Reitco's listing agreement with
the NYSE, provided that each party will use its best efforts to consult with the
other parties hereto prior to any such issuance.
6.8. Notification of Certain Matters. The Company, Reitco and Opco
shall give prompt notice to the other parties hereto of (a) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (b) any
material failure of the Company, Reitco or Opco, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.8 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
40
6.9. Directors' and Officers' Insurance and Indemnification.
(a) All the rights to indemnification and, to the extent
applicable, exculpation from liabilities for acts or omissions occurring at or
prior to the Effective Time existing in favor of the current or former directors
or officers of the Company or each of its Subsidiaries as provided in their
respective certificates of incorporation or bylaws (or comparable organizational
documents) and existing indemnity contracts will be assumed by Reitco and Reitco
will be directly responsible for such indemnification, without further action,
as of the Effective Time and will continue in full force and effect in
accordance with their respective terms for a period not less than six years from
the Effective Time. In addition, from and after the Effective Time, directors
and officers of the Company who become or remain directors or officers (if any)
of any Subsidiary thereof will be entitled (with respect to acts or omissions
occurring after the Effective Time) to the same indemnity rights and protections
(including those provided by directors' and officers' liability insurance) as
are afforded to directors and officers of Reitco, Opco or such Subsidiary, as
the case may be. Notwithstanding any other provision hereof, the provisions of
this Section 6.9 (i) are intended to be for the benefit of, and will be
enforceable by, each indemnified party, his or her heirs and his or her legal
representatives and (ii) are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such person may have by
contract or otherwise.
(b) Reitco will maintain in effect for not less than six
years after the Effective Time one or more policies of directors' and officers'
liability insurance that provide coverage for the current directors and officers
of the Company that is substantially similar to that provided by the policies
maintained by or on behalf of the Company and its Subsidiaries on the date
hereof with respect to matters existing or occurring at or prior to the
Effective Time; provided, however, that if the aggregate annual premiums for
such insurance at any time during such period exceed 150% of the per annum rate
of premium currently paid by the Company and its Subsidiaries for such insurance
on the date of this Agreement, the Reitco will cause the Surviving Corporation
to, and the Surviving Corporation will, provide the maximum coverage that will
then be available at an annual premium equal to 150% of such rate.
6.10. Employee Benefit Matters.
(a) With respect to each Reitco Benefit Plan, if the
Effective Time occurs, service with the Company will be treated as service with
Reitco and Opco for purposes of determining eligibility to participate, vesting
and entitlement to benefits (other than the accrual of benefits under any
defined benefit pension plan); provided, however, that such service will not be
recognized to the extent that such recognition would result in a duplication of
benefits. Such service also will apply for purposes of satisfying any waiting
periods, evidence of insurability requirements or the application of any
preexisting condition limitations under any Reitco Benefit Plan. Employees of
the Company will be given credit under any Reitco Benefit Plan, in which they
are eligible to participate for amounts paid under a corresponding Company
benefit plan during the same period for purposes of applying deductibles,
copayments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the Reitco Benefit Plans.
41
(b) For not less than one year following the Effective Time,
Reitco and Opco shall maintain compensation and employee benefit plans and
arrangements for employees of the Company and its Subsidiaries ("Affected
Employees") that are, in the aggregate, no less favorable than as provided under
the compensation arrangements and Company Benefit Plans as in effect on the date
hereof. For not less than one year following the Effective Time, Reitco and Opco
shall provide severance pay and benefits pursuant to the terms of all
employment, severance and other compensation agreements and arrangements,
including but not limited to, severance benefit plans, with respect to the
Affected Employees. Notwithstanding the foregoing, Reitco and Opco shall have
the right (i) following the Effective Time to transfer to one or more employee
benefit plans maintained by Reitco and Opco any employee of the Company or any
Subsidiary who becomes an employee of Reitco or Opco or the Surviving
Corporation and (ii) in the good faith exercise of its managerial discretion, to
terminate the employment of any employee. Nothing in this Agreement shall be
construed as granting to any employee any rights of continuing employment or any
other enforceable rights.
(c) Reitco and Opco shall honor all Company Benefit Plans and
other contractual commitments in effect immediately prior to the Effective Time
between the Company or its Subsidiaries and Affected Employees or former
employees of the Company or its Subsidiaries. Notwithstanding the foregoing,
Reitco and Opco shall have the right following the Effective Time to terminate
any Company Benefit Plans, subject to their obligations to pay benefits accrued
to the date of such termination and to their obligation to comply with Section
6.10(b). Without limiting the generality of the foregoing, Reitco and Opco shall
honor all severance benefits, vacation, holiday, sickness and personal days
accrued by Affected Employees and, to the extent applicable, former employees of
the Company and its Subsidiaries as of the Effective Time.
6.11. Tax Treatment. Each of Reitco, Opco and the Company will use
reasonable efforts to cause the Merger to qualify as part of a reorganization
under Section 368(a) of the Code.
6.12. Registration Statement. Subject to their rights under Sections
1.3 and 6.2, as promptly as practicable after the date of this Agreement, Reitco
and Opco will (i) file with the SEC a registration statement or amend a
registration statement that has been previously filed with the SEC to register
under the Securities Act the Paired Shares to be issued as Merger Consideration,
(ii) use their best efforts to cause such registration statement or amended
registration statement to be declared effective by the SEC and (iii) will use
their best efforts to maintain the effectiveness of such registration statement
or amended registration statement until the Effective Time in order to satisfy
the closing condition set forth in Section 7.1(d).
6.13. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
42
ARTICLE VII.
CONDITIONS
7.1. Conditions to the Obligations of Each Party. The respective
obligations of the Company, Reitco and Opco to consummate the Merger are subject
to the satisfaction (or, if permissible, waiver by the party for whose benefit
such conditions exist) of the following conditions:
(a) Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved by the Company's
stockholders in the manner required by the DGCL;
(b) No Order. No Governmental Entity or federal or state
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or order (whether temporary, preliminary or permanent) which is in
effect and which materially restricts, prevents or prohibits consummation of the
Merger or any transaction contemplated by this Agreement;
(c) Other Approvals. Other than the filing of merger
documents in accordance with the DGCL, all authorizations, consents, waivers,
orders or approvals required to be obtained, and all filings, notices or
declarations required to be made, by the Company, Reitco or Opco prior to the
consummation of the Merger and the transactions contemplated hereunder shall
have been obtained from, and made with, all required Governmental Entities
except for such authorizations, consents, waivers, orders, approvals, filings,
notices or declarations, the failure to obtain or make which would not violate
Section 4.4(iii) or have a Reitco Material Adverse Effect.
(d) Freely Tradable Listed Shares. Except for restrictions
under Rule 145 under the Securities Act on shares issued to affiliates of the
Company, the Paired Shares issued as Merger Consideration shall be registered
under the Securities Act and freely tradable upon issuance and shall have been
approved for listing on the NYSE, subject to notice of issuance.
(e) Change in Tax Laws. There shall not have been any
federal legislative or regulatory change that would cause Reitco to cease to
qualify as a REIT for federal income tax purposes.
(f) HSR Act. The applicable waiting period under the HSR Act
shall have expired or been terminated.
(g) Debt Tender. The holders of the Notes shall have (i)
validly tendered and not withdrawn their Notes sufficient to satisfy the Minimum
Condition, (ii) granted consents sufficient to approve the Covenant Elimination.
43
7.2. Additional Conditions to Obligations of Reitco and Opco. The
obligations of Reitco and Opco to effect the Merger and the transactions
contemplated herein are also subject to the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company contained in this Agreement,
without giving effect to any notification to Reitco delivered pursuant to
Section 6.8, shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date, except (i) for
changes specifically permitted by this Agreement, (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date. Reitco shall have received
certificates of the Chief Executive Officer of the Company to such effect.
(b) Agreement and Covenants. The Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date. Reitco and Opco shall have received certificates of the Chief
Executive Officer of the Company to that effect.
(c) Accounting Certificate. Reitco and Opco shall have
received from the independent accountants of the Company, in form and substance
satisfactory to Reitco and Opco, a certification to the effect that, as of the
Effective Time, the Company had no current or accumulated E&P as of September
30, 1997 and the Company's Chief Financial Officer, in form and substance
satisfactory to Reitco and Opco a certification to the effect that as of the
Effective Time the Company has no current or accumulated E&P.
(d) REIT Opinion. Reitco and Opco shall have received from
Cravath, Swaine & ▇▇▇▇▇, an opinion, in form and substance satisfactory to
Reitco and Opco, to the effect that the transactions contemplated by this
Agreement will not impair Reitco's ability to qualify as a REIT.
(e) Tax Opinion. Cravath, Swaine & ▇▇▇▇▇, counsel to Reitco
and Opco, shall have delivered to Reitco and Opco an opinion in form and
substance satisfactory to Reitco and Opco, dated as of the Closing Date, to the
effect that, based upon representations, assumptions and conditions customary
for transactions such as the Merger, the Merger will be treated for federal
income tax purposes as part of a reorganization within the meaning of Section
368(a) of the Code and that Reitco and the Company will each be a party to such
reorganization within the meaning of Section 368(b) of the Code.
(f) Brentwood Agreement. The Company shall have terminated
corporate development and administrative services agreement with Brentwood
Buyout Partners, L.P.
(g) Shareholders Agreement. The stockholder identified in
Section 3.7 of the Shareholders Agreement shall have become a party thereto.
44
7.3. Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Reitco and Opco contained in this Agreement,
without giving effect to any notification made to the Company pursuant to
Section 6.8, shall be true and correct in all material respects as of the
Effective Time, as though made on and as of the Effective Time, except (i) for
changes specifically permitted by this Agreement and (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date. The Company shall have
received certificates of an executive officer of each of Reitco and Opco to such
effect.
(b) Agreement and Covenants. Reitco and Opco each shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time. The Company shall have received certificates of the Chief
Executive Officer and Chief Financial Officer of each of Reitco and Opco to that
effect.
(c) Tax Certificate. Reitco shall have delivered to the
Company a certificate substantially in the form attached hereto as Schedule
7.3(c) executed by Reitco.
(d) Opco Shares Certificate. The fair market value of the
Opco Shares to be received by holders of Common Stock in the Merger shall not
exceed seven and one-half percent (7 1/2%) of the fair market value of the total
Common Stock Consideration and the Company shall have received a certificate of
the Chief Financial Officer of Reitco to the foregoing effect, which certificate
will also state the actual fair market value of the Opco Shares so received.
(e) Tax Opinion. ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Company,
shall have delivered to the Company an opinion in form and substance
satisfactory to the Company, dated as of the Closing Date, to the effect that,
based upon representations, assumptions and conditions customary for
transactions such as the Merger, the Merger will be treated for federal income
tax purposes as part of a reorganization within the meaning of Section 368(a) of
the Code and that Reitco and the Company will each be a party to such
reorganization within the meaning of Section 368(b) of the Code.
ARTICLE VIII.
TERMINATION
8.1. Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may be abandoned at any time prior to the Effective Time, whether before
or after stockholder approval hereof:
45
(a) By the mutual consent of the Board of Directors of
Reitco and the Board of Directors of the Company;
(b) By Reitco, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section 7.2(a) or
Section 7.2(b), as the case may be, would be incapable of being satisfied by
December 31, 1998 (or as otherwise extended); provided, that in any case, a
willful breach shall be deemed to cause such conditions to be incapable of being
satisfied for purposes of this Section 8.1(b);
(c) By the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Reitco or Opco set forth in this
Agreement, or if any representation or warranty of Reitco or Opco shall have
become untrue, in either case such that the conditions set forth in Section
7.3(a) or Section 7.3(b), as the case may be, would be incapable of being
satisfied by December 31, 1998 (or as otherwise extended); provided, that in any
case, a willful breach shall be deemed to cause such conditions to be incapable
of being satisfied for purposes of this Section 8.1(c);
(d) By either of Reitco or the Company, if any court or
other Governmental Entity shall have issued, enacted, entered, promulgated or
enforced any order, judgment, decree, injunction, or ruling or taken any other
action restraining, enjoining or otherwise prohibiting this Agreement or the
Merger and such order, judgment, decree, injunction, ruling or other action
shall have become final and nonappealable;
(e) By either of Reitco or the Company, if the Merger shall
not have been consummated before December 31, 1998; or
8.2. Effect of Termination. In the event of the termination of this
Agreement as provided in Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of Reitco, Opco or the
Company except that the provisions of this Section 8.2 and Section 6.3(c) shall
survive any such termination. Nothing contained in this Section 8.2 or otherwise
in this Agreement shall relieve any party from liability for any fraud or breach
of this Agreement or the Confidentiality Agreement.
ARTICLE IX.
MISCELLANEOUS
9.1. Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
9.2. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any
46
vote of the stockholders of the Company contemplated hereby, by written
agreement of the parties hereto, pursuant to action taken by their respective
Boards of Directors, at any time prior to the Closing Date with respect to any
of the terms contained herein.
9.3. Nonsurvival of Representations and Warranties. The respective
representations and warranties of the Company, Reitco and Opco contained herein
shall expire with, and be terminated and extinguished at the Effective Time, and
thereafter none of the Company, Reitco or Opco nor any officer, director or
principal thereof shall be under any liability whatsoever with respect to any
such representation or warranty. This Section 9.3 shall have no effect upon any
other obligation of the parties hereto, whether to be performed before or after
the Effective Time.
9.4. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight courier service, such as FedEx, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to the Company, to:
Cobblestone Holdings, Inc.
3702 ▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Brentwood Associates
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Reitco, to:
Meditrust Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to Opco, to:
Meditrust Operating Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
9.5. Interpretation. When a reference is made in this Agreement to
Sections or Articles, such reference shall be to a Section or Article of this
Agreement unless otherwise indicated. Whenever the words "include", "includes"
or "including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". As used in this Agreement, the term
"affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act.
9.6. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.7. Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement and the Confidentiality Agreement (including the
exhibits hereto and the documents and the instruments referred to herein and
therein): (a) constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among
48
the parties with respect to the subject matter hereof, and (b) except as
provided in Article III; Section 6.9 and Section 6.10 with respect to the
obligations of the Company or the Surviving Corporation thereunder, are not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.8. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
9.9. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
9.10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
(Signature Page(s) to Follow)
49
IN WITNESS WHEREOF, the Company, Reitco and Opco have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
COBBLESTONE HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. Karnaras
--------------------------------
Name: ▇▇▇▇▇▇ ▇. Karnaras
Title: Vice President & CFO
By: /s/ ▇▇▇▇▇ ▇. Husband
--------------------------------
Name: ▇▇▇▇▇ ▇. Husband
Title: PRESIDENT
MEDITRUST CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Title: Senior Vice President
MEDITRUST OPERATING COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
50
List of Schedules for Agreement and Plan of Merger dated as of January 11, 1998
among Meditrust Corporation ("Reitco"), Meditrust Operating Company ("Opco", and
together with Reitco, "Registrant") and Cobblestone Holdings, Inc.
("Cobblestone").
Schedule 4.2: Capitalization (Cobblestone)
Schedule 4.4: Consents and Approvals; No Violations (Cobblestone)
Schedule 4.6: Absence of Certain Changes (Cobblestone)
Schedule 4.7: Litigation (Cobblestone)
Schedule 4.10: Taxes (Cobblestone)
Schedule 4.14: Related Party Transactions (Cobblestone)
Schedule 4.18: Environmental (Cobblestone)
Schedule 4.20: Insurance (Cobblestone)
Schedule 5.2: Capitalization (Registrant)
Schedule 5.4: Consents Which May Be Required (Registrant)
Schedule 5.7: Litigation (Registrant)
Schedule 5.13: Taxes (Registrant)
Schedule 5.14: Employee Benefits (Registrant)
Schedule 5.16: Related Party Transactions (Registrant)
Schedule 5.22: Compliance With Laws; Permits (Registrant)
Schedule 6.1: Interim Operations (Cobblestone)
Schedule 6.2: Interim Operations (Registrant)
Schedule 7.3(c): Tax Certificate