<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997
REGISTRATION NOS. 333-34831 AND 333-34831-01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
JOINT REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
(EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER) SPECIFIED IN ITS CHARTER)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
6798 7948
(PRIMARY STANDARD INDUSTRIAL CODE (PRIMARY STANDARD INDUSTRIAL CODE
NUMBER) NUMBER)
95-3520818 95-3419438
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
301 WEST HUNTINGTON DRIVE, SUITE 405 285 WEST HUNTINGTON DRIVE
ARCADIA, CALIFORNIA 91007 ARCADIA, CALIFORNIA 91007
(626) 574-5550 (626) 574-7223
(ADDRESS, INCLUDING ZIP CODE, AND (ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA TELEPHONE NUMBER, INCLUDING AREA
CODE, OF PRINCIPAL EXECUTIVE CODE, OF PRINCIPAL EXECUTIVE
OFFICES) OFFICES)
BRIAN L. FLEMING KATHRYN J. MCMAHON
ACTING PRESIDENT AND CHIEF EXECUTIVE GENERAL COUNSEL AND SECRETARY
OFFICER 285 WEST HUNTINGTON DRIVE
301 WEST HUNTINGTON DRIVE, SUITE 405 P.O. BOX 60014
P.O. BOX 60025 ARCADIA, CALIFORNIA 91066-6014
ARCADIA, CALIFORNIA 91066-6025 (626) 574-7223
(626) 574-5550
(NAME, ADDRESS, INCLUDING ZIP CODE,
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
FREDERICK B. MCLANE MICHAEL J. BOHNEN
O'MELVENY & MYERS LLP NUTTER, MCCLENNEN & FISH, LLP
400 SOUTH HOPE STREET, 15TH FLOOR ONE INTERNATIONAL PLACE
LOS ANGELES, CALIFORNIA 90071-2899 BOSTON, MASSACHUSETTS 02110-2699
(213) 669-6000 (617) 439-2000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the transactions described herein.
----------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
THE REGISTRANTS HEREBY AMEND THIS JOINT REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS JOINT
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THIS JOINT REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THE MEDITRUST COMPANIES
MEDITRUST MEDITRUST ACQUISITION
197 FIRST AVENUE COMPANY
NEEDHAM, MASSACHUSETTS 02194 197 FIRST AVENUE
NEEDHAM, MASSACHUSETTS 02194
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
The Special Meetings of Shareholders of Meditrust and Meditrust Acquisition
Company ("MAC") will be held at Fleet Bank, 75 State Street, 8th Floor,
Conference Room F, Boston, Massachusetts on Wednesday, November 5, 1997 at
11:00 A.M. and 11:30 A.M. local time, respectively (together with all
adjournments and postponements thereof, the "Meditrust Meetings"), for the
following purposes:
1. To consider and act upon a proposal to approve and adopt the Third
Amended and Restated Agreement and Plan of Merger dated as of April 13,
1997 (the "Merger Agreement") among Meditrust, MAC, Santa Anita Realty
Enterprises, Inc. ("Realty") and Santa Anita Operating Company
("Operating") which provides, among other things, for
(i) the merger of Meditrust into Realty,
(ii) the merger of MAC into Operating,
(iii) the issuance of 1.2016 shares of paired common stock of Realty
and Operating in exchange for each outstanding share of Meditrust (and
the related share of MAC),
(iv) the amendment of the Certificate of Incorporation of Realty to
increase the authorized number of capital shares, to authorize the
creation of a new class of common stock issuable in one or more series
upon terms to be determined by the Board of Directors and to change the
name of Realty to Meditrust Corporation, and
(v) the amendment of the Certificate of Incorporation of Operating to
increase the authorized number of capital shares, to authorize the
creation of a new class of common stock issuable in one or more series
upon terms to be determined by the Board of Directors and to change the
name of Operating to Meditrust Operating Company,
all as described more fully in the attached Joint Proxy
Statement/Prospectus which includes a copy of the Merger Agreement.
2. To consider and act upon such other business and matters or proposals
as may properly come before the Meditrust Meetings.
The Boards of Trustees of Meditrust and MAC have fixed the close of business
on October 3, 1997 as the record date for determining the shareholders having
the right to receive notice of and to vote at the Meditrust Meetings. Only
shareholders of record at the close of business on such date are entitled to
notice of and to vote at the Meditrust Meetings. A list of shareholders
entitled to vote at the Meditrust Meetings will be available during ordinary
business hours at Meditrust's executive offices, 197 First Avenue, Needham,
Massachusetts 02194, for ten days prior to the Meditrust Meetings, for
examination by any Meditrust or MAC shareholder for purposes germane to the
Meditrust Meetings.
THE BOARDS OF TRUSTEES OF MEDITRUST AND MAC RECOMMEND THAT YOU VOTE
"FOR"APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT. ADOPTION OF THE MERGER AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF EACH OF MEDITRUST
AND MAC ENTITLED TO VOTE AT THE MEDITRUST MEETINGS. WHETHER OR NOT YOU EXPECT
TO ATTEND THE MEDITRUST MEETINGS, PLEASE SIGN AND MAIL PROMPTLY THE ENCLOSED
PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE BOARDS OF TRUSTEES OF MEDITRUST
AND MAC. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES IS ENCLOSED FOR THAT PURPOSE.
Failure to return a properly executed proxy or to vote at the Meditrust
Meetings will have the same effect as a vote against the merger.
By Order of the Boards of Trustees of
Meditrust and Meditrust Acquisition
Company
LOGO
MICHAEL S. BENJAMIN
Secretary
Needham, Massachusetts
September 26, 1997
<PAGE>
THE SANTA ANITA COMPANIES
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING
301 WEST HUNTINGTON DRIVE, SUITE 405 COMPANY
ARCADIA, CALIFORNIA 91007 285 WEST HUNTINGTON DRIVE
ARCADIA, CALIFORNIA 91007
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
The Special Meetings of Shareholders of Santa Anita Realty Enterprises, Inc.
("Realty") and Santa Anita Operating Company ("Operating") will be held at
Fleet Bank, 75 State Street, 8th Floor, Conference Room F, Boston,
Massachusetts on Wednesday, November 5, 1997 at 10:00 A.M. and 10:30 A.M. local
time, respectively, (together with all adjournments and postponements thereof,
the "Santa Anita Meetings") for the following purposes:
1. To consider and act upon a proposal to approve and adopt the Third
Amended and Restated Agreement and Plan of Merger dated as of April 13,
1997 (the "Merger Agreement") among Meditrust, Meditrust Acquisition
Company ("MAC"), Realty and Operating (Realty together with Operating are
referred to as "The Santa Anita Companies"), which Merger Agreement
provides, among other things, for
(i) the merger of Meditrust into Realty,
(ii) the merger of MAC into Operating,
(iii) the issuance of 1.2016 shares of paired common stock of Realty
and Operating in exchange for each outstanding share of Meditrust (and
the related share of MAC),
(iv) the amendment of the Certificate of Incorporation of Realty to
increase the authorized number of capital shares, to authorize the
creation of a new class of common stock issuable in one or more series
upon terms to be determined by the Board of Directors and to change the
name of Realty to Meditrust Corporation, and
(v) the amendment of the Certificate of Incorporation of Operating to
increase the authorized number of capital shares, to authorize the
creation of a new class of common stock issuable in one or more series
upon terms to be determined by the Board of Directors and to change the
name of Operating to Meditrust Operating Company,
all as described more fully in the attached Joint Proxy
Statement/Prospectus which includes a copy of the Merger Agreement.
2. To consider and act upon a proposal to authorize the transfer of some
or all of the assets of the surviving corporations in the mergers to one or
more wholly-owned subsidiaries in exchange for an equity interest in such
subsidiaries.
3. To consider and act upon a proposal to authorize the issuance of
paired common stock of The Santa Anita Companies in exchange for the paired
shares of the Series A Preferred Stock of The Santa Anita Companies.
4. To amend The Santa Anita Companies' 1995 Share Award Plans to increase
the number of shares issuable under Realty's Share Award Plan from 230,000
shares to 5% of the outstanding shares of Realty and under Operating's
Share Award Plan from 780,000 shares to 5% of the outstanding paired shares
of Operating and Realty, to increase further the number of shares issuable
under Realty's Share Award Plan to provide for the shares issuable pursuant
to outstanding Meditrust options that are converted to Realty options upon
the merger, to require Realty to acquire Operating common stock to pair
with Realty common stock upon exercise of the options under Realty's Share
Award Plan, provided that Realty shall not have the option to acquire at
any time more than 9.8% of the outstanding shares of Operating, and to
increase the per employee option award limitation under each Plan from
150,000 to 450,000 shares per year.
5. To amend the Certificates of Incorporation of The Santa Anita
Companies to delete the cumulative voting provisions contained in Article
Eighth thereof.
6. To consider and act upon such other business and matters or proposals
as may properly come before the Santa Anita Meetings.
The Boards of Directors of The Santa Anita Companies have fixed the close of
business on October 3, 1997 as the record date for determining the shareholders
having the right to receive notice of and to vote at the Santa Anita Meetings.
Only shareholders of record at the close of business on such date are entitled
to notice of and to vote at the Santa Anita Meetings. A list of shareholders
entitled to vote at the Santa Anita Meetings will be available during ordinary
business
<PAGE>
hours at the principal offices of Operating, 285 West Huntington Drive,
Arcadia, California, for ten days prior to the Santa Anita Meetings, for
examination by any shareholder of The Santa Anita Companies for purposes
germane to the Santa Anita Meetings.
THE BOARDS OF DIRECTORS OF THE SANTA ANITA COMPANIES RECOMMEND THAT YOU VOTE
"FOR" EACH OF THE ABOVE PROPOSALS.
YOUR VOTE IS IMPORTANT. ADOPTION OF THE MERGER AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF EACH OF REALTY AND
OPERATING ENTITLED TO VOTE AT THE SANTA ANITA MEETINGS. WHETHER OR NOT YOU
EXPECT TO ATTEND THE SANTA ANITA MEETINGS, PLEASE SIGN AND MAIL PROMPTLY THE
ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE BOARDS OF DIRECTORS OF
THE SANTA ANITA COMPANIES. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
Failure to return a properly executed proxy or to vote at the Santa Anita
Meetings will have the same effect as a vote against the merger.
LOGO LOGO
BRIAN L. FLEMING KATHRYN J. McMAHON
Secretary Secretary
Santa Anita Realty Enterprises, Inc. Santa Anita Operating Company
Arcadia, California Arcadia, California
September 26, 1997 September 26, 1997
<PAGE>
[MEDITRUST LOGO] [SANTA ANITA LOGO]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Meditrust and The Santa Anita Companies have approved a merger
agreement that would result in a combination of the companies.
Meditrust shareholders will receive 1.2016 shares of The Santa Anita
Companies for each share of Meditrust that they own. As of September 23, 1997,
1.2016 shares of The Santa Anita Companies had a market value of $40.55. Santa
Anita shareholders will continue to hold their existing shares after the
merger. Until October 24, 1997, Santa Anita common shareholders may choose to
receive cash for some of their shares following the Merger for $31 cash per
share.
We estimate that current Meditrust shareholders will own between 86% and 89%
of the common shares of Santa Anita after the merger, depending upon how many
Santa Anita shares are exchanged for cash.
The merger cannot be completed unless a majority of the shareholders of each
of the companies approve it. Shareholders of The Santa Anita Companies are also
being asked to approve the transfer of assets of each company to one or more of
their wholly-owned subsidiaries, the issuance of common stock in exchange for
outstanding preferred stock, an increase in the number of shares available
under the Santa Anita stock option plans and the deletion of Santa Anita's
cumulative voting provisions. Approval of these other proposals is not a
condition of the merger. YOUR VOTE IS VERY IMPORTANT.
Whether or not you plan to attend a shareholders meeting, please take the
time to vote on the proposal(s) submitted at your meeting by completing and
mailing the enclosed proxy card to us. If you sign, date and mail your proxy
card without indicating how you wish to vote, your proxy will be counted as a
vote in favor of the proposal(s) submitted at your meeting. If you fail to
return your card, the effect will be a vote against the merger, unless you
attend the meetings and vote in person for the merger.
This Joint Proxy Statement/Prospectus provides you with detailed information
about the proposed merger. It also provides information about the other matters
to be voted on at the meetings. In addition, you may obtain information about
our companies from documents that we have filed with the Securities and
Exchange Commission. We encourage you to read this entire document carefully.
LOGO
Abraham D. Gosman
Chairman and Chief Executive Officer
Meditrust
LOGO
William C. Baker
Chairman of the Boards
The Santa Anita Companies
Neither the SEC nor any state securities regulators have approved the Santa
Anita common stock to be issued under this Joint Proxy Statement/Prospectus
or determined if this Joint Proxy Statement/Prospectus is accurate or
adequate. Any representation to the contrary is a criminal offense.
Joint Proxy Statement/Prospectus dated September 26, 1997, and first mailed to
shareholders on September 29, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER................................... 1
SUMMARY.................................................................. 4
RISK FACTORS............................................................. 16
THE MEETINGS............................................................. 24
THE SANTA ANITA MEETINGS................................................. 25
General.................................................................. 25
Matters to be Considered................................................. 25
Boards of Directors Recommendations...................................... 26
Record Date and Voting................................................... 26
Proxies; Revocation of Proxies........................................... 27
THE MEDITRUST MEETINGS................................................... 28
General.................................................................. 28
Matters to be Considered................................................. 28
Boards of Trustees Recommendations....................................... 29
Record Date and Voting................................................... 29
Proxies; Revocation of Proxies........................................... 29
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION.............. 31
THE MERGERS.............................................................. 32
Introduction............................................................. 32
Certain Arrangements..................................................... 33
Election to Receive Cash; Procedure for Election; Proration.............. 34
Background of the Mergers................................................ 35
Realty and Operating Reasons for the Mergers; Recommendations of the
Boards of Directors of Realty and Operating............................. 42
Meditrust and MAC Reasons for the Mergers; Recommendations of the Boards
of Trustees of Meditrust and MAC........................................ 43
Opinion of Financial Advisor to Realty and Operating..................... 46
Financial Analysis of Financial Adviser to Meditrust and MAC............. 50
Stock Options and Employee Benefits...................................... 51
Business Strategy........................................................ 52
Directors of the Surviving Corporations.................................. 55
Resale Restrictions...................................................... 57
Approvals................................................................ 57
Interests of Certain Persons in the Mergers.............................. 58
Appraisal Rights......................................................... 60
Material Differences in Rights of Shareholders of The Santa Anita
Companies and Meditrust and MAC......................................... 62
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accounting Treatment of the Mergers....................................... 68
Material Federal Income Tax Consequences of the Mergers................... 68
PRO FORMA FINANCIAL STATEMENTS............................................ 76
THE MERGER AGREEMENT...................................................... 90
General................................................................... 90
Conversion of Shares...................................................... 90
Sale of Shares to MAC..................................................... 91
Sale of Shares to Unaffiliated Third Party................................ 91
Cash Election; Assurance By Meditrust..................................... 91
Representations and Warranties............................................ 92
Certain Covenants......................................................... 92
No Solicitation........................................................... 93
Management Following the Mergers.......................................... 94
Increase in Authorized Shares; Authorization of Series Common Stock....... 94
Director and Officer Indemnification...................................... 95
Colony Termination Fee.................................................... 95
Conditions............................................................... 95
Termination; Termination Fees and Expenses................................ 96
Other Expenses............................................................ 97
Stock Exchange Listing.................................................... 97
THE SANTA ANITA COMPANIES................................................. 98
Introduction.............................................................. 98
Realty.................................................................... 98
Operating................................................................. 98
Legal Proceedings......................................................... 98
Selected Combined Financial Information................................... 100
Principal and Management Shareholders..................................... 101
MEDITRUST................................................................. 103
Business.................................................................. 103
Meditrust Summary Financial Information................................... 104
Principal and Management Shareholders of Meditrust and MAC................ 105
MEDITRUST ACQUISITION COMPANY............................................. 107
DESCRIPTION OF CAPITAL STOCK OF THE SANTA ANITA COMPANIES................. 108
Authorized Capital Stock.................................................. 108
Common Stock.............................................................. 108
Preferred Stock........................................................... 108
Rights Agreement.......................................................... 109
Transfer Agent and Registrar.............................................. 111
The Pairing............................................................... 111
Restrictions on Transfers................................................. 111
Stock Exchange Listing.................................................... 112
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF SHARES OF MAC............................................. 112
Shares of Beneficial Interest............................................ 112
Additional Provisions.................................................... 112
Pairing.................................................................. 113
Transfer Agent and Registrar............................................. 113
OTHER SANTA ANITA PROPOSALS.............................................. 113
Transfer of Assets to One or More Subsidiaries........................... 113
Issuance of Paired Common Stock in Exchange for Series A Preferred
Stock................................................................... 114
Proposal to Amend the Santa Anita Operating Company 1995 Share Award
Plan.................................................................... 114
Proposal to Amend the Santa Anita Realty Enterprises, Inc. 1995 Share
Award Plan.............................................................. 122
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Proposal to Eliminate Cumulative Voting.................................... 124
PROPOSALS FOR NEXT ANNUAL MEETINGS......................................... 125
LEGAL MATTERS.............................................................. 125
EXPERTS.................................................................... 125
WHERE YOU CAN FIND MORE INFORMATION........................................ 126
LIST OF DEFINED TERMS...................................................... 128
</TABLE>
<TABLE>
<S> <C>
Annex A............................................ The Merger Agreement
Annex B............................................ Opinion of Financial Advisor
Annex C............................................ Description of Meditrust
Acquistion Company Shares
</TABLE>
(ii)
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why are the companies proposing the merger? How will I benefit?
A: The merger means that you will have a stake in two companies with over $3.0
billion in assets. The merger will give Meditrust an opportunity to expand its
health care related business and to diversify outside health care. The merger
will give Santa Anita the ability to access capital as part of a larger company
and to use its paired share structure in a more advantageous manner.
Shareholders will have the tax benefits associated with the ownership of real
estate by a REIT, as well as the economic benefit of ownership of an operating
company.
Q: What will I receive in the merger?
A: Meditrust shareholders will receive 1.2016 shares of The Santa Anita
Companies for each share of Meditrust that they own.
Santa Anita shareholders will continue to hold their existing shares after the
merger. Until October 24, 1997, Santa Anita common shareholders may choose to
receive cash for some of their shares after the merger. Up to 3,225,806 shares,
or approximately 25% of the outstanding Santa Anita common shares prior to the
merger, may be exchanged for $31 per share in cash. If the number of shares for
which shareholders choose to receive cash is more than 3,225,806, the excess
will be returned to the shareholders on a pro rata basis.
Q: When and where are the shareholder meetings?
A: The Santa Anita meetings and the Meditrust meetings will take place on
November 5, 1997 at Fleet Bank, 75 State Street, 8th Floor, Conference Room F,
Boston, Massachusetts, at the following times:
10:00 a.m. Santa Anita Realty Enterprises, Inc.
10:30 a.m. Santa Anita Operating Company
11:00 a.m. Meditrust
11:30 a.m. Meditrust Acquisition Company
Q: What else am I being asked to approve in the merger agreement?
A: Approval of the merger agreement by the Santa Anita shareholders also will
allow us to increase the authorized number of shares of Santa Anita common
stock and establish a new class of common stock.
Q: Other than the vote on the merger, what else will happen at the Meditrust
shareholder meetings?
A: Nothing is scheduled.
Q: What else will happen at the Santa Anita shareholder meetings?
A: The shareholders of The Santa Anita Companies will also vote to approve the
transfer after the merger of some or all of our assets to one or more of our
wholly-owned subsidiaries, the issuance of common stock in exchange for Santa
Anita's outstanding preferred stock, an increase in the number of shares
available under the Santa Anita stock option plans, an increase in the number
of shares that can be awarded each year to each employee of The Santa Anita
Companies, a change in the method of acquiring Operating common stock by
employees holding options for Realty common stock, and the deletion of the
Santa Anita cumulative voting provisions.
Q: What do I need to do now?
A: Just mail your signed proxy card in the enclosed return envelope as soon as
possible, so that your shares may be represented at the shareholder meetings.
The Boards of all of the companies unanimously recommend voting in favor of the
merger. The Boards of The Santa Anita Companies also unanimously recommend
voting for the other Santa Anita meeting proposals.
Q: What do I do if I want to change my vote?
A: Just send in a later-dated, signed proxy card to your company's Secretary so
that it arrives before your meeting, or attend your meeting and vote in person.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Should I send in my share certificates now?
A: Meditrust shareholders: do not send in your share certificates now. After
the merger is completed, we will send you written instructions for exchanging
your share certificates.
Santa Anita shareholders: if you wish to receive cash for your common stock
following the merger, you must deliver your certificates to the transfer agent
with the letter of transmittal which is being furnished to you along with a
Cash Election Form by October 24, 1997.
Q: What happens to my future dividends?
A: We expect no changes in the Meditrust or Santa Anita dividend policies
before the merger. Meditrust will pre-pay a portion of its quarterly dividend
to its shareholders immediately prior to the merger. After the merger, we
expect the initial annual dividend rate to be $2.39 per share, which is
equivalent to the current dividend rate paid by Meditrust as adjusted for the
increase in shares due to the merger. The payment of dividends in the future
will depend on the companies' financial condition and earnings, business
conditions and other factors.
Q: Will horse racing continue at Santa Anita Park after the merger?
A: Yes.
Q: Will I receive the free passes to attend Santa Anita Park which have been
made available to Santa Anita shareholders in the past?
A: Yes.
Q: When do you expect the merger to be completed?
A: We hope to complete the merger in the fourth quarter of 1997 shortly after
the shareholder meetings.
Q: What are the major risks involved in the merger?
A: There are certain risks involved with the merger. These include: failure of
the surviving company to continue to qualify as a REIT; slower growth in funds
from operations per share if we do not make acquisitions that benefit from the
use of the paired share structure; competing with existing operators; and
running new businesses.
Q: What are the federal income tax consequences to shareholders caused by the
merger?
A: The merger should be tax free. The cash received by Meditrust shareholders
for fractional shares, by Santa Anita shareholders who elect to receive cash in
exchange for their common shares following the merger and by a holder of Santa
Anita preferred stock who elects appraisal rights will be taxable.
Q: How does the paired share structure work?
A: Both The Santa Anita Companies and The Meditrust Companies have a paired
share structure. This means that as a shareholder, you own shares of two
companies. The shares of the two companies, however, trade and are transferable
only as a single unit.
For example, a shareholder of The Santa Anita Companies owns stock in two
companies, Santa Anita Realty Enterprises, Inc. and Santa Anita Operating
Company. A Santa Anita shareholder can sell his shares in Santa Anita Realty
Enterprises, Inc. at any time, but selling his Realty shares means that he is
also selling an equal number of Operating shares; likewise he can sell his
shares in Santa Anita Operating Company at any time, but selling his Operating
shares means that he is also selling an equal number of Realty shares.
2
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
A REIT may own and lease real estate but may not conduct an operating business.
The paired share structure allows the shareholders of The Santa Anita Companies
to enjoy the economic benefits of owning both a company that owns real estate
and a company that operates a business that may use such real estate.
Q: What is Meditrust Acquisition Company?
A: Meditrust Acquisition Company or MAC is a Massachusetts business trust. On
September 23, 1997, MAC purchased 9.8% of the outstanding paired common stock
of The Santa Anita Companies. Meditrust formed MAC to accomplish the merger.
Q: Who owns MAC?
A: Meditrust currently owns MAC. Meditrust will distribute the MAC shares to
Meditrust's shareholders immediately prior to the record date for determining
the shareholders entitled to vote on the merger.
The reason for this was to create a Meditrust-affiliated company to merge with
Santa Anita Operating Company.
Q: Will I receive certificates for the MAC shares?
A: No. The certificates that currently represent the Meditrust shares that you
own will also represent the same number of MAC shares. If the merger does not
occur, you may exchange your certificates for certificates that say they
represent both Meditrust shares and MAC shares.
Q: May I sell my MAC shares at any time?
A: You may sell your MAC shares at any time, but selling your MAC shares means
that you are also selling an equal number of Meditrust shares. You may sell
your Meditrust shares at any time, but selling your Meditrust shares means that
you are also selling an equal number of MAC shares.
Q: What are the federal income tax consequences to Meditrust shareholders
caused by the distribution of the MAC shares?
A: The distribution of MAC shares should be treated in part as a tax-free
distribution and in part as a taxable dividend but should not increase the
overall taxable dividend income to the Meditrust shareholders over the course
of Meditrust's current tax year.
3
<PAGE>
SUMMARY
This summary highlights selected information from this Joint Proxy
Statement/Prospectus and may not contain all of the information that is
important to you. To better understand the merger and for a more complete
description of the legal terms of the merger, you should read carefully the
entire document and the documents we have referred you to. See "Where You Can
Find More Information" on page 126.
This Joint Proxy Statement/Prospectus contains certain forward-looking
statements concerning the benefits expected as a result of the merger and the
future financial performance of Meditrust and The Santa Anita Companies after
the merger. Actual results may differ significantly from the pro forma
financial statements.
THE COMPANIES
SANTA ANITA REALTY ENTERPRISES, INC.
301 West Huntington Drive, Suite 405
Arcadia, California 91007
(626) 574-5550
Santa Anita Realty Enterprises, Inc. is a real estate investment trust, or
"REIT", that owns Santa Anita Racetrack, a 50% interest in a regional mall, a
medical office building and other real estate assets.
SANTA ANITA OPERATING COMPANY
285 West Huntington Drive
Arcadia, California 91007
(626) 574-7223
Santa Anita Operating Company operates the thoroughbred horse racing business
at Santa Anita Park through its subsidiary, Los Angeles Turf Club,
Incorporated.
Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company,
together referred to as "The Santa Anita Companies" or "Santa Anita", have an
organizational structure called a "paired share structure." The shares of the
two companies are sold only in pairs which are referred to as shares of "paired
common stock."
A REIT may own and lease real estate but may not conduct an operating
business. The paired share structure allows the shareholders of The Santa Anita
Companies to enjoy the economic benefits of owning both a company that owns
real estate and a company that operates a business that may use such real
estate.
MEDITRUST
197 First Avenue
Needham, Massachusetts 02194
(781) 433-6000
Meditrust is a REIT which currently invests primarily in health care related
real property and other interests in real estate located throughout the United
States. Meditrust also invests in other entities outside the United States
which make similar health care real estate investments. Meditrust will be
merged into Santa Anita Realty Enterprises, Inc. as part of the merger.
MEDITRUST ACQUISITION COMPANY
197 First Avenue
Needham, Massachusetts 02194
(781) 433-6000
Meditrust Acquisition Company, or "MAC", is a Massachusetts business trust
organized to accomplish the merger. It has conducted no business other than in
connection with the merger agreement. Meditrust Acquisition Company is
currently owned by Meditrust. Meditrust intends to distribute the shares of MAC
to its shareholders, one share of MAC for each Meditrust share owned. The
shares of Meditrust Acquisition Company will be represented by the stock
certificates for the Meditrust shares and will be transferable only with the
Meditrust shares. MAC will be merged into Santa Anita Operating Company as part
of the merger.
Meditrust and Meditrust Acquisition Company, together with Meditrust referred
to as "The Meditrust Companies", have entered into a pairing arrangement
similar to that of The Santa Anita Companies.
REASONS FOR THE MERGER
CHALLENGES FACING SANTA ANITA
Santa Anita has faced several challenges recently, including declining
attendance at Santa
4
<PAGE>
Anita Park, difficulty raising capital on satisfactory terms and underrealized
value of its paired share structure.
OPPORTUNITIES FOR SANTA ANITA (SEE PAGE 42)
We believe that the merger will allow Santa Anita to overcome these
challenges by providing the following benefits:
. Access to capital resources unavailable to Santa Anita on its own, which
could facilitate expansion and diversification;
. Presentation of a broad spectrum of investment opportunities; and
. Opportunity to realize more fully the value of the paired share
structure.
OPPORTUNITIES FOR MEDITRUST (SEE PAGE 43)
The merger will provide Meditrust with the opportunity to both own real
estate and operate businesses that use this real estate.
The shareholders of Meditrust will receive the tax benefits associated with
real estate ownership in a REIT and the economic benefits of participating in a
fully integrated operating company.
We believe that the combined companies will have greater financial strength,
expansion opportunities and growth potential than either Santa Anita or
Meditrust would have on its own.
UNCERTAINTIES REGARDING THE MERGER (SEE PAGE 16)
In reaching its recommendation in favor of the merger, each of the Boards
considered the following principal uncertainties:
. Unless we make acquisitions that benefit from the use of the paired share
structure, the merger initially will cause Meditrust's funds from
operations per share not to grow as fast immediately after the merger as
might be expected without the merger;
. If we do acquire new businesses that compete with the existing operators
in our portfolio, those existing operators may reduce the amount of new
business that they do with us; and
. If we acquire businesses outside the health care or horse racing sectors,
we will need to hire experienced management to run those businesses.
In addition, the Boards considered the possible difficulties which could
arise such as:
. failure to continue to qualify as a REIT;
. the fact that certain members of the Boards and management of The Santa
Anita Companies may have different interests in the merger than the
shareholders;
. general risks in the health care, horse racing and real estate investment
industries;
. potential anti-takeover effects of certain provisions of The Santa Anita
Companies' charters and by-laws;
. certain tax constraints and other limitations on the surviving
corporations' ability to make acquisitions due to the paired share
structure; and
. substantial expenses and payments if the merger is not approved.
RECOMMENDATIONS TO SHAREHOLDERS REGARDING THE MERGER
TO THE SANTA ANITA COMPANIES SHAREHOLDERS:
The Boards of Directors of The Santa Anita Companies believe that the merger
is in your best interests and unanimously recommend that you vote FOR the
proposal to approve and adopt the merger agreement.
TO THE MEDITRUST COMPANIES SHAREHOLDERS:
The Boards of Trustees of The Meditrust Companies believe that the merger is
in your best interests and unanimously recommend that you vote FOR the proposal
to approve and adopt the merger agreement.
THE MERGER
The merger agreement is attached as Annex A to this Joint Proxy Statement/
Prospectus. We encourage you to read the merger agreement, which is the legal
document that governs the merger.
WHAT MEDITRUST SHAREHOLDERS WILL RECEIVE AFTER THE MERGER (SEE PAGE 90)
As a result of the merger,
. Meditrust will merge into Santa Anita Realty Enterprises, Inc., which
will change its name to Meditrust Corporation;
5
<PAGE>
. Meditrust Acquisition Company will merge into Santa Anita Operating
Company, which will change its name to Meditrust Operating Company; and
. Meditrust shareholders will receive for each Meditrust share and the
related share of Meditrust Acquisition Company 1.2016 shares of paired
common stock. The Santa Anita Companies will not issue fractional shares.
Instead, Meditrust shareholders entitled to receive fractional shares
will receive a check for the value of any fractional share.
Meditrust shareholders should not send in their stock certificates for
exchange until instructed to do so after we complete the merger.
WHAT CURRENT SHAREHOLDERS OF THE SANTA ANITA COMPANIES' PAIRED COMMON STOCK
WILL HOLD AFTER THE MERGER (SEE PAGE 32)
Each holder of paired common stock will continue to own his shares after the
merger, although until October 24, 1997 a holder may choose to receive cash for
some or all of his shares after the merger.
The Santa Anita Companies will purchase a limited number of Santa Anita
common shares for cash at $31 per share. Depending on the number of
shareholders who choose to receive cash for their shares of paired common stock
after the merger, a shareholder may or may not be able to receive cash for all
of his shares. This payment of cash to shareholders who make a cash election
will occur after the merger occurs and at approximately the same time as The
Meditrust Companies' shareholders will receive their shares of paired common
stock.
EFFECT ON MARKET PRICE OF PAIRED COMMON STOCK
It is possible that the cash election may have an impact on the market price
for Santa Anita paired common stock. However, Meditrust and Santa Anita
shareholders will have the opportunity to cast their votes (or change their
votes) after the deadline for making cash elections on October 24, 1997, when
any such impact would not be present.
PURCHASES OF SANTA ANITA SHARES (SEE PAGES 33 AND 91)
To provide Santa Anita with cash to finance the payment of cash to
shareholders who make a cash election, MAC has purchased 1,255,076 shares of
The Santa Anita Companies' paired common stock at $31 per share. Also,
Meditrust will make available $61,092,644 to finance Santa Anita's purchase.
MAC plans to vote any shares it acquires in favor of all matters to be voted on
at the Santa Anita meetings.
Santa Anita shareholders should not send in their stock certificates in
connection with the merger unless they wish to receive cash for some or all of
their shares after the merger.
OWNERSHIP OF THE SANTA ANITA COMPANIES AFTER THE MERGER
The Santa Anita Companies will issue approximately 74 million shares to
Meditrust shareholders in the merger. We estimate that current Meditrust
shareholders will own between 86% and 89% of the outstanding paired common
stock of the surviving corporations. This information is based on the number of
shares of Meditrust and The Santa Anita Companies outstanding on August 31,
1997. This information does not take into account outstanding Meditrust
convertible debentures or the conversion of outstanding stock options, but does
take into account the exchange of Santa Anita paired preferred stock.
As of June 30, 1997 and for the year ended December 31, 1996, the pro forma
percentages of assets, revenues and net income of the combined entity
attributable to The Santa Anita Companies and Meditrust are approximately as
follows:
<TABLE>
<CAPTION>
THE SANTA ANITA
COMPANIES MEDITRUST
--------------- ---------
<S> <C> <C>
Assets................................................ 17 % 83%
Revenues.............................................. 23 % 77%
Net income............................................ (1.7)% 101.7%
</TABLE>
DIVIDENDS AFTER THE MERGER
After the merger, all shareholders will receive a dividend for the period
from the previous dividend
6
<PAGE>
record date through the end of that quarter. We expect the initial annual
dividend rate to be $2.39 per share, which is equivalent to the current
dividend rate paid by Meditrust as adjusted for the increase in shares due to
the merger. The payment of dividends in the future will depend on the financial
condition and earnings, business conditions and other factors.
SHAREHOLDER VOTE REQUIRED
Santa Anita (see page 26)
The favorable vote of a majority of the outstanding shares of each of The
Santa Anita Companies' common and preferred stock voting together is required
to approve the merger, the transfer of assets to wholly-owned subsidiaries and
the amendment to each Certificate of Incorporation to delete cumulative voting.
A favorable vote of a majority of the outstanding shares of each company's
common stock voting as a class is also required to approve the amendment to
eliminate cumulative voting. If you vote in favor of the merger, you are also
voting to amend the certificates of incorporation of each company to increase
the number of authorized shares and to authorize the creation of a new class of
common stock issuable in one or more series on terms to be determined by the
Board of Directors of that company. This will provide greater flexibility in
making future acquisitions and making full use of the paired share structure.
The favorable vote of a majority of the shares of The Santa Anita Companies'
common and preferred stock voting together and present or represented by proxy
at the respective meetings is required to approve the exchange of paired common
stock for Santa Anita preferred stock and the increase in the number of shares
issuable under the stock option plans.
As of August 31, 1997, directors and executive officers of The Santa Anita
Companies beneficially owned approximately 9.8% of the common stock of The
Santa Anita Companies. All directors and executive officers intend to vote
their shares in favor of the merger and the other proposals described herein.
Meditrust (see page 29)
The favorable vote of a majority of the outstanding shares of each of
Meditrust and Meditrust Acquisition Company is required to approve the merger.
As of August 31, 1997, trustees and executive officers of The Meditrust
Companies beneficially owned approximately 2.2% of the shares of The Meditrust
Companies. All trustees and executive officers intend to vote their shares in
favor of the merger.
BOARDS OF DIRECTORS OF THE SURVIVING COMPANIES AFTER THE MERGER
Following the merger, the current seven Trustees of Meditrust will sit on the
Boards of Meditrust Corporation and Meditrust Operating Company. William C.
Baker and J. Terrence Lanni will also sit on the Meditrust Corporation Board
and James P. Conn and John C. Cushman, III will sit on the Meditrust Operating
Company Board. Mr. Baker, Mr. Lanni, Mr. Conn and Mr. Cushman are currently
Directors of The Santa Anita Companies.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 58)
You should be aware that certain members of management and of the Boards of
Directors of Santa Anita, including the following officers of Operating,
William C. Baker (President and Chief Executive Officer), Clifford C. Goodrich,
(Executive Vice President), Thomas S. Robbins (Vice President--Racing) and
Kathryn J. McMahon (General Counsel and Secretary), and the following officers
of Realty, Brian L. Fleming (Acting President, Chief Executive Officer,
Executive Vice President, Chief Financial Officer and Secretary) and Tom D.
Austin (Vice President), have severance agreements, stock options, restricted
stock and other arrangements that provide them with interests in the merger
that are different from, or in addition to, yours. The Santa Anita Companies
currently estimate that the aggregate payments required to be made under the
severance agreements to executive officers would be approximately $4.2 million
and the aggregate value of such options, restricted stock and other
arrangements that may become vested when the merger occurs, based on the price
per share of Santa Anita common stock as of September 23, 1997, is
approximately $3 million.
7
<PAGE>
In connection with the merger, each outstanding option to purchase a share of
Meditrust will become an option to purchase 1.2016 shares of Santa Anita paired
common stock. Also, options for approximately 386,336 Meditrust shares will be
immediately exercisable.
You should be aware that certain members of management and the Board of
Trustees of Meditrust, including Michael S. Benjamin (Senior Vice President,
Secretary and General Counsel); David F. Benson (Trustee, President and
Treasurer); Edward W. Brooke (Trustee); Michael F. Bushee (Chief Operating
Officer); John G. Demeritt (Controller); Abraham D. Gosman (Chairman and Chief
Executive Officer); Philip L. Lowe (Trustee); Thomas J. Magovern (Trustee);
Stephen C. Mecke (Vice President of Development); Debora A. Pfaff (Vice
President of Operations); Stephen H. Press (Vice President of Acquisitions);
and Gerald Tsai, Jr. (Trustee) have stock options which will become immediately
exercisable and therefore they may have interests in the merger which are
different from, or in addition to, yours. Meditrust estimates that the
aggregate value of such options, based on the per share price of the shares of
Meditrust on September 23, 1997, is approximately $2.2 million.
In addition, Meditrust is currently negotiating a 5-year employment contract
with its Chief Executive Officer, which may include a special cash payment if
the merger occurs, reflecting the value of the merger consideration to
Meditrust shareholders. Based upon the market price per share on September 23,
1997, the payment would be approximately $11.76 million.
CONDITIONS TO THE MERGER (SEE PAGE 95)
The completion of the merger depends upon meeting a number of conditions,
including the following:
(1) obtaining the approval of the shareholders;
(2) obtaining required regulatory and third party approvals and consents;
and
(3) the receipt of opinions of counsel on certain tax matters, including
REIT qualification.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 96)
Either The Santa Anita Companies or The Meditrust Companies can terminate the
merger agreement if, among other things, any of the following occurs:
(1) the merger is not completed by April 13, 1998;
(2) the companies do not obtain the required shareholder approvals;
(3) law or court order permanently prohibits the merger;
(4) the other party materially breaches its representations, warranties
or obligations under the merger agreement;
(5) the Boards of either of The Santa Anita Companies or The Meditrust
Companies change their recommendations regarding the merger in a manner
adverse to the other parties; or
(6) The Santa Anita Companies enter into an agreement for a significant
business combination or other similar transaction with another party.
TERMINATION FEES AND EXPENSES (SEE PAGE 96)
If the merger agreement is terminated under any of the following
circumstances, The Santa Anita Companies must reimburse The Meditrust Companies
for their transaction expenses (up to $1 million) and/or pay a termination fee
of $12 million:
<TABLE>
<CAPTION>
CIRCUMSTANCES FEE
- ---------------------------------------
<S> <C>
The Santa Anita up to
Companies shareholders $1 million
do not approve the of expenses
merger
- ---------------------------------------
The merger agreement is $12 million
terminated and The Santa
Anita Companies enter
into a similar agreement
within one year with
another party or another
party acquires more than
30% of the stock of The
Santa Anita Companies
within one year
- ---------------------------------------
The Santa Anita $12 million
Companies enter into an plus up to
agreement for a $1 million
significant business of expenses
combination or other
similar transaction with
another party
</TABLE>
8
<PAGE>
Meditrust must pay The Santa Anita Companies a fee of $4 million under
certain circumstances if the shareholders of The Meditrust Companies fail to
approve the merger.
ACCOUNTING TREATMENT (SEE PAGE 68)
The merger will be accounted for by the purchase method of accounting. Under
the purchase method of accounting, Meditrust is considered to be acquiring
Realty and MAC is considered to be acquiring Operating.
OPINION OF FINANCIAL ADVISOR (SEE PAGE 46)
In deciding to approve the merger, the Boards of The Santa Anita Companies
considered an opinion from their financial advisor, Morgan Stanley & Co.
Incorporated, as to the fairness of the exchange ratio to the shareholders of
The Santa Anita Companies from a financial point of view. We have attached the
opinion as Annex B and encourage you to read it in its entirety.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 68)
We have structured the merger so that neither the companies nor our
shareholders should recognize any gain or loss for federal income tax
purposes.
However, there may be gain or loss for federal income tax purposes in the
following cases:
- --the issuance of a note and/or the transfer of cash between The Santa Anita
Companies before the merger;
- --cash received by shareholders of The Meditrust Companies instead of
fractional shares;
- --cash received by those Santa Anita shareholders who elect to receive cash
for some or all of their shares after the merger; and
- --cash received by holders of Santa Anita preferred stock who exercise
appraisal rights.
Meditrust shareholders may also recognize income with respect to a portion
of the distribution of the Meditrust Acquisition Company shares as well as on
any interim dividend declared and paid at the time of the merger.
APPRAISAL RIGHTS (SEE PAGE 60)
No appraisal rights are available to the shareholders of The Santa Anita
Companies or The Meditrust Companies in connection with the merger, other than
the holders of the outstanding preferred stock of The Santa Anita Companies.
CERTAIN EFFECTS OF THE MERGER ON THE RIGHTS OF THE MEDITRUST COMPANIES'
SHAREHOLDERS (SEE PAGE 62)
As a result of the merger, The Meditrust Companies' shareholders will become
shareholders of The Santa Anita Companies and the businesses of Meditrust and
MAC will be conducted as Delaware corporations rather than as Massachusetts
business trusts. As a result, there will be some changes in the rights of The
Meditrust Companies' shareholders.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (SEE PAGE 31)
The Santa Anita Companies' paired common stock and The Meditrust Companies'
paired shares are each listed on the New York Stock Exchange.
On April 11, 1997, the last full trading day prior to the public
announcement of the proposed merger, The Santa Anita Companies' paired common
stock closed at $27.375 and Meditrust shares closed at $37.25. On September
23, 1997, The Santa Anita Companies' paired common stock closed at $33.75 and
the shares of Meditrust closed at $41.0625.
OTHER SANTA ANITA MEETING MATTERS
At the Santa Anita meetings, The Santa Anita Companies are also asking their
shareholders to vote on the following proposals:
. to authorize the transfer of assets of each company to one or more wholly-
owned subsidiaries (see page 113)
. to authorize the exchange of paired common stock for paired preferred stock
(see page 114)
. to increase the number of shares authorized under the 1995 Share Award Plan
of each of The Santa Anita Companies and amend the plans in certain other
respects (see page 114)
. to eliminate cumulative voting (see page 124)
Approval by Santa Anita shareholders of these proposals is not a condition
to completion of the merger.
The Santa Anita Boards recommend that you vote FOR these proposals.
9
<PAGE>
LITIGATION INVOLVING SANTA ANITA (PAGE 98)
The Santa Anita Companies are parties to certain legal proceedings. One
lawsuit, which was filed in October 1996 and amended in April 1997, alleges a
breach of fiduciary duties by certain officers and directors and seeks to
enjoin the merger.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
How We Prepared the Financial Statements
We are providing you the following information to aid your analysis of the
financial aspects of the merger.
We derived this information from the audited and unaudited financial
statements of Meditrust and The Santa Anita Companies for their respective
fiscal years 1992 through 1996 and for the first six months of 1997. The
information is only a summary and you should read it in conjunction with our
historical financial statements (and related notes) contained in the annual
reports and other information that we have filed with the SEC.
Because Meditrust Acquisition Company was formed on June 2, 1997 and has no
operating business, no historical financial information for this company is
available. See "Where You Can Find More Information" on page 126.
Purchase Accounting Treatment
The merger will be accounted for as a purchase by The Meditrust Companies of
The Santa Anita Companies. The unaudited pro forma financial information
reflects this method of accounting and gives you a better picture of what our
businesses might have looked like had they been combined for fiscal 1996 and
the period ended June 30, 1997.
We prepared the pro forma balance sheet by adjusting the balances to reflect
the fair market value, including goodwill, of the assets and liabilities of The
Santa Anita Companies.
The pro forma statement of operations has been prepared by adding the
historical operations of The Santa Anita Companies to the historical operations
of Meditrust and adjusting for certain known changes such as changes in
depreciation and amortization expense to reflect the adjustment of the Santa
Anita assets to fair market value.
The companies may have performed differently if they had always been
combined. You should not rely on the pro forma information as being indicative
of the historical results that we would have had or the future results that we
will experience after the merger. See "Pro Forma Financial Statements" on page
76.
Periods Covered
The unaudited pro forma statements of operations combine Meditrust's results
for its 1996 fiscal year and for the period ended June 30, 1997 with The Santa
Anita Companies' results for their 1996 fiscal year and for the period ended
June 30, 1997, giving effect to the merger as if it had occurred at the
beginning of the periods presented.
The unaudited pro forma balance sheet combines Meditrust's balance sheet and
the fair market value of The Santa Anita Companies' assets at June 30, 1997
giving effect to the merger as if it had occurred on June 30, 1997.
10
<PAGE>
SUMMARY COMBINED HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
The following tables set forth historical and pro forma financial information
for Meditrust and The Santa Anita Companies and the combined Meditrust
Corporation and Meditrust Operating Company and should be read in conjunction
with, and are qualified in their entirety by, the historical financial
statements and notes thereto of Meditrust and The Santa Anita Companies and the
pro forma financial statements and notes thereto of Meditrust Corporation and
Meditrust Operating Company located elsewhere in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
PRO FORMA (1)
HISTORICAL MEDITRUST CORPORATION
THE SANTA ANITA HISTORICAL AND MEDITRUST
COMPANIES MEDITRUST OPERATING COMPANY
FOR THE YEAR AND SIX FOR THE YEAR AND SIX FOR THE YEAR AND SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED
------------------------ ------------------------ ------------------------
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1996 1997 1996 1997 1996 1997
------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
OPERATING DATA:
Total revenue........... $ 77,225 $ 53,483 $254,024 $ 138,979 $331,249 $ 192,462
Total expenses.......... 76,685 51,230 96,048 55,979 175,951 107,954
-------- ----------- -------- ----------- -------- -----------
Net income.............. 540 2,253 157,976 83,000 155,298 84,508
Preferred stock divi-
dends.................. 12,420 3,119 -- -- -- --
-------- ----------- -------- ----------- -------- -----------
Net income (loss) appli-
cable to
common shares.......... $(11,880) $ (866) $157,976 $ 83,000 $155,298 $ 84,508
======== =========== ======== =========== ======== ===========
PER SHARE:
Net income (loss)....... $ (1.05) $ (.08) $ 2.66 $ 1.35 $ 1.86 $ .98
OTHER DATA:
Funds from operations
(2).................... 14,244 11,863 179,245 95,346 190,747 106,034
Cash provided from oper-
ating activities (2)... 11,977 1,027 188,551 86,828 189,653 103,814
Weighted average common
shares outstanding..... 11,317 11,480 59,458 61,509 83,629 86,256
<CAPTION>
JUNE 30, JUNE 30, JUNE 30,
1997 1997 1997
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA:
Real estate investments,
net.................... $ 39,233 $ 2,442,796 $ 2,696,080
Total assets............ $ 86,460 $ 2,566,604 $ 3,075,031
Indebtedness, net:
Notes and bank notes
payable............... $ 6,653 $ 770,649 $ 777,302
Convertible deben-
tures................. -- 278,512 278,512
Bonds and mortgages
payable............... 20,210 59,544 79,754
Total.................. $ 26,863 $ 1,108,705 $ 1,135,568
Total liabilities ...... $ 50,783 $ 1,178,839 $ 1,304,622
Series A redeemable pre-
ferred stock........... $ 25,540 -- --
Total shareholders' eq-
uity................... $ 10,137 $ 1,387,765 $ 1,770,409
Total shares outstand-
ing.................... 11,476 61,588 86,347
</TABLE>
- -------
(1) The pro forma information does not purport to represent what Meditrust
Corporation's and Meditrust Operating Company's results of operations would
have been for the fiscal year ended December 31, 1996 if the merger had in
fact occurred on January 1, 1996 or what Meditrust Corporation's or
Meditrust Operating Company's financial position or results of operations
would have been for or as of the six months ended June 30, 1997, if the
merger had in fact occurred on or prior to January 1, 1997. Such pro forma
information should not be used or relied upon to project Meditrust
Corporation's and Meditrust Operating Company's financial position for any
future periods or to project Meditrust Corporation's and Meditrust
Operating Company's results of operations for any future periods.
11
<PAGE>
(2) In accordance with a resolution adopted by the Board of Governors of the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT"),
funds from operations represent net income (loss) (computed in accordance
with generally accepted accounting principles), excluding gains or losses
from debt restructuring or sales of property, significant non-recurring
items and after adjustments for unconsolidated partnerships, joint ventures
and corporations. Pro forma financial information also includes certain
adjustments to funds from operations for real estate related goodwill
amortization ($5,356 and $2,678 on a pro forma basis for Meditrust
Corporation and Meditrust Operating Company combined for the year ended
December 31, 1996 and six months ended June 30, 1997, respectively). Funds
from operations should not be considered as an alternative to net income or
other measurements under generally accepted accounting principles, as an
indicator of operating, investing or financing activities or as a measure
of liquidity. Funds from operations does not reflect working capital
changes, cash expenditures for capital improvements or principal payments
on indebtedness.
The following is a reconciliation of funds from operations to cash provided
by operating activities.
<TABLE>
<CAPTION>
PRO FORMA(1)
MEDITRUST CORPORATION
HISTORICAL HISTORICAL AND MEDITRUST
THE SANTA ANITA COMPANIES MEDITRUST OPERATING COMPANY
FOR THE YEAR AND SIX FOR THE YEAR AND SIX FOR THE YEAR AND SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED
----------------------------- ------------------------ ---------------------
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1996 1997 1996 1997 1996 1997
------------- ------------ ------------ ----------- ------------ --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Funds from operations
(unaudited)............ $ 14,244 $ 11,863 $179,245 $95,346 $190,747 $106,034
Other non real estate
depreciation and
amortization........... 1,767 1,311 2,601 1,009 3,601 1,780
Shares issued for
compensation........... 524 31 2,039 1,000 2,563 1,031
Other items, net........ (3,790) (7,217) 167 137 (7,258) (5,031)
Changes in working
capital................ (768) (4,961) 4,499 (10,664) -- --
------------ ------------ -------- ------- -------- --------
Cash provided by
operating activities... $ 11,977 $ 1,027 $188,551 $86,828 $189,653 $103,814
============ ============ ======== ======= ======== ========
</TABLE>
--------
(1) Pro forma cash provided by operating activities represents pro forma
net income plus depreciation and amortization less the effect of the
non-cash portion of compensation expenses. The pro forma amounts do not
include adjustments from changes in working capital resulting from
changes in current assets and current liabilities.
12
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
THE SANTA ANITA COMPANIES
The following table presents selected combined financial information with
respect to The Santa Anita Companies for the five years ended December 31, 1996
and for the six-month periods ended June 30, 1997 and June 30, 1996. This
financial information has been derived from audited financial statements
included in The Santa Anita Companies' Annual Report on Form 10-K for the
fiscal years ended December 31, 1992 through December 31, 1996 and the
unaudited financial statements included in The Santa Anita Companies' Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997. The Santa Anita
Companies' Annual Report on Form 10-K, as amended by amendments on Form 10-K/A,
for the year ended December 31, 1996 (the "Santa Anita Form 10-K") and The
Santa Anita Companies' Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 are incorporated by reference in this Joint Proxy Statement/Prospectus
and should be read in conjunction with such financial statements and the
accompanying footnotes. See "Where You Can Find More Information" on page 126.
<TABLE>
<CAPTION>
AT AND FOR THE
SIX MONTHS
ENDED JUNE 30, AT AND FOR THE YEAR ENDED DECEMBER 31,
--------------- --------------------------------------------
1997 1996* 1996 1995* 1994* 1993* 1992*
------ ------- -------- -------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues.......... 53,483 $57,032 $ 77,225 $ 81,206 $81,449 $95,011 $94,177
Costs and expenses...... 51,230 48,546 76,685 106,838 79,424 97,912 87,851
------ ------- -------- -------- ------- ------- -------
Income (loss) before
income taxes........... 2,253 8,486 540 (25,632) 2,025 (2,901) 6,326
Income tax benefit...... -- -- -- 2,000 -- 2,523 158
------ ------- -------- -------- ------- ------- -------
Income (loss) before
extraordinary gain..... 2,253 8,486 540 (23,632) 2,025 (378) 6,484
Extraordinary gain on
early retirement of
debt................... -- -- -- 4,050 -- -- --
------ ------- -------- -------- ------- ------- -------
Net income (loss)....... 2,253 8,486 540 (19,582) 2,025 (378) 6,484
Preferred stock
dividends(1)........... 3,119 -- 12,420 -- -- -- --
------ ------- -------- -------- ------- ------- -------
Net income (loss)
applicable to common
shares................. $ (866) $ 8,486 $(11,880) $(19,582) $ 2,025 $ (378) $ 6,484
====== ======= ======== ======== ======= ======= =======
PER SHARE:
Net income (loss) per
common share:
Before extraordinary
gain.................. $ (.08) $ .75 $ (1.05) $ (2.11) $ .18 $ (.03) $ .58
Extraordinary gain..... -- -- -- .36 -- -- --
------ ------- -------- -------- ------- ------- -------
$ (.08) $ .75 $ (1.05) $ (1.75) $ .18 $ (.03) $ .58
====== ======= ======== ======== ======= ======= =======
Dividends paid per
common share........... $ .40 $ .40 $ .80 $ .80 $ 1.08 $ 1.36 $ 1.36
Dividends declared per
common share........... $ .40 $ .40 $ .80 $ .80 $ .94 $ 1.36 $ 1.36
Book value.............. $ .88 $ 3.21 $ 1.29 $ 2.83 $ 5.36 $ 6.11 $ 7.51
Weighted average common
shares outstanding..... 11,480 11,271 11,317 11,214 11,143 11,141 11,141
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Total assets(2)(3)(4)... $ 86,460 $93,481 $114,876 $142,121 $257,239 $248,043
Loans payable(2)(4)..... 26,863 25,824 51,074 50,375 153,131 133,217
Shareholders'
equity(3).............. 10,137 14,789 31,901 59,720 60,088 83,619
</TABLE>
- -------
* The six months ended June 30, 1996 and the fiscal years 1995 and prior have
been restated to reflect an impairment in value of an unconsolidated joint
venture investment (Joppa Associates) in 1991 instead of 1995, and increase
The Santa Anita Companies' share of the joint venture losses from 33 1/3% to
50% for all periods presented since it was probable that one of the partners
would not bear its share of losses. See Note 2 to the financial statements
in the Santa Anita Form 10-K.
(1) See Note 16 to the financial statements in the Santa Anita Form 10-K. See
"Where You Can Find More Information" on page 126.
(2) The decrease in total assets, loans payable and shareholders' equity in
1996 compared with 1995 was due primarily to the sale of four neighborhood
shopping centers and two office buildings and to the sale of the investment
in Pacific Gulf Properties Inc. (see Note 3 to the financial statements in
the Santa Anita Form 10-K).
(3) The decrease in total assets and shareholders' equity in 1995 compared with
1994 was due primarily to the nonrecurring charge of $30,300 in 1995
relating to Realty's plan to dispose of its non-core real estate assets
(see Note 3 to the financial statements in the Santa Anita Form 10-K).
(4) The decrease in total assets and loans payable in 1994 compared with 1993
was due primarily to the sale of Realty's multifamily and industrial
properties in 1994 (see Note 8 to the financial statements in the Santa
Anita Form 10-K).
13
<PAGE>
MEDITRUST
The following table presents selected financial information with respect to
Meditrust for the five years ended December 31, 1996 and for the six-month
periods ended June 30, 1997 and June 30, 1996. This financial information has
been derived from audited financial statements included in the Meditrust Annual
Report on Form 10-K for the fiscal years ended December 31, 1992 through
December 31, 1996 and the unaudited financial statements included in the
Meditrust Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
The Meditrust Annual Report on Form 10-K for the year ended December 31, 1996
and Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 are
incorporated by reference in this Joint Proxy Statement/Prospectus, and should
be read in conjunction with such financial statements and the accompanying
footnotes. See "Where You Can Find More Information" on page 126.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................ $138,979 $121,500 $254,024 $209,369 $172,993 $150,375 $132,394
Expenses:
Interest expense....... 38,378 30,596 64,216 64,163 67,479 62,193 58,159
Depreciation and
amortization.......... 13,355 11,184 23,207 18,176 17,171 16,277 14,032
General and
administrative
expenses.............. 4,246 3,944 8,625 7,058 7,883 8,269 8,845
-------- -------- -------- -------- -------- -------- --------
Total expenses.......... 55,979 45,724 96,048 89,397 92,533 86,739 81,036
-------- -------- -------- -------- -------- -------- --------
Net income before
extraordinary item..... 83,000 75,776 157,976 119,972 80,460 63,636 51,358
Loss on prepayment of
debt................... -- -- -- 33,454 -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 83,000 $ 75,776 $157,976 $ 86,518 $ 80,460 $ 63,636 $ 51,358
======== ======== ======== ======== ======== ======== ========
PER SHARE:
Net income before
extraordinary item..... $ 1.35 $ 1.31 $ 2.66 $ 2.52 $ 2.28 $ 2.03 $ 1.95
Loss on prepayment of
debt................... -- -- -- 0.70 -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 1.35 $ 1.31 $ 2.66 $ 1.82 $ 2.28 $ 2.03 $ 1.95
======== ======== ======== ======== ======== ======== ========
Distributions paid...... $ 1.42 $ 1.38 $ 2.78 $ 2.70 $ 2.62 $ 2.54 $ 2.46
Book value.............. $ 22.53 $ 22.51 $ 22.57 $ 20.75 $ 19.44 $ 17.84 $ 16.12
Shares of beneficial
interest (weighted
average)............... 61,509 57,909 59,458 47,563 35,314 31,310 26,360
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate investments,
net.................... $2,442,796 $2,188,078 $1,777,798 $1,484,229 $1,214,308 $1,021,630
Total assets............ $2,566,604 $2,316,875 $1,891,852 $1,595,130 $1,310,401 $1,094,941
Indebtedness, net:
Notes and bank notes
payable............... $ 770,649 $ 518,904 $ 414,522 $ 454,005 $ 366,530 $ 377,256
Convertible
debentures............ 278,512 280,813 295,209 231,277 199,822 93,356
Bonds and mortgages
payable............... 59,544 59,043 52,560 80,470 91,893 135,973
Total.................. $1,108,705 $ 858,760 $ 762,291 $ 765,752 $ 658,245 $ 606,585
Total liabilities....... $1,178,839 $ 931,934 $ 830,097 $ 824,983 $ 724,606 $ 663,458
Total shareholders'
equity................. $1,387,765 $1,384,941 $1,061,755 $ 770,147 $ 585,795 $ 431,483
</TABLE>
14
<PAGE>
COMPARATIVE PER SHARE DATA
We have summarized below the per share information for our respective
companies on an historical, pro forma combined and equivalent basis. The pro
forma information gives effect to the merger accounted for on a purchase basis.
You should read this information in conjunction with our historical financial
statements (and related notes) contained in the annual reports and other
information that we have filed with the SEC. See "Where You Can Find More
Information" on page 126. You should also read this information in connection
with the pro forma financial information set forth on page 76. You should not
rely on the pro forma information as being indicative of the historical results
that we would have had or the future results that we will experience after the
merger.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997 (UNAUDITED)
------------------------------------- -------------------------------------
HISTORICAL PRO FORMA(1) EQUIVALENT(2) HISTORICAL PRO FORMA(1) EQUIVALENT(2)
---------- ------------ ------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net Income
Meditrust.............. $ 2.66 $1.86 $2.23 $ 1.35 $ 0.98 $ 1.18
Santa Anita Companies.. $(1.05) -- -- $ (.08) -- --
Distributions paid
Meditrust.............. $ 2.78 -- -- $ 1.42 -- --
Santa Anita Companies.. $ 0.80 -- -- $ 0.40 -- --
Book Value(3)
Meditrust.............. $22.57 -- -- $22.53 $20.50 $24.64
Santa Anita Companies.. $ 1.29 -- -- $ .88 -- --
</TABLE>
- --------
(1) The pro forma combined per share data for Meditrust and The Santa Anita
Companies for the year ended December 31, 1996 and the six months ended
June 30, 1997 have been prepared as if the merger had occurred on January
1, 1996 and 1997, respectively, resulting in weighted average shares
outstanding of 83,629,000 and 86,256,000 for the year ended December 31,
1996 and the six months ended June 30, 1997, respectively. The pro forma
combined book value per share for Meditrust and The Santa Anita Companies
has been prepared assuming that, in the merger, each share of Meditrust is
converted into 1.2016 shares of Paired Common Stock, resulting in total
outstanding shares of Paired Common Stock of 86,347,000 as of June 30,
1997.
(2) The equivalent pro forma combined per share amounts of Meditrust are
calculated by multiplying pro forma Net Income per share of Meditrust and
pro forma Book Value per share of Meditrust by the exchange ratio of 1.2016
to 1.
(3) Book value per common share was calculated using shareholders' equity as
reflected in the historical and pro forma financial statements divided by
the number of shares of common stock outstanding.
15
<PAGE>
RISK FACTORS
In addition to the other information contained in this Joint Proxy
Statement/Prospectus, you should consider the following risk factors before you
decide whether or not you wish to approve the merger.
This Joint Proxy Statement/Prospectus contains forward-looking statements
that are subject to risks and uncertainties. Forward-looking statements include
the information concerning future results of operations, economic benefits of
participation in a fully integrated operating company and expanded business
opportunities relating to us after the merger. These statements are set forth
under "Summary", "Background of the Mergers", "Realty and Operating Reasons for
the Mergers; Recommendations of the Boards of Directors of Realty and
Operating", "Meditrust and MAC Reasons for the Mergers; Recommendations of the
Boards of Trustees of Meditrust and MAC", "Opinion of Financial Advisor to
Realty and Operating" and "Business Strategy." These statements are usually
preceded by, followed by or otherwise include the words "believes", "expects",
"anticipates", "intends", "estimates" or similar expressions.
For those statements, we claim the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of
1995. The following important factors, in addition to those discussed elsewhere
in this Joint Proxy Statement/Prospectus and in the documents which we
incorporate by reference, could affect our future results. These factors could
cause those results to differ materially from those expressed in the forward-
looking statements:
. the declaration or payment of distributions by the surviving
corporations;
. the completion of the merger;
. the policies of the surviving corporations regarding investments,
acquisitions, dispositions, financings, conflicts of interest and other
matters;
. risks associated with the real estate markets in general;
. the availability of debt and equity financing;
. interest rates;
. general economic conditions;
. trends affecting the surviving corporations' financial condition or
results of operations; and
. the risks described below.
You should be aware that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from those in the forward-looking statements as a
result of various factors. The accompanying information contained in this Joint
Proxy Statement/Prospectus, including the information set forth below,
identifies important factors that could cause such differences.
TAX RISKS
Dependence on Qualification as a REIT
Meditrust Corporation intends to qualify as a REIT for federal income tax
purposes. In order to qualify as a REIT, a company must comply with highly
technical and complex tax provisions. The complexity of these provisions is
greater in the case of a REIT that owns real estate and leases it to a
corporation with which its stock is paired. In 1983, Congress passed
legislation which would ordinarily prevent a corporation from qualifying as a
REIT if its stock is paired with the stock of a corporation whose activities
are inconsistent with REIT status, such as Meditrust Operating Company. This
disqualification does not apply to a paired REIT if the REIT and its paired
operating company were paired on June 30, 1983. Realty was paired with
Operating on June 30, 1983. There are, however, no judicial or administrative
authorities interpreting this "grandfathering" rule in the context of a merger
or otherwise. There is also no guarantee that new legislation, new regulations,
administrative interpretations or court decisions will not change the tax laws
with respect to qualification as a REIT or the effect of the pairing agreement.
16
<PAGE>
If Meditrust Corporation fails to qualify as a REIT, it would be required to
pay federal income tax on its taxable income at corporate rates. Unless
entitled to relief under certain statutory provisions, Meditrust Corporation
also would not be allowed to re-elect REIT status for the following four
taxable years. This would reduce the net earnings of Meditrust Corporation
available for distribution to shareholders because of the additional tax
liability to Meditrust Corporation for the year or years involved. Meditrust
Corporation might be required to borrow funds or to sell certain of its
investments to pay the tax due on any distributions made. The failure to
qualify as a REIT would also constitute a default under certain debt
obligations of Meditrust Corporation.
If the IRS were to determine that any of Realty's, Meditrust's or MAC's
elections to qualify as REITs were invalid, and consequently corporate taxes
were due, then Meditrust Corporation would be liable to pay these taxes.
Nutter, McClennen & Fish, LLP will render an opinion regarding Meditrust's
qualification as a REIT immediately prior to the merger and that the merger
will not adversely affect Realty's qualification as a REIT. O'Melveny & Myers
LLP will render an opinion regarding Realty's qualification as a REIT for 1996;
that if Realty continues to operate in the same manner as in 1996, it will
continue to so qualify; and that the merger will not adversely affect Realty's
qualification as a REIT.
DILUTIVE EFFECT OF THE MERGER; DEPENDENCE ON ACQUISITIONS
As a result of the amount being paid to acquire The Santa Anita Companies,
the merger has a dilutive effect on Meditrust's net income per share on a pro
forma basis for 1996 and the six months ended June 30, 1997 and may have a
dilutive effect on net income per share in future periods. The Unaudited Pro
Forma Financial Information shows how the merger would reduce the net income
per share for the year ended December 31, 1996 and the six months ended June
30, 1997. On a pro forma basis (post-merger) for the surviving corporations,
net income per share was $1.86 for the year ended December 31, 1996 and $.98
for the six months ended June 30, 1997, as compared to $2.21 and $1.12 for
Meditrust (pre-merger adjusted by the exchange ratio). See "Pro Forma Financial
Statements." In addition, we believe that the merger initially will cause
Meditrust's funds from operations per share not to grow as fast in the periods
following the merger as might be expected without the merger.
We will try to minimize this potential effect by making strategic
acquisitions which benefit from the use of the paired share structure. See "The
Mergers--Business Strategy." We cannot assure you, however, that we will be
able to identify and acquire at appropriate prices businesses that meet our
goals. Nor can we assure you that any such acquired businesses will perform in
a manner that will allow us to eliminate the dilution or increase the rate of
growth in funds from operations. Furthermore, because of the paired share
arrangement, we will face certain limitations in structuring potential
acquisitions, especially acquisitions that will be tax-free for the owners of
the acquired properties. These limitations could prevent some acquisitions and
in other cases, increase the acquisition costs. The longer it takes to make
acquisitions and the greater the costs of making acquisitions, the less likely
it will be that we will meet our anticipated growth in funds from operations.
While the authorization of a new class of common stock and the ability of the
surviving corporations to transfer some or all of their assets to wholly-owned
subsidiaries should help us negotiate and complete acquisitions, we cannot
assure you that this will be the case.
EFFECT OF CERTAIN ACQUISITIONS ON EXISTING OPERATIONS; RELIANCE ON OUTSIDE
MANAGEMENT
If we acquire new businesses, and if those new businesses compete with the
existing businesses of operators in Meditrust's portfolio, those existing
operators may reduce the amount of new business that they do with Meditrust.
In order to acquire businesses outside the health care or horse racing
sectors, we will need to hire and retain experienced management to run those
businesses. We cannot assure you that we will be able to hire and retain
experienced management for such businesses. If we cannot hire qualified
management for such
17
<PAGE>
businesses, we might not acquire such businesses, which may lengthen the time
it takes to make acquisitions and increase our funds from operations per share.
In addition, if we cannot hire and retain qualified management for these
businesses, these businesses might not be successful once acquired.
INTERESTS OF CERTAIN DIRECTORS AND OFFICERS OF THE SANTA ANITA COMPANIES AND
THE MEDITRUST COMPANIES IN THE MERGER
Shareholders of The Santa Anita Companies and The Meditrust Companies should
be aware that certain members of management and certain members of the Boards
of Directors of The Santa Anita Companies as well as certain members of
management and the Board of Trustees of The Meditrust Companies have certain
interests in, and will receive benefits as a consequence of, the merger that
are separate from the interests of, and benefits to, shareholders generally.
These different interests may result in conflicts with respect to these
individuals' obligations to Realty and Operating or Meditrust and MAC in
determining whether it should complete the merger.
Realty and Operating have entered into severance agreements and other
arrangements with several officers that, under certain circumstances, entitle
each officer to receive payments and other benefits if the officer's employment
is terminated following a change in control. Shareholder approval of the merger
would constitute a change of control under these agreements and arrangements.
The Santa Anita Companies currently estimate that the aggregate payments to
executive officers required under the severance agreements would be
approximately $4.2 million, and the aggregate value of the unvested options,
restricted stock and accelerated retirement plan and thrift plan benefits of
officers would be approximately $3 million, based on the price per share of
paired common stock as of September 23, 1997.
The Compensation Committee of Meditrust has considered a proposal that upon
consummation of the merger a payment be made to the Chief Executive Officer of
Meditrust in an amount equal to 5% of the increase from the value of
Meditrust's outstanding shares on the day before the merger was announced to
the value of the paired common stock to be issued in exchange for Meditrust
shares determined over a period of time after the merger is consummated. The
amount of the payment, based upon the market price per share on September 23,
1997, would be $11.76 million. See "The Mergers--Interests of Certain Persons
in the Mergers."
In addition, in connection with the merger, each outstanding option to
purchase a share of Meditrust will become an option to purchase 1.2016 paired
shares of The Santa Anita Companies. Any such Meditrust option granted prior to
November 1, 1997 will be immediately exercisable (except for options granted to
executive officers on or after August 8, 1997). Meditrust estimates that the
aggregate value of the unvested options to the officers and trustees of
Meditrust would be $2,150,090, based upon the price per share of Meditrust as
of September 23, 1997. See "The Mergers-Interests of Certain Persons in the
Mergers."
POTENTIAL CONFLICTS BETWEEN MEDITRUST CORPORATION AND MEDITRUST OPERATING
COMPANY
Meditrust Corporation and Meditrust Operating Company will be separate
corporate entities with separate Boards of Directors. A majority of the
directors of each of Meditrust Corporation and Meditrust Operating Company,
however, will be the same. Meditrust Corporation and Meditrust Operating
Company generally will have different employees, separate creditors and will be
subject to different state law licensing and regulatory requirements. The
interests of the Board of Directors of each company may conflict and such
conflicts may possibly give rise to disputes between the companies. Meditrust
Corporation and Meditrust Operating Company will have, immediately following
the merger, the same Chairman of the Board as well as seven of the same
directors. We believe this overlap will help decrease the possibility of
disagreements between the two companies.
HEALTH CARE INDUSTRY RISKS
Operating Risks
After the merger, we expect that Meditrust Corporation's primary business
will be that of buying, selling and leasing health care related properties. The
risks of this business include, among other things: competition
18
<PAGE>
for tenants and borrowers from other health care financing providers, a number
of which may have greater marketing and financial resources and experience than
we have; changes in government regulation of health care and changes in the
availability and cost of insurance coverage; increases in operating costs due
to inflation and other factors, which may not have been offset in recent years
by higher rates; and adverse effects of general and local economic conditions.
These factors could hurt the ability of our operators to generate revenues and
to make payments to us. This, in turn, could hurt Meditrust Corporation's
ability to make expected distributions to shareholders.
Competition for Acquisition Opportunities
After the merger, we may be competing for investment opportunities with
entities that have substantially greater financial resources than we do. These
entities may generally be able to accept more risk than we can prudently
manage. These risks include the creditworthiness of an operator or the location
of its investments. Competition may reduce the number of suitable investment
opportunities offered to us and increase the bargaining power of property
owners with which we may be required to negotiate.
Government Regulation
Health care is an area subject to extensive regulation and frequent
regulatory change. The cost of many of the services offered by Meditrust's
current operators are reimbursed or paid for by Medicare programs for elderly
and disabled patients, state Medicaid programs for maintenance organizations,
preferred provider organizations and directly from patients. The Meditrust
Companies and their operators are and will continue to be subject to varying
degrees of regulation and licensing by health or social service agencies and
other regulatory authorities in the various states and localities in which they
operate or in which they will operate. Changes in, or the adoption of, such
laws and regulations, or new interpretations of existing laws and regulations,
could have a significant effect on The Meditrust Companies and their operators'
methods of doing business, costs of doing business and amounts of reimbursement
from governmental and other payors. In addition, the President and Congress
have in the past, and may in future, propose health care reforms which could
impose additional regulations on The Meditrust Companies and their operators or
limit the amounts that they may charge for services. Meditrust cannot make any
assessment as to the ultimate timing and impact that any pending or future
health care reform proposals may have on the assisted living, nursing facility
and rehabilitation care industries, or on the health care industry in general.
No assurance can be given that any such reform will not have a material adverse
effect on the business, financial condition or results of operations of The
Meditrust Companies.
HORSE RACING INDUSTRY RISKS
Regulation of Gaming Operations
Operating's pari-mutuel wagering operations, conducted by its subsidiary Los
Angeles Turf Club, Incorporated, depend upon the continued governmental
acceptance of such operations as forms of legalized gaming. As a form of
gaming, pari-mutuel wagering is subject to extensive licensing and regulatory
control by the California Horse Racing Board, or the "CHRB". The CHRB has broad
powers with respect to the licensing of gaming operations. It may revoke,
suspend, condition or limit the gaming operations of Operating prior to the
merger and Meditrust Operating Company after the merger. Any such change in
regulations may have a material adverse effect on Meditrust Operating Company.
On a meet-by-meet basis, Los Angeles Turf Club, Incorporated must obtain a
license from the CHRB to hold horse racing meets at Santa Anita Park and to
accept pari-mutuel wagers. The CHRB has broad discretion to reject any
application for a license. Prior to the merger, Los Angeles Turf Club,
Incorporated will file an application as a licensee to conduct the 1997-1998
horse racing meet and following the merger will file an amendment to its
application reflecting Meditrust Operating Company's ownership. In informal
discussions, representatives of the CHRB have indicated to Operating's
management that the merger will not adversely
19
<PAGE>
affect the license. We cannot assure you, however, that the CHRB will not
object. Failure to receive timely approval of an application could have a
material adverse effect on Meditrust Operating Company.
California law requires that each of the directors and certain employees of
the license holder must be licensed with the CHRB. We cannot assure you that
the CHRB will grant licenses to each of the proposed directors and each of such
employees. If a director or employee required to be licensed were denied a
license by the CHRB, Los Angeles Turf Club, Incorporated would have to replace
such director or employee with a director or employee who was or would be so
licensed.
The CHRB also has the discretion to limit the number of days and dates on
which Los Angeles Turf Club, Incorporated may conduct live horse racing. We
cannot assure you as to how many, or which, horse racing days the CHRB will
allocate to Los Angeles Turf Club, Incorporated in the future. We cannot assure
you that an issued license will not be modified or revoked.
Dependence on Relationship with Owners and Trainers Associations
Los Angeles Turf Club, Incorporated's horse racing operations require it to
maintain good working relationships with the Thoroughbred Owners of California,
or the "Owners Association", and the California Horsemen's Benevolent and
Protective Association, or the "Trainers Association." If Los Angeles Turf
Club, Incorporated cannot maintain working relationships with the Owners
Association or the Trainers Association or finds itself unable to attract a
sufficient number of horses to its live horse race meets, such events could
have a material adverse effect on Meditrust Operating Company.
Competition
Thoroughbred horse racing, and gaming generally, are competitive industries.
Meditrust Operating Company will compete in its markets with other horse racing
facilities, off-track betting, state-run lotteries and Native American
reservation gaming. Many of these competitors have resources that exceed those
of Meditrust Operating Company. Meditrust Operating Company will also compete
locally with other sporting and entertainment businesses. Approval of
legislation legalizing casinos and other forms of gaming or expansion of gaming
at Native American reservations could increase competition for Meditrust
Operating Company. Meditrust Operating Company also may face increasing
competition from businesses accepting wagers by telephone and via the Internet.
Declines in On-Track Attendance
Substantially all race tracks across the nation, including Santa Anita Park,
are experiencing declines in on-track attendance. We cannot assure you that
Meditrust Operating Company will not experience further declines in on-track
attendance, which could have a material adverse effect on its results of
operations.
Lack of Experience in the Horse Racing Business; Reliance on Operating
Management
After the merger, Meditrust Operating Company will manage Operating's
existing horse racing operations, an area in which Meditrust has no prior
experience. Although Meditrust Operating Company expects to retain Operating's
existing management and personnel to continue to manage these horse racing
operations, we cannot assure you that such management and personnel will
continue to be employed by Meditrust Operating Company. Failure to retain such
management and personnel, or to hire qualified management and personnel in
their absence, could have a material adverse effect on the results of
operations and financial condition of Meditrust Operating Company.
REAL ESTATE INVESTMENT RISKS
General Risks
Meditrust Corporation's investments will be subject to risks relating to
owning real estate. The underlying value of Meditrust Corporation's real estate
investments and Meditrust Corporation's income and ability to
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<PAGE>
make distributions to you will depend on the ability of the lessees, the
operators and Meditrust Operating Company to operate Meditrust Corporation's
properties in a manner sufficient to maintain or increase revenues and to
generate sufficient income in excess of operating expenses to make rent
payments under their leases or loan payments in respect of their loans from
Meditrust Corporation.
Income from Meditrust Corporation's properties may also be adversely affected
by
. changes in national economic conditions, changes in local market
conditions due to changes in general or local economic conditions and
neighborhood characteristics;
.changes in interest rates and in the availability, cost and terms of
mortgage funds;
. the impact of present or future environmental legislation and compliance
with environmental laws and other regulatory requirements;
.the ongoing need for capital improvements, particularly in older
structures;
.changes in real estate tax rates and other operating expenses;
.adverse changes in governmental rules and fiscal policies;
.adverse changes in zoning laws; and
. civil unrest, earthquakes and other natural disasters (which may result
in uninsured losses) and other factors which are beyond our control.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. Meditrust Corporation's
ability to vary its portfolio in response to changes in economic and other
conditions will therefore be limited. If Meditrust Corporation wants to sell an
investment, we cannot assure you that Meditrust Corporation will be able to
dispose of it in the time period it desires or that the sales prices of any
investment will recoup or exceed the amount of Meditrust Corporation's
investment.
Property Taxes
Meditrust's health facilities and real estate investments and The Santa Anita
Companies' racing facilities and real estate investments are subject to real
property taxes. The real property taxes on properties in which Meditrust
Corporation invests may increase or decrease as property tax rates change and
as the value of the properties are assessed or reassessed by taxing
authorities. In addition, as a result of the merger, certain of Meditrust
Corporation's properties may be subject to reappraisal or reassessment. If
property taxes increase as a result of such reappraisals or reassessments,
Meditrust Corporation's ability to make expected distributions to you could be
adversely affected.
Environmental Matters
The obligation to pay for the cost of complying with existing environmental
laws, ordinances and regulations, as well as the cost of complying with future
legislation, may affect the operating costs of Meditrust Corporation and
Meditrust Operating Company. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of hazardous or toxic substances on, under or in such property. Such laws often
impose liability whether or not the owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. In
addition, the presence of hazardous or toxic substances, or the failure to
remediate such property properly, may adversely affect the owner's ability to
borrow by using such real property as collateral.
Persons who arrange for the transportation, disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at the disposal or treatment facility, whether
or not such facility is or ever was owned or operated by such person. Certain
environmental laws and
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<PAGE>
common law principles could be used to impose liability for releases of
hazardous materials, including asbestos-containing materials, or "ACMs", into
the environment. In addition, third parties may seek recovery from owners or
operators of real properties for personal injury associated with exposure to
released ACMs or other hazardous materials. Environmental laws may also impose
restrictions on the use or transfer of property, and these restrictions may
require expenditures. In connection with the ownership and operation of any of
Meditrust Corporation's properties, Meditrust Corporation, Meditrust Operating
Company, the lessees or the operators may be liable for any such costs. The
cost of defending against claims of liability or remediating contaminated
property and the cost of complying with environmental laws could materially
adversely affect Meditrust Corporation's results of operations and financial
condition.
Uninsured and Underinsured Losses
Each of Meditrust's leases and mortgage loans specifies comprehensive
insurance to be maintained on each of the applicable properties, including
liability, fire and extended coverage. Meditrust believes such specified
coverage is of the type and amount customarily obtained for or by an owner of
such properties. Leases and loan documents for new investments (including those
leased to Meditrust Operating Company) will contain similar provisions.
However, there are certain types of losses, generally of a catastrophic nature,
such as earthquakes and floods, that may be uninsurable or not economically
insurable. For example, earthquake insurance is not presently maintained at
Santa Anita Park. We will use our discretion in determining amounts, coverage
limits and deductibility provisions of insurance, with a view to maintaining
appropriate insurance coverage on the investments of Meditrust Corporation and
Meditrust Operating Company at a reasonable cost and on suitable terms. This
may result in insurance coverage that, in the event of a substantial loss,
would not be sufficient to pay the full current market value or current
replacement cost of the lost investment of Meditrust Corporation or Meditrust
Operating Company. Inflation, changes in building codes or ordinances,
environmental considerations, and other factors also might make it infeasible
to use insurance proceeds to replace the property after such property has been
damaged or destroyed. Under such circumstances, the insurance proceeds received
by Meditrust Corporation or Meditrust Operating Company might not be adequate
to restore its economic position with respect to such property.
COMPARISON OF SHAREHOLDER RIGHTS
Certain provisions of our Certificates and By-Laws could have a potential
anti-takeover effect. The following provisions could have the effect of making
it more difficult for a third party to acquire control of Meditrust Corporation
and Meditrust Operating Company, including certain acquisitions that
shareholders may deem to be in their best interests:
. the Certificates and By-Laws provide for a classified board of directors;
. Following the merger, Delaware law will permit removal of directors of
Meditrust Corporation and Meditrust Operating Company, other than upon
expiration of their term, only for cause;
. the Certificates and the By-Laws do not permit shareholders to call a
special meeting of shareholders;
. the By-Laws contain restrictions on the number of shares that may be
owned by any shareholder or group of shareholders;
. the By-Laws require that any action to be taken by shareholders must be
taken at a meeting and may not be taken by written consent;
. the Certificates will permit, if approved by the shareholders of Santa
Anita, the issuance of one or more series of a new class of common stock
with rights and preferences to be determined by the Board of Directors;
. the Certificates and Delaware law restrict certain business combinations
with interested shareholders; and
. the By-Laws require advance notice of shareholder proposals and director
nominations.
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<PAGE>
See "The Mergers--Material Differences in Rights of Shareholders of The Santa
Anita Companies and Meditrust and MAC."
You should also be aware that, if the merger agreement and the amendment to
each Certificate to eliminate cumulative voting which you are being asked to
vote on at the meetings are approved, the rights of shareholders of Meditrust
Corporation and Meditrust Operating Company under the provisions of our
Certificates and By-Laws will differ significantly from the existing rights of
the Meditrust and MAC shareholders under their declarations of trust and by-
laws as well as from the existing rights of the shareholders of The Santa Anita
Companies under The Santa Anita Companies' Certificates and by-laws. You should
read carefully the merger agreement, attached to this Joint Proxy
Statement/Prospectus as Annex A, which specifies the amendments to be made in
the merger to the Certificates of The Santa Anita Companies, as well as the
description of the proposal to eliminate cumulative voting.
SUBSTANTIAL EXPENSES AND PAYMENTS IF THE MERGER FAILS TO OCCUR
We cannot assure you that the merger will be completed. If the merger is not
completed, Meditrust, Realty and Operating will have incurred substantial
expenses in connection with the transactions described in this Joint Proxy
Statement/Prospectus. If the merger agreement is terminated under any of the
following circumstances, The Santa Anita Companies must reimburse The Meditrust
Companies for their transaction expenses (up to $1 million) and/or pay a
termination fee of $12 million:
<TABLE>
<CAPTION>
CIRCUMSTANCES FEE
-----------------------------------------------------------------------------
<S> <C>
The Santa Anita Companies shareholders do not approve up to $1 million
the merger of expenses
-----------------------------------------------------------------------------
The merger agreement is terminated and The Santa Anita $12 million
Companies enter into a similar agreement within one year
with another party or another party acquires more than
30% of the stock of The Santa Anita Companies within one
year
-----------------------------------------------------------------------------
The Santa Anita Companies enter into an agreement for a $12 million plus
significant business combination or other similar up to $1 million
transaction with another party of expenses
</TABLE>
If the merger agreement is terminated under the following circumstance, then
Meditrust must pay The Santa Anita Companies a fee of $4 million.
<TABLE>
<CAPTION>
CIRCUMSTANCE FEE
--------------------------------------
<S> <C>
The Meditrust Companies $4 million
shareholders do not
approve the merger
</TABLE>
See "The Merger Agreement--Termination; Termination Fees and Expenses."
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<PAGE>
THE MEETINGS
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
Santa Anita Realty Enterprises, Inc. ("Realty") and Santa Anita Operating
Company ("Operating" and, together with Realty, "The Santa Anita Companies"),
in connection with the solicitation of proxies by the respective Boards of
Directors of Realty and Operating for use at the Special Meetings of the
Shareholders of Realty and Operating to be held on November 5, 1997, at the
times and place and for the purposes specified in the accompanying Notice of
Special Meetings of Shareholders, and at any adjournments of such meetings (the
"Santa Anita Meetings").
The outstanding shares of common stock, $.10 par value, of Realty ("Realty
Common Stock"), are "paired" with the outstanding shares of common stock, $.10
par value, of Operating ("Operating Common Stock"), so that they are
transferable and tradable only in combination as units, each unit consisting of
one share of Realty Common Stock and one share of Operating Common Stock
("Paired Common Stock"). The pairing is evidenced by "back-to-back" stock
certificates and the certificates bear a legend referring to the restrictions
on transfer imposed by the by-laws of Realty and Operating. The outstanding
shares of Series A Redeemable Preferred Stock (the "Series A Preferred Stock")
of The Santa Anita Companies are also paired, so that they are transferable and
tradable only in units.
This Joint Proxy Statement/Prospectus is also being furnished to shareholders
of Meditrust and Meditrust Acquisition Company ("MAC"; references to MAC
include its predecessor in interest Meditrust Acquisition Corporation IV), in
connection with the solicitation of proxies by the Boards of Trustees of
Meditrust and MAC for use at the Special Meetings of the Shareholders of
Meditrust and MAC to be held on November 5, 1997, at the times and place and
for the purposes specified in the accompanying Notice of Special Meetings of
Shareholders and at any adjournments of such meetings (the "Meditrust
Meetings").
MAC was organized as a subsidiary of Meditrust to facilitate the mergers of
Meditrust with Realty and Operating. On June 19, 1997, Meditrust Acquisition
Corporation IV, another wholly-owned subsidiary of Meditrust and a signatory to
the original merger agreement executed on April 13, 1997 along with The Santa
Anita Companies and Meditrust, assigned all its rights, interests and
obligations thereunder to MAC. The Second Amended and Restated Agreement and
Plan of Merger, dated as of April 13, 1997 was executed by Meditrust, MAC,
Meditrust Acquisition Corporation IV, Realty and Operating and served as a
novation of the original merger agreement, substituting MAC as a party thereto,
and discharging Meditrust Acquisition Corporation IV. The Third Amended and
Restated Agreement and Plan of Merger, dated as of April 13, 1997 among
Meditrust, MAC, Realty and Operating (the "Merger Agreement") was executed on
September 19, 1997. Meditrust has transferred $43,662,265 to MAC and on October
3, 1997 will distribute the shares of MAC to shareholders of record of
Meditrust on that date. One share of MAC will be distributed for each share of
Meditrust. Each outstanding share of Meditrust (and the certificate
representing such share) will be deemed to represent in addition one
outstanding share of MAC. Trading of the shares of Meditrust and MAC will be
paired in a manner similar to that of The Santa Anita Companies.
The shareholders of The Santa Anita Companies, Meditrust and MAC at their
respective meetings will be asked to consider and vote upon a proposal to
approve and adopt the Merger Agreement, which provides for the mergers (the
"Mergers") of Meditrust with and into Realty, with Realty to be the surviving
corporation, and of MAC with and into Operating, with Operating to be the
surviving corporation, all on the terms and conditions set forth in the Merger
Agreement, a copy of which is attached hereto as Annex A and incorporated
herein by reference. As a result of the Mergers, each share of Meditrust (the
"Meditrust Shares"), and the related share of MAC (the "MAC Shares") issued and
outstanding immediately prior to the effective time of the Mergers will be
converted into the right to receive 1.2016 shares of Paired Common Stock.
Adoption of the Merger Agreement will also approve an amendment to the
Certificate of Incorporation of each surviving corporation to increase the
authorized number of shares of capital stock, to change the name of each
surviving corporation and to authorize a new class of common stock. In
addition, shareholders of Realty and Operating will have the right until
October 24, 1997 to elect to receive cash for some or all of their shares of
Paired Common Stock at a price of $31.00 per share, up to an aggregate of
3,225,806 shares. Electing shareholders
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<PAGE>
will receive cash after the Mergers occur at approximately the same time that
the Meditrust and MAC shareholders will receive shares of Paired Common Stock.
The approvals of the shareholders of Realty, Operating, Meditrust and MAC are
conditions to consummation of the Mergers. A summary description of the Mergers
is included in this Joint Proxy Statement/Prospectus. Upon the closing of the
Mergers, Realty will change its name to Meditrust Corporation and Operating
will change its name to Meditrust Operating Company.
Shareholders of The Santa Anita Companies will also be asked (i) to approve
the transfer of some or all of the assets of the surviving corporations to one
or more subsidiaries of the surviving corporations in exchange for equity
interests therein; (ii) to approve the issuance of Paired Common Stock in
exchange for, at the option of Colony Investors II, L.P. ("Colony") or any
other holder thereof or The Santa Anita Companies, the paired shares of Series
A Preferred Stock held by Colony (which shares are currently redeemable only at
the option of Colony and only for cash) as more fully described in this Joint
Proxy Statement/Prospectus; (iii) to approve amendments to the Realty 1995
Share Award Plan (the "Realty Share Award Plan") and the Operating 1995 Share
Award Plan (the "Operating Share Award Plan") to increase the number of shares
available under each plan and amend the plans in certain other respects; and
(iv) to approve amendments to the Certificates of Incorporation of Realty and
Operating to delete the cumulative voting provisions.
The Santa Anita Companies have filed a Registration Statement on Form S-4
(including exhibits and amendments thereto, the "Registration Statement")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"),
relating to the shares of Paired Common Stock that are proposed to be issued in
connection with the Mergers to the holders of the Meditrust Shares (and the
related MAC Shares). This Joint Proxy Statement/Prospectus also constitutes the
Prospectus of The Santa Anita Companies filed as part of the Registration
Statement.
PROXIES ARE BEING SOLICITED BY THE RESPECTIVE BOARDS OF DIRECTORS OF REALTY
AND OPERATING AND BY THE BOARDS OF TRUSTEES OF MEDITRUST AND MAC. TO ASSURE
REPRESENTATION OF YOUR SHARES AT THE SANTA ANITA MEETINGS AND THE MEDITRUST
MEETINGS, YOU MUST MARK AND RETURN THE ENCLOSED PROXY CARD. FAILURE TO RETURN A
PROPERLY EXECUTED PROXY OR TO VOTE AT THE SPECIAL MEETINGS WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE MERGERS.
THE SANTA ANITA MEETINGS
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the holders of
the Realty Common Stock and Realty Series A Preferred Stock (collectively,
"Realty Capital Stock") and the holders of Operating Common Stock and Operating
Series A Preferred Stock (collectively, "Operating Capital Stock") in
connection with the solicitation of proxies by the Realty and Operating Boards
of Directors for use at the Santa Anita Meetings to be held at Fleet Bank, 75
State Street, 8th Floor, Conference Room F, Boston, Massachusetts on November
5, 1997 at 10:00 A.M. and 10:30 A.M., local time, respectively, and at any
adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the Santa Anita Meetings, holders of Realty Capital Stock and Operating
Capital Stock will be asked to consider and vote upon the following proposals,
and such other matters as may properly be brought before the Santa Anita
Meetings, or any adjournments or postponements thereof.
1. To approve and adopt the Merger Agreement which provides, among other
things, for (i) the merger of Meditrust with and into Realty; (ii) the
merger of MAC with and into Operating; (iii) the issuance of 1.2016 shares
of Paired Common Stock in exchange for each outstanding Meditrust Share
(and the related MAC Share); (iv) the amendment of the Certificate of
Incorporation of Realty (a) to increase the authorized number of capital
shares, (b) to authorize the creation of a new class of common stock
issuable in one or more series upon terms to be determined by the Board of
Directors and (c) to change the name of Realty to Meditrust Corporation;
and (v) the amendment of the Certificate of Incorporation of
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<PAGE>
Operating (a) to increase the authorized number of capital shares, (b) to
authorize the creation of a new class of common stock issuable in one or
more series upon terms to be determined by the Board of Directors and
(c) to change the name of Operating to Meditrust Operating Company. See
"The Mergers" and "The Merger Agreement."
2. To consider and act upon a proposal to authorize the transfer of some
or all of the assets of the surviving corporations in the Mergers to one or
more wholly-owned subsidiaries in exchange for an equity interest in such
subsidiaries. See "Other Santa Anita Proposals--Transfer of Assets to One
or More Subsidiaries."
3. To consider and act upon a proposal to authorize the issuance of
Paired Common Stock of The Santa Anita Companies in exchange for the
outstanding paired shares of Series A Preferred Stock. See "Other Santa
Anita Proposals--Issuance of Paired Common Stock in Exchange for Series A
Preferred Stock."
4. To consider and act upon a proposal to amend the Realty and Operating
Share Award Plans to increase the number of shares issuable under the
Realty Share Award Plan from 230,000 shares to 5% of the outstanding shares
of Realty and the number of shares issuable under the Operating Share Award
Plan from 780,000 shares to 5% of the outstanding shares of Operating; to
increase further the number of shares issuable under the Realty Share Award
Plan to include the shares necessary to satisfy the Meditrust options that
have been granted and are converted to Realty options upon the Mergers; to
require Realty to acquire Operating Common Stock to pair with Realty Common
Stock upon exercise of the options under the Realty Share Award Plan,
provided that Realty shall not have the option to acquire at any time more
than 9.8% of the outstanding shares of Operating; and to increase the per
employee option award limitation from 150,000 to 450,000 shares per year.
See "Other Santa Anita Proposals--Proposal to Amend the Santa Anita Realty
Enterprises, Inc. 1995 Share Award Plan" and "Other Santa Anita Proposals--
Proposal to Amend the Santa Anita Operating Company 1995 Share Award Plan."
5. To consider and act upon a proposal to amend the Certificates of
Incorporation of Realty and Operating to delete the cumulative voting
provision contained in Article Eighth. See "Other Santa Anita Proposals--
Proposal to Eliminate Cumulative Voting."
6. To consider and act upon such other business and matters or proposals
as may properly come before the Santa Anita Meetings.
BOARDS OF DIRECTORS RECOMMENDATIONS
The Boards of Directors of Realty and Operating have unanimously approved the
Merger Agreement, the proposal to authorize the issuance of Paired Common Stock
in exchange for Series A Preferred Stock (the "Exchange Proposal"), the
proposal to authorize the transfer of assets of each surviving corporation to
one or more wholly-owned subsidiaries of that company (the "Asset Transfer
Proposal"), the amendments to the Realty and Operating Share Award Plans (the
"Share Award Plan Proposal"), and the amendments to their respective
Certificates of Incorporation to eliminate cumulative voting (the "Cumulative
Voting Proposal") and recommend a vote FOR approval and adoption of these
proposals. See "The Mergers" and "Other Santa Anita Proposals."
RECORD DATE AND VOTING
The Boards of Directors of Realty and Operating have fixed October 3, 1997 as
the record date for the determination of the shareholders entitled to notice of
and to vote at the Santa Anita Meetings. Accordingly, only shareholders of
record of Realty and Operating on the record date will be entitled to notice of
and to vote at the Santa Anita Meetings. As of September 23, 1997, there were
issued and outstanding 12,857,201 shares of Realty Common Stock, 12,806,900
shares of Operating Common Stock and 867,343 shares of Series A Preferred Stock
of each of Realty and Operating. As of September 23, 1997, there were
approximately 19,000 holders of record of Realty Common Stock and Operating
Common Stock, respectively. The shares of the Series A Preferred Stock are held
by one holder of record. There are 50,301 more shares of Realty Common Stock
outstanding than shares of Operating Common Stock as a result of the
acquisition of such shares by Operating to be paired with authorized but
unissued shares of Operating Common Stock in connection with
26
<PAGE>
awards under Operating's employee benefit plans. Each holder of record of
shares of Realty Capital Stock and Operating Capital Stock on the record date
is entitled to one vote per share, which may be cast either in person or by
properly executed proxy. The presence either in person or by properly executed
proxy of the holders of a majority of the outstanding shares of Realty Capital
Stock and Operating Capital Stock entitled to vote at the Santa Anita Meetings,
respectively, is necessary to constitute a quorum at each of the Santa Anita
Meetings.
The approval and adoption of the Merger Agreement will require the
affirmative vote of the holders of a majority of the shares of Realty Capital
Stock and a majority of the shares of the Operating Capital Stock outstanding
on the record date.
The approval of the Exchange Proposal and the Share Award Plan Proposal will
each require the affirmative vote of a majority of the shares of Realty Capital
Stock and Operating Capital Stock present in person or by proxy and entitled to
vote, provided that the votes cast on each proposal represent 50% of the shares
of each of Realty Capital Stock and Operating Capital Stock, as the case may
be, entitled to vote on the proposal.
The approval of both the Asset Transfer Proposal and the Cumulative Voting
Proposal will require the affirmative vote of the holders of a majority of the
shares of Realty Capital Stock and Operating Capital Stock, as the case may be,
outstanding on the record date. Approval of the Cumulative Voting Proposal also
requires the affirmative vote of the holders of a majority of the shares of
Realty Common Stock and Operating Common Stock, in each case voting as a class,
outstanding on the record date.
Shares of Realty and Operating represented in person or by proxy will be
counted for the purpose of determining whether a quorum is present at the Santa
Anita Meetings. Shares which abstain from voting as to a particular matter, and
shares held by a broker or nominee in "street name" which indicates on a proxy
that it does not have discretionary authority to vote as to a particular
matter, will be treated as shares that are present and entitled to vote at the
Santa Anita Meetings for purposes of determining whether a quorum exists but
will be treated as not present or entitled to vote with respect to a specific
proposal. BECAUSE THE MERGER AGREEMENT, THE ASSET TRANSFER PROPOSAL AND THE
CUMULATIVE VOTING PROPOSAL MUST BE APPROVED BY THE HOLDERS OF A MAJORITY OF THE
SHARES OF REALTY CAPITAL STOCK AND OPERATING CAPITAL STOCK OUTSTANDING ON THE
RECORD DATE, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE MERGER AGREEMENT, THE ASSET TRANSFER PROPOSAL AND THE
CUMULATIVE VOTING PROPOSAL.
As of August 31, 1997, directors and executive officers of Realty and
Operating may be deemed to have or share beneficial ownership of approximately
9.8% of the outstanding Realty and Operating Capital Stock. Each of the
directors and executive officers of Realty and Operating has advised The Santa
Anita Companies that he or she intends to vote or direct the vote of all of his
or her shares over which he or she has or shares voting control for approval
and adoption of the Merger Agreement and the other proposals described above.
See "The Santa Anita Companies--Principal and Management Shareholders."
PROXIES; REVOCATION OF PROXIES
This Joint Proxy Statement/Prospectus is being furnished to the Realty and
Operating shareholders in connection with the solicitation of proxies by and on
behalf of the Boards of Directors for use at the Santa Anita Meetings, and is
accompanied by a Proxy Card.
All shares of Realty and Operating that are entitled to vote and are
represented at the Santa Anita Meetings by properly executed proxies received
prior to or at the Santa Anita Meetings, and not revoked, will be voted at the
Santa Anita Meetings in accordance with the instructions indicated on such
proxies, except as set forth in the following sentence. If no voting
instructions are indicated (other than in the case of broker non-votes), such
proxies will be voted FOR approval and adoption of the Merger Agreement and the
other proposals described above.
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<PAGE>
If any other matters are properly presented at the Santa Anita Meetings for
consideration, including, among other things, consideration of a motion to
adjourn such meetings to another time and/or place (including, without
limitation, for the purposes of soliciting additional proxies or allowing
additional time for the satisfaction of conditions to the Mergers), the persons
named in the enclosed forms of proxy and acting thereunder will have discretion
to vote on such matters. However, proxies voted against the Mergers will not be
voted in favor of adjournment in order to continue to solicit proxies.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Realty or Operating, as appropriate, at or before the
taking of the vote at the Realty shareholder meeting or Operating shareholder
meeting, a written notice of revocation bearing a later date than the proxy, or
(ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary before the taking of the vote at such meeting
and voting in person (although attendance at the Santa Anita Meetings will not
in and of itself constitute a revocation of a proxy). Any written notice of
revocation or subsequent proxy should be sent to, in the case of Realty, Santa
Anita Realty Enterprises, Inc., 301 West Huntington Drive, Arcadia, California
91007, Attention: Brian L. Fleming, Secretary; or, in the case of Operating,
Santa Anita Operating Company, 285 West Huntington Drive, Arcadia, California
91007, Attention: Kathryn J. McMahon, Secretary; or hand delivered to the
appropriate Secretary at or before the taking of the vote at the Santa Anita
Meetings.
All expenses of the solicitation of proxies, including the cost of mailing
this Joint Proxy Statement/Prospectus to the shareholders of Realty and
Operating, will be borne by Realty and Operating. In addition to solicitation
by use of the mails, proxies may be solicited from the Realty and Operating
shareholders by directors, officers and employees of each company in person or
by telephone, telegram or other means of communication. Such directors,
officers and employees will not be additionally compensated, but may be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. Realty and Operating have retained D. F. King & Co., a proxy
solicitation firm, for assistance in connection with the solicitation of
proxies for the Santa Anita Meetings at a cost of approximately $20,000 plus
reimbursement of reasonable out-of-pocket expenses. Any questions or requests
for assistance regarding this Joint Proxy Statement/Prospectus and related
proxy materials may be directed to D.F. King & Co. by telephone at (800) 769-
5414. Arrangements will also be made with brokerage houses, custodians,
nominees and fiduciaries for forwarding of proxy solicitation materials to
beneficial owners of shares held of record by such brokerage houses,
custodians, nominees and fiduciaries, and Realty and Operating will reimburse
such brokerage houses, custodians, nominees and fiduciaries for their
reasonable expenses incurred in connection therewith.
THE MEDITRUST MEETINGS
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of the
Meditrust Shares and MAC Shares in connection with the solicitation of proxies
by the Boards of Trustees of Meditrust and MAC for use at the Meditrust
Meetings to be held at Fleet Bank, 75 State Street, 8th Floor, Conference Room
F, Boston, Massachusetts on November 5, 1997, commencing at 11:00 A.M. and
11:30 A.M., local time, respectively, and at any adjournments or postponements
thereof.
MATTERS TO BE CONSIDERED
At the Meditrust Meetings, holders of the Meditrust Shares and the MAC Shares
will be asked to consider and vote upon (i) a proposal to approve and adopt the
Merger Agreement, pursuant to the terms of which (a) Meditrust will be merged
with and into Realty, (b) MAC will be merged with and into Operating, (c) each
outstanding share of Meditrust (and each related outstanding share of MAC) will
be exchanged for 1.2016 paired shares of Realty and Operating, respectively,
(d) the Certificate of Incorporation of Realty will be amended to increase the
authorized number of capital shares, to authorize the creation of a new class
of common stock issuable in one or more series upon terms to be determined by
the Board of Directors and to change the name of Realty to Meditrust
Corporation and (e) the Certificate of Incorporation of Operating will be
amended to increase the authorized number of capital shares, to authorize the
creation of a new class of
28
<PAGE>
common stock issuable in one or more series upon terms to be determined by the
Board of Directors and to change the name of Operating to Meditrust Operating
Company, and (ii) such other matters as may properly be brought before the
Meditrust Meetings, or any adjournments or postponements thereof. See "The
Mergers" and "The Merger Agreement."
BOARDS OF TRUSTEES RECOMMENDATIONS
The Boards of Trustees of Meditrust and MAC have unanimously approved the
Merger Agreement and recommend a vote FOR approval and adoption of the Merger
Agreement. See "The Mergers."
RECORD DATE AND VOTING
The Boards of Trustees of Meditrust and MAC have fixed October 3, 1997 as the
record date for the determination of the shareholders entitled to notice of and
to vote at the Meditrust Meetings. Accordingly, only holders of record of
Meditrust Shares and MAC Shares on the record date will be entitled to notice
of and to vote at the Meditrust Meetings. As of September 23, 1997, there were
61,703,389 issued and outstanding Meditrust Shares, held by 5,677 holders of
record. Each holder of record of Meditrust Shares and each holder of record of
MAC Shares on the record date is entitled to one vote per share, which may be
cast either in person or by properly executed proxy.
The approval and adoption of the Merger Agreement will require the
affirmative vote of the holders of a majority of the Meditrust Shares and a
majority of the MAC Shares outstanding on the record date.
The presence either in person or by properly executed proxy of the holders of
a majority of the outstanding Meditrust Shares and a majority of the
outstanding MAC Shares entitled to vote at the respective Meditrust Meetings is
necessary to constitute a quorum at such meetings. Shares of Meditrust and MAC
represented in person or by proxy will be counted for the purpose of
determining whether a quorum is present at the Meditrust Meetings. Shares which
abstain from voting as to a particular matter, and shares held in "street
name"by a broker or nominee that indicates on a proxy that it does not have
discretionary authority to vote as to a particular matter, will be treated as
shares that are present and entitled to vote at the Meditrust Meetings for
purposes of determining whether a quorum exists. BECAUSE THE MERGER AGREEMENT
MUST BE APPROVED BY THE HOLDERS OF A MAJORITY OF THE SHARES OF MEDITRUST AND
MAC OUTSTANDING ON THE RECORD DATE, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE
THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT.
As of August 31, 1997, trustees and executive officers of Meditrust and their
affiliates may be deemed to have or share beneficial ownership of approximately
2.2%, of the outstanding Meditrust Shares. As of the record date, each trustee
and executive officer of Meditrust will own the same number of shares of MAC as
he or she owns of Meditrust. Each of the trustees and executive officers of
Meditrust and MAC has advised Meditrust and MAC that he or she intends to vote
or direct the vote of all of his or her shares over which he or she has or
shares voting control for approval and adoption of the Merger Agreement. See
"Meditrust--Principal and Management Shareholders of Meditrust and MAC."
PROXIES; REVOCATION OF PROXIES
This Joint Proxy Statement/Prospectus is being furnished to the shareholders
of Meditrust and MAC in connection with the solicitation of proxies by and on
behalf of the Boards of Trustees of Meditrust and MAC for use at the Meditrust
Meetings, and is accompanied by a form of proxy.
All shares of Meditrust and MAC which are entitled to vote and are
represented at the Meditrust Meetings by properly executed proxies received
prior to or at such meetings, and not revoked, will be voted at such meetings
in accordance with the instructions indicated on such proxies. If no
instructions are indicated (other than in the case of broker non-votes), such
proxies will be voted FOR approval and adoption of the Merger Agreement.
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If any other matters are properly presented at the Meditrust Meetings for
consideration, including, among other things, consideration of a motion to
adjourn such meetings to another time and/or place (including, without
limitation, for the purposes of soliciting additional proxies or allowing
additional time for the satisfaction of conditions to the Mergers), the persons
named in the enclosed forms of proxy and acting thereunder will have discretion
to vote on such matters in accordance with their best judgment. However,
proxies voted against the Mergers will not be voted in favor of adjournment in
order to continue to solicit proxies. Pursuant to the By-Laws of Meditrust and
MAC, no notice of an adjourned meeting need be given other than announcement at
the Meditrust Meetings, except when the meeting is adjourned for 30 days or
more.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Meditrust or MAC, as appropriate, at or before the taking
of the vote at the respective Meditrust Meeting, a written notice of revocation
bearing a later date than the proxy, or (ii) duly executing a later dated proxy
relating to the same shares and delivering it to the respective Secretary
before the taking of the vote at such meeting and voting in person (although
attendance at the Meditrust Meetings will not in and of itself constitute a
revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent, in the case of Meditrust or MAC, to Meditrust, 197 First
Avenue, Needham, Massachusetts 02194, Attention: Secretary; or hand delivered
to the appropriate Secretary at or before the taking of the vote at the
Meditrust Meetings.
All expenses of the solicitation of proxies, including the cost of mailing
this Joint Proxy Statement/Prospectus to the shareholders of Meditrust and MAC,
will be borne by Meditrust and MAC, respectively. In addition to solicitation
by use of the mails, proxies may be solicited from the Meditrust and MAC
shareholders by Trustees, officers and employees of each company in person or
by telephone, telegram or other means of communication. Such Trustees, officers
and employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation.
Meditrust and MAC have retained D.F. King & Co., a solicitation firm, for
assistance in connection with the solicitation of proxies for the Meditrust
Meetings at a cost of approximately $20,000 plus reimbursement of reasonable
out-of-pocket expenses. Any questions or requests for assistance regarding this
Joint Proxy Statement/Prospectus and related proxy materials may be directed to
D.F. King & Co. by telephone at (800) 769-5414. Arrangements also will be made
with brokerage houses, custodians, nominees and fiduciaries for forwarding of
proxy solicitation materials to beneficial owners of shares held of record by
such brokerage houses, custodians, nominees and fiduciaries, and Meditrust and
MAC will reimburse such brokerage houses, custodians, nominees and fiduciaries
for their reasonable expenses incurred in connection therewith.
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The Paired Common Stock, the Meditrust Shares and the MAC Shares are listed
on the New York Stock Exchange ("NYSE"). The Santa Anita Companies' ticker
symbol is "SAR". The Meditrust and MAC ticker symbol is "MT". Following the
Mergers, Paired Common Stock will continue to be listed on the NYSE and traded
under the symbol "MT".
The tables below set forth, for the calendar quarters indicated, the reported
high and low sale prices of Paired Common Stock and the Meditrust Shares as
reported on the NYSE Composite Transaction Tape, in each case based on
published financial sources, and the dividends declared on such stock.
<TABLE>
<CAPTION>
PAIRED COMMON STOCK MEDITRUST SHARES(1)
----------------------- -----------------------
MARKET PRICE CASH MARKET PRICE CASH
------------- DIVIDENDS ------------- DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1995
1st Quarter.................. $17.50 $13.38 $.20 $32.13 $29.50 $ .6675
2nd Quarter.................. 17.13 14.38 .20 34.13 29.00 .6725
3rd Quarter.................. 15.00 13.38 .20 35.50 32.63 .6775
4th Quarter.................. 13.63 11.88 .20 35.50 31.25 .6825
1996
1st Quarter.................. $15.25 $12.00 $.20 $36.63 $33.25 $ .6875
2nd Quarter.................. 15.13 12.38 .20 34.38 31.75 .6925
3rd Quarter.................. 18.50 12.50 .20 35.38 33.13 .6975
4th Quarter.................. 27.88 18.25 .20 40.00 34.50 .7025
1997
1st Quarter.................. $30.50 $26.25 $.20 $40.63 $36.63 $ .7075
2nd Quarter.................. 31.06 27.13 .20 39.88 35.50 .7125
3rd Quarter (through
September 23, 1997)......... 33.75 29.50 .20 41.25 38.31 .7175
</TABLE>
- --------
(1) Historical data does not include the MAC Shares, which are expected to
commence trading with the Meditrust Shares on October 4, 1997.
On April 11, 1997, the last full trading day prior to the public announcement
of the proposed Mergers, the closing price on the NYSE Composite Tape was
$27.375 per share of Paired Common Stock and $37.25 per Meditrust Share. On
September 23, 1997, the most recent practicable date prior to the printing of
this Joint Proxy Statement/Prospectus, the closing price on the NYSE Composite
Tape was $33.75 per share of Paired Common Stock and $41.0625 per share of
Meditrust. Shareholders are urged to obtain current market quotations prior to
making any decision with respect to the proposals to be acted upon at the Santa
Anita Meetings and Meditrust Meetings.
Operating and MAC have not paid, and do not intend to pay, any dividends.
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THE MERGERS
The following description of the Mergers describes the material provisions of
the Merger Agreement, but does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement, which is attached to this
Joint Proxy Statement/Prospectus as Annex A.
INTRODUCTION
The Santa Anita Companies, Meditrust and MAC have entered into the Merger
Agreement providing for the Mergers. Pursuant to the Merger Agreement, at the
time specified in the Certificates of Merger that will be filed with the
Delaware Secretary of State (the "Effective Time"), Meditrust will merge with
and into Realty, with Realty to be the surviving corporation, which will change
its name to Meditrust Corporation. Also at the Effective Time, MAC will merge
with and into Operating, with Operating to be the surviving corporation, which
will change its name to Meditrust Operating Company (Meditrust Corporation and
Meditrust Operating Company are together herein referred to as the "Surviving
Corporations"). As a result of the Mergers, each Meditrust Share issued and
outstanding immediately prior to the Effective Time will be converted into the
right to receive 1.2016 shares of paired Realty Common Stock and each share of
MAC Share issued and outstanding immediately prior to the Effective Time will
be converted into the right to receive 1.2016 shares of paired Operating Common
Stock. At September 23, 1997 there were outstanding 61,703,389 Meditrust
Shares. At September 23, 1997 there were outstanding 12,857,201 shares of
Realty Common Stock, 12,806,900 shares of Operating Common Stock and 867,343
shares of Series A Preferred Stock. Based upon such numbers of outstanding
shares, the shareholders of Meditrust and MAC will own approximately 86% to 89%
of the outstanding Paired Common Stock of The Santa Anita Companies immediately
following consummation of the Mergers, depending on the number of shareholders
of The Santa Anita Companies who elect to receive cash for some or all of their
shares of Paired Common Stock following the Mergers. See "--Election to Receive
Cash; Procedure for Election; Proration."
The exchange ratio of 1.2016 was calculated by dividing the per share price
of Meditrust Shares on April 11, 1997 of $37.25 by $31.00. The $31.00 amount
represents the value attributed to the shares of Paired Common Stock of The
Santa Anita Companies by Meditrust at the time of execution of the Merger
Agreement and was based upon Meditrust's assessment of a variety of factors,
including the potential value of the opportunities that might be available to
Meditrust and MAC as a result of the Mergers, including the opportunity to more
fully develop the paired share structure of The Santa Anita Companies, and the
other factors described below under "--Meditrust and MAC Reasons for the
Mergers; Recommendations of the Boards of Trustees of Meditrust and MAC." The
exchange ratio is subject to change in the event the Effective Time occurs
after December 31, 1997 as a result of acquisitions and other business
combinations proposed to be entered into by Meditrust or MAC, as long as all
other closing conditions within Realty's or Operating's control or for which
The Santa Anita Companies are responsible have been satisfied. In such event,
the exchange ratio will equal a fraction, the numerator of which will be $37.25
and the denominator of which will equal the sum of (i) $31.00 and (ii) the
difference between (a) the per share amount of all dividends, if any are
declared during such period, on Meditrust Shares accrued with respect to
periods after December 31, 1997 and prior to the Effective Time divided by
1.2016, and (b) the per share amount of all dividends, if any are declared
during such period, on Realty Common Stock accrued with respect to periods
after December 31, 1997 and prior to the Effective Time.
Fractional shares will not be issuable in connection with the Mergers.
Meditrust shareholders and MAC shareholders otherwise entitled to a fractional
share will be paid the value of such fraction in cash. See "The Merger
Agreement--Conversion of Shares."
Each outstanding share of Paired Common Stock will remain outstanding and
unaffected by the Mergers, except for shares of Operating held by MAC (which
may be cancelled at the option of Meditrust Operating Company).
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<PAGE>
Until October 24, 1997, holders of Paired Common Stock who wish to receive
$31.00 in cash per share for any or all of their shares may make an election to
that effect in accordance with the procedures set forth below under "--Election
to Receive Cash; Procedure for Election; Proration." Due to the limited amount
of cash to be paid as a result of such elections, holders of shares of Paired
Common Stock who follow such procedures to receive cash may, as a result of
proration, retain some shares of Paired Common Stock despite such election.
Each outstanding share of Series A Preferred Stock will remain outstanding
and unaffected by the Mergers except to the extent that a holder of Series A
Preferred Stock exercises its rights of appraisal as described under "Appraisal
Rights." As described under "Other Santa Anita Proposals--Issuance of Paired
Common Stock in Exchange for Series A Preferred Stock," if shareholders approve
the proposal to exchange the Series A Preferred Stock for Paired Common Stock,
Realty and Operating or, following the Mergers, Meditrust Corporation and
Meditrust Operating Company may cause the Series A Preferred Stock to be
exchanged for Paired Common Stock.
Pursuant to the Merger Agreement and a distribution agreement entered into
between Meditrust and MAC to effect the distribution of the MAC Shares to the
Meditrust shareholders (the "Distribution Agreement"), MAC has purchased
1,255,076 newly issued shares of Paired Common Stock from The Santa Anita
Companies at $31.00 per share, for an aggregate purchase price of $38,907,356.
The Santa Anita Companies, Meditrust and MAC also have agreed, to the extent
The Santa Anita Companies so elect, that an additional $61,092,644 will be
available immediately after the Effective Time to be used to purchase
outstanding shares of Paired Common Stock, at the election of the Santa Anita
shareholders. See "--Purchase of Paired Common Stock; Procedure for Election;
Proration." Pursuant to the Merger Agreement, Meditrust has the right to
designate one or more unaffiliated third parties to purchase newly issued
shares of Paired Common Stock from The Santa Anita Companies at $31.00 per
share equal to up to 9.8% of the then outstanding shares of Paired Common
Stock. If the Mergers are not consummated, MAC has the right to require the
shares of Paired Common Stock purchased by it to be registered for resale under
the Securities Act. Whether or not the Mergers occur, the unaffiliated third
party or parties, if any, will have the right to require the shares of Paired
Common Stock purchased by it to be registered for resale under the Securities
Act.
CERTAIN ARRANGEMENTS
The Distribution. Meditrust has transferred to MAC $43,662,265 and MAC has
purchased 1,255,076 shares of Paired Common Stock. See "The Merger Agreement--
Sale of Shares to MAC." On October 3, 1997 Meditrust will distribute to its
shareholders, as a dividend, MAC Shares at the rate of one MAC Share for each
Meditrust Share. This Joint Proxy Statement/Prospectus includes a summary of
the rights and privileges of the MAC Shares as Annex C. Meditrust and MAC have
entered into a pairing agreement whereby each of Meditrust and MAC has agreed
that Meditrust will not issue Meditrust Shares unless they are paired on a one-
for-one basis with MAC Shares, MAC will not issue MAC Shares unless they are
paired on a one-for-one basis with Meditrust Shares and the outstanding
Meditrust Shares are deemed to be paired on a one-for-one basis with the
outstanding MAC Shares, with each certificate representing Meditrust Shares
being deemed to represent an equivalent number of MAC Shares. The MAC Shares
will be evidenced by the certificates for the related Meditrust Shares and the
registered holders of the Meditrust Shares shall also be the registered holders
of the related MAC Shares. The surrender for transfer of any certificate for
Meditrust Shares will also constitute the surrender for transfer of the related
MAC Shares represented thereby. At the Effective Time, the Exchange Agent (as
defined under "The Merger Agreement--Conversion of Shares") will, upon receipt
of certificates representing Meditrust Shares, issue shares of Paired Common
Stock in exchange for each Meditrust Share and corresponding MAC Share. See
"The Merger Agreement--Conversion of Shares." If the Mergers are not approved
by the shareholders of either Meditrust or MAC or the Merger Agreement is
terminated for any other reason, holders of Meditrust Shares and MAC Shares
may, but are not obligated to, exchange their certificates by submitting them
to Meditrust's registrar and transfer agent in exchange for certificates that
on their face represent Meditrust Shares and MAC Shares. Failure to exchange
any certificate will not affect the fact that a certificate that on its face
represents only Meditrust Shares also represents the
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<PAGE>
related MAC Shares. In the event of any non-approval or termination of the
Merger Agreement as described above, MAC expects to liquidate its assets and
distribute the cash it receives as a liquidating distribution to its
shareholders on the immediately succeeding Meditrust dividend payment date, and
the amount of the Meditrust dividend otherwise payable on such date will be
adjusted by the amount of the MAC cash distribution, so that the total cash
amount payable to Meditrust shareholders will be the same as if the MAC Shares
had not been distributed.
Operating Note. Immediately before the Effective Time, Operating will deliver
to Realty an interest-bearing promissory note (the "Operating Note") for a term
not less than three years. The purpose of the Operating Note is to adjust the
relative values of Realty and Operating to approximate the relative values of
Meditrust and MAC at 98.1% and 1.9%, respectively, immediately prior to the
Effective Time, in order to ensure that the Mergers qualify as tax free
reorganizations. The amount of the Operating Note will be equal to $.96
multiplied by the number of shares of Operating Common Stock outstanding
immediately prior to the Effective Time.
ELECTION TO RECEIVE CASH; PROCEDURE FOR ELECTION; PRORATION
Until October 24, 1997 each shareholder of The Santa Anita Companies on the
record date for the Santa Anita Meetings, other than MAC, will be entitled to
make an unconditional election (the "Cash Election") to receive cash for some
or all of such shareholder's shares of Paired Common Stock at a price of $31.00
per share in cash (the "Cash Election Price") following the Effective Time,
subject to the proration provisions described below. Each shareholder of The
Santa Anita Companies may make the Cash Election by indicating on the election
form the number of shares of Paired Common Stock (the "Electing Shares") for
which such shareholder desires to receive cash. All Cash Elections must be made
no later than 5:00 P.M. (New York City time) on October 24, 1997. No action
will be taken with respect to any share of Paired Common Stock as to which no
election is made, and the holders of such shares will continue to hold such
shares following the Effective Time. No payment will be made if the Mergers are
not consummated.
The maximum number of shares of Paired Common Stock for which shareholders of
The Santa Anita Companies may elect to receive cash will be 3,225,806 shares
(the "Cash Election Number"), which is approximately 25% of the total number of
outstanding shares of Paired Common Stock as of September 23, 1997. If Cash
Elections are received for a number of shares of Paired Common Stock in excess
of the Cash Election Number, then the aggregate number of shares of Paired
Common Stock which will be purchased will be reduced by multiplying the number
of Electing Shares covered by such Cash Election by a cash proration factor
(the "Cash Proration Factor") determined by dividing the Cash Election Number
by the total number of Electing Shares. The number of Electing Shares covered
by each Cash Election which are purchased will be that number which results
from multiplying the number of such Electing Shares by the Cash Proration
Factor and rounding down to the nearest whole number. Electing Shares which are
not purchased as a result of proration will remain outstanding.
It is possible that the Cash Election may have an impact on the market price
for the shares of Paired Common Stock. However, Meditrust and Santa Anita
shareholders will have the opportunity to cast their votes (or change their
votes) in connection with the Mergers after the deadline for making Cash
Elections on October 24, 1997 when any such impact would not be present.
THERE CAN BE NO ASSURANCES TO SHAREHOLDERS OF THE SANTA ANITA COMPANIES THAT
THEY WILL RECEIVE CASH FOR ALL SHARES OF PAIRED COMMON STOCK IN RESPECT OF
WHICH A CASH ELECTION IS MADE.
The forms for making a Cash Election (collectively, the "Election Form")
accompany this Joint Proxy Statement/Prospectus sent to holders of Paired
Common Stock. For a Cash Election to be effective, the Election Form must be
properly completed and signed, and must be delivered, together with
certificates for the shares of Paired Common Stock to which such Cash Election
relates, duly endorsed in blank or otherwise in form acceptable for transfer on
the books of The Santa Anita Companies (or by appropriate guarantee of delivery
as
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<PAGE>
set forth in such form), to Harris Trust Company of New York, and not
withdrawn, no later than 5:00 P.M. (New York City time) on October 24, 1997
(the "Election Time").
Meditrust and The Santa Anita Companies have the right to establish rules and
procedures governing the validity of the Election Forms, and all procedures in
connection with the use of the Election Forms. Any such rule or procedure shall
be binding upon all persons concerned, provided that it shall have a reasonable
purpose and shall be applied uniformly. Although persons who have submitted a
defective Election Form will be entitled to correct such defects prior to the
Election Time, The Santa Anita Companies will not be under any obligation to
notify any such person of any such defect in an Election Form submitted by such
person.
An Election Form may be revised by any shareholder of The Santa Anita
Companies who submitted the Election Form by submitting to Harris Trust Company
of New York, prior to the Election Time, notice of such revision and a revised
Election Form properly completed and signed and bearing a date later than the
prior Election Form. Cash Elections are irrevocable, except that any
shareholder of The Santa Anita Companies may, at any time prior to the Election
Time, revoke his or her election by delivering written notice to Harris Trust
Company of New York prior to the Election Time and in accordance with the terms
and provisions of the Election Form.
Holders of shares of Paired Common Stock who do not make an effective Cash
Election will retain all their shares of Paired Common Stock.
All effective Cash Elections properly and timely delivered to Harris Trust
Company of New York will be irrevocable after the Election Time.
BACKGROUND OF THE MERGERS
The Boards of Directors of The Santa Anita Companies and The Meditrust
Companies have approved the Mergers after conducting a thorough evaluation of
strategic alternatives available to each of them.
The Santa Anita Companies initiated this process in response to several
challenges facing them, including: (i) declining on-track attendance at Santa
Anita Park in the midst of dramatic changes in the horse racing industry; (ii)
difficulty raising new capital on satisfactory terms; and (iii) the
underrealized value of the paired share structure of The Santa Anita Companies.
Average daily on-track attendance at the Santa Anita racing meet has declined
from 22,900 for the 1990-1991 meeting to 12,300 for the 1996-1997 meeting. This
decline has resulted in a decline in average daily on-track wagering during the
same period from $5,346,000 to $2,557,000. There have been corresponding
declines in attendance-related revenues such as admissions, parking, programs
and food and beverage revenues. These declines, which have been experienced
throughout the thoroughbred horse racing industry, have resulted from a number
of factors, including the introduction of state lotteries, the advent of
simulcasting and off-track wagering and increased competition from other forms
of entertainment and gaming venues. While to date the declines in wagering
revenues have been offset to a significant extent by increases in The Santa
Anita Companies' off-track and satellite wagering revenues, the Boards of
Directors and management view the decline in on-track attendance and wagering
with concern and believe that significant capital expenditures are necessary at
Santa Anita Park to make it more competitive with other entertainment venues.
In the spring of 1995, The Santa Anita Companies retained two nationally
recognized investment banking firms to underwrite a public offering of shares
of Paired Common Stock. The proceeds were to be used to repay bank debt and to
finance the initial phase of a proposed entertainment center on approximately
80 acres of the underutilized parking lot of Santa Anita Park. On July 7, 1995,
management withdrew the proposed public offering because of insufficient market
interest at a price considered by The Santa Anita Companies to be adequate. In
November 1995, Realty's expiring working capital credit line was renewed by its
commercial
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bank for a short-term period, but the borrowing limit was reduced from $30
million to $20 million. In December 1995, management issued a request for
proposals to finance the proposed entertainment center on a joint venture basis
to a group of 17 qualified candidates with development and financial
capabilities. The Santa Anita Companies received responses from several
nationally known development companies and met one or more times with each
interested respondent. Based on the proposals received and the subsequent
meetings, management determined that the terms and conditions required by the
prospective development partners were not in the best interests of The Santa
Anita Companies and ceased to pursue a development partnership with any such
parties.
Management and the Boards of Directors of The Santa Anita Companies also
believed that the paired share structure was an underutilized asset. The paired
share structure permits common ownership of two companies with one taxed as a
REIT and the other taxed as a "C" corporation ("operating company") under the
Internal Revenue Code of 1986, as amended (the "Code"). It further permits the
REIT to earn all or a portion of its income from leasing property to the
operating company and, under the Code, to distribute that income in the form of
distributions to its shareholders without incurring income tax at the corporate
level. The Santa Anita Companies' paired share structure, which would otherwise
be prohibited under the Code, was grandfathered pursuant to the Deficit
Reduction Act of 1984. To The Santa Anita Companies' knowledge, only three
other public companies are able to utilize this paired share structure. The
Boards of Directors believed that the paired share structure could increase
shareholder value if used as part of a program to acquire operating companies
with significant real estate-related activities. However, such an acquisition
program requires significant capital resources, additional acquisition
expertise and access to attractive investment opportunities.
The Boards of Directors met jointly with management in October 1995 to review
the strategic issues facing The Santa Anita Companies. Discussed were
opportunities relating to the horse racing business, financing for the
development of the proposed entertainment center and the more effective
utilization of the paired share structure of The Santa Anita Companies. Also
addressed were issues relating to other, non-core real estate assets of Realty,
particularly certain properties (the "Towson and Joppa properties") where
Realty had potentially significant contingent liabilities relating to
guarantees of approximately $74 million with respect to approximately $181
million of mortgage debt (the Towson and Joppa properties were sold in 1997 and
the guaranties were assumed by third parties or discharged). The Boards of
Directors also discussed the desirability of retaining an investment banking
firm to assist The Santa Anita Companies in analyzing the use of the paired
share structure. Subsequently, Morgan Stanley & Co. Incorporated ("Morgan
Stanley") was retained as a financial adviser to assist in analyzing these
issues.
The Boards of Directors met twice in February 1996 to discuss, among other
matters, the strategic direction of The Santa Anita Companies and the status of
the Towson and Joppa properties and the proposed entertainment center. At the
conclusion of the second meeting, the Boards of Directors appointed a committee
composed of five outside directors (William C. Baker, Thomas J. Barrack, Jr.,
John C. Cushman, III, J. Terrence Lanni and Thomas P. Mullaney) to formulate
recommendations concerning Realty's investments in the Towson and Joppa
properties and to further study strategic alternatives. The Boards of Directors
appointed a committee composed only of outside directors because their
responsibilities would involve, in part, a review of the ability of management
to deal effectively with these issues.
That committee met six times during March 1996 and became increasingly
concerned about the risks to The Santa Anita Companies from the Towson and
Joppa properties and the proposed entertainment center, particularly in light
of Realty's limited capital resources. The committee also reviewed the horse
racing business. In each case, the committee members had reservations about the
ability of management to deal effectively with the challenges posed. As a
consequence, the committee recommended to the Boards of Directors of The Santa
Anita Companies that Mr. Baker be appointed Chairman of the Board and Chief
Executive Officer of Realty and that the responsibilities and compensation of
certain other officers be modified. Mr. Baker was appointed Chairman and Chief
Executive Officer of Realty as of April 1, 1996. Mr. Baker promptly undertook
to reshape Realty's management, review the entertainment center proposal and
address the sale of non-core properties.
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<PAGE>
Based on the unsuccessful attempts to raise capital described above,
management determined that it would be difficult for The Santa Anita Companies
to raise on their own the capital required for necessary improvements at Santa
Anita Park, development of the Arcadia property and the acquisition of
companies or assets to permit the optimum use of the paired share structure.
Management also concluded that, even if the capital were available, The Santa
Anita Companies lacked the necessary acquisition expertise and access to
investment opportunities to successfully pursue an expansion strategy.
Management concluded that the most attractive way for The Santa Anita
Companies to gain access to the necessary capital, acquisition experience and
expertise and investment opportunities, was to enter into a strategic alliance
with a suitable partner. Management identified Colony Capital, Inc., its
affiliate, Colony, and Thomas J. Barrack, Jr., the Chief Executive Officer of
Colony Capital, Inc. and a director of The Santa Anita Companies, as a
potential strategic partner.
In August 1996, The Santa Anita Companies entered into an agreement (the
"Colony Agreement") providing for a strategic alliance with Colony (the
"Initial Colony Transaction"). Pursuant to the Initial Colony Transaction,
which was subject to shareholder approval, Colony would invest, over time, a
total of $138 million in The Santa Anita Companies in exchange for an interest
of up to 45% and minority representation on the Boards of Directors. The Boards
of Directors approved the Initial Colony Transaction because they believed it
provided The Santa Anita Companies with a number of strategic resources which
would enhance their short-term and long-term growth prospects. These included:
(i) the issuance of $138 million of common stock and equivalents at an
effective price of $15.00 per share, representing a 15.4% premium to the
average trading price for the 30 trading days immediately preceding the
announcement of the Initial Colony Transaction; (ii) access to the capital
necessary for needed improvements at Santa Anita Park; (iii) access to Colony's
acquisition and financing experience and expertise and its investment
opportunities or "deal flow"; (iv) greater ability to access new capital in the
future on attractive terms because of greater financial stability and stronger
management; and (v) increased likelihood of the ability to maintain the current
annual dividend and eventually to increase it.
In reaching their conclusions, the Boards of Directors received the advice of
Morgan Stanley as to the value of The Santa Anita Companies based on the
current and historical trading price and volume of the Paired Common Stock, net
asset values, discounted cash flows, premiums paid in similar transactions and
comparisons with other publicly traded companies. They also received an opinion
from Morgan Stanley to the effect that the consideration to be received by The
Santa Anita Companies from Colony was fair from a financial point of view. The
Boards of Directors did not solicit competing proposals because Colony had
indicated that it would withdraw its proposal if they did and because the
Colony Agreement contained a "fiduciary out" which would permit the Boards to
consider more attractive competing proposals should they occur. In addition, in
August 1996, The Santa Anita Companies completed a change in their senior
management, resulting in Mr. Baker, who had been appointed Chairman of the
Board of Realty in April 1996, becoming Chairman of the Board of both Realty
and Operating and Chief Executive Officer of Operating and resigning as Chief
Executive Officer of Realty. Mr. Baker had completed a restructuring of the
management of Realty, and the Boards believed that Operating required his
attention. Under the Rulings issued by the IRS with respect to The Santa Anita
Companies' paired share status, no person may be an officer of both Realty and
Operating at the same time. Brian L. Fleming became the Acting President and
Chief Executive Officer and a director of Realty.
In September 1996, as part of the Initial Colony Transaction, Colony acquired
112,700 shares of Paired Common Stock and 867,343 shares of Series A Preferred
Stock for an aggregate price of $12.716 million. The Santa Anita Companies and
Colony contemplated that the Series A Preferred Stock would be exchanged for
Paired Common Stock on a share-for-share basis following shareholder approval
of the Initial Colony Transaction. The terms of the Series A Preferred Stock
provided that, upon the occurrence of certain events, including termination of
the Colony Agreement or closing of the Initial Colony Transaction, Colony would
have the option to require The Santa Anita Companies to redeem the Series A
Preferred Stock for cash or a combination of cash and a promissory note based
on the average market price of the Paired Common Stock for
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the 30 trading days preceding the notice of redemption. Colony was also
entitled to a termination fee and reimbursement of expenses if the Initial
Colony Transaction were not consummated.
In October 1996, The Santa Anita Companies received an unsolicited proposal
(the "KAI Proposal") from Koll Arcadia Investors, LLC ("KAI"), an investor
group comprised of Apollo Real Estate Investors II, L.P. ("Apollo") and
principals of the Koll Company, to recapitalize The Santa Anita Companies in a
series of transactions which would transfer control of The Santa Anita
Companies to KAI. The KAI Proposal involved a cash dividend of $14 per share of
Paired Common Stock and an investment by KAI of up to $150 million in The Santa
Anita Companies. The KAI Proposal also contemplated additional borrowings of
approximately $100 million by The Santa Anita Companies to finance the payment
of the cash dividend. As a result, KAI would own approximately 58% of The Santa
Anita Companies and control a majority of the seats on the Boards of Directors.
In response to the KAI Proposal, the Boards of Directors of The Santa Anita
Companies formed special committees of four outside directors (Richard S. Cohen
(Chairman), Arthur L. Crowe, Thomas P. Mullaney and William D. Schulte,
collectively the "Independent Committees") to review the KAI Proposal and any
other proposals of a strategic nature which might be received in the future and
to report their findings and recommendations to the full Boards of Directors.
The Boards of Directors appointed committees composed only of outside directors
because of the possibility that management might be treated less favorably in a
KAI transaction than was contemplated by the Initial Colony Transaction. At
their organizational meetings, the Independent Committees retained Morgan
Stanley as their financial adviser and Latham & Watkins as special counsel. The
Independent Committees met 17 times between October 1996 and January 1997.
During this period Morgan Stanley met with representatives of KAI to better
understand the KAI Proposal and reported back to the Independent Committees.
The Independent Committees in turn reported back to the full Boards of
Directors.
In December 1996 the Boards of Directors concluded that shareholder approval
of the Initial Colony Transaction was unlikely because the price per share of
Paired Common Stock had increased to $27.88 on December 13, 1996 as a result of
the KAI Proposal and rumors in the market that other parties might be
interested in a strategic transaction with The Santa Anita Companies.
Therefore, in early January 1997 The Santa Anita Companies and Colony revised
the Colony Agreement to allow The Santa Anita Companies to initiate discussions
and negotiations with third parties with respect to transactions that might
involve a transfer of control, and which would otherwise be inconsistent with
the Colony Agreement's restrictions on solicitation of other proposals. Shortly
thereafter, Thomas J. Barrack, Jr. resigned from the Boards of Directors.
Morgan Stanley then contacted a total of 33 parties to determine whether they
would be interested in exploring a strategic transaction with The Santa Anita
Companies. Among those parties was Meditrust. After the initial contact by
Morgan Stanley, Meditrust management began to consider the benefits of
Meditrust acquiring The Santa Anita Companies, including the possible economic
benefits of its shareholders owning paired shares of an operating company and a
REIT. On January 9, 1997 representatives of Meditrust and The Santa Anita
Companies initiated discussions regarding a possible merger. The parties agreed
to make information available to each other pursuant to a written
confidentiality agreement dated January 13, 1997. Meditrust retained Lazard
Freres & Co. LLC ("Lazard") to assist it in its preliminary negotiations with
The Santa Anita Companies and Morgan Stanley. In connection with its engagement
by Meditrust, Lazard performed preliminary due diligence on The Santa Anita
Companies and, on behalf of Meditrust, informally communicated proposals to
Morgan Stanley to gauge The Santa Anita Companies' interest in such proposals.
Most of the communications at this point occurred between Lazard and Morgan
Stanley. In addition to Meditrust, KAI and Colony, seven other parties
(comprising two non-REIT hotel companies, two REITs, two real estate
opportunity funds and one manufacturing company) executed written
confidentiality agreements and performed significant due diligence on The Santa
Anita Companies and their properties. The Meditrust Board of Trustees met on
January 24, 1997 to review materials which had been furnished to them by
Meditrust management regarding The Santa Anita Companies. On January 28, 1997
KAI revised the KAI Proposal to provide for a cash dividend of $11 per share of
Paired Common Stock and a self-tender for up to 5,600,000 shares of Paired
Common Stock at $16 per paired share in cash or cash and warrants. This revised
proposal contemplated borrowings by The Santa Anita Companies of up to $135
million.
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In February 1997 Morgan Stanley sent Meditrust, KAI, Colony and three other
interested parties a written request for proposals for business combinations
with The Santa Anita Companies. On February 27 and 28, 1997, the Meditrust
Board of Trustees continued its review of a proposed merger with The Santa
Anita Companies. On February 28, 1997 the Meditrust Board of Trustees met with
a representative of Lazard and further engaged Lazard to assist Meditrust in
connection with negotiation of a potential business combination with The Santa
Anita Companies. On that date, the Meditrust Board authorized Lazard to
communicate to Morgan Stanley an oral proposal to merge with The Santa Anita
Companies in a tax-free stock-for-stock exchange valued at $27.00 per share of
Paired Common Stock, subject to the approval by the Meditrust Board of any
binding agreement. In connection with its engagement by Meditrust, Lazard
performed further due diligence on The Santa Anita Companies, attended meetings
with representatives of The Santa Anita Companies, assisted Meditrust in
negotiating the key terms of the Merger Agreement (including appropriate
termination fees, board representation for the Surviving Corporations and
acquisition of blocks of Paired Common Stock by MAC and an unaffiliated third
party), performed limited financial analysis, advised Meditrust with respect to
tactical and procedural issues arising out of The Santa Anita Companies'
auction process (including strategies for dealing with competitive bidders that
were also key shareholders of The Santa Anita Companies) and assisted Meditrust
in anticipating perception of the Mergers and related transactions by
shareholders and the capital markets.
On March 17, 1997 KAI and Colony announced proposals. The announcement stated
that the proposals were separate and independent, and not conditioned on one
another. The financial terms of the revised proposals were similar to those of
the January 28 proposal of KAI, with the principal distinction being the
participation of Colony. The revised proposals, by their terms, expired on
March 28, 1997.
On March 25, 1997 the Meditrust Board authorized the submission of a written
proposal to The Santa Anita Companies. On March 26, 1997 Meditrust submitted a
written proposal to The Santa Anita Companies providing for a stock-for-stock
merger of Meditrust and a related corporation with and into Realty and
Operating, respectively, in a transaction valued at $27.00 per share of Paired
Common Stock, subject to a collar on the number of shares to be issued (the
"Initial Meditrust $27 Proposal"). The Initial Meditrust $27 Proposal also
provided for up to $100 million in cash to be made available by Meditrust to
fund either a dividend by The Santa Anita Companies to its shareholders or a
cash share purchase election to be made available to holders of Paired Common
Stock. The transaction contemplated by the Initial Meditrust $27 Proposal would
have been subject to purchase accounting and generally would have been tax-free
to Meditrust, The Santa Anita Companies and all shareholders other than those
receiving a distribution from The Santa Anita Companies or electing to receive
cash for their Paired Common Stock. In addition, the Initial Meditrust $27
Proposal provided for one member of the Board of Directors of each of the
Surviving Corporations to come from the Board of Directors of Realty or
Operating, as the case may be.
On March 27, 1997, The Santa Anita Companies announced that they had received
confidential written proposals from several strategic and financial parties and
that the Independent Committees had been authorized to commence final
negotiations with selected parties. Included among these were Meditrust, KAI,
Colony, a REIT and a group led by two real estate opportunity funds. The
Independent Committees or Morgan Stanley, on their behalf, then met or
discussed with the parties their respective proposals.
On March 31, 1997, Meditrust submitted a revised written proposal (the
"Revised Meditrust $27 Proposal") to the Boards of Directors of The Santa Anita
Companies containing substantially the same terms as the Initial Meditrust $27
Proposal, except that (i) The Santa Anita Companies would have two
representatives on the Board of Directors of each of the Surviving
Corporations, (ii) Meditrust would agree to reimburse The Santa Anita Companies
for the $4 million termination fee paid to Colony in the event that the
Meditrust shareholders fail to approve the Mergers and certain other conditions
are satisfied and (iii) the Revised Meditrust $27 Proposal set forth in greater
detail certain matters related to transaction protection, conditions to closing
and other terms to be set forth in a definitive merger agreement.
On March 31, 1997, The Santa Anita Companies terminated the Colony Agreement
in accordance with its terms, and paid the $4.5 million termination fee and
expenses owed to Colony pursuant to the Colony
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Agreement. By terminating the Colony Agreement, The Santa Anita Companies were
no longer obligated to give Colony five business days notice prior to entering
into an agreement with another party. Colony has retained its Series A
Preferred Stock and the Paired Common Stock which it purchased in September
1996. Colony may require The Santa Anita Companies to redeem the Series A
Preferred Stock as described above.
On April 1, 1997, the Independent Committees met with representatives of
Meditrust to discuss its proposal and requested Meditrust to consider certain
modifications to the Revised Meditrust $27 Proposal including the use of a
fixed exchange ratio without a collar so that shareholders of The Santa Anita
Companies would benefit from any appreciation of the price of Meditrust Shares
following an announcement of the transaction, and further requested that
Meditrust meet with the Boards of Directors of The Santa Anita Companies on
April 9, 1997. The Meditrust Board met on April 4, 1997 and approved a revised
proposal (the "Meditrust April 6 Proposal"), which was submitted to The Santa
Anita Companies on April 6, 1997 and was substantially similar to the Revised
Meditrust $27 Proposal except that (i) it did not provide for a collar on the
number of shares issued and (ii) it did not specify the merger consideration,
with such consideration to be provided to the Boards of Directors of The Santa
Anita Companies at the April 9 meeting. The Meditrust Board met again on April
6, 1997 and authorized Meditrust to propose a higher value for each share of
Paired Common Stock.
At the direction of the Independent Committees, Morgan Stanley then
instructed all parties who had submitted proposals to present their best and
final proposals on or before the April 9 meeting. Pursuant to this instruction,
on April 8, 1997 Meditrust submitted a revised written proposal to The Santa
Anita Companies substantially similar to the Meditrust April 6 Proposal but
which specified a value of $30.50 per share. On the same date KAI and Colony
each submitted a revised recapitalization proposal which contemplated a cash
dividend of $11 per share of Paired Common Stock and a self-tender for up to
5,600,000 shares of Paired Common Stock (approximately 49% of the outstanding
shares at the time) at $17.50 per paired share in cash or cash and warrants
(the "KAI/Colony Proposals"). These separate and independent proposals also
contemplated significant borrowings by The Santa Anita Companies. The other
REIT proposed a strategic alliance in which it would purchase for $300 million
preferred stock with an 8% dividend and redeemable at its option after seven
years and warrants to acquire a 45% interest in The Santa Anita Companies at an
exercise price of $29 per share. The group led by the two real estate
opportunity funds proposed to invest $150 million over a three-year period (at
a price equivalent to $27 per paired share); to purchase $50 million of
convertible preferred stock with a 10% pay-in-kind distribution and convertible
into common equity at $32.40 per share; to arrange for an additional $125
million of debt financing; and to acquire control of the Boards of Directors.
Up to $100 million of the funds raised would be used for a self tender for
outstanding shares of Paired Common Stock at $27 per paired share. Another real
estate opportunity fund indicated its interest in "topping" any real estate
opportunity fund but not in competing with an operating real estate company or
REIT.
On April 9, 1997, representatives of Meditrust, KAI, Colony and the other
REIT met with the full Boards of Directors of The Santa Anita Companies to
discuss their respective proposals. The other real estate opportunity funds
were not invited because their proposals were not sufficiently definitive and,
in the case of the proposal of the group led by the two real estate opportunity
funds, because the proposal was subject to full due diligence and indicated a
valuation per paired share that was lower than the valuations contained in the
other proposals. Following the presentations, the meetings of the Boards were
recessed, while the Independent Committees met to discuss the proposals.
The members of the Independent Committees, aided by Morgan Stanley and
counsel, engaged in a detailed discussion of the proposals and associated
presentations. Morgan Stanley advised the Independent Committees that the
Meditrust proposal had an estimated preliminary valuation of $28.27 to $30.50
per share and the KAI/Colony Proposals an estimated preliminary valuation of
$25.00 to $28.50 per share. These estimated preliminary valuations were based
on Morgan Stanley's analyses of the respective proposals and (i) in the case of
the Meditrust proposal, projections for estimated funds from operations for a
combined Meditrust/Santa Anita and, (ii) in the case of the KAI/Colony
Proposals, estimates of the trading value of the
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post-recapitalization Santa Anita Companies. The other REIT's proposal did not
lend itself to this type of analysis as it involved an investment in The Santa
Anita Companies, but no immediate consideration for holders of shares of the
Paired Common Stock. The members of the Independent Committee then articulated
and debated the perceived advantages and disadvantages of each of the proposals
as follows:
Meditrust. This proposal involved the highest dollar value to be offered
in exchange for the shares of Paired Common Stock, and Meditrust was an
entity with both a high dividend rate and a record of consistent dividend
growth. Meditrust's Chief Executive Officer was a strong leader and its
financial team seemed strong and effective. Meditrust operated in the
growth industry of health care, and its significant market capitalization
offered the prospect of considerable liquidity to shareholders. On the
other hand, it was recognized that a transaction with Meditrust might be
difficult to consummate if opposed by KAI, Colony and other shareholders
apparently aligned with them. In addition, the fact that the transaction
was likely to be dilutive initially to Meditrust might lead to a fall in
the price of Meditrust Shares following the announcement. However, the
positive attributes of this proposal significantly outweighed the negative
ones.
KAI and Colony. These proposals provided an attractive economic
opportunity for shareholders of The Santa Anita Companies. The Apollo and
Colony principals who would be the moving forces at The Santa Anita
Companies were viewed as talented and financially sophisticated. It was
believed that the involvement of these creative and sophisticated
individuals could potentially generate significant value for shareholders
on a post-transaction basis. On the other hand, the KAI/Colony Proposals
appeared economically inferior to the Meditrust proposal, the increased
leverage of The Santa Anita Companies that would be required to effect the
KAI/Colony Proposals would increase the risk of failure in the future, and
the diminished "float" of the shares of Paired Common Stock following
consummation of the transaction could result in considerably less liquidity
than would be available, for example, following the consummation of a
transaction with Meditrust.
REIT. The Committee members did not believe that this proposal was as
attractive as the Meditrust proposal. It did not provide shareholders with
a more liquid security at a premium to the current market price, nor did it
contemplate a cash election for those shareholders interested in such an
option. Moreover, the Committee members believed that a proposal, such as
the Meditrust proposal, which involved a transfer of control to a company
with significantly greater financial resources and greater exposure to
potential acquisitions was desirable and more consistent with shareholders'
expectations. Finally, this proposal appeared to attribute a value to the
Paired Common Stock of $29 per share, as opposed to the higher valuation
indicated by the Meditrust proposal.
As a result of this discussion, the Independent Committees decided
unanimously that the Meditrust proposal be pursued.
The Independent Committees reported their recommendations to the Boards of
Directors, which also engaged in an extended discussion of the relative merits
of the proposals. The Boards of Directors then adjourned and reconvened on the
morning of April 10. After further discussion, the Boards of Directors
unanimously authorized management to enter into negotiations with Meditrust to
determine whether a satisfactory merger agreement could be reached with
Meditrust. Meditrust was invited to meet with The Santa Anita Companies later
that day, at which time it was notified of the Boards' decisions, and KAI,
Colony and the others that had submitted proposals were notified that their
proposals had not been selected. After the Boards' decisions based on the final
proposals submitted at the April 9 meeting, on April 10, 1997, KAI and Colony
submitted oral proposals for a recapitalization on terms similar to their prior
recapitalization proposals, but increasing the cash to be paid pursuant to the
self-tender by $2 per share of Paired Common Stock. Over the next few days
Meditrust and The Santa Anita Companies proceeded to draft and negotiate the
Merger Agreement. In structuring the transaction, it was determined that since
The Santa Anita Companies consisted of two corporate entities, Realty and
Operating, it would facilitate the consummation of the Mergers if an entity
corresponding to Operating were created by Meditrust. It was determined that
Meditrust would use a subsidiary, which would then be merged into Operating,
with Meditrust merging into Realty. Meditrust and its
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subsidiary would enter into a pairing arrangement similar to that which existed
between Realty and Operating. Prior to the Mergers, Meditrust would distribute
to its shareholders one share of the subsidiary for each Meditrust Share owned.
In order to match the relative value of Operating as part of The Santa Anita
Companies, it was contemplated that Meditrust would contribute approximately
$43,662,265, or approximately two percent of its total assets to this
subsidiary. On April 13, 1997, Meditrust and The Santa Anita Companies agreed
that the exchange ratio in the Mergers would be based on a price of $31.00 per
share based on the closing price of shares of Meditrust on Friday, April 11,
1997. On April 11, 1997, the last full trading day prior to signing the Merger
Agreement, the closing price on the NYSE Composite Tape was $27.375 per share
of Paired Common Stock and $37.25 per Meditrust Share. The Merger Agreement was
unanimously approved by the Boards of all parties on April 13, 1997. Later that
day, the Merger Agreement was signed and a press release was issued.
On April 22, 1997, Meditrust, Meditrust Acquisition Corporation IV and The
Santa Anita Companies entered into a First Amended and Restated Agreement and
Plan of Merger dated as of April 13, 1997, which implemented certain technical
amendments to the Merger Agreement. On June 19, 1997, Meditrust, MAC, Meditrust
Acquisition Corporation IV and The Santa Anita Companies entered into the
Second Amended and Restated Agreement and Plan of Merger dated as of April 13,
1997, pursuant to which, among other things, the Merger Agreement was (i)
novated to release Meditrust Acquisition Corporation IV from its obligations
thereunder and substitute MAC in its place, (ii) amended to provide that MAC,
instead of Meditrust, would be obligated to purchase newly issued shares of The
Santa Anita Companies at a price of $31 per share, but that such obligation
could be satisfied by the purchase of shares of Paired Common Stock in the open
market and (iii) in light of the Surviving Corporations' evolving business
strategy and in order to facilitate the consummation of future acquisitions,
amended to provide that (a) the charters of the Surviving Corporations would be
amended to permit each Surviving Corporation to issue a new class of common
stock in one or more series having different designations, rights, preferences
and privileges than those of the existing class of common stock for a variety
of purposes including, among other things, as consideration in connection with
future business combinations and (b) the Surviving Corporations would be
authorized to transfer some or all of their assets to one or more wholly-owned
subsidiaries in exchange for an equity interest in such subsidiaries. On
September 19, 1997, Meditrust, MAC and The Santa Anita Companies entered into a
Third Amended and Restated Agreement and Plan of Merger dated as of April 13,
1997, which implemented certain technical amendments to the Merger Agreement
and specified certain changes to the Realty Share Award Plan and the Operating
Share Award Plan, as described in "Other Santa Anita Proposals--Proposal to
Amend the Santa Anita Operating Company 1995 Share Award Plan" and "--Proposal
to Amend the Santa Anita Realty Enterprises, Inc. 1995 Share Award Plan".
REALTY AND OPERATING REASONS FOR THE MERGERS; RECOMMENDATIONS OF THE BOARDS OF
DIRECTORS OF REALTY AND OPERATING
The Boards of Directors of Realty and Operating have carefully reviewed and
considered the terms and conditions of the Mergers and believe the Mergers are
in the best interests of the shareholders of The Santa Anita Companies. The
decision of the Boards of Directors of The Santa Anita Companies to approve the
Mergers and to recommend approval of the Mergers by the shareholders of The
Santa Anita Companies was based upon the following, which are all of the
material factors:
(i) The performance of shares of Paired Common Stock in recent years has
been disappointing to many shareholders, declining from $21.75 in March
1993 to $12.50 in June 1996. With the announcement of the Initial Colony
Transaction, the price had improved to $18.50 in September 1996, and to
$29.25 in January 1997 after The Santa Anita Companies announced that they
had amended the Colony Agreement to permit them to initiate discussions and
negotiations with third parties with respect to transactions which might
involve a transfer of control. On September 23, 1997, the price was $33.75.
The Boards of Directors believe that the process described above under "--
Background of the Mergers" leading up to the Meditrust transaction resulted
in the highest value currently obtainable for the shareholders of The Santa
Anita Companies. They are also concerned that failure to consummate the
Meditrust transaction could result in a significant decline in the price of
the shares of Paired Common Stock;
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(ii) Without significant additional capital and management resources, The
Santa Anita Companies will have difficulty addressing the decline in on-
track attendance and other challenges facing the thoroughbred horse racing
industry and diversifying their activities into other areas through
acquisitions or investment;
(iii) The Boards of Directors believe that the Meditrust proposal is fair
to the shareholders of The Santa Anita Companies and this belief is
supported by an opinion from Morgan Stanley to such effect (see "--Opinion
of Financial Adviser to Realty and Operating");
(iv) The Meditrust proposal appears to involve the highest dollar value
offered for the shares of Paired Common Stock; Meditrust has established a
consistent long-term record of growth including an increasing dividend
significantly higher than The Santa Anita Companies' existing dividend;
Meditrust's industry is a dominant and growing industry; and the market
capitalization of the combined companies will offer greater liquidity to
shareholders;
(v) The KAI/Colony Proposals offered less value per share than the
Meditrust proposal, required significant borrowings, thereby increasing the
risk of failure, and would have resulted in an entity with a significantly
smaller market capitalization than The Santa Anita Companies currently
possess; and
(vi) No other proposals or indications of interest appeared to offer
greater potential value to the shareholders of The Santa Anita Companies.
The Boards of Directors of The Santa Anita Companies also considered the
following potentially negative factors in their deliberations concerning the
Mergers:
(i) the potential difficulty of consummating a transaction not initially
supported by KAI, Colony and other shareholders apparently aligned with
them;
(ii) the initial dilutive effect of the Mergers to Meditrust (see "Risk
Factors--Dilutive Effect of the Merger; Dependence on Acquisitions");
(iii) the need of Meditrust to hire and retain additional management
resources if it is to successfully execute a strategy of expansion into new
lines of business by acquisition; and
(iv) restrictions on the solicitation of other proposals (see "The Merger
Agreement--No Solicitation") which could, under specified circumstances
require the payment by The Santa Anita Companies of a $12 million
termination fee. However, the other proposals considered by the Boards of
Directors had comparable requirements.
In view of the wide variety of factors considered by the Boards of Directors
of The Santa Anita Companies in connection with their evaluation of the Mergers
and the complexity of such matters, neither Board considered it practicable to,
nor did it attempt to, quantify, rank or otherwise assign relative weights to
the specific factors it considered in reaching its decision.
There can be no assurance that the expected benefits of the Mergers will be
realized.
THE REALTY AND OPERATING BOARDS CONSIDER THE TRANSACTIONS TO BE FAIR TO THE
REALTY SHAREHOLDERS AND THE OPERATING SHAREHOLDERS RESPECTIVELY, AND
UNANIMOUSLY RECOMMEND THAT THE REALTY SHAREHOLDERS AND THE OPERATING
SHAREHOLDERS VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGERS AND THE MERGER
AGREEMENT.
MEDITRUST AND MAC REASONS FOR THE MERGERS; RECOMMENDATIONS OF THE BOARDS OF
TRUSTEES OF MEDITRUST AND MAC
At meetings of the Meditrust Board and the MAC Board held on April 13, 1997,
after careful consideration, the Boards of Meditrust and MAC unanimously (a)
determined that the Mergers are in the best interests of the shareholders of
Meditrust and MAC, (b) approved the Merger Agreement and the transactions
contemplated thereby, including the purchase by MAC of shares of Paired Common
Stock, as described under "The Merger Agreement--Sale of Stock to MAC", and (c)
resolved to recommend that the shareholders of Meditrust and MAC vote in favor
of approving and adopting the Mergers and the Merger Agreement.
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The Meditrust and MAC Boards made their determination after careful
consideration of, and based on, a number of factors. The factors described
below are all the material factors considered by the Meditrust and MAC Boards:
(i) the opportunity to improve the operating performance of the Santa
Anita Racetrack and to realize additional value through more fully
developing the real estate owned by The Santa Anita Companies;
(ii) the opportunities that may be available to Meditrust and MAC as a
result of the Mergers, including the opportunities to expand Meditrust's
real estate business within health care, to diversify its real estate
business outside of the health care sector and to expand MAC's operations
into real estate-intensive operating businesses, subject to certain
constraints on the Surviving Corporations' ability to make future
acquisitions;
(iii) the fact that the Mergers will allow Meditrust Corporation to act
as an owner and Meditrust Operating Company to act as an operator of real
estate properties, which in turn should allow Meditrust's shareholders,
through the paired share structure, to receive the tax benefits associated
with real estate ownership in a REIT and the economic benefits of
participating in a related operating company;
(iv) the fact that the consideration to be paid for The Santa Anita
Companies, based on the market value of Meditrust Shares on April 11, 1997,
represented a substantial premium over the value of The Santa Anita
Companies' assets on a stand-alone basis, a 227.5% premium over the market
price of the shares of Paired Common Stock on August 16, 1996 (the last
trading day prior to the announcement of the Initial Colony Transaction),
and a 13% premium over the market price of the shares of Paired Common
Stock on April 11, 1997;
(v) the facts that (a) unless Meditrust is successful in identifying and
consummating acquisitions that complement and capitalize upon the
opportunities inherent in the paired share structure, the Mergers are
expected to have a dilutive effect on Meditrust's earnings and (b) if such
acquisitions are outside of the health care or horse racing sectors,
Meditrust will need to hire experienced management to run those businesses;
in considering these factors the Meditrust Board considered relevant the
experience of Meditrust's management team and the history of its Chairman
and Chief Executive Officer in consistently producing positive results for
Meditrust and its shareholders;
(vi) the fact that if MAC becomes an operator of nursing home and
assisted living facilities, it may be viewed by Meditrust's current
operators as a competitor, which may have an adverse impact on Meditrust's
existing business;
(vii) the financial condition, results of operations and cash flow of The
Santa Anita Companies, both on an historical and a prospective basis; in
light of the price being paid for The Santa Anita Companies, this factor
was considered unfavorable by the Meditrust and MAC Boards; however, due to
the potential opportunities discussed above, the Meditrust and MAC Boards
did not attach great weight to this factor;
(viii) the financial condition, results of operations and cash flow of
Meditrust and MAC and the combined companies, both on an historical and a
prospective basis, which were taken into account by the Meditrust and MAC
Boards in considering the value of the Meditrust Shares and MAC Shares and
which supported the Meditrust and MAC Boards' valuation of the
consideration to be paid for The Santa Anita Companies; in this regard,
however, the Meditrust and MAC Boards also noted the expected dilutive
effect of the Mergers as discussed in clause (v) above;
(ix) the fact that (a) Meditrust agreed to purchase, at a price of $31.00
per share, shares of Paired Common Stock representing 9.8% of the issued
and outstanding Paired Common Stock after giving effect to such purchase
and (b) Santa Anita agreed to issue to one or more independent purchasers
designated by Meditrust an additional number of shares of Paired Common
Stock not in excess of (I) 19.6% of the outstanding shares before giving
effect to the issuance referred to in clause (a) less (II) the number of
shares of Paired Common Stock to be issued pursuant to clause (a); in this
regard, the Meditrust and MAC Boards noted that such purchases may increase
the likelihood that the Mergers will be approved by the shareholders of The
Santa Anita Companies but that purchases by Meditrust under clause (a)
present the risk that Meditrust may not be able fully to recoup its
investment in The Santa Anita Companies if the Mergers are not consummated;
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(x) the fact that upon consummation of the Mergers the Boards of
Directors of Meditrust Corporation and Meditrust Operating Company each
will consist of up to twelve directors designated by Meditrust, two of
which in each case will be members of the current Realty Board or the
current Operating Board, as the case may be. See "The Merger Agreement--
Management Following the Mergers";
(xi) the ability to consummate the Mergers as a tax-free reorganization
under the Code while preserving the tax status of the paired share
arrangement of The Santa Anita Companies;
(xii) the provisions of the Merger Agreement that limit The Santa Anita
Companies' ability to furnish information to and participate in substantive
negotiations and discussions with third parties and to terminate the Merger
Agreement to enter into a definitive agreement with a third party in
connection with an Alternative Transaction (as defined under "The Merger
Agreement--No Solicitation") upon the payment of a $12 million termination
fee plus up to $1 million in expense reimbursement (see "The Merger
Agreement--Termination; Termination Fees and Expenses");
(xiii) the fact that other interested parties had submitted proposals to
The Santa Anita Companies with respect to potential acquisitions of The
Santa Anita Companies, including the KAI/Colony Proposals described under
"--Background of the Mergers"; and
(xiv) the fact that, to Meditrust's knowledge, there are only four
publicly traded paired share REITs in existence, two of which recently had
announced or completed strategic transactions and one of which publicly had
announced that it would not engage in any such transaction.
In reaching its views as to the fairness of the transactions, the Meditrust
and MAC Boards concluded that the opportunities that may be presented to
Meditrust as a result of the transactions (such as those described in clauses
(i), (ii) and (iii) above) should outweigh the risks of pursuing those
opportunities (such as those identified in clauses (v) and (vi) above) and the
substantial premium to be paid by Meditrust (as referred to in clause (iv)
above). In light of that conclusion, and because of the relative sizes of The
Meditrust Companies and The Santa Anita Companies (in effect, the transactions
represent less than 15% of the relative market value of The Meditrust Companies
at the date of execution of the Merger Agreement), the Boards of Meditrust and
MAC decided not to request a fairness opinion from an independent third party
adviser and the Meditrust and MAC Boards did not perform a standard financial
analysis of The Santa Anita Companies or Meditrust, on a stand-alone or
comparative basis, in connection with the Mergers.
In view of the wide variety of factors considered by the Boards of Trustees
of Meditrust and MAC in connection with their evaluation of the Mergers and the
complexity of such matters, neither Board considered it practicable to, nor did
it attempt to, quantify, rank or otherwise assign relative weights to each
factor it considered in reaching its decision, but rather conducted a
discussion of the factors described above, including asking questions of
Meditrust's management and legal, financial and accounting advisors, and
reached a general consensus that the Mergers were in the best interests of
Meditrust and MAC and their respective shareholders. The Meditrust and MAC
Boards did not make any decision as to whether any particular factor (or any
aspect of any particular factor) was favorable or unfavorable to its ultimate
determination, although, as noted above, the Meditrust and MAC Boards did reach
this conclusion with respect to certain factors. In addition, in considering
the factors described above, individual members of the Meditrust and MAC Boards
may have given different weight to different factors. The Meditrust and MAC
Boards did not have available to them the valuations of Morgan Stanley set
forth below. Therefore, these valuations did not play a role in the Board's
determination. These valuations were furnished to the Meditrust and MAC Boards
after the execution of the Merger Agreement, and the Boards have not changed
their view as to the fairness of the Mergers to the Meditrust shareholders and
the MAC shareholders.
There can be no assurance that the expected benefits of the Mergers will be
realized.
THE BOARDS OF TRUSTEES OF MEDITRUST AND MAC CONSIDER THE TRANSACTIONS FAIR TO
THE MEDITRUST SHAREHOLDERS AND THE MAC SHAREHOLDERS, RESPECTIVELY, AND
UNANIMOUSLY RECOMMEND THAT THE MEDITRUST SHAREHOLDERS AND THE MAC SHAREHOLDERS,
AS THE CASE MAY BE, VOTE "FOR" THE APPROVAL OF THE MERGERS AND THE MERGER
AGREEMENT.
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OPINION OF FINANCIAL ADVISOR TO REALTY AND OPERATING
The Santa Anita Companies have retained Morgan Stanley to act as their
financial advisor in connection with the transactions contemplated by the
Merger Agreement. The Santa Anita Companies had previously retained Morgan
Stanley in November 1995 in connection with certain matters described under "--
Background of the Mergers" above. Morgan Stanley rendered to the Boards of
Directors of The Santa Anita Companies written opinions dated April 13, 1997,
the date of the original merger agreement, and the date of this Joint Proxy
Statement/Prospectus that, based upon and subject to the various considerations
set forth in each such opinion, the Mergers are fair from a financial point of
view to The Santa Anita Companies on the date of each such opinion.
THE FULL TEXT OF THE OPINION OF MORGAN STANLEY, DATED THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, LIMITATIONS ON AND THE SCOPE OF
REVIEW BY MORGAN STANLEY IN RENDERING ITS OPINION IS ATTACHED TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AS ANNEX B. SHAREHOLDERS OF THE SANTA ANITA
COMPANIES ARE URGED TO READ MORGAN STANLEY'S OPINION IN ITS ENTIRETY. MORGAN
STANLEY'S OPINION IS DIRECTED TO THE BOARDS OF DIRECTORS OF THE SANTA ANITA
COMPANIES, AND ADDRESSES THE FAIRNESS OF THE CONSIDERATION PURSUANT TO THE
MERGER AGREEMENT TO THE HOLDERS OF PAIRED COMMON STOCK FROM A FINANCIAL POINT
OF VIEW AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGERS OR CONSTITUTE A
RECOMMENDATION AS TO HOW SHAREHOLDERS OF THE SANTA ANITA COMPANIES SHOULD VOTE
AT THE SANTA ANITA MEETINGS. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET
FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In rendering its opinion, Morgan Stanley, among other things: (i) reviewed
certain publicly available financial statements and other business and
financial information of The Santa Anita Companies and Meditrust, respectively;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning The Santa Anita Companies and Meditrust,
respectively; (iii) analyzed certain financial forecasts prepared by the
managements of The Santa Anita Companies; (iv) discussed the past and current
operations and financial condition and the prospects of The Santa Anita
Companies with senior executives of The Santa Anita Companies; (v) reviewed the
pro forma impact of the Mergers on Meditrust's funds from operations, cash
flow, consolidated capitalization and financial ratios; (vi) reviewed the
reported prices and trading activity of the Paired Common Stock and the
Meditrust Shares; (vii) compared the financial performance of The Santa Anita
Companies and Meditrust and the prices and trading activity of the Paired
Common Stock and the Meditrust Shares with that of certain other publicly-
traded companies comparable with The Santa Anita Companies and Meditrust,
respectively, and their securities; (viii) reviewed the financial terms, to the
extent publicly available, of certain acquisition transactions deemed relevant;
(ix) discussed with senior executives of The Santa Anita Companies and
Meditrust their estimates of the existing assets and operations, investment
opportunities and growth prospects potentially available to the combined
companies; (x) participated in discussions and negotiations among
representatives of The Santa Anita Companies and Meditrust and their financial
and legal advisors; (xi) reviewed the Merger Agreement and certain related
documents; and (xii) performed such other analyses and considered such other
factors as Morgan Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for purposes of its opinion. With respect to the financial
forecasts, Morgan Stanley assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of The Santa Anita Companies and Meditrust. In addition,
Morgan Stanley assumed that (i) the Mergers will be consummated in accordance
with the terms set forth in the Merger Agreement, including, among other
things, that the Mergers will be treated as tax-free reorganizations and/or
exchanges, each pursuant to the Code; and (ii) immediately prior to and
immediately following consummation of the Mergers, Realty will qualify as a
real estate investment trust ("REIT") and the Paired Common Stock will qualify
for paired share status. Morgan Stanley's opinion stated that it is necessarily
based on financial, economic, market and other conditions as in effect on, and
the information made available to Morgan Stanley as of, the date of such
opinion.
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The following is a brief summary of all material analyses performed and all
material assumptions by Morgan Stanley and reviewed with the Boards of
Directors of The Santa Anita Companies on April 13, 1997 in connection with the
preparation of the Morgan Stanley opinion and with its oral presentation to the
Boards of Directors of The Santa Anita Companies on such date:
Paired Common Stock Performance. Morgan Stanley's analysis of the Paired
Common Stock performance consisted of an historical analysis of closing prices
during the 120-trading-day period ended April 11, 1997, as well as the closing
price on April 11, 1997. During the 120-trading-day period, based on closing
prices on the NYSE, the Paired Common Stock achieved a low of $19.375 and a
high of $30.375. The closing price of the Paired Common Stock on April 11, 1997
was $27.375, a discount of 11% to the then $30.50 per paired share offered by
Meditrust.
Net Asset Value. Morgan Stanley reviewed and analyzed the assets of The Santa
Anita Companies to determine the range of values for each of The Santa Anita
Companies' significant assets. This methodology assumed that The Santa Anita
Companies would continue as going concerns (not suffering the adverse tax
consequences of an actual sale of assets). The asset valuations were based on a
variety of factors including estimates by The Santa Anita Companies, executed
sale contracts that were provided by The Santa Anita Companies, multiples of
earnings before interest, taxes, depreciation and amortization ("EBITDA")
(primarily in the case of Santa Anita Racetrack) and capitalization rate
valuation analysis that was developed through discussions with management and
knowledgeable real estate experts in the local real estate market. Morgan
Stanley derived a range of implicit per paired share equity value by netting
working capital and total debt from the range of asset values. This analysis
indicated that the implied per paired share equity value of The Santa Anita
Companies ranged from $13.13 to $16.09.
Discounted Cash Flow. Morgan Stanley conducted a discounted cash flow
analysis of The Santa Anita Companies for the fiscal years ended 1997 through
2002 to estimate the present value of the unlevered free cash flows that The
Santa Anita Companies are expected to generate if The Santa Anita Companies
perform in accordance with certain financial forecasts. The discounted cash
flow analysis was based upon certain discussions with the management of The
Santa Anita Companies as well as upon certain financial forecasts prepared by
the management of The Santa Anita Companies. The management of The Santa Anita
Companies prepared two sets of projections: a base case (the "Base Case") and a
case that assumed that The Santa Anita Companies would obtain the necessary
entitlements to complete the construction on The Santa Anita Companies'
property of, and lease, an approximately 500,000 square foot entertainment
center by 1999 (the "Entertainment Center Case"). These projections included
forecasts of financial statements for years 1997 through 2001 and the
assumptions used in these forecasts for The Santa Anita Companies. For The
Santa Anita Companies, the forecasts included a combined statement of
operations, which provided net income and net income per share figures as well
as an FFO per share figure for each year, a statement of cash flows and a
balance sheet. For Realty, the forecasts included a statement of operations, a
net income per property report, a balance sheet and a statement of cash flows.
For Operating and its subsidiaries, the forecasts included a statement of
operations, which provided a breakdown of wagering commissions, a balance
sheet, a statement of cash flows and a detailed list of costs and expenses
related to the horse racing business. Other than construction of the
entertainment center as part of the Entertainment Center Case, the Base Case
and the Entertainment Center Case were analyzed using identical assumptions--
(i) that the sale of the two remaining neighborhood centers owned by Realty
would be consummated in 1997; (ii) that the partnership interests in H-T
Associates and Joppa Associates owned by Realty would be sold in 1997; and
(iii) that on-track attendance and wagering would remain unchanged and that
Southern California satellite, Northern California, out-of-state and total
wagering would grow at annual rates of 2%, 3%, 10% and 6%, respectively.
Unlevered free cash flows of The Santa Anita Companies were calculated as net
income plus depreciation and amortization plus minority interest plus other
noncash expenses plus after-tax net interest expense plus changes in working
capital less capital expenditures, acquisition costs and other expenses. Morgan
Stanley calculated terminal values for The Santa Anita Companies by applying a
range of EBITDA multiples and FFO (funds from operations, defined as net income
plus depreciation, amortization and share of FFO from joint ventures)
multiples. The unlevered free
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cash flow streams and terminal values were then discounted to the present using
a range of discount rates from 9.5% to 11.5%. Using the financial information
and forecasts provided by management of The Santa Anita Companies, Morgan
Stanley derived implied per paired share equity price ranges for The Santa
Anita Companies. This analysis indicated that the implied per paired share
equity value for The Santa Anita Companies (i) in the Base Case ranged from
$10.62 to $13.19 and (ii) in the Entertainment Center Case ranged from $13.19
to $17.05.
Comparable Company Analysis. Comparable company analysis examines a company's
trading performance relative to a group of publicly traded peers. Morgan
Stanley analyzed the trading performance of The Santa Anita Companies and
certain financial information of The Santa Anita Companies with a group of
several publicly traded racetrack companies (Hollywood Park and Churchill
Downs), diversified property companies (Colonial Properties Trust, Cousins
Properties, First Union Real Estate, Pacific Gulf Properties, Pennsylvania REIT
and Washington REIT) and paired share REITs (Patriot American Hospitality,
Inc./California Jockey Club/Bay Meadows Operating Company and Starwood Lodging)
(collectively, the "Comparable Companies"), which Morgan Stanley determined
were similar to The Santa Anita Companies because of involvement in the horse
racing industry, the presence of diversified real estate investments and/or
control of a paired shared structure, all of which were deemed pertinent to The
Santa Anita Companies. Historical financial information used in connection with
the ratios discussed below with respect to the Comparable Companies is as of
the most recent financial statements available to The Santa Anita Companies.
Morgan Stanley assessed the relative performance and value for The Santa
Anita Companies by analyzing certain market trading statistics of the
Comparable Companies and comparing these statistics to those of The Santa Anita
Companies. Such statistics included, among other things, dividend yield, market
price as a multiple of earnings per share, market price as a multiple of FFO
and aggregate value (market value plus debt, preferred stock and minority
interests, less cash and cash equivalents) as a multiple of EBITDA, such
ratios, when available, being calculated for actual twelve months trailing and
for estimated calendar year 1996 and calendar year 1997 (based on current
estimates prepared by IBES and First Call).
Using the financial information and forecasts provided by management of The
Santa Anita Companies, Morgan Stanley derived an implied per share equity price
range for The Santa Anita Companies based upon application of the financial
multiples from the Comparable Companies (18 to 24 times for 1997 estimated
earnings per share, 10 to 13 times for 1997 estimated FFO and 12 to 16 times
for 1997 estimated EBITDA). The analysis indicated that the implied per paired
share equity value of The Santa Anita Companies ranged from $12.30 to $16.00.
No company utilized in the Comparable Companies analysis as a comparison is
identical to The Santa Anita Companies. In evaluating the Comparable Companies,
Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of The Santa Anita
Companies such as the impact of competition on the business of The Santa Anita
Companies and the industry generally, industry growth and the absence of any
adverse material change in the financial condition and prospects of The Santa
Anita Companies or the industry or in the financial markets in general.
Paired Share Acquisition Analysis. Comparable acquisition analysis examines
relevant aspects of past transactions similar to a proposed transaction. Since
one of the defining characteristics of the Mergers is the paired share
structure of The Santa Anita Companies, Morgan Stanley also analyzed the recent
acquisition of California Jockey Club and Bay Meadows Operating Company, a
publicly traded paired share REIT, by Patriot American Hospitality Inc. The
aggregate consideration paid for the California Jockey Club/Bay Meadows
Operating Company paired shares represented a premium of $91 million to $152
million (depending on the form of consideration chosen by California Jockey
Club/Bay Meadows Operating Company shareholders) to the price of California
Jockey Club/Bay Meadows Operating Company paired shares prior to the
announcement of the initial transaction between these companies and Hudson Bay
Partners L.P. on August 16, 1996. The $30.50 per share of Paired Common Stock
then proposed by Meditrust represented an aggregate premium of
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$208 million to the price of the shares of Paired Common Stock prior to August
16, 1996, the date of the Initial Colony Transaction. This premium compared
favorably to the premium commanded by California Jockey Club/Bay Meadows
Operating Company.
Morgan Stanley also reviewed the premiums paid to the unaffected share price
for 32 publicly traded REITs and real estate operating companies in
merger/acquisition transactions from August 1994 through February 1997. The
average premium paid in these transactions was 19.2%. Application of this
premium to the per paired share closing price of The Santa Anita Companies
prior to August 16, 1996, the date of the Initial Colony Transaction, results
in a valuation of $15.47 per paired share.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portions of Morgan Stanley's analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion. In addition,
Morgan Stanley may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting for any
particular analysis described above should not be taken to be Morgan Stanley's
view of the actual value of The Santa Anita Companies.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of The Santa Anita
Companies or Meditrust. The analyses performed by Morgan Stanley are not
necessarily indicative of actual values, which may be significantly more or
less favorable than suggested by such analyses. Such analyses were prepared
solely as a part of Morgan Stanley's fairness opinion and were provided to the
Boards of Directors of The Santa Anita Companies in connection with the
delivery of Morgan Stanley's written opinion. The analyses do not purport to be
appraisals or to reflect the prices at which The Santa Anita Companies might
actually be sold. Because such estimates are inherently subject to uncertainty,
neither Morgan Stanley nor any other person assumes responsibility for their
accuracy. In addition, as described above, Morgan Stanley's opinion and
presentation to the Boards of Directors of The Santa Anita Companies was one of
many factors taken into consideration by the Boards of Directors of The Santa
Anita Companies in making its determination to approve the Merger Agreement and
the transactions contemplated thereby. Consequently, the Morgan Stanley
analyses described above should not be viewed as determinative of the opinions
of the Boards of Directors of The Santa Anita Companies with respect to the
value of The Santa Anita Companies.
The Santa Anita Companies retained Morgan Stanley based upon its experience
and expertise. Morgan Stanley is an internationally recognized investment
banking and advisory firm. Morgan Stanley, as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the past, Morgan Stanley and Dean Witter Reynolds Inc. and their
respective affiliates have provided financial advisory services to The Santa
Anita Companies and Meditrust and have received fees for the rendering of such
services. Morgan Stanley is a full service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking, financing and financial advisory services. In the ordinary course of
Morgan Stanley's trading, financing and brokerage activities, Morgan Stanley or
its affiliates may at any time have long or short positions, and may trade or
otherwise effect transactions, for its own accounts or for the account of
customers, in securities of The Santa Anita Companies, Meditrust or any other
company involved in the transactions contemplated by the Merger Agreement.
Pursuant to an engagement letter between The Santa Anita Companies and Morgan
Stanley, The Santa Anita Companies retained Morgan Stanley as financial advisor
in connection with potential strategic transactions involving The Santa Anita
Companies. The Santa Anita Companies have paid Morgan Stanley an advisory fee
of $500,000 pursuant to the engagement letter. With regard to the Merger
Agreement and the transactions contemplated thereby, The Santa Anita Companies
have further agreed to pay Morgan Stanley a
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transaction fee of approximately $6 million upon consummation of the Mergers.
The Santa Anita Companies have also agreed to reimburse Morgan Stanley for its
out-of-pocket expenses and to indemnify Morgan Stanley and its affiliates,
their respective directors, officers, agents and employees and each person, if
any, controlling Morgan Stanley, or any of its affiliates against certain
liabilities, including liabilities under the federal securities laws.
FINANCIAL ANALYSIS OF FINANCIAL ADVISOR TO MEDITRUST AND MAC
On April 13, 1997, Lazard delivered a presentation to the Meditrust Board of
Trustees describing certain financial analyses performed by Lazard with respect
to the Mergers (the "Lazard Presentation"). The Lazard Presentation was
delivered for the information of the Meditrust Board and does not constitute an
opinion as to the fairness, from a financial point of view or otherwise, of the
consideration to be paid by The Meditrust Companies to The Santa Anita
Companies in connection with the Mergers. The Lazard Presentation does not
constitute a recommendation to any shareholder of Meditrust or MAC concerning
how such shareholder should vote with respect to the Merger Agreement or the
Mergers.
The following is a brief summary of the material analyses included in the
Lazard Presentation and discussed with Meditrust's Board of Trustees at its
meeting on April 13, 1997.
Implied Premium Analysis. Lazard analyzed the premium for The Santa Anita
Companies implied by a purchase price of $30.50 per share. Based on an
aggregate number of shares outstanding of approximately 12.4 million, Lazard
determined that a purchase price of $30.50 per share implied an aggregate
equity valuation for The Santa Anita Companies of $376.9 million and an
aggregate enterprise valuation (aggregate equity valuation plus net debt) of
$402.7 million. The implied premium for The Santa Anita Companies of $250.3
million was determined by subtracting the adjusted book value (as adjusted to
reflect the appraised value of certain assets provided to Lazard by Meditrust)
of $152.4 million from the aggregate enterprise valuation of $402.7 million.
Pro Forma Merger Consequences Analysis. Lazard analyzed certain pro forma
effects of the Mergers on the projected funds from operations and estimated
stock price of the combined companies based on the projections provided by the
managements of each of Meditrust and The Santa Anita Companies regarding the
financial performance of Meditrust and The Santa Anita Companies, respectively.
Lazard assumed, after consultation with Meditrust management, that, among other
things, (i) the purchase price per share of Paired Common Stock was $30.50,
(ii) the Meditrust price per share was $37.61, (iii) the implied exchange ratio
was 1.2332, (iv) the Mergers would be accounted for under the purchase method
of accounting, (v) the effect of the Mergers would include an asset write-up of
$115 million, (vi) goodwill of $254 million would be created and (vii) the
Mergers would not have a negative impact on the core business of Meditrust.
Lazard performed its pro forma analyses under two scenarios: (a) a scenario
that assumed no future acquisitions by the combined companies and (b) a
scenario that assumed future acquisitions consisting of an initial acquisition
of $1 billion in size (an assumed purchase multiple of 10.0x EBITDA) at the end
of the first quarter of 1998 and thereafter monthly acquisitions of $10 million
in size (an assumed purchase multiple of 10.0x EBITDA). Lazard analyzed the
possible impact of the Mergers on the estimated stock price at year end of the
combined companies for the years 1997 through 1999 assuming a range of
multiples (12.0x, 13.0x and 14.0x) to estimated pro forma funds from
operations. These projected prices were compared to estimated prices based on
the then current multiple of approximately 12.0x stand alone funds from
operations. With respect to the financial forecasts underlying these pro forma
calculations, Lazard assumed that they had been reasonably prepared on the
bases reflecting the best currently available estimates and judgments of
management of Meditrust and The Santa Anita Companies as to the future
financial performance of Meditrust and The Santa Anita Companies, respectively.
Lazard assumed no responsibility for and expressed no view as to such forecasts
or the assumptions upon which they were based.
Assuming that no future acquisitions are made by the combined companies and
that amortization of goodwill related to the Mergers is added back in the
calculation of projected funds from operations, Lazard's analysis implied that
the Mergers would result in dilution of 8%, 7%, 7% and 6%, respectively, in
projected
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funds from operations per share for the years 1997 through 2000. For the years
1997 through 1999, Lazard's analysis implied that the Mergers would result in
estimated stock price dilution of 7%, 6% and 6%, respectively, using a multiple
of 12.0x to estimated funds from operations; accretion of 0%, 1% and 2%,
respectively, using a multiple of 13.0x to estimated funds from operations; and
accretion of 8%, 9% and 10%, respectively, using a multiple of 14.0x to
estimated funds from operations.
Assuming that future acquisitions are made by the combined companies as
described above and that amortization of goodwill relating to the Mergers is
added back in the calculation of projected funds from operations, Lazard's
analysis implied that the Mergers would result in 8% dilution, 1% dilution, 2%
accretion and 3% accretion, respectively, in projected funds from operations
per share for the years 1997 through 2000. For the years 1997 through 1999,
Lazard's analysis implied that the Mergers would result in estimated stock
price dilution of 1%, accretion of 2% and accretion of 3%, respectively, using
a multiple of 12.0x to estimated funds from operations; accretion of 7%, 11%
and 12%, respectively, using a multiple of 13.0x to estimated funds from
operations; and accretion of 16%, 19% and 20%, respectively, using a multiple
of 14.0x to estimated funds from operations.
In performing its analyses, Lazard made numerous assumptions with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of The
Meditrust Companies and The Santa Anita Companies and all of which are beyond
control of Lazard. The results of the analyses performed by Lazard are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. In
addition, analyses relating to the values of businesses do not purport to be
appraisals or to reflect actual market valuations or trading ranges, which may
vary significantly from amounts set forth above. Although, in connection with
the delivery of the Lazard Presentation, Lazard analyzed Meditrust and The
Santa Anita Companies, the Lazard Presentation is not a valuation of The
Meditrust Companies or The Santa Anita Companies and does not represent
Lazard's view as to what the value of the shares of Paired Common Stock will be
upon consummation of the Mergers.
Lazard is an internationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and for other purposes. Meditrust
retained Lazard to act as its financial advisor in connection with the Mergers
and related matters based upon its qualifications, expertise and reputation in
investment banking in general and mergers and acquisitions specifically. In the
course of its activities, Lazard has provided and continues to provide
investment advisory services to Meditrust for which Lazard has received or will
receive customary compensation. Lazard may, in the ordinary course of its
business, trade securities of The Meditrust Companies or The Santa Anita
Companies for its own account or for the accounts of customers and, therefore,
may hold long or short positions in such securities at any time.
Lazard has acted as financial advisor to Meditrust in connection with the
Mergers and will receive a fee for its services. Pursuant to an engagement
letter dated as of February 1, 1997, and amended on April 17, 1997, Meditrust
has paid Lazard total fees of $750,000. An additional fee of $1,750,000 will be
payable to Lazard upon the closing of the Mergers. Meditrust has further agreed
to reimburse Lazard for its reasonable out-of-pocket expenses, including fees
and disbursements of counsel. Meditrust has also agreed to indemnify Lazard and
its members, employees, agents, affiliates and controlling persons against
certain liabilities, including certain liabilities under the federal securities
laws, relating to or arising out of its engagement.
STOCK OPTIONS AND EMPLOYEE BENEFITS
Under the Meditrust 1988 Stock Option Plan, upon a Reorganization (as defined
under such plan) participants have the right upon subsequent exercise of their
options to acquire the kind and amount of securities and property which such
participant would then have if such participant had exercised such option
immediately before the Reorganization and continued to hold all securities and
property which came to such participant as a result of the Reorganization. At
the Effective Time, a Reorganization will be deemed to have
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occurred. Under the Meditrust 1992 Equity Incentive Plan, in the event of a
change in control of Meditrust, in order to preserve the rights of
participants, the Compensation Committee of the Board of Trustees of Meditrust
may cause outstanding awards issued under the plan to be assumed, or new rights
substituted therefor, by another entity. In accordance with the provisions of
the aforementioned plans, upon consummation of the Mergers, pursuant to the
Merger Agreement, each outstanding option to purchase from Realty a Meditrust
Share (the "Meditrust Option") will be converted into an option to purchase
such number of shares of Paired Common Stock (rounded down to the nearest whole
number) as is equal to the number of Meditrust Shares issuable upon exercise of
such option multiplied by the Exchange Ratio. Such options, as so converted,
shall be immediately exercisable, except for Meditrust Options to purchase 2.1
million Meditrust Shares at $39.375 per share granted to senior management of
Meditrust on August 8, 1997 (including options to purchase 1.0 million
Meditrust Shares granted to Abraham D. Gosman), which options will vest over
five years from the date of the grant. The exercise price per share of each
such option, as so converted, will be equal to (x) the aggregate exercise price
for the Meditrust Shares otherwise purchasable pursuant to such Meditrust
Option immediately prior to the Effective Time divided by (y) the number of
whole shares of Paired Common Stock deemed purchasable pursuant to such
Meditrust Option as determined above (rounded to the nearest whole cent). The
value to the officers and trustees of Meditrust of the acceleration of the
exercisability of such options, based upon a closing price of $41.0625 per
Meditrust Share on September 23, 1997, is $2,150,090. In the case of any option
to which Section 421 of the Code applies by reason of its qualification under
any of Sections 422-424 of the Code ("qualified stock options"), the option
price, the number of shares of Realty Common Stock purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code.
In order that the holder of a Meditrust option, as so converted, may receive
upon exercise of such option an equal number of shares of Realty Common Stock
and Operating Common Stock, Realty shall purchase from Operating or make
arrangements with Operating for simultaneous issuance by Operating of the same
number of shares of Operating as the number of shares of Realty to be issued by
Realty in connection with such exercises.
Realty has agreed to comply with the terms of the Meditrust stock plans and
ensure, to the extent required by, and subject to the provisions of, such stock
plans, that the Meditrust Options which qualified as qualified stock options
prior to the Effective Time continue to qualify as qualified stock options
after the Effective Time.
Realty and Operating have agreed to take all corporate action necessary to
reserve for issuance a sufficient number of shares of Realty Common Stock for
delivery upon exercise of such options, as so converted, and shares of
Operating Common Stock for delivery upon purchase as provided above. The
Surviving Corporations will use their reasonable best efforts to have declared
effective as soon as practicable following the Effective Time a registration
statement on Form S-8 (or any successor or other appropriate form) with respect
to the Paired Common Stock subject to such options, as so converted, and shall
use their reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options, as so converted, remain outstanding. With respect to those individuals
who subsequent to the Mergers will be subject to the reporting requirements
under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), where applicable, the Surviving Corporations will administer
the stock plans assumed pursuant to the Merger Agreement in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act to the extent the
applicable stock plan complied with such rule prior to the Mergers.
BUSINESS STRATEGY
The primary business objective of the Surviving Corporations will be to
maximize the long-term total return to their shareholders. This objective is
predicated on the following two factors:
. Positive Spread Investment. Management will seek to maximize shareholder
value through positive spread investment opportunities which provide an
accretive cash flow return. Through their paired share structure, the
Surviving Corporations will be able to acquire operating companies and
assets thereby
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reducing economic "leakage." Meditrust will bring its sound capital
structure to the paired share structure to facilitate the acquisition of
growth oriented companies.
. Quality of Management. The Surviving Corporations will seek to employ a
strong management team available for each line of business which is
acquired, properly incentivizing each such team and providing them with
appropriate financial and capital resources.
Management of the Surviving Corporations will seek to continue to increase
shareholder value by operating the core businesses of the former Meditrust and
The Santa Anita Companies in a manner consistent with maximizing funds from
operations, and by actively pursuing acquisition opportunities that will best
utilize the benefits of the paired share structure.
The key elements of this strategy are the following:
. Continue to expand core sale/leaseback and mortgage financing
portfolio. Meditrust's portfolio consists of over $2.6 billion in health
care investments, making it the largest health care REIT in the country.
Meditrust's growth and profitability have historically been driven by its
ability to make investments in additional properties. The Surviving
Corporations will be committed to further expanding and diversifying
Meditrust's existing portfolio of investments.
. Make strategic acquisitions of operating companies in the health care
sector. After the Mergers are completed, the paired share structure will
allow Meditrust Corporation to act as an owner of real estate assets and
Meditrust Operating Company to act as an operator of businesses with real
estate assets, thereby providing shareholders with the benefits of real
estate ownership through a REIT and the economic growth associated with a
fully integrated operating company. The paired share structure should
also facilitate the purchase of international health care related real
estate assets, as many of such assets are currently affiliated with
operating companies.
. Make acquisitions outside the health care sector. The Surviving
Corporations intend to explore a range of other strategic acquisitions
outside the health care industry in order to capitalize on the inherent
value of the paired share structure through diversified active and
passive investments. Management of the Surviving Corporations intends to
seek to consummate such acquisitions which may benefit from the paired
share structure.
. Maximize the value of the Santa Anita horse racing and real estate
assets. The Surviving Corporations anticipate continuing The Santa Anita
Companies' commitment to high quality horse racing and maintaining its
industry leadership in the horse racing industry. The Surviving
Corporations also will seek to maximize the value of the approximately 85
acres of the underutilized land at Santa Anita Park.
There is no assurance that the Surviving Corporations will be able to meet
any or all of these objectives. See "Risk Factors."
Continue to Expand Sale/Leaseback and Mortgage Financing Portfolio
The Surviving Corporations intend to expand their portfolio of investments in
the health care industry by continuing to expand Meditrust's traditional core
business of providing financing to operators of real estate intensive
businesses in the health care industry. Meditrust currently manages a portfolio
of over $2.6 billion in income-producing, health care-related facilities,
including nursing homes, assisted living facilities, medical office buildings
and other health care-related facilities. The Surviving Corporations intend to
continue to expand and diversify this portfolio by broadening its geographic
base, providing financing to additional operators and to other sectors of
health care, increasing the number of health care facilities in its portfolio
and diversifying the types of financings provided.
Over its 12-year history, Meditrust has developed, and currently maintains,
strong relationships with the operators to whom it provides capital. The
Surviving Corporations intend to continue to build and expand those
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relationships by providing additional capital to existing operators and by
pursuing their business strategy in a manner that seeks to minimize any
perceived conflict with such operators. Meditrust's historical ability to
provide mortgage and sale/leaseback financing both for operating facilities and
for the development of new facilities has provided Meditrust with a competitive
advantage in expanding its core financing business. The Surviving Corporations
intend to continue Meditrust's practice of structuring its transactions to
accommodate the unique characteristics of its operators and their facilities, a
practice which Meditrust believes has made it an attractive source of financing
for operators.
Make Strategic Acquisitions of Operating Companies in the Health Care Sector
The federal income tax laws relating to qualification as a REIT have
historically limited Meditrust's activities to that of a passive investor in
real estate. As a paired share REIT that is grandfathered from the application
of Section 269B of the Code (see "Material Federal Income Tax Consequences of
the Mergers"), Meditrust Corporation and Meditrust Operating Company will be
able to pursue a wider variety of strategic acquisitions, including
acquisitions of operating companies. In evaluating potential strategic
acquisitions, the Surviving Corporations expect to consider such factors as:
(i) historical performance of the acquisition candidate; (ii) the long-term
outlook of the sector in which the candidate operates in terms of sustainable
profitability and growth prospects; (iii) the extent to which such an
acquisition candidate complements Meditrust's portfolio of then existing
investments and business relationships; (iv) the asset intensiveness of the
business and the feasibility of transferring the candidate's owned property
into the REIT in a tax-efficient manner; (v) the cost of such an acquisition
relative to its expected contribution to the consolidated earnings and funds
from operations of the Surviving Corporations; and (vi) the Surviving
Corporations' confidence that an appropriate management team or partnership
structure will be in place to effectively manage the acquired operations.
Meditrust's management has significant experience investing in the health
care industry and has developed expertise in key areas, including knowledge of
reimbursement systems and extensive perspective on the fundamental changes that
affect the ways in which health care is delivered. The Surviving Corporations
will seek to take advantage of this experience by focusing primarily on
strategic acquisitions of operating companies in the health care field. For
example, Meditrust believes retirement communities are emerging as a preferred
alternative for meeting the growing demand for cost effective residential
settings in which to care for the elderly who choose not to live independently.
Meditrust believes retirement communities will require large capital infusions
over the next 30 years and that significant opportunities exist for companies
with the ability to finance and operate such facilities. Meditrust also
believes that the stability of future senior housing demand for this sector
will be less dependent on economic and business cycles than many other
industries due to the growing demand for housing for an aging population.
The Surviving Corporations also expect to continue to explore, on a
disciplined basis, international expansion opportunities focusing on the health
care industry of western Europe.
The Surviving Corporations' acquisition candidates and joint venture partners
may include companies in which Mr. Gosman and/or other directors of the
Surviving Corporations have an interest, but any such acquisitions or joint
ventures would be subject to the approval of the disinterested directors of the
Surviving Corporations.
Make Acquisitions Outside the Health Care Sector
The Surviving Corporations also intend to explore a range of other strategic
opportunities which would utilize the paired share structure to maximize
shareholder value, including acquiring real estate companies outside the health
care industry. Meditrust and Santa Anita believe significant opportunities
exist for consolidation of traditional real estate companies as well as
operating companies, and the Surviving Corporations will attempt to take
advantage of such opportunities by identifying and combining businesses where
potential operational efficiencies can be achieved. Meditrust and Santa Anita
recognize that pursuing such opportunities will involve a significant
diversification from Meditrust's traditional focus on the health care
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industry and Santa Anita's core business of horse racing. For this reason,
management of the Surviving Corporations intends to seek opportunities to form
strategic alliances involving experienced management teams or with investor
groups with industry and investment experience in the relevant fields.
In order to facilitate the consummation of acquisitions by the Surviving
Corporations, shareholder approval of the Asset Transfer Proposal will
authorize the Surviving Corporations to transfer some or all of their assets to
one or more wholly-owned subsidiaries in exchange for an equity interest in
such subsidiaries. This will facilitate the use of an UPREIT or DownREIT
structure in connection with acquisitions. The Merger Agreement provides for an
amendment to the charters of the Surviving Corporations to authorize a new
class of common stock issuable in one or more series that have different
designations, rights, preferences and privileges than the existing common
stock. See "Other Santa Anita Proposals--Transfer of Assets to One or More
Subsidiaries" and "The Merger Agreement--Increase in Authorized Shares;
Authorization of Series Common Stock."
Maximize the Value of the Santa Anita Horse Racing and Real Estate Assets
Since 1934, the physical attributes of Santa Anita Park and the prominence of
the horse racing events held there have combined to create one of the pre-
eminent horse racing franchises in the United States. Nevertheless, fundamental
changes in the horse racing industry, including the introduction of state
lotteries, competition from other forms of entertainment and gaming venues and
technological advances such as satellite simulcasts, have reduced on-track
attendance and related revenues, although such decreased revenue has been
largely offset by increases in off-track and satellite wagering. See "--
Background of the Mergers". The Surviving Corporations anticipate continuing
The Santa Anita Companies' commitment to high quality horse racing and renewing
its commitment to maintain industry leadership while operating the horse racing
business in a manner consistent with management's overall objective.
The Surviving Corporations will also seek to maximize the value of the
approximately 85 acres of the underutilized land at Santa Anita Park. Prior to
entering into the Merger Agreement, The Santa Anita Companies' management had
been exploring opportunities with respect to this asset, including the
disposition of certain of these assets and a commercial development on a
portion of the underutilized land at Santa Anita Park. This commercial
development may include entertainment, restaurant, retail and other venues. The
Surviving Corporations will continue to review such proposals.
DIRECTORS OF THE SURVIVING CORPORATIONS
Upon consummation of the Mergers, the following persons will serve as
Directors of the indicated corporation(s):
<TABLE>
<CAPTION>
NAME CORPORATION(S) TERM EXPIRES
---- -------------- ------------
<S> <C> <C>
Abraham D. Gosman................... Meditrust Corporation and 2000
Meditrust Operating Company 2000
David F. Benson..................... Meditrust Corporation and 1998
Meditrust Operating Company 1998
Edward W. Brooke.................... Meditrust Corporation and 2000
Meditrust Operating Company 2000
C. Gerald Goldsmith................. Meditrust Corporation and 2000
Meditrust Operating Company 2000
Philip L. Lowe...................... Meditrust Corporation and 1998
Meditrust Operating Company 1998
Thomas J. Magovern.................. Meditrust Corporation and 1998
Meditrust Operating Company 1998
Gerald Tsai, Jr. ................... Meditrust Corporation and 1999
Meditrust Operating Company 1999
William C. Baker.................... Meditrust Corporation 2000
J. Terrence Lanni................... Meditrust Corporation 1999
James P. Conn....................... Meditrust Operating Company 1999
John C. Cushman, III................ Meditrust Operating Company 2000
</TABLE>
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Abraham D. Gosman will be the Chairman of the Surviving Corporations. Mr.
Gosman has been the Chairman of Meditrust since its organization in 1985 and
became Chief Executive Officer in February 1991. Mr. Gosman is also the
Chairman of the Board, Chief Executive Officer and President of PhyMatrix
Corp., a publicly traded physician practice management company which renders
managerial and administrative services to a variety of specialized medical care
and treatment providers. Additionally, Mr. Gosman is Chairman of the Board of
CareMatrix Corporation, a publicly traded company which provides a full range
of quality senior residential services in assisted living settings. Mr. Gosman
was the Chief Executive Officer of The Mediplex Group, Inc. ("Mediplex"), an
operator and developer of health care facilities, from its inception in 1983
until 1988 and from 1990 until June 1994, when Mediplex was acquired by Sun
Healthcare Group, Inc. Mr. Gosman has been in the health care and development
business for more than 30 years.
David F. Benson has been a Trustee of Meditrust since 1991. Mr. Benson has
been President of Meditrust since September 1991 and Treasurer since October
1996. Mr. Benson also served as Treasurer of Meditrust from January 1986 to May
1992. He was Treasurer of Mediplex from January 1986 through June 1987. He was
previously associated with Coopers & Lybrand L.L.P., independent accountants,
from 1979 to 1985. Mr. Benson is a trustee of Mid-Atlantic Realty Trust and a
member of the Board of Directors of Harborside Healthcare Corporation and
Nursing Home Properties, Plc.
Edward W. Brooke has been a Trustee of Meditrust since 1985. Mr Brooke was a
partner of O'Connor & Hannan, a Washington, D.C. law firm, from 1979 until
January 1997. From 1979 until October 1990 he was Of Counsel to Csaplar & Bok,
a Boston law firm. He was United States Senator from Massachusetts from January
1967 to January 1979 and the Massachusetts Attorney General from 1963 to 1967.
C. Gerald Goldsmith has been a Trustee of Meditrust since August 8, 1997. Mr.
Goldsmith was Chairman and President of I.C.D., a New York Stock Exchange
listed company from 1972 to 1976, and since then he has been an independent
investor and financial advisor. He currently serves as a director of Nine West
Group, Inc., Palm Beach National Bank & Trust Company, American Banknote
Corporation and Innkeepers USA Trust. He also serves as Chairman of the Board
of Intercoastal Health Foundation.
Philip L. Lowe has been a Trustee of Meditrust since 1987. Mr. Lowe has been
a principal of Philip L. Lowe and Associates, a consulting firm, and its
predecessors for more than five years and until March 1997 had been a director
of Analog Devices, Inc. for 17 years.
Thomas J. Magovern has been a Trustee of Meditrust since 1985. Mr. Magovern
has been a Regional Vice President, Real Estate Asset Management of Summit Bank
(successor to United Jersey Bank), a New Jersey banking institution, since
November 1995. He was a principal of Nationwide Financial Corp., a real estate
consulting firm from September 1993 to October 1995. Mr. Magovern was Executive
Vice President of Northeast Savings, F.A. from January 1991 until February
1993. Prior to that time he had been Senior Vice President of City Savings
Bank, F.S.B. from April 1989 until January 1991 and a Vice President of that
bank for more than five years.
Gerald Tsai, Jr. has been a Trustee of Meditrust since 1992. Mr. Tsai has
been the Chairman, Chief Executive Officer and President of Delta Life
Corporation, an annuity company, since February 1993. Mr. Tsai retired in 1991
as Chairman of the Executive Committee of the Board of Directors of Primerica
Corporation, a diversified financial services company, which position he held
since December 1988. From January 1987 to December 1988, Mr. Tsai was Chairman,
and from April 1986 to December 1988, he was Chief Executive Officer of
Primerica Corporation. He is a director of Rite Aid Corporation, Sequa
Corporation, Triarc Companies, Inc., Proffitt's, Inc. and Zenith National
Insurance Corp. Mr. Tsai is also a Trustee of Boston University and New York
University Medical Center.
William C. Baker has been Chairman of the Board of Realty and Chairman of the
Board and Chief Executive Officer of Operating since August 1996 and a Director
since 1991. Mr. Baker was Chief Executive Officer of Realty from April l996 to
August 1996. Mr. Baker was the President of Red Robin International, Inc.
(restaurant company) from 1993 to 1995, a private investor from 1988 to 1992
and Chairman of the Board and
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Chief Executive Officer of Del Taco, Inc. (restaurant franchise) from 1976 to
1988. He has also served as Chairman of the Board of Coast Newport Properties
(real estate brokers) since 1991. Mr. Baker is a Director of Callaway Golf
Company (golf equipment) and Public Storage, Inc. (REIT).
James P. Conn has been a Director of Realty and Operating since 1995. Mr.
Conn has been the Managing Director and Chief Investment Officer of Financial
Security Assurance, Inc. (insurance) since 1992. He was also the President and
Chief Executive Officer of Bay Meadows Operating Company (horse racing) from
1988 to 1992. Mr. Conn is a Trustee of Gabelli Equity Trust and Gabelli Global
Multimedia Trust (investment companies).
John C. Cushman, III has been a Director of Realty and Operating since 1996.
Mr. Cushman has been the President and Chief Executive Officer of Cushman
Realty Corporation since 1978. He is a Director of National Golf Properties,
Inc. (golf course owner).
J. Terrence Lanni has been a Director of Realty and Operating since 1995. He
has been the Chairman and Chief Executive Officer of MGM Grand Inc.
(hotel/casino) since 1995. He was the President and Chief Operating Officer of
Caesars World Inc. (hotel/casino) from 1981 to 1995.
RESALE RESTRICTIONS
The shares of Paired Common Stock to be issued to the Meditrust and MAC
shareholders in connection with the Mergers have been registered under the
Securities Act. The shares of Paired Common Stock received by Meditrust and MAC
shareholders upon consummation of the Mergers will be freely transferrable
under the Securities Act, except that shares issued to any person who may be
deemed to be an "affiliate" of Meditrust or MAC, as applicable, within the
meaning of Rule 145 under the Securities Act, may only be sold pursuant to an
effective registration statement under the Securities Act covering such shares
or in compliance with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act. "Affiliates" are generally
defined as persons who control, are controlled by, or are under common control
with Meditrust or MAC at the time of the respective Meditrust Meetings
(generally trustees, certain executive officers and principal shareholders).
This Joint Proxy Statement/Prospectus does not cover any resales of the
Paired Common Stock to be received by the shareholders of Meditrust upon
consummation of the Mergers, and no person is authorized to make any use of
this Joint Proxy Statement/Prospectus in connection with any such resale.
APPROVALS
The Mergers will require the consent of certain institutional lenders of The
Santa Anita Companies and Meditrust. As of the date of this Joint Proxy
Statement/Prospectus, some of the foregoing consents have been received. It is
not anticipated that such consents will be withheld. There can be no assurance
as to the timing of the receipt of such consents, if given, or as to the
conditions, if any, on which consents will be given. It is possible that
application will have to be made to the California Department of Alcoholic
Beverage Control to approve the transfer of liquor licenses held by Los Angeles
Turf Club, Incorporated, a wholly-owned subsidiary of Operating ("LATC").
Although such approval, if required, cannot be finalized before the Mergers are
completed, it is not anticipated that such approval will be withheld.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), prohibits consummation of the Mergers until certain information has
been furnished to the Antitrust Division of the Department of Justice and the
Federal Trade Commission and certain waiting period requirements have been
satisfied. As of the date of this Joint Proxy Statement/Prospectus, all such
waiting period requirements have been satisfied.
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INTERESTS OF CERTAIN PERSONS IN THE MERGERS
The following officers of Operating: William C. Baker (President and Chief
Executive Officer), Clifford C. Goodrich (Executive Vice President), Thomas S.
Robbins (Vice President--Racing) and Kathryn J. McMahon (General Counsel and
Secretary), and the following officer of Realty: Brian L. Fleming (Acting
President, Chief Executive Officer, Executive Vice President and Chief
Financial Officer and Secretary) have severance agreements with The Santa Anita
Companies which provide, among other things, that if a Change in Control (as
defined in such agreements) occurs and within three years thereafter there is a
Qualifying Termination (as defined, which includes assignment to the employee
of any duties inconsistent in any material respect with the employee's
position, authority, duties or responsibilities prior to the Change in Control,
certain reductions in the employee's total compensation and any involuntary
termination without "cause"), then the employee will be entitled to a lump sum
payment equal to 2 1/2 times the sum of (i) the employee's current annual base
salary rate plus (ii) the employee's average bonus over the three calendar
years preceding the Change in Control (the "Cash Amount"). In addition, the
employees may continue to participate in The Santa Anita Companies' medical and
dental plans for three years if the employee pays the applicable premium. The
severance agreements provide that no payments will be made to the extent such
payments, together with any other payments by The Santa Anita Companies, would
cause the limits in Section 280G of the Code to be exceeded. At the Effective
Time, a Change in Control will be deemed to have occurred under the severance
agreements. One or more of the employees may assert that a Qualifying
Termination will occur at the Effective Time even if the employee is not
terminated by The Santa Anita Companies. Operating has entered into a severance
agreement with another employee that contains terms similar to those described
above. Operating also has an agreement with an additional officer and Realty
has similar agreements with selected employees, including Tom D. Austin (Vice
President), which have comparable terms to those described above except (a) in
the event the employee becomes entitled to a lump sum payment, the payment is
calculated at one times the Cash Amount, rather than 2 1/2 times the Cash
Amount, and (b) the employee is not entitled to participate in medical and
dental plans for the three-year period. If Qualifying Terminations of each of
the officers were to occur at the Effective Time, The Santa Anita Companies
currently estimate that the payments to the executive officers required to be
made under the severance agreements would be approximately: $1,583,333 to Mr.
Baker; $788,333 to Mr. Goodrich; $505,833 to Mr. Robbins; $353,750 to Ms.
McMahon; $800,000 to Mr. Fleming; and $135,500 to Mr. Austin.
Under the Realty Share Award Plan, the Realty 1984 Stock Option Program, the
Operating Share Award Plan, and the Operating 1984 Stock Option Program
(collectively, the "Santa Anita Plans"), upon a Change in Control Event (as
defined in such plans), a participant's options and stock appreciation rights
become immediately exercisable and any restrictions upon restricted stock
immediately lapse, subject to certain exceptions. See "Other Santa Anita
Proposals--Proposal to Amend Santa Anita Realty Enterprises, Inc. 1995 Share
Award Plan" and "--Proposal to Amend Santa Anita Operating Company 1995 Share
Award Plan." At the Effective Time, a Change in Control Event under each of the
Santa Anita Plans will be deemed to have occurred. As a result, non-vested
options (at September 23, 1997) granted to employees to acquire 188,620 shares
of Paired Common Stock will become immediately exercisable, including options
held by the following current executive officers of either Realty or Operating
with the indicated exercise prices: William C. Baker (options to acquire 75,000
shares at an exercise price of $15.25 per share); Clifford C. Goodrich (options
to acquire 16,200 shares at exercise prices ranging from $12.625 to $17.38 per
share); Thomas S. Robbins (options to acquire 8,500 shares at exercise prices
ranging from $12.625 to $17.38 per share); Kathryn J. McMahon (options to
acquire 7,200 shares at exercise prices ranging from $12.625 to $17.125 per
share); Brian L. Fleming (options to acquire 18,800 shares at exercise prices
ranging from $12.625 to $18.625 per share); and Tom D. Austin (options to
acquire 5,400 shares at exercise prices ranging from $12.625 to $16.75 per
share). The approximate aggregate value of such options held by executive
officers, based upon the price per share of Paired Common Stock as of September
23, 1997, is $2.4 million ($1,387,500 for Mr. Baker, $300,960 for Mr. Goodrich,
$158,981 for Mr. Robbins, $137,700 for Ms. McMahon, $319,150 for Mr. Fleming
and $101,700 for Mr. Austin). In addition, restrictions on 12,098 shares of
Paired Common Stock issued to Mr. Goodrich, the Executive Vice President of
Operating, will lapse if Mr. Goodrich is involuntarily terminated without cause
or he voluntarily terminates employment for a good reason (as defined in his
restricted stock agreement). The value of such 12,098 shares is $408,308 based
upon the price per share of Paired Common Stock as of September 23, 1997.
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Under The Santa Anita Companies' Retirement Income Plan (the "Retirement
Plan") and Thrift Plan for Employees (the "Thrift Plan"), upon a Change in
Control Event (as defined in such plan), all benefits under the Retirement Plan
and the Thrift Plan will become 100% vested. At the Effective Time, a Change in
Control Event under the Retirement Plan and the Thrift Plan will be deemed to
have occurred. All executive officers of Realty and Operating may participate
in these plans. As of August 31, 1997, the benefits of Mr. Baker, Ms. McMahon
and Messrs. Fleming and Austin under the Retirement Plan were not vested. The
value, determined on actuarial basis, of these benefits as of that date, was
approximately $116,000. As of August 31, 1997, 7,093 shares were allocated to
executive officers under the Thrift Plan, of which 6,650 were vested. The value
of the unvested 443 shares is $14,951, based upon the price per share of Paired
Common Stock as of September 23, 1997.
Under The Santa Anita Companies' consulting agreements with directors, a
director retiring subsequent to 1960 and serving Realty, Operating or a
predecessor as an outside director for at least ten years is remunerated at the
annual rate of $480 times his or her years of service. This annual amount is
payable for five years. As a result of the Mergers, two retiring directors with
respective tenures of 37 and 30 years will be eligible for such payments.
The Compensation Committee of Meditrust is currently negotiating a five year
employment contract with Mr. Gosman. In connection with such negotiation, and
in recognition of Mr. Gosman's unique role in connection with the Mergers, the
Compensation Committee has considered a proposal that, in the event that the
Mergers are consummated, Mr. Gosman be paid an amount in cash equal to the
number of shares of Meditrust outstanding immediately prior to the Mergers
multiplied by 5% of the increase from (i) $37.25 (the closing price per share
of Meditrust on the NYSE on the last trading day prior to the announcement of
the Mergers) to (ii) the average closing price of 1.2016 shares of Paired
Common Stock on the 40 trading days commencing 30 days after the date of the
closing of the Mergers. Based upon the closing price on September 23, 1997, the
amount of the payment would be approximately $11.76 million. The Board of
Trustees of Meditrust has not yet considered this proposal.
Pursuant to the Merger Agreement, each outstanding option to purchase a
Meditrust Share will be converted into an option to purchase from Realty such
number of shares of Paired Common Stock (rounded down to the nearest whole
number) as is equal to the number of Meditrust Shares issuable upon exercise of
such option multiplied by the Exchange Ratio. In connection with the Mergers, a
total of approximately 386,336 Meditrust options will be immediately
exercisable, including the following options held by the Trustees and
management of Meditrust with the indicated exercise prices: Michael S. Benjamin
(options to acquire 13,333 shares at an exercise price of $30.125); David F.
Benson (options to acquire 20,000 shares at an exercise price of $30.125);
Edward W. Brooke (options to acquire 20,000 shares at an exercise price of
$30.125); Michael F. Bushee (options to acquire 13,333 shares at an exercise
price of $30.125); John G. Demeritt (options to acquire 20,333 shares at an
exercise price of $34.125); Abraham D. Gosman (options to acquire 20,000 shares
at an exercise price of $30.125); Philip L. Lowe (options to acquire 20,000
shares at an exercise price of $30.125); Thomas J. Magovern (options to acquire
13,357 shares at an exercise price of $30.25, and 13,825 shares at an exercise
price of $30.00); Stephen C. Mecke (options to acquire 11,666 shares at an
exercise price of $30.125); Debora A. Pfaff (options to acquire 11,666 shares
at an exercise price of $30.125); Stephen H. Press (options to acquire 11,666
shares at an exercise price of $30.125); and Gerald Tsai, Jr. (options to
acquire 20,000 shares at an exercise price of $30.125).
Pursuant to the Merger Agreement, after the Effective Time Meditrust
Corporation and Meditrust Operating Company will indemnify the directors and
officers of Realty and Operating against liabilities or expenses incurred in
connection with claims relating to matters occurring prior to the Effective
Time to the full extent permitted under applicable law, and have agreed to
maintain in effect directors' and officers' liability insurance for their
benefit. See "The Merger Agreement--Director and Officer Indemnification."
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Following the Effective Time, all of the Trustees of Meditrust will serve on
the Boards of Directors of the Surviving Corporations. In addition, William C.
Baker and J. Terrence Lanni will serve on the Board of Directors of Meditrust
Corporation and James P. Conn and John C. Cushman, III will serve on the Board
of Directors of Meditrust Operating Company. Messrs. Baker, Lanni, Conn and
Cushman are currently Directors of Realty and Operating. See "--Directors of
the Surviving Corporations."
APPRAISAL RIGHTS
Under Delaware and Massachusetts law, neither the holders of the Paired
Common Stock of The Santa Anita Companies nor the shareholders of Meditrust or
MAC will have any dissenters' or appraisal rights; however, the holders of the
Series A Preferred Stock of The Santa Companies have appraisal rights in
connection with the Mergers under Section 262 ("Section 262") of the Delaware
General Corporation Law ("DGCL").
The following summary of the availability of appraisal rights is not a
complete statement of the law relating to appraisal rights and is qualified in
its entirety by reference to Section 262. All references in Section 262 and in
this summary to a "stockholder" or "holder" are to the record holder of the
shares of Series A Preferred Stock as to which appraisal rights are asserted.
Holders of Series A Preferred Stock. Under the DGCL, holders of The Santa
Anita Companies' Series A Preferred Stock who follow the procedures set forth
in Section 262 will be entitled to have their shares of Series A Preferred
Stock appraised by the Delaware Chancery Court and to receive payment in cash
of the "fair value" of such shares of Series A Preferred Stock, exclusive of
any element of value arising from the accomplishment or expectation of the
Mergers, together with a fair rate of interest, if any, as determined by such
court. A person who has a beneficial interest in shares of Series A Preferred
Stock held of record in the name of another person, such as a broker or
nominee, must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect appraisal rights.
Under Section 262, when a proposed merger is to be submitted for approval at
a meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, must notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are
available, that appraisal rights are available, and must include with such
notice a copy of Section 262. Any holder of Series A Preferred Stock who wishes
to exercise such appraisal rights or who wishes to preserve his or her right to
do so should review the following discussion and Section 262 carefully, because
failure to comply timely and properly with the procedures specified will result
in the loss of appraisal rights under the DGCL.
A HOLDER OF SERIES A PREFERRED STOCK WISHING TO EXERCISE SUCH HOLDER'S
APPRAISAL RIGHTS (A) MUST NOT VOTE IN FAVOR OF THE MERGERS AND (B) MUST DELIVER
TO THE SANTA ANITA COMPANIES, PRIOR TO THE VOTES ON THE MERGERS AT THE SANTA
ANITA MEETINGS TO BE HELD ON NOVEMBER 5, 1997, A WRITTEN DEMAND FOR APPRAISAL
OF SUCH HOLDER'S SHARES OF SERIES A PREFERRED STOCK. THUS, ANY HOLDER OF SERIES
A PREFERRED STOCK WHO WISHES TO ELECT TO DEMAND APPRAISAL AND WHO EXECUTES AND
RETURNS A PROXY CARD ON ONE OF THE ACCOMPANYING FORMS MUST SPECIFY THAT SUCH
HOLDER'S SHARES ARE TO BE VOTED AGAINST THE MERGERS OR THAT THE PROXY HOLDER
SHOULD ABSTAIN FROM VOTING SUCH HOLDER'S SHARES. IF THE SHAREHOLDER RETURNS A
PROXY WITHOUT VOTING INSTRUCTIONS, OR WITH INSTRUCTIONS TO VOTE IN FAVOR OF THE
MERGERS, SUCH HOLDER'S SHARES WILL AUTOMATICALLY BE VOTED IN FAVOR OF THE
MERGERS AND THE SHAREHOLDER WILL LOSE ANY RIGHT TO APPRAISAL OF SUCH HOLDER'S
SHARES OF SERIES A PREFERRED STOCK.
A holder of Series A Preferred Stock wishing to exercise such holder's
appraisal rights must be the record holder of such Series A Preferred Stock on
the date the written demand for appraisal is made and must continue to hold
such Series A Preferred Stock until the consummation of the Mergers.
Accordingly, a holder of Series A Preferred Stock who is the record holder of
the Series A Preferred Stock on the date the written demand for appraisal is
made, but who thereafter transfers such Series A Preferred Stock prior to the
consummation of the Mergers, will lose any right to appraisal in respect of
such Series A Preferred Stock.
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Only a holder of record of Series A Preferred Stock is entitled to assert
appraisal rights for the shares of Series A Preferred Stock registered in that
holder's name. A demand for appraisal should be executed by or on behalf of the
holder of record, fully and correctly, as such holder's name appears on the
holder's stock certificates. If the shares of Series A Preferred Stock are
owned of record in a fiduciary capacity, such as by a trustee, guardian or
custodian, execution of the demand should be made in that capacity, and if the
shares of Series A Preferred Stock are owned of record by more than one person,
such as a joint tenancy or tenancy in common, the demand should be executed by
or on behalf of all joint owners. An authorized agent, including one or more
joint owners, may execute a demand for appraisal on behalf of a holder of
record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is agent
for such owner or owners. A record holder such as a broker who holds shares of
Series A Preferred Stock as nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of Series A Preferred Stock held
for one or more beneficial owners while not exercising such rights with respect
to the shares of Series A Preferred Stock held for other beneficial owners; in
such case, the written demand should set forth the number of shares of Series A
Preferred Stock as to which appraisal is sought. When no number of shares of
Series A Preferred Stock is expressly mentioned the demand will be presumed to
cover all shares of Series A Preferred Stock held in the name of the record
owner. Shareholders who hold their Series A Preferred Stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such nominee.
WRITTEN DEMAND FOR APPRAISAL RIGHTS SHOULD BE SENT OR DELIVERED TO THE
SECRETARY, SANTA ANITA OPERATING COMPANY, 285 WEST HUNTINGTON DRIVE, P.O. BOX
60014, ARCADIA, CALIFORNIA 91066-6014. SUCH DEMAND MUST BE RECEIVED BY THE
SANTA ANITA COMPANIES BEFORE THE SANTA ANITA MEETINGS ON NOVEMBER 5, 1997.
If any holder of Series A Preferred Stock demands appraisal, and the issuance
of Paired Common Stock in exchange for the outstanding Series A Preferred Stock
is approved by the required shareholder vote at the Santa Anita Meetings, then
The Santa Anita Companies may elect, prior to the Effective Time, to exchange
such shareholders' Series A Preferred Stock for shares of Paired Common Stock.
See "Other Santa Anita Proposals--Issuance of Paired Common Stock in Exchange
for Series A Preferred Stock." Upon completion of such exchange, such
shareholder would no longer have any appraisal rights.
Within 10 days after the consummation of the Mergers, the Surviving
Corporations will notify each holder of Series A Preferred Stock who has
properly asserted appraisal rights under Section 262 and has not voted in favor
of the Mergers of the date the Mergers became effective.
Within 120 days after the consummation of the Mergers, but not thereafter,
the Surviving Corporations or any holder of Series A Preferred Stock who has
complied with the statutory requirements summarized above may file a petition
in the Delaware Chancery Court demanding a determination of the fair value of
the Series A Preferred Stock. The Surviving Corporations are under no
obligation to, and The Santa Anita Companies have no present intention to, file
such a petition with respect to the appraisal of the fair value of the Series A
Preferred Stock. Accordingly, it is the obligation of the holders of Series A
Preferred Stock to initiate all necessary action to perfect their appraisal
rights within the time prescribed in Section 262.
Within 120 days after the consummation of the Mergers, any holder of Series A
Preferred Stock who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to receive from the
Surviving Corporations a statement setting forth the aggregate number of shares
of Series A Preferred Stock not voted in favor of the Mergers and with respect
to which demands for appraisal have been received and the aggregate number of
holders of such shares of Series A Preferred Stock. Such statements must be
mailed within 10 days after a written request therefor has been received by the
Surviving Corporations.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine the holders of Series A
Preferred Stock who have complied with Section 262 and who have
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become entitled to appraisal rights and will appraise the "fair value" of their
shares of Series A Preferred Stock, exclusive of any element of value arising
from the accomplishment or expectation of the Mergers, together with a fair
rate of interest, if any, to be paid upon the amount determined to be the fair
value. The Delaware Supreme Court has stated that "proof of value by any
techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
the appraisal proceedings.
The Delaware Chancery Court will determine the amount of interest, if any, to
be paid on the amounts to be received by persons whose shares of Series A
Preferred Stock have been appraised. The costs of the proceeding may be
determined by the Delaware Chancery Court and taxed upon the parties as the
court deems equitable. The Delaware Chancery Court may also order that all or a
portion of the expenses incurred by any shareholder in connection with an
appraisal, including, without limitation, reasonably attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all of the shares of Series A Preferred Stock
entitled to appraisal.
Any holder of Series A Preferred Stock who has duly demanded appraisal in
compliance with Section 262 will not, after consummation of the Mergers, be
entitled to vote such holder's shares of Series A Preferred Stock for any
purpose or be entitled to the payment of dividends or other distributions on
those shares (except dividends or other distributions payable to holders of
record of Series A Preferred Stock as of a record date prior to the
consummations of the Mergers).
If holders of Series A Preferred Stock who properly demand appraisal of their
Series A Preferred Stock under Section 262 fail to perfect, or effectively
withdraw or lose, their right to appraisal, as provided in the DGCL, the shares
of Series A Preferred Stock of such holders will remain outstanding shares of
Series A Preferred Stock of the Surviving Corporations, subject to the rights
of the Surviving Corporations and the holders as set forth below in
"Description of Capital Stock of The Santa Anita Companies--Preferred Stock." A
holder of Series A Preferred Stock will fail to perfect, or effectively lose or
withdraw, his or her right to appraisal if, among other things, no petition for
appraisal is filed within 120 days of the Effective Time, or if the stockholder
delivers to the Surviving Corporations a written withdrawal of his or her
demand for appraisal. Any such attempt to withdraw an appraisal demand more
than 60 days after the Effective Time will require the written approval of the
Surviving Corporations, and no appraisal proceeding in the Delaware Chancery
Court may be dismissed as to any shareholder without court approval.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING APPRAISAL
RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
MATERIAL DIFFERENCES IN RIGHTS OF SHAREHOLDERS OF THE SANTA ANITA COMPANIES AND
MEDITRUST AND MAC
If the Mergers are consummated, the business of the Surviving Corporations
will be conducted as Delaware corporations. Meditrust and MAC are business
trusts organized under the laws of The Commonwealth of Massachusetts. The
rights of holders of Meditrust Shares presently are governed by the Restated
Declaration of Trust dated May 10, 1996 (the "Declaration") and Meditrust's By-
laws. The rights of holders of MAC are governed by the Declaration of Trust
dated June 2, 1997 (the "MAC Declaration") and the By-laws of MAC, which are
substantially similar to the Declaration and the By-laws of Meditrust insofar
as shareholder rights are concerned. Except as noted below in this Section, all
statements relating to Meditrust and the Declaration apply to MAC and the MAC
Declaration.
Set forth below is a summary of the material differences between the rights
of the holders of Meditrust Shares and MAC Shares and those of shareholders of
The Santa Anita Companies, which will be the Surviving Corporations. The
summary does not purport to be a complete statement of all such differences,
and is qualified by reference to the DGCL, The Santa Anita Companies'
Certificates of Incorporation ("The Santa Anita Companies' Certificates"), and
their By-Laws ("The Santa Anita Companies' By-Laws"), the Declaration, the
Meditrust By-Laws and the MAC Declaration and By-Laws. Copies of The Santa
Anita Companies'
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Certificates, The Santa Anita Companies' By-Laws, the Meditrust Declaration,
the Meditrust By-Laws and the MAC Declaration and By-Laws are incorporated by
reference herein and will be sent to shareholders of The Santa Anita Companies
and The Meditrust Companies upon request. See "Where You Can Find More
Information." Copies of the Declaration, the MAC Declaration and the By-Laws of
Meditrust and MAC are available for inspection by shareholders at the principal
office of Meditrust in Needham, Massachusetts.
Paired Shares. Prior to the record date, Meditrust and MAC entered into a
stock-pairing arrangement pursuant to which any transferee of Meditrust Shares
will also receive a beneficial interest in an equal number of MAC Shares and
any transferee of MAC Shares will also receive a beneficial interest in an
equal number of Meditrust Shares and such shares will be paired with one
another for the purpose of trading.
The Santa Anita Companies' By-Laws and a pairing agreement dated as of
December 31, 1979 between Realty and Operating provide for a similar stock-
pairing arrangement.
Purposes. The primary purpose of Meditrust is to invest in health care
related, income-producing investments in real property and real estate
interests. While the trustees are given broad general powers by the Declaration
in the determination of which activities may be pursued by Meditrust, the
policy of Meditrust is to make investments which comply with the requirements
of the Code with respect to the composition of the investments and the
derivation of the income for a REIT. While MAC was formed to facilitate the
Mergers, the MAC Declaration states no primary purpose.
The Santa Anita Companies' Certificates provide that Realty and Operating may
engage in any lawful activity or business permitted a corporation under the
laws of the State of Delaware. The By-Laws of Realty, however, provide that
Realty shall conduct its business in such a manner as to be qualified to be
taxed as a REIT and the assets of Realty shall be invested principally in real
property and interests in real estate.
Shareholders' Meetings. The Declaration provides that whenever holders of
Meditrust Shares are required or permitted to take any action, unless a vote at
a meeting is specifically required, such action may be taken without a meeting
by written consents setting forth the action so taken signed by the holders of
at least a majority (or, in certain cases, three-quarters) of the outstanding
shares that would be entitled to vote thereon at a meeting. Special meetings
are required to be called upon the written request of holders of at least 10%
of the Meditrust Shares.
The Santa Anita Companies' Certificates and By-Laws provide that any action
required or permitted to be taken by shareholders of The Santa Anita Companies
must be taken at a meeting and may not be taken by consent in writing. The
Santa Anita Companies' By-Laws also provide that shareholders of The Santa
Anita Companies do not have the right to call meetings of the shareholders and
that shareholders must provide advance notice of any proposals that they wish
to be submitted for shareholder approval.
Board of Trustees/Board of Directors. The Declaration provides that the
trustees of Meditrust (the "Trustees") have full, absolute and exclusive power,
control and authority over the property and income and the business and affairs
Meditrust, to the same extent as if they were the sole owners thereof in their
own right. The Trustees are elected to hold office for one year terms and until
their successors are elected and qualified. The Declaration does not provide
for cumulative voting. The number of Trustees is such number, not less than
three (one, in the case of MAC) nor more than twelve, as may be determined and
changed from time to time by the Trustees or by the holders of Meditrust
Shares. At the present time, such number has been fixed at eight in the case of
Meditrust (with one current vacancy) and two in the case of MAC. Any Trustee
may be removed at any time with or without cause by the holders of a majority
of the outstanding Meditrust Shares or with cause by unanimous vote of the
remaining Trustees.
The Santa Anita Companies' business and affairs are managed by their
respective Boards of Directors. The Santa Anita Companies' Certificates and By-
Laws provide for classified Boards of Directors. The directors of The Santa
Anita Companies are divided into three classes and each year one class of
directors is elected to hold
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office for a term of three years and until the successors of the respective
directors are elected and qualified. The Santa Anita Companies' By-Laws provide
that the Boards of Directors are authorized to fix the number of directors. The
number is currently fixed at ten. The DGCL provides that, unless otherwise
provided in the certificate of incorporation (The Santa Anita Companies'
Certificates do not so otherwise provide), so long as the Boards are classified
as described above, the directors may be removed by the holders of a majority
of the shares then entitled to vote at an election of directors only for cause.
The DGCL does not contain any provision for the removal of a director by other
directors and The Santa Anita Companies' Certificates and By-Laws contain no
provisions in respect of this subject.
The Santa Anita Companies' Certificates provide that every shareholder
entitled to vote at any election of directors may cumulate such shareholder's
votes and give one nominee a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the shareholder's
shares are normally entitled or distribute such number of votes among any
number of the nominees. At the Santa Anita Meetings, the shareholders of The
Santa Anita Companies are being asked to vote to amend The Santa Anita
Companies' Certificates to delete these cumulative voting provisions. See
"Other Santa Anita Proposals--Proposal to Eliminate Cumulative Voting."
Distributions. The Declaration provides that dividends are payable out of
income, capital, capital gains, principal, surplus, proceeds from the increase
or financing or refinancing of Meditrust obligations, or from the sale of
portions of Meditrust's property or any other source as the Trustees determine.
Under the DGCL, The Santa Anita Companies may pay dividends out of surplus or
out of net profits for the current or previous fiscal year.
Realty expects to distribute dividends of at least 95% of its REIT taxable
income (determined without regard to net capital gains and the dividends paid
deduction) on a current basis in order to maintain its status as a real estate
investment trust under the Code.
Dissenters' Rights of Appraisal. Neither the Declaration nor any
Massachusetts statute grants to the holders of Meditrust Shares any rights in
the nature of dissenters' rights of appraisal with respect to any action upon
which the holders of Meditrust Shares may be entitled to vote.
Under the DGCL, no dissenters' rights of appraisal are granted to
shareholders who dissent from a sale, lease or exchange of all or substantially
all of the assets of a corporation. The DGCL further provides that no
dissenters' rights of appraisal are granted to shareholders who dissent from a
merger or consolidation for which a shareholders' vote is required if the
shares of the class of stock in question are listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the NASD or held of record by more than 2,000 shareholders,
unless the shareholders are required in connection with the merger or
consolidation to accept for their stock anything except (i) stock of the
corporation surviving or resulting from the merger or consolidation, (ii) stock
of any other corporation listed on a national securities exchange or designated
as a national market system security on an interdealer quotation system by the
NASD or held of record by more than 2,000 shareholders, (iii) cash in lieu of
fractional shares or (iv) any combination of (i), (ii) and (iii) above. The
shares of Meditrust, MAC and The Santa Anita Companies (other than the shares
of Series A Preferred Stock) are traded on the NYSE. Under the DGCL, the
holders of Santa Anita Companies' Series A Preferred Stock are entitled to
appraisal rights in connection with a merger or consolidation, subject to
certain exceptions.
Amendment; Termination. Amendment of the Declaration or termination of
Meditrust requires the approval of the holders of at least a majority (or, in
certain cases with respect to the Declaration, up to 90%) of the issued and
outstanding Meditrust Shares.
The DGCL provides that the affirmative vote of the board of directors and the
approval by at least a majority of the holders of the issued and outstanding
shares of capital stock entitled to vote is required to
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amend the certificate of incorporation, to merge or consolidate the subject
corporation with or into another corporation (with certain exceptions) or to
sell or otherwise dispose of all or substantially all of its assets or to cause
it to dissolve. The Santa Anita Companies' Certificates provide that a super
majority is required for the approval of certain business combinations. See "--
Fair Price Provision and Shareholder Rights Plan." The Santa Anita Companies'
By-Laws provide that they may be amended or repealed with the approval of the
holders of 80% of the issued and outstanding stock entitled to vote or, except
with respect to the provisions governing transfers of stock, by The Santa Anita
Companies' Boards of Directors.
Shareholder Liability. The Declaration provides that no holder of Meditrust
Shares shall be liable for any debt, liability or obligation of Meditrust or
any claim, demand, judgment or decree against Meditrust arising out of any
action taken or omitted for or on behalf of Meditrust. The Declaration further
provides that all third persons shall look solely to Meditrust's property for
satisfaction of claims arising in connection with the affairs of Meditrust.
Under the laws of The Commonwealth of Massachusetts no personal liability will
attach to the holders of Meditrust Shares for contract claims under any
undertaking containing a provision disavowing shareholder liability as a term
thereof where adequate notice is given of such a provision. It is possible,
however, that holders of Meditrust Shares may be held personally liable with
respect to undertakings containing such a provision in a few jurisdictions.
With respect to all types of claims in such jurisdictions and with respect to
tort claims, contract claims where shareholder liability is not disavowed as
described above, claims for certain taxes and certain statutory liabilities in
other jurisdictions, a shareholder may be held personally liable to the extent
that such claims are not satisfied by Meditrust. However, Meditrust is
obligated by the Declaration to indemnify any holder of Meditrust Shares who,
contrary to the provisions of the Declaration, is held to any personal
liability.
Under the DGCL, holders of Realty Capital Stock and Operating Capital Stock
are not personally liable, as such, for claims of third parties against The
Santa Anita Companies.
Liability and Indemnification of Trustees, Directors, Officers and
Agents. The Declaration provides that no trustee, officer, employee, agent or
affiliate of Meditrust shall be liable for any loss suffered by Meditrust which
arises out of any action or inaction by such person if such person, in good
faith, determined that such course of conduct was in the best interests of
Meditrust or MAC and did not constitute gross negligence or willful misconduct.
The Declaration further provides that no Trustee shall be personally liable to
Meditrust or its shareholders for breach of fiduciary duty, except to the
extent provided by law for breach of the Trustee's duty of loyalty. With the
exception of gross negligence or willful misconduct, a trustee, officer,
employee, agent or affiliate is entitled under the Declaration to be
indemnified against all liability in connection with the affairs of Meditrust.
The Santa Anita Companies' Certificates and By-Laws provide that The Santa
Anita Companies shall indemnify to the full extent permitted by law any person
made or threatened to be made a party to an action or proceeding by reason of
the fact that such person is or was a director or officer of The Santa Anita
Companies, including for breaches of fiduciary duty with respect to directors,
or serves or served any other enterprise as a director, officer, employee or
agent at the request of The Santa Anita Companies. Delaware law allows
indemnification against expenses (including attorneys' fees) incurred in the
defense or settlement of a derivative action (a suit brought on behalf of the
corporation), provided that, with respect to officers and directors, there is a
determination by a majority vote of disinterested directors or a committee
thereof, independent legal counsel or a majority vote of the shareholders that
the person seeking indemnification acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that, without court approval, no indemnification may be
made in respect to any matter in which the person seeking indemnification has
been adjudged liable in the performance of his duty to the corporation. In non-
derivative actions, the DGCL permits, in addition to indemnification against
expenses, indemnification against judgments, fines and amounts paid in
settlement, upon a determination, made, with respect to officers and directors,
in the manner described above, that the person seeking indemnification acted in
a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal proceeding that such
person had no reasonable cause to believe his conduct was unlawful.
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Transactions with Affiliated Persons. The Declaration provides that, in the
absence of fraud, a transaction between Meditrust and any other person shall
not be invalid even though (a) one or more Trustees, officers, employees or
agents are directly or indirectly interested in or connected with, or are
trustees, partners, directors, employees, officers, or agents of such other
person, or (b) one or more of the Trustees, officers, employees or agents is a
party to or directly or indirectly interested in such transaction, provided
that (i) such interest or connection is disclosed or known to the Trustees and
thereafter the Trustees authorize or ratify such contract, act or other
transaction by affirmative vote of a majority of the Trustees who are not so
interested or (ii) such interest or connection is disclosed or known to the
holders of Meditrust Shares, and thereafter such transaction is approved by the
holders of a majority of the Meditrust Shares issued and outstanding or (iii)
such transaction is fair to Meditrust as of the time it is authorized, approved
or ratified by the Trustees or the shareholders. The Declaration further
provides that no Trustee, officer or advisor of Meditrust or any of their
affiliates shall, directly or indirectly, acquire any asset for the purpose of
reselling it to Meditrust, except to purchase property to be acquired by
Meditrust upon completion of financing arrangements by Meditrust.
Neither The Santa Anita Companies' Certificates nor By-Laws restrict by their
terms the transactions to which The Santa Anita Companies' or their officers or
directors may be parties. The DGCL provides that no contract or transaction
between a corporation and one or more of its directors or officers, or between
a corporation and any other corporation or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be invalid solely for this reason, provided that the
material facts of the relationship of the party to the corporation and such
financial interest are disclosed and the contract or transaction is authorized
by the affirmative votes of a majority of the disinterested directors or by a
majority of the shareholders entitled to vote thereon, or provided that the
contract or transaction was fair to the corporation at the time of
authorization or ratification by the board or the shareholders. Under the DGCL,
a corporation may lend money to, or guarantee any obligation of, its employees,
officers and directors and otherwise assist them, whenever, in the judgment of
the directors, such loan, guarantee or assistance may reasonably be expected to
benefit the corporation.
Tax Treatment. Meditrust, MAC and Realty are each qualified as a REIT under
the applicable provisions of the Code. Operating is treated as a regular
taxable "C" corporation under the Code.
Excess Share Limitations. The Declaration provides that if a holder of
Meditrust Shares obtains direct or indirect ownership of at least 9.9% of the
outstanding Meditrust Shares, the Trustees of Meditrust may call for the
purchase from such shareholder of such number of shares sufficient to reduce
his ownership of Meditrust Shares to no more than 9.9% and refuse to transfer
or issue shares to such shareholder if acquisition of such shares would result
in direct or indirect ownership of more than 9.9% of the outstanding Meditrust
Shares.
The Santa Anita Companies' By-Laws provide that if a shareholder obtains any
ownership interest which would cause Realty to fail to conform with the
requirements of the Code pertaining to a REIT, the Board of Directors of Realty
or Operating may call for the purchase from such shareholder of such number of
shares sufficient to reduce his holdings to conform to the requirements of the
Code and refuse to register the transfer of shares to any person whose
acquisition of such shares would result in Realty being unable to conform to
the requirements of the Code pertaining to a REIT.
Capitalization. The trustees may issue Meditrust Shares in unlimited amounts
on such terms as they deem appropriate. As of September 23, 1997, there were
61,703,389 Meditrust Shares issued and outstanding.
The Santa Anita Companies are each authorized to issue 19,000,000 shares of
common stock, par value $.10 per share, and 6,000,000 shares of preferred
stock, par value $.10 per share. See "Description of Capital Stock of The Santa
Anita Companies." The Merger Agreement provides that The Santa Anita Companies'
Certificates will be amended to increase the number of shares of authorized
common stock to 300,000,000 and to create a new class of common stock issuable
in one or more series upon terms to be determined by the Board of Directors.
The Realty preferred stock and Operating preferred stock may be issued in such
series upon such terms as may be prescribed by Realty's or Operating's Board of
Directors. Subject to there being
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sufficient authorized capital stock, and subject to the requirements of the
NYSE, additional shares of Realty Common Stock and Operating Common Stock and
shares of Realty preferred stock and Operating preferred stock may be issued
without further action by the shareholders of Realty or Operating. Neither The
Santa Anita Companies' Certificates nor their By-Laws restrict the issuance of
warrants or options to purchase capital stock of The Santa Anita Companies or
securities convertible into such capital stock and the By-Laws expressly
authorize the adoption of employee stock purchase plans providing for the
issuance and sale of their capital stock or the granting of options to purchase
their capital stock. Except as provided in the Merger Agreement, certain
existing option plans and agreements, the Series A Preferred Stock and the
shareholder rights plan described below, there are no present plans calling for
the issuance of any additional stock, options, warrants or convertible
securities. The issuance of any thereof may result in the dilution of the
ownership position of existing shareholders or may have the effect of delaying,
deferring or preventing a change in control without any further action by the
shareholders of The Santa Anita Companies.
Fair Price Provision and Shareholder Rights Plan. The Declaration does not
provide for the restriction of certain business combinations and Meditrust has
not adopted a shareholder rights plan. Pursuant to the Declaration, the
Trustees may call for the purchase from any holder of Meditrust Shares a number
of Meditrust Shares sufficient to bring the direct or indirect ownership of
such holder to no more than 9.9% of the issued and outstanding Meditrust
Shares, and may refuse to transfer or issue Meditrust Shares to any person
whose acquisition of such shares would result in direct or indirect ownership
of more than 9.9% of the issued and outstanding Meditrust Shares.
The Santa Anita Companies' Certificates restrict certain Business
Combinations (as hereinafter defined) with Interested Shareholders (as
hereinafter defined) (the "Business Combination Provision"). The Business
Combination Provision provides that Business Combinations with Interested
Shareholders (without regard to the length of time a shareholder has been an
interested shareholder) may not be consummated without the vote of the holders
of 80% of all issued and outstanding shares entitled to vote in the election of
directors (the "Voting Stock"), and, if less than 90% of the Voting Stock
approves the Business Combination, a majority of the combined voting power of
the then outstanding shares of Voting Stock held by persons who are not
Interested Shareholders. The Business Combination Provision does not apply to
Business Combinations approved by a majority of the directors unaffiliated with
the Interested Shareholder and elected prior to such an Interested Shareholder
becoming an Interested Shareholder or if certain price and procedural
requirements are met. A Business Combination includes (i) a merger or
consolidation, (ii) the sale or disposition of assets of Realty or Operating
having an aggregate fair market value of $5,000,000 or more, (iii) the issuance
of stock of Realty or Operating having a fair market value of $5,000,000 or
more, (iv) the adoption of a plan of liquidation or dissolution proposed by or
on behalf of an Interested Shareholder and (v) any merger, consolidation,
reclassification or recapitalization which increases the proportionate
shareholdings of an Interested Shareholder. An Interested Shareholder for the
purposes of application of the Business Combination Provision includes any
person or entity who is, together with its affiliates and associates, (or who
is an affiliate of Realty or Operating and during the prior two years was) the
beneficial owner (as defined in The Santa Anita Companies' Certificates and
consistent with Regulation 13D under the Exchange Act) of more than 10% of the
Voting Stock or an assignee of such a person or entity.
Under a shareholder rights plan adopted by The Santa Anita Companies in June
1989 (the "Rights Plan"), there is attached to each outstanding share of Realty
Common Stock one right (a "Right") which entitles the holder to purchase from
Realty, initially, one one-hundredth of a share of junior participating
preferred stock having economic and voting rights equivalent to one share of
Realty Common Stock, at a price of $100, subject to adjustment. No separate
rights certificates have been distributed. The Rights are not exercisable or
transferable apart from the shares of Realty Common Stock until the earlier of
ten business days following a public announcement that a person or group (an
"Acquiring Person") has acquired beneficial ownership of 10% or more of
Realty's Voting Stock, other than pursuant to a Qualified Offer (as defined in
the Rights Plan) or ten business days or such later date as may be determined
by the Realty Board of Directors following the commencement of, or announcement
of the intention to commence, a tender or exchange offer that would result
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in a person or group of affiliates or associated persons beneficially owning
10% or more of Realty's Voting Stock. Upon an Acquiring Person becoming such or
the occurrence of certain other events involving the Acquiring Person or upon a
business combination involving an Acquiring Person where Realty is not the
surviving corporation, each holder of a Right, other than the Acquiring Person,
would be entitled to purchase shares of Realty Common Stock, or an acquiring
corporation's common stock, having a market value of two times the exercise
price of the Right. During such time as the stock-pairing arrangement between
Realty and Operating shall remain in effect, Operating will issue, on a share-
for-share basis, Operating Common Stock, or, as the case may be, Operating
junior participating preferred shares to each person receiving shares of Realty
Common Stock or preferred shares upon exercise or in exchange for one or more
Rights. At any time after an Acquiring Person has become such, the Board of
Directors of Realty may exchange the Rights not owned by such Acquiring Person,
in whole or in part, at an exchange ratio of one share of Realty Common Stock
per Right, subject to adjustment. Realty is entitled to redeem the Rights in
whole, but not in part, at a price of $.001 per Right prior to the earlier of
the expiration of the Rights on August 31, 1999 or the close of business ten
days after the announcement that an Acquiring Person has become such.
Business Combinations with Interested Stockholders. Neither the Declaration
nor any Massachusetts statute restricts the consummation of a business
combination with holders of Meditrust Shares.
Under the DGCL, a corporation may not engage in a business combination with
an "interested stockholder" for a period of three years following the time that
such stockholder became an interested stockholder. The foregoing prohibition is
subject to the following exceptions: (1) if, prior to the time that such
stockholder became an interested stockholder, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the interested stockholder becoming an interested stockholder; (2)
if, upon consummation of the transaction which resulted in the interested
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding
immediately prior to the commencement of such transaction (with certain
adjustments); or (3) at or subsequent to the time that such stockholder became
an interested stockholder, the business combination is approved by the board of
directors and by the vote of the holders of at least 66 2/3% of the outstanding
voting stock not owned by the interested stockholder at an annual or special
meeting of the corporation. Furthermore, the prohibition does not apply to
business combinations proposed prior to the consummation or abandonment of, and
subsequent to the public announcement or notification pursuant to the statute
of, a proposed transaction which meets certain requirements. The DGCL permits
the corporation, by vote of the holders of at least a majority of the shares
entitled to vote, to adopt an amendment to its certificate of incorporation or
by-laws expressly electing not to be governed by the provision restricting
business combinations with interested stockholders (The Santa Anita Companies
have not adopted such an amendment). Subject to certain exceptions, the
definition of "interested stockholder" includes any person that (i) owns 15% or
more of the outstanding voting stock of the corporation or (ii) is an affiliate
or associate of the corporation and owned 15% or more of the outstanding voting
stock at any time within the 3-year period immediately prior to the date on
which it is sought to be determined whether such person is an interested
stockholder, and the affiliates and associates of any such person.
ACCOUNTING TREATMENT OF THE MERGERS
The Mergers will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles as if The Meditrust
Companies acquired The Santa Anita Companies. Under the purchase method of
accounting, the purchase price of The Santa Anita Companies, including the
direct costs of the Mergers, will be allocated to the assets acquired and
liabilities assumed based upon their estimated relative fair values with excess
purchase consideration allocated to goodwill.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS
The following is a summary of the material federal income tax consequences of
the Mergers. This summary is not tax advice. Except as discussed below, no
ruling or determination letters from the Internal Revenue Service ("IRS") have
been or will be requested on any tax issue connected with the Mergers.
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It is a condition to the consummation of the Mergers that Meditrust, Realty
and Operating receive (i) an opinion from O'Melveny & Myers LLP that (a) Realty
met the requirements of the Code for qualification as a REIT for the calendar
year 1996 and if it continues to operate in the same manner as it has in such
year, it will continue to so qualify, and (b) the consummation of the
transaction contemplated by the Merger Agreement will not adversely affect the
qualification of Realty as a REIT or its ability to retain its status as a
grandfathered paired share REIT; (ii) an opinion from Nutter, McClennen & Fish,
LLP that (a) Meditrust met the requirements of the Code for qualification as a
REIT immediately prior to the Effective Time and (b) the consummation of the
transaction contemplated by the Merger Agreement will not adversely affect the
qualification of Realty as a REIT or its ability to retain its status as a
grandfathered paired share REIT. It is a further condition that Meditrust
receive an opinion from Nutter, McClennen & Fish, LLP that the Mergers will
qualify as "reorganizations" under Section 368(a) of the Code, or,
alternatively, in the case of the merger between MAC and Operating, Section 351
of the Code. None of Meditrust, Realty nor Operating intends to waive these
conditions. However, if any of Meditrust, Realty or Operating waives these
conditions, each of Meditrust, MAC, Realty and Operating will resolicit proxies
from their respective shareholders.
The opinions of Nutter, McClennen & Fish, LLP and O'Melveny & Myers LLP will
be based upon the Code as currently in effect, applicable Treasury Regulations
thereunder and judicial and administrative interpretations thereof, all of
which are subject to change, including changes that may be retroactive, and
upon certain customary assumptions and representations. Opinions of counsel are
not binding on the IRS or the courts. Accordingly, no assurance can be given
that the IRS will not challenge the propriety of one or more of the tax
positions described herein or that such a challenge would not be successful.
This summary does not purport to deal with all aspects of taxation that may
be relevant to particular shareholders in light of their personal investment or
tax circumstances. Except as specifically provided, the discussion below does
not address foreign, state, or local tax consequences, nor does it specifically
address the tax consequences to taxpayers subject to special treatment under
the federal income tax laws (including dealers in securities, foreign persons,
life insurance companies, tax-exempt organizations, financial institutions, and
taxpayers subject to the alternative minimum tax). The discussion deals only
with shareholders who hold their shares as capital assets. No assurance can be
given that legislative, judicial or administrative changes will not affect the
accuracy of any statements in this Joint Proxy Statement/Prospectus with
respect to transactions entered into or contemplated prior to the effective
date of such changes.
EACH SHAREHOLDER IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE MERGERS, THE CASH ELECTION
AND OWNERSHIP OF THE PAIRED COMMON STOCK, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES THEREOF AND OF POTENTIAL CHANGES IN THE
APPLICABLE TAX LAWS.
General. Nutter, McClennen & Fish, LLP expects to render an opinion, based on
customary assumptions and representations and subject to the limitations set
forth herein, that the Mergers will qualify as "reorganizations" under Section
368(a) of the Code, or, alternatively, in the case of the Merger of MAC and
Operating, Section 351 of the Code. The relevant consequences of such
qualification will be that:
(i) No gain or loss will be recognized by Meditrust, MAC, Realty or
Operating by reason of the Mergers.
(ii) Except for any cash received in lieu of fractional shares, no gain
will be recognized by any Meditrust shareholder or MAC shareholder upon the
exchange of Meditrust Shares and MAC Shares for Realty Common Stock and
Operating Common Stock, respectively, in the Mergers.
(iii) The basis of the Realty Common Stock received by a Meditrust
shareholder in the Realty Merger will be the same as the basis of the
Meditrust Shares surrendered in exchange therefor (as reduced to reflect
the distribution of MAC Shares, to the extent such distribution is not
treated as a taxable dividend).
(iv) The basis of the Operating Common Stock received by a MAC
shareholder in the Operating Merger will be the same as the basis of the
MAC Shares surrendered in exchange therefor.
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(v) The holding period of the Realty Common Stock received by a Meditrust
shareholder in the Realty Merger will include the period during which the
Meditrust Shares surrendered in exchange therefor were held.
(vi) The holding period of the Operating Common Stock received by a MAC
shareholder in the Operating Merger will include the period during which
the MAC Shares surrendered in exchange therefor were held.
Distribution of MAC Shares to Meditrust Shareholders. The distribution of MAC
Shares to Meditrust shareholders will receive dividend treatment to the extent
of Meditrust's current earnings and profits measured at the end of Meditrust's
taxable year, which will be the date of the Mergers if the Mergers are
consummated. If the total distributions made with respect to Meditrust Shares
for such year exceeds Meditrust's current earnings and profits, then such
earnings and profits will be allocated pro rata to each distribution. The
amount by which any such distribution exceeds its allotted portion of current
earnings and profits will be treated as a return of investment and then, to the
extent that such distribution exceeds a Meditrust shareholder's tax basis, as
gain from the sale or exchange of such shares. Alternatively, it is possible
that the MAC Shares might be considered taxable "boot" in the exchange of
Meditrust Shares for Realty Common Stock. In this event, the fair market value
of the MAC Shares would be subject to tax, but not in excess of any built-in
gain of the Meditrust Shares held by each Meditrust shareholder. Meditrust
intends to report the transaction as a dividend as described above.
If the Mergers are not consummated, it is likely that MAC will be liquidated.
Any such liquidation may result in capital gain or loss to the MAC shareholders
equal to the difference between the liquidation proceeds and their bases in the
MAC Shares. Similarly, MAC may pay a capital gain dividend which would cause
MAC shareholders to recognize capital gain to the extent to which the value of
the Paired Common Stock which is owned by MAC exceeds its purchase price. In
any event, Meditrust expects that by the end of its taxable year, whether or
not the Mergers are completed, it will distribute regular cash dividends equal
in amount to prior distributions received by shareholders that are subject to
current taxation.
Cash Election by Realty and Operating Shareholders. An exchange by a Realty
and Operating shareholder (a "Holder") of shares of Paired Common Stock for
cash pursuant to the Cash Election will be a taxable transaction for federal
income tax purposes. As a consequence of the Cash Election, a Holder, depending
on such Holder's particular circumstances, will be treated either as
recognizing gain or loss from the disposition of the Realty Common Stock and
Operating Common Stock or as receiving a dividend distribution from Realty and
Operating.
Under Section 302 of the Code, a Holder will recognize gain or loss on an
exchange of Realty Common Stock and Operating Common Stock for cash if the
exchange (i) results in a "complete termination" of such Holder's equity
interest in the corporation, (ii) results in a "substantially disproportionate"
redemption with respect to such Holder or (iii) is "not essentially equivalent
to a dividend" with respect to the Holder. Section 302 applies attribution
rules pursuant to which a Holder is deemed to own any stock (i) owned by
certain family members (except that in the case of a "complete termination" a
Holder may, under certain circumstances, waive attribution from family
members), (ii) owned directly or indirectly by a partnership, estate or trust
in proportion to such Holder's partnership or beneficial interest, (iii) owned
directly or indirectly by a corporation, if such Holder owns, directly or
indirectly, 50% of the value of the stock of such corporation, in proportion to
such ownership and (iv) that the Holder has the right to acquire by exercise of
an option. An exchange of Realty Common Stock and Operating Common Stock for
cash will be a substantially disproportionate redemption with respect to a
Holder if the percentage of the then outstanding Realty Common Stock and
Operating Common Stock owned by such Holder immediately after the exchange is
less than 80% of the percentage of the Realty Common Stock and Operating Common
Stock owned by such Holder immediately before the exchange. If an exchange of
Realty Common Stock and Operating Common Stock for cash fails to satisfy the
"substantially disproportionate" test, the Holder may nonetheless satisfy the
"not essentially equivalent to a dividend" test. An exchange of Realty Common
Stock and Operating Common Stock for cash
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will satisfy the "not essentially equivalent to a dividend" test if it results
in a "meaningful reduction" of the Holder's equity interest in the corporation.
An exchange of Realty Common Stock and Operating Common Stock for cash that
results in a reduction of the proportionate equity interest in the corporation
of a Holder whose relative equity interest in the corporation is minimal (an
interest of less than one percent should satisfy this requirement) and who does
not exercise any control over or participate in the management of the
corporation's corporate affairs should be treated as "not essentially
equivalent to a dividend."
If a Holder is treated under Section 302 as recognizing gain or loss from the
disposition of the Realty Common Stock and Operating Common Stock pursuant to
the Cash Election, such gain or loss will be equal to the difference between
the amount of cash received and such Holder's tax basis in the Realty Common
Stock and Operating Common Stock exchanged therefor. Any such gain or loss will
be capital gain or loss and will be long-term capital gain or loss depending on
the holding period of the Realty Common Stock and Operating Common Stock. See
"--Capital Gain Income" below. Gain or loss must be determined separately for
each block of Realty Common Stock and Operating Common Stock (that is, Realty
Common Stock and Operating Common Stock acquired at the same cost in a single
transaction) that is exchanged for cash. Under current law, a Holder may be
able to designate (generally through its broker) which blocks of Realty Common
Stock and Operating Common Stock are tendered if less than all of such Holder's
Realty Common Stock and Operating Common Stock are exchanged for cash, and the
order in which blocks are exchanged for cash. Each Holder should consult its
tax advisor concerning the mechanics and desirability of such a designation.
If a Holder is not treated under Section 302 as recognizing gain or loss from
the disposition of the Realty Common Stock and Operating Common Stock pursuant
to the Cash Election, the amount of cash received by such Holder pursuant to
the Cash Election will be treated first, as a dividend to the extent of the
Holder's allocable portion of Realty's and Operating's respective current and
accumulated earnings and profits; next, as a non-taxable return of capital to
the extent of the Holder's tax basis in its shares; and thereafter as a capital
gain. To the extent such amount is taxable as a dividend, such dividend will be
includible in the Holder's gross income as ordinary income in its entirety,
without reduction for the tax basis of the shares subject to the Cash Election,
and no loss will be recognized. The Holder's tax basis in the shares subject to
the Cash Election, however, will be added to such Holder's tax basis in the
remaining shares that it owns. To the extent that cash received in exchange for
shares is treated as a dividend to a corporate Holder, (i) it will be eligible
for a dividend-received deduction to the extent of any dividends received from
Operating (subject to applicable limitations) and (ii) it will be subject to
the "extraordinary dividend" provisions of the Code. Corporate Holders should
consult their tax advisors concerning the availability of the dividend-received
deduction and the application of the "extraordinary dividend" provisions of the
Code. Because Realty and Operating are not expected to have significant
earnings and profits, it is expected that little, if any, of the cash received
pursuant to the Cash Election will be accorded dividend treatment.
Exercise of Appraisal Rights. The exercise by a holder of Series A Preferred
Stock of its appraisal rights resulting in the payment of cash to such holder
in exchange for its Series A Preferred Stock is a taxable transaction for
federal income tax purposes. Such a holder will be treated as recognizing gain
or loss from the disposition of Series A Preferred Stock equal to the
difference between the amount of cash received and such holder's tax basis in
the Series A Preferred Stock exchanged therefor. Any such gain or loss will be
capital gain or loss and will be long-term capital gain or loss depending on
the holding period of the Series A Preferred Stock. See "--Capital Gain Income"
below.
Issuance of Operating Note to Realty. The issuance of the Operating Note to
Realty will be treated as a distribution by Operating to its shareholders in an
amount equal to the face amount of the Operating Note, and a capital
contribution by those shareholders to Realty. This deemed distribution will be
treated first, as a dividend to the extent of Operating's current and
accumulated earnings and profits; next, as a non-taxable return of capital to
the extent of each Holder's tax basis in its shares; and thereafter as a
capital gain. Because Operating is not expected to have significant earnings
and profits, it is expected that little, if any, of this deemed distribution
will be accorded dividend treatment.
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Qualification as a Real Estate Investment Trust. Meditrust elected to be
taxed as a REIT under Sections 856 through 860 of the Code and applicable
Treasury Regulations, commencing with its taxable year ended December 31, 1985.
Meditrust believes that, commencing with such taxable year, it has been
organized and operated in such a manner so as to qualify for taxation as a
REIT. Similarly, Realty elected to be taxed as a REIT, commencing with its
taxable year ended December 31, 1980 and it also believes that, commencing with
such taxable year, it has been organized and operated in such a manner so as to
qualify for taxation as a REIT. After the Mergers, Realty, under the name of
Meditrust Corporation, intends to continue to operate in such a manner. So long
as Realty qualifies for taxation as a REIT, it will not be subject to federal
corporate income taxes on net income that it currently distributes to
shareholders. This treatment substantially eliminates the "double taxation"
(once at the corporate level and again at the shareholder level) that generally
results from investment in a regular corporation. Even if Realty qualifies for
taxation as a REIT, however, it may be subject to certain federal income or
excise taxes.
To qualify as a REIT, Realty must elect to be so treated and must meet, on a
continuing basis, certain requirements relating to Realty's ownership,
organization, sources of income, nature of assets, and distribution of income
to shareholders ("REIT Requirements"). Realty intends to satisfy the REIT
Requirements and to the extent practical, avoid payment of material amounts of
federal income or excise tax. If Realty fails to meet the REIT Requirements in
any taxable year, and certain relief provisions do not apply, it will be
subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. If Realty fails to qualify as a REIT
in any year it will be taxed on its income regardless of whether it distributes
such income to its shareholders. As a result, Realty's failure to qualify as a
REIT could reduce the cash available for distribution to its shareholders. In
addition, if Realty fails to qualify as a REIT, all distributions to
shareholders will be taxable as ordinary income to the extent of Realty's
current and accumulated earnings and profits, and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends-received deduction. Unless entitled to relief under specific
statutory provisions, Realty will also be disqualified from taxation as a REIT
for the four taxable years following any year during which qualification was
lost, and may be subject to corporate tax upon the appreciated value of its
assets upon a subsequent sale of those assets. It is not possible to state
whether in all circumstances Realty would be entitled to such statutory relief.
Paired Share Arrangement and REIT Qualification. Prior to the establishment
of Operating and the pairing of its shares with shares of Realty, the IRS
issued two private letter rulings, dated October 16, 1979 and January 11, 1980
(the "Rulings") to Realty in which the IRS held that, subject to certain
conditions and based on facts and representations made by Realty, the pairing
of the Realty Common Stock and the Operating Common Stock and the operation of
Operating would not preclude Realty from qualifying as a REIT. Subsequent to
the issuance of the Rulings, (i) the IRS announced that it would no longer
issue rulings to the effect that a REIT whose shares are paired with those of a
non-REIT will qualify as a REIT if the activities of the paired entities are
integrated, and (ii) Congress, in 1984, enacted Section 269B of the Code.
Section 269B of the Code provides that if the shares of a REIT and a non-REIT
are paired, then the REIT and the non-REIT shall be treated as one entity for
purposes of determining whether either company qualifies as a REIT. If Section
269B applied to Realty and Operating, then Realty would not be able to satisfy
the REIT Requirements (described above) and thus would not be eligible to be
taxed as a REIT. Section 269B does not apply, however, if the shares of the
REIT and the non-REIT were paired on or before June 30, 1983 and the REIT was
taxable as a REIT on or before June 30, 1983. As a result of this
grandfathering provision, Section 269B does not apply to Realty and Operating.
It is believed that the Rulings are still valid and that the Mergers will not
conflict with the Rulings. In addition, O'Melveny & Myers LLP expects to render
an opinion, and Nutter, McClennen & Fish, LLP also expects to render its
opinion in reliance upon such opinion, to the effect that the Mergers will not
adversely affect the qualification of Realty as a REIT or its ability to retain
its status as grandfathered from the application of Section 269B(a)(3) of the
Code pursuant to Section 136(c)(3) of the Deficit Reduction Act of 1984. The
opinions of counsel, based on certain assumptions and representations, will
conclude that the tax
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benefits under the tax laws of a paired share ownership structure as described
above will not be affected adversely by the Mergers. There are, however, no
judicial or administrative authorities interpreting this grandfathering rule or
the application of the grandfathering rule when a grandfathered paired share
REIT merges with a non-paired shared REIT. Therefore, the opinions of counsel
are based solely on the literal language of the statutory grandfathering rule,
and such counsel's judgment concerning the application of any other relevant
provisions of tax law. There can be no assurance that the IRS will not
challenge the positions taken in the opinions under Code Section 269B or other
provisions of tax law and seek to deny Realty REIT status despite its
grandfathered status. While counsel believe that any such challenge will not
prevail in court, there can be no certainty regarding the ultimate outcome of
such litigation.
Further, even if Section 269B of the Code does not apply, the IRS could
assert that Realty and Operating should be treated as one entity under general
tax principles. In general, such an assertion should only be upheld if the
separate corporate identities are a sham or unreal, which is not the case here.
Both before and after the Mergers, there is not a complete overlap in identity
of Realty's directors and Operating's directors and no individual serves as an
officer of both Realty and Operating. In addition, Realty and Operating have
separate creditors and are subject to different state law licensing and
regulatory requirements. Realty and Operating have maintained separate books
and records and separate officers (which is required by the Rulings) and all
material transactions between them have been and will be negotiated and
structured with the intention of achieving an arm's-length result. Based on the
foregoing, the separate corporate identities of Realty and Operating should be
respected.
Due to the paired structure, Realty and Operating are controlled by the same
interests. As a result, the IRS could, pursuant to Section 482 of the Code,
seek to distribute, apportion or allocate gross income, deductions, credits or
allowances between them if it determines that such distribution, apportionment
or allocation is necessary in order to prevent evasion of taxes or to clearly
reflect income. Because all material transactions between Realty and Operating
will continue to be negotiated and structured with the intention of achieving
an arm's-length result, it is believed that the potential application of
Section 482 of the Code should not have a material effect on Realty or
Operating.
Finally, the paired share ownership structure can affect the qualification of
the rents received by Realty from LATC under the REIT Requirements. Rents
received from a tenant will not qualify as rents under the REIT Requirements if
the REIT, or a direct or indirect owner of 10% or more of the REIT, directly or
constructively, owns 10% or more of such tenant. Therefore, Realty must not
own, directly or constructively, 10% or more of Operating. In such event, the
rent paid to Realty by LATC with respect to property leased by Realty to LATC
would not qualify as "rents from real property." If such income, along with any
other non-qualifying income, equals more than 5% of Realty's gross income, and
certain relief provisions do not apply, then Realty would fail to qualify as a
REIT. In order to prevent such a situation, the By-laws of Realty contain
restrictions on the amount of Realty Common Stock and Operating Common Stock
that any one person can own. These restrictions generally provide that any
attempt by any one person to actually or constructively own an amount of
outstanding Paired Common Stock that would cause Realty not to be in
conformance with the requirements for treatment as a REIT will be void ab
initio. Any shareholder whose Paired Common Stock is redeemed pursuant to these
restrictions may have a taxable gain with respect to the redemption. Further,
notwithstanding these restrictions, because the Code's constructive ownership
rules for purposes of the 10% ownership limits are broad, and it is not
possible to continually monitor direct and indirect ownership of paired shares,
it is possible that some person may own sufficient shares of Paired Common
Stock to cause the rents paid from LATC to Realty to fail to be "rents from
real property."
Federal Income Taxation of Operating. Operating will owe ordinary corporate
income taxes on its taxable income. Any income, net of taxes, will be available
for retention in Operating's business or for distribution to shareholders as
dividends. However, there is no tax provision that requires Operating to
distribute any of its after-tax earnings and Operating does not expect to pay
cash dividends in the foreseeable future.
73
<PAGE>
Federal Income Taxation of Holders of Paired Common Stock. Notwithstanding
that shares of Realty and Operating may be transferred only as a unit, holders
of shares of Paired Common Stock will be treated for U.S. federal ~income tax
purposes as holding equal numbers of shares of Realty Common Stock and of
Operating Common Stock. The tax treatment of distributions to shareholders and
of any gain or loss upon sale or other disposition of the shares of Paired
Common Stock (as well as the amount of gain or loss) must therefore be
determined separately with respect to each share of Realty Common Stock and
each share of Operating Common Stock contained within each share of Paired
Common Stock. The tax basis and holding period for each share of Realty Common
Stock and each share of Operating Common Stock also must be determined
separately. Upon a taxable sale of a share of Paired Common Stock, the amount
realized should be allocated between the Realty Common Stock and the Operating
Common Stock based on their then relative values.
As long as Realty qualifies as a REIT, distributions made to Realty's
shareholders up to the amount of Realty's current or accumulated earnings and
profits (and not designated as capital gain) will be taken into account by them
as ordinary income. Each year Realty will designate a certain amount of income
as capital gain. Such amount will be taxed as long-term capital gain (to the
extent they do not exceed Realty's actual net capital gain for the taxable
year) without regard to the period for which the shareholder has held its stock
and the shareholder will be allowed a credit for tax paid by the REIT with
respect to the capital gain not currently distributed to the shareholder.
However, corporate Holders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. Corporate Holders will not be
entitled to a dividends received deduction for any dividends paid by Realty if
it qualifies as a REIT. Distributions (other than capital gain dividends) in
excess of Realty's current and accumulated earnings and profits will not be
taxable to a Holder to the extent that they do not exceed the adjusted basis of
the Holder's Realty Common Stock, but rather will reduce the adjusted basis of
such stock. To the extent that such distributions exceed the adjusted basis of
a Holder's Realty Common Stock they will be included in income as long-term
capital gain (or short-term capital gain if the shares have been held for one
year or less). In addition, any dividend declared by Realty in October,
November or December of any year payable to a Holder of record on a specified
date in any such month shall be treated as both paid by Realty and received by
the Holder on December 31 of such year, provided that the dividend is actually
paid by Realty during January of the following calendar year.
Realty will be treated as having sufficient earnings and profits to treat as
a dividend any distribution by Realty up to the amount required to be
distributed in order to avoid imposition of an excise tax. As a result, Holders
may be required to treat certain distributions that would otherwise result in a
tax-free return of capital as taxable distributions. Moreover, any "deficiency
dividend" (a special dividend to prevent loss of REIT status) will be treated
as a "dividend" (either as ordinary or capital gain dividend, as the case may
be), regardless of Realty's earnings and profits.
Distributions from Operating up to the amount of its current or accumulated
earnings and profits will be taken into account by its Holders as ordinary
income and corporate Holders will be eligible for the dividends received
deduction. Distributions in excess of Operating's current and accumulated
earnings and profits will not be taxable to a Holder to the extent that they do
not exceed the adjusted basis of the Holder's Operating Common Stock, but
rather will reduce the adjusted basis of such Operating Common Stock. To the
extent that such distributions exceed the adjusted basis of a Holder's
Operating Common Stock they will be included in income as long-term capital
gain or short-term capital gain depending on the holding period of the stock.
See "--Capital Gain Income" below.
Taxable distributions from Realty or Operating and gain or loss from the
disposition of shares of Realty Common Stock and Operating Common Stock will
not be treated as passive activity income and, therefore, Holders generally
will not be able to apply any passive activity losses (such as losses from
certain types of limited partnerships in which the Holder is a limited partner)
against such income. In addition, taxable distributions from Realty or
Operating generally will be treated as investment income for purposes of the
investment interest limitations. Capital gains from the disposition of shares
of Paired Common Stock (or distributions from either company treated as such)
will be treated as investment income only if the Holder so
74
<PAGE>
elects, in which case such capital gains will be taxed at ordinary income
rates. Realty and Operating will notify Holders after the close of their
taxable years as to the portions of the distributions attributable to that year
that constitute ordinary income, return of capital and (in the case of Realty)
capital gain. Holders may not include in their individual income tax returns
any new operating losses or capital losses of Realty or of Operating.
In general, any gain or loss realized upon a taxable disposition of shares of
Paired Common Stock by a Holder who is not a dealer in securities will be
treated as long-term capital gain or loss or as short-term capital gain or loss
depending on the holding period of the shares of Paired Common Stock. See "--
Capital Gain Income" below.
In addition, any loss upon a sale or exchange of Realty Common Stock by a
shareholder who has held such stock for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss to
the extent of distributions from Realty required to be treated by such
shareholder as long-term capital gain. All or a portion of any loss realized
upon a taxable disposition of shares of Paired Common Stock may be disallowed
if other shares of Paired Common Stock are purchased within 30 days before or
after the disposition.
Capital Gain Income. The recently enacted Taxpayer Relief Act of 1997 has
made significant changes to the taxation of capital gain income for non-
corporate taxpayers. Generally, gains from property held for between 12 months
and 18 months are subject to a maximum tax rate of 28%. Gains from property
held for more than 18 months are subject to a maximum tax rate of 20%. Gain
attributable to capital assets held for 12 months or less will be treated as
short-term capital gain and subject to the same tax rates as ordinary income.
Information Reporting Requirements and Backup Withholding. Under certain
circumstances, Holders may be subject to backup withholding at a rate of 31% on
payments made with respect to, or on cash proceeds of a sale or exchange of,
Paired Common Stock. A broker is required to make such backup withholding only
if: (i) the Holder fails to furnish its taxpayer identification number ("TIN")
(which, for an individual, would be his or her Social Security number); (ii)
the Holder furnishes an incorrect TIN; (iii) it is notified by the IRS that the
Holder has failed to report properly payments of interest and dividends; or
(iv) under certain circumstances, it fails to certify, under penalty of
perjury, that the Holder has furnished a correct TIN and has not been notified
by the IRS that the Holder is subject to backup withholding for failure to
report interest and dividend payments. Backup withholding will not apply with
respect to payments made to certain exempt recipients, such as corporations and
tax-exempt organizations. In addition, Realty and Operating may be required to
withhold a portion of capital gain distributions made to any Holders who fail
to certify their non-foreign status. Additional issues may arise pertaining to
information reporting and withholding with respect to foreign shareholders and
each such shareholder should consult his or her tax advisor with respect to any
such information reporting and withholding requirements.
Other Tax Consequences. Realty, Operating and the Holders of Paired Common
Stock may be subject to state or local taxation in various jurisdictions,
including those in which it or they transact business or reside. The state and
local tax treatment of Realty, Operating and the Holders of Paired Common Stock
may not conform to the federal income tax consequences discussed above.
CONSEQUENTLY, HOLDERS OF PAIRED COMMON STOCK SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE EFFECT OF STATE AND LOCAL TAX LAWS ON THE OWNERSHIP AND
EXCHANGE OF THEIR PAIRED COMMON STOCK.
75
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Realty and Operating are two separate companies whose shares of common stock
are paired and trade together as a single unit. At the time of the Mergers,
Meditrust will merge with and into Realty, with Realty to be the surviving
corporation, which will change its name to Meditrust Corporation. MAC will
merge with and into Operating, with Operating to be the surviving corporation,
which will change its name to Meditrust Operating Company.
Pursuant to the above, the following pro forma financial statements have been
provided: (i) Meditrust Corporation and Meditrust Operating Company combined
pro forma financial statements which combine the activities of Meditrust and
The Santa Anita Companies, (ii) separate Meditrust Corporation consolidated pro
forma financial statements which reflect the activities of Meditrust and Realty
and (iii) separate Meditrust Operating Company consolidated pro forma financial
statements which reflect the activities of MAC and Operating.
The following unaudited Pro Forma Condensed Statements of Operations and
Balance Sheets presented assume the Mergers had been consummated on terms set
forth in the Merger Agreement as of or at the beginning of the periods
presented. In addition, the unaudited Pro Forma Condensed Balance Sheets
presented assume the Mergers had occurred on June 30, 1997.
The following unaudited Pro Forma Condensed Statements of Operations for the
year ended December 31, 1996 and the six months ended June 30, 1997 of
Meditrust Corporation and Meditrust Operating Company are derived from the
historical financial information and pro forma information based in part upon
the Combined and Separate Statements of Income of The Santa Anita Companies
filed with the Santa Anita Form 10-K for the year ended December 31, 1996 and
Quarterly Report on Form 10-Q for the six months ended June 30, 1997, as
amended, and in part upon the Consolidated Statements of Operations of
Meditrust filed with Meditrust's Annual Report on Form 10-K for the year ended
December 31, 1996 and Quarterly Report on Form 10-Q for the six months ended
June 30, 1997. The following unaudited Pro Forma Condensed Balance Sheets are
based in part upon The Santa Anita Companies' Combined and Separate Balance
Sheets as of June 30, 1997 and Meditrust's Balance Sheet as of June 30, 1997
and should be read in conjunction with the financial statements filed with The
Santa Anita Companies' and Meditrust's respective Quarterly Reports on Form 10-
Q for the six months ended June 30, 1997. In management's opinion, all material
adjustments necessary to reflect the effects of the Mergers have been made.
In conjunction with the financial statements filed with The Santa Anita
Companies' Annual and Quarterly Reports, separate financial statements are
prepared for Realty and Operating. Combined Realty and Operating financial
statements are prepared for The Santa Anita Companies. The separate net income
(loss) and related per share amounts of Realty and Operating cannot be added
together to total the combined net income (loss) and related per share amounts
for The Santa Anita Companies because of adjustments and eliminations arising
from inter-entity transactions. Inter-entity pro forma adjustments are
reflected only in the separate pro forma financial statements and not in the
combined pro forma presentation. As such, the separate Meditrust Corporation
and Meditrust Operating Company pro forma financial statements on pages 82 to
89 together do not necessarily reconcile to the combined Meditrust Corporation
and Meditrust Operating Company pro forma financial statements on pages 78 to
81.
The following unaudited Pro Forma Financial Statements have been adjusted for
the purchase method of accounting whereby Santa Anita Park, related leasehold
improvements and other real estate assets owned by The Santa Anita Companies
are adjusted to estimated fair market value. Although The Santa Anita Companies
are issuing their shares of Paired Common Stock to Meditrust shareholders and
will be the surviving entities following the Mergers, The Santa Anita Companies
are considered the acquired companies for accounting
76
<PAGE>
purposes as the current Meditrust shareholders will hold the majority of the
combined shares of Paired Common Stock subsequent to the Mergers. The fair
market values of the assets and liabilities of The Santa Anita Companies have
been determined based upon preliminary estimates and are subject to change as
additional information is obtained. Management of Meditrust does not anticipate
that the preliminary allocation of purchase costs based upon the estimated fair
market value of the assets and liabilities of The Santa Anita Companies will
materially change; however, the allocations of purchase costs are subject to
final determination based upon estimates and other evaluations of fair market
value as of the consummation of the Mergers. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Statements may differ
from the amounts ultimately determined.
The following unaudited Pro Forma Condensed Statements of Operations are not
necessarily indicative of what the actual results of operations of Meditrust
Corporation and Meditrust Operating Company would have been assuming such
transactions had been completed as of the beginning of the period presented,
nor do they purport to represent the results of operations for future periods.
Further, the unaudited Pro Forma Condensed Statements of Operations for the
interim period ended June 30, 1997 are not necessarily indicative of the
results of operations for the full year.
The following unaudited Pro Forma Condensed Balance Sheets are not
necessarily indicative of what the actual financial position would have been
assuming such transactions had been completed as of June 30, 1997, nor do they
purport to represent the future financial position of Meditrust Corporation and
Meditrust Operating Company.
77
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------
THE SANTA ANITA PRO FORMA PRO FORMA
MEDITRUST COMPANIES ADJUSTMENTS COMBINED
--------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental income........... $109,119 $ 6,671 $ $115,790
Horse racing............ 68,606 68,606
Interest income......... 144,905 1,948 146,853
-------- -------- -------- --------
Total revenues........ 254,024 77,225 331,249
-------- -------- -------- --------
Expenses:
Horse racing operating
costs.................. 48,735 48,735
Rental property
operating expenses..... 2,434 2,434
Interest................ 64,216 3,263 67,479
Depreciation and
amortization........... 23,207 4,870 2,429 (A) (B) 30,506
General and
administrative......... 8,625 10,289 18,914
Losses from
unconsolidated joint
ventures............... 994 789 (A) 1,783
Strategic alliance
costs.................. 1,200 1,200
Arcadia development
costs.................. 2,900 2,900
Program for disposition
of non-core real estate
assets................. 2,000 2,000
-------- -------- -------- --------
Total expenses........ 96,048 76,685 3,218 175,951
-------- -------- -------- --------
Net Income (loss)........ 157,976 540 (3,218) 155,298
Preferred stock
dividends............... 12,420 (12,420) (C)
-------- -------- -------- --------
Net income (loss)
applicable to common
shares.................. $157,976 $(11,880) $ 9,202 $155,298
======== ======== ======== ========
Per share:
Net income (loss) (D).... $ 2.66 $ (1.05) $ 0.25 $ 1.86
======== ======== ======== ========
Weighted average common
shares outstanding...... 59,458 11,317 12,854 (E) 83,629
======== ======== ======== ========
Dividends paid per common
share................... $ 2.78 $ 0.80
======== ========
Dividend consists of:
Return of capital....... $ 0.15 $ 0.80
Income.................. 2.63
-------- --------
$ 2.78 $ 0.80
======== ========
</TABLE>
- --------
(A) Represents adjustment to decrease depreciation by $2,927 as a result of
recording the investment in land, buildings, improvements and operating
property, plant and equipment at fair market value. Also represents
adjustments to increase depreciation related to joint ventures by $789.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives ranging from 5 to 40 years. Depreciation expense
decreased due to the fact that Meditrust uses longer depreciable lives than
those used by The Santa Anita Companies for certain types of assets. The
adjustments to real estate assets and operating equipment include an
increase of $151,377 to non-depreciable land, an increase of $58,522 in the
carrying value of buildings and a reduction of $10,551 in the carrying
value of operating equipment.
(B) Represents adjustment to reflect amortization of goodwill of $5,356.
Goodwill represents the purchase consideration in excess of the fair market
value of the assets of The Santa Anita Companies. Amortization of goodwill
is computed using the straight-line method over a 40-year estimated useful
life.
(C) Represents adjustment to eliminate Series A Preferred Stock dividends as a
result of exchanging the Series A Preferred Stock for shares of Paired
Common Stock.
(D) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Corporation or Meditrust Operating Company.
(E) Represents adjustment to reflect additional shares of Paired Common Stock
issued to Meditrust and MAC shareholders at the Effective Time and assumes
the exchange of Series A Preferred Stock for shares of Paired Common Stock.
See "Description of Capital Stock of The Santa Anita Companies--Preferred
Stock" and "Other Santa Anita Proposals--Issuance of Paired Common Stock in
Exchange for Series A Preferred Stock."
78
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
-----------------------------------------------------
THE SANTA ANITA PRO FORMA PRO FORMA
MEDITRUST COMPANIES ADJUSTMENTS COMBINED
--------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental income........... $66,091 $ 2,046 $ $ 68,137
Horse racing............ 50,266 50,266
Interest income......... 72,888 1,171 74,059
------- ------- ------- --------
Total revenues........ 138,979 53,483 192,462
------- ------- ------- --------
Expenses:
Horse racing operating
costs.................. 36,351 36,351
Rental property
operating expenses..... 551 551
Interest................ 38,378 1,240 39,618
Depreciation and
amortization........... 13,355 3,580 340 (A) (B) 17,275
General and
administrative......... 4,246 4,464 8,710
Losses from
unconsolidated joint
ventures............... 419 405 (A) 824
Strategic alliance
costs.................. 4,500 4,500
Program for disposition
of non-core real estate
assets................. 125 125
------- ------- ------- --------
Total expenses........ 55,979 51,230 745 107,954
------- ------- ------- --------
Net income............... 83,000 2,253 (745) 84,508
Preferred stock
dividends............... 3,119 (3,119) (C)
------- ------- ------- --------
Net income (loss)
applicable to common
shares.................. $83,000 $ (866) $ 2,374 $ 84,508
======= ======= ======= ========
Per share:
Net income (loss) (D).... $ 1.35 $ (0.08) $ (0.29) $ 0.98
======= ======= ======= ========
Weighted average common
shares outstanding...... 61,509 11,480 13,267 (E) 86,256
======= ======= ======= ========
Dividends paid per common
share................... $ 1.42 $ 0.40
======= =======
Dividend consists of:
Return of capital....... $ 0.07 $ 0.40
Income.................. 1.35
------- -------
$ 1.42 $ 0.40
======= =======
</TABLE>
- --------
(A) Represents adjustment to decrease depreciation by $2,338 as a result of
recording the investment in land, buildings, improvements and operating
property, plant and equipment at fair market value. Also represents
adjustments to increase depreciation related to joint ventures by $405.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives ranging from 5 to 40 years. Depreciation expense
decreased due to the fact that Meditrust uses longer depreciable lives than
those used by The Santa Anita Companies for certain types of assets. The
adjustments to real estate assets and operating equipment include an
increase of $151,377 to non-depreciable land, an increase of $58,522 in the
carrying value of buildings and a reduction of $10,551 in the carrying
value of operating equipment.
(B) Represents adjustment to reflect amortization of goodwill of $2,678.
Goodwill represents the purchase consideration in excess of the fair market
value of the assets of The Santa Anita Companies. Amortization of goodwill
is computed using the straight-line method over a 40-year estimated useful
life.
(C) Represents adjustment to eliminate Series A Preferred Stock dividends as a
result of exchanging the Series A Preferred Stock for shares of Paired
Common Stock.
(D) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Corporation or Meditrust Operating Company.
(E) Represents adjustment to reflect additional shares of Paired Common Stock
issued to Meditrust and MAC shareholders at the Effective Time and assumes
the exchange of Series A Preferred Stock for shares of Paired Common Stock.
See "Description of Capital Stock of The Santa Anita Companies--Preferred
Stock" and "Other Santa Anita Proposals--Issuance of Paired Common Stock in
Exchange for Series A Preferred Stock."
79
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
---------------------------------------------------------
THE SANTA ANITA PRO FORMA PRO FORMA
MEDITRUST COMPANIES ADJUSTMENTS COMBINED
---------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
Real estate investments:
Meditrust building and
improvements.......... $1,142,048 $ $ $1,142,048
Santa Anita
Racetrack(A).......... 8,507 108,493 (B) 117,000
Commercial
properties(A)......... 9,146 71,869 (B) 81,015
Commercial properties
to be sold............ 9,163 (463)(B) 8,700
Investments in and
advances to
unconsolidated joint
ventures.............. 1,876 34,152 (B) 36,028
Real estate mortgages &
loans................. 1,300,748 10,541 1,311,289
---------- --------- ----------- ----------
Total real estate
investments......... 2,442,796 39,233 214,051 2,696,080
---------- --------- ----------- ----------
Cash and cash
equivalents............ 29,148 18,974 48,122
Fees, interest and other
receivables............ 25,677 2,106 27,783
Operating property,
plant & equipment...... 19,551 (10,551)(B) 9,000
Other assets, net....... 68,983 6,596 4,243 (C) 79,822
Goodwill................ 214,224 (D) 214,224
---------- --------- ----------- ----------
Total assets......... $2,566,604 $ 86,460 $ 421,967 $3,075,031
========== ========= =========== ==========
Liabilities and
Shareholders' Equity
Indebtedness:
Notes payable, net..... 495,166 495,166
Convertible debentures,
net................... 278,512 278,512
Bank notes payable,
net................... 275,483 6,653 282,136
Bonds and mortgages
payable, net.......... 59,544 20,210 79,754
---------- --------- ----------- ----------
Total indebtedness... 1,108,705 26,863 1,135,568
---------- --------- ----------- ----------
Deferred income &
expenses............... 9,130 2,083 11,213
Accrued expenses and
other liabilities...... 61,004 21,837 75,000 (E) 157,841
---------- --------- ----------- ----------
Total liabilities.... 1,178,839 50,783 75,000 1,304,622
---------- --------- ----------- ----------
Commitments and
contingencies
Series A Redeemable
Preferred Stock........ 25,540 (25,540)(F)
Shareholders' equity
Common stock 86,347
shares pro forma
combined outstanding.. 2,295 14,987 (F)(G) 17,282
Additional paid-in-
capital............... 139,933 1,753,054 (F)(H) 1,892,987
Shares of beneficial
interest............... 1,527,625 (1,527,625)(H)
Retained
Earnings/Distributions
in excess of net
income................. (139,860) (131,995) 131,995 (H) (139,860)
Unearned compensation
expense................ (96) 96 (H)
---------- --------- ----------- ----------
Total shareholders'
equity.............. 1,387,765 10,137 372,507 1,770,409
---------- --------- ----------- ----------
Total liabilities and
shareholders' equity... $2,566,604 $ 86,460 $ 421,967 $3,075,031
========== ========= =========== ==========
</TABLE>
80
<PAGE>
(A) No post-merger accumulated depreciation has been recorded.
(B) Represents adjustments for the purchase method of accounting whereby the
investment in land, buildings, improvements, joint ventures and operating
property, plant and equipment owned by The Santa Anita Companies are
adjusted to estimated fair market value based on recent appraisals.
Adjustments for the joint ventures were determined by applying The Santa
Anita Companies' share (per the partnership agreements) to the estimated
fair value of the underlying net assets of the joint ventures.
(C) Represents estimated adjustments to fair value detailed as follows:
<TABLE>
<S> <C>
Works of art owned by Operating................................... $10,000
Reclassification of Entertainment Center Costs to Commercial
Properties....................................................... (3,418)
Write-off of straight-line rent receivable........................ (1,126)
Write-off of Other Deferred Costs................................. (1,213)
-------
$ 4,243
=======
</TABLE>
(D) Represents the purchase consideration in excess of the fair market value of
the assets of The Santa Anita Companies.
(E) Represents estimated adjustments for (1) accrued merger costs including
financial advisory, legal and accounting fees, printing and various other
professional fees anticipated in connection with the Mergers, (2) accrued
expenses associated with certain employment agreements and benefit programs
of The Santa Anita Companies including severance agreements, settlement of
options and purchase accounting adjustments related to The Santa Anita
Companies' defined benefit pension and deferred compensation plans (since
management is presently evaluating the effects of the integration of the
companies, these amounts are preliminary and subject to change) and (3)
other liabilities including potential settlement of outstanding legal
matters consisting of a shareholder lawsuit, a breach of contract lawsuit
and various claims and lawsuits arising from business operations.
(F) Represents the exchange of Series A Preferred Stock for shares of Paired
Common Stock. See "Description of Capital Stock of The Santa Anita
Companies--Preferred Stock" and "Other Santa Anita Proposals--Issuance of
Paired Common Stock in Exchange for Series A Preferred Stock."
(G) Represents the exchange of shares of Meditrust and MAC for shares of Paired
Common Stock. See "The Mergers--Introduction."
(H) Based upon 12,343 shares of Paired Common Stock outstanding (which includes
the effect of having exchanged the 867 shares of Series A Preferred Stock
for shares of Paired Common Stock), the estimated total purchase
consideration is $382,633. The adjustments to shareholders' equity
eliminate The Santa Anita Companies' historical equity accounts totaling
$35,677 (which includes the effect of exchanging the Series A Preferred
Stock, which has a value of $25,540, for shares of Paired Common Stock) and
record equity based on the number of shares of Paired Common Stock held by
shareholders of The Santa Anita Companies that remain outstanding after the
Mergers at $31 per share of Paired Common Stock, which is based on the
closing price of Meditrust Shares on April 11, 1997 of $37.25 per share.
81
<PAGE>
MEDITRUST CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------
SANTA ANITA
REALTY PRO FORMA PRO FORMA
MEDITRUST ENTERPRISES, INC. ADJUSTMENTS COMBINED
--------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental income.......... $109,119 $ 6,671 $ $115,790
Rental income--
Operating............. 10,861 10,861
Interest income........ 144,905 1,652 146,557
-------- -------- -------- --------
Total revenues........ 254,024 19,184 273,208
-------- -------- -------- --------
Expenses:
Rental property
operating expenses.... 2,434 2,434
Interest............... 64,216 2,670 66,886
Depreciation and
amortization.......... 23,207 1,718 3,697 (A)(B) 28,622
General and
administrative........ 8,625 4,046 12,671
Losses from
unconsolidated joint
ventures.............. 994 789 (A) 1,783
Strategic alliance
costs................. 1,090 1,090
Arcadia development
costs................. 2,900 2,900
Program for disposition
of non-core real
estate assets......... 2,000 2,000
-------- -------- -------- --------
Total expenses........ 96,048 17,852 4,486 118,386
-------- -------- -------- --------
Net Income.............. 157,976 1,332 (4,486) 154,822
Preferred stock
dividends.............. 12,368 (12,368) (C)
-------- -------- -------- --------
Net income (loss)
applicable to common
shares................. $157,976 $(11,036) $ 7,882 $154,822
======== ======== ======== ========
Per share:
Net income (loss) (D)... $ 2.66 $ (0.97) $ 0.16 $ 1.85
======== ======== ======== ========
Weighted average common
shares outstanding..... 59,458 11,429 12,854 (E) 83,742
======== ======== ======== ========
Dividends paid per
common share........... $ 2.78 $ 0.80
======== ========
Dividend consists of:
Return of capital...... $ 0.15 $ 0.80
Income................. 2.63
-------- --------
$ 2.78 $ 0.80
======== ========
</TABLE>
- --------
(A) Represents adjustment to decrease depreciation by $774 as a result of
recording the investment in land, buildings, improvements and operating
property, plant and equipment at fair market value. Also represents
adjustment to increase depreciation related to joint ventures by $789.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives ranging from 5 to 40 years. Depreciation expense
decreased due to the fact that Meditrust uses longer depreciable lives than
those used by The Santa Anita Companies for certain types of assets. The
adjustments to real estate assets include an increase of $151,377 to non-
depreciable land and an increase of $58,522 in the carrying value of
buildings.
(B) Represents adjustment to reflect amortization of goodwill of $4,471.
Goodwill represents the purchase consideration in excess of the fair market
value of the assets of Realty. Amortization of goodwill is computed using
the straight-line method over a 40-year estimated useful life.
(C) Represents adjustment to eliminate Realty's Series A Preferred Stock
dividends as a result of exchanging the Series A Preferred Stock of Realty
for shares of Realty Common Stock.
(D) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Corporation.
(E) Represents adjustment to reflect additional shares of Realty Common Stock
issued to Meditrust shareholders at the Effective Time and assumes the
exchange of Series A Preferred Stock of Realty for shares of Realty Common
Stock. See "Description of Capital Stock of The Santa Anita Companies--
Preferred Stock" and "Other Santa Anita Proposals--Issuance of Paired
Common Stock in Exchange for Series A Preferred Stock."
82
<PAGE>
MEDITRUST CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
------------------------------------------------------
SANTA ANITA
REALTY PRO FORMA PRO FORMA
MEDITRUST ENTERPRISES, INC. ADJUSTMENTS COMBINED
--------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental income.......... $66,091 $2,046 $ $68,137
Rental income--
Operating ............ 8,431 8,431
Interest income........ 72,888 1,048 73,936
------- ------ ------- -------
Total revenues........ 138,979 11,525 150,504
------- ------ ------- -------
Expenses:
Interest............... 38,378 1,141 39,519
Depreciation and
amortization.......... 13,355 1,101 1,606 (A)(B) 16,062
General and
administrative........ 4,246 2,115 6,361
Losses from
unconsolidated joint
ventures.............. 419 405 (A) 824
Strategic alliance
costs................. 4,080 4,080
Program for disposition
of non-core real
estate assets......... 125 125
------- ------ ------- -------
Total expenses........ 55,979 8,981 2,011 66,971
------- ------ ------- -------
Net Income.............. 83,000 2,544 (2,011) 83,533
Preferred stock
dividends.............. 2,892 (2,892) (C)
------- ------ ------- -------
Net income (loss)
applicable to common
shares................. $83,000 $(348) $ 881 $83,533
======= ====== ======= =======
Per share:
Net income (loss) (D)... $ 1.35 $(0.03) $ (0.35) $ 0.97
======= ====== ======= =======
Weighted average common
shares outstanding..... 61,509 11,587 13,267 (E) 86,363
======= ====== ======= =======
Dividends paid per
common share........... $ 1.42 $ 0.40
======= ======
Dividend consists of:
Return of capital...... $ 0.07 $ 0.40
Income................. 1.35
------- ------
$ 1.42 $ 0.40
======= ======
</TABLE>
- --------
(A) Represents adjustment to decrease depreciation by $630 as a result of
recording the investment in land, buildings, improvements and operating
property, plant and equipment at fair market value. Also represents
adjustment to increase depreciation related to joint ventures by $405.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives ranging from 5 to 40 years. Depreciation expense
decreased due to the fact that Meditrust uses longer depreciable lives than
those used by The Santa Anita Companies for certain types of assets. The
adjustments to real estate assets include an increase of $151,377 to non-
depreciable land and an increase of $58,522 in the carrying value of
buildings.
(B) Represents adjustments to reflect amortization of goodwill of $2,236.
Goodwill represents the purchase consideration in excess of the fair market
value of the assets of Realty. Amortization of goodwill is computed using
the straight-line method over a 40-year estimated useful life.
(C) Represents adjustment to eliminate Realty's Series A Preferred Stock
dividends as a result of exchanging the Series A Preferred Stock of Realty
for shares of Realty Common Stock.
(D) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Corporation.
(E) Represents adjustment to reflect additional shares of Realty Common Stock
issued to Meditrust shareholders at the Effective Time and assumes the
exchange of Series A Preferred Stock of Realty for shares of Realty Common
Stock. See "Description of Capital Stock of The Santa Anita Companies--
Preferred Stock" and "Other Santa Anita Proposals--Issuance of Paired
Common Stock in Exchange for Series A Preferred Stock."
83
<PAGE>
MEDITRUST CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
--------------------------------------------------------------
SANTA ANITA
REALTY PRO FORMA PRO FORMA
MEDITRUST ENTERPRISES, INC. ADJUSTMENTS COMBINED
---------- ----------------- ----------- ----------
<S> <C> <C> <C> <C>
Real estate investments:
Meditrust building and
improvements.......... $1,142,048 $ $ $1,142,048
Santa Anita Racetrack
(A)................... 8,507 108,493 (B) 117,000
Commercial properties
(A)................... 12,068 68,947 (B) 81,015
Commercial properties
to be sold............ 9,163 (463)(B) 8,700
Investments in and
advances to
unconsolidated joint
ventures.............. 1,876 34,152 (B) 36,028
Real estate mortgages &
loans................. 1,300,748 10,541 1,311,289
---------- --------- ---------- ----------
Total real estate
investments......... 2,442,796 42,155 211,129 2,696,080
---------- --------- ---------- ----------
Cash and cash
equivalents............ 29,148 11,887 (9,046) 31,989
Fees, interest and other
receivables............ 25,677 38 25,715
Other assets, net....... 68,983 6,352 (5,757)(C) 69,578
Goodwill................ 178,856 (D) 178,856
---------- --------- ---------- ----------
Total assets............ $2,566,604 $ 60,432 $ 375,182 $3,002,218
========== ========= ========== ==========
Liabilities and
Shareholders' Equity
Indebtedness:
Notes payable, net..... 495,166 495,166
Convertible debentures,
net................... 278,512 278,512
Bank notes payable,
net................... 275,483 6,250 281,733
Bonds and mortgages
payable, net.......... 59,544 20,210 79,754
========== ========= ========== ==========
Total indebtedness... 1,108,705 26,460 1,135,165
========== ========= ========== ==========
Deferred income &
expenses............... 9,130 9,130
Accrued expenses and
other liabilities...... 61,004 5,736 39,560 (E) 106,300
========== ========= ========== ==========
Total liabilities.... 1,178,839 32,196 39,560 1,250,595
========== ========= ========== ==========
Commitments and
contingencies
Series A Redeemable
Preferred Stock....... 24,263 (24,263)(F)
Shareholders' equity
Common stock 86,473
shares pro forma
outstanding........... 1,160 7,487 (F)(G) 8,647
Additional paid-in-
capital............... 122,181 1,771,655 (F)(H)(I) 1,893,836
Shares of beneficial
interest............... 1,527,625 (1,527,625)(H)
Retained
Earnings/Distributions
in excess of net
income................. (139,860) (119,368) 119,368 (H) (139,860)
Note receivable--from
Meditrust Operating
Company................ (11,000)(I) (11,000)
---------- --------- ---------- ----------
Total shareholders'
equity.............. 1,387,765 3,973 359,885 1,751,623
---------- --------- ---------- ----------
Total liabilities and
shareholders' equity... $2,566,604 $ 60,432 $ 375,182 $3,002,218
========== ========= ========== ==========
</TABLE>
84
<PAGE>
(A) No post-merger accumulated depreciation has been recorded.
(B) Represents adjustments for the purchase method of accounting whereby the
investment in land, buildings, improvements and joint ventures owned by
Realty are adjusted to estimated fair market value based on recent
appraisals. Adjustments for the joint ventures were determined by applying
The Santa Anita Companies' share (per the partnership agreements) to the
fair value of the underlying net assets of the joint ventures.
(C) Represents estimated adjustments to fair value detailed as follows:
<TABLE>
<S> <C>
Reclassification of the Entertainment Center Costs to Commercial
Properties $(3,418)
Write-off of straight-line rent receivable....................... (1,126)
Write-off of other Deferred Costs................................ (1,213)
-------
$(5,757)
=======
</TABLE>
(D) Represents the purchase consideration in excess of the fair market value of
the assets of Realty.
(E) Represents estimated adjustments for (1) accrued merger costs including
financial advisory, legal and accounting fees, printing and various other
professional fees anticipated in connection with the Mergers, (2) accrued
expenses associated with certain employment agreements and benefit programs
of Realty including severance agreements, settlement of options and
purchase accounting adjustments related to Realty's defined benefit pension
and deferred compensation plans (since management is presently evaluating
the effects of the integration of the two companies, these amounts are
preliminary and subject to change) and (3) other liabilities including
potential settlement of outstanding legal matters consisting of a
shareholder lawsuit, a breach of contract lawsuit and various claims and
lawsuits arising from business operations.
(F) Represents the exchange of Series A Preferred Stock of Realty for shares of
Realty Common Stock. See "Description of Capital Stock of The Santa Anita
Companies--Preferred Stock" and "Other Santa Anita Proposals--Issuance of
Paired Common Stock in Exchange for Series A Preferred Stock."
(G) Represents the exchange of shares of Meditrust for shares of Realty Common
Stock.
(H) Based on the relative value between Realty and Operating of the 12,469
shares of Realty Common Stock outstanding (which includes the effect of
having exchanged the 867 shares of Series A Preferred Stock of Realty for
shares of Realty Common Stock), the estimated total purchase consideration
allocable to Realty is approximately $374,980. The adjustments to
shareholders' equity eliminate Realty's historical equity accounts totaling
$28,236 (which includes the effect of exchanging the Series A Preferred
Stock of Realty, which has a value of $24,263, for Realty Common Stock) and
records equity based on the number of shares of Realty Common Stock held by
shareholders of Realty that remain outstanding after the Mergers.
(I) To reflect the delivery of the Operating Note, the purpose of which is to
adjust the relative values of Realty and Operating to approximate the
relative values of Meditrust and MAC immediately prior to the Effective
Time. Due to the affiliation of Meditrust Corporation and Meditrust
Operating Company, the Operating Note has been classified in shareholders'
equity. See "The Mergers--Certain Arrangements--Operating Note."
85
<PAGE>
MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------
MEDITRUST SANTA ANITA
ACQUISITION OPERATING PRO FORMA PRO FORMA
COMPANY COMPANY ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Horse racing.............. $ $68,606 $ $68,606
Interest and other
income................... 581 2,775 (A) 3,356
------ ------- ------- -------
Total revenues.......... 69,187 2,775 71,962
------ ------- ------- -------
Expenses:
Horse racing operating
costs.................... 48,735 48,735
Interest.................. 788 660 (B) 1,448
Depreciation and
amortization............. 3,212 (1,416)(C)(D) 1,796
General and
administrative(E)........ 17,104 17,104
Strategic alliance costs.. 110 110
------ ------- ------- -------
Total expenses.......... 69,949 (756) 69,193
------ ------- ------- -------
Net Income (loss).......... (762) 3,531 2,769
Preferred stock dividends.. 52 (52)(F)
------ ------- ------- -------
Net income (loss)
applicable to common
shares.................... $ $ (814) $ 3,583 $ 2,769
====== ======= ======= =======
Per share:
Net income (loss)(G)....... $ $(0.07) $ 0.10 $ 0.03
====== ======= ======= =======
Weighted average common
shares outstanding........ 59,458 11,317 12,854 (H) 83,629
====== ======= ======= =======
</TABLE>
- --------
(A) Represents estimated dividends (based upon Meditrust's anticipated
distribution subsequent to the Mergers of $2.39 per share) on the shares of
Realty acquired by MAC and subsequent to the Mergers held by Operating.
(B) Represents estimated interest expense on the Operating Note.
(C) Represents adjustment to decrease depreciation by $2,212 as a result of
recording the investment in property, plant and equipment at fair market
value. Depreciation is computed using the straight-line method and is based
upon the estimated useful lives ranging from 5 to 40 years. Depreciation
expense decreased due to the fact that Meditrust uses longer depreciable
lives than those used by The Santa Anita Companies for certain types of
assets. The adjustment to operating equipment included a reduction of
$10,551 in the carrying value of operating equipment.
(D) Represents adjustment to reflect amortization of goodwill of $796. Goodwill
represents the purchase consideration in excess of the fair market value of
the assets of Operating. Amortization of goodwill is computed using the
straight-line method over a 40-year estimated useful life.
(E) Includes rental income paid to Realty of $10,861.
(F) Represents adjustment to eliminate Series A Preferred Stock of Operating
dividends as a result of exchanging the Series A Preferred Stock of
Operating for shares of Operating Common Stock.
(G) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard; No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Operating Company.
(H) Represents adjustment to reflect additional shares of Operating Common
Stock issued to MAC shareholders at the Effective Time and assumes the
exchange of Series A Preferred Stock of Operating for shares of Operating
Common Stock. See "Description of Capital Stock of The Santa Anita
Companies--Preferred Stock" and "Other Santa Anita Proposals--Issuance of
Paired Common Stock in Exchange for Series A Preferred Stock."
86
<PAGE>
MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------------------
MEDITRUST SANTA ANITA
ACQUISITION OPERATING PRO FORMA PRO FORMA
COMPANY COMPANY ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Horse racing.............. $ $50,266 $ $50,266
Interest and other
income................... 173 1,388 (A) 1,561
------- ------- ------- -------
Total revenues.......... 50,439 1,388 51,827
------- ------- ------- -------
Expenses:
Horse racing operating
costs.................... 36,351 36,351
Interest.................. 102 330 (B) 432
Depreciation and
amortization............. 2,517 (722)(C)(D) 1,795
General and
administrative(E)........ 11,331 11,331
Strategic alliance costs.. 420 420
------- ------- ------- -------
Total expenses.......... 50,721 (392) 50,329
------- ------- ------- -------
Net Income................. (282) 1,780 1,498
------- ------- ------- -------
Preferred stock dividends.. 227 (227)
Net income (loss)
applicable to common
shares.................... $ $ (509) $ 2,007 $ 1,498
======= ======= ======= =======
Per share:
Net income/(loss) (F)...... $ $ (0.04) $ 0.06 (G) $ 0.02
======= ======= ======= =======
Weighted average common
shares outstanding........ 61,509 11,480 13,267 86,256
======= ======= ======= =======
</TABLE>
- --------
(A) Represents estimated dividends (based upon Meditrust's anticipated
distributions subsequent to the Mergers of $2.39 per share) on the shares
of Realty acquired by MAC and subsequent to the Mergers held by Operating.
(B) Represents estimated interest expense on the Operating Note.
(C) Represents adjustment to decrease depreciation by $1,120 as a result of
recording the investment in property, plant and equipment at fair market
value. Depreciation is computed using the straight-line method and is based
upon the estimated useful lives ranging from 5 to 40 years. Depreciation
expense decreased due to the fact that Meditrust uses longer depreciable
lives than those used by The Santa Anita Companies for certain types of
assets. The adjustment to operating equipment included a reduction of
$10,551 in the carrying value of operating equipment.
(D) Represents adjustment to reflect amortization of goodwill of $398. Goodwill
represents the purchase consideration in excess of the fair market value of
the assets of Operating. Amortization of goodwill is computed using the
straight-line method over a 40-year estimated useful life.
(E) Includes rental income paid to Realty of $8,431.
(F) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Operating Company.
(G) Represents adjustment to reflect additional shares of Operating Common
Stock issued to MAC shareholders at the Effective Time and assumes the
exchange of Series A Preferred Stock of Operating for shares of Operating
Common Stock. See "Description of Capital Stock of The Santa Anita
Companies--Preferred Stock" and "Other Santa Anita Proposals--Issuance of
Paired Common Stock in Exchange for Series A Preferred Stock."
87
<PAGE>
MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
---------------------------------------------------------
MEDITRUST SANTA ANITA
ACQUISITION OPERATING PRO FORMA PRO FORMA
COMPANY COMPANY ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Operating property,
plant & equipment...... $ $19,551 $(10,551)(A) $ 9,000
Cash and cash
equivalents............ 7,087 9,046 16,133
Fees, interest and other
receivables............ 2,068 2,068
Other assets, net....... 1,740 10,000 (B) 11,740
Goodwill, net........... 31,827 (C) 31,827
Investment in Meditrust
Corporation............ 2,184 34,542 (D) 36,726
------- ------- -------- ---------
Total assets......... $ $32,630 $ 74,864 $ 107,494
======= ======= ======== =========
Liabilities and
Shareholders' Equity:
Indebtedness:
Bank notes payable,
net................... 403 403
Note payable to
Meditrust
Corporation........... 11,000 (E) 11,000
------- ------- -------- ---------
Total indebtedness... 403 11,000 11,403
------- ------- -------- ---------
Deferred income &
expenses............... 2,083 2,083
Accrued expenses and
other liabilities...... 17,588 35,440 (F) 53,028
------- ------- -------- ---------
Total liabilities.... 20,074 46,440 66,514
------- ------- -------- ---------
Commitments and
contingencies
Series A Redeemable
Preferred Stock....... 1,277 (1,277)(G)
Shareholders' equity
Common stock 86,347
shares pro forma
outstanding........... 1,148 7,487 (G)(H) 8,635
Additional paid-in-
capital............... 20,994 11,351 (D)(E)(G)(I) 32,345
Retained
Earnings/Distributions
in excess of net
income................. (10,767) 10,767 (I)
Unearned compensation
expense................ (96) 96 (I)
------- ------- -------- ---------
Total shareholders'
equity.............. 11,279 29,701 40,980
------- ------- -------- ---------
Total liabilities and
shareholders' equity... $ $32,630 $ 74,864 $ 107,494
======= ======= ======== =========
</TABLE>
88
<PAGE>
(A) Represents adjustments for the purchase method of accounting whereby the
operating property, plant and equipment owned by Operating are adjusted to
estimated fair market value based on recent appraisals.
(B) Represents the estimated fair market value of works of art owned by
Operating.
(C) Represents the purchase consideration in excess of the fair market value of
the assets of Operating.
(D) To reflect the capitalization of MAC by Meditrust and the acquisition by
MAC of the shares of Realty which are assumed to remain outstanding after
the Mergers.
(E) To reflect the delivery of the Operating Note, the purpose of which is to
adjust the relative values of Realty and Operating to approximate the
relative values of Meditrust and MAC immediately prior to the Effective
Time. See "The Mergers--Certain Arrangements--Operating Note."
(F) Represents estimated adjustments for (1) accrued merger costs including
financial advisory, legal and accounting fees, printing and various other
professional fees anticipated in connection with the Mergers, (2) accrued
expenses associated with certain employment agreements and benefit programs
of Operating including severance agreements, settlement of options and
purchase accounting adjustments related to Operating's defined benefit
pension and deferred compensation plans (since management is presently
evaluating the effects of the integration of the two companies, these
amounts are preliminary and subject to change), and (3) other liabilities
including potential settlement of outstanding legal matters consisting of a
shareholder lawsuit, a breach of contract lawsuit and various claims and
lawsuits arising from business operations.
(G) Represents the exchange of Series A Preferred Stock of Operating for shares
of Operating Common Stock. See "Description of Capital Stock of The Santa
Anita Companies--Preferred Stock" and "Other Santa Anita Proposals--
Issuance of Paired Common Stock in Exchange for Series A Preferred Stock."
(H) Represents the exchange of shares of MAC for shares of Operating Common
Stock.
(I) Based on the relative value between Realty and Operating of the 12,343
shares of Operating Common Stock outstanding (which includes the effect of
having exchanged the 867 shares of Series A Preferred Stock of Operating
for shares of Operating Common Stock), the total purchase consideration
allocable to Operating is approximately $7,653. The adjustments to
shareholders' equity eliminate Operating's historical equity accounts
totaling $12,556 (which includes the effect of exchanging the Series A
Preferred Stock of Operating, which has a value of $1,277, for Operating
Common Stock) and record equity based on the number of shares of Operating
Common Stock held by shareholders of Operating that remain outstanding
after the Mergers.
89
<PAGE>
THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the Merger
Agreement, a copy of which is attached as Annex A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. Such summary is
qualified in its entirety by reference to the Merger Agreement. Shareholders of
The Santa Anita Companies, Meditrust and MAC are urged to read the Merger
Agreement in its entirety for a more complete description of the terms and
conditions of the Mergers.
GENERAL
The Merger Agreement provides that, following the approval of the
transactions contemplated by the Merger Agreement by the shareholders of
Realty, Operating, Meditrust and MAC, and the satisfaction or waiver of the
other conditions to closing set forth in the Merger Agreement, Meditrust will
be merged with and into Realty, with Realty continuing as the surviving
corporation (the "Realty Merger"), and MAC will be merged with and into
Operating, with Operating continuing as the surviving corporation (the
"Operating Merger"). After consummation of the Realty Merger, Realty will
change its name to Meditrust Corporation and, after consummation of the
Operating Merger, Operating will change its name to Meditrust Operating
Company.
If all conditions to the Realty Merger are satisfied or waived, the Realty
Merger will become effective at the time of the filing by Realty and Meditrust
of a duly executed Certificate of Merger with the Secretary of State of the
State of Delaware or at such other time as may be agreed upon by the parties
and specified in the Certificate of Merger.
If all conditions to the Operating Merger are satisfied or waived, the
Operating Merger will become effective at the time of the filing by Operating
and MAC of a duly executed Certificate of Merger with the Secretary of State of
the State of Delaware or at such other time as may be agreed upon by the
parties and specified in the Certificate of Merger. It is expected that both
the Realty Merger and the Operating Merger will occur simultaneously.
CONVERSION OF SHARES
At the Effective Time, pursuant to the Merger Agreement, each issued and
outstanding Meditrust Share (and the related MAC Share) will be converted into
the right to receive a number of shares of Paired Common Stock equal to the
Exchange Ratio.
The "Exchange Ratio" is 1.2016 or, if the closing date occurs after December
31, 1997 as a result of acquisitions and other business combinations proposed
to be entered into by Meditrust or MAC (and provided that there are no other
conditions to closing within Realty's or Operating's control or for which they
are responsible that have not yet been satisfied), an amount equal to $37.25
divided by the sum of (i) $31.00 and (ii) if the closing date occurs after
December 31, 1997 a number equal to the per share amount of any dividends of
Meditrust accrued with respect to periods after December 31, 1997 and prior to
the closing date divided by 1.2016, less the per share amount of any dividends
of Realty accrued with respect to periods after December 31, 1997 and prior to
the closing date.
Based upon the number of outstanding shares of Paired Common Stock and the
number of outstanding Meditrust Shares (and the related MAC Shares) (in each
case including 2,912,299 shares subject to options but not including
Meditrust's convertible debentures) as of September 23, 1997, the beneficial
owners of Meditrust Shares and MAC Shares immediately prior to the consummation
of the Mergers will own from approximately 86% to 89% of the outstanding Paired
Common Stock immediately following consummation of the Mergers, depending upon
how many shareholders of The Santa Anita Companies make a Cash Election. If any
holder of Meditrust Shares or MAC Shares would be entitled to receive
fractional shares, then, in lieu of a fractional share, such holder will be
entitled to receive an amount in cash (without interest) equal to such holder's
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proportionate interest in the net proceeds from the sale or sales in the open
market by Boston EquiServe, Canton, Massachusetts (the "Exchange Agent"), on
behalf of all such holders, of the aggregate fractional Paired Common Stock
issued in connection with the Mergers.
Promptly after the Effective Time, the Exchange Agent will mail or deliver to
each person who was, at the Effective Time, a holder of record of Meditrust
Shares and MAC Shares, a form of letter of transmittal containing instructions
for use in effecting the surrender of the old Meditrust certificates
representing such Meditrust Shares and MAC Shares in exchange for certificates
representing shares of Paired Common Stock certificates and cash in lieu of
fractional shares as provided in the Merger Agreement. Upon surrender to the
Exchange Agent of a certificate representing Meditrust Shares and MAC Shares
for cancellation together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, whether or not
accompanied by a summary of the rights of the MAC Shares, the holder of such
certificate representing Meditrust Shares and MAC Shares will be entitled to
receive in exchange therefor a certificate representing Paired Common Stock of
the Surviving Corporations, and the certificate representing Meditrust Shares
and MAC Shares shall be cancelled. No interest will be paid or will accrue on
the amount payable with respect to fractional shares upon surrender of
certificates representing Meditrust Shares and MAC Shares.
After the Effective Time, each certificate formerly representing Meditrust
Shares and MAC Shares, until so surrendered and exchanged, shall be deemed, for
all purposes, to evidence only the right to receive the number of whole shares
of the Paired Common Stock that the holder of such certificate is entitled to
receive in the Mergers and any cash payment in lieu of a fractional share. The
holder of any such unexchanged certificate will not be entitled to receive any
dividends or other distributions payable by either Realty or Operating until
the certificate has been surrendered, at which point, subject to applicable
laws, such dividends and distributions, together with any cash payment in lieu
of a fractional share, will be paid without interest.
SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES REPRESENTING MEDITRUST
SHARES AND MAC SHARES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
SALE OF SHARES TO MAC
As contemplated by the Merger Agreement, MAC has purchased from Realty and
Operating 1,255,076 newly issued, fully paid and non-assessable shares of
Paired Common Stock at a purchase price of $31.00 per share (the "Acquired
Shares"). The Acquired Shares represent 9.8% of the issued and outstanding
Paired Common Stock immediately after the issuance and sale of the Acquired
Shares and approximately 9.1% of the issued and outstanding Paired Common Stock
entitled to vote at the Santa Anita Meetings assuming unaffiliated third
parties purchase the maximum number of shares of Paired Common Stock as
contemplated by the Merger Agreement. See "--Sale of Shares to Unaffiliated
Third Party." MAC intends to vote all shares of Paired Common Stock held by it
in favor of all of the proposals to be voted on at the Santa Anita Meetings. If
the Mergers are not consummated, the Merger Agreement provides that MAC will be
entitled to customary registration rights with respect to the Acquired Shares.
SALE OF SHARES TO UNAFFILIATED THIRD PARTY
Also in connection with the Mergers, Meditrust has the right to designate one
or more unaffiliated third parties who may purchase from Realty and Operating
newly issued, fully paid and non-assessable shares of Paired Common Stock at a
purchase price of $31.00 per share (the "Unaffiliated Acquired Shares"), equal
to up to 19.6% of the issued and outstanding Paired Common Stock (determined
prior to the purchase by MAC) less the amount purchased by MAC. The Merger
Agreement provides that, upon the earlier of consummation of the Mergers and
termination of the Merger Agreement, the unaffiliated purchasers, if any, will
be entitled to customary registration rights with respect to the Unaffiliated
Acquired Shares.
CASH ELECTION; ASSURANCE BY MEDITRUST
Holders of Paired Common Stock may elect to receive cash for their shares for
$31.00 in cash up to a maximum of 3,225,806 shares. Shareholders who so elect
will receive cash after the Mergers and
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at approximately the same time that the Meditrust and MAC shareholders will
receive shares of Paired Common Stock. Subject to the consummation of the
Mergers, The Santa Anita Companies, Meditrust and MAC have agreed that an
aggregate of $100 million in cash will be made available to fund this purchase.
See "The Mergers--Purchase of Paired Common Stock; Procedure for Election;
Proration."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties
relating to, among other things, (a) due organization, valid existence and good
standing of each of Realty, Operating, Meditrust and MAC and certain similar
corporate matters; (b) the capital structure of each of Realty, Operating,
Meditrust and MAC; (c) the authorization, execution, delivery and
enforceability of the Merger Agreement, the consummation of the transactions
contemplated by the Merger Agreement and related matters; (d) absence of
conflicts under charters or by-laws, required consents or approvals and
violations of any instruments or law; (e) financial statements of each of
Realty, Operating, Meditrust and MAC and the accuracy of information contained
therein; (f) undisclosed liabilities; (g) the absence of certain material
adverse changes or events; (h) delivery and filing of documents filed with the
Securities and Exchange Commission (the "SEC"); (i) taxes and tax returns;
(j) real property; (k) agreements, contracts and commitments; (l) litigation;
(m) environmental matters; (n) compliance with laws; (o) tax matters relating
to the Mergers; (p) benefit plans; (q) indebtedness; and (r) certain other
matters.
CERTAIN COVENANTS
The Merger Agreement also contains various covenants on the part of each of
Realty, Operating, Meditrust and MAC which provide that until the Effective
Time, it and each of its respective subsidiaries will: (a) conduct its business
in the ordinary and usual course consistent with past practice and existing
business plans; and (b) not take any action or omit to take any action that
would cause Realty or Meditrust to be disqualified as a REIT or which would
result in a loss of Realty's status as grandfathered from the application of
Section 269B of the Code (relating to the paired share status). Each of Realty
and Operating has also agreed that it will not, without the prior written
consent of Meditrust (which will not unreasonably be withheld), (i) voluntarily
sell, transfer or dispose of any real property of Realty or of Operating; (ii)
incur any debt or lease obligations or purchase money financing obligations,
other than, in each case, in the ordinary course of business consistent with
past practice; (iii) acquire any additional real estate or other assets (other
than receipt of cash or investments of cash in cash-equivalents in connection
with permitted sales of assets); (iv) adopt or propose any change in their
respective certificates of incorporation or any material change in their
respective by-laws; (v) adopt, or permit any of their respective subsidiaries
to adopt, a plan or agreement of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other material
reorganization of them or any of their respective subsidiaries (other than a
liquidation or dissolution of any subsidiary or a merger or consolidation
between wholly-owned subsidiaries); (vi) redeem, purchase or otherwise acquire
directly or indirectly any of their capital stock; (vii) grant any severance or
termination pay to any director, officer or employee; (viii) enter into any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee; (ix)
increase benefits payable under any existing severance or termination pay
policies or employment agreements; (x) increase compensation, bonus or other
benefits payable to directors, officers or employees other than increases
payable to employees in the ordinary course of business consistent with past
practice or merit increases in salaries of employees at regularly scheduled
times in customary amounts consistent with past practices; (xi) issue or enter
into any executory agreement to issue any new equity securities other than (A)
capital stock issued in replacement of lost, stolen or transferred outstanding
shares, (B) capital stock to be issued upon exercise of options or warrants
outstanding, (C) capital stock to be issued upon exchange of the Series A
Preferred Stock, (D) capital stock to be issued pursuant to the Rights
Agreement described under "Description of Capital Stock of The Santa Anita
Companies--Rights Agreement" or (E) as otherwise contemplated by the Merger
Agreement; (xii) declare and pay any dividends or make other distributions to
holders of Realty Common Stock in excess of $.20 per Realty Common Stock per
quarter or such additional dividends as are otherwise necessary
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for Realty to satisfy the REIT Requirements, or repay indebtedness except for
scheduled repayments pursuant to the terms of such indebtedness; (xiii) amend
or terminate the Rights Agreement unless advised by outside counsel that such
amendment or termination could reasonably be required by the fiduciary duties
of its Board of Directors; and (xiv) agree, or permit any subsidiary to agree,
or commit to do any of the foregoing.
In addition, Meditrust will not, without the prior written consent of Realty
and Operating (which will not unreasonably be withheld): (a) issue any
Meditrust Shares at a price materially less than prevailing market prices,
except for Meditrust Shares issued pursuant to existing contractual obligations
or pursuant to employee benefit plans; and (b) increase its quarterly dividends
to holders of Meditrust Shares by more than $.0075 per Meditrust Share per
quarter or by such additional amount as is otherwise necessary for Meditrust to
satisfy the REIT Requirements.
Pursuant to the Merger Agreement, each of Realty, Operating, Meditrust and
MAC has agreed: (a) to use its reasonable best efforts to prepare and file all
necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to obtain all necessary permits,
consents, orders, approvals and authorizations of, or any exemption by, all
third parties necessary or advisable to consummate the transactions
contemplated under the Merger Agreement; (b) to furnish the other parties with
all information concerning itself, its subsidiaries, directors, trustees,
officers and shareholders and other affiliates and such other matters as may be
reasonably necessary or advisable in connection with any statement, filing,
notice or application; (c) to furnish the other parties with copies of written
communications received by each such party, or any of its subsidiaries,
associates or other affiliates, from, or delivered by any of the foregoing to,
any governmental entity in respect of the transactions contemplated by the
Merger Agreement; and (d) to cooperate with each other party and promptly take
or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable to obtain favorable review of the Mergers under
the HSR Act.
NO SOLICITATION
The Merger Agreement provides that neither Realty nor Operating nor any of
their respective subsidiaries will, and that each of Realty and Operating will
use their best efforts to cause their respective directors and any other
persons acting, or purporting to act, on their behalf (including, but not
limited to, their officers, employees, investment bankers, financial advisors,
attorneys or accountants) not to, initiate any contact with, solicit, encourage
or enter into or continue any discussions, negotiations, understandings or
agreements with, anyone other than Meditrust (a "Third Party") with respect to,
or furnish or disclose any non-public information regarding Realty, Operating
or their subsidiaries, to any Third Party in connection with, any Competing
Transaction Proposal (which is defined as a bona fide proposal from a Third
Party relating to any recapitalization, business combination, asset sale, joint
venture or other transaction which would be inconsistent with the transactions
which are the subject of the Merger Agreement). Notwithstanding the foregoing,
except to the extent the Realty Board and the Operating Board could reasonably
be required by their fiduciary duties as determined in good faith on the
written advice of outside counsel to Realty and Operating to take the following
steps at any time prior to approval by the shareholders of Realty and Operating
of the Realty Shareholder Matters and the Operating Shareholder Matters,
respectively, (i) Realty and Operating may, in response to an unsolicited
request, furnish non-public information with respect to Realty and Operating or
their subsidiaries to any Third Party pursuant to a customary confidentiality
and standstill agreement and discuss that information (but not a Competing
Transaction Proposal) with the Third Party and (ii) upon receipt by Realty or
Operating of a Competing Transaction Proposal from a Third Party, if each of
the Realty Board and the Operating Board has reasonably determined that the
transaction contemplated by the Competing Transaction Proposal, if consummated,
would constitute an Alternative Transaction, as defined below, then Realty and
Operating may participate in discussions and negotiations with the Third Party
regarding the Competing Transaction Proposal. An "Alternative Transaction" is
defined in the Merger Agreement as a transaction that the Realty Board and the
Operating Board in good faith on the advice of a nationally recognized
financial advisor determine could provide greater value to their shareholders
than the Mergers. Realty and Operating may not enter into an agreement for an
Alternative Transaction unless they have notified Meditrust at least five
business days in
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advance thereof and paid to Meditrust a termination fee of $12 million (the
"Termination Fee") and expense reimbursement of up to $1 million ("Transaction
Expenses").
MANAGEMENT FOLLOWING THE MERGERS
The Merger Agreement provides that, following the Effective Time, the Boards
of Directors of Meditrust Corporation and Meditrust Operating Company will
consist of up to 12 persons to be designated by Meditrust two of which shall be
members of the Board of Directors of Realty and two of which shall be members
of the Board of Directors of Operating.
INCREASE IN AUTHORIZED SHARES; AUTHORIZATION OF SERIES COMMON STOCK
The Certificates of Incorporation of Realty and Operating, as in effect
immediately prior to the Effective Time and as amended in accordance with the
provisions of the Merger Agreement to increase the number of authorized shares
issuable by Realty and Operating to 300,000,000 and to authorize a new class of
common stock issuable in one or more series upon terms to be determined by the
Board of Directors (the "Series Common Stock"), shall become the Certificates
of Incorporation of the Surviving Corporations. The By-Laws of Realty and
Operating, as in effect immediately prior to the Effective Time, shall become
the By-Laws of the Surviving Corporations.
The Boards of Directors believe the increase in the authorized shares
issuable and the creation of the Series Common Stock are in the best interests
of the Surviving Corporations and their shareholders and believe it advisable
to authorize such shares so that sufficient shares of common stock will be
available for, among other things, issuance in connection with public or
private offerings of shares for cash, dividends payable in stock of the
corporation, acquisitions of other companies and issuances under employee
benefit plans.
The Series Common Stock will be a new class of stock for which the
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof (collectively, the
"Limitations and Restrictions") with respect to any series are determined by
the Board of Directors of a Surviving Corporation. As such, the Boards of
Directors of the Surviving Corporations will, in the event of the consummation
of the Mergers, be entitled to authorize the creation and issuance of shares of
Series Common Stock in one or more series with such Limitations and
Restrictions as may be determined in each Board's sole discretion, with no
further authorization by security holders required for the creation and
issuance thereof.
The Board of Directors of each of the Surviving Corporations will be required
to make any determination to issue shares of Series Common Stock based on its
judgment as to the best interests of the shareholders and the Surviving
Corporation. Although neither Board of Directors has any present intention of
doing so, it could issue shares of Series Common Stock that could, depending on
the terms of the series in which they are issued, make more difficult or
discourage an attempt to obtain control of the Surviving Corporations by means
of a merger, tender offer, proxy contest or other means. When in the judgment
of the Board of Directors this action will be in the best interest of the
shareholders and the Surviving Corporations, such shares could be used to
create voting or other impediments or to discourage persons seeking to gain
control of the Surviving Corporations. Such shares could be privately placed
with purchasers favorable to the Board of Directors in opposing an attempt to
gain control of the Surviving Corporations. In addition, the Board of Directors
could authorize holders of a series of Series Common Stock to vote either
separately as a class or with the holders of other series of common stock, on
any merger, sale or exchange of assets by the Surviving Corporations or any
other extraordinary corporate transaction. The existence of the additional
authorized shares could have the effect of discouraging unsolicited takeover
attempts. The issuance of new shares also could dilute the stock ownership of a
person or entity seeking to obtain control of the Surviving Corporations should
the Board of Directors consider the action of such entity or person not to be
in the best interest of the shareholders and the Surviving Corporations.
While the Surviving Corporations may consider effecting an equity offering of
common stock in the proximate future for purposes of raising additional working
capital or otherwise, neither Realty nor Operating,
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as of the date hereof, has any agreements or understandings with any third
party to effect any such offering, to purchase any shares offered in connection
therewith, or to veto any such shares, and no assurances are given that any
offering will in fact be effected or that, if effected, the shares issued will
be of common stock or Series Common Stock. Therefore, the terms of any common
stock subject to this proposal cannot be stated or estimated with respect to
any or all of the securities authorized.
DIRECTOR AND OFFICER INDEMNIFICATION
From and after the Effective Time, each of the Surviving Corporations will
indemnify, defend and hold harmless the respective present officers, directors
and employees of Realty and Operating and any of their respective subsidiaries
against all losses, expenses, claims, damages or liabilities arising out of
actions or omissions occurring on or prior to the closing date to the full
extent permitted or required under applicable law (and shall also advance
expenses as incurred to the fullest extent permitted under applicable law,
provided that, to the extent required by applicable law, the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification).
Each of the Surviving Corporations will be required to maintain in effect for
not less than six years the current policies (or comparable policies) of
directors' and officers' liability insurance maintained by Realty and Operating
with respect to matters occurring prior to the closing date. If the aggregate
annual premiums for such insurance during such six year period exceed 200% of
the per annum rate of the aggregate premium currently paid by Operating and
Realty and any of their respective subsidiaries for such insurance on the date
of the Merger Agreement, then each of the Surviving Corporations will provide
the most advantageous coverage that is then available at an annual premium
equal to 200% of such rate.
COLONY TERMINATION FEE
Realty and Operating have paid to Colony $4,500,000 as a termination fee and
transaction expenses pursuant to the Colony Agreement. If either Meditrust or
MAC fails to call its respective shareholders meeting or the shareholders of
Meditrust and MAC fail to approve the Mergers at their respective shareholder
meetings, and the Mergers are approved by the shareholders of Realty and
Operating and all other conditions to Meditrust's consummation of the Mergers
have been satisfied, Meditrust shall pay to Realty and Operating $4,000,000 in
the aggregate.
CONDITIONS
The respective obligation of each party to consummate the Mergers is subject
to the fulfillment of each of the following conditions: (a) the adoption of the
Merger Agreement shall have been duly approved by the shareholders of Meditrust
and MAC, the adoption of the Merger Agreement and the issuance of shares of
Realty Common Stock in the Realty Merger shall have been duly approved by the
shareholders of Realty and the adoption of the Merger Agreement and the
issuance of shares of Operating Common Stock in the Operating Merger shall have
been duly approved by the shareholders of Operating in accordance with
Massachusetts law (in the case of Meditrust and MAC), the DGCL, other
applicable law and their respective organizational documents; (b) the waiting
periods applicable to the consummation of the Mergers under the HSR Act shall
have expired or been terminated and all filings required to be made prior to
the closing by any party to the Merger Agreement or any of its respective
subsidiaries with, and all consents, approvals and authorizations required to
be obtained prior to the closing by any party to the Merger Agreement or any of
its respective subsidiaries from, any governmental entity shall have been made
or obtained except where the failure to obtain such consents is not reasonably
likely to have a Material Adverse Effect (as defined in the Merger Agreement)
on the Surviving Corporations and cannot reasonably be expected to subject the
parties to the Merger Agreement or their affiliates, directors, trustees or
officers to the risk of criminal liability; (c) all consents or approvals of
all persons (other than governmental entities) required for or in connection
with or as a result of the execution, delivery and performance of the Merger
Agreement and the consummation of the transactions contemplated thereby shall
have been obtained and shall be in full force and effect, except for those the
failure of which to obtain would not have a Material Adverse Effect; (d) no
United States or state court or other governmental entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
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statute, rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by the Merger Agreement; (e)
Meditrust, Realty and Operating shall have received an opinion from O'Melveny &
Myers LLP, dated the Effective Time, and reasonably satisfactory to Meditrust,
Realty and Operating, to the effect that (i) for the calendar year 1996, Realty
met the requirements of the Code for qualification as a REIT, and if Realty
continues its operations in the same manner as it has in such year, Realty will
continue to so qualify; and (ii) (A) the consummation by Realty and Operating
of the transactions contemplated by the Merger Agreement will not adversely
affect the qualification of Realty as a REIT or (B) its ability to retain its
status as grandfathered from the application of Section 269B(a)(3) of the Code
pursuant to Section 136(c)(3) of the Deficit Reduction Act of 1984; (f)
Meditrust, Realty and Operating shall have received an opinion of Nutter,
McClennen & Fish, LLP, dated the Effective Time, and reasonably satisfactory to
Meditrust, Realty and Operating, to the effect that (i) immediately prior to
the Effective Time, Meditrust was qualified as a REIT and (ii) the consummation
by Realty and Operating of the transactions contemplated by the Merger
Agreement will not adversely affect the qualification of Realty as a REIT or
its ability to retain its status as grandfathered from the application of
Section 269B(a)(3) of the Code pursuant to Section 136(c)(3) of the Deficit
Reduction Act of 1984; (g) Meditrust shall have received an opinion from
Nutter, McClennen & Fish, LLP, dated the Effective Time, and reasonably
satisfactory to Meditrust, to the effect that the Realty Merger shall qualify
as a "reorganization" under Section 368(a) of the Code and that the Operating
Merger shall qualify as a "reorganization" under Section 368(a) of the Code or,
alternatively, under Section 351 of the Code; and (h) the Registration
Statement shall have become effective under the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC. The parties will not waive the conditions described in
paragraphs (a), (b), (e), (f), (g) or (h).
The obligation of Meditrust to consummate the Mergers is also subject to the
fulfillment or waiver by Meditrust prior to the closing of each of the
following conditions: (a) the representations and warranties of each of Realty
and Operating set forth in the Merger Agreement shall be true and correct, and
Meditrust shall have received an officer's certificate of each of Realty and
Operating to such effect; (b) Realty and Operating shall have complied with all
covenants in all material respects and performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the closing date, and Meditrust shall have received an officer's
certificate of each of Realty and Operating to such effect; (c) there shall
have been no Material Adverse Effect on Realty or Operating, and there shall
have been delivered to Meditrust an officer's certificate of each of Realty and
Operating to such effect; (d) the Rights under the Rights Agreement shall not
have become exercisable; (e) Meditrust shall have received the resignations of
all directors of Realty and Operating, except those directors designated by
Meditrust to remain on the Boards of Directors of Realty and Operating,
respectively; and (f) the Paired Common Stock to be issued in the Mergers shall
have been approved for listing on the NYSE upon official notice of issuance.
The obligation of Realty and Operating to consummate the Mergers is also
subject to the fulfillment or waiver by Realty and Operating prior to the
closing date of each of the following conditions: (a) the representations and
warranties of Meditrust set forth in the Merger Agreement shall be true and
correct and Realty and Operating shall have received an officer's certificate
of Meditrust to such effect; (b) each of Meditrust and MAC shall have complied
with all covenants in all material respects and performed in all material
respects all obligations required to be performed by it under the Merger
Agreement at or prior to the closing date, and Realty and Operating shall have
received an officer's certificate of each of Meditrust and MAC to such effect;
and (c) there shall have been no Material Adverse Effect on Meditrust and there
shall have been delivered to Realty and Operating an officer's certificate of
Meditrust to such effect.
TERMINATION; TERMINATION FEES AND EXPENSES
The Merger Agreement may be terminated:
(a) at any time prior to the Effective Time, before or after the approval by
the shareholders of Meditrust, Operating and/or Realty, by the mutual consent
of the parties, by action of its respective Board; (b) by action of the Board
of any party thereto, if (i) the Mergers shall not have been consummated by
April 13, 1998, provided that, the terminating party shall not have breached in
any material respect its obligations under the Merger
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Agreement in any manner that shall have caused or resulted in such failure,
(ii) if Realty's, Operating's, Meditrust's or MAC's shareholders fail to
approve the Mergers as the case may be, at their respective shareholders
meetings or (iii) Realty and Operating have entered into an Alternative
Transaction and Realty and Operating have complied with their obligations
described above under "--No Solicitation" and paid the Termination Fee; (c) by
action of the Meditrust Board, if (i) either Realty or Operating shall have
failed to comply in any material respect with any of the covenants or
agreements contained in the Merger Agreement to be performed by such company at
or prior to the time of termination; or (ii) either of the Realty Board or the
Operating Board shall have failed to recommend to its shareholders the approval
of the transactions contemplated by the Merger Agreement or shall have
withdrawn, modified or changed in a manner adverse to Meditrust its approval or
recommendation of the Mergers; (d) by action of either the Realty Board or the
Operating Board, if (i) Meditrust shall have failed to comply in any material
respect with any of the covenants or agreements contained in the Merger
Agreement to be performed by it at or prior to the time of termination; or (ii)
the Boards of Meditrust and MAC shall have failed to recommend to their
respective shareholders the approval of the transactions contemplated by the
Merger Agreement, or shall have withdrawn, modified or changed in a manner
adverse to Realty or Operating its approval or recommendation of the Merger
Agreement.
In the event of termination of the Merger Agreement, and if Realty or
Operating merges with, or sells or otherwise transfers directly or indirectly
more than 25% of its assets to a third party, or any third party (individually
or as part of a group), acquires directly or indirectly beneficial ownership of
more than 30% of the Paired Common Stock, or Realty or Operating enter into an
agreement providing for any of the foregoing, in each case within one year
after the earlier of (i) the date of the meeting of shareholders of Realty and
Operating convened to consider the Mergers and (ii) the termination of the
Merger Agreement (other than in accordance with clause (b)(iii) of the
immediately preceding paragraph), Realty and Operating shall pay Meditrust the
Termination Fee unless already paid.
Realty and Operating shall pay (a) the Termination Fee and certain
transaction expenses to Meditrust under circumstances involving an Alternative
Transaction as described above under "--No Solicitation" and (b) the
Transaction Expenses to Meditrust if the Mergers are not approved.
In the event that the Merger Agreement is terminated as described above, MAC
will be entitled to demand that Realty and Operating cause to be filed with the
SEC a registration statement under the Securities Act for an offering on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, or
such other appropriate rule under the Securities Act, relating to the sale of
any shares of Paired Common Stock then owned by MAC that were acquired pursuant
to the Merger Agreement. Upon the earlier of consummation of the Mergers and
termination of the Merger Agreement, the unaffiliated third party purchaser, if
any, will have the right to require the shares of Paired Common Stock purchased
by it to be registered for resale under the Securities Act. Other than as
provided in the immediately preceding sentences, all other further obligations
of the parties under the Merger Agreement, subject to certain exceptions, will
terminate without further liability on the part of any party to the others upon
the termination of the Merger Agreement as provided above.
OTHER EXPENSES
Except as described above, all costs and expenses incurred in connection with
the Merger Agreement and the transactions contemplated thereby will be paid by
the party incurring such costs or expenses. The parties estimate that fees and
expenses related to the Mergers, consisting primarily of transaction costs for
fees and expenses of investment bankers, attorneys and accountants and
financial printing and other related charges, will total approximately $30
million, assuming the Mergers are completed, of which approximately $11.15
million is attributable to The Santa Anita Companies and approximately $18.85
million is attributable to Meditrust and MAC.
STOCK EXCHANGE LISTING
It is a condition to the Mergers that the shares of Paired Common Stock
issuable in the Mergers be approved for listing on the NYSE on or prior to the
Effective Time upon official notice of issuance.
97
<PAGE>
THE SANTA ANITA COMPANIES
INTRODUCTION
Realty and Operating are two separate companies, the stocks of which trade as
a single unit under a stock-pairing arrangement. Realty and Operating were each
incorporated in 1979 and are the successors of a corporation originally
organized in 1934 to conduct thoroughbred horse racing in Southern California.
REALTY
Realty operates as a REIT under the provisions of the Code. As such, Realty
is principally engaged in investing in and holding real property. Realty is a
self-administered equity REIT.
Currently, Realty owns an approximately 400 acre parcel in Arcadia,
California which is the site for the Santa Anita Park Racetrack (the
"Racetrack"), a thoroughbred horse racing facility, a 50% interest in the
operations of the Santa Anita Fashion Park Mall, a 1.1 million square foot
regional shopping mall and Santa Anita Medical Plaza, a six story, 85,000
square foot medical office building. Additionally, Realty owns one neighborhood
shopping center, and a 24-acre undeveloped land parcel in Southern California.
Realty no longer intends to hold the neighborhood shopping center and land
parcel and is seeking buyers for these properties.
Additional information concerning Realty is included in the Realty documents
filed with the SEC and incorporated by reference in this Joint Proxy
Statement/Prospectus. See "Where You Can Find More Information."
OPERATING
Operating is engaged in thoroughbred horse racing. The thoroughbred horse
racing operation is conducted by LATC, which leases the Racetrack from Realty.
The Racetrack is one of the premier thoroughbred horse racing venues in North
America. Operating has conducted a winter live thoroughbred horse racing meet
at the Racetrack each year since 1934 (except for three years during World War
II). In addition, the Racetrack has been the site of a fall meet conducted by
Oak Tree Racing Association, which has leased the Racetrack from LATC since
1969. The Racetrack was the location of the 1986 and 1993 Breeders' Cup
Championships. The race meets held at the Racetrack in 1997 will offer 52
graded stakes races, the highest number offered by any racetrack in North
America.
Santa Anita's live races are simulcast to 16 satellite wagering sites in
Southern California, 15 sites in Northern California and 986 sites in 38 other
states and 10 foreign countries. Approximately 77% of wagering at Santa Anita's
1996 winter meet was through off-site wagering. Operating believes that it is
well positioned to benefit from the continued industry trend toward satellite
wagering, which has been driven by technological developments, legislative
changes and customers' desire for convenience.
Additional information concerning Operating is included in the Operating
documents filed with the SEC and incorporated by reference in this Joint Proxy
Statement/Prospectus. See "Where You Can Find More Information."
LEGAL PROCEEDINGS
In October 1996, a purported class action complaint was filed by Barbara J.
Gignac in the Superior Court of Los Angeles County, California, naming as
defendants The Santa Anita Companies and certain of their officers and
directors. The complaint alleged breaches of fiduciary duties by the defendants
as a result of the Initial Colony Transaction. On April 30, 1997, Barbara
Gignac and other plaintiffs filed a First Amended Class Action Complaint
("Amended Complaint") charging the individual defendants with breach of their
fiduciary duties as a result of The Santa Anita Companies entering into the
Merger Agreement. The Amended Complaint
98
<PAGE>
seeks, inter alia, to enjoin the Mergers and compensatory damages in an
unspecified amount. The Santa Anita Companies intend to contest vigorously the
claims asserted in the Amended Complaint.
Certain other claims, suits and complaints arising in the ordinary course of
business have been filed or were pending against Realty and/or Operating and
its subsidiaries at August 31, 1997. In the opinion of the managements of
Realty and Operating, all such matters are adequately covered by insurance or,
if not so covered, are of such kind, or involve such amounts, as would not have
a significant effect on the financial position or results of operations of
Realty and Operating if disposed of unfavorably.
99
<PAGE>
SELECTED COMBINED FINANCIAL INFORMATION
The following table presents selected combined financial information with
respect to The Santa Anita Companies for the five years ended December 31, 1996
and for the six-month periods ended June 30, 1997 and June 30, 1996. This
financial information has been derived from audited financial statements
included in The Santa Anita Companies' Annual Report on Form 10-K for the
fiscal years ended December 31, 1992 through December 31, 1996 and the
unaudited financial statements included in The Santa Anita Companies' Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997. The Santa Anita Form
10-K and The Santa Anita Companies' Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 are incorporated by reference in this Joint Proxy
Statement/Prospectus and should be read in conjunction with such financial
statements and the accompanying footnotes. See "Where You Can Find More
Information."
<TABLE>
<CAPTION>
AT AND FOR THE
SIX MONTHS
ENDED JUNE 30, AT AND FOR THE YEAR ENDED DECEMBER 31,
---------------- --------------------------------------------
1997 1996* 1996 1995* 1994* 1993* 1992*
------- ------- -------- -------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues.......... $53,483 $57,032 $ 77,225 $ 81,206 $81,449 $95,011 $94,177
Costs and expenses...... 51,230 48,546 76,685 106,838 79,424 97,912 87,851
------- ------- -------- -------- ------- ------- -------
Income (loss) before
income taxes........... 2,253 8,486 540 (25,632) 2,025 (2,901) 6,326
Income tax benefit...... -- -- -- 2,000 -- 2,523 158
------- ------- -------- -------- ------- ------- -------
Income (loss) before
extraordinary gain..... 2,253 8,486 540 (23,632) 2,025 (378) 6,484
Extraordinary gain on
early retirement of
debt................... -- -- -- 4,050 -- -- --
------- ------- -------- -------- ------- ------- -------
Net income (loss)....... 2,253 8,486 540 (19,582) 2,025 (378) 6,484
Preferred stock
dividends(1)........... 3,119 -- 12,420 -- -- -- --
------- ------- -------- -------- ------- ------- -------
Net income (loss)
applicable to common
shares................. $ (866) $ 8,486 $(11,880) $(19,582) $ 2,025 $ (378) $ 6,484
======= ======= ======== ======== ======= ======= =======
PER SHARE:
Net income (loss) per
common share:
Before extraordinary
gain.................. $ (.08) $ .75 $ (1.05) $ (2.11) $ .18 $ (.03) $ .58
Extraordinary gain..... -- -- -- .36 -- -- --
------- ------- -------- -------- ------- ------- -------
$ (.08) $ .75 $ (1.05) $ (1.75) $ .18 $ (.03) $ .58
======= ======= ======== ======== ======= ======= =======
Dividends paid per
common share........... $ .40 $ .40 $ .80 $ .80 $ 1.08 $ 1.36 $ 1.36
Dividends declared per
common share........... $ .40 $ .40 $ .80 $ .80 $ .94 $ 1.36 $ 1.36
Book value.............. $ .88 $ 3.21 $ 1.29 $ 2.83 $ 5.36 $ 6.11 $ 7.51
Weighted average common
shares outstanding..... 11,480 11,271 11,317 11,214 11,143 11,141 11,141
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets(2)(3)(4)... $ 86,460 $93,481 $114,876 $142,121 $257,239 $248,043
Loans payable(2)(4)..... 26,863 25,824 51,074 50,375 153,131 133,217
Shareholders'
equity(3).............. 10,137 14,789 31,901 59,720 60,088 83,619
</TABLE>
- --------
* The six months ended June 30, 1996 and the fiscal years 1995 and prior have
been restated to reflect an impairment in value of an unconsolidated joint
venture investment (Joppa Associates) in 1991 instead of 1995, and increase
The Santa Anita Companies' share of the joint venture losses from 33 1/3% to
50% for all periods presented since it was probable that one of the partners
would not bear its share of losses (see Note 2 to the financial statements
in the Santa Anita Form 10-K).
(1) See Note 16 to the financial statements in the Santa Anita Form 10-K. See
"Where You Can Find More Information."
(2) The decrease in total assets, loans payable and shareholders' equity in
1996 compared with 1995 was due primarily to the sale of four neighborhood
shopping centers and two office buildings and to the sale of the investment
in Pacific Gulf Properties Inc. (see Note 3 to the financial statements in
the Santa Anita Form 10-K).
(3) The decrease in total assets and shareholders' equity in 1995 compared with
1994 was due primarily to the nonrecurring charge of $30,300 in 1995
relating to Realty's plan to dispose of its non-core real estate assets
(see Note 3 to the financial statements in the Santa Anita Form 10-K).
(4) The decrease in total assets and loans payable in 1994 compared with 1993
was due primarily to the sale of Realty's multifamily and industrial
properties in 1994 (see Note 8 to the financial statements in the Santa
Anita Form 10-K).
100
<PAGE>
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
The following table sets forth, as of August 31, 1997, except as otherwise
noted, the number of shares of paired capital stock of Realty and Operating
beneficially owned, directly or indirectly, by (i) each person who, to the
knowledge of The Santa Anita Companies, beneficially owns more than 5% of the
Paired Common Stock and (ii) the current chief executive officer and the four
most highly compensated current executive officers of Realty and Operating,
each director of Realty and Operating (other than directors' qualifying shares)
and all current directors and officers of Realty as a group and all current
directors and officers of Operating as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF SHARES OF
SHARES OF PAIRED COMMON
CLASS PAIRED STOCK(1)(2)
OF COMMON -----------------------
NAME STOCK STOCK(1)(2) PRE-MERGER POST-MERGER+
- ---- ------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
Meditrust Acquisition Company.... Common 1,255,076(3) 9.8% 1.5%
197 First Avenue
Needham, Massachusetts 02194
Apollo Real Estate Investment Common 989,900(4) 8.6 1.1
Fund II, L.P. and affiliates.....
1301 Avenue of the Americas
New York, New York 10019
Gotham Partners, L.P. and Common 589,300(5) 5.1 *
affiliates.......................
110 East 42nd Street, 18th Floor
New York, New York 10017
Colony Investors II, L.P......... Common 112,700 1.0(6) *
1999 Avenue of the Stars
Los Angeles, California 90067
OPERATING MANAGEMENT
William C. Baker................. Common 281,400 2.4 *
Clifford C. Goodrich(7).......... Common 96,108 * *
Thomas S. Robbins................ Common 22,961 * *
Mark T. Stephens(8).............. Common 11,242 * *
Kathryn J. McMahon............... Common 6,294 * *
All current directors and
executive officers as a group
(13 persons)(7)(9).............. Common 1,164,239 9.8 1.3
REALTY MANAGEMENT
Brian L. Fleming................. Common 22,384 * *
Tom D. Austin.................... Common 3,122 * *
All current directors and
executive officers as a group
(11 persons)(9)................. Common 1,053,140 8.8 1.2
</TABLE>
- --------
* Less than one percent.
+ Based on pro forma amount of Paired Common Stock outstanding as of June 30,
1997.
(1) Includes shares subject to options exercisable within 60 days of August 31,
1997, as follows: Baker--275,000; Goodrich--57,800; Robbins--19,000;
Stephens--11,000; McMahon--4,800; all current directors and executive
officers of Operating as a group--367,600; Fleming--22,200; Austin--2,600;
and all current directors and executive officers of Realty as a group--
299,800.
(2) Includes fully-vested shares allocated to the named officer's accounts in
The Santa Anita Companies' Thrift Plan as follows: Goodrich--1,983;
Robbins--3,961; Stephens--242; McMahon--194; all current directors and
executive officers of Operating as a group--6,380; Fleming--184; Austin--
86; and all current directors and executive officers of Realty as a group--
270.
(3) On September 23, 1997, MAC purchased 1,225,076 paired shares pursuant to
the Merger Agreement.
101
<PAGE>
(4) As disclosed in Amendment No. 5 to Schedule 13D dated April 8, 1997.
(5) As disclosed in Schedule 13D dated November 21, 1996.
(6) Colony also owns 867,343 shares of the Series A Preferred Stock,
representing all of the shares of the Series A Preferred Stock outstanding.
(7) Includes 12,098 shares of restricted stock which provide for restrictions
on transfer prior to vesting and are subject to forfeiture in certain
circumstances.
(8) Mr. Stephens resigned as an officer of a subsidiary of Operating effective
September 12, 1997.
(9) Includes 164,200 shares held in different trusts by separate directors,
159,871 shares beneficially owned by a director's spouse, 179,984 shares
held in trust for the benefit of a director's non-immediate family members
and a charitable organization for which a director's spouse has voting
power, 91 shares owned by a director's minor children and 227,245 shares of
which a director has been granted a revocable proxy to represent and vote
all such shares.
102
<PAGE>
MEDITRUST
BUSINESS
Meditrust, a REIT organized on August 6, 1985, invests primarily in the
health care industry in locations throughout the United States and also invests
in other entities which invest in similar facilities outside of the United
States. The objective of Meditrust is to enable shareholders to participate in
the investment in health care related facilities held primarily for the
production of income to be distributed to shareholders. In meeting this
objective, Meditrust invests in high quality facilities that are managed by
experienced operators and achieves diversity in its property portfolio by
sector of the health care industry, geographic location, operator and form of
investment.
Meditrust was organized to qualify, and intends to continue to operate, as a
real estate investment trust in accordance with federal tax laws and
regulations. So long as Meditrust so complies, with limited exceptions,
Meditrust will not be taxed under federal income tax laws on that portion of
its taxable income that it distributes to its shareholders on a current basis.
Meditrust has distributed, and intends to continue to distribute, substantially
all of its real estate investment trust taxable income to shareholders on a
current basis.
As of August 31, 1997, Meditrust had investments in 474 facilities,
consisting of 282 long-term care facilities, 133 retirement and assisted living
facilities, 26 rehabilitation hospitals, 26 medical office buildings, six
alcohol and substance abuse and psychiatric facilities, and one acute care
hospital campus. Included in the 474 facilities are 62 properties under
construction which are expected to be completed during the next 12 to 18
months. Meditrust's investments take the form of permanent mortgage loans,
sale/leaseback transactions and development projects. Generally, Meditrust
enters into development projects where, upon completion of the facility,
Meditrust's development funding is to be replaced by either a permanent
mortgage loan or a sale/leaseback transaction with Meditrust.
Additional information concerning Meditrust is included in the Meditrust
documents filed with the SEC and incorporated by reference in this Joint Proxy
Statement/Prospectus. See "Where You Can Find More Information."
103
<PAGE>
MEDITRUST SUMMARY FINANCIAL INFORMATION
The following table presents selected financial information with respect to
Meditrust for the five years ended December 31, 1996 and for the six-month
periods ended June 30, 1997 and June 30, 1996. This financial information has
been derived from audited financial statements included in the Meditrust Annual
Report on Form 10-K for the fiscal years ended December 31, 1992 through
December 31, 1996 and the unaudited financial statements included in the
Meditrust Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
The Meditrust Annual Report on Form 10-K for the year ended December 31, 1996
and Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 are
incorporated by reference in this Joint Proxy Statement/Prospectus, and should
be read in conjunction with such financial statements and the accompanying
footnotes. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................ $138,979 $121,500 $254,024 $209,369 $172,993 $150,375 $132,394
Expenses:
Interest expense....... 38,378 30,596 64,216 64,163 67,479 62,193 58,159
Depreciation and
amortization.......... 13,355 11,184 23,207 18,176 17,171 16,277 14,032
General and
administrative
expenses.............. 4,246 3,944 8,625 7,058 7,883 8,269 8,845
-------- -------- -------- -------- -------- -------- --------
Total expenses.......... 55,979 45,724 96,048 89,397 92,533 86,739 81,036
-------- -------- -------- -------- -------- -------- --------
Net income before
extraordinary item..... 83,000 75,776 157,976 119,972 80,460 63,636 51,358
Loss on prepayment of
debt................... -- -- -- 33,454 -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 83,000 $ 75,776 $157,976 $ 86,518 $ 80,460 $ 63,636 $ 51,358
======== ======== ======== ======== ======== ======== ========
PER SHARE:
Net income before
extraordinary item..... $ 1.35 $ 1.31 $ 2.66 $ 2.52 $ 2.28 $ 2.03 $ 1.95
Loss on prepayment of
debt................... -- -- -- 0.70 -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 1.35 $ 1.31 $ 2.66 $ 1.82 $ 2.28 $ 2.03 $ 1.95
======== ======== ======== ======== ======== ======== ========
Distributions paid...... $ 1.42 $ 1.38 $ 2.78 $ 2.70 $ 2.62 $ 2.54 $ 2.46
Book value.............. $ 22.53 $ 22.51 $ 22.57 $ 20.75 $ 19.44 $ 17.84 $ 16.12
Shares of beneficial
interest (weighted
average)............... 61,509 57,909 59,458 47,563 35,314 31,310 26,360
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate investments,
net.................... $2,442,796 $2,188,078 $1,777,798 $1,484,229 $1,214,308 $1,021,630
Total assets............ $2,566,604 $2,316,875 $1,891,852 $1,595,130 $1,310,401 $1,094,941
Indebtedness, net:
Notes and bank notes
payable............... $ 770,649 $ 518,904 $ 414,522 $ 454,005 $ 366,530 $ 377,256
Convertible
debentures............ 278,512 280,813 295,209 231,277 199,822 93,356
Bonds and mortgages
payable............... 59,544 59,043 52,560 80,470 91,893 135,973
Total.................. $1,108,705 $ 858,760 $ 762,291 $ 765,752 $ 658,245 $ 606,585
Total liabilities....... $1,178,839 $ 931,934 $ 830,097 $ 824,983 $ 724,606 $ 663,458
Total shareholders'
equity................. $1,387,765 $1,384,941 $1,061,755 $ 770,147 $ 585,795 $ 431,483
</TABLE>
104
<PAGE>
PRINCIPAL AND MANAGEMENT SHAREHOLDERS OF MEDITRUST AND MAC
The following table sets forth, as of August 31, 1997, except as otherwise
noted, the number of shares of Meditrust beneficially owned directly or
indirectly, by (i) each person who, to the knowledge of Meditrust, beneficially
owns more than 5% of the Meditrust Shares, and (ii) the chief executive officer
and each of the four most highly compensated executive officers of Meditrust,
each Trustee and all current Trustees and executive officers of Meditrust as a
group. As of such date, the MAC Shares had not yet been distributed to the
holders of Meditrust Shares and Meditrust was the sole shareholder of MAC. As
of the consummation of the distribution, each holder of Meditrust Shares will
be deemed to hold an equivalent number of MAC Shares. Numbers may not be exact
as a result of changes in ownership of Meditrust Shares between August 31, 1997
and the date of the distribution.
<TABLE>
<CAPTION>
SHARES SUBJECT SHARES BENEFICIALLY
SHARES TO OPTIONS OWNED AS A PERCENTAGE OF
BENEFICIALLY EXERCISABLE SHARES OUTSTANDING
NAME AND PRINCIPAL OWNED AS OF WITHIN 60 DAYS -------------------------
OCCUPATION OR EMPLOYMENT 8/31/97(1) OF 8/31/97 PRE-MERGER POST-MERGER(2)
- ------------------------ ------------ -------------- ---------- --------------
<S> <C> <C> <C> <C>
Franklin Resources, 3,202,838(3) 0 5.2% 4.5%
Inc. ..................
77 Mariners Island
Blvd.
San Mateo, CA 94404
Abraham D. Gosman....... 991,064(4) 211,353 1.6 1.3
Chairman and Chief
Executive Officer of
Meditrust
David F. Benson......... 68,867 55,706 * *
President and Treasurer
of Meditrust and
President of MAC
Edward W. Brooke........ 92,555(5) 40,000 * *
Former Partner in the
law firm of O'Connor &
Hannan
C. Gerald Goldsmith..... 0 0 * *
Independent investor
and financial advisor
Philip L. Lowe.......... 43,000(6) 40,000 * *
Principal of Philip L.
Lowe and Associates,
consulting firm
Thomas J. Magovern...... 27,250 20,000 * *
Regional Vice
President, Real Estate
Asset Management,
Summit Bank, a New
Jersey banking
institution
Gerald Tsai, Jr. ....... 28,000 20,000 * *
Chairman, Chief
Executive Officer and
President of Delta Life
Corporation, an annuity
company
Michael S. Benjamin..... 23,698 13,333 * *
Senior Vice President
and General Counsel of
Meditrust
Michael F. Bushee....... 25,071 13,333 * *
Chief Operating Officer
of Meditrust
Stephen H. Press........ 24,837 23,332 * *
Vice President of
Acquisitions of
Meditrust
All Trustees and
executive officers of
Meditrust as a group
(14 in number)......... 1,325,526(7) 460,389 2.2% 1.9
All Trustees and 182,390(5) 109,039 * *
executive officers of
MAC as a group
(3 in number)
</TABLE>
105
<PAGE>
- --------
* Less than 1%.
(1) Unless otherwise indicated, the number of Meditrust Shares stated as being
owned beneficially includes (i) Meditrust Shares beneficially owned by
spouses, minor children and/or other relatives in which the Trustee may
share voting or investment power and (ii) any Meditrust Shares listed as
being subject to options exercisable within 60 days of August 31, 1997.
(2) Constitutes percentage ownership of the Paired Common Stock of the
Surviving Corporations.
(3) Based on information concerning beneficial ownership of Meditrust Shares as
of December 31, 1996 as set forth in the Schedule 13G of Franklin
Resources, Inc. dated February 13, 1997.
(4) Includes 162,000 Meditrust Shares owned by A.M.A. Financial Corporation, of
which Mr. Gosman is President and a 98% shareholder.
(5) Does not include 817 Meditrust Shares owned by Mr. Brooke's wife, 2,271
Meditrust Shares owned of record by Mr. Brooke as custodian for his son and
2,100 Meditrust Shares owned of record by Mr. Brooke as trustee for his
grandchildren, as to which Meditrust Shares Mr. Brooke disclaims any
beneficial interest.
(6) Does not include 1,500 Meditrust Shares owned by Mr. Lowe's wife, as to
which Meditrust Shares Mr. Lowe disclaims any beneficial interest.
(7) Does not include an aggregate of 7,038 Meditrust Shares owned by or for
parents, spouses or children, as to which Meditrust Shares the Trustees or
officers disclaim any beneficial interest.
106
<PAGE>
MEDITRUST ACQUISITION COMPANY
Meditrust Acquisition Company is a Massachusetts business trust formed in
June 1997 to facilitate the Mergers. On June 19, 1997, Meditrust Acquisition
Corporation IV, another wholly-owned subsidiary of Meditrust and a signatory to
the original merger agreement, assigned all its rights, interests and
obligations thereunder to MAC. The Second Amended and Restated Agreement and
Plan of Merger, dated as of April 13, 1997 was executed by Meditrust, MAC,
Realty and Operating and served as a novation of the original merger agreement,
substituting MAC as a party thereto, and discharging Meditrust Acquisition
Corporation IV. On September 19, 1997, Meditrust, MAC, Realty and Operating
entered into the Third Amended and Restated Agreement and Plan of Merger, dated
as of April 13, 1997.
Meditrust has transferred to MAC $43,662,265 and MAC has purchased 1,255,076
shares of Paired Common Stock (the Acquired Shares) from The Santa Anita
Companies. Other than purchasing and holding such shares and entering into the
Merger Agreement, MAC will not conduct any other business. MAC has not paid and
does not plan to pay any compensation to its management, and has not entered
into any transactions with any third party except as described in the preceding
sentence. MAC has entered into a Distribution Agreement with Meditrust which
sets forth, among other things, the mechanics and other terms of the
distribution and the fact that Meditrust shall provide MAC with such
transactional services as MAC shall reasonably request for a period of time
following the distribution. MAC is not a party to any legal proceedings. For
information concerning the ownership of MAC Shares, see "Meditrust--Principal
and Management Shareholders of Meditrust and MAC."
MAC has elected to qualify as a REIT and intends to continue to so qualify.
David F. Benson is a Trustee and the President of MAC. Mr. Benson is also a
Trustee, President and Treasurer of Meditrust. Edward F. Brooke is a Trustee of
MAC and also a Trustee of Meditrust. Michael S. Benjamin is the Secretary of
MAC and is also a Senior Vice President, Secretary and General Counsel of
Meditrust.
107
<PAGE>
DESCRIPTION OF CAPITAL STOCK OF THE SANTA ANITA COMPANIES
AUTHORIZED CAPITAL STOCK
Realty and Operating have the same authorized capital structure, consisting
of 19,000,000 shares of common stock, $.10 par value, and 6,000,000 shares of
preferred stock, $.10 par value. If the Mergers are consummated, the authorized
number of shares of common stock for each of Realty and Operating will be
increased to 300,000,000. The Board of Directors of each company is authorized
without further shareholder authorization to issue the preferred stock from
time to time in one or more series, and to determine the provisions applicable
to each series, including the number of shares, dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption price or prices, and liquidation
preferences. Such preferred shares may be subject to the Pairing Agreement
described below.
At the close of business on September 23, 1997, 12,857,201 shares of Realty
Common Stock and 12,806,900 shares of Operating Common Stock were issued and
outstanding and 867,343 shares of Series A Preferred Stock were outstanding.
COMMON STOCK
Subject to provisions of law and the preferences of any series of preferred
stock outstanding, holders of Paired Common Stock are entitled to receive
dividends at such times and in such amounts as may be declared from time to
time by the respective Board of Directors out of funds legally available
therefor. To maintain eligibility as a REIT, Realty must in general distribute
at least 95% of its "real estate investment trust taxable income" before
deduction of dividends paid (less any net long-term capital gain and subject to
certain other adjustments) to its shareholders.
Holders of Paired Common Stock are entitled to one vote for each share held
on every matter submitted to a vote of shareholders and have the right to
cumulate their votes in the election of directors. Shareholders are being asked
to delete the cumulative provisions from the Certificates of Incorporation. See
"Other Santa Anita Proposals--Proposal to Eliminate Cumulative Voting." Except
as otherwise provided by law or by the Certificate of Incorporation or by
resolutions of the Board of Directors providing for the issue of any series of
preferred stock, the holders of the Paired Common Stock of each company have
sole voting power.
The Merger Agreement provides for an amendment to the Certificates of
Incorporation of The Santa Anita Companies to authorize the creation of a new
class of common stock issuable in one or more series upon terms to be
determined by the Board of Directors. See "The Merger Agreement--Increase in
Authorized Shares; Authorization of Series Common Stock."
PREFERRED STOCK
The shares of Series A Preferred Stock are paired in the same manner as the
Paired Common Stock, and holders thereof are entitled to participate in any
dividends paid to the same extent as the holders of the Paired Common Stock.
Holders of Series A Preferred Stock are entitled, except as otherwise required
by law, to vote together with the holders of the Paired Common Stock on all
matters presented to the holders of the Paired Common Stock other than the
election of directors. The affirmative vote of 66 2/3% of the shares of Series
A Preferred Stock of Realty or Operating, as the case may be, will be required
for Realty or Operating to amend its Certificate of Incorporation to (i) create
or increase the authorized number of shares of any class or series of stock
that ranks senior to the Series A Preferred Stock, (ii) amend, alter or repeal
any provision of its Certificate of Incorporation or By-laws in a manner that
would adversely affect the Series A Preferred Stock or (iii) authorize any
reclassification, combination, split or division of any series of stock without
making the same adjustment to the Series A Preferred Stock. The Series A
Preferred Stock of each company has a liquidation preference of $0.01 per
share, plus all accrued and unpaid dividends.
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The Series A Preferred Stock may not be redeemed by The Santa Anita Companies
prior to September 4, 1999. The holders of the Series A Preferred Stock may
require The Santa Anita Companies to redeem such stock at any time, at a
redemption price per paired share equal to the average of the last reported
sale price of the Paired Common Stock on each of the 30 trading days prior to
the date such shares are surrendered for redemption plus any accrued and unpaid
dividends (the "Redemption Price"); provided, however, that if a tender offer
for the Paired Common Stock is pending at the time the Series A Preferred Stock
is surrendered for redemption, the redemption price for the Series A Preferred
Stock will be the last reported sale of the Paired Common Stock on the date the
shares are surrendered for redemption. In lieu of such redemption, Realty and
Operating will, if the approval of the shareholders of The Santa Anita
Companies is obtained, have the option to deliver to the redeeming holders
Paired Common Stock on a share-for-share basis. If Realty and Operating fail to
obtain shareholder approval of the exchange of the Series A Preferred Stock for
Paired Common Stock, they may deliver promissory notes, due in six months from
the date of issue, for any portion of the redemption price in excess of the
original purchase price of $12.975 per paired share of Series A Preferred
Stock. Such notes will bear interest at a variable rate equal to 2% per annum
in excess of the prime commercial lending rate published from time to time in
The Wall Street Journal. The Santa Anita Companies will have 30 days after the
date of the redemption notice to deliver the consideration to the holders of
Series A Preferred Stock surrendered for redemption or exchange. Realty and
Operating may require the holders of the Series A Preferred Stock to exchange
the Series A Preferred Stock at any time for an equal number of shares of
Paired Common Stock, provided that the approval of the shareholders of The
Santa Anita Companies is obtained. After September 4, 1999, paired shares of
Series A Preferred Stock will be redeemable at the option of The Santa Anita
Companies for cash at a redemption price per paired share equal to the
Redemption Price as of the date The Santa Anita Companies call such shares for
redemption. The Santa Anita Companies must give at least five business days
written notice of their intent to redeem or exchange the Series A Preferred
Stock.
RIGHTS AGREEMENT
Realty has distributed to each holder of Realty Common Stock, and has
authorized, with respect to each additional share of Realty Common Stock that
shall become outstanding between the date of such distribution and the earliest
of the Distribution Date, the Expiration Date (as such terms are hereinafter
defined) or the date, if any, on which Rights may be redeemed, the distribution
of one Right for each share of Realty Common Stock. Each Right entitles the
registered holder to purchase from Realty, initially, one one-hundredth of a
share of Junior Participating Preferred Stock ("Junior Preferred Stock") at a
price of $100 (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement among Realty,
Operating and Union Bank, as Rights Agent, dated as of June 15, 1989 (the
"Rights Agreement").
Junior Preferred Stock purchasable upon exercise of the Rights will be
entitled to dividends of 100 times the dividends per share declared on Realty
Common Stock and, in the event of liquidation, will be entitled to a minimum
preferential liquidating distribution of $100 per share and an aggregate
liquidating distribution per share of 100 times the distribution made with
respect to each share of Realty Common Stock. Each share of the Junior
Preferred Stock is entitled to 100 votes on all matters submitted to a vote of
shareholders. The Junior Preferred Stock will vote together with Realty Common
Stock and in the event of any merger, consolidation or other transaction in
which Realty Common Stock is exchanged, each share of Junior Preferred Stock
will be entitled to receive 100 times the amount received per share of Realty
Common Stock.
Because of the voting, dividend and liquidation rights of the Junior
Preferred Stock, the value when issued of the one one-hundredth interest in a
share of Junior Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Realty Common Stock.
Until the earlier to occur of (i) 10 business days following a public
announcement that an Acquiring Person has acquired beneficial ownership of 10%
or more of Realty's general voting power other than pursuant to a Qualified
Offer (as defined below), the date of such public announcement being called the
"Stock Acquisition Date," or (ii) 10 business days (or such later date as may
be determined by action of the Board of Directors) following the commencement
of, or announcement of an intention to make, a tender offer or
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exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 10% or more of Realty's general voting power
(the date of such earlier occurrence being called the "Distribution Date"), the
Rights will be evidenced by the certificates representing Realty Common Stock
and will be transferred with and only with Realty Common Stock. The surrender
for transfer of any certificate for Realty Common Stock will also constitute
the transfer of the Rights associated with the Realty Common Stock represented
by such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of Realty Common Stock as of the close of business
on the Distribution Date and such separate Right Certificates alone will
evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on August 31, 1999 (the "Expiration Date"), unless the Expiration Date
is extended or unless the Rights are earlier redeemed or exchanged by Realty,
as described below.
The Purchase Price payable, the number of shares or other securities or
property issuable upon exercise of the Rights, and the number of outstanding
Rights, are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, Junior Preferred Stock, (ii) upon the grant to holders of
Realty Common Stock or Junior Preferred Stock of certain rights or warrants to
subscribe for Realty Common Stock or Junior Preferred Stock at a price, or
securities convertible into Realty Common Stock or Junior Preferred Stock with
a conversion price, less than the then current per share market price, or (iii)
upon the distribution to holders of Realty Common Stock or Junior Preferred
Stock of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable in
Realty Common Stock) or of subscription rights or warrants (other than those
referred to above).
A Qualified Offer is a tender offer or exchange offer for all outstanding
Realty Common Stock which is determined by a majority of the independent
directors to be adequate and otherwise in the best interests of Realty and its
shareholders.
If any person becomes an Acquiring Person other than by a purchase pursuant
to a Qualified Offer, each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will not be entitled to the benefit of
such adjustment), will thereafter have the right to receive upon exercise that
number of shares of Realty Common Stock or Realty Common Stock equivalents
having a market value of two times the exercise price of the Right. Such an
adjustment will also be made in the event that (i) an Acquiring Person merges
with or otherwise consolidates or combines with Realty in a transaction in
which Realty is the surviving corporation, (ii) an Acquiring Person engages in
one or more self-dealing transactions specified in the Rights Agreement, or
(iii) during such time as there is an Acquiring Person, an event specified in
the Rights Agreement occurs which results in the Acquiring Person's ownership
interest in Realty being increased by more than 1%.
In the event that, at any time after an Acquiring Person has become such,
Realty is acquired in a merger or other business combination transaction (other
than a merger which follows a Qualified Offer at the same or a higher price) or
50% or more of its consolidated assets or earning power are sold, each holder
of a Right (other than an Acquiring Person) will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right.
At any time after an Acquiring Person has become such, the Board of Directors
of Realty may exchange the Rights (other than Rights owned by such person or
group), in whole or in part, at an exchange ratio of one share of Realty Common
Stock per Right (subject to adjustment.)
The Rights Agreement provides that, during such time as the Pairing Agreement
shall remain in effect, Operating will issue, on a share for share basis,
Operating Common Stock or, as the case may be, Operating Junior Preferred Stock
to each person receiving Realty Common Stock or Junior Preferred Stock upon
exercise of or in exchange for one or more Rights.
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With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of Realty Common
Stock or Junior Preferred Stock, as the case may be, on the last trading day
prior to the date of exercise.
Up to and including the tenth business day after a Stock Acquisition Date,
the Realty Board of Directors may redeem the Rights in whole, but not in part,
at a price of $.001 per Right (the "Rights Redemption Price"). The redemption
of the Rights may be made effective at such time on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Rights Redemption Price.
The terms of the Rights may be amended by the Realty Board of Directors
without the consent of the holders of the Rights at any time prior to the
Distribution Date. Thereafter the Rights may be amended to make changes which
do not adversely affect the interests of the holders of the Rights, or which
shorten or lengthen time periods, subject to certain limitations set forth in
the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a Realty shareholder, including, without limitation, the right to vote or to
receive dividends.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Paired Common Stock is Harris Trust
Company of California, Los Angeles, California. The Paired Common Stock is
transferable in Los Angeles, California and New York, New York.
THE PAIRING
Pursuant to a pairing agreement by and between Realty and Operating, dated as
of December 20, 1979 (the "Pairing Agreement"), the shares of Realty Common
Stock and shares of Operating Common Stock are transferable and tradeable only
in combination as units, each unit consisting of one share of Realty Common
Stock and one share of Operating Common Stock. These restrictions on the
transfer of shares of Realty Common Stock and Operating Common Stock are
imposed by The Santa Anita Companies' By-Laws. The pairing is evidenced by
"back-to-back" stock certificates; that is, certificates evidencing shares of
Operating Common Stock are printed on the reverse side of certificates
evidencing shares of Realty Common Stock. The certificates bear a legend
referring to the restrictions on transfer imposed by The Santa Anita Companies'
By-Laws. To permit proper allocation of the consideration received in
connection with the sale of Paired Common Stock, the Pairing Agreement provides
that Realty and Operating shall, as decided from time to time but not less than
once a year, jointly make arrangements to determine the relative value of the
stock of each company.
RESTRICTIONS ON TRANSFERS
Under the Code, Realty may not own, directly or indirectly, after application
of the attribution rules of the Code, 10% or more of the outstanding shares of
Operating Common Stock, if Realty is to qualify as a REIT. Moreover, Realty
Common Stock must be held by 100 or more shareholders and 50% or more of the
Realty Common Stock may not be held by or for five or fewer individuals. The
Santa Anita Companies' By-Laws provide that if a shareholder obtained or
obtains any ownership interest which is not in conformity with the requirements
of the Code pertaining to a REIT, the Board of Directors of Realty or Operating
may call for the purchase from such shareholder of such number of shares
sufficient to reduce his holdings to conform to the requirements of the Code.
The purchase price for the shares called for purchase shall be equal to the
fair market value of such shares as reflected in the closing price for such
shares on the principal stock exchange on which such shares are listed, or if
such shares are not listed, then the last bid quotation for shares of such
stock as of the close of business on the date fixed by the Board of Directors
for such purchase. In addition, any
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transfer of shares which would cause a shareholder to own, as determined under
the provisions of the Code, such an amount of the outstanding voting power or
total number of outstanding shares as would cause Realty not to be in
conformance with the requirements of the Code shall be void ab initio; or, if
such provision is determined to be invalid, the transferee of such shares shall
be deemed to have acted as agent on behalf of Realty or Operating, as
applicable in acquiring such shares and to hold such shares on behalf of Realty
or Operating, as applicable.
STOCK EXCHANGE LISTING
It is a condition to the Mergers that the shares of Paired Common Stock
issuable in the Mergers be approved for listing on the NYSE on or prior to the
Effective Time upon official notice of issuance.
DESCRIPTION OF SHARES OF MAC
There is no limit on the number of shares of beneficial interest MAC is
authorized to issue. Shares may be issued by the Board of Trustees in one or
more classes or series with such relative rights and preferences as may be
designated by the Trustees without any vote of the shareholders. The
outstanding MAC Shares are of one class and without par value. The following
description is qualified in all respects by reference to the MAC Declaration
and By-Laws, copies of which are incorporated herein by reference.
SHARES OF BENEFICIAL INTEREST
All MAC Shares participate equally in dividends and in net assets available
for distribution to shareholders on liquidation or termination of MAC, have one
vote per share on all matters submitted to a vote of the shareholders and do
not have cumulative voting rights in the election of Trustees.
ADDITIONAL PROVISIONS
The MAC Declaration provides that annual meetings of shareholders are to be
held within six months after the end of each fiscal year and special meetings
of the shareholders may be called by the President of MAC, a majority of the
Trustees or a majority of the Independent Trustees (defined in the MAC
Declaration) and shall be called upon the written request of the holders of 10%
or more of the outstanding MAC Shares.
Whenever any action is to be taken by the shareholders, it shall, except as
otherwise clearly indicated in the MAC Declaration, be authorized by holders of
a majority of the MAC Shares present in person or represented by proxy and
entitled to vote thereon, provided that such majority shall be at least a
majority of the number of MAC Shares required to constitute a quorum.
Notwithstanding the foregoing, at all elections of Trustees, voting by
shareholders shall be conducted under the non-cumulative method and the
election of Trustees shall be by the affirmative vote of the holders of MAC
Shares representing a plurality of the MAC Shares then outstanding which are
present in person or by proxy at a meeting in which a quorum is present.
Whenever shareholders are required or permitted to take any action (unless a
vote at a meeting is specifically required, as with respect to termination or
amendment of the MAC Declaration), such action may be taken without a meeting
by written consents setting forth the action so taken, signed by the holders of
a majority (or such higher percentage as may be specified) of the outstanding
MAC Shares that would be entitled to vote thereon at a meeting.
Except with respect to matters on which a shareholders' vote is specifically
required by the MAC Declaration, no action taken by the shareholders at any
meeting shall in any way bind the Trustees.
The MAC Shares have no preemptive, conversion, exchange, sinking fund or
appraisal rights.
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PAIRING
The Meditrust Shares and the MAC Shares will be transferable and tradeable
only in combination as units, each unit consisting of one Meditrust Share and
one MAC Share. The MAC Shares will be evidenced by the certificates for the
related Meditrust Shares and the registered holders of the Meditrust Shares
will also be the registered holders of the related MAC Shares.
TRANSFER AGENT AND REGISTRAR
Boston EquiServe, Canton, Massachusetts, acts as transfer agent and registrar
of the MAC Shares.
OTHER SANTA ANITA PROPOSALS
TRANSFER OF ASSETS TO ONE OR MORE SUBSIDIARIES
Shareholder approval is being sought to authorize each of the Surviving
Corporations, following the Mergers, to transfer some or all of its assets to
one or more wholly-owned subsidiaries in exchange for equity interests in such
subsidiaries. Additional shareholder approval will not be required if such
subsidiary ultimately transfers these assets to a third party. Any further
transfer of these assets by such subsidiaries will be on such terms and
conditions as the governing bodies of such subsidiaries may determine. The
purpose of this provision is to allow the Surviving Corporations flexibility in
structuring future acquisitions. This proposal would allow Meditrust
Corporation to restructure itself as an "umbrella partnership REIT" ("UPREIT")
or as a "DownREIT."
In an UPREIT structure, all of the assets of Meditrust Corporation would be
held by an operating partnership (or limited liability company) in which
Meditrust Corporation will own a substantial interest. The operating
partnership or limited liability company units (the "OP Units") can be used as
currency to acquire properties. While a seller is required to recognize gain
with respect to any properties transferred in exchange for REIT common stock,
the UPREIT structure permits sellers generally to defer their tax liability.
With the UPREIT structure, sellers can transfer their properties to the
operating partnership (or limited liability company) in exchange for OP Units,
which would be convertible into shares of REIT common stock, typically on a
one-for-one basis. Gain realized upon the contribution of property in exchange
for OP Units generally would be deferred until either the operating partnership
or limited liability company sold the contributed properties or the sellers
converted the OP Units to REIT common stock.
A DownREIT enables a REIT to acquire and hold real estate properties in an
operating partnership (or limited liability company) that is separate and apart
from other properties in the REIT. The owner/developer contributes assets to
the operating partnership or limited liability company and, in return, receives
partnership (or limited liability company) units that can be exchanged at some
future date for shares of common stock in the REIT. In most cases, any gain
realized by the owner/developer would be deferred until either the
owner/developer converted the partnership (or limited liability company) units
into REIT common stock or the operating partnership (or limited liability
company) sold the contributed properties.
Restructuring Meditrust Corporation as an UPREIT or a DownREIT should have no
impact on its REIT qualification.
The affirmative vote of holders of a majority of the shares of each of Realty
Capital Stock and Operating Capital Stock outstanding is required to approve
this proposal.
THE BOARD OF DIRECTORS OF EACH OF REALTY AND OPERATING RECOMMENDS A VOTE BY
ITS RESPECTIVE SHAREHOLDERS "FOR" THIS PROPOSAL. Proxies solicited by the
Boards of Directors will be so voted unless shareholders specify otherwise in
the proxy.
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ISSUANCE OF PAIRED COMMON STOCK IN EXCHANGE FOR SERIES A PREFERRED STOCK
Shareholders of each of Realty and Operating are being asked to authorize
Realty and Operating to issue Paired Common Stock in exchange for shares of
Series A Preferred Stock. The Series A Preferred Stock is redeemable at the
option of the holder thereof at any time at a redemption price per share equal
to the average closing price of a share of Paired Common Stock for the 30
trading days preceding the date of the notice of redemption; provided, however,
that if a tender offer for Paired Common Stock is pending at the time the
Series A Preferred Stock is surrendered for redemption, the redemption price
for the Series A Preferred Stock will be the last reported sale price of the
Paired Common Stock on the date the shares are surrendered for redemption. In
lieu of redeeming the 867,343 outstanding paired shares of Series A Preferred
Stock, Realty and Operating have the option to exchange shares of the Series A
Preferred Stock for shares of Paired Common Stock on a basis of one share of
Paired Common Stock for each paired share of Series A Preferred Stock. However,
no exchange of Paired Common Stock for Series A Preferred Stock may occur
unless the shareholders of Realty and Operating have approved this exchange.
The Boards of Directors of Realty and Operating consider it important that
Realty and Operating have the option to exchange shares of Paired Common Stock
for shares of Series A Preferred Stock to avoid the payment of a potentially
significant amount of cash if the shares of Series A Preferred Stock are
surrendered for redemption. For example, if notice of redemption with respect
to the Series A Preferred Stock had been furnished by Colony on September 23,
1997, Realty and Operating would have been obligated to pay an approximate $28
million redemption price. Moreover, the redemption price, if measured by the
average price over the 30 trading days preceding the notice of redemption,
could be significantly higher than the then price of the Paired Common Stock.
If the exchange occurs, the holder of the Series A Preferred Stock would have
the same rights as other holders of Paired Common Stock and would no longer
have any rights as a holder of Series A Preferred Stock. See "Description of
Capital Stock of The Santa Anita Companies." In particular, the holder of the
Series A Preferred Stock would no longer have the right to cause a redemption
of the Series A Preferred Stock (or Paired Common Stock received upon the
exchange). Pursuant to the Colony Agreement, Colony has the ability to cause
Realty and Operating to effect registration of sales of the Paired Common Stock
received upon the exchange (and 112,700 shares of Paired Common Stock purchased
by Colony from The Santa Anita Companies in September 1996) under the
Securities Act. The Santa Anita Companies would bear the costs of any such
registration (other than underwriting discounts and selling commissions and
fees and expenses of counsel to the selling holders).
The affirmative vote of holders of a majority of the shares of each of Realty
Capital Stock and Operating Capital Stock having voting power present or
represented by proxy at the meeting is required to approve this proposal,
provided that the votes cast on the proposal represent over 50% of the shares
of each of the Realty Capital Stock and Operating Capital Stock entitled to
vote on the proposal.
THE BOARD OF DIRECTORS OF EACH OF REALTY AND OPERATING RECOMMENDS A VOTE BY
ITS RESPECTIVE SHAREHOLDERS "FOR" THIS PROPOSAL. Proxies solicited by the
Boards of Directors will be so voted unless shareholders specify otherwise in
the proxy.
PROPOSAL TO AMEND THE SANTA ANITA OPERATING COMPANY 1995 SHARE AWARD PLAN
In the opinion of the Board of Directors of Operating, the future success of
The Santa Anita Companies depends, in large part, on their ability to attract,
retain, motivate and award employees and certain other individuals who perform
substantial services for The Santa Anita Companies. Under the Operating Share
Award Plan, Operating is currently authorized to make incentive awards to
employees, officers, consultants, advisers and agents of Operating to purchase
up to 780,000 shares of Paired Common Stock.
Currently, approximately 25 of Operating's officers, employees, consultants,
advisors and agents are eligible to participate in the Operating Share Award
Plan. On August 31, 1997, incentive awards relating to 213,698 shares of Paired
Common Stock were outstanding under the Operating Share Award Plan and 491,954
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shares of Paired Common Stock were available for future grants under the
Operating Share Award Plan. If the Mergers are consummated, the number of
employees, officers, consultants, advisors and agents eligible to participate
in the Operating Share Award Plan will increase significantly. In addition,
Operating will not be permitted to grant any incentive awards which remain
available for grant under Meditrust's 1988 Stock Option Plan or 1992 Equity
Incentive Plan. To ensure that Operating has the ability to continue to provide
incentive awards to its officers, employees, consultants, advisors and agents,
the Board of Directors of Operating has determined that the number of shares of
Paired Common Stock available for issuance under the Operating Share Award Plan
should be increased to 5% of the outstanding number of shares of Operating
Common Stock from time to time, with 4,000,000 shares being available as
incentive stock options. Thus, if these amendments are approved, up to 5% of
outstanding Paired Common Stock can be issued to officers and employees of
Operating. In addition, the proposal will increase the per employee award
limitation from 150,000 shares to 450,000 shares per year.
The proposal to amend the Operating Share Award Plan is being presented to
the shareholders of Operating as a separate proposal from the proposal to
approve the Merger Agreement, and the approval of the proposal to amend the
Operating Share Award Plan is not a condition to approval of the Merger
Agreement or the consummation of the Mergers. However, approval of the Merger
Agreement is a condition to approval of the proposal to amend the Operating
Share Award Plan.
The following summary sets forth all the material terms and provisions of the
Operating Share Award Plan and is qualified in its entirety by the full text of
the Operating Share Award Plan, a copy of which is available for review at the
principal office of Operating, and will be furnished to shareholders without
charge upon written request to the Shareholder Relations Office of The Santa
Anita Companies at P.O. Box 60014, Arcadia, California 91066-6014.
General Description of the Operating Share Award Plan
The purpose of the Operating Share Award Plan is to promote the success of
Operating and its subsidiaries and the interests of shareholders by providing
an additional means (through the grant of incentive awards related to equity
interests in and the financial performance of The Santa Anita Companies) to
attract, retain, motivate and reward employees and certain other eligible
individuals who perform substantial services for Operating and its
subsidiaries.
Administration. The Operating Share Award Plan is administered by the
Compensation Committee of the Board of Directors of Operating (the
"Committee"). The Committee has the authority to determine the persons to be
granted awards under the Operating Share Award Plan and to determine the
specific terms and conditions of such awards, including, without limitation,
the number of shares of Paired Common Stock subject to each award, the price to
be paid for the shares of Paired Common Stock and any performance or other
vesting criteria. The Committee will make all other determinations necessary or
advisable for the administration of the Operating Share Award Plan. The
Committee has not made any awards with respect to the additional shares of
Paired Common Stock that would be authorized under the Operating Share Award
Plan if the proposed amendment is approved by the shareholders.
Eligibility. Any officer (whether or not a director) or employee of Operating
or its subsidiaries, and any individual consultant, advisor or (to the extent
such participation would not adversely affect Operating's ability to comply
with certain securities and other applicable laws) agent who renders or has
rendered bona fide services (other than services in connection with the
offering or sale of securities of Operating in a capital raising transaction)
to Operating, is eligible for selection to participate in the Operating Share
Award Plan. Non-employee directors are not eligible to receive awards under the
Operating Share Award Plan. Approximately 25 employees of Operating and its
subsidiaries, including officers, are considered eligible to participate in the
Operating Share Award Plan at the present time, subject to the power of the
Committee to determine all eligible employees to whom awards will be granted.
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Shares Available for Awards. A maximum of 780,000 shares of Paired Common
Stock are currently authorized to be issued to eligible persons under the
Operating Share Award Plan. The number of awards payable solely in cash,
together with the number of awards payable in cash or shares that are actually
paid in cash and the aggregate number of shares of Paired Common Stock that may
be delivered under the Operating Share Award Plan, shall not exceed 780,000.
Awards payable solely in cash that are not treated as derivative securities
under Rule 16b-3 under the Exchange Act do not count against this limit. The
maximum number of stock options ("Options") and stock appreciation rights
("SAR's") (whether payable in shares or cash) that currently may be granted to
an eligible person during any one-year period shall not exceed 150,000.
The number and kind of shares available under the Operating Share Award Plan
are subject to adjustment in the event of certain reorganizations,
recapitalizations, stock splits, stock dividends, distributions or other
similar extraordinary transactions or events in respect of Operating, Operating
Common Stock or Realty Common Stock. Shares of Paired Common Stock relating to
(i) Options or SAR's which are not exercised, (ii) Restricted Stock Awards
which do not vest, (iii) Performance Share Awards which are not issued, or
(iv) any award which is not exercised or converted or which expires or is
cancelled, terminated or forfeited (or certain cash awards with respect to
shares of Paired Common Stock that are not vested or paid) will again become
available for regrant and award purposes under the Operating Share Award Plan
to the extent permitted by law. Shares of Paired Common Stock that are issued
pursuant to awards and subsequently reacquired by Operating or Realty pursuant
to the terms and conditions of the awards also shall be available for
reissuance under the Operating Share Award Plan to the extent permitted by law.
Additional rules for determining the number of shares or cash only awards
authorized under the Operating Share Award Plan may be adopted by the Committee
consistent with applicable law.
Vesting and Award Periods; Deferred Payments. Except as may be provided in
the award agreement, no award made under the Operating Share Award Plan shall
be exercisable or shall vest for a period of six months after the award date.
Each award shall expire on such date as is determined by the Committee, but in
the case of Options or other rights to acquire shares of Paired Common Stock,
not later than 10 years after the award date.
The Committee may authorize the deferral of any payment of cash or issuance
of shares of Paired Common Stock under the Operating Share Award Plan at the
election and request of a participant.
Loans to Finance Exercise of Awards. Operating, with the Committee's
approval, may loan to a participant funds sufficient to exercise or pay for any
award made under the Operating Share Award Plan. Each such loan shall be
evidenced by a promissory note bearing interest at a rate determined by the
Committee but not less than the applicable imputed interest rate specified by
the Code. The note shall provide for full recourse against the participant and
shall be repaid over a period of time not to exceed five years, with 10%
minimum annual installments and a 60% balloon of principal payable at the end
of the fifth year; provided that Operating may demand payment, in addition to
such installments, as may be required for it to remain in compliance with any
applicable state or federal regulation. Unless the Committee otherwise
determines, the note in most circumstances will become due and payable 10
business days following any termination of the participant's employment with
Operating. In addition, Operating may loan the participant funds sufficient to
pay the tax liability, if any, resulting from the exercise, payment or vesting
of the award; the terms of such a loan need not conform to the foregoing
provisions.
Transferability. Awards under the Operating Share Award Plan are not
transferable by a participant other than by will or the laws of descent and
distribution, pursuant to a qualified domestic relations order or another
exception to the transfer restrictions under Rule 16b-3. Amounts payable or
shares of Paired Common Stock issuable pursuant to an award will be paid only
to the participant (during his or her lifetime), the participant's
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beneficiaries or representatives or to the extent permitted by law and Rule
16b-3, to a third party pursuant to such conditions as the Committee may
establish; provided, however, that to the extent permitted by law, the
Committee may establish procedures for payments to third parties or "cashless
exercises" with unaffiliated third parties who provide financing or otherwise
facilitate the exercise of awards consistent with applicable legal standards.
Awards That May Be Granted under the Operating Share Award Plan
Options. An Option is the right to purchase shares of Paired Common Stock at
a future date at a specified price ("Option price"). Under the Operating Share
Award Plan, each participant, at the time of grant, will be granted Options to
acquire an equal number of Operating Common Stock and Realty Common Stock. The
Option price of each share of Paired Common Stock covered by an Option will be
determined by the Committee, but will in no event be less than 100% of the fair
market value (as defined in the Operating Share Award Plan) of such Paired
Common Stock on the date such Option is granted. The closing price of a share
of Paired Common Stock, as reported on the NYSE Composite Tape on September 23,
1997, was $33.75.
An Option with respect to Operating Common Stock may either be an incentive
stock option, as defined in the Code, or a nonqualified stock option. Options
for the related Realty Common Stock will be non-qualified stock options. The
aggregate fair market value of the Operating Common Stock (determined at the
time the Option is granted) for which incentive stock options may be first
exercisable by an Option holder during any calendar year under the Operating
Share Award Plan or any other plan of Operating or its subsidiaries may not
exceed $100,000. A nonqualified stock option is not subject to any of these
limitations. Incentive stock options may not be granted to a person who owns
more than 10% of the total combined voting power of all classes of stock of
Operating unless the Option price with respect to the Operating Common Stock is
at least 110% of the fair market value of the Operating Common Stock subject to
the Option and such Option by its terms is not exercisable after the expiration
of five years from the date such Option is granted; in such event, the portion
of the Option price with respect to Realty Common Stock is not required to
exceed 100% of the fair market value of such Realty Common Stock.
Full payment for shares purchased on the exercise of any Option shall be made
at the time of such exercise in one or a combination of the following methods:
(i) cash or (ii) check. In addition, if authorized by the Committee, payment
may be made by (A) third party payment, (B) the delivery of shares of Paired
Common Stock already owned by the participant, (C) a combination of cash and a
promissory note by the option holder in favor of Operating, or (D) requesting
that Operating reduce the number of shares of Paired Common Stock by a number
of shares of Paired Common Stock with a fair market value equal to the Option
price. In addition, Option holders may be permitted to offset or surrender
stock or deliver already owned stock in satisfaction of applicable tax
withholding requirements.
Subject to early termination or acceleration provisions (which are summarized
below), an Option generally will be exercisable, in whole or in part, from the
date specified in the related award agreement until the expiration date
determined by the Committee. Unless the award agreement provides otherwise,
Options are not exercisable until at least six months after the award date. In
no event, however, is an Option exercisable after ten years from its date of
grant.
The Committee may grant to a holder of an Option under the Operating Share
Award Plan, if he or she is otherwise eligible and (where consent is required)
consents, a new or modified award in lieu of an award previously granted with
respect to a number of shares, at an Option price and for a length of time,
which is greater or lesser than that under the earlier award, or may do so by
cancellation and regrant, amendment, substitution or otherwise, subject only to
the general limitations described in the Operating Share Award Plan or under
applicable law.
Dividend Equivalents. The Committee may, at the time of granting an Option,
grant Dividend Equivalents attributable to shares of Paired Common Stock
subject to the Option. Dividend Equivalents are cash payments representing all
or a portion of the value of cash dividends (or other cash distributions) per
share of Paired Common Stock paid by Operating and Realty, calculated with
reference to the number of shares of
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Paired Common Stock subject to the Option, and are paid on a dividend payment
date to the Option holder. Dividend Equivalents shall be paid only to the
extent the Option is unexercised as of the dividend record date, and may be
granted for a portion of the time period during which the Option is
unexercised.
Stock Appreciation Rights. In its discretion, the Committee may grant to a
participant a SAR. A SAR is a right to receive a number of shares of Paired
Common Stock or an amount of cash, or a combination of shares of Paired Common
Stock and cash, the aggregate amount or value of which is determined by
reference to a change in the fair market value of the shares of Paired Common
Stock.
SAR's may be granted either concurrently with the grant of another award or
in respect of an outstanding award, in whole or in part, or independently of
any other award. The Committee, in its discretion, may provide for payment upon
exercise of a SAR to be solely in shares of Paired Common Stock (valued at fair
market value at date of exercise), in cash, or in a combination of shares of
Paired Common Stock and cash, or leave the election of same to the participant,
subject to any applicable legal requirements.
Restricted Stock Awards. A Restricted Stock Award typically is an award for a
fixed number of shares of Paired Common Stock subject to vesting requirements
and other restrictions. The Committee specifies the price, if any, the
participant must pay for such shares of Paired Common Stock and the
restrictions (which may include performance standards) imposed on such shares
of Paired Common Stock which shall not terminate earlier than six months after
the award date, unless the award provides otherwise. Restricted Stock awarded
to a participant may not be voluntarily or involuntarily sold, assigned,
transferred, pledged or encumbered during the restricted period (i.e., prior to
the vesting date) and, unless the Committee otherwise determines, must be
returned to Operating if the participant terminates employment prior to the
vesting date. Unless otherwise provided in the award agreement, recipients of
Restricted Stock Awards shall have voting rights and receive dividends on the
Restricted Stock prior to the time the restrictions lapse.
Performance Share Awards. The Committee may, in its discretion, grant one or
more Performance Share Awards to any eligible person based upon such factors
(including the contributions, responsibilities and other compensation of the
person) as the Committee shall deem relevant in light of the specific type and
terms of the award. The amount of cash or shares of Paired Common Stock or
other property that may be deliverable pursuant to such an award is based upon
the degree of attainment over a specified period (a "performance cycle") of
such measure(s) of performance of Operating (or any part thereof) or the
participant as may be established by the Committee.
An award agreement shall specify the maximum number of shares of Paired
Common Stock (if any) subject to the Performance Share Award, the consideration
(but not less than the minimum lawful consideration) to be paid for any such
shares as may be issuable to the participant, the duration of the award and the
conditions upon which delivery of any shares of Paired Common Stock or cash to
the participant shall be based.
Stock Bonuses. The Committee may grant a stock bonus of shares of Paired
Common Stock to any eligible person to reward exceptional or special services,
contributions or achievements in the manner and on such terms and conditions
(including any restrictions on such shares) as determined from time to time by
the Committee. The number of shares of Paired Common Stock so awarded shall be
determined by the Committee and may be granted independently or in lieu of a
cash bonus.
Other Miscellaneous Provisions
Adjustments; Acceleration. The Operating Share Award Plan contains provisions
relating to adjustments for changes in Operating Common Stock or Realty Common
Stock upon certain specified events. The number and kind of shares available
under the Operating Share Award Plan, as well as the number, kind and price of
shares subject to outstanding awards, are subject to adjustment in the event of
a reorganization, merger, sale of assets, recapitalization, stock split, stock
dividend, exchange offer or similar events.
The Operating Share Award Plan also provides for full vesting and
acceleration of exercise dates of awards (subject to certain tax limitations)
in the event of a Change in Control Event affecting Operating. Except in the
case of an option award, the Committee, prior to the Change in Control Event,
may determine that there shall be no such acceleration of benefits. (A Change
in Control Event is generally defined as an
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acquisition by one person (or group of persons) of 20% of the ownership of
Operating, the replacement of the majority of the members of the incumbent
Board of Directors (excluding replacement directors nominated by the incumbent
Board of Directors), mergers, sales of substantially all of Operating's assets,
and similar transactions which result in a 20% change in ownership, and
liquidation or dissolution, subject to certain exceptions. The Mergers, if
approved, will constitute a Change in Control Event.) This provision of the
Operating Share Award Plan is effective only through September 30, 2002, but is
subject to an automatic 60-month extension unless the Board of Directors of
Operating provides notice of an amendment or change no later than six months
before the expiration date.
Termination of Employment. The Committee shall establish in respect of awards
granted under the Operating Share Award Plan the effect of a termination of
employment on the rights and benefits thereunder and in so doing may make
distinctions based upon the cause of termination. The Committee shall have the
discretion (at the time of or following any such termination) to extend the
exercise period of an award and to increase the number of shares covered by the
award with respect to which the award is exercisable or vested.
Termination of or Changes to the Operating Share Award Plan. The authority to
grant new awards under the Operating Share Award Plan will terminate on
December 15, 2004, unless the Operating Share Award Plan is terminated prior to
that time by the Board of Directors of Operating. Such termination typically
will not affect rights of participants which accrued prior to such termination.
The Board may, without shareholder approval, suspend or amend the Operating
Share Award Plan at any time, and the Committee may, with the consent of a
holder, substitute awards or modify the terms and conditions of an outstanding
award, to, among other changes, extend the term (subject to maximum term
limits), reduce the price, accelerate exercisability or vesting or preserve
benefits of the award. Without shareholder approval, the Board may not increase
the maximum number of shares which may be delivered pursuant to awards granted
under the Operating Share Award Plan, materially increase the benefits accruing
to participants under the Operating Share Award Plan or materially change the
requirements as to the eligibility to participate in the Operating Share Award
Plan. (Amendment of the Operating Share Award Plan will not, without the
consent of the participant, adversely affect such person's rights under an
award previously granted, unless the award itself otherwise expressly so
provides.) Amendments that are permitted without shareholder approval could
increase the costs to Operating of the Operating Share Award Plan.
Federal Income Tax Treatment of Awards under the Operating Share Award Plan
The federal income tax consequences of the Operating Share Award Plan under
current federal law, which is subject to change, are summarized in the
following discussion which deals with the general tax principles applicable to
the Operating Share Award Plan. State and local tax consequences are beyond the
scope of this summary.
Nonqualified Stock Options. No taxable income will be realized by an Option
holder upon the grant of a nonqualified stock option. Upon exercise of a
nonqualified stock option, the Option holder will realize ordinary income in an
amount measured by the excess of the fair market value of the shares of Paired
Common Stock on the date of exercise over the Option price. Operating will be
entitled to a corresponding deduction; Operating will also realize gain on the
excess of the fair market value of the Realty Common Stock over its basis. Upon
a subsequent disposition of the shares of Paired Common Stock, the participant
will realize short-term or long-term capital gain or loss, depending on the
holding period. Operating will not be entitled to any further deduction at that
time.
Incentive Stock Options. An Option holder who receives an incentive stock
option will not be treated as receiving taxable income upon the grant of the
Option or upon the exercise of the Option (but only to the extent the exercise
relates to Operating Common Stock), provided the exercise occurs, in general,
during employment or within three months after termination of employment.
However, any appreciation in value of Operating Common Stock after the date of
grant will be an item of tax preference at the time of exercise in determining
liability for the alternative minimum tax. If Operating Common Stock acquired
pursuant to an incentive stock option is not sold or otherwise disposed of
within two years from the date of grant of the
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Option nor within one year after the date of exercise, any gain or loss
resulting from disposition of Operating Common Stock will be treated as long-
term capital gain or loss. If Operating Common Stock acquired upon exercise of
an incentive stock option is disposed of prior to the expiration of such
holding periods (a "disqualifying disposition"), the Option holder will realize
ordinary income in the year of such disposition in an amount equal to the
excess of the fair market value of each share of Operating Common Stock on the
date of exercise over the Option price. However, under a special rule, the
ordinary income realized upon a disqualifying disposition will not exceed the
amount of the Option holder's gain. Any remaining gain or any net loss will be
taxed as short-term or long-term capital gain or loss, depending on the holding
period.
Operating will not be entitled to any deduction as a result of the grant or
exercise of an incentive stock option, or on a later disposition of the stock
received, except that in the event of a disqualifying disposition Operating
will be entitled to a deduction equal to the amount of ordinary income realized
by the Option holder.
The portion of the Option relating to Realty Common Stock will be treated for
tax purposes as a nonqualified stock option.
Stock Appreciation Rights. At the time of receiving a SAR, the participant
will not recognize any taxable income. Likewise, Operating will not be entitled
to a deduction for the SAR. Upon the exercise of a SAR, the participant will
generally recognize ordinary income in an amount equal to the cash and/or fair
market value of the shares received. If a participant receives stock, then the
amount recognized as ordinary income becomes the participant's tax basis for
determining gains or losses (taxable either as short-term or long-term capital
gain or loss, depending on the holding period) on the subsequent sale of such
stock. The holding period for such shares commences as of the date ordinary
income is recognized. Operating will be entitled to a deduction in the amount
and at the time that the participant first recognizes ordinary income.
Restricted Stock. So long as the Restricted Stock remains both subject to
substantial risk of forfeiture and nontransferability, no tax consequences need
attach to the grant of this type of award. The recipient of Restricted Stock
will recognize ordinary income equal to the excess of the fair market value of
the Restricted Stock at the time the restrictions lapse over the amount, if
any, which the recipient paid for the Restricted Stock. However, the recipient
may elect, within 30 days after the date of receipt, to recognize ordinary
income at the time of receipt in an amount equal to the fair market value of
the stock (at the time of receipt) over the amount paid by the recipient.
Operating may deduct an amount equal to the income recognized by the recipient
at the time the recipient recognizes the income; Operating will also realize
gain on the excess of the fair market value of the Realty Common Stock over its
basis.
The tax treatment of Restricted Stock which is disposed of will depend upon
whether the recipient made an election to include the value of the stock in
income when awarded. If the recipient made such an election, any disposition
after the restrictions lapse will result in a long-term or short-term capital
gain or loss depending upon the period the Restricted Stock is held. If,
however, such election is made and for any reason the restrictions imposed on
the Restricted Stock fail to lapse, the individual will not be entitled to a
deduction. If an election is not made, disposition after the lapse of
restrictions will result in short-term or long-term capital gain or loss
(depending on the period of time the stock is held after the restrictions
lapse) equal to the difference between the amount received on disposition and
the greater of the amount paid for the stock by the recipient or its fair
market value at the date the restrictions lapsed.
Performance Share Awards. A participant who has been granted a Performance
Share Award will not realize taxable income at the time of grant, and Operating
will not be entitled to a deduction at that time. When an award is paid,
whether in cash or shares, the participant will have ordinary income, and
Operating will have a corresponding deduction. The measure of such income and
deduction will be the amount of cash and the fair market value of the shares at
the time the award is paid.
Stock Bonus. A participant who receives a stock bonus will be taxed on the
fair market value of the stock and Operating will have a deduction in the same
amount.
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Dividend Equivalents. A recipient of a Dividend Equivalent award will not
realize taxable income at the time of grant and Operating will not be entitled
to a deduction at that time. When a Dividend Equivalent is paid, the
participant will recognize ordinary income, and Operating will be entitled to a
deduction. The measure of the income and deduction will be the amount of cash
paid.
Special Rules Governing Persons Subject to Section 16(b). Under the federal
tax law, special rules may apply to participants in the Operating Share Award
Plan who are subject to the restrictions on resale of Operating Common Stock
under Section 16(b) of the Exchange Act. These rules, which effectively take
into account the Section 16(b) restrictions, apply in limited circumstances and
may impact the timing and/or amount of income recognized by these persons with
respect to certain stock-based awards under the Operating Share Award Plan.
Accelerated Payments. If, as a result of a Change in Control Event, a
participant's Options or SAR's become immediately exercisable, or if
restrictions immediately lapse on Restricted Stock, or if shares covered by a
Performance Share Award are immediately issued or a cash payment under an award
is accelerated, the additional economic value, if any, attributable to the
acceleration would be deemed a parachute payment if such value, when combined
with the value of other payments which are deemed to result from the change in
control, equals or exceeds a threshold amount equal to 300% of the
participant's average annual taxable compensation over the five calendar years
preceding the year in which the change in control occurs. In such case, the
excess of the total parachute payments over such participant's average annual
taxable compensation will be subject to a 20% non-deductible excise tax in
addition to any income tax payable. Operating would not be entitled to a
deduction for that portion of any parachute payment which is subject to the
excise tax. The Operating Share Award Plan provides that awards shall not be
accelerated to the extent the acceleration wold cause Operating to lose its tax
deduction. The participant may elect which parachute payments are reduced in
this situation.
Section 162(m) Limits. Notwithstanding the foregoing discussion of the
deductibility of compensation under the Operating Share Award Plan by
Operating, Section 162(m) of the Code would render non-deductible to Operating
certain compensation to the Chief Executive Officer and four other most highly
compensated executive officers in excess of $1,000,000 in any year unless such
excess compensation is performance-based (as defined) or is otherwise exempt
from these new limits on deductibility. The applicable conditions of an
exemption for performance-based compensation plans include, among others, a
requirement that the shareholders approve the material terms of the plans.
Although Operating believes that Options and SAR's granted under the Operating
Share Award Plan (to the extent granted at a price not less than market price
on the date of grant) currently are exempt from such limits as performance-
based compensation, other awards under the Operating Share Award Plan may not
be, if the aggregate compensation of a covered officer would exceed such limit.
No assurances can be given that the applicable law or rules will not change or
that compensation under the Operating Share Award Plan to such persons will be
deductible to Operating.
Future incentive awards under the Operating Share Award Plan are subject to
the discretion of the Committee. The Committee has not made any awards with
respect to the additional shares of Operating Common Stock that would be
authorized under the Operating Share Award Plan if the proposed increase is
approved. Therefore, it is impossible to indicate the specific awards that will
be granted to or the benefits that will be received by any individual
participant or any group of participants under the Operating Share Award Plan.
Recommendation of the Board of Directors "For" this Proposal
The Board of Directors of Operating believes that the amendment of the
Operating Share Award Plan will promote the interests of Operating and its
shareholders and continue to enable Operating to attract, retain and reward
persons important to Operating's success through the recognition of the
attainment of long-term corporate goals and objectives. To approve the
amendment to the Operating Share Award Plan, the affirmative vote of holders of
the majority of the shares having voting power present or represented by proxy
at the meeting, provided the votes cast on the proposal represent over 50% of
the shares entitled to vote on the proposal, is required.
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THE BOARD OF DIRECTORS OF OPERATING HAS APPROVED THE AMENDMENTS TO THE
OPERATING SHARE AWARD PLAN AND RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL. Proxies solicited by the Board of Directors will be so voted unless
shareholders specify otherwise in the proxy.
PROPOSAL TO AMEND THE SANTA ANITA REALTY ENTERPRISES, INC. 1995 SHARE AWARD
PLAN
In the opinion of the Board of Directors of Realty, the future success of The
Santa Anita Companies depends, in large part, on their ability to attract,
retain, motivate and award employees and certain other individuals who perform
substantial services for The Santa Anita Companies. Under the Realty Share
Award Plan, Realty is currently authorized to make incentive awards to
employees, officers and employee directors of, and consultants, advisers and
agents to, Realty to purchase up to 230,000 shares of Realty Common Stock.
Currently, approximately five of Realty's officers, employees, consultants,
advisors and agents are eligible to participate in the Realty Share Award Plan.
On August 31, 1997, incentive awards relating to 19,075 shares of Realty Common
Stock were outstanding under the Realty Share Award Plan and 210,500 shares of
Realty Common Stock were available for future grants under the Realty Share
Award Plan. If the Mergers are consummated, the number of employees, officers,
consultants, advisors and agents eligible to participate in the Realty Share
Award Plan will increase significantly. In addition, Realty will not be
permitted to grant any incentive awards which remain available for grant under
Meditrust's 1988 Stock Option Plan or 1992 Equity Incentive Plan. To ensure
that Realty has the ability to continue to provide incentive awards to its
officers, employees, consultants, advisors and agents, the Board of Directors
of Realty has determined that the number of shares of Realty Common Stock
available for issuance under the Realty Share Award Plan should be increased to
5% of the outstanding number of shares of Realty Common Stock from time to
time, plus the number of shares necessary to satisfy the 3,499,419 Meditrust
options that will be converted to Realty options upon the Mergers, with
4,000,000 shares being available as incentive stock options. If amendments to
the Realty Share Award Plan are approved by the shareholders, the issuance of
Paired Common Stock to holders of Realty options will change so as to operate
in the same manner as the Operating Share Award Plan; that is, Realty will have
the obligation to provide the option holder upon exercise with a paired share
of Operating Common Stock, provided that Realty shall not at any time acquire
more than 9.8% of the outstanding shares of Operating. Thus, if these
amendments are approved, up to 5% of outstanding Paired Common Stock can be
issued to officers and employees of Realty. In addition, the proposal will
increase the per employee award limitation from 150,000 shares to 450,000
shares per year.
The proposal to amend the Realty Share Award Plan is being presented to the
shareholders of Realty as a separate proposal from the proposal to approve the
Merger Agreement, and the approval of the proposal to amend the Realty Share
Award Plan is not a condition to approval of the Merger Agreement or the
consummation of the Mergers. However, approval of the Merger Agreement is a
condition to approval of the proposal to amend the Realty Share Award Plan.
The following summary sets forth all the material terms and provisions of the
Realty Share Award Plan and is qualified in its entirety by the full text of
the Realty Share Award Plan, a copy of which is available for review at the
principal office of Realty, and will be furnished to shareholders without
charge upon written request to the Shareholder Relations Office of The Santa
Anita Companies at P.O. Box 60014, Arcadia, California 91066-6014.
General Description of the Realty Share Award Plan
The purpose of the Realty Share Award Plan is to promote the success of
Realty and its subsidiaries and the interests of shareholders by providing an
additional means (through the grant of incentive awards related to equity
interests in and the financial performance of Realty and Operating) to attract,
retain, motivate and reward employees and certain other eligible individuals
who perform substantial services for Realty and its subsidiaries.
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Eligibility. Any officer (whether or not a director) or employee of Realty or
its subsidiaries, and any individual consultant, advisor or (to the extent such
participation would not adversely affect Realty's ability to comply with
certain securities and other applicable laws) agent who renders or has rendered
bona fide services (other than services in connection with the offering or sale
of securities of Realty in a capital raising transaction) to Realty, is
eligible for selection to participate in the Realty Share Award Plan. Non-
employee directors are not eligible to receive awards under the Realty Share
Award Plan. Approximately five employees of Realty, including officers, are
considered eligible to participate in the Realty Share Award Plan at the
present time, subject to the power of the Compensation Committee of the Realty
Board of Directors (the "Realty Committee") to determine all eligible employees
to whom awards will be granted.
Shares Available for Awards. A maximum of 230,000 shares of Realty Common
Stock currently may be issued to eligible persons under the Realty Share Award
Plan. The number of awards payable solely in cash, together with the number of
awards payable in cash or shares that are actually paid in cash and the
aggregate number of shares of Realty Common Stock that may be delivered under
the Realty Share Award Plan, shall not exceed 230,000. Awards payable solely in
cash that are not treated as derivative securities under Rule 16b-3 of the
Exchange Act do not count against this limit. The maximum number of stock
options and stock appreciation rights (whether payable in shares or cash) that
currently may be granted to an eligible person during any one-year period shall
not exceed 150,000.
In general, the terms and conditions of the Realty Share Award Plan are
identical to the terms and conditions of the Operating Share Award Plan. See
"--Proposal to Amend the Santa Anita Operating Company 1995 Share Award Plan."
There are some differences, however. Under the Realty Share Award Plan, unless
it is amended as described herein, each option holder is granted options to
acquire Realty Common Stock but is not granted any options to acquire Operating
Common Stock. However, the option holder is required to acquire a number of
shares of Operating Common Stock equal to the number of Realty Common Stock
acquired pursuant to the exercise of an option. Management estimates the fair
market value of a share of Realty Common Stock on September 23, 1997 was $32.06
(based on the price of a share of the Paired Common Stock on that date), and
the price of a share of Operating Common Stock on September 23, 1997 was $1.69.
All other awards under the Realty Share Award Plan if paid or based on stock,
are paid or based on Paired Common Stock rather than Realty Common Stock.
Realty may loan to an option holder funds sufficient to exercise all or a
portion of the options granted, such loans to be made at the absolute
discretion of the Realty Committee. See "--Proposal to Amend the Santa Anita
Operating Company 1995 Share Award Plan--General Description of the Operating
Share Award Plan" for a further description of these loans. In addition, Realty
may loan funds and award bonuses to an option holder in an aggregate amount
equal to the purchase price, in after-tax dollars, of Operating Common Stock
required to be purchased under the Realty Share Award Plan upon exercise of the
option, less the aggregate par value of the Operating Common Stock.
Section 162(m) of the Code would render non-deductible to Realty certain
compensation to the Chief Executive Officer and the four other most highly
compensated executive officers in excess of $1,000,000 in any year unless such
excess compensation is performance-based (as defined) or is otherwise exempt
from these new limits on deductibility. The applicable conditions of an
exemption for performance-based compensation plans include, among others, a
requirement that the shareholders approve the material terms of the plans.
Although Realty believes that options and SAR's granted under the Realty Share
Award Plan (to the extent granted at a price not less than market price on the
date of the grant) currently are exempt from such limits as performance-based
compensation, other awards under the Realty Share Award Plan may not be, if the
aggregate compensation of a covered officer would exceed such limit. No
assurances can be given that the applicable laws or rules will not change or
that compensation under the Realty Share Award Plan to such persons will be
deductible to Realty. If Realty cannot deduct amounts paid as compensation
under the Realty Share Award Plan, it may affect Realty's ability to meet the
distribution requirements of the REIT rules under the Code. In this event,
Realty expects to use strategies to avoid loss of REIT status by, for example,
borrowing the funds necessary to meet the distribution requirements, or by
modifying the Realty Share Award Plan to avoid any non-deductible payments.
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Future incentive awards under the Realty Share Award Plan are subject to the
discretion of the Realty Committee. The Realty Committee has not made any
awards with respect to the additional shares of Realty Common Stock that would
be authorized under the Realty Share Award Plan if the proposed increase is
approved by the shareholders. Therefore, it is impossible to indicate the
specific awards that will be granted to or the benefits that will be received
by any individual participant or any group of participants under the Realty
Share Award Plan.
Recommendation of the Board of Directors "For" this Proposal
The Realty Board of Directors believes that the amendment of the Realty Share
Award Plan will promote the interests of Realty and its shareholders and
continue to enable Realty to attract, retain and reward persons important to
Realty's success through the recognition of the attainment of long-term
corporate goals and objectives. To approve the amendment to the Realty Share
Award Plan, the affirmative vote of holders of the majority of the shares of
the Realty Capital Stock present or represented by proxy at the meeting,
provided the votes cast on the proposal represent over 50% of the shares
entitled to vote on the proposal, is required.
THE REALTY BOARD OF DIRECTORS HAS APPROVED THE AMENDMENTS TO THE REALTY SHARE
AWARD PLAN AND RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL. Proxies
solicited by the Board of Directors will be so voted unless shareholders
specify otherwise in the proxy.
PROPOSAL TO ELIMINATE CUMULATIVE VOTING
Shareholders of each of Realty and Operating are being asked to authorize an
amendment of the Certificates of Incorporation of Realty and Operating to
delete the provision relating to cumulative voting contained in Article Eighth
thereof.
The holders of Realty Capital Stock and Operating Capital Stock are presently
permitted to cumulate their votes in the election of directors of Realty and
Operating, respectively. Pursuant to the cumulative voting provisions, each
holder is entitled to cast, for every share held, a number of votes equal to
the number of directors to be elected. Each such holder may cast such number of
votes for one nominee, or distribute such number of votes among two or more
nominees in any manner.
One of the principal effects of cumulative voting is to make it more likely
that an individual or group of individuals who own less than a plurality of the
voting shares would be able to obtain representation on a board of directors.
Such an individual or group may have interests and goals which are not
consistent with and might be in conflict with those of a majority of the
shareholders. The Boards of Directors of The Santa Anita Companies believe that
each director should represent the interests of all of the shareholders, rather
than the interests of any special constituency, and that the presence on the
Board of one or more directors representing such a constituency could disrupt
and impair the efficient management of The Santa Anita Companies.
The elimination of cumulative voting could discourage accumulations of large
blocks of stock and therefore could tend to reduce temporary fluctuations in
the market price that could be caused by such accumulations.
To approve the amendment to the Certificates of Incorporation of Realty and
Operating to eliminate cumulative voting, the affirmative vote of holders of
the majority of the shares of Realty and Operating Capital Stock outstanding
and the affirmative vote of the holders of the majority of the shares of Realty
and Operating common stock outstanding, voting separately as a class, are
required.
THE BOARD OF DIRECTORS OF EACH OF REALTY AND OPERATING HAS APPROVED THE
AMENDMENT TO THE CERTIFICATES OF INCORPORATION AND RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE PROPOSAL. Proxies solicited by the Boards of Directors will be
so voted unless shareholders specify otherwise in the proxy.
124
<PAGE>
PROPOSALS FOR NEXT ANNUAL MEETINGS
Any proposal which a shareholder intends to present at the next Annual
Meetings of Shareholders of The Santa Anita Companies to be held in May 1998
must be received at the principal executive offices of Realty or Operating, as
the case may be, to which such proposal relates by December 8, 1997, if such a
proposal is to be considered for inclusion in the Joint Proxy Statement of
Realty and Operating and the form of proxy related to those meetings. The Santa
Anita Companies' By-Laws include advance notice and other requirements
regarding proposals for shareholder action at shareholders' meetings other than
those proposed by the Board of Directors. A copy of the By-Laws for either
Realty or Operating may be obtained by written request addressed to the
attention of the Secretary of Operating or Realty at the applicable address set
forth on the first page of this Joint Proxy Statement/Prospectus.
Any shareholder of Meditrust or MAC who intends to submit a proposal for
inclusion in the proxy materials for the 1998 annual meeting of shareholders of
Meditrust and MAC must submit such proposal to the Secretary of Meditrust or
MAC, as the case may be, to which such proposal relates by December 15, 1997.
If the Mergers are consummated, neither Meditrust nor MAC will exist as
separate entities and therefore will not hold annual meetings of stockholders.
The rules of the SEC set forth standards as to what shareholder proposals are
required to be included in a proxy statement for an annual meeting.
LEGAL MATTERS
The validity of the shares of Paired Common Stock to be issued in connection
with the Mergers will be passed upon for The Santa Anita Companies by O'Melveny
& Myers LLP, Los Angeles, California. Certain tax matters relating to the
Mergers will be passed upon by O'Melveny & Myers LLP and by Nutter, McClennen &
Fish, LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of The Santa Anita Companies at
December 31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996 incorporated in this Joint Proxy Statement/Prospectus and
Registration Statement by reference to the Santa Anita Form 10-K have been
audited by Ernst & Young LLP, independent accountants, as set forth in their
report thereon included therein and incorporated herein by reference. The
financial statements of Anita Associates and the consolidated financial
statements of H-T Associates, both incorporated by reference in this Joint
Proxy Statement/Prospectus and Registration Statement by reference to the Santa
Anita Form 10-K, have been audited by KPMG Peat Marwick LLP, independent
accountants, as set forth in their reports thereon included therein and
incorporated herein by reference. The report of KPMG Peat Marwick LLP on H-T
Associates, dated February 10, 1997, contains an explanatory paragraph that
states that the partnership's primary subsidiary is in technical default on its
notes payable at December 31, 1996. As such, those notes may be callable at the
lender's discretion. This technical default raises substantial doubt about the
Partnership's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. See the financial statements of H-T Associates
incorporated by reference into the Santa Anita Form 10-K. Such financial
statements are incorporated herein in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
Representatives of Ernst & Young LLP are expected to be present at the Santa
Anita Meetings and will have the opportunity to make a statement if they desire
to do so and will also be available to respond to appropriate questions from
shareholders.
The consolidated financial statements and the related financial statement
schedules incorporated in this Joint Proxy Statement/Prospectus by reference
from Meditrust's Current Report on Form 8-K dated January 31,
125
<PAGE>
1997 and Annual Report on Form 10-K for the fiscal year ended December 31, 1996
have been audited by Coopers & Lybrand L.L.P., independent accountants, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
The Santa Anita Companies and Meditrust file, and MAC is now required to
file, annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or
other information we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-
SEC-0330 for further information on the public reference rooms. Our SEC filings
are also available to the public from commercial document retrieval services
and at the web site maintained by the SEC at "http://www.sec.gov."
The Santa Anita Companies have filed a Registration Statement on Form S-4 to
register with the SEC the Paired Common Stock of The Santa Anita Companies to
be issued to the shareholders of The Meditrust Companies in the Mergers. This
Joint Proxy Statement/Prospectus is a part of that Registration Statement and
constitutes a prospectus of The Santa Anita Companies in addition to being a
proxy statement of The Santa Anita Companies and Meditrust and MAC for the
shareholder meetings. As allowed by SEC rules, this Joint Proxy
Statement/Prospectus does not contain all the information you can find in the
Registration Statement or the exhibits to the Registration Statement.
The SEC allows us to "incorporate by reference" information into this Joint
Proxy Statement/Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
Joint Proxy Statement/Prospectus, except for any information superseded by
information in this Joint Proxy Statement/Prospectus. This Joint Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that we have previously filed with the SEC. These documents contain important
information about our companies and their finances.
THE SANTA ANITA COMPANIES SEC
FILINGS
PERIOD
(FILE NOS. 0-9109 AND 0-9110)
- ------------------------ Year ended December 31, 1996
Annual Report on Form 10-K as Quarter ended June 30, 1997
amended by Amendments on Form 10- Event date January 7, 1997 and April
K/A................................. 13, 1997
Quarterly Report on Form 10-Q........
Current Reports on Form 8-K..........
MEDITRUST SEC FILINGS (FILE NO. 1- PERIOD
09582)
- ------------------------ Year ended December 31, 1996
Annual Report on Form 10-K........... Quarter ended June 30, 1997
Quarterly Report on Form 10-Q........ Filed on January 31, 1997 and April
Current Reports on Form 8-K.......... 16, 1997
Schedule 14A Proxy Statement......... Filed on April 10, 1997
PERIOD
MAC SEC FILING (FILE NO. 1-13345)
- ---------------------
Registration Statement on Form 10.... Filed on September 10, 1997
We are also incorporating by reference additional documents that we file with
the SEC between the date of this Joint Proxy Statement/Prospectus and the dates
of the meetings of our shareholders.
The Santa Anita Companies have supplied all information contained or
incorporated by reference in this Joint Proxy Statement/Prospectus relating to
The Santa Anita Companies, and Meditrust has supplied all such information
relating to Meditrust and MAC.
126
<PAGE>
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the
SEC. Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this Joint Proxy Statement/Prospectus. Shareholders may obtain
documents incorporated by reference in this Joint Proxy Statement/Prospectus by
requesting them in writing or by telephone from the appropriate party at the
following address:
The Santa Anita Companies: Meditrust and MAC:
Santa Anita Operating Company Meditrust
285 West Huntington Drive 197 First Avenue
Arcadia, California 91007 Needham, Massachusetts 02194
(626) 574-7223
Attn: Kathryn J. McMahon (781) 433-6000
Attn: Michael S. Benjamin
If you would like to request documents from us, please do so by October 24,
1997 to receive them before the shareholder meetings.
You should rely only on the information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus to vote on the proposals. We
have not authorized anyone to provide you with information that is different
from what is contained in this Joint Proxy Statement/Prospectus. This Joint
Proxy Statement/Prospectus is dated September 26, 1997. You should not assume
that the information contained in the Joint Proxy Statement/Prospectus is
accurate as of any date other than such date, and neither the mailing of this
Joint Proxy Statement/Prospectus to shareholders nor the issuance of Paired
Common Stock in the Mergers shall create any implication to the contrary.
127
<PAGE>
LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM PG. NO.
- ------------ -------
<S> <C>
Acquired Shares......................................................... 91
Acquiring Person........................................................ 67
Alternative Transaction................................................. 93
Amended Complaint....................................................... 98
Apollo.................................................................. 38
Asset Transfer Proposal................................................. 26
Base Case............................................................... 47
Business Combination Provision.......................................... 67
Cash Amount............................................................. 58
Cash Election........................................................... 34
Cash Election Number.................................................... 34
Cash Election Price..................................................... 34
Cash Proration Factor................................................... 34
Change in Control Event................................................. 59
Code.................................................................... 36
Colony.................................................................. 25
Colony Agreement........................................................ 37
Committee............................................................... 115
Comparable Companies.................................................... 48
Cumulative Voting Proposal.............................................. 26
Declaration............................................................. 62
DGCL.................................................................... 60
disqualifying disposition............................................... 120
Distribution Agreement.................................................. 33
Distribution Date....................................................... 110
DownREIT................................................................ 113
EBITDA.................................................................. 47
Effective Time.......................................................... 32
Electing Shares......................................................... 34
Election Form........................................................... 34
Election Time........................................................... 35
Entertainment Center Case............................................... 47
Exchange Act............................................................ 52
Exchange Agent.......................................................... 91
Exchange Proposal....................................................... 26
Exchange Ratio.......................................................... 90
Expiration Date......................................................... 110
Holder.................................................................. 70
HSR Act................................................................. 57
Independent Committees.................................................. 38
Initial Colony Transaction.............................................. 37
Initial Meditrust $27 Proposal.......................................... 39
IRS..................................................................... 68
Junior Preferred Stock.................................................. 109
KAI..................................................................... 38
KAI Proposal............................................................ 38
KAI/Colony Proposals.................................................... 40
LATC.................................................................... 57
Lazard.................................................................. 38
Lazard Presentation..................................................... 50
Limitations and Restrictions............................................ 94
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PG. NO.
- ------------ -------
<S> <C>
MAC..................................................................... 24
MAC Declaration......................................................... 62
MAC Shares.............................................................. 24
Material Adverse Effect................................................. 95
Mediplex................................................................ 56
Meditrust April 6 Proposal.............................................. 40
The Meditrust Companies................................................. 4
Meditrust Meetings...................................................... 24
Meditrust Option........................................................ 52
Meditrust Shares........................................................ 24
Merger Agreement........................................................ 24
Mergers................................................................. 24
Morgan Stanley.......................................................... 36
NYSE.................................................................... 31
Operating............................................................... 24
operating company....................................................... 36
Operating Capital Stock................................................. 25
Operating Common Stock.................................................. 24
Operating Merger........................................................ 90
Operating Note.......................................................... 34
Operating Share Award Plan.............................................. 25
Option price............................................................ 117
Options................................................................. 116
OP Units................................................................ 113
Paired Common Stock..................................................... 24
Pairing Agreement....................................................... 111
Purchase Price.......................................................... 109
Qualified Offer......................................................... 65
qualified stock options................................................. 50
Racetrack............................................................... 98
Realty.................................................................. 24
Realty Capital Stock.................................................... 25
Realty Committee........................................................ 123
Realty Common Stock..................................................... 24
Realty Merger........................................................... 90
Realty Share Award Plan................................................. 25
Redemption Price........................................................ 109
Registration Statement.................................................. 25
REIT.................................................................... 46
REIT Requirements....................................................... 72
Retirement Plan......................................................... 59
Revised Meditrust $27 Proposal.......................................... 39
Right................................................................... 67
Right Certificates...................................................... 110
Rights Agreement........................................................ 109
Rights Plan............................................................. 67
Rights Redemption Price................................................. 111
Rulings................................................................. 72
Santa Anita............................................................. 4
Santa Anita Plans....................................................... 58
</TABLE>
128
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PG. NO.
- ------------ -------
<S> <C>
The Santa Anita Companies............................................... 24
The Santa Anita Companies' By-Laws...................................... 62
The Santa Anita Companies' Certificates................................. 62
Santa Anita Form 10-K................................................... 13
Santa Anita Meetings.................................................... 24
SAR's................................................................... 116
SEC..................................................................... 92
Section 262............................................................. 60
Securities Act.......................................................... 25
Series A Preferred Stock................................................ 24
Series Common Stock..................................................... 94
Share Award Plan Proposal............................................... 26
Statement 128........................................................... 78
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PG. NO.
- ------------ -------
<S> <C>
Stock Acquisition Date.................................................. 109
Surviving Corporations.................................................. 32
Termination Fee......................................................... 94
Third Party............................................................. 93
Thrift Plan............................................................. 59
TIN..................................................................... 75
Towson and Joppa Properties............................................. 36
Transaction Expenses.................................................... 94
Trustees................................................................ 63
Unaffiliated Acquired Shares............................................ 91
UPREIT.................................................................. 113
Voting Stock............................................................ 67
</TABLE>
129
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIRD AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 13, 1997
BY AND AMONG
SANTA ANITA REALTY ENTERPRISES, INC.,
SANTA ANITA OPERATING COMPANY
MEDITRUST
AND
MEDITRUST ACQUISITION COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
RECITALS
AGREEMENT
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
THE REORGANIZATION; CLOSING; EFFECTIVE TIME
<C> <S> <C>
Section 1.1: Meditrust Acquisition Company; the Distribution........... A-2
1.1.1 Meditrust Acquisition Company............................. A-2
1.1.2 Distribution.............................................. A-2
1.1.3 Pairing................................................... A-2
Section 1.2: Delivery of Note.......................................... A-2
Section 1.3: The Mergers............................................... A-2
1.3.1 Realty Merger............................................. A-2
1.3.2 Operating Merger.......................................... A-2
Section 1.4: Effective Time............................................ A-2
Section 1.5: Closing................................................... A-3
Section 1.6: Sale of Santa Anita Shares to MAC......................... A-3
Section 1.7: Sale of Santa Anita Shares to Designee of Meditrust....... A-3
Section 1.8: Assurance by Meditrust.................................... A-4
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS; CORPORATE NAME
Section 2.1: Realty Certificate of Incorporation....................... A-4
Section 2.2: Realty By-laws............................................ A-4
Section 2.3: Operating Certificate of Incorporation.................... A-4
Section 2.4: Operating By-laws......................................... A-5
ARTICLE III
DIRECTORS AND OFFICERS
Section 3.1: Realty Directors.......................................... A-5
Section 3.2: Operating Directors....................................... A-5
ARTICLE IV
MERGER CONSIDERATION; ASSIGNMENT CONSIDERATION;
CONVERSION OR CANCELLATION OF SHARES IN THE MERGERS
Realty Merger Consideration; Conversion or Cancellation of
Section 4.1: Meditrust Shares.......................................... A-5
Operating Merger Consideration; Conversion or Cancellation
Section 4.2: of MAC Shares............................................. A-5
Section 4.3: Exchange Ratio............................................ A-5
Section 4.4: Pairing of Realty and Operating Shares.................... A-6
Section 4.5: Exchange of Old Certificates for New Certificates......... A-6
4.5.1 Effect on Meditrust Shares and MAC Shares................. A-6
4.5.2 Appointment of Exchange Agent............................. A-6
4.5.3 Exchange Procedures....................................... A-6
4.5.4 Fractional Shares......................................... A-7
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
4.5.5 Distributions with Respect to Unexchanged Shares............ A-7
4.5.6 Transfers................................................... A-8
4.5.7 No Liability................................................ A-8
4.5.8 Withholding Rights.......................................... A-8
4.5.9 Transfer Taxes.............................................. A-8
4.5.10 Stock Options............................................... A-8
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1: Representations and Warranties of Meditrust................. A-10
5.1.1 Organization of Meditrust................................... A-10
5.1.2 Operating Subsidiaries and MAC.............................. A-10
5.1.3 Capitalization.............................................. A-10
5.1.4 Authority................................................... A-10
5.1.5 Litigation.................................................. A-11
5.1.6 Financial Statements........................................ A-11
5.1.7 Absence of Changes.......................................... A-11
5.1.8 No Undisclosed Liabilities.................................. A-12
5.1.9 Meditrust SEC Documents..................................... A-12
5.1.10 Certain Matters............................................. A-12
5.1.11 Environmental Matters....................................... A-12
5.1.12 Compliance with Laws and Orders............................. A-12
5.1.13 Real Property............................................... A-12
5.1.14 Indebtedness................................................ A-13
5.1.15 No Finder................................................... A-13
5.1.16 Tax Matters................................................. A-13
5.1.17 Benefit Plans............................................... A-13
Section 5.2: Representations and Warranties of Realty.................... A-14
5.2.1 Organization of Realty...................................... A-14
5.2.2 Capitalization.............................................. A-14
5.2.3 Authority................................................... A-15
5.2.4 Litigation.................................................. A-15
5.2.5 Financial Statements........................................ A-15
5.2.6 Absence of Changes.......................................... A-16
5.2.7 No Undisclosed Liabilities.................................. A-16
5.2.8 Santa Anita SEC Documents................................... A-16
5.2.9 Certain Matters............................................. A-16
5.2.10 Environmental Matters....................................... A-16
5.2.11 Compliance with Laws and Orders............................. A-16
5.2.12 Real Property............................................... A-16
5.2.13 Indebtedness................................................ A-17
5.2.14 No Finder................................................... A-17
5.2.15 Former Agreement............................................ A-17
5.2.16 Tax Matters................................................. A-17
5.2.17 Benefit Plans............................................... A-18
5.2.18 Hahn Agreement.............................................. A-18
Section 5.3: Representations and Warranties of Operating................. A-18
5.3.1 Organization of Operating................................... A-18
5.3.2 Operating Subsidiaries...................................... A-19
5.3.3 Capitalization.............................................. A-19
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
5.3.4 Authority.................................................. A-19
5.3.5 Litigation................................................. A-20
5.3.6 Financial Statements....................................... A-20
5.3.7 Absence of Changes......................................... A-20
5.3.8 No Undisclosed Liabilities................................. A-20
5.3.9 Santa Anita SEC Documents.................................. A-21
5.3.10 Certain Matters............................................ A-21
5.3.11 Environmental Matters...................................... A-21
5.3.12 Compliance with Laws and Orders............................ A-21
5.3.13 Real Property.............................................. A-21
5.3.14 Indebtedness............................................... A-22
5.3.15 No Finder.................................................. A-22
5.3.16 Former Agreement........................................... A-22
5.3.17 Tax Matters................................................ A-22
5.3.18 Benefit Plans.............................................. A-22
ARTICLE VI
COVENANTS
Section 6.1: Conduct Pending the Closing................................ A-23
Section 6.2: Acquisition Proposals...................................... A-24
Section 6.3: Information Supplied....................................... A-25
Section 6.4: Shareholder Approvals; Registration Statement.............. A-25
6.4.1 Registration Statement..................................... A-25
6.4.2 Shareholder Meetings....................................... A-25
Section 6.5: Other Actions.............................................. A-26
Section 6.6: Access..................................................... A-27
Section 6.7: Notification of Certain Matters............................ A-27
Section 6.8: Publicity.................................................. A-28
Section 6.9: Indemnification of Directors and Officers.................. A-28
Section 6.10: Colony Termination Fee..................................... A-28
ARTICLE VII
CONDITIONS
Section 7.1: Conditions to Each Party's Obligation...................... A-29
7.1.1 Shareholder Approval....................................... A-29
7.1.2 Governmental and Regulatory Consents....................... A-29
7.1.3 Third-Party Consents....................................... A-29
7.1.4 Litigation................................................. A-29
7.1.5 Opinions................................................... A-29
7.1.6 Registration Statement..................................... A-30
Section 7.2: Conditions to Obligation of Meditrust...................... A-30
7.2.1 Representations and Warranties............................. A-30
7.2.2 Performance of Obligations................................. A-30
7.2.3 No Material Adverse Effect................................. A-30
7.2.4 Rights..................................................... A-30
7.2.5 Resignation of Directors................................... A-30
7.2.6 The Exchange Approval...................................... A-30
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 7.3: Conditions to Obligation of Realty and Operating........... A-30
7.3.1 Representations and Warranties............................. A-30
7.3.2 Performance of Obligations................................. A-30
7.3.3 No Material Adverse Effect................................. A-30
ARTICLE VIII
TERMINATION
Section 8.1: Termination by Mutual Consent.............................. A-31
Section 8.2: Termination by any Party Hereto............................ A-31
Section 8.3: Termination by Meditrust................................... A-31
Section 8.4: Termination by Either of Realty or Operating............... A-31
Section 8.5: Effect of Termination and Abandonment...................... A-31
Section 8.6: Payment of Expenses and Termination Fee.................... A-32
ARTICLE IX
MISCELLANEOUS AND GENERAL
Section 9.1: Survival................................................... A-32
Section 9.2: Modification or Amendment.................................. A-32
Section 9.3: Waiver of Conditions....................................... A-32
Section 9.4: Counterparts............................................... A-32
Section 9.5: Governing Law.............................................. A-32
Section 9.6: Notices.................................................... A-32
Section 9.7: Entire Agreement, Etc. .................................... A-33
Section 9.8: Captions................................................... A-33
Section 9.9: Severability............................................... A-33
Section 9.10: No Third-Party Beneficiaries............................... A-33
Section 9.11: Specific Performance....................................... A-33
Section 9.12: Trusts..................................................... A-33
</TABLE>
iv
<PAGE>
THIRD AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This THIRD AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
April 13, 1997 (this "Agreement"), by and among SANTA ANITA REALTY ENTERPRISES,
INC., a Delaware corporation ("Realty"), SANTA ANITA OPERATING COMPANY, a
Delaware corporation ("Operating" and together with Realty, the "Companies"),
MEDITRUST, a Massachusetts business trust ("Meditrust"), and MEDITRUST
ACQUISITION COMPANY, a Massachusetts business trust ("MAC").
R E C I T A L S
A. Original Agreement. Effective as of April 13, 1997, the Companies,
Meditrust and Meditrust Acquisition Corporation IV, a Delaware Corporation ("M
Acquisition"), entered into an Amended and Restated Agreement and Plan of
Merger (the "Original Merger Agreement").
B. Novation. Effective June 19, 1997, pursuant to a Second Amended and
Restated Agreement and Plan of Merger dated as of April 13, 1997 (the "Second
Restated Merger Agreement") the parties to the Original Merger Agreement and
MAC effected a novation whereby MAC became a party to the Original Merger
Agreement in the place of M Acquisition, and in connection therewith amended
and restated the Original Merger Agreement in its entirety.
C. The parties hereby amend and restate the Second Restated Merger Agreement
in its entirety.
D. Spin-off. Prior to the record dates for the shareholder meetings of
Meditrust and MAC referred to in Section 6.4.2, Meditrust intends to transfer
to MAC, a wholly owned subsidiary of Meditrust, cash equal to the MAC Amount,
and to distribute beneficial ownership of shares of MAC to its shareholders,
which will be represented by the share certificates for Meditrust Shares
pending the Mergers described below.
E. Note. Prior to the Effective Time, Operating intends to deliver to Realty
a promissory note or cash in the amount of the Note Amount.
F. The Mergers. At the Effective Time, the parties intend to effect a merger
of Meditrust with and into Realty, with Realty being the surviving corporation
(the "Realty Merger"), and a merger of MAC with and into Operating, with
Operating being the surviving corporation (the "Operating Merger").
G. Intention of the Parties. It is the intention of the parties to this
Agreement that for United States federal income tax purposes the Realty Merger
and the Operating Merger (the "Mergers") shall qualify as "reorganizations"
within the meaning of Section 368(a) of the Code.
H. Approvals. The respective Board of Directors or Board of Trustees of each
party hereto has determined that this Agreement is in the best interests of
such party and its shareholders and has duly approved this Agreement and the
consummation of the transactions contemplated hereby and authorized its
execution and delivery.
I. Defined Terms. Defined terms used herein shall have the meanings set forth
herein and in Annex A hereto.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements set forth herein, the parties hereto
hereby agree as follows:
A-1
<PAGE>
ARTICLE I
THE REORGANIZATION; CLOSING; EFFECTIVE TIME
Section 1.1: Meditrust Acquisition Company; the Distribution.
1.1.1 Meditrust Acquisition Company. Prior to the record dates for the
shareholder meetings of Meditrust and MAC referred to in Section 6.4.2,
Meditrust will transfer to MAC cash equal to the MAC Amount, and will cause
MAC to issue an amount of its shares of beneficial interest to Meditrust
equal to the number of Meditrust Shares then outstanding and to take all
necessary actions required in connection therewith.
1.1.2 Distribution. Prior to the record dates for the shareholder
meetings of Meditrust and MAC referred to in Section 6.4.2, Meditrust will
effect the distribution to its shareholders of the beneficial ownership of
all the outstanding MAC Shares, with the MAC Shares being deemed to be
represented by the Meditrust Shares pending the Mergers. Meditrust will
take all necessary actions required in connection with such distribution.
1.1.3 Pairing. The transferee of any Meditrust Shares following the time
of the distribution referred to in Section 1.1.2 shall also receive a
beneficial interest in an equal number of MAC Shares.
Section 1.2: Delivery of Note. Prior to the Effective Time, Operating will
deliver to Realty a promissory note or cash, in whole or in part, in the amount
of the Note Amount.
Section 1.3: The Mergers.
1.3.1 Realty Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Realty and Meditrust will consummate the
Realty Merger in which Meditrust will be merged with and into Realty and
the separate legal existence of Meditrust will thereupon cease. Realty will
be the surviving corporation of the Realty Merger (sometimes hereinafter
referred to as the "Realty Surviving Corporation") and will continue to be
a corporation governed by the laws of the State of Delaware.
1.3.2 Operating Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Operating and MAC will consummate the
Operating Merger in which MAC will be merged with and into Operating and
the separate legal existence of MAC will thereupon cease. Operating will be
the surviving corporation of the Operating Merger (sometimes hereinafter
referred to as the "Operating Surviving Corporation") and will continue to
be a corporation governed by the laws of the State of Delaware.
Section 1.4: Effective Time. Realty and Meditrust will cause a certificate of
merger to be executed and delivered to the Secretary of State of the State of
Delaware in accordance with the DGCL (the "Realty Merger Certificate") and
Meditrust will cause a certificate of termination to be executed and delivered
to the Secretary of State of the Commonwealth of Massachusetts. The Realty
Merger will become effective at such time as the Realty Merger Certificate has
been filed with the Secretary of State of the State of Delaware in accordance
with the provisions of the DGCL or at such other time as may be agreed upon by
the parties and specified in the Realty Merger Certificate in accordance with
applicable law. Operating and MAC will cause a certificate of merger to be
executed and delivered to the Secretary of State of the State of Delaware as
provided in the DGCL (the "Operating Merger Certificate") and MAC will cause a
certificate of termination to be executed and delivered to the Secretary of
State of the Commonwealth of Massachusetts. The Operating Merger will become
effective at such time as the Operating Merger Certificate has been filed with
the Secretary of State of the State of Delaware in accordance with the
provisions of the DGCL or at such other time as may be agreed upon by the
parties and specified in the Operating Merger Certificate in accordance with
applicable law. It is the intention of the parties that the Mergers shall
become effective at the same time, and that the Realty Merger Certificate and
the Operating Merger Certificate shall so provide. The date and time when the
Mergers become effective is referred to herein as the "Effective Time."
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Section 1.5: Closing. The closing of the Reorganization (the "Closing") will
take place at the offices of O'Melveny & Myers LLP, Los Angeles, California at
10:00 A.M. on the first business day on which all the conditions set forth in
Article VII can be fulfilled or are waived, or at such other place or time as
the parties hereto may agree. The date upon which the Closing occurs is herein
called the "Closing Date".
Section 1.6: Sale of Santa Anita Shares to MAC. Realty and Operating will
notify Meditrust at least seven days in advance of the record dates for the
Realty and Operating shareholder meetings provided for in Section 6.4.2. Prior
to such record dates, MAC shall purchase from Realty and Operating newly
issued, fully paid and nonassessable Santa Anita Shares at a purchase price of
$31.00 per Santa Anita Share (the "Acquired Shares"). With respect to any such
purchase, MAC shall for all purposes be deemed to have become the holder of
record of the number of Santa Anita Shares to be purchased immediately upon
delivery to Realty and Operating of written notice from MAC of its intention to
make such purchase and payment of the aggregate purchase price as provided in
clause (ii) below and delivery of the certificate in clause (iii) below. The
Santa Anita Share Certificates issued pursuant to this Section 1.6 shall have
impressed on, printed on, written on or otherwise attached to them the legend
set forth in Section 3(c) of the Rights Agreement and MAC shall have all the
rights to which a holder of Rights as of the Rights Record Date (as defined in
the Rights Agreement) is entitled. The number of Acquired Shares shall equal
such number of Santa Anita Shares that will result, immediately after the
issuance and sale of the Acquired Shares and after taking into account any
Santa Anita Shares purchased by Meditrust and MAC in the open market, in (a)
Meditrust and/or MAC owning, after application of the Constructive Ownership
Rules (as defined in the certificate described in clause (iii) below), 9.8% of
the outstanding Santa Anita Shares and (b) no other person owning, after
application of such Constructive Ownership Rules, in excess of 9.8% of the
outstanding Santa Anita Shares. To consummate the purchase of the Acquired
Shares and as a condition to their issuance, (i) Realty and Operating will have
delivered to MAC certificates representing the Acquired Shares, (ii) MAC will
have paid to Realty and Operating the aggregate purchase price for the Acquired
Shares in immediately available funds, (iii) MAC shall have delivered to Realty
and Operating a certificate in the form attached hereto as Annex B, (iv) the
Acquired Shares will have been approved for listing on the Exchange upon
official notice of issuance, and (v) O'Melveny & Myers LLP will have delivered
to MAC an opinion to the effect that the Acquired Shares have been duly
authorized by all necessary corporate action on the part of the issuer and that
the Acquired Shares are validly issued, fully paid and nonassessable. In the
event that this Agreement is terminated pursuant to Article VIII, MAC shall be
entitled to the benefit of the registration rights set forth in Annex D hereto
with respect to the Acquired Shares.
Section 1.7: Sale of Santa Anita Shares to Designee of Meditrust. Prior to
the record date for the Realty and Operating shareholder meetings provided for
in Section 6.4.2, Meditrust may designate MAC and/or one or more Unaffiliated
Persons who may, prior to such record date, purchase from Realty and Operating
newly issued, fully paid and nonassessable Santa Anita Shares at a purchase
price of $31.00 per Santa Anita Share (the "Unaffiliated Acquired Shares").
With respect to any such purchase, MAC and/or the designated Unaffiliated
Person or Unaffiliated Persons shall for all purposes be deemed to have become
the holder or holders of record of the number of Santa Anita Shares to be
purchased immediately upon delivery to Realty and Operating of written notice
from Meditrust of such purchaser's or purchasers' intention to make such
purchase and payment of the aggregate purchase price as provided in clause (ii)
below and delivery of the certificate in clause (iii) below. The Santa Anita
Share Certificates issued pursuant to this Section 1.7 shall have impressed on,
printed on, written on or otherwise attached to them the legend set forth in
Section 3(c) of the Rights Agreement and the holder or holders of such shares
shall have all the rights to which a holder of Rights as of the Rights Record
Date (as defined in the Rights Agreement) is entitled. The aggregate number of
Unaffiliated Acquired Shares which may be purchased pursuant to this Section
1.7 is up to (a) 19.6% of the issued and outstanding Santa Anita Shares
immediately prior to the issuance and sale of the Acquired Shares to MAC
pursuant to Section 1.6 less (b) the number of Acquired Shares to be issued to
MAC pursuant to Section 1.6; provided, however, that no person, as a result of
the issuance and sale of the Unaffiliated Acquired Shares, shall own, after
application of the Constructive Ownership Rules, in excess of 9.8% of the
outstanding Santa Anita Shares. To consummate the purchase of the Unaffiliated
Acquired Shares and as a condition to their issuance, (i) Realty and Operating
will have delivered to the purchasers certificates representing the
Unaffiliated
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Acquired Shares, (ii) such purchasers will have paid to Realty and Operating
the purchase price for the Unaffiliated Acquired Shares in immediately
available funds, (iii) such purchasers will have delivered to Realty and
Operating a certificate in the form attached hereto as Annex B if such
purchaser is MAC or in the form attached hereto as Annex C if such purchaser is
an Unaffiliated Purchaser, (iv) the Unaffiliated Acquired Shares will have been
approved for listing on the Exchange upon official notice of issuance, and (v)
O'Melveny & Myers LLP will have delivered to such purchasers an opinion to the
effect that such Unaffiliated Acquired Shares have been duly authorized by all
necessary corporate action on the part of the issuer and that such Acquired
Shares are validly issued, fully paid and nonassessable. In the event that this
Agreement is terminated pursuant to Article VIII or upon the effectiveness of
the Mergers, such purchasers who are Unaffiliated Persons shall be entitled to
the benefit of the registration rights set forth in Annex D hereto with respect
to the Unaffiliated Acquired Shares. In the event that this Agreement is
terminated pursuant to Article VIII and such purchaser is MAC, MAC shall be
entitled to the benefit of the registration rights set forth in Annex D hereto
with respect to the Unaffiliated Acquired Shares.
Section 1.8: Assurance by Meditrust. At the option of the Realty Board and
the Operating Board, subject to and concurrent with the consummation of the
Mergers, Meditrust and MAC will ensure that Realty and Operating have available
in the aggregate up to $100,000,000 in cash in immediately available funds, in
the ratio of $98,900,000 for Realty and $1,100,000 for Operating, to fund a
cash election effective immediately after consummation of the Mergers by the
holders of Santa Anita Shares outstanding prior to the Mergers at $31.00 per
Santa Anita Share; provided that the sum of any amounts provided by Meditrust
and MAC shall be reduced by the purchase price paid (i) by MAC for the Acquired
Shares pursuant to Section 1.6, (ii) by MAC for the Unaffiliated Acquired
Shares pursuant to Section 1.7 and (iii) by Unaffiliated Purchasers for the
Unaffiliated Acquired Shares pursuant to Section 1.7; provided further that in
no event shall the sum of any such amounts provided by Meditrust and MAC be
reduced by an amount in excess of $31.00 multiplied by such number that would
represent the number of Acquired Shares that would be required to be purchased
by MAC pursuant to Section 1.6 if immediately prior to such purchase MAC owned,
pursuant to the Constructive Ownership Rules, no Santa Anita Shares. Such funds
shall be provided to Realty and Operating after the delivery by Operating to
Realty of the promissory note referred to in Section 1.1.2 and immediately
after the consummation of the Mergers.
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS; CORPORATE NAME
Section 2.1: Realty Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of Realty shall be amended to reflect that (i) the
name of Realty Surviving Corporation shall be Meditrust Corporation, and (ii)
the Fourth Article shall be as set forth in Annex E hereto, and as so amended,
will be the certificate of incorporation of Realty Surviving Corporation, until
duly amended in accordance with the terms thereof and the DGCL.
Section 2.2: Realty By-laws. The By-laws of Realty will be the By-laws of the
Realty Surviving Corporation, until duly amended in accordance with the terms
thereof, the Realty Certificate and the DGCL.
Section 2.3: Operating Certificate of Incorporation. At the Effective Time,
the Certificate of Incorporation of Operating shall be amended to reflect that
(i) the name of Operating Surviving Corporation shall be Meditrust Operating
Company, and (ii) the Fourth Article shall be as set forth in Annex F hereto,
and as so amended, will be the certificate of incorporation of the Operating
Surviving Corporation, until duly amended in accordance with the terms thereof
and the DGCL.
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Section 2.4: Operating By-laws. The By-laws of Operating, as in effect at the
Effective Time, will be the By-laws of Operating Surviving Corporation, until
duly amended in accordance with the terms thereof, the Operating Certificate
and the DGCL.
ARTICLE III
DIRECTORS AND OFFICERS
Section 3.1: Realty Directors. Immediately after the Effective Time, the
Board of Directors of Realty Surviving Corporation will consist of up to 12
directors and will be comprised of up to 10 individuals to be designated by
Meditrust and two current members of the Realty or Operating Board to be
designated by Meditrust after consultation with Realty. The designation of such
directors will occur prior to the initial filing of the Registration Statement
with the SEC. The new directors of Realty Surviving Corporation will be
appointed to different classes as designated by the Meditrust Board, and they
will commence to serve at the Effective Time and will remain directors until
their successors have been duly elected and qualified.
Section 3.2: Operating Directors. Immediately after the Effective Time, the
Board of Directors of Operating Surviving Corporation will consist of up to 12
directors and will be comprised of up to 10 individuals to be designated by
Meditrust and two current members of the Operating or Realty Board to be
designated by Meditrust after consultation with Operating. The designation of
such directors will occur prior to the initial filing of the Registration
Statement with the SEC. The new directors of Operating Surviving Corporation
will be appointed to different classes as designated by the Meditrust Board,
and they will commence to serve at the Effective Time and will remain directors
until their successors have been duly elected and qualified.
ARTICLE IV
MERGER CONSIDERATION; ASSIGNMENT CONSIDERATION;
CONVERSION OR CANCELLATION OF SHARES IN THE MERGERS
Section 4.1: Realty Merger Consideration; Conversion or Cancellation of
Meditrust Shares. At the Effective Time, by virtue of the Realty Merger and
without any action on the part of the holder of any capital stock of Meditrust,
subject to Sections 4.4 and 4.5, each Meditrust Share issued and outstanding
immediately prior to the Effective Time (other than any Meditrust Share held in
Meditrust's treasury (which shall be cancelled)) will be converted into the
right to receive such number of fully paid and nonassessable Realty Common
Shares as may be calculated in accordance with the Exchange Ratio. Realty
Shares outstanding immediately prior to the Effective Time shall remain
outstanding after the Effective Time and shall not be converted or exchanged in
the Realty Merger, except that any Realty Shares held by MAC may be cancelled
at the option of Operating Surviving Corporation.
Section 4.2: Operating Merger Consideration; Conversion or Cancellation of
MAC Shares. At the Effective Time, by virtue of the Operating Merger and
without any action on the part of the holder of any capital stock of MAC,
subject to Sections 4.4 and 4.5, each MAC Share issued and outstanding
immediately prior to the Effective Time (other than any MAC Share held in MAC's
or Meditrust's treasury (which shall be cancelled)) will be converted into the
right to receive such number of fully paid and nonassessable Operating Shares
as may be calculated in accordance with the Exchange Ratio. Operating Shares
outstanding immediately prior to the Effective Time shall remain outstanding
after the Effective Time and shall not be converted or exchanged in the
Operating Merger, except that any Operating Shares held by MAC shall be
cancelled.
Section 4.3: Exchange Ratio. The number of Realty Common Shares into which
each Meditrust Share will be converted, as provided in Section 4.1, and the
number of Operating Common Shares into which each MAC Share will be converted,
as provided in Section 4.2, will be equal to the number obtained by dividing
(i) $37.25, by (ii) the sum of (x) $31.00 and (y) if the Closing Date occurs
after December 31, 1997, as a result of acquisitions and other business
combinations proposed to be entered into by Meditrust or MAC (and provided that
there are no other conditions to closing within Realty's or Operating's control
or for which they are responsible that have not yet been satisfied), a number
equal to the per share amount of any dividends of
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Meditrust, if any, accrued with respect to periods after such date and prior to
the Closing Date divided by 1.2016 less the per share amount of any dividends
of Realty accrued with respect to periods after such date and prior to the
Closing Date (the "Exchange Ratio").
Section 4.4: Pairing of Realty and Operating Shares. Pursuant to the Pairing
Agreement, each and every Realty Share issued in connection with the Realty
Merger will be paired with an Operating Share issued in connection with the
Operating Merger, with the effect that each Meditrust shareholder will receive
paired shares of common stock of Realty Surviving Corporation and Operating
Surviving Corporation.
Section 4.5: Exchange of Old Certificates for New Certificates.
4.5.1 Effect on Meditrust Shares and MAC Shares.
(a) At the Effective Time, all Meditrust Shares and MAC Shares will
cease to be outstanding, will be cancelled and retired and will cease
to exist, and each holder of an Old Meditrust Certificate will
thereafter cease to have any rights with respect to such Old Meditrust
Certificates, except the right to receive, without interest, upon
exchange of such Old Meditrust Certificates in accordance with this
Section 4.5, the Santa Anita Share Certificates and payments to which
such holder is entitled pursuant to this Article IV. A holder of an Old
Meditrust Certificate shall have no rights as a shareholder of Realty
or Operating until the Old Meditrust Certificate have been exchanged
for Santa Anita Share Certificates and cash as provided herein.
(b) Notwithstanding anything contained in this Agreement to the
contrary, in order for Realty Surviving Corporation to continue to meet
the REIT Requirements, no person or entity shall own, or be deemed to
own by virtue of the attribution provisions of Section 544 (as modified
by Section 856(h)(1)(B)) or Section 318 (as modified by Section
856(d)(5)) of the Code, more than 9.8% of the outstanding Santa Anita
Shares (the "Ownership Limit") at or after the Effective Time.
Therefore, if any holder of Meditrust Shares or MAC Shares would
receive in connection with the Mergers a number of Santa Anita Shares
such that any person or entity would own, or be deemed to own under the
applicable attribution rules of the Code referred to above, Santa Anita
Shares in excess of the Ownership Limit, then such holder shall acquire
no right or interest in such number of Santa Anita Shares which would
cause such person or entity to exceed the Ownership Limit, but such
holder shall, in lieu of receiving those Santa Anita Shares which would
cause the Ownership Limit to be exceeded (the "Limited Shares"), have
the right to be paid by Realty Surviving Corporation an amount in cash
for such Limited Shares equal to the product of the Fair Market Value
(as hereinafter defined) per Limited Share multiplied by the number of
such Limited Shares. "Fair Market Value" shall be equal to the average
closing price of the Santa Anita Shares on the Exchange on the five (5)
trading days immediately preceding the Effective Time.
4.5.2 Appointment of Exchange Agent. From and after the Effective Time
until the end of the six-month period following the Effective Time, the
Surviving Corporations will make available or cause to be made available to
an exchange agent appointed by Meditrust and reasonably acceptable to
Realty and Operating (the "Exchange Agent"), certificates for (a) paired
Realty and Operating Common Shares (the "Santa Anita Share Certificates"),
and (b) cash in amounts sufficient to allow the Exchange Agent to make all
deliveries of Santa Anita Share Certificates and payments that may be
required in exchange for Old Meditrust Certificates pursuant to this
Article IV.
4.5.3 Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporations will cause the Exchange Agent to mail or deliver to
each person who was, at the Effective Time, a holder of record of Meditrust
Shares a form (the terms of which will be mutually agreed upon by the
parties hereto prior to the Effective Time) of letter of transmittal
containing instructions for use in effecting the surrender of the Old
Meditrust Certificates in exchange for Santa Anita Share Certificates and
payments pursuant to this Article IV. Upon surrender to the Exchange Agent
of an Old Meditrust Certificate for cancellation together with such letter
of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of such Old Meditrust Certificate will be
entitled to receive in exchange therefor a Santa Anita Share Certificate
representing paired shares of the Surviving Corporations, to which such
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holder is entitled pursuant to this Article IV, and the Old Meditrust
Certificate shall be cancelled. No interest will be paid or will accrue on
the amount payable upon surrender of Old Meditrust Certificates. If any
Santa Anita Share Certificate is to be issued in a name other than that in
which the Old Meditrust Certificate surrendered in exchange therefor is
registered, it will be a condition of such exchange that the person
requesting such exchange will pay any transfer or other taxes required by
reason of the issuance of such Santa Anita Share Certificate in a name
other than that of the registered holder of the Old Meditrust Certificate
surrendered, or will establish to the satisfaction of the Surviving
Corporations that any such taxes have been paid or are not applicable. Six
months after the Effective Time, the Surviving Corporations will be
entitled to cause the Exchange Agent to deliver to them any applicable
Santa Anita Share Certificates, or cash (including any interest thereon)
made available to the Exchange Agent that are unclaimed by the former
shareholders of Meditrust and MAC. Any such former shareholders who have
not theretofore exchanged their Old Meditrust Certificates for Santa Anita
Share Certificates and cash pursuant to this Article IV will thereafter be
entitled to look exclusively to the Surviving Corporations and only as
general creditors thereof for the Santa Anita Shares and cash to which they
become entitled upon exchange of their Old Meditrust Certificates pursuant
to this Article IV. Each Surviving Corporation will pay all applicable
charges and expenses, including its applicable share of those of the
Exchange Agent, in connection with the exchange of Santa Anita Share
Certificates and cash as contemplated hereby.
4.5.4 Fractional Shares. No fractional Santa Anita Shares will be issued
in the Reorganization. In lieu of any such fractional shares, each person
who would otherwise have been entitled to a fraction of a Santa Anita Share
upon surrender of an Old Meditrust Certificate pursuant to this Article IV
will be paid an amount in cash (without interest) equal to such holder's
proportionate interest in the net proceeds from the sale or sales in the
open market by the Exchange Agent, on behalf of all such holders, of the
aggregate fractional Santa Anita Shares which would otherwise be issued
pursuant to this Article IV. As soon as practicable following the Effective
Time, the Exchange Agent will determine the excess of (i) the number of
full Santa Anita Shares delivered to the Exchange Agent over (ii) the
aggregate number of full Santa Anita Shares to be distributed in respect of
Meditrust Shares and MAC Shares (such excess being herein called the
"Excess Shares"), and the Exchange Agent, as agent for the former holders
of such shares, will sell the Excess Shares at the prevailing prices on the
open market. The sale of the Excess Shares by the Exchange Agent will be
executed on the Exchange through one or more firms and will be executed in
round lots to the extent practicable. All commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with such sale
of Excess Shares, will be deducted from the proceeds from the sale of the
Excess Shares. Until the earlier of six months following the Effective Time
and the date the net proceeds of such sale or sales have been distributed,
the Exchange Agent will hold such proceeds in trust for such former
shareholders. As soon as practicable after the determination of the amount
of cash to be paid in lieu of any fractional interests, the Exchange Agent
will make available in accordance with this Agreement such amounts to such
former shareholders.
4.5.5 Distributions with Respect to Unexchanged Shares. Notwithstanding
any other provisions of this Agreement, as provided in Section 4.5.1, no
holder of an Old Meditrust Certificate shall have rights as a shareholder
of Realty or Operating until such holder has exchanged its Old Meditrust
Certificate for a Santa Anita Share Certificate; therefore, no dividends
will be paid to any person holding an Old Meditrust Certificate until such
Old Meditrust Certificate is surrendered for exchange as provided herein
(it being understood that such dividends will be paid to the Exchange Agent
to be held for distribution upon the exchange for Old Meditrust
Certificates as herein provided). Subject to the effect of applicable laws,
following surrender of any such Old Meditrust Certificate by any holder
thereof, there will be paid to the holder of the Santa Anita Share
Certificate 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 theretofore payable with respect to
the Santa Anita Shares represented thereby and not paid, less the amount of
any withholding taxes which may be required thereon, 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 the time of such
surrender and a payment date subsequent to the time of such surrender
payable with respect
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to the Santa Anita Shares represented thereby, less the amount of any
withholding taxes which may be required thereon.
4.5.6 Transfers. At or after the Effective Time, there will be no
transfers on the stock transfer books of either Surviving Corporation of
Meditrust Shares or MAC Shares which were outstanding immediately prior to
the Effective Time.
4.5.7 No Liability. In the event that any Old Meditrust Certificate is
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Old Meditrust Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporations, the posting by
such person of a bond in such reasonable amount as the Surviving
Corporations may direct as indemnity against any claim that may be made
against it with respect to such Old Meditrust Certificate, the Surviving
Corporations will, in exchange for such lost, stolen or destroyed Old
Meditrust Certificates, issue or cause to be issued the Santa Anita Shares
and pay or cause to be paid the amounts deliverable in respect thereof
pursuant to this Article IV. None of any party hereto, the Exchange Agent
or either Surviving Corporation will be liable to any holder of Meditrust
Shares or MAC Shares for any cash, Santa Anita Shares or other property
from the payment fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
4.5.8 Withholding Rights. The Surviving Corporations will be entitled to
deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of Meditrust Shares or MAC Shares such amounts
as may be required to be deducted and withheld with respect to the making
of such payment under the Code, or under any provision of state or local
tax law. To the extent that amounts are so withheld and paid over to the
appropriate taxing authority, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the
Meditrust Shares in respect of which such deduction and withholding was
made.
4.5.9 Transfer Taxes. Except as provided above, the Surviving
Corporations will pay or cause to be paid any transfer or gains tax
(including, without limitation, any real property gains or transfer tax)
imposed in connection with or as a result of the Mergers, including any
such tax that is imposed on a shareholder of Meditrust.
4.5.10 Stock Options.
(a) As soon as practicable following the date of this Agreement (i)
the Compensation Committee administering the Meditrust 1988 Stock
Option Plan (or the Meditrust Board, if appropriate) shall, in
accordance with its authority to interpret said Plan, determine that
the Mergers provided for in this Agreement constitute the merger of
Meditrust into another entity under Section 13 of said Plan, and (ii)
the Stock Option Committee administering the Meditrust 1992 Equity
Incentive Plan (or the Meditrust Board, if appropriate) shall, in the
exercise of its discretion under Section 11(e) of said Plan, determine
that a change of control of the Company shall occur upon the Mergers
provided for in this Agreement, and Realty shall assume the stock
options granted under said Plans. Pursuant to the Mergers, each
outstanding option to purchase a Meditrust Share will be converted into
an option to purchase from Realty (pursuant to the Realty 1995 Share
Award Plan if the amendment to the 1995 Realty Share Award Plan is
approved by the shareholders of Realty in connection with the Mergers)
such number of Santa Anita Shares (rounded down to the nearest whole
number) as is equal to the number of Meditrust Shares issuable upon
exercise of such option multiplied by the Exchange Ratio. The
respective Committees (or the Meditrust Board, if appropriate) shall
also provide that such options (to the extent issued prior to November
1, 1997 and excluding options granted to executive officers on or after
August 8, 1997), as converted, are immediately exercisable. The
exercise price per share of each such option, as so converted, will be
equal to (x) the aggregate exercise price for the Meditrust Shares
otherwise purchasable pursuant to such Meditrust option immediately
prior to the Effective Time divided by (y) the number of whole Santa
Anita Shares deemed purchasable from Realty pursuant to such Meditrust
option as determined above (rounded to the nearest whole cent).
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(b) Realty shall purchase from Operating (provided that Realty shall
not have the option to acquire at any time more than 9.8% of the
outstanding shares of Operating) or make arrangements with Operating
for simultaneous issuance by Operating of the number of shares of
Operating Common Stock to be delivered by Realty in connection with the
exercise of the Meditrust stock options as converted as provided in
paragraph (a) above, so that upon exercise the holder of such an option
will receive Santa Anita Shares as provided in paragraph (a) above.
Operating shall sell to Realty or make arrangements with Realty for
simultaneous issuance by Operating of the number of shares of Operating
Common Shares to be delivered by Realty in connection with the exercise
of Meditrust stock options as converted as provided in paragraph (a)
above so that upon exercise the holder of such an option will receive
Santa Anita shares as provided in paragraph (a) above.
The Realty 1995 Share Award Plan shall be amended as of the Effective
Time (if such amendment is approved by shareholders of Realty in
connection with the Mergers) to provide that each option granted
pursuant thereto shall entitle the holder thereof to receive from
Realty Santa Anita Shares upon exercise of such option and to provide
that the number of Realty Common Shares available for issuance pursuant
thereto shall be 5% of the number of shares of such stock outstanding
at the time of any particular issuance, plus a number of shares equal
to the number of shares with respect to which options granted under the
Meditrust 1988 Stock Option Plan and the Meditrust 1992 Equity
Incentive Plan prior to the Effective Time may be exercised, with
4,000,000 shares being available as incentive stock options. The
Operating 1995 Share Award Plan shall be amended as of the Effective
Time (if such amendment is approved by shareholders of Operating in
connection with the Mergers) to provide that the number of Operating
Common Shares available for issuance pursuant thereto shall be 5% of
the number of shares of such stock outstanding at the time of any
particular issuance, with 4,000,000 shares being available as incentive
stock options. Each such plan shall also be amended to increase the
maximum number of shares with respect to which options may be granted
to an eligible employee during any one-year period so as not to exceed
450,000.
(c) Realty shall assume the obligations under and comply with the
terms of the Meditrust Stock Option Plan and Equity Incentive Plan
(both as modified in accordance with paragraph (a) of this Section
4.5.10) and ensure, to the extent required by and subject to the
provisions of such Plans that the options granted thereunder which
qualified as qualified stock options prior to the Effective Time
continue to qualify as qualified stock options after the Effective
Time. In the case of any option to which Section 421 of the Code
applies by reason of its qualification under any of Sections 422-424 of
the Code, the option price, the number of Santa Anita Shares
purchasable pursuant to such options and the terms and conditions of
exercise of such option shall be determined in order to comply with
Section 424(a) of the Code.
(d) Realty and Operating shall take all corporate action necessary to
reserve for issuance a sufficient number of Realty and Operating Common
Shares for delivery upon exercise of the Meditrust stock options above
assumed by Realty in accordance with this Section 4.5.10. The Surviving
Corporations shall use their reasonable best efforts to have declared
effective as soon as practicable following the Effective Time, a
registration statement on Form S-8 (or any successor or other
appropriate form) with respect to the Santa Anita Shares subject to
such Meditrust stock options and shall use their reasonable best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such
Meditrust stock options remain outstanding. With respect to those
individuals who subsequent to the Mergers will be subject to the
reporting requirements under Section 16(a) of the Exchange Act, where
applicable, the Surviving Corporations shall administer the Stock Plans
assumed pursuant to this Section 4.5.10 in a manner that complies with
Rule 16b-3 promulgated under the Exchange Act to the extent the
applicable Stock Plan complied with such rule prior to the Mergers.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1: Representations and Warranties of Meditrust.
As an inducement to Realty and Operating to enter into this Agreement and to
consummate the transactions contemplated hereby, Meditrust represents and
warrants to Realty and Operating and agrees as follows:
5.1.1 Organization of Meditrust. Meditrust is a business trust duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. Meditrust is duly qualified to transact
business and is in good standing in each of the jurisdictions in which the
ownership or leasing of the properties used in its business or the conduct
of its business requires such qualification (each of which is listed in the
Meditrust Disclosure Schedule), other than in such jurisdictions where the
failure to be so qualified and in good standing would not, individually or
in the aggregate, have a Material Adverse Effect on Meditrust. Meditrust
has all requisite power and authority to own or lease and operate its
properties and to carry on its business as now conducted. Meditrust has
delivered to Realty and Operating complete and correct copies of the
Restated Declaration of Trust and By-laws of Meditrust (the "Meditrust
Charter") as amended and in effect on the date hereof. Meditrust has no
subsidiaries other than as set forth in the Meditrust Disclosure Schedule.
5.1.2 Operating Subsidiaries and MAC. The Meditrust Disclosure Schedule
accurately and completely sets forth as to (a) each subsidiary of Meditrust
which is a corporation, its name, the jurisdiction of its incorporation,
the number of shares of its capital stock of each class outstanding and the
number of such outstanding shares owned by Meditrust and its other
subsidiaries and (b) as to each subsidiary of Meditrust which is not a
corporation, its name, the jurisdiction of its organization or formation
and a detailed description of its capital structure which indicates the
direct or indirect interest of Meditrust in such subsidiary. Each of the
subsidiaries of Meditrust and MAC is a trust, corporation, limited
liability company or partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation and has
all requisite power and authority to own or lease and operate its
properties, and to carry on its business as now conducted. All of the
issued and outstanding shares of capital stock or other equity interests in
each subsidiary of Meditrust are validly issued, fully paid and
nonassessable and owned beneficially by Meditrust, free and clear of any
liens or other encumbrances, and there are no options, warrants or other
rights to acquire, or agreements or commitments pursuant to which any such
subsidiary is obligated to issue, sell, purchase or redeem shares of
capital stock or other equity interests in such subsidiary. Immediately
prior to the Effective Time, all of the issued and outstanding MAC Shares
will be validly issued, fully paid and nonassessable.
5.1.3 Capitalization. As of March 31, 1997, the authorized capital of
Meditrust consists of an unlimited number of shares of beneficial interest
without par value (the "Meditrust Shares"), of which 61,495,104 Meditrust
Shares are validly issued and outstanding and are fully paid and
nonassessable. As of the date of this Agreement, Meditrust has outstanding
options to purchase an aggregate of 893,832 Meditrust Shares (the
"Meditrust Options") pursuant to option plans of Meditrust, and has made
grants pursuant to which it is committed to issue 36,103 Meditrust Shares
under its Meditrust 1992 Equity Incentive Plan (the "Stock Grant Shares").
Except for the Meditrust Options, the Stock Grant Shares and the
convertible debt referred to in the audited balance sheet of Meditrust as
of December 31, 1996 referenced in Section 5.1.6 hereof, as of the date of
this Agreement, there are no options, warrants or other rights to acquire,
or agreements or commitments pursuant to which Meditrust is obligated to
issue, sell, purchase or redeem shares of capital stock of Meditrust.
Immediately prior to the Effective Time, the issued and outstanding capital
of MAC shall be the same as Meditrust.
5.1.4 Authority.
(a) Each of Meditrust and MAC has full power and authority to enter
into this Agreement and, subject to the approval by the shareholders of
Meditrust of the Meditrust Shareholder Matters and of MAC of the MAC
Shareholder Matters, to consummate the transactions contemplated
hereby.
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(b) The execution, delivery and performance by each of Meditrust and
MAC of this Agreement and the consummation by each of Meditrust and MAC
of the transactions contemplated hereby have been duly authorized by
all necessary action on the part of Meditrust or MAC, as the case may
be, subject to the approval by the shareholders of Meditrust of the
Meditrust Shareholder Matters and by the shareholders of MAC of the MAC
Shareholder Matters. This Agreement is the legal, valid and binding
agreement of each of Meditrust and MAC, enforceable against Meditrust
and MAC, respectively, in accordance with its terms.
(c) The execution or delivery by each of Meditrust and MAC of this
Agreement, and consummation of the transactions contemplated hereby or
compliance with or fulfillment of the terms and provisions hereof by
each of Meditrust and MAC, will not (i) conflict with, result in a
breach of the terms, conditions or provisions of, or constitute a
default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights, or
result in the creation or imposition of any encumbrance upon any of the
assets of Meditrust, MAC or any other subsidiary of Meditrust, under
the Meditrust Charter, the Declaration of Trust or By-Laws of MAC (the
"MAC Charter") or the charter documents of any of the other
subsidiaries of Meditrust, or any other instrument or agreement to
which Meditrust, MAC or any other subsidiary of Meditrust is a party or
any of its properties is subject or by which it is bound or any
statute, other law or regulatory provision affecting it, (ii) require
the approval, consent or authorization of, or the making of any
declaration, filing or registration with, any third party or any
foreign, federal, state or local court, governmental authority or
regulatory body, by or on behalf of Meditrust, MAC or any other
subsidiary of Meditrust, or (iii) adversely affect the qualification of
Meditrust as a REIT, except for (A) the filing of appropriate documents
with the SEC and pursuant to the HSR Act, (B) approval by the
shareholders of Meditrust of the Meditrust Shareholder Matters and by
the shareholders of MAC of the MAC Shareholder Matters, (C) those
matters set forth in the Meditrust Disclosure Schedule, (D) filings
with the Secretary of State of the States of Delaware and Massachusetts
and (E) such conflicts, breaches, defaults, events, creations,
impositions, approvals, consents, declarations, filings or
authorizations which would not reasonably be expected to either (x)
have a Material Adverse Effect on Meditrust or (y) prevent or hinder
the consummation of the transactions contemplated hereby.
(d) At all times since 1985, Meditrust has been and will continue to
be organized and operated in conformity with the REIT Requirements, and
its proposed method of operation, until the Realty Merger occurs, will
enable it to continue to meet the REIT Requirements.
5.1.5 Litigation. Except as disclosed in the Meditrust Disclosure
Schedule or in the Meditrust SEC Documents, there are no actions, suits or
proceedings or court orders or decrees pending, or, to the knowledge of
Meditrust, threatened to which Meditrust, MAC or any subsidiary of
Meditrust is a party or any of their respective properties is subject or by
which any of them is bound before or by any court or governmental agency,
which if determined adversely to the interests of Meditrust, MAC or any
subsidiary of Meditrust, would reasonably be expected to either (x) have a
Material Adverse Effect on Meditrust or (y) prevent or hinder the
consummation of the transactions contemplated hereby.
5.1.6 Financial Statements. Prior to the execution of this Agreement,
Meditrust has delivered to Realty and Operating true and complete copies of
the audited balance sheets of Meditrust as of December 31, 1996, 1995 and
1994, and the related audited statements of operations, shareholders'
equity and cash flows for each of the fiscal years then ended, together
with a true and correct copy of the report on such audited information by
Coopers & Lybrand L.L.P., and all letters from such accountants with
respect to the results of such audits. Except as set forth in the notes
thereto, all such financial statements were prepared in accordance with
GAAP and fairly present the financial condition and results of operations
of Meditrust as of the respective dates thereof and for the respective
periods covered thereby.
5.1.7 Absence of Changes. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on the Closing
Date, since December 31, 1996, except as disclosed in the Meditrust
Disclosure Schedule, there has not been any material adverse change, or any
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event or development which, individually or together with other such
events, could reasonably be expected to result in a Material Adverse Effect
on Meditrust.
5.1.8 No Undisclosed Liabilities. Except as reflected or reserved against
in the balance sheet included in Meditrust's audited financial statements
for the year ended December 31, 1996 or in the notes thereto or as
disclosed in the Meditrust Disclosure Schedule, there are no liabilities
against, relating to or affecting Meditrust, MAC or any subsidiary of
Meditrust or any of their respective assets and properties, known, unknown,
fixed or contingent, other than liabilities incurred in the ordinary course
of business consistent with past practice and such other liabilities which
in the aggregate would not reasonably be expected to result in a Material
Adverse Effect on Meditrust.
5.1.9 Meditrust SEC Documents. Meditrust has previously delivered or made
available to Realty and Operating complete and correct copies of all
Meditrust SEC Documents. As of their respective dates, none of the
Meditrust SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Meditrust has
timely made all filings required under the Securities Act and the Exchange
Act and, as of their respective dates, all such filings complied, in all
material respects, with the requirements of the Securities Act and the
Exchange Act, as applicable.
5.1.10 Certain Matters. Except as disclosed in the Meditrust Disclosure
Schedule, the Meditrust SEC Documents, or in reports of consultants or
title companies delivered to Realty and Operating prior to the date of this
Agreement, there are no structural, mechanical, HVAC, zoning or title
conditions relating to the real property of Meditrust, MAC or any
subsidiary of Meditrust that would reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect on Meditrust.
5.1.11 Environmental Matters. Each of Meditrust, MAC and each subsidiary
of Meditrust has obtained all licenses which are required in respect of its
business, operations, assets and properties under applicable environmental
laws, other than those which the failure to obtain would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on Meditrust. Each of Meditrust, MAC and each subsidiary of
Meditrust is in compliance with the terms and conditions of all such
licenses and with any applicable environmental law, except those where the
failure to be in compliance would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect on Meditrust.
5.1.12 Compliance with Laws and Orders. Except as disclosed in the
Meditrust Disclosure Schedule, none of Meditrust, MAC or any of the
subsidiaries of Meditrust is in violation of or in default under any law or
order applicable to Meditrust, MAC or any subsidiary of Meditrust or any of
their respective assets and properties, which violation or default would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Meditrust or MAC.
5.1.13 Real Property. (a) As to the real property which is owned by
Meditrust, MAC, or to the best of Meditrust's knowledge, any of the
subsidiaries of Meditrust, such entity has good and marketable title to
such real property, free and clear of any liens or other encumbrances,
except the liens and encumbrances disclosed in the Meditrust Disclosure
Schedule or which would not, individually or in the aggregate, have a
Material Adverse Effect on Meditrust.
(b) As to real property in which any of Meditrust, MAC or any of the
subsidiaries of Meditrust has a leasehold interest, Meditrust has a
valid, binding and enforceable leasehold interest, free and clear of
all liens and encumbrances, except for any liens or encumbrances
disclosed in the Meditrust Disclosure Schedule or which would not,
individually or in the aggregate, have a Material Adverse Effect on
Meditrust.
(c) As to real property which is owned indirectly by Meditrust
through Meditrust's interest in a joint venture, partnership or similar
ownership venture, (i) Meditrust has a good and valid interest in such
joint venture, partnership or other entity, free and clear of all liens
and encumbrances, except for any liens or encumbrances disclosed in the
Meditrust Disclosure Schedule or which would not, individually or in
the aggregate, have a Material Adverse Effect on Meditrust; and (ii) to
the
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knowledge of Meditrust, such joint venture, partnership or other entity
has good and marketable title to such real property, in the case of
owned real property, or a valid, binding and enforceable leasehold
interest in such real property, in the case of leased real property, in
each case free and clear of all liens and encumbrances, except for any
liens or encumbrances disclosed in the Meditrust Disclosure Schedule or
which would not, individually or in the aggregate, have a Material
Adverse Effect on Meditrust.
5.1.14 Indebtedness. Neither Meditrust, MAC nor any of the subsidiaries
of Meditrust is in default or breach under any indebtedness of Meditrust,
MAC or any of the subsidiaries of Meditrust, except where such default or
breach, individually or in the aggregate, would not have a Material Adverse
Effect on Meditrust or MAC.
5.1.15 No Finder. Neither Meditrust nor any party acting on behalf of
Meditrust has paid or become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement other than to Lazard Freres & Co. LLC
pursuant to a letter agreement dated as of February 1, 1997.
5.1.16 Tax Matters.
(a) At all times since the initial public offering of Meditrust,
Meditrust has been and will continue to be organized and operated in
conformity with the REIT Requirements, and its proposed method of
operation will enable it to continue to meet the REIT Requirements.
(b) The execution or delivery by Meditrust of this Agreement and the
consummation by Meditrust of the transactions contemplated hereby or
compliance with or fulfillment of the terms and provisions hereof by
Meditrust, will not adversely affect the qualification of Meditrust as
a REIT, for each taxable year ending on or after the date of this
Agreement.
(c) Each of Meditrust, MAC and each subsidiary of Meditrust has
timely, completely and correctly filed all Federal, state and local tax
returns and reports required to be filed by them, and have timely paid
or made adequate provision for the payment of all taxes, if any,
required to be paid with respect thereto, except where the failure to
file or pay is not reasonably expected to have a Material Adverse
Effect on Meditrust. Except as set forth in the Meditrust Disclosure
Schedule, neither Meditrust, MAC nor any of the subsidiaries of
Meditrust have been audited or examined by the IRS or any state or
local taxing authority and no notice of any such audit has been
received by Meditrust, MAC or any of the subsidiaries of Meditrust, nor
have Meditrust, MAC or any of the subsidiaries of Meditrust extended
any applicable statute of limitations for the assessment or collections
of tax. No liens for taxes exist with respect to any assets or
properties of Meditrust, MAC or any of the subsidiaries of Meditrust,
except for statutory liens for taxes not yet due.
(d) Each of Meditrust, MAC and each subsidiary of Meditrust has
complied with all applicable laws, rules and regulations relating to
the payment and withholding of taxes (including, without limitations,
withholding of taxes pursuant to Sections 1441, 1442, 3121 and 3402 of
the Code or similar provisions under any foreign federal laws or any
state or local laws, domestic or foreign) and has, within the time and
the manner prescribed by law, withheld from and paid over to the proper
governmental authorities all amounts required to be so withheld and
paid over under applicable laws, except where the failure to pay or
withhold is not reasonably expected to have a Material Adverse Effect
on Meditrust.
5.1.17 Benefit Plans.
(a) Each "employee pension benefit plan" (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (hereinafter a "Pension Plan"), "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) (hereinafter a "Welfare
Plan"), and other plan, arrangement or policy (written or oral)
relating to stock options, stock purchases, compensation, deferred
compensation, severance, fringe benefits or other employee benefits, in
each case maintained or contributed to, or required to be maintained or
contributed to, by
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Meditrust, MAC or the subsidiaries of Meditrust for the benefit of any
present or former employee, officer or director (each of the foregoing,
a "Benefit Plan") has been administered in all material respects in
accordance with its terms. Each of Meditrust, MAC and each subsidiary
of Meditrust and all their Benefit Plans are in compliance with the
applicable provisions of ERISA, all other applicable laws and all
applicable collective bargaining agreements, except where the failure
to comply would not reasonably be expected to have a Material Adverse
Effect on Meditrust.
(b) None of Meditrust or any Commonly Controlled Entity has incurred
any liability to a Pension Plan under Title IV of ERISA (other than for
contributions or liabilities under Section 412 of the Code not yet due)
or to the Pension Benefit Guaranty Corporation (other than for payment
of premiums not yet due) that, when aggregated with other such
liabilities, would result in a material liability of Meditrust, which
liability has not been fully paid.
(c) No Commonly Controlled Entity has withdrawn from any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) where
such withdrawal has resulted or would result in any material
"withdrawal liability" (within the meaning of Section 4201 of ERISA)
that has not been fully paid.
(d) Each Benefit Plan that is a Welfare Plan may be amended or
terminated at any time after the Effective Time without any material
increase in liability to the Surviving Corporations.
(e) No employee of Meditrust, MAC or any of the subsidiaries of
Meditrust will be entitled to any additional benefits or any
acceleration of the time of payment or vesting of any benefits under
any Benefit Plan as a result of the transactions contemplated by this
Agreement.
(f) Each such Benefit Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from
the IRS that covers the Tax Reform Act of 1986.
Section 5.2: Representations and Warranties of Realty.
As an inducement to Meditrust and MAC to enter into this Agreement and to
consummate the transactions contemplated hereby, Realty represents and warrants
to Meditrust and MAC and agrees as follows:
5.2.1 Organization of Realty. Realty is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Realty is duly qualified to transact business and is in good
standing in each of the jurisdictions in which the ownership or leasing of
the properties used in its business or the conduct of its business requires
such qualification (each of which is listed in the Realty Disclosure
Schedule), other than in such jurisdictions where the failure to be so
qualified and in good standing would not, individually or in the aggregate,
have a Material Adverse Effect on Realty. Realty has all requisite
corporate power and authority to own or lease and operate its properties
and to carry on its business as now conducted. Realty has delivered to
Meditrust complete and correct copies of the Certificate of Incorporation
(the "Realty Certificate") and by-laws (the "Realty By-laws") of Realty, in
each case as amended and in effect on the date hereof. Realty has no
subsidiaries, other than Santa Anita Realty LLC, which has not conducted,
and conducts no business.
5.2.2 Capitalization. On the date hereof, the authorized capital of
Realty consists of 6,000,000 shares of preferred stock, $.10 par value (the
"Realty Preferred Shares"), and 19,000,000 shares of common stock, $.10 par
value (the "Realty Common Shares" and together with the Realty Preferred
Shares, the "Realty Shares"), of which 867,343 Realty Preferred Shares and
11,586,925 Realty Common Shares are validly issued and outstanding and are
fully paid and nonassessable and of which none is reserved for any purpose,
except those Realty Shares issuable upon exercise of the Realty Options (as
defined below), the exchange of outstanding Realty Preferred Shares and the
Rights. As of the date of this Agreement, Realty has granted options to
purchase an aggregate of 315,675 Realty Common Shares (the "Realty
Options") pursuant to option plans of Realty. Except for the Realty Options
and the Rights, and except as contemplated by this Agreement or as
disclosed in the Realty Disclosure Schedule, as of the date of this
Agreement, there are no options, warrants or other rights to acquire, or
agreements or commitments pursuant to which Realty is obligated to issue,
sell, purchase or redeem shares of capital stock of Realty. 59,291
restricted Realty Common Shares and options to purchase 470,000 Realty
Common Shares have
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been issued pursuant to Operating's option plans. No restricted Santa Anita
Shares have been issued pursuant to Realty's 1995 Share Award Plan. The
Acquired Shares and the Unaffiliated Acquired Shares have been duly
authorized and, when issued and paid for in accordance with the terms of
this Agreement, will be fully paid and nonassessable Santa Anita Shares,
not subject to any preemptive right.
5.2.3 Authority.
(a) Realty has full corporate power and authority to enter into this
Agreement and, subject to the approval by the shareholders of Realty of
the Realty Shareholder Matters, to consummate the transactions
contemplated hereby.
(b) The execution, delivery and performance by Realty of this
Agreement and the consummation by Realty of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Realty, subject to the approval by the
shareholders of Realty of the Realty Shareholder Matters. This
Agreement is the legal, valid and binding agreement of Realty,
enforceable against Realty in accordance with its terms.
(c) The execution or delivery by Realty of this Agreement and
consummation of the transactions contemplated hereby or compliance with
or fulfillment of the terms and provisions hereof by Realty, will not
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss
of rights, or result in the creation or imposition of any encumbrance
upon any of the assets of Realty, under the Realty Certificate, the
Realty By-laws, the Pairing Agreement dated December 20, 1979 (the
"Pairing Agreement") between Realty and Operating, or any other
instrument or agreement to which Realty is a party or any of its
properties is subject or by which it is bound or any statute, other law
or regulatory provision affecting it, or (ii) require the approval,
consent or authorization of, or the making of any declaration, filing
or registration with, any third party or any foreign, federal, state or
local court, governmental authority or regulatory body, by or on behalf
of Realty, except, in the case of clauses (i) and (ii) above, for (A)
the filing of appropriate documents with the SEC and pursuant to the
HSR Act, (B) approval by the shareholders of Realty of the Realty
Shareholder Matters, (C) those matters set forth in the Realty
Disclosure Schedule, (D) filings with the Secretary of State of the
State of Delaware and (E) such conflicts, breaches, defaults, events,
creations, impositions, approvals, consents, declarations, filings or
authorizations which would not reasonably be expected to either (x)
have a Material Adverse Effect on Realty or (y) prevent or hinder the
consummation of the transactions contemplated hereby.
(d) The Board of Directors of Realty has taken all action to exempt
the transactions contemplated by this Agreement from Section 203 of the
DGCL, the Rights Agreement and Article Ninth of the Realty Certificate.
5.2.4 Litigation. Except as disclosed in the Realty Disclosure Schedule
or in the Santa Anita SEC Documents, there are no actions, suits or
proceedings or court orders, or decrees pending or, to the knowledge of
Realty, threatened to which Realty is a party or any of its properties is
subject or by which it is bound before or by any court or governmental
agency, which if determined adversely to the interests of Realty, would
reasonably be expected to either (x) have a Material Adverse Effect on
Realty or (y) prevent or hinder the consummation of the transactions
contemplated hereby.
5.2.5 Financial Statements. Except as referenced in the Realty Disclosure
Schedule, (i) prior to the execution of this Agreement, Realty has
delivered to Meditrust true and complete copies of the audited balance
sheets of Realty as of December 31, 1996, 1995 and 1994, and the related
audited statements of operations, shareholders' equity and cash flows for
each of the fiscal years then ended, together with a true and correct copy
of the report on such audited information by Kenneth Leventhal & Co (for
the 1994 fiscal year) and Ernst & Young LLP (for the 1995 and 1996 fiscal
years), and all letters from such accountants with respect to the results
of such audits; and (ii) except as set forth in the notes thereto, all such
financial statements were prepared in accordance with GAAP and fairly
present the financial condition and results of operations of Realty as of
the respective dates thereof and for the respective periods covered
thereby.
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5.2.6 Absence of Changes. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on the Closing
Date, since December 31, 1996, except as disclosed in the Realty Disclosure
Schedule, there has not been any material adverse change, or any event or
development which, individually or together with other such events, could
reasonably be expected to result in a Material Adverse Effect on Realty.
5.2.7 No Undisclosed Liabilities. Except as reflected or reserved against
in the balance sheet included in Realty's audited financial statements for
the year ended December 31, 1996 or in the notes thereto or as disclosed in
the Realty Disclosure Schedule, there are no liabilities against, relating
to or affecting Realty or any of its assets and properties, known, unknown,
fixed or contingent, other than liabilities incurred in the ordinary course
of business consistent with past practice and such other liabilities which
in the aggregate would not reasonably be expected to result in a Material
Adverse Effect on Realty.
5.2.8 Santa Anita SEC Documents. Except as referenced in the Realty
Disclosure Schedule, (i) Realty has previously delivered or made available
to Meditrust complete and correct copies of all Santa Anita SEC Documents;
(ii) as of their respective dates, none of the Santa Anita SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and (iii) Realty has timely made all
filings required under the Securities Act and the Exchange Act and, as of
their respective dates, all such filings complied, in all material
respects, with the requirements of the Securities Act and the Exchange Act,
as applicable.
5.2.9 Certain Matters. Except as disclosed in the Realty Disclosure
Schedule, the Santa Anita SEC Documents, or in reports of consultants or
title companies delivered to Meditrust prior to the date of this Agreement,
there are no structural, mechanical, HVAC, zoning or title conditions
relating to Realty's real property that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on
Realty.
5.2.10 Environmental Matters. Realty has obtained all licenses which are
required in respect of its business, operations, assets and properties
under applicable environmental laws other than those which the failure to
obtain would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect on Realty. Except as disclosed in the
Realty Disclosure Schedule, Realty is in compliance with the terms and
conditions of all such licenses and with any applicable environmental law,
except those where the failure to be in compliance would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on Realty.
5.2.11 Compliance with Laws and Orders. Except as disclosed in the Realty
Disclosure Schedule, Realty is not, nor has Realty at any time within the
last five years been, in violation of or in default under any law or order
applicable to Realty or any of its assets and properties, which violation
or default would reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect on Realty.
5.2.12 Real Property.
(a) As to real property which is owned by Realty, Realty has good and
marketable title to such real property, free and clear of any liens or
other encumbrances, except the liens and encumbrances disclosed in the
Realty Disclosure Schedule or which would not, individually or in the
aggregate, have a Material Adverse Effect on Realty.
(b) As to real property in which Realty has a leasehold interest,
Realty has a valid, binding and enforceable leasehold interest, free
and clear of all liens and encumbrances, except for any liens or
encumbrances disclosed in the Realty Disclosure Schedule or which would
not, individually or in the aggregate, have a Material Adverse Effect
on Realty.
(c) As to real property which is owned indirectly by Realty through
Realty's interest in a joint venture, partnership or similar ownership
venture, (i) Realty has a good and valid interest in such joint
venture, partnership or other entity, free and clear of all liens and
encumbrances, except for any liens or encumbrances disclosed in the
Realty Disclosure Schedule or which would not, individually or in the
aggregate, have a Material Adverse Effect on Realty; and (ii), to the
knowledge of Realty,
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such joint venture, partnership or other entity has good and marketable
title to such real property, in the case of owned real property, or a
valid, binding and enforceable leasehold interest in such real
property, in the case of leased real property, free and clear of all
liens and encumbrances, except for any liens or encumbrances disclosed
in the Realty Disclosure Schedule or which would not, individually or
in the aggregate, have a Material Adverse Effect on Realty.
5.2.13 Indebtedness. Except as disclosed in the Realty Disclosure
Schedule, Realty is not in default or breach under any indebtedness of
Realty, except where such default or breach, individually or in the
aggregate, would not have a Material Adverse Effect on Realty.
5.2.14 No Finder. Neither Realty nor any party acting on behalf of Realty
has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated
by this Agreement other than to Morgan Stanley & Co. Incorporated pursuant
to a letter agreement dated August 1, 1996.
5.2.15 Former Agreement. The Amended and Restated Formation Agreement,
dated as of October 24, 1996, as amended as of January 7, 1997, among
Operating, Realty and Colony Investors II, L.P. ("Colony") has been
terminated in accordance with its terms and Realty and Operating have no
liabilities or obligations, contingent or otherwise, under or arising out
of such agreement or the transactions contemplated thereby, except for
obligations under the confidentiality provisions of such agreement, certain
registration rights, certain limited rights of indemnification and as
disclosed in the Realty Disclosure Schedule.
5.2.16 Tax Matters.
(a) At all times since January 1, 1980, Realty has been and will
continue to be organized and operated in conformity with the REIT
Requirements, and its proposed method of operation will enable it to
continue to meet the REIT Requirements and to otherwise preserve the
federal income tax status of its paired share status. The Pairing
Agreement was duly and validly authorized and is a valid and binding
agreement, enforceable against Realty in accordance with its terms. The
Realty Shares are paired with the Operating Shares pursuant to the
Pairing Agreement and such pairing is grandfathered from the
application of Section 269B(a)(3) of the Code pursuant to Section
136(c)(3) of the Deficit Reduction Act of 1984.
(b) The execution or delivery by Realty of this Agreement and the
consummation by Realty of the transactions contemplated hereby or
compliance with or fulfillment of the terms and provisions hereof by
Realty, will not (i) conflict with the private letter rulings issued by
the IRS to Realty dated October 16, 1979 and January 11, 1980 (the
"Private Letter Rulings") or (ii) adversely affect the qualification of
Realty as a REIT, for each taxable year ending on or after the date of
this Agreement or adversely affect the ability of Realty to retain its
status as grandfathered from the application of Section 269B(a)(3) of
the Code pursuant to Section 136(c)(3) of the Deficit Reduction Act of
1984.
(c) Since January 1, 1980, Realty and Operating have operated
consistent with the Private Letter Rulings and the IRS has not revoked
or threatened to revoke the Private Letter Rulings.
(d) Except as disclosed in the Realty Disclosure Schedule, Realty has
timely, completely and correctly filed all Federal, state and local tax
returns and reports required to be filed by them, and has timely, paid
or made adequate provision for the payment of all taxes, if any,
required to be paid with respect thereto, except where the failure to
file or pay is not reasonably expected to have a Material Adverse
Effect on Realty. Except as set forth in the Realty Disclosure
Schedule, neither Realty nor any of its subsidiaries have been audited
or examined by the IRS or any state or local taxing authority and no
notice of any such audit has been received by Realty, nor has Realty
extended any applicable statute of limitations for the assessment or
collections of tax. Except as disclosed in the Realty Disclosure
Schedule, no liens for taxes exist with respect to any assets or
properties of Realty or any of its subsidiaries, except for statutory
liens for taxes not yet due.
(e) Realty has complied with all applicable laws, rules and
regulations relating to the payment and withholding of taxes (including
without limitations, withholding of taxes pursuant to Sections
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1441, 1442, 3121 and 3402 of the Code or similar provisions under any
foreign federal laws or any state or local laws, domestic or foreign)
and has, within the time and the manner prescribed by law, withheld
from and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under applicable laws, except
where the failure to pay or withhold is not reasonably expected to have
a Material Adverse Effect on Realty.
5.2.17 Benefit Plans.
(a) Each Pension Plan, Welfare Plan and other plan, arrangement or
policy (written or oral) relating to stock options, stock purchases,
compensation, deferred compensation, severance, fringe benefits or
other employee benefits, in each case maintained or contributed to, or
required to be maintained or contributed to, by Realty for the benefit
of any present or former employee, officer or director (each of the
foregoing, a "Benefit Plan") has been administered in all material
respects in accordance with its terms. Realty and all their Benefit
Plans are in compliance with the applicable provisions of ERISA, all
other applicable laws and all applicable collective bargaining
agreements, except where the failure to comply would not reasonably be
expected to have a Material Adverse Effect on Realty.
(b) None of Realty or any Commonly Controlled Entity has incurred any
liability to a Pension Plan under Title IV of ERISA (other than for
contributions or liabilities under Section 412 of the Code not yet due)
or to the Pension Benefit Guaranty Corporation (other than for payment
of premiums not yet due) that, when aggregated with other such
liabilities, would result in a material liability of Realty, which
liability has not been fully paid.
(c) No Commonly Controlled Entity has withdrawn from any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) where
such withdrawal has resulted or would result in any material
"withdrawal liability" (within the meaning of Section 4201 of ERISA)
that has not been fully paid.
(d) Each Benefit Plan that is a Welfare Plan may be amended or
terminated at any time after the Effective Time without any material
increase in liability to the Surviving Corporations.
(e) Except as set forth in the Realty Disclosure Schedule, no
employee of Realty or any of its subsidiaries will be entitled to any
additional benefits or any acceleration of the time of payment or
vesting of any benefits under any Benefit Plan as a result of the
transactions contemplated by this Agreement.
(f) Each such Benefit Plan intended to qualify under Section 401(a)
of the Code has received a favorable determination letter from the IRS
that covers the Tax Reform Act of 1986.
5.2.18 Hahn Agreement. Realty has entered into a Memorandum of Agreement,
dated as of January 27, 1997 (the "Memorandum"), with TrizecHahn Centers,
Inc. ("Hahn"), pursuant to which Realty and Hahn have agreed (i) to
cooperate to obtain the agreement of The Mitsubishi Bank, Limited to
release Realty from the Santa Anita Repayment Guaranty (as defined in the
Memorandum) and (iii) that Hahn will, subject to the full and faithful
performance by Realty of its obligations under the Memorandum, defend,
indemnify and hold Realty harmless from and against any and all claims,
demands, damages, losses, liabilities, costs and expenses, including
reasonable attorneys' and consultant fees, arising out of or in connection
with any liability under the Santa Anita Repayment Guaranty). To the
knowledge of Realty, Hahn has a net worth in excess of $500 million.
Section 5.3 Representations and Warranties of Operating.
As an inducement to Meditrust and MAC to enter into this Agreement and to
consummate the transactions contemplated hereby, Operating represents and
warrants to Meditrust and MAC and agrees as follows:
5.3.1 Organization of Operating. Operating is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. Operating and its subsidiaries are each duly qualified
to transact business and are each in good standing in each of the
jurisdictions in which the ownership or leasing of the properties used in
its business or the conduct of its business requires such qualification
(each of which is listed in the Operating Disclosure Schedule), other than
in such
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jurisdictions where the failure to be so qualified and in good standing
would not, individually or in the aggregate, have a Material Adverse Effect
on Operating. Operating has all requisite corporate power and authority to
own or lease and operate its properties and to carry on its business as now
conducted. Operating has delivered to Meditrust complete and correct copies
of the Certificate of Incorporation (the "Operating Certificate") and by-
laws (the "Operating By-laws") of Operating, in each case as amended and in
effect on the date hereof.
5.3.2 Operating Subsidiaries. The Operating Disclosure Schedule
accurately and completely sets forth as to (a) each subsidiary of Operating
which is a corporation, its name, the jurisdiction of its incorporation,
the number of shares of its capital stock of each class outstanding and the
number of such outstanding shares owned by Operating and its other
subsidiaries and (b) as to each subsidiary of Operating which is not a
corporation, its name, the jurisdiction of its organization or formation
and a detailed description of its capital structure which indicates the
direct or indirect interest of Operating in such subsidiary. Each
subsidiary of Operating is a trust, corporation, limited liability company
or partnership duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation and has all requisite power
and authority to own or lease and operate its properties, and to carry on
its business as now conducted. All of the issued and outstanding shares of
capital stock or other equity interests in each subsidiary of Operating are
validly issued, fully paid and nonassessable and owned beneficially by
Operating, free and clear of any liens or other encumbrances, and there are
no options, warrants or other rights to acquire, or agreements or
commitments pursuant to which any such subsidiary is obligated to issue,
sell, purchase or redeem shares of capital stock or other equity interests
in such subsidiary.
5.3.3 Capitalization. On the date hereof, the authorized capital of
Operating consists of 6,000,000 shares of preferred stock, $.10 par value
(the "Operating Preferred Shares"), and 19,000,000 shares of common stock,
$.10 par value (the "Operating Common Shares" and together with the
Operating Preferred Shares, the "Operating Shares"), of which 867,343
Operating Preferred Shares and 11,496,225 Operating Common Shares are
validly issued and outstanding and are fully paid and nonassessable and of
which none is reserved for any purpose, except those Operating Shares
issuable upon exercise of the Operating Options (as hereinafter defined),
the exchange of outstanding Operating Preferred Shares and the Rights.
Operating has granted options to purchase an aggregate of 470,000 Operating
Common Shares (the "Operating Options") pursuant to option plans of
Operating. Except for the Operating Options, and except as contemplated by
this Agreement or as disclosed in the Operating Disclosure Schedule, there
are no options, warrants or other rights to acquire, or agreements or
commitments pursuant to which Operating is obligated to issue, sell,
purchase or redeem shares of capital stock of Operating. 59,291 restricted
Operating Common Shares have been issued pursuant to Operating's 1995 Share
Award Plan. The Acquired Shares and the Unaffiliated Acquired Shares have
been duly authorized and when issued and paid for in accordance with the
terms of this Agreement, will be fully paid and nonassessable Santa Anita
Shares, not subject to any preemptive right.
5.3.4 Authority.
(a) Operating has full corporate power and authority to enter into
this Agreement and, subject to the approval by the shareholders of
Operating of the Operating Shareholder Matters, to consummate the
transactions contemplated hereby.
(b) The execution, delivery and performance by Operating of this
Agreement and the consummation by Operating of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Operating, subject to the approval by
the shareholders of Operating of the Operating Shareholder Matters.
This Agreement is the legal, valid and binding agreement of Operating,
enforceable against Operating in accordance with its respective terms.
(c) The execution or delivery by Operating of this Agreement and
consummation of the transactions contemplated hereby or compliance with
or fulfillment of the terms and provisions hereof by Operating, will
not (i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or
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cancellation or a loss of rights, or result in the creation or
imposition of any encumbrance upon any of the assets of Operating or
any of its subsidiaries, under the Operating Certificate, the Operating
By-laws, the organizational documents of any subsidiary of Operating,
the Pairing Agreement or any other instrument or agreement to which
Operating or any of its subsidiaries is a party or any of their
respective properties is subject or by which any of them is bound or
any statute, other law or regulatory provision affecting any of them,
or (ii) require the approval, consent or authorization of, or the
making of any declaration, filing or registration with, any third party
or any foreign, federal, state or local court, governmental authority
or regulatory body, by or on behalf of Operating or any of its
subsidiaries, except for (A) the filing of appropriate documents with
the SEC and pursuant to the HSR Act, (B) approval by the shareholders
of Operating of the Operating Shareholder Matters, (C) those matters
set forth in the Operating Disclosure Schedule, (D) filings with the
Secretary of State of Delaware and (E) such conflicts, breaches,
defaults, events, creations, impositions, approvals, consents,
declarations, filings or authorizations, which would not reasonably be
expected to either (x) have a Material Adverse Effect on Operating or
(y) prevent or hinder the consummation of the transactions contemplated
hereby.
(d) The Pairing Agreement is duly and validly authorized and is a
valid and binding agreement, enforceable against Operating in
accordance with its terms. The Operating Shares are paired with the
Realty Shares pursuant to the Pairing Agreement and Section 136(c)(3)
of the Deficit Reduction Act of 1984; such pairing does not cause the
activities of Operating to be attributed to Realty as provided in
Section 269B(a)(3) of the Code.
(e) The Board of Directors of Operating has taken all action to
exempt the transactions contemplated by this Agreement from Section 203
of the DGCL, the Rights Agreement and Article Ninth of the Operating
Certificate.
5.3.5 Litigation. Except as disclosed in the Operating Disclosure
Schedule or in the Santa Anita SEC Documents, there are no actions, suits
or proceedings or court orders or decrees pending, or, to the knowledge of
Operating, threatened to which Operating or its subsidiaries is a party or
any of its properties is subject or by which it is bound before or by any
court or governmental agency, which if determined adversely to the
interests of Operating or its subsidiaries, would reasonably be expected to
either (x) have a Material Adverse Effect on Operating or (y) prevent or
hinder the consummation of the transactions contemplated hereby.
5.3.6 Financial Statements. Prior to the execution of this Agreement,
Operating has delivered to Meditrust true and complete copies of the
audited consolidated balance sheets of Operating and its subsidiaries as of
December 31, 1996, 1995 and 1994, and the related audited consolidated
statements of operations, shareholders' equity and cash flows for each of
the fiscal years then ended, together with a true and correct copy of the
report on such audited information by Kenneth Leventhal & Co. (for the 1994
fiscal year) and Ernst & Young LLP (for the 1995 and 1996 fiscal years),
and all letters from such accountants with respect to the results of such
audits. Except as set forth in the notes thereto, all such financial
statements were prepared in accordance with GAAP and fairly present the
consolidated financial condition and results of operations of Operating and
its consolidated subsidiaries as of the respective dates thereof and for
the respective periods covered thereby.
5.3.7 Absence of Changes. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on the Closing
Date, and except as disclosed in the Operating Disclosure Schedule, since
December 31, 1996, there has not been any material adverse change, or any
event or development which, individually or together with other such
events, could reasonably be expected to result in a Material Adverse Effect
on Operating.
5.3.8 No Undisclosed Liabilities. Except as reflected or reserved against
in the consolidated balance sheet included in Operating's audited financial
statements for the year ended December 31, 1996 or in the notes thereto or
as disclosed in the Operating Disclosure Schedule, there are no liabilities
against, relating to or affecting Operating or any of its subsidiaries or
any of its assets and properties, known, unknown, fixed or contingent,
other than liabilities incurred in the ordinary course of business
consistent
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with past practice and such other liabilities which in the aggregate would
not reasonably be expected to result in a Material Adverse Effect on
Operating.
5.3.9 Santa Anita SEC Documents. Except as referenced in the Operating
Disclosure Schedule, (i) Operating has previously delivered or made
available to Meditrust complete and correct copies of the Santa Anita SEC
Documents; (ii) as of their respective dates, none of the Santa Anita SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and (iii) Operating has timely made
all filings required under the Securities Act and the Exchange Act and, as
of their respective dates, all such filings complied, in all material
respects, with the requirements of the Securities Act and the Exchange Act,
as applicable.
5.3.10 Certain Matters. Except as disclosed in the Santa Anita SEC
Documents, the Operating Disclosure Schedule or in reports of consultants
or title companies delivered to Meditrust prior to the date of this
Agreement, there are no structural, mechanical, HVAC, zoning or title
conditions relating to real property of Operating or any of its
subsidiaries would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on Operating.
5.3.11 Environmental Matters. Each of Operating and its subsidiaries has
obtained all licenses which are required in respect of its business,
operations, assets and properties under applicable environmental laws other
than those which the failure to obtain would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on
Operating. Except as disclosed in the Operating Disclosure Schedule, each
of Operating and its subsidiaries is in compliance with the terms and
conditions of all such licenses and with any applicable environmental law,
except those where the failure to be in compliance would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on Operating.
5.3.12 Compliance with Laws and Orders. Except as disclosed in the
Operating Disclosure Schedule, none of Operating and its subsidiaries is,
nor has any of Operating and its subsidiaries at any time within the last
five years been, in violation of or in default under any law or order
including, without limitation, the California Horse Racing Board applicable
to Operating and its subsidiaries or any of their assets and properties,
which violations or default would reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect on Operating.
5.3.13 Real Property
(a) As to real property which is owned to the best of its knowledge,
by Operating or by any of its subsidiaries, good and marketable title
to the real property, free and clear of any liens or other
encumbrances, except the liens and encumbrances disclosed in the
Operating Disclosure Schedule or which would not individually or in the
aggregate, have a Material Adverse Effect on Operating.
(b) As to real property in which Operating or any of its subsidiaries
has a leasehold interest, Operating or such subsidiary has a valid,
binding and enforceable leasehold interest, free and clear of any liens
or other encumbrances except the liens and encumbrances disclosed in
the Operating Disclosure Schedule or which would not, individually or
in the aggregate, have a Material Adverse Effect on Operating.
(c) As to real property which is owned indirectly by Operating or any
of its subsidiaries, through Operating's or any of its subsidiaries'
interest in a joint venture, partnership or similar ownership venture,
(i) Operating or its subsidiaries, as the case may be, has a good and
valid interest in such joint venture, partnership or other entity free
and clear of any liens or other encumbrances; and (ii), to the
knowledge of Operating such joint venture, partnership or other entity
has good and marketable title to such real property, in the case of
owned real property, or a valid, binding and enforceable leasehold
interest in such real property, in the case of leased real property,
free and clear of any liens or other encumbrances, except the liens and
encumbrances disclosed in the Operating Disclosure Schedule or which
would not, individually or in the aggregate, have a Material Adverse
Effect on Operating.
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5.3.14 Indebtedness. Neither Operating nor any of its subsidiaries is in
default or breach under any indebtedness of Operating or any of its
subsidiaries, except where such default or breach, individually or in the
aggregate, would not have a Material Adverse Effect on Operating.
5.3.15 No Finder. Neither Operating nor any party acting on behalf of
Operating has paid or become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement, other than to Morgan Stanley & Co.
Incorporated pursuant to a letter agreement dated August 1, 1996.
5.3.16 Former Agreement. The Amended and Restated Formation Agreement,
dated as of October 24, 1996, as amended as of January 7, 1997, among
Operating, Realty and Colony has been terminated in accordance with its
terms and Realty and Operating have no liabilities or obligations,
contingent or otherwise, under or arising out of such agreement or the
transactions contemplated thereby, except for obligations under the
confidentiality provisions of such agreement, certain registration rights,
certain limited rights of indemnification and as disclosed in the Operating
Disclosure Schedule.
5.3.17 Tax Matters.
(a) Operating and its subsidiaries have timely, completely and
correctly filed all Federal, state and local tax returns and reports
required to be filed by them, and have timely paid or made adequate
provision for the payment of all taxes, if any, required to be paid
with respect thereto, except where the failure to file or pay is not
reasonably expected to have a Material Adverse Effect on Operating.
Except as set forth in the Operating Disclosure Schedule, neither
Operating nor any of its subsidiaries have been audited or examined by
the IRS or any state or local taxing authority and no notice of any
such audit has been received by Operating or any of its subsidiaries,
nor have Operating or any of its subsidiaries extended any applicable
statute of limitations for the assessment or collections of tax. No
liens for taxes exist with respect to any assets or properties of
Operating or any of its subsidiaries, except for statutory liens for
taxes not yet due.
(b) Operating and each of its subsidiaries has complied with all
applicable laws, rules and regulations relating to the payment and
withholding of taxes (including, without limitations, withholding of
taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or
similar provisions under any foreign federal laws or any state or local
laws, domestic or foreign) and has, within the time and the manner
prescribed by law, withheld from and paid over to the proper
governmental authorities all amounts required to be so withheld and
paid over under applicable laws, except where the failure to pay or
withhold is not reasonably expected to have a Material Adverse Effect
on Operating.
5.3.18 Benefit Plans.
(a) Each Pension Plan, Welfare Plan and other plan, arrangement or
policy (written or oral) relating to stock options, stock purchases,
compensation, deferred compensation, severance, fringe benefits or
other employee benefits, in each case maintained or contributed to, or
required to be maintained or contributed to, by Operating or its
subsidiaries for the benefit of any present or former employee, officer
or director (each of the foregoing, a "Benefit Plan") has been
administered in all material respects in accordance with its terms.
Operating and its subsidiaries and all their Benefit Plans are in
compliance with the applicable provisions of ERISA, all other
applicable laws and all applicable collective bargaining agreements,
except where the failure to comply would not reasonably be expected to
have a Material Adverse Effect on Operating.
(b) None of Operating or any Commonly Controlled Entity has incurred
any liability to a Pension Plan under Title IV of ERISA (other than for
contributions or liabilities under Section 412 of the Code not yet due)
or to the Pension Benefit Guaranty Corporation (other than for payment
of premiums not yet due) that, when aggregated with other such
liabilities, would result in a material liability of Operating, which
liability has not been fully paid.
(c) No Commonly Controlled Entity has withdrawn from any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) where
such withdrawal has resulted or would result in any material
"withdrawal liability" (within the meaning of Section 4201 of ERISA)
that has not been fully paid.
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(d) Each Benefit Plan that is a Welfare Plan may be amended or
terminated at any time after the Effective Time without any material
increase in liability to the Surviving Corporations.
(e) Except as set forth in the Operating Disclosure Schedule, no
employee of Operating or any of its subsidiaries will be entitled to
any additional benefits or any acceleration of the time of payment or
vesting of any benefits under any Benefit Plan as a result of the
transactions contemplated by this Agreement.
(f) Each such Benefit Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from
the IRS that covers the Tax Reform Act of 1986.
ARTICLE VI
COVENANTS
Section 6.1: Conduct Pending the Closing. Each of Meditrust, MAC, Realty and
Operating covenants and agrees as to itself and its subsidiaries that, from and
after the date hereof until the Effective Time, except insofar as the other
party shall otherwise consent or except as otherwise contemplated by this
Agreement or its Disclosure Schedule:
6.1.1 Taking into account any operational matters that may arise that are
primarily attributable to the pendency of the Reorganization, it will use
reasonable best efforts such that the business of it and its subsidiaries
will be conducted only in the ordinary and usual course consistent with
past practice and existing business plans and, to the extent consistent
therewith, it and its subsidiaries will use all reasonable efforts to
preserve their business organization intact and maintain their existing
relations with customers, suppliers, employees and business associates.
6.1.2 Neither Realty, MAC nor Meditrust shall take any action or omit to
take any action that would cause Realty, MAC or Meditrust to be
disqualified as a REIT or which would result in a loss of Realty's status
as grandfathered from the application of Section 269B(a)(3) of the Code
pursuant to Section 136(c)(3) of the Deficit Reduction Act of 1984 or other
failure to meet the REIT Requirements.
6.1.3 Neither Realty nor Operating shall, and Operating shall cause the
subsidiaries it controls not to, without the prior written consent of
Meditrust, which shall not be unreasonably withheld,
(a) voluntarily sell, transfer or dispose of any real property of
Realty or of Operating;
(b) incur any debt or lease obligations or purchase money financing
obligations, other than, in each case, in the ordinary course of
business consistent with past practice (for example, trade payables);
(c) acquire any additional real estate or other assets (other than
receipt of cash or investments of cash in cash-equivalents in
connection with permitted sales of assets);
(d) adopt or propose any change in their respective certificates of
incorporation or any material change in their respective bylaws;
(e) subject to the provisions of Section 6.2, adopt, or permit any of
their respective subsidiaries to adopt, a plan or agreement of complete
or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other material reorganization of
Operating, Realty or any of their respective subsidiaries (other than a
liquidation or dissolution of any subsidiary or a merger or
consolidation between wholly owned subsidiaries);
(f) redeem, purchase or otherwise acquire directly or indirectly any
of Operating's or Realty's capital stock except acquisitions of
restricted stock pursuant to the terms of Operating's option plans;
(g) (i) grant any severance or termination pay to any director,
officer or employee, (ii) enter into any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee, (iii)
increase benefits payable under any existing severance or termination
pay policies or employment agreements or (iv) increase
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compensation, bonus or other benefits payable to directors, officers or
employees other than, in the case of clause (iv) only, increases in
compensation, bonus or other benefits payable to employees in the
ordinary course of business consistent with past practice or merit
increases in salaries of employees at regularly scheduled times in
customary amounts consistent with past practices;
(h) issue or enter into any executory agreement to issue any new
equity securities other than (A) Santa Anita Shares issued in
replacement of lost, stolen or transferred outstanding shares, (B)
Santa Anita Shares to be issued upon exercise of options or warrants
outstanding, (C) Santa Anita Shares to be issued upon exchange of Santa
Anita Preferred Shares, (D) Santa Anita Shares to be issued pursuant to
the Rights Agreement, or (E) as otherwise contemplated by this
Agreement;
(i) declare and pay any dividends or make other distributions to
holders of Realty Shares in excess of $.20 per Realty Share per quarter
or such additional dividends as are otherwise necessary for Realty to
satisfy the REIT Requirements, or repay indebtedness except for
scheduled repayments pursuant to the terms of such indebtedness;
(j) amend or terminate the Rights Agreement unless advised by outside
counsel that such amendment or termination could reasonably be required
by the fiduciary duties of its Board of Directors; or
(k) agree, or permit any subsidiary to agree, or commit to do any of
the foregoing.
6.1.4 Meditrust shall not, without the prior written consent of Realty
and Operating, which shall not be unreasonably withheld,
(a) issue any Meditrust Shares at a price materially less than
prevailing market prices, except for Meditrust Shares issued pursuant
to existing contractual obligations or pursuant to employee benefit
plans; and
(b) increase its quarterly dividends to holders of Meditrust Shares
by more than $.0075 per Meditrust Share per quarter or by such
additional amount as is otherwise necessary for Meditrust to satisfy
the REIT Requirements.
Section 6.2: Acquisition Proposals. (a) From the date of this Agreement until
the Closing Date, neither Realty nor Operating nor any of their respective
subsidiaries will, and each of Realty and Operating will use their best efforts
to cause their respective directors and any other persons acting, or purporting
to act, on their behalf (including, but not limited to, their officers,
employees, investment bankers, financial advisors, attorneys or accountants)
not to, initiate any contact with, solicit, encourage or enter into or continue
any discussions, negotiations, understandings or agreements with, anyone other
than Meditrust (a "Third Party") with respect to, or furnish or disclose any
non-public information regarding Realty, Operating or their subsidiaries, to
any Third Party in connection with, any Competing Transaction Proposal.
Notwithstanding the foregoing, to the extent the Realty Board and the Operating
Board could reasonably be required by their fiduciary duties as determined in
good faith on the written advice of outside counsel to Realty and Operating, to
take the following steps at any time prior to approval by the Realty
shareholders of the Realty Shareholder Matters and approval by the Operating
shareholders of the Operating Shareholder Matters, (i) Realty and Operating
may, in response to an unsolicited request, furnish non-public information with
respect to Realty and Operating or their subsidiaries to any Third Party
pursuant to a customary confidentiality and standstill agreement and discuss
that information (but not a Competing Transaction Proposal) with the Third
Party and (ii) upon receipt by Realty or Operating of a Competing Transaction
Proposal from a Third Party, if each of the Realty Board and the Operating
Board has reasonably determined that the transaction contemplated by the
Competing Transaction Proposal, if consummated, would constitute an Alternative
Transaction, then Realty and Operating may participate in discussions and
negotiations with the Third Party regarding the Competing Transaction Proposal.
(b) At least five business days prior to entering into definitive agreements
with respect to an Alternative Transaction, Realty and Operating will deliver
an Alternative Transaction Notice to Meditrust advising it of the determination
by the Realty Board and the Operating Board that the transaction contemplated
by the
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Competing Transaction Proposal would constitute an Alternative Transaction,
which notice will include a summary of the Alternative Transaction. During such
five business day period, Meditrust may propose an improved transaction to
Realty and Operating.
(c) If prior to the approval by the shareholders of Realty of the Realty
Shareholder Matters and approval by the shareholders of Operating of the
Operating Shareholder Matters (i) Realty and Operating have delivered an
Alternative Transaction Notice to Meditrust in accordance with Section 6.2(b),
(ii) the terms of the Alternative Transaction are not modified in a manner
adverse to Realty or Operating and (iii) Realty and Operating have paid the
Termination Fee to Meditrust and reimbursed Meditrust's Transaction Expenses,
then Realty and Operating may terminate this Agreement and enter into an
agreement with a Qualified Third Party with respect to the Alternative
Transaction described in the Alternative Transaction Notice that Realty and
Operating gave to Meditrust. A "Qualified Third Party" means a Third Party
which the Board of Directors of Realty and Operating reasonably determine has
the financial ability (including, to the extent external financing will be
required, binding commitments for that financing) to complete an Alternative
Transaction.
(d) Neither Realty nor Operating will modify, or release any third party
from, any confidentiality or standstill agreement to which either of them is a
party.
Section 6.3: Information Supplied. Each of the parties hereto agrees that
none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in any registration statement, proxy statement or
Schedule 14A, or any amendment or supplement thereto, will, in the case of a
registration statement, at the time such registration statement and each
amendment and supplement thereto becomes effective under the Securities Act,
or, in the case of a proxy statement or Schedule 14A, at the time such proxy
statement or Schedule 14A and each amendment and supplement thereto is filed
with the SEC or mailed to shareholders and at the time of the applicable
meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
Section 6.4: Shareholder Approvals; Registration Statement.
6.4.1 Registration Statement. Realty, Operating, Meditrust and MAC shall
prepare and file with the SEC the Registration Statement registering the
issuance of the Santa Anita Shares to Meditrust's and MAC's shareholders,
which shall include a joint proxy statement to solicit proxies in
connection with the meetings of the shareholders of each of Realty,
Operating, Meditrust and MAC referred to in Section 6.4.2 (the form of such
joint proxy statement, together with any amendments thereof or supplements
thereto, mailed to the shareholders of each of Realty, Operating, Meditrust
and MAC in connection with such meetings is referred to herein as the
"Proxy Statement").
6.4.2 Shareholder Meetings. Subject to the second succeeding sentence,
each of Realty, Operating, Meditrust and MAC agrees to take, in accordance
with applicable law and its Certificate of Incorporation and By-laws or
Charter, all action necessary to convene a meeting of its respective
shareholders, as promptly as practicable after the Proxy Statement is
cleared by the SEC, to consider and vote upon the approval of the
transactions contemplated hereby. Subject to the next succeeding sentence,
each of the Realty Board, the Operating Board, the Meditrust Board and the
Board of Trustees of MAC shall recommend such adoption and approval and
shall take all lawful action to solicit such approval by shareholders. Each
of the Realty Board or the Operating Board may fail to take action
necessary to convene a meeting of its shareholders or make such a
recommendation, or withdraw, modify, or change any such recommendation, or
recommend any other offer or proposal, only if Realty and Operating have
complied with Section 6.2(a) and an Alternative Transaction is pending at
the time the Realty Board and Operating Board make such determination;
provided that no such failure to convene a meeting or to recommend, or no
such withdrawal, modification or change of any such recommendation or
recommendation of any other offer or proposal shall be made unless (a)
Realty and Operating shall have delivered to Meditrust at least 48 hours
written notice advising Meditrust that the Boards of Realty and Operating
have received a proposal for an Alternative Transaction and identifying the
person or persons
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making such proposal and (b) such Board, based on the written opinion of
its outside counsel, has determined that convening such a meeting, making
such recommendation, or the failure to recommend any other offer or
proposal, or the failure to so withdraw, modify, or change its
recommendation, or the failure to recommend any other offer or proposal,
could reasonably be deemed to cause the members of such board to breach
their fiduciary duties under applicable law. In such event, notwithstanding
anything contained in this Agreement to the contrary, any such failure to
convene such a meeting, failure to recommend, withdrawal, modification, or
change of recommendation or recommendation of such other offer or proposal,
or the entering by Realty and Operating into an agreement with respect to
an Alternative Transaction in accordance with Section 6.2, shall not
constitute a breach of this Agreement by Realty and Operating. Neither
Meditrust nor MAC shall be required to convene its shareholder meeting if
Realty and Operating do not convene their respective shareholder meetings
as described in this Section 6.4.2.
Section 6.5: Other Actions.
6.5.1 Each party hereto shall cooperate with the other parties hereto,
subject to the terms and conditions set forth herein, use its reasonable
best efforts promptly to prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to obtain as promptly as practicable all necessary permits,
consents, orders, approvals and authorizations of, or any exemption by, all
third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated hereby. Each party shall have the
right to review in advance, and each will use its best efforts to consult
with the other, in each case, subject to applicable laws relating to the
exchange of information, with respect to all the information relating to
the other parties which appear in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated hereby. In exercising the
foregoing rights, each of the parties hereto shall act reasonably and as
promptly as practicable. Each party hereto shall consult with the other
parties hereto with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated hereby
and each party shall keep the other parties hereto apprised of the status
of matters relating to completion of the transactions contemplated hereby.
6.5.2 Each party hereto shall, upon request and except as otherwise may
be required by applicable law, furnish the other parties hereto with all
information concerning itself, its subsidiaries, directors, trustees,
officers and shareholders and other Affiliates and such other matters as
may be reasonably necessary or advisable in connection any statement,
filing, notice or application made by or on behalf of such other party or
any of its Affiliates to any Governmental Entity in connection with any
transactions contemplated by this Agreement.
6.5.3 Each party hereto shall, subject to applicable laws relating to the
exchange of information, promptly furnish the other parties hereto with
copies of written communications received by each such party, or any of its
subsidiaries, associates or other Affiliates, from, or delivered by any of
the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
6.5.4 Each party hereto shall cooperate with each other party hereto and
promptly take or cause to be taken all actions and do or cause to be done
all things necessary, proper or advisable to obtain favorable review of the
proposed transaction under the HSR Act, which efforts shall include,
without limitation, except as otherwise may be required by applicable law,
obtaining mutual agreement concerning agency appearances and submissions
and allowing each party or its attorneys to (i) interview the other party's
employees, (ii) review the other party's documents and data, (iii) assist
in all preparation for any agency interviews, depositions or voluntary
agency appearances and attend such appearances to the extent permitted by
agency rules and (iv) review and approve in advance of submission any
written materials to be submitted to the agency. Each of the parties hereto
shall use reasonable best efforts to resolve any objections that may be
asserted with respect to the Reorganization by the Department of Justice,
the Federal Trade Commission, any State Attorney General or any other
Governmental Entity (including, without limitation, objections under any
antitrust laws). In the event a suit is threatened or instituted
challenging the Reorganization as violative of any antitrust laws, each
party shall use reasonable efforts to
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avoid the filing of, resist or resolve such suit. The parties hereto shall
use reasonable efforts to take such action as may be required: (i) by the
Department of Justice, the Federal Trade Commission, any State Attorney
General or any other Governmental Entity in order to resolve such
objections as any of them may have to the Reorganization, 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 Reorganization as
violative of any antitrust laws, in order to avoid the entry of, or to
cause the withdrawal or voiding of, any injunction, temporary restraining
order or other order which has the effect of preventing the consummation of
the transactions contemplated hereby.
Section 6.6: Access.
(a) Upon reasonable notice, and except as may otherwise be required by
applicable law or contractual requirements, each party hereto shall afford each
other party's Representatives full access, during normal business hours
throughout the period until the Effective Time, to its properties, books,
Contracts, records, employees, contract employees and accountants and, during
such period, shall (and shall cause each of its subsidiaries to) furnish
promptly to the other party all information concerning its business, properties
and personnel as may reasonably be requested, provided that no investigation
pursuant to this Section 6.6 shall be deemed to modify any representation or
warranty made by the party furnishing such information. Each party hereto shall
not, and shall cause its respective Representatives not to, use any information
obtained pursuant to this Section for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, pending consummation of the transactions herein contemplated, each
party conducting an investigation hereunder (the "Examining Party") shall keep
confidential, and shall cause its Representatives to keep confidential, all
information and documents obtained from the other party (the "Examined Party")
pursuant to this Section or during the investigation leading up to the
execution of this Agreement unless such information (i) was already known to
the Examining Party (unless subject to a separate confidentiality agreement
with the Examined Party), (ii) becomes available to the Examining Party from
other sources not known by the Examining Party to be bound by a confidentiality
obligation to the Examined Party, (iii) is independently acquired by the
Examining Party as a result of work carried out by any employee or
representative of the Examining Party to whom no disclosure of such information
has been made, (iv) is disclosed with the prior written approval of the
Examined Party or (v) is or becomes readily ascertainable from published
information or trade sources. Upon any termination of this Agreement, each
party shall (i) collect and deliver to the other party all nonpublic documents
obtained by it or any of its Representatives from the other party and then in
their possession and any copies thereof and (ii) destroy or cause to be
destroyed all notes, memoranda or other documents in the possession of it or
any of its Representatives containing or reflecting any nonpublic information
obtained from the other party.
(b) Each of Realty and Operating agrees that it will notify Meditrust in
advance of any material communications made to or received from the SEC, the
IRS, the California Horse Racing Board and any other regulatory authority
having jurisdiction over Realty or Operating and, to the extent reasonably
practicable, will solicit Meditrust's comments regarding such communications
and any written materials submitted to any such authority.
(c) Each of Realty and Operating agrees to make available to Meditrust
promptly upon the written request of Meditrust, and in no event later than the
time prescribed by applicable statute, all information and materials to which
Meditrust would be entitled under Section 220 of the DGCL if Meditrust were a
shareholder of Realty and Operating at the time of such request. Each of Realty
and Operating further agrees to treat Meditrust as a shareholder of such
company and to afford to Meditrust all rights to which Meditrust would be
entitled a shareholder under Rules 14a-7 and 14d-5 under the Exchange Act (it
being understood that such right may not be satisfied by Realty or Operating
electing to mail materials to its shareholders).
Section 6.7: Notification of Certain Matters.
(a) Each party shall give prompt notice to the other party of any change that
is reasonably likely to result in any Material Adverse Effect.
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(b) Each of Realty and Operating shall promptly (and in any event within 48
hours) notify Meditrust and provide copies of (i) any request made by any
shareholder pursuant to Section 220 of the DGCL or Rules 14d-5 or 14a-7 under
the Exchange Act and (ii) any amendments filed by any person holding in excess
of 5% of the Santa Anita Shares to their statements on Schedule 13D.
(c) Each party shall give prompt notice to the other parties of (i) any
notice or communication from any Person alleging that the consent of such
person is or may be required in connection with the consummation of the
transactions contemplated by this Agreement and (ii) any actions, suits,
proceedings, court orders or decrees commenced or, to its knowledge, threatened
against it or any of its subsidiaries which, if pending on the date of this
Agreement, would be required to be disclosed pursuant to Section 5.1.5, 5.2.4
or 5.3.5, as applicable.
Section 6.8: Publicity. The initial press release relating hereto shall be a
joint press release and, thereafter, each party hereto shall consult with each
other party hereto prior to issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and
prior to making any filings with any Governmental Entity or stock exchange with
respect thereto.
Section 6.9: Indemnification of Directors and Officers. From and after the
Closing Date, each of Realty Surviving Corporation and Operating Surviving
Corporation shall indemnify, defend and hold harmless the respective present
officers, directors and employees of Realty and Operating and any of their
respective subsidiaries against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring on or prior to the
Closing Date (including, without limitation, the transactions contemplated by
this Agreement) to the full extent permitted or required under applicable law
(and shall also advance expenses as incurred to the fullest extent permitted
under applicable law, provided that, to the extent required by applicable law,
the person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification). Each of Realty and Operating agrees that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the present directors,
officers and employees of Realty and Operating or any of their respective
subsidiaries (collectively, the "Indemnified Parties") as provided in the
Realty Certificate or Realty By-laws and the Operating Certificate or Operating
By-laws or pursuant to other agreements, as in effect as of the date hereof,
shall survive the Closing and shall continue in full force and effect. Each of
Realty Surviving Corporation and Operating Surviving Corporation shall maintain
in effect for not less than six years the current policies (or comparable
policies) of directors' and officers' liability insurance maintained by Realty
and Operating with respect to matters occurring prior to the Closing Date;
provided however, that if the aggregate annual premiums for such insurance
during such six year period shall exceed 200% of the per annum rate of the
aggregate premium currently paid by Operating and Realty and any of their
respective subsidiaries for such insurance on the date of this Agreement, then
Meditrust shall cause each of Realty Surviving Corporation and Operating
Surviving Corporation to, and each of Realty Surviving Corporation and
Operating Surviving Corporation shall, provide the most advantageous coverage
that shall then be available at an annual premium equal to 200% of such rate.
This Section 6.9 is intended to benefit the Indemnified Parties.
Section 6.10: Colony Termination Fee. Realty and Operating have paid to
Colony $4,500,000 as a termination fee and transaction expenses pursuant to the
Amended and Restated Formation Agreement, dated as of October 24, 1996, as
amended as of January 7, 1997. If either Meditrust or MAC fail to call their
respective shareholders meetings or the shareholders fail to approve the
Meditrust Shareholder Matters or the MAC Shareholder Matters at their
respective shareholder meetings, and the Realty Shareholder Matters and the
Operating Shareholder Matters are approved and all other conditions to
Meditrust's consummation of the Reorganization have been satisfied, Meditrust
shall pay to Realty and Operating $4,000,000 in the aggregate; provided,
however, that if Realty determines, in its sole and absolute discretion, that
its portion of such amount will affect its qualification as a REIT, then the
parties will negotiate in good faith an arrangement acceptable to Realty. In no
event shall such payment be less than the lower of (a) the maximum amount which
Realty may receive without affecting its qualification as a REIT and (b) the
amount to be paid pursuant to this Section 6.10 without regard to this
sentence.
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ARTICLE VII
CONDITIONS
Section 7.1: Conditions to Each Party's Obligation. The respective obligation
of each party hereto to consummate the Mergers is subject to the fulfillment of
each of the following conditions:
7.1.1 Shareholder Approval. The Meditrust Shareholder Matters shall have
been duly approved by the shareholders of Meditrust, the MAC Shareholder
Matters shall have been duly approved by the shareholders of MAC, the
Realty Shareholder Matters shall have been duly approved by the
shareholders of Realty and the Operating Shareholder Matters shall have
been duly approved by the shareholders of Operating in accordance with
Massachusetts law (in the case of Meditrust and MAC), the DGCL, other
applicable law and the Certificates of Incorporation and By-laws or Charter
of each of them.
7.1.2 Governmental and Regulatory Consents. The waiting periods
applicable to the consummation of the transactions contemplated hereby
under the HSR Act shall have expired or been terminated and all filings
required to be made prior to the Closing by any party hereto or any of its
respective subsidiaries with, and all consents, approvals and
authorizations required to be obtained prior to the Closing by any party
hereto or any of its respective subsidiaries from, any Governmental Entity
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been made
or obtained, except where the failure to obtain such consents is not
reasonably likely to have a Material Adverse Effect on the Surviving
Corporations and could not reasonably be expected to subject the parties
hereto or their Affiliates or any directors, trustees or officers of any of
the foregoing to the risk of criminal liability.
7.1.3 Third-Party Consents. All consents or approvals of all persons
(other than Governmental Entities) required for or in connection with or as
a result of the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby shall have been
obtained and shall be in full force and effect, except for those the
failure of which to obtain would not have a Material Adverse Effect.
7.1.4 Litigation. No United States or state court or other Governmental
Entity of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is in effect and prohibits consummation of the transactions
contemplated hereby.
7.1.5 Opinions.
(a) Meditrust, Realty and Operating shall have received an opinion
from O'Melveny & Myers LLP, dated the Effective Time, and reasonably
satisfactory to Meditrust, Realty and Operating, to the effect that (i)
for the calendar year 1996, Realty met the requirements of the Code for
qualification as a REIT, and if Realty continues its operations in the
same manner as it has in such year, Realty will continue to so qualify;
and (ii) (A) the consummation by Realty and Operating of the
transaction contemplated by this Agreement will not adversely affect
the qualification of Realty as a REIT or (B) its ability to retain its
status as grandfathered from the application of Section 269B(a) (3) of
the Code pursuant to Section 136(c) (3) of the Deficit Reduction Act of
1984. Nutter, McClennen & Fish, LLP may rely upon the opinion in clause
(ii)(B) in giving its opinion referred to in clause (b) below.
(b) Meditrust, Realty and Operating shall have received an opinion of
Nutter, McClennen & Fish, LLP, dated the Effective Time, and reasonably
satisfactory to Meditrust, Realty and Operating, to the effect that (i)
immediately prior to the Effective Time, Meditrust was qualified as a
REIT and (ii) the consummation by Realty and Operating of the
transaction contemplated by this Agreement will not adversely affect
the qualification of Realty as a REIT or its ability to retain its
status as grandfathered from the application of Section 269B(a)(3) of
the Code pursuant to Section 136(c)(3) of the Deficit Reduction Act of
1984.
(c) Meditrust shall have received an opinion from Nutter, McClennen &
Fish, LLP, dated the Effective Time, and reasonably satisfactory to
Meditrust, to the effect that the merger of Meditrust with and into
Realty shall qualify as a "reorganization" under Section 368(a) of the
Code, and the
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merger of MAC with and into Operating shall qualify as a
"reorganization" under Section 368(a) of the Code, or, alternatively,
under Section 351 of the Code.
7.1.6 Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
Section 7.2: Conditions to Obligation of Meditrust. The obligation of
Meditrust to consummate the Reorganization is also subject to the fulfillment
or waiver by Meditrust prior to the Closing of each of the following
conditions:
7.2.1 Representations and Warranties. The representations and warranties
of each of Realty and Operating set forth in this Agreement qualified by
materiality shall be true and correct and those not so qualified shall be
true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date
(except that representations and warranties that by their terms speak as of
the date of this Agreement or some other date shall be true and correct as
of such date), and Meditrust shall have received certificates signed on
behalf of each of Realty and Operating by an officer to such effect.
7.2.2 Performance of Obligations. Realty and Operating shall have
complied with all covenants in all material respects and performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Meditrust shall have
received a certificate signed on behalf of each of the Companies by an
officer to such effect.
7.2.3 No Material Adverse Effect. Between the date hereof and the Closing
Date, there shall have been no Material Adverse Effect on Realty or
Operating; and there shall have been delivered to Meditrust a certificate
with respect to Realty and a certificate with respect to Operating, each to
such effect, dated the Closing Date, signed on behalf of Realty and
Operating; provided that no Material Adverse Effect on Realty or Operating
shall be deemed to occur solely as a result of actions taken or not taken
in accordance with the provisions of Section 6.1.
7.2.4 Rights. The Rights under the Rights Agreement shall not have become
exercisable.
7.2.5 Resignation of Directors. Meditrust shall have received the
resignations of all directors of Realty and Operating, except those
directors designated by Meditrust pursuant to Section 3.1 and Section 3.2
hereof.
7.2.6 The Exchange Approval. The Santa Anita Shares to be issued in the
Mergers shall have been approved for listing on the Exchange upon official
notice of issuance.
Section 7.3: Conditions to Obligation of Realty and Operating. The obligation
of Realty and Operating to consummate the Reorganization is also subject to the
fulfillment or waiver by Realty and Operating prior to the Closing Date of each
of the following conditions:
7.3.1 Representations and Warranties. The representations and warranties
of Meditrust set forth in this Agreement qualified by materiality shall be
true and correct and those not so qualified shall be true and correct in
all material respects as of the date of this Agreement (except to the
extent such representations or warranties relate to MAC, in which case as
of June 19, 1997) and as of the Closing Date as though made on and as of
the Closing Date (except that representations and warranties that by their
terms speak as of the date of this Agreement or some other date shall be
true and correct as of such date) and Realty and Operating shall have
received certificates signed on behalf of Meditrust by an officer to such
effect.
7.3.2 Performance of Obligations. Each of Meditrust and MAC shall have
complied with all covenants in all material respects (it being understood
that MAC's obligation to comply shall have commenced on June 19, 1997) and
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Realty and
Operating shall have received certificates signed on behalf of each of
Meditrust and MAC by an officer to such effect.
7.3.3 No Material Adverse Effect. Between the date hereof and the Closing
Date, there shall have been no Material Adverse Effect on Meditrust; and
there shall have been delivered to Realty and Operating a certificate with
respect to Meditrust to such effect, dated the Closing Date, signed on
behalf of Meditrust.
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ARTICLE VIII
TERMINATION
Section 8.1: Termination by Mutual Consent. This Agreement may be terminated,
and the Reorganization may be abandoned, at any time prior to the Effective
Time, before or after the approval by the shareholders of Meditrust, MAC,
Operating and/or Realty, by the mutual consent of each party hereto, by action
of its Board.
Section 8.2: Termination by any Party Hereto. This Agreement may be
terminated, and the Reorganization may be abandoned before or after the
approval by the shareholders of Meditrust, MAC, Operating and/or Realty, by
action of the Board of any party hereto, if (i) the Reorganization shall not
have been consummated by April 13, 1998 or (ii) if Meditrust, Realty, Operating
or MAC convene the shareholders meeting contemplated by Section 6.4 and
Meditrust's, Realty's, Operating's or MAC's shareholders fail to approve the
Meditrust Shareholder Matters, Realty Shareholder Matters, Operating
Shareholder Matters or MAC Shareholder Matters, as the case may be, at their
respective shareholders meetings or (iii) Realty and Operating enter into an
Alternative Transaction pursuant to Section 6.2, provided that, (A) in the case
of a termination pursuant to clause (i) above, the terminating party shall not
have breached in any material respect its obligations under this Agreement in
any manner that shall have caused or resulted in the failure referred to above
and (B) Realty and Operating shall not have the right to terminate pursuant to
clause (iii) unless they have complied with their obligations under Section
6.2(a), Section 6.2(b) and Section 6.2(c) and paid the Termination Fee and
expenses pursuant to Section 8.6.
Section 8.3: Termination by Meditrust. This Agreement may be terminated and
the Reorganization may be abandoned at any time prior to the Effective Time,
before or after the adoption and approval by shareholders of Meditrust referred
to in Section 6.4, by action of the Meditrust Board, if (i) either Realty or
Operating shall have failed to comply in any material respect with any of the
covenants or agreements contained herein to be performed by such Company at or
prior to the time of termination; or (ii) either of the Realty Board or the
Operating Board shall have failed to recommend to its shareholders the approval
of the transactions contemplated hereby or shall have withdrawn, modified or
changed in a manner adverse to Meditrust its approval or recommendation of this
Agreement.
Section 8.4: Termination by Either of Realty or Operating. This Agreement may
be terminated and the Reorganization may be abandoned at any time prior to the
Effective Time, before or after the adoption and approval by shareholders of
Realty or Operating referred to in Section 6.4, by action of either the Realty
Board or the Operating Board, if (i) Meditrust shall have failed to comply in
any material respect with any of the covenants or agreements contained herein
to be performed by it at or prior to the time of termination; or (ii) the Board
of Trustees of Meditrust or MAC shall have failed to recommend to their
respective shareholders the approval of the transactions contemplated hereby,
or shall have withdrawn, modified or changed in a manner adverse to Realty or
Operating its approval or recommendation of this Agreement.
Section 8.5: Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Reorganization
pursuant to this Article VIII, other than as set forth in Section 8.6 and the
following sentence, no party hereto (or any of its directors or officers) shall
have any liability or further obligation to any other party, except that
nothing herein will relieve any party from liability for any material and
willful breach of any covenant contained herein, and except that the provisions
of Sections 6.6 (excluding the first sentence thereof), 6.10, 8.6 and this
Section 8.5 shall survive such termination. If Realty or Operating merges with,
or sells or otherwise transfers directly or indirectly more than 25% of its
assets to a Third Party, or any Third Party (individually or as part of a
group), acquires directly or indirectly beneficial ownership of more than 30%
of the Santa Anita Shares, or Realty or Operating enter into an agreement
providing for any of the foregoing, in each case within one year after the
earlier of (i) the date of the meeting of shareholders of Realty and Operating
convened to consider the Realty Shareholder Matters and the Operating
Shareholder Matters and (ii) the termination of this Agreement (other than
pursuant to Section 6.2(c)), Realty and Operating shall pay Meditrust the sum
of $12 million in the aggregate, less the amount of the Termination Fee, if
paid.
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<PAGE>
Section 8.6: Payment of Expenses and Termination Fee. Each party shall bear
its own expenses in connection with the matters contemplated by this Agreement,
except that Realty and Operating shall pay (a) the Termination Fee and
Transaction Expenses to Meditrust under the circumstances set forth in Section
6.2; (b) the Transaction Expenses to Meditrust if the Realty Shareholder
Matters or the Operating Shareholder Matters are not approved as contemplated
in Section 6.4; and (c) the amount set forth in Section 8.5 if the conditions
set forth therein are satisfied. Meditrust shall pay the amount set forth in
Section 6.10 if the conditions set forth therein are satisfied.
ARTICLE IX
MISCELLANEOUS AND GENERAL
Section 9.1: Survival. Only those agreements and covenants of the parties
which by their express terms apply in whole or in part after the Effective Time
shall survive the Effective Time. All other representations, warranties,
agreements and covenants, shall be deemed only to be conditions of the
Reorganization and shall not survive the Effective Time.
Section 9.2: Modification or Amendment. Subject to the applicable provisions
of the DGCL, at any time prior to the Effective Time, before or after the
adoption and approval by shareholders of any party referred to in Section 6.4,
the parties hereto may modify or amend this Agreement, by written agreement
executed and delivered by duly authorized officers of the respective parties.
Section 9.3: Waiver of Conditions. The conditions to each party's obligation
to consummate the Reorganization are for the sole benefit of such party and may
be waived by such party in whole or in part to the extent permitted by
applicable law.
Section 9.4: Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
Section 9.5: Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
made and performed in such state.
Section 9.6: Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the other shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered
personally, or by telecopy or facsimile, upon confirmation of receipt, (ii) on
the first business day following the date of dispatch if delivered by Federal
Express or other next-day courier service, or (iii) on the third business day
following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice.
If to Meditrust or MAC, addressed to: with a copy to:
Meditrust Nutter, McClennen & Fish,
197 First Avenue LLP
Needham, Massachusetts 02194 One International Place
Attention: President Boston, Massachusetts
Fax No.: (617) 433-1290 02110-2699
Attention: Michael J.
Bohnen, Esq.
Fax No.: (617) 973-9748
If to Realty, addressed to: with a copy to:
Santa Anita Realty Enterprises, Inc. O'Melveny & Myers LLP
301 West Huntington Drive, Suite 405 400 South Hope Street
Arcadia, California 91007 Los Angeles, California
Attention: Mr. Brian L. Fleming 90071
Fax No.: (818) 574-0634 Attention: Frederick B.
McLane, Esq.
Fax No.: (213) 669-6407
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<PAGE>
If to Operating, addressed to: with a copy to:
Santa Anita Operating Company O'Melveny & Myers LLP
285 West Huntington Drive 400 South Hope Street
Arcadia, California 91007 Los Angeles, California
Attention: Mr. William C. Baker 90071
Fax No.: (818) 574-6687 Attention: Frederick B.
McLane, Esq.
Fax No.: (213) 669-6407
Section 9.7: Entire Agreement, Etc. This Agreement (and the Exhibits and
Disclosure Schedules hereto) (a) constitute the entire agreement, and supersede
all other prior agreements, understandings, representations and warranties,
both written and oral, among the parties, with respect to the subject matter
hereof including, without limitation, the Agreement and Plan of Merger dated as
of April 13, 1997, the Original Merger Agreement and the Second Restated Merger
Agreement, and (b) shall not be assignable by operation of law or otherwise.
Section 9.8: Captions. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Section 9.9: Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination, the parties shall negotiate in
good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
Section 9.10: No Third-Party Beneficiaries. Nothing contained in this
Agreement, except as provided in Section 6.9 hereof, expressed or implied, is
intended to confer upon any person or entity other than the parties hereto, any
benefit, right or remedies.
Section 9.11: Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any of the provisions of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
Section 9.12: Trusts. The Declaration of Trust establishing Meditrust, dated
August 6, 1985, a copy of which, together with all amendments thereto (the
"Declaration"), is duly filed in the office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name "Meditrust" refers to the
trustees under the Declaration collectively as trustees, but not individually
or personally. No trustee, officer, director, shareholder, employee or agent of
Meditrust or its subsidiaries shall be held to any personal liability, jointly
or severally, for any obligation of, or claim against Meditrust or any of its
subsidiaries. All persons dealing with Meditrust, in any way, shall look only
to Meditrust's assets for recovery of any judgment or suit or the performance
of any obligation.
The Declaration of Trust establishing MAC, dated June 2, 1997, a copy of
which, together with all amendments thereto (the "MAC Declaration"), is duly
filed in the office of the Secretary of State of the Commonwealth of
Massachusetts, provides that the name "Meditrust Acquisition Company" refers to
the trustees under the MAC Declaration collectively as trustees, but not
individually or personally. No trustee, officer, director, shareholder,
employee or agent of MAC or its subsidiaries shall be held to any personal
liability, jointly or severally, for any obligation of, or claim against MAC or
any of its subsidiaries. All persons dealing with MAC, in any way, shall look
only to MAC's assets for recovery of any judgment or suit or the performance of
any obligation.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto on the date first
hereinabove written.
Santa Anita Realty Enterprises, Inc.
/s/ Brian L. Fleming
By __________________________________
Executive Vice President
Santa Anita Operating Company
/s/ William C. Baker
By __________________________________
Chief Executive Officer
Meditrust
/s/ David F. Benson
By __________________________________
President
Meditrust Acquisition Company
/s/ David F. Benson
By __________________________________
President
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<PAGE>
ANNEX A TO THIRD
AMENDED AND
RESTATED
AGREEMENT AND
PLAN OF MERGER
DEFINED TERMS
Acquired Shares: as defined in Section 1.6.1.
Affiliate: as defined in Rule 12b-2 under the Exchange Act.
Agreement: as defined in the Preamble.
Alternative Transaction: a transaction that is the subject of a Competing
Transaction Proposal with a Third Party that the Realty Board and the Operating
Board in good faith on the advice of a nationally recognized financial advisor
determine could provide greater value to their shareholders than the
transactions contemplated here.
Alternative Transaction Notice: a notice of the determination of the Realty
Board and the Operating Board that the transaction contemplated by a Competing
Transaction Proposal would be an Alternative Transaction, which notice contains
the information described in 6.2(b).
Benefit Plan: as defined in Section 5.1.17.
Board: the Meditrust Board, the Operating Board or the Realty Board.
Closing: as defined in Section 1.5.
Closing Date: as defined in Section 1.5.
Code: the Internal Revenue Code of 1986, as amended.
Commonly Controlled Entity: any person or entity that, together with another
person or entity, is treated as a single employer under Section 414 of the
Code.
Competing Transaction Proposal: a bona fide proposal from a Third Party
relating to any recapitalization, business combination, asset sale, joint
venture or other transaction which would be inconsistent with the transactions
which are the subject of this Agreement.
Contract: any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation or commitment.
DGCL: the Delaware General Corporation Law as in effect at the relevant times
for purposes of this Agreement.
Disclosure Schedules: the Operating Disclosure Schedule, the Realty
Disclosure Schedule and the Meditrust Disclosure Schedule.
Effective Time: as defined in Section 1.4.
Employee Stock Options: as defined in Section 4.5.10.
ERISA: as defined in Section 5.1.17.
Examined Party: as defined in Section 6.6.
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<PAGE>
Examining Party: as defined in Section 6.6.
Excess Shares: as defined in Section 4.5.4.
Exchange: the New York Stock Exchange, Inc.
Exchange Act: the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
Exchange Agent: as defined in Section 4.5.2.
Exchange Ratio: as defined in Section 4.3.
GAAP: generally accepted accounting principles consistently applied.
Governmental Entity: any governmental or regulatory authority, agency, court,
commission or other entity.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Indemnified Parties: as defined in Section 6.9.
IRS: the United States Internal Revenue Service.
Material Adverse Effect: with respect to any party, an effect which would be
materially adverse to the properties, business, financial condition, results of
operations or prospects of such party and its subsidiaries taken as a whole.
Mergers: as defined in Recital F.
MAC: as defined in the Preamble.
MAC Amount: an amount equal to .019 multiplied by the product of $37.25 times
the number of shares outstanding immediately prior to the payment of cash to
MAC by Meditrust pursuant to Section 1.1.1.
MAC Charter: as defined in Section 5.1.4.
MAC Shareholder Matters: adoption of this Agreement.
MAC Shares: the shares of beneficial interest without par value of MAC issued
to Meditrust and distributed to Meditrust's shareholders prior to the Mergers
equal in amount to the number of Meditrust Shares outstanding immediately prior
to the Mergers.
Meditrust: as defined in the Preamble.
Meditrust Board: the Board of Trustees of Meditrust.
Meditrust Charter: as defined in Section 5.1.1.
Meditrust Disclosure Schedule: the disclosure schedule dated the date of the
Agreement delivered by Meditrust to the other parties and relating to this
Agreement.
Meditrust Options: as defined in Section 5.1.3.
Meditrust SEC Documents: all filings made by Meditrust with the SEC since
December 31, 1994.
Meditrust Shares: the shares of beneficial interest without par value of
Meditrust.
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<PAGE>
Meditrust Shareholder Matters: the adoption of this Agreement.
Note Amount: an amount equal to the number of Operating Shares outstanding as
of the date the promissory note referred to in Section 1.2 is issued,
multiplied by the excess of (i) $31.00 multiplied by a fraction equal to the
relative value of (x) an Operating Share to (y) a paired Realty Share and
Operating Share as determined by Morgan Stanley & Co. Incorporated as of April
13, 1997; over (ii) the product of .019 multiplied by $31.00.
Old Meditrust Certificate: a certificate for Meditrust Shares.
Operating: as defined in the Preamble.
Operating Board: the Board of Directors of Operating.
Operating By-Laws: as defined in Section 5.3.1.
Operating Certificate: as defined in Section 5.3.1.
Operating Common Shares: as defined in Section 5.3.3.
Operating Disclosure Schedule: the disclosure schedule dated the date of the
Agreement delivered by Operating to Meditrust and relating to this Agreement.
Operating Merger: as defined in Recital E.
Operating Merger Certificate: as defined in Section 1.4.
Operating Options: as defined in Section 5.3.3.
Operating Preferred Shares: as defined in Section 5.3.3.
Operating Shareholder Matters: the adoption of this Agreement.
Operating Shares: as defined in Section 5.3.3.
Operating Surviving Corporation: as defined in Section 1.3.2.
Pairing Agreement: as defined in Section 5.2.3(c).
Pension Plan: as defined in Section 5.1.17.
Person: an individual, joint venture, partnership, limited liability company,
trust, business trust, corporation, cooperative, association, private
foundation, charitable trust, employee pension, profit sharing, stock bonus or
supplemental unemployment benefit trust, or any other entity.
Private Letter Rulings: as defined in Section 5.2.16(b).
Proxy Statements: as defined in Section 6.4.1.
Realty: as defined in the Preamble.
Realty Board: the Board of Directors of Realty.
Realty By-Laws: as defined in Section 5.2.1.
Realty Certificate: as defined in Section 5.2.1.
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<PAGE>
Realty Common Shares: as defined in Section 5.2.3.
Realty Disclosure Schedule: the disclosure schedule dated the date of this
Agreement delivered by Realty to Meditrust and relating to this Agreement.
Realty Merger: as defined in Recital E.
Realty Merger Certificate: as defined in Section 1.4.
Realty Options: as defined in Section 5.2.2.
Realty Preferred Shares: as defined in Section 5.2.2.
Realty Shareholder Matters: the adoption of this Agreement.
Realty Shares: as defined in Section 5.2.2.
Realty Surviving Corporation: as defined in Section 1.3.1.
Registration Statement: the registration statement on Form S-4 to be filed by
Realty and Operating with the SEC in connection with the Reorganization with
respect to the Santa Anita Shares to be issued to Meditrust's shareholders.
Reorganization: the Mergers and other transactions contemplated hereby.
REIT: a real estate investment trust, as defined in Section 856 of the Code.
REIT Requirements: the requirements for Realty or Meditrust, as applicable,
to (i) qualify as a REIT under the Code, (ii) to avoid any federal income or
excise tax liability, (iii) as to Realty only, retain its status as
grandfathered from the application of Section 269B(a)(3) of the Code pursuant
to Section 136(c)(3) of the Deficit Reduction Act of 1984, (iv) as to Realty
only, retain the benefits of the Private Letter Rulings, and (v) otherwise
maintain the current federal income tax treatment of the pairing arrangement
for the Santa Anita Shares.
Representatives: with respect to any party, such party's officers, employees,
counsel, accountants and other authorized representatives.
Rights: the rights of the shareholders of Realty and Operating under the
Rights Agreement.
Rights Agreement: the Rights Agreement, dated as of June 15, 1989, among
Realty, Operating and Union Bank, as Rights Agent.
Santa Anita SEC Documents: all filings made by Realty or Operating with the
SEC since December 31, 1994, including the Annual Report on Form 10-K for the
year ended December 31, 1996, in the form attached to the Realty and Operating
Disclosure Schedules.
Santa Anita Shares: paired common stock, $.10 par value per share, of Realty
and Operating.
Santa Anita Share Certificates: as defined in Section 4.5.2.
SEC: the Securities and Exchange Commission.
Securities Act: the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
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<PAGE>
subsidiary: any corporation or other organization whether incorporated or
unincorporated of which at least 25% of the securities or interests having by
the terms thereof or any agreement ordinary voting power to elect the board of
directors or others performing similar functions with respect to such
corporation or other organization that 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.
Surviving Corporations: the Realty Surviving Corporation and the Operating
Surviving Corporation, each as "Surviving Corporation".
Termination Fee: $12,000,000, provided, however, that if Meditrust
determines, in its sole and absolute discretion, that such amount will affect
its qualification as a REIT, then the parties will reasonably negotiate an
arrangement acceptable to Meditrust. In no event shall such payment be less
than the lower of (a) the maximum amount which Meditrust may receive without
affecting its qualification as a REIT and (b) the amount to be paid without
regard to this sentence.
Third Party: as defined in Section 6.2.
Transaction Expenses: fees and disbursements of Meditrust's counsel,
accountants and other financial, legal, accounting or other advisors incurred
by it in connection with the preparation and negotiation of the Agreement and
the consummation of the matters contemplated hereby in an amount no greater
than $1,000,000.
Unaffiliated Acquired Shares: as defined in Section 1.7.
Unaffiliated Person: a Person whose ownership of Unaffiliated Acquired Shares
will not cause (i) any Person to own, directly or indirectly, after application
of the attribution rules of Section 318(a) of the Code, as modified by Section
856(d) (5) of the Code, more than 9.9% in value of the common stock and
preferred stock of Realty and Operating, or (ii) Realty to fail to satisfy any
of the REIT Requirements.
Welfare Plans: as defined in Section 5.1.17.
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<PAGE>
ANNEX B
TO THIRD AMENDED
AND RESTATED
AGREEMENT AND
PLAN OF
MERGER
CERTIFICATE
REGARDING CERTAIN SHARE OWNERSHIP MATTERS
In connection with the issuance to Meditrust Acquisition Company
("Purchaser") by the Company of its common stock constituting [ %] of the total
outstanding common stock of the Company, Purchaser hereby certifies and
warrants that for the period beginning April 13, 1997 through the Effective
Time:
1. No Person Constructively Owns, directly or indirectly, more than 9.9%
in value of the stock of Purchaser.
2. No corporation (as defined for federal or state income tax purposes)
of which Purchaser Constructively Owns, directly or indirectly, more than
9.9% in value of the stock of such corporation, Constructively Owns any
shares of the Company (excluding for this purpose any Paired Shares owned,
directly or indirectly, by Purchaser without regard to the Constructive
Ownership Rules).
3. No partnership (as defined for federal or state income tax purposes)
of which Purchaser is a partner or other equity member Constructively Owns
any shares of the Company (excluding for this purpose any Paired Shares
owned, directly or indirectly, by Purchaser without regard to the
Constructive Ownership Rules).
4. No trust (as defined for federal or state income tax purposes) of
which Purchaser is a beneficiary Constructively Owns any shares of the
Company (excluding for this purpose any Paired Shares owned, directly or
indirectly, by Purchaser without regard to the Constructive Ownership
Rules).
5. Purchaser Constructively Owns, directly or indirectly, no more than
9.9% by value of the stock of the Company (including for this purpose any
Paired Shares issued pursuant to the Merger Agreement).
6. The issuance of Paired Shares to Purchaser pursuant to Section 1.6 of
the Merger Agreement will not cause Purchaser or any other Person to
Constructively Own more than 9.9% by value of the stock of the Company or
cause any rent received by the Company to fail to qualify as "rents from
real property" within the meaning of Section 856(d)(2)(B) of the Code or
cause the Company to be "closely held" within the meaning of Section 856(h)
of the Code.
7. Purchaser is acquiring Paired Shares for investment purposes only, and
not with a view to their resale or other distribution.
8. Purchaser is an "accredited investor" within the meaning of Regulation
D under the Securities Act of 1933.
9. Purchaser will not transfer all or any portion of the Paired Shares to
any Person if the ownership of such shares by such Person will cause any
Person to Constructively Own, directly or indirectly, more than 9.9% by
value of the stock of the Company (including for this purpose any Paired
Shares issued pursuant to the Merger Agreement) or cause the Company to be
"closely held" within the meaning of Section 856(h) of the Code.
For the purposes of this Certificate capitalized terms shall have the
meanings assigned to such terms in Exhibit A hereto.
IN WITNESS WHEREOF, I have executed this Certificate as of , 1997.
MEDITRUST ACQUISITION COMPANY,
a Massachusetts Business Trust
By: _________________________________
Name:
Title:
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<PAGE>
EXHIBIT A
DEFINITIONS
"Code": the Internal Revenue Code of 1986, as amended.
"Company": Santa Anita Realty Enterprises, Inc.
"Constructive Ownership Rules": the constructive ownership rules of Section
318 of the Code, as modified by Section 856(d)(5) of the Code. Generally, these
rules provide:
(1) an individual is considered as owning the Ownership Interest that is
owned, directly or constructively, by or for his spouse, his children, his
grandchildren, and his parents;
(2) an Ownership Interest that is owned, directly or constructively, by
or for a partnership or estate is considered as owned proportionately by
its partners or beneficiaries;
(3) an Ownership Interest that is owned, directly or constructively, by
or for a trust is considered as owned by its beneficiaries in proportion to
the actuarial interest of such beneficiaries (provided, however, that in
the case of a "grantor trust" the Ownership Interest will be considered as
owned by the grantors);
(4) if 10 percent or more in value of the stock in a corporation is
owned, directly or constructively, by or for any person, such person shall
be considered as owning the Ownership Interest that is owned, directly or
constructively, by or for such corporation in that proportion which the
value of the stock which such person so owns bears to the value of all the
stock in such corporation;
(5) an Ownership Interest that is owned, directly or constructively, by
or for a partner of a partnership or a beneficiary of an estate or trust
shall be considered as owned by the partnership, estate, or trust;
(6) if 10 percent or more in value of the stock in a corporation is
owned, directly or constructively, by or for any person, such corporation
shall be considered as owning the Ownership Interest that is owned,
directly or constructively, by or for such person;
(7) if any person has an option to acquire an Ownership Interest
(including an option to acquire an option or any one of a series of such
options), such Ownership Interest shall be considered as owned by such
person;
(8) an Ownership Interest that is constructively owned by a person by
reason of the application of the rules described in paragraphs (1) through
(7) above shall, for purposes of applying paragraphs (1) through (7), be
considered as directly owned by such person provided, however, that (a) an
Ownership Interest constructively owned by an individual by reason of
paragraph (1) shall not be considered as owned by him for purposes of again
applying paragraph (1) in order to make another the constructive owner of
such Ownership Interest, (b) an Ownership Interest constructively owned by
a partnership, estate, trust, or corporation by reason of the application
of paragraphs (5) or (6) shall not be considered as owned by it for
purposes of applying paragraphs (2), (3), or (4) in order to make another
the constructive owner of such Ownership Interest, (c) if an Ownership
Interest may be considered as owned by an individual under paragraphs (1)
or (7), it shall be considered as owned by him under paragraph (7), and (d)
for purposes of the above described rules, an S corporation shall be
treated as a partnership and any shareholder of the S corporation shall be
treated as a partner of such partnership except that this rule shall not
apply for purposes of determining whether stock in the S corporation is
constructively owned by any person.
(9) For purposes of the above summary of the constructive ownership
rules, the term "Ownership Interest" means the ownership of stock with
respect to a corporation and, with respect to any other type of entity, the
ownership of an interest in either its assets or net profits.
"Constructively Owns": a Person constructively owns any asset which such
Person is considered to own after application of the Constructive Ownership
Rules.
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<PAGE>
"Merger Agreement": that certain Third Amended and Restated Agreement and
Plan of Merger dated as of April 13, 1997, by and among Santa Anita Realty
Enterprises, Inc., Santa Anita Operating Company, Meditrust and Meditrust
Acquisition Company.
"Paired Shares": paired common stock, $.10 par value per share, of Santa
Anita Realty Enterprises, Inc. and Santa Anita Operating Company.
"Person": an individual, joint venture, partnership, limited liability
company, trust, business trust, corporation, cooperative, association, private
foundation, charitable trust, employee pension, profit sharing, stock bonus or
supplemental unemployment benefit trust, or any other entity.
"REIT": a real estate investment trust which meets the requirements of
Sections 856 through 860 of the Code.
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<PAGE>
ANNEX C
TO THIRD
AMENDED
AND RESTATED
AGREEMENT AND
PLAN OF MERGER
CERTIFICATE
REGARDING CERTAIN SHARE OWNERSHIP MATTERS
In connection with the issuance to ("Purchaser") by the Company of its
common stock constituting [ %] of the total outstanding common stock of the
Company, Purchaser hereby certifies and warrants that for the period beginning
April 13, 1997 through the Effective Time:
1. If the Purchaser is a corporation (as defined for federal or state
income tax purposes), no Person Constructively Owns, directly or
indirectly, more than 9.9% in value of the stock of Purchaser.
2. If the Purchaser is not a corporation (as defined for federal or state
income tax purposes), no Person Constructively Owns, directly or
indirectly, an interest of more than 9.9% in the assets or net profits of
the Purchaser.
3. No corporation (as defined for federal or state income tax purposes)
of which Purchaser Constructively Owns, directly or indirectly, more than
9.9% in value of the stock of such corporation, Constructively Owns any
shares of the Company (excluding for this purpose any Paired Shares owned,
directly or indirectly, by Purchaser without regard to the Constructive
Ownership Rules).
4. No partnership (as defined for federal or state income tax purposes)
of which Purchaser is a partner or other equity member Constructively Owns
any shares of the Company (excluding for this purpose any Paired Shares
owned, directly or indirectly, by Purchaser without regard to the
Constructive Ownership Rules).
5. No trust (as defined for federal or state income tax purposes) of
which Purchaser is a beneficiary Constructively Owns any shares of the
Company (excluding for this purpose any Paired Shares owned, directly or
indirectly, by Purchaser without regard to the Constructive Ownership
Rules).
6. Purchaser Constructively Owns, directly or indirectly, no more than
9.9% by value of the stock of the Company (including for this purpose any
Paired Shares issued pursuant to the Merger Agreement).
7. The issuance of Paired Shares to Purchaser pursuant to Section 1.7 of
the Merger Agreement will not cause Purchaser or any other Person to
Constructively Own more than 9.9% by value of the stock of the Company or
cause any rent received by the Company to fail to qualify as "rents from
real property" within the meaning of Section 856(d)(2)(B) of the Code or
cause the Company to be "closely held" within the meaning of Section 856(h)
of the Code.
8. Purchaser is acquiring Paired Shares for investment purposes only, and
not with a view to their resale or other distribution.
9. Purchaser is an "accredited investor" within the meaning of Regulation
D under the Securities Act of 1933.
10. There is no understanding or arrangement between Purchaser and any
other Person as to how the Purchaser will vote the Paired Shares being
issued to Purchaser.
11. Purchaser will not transfer all or any portion of the Paired Shares
to any Person if (i) the ownership of such shares by such Person will cause
any Person to Constructively Own, directly or indirectly, more than 9.9% by
value of the stock of the Company (including for this purpose any Paired
Shares issued pursuant to the Merger Agreement), or (ii) there is any
understanding or arrangement between the transferee and any other Person
who Constructively Owns Paired Shares as to how the transferee will vote
such Paired Shares, or (iii) the ownership of such shares by such Person
will cause the Company to be "closely held" within the meaning of Section
856(h) of the Code.
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For the purposes of this Certificate capitalized terms shall have the
meanings assigned to such terms in Exhibit A hereto.
IN WITNESS WHEREOF, I have executed this Certificate as of , 1997.
_____________________________________
[Name]
_____________________________________
[Title]
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<PAGE>
EXHIBIT A
DEFINITIONS
"Code": the Internal Revenue Code of 1986, as amended.
"Company": Santa Anita Realty Enterprises, Inc.
"Constructive Ownership Rules": the constructive ownership rules of Section
318 of the Code, as modified by Section 856(d)(5) of the Code. Generally, these
rules provide:
(1) an individual is considered as owning the Ownership Interest that is
owned, directly or constructively, by or for his spouse, his children, his
grandchildren, and his parents;
(2) an Ownership Interest that is owned, directly or constructively, by
or for a partnership or estate is considered as owned proportionately by
its partners or beneficiaries;
(3) an Ownership Interest that is owned, directly or constructively, by
or for a trust is considered as owned by its beneficiaries in proportion to
the actuarial interest of such beneficiaries (provided, however, that in
the case of a "grantor trust" the Ownership Interest will be considered as
owned by the grantors);
(4) if 10 percent or more in value of the stock in a corporation is
owned, directly or constructively, by or for any person, such person shall
be considered as owning the Ownership Interest that is owned, directly or
constructively, by or for such corporation in that proportion which the
value of the stock which such person so owns bears to the value of all the
stock in such corporation;
(5) an Ownership Interest that is owned, directly or constructively, by
or for a partner of a partnership or a beneficiary of an estate or trust
shall be considered as owned by the partnership, estate, or trust;
(6) if 10 percent or more in value of the stock in a corporation is
owned, directly or constructively, by or for any person, such corporation
shall be considered as owning the Ownership Interest that is owned,
directly or constructively, by or for such person;
(7) if any person has an option to acquire an Ownership Interest
(including an option to acquire an option or any one of a series of such
options), such Ownership Interest shall be considered as owned by such
person;
(8) an Ownership Interest that is constructively owned by a person by
reason of the application of the rules described in paragraphs (1) through
(7) above shall, for purposes of applying paragraphs (1) through (7), be
considered as directly owned by such person provided, however, that (a) an
Ownership Interest constructively owned by an individual by reason of
paragraph (1) shall not be considered as owned by him for purposes of again
applying paragraph (1) in order to make another the constructive owner of
such Ownership Interest, (b) an Ownership Interest constructively owned by
a partnership, estate, trust, or corporation by reason of the application
of paragraphs (5) or (6) shall not be considered as owned by it for
purposes of applying paragraphs (2), (3), or (4) in order to make another
the constructive owner of such Ownership Interest, (c) if an Ownership
Interest may be considered as owned by an individual under paragraphs (1)
or (7), it shall be considered as owned by him under paragraph (7), and (d)
for purposes of the above described rules, an S corporation shall be
treated as a partnership and any shareholder of the S corporation shall be
treated as a partner of such partnership except that this rule shall not
apply for purposes of determining whether stock in the S corporation is
constructively owned by any person.
(9) For purposes of the above summary of the constructive ownership
rules, the term "Ownership Interest" means the ownership of stock with
respect to a corporation and, with respect to any other type of entity, the
ownership of an interest in either its assets or net profits.
"Constructively Owns": a Person constructively owns any asset which such
Person is considered to own after application of the Constructive Ownership
Rules.
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"Merger Agreement": that certain Third Amended and Restated Agreement and
Plan of Merger dated as of April 13, 1997, by and among Santa Anita Realty
Enterprises, Inc., Santa Anita Operating Company, Meditrust and Meditrust
Acquisition Company.
"Paired Shares": paired common stock, $.10 par value per share, of Santa
Anita Realty Enterprises, Inc. and Santa Anita Operating Company.
"Person": an individual, joint venture, partnership, limited liability
company, trust, business trust, corporation, cooperative, association, private
foundation, charitable trust, employee pension, profit sharing, stock bonus or
supplemental unemployment benefit trust, or any other entity.
"REIT": a real estate investment trust which meets the requirements of
Sections 856 through 860 of the Code.
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<PAGE>
ANNEX D
TO THIRD AMENDED
AND RESTATED
AGREEMENT
AND PLAN OF
MERGER
REGISTRATION RIGHTS
Unless otherwise indicated, capitalized terms used herein shall have the
meanings assigned to them in the Third Amended and Restated Agreement and Plan
of Merger dated as of April 13, 1997 (the "Agreement") to which this exhibit is
attached.
Section 1. Definitions and Usage.
1.1. Definitions. As used in this Exhibit:
"Beneficially Owning" means owning Realty Shares directly, indirectly or
constructively by a Person through the application of Section 318(a) of the
Code, as modified by Section 856(d)(5) of the Code, or Section 544 of the Code,
as modified by Section 856(h) of the Code. The term "Beneficially Own" shall
have a correlative meaning.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Continuously Effective", with respect to a specified registration statement,
shall mean that such registration statement shall not cease to be effective and
available for Transfers of Registrable Securities thereunder for longer than
either (i) any ten (10) consecutive business days, or (ii) an aggregate of
fifteen (15) business days during the period specified in the relevant
provision of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules
and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Issuance Percentage", when used with respect to Realty and Operating, shall
mean the relative percentages that Realty and Operating may from time to time
determine based on their joint determination of the relative values of Realty
Shares and Operating Shares.
"MT" shall mean Meditrust Acquisition Company under the Agreement or any
purchaser of Unaffiliated Acquired Shares pursuant to Section 1.7 of the
Agreement.
"Ownership Limit" when used with respect to Realty means 8% in value, voting
power or in number, whichever is more restrictive, of the issued and
outstanding capital stock of Realty and, when used with respect to Operating
means 8% in value, voting power or in number, whichever is more restrictive, of
the issued and outstanding capital stock of Operating.
"Paired Shares" means an Operating Share and a Realty Share which are
"paired" pursuant to the Pairing Agreement dated December 20, 1979 between
Realty and Operating, as it may be amended from time to time.
"Person" shall mean any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
"Register", "registered", and "registration" shall refer to a registration
effected by preparing and filing a registration statement or similar document
in compliance with the Securities Act, and the declaration or ordering by the
Commission of effectiveness of such registration statement or document.
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"Registrable Securities" shall mean any Santa Anita Shares issued pursuant to
Section 1.6 or 1.7 of the Agreement.
"Registrable Securities then outstanding" shall mean, with respect to a
specified determination date, the Registrable Securities owned by MT on such
date.
"Registration Expenses" shall have the meaning set forth in Section 5.1.
"REIT Requirements" shall mean the requirements for Realty to (i) continue to
qualify as a REIT under the Code and the rules and regulations promulgated
thereunder, (ii) retain the benefits of those certain private letter rulings
issued by the Internal Revenue Service to Realty dated as of October 16, 1979,
as supplemented January 11, 1980, (iii) avoid any federal income or excise tax
liability, and (iv) retain its status as grandfathered from the application of
Section 269B(a)(3) of the Code pursuant to Section 136(c)(3) of the Deficit
Reduction Act of 1984.
"Securities Act" shall mean the Securities Act of 1933 and the rules and
regulations of the Commission thereunder, all as the same may be in effect at
the time.
"Transfer" shall mean and include the act of selling, giving, transferring,
creating a trust (voting or otherwise), assigning or otherwise disposing of
(other than pledging, hypothecating or otherwise transferring as security) (and
correlative words shall have correlative meanings); provided, however, that any
transfer or other disposition upon foreclosure or other exercise of remedies of
a secured creditor after an event of default under or with respect to a pledge,
hypothecation or other transfer as security shall constitute a "Transfer."
"Underwriters' Representative" shall mean the managing underwriter, or, in
the case of a co-managed underwriting, the managing underwriter designated as
the Underwriters' Representative by the co-managers.
"Violation" shall have the meaning set forth in Section 6.1.
Section 2. Shelf Registration.
2.1. If (a) the Agreement is terminated for any reason and within 15 business
days after the date of such termination MT shall make a written request to
Realty and Operating or (b) the Mergers are effective and MT shall make a
written request to Realty or Operating, then Realty and Operating shall cause
to be filed with the Commission a registration statement under the Securities
Act for an offering by Meditrust Acquisition Company by means of a distribution
to its shareholders or an offering by MT on a delayed or continuous basis
pursuant to Rule 415 or such other appropriate rule under the Securities Act,
and Realty and Operating shall include therein all or any portion of the
Registrable Securities as MT shall request in such written request. Any request
made pursuant to this Section 2.1 shall be addressed to the attention of the
Secretary of each of Realty and Operating, and shall specify the number of
Registrable Securities to be registered, the intended methods of disposition
thereof and that the request is for a demand Registration pursuant to this
Section 2.1.
2.2. Realty and Operating shall be entitled to postpone for up to 90 days the
filing, effectiveness, supplementing or amending of any registration statement
otherwise required to be prepared and filed pursuant to this Section 2, if the
Board of Directors of Realty or the Board of Directors of Operating determines
that such registration and the Transfer of Registrable Securities contemplated
thereby would interfere with, or require premature disclosure of, any material
financing, acquisition, disposition, reorganization or other transaction
involving Realty or Operating or any of their respective subsidiaries and
Realty or Operating, as the case may be, promptly gives MT notice of such
determination. MT hereby acknowledges that any notice given by Realty or
Operating pursuant to this Section 2.2 shall constitute material non-public
information and that the United States securities laws prohibit any Person who
has material non-public information about a company from purchasing or selling
securities of such company or from communicating such information to any other
Person under circumstances in which it is reasonably foreseeable that such
Person is likely to purchase or sell such securities.
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2.3. Following receipt of a request for a registration pursuant to Section
2.1, Realty and Operating shall:
(i) File the registration statement with the Commission as promptly as
practicable and shall use their respective reasonable efforts to have the
registration declared effective under the Securities Act as soon as
reasonably practicable, in each instance giving due regard to the need to
prepare current financial statements, conduct due diligence and complete
other actions that are reasonably necessary to effect a registered public
offering.
(ii) Use their respective reasonable efforts to keep the relevant
registration statement Continuously Effective until such date as of which
all the Registrable Securities under the registration statement have been
disposed of in a manner described in the registration statement, but in no
event later than the 120th day following the effective date of such
registration statement. Notwithstanding the foregoing, if for any reason
the effectiveness of a registration pursuant to this Section 2 is
suspended, the relevant foregoing period shall be extended by the aggregate
number of days of such suspension.
2.4. Notwithstanding anything in this Agreement to the contrary, no
registration shall be effected hereunder and no Transfer of Registrable
Securities may be effected if as a result thereof Realty would not satisfy the
REIT Requirements in any respect or if such registration or Transfer would
result in any Person Beneficially Owning Paired Shares in excess of the
Ownership Limit. For purposes of the preceding sentence, registration shall not
be deemed to have been effected (i) unless a registration statement with
respect thereto has become effective, or (ii) if after such registration
statement has become effective, the related offer, sale or distribution of
Registrable Securities thereunder is prohibited by any stop order, injunction
or other order or requirement of the Commission or other governmental agency or
court for any reason not attributable to MT and such prohibition is not
thereafter eliminated. If Realty and Operating shall have complied with their
respective obligations under this Agreement, a right to demand a registration
pursuant to this Section 2 shall be deemed to have been satisfied upon the
effective date of the registration statement, provided no stop order or similar
order, or proceedings for such an order, is thereafter entered or initiated.
2.5. A registration pursuant to this Section 2 shall be on such appropriate
registration form of the Commission as shall be selected by Realty and
Operating and shall permit the disposition of the Registrable Securities in
accordance with the intended method or methods of disposition specified in the
request pursuant to Section 2.1.
2.6. If the registration pursuant to Section 2 involves an underwritten
offering (whether on a "firm commitment," "best efforts" or "all reasonable
efforts" basis or otherwise), MT shall select the underwriter or underwriters
and manager or managers to administer such underwritten offering; provided,
however, that each Person so selected shall be acceptable to Realty and
Operating.
Section 3. Registration Procedures. Whenever required under Section 2 to
effect the registration of any Registrable Securities, Realty and Operating
shall, as expeditiously as practicable:
3.1. Prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use their respective reasonable
efforts to cause such registration statement to become effective; provided,
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto, Realty and Operating shall furnish to one
firm of counsel for MT copies of all such documents in the form substantially
as proposed to be filed with the Commission.
3.2. Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act and rules thereunder with respect to the disposition of all
securities covered by such registration statement. Realty and Operating shall
amend the registration statement or supplement the prospectus so that it will
remain current and in compliance with the requirements of the Securities Act
for the period specified in Section 2.3(ii), and if during such period any
event or development occurs as a result of which the registration statement or
prospectus contains a misstatement of a material fact or
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<PAGE>
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, Realty or Operating shall promptly
notify MT, amend the registration statement or supplement the prospectus so
that each will thereafter comply with the Securities Act and furnish to MT such
amended or supplemented prospectus, which MT shall thereafter use in the
Transfer of Registrable Securities covered by such registration statement.
Pending any such amendment or supplement, MT shall cease making offers or
Transfers of Registrable Shares pursuant to the prior prospectus. In the event
that any Registrable Securities included in a registration statement subject
to, or required by, this Agreement remain unsold at the end of the period
during which Realty and Operating are obligated to use their respective
reasonable efforts to maintain the effectiveness of such registration
statement, Realty and Operating may file a post-effective amendment to the
registration statement for the purpose of removing such Registrable Securities
from registered status.
3.3. Furnish to MT without charge, such numbers of copies of the registration
statement, any pre-effective or post-effective amendment thereto, the
prospectus, including each preliminary prospectus and any amendments or
supplements thereto, in each case in conformity with the requirements of the
Securities Act and the rules thereunder, and such other related documents as MT
may reasonably request in order to facilitate the disposition of Registrable
Securities owned by MT.
3.4. Use their respective reasonable efforts (i) to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such states where an exemption from registration is not
available and as shall be reasonably requested by the Underwriters'
Representative and (ii) to obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of the offer and transfer
of any of the Registrable Securities in any state, at the earliest possible
moment; provided, however, that neither Realty nor Operating shall be required
in connection therewith or as a condition thereto to qualify to do business or
to consent to general service of process in any state.
3.5. In the event of any underwritten offering, use their respective
reasonable efforts to enter into and perform their respective obligations under
an underwriting agreement (including indemnification and contribution
obligations of underwriters), in usual and customary form, with the managing
underwriter or underwriters of such offering. Realty and Operating shall also
cooperate with MT and the Underwriters' Representative for such offering in the
marketing of the Registrable Securities, including making available the
officers, accountants, counsel, premises, books and records of Realty and
Operating for such purpose, but neither Realty nor Operating shall be required
to incur any material out-of-pocket expense pursuant to this sentence.
3.6. Promptly notify MT of any stop order issued or threatened to be issued
by the Commission in connection therewith and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
3.7. Make available for inspection by MT, any underwriter participating in
such offering and the representatives of MT and such Underwriter (but not more
than one firm of counsel to MT), all financial and other information as shall
be reasonably requested by them, and provide MT, any underwriter participating
in such offering and the representatives of MT and such Underwriter the
reasonable opportunity to discuss the business affairs of Realty and Operating
with their principal executives and independent public accountants who have
certified the audited financial statements included in such registration
statement, in each case all as necessary to enable them to exercise their due
diligence responsibility under the Securities Act; provided, however, that
information that Realty or Operating determines to be confidential and which
Realty or Operating advises such Person in writing, is confidential shall not
be disclosed unless such Person signs a confidentiality agreement reasonably
satisfactory to Realty and Operating or MT agrees to be responsible for such
Person's breach of confidentiality on terms reasonably satisfactory to Realty
and Operating.
3.8. Use their respective reasonable efforts to obtain a so-called "comfort
letter" from the independent public accountants of Realty and Operating, and
legal opinions of counsel to Realty and Operating addressed to
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MT in customary form and covering such matters of the type customarily covered
by such letters, and in a form that shall be reasonably satisfactory to MT.
Delivery of any such opinion or comfort letter shall be subject to the
recipient furnishing such written representations or acknowledgements as are
customarily provided by selling stockholders who receive such comfort letters
or opinions.
3.9. Use their respective reasonable efforts to cause the Registrable
Securities covered by such registration statement (i) if the Paired Shares are
then listed on a securities exchange or included for quotation in a recognized
trading market, to continue to be so listed or included for a reasonable period
of time after the offering, and (ii) to be registered with or approved by such
other United States or state governmental agencies or authorities as may be
necessary by virtue of the business and operations of Realty and Operating to
enable MT to consummate the disposition of such Registrable Securities.
3.10. Take such other actions as are reasonably required in order to expedite
or facilitate the disposition of Registrable Securities included in each such
registration.
Section 4. MT's Obligations. It shall be a condition precedent to the
obligations of Realty and Operating to take any action pursuant to this
Agreement with respect to the Registrable Securities of MT that MT shall:
4.1. Furnish to Realty and Operating such information regarding MT, the
number of the Registrable Securities owned by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of MT's Registrable Securities, and to cooperate fully with Realty and
Operating in preparing such registration.
Section 5. Expenses of Registration. Expenses in connection with
registrations pursuant to this Agreement shall be allocated and paid as
follows:
5.1. Realty and Operating shall bear and pay all expenses incurred in
connection with any registration, filing, or qualification of Registrable
Securities, including all registration, filing and National Association of
Securities Dealers, Inc. fees, all fees and expenses of complying with
securities or blue sky laws, all printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for Realty and
Operating, and of the independent public accountants for Realty and Operating,
including the expenses of "cold comfort" letters required by or incident to
such performance and compliance (the "Registration Expenses"), but excluding
underwriting discounts and commissions relating to Registrable Securities
(which shall be paid by MT) and all fees and expenses of counsel for MT;
provided, however, that Realty and Operating shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 2 if the
registration is subsequently withdrawn. Realty and Operating each agree between
themselves that they shall bear and pay Registration Expenses in an amount
equal to its respective Issuance Percentage of such Registration Expenses and
that they shall reimburse each other to the extent necessary to cause each of
them to so bear and pay such respective amounts.
Section 6. Indemnification; Contribution. If any Registrable Securities are
included in a registration statement under this Agreement:
6.1. To the extent permitted by applicable law, each of Realty and Operating,
severally and not jointly, shall indemnify and hold harmless MT, each Person,
if any, who controls MT within the meaning of the Securities Act, and each
officer, director, partner and employee of MT and such controlling Person,
against any and all losses, claims, damages, liabilities and expenses (joint or
several), including reasonable attorneys' fees and disbursements and reasonable
expenses of investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may otherwise become subject under the Securities Act, the
Exchange Act or other federal or state laws, insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"):
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(i) Any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein, or any amendments or
supplements thereto; or
(ii) The omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein
not misleading; provided, however, that the indemnification required by
this Section 6.1 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or expense if such settlement is effected
without the consent of Realty or Operating (which consent shall not be
unreasonably withheld), nor shall Realty or Operating be liable in any such
case for any such loss, claim, damage, liability or expense to the extent
that it arises out of or is based upon a Violation which occurs in reliance
upon and in conformity with information furnished to Realty or Operating by
MT expressly for use in connection with such registration; and provided,
further, that the indemnity agreement contained in this Section 6 shall not
apply to the extent that any such loss is based on or arises out of an
untrue statement or alleged untrue statement of a material fact, or an
omission or alleged omission to state a material fact, contained in or
omitted from any preliminary prospectus if the final prospectus shall
correct such untrue statement or alleged untrue statement, or such omission
or alleged omission, and a copy of the final prospectus has not been sent
or given to such person at or prior to the confirmation of sale to such
person if an underwriter was under an obligation to deliver such final
prospectus and failed to do so.
6.2. To the extent permitted by applicable law, MT shall indemnify and hold
harmless Realty, Operating, each of the directors, officers and employees of
Realty and Operating, and each Person, if any, who controls Realty or Operating
within the meaning of the Securities Act, against any and all losses, claims,
damages, liabilities and expenses (joint and several), including reasonable
attorneys' fees and disbursements and reasonable expenses of investigation,
incurred by such party pursuant to any actual or threatened action, suit,
proceeding or investigation, or to which any of the foregoing Persons may
otherwise become subject under the Securities Act, the Exchange Act or other
federal or state laws, but only insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based upon any Violation, in each
case to the extent that such Violation arises out of or is based upon
information furnished by MT expressly for use in connection with such
registration; provided, however, that (x) the indemnification required by this
Section 6.2 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected without the
consent of MT (which consent shall not be unreasonably withheld) and (y) in no
event shall the amount of any indemnity under this Section 6.2 exceed the gross
proceeds from the applicable offering received by MT.
6.3. Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, suit, proceeding, investigation or
threat thereof made in writing for which such indemnified party may make a
claim under this Section 6, such indemnified party shall deliver to the
indemnifying party a written notice thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties. The
failure to deliver written notice to the indemnifying party within a reasonable
time following the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 6 to the extent of such
prejudice but shall not relieve the indemnifying party of any liability that it
may have to any indemnified party otherwise than pursuant to this Section 6.
Any fees and expenses incurred by the indemnified party (including any fees and
expenses incurred in connection with investigating or preparing to defend such
action or proceeding) shall be paid to the indemnified party, as incurred,
within thirty (30) days of written notice thereof to the indemnifying party.
Any such indemnified party shall have the right to employ separate counsel in
any such action, claim or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be the expenses of such
indemnified party unless (i) the indemnifying party has agreed to pay such fees
and expenses or (ii) the indemnifying party shall have failed to promptly
assume the defense of such action, claim or proceeding or (iii) the named
parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the
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indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the indemnifying party and
that the assertion of such defenses would create a conflict of interest such
that counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action, claim or proceeding on behalf of
such indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or proceeding or
separate but substantially similar or related actions, claims or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any
time for all such indemnified parties, unless in the reasonable judgment of
such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to
such action, claim or proceeding, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or
counsels).
6.4. If the indemnification required by this Section 6 from the indemnifying
party is unavailable to an indemnified party hereunder in respect of any
losses, claims, damages, liabilities or expenses referred to in this Section 6:
(i) The indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or expenses
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any Violation has been committed
by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Violation. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 6.1 and Section
6.2, any legal or other fees or expenses reasonably incurred by such party
in connection with any investigation or proceeding.
(ii) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 6.4 were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in Section 6.4(i). No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
6.5. If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
this Section 6 without regard to the relative fault of such indemnifying party
or indemnified party or any other equitable consideration referred to in
Section 6.4.
6.6. The obligations of Realty, Operating and MT under this Section 6 shall
survive the completion of any offering of Registrable Securities pursuant to a
registration statement under this Agreement, and otherwise.
A-53
<PAGE>
ANNEX E
TO THIRD AMENDED
AND RESTATED
AGREEMENT
AND PLAN OF MERGER
FOURTH: Capitalization. Section 1. The total number of shares of all classes
of stock which the Corporation shall have authority to issue is 306,000,000, of
which 270,000,000 shares of the par value of $.10 each are to be of a class
designated Common Stock, 6,000,000 shares of the par value of $.10 each are to
be of a class designated Preferred Stock and 30,000,000 shares of the par value
of $.10 each are to be of a class designated Series Common Stock.
Section 2. The shares of Preferred Stock may be issued from time to time in
one or more series. The Board of Directors of the Corporation is hereby
authorized to fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences of
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or all or any of
them.
Section 3. The shares of Series Common Stock may be issued from time to time
in one or more series. The Board of Directors of the Corporation is hereby
authorized to fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences of
any wholly unissued series of Series Common Stock and the number of shares
constituting any such series and the designation thereof, or all or any of
them.
Section 4. (a) Each holder of Common Stock, as such, shall be entitled to one
vote for each share of Common Stock held of record by such holder on all
matters on which stockholders generally are entitled to vote.
(b) Except as otherwise required by law, holders of a series of Preferred
Stock or Series Common Stock, as such, shall be entitled only to such voting
rights, if any, as shall expressly be granted thereto by this Certificate of
incorporation (including any Certificate of Designation relating to such
series).
(c) Subject to applicable law and the rights, if any, of the holders of any
outstanding series of Preferred Stock or Series Common Stock or any class or
series of stock having a preference over or the right to participate with the
Common Stock with respect to the payment of dividends, dividends may be
declared and paid on the Common Stock at such times and in such amounts as the
Board of Directors in its discretion shall determine.
(d) Upon the dissolution, liquidation or winding up of the Corporation,
subject to the rights, if any, of the holders of any outstanding series of
Preferred Stock or Series Common Stock or any class or series of stock having a
preference over or the right to participate with the Common Stock with respect
to the distribution of assets of the Corporation upon such dissolution,
liquidation or winding up of the Corporation, the holders of the Common Stock,
as such, shall be entitled to receive the assets of the Corporation available
for distribution to its stockholders ratably in proportion to the number of
shares held by them.
A-54
<PAGE>
ANNEX F
TO THIRD AMENDED
AND RESTATED
AGREEMENT
AND PLAN OF MERGER
FOURTH: Capitalization. Section 1. The total number of shares of all classes
of stock which the Corporation shall have authority to issue is 306,000,000, of
which 270,000,000 shares of the par value of $.10 each are to be of a class
designated Common Stock, 6,000,000 shares of the par value of $.10 each are to
be of a class designated Preferred Stock and 30,000,000 shares of the par value
of $.10 each are to be of a class designated Series Common Stock.
Section 2. The shares of Preferred Stock may be issued from time to time in
one or more series. The Board of Directors of the Corporation is hereby
authorized to fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences of
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or all of any of
them.
Section 3. The shares of Series Common Stock may be issued from time to time
in one or more series. The Board of Directors of the Corporation is hereby
authorized to fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences of
any wholly unissued series of Series Common Stock and the number of shares
constituting any such series and the designation thereof, or all or any of
them.
Section 4. (a) Each holder of Common Stock, as such, shall be entitled to one
vote for each share of Common Stock held of record by such holder on all
matters on which stockholders generally are entitled to vote.
(b) Except as otherwise required by law, holders of a series of Preferred
Stock or Series Common Stock, as such, shall be entitled only to such voting
rights, if any, as shall expressly be granted thereto by this Certificate of
Incorporation (including any Certificate of Designation relating to such
series).
(c) Subject to applicable law and the rights, if any, of the holders of any
outstanding series of Preferred Stock or Series Common Stock or any class or
series of stock having a preference over or the right to participate with the
Common Stock with respect to the payment of dividends, dividends may be
declared and paid on the Common Stock as such times and in such amounts as the
Board of Directors in its discretion shall determine.
(d) Upon the dissolution, liquidation or winding up of the Corporation,
subject to the rights, if any, of the holders of any outstanding series of
Preferred Stock or Series Common Stock or any class or series of stock having a
preference over or the right to participate with the Common Stock with respect
to the distribution of assets of the Corporation upon such dissolution,
liquidation or winding up of the Corporation, the holders of the Common Stock,
as such, shall be entitled to receive the assets of the Corporation available
for distribution to its stockholders ratably in proportion to the number of
shares held by them.
A-55
<PAGE>
ANNEX B
LOGO
September 26, 1997
Boards of Directors
Santa Anita Realty Enterprises, Inc.
Santa Anita Operating Company
301 West Huntington Drive
Suite 405
Arcadia, California 91007-3471
Members of the Boards:
We understand that Santa Anita Realty Enterprises, Inc., a Delaware
corporation ("Realty"), and Santa Anita Operating Company, a Delaware
corporation ("Operating" and, together with Realty, "Santa Anita" or the
"Companies"), have entered into a Third Amended and Restated Agreement and Plan
of Merger, dated as of April 13, 1997 (the "Merger Agreement"), with Meditrust,
a Massachusetts business trust, and Meditrust Acquisition Company, a
Massachusetts business trust ("MAC") formed and capitalized by Meditrust, which
Merger Agreement provides, among other things, that (i) Meditrust and MAC will
merge (the "Mergers") with and into Realty and Operating, respectively; (ii)
upon consummation of the Mergers, shareholders of Meditrust and MAC will
receive in exchange for their shares of Meditrust and MAC 1.2016 paired shares
(the "Exchange Ratio") of common stock, par value $.10 per share, of the
Companies (the "Santa Anita Common Stock"); and (iii) Meditrust will make
available to the Companies up to $100 million in cash to be used to fund a
self-tender by the Companies for up to 3.2 million currently outstanding
paired-shares of Santa Anita Common Stock at a price per share of $31.00 or a
cash election by the holders of Santa Anita Common Stock (such provision of
cash, together with the Exchange Ratio, being referred to herein as the
"Consideration"). The terms and conditions of the Mergers are more fully set
forth in the Merger Agreement.
You have asked for our opinion as to whether the Consideration pursuant to
the Merger Agreement is fair from a financial point of view to the holders of
shares of Santa Anita Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Companies and Meditrust,
respectively;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Companies and Meditrust, respectively;
(iii) analyzed certain financial forecasts prepared by the managements of
the Companies, respectively;
(iv) discussed the past and current operations and financial condition and
the prospects of the Companies with senior executives of the
Companies;
<PAGE>
(v) reviewed the pro forma impact of the Mergers on Meditrust's funds from
operations, cash flow, consolidated capitalization and financial
ratios;
(vi) reviewed the reported prices and trading activity for the Santa Anita
Common Stock and Meditrust shares;
(vii) compared the financial performance of the Companies and Meditrust and
the prices and trading activity of the Santa Anita Common Stock and
Meditrust shares with that of certain other publicly traded companies
comparable with the Companies and Meditrust, respectively, and their
securities;
(viii) reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions deemed relevant;
(ix) discussed with senior executives of the Companies and Meditrust their
estimates of the existing assets and operations, investment
opportunities and growth prospects potentially available to the
combined companies;
(x) participated in discussions and negotiations among representatives of
the Companies and Meditrust and their financial and legal advisors;
(xi) reviewed the Merger Agreement and certain related documents; and
(xii) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial forecasts, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Companies
and Meditrust. In addition, we have assumed that the Mergers will be
consummated in accordance with the terms set forth in the Merger Agreement,
including, among other things, that the Mergers will be treated as tax-free
reorganizations and/or exchanges, each pursuant to the Internal Revenue Code of
1986, as amended. We were instructed by the Companies to solicit, and did
solicit, interest from third parties with respect to the acquisition of control
of the Companies or their assets and with respect to a strategic alliance with
or investment in the Companies or their assets. Our opinion is necessarily
based on financial, economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
Morgan Stanley has assumed that immediately prior to and immediately
following consummation of the Mergers Realty will qualify as a real estate
investment trust and the Santa Anita Common Stock will qualify for paired share
status.
We have acted as financial advisor to the boards of directors of Santa Anita
in connection with this transaction and will receive a fee for our services,
including a transaction fee, which is contingent upon the consummation of the
Mergers. In the past, Morgan Stanley & Co. Incorporated and Dean Witter
Reynolds Inc. and their respective affiliates have provided financial advisory
and financing services for Santa Anita and Meditrust and have received fees for
the rendering of these services. In the ordinary course of business, Morgan
Stanley & Co. Incorporated and Dean Witter Reynolds Inc. and their respective
affiliates may from time to time trade in the debt and equity securities or
senior loans of the Companies and Meditrust.
It is understood that this letter is for the information of the boards of
directors of Santa Anita, except that this opinion may be included in its
entirety in any filing made by Santa Anita in respect of the transaction with
the Securities and Exchange Commission. This opinion does not in any manner
address the prices at which the Santa Anita Common Stock will trade following
consummation of the Mergers. In addition, Morgan Stanley expresses no opinion
or recommendation as to how the holders of shares of Santa Anita Common Stock
should vote at the shareholders' meetings held in connection with the Mergers.
B-2
<PAGE>
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Consideration pursuant to the Merger Agreement is fair from a
financial point of view to the holders of shares of Santa Anita Common Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ Ron Sturzenegger
By:________________________________
Ron Sturzenegger
Principal
B-3
<PAGE>
ANNEX C
DESCRIPTION OF MEDITRUST ACQUISITION COMPANY SHARES
There is no limit on the number of shares (the "MAC Shares") which Meditrust
Acquisition Company ("MAC") is authorized to issue. MAC Shares may be issued by
the Board of Trustees without any vote of the shareholders. The MAC Shares are
without par value. On the date hereof, the outstanding MAC Shares are of one
class. The following description is qualified in all respects by reference to
the MAC Declaration and the MAC By-laws, copies of which are incorporated by
reference as exhibits to the Registration Statement on Form 10 filed with the
SEC.
Redemption. For MAC to qualify as a real estate investment trust under the
Internal Revenue Code of 1986, as amended (the "Code"), in any taxable year,
not more than 50% of its outstanding shares may be owned by five or fewer
individuals and MAC Shares must be owned by 100 or more persons during at least
335 days of a taxable year of 12 months or during a proportionate part of a
shorter taxable year. In order to meet these requirements, the Trustees have
the power to redeem or prohibit the transfer of a sufficient number of MAC
Shares selected in a manner deemed appropriate to maintain or bring the
ownership of the MAC Shares into conformity with such requirements. In
connection with the foregoing, if the Trustees shall, at any time and in good
faith, be of the opinion that direct or indirect ownership of at least 9.9% or
more of the MAC Shares has or may become concentrated in the hands of one
beneficial owner, the Trustees shall have the power (i) by lot or other means
deemed equitable by them to call for the purchase from any shareholder of MAC
of a number of MAC Shares sufficient, in the opinion of the Trustees, to
maintain or bring the direct or indirect ownership of MAC Shares of such owner
to a level of no more than 9.9% of the outstanding MAC Shares, and (ii) to
refuse to transfer or issue MAC Shares to any person whose acquisition of such
MAC Shares would cause a beneficial holder to hold in excess of 9.9% of the
outstanding MAC Shares. Further, any transfer of MAC Shares that would create a
beneficial owner of more than 9.9% of the outstanding MAC Shares shall be
deemed void and the intended transferee shall be deemed never to have had an
interest therein. The purchase price for any MAC Shares so redeemed shall be
equal to the fair market value of the MAC Shares reflected in the closing sales
price for the MAC Shares, if then listed on a national securities exchange, or
the average of the closing sales price for the MAC Shares if then listed on
more than one national securities exchange, or if the MAC Shares are not then
listed on a national securities exchange, the latest bid quotation for the MAC
Shares if then traded over-the-counter, on the last business day immediately
preceding the day on which notices of such acquisition are sent by MAC. From
and after the date fixed for purchase by the Trustees, the holder of any MAC
Shares so called for purchase shall cease to be entitled to distributions,
voting rights and other benefits with respect to such MAC Shares, except the
right to payment of the purchase price for the MAC Shares.
The foregoing provisions may have the effect of discouraging unilateral
tender offers or other takeover proposals which certain shareholders might deem
in their interest or in which they might receive a substantial premium. The
provisions could also have the effect of insulating current management against
the possibility of removal and could, by possibly reducing temporary
fluctuations in market price caused by accumulations of MAC Shares, deprive
shareholders of opportunities to sell at a temporarily higher market price.
Additional Provisions. The MAC Declaration provides that annual meetings of
shareholders are to be held within six months after the end of each fiscal year
and special meetings of the shareholders may be called by the President of MAC,
a majority of the Trustees or a majority of the Independent Trustees (defined
in the MAC Declaration) and shall be called upon the written request of the
holders of 10% or more of the outstanding MAC Shares.
Whenever any action is to be taken by the shareholders, it shall, except as
otherwise clearly indicated in the MAC Declaration or By-Laws, be authorized by
holders of a majority of the MAC Shares present in person or represented by
proxy and entitled to vote thereon, provided that such majority shall be at
least a majority of
<PAGE>
the number of MAC Shares that constitute a quorum. Notwithstanding the
foregoing, at all elections of Trustees, voting by shareholders shall be
conducted under the non-cumulative method and the election of Trustees shall be
by the affirmative vote of the holders of MAC Shares representing a plurality
of the MAC Shares then outstanding which are present in person or by proxy at a
meeting in which a quorum is present.
Whenever shareholders are required or permitted to take any action (unless a
vote at a meeting is specifically required, as with respect to termination or
amendment of the MAC Declaration), such action may be taken without a meeting
by written consents setting forth the action so taken, signed by the holders of
a majority (or such higher percentage as may be specified) of the outstanding
MAC Shares that would be entitled to vote thereon at a meeting.
Except with respect to matters on which a shareholders' vote is specifically
required by the MAC Declaration, no action taken by the shareholders at any
meeting shall in any way bind the Trustees.
The MAC Shares have no preemptive or appraisal rights.
The MAC Declaration provides that shareholders of MAC shall not be subject to
any liability for the acts or obligations of MAC and that, as far as is
practicable, each written agreement of MAC is to contain a provision to that
effect. No personal liability will attach to the shareholders for claims under
any contract containing such a provision in writing where adequate notice is
given of such provision, except possibly in a few jurisdictions. With respect
to all types of claims in such jurisdictions and with respect to tort claims,
contract claims where the shareholder liability is not disavowed as described
above, claims for taxes and certain statutory liabilities in other
jurisdictions, a shareholder may be held personally liable to the extent claims
are not satisfied by MAC. However, the MAC Declaration provides that, upon
payment of any such liability, the shareholder will be entitled to
reimbursement from the general assets of MAC. The Trustees intend to conduct
the operations of MAC, with the advice of counsel, in such a way as to avoid,
as far as is practicable, the ultimate liability of the shareholders of MAC.
The Trustees do not intend to provide insurance covering such risks to
shareholders.
All MAC Shares participate equally in dividends and in net assets available
for distribution to holders of MAC Shares on liquidation or termination of MAC,
have one vote per share on all matters submitted to a vote of the shareholders
and do not have cumulative voting rights in the election of Trustees. The MAC
Shares have no conversion, exchange or sinking fund rights.
Paired Share Structure. MAC Shares are transferable and tradeable only in
combination as a unit with shares of Meditrust, each unit consisting of one
share of Meditrust and one MAC Share. These restrictions are imposed by the MAC
By-Laws. The MAC Shares are evidenced by the certificates for the related
Meditrust shares.
Transfer Agent and Registrar. Boston EquiServe, Canton, Massachusetts, acts
as transfer agent and registrar of the MAC Shares.
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Third Amended and Restated Agreement and Plan of Merger, dated as of
April 13, 1997, by and among Santa Anita Realty Enterprises, Inc.,
Santa Anita Operating Company, Meditrust and Meditrust Acquisition
Company (attached as Annex A to the Joint Proxy Statement/Prospectus
included in this Registration Statement)
2.2 Form of Proxy for Realty and Operating shareholders
2.3 Form of Proxy for Meditrust and MAC shareholders
2.4 Cash Election Materials
4.1 Pairing Agreement by and between Realty and Operating, dated as of
December 20, 1979
(incorporated by reference to Exhibit 5 to Registration Statement on
Form 8-A of Operating filed February 5, 1980)
4.2 Rights Agreement, dated June 15, 1989, among Realty, Operating, and
Union Bank, as Rights Agent (incorporated by reference to Exhibit
2.1 to Registration Statement on Form 8-A of Realty filed June 19,
1989)
4.3 Credit Agreement dated as of November 9, 1994 between First Inter-
state Bank of California and Realty (incorporated by reference to
Exhibit 10.4 of the Joint Quarterly Report on Form 10-Q of Realty
and Operating for the quarter ended September 30, 1994)
4.4 First Amendment dated as of May 31, 1995, to Credit Agreement dated
as of November 9, 1994 between First Interstate Bank of California
and Realty (incorporated by reference to Exhibit 4.4 of the Joint
Annual Report on Form 10-K of Realty and Operating for the year
ended December 31, 1995)
4.5 Second Amendment dated as of January 26, 1996, to Credit Agreement
dated as of November 9, 1994 between First Interstate Bank of Cali-
fornia and Realty (incorporated by reference to Exhibit 4.5 of the
Joint Annual Report on Form 10-K of Realty and Operating for the
year ended December 31, 1995)
4.6 Third Amendment dated as of July 1, 1996, to Credit Agreement dated
as of November 9, 1994 between First Interstate Bank of California
and Realty (incorporated by reference to Exhibit 4.1 of the Joint
Quarterly Report on Form 10-Q of Realty and Operating for the quar-
ter ended June 30, 1996)
4.7 Fourth Amendment dated as of June 1, 1997, to Credit Agreement dated
as of November 9, 1994 between First Interstate Bank of California
and Realty (incorporated by reference to Exhibit 4.1 of the Joint
Quarterly Report on Form 10-Q of Realty and Operating for the quar-
ter ended June 30, 1997)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.8 Certificate of Designations of Series A Redeemable Preferred Stock
of Realty (incorporated by reference to Exhibit N to Exhibit 2 of
the Current Report on Form 8-K of Realty and Operating, dated Octo-
ber 24, 1996)
4.9 Certificate of Designations of Series A Redeemable Preferred Stock
of Operating (incorporated by reference to Exhibit O to Exhibit 2 of
the Current Report on Form 8-K of Realty and Operating, dated Octo-
ber 24, 1996)
5 Opinion of O'Melveny & Myers LLP
8.1 Opinion of O'Melveny & Myers LLP
8.2 Opinion of Nutter, McClennen & Fish, LLP
8.3 Opinion of Nutter, McClennen & Fish, LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consents of KPMG Peat Marwick LLP
23.4 Consents of O'Melveny & Myers LLP (included in Exhibits 5 and 8.1)
23.5 Consents of Nutter, McClennen & Fish, LLP (included in Exhibits 8.2
and 8.3)
23.6 Consent of Morgan Stanley & Co. Incorporated
23.7 Consent of Lazard Freres & Co. LLC
23.8 Consent of Abraham D. Gosman
23.9 Consent of David F. Benson
23.10 Consent of Edward W. Brooke
23.11 Consent of C. Gerald Goldsmith
23.12 Consent of Philip L. Lowe
23.13 Consent of Thomas J. Magovern
23.14 Consent of Gerald Tsai, Jr.
24 Power of Attorney (previously filed)
99 Form of Appraisal Rights Notice (previously filed)
</TABLE>
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, EACH REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO JOINT REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF ARCADIA, STATE OF CALIFORNIA, ON SEPTEMBER 24, 1997
Santa Anita Realty Enterprises, Inc. Santa Anita Operating Company
By /s/ Brian L. Fleming By /s/ William C. Baker
--------------------------------- -----------------------------------
Brian L. Fleming William C. Baker
Acting President and Chief Chairman of the Board and Chief
Executive Officer and Executive Executive Officer (Principal
Vice President and Chief Executive Officer)
Financial Officer (Principal
Executive and Financial Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO JOINT REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
ON SEPTEMBER 24, 1997 IN THEIR INDICATED CAPACITIES.
SIGNATURE TITLE
* Chairman of the
Board and Chief
- -------------------------------- Executive Officer
WILLIAM C. BAKER (Principal Executive
Officer) of Operating and
Chairman of the
Board of Realty
* Director of Realty
and Director of
- -------------------------------- Operating
RICHARD S. COHEN
* Director of Realty
and Director of
- -------------------------------- Operating
JAMES P. CONN
* Director of Realty
Director of
- -------------------------------- Operating
ARTHUR LEE CROWE
* Director of Realty
- -------------------------------- and Director of
JOHN C. CUSHMAN, III Operating
II-3
<PAGE>
SIGNATURE TITLE
* Acting President and Chief
- --------------------------------- Executive Officer
BRIAN L. FLEMING and Executive Vice
President and Chief
Financial Officer and
Secretary
(Principal Financial and
Accounting Officer)
of Realty and Director
of Realty
* Executive Vice
President and
- --------------------------------- Director of
CLIFFORD C. GOODRICH Operating
* Director of Realty
- --------------------------------- and Director of
TAYLOR B. GRANT Operating
* Director of Realty
- --------------------------------- and Director of
J. TERRENCE LANNI Operating
* Director of Realty
- --------------------------------- and Director of
THOMAS P. MULLANEY Operating
* Director of Realty
- --------------------------------- and Director of
WILLIAM D. SCHULTE Operating
* Controller (Principal
- --------------------------------- Financial Officer)
ELIZABETH P. HAUG of Operating
* By William C. Baker, attorney-in-fact
/s/ William C. Baker
- ----------------------------------------
WILLIAM C. BAKER
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
2.1 Third Amended and Restated Agreement and Plan of Merger,
dated as of April 13, 1997, by and among Santa Anita Realty
Enterprises, Inc., Santa Anita Operating Company, Meditrust
and Meditrust Acquisition Company (attached as Annex A to the
Joint Proxy Statement/Prospectus included in this Registra-
tion Statement)
2.2 Form of Proxy for Realty and Operating shareholders
2.3 Form of Proxy for Meditrust and MAC shareholders
2.4 Cash Election Materials
5 Opinion of O'Melveny & Myers LLP
8.1 Opinion of O'Melveny & Myers LLP
8.2 Opinion of Nutter, McClennen & Fish, LLP
8.3 Opinion of Nutter, McClennen & Fish, LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consents of KPMG Peat Marwick LLP
23.4 Consents of O'Melveny & Myers LLP (included in Exhibits 5 and
8.1)
23.5 Consents of Nutter, McClennen & Fish, LLP (included in Exhib-
its 8.2 and 8.3)
23.6 Consent of Morgan Stanley & Co. Incorporated
23.7 Consent of Lazard Freres & Co. LLC
23.8 Consent of Abraham D. Gosman
23.9 Consent of David F. Benson
23.10 Consent of Edward W. Brooke
23.11 Consent of C. Gerald Goldsmith
23.12 Consent of Philip L. Lowe
23.13 Consent of Thomas J. Magovern
23.14 Consent of Gerald Tsai, Jr.
</TABLE>
<PAGE>
EXHIBIT 2.2
LOGO
PROXY FOR SPECIAL MEETINGS OF SHAREHOLDERS TO BE HELD ON NOVEMBER 5, 1997
SANTA ANITA REALTY SANTA ANITA
ENTERPRISES, INC. OPERATING COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE RESPECTIVE BOARDS OF DIRECTORS
The undersigned hereby appoints William C. Baker, James P. Conn and John C.
Cushman, III as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote as designated below, all
the shares of Common Stock of Santa Anita Realty Enterprises, Inc. ("Realty")
and Santa Anita Operating Company ("Operating") held of record by the
undersigned on October 3, 1997, at the special meetings of shareholders to be
held on November 5, 1997 or any adjournment thereof.
PLEASE MARK VOTE IN THE FOLLOWING MANNER [X] USING DARK INK ONLY
THE BOARD OF DIRECTORS OF REALTY RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4 AND
5.
1. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to approve and adopt the Third Amended and
Restated Agreement and Plan of Merger, dated as of
April 13, 1997, among Realty, Operating, Meditrust
and Meditrust Acquisition Company
2. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to authorize the transfer of some or all
of the assets of Realty to one or more wholly-owned
subsidiaries
3. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to authorize the issuance of Paired Common
Stock of Realty in exchange for paired Series A
Preferred Stock of Realty
4. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to amend the Realty Share Award Plan to
increase the number of shares issuable thereunder,
to require Realty to acquire Operating Common Stock
to pair with Realty Common Stock upon exercise of
the options and to increase the per employee option
award limitation
5. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to amend the Realty Certificate of
Incorporation to delete the cumulative voting
provisions
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
LOGO
PLEASE MARK VOTE IN THE FOLLOWING MANNER [X] USING DARK INK ONLY
THE BOARD OF DIRECTORS OF OPERATING RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4
AND 5.
proposal to approve and adopt the Third Amended and
Restated Agreement and Plan of Merger, dated as of
April 13, 1997, among Realty, Operating, Meditrust
and Meditrust Acquisition Company
1. [_] FOR [_] AGAINST [_] ABSTAIN
2. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to authorize the transfer of some or all of
the assets of Operating to one or more wholly-owned
subsidiaries
3. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to authorize the issuance of Paired Common
Stock of Operating in exchange for paired Series A
Preferred Stock of Operating
4. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to amend the Operating Share Award Plan to
increase the number of shares issuable thereunder and
to increase the per employee option award limitation
5. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to amend the Operating Certificate of
Incorporation to delete the cumulative voting
provisions
In their discretion, the proxies are authorized to vote upon such other
business that may properly come before the special meetings.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDERS. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR EACH OF THE PROPOSALS.
Receipt of the Notice of Special Meetings and accompanying Joint Proxy
Statement/Prospectus is hereby acknowledged.
Dated: _____________________________
Signature __________________________
Signature if held jointly __________
Please sign exactly as your name
appears. When shares are held by
joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporation name, by President or
other authorized officer. If a
partnership, please sign a
partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
<PAGE>
EXHIBIT 2.3
LOGO
PROXY FOR SPECIAL MEETINGS OF SHAREHOLDERS TO BE HELD NOVEMBER 5, 1997
MEDITRUST MEDITRUST ACQUISITION COMPANY
The undersigned, having received the Notice of Special Meetings and
accompanying Joint Proxy Statement/Prospectus, hereby appoint(s) Abraham D.
Gosman, David F. Benson and Edward W. Brooke, and each of them, Proxies of the
undersigned (with full power of substitution) to attend the above Special
Meetings of Shareholders and all adjournments thereof (the "Meetings"), and
there to vote all shares of beneficial interest of Meditrust and Meditrust
Acquisition Company ("MAC") that the undersigned would be entitled to vote, if
personally present, in regard to all matters which may come before the
Meetings.
The undersigned hereby confer(s) upon the Proxies, and each of them,
discretionary authority to consider and act upon such business, matters or
proposals other than the proposals set forth below as may properly come before
the Meetings. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
SPECIFIED HEREIN. IF NO SPECIFICATION IS MADE THE PROXIES INTEND TO VOTE FOR
ITEM 1.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
THE BOARD OF TRUSTEES OF MEDITRUST RECOMMENDS A VOTE FOR ITEM 1.
[X] Please mark vote as in this example.
1. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to approve and adopt the Third Amended and
Restated Agreement and Plan of Merger, dated as of
April 13, 1997, among Meditrust, Meditrust
Acquisition Company, Santa Anita Realty
Enterprises, Inc. and Santa Anita Operating Company
THIS PROXY IS SOLICITED ON BEHALF OF THE RESPECTIVE BOARDS OF TRUSTEES.
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
LOGO
THE BOARD OF TRUSTEES OF MAC RECOMMENDS A VOTE FOR ITEM 1.
[X] Please mark vote as in this example.
1. [_] FOR [_] AGAINST [_] ABSTAIN
proposal to approve and adopt the Third Amended and
Restated Agreement and Plan of Merger, dated as of
April 13, 1997, among Meditrust, Meditrust
Acquisition Company, Santa Anita Realty
Enterprises, Inc. and Santa Anita Operating Company
In signing, please write
name(s) exactly as appearing in
the imprint on this card. For
shares held jointly, each joint
owner should sign. If signing
as executor, or in any other
representative capacity, or as
an officer of a corporation,
please indicate your full title
as such.
Date: __________________________ _____________________________________________
Signature
Date: __________________________ _____________________________________________
Signature
<PAGE>
SANTA ANITA SANTA ANITA
REALTY OPERATING
ENTERPRISES, INC. COMPANY
CASH ELECTION INSTRUCTIONS
The enclosed Letter of Transmittal and accompanying instructions are being
provided to you along with a Joint Proxy Statement/Prospectus dated September
26, 1997, which describes the Third Amended and Restated Agreement and Plan of
Merger dated as of April 13, 1997, among Meditrust, Meditrust Acquisition
Company ("MAC"), Santa Anita Realty Enterprises, Inc. ("Realty") and Santa
Anita Operating Company ("Operating"), providing for the merger of Meditrust
with and into Realty, with Realty being the surviving corporation, and for the
merger of MAC into Operating, with Operating being the surviving corporation
(the "Mergers"). Capitalized terms used herein and not specifically defined
herein have the meaning specified in the Joint Proxy Statement/Prospectus.
As described in the Joint Proxy Statement/Prospectus, subject to the
consummation of the Mergers and certain limitations, record holders of shares
of Paired Common Stock are entitled to make an unconditional election (a "Cash
Election") on or prior to 5:00 P.M. (New York City time) on October 24, 1997
(the "Election Time") to receive the Cash Election Price for any such shares of
Paired Common Stock by executing and submitting the enclosed Letter of
Transmittal (see below), and complying with the other requirements set forth
therein. Only shares of Paired Common Stock are eligible to be purchased for
the Cash Election Price.
The Letter of Transmittal may be submitted only by the registered holder of
shares of Paired Common Stock. Accordingly, if you are not the registered
holder of the shares of Paired Common Stock and if you wish to have your bank
or broker exercise, on your behalf, the Cash Election for your shares of Paired
Common Stock, please so instruct them. Your instructions should be forwarded as
promptly as possible to permit the exercise of the Cash Election in accordance
with the provisions of the Cash Election process as described in the Joint
Proxy Statement/Prospectus. If complete written instructions are not received
by the Election Time and in accordance with such Cash Election procedures, the
Cash Election will not be exercised on your behalf. If you are the registered
holder of the shares of Paired Common Stock and you wish to exercise the Cash
Election, you are requested to complete, execute and return the Letter of
Transmittal attached to this letter as promptly as possible to permit the
exercise of the Cash Election in accordance with the provisions of the Cash
Election procedure as described in the Joint Proxy Statement/Prospectus. If a
complete Letter of Transmittal is not received by the Election Time and in
accordance with such Cash Election procedures, the Cash Election will not be
exercised on your behalf. We urge you, however, to read these documents
carefully before exercising the Cash Election. Due to the limited amount of
cash consideration to be paid, holders of shares of Paired Common Stock who
follow such procedures to elect to receive cash may not, as a result of
proration, receive cash for all their shares despite such election.
Holders of shares of Paired Common Stock who do not wish to make the Cash
Election need not submit the Letter of Transmittal.
ANY CASH ELECTION MADE PURSUANT TO A LETTER OF TRANSMITTAL THAT HAS BEEN
TIMELY AND PROPERLY SUBMITTED IN COMPLIANCE WITH THE CASH ELECTION PROCEDURE AS
DESCRIBED IN THE JOINT PROXY STATEMENT/PROSPECTUS WILL BE IRREVOCABLE AFTER THE
ELECTION TIME.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE CASH ELECTION SHOULD
BE DIRECTED TO HARRIS TRUST COMPANY OF NEW YORK AT THE FOLLOWING TOLL-FREE
TELEPHONE NUMBER: (800-245-7630).
<PAGE>
LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES OF PAIRED COMMON STOCK OF
THE SANTA ANITA COMPANIES
The undersigned hereby elects to exercise the Cash Election (capitalized
terms used herein and not defined herein having the meaning specified in the
Joint Proxy Statement/Prospectus referred to below) for the shares of Paired
Common Stock specified below which are held by the undersigned.
It is understood that the Cash Election is irrevocable after October 24, 1997
and is subject to (i) the terms, conditions and limitations set forth in the
Joint Proxy Statement/Prospectus, dated September 26, 1997, relating to the
Mergers (the "Joint Proxy Statement/Prospectus"), receipt of which is
acknowledged by the undersigned and (ii) the terms of the Third Amended and
Restated Agreement and Plan of Merger, dated as of April 13, 1997, as the same
may be amended from time to time, a conformed copy of which appears as Annex A
to the Joint Proxy Statement/Prospectus.
DESCRIPTION OF SHARES TENDERED FOR CASH
- --------------------------------------------------------------------------------
REGISTRATION
IF THERE IS
ANY ERROR IN
THE NAME OR
ADDRESS
SHOWN BELOW,
PLEASE MAKE
THE TOTAL NUMBER OF NUMBER OF
NECESSARY CERTIFICATE SHARES REPRESENTED BY SHARES TENDERED
CORRECTIONS. NO(S) SHARE CERTIFICATES/1/ FOR CASH/2/
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described
above are being tendered for cash. See Instruction 7.
The Tender Agent will issue a check in the amount of the number of Shares of
Paired Common Stock tendered for cash hereby, or such lesser number of Shares
as may be purchased in accordance with the pro-ration procedures, multiplied by
$31.00 (the "Cash Election Price") and/or return any Certificates for Shares
not tendered for cash or accepted for payment, in each case in the name shown
above and mailed to the address reflected above unless instructions are given
in the boxes below.
Deliver this Letter of Transmittal, by hand, courier, mail or facsimile,
together with the certificate(s) representing your shares, no later than 5:00
P.M. (New York City time) on October 24, 1997 (the "Election Time") to Harris
Trust Company of New York, the Tender Agent, at one of the following addresses.
Your cash entitlement is described in the accompanying notice.
BY HAND/OVERNIGHT COURIER: BY MAIL:
Harris Trust Company of New York Harris Trust Company of New York
Wall Street Plaza Wall Street Station
88 Pine Street P.O. Box 1010
19th Floor New York, NY 10268-1010
New York, NY 10005
TELEPHONE FACSIMILE (FOR ELIGIBLE
1-800-245-7630 INSTITUTIONS)
212-701-7636
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
DELIVERY OF THIS LETTER OF TRANSMITTAL AFTER THE ELECTION TIME DOES NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
[_]CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE
IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION ON THIS LETTER OF
TRANSMITTAL, THE TENDER AGENT WILL CONTACT YOU DIRECTLY WITH REPLACEMENT
INSTRUCTIONS.
Number, class and series of Shares represented by the lost or destroyed
Certificates: __________________________________________________________________
THE CASH ELECTION FOR THE SHARES OF PAIRED COMMON STOCK SPECIFIED ABOVE IS
IRREVOCABLE, EXCEPT THAT SUCH CASH ELECTION MAY BE WITHDRAWN AT ANY TIME PRIOR
TO 5:00 P.M. (NEW YORK CITY TIME) ON OCTOBER 24, 1997. SEE INSTRUCTION 10 OF
THE "INSTRUCTIONS FOR TENDERING CERTIFICATES" SET FORTH BELOW.
<PAGE>
SPECIAL PAYMENT AND ISSUANCE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS --------------------------------------
- -------------------------------------- Complete only if the check repre-
Complete only if the check senting the Cash Election Price
representing the Cash Election and/or any certificate for shares
Price and/or any certificate for not tendered for cash or not ac-
shares not tendered for cash or cepted for payment is to be
not accepted for payment is to be mailed to some address other than
paid and/or issued in a name the address reflected above.
which differs from the name on
the tendered for cash
certificate(s).
Issue Check and/or Certificate(s)
to:
Issue Check and/or Certificate(s)
to:
Name: ____________________________
(Please Print)
Address: _________________________
Name: ____________________________ __________________________________
(Please Print) (Include Zip Code)
Address: _________________________
__________________________________
(Include Zip Code)
__________________________________
(Employer Identification or
Social Security Number)
(Please also complete Substitute
Form W-9 on the reverse AND see
instructions regarding signature
guarantee.)
SIGNATURE(S) REQUIRED
[Signature(s) of Registered Holder(s) SIGNATURE(S) GUARANTEED (IF REQUIRED)
or Agent] --------------------------------------
- -------------------------------------- Unless the shares are tendered
Must be signed by the registered for cash by the registered hold-
holder(s) EXACTLY as name(s) er(s) of the Paired Common Stock,
appear(s) on stock certificate(s) or for the account of a member in
or on a security position good standing of a "Signature
listing. If signature is by a Guarantee Program" ("STAMP"),
trustee, executor, administrator, Stock Exchange Medallion Program
guardian, attorney-in-fact, ("SEMP") or New York Stock Ex-
officer for a corporation acting change Medallion Signature Pro-
in a fiduciary or representative gram ("MSP") (an "Eligible Insti-
capacity, or other person please tution"), the above signature(s)
set forth full title. SEE must be guaranteed by an Eligible
INSTRUCTIONS 2, 3 OR 4. Institution. SEE INSTRUCTION 3.
----------------------------------
---------------------------------- Authorized Signature
Signature of Registered Holder ----------------------------------
---------------------------------- Name (Please Print)
Name of Registered Holder (Please ----------------------------------
Print) Name of Firm
---------------------------------- ----------------------------------
Title, if any Address of Firm (Include Zip Code)
Address: _________________________ Date: ____________________________
---------------------------------- Phone No: ________________________
(Include Zip Code)
Date: ____ Phone No.: ____________
Employer Identification or
Social Security Number ___________
(See Substitute Form W-9)
(Please also complete Substitute
Form W-9 on the reverse AND see
instructions regarding signature
guarantee.)
<PAGE>
This Letter of Transmittal is to be used either if
Certificates for Shares are to be forwarded herewith or,
unless an Agent's Message (as defined below) is utilized,
if delivery of Shares is to be made by book-entry transfer
to an account maintained by the Tender Agent at a Book-
Entry Transfer Facility (as defined in and pursuant to the
procedures set forth in Instruction 6). Stockholders who
deliver Shares by book-entry transfer are referred to
herein as "Book-Entry Stockholders" and other stockholders
are referred to herein as "Certificate Stockholders".
Stockholders whose Certificates for Shares are not
immediately available or who cannot deliver either the
Certificates for, or a Book-Entry Confirmation (as defined
below) with respect to, their Shares and all other
documents required hereby to the Tender Agent prior to the
Election Time (as defined above) must tender for cash their
Shares in accordance with the guaranteed delivery
procedures set forth in Instruction 1. Delivery of
documents to a Book-Entry Transfer Facility does not
constitute delivery to the Tender Agent.
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE
TENDER AGENT WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY
TRANSFER):
Name of Tendering Institution ______________________________
Check box of Book-Entry Transfer Facility:
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
Account Number _____________________________________________
Transaction Code Number ____________________________________
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY
SENT TO THE TENDER AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s) _____________________________
Date of Execution of Notice of Guaranteed Delivery _________
Name of Institution that Guaranteed Delivery _______________
<PAGE>
INSTRUCTIONS FOR TENDERING CERTIFICATES
1. Requirements of Delivery. This Letter of Transmittal is to be completed by
stockholders either if Certificates are to be forwarded herewith or, unless an
Agent's Message (as defined below) is utilized, if delivery of Shares is to be
made pursuant to the procedures for book-entry transfer set forth in
Instruction 6. For a stockholder validly to tender for cash Shares, either (a)
a Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message (as defined below), and any other
required documents, must be received by the Tender Agent at one of its
addresses set forth herein no later than 5:00 P.M. (New York City time) on
October 24, 1997 (the "Election Time") and either Certificates for tendered
Shares must be received by the Tender Agent at one of such addresses or Shares
must be delivered pursuant to the procedures for book-entry transfer set forth
herein (a Book-Entry Confirmation (as defined below)), and received by the
Tender Agent, in each case prior to the Election Time, or (b) the tendering
stockholder must comply with the guaranteed delivery procedures set forth
below.
Stockholders whose Certificates for Shares are not immediately available or
who cannot deliver their Certificates and all other required documents to the
Tender Agent or complete the procedures for book-entry transfer prior to the
Election Time may tender for cash their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery and meeting all of the following
guaranteed delivery procedures: (a) such tender for cash must be made by or
through an Eligible Institution, (b) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by The Santa
Anita Companies herewith, must be received by the Tender Agent prior to the
Election Time and (c) the Certificates for all tendered Shares in proper form
for transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Tender Agent within three trading days after
the date of execution of such Notice of Guaranteed Delivery. A "trading day" is
any day on which the New York Stock Exchange is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Tender
Agent or transmitted by facsimile or mail to the Tender Agent and must include
a guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
"Agent's Message" means a message transmitted by a Book-Entry Transfer
Facility to, and received by, the Tender Agent and forming a part of a Book-
Entry Confirmation that states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering for cash the shares that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that The Santa Anita Companies may enforce such agreement against such
participant.
THE METHOD OF DELIVERY OF CERTIFICATE(S), THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE TENDER AGENT (INCLUDING,
IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY. DELIVERY OF CERTIFICATES(S), THE LETTER OF TRANSMITTAL, BOOK-ENTRY
CONFIRMATION OR ANY OTHER REQUIRED DOCUMENTS (INCLUDING THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY) AFTER THE ELECTION TIME WILL NOT BE VALID. A RETURN ENVELOPE
IS ENCLOSED.
No alternative, conditional or contingent tenders for cash will be accepted
and no fractional Shares will be purchased. All tendering stockholders, by
execution of this Letter of Transmittal (or fax hereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
2. Cash Election Price is paid to registered holder. If the check
representing the Cash Election Price and any Certificate for Shares not
tendered or not accepted for payment are to be issued in the same name as the
tendered Certificate is registered, the Letter of Transmittal should be
completed and signed exactly as the tendered Certificate is registered. Do not
sign the Certificate(s). If any of the shares tendered hereby are owned by two
or more joint owners, all such owners must sign this Letter of Transmittal
exactly as written on the face of the Certificate(s). If any shares are
registered in different names on several certificates, it will be necessary to
complete, sign and submit as many separate Letters of Transmittal as there are
different registrations.
3. Guarantee of Signatures. Except as otherwise provided below, signatures on
this Letter of Transmittal must be guaranteed by an entity which is a member in
good standing of a "Signature Guarantee Program" ("STAMP"), Stock Exchange
Medallion Program ("SEMP") or New York Stock Exchange Medallion Signature
Program ("MSP") (an "Eligible Institution"). Signature guarantees are not
required if the Certificate(s) tendered herewith are submitted by the
registered owner (which term, for purposes of this Section, includes any
participant in any Book-Entry Transfer Facilities system whose name appears on
a security position listing as the owner of the Shares) of such shares who has
not
<PAGE>
completed the section entitled "Special Payment and Issuance Instructions" or
"Special Delivery Instructions" or for the account of an Eligible Institution.
If the tendered Certificates are registered in the name of a person other than
the signer of this Letter of Transmittal, or if issuance is to be made to a
person other than the signer of this Letter of Transmittal, or if the issuance
is to be made to a person other than the registered owner or owners, then the
tendered certificates must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name or names of the registered
owners appear on such certificates or stock powers, with the signatures on the
Certificates or stock powers guaranteed by an Eligible Institution as provided
herein.
4. Special Payment and Issuance and Delivery Instructions. Indicate the name
and address to which the check representing the Cash Election Price and/or any
Certificate for Shares not tendered or not accepted for payment is to be sent
if different from the name and/or address of the person(s) signing this Letter
of Transmittal.
5. Letter of Transmittal Required; Tender of Certificate(s), Lost
Certificate(s). You will not receive your Cash Election Price unless and until
you deliver this Letter of Transmittal, properly completed and duly executed,
to the Tender Agent, together with the certificate(s) evidencing your shares
and any required accompanying evidences of authority. If the certificate(s) has
(have) been lost or destroyed, check the box on the reverse of this Letter of
Transmittal. In such event, the Tender Agent will forward additional
documentation necessary to be completed in order to replace such lost or
destroyed certificate(s).
6. Book-Entry Transfers. The Tender Agent will establish accounts with
respect to the Shares at The Depository Trust Company and Philadelphia
Depository Trust Company (the "Book-Entry Transfer Facilities") within two
business days after the date of the Joint Proxy Statement/Prospectus. Any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a Book-
Entry Transfer Facility to transfer such Shares into the Tender Agent's account
in accordance with such Book-Entry Transfer Facility's procedures for such
transfer. However, although delivery of Shares may be effected through book-
entry transfer into the Tender Agent's account at a Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or any Agent's
Message, and any other required documents, must, in any case, be transmitted
to, and received by, the Tender Agent at one of its addresses set forth on the
front of this Letter of Transmittal prior to the Election Time, or the delivery
procedures described below. The confirmation of a book-entry transfer of Shares
into the Tender Agent's accounts is referred to herein as a "Book-Entry
Confirmation". Delivery of documents to a Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures does not
constitute delivery to the Tender Agent.
7. Partial Tenders for Cash (Applicable to Certificate Stockholders Only). If
fewer than all the Shares evidenced by any Certificate submitted are to be
tendered for cash, fill in the number of Shares that are to be tendered for
cash in the box entitled "Number of Shares Tendered". In any such case, new
Certificate(s) for the remainder of the Shares not purchased will be sent to
the registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the acceptance for payment
of, and payment for, the Shares tendered herewith. All Shares represented by
Certificates delivered to the Tender Agent will be deemed to have been tendered
for cash unless otherwise indicated.
8. Stock Transfer Taxes. Except as provided below, The Santa Anita Companies
will pay any stock transfer taxes with respect to the transfer and sale of
Shares to it or its order pursuant to the Cash Election. If, however, payment
of the Cash Election Price is to be made to, or if Certificates for Shares not
tendered for cash or accepted for payment are to be registered in the name of,
any person(s) other than the registered owner(s), or if tendered Certificates
are registered in name(s) of any person(s) other than the person(s) signing
this Letter of Transmittal, the amount of any stock transfer taxes (whether
imposed on the registered owner(s) or such person(s)) payable on account of the
transfer to such person(s) will be deducted from the Cash Election Price unless
satisfactory evidence of the payment of such taxes or exemption therefrom is
submitted.
Except as provided in this Instruction 8, it will not be necessary for
transfer tax stamps to be affixed to the Certificates listed in this Letter of
Transmittal.
9. Form W-9. Each stockholder who tenders for cash one or more certificates
is required to provide the Tender Agent with such stockholder's correct
Taxpayer Identification Number ("TIN") on Form W-9, which is attached. Failure
to provide the information on the form may subject the tendering stockholder to
31% federal income tax withholding on the payment of any cash consideration due
for the shares evidenced by the certificate(s) tendered. The words "Applied
For" should be written in the space for the TIN in Part I of the form if the
tendering stockholder has not been issued a TIN and has applied for a number or
intends to apply for a number in the near future. If the words "Applied For"
are written in Part I and the Tender Agent is not provided with a TIN within 60
days, the Tender Agent will withhold 31% on all payments to such tendering
stockholders of any cash consideration due for their former Shares until a TIN
is provided to the Tender Agent.
10. Withdrawal Rights. Cash Elections are irrevocable, except that a Cash
Election and the shares of Paired Common Stock to which such Cash Election
relates may be withdrawn at any time prior to the Election Time. For a
withdrawal to be effective, a written, telegraphic or facsimile transmission of
notice of withdrawal must be recieved by the
<PAGE>
Tender Agent at one of its addresses set forth herein no later than the
Election Time. Any notice of withdrawal must specify the name of the person who
completed the Letter of Transmittal or Notice of Guaranteed Delivery, the
number of shares of Paired Common Stock to be withdrawn and the name of the
registered holder, if different from that of the person who completed the
Letter of Transmittal or Notice of Guaranteed Delivery. If share certificates
evidencing the shares of Paired Common Stock to be withdrawn have been
delivered or otherwise identified to the Tender Agent, then, prior to the
physical release of such share certificates, the serial numbers shown on such
share certificates must be submitted to the Tender Agent and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
the shares have been tendered pursuant to the procedure for book-entry transfer
as described in Instruction 6 above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn shares and must be signature guaranteed by an
Eligible Institution.
All questions as to the form and validity of any notice of withdrawal will be
determined by The Santa Anita Companies, in their sole discretion, whose
determination will be final and binding. None of The Santa Anita Companies,
Meditrust, any of their affiliates or assigns, Harris Trust Company of New York
or any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
The withdrawal of a Cash Election and the shares of Paired Common Stock to
which such Cash Election relates may not be rescinded. Any shares of Paired
Common Stock with respect to which a Cash Election has been properly and
effectively withdrawn will no longer be eligible to be purchased for the Cash
Election Price.
<PAGE>
IMPORTANT TAX INFORMATION PAYER: HARRIS TRUST COMPANY OF NEW YORK
WHAT TAXPAYER ---------------------------------------------------
IDENTIFICATION NUMBER TO SUBSTITUTE PART I - PART III-
GIVE THE PROCESSING AGENT FORM W-9 PLEASE Social
PROVIDE YOUR Security OR
TIN IN THE BOX Employer
AT THE RIGHT Identification
AND CERTIFY BY Number
SIGNING AND ---------------
DATING BELOW (If awaiting
DEPARTMENT OF THE TREASURY TIN WRITE
INTERNAL REVENUE SERVICE "Applied For")
CERTIFICATION - Under penalties of perjury, I
certify that:
The registered holder PAYER'S REQUEST FOR
is required to give the TAXPAYER
Tender Agent the social (1) The number shown on this form is my correct
security number or Taxpayer Identification Number (or I am waiting
employer identification for a number to be issued to me), and
number of the IDENTIFICATION NUMBER (TIN)
registered holder of
the certificate(s). If (2) I am not subject to backup withholding either
the certificate(s) are because I have not been notified by the Internal
in more than one name Revenue Service (IRS) that I am subject to backup
or are not in the name withholding as a result of a failure to report
of the actual owner, all interest or dividends, or the IRS has
consult the enclosed notified me that I am no longer subject to backup
Form W-9 guidelines for withholding.
additional guidance on
which numbers to
report.
----------------------------------
PART II - For Payees exempt
from backup withholding, see
the enclosed Guidelines for
Certification of Taxpayer
Identification Number on
Substitute Form W-9 and
complete as instructed therein.
CERTIFICATION INSTRUCTIONS - You must cross out
item (2) above if you have been notified by the
IRS that you are subject to backup withholding
because of underreporting interest or dividends
on your tax return. However, if after being
notified by the IRS that you were subject to
backup withholding, you received another
notification from the IRS that you were no longer
subject to backup withholding, do not cross out
item (2). (Also see instructions in the enclosed
Guidelines.)
---------------------------------------------------
SIGNATURE............... DATE....................
NOTE: FAILURE TO COMPLETE AND RETURN THIS
SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF
YOU ARE AWAITING YOUR TIN.
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION
NUMBER
I certify under penalties of perjury that a TIN
has not been issued to me, and either (1) I have
mailed or delivered an application to receive a
TIN to the appropriate IRS Center or Social
Security Administration Office or (2) I intend
to mail or deliver an application in the near
future. I understand that if I do not provide a
TIN by the time of payment, 31% of all payments
made to me thereafter will be withheld until I
provide a number.
Signature _____________ Date ___________________
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES FOR CASH OF PAIRED COMMON STOCK
OF
SANTA ANITA REALTY ENTERPRISES, INC.
AND
SANTA ANITA OPERATING COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON FRIDAY, OCTOBER 24, 1997
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates representing paired shares of
common stock, par value $.10 per share (collectively, the "Shares"), of The
Santa Anita Companies are not immediately available, if the procedure for
Book-Entry transfer cannot be completed on a timely basis, or if time will not
permit all required documents to reach the Tender Agent (as identified below)
prior to the time specified above. Such form may be delivered by hand or
transmitted by telegram, facsimile transmission or mail to the Tender Agent.
See Instruction 1 of the Letter of Transmittal Instructions.
The Tender Agent for the Offer is:
HARRIS TRUST
COMPANY OF NEW YORK
By Hand/Overnight Courier: By Mail:
HARRIS TRUST HARRIS TRUST
COMPANY OF NEW YORK COMPANY OF NEW YORK
WALL STREET PLAZA WALL STREET STATION
88 PINE STREET P.O. BOX 1010
19TH FLOOR NEW YORK, NY 10268-1010
NEW YORK, NY 10005
By Facsimile Transmission: Confirm by Telephone:
(FOR ELIGIBLE INSTITUTIONS ONLY) (800) 245-7630
(212) 701-7636
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
LADIES AND GENTLEMEN:
The undersigned hereby tenders for cash the shares of Paired Common Stock of
The Santa Anita Companies, upon the terms and subject to the conditions set
forth in the Joint Proxy Statement/Prospectus dated September 26, 1997 and the
related Letter of Transmittal (which together constitute the "Offer"), receipt
of which is hereby acknowledged, the number of Shares indicated below pursuant
to the guaranteed delivery procedures set forth in Instruction 1 of the Letter
of Transmittal.
<PAGE>
Certificate No(s). (if available)_______________________________________________
Number of Shares:_______________________________________________________________
Check ONE box if Shares will be tendered by book-entry transfer:
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
Account Number__________________________________________________________________
Dated____________________________________________________________________ , 1997
Name(s) of Record Holder(s)_____________________________________________________
(Please Type or Print)
Address(es)_____________________________________________________________________
Zip Code
Area Code and Tel. No.__________________________________________________________
Signature(s)____________________________________________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion
Program, (a) represents that the above named person(s) "own(s)" the Shares
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (b)
represents that such tender of Shares complies with Rule 14e-4 under the
Exchange Act, and (c) guarantees delivery to the Depositary, at one of its
addresses set forth above, of certificates representing the Shares
tendered hereby in proper form for transfer, or confirmation of book-entry
transfer of such Shares into the Depositary's accounts at The Depository
Trust Company or Philadelphia Depository Trust Company, in each case with
delivery of a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), and any other required documents, within three New
York Stock Exchange trading days after the date hereof.
Name of Firm: _______________________ _________________________________
Authorized Signature
_________________________________
Title
Address: ____________________________ Name:____________________________
Please Type or Print
_____________________________________ Title:___________________________
Zip Code
Area Code and Telephone Number: _____
Dated:____________________ , 1997
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT 5
September 10, 1997
(213) 669-6000
Santa Anita Realty Enterprises, Inc.
301 West Huntington Drive, Suite 405
Arcadia, California 91007
Santa Anita Operating Company
285 West Huntington Drive
Arcadia, California 91007
Re: Registration Statement on Form S-4
Dear Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933, as
amended (the "Act") of up to 83,703,723 shares of Common Stock of Santa Anita
Realty Enterprises, Inc. ("Realty"), par value $0.10 per share ("Realty Common
Stock"), and up to 83,703,723 shares of Common Stock of Santa Anita Operating
Company ("Operating"), par value $0.10 per share ("Operating Common Stock"), to
be issued in connection with the proposed mergers of Meditrust with and into
Realty and Meditrust Acquisition Company with and into Operating (collectively,
the "Mergers"), pursuant to the Registration Statement on Form S-4 (File Nos.
333-34831 and 333-34831-01) (the "Registration Statement"), filed by Realty and
Operating with the Securities and Exchange Commission on September 2, 1997, you
have requested our opinion set forth below. Such shares of Realty Common Stock
and Operating Common Stock, which will be paired for transfer and trading
purposes, are referred to herein as "Shares."
We have considered such facts and examined such questions of law as we have
considered appropriate for purposes of rendering the opinion expressed below.
We are opining only as to the General Corporation Law of the State of
Delaware and we express no opinion with respect to the applicability or the
effect of any other laws or as to any matters of municipal law or of any other
local agencies within any state.
Subject to the foregoing and in reliance thereon, in our opinion, upon
approval of the Mergers by the respective stockholders of Realty, Operating,
Meditrust and Meditrust Acquisition Company in accordance with the terms and
conditions set forth in the Registration Statement and the filing of
Certificates of Merger with the Secretary of State of the State of Delaware and
Certificates of Termination with the Secretary of State of the Commonwealth of
Massachusetts and the issuance and delivery of the shares pursuant to the
Mergers, the Shares will be duly authorized, validly issued, fully paid and
non-assessable.
We consent to your filing this opinion as an exhibit to the Registration
Statement and the reference to our firm under the headings "The Mergers--
Material Federal Income Tax Consequences of the Mergers" and "Legal Matters."
Very truly yours,
O'MELVENY & MYERS LLP
<PAGE>
Exhibit 8.1
September 26, 1997
Santa Anita Realty Enterprises, Inc.
301 West Huntington Drive
Arcadia, California 91007
Re: Santa Anita Realty Enterprises, Inc. and
Santa Anita Operating Company -- Joint
Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
In connection with the above-referenced joint registration statement
(the "Joint Registration Statement") regarding the proposed merger or Meditrust,
a Massachusetts business trust ("Meditrust"), and Meditrust Acquisition Company,
a Massachusetts business trust ("MAC"), into Santa Anita Realty Enterprises,
Inc., a Delaware corporation ("Realty", which after the Effective Time will be
named Meditrust Corporation), and Santa Anita Operating Company, a Delaware
corporation ("Operating Company"), respectively, pursuant to the Third Amended
and Restated Agreement and Plan of Merger, dated as of April 13, 1997, by and
between Realty, Operating Company, Meditrust and MAC (the "Merger Agreement"),
you have requested our opinion regarding certain federal income tax matters
related to Realty. Capitalized terms used in this letter and not otherwise
defined herein have the meanings assigned to such terms in the Joint
Registration Statement or the Merger Agreement.
The opinion set forth in this letter is based on relevant provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
thereunder (including proposed, temporary and final Treasury Regulations, the
"Regulations") and interpretations of the foregoing as expressed in court
decisions, administrative determinations, and the legislative history as of the
date hereof. These provisions and interpretations are subject to change, which
may or may not be
<PAGE>
Page 2 - Santa Anita Realty Enterprises, Inc. - September 26, 1997
retroactive in effect, that might result in modifications of our opinion.
In rendering our opinion we examined such records, documents and other
materials as we considered necessary or appropriate as a basis for such opinion,
including the following: (1) the Merger Agreement, (2) the Joint Registration
Statement (including all amendments made through the date hereof), (3) the
Pairing Agreement, dated December 20, 1979, as amended, between Realty and
Operating Company, (4) the Articles of Incorporation and Bylaws of Realty and
Operating Company, each as of the first taxable year for which Realty elected to
be a REIT, and as amended to the date hereof, (5) a copy of the Annual Reports
on Form 10-K for each of the years 1994-1996 for Pacific Gulf Properties Inc., a
Maryland corporation of which Realty was a shareholder (the "Pacific Gulf Annual
Reports"), (6) a letter from Realty's financial advisor, dated May 15, 1997,
advising Realty of the relative values of Realty Common Shares and Operating
Common Shares as of April 13, 1997, (7) the private letter rulings, dated
October 16, 1979 and January 11, 1980 (the "Private Letter Rulings") relating to
the qualification of rent receipts received by Realty from Los Angeles Turf
Club, Incorporated, a wholly-owned subsidiary of Operating Company, as "rents
from real property" for REIT purposes, and (8) such other documents and
information provided by Realty as we deemed relevant to our opinion.
In addition, Realty and Meditrust have each provided us with a certificate
(the "Officers' Certificates"), executed by duly appointed officers of Realty
and Meditrust, respectively, setting forth certain representations relating to
the manner in which Realty and Operating Company, and Meditrust and MAC, have
been owned and operated prior to the Mergers, and will be owned and operated
after the Mergers. We have also relied on the statements in the Joint
Registration Statement, the Merger Agreement and other documents relating to the
Merger (the "Documents") regarding the operation and ownership of Meditrust,
MAC, Realty and Operating Company, and on statements in the Pacific Gulf Annual
Reports regarding qualification of Pacific Gulf Properties Inc. as a REIT under
the Code. We have neither independently investigated nor verified such
representations or statements, and we assume that such representations and
statements are true, correct and complete and that all representations made "to
the best of the knowledge and belief" of any person or party or with similar
qualification are and will be true, correct and complete as if made without such
qualification and that no action will occur from the date hereof until the
Mergers that is inconsistent with such representations.
<PAGE>
Page 3 - Santa Anita Realty Enterprises, Inc. - September 26, 1997
We have assumed for the purposes of this opinion that (1) the Mergers and
related transactions contemplated by the Documents will be consummated in
accordance with the Documents and as described in the Joint Registration
Statement (including satisfaction of all covenants and conditions therein
without amendment or waiver thereof) and (2) Realty, Operating Company,
Meditrust and MAC, and any affiliated entities, have operated and will operate
consistent with their governing documents and applicable laws. We confirm to
you, however, that we are not aware of any facts that would lead us to believe
that any of these assumptions is false in any material way.
We have also assumed in rendering the opinion set forth herein (1) the
genuineness of all signatures on documents we have examined, (2) the
authenticity of all documents submitted to us as originals, (3) the conformity
to the original documents of all documents submitted to us as copies, (4) the
conformity of final documents to all documents submitted to us as drafts, (5)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (6) the accuracy and completeness of all
records made available to us, (7) the factual accuracy of all representations,
warranties and other statements made by all parties, and (8) the continued
accuracy of all documents, certificates, warranties and covenants on which we
have relied in rendering the opinion set forth below and that were given or
dated earlier than the date of this letter, insofar as relevant to the opinion
set forth herein, from such earlier date through and including the date of this
letter. No facts have come to our attention, however, that would cause us to
question the accuracy of any such documents, certificates, statements,
representations, warranties or covenants in a material way.
Based upon and subject to the foregoing, we are of the opinion that:
1. For the calendar year 1996, Realty met the requirements of the Code for
qualification as a REIT, and if Realty continues its operations in the same
manner as it has in such year, Realty will continue to so qualify.
2. Assuming Realty and Operating Company will conduct their operations in
accordance with the Private Letter Rulings, the consummation by Realty and
Operating of the transaction contemplated by the Merger Agreement will not
adversely affect the qualification of Realty as a REIT or its ability to retain
its status as grandfathered from the application of Section
<PAGE>
Page 4 - Santa Anita Realty Enterprises, Inc. - September 26, 1997
269B(a)(3) of the Code pursuant to Section 136(c)(3) of the Deficit Reduction
Act of 1984.
Realty's continuing qualification and taxation as a REIT after the Merges
will depend upon Realty's ability to meet on an ongoing basis, through actual
operations, the various requirements of the Code and the Regulations described
in the Joint Registration Statement with regard to, among other things, its
income, assets, distribution, ownership and certain administrative matters.
O'Melveny & Myers LLP will not review Realty's compliance with these
requirements. Accordingly, no assurance can be given that Realty will continue
to satisfy the requirements for qualification and taxation as a REIT for any
particular taxable year.
Other than as expressly stated above, we express no opinion on any issue
relating to Realty or to any investment therein. Meditrust and Operating Company
may rely on this opinion as though it were addressed to them.
We hereby consent to the filing of this opinion as an exhibit to the Joint
Registration Statement and to the use of the name of our firm therein and under
the captions "Material Federal Income Tax Treatment of the Mergers" and "Legal
Matters" in the Joint Registration Statement.
Respectfully submitted,
O'MELVENY & MYERS LLP
<PAGE>
Exhibit 8.2
[Letterhead of Nutter, McClennen & Fish, LLP]
September 26, 1997
Meditrust
197 First Avenue
Needham, Massachusetts 02194
Re: Santa Anita Realty Enterprises, Inc. and
Santa Anita Operating Company -- Joint
Registration Statement on Form S-4 (File Nos. 333-34831 and 333-34831-01)
Ladies and Gentlemen:
In connection with the above-referenced joint registration statement (the
"Joint Registration Statement") regarding the proposed merger of Meditrust, a
Massachusetts business trust ("Meditrust"), and Meditrust Acquisition Company, a
Massachusetts business trust ("MAC"), into Santa Anita Realty Enterprises,
Inc., a Delaware corporation ("Realty", which after the Effective Time will be
named Meditrust Corporation), and Santa Anita Operating Company, a Delaware
corporation ("Operating Company"), respectively (the "Mergers"), pursuant to the
Third Amended and Restated Agreement and Plan of Merger, dated as of April 13,
1997 by and between Realty, Operating Company, Meditrust and MAC (the "Merger
Agreement"), you have requested our opinion regarding certain federal income tax
matters related to Meditrust. Capitalized terms used in this letter and not
otherwise defined herein have the meanings assigned to such terms in the Joint
Registration Statement or the Merger Agreement.
The opinion set forth in this letter is based on relevant provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
thereunder (including proposed and temporary Treasury Regulations) and
interpretations of the foregoing as expressed in court decisions, administrative
determinations, and legislative history as of the date hereof. The provisions
and interpretations are subject to change, which may or may not be retroactive
in effect, that might result in modifications of our opinion.
In regarding our opinion we examined such records, documents and other
materials as we considered necessary or appropriate as a basis for such opinion,
including the following: (1) the Merger Agreement, (2) the Joint Registration
Statement (including all amendments made through the date hereof), (3) the
Pairing Agreement, dated December 20, 1979, as amended, between Realty and
Operating Company, (4) the Declaration of Trust of Meditrust dated August 6,
1985, as restated on May 10, 1996 (as so restated, the "Declaration of Trust"),
(5) the by-laws of Meditrust adopted on August 6, 1985, as amended on February
24, 1992 (as so amended, the "By-laws"), (6) the private letter rulings of the
<PAGE>
Meditrust
September 26, 1997
Page 2
Internal Revenue Service ("IRS") addressed to Realty, dated October 16, 1979 and
January 11, 1980 (the "Private Letter Rulings") relating to the qualification of
rent receipts received by Realty from Los Angeles Turf Club, Incorporated, a
wholly-owned subsidiary of Operating Company, as "rents from real property" for
purposes of Code provisions applicable to a real estate investment trust
("REIT"), (7) the opinion of O'Melveny & Myers LLP of even date herewith
regarding certain federal income tax matters ("O'Melveny Opinion"), and (8) such
other documents and information provided by Meditrust and Realty as we deemed
relevant to our opinion.
In addition, Meditrust and Realty have each provided us with a certificate
(the "Officers' Certificates") executed by duly appointed officers of Meditrust
and Realty, respectively, setting forth certain representations relating to the
manner in which Meditrust, MAC, Realty and Operating Company have been owned and
operated prior to the Mergers, and will be owned and operated after the Mergers.
We have also relied on the statements in the Joint Registration Statement, the
Merger Agreement and other documents relating to the Merger (the "Documents")
regarding the operation and ownership of Meditrust, MAC, Realty and Operating
Company. We have neither independently investigated nor verified such
representations or statements, and we assume that such representations and
statements are true, correct and complete and that all representations made "to
the best of the knowledge and belief" of any person or party or with similar
qualification are and will be true, correct and complete as if made without such
qualification and that no action will occur from the date hereof until the
Mergers that is inconsistent with such representations.
We have assumed for the purposes of this opinion that the Mergers and
related transactions contemplated by the Documents will be consummated in
accordance with the Documents and as described in the Joint Registration
Statement (including satisfaction of all covenants and conditions therein
without amendment or waiver thereof), and that Meditrust, MAC, Realty and
Operating Company, and any affiliated entities, have operated and will operate
in accordance with their governing documents and applicable laws. We confirm to
you, however, that we are not aware of any facts that would lead us to believe
that any of these assumptions is false in any material way.
We have also assumed in rendering the opinion set forth herein (1) the
genuineness of all signatures on documents we have examined, (2) the
authenticity of all documents submitted to us as originals, (3) the conformity
to the original documents of all documents submitted to us as copies, (4) the
conformity of final documents to all documents submitted to us as drafts, (5)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (6) the accuracy and completeness of all
records made available to us, (7) the factual accuracy of all representations,
warranties and other statements made by all parties, and (8) the continued
accuracy of all documents,
<PAGE>
Meditrust
September 26, 1997
Page 3
certificates, warranties and covenants on which we have relied in rendering the
opinion set forth below and that were given or dated earlier than the date of
this letter, insofar as relevant to the opinion set forth herein, from such
earlier date through and including the date of this letter. No facts have come
to our attention, however, that would cause us to question the accuracy of any
documents, certificates, statements, representations, warranties or covenants in
a material way.
Based upon and subject to the foregoing, we are of the opinion that:
1. Immediately prior to the Effective Time, Meditrust met the requirements
of the Code for qualification as a REIT.
2. Assuming Realty and Operating Company will conduct their operations in
accordance with the Private Letter Rulings, the consummation by Realty and
Operating of the transaction contemplated by the Merger Agreement will not
adversely affect (i) the qualification of Realty as a REIT or (ii) its ability
to retain its status as grandfathered from the application of Section 269B(a)(3)
of the Code pursuant to Section 136(c)(3) of the Deficit Reduction Act of 1984.
Our opinion in the preceding clause (i) relies in part on the O'Melveny Opinion
as to the REIT status of Realty. Our opinion in the preceding clause (ii) is
given in reliance on the O'Melveny Opinion rendered as to this matter.
Realty's continuing qualification and taxation as a REIT after the Mergers
will depend upon Realty's ability to meet on an ongoing basis, through actual
operations, the various requirements of the Code and the Regulations described
in the Joint Registration Statement with regard to, among other things, its
income, assets, distribution, ownership and certain administrative matters.
Accordingly, no assurance can be given that Realty will continue to satisfy the
requirements for qualification and taxation as a REIT for any particular taxable
year.
Other than as expressly stated above, we express no opinion on any issue
relating to Meditrust, Realty or Operating Company or as to any investment
therein. In particular, our opinion addresses the matters set forth above under
U.S. federal income tax law only, and no opinion is expressed under the
provisions of any foreign, state or local tax law. Realty and Operating Company
may rely on this opinion as though it were addressed to them.
Although this opinion reflects our conclusions as to the application of
current law to the facts and transactions described herein, we can offer no
assurance that contrary positions will not be asserted by the IRS or that the
IRS or a court of law will not rule otherwise. We undertake no responsibility to
apprise you of any developments in the applicable law after the date of this
opinion.
<PAGE>
Meditrust
September 26, 1997
Page 4
We hereby consent to the filing of this opinion as an exhibit to the Joint
Registration Statement and to the use of the name of our firm therein and under
the caption "Material Federal Income Tax Treatment of the Mergers" in the Joint
Registration Statement.
Very truly yours,
NUTTER, McCLENNEN & FISH, LLP
<PAGE>
Exhibit 8.3
[Letterhead of Nutter, McClennen & Fish, LLP]
September 26, 1997
Meditrust
197 First Avenue
Needham, Massachusetts 02194
Re: Santa Anita Realty Enterprises, Inc. and
Santa Anita Operating Company -- Joint
Registration Statement on Form S-4 (File Nos. 333-34831 and 333-34831-01)
-------------------------------------------------------------------------
Ladies and Gentlemen:
In connection with the above-referenced joint registration statement (the
"Joint Registration Statement") regarding the proposed merger of Meditrust, a
Massachusetts business trust ("Meditrust"), and Meditrust Acquisition Company, a
Massachusetts business trust ("MAC"), into Santa Anita Realty Enterprises, Inc.,
a Delaware corporation ("Realty"), and Santa Anita Operating Company, a Delaware
corporation ("Operating Company"), respectively (the "Mergers"), pursuant to the
Third Amended and Restated Agreement and Plan of Merger, dated as of April 13,
1997 by and between Realty, Operating Company, Meditrust and MAC (the "Merger
Agreement"), you have requested our opinion regarding certain federal income tax
matters related to Meditrust. Capitalized terms used in this letter and not
otherwise defined herein have the meanings assigned to such terms in the Joint
Registration Statement or the Merger Agreement.
The opinion set forth in this letter is based on relevant provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
thereunder (including proposed and temporary Treasury Regulations) and
interpretations of the foregoing as expressed in court decisions, administrative
determinations, and legislative history as of the date hereof. These provisions
and interpretations are subject to change, which may or may not be retroactive
in effect, that might result in modifications of our opinion.
In rendering our opinion we examined such records, documents and other
materials as we considered necessary or appropriate as a basis for such opinion,
including the following: (1) the Merger Agreement, (2) the Joint Registration
Statement (including all amendments made through the date hereof), (3) the
opinion of O'Melveny and Myers LLP of even date herewith regarding certain
federal income tax matters, and (4) such other documents and information
provided by Meditrust, MAC, Realty and Operating Company as we deemed relevant
to our opinion.
<PAGE>
Meditrust
September 26, 1997
Page 2
In addition, Meditrust, MAC, Realty and Operating Company have each
provided us with a certificate (the "Officers' Certificates") executed by duly
appointed officers of each of such companies setting forth certain
representations relating to the Mergers. We have also relied on the statements
in the Joint Registration Statement, the Merger Agreement and other documents
relating to the Merger (the "Documents") regarding the operation and ownership
of Meditrust, MAC, Realty and Operating Company. We have neither independently
investigated nor verified such representations or statements, and we assume that
such representations and statements are true, correct and complete and that all
representations made "to the best of the knowledge and belief" of any person or
party or with similar qualification are and will be true, correct and complete
as if made without such qualification and that no action will occur from the
date hereof until the Mergers that is inconsistent with such representations.
We have assumed for the purposes of this opinion that (1) the Mergers and
related transactions contemplated by the Documents will be consummated in
accordance with the Documents and as described in the Joint Registration
Statement (including satisfaction of all covenants and conditions therein
without amendment or waiver thereof), (2) the Mergers will qualify as mergers
under the applicable laws of Massachusetts and Delaware, (3) each of Meditrust,
MAC, Realty and Operating Company will comply with all reporting obligations
with respect to the Mergers required under the Code and the Treasury
Regulations thereunder, and (4) the Merger Agreement and all other documents and
instruments referred to therein or in the Joint Registration Statement are valid
and binding in accordance with their terms. We confirm to you, however, that we
are not aware of any facts that would lead us to believe that any of these
assumptions is false in any material way.
We have also assumed in rendering the opinion set forth herein (1) the
genuineness of all signatures on documents we have examined, (2) the
authenticity of all documents submitted to us as originals, (3) the conformity
to the original documents of all documents submitted to us as copies, (4) the
conformity of final documents to all documents submitted to us as drafts, (5)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (6) the accuracy and completeness of all
records made available to us, (7) the factual accuracy of all representations,
warranties and other statements made by all parties, and (8) the continued
accuracy of all documents, certificates, warranties and covenants on which we
have relied in rendering the opinion set forth below and that were given or
dated earlier than the date of this letter, insofar as relevant to the opinion
set forth herein, from such earlier date through and including the date of this
letter. No facts have come to our attention, however, that would cause us to
question the accuracy of any documents, certificates, statements,
representations, warranties or covenants in a material way.
<PAGE>
Meditrust
September 26, 1997
Page 3
Any inaccuracy in, or breach of, any of the aforementioned statements,
representations, warranties and assumptions or any change after the date hereof
in applicable law could adversely affect our opinion. No ruling has been (or
will be) sought from the Internal Revenue Service by Meditrust, MAC, Realty and
Operating Company as to the federal income tax consequences of any aspect of the
Mergers.
Based solely upon and subject to the foregoing, as well as the limitations
set forth below, it is our opinion, under presently applicable federal income
tax laws, that the Mergers will be treated for federal income tax purposes as
reorganizations within the meaning of Section 368(a) of the Code. Alternatively,
with respect to the merger of MAC into Operating Company, it is our opinion,
under presently applicable federal income tax laws, that the merger will be
treated as a tax-free transaction pursuant to Section 351 of the Code.
Other than as expressly stated above, we express no opinion on any issue
relating to the Mergers that are the subject of the Joint Registration
Statement. In particular, our opinion addresses the matters set forth above
under U.S. federal income tax law only, and no opinion is expressed under the
provisions of any foreign, state or local tax law.
Although this opinion reflects our conclusions as to the application of
current law to the facts and transactions described herein, we can offer no
assurance that contrary positions will not be asserted by the Internal Revenue
Service or that the Internal Revenue Service or a court of law will not rule
otherwise. We undertake no responsibility to apprise you of any developments
in the applicable law after the date of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the Joint
Registration Statement and to the use of the name of our firm therein and under
the caption "Material Federal Income Tax Treatment of the Mergers" in the Joint
Registration Statement.
Very truly yours,
NUTTER, McCLENNEN & FISH, LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference of our report dated April 14, 1997 accompanying
the financial statements and schedules of:
(a) Santa Anita Companies
(b) Santa Anita Realty Enterprises, Inc., and
(c) Santa Anita Operating Company and Subsidiaries
appearing in the above-listed entities' Annual Report on Form 10-K for the year
ended December 31, 1996 as amended on Form 10-K/A, in the Joint Proxy
Statement/Prospectus included in the Registration Statement on Form S-4 of
Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company.
/s/ Ernst & Young LLP
Ernst & Young LLP
Los Angeles, California
September 24, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4 (File Nos. 333-34831 and 333-34831-01) of our report dated January
16, 1997, on our audits of the consolidated financial statements and financial
statement schedules of Meditrust as of December 31, 1996 and 1995 and for the
years ended December 31, 1996 , 1995 and 1994. We also consent to the reference
to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
September 24, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Santa Anita Realty Enterprise, Inc.
and
Santa Anita Operating Company:
We consent to incorporation by reference in the Joint Registration on Form S-4
of Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company of
our report dated February 10, 1997, relating to the consolidated balance sheets
of H-T Associates and subsidiary (the "Partnership") as of December 31, 1996
and 1995, and the related consolidated statements of operations, partners'
capital (deficit) and cash flows for each of the years in the three-year period
ended December 31, 1996, which report appears in the December 31, 1996 Joint
Annual Report on Form 10-K of Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company and to the reference to our firm under the heading
"Experts" in the Joint Registration Statement. Our report dated February 10,
1997, contains an explanatory paragraph that states that the Partnership's
primary subsidiary is in technical default on its notes payable at December 31,
1996. As such, those notes may be callable at the lender's discretion. This
technical default raises substantial doubt about the Partnership's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
San Diego, California
September 23, 1997
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Santa Anita Realty Enterprise, Inc.
and
Santa Anita Operating Company:
We consent to incorporation by reference in the Joint Registration on Form S-4
of Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company of
our report dated February 7, 1997, relating to the balance sheets of Anita
Associates as of December 31, 1996 and 1995, and the related statements of
income, partners' deficit and cash flows for each of the years in the three-
year period ended December 31, 1996, which report appears in the December 31,
1996 Joint Annual Report on Form 10-K of Santa Anita Realty Enterprises, Inc.
and Santa Anita Operating Company and to the reference to our firm under the
heading "Experts" in the Joint Registration Statement.
/s/ KPMG Peat Marwick LLP
San Diego, California
September 23, 1997
<PAGE>
EXHIBIT 23.6
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
555 CALIFORNIA STREET
SAN FRANCISCO,
CALIFORNIA 94104
(415) 576-2000
September 23, 1997
Santa Anita Realty Enterprises, Inc.
Santa Anita Operating Company
301 West Huntington Drive
Suite 405
Arcadia, California 91007-3471
Dear Sirs:
We hereby consent to the inclusion in the Joint Registration Statement of
Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company
(together the "Santa Anita Companies") on Form S-4, of our opinion letter
appearing as Annex B to the Joint Proxy Statement/Prospectus which is part of
the Joint Registration Statement, and to the references of our firm name
therein. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations adopted by the
Securities and Exchange Commission thereunder, nor do we admit that we are
experts with respect to any part of the Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ Ron D. Sturzenegger
By: ____________________________
Ron D. Sturzenegger
Principal
<PAGE>
EXHIBIT 23.7
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, N.Y. 10020
Telephone (212) 632-6000 New York
Facsimile (212) 632-6060
September 25, 1997
To the Board of Directors:
We hereby consent to the reference to the presentation of our Firm, dated
April 13, 1997, to the Board of Trustees of Meditrust under the caption "The
Mergers--Financial Analysis of Financial Advisor to Meditrust and MAC" in the
Joint Proxy Statement/Prospectus of Meditrust, Meditrust Acquisition Company
and The Santa Anita Companies, which Joint Proxy Statement/Prospectus is part
of the Registration Statement on Form S-4 of The Santa Anita Companies. In
giving such consent, we do not thereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"expert" as used in, or that we come within the category of persons whose
consent is required under Section 7 of, the Securities Act of 1933 or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
LAZARD FRERES & CO. LLC
/s/ J. Ira Harris
By _________________________
J. Ira Harris, Managing Director
<PAGE>
EXHIBIT 23.8
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I hereby consent to the reference to me as a prospective director of
Meditrust Corporation and Meditrust Operating Company where it appears in this
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
/s/ Abraham D. Gosman
_________________________________
Abraham D. Gosman
<PAGE>
EXHIBIT 23.9
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I hereby consent to the reference to me as a prospective director of
Meditrust Corporation and Meditrust Operating Company where it appears in this
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
/s/ David F. Benson
_________________________________
David F. Benson
<PAGE>
EXHIBIT 23.10
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I hereby consent to the reference to me as a prospective director of
Meditrust Corporation and Meditrust Operating Company where it appears in this
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
/s/ Edward W. Brooke
_________________________________
Edward W. Brooke
<PAGE>
EXHIBIT 23.11
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I hereby consent to the reference to me as a prospective director of
Meditrust Corporation and Meditrust Operating Company where it appears in this
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
/s/ C. Gerald Goldsmith
_________________________________
C. Gerald Goldsmith
<PAGE>
EXHIBIT 23.12
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I hereby consent to the reference to me as a prospective director of
Meditrust Corporation and Meditrust Operating Company where it appears in this
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
/s/ Philip L. Lowe
_________________________________
Philip L. Lowe
<PAGE>
EXHIBIT 23.13
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I hereby consent to the reference to me as a prospective director of
Meditrust Corporation and Meditrust Operating Company where it appears in this
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
/s/ Thomas J. Magovern
_________________________________
Thomas J. Magovern
<PAGE>
EXHIBIT 23.14
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I hereby consent to the reference to me as a prospective director of
Meditrust Corporation and Meditrust Operating Company where it appears in this
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
/s/ Gerald Tsai, Jr.
_________________________________
Gerald Tsai, Jr.
