UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 for the
transition period from ___ to ____
<TABLE>
<S> <C>
Commission file number 0-9109 Commission file number 0-9110
MEDITRUST CORPORATION MEDITRUST OPERATING COMPANY
--------------------- ---------------------------
(Exact name of registrant as specified (Exact name of registrant as specified
in its charter) in its charter)
Delaware Delaware
-------- --------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
95-3520818 95-3419438
---------- ----------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
197 First Avenue, Suite 300 197 First Avenue, Suite 100
Needham Heights, Massachusetts 02194-9127 Needham Heights, Massachusetts 02194-9127
- ----------------------------------------- -----------------------------------------
(Address of principal executive (Address of principal executive
offices including zip code) offices including zip code)
(781) 433-6000 (781) 453-8062
-------------- --------------
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
</TABLE>
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No .
--- ---
The number of shares outstanding of each of the issuers' classes of common
stock, as of the close of business on July 31, 1998 were:
Meditrust Corporation 152,319,814
Meditrust Operating Company 151,014,437
<PAGE>
THE MEDITRUST COMPANIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
The Meditrust Companies
Combined Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997 4
Combined Consolidated Statements of Income for the three
months ended June 30, 1998 and 1997 (unaudited) 5
Combined Consolidated Statements of Income for the six months
ended June 30, 1998 and 1997 (unaudited) 6
Combined Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 (unaudited) 7
Meditrust Corporation
Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997 8
Consolidated Statements of Income for the three months
ended June 30, 1998 and 1997 (unaudited) 9
Consolidated Statements of Income for the six months
ended June 30, 1998 and 1997 (unaudited) 10
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 (unaudited) 11
Meditrust Operating Company
Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997 12
Consolidated Statement of Operations for the three months
ended June 30, 1998 (unaudited) 13
Consolidated Statement of Operations for the six months
ended June 30, 1998 (unaudited) 14
Consolidated Statement of Cash Flows for the six months
ended June 30, 1998 (unaudited) 15
Notes to Combined Consolidated Financial Statements (unaudited) 16
</TABLE>
-2-
<PAGE>
THE MEDITRUST COMPANIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 32
Part II. Other Information
Item 1. Legal Proceedings 47
Item 2. Changes in Securities 48
Item 4. Submission of Matters to a Vote of Security Holders 49
Item 5. Other Information 51
Item 6. Exhibits and Reports on Form 8-K 51
Signatures 55
</TABLE>
-3-
<PAGE>
ITEM I. FINANCIAL INFORMATION
THE MEDITRUST COMPANIES
COMBINED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(In thousands) (Unaudited)
<S> <C> <C>
Assets
Real estate investments, net (Note 3) $ 3,345,261 $ 2,935,772
Cash and cash equivalents 61,576 43,732
Fees, interest and other receivables 76,420 23,650
Goodwill 345,110 194,893
Other assets, net (Note 5) 131,842 82,236
-------------- -------------
Total assets $ 3,960,209 $ 3,280,283
============== =============
Liabilities and Shareholders' Equity
Indebtedness (Note 4):
Notes payable, net $ 901,750 $ 900,594
Convertible debentures, net 227,631 234,000
Bank notes payable, net 129,691 179,527
Bonds and mortgages payable, net 77,536 63,317
-------------- -------------
Total indebtedness 1,336,608 1,377,438
Accounts payable, accrued expenses and other liabilities 103,331 77,106
-------------- -------------
Total liabilities 1,439,939 1,454,544
-------------- -------------
Commitments and contingencies (Notes 3, 10, and 13) -- --
Shareholders' equity (Notes 4, 5, 6 and 11):
Meditrust Corporation Preferred Stock, $.10 par value;
6,000 shares authorized; 700 and no shares issued and
outstanding at June 30, 1998 and December 31, 1997,
respectively 70
Paired Common Stock, $.20 combined par value; 270,000
shares authorized; 106,288 and 88,128 paired shares
issued and outstanding at June 30, 1998 and
December 31, 1997, respectively 21,257 17,626
Additional paid-in-capital 2,705,384 2,001,086
Distributions in excess of net income (206,441) (192,973)
-------------- -------------
Total shareholders' equity 2,520,270 1,825,739
-------------- -------------
Total liabilities and shareholders' equity $ 3,960,209 $ 3,280,283
============== =============
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-4-
<PAGE>
THE MEDITRUST COMPANIES
COMBINED CONSOLIDATED STATEMENTS OF INCOME
for the three months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(In thousands, except per share amounts)
Revenue:
Rental $ 49,062 $ 33,798
Interest 38,629 37,216
Horse racing 13,196
Golf course 13,252
---------- ----------
114,139 71,014
---------- ----------
Expenses:
Interest 24,768 20,263
Depreciation and amortization 12,975 6,490
Amortization of goodwill 1,898 389
General and administrative 3,923 1,925
Horse racing operations 11,234
Golf course operations 9,818
Rental property operations 1,457
Income from unconsolidated joint venture (337)
---------- ----------
65,736 29,067
---------- ----------
Net income 48,403 41,947
Preferred stock dividends (613)
---------- ----------
Net income available to Paired
Common shareholders $ 47,790 $ 41,947
========== ==========
Basic earnings per Paired Common Share (Note 11) $ .48 $ .57
========== ==========
Diluted earnings per Paired Common Share (Note 11) $ .47 $ .56
========== ==========
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-5-
<PAGE>
THE MEDITRUST COMPANIES
COMBINED CONSOLIDATED STATEMENTS OF INCOME
for the six months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(In thousands, except per share amounts)
Revenue:
Rental $ 93,059 $ 66,091
Interest 77,317 72,888
Horse racing 49,707
Golf course 13,252
Other (Note 3) 26,000
---------- ----------
259,335 138,979
---------- ----------
Expenses:
Interest 50,221 38,378
Depreciation and amortization 24,246 12,577
Amortization of goodwill 3,474 778
General and administrative 8,307 4,246
Horse racing operations 39,430
Golf course operations 9,818
Rental property operations 2,722
Income from unconsolidated joint venture (448)
Other (Note 7) 21,541
---------- ----------
159,311 55,979
---------- ----------
Net income 100,024 83,000
Preferred stock dividends (613)
---------- ----------
Net income available to Paired
Common shareholders $ 99,411 $ 83,000
========== ==========
Basic earnings per Paired Common Share (Note 11) $ 1.04 $ 1.12
========== ==========
Diluted earnings per Paired Common Share (Note 11) $ 1.02 $ 1.12
========== ==========
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-6-
<PAGE>
THE MEDITRUST COMPANIES
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 100,024 $ 83,000
Depreciation of real estate 22,934 12,346
Goodwill amortization 3,474 778
Shares issued for compensation 288 1,000
Equity in income of joint venture, net of dividends received 802
Other depreciation, amortization and other items, net 6,376 368
Other non cash expenses 10,444
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
AVAILABLE FOR DISTRIBUTION 144,342 97,492
Net change in other assets and liabilities (18,492) (10,664)
----------- ----------
Net cash provided by operating activities 125,850 86,828
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of paired common and Realty preferred stock 456,713 --
Proceeds from borrowings on bank notes payable 550,000 373,000
Repayment of bank notes payable (600,000) (121,000)
Equity offering and debt issuance costs (11,339) (39)
Principal payments on bonds and mortgages payable (7,159) (510)
Distributions to shareholders (112,879) (87,346)
Proceeds from exercise of stock options 3,836 3,463
----------- ----------
Net cash provided by financing activities 279,172 167,568
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of real estate and development funding (347,603) (148,135)
Investment in real estate mortgages and development funding (133,666) (125,839)
Prepayment proceeds and principal payments received
on real estate mortgages 266,260 7,037
Proceeds from sale of real estate 4,709
Acquisition of Cobblestone (178,523)
Cash acquired in Cobblestone merger 723
Working capital advances and acquisition of receivables, net
of repayments and collections 922 (485)
Investment in equity securities (552)
----------- ----------
Net cash used in investing activities (387,178) (267,974)
----------- ----------
Net increase (decrease) in cash and cash equivalents 17,844 (13,578)
CASH AND CASH EQUIVALENTS AT:
Beginning of period 43,732 42,726
----------- ----------
End of period $ 61,576 $ 29,148
=========== ==========
Supplemental disclosure of cash flow information (Note 2)
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-7-
<PAGE>
MEDITRUST CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------- ---------------
(In thousands) (Unaudited)
<S> <C> <C>
Assets
Real estate investments, net (Note 3) $ 3,345,261 $ 2,935,772
Cash and cash equivalents 43,315 24,059
Fees, interest and other receivables 68,996 21,070
Goodwill 313,087 162,408
Due from Meditrust Operating Company 30,990 18,490
Other assets, net (Note 5) 75,175 54,129
-------------- -------------
Total assets $ 3,876,824 $ 3,215,928
============== =============
Liabilities and Shareholders' Equity
Indebtedness (Note 4):
Notes payable, net $ 901,750 $ 900,594
Convertible debentures, net 227,631 234,000
Bank notes payable, net 129,691 179,527
Bonds and mortgages payable, net 77,536 63,317
-------------- -------------
Total indebtedness 1,336,608 1,377,438
Accounts payable, accrued expenses and other liabilities 59,993 46,250
-------------- -------------
Total liabilities 1,396,601 1,423,688
-------------- -------------
Commitments and contingencies (Notes 3, 10, and 13) -- --
Shareholders' equity (Notes 4, 5, 6 and 11):
Preferred Stock, $.10 par value; 6,000 shares authorized;
700 and no shares issued and outstanding at June 30, 1998
and December 31, 1997, respectively 70
Common Stock, $.10 par value; 270,000 shares authorized;
107,593 and 89,433 shares issued and outstanding at
June 30, 1998 and December 31, 1997, respectively 10,759 8,943
Additional paid-in-capital 2,685,137 1,988,798
Distributions in excess of net income (202,615) (192,373)
-------------- -------------
2,493,351 1,805,368
Note receivable - Meditrust Operating Company (13,128) (13,128)
-------------- -------------
Total shareholders' equity 2,480,223 1,792,240
-------------- -------------
Total liabilities and shareholders' equity $ 3,876,824 $ 3,215,928
============== =============
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-8-
<PAGE>
MEDITRUST CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
for the three months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(In thousands, except per share amounts)
Revenue:
Rental $ 49,338 $ 33,798
Interest 38,446 37,216
Rent from Meditrust Operating Company 5,681
Interest from Meditrust Operating Company 457
Royalty from Meditrust Operating Company 133
---------- ----------
94,055 71,014
---------- ----------
Expenses:
Interest 24,695 20,263
Depreciation and amortization 11,722 6,490
Amortization of goodwill 1,696 389
General and administrative 3,274 1,925
Rental property operations 1,457
Income from unconsolidated joint venture (337)
---------- ----------
42,507 29,067
---------- ----------
Net income 51,548 41,947
Preferred stock dividends (613)
---------- ----------
Net income available to Common shareholders $ 50,935 $ 41,947
========== ==========
Basic earnings per Common Share (Note 11) $ .51 $ .57
========== ==========
Diluted earnings per Common Share (Note 11) $ .50 $ .56
========== ===========
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-9-
<PAGE>
THE MEDITRUST CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
for the six months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(In thousands, except per share amounts)
Revenue:
Rental $ 92,994 $ 66,091
Interest 76,958 72,888
Rent from Meditrust Operating Company 12,462
Interest from Meditrust Operating Company 949
Royalty from Meditrust Operating Company 133
Other (Note 3) 26,000
------------ -----------
209,496 138,979
------------ -----------
Expenses:
Interest 50,112 38,378
Depreciation and amortization 22,180 12,577
Amortization of goodwill 3,071 778
General and administrative 7,068 4,246
Rental property operations 2,722
Income from unconsolidated joint venture (448)
Other (Note 7) 21,541
------------ -----------
106,246 55,979
------------ -----------
Net income 103,250 83,000
Preferred stock dividends (613)
------------ -----------
Net income available to Common shareholders $ 102,637 $ 83,000
============ ===========
Basic earnings per Common Share (Note 11) $ 1.06 $ 1.12
============ ===========
Diluted earnings per Common Share (Note 11) $ 1.05 $ 1.12
============ ===========
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-10-
<PAGE>
MEDITRUST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 103,250 $ 83,000
Depreciation of real estate 21,959 12,346
Goodwill amortization 3,071 778
Shares issued for compensation 282 1,000
Equity in income of joint venture, net of dividends received 802
Other depreciation, amortization and other items, net 5,377 368
Other non cash expenses 8,405
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
AVAILABLE FOR DISTRIBUTION 143,146 97,492
Net change in other assets and liabilities (10,781) (10,664)
----------- ----------
Net cash provided by operating activities 132,365 86,828
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common and preferred stock 447,044 --
Proceeds from borrowings on bank notes payable 550,000 373,000
Repayment of bank notes payable (600,000) (121,000)
Equity offering and debt issuance costs (11,234) (39)
Principal payments on bonds and mortgages payable (7,159) (510)
Proceeds from intercompany borrowings, net of repayments 4,534
Distributions to shareholders (112,879) (87,346)
Proceeds from exercises of stock options 3,763 3,463
----------- ----------
Net cash provided by financing activities 274,069 167,568
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of real estate and development funding (347,603) (148,135)
Investment in real estate mortgages and development funding (133,666) (125,839)
Prepayment proceeds and principal payments received
on real estate mortgages 266,260 7,037
Proceeds from sale of real estate 4,709
Acquisition of Cobblestone (178,523)
Cash acquired from Cobblestone merger 723
Working capital advances and acquisition of receivables, net
of repayments and collections 922 (485)
Investment in equity securities (552)
----------- ----------
Net cash used in investing activities (387,178) (267,974)
----------- ----------
Net increase (decrease) in cash and cash equivalents 19,256 (13,578)
CASH AND CASH EQUIVALENTS AT:
Beginning of period 24,059 42,726
----------- ----------
End of period $ 43,315 $ 29,148
=========== ==========
Supplemental disclosure of cash flow information (Note 2)
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-11-
<PAGE>
MEDITRUST OPERATING COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(In thousands) (Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 18,261 $ 19,673
Fees, interest and other receivables 7,424 2,580
Other current assets, net 10,357 3,078
----------- -----------
Total current assets 36,042 25,331
----------- -----------
Investment in common stock of Meditrust Corporation 37,581 37,581
Goodwill 32,023 32,485
Property, plant and equipment, less accumulated depreciation of
$1,933 and $171, respectively 27,923 10,529
Artwork 14,500 14,500
Other non-current assets 4,142
----------- -----------
Total assets $ 152,211 $ 120,426
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 18,048 $ 14,180
Payable to owners, trainers and breeders 1,149 5,939
Deferred compensation 2,815 3,977
Accrued payroll 3,173 3,491
Other liabilities 8,343 1,419
Due to Meditrust Corporation 30,990 18,490
----------- -----------
Total current liabilities 64,518 47,496
----------- -----------
Note payable to Meditrust Corporation 13,128 13,128
Deferred revenue 6,370 1,349
Other non-current liabilities 3,010
Deferred income taxes 685 501
----------- -----------
Total liabilities 87,711 62,474
----------- -----------
Commitments and contingencies (Notes 3, 10, and 13) -- --
Shareholders' equity (Notes 4, 5, 6 and 11):
Common Stock, $.10 par value; 270,000 shares authorized;
106,288 and 88,128 shares issued and outstanding at June 30, 1998
and December 31, 1997, respectively 10,629 8,813
Additional paid-in-capital 57,697 49,739
Retained earnings (deficit) (3,826) (600)
----------- ------------
Total shareholders' equity 64,500 57,952
----------- ------------
Total liabilities and shareholders' equity $ 152,211 $ 120,426
=========== ============
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-12-
<PAGE>
MEDITRUST OPERATING COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
for the three months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
1998
----
<S> <C>
(In thousands, except per share amounts)
Revenue:
Horse Racing:
Wagering commissions $ 8,032
Admission related 5,164
------------
Total horse racing 13,196
------------
Golf course:
Golf 9,079
Food and beverage 2,687
Pro shop sales 1,076
Other 69
------------
Total golf course 12,911
------------
Interest 183
Other 65
------------
26,355
------------
Expenses:
Horse racing operations 11,234
Golf course operations 9,818
Depreciation and amortization 1,253
Amortization of goodwill 202
Interest and other 73
Interest to Meditrust Corporation 457
General and administrative 649
Royalty to Meditrust Corporation 133
Rent to Meditrust Corporation 5,681
------------
29,500
------------
Loss before income taxes (3,145)
Provision for income taxes --
------------
Net loss $ (3,145)
============
Basic earnings per Common Share (Note 11) $ (.03)
===========
Diluted earnings per Common Share (Note 11) $ (.03)
===========
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-13-
<PAGE>
MEDITRUST OPERATING COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
for the six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
1998
----
<S> <C>
(In thousands, except per share amounts)
Revenue:
Horse Racing:
Wagering commissions $ 33,963
Admission related 15,744
------------
Total horse racing 49,707
------------
Golf course:
Golf 9,079
Food and beverage 2,687
Pro shop sales 1,076
Other 410
------------
Total golf course 13,252
------------
Interest 359
Other 65
------------
63,383
------------
Expenses:
Horse racing operations 39,430
Golf course operations 9,818
Depreciation and amortization 2,066
Amortization of goodwill 403
Interest and other 109
Interest to Meditrust Corporation 949
General and administrative 1,239
Royalty to Meditrust Corporation 133
Rent to Meditrust Corporation 12,462
------------
66,609
------------
Loss before income taxes (3,226)
Provision for income taxes --
------------
Net loss $ (3,226)
============
Basic earnings per Common Share (Note 11): $ (.03)
============
Diluted earnings per Common Share (Note 11): $ (.03)
============
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-14-
<PAGE>
MEDITRUST OPERATING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
1998
----
<S> <C>
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,226)
Goodwill amortization 403
Shares issued for compensation 6
Other depreciation and amortization 1,974
Other items 2,039
Net change in other assets and liabilities (7,711)
---------
Net cash used in operating activities (6,515)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 9,669
Equity offering costs (105)
Net repayment of intercompany borrowings (4,534)
Proceeds from exercises of stock options exercises 73
---------
Net cash provided by financing activities 5,103
---------
Net decrease in cash and cash equivalents (1,412)
CASH AND CASH EQUIVALENTS AT:
Beginning of period 19,673
---------
End of period $ 18,261
=========
Supplemental disclosure of cash flow information (Note 2)
</TABLE>
The accompanying notes, together with the Notes to the Combined Consolidated
Financial Statements incorporated by reference in the Companies' Form 10-K
for the year ended December 31, 1997, are an integral part of
these financial statements.
-15-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, have been condensed or omitted in this Form 10-Q
in compliance with the Rules and Regulations of the Securities and
Exchange Commission.
The accompanying unaudited combined consolidated financial statements
reflect all adjustments (consisting of normal recurring accruals)
necessary to present fairly their financial position as of June 30, 1998
and their results of operations for each of the three and six-month
periods ended June 30, 1998 and 1997 and cash flows for each of the
six-month periods ended June 30, 1998 and 1997. The results of
operations for the six-month period ended June 30, 1998 are not
necessarily indicative of the results which may be expected for any
other interim period or for the entire year.
In the opinion of Meditrust Corporation ("Realty") and Meditrust
Operating Company and subsidiaries ("Operating Company" and collectively
with Realty the "Companies" or "The Meditrust Companies"), the
disclosures contained in this Form 10-Q are adequate to make the
information presented not misleading. See the Companies' Annual Report
on Form 10-K and 10-K/A for the year ended December 31, 1997 (and the
Reports on Form 8-K and 8-K/A dated February 26, 1998, incorporated by
reference therein) for additional information relevant to significant
accounting policies followed by the Companies.
On May 29, 1998, Realty acquired Cobblestone Holdings, Inc.
("Cobblestone") and its wholly owned subsidiary Cobblestone Golf Group,
Inc. Cobblestone's business consists primarily of owning, leasing,
managing and operating golf courses and related facilities. This
transaction is being accounted for under the purchase method of
accounting.
With the acquisition of Cobblestone and several other golf facilities,
Operating Company is currently engaged in golf facility operations. The
golf facility operations are conducted by several subsidiaries of
Operating Company which lease the respective facilities from Realty and
its subsidiaries.
The significant accounting policies related to golf facility operations
are as follows:
Property, Equipment and Leasehold Interests
Golf facility property and equipment are recorded at cost.
Depreciation is provided using the straight-line method over the
estimated useful lives of the related assets which generally are
as follows:
Depreciable land improvements 20 years
Buildings and improvements 30 years
Equipment, furniture and fixtures 3 to 10 years
Golf facility leasehold improvements, equipment recorded under
capital leases, and property and equipment related to leased
facilities are depreciated and amortized using the straight-line
method over the shorter of the lease term or the estimated
useful lives of the related assets. Costs associated with the
acquisition of leasehold interests in golf facilities have been
capitalized and are amortized over the remaining life of the
related lease, which range from four to 35 years.
-16-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies, Continued
Property, Equipment and Leasehold Interests, Continued
Golf course facility construction in progress is carried at cost.
All costs associated with, or allocable to, golf facility
construction in progress are capitalized until construction is
completed.
Revenue and Deferred Revenue
Operating Company's primary sources of golf revenue are
membership and initiation fees and dues at semi-private and
private country clubs, greens fees, food and beverage services,
golf cart rentals, retail merchandise sales, driving range and
lodging fees.
Golf facility operating revenue is recognized when received,
except for dues and fees paid in advance, which are recognized
over the period during which the dues and fees allow the members
access to the facilities. Revenue is recognized on membership and
initiation fees over the expected life of the membership.
Seasonal weather conditions as well as the timing of new course
purchases or leases may cause the Companies' revenue to vary from
quarter to quarter. The period from April through September tends
to account for a greater portion of the operating revenue than
the remainder of the year.
Reclassification
Certain reclassifications have been made to the 1997 presentation
to conform to the 1998 presentation.
-17-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
The Meditrust Companies: Six Months Ended
June 30,
-----------------------------
(In thousands) 1998 1997
---- ----
<S> <C> <C>
Interest paid during the period $ 49,598 $ 36,509
Interest capitalized during the period 3,442
Non-cash investing and financing transactions:
Value of real estate acquired:
Land, land improvements and buildings 17,294
Accumulated depreciation of buildings sold 4,179
Increase (reduction) in real estate mortgages net of
participation reduction (31,597) 128
Change in market value of equity securities in excess
of cost 14,798 (186)
Value of Shares issued for conversion of debentures 6,917 2,927
In connection with the Cobblestone merger:
Fair value of assets acquired 302,713
Excess purchase consideration over estimated
fair market value of assets acquired 153,750
Liabilities assumed (37,488)
Cash, net (177,800)
Value of the issuance of Paired Common Shares 241,175
Meditrust Corporation:
Six Months Ended
June 30,
------------------------------
(In thousands) 1998 1997
---- ----
Interest paid during the period $ 49,561 $ 36,509
Interest capitalized during the period 3,442
Non-cash investing and financing transactions:
Value of real estate acquired:
Land, land improvements and buildings 17,294
Accumulated depreciation of buildings sold 4,179
Increase (reduction) in real estate mortgages net of
participation reduction (31,597) 128
Change in market value of equity securities in excess
of cost 14,798 (186)
Value of shares issued for conversion of debentures 6,786 2,927
</TABLE>
-18-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Supplemental Cash Flow Information, Continued
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------
(In thousands) 1998 1997
---- ----
<S> <C> <C>
In connection with the Cobblestone merger:
Fair value of assets acquired $ 272,463
Excess purchase consideration over estimated
fair market value of assets acquired 153,750
Liabilities assumed (11,638)
Cash, net (177,800)
Value of the issuance of common shares 236,775
Meditrust Operating Company:
Six Months Ended
June 30,
---------------------------------
(In thousands) 1998 1997
---- ----
Interest paid during the period $ 91
Non-cash investing and financing transactions:
Value of shares issued for conversion of debentures 131
In connection with the Cobblestone merger:
Fair value of assets acquired 30,250
Excess purchase consideration over estimated
fair market value of assets acquired --
Liabilities assumed (25,850)
Value of the issuance of common shares 4,400
</TABLE>
3. Real Estate Investments
<TABLE>
<CAPTION>
The following is a summary of Realty's real estate investments:
June 30, December 31,
(In thousands) 1998 1997
---- ----
<S> <C> <C>
Land $ $ 249,852
Land improvements, net of accumulated depreciation of $798
Leasehold interests, net of accumulated depreciation of $112
Buildings and improvements, net of accumulated depreciation
of $141,000 and $124,582 1,223,255
Real estate mortgages and loans receivable 1,268,634 1,432,825
Investment in unconsolidated joint venture, net of accumulated
depreciation of $1,000 and $250 28,289 29,840
Assets held for sale, net of accumulated depreciation and
other provisions of $11,525 and $0 3,784
---------- ----------
$3,345,261 $2,935,772
========== ==========
</TABLE>
-19-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Real Estate Investments, Continued
During the six months ended June 30, 1998, Realty acquired seven assisted
living facilities and twenty-two medical office buildings for
$230,660,000. Realty also acquired eight golf facilities for $64,189,000.
In addition, during the six month period ended June 30, 1998, Realty
provided net funding of $17,773,000 for the construction of twelve
assisted living facilities and one golf facility and also provided
$1,820,000 for an addition to a long-term care facility already in the
portfolio. Realty also provided net funding of $33,161,000 for ongoing
construction of facilities it currently owns which were in the portfolio
prior to 1998.
Also during the six months ended June 30, 1998, Realty provided permanent
mortgage financing of $37,420,000 for one long-term care facility and for
135 acres of development stage property. Realty also provided $2,122,000
in additions to permanent mortgages already in the portfolio.
Realty commenced new development funding of $20,698,000 relating to two
long-term care facilities and one medical office building. Realty also
provided $73,426,000 for ongoing construction of mortgaged facilities
already in the portfolio.
During the six months ended June 30, 1998, Realty received $4,709,000
from the sale of a long-term care facility. There was no gain or loss
realized on the sale.
As a result of the merger with Cobblestone, Realty acquired 21 golf
facilities and leasehold interests in four golf facilities and recorded
them at appraised values of $224,434,000 and $23,641,000, respectively.
During the six months ended June 30, 1998, Realty received principal
payments on real estate mortgages of $266,260,000. Included in this
amount was a $122,000,000 prepayment of mortgage investments for which a
prepayment and make-whole gain of $26,000,000 was received and has been
classified as other income in the consolidated statements of income.
At June 30, 1998, Realty was committed to provide additional financing of
approximately $204,464,000 relating to six medical office buildings, nine
long-term care facilities, and 39 assisted living facilities which are
currently under construction as well as additions to existing facilities
in the portfolio.
From time to time, Realty enters into transactions with related parties.
As of June 30, 1998, Realty had total commitments of $355,857,000 to
entities in which the Companies' then Chairman owned or was expected to
own a controlling equity interest or a minority interest, of which
$296,288,000 has been funded. Included in the commitment amount is
$22,229,000 to an entity in which Realty's Chief Operating Officer owns a
2.5% equity interest, for the development of 135 acres of land in
Jupiter, Florida, $17,920,000 of which had been funded as of June 30,
1998. Realty may enter into additional transactions with related
parties in the future. All of the
-20-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Real Estate Investments, Continued
terms and conditions of such transactions are subject to approval by the
independent Directors of Realty. During 1996 and 1997, Realty provided
mortgage financing in the aggregate amount of $82,270,000 (of which
$74,313,000 had been funded through January 1998) to certain limited
partnerships in which the Companies' then Chairman holds a minority
equity interest, for the construction and/or permanent financing of 11
medical office buildings. During January 1998, Realty acquired all of the
assets of, or all of the partnership interests in such limited
partnerships for an aggregate purchase price of $110,528,000, and
currently leases the medical office buildings directly to the occupants
thereof. On August 3, 1998, the Companies' Chairman resigned as Chairman
and as a Director, and as Chief Executive Officer and Treasurer of
Operating Company (see Note 13).
4. Indebtedness and Shareholders' Equity
On February 26, 1998, the Companies entered into transactions with
Merrill Lynch International, a UK-based broker/dealer subsidiary of
Merrill Lynch & Co., Inc. ("MLI"). Pursuant to the terms of a Stock
Purchase Agreement, MLI purchased 8,500,000 shares of Series A Non-Voting
Convertible Common Stock par value $.10 per share from each of the
Companies at a purchase price of $32.625 per share. The Series A
Non-Voting Convertible Common Stock converted to paired common stock of
the Companies on June 18, 1998, the business day following the date on
which the stockholders of the Companies approved the merger of Realty
with La Quinta Inns, Inc. ("La Quinta") and ("La Quinta Merger"). Net
proceeds from the issuance of securities were approximately $272,000,000
and were used by the Companies to repay existing indebtedness.
Separately, the Companies and MLI entered into a Purchase Price
Adjustment Agreement under which the Companies will, within one year from
the date of MLI's purchase, on a periodic basis, adjust the original
$32.625 purchase price per share based on the market price of the paired
common stock at the time of any interim or final adjustments, by
receiving additional paired common stock from MLI or by issuing
additional paired common stock to MLI. In the event that the market price
for the paired shares is lower than the original purchase price, the
Companies will have to deliver additional paired shares to MLI which
would have dilutive effects on the capital stock of the Companies. This
dilutive effect increases significantly as the market price of the paired
shares declines further below the original purchase price. Moreover,
settlement, whether at maturity or at an earlier date, may force the
Companies to issue paired shares at a depressed price, which may heighten
this dilutive effect on the capital stock of the Companies.
The paired common shares issued under the above listed agreements receive
the same dividend as the Companies' paired common stock, however, the
guaranteed minimum return is LIBOR plus 75 basis points. Any difference
between LIBOR plus 75 basis points and the dividend payments received by
MLI will be included in an adjustment amount under the Purchase Price
Adjustment Agreement. The Companies expect the annual dividend to exceed
LIBOR plus 75 basis points.
These transactions have been accounted for as a Forward Equity Issuance
Transaction ("FEIT") with the original 8,500,000 and all additional
paired common shares issued treated as outstanding from their date of
issuance for both basic and diluted earnings per share purposes. The
contingently issuable shares calculated as of June 30, 1998 are included
in the calculation of diluted earnings per share. The accounting
treatment for this type of transaction is expected to be reviewed by the
Emerging Issues Task Force ("EITF"). The Securities and Exchange
Commission has concluded that until the EITF has an opportunity to
perform a full review of this type of transaction,
-21-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Indebtedness and Shareholders' Equity, Continued
future transactions of this type will be accounted for as debt. For
previously completed transactions such as the Companies', the Securities
and Exchange Commission will not object to the accounting treatment
reflected in this Quarterly Report on Form 10-Q.
Pursuant to the FEIT agreement, the Companies placed in a collateral
account approximately 862,000 shares of unregistered paired common
shares, based on a measurement of the closing stock price on May 31,
1998. According to the terms of the FEIT, had the closing stock price of
$27.9375 on June 30, 1998 been used, approximately 1,277,000 additional
paired common shares would have been contingently issuable.
During the six months ended June 30, 1998, $1,160,000 of principal amount
of 9% convertible debentures were converted into 51,621 paired common
shares; $5,027,000 of principal amount of 7% convertible debentures were
converted into 197,231 paired common shares; $65,000 of principal amount
of 7.5% convertible debentures were converted into 2,158 paired common
shares and $665,000 of principal amount of 6 7/8% convertible debentures
were converted into 21,521 paired common shares.
On June 10, 1998, Realty issued 7,000,000 depository shares of Meditrust
Corporation. Each depository share represents one-tenth of a share of 9%
Series A Cumulative Redeemable Preferred Stock with a par value of $.10
per share. Total proceeds from this issuance were approximately
$169,488,000, which were primarily used to repay existing indebtedness.
As of June 30, 1998, the following classes of Preferred Stock, Excess
Stock and Series Common Stock were authorized; no shares were issued or
outstanding at either June 30, 1998 or December 31, 1997:
Meditrust Operating Company Preferred Stock
$.10 par value; 6,000,000 shares authorized;
Meditrust Corporation Excess Stock
$.10 par value; 25,000,000 shares authorized;
Meditrust Operating Company Excess Stock
$.10 par value; 25,000,000 shares authorized;
Meditrust Corporation Series Common Stock
$.10 par value; 30,000,000 shares authorized;
Meditrust Operating Company Series Common Stock $.10 par value;
30,000,000 shares authorized.
-22-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Comprehensive Income and Other Assets
As of January 1, 1998, the Companies adopted Statement of Financial
Accounting Standards No. 130 ("SFAS 130") "Reporting Comprehensive
Income". SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components; however, the adoption of this
statement has no impact on the Companies' net income or shareholders'
equity. SFAS 130 requires, among other things, unrealized gains or losses
on the Companies' available-for-sale investments to be included in other
comprehensive income.
During 1996 and 1997, Realty invested approximately $26,982,000 in
exchange for 14,285,000 shares of common stock, representing a 19.99%
interest in Nursing Home Properties Plc ("NHP Plc"), a property
investment group which specializes in the financing, through sale
leaseback transactions, of nursing homes located in the United Kingdom.
Realty does not have the right to vote more than 9.99% of the shares of
NHP Plc. As of June 30, 1998 the market value of this investment was
$38,715,000 and is included in other assets in the accompanying balance
sheet. In addition, Realty has agreed to purchase additional shares of
NHP Plc (see Note 13).
The resulting difference between the current market value and cost,
$11,733,000, is included in shareholders' equity in the accompanying
balance sheet.
As of June 30, 1998, Realty owns 331,000 shares of stock and warrants to
purchase 1,006,000 shares of stock in Balanced Care Corporation ("BCC"),
a healthcare operator, which completed an initial public offering of its
stock in 1998. The stock and warrants have a current market value of
$7,739,000. The difference between current market value and cost of the
BCC investment, $6,634,000, is included in shareholders' equity in the
accompanying balance sheet.
The following is a summary of the Companies' comprehensive income:
<TABLE>
<CAPTION>
Six Months Ended June 30,
(In thousands) 1998 1997
---- ----
<S> <C> <C>
Net income $100,024 $ 83,000
Other comprehensive income:
Change in market value of equity securities
in excess of cost 14,798 (186)
-------- ----------
Comprehensive income $114,822 $ 82,814
======== ==========
</TABLE>
As a result of the merger with Cobblestone, Realty acquired the
Cobblestone tradename with an appraised value of $8,570,000.
-23-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Distributions Paid to Shareholders
On June 15, 1998, Realty paid a dividend of $.61125 per share of
common stock to shareholders of record on May 31, 1998.
7. Other Expenses
During the six months ended June 30, 1998, the Companies pursued a
strategy of diversifying into new business lines including hospitality
and golf (See Notes 8 and 13). Consistent with this strategy, Realty
commenced a reevaluation of its intentions with respect to certain
existing healthcare real estate facilities and other assets.
As a result of continued deteriorating performance at two owned
psychiatric facilities and the corresponding impact on Realty's
resources, management committed to a plan to sell these facilities as
soon as practicable. Accordingly, Realty recorded a provision of
$10,500,000 to adjust the carrying value of these facilities and related
working capital receivables to estimated fair value less costs to sell as
of June 30, 1998. In addition, as part of the continuing evaluation of
its existing healthcare real estate portfolio, Realty also provided for
the establishment of a $3,000,000 valuation reserve as of June 30, 1998.
Realty holds other assets and receivables that are unrelated to its
historical primary business of healthcare financing. Management has
determined that protracted collection efforts for these assets is
currently an inefficient use of its resources and therefore recorded a
provision of approximately $5,100,000 to reduce the carrying value of
these assets to net realizable value as of June 30, 1998.
Additionally, Realty incurred approximately $3,000,000 of non-recurring
costs related to the evaluation of certain acquisition targets which it
is no longer pursuing at June 30, 1998.
8. Cobblestone Holdings, Inc. Merger
On May 29, 1998, Realty completed its merger with Cobblestone pursuant to
an Agreement and Plan of Merger dated as of January 11, 1998, as amended
by a First Amendment thereto dated as of March 16, 1998 (as amended, the
"Cobblestone Merger Agreement"). Under the terms of the Cobblestone
Merger Agreement, Cobblestone merged with and into Realty, with Realty as
the surviving corporation (the "Cobblestone Merger").
Prior to the Cobblestone Merger, Operating Company entered into an Asset
Transfer Agreement with Cobblestone Golf Group, Inc., whereby Cobblestone
Golf Group, Inc. transferred certain non-real estate assets to Operating
Company.
-24-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. Cobblestone Holdings, Inc. Merger, Continued
Upon the closing of the Cobblestone Merger, each share of common stock of
Cobblestone was converted into the right to receive 3.867 paired common
shares and each share of preferred stock of Cobblestone was converted
into the right to receive .2953 paired common shares. The total number of
paired common shares issued in connection with the Cobblestone Merger was
approximately 8,177,000, with an aggregate market value of approximately
$230,000,000, plus the issuance of approximately 452,000 options valued
at $10,863,000. In addition, Realty advanced monies in order for
Cobblestone to satisfy approximately $170,000,000 of its long-term debt
and associated costs. Accordingly, the operations of Cobblestone are
included in the combined and consolidated financial statements since
consummation of the Cobblestone Merger. The total consideration paid in
connection with the Cobblestone Merger was approximately $420,000,000.
The excess of the purchase price, including costs of the Cobblestone
Merger, over the fair value of the net assets acquired approximated
$153,750,000 and is being amortized over 20 years.
The following unaudited pro forma condensed combined consolidated results
of operations of Realty and Operating Company have been prepared as if
the Cobblestone Merger had occurred January 1, 1997:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) For the six months ended June 30,
---------------------------------
1998 1997
---- ----
<S> <C> <C>
Revenues $293,628 $179,469
Net income $ 89,830 $ 82,086
Basic earnings per paired common share $ 0.88 $ 0.95
Weighted average paired common shares outstanding 102,476 82,086
</TABLE>
The pro forma condensed combined consolidated results do not purport to
be indicative of results that would have occurred had the Cobblestone
Merger been in effect for the periods presented, nor do they purport to
be indicative of the results that will be obtained in the future.
9. Newly Issued Accounting Standards
Financial Accounting Standards Board Statement No. 131 ("SFAS 131")
"Disclosure about Segments of an Enterprise and Related Information" is
effective for financial statements issued for periods beginning after
December 15, 1997. SFAS 131 requires disclosures about segments of an
enterprise and related information regarding the different types of
business activities in which an enterprise engages and the different
economic environments in which it operates. Due to the Companies' plans
for acquisitions of companies in a variety of business segments, the
Companies are in the process of evaluating the effect of the
implementation of SFAS 131.
-25-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. Newly Issued Accounting Standards, Continued
Financial Accounting Standards Board Statements No. 132 ("SFAS 132"):
"Disclosures about Pensions and Other Postretirement Benefits." SFAS 132
is effective for financial periods beginning after December 15, 1997.
SFAS 132 established standards for reporting and display of pension and
postretirement benefits. Furthermore, additional information on changes
in benefit obligations and fair values of plan assets shall be displayed
in the financial statements. The Companies intend to adopt the
requirements of SFAS 132 in the financial statements for the year ending
December 31, 1998 and do not believe implementation will have a material
effect on the financial statements.
Effective May 21, 1998, the Companies adopted the guidance provided in
Emerging Issues Task Force No. 98-9 (EITF 98-9): "Accounting for
Contingent Rent in Interim Financial Periods." The adoption of EITF 98-9
did not and is not expected to have a material impact on the Companies'
financial position or results of operations.
10. Contingencies
Litigation
On January 8, 1998 the Companies received notice that they were named as
a defendant in a class action entitled, Lynn Robbins v. William J.
Razzouk, et al; Civil Action No. 98CI-00192 filed January 7, 1998 in the
District Court of Bexar County, Texas and on January 20, 1998 the
Companies received notice that they were named as a defendant in a class
action entitled, Adele Brody v. William J. Razzouk, et al., Civil Action
No. 98CI-00456 filed January 12, 1998 in the District Court of Bexar
County, Texas. The complaints, which have been consolidated into one
action, (i) allege, in part, that La Quinta and its directors violated
their fiduciary duty, duty of care and loyalty to La Quinta shareholders
by entering into a merger agreement with the Companies without having
first invited other bidders, and the Companies aided and abetted La
Quinta and its directors in the alleged breaches, and (ii) seek
injunctive relief enjoining the merger with La Quinta and compensatory
damages. In April 1998, the complaint was amended to add as defendants
Merrill Lynch and certain individuals and entities allegedly controlled
by or associated with the Bass family and to allege, among other things,
that (a) certain of the defendants breached their fiduciary duties to La
Quinta shareholders, (b) the directors of La Quinta and Merrill Lynch, as
financial advisor to La Quinta in connection with the La Quinta Merger,
have conflicts of interest based on dealings with the Companies, (c) the
Companies and Merrill Lynch aided and abetted the alleged breaches of
duty by the other defendants and that Merrill Lynch acted negligently in
rendering advice to La Quinta's Board of Directors, and (d) certain
option payments and/or alleged special treatment of certain defendants in
connection with such options violate Article 2.02 of the Texas Business
Corporation Act. The defendants and counsel for the class plaintiffs have
negotiated and entered into an agreement in principle to settle the
action, dated on or about May 8, 1998 (the "Memorandum of
Understanding"). The Memorandum of Understanding sets forth the principal
bases for the settlement which include the issuance of a
-26-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. Contingencies, Continued
series of press releases prior to the meetings of the shareholders of the
Companies and La Quinta to consider the La Quinta merger agreement and
the inclusion of a section describing the FEIT with MLI in the joint
proxy statement/prospectus prepared for the Companies' and La Quinta's
shareholders meetings. The proposed settlement will be contingent upon
the execution of an appropriate and satisfactory stipulation of
settlement and related documents, and Final Court Approval of the
settlement (as defined in the Memorandum of Understanding) by the Texas
Court. La Quinta has agreed to pay counsel for the class plaintiffs
attorney's fees in an amount not to exceed $700,000 in the event such
settlement is consummated.
The Companies are also a party to a number of other claims and lawsuits
arising out of the normal course of business; the Companies believe that
none of these claims or pending lawsuits, either individually or in the
aggregate, will have a material adverse affect on the Companies' business
or on their consolidated financial position or results of operations.
Paired Share REIT Legislation
On July 22, 1998, the President of the United States of America signed
into law the Internal Revenue Service Restructuring and Reform Act of
1998 (the "Reform Act"). Included in the Reform Act is a freeze on the
grandfathered status of paired share REITs such as the Companies. Under
this legislation, the anti-pairing rules provided in the Internal Revenue
Code of 1986, as amended (the "Code"), apply to real property interests
acquired after March 26, 1998 by the Companies, or by a subsidiary or
partnership in which a ten percent or greater interest is owned by the
Companies, unless (1) the real property interests are acquired pursuant
to a written agreement that was binding on March 26, 1998 and at all
times thereafter or (2) the acquisition of such real property interests
was described in a public announcement or in a filing with the SEC on or
before March 26, 1998.
Under the Reform Act, the properties acquired in connection with the July
17, 1998 La Quinta Merger and in connection with the May 29, 1998
Cobblestone Merger generally are not subject to these anti-pairing rules.
However, any property acquired by the Companies, La Quinta, or
Cobblestone after March 26, 1998, other than property acquired pursuant
to a written agreement
-27-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. Contingencies, Continued
that was binding on March 26, 1998 or described in a public announcement
or in a filing with the SEC on or before March 26, 1998, is subject to
the anti-pairing rules. Moreover, under the Reform Act any otherwise
grandfathered property will become subject to the anti-pairing rules if
the rent on a lease or renewal with respect to such property is
determined to exceed an arm's length rate. In addition, the Reform Act
also provides that a property held by the Companies that is not subject
to the anti-pairing rules will become subject to such rules in the event
of an improvement placed in service after December 31, 1999 that changes
the use of the property and the cost of which is greater than 200 percent
of (A) the undepreciated cost of the property (prior to the improvement)
or (B) in the case of property acquired where there is a substituted
basis (e.g., the properties acquired from La Quinta and Cobblestone), the
fair market value of the property on the date it was acquired by the
Companies.
There is an exception for improvements placed in service before January
1, 2004 pursuant to a binding contract in effect on December 31, 1999 and
at all times thereafter. This restriction on property improvements
applies to the properties acquired from La Quinta and Cobblestone, as
well as all other properties owned by the Companies, and limits the
ability of the Companies to improve or change the use of those properties
after December 31, 1999. The Companies are considering various steps
which they might take in order to minimize the effect of the Reform Act.
Restructuring the operations of Realty and Operating Company, however, to
comply with the legislation may cause the Companies to incur
substantial tax liabilities, to recognize an impairment loss on their
goodwill asset or otherwise adversely affect the Companies.
11. Earnings Per Share
Combined consolidated earnings per share is computed as follows:
<TABLE>
<CAPTION>
For the three months ended June 30, 1998
------------------------------------------------
(In thousands, except per share amounts) Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS:
Income available to common shareholders $ 47,790 100,193 $.48
Effect of Dilutive Securities:
Stock Options 430
Contingently issuable shares to MLI 1,277
(Note 4)
Diluted EPS:
-------------------------------------------------
Income available to common shareholders $ 47,790 101,900 $.47
=================================================
</TABLE>
-28-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. Earnings Per Share, Continued
<TABLE>
<CAPTION>
For the three months ended June 30, 1997
---------------------------------------------------
(In thousands, except per share amounts) Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS:
Income available to common shareholders $ 41,947 73,989 $ .57
Effect of Dilutive Securities:
Stock Options 278
Diluted EPS:
---------------------------------------------------
Income available to common shareholders $ 41,947 74,267 $ .56
===================================================
For the six months ended June 30, 1998
---------------------------------------------------
(In thousands, except per share amounts) Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS:
Income available to common shareholders $ 99,411 95,835 $1.04
Effect of Dilutive Securities:
Stock Options 476
Contingently issuable shares to MLI 851
(Note 4)
Diluted EPS:
---------------------------------------------------
Income available to common shareholders $ 99,411 97,162 $1.02
===================================================
For the six months ended June 30, 1997
---------------------------------------------------
(In thousands, except per share amounts) Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS:
Income available to common shareholders $ 83,000 73,909 $1.12
Effect of Dilutive Securities:
Stock Options 278
Diluted EPS:
---------------------------------------------------
Income available to common shareholders $ 83,000 74,187 $1.12
===================================================
</TABLE>
Weighted average common shares of Realty for purposes of computing Basic
EPS were approximately 101,498,000 and 73,989,000 and for Diluted EPS
were 103,205,000 and 74,267,000 for the three month periods ended June
30, 1998 and 1997, respectively. Weighted average common shares of
Operating Company for purposes of computing Basic and Diluted EPS for the
three month period ended June 30, 1998 were 101,193,000 and 101,900,000,
respectively.
-29-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. Earnings Per Share, Continued
Weighted average common shares of Realty for purposes of computing Basic
EPS were approximately 97,140,000 and 73,909,000 and for Diluted EPS were
98,467,000 and 74,187,000 for the six month periods ended June 30, 1998
and 1997, respectively. Weighted average common shares of Operating
Company for purposes of computing Basic and Diluted EPS for the six month
period ended June 30, 1998 were 95,835,000 and 97,162,000, respectively.
Operating Company holds common shares of Realty which are unpaired
pursuant to a stock option plan approved by the shareholders. The common
shares held totaled 1,305,000 as of June 30, 1998. These shares affect
the calculation of Realty's net income per common share but are
eliminated in the calculation of net income per paired common share for
The Meditrust Companies.
Convertible debentures outstanding for the three and six month periods
ended June 30, 1998 and 1997 are not included in the computation of
diluted EPS because the inclusion would result in an antidilutive effect.
12. Transactions between Realty and Operating Company
Operating Company leases the various golf course facilities from Realty
and its subsidiaries. The lease arrangements between Operating Company
and Realty include base and additional rent provisions and require
Operating Company to assume costs attributable to taxes, maintenance and
insurance.
Operating Company has entered into a royalty arrangement with Realty
for the use of the Cobblestone tradename at a rate of approximately
.75% of golf course revenues.
13. Subsequent Events
On July 9, 1998 Realty declared a dividend of $.61625 per share payable
on August 14, 1998 to shareholders of record on July 31, 1998.
On July 17, 1998, the Companies completed the acquisition of La Quinta,
in which La Quinta merged with and into Realty, with Realty as the
surviving corporation. As a result of the La Quinta Merger, holders of
all of the issued and outstanding common stock of La Quinta received in
exchange cash and newly-issued shares of Paired Common Stock of the
Companies with an aggregate value of approximately $1,650,000,000. In
addition, Realty assumed or retired approximately $1,000,000,000 of La
Quinta's existing indebtedness. Shareholders of Realty, including former
La Quinta shareholders who received stock consideration in the La Quinta
Merger, are eligible to receive a special dividend distribution of La
Quinta's accumulated but undistributed earnings and profits which will be
payable by Realty in the amount of $.88361 per share of Realty common
stock on September 11, 1998 to all shareholders of record of Realty
common stock on August 28, 1998. La Quinta, the operations of which will
be conducted by a subsidiary of Operating Company, is a fully-integrated
lodging company that focuses on the ownership, operation and development
of its two hotel products: (i) La Quinta Inns, a chain positioned in the
mid-price segment without food and beverage facilities, and (ii) La
Quinta Inns & Suites, a new concept positioned at the upper end of the
mid-price segment without food and beverage facilities. As of June 30,
1998, La Quinta owned and operated 280 hotels, principally in the western
and southern regions of the United States, with a total of over 36,000
rooms. La Quinta's real estate is owned by Realty or a subsidiary of
Realty and generally is leased and managed by subsidiaries of Operating
Company.
-30-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
13. Subsequent Events, Continued
On July 17, 1998, Realty entered into a new credit agreement (the "New
Credit Agreement") which provides Realty with up to $2,250,000,000 in
credit facilities, replacing Realty's existing $365,000,000 revolving
credit facilities. The New Credit Agreement provides for borrowings in
four separate tranches (each a "Tranche"): Tranche A, a $1,000,000,000
revolving loan, amounts of which if repaid may be reborrowed, Tranche B,
a term loan in the amount of $500,000,000, amounts of which if repaid may
not be reborrowed, Tranche C, a term loan in the amount of $250,000,000,
amounts of which if repaid may not be reborrowed, and Tranche D, a term
loan in the amount of $500,000,000, amounts of which if repaid may not be
reborrowed. A total of $710,000,000 was available at August 12, 1998.
Borrowings under the New Credit Agreement include LIBOR, Base Rate and
Money Market Borrowings. Pricing on the loan commitments, loans and
letters of credit under the New Credit Agreement varies according to the
pricing level commensurate with the credit quality of Realty. Events of
default under the New Credit Agreement include, among other things,
failure to pay any principal or reimbursement obligation when due,
failure to meet any of the covenants of the New Credit Agreement, failure
of the representations and warranties to be true in any material respect,
and default under other debt instruments of the Companies or their
subsidiaries. The New Credit Agreement includes covenants with respect to
maintaining certain financial benchmarks, limitations on the types and
percentage of investments in certain business lines, limitations on
dividends of Realty and Operating Company, and other restrictions. In
addition, Operating Company is a guarantor of all of the obligations of
Realty under the New Credit Agreement.
On July 21, 1998, Realty agreed to invest approximately an additional
$30,400,000 in NHP Plc, through an agreement to purchase previously
issued warrants to purchase common shares of NHP Plc, and an agreement to
purchase newly issued common shares of NHP Plc. The investment, expected
to close during August 1998, will increase Realty's total equity
investment to approximately $57,382,000, at cost. The investment will add
approximately 12,322,000 shares to Realty's current investment of
14,285,000 shares of NHP Plc, and will maintain Realty's ownership
interest in NHP Plc at 19.99% of which Realty has voting rights with
respect to 9.99%.
Realty has notified the trustee of its $100,000,000 Remarketing Reset
Notes due August 15, 2002 that it will redeem these securities in full at
par value on August 17, 1998. Also, Realty has notified the trustee of La
Quinta Inns $120,000,000 9-1/4% Senior Subordinated Notes due 2003, that
it will redeem these securities on September 11, 1998 at 103.46% of par.
Realty's credit facility will be used to refinance both of these
redemptions.
On August 3, 1998, Abraham D. Gosman resigned his position as Director
and Chairman of the Boards of the Companies and Chief Executive Officer
and Treasurer of Operating Company. Thomas M. Taylor was appointed
Interim Chairman of the Companies. David F. Benson will serve as Interim
Chief Executive Officer of Realty, and William C. Baker will serve as
Interim President and Interim Treasurer of Operating Company. In
connection with discussions relating to his resignation, the Companies
are considering making severance payments to Mr. Gosman, the amounts of
which may be significant. These discussions are ongoing.
During the next two months, the Boards of Directors of the Companies
anticipate filling the Chairman and CEO positions, reviewing
and approving a modified investment and operating strategy for the
Companies, and selecting an appropriate corporate structure
through which to conduct the business activities of the Companies in
response to the recent paired share REIT legislation.
-31-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
ITEM 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Certain matters discussed herein may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Although The Meditrust Companies (the "Companies"), consisting of Meditrust
Corporation ("Realty") and Meditrust Operating Company ("Operating"), believe
the statements are based on reasonable assumptions, the Companies can give no
assurance that their expectations will be attained. Actual results and timing of
certain events could differ materially from those projected in or contemplated
by the forward-looking statements due to a number of factors, including, without
limitation, general economic and real estate conditions, the availability of
equity and debt financing for acquisitions and renovations, interest rates,
competition for hotel and golf services in a given market, the enactment of
legislation impacting the Companies' status as a paired share real estate
investment trust ("REIT") or Realty's status as a REIT and other risks detailed
from time to time in the filings of Realty and Operating with the Securities and
Exchange Commission ("SEC"), including, without limitation, quarterly reports on
Form 10-Q, reports on Form 8-K, and annual reports on Form 10-K.
The basis of presentation includes Management's Discussion and Analysis of
Financial Condition and Results of Operations for the combined and separate SEC
registrants. Management of the Companies believes that combined presentation is
most beneficial to the reader. However, it should be noted that combined results
of operations for the three and six months ended June 30, 1997 are principally
related to the activity of Realty.
On November 5, 1997, Meditrust merged with Santa Anita Realty Enterprises, Inc.,
with Santa Anita Realty Enterprises, Inc. as the surviving corporation, and
Meditrust Acquisition Company merged with Santa Anita Operating Company, with
Santa Anita Operating Company as the surviving corporation (hereafter referred
to as the "Santa Anita Merger" or "Santa Anita Mergers"). Upon completion of the
Santa Anita Mergers, Santa Anita Realty Enterprises, Inc. changed its corporate
name to "Meditrust Corporation" and Santa Anita Operating Company changed its
corporate name to "Meditrust Operating Company." The Santa Anita Mergers were
accounted for as reverse acquisitions whereby Meditrust and Meditrust
Acquisition Company were treated as the acquirers for accounting purposes.
Accordingly, the financial history is that of Meditrust and Meditrust
Acquisition Company prior to the Santa Anita Mergers. For the three and six
month periods ended June 30, 1997, all share and per share amounts have been
retroactively adjusted to reflect the 1.2016 exchange of shares of beneficial
interest for paired common shares of the Companies.
The Meditrust Companies - Combined Results of Operations
Three months ended June 30, 1998 vs. Three months ended June 30, 1997
Revenue for the three months ended June 30, 1998 was $114,139,000 compared to
$71,014,000 for the three months ended June 30, 1997, an increase of
$43,125,000. Revenue growth was primarily attributable to increased rental and
interest income of $16,677,000, which resulted from additional real estate
investments made over the last year, the addition of golf course revenue of
$13,252,000, and horse racing revenue of $13,196,000.
-32-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
The Meditrust Companies - Combined Results of Operations, Continued
For the three months ended June 30, 1998, total expenses increased by
$37,006,000. Expense growth was primarily attributable to the addition of
operating expenses from the horse racing and golf facility businesses. Horse
racing operating costs of $11,234,000 were incurred as the Santa Anita Companies
concluded the live racing season, and the addition of golf facility operating
costs of $9,818,000 were principally incurred during the post-acquisition period
of May 29, 1998 through June 30, 1998. Interest expense increased by $4,505,000
due to increases in debt outstanding resulting from additional real estate
investments made over the past year. Depreciation and amortization increased by
$7,994,000, which was a result of increased real estate investments and
amortization of goodwill from acquisitions completed subsequent to June 30,
1997. General and administrative expenses increased by $1,998,000 principally
due to a higher level of operating costs associated with portfolio growth and as
a result of the mergers. Rental property operating expenses of $1,457,000 were
incurred during the three months ended June 30, 1998 and related to management
of medical office buildings.
Net income for the three months ended June 30, 1998 was $48,403,000 compared to
$41,947,000 for the three months ended June 30, 1997, an increase of $6,456,000
or 15%. Net income per share of paired common stock of the Companies for the
three months ended June 30, 1998 was $0.48 compared to $0.57 for the three
months ended June 30, 1997. The per share amount decreased primarily due to
dilution resulting from mergers completed since June 30, 1997. Per share amounts
for 1997 have been restated to reflect the exchange of Meditrust Shares of
Beneficial Interest for paired common shares of the Companies pursuant to the
Santa Anita Merger. In connection with the Santa Anita Merger, 24,822,000
additional paired common shares are now outstanding.
Six months ended June 30, 1998 vs. Six months ended June 30, 1997
Revenue for the six months ended June 30, 1998 was $259,335,000 compared to
$138,979,000 for the six months ended June 30, 1997, an increase of
$120,356,000. Revenue growth was primarily attributable to the addition of
operating revenues from businesses acquired since June 30, 1997. Operating
revenues of $62,959,000 were added during the six months ended June 30, 1998 and
include horse racing of $49,707,000, and golf related activities, which
commenced on May 29, 1998, of $13,252,000. Rental and interest income increased
$31,397,000, as a result of additional real estate investments made over the
last year net of mortgage prepayments. Other income for the six months ended
June 30, 1998 included a nonrecurring $26,000,000 prepayment and make-whole gain
as a result of approximately $120,000,000 in mortgage investments that were
repaid prior to their maturity.
For the six months ended June 30, 1998, total expenses increased by
$103,780,000. Expense growth was primarily attributable to the addition of horse
racing and golf facility related businesses that were acquired subsequent to
June 30, 1997. Horse racing operating costs of $39,430,000 were incurred by the
Santa Anita Companies during the live racing season, and the addition of golf
course operating costs of $9,818,000 which were principally incurred for the
period of May 29, 1998 through June 30,
-33-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
The Meditrust Companies - Combined Results of Operations, Continued
1998. Interest expense increased by $11,843,000 due to increases in debt
outstanding resulting from additional real estate investments made over the past
year. Depreciation and amortization increased by $14,365,000, which was a result
of increased real estate investments and amortization of goodwill from
acquisitions completed subsequent to June 30, 1997. General and administrative
expenses increased by $4,061,000 principally due to a higher level of operating
costs associated with portfolio growth and as a result of the acquisitions.
Rental property operating expenses of $2,722,000 were incurred during the six
months ended June 30, 1998 and related to management of medical office
buildings.
During the six months ended June 30, 1998, the Companies pursued a strategy of
diversifying into new business lines including hospitality and golf (See Notes
8 and 13). Consistent with this strategy, Realty commenced a reevaluation of its
existing health care real estate portfolio and other assets. As a result of
continued deteriorating performance at two owned psychiatric facilities and the
corresponding impact on Realty's resources, management has committed to a plan
to sell these facilities as soon as practicable. Accordingly, Realty has
recorded a provision of $10,500,000 to adjust the carrying value of these
facilities and related working capital receivables to estimated fair value less
costs to sell as of June 30, 1998. As part of the continuing evaluation of its
existing health care real estate portfolio, Realty has also provided for the
establishment of a $3,000,000 valuation reserve as of June 30, 1998.
Realty also has held other assets and receivables that are unrelated to its
historical primary business of health care financing. Management has determined
that further collection efforts for these assets is currently an inefficient use
of its resources and therefore has recorded a provision of approximately
$5,000,000 to reduce the carrying value of these assets to net realizable value
as of June 30, 1998.
Additionally, Realty has recorded approximately $3,000,000 of non-recurring
costs related to the evaluation of certain acquisition targets which it is no
longer pursuing at June 30, 1998.
Net income for the six months ended June 30, 1998 was $100,024,000 compared to
$83,000,000 for the six months ended June 30, 1997, an increase of $17,024,000
or 21%. Net income per share of paired common stock of the Companies for the six
months ended June 30, 1998 was $1.04 compared to $1.12 for the six months ended
June 30, 1997. The per share amount decreased primarily due to dilution
resulting from acquisitions completed since June 30, 1997. Per share amounts for
1997 have been restated to reflect the exchange of Meditrust Shares of
Beneficial Interest for paired common shares of the Companies pursuant to the
Santa Anita Merger. In connection with the Santa Anita and Cobblestone Mergers,
24,822,000 and 8,177,000 additional paired common shares, respectively, are now
outstanding.
-34-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
The Meditrust Companies - Combined Financial Condition
As of June 30, 1998, the Companies' gross real estate investments totaled
approximately $3,499,696,000, consisting of 217 long-term care facilities, 184
retirement and assisted living facilities, 34 golf facilities, 33 medical office
buildings, 26 rehabilitation hospitals, six alcohol and substance abuse
treatment facilities and psychiatric hospitals, one acute care hospital campus,
one racetrack, a 50% interest in a fashion mall, and land held for development.
As of June 30, 1998, the Companies' outstanding commitments for additional
financing totaled approximately $204,464,000 for the completion of 39 assisted
living facilities, nine long-term care facilities and six medical office
buildings currently under construction and additions to existing facilities in
the portfolio.
The Companies provide funding for their investments through a combination of
long-term and short-term financing including both debt and equity. The Companies
obtain long-term financing through the issuance of shares, long-term unsecured
notes, convertible debentures and the assumption of mortgage notes. The
Companies obtain short-term financing through the use of bank lines of credit
which are replaced with long-term financing as appropriate. From time to time,
the Companies may utilize interest rate caps or swaps to attempt to hedge
interest rate volatility. It is the Companies' objective to match mortgage and
lease terms with the terms of their borrowings. The Companies attempt to
maintain an appropriate spread between their borrowing costs and the rate of
return on their investments. When development loans convert to sale/leaseback
transactions or permanent mortgage loans, the base rent or interest rate, as
appropriate, is fixed at the time of such conversion. There is, however, no
assurance that the Companies will satisfactorily achieve, if at all, the
objectives set forth in this paragraph.
On February 26, 1998, the Companies entered into transactions with Merrill Lynch
International, a UK-based broker/dealer subsidiary of Merrill Lynch & Co., Inc.
("MLI"). Pursuant to the terms of a Stock Purchase Agreement, MLI purchased
8,500,000 shares of Series A Non-Voting Convertible Common Stock par value $.10
per share from each of the Companies at a purchase price of $32.625 per share.
The Series A Non-Voting Convertible Common Stock converted to paired common
stock of the Companies on June 18, 1998, the business day following the date on
which the stockholders of the Companies approved the merger of Realty with La
Quinta Inns, Inc. ("La Quinta") and ("La Quinta Merger"). Net proceeds from the
issuance of securities were approximately $272,000,000 and were used by the
Companies to repay existing indebtedness. Separately, the Companies and MLI
entered into a Purchase Price Adjustment Agreement under which the Companies
will, within one year from the date of MLI's purchase on a periodic basis adjust
the original $32.625 purchase price per share based on the market price of the
paired common stock at the time of any interim or final adjustments, by
receiving additional paired common stock from MLI or by issuing additional
paired common stock to MLI. In the event that the market price for the paired
shares is lower than the original purchase price, the Companies will have to
deliver additional paired shares to MLI which would have dilutive effects on the
capital stock of the Companies. This dilutive effect increases significantly as
the market price of the paired shares decline further below the original
purchase price. Moreover, settlement, whether at maturity or at an earlier date,
may force the Companies to issue paired shares at a depressed price, which may
heighten this dilutive effect on the capital stock of the Companies.
The paired common shares issued under the above listed agreements receive the
same dividend as the Companies' paired common stock, however, the guaranteed
minimum return is LIBOR plus 75 basis points. Any difference between LIBOR plus
75 basis points and the dividend payments received by MLI will be included in an
adjustment amount under the Purchase Price Adjustment Agreement. The Companies
expect the annual dividend to exceed LIBOR plus 75 basis points.
-35-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Combined Financial Condition, Continued
These transactions have been accounted for as a Forward Equity Issuance
Transaction ("FEIT") with the original 8,500,000 and all additional paired
common shares treated as outstanding from their date of issuance for both basic
and diluted earnings per share purposes. The contingently issuable shares
calculated as of June 30, 1998 are included in the calculation of diluted
earnings per share. The accounting treatment for this type of transaction is
expected to be reviewed by the Emerging Issues Task Force ("EITF"). The SEC has
concluded that until the EITF has an opportunity to perform a full review of
this type of transaction, future transactions of this type will be accounted for
as debt. For previously completed transactions such as the Companies', the SEC
will not object to the accounting treatment reflected in this Quarterly Report
on Form 10-Q. Pursuant to the FEIT agreement, the Companies placed in a
collateral account approximately 862,000 shares of unregistered paired common
shares, based on a measurement of the closing stock price on May 31, 1998.
According to the terms of the FEIT agreements, had the closing stock price of
$27.9375 on June 30, 1998 been used, approximately 1,277,000 additional paired
common shares would have been contingently issuable.
On May 29, 1998, Realty completed its merger with Cobblestone Holdings, Inc.
("Cobblestone") pursuant to an Agreement and Plan of Merger dated as of January
11, 1998, as amended by a First Amendment thereto dated as of March 16, 1998 (as
amended, the "Merger Agreement"). Under the terms of the Merger Agreement,
Cobblestone, the parent of Cobblestone Golf Group, Inc., merged with and into
Realty, with Realty as the surviving corporation (the "Cobblestone Merger").
Upon the closing of the Cobblestone Merger, each share of common stock of
Cobblestone was converted into the right to receive 3.867 paired common shares
and each share of preferred stock of Cobblestone was converted into the right to
receive .2953 paired common shares. The total number of paired common shares
issued in connection with the Cobblestone Merger was approximately 8,177,000,
with an aggregate market value of approximately $230,000,000 plus the issuance
of approximately 452,000 options valued at $10,863,000. In addition, Realty
advanced monies in order for Cobblestone to satisfy approximately $170,000,000
of Cobblestone's debt and associated costs. The total consideration paid in
connection with the Cobblestone Merger was approximately $420,000,000. The
excess of the purchase price, including costs of the Cobblestone Merger, over
the fair value of the net assets acquired approximated $153,750,000 and is being
amortized over 20 years.
On June 10, 1998, Realty issued 7,000,000 depositary shares. Each depositary
share represents one-tenth of a share of 9% Series A Cumulative Redeemable
Preferred Stock with a par value of $.10 per share. Total proceeds from this
issuance of approximately $169,488,000 were used by Realty primarily to repay
existing indebtedness.
The Companies had shareholders' equity of $2,520,720,000 and debt constituted
35% of the Companies' total capitalization as of June 30, 1998.
On July 9, 1998 Realty declared a dividend of $.61625 per share payable on
August 14, 1998 to shareholders of record on July 31, 1998.
On July 17, 1998, Realty completed its acquisition of La Quinta, and La Quinta
was merged with and into Realty, with Realty being the surviving corporation. As
consideration for the La Quinta Merger, La Quinta shareholders were eligible to
receive common stock of Realty and common stock of Operating.
-36-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Combined Financial Condition, Continued
Approximately 25% of the La Quinta shares were acquired in the merger for cash
for $26.00 per share and the remaining shares (approximately 75%) were each
converted into 0.738 paired common shares and the right to receive an earnings
and profits distribution.
On July 17, 1998 pursuant to its merger agreement with La Quinta, Realty
declared a special dividend distribution of $0.88361 per share of Realty common
stock. Holders of Realty common stock of record on August 28, 1998 will be
eligible to receive the special dividend distribution, which will be paid on
September 11, 1998.
On July 17, 1998 Realty executed an agreement for an unsecured bank facility for
a total of $2,250,000,000 bearing interest at the lenders' prime rate plus .50%
or LIBOR plus 1.375% (7.06% at July 24, 1998). The facility is comprised of
three tranches with term loans at various maturity dates between July 17, 1999
and July 17, 2001 and a revolving tranche with availability of $1,000,000,000
maturing July 17, 2001. A total of $710,000,000 was available at August 12,
1998.
Realty has notified the trustee of its $100,000,000 Remarketing Reset Notes due
August 15, 2002 that it will redeem these securities in full at par value on
August 17, 1998. Also, Realty has notified the trustee of La Quinta Inns
$120,000,000 9-1/4% Senior Subordinated Notes due 2003, that it will redeem
these securities on September 11, 1998 at 103.46% of par. Realty's credit
facility will be used to refinance both of these redemptions.
In addition, the Companies have an effective shelf registration statement on
file with the Securities and Exchange Commission under which the Companies may
issue $1,875,000,000 of securities including shares, preferred stock, debt,
series common stock, convertible debt and warrants to purchase shares, preferred
shares, debt, series common stock and convertible debt.
The Companies believe that their various sources of capital are adequate to
finance their operations as well as pending acquisitions, mortgage financings
and future dividends. Over the next twelve months, as the Companies identify
appropriate investment opportunities, the Companies may raise additional capital
through the sale of Shares, series common stock or preferred stock, the issuance
of additional long-term debt or through a securitization transaction.
Realty - Results of Operations
Three months ended June 30, 1998 vs. Three months ended June 30, 1997
Revenue for the three months ended June 30, 1998 was $94,055,000 compared to
$71,014,000 for the three months ended June 30, 1997, an increase of
$23,041,000. Revenue growth was primarily attributable to increased healthcare
rental and interest income of $16,770,000 from additional real estate
investments made over the last year net of mortgage prepayments. The increase
also arose from rent, interest and royalties of $6,271,000 collected from
Operating related to the addition of horse racing and golf rental activities.
-37-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Realty - Results of Operations, Continued
For the three months ended June 30, 1998, total expenses increased by
$13,440,000. Interest expense increased $4,432,000 due to increases in debt
outstanding resulting from additional real estate investments made over the past
year. Depreciation and amortization increased by $6,539,000 which was a result
of increased real estate investments and amortization of goodwill from
acquisitions completed subsequent to June 30, 1997. General and administrative
expenses increased by $1,349,000 principally due to a higher level of operating
costs associated with portfolio growth and as a result of the acquisition.
Rental property operating expenses of $1,457,000 were incurred during the three
months ended June 30, 1998 and related to management of medical office
buildings.
Net income for the three months ended June 30, 1998 was $51,548,000 compared to
$41,947,000 for the three months ended June 30, 1997, an increase of $9,601,000
or 23%. Net income per common share for the three months ended June 30, 1998 was
$0.50 compared to $0.57 for the three months ended June 30, 1997. The per share
amount decreased primarily due to dilution resulting from acquisitions completed
subsequent to June 30, 1997. Per share amounts for 1997 have been restated to
reflect the exchange of Meditrust Shares of Beneficial Interest for paired
common shares of the Companies pursuant to the Santa Anita Merger.
Six months ended June 30, 1998 vs. Six months ended June 30, 1997
Revenue for the six months ended June 30, 1998 was $209,496,000 compared to
$138,979,000 for the six months ended June 30, 1997, an increase of $70,517,000.
Healthcare rental and interest income increased $30,973,000 as a result of
additional real estate investments made over the last year net of mortgage
prepayments. The increase also arose from rent, interest and royalty revenue of
$13,544,000 related to the addition of horse racing and golf rental activities.
Other income for the six months ended June 30, 1998 included a nonrecurring
$26,000,000 prepayment and make-whole gain as a result of approximately
$120,000,000 in mortgage investments that were repaid prior to their maturity.
For the six months ended June 30, 1998, total expenses increased by $50,267,000.
Interest expense increased by $11,734,000 due to increases in debt outstanding
resulting from additional real estate investments made over the past year.
Depreciation and amortization increased by $11,896,000 which was a result of
increased real estate investments and amortization of goodwill from mergers
completed subsequent to June 30, 1997. General and administrative expenses
increased by $2,822,000 principally due to a higher level of operating costs
associated with portfolio growth and as a result of the mergers.
-38-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Realty - Results of Operations, Continued
Rental property operating expenses of $2,722,000 were incurred during the six
months ended June 30, 1998 and related to management of medical office
buildings.
During the six months ended June 30, 1998, the Companies pursued a strategy of
diversifying into new business lines including hospitality and golf. Consistent
with this strategy, Realty commenced a reevaluation of its existing health care
real estate portfolio and other assets. As a result of continued deteriorating
performance at two owned psychiatric facilities and the corresponding impact on
Realty's resources, management has committed to a plan to sell these facilities
as soon as practicable. Accordingly, Realty has recorded a provision of
$10,500,000 to adjust the carrying value of these facilities and related working
capital receivables to estimated fair value less costs to sell as of June 30,
1998. As part of the continuing evaluation of its existing health care real
estate portfolio, Realty has also provided for the establishment of a $3,000,000
valuation reserve as of June 30, 1998.
Realty also has held other assets and receivables that are unrelated to its
historical primary business of health care financing. Management has determined
that further collection efforts for these assets is currently an inefficient use
of its resources and therefore has recorded a provision of approximately
$5,000,000 to reduce the carrying value of these assets to net realizable value
as of June 30, 1998.
Additionally, Realty has recorded approximately $3,000,000 of non-recurring
costs related to the evaluation of certain acquisition targets which it is no
longer pursuing at June 30, 1998.
Net income for the six months ended June 30, 1998 was $103,250,000 compared to
$83,000,000 for the six months ended June 30, 1997, an increase of $20,250,000
or 24%. Net income per common share for the six months ended June 30, 1998 was
$1.06 compared to $1.12 for the six months ended June 30, 1997. The per share
amount decreased primarily due to dilution resulting from acquisitions completed
subsequent to June 30, 1997. Per share amounts for 1997 have been restated to
reflect the exchange of Meditrust Shares of Beneficial Interest for paired
common shares of the Companies pursuant to the Santa Anita Merger.
Realty - Financial Condition
As of June 30, 1998, Realty's gross real estate investments totaled
approximately $3,499,696,000, consisting of 217 long-term care facilities, 184
retirement and assisted living facilities, 34 golf facilities,
-39-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Realty - Financial Condition, Continued
33 medical office buildings, 26 rehabilitation hospitals, six alcohol, and
substance abuse treatment facilities and psychiatric hospitals, one acute care
hospital campus, one racetrack, a 50% interest in a fashion mall, and land held
for development. As of June 30, 1998, Realty's outstanding commitments for
additional financing totaled approximately $204,464,000 for the completion of 39
assisted living facilities, nine long-term care facilities and six medical
office buildings currently under construction and additions to existing
facilities in the portfolio.
Realty provides funding for investments through a combination of long-term and
short-term financing including both debt and equity. Realty obtains long-term
financing through the issuance of equity, long-term unsecured notes, convertible
debentures and the assumption of mortgage notes. Realty obtains short-term
financing through the use of bank lines of credit which are replaced with
long-term financing as appropriate. From time to time, Realty may utilize
interest rate caps or swaps to attempt to hedge interest rate volatility. It is
the objective of Realty to match mortgage and lease terms with the terms of its
borrowings. Realty attempts to maintain an appropriate spread between borrowing
costs and the rate of return on investments. When development loans convert to
sale/leaseback transactions or permanent mortgage loans, the base rent or
interest rate, as appropriate, is fixed at the time of such conversion. There
is, however, no assurance that Realty will satisfactorily achieve, if at all,
the objectives set forth in this paragraph.
On February 26, 1998, the Companies entered into transactions with
Merrill Lynch International, a UK-based broker/dealer subsidiary of Merrill
Lynch & Co., Inc. ("MLI"). Pursuant to the terms of a Stock Purchase Agreement,
MLI purchased 8,500,000 shares of Series A Non-Voting Convertible Common Stock
par value $.10 per share from each of the Companies at a purchase price of
$32.625 per share. The Series A Non-Voting Convertible Common Stock converted to
paired common stock of the Companies on June 18, 1998, the business day
following the date on which the stockholders of the Companies approved the
merger of Realty with La Quinta. Net proceeds from the issuance of securities
were approximately $272,000,000 and were used by the Companies to repay existing
indebtedness. Separately, the Companies and MLI entered into a Purchase Price
Adjustment Agreement under which the Companies will, within one year from the
date of MLI's purchase, adjust the original $32.625 purchase price per share
based on the market price of the paired common stock at the time of the
adjustment, by receiving shares from MLI or by issuing additional paired common
stock to MLI. In the event that the market price for the paired shares is lower
than the original purchase price, the Companies will have to deliver additional
paired shares to MLI which would have dilutive effects on the capital stock of
the Companies. This dilutive effect increases significantly as the market price
of the paired shares declines further below the original purchase price.
Moreover, settlement, whether at maturity or at an earlier date, may force the
Companies to issue paired shares at a depressed price, which may heighten this
dilutive effect on the capital stock of the Companies.
The paired common shares issued under the above listed agreements receive the
same dividend as the Companies' paired common stock, however, the guaranteed
minimum return is LIBOR plus 75 basis points. Any difference between LIBOR plus
75 basis points and the dividend payments received by MLI will be included in an
adjustment amount under the Purchase Price Adjustment Agreement. The Companies
expect the annual dividend to exceed LIBOR plus 75 basis points.
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<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Realty - Financial Condition, Continued
These transactions have been accounted for as a Forward Equity Issuance
Transaction ("FEIT") with the original 8,500,000 and all additional paired
common shares issued treated as outstanding from their date of issuance for both
basic and diluted earnings per share purposes. The contingently issuable shares
calculated as of June 30, 1998 are included in the calculation of diluted
earnings per share. The accounting treatment for this type of transaction is
expected to be reviewed by the Emerging Issues Task Force ("EITF"). The
Securities and Exchange Commission has concluded that until the EITF has an
opportunity to perform a full review of this type of transaction, future
transactions of this type will be accounted for as debt. For previously
completed transactions such as the Companies', the Securities and Exchange
Commission will not object to the accounting treatment reflected in this
Quarterly Report on Form 10-Q. Pursuant to the FEIT agreement, the Companies
placed in a collateral account approximately 862,000 shares of unregistered
paired common shares, based on a measurement of the closing stock price on May
31, 1998. According to the terms of the FEIT agreements, had the closing stock
price of $27.9375 on June 30, 1998 been used, approximately 1,277,000 additional
paired common shares would have been contingently issuable.
On May 29, 1998, Realty completed its merger with Cobblestone pursuant to the
Merger Agreement. Under the terms of the Merger Agreement, Cobblestone, the
parent of Cobblestone Golf Group, Inc., merged with and into Realty, with Realty
as the surviving corporation. Upon the closing of the Cobblestone Merger, each
share of common stock of Cobblestone was converted into the right to receive
3.867 common shares and each share of preferred stock of Cobblestone was
converted into the right to receive .2953 common shares. The total number of
shares issued in connection with the Cobblestone Merger was approximately
8,177,000, with an aggregate market value of approximately $230,000,000 plus the
issuance of approximately 452,000 options valued at $10,863,000. In addition,
Realty advanced monies in order for Cobblestone to satisfy approximately
$170,000,000 of Cobblestone's debt and associated costs. The total consideration
paid in connection with the Cobblestone Merger was approximately $420,000,000.
The excess of the purchase price, including costs of the Cobblestone Merger,
over the fair value of the net assets acquired approximated $153,750,000 and is
being amortized over 20 years.
On June 10, 1998, Realty issued 7,000,000 depositary shares. Each depositary
share represents one-tenth of a share of 9% Series A Cumulative Redeemable
Preferred Stock with a par value of $.10 per share. Total proceeds from this
issuance of approximately $169,488,000 were used by Realty primarily to repay
existing indebtedness.
The Companies had shareholders' equity of $2,520,720,000 and debt constituted
35% of the Companies' total capitalization as of June 30, 1998.
On July 17, 1998, Realty completed its acquisition of La Quinta, and La Quinta
was merged with and into Realty, with Realty being the surviving corporation. As
consideration for the merger, La Quinta shareholders were eligible to receive
common stock of Realty and common stock of Operating. Approximately 25% of the
La Quinta shares were acquired in the merger for cash for $26.00 per share and
the remaining shares (approximately 75%) were converted into 0.738 paired
common shares and the right to receive an earnings and profits distribution.
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<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Realty - Financial Condition, Continued
On July 17, 1998 pursuant to its merger agreement with La Quinta, Realty
declared a special dividend distribution of $0.88361 per share of Realty common
stock. Holders of Realty common stock of record on August 28, 1998 will be
eligible to receive the special dividend distribution, which will be paid on
September 11, 1998.
On July 17, 1998 Realty executed an agreement for an unsecured bank facility
for a total of $2,250,000,000 bearing interest at the lenders' prime rate plus
.50% or LIBOR plus 1.375%. The facility is comprised of three tranches with
term loans at various maturity dates and a revolving tranche with availability
of $1,000,000,000. A total of $710,000,000 was available at August 12, 1998.
Realty has notified the trustee of its $100,000,000 Remarketing Reset Notes due
August 15, 2002 that it will redeem these securities in full at par value on
August 17, 1998. Also, Realty has notified the trustee of La Quinta Inns
$120,000,000 9-1/4% Senior Subordinated Notes due 2003, that it will redeem
these securities on September 11, 1998 at 103.46% of par. Realty's credit
facility will be used to refinance both of these redemptions.
In addition, the Companies have a shelf registration statement on file with the
Securities and Exchange Commission under which the Companies may issue,
$1,825,000,000 of securities including shares, preferred stock, debt, series
common stock, convertible debt and warrants to purchase shares, preferred
shares, debt, series common stock and convertible debt.
Realty has notified the trustee of its $1,000,000 Remarketing Reset Notes due
August 15, 2002 that it will redeem these securities in full at par value on
August 17, 1998. Also Realty has notified the trustee of La Quinta Inns
$120,000,000 9-1/4% Senior Subordinated Notes due 2003, that it will redeem
these securities on September 11, 1998 at 103.46% of par. Realty's credit
facility will be used to refinance both of these redemptions.
Realty had shareholders' equity of $2,480,223,000 and debt constituted 35% of
total capitalization as of June 30, 1998.
Realty believes that various sources of capital available over the next twelve
months are adequate to finance pending acquisitions, mortgage financings and
dividends. Over the next twelve months, as Realty identifies appropriate
investment opportunities, Realty may raise additional capital through the sale
of Shares, series common stock or preferred stock, the issuance of additional
long-term debt or through a securitization transaction.
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<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Operating - Results of Operations
Three months ended June 30, 1998
Operating currently derives its revenue primarily from thoroughbred horse racing
activities and golf facility activities which were $13,196,000 and $12,911,000,
respectively, during the three months ended June 30, 1998. Live thoroughbred
horse racing at Santa Anita Racetrack totaled 16 days during the three months
ended June 30, 1998. Horse racing is a seasonal business and the entire racing
season for 1998 consists of 86 racing days. As a result, horse racing revenues
in the second quarter are not indicative of what future quarters in 1998 will
generate. Interest and other income was $248,000 for the three month period June
30, 1998.
Horse racing and golf operating costs were $27,323,000 including $6,271,000 in
rent, royalties and interest paid to Realty pursuant to the terms of lease
agreements for the Santa Anita Racetrack and golf courses. Rent expense is
determined by wagering levels, commission rates, base rental, contingent and
contractual amounts. The operating margin for the racetrack was somewhat lower
than originally anticipated, partially as a result of the impact on racetrack
attendance during the "El Nino" weather pattern that recently affected the area
and additional marketing costs incurred to overcome attendance shortfalls.
Interest expense was $530,000 primarily for a Note payable to Realty.
Depreciation and amortization expense was $1,455,000 primarily for depreciation
of racing related equipment, furniture and fixtures which were amortized and
matched with revenues and amortization of goodwill as a result of the Santa
Anita Merger. General and administrative expenses were $649,000 principally for
compensation and consulting arrangements as a result of the Santa Anita Merger.
As a result, a net loss of $3,145,000 was incurred for the three months ended
June 30, 1998.
Six months ended June 30, 1998
Operating currently derives its revenue primarily from thoroughbred horse
racing activities and golf facility activities which were $49,707,000 and
$13,252,000, respectively, during the six months ended June 30, 1998. Live
thoroughbred horse racing at Santa Anita Racetrack totaled 81 days during the
six months ended June 30, 1998. Horse racing is a seasonal business and the
entire racing season for 1998 consists of 86 racing days. As a result, horse
racing revenues in the second quarter are not indicative of what future
quarters in 1998 will generate. Interest and other income was $424,000 for the
six month period June 30, 1998.
Horse racing and golf operating costs were $62,792,000 including $13,544,000 in
rent, royalties and interest paid to Realty pursuant to the terms of leases
agreement for Santa Anita Racetrack and the golf facilities. Rent expense is
determined by wagering levels, commission rates, base rental, contingent and
contractual amounts. The operating margin for the racetrack was somewhat lower
than originally anticipated, partially as a result of the impact on racetrack
attendance during the "El Nino" weather pattern that recently affected the area
and additional marketing costs incurred to overcome attendance shortfalls.
Interest expense was $1,191,000 primarily for a Note payable to Realty.
Depreciation and amortization expense was $2,469,000 primarily for depreciation
of racing related equipment, furniture and fixtures which were amortized and
matched with revenues and amortization of goodwill as a result of the Santa
Anita Merger. General and administrative expenses were $1,239,000 principally
for compensation and consulting arrangements as a result of the Santa Anita
Merger.
As a result, a net loss of $3,226,000 occurred for the six months ended
June 30, 1998.
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<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Operating - Financial Condition
Operating provides funding from racetrack operations and through a combination
of long-term and short-term financing including both debt and equity. Operating
obtains long-term financing through the issuance of common shares and unsecured
notes. Operating obtains short-term financing through borrowings from Realty.
On February 26, 1998, the Companies entered into transactions with Merrill Lynch
International, a UK-based broker/dealer subsidiary of Merrill Lynch & Co., Inc.
("MLI"). Pursuant to the terms of a Stock Purchase Agreement, MLI purchased
8,500,000 shares of Series A Non-Voting Convertible Common Stock par value $.10
per share from each of the Companies at a purchase price of $32.625 per share.
The Series A Non-Voting Convertible Common Stock converted to paired common
stock of the Companies on June 18, 1998, the business day following the date on
which the shareholders of the Companies approved the merger of Realty with La
Quinta. Net proceeds from the issuance of securities were approximately
$272,000,000 and were used by the Companies to repay existing indebtedness.
Separately, the Companies and MLI entered into a Purchase Price Adjustment
Agreement under which the Companies will, within one year from the date of MLI's
purchase on a periodic basis, adjust the original $32.625 purchase price per
share based on the market price of the paired common stock at the time of any
interim or final adjustments, by receiving additional paired common stock from
MLI or by issuing additional paired common stock to MLI. In the event that the
market price for the paired shares is lower than the original purchase price,
the Companies will have to deliver additional paired shares to MLI which would
have dilutive effects on the capital stock of the Companies. This dilutive
effect increases significantly as the market price of the paired shares decline
further below the original purchase price. Moreover, settlement whether at
maturity or at an earlier date may force the Companies to issue paired shares at
a depressed price, which may heighten this dilutive effect on the capital stock
of the Companies.
The paired common shares issued under the above listed agreements receive the
same dividend as the Companies' paired common stock, however, the guaranteed
minimum return is LIBOR plus 75 basis points. Any difference between LIBOR plus
75 basis points and the dividend payments received by MLI will be included in an
adjustment amount under the Purchase Price Adjustment Agreement. The Companies
expect the annual dividend to exceed LIBOR plus 75 basis points.
These transactions have been accounted for as a Forward Equity Issuance
Transaction ("FEIT") with the original 8,500,000 and all additional paired
common shares treated as outstanding from their date of issuance for both basic
and diluted earnings per share purposes. The contingently issuable shares
calculated as of June 30, 1998 are included in the calculation of diluted
earnings per share. The accounting treatment for this type of transaction is
expected to be reviewed by the Emerging Issues Task Force ("EITF"). The
Securities and Exchange Commission has concluded that until the EITF has an
opportunity to perform a full review of this type of transaction, future
transactions of this type will be accounted for as debt. For previously
completed transactions such as the Companies', the Securities and Exchange
Commission will not object to the accounting treatment reflected in this
Quarterly Report on Form 10-Q. Pursuant to the FEIT agreement, the Companies
placed in a collateral account approximately 862,000 shares of unregistered
paired common shares, based on a measurement of the closing stock price on May
31, 1998. According to the terms of the FEIT agreements, had the closing stock
price of $27.9375 on June 30, 1998 been used, approximately 1,277,000 additional
paired common shares would have been contingently issuable.
On May 29, 1998, Realty completed its merger with Cobblestone pursuant to the
Merger Agreement. Under the terms of the Merger Agreement, Cobblestone, the
parent of Cobblestone Golf Group, Inc., merged with and into Realty, with Realty
as the surviving corporation. Upon the closing of the merger, each share of
common stock of Cobblestone was converted into the right to receive 3.867 paired
-44-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Operating - Financial Condition, Continued
common shares and each share of preferred stock of Cobblestone was converted
into the right to receive .2953 paired common shares. The total number of paired
shares issued in connection with the Cobblestone Merger was approximately
8,177,000, with an aggregate market value of approximately $230,000,000 plus the
issuance of approximately 452,000 options valued at $10,863,000. In addition,
Realty advanced monies in order for Cobblestone to satisfy approximately
$170,000,000 of Cobblestone's long term debt and associated costs. The total
consideration paid in connection with the Cobblestone Merger was approximately
$420,000,000. The excess of the purchase price, including costs of the
Cobblestone Merger, over the fair value of the net assets acquired approximated
$153,750,000 and is being amortized over 20 years.
The Companies have a shelf registration statement on file with the Securities
and Exchange Commission under which the Companies may issue, upon effectiveness,
$1,825,000,000 of securities including shares, preferred stock, debt, series
common stock, convertible debt and warrants to purchase shares, preferred stock,
debt, series common stock and convertible debt.
Operating had shareholders' equity of $64,500,000 as of June 30, 1998.
Operating believes that various sources of capital available over the next
twelve months are adequate to finance operations as well as pending
acquisitions. Over the next twelve months, as Operating identifies appropriate
investment opportunities, Operating may raise additional capital through the
sale of Shares, series common stock or preferred stock, the issuance of
additional long-term debt or through a securitization transaction.
Recent Legislative Developments
On July 22, 1998, the President signed into law the Internal Revenue Service
Restructuring and Reform Act of 1998 (the "Reform Act"). Included in the Reform
Act is a freeze on the grandfathered status of paired share REITs such as the
Companies. Under this legislation, the anti-pairing rules provided in the
Internal Revenue Code of 1986, as amended (the "Code"), apply to real property
interests acquired after March 26, 1998 by the Companies, or by a subsidiary or
partnership in which a ten percent or greater interest is owned by the
Companies, unless (1) the real property interests are acquired pursuant to a
written agreement that was binding on March 26, 1998 and at all times thereafter
or (2) the acquisition of such real property interests was described in a public
announcement or in a filing with the SEC on or before March 26, 1998.
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<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Recent Legislative Developments, Continued
Under the Reform Act, the properties acquired in connection with the July 17,
1998 La Quinta Merger and in connection with the May 29, 1998 Cobblestone Merger
generally are not subject to these anti-pairing rules. However, any property
acquired by the Companies, La Quinta, or Cobblestone after March 26, 1998, other
than property acquired pursuant to a written agreement that was binding on March
26, 1998 or described in a public announcement or in a filing with the SEC on or
before March 26, 1998, is subject to the anti-pairing rules. Moreover, under the
Reform Act any otherwise grandfathered property will become subject to the
anti-pairing rules if a lease or renewal with respect to such property is
determined to exceed an arm's length rate. In addition, the Reform Act also
provides that a property held by the Companies that is not subject to the
anti-pairing rules will become subject to such rules in the event of an
improvement placed in service after December 31, 1999 that changes the use of
the property and the cost of which is greater than 200 percent of (A) the
undepreciated cost of the property (prior to the improvement) or (B) in the case
of property acquired where there is a substituted basis (e.g., the properties
acquired from La Quinta and Cobblestone), the fair market value of the property
on the date it was acquired by the Companies.
There is an exception for improvements placed in service before January 1, 2004
pursuant to a binding contract in effect on December 31, 1999 and at all times
thereafter. This restriction on property improvements applies to the properties
acquired from La Quinta and Cobblestone, as well as all other properties owned
by the Companies, and limits the ability of the Companies to improve or change
the use of those properties after December 31, 1999. The Companies are
considering various steps which they might take in order to minimize the effect
of the Reform Act.
Restructuring the operations of Realty and Operating Company to comply with the
recent legislation may cause the Companies to incur substantial tax liabilities,
to recognize an impairment loss on their goodwill asset or otherwise adversely
affect the Companies.
Recent Events
On August 3, 1998, Abraham D. Gosman resigned his position as Director and
Chairman of the Boards of the Companies and Chief Executive Officer and
Treasurer of Operating Company. Thomas M. Taylor was appointed Interim Chairman
of the Companies. David F. Benson will serve as Interim Chief Executive Officer
of Realty, and William C. Baker will serve as Interim President and Interim
Treasurer of Operating Company. In connection with discussions relating to his
resignation, the Companies are considering making severance payments to Mr.
Gosman, the amounts of which may be significant. These discussions are ongoing.
Over the next two months, The Meditrust Companies Boards of Directors anticipate
filling the Chairman and CEO positions, reviewing and approving a modified
investment and operating strategy for The Meditrust Companies, and selecting an
appropriate corporate structure through which to conduct the business activities
of the Companies in response to the recent paired share REIT legislation.
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<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Newly Issued Accounting Standards
Financial Accounting Standards Board Statements No. 132 ("SFAS 132"):
"Disclosures about Pensions and Other Postretirement Benefits." SFAS 132 is
effective for financial periods beginning after December 15, 1997. SFAS 132
established standards for reporting and display of pension and postretirement
benefits. Furthermore, additional information on changes in benefit obligations
and fair values of plan assets shall be displayed in the financial statements.
The Companies intend to adopt the requirements of SFAS 132 in the financial
statements for the year ending December 31, 1998 and do not believe
implementation will have a material effect on the financial statements.
Effective May 21, 1998, the Companies adopted the guidance provided in Emerging
Issues Task Force No. 98-9 ("EITF 98-9"): "Accounting for Contingent Rent in
Interim Financial Periods." The adoption of EITF 98-9 did not and is not
expected to have a material impact on the Companies' financial position or
results of operations.
Year 2000
The Companies are assessing the potential impact on information systems as a
result of reaching the year 2000. Presently, the Companies believe their current
systems will be year 2000 compliant and would not expect any costs associated to
be material to the Companies' financial position or results of operations. The
Companies are in the process of determining what, if any, cost would be incurred
to remedy existing information systems. Additionally, the Companies will assess
the costs, if any, required to remedy business operations of acquired companies
in the future.
Seasonality
The horse racing industry is seasonal in nature. At Santa Anita, horse racing is
subject to significant seasonal variation in revenue due primarily to the number
of live racing dates in a calendar quarter. The racetrack conducts an annual
17-week thoroughbred horse racing meet which commences the day after Christmas
and continues through mid-April. The racetrack is also sublet to Oak Tree Racing
Association ("Oak Tree") for an annual thoroughbred horse racing meet which
commences in the fall. Oak Tree normally races five weeks in even-numbered years
and six weeks in odd-numbered years. This seasonal pattern may cause the
Companies results of operations related to horse racing to vary significantly
from quarter to quarter.
The golf industry is also seasonal in nature. Adverse weather conditions can
potentially reduce the playing season at one or more of the Companies' golf
facilities. As a result, the second and third calendar quarters generally have
greater revenue than other quarters due to the more favorable weather conditions
at these times of the year. This seasonal pattern, as well as the timing of new
course purchases or leases, may cause the Companies' results of operations
related to golf to vary significantly from quarter to quarter.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
On January 8, 1998 the Companies received notice that they were named as
defendants in an action entitled Lynn Robbins v. William J. Razzouk, et al;
Civil Action No. 98CI-00192 filed January 7, 1998 in the District Court of Bexar
County, Texas, and on January 20, 1998 the Companies received notice that they
were named as defendants in an action entitled Adele Brody v. William J.
Razzouk, et al., Civil Action No. 98CI-00456 filed January 12,1998 in the
District Court of Bexar County, Texas. The complaints, which have been
consolidated into one action, (i) allege, in part, that La Quinta and its
directors violated their fiduciary duty of care and loyalty to La Quinta
shareholders by entering into a merger agreement with the Companies without
having first invited other bidders, and the Companies aided and abetted La
Quinta and its directors in the alleged breaches, and (ii) seek injunctive
relief enjoining the merger with La Quinta and compensatory damages. The
defendants and counsel for the class plaintiffs have negotiated and entered into
an agreement in principle to settle the action, dated on or about May 8, 1998
(the "Memorandum of Understanding"). The Memorandum of Understanding sets forth
the principal bases for the settlement which include the issuance of a series of
press releases prior to the meetings of the shareholders of the Companies and La
Quinta to consider the La Quinta merger agreement and the inclusion of a section
describing the Forward Equity Issuance Transaction with MLI in the joint
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<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
PART II: OTHER INFORMATION
Item 1. Legal Proceedings, Continued
proxy statement/prospectus prepared for the La Quinta's shareholder meetings.
The proposed settlement will be contingent upon the execution of an appropriate
and satisfactory stipulation of settlement and related documents, and Final
Court Approval of the settlement (as defined in the Memorandum of Understanding)
by the Texas Court. La Quinta has agreed to pay counsel for the class plaintiffs
attorney's fees in an amount not to exceed $700,000 in the event such settlement
is consummated.
Item 2. Changes in Securities
On February 26, 1998, the Companies entered into two transactions with Merrill
Lynch International, a UK-based broker/dealer subsidiary of Merrill Lynch & Co.,
Inc. ("MLI"). Pursuant to the terms of a Stock Purchase Agreement, MLI purchased
8,500,000 shares of Series A Non-Voting Convertible Common Stock par value $.10
per share from each of the Companies at a purchase price of $32.625 per share.
The Series A Non-Voting Convertible Common Stock converted to paired common
stock of the Companies on June 18, 1998, the business day following the date on
which the stockholders of the Companies approved the merger of Realty with La
Quinta Inns, Inc. ("La Quinta") and ("La Quinta Merger"). Non-Voting Convertible
Common Stock was $277,312,500, less an aggregate private placement discount to
MLI of 2%, or $5,546,250. Net proceeds from the issuance of securities were
approximately $272,000,000 and were used by the Companies to repay existing
indebtedness. The transaction was exempt from the registration requirements of
the Securities Act of 1933 (the "Act") by virtue of the safe harbor exemption
provided by rule 506 of Regulation D promulgated under the Act. Separately, the
Companies and MLI entered into a Purchase Price Adjustment Agreement under which
the Companies will, within one year from the date of MLI's purchase on a
periodic basis, adjust the original $32.625 purchase price per share based on
the market price of the paired common stock at the time of any interim or final
adjustments, by receiving additional paired common stock from MLI or by issuing
additional paired common stock to MLI.
In the event that the market price for the paired shares is lower than the
original purchase price, the Companies will have to deliver additional paired
shares to MLI which would have dilutive effects on the capital stock of the
Companies. This dilutive effect increases significantly as the market price of
the paired shares decline further below the original purchase price. Moreover,
settlement whether at maturity or at an earlier date may force the Companies to
issue paired shares at a depressed price, which may heighten this dilutive
effect on the capital stock of the Companies.
The paired common shares issued under the above listed agreements receive the
same dividend as the Companies' paired common stock, however, the guaranteed
minimum return is LIBOR plus 75 basis points. Any difference between LIBOR plus
75 basis points and the dividend payments received by MLI will be included in an
adjustment amount under the Purchase Price Adjustment Agreement. The Companies
expect the annual dividend to exceed LIBOR plus 75 basis points.
On July 17, 1998 the Certificates of Incorporation (the "Charters") of Realty
and Operating Company (each, a "Company") were amended. The amendments to the
Charters (i) added a new Article Thirteenth ("Article Thirteenth") which
contains the restrictions on ownership and transfer all classes and series of
the Common Stock Preferred Stock and Series Common Stock of the Companies, as
described below and (ii) amended certain other provisions of the Charters in
order to authorize the issuance of 25 million shares of a new class of capital
stock known as "Excess Stock." The following summary of certain provisions of
Article Thirteenth does not purport to be complete and is subject to, and
qualified in its entirety by reference to, such Article Thirteenth. In addition,
capitalized terms used below and not defined herein have the respective meanings
assigned to them in such Article Thirteenth.
Article Thirteenth of each Charter provides, in substance, as follows: no
person or entity (other than a Look-Through Entity) may Beneficially Own or
Constructively Own in excess of 9.25%, and no Look-Through Entity may
Beneficially Own or Constructively Own in excess of 9.8%, of the outstanding
shares of any class or series of Equity Stock (which is defined to include both
common stock and preferred stock) of the Company (the "Ownership Limitation"),
unless the Ownership Limitation is waived by the Board of Directors of the
Company in accordance with Article Thirteenth. In addition, any transfer of
Equity Stock of the Company that would (i) violate the Ownership Limitation, or
(ii) result in the Company being "closely held" within the meaning of Section
856(h) of the Code, or (iii) cause the Company to Constructively Own 10% or
more of the ownership interests in a tenant of the real property of the Company
or any of its direct or indirect subsidiaries, within the meaning of Section
856(d)(2)(B) of the Code, or (iv) result in the shares of capital stock of the
Company being beneficially owned (within the meaning of Section 856(a)(5) of
the Code) by fewer than 100 persons, will be void ab initio and the intended
transferee will acquire no right or interest in such shares of Equity Stock.
The limitations described in clauses (ii), (iii) and (iv) of the preceding
sentence are hereinafter called the "Other Limitations."
If there is a purported transfer of Equity Stock or a Non-Transfer Event
that would result in a violation of the Ownership Limitation or the Other
Limitations, then, unless such violation is waived by the Board of Directors of
the Company in accordance with Article Thirteenth, (i) the purported transferee
shall be deemed to be a Prohibited Owner (defined, in general, as any person or
entity which is prevented from becoming the record owner of Equity Stock by the
provisions of Article Thirteenth described in this paragraph) and shall acquire
no right or interest (or, in the case of a Non-Transfer Event, the person or
entity holding record title to the relevant Equity Securities shall cease to
own any right or interest) in such number of shares of such Equity Stock the
ownership of which would violate the Ownership Limitation or the Other
Limitations and (ii) such number of shares of such Equity Stock in excess of
the Ownership Limitation or which results in the violation of the Other
Limitations shall be automatically converted into an equal number of shares of
Excess Stock and transferred to a trust (the "Trust") created and administered
for the exclusive benefit of a beneficiary (the "Beneficiary") named by the
Company.
The Prohibited Owner shall not be entitled to any such dividends and
distributions on the Excess Stock. In the event of any voluntary or involuntary
liquidation, winding up or distribution of assets of the Company, each holder
of Excess Stock shall be entitled to receive, ratably with each other holder of
shares of Equity Stock of the same class or series from which it was converted,
that portion of the assets of the Company that is available for distribution to
the holders of such class or series of Equity Stock. The Trust will distribute
to the Prohibited Owner the amounts received upon such liquidation, winding up
or distribution; provided, however, that the Prohibited Owner shall not be
entitled to receive amounts in excess of the price per share such Prohibited
Owner paid for such shares of Equity Stock in the transfer which resulted in
the conversion of such shares into Excess Stock or, in the case of a
Non-Transfer Event or transfer in which the Prohibited Owner did not give value
(such as a gift or devise) and which Non-Transfer Event or transfer, as the
case may be, resulted in the conversion of the shares into Excess Stock, the
price per share equal to the Market Price on the date of such Non-Transfer
Event or transfer, and any remaining amount shall be distributed to the
Beneficiary. As a result, the amount received by a Prohibited Owner per share
of Excess Stock upon any such liquidation, winding up or distribution of assets
may be greater or less than the amount it would have received had it disposed
of a share of the corresponding Equity Stock.
The Trustee, as record holder of the Excess Stock, shall be entitled to
vote all shares of Excess Stock.
Shares of Excess Stock will be deemed to have been offered for sale to the
Company or its designee at a price per share equal to the lesser of (i) the
price per share in the transaction that created such shares of Excess Stock
(or, in the case of a devise, gift or Non-Transfer Event, the Market Price at
the time of such devise, gift or Non-Transfer Event) and (ii) the Market Price
on the date the Company or its designee accepts such offer.
If the Company fails to exercise its option to purchase the Excess Stock
as described in the immediately preceding paragraph, the Trustee shall as soon
as practicable designate one or more persons or entities as Permitted
Transferees, provided that the Permitted Transferees so designated purchase for
"valuable consideration" (whether in a public or private sale) the shares of
Excess Stock in question. Upon transfer of shares of Excess Stock by the
Trustee to a Permitted Transferee, such shares of Excess Stock shall be
automatically converted into an equal number of shares of Equity Stock of the
same class and series from which such Excess Stock was converted.
In the event the Company accepts the offer to purchase shares of Excess
Stock or such Excess Stock is transferred to a Permitted Transferee as
aforesaid, the Prohibited Owner of such Excess Stock shall be entitled to
receive from the Trustee, following the sale or other disposition of such
shares of Excess Stock, the lesser of (i)(a) in the case of a purported
transfer in which the Prohibited Owner gave value for shares of Equity Stock
and which transfer resulted in the conversion of such shares into shares of
Excess Stock, the price per share, if any, such Prohibited Owner paid for the
shares of Equity Stock and (b) in the case of a Non-Transfer Event or transfer
in which the Prohibited Owner did not give value for such shares (e.g., if the
shares were received through a gift or devise) and which Non-Transfer Event or
transfer, as the case may be, resulted in the conversion of such shares into
shares of Excess Stock, the price per share equal to the Market Price on the
date of such Non-Transfer Event or transfer and (ii) the price per share
received by the Trustee from the sale or other disposition of such Excess Stock
to the Company or a Permitted Transferee, and any excess amounts received by
the Trustee shall be distributed to the Beneficiary. As a result, any amounts
received by a Prohibited Owner in respect of Excess Stock as aforesaid may be
more or less than the amounts such Prohibited Owner would have received had it
disposed of the Equity Stock which was converted into such Excess Stock.
Every Beneficial Owner and Constructive Owner of more than 5% (or such
lower percentages as required pursuant to regulations under the Code) of the
outstanding shares of any class or series of Equity Stock of the Company shall,
within 30 days after January 1 of each year, provide the Company with a written
statement or affidavit stating the name and address of such owner, the number
of shares of Equity Stock Beneficially Owned or Constructively Owned, and a
description of how such shares are held. In addition, each person or entity who
is a Beneficial Owner or Constructive Owner of shares of Equity Stock and each
person or entity (including the stockholder of record) who is holding shares of
Equity Stock for a Beneficial Owner or Constructive Owner shall provide to the
Company a written statement or affidavit containing such information as the
Company may request to determine Realty's status as a REIT and to ensure
compliance with the Ownership Limitations.
The foregoing restrictions on ownership and transfer pursuant to Article
Thirteenth shall apply until the Board of Directors of Realty determines that
it is no longer in the best interests of Realty to attempt to qualify, or to
continue to qualify, as a REIT. In addition, the Board of Directors of Realty,
upon receipt of a ruling from the Internal Revenue Service or an opinion of
counsel and subject to certain further terms and conditions, may exempt a
person or entity from the Ownership Limitation.
As used in each Charter:
"Look-Through Entity" shall mean a person or entity that is either (i) a
trust described in Section 401(a) of the Code and exempt from tax under Section
501(a) of the Code as modified by Section 856(h)(3) of the Code or (ii)
registered under the Investment Company Act of 1940.
-48-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Securityholders
At the Annual Meeting of Shareholders of Meditrust Corporation and Meditrust
Operating Company held on June 18, 1998, the recorded vote for each of the
following matters submitted to the shareholders of the Companies was as follows:
1. To approve and adopt the Agreement and Plan of Merger, as amended, by and
among Meditrust Corporation, Meditrust Operating Company and La Quinta Inns,
Inc. in the form included in the Proxy Statement accompanying the Notice of the
Annual Meeting of Shareholders.
For Against Abstain
Meditrust Corporation 46,079,224 5,818,450 884,013
Meditrust Operating Company 44,331,243 7,536,860 913,549
2. Election of Directors of Meditrust Corporation: David F. Benson, Nancy G.
Brinker and Thomas J. Magovern were nominated and duly elected to hold office as
Directors of Meditrust Corporation, each to serve a term of three years and
until their successors are duly elected and qualified, by the number of votes
set forth opposite each person's name as follows:
David F. Benson 70,261,256
Nancy G. Brinker 70,239,639
Thomas J. Magovern 70,256,824
The following persons continued as Directors of Meditrust Corporation following
the meeting:
Abraham D. Gosman
Donald J. Amaral
Edward W. Brooke
James P. Conn
John C. Cushman, III
C. Gerald Goldsmith
Stephen E. Merrill
Gerald Tsai, Jr.
3. Election of Directors of Meditrust Operating Company: David F. Benson, Nancy
G. Brinker, William G. Byrnes and Thomas J. Magovern were nominated and duly
elected to hold office as Directors of Meditrust Operating Company, each to
serve a term of three years and until their successors are duly elected and
qualified, by the number of votes set forth opposite each person's name as
follows:
-49-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Securityholders, Continued
David F. Benson 70,262,274
Nancy G. Brinker 70,235,384
William G. Byrnes 70,258,492
Thomas J. Magovern 70,259,576
The persons listed below continued as Directors of Meditrust Operating Company
following the meeting:
Abraham D. Gosman
Donald J. Amaral
William C. Baker
Edward W. Brooke
C. Gerald Goldsmith
Stephen E. Merrill
Gerald Tsai, Jr.
4. (a) To approve and adopt the Amendment to the Restated Certificate of
Incorporation of Meditrust Corporation to provide for restrictions on the
transfer and ownership of Meditrust Corporation's equity securities and to
authorize 25,000,000 shares of excess stock as described in the Proxy Statement
accompanying the Notice of the Annual Meeting of Shareholders.
For Against Abstain
Meditrust Corporation 49,890,831 1,919,191 971,630
(b) To approve and adopt the Amendment to the Restated Certificate of
Incorporation of Meditrust Operating Company to provide for restrictions on the
transfer and ownership of Meditrust Operating Company's equity securities and to
authorize 25,000,000 shares of excess stock as described in the Proxy Statement
accompanying the Notice of the Annual Meeting of Shareholders.
For Against Abstain
Meditrust Operating Company 50,046,840 1,729,211 1,005,601
5. (a) To approve the performance based compensation plans of Meditrust
Corporation as described and included in the Proxy Statement accompanying the
Notice of the Annual Meeting of Shareholders.
For Against Abstain
Meditrust Corporation 63,962,840 7,625,683 1,506,429
-50-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Securityholders, Continued
(b) To approve the performance based compensation plans of Meditrust
Operating Company as described and included in the Proxy Statement accompanying
the Notice of the Annual Meeting of Shareholders.
For Against Abstain
Meditrust Operating Company 63,798,408 7,780,859 1,515,685
6. (a) To approve an Amendment to the Meditrust Corporation Amended and Restated
1995 Share Award Plan to permit the grant to key employees, over any consecutive
two-year period, options to acquire up to 2,500,000 shares.
For Against Abstain
Meditrust Corporation 57,420,974 14,197,023 1,476,955
(b) To approve an Amendment to the Meditrust Operating Company Amended
and Restated 1995 Share Award Plan, to permit the grant to key employees, over
any consecutive two-year period, options to acquire up to 2,500,000 shares.
For Against Abstain
Meditrust Operating Company 57,365,179 14,215,170 1,514,603
Item 5. Other Information
The By-laws of each of the Companies specify when a stockholder must
submit nominations for director or proposals for consideration at a
stockholders' meeting in order for those nominations or proposals to be
considered in the meeting. In order for the nominations or proposals to be
considered at a stockholders' meeting, the stockholder making them must have
given timely notice in writing to the Secretary of such Company. To be timely,
a stockholder's notice must be delivered to or mailed and received at the
principal executive offices of such Company, not less than 60 days nor more
than 90 days prior to the meeting; except that in the event that a meeting is
called for a date other than a date specified in the By-laws, and less than 75
days' prior public disclosure of the date of the meeting is given, notice by
the stockholder to be timely must be received no later than the close of
business on the 15th calendar day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made.
A stockholder's notice to the Secretary concerning nominations for director
shall set forth the name, age, address and principal occupation of each such
nominee and the amount and type of such Company's stock held by each such
nominee, together with any additional information reasonably necessary to
determine the eligibility of each such nominee and any information required to
be disclosed in the solicitation of proxies in respect to each such nominee by
Schedule 14A, as amended from time to time or other applicable rules and
regulations of the Securities and Exchange Commission. The notice to the
Secretary shall also set forth the name, address, and the amount and type of
beneficial ownership of such Company's stock of the stockholder intending to
nominate the candidate or candidates identified in the notice to the Secretary.
Any stockholder desiring to bring any other business before any annual meeting
of stockholders shall set forth in such stockholder's notice to the Secretary
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the meeting, (ii) the
name and record address of the stockholder proposing such business, (iii) the
class and number of shares of such Company's stock that are beneficially owned
by such stockholder and (iv) any material interest of such stockholder in such
business. In order to be properly brought before any special meeting of
stockholders (other than any special meeting held for the purpose of electing
directors), business must be specified in the notice or meeting (or any
supplement thereto) given by or at the direction of the Board of Directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description
- --- -----------
2.1 Agreement and Plan of Merger, dated as of January 3, 1998, by and among
La Quinta Inns, Inc., Meditrust Corporation and Meditrust Operating
Company (incorporated by reference to Exhibit 10.1 to the Joint Current
Report on Form 8-K for Meditrust Corporation and Meditrust Operating
Company filed January 8, 1998).
-51-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K, Continued
2.2 Shareholders Agreement, dated as of January 3, 1998, by and among
Meditrust Corporation, Meditrust Operating Company, certain shareholders
of La Quinta Inns, Inc. and, solely for the purposes of Section 3.6
thereof, La Quinta Inns, Inc. (incorporated by reference to Exhibit 10.2
to the Joint Current Report on Form 8-K for Meditrust Corporation and
Meditrust Operating Company filed January 8, 1998);
2.3 Agreement and Plan of Merger, dated as of January 11, 1998, by and among
Cobblestone Holdings, Inc., Meditrust Corporation and Meditrust Operating
Company (incorporated by reference to Exhibit 2 to the Joint Current
Report on Form 8-K for Meditrust Corporation and Meditrust Operating
Company filed January 16, 1998);
2.4 Shareholders Agreement, dated as of January 11, 1998, by and among
Meditrust Corporation, Meditrust Operating Company and certain
shareholders of Cobblestone Holdings, Inc. (incorporated by reference to
Exhibit 10 to the Joint Current Report on Form 8-K for Meditrust
Corporation and Meditrust Operating Company filed January 16, 1998);
2.5 First Amendment to Agreement and Plan of Merger, dated as of March 16,
1998, by and among Cobblestone Holdings, Inc., Meditrust Corporation and
Meditrust Operating Company (incorporated by reference to Exhibit 2 to
the Joint Current Report on Form 8-K for Meditrust Corporation and
Meditrust Operating Company filed March 18, 1998);
2.6 First Amendment to Shareholders Agreement, dated as of March 16, 1998, by
and among Meditrust Corporation, Meditrust Operating Company and certain
shareholders of Cobblestone Holdings, Inc. (incorporated by reference to
Exhibit 10 to the Joint Current Report on Form 8-K for Meditrust
Corporation and Meditrust Operating Company filed March 18, 1998);
3.1 Restated Certificate of Incorporation of Meditrust Corporation
(incorporated by reference to Exhibit 3.2 to Joint Registration Statement
on Form S-4 of Meditrust Corporation and Meditrust Operating Company
(File Nos. 333-47737 and 333-47737-01));
3.2 Amended and Restated By-laws of Meditrust Corporation (incorporated by
reference to Exhibit 3.5 to Joint Registration Statement on Form S-4 of
Meditrust Corporation and Meditrust Operating Company (File Nos.
333-47737 and 333-47737-01));
3.3 Restated Certificate of Incorporation of Meditrust Operating Company
(incorporated by reference to Exhibit 3.4 to Joint Registration Statement
on Form S-4 of Meditrust Corporation and Meditrust Operating Company
(File Nos. 33-47737 and 333-47737-01));
3.4 Amended and Restated By-laws of Meditrust Operating Company (incorporated
by reference to Exhibit 3.6 to Joint Registration Statement on Form S-4
of Meditrust Corporation and Meditrust Operating company (File Nos.
333-47737 and 333-47737-01));
-52-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K, Continued
3.5 Certificate of Merger merging Cobblestone Holdings, Inc. with and into
Meditrust Corporation filed with the Secretary of State of Delaware on
May 29, 1998;
3.6 Certificate of Designation for the 9% Series A Cumulative Redeemable
Preferred Stock of Meditrust Corporation filed with the Secretary of
State of Delaware on June 12, 1998 (incorporated by reference to Joint
Current Report of the Companies, event date June 10, 1998);
3.7 Certificate of Merger merging La Quinta Inns, Inc. with and into
Meditrust Corporation filed with the Secretary of State of Delaware on
July 17, 1998;
3.8 Certificate of Amendment of Restated Certificate of Incorporation of
Meditrust Corporation filed with the Secretary of State of Delaware on
July 17, 1998;
3.9 Certificate of Amendment of Restated Certificate of Incorporation of
Meditrust Operating Company filed with the Secretary of State of Delaware
on July 17, 1998;
4.1 Certificate of Designation for the 9% Series A Cumulative Redeemable
Preferred Stock of Meditrust Corporation filed with the Secretary of
State of Delaware on June 12, 1998 (incorporated by reference to Joint
Current Report of the Companies, event date June 10, 1998);
4.2 Certificate of Amendment of Restated Certificate of Incorporation of
Meditrust Operating Company filed with the Secretary of State of Delaware
on July 17, 1998; (See Exhibit 3.6 above)
27 Financial Data Schedule;
99.1 Purchase Agreement, dated February 26, 1998, by and among Merrill Lynch
International, Meditrust Corporation and Meditrust Operating Company
(incorporated by reference to Exhibit 4.32 to the Joint Registration
Statement on Form S-4 of Meditrust Corporation and Meditrust Operating
Company (File Nos. 333-47737 and 333-47737-01));
99.2 Purchase Price Adjustment Mechanism Agreement, dated February 26, 1998,
by and among Merrill Lynch International, Meditrust Corporation and
Meditrust Operating Company (incorporated by reference to Exhibit 4.33 to
the Joint Registration Statement on Form S-4 of Meditrust Corporation and
Meditrust Operating Company (File Nos. 333-47737 and 333-47737-01));
-53-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K, Continued
99.3 Amendment Agreement, dated July 16, 1998, by and among Merrill Lynch
International, Meditrust Corporation and Meditrust Operating Company;
99.4 Amendment Agreement, dated July 31, 1998, by and among Merrill Lynch
International, Meditrust Corporation and Meditrust Operating Company;
99.5 Credit Agreement dated as of July 17, 1998, among Meditrust Corporation,
Morgan Guaranty Trust Company of New York and the other Banks set forth
therein;
(b) Reports on Form 8-K. During the quarter ended June 30, 1998, the
Companies filed the following Current Reports on Form 8-K:
1. Joint Current Report on Form 8-K/A, event date February 26, 1998, which
contains financial statements of the Companies and which amends the Joint
Current Report on Form 8-K, event date February 26, 1998.
2. Joint Current Report on Form 8-K, event date May 13, 1998, which contains
financial statements of Cobblestone Holdings, Inc.
3. Joint Current Report on Form 8-K/A, event date January 3, 1998, which
contains unaudited pro forma financial information, amends the Joint
Current Report on Form 8-K, event date January 3, 1998, as filed with the
Securities and Exchange Commission on March 10, 1998.
4. Joint Current Report on Form 8-K, event date May 20, 1998, which contains
unaudited financial statements of La Quinta Inns, Inc.
5. Joint Current Report on Form 8-K, event date June 10, 1998, which
contains exhibits required in connection with the offering of the 9%
Series A Cumulative Redeemable Preferred Stock of Meditrust Corporation.
-54-
<PAGE>
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Meditrust Corporation
---------------------------
August 14, 1998 /s/ Laurie T. Gerber
---------------------------
Laurie T. Gerber
Chief Financial Officer
Meditrust Operating Company
---------------------------
August 14, 1998 /s/ William C. Baker
---------------------------
William C. Baker
Interim President and
Interim Treasurer
-55-
CERTIFICATE OF MERGER
OF
COBBLESTONE HOLDINGS, INC.
WITH AND INTO
MEDITRUST CORPORATION
Pursuant to Section 251 of the
Delaware Corporation Law
The undersigned corporation organized and existing under and by the
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations in the merger is as follows:
Name State of Incorporation
---- ----------------------
Cobblestone Holdings, Inc. Delaware
Meditrust Corporation Delaware
SECOND: That the Agreement and Plan of Merger dated as of January 11,
1998, among Meditrust Corporation ("Meditrust"), Meditrust Operating Company and
Cobblestone Holdings, Inc., as amended on March 16, 1998, has been approved,
adopted, certified, executed and acknowledged by each of the constituent
corporations in accordance with the requirements of Section 251 of the General
Corporation Law of the State of Delaware.
THIRD: That Meditrust shall be the surviving corporation (the
"Surviving Corporation").
FOURTH: That the certificate of incorporation of Meditrust will be the
certificate of incorporation of the Surviving Corporation.
FIFTH: That the executed Agreement and Plan of Merger is on file at an
office of the Surviving Corporation. The address of such office is:
Meditrust Corporation
197 First Avenue
Needham Heights, MA 02194-9127
<PAGE>
SIXTH: That a copy of the Agreement and Plan of Merger, as amended,
will be furnished by the Surviving Corporation, on request and without cost, to
any stockholder of any constituent corporation.
(Signature page to follow)
<PAGE>
IN WITNESS WHEREOF, Meditrust Corporation has caused this Certificate
of Merger to be executed by its duly authorized officer this 29th day of May,
1998.
MEDITRUST CORPORATION
By: /s/ Michael S. Benjamin
--------------------------------
Name: Michael S. Benjamin
Title: Senior Vice President
CERTIFICATE OF MERGER
OF
LA QUINTA INNS, INC.
(a Texas corporation)
INTO
MEDITRUST CORPORATION
(a Delaware corporation)
The undersigned corporation DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger (the "Merger") are as follows:
Name State of Incorporation
---- ----------------------
Meditrust Corporation Delaware
La Quinta Inns, Inc. Texas
SECOND: That an Agreement and Plan of Merger (the "Merger Agreement") dated
as of January 3, 1998, as amended, among La Quinta Inns, Inc., Meditrust
Corporation and Meditrust Operating Company has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with the requirements of Section 252 of the Delaware General
Corporation Law.
THIRD: That the surviving corporation of the Merger will be Meditrust
Corporation, a Delaware corporation.
FOURTH: That the Restated Certificate of Incorporation of the surviving
corporation shall be its certificate of incorporation.
FIFTH: That the executed Merger Agreement is on file at an office of the
surviving corporation, such office is located at 197 First Avenue, Suite 300,
Needham, Massachusetts 02194.
SIXTH: That a copy of the Merger Agreement will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
<PAGE>
SEVENTH: That the authorized capital stock of La Quinta Inns, Inc. consists
of 200,000,000 shares of common stock, par value $.10 per share.
EIGHTH: That this Certificate of Merger shall be effective upon the filing
of this Certificate of Merger with the Secretary of State of the State of
Delaware.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE>
IN WITNESS WHEREOF, Meditrust Corporation has caused this Certificate to be
signed on its behalf by its duly authorized officer as of the 17th day of July,
1998.
MEDITRUST CORPORATION
By: /s/ Michael S. Benjamin
--------------------------------
Name: Michael S. Benjamin
Title: Senior Vice President
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
MEDITRUST CORPORATION
We, the undersigned, being the duly elected President and Secretary of
Meditrust Corporation (the "Company"), a corporation organized and existing
under the laws of the State of Delaware, do hereby certify:
FIRST, That at a meeting held on April 3, 1998, the Board of Directors of
the Company approved proposed amendments of the Restated Certificate of
Incorporation of the Company, declaring said amendments to be advisable and
authorizing the proposed amendments to be presented to the stockholders of the
Company for their consideration at the Special Meeting of Shareholders held on
June 18, 1998. The resolutions setting forth the proposed amendments are as
follows:
That the Company amend Article Fourth of its Restated Certificate of
Incorporation to increase the authorized capital of the Company to provide for
25,000,000 shares of Excess Stock by replacing Section 1 and adding a new
Section 5 as follows:
"SECTION 1. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 331,000,000, of
which 270,000,000 shares of the par value of $.10 each are to be 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, 30,000,000
shares of the par value of $.10 each are to be of a class designated
Series Common Stock and 25,000,000 of the par value $.10 each are to
be of a class designated Excess Stock."
"SECTION 5. The terms and conditions applicable to shares of
Excess Stock are set forth in Article Thirteenth hereof."
That the Company amend its Restated Certificate of Incorporation by adding
thereto Article Thirteenth, in the form attached hereto as Exhibit A.
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SECOND, That at the Special Meeting of Shareholders held on June 18, 1998,
and pursuant to notice duly given, the holders of a majority of the outstanding
shares of the Company's Common Stock voted in favor of the amendments.
THIRD, That the above-referenced amendments were duly adopted in accordance
with the provisions of Section 242 of the Delaware General Corporation Law, as
amended.
IN WITNESS WHEREOF, this Certificate of Amendment of Restated Certificate
of Incorporation has been executed on behalf of Meditrust Corporation by its
duly authorized officers this 15th day of July, 1998.
Meditrust Corporation
By /s/ David F. Benson
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David F. Benson, its President
ATTEST:
/s/ Michael S. Benjamin
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Michael S. Benjamin
Secretary
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EXHIBIT A
THIRTEENTH:
Section 13.1 Restrictions on Ownership and Transfer of Equity Stock.
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(a) Definitions. For purposes of this Article Thirteenth, the following
terms shall have the meanings set forth below:
"Beneficial Ownership" shall mean, with respect to any Person, ownership of
shares of Equity Stock equal to the sum of (i) the shares of Equity Stock
directly or indirectly owned by such Person, (ii) the number of shares of Equity
Stock treated as owned directly or indirectly by such Person through the
application of the constructive ownership rules of Section 544 of the Internal
Revenue Code of 1986, as amended (the "Code"), as modified by Section
856(h)(1)(B) of the Code, and (iii) the number of shares of Equity Stock which
such Person is deemed to beneficially own pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided,
however, that for the purposes of calculating the foregoing, no share shall be
counted more than once. The terms "Beneficial Owner," "Beneficially Owns" and
"Beneficially Owned" shall have correlative meanings.
"Beneficiary" shall mean, with respect to any Trust, one or more
organizations described in each of Section 170(b)(1)(A) (other than clauses
(vii) and (viii) thereof) and Section 170(c)(2) of the Code that are named by
the Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 13.2(d).
"Constructive Ownership" shall mean ownership of shares of Equity Stock by
a Person who is or would be treated as a direct or indirect owner of such shares
of Equity Stock through the application of Section 318 of the Code, as modified
by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have correlative
meanings.
"Equity Stock" shall mean the common stock, par value $.10 per share, and
the preferred stock, par value $.10 per share of the Corporation and Operating
Company.
"Look-Through Entity" shall mean a Person that is either (i) a trust
described in Section 401(a) of the Code and exempt from tax under Section 501(a)
of the Code as modified by Section 856(h)(3) of the Code or (ii) registered
under the Investment Company Act of 1940.
"Look-Through Ownership Limit" shall mean, with respect to a class or
series of Equity Stock, 9.8% of the number of outstanding shares of such Equity
Stock.
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"Market Price" on any date shall mean the average of the Closing Price for
the five consecutive Trading Days ending on such date. The "Closing Price" on
any date shall mean the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Equity Stock are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Equity Stock are listed or admitted to trading or, if the shares of Equity Stock
are not listed or admitted to trading on any national securities exchange, the
last quoted price, or if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the Nasdaq Stock
Market, Inc. or, if such system is no longer in use, the principal other
automated quotation system that may then be in use or, if the shares of Equity
Stock are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker selected by the
Board of Directors making a market in the shares of Equity Stock. In the case of
Equity Stock that is paired, "Market Price" shall mean the "Market Price" for
paired shares multiplied by a fraction (expressed as a percentage) determined by
dividing the value for such Equity Stock most recently determined under Section
2(e) of the Pairing Agreement by the value of a paired share most recently
determined under Section 2(e) of the Pairing Agreement (the "Valuation
Percentage").
"Non-Transfer Event" shall mean an event (other than a purported Transfer)
that would (a) cause any Person (other than a Look-Through Entity) to
Beneficially Own or Constructively Own shares of Equity Stock in excess of the
Ownership Limit, (b) cause any Look-Through Entity to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Look-Through
Ownership Limit, (c) result in the capital stock of the Corporation being
beneficially owned (within the meaning of Section 856(a)(5) of the Code) by
fewer than 100 persons within the meaning of Section 856(a)(5) of the Code, (d)
result in the Corporation being "closely held" within the meaning of Section
856(h) of the Code, or (e) cause the Corporation to Constructively Own 10% or
more of the ownership interest in a tenant of the Corporation's or a
Subsidiary's real property within the meaning of Section 856(d)(2)(B) of the
Code. Non-Transfer Events include but are not limited to (i) the granting of any
option or entering into any agreement for the sale, transfer or other
disposition of shares of Equity Stock or (ii) the sale, transfer, assignment or
other disposition of interests in any Person or of any securities or rights
convertible into or exchangeable for shares of Equity Stock that results in
changes in Beneficial Ownership or Constructive Ownership of shares of Equity
Stock.
"Operating Company" shall mean Meditrust Operating Company.
"Ownership Limit" shall mean, with respect to any class or series of Equity
Stock, 9.25 % of the number of outstanding shares of such class or series of
Equity Stock. For purposes of computing the percentage of shares of any class or
series of Equity Stock of the Corporation that is Beneficially Owned by any
Person, any shares of Equity Stock of the Corporation which
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are deemed to be Beneficially Owned by such Person pursuant to Rule 13d-3 of the
Exchange Act but which are not outstanding shall be deemed to be outstanding.
"Pairing Agreement" shall mean the Pairing Agreement, dated as of December
20, 1979, by and between Santa Anita Realty Enterprises, Inc. (the predecessor
of Meditrust Corporation) and Santa Anita Operating Company (the predecessor of
Meditrust Operating Company), as amended from time to time in accordance with
the provisions thereof.
"Permitted Transferee" shall mean any Person designated as a Permitted
Transferee in accordance with the provisions of Section 13.2(h).
"Person" shall mean (a) an individual or any corporation, partnership,
estate, trust, association, private foundation, joint stock company, limited
liability company or any other entity and (b) a "group" as that term is defined
for purposes of Rule 13d-5 of the Exchange Act.
"Prohibited Owner" shall mean, with respect to any purported Transfer or
Non-Transfer Event, any Person who is prevented from being or becoming the
owner of record title to shares of Equity Stock by the provisions of Section
13.2(a).
"Restriction Termination Date" shall mean the first day on which the Board
of Directors determines that it is no longer in the best interests of the
Corporation to attempt to, or continue to, qualify under the Code as a real
estate investment trust (a "REIT").
"Trading Day" shall mean a day on which the principal national securities
exchange on which shares of Equity Stock are listed or admitted to trading is
open for the transaction of business or, if shares of Equity Stock are not
listed or admitted to trading on any national securities exchange, any day other
than a Saturday, a Sunday or a day on which banking institutions in the State of
New York are authorized or obligated by law or executive order to close.
"Transfer" (as a noun) shall mean any sale, transfer, gift, assignment,
devise or other disposition of shares of Equity Stock, whether voluntary or
involuntary, whether of record, constructively or beneficially and whether by
operation of law or otherwise. "Transfer" (as a verb) shall have the correlative
meaning.
"Trust" shall mean any separate trust created and administered in
accordance with the terms of Section 13.2, for the exclusive benefit of any
Beneficiary.
"Trustee" shall mean any Person or entity unaffiliated with both the
Corporation and any Prohibited Owner designated by the Corporation to act as
trustee of any Trust, or any successor trustee thereof. The Trustee shall be
designated by the Corporation and the Operating Company in accordance with the
Pairing Agreement.
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(b) Restriction on Ownership and Transfer.
(i) Except as provided in Section 13.1(d), until the Restriction
Termination Date, (i) no Person (other than a Look-Through Entity) shall
Beneficially Own or Constructively Own outstanding shares of Equity Stock in
excess of the Ownership Limit and no Look-Through Entity shall Beneficially Own
or Constructively Own outstanding shares of Equity Stock in excess of the
Look-Through Ownership Limit, (ii) any Transfer (whether or not the result of a
transaction entered into through the facilities of the New York Stock Exchange)
that, if effective, would result in any Person (other than a Look-Through
Entity) Beneficially Owning or Constructively Owning shares of Equity Stock in
excess of the Ownership Limit shall be void ab initio as to the Transfer of that
number of shares of Equity Stock which would be otherwise Beneficially Owned or
Constructively Owned by such Person in excess of the Ownership Limit and the
intended transferee shall acquire no rights in such shares of Equity Stock, and
(iii) any Transfer (whether or not the result of a transaction entered into
through the facilities of the New York Stock Exchange) that, if effective, would
result in any Look-Through Entity Beneficially Owning or Constructively Owning
shares of Equity Stock in excess of the Look-Through Ownership Limit shall be
void ah initio as to the Transfer of that number of shares of Equity Stock which
would be otherwise Beneficially Owned or Constructively Owned by such
Look-Through Entity in excess of the Look-Through Ownership Limit and the
intended transferee shall acquire no rights in such shares of Equity Stock.
(ii) Until the Restriction Termination Date, any Transfer (whether or not
the result of a transaction entered into through the facilities of the New York
Stock Exchange) that, if effective, would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code shall be void ab
initio as to the Transfer of that number of shares of Equity Stock that would
cause the Corporation to be "closely held" within the meaning of Section 856(h)
of the Code, and the intended transferee shall acquire no rights in such shares
of Equity Stock.
(iii) Until the Restriction Termination Date, any Transfer (whether or not
the result of a transaction entered into through the facilities of the New York
Stock Exchange) of shares of Equity Stock that, if effective, would cause the
Corporation to Constructively Own 10% or more of the ownership interests in a
tenant of the real property of the Corporation or any direct or indirect
subsidiary (whether a corporation, partnership, limited liability company or
other entity) of the Corporation (a "Subsidiary"), within the meaning of Section
856(d)(2)(B) of the Code, shall be void ab initio as to the Transfer of that
number of shares of Equity Stock that would cause the Corporation to
Constructively Own 10% or more of the ownership interests in a tenant of the
real property of the Corporation or a Subsidiary within the meaning of Section
856(d)(2)(B) of the Code, and the intended transferee shall acquire no rights in
such shares of Equity Stock.
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(iv) Until the Restriction Termination Date, any Transfer (whether or not
the result of a transaction entered into through the facilities of the New York
Stock Exchange) that, if effective, would result in the shares of capital stock
of the Corporation being beneficially owned (within the meaning of Section
856(a)(5) of the Code) by fewer than 100 persons within the meaning of Section
856(a)(5) of the Code shall be void ab initio and the intended transferee shall
acquire no rights in such shares of Equity Stock.
(c) Owners Required to Provide Information. Until the Restriction
Termination Date:
(i) Every Beneficial Owner or Constructive Owner of more than 5%, or such
lower percentages as required pursuant to regulations under the Code, of the
outstanding shares of any class or series of Equity Stock of the Corporation
shall, within 30 days after January 1 of each year, provide to the Corporation a
written statement or affidavit stating the name and address of such Beneficial
Owner or Constructive Owner, the number of shares of Equity Stock Beneficially
Owned or Constructively Owned, and a description of how such shares are held.
Each such Beneficial Owner or Constructive Owner shall provide to the
Corporation such additional information as the Corporation may request to ensure
compliance with the restrictions in this Section 13.1.
(ii) Each Person who is a Beneficial Owner or Constructive Owner of shares
of Equity Stock and each Person (including the stockholder of record) who is
holding shares of Equity Stock for a Beneficial Owner or Constructive Owner
shall provide to the Corporation a written statement or affidavit stating such
information as the Corporation may request in order to determine the
Corporation's status as a REIT and to ensure compliance with the Ownership Limit
or the Look-Through Ownership Limit, as the case may be.
(d) Exception. The Board of Directors, upon receipt of a ruling from the
Internal Revenue Service or an opinion of counsel in each case to the effect
that the restrictions contained in subsections (b)(ii) through (iv) of this
Section 13.1 would not be violated, may exempt a Person from the Ownership Limit
or Look-Through Ownership Limit, provided that (A) the Board of Directors
obtains such representations and undertakings from such Person as are reasonably
necessary to ascertain that no Person's Beneficial Ownership or Constructive
Ownership of shares of Equity Stock will (i) result in the capital stock of the
Corporation being beneficially owned (within the meaning of Section 856(a)(5) of
the Code) by fewer than 100 persons within the meaning of Section 856(a)(5) of
the Code, (ii) result in the Corporation being "closely held" within the meaning
of Section 856(h) of the Code or (iii) cause the Corporation to Constructively
Own 10% or more of the ownership interests in the real property of a tenant of
the Corporation or a Subsidiary within the meaning of Section 856(d)(2)(B) of
the Code and (B) such Person agrees in writing that any violation or attempted
violation of the Ownership Limit or Look-Through Ownership Limit will result in
the conversion of such shares into shares of Excess Stock pursuant to Section
13.2(a).
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(e) New York Stock Exchange Transactions. Notwithstanding any provision
contained herein to the contrary, nothing in this Certificate of Incorporation
shall preclude the settlement of any transaction entered into through the
facilities of the New York Stock Exchange.
Section 13.2. Excess Stock.
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(a) Conversion into Excess Stock.
(i) If, notwithstanding the other provisions contained in this Article
Thirteenth, prior to the Restriction Termination Date, there is a purported
Transfer or Non-Transfer Event such that any Person (other than a Look-Through
Entity) would either Beneficially Own or Constructively Own shares of Equity
Stock in excess of the Ownership Limit or such that any Person that is a
Look-Through Entity would either Beneficially Own or Constructively Own shares
of Equity Stock in excess of the Look Through Ownership Limit, then, (i) except
as otherwise provided in Section 13. l(d), the purported transferee shall be
deemed to be a Prohibited Owner and shall acquire no right or interest (or, in
the case of a Non-Transfer Event, the Person holding record title to the shares
of Equity Stock Beneficially Owned or Constructively Owned by such Beneficial
Owner or Constructive Owner, shall cease to own any right or interest) in such
number of shares of Equity Stock which would cause such Beneficial Owner or
Constructive Owner to Beneficially Own or Constructively Own shares of Equity
Stock in excess of the Ownership Limit or the Look-Through Ownership Limit, as
the case may be, (ii) such number of shares of Equity Stock in excess of the
Ownership Limit or the Look-Through Ownership Limit, as the case may be,
(rounded up to the nearest whole share) shall be automatically converted into an
equal number of shares of Excess Stock and transferred to a Trust in accordance
with Section 13.2(d) and (iii) the Prohibited Owner shall submit such number of
shares of Equity Stock to the Corporation for registration in the name of the
Trustee of the Trust. Such conversion into Excess Stock and transfer to a Trust
shall be effective as of the close of trading on the Trading Day prior to the
date of the Transfer or Non-Transfer Event, as the case may be.
(ii) If, notwithstanding the other provisions contained in this Article
Thirteenth, prior to the Restriction Termination Date, there is a purported
Transfer or Non-Transfer Event that, if effective, would (i) result in the
capital stock of the Corporation being beneficially owned (within the meaning of
Section 856(a)(5) of the Code) by fewer than 100 persons within the meaning of
Section 856(a)(5) of the Code, (ii) result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code or (iii) cause the
Corporation to Constructively Own 10% or more of the ownership interest in a
tenant of the Corporation's or a Subsidiary's real property within the meaning
of Section 856(d)(2)(B) of the Code, then (x) the purported transferee shall be
deemed to be a Prohibited Owner and shall acquire no right or interest (or, in
the case of a Non-Transfer Event, the Person holding record title of the shares
of Equity Stock with respect to which such Non-Transfer Event occurred, shall be
deemed to be a Prohibited Owner and shall cease to own any right or
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interest) in such number of shares of Equity Stock, the ownership of which by
such purported transferee or record holder would (A) result in the shares of
capital stock of the Corporation being beneficially owned (within the meaning of
Section 856(a)(5) of the Code) by fewer than 100 persons within the meaning of
Section 856(a)(5) of the Code, (B) result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code or (C) cause the
Corporation to Constructively Own 10% or more of the ownership interests in a
tenant of the Corporation's or a Subsidiary's real property within the meaning
of Section 856(d)(2)(B) of the Code, (y) such number of shares of Equity Stock
(rounded up to the nearest whole share) shall be automatically converted into an
equal number of shares of Excess Stock and transferred to a Trust in accordance
with Section 13.2(d) and (z) the Prohibited Owner shall submit such number of
shares of Equity Stock to the Corporation for registration in the name of the
Trustee of the Trust. Such conversion into Excess Stock and transfer to a Trust
shall be effective as of the close of trading on the Trading Day prior to the
date of the Transfer or Non-Transfer Event, as the case may be.
(iii) Upon the occurrence of such a conversion of shares of any class or
series of Equity Stock into an equal number of shares of Excess Stock, such
shares of Equity Stock shall be automatically retired and canceled, without any
action required by the Board of Directors of the Corporation, and shall
thereupon be restored to the status of authorized but unissued shares of the
particular class or series of Equity Stock from which such Excess Stock was
converted and may be reissued by the Corporation as that particular class or
series of Equity Stock.
(iv) Upon the conversion into Excess Shares (pursuant to the Certificate of
Incorporation of Operating Company) of any shares of any class or series of
Operating Company stock that are paired with a class or series of shares of
Equity Stock, pursuant to the Pairing Agreement, such shares of Equity Stock
shall likewise be converted into an equal number of shares of Excess Stock and
be paired with such converted shares of Operating Company, pursuant to the
Pairing Agreement.
(b) Remedies for Breach. If the Corporation, or its designees, shall at any
time determine in good faith that a Transfer has taken place in violation of
Section 13. l(b) or that a Person intends to acquire or has attempted to acquire
Beneficial Ownership or Constructive Ownership of any shares of Equity Stock in
violation of Section 13.l(b), the Corporation shall take such action as it
deems advisable to refuse to give effect to or to prevent such Transfer or
acquisition, including, but not limited to, refusing to give effect to such
Transfer on the stock transfer books of the Corporation or instituting
proceedings to enjoin such Transfer or acquisition.
(c) Notice of Restricted Transfer. Any Person who acquires or attempts to
acquire shares of Equity Stock in violation of Section 13.1(b), or any Person
who owns shares of Equity Stock that were converted into shares of Excess Stock
and transferred to a Trust pursuant to subsections (a) and (d) of this Section
13.2, shall immediately give written notice to the Corporation of such event and
shall provide to the Corporation such other information
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as the Corporation may request in order to determine the effect, if any, of
such Transfer or Non-Transfer Event, as the case may be, on the Corporation's
status as a REIT.
(d) Ownership in Trust. Upon any Transfer or Non-Transfer Event that results
in Excess Stock pursuant to Section 13.2(a), such Excess Stock shall be
automatically transferred to a Trust to be held for the exclusive benefit of the
Beneficiary. The Corporation and the Operating Company shall name a Beneficiary
for each Trust. Any conversion of shares of Equity Stock into shares of Excess
Stock and transfer to a Trust shall be effective as of the close of trading on
the Trading Day prior to the date of the Transfer or Non-Transfer Event that
results in the conversion. Shares of Excess Stock so held in trust shall remain
issued and outstanding shares of stock of the Corporation.
(e) Dividend Rights. Each share of Excess Stock shall be entitled to the same
dividends and distributions (as to both timing and amount) as may be declared by
the Board of Directors as shares of the class or series of Equity Stock from
which such Excess Stock was converted. The Trustee, as record holder of the
shares of Excess Stock, shall be entitled to receive all dividends and
distributions and shall hold all such dividends or distributions in trust for
the benefit of the Beneficiary. The Prohibited Owner with respect to such shares
of Excess Stock shall repay to the Trust the amount of any dividends or
distributions received by it (i) that are attributable to any shares of Equity
Stock that have been converted into shares of Excess Stock and (ii) the record
date of which was on or after the date that such shares were converted into
shares of Excess Stock. The Corporation shall take all measures that it
determines reasonably necessary to recover the amount of any such dividend or
distribution paid to a Prohibited Owner, including, if necessary, withholding
any portion of future dividends or distributions payable on shares of Equity
Stock Beneficially Owned or Constructively Owned by the Person who, but for the
provisions of this Article Thirteenth, would Constructively Own or Beneficially
Own the shares of Equity Stock that were converted into shares of Excess Stock;
and, as soon as reasonably practicable following the Corporation's receipt or
withholding thereof, shall pay over to the Trust for the benefit of the
Beneficiary the dividends so received or withheld, as the case may be.
(f) Rights upon Liquidation. In the event of any voluntary or involuntary
liquidation of, or winding up of, or any distribution of the assets of, the
Corporation, each holder of shares of Excess Stock shall be entitled to receive,
ratably with each other holder of shares of Equity Stock of the same class or
series from which the Equity Stock was converted, that portion of the assets of
the Corporation that is available for distribution to the holders of such class
or series of Equity Stock. The Trust shall distribute to the Prohibited Owner
the amounts received upon such liquidation, dissolution, or winding up, or
distribution; provided, however, that the Prohibited Owner shall not be entitled
to receive amounts in excess of, in the case of a purported Transfer in which
the Prohibited Owner gave value for shares of Equity Stock and which Transfer
resulted in the conversion of the shares into shares of Excess Stock, the price
per share, if any, such Prohibited Owner paid for the shares of Equity Stock
(which, in the case of Equity Stock that is paired, shall equal the price per
paired share multiplied by the most recent Valuation Percentage) and, in the
case of a Non-
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Transfer Event or Transfer in which the Prohibited Owner did not give value for
such shares (e.g., if the shares were received through a gift or devise) and
which Non-Transfer Event or Transfer, as the case may be, resulted in the
conversion of the shares into shares of Excess Stock, the price per share equal
to the Market Price on the date of such Non-Transfer Event or Transfer. Any
remaining amount in such Trust shall be distributed to the Beneficiary.
(g) Voting Rights. Each share of Excess Stock shall entitle the holder to the
number of votes the holder would have, if such share of Excess Stock was a share
of Equity Stock of the same class or series from which such Excess Stock was
converted, on all matters submitted to a vote at any meeting of stockholders.
The holders of shares of Excess Stock converted from the same class or series of
Equity Stock shall vote together with the holders of such Equity Stock as a
single class on all such matters. The Trustee, as record holder of the Excess
Stock, shall be entitled to vote all shares of Excess Stock. Any vote by a
Prohibited Owner as a purported holder of shares of Equity Stock prior to the
discovery by the Corporation that the shares of Equity Stock have been converted
into shares of Excess Stock shall, subject to applicable law, be rescinded and
shall be void ab initio with respect to such shares of Excess Stock, and the
Prohibited Owner shall be deemed to have given, as of the close of trading on
the Trading Day prior to the date of the purported Transfer or Non-Transfer
Event that results in the conversion of the shares of Equity Stock into shares
of Excess Stock and the transfer of such shares to a Trust pursuant to
subsections (a) and (d) of this Section 13.2, an irrevocable proxy to the
Trustee to vote the shares of Excess Stock in the manner in which the Trustee,
in its sole and absolute discretion, desires.
(h) Designation of Permitted Transferee.
(i) The Trustee shall have the exclusive and absolute right to designate
one or more Permitted Transferees of any and all shares of Excess Stock if the
Corporation fails to exercise its option with respect to such shares pursuant to
Section 13.2(j) hereof within the time period set forth therein. As soon as
practicable, but in an orderly fashion so as not to materially adversely affect
the Market Price of the shares of Excess Stock, the Trustee shall designate any
one or more Persons as Permitted Transferees; provided, however, that (i) the
Permitted Transferee so designated purchases for valuable consideration (whether
in a public or private sale) the shares of Excess Stock (which, in the case of
paired Excess Stock, shall be determined based on the Valuation Percentage) and
(ii) the Permitted Transferee so designated may acquire such shares of Excess
Stock without violating any of the restrictions set forth in Section 13.1(b) and
without such acquisition resulting in the conversion of the shares of Equity
Stock so acquired into shares of Excess Stock and the transfer of such shares to
a Trust pursuant to subsections (a) and (d) of this Section 13.2.
(ii) Upon the designation by the Trustee of a Permitted Transferee in
accordance with the provisions of this Section 13.2(h), the Trustee shall cause
to be transferred to the Permitted Transferee that number of shares of Excess
Stock acquired by the Permitted Transferee. Upon such transfer of the shares of
Excess Stock to the Permitted Transferee, such shares of Excess Stock shall be
automatically converted into an
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equal number of shares of Equity Stock of the same class and series from which
such Excess Stock was converted. Upon the occurrence of such a conversion of
shares of Excess Stock into an equal number of shares of Equity Stock, such
shares of Excess Stock shall be automatically retired and canceled, without any
action required by the Board of Directors of the Corporation, and shall
thereupon be restored to the status of authorized but unissued shares of Excess
Stock and may be reissued by the Corporation as Excess Stock.
(iii) The Trustee shall (i) cause to be recorded on the stock transfer
books of the Corporation that the Permitted Transferee is the holder of record
of such number of shares of Equity Stock, and (ii) distribute to the Beneficiary
any and all amounts held with respect to the shares of Excess Stock after making
payment to the Prohibited Owner pursuant to Section 13.2(i).
(iv) If the Transfer of shares of Excess Stock to a purported Permitted
Transferee shall violate any of the transfer restrictions set forth in Section
13.1(b), such Transfer shall be void ab initio as to that number of shares of
Excess Stock that cause the violation of any such restriction when such shares
are converted into shares of Equity Stock (as described in subsection (h)(ii)
above) and the purported Permitted Transferee shall be deemed to be a Prohibited
Owner and shall acquire no rights in such shares of Excess Stock or Equity
Stock. Such shares of Equity Stock shall be automatically reconverted into
Excess Stock and transferred to the Trust from which they were originally
Transferred. Such conversion and transfer to the Trust shall be effective as of
the close of trading on the Trading Day prior to the date of the Transfer to the
purported Permitted Transferee and the provisions of this Article Thirteenth
shall apply to such shares, including, without limitation, the provisions of
subsections (h) through (j) of this Section 13.2 with respect to any future
Transfer of such shares by the Trust.
(i) Compensation to Record Holder of Shares of Equity Stock that are
Converted into Shares of Excess Stock. Any Prohibited Owner shall be entitled
(following discovery of the shares of Excess Stock and subsequent designation of
the Permitted Transferee in accordance with Section 13.2(h) or following the
acceptance of the offer to purchase such shares in accordance with Section
13.2(j) to receive from the Trustee following the sale or other disposition of
such shares of Excess Stock the lesser of (i)(a) in the case of a purported
Transfer in which the Prohibited Owner gave value for shares of Equity Stock and
which Transfer resulted in the conversion of such shares into shares of Excess
Stock, the price per share, if any, such Prohibited Owner paid for the shares of
Equity Stock (which, in the case of paired Excess Stock, shall be determined
based on the Valuation Percentage) and (b) in the case of a Non-Transfer Event
or Transfer in which the Prohibited Owner did not give value for such shares
(e.g., if the shares were received through a gift or devise) and which
Non-Transfer Event or Transfer, as the case may be, resulted in the conversion
of such shares into shares of Excess Stock, the price per share equal to the
Market Price on the date of such Non-Transfer Event or Transfer or (ii) the
price per share (which, in the case of paired Excess Stock, shall be determined
based on
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<PAGE>
the Valuation Percentage) received by the Trustee from the sale or other
disposition of such shares of Excess Stock in accordance with this Section
13.2(i) or Section 13.2(j). Any amounts received by the Trustee in respect of
such shares of Excess Stock and in excess of such amounts to be paid the
Prohibited Owner pursuant to this Section 13.2(i) shall be distributed to the
Beneficiary in accordance with the provisions of Section 13.2(h). Each
Beneficiary and Prohibited Owner shall waive any and all claims that it may have
against the Trustee and the Trust arising out of the disposition of shares of
Excess Stock, except for claims arising out of the gross negligence or willful
misconduct of, or any failure to make payments in accordance with this Section
13.2 by, such Trustee or the Corporation.
(j) Purchase Right in Excess Stock. Shares of Excess Stock shall be deemed to
have been offered for sale to the Corporation or its designee, at a price per
share equal to the lesser of (i) the price per share (which, in the case of
paired Excess Stock, shall be determined based on the Valuation Percentage) in
the transaction that created such shares of Excess Stock (or, in the case of
devise, gift or Non-Transfer Event, the Market Price at the time of such devise,
gift or Non-Transfer Event) or (ii) the Market Price on the date the
Corporation, or its designee, accepts such offer. The Corporation shall have the
right to accept such offer for a period of 90 days following the later of (a)
the date of the Non-Transfer Event or purported Transfer which results in such
shares of Excess Stock or (b) the date on which the Corporation determines in
good faith that a Transfer or Non-Transfer Event resulting in shares of Excess
Stock previously has occurred, if the Corporation does not receive a notice of
such Transfer or Non-Transfer Event pursuant to Section 13.2(c).
Section 13.3. Remedies Not Limited. Nothing contained in this Article
Thirteenth shall limit the authority of the Corporation to take such other
action as it deems necessary or advisable to protect the Corporation and the
interests of its stockholders by preservation of the Corporation's status as a
REIT and to ensure compliance with the requirements of the Pairing Agreement and
with the restrictions set forth in Section 13.1.
Section 13.4. Ambiguity. In the case of an ambiguity in the application of
any of the provisions of this Article Thirteenth, including any definition
contained in Section 13.1(a), the Board of Directors shall have the power to
determine the application of the provisions of this Article Thirteenth with
respect to any situation based on the facts known to it.
Section 13.5. Legend. Each certificate for shares of Equity Stock shall
bear the following legend:
"The shares of Meditrust Corporation and Meditrust Operating Company
represented by this combined certificate are subject to restrictions in the
respective Certificates of Incorporation of each company which prohibit (a) any
Person (other than a Look-Through Entity) (as such terms are defined in the
respective Certificates of Incorporation of each company) from Beneficially
Owning or Constructively Owning (as these terms are defined
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<PAGE>
in the respective Certificates of Incorporation of each company) in excess of
9.25% of the number of outstanding shares of any class or series of Equity Stock
(as that term is defined in the respective Certificates of Incorporation of each
company), (b) any Look-Through Entity from Beneficially Owning or Constructively
Owning in excess of 9.8% of the number of outstanding shares of any class or
series of Equity Stock, (c) any Person from acquiring or maintaining any
ownership interest in the stock of either company that is inconsistent with (i)
the requirements of the Internal Revenue Code of 1986, as amended, pertaining to
real estate investment trusts or (ii) Article Thirteenth of the respective
Certificates of Incorporation of each company and (d) any transfer of shares of
any class or series of Equity Stock of either company that are paired pursuant
to the Pairing Agreement, dated as of December 20, 1979, between the two
companies, as amended from time to time in accordance with the provisions
thereof (the "Pairing Agreement"), except in combination with an equal number of
shares of the other company in accordance with the respective Certificates of
Incorporation of each company and the Pairing Agreement, copies of which are on
file with the transfer agent named on the face hereof, and the holder of this
certificate by his acceptance hereof consents to be bound by such restrictions.
Meditrust Corporation and Meditrust Operating Company will furnish without
charge to each stockholder who so requests a copy of the relevant provisions of
the respective Certificates of Incorporation of each company, a copy of the
Pairing Agreement and a copy of the provisions setting forth the designations,
preferences, privileges and rights of each class of stock or series thereof that
each company is authorized to issue and the qualifications, limitations and
restrictions of such preferences and/or rights. Any such request may be
addressed to the Secretary of either company or to the transfer agent named on
the face hereof."
Section 13.6. Severability. Each provision of this Article Thirteenth shall
be severable and an adverse determination as to any such provision shall be in
no way affect the validity of any other provision.
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CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
MEDITRUST OPERATING COMPANY
We, the undersigned, being the duly elected Chief Executive Officer and
Secretary of Meditrust Operating Company (the "Company"), a corporation
organized and existing under the laws of the State of Delaware, do hereby
certify:
FIRST, That at a meeting held on April 3, 1998, the Board of Directors
of the Company approved proposed amendments of the Restated Certificate of
Incorporation of the Company, declaring said amendments to be advisable and
authorizing the proposed amendments to be presented to the stockholders of the
Company for their consideration at the Special Meeting of Shareholders held on
June 18, 1998. The resolutions setting forth the proposed amendments are as
follows:
That the Company amend Article Fourth of its Restated Certificate of
Incorporation to increase the authorized capital of the Company to provide for
25,000,000 shares of Excess Stock by replacing Section 1 and adding a new
Section 5 as follows:
"SECTION 1. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 331,000,000, of
which 270,000,000 shares of the par value of $.10 each are to be 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, 30,000,000
shares of the par value of $.10 each are to be of a class designated
Series Common Stock and 25,000,000 of the par value $.10 each are to be
of a class designated Excess Stock."
"SECTION 5. The terms and conditions applicable to shares of
Excess Stock are set forth in Article Thirteenth hereof."
That the Company amend its Restated Certificate of Incorporation by
adding thereto Article Thirteenth, in the form attached hereto as Exhibit A.
<PAGE>
SECOND, That at the Special Meeting of Shareholders held on June 18,
1998, and pursuant to notice duly given, the holders of a majority of the
outstanding shares of the Company's Common Stock voted in favor of the
amendments.
THIRD, That the above-referenced amendments were duly adopted in
accordance with the provisions of Section 242 of the Delaware General
Corporation Law, as amended.
IN WITNESS WHEREOF, this Certificate of Amendment of Restated
Certificate of Incorporation has been executed on behalf of Meditrust Operating
Company by its duly authorized officers this 15th day of July, 1998.
Meditrust Operating Company
By /s/ Abraham D. Gosman
-------------------------------
Abraham D. Gosman, its Chief
Executive Officer
ATTEST:
/s/ Michael J. Bohnen
- -----------------------------
Michael J. Bohnen
Secretary
<PAGE>
EXHIBIT A
THIRTEENTH:
Section 13.1. Restrictions on Ownership and Transfer of Equity Stock.
-------------------------------------------------------
(a) Definitions. For purposes of this Article Thirteenth, the following
terms shall have the meanings set forth below:
"Beneficial Ownership" shall mean, with respect to any Person,
ownership of shares of Equity Stock equal to the sum of (i) the shares of Equity
Stock directly or indirectly owned by such Person, (ii) the number of shares of
Equity Stock treated as owned directly or indirectly by such Person through the
application of the constructive ownership rules of Section 544 of the Internal
Revenue Code of 1986, as amended (the "Code"), as modified by Section
856(h)(1)(B) of the Code as if the Corporation were a real estate investment
trust (a "REIT") as defined in the Code, and (iii) the number of shares of
Equity Stock which such Person is deemed to beneficially own pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); provided, however, that for the purposes of calculating the foregoing, no
share shall be counted more than once. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have correlative meanings.
"Beneficiary" shall mean, with respect to any Trust, one or more
organizations described in each of Section 170(b)(1)(A) (other than clauses
(vii) and (viii) thereof) and Section 170(c)(2) of the Code that are named by
the Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 13.2(d).
"Constructive Ownership" shall mean ownership of shares of Equity Stock
by a Person who is or would be treated as a direct or indirect owner of such
shares of Equity Stock through the application of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have correlative
meanings.
"Equity Stock" shall mean the common stock, par value $.10 per share,
and the preferred stock, par value $.10 per share of the Corporation and
Operating Company.
"Look-Through Entity" shall mean a Person that is either (i) a trust
described in Section 401(a) of the Code and exempt from tax under Section 501(a)
of the Code as modified by Section 856(h)(3) of the Code as if the Corporation
were a REIT or (ii) registered under the Investment Company Act of 1940.
"Look-Through Ownership Limit" shall mean, with respect to a class or
series of Equity Stock, 9.8% of the number of outstanding shares of such Equity
Stock.
<PAGE>
"Market Price" on any date shall mean the average of the Closing Price
for the five consecutive Trading Days ending on such date. The "Closing Price"
on any date shall mean the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Equity Stock are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Equity Stock are listed or admitted to trading or, if the shares of Equity Stock
are not listed or admitted to trading on any national securities exchange, the
last quoted price, or if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the Nasdaq Stock
Market, Inc. or, if such system is no longer in use, the principal other
automated quotation system that may then be in use or, if the shares of Equity
Stock are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker selected by the
Board of Directors making a market in the shares of Equity Stock. In the case of
Equity Stock that is paired, "Market Price" shall mean the "Market Price" for
paired shares multiplied by a fraction (expressed as a percentage) determined by
dividing the value for such Equity Stock most recently determined under Section
2(e) of the Pairing Agreement by the value of a paired share most recently
determined under Section 2(e) of the Pairing Agreement (the "Valuation
Percentage").
"Non-Transfer Event" shall mean an event (other than a purported
Transfer) that would (a) cause any Person (other than a Look-Through Entity) to
Beneficially Own or Constructively Own shares of Equity Stock in excess of the
Own- ership Limit, (b) cause any Look-Through Entity to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Look- Through
Ownership Limit, (c) result in the capital stock of the Corporation being
beneficially owned (within the meaning of Section 856(a)(5) of the Code as if
the Corporation were a REIT) by fewer than 100 persons within the meaning of
Section 856(a)(5) of the Code as if the Corporation were a REIT, (d) result in
the Corporation being "closely held" within the meaning of Section 856(h) of the
Code as if the Corporation were a REIT, or (e) cause the Corporation to
Constructively Own 10% or more of the ownership interest in a tenant of the
Corporation's or a Subsidiary's real property within the meaning of Section
856(d)(2)(B) of the Code as if the Corporation were a REIT. Non-Transfer Events
include but are not limited to (i) the granting of any option or entering into
any agreement for the sale, transfer or other disposition of shares of Equity
Stock or (ii) the sale, transfer, assignment or other disposition of interests
in any Person or of any securities or rights convertible into or exchangeable
for shares of Equity Stock that results in changes in Beneficial Ownership or
Constructive Ownership of shares of Equity Stock.
"Ownership Limit" shall mean, with respect to any class or series of
Equity Stock, 9.25% of the number of outstanding shares of such class or series
of Equity Stock. For purposes of computing the percentage of shares of any class
or series of Equity Stock of the Corporation that is Beneficially Owned by any
Person, any shares of Equity Stock of the Corporation which
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<PAGE>
are deemed to be Beneficially Owned by such Person pursuant to Rule 13d-3 of the
Exchange Act but which are not outstanding shall be deemed to be outstanding.
"Pairing Agreement" shall mean the Pairing Agreement, dated as of
December 20, 1979, by and between Santa Anita Realty Enterprises, Inc. (the
predecessor of Meditrust Corporation) and Santa Anita Operating Company (the
predecessor of Meditrust Operating Company), as amended from time to time in
accordance with the provisions thereof.
"Permitted Transferee" shall mean any Person designated as a Permitted
Transferee in accordance with the provisions of Section 13.2(h).
"Person" shall mean (a) an individual or any corporation, partnership,
estate, trust, association, private foundation, joint stock company, limited
liability company or any other entity and (b) a "group" as that term is defined
for purposes of Rule 13d-5 of the Exchange Act.
"Prohibited Owner" shall mean, with respect to any purported Transfer
or Non-Transfer Event, any Person who is prevented from being or becoming the
owner of record title to shares of Equity Stock by the provisions of Section
13.2(a).
"Restriction Termination Date" shall mean the first day on which the
Board of Directors determines that it is no longer in the best interests of
Meditrust Corporation to attempt to, or continue to, qualify under the Code as a
REIT.
"Trading Day" shall mean a day on which the principal national
securities exchange on which shares of Equity Stock are listed or admitted to
trading is open for the transaction of business or, if shares of Equity Stock
are not listed or admitted to trading on any national securities exchange, any
day other than a Saturday, a Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or executive order to
close.
"Transfer" (as a noun) shall mean any sale, transfer, gift, assignment,
devise or other disposition of shares of Equity Stock, whether voluntary or
involuntary, whether of record, constructively or beneficially and whether by
operation of law or otherwise. "Transfer" (as a verb) shall have the correlative
meaning.
"Trust" shall mean any separate trust created and administered in
accordance with the terms of Section 13.2, for the exclusive benefit of any
Beneficiary.
"Trustee" shall mean any Person or entity unaffiliated with both the
Corporation and any Prohibited Owner designated by the Corporation to act as
trustee of any Trust, or any successor trustee thereof. The Trustee shall be
designated by the Corporation and the Operating Company in accordance with the
Pairing Agreement.
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<PAGE>
(b) Restriction on Ownership and Transfer.
--------------------------------------
(i) Except as provided in Section 13.1(d), until the
Restriction Termination Date, (i) no Person (other than a Look-Through Entity)
shall Beneficially Own or Constructively Own outstanding shares of Equity Stock
in excess of the Ownership Limit and no Look-Through Entity shall Beneficially
Own or Constructively Own outstanding shares of Equity Stock in excess of the
Look-Through Ownership Limit, (ii) any Transfer (whether or not the result of a
transaction entered into through the facilities of the New York Stock Exchange)
that, if effective, would result in any Person (other than a Look-Through
Entity) Beneficially Owning or Constructively Owning shares of Equity Stock in
excess of the Ownership Limit shall be void ab initio as to the Transfer of that
number of shares of Equity Stock which would be otherwise Beneficially Owned or
Constructively Owned by such Person in excess of the Ownership Limit and the
intended transferee shall acquire no rights in such shares of Equity Stock, and
(iii) any Transfer (whether or not the result of a transaction entered into
through the facilities of the New York Stock Exchange) that, if effective, would
result in any Look-Through Entity Beneficially Owning or Constructively Owning
shares of Equity Stock in excess of the Look-Through Ownership Limit shall be
void ab initio as to the Transfer of that number of shares of Equity Stock which
would be otherwise Beneficially Owned or Constructively Owned by such Look-
Through Entity in excess of the Look-Through Ownership Limit and the intended
transferee shall acquire no rights in such shares of Equity Stock.
(ii) Until the Restriction Termination Date, any Transfer
(whether or not the result of a transaction entered into through the facilities
of the New York Stock Exchange) that, if effective, would result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code if the Corporation were a REIT shall be void ab initio as to the Transfer
of that number of shares of Equity Stock that would cause the Corporation to be
"closely held" within the meaning of Section 856(h) of the Code as if the
Corporation were a REIT, and the intended transferee shall acquire no rights in
such shares of Equity Stock.
(iii) Until the Restriction Termination Date, any Transfer
(whether or not the result of a transaction entered into through the facilities
of the New York Stock Exchange) of shares of Equity Stock that, if effective,
would cause the Corporation to Constructively Own 10% or more of the ownership
interests in a tenant of the real property of the Corporation or any direct or
indirect subsidiary (whether a corporation, partnership, limited liability
company or other entity) of the Corporation (a "Subsidiary"), within the meaning
of Section 856(d)(2)(B) of the Code as if the Corporation were a REIT, shall be
void ab initio as to the Transfer of that number of shares of Equity Stock that
would cause the Corporation to Constructively Own 10% or more of the ownership
interests in a tenant of the real property of the Corporation or a Subsidiary
within the meaning of Section 856(d)(2)(B) of the Code as if the Corporation
were a REIT, and the intended transferee shall acquire no rights in such shares
of Equity Stock.
(iv) Until the Restriction Termination Date, any Transfer
(whether or not the result of a transaction entered into through the facilities
of the New York Stock Exchange) that, if effective, would result in the shares
of capital stock of the Corporation being beneficially
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<PAGE>
owned (within the meaning of Section 856(a)(5) of the Code as if the Corporation
were a REIT) by fewer than 100 persons within the meaning of Section 856(a)(5)
of the Code as if the Corporation were a REIT shall be void ab initio and the
intended transferee shall acquire no rights in such shares of Equity Stock.
(c) Owners Required to Provide Information. Until the Restriction
Termination Date:
(i) Every Beneficial Owner or Constructive Owner of more than
5%, or such lower percentages as required pursuant to regulations under the Code
as if the Corporation were a REIT, of the outstanding shares of any class or
series of Equity Stock of the Corporation shall, within 30 days after January 1
of each year, provide to the Corporation a written statement or affidavit
stating the name and address of such Beneficial Owner or Constructive Owner, the
number of shares of Equity Stock Beneficially Owned or Constructively Owned, and
a description of how such shares are held. Each such Beneficial Owner or
Constructive Owner shall provide to the Corporation such additional information
as the Corporation may request to ensure compliance with the restrictions in
this Section 13.1.
(ii) Each Person who is a Beneficial Owner or Constructive
Owner of shares of Equity Stock and each Person (including the stockholder of
record) who is holding shares of Equity Stock for a Beneficial Owner or
Constructive Owner shall provide to the Corporation a written statement or
affidavit stating such information as the Corporation may request in order to
determine the Corporation's status as a REIT (as if the Corporation were a REIT)
and to ensure compliance with the Ownership Limit or the Look-Through Ownership
Limit, as the case may be.
(d) Exception. The Board of Directors, upon receipt of a ruling from
the Internal Revenue Service or an opinion of counsel in each case to the effect
that the restrictions contained in subsections (b)(ii) through (iv) of this
Section 13.1 would not be violated, may exempt a Person from the Ownership Limit
or Look-Through Ownership Limit, provided that (A) the Board of Directors
obtains such representations and undertakings from such Person as are reasonably
necessary to ascertain that no Person's Beneficial Ownership or Constructive
Ownership of shares of Equity Stock will (i) result in the capital stock of the
Corporation being beneficially owned (within the meaning of Section 856(a)(5) of
the Code as if the Corporation were a REIT) by fewer than 100 persons within the
meaning of Section 856(a)(5) of the Code as if the Corporation were a REIT, (ii)
result in the Corporation being "closely held" within the meaning of Section
856(h) of the Code as if the Corporation were a REIT or (iii) cause the
Corporation to Constructively Own 10% or more of the ownership interests in the
real property of a tenant of the Corporation or a Subsidiary within the meaning
of Section 856(d)(2)(B) of the Code as if the Corporation were a REIT and (B)
such Person agrees in writing that any violation or attempted violation of the
Ownership Limit or Look-Through Ownership Limit will result in the conversion of
such shares into shares of Excess Stock pursuant to Section 13.2(a).
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<PAGE>
(e) New York Stock Exchange Transactions. Notwithstanding any provision
contained herein to the contrary, nothing in this Certificate of Incorporation
shall preclude the settlement of any transaction entered into through the
facilities of the New York Stock Exchange.
Section 13.2. Excess Stock.
-------------
(a) Conversion into Excess Stock.
(i) If, notwithstanding the other provisions contained in this
Article Thirteenth, prior to the Restriction Termination Date, there is a
purported Transfer or Non- Transfer Event such that any Person (other than a
Look-Through Entity) would either Beneficially Own or Constructively Own shares
of Equity Stock in excess of the Ownership Limit or such that any Person that is
a Look-Through Entity would either Beneficially Own or Constructively Own shares
of Equity Stock in excess of the Look-Through Ownership Limit, then, (i) except
as otherwise provided in Section 13.1(d), the purported transferee shall be
deemed to be a Prohibited Owner and shall acquire no right or interest (or, in
the case of a Non-Transfer Event, the Person holding record title to the shares
of Equity Stock Beneficially Owned or Constructively Owned by such Beneficial
Owner or Constructive Owner, shall cease to own any right or interest) in such
number of shares of Equity Stock which would cause such Beneficial Owner or
Constructive Owner to Beneficially Own or Constructively Own shares of Equity
Stock in excess of the Ownership Limit or the Look- Through Ownership Limit, as
the case may be, (ii) such number of shares of Equity Stock in excess of the
Ownership Limit or the Look-Through Ownership Limit, as the case may be,
(rounded up to the nearest whole share) shall be automatically converted into an
equal number of shares of Excess Stock and transferred to a Trust in accordance
with Section 13.2(d) and (iii) the Prohibited Owner shall submit such number of
shares of Equity Stock to the Corporation for registration in the name of the
Trustee of the Trust. Such conversion into Excess Stock and transfer to a Trust
shall be effective as of the close of trading on the Trading Day prior to the
date of the Transfer or Non-Transfer Event, as the case may be.
(ii) If, notwithstanding the other provisions contained in
this Article Thirteenth, prior to the Restriction Termination Date, there is a
purported Transfer or Non- Transfer Event that, if effective, would (i) result
in the capital stock of the Corporation being beneficially owned (within the
meaning of Section 856(a)(5) of the Code as if the Corporation were a REIT) by
fewer than 100 persons within the meaning of Section 856(a)(5) of the Code as if
the Corporation were a REIT, (ii) result in the Corporation being "closely held"
within the meaning of Section 856(h) of the Code as if the Corporation were a
REIT or (iii) cause the Corporation to Constructively Own 10% or more of the
ownership interest in a tenant of the Corporation's or a Subsidiary's real
property within the meaning of Section 856(d)(2)(B) of the Code as if the
Corporation were a REIT, then (x) the purported transferee shall be deemed to be
a Prohibited Owner and shall acquire no right or interest (or, in the case of a
Non-Transfer Event, the Person holding record title of the shares of Equity
Stock with respect to which such Non-Transfer Event occurred, shall be deemed to
be a Prohibited Owner and shall cease to own any right or interest) in such
number of shares of
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<PAGE>
Equity Stock, the ownership of which by such purported transferee or record
holder would (A) result in the shares of capital stock of the Corporation being
beneficially owned (within the meaning of Section 856(a)(5) of the Code as if
the Corporation were a REIT) by fewer than 100 persons within the meaning of
Section 856(a)(5) of the Code as if the Corporation were a REIT, (B) result in
the Corporation being "closely held" within the meaning of Section 856(h) of the
Code as if the Corporation were a REIT or (C) cause the Corporation to
Constructively Own 10% or more of the ownership interests in a tenant of the
Corporation's or a Subsidiary's real property within the meaning of Section
856(d)(2)(B) of the Code as if the Corporation were a REIT, (y) such number of
shares of Equity Stock (rounded up to the nearest whole share) shall be
automatically converted into an equal number of shares of Excess Stock and
transferred to a Trust in accordance with Section 13.2(d) and (z) the Prohibited
Owner shall submit such number of shares of Equity Stock to the Corporation for
registration in the name of the Trustee of the Trust. Such conversion into
Excess Stock and transfer to a Trust shall be effective as of the close of
trading on the Trading Day prior to the date of the Transfer or Non-Transfer
Event, as the case may be.
(iii) Upon the occurrence of such a conversion of shares of
any class or series of Equity Stock into an equal number of shares of Excess
Stock, such shares of Equity Stock shall be automatically retired and canceled,
without any action required by the Board of Directors of the Corporation, and
shall thereupon be restored to the status of authorized but unissued shares of
the particular class or series of Equity Stock from which such Excess Stock was
converted and may be reissued by the Corporation as that particular class or
series of Equity Stock.
(iv) Upon the conversion into Excess Shares (pursuant to the
Certificate of Incorporation of Meditrust Corporation) of any shares of any
class or series of Meditrust Corporation stock that are paired with a class or
series of shares of Equity Stock, pursuant to the Pairing Agreement, such shares
of Equity Stock shall likewise be converted into an equal number of shares of
Excess Stock and be paired with such converted shares of Meditrust Corporation,
pursuant to the Pairing Agreement.
(b) Remedies for Breach. If the Corporation, or its designees, shall at
any time determine in good faith that a Transfer has taken place in violation of
Section 13.1(b) or that a Person intends to acquire or has attempted to acquire
Beneficial Ownership or Constructive Ownership of any shares of Equity Stock in
violation of Section 13.1(b), the Corporation shall take such action as it deems
advisable to refuse to give effect to or to prevent such Transfer or
acquisition, including, but not limited to, refusing to give effect to such
Transfer on the stock transfer books of the Corporation or instituting
proceedings to enjoin such Transfer or acquisition.
(c) Notice of Restricted Transfer. Any Person who acquires or attempts
to acquire shares of Equity Stock in violation of Section 13.1(b), or any Person
who owns shares of Equity Stock that were converted into shares of Excess Stock
and transferred to a Trust pursuant to subsections (a) and (d) of this Section
13.2, shall immediately give written notice to the
-7-
<PAGE>
Corporation of such event and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect, if
any, of such Transfer or Non- Transfer Event, as the case may be, on the
Corporation's status as a REIT (determined as if the Corporation were a REIT).
(d) Ownership in Trust. Upon any Transfer or Non-Transfer Event that
results in Excess Stock pursuant to Section 13.2(a), such Excess Stock shall be
automatically transferred to a Trust to be held for the exclusive benefit of the
Beneficiary. The Corporation and the Operating Company shall name a Beneficiary
for each Trust. Any conversion of shares of Equity Stock into shares of Excess
Stock and transfer to a Trust shall be effective as of the close of trading on
the Trading Day prior to the date of the Transfer or Non-Transfer Event that
results in the conversion. Shares of Excess Stock so held in trust shall remain
issued and outstanding shares of stock of the Corporation.
(e) Dividend Rights. Each share of Excess Stock shall be entitled to
the same dividends and distributions (as to both timing and amount) as may be
declared by the Board of Directors as shares of the class or series of Equity
Stock from which such Excess Stock was converted. The Trustee, as record holder
of the shares of Excess Stock, shall be entitled to receive all dividends and
distributions and shall hold all such dividends or distributions in trust for
the benefit of the Beneficiary. The Prohibited Owner with respect to such shares
of Excess Stock shall repay to the Trust the amount of any dividends or
distributions received by it (i) that are attributable to any shares of Equity
Stock that have been converted into shares of Excess Stock and (ii) the record
date of which was on or after the date that such shares were converted into
shares of Excess Stock. The Corporation shall take all measures that it
determines reasonably necessary to recover the amount of any such dividend or
distribution paid to a Prohibited Owner, including, if necessary, withholding
any portion of future dividends or distributions payable on shares of Equity
Stock Beneficially Owned or Constructively Owned by the Person who, but for the
provisions of this Article Thirteenth, would Constructively Own or Beneficially
Own the shares of Equity Stock that were converted into shares of Excess Stock;
and, as soon as reasonably practicable following the Corporation's receipt or
withholding thereof, shall pay over to the Trust for the benefit of the
Beneficiary the dividends so received or withheld, as the case may be.
(f) Rights upon Liquidation. In the event of any voluntary or
involuntary liquidation of, or winding up of, or any distribution of the assets
of, the Corporation, each holder of shares of Excess Stock shall be entitled to
receive, ratably with each other holder of shares of Equity Stock of the same
class or series from which the Equity Stock was converted, that portion of the
assets of the Corporation that is available for distribution to the holders of
such class or series of Equity Stock. The Trust shall distribute to the
Prohibited Owner the amounts received upon such liquidation, dissolution, or
winding up, or distribution; provided, however, that the Prohibited Owner shall
not be entitled to receive amounts in excess of, in the case of a purported
Transfer in which the Prohibited Owner gave value for shares of Equity Stock and
which Transfer resulted in the conversion of the shares into shares of Excess
Stock, the price per share, if any, such Prohibited Owner paid for the shares of
Equity Stock (which, in the case of Equity
-8-
<PAGE>
Stock that is paired, shall equal the price per paired share multiplied by the
most recent Valuation Percentage) and, in the case of a Non-Transfer Event or
Transfer in which the Prohibited Owner did not give value for such shares (e.g.,
if the shares were received through a gift or devise) and which Non-Transfer
Event or Transfer, as the case may be, resulted in the conversion of the shares
into shares of Excess Stock, the price per share equal to the Market Price on
the date of such Non-Transfer Event or Transfer. Any remaining amount in such
Trust shall be distributed to the Beneficiary.
(g) Voting Rights. Each share of Excess Stock shall entitle the holder
to the number of votes the holder would have, if such share of Excess Stock was
a share of Equity Stock of the same class or series from which such Excess Stock
was converted, on all matters submitted to a vote at any meeting of
stockholders. The holders of shares of Excess Stock converted from the same
class or series of Equity Stock shall vote together with the holders of such
Equity Stock as a single class on all such matters. The Trustee, as record
holder of the Excess Stock, shall be entitled to vote all shares of Excess
Stock. Any vote by a Prohibited Owner as a purported holder of shares of Equity
Stock prior to the discovery by the Corporation that the shares of Equity Stock
have been converted into shares of Excess Stock shall, subject to applicable
law, be rescinded and shall be void ab initio with respect to such shares of
Excess Stock, and the Prohibited Owner shall be deemed to have given, as of the
close of trading on the Trading Day prior to the date of the purported Transfer
or Non-Transfer Event that results in the conversion of the shares of Equity
Stock into shares of Excess Stock and the transfer of such shares to a Trust
pursuant to subsections (a) and (d) of this Section 13.2, an irrevocable proxy
to the Trustee to vote the shares of Excess Stock in the manner in which the
Trustee, in its sole and absolute discretion, desires.
(h) Designation of Permitted Transferee.
(i) The Trustee shall have the exclusive and absolute right to
designate one or more Permitted Transferees of any and all shares of Excess
Stock if the Corporation fails to exercise its option with respect to such
shares pursuant to Section 13.2(j) hereof within the time period set forth
therein. As soon as practicable, but in an orderly fashion so as not to
materially adversely affect the Market Price of the shares of Excess Stock, the
Trustee shall designate any one or more Persons as Permitted Transferees;
provided, however, that (i) the Permitted Transferee so designated purchases for
valuable consideration (whether in a public or private sale) the shares of
Excess Stock (which, in the case of paired Excess Stock, shall be determined
based on the Valuation Percentage) and (ii) the Permitted Transferee so
designated may acquire such shares of Excess Stock without violating any of the
restrictions set forth in Section 13.1(b) and without such acquisition resulting
in the conversion of the shares of Equity Stock so acquired into shares of
Excess Stock and the transfer of such shares to a Trust pursuant to subsections
(a) and (d) of this Section 13.2.
(ii) Upon the designation by the Trustee of a Permitted
Transferee in accordance with the provisions of this Section 13.2(h), the
Trustee shall cause to be transferred to the Permitted Transferee that number of
shares of Excess Stock acquired by
-9-
<PAGE>
the Permitted Transferee. Upon such transfer of the shares of Excess Stock to
the Permitted Transferee, such shares of Excess Stock shall be automatically
converted into an equal number of shares of Equity Stock of the same class and
series from which such Excess Stock was converted. Upon the occurrence of such a
conversion of shares of Excess Stock into an equal number of shares of Equity
Stock, such shares of Excess Stock shall be automatically retired and canceled,
without any action required by the Board of Directors of the Corporation, and
shall thereupon be restored to the status of authorized but unissued shares of
Excess Stock and may be reissued by the Corporation as Excess Stock.
(iii) The Trustee shall (i) cause to be recorded on the stock
transfer books of the Corporation that the Permitted Transferee is the holder of
record of such number of shares of Equity Stock, and (ii) distribute to the
Beneficiary any and all amounts held with respect to the shares of Excess Stock
after making payment to the Prohibited Owner pursuant to Section 13.2(i).
(iv) If the Transfer of shares of Excess Stock to a purported
Permitted Transferee shall violate any of the transfer restrictions set forth in
Section 13.1(b), such Transfer shall be void ab initio as to that number of
shares of Excess Stock that cause the violation of any such restriction when
such shares are converted into shares of Equity Stock (as described in
subsection (h)(ii) above) and the purported Permitted Transferee shall be deemed
to be a Prohibited Owner and shall acquire no rights in such shares of Excess
Stock or Equity Stock. Such shares of Equity Stock shall be automatically
reconverted into Excess Stock and transferred to the Trust from which they were
originally Transferred. Such conversion and transfer to the Trust shall be
effective as of the close of trading on the Trading Day prior to the date of the
Transfer to the purported Permitted Transferee and the provisions of this
Article Thirteenth shall apply to such shares, including, without limitation,
the provisions of subsections (h) through (j) of this Section 13.2 with respect
to any future Transfer of such shares by the Trust.
(i) Compensation to Record Holder of Shares of Equity Stock that are
Converted into Shares of Excess Stock. Any Prohibited Owner shall be entitled
(following discovery of the shares of Excess Stock and subsequent designation of
the Permitted Transferee in accordance with Section 13.2(h) or following the
acceptance of the offer to purchase such shares in accordance with Section
13.2(j) to receive from the Trustee following the sale or other disposition of
such shares of Excess Stock the lesser of (i)(a) in the case of a purported
Transfer in which the Prohibited Owner gave value for shares of Equity Stock and
which Transfer resulted in the conversion of such shares into shares of Excess
Stock, the price per share, if any, such Prohibited Owner paid for the shares of
Equity Stock (which, in the case of paired Excess Stock, shall be determined
based on the Valuation Percentage) and (b) in the case of a Non- Transfer Event
or Transfer in which the Prohibited Owner did not give value for such shares
(e.g., if the shares were received through a gift or devise) and which
Non-Transfer Event or Transfer, as the case may be, resulted in the conversion
of such shares into shares of Excess Stock, the price per share equal to the
Market Price on the date of such Non-Transfer Event or Transfer or (ii) the
price per share (which, in the case of paired Excess Stock, shall be
-10-
<PAGE>
determined based on the Valuation Percentage) received by the Trustee from the
sale or other disposition of such shares of Excess Stock in accordance with this
Section 13.2(i) or Section 13.2(j). Any amounts received by the Trustee in
respect of such shares of Excess Stock and in excess of such amounts to be paid
the Prohibited Owner pursuant to this Section 13.2(i) shall be distributed to
the Beneficiary in accordance with the provisions of Section 13.2(h). Each
Beneficiary and Prohibited Owner shall waive any and all claims that it may have
against the Trustee and the Trust arising out of the disposition of shares of
Excess Stock, except for claims arising out of the gross negligence or willful
misconduct of, or any failure to make payments in accordance with this Section
13.2 by, such Trustee or the Corporation.
(j) Purchase Right in Excess Stock. Shares of Excess Stock shall be
deemed to have been offered for sale to the Corporation or its designee, at a
price per share equal to the lesser of (i) the price per share (which, in the
case of paired Excess Stock, shall be determined based on the Valuation
Percentage) in the transaction that created such shares of Excess Stock (or, in
the case of devise, gift or Non-Transfer Event, the Market Price at the time of
such devise, gift or Non-Transfer Event) or (ii) the Market Price on the date
the Corporation, or its designee, accepts such offer. The Corporation shall have
the right to accept such offer for a period of 90 days following the later of
(a) the date of the Non-Transfer Event or purported Transfer which results in
such shares of Excess Stock or (b) the date on which the Corporation determines
in good faith that a Transfer or Non-Transfer Event resulting in shares of
Excess Stock previously has occurred, if the Corporation does not receive a
notice of such Transfer or Non-Transfer Event pursuant to Section 13.2(c).
Section 13.3. Remedies Not Limited. Nothing contained in this Article
Thirteenth shall limit the authority of the Corporation to take such other
action as it deems necessary or advisable to protect the Corporation and the
interests of its stockholders by preservation of the Meditrust Corporation's
status as a REIT and to ensure compliance with the requirements of the Pairing
Agreement and with the restrictions set forth in Section 13.1.
Section 13.4. Ambiguity. In the case of an ambiguity in the application
of any of the provisions of this Article Thirteenth, including any definition
contained in Section 13.1(a), the Board of Directors shall have the power to
determine the application of the provisions of this Article Thirteenth with
respect to any situation based on the facts known to it.
Section 13.5. Legend. Each certificate for shares of Equity Stock shall
bear the following legend:
"The shares of Meditrust Corporation and Meditrust Operating Company
represented by this combined certificate are subject to restrictions in the
respective Certificates of Incorporation of each company which prohibit (a) any
Person (other than a Look-Through Entity) (as such terms are defined in the
respective Certificates of Incorporation of each company) from Beneficially
Owning or Constructively Owning (as these terms are defined in the respective
Certificates of Incorporation of each company) in excess of 9.25% of the number
of outstanding shares of any class or series of Equity Stock (as that term is
defined in the respective Certificates
-11-
<PAGE>
of Incorporation of each company), (b) any Look-Through Entity from Beneficially
Owning or Constructively Owning in excess of 9.8% of the number of outstanding
shares of any class or series of Equity Stock, (c) any Person from acquiring or
maintaining any ownership interest in the stock of either company that is
inconsistent with (i) the requirements of the Internal Revenue Code of 1986, as
amended, pertaining to real estate investment trusts or (ii) Article Thirteenth
of the respective Certificates of Incorporation of each company and (d) any
transfer of shares of any class or series of Equity Stock of either company that
are paired pursuant to the Pairing Agreement, dated as of December 20, 1979,
between the two companies, as amended from time to time in accordance with the
provisions thereof (the "Pairing Agreement"), except in combination with an
equal number of shares of the other company in accordance with the respective
Certificates of Incorporation of each company and the Pairing Agreement, copies
of which are on file with the transfer agent named on the face hereof, and the
holder of this certificate by his acceptance hereof consents to be bound by such
restrictions.
Meditrust Corporation and Meditrust Operating Company will furnish
without charge to each stockholder who so requests a copy of the relevant
provisions of the respective Certificates of Incorporation of each company, a
copy of the Pairing Agreement and a copy of the provisions setting forth the
designations, preferences, privileges and rights of each class of stock or
series thereof that each company is authorized to issue and the qualifications,
limitations and restrictions of such preferences and/or rights. Any such request
may be addressed to the Secretary of either company or to the transfer agent
named on the face hereof."
Section 13.6. Severability. Each provision of this Article Thirteenth
shall be severable and an adverse determination as to any such provision shall
be in no way affect the validity of any other provision.
-12-
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (the "Amendment Agreement") dated as of July 16,
1998, by and between Meditrust Corporation (the "REIT"), Meditrust Operating
Company ("OPCO," and together with the REIT, the "Companies") and Merrill Lynch
International ("MLI"), through its agent Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S," and together with MLI the "Merrill Lynch Parties").
Reference is made herein to the Purchase Agreement and the Purchase Price
Adjustment Mechanism Agreement each dated as of February 26, 1998 by and between
the Companies and the Merrill Lynch Parties (the "Purchase Agreement," and the
"Adjustment Agreement," respectively). Capitalized terms not otherwise defined
herein shall have the meaning ascribed thereto in the Adjustment Agreement.
WHEREAS, Section 5 of the Adjustment Agreement provides, among other
things, that the Companies shall deliver the Interim Settlement Amount in
Interim Settlement Shares;
WHEREAS, the Companies and the Merrill Lynch Parties desire to amend
the Adjustment Agreement so as to allow for the delivery by the Companies of the
Interim Settlement Amount in cash, subject to the terms and conditions hereof;
WHEREAS, Section 4 of the Adjustment Agreement provides that MLI will,
at its discretion, sell the percentage of Adjustment Shares indicated therein in
transactions that involve a public offering; and
WHEREAS, the Purchase Shares and the Paired Shares delivered by the
Companies to MLI pursuant to the Adjustment Agreement are not the subject of an
Effective Registration Statement;
NOW, THEREFORE, in consideration of the mutual undertakings herein set
forth, the parties, intending to be legally bound, hereby agree as follows:
1. Within 5 Business Days following each Reset Date, the Companies may
deliver the Interim Settlement Amount (or 150% percent of the
Interim Settlement Amount if the Companies elect to deliver Interim
Settlement Shares that are not the subject of an Effective
Registration Statement) in either Interim Settlement Shares or cash
to MLI or its agent for deposit with MLI.
2. If on any Exchange Trading Day the Closing Price is below $25.50 (a
"Price Decline Event Date"), the Companies may elect to deliver cash
collateral in lieu of settlement of Adjustment Shares pursuant to
Section 4.1 of the Adjustment Agreement.
<PAGE>
3. In the event the Companies elect to deliver cash collateral pursuant
to Section 2 hereof:
(i) such Price Decline Event Date shall be a Reset Date for
purposes of Section 5 of the Adjustment Agreement and Price
Decline Reset Dates will occur weekly beginning on the day one
week after the related Price Decline Event Date; provided,
that if such day is not an Exchange Trading Day then the Price
Decline Reset Date shall be the next Exchange Trading Day;
(ii) on such Reset Date and each subsequent Reset Date until the
final Price Decline Reset Date, Interim Settlement Amount for
purposes of Section 5 of the Adjustment Agreement shall mean
the amount by which the Reference Amount less $10,000,000
exceeds the product of (x) $25.50 and (y) the number of
Adjustment Shares;
(iii) within 5 Business Days following such Price Decline Event Date
and each Price Decline Reset Date thereafter, the Companies
shall deliver to MLI an amount in cash such that cash
collateral held by MLI pursuant to this clause (iii) of this
Section 3, exclusive of cash amounts otherwise held by MLI
pursuant to Section 5 of the Adjustment Agreement, shall equal
at least the product of (a) the difference between $25.50 and
the Closing Price on such Price Decline Event Date or Price
Decline Reset Date and (b) the Adjustment Shares; and
(iv) if on any Price Decline Reset Date, the Closing Price is
greater and has been greater than $25.50 for the preceding 4
Exchange Trading Days, such date shall be the final Price
Decline Reset Date for the related Price Decline Event Date
and within 2 Exchange Trading Days of such Price Decline Reset
Date, MLI shall deliver to the Companies the amount in cash
previously delivered to MLI by the Companies pursuant to this
Section 3 together with the interest accrued thereon.
4. If the Closing Price on any Exchange Trading Day is below $23.50,
MLI retains its right to settle Adjustment Shares pursuant to Section 4.1 of the
Adjustment Agreement, and the Company shall not have the right to avoid the
settlement of Adjustment Shares by posting cash collateral pursuant to 3 hereof.
5. In the event the Purchase Shares or any Interim Settlement Shares
are not the subject of an Effective Registration Statement, and MLI is entitled
to settle Adjustment Shares pursuant to Section 4.1 of the Adjustment Agreement,
MLI may effect a sale pursuant to such section, at its discretion, in a
commercially reasonable manner, other than as specified in Section 3.1 of the
Adjustment
2
<PAGE>
Agreement, which may include a private placement at a discount to the
Closing Price on the date or dates of such sale or sales.
6. Notwithstanding the provisions of Section 5 of the Adjustment
Agreement to the contrary, all cash amounts on deposit with MLI pursuant to
Section 5 of the Adjustment Agreement and Sections 1 and 3 hereof shall bear
interest at the Federal Funds rate determined with reference to the publication
of the Board of Governors of the Federal Reserve System "Statistical Release
H.15(519), Selected Interest Rates" under the heading "Federal Funds
(Effective)" plus the Spread.
7. If on any Reset Date MLI is required pursuant to Section 5 of the
Adjustment Agreement to deliver the amount in excess of the Interim Settlement
Amount held by MLI on such Reset Date, MLI shall deliver to the Companies the
amount of such excess in cash, to the extent of any cash collateral held by MLI
pursuant to the Adjustment Agreement as amended hereby, and, in Interim
Settlement Shares, to the extent of any remaining such excess.
8. The Companies agree to file a registration statement covering the
sale of Paired Shares delivered to MLI pursuant to the Purchase Agreement and
the Adjustment Agreement by the close of the 10th Business Day from the first
Business Day following the date on which the articles of merger in connection
with the merger of La Quinta Inns, Inc. and the Companies are filed and to use
their best efforts to have the same declared effective by the Commission as
promptly as practicable.
9. This Amendment Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument.
10. Except as hereby amended, the Adjustment Agreement shall remain in
full force and effect.
11. In the event of any conflict between the provisions of the
Adjustment Agreement and this Amendment Agreement, the provisions of this
Amendment Agreement shall govern.
12. This Amendment Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of New York, all rights and remedies
being governed by such laws.
3
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Amendment Agreement as of the date first above written
MERRILL LYNCH INTERNATIONAL
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
---------------------------------------
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
---------------------------------------
Name:
Title:
MEDITRUST OPERATING COMPANY
By: /s/ Michael J. Bohnen
---------------------------------------
Name: Michael J. Bohnen
Title: Secretary
MEDITRUST CORPORATION
By:
---------------------------------------
Name:
Title:
4
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Amendment Agreement as of the date first above written
MERRILL LYNCH INTERNATIONAL
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
---------------------------------------
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
---------------------------------------
Name:
Title:
MEDITRUST OPERATING COMPANY
By:
---------------------------------------
Name:
Title:
MEDITRUST CORPORATION
By: /s/ Laurie T. Gerber
---------------------------------------
Name: Laurie T. Gerber
Title: Chief Financial Officer
5
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Amendment Agreement as of the date first above written
MERRILL LYNCH INTERNATIONAL
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Dean D'onofrio
---------------------------------------
Name: Dean D'onofrio
Title: Managing Director
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Dean D'onofrio
---------------------------------------
Name: Dean D'onofrio
Title: Managing Director
MEDITRUST OPERATING COMPANY
By:
---------------------------------------
Name:
Title:
MEDITRUST CORPORATION
By:
---------------------------------------
Name:
Title:
6
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (the "Agreement") dated as of July 31, 1998 by and
between Meditrust Corporation (the "REIT"), Meditrust Operating Company ("OPCO,"
and together with the REIT, the "Companies") and Merrill Lynch International
("MLI"), through its agent Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLLPP&S," and together with MLI the "Merrill Lynch Parties"). Reference is
made herein to the Purchase Agreement and the Purchase Price Adjustment
Mechanism Agreement each dated as of February 26, 1998 by and between the
Companies and the Merrill Lynch Parties (the "Purchase Agreement," and the
"Adjustment Agreement", respectively) and the Amendment Agreement dated as of
July 16, 1998, by and between the Companies and the Merrill Lynch Parties (the
"Amendment Agreement"). Capitalized terms not otherwise defined herein shall
have the meaning ascribed thereto in the Adjustment Agreement.
WHEREAS, in Section 7 of the Amendment Agreement the Companies agreed
to file a registration statement as promptly as practicable;
WHEREAS, the Companies and the Merrill Lynch Parties desire to amend
the Amendment Agreement to provide that the Companies shall use their best
efforts to file a registration statement within 10 Business Days from the date
of the Amendment Agreement;
NOW, THEREFORE, in consideration of the mutual undertakings herein as
set forth, the parties, intending to be legally bound, hereby agree as follows:
1. The Merrill Lynch Parties waive the requirement that the
Companies file a registration statement covering the sale of
Paired Shares deliver to MLI pursuant to the Purchase
Agreement and the Adjustment Agreement within 10 Business Days
from the date of the Amendment Agreement.
2. The Companies agree to use their best efforts to file a
registration statement covering the sale of Paired Shares
delivered to MLI pursuant to the Purchase Agreement and the
Adjustment Agreement as promptly as practicable.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date of first above written.
MERRILL LYNCH INTERNATIONAL
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Luke Farber
-----------------------------------------
Name: Luke Farber
Title: Vice President and Senior Counsel
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ Luke Farber
-----------------------------------------
Name: Luke Farber
Title: Vice President and Senior Counsel
MEDITRUST OPERATING COMPANY
By: /s/ Abraham Gosman
-----------------------------------------
Name: Abraham Gosman
Title: Chairman
MEDITRUST CORPORATION
By: /s/ Laurie T. Gerber
-----------------------------------------
Name: Laurie T. Gerber
Title: Chief Financial Officer
================================================================================
CREDIT AGREEMENT
dated as of July 17, 1998
among
MEDITRUST CORPORATION,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Bank and as Administrative Agent
for the Banks,
J.P. MORGAN SECURITIES, INC.,
and
BT ALEX. BROWN INCORPORATED,
as Lead Arrangers,
FLEET NATIONAL BANK,
and
BANCBOSTON SECURITIES INC.,
as Co-Arrangers,
BANKERS TRUST COMPANY,
as Bank and as Syndication Agent,
BANKBOSTON, N.A.,
as Bank and as Co-Documentation Agent,
FLEET NATIONAL BANK,
as Bank and as Co-Documentation Agent,
and
THE BANKS LISTED HEREIN
================================================================================
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of July 17, 1998, among MEDITRUST
CORPORATION (the "Borrower"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Bank
and as Administrative Agent for the Banks, BANKERS TRUST COMPANY, as Bank and
as Syndication Agent, BANKBOSTON, N.A., as Bank and as Co-Documentation Agent,
FLEET NATIONAL BANK, as Bank and as Co-Documentation Agent, and the BANKS listed
on the signature pages hereof (the "Banks").
W I T N E S S E T H:
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section I.1. Definitions. The following terms, as used herein,
have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.3.
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.7(b).
"Administrative Agent" means Morgan Guaranty Trust Company of
New York in its capacity as Administrative Agent for the Banks hereunder, and
its successors in such capacity.
"Administrative Questionnaire" means, with respect to each
Bank, an administrative questionnaire in the form prepared by the Administrative
Agent and submitted to the Administrative Agent (with a copy to the Borrower)
duly completed by such Bank.
"Affiliate", as applied to any Person, means any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, that
<PAGE>
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as applied to any Person, means the possession, directly or indirectly,
of the power to vote ten percent (10.0%) or more of the equity securities having
voting power for the election of directors of such Person or otherwise to direct
or cause the direction of the management and policies of that Person, whether
through the ownership of voting equity securities or by contract or otherwise.
"Agreement" means this Credit Agreement as the same may from
time to time hereafter be modified, supplemented or amended.
"Annual EBITDA" means, measured as of the last day of each
calendar quarter, an amount derived from (i) total revenues as determined in
accordance with GAAP and reflected in the combined consolidated financial
statements relating to the Borrower, MOC and their Consolidated Subsidiaries or
to the Borrower's or MOC's direct or indirect interest in Minority Holdings for
the previous four consecutive calendar quarters including the quarter then
ended, on an accrual basis, less (ii) total operating expenses and other
expenses relating to the Borrower, MOC and their Consolidated Subsidiaries and
relating to the Borrower's and MOC's direct or indirect interest in Minority
Holdings for such period (other than interest, taxes, depreciation,
amortization, and other non-cash items), less (iii) total corporate operating
expenses (including general overhead expenses) and other expenses of the
Borrower, MOC, their Consolidated Subsidiaries and such expenses relating to the
Borrower's and MOC's direct or indirect interest in Minority Holdings (other
than interest, taxes, depreciation, amortization and other non-cash items), for
such period.
"Applicable Interest Rate" means the lesser of (x) the rate at
which the interest rate applicable to any floating rate Debt could be fixed for
the balance of the term of such Debt, at the time of calculation, by the
Borrower entering into an unsecured interest rate swap agreement (or, if such
rate is incapable of being fixed by entering into an unsecured interest rate
swap agreement at the time of calculation, a reasonably determined fixed rate
equivalent), and (y) the rate at which the
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<PAGE>
interest rate applicable to such floating rate Debt is actually capped, at the
time of calculation, if the Borrower has entered into an interest rate cap
agreement with respect thereto or if the documentation for such Debt contains a
cap.
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office, and (iii) in the
case of its Money Market Loans, its Money Market Lending Office.
"Applicable Margin" means
(a) with respect to Tranche A Loans, (x) prior to the
Conversion Date and until such time as the Tranche B Loans and the Tranche C
Loans have been repaid in full, with respect to each Euro-Dollar Loan, 1.375%,
and with respect to each Base Rate Loan, .50%, and (y) prior to the Conversion
Date and from and after such time as the Tranche B Loans and the Tranche C Loans
shall have been repaid in full, with respect to each Euro-Dollar Loan and each
Base Rate Loan, the respective percentages per annum determined, at any time,
based on the range into which the Borrower's Credit Rating (if any) then falls,
in accordance with the table set forth below. Any change in the Borrower's
Credit Rating shall be effective immediately as of the date on which any of the
Rating Agencies announces a change in the Borrower's Credit Rating or the date
on which the Borrower has no Credit Rating, whichever is applicable. In the
event that the Borrower receives two (2) Credit Ratings that are not equivalent,
the Applicable Margin shall be determined by the lower of such two (2) Credit
Ratings unless such Credit Ratings are more than two levels apart, in which
event, the middle level (or if there shall be no middle level as a result of the
Credit Ratings being three levels apart, then the lower of the two "middle"
levels) shall apply.
3
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Borrower's Credit Applicable Margin Applicable Margin
Rating for Euro-Dollar for Base Rate
(S&P/Moody's Ratings) Loans (% per annum) Loans (% per annum)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
BBB+/Baa1 (or better) 0.85% 0.0%
- -----------------------------------------------------------------------------------------
BBB/Baa2 1.075% 0.0%
- -----------------------------------------------------------------------------------------
BBB-/Baa3 1.175% 0.0%
- -----------------------------------------------------------------------------------------
BB+/Ba1 1.375% 0.50%
- -----------------------------------------------------------------------------------------
Less than BB+/Ba1 1.625% 1.00%
or no rating
- -----------------------------------------------------------------------------------------
</TABLE>
(b) with respect to Tranche B Loans, prior to the
Conversion Date, the Applicable Margin with respect to each Euro-Dollar Loan,
shall mean 1.375%, and with respect to each Base Rate Loan, shall mean 0.50%;
(c) with respect to Tranche C Loans, prior to the
Conversion Date, the Applicable Margin with respect to each Euro-Dollar Loan,
shall mean 1.375%, and with respect to each Base Rate Loan, shall mean 0.50%,
provided, however, that if the Borrower shall exercise the Extension Option,
then as of the day immediately succeeding the date on which the Tranche C Loans
would have matured, the Applicable Margin with respect to each Euro-Dollar Loan,
shall mean 1.875%, and with respect to each Base Rate Loan, shall mean 1.00%;
(d) with respect to Tranche D Loans, prior to the
Conversion Date, the Applicable Margin with respect to each Euro-Dollar Loan,
shall mean 1.375%, and with respect to each Base Rate Loan, shall mean 0.50%;
(e) from and after the Conversion Date, Applicable
Margin means, with respect to each Euro-Dollar Loan and each Base Rate Loan, the
respective percentages per annum determined, at any time, based on the range
into which the Total Debt Ratio then falls, in accordance with the table set
forth below. Any change in the Total Debt Ratio shall occur on the date on which
the Borrower delivers, or was required to have delivered, the certificate
pursuant to Section 5.1(c) hereof,
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<PAGE>
whichever is earlier. If the Borrower shall fail to deliver such certificate in
accordance with Section 5.1(c) hereof, then the Total Debt Ratio shall be deemed
to be greater than 50%.
================================================================================
Maximum Total Debt Maximum Total Debt
Ratio less than 50%. Ratio equal to or
greater than 50%.
- --------------------------------------------------------------------------------
Applicable Margin for Tranche A: 0% Tranche A: 0%
Base Rate Loans Tranche B: 0% Tranche B: 0%
Tranche C: 0% Tranche C: 0%
Tranche D: 0% Tranche D: 0%
Applicable Margin for Tranche A: 1.00% Tranche A: 1.125%
Euro-Dollar Loans Tranche B: 1.00% Tranche B: 1.125%
Tranche C: 1.00% Tranche C: 1.125%
Tranche D: 1.00% Tranche D: 1.125%
================================================================================
"Assignee" has the meaning set forth in Section 9.6(c).
"Bank" means each bank and other Person listed on the
signature pages hereof, each Assignee which becomes a Bank pursuant to Section
9.6(c), and their respective successors and each Designated Lender; provided,
however, that the term "Bank" shall exclude each Designated Lender when used in
reference to a Committed Loan, the Commitments or terms relating to the
Committed Loans and the Commitments and shall further exclude each Designated
Lender for all other purposes hereunder except that any Designated Lender which
funds a Money Market Loan shall, subject to Section 9.6(d), have the rights
(including the rights given to a Bank contained in Section 9.3 and otherwise in
Article 9) and obligations of a Bank associated with holding such Money Market
Loan.
"Bankruptcy Code" means Title 11 of the United States Code,
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds
Rate plus .50%.
"Base Rate Borrowing" means a Borrowing comprised of Base Rate
Loans.
5
<PAGE>
"Base Rate Loan" means a Committed Loan to be made by a Bank
as a Base Rate Loan in accordance with the applicable Notice of Borrowing or
pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means Meditrust Corporation and its successors.
"Borrowing" has the meaning set forth in Section 1.3.
"Capital Expenditures" means, for any period, the sum of all
expenditures (whether paid in cash or accrued as a liability) by the Borrower or
MOC which are capitalized on the combined consolidated balance sheet of the
Borrower or MOC in conformity with GAAP, but less (i) all expenditures made with
respect to the acquisition by the Borrower, MOC and their Consolidated
Subsidiaries of any interest in real property within nine months after the date
such interest in real property is acquired; (ii) capital expenditures made from
the proceeds of insurance or condemnation awards (or payments in lieu thereof)
or indemnity payments received during such period by the Borrower, MOC or any of
their Consolidated Subsidiaries from third parties; and (iii) all construction,
additions or other long-term investments.
"Cash or Cash Equivalents" means (i) cash, (ii) direct
obligations of the United States Government, including, without limitation,
treasury bills, notes and bonds, (iii) interest bearing or discounted
obligations of Federal agencies and government sponsored entities or pools of
such instruments offered by banks rated AA or better by S&P or Aa2 by Moody's
and dealers, including, without limitation, Federal Home Loan Mortgage
Corporation participation sale certificates, Government National Mortgage
Association modified pass-through certificates, Federal National Mortgage
Association bonds and notes, Federal Farm Credit System securities, (iv) time
deposits, domestic and Eurodollar certificates of deposit, bankers acceptances,
commercial
6
<PAGE>
paper rated at least A-1 by S&P and P-1 by Moody's, and/or guaranteed by an Aa
rating by Moody's, an AA rating by S&P, or better rated credit, floating rate
notes, other money market instruments and letters of credit each issued by banks
which have a long-term debt rating of at least AA by S&P or Aa2 by Moody's, (v)
obligations of domestic corporations, including, without limitation, commercial
paper, bonds, debentures, and loan participations, each of which is rated at
least AA by S&P, and/or Aa2 by Moody's, and/or unconditionally guaranteed by an
AA rating by S&P, an Aa2 rating by Moody's, or better rated credit, (vi)
obligations issued by states and local governments or their agencies, rated at
least MIG-1 by Moody's and/or SP-1 by S&P and/or guaranteed by an irrevocable
letter of credit of a bank with a long-term debt rating of at least AA by S&P or
Aa2 by Moody's, (vii) repurchase agreements with major banks and primary
government securities dealers fully secured by U.S. Government or agency
collateral equal to or exceeding the principal amount on a daily basis and held
in safekeeping, (viii) real estate loan pool participations, guaranteed by an
entity with an AA rating given by S&P or an Aa2 rating given by Moody's, or
better rated credit, and (ix) shares of any mutual fund that has its assets
primarily invested in the types of investments referred to in clauses (i)
through (v).
"Closing Date" means the date on which the Administrative
Agent shall have received the documents specified in or pursuant to Section 3.1,
and shall have satisfied all other conditions set forth in Section 3.1.
"Commitment" means, with respect to each Bank, the amount
committed by such Bank pursuant to this Agreement with respect to any Loans, as
such amount may be reduced from time to time pursuant to Sections 2.9, 2.10,
2.11 and 6.2.
"Committed Borrowing" has the meaning set forth in Section
1.3.
"Committed Loan" means a loan made by a Bank pursuant to
Section 2.1; provided that, if any such loan or loans (or portions thereof) are
combined or subdivided pursuant to a Notice of Interest Rate Election, the term
"Committed Loan" shall refer to the combined principal amount resulting from
such combination or to each of the separate principal amounts resulting from
such subdivision, as the case may be.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity which is consolidated with the Borrower or MOC in accordance with
GAAP.
7
<PAGE>
"Consolidated Tangible Net Worth" means at any date the
combined consolidated stockholders' equity of the Borrower (determined on a book
basis) and MOC, less their combined consolidated Intangible Assets, all
determined as of such date. For purposes of this definition "Intangible Assets"
means with respect to any such intangible assets, the amount (to the extent
reflected in determining such combined consolidated stockholders' equity) of (i)
all write-ups subsequent to December 31, 1997 in the book value of any asset
owned by the Borrower, MOC or a Consolidated Subsidiary other than write-ups in
connection with the acquisition of any asset in accordance with GAAP purchase
accounting, and (ii) goodwill, patents, trademarks, service marks, trade names,
anticipated future benefit of tax loss carry forwards, copyrights, organization
or developmental expenses and other intangible assets.
"Construction Asset" means any Real Property Asset on which
construction of improvements has commenced (such commencement evidenced by
foundation excavation) but has not yet been completed (as such completion shall
be evidenced by such Real Property Asset being open for business to the general
public).
"Contingent Obligation" as to any Person means, without
duplication, (i) any contingent obligation of such Person required to be shown
on such Person's balance sheet in accordance with GAAP, and (ii) any obligation
required by GAAP to be disclosed in the footnotes to such Person's financial
statements, guaranteeing partially or in whole any non-recourse Debt, lease,
dividend or other obligation, exclusive of contractual indemnities (including,
without limitation, any indemnity or price-adjustment provision relating to the
purchase or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet been called
on or quantified, of such Person or of any other Person. The amount of any
Contingent Obligation described in clause (ii) shall be deemed to be (a) with
respect to a guaranty of interest or interest and principal, or operating income
guaranty, the sum of all payments required to be made thereunder (which in the
case of an operating income guaranty shall be deemed to be equal to the debt
service for the note secured thereby), calculated at the Applicable Interest
Rate, through (i) in the case of an interest or interest and principal guaranty,
the stated date of maturity of the obligation (and commencing on the date
interest could first be payable thereunder), or (ii) in the case of an operating
income guaranty, the date through which such guaranty will remain in effect, and
(b) with respect to all guarantees not covered by the preceding clause (a), an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such guaranty is made or, if not stated or
8
<PAGE>
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as recorded on the
balance sheet and in the footnotes to the most recent financial statements of
the Borrower required to be delivered pursuant to Sections 4.4 or 5.1 hereof.
Notwithstanding anything contained herein to the contrary, guarantees of
completion shall not be deemed to be Contingent Obligations unless and until a
claim for payment or performance has been made thereunder, at which time any
such guaranty of completion shall be deemed to be a Contingent Obligation in an
amount equal to any such claim. Subject to the preceding sentence, (i) in the
case of a joint and several guaranty given by such Person and another Person
(but only to the extent such guaranty is recourse, directly or indirectly to the
Borrower), the amount of the guaranty shall be deemed to be 100% thereof unless
and only to the extent that such other Person has delivered Cash or Cash
Equivalents to secure all or any part of such Person's guaranteed obligations,
(ii) in the case of joint and several guarantees given by a Person in whom the
Borrower owns an interest (which guarantees are non-recourse to the Borrower),
to the extent the guarantees, in the aggregate, exceed 15% of total real estate
investments, the amount in excess of 15% shall be deemed to be a Contingent
Obligation of the Borrower, and (iii) in the case of a guaranty (whether or not
joint and several) of an obligation other wise constituting Debt of such Person,
the amount of such guaranty shall be deemed to be only that amount in excess of
the amount of the obligation constituting Debt of such Person. Notwithstanding
anything contained herein to the contrary, "Contingent Obligations" shall not be
deemed to include guarantees of Unused Commitments or of construction loans to
the extent the same have not been drawn.
"Conversion Date" has the meaning set forth in Section 3.3(a).
"Core Asset Type" means (i) ownership, financing or operation
of Healthcare Properties, (ii) ownership, financing or operation of Hotel
Properties, (iii) ownership, financing or operation of Golf Properties, and (iv)
owner ship or operation of Santa Anita Park.
"Credit Rating" means the publicly announced rating for
long-term senior unsecured indebtedness of the Borrower given by one or more of
the Rating Agencies, at least one of which shall be Moody's or S&P.
9
<PAGE>
"Debt" of any Person (including Minority Holdings) means,
without duplication, (A) as shown on such Person's combined consolidated balance
sheet (i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property and, (ii) all indebtedness of such Person evidenced
by a note, bond, debenture or similar instrument (whether or not disbursed in
full in the case of a construction loan), (B) the face amount of all letters of
credit issued for the account of such Person and, without duplication, all
unreimbursed amounts drawn thereunder, (C) all Contingent Obligations of such
Person, (D) all payment obligations of such Person under any interest rate
protection agreement (including, without limitation, any interest rate swaps,
caps, floors, collars and similar agreements) and currency swaps and similar
agreements which were not entered into specifically in connection with Debt set
forth in clauses (A), (B) or (C) hereof. For purposes of this Agreement, Debt
(other than Contingent Obligations) of the Borrower shall be deemed to include
only the Borrower's pro rata share (such share being based upon the Borrower's
percentage ownership interest as shown on the Borrower's annual audited
financial statements) of the Debt of any Person in which the Borrower, directly
or indirectly, owns an interest, provided that such Debt is nonrecourse, both
directly and indirectly, to the Borrower.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Designated Lender" means a special purpose corporation that
(i) shall have become a party to this Agreement pursuant to Section 9.6(d), and
(ii) is not otherwise a Bank.
"Designated Lender Notes" means promissory notes of the
Borrower, substantially in the form of Exhibit A-5 hereto, evidencing the
obligation of the Borrower to repay Money Market Loans made by Designated
Lenders, and "Designated Lender Note" means any one of such promissory notes
issued under Section 9.6(d) hereof.
"Designating Lender" shall have the meaning set forth in
Section 9.6(d) hereof.
10
<PAGE>
"Designation Agreement" means a designation agreement in
substantially the form of Exhibit G attached hereto, entered into by a Bank and
a Designated Lender and accepted by the Administrative Agent.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized by
law to close.
"Domestic Lending Office" means, as to each Bank, its office
located within the United States at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its Domestic
Lending Office) or such other office within the United States as such Bank may
hereafter designate as its Domestic Lending Office by notice to the Borrower and
the Administrative Agent; provided that no Bank shall be permitted to change its
Domestic Lending Office if as a result of such change either (i) pursuant to the
provisions of Section 8.1 or Section 8.2, the Borrower would be unable to
maintain any Loans as Euro-Dollar Loans; or (ii) the Borrower would be required
to make any payment to such Bank pursuant to the provisions of Section 8.3 or
Section 8.4.
"Duff & Phelps" means Duff & Phelps Credit Rating Co. or any
successor thereto.
"Environmental Affiliate" means any partnership, or joint
venture, trust or corporation in which an equity interest in excess of 20% is
owned by the Borrower, either directly or indirectly.
"Environmental Approvals" means any permit, license,
approval, ruling, variance, exemption or other authorization required under
applicable Environmental Laws.
"Environmental Claim" means, with respect to any Person, any
written notice, claim, demand or similar communication by any other Person
alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damage, property damage,
personal injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned by such Person or
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law, in each case as to which could reasonably be expected to
have a Material Ad verse Effect.
11
<PAGE>
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of Material of Environmental Concern or
hazardous wastes into the environment including, without limitation, ambient
air, surface water, ground water, or land, or other wise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Material of Environmental
Concern or hazardous wastes or the clean-up or other remediation thereof.
"Environmental Report" has the meaning set forth in Section
4.7.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower or any Subsidiary, are treated as a single employer under Section 414
of the Internal Revenue Code.
"Euro-Dollar Borrowing" has the meaning set forth in Section
1.3.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its
office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative Questionnaire
as its Euro-Dollar Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar Lending Office by
notice to the Borrower and the Administrative Agent; provided that no Bank
shall be permitted to change its Euro-Dollar Lending Office if as a result of
such change either (i) pursuant to the provisions of Section 8.1
12
<PAGE>
or Section 8.2, the Borrower would be unable to maintain any Loans as
Euro-Dollar Loans; or (ii) the Borrower would be required to make any payment to
such Bank pursuant to the provisions of Sections 8.3 or Section 8.4.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank
as a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing or Notice of Interest Rate Election.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.7(b).
"Event of Default" has the meaning set forth in Section 6.1.
"Existing Credit Agreements" means those agreements set forth
on Exhibit I attached hereto.
"Existing Letters of Credit" has the meaning set forth in
Section 2.2(c).
"Extension Fee" has the meaning set forth in Section 2.8(d).
"Extension Option" has the meaning set forth in Section
2.9(b).
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day; provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Domestic Business Day as so published on
the next succeeding Domestic Business Day, and (ii) if no such rate is so
published on such next succeeding Domestic Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to Morgan on such day on such
transactions as determined by the Administrative Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System as constituted from time to time.
13
<PAGE>
"FFO" means "funds from operations," defined to mean net
income (or loss) (computed in accordance with GAAP), excluding gains (or losses)
from debt restructurings and sales of properties, plus depreciation and
amortization, after adjustments for Minority Holdings. Adjustments for Minority
Holdings will be calculated to reflect FFO on the same basis as above.
"Fitch" means Fitch Investors Services, L.P. or any successor
thereto.
"Fronting Bank" shall mean Morgan, Bankers Trust Company,
BankBoston, N.A., Fleet National Bank, NationsBank, N.A., or such other Bank
which the Borrower is notified by the Administrative Agent may be a Fronting
Bank and which is designated by the Borrower in its Notice of Borrowing as the
Bank which shall issue a Letter of Credit with respect to such Notice of
Borrowing.
"GAAP" means generally accepted accounting principles
recognized as such in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
Board or in such other statements by such other entity as may be approved by a
significant segment of the accounting profession, which are applicable to the
circumstances as of the date of determination.
"Golf Properties" means golf courses and golf clubs.
"Governmental Authority" means any Federal, state or local
government or any other political subdivision thereof or agency exercising
executive, legislative, judicial, regulatory or administrative functions having
jurisdiction over the Borrower or any Real Property Asset.
"Group of Loans" means, at any time, a group of Loans
consisting of (i) all Committed Loans which are Base Rate Loans at such time, or
(ii) all Committed Loans which are Euro-Dollar Loans having the same Interest
Period at such time; provided that, if a Loan of any particular Bank is
converted to or made as a Base Rate Loan pursuant to Section 8.2 or 8.5, such
Loan shall be included in the same Group or Groups of Loans from time to time as
it would have been in if it had not been so converted or made.
14
<PAGE>
"Guarantor Subsidiary" means any Subsidiary of the Borrower
(i) to which more than ten percent (10%) of Total Fair Market Value is
attributable, and (ii) in which the Borrower owns, directly or indirectly, less
than ninety percent (90%) of the equity interests thereof.
"Guaranty" means the Guaranty of Payment, dated as of even
date herewith, by MOC, together with any other Guaranty of Payment to be entered
into by a Guarantor Subsidiary in accordance with Section 5.22 hereof.
"Healthcare Mortgages" means mortgage loans owned by the
Borrower, MOC or their Consolidated Subsidiaries, secured by Liens on Healthcare
Properties, exclusive of Healthcare Mortgages on Real Property Assets which
would be considered a Construction Asset, and exclusive of any Healthcare
Mortgages encumbering individual Real Property Assets with a debt service
coverage ratio of less than 1.1:1, provided that any Healthcare Mortgage
encumbering any such Real Property Asset shall be included in the applicable
calculation if the same shall be cross-defaulted and cross-collateralized with
other Healthcare Mortgages encumbering Real Property Assets, provided that the
entire pool of cross-defaulted and cross-collateralized Healthcare Mortgages
shall have a combined debt service coverage ratio of 1.1:1 or better.
"Healthcare Properties" means hospitals, long-term care
facilities, rehabilitation facilities, independent or assisted living facilities
for seniors, medical office buildings and substance abuse facilities.
"Hotel Properties" means hotels, motels, conference centers
and resorts.
"Indemnitee" has the meaning set forth in Section 9.3(b).
"Interest Period" means: (i) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Committed Borrowing or of
any Notice of Interest Rate Election with respect to such Committed Borrowing
and ending one, two, three or six months thereafter, as the Borrower may elect
in the applicable Notice of Committed Borrowing or Notice of Interest Rate
Election; provided that:
15
<PAGE>
(a) any Interest Period which would other wise end on
a day which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Euro-Dollar
Business Day of a calendar month.
Notwithstanding the foregoing, however, prior to the date which is 90 days from
the Closing Date, with respect to Tranche B Loans, Tranche C Loans and Tranche D
Loans, the Borrower shall only be permitted to select Interest Periods of one
month, and with respect to Tranche A Loans, the Borrower shall use its best
efforts to cooperate with the Administrative Agent in selecting Interest Periods
in order to facilitate the syndication of the Tranche A Loan Commitments.
(ii) with respect to each Base Rate Borrowing, the period
commencing on the date of such Committed Borrowing or Notice of Interest Rate
Election and ending 30 days thereafter; provided that any Interest Period which
would otherwise end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day.
(iii) with respect to each Money Market LIBOR Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending 1, 2, 3 or 6 months thereafter, as the Borrower may elect
in the applicable Notice of Money Market Borrowing in accordance with Section
2.3; provided that:
(a) any Interest Period which would other wise end on
a day which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar Business
Day;
16
<PAGE>
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall, subject to clause (c) below, end
on the last Euro-Dollar Business Day of a calendar month;
(c) if any Interest Period includes a date on which a
payment of principal of Loans is required to be made under Section 2.10
but does not end on such date, then (i) the principal amount (if any)
of each Money Market LIBOR Loan required to be repaid on such date and
(ii) the remainder (if any) of each such Money Market LIBOR Loan shall
have an Interest Period deter mined as set forth above; and
(d) any Interest Period which would other wise end
after the Maturity Date shall end on the Maturity Date.
(iv) with respect to each Money Market Absolute Rate Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 14 days)
as the Borrower may elect in accordance with Section 2.3; provided that:
(a) any Interest Period which would other wise end on
a day which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day; and
(b) if any Interest Period includes a date on which a
payment of principal of Loans is required to be made under Section 2.10
but does not end on such date, then (i) the principal amount (if any)
of each Money Market Absolute Rate Loan required to be repaid on such
date and (ii) the remainder (if any) of each such Money Market Absolute
Rate Loan shall have an Interest Period determined as set forth above.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Investment Grade Rating" means a rating for a Person's senior
long-term unsecured debt, or if no such rating has been issued, a "shadow"
rating, of BBB- or better
17
<PAGE>
from S&P, and a rating or "shadow" rating of Baa3 or better from Moody's or a
rating or "shadow" rating equivalent to the foregoing from either Duff & Phelps
or Fitch. Any such "shadow" rating shall be evidenced by a letter from the
applicable Rating Agency or by such other evidence as may be reasonably
acceptable to the Administrative Agent (as to any such other evidence, the
Administrative Agent shall present the same to, and discuss the same with, the
Banks).
"Invitation for Money Market Quotes" has the meaning set forth
in Section 2.3(c).
"Letter(s) of Credit" has the meaning provided in Section
2.2(c).
"Letter of Credit Collateral" has the meaning provided in
Section 6.4.
"Letter of Credit Collateral Account" has the meaning provided
in Section 6.4.
"Letter of Credit Documents" has the meaning provided in
Section 2.17.
"Letter of Credit Usage" means, without duplication, at any
time the sum of (i) the aggregate maximum amount available to be drawn under the
Letters of Credit then outstanding, assuming compliance with all requirements
for drawing referred to therein, and (ii) the aggregate amount of the Borrower's
unpaid obligations under this Agreement in respect of the Letters of Credit.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.3.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, each of
the Borrower and any Subsidiary shall be deemed to own subject to a Lien any
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
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<PAGE>
"Loan" means a Base Rate Loan or a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Base Rate Loans or Euro-Dollar Loans or Money
Market Loans or any combination of the foregoing.
"Loan Documents" means this Agreement, the Notes, any
Guaranty, the Letter(s) of Credit, the Letter of Credit Documents and any
related documents.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.7(b).
"Margin Stock" shall have the meaning provided such term in
Regulation U of the Federal Reserve Board.
"Material Adverse Effect" means a material adverse effect upon
(i) the current or future business, operations, properties or assets of the
Borrower and its Subsidiaries taken as a whole, or MOC and its Subsidiaries
taken as a whole, or (ii) the ability of the Borrower or MOC to perform its
obligations hereunder or under the Guaranty in all material respects, including
to pay interest and principal.
"Material of Environmental Concern" means and includes
pollutants, contaminants, hazardous wastes, and toxic, radioactive, caustic or
otherwise hazardous sub stances, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics, except those
incidental to the operation of the applicable Real Property Asset.
"Material Plan" means at any time a Plan having aggregate
Unfunded Liabilities in excess of $5,000,000.
"Maturity Date" has the meaning set forth in
Section 2.9.
"Minority Holdings" means partnerships, limited liability
companies and corporations directly or indirectly held or owned by the Borrower
or MOC, other than Anita Associates, which are not consolidated with the
Borrower or MOC on their financial statements.
"MOC" means Meditrust Operating Company, a Delaware
corporation.
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<PAGE>
"Money Market Absolute Rate" has the meaning set forth in
Section 2.3.
"Money Market Absolute Rate Loan" means a Loan to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Borrowing" has the meaning set forth in Section
1.3.
"Money Market Lending Office" means, as to each Bank, its
Domestic Lending Office or such other office, branch or affiliate of such Bank
as it may hereafter designate as its Money Market Lending Office by notice to
the Borrower and the Administrative Agent; provided that any Bank may from time
to time by notice to the Borrower and the Administrative Agent designate
separate Money Market Lending Offices for its Money Market LIBOR Loans, on the
one hand, and its Money Market Absolute Rate Loans, on the other hand, in which
case all references herein to the Money Market Lending Office of such Bank shall
be deemed to refer to either or both of such offices, as the context may
require.
"Money Market LIBOR Loan" means a Loan to be made by a Bank
pursuant to a LIBOR Auction (including such a Loan bearing interest at the Base
Rate pursuant to Section 2.3).
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.3.
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.3.
"Money Market Quote Request" has the meaning set forth in
Section 2.3(b).
"Moody's" means Moody's Investors Service, Inc. or any
successor thereto.
"Morgan" means Morgan Guaranty Trust Company of New York, in
its individual capacity.
"Mortgages" has the meaning set forth in Section
3.3(a) hereof.
20
<PAGE>
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the ERISA
Group during such five year period.
"NAIC" means The National Association of Insurance
Commissioners.
"Net Cash Proceeds" means all cash when and as received in
connection with the sale or refinancing of any asset, less reasonable costs and
expenses, repayment of secured indebtedness with respect to the applicable
asset, and net of an amount equal to taxable capital gains and real estate
transfer taxes payable in connection with any asset sale.
"Net Offering Proceeds" means all cash received by the
Borrower or MOC as a result of the sale of common stock, preferred stock,
partnership interests, limited liability company interests, or other ownership
or equity interests in the Borrower or MOC (or evidence of indebtedness of the
Borrower or MOC convertible into any of the foregoing), or debt securities, less
customary costs and discounts of issuance paid by the Borrower or MOC, as the
case may be, and exclusive of any cash proceeds received in connection with the
settlement of the Forward Equity Issuance Transaction, dated as of February 26,
1998 with Merrill Lynch International.
"Non-Recourse Debt" means Debt of the Borrower, MOC, or any of
their Subsidiaries on a combined consolidated basis for which the right of
recovery of the obligee thereof is limited to recourse against the Real Property
Assets securing such Debt (subject to such limited exceptions to the
non-recourse nature of such Debt such as fraud, misappropriation,
misapplication and environmental indemnities, as are usual and customary in like
transactions at the time of the incurrence of such Debt).
"Notes" means, collectively, the promissory notes of the
Borrower, each substantially in the forms of Exhibit A-1, A-2, A-3 and A-4
hereto, evidencing the obligation of the Borrower to repay the Tranche A Loans,
the Tranche B
21
<PAGE>
Loans, the Tranche C Loans and the Tranche D Loans, respectively, together with
any Designated Lender Notes, and "Note" means any one of such promissory notes
issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing or
a Notice of Money Market Borrowing.
"Notice of Committed Borrowing" has the meaning set forth in
Section 2.2.
"Notice of Interest Rate Election" has the meaning set forth
in Section 2.15(a).
"Notice of Money Market Borrowing" has the meaning set forth
in Section 2.3(f).
"Notice to Extend" has the meaning set forth in Section
2.9(b).
"Obligations" means all obligations, liabilities, interest,
fees and indebtedness of every nature of the Borrower from time to time owing to
any Bank under or in connection with this Agreement or any other Loan Document,
including, without limitation, (i) the outstanding principal amount of the
Committed Loans at such time, plus (ii) the Letter of Credit Usage at such time,
plus (iii) the out standing principal amount of any Money Market Loans at such
time.
"Outstanding Balance" means the sum of (i) the aggregate
outstanding and unpaid principal balance of all Loans and (ii) the Letter of
Credit Usage.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section 9.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" means (a) Liens in favor of the Borrower or
MOC on all or any part of the assets of Subsidiaries of the Borrower or MOC,
provided that (i) the Debt to
22
<PAGE>
which such Lien relates is held by the Borrower or MOC, (ii) such Debt is not
otherwise pledged or encumbered, and (iii) no more than 20% of the Unencumbered
Asset Pool Properties Value may be subject to any such Liens; (b) Liens to
secure the performance of statutory obligations, surety or appeal bonds,
performance bonds, completion bonds, government contracts or other obligations
of a like nature, including Liens in connection with workers' compensation,
unemployment insurance and other types of statutory obligations or to secure the
performance of tenders, bids, leases, contracts (other than for the repayment of
Debt) and other similar obligations incurred in the ordinary course of business;
(c) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded; provided, that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (d) Liens on property of the Borrower, MOC
or any Subsidiary thereof in favor of the Federal or any state government to
secure certain payments pursuant to any contract, statute or regulation; (e)
easements (including, without limitation, reciprocal easement agreements and
utility agreements), rights of way, covenants, consents, reservations,
encroachments, variations and zoning and other restrictions, charges or
encumbrances (whether or not recorded), which do not interfere materially with
the ordinary conduct of the business of the Borrower, MOC or any Subsidiary
thereof and which do not materially detract from the value of the property to
which they attach or materially impair the use thereof by the Borrower, MOC or
any Subsidiary thereof; (f) statutory Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other Liens imposed by law and
arising in the ordinary course of business, for sums not then due and payable
(or which, if due and payable, are being contested in good faith and with
respect to which adequate reserves are being maintained to the extent required
by GAAP); (g) Liens not otherwise permitted by this definition and incurred in
the ordinary course of business of any or all of the Borrower, MOC or any
Subsidiary thereof with respect to obligations which do not exceed $500,000 in
principal amount in the aggregate at any one time outstanding; and (h) the
interests of lessees and lessors under leases of real or personal property made
in the ordinary course of business which would not have a Material Adverse
Effect.
23
<PAGE>
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or contributed to, by any member of
the ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed to, by
any Person which was at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by
Morgan in New York City from time to time as its Prime Rate.
"Property Expenses" means, when used with respect to any Real
Property Asset, the costs of maintaining such Real Property Asset which are the
responsibility of the owner thereof and that are not paid directly by the tenant
thereof, including, without limitation, taxes, insurance, repairs and
maintenance, but provided that if such tenant is more than 90 days in arrears in
the payment of base or fixed rent, then such costs will also constitute
"Property Expenses", but excluding Capital Expenditures, depreciation,
amortization, general administrative and interest costs.
"Property Income" means, when used with respect to any Real
Property Asset, cash rents and other cash revenues received in the ordinary
course therefrom.
"Rating Agencies" means, collectively, S&P, Moody's, Duff &
Phelps and Fitch.
"Real Property Assets" means as of any time, the real property
assets owned directly or indirectly by the Borrower, MOC or any Consolidated
Subsidiary of either the Borrower or MOC at such time, including, without
limitation, mortgage loans.
24
<PAGE>
"Recourse Debt" shall mean Debt of the Borrower, MOC or any
Subsidiary that is not Non-Recourse Debt.
"Reference Bank" means the principal London offices of
Morgan.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Related Fund" means, with respect to any Bank that is a fund
that invests in bank loans, any other fund that invests in bank loans and is
advised or managed by the same investment advisor as such Bank or by an
Affiliate of such investment advisor.
"Release" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, deposit, discharge, leaching or migration.
"Required Banks" means, at any time, Banks having at least
66-2/3% of the aggregate amount of the Commitments or, if the Commitments shall
have been terminated, holding Notes evidencing at least 66 2/3% of the aggregate
unpaid principal amount of the Loans and Letter of Credit Usage.
"Requirements" means all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, injunctions, rules, regulations
and requirements of every Governmental Authority having jurisdiction over any
Real Property Asset and all restrictive covenants applicable to any Real
Property Asset.
"Security Conversion" has the meaning set forth in
Section 3.3(a).
"Security Documents" has the meaning set forth in
Section 3.3(a).
"Solvent" means, with respect to any Person, at the time of
determination: (i) the fair saleable value of its assets is in excess of the
total amount of its liabilities (including, without limitation, contingent
liabilities); (2) the present fair saleable value of its assets is greater than
its liability on its existing debts as such debts become absolute and matured;
and (3) it is then able
25
<PAGE>
to pay its debts (including, without limitation, contingent debts and other
commitments) as they mature.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests representing either (i) direct or
indirect ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions or (ii) a majority of the economic
interest therein, are at the time directly or indirectly owned by the Borrower
or MOC.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or any successor thereof.
"Term" has the meaning set forth in Section 2.9.
"Total Debt Ratio" means the ratio, as of the date of
determination, of (i) the sum, without duplication, of (x) the Total Liabilities
of the Borrower, MOC and their Consolidated Subsidiaries, and (y) the
Borrower's, MOC's and their Consolidated Subsidiaries' pro rata share of the
Total Liabilities of any Minority Holdings of the Borrower or MOC or their
Consolidated Subsidiaries, to (ii) Total Fair Market Value.
"Total Debt Service" means, as of the last day of each
calendar quarter, an amount equal to the sum of (i) interest (whether accrued,
paid or capitalized) actually payable by the Borrower, MOC or their Consolidated
Subsidiaries on their Debt for the previous four consecutive quarters including
the quarter then ended, plus (ii) the Borrower's, MOC's and their Consolidated
Subsidiaries' pro rata share of interest (whether accrued, paid or capitalized)
actually payable by any Minority Holdings of the Borrower or MOC or their
Consolidated Subsidiaries on their Debt for the previous four consecutive
quarters including the quarter then ended.
"Total Fair Market Value" means, the sum of (w) the sum of (A)
with respect to those Real Property Assets which are Healthcare Properties, the
quotient of (i) Annual EBITDA (which shall be calculated on an annualized basis,
commencing as of the quarter ending September 30, 1998, and from and after July
1, 1999, shall be calculated based upon the Annual EBITDA for the preceding four
quarters) with
26
<PAGE>
respect thereto (or in the case of Healthcare Properties owned by Minority
Holdings, the Borrower's, MOC's or their Consolidated Subsidiaries' pro rata
share thereof) for the previous four (4) consecutive quarters, including the
quarter then ended, divided by (ii) 9.75%, (B) the book value of any Healthcare
Mortgages (or in the case of Healthcare Mortgages owned by Minority Holdings,
the Borrower's, MOC's or their Consolidated Subsidiaries' pro rata share
thereof), (C) with respect to those Real Property Assets which are Hotel
Properties, the sum of (x) the quotient of (i) Annual EBITDA (which shall be
calculated on an annualized basis, commencing as of the quarter ending September
30, 1998, and from and after July 1, 1999, shall be calculated based upon the
Annual EBITDA for the preceding four quarters) with respect thereto (or in the
case of Hotel Properties owned by Minority Holdings, the Borrower's, MOC's or
their Consolidated Subsidiaries' pro rata share thereof) for the previous four
(4) consecutive quarters, including the quarter then ended, less an amount equal
to 4% of gross revenues with respect thereto for such period for reserves for
furniture, fixtures and equipment and (ii) 10%, and (y) 50% of the book value of
any Real Property Asset which is a Hotel Property and which is a Construction
Asset (or in the case of Hotel Properties which are Construction Assets owned by
Minority Holdings, the Borrower's, MOC's or their Consolidated Subsidiaries'
pro rata share thereof), (D) the book value of the Borrower's and MOC's
investment resulting from the merger with Santa Anita Realty Enterprises, Inc.
and Santa Anita Operating Company, exclusive of any goodwill attributable
thereto, (E) with respect to each Real Property Asset which is a Golf Property,
the quotient of (i) Annual EBITDA (which shall be calculated on an annualized
basis, commencing as of the quarter ending September 30, 1998, and from and
after July 1, 1999, shall be calculated based upon the Annual EBITDA for the
preceding four quarters) (or in the case of Golf Properties which are owned by
Minority Holdings, the Borrower's, MOC's or their Consolidated Subsidiaries'
pro rata share thereof) with respect thereto for the previous four (4)
consecutive quarters, including the quarter then ended, less an amount equal to
5% of revenues as a reserve for Capital Expenditures, divided by (ii) 10.75%,
and (F) with respect to those assets which are not Healthcare Properties,
Healthcare Mortgages, Hotel Proper ties or Golf Properties, the purchase price
with respect to each thereof (or in the case of such assets which are owned by
Minority Holdings, the Borrower's, MOC's or their Consolidated Subsidiaries'
pro rata share thereof), exclusive of
27
<PAGE>
any portion thereof attributable to goodwill, until such time as the Borrower,
the Administrative Agent and the Required Banks shall agree to a different
method of valuation of each thereof, (x) with respect to those Real Property
Assets described in clauses (A), (C) and (E) of clause (w) and owned for less
than the four previous consecutive quarters but owned for at least one (1) full
fiscal quarter, the lesser of (A) the purchase price for each thereof (or, in
the case of Minority Holdings, the Borrower's MOC's or their Consolidated
Subsidiaries' pro rata share thereof), and (B) the quotient of (i) Annual EBITDA
(or, in the case of Minority Holdings, the Borrower's MOC's or their
Consolidated Subsidiaries' pro rata share thereof) applicable to each such Real
Property Asset, and (ii) the applicable capitalization rate, (y) with respect to
those Real Property Assets described in clauses (A), (C) and (E) of clause (w)
and owned for less than one full quarter, the purchase price for each thereof
(or, in the case of Minority Holdings, the Borrower's MOC's or their
Consolidated Subsidiaries' pro rata share thereof), and (z) Cash or Cash
Equivalents of the Borrower, MOC and their Subsidiaries as of the date of
determination. In addition, for purposes of calculating covenant compliance as
of the Closing Date only, the purchase price of La Quinta Inns, Inc. and
Cobblestone Holdings, Inc. shall be deemed to be the actual purchase prices
thereof, inclusive of any amounts attributable to goodwill.
"Total Liabilities" means the sum of all Debt of a Person and
all accounts payable and all other liabilities of such Person.
"Tranche A Bank" means any Bank that has committed to fund a
portion of the Tranche A Loan.
"Tranche A Loan" means the revolving credit loan or loans to
be made to the Borrower for the purposes set forth in Section 5.16 hereof.
"Tranche A Loan Amount" has the meaning set forth
in Section 2.1.
"Tranche A Loan Commitment" means, with respect to each Bank,
the amount committed by such Bank pursuant to this Agreement with respect to the
Tranche A Loan as set forth on the signature pages hereto, as such amount may be
reduced from time to time pursuant to Sections 2.9, 2.10, 2.11 and 6.2.
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<PAGE>
"Tranche A Notes" means the promissory notes of the Borrower,
each substantially in the form of Exhibit A-1 hereto, evidencing the obligation
of the Borrower to repay the Tranche A Loan, and "Tranche A Note" means any one
of such promissory notes issued hereunder.
"Tranche B Bank" means any Bank that has committed to fund a
portion of the Tranche B Loan.
"Tranche B Loan" means the term loan or loans to be made to
the Borrower for the purposes set forth in Section 5.16 hereof.
"Tranche B Loan Amount" has the meaning set forth
in Section 2.1.
"Tranche B Loan Commitment" means, with respect to each Bank,
the amount committed by such Bank pursuant to this Agreement with respect to the
Tranche B Loan as set forth on the signature pages hereto, as such amount may be
reduced from time to time pursuant to Sections 2.9, 2.10, 2.11 and 6.2.
"Tranche B Notes" means the promissory notes of the Borrower,
each substantially in the form of Exhibit A-2 hereto, evidencing the obligation
of the Borrower to repay the Tranche B Loan, and "Tranche B Note" means any one
of such promissory notes issued hereunder.
"Tranche C Bank" means any Bank that has committed to fund a
portion of the Tranche C Loan.
"Tranche C Loan" means the term loan or loans to be made to
the Borrower for the purposes set forth in Section 5.16 hereof.
"Tranche C Loan Amount" has the meaning set forth
in Section 2.1.
"Tranche C Loan Commitment" means, with respect to each Bank,
the amount committed by such Bank pursuant to this Agreement with respect to the
Tranche C Loan as set forth on the signature pages hereto, as such amount may be
reduced from time to time pursuant to Sections 2.9, 2.10, 2.11 and 6.2.
29
<PAGE>
"Tranche C Notes" means the promissory notes of the Borrower,
each substantially in the form of Exhibit A-3 hereto, evidencing the obligation
of the Borrower to repay the Tranche C Loan, and "Tranche C Note" means any one
of such promissory notes issued hereunder.
"Tranche D Bank" means any Bank that has committed to fund a
portion of the Tranche D Loan.
"Tranche D Loan" means the term loan or loans to be made to
the Borrower for the purposes set forth in Section 5.16 hereof.
"Tranche D Loan Amount" has the meaning set forth
in Section 2.1.
"Tranche D Loan Commitment" means, with respect to each Bank,
the amount committed by such Bank pursuant to this Agreement with respect to the
Tranche D Loan as set forth on the signature pages hereto, as such amount may be
reduced from time to time pursuant to Sections 2.9, 2.10, 2.11 and 6.2.
"Tranche D Notes" means the promissory notes of the Borrower,
each substantially in the form of Exhibit A-4 hereto, evidencing the obligation
of the Borrower to repay the Tranche D Loan, and "Tranche D Note" means any one
of such promissory notes issued hereunder.
"Unencumbered Asset Pool Net Operating Cash Flow" means, as of
any date of determination with respect to (A) the Unencumbered Asset Pool
Properties which are Healthcare Properties, Property Income with respect thereto
for the previous four (4) consecutive quarters (except as provided below),
including the quarter then ended, but less Property Expenses with respect
thereto for the previous four (4) consecutive quarters (except as provided
below), including the quarter then ended, (B) Healthcare Mortgages, the interest
received thereon for the previous four (4) consecutive quarters (except as
provided below), including the quarter then ended, (C) the Unencumbered Asset
Pool Properties which are Hotel Properties, Property Income with respect thereto
for the previous four (4) consecutive quarters (except as provided below),
including the quarter then ended, but less Property Expenses with respect
thereto for the previous four (4) consecutive quarters (except as provided
below), including the quarter then ended, and less an amount equal to 4%
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of gross revenues for the applicable period for reserves for furniture, fixtures
and equipment, (D) each Real Property Asset which is a Golf Property operated by
the Borrower, MOC or any Consolidated Subsidiary, Property Income with respect
thereto for the previous four (4) consecutive quarters (except as provided
below), including the quarter then ended, but less Property Expenses with
respect thereto for the previous four (4) consecutive quarters (except as
provided below), including the quarter then ended, and less an amount equal to
5% of revenues as a reserve for Capital Expenditures, and (E) with respect to
those assets which are not Healthcare Properties, Healthcare Mortgages, Hotel
Properties or Golf Properties, Property Income with respect thereto for the
previous four (4) consecutive quarters (except as provided below), including the
quarter then ended, but less Property Expenses with respect thereto for the
previous four (4) consecutive quarters (except as provided below).
Notwithstanding the foregoing, with respect to any Unencumbered Asset Pool
Property owned by the Borrower, MOC or any of their Consolidated Subsidiaries
for a period of less than four (4) fiscal quarters, Unencumbered Asset Pool Net
Operating Cash Flow shall be determined in a manner consistent with the
foregoing calculation utilizing annualized Property Income, Property Expenses,
reserves and sales for the relevant period of the Borrower's, MOC's or any of
their Consolidated Subsidiaries' ownership of such Unencumbered Asset Pool
Property.
"Unencumbered Asset Pool Properties" means, as of any date,
the Real Property Assets listed in Exhibit B attached hereto and made a part
hereof, each of which is open for business and operating and each of which is a
Healthcare Mortgage or is 100% owned in fee (or leasehold in the case of assets
listed as such on Exhibit B) by the Borrower, MOC or any of their Consolidated
Subsidiaries and each of which is not subject to any Lien (other than Permitted
Liens and other than, in the case of Hotel Properties, Liens securing industrial
revenue bonds, representing less than 20% of the Unencumbered Asset Pool
Properties Value attributable to any such hotel property), together with all
Real Property Assets which have become part of the Unencumbered Asset Pool
Properties as of such date. In addition, in the case of any Real Property Asset
which is an Unencumbered Asset Pool Property owned by Consolidated Subsidiaries
of the Borrower or MOC, neither the Borrower or MOC shall, directly or
indirectly, pledge their interests in any such Consolidated Subsidiary nor shall
the Borrower or MOC permit
31
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any such Consolidated Subsidiary to enter into any negative pledge with respect
thereto or to incur any Unsecured Debt.
"Unencumbered Asset Pool Properties Value" means:
(i) with respect to the Unencumbered Asset
Pool Properties owned by the Borrower, MOC or any of their Consolidated
Subsidiaries for a period of at least four (4) fiscal quarters, the sum of (A)
55% of the quotient of (x) the Unencumbered Asset Pool Net Operating Cash Flow
with respect to each Unencumbered Asset Pool Property which is a Healthcare
Property and (y) 9.75%, (B) 75% of the book value of any Healthcare Mortgages,
(C) 50% of the quotient of (x) the Unencumbered Asset Pool Net Operating Cash
Flow with respect to each Unencumbered Asset Pool Property which is a Hotel
Property, and (y) 10%, less an amount equal to the outstanding principal amount
of any industrial revenue bonds secured by Liens thereon, (D) 50% of the
quotient of (x) Unencumbered Asset Pool Net Operating Cash Flow with respect to
each Real Property Asset which is a Golf Property operated by the Borrower, MOC
or any Consolidated Subsidiary, divided by (y) 10.75%, and (E) with respect to
those assets which are not Core Asset Type, 50% of the purchase price with
respect to each thereof, exclusive of any portion thereof attributable to
goodwill; and
(ii) with respect to Unencumbered Asset Pool Properties owned
by the Borrower, MOC or any of their Consolidated Subsidiaries for a period of
less than four (4) fiscal quarters and more than one (1) fiscal quarter, the sum
of (x) 55% of the quotient of (x) the Unencumbered Asset Pool Net Operating Cash
Flow with respect to each Unencumbered Asset Pool Property which is a
Healthcare Property, and (y) 9.75%, (B) 75% of the book value of any Healthcare
Mortgages, (C) 50% of the quotient of (x) the Unencumbered Asset Pool Net
Operating Cash Flow with respect to each Unencumbered Asset Pool Property which
is a Hotel Property, and (y) 10%, less an amount equal to the outstanding
principal amount of any industrial revenue bonds secured by Liens thereon, (D)
50% of the quotient of (x) Unencumbered Asset Pool Net Operating Cash Flow with
respect to each Real Property Asset which is a Golf Property operated by the
Borrower, MOC or any Consolidated Subsidiary, divided by (y) 10.75%, and (E)
with respect to those assets which are not Healthcare Properties, Healthcare
Mortgages, Hotel Proper ties or Golf Properties, 50% of the purchase price with
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respect to each thereof, exclusive of any portion thereof attributable to
goodwill; and
(iii) with respect to Unencumbered Asset Pool Properties owned
by the Borrower, MOC or any of their Consolidated Subsidiaries for a period of
less than one (1) fiscal quarter, (A) in the case of Healthcare Properties, 55%
of the purchase price for each thereof, exclusive of any portion thereof
attributable to goodwill, (B) in the case of Healthcare Mortgages, 75% of the
book value thereof, (C) in the case of Hotel Properties, 50% of the purchase
price for each thereof, exclusive of any portion thereof attributable to
goodwill, less an amount equal to the outstanding principal amount of any
industrial revenue bonds secured by Liens thereon, (D) in the case of Golf
Properties, 50% of the purchase price for each thereof, exclusive of any portion
thereof attributable to goodwill, and (E) in the case of any asset which is not
a Core Asset Type, 50% of the purchase price for each thereof, exclusive of any
portion thereof attributable to goodwill.
Notwithstanding anything contained herein to the contrary, in no event shall
more than 20% of the Unencumbered Asset Pool Properties Value be attributable to
assets of a type other than a Core Asset Type, and, in addition, no single type
of asset other than a Core Asset Type shall account for more than 10% of the
Unencumbered Asset Pool Properties Value, other than time sharing properties,
which may account for up to 15% of the Unencumbered Asset Pool Properties Value.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA Group
to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including
the States and the District of Columbia, but excluding its territories and
possessions.
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"Unsecured Debt" means Debt not secured by a Lien on any Real
Property Asset.
"Unsecured Debt Ratio" means, as of any date of determination,
the ratio of the Unencumbered Asset Pool Properties Value as of the date of
determination to the aggregate amount of Unsecured Debt of the Borrower, MOC and
their Consolidated Subsidiaries outstanding as of such date of determination.
"Unsecured Interest Expense" means, as of the last day of each
calendar quarter, an amount equal to the sum of (i) interest (whether accrued,
paid or capitalized) actually payable by the Borrower, MOC or their Consolidated
Subsidiaries on their Unsecured Debt for the previous four consecutive quarters
including the quarter then ended, plus (ii) the Borrower's, MOC's and their
Consolidated Subsidiaries' pro rata share of interest (whether accrued, paid or
capitalized) actually payable by any Minority Holdings of the Borrower, MOC or
their Consolidated Subsidiaries on their Unsecured Debt for the previous four
consecutive quarters including the quarter then ended.
"Unused Commitments" means an amount equal to all unadvanced
funds (other than unadvanced funds in connection with any construction loan)
which any third party is obligated to advance to the Borrower or otherwise,
pursuant to any Loan Document, written instrument or otherwise.
Section 1.2. Accounting Terms and Determinations. Unless
otherwise specified herein,1all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited combined consolidated financial statements of the Borrower
delivered to the Administrative Agent and the Banks; provided that, the Borrower
shall promptly notify the Administrative Agent of any change in GAAP that has a
material affect on the operation of any covenant, which notice shall include an
analysis of the effect of any such change, and provided further that, if the
Borrower notifies the Administrative Agent and the Banks that the Borrower
wishes to amend any covenant in Article V to eliminate the
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effect of any change in GAAP on the operation of such covenant (or if the
Administrative Agent notifies the Borrower that the Required Banks wish to amend
Article V for such purpose), then the Borrower's compliance with such covenant
shall be determined on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such covenant is amended in a manner satisfactory to the Borrower and the
Required Banks.
Section 1.3. Types of Borrowings. The term "Borrowing" denotes
the aggregation of Loans of one or more Banks to be made to the Borrower
pursuant to Article II on the same date, all of which Loans are of the same type
(subject to Article VIII) and, except in the case of Base Rate Loans, have the
same Interest Period. Borrowings are classified for purposes of this Agreement
either by reference to the pricing of Loans comprising such Borrowing (e.g., a
"Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by
reference to the provisions of Article II under which participation therein is
determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.1 in
which all Banks participate in proportion to their Commitments, while a "Money
Market Borrowing" is a Borrowing under Section 2.3).
ARTICLE II
THE CREDITS
Section 2.1. Commitments to Lend.
(a) Tranche A Loan. Each Tranche A Bank severally agrees, on
the terms and conditions set forth in this Agreement, to make Tranche A Loans to
the Borrower and participate in Letters of Credit issued by the Fronting Bank on
behalf of the Borrower pursuant to this Section 2.1(a) from time to time during
the Term in amounts such that the aggregate principal amount of Tranche A Loans
made by such Bank at any one time outstanding together with such Bank's pro rata
share of Letter of Credit Usage with respect to the Borrower shall not exceed
the amount of its Tranche A Loan Commitment at such time. The aggregate amount
of Tranche A Loans (inclusive of all Money Market Loans) to be made hereunder
together with the Letter of Credit Usage with respect to the Borrower shall not
exceed
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at any one time the lesser of (x) One Billion Dollars ($1,000,000,000) (the
"Tranche A Loan Amount") and (y) the aggregate Tranche A Loan Commitments then
in effect. Each Euro-Dollar Borrowing under this subsection (a) shall be in an
aggregate principal amount of at least $10,000,000, or an integral multiple of
$500,000 in excess thereof, and each Base Rate Borrowing under this subsection
(a) shall be in an aggregate principal amount of at least $10,000,000, or an
integral multiple of $500,000 in excess thereof, and in each case shall be made
from the several Banks ratably in proportion to their respective Tranche A Loan
Commitments. Subject to the limitations set forth herein, any Tranche A Loan
amounts repaid may be reborrowed; and
(b) Tranche B Loan. Each Tranche B Bank sever ally agrees, on
the terms and conditions set forth in this Agreement, to make the Tranche B Loan
on the Closing Date to the Borrower in an amount such that the aggregate
principal amount of the Tranche B Loan made by such Bank on the Closing Date
shall not exceed the amount of its Tranche B Loan Commitment then in effect. The
aggregate amount of the Tranche B Loan to be made hereunder shall not exceed
Five Hundred Million Dollars ($500,000,000) (the "Tranche B Loan Amount"). Any
Tranche B Loan amounts repaid may not be reborrowed.
(c) Tranche C Loan. Each Tranche C Bank severally agrees, on
the terms and conditions set forth in this Agreement, to make the Tranche C Loan
on the Closing Date to the Borrower in an amount such that the aggregate
principal amount of the Tranche C Loan made by such Bank on the Closing Date
shall not exceed the amount of its Tranche C Loan Commitment then in effect. The
aggregate amount of the Tranche C Loan to be made hereunder shall not exceed Two
Hundred Fifty Million Dollars ($250,000,000) (the "Tranche C Loan Amount"). Any
Tranche C Loan amounts repaid may not be reborrowed.
(d) Tranche D Loan. Each Tranche D Bank sever ally agrees, on
the terms and conditions set forth in this Agreement, to make the Tranche D Loan
on the Closing Date to the Borrower in an amount such that the aggregate
principal amount of the Tranche D Loan made by such Bank on the Closing Date
shall not exceed the amount of its Tranche D Loan Commitment then in effect. The
aggregate amount of the Tranche D Loan to be made hereunder shall not exceed
Five Hundred Million Dollars ($500,000,000) (the "Tranche D
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Loan Amount"). Any Tranche D Loan amounts repaid may not be reborrowed.
Section 2.2. Notice of Committed Borrowing. (a) With respect
to Tranche A Loans, the Borrower shall give the Administrative Agent notice (a
"Notice of Committed Borrowing") not later than 10:00 a.m. (New York City time)
(x) one Domestic Business Day before each Base Rate Borrowing or (y) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(1) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Base Rate Borrowing or a
Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(2) the aggregate amount of such Borrowing,
(3) whether the Loans comprising such Borrowing are
to be Base Rate Loans or Euro-Dollar Loans,
(4) in the case of a Euro-Dollar Borrowing, the
duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period, and
(5) that no Default or Event of Default has occurred
or is continuing.
Notwithstanding the time frame set forth in clause (a)(x) above, in the event
that the Money Market Quotes submitted by the Banks pursuant to Section 2.3(d)
below are, in the aggregate, in an amount less than the principal amount
requested by the Borrower in the related Money Market Quote Request, then the
Borrower shall be permitted to give the Administrative Agent notice of its
intent to make a Base Rate Borrowing, in the amount of the difference between
accepted Money Market Quotes and the principal amount requested by the Borrower
in the related Money Market Quote Request, no later than 12:00 Noon (New York
City time) on the date of such Borrowing.
(b) With respect to the Tranche B Loan, the Tranche C Loan and
the Tranche D Loan, the Borrower shall give the Administrative Agent a Notice of
Committed Borrowing not later than 12:00 Noon (Eastern Time) (x) one Domes tic
Business Day before the Closing Date or (y) the third
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Euro-Dollar Business Day before the Closing Date, specifying:
(1) whether the Loans comprising the Tranche B Loan,
the Tranche C Loan or the Tranche D Loan are to be Base Rate Loans or
Euro-Dollar Loans,
(2) in the case of a Euro-Dollar Borrowing, the
duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period, and
(3) that no Default or Event of Default has occurred
or is continuing.
(c) The Borrower shall give the Administrative Agent, and the
designated Fronting Bank, a Notice of Committed Borrowing in the event that it
desires to have standby Letters of Credit (each, a "Letter of Credit") issued
hereunder no later than 10:00 a.m., New York City time, at least four (4)
Domestic Business Days prior to the date of such issuance. Each such notice
shall specify (i) the designated Fronting Bank, (ii) the aggregate amount of the
requested Letters of Credit, (iii) the individual amount of each requested
Letter of Credit and the number of Letters of Credit to be issued, (iv) the date
of such issuance (which shall be a Domestic Business Day), (v) the name and
address of the beneficiary, (vi) the expiration date of the Letter of Credit
(which in no event shall be later than twelve (12) months after the issuance of
such Letter of Credit or five Domestic Business Days prior to the Maturity Date
of the Tranche A Loans, whichever is earlier), (vii) the purpose and
circumstances for which such Letter of Credit is being issued and (viii) the
terms upon which each such Letter of Credit may be drawn down (which terms shall
not leave any discretion to Fronting Bank). Each such notice may be revoked
telephonically by the Borrower to the applicable Fronting Bank and the
Administrative Agent any time prior to the date of issuance of the Letter of
Credit by the applicable Fronting Bank, provided such revocation is confirmed in
writing by the Borrower to the Fronting Bank and the Administrative Agent within
one (1) Domestic Business Day by facsimile. No later than 10:00 a.m., New York
City time, on the date that is four (4) Domestic Business Days prior to the date
of issuance, the Borrower shall specify a precise description of the documents
and the verbatim text of any certificate
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to be presented by the beneficiary of such Letter of Credit, which if presented
by such beneficiary prior to the expiration date of the Letter of Credit would
require the Fronting Bank to make a payment under the Letter of Credit;
provided, that the Fronting Bank may, in its reasonable judgment, require
changes in any such documents and certificates only in conformity with changes
in customary and commercially reasonable practice or law and, provided further,
that no Letter of Credit shall require payment against a conforming draft to be
made thereunder on the following Domestic Business Day that such draft is
presented if such presentation is made later than 10:00 A.M. New York City time
(except that if the beneficiary of any Letter of Credit requests at the time of
the issuance of its Letter of Credit that payment be made on the same Domestic
Business Day against a conforming draft, such beneficiary shall be entitled to
such a same day draw, provided such draft is presented to the applicable
Fronting Bank no later than 10:00 A.M. New York City time and provided further
the Borrower shall have requested to the Fronting Bank and the Administrative
Agent that such beneficiary shall be entitled to a same day draw). In
determining whether to pay on such Letter of Credit, the Fronting Bank shall be
responsible only to determine that the documents and certificates required to be
delivered under the Letter of Credit have been delivered and that they comply on
their face with the requirements of that Letter of Credit.
Notwithstanding anything contained herein to the contrary, the
Borrower and the Banks hereby acknowledge that NationsBank, N.A. and Fleet
National Bank have previously issued the letters of credit (the "Existing
Letters of Credit") more particularly described on Exhibit J attached hereto
for the accounts of La Quinta Inns, Inc., LQ-Baton Rouge Joint Venture, La
Quinta Development Partners, L.P., and the Borrower, and that for purposes of
this Agreement, the Existing Letters of Credit shall be deemed to be Letters of
Credit, with the same force and effect as though the Existing Letters of Credit
had been issued hereunder for the account of the Borrower. In addition, the
Borrower hereby accepts and assumes all the duties, liabilities and obligations
of the parties on whose behalf the Existing Letters of Credit were issued under
or in respect of the Existing Letters of Credit, and any other agreements or
applications made in connection therewith, and, without limiting the generality
of the foregoing, the Borrower
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further agrees, immediately upon demand therefor by the applicable Fronting
Bank, to pay such Fronting Bank, and to reimburse such Fronting Bank for, any
and all amounts paid or expended by such Fronting Bank under or in connection
with any of the Existing Letters of Credit.
Section 2.3. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed
Borrowings pursuant to Section 2.1, at such time as the Borrower's Credit Rating
is an Investment Grade Rating from S&P and Moody's, the Borrower may, as set
forth in this Section, request the Tranche A Banks during the Term to make
offers to make Money Market Loans to the Borrower, not to exceed, at such time,
the lesser of (i) the aggregate undrawn Tranche A Loan Commitments, less the
Letter of Credit Usage, and (ii) $350,000,000. The Tranche A Banks may, but
shall have no obligation to, make such offers and the Borrower may, but shall
have no obligation to, accept any such offers in the manner set forth in this
Section.
(b) Money Market Quote Request. When the Borrower wishes to
request offers to make Money Market Loans under this Section, it shall transmit
to the Administrative Agent by telex or facsimile transmission a notice of money
market borrowing (a "Money Market Quote Request") substantially in the form of
Exhibit D hereto so as to be received not later than 10:30 A.M. (New York City
time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing
proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business
Day next preceding the date of Borrowing proposed therein, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Tranche A Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which
shall be $10,000,000 or a larger multiple of $500,000,
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(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of Interest
Period, and
(iv) whether the Money Market Quotes requested are
to set forth a Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within thirty days (or such other number of days as the
Borrower and the Administrative Agent may agree) of any other Money Market Quote
Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt
of a Money Market Quote Request, the Administrative Agent shall send to the
Tranche A Banks by telex or facsimile transmission an Invitation for Money
Market Quotes substantially in the form of Exhibit E hereto (an "Invitation for
Money Market Quotes"), which shall constitute an invitation by the Borrower to
each Tranche A Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each
Tranche A Bank may submit a Money Market Quote containing an offer or offers to
make Money Market Loans in response to any Invitation for Money Market Quotes.
Each Money Market Quote must comply with the requirements of this subsection (d)
and must be submitted to the Administrative Agent by telex or facsimile
transmission at its offices specified in or pursuant to Section 9.1 not later
than (x) 10:00 A.M. (New York City time) on the third Euro-Dollar Business Day
prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y)
10:00 A.M. (New York City time) on the proposed date of Borrowing, in the case
of an Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective); provided that Money Market Quotes submitted by the Administrative
Agent (or any affiliate of the Administra-
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tive Agent) in the capacity of a Bank may be submitted, and may only be
submitted, if the Administrative Agent or such affiliate notifies the Borrower
of the terms of the offer or offers contained therein not later than fifteen
(15) minutes prior to the applicable deadline for the other Banks. Subject to
Articles III and VI, any Money Market Quote so made shall be irrevocable except
with the written consent of the Administrative Agent given on the instructions
of the Borrower. Such Money Market Loans may be funded by such Tranche A Bank's
Designated Lender (if any) as provided in Section 9.6(d), however such Bank
shall not be required to specify in its Money Market Quote whether such Money
Market Loans will be funded by such Designated Lender.
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit F hereto and shall in any case specify:
(1) the proposed date of Borrowing,
(2) the principal amount of the Money Market Loan
for which each such offer is being made, which principal amount (w) may
be greater than or less than the Commitment of the quoting Tranche A
Bank, (x) must be $10,000,000 or a larger multiple of $500,000, (y) may
not exceed the principal amount of Money Market Loans for which offers
were requested and (z) may be subject to an aggregate limitation as to
the principal amount of Money Market Loans for which offers being made
by such quoting Tranche A Bank may be accepted,
(3) in the case of a LIBOR Auction, the margin above
or below the applicable London Interbank Offered Rate (the "Money
Market Margin") offered for each such Money Market Loan, expressed as a
percentage (specified to the nearest 1/10,000th of 1%) to be added to
or subtracted from such base rate,
(4) in the case of an Absolute Rate Auction, the
rate of interest per annum (specified to the nearest 1/10,000th of 1%)
(the "Money Market Absolute Rate") offered for each such Money Market
Loan, and
(5) the identity of the quoting Tranche A Bank.
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A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(1) is not substantially in conformity with Exhibit F
hereto or does not specify all of the information required by
subsection (d)(ii) above;
(2) contains qualifying, conditional or
similar language;
(3) proposes terms other than or in addition to
those set forth in the applicable Invitation for Money Market Quotes;
or
(4) arrives after the time set forth in subsection
(d)(i).
(e) Notice to the Borrower. The Administrative Agent shall
promptly notify the Borrower (x) with respect to each Money Market Quote
submitted in accordance with subsection (d), of the terms of such Money Market
Quote and the identity of the Tranche A Bank submitting such Money Market Quote
and (y) of any Money Market Quote that amends, modifies or is otherwise
inconsistent with a previous Money Market Quote submitted by such Bank with
respect to the same Money Market Quote Request. Any such subsequent Money Market
Quote shall be disregarded by the Administrative Agent unless such subsequent
Money Market Quote is submitted solely to correct a manifest error in such
former Money Market Quote. The Administrative Agent's notice to the Borrower
shall specify (A) the aggregate principal amount of Money Market Loans for which
offers have been received for each Interest Period specified in the related
Money Market Quote Request, (B) the respective principal amounts and Money
Market Margins or Money Market Absolute Rates, as the case may be, so offered
and (C) if applicable, limitations on the aggregate principal amount of Money
Market Loans for which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by the Borrower. Not later than
12:00 noon (New York City time) on (x) the third Euro-Dollar Business Day prior
to the proposed date of
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Borrowing, in the case of a LIBOR Auction or (y) the pro posed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Tranche A Banks not later than
the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective), the Borrower
shall notify the Administrative Agent of its acceptance or non-acceptance of the
offers so notified to it pursuant to subsection (e). In the case of acceptance,
such notice (a "Notice of Money Market Borrowing") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money
Market Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request;
(ii) the principal amount of each Money Market
Borrowing must be $10,000,000 or a larger multiple of $500,000;
(iii) acceptance of offers may only be made on the
basis of ascending Money Market Margins or Money Market Absolute Rates,
as the case may be; and
(iv) the Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails to comply with
the requirements of this Agreement.
(g) Allocation by Administrative Agent. If offers are made by
two or more Tranche A Banks with the same Money Market Margins or Money Market
Absolute Rates, as the case may be, for a greater aggregate principal amount
than the amount in respect of which such offers are accepted for the related
Interest Period, the principal amount of Money Market Loans in respect of which
such offers are accepted shall be allocated by the Administra tive Agent among
such Tranche A Banks as nearly as possible (in multiples of $500,000, as the
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determinations by the Administra-
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tive Agent of the amounts of Money Market Loans shall be conclusive in the
absence of manifest error.
(h) Notification by Administrative Agent. Upon receipt of the
Borrower's Notice of Money Market Borrowing in accordance with Section 2.3(f)
hereof, the Administra tive Agent shall, on the date such Notice of Money Market
Borrowing is received by the Administrative Agent, notify each Tranche A Bank of
the principal amount of the Money Market Borrowing accepted by the Borrower and
of such Tranche A Bank's share (if any) of such Money Market Borrowing and such
Notice of Money Market Borrowing shall not thereafter be revocable by the
Borrower. A Tranche A Bank who is notified that it has been selected to make a
Money Market Loan may designate its Designated Lender (if any) to fund such
Money Market Loan on its behalf, as described in Section 9.6(d). Any Designated
Lender which funds a Money Market Loan shall on and after the time of such
funding become the obligee under such Money Market Loan and be entitled to
receive payment thereof when due. No Tranche A Bank shall be relieved of its
obligation to fund a Money Market Loan, and no Designated Lender shall assume
such obligation, prior to the time the applicable Money Market Loan is funded.
Section 2.4. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Committed Borrowing, the
Administrative Agent shall notify each Bank on the same day as it receives the
Notice of Committed Borrowing of the contents thereof and of such Bank's share
of such Borrowing and such Notice of Committed Borrowing shall not thereafter be
revocable by the Borrower except as may be permitted pursuant to Article VIII
hereof.
(b) Not later than 2:00 P.M. (New York City time) on the date
of each Committed Borrowing, each Bank shall make available its share of such
Committed Borrowing, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to in Section 9.1. The
Administrative Agent will make the funds so received from the Banks available to
the Borrower at the Administrative Agent's aforesaid address. If the Borrower
has requested the issuance of a Letter of Credit, no later than 12:00 Noon (New
York City time) on the date of such issuance as indicated in the notice
delivered pursuant to Section 2.2(c), the Fronting Bank shall issue
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such Letter of Credit in the amount so requested and deliver the same to the
Borrower with a copy thereof to the Administrative Agent. Immediately upon the
issuance of each Letter of Credit by the Fronting Bank, such Fronting Bank shall
be deemed to have sold and transferred to each other Tranche A Bank, and each
such other Tranche A Bank shall be deemed, and hereby agrees, to have
irrevocably and unconditionally purchased and received from the Fronting Bank,
without recourse or warranty, an undivided interest and a participation in such
Letter of Credit, any drawing thereunder, and the obligations of the Borrower
hereunder with respect thereto, and any security therefor or guaranty pertaining
thereto, in an amount equal to such Tranche A Bank's ratable share thereof
(based upon the ratio its Tranche A Loan Commitment bears to the aggregate of
all Tranche A Loan Commitments). Upon any change in any of the Tranche A Loan
Commitments in accordance herewith, there shall be an automatic adjustment to
such participations to reflect such changed shares. The Fronting Bank shall have
the primary obligation to fund any and all draws made with respect to such
Letter of Credit notwithstanding any failure of a participating Tranche A Bank
to fund its ratable share of any such draw. The Administrative Agent will
instruct the Fronting Bank to make such Letter of Credit available to the
Borrower and the Fronting Bank shall make such Letter of Credit available to the
Borrower at the Borrower's aforesaid address or at such address in the United
States as the Borrower shall request on the date of the Borrowing.
(c) Unless the Administrative Agent shall have received notice
from a Bank prior to the date of any Borrowing that such Bank will not make
available to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available to
the Administrative Agent on the date of such Borrowing in accordance with
subsection (b) of this Section 2.4 and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Administrative Agent, such Bank and the Borrower
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at
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(i) in the case of the Borrower, a rate per annum equal to the interest rate
applicable thereto pursuant to Section 2.7 and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall constitute such Bank's
Loan included in such Borrowing for purposes of this Agreement.
Section 2.5. Notes.
(a) The Loans shall be evidenced by the Notes, each of which
shall be payable to the order of each Bank for the account of its Applicable
Lending Office in an amount equal to each such Bank's respective Commitment(s).
(b) Each Bank may, by notice to the Borrower and the
Administrative Agent, request that its Tranche A Loans, Tranche B Loans, Tranche
C Loans and Tranche D Loans, respectively, of a particular type be evidenced by
a separate Note in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A-1,
A-2, A-3 or A-4 hereto, with appropriate modifications to reflect the fact that
it evidences solely Loans of the relevant type. Each reference in this Agreement
to the "Note" of such Bank shall be deemed to refer to and include any or all of
such Notes, as the context may require.
(c) Upon receipt of each Bank's Note, the Administrative Agent
shall forward such Note to such Bank. Each Bank shall record the date, amount,
type and maturity of each Loan made by it and the date and amount of each
payment of principal made by the Borrower with respect thereto, and may, if such
Bank so elects in connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to evidence
the foregoing information with respect to each such Loan then outstanding;
provided that the failure of any Bank to make any such recordation or
endorsement, or any error in such notation or endorsement, shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach to
and make a part of its Note a continuation of any such schedule as and when
required.
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(d) There shall be no more than ten (10) Euro-Dollar
Borrowings outstanding at any one time pursuant to this Agreement.
Section 2.6. Maturity of Loans. The Loans shall mature, and
the principal amount thereof shall be due and payable, on the respective
Maturity Date thereof.
Section 2.7. Interest Rates.
(a) Each Base Rate Loan with respect to each Tranche A Loan,
Tranche B Loan, Tranche C Loan or Tranche D Loan, as applicable, shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the sum of
the Applicable Margin then in effect plus the Base Rate for such day. Such
interest shall be payable for each Interest Period on the last day thereof.
(b) Each Euro-Dollar Loan with respect to each Tranche A Loan,
Tranche B Loan, Tranche C Loan or Tranche D Loan, as applicable, shall bear
interest on the outstanding principal amount thereof, for each day during the
Interest Period applicable thereto, at a rate per annum equal to the sum of the
Applicable Margin then in effect plus the Adjusted London Interbank Offered Rate
for such day.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Federal Reserve Board (or any successor) for determining the
maximum re serve requirement for a member bank of the Federal Reserve System in
New York City with deposits exceeding five billion dollars in respect of
"Eurocurrency liabilities" (or
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in respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Euro-Dollar Loans is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents). The Adjusted
London Interbank Offered Rate shall be adjusted automatically on and as of the
effective date of any change in the Euro-Dollar Reserve Percentage.
"London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in dollars are
offered to the Reference Bank in the London interbank market at approximately
11:00 a.m. (London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Euro-Dollar Loan of such Reference Bank to which such Interest Period is to
apply and for a period of time comparable to such Interest Period.
(c) Subject to Section 8.1, each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.3(f) as if the related Money Market LIBOR Loan were a Committed Loan
which is a Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted
by the Bank making such Loan in accordance with Section 2.3. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.3. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
ninety days, at intervals of ninety days after the first day thereof.
(d) In the event that, and for so long as, any Event of
Default shall have occurred and be continuing, the outstanding principal amount
of the Loans, and, to the extent permitted by law, overdue interest in respect
of all Loans, shall bear interest at the annual rate of the sum of the Base Rate
and four percent (4%).
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(e) The Administrative Agent shall determine each interest
rate applicable to the Loans hereunder. The Administrative Agent shall give
prompt notice to the Borrower and the Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(f) The Reference Bank agrees to use its best efforts to
furnish quotations to the Administrative Agent as contemplated by this Section.
If the Reference Bank does not furnish a timely quotation, the provisions of
Section 8.1 shall apply.
Section 2.8. Fees.
(a) Facility Fee. (i) During the Term, prior to the Conversion
Date and until such time as the Tranche B Loans and the Tranche C Loans shall
have been repaid in full, the Borrower shall pay to the Administrative Agent for
the account of the Banks ratably in proportion to their respective Tranche A
Loan Commitments, a facility fee on the daily average Tranche A Loan Commitments
in any given quarter at a percentage per annum equal to 0.375%.
(ii) During the Term, prior to the Conversion Date
and from and after such time as the Tranche B Loans and the Tranche C Loans
shall have been repaid in full, the Borrower shall pay to the Administrative
Agent for the account of the Banks ratably in proportion to their respective
Tranche A Loan Commitments, a facility fee on the daily average Tranche A Loan
Commitments in any given quarter at the respective percentages per annum based
upon the Borrower's Credit Rating in accordance with the following table:
Borrower's Credit Rating Applicable Facility Fee
(% per annum)
- ---------------------------------------------------- ---------------------------
BBB+/Baa1 (or better) 0.15%
BBB/Baa2 0.175%
BBB-/Baa3 0.20%
BB+/Ba1 or below or no rating 0.375%
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(iii) During the Term, prior to the Conversion Date,
the Borrower shall pay to the Administrative Agent for the account of the Banks
ratably in proportion to their respective Tranche B Loan Commitments, a facility
fee on the daily average Tranche B Loan Commitments in any given quarter at a
percentage per annum equal to 0.375%.
(iv) During the Term, prior to the Conversion Date,
the Borrower shall pay to the Administrative Agent for the account of the Banks
ratably in proportion to their respective Tranche C Loan Commitments, a facility
fee on the daily average Tranche C Loan Commitments in any given quarter at a
percentage per annum equal to 0.375%.
(v) During the Term, prior to the Conversion Date,
the Borrower shall pay to the Administrative Agent for the account of the Banks
ratably in proportion to their respective Tranche D Loan Commitments, a facility
fee on the daily average Tranche D Loan Commitments in any given quarter at a
percentage per annum equal to 0.375%.
(vi) During the Term, from and after the
Conversion Date, the Borrower shall pay to the Administra tive Agent for the
account of the Banks ratably in proportion to their respective Tranche A Loan
Commitments, Tranche B Loan Commitments, Tranche C Loan Commitments and Tranche
D Loan Commitments, in any given quarter at the respective percentages per annum
based upon the range into which the Total Debt Ratio then falls in accordance
with the following table:
Total Debt Ratio Applicable Commitment Fee
(% per annum)
- -------------------------------------------------- ----------------------------
less than 50% 0.25%
equal to or greater than 50% 0.375%
The facility fee with respect to Tranche A Loans shall be payable quarterly, in
arrears, on each January 1, April 1, July 1, and October 1, as well as on the
applicable Maturity Date, during the Term and any extensions thereof. The
facility fee with respect to Tranche B Loans, Tranche C Loans and Tranche D
Loans shall be payable on the last day of each Interest Period and, if such
Interest Period is longer than three months, at intervals of three months
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after the first day thereof, i.e. simultaneously with the payment of interest in
accordance with the provisions of Section 2.7. Any change in the Borrower's
Credit Rating or Total Debt Ratio causing it to move into a different range on
the applicable table shall effect a change in the applicable percentage per
annum effective as of the date, in the case of a change in the Credit Rating of
the Borrower, on which any of the Rating Agencies announces a change in the
Borrower's Credit Rating or the date on which the Borrower has no Credit Rating,
whichever is applicable, or in the case of a change in the Total Debt Ratio, on
which the Borrower delivers, or was required to have delivered, the certificate
pursuant to Section 5.1(c) hereof, whichever is earlier. If the Borrower shall
fail to deliver such certificate in accordance with Section 5.1(c) hereof, then
the Total Debt Ratio shall be deemed to be greater than 50%. In the event that
the Borrower's Credit Rating is such that the Rating Agencies' ratings are split
between a higher and a lower rating, the applicable percentage per annum shall
be based upon the lower of such two (2) Borrower's Credit Ratings unless such
Borrower's Credit Ratings are more than two levels apart, in which event, the
middle level shall apply (or if there shall be no middle level as a result of
the Credit Ratings being three levels apart, then the lower of the two "middle"
levels).
(b) Letter of Credit Fee. During the Term, the Borrower shall
pay to the Administrative Agent, for the account of the Tranche A Banks in
proportion to their interests in respective undrawn issued Letters of Credit, a
fee (a "Letter of Credit Fee") in an amount, provided that no Event of Default
shall have occurred and be continuing, equal to a rate per annum equal to the
Applicable Margin with respect to Tranche A Loans which are Euro-Dollar Loans on
the daily average of such issued and undrawn Letters of Credit, which fee shall
be payable, in arrears, on each January 1, April 1, July 1 and October 1 during
the Term. From the occurrence, and during the continuance, of an Event of
Default, such fee shall be increased to be equal to four percent (4%) per annum
on the daily average of such issued and undrawn Letters of Credit.
(c) Fronting Bank Fee. The Borrower shall pay any Fronting
Bank, for its own account, a fee (a "Fronting Bank Fee") equal to .15% on the
daily average of such issued and undrawn Letters of Credit, which fee shall be
in
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addition to and not in lieu of, the Letter of Credit Fee. The Fronting Bank Fee
shall be payable in arrears on each January 1, April 1, July 1 and October 1
during the Term.
(d) Extension Fee. On or before July 15, 1999, provided that
the Borrower has delivered the Notice to Extend pursuant to Section 2.9(b), the
Borrower shall pay to the Administrative Agent for the account of the Banks
ratably in proportion to their Tranche C Loan Commitments an extension fee (the
"Extension Fee") of .125% of the Tranche C Loan Commitments outstanding as of
such date.
(e) Fees Non-Refundable. All fees set forth in this Section
2.8 shall be deemed to have been earned on the date payment is due in accordance
with the provisions hereof and shall be non-refundable. The obligation of the
Borrower to pay such fees in accordance with the provisions hereof shall be
binding upon the Borrower and shall inure to the benefit of the Administrative
Agent and the Banks regardless of whether any Loans are actually made.
Section 2.9. Mandatory Termination. (a) The term (the "Term")
of the Commitments shall terminate and expire, all Loans under the respective
Tranches shall be repaid, and the Borrower shall return or cause to be re turned
all Letters of Credit to the Fronting Bank, as follows (in each case, the
"Maturity Date"):
Loan Maturity Date
---- -------------
Tranche A Loans/
Letters of Credit July 17, 2001
Tranche B Loan July 17, 1999
Tranche C Loan July 17, 1999, as the
same may be extended
as hereinafter provided
Tranche D Loan July 17, 2001
(b) The Borrower shall have one option (the "Extension
Option") to extend the Maturity Date with respect to the Tranche C Loan for a
period of six (6) months. Subject to the conditions set forth below, the
Borrower may exercise the Extension Option by delivering a written notice to the
Administrative Agent not more than four months or less than one month prior to
the Maturity Date of the Tranche C Loan (a "Notice to Extend"), stating that the
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Borrower has elected to extend the Maturity Date for six (6) months. The
Borrower's delivery of the Notice to Extend shall be irrevocable. In no event
shall the Maturity Date with respect to the Tranche C Loan occur later than
eighteen (18) months after the Closing Date. The Borrower's right to exercise
the Extension Option shall be subject to the following terms and conditions: (i)
no Event of Default shall have occurred and be continuing either on the date the
Borrower delivers the Notice to Extend to the Administrative Agent or on the
date that the Tranche C Loan would otherwise have been payable, (ii) the
Borrower shall have paid the Extension Fee, together with such amounts as are
required pursuant to Section 2.10(c) on or before the date that the Tranche C
Loan would otherwise have been payable, and (iii) the Borrower shall be in
compliance with the provisions of Section 5.8 hereof.
Section 2.10. Mandatory Prepayment.
(a) In the event that the Unsecured Debt Ratio is not
maintained in accordance with Section 5.8(e) as of the last day of a calendar
quarter, the Borrower shall prepay to the Administrative Agent, for the account
of the Banks, the Tranche A Loans, the Tranche B Loans, the Tranche C Loans or
the Tranche D Loans, in that order, in an amount sufficient to cause the
Unsecured Debt Ratio to be in compliance with the provisions of Section 5.8(e)
simultaneously with delivery of the certificate required to be delivered
pursuant to Section 5.1(c) (or if the Borrower shall fail to deliver any such
certificate, then on the date on which such certificate should have been
delivered). Failure by the Borrower to so prepay the Tranche A Loans, the
Tranche B Loans, the Tranche C Loans or the Tranche D Loans, in such order of
priority, so as to comply with the provisions of Section 5.8(e) shall be an
Event of Default.
(b) With respect to Tranche A Loans, to the extent that Net
Offering Proceeds or Net Cash Proceeds are not required pursuant to Section
2.10(d) or (e) hereof to repay Tranche B Loans or Tranche C Loans, then the
balance of any such Net Offering Proceeds and Net Cash Proceeds, net of any
amounts which the Borrower anticipates reinvesting in Real Property Assets or
other assets within ten (10) days after receipt thereof (provided, however, that
if the Borrower shall not in fact so reinvest such funds within such ten (10)
day period, the Borrower shall immediately apply the same in prepayment of the
Tranche A Loans), shall
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be applied by the Borrower, simultaneously with receipt thereof, to prepay the
Tranche A Loans. Notwithstanding the foregoing, however, in the event that the
balance of the Net Offering Proceeds and the Net Cash Proceeds shall be less
than $2,500,000 in any one case or $10,000,000 in the aggregate, then, provided
that no Event of Default shall have occurred and be outstanding, the Borrower
may retain the same.
(c) With respect to the Tranche B Loan, on or before April 15,
1999, the Borrower shall prepay the Tranche B Loans in an amount not less than
$250,000,000 in the aggregate, inclusive of all amounts paid pursuant to Section
2.10(a), (d) and Section 2.11. On or before July 15, 1999, the Borrower shall
prepay the balance of the Tranche B Loans.
(d) With respect to Tranche B Loans, the Borrower shall apply
fifty percent (50%) of all Net Offering Proceeds simultaneously with receipt
thereof to prepay the Tranche B Loans.
(e) At such time as the Tranche B Loans shall have been repaid
in full, the Borrower shall apply fifty percent (50%) of all Net Offering
Proceeds simultaneously with receipt thereof to prepay the Tranche C Loans.
(f) At such time as the Tranche C Loans shall have been repaid
in full, then the balance of any such Net Offering Proceeds and Net Cash
Proceeds, net of any amounts which the Borrower anticipates reinvesting in Real
Property Assets or other assets within ten (10) days after receipt thereof
(provided, however, that if the Borrower shall not in fact so reinvest such
funds within such ten (10) day period, the Borrower shall immediately apply the
same in prepayment of the Tranche A Loans), shall be applied by the Borrower,
simultaneously with receipt thereof, to prepay the Tranche A Loans.
Notwithstanding the foregoing, how ever, in the event that the balance of the
Net Offering Proceeds and the Net Cash Proceeds shall be less than $2,500,000 in
any one case or $10,000,000 in the aggregate, then, provided that no Event of
Default shall have occurred and be outstanding, the Borrower may retain the
same.
(g) Amounts prepaid pursuant to this Section 2.10 with respect
to Tranche A Loans may be reborrowed. Amounts prepaid pursuant to this Section
2.10 with respect
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to Tranche B Loans, Tranche C Loans and/or Tranche D Loans may not be
reborrowed.
Section 2.11. Optional Prepayments.
(a) The Borrower may, upon at least one Domestic Business
Day's notice (which notice shall specify whether the Loans so being prepaid
constitute a part of a Tranche A Loan, a Tranche B Loan, a Tranche C Loan or a
Tranche D Loan) to the Administrative Agent, prepay to the Administrative
Agent, for the account of the Banks, any Base Rate Borrowing in whole at any
time, or from time to time in part in amounts aggregating Ten Million Dollars
($10,000,000), or an integral multiple of Five Hundred Thousand Dollars
($500,000) in excess thereof or, if less, the outstanding principal balance, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Borrowing.
(b) Except as provided in Section 8.2, the Borrower may not
prepay all or any portion of the principal amount of any Euro-Dollar Loan prior
to the maturity thereof unless the Borrower shall also pay any applicable
expenses pursuant to Section 2.13. Any such prepayment shall be upon at least
three (3) Euro-Dollar Business Days' notice to the Administrative Agent. Any
notice of prepayment delivered pursuant to this Section 2.11(b) shall set forth
the amount of such prepayment which is applicable to any Loan made for working
capital purposes, as well as whether the Loans so being prepaid constitute a
part of a Tranche A Loan, a Tranche B Loan, a Tranche C Loan or a Tranche D
Loan. Each such optional prepayment shall be in the amounts set forth in Section
2.11(a) above and shall be applied to prepay ratably the Loans of the Banks
included.
(c) The Borrower may not prepay any Money Market Loan without
the consent of the respective Tranche A Bank that made such Money Market Loan.
(d) The Borrower may not prepay all or any portion of the
Tranche C Loan prior to repayment in full of the Tranche B Loan. The Borrower
may not prepay all or any part of the Tranche D Loan prior to repayment in full
of the Tranche A Loan, the Tranche B Loan and the Tranche C Loan.
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(e) The Borrower may, upon at least one (1) Domestic Business
Day's notice to the Administrative Agent (by 11:00 a.m. New York time on such
Domestic Business Day), reimburse the Administrative Agent for the benefit of
the Fronting Bank for the amount of any drawing under a Letter of Credit in
whole or in part in any amount.
(f) The Borrower may at any time return any undrawn Letter of
Credit to the Fronting Bank in whole, but not in part, and the Fronting Bank
shall give the Administrative Agent and each of the Banks notice of such
return.
(g) The Borrower may at any time and from time to time cancel
all or any part of the Tranche A Loan Commitments in amounts aggregating Ten
Million Dollars ($10,000,000), or an integral multiple of Five Hundred Thousand
Dollars ($500,000) in excess thereof, by the delivery to the Administrative
Agent and the Banks of a notice of cancellation upon at least three (3) Domestic
Business Days' notice to Administrative Agent and the Banks, whereupon, all or
such portion of the Tranche A Loan Commitments shall terminate as to the Banks,
pro rata on the date set forth in such notice of cancellation, and, if there are
any Loans then outstanding in an aggregate amount which exceeds the aggregate
Commitments (after giving effect to any such reduction), the Borrower shall
prepay to the Administrative Agent, for the account of the Banks, all or such
portion of Tranche A Loans outstanding on such date in accordance with the
requirements of Sections 2.11(a) and (b). In no event shall the Borrower be
permitted to cancel Tranche A Loan Commitments for which a Letter of Credit has
been issued and is outstanding unless the Borrower returns (or causes to be
returned) such Letter of Credit to the Fronting Bank. The Borrower shall be
permitted to designate in its notice of cancellation which Loans, if any, are
to be prepaid.
(h) Upon receipt of a notice of prepayment or cancellation or
a return of a Letter of Credit pursuant to this Section, the Administrative
Agent shall promptly, and in any event within one (1) Domestic Business Day,
notify each Bank of the contents thereof and of such Bank's rat able share (if
any) of such prepayment or cancellation and such notice shall not thereafter be
revocable by the Borrower.
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(i) Any amounts so prepaid pursuant to this Section 2.11 with
respect to Tranche A Loans may be reborrowed subject to the other terms of this
Agreement. Any amounts so prepaid pursuant to this Section 2.11 with respect to
Tranche B Loans, the Tranche C Loans or the Tranche D Loans may not be
reborrowed subject to the other terms of this Agreement. In the event that the
Borrower elects to cancel all or any portion of the Tranche A Loan Commitments
pursuant to Section 2.11(g) hereof, such amounts may not be reborrowed.
Section 2.12. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of, and
interest on, the Loans and of fees here under, without deduction, setoff or
counterclaim, not later than 12:00 Noon (New York City time) on the date when
due, in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to in Section 9.1. Payments
received by the Administrative Agent after such time shall be deemed to have
been received on the next Domestic Business Day. The Administrative Agent will
distribute to each Bank its ratable share of each such payment received by the
Administrative Agent for the account of the Banks on the same day as received by
the Administrative Agent if received by the Administrative Agent by 1:00 p.m.
(New York City time), or, if received by the Administrative Agent after 1:00
p.m. (New York City time), on the immediately following Domestic Business Day.
If the Administrative Agent shall fail to distribute to a Bank its ratable share
of a payment on the same day it is received or the immediately following
Domestic Business Day, as applicable in accordance with the immediately
preceding sentence, the Administrative Agent shall pay to such Bank the interest
accrued on such payment at the Federal Funds Rate, commencing on the day the
Administra tive Agent should have made the payment to such Bank and ending on
the day prior to the date payment is actually made. Whenever any payment of
principal of, or interest on, the Base Rate Loans or of fees shall be due on a
day which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding
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Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.
(b) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each Bank shall repay to the
Administra tive Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Administrative Agent, at the Federal Funds Rate.
Section 2.13. Funding Losses. If the Borrower makes any
payment of principal with respect to any Euro-Dollar Loan (pursuant to Article
II, VI or VIII or other wise, and specifically including any payments made
pursuant to Sections 2.10 or 2.11) on any day other than the last day of the
Interest Period applicable thereto, or if the Borrower fails to borrow any
Euro-Dollar Loans or convert any Base Rate Loan into a Euro-Dollar Loan, after
notice has been given to any Bank in accordance with Section 2.4(a), the
Borrower shall reimburse each Bank within 15 days after demand for any resulting
loss or expense incurred by it (or by an existing Participant in the related
Loan; provided that no Participant shall be entitled to receive more than the
Bank with respect to which such Participant is a Participant would be entitled
to receive under this Section 2.13), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or failure to
borrow, provided that such Bank shall have delivered to the Borrower a
certificate as to the amount of such loss or expense and the calculation
thereof, which certificate shall be conclusive in the absence of manifest error.
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Section 2.14. Computation of Interest and Fees. Interest
based on the Base Rate hereunder shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
Section 2.15. Method of Electing Interest Rates.
(a) The Loans included in each Borrowing shall bear interest
initially at the type of rate specified by the Borrower in the applicable Notice
of Committed Borrowing. Thereafter, the Borrower may from time to time elect to
change or continue the type of interest rate borne by each Group of Loans
(subject in each case to the provisions of Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower
may elect to convert such Loans to Euro-Dollar Loans as of any
Euro-Dollar Business Day;
(ii) if such Loans are Euro-Dollar Loans, the
Borrower may elect to convert such Loans to Base Rate Loans or elect to
continue such Loans as Euro-Dollar Loans for an additional Interest
Period, in each case effective on the last day of the then cur rent
Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent at least three (3) Euro-Dollar
Business Days before the conversion or continuation selected in such notice is
to be effective (unless the relevant Loans are to be continued as Base Rate
Loans, in which case such notice shall be delivered to the Administrative Agent
no later than 12:00 Noon (New York City time) at least one (1) Domestic Business
Day before such continuation is to be effective). A Notice of Interest Rate
Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group of Loans, (ii) the
portion to which
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such notice applies, and the remaining portion to which it does not apply, are
each $10,000,000 or any larger multiple of $500,000, (iii) there shall be no
more than ten (10) Borrowings comprised of Euro-Dollar Loans outstanding at any
time under this Agreement, (iv) no Loan may be continued as, or converted into,
a Euro-Dollar Loan when any Event of Default has occurred and is continuing, and
(v) no Interest Period shall extend beyond the Maturity Date.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion
thereof) to which such notice applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply with
the applicable clause of subsection (a) above;
(iii) if the Loans comprising such Group of Loans are
to be converted, the new type of Loans and, if such new Loans are
Euro-Dollar Loans, the duration of the initial Interest Period
applicable thereto; and
(iv) if such Loans are to be continued as
Euro-Dollar Loans for an additional Interest Period, the duration of
such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from
the Borrower pursuant to subsection (a) above, the Administrative Agent shall
notify each Bank on the same day as it receives such Notice of Interest Rate
Election of the contents thereof and such notice shall not thereafter be
revocable by the Borrower. If the Borrower fails to deliver a timely Notice of
Interest Rate Election to the Administrative Agent for any Group of Loans that
are Euro-Dollar Loans, such Loans shall be converted into Base Rate Loans on the
last day of the then current Interest Period applicable thereto.
Section 2.16. Letters of Credit. (a) Subject to the terms
contained in this Agreement and the other Loan
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Documents, upon the receipt of a notice in accordance with Section 2.2(c)
requesting the issuance of a Letter of Credit, the Fronting Bank shall issue a
Letter of Credit or Letters of Credit in such form as is reasonably acceptable
to the Borrower in an amount or amounts equal to the amount or amounts requested
by the Borrower.
(b) Each Letter of Credit shall be issued in the minimum
amount of Two Hundred Fifty Thousand Dollars ($250,000).
(c) The Letter of Credit Usage shall be no more than Two
Hundred Million Dollars ($200,000,000) at any one time.
(d) No Letter of Credit shall be issued, if, after giving
effect to the issuance thereof, the sum of the Tranche A Loans, the Letter of
Credit Usage and the Money Market Loans then outstanding would exceed the
aggregate Tranche A Loan Commitments then in effect.
(e) There shall be no more than forty (40) Letters of Credit
outstanding at any one time.
(f) In the event of any request for a drawing under any Letter
of Credit by the beneficiary thereunder, the Fronting Bank shall endeavor to
notify the Borrower and the Administrative Agent (and the Administrative Agent
shall endeavor to notify each Bank thereof) on or before the date on which the
Fronting Bank intends to honor such drawing, and, except as provided in this
subsection (f), the Borrower shall reimburse the Fronting Bank, in immediately
available funds, on the same day on which such drawing is honored in an amount
equal to the amount of such drawing. Notwithstanding anything contained herein
to the contrary, however, unless the Borrower shall have notified the
Administrative Agent, and the Fronting Bank prior to 11:00 a.m. (New York time)
on the Domestic Business Day immediately prior to the date of such drawing that
the Borrower intends to reimburse the Fronting Bank for the amount of such
drawing with funds other than the proceeds of the Loans, the Borrower shall be
deemed to have timely given a Notice of Committed Borrowing pursuant to Section
2.2 to the Administrative Agent, requesting a Borrowing of Tranche A Loans as
Base Rate Loans on the date on which such drawing is honored and in an amount
equal to the amount of such drawing. If the Borrower shall so notify
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the Administrative Agent and the Fronting Bank that the Borrower intends to
reimburse the Fronting Bank for the amount of such drawing with funds other than
the proceeds of the Loans, and the Borrower shall fail to so reimburse the
Fronting Bank, then the Borrower shall be deemed to have timely given a Notice
of Committed Borrowing pursuant to Section 2.2 to the Administrative Agent,
requesting a Borrowing of Tranche A Loans as Base Rate Loans on the date
immediately succeeding the date on which the Borrower should have reimbursed the
Fronting Bank. Each Tranche A Bank (other than the Fronting Bank) shall, in
accordance with Section 2.4(b), make available its share of such Borrowing to
the Administrative Agent, the proceeds of which shall be applied directly by the
Administrative Agent to reimburse the Fronting Bank for the amount of such draw.
In the event that any such Tranche A Bank fails to make available to the
Fronting Bank the amount of such Bank's participation on the date of a drawing,
the Fronting Bank shall be entitled to recover such amount on demand from such
Tranche A Bank together with interest at the Federal Funds Rate commencing on
the date such drawing is honored.
(g) If, after the date hereof, any change in any law or
regulation or in the interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof shall either (i)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against letters of credit issued by, or assets held by, or deposits
in or for the account of, or participations in any letter of credit, upon any
Bank (including the Fronting Bank) or (ii) impose on any Bank any other
condition regarding this Agreement or such Bank (including the Fronting Bank) as
it pertains to the Letters of Credit or any participation therein and the result
of any event referred to in the preceding clause (i) or (ii) shall be to
increase, by an amount reasonably deemed by the Fronting Bank or such Bank to be
material, the cost to the Fronting Bank or any Bank of issuing or maintaining
any Letter of Credit or participating therein then the Borrower shall pay to the
Fronting Bank or such Bank, within 15 days after written demand by such Bank
(with a copy to the Administrative Agent), which demand shall be accompanied by
a certificate showing, in reasonable detail, the calculation of such amount or
amounts, such additional amounts as shall be required to compensate the Fronting
Bank or such Bank for such increased costs or reduction in amounts received or
receivable hereunder. The certificate required
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to be delivered pursuant to this Section 2.16(g) shall, absent manifest error,
be final and conclusive and binding on the Borrower.
(h) The Borrower hereby agrees to protect, indemnify, pay and
save the Fronting Bank harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees and disbursements) which the Fronting Bank may incur or be
subject to as a result of (i) the issuance of the Letters of Credit, other than
as a result of the gross negligence or wilful misconduct of the Fronting Bank or
(ii) the failure of the Fronting Bank to honor a drawing under any Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental Authority
(collectively, "Governmental Acts"), other than as a result of the gross
negligence or wilful misconduct of the Fronting Bank. As between the Borrower
and the Fronting Bank, the Borrower assumes all risks of the acts and omissions
of, or misuses of, the Letters of Credit issued by the Fronting Bank, by the
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, the Fronting Bank shall not be responsible (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
such Letters of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or insufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) for failure of the beneficiary
of any such Letter of Credit to comply fully with conditions required in order
to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any message, by mail, cable, telegraph,
telex, facsimile transmission, or otherwise; (v) for errors in interpretation of
any technical terms; (vi) for any loss or delay in the transmission or otherwise
of any documents required in order to make a drawing under any such Letter of
Credit or of the proceeds thereof; (vii) for the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of such Letter of
Credit; and (viii)
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for any consequence arising from causes beyond the control of the Fronting Bank,
including any Government Acts, in each case other than as a result of the gross
negligence or willful misconduct of the Fronting Bank. None of the above shall
affect, impair or prevent the vesting of the Fronting Bank's rights and powers
hereunder. In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Fronting
Bank under or in connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in good faith, shall not put the
Fronting Bank under any resulting liability to the Borrower.
(i) If the Fronting Bank or the Administrative Agent is
required at any time, pursuant to any bankruptcy, insolvency, liquidation or
reorganization law or otherwise, to return to the Borrower any reimbursement by
the Borrower of any drawing under any Letter of Credit, each Bank shall pay to
the Fronting Bank or the Administrative Agent, as the case may be, its share of
such payment, but without interest thereon unless the Fronting Bank or the
Administrative Agent is required to pay interest on such amounts to the person
recovering such payment, in which case with interest thereon, computed at the
same rate, and on the same basis, as the interest that the Fronting Bank or the
Administrative Agent is required to pay.
Section 2.17. Letter of Credit Usage Absolute. The
obligations of the Borrower under this Agreement in respect of any Letter of
Credit shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement (as the same may be amended from
time to time) and any Letter of Credit Documents (as hereinafter defined) under
all circumstances, including, without limitation, to the extent permitted by
law, the following circumstances:
(a) any lack of validity or enforceability of any Letter of
Credit or any other agreement or instrument relating thereto (collectively, the
"Letter of Credit Documents") or any Loan Document;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Borrower in respect
of the Letters of Credit or any other amendment or waiver of or any consent by
the Borrower to departure from all or any of the Letter
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of Credit Documents or any Loan Document; provided, that the Fronting Bank shall
not consent to any such change or amendment unless previously consented to in
writing by the Borrower;
(c) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the obligations of the Borrower in respect of the
Letters of Credit;
(d) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such beneficiary
or any such transferee may be acting), the Administrative Agent, the Fronting
Bank or any Bank (other than a defense based on the gross negligence or wilful
misconduct of the Administrative Agent, the Fronting Bank or such Bank) or any
other Person, whether in connection with the Loan Documents, the transactions
contemplated hereby or by the Letters of Credit Documents or any unrelated
transaction;
(e) any draft or any other document presented under or in
connection with any Letter of Credit or other Loan Document proving to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; provided, that payment by the
Fronting Bank under such Letter of Credit against presentation of such draft or
document shall not have constituted gross negligence or wilful misconduct of the
Fronting Bank;
(f) payment by the Fronting Bank against presentation of a
draft or certificate that does not comply with the terms of the Letter of
Credit; provided, that such payment shall not have constituted gross negligence
or wilful misconduct of the Fronting Bank; and
(g) any other circumstance or happening whatsoever other than
the payment in full of all obligations hereunder in respect of any Letter of
Credit or any agreement or instrument relating to any Letter of Credit, whether
or not similar to any of the foregoing, that might otherwise constitute a
defense available to, or a discharge of, the Borrower; provided, that such other
circumstance or happening shall not have been the result of gross negligence or
wilful misconduct of the Fronting Bank.
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ARTICLE III
CONDITIONS
Section 3.1. Closing. The closing hereunder shall occur on
the date (the "Closing Date") when each of the following conditions is satisfied
(or waived by the Administrative Agent, such waiver to be evidenced by the
continuation or funding after the date hereof of Loans and notice of such waiver
to be given to the Banks by the Administrative Agent), each document to be dated
the Closing Date unless otherwise indicated:
(a) the Borrower shall have executed and delivered to the
Administrative Agent a Tranche A Note, a Tranche B Note, a Tranche C Note and a
Tranche D Note for the account of each Bank dated on or before the Closing Date
complying with the provisions of Section 2.5;
(b) the Borrower shall have executed and delivered to the
Administrative Agent a duly executed original of this Agreement;
(c) MOC shall have executed and delivered to the
Administrative Agent a duly executed original of the Guaranty;
(d) the Administrative Agent shall have received an opinion of
Nutter, McClennen & Fish, LLP and Cravath, Swaine & Moore, counsel for the
Borrower and MOC, accept able to the Administrative Agent, the Banks and their
counsel;
(e) the Administrative Agent shall have received all documents
the Administrative Agent may reasonably request relating to the existence of the
Borrower, MOC, the authority for and the validity of this Agreement and the
other Loan Documents, and any other matters relevant hereto, all in form and
substance reasonably satisfactory to the Administrative Agent. Such
documentation shall include, without limitation, the certificate of
incorporation and by-laws of the Borrower and MOC, as amended, modified or
supplemented to the Closing Date, each certi-
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fied to be true, correct and complete by an officer of the Borrower or MOC as of
a date not more than forty-five (45) days prior to the Closing Date, together
with a good standing certificate from the Secretary of State (or the equivalent
thereof) of the State of Delaware with respect to the Borrower and of the State
of Delaware with respect to MOC, and a good standing certificate from the
Secretary of State (or the equivalent thereof) of each other State in which the
Borrower and MOC is required to be qualified to trans act business unless the
failure to qualify would not have a Material Adverse Effect, each to be dated
not more than forty-five (45) days prior to the Closing Date;
(f) the Administrative Agent shall have received all
certificates, agreements and other documents and papers referred to in this
Section 3.1 and Section 3.2, unless otherwise specified, in sufficient
counterparts, satisfactory in form and substance to the Administrative Agent in
its sole discretion;
(g) the Borrower and MOC shall have taken all actions required
to authorize the execution and delivery of this Agreement and the other Loan
Documents and the performance thereof by the Borrower and MOC;
(h) the Administrative Agent and each Bank shall have received
an unaudited combined consolidated balance sheet and income statement of the
Borrower for the fiscal quarter ended March 31, 1998;
(i) the Administrative Agent shall be satisfied that neither
the Borrower nor MOC is subject to any present or contingent environmental
liability which could reason ably be expected to have a Material Adverse Effect;
(j) the Administrative Agent shall have received wire transfer
instructions in connection with the Loans to be made on the Closing Date;
(k) the Administrative Agent shall have received, for its and
any other Bank's account, all fees due and payable pursuant to Section 2.8
hereof on or before the Closing Date, and the reasonable fees and expenses
accrued through the Closing Date of Skadden, Arps, Slate, Meagher & Flom LLP,
and the Fronting Banks under the Existing Letters of Credit shall have received
all fees thereunder accrued through the Closing Date;
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(l) the Administrative Agent shall have received copies of all
consents, licenses and approvals, if any, required in connection with the
execution, delivery and performance by the Borrower, and the validity and
enforceability against the Borrower, of the Loan Documents, or in connection
with any of the transactions contemplated thereby to occur on or prior to the
Closing Date, and such consents, licenses and approvals shall be in full force
and effect;
(m) the representations and warranties of the Borrower
contained in this Agreement shall be true and correct in all material respects
on and as of the Closing Date both before and after giving effect to the making
of any Loans;
(n) receipt by the Administrative Agent and the Banks of a
certificate of an officer of the Borrower certifying that the Borrower is in
compliance with all covenants of the Borrower contained in this Agreement,
including, without limitation, the requirements of Section 5.8, as of the
Closing Date;
(o) the Borrower shall intend to continue to qualify as a real
estate investment trust under the Internal Revenue Code;
(p) the Existing Credit Agreements shall have been terminated
and all amounts outstanding thereunder repaid in full; and
(q) the Borrower shall have completed its acquisition of
La Quinta Inns, Inc. and shall not have waived any material condition to the
closing thereof.
The Administrative Agent shall promptly notify the Borrower and the Banks of the
Closing Date, and such notice shall be conclusive and binding on all parties
hereto.
Section 3.2. Borrowings. The obligation of any Bank to make
a Loan on the occasion of any Borrowing or to participate in any Letter of
Credit issued by the Fronting Bank and the obligation of the Fronting Bank to
issue a Letter of Credit on the occasion of any Borrowing is subject to the
satisfaction of the following conditions:
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(a) the Closing Date shall have occurred on or prior to July
31, 1998;
(b) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.2 or 2.3;
(c) immediately after such Borrowing, the Out standing Balance
will not exceed the aggregate amount of the Commitments and with respect to each
Bank, such Bank's pro rata portion of the Committed Loans and Letter of Credit
Usage will not exceed such Bank's Commitment;
(d) immediately before and after such Borrowing, no monetary
Default or any Event of Default shall have occurred and be continuing both
before and after giving effect to the making of such Loans;
(e) the representations and warranties of the Borrower
contained in this Agreement (other than representations and warranties which
speak as of a specific date) shall be true and correct in all material respects
on and as of the date of such Borrowing both before and after giving effect to
the making of such Loans;
(f) no law or regulation shall have been adopted, no order,
judgment or decree of any Governmental Authority shall have been issued, and no
litigation shall be pending or threatened, which does or, with respect to any
threatened litigation, seeks to enjoin, prohibit or restrain, the making or
repayment of the Loans, the issuance of any Letter of Credit or any
participations therein or the consummation of the transactions contemplated
hereby; and
(g) no event, act or condition shall have occurred after the
Closing Date which, in the reasonable judgment of the Administrative Agent or
the Required Banks holding Tranche A Loans, as the case may be, has had or is
likely to have a Material Adverse Effect.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(c) through (g) of this Section (except that with respect to clause (f), such
representation and warranty shall be deemed to be limited to laws, regulations,
orders, judgments, decrees
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and litigation affecting the Borrower and not solely the Banks).
Section 3.3. Security Conversion. (a) If as of the last day
of any fiscal quarter from and after April 30, 1999, the Total Debt Ratio shall
be greater than 57.5% (any such date being the "Conversion Date"), the Borrower
shall promptly deliver (the "Security Conversion") to the Administrative Agent,
mortgages and/or deeds of trust (collectively, the "Mortgages"), together with
assignments of leases and rents; UCC-1 financing statements; pledges of stock,
partnership, membership or other equity interests in Subsidiaries and Minority
Holdings (with respect to whose assets the Borrower is unable to deliver
Mortgages); pledges of Healthcare Mortgages and other mortgage loans and loans,
and any other documents that the Administrative Agent may reasonably require,
and take such steps as the Administrative Agent may reasonably require in order
to perfect its security interest in the applicable asset, in recordable form
where applicable and all in form and substance reasonably acceptable to the
Administrative Agent (collectively, the "Security Documents"), executed by the
Borrower or the applicable Consolidated Subsidiary. The Mortgages shall create,
and upon recording shall perfect, a first priority Lien on each of the
Unencumbered Asset Pool Properties, as well as a second priority Lien on each
other Real Property Asset of the Borrower and its Consolidated Subsidiaries, to
the extent permitted by any existing first mortgage Liens thereon, it being
recognized that any such Security Documents shall secure, on a pari passu equal
and ratable basis, all Unsecured Debt of the Borrower. The Mortgages shall
secure the Notes, except that in those states where a tax is imposed on the
recording of a mortgage, the Mortgages shall be limited to an amount equal to
100% of the fair market value of the applicable Real Property Asset. Failure by
the Borrower to promptly deliver all Security Documents together with all other
items required pursuant to this Section 3.3 or to pay any amounts required to be
paid in connection therewith shall be an Event of Default.
(b) In the event the Security Conversion occurs and the
Borrower delivers the Security Documents, the Administrative Agent shall cause
all of the Security Documents to be recorded and/or filed in the appropriate
offices, as security for the Loans, at the Borrower's sole cost and expense. The
Borrower also shall cause to be
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delivered to the Administrative Agent, at the Borrower's sole cost and expense,
title reports (but not title policies) with respect to each Real Property
Asset. The Borrower will cause the applicable Consolidated Subsidiaries to
execute such further instruments and documents and perform such further acts as
the Administrative Agent shall reasonably request to carry out the creation and
perfection of the liens and security interests contemplated by the Security
Documents. In the event that the Borrower does not pay in full any recording or
other fees or taxes in connection with the Security Conversion, the
Administrative Agent may proceed to pay the same on behalf of the Borrower, and
the Borrower's failure to reimburse the same within five (5) Domestic Business
Days after demand, together with interest thereon at the rate specified in
Section 2.7(d), shall constitute an Event of Default.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and each of the
other Banks which may become a party to this Agreement to make the Loans, the
Borrower makes the following representations and warranties as of the date
hereof. Such representations and warranties shall survive the effectiveness of
this Agreement, the execution and delivery of the other Loan Documents and the
making of the Loans.
Section 4.1. Existence and Power. The Borrower is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Delaware and has all powers and all material governmental
licenses, authorizations, consents and approvals required to own its property
and assets and carry on its business as now conducted or as it presently
proposes to conduct and has been duly qualified and is in good standing in every
jurisdiction in which the failure to be so qualified and/or in good standing is
likely to have a Material Adverse Effect.
Section 4.2. Power and Authority. The Borrower has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of each of the Loan Documents to which it is a party and has taken
all necessary action to authorize the execution and delivery on behalf of the
Borrower and the performance by the Borrower
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of such Loan Documents. The Borrower has duly executed and delivered each Loan
Document to which it is a party, and each such Loan Document constitutes the
legal, valid and binding obligation of the Borrower, enforceable in accordance
with its terms, except as enforceability may be limited by applicable
insolvency, bankruptcy or other laws affecting creditors rights generally, or
general principles of equity, whether such enforceability is considered in a
proceeding in equity or at law.
Section 4.3. No Violation. Neither the execution, delivery
or performance by or on behalf of the Borrower of the Loan Documents, nor
compliance by the Borrower with the terms and provisions thereof nor the
consummation of the transactions contemplated by the Loan Documents, (i) will
contravene any applicable provision of any law, statute, rule, regulation,
order, writ, injunction or decree of any court or governmental instrumentality
applicable to the Borrower or (ii) will conflict with or result in any breach
of, any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Borrower
pursuant to the terms of any material indenture, mortgage, deed of trust, or
other agreement or other instrument to which the Borrower (or of any
partnership of which the Borrower is a partner) is a party or by which it or any
of its property or assets is bound or to which it is subject or (iii) will cause
a default by the Borrower under any organizational document of any Subsidiary,
or cause a default under MOC's certificate of incorporation or by-laws, and
which, in any case set forth in clauses (i), (ii) or (iii), could result in a
Material Adverse Effect.
Section 4.4. Financial Information.
(a) The unaudited combined consolidated balance sheets of the
Borrower and MOC as of March 31, 1998, delivered to the Administrative Agent
fairly presents, in conformity with GAAP, the combined consolidated financial
position of the Borrower and MOC as of such date and their combined consolidated
results of operations for such fiscal period.
(b) Since March 31, 1998, (i) there has been no material
adverse change in the business, financial position or results of operations of
the Borrower or MOC and (ii)
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except as previously disclosed to the Administrative Agent, neither the Borrower
nor MOC has incurred any material indebtedness or guaranty.
Section 4.5. Litigation.
(a) There is no action, suit or proceeding pending against, or
to the knowledge of the Borrower, threatened against or affecting, (i) the
Borrower, MOC or any of their Subsidiaries, (ii) the Loan Documents or any of
the transactions contemplated by the Loan Documents or (iii) any of their
assets, in any case before any court or arbitrator or any governmental body,
agency or official, which in any case set forth in clauses (i) or (ii) could
reasonably be expected to have a Material Adverse Effect or which in any manner
draws into question the validity of this Agreement or the other Loan Documents.
(b) There are no final nonappealable judgments or decrees in
an aggregate amount of Ten Million Dollars ($10,000,000) or more entered by a
court or courts of competent jurisdiction against the Borrower or MOC (other
than any judgment as to which, and only to the extent, a reputable insurance
company has acknowledged coverage of such claim in writing).
Section 4.6. Compliance with ERISA.
(a) Except as previously disclosed to the Administrative
Agent and the Banks in writing, each member of the ERISA Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Internal
Revenue Code with respect to each Plan maintained and/or contributed to by such
member, and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan. No member of the ERISA Group has at any time during the three-year
period prior to the date of this Agreement (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect of
any Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan if and as required by the terms of such Plan or in respect of
any Benefit Arrangement if and as required by the terms of such Benefit
Arrangement, (iii) adopted any amendment to any Plan or Benefit Arrangement,
which has resulted or is likely to result in the imposition of a Lien or the
posting of a bond or other security under ERISA or the Internal Revenue Code or
(iv)
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incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
(b) Except for each "employee benefit plan" (as such term is
defined in Section 3(3) of ERISA) that is maintained, or contributed to, by one
or more members of the ERISA Group, no member of the ERISA Group is a "party in
interest" (as such term is defined in Section 3(14) of ERISA or a "disqualified
person" (as such term is defined in Section 4975(e)(2) of the Internal Revenue
Code) with respect to any funded employee benefit plan and none of the assets of
any such plans have been invested in a manner that would cause the transactions
contemplated by the Loan Documents to constitute a "prohibited transaction" (as
such term is defined in Section 4975(a)(2) of the Internal Revenue Code or
Section 406 of ERISA) unless such transaction is subject to an exemption
established by or in accordance with Section 4975 of the Internal Revenue Code
and/or Section 408 of ERISA and/or regulations promulgated there under.
Section 4.7. Environmental Compliance. To the best of the
Borrower's knowledge, except as set forth in the Phase I environmental report(s)
made available to the Administrative Agent with respect to each of the
Unencumbered Asset Pool Properties (as supplemented or amended, the
"Environmental Reports"), (i) there are in effect all Environmental Approvals
which are required to be obtained under all Environmental Laws with respect to
the Real Property Assets, except for such Environmental Approvals the absence of
which would not have a Material Adverse Effect, (ii) the Borrower is in
compliance in all material respects with the terms and conditions of all such
Environmental Approvals, and is also in compliance in all material respects
with all other Environmental Laws or any plan, order, decree, judgment,
injunction, notice or demand letter issued, entered or approved thereunder,
except to the extent failure to comply would not have a Material Adverse Effect.
Except as set forth in the Environmental Reports or otherwise
disclosed to the Administrative Agent and the Banks in writing as of the Closing
Date, to the Borrower's actual knowledge:
(i) There are no Environmental Claims or
investigations pending or threatened by any Governmen-
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tal Authority with respect to any alleged failure by the Borrower to
have any Environmental Approval required in connection with the
conduct of the business of the Borrower on any of the Unencumbered
Asset Pool Properties, or with respect to any generation, treatment,
storage, recycling, transportation, Release or disposal of any Material
of Environmental Concern generated by the Borrower or any lessee on any
of the Unencumbered Asset Pool Properties that may reasonably be
expected to have a Material Adverse Effect;
(ii) No Material of Environmental Concern has been
Released at the Unencumbered Asset Pool Property to an extent that it
may reasonably be expected to have a Material Adverse Effect;
(iii) No PCB (in amounts or concentrations which
exceed those set by applicable Environmental Laws) is present at any of
the Unencumbered Asset Pool Properties;
(iv) No friable asbestos is present at any of the
Unencumbered Asset Pool Properties which may reasonably be expected to
have a Material Adverse Effect;
(v) There are no underground storage tanks for
Material of Environmental Concern, active or abandoned, at any of the
Unencumbered Asset Pool Proper ties which may reasonably be expected to
have a Material Adverse Effect;
(vi) No Environmental Claims have been filed with a
Governmental Authority with respect to any of the Unencumbered Asset
Pool Properties, and none of the Unencumbered Asset Pool Properties is
listed or proposed for listing on the National Priority List
promulgated pursuant to CERCLA, on CERCLIS or on any similar state list
of sites requiring investigation or clean-up which may reasonably be
expected to have a Material Adverse Effect;
(vii) There are no Liens arising under or pursuant to
any Environmental Laws on any of the Unencumbered Asset Pool
Properties, and no government
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actions have been taken or are in process which could subject any of
the Unencumbered Asset Pool Properties to such Liens; and
(viii) There have been no environmental
investigations, studies, audits, tests, reviews or other analyses
conducted by, or which are in the possession of, the Borrower in
relation to any of the Unencumbered Asset Pool Properties which have
not been made available to the Administrative Agent.
Section 4.8. Taxes. The initial tax year of the Borrower for
federal income tax purposes was 1980. The federal income tax returns of the
Borrower and its Consolidated Subsidiaries for the fiscal year ended December
31, 1996 have been filed. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary except those being contested in good faith. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
or other governmental charges are, in the opinion of the Borrower, adequate.
Section 4.9. Full Disclosure. All information heretofore
furnished by the Borrower to the Administrative Agent or any Bank for purposes
of or in connection with this Agreement or any transaction contemplated hereby
is true and accurate in all material respects on the date as of which such
information is stated or certified. The Borrower has disclosed to the Banks in
writing any and all facts known to the Borrower which materially and adversely
affect or are likely to materially and adversely affect (to the extent the
Borrower can now reasonably foresee), the business, operations or financial
condition of the Borrower considered as one enterprise or the ability of the
Borrower to perform its obligations under this Agreement or the other Loan
Documents.
Section 4.10. Solvency. On the Closing Date and after giving
effect to the transactions contemplated by the Loan Documents occurring on the
Closing Date, the Borrower is Solvent.
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Section 4.11. Use of Proceeds; Margin Regulations. All
proceeds of the Loans will be used by the Borrower only in accordance with the
provisions hereof. No part of the proceeds of any Loan will be used by the
Borrower to purchase or carry any Margin Stock or to extend credit to others for
the purpose of purchasing or carrying any Margin Stock. Neither the making of
any Loan nor the use of the proceeds thereof will violate or be inconsistent
with the provisions of Regulations T, U or X of the Federal Reserve Board.
Section 4.12. Governmental Approvals. No order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is required
in connection with the execution, delivery and performance of any Loan Document
or the consummation of any of the transactions contemplated thereby other than
those that have already been duly made or obtained and remain in full force and
effect.
Section 4.13. Investment Company Act; Public Utility Holding
Company Act. The Borrower is not (x) an "investment company" or a company
"controlled" by an "in vestment company", within the meaning of the Investment
Company Act of 1940, as amended, (y) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of either a "holding company"
or a "subsidiary company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or (z) subject to any other federal or state
law or regulation which purports to restrict or regulate its ability to borrow
money.
Section 4.14. Closing Date Transactions. On the Closing Date
and immediately prior to or concurrently with the making of the Loans, the
transactions (other than the making of the Loans) intended to be consummated on
the Closing Date will have been consummated in accordance with all applicable
laws. On or prior to the Closing Date, all consents and approvals of, and
filings and registrations with, and all other actions by, any Person required in
order to make or consummate such transactions have been
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obtained, given, filed or taken and are in full force and effect.
Section 4.15. Representations and Warranties in Loan
Documents. All representations and warranties made by the Borrower in the Loan
Documents are true and correct in all material respects.
Section 4.16. Patents, Trademarks, etc. The Borrower has
obtained and holds in full force and effect all patents, trademarks, service
marks, trade names, copy rights and other such rights, free from burdensome
restrictions, which are necessary for the operation of its business as
presently conducted, the impairment of which is likely to have a Material
Adverse Effect. To the Borrower's knowledge, no material product, process,
method, substance, part or other material presently sold by or employed by the
Borrower in connection with such business infringes any patent, trademark,
service mark, trade name, copyright, license or other such right owned by any
other Person. There is not pending or, to the Borrower's knowledge, threatened
any claim or litigation against or affecting the Borrower contesting its right
to sell or use any such product, process, method, substance, part or other
material.
Section 4.17. No Default. No Default or Event of Default
exists under or with respect to any Loan Document. The Borrower is not in
default in any material respect beyond any applicable grace period under or with
respect to any other material agreement, instrument or undertaking to which it
is a party or by which it or any of its property is bound in any respect, the
existence of which default is likely (to the extent that the Borrower can now
reasonably foresee) to result in a Material Adverse Effect.
Section 4.18. Licenses, etc. The Borrower has obtained and
holds in full force and effect, all franchises, licenses, permits,
certificates, authorizations, qualifications, accreditations, easements, rights
of way and other consents and approvals which are necessary for the operation of
its businesses as presently conducted, the absence of which is likely (to the
extent that the Borrower can now reasonably foresee) to have a Material Adverse
Effect.
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Section 4.19. Compliance With Law. The Borrower is in
compliance with all laws, rules, regulations, orders, judgments, writs and
decrees, including, without limitation, all building and zoning ordinances and
codes, the failure to comply with which is likely (to the extent that the
Borrower can now reasonably foresee) to have a Material Adverse Effect.
Section 4.20. No Burdensome Restrictions. The Borrower is not
a party to any agreement or instrument or subject to any other obligation or any
charter or corporate or partnership restriction, as the case may be, which,
individually or in the aggregate, is likely (to the extent that the Borrower can
now reasonably foresee) to have a Material Adverse Effect.
Section 4.21. Brokers' Fees. The Borrower has not dealt with
any broker or finder with respect to the transactions contemplated by the Loan
Documents or other wise in connection with this Agreement, and the Borrower has
not done any acts, had any negotiations or conversation, or made any agreements
or promises which will in any way create or give rise to any obligation or
liability for the payment by the Borrower of any brokerage fee, charge,
commission or other compensation to any party with respect to the transactions
contemplated by the Loan Documents, other than the fees payable hereunder.
Section 4.22. Labor Matters. Except as set forth on Schedule
4.22 attached hereto and made a part hereof, there are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Borrower and the
Borrower has not suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five (5) years.
Section 4.23. Organizational Documents. The documents
delivered pursuant to Section 3.1(e) constitute, as of the Closing Date, all of
the organizational documents (together with all amendments and modifications
thereof) of the Borrower. The Borrower represents that it has delivered to the
Administrative Agent true, correct and complete copies of each of the documents
set forth in this Section 4.23.
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Section 4.24. Principal Offices. The principal office, chief
executive office and principal place of business of the Borrower is 197 First
Avenue, Needham, Massachusetts 02494.
Section 4.25. REIT Status. For the fiscal year ended December
31, 1997, the Borrower qualified, for the current fiscal year, the Borrower is
in a position to qualify as, and the Borrower intends to continue to qualify
as, a real estate investment trust under the Internal
Revenue Code.
Section 4.26. Ownership of Property. The Borrower owns,
directly or indirectly, the Healthcare Mortgages and fee simple title to, or a
ground leasehold interest in, each of the other Unencumbered Asset Pool Proper
ties.
Section 4.27. Year 2000 Compliance. The Borrower will
conduct a comprehensive review and assessment of the Borrower's and its
Subsidiaries' computer applications and will commence inquiry of the Borrower's
key suppliers, vendors and customers with respect to the "year 2000 problem"
(that is, the risk that computer applications may not be able to properly
perform date sensitive functions after December 31, 1999). The Borrower does not
believe the year 2000 problem will result in an inability on the Borrower's part
to repay the Loans or a Material Adverse Effect.
Section 4.28. Insurance. The Borrower currently maintains or
requires its operators/lessees to maintain insurance at 100% replacement cost
insurance coverage in respect of each of the Real Property Assets, as well as
comprehensive general liability insurance (including "builders' risk") against
claims for personal, and bodily injury and/or death, to one or more persons, or
property damage, as well as workers' compensation insurance, in each case with
respect to the Real Property Assets in amounts that prudent owner of assets such
as the Real Property Assets would maintain.
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ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank
has any Commitment hereunder or any Obligations remain unpaid:
Section 5.1. Information. The Borrower will deliver, and will
cause MOC to deliver, to the Administrative Agent and to each of the Banks:
(a) as soon as available and in any event within 105 days
after the end of each fiscal year of the Borrower or MOC, an audited combined
consolidated balance sheet of the Borrower or MOC, as the case may be, as of the
end of such fiscal year and the related combined consolidated statements of cash
flow and operations for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, audited by
PricewaterhouseCoopers, LLP or other independent public accountants of similar
standing;
(b) as soon as available and in any event within sixty (60)
days after the end of each quarter of each fiscal year (other than the last
quarter in any fiscal year) of the Borrower or MOC, a statement of the Borrower
or MOC, as the case may be, prepared in accordance with GAAP, setting forth the
operating income and operating expenses of the Borrower or MOC, in sufficient
detail so as to calculate Unencumbered Asset Pool Net Operating Cash Flow of the
Borrower and MOC for the immediately preceding quarter;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of an officer
of the Borrower (and MOC in the case of clause (iii)), (i) setting forth in
reason able detail the calculations required to establish whether the Borrower
was in compliance with the requirements of Section 5.8 on the date of such
financial statements;( ii) stating whether any Default exists on the date of
such certificate and, if any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or proposes to take with
respect thereto; and (iii) certifying (x) that such financial statements fairly
present the financial condition and the results of operations of the Borrower
or MOC as of the dates and for the periods
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indicated, in accordance with GAAP, subject, in the case of interim financial
statements, to normal year-end adjustments, and (y) that such officer has
reviewed the terms of the Loan Documents and has made, or caused to be made
under his or her supervision, a review in reasonable detail of the business and
condition of the Borrower during the period beginning on the date through which
the last such review was made pursuant to this Section 5.1(c) and ending on a
date not more than ten (10) Domestic Business Days prior to the date of such
delivery and that on the basis of such review of the Loan Documents and the
business and condition of the Borrower, to the best knowledge of such officer,
no Default or Event of Default under any other provision of Section 6.1 occurred
or, if any such Default or Event of Default has occurred, specifying the nature
and extent thereof and, if continuing, the action the Borrower proposes to take
in respect thereof;
(d) Intentionally Omitted.
(e) (i) within five (5) days after the president, chief
financial officer, treasurer, controller or other executive officer of the
Borrower obtains knowledge of any Default, if such Default is then continuing, a
certificate of an officer of the Borrower setting forth the details thereof and
the action which the Borrower is taking or proposes to take with respect
thereto; (ii) promptly and in any event within ten (10) days after the Borrower
obtains knowledge thereof, notice of (x) any litigation or governmental
proceeding pending or threatened against the Borrower which is likely to
individually or in the aggregate, result in a Material Adverse Effect, and (y)
any other event, act or condition which is likely to result in a Material
Adverse Effect;
(f) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which is likely to constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows that
the plan administrator of any Plan maintained or contributed to by such member
has given or is required to give notice of any such reportable event, a copy of
the notice of such reportable event given or required to be given to the PBGC;
(ii) receives notice under
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Section 4219(b)(1) of complete or partial withdrawal liability under Title IV of
ERISA or notice under Sections 4041A, 4242 or 4245 that any Multiemployer Plan
is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives written notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or appoint a trustee to administer, any Plan, a
copy of such notice; (iv) applies to the Internal Revenue Service for a waiver
of the minimum funding standard under Section 412 of the Internal Revenue Code,
a copy of such application; (v) gives written notice to the PBGC of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed in concert with such notice with the PBGC; (vi) gives
written notice to the PBGC of withdrawal from any Plan pursuant to Section 4063
of ERISA, a copy of such notice; or (vii) fails to make any payment or
contribution to any Plan or Multiemployer Plan or in respect of any Benefit
Arrangement or adopts any written amendment to any Plan or Benefit Arrangement
which has resulted or is likely to result in the imposition of a Lien or the
posting of a bond or other security under ERISA or the Internal Revenue Code, a
certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA Group is required or
proposes to take;
(g) promptly and in any event within ten (10) Domestic
Business Days after the Borrower obtains actual knowledge of any of the
following events, a certificate of the Borrower executed by an officer of the
Borrower specifying the nature of such event and the Borrower's, and if the
Borrower has actual knowledge thereof, the Environmental Affiliate's, proposed
initial response thereto: (i) the receipt by the Borrower, or, if the Borrower
has actual knowledge thereof, any of the Environmental Affiliates, of any
communication (written or oral), whether from a Govern mental Authority,
citizens group, employee or otherwise, that alleges that the Borrower, or any of
the Environmental Affiliates, is not in compliance with applicable Environmental
Laws, and such noncompliance is likely to have a Material Adverse Effect, (ii)
the Borrower shall obtain actual knowledge that there exists any Environmental
Claim
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which is likely to have a Material Adverse Effect pending or threatened against
the Borrower or any Environmental Affiliate or (iii) the Borrower obtains actual
knowledge of any Release, emission, discharge or disposal of any Material of
Environmental Concern that is likely to form the basis of any Environmental
Claim against the Borrower or any Environmental Affiliate that could have a
Material Adverse Effect;
(h) promptly and in any event within five (5) Domestic
Business Days after receipt of any material notices or correspondence from any
company or agent for any
company providing insurance coverage to the Borrower or MOC relating to any
material loss or loss of the Borrower or MOC with respect to any of the
Unencumbered Asset Pool Properties, copies of such notices and correspondence;
(i) promptly upon the mailing thereof to the shareholders or
partners of the Borrower or MOC, copies of all financial statements, reports
and proxy statement so mailed;
(j) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and
8-K (or their equivalents) which the Borrower or MOC shall have filed with the
Securities and Exchange Commission;
(k) simultaneously with delivery of the information required
by Sections 5.1(a) and (b), a statement of Unencumbered Asset Pool Net Operating
Cash Flow with respect to each Unencumbered Asset Pool Property and a list
of all Unencumbered Asset Pool Properties; and
(l) from time to time such additional information regarding
the financial position or business of the Borrower or MOC as the Administrative
Agent, at the request of any Bank, may reasonably request.
Section 5.2. Payment of Obligations. The Borrower will pay
and discharge, at or before maturity, all its material obligations and
liabilities including, without limitation, any obligation pursuant to any
agreement by which it or any of its properties is bound and any tax
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liabilities, in any case, where failure to do so will likely result in a
Material Adverse Effect except (i) such tax liabilities as may be contested in
good faith by appropriate proceedings, and the Borrower will maintain in
accordance with GAAP, appropriate reserves for the accrual of any of the same;
or (ii) such obligation or liability as may be contested in good faith by
appropriate proceedings.
Section 5.3. Maintenance of Property; Insurance.
(a) The Borrower will keep, or require its operators and/or
lessees to keep, each of the Unencumbered Asset Pool Properties in good repair,
working order and condition, subject to ordinary wear and tear.
(b) The Borrower shall, or shall cause its operators and/or
lessees to, (a) maintain insurance as specified in Section 4.28 hereof with
insurers meeting the qualifications described therein, which insurance shall in
any event not provide for materially less coverage than the insurance in effect
on the Closing Date, and (b) furnish to the Administrative Agent from time to
time, upon written request, copies of the policies under which such insurance is
issued, certificates of insurance and such other information relating to such
insurance as the Administrative Agent may reasonably request. The Borrower will
deliver to the Administrative Agent (i) upon request of the Administrative
Agent from time to time, full information as to the insurance carried, (ii) with
respect to any policy providing for coverage in excess of $50,000,000, within
five (5) days of receipt of notice from any insurer, a copy of any notice of
cancellation or material change in coverage from that existing on the date of
this Agreement and (iii) with respect to any policy providing for coverage in
excess of $50,000,000, forthwith, notice of any cancellation or nonrenewal of
coverage by the Borrower.
Section 5.4. Conduct of Business. The Borrower's primary
business will continue to be acquiring, owning, operating, managing, developing
(to the extent permitted in this Agreement), financing or leasing assets of the
Core Asset Type.
Section 5.5. Compliance with Laws. The Borrower will comply
in all material respects with all applicable
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laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws, all zoning and
building codes and ERISA and the rules and regulations thereunder) except where
the necessity of compliance therewith is contested in good faith by appropriate
proceedings.
Section 5.6. Inspection of Property, Books and Records. The
Borrower will keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation to
its business and activities; and upon at least five (5) Domes tic Business Days'
notice (provided, however, that if an Event of Default shall have occurred and
be continuing, then no such notice shall be required) will permit
representatives of any Bank at such Bank's expense to visit and inspect any of
its properties to examine and make abstracts from any of its books and records
and to discuss its affairs, finances and accounts with its officers and
employees, all at such reasonable times, upon reasonable notice, and as often as
may reasonably be desired.
Section 5.7. Existence.
(a) The Borrower shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence.
(b) The Borrower shall do or cause to be done all things
necessary to preserve and keep in full force and effect its patents, trademarks,
servicemarks, tradenames, copyrights, franchises, licenses, permits,
certificates, authorizations, qualifications, accreditations, easements, rights
of way and other rights, consents and approvals the nonexistence of which is
likely to have a Material Adverse Effect.
Section 5.8. Financial Covenants.
(a) Total Liabilities to Total Fair Market Value. As of the
last day of each calendar quarter, the Total Debt Ratio will not be greater than
(i) 60% from the Closing Date through June 30, 1999, (ii) 57.5% from July 1,
1999 through December 31, 1999, (iii) 55% from and after January 1, 2000 through
December 31, 2000, (iv) 52.5% from
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January 1, 2001 through the final Maturity Date, and (v) notwithstanding the
provisions of clauses (i), (ii), (iii), or (iv) to the contrary, from and after
the Conversion Date, 60%.
(b) Total Debt to Annual EBITDA. As of the last day of each
calendar quarter, the ratio of (i) the sum, without duplication, of (x) the Debt
of the Borrower, MOC and their Consolidated Subsidiaries, and (y) the Borrower's
and MOC's pro rata share of the Debt of any Minority Holdings of the Borrower
or MOC to (ii) Annual EBITDA, will not be more than (x) 5.25:1 commencing as of
July 1, 1998 through December 31, 1998, (y) 5.0:1 from January 1, 1999 through
December 31, 1999, and 4.75:1 thereafter. For purposes of this clause (b), prior
to June 30, 1999, Annual EBITDA shall be calculated on an annualized basis,
commencing as of the quarter ending September 30, 1998, and from and after July
1, 1999, Annual EBITDA shall be calculated based upon the Annual EBITDA for the
preceding four quarters.
(c) EBITDA Debt Service Coverage. As of the last day of each
calendar quarter, the ratio of (x) Annual EBITDA to (y) Total Debt Service, will
not be less than 2.0:1.
(d) Fixed Charge Coverage. As of the last day of each calendar
quarter, the ratio of (x) Annual EBITDA, less such reserves for Capital
Expenditures as are set forth in the definition of Total Fair Market Value, to
(y) the sum of (i) Total Debt Service, (ii) scheduled payments of principal on
any Debt of the Borrower, MOC or any Consolidated Subsidiary, whether or not
paid by the Borrower, MOC or any such Consolidated Subsidiary (excluding balloon
payments) for the previous four consecutive quarters including the quarter then
ended, plus the Borrower's, MOC's and their Consolidated Subsidiaries' pro rata
share of scheduled payments of principal on any Debt of any Minority Holding,
whether or not paid by the Borrower, MOC or their Consolidated Subsidiaries
(excluding balloon payments) for the previous four consecutive quarters
including the quarter then ended, and (iii) dividends or other payments payable
by the Borrower or MOC with respect to any preferred stock of the Borrower or
MOC, will not be less than 1.75:1.
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(e) Unsecured Debt Ratio. As of the last day of each calendar
quarter, the Unsecured Debt Ratio will not be less than (x) 0.9:1 commencing as
of July 1, 1998 through December 31, 1998, (y) 0.95:1 from January 1, 1999
through June 30, 1999, and 1.0:1 thereafter.
(f) Unencumbered Debt Service Coverage. As of the last day of
each calendar quarter, the ratio of (i) Unencumbered Asset Pool Net Operating
Cash Flow to (ii) Unsecured Interest Expense will not be less than 2.0:1.
(g) Minimum Consolidated Tangible Net Worth. The Consolidated
Tangible Net Worth will at no time be less than the sum of (i) $2,500,000,000,
(ii) 75% of all Net Offering Proceeds, and (iii) in the case of convertible Debt
in existence as of the Closing Date, upon conversion of any such Debt to an
equity interest in the Borrower or MOC, 75% of the principal amount of such Debt
so converted.
(h) Limitation on Secured Debt. Secured Debt of the Borrower,
MOC and their Consolidated Subsidiaries shall at no time exceed twenty-five
percent (25%) of Total Fair Market Value, exclusive of any Mortgages delivered
in connection with the Security Conversion or any intercompany debt otherwise
permitted hereunder.
(i) Dividends. The Borrower will not, as deter mined on an
aggregate annual basis, pay any cash dividends in excess of (i) 100% of its
combined consolidated FFO for such year for the period ending June 30, 1999, and
(ii) 95% from and after July 1, 1999. Notwithstanding the foregoing, however,
the Borrower may make a one-time dividend to maintain its status as a REIT in
connection with its acquisition of La Quinta Inns, Inc. MOC will not, as
determined on an aggregate annual basis, pay any cash dividends in excess of the
sum of 100% of its net income (as determined in accordance with GAAP) and
non-cash items. The Borrower or MOC shall be permitted to (i) dividend to its
shareholders the stock of any Consolidated Subsidiary, provided that such
Consolidated Subsidiary shall not own at such time any assets that meet the
asset requirements of Section 856(c)(4) of the Internal Revenue Code, and (ii)
issue additional shares of stock in itself to its shareholders up
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to such amount as shall result in 51% of the stock of the Borrower not being
traded with the stock of MOC.
Section 5.9. Restriction on Fundamental Changes; Operation
and Control. (a) None of the Borrower, MOC or any Guarantor Subsidiary shall
enter into any merger or consolidation, unless the Borrower, MOC or such
Guarantor Subsidiary, as the case may be, is the surviving entity, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution),
discontinue its business or convey, lease, sell, transfer or otherwise dispose
of, in one transaction or series of transactions, any substantial part of its
business or property, whether now or hereafter acquired, without the prior
written consent of the Administrative Agent, which consent shall not be
unreasonably withheld, conditioned or delayed.
(b) The Borrower shall not amend its certificate of
incorporation or by-laws, as applicable, in any material respect, without the
Administrative Agent's consent, which shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, the filing of a certificate of
designation with respect to an issuance of any class or series of preferred or
series common stock shall not constitute an amendment for purposes hereof. In
addition, filing of certificates of amendment with respect to the increase in
the authorized capital of each of the Borrower and MOC to provide for 25,000,000
shares of excess stock shall not be deemed to be a material amendment for
purposes hereof.
Section 5.10. Changes in Business. Neither the Borrower nor
MOC shall enter into any business other than businesses with respect to the Core
Asset Types if the same shall result in (i) more than 20% of the Total Fair
Market Value being attributable to assets of a type other than the Core Asset
Type, or (ii) more than 10% of the Total Fair Market Value being attributable to
assets of a single type other than the Core Asset Type, with the exception of
"time sharing" Real Property Assets which may constitute up to 15% of the Total
Fair Market Value.
Section 5.11. Fiscal Year; Fiscal Quarter. The Borrower shall
not change its fiscal year or any of its
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fiscal quarters without the Administrative Agent's consent, which shall not be
unreasonably withheld or delayed.
Section 5.12. Margin Stock. None of the proceeds of the Loan
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any Margin Stock.
Section 5.13. Intentionally Omitted.
Section 5.14. Interest Rate Protection. The Borrower and MOC
shall maintain Interest Rate Hedges on a notional amount of the Debt of the
Borrower, MOC and their Subsidiaries which, when added to the aggregate
principal amount of the Debt of the Borrower, MOC and their Subsidiaries which
bears interest at a fixed rate, equals or exceeds 60% of the aggregate principal
amount of all Debt of the Borrower, MOC and their Subsidiaries. "Interest Rate
Hedges" shall mean interest rate exchange, collar, cap, swap, adjustable strike
cap, adjustable strike corridor or similar agreements having terms, conditions
and tenors reasonably acceptable to the Administrative Agent entered into by the
Borrower, MOC and/or their Subsidiaries in order to provide protection to, or
minimize the impact upon, the Borrower, MOC and/or their Subsidiaries of in
creasing floating rates of interest applicable to Debt.
Section 5.15. Investments. The Borrower shall not invest, nor
permit any Consolidated Subsidiary or Minority Holding to invest in any of the
following asset types so that the portion of the Total Fair Market Value
attributable thereto shall exceed the percentages set forth below:
1. Undeveloped land 5%
2. Construction Assets 20%
3. Joint ventures 10%
4. Minority Holdings and 10%
stock holdings (exclusive
of Subsidiaries)
5. Assets located outside 5%
of the United States
6. An individual operator 35%
of healthcare assets (calculated
as a percentage of the total
Total Fair Market Value
attributable to healthcare assets)
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Section 5.16. Use of Proceeds. The Borrower shall use the
proceeds of the Loans solely to finance the acquisition of La Quinta Inns, Inc.,
to repay the obligations under the Existing Credit Agreements, to finance the
acquisition of additional assets and for its general business purposes. The
Borrower shall not use any of the proceeds of the Loans to satisfy any
obligations of the Borrower under any forward equity contracts.
Section 5.17. Borrower Status. The Borrower shall at all times
(i) maintain its status as a self-directed and self-administered real estate
investment trust under the Internal Revenue Code, and (ii) remain a publicly
traded company listed on the New York Stock Exchange.
Section 5.18. Limitations On Subsidiary Debt. No Subsidiary
of the Borrower shall incur Debt other than (i) combined consolidated
intercompany debt, which by its terms (or pursuant to separate agreement) shall
be fully subordinated in right of payment to the Loans and other Obligations
hereunder (the Borrower hereby acknowledging and agreeing that with respect to
all such intercompany debt of which it is or at any time may be the beneficiary,
the same is and shall be fully subordinated to the payment in full of the
Obligations), (ii) existing Debt, as more particularly set forth on Schedule
5.18 hereto, and (iii) Debt which in the aggregate does not exceed 5% of Total
Fair Market Value, provided, however, in no event may Unsecured Debt of such
Subsidiaries exceed 1% in the aggregate of Total Fair Market Value.
Section 5.19. Negative Pledge. Neither the Borrower nor MOC
will, nor will they permit any of their Subsidiaries to, enter into any
agreement (other than this Agreement and the other Loan Documents) prohibiting
the creation or assumption of any Lien upon their properties (other than with
respect to any mortgage on a particular property), revenues or assets, whether
now owned or hereafter acquired, or restricting the ability of the Borrower to
amend or modify this Agreement or any other Loan Document.
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Section 5.20. Affiliate Transactions. Neither the Borrower
nor MOC will enter into any transaction with or make any payment to any
Affiliates unless the terms thereof are not less favorable to the Borrower, MOC
or any Subsidiary than those which are generally available in the market.
Section 5.21. Sale of Unencumbered Asset Pool Properties.
Prior to the sale or transfer of any Real Property Asset that is an Unencumbered
Asset Pool Property or any interest in any Subsidiary owning any Real Property
Asset that is an Unencumbered Asset Pool Property, to which, individually or in
the aggregate, $50,000,000 or more of Total Fair Market Value is attributable,
the Borrower shall (i) deliver prior written notice to the Administrative
Agent and the Banks, (ii) deliver to the Administrative Agent and the Banks a
certificate from an officer certifying that at the time of such sale or other
disposal (based on pro-forma calculations for the previous period assuming that
such Real Property Asset or interest was not owned by the Borrower for the
relevant period) all of the covenants contained in Sections 5.08 and 5.15 are
and after giving effect to the transaction shall continue to be true and
accurate in all respects, and (iii) pay to the Administrative Agent an amount
equal to that required pursuant to Section 2.10. Notwithstanding anything
contained herein to the contrary, during the continuance of any Event of
Default, the Borrower shall not sell or transfer any Real Property Asset that is
an Unencumbered Asset Pool Property, or take any action that would cause such
Real Property Asset to cease to qualify as an Unencumbered Asset Pool Property.
Section 5.22. Guarantor Subsidiary. The Borrower shall
deliver not less than five (5) Domestic Business Days' notice prior to the
creation of any Guarantor Subsidiary or prior to the date on which an existing
Subsidiary shall become a Guarantor Subsidiary, and within ten (10) Domestic
Business Days thereafter, shall cause any such Subsidiary to execute and deliver
to the Administra tive Agent, for the benefit of the Banks, a Guaranty.
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ARTICLE VI
DEFAULTS
Section 6.1. Events of Default. Each of the following shall
constitute an event of default under this Agreement (an "Event of Default"):
(a) the Borrower shall fail to pay when due any principal of
any Loan, or the Borrower shall fail to pay within five (5) Domestic Business
Days after the same is due any interest on any Loan or any fees or other amounts
payable hereunder;
(b) the Borrower shall fail to observe or per form any
covenant contained in Sections 5.8 through and including 5.23, inclusive,
subject to any applicable grace periods set forth therein;
(c) the Borrower shall fail to observe or per form any
covenant or agreement contained in this Agreement (other than those covered by
clause (a) or (b) above) for 30 days after written notice thereof has been given
to the Borrower by the Administrative Agent, provided, however, that if the same
is not reasonably capable of cure within such 30 day period, then provided that
the Borrower shall have commenced to cure the same within such 30 day period and
shall diligently prosecute the same, then such 30 day period shall be extended
to 90 days;
(d) any representation, warranty, certification or statement
made by the Borrower in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall prove to
have been incorrect in any material respect when made (or deemed made);
(e) the Borrower or MOC shall default in the payment when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) of any amount owing in respect of (i) any Recourse Debt or Debt
guaranteed by the Borrower, MOC or any Subsidiary (other than the Obligations),
equal to or in excess of $10,000,000 in the aggregate, or (ii) any Non-Recourse
Debt of the Borrower, MOC or any Subsidiary equal to or in excess of
$25,000,000, and such default under either clause (i) or (ii) shall continue
beyond the giving of any required notice and the expiration of any applicable
grace period (as the same may be extended by the applicable lender) and
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such default shall not be waived by the applicable lender (which waiver shall
serve to reinstate the applicable loan), or the Borrower or MOC shall default in
the performance or observance of any obligation or condition with respect to
any such Debt or any other event shall occur or condition exist beyond the
giving of any required notice and the expiration of any applicable grace period
(as the same may be extended by the applicable lender), if in any such case as a
result of such default, event or condition, (x) the lender thereof shall
accelerate the maturity of any such Debt or (y) which would permit (without any
further requirement of notice, other than a notice of acceleration, or lapse of
time) the holder or holders thereof, or any trustee or agent for such holders,
to accelerate the maturity of any such Debt and such default shall not be
waived by the applicable lender (which waiver shall serve to reinstate the
applicable loan), or any such Debt shall become or be declared to be due and
payable prior to its stated maturity other than as a result of a regularly
scheduled payment;
(f) the Borrower or MOC shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(g) an involuntary case or other proceeding shall be commenced
against the Borrower or MOC seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 90
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days; or an order for relief shall be entered against the Borrower or MOC under
the federal bankruptcy laws as now or hereafter in effect;
(h) the Borrower shall default in its obligations under any
Loan Document other than this Agreement beyond any applicable notice and grace
periods;
(i) MOC or any Guarantor Subsidiary shall de fault in its
obligations under the Guaranty beyond any applicable notice and grace periods;
(j) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $5,000,000 which it shall have
become liable to pay to the PBGC under Title IV of ERISA, or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any member
of the ERISA Group, any plan administrator of such Material Plan or any
combination of the foregoing, or the PBGC shall institute proceedings under
Title IV of ERISA to terminate, to impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer, any Material Plan, or a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated, or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Sections 4203(a), 4205(a)
or 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation to such Multiemployer Plan in excess of $5,000,000;
(k) one or more final nonappealable judgments or decrees in an
aggregate amount of $10,000,000 as of such date shall be entered by a court or
courts of competent jurisdiction against the Borrower or MOC (other than any
judgment as to which, and only to the extent, a reputable insurance company has
acknowledged coverage of such claim in writing) and (i) any such judgments or
decrees shall not be stayed, discharged, paid, bonded or vacated within thirty
(30) days (or bonded, vacated or satisfied within thirty (30) after any stay is
lifted) or (ii) enforcement proceedings shall be commenced by any creditor on
any such judgments or decrees;
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(l) (i) any Environmental Claim shall have been asserted
against the Borrower or any Environmental Affiliate, (ii) any Release,
emission, discharge or disposal of any Material of Environmental Concern shall
have occurred, and such event is reasonably likely to form the basis of an
Environmental Claim against the Borrower or any Environmental Affiliate, or
(iii) the Borrower or the Environmental Affiliates shall have failed to obtain
any Environmental Approval necessary for the ownership, or operation of its
business, property or assets or any such Environmental Approval shall be
revoked, terminated, or otherwise cease to be in full force and effect, in the
case of clauses (i), (ii) or (iii) above, if the existence of such condition has
had or is reasonably likely to have a Material Adverse Effect;
(m) a Person or an Affiliated group of Persons shall acquire
fifteen percent (15%) or more of the combined voting stock of the Borrower or
MOC, and the Borrower shall not have repaid the Loans in full, returned all
outstanding Letters of Credit and terminated this Agreement within forty-five
(45) days after such Person or group of Persons shall have acquired such
percentage of such stock;
(n) the Borrower shall cease at any time to qualify as a real
estate investment trust under the Internal Revenue Code; and
(o) at any time, for any reason the Borrower, MOC or any
Guarantor Subsidiary seeks to repudiate its obligations under any Loan Document.
Section 6.2. Rights and Remedies. Upon the occurrence of any
Event of Default described in Sections 6.1(f) or (g), the unpaid principal
amount of, and any and all accrued interest on, the Loans and any and all
accrued fees and other Obligations hereunder shall automatically become
immediately due and payable, with all additional interest from time to time
accrued thereon and without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by the
Borrower; and upon
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the occurrence and during the continuance of any other Event of Default, the
Administrative Agent may (and, upon the instructions of the Required Banks,
shall) exercise any of its rights and remedies hereunder and by written notice
to the Borrower, terminate the Tranche A Loan Commitments, declare the unpaid
principal amount of and any and all accrued and unpaid interest on the Loans and
any and all accrued fees and other Obligations hereunder to be, and the same
shall thereupon be, immediately due and payable with all additional interest
from time to time accrued thereon and without presentation, demand, or protest
or other requirements of any kind other than as provided in the Loan Documents
(including, without limitation, valuation and appraisement, diligence,
presentment, and notice of intent to demand or accelerate), all of which are
hereby expressly waived by the Borrower.
Section 6.3. Notice of Default. If the Administrative Agent
shall not already have given any notice to the Borrower under Section 6.1, the
Administrative Agent shall give notice to the Borrower under Section 6.1
promptly upon being requested to do so by the Required Banks and shall thereupon
notify all the Banks thereof.
Section 6.4. Actions in Respect of Letters of Credit. (a) If,
at any time and from time to time, any Letter of Credit shall have been issued
hereunder and an Event of Default shall have occurred and be continuing, then,
upon the occurrence and during the continuation thereof, the Administrative
Agent may (and shall, at the request of any of the Fronting Banks), whether in
addition to the taking by the Administrative Agent of any of the actions
described in this Article or otherwise, make a demand upon the Borrower to, and
forthwith upon such demand (but in any event within ten (10) days after such
demand) the Borrower shall, pay to the Administrative Agent, on behalf of the
Banks, in same day funds at the Administra tive Agent's office designated in
such demand, for deposit in a special cash collateral account (the "Letter of
Credit Collateral Account") to be maintained in the name of the Administrative
Agent (on behalf of the Banks) and under its sole dominion and control at such
place as shall be designated by the Administrative Agent, an amount equal to
the amount of the Letter of Credit Usage under the Letters of Credit. Interest
shall accrue on the Letter of Credit
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Collateral Account at a rate equal to the rate on overnight funds.
(b) In connection with the foregoing, the Borrower hereby
pledges, assigns and grants to the Administra tive Agent, as administrative
agent for its benefit and the ratable benefit of the Banks a lien on and a
security interest in, the following collateral (the "Letter of Credit
Collateral"):
(i) the Letter of Credit Collateral Account, all
cash deposited therein and all certificates and instruments, if any,
from time to time representing or evidencing the Letter of Credit
Collateral Account;
(ii) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to or otherwise
possessed by the Administrative Agent for or on behalf of the Borrower
in substitution for or in respect of any or all of the then existing
Letter of Credit Collateral;
(iii) all interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Letter of Credit Collateral; and
(iv) to the extent not covered by the above
clauses, all proceeds of any or all of the fore going Letter of Credit
Collateral.
The lien and security interest granted hereby secures the payment of all
obligations of the Borrower now or hereafter existing hereunder and under any
other Loan Document.
(c) The Borrower hereby authorizes the Administrative Agent
for the ratable benefit of the Banks to apply, from time to time after funds are
deposited in the Letter of Credit Collateral Account, funds then held in the
Letter of Credit Collateral Account to the payment of any amounts, in such order
as the Administrative Agent may elect, as shall have become due and payable by
the Borrower to the Banks in respect of the Letters of Credit.
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(d) Neither the Borrower nor any Person claiming or acting on
behalf of or through the Borrower shall have any right to withdraw any of the
funds held in the Letter of Credit Collateral Account, except as provided in
Section 6.4(h) hereof.
(e) The Borrower agrees that it will not (i) sell or otherwise
dispose of any interest in the Letter of Credit Collateral or (ii) create or
permit to exist any lien, security interest or other charge or encumbrance upon
or with respect to any of the Letter of Credit Collateral, except for the
security interest created by this Section 6.4.
(f) If any Event of Default shall have occurred and be
continuing:
(i) The Administrative Agent may, in its sole
discretion, without notice to the Borrower except as required by law
and at any time from time to time, charge, set off or otherwise apply
all or any part of first, (x) amounts previously drawn on any Letter of
Credit that have not been reimbursed by the Borrower and (y) any Letter
of Credit Usage described in clause (ii) of the definition thereof that
are then due and payable and second, any other unpaid Obligations then
due and payable against the Letter of Credit Collateral Account or any
part thereof, in such order as the Administrative Agent shall elect.
The rights of the Administrative Agent under this Section 6.4 are in
addition to any rights and remedies which any Bank may have.
(ii) The Administrative Agent may also exercise, in
its sole discretion, in respect of the Letter of Credit Collateral
Account, in addition to the other rights and remedies provided herein
or otherwise available to it, all the rights and remedies of a secured
party upon default under the Uniform Commercial Code in effect in the
State of New York at that time.
(g) The Administrative Agent shall be deemed to have exercised
reasonable care in the custody and preserva-
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tion of the Letter of Credit Collateral if the Letter of Credit Collateral is
accorded treatment substantially equal to that which the Administrative Agent
accords its own property, it being understood that, assuming such treatment,
the Administrative Agent shall not have any responsibility or liability with
respect thereto.
(h) At such time as all Events of Default have been cured or
waived in writing, all amounts remaining in the Letter of Credit Collateral
Account shall be promptly returned to the Borrower. Absent such cure or written
waiver, any surplus of the funds held in the Letter of Credit Collateral Account
and remaining after payment in full of all of the Obligations of the Borrower
hereunder and under any other Loan Document after the Maturity Date shall be
paid to the Borrower or to whomsoever may be lawfully entitled to receive such
surplus.
ARTICLE VII
THE ADMINISTRATIVE AGENT
Section 7.1. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to the Administrative Agent by the
terms hereof or thereof, together with all such powers as are reasonably
incidental thereto.
Section 7.2. Administrative Agent and Affiliates. Morgan
shall have the same rights and powers under this Agreement as any other Bank and
may exercise or refrain from exercising the same as though it were not the
Administrative Agent, and Morgan and its affiliates may accept deposits from,
lend money to, and generally engage in any kind of business with the Borrower or
any subsidiary or affiliate of the Borrower as if it were not the Administrative
Agent hereunder, and the term "Bank" and "Banks" shall include Morgan in its
individual capacity.
Section 7.3. Action by Administrative Agent. The obligations
of the Administrative Agent hereunder are only those expressly set forth herein.
Without limiting
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the generality of the foregoing, the Administrative Agent shall not be required
to take any action with respect to any Default, except as expressly provided in
Article VI.
Section 7.4. Consultation with Experts. The Administrative
Agent may consult with legal counsel (who may be counsel for the Borrower),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
Section 7.5. Liability of Administrative Agent. Neither the
Administrative Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be liable for any action taken or
not taken by it in connection herewith (i) with the consent or at the request of
the Required Banks or, where required by the terms of this Agreement, all of the
Banks, or (ii) in the absence of its own gross negligence or willful misconduct.
Neither the Administrative Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement or any borrowing hereunder; (ii) the performance or observance of
any of the covenants or agreements of the Borrower; (iii) the satisfaction of
any condition specified in Article III, except receipt of items required to be
delivered to the Administrative Agent; or (iv) the validity, effectiveness or
genuineness of this Agreement, the other Loan Documents or any other instrument
or writing furnished in connection herewith. The Administrative Agent shall not
incur any liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex or similar writing)
believed by it in good faith to be genuine or to be signed by the proper party
or parties.
Section 7.6. Indemnification. Each Bank shall, ratably in
accordance with its Commitment or if the Commitments have been terminated, in
accordance with the aggregate unpaid principal amount of its Loans and its share
of the Letter of Credit Usage, indemnify the Administrative Agent and each Bank
acting as syndication agent or
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co-documentation agent, its affiliates and their respective directors, officers,
agents and employees (to the extent not reimbursed by the Borrower) against any
cost, expense (including counsel fees and disbursements), claim, demand, action,
loss or liability (except such as result from such indemnitees' gross
negligence, willful misconduct, bad faith or fraud) that such indemnitees may
suffer or incur in connection with this Agreement, the other Loan Documents or
any action taken or omitted by such indemnitees hereunder.
Section 7.7. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under this
Agreement.
Section 7.8. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving notice thereof to the
Banks and the Borrower. Upon any such resignation, the Required Banks shall have
the right to appoint a successor Administrative Agent with the consent of the
Borrower provided that no Event of Default shall have occurred and be
continuing. If no successor Administrative Agent shall have been so appointed by
the Required Banks or so consented to by the Borrower, and shall have accepted
such appointment, within 30 days after the retiring Administrative Agent gives
notice of resignation, then the retiring Administrative Agent may, on behalf of
the Banks, with the consent of the Borrower, provided no Event of Default shall
have occurred and be outstanding, which consent shall not be unreasonably
withheld, appoint a successor Administrative Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of its appointment as the Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to
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and become vested with all the rights and duties of the retiring Administrative
Agent, and the retiring Administra tive Agent shall be discharged from its
duties and obligations hereunder first accruing or arising after the effective
date of such retirement. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
the Administrative Agent.
Section 7.9. Administrative Agent's Fee. The Borrower shall
pay to the Administrative Agent for its own account fees in the amounts and at
the times previously agreed upon between the Borrower and the Administrative
Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.1. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period for any
Euro-Dollar Borrowing or Money Market Borrowing:
(a) the Administrative Agent is advised by the Reference Bank
that deposits in dollars (in the applicable amounts) are not being offered to
the Reference Bank in the relevant market for such Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the
affected Loans advise the Administrative Agent that the Adjusted London
Interbank Offered Rate as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding their
Euro-Dollar Loans for such Interest Period, the Administra tive Agent shall
forthwith give notice thereof to the Borrower and the Banks, whereupon until the
Administrative Agent notifies the Borrower that the circumstances giving rise to
such suspension no longer exist, the obligations of the Banks to make
Euro-Dollar Loans, or to continue or convert outstanding Loans as or into
Euro-Dollar Loans, as the case may be, shall be suspended, and each outstanding
Euro-Dollar Loan shall be converted into a Base Rate Loan
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on the last day of the then current Interest Period applicable thereto. Unless
the Borrower notifies the Administrative Agent at least two Domestic Business
Days before the date of any Euro-Dollar Borrowing or Money Market Euro-Dollar
Borrowing for which a Notice of Borrowing has previously been given that it
elects not to borrow on such date, (i) if such Borrowing is a Committed
Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing, and
(ii) if such Borrowing is a Money Market Euro-Dollar Borrowing, the Money
Market LIBOR Loans comprising such Borrowing shall bear interest for each day
from and including the first day to but excluding the last day of the Interest
Period applicable thereto at the Base Rate for such day.
Section 8.2. Illegality. If, after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
existing applicable law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency, including the NAIC, charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency, including the NAIC,
shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans or Money Market Loans or
to participate in any Letter of Credit issued by the Fronting Bank, or, with
respect to the Fronting Bank, to issue any Letter of Credit, and such Bank shall
so notify the Administrative Agent, the Administrative Agent shall forthwith
give notice thereof to the other Banks and the Borrower, whereupon until such
Bank notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make or convert Euro-Dollar Loans or Money Market Loans, or to participate in
any Letter of Credit issued by the Fronting Bank or, with respect to the
Fronting Bank, to issue any Letter of Credit, shall be suspended. Before giving
any notice to the Administrative Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in
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the reasonable judgment of such Bank, be otherwise disadvantageous to such Bank.
If such Bank shall determine that it may not lawfully continue to maintain and
fund any of its outstanding Euro-Dollar Loans or Money Market Loans (as the case
may be) to maturity and shall so specify in such notice, the Borrower shall
immediately prepay, without payment of any costs pursuant to Section 2.13, in
full the then outstanding principal amount of each such Euro-Dollar Loan or
Money Market Loan, together with accrued interest thereon. Concurrently with
prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan
in an equal principal amount from such Bank (on which interest and principal
shall be payable contemporaneously with the related Euro-Dollar Loans or Money
Market Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
If at any time, it shall be unlawful or impossible for any
Bank to make, maintain or fund its Euro-Dollar Loans under Section 8.1 or
Section 8.2, the Borrower shall have the right, upon five (5) Domestic Business
Day's notice to the Administrative Agent, to either (x) cause a bank, reasonably
acceptable to the Administrative Agent, or a Bank, to offer to purchase the
Commitments of such Bank for an amount equal to such Bank's outstanding Loans,
and to become a Bank hereunder, which offer such Bank is hereby required to
accept, or (y) to repay, including through a Borrowing hereunder, in full all
Loans then outstanding of such Bank, together with interest and all other
amounts due thereon, upon which event, such Bank's Commitments shall be deemed
to be cancelled pursuant to Section 2.11(f).
Section 8.3. Increased Cost and Reduced Return.
(b) If, after (x) the date hereof, in the case of any
Committed Loan or any obligation to make Committed Loans or (y) the date of the
related Money Market Quote, in the case of any Money Market Loan, the adoption
of any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency,
including the NAIC, charged with the interpretation or administration thereof,
or compliance by any Bank (or its Applicable
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Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, including the NAIC, shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System (but excluding with respect to any
Euro-Dollar Loan any such requirement reflected in an applicable Euro-Dollar
Reserve Percentage)), special deposit, insurance assessment or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on any
Bank (or its Applicable Lending Office) or on the London interbank market any
other condition affecting its Euro-Dollar Loans or Money Market LIBOR Loans, its
Note, or its obligation to make Euro-Dollar Loans, and the result of any of the
fore going is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount reasonably deemed by such Bank to be material, then, within 15 days after
demand by such Bank (with a copy to the Administrative Agent), which demand
shall be accompanied by a certificate showing, in reason able detail, the
calculation of such amount or amounts, the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank on an after-tax basis
for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency, including the NAIC, charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, including the NAIC, has or would have the
effect of reducing the rate of return on capital of such Bank (or its Parent) as
a consequence of such Bank's obligations hereunder to a level below that which
such Bank (or its Parent) could have achieved but for such adoption, change,
request
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or directive (taking into consideration its policies with respect to capital
adequacy) by an amount reasonably deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank (with a copy to the
Administrative Agent), which demand shall be accompanied by a certificate
showing, in reasonable detail, the calculation of such amount or amounts, the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its Parent) on an after-tax basis for such reduction.
(c) Each Bank will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the reason able judgment of such Bank, be otherwise materially
disadvantageous to such Bank. A certificate of any Bank claiming compensation
under this Section and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods.
(d) If at any time, it shall be unlawful or impossible for any
Bank to make, maintain or fund its Euro-Dollar Loans or if the Borrower is
required to make a payment under Sections 8.3(a) or (b), the Borrower shall have
the right, upon five (5) Domestic Business Day's notice to the Administrative
Agent, to either (x) cause a bank, reasonably acceptable to the Administrative
Agent, or a Bank, to offer to purchase the Commitments of such Bank for an
amount equal to such Bank's outstanding Loans, and to become a Bank hereunder,
which offer such Bank is hereby required to accept, or (y) to repay, including
with a Borrowing hereunder, in full all Loans then outstanding of such Bank,
together with interest and all other amounts due thereon, upon which event, such
Bank's Commitments shall be deemed to be cancelled pursuant to Section 2.11(f).
Section 8.4. Taxes.
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(a) Any and all payments by the Borrower to or for the account
of any Bank or the Administrative Agent hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Administrative Agent, taxes imposed on its net income, and
franchise taxes imposed on its net income, by the jurisdiction under the laws of
which such Bank or the Administrative Agent (as the case may be) is organized or
any political subdivision thereof and, in the case of each Bank, taxes imposed
on its net income, and franchise or similar taxes imposed on its net income, by
the jurisdiction of such Bank's Applicable Lending Office or any political
subdivision thereof (and, if different from the jurisdiction of such Bank's
Applicable Lending Office, the jurisdiction of the domicile of its Loans either
established by the Bank pursuant to Section 9.12 or determined by the
applicable taxing authorities) (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, with holdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under any Note or
Letter of Credit or participation therein to any Bank or the Administrative
Agent, (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 8.4) such Bank, the Fronting Bank or the
Administrative Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions, (iii) the Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with
applicable law and (iv) the Borrower shall furnish to the Administrative Agent,
at its address referred to in Section 9.1, the original or a certified copy of
a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes and any other excise or property taxes, or
charges or similar levies which arise from any payment made hereunder or under
any Note or Letter of Credit or participation therein or from
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the execution or delivery of, or otherwise with respect to, this Agreement or
any Note or Letter of Credit or participation therein (hereinafter referred to
as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank, the Fronting
Bank and the Administrative Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed or asserted by
any jurisdiction on amounts payable under this Section 8.4) paid by such Bank,
the Fronting Bank or the Administrative Agent (as the case may be) and any
liability (including penalties, interest and expenses, provided, however, that
the applicable Bank, Fronting Bank or Administrative Agent shall have notified
the Borrower of the imposition of the applicable Tax or Other Tax within 30 days
of such imposition) arising therefrom or with respect thereto. Any payment
required under this indemnification shall be made within 15 days from the date
such Bank, the Fronting Bank or the Administrative Agent (as the case may be)
makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Bank listed on the signature pages hereof
and on or prior to the date on which it becomes a Bank in the case of each other
Bank, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Bank remains lawfully able to do so), shall provide
the Borrower with (i) Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is entitled to benefits under an income tax treaty to
which the United States is a party which reduces the rate of withholding tax on
payments of interest or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States or (ii) if such Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Internal Revenue Code, Internal Revenue Service form
W-8 or any successor form prescribed by the Internal Revenue Service claiming
complete exemption from, or a reduced rate of, withholding tax on payment of
interest under the Loan Documents. If the form provided by a Bank at the time
such Bank first became a party to this Agreement or at any time
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thereafter (other than solely by reason of a change in United States law or a
change in the terms of any treaty to which the United States is a party after
the date hereof) indicates a United States interest withholding tax rate in
excess of zero (or would have indicated such a withholding tax rate if such form
had been submitted and completed accurately and completely and either was not
submitted or was not completed accurately and completely), or if a Bank
otherwise is subject to United States interest withholding tax at a rate in
excess of zero at any time for any reason (other than solely by reason of a
change in United States law or regulation or a change in any treaty to which the
United States is a party after the date hereof), withholding tax at such rate
shall be considered excluded from "Taxes" as defined in Section 8.4(a). In
addition, any amount that otherwise would be considered "Taxes" or "Other Taxes"
for purposes of this Section 8.4 shall be excluded therefrom if the Bank either
has transferred the domicile of its Loans pursuant to Section 9.12 or changed
the Applicable Lending Office with respect to such Loans and such amount would
not have been incurred had such transfer or change not been made.
(e) For any period with respect to which a Bank has failed to
provide the Borrower with the appropriate form pursuant to Section 8.4(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Bank shall not be entitled to indemnification under Section 8.4(a) with
respect to Taxes imposed by the United States; provided, however, that should a
Bank, which is otherwise exempt from or subject to a reduced rate of withholding
tax, become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Bank shall reasonably
request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to
or for the account of any Bank pursuant to this Section 8.4, then such Bank will
change the jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if such change,
in the reasonable judgment of such
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Bank, is not otherwise materially disadvantageous to such Bank.
(g) If at any time, Taxes shall be payable by the Borrower
hereunder, the Borrower shall have the right, upon five (5) Domestic Business
Day's notice to the Administrative Agent, to either (x) cause a bank,
reasonably acceptable to the Administrative Agent, or a Bank, to offer to
purchase the Commitments of such Bank for an amount equal to such Bank's
outstanding Loans, and to become a Bank hereunder, which offer such Bank is
hereby required to accept, or (y) to repay, including with a Borrowing
hereunder, in full all Loans then outstanding of such Bank, together with
interest and all other amounts due thereon, upon which event, such Bank's
Commitments shall be deemed to be cancelled pursuant to Section 2.11(g).
Section 8.5. Base Rate Loans Substituted for Affected
Euro-Dollar Loans. If (i) the obligation of any Bank to make, or convert
outstanding Loans to, Euro-Dollar Loans has been suspended pursuant to Sections
8.1 or 8.2 or (ii) any Bank has demanded compensation under Section 8.3 or 8.4
with respect to its Euro-Dollar Loans and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Administrative
Agent, have elected that the provisions of this Section shall apply to such
Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer exist:
(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans (on which interest
and principal shall be payable contemporaneously with the related Euro-Dollar
Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such Euro-Dollar
Loans shall be applied to repay its Base Rate Loans instead.
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ARTICLE IX
MISCELLANEOUS
Section 9.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower or the Administrative Agent, at its
address or telecopy number set forth on the signature pages hereof, together
with copies thereof, in the case of the Borrower, to Suite 300, 197 First
Avenue, Needham, Massachusetts 02494, Attention: President, Telephone: (781)
433-6000, Telecopy: (781) 449-1530, with a copy to: the Borrower, Suite 300, 197
First Avenue, Needham, Massachusetts 02494, Attention: General Counsel,
Telephone: (781) 433-6000, Telecopy: (781) 449-1530, with a copy to: Nutter,
McClennen & Fish, LLP, One International Place, Boston, Massachusetts 02110,
Attention: Paul R. Eklund, Esq., and in the case of the Administrative Agent, to
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022, Attention: Martha Feltenstein, Esq., Telephone: (212) 735-2272, Telecopy:
(212) 735-2000, (y) in the case of any Bank, at its address or telecopy number
set forth on the signature pages hereof or in its Administrative Questionnaire
or (z) in the case of any party, such other address or telecopy number as such
party may hereafter specify for the purpose by notice to the Administrative
Agent, the Banks and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telecopy, when such telecopy
is transmitted to the telecopy number specified in this Section, (ii) if given
by mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified in this Section; provided that
notices to the Administrative Agent under Article II or Article VIII shall not
be effective until received.
Section 9.2. No Waivers. No failure or delay by the
Administrative Agent or any Bank in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
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Section 9.3. Expenses; Indemnification.
(a) The Borrower shall pay (i) all reasonable out-of-pocket
expenses of the Administrative Agent (including, without limitation, reasonable
fees and disbursements of special counsel Skadden, Arps, Slate, Meagher & Flom
LLP), in connection with the preparation and administration of this Agreement,
the Loan Documents and the documents and instruments referred to therein, the
syndication of the Loans, any waiver or consent hereunder or any amendment or
modification hereof or any Default or alleged Default hereunder and (ii) if an
Event of Default occurs, all out-of-pocket expenses incurred by the
Administrative Agent and each Bank, including, without limitation, reasonable
fees and disbursements of counsel for the Administrative Agent and each Bank, in
connection with the enforcement of the Loan Documents and the instruments
referred to therein and such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting there from.
(b) The Borrower agrees to indemnify the Administrative Agent
and each Bank, their respective affiliates and the respective directors,
officers, agents and employees of the foregoing (each an "Indemnitee") and hold
each Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel and settlements and settlement
costs, which may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) that may at any time
(including, without limitation, at any time following the payment of the
Obligations) be imposed on, asserted against or incurred by any Indemnitee as a
result of, or arising out of, or in any way related to or by reason of, (i) any
of the transactions contemplated by the Loan Documents or the execution,
delivery or performance of any Loan Document (including, without limitation, the
Borrower's actual or proposed use of proceeds of the Loans, whether or not in
compliance with the provisions hereof), (ii) any violation by the Borrower or
the Environmental Affiliates of any
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applicable Environmental Law, (iii) any Environmental Claim arising out of the
management, use, control, ownership or operation of property or assets by the
Borrower or any of the Environmental Affiliates, including, without limitation,
all on-site and off-site activities involving Material of Environmental
Concern, (iv) the breach of any environmental representation or warranty set
forth herein, (v) the grant to the Administrative Agent and the Banks of any
Lien in any property or assets of the Borrower or any stock or other equity
interest in the Borrower, and (vi) the exercise by the Administrative Agent and
the Banks of their rights and remedies (including, without limitation,
foreclosure) under any agreements creating any such Lien (but excluding, as to
any Indemnitee, any such losses, liabilities, claims, damages, expenses,
obligations, penal ties, actions, judgments, suits, costs or disbursements
incurred solely by reason of (i) the gross negligence, willful misconduct, bad
faith or fraud of any Indemnitee as finally determined by a court of competent
jurisdiction or (ii) any investigative, administrative or judicial proceeding
imposed or asserted against any Indemnitee by any bank regulatory agency or by
any equity holder of such Indemnitee, it being agreed that the Borrower shall
not be obligated to indemnify any Indemnitee or to pay any expenses if and for
so long as any such court case or proceeding shall be pending provided that the
Borrower shall be diligently prosecuting the same, provided, further, if such
court or proceeding does not finally determine that such Indemnitee has
committed gross negligence, willful misconduct, bad faith or fraud, then the
Borrower shall indemnify such Indemnitee in accordance with the provisions
hereof and shall reimburse such Indemnitee for all expenses, together with
interest thereon from the date incurred to the date so reimbursed at a rate per
annum equal to the Base Rate plus four percent (4%). The Borrower's obligations
under this Section shall survive the termination of this Agreement and the
payment of the Obligations.
(c) The Borrower shall pay, and hold the Administrative Agent
and each of the Banks harmless from and against, any and all present and future
U.S. stamp, recording, transfer and other similar foreclosure related taxes
with respect to the foregoing matters and hold the Administrative Agent and
each Bank harmless from and against any and all liabilities with respect to or
resulting from any
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delay or omission (other than to the extent attributable to such Bank) to pay
such taxes.
Section 9.4. Sharing of Set-Offs. In addition to any rights
now or hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
any Event of Default, each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to the
Borrower or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), other than deposits held for the
benefit of third parties, and any other indebtedness at any time held or owing
by such Bank (including, without limitation, by branches and agencies of such
Bank wherever located) to or for the credit or the account of the Borrower
against and on account of the Obligations of the Borrower then due and payable
to such Bank under this Agreement or under any of the other Loan Documents,
including, without limitation, all interests in Obligations purchased by such
Bank. Each Bank agrees that if it shall, by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion of the aggregate
amount of principal and interest due with respect to any Note held by it or
Letter of Credit participated in by it, or, in the case of the Fronting Bank,
Letter of Credit issued by it, which is greater than the proportion received by
any other Bank or Letter of Credit issued or participated in by such other Bank,
in respect of the aggregate amount of principal and interest due with respect to
any Note held by such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the Notes held by the
other Banks or Letter of Credit issued or participated in by such other Bank,
and such other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the Banks
or Letter of Credit issued or participated in by such other Banks shall be
shared by the Banks pro rata; provided that nothing in this Section shall impair
the right of any Bank to exercise any right of set-off or counterclaim it may
have and to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its indebtedness under the Notes or the
Letters of Credit. The
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Borrower agrees, to the fullest extent that it may effectively do so under
applicable law, that any holder of a participation in a Note, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of set-off
or counterclaim and other rights with respect to such participation as fully as
if such holder of a participation were a direct creditor of the Borrower in the
amount of such participation.
Section 9.5. Amendments and Waivers. Any provision of this
Agreement (including any of the financial covenants given by the Borrower
pursuant to Section 5.8), the Notes, the Letters of Credit or other Loan
Documents may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Administrative Agent are affected thereby, by the
Administrative Agent); provided that if such amendment or waiver affects only
the Banks of any single tranche, then only the Required Banks within that
tranche shall be required to sign such amendment or waiver; provided further
that no such amendment or waiver shall, unless signed by all the Banks, (i)
increase or decrease the Tranche A Loan Commitment, Tranche B Loan Commitment,
Tranche C Loan Commitment or the Tranche D Loan Commitment of any Bank (except
for a ratable decrease in the Commitments of all Banks) or subject any Bank to
any additional obligation, (ii) reduce the principal of or rate of interest on
any Loan or any fees specified herein, (iii) postpone the date fixed for any
payment of principal of or interest on any Loan or any fees hereunder or for
any reduction or termination of any Commitment, (iv) release the Guaranty or
otherwise release any other collateral including the Mortgages, if applicable,
(v) extend the expiration of any Letter of Credit beyond the Maturity Date
applicable to the Tranche A Loans, (vi) permit the Borrower to assign its rights
under this Agreement, (vii) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement, or (viii) change the order of
the application of voluntary or mandatory prepayments pursuant to Sections 2.10
or 2.11. Notwithstanding the foregoing, no amendment, waiver or consent shall,
unless in writing and signed by the Designating Lender on
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behalf of its Designated Lender affected thereby, (a) subject such Designated
Lender to any additional obligations, (b) reduce the principal of, interest on,
or other amounts due with respect to, the Designated Lender Note made payable to
such Designated Lender, or (c) postpone any date fixed for any payment of
principal of, or interest on, or other amounts due with respect to the
Designated Lender Note made payable to the Designated Lender.
Section 9.6. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement or the other Loan Documents without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or
other institutions (each a "Participant") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant by a Bank
of a participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement; provided that such participation agreement may
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement described in clause (i), (ii), (iii) or (iv) of Section 9.5
without the consent of the Participant. The Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article VIII with respect to its participating
interest. An assignment or other transfer which is not permitted by subsection
(c) or (d) below shall be given effect for purposes of this Agreement only to
the extent of a partici-
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pating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or
other institutions (each an "Assignee") all, or a proportionate part of all, of
its rights and obligations under this Agreement, the Notes and the other Loan
Documents in an amount not less than $2,000,000 (unless to an existing Bank or
to a Related Fund of any existing Bank or unless the Assignee at such time shall
hold less than $2,000,000, in which event the assignment shall be of the balance
thereof) (or such lesser amount as may be agreed to by the Administrative Agent)
with respect to any or all of its Tranche A Loan Commitments, Tranche B Loan
Commitments, Tranche C Loan Commitments or Tranche D Loan Commitments, and such
Assignee shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit C attached hereto
executed by such Assignee and such transferor Bank, with (and subject to) the
subscribed consent of the Administrative Agent and, in the case of an assignment
of a Tranche A Loan Commitment, the Fronting Bank, which consent shall not be
unreasonably withheld or delayed, and, provided no Event of Default shall have
occurred and be continuing, the Borrower, which consent shall not be
unreasonably withheld or delayed (it being understood, however, that the
Borrower shall retain the right to withhold its consent if any material portion
of the business of the proposed assignee shall be a business which is directly
competitive with that of the Borrower). Notwithstanding the foregoing, however,
no consent shall be required in connection with any assignment to a Person that
is already a Bank hereunder, an Affiliate of the assignor, or a Related Fund of
any Bank. Upon execution, delivery and recordation of such instrument in the
Register pursuant to subsection (g) hereof, and payment by such Assignee to such
transferor Bank of an amount equal to the purchase price agreed between such
transferor Bank and such Assignee, such Assignee shall be a Bank party to this
Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and the transferor
Bank shall be released from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (c), the transferor
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Bank, the Administrative Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note or Notes are issued to the
Assignee. In connection with any such assignment, the transferor Bank shall pay
to the Administrative Agent an administrative fee for processing such assignment
in the amount of $2,500 (provided that only one such fee shall be payable in
connection with simultaneous assignments to Related Funds). If the Assignee is
not incorporated under the laws of the United States of America or a state
thereof, it shall deliver to the Borrower and the Administrative Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 8.4.
(d) Any Bank (each, a "Designating Lender") may at any time
designate one Designated Lender to fund Money Market Loans on behalf of such
Designating Lender subject to the terms of this Section 9.6(d) and the
provisions in Section 9.6(b) and (c) shall not apply to such designation. No
Bank may designate more than one (1) Designated Lender. The parties to each such
designation shall execute and deliver to the Administrative Agent for its
acceptance a Designation Agreement. Upon such receipt of an appropriately
completed Designation Agreement executed by a Designating Lender and a designee
representing that it is a Designated Lender, the Administrative Agent will
accept such Designation Agreement and will give prompt notice thereof to the
Borrower, whereupon, (i) the Borrower shall execute and deliver to the
Designating Bank a Designated Lender Note payable to the order of the Designated
Lender, (ii) from and after the effective date specified in the Designation
Agreement, the Designated Lender shall become a party to this Agreement with a
right (subject to the provisions of Section 2.3(b)) to make Money Market Loans
on behalf of its Designating Lender pursuant to Section 2.3 after the Borrower
has accepted a Money Market Loan (or portion thereof) of the Designating Lender,
and (iii) the Designated Lender shall not be required to make payments with
respect to any obligations in this Agreement except to the extent of excess cash
flow of such Designated Lender which is not otherwise required to repay
obligations of such Designated Lender which are then due and payable; provided,
however, that regardless of such designation and assumption by the Designated
Lender, the Designating Lender shall be and remain obligated to the Borrower and
the Banks
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for each and every of the obligations of the Designating Lender and its related
Designated Lender with respect to this Agreement, including, without limitation,
any indemnification obligations under Section 7.6 hereof and any sums otherwise
payable to the Borrower by the Designated Lender. Each Designating Lender shall
serve as the administrative agent of the Designated Lender and shall on behalf
of, and to the exclusion of, the Designated Lender: (i) receive any and all
payments made for the benefit of the Designated Lender and (ii) give and receive
all communications and notices and take all actions hereunder, including,
without limitation, votes, approvals, waivers, consents and amendments under or
relating to this Agreement and the other Loan Documents. Any such notice,
communication, vote, approval, waiver, consent or amendment shall be signed by
the Designating Lender as administrative agent for the Designated Lender and
shall not be signed by the Designated Lender on its own behalf and shall be
binding upon the Designated Lender to the same extent as if signed by the
Designated Lender on its own behalf. The Borrower, the Administrative Agent, and
the Banks may rely thereon with out any requirement that the Designated Lender
sign or acknowledge the same. No Designated Lender may assign or transfer all or
any portion of its interest hereunder or under any other Loan Document, other
than assignments to the Designating Lender which originally designated such
Designated Lender or otherwise in accordance with the provisions of Section
9.6(b) and (c).
(e) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note and the Letter(s) of Credit
participated in by such Bank or, in the case of the Fronting Bank, issued by it,
to a Federal Reserve Bank, and any Bank which is a fund that invests in bank
loans may pledge all or any portion of its Note or Loans to a transferee in
support of its obligations to such transferee. No such assignment shall release
the transferor Bank from its obligations hereunder.
(f) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.3 or 8.4
than such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provi-
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sions of Section 8.2, 8.3 or 8.4 requiring such Bank to designate a different
Applicable Lending Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
(g) The Administrative Agent shall maintain at its address
referred to on the signature pages hereof a copy of each Assignment and
Assumption Agreement delivered to and accepted by it and a register (the
"Register") for the recordation of the names and addresses of the Banks, the
Commitment of, and the principal amount of the Loans under the Commitments owing
to, each Bank from time to time and whether such Bank is an original Bank or the
assignee of another Bank pursuant to an Assignment and Assumption Agreement. The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower and each of its Subsidiaries, the Administra
tive Agent and the other Banks may treat each Person whose name is recorded in
the Register as a Bank hereunder for all purposes of this Agreement and the Loan
Documents. The Register shall be available for inspection by the Borrower or any
Bank at any reasonable time and from time to time upon reasonable prior notice.
No assignment pursuant to this Section 9.6 will be effective unless and until it
is recorded in the Register.
Section 9.7. Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of any
judgment in respect thereof may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, the Borrower hereby accepts
for itself and in respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and appellate courts
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from any thereof. The Borrower irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
hand delivery, or mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address set forth below. The Borrower
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement or any other Loan Document brought in
the courts referred to above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum. Nothing
herein shall affect the right of the Administrative Agent, any Bank or any
holder of a Note to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Borrower in any
other jurisdiction.
Section 9.8. Marshaling; Recapture. Neither the Administrative
Agent nor any Bank shall be under any obligation to marshal any assets in favor
of the Borrower or any other party or against or in payment of any or all of the
Obligations. To the extent any Bank receives any payment by or on behalf of the
Borrower, which payment or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
the Borrower or its estate, trustee, receiver, custodian or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such payment or repayment, the Obligation or part thereof
which has been paid, reduced or satisfied by the amount so repaid shall be
reinstated by the amount so repaid and shall be included within the liabilities
of the Borrower to such Bank as of the date such initial payment, reduction or
satisfaction occurred.
Section 9.9. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
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hereof. This Agreement shall become effective upon receipt by the Administrative
Agent of counterparts hereof signed by each of the parties hereto (or, in the
case of any party as to which an executed counterpart shall not have been
received, receipt by the Administrative Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party).
Section 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
Administrative Agent AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.11. Survival. All indemnities set forth herein
shall survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder.
Section 9.12. Domicile of Loans. Subject to the provisions of
Article VIII, each Bank may transfer and carry its Loans at, to or for the
account of any domestic or foreign branch office, subsidiary or affiliate of
such Bank.
Section 9.13. Limitation of Liability. No claim may be made
by the Borrower or any other Person against the Administrative Agent or any Bank
or the affiliates, directors, officers, employees, attorneys or agent of any of
them for any consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the trans actions contemplated by this Agreement or by the other Loan Documents,
or any act, omission or event occurring in connection therewith; and the
Borrower hereby waives, releases and agrees not to sue upon any claim for any
such damages, whether or not accrued and whether or not known or suspected to
exist in its favor.
Section 9.14. No Bankruptcy Proceedings. Each of the Borrower,
the Banks, the Administrative Agent and the Co-Agents hereby agrees that it will
not institute against any Designated Lender or join any other Person in
instituting against any Designated Lender any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding under any federal or state
bankruptcy or similar law, until the later to occur of (i) one year and one day
after the payment in full of the latest maturing commercial paper note issued by
such Designated Lender and (ii) the Maturity Date.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
MEDITRUST CORPORATION, a Delaware
corporation
By: /s/ Michael S. Benjamin
-------------------------------------
Name: Michael S. Benjamin
Title: Senior Vice President
Suite 300
197 First Avenue
Needham, Massachusetts 02494
Telephone Number: 781-433-6000
Telecopy Number: 781-449-1530
Attention: President
<PAGE>
Commitments:
$215,000,000 Tranche A MORGAN GUARANTY TRUST COMPANY
$107,500,000 Tranche B OF NEW YORK, as a Bank and as
$148,750,000 Tranche C Administrative Agent
$140,000,000 Tranche D
By: /s/ Timothy V. O'Donovan
-------------------------------------
Name: Timothy V. O'Donovan
Title: Vice President
<PAGE>
Commitments:
$215,000,000 Tranche A BANKERS TRUST COMPANY, as a Bank
$107,500,000 Tranche B and as Syndication Agent
$ 5,000,000 Tranche C
$120,000,000 Tranche D
By: /s/ G. Andrew Keith
-------------------------------------
Name: G. Andrew Keith
Title: Vice President
<PAGE>
Commitments:
$215,000,000 Tranche A FLEET NATIONAL BANK, as a Bank and
$107,500,000 Tranche B as Co-Documentation Agent
$ 5,000,000 Tranche C
$120,000,000 Tranche D
By: /s/ Cliff Mellor
-------------------------------------
Name: Cliff Mellor
Title: Vice President
<PAGE>
Commitments:
$215,000,000 Tranche A BANKBOSTON, N.A., as a Bank and as
$107,500,000 Tranche B Co-Documentation Agent
5,000,000 Tranche C
$120,000,000 Tranche D
By: /s/ Douglas Novitch
---------------------------------------
Name: Douglas Novitch
Title: Vice President
<PAGE>
Commitments:
$100,000,000 Tranche A NATIONSBANK, N.A., as a Bank
$50,000,000 Tranche B
By: /s/ F. Scott Singhof
---------------------------------------
Name: F. Scott Singhof
Title: Senior Vice President
<PAGE>
Commitments:
$33,300,000 Tranche A VIA BANQUE, as a Bank
$16,700,000 Tranche B
By: /s/ J.F. Vitt
-------------------------------------
Name: J.F. Vitt
Title: DGA
<PAGE>
Commitments:
$6,700,000 Tranche A OAK BROOK BANK, as a Bank
$3,300,000 Tranche B
By: /s/ Jeffrey W. Brown
---------------------------------------
Name: Jeffrey W. Brown
Title: Executive Vice President
<PAGE>
Commitments:
$30,000,000 Tranche C PARIBAS CAPITAL FUNDING LLC, as a
Bank
By: /s/ Jeffrey J. Youle
-------------------------------------
Name: Jeffrey J. Youle
Title: Director
<PAGE>
Commitments:
$25,000,000 Tranche C THE TRAVELERS INSURANCE COMPANY,
as a Bank
By: /s/ T.M. Torrey
---------------------------------------
Name: T.M. Torrey
Title: Second Vice President
<PAGE>
Commitments:
$21,250,000 Tranche C TORONTO DOMINION (TEXAS), INC., as
a Bank
By: /s/ Jorge A. Garcia
--------------------------------------
Name: Jorge A. Garcia
Title: Vice President
<PAGE>
Commitments:
$10,000,000 Tranche C CANADIAN IMPERIAL BANK OF COMMERCE, as
a Bank
By: /s/ William M. Swenson
--------------------------------------
Name: William M. Swenson
Title: Authorized Signatory
<PAGE>
Total Commitments
$2,250,000,000.00
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative
Agent
By: /s/ Timothy V. O'Donovan
------------------------------------
Name: Timothy V. O'Donovan
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention: Timothy O'Donovan
Telephone number: (212) 648-8111
Telecopy number: (212) 648-5249
Domestic and Euro-Currency
Lending Office:
Nassau, Bahamas Office
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19173-2107
Attention: William Lame
Telecopy number: (302) 634-4222
<PAGE>
EXHIBIT A-1
TRANCHE A NOTE
$ ______________ New York, New York
July__, 1998
For value received, MEDITRUST CORPORATION, a Delaware
corporation (the "Borrower") promises to pay to the order of _______________
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Tranche A Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the Maturity Date. The
Borrower promises to pay interest on the unpaid principal amount of each such
Tranche A Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of Administrative Agent under the Credit Agreement (as defined
below).
All Tranche A Loans made by the Bank, the respective types and
maturities thereof and all repayments of the principal thereof shall be recorded
by the Bank and, if the Bank so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Tranche A Loan then outstanding may be endorsed by the
Bank on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This Note is one of the Tranche A Notes referred to in the
Credit Agreement, dated as of July , 1998, among the Borrower, the Banks party
thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
MEDITRUST CORPORATION, a Delaware
corporation
By: ________________________________
Name:
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
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<PAGE>
EXHIBIT A-2
TRANCHE B NOTE
$ ______________ New York, New York
__July___, 1998
For value received, MEDITRUST CORPORATION, a Delaware
corporation (the "Borrower") promises to pay to the order of _______________
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Tranche B Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the Maturity Date. The
Borrower promises to pay interest on the unpaid principal amount of each such
Tranche B Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of Administrative Agent under the Credit Agreement (as defined
below).
All Tranche B Loans made by the Bank, the respective types and
maturities thereof and all repayments of the principal thereof shall be recorded
by the Bank and, if the Bank so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Tranche B Loan then outstanding may be endorsed by the
Bank on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This Note is one of the Tranche B Notes referred to in the
Credit Agreement, dated as of July , 1998, among the Borrower, the Banks party
thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
MEDITRUST CORPORATION, a Delaware corporation
By: _________________________________________
Name:
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
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<PAGE>
EXHIBIT A-3
TRANCHE C NOTE
$ ______________ New York, New York
________, 1998
For value received, MEDITRUST CORPORATION, a Delaware
corporation (the "Borrower") promises to pay to the order of _______________
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Tranche C Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the Maturity Date. The
Borrower promises to pay interest on the unpaid principal amount of each such
Tranche C Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of Administrative Agent under the Credit Agreement (as defined
below).
All Tranche C Loans made by the Bank, the respective types and
maturities thereof and all repayments of the principal thereof shall be recorded
by the Bank and, if the Bank so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Tranche C Loan then outstanding may be endorsed by the
Bank on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This Note is one of the Tranche C Notes referred to in the
Credit Agreement, dated as of July , 1998, among the Borrower, the Banks party
thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
MEDITRUST CORPORATION, a Delaware corporation
By: _________________________________________
Name:
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
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<PAGE>
EXHIBIT A-4
TRANCHE D NOTE
$______________ New York, New York
__July___, 1998
For value received, MEDITRUST CORPORATION, a Delaware
corporation (the "Borrower") promises to pay to the order of _______________
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Tranche D Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the Maturity Date. The
Borrower promises to pay interest on the unpaid principal amount of each such
Tranche D Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of Administrative Agent under the Credit Agreement (as defined
below).
All Tranche D Loans made by the Bank, the respective types and
maturities thereof and all repayments of the principal thereof shall be recorded
by the Bank and, if the Bank so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Tranche D Loan then outstanding may be endorsed by the
Bank on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This Note is one of the Tranche D Notes referred to in the
Credit Agreement, dated as of July , 1998, among the Borrower, the Banks party
thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
MEDITRUST CORPORATION, a Delaware corporation
By: _________________________________________
Name:
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
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<PAGE>
EXHIBIT A-5
DESIGNATED LENDER NOTE
$______________ New York, New York
________, 1998
For value received, MEDITRUST CORPORATION, a Delaware
corporation (the "Borrower") promises to pay to the order of _______________
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Tranche A Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the Maturity Date. The
Borrower promises to pay interest on the unpaid principal amount of each such
Tranche A Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of Administrative Agent under the Credit Agreement (as defined
below).
All Tranche A Loans made by the Bank, the respective types and
maturities thereof and all repayments of the principal thereof shall be recorded
by the Bank and, if the Bank so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Tranche A Loan then outstanding may be endorsed by the
Bank on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This Note is one of the Designated Lender Notes referred to in
the Credit Agreement, dated as of July , 1998, among the Borrower, the Banks
party thereto, and Morgan Guaranty Trust Company of New York, as Administrative
Agent (as the same may be amended from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
MEDITRUST CORPORATION, a Delaware corporation
By: _________________________________________
Name:
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
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<PAGE>
EXHIBIT B
Unencumbered Asset Pool Properties
<PAGE>
EXHIBIT C
FORM OF ASSIGNMENT AND ASSUMPTION
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of __________, 199_ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), MEDITRUST CORPORATION (the "Borrower")
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the
"Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Assignment") relates to the Credit Agreement dated as of ________ __, 199_ (the
"Loan Agreement") among the Borrower, the Assignor and the other Banks party
thereto, as Banks, and the Agent;
WHEREAS, as provided under the Loan Agreement, the Assignor
has a Commitment to make Loans to the Borrower in an aggregate principal amount
at any time outstanding not to exceed $__________;
WHEREAS, Loans made to the Borrower by the Assignor under the
Loan Agreement in the aggregate principal amount of $____________ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Loan Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Loans, and
the Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not
otherwise defined herein shall have the respective meanings set forth
in the Loan Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells
to the Assignee all of the rights of the Assignor under the Loan Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Loan Agreement to the extent of the Assigned Amount, including the
purchase from the Assignor of the corresponding portion of the principal amount
of the Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, the Borrower and
the Agent and the payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Bank under the
Loan Agreement with a Commitment in an amount equal to the Assigned Amount, and
(ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by
a like amount and the Assignor released from its obligations under the Loan
Agreement
<PAGE>
to the extent such obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds the amount heretofore agreed between them.1 It
is understood that fees accrued to the date hereof are for the account of the
Assignor and such fees accruing from and including the date hereof are for the
account of the Assignee. Each of the Assignor and the Assignee hereby agrees
that if it receives any amount under the Loan Agreement which is for the account
of the other party hereto, it shall receive the same for the account of such
other party to the extent of such other party's interest therein and shall
promptly pay the same to such other party.
SECTION 4. Consent of the Borrower and the Agent. This
Agreement is conditioned upon the written consent of the Borrower and the
consent of the Agent pursuant to section 9.6(c) of the Loan Agreement. The
execution of this Agreement by the Borrower and the Agent is evidence of the
required consents. Pursuant to Section 9.6(c) the Borrower agrees to execute and
deliver a Note payable to the order of the Assignee to evidence the assignment
and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Loan Agreement or any Note, except that it hereby represents
and warrants that it own the Commitments and the Loans being sold hereunder free
and clear of all adverse claims. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed
by and construed in accordance with the external laws of the State of
New York
- --------
(1) The amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any
portion of any upfront fee to be paid by the Assignor to the Assignee. It
may be preferable in an appropriate case to specify these amounts
generically or by formula rather than as a fixed sum.
<PAGE>
SECTION 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By: _________________________________________
Name:
Title:
[ASSIGNEE]
By: _________________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK
By: _________________________________________
Name:
Title:
CONSENTED TO:
MEDITRUST CORPORATION
By: ____________________________
Name:
Title:
<PAGE>
EXHIBIT D
Form of Money Market Quote Request
----------------------------------
[Date]
To: Morgan Guaranty Trust Company of New York (the "Administrative Agent")
From: Meditrust Corporation
Re: Credit Agreement (the "Credit Agreement") dated as of July 15, 1998
among Meditrust Corporation, the Banks parties thereto and the
Administrative Agent
We hereby give notice pursuant to Section 2.3 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount(2) Interest Period(3)
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the London
Interbank Offered Rate.]
The funding of Money Market Loans made in connection with this
Money Market Quote Request [may/may not] be made by Designated Lenders.
Terms used herein have the meanings assigned to them in the
Credit Agreement.
Meditrust Corporation
By: ________________________________________
Name:
Title:
- --------
(2) Amount must be $10,000,000 or a larger multiple of $500,000.
(3) Not less than one month (LIBOR Auction) or not less than 30 days (Absolute
Rate Auction), subject to the provisions of the definition of Interest Period.
<PAGE>
EXHIBIT E
Form of Invitation for Money Market Quotes
------------------------------------------
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Meditrust Corporation (the
"Borrower")
Pursuant to Section 2.3 of the Credit Agreement dated as of
July 15, 1998 among Meditrust Corporation, the Banks parties thereto and the
undersigned, as Administrative Agent, we are pleased on behalf of the Borrower
to invite you to submit Money Market Quotes to the Borrower for the following
proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the London
Interbank Offered Rate.]
Please respond to this invitation by no later than 10:00 A.M.
(New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By ____________________________________
Authorized Officer
<PAGE>
EXHIBIT F
Form of Money Market Quote
--------------------------
To: Morgan Guaranty Trust Company of New York, as Administrative
Agent
Re: Money Market Quote to Meditrust Corporation (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
-----------------------------
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- --------- --------- ------------ --------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$____________.]**
We understand and agree that the offer(s) set forth
above, subject to the satisfaction of the applicable conditions set
forth in the Credit Agreement dated as of July 15, 1998 among Meditrust
Corporation, the Banks parties thereto and yourselves, as
Administrative Agent, irrevocably obligates us to make the Money Market
Loan(s) for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By: ________________________________________
Authorized Officer
<PAGE>
EXHIBIT G
FORM OF DESIGNATION AGREEMENT
-----------------------------
Dated _____________, 199___
Reference is made to that certain Credit Agreement dated as of July 17,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among MEDITRUST CORPORATION, BANKERS TRUST COMPANY, as
Syndication Agent, BANKBOSTON, N.A., as Co-Documentation Agent, FLEET NATIONAL
BANK, as Co-Documentation Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK
(the "Administrative Agent"), as Administrative Agent. Terms defined in the
Credit Agreement are used herein with the same meaning.
[NAME OF DESIGNOR] (the "Designor"), [NAME OF DESIGNEE] (the
"Designee"), the Administrative Agent and Borrower agree as follows:
1. The Designor hereby designates the Designee, and the Designee hereby
accepts such designation, to have a right to make Money Market Loans pursuant to
Section 2.3 of the Credit Agreement. Any assignment by Designor to Designee of
its rights to make a Money Market Loan pursuant to such Article III shall be
effective at the time of the funding of such Money Market Loan and not before
such time.
2. Except as set forth in Section 7 below, the Designor makes no
representation or warranty and assumes no responsibility pursuant to this
Designation Agreement with respect to (a) any statements, warranties or
representations made in or in connection with any Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Loan Document or any other instrument and document furnished pursuant
thereto and (b) the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under any Loan Document or
any other instrument or document furnished pursuant thereto.
3. The Designee (a) confirms that it has received a copy of each Loan
Document, together with copies of the financial statements referred to in
Section 5.1 of the Credit Agreement and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Designation Agreement; (b) agrees that it will independently and
without reliance upon the Administrative Agent, the Designor or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under any Loan Document; (c) confirms that it is a Designated Lender; (d)
appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers and discretion under any Loan Document
as are delegated to the Administrative Agent by the terms thereof, together with
such powers and discretion as are reasonably incidental thereto; and (e) agrees
to be bound by each and every provision of each Loan Document and further agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of any Loan Document are required to be performed by it as a Bank,
subject to Section 9.6(d) of the Credit Agreement.
<PAGE>
4. The Designee hereby appoints Designor as Designee's agent and
attorney in fact, and grants to Designor an irrevocable power of attorney, to
receive payments made for the benefit of Designee under the Credit Agreement, to
deliver and receive all communications and notices under the Credit Agreement
and other Loan Documents and to exercise on Designee's behalf all rights to
vote and to grant and make approvals, waivers, consents of amendments to or
under the Credit Agreement or other Loan Documents, subject to Section 9.5 of
the Credit Agreement. Any document executed by the Designor on the Designee's
behalf in connection with the Credit Agreement or other Loan Documents shall be
binding on the Designee. The Borrower, the Administrative Agent and each of the
Banks may rely on and are beneficiaries of the preceding provisions.
5. Following the execution of this Designation Agreement by the
Designor and its Designee, it will be delivered to the Administrative Agent for
recording by the Administrative Agent. The effective date for this Designation
Agreement (the "Effective Date") shall be the date of receipt hereof by the
Administrative Agent, unless otherwise specified on the signature page thereto.
6. The Administrative Agent hereby agrees that it will not institute
against any Designated Lender or join any other Person in instituting against
any Designated Lender any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceeding under any federal or state bankruptcy or similar law,
until the later to occur of (i) one year and one day after the payment in full
of the latest maturing commercial paper note issued by such Designated Lender
and (ii) the Maturity Date.
7. The Designor unconditionally agrees to pay or reimburse the Designee
and save the Designee harmless against all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed or asserted by any of the
parties to the Loan Documents against the Designee (except as set forth in
Section 8 below), in its capacity as such, in any way relating to or arising out
of this Agreement or any other Loan Documents or any action taken or omitted by
the Designee hereunder or thereunder, provided that the Designor shall not be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements if the
same results from the Designee's gross negligence or willful misconduct.
8. Upon such acceptance and recording by the Administrative Agent, as
of the Effective Date, the Designee shall be a party to the Credit Agreement
with a right (subject to the provisions of Section 2.3(b)) to make Money Market
Loans as a Bank pursuant to Section 2.3 of the Credit Agreement and the rights
and obligations of a Bank related thereto; provided, however, that the Designee
shall not be required to make payments with respect to such obligations except
to the extent of excess cash flow of such Designee which is not otherwise
required to repay obligations of such Designated Lender which are then due and
payable. Notwithstanding the foregoing, the Designor, as administrative agent
for the Designee, shall be and remain obligated to the Borrower, the Co-Agents
and the Banks for each and every of the obligations of the Designee and its
Designor with respect to the Credit Agreement, including, without limitation,
any indemnification obligations
<PAGE>
under Section 7.6 of the Credit Agreement and any sums otherwise payable to the
Borrower by the Designee.
9. This Designation Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
10. This Designation Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Designation Agreement by facsimile
transmission shall be effective as delivery of a manually executed counter part
of this Designation Agreement.
<PAGE>
IN WITNESS WHEREOF, the Designor and the Designee, intending to be
legally bound, have caused this Designation Agreement to be executed by their
officers thereunto duly authorized as of the date first above written.
Effective Date: ________________________,
199__
[NAME OF DESIGNOR], as
Designor
By: _____________________________________
Title: __________________________________
[NAME OF DESIGNEE] as
Designee
By: _____________________________________
Title: __________________________________
Applicable Lending Office
(and address for notices):
[ADDRESS]
Accepted this _____ day
of __________, 19
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent
By: __________________________
Title: _______________________
<PAGE>
Exhibit H
Intentionally Deleted
<PAGE>
Exhibit I
Existing Credit Agreements
1. Revolving Credit Agreement, by and between the Borrower and Via Banque, in
the principal amount of $50,000,000.
2. Revolving Credit Agreement, by and among the Borrower, Fleet National Bank
and other lenders, in the principal amount of $300,000,000.
3. Credit Agreement, by and among La Quinta Inns, Inc., NationsBank of Texas,
N.A. and other lenders, in the principal amount of $325,000,000.
$. Credit Agreement, by and among La Quinta Inns, Inc., NationsBank of Texas,
N.A. and other lenders, in the principal amount of $75,000,000.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1. Definitions........................................................................... 1
Section 1.2. Accounting Terms and Determinations...................................................34
Section 1.3. Types of Borrowings...................................................................35
ARTICLE II
THE CREDITS
Section 2.1. Commitments to Lend...................................................................35
Section 2.2. Notice Of Committed Borrowing.........................................................37
Section 2.3. Money Market Borrowings...............................................................40
Section 2.4. Notice to Banks; Funding of Loans.....................................................45
Section 2.5. Notes.................................................................................47
Section 2.6. Maturity of Loans.....................................................................48
Section 2.7. Interest Rates........................................................................48
Section 2.8. Fees..................................................................................50
Section 2.9. Mandatory Termination.................................................................53
Section 2.10. Mandatory Prepayment..................................................................54
Section 2.11. Optional Prepayments..................................................................56
Section 2.12. General Provisions as to Payments.....................................................58
Section 2.13. Funding Losses........................................................................59
Section 2.14. Computation of Interest and Fees......................................................59
Section 2.15. Method of Electing Interest Rates.....................................................60
Section 2.16. Letters of Credit.....................................................................61
Section 2.17. Letter of Credit Usage Absolute.......................................................65
ARTICLE III
CONDITIONS
Section 3.1. Closing...............................................................................67
Section 3.2. Borrowings............................................................................69
Section 3.3 Security Conversion...................................................................71
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Existence and Power...................................................................72
Section 4.2. Power and Authority...................................................................72
Section 4.3. No Violation..........................................................................73
Section 4.4. Financial Information.................................................................73
Section 4.5. Litigation............................................................................76
Section 4.6. Compliance with ERISA.................................................................76
Section 4.7. Environmental Compliance..............................................................75
Section 4.8. Taxes.................................................................................77
Section 4.9. Full Disclosure.......................................................................77
i
<PAGE>
Section 4.10. Solvency..............................................................................77
Section 4.11. Use of Proceeds; Margin Regulations...................................................77
Section 4.12. Governmental Approvals................................................................78
Section 4.13. Investment Company Act; Public Utility
Holding Company Act...................................................................78
Section 4.14. Closing Date Transactions.............................................................78
Section 4.15. Representations and Warranties in Loan
Documents.............................................................................78
Section 4.16. Patents, Trademarks, etc..............................................................79
Section 4.17. No Default............................................................................79
Section 4.18. Licenses, etc.........................................................................79
Section 4.19. Compliance With Law...................................................................79
Section 4.20. No Burdensome Restrictions............................................................80
Section 4.21. Brokers' Fees.........................................................................80
Section 4.22. Labor Matters.........................................................................80
Section 4.23. Organizational Documents..............................................................80
Section 4.24. Principal Offices.....................................................................80
Section 4.25. REIT Status...........................................................................80
Section 4.26. Ownership of Property.................................................................81
Section 4.27. Year 2000 Compliance..................................................................81
Section 4.28. Insurance.............................................................................81
ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
Section 5.1. Information...........................................................................81
Section 5.2. Payment of Obligations................................................................85
Section 5.3. Maintenance of Property; Insurance....................................................86
Section 5.4. Conduct of Business...................................................................86
Section 5.5. Compliance with Laws..................................................................86
Section 5.6. Inspection of Property, Books and
Records...............................................................................87
Section 5.7. Existence.............................................................................87
Section 5.8. Financial Covenants...................................................................87
Section 5.9. Restriction on Fundamental Changes;
Operation and Control.................................................................89
Section 5.10. Changes in Business...................................................................90
Section 5.11. Fiscal Year; Fiscal Quarter...........................................................90
Section 5.12. Margin Stock..........................................................................90
Section 5.13. Intentionally Omitted.................................................................90
Section 5.14. Interest Rate Protection..............................................................91
Section 5.15. Investments in Unimproved Real Property...............................................91
Section 5.16. Use of Proceeds.......................................................................91
Section 5.17. Borrower Status.......................................................................92
Section 5.18. Limitations on Subsidiary Debt........................................................92
Section 5.19. Negative Pledge.......................................................................92
Section 5.20. Affiliate Transactions................................................................92
Section 5.21. Sale of Unencumbered Asset Pool.......................................................92
Section 5.22. Guarantor Subsidiary..................................................................93
ii
<PAGE>
ARTICLE VI
DEFAULTS
Section 6.1. Events of Default.....................................................................93
Section 6.2. Rights and Remedies...................................................................97
Section 6.3. Notice of Default.....................................................................98
Section 6.4. Actions in Respect of Letters of Credit...............................................98
ARTICLE VII
THE Administrative Agent
Section 7.1. Appointment and Authorization........................................................101
Section 7.2. Administrative Agent and Affiliates..................................................101
Section 7.3. Action by Administrative Agent.......................................................101
Section 7.4. Consultation with Experts............................................................101
Section 7.5. Liability of Administrative Agent....................................................101
Section 7.6. Indemnification......................................................................102
Section 7.7. Credit Decision......................................................................102
Section 7.8. Successor Administrative Agent.......................................................103
Section 7.9. Administrative Agent's Fee...........................................................103
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.1. Basis for Determining Interest Rate
Inadequate or Unfair.................................................................104
Section 8.2. Illegality...........................................................................104
Section 8.3. Increased Cost and Reduced Return....................................................106
Section 8.4. Taxes................................................................................108
Section 8.5. Base Rate Loans Substituted for Affected
Euro-Dollar Loans....................................................................111
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notices..............................................................................112
Section 9.2. No Waivers...........................................................................113
Section 9.3. Expenses; Indemnification............................................................113
Section 9.4. Sharing of Set-Offs..................................................................115
Section 9.5. Amendments and Waivers...............................................................116
Section 9.6. Successors and Assigns...............................................................117
Section 9.7. Governing Law; Submission to Jurisdiction............................................121
Section 9.8. Marshaling; Recapture................................................................122
Section 9.9. Counterparts; Integration;
Effectiveness........................................................................122
Section 9.10. WAIVER OF JURY TRIAL.................................................................123
Section 9.11. Survival.............................................................................123
Section 9.12. Domicile of Loans....................................................................123
Section 9.13. Limitation of Liability..............................................................123
Section 9.14. No Bankruptcy Proceedings............................................................123
</TABLE>
iii
<PAGE>
Exhibit A-1 - Form of Tranche A Note
Exhibit A-2 - Form of Tranche B Note
Exhibit A-3 - Form of Tranche C Note
Exhibit A-4 - Form of Tranche D Note
Exhibit A-5 - Designated Lender Note
Exhibit B - Unencumbered Asset Pool Properties
Exhibit C - Assignment and Assumption Agreement
Exhibit D - Form of Money Market Quote Request
Exhibit E - Form of Invitation for Money Market
Quotes
Exhibit F - Form of Money Market Quote
Exhibit G - Form of Designation Agreement
Exhibit H - Intentionally Deleted
Exhibit I - Existing Credit Agreements
Exhibit J - Existing Letters of Credit
Schedule 4.22- Labor Matters
Schedule 5.18- Existing Subsidiary Debt
iv
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of June 30, 1998 and the Consolidated Statement of
Income for the six months ended June 30, 1998 of Meditrust Corporation and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000313749
<NAME> MEDITRUST CORPORATON
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 43,315
<SECURITIES> 0
<RECEIVABLES> 68,996
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,201,773
<DEPRECIATION> 153,435
<TOTAL-ASSETS> 3,876,824
<CURRENT-LIABILITIES> 0
<BONDS> 1,336,608
0
70
<COMMON> 2,695,896
<OTHER-SE> (202,615)
<TOTAL-LIABILITY-AND-EQUITY> 3,876,824
<SALES> 0
<TOTAL-REVENUES> 209,496
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,112
<INCOME-PRETAX> 102,637
<INCOME-TAX> 0
<INCOME-CONTINUING> 102,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,637
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of June 30, 1998 and the Consolidated Statement of
Operations for the six months ended June 30, 1998 of Meditrust Operating Company
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000314661
<NAME> MEDITRUST OPERATING COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 18,261
<SECURITIES> 0
<RECEIVABLES> 7,424
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,357
<PP&E> 29,856
<DEPRECIATION> 1,933
<TOTAL-ASSETS> 152,211
<CURRENT-LIABILITIES> 64,518
<BONDS> 0
0
0
<COMMON> 68,326
<OTHER-SE> (3,826)
<TOTAL-LIABILITY-AND-EQUITY> 152,211
<SALES> 0
<TOTAL-REVENUES> 63,383
<CGS> 0
<TOTAL-COSTS> 49,248
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,058
<INCOME-PRETAX> (3,226)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,226)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,226)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
