SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
<TABLE>
<S> <C>
Meditrust Corporation Meditrust Operating Company
- ------------------------------------------------ ------------------------------------------------
(Name of Registrant as Specified In Its Charter) (Name of Registrant as Specified In Its Charter)
</TABLE>
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
The Meditrust Companies
A Real Estate Investment Trust
- --------------------------------------------------------------------------------
, 1999
Dear Fellow Stockholder:
We are asking you to consider and vote on two important proposals, which
are summarized below, to better position The Meditrust Companies for the
business challenges and opportunities that lie ahead:
o The Restated Certificates of Incorporation of The Meditrust Companies,
as amended to date, will be amended and restated in their entirety.
The existing provisions will be continued in the Amended and Restated
Certificates of Incorporation (the "Amended Certificates") and new
provisions calling for increasing our authorized capital stock and the
pairing of the common stock of each of The Meditrust Companies with
the common stock of the other company will be added. The Amended
Certificates will not contain any new so-called "anti-takeover"
devices.
o The Pairing Agreement, as amended, between The Meditrust Companies
will be terminated. The termination of the Pairing Agreement will not,
however, terminate the paired share structure of The Meditrust
Companies as the Amended Certificates' pairing provisions are intended
to preserve this structure for the immediate future. The termination
of the Pairing Agreement will automatically terminate a provision of
the By-laws of each of The Meditrust Companies, principally requiring
the pairing of certain classes of The Meditrust Companies' capital
stock.
The primary purposes of these proposals are to permit each of The Meditrust
Companies to issue unpaired shares of its capital stock, as well as to enable
The Meditrust Companies' Boards of Directors to terminate, when and if
appropriate, the pairing of The Meditrust Companies' capital stock, in each
case, without further action by the stockholders of either company. At this
time, the Boards of Directors intend to preserve the pairing of The Meditrust
Companies' common stock through the spin-off of the health care business. We
believe that the ability to issue unpaired shares of capital stock will
facilitate The Meditrust Companies' capital raising and formation efforts. In
addition, we believe that the ability to issue unpaired shares of capital stock,
as well as the ability to terminate the pairing of The Meditrust Companies'
capital stock, will permit The Meditrust Companies to efficiently respond in a
timely manner to the challenges presented by recently adopted federal
legislation which limits the future use of the paired share structure. Finally,
we believe that the ability to issue unpaired shares of capital stock may permit
The Meditrust Companies to capitalize on further opportunities to enhance
stockholder value.
These proposals are described in detail in the accompanying Joint Proxy
Statement, which we urge you to read in its entirety, including the section
"Risk Factors" commencing on page 4 of the Joint Proxy Statement. We are also
enclosing a brochure for your review which describes the comprehensive
restructuring plan that we announced on November 12, 1998, the status of our
efforts in implementing the restructuring plan and how these proposals fit into
that plan. You should note, however, that you are being asked to vote only on
the proposals described in the Joint Proxy Statement and that you are not being
asked to approve or ratify the restructuring plan.
THE MEDITRUST COMPANIES' BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND YOU
VOTE "FOR" APPROVAL AND ADOPTION OF BOTH OF THE PROPOSALS BY SIGNING, DATING
AND PROMPTLY RETURNING THE PROXY CARDS TO US IN THE POSTAGE-PAID ENVELOPE.
The Special Meetings of Stockholders will be held on , 1999.
To assure that your vote on these proposals is counted, please return the
enclosed proxy cards as soon as practicable. If you have additional questions
or need assistance with the proper completion and return of your proxy cards,
please call D.F. King & Co., Inc., The Meditrust Companies' proxy solicitation
firm, toll-free at 1-800-848-3410.
We believe that we have developed a promising plan for The Meditrust
Companies' future and we have already begun to successfully implement this
plan. However, more work needs to be done to ensure The Meditrust Companies'
success in the new business environment.
Thank you for your prompt attention to this important matter.
Very truly yours,
/s/ Thomas M. Taylor /s/ David F. Benson /s/ William C. Baker
Thomas M. Taylor David F. Benson William C. Baker
Interim Chairman of President of President of Meditrust
the Boards of Directors of Meditrust Corporation Operating Company
The Meditrust Companies
<PAGE>
[Preliminary Joint Proxy Statement]
[To be released as soon as practicable, but not sooner than on or about
March 29, 1999]
MEDITRUST CORPORATION
197 First Avenue, Suite 300
Needham, Massachusetts 02494
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999
------------------------
A Special Meeting of Stockholders of Meditrust Corporation ("Meditrust")
will be held at the Goodwin, Procter & Hoar LLP Conference Center, Second
Floor, 53 State Street, Boston, Massachusetts 02109 on ,
, 1999 at 10:00 a.m., local time, (together with all adjournments and
postponements thereof, the "Meditrust Meeting"), to consider and act upon the
following related proposals:
1. To approve and adopt the Amended and Restated Certificate of
Incorporation of Meditrust (the "Amended Meditrust Certificate"), which will
include (i) an increase in the amount of authorized common stock, (ii)
requirements, which are waiveable or terminable by Meditrust's Board of
Directors, to "pair" shares of common stock of Meditrust with shares of common
stock of Meditrust Operating Company, a Delaware corporation ("Operating
Company"), and (iii) the terms and provisions which are presently in
Meditrust's Restated Certificate of Incorporation, as amended to date (the
"Existing Meditrust Certificate"). A copy of the proposed Amended Meditrust
Certificate is attached as Annex A of this Joint Proxy Statement.
2. To terminate the Pairing Agreement, dated as of December 20, 1979, as
amended, by and between Meditrust and Operating Company (the "Pairing
Agreement"), upon the filing of each of the Amended Meditrust Certificate and
the Amended and Restated Certificate of Incorporation of Operating Company. A
copy of the Pairing Agreement, as amended to date, is attached as Annex C of
this Joint Proxy Statement.
3. Such other business as may properly come before the Meditrust Meeting.
The primary purposes of these proposals are: (i) to enable Meditrust to issue
unpaired shares of its capital stock, and (ii) when and if appropriate, to
enable the Board of Directors to terminate the pairing of capital stock of each
of Meditrust and Operating Company. At this time, the Board of Directors
intends to preserve the pairing of capital stock through the spin-off of the
health care business. See "Future Waiver or Termination of the Pairing
Requirements" beginning on page 14.
The Board of Directors of Meditrust has fixed the close of business on
, 1999 as the record date for determining the stockholders
having the right to receive notice of and to vote at the Meditrust Meeting.
Only stockholders of record of Meditrust's common stock, par value $.10 per
share ("Meditrust Common Stock"), at the close of business on such date are
entitled to notice of and to vote at the Meditrust Meeting. A list of
stockholders entitled to vote at the Meditrust Meeting will be available during
ordinary business hours at the offices of Goodwin, Procter & Hoar LLP, 53 State
Street, Boston, Massachusetts 02109 and also at Meditrust's executive offices,
197 First Avenue, Suite 300, Needham, Massachusetts 02494, at least (10) ten
days prior to the Meditrust Meeting, for examination by any Meditrust
stockholder for purposes germane to the Meditrust Meeting.
The Board of Directors of Meditrust recommends that you vote "FOR"
approval and adoption of the Amended Meditrust Certificate, "FOR" approval of
the termination of the Pairing Agreement and "FOR" approval of each of the
other proposals presented at the Meditrust Meeting. When considering each of
these proposals, we encourage you to read the Joint Proxy Statement in its
entirety, including the section captioned "Risk Factors" beginning on page 4.
Your vote is important. The approval and adoption of the Amended Meditrust
Certificate requires the affirmative vote of a majority of the outstanding
shares of Meditrust Common Stock entitled to vote at the Meditrust Meeting. The
approval of the termination of the Pairing Agreement requires the affirmative
vote of two-thirds of the outstanding shares of Meditrust Common Stock entitled
to vote at the Meditrust Meeting. Whether or not you expect to attend the
Meditrust Meeting, please promptly sign and mail the enclosed white proxy card
which is being solicited on behalf of the Board of Directors of Meditrust. A
return envelope which requires no postage if mailed in the United States is
enclosed for that purpose.
Failure to return a properly executed proxy will have the same effect as a
vote against the approval and adoption of the Amended Meditrust Certificate and
against the termination of the Pairing Agreement unless you vote in person at
the Meditrust Meeting.
By Order of the Board of Directors of
MEDITRUST CORPORATION
DAVID F. BENSON
President
Needham, Massachusetts
, 1999
<PAGE>
MEDITRUST OPERATING COMPANY
197 First Avenue, Suite 100
Needham, Massachusetts 02494
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999
------------------------
A Special Meeting of Stockholders of Meditrust Operating Company
("Operating Company") will be held at the Goodwin, Procter & Hoar LLP
Conference Center, Second Floor, 53 State Street, Boston, Massachusetts 02109
on , , 1999 at 10:30 a.m., local time, (together with
all adjournments and postponements thereof, the "Operating Company Meeting"),
to consider and act upon the following related proposals:
1. To approve and adopt the Amended and Restated Certificate of
Incorporation of Operating Company (the "Amended Operating Company
Certificate"), which will include (i) an increase in the amount of authorized
common stock, (ii) requirements, which are waiveable or terminable by Operating
Company's Board of Directors, to pair shares of common stock of Operating
Company with shares of common stock of Meditrust Corporation, a Delaware
corporation ("Meditrust"), and (iii) the terms and provisions which are
presently in Operating Company's Restated Certificate of Incorporation, as
amended to date (the "Existing Operating Company Certificate"). A copy of the
proposed Amended Operating Company Certificate is attached as Annex B to this
Joint Proxy Statement.
2. To terminate the Pairing Agreement, dated as of December 20, 1979, as
amended (the "Pairing Agreement"), by and between Operating Company and
Meditrust, upon filing of each of the Amended Operating Company Certificate and
the Amended and Restated Certificate of Incorporation of Meditrust. A copy of
the Pairing Agreement, as amended to date, is attached as Annex C to this Joint
Proxy Statement.
3. Such other business as may properly come before the Operating Company
Meeting.
The primary purposes of these proposals are: (i) to enable Operating Company to
issue unpaired shares of its capital stock, and (ii) when and if appropriate,
to enable the Board of Directors to terminate the pairing of capital stock of
each of Meditrust and Operating Company. At this time, the Board of Directors
intends to preserve the pairing of capital stock through the spin-off of the
health care business. See "Future Waiver or Termination of the Pairing
Requirements" beginning on page 14.
The Board of Directors of Operating Company has fixed the close of
business on , 1999 as the record date for determining the
stockholders having the right to receive notice of and to vote at the Operating
Company Meeting. Only stockholders of record of Operating Company's common
stock, par value $.10 per share ("Operating Company Common Stock"), at the
close of business on such date are entitled to notice of and to vote at the
Operating Company Meeting. A list of stockholders entitled to vote at the
Operating Company Meeting will be available during ordinary business hours at
the offices of Goodwin, Procter & Hoar LLP, 53 State Street, Boston,
Massachusetts 02109 and also at Operating Company's executive offices, 197
First Avenue, Suite 100, Needham, Massachusetts 02494, at least ten (10) days
prior to the Operating Company Meeting, for examination by any Operating
Company stockholder for purposes germane to the Operating Company Meeting.
The Board of Directors of Operating Company recommends that you vote "FOR"
approval and adoption of the Amended Operating Company Certificate, "FOR"
approval of the termination of the Pairing Agreement and "FOR" approval of each
of the other proposals presented at the Operating Company Meeting. When
considering each of these proposals, we encourage you to read the Joint Proxy
Statement in its entirety, including the section captioned "Risk Factors"
beginning on page 4.
Your vote is important. The approval and adoption of the Amended Operating
Company Certificate requires the affirmative vote of a majority of the
outstanding shares of Operating Company Common Stock entitled to vote at the
Operating Company Meeting. The approval of the termination of the Pairing
Agreement requires the affirmative vote of two-thirds of the outstanding shares
of Operating Company Common Stock entitled to vote at the Operating Company
Meeting. Whether or not you expect to attend the Operating Company Meeting,
please promptly sign and mail the enclosed blue proxy card which is being
solicited on behalf of the Board of Directors of Operating Company. A return
envelope which requires no postage if mailed in the United States is enclosed
for that purpose.
Failure to return a properly executed proxy will have the same effect as a
vote against the approval and adoption of the Amended Operating Company
Certificate and against the termination of the Pairing Agreement unless you
vote in person at the Operating Company Meeting.
By Order of the Board of Directors of
MEDITRUST OPERATING COMPANY
GILBERT G. MENNA
Secretary
Needham, Massachusetts
, 1999
<PAGE>
THE MEDITRUST AND OPERATING COMPANY MEETINGS
This Joint Proxy Statement is furnished in connection with the
solicitation of proxies from the holders of the common stock of each of
Meditrust Corporation, a Delaware Corporation ("Meditrust") and Meditrust
Operating Company, a Delaware corporation ("Operating Company" and together
with Meditrust, "The Meditrust Companies"), which shares are paired and traded
as a single unit on the New York Stock Exchange (the "Paired Shares"), by the
Boards of Directors of Meditrust and Operating Company for use at the Meditrust
Meeting and the Operating Company Meeting (as each is defined below). This
Joint Proxy Statement and accompanying forms of proxy are first being mailed to
the respective stockholders of The Meditrust Companies on or about
, 1999.
Purpose of the Meetings
Meditrust
At a special meeting of the stockholders of Meditrust to be held at the
Goodwin, Procter & Hoar LLP Conference Center, Second Floor, 53 State Street,
Boston, Massachusetts on , 1999, at 10:00 a.m. local time
(together with all adjournments and postponements thereof, the "Meditrust
Meeting"), holders of Meditrust common stock, par value $.10 per share,
("Meditrust Common Stock") will consider and vote upon:
(1) a proposal to approve and adopt the Amended and Restated
Certificate of Incorporation of Meditrust (the "Amended Meditrust
Certificate"), attached hereto as Annex A, which will include (i) an
increase in the amount of authorized common stock, (ii) requirements which
are waiveable or terminable by Meditrust's Board of Directors, to pair
shares of Meditrust Common Stock with shares of Operating Company common
stock, par value $.10 per share ("Operating Company Common Stock") and
(iii) the terms and provisions which are presently in Meditrust's Restated
Certificate of Incorporation, as amended to date (the "Existing Meditrust
Certificate");
(2) a proposal to approve the termination of the Pairing Agreement,
dated as of December 20, 1979, as amended, by and between Meditrust and
Operating Company (the "Pairing Agreement"); and
(3) such other matters as may properly be brought before the Meditrust
Meeting.
THE MEDITRUST BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL AND ADOPTION OF THE AMENDED MEDITRUST CERTIFICATE AND FOR APPROVAL OF
THE TERMINATION OF THE PAIRING AGREEMENT.
IN CONSIDERING EACH OF THESE PROPOSALS, WE URGE YOU TO READ THE JOINT
PROXY STATEMENT IN ITS ENTIRETY, INCLUDING THE SECTION CAPTIONED "RISK FACTORS"
BEGINNING ON PAGE 4.
Operating Company
At a special meeting of the stockholders of Operating Company to be held
at the Goodwin, Procter & Hoar LLP Conference Center, Second Floor, 53 State
Street, Boston, Massachusetts on , 1999, at 10:30 a.m. local time
(together with all adjournments and postponements thereof, the "Operating
Company Meeting"), holders of Operating Company Common Stock will consider and
vote upon:
(1) a proposal to approve and adopt the Amended and Restated
Certificate of Incorporation of Operating Company (the "Amended Operating
Company Certificate" and together with the Amended Meditrust Certificate,
the "Amended Certificates"), attached hereto as Annex B, which will include
(i) an increase in the amount of authorized common stock, (ii)
requirements, which are waiveable or terminable by Operating Company's
Board of Directors, to pair shares of Operating Company Common Stock with
shares of Meditrust Common Stock and (iii) the terms and provisions which
are presently in Operating Company's Restated Certificate of Incorporation,
as amended to date (the "Existing Operating Company Certificate" and
together with the Existing Meditrust Certificate, the "Existing
Certificates");
(2) a proposal to terminate the Pairing Agreement; and
(3) such other matters as may properly be brought before the Operating
Company Meeting.
THE OPERATING COMPANY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR APPROVAL AND ADOPTION OF THE AMENDED OPERATING COMPANY CERTIFICATE AND
FOR APPROVAL OF THE TERMINATION OF THE PAIRING AGREEMENT.
IN CONSIDERING EACH OF THESE PROPOSALS, WE URGE YOU TO READ THE JOINT
PROXY STATEMENT IN ITS ENTIRETY, INCLUDING THE SECTION CAPTIONED "RISK FACTORS"
BEGINNING ON PAGE 4.
<PAGE>
Record Date; Voting Rights; Proxies
The Meditrust Companies have fixed the close of business on
, 1999 as the record date (the "Companies Record Date") for determining
holders of Paired Shares entitled to notice of and to vote at each of the
Meditrust Meeting and the Operating Company Meeting (collectively, the
"Companies Meetings"). Only holders of Paired Shares at the close of business
on the Companies Record Date will be entitled to notice of and to vote at the
Companies Meetings. As of the Companies Record Date, there were outstanding and
entitled to vote shares of Meditrust Common Stock and
shares of Operating Company Common Stock. Shares held in the treasury of
Meditrust or Operating Company are not considered outstanding. There were
holders of record of Meditrust Common Stock and holders of
record of Operating Company Common Stock as of the Companies Record Date.
All Paired Shares that are entitled to vote and are represented at the
Companies Meetings by properly executed proxies received prior to or at the
respective meeting will be voted at the meeting in accordance with the
instructions indicated on the proxies. If no instructions are given on the
proxy cards, they will be voted "FOR" approval and adoption of the respective
proposals set forth thereon. If any other matters are properly presented at the
Meditrust Meeting or the Operating Company Meeting for consideration, including
consideration of a motion to adjourn such meeting to another time and/or place
(including, without limitation, for the purposes of soliciting additional
proxies), the persons named in the enclosed forms of proxy will have discretion
to vote on such matters in accordance with their best judgment. However,
proxies voted against the proposals will not be voted in favor of adjournment
in order to continue to solicit proxies. Pursuant to the respective By-laws of
each of The Meditrust Companies, no notice of an adjourned meeting need be
given other than announcement at the respective meeting, except where the
meeting is adjourned for 30 days or more.
A stockholder who has given a proxy may revoke it at any time before it is
exercised by giving written notice to the Secretary of Meditrust or Operating
Company, as the case may be, by signing and returning a later dated proxy, or
by voting in person at the Meditrust Meeting or the Operating Company Meeting,
as the case may be; however, mere attendance at the Meditrust Meeting or the
Operating Company Meeting will not in and of itself have the effect of revoking
the proxy.
Solicitation of Proxies
Meditrust and Operating Company will bear equally the costs of
solicitation of proxies and of preparing, printing and mailing this Joint Proxy
Statement. Brokerage houses, fiduciaries, nominees and others will be
reimbursed for their out-of-pocket expenses in forwarding proxy materials to
beneficial owners of Paired Shares held in their names. In addition to the
solicitation of proxies by use of the mails, proxies may be solicited from
holders of Paired Shares by directors, officers and employees of The Meditrust
Companies in person or by telephone, telegraph, facsimile or other appropriate
means of communications. No additional compensation, except for reimbursement
of reasonable out-of-pocket expenses, will be paid to these directors, officers
and employees of The Meditrust Companies in connection with the solicitation.
In addition, D.F. King & Co., Inc., a proxy solicitation firm, has been engaged
by The Meditrust Companies to act as proxy solicitor and will receive fees
estimated at $100,000, plus reimbursement of out-of-pocket expenses.
Quorum
The holders of a majority of the common stock issued and outstanding and
entitled to vote, present in person or represented by proxy, shall constitute a
quorum at each of the Companies Meetings. Votes cast in person or by proxy at
the Meditrust Meeting and the Operating Company Meeting will be tabulated by
the inspector of elections appointed for each respective meeting and will
determine whether or not a quorum is present. The inspector of elections will
treat abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum, but as unvoted for purposes of
determining the approval of any matter submitted to the shareholders for a
vote. Broker non-votes (i.e., proxies on which a broker or nominee indicates
that it does not have discretionary authority as to certain shares to vote on a
particular matter) will also be considered present for the purposes of
determining the presence of a quorum, but unvoted with respect to that
particular matter.
2
<PAGE>
Required Vote
Meditrust Voting Requirements. The approval and adoption of the Amended
Meditrust Certificate requires the affirmative vote of holders of a majority of
the outstanding shares of Meditrust Common Stock entitled to vote at the
Meditrust Meeting, which shall be duly convened and at which a quorum is
present. The approval of the termination of the Pairing Agreement requires the
affirmative vote of the holders of two-thirds of the outstanding shares of
Meditrust Common Stock entitled to vote at the Meditrust Meeting, which shall
be duly convened and at which a quorum is present. Abstentions and broker
non-votes will have the effect of a vote against the approval and adoption of
the Amended Meditrust Certificate and against the approval of the termination
of the Pairing Agreement.
As of , 1999, the directors and officers of Meditrust
beneficially owned approximately 4.2% of the outstanding Meditrust Common Stock
and have expressed their intention to vote in favor of the approval and
adoption of the Amended Meditrust Certificate and in favor of the approval of
the termination of the Pairing Agreement.
Operating Company Voting Requirements. The approval and adoption of the
Amended Operating Company Certificate requires the affirmative vote of holders
of a majority of the outstanding shares of the Operating Company Common Stock
entitled to vote at the Operating Company Meeting, which shall be duly convened
and at which a quorum is present. The approval of the termination of the
Pairing Agreement requires the affirmative vote of the holders of two-thirds of
the outstanding shares of Operating Company Common Stock entitled to vote at
the Operating Company Meeting, which shall be duly convened and at which a
quorum is present. Abstentions and broker non-votes will have the effect of a
vote against the approval and adoption of the Amended Operating Company
Certificate and against the approval of the termination of the Pairing
Agreement.
As of , 1999, the directors and officers of Operating
Company beneficially owned approximately 4.2% of the outstanding Operating
Company Common Stock and have expressed their intention to vote in favor of the
approval and adoption of the Amended Operating Company Certificate and in favor
of the approval of the termination of the Pairing Agreement.
3
<PAGE>
RISK FACTORS
As a stockholder of each of The Meditrust Companies, you are being asked
to consider and vote upon the proposals described in this Joint Proxy
Statement. In evaluating these proposals you should review and consider all of
the information set forth in this Joint Proxy Statement, including the
potential risks described below, including risks related to the adoption of the
proposals described in this Joint Proxy Statement.
Forward Looking Statements Legend
Certain matters discussed within this Joint Proxy Statement may constitute
"forward-looking statements" within the meaning of the federal securities laws.
Although The Meditrust Companies believe the statements are based on reasonable
assumptions, they can give no assurance that their expectations will be
attained. Actual results and the 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 conditions of the capital markets at
the time of the proposed spin-off of the health care division, the
identification of satisfactory prospective buyers for the non-strategic assets
which have not yet been sold and the availability of financing for such
prospective buyers, the availability of equity and debt financing for The
Meditrust Companies' capital investment program, interest rates, competition
for hotel services and health care facilities in a given market and other risks
detailed from time to time in the filings of The Meditrust Companies with the
Securities and Exchange Commission ("SEC"), including the Joint Annual Report
on Form 10-K/A for the year ended December 31, 1997 and other periodic filings
under the Securities Exchange Act of 1934, as amended.
The Bass Group and Other Stockholders Could Increase Their Holdings in
Meditrust
Upon approval and adoption of the proposals, certain stockholders of The
Meditrust Companies, including Thomas M. Taylor, the Interim Chairman of the
Board of Directors of The Meditrust Companies, certain stockholders affiliated
with Thomas M. Taylor & Co. and certain members of the Bass family
(collectively, the "Bass Group"), could increase their ownership in Meditrust
up to an aggregate of 13%, subject to applicable real estate investment trust
("REIT") qualification tests. See "Proposal 1--Approve and Adopt the Respective
Amended and Restated Certificates of Incorporation of Each of The Meditrust
Companies--Background" beginning on page 7. Some or all of this increase could
be accomplished through an offering or offerings, whose terms are yet to be
decided, of unpaired Meditrust Common Stock or unpaired preferred stock of
Meditrust that is convertible into Paired Shares. Any offering would be
conducted pursuant to applicable law and the rules and regulations of the New
York Stock Exchange. The approval of the proposals presented in this Joint
Proxy Statement will provide The Meditrust Companies with more options in
structuring investments in which the Bass Group may participate to increase
their holdings in Meditrust. Accordingly, stockholders, such as the Bass Group,
may be able to exert a greater influence, including greater voting control,
over the affairs of Meditrust. In addition, to the extent that these affiliated
stockholders have greater interests in one of The Meditrust Companies than in
the other, their interests may not be completely aligned with other holders of
Paired Shares. Accordingly, a combination of their ability to exert greater
influence over the affairs of Meditrust and their potential divergence of
interests from other holders of Paired Shares, could result in Meditrust taking
actions that benefit holders of Meditrust Common Stock that may not benefit
holders of the Paired Shares. See "Interests of Certain Persons in Matters to
be Acted Upon" beginning on page 18.
Timing and Method of Future Waiver or Termination of Pairing Provisions
Uncertain
The Meditrust Companies have not determined the timing or method of any
specific waiver or termination of the pairing requirements that are contained
in the Amended Certificates. The Boards of Directors have considered general
situations for which a waiver of the pairing requirements may be utilized, for
example, in connection with an offering or placement of unpaired securities in
a capital raising transaction or in connection with an acquisition in which,
for reasons specific to the transaction, unpaired securities are necessary or
appropriate. See "Future Waiver or Termination of the Pairing
Requirements--Waiver" on page 14. With respect to any such issuance of unpaired
securities, the Boards of Directors must still fulfill their fiduciary duties,
as well as ensure compliance with certain legal and/or regulatory requirements.
4
<PAGE>
Although the Boards of Directors have considered the effects of the
recently adopted Internal Revenue Service Restructuring and Reform Act of 1998
(the "Reform Act") on The Meditrust Companies' present activities, they are
uncertain as to the exact timing of the termination of the pairing requirements.
See "Proposal 1--Approve and Adopt the Respective Amended and Restated
Certificates of Incorporation of Each of The Meditrust Companies--Effect of the
Reform Act" beginning on page 9. The Meditrust Companies have publicly indicated
that the paired share structure will be retained until the previously announced
spin-off of the new health care REIT is completed and may be retained for a
period of time thereafter. See the accompanying Stockholder Brochure Regarding
the Comprehensive Restructuring Plan (the "Brochure")--"The Plan." However, the
Reform Act imposes substantial limitations on The Meditrust Companies' ability
to grow through acquisitions of companies or properties using the paired share
structure. Accordingly, the Boards of Directors will likely continue to analyze
various alternative structures and may elect to utilize one of these alternative
structures in order to facilitate growth after the spin-off. The Boards of
Directors may in the future consider alternative structures in order to address
the challenges presented by the Reform Act, including the following: (i)
adopting a "semi-stapled" structure in which some capital stock is paired, but
greater than 50% of the capital stock in Meditrust is unpaired, (ii) merging
Meditrust and Operating Company and abandoning Meditrust's REIT status and (iii)
terminating the paired share structure completely so that all of the capital
stock of Meditrust and Operating Company trade independently of each other. See
"Future Waiver or Termination of the Pairing Requirements--Termination"
beginning on page 14. However, we cannot assure you which alternative, if any,
will be selected or when any such alternative structure that is selected would
be put in place, if at all. See "Proposal 1--Approve and Adopt the Respective
Amended and Restated Certificates of Incorporation of Each of The Meditrust
Companies--Effect of the Reform Act" beginning on page 9 and the Brochure.
Furthermore, although the Boards of Directors have considered various
alternatives to the paired share structure, as more fully described in the
section captioned "Future Waiver or Termination of the Pairing Requirements"
beginning on page 14, no decision has been made as to which alternative
structure, if any, to implement. Because of the changing nature of The
Meditrust Companies' asset base and operations caused by the implementations of
the comprehensive restructuring plan (the "Plan") as described in the Brochure,
as well as the contemplated spin-off, the Boards of Directors will not likely
make a determination on an alternative structure, including the timing and the
method, until after the spin-off of the new health care REIT. Accordingly, as
you consider each of the proposals presented in this Joint Proxy Statement, you
should be aware of this uncertainty of timing and method of implementing
changes, if any, to the paired share structure.
Potential Disproportionate Dilution Among Stockholders of Meditrust and
Operating Company
In the future, the Boards of Directors may issue unpaired shares of
capital stock of either Meditrust or Operating Company. See "Future Waiver or
Termination of the Pairing Requirements" beginning on page 13. Accordingly,
depending on the number of unpaired shares of capital stock issued by each of
The Meditrust Companies, the voting power of the stockholders of either
Meditrust or Operating Company may be diluted disproportionately with respect
to the voting power and/or economic interests of the stockholders of the other
company. Although The Meditrust Companies would likely enact conflicts of
interest resolution mechanisms to address such potential disproportionate
dilution, there can be no guarantee that such mechanisms would adequately
address all conflicts of interest that may arise. See also "Proposal 1--Approve
and Adopt the Respective Amended and Restated Certificates of Incorporation of
Each of The Meditrust Companies--Increase in Authorized Capital Stock"
beginning on page 10 and "--Effect of Elimination of Pairing Agreement" below.
Effect of Elimination of Pairing Agreement
The Pairing Agreement is an agreement by and between Meditrust and
Operating Company that each may enforce against the other in connection with
the issuance of shares of capital stock. For example, in the event Operating
Company desired to issue Operating Company Common Stock and Meditrust refused
to issue shares of Meditrust Common Stock to pair with the Operating Company
Common Stock, Operating Company could seek to enforce the Pairing Agreement in
a legal action. Upon approval and adoption of the proposals presented in this
Joint Proxy Statement, the Pairing Agreement will be terminated and there will
no longer be a contractual relationship between Meditrust and Operating Company
that either Meditrust or Operating Company could utilize to enforce the
pairing. Rather, each of The Meditrust Companies will
5
<PAGE>
have to rely upon the provisions present in the other company's Amended
Certificate. Such provisions may only be enforced by the respective company's
own stockholders. In addition, each Amended Certificate may be amended
according to applicable law, which may permit the waiver or termination of the
pairing requirements by the Board of Directors or stockholders of either of The
Meditrust Companies without the consent of the other company's Board of
Directors or stockholders. Although the Boards of Directors do not believe this
possibility presents a meaningful risk in the near term, in the event
substantial amounts of unpaired securities are issued in the future, the
possibility may increase that either of The Meditrust Companies will terminate
the pairing at a time when the other company would not choose to so terminate.
6
<PAGE>
PROPOSAL 1 -- APPROVE AND ADOPT THE RESPECTIVE AMENDED AND RESTATED
CERTIFICATES OF INCORPORATION OF EACH OF THE MEDITRUST COMPANIES
Each of The Meditrust Companies has proposed the approval and adoption of
an Amended and Restated Certificate of Incorporation, which will include all of
the terms and provisions presently contained within each of the Existing
Certificates. In addition, provisions which will require the pairing of
Meditrust Common Stock and Operating Company Common Stock with each other will
be included in each of the Amended Certificates. These pairing provisions,
which are not present in the Existing Certificates, will be waiveable and
terminable by the Board of Directors of each of The Meditrust Companies. The
Amended Certificates also will contain provisions which increase the number of
authorized shares of common stock.
Background
For Meditrust to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), it must meet certain requirements concerning the
ownership of its outstanding shares of capital stock. Specifically, not more
than 50% in value of Meditrust's outstanding shares of capital stock may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities) (such ownership restriction, the "5/50 Test")
and, 100 or more persons must beneficially own Meditrust capital stock. In
addition, at least 75% of Meditrust's gross income for each year must consist
of qualified rents from real property and income from certain other real
property investments. The Code contains certain provisions that exclude rental
income paid by a "related party" from the concept of qualified rents from real
property for purposes of this gross income test. The Code will treat Operating
Company as a "related party" for purposes of this gross income test if
Meditrust owns, actually or constructively, 10% or more of the ownership
interests in Operating Company within the meaning of Section 856(d)(2)(B) of
the Code. Meditrust will be deemed to constructively own 10% or more of the
ownership interests in Operating Company if a person holding 10% or more of
Meditrust Common Stock also holds 10% or more of Operating Company Common
Stock. Thus, if one person held 10% or more of the outstanding Paired Shares,
Operating Company would be deemed a related party of Meditrust and Meditrust
would lose its status as a REIT. Accordingly, both of The Meditrust Companies
must have various restrictions on the ownership of shares of their capital
stock in order to ensure that the 5/50 Test is met, as well as to ensure that
rents received by Meditrust from Operating Company are not deemed to be rents
from a related party.
Section 269B(a)(3) of the Code provides that if the shares of a REIT and a
non-REIT, such as Operating Company, are paired, then the REIT and the non-REIT
shall be treated as one entity for purposes of determining whether either
company qualifies as a REIT. If Section 269B(a)(3) applied to Meditrust and
Operating Company, then Meditrust would not be eligible to be taxed as a REIT.
Section 269B(a)(3) does not apply, however, if the shares of the REIT and its
paired operating company were paired on or before June 30, 1983 and the REIT
was taxable as a REIT on June 30, 1983. The predecessors to The Meditrust
Companies ("The Santa Anita Companies") were paired on December 20, 1979. Thus,
as a result of this "grandfathering" rule, Section 269B(a)(3) does not apply to
The Meditrust Companies.
Both of The Meditrust Companies' Restated Certificates of Incorporation
were filed with the Delaware Secretary of State on March 2, 1998. The terms of
these Restated Certificates of Incorporation were substantially similar to the
Certificates of Incorporation inherited from the predecessors to The Meditrust
Companies ("The Santa Anita Companies"), except for name changes and increases
in the amount of authorized capital stock. These Restated Certificates of
Incorporation did not contain any restrictions on ownership of shares of the
respective company's capital stock. Rather, The Santa Anita Companies had
relied upon provisions contained within their respective By-laws to restrict
ownership. On June 18, 1998, the stockholders of The Meditrust Companies
approved an amendment to each of The Meditrust Companies' Restated Certificates
of Incorporation to include restrictions on the ownership of shares of the
capital stock of The Meditrust Companies that are sufficiently stringent to
preserve, under current law, Meditrust's status as a REIT. The Meditrust
Companies' Restated Certificates of Incorporation, together with these
amendments (which together constitute each of the Existing Certificates), will
be included in the Amended Certificates.
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<PAGE>
Pairing Provisions of Amended Certificates
The Amended Certificates will also contain provisions which require the
pairing of the shares of capital stock of Meditrust and capital stock of
Operating Company with each other. These provisions, which will be waiveable
and terminable by The Meditrust Companies' Boards of Directors, are designed to
preserve The Meditrust Companies' paired share structure following termination
of the Pairing Agreement. See "Future Waiver or Termination of the Pairing
Requirements" beginning on page 14. Currently, the pairing of the capital
stock of The Meditrust Companies may only be terminated by the stockholders of
The Meditrust Companies. In the event the Amended Certificates and the
termination of the Pairing Agreement, are approved by the stockholders of The
Meditrust Companies, the Boards of Directors will be able to terminate the
pairing of the capital stock of The Meditrust Companies without further action
by stockholders. See "--Interdependence of Proposals" beginning on page 11 and
"Future Waiver or Termination of the Pairing Requirements" beginning on page 14
and "Risk Factors--Timing and Method of Future Waiver or Termination of Pairing
Uncertain" beginning on page 4. The Boards of Directors believe that the
limitations on the use of the paired share structure imposed by the Reform Act
will ultimately require a response by The Meditrust Companies. See "--Effect of
the Reform Act" beginning on page 9. These limitations will likely require that
The Meditrust Companies have the flexibility to respond efficiently and timely
through one or more transactions (including "destapling" The Meditrust
Companies) that would be prohibited under The Meditrust Companies' current
Pairing Agreement and By-laws, but would be permitted under the Amended
Certificates. See "Future Waiver or Termination of the Pairing Requirements"
beginning on page 14.
The Amended Certificates' pairing requirements, which are substantially
similar to the current pairing requirements contained in the Pairing Agreement
and the By-laws, will provide that outstanding shares of Meditrust Common Stock
and outstanding shares of Operating Company Common Stock will continue to be
paired and traded as a single unit. Unlike the current pairing requirements,
however, the Amended Certificates will not require the pairing of issuances of
preferred stock convertible into Paired Shares. Furthermore, upon approval and
adoption of the proposals, the pairing provisions will be waiveable and
terminable by the Boards of Directors. See "Future Waiver or Termination of the
Pairing Requirements" beginning on page 14. In addition, the Amended
Certificates will provide that The Meditrust Companies may issue unpaired
shares of capital stock, including unpaired common stock and unpaired preferred
stock convertible into common stock. Presently, although the Pairing Agreement
and the By-laws do not permit The Meditrust Companies to issue unpaired common
stock or unpaired preferred stock that is convertible into common stock, these
documents do permit issuances of unpaired non-convertible preferred stock and
paired preferred stock. The Meditrust Companies believe that the ability to
issue unpaired common stock and unpaired preferred stock convertible into
common stock will enhance The Meditrust Companies' capital raising and
formation activities as The Meditrust Companies will be better able to match
each of their respective needs with the specific goals and criteria of
potential investors. The following table summarizes the differences between the
pairing provisions of the Amended Certificates, on the one hand, and the
Pairing Agreement and By-laws, on the other.
8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Circumstances Amended Certificates Pairing Agreement
and By-laws
- ------------------------------------- -------------------------------- --------------------------------
<S> <C> <C>
Currently Outstanding Securities:
Common Stock Must continue to be paired Must continue to be paired
(unless pairing provisions are
waived by Board)
Preferred Stock Convertible Must continue to be paired Must continue to be paired
into Common Stock (unless pairing provisions are
waived by Board)
Preferred Stock (not convertible) Meditrust's unpaired preferred Meditrust's unpaired preferred
may continue to be unpaired may continue to be unpaired
- ------------------------------------- -------------------------------- --------------------------------
Issuance of New Securities:
Common Stock May issue unpaired (subject to Must be paired
REIT qualification tests)
Preferred Stock Convertible May issue unpaired (subject to Must be paired
into Common Stock REIT qualification tests)
Preferred Stock (not convertible) May issue unpaired (subject to Meditrust and Operating Company
REIT qualification tests) may each issue unpaired
- ------------------------------------- -------------------------------- --------------------------------
Waiver of Pairing By Boards of Directors By Stockholders
- ------------------------------------- -------------------------------- --------------------------------
Termination of Pairing By Boards of Directors By Stockholders
- -------------------------------------------------------------------------------------------------------
</TABLE>
Even if both proposals are approved by the stockholders, the shares of
capital stock of The Meditrust Companies will continue to be subject to the
ownership restrictions contained within the Amended Certificates that are
designed to preserve Meditrust's status as a REIT, unless and until Meditrust's
stockholders elect to terminate its REIT qualification. For example, a
purchaser of shares of capital stock, including shares of unpaired common stock
or unpaired preferred stock that is convertible into common stock, will be
subject to the provisions of the Amended Certificate that are designed to
ensure that Meditrust satisfies the 5/50 Test.
Effect of the Reform Act
Since its enactment on July 22, 1998, the Reform Act froze the
grandfathered status of paired share REITs, such as The Meditrust Companies.
Under this legislation, the anti-pairing rules provided in the Code apply to
real property interests acquired after March 26, 1998 by The Meditrust
Companies, or by a subsidiary or partnership in which a 10% or greater interest
is owned by The Meditrust Companies, unless (i) the real property interests are
acquired pursuant to a written agreement that was binding on March 26, 1998 and
at all times thereafter or (ii) 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. Furthermore, under the Reform Act, any otherwise grandfathered
property will become subject to the anti-pairing rules of the Code if the rent
paid under lease or renewal with respect to such property is determined to
exceed the rental rate of an arm's length negotiation. The Reform Act also
provides that an interest in real property held by The Meditrust Companies that
is not subject to these rules would become subject to these rules in the event
certain improvements to such real property are placed in service after December
31, 1999; specifically, if such improvements change the use of the property and
the cost of such improvements are greater than 200% of (i) the undepreciated
cost of the property (prior to the improvement) or (ii) in the case of property
acquired where there is a substituted basis (including the properties acquired
in 1998 from La Quinta Inns, Inc.), the fair market value of the property on
the date it was acquired by The Meditrust 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.
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<PAGE>
The restrictions on the activities of a paired share REIT in the Reform
Act in the future may make it impractical or undesirable for The Meditrust
Companies to continue to maintain their paired share structure. These
restrictions, as a practical matter, may prevent the Operating Company from
operating hotels acquired in the future either by Meditrust or the Operating
Company. The Meditrust Companies believe that these restrictions may, over
time, adversely affect their competitive position and financial condition. In
addition, termination of the Pairing Agreement would enhance the ability of The
Meditrust Companies to raise additional equity capital even while maintaining
its status as a paired share REIT, because under the Amended Certificates the
Boards of Directors of The Meditrust Companies could waive the pairing
restrictions and ownership limitations in order to permit investors to acquire
10% or more of the stock of either Meditrust or the Operating Company (but not
both) without causing Meditrust to lose its status as a REIT. See
"--Background" beginning on page 7. The proposed adoption of the Amended
Certificates and the proposed termination of the Pairing Agreement will provide
the Boards of Directors of The Meditrust Companies with the ability to most
efficiently and effectively deal with the restrictions imposed on The Meditrust
Companies by the Reform Act.
Increase in Authorized Capital Stock
Article Fourth of each of the Amended Certificates, attached as Annexes A
and B to this Joint Proxy Statement, will provide for an increased number of
authorized shares of each of Meditrust Common Stock and Operating Company
Common Stock from 270,000,000 to 500,000,000. As of the Companies Record Date,
in addition to the shares of Meditrust Common Stock and the
shares of Operating Company Common Stock,
additional Paired Shares were reserved for issuance under the Meditrust 1995
Share Award Plan, the Operating Company 1995 Share Award Plan and the assumed
option grants of Cobblestone that had been issued pursuant to the Stock Option
Plan for Key Employees of Cobblestone Holdings, Inc. As of the Companies Record
Date, there were shares of Meditrust Common Stock and shares of
Operating Company Stock available for issuance or reservation. Upon approval
and adoption of the Amended Certificates, there will be shares of Meditrust
Common Stock and shares of Operating Common Stock available for issuance or
reservation. Also, as of the Companies Record Date, there were 700,000 shares
of Meditrust Series A Preferred Stock issued and outstanding. As of the
Companies Record Date, there were 5,300,000 shares of preferred stock of
Meditrust available for issuance and reservation and 6,000,000 shares of
preferred stock of Operating Company available for issuance and reservation.
The relative rights and limitations of the common stock would remain unchanged
after the amendment. There are no pre-emptive rights relating to Meditrust
Common Stock and Operating Company Common Stock.
The additional shares of common stock, if so authorized, could be issued
at the discretion of the Boards of Directors without any further action by the
stockholders, except as required by the terms of existing designations of
capital stock, applicable law or by the rules of the New York Stock Exchange.
Except to the extent that The Meditrust Companies may issue Paired Shares
pursuant to their stock option plans, The Meditrust Companies currently have no
commitments that would involve the issuance of additional shares of common
stock, but wish to have such shares available for future issuances from time to
time as may be necessary. The Boards of Directors believe that having such
additional shares of common stock authorized and available for issuance will
allow The Meditrust Companies greater flexibility in considering potential
future actions involving the issuance of common stock such as (i) enabling The
Meditrust Companies to raise cash through sales of stocks to private investors
and (ii) enabling The Meditrust Companies to pursue acquisitions that are
consistent with The Meditrust Companies growth strategy. The availability of
additional shares of Meditrust Common Stock and Operating Company Common Stock
will also allow the Boards of Directors to issue or dividend enough unpaired
common stock to destaple The Meditrust Companies without further stockholder
action. See "--Pairing Provisions of Amended Certificates" beginning on page 8,
"--Effect of the Reform Act" beginning on page 9 and "Future Waiver or
Termination of the Pairing Provisions" beginning on page 14. Stockholder
approval will not be sought prior to the issuance of additional securities
unless such issuances relate to a transaction which requires stockholder
approval. See "Risk Factors--Timing and Method of Future Waiver or Termination
of Pairing Provisions Is Uncertain" beginning on page 4 and "Recommendations of
the Boards of Directors" beginning on page 16.
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<PAGE>
The issuance of additional shares of capital stock of The Meditrust
Companies may have a dilutive effect on the equity and voting power of existing
stockholders. See also "Risk Factors--Potential Disproportionate Dilution Among
Stockholders of Meditrust and Operating Company" beginning on page 5. Approval
and adoption may make the removal of the management of each of The Meditrust
Companies more difficult, even if such removal would be generally beneficial to
the stockholders of Meditrust and/or Operating Company. In addition, the
authorization to issue additional shares of common stock provides management
with a capacity to negate the efforts of unfriendly bidders or tender offers
through the issuance of securities to others or through the dilution of the
stock holdings of such unfriendly bidders or tender offerors. The increase in
authorized common stock in each of the Amended Certificates is not proposed in
response to any effort of which The Meditrust Companies are aware to obtain
control of either of The Meditrust Companies. Such increase in authorized
common stock is not being included in this proposal as part of any plan by the
Boards of Directors to adopt a series of amendments to the Existing
Certificates or the respective By-laws of each of The Meditrust Companies so as
to render the takeover of either of The Meditrust Companies more difficult.
A copy of the proposed Amended Meditrust Certificate and the proposed
Amended Operating Company Certificate, which you are encouraged to read in
their entirety, are attached as Annex A and Annex B, respectively.
Interdependence of Proposals
In considering each of the proposals to approve and adopt each of the
Amended Certificates, you should note that these proposals are dependent on the
approval of the termination of the Pairing Agreement. See "Proposal 2--Approve
the Termination of the Pairing Agreement" beginning on page 12. Accordingly, in
the event the termination of the Pairing Agreement is not approved, no further
action will be taken with respect to the Amended Certificates, even if they are
approved at the Companies Meetings.
Required Vote
The approval and adoption of the Amended Meditrust Certificate requires
the affirmative vote of the holders of a majority of the outstanding Meditrust
Common Stock. The approval and adoption of the Amended Operating Company
Certificate requires the affirmative vote of the holders of a majority of the
outstanding Operating Company Common Stock. See "Recommendations of the Boards
of Directors" beginning on page 16.
THE BOARDS OF DIRECTORS OF THE MEDITRUST COMPANIES RECOMMEND A VOTE "FOR"
THE APPROVAL AND ADOPTION OF THE AMENDED CERTIFICATES.
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<PAGE>
PROPOSAL 2 -- APPROVE THE TERMINATION OF THE PAIRING AGREEMENT
In connection with the proposed approval and adoption of the Amended
Certificates, The Meditrust Companies have proposed the termination of the
Pairing Agreement. The provisions requiring the pairing of the common stock of
each of The Meditrust Companies will be incorporated into the Amended
Certificates, thus eliminating the need for a separate Pairing Agreement.
Termination of the Pairing Agreement will be effective upon the filing of the
Amended Certificates.
Background
Qualification as a REIT involves the application of highly technical and
complex provisions of the Code. See "Proposal 1--Approve and Adopt the
Respective Amended and Restated Certificates of Incorporation of Each of The
Meditrust Companies--Background" beginning on page 7. Meditrust's ability to
qualify as a REIT is dependent upon its continued grandfathered status from the
anti-pairing rules of Section 269B(a)(3) of the Code, which would ordinarily
prevent Meditrust from qualifying as a REIT. See "Proposal 1--Approve and Adopt
the Respective Amended and Restated Certificates of Incorporation of The
Meditrust Companies--Background" beginning on page 7. In order to preserve the
paired share status of The Santa Anita Companies, The Meditrust Companies
continued under the original Pairing Agreement, subject to certain amendments
to correct certain provisions with respect to option grants and to include
subsequently issued classes and series of stock. In connection with the
restrictions of the Pairing Agreement inherited from The Santa Anita Companies,
certain provisions in each of the respective By-laws of The Meditrust Companies
that were similarly inherited, reiterated certain pairing requirements in
addition to ownership restrictions intended to protect the REIT status of The
Santa Anita Companies. On June 18, 1998, in an amendment to the respective
Restated Certificates of Incorporation of The Meditrust Companies, the
stockholders of The Meditrust Companies approved and adopted stricter
restrictions that provided the Boards of Directors with more flexibility. Such
restrictions will continue in the Amended Certificates. See "Proposal
1--Approve and Adopt the Respective Amended and Restated Certificates of
Incorporation of Each of The Meditrust Companies-- Background" beginning on
page 7. The provisions of the respective By-laws that reiterate certain pairing
requirements are only effective until the termination of the Pairing Agreement.
Thus, the termination of the Pairing Agreement will also automatically
terminate the reiteration of the pairing requirements in the respective By-laws
of each of The Meditrust Companies. Upon approval and adoption of the
proposals, the pairing requirements will only be in the Amended Certificates.
Pairing Agreement No Longer Necessary
Once the pairing provisions of the Amended Certificates are adopted, a
separate Pairing Agreement will no longer be necessary. See "Proposal
1--Approve and Adopt the Respective Amended and Restated Certificates of
Incorporation of Each of The Meditrust Companies--Pairing Provisions of Amended
Certificates" and "--Interdependence of Proposals" beginning on pages 8 and 11,
respectively. The pairing provisions contained in the Amended Certificates will
provide the Boards of Directors with the power to waive or terminate the
pairing provisions without further stockholder action. See "Proposal 1--Approve
and Adopt the Respective Amended and Restated Certificates of Incorporation of
Each of The Meditrust Companies--Pairing Provisions of Amended Certificates"
and "Recommendations of the Boards of Directors" beginning on pages 8 and 16,
respectively.
In considering the termination of the Pairing Agreement, stockholders of
Meditrust and stockholders of Operating Company should carefully read the
Pairing Agreement, as amended, attached for your convenience as Annex C to this
Joint Proxy Statement.
Interdependence of Proposals
In considering each of the proposals to terminate the Pairing Agreement,
you should note that these proposals are dependent on the approval and adoption
of the Amended Certificates. See "Proposal 1--Approve and Adopt the Respective
Amended and Restated Certificates of Incorporation of Each of The Meditrust
Companies" beginning on page 7. Accordingly, in the event the Amended
Certificates are not approved and adopted, no further action will be taken with
respect to the termination of the Pairing Agreement, even if such termination
is approved at the Companies Meetings.
12
<PAGE>
Required Vote
The termination of the Pairing Agreement requires approval by the
affirmative vote of the holders of two-thirds of the outstanding shares of
Meditrust Common Stock and the affirmative vote of the holders of two-thirds of
the outstanding shares of Operating Company Common Stock. See "Recommendations
of the Boards of Directors" beginning on page 16.
THE BOARDS OF DIRECTORS OF THE MEDITRUST COMPANIES RECOMMEND A VOTE "FOR"
THE TERMINATION OF THE PAIRING AGREEMENT.
13
<PAGE>
FUTURE WAIVER OR TERMINATION OF THE PAIRING REQUIREMENTS
General
If the stockholders of The Meditrust Companies approve both of the
proposals, the Boards of Directors will have the ability to terminate, when and
if appropriate, the pairing provisions without further stockholder action. At
this time, the Boards of Directors intend to preserve the paired share structure
of The Meditrust Companies while they pursue the separation of their health care
and lodging business segments through the spin-off of the health care business
into a new separately traded, publicly listed health care REIT. See
Brochure--"The Plan." Prior to the spin-off the Boards of Directors may consider
waiving the pairing provisions on a case-by-case basis in order to more
efficiently engage in capital raising and formation transactions. The Boards of
Directors will take action to waive or terminate the pairing provisions only
after carefully considering the advantages and disadvantages of such actions, in
light of the facts and circumstances at that time.
Waiver
The ability to issue shares of unpaired capital stock may provide The
Meditrust Companies with the flexibility to more appropriately match the
criteria and goals of potential institutional investors with the specific
capital needs of each company, creating the benefit of achieving more efficient
and cost-effective capital raising. Upon approval and adoption of the
proposals, the Boards of Directors will also have the ability to waive the
pairing provisions on a case-by-case basis in order to enter into tax-free
acquisitions that are consistent with the growth strategies of The Meditrust
Companies. See Brochure--"The Corporate Document Proposals." There are a number
of situations in which either Meditrust or Operating Company may consider
issuing unpaired capital stock, including in offerings of securities or in
connection with acquisitions. These issuances may well constitute a part of
ordinary capital raising and acquisition efforts and individually may not
necessarily impact The Meditrust Companies' status as a paired share REIT. See
"Proposal 1--Approve and Adopt the Respective Amended and Restated Certificates
of Incorporation of Each of The Meditrust Companies--Background" and "--Effect
of the Reform Act" beginning on pages 7 and 9, respectively.
Termination
The Board of Directors of either Meditrust or Operating Company may choose
to terminate The Meditrust Companies' status as a grandfathered paired share
REIT under the Code (i.e., "destaple" The Meditrust Companies). See "Proposal
1--Approve and Adopt the Respective Amended and Restated Certificates of
Incorporation of Each of The Meditrust Companies--Effect of the Reform Act"
beginning on page 9. The Meditrust Companies could destaple if either Meditrust
or Operating Company declare a dividend of slightly more than one newly issued
share of unpaired common stock on each then outstanding share of common stock.
Such dividend, and the resulting destapling of the existing paired share
entities, could be accomplished without further stockholder action under the
Amended Certificates. In addition, under the Amended Certificates, the Boards
of Directors of The Meditrust Companies will also have the ability to terminate
the pairing requirements outright without further stockholder action, which
also would destaple The Meditrust Companies. Either method of destapling would
substantially change the nature of your investment in The Meditrust Companies.
14
<PAGE>
Prior to terminating the paired share structure the Boards of Directors
would consider the following material factors, among others:
o Advice and input from various advisors, including financial advisors
and outside legal and tax counsel to assist the Boards in evaluating
the various strategic, legal, financial and tax issues related to the
termination of the paired share structure.
o The advantages and disadvantages of available alternatives other than
the termination of the paired share structure, such as a semi-stapled
structure in which some of the capital stock of each of Meditrust and
Operating Company could be sold unpaired and some of the capital stock
of The Meditrust Companies is still paired. See also "Risk
Factors--Timing and Method of Future Waiver or Termination of Pairing
Provisions Uncertain" beginning on page 4.
o The relative levels of potential and actual conflicts of interest
inherent in adopting any other alternatives under consideration. The
Boards of Directors may decide that conflicts resolution mechanisms,
such as a conflicts resolution plan, independent committees of the
Boards of Directors, and independent management teams, will need to be
implemented.
o The determination by the Boards of Directors, or independent
committees thereof, of whether the termination of the pairing
provisions would be in the best interests of the stockholders of each
of The Meditrust Companies.
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<PAGE>
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Boards of Directors of The Meditrust Companies believe that amending
and restating the Existing Certificates and terminating the Pairing Agreement
is in your best interest and unanimously recommend that you vote "FOR" both
proposals. See "Proposal 1--Approve and Adopt the Respective Amended and
Restated Certificates of Incorporation of Each of The Meditrust
Companies--Interdependence of Proposals" beginning on page 11.
Factors Considered by the Boards of Directors
In determining that these proposals are in the best interests of our
stockholders, the Boards of Directors considered a variety of factors,
including the principal benefits and detriments described below. The Boards of
Directors have considered that the positive factors weighing in favor of the
proposals outweighed the negative factors. Accordingly, the Boards of Directors
concluded that these proposals are in the best interests of The Meditrust
Companies' stockholders and should be recommended for approval and adoption by
The Meditrust Companies' stockholders.
The Boards of Directors considered the benefits that the ability to
currently issue unpaired securities would present to each of the Companies.
Under the Code, each of The Meditrust Companies would be permitted to issue an
amount of unpaired shares of common stock and securities convertible into common
stock without jeopardizing The Meditrust Companies' grandfathered paired share
status. However, under The Meditrust Companies' respective organizational and
governing documents, neither Meditrust nor Operating Company is permitted to
issue unpaired shares of common stock or preferred stock convertible into common
stock. The ability to issue unpaired securities primarily serves two purposes.
First, Meditrust and Operating Company each will be able to more appropriately
match its specific capital needs with the investment criteria of the investment
community. For example, certain investors may have a specific interest in
investing only in the real estate portion of the paired share entity, rather
than the operating portion of the paired share entity. Second, either Meditrust
or Operating Company may be permitted to issue securities in acquisitions that
would facilitate the respective company's growth efforts. For example, certain
potential targets may desire to receive only securities of either Meditrust or
Operating Company in order to facilitate a fully tax-free transaction, which, if
the respective Board of Directors of each of The Meditrust Companies determines
that such an issuance is appropriate, can potentially lead to more efficient and
cost effective acquisitions. The Boards of Directors also recognized that the
ability to issue unpaired securities to certain stockholders of The Meditrust
Companies, including the Bass Group, could increase their ownership in Meditrust
and cause disproportionate dilution among stockholders of Meditrust and
Operating Company. Consequently, such stockholders may have interests which
diverge from the interests of other holders of Paired Shares. See "Risk
Factors--Potential Disproportionate Dilution Among Stockholders of Meditrust and
Operating Company" beginning on page 5.
Another factor that the Boards of Directors considered was the flexibility
provided by the proposals in addressing the challenges presented by the Reform
Act. The Boards of Directors also considered, however, the offsetting
detrimental effect in requesting stockholder approval for the proposals without
a definitive plan as to how to address the Reform Act, including when or if The
Meditrust Companies will terminate its paired share status. See "Risk
Factors--Timing and Method of Future Waiver or Termination of Pairing
Provisions Uncertain" beginning on page 4. Nonetheless, given the progress of
the Plan, as described in the Brochure "--The Record to Date" and the changing
nature of the composition of The Meditrust Companies, in addition to
potentially changing federal law, the Boards of Directors realized the need for
corporate documents that provide the maximum flexibility to effectively address
the Reform Act's challenges. See "Proposal 1--Approve and Adopt the Respective
Amended and Restated Certificates of Incorporation of Each of The Meditrust
Companies--Effect of the Reform Act" beginning on page 9. In this regard, the
Boards of Directors also recognized that several of the contemplated
alternative structures may require stockholder approval at a later date if the
corporate entities which comprise the paired share entity would substantially
change. See "Risk Factors--Timing and Method of Future Waiver or Termination of
Pairing Provisions Uncertain," "Proposal 1--Approve and Adopt the Respective
Amended and Restated Certificates of Incorporation of Each of The Meditrust
Companies--Increase in Authorized Capital Stock" and "Future Waiver or
Termination of the Pairing Requirements--Termination," beginning on pages 4, 10
and 14, respectively.
16
<PAGE>
Although the termination of the Pairing Agreement will eliminate the
contractual relationship between The Meditrust Companies, the Boards of
Directors do not believe that there is a meaningful risk in the near term that
either of The Meditrust Companies will refuse to cooperate in the pairing of
their capital stock. See "Risk Factors--Effect of Elimination of Pairing
Agreement" on page 5.
The Boards of Directors of The Meditrust Companies considered the totality
of the above factors without assigning weight or ranking the relative
importance of any particular factor. Consequently, the Boards of Directors of
The Meditrust Companies recommends that you vote "FOR" approval and adoption of
both proposals.
17
<PAGE>
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In considering the recommendation of the Boards of Directors of The
Meditrust Companies with respect to the approval and adoption of the Amended
Certificates and the approval of the termination of the Pairing Agreement,
holders of Paired Shares should be aware that the management team of each
Company may have interests that are in addition to their interests as
individual stockholders in each of The Meditrust Companies. For example, in the
event both of the proposals presented in this Joint Proxy Statement are
approved, each of The Meditrust Companies will have the ability to issue
unpaired shares of its capital stock. Any such issuance of unpaired shares of
capital stock will require approval by the Board of Directors of the respective
company based upon, among other things, the recommendations of such company's
management. The ability to issue such unpaired shares of capital stock may
disproportionately assist the management of such company in achieving that
company's individualized goals, which may not necessarily be to the benefit of
the other company. See "Risk Factors--The Bass Group and Other Stockholders
Could Increase Their Holdings in Meditrust" and "Future Waiver or Termination
of Pairing Requirements" beginning on pages 4 and 14, respectively.
Holders of Paired Shares should also be aware that members of the Bass
Group, including Thomas M. Taylor, the Interim Chairman of the Boards of
Directors of The Meditrust Companies, may have interests that are different
from, or in addition to, the interests of the holders of Paired Shares
generally. For example, the proposed Amended Certificates, together with the
proposed termination of the Pairing Agreement may allow The Meditrust Companies
to raise additional capital through investments from investors that may exceed
the 9.25% Ownership Limit in the respective Existing Certificates. These
investors could include certain members of the Bass Group. The Meditrust
Companies have previously announced that the Bass Group may increase their
holdings in Meditrust up to an aggregate of 13%, subject to applicable REIT
qualification tests. Some or all of this increase may be accomplished through
participation in an offering or offerings, whose terms are yet to be decided,
of, among other securities, unpaired common stock of Meditrust or unpaired
preferred stock convertible into unpaired common stock of Meditrust or, in
certain circumstances, Paired Shares. Any such offering, which may include a
public offering or a private placement, would be conducted in accordance with
all applicable law. Thus, any sale of equity securities of The Meditrust
Companies, if offered publicly will be offered pursuant to a prospectus.
Notwithstanding the foregoing, no assurance can be made that any such offering
will be made, or, if made, that the Bass Group would participate. In the event
the proposals presented in this Joint Proxy Statement are not approved, the
Bass Group will not be permitted to increase their holdings in Paired Shares to
a level in excess of 9.9% because ownership in excess of such amount would
cause the rents received by Meditrust from Operating Company to constitute
rents from a related party, which would terminate Meditrust's REIT status, nor
will the Bass Group be permitted to invest directly in Meditrust Common Stock
or shares of preferred stock convertible into Meditrust Common Stock because
Meditrust will not be permitted to issue such unpaired shares of capital stock.
The Boards of Directors of The Meditrust Companies were aware of such
interests and considered them, among other matters, in approving the proposed
Amended Certificates and the proposed termination of the Pairing Agreement. See
"Recommendations of the Boards of Directors" beginning on page 16.
18
<PAGE>
OUTSTANDING CAPITAL STOCK
Each of The Meditrust Companies' authorized capital stock currently
consists of 270,000,000 shares of common stock, par value $.10 per share,
30,000,000 shares of series common stock, par value $.10 per share, 10,000,000
shares of which have been designated as Series A Common Stock, 6,000,000 shares
of preferred stock, par value $.10 per share, 200,000 shares of which have been
designated as Junior Participating Preferred Stock and 25,000,000 shares of
Excess Stock, par value $.10 per share. In addition, Meditrust has designated
805,000 shares of its preferred stock as Series A Preferred Stock. The Board of
Directors of each company is authorized, without further stockholder approval,
to issue the preferred stock from time to time in one or more series, and to
determine the provisions applicable to each series, including the number of
shares, dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), redemption
price or prices, and liquidation preferences.
The Meditrust Companies Paired Shares are traded on the NYSE under the
ticker symbol "MT." As of , 1999 there were issued and outstanding
shares of Meditrust Common Stock, shares of Operating Company
Common Stock, no shares of Series A Common Stock, no shares of Junior
Participating Preferred Stock and 700,000 shares of Meditrust Series A
Preferred Stock.
Holders of Meditrust Common Stock and Operating Company Common Stock are
entitled to one vote for each share held on each matter submitted to a
stockholder vote. Except as otherwise provided by law, by the certificates of
incorporation or by resolutions of the Boards of Directors providing for the
issuance of any series of preferred stock, the holders of the Meditrust Common
Stock and Operating Company Common Stock have sole voting power.
19
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS OF THE MEDITRUST COMPANIES
The following table sets forth as of , 1999, except as otherwise
noted, the number of Paired Shares beneficially owned, directly or indirectly,
by (i) each of the Directors of each of The Meditrust Companies, (ii) all
persons who served as chief executive officer of either of The Meditrust
Companies for the year ended December 31, 1998, (iii) each of the four most
highly compensated executive officers for the year ended December 31, 1998,
(iv) all Directors and current executive officers of The Meditrust Companies as
a group, and (v) all persons who, to the knowledge of The Meditrust Companies,
beneficially own five percent or more of the Paired Shares as of ,
1999. Unless otherwise indicated, all information concerning beneficial
ownership was provided by the respective director, executive officer or five
percent beneficial owner, as the case may be.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class
- ------------------------------------------------- ------------------------- -----------------
<S> <C> <C>
Directors and Executive Officers:
Donald J. Amaral 13,500 *
William C. Baker 61,400 *
David F. Benson 207,810(2) *
Nancy G. Brinker 1,500 *
Edward W. Brooke 229,229(3) *
William G. Byrnes 80,182 *
James P. Conn 15,062 *
John C. Cushman, III 224,954 *
C. Gerald Goldsmith 1,000 *
Thomas J. Magovern 81,941 *
Stephen E. Merrill 1,000 *
Thomas M. Taylor 5,161,647(4) 3.4%
Gerald Tsai, Jr. 69,889 *
Michael S. Benjamin 118,665 *
Michael F. Bushee 120,316 *
Laurie T. Gerber 28,665
- ------------------------ --------- ----
All Directors and current executive officers of 6,416,760(6) 4.2%
The Meditrust Companies as a group
5% Stockholders:
Portfolio C Investors, L.P. 2,990,809(7)
The Airlie Group, L.P. 269,633(8)
Annie R. Bass Grandson's Trust for Lee M. Bass 445,962(9)
Annie R. Bass Grandson's Trust for Sid. R. Bass 445,962(10)
The Bass Management Trust 658,526(11)
Hyatt Anne Bass Successor Trust 857,701(12)
Lee M. Bass, Inc. 2,294,211(13)
Peter Sterling 187,600
Samantha Sims Bass Successor Trust 857,701(14)
Sid R. Bass, Inc. 2,294,211(15)
Thomas M. Taylor & Co. 1,901,205(16)
William P. Hallman, Jr. 140,002(17) *
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class
- ---------------------------------------- ------------------------- -----------------
<S> <C> <C>
- ------------------------ ------------ ------
(as a Group)
13,343,523 8.9%
c/o W. Robert Cotham
201 Main Street
Suite 2600
Fort Worth, Texas 76102
Former Director and Executive Officer:
Abraham D. Gosman 969,644(5) *
</TABLE>
- ------------
* Less than 1%.
(1) Unless otherwise indicated, the number of Paired Shares stated as being
owned beneficially includes (i) Paired Shares beneficially owned by
spouses, minor children and/or other relatives in which the Director or
officer may share voting power and (ii) any Paired Shares listed as being
subject to options exercisable within 60 days of January 15, 1999.
(2) Does not include 120 Paired Shares owned by Mr. Benson's children, to
which Mr. Benson disclaims any beneficial interest.
(3) Does not include 1,201 Paired Shares owned by Mr. Brooke's wife's IRA,
6,000 Paired Shares owned of record by Mr. Brooke as custodian for his son
and 1,733 Paired Shares owned of record by Mr. Brooke as trustee for his
grandchildren and 270 shares as custodian, as to which Paired Shares Mr.
Brooke disclaims any beneficial interest.
(4) Mr. Thomas M. Taylor may be deemed to beneficially own the shares
beneficially owned by Thomas M. Taylor & Co., Portfolio C Investors, L.P.,
Trinity I Fund, L.P. and the Airlie Group, L.P. The aggregate of all of
such shares which Mr. Thomas M. Taylor may be deemed to beneficially own
is 7,354,730.
(5) Mr. Gosman served as CEO of Operating Company until August 1998. Based on
company filings prior to Mr. Gosman's resignation on August 3, 1998.
(6) Does not include an aggregate of 9,324 Paired Shares owned by or for
parents, spouses or children, as to which Paired Shares the Directors or
officers disclaim any beneficial interest.
(7) Mr. Thomas M. Taylor, solely in his capacity as the President and sole
shareholder of the general partner of general partner of Trinity I Fund,
L.P., the sole stockholder of the general partner of Portfolio C
Investors, L.P., may also be deemed a beneficial owner of such shares.
(8) Mr. Thomas M. Taylor, solely in his capacity as President of the general
partner of the Airlie Group, L.P.'s general partner, may also be deemed a
beneficial owner of such shares.
(9) Mr. William P. Hallman, Jr., solely in his capacity as Trustee of the
Annie R. Bass Grandson's Trust for Lee M. Bass, may also be deemed a
beneficial owner of such shares.
(10) Mr. William P. Hallman, Jr., solely in his capacity as Trustee of the
Annie R. Bass Grandson's Trust for Sid R. Bass, may also be deemed a
beneficial owner of such shares.
(11) Mr. Perry R. Bass, solely in his capacity as sole Trustee and as one of
two trustors of The Bass Management Trust, may also be deemed a beneficial
owner of such shares.
(12) Panther City Investment Company, solely in its capacity as Trustee of the
Hyatt Anne Bass Successor Trust, may also be deemed a beneficial owner of
such shares.
(13) Mr. Lee M. Bass, solely in his capacity as President of Lee M. Bass, Inc.,
may also be deemed a beneficial owner of such shares.
21
<PAGE>
(14) Panther City Investment Company, solely in its capacity as Trustee of the
Samantha Sims Bass Successor Trust, may also be deemed a beneficial owner
of such shares.
(15) Mr. Sid R. Bass, solely in his capacity as President of Sid R. Bass, Inc.,
may also be deemed a beneficial owner of such shares.
(16) Mr. Thomas M. Taylor, solely in his capacity as President of Thomas M.
Taylor & Co., may also be deemed a beneficial owner of such shares.
(17) Such amount does not include shares held in Annie R. Bass Grandson's Trust
for Lee M. Bass and Annie R. Bass Grandson's Trust for Sid R. Bass, for
both of which Mr. Hallman serves as trustee.
The information reflected for certain beneficial owners listed under the
heading "5% Shareholders" is based on statements and reports filed with the SEC
on February 10, 1999 and furnished to The Meditrust Companies by such holders.
No independent investigation concerning the accuracy thereof has been made by
The Meditrust Companies.
22
<PAGE>
OTHER MATTERS
As of the date of this Joint Proxy Statement, The Meditrust Companies'
Boards of Directors know of no matters that will be presented for consideration
at the respective meetings other than as described in this Joint Proxy
Statement. If any other matters shall properly come before the Meditrust
Meeting or the Operating Company Meeting and be voted upon, the enclosed
proxies will be deemed to confer discretionary authority on the individuals
named as proxies therein to vote the shares represented by such proxies as to
any such matters. The persons named as proxies intend to vote in accordance
with the recommendation of the management of Meditrust or Operating Company.
FUTURE STOCKHOLDER PROPOSALS
Any Meditrust or Operating Company stockholder who intends to submit a
proposal for inclusion in the proxy materials for the 1999 annual meetings of
stockholders of Meditrust or Operating Company must have submitted such
proposal in writing to the respective Secretary of Meditrust or Operating
Company by January 21, 1999, if the proposal is to be considered for inclusion
in the Joint Proxy Statement of Meditrust and Operating Company and the form of
proxy relating to those meetings. The Meditrust Companies' By-laws include
advance notice and other requirements regarding proposals for stockholder
action at stockholders' meetings other than those proposed by the Boards of
Directors. A copy of the By-laws of either Meditrust or Operating Company may
be obtained by written request addressed to the respective Secretary at the
address set forth below.
SEC rules set forth standards as to what stockholder proposals are
required to be included in a proxy statement for an annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
The Meditrust Companies file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please
call the SEC at 800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from commercial
document retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
The Meditrust Companies' SEC filings are also available through their
website at "http://www.reit.com." or by contacting their Investor Relations
Departments at the addresses and phone numbers listed below:
<TABLE>
<S> <C>
Meditrust Corporation Meditrust Operating Company
197 First Avenue, Suite 300 197 First Avenue, Suite 100
Needham, MA 02494 Needham, MA 02494
Attn: Investor Relations Attn: Investor Relations
Tel: (781) 433-6000 Tel: (781) 453-8062
</TABLE>
If you would like to request documents from us, please do so by ,
1999 to receive them before the Meditrust Meeting or Operating Company Meeting.
You should rely only on the information contained or incorporated by reference
in this Joint Proxy Statement to vote on The Meditrust Companies' proposals. We
have not authorized anyone to provide you with information that is different
from what is contained in this Joint Proxy Statement. This Joint Proxy
Statement is dated , 1999. You should not assume that the information
contained in this Joint Proxy Statement is accurate as of any date other than
such date, and the mailing of this Joint Proxy Statement to shareholders shall
not create any implication to the contrary.
23
<PAGE>
ANNEX A
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MEDITRUST CORPORATION
Meditrust Corporation, a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The Corporation filed its original Certificate of Incorporation with
the Secretary of State of the State of Delaware on August 23, 1979 (the
"Original Certificate of Incorporation") under the name "Santa Anita Realty
Enterprises, Inc." The name of the Corporation was changed to Meditrust
Corporation on November 5, 1997, by way of amendment to the Original
Certificate of Incorporation. A Restated Certificate of Incorporation (the
"Second Certificate") was filed with the Secretary of State of the State of
Delaware on March 2, 1998 restating and integrating the Corporation's
certificate of incorporation as theretofore amended and supplemented.
2. This Amended and Restated Certificate of Incorporation (the
"Certificate") amends, restates and integrates the Corporation's Certificate of
Incorporation as heretofore amended and supplemented. The Certificate was duly
adopted by the Board of Directors of the Corporation in accordance with the
provisions of Sections 242 and 245 of the Delaware General Corporation Law, as
amended from time to time (the "DGCL"), and was duly adopted by the
stockholders of the Corporation in accordance with the applicable provisions of
Sections 242 and 245 of the DGCL.
3. The text of the Second Certificate, as amended to date, is hereby
amended and restated in its entirety to provide as herein set forth in full:
FIRST. Name. The name of the Corporation is Meditrust Corporation.
SECOND. Registered Office. The address of its registered office in the
State of Delaware is 1013 Centre Road, Suite 300 in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is
Corporation Service Company.
THIRD. Purposes. The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware and to do all
things and exercise all powers, rights and privileges which a business
corporation may now or hereafter be organized or authorized to do or
to exercise under the laws of the State of Delaware.
FOURTH. Capitalization.
SECTION 1. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 561,000,000, of which 500,000,000
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 2. The shares of Preferred Stock may be issued from time to time
in one or more series. The Board of Directors of the Corporation, or any duly
authorized committee thereof, is hereby authorized to fix or authorize the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price
or prices, and the liquidation preferences of any wholly unissued series of
Preferred Stock and the number of shares constituting any such series and the
designation thereof, or all or any of them and such other rights specified by
the Board of Directors of the Corporation and not prohibited by law.
SECTION 3. The shares of Series Common Stock may be issued from time to
time in one or more series. The Board of Directors of the Corporation is hereby
authorized to fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices,
<PAGE>
and the liquidation preferences of any wholly unissued series of Series Common
Stock and the number of shares constituting any such series and the designation
thereof, or all or any of them.
SECTION 4. (a) Each holder of Common Stock, as such, shall be entitled to
one vote for each share of Common Stock held of record by such holder on all
matters on which stockholders generally are entitled to vote.
(b) Except as otherwise required by law, holders of a series of
Preferred Stock or Series Common Stock, as such, shall be entitled only to such
voting rights, if any, as shall expressly be granted thereto by this
Certificate of Incorporation (including any Certificate of Designation relating
to such series).
(c) Subject to applicable law and the rights, if any, of the holders of
any outstanding series of Preferred Stock or Series Common Stock or any class
or series of stock having a preference over or the right to participate with
the Common Stock with respect to the payment of dividends, dividends may be
declared and paid on the Common Stock at such times and in such amounts as the
Board of Directors of the Corporation in its discretion shall determine.
(d) Upon the dissolution, liquidation or winding up of the Corporation,
subject to the rights, if any, of the holders of any outstanding series of
Preferred Stock or Series Common Stock or any class or series of stock having a
preference over or the right to participate with the Common Stock with respect
to the distribution of assets of the Corporation upon such dissolution,
liquidation or winding up of the Corporation, the holders of the Common Stock,
as such, shall be entitled to receive the assets of the Corporation available
for distribution to its stockholders ratably in proportion to the number of
shares held by them.
SECTION 5. The terms and conditions applicable to shares of Excess Stock
are set forth in Article Thirteenth hereof.
FIFTH. [DELETED].
SIXTH. By-laws. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is expressly
authorized, without stockholder approval, to make, alter or repeal the by-laws
of the Corporation.
SEVENTH. Right to Amend Certificate. The Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Certificate, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
EIGHTH. [DELETED].
NINTH:
Part 1. Vote Required for Certain Business Combinations
1.1. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or any other Article of this Certificate of
Incorporation, and except as otherwise expressly provided in Part 2 of this
Article Ninth:
(a) any merger or consolidation of the Corporation or any Subsidiary
with (i) any Interested Stockholder or (ii) any other corporation (whether or
not itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an Interested Stockholder;
or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value of $5,000,000 or more; or
(c) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair Market Value
of $5,000,000 or more, other than the issuance of securities by the Corporation
A-2
<PAGE>
or any Subsidiary upon the conversion of convertible securities of the
Corporation or any Subsidiary into stock of the Corporation or any Subsidiary;
or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(e) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder;
shall require the affirmative vote of the holders of at least (a) 80% of the
combined voting power of the then outstanding shares of stock of all classes
and series of the Corporation entitled to vote in the election of directors
(the "Voting Stock"), and (b) a majority of the combined voting power of the
then outstanding shares of Voting Stock held by persons who are Disinterested
Stockholders, provided, however, that the majority vote requirement of this
clause (b) shall not be applicable if the Business Combination is approved by
the affirmative vote of the holders of not less than 90% of combined voting
power of the then outstanding shares of Voting Stock. The foregoing affirmative
vote requirements are hereinafter referred to as the "Special Vote
Requirement." The Special Vote Requirement shall be applicable notwithstanding
the fact that no vote may be required, or that a lesser percentage may be
specified, by law or in any agreement with any national securities exchange or
otherwise.
1.2. Definition of "Business Combination." The term "Business Combination"
as used in this Article Ninth shall mean any transaction which is referred to
in any one or more of clauses (a) through (e) of Section 1.1.
Part 2. When Special Vote Requirement Is Not Applicable
The provisions of Part 1 of this Article Ninth shall not be applicable to
any particular Business Combination, and such Business Combination shall
require only such affirmative vote as is required by law and any other Article
of this Certificate of Incorporation, if all of the conditions specified in
either of the following Sections 2.1 and 2.2 are met:
2.1. Approval by Continuing Directors. The Business Combination shall have
been approved by a majority of the Continuing Directors.
2.2. Price and Procedural Requirements. All of the following conditions
shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of Common Stock in such
Business Combination shall be at least equal to the higher of (i) the highest
price paid for any share of Common Stock by any person who is an Interested
Stockholder within the two-year period immediately prior to the time of the
first public announcement of the proposed Business Combination (the
"Announcement Date") or in the transaction in which such person became an
Interested Stockholder, whichever price is the higher; or (ii) the Fair Market
Value per share of the Corporation's Common Stock on the Announcement Date or
on the date on which the Interested Stockholder became an Interested
Stockholder (the "Determination Date"), whichever is higher. The price paid for
any share of Common Stock shall be the amount of cash plus the Fair Market
Value of any other consideration to be received therefor, determined at the
time of payment thereof.
(b) The aggregate amount of the cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration
other than cash to be received in such Business Combination by holders of
securities of the Corporation other than Common Stock shall be at least equal
to the higher of (i) if applicable, the highest preferential amount to which
the holders of such securities are entitled in the event of any voluntary
liquidation, dissolution or winding up of the Corporation, (ii) the highest
price paid for any of such securities by any person who is an Interested
Stockholder within the two-year period immediately prior to the Announcement
Date or in the
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transaction in which such person became an Interested Stockholder, whichever
price is higher, (iii) the Fair Market Value of such securities on the
Announcement Date or the Determination Date, whichever is higher, or (iv) if
such securities are convertible into or exchangeable for shares of Common
Stock, the amount per share of such Common Stock determined pursuant to the
foregoing paragraph (a) reduced by any amount payable by the holders of such
securities in accordance with the terms of such securities, per share, upon
such conversion or exchange, multiplied by the total number of shares of Common
Stock into which or for which such securities are convertible or exchangeable.
(c) The consideration to be received by holders of a particular class of
outstanding Voting Stock (including Common Stock) shall be in cash or in the
same forms the Interested Stockholder has previously paid for shares of such
class of Voting Stock. If the Interested Stockholder has paid for shares of any
class of Voting Stock with varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either cash or the form
of consideration used to acquire the largest number of shares of such class of
Voting Stock previously acquired by it.
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (i)
there shall have been (1) no reduction in the annual rate of dividends paid on
the Common Stock (except as necessary to reflect any subdivision of the Common
Stock), except as approved by a majority of the Continuing Directors, and (2)
an increase in such annual rate of dividends necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing the
number of outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the Continuing
Directors; and (ii) such Interested Stockholder shall have not become the
beneficial owner of any additional shares of Voting Stock except as part of the
transaction which results in such Interested Stockholder becoming an Interested
Stockholder.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantages provided by the Corporation, whether in anticipation of
or in connection with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934 and the rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to all stockholders
of the Corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent provisions).
Part 3. Certain Definitions
For the purposes of this Article Ninth:
3.1. A "person" shall mean any individual, firm, corporation, partnership,
trust or other entity.
3.2. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(a) is the beneficial owner, directly or indirectly, of more than 10% of
the combined voting power of the then outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10% or more of the combined voting power of
the then outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any shares of Voting
Stock which were at any time within the two-year period immediately prior to
the date in question beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of
the Securities Act of 1933.
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3.3. A person shall be a "beneficial owner" of any Voting Stock:
(a) which such person or any of its Affiliates or Associates beneficially
owns, directly or indirectly; or
(b) which such person or any of its Affiliates or Associates has (i) the
right to acquire (whether such right is exercisable immediately or only after
the passage of time), pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote or to direct the vote pursuant to any
agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
3.4. For the purposes of determining whether a person is an Interested
Stockholder pursuant to Section 3.2, the number of shares of Voting Stock
deemed to be outstanding shall include shares deemed owned through application
of Section 3.3 but shall not include any other shares of Voting Stock which may
be issuable to other persons pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
3.5. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on January 1, 1984.
3.6. "Subsidiary" means any corporation of which more than a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for purposes of the definition of
Interested Stockholder set forth in Section 3.2, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity security is
owned by the Corporation, by a Subsidiary, or by the Corporation and one or
more Subsidiaries.
3.7. "Continuing Director" means any member of the Board of Directors of
the Corporation who is unaffiliated with, and not a nominee of, the Interested
Stockholder and was a member of the Board of Directors of the Corporation prior
to the time that the Interested Stockholder became an Interested Stockholder
and any successor of a Continuing Director who is unaffiliated with, and not a
nominee of, the Interested Stockholder and who is recommended to succeed a
Continuing Director by a majority of Continuing Directors then on the Board of
Directors of the Corporation.
3.8. "Disinterested Stockholder" means a holder of Voting Stock who is not
an Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder and whose shares are not deemed owned by an Interested Stockholder
through application of Section 3.3.
3.9. "Fair Market Value" means: (a) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such quotations
are available, the Fair Market Value on the date in question of a share of such
stock as determined by a majority of the Continuing Directors in good faith;
and (b) in the case of stock of any class of securities not traded on any
securities exchange or in the over-the-counter market or in the case of
property other than cash or stock, the Fair Market Value of such securities or
property on the date in question as determined by a majority of the Continuing
Directors in good faith. If the stock is paired for purposes of trading with
that of any other corporation, the Fair Market Value of the paired stock shall
be determined pursuant to the pairing or other agreement which provides for the
determination of the relative values of the stock of the Corporation and the
stock of such other corporation, after determining the Fair Market Value of the
paired stock as set forth above.
3.10. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration to be received" as used in Sections 2.2(a),
(b) and (c) shall include the shares of Common Stock and/or the shares of any
other class of outstanding Voting Stock retained by the holders of such shares.
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Part 4. Directors' Duty to Determine Certain Facts
The majority of the Continuing Directors of the Corporation shall have the
power and duty to determine for the purpose of this Article Ninth, on the basis
of information known to them after reasonable inquiry, all facts necessary to
determine the applicability of the various provisions of this Article Ninth,
including (A) whether a person is an Interested Stockholder, (B) the number of
shares of Voting Stock beneficially owned by any person, (C) whether a person
is an Affiliate or Associate of another, (D) whether the requirements of
Section 2.2 have been met with respect to any Business Combination, and (E)
whether the assets which are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value of $5,000,000 or more; and the good faith determination of a
majority of the Continuing Directors shall be conclusive and binding for all
purposes of this Article Ninth.
Part 5. No Effect on Fiduciary Obligations of Interested Stockholders
Nothing contained in this Article Ninth shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
Part 6. Amendment, Repeal, Inconsistent Provisions
Notwithstanding any other provisions of law or of this Certificate of
Incorporation or the by-laws of the Corporation which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of securities which may be required by law or
by this Certificate of Incorporation, any proposal to amend or repeal, or adopt
any provisions inconsistent with, this Article Ninth of this Certificate of
Incorporation shall require for approval the affirmative vote of at least (a)
80% of the combined voting power of the then outstanding Shares of Voting Stock
and (b) a majority of the combined voting power of the then outstanding shares
of Voting Stock held by persons who are Disinterested Stockholders, provided
that the majority vote requirement of this clause (b) shall not be applicable
if the proposal is approved by the affirmative vote of not less than 90% of the
combined voting power of the then outstanding shares of Voting Stock.
TENTH:
(a) The number of directors shall be as provided in the by-laws. The
Board of Directors of the Corporation shall be divided into three classes,
designated Class I, Class II and Class III, such classes to be as nearly equal
in number as possible and to have the number provided in the by-laws. At the
annual meeting of stockholders in 1986, Directors of Class I shall be elected
to hold office for a term expiring at the next succeeding annual meeting,
Directors of Class II shall be elected to hold office for a term expiring at
the second succeeding annual meeting, and Directors of Class III shall be
elected to hold office for a term expiring at the third succeeding annual
meeting. Thereafter at each annual meeting of stockholders, directors shall be
chosen for a term of three years to succeed those whose terms then expire and
shall hold office until the third following annual meeting of stockholders and
until the election of their respective successors. Any vacancy on the Board of
Directors of the Corporation, whether arising through death, resignation or
removal of a director or through an increase in the number of directors of any
class, shall be filled by a majority vote of all the remaining directors. The
term of office of any director elected to fill such a vacancy shall expire at
the expiration of the term of office of directors of the class in which the
vacancy occurred. Notwithstanding any other provision of this Article, and
except as otherwise required by law, whenever the holders of any one or more
series of Preferred Stock or other securities of the Corporation shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the term of office, the filling of vacancies and other features of
such directorships shall be governed by the terms of this Certificate of
Incorporation applicable thereto, and unless the terms of this Certificate of
Incorporation expressly provide otherwise, such directorships shall be in
addition to the number of directors provided in the by-laws and such directors
shall not be classified pursuant to this Article.
(b) Any action required or permitted to be taken by holders of stock of
the Corporation must be taken at a meeting of such holders and may not be taken
by consent in writing. The by-laws of the Corporation may be amended by the
stockholders only by the affirmative vote of at least 80% of the voting power
of the Corporation. Notwithstanding
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any other provision of law or of this Certificate of Incorporation or the
by-laws of the Corporation which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of securities which may be required by law or by this
Certificate of Incorporation, any proposal to amend or repeal, or adopt any
provisions inconsistent with, this Article Tenth shall require for approval the
affirmative vote of at least 80% of the voting power of the Corporation.
ELEVENTH:
The Board of Directors of the Corporation shall base the response of this
Corporation to any proposed Business Combination on the evaluation of the Board
of Directors of the Corporation of what is in the best interest of this
Corporation. In evaluating what is in the best interest of this Corporation,
the Board of Directors of the Corporation shall consider:
(a) The best interest of the stockholders. For this purpose, the Board
shall consider among other factors, not only the consideration offered in the
proposed Business Combination in relation to the then current market price of
this Corporation's stock, but also in relation to the then current value of
this Corporation in a freely negotiated transaction and in relation to the then
current estimate of the Board of Directors of the Corporation of the future
value of this Corporation as an independent entity; and
(b) Such other factors as the Board of Directors of the Corporation
determines to be relevant, including, among other factors, the social, legal
and economic effects on the communities in which this Corporation and its
subsidiaries operate and are located.
TWELFTH:
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as director.
Any repeal or modification of this Article shall not result in any
liability for a director with respect to any action or omission occurring prior
to such repeal or modification.
THIRTEENTH:
Section 13.1 Restrictions on Ownership and Transfer of Equity Stock.
(a) Definitions. For purposes of this Article Thirteenth and Article
Fourteenth, 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).
"Common Stock" shall mean the common stock, par value $.10 per share of
the Corporation.
"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
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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 and the Preferred Stock, par
value $.10 per share of the Corporation.
"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.
"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 of the Corporation 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 14.2(c) by the value of a paired
share most recently determined under Section 14.2(c) (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.
"Operating Company Common Stock" shall mean the common stock, par value
$.10 per share of Operating Company.
"Operating Company Equity Stock" shall mean Operating Company Common Stock
and preferred stock of any designation, par value $.10 per share of 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
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of the Corporation which 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 the Corporation) and Santa Anita Operating Company (the predecessor of
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 of the Corporation 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 Operating Company in accordance with Article
Fourteenth.
(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.
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(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.
(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 of the Corporation, 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 of the Corporation 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).
(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.
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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) 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 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 Article Fourteenth, 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 Article Fourteenth.
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(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 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.
(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 of the Corporation 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-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
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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 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
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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 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 Article Fourteenth and
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 of the Corporation 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 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
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that are paired pursuant to Article Fourteenth of the respective Certificates
of Incorporation of each company, except in combination with an equal number of
shares of the other company in accordance with the respective Certificates of
Incorporation of each company, 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 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.
FOURTEENTH:
Section 14.1 Transfer of Shares. Until the restrictions and limitations
set forth in this Article Fourteenth shall have been terminated in the manner
hereinafter provided:
(a) Except as provided herein, no shares of Equity Stock shall be
transferable, and they shall not be transferred on the books of the
Corporation, unless (i) a simultaneous transfer is made by the same transferor
to the same transferee, or (ii) such transferor has previously arranged with
Operating Company for the transfer to the transferee, of the same number of
shares of Operating Company Equity Stock, except that Operating Company may
transfer shares of Equity Stock acquired by it from the Corporation to a person
to whom Operating Company simultaneously issues the same number of shares of
Operating Company Equity Stock.
(b) Except as provided herein, each certificate evidencing ownership of
shares of Equity Stock shall be deemed to evidence, in addition, the same
number of shares of Operating Company Equity Stock.
(c) Notwithstanding the foregoing, any shares of Equity Stock issued
after the date of the filing of this Certificate, which are issued on an
unpaired basis by the Corporation pursuant to the terms of Section 14.7 of this
Certificate may be transferred without compliance with Section 14.1(a) or
Section 14.3 and may be evidenced solely by a certificate which is not deemed
to evidence a like number of shares of Operating Company Equity Stock as
required by Section 14.1(b).
Section 14.2 Issuance of Shares. Until such time as the pairing of the
outstanding shares of Common Stock and the outstanding shares of Operating
Company Common Stock in accordance with this Article Fourteenth (the "Pairing"
and each paired share a "Paired Share") shall have been terminated in the
manner herein provided:
(a) Except as provided herein, the Corporation shall not issue or agree
to issue any shares of Equity Stock to any person except Operating Company
unless effective provision has been made for the simultaneous issuance or
transfer to the same person of the same number of shares of Operating Company
Equity Stock and for the pairing of such shares of the Corporation and
Operating Company and unless the Corporation and Operating Company have agreed
on the manner and basis of allocating the consideration to be received upon
such issuance between the Corporation and Operating Company or, if allocation
of such consideration between them is not practicable, on the payment by one
company to the other of cash or other consideration in lieu thereof. Any such
allocation or payment shall be based on the respective fair market values of
the Equity Stock and the Operating Company Equity Stock.
(b) As desired from time to time, but not less often than once each
calendar year, the Corporation and Operating Company shall jointly arrange for
the determination of the fair market value as of a date specified by the
Corporation and Operating Company (the "valuation date") of the shares of
Operating Company Common Stock outstanding on the valuation date. The amount so
determined (the "fair market value of the Operating Company Shares") shall
thereafter be used in all calculations pursuant to this Section 14.2 until a
new determination is made. The fair market value of each share of Common Stock
shall be determined by subtracting the fair market value of
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one Operating Company Common Stock from the average of the closing sale prices
of a Paired Share over the principal exchange on which the Paired Shares are
listed, or if not listed, then the average of the last bid prices in the over-
the-counter market during the ten business days prior to any date of
determination of the fair market value of Common Stock.
Section 14.3 Stock Certificates; Transfer Agents and Registrars. Until
such time as the Pairing shall have been terminated in the manner herein
provided, except in the case of shares of Equity Stock issued to Operating
Company or Equity Stock issued pursuant to Section 14.7, each certificate which
is issued evidencing shares of Equity Stock shall be printed "back-to-back"
with a certificate evidencing the same number of Operating Company Equity
Stock, shall bear a conspicuous legend (on the face thereof) referring to the
restrictions on the transfer of the shares evidenced thereby contained in the
bylaws of the Corporation, and shall be in a form which satisfies the
requirements of the laws of Delaware and which has been approved by the Board
of Directors of the Corporation.
Section 14.4 Stock Dividends, Reclassifications, etc. Until such time as
the Pairing shall have been terminated in the manner herein provided, the
Corporation shall not declare or pay any stock dividend consisting in whole or
in part of Equity Stock, issue any rights or warrants to purchase any shares of
Stock, or subdivide, combine or otherwise reclassify the shares of Equity
Stock, unless Operating Company simultaneously takes the same or equivalent
action with respect to the Operating Company Equity Stock, to the end that the
outstanding shares of Equity Stock and Operating Company Equity Stock will at
all times be effectively paired on a one-for-one basis as contemplated herein.
Section 14.5 Shares in Excess of the Ownership Limit or in Violation of
the Transfer Restrictions; Designation of Trustee and Beneficiaries. Until such
time as the Board of Directors of the Corporation determines that it is no
longer in the best interest of the Corporation to attempt to, or continue to,
qualify under the Code, as a REIT:
(a) Upon the conversion of a share of any class or series of Equity
Stock of the Corporation into a share of Excess Stock of the Corporation in
accordance with the provisions of Article Thirteenth, if such share of Equity
Stock was paired prior to its conversion into Excess Stock, the corresponding
paired share of that same class or series of Equity Stock of Operating Company
shall be simultaneously converted into a share of Excess Stock of Operating
Company; such shares of Excess Stock of the Corporation and Operating Company
shall be paired and shall be simultaneously transferred to a trust established
by the Corporation and Operating Company for such purpose (a "Trust").
(b) Upon the conversion of a share of Excess Stock of the Corporation
into a share of Equity Stock of the Corporation of the same class or series
from which such Excess Stock was converted in accordance with the provisions of
Article Thirteenth, if such share of Excess Stock was paired prior to its
conversion from Equity Stock into Excess Stock, the corresponding paired share
of Excess Stock of Operating Company shall be simultaneously converted into a
share of Equity Stock of Operating Company of the same class or series from
which such Excess Stock was converted and such shares of Equity Stock shall be
paired.
(c) With respect to an offer made by the Trust to the Corporation to
purchase shares of Excess Stock from a Trust pursuant to Article Thirteenth, in
the case of shares of Excess Stock that are paired, the Corporation shall
accept such offer with respect to its shares of Excess Stock without the
agreement of Operating Company to accept such offer with respect to the
corresponding paired shares of its Excess Stock.
(d) The Trustee of each Trust shall be designated by mutual agreement of
the Board of Directors of the Corporation and the Board of Directors of
Operating Company.
(e) The Beneficiary with respect to each Trust shall be designated by
mutual agreement of the Board of Directors of the Corporation and the Board of
Directors of Operating Company.
(f) At such time that the Board of Directors of the Corporation no
longer deems it in the best interests of the Corporation to attempt to, or
continue to, qualify under the Code as a REIT, it shall notify the Board of
Directors of Operating Company in writing of such determination and the
Ownership Limit and the Transfer Restrictions shall cease to have effect, as
provided in Article Thirteenth.
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Section 14.7 Unpaired Shares.
(a) Shares of capital stock of any class or series, irrespective of
whether such shares are convertible into Paired Shares, may be issued by the
Corporation to any person without effective provision for the simultaneous
issuance or transfer to the same person of the same number of shares of that
same class or series of capital stock of Operating Company and without
effective provision for the pairing of such shares of capital stock of the
Corporation and Operating Company, as the Board of Directors of the Corporation
shall in its sole discretion determine (any such shares of capital stock of any
class or series issued by the Corporation pursuant to this Section 14.7 are
referred to herein as "Unpaired Shares").
(b) Unpaired Shares may be transferred on the books of the Corporation
without a simultaneous transfer to the same transferee of any shares of any
other class or series of capital stock of Operating Company.
Section 14.8 Merger, Sale of Assets, etc. Commencing at the Effective Time
and continuing until such time as the Pairing shall have been terminated in the
manner provided herein, the Corporation will not be a party to any merger,
consolidation, sale of assets, liquidation or other form or reorganization
purchase to which shares of Equity Stock are converted, redeemed, exchanged or
otherwise changed unless Operating Company is also a party to such transaction.
Section 14.9 Waiver and Termination. The Board of Directors of the
Corporation is hereby authorized to waive, repeal or make inapplicable the
restrictions and limitations set forth in this Article Fourteenth in its
entirety or in any provision of this Article Fourteenth.
Section 14.10 Severability. Each provision of this Article Fourteenth
shall be severable and an adverse determination as to any provision shall in no
way affect the validity of any other provision.
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CERTIFICATE OF POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF
JUNIOR PARTICIPATING PREFERRED STOCK
I. DESIGNATION AND AMOUNT
The shares of such series shall be designated as "Junior Participating
Preferred Stock" (the "Junior Preferred Stock") and the number of shares
constituting the Junior Preferred Stock shall be 200,000. Such number of shares
may be increased or decreased by resolution of the Board of Directors of the
Corporation; provided, that no decrease shall reduce the number of shares of
Junior Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise
of outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Junior
Preferred Stock.
II. DIVIDENDS AND DISTRIBUTIONS
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Junior
Preferred Stock with respect to dividends, the holders of shares of Junior
Preferred Stock, in preference to the holders of Common Stock, par value $.10
per share (the "Common Stock"), of the Corporation, and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board of
Directors of the Corporation out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March, June, September
and December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Junior Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Junior Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Junior Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Junior
Preferred Stock as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Junior Preferred Stock in an amount
less than the total amount of such dividends at the
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time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors of the Corporation may fix a record date for the determination of
holders of shares of Junior Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
III. VOTING RIGHTS
The holders of shares of Junior Preferred Stock shall have the following
voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Junior Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein, in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Junior Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Except as set forth herein, in the Corporation's Certificate of
Incorporation or as otherwise provided by law, holders of Junior Preferred
Stock shall have no voting rights.
IV. CERTAIN RESTRICTIONS
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Junior Preferred Stock as provided in Section II are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Junior Preferred Stock outstanding shall
have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred Stock,
except dividends paid ratably on the Junior Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Junior Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares
of Junior Preferred Stock, or any shares of stock ranking on a parity with
the Junior Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors of
the Corporation) to all holders of such shares upon such terms as the Board
of Directors of the Corporation, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
IV purchase or otherwise acquire such shares at such time and in such manner.
V. REACQUIRED SHARES
Any shares of Junior Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series
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of Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
VI. LIQUIDATION, DISSOLUTION OR WINDING UP
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock unless, prior thereto, the holders of shares of Junior
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Junior Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Junior Preferred Stock, except distributions made ratably on the Junior
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Junior Preferred Stock were entitled immediately
prior to such event under the proviso in clause (1) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
VII. CONSOLIDATION, MERGER, ETC.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Junior Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of shares of
Junior Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
VIII. REDEMPTION
The shares of Junior Preferred Stock shall not be redeemable.
IX. RANK
The Junior Preferred Stock shall rank, with respect to the payment of
dividends and the distribution of assets, junior to all series of any other
class of the Corporation's Preferred Stock.
X. AMENDMENT
The Certificate of Incorporation of the Corporation shall not be amended
in any manner which would alter or change the powers, preferences or special
rights of the Junior Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Junior Preferred Stock, voting together as a single series.
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CERTIFICATE OF POWERS, DESIGNATIONS, PREFERENCES AND
RIGHTS OF SERIES A NON-VOTING CONVERTIBLE COMMON STOCK
1. Designation and Amount. There shall be a series of undesignated Series
Common Stock of the Corporation designated as "Series A Non-Voting Convertible
Common Stock" and the number of shares constituting such series shall be ten
million (10,000,000). The number of shares designated as shares of Series A
Non-Voting Convertible Common Stock may be increased or decreased by the Board
of Directors of the Corporation without a vote of stockholders. Except as
otherwise expressly provided herein, all shares of Series A Non-Voting
Convertible Common Stock shall be identical to shares of Common Stock (as
defined in Article FOURTH of the Certificate of Incorporation of the
Corporation, as amended (the "Certificate of Incorporation")) and shall entitle
the holders thereof to the same rights and privileges.
2. Voting. The holders of Series A Non-Voting Convertible Common Stock
shall not have any right to vote, except as required under applicable law and,
except as required by law, the holders of Common Stock and Series A Non-Voting
Convertible Common Stock shall vote together as a single class on all matters
as to which holders of Series A Non-Voting Convertible Common Stock are
entitled to vote as set forth herein. Except as required by law or as set forth
herein, the holders of Series A Non-Voting Convertible Common Stock (to the
extent permitted by this Section 2), Common Stock (to the extent permitted by
the Certificate of Incorporation), Preferred Stock (to the extent permitted by
the Certificate of Incorporation) and Series Common Stock (to the extent
permitted by the Certificate of Incorporation) shall vote together as a single
class on all matters submitted to the stockholders for a vote.
3. Dividends. Subject to applicable law, the holders of Series A
Non-Voting Convertible Common Stock shall be entitled to receive such dividends
out of funds legally available therefor at such times and in such amounts as
the Board of Directors of the Corporation may determine in its sole discretion
shall be paid with respect to the Common Stock, with each share of Common Stock
and each share of Series A Non-Voting Convertible Common Stock sharing
share-for-share in such dividends (with each share of Series A Non-Voting
Convertible Common Stock being equal to the number of shares of Common Stock
into which it would then be convertible on the record date for such dividend)
except that if dividends are declared which are payable in shares of Common
Stock or Series A Non-Voting Convertible Common Stock, dividends shall be
declared which are payable at the equivalent rate in both classes of stock and
the dividends payable in shares of Common Stock shall be payable to the holders
of that class of stock and the dividends payable in shares of Series A
Non-Voting Convertible Common Stock shall be payable to the holders of that
class of stock.
4. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary
(a "Liquidation Event"), after the payment or provision for payment of all
debts and liabilities of the Corporation and all preferential amounts to which
the holders of Preferred Stock or Series Common Stock, if any, are entitled
with respect to the distribution of assets in liquidation, the holders of
Series A Non-Voting Convertible Common Stock shall be entitled to share ratably
with the holders of Common Stock (with each share of Series A Non-Voting
Convertible Common Stock being equal to the number of shares of Common Stock
into which it would then be convertible on the effective date of such
Liquidation Event) in the remaining assets of the Corporation available for
distribution.
5. Conversion of Series A Non-Voting Convertible Common Stock.
(a) Automatic Conversion. Each share of Series A Non-Voting Convertible
Common Stock shall be automatically converted, without the payment of any
additional consideration, into fully paid and non-assessable shares of Common
Stock at the rate of one share of Common Stock for each share of Series A
Non-Voting Convertible Common Stock so converted (the "Series A Non-Voting
Conversion Rate") as of the date (the "Conversion Date") that is the earlier to
occur of (i) the next Business Day (as defined below) following the date on
which the shareholders of the Corporation and of Operating Company shall have
approved the merger transaction (the "Merger") among La Quinta Inns, Inc. ("La
Quinta"), Operating Company and the Corporation, and (ii) the date of any
termination of the Agreement and Plan of Merger dated as of January 3, 1998 and
among La Quinta, Operating Company and the Corporation relating to the Merger
in accordance with the terms thereof. As used herein, the term "Business Day"
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means any day other than Saturday, Sunday, or any other day on which banking
institutions in the States of Delaware or New York are not open for business.
(b) Procedure for Conversion. As of the Conversion Date, all outstanding
shares of Series A Non-Voting Convertible Common Stock shall be converted
automatically without any further action by the holders of Series A Non-Voting
Convertible Common Stock and whether or not the certificates representing such
shares of Series A Non-Voting Convertible Common Stock are surrendered to the
Corporation or its transfer agent. On the Conversion Date, all rights with
respect to the Series A Non-Voting Convertible Common Stock so converted shall
terminate, except any of the rights of the holders thereof, in accordance with
the procedures herein, to receive certificates for the number of shares of
Common Stock into which such Series A Non-Voting Convertible Common Stock has
been converted. The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable on the Conversion Date unless
certificates evidencing such shares of the Series A Non-Voting Convertible
Common Stock being converted, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto),
are surrendered at the principal executive office of the Corporation (or the
offices of the transfer agent for the Series A Non-Voting Convertible Common
Stock or such office or offices of an agent for conversion as may from time to
time be designated by notice to the holders of the Series A Non-Voting
Convertible Common Stock by the Corporation), together with written notice by
the holder of such Series A Non-Voting Convertible Common Stock stating the
name or names (with addresses) and denominations in which the certificate or
certificates for Common Stock shall be issued and shall include instructions
for delivery thereof. Upon such surrender of a certificate representing Series
A Non-Voting Convertible Common Stock following its automatic conversion, the
Corporation shall issue and send by hand delivery, by courier or by first class
mail (postage prepaid) to the holder thereof or to such holder's designee, at
the address designated by such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled upon
conversion. In the event that there shall have been surrendered a certificate
or certificates representing Series A Non-Voting Convertible Common Stock, only
part of which are to be converted, the Corporation shall issue and send to such
holder or such holder's designee, in the manner set forth in the preceding
sentence, a new certificate or certificates representing the number of shares
of Series A Non-Voting Convertible Common Stock which shall not have been
converted. If the certificate or certificates for Common Stock are to be issued
in a name other than the name of the registered holder of the Series A
Non-Voting Convertible Common Stock surrendered for conversion, the Corporation
shall not be obligated to issue or deliver any certificate unless and until the
holder of the Series A Non-Voting Convertible Common Stock surrendered has paid
to the Corporation the amount of any tax that may be payable in respect of any
transfer involved in such issuance or has established to the satisfaction of
the Corporation that such tax has been paid.
(c) Reservation of Stock Issuable Upon Conversion. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of
the shares of Series A Non-Voting Convertible Common Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Non-Voting Convertible Common
Stock.
6. Adjustments.
(a) Changes in Common Stock. In the event the Corporation shall (i) pay
a dividend in or make a distribution in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of its shares of Common Stock any shares of the Corporation, the Series A
Non-Voting Conversion Rate in effect immediately prior thereto shall be
adjusted so that the holder of a share of Series A Non-Voting Convertible
Common Stock thereafter surrendered for conversion shall be entitled to receive
the number of shares of Common Stock which it would have owned or have been
entitled to receive after the happening of any of the events described above
had such share of Series A Non-Voting Convertible Common Stock been converted
on or immediately prior to the record date for such dividend or the effective
date of such subdivision, combination or reclassification, as the case may be.
(b) Changes in Series A Non-Voting Convertible Common Stock. In the
event that the Corporation shall (i) pay a dividend in or make a distribution
in shares of its Series A Non-Voting Convertible Common Stock, (ii)
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<PAGE>
subdivide its outstanding shares of Series A Non-Voting Convertible Common
Stock, (iii) combine its outstanding shares of Series A Non-Voting Convertible
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of its shares of Series A Non-Voting Convertible Common Stock any shares of the
Corporation, the Series A Non-Voting Conversion Rate in effect immediately
prior thereto shall be adjusted so that the holder of a share of Series A
Non-Voting Convertible Common Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock which it would have
owned or have been entitled to receive after the happening of any of the events
described above had such share of Series A Non-Voting Convertible Common Stock
been converted on or immediately prior to the record date for such dividend or
the effective date of such subdivision, combination or reclassification, as the
case may be.
(c) General. An adjustment made pursuant to this Section 6 shall become
effective immediately after the record date (in the case of a dividend or
distribution in shares of capital stock) and shall become effective immediately
after the effective date (in the case of a subdivision, combination or
reclassification). No adjustment in accordance with this Section 6 shall be
required unless such adjustment would require an increase or decrease in any
conversion rate of at least 0.1%; provided, however, that any adjustments which
by reason of this clause are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
7. Notices. In the event that the Corporation provides any notice, report
or statement to the holders of Common Stock or Series A Non-Voting Convertible
Common Stock (in their capacity as such), the Corporation shall at the same
time provide a copy of any such notice, report or statement to each record
holder of outstanding Series A Non-Voting Convertible Common Stock.
8. Status of Acquired Shares. Shares of Series A Non-Voting Convertible
Common Stock acquired by the Corporation (upon conversion or otherwise) will be
restored to the status of authorized but unissued shares of undesignated Series
Common Stock.
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<PAGE>
MEDITRUST CORPORATION
CERTIFICATE OF THE POWERS, DESIGNATIONS
PREFERENCES AND RIGHTS OF THE
9% SERIES A CUMULATIVE REDEEMABLE PREFERRED STOCK
PAR VALUE $.10 PER SHARE
LIQUIDATION VALUE $250 PER SHARE
I.
(a) Title. The Series of Preferred Stock is hereby designated as the "9%
Series A Cumulative Redeemable Preferred Stock" (the "Series A Preferred
Stock").
(b) Number. The number of authorized shares of Series A Preferred Stock
shall be 805,000.
(c) Ranking. In respect of rights to the payment of dividends and the
distribution of assets in the event of any liquidation, dissolution or winding
up of the Corporation, the Series A Preferred Stock shall rank (i) senior to
the Corporation's Common stock, par value $.10 per share (the "Common Stock"),
senior to the Corporation's Series A Non-Voting Convertible Common Stock, par
value $.10 per share (the "Series A Common Stock"), senior to the Corporation's
Junior Participating Preferred Stock, par value $.10 per share (the "Junior
Preferred Stock"), and senior to any other class or series of capital stock of
the Corporation other than capital stock referred to in clauses (ii) and (iii)
of this sentence, (ii) on a parity with any class or series of capital stock of
the Corporation the terms of which specifically provide that such class or
series of capital stock ranks on a parity with the Series A Preferred Stock in
respect of rights to the payment of dividends and the distribution of assets in
the event of any liquidation, dissolution or winding up of the Corporation, and
(iii) junior to any class or series of capital stock of the Corporation the
terms of which specifically provide that such class or series of capital stock
ranks senior to the Series A Preferred Stock in respect of rights to the
payment of dividends and the distribution of assets in the event of any
liquidation, dissolution or winding up of the Corporation. The term "capital
stock" does not include convertible debt securities.
Without limitation to the provisions of the preceding paragraph, the
Series A Preferred Stock shall rank, in respect of rights to the payment of
dividends and the distribution of assets in the event of any liquidation,
dissolution or winding up of the Corporation, (a) senior to any shares of
Excess Stock (as defined below) issued upon conversion of any capital stock
referred to in clause (i) of the preceding paragraph, (b) on a parity with any
shares of Excess Stock issued upon conversion of any capital stock referred to
in clause (ii) of the preceding paragraph and (c) junior to any shares of
Excess Stock issued upon conversion of any capital stock referred to in clause
(iii) of the preceding paragraph.
(d) Dividends.
(i) Subject to the preferential rights of the holders of any class or
series of capital stock of the Corporation ranking prior to the Series A
Preferred Stock as to dividends, the holders of the then outstanding shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors of the Corporation or any duly authorized committee
thereof (collectively, the "Board of Directors of the Corporation"), out of
funds legally available for the payment of dividends, cumulative cash dividends
at the rate of 9% per annum of the $250.00 per share liquidation preference of
the Series A Preferred Stock (equivalent to an annual rate of $22.50 per
share). Such dividends shall accrue daily, shall accrue and the cumulative from
June 17, 1998 (the "Original Issue Date") and shall be payable quarterly in
arrears in cash on March 31, June 30, September 30 and December 31 (each, a
"Dividend Payment Date") of each year, commencing September 30, 1998; provided
that if any Dividend Payment Date is not a Business Day (as hereinafter
defined), then the dividend which would otherwise have been payable on such
Dividend Payment Date may be paid on the next succeeding Business Day with the
same force and effect as if paid on such Dividend Payment Date and no interest
or additional dividends or other sum shall accrue on the amount so payable for
the period from and after such Dividend Payment Date to such next succeeding
Business Date. The period from and including the Original Issue Date to but
excluding the first Dividend Payment Date, and each
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subsequent period from and including a Dividend Payment Date to but excluding
the next succeeding Dividend Payment Date, is hereinafter called a "Dividend
Period". Dividends shall be payable to holders of record as they appear in the
stock transfer books of the Corporation at the close of business on the
applicable record date (each, a "Record Date"), which shall be the 15th day of
the calendar month in which the applicable Dividend Payment Date falls or such
other date designated by the Board of Directors of the Corporation for the
payment of dividends that is not more than thirty (30) nor less than ten (10)
days prior to such Dividend Payment Date. The amount of any dividend payable
for any Dividend Period, or portion thereof, shall be computed on the basis of
a 360-day year consisting of twelve 30-day months, it being understood that the
amount of the dividend payable per share of Series A Preferred Stock for each
full Dividend Period shall be computed by dividing the annual dividend rate of
$22.50 per share by four (it being further understood that the dividend payable
on September 30, 1998 shall be for more than a full Dividend Period). The
dividends payable on any Dividend Payment Date or any other date shall include
dividends accrued to but excluding such Dividend Payment Date or other date, as
the case may be.
"Business Day" shall mean any day, other than a Saturday or Sunday, that
is not a day on which banking institutions in The City of New York are
authorized or required by law, regulation or executive order to close. All
references herein to "accrued and unpaid" dividends on the Series A Preferred
Stock (and all references of like import) shall include, unless otherwise
expressly stated or the context otherwise requires, accumulated dividends, if
any, on the Series A Preferred Stock; and all references herein to "accrued and
unpaid" dividends on any other class or series of capital stock of the
Corporation shall include, if (and only if) such class or series of capital
stock provides for cumulative dividends and unless otherwise expressly stated
or the context otherwise requires, accumulated dividends, if any, thereon.
(ii) If any shares of Series A Preferred Stock are outstanding, no full
dividends will be declared or paid or set apart for payment on any capital
stock of the Corporation of any other class or series ranking, as to dividends,
on a parity with or junior to the Series A Preferred Stock for any period
unless full cumulative dividends have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
such payment on the Series A Preferred Stock for all past Dividend Periods
(including, without limitation, any Dividend Period terminating on the date
upon which the dividends on such other capital stock are declared or paid or
set apart for payment, as the case may be). When dividends are not paid in full
(or a sum sufficient for such full payment is not set apart therefor) upon the
Series A Preferred Stock and the shares of any other class or series of capital
stock of the Corporation ranking on a parity as to dividends with the Series A
Preferred Stock, all dividends declared upon the Series A Preferred Stock and
any other class or series of capital stock of the Corporation ranking on a
parity as to dividends with the Series A Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share of Series A Preferred
Stock and such other class or series of capital stock of the Corporation shall
in all cases bear to each other the same ratio that accrued and unpaid
dividends per share on the shares of Series A Preferred Stock and such other
class or series of capital stock of the Corporation bear to each other.
Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Series A Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Series A Preferred Stock
for all past Dividend Periods (including, without limitation, any Dividend
Period terminating on the applicable Subject (as defined below)), (A) no
dividends (other than in shares of, or options, warrants or rights to subscribe
for or purchase shares of, Common Stock or any other class or series of capital
stock of the Corporation ranking junior to the Series A Preferred Stock as to
dividends and as to the distribution of assets upon liquidation, dissolution
and winding up of the Corporation) shall be declared or paid or set apart for
payment or other distribution declared or made upon the Common Stock of the
Corporation or any other class or series of capital stock of the Corporation
ranking junior to or on a parity with the Series A Preferred Stock as to
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up of the Corporation, nor shall any shares of Common Stock of the
Corporation or shares of any other class or series of capital stock of the
Corporation ranking junior to or on a parity with the Series A Preferred Stock
as to dividends or as to the distribution of assets upon liquidation,
dissolution or winding up of the Corporation be redeemed, purchased or
otherwise acquired for any consideration (or any monies paid to or made
available for a sinking fund for the redemption of any such shares of junior or
parity stock) by the Corporation (except by conversion into or exchange for
shares of any other class or
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series of capital stock of the Corporation ranking junior to the Series A
Preferred Stock as to dividends and as to the distribution of assets upon
liquidation, dissolution and winding up of the Corporation, except for the
purchase of capital stock of the Corporation pursuant to Section 7.5 of the
Corporation's by-laws (so long as such purchase is made in accordance with the
terms of such Section 7.5), and except for, if the Amendments (as hereinafter
defined) to the Certificate of Incorporation become effective in accordance
with the DGCL as contemplated by Section I(j) hereof, the purchase or
conversion of Excess Stock (as hereinafter defined) in accordance with the
provisions of Article Thirteenth (as hereinafter defined). As used in this
paragraph, the term "Subject Date" means any date on which any dividends shall
be declared or paid or set apart for payment or other distribution declared or
made upon the Common Stock of the Corporation or any other class or series of
capital stock of the Corporation ranking junior to on a parity with the Series
A Preferred Stock as to dividends or as to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation or on which any
shares of Common Stock of the Corporation or any shares of any other class or
series of capital stock of the Corporation ranking junior to or on a parity
with the Series A Preferred Stock as to dividends or as to the distribution of
assets upon liquidation, dissolution or winding up of the Corporation shall be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
paid to or made available for a sinking fund for the redemption of any such
shares of junior or parity stock) by the Corporation.
(iii) No dividends on the Series A Preferred Stock shall be declared by
the Board of Directors of the Corporation or paid or set apart for payment by
the Corporation at such times as any agreement of the Corporation, including
any agreement relating to its indebtedness, prohibits such declaration, payment
or setting apart for payment or provides that such declaration, payment or
setting apart for payment would constitute a breach thereof or a default
thereunder, or if such declaration or payment shall be restricted or prohibited
by law.
Anything in the Certificate of Designation to the contrary
notwithstanding, dividends on the Series A Preferred Stock will accrue and be
cumulative from the Original Issue Date whether or not the Corporation has
earnings, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are declared.
(iv) No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend or payments on the Series A Preferred Stock which
may be in arrears, and holders of the Series A Preferred Stock will not be
entitled to any dividends (within the meaning of the Code), whether payable in
cash, securities or other property, in excess of the full cumulative dividends
described herein.
(v) Any dividend payment made on the Series A Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to such shares.
(vi) If, for any taxable year, the Corporation elects to designate as
"capital gain dividends" (as defined in Section 857 of the Internal Revenue
Code of 1986, as amended (the "Code")), any portion (the "Capital Gains
Amount") of the dividends (within the meaning of the Code) paid or made
available for the year to holders of all classes and series of the
Corporation's capital stock (the "Total Dividends"), then the portion of the
Capital Gains Amount that shall be allocable to the holders of the Series A
Preferred Stock shall be an amount equal to (A) the total Capital Gains Amount
multiplied by (B) a fraction (1) the numerator of which is equal to the total
dividends (within the meaning of the Code), paid or made available to the
holders of the Series A Preferred Stock for that year and (2) the denominator
of which is the Total Dividends for that year.
(e) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, then, before any distribution or payment shall
be made to the holders of any Common Stock of the Corporation or shares of any
other class or series of capital stock of the Corporation ranking junior to the
Series A Preferred Stock with respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, but subject to the
preferential rights of the holders of shares of any class or series of capital
stock of the Corporation ranking prior to the Series A Preferred Stock with
respect to such distribution of assets upon liquidation, dissolution or winding
up, the holders of the shares of Series A Preferred Stock then outstanding
shall be entitled to receive and be paid out of
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the assets of the Corporation legally available for distribution to it
stockholders liquidating distributions in cash or property at its fair market
value as determined by the Board of Directors of the Corporation in the amount
of $250.00 per share, plus an amount equal to all accrued and unpaid dividends
thereon to the date of payment.
(ii) After payment to the holders of the Series A Preferred Stock of the
full amount of the liquidating distributions (including accrued and unpaid
dividends) to which they are entitled, the holders of Series A Preferred Stock,
as such, shall have no right or claim to any of the remaining assets of the
Corporation.
(iii) If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation legally available
therefor are insufficient to pay the full amount of liquidating distributions
on all outstanding shares of Series A Preferred Stock and the full amount of
the liquidating distributions payable on all outstanding shares of any other
classes or series of capital stock of the Corporation ranking on a parity with
the Series A Preferred Stock with respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, then the holders of
the Series A Preferred Stock and all such other classes or series of capital
stock will share ratably in any such distribution of assets in proportion to
the full liquidating distributions (including, if applicable, accrued and
unpaid dividends) to which they would otherwise respectively be entitled.
(iv) If liquidating distributions shall have been made in full to all
holders of Series A Preferred Stock, the remaining assets of the Corporation
shall be distributed among the holders of any other classes or series of
capital stock of the Corporation ranking junior to the Series A Preferred Stock
as to the distribution of assets upon liquidation, dissolution or winding up,
according to their respective rights and preferences.
(v) For purposes of this Section I(e), neither the consolidation or
merger of the Corporation with or into any other corporation, trust or other
entity, nor the sale, lease or conveyance of all or substantially all of the
property or business of the Corporation, shall be deemed to constitute a
liquidation, dissolution or winding up of the Corporation.
(f) Redemption.
(i) The Series A Preferred Stock is not redeemable prior to June 17,
2003. However, the Company is entitled, irrespective of any provision of this
Certificate of Designation to the contrary, pursuant to Section 7.5 of its
by-laws, to call for purchase and purchase from the holders thereof shares of
Series A Preferred Stock on the terms and subject to the conditions set forth
in such Section 7.5.
(ii) On and after June 17, 2003, the Corporation may, at its option,
upon not less than thirty (30) nor more than sixty (60) days' prior written
notice to the holders of record of the Series A Preferred Stock, redeem the
Series A Preferred Stock, in whole or from time to time in part, for a cash
redemption price equal to $250.00 per share, together with (except as provided
in Section I(g)(vi) below) all accrued and unpaid dividends to the date fixed
for redemption (the "Redemption Price"). Any date fixed for the redemption of
shares of Series A Preferred Stock is hereinafter called a "Redemption Date".
(iii) The Redemption Price of the Series A Preferred Stock (other than
the portion thereof consisting of accrued and unpaid dividends) shall be
payable solely out of the proceeds received by the Corporation from the sale of
other capital stock of the Corporation and not from any other source. For
purposes of the preceding sentence, the term "capital stock" means any equity
securities (including Common Stock of the Corporation, series common stock, par
value $.10 per share ("Series Common Stock"), of the Corporation, and any other
series of Preferred Stock of the Corporation), shares, interest, participations
or other ownership interests (however designated), depositary shares
representing interests in any of the foregoing, and any rights (other than debt
securities convertible into or exchangeable for equity securities) or options
to purchase any of the foregoing.
(g) Procedures for Redemption; Limitations on Redemption.
(i) If fewer than all of the outstanding shares of Series A Preferred
Stock are to be redeemed at the option of the Corporation, the number of shares
to be redeemed will be determined by the Corporation and such shares may be
redeemed pro rata from the holders of record of such shares in proportion to
the number of such shares held by such holders (with adjustments to avoid
redemption of fractional shares or, if fractional shares are outstanding, with
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such additional adjustments as the Corporation may elect in order to effect the
redemption of fractional shares) or by lot or any other equitable manner
determined by the Corporation (a) that will not give the Corporation the right
to purchase shares of Series A Preferred Stock pursuant to Section 7.5 of its
by-laws and (b) if the Amendments to the Certificate of Incorporation become
effective in accordance with the DGCL as contemplated by Section I(j) hereof,
that will not result in the conversion of any Series A Preferred Stock into
Excess Stock.
(ii) Notice of redemption will be given by publication in The Wall
Street Journal or, if such newspaper is not then being published, another
newspaper of general circulation in The City of New York, such publication to
be made once a week for two successive weeks commencing not less than thirty
(30) or more than sixty (60) days prior to the Redemption Date. Notice of any
redemption will also be mailed by or on behalf of the Corporation, first class
postage prepaid, not less than thirty (30) nor more than sixty (60) days prior
to the applicable Redemption Date, addressed to each holder of record of the
Series A Preferred Stock to be redeemed at the address set forth in the share
transfer records of the Corporation. In addition to any information required by
law or by the applicable rules of any exchange upon which Series A Preferred
Stock may be listed or admitted to trading, such notice shall state: (1) the
Redemption Date; (2) the Redemption Price; (3) the number of shares of Series A
Preferred Stock to be redeemed; (4) the place or places (which shall include a
place in the Borough of Manhattan, The City of New York) where certificates for
such shares are to be surrendered for payment of the Redemption Price; and (5)
that dividends on the shares of Series A Preferred Stock to be redeemed will
cease to accrue on such Redemption Date. If fewer than all of the outstanding
shares of Series A Preferred Stock are to be redeemed, the notice mailed to
each holder of shares to be redeemed shall also specify the number of Series A
Preferred Stock to be redeemed from such holder. No failure to give or defect
in such notice or defect in the mailing thereof shall affect the validity of
the proceedings for the redemption of any shares of Series A Preferred Stock
except as to the holder to whom notice was defective or not given.
(iii) If notice has been published and mailed in accordance with Section
I(g)(ii) above and provided that on or before the Redemption Date specified in
such notice all funds necessary for such redemption have been irrevocably set
aside by the Corporation, separate and apart from its other funds, in trust for
the benefit of the holders of the Series A Preferred Stock so called for
redemption, so as to be, and to continue to be, available therefor, then, from
and after the Redemption Date, dividends on the shares of Series A Preferred
Stock so called for redemption shall cease to accrue, such shares shall no
longer be deemed to be outstanding, and all rights of the holders thereof as
holders of such shares (except the right to receive the Redemption Price) shall
terminate. In the event any Redemption Date shall not be a Business Day, then
payment of the Redemption Price need not be made on such Redemption Date but
may be made on the next succeeding Business Day with the same force and effect
as if made on such Redemption Date and no interest, additional dividends or
other sum shall accrue on the amount payable for the period from and after such
Redemption Date to such next succeeding Business Date.
(iv) Upon surrender, in accordance with such notice, of the certificates
for any shares of Series A Preferred Stock to be so redeemed (properly endorsed
or assigned for transfer, if the Corporation shall so require and the notice
shall so state), such shares of Series A Preferred Stock shall be redeemed by
the Corporation at the Redemption Price. In case fewer than all the shares of
Series A Preferred Stock represented by any such certificate are redeemed, a
new certificate or certificates shall be issued representing the unredeemed
shares of Series A Preferred Stock without cost to the holder thereof.
(v) Any deposit of monies with a bank or trust company for the purpose
of redeeming Series A Preferred Stock shall be irrevocable and such monies
shall be held in trust for the benefit of the holders of Series A Preferred
Stock entitled thereto, except that (1) the Corporation shall be entitled to
receive from such bank or trust company the interest or other earnings, if any,
earned on the monies so deposited in trust; and (2) any balance of the monies
so deposited by the Corporation and unclaimed by the holders of the Series A
Preferred Stock entitled thereto at the expiration of two years from the
applicable Redemption Date shall be repaid, together with any interest or other
earnings earned thereon, to the Corporation and, after any such repayment, the
holders of the shares entitled to the funds so repaid to the Corporation shall
look only to the Corporation for payment without interest or other earnings
thereon.
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(vi) Anything in this Certificate of Designation to the contrary
notwithstanding, the holders of record of shares of Series A Preferred Stock at
the close of business on a Record Date will be entitled to receive the dividend
payable with respect to such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares after such Record Date and on or
prior to such Dividend Payment Date or the Corporation's default in the payment
of the dividend due on such Dividend Payment Date, in which case the amount
payable upon redemption of such shares (including fractional shares) of Series
A Preferred Stock will not include such dividend (and the full amount of the
dividend payable for the applicable Dividend Period shall instead be paid on
such Dividend Payment Date to the holders of record on such Record Date as
aforesaid). Except as provided in this Section I(g)(vi) and except to the
extent that accrued and unpaid dividends are payable as part of the Redemption
Price pursuant to Section I(f)(ii), the Corporation will make no payment or
allowance for unpaid dividends, regardless of whether or not in arrears, on
shares of Series A Preferred Stock or Depositary Shares called for redemption.
(vii) Unless full cumulative dividends on all outstanding shares of
Series A Preferred Stock shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past Dividend Periods (including, without limitation, any
Dividend Period terminating on the date of the redemption of shares of Series A
Preferred Stock referred to below), no shares of Series A Preferred Stock shall
be redeemed unless all outstanding shares of Series A Preferred Stock are
simultaneously redeemed; provided, however, that the foregoing shall not
prevent (a) the purchase or acquisition of Series A Preferred Stock pursuant to
Section 7.5 of the by-laws of the Corporation (so long as such purchase is made
in accordance with the terms of such Section 7.5) or pursuant to a purchase or
exchange offer made on the same terms to the holders of all outstanding shares
of Series A Preferred Stock or (b) if the Amendments to the Certificate of
Incorporation become effective in accordance with the DGCL as contemplated by
Section I(j) hereof, the purchase or conversion of Excess Stock of the
Corporation in accordance with the provisions of Article Thirteenth. In
addition, unless full cumulative dividends on all outstanding shares of Series
A Preferred Stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past Dividend Periods (including, without limitation, any Dividend Period
terminating on the date of the direct or indirect purchase or other acquisition
of shares of Series A Preferred Stock by the Corporation referred to below) the
Corporation shall not purchase or otherwise acquire, directly or indirectly,
any shares of Series A Preferred Stock (except by conversion into or exchange
for capital stock of the Corporation ranking junior to the Series A Preferred
Stock as to the payment of dividends and with respect to the distribution of
assets upon liquidation, dissolution and winding up of the Corporation);
provided, however, that the foregoing shall not prevent (a) the purchase or
acquisition of Series A Preferred Stock pursuant to Section 7.5 of the by-laws
of the Corporation (so long as such purchase is made in accordance with the
terms of such Section 7.5) or pursuant to a purchase or exchange offer made on
the same terms to the holders of all outstanding shares of Series A Preferred
Stock or (b) if the Amendments to the Certificate of Incorporation become
effective in accordance with the DGCL as contemplated by Section I(j) hereof,
the purchase or conversion of Excess Stock of the Corporation in accordance
with the provisions of Article Thirteenth.
(h) Voting Rights. Except as required by laws and as set forth below in
this Section I(h), the holders of the Series A Preferred Stock shall not have
any voting rights.
(i) Whenever dividends on any shares of Series A Preferred Stock shall
be in arrears for six or more Dividend Periods, whether or not such Dividend
Periods are consecutive, the number of directors then constituting the Board of
Directors of the Corporation shall be automatically increased by two (if not
already increased by two by reason of the election of directors by the holders
of any other class or series of capital stock of the Corporation upon which
like voting rights have been conferred and are exercisable and with which the
Series A Preferred Stock is entitled to vote as a class with respect to the
election of such two directors) and the holders of shares of Series A Preferred
Stock (voting separately as a class with all other classes or series of capital
stock of the Corporation upon which like voting rights have been conferred and
are exercisable and which are entitled to vote as a class with the Series A
Preferred Stock in the election of such two directors) will be entitled to vote
for the election of such two directors of the Corporation at a special meeting
called by an officer of the Corporation at the request of the holders of record
of at least 10% of the outstanding shares of Series A Preferred Stock or by
holders of any other class or series of capital stock of the Corporation upon
which like voting rights have been conferred and are exercisable and
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which is entitled to vote as a class with the Series A Preferred Stock in the
election of such two directors (unless such request is received less than
ninety (90) days before the date fixed for the next annual or special meeting
of stockholders, in which case the vote for such two directors shall be held at
the earlier of the next such annual or special meeting of stockholders), and at
each subsequent annual meeting of stockholders until all dividends accumulated
on the Series A Preferred Stock for all past Dividend Periods and the then
current Dividend Period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment, whereupon the right
of the holders of Series A Preferred Stock to elect such two directors shall
cease and (unless there are one or more other classes or series of capital
stock of the Corporation upon which like voting rights have been conferred and
are exercisable) the term of office of such directors previously so elected
shall terminate and the authorized number of directors of the Corporation shall
thereupon return to the number of authorized directors otherwise in effect, but
subject always to the same provisions for the reinstatement and divestment of
the right to elect such two additional directors in the case of any such future
dividend arrearage.
In the case of any such request for a special meeting (unless such request
is received less than ninety (90) days before the date fixed for the next
annual or special meeting of stockholders), such meeting shall be held on the
earliest practicable date at the place designated by the holders of capital
stock requesting such meeting or, if none, at a place designated by the
Secretary of the Corporation, upon notice similar to that required for an
annual meeting of stockholders. If such special meeting is not called by an
officer of the Corporation within thirty (30) days after such request, then the
holders of record of at least 10% of the outstanding shares of Series A
Preferred Stock may designate in writing a holder of Series A Preferred Stock
to call such meeting at the expense of the Corporation, and such meeting may be
called by the holder so designated upon notice similar to that required for
annual meetings of stockholders and shall be held at the place designated by
the holder calling such meeting. The holders of Series A Preferred Stock shall
have access to the stock transfer records of the Corporation for the purpose of
causing a meeting of stockholders to be called pursuant to the provisions of
this paragraph.
The procedures in this Section I(h) for the calling of meetings and the
election of directors shall, to the extent permitted by law, supersede anything
inconsistent contained in the by-laws of the Corporation.
So long as any Series A Preferred Stock are outstanding, the number of
directors constituting the entire Board of Directors of the Corporation shall
at all times be such so that the exercise, by the holders of the Series A
Preferred Stock and the holders of any other classes or series of capital stock
of the Corporation upon which like voting rights have been conferred, of the
right to elect directors under the circumstances provided above will not
contravene any provision of the Corporation's Certificate of Incorporation or
by-laws restricting the number of directors which may constitute the entire
Board of Directors of the Corporation.
If at any time when the voting rights conferred upon the Series A
Preferred Stock pursuant to this Section I(h)(i) are exercisable any vacancy in
the office of a director elected pursuant to this Section I(h)(i) shall occur,
then such vacancy may be filled only by the remaining such director or by vote
of the holders of record of the outstanding Series A Preferred Stock and any
other classes or series of capital stock of the Corporation upon which like
voting rights have been conferred and are exercisable and which are entitled to
vote as a class with the Series A Preferred Stock in the election of directors
pursuant to this Section I(h)(i).
(ii) So long as any shares of Series A Preferred Stock remain
outstanding, the Corporation shall not, without the affirmative vote or consent
of the holders of at least two-thirds of the shares of Series A Preferred Stock
outstanding at the time, given in person or by proxy (with the Series A
Preferred Stock voting separately as a class), (A) authorize or create, or
increase the authorized or issued amount of, any class or series of capital
stock of the Corporation ranking prior to the Series A Preferred Stock with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of the Corporation or reclassify any
authorized capital stock of the Corporation into such shares, or create,
authorize or issue any obligation or security convertible into, exchangeable or
exercisable for, or evidencing the right to purchase, any such shares, or (B)
amend, alter or repeal the provisions of the Certificate of Incorporation
(including, without limitation, the certificate of powers, designations,
preferences and rights of the Series A Preferred Stock (the "Certificate of
Designation")), whether by merger or consolidation (an "Event") or otherwise,
so as to materially and adversely affect any right, preference, privilege or
voting power of the Series A
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Preferred Stock or the holders thereof; provided, however, with respect to the
occurrence of any of the Events set forth in (B) above, so long as the Series A
Preferred Stock remains outstanding or is converted into like securities of the
surviving entity, in each case with the terms thereof materially unchanged,
taking into account that upon the occurrence of such an Event the Corporation
may not be the surviving entity, the occurrence of any such Event shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting power of the Series A Preferred Stock or the holders thereof; and
provided, further, that the Amendments to the Certificate of Incorporation
shall not be deemed, with respect to the Series A Preferred Stock, to be an
amendment, alteration or repeal which materially and adversely affects such
rights, preferences, privileges or voting powers; and provided, further, that
any amendment to the Certificate of Incorporation to authorize any increase in
the amount of the authorized Excess Stock, Preferred Stock or Series Common
Stock or the creation or issuance of any other series of Preferred Stock or any
shares or series of Excess Stock or Series Common Stock, or any increase in the
amount of authorized or outstanding shares of Series A Preferred Stock or any
other series of Preferred Stock or any shares or series of Excess Stock or
Series Common Stock, in each case ranking on a parity with or junior to the
Series A Preferred Stock with respect to payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers. For purposes of this
paragraph, the filing in accordance with applicable law of a certificate of
designations setting forth the designations, preferences and relative,
participating, optional or other special rights of a class or series of capital
stock of the Corporation shall be deemed an amendment to the Certificate of
Incorporation.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding Series A Preferred Stock shall have been redeemed
or called for redemption and sufficient funds shall have been deposited in
trust in accordance with the terms of Section I(g)(v) hereof to effect such
redemption.
(iii) On each matter submitted to a vote of the holders of Series A
Preferred Stock, including any action by written consent, in accordance with
this Section I(h) or as otherwise required by law, each whole share of Series A
Preferred Stock shall be entitled to ten votes, each of which ten votes may be
directed separately by the holder thereof (or by any proxy or proxies of such
holder). With respect to each whole share of Series A Preferred Stock, the
holder thereof may designate up to ten proxies, with each such proxy having the
right to vote a whole number of votes (totaling ten per share of Series A
Preferred Stock). In the event that fractional shares of Series A Preferred
Stock are issued, then each such fractional share shall be entitled to a
proportionate number of votes and, if any such fractional share is entitled to
more than one vote, such votes may be directed separately and proxies may be
designated as in the case of whole shares of Series A Preferred Stock.
(i) Conversion. The Series A Preferred Stock is not convertible into or
exchangeable for any other property or securities of the Corporation, except
that, if the Amendments to the Certificate of Incorporation become effective in
accordance with the DGCL as contemplated by Section I(j) hereof, the Series A
Preferred Stock shall be convertible into Excess Stock on the terms and subject
to the conditions set forth in Article Thirteenth.
(j) Restrictions on Ownership and Transfer. In the event that the
Corporation shall purchase any shares of Series A Preferred Stock pursuant to
Section 7.5 of its by-laws, then the purchase price paid by the Corporation for
any such shares of Series A Preferred Stock shall be the price specified in its
by-laws plus accrued and unpaid dividends on such shares to the date of
purchase.
As set forth in the Joint Proxy Statement/Prospectus dated May 19, 1998
(the "Proxy Statement") of The Meditrust Companies and La Quinta Inns, Inc.,
the Corporation is soliciting the vote of its stockholders in favor of
amendments (the "Amendments") to its Certificate of Incorporation which would
(i) add a new Article Thirteenth to such Certificate of Incorporation in the
form set forth as Annex E to the Proxy Statement ("Article Thirteenth") and
(ii) authorize a new class of capital stock of the Corporation to be known as
Excess Stock ("Excess Stock"). If the Amendments are approved and become
effective in accordance with the DGCL, then, from and after the date on which
the Amendments shall have become effective in accordance with the DGCL, the
Series A Preferred Stock shall be subject to all of the terms and provisions of
Article Thirteenth and, without limitation to the foregoing, shall be
convertible into Excess Stock on the terms and subject to the conditions, and
shall be subject to the limitations on ownership and transfer, set forth in
Article Thirteenth.
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(k) Fractional Shares. Series A Preferred Stock may be issued in
fractional shares equal to 1/10th of a whole share of Series A Preferred Stock
and any integral multiple of 1/10th of a whole share of Series A Preferred
Stock.
(l) Office or Agency in New York City. The Corporation will at all times
maintain an office or agency in the Borough of Manhattan, The City of New York,
where shares of Series A Preferred Stock may be surrendered for payment
(including upon redemption or repurchase, if any), registration of transfer or
exchange.
If any shares of Series A Preferred Stock are purchased by the Corporation
in accordance with Section 7.5 of its by-laws or if the Amendments shall have
become effective as contemplated by this Section I(j) and thereafter any shares
of Series A Preferred Stock are converted into Excess Stock and, in either such
case, if fewer than all the shares of Series A Preferred Stock evidenced by any
stock certificate are so purchased or converted, a new certificate or
certificates shall be issued representing the remaining shares of Series A
Preferred Stock evidenced by such certificate without cost to the holder
thereof.
II.
The Series A Preferred Stock shall have no preemptive rights.
III.
If any power, preference or relative, participating, optional and other
special right of the Series A Preferred Stock, or qualification or restriction
thereof, set forth in the Certificate of Designation is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy,
then, to the extent permitted by law, all other powers, preferences and
relative, participating, optional and other special rights of the Series A
Preferred Stock and qualifications and restrictions thereof set forth in the
Certificate of Designation which can be given effect without the invalid,
unlawful or unenforceable powers, preferences or relative, participating,
optional or other special rights of the Series A Preferred Stock or the
qualifications or restriction thereof shall remain in full force and effect and
shall not be deemed dependent upon any other such powers, preferences or
relative, participating, optional or other special right of the Series A
Preferred Stock or qualifications or restrictions thereof unless so expressed
herein.
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I, , of the Corporation, for the purpose of amending and
restating the Corporation's Certificate of Incorporation pursuant to the
General Corporation Law of the State of Delaware, do execute this certificate,
hereby declaring and certifying that this is my act and deed on behalf of the
Corporation this day of , 1999.
By:
------------------------
Name:
Title:
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ANNEX B
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MEDITRUST OPERATING COMPANY
Meditrust Operating Company, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The Corporation filed its original Certificate of Incorporation with
the Secretary of State of the State of Delaware on August 23, 1979 (the
"Original Certificate of Incorporation") under the name "Santa Anita Operating
Company". The name of the Corporation was changed to Meditrust Operating
Company on November 5, 1997, by way of amendment to the Original Certificate of
Incorporation. A Restated Certificate of Incorporation (the "Second
Certificate") was filed with the Secretary of State of the State of Delaware on
March 2, 1998 restating and integrating the Corporation's certificate of
incorporation as theretofore amended and supplemented.
2. This Amended and Restated Certificate of Incorporation (the
"Certificate") amends, restates and integrates the Corporation's Certificate of
Incorporation as heretofore amended and supplemented. The Certificate was duly
adopted by the Board of Directors of the Corporation in accordance with the
provisions of Sections 242 and 245 of the Delaware General Corporation Law, as
amended from time to time (the "DGCL"), and was duly adopted by the
stockholders of the Corporation in accordance with the applicable provisions of
Sections 242 and 245 of the DGCL.
3. The text of the Second Certificate, as amended to date, shall at the
effective time of this Certificate read as follows:
FIRST. Name. The name of the Corporation is Meditrust Operating Company.
SECOND. Registered Office. The address of its registered office in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is Corporation Service
Company.
THIRD. Purposes. The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware and to do all
things and exercise all powers, rights and privileges which a business
corporation may now or hereafter be organized or authorized to do or to
exercise under the laws of the State of Delaware.
FOURTH. Capitalization.
SECTION 1. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 561,000,000, of which 500,000,000
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 2. The shares of Preferred Stock may be issued from time to time
in one or more series. The Board of Directors of the Corporation, or any duly
authorized committee thereof, is hereby authorized to fix or authorize the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price
or prices, and the liquidation preferences of any wholly unissued series of
Preferred Stock and the number of shares constituting any such series and the
designation thereof, or all or any of them and such other rights specified by
the Board of Directors of the Corporation and not prohibited by law.
SECTION 3. The shares of Series Common Stock may be issued from time to
time in one or more series. The Board of Directors of the Corporation is hereby
authorized to fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices,
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and the liquidation preferences of any wholly unissued series of Series Common
Stock and the number of shares constituting any such series and the designation
thereof, or all or any of them.
SECTION 4. (a) Each holder of Common Stock, as such, shall be entitled to
one vote for each share of Common Stock held of record by such holder on all
matters on which stockholders generally are entitled to vote.
(b) Except as otherwise required by law, holders of a series of
Preferred Stock or Series Common Stock, as such, shall be entitled only to such
voting rights, if any, as shall expressly be granted thereto by this
Certificate of Incorporation (including any Certificate of Designation relating
to such series).
(c) Subject to applicable law and the rights, if any, of the holders of
any outstanding series of Preferred Stock or Series Common Stock or any class
or series of stock having a preference over or the right to participate with
the Common Stock with respect to the payment of dividends, dividends may be
declared and paid on the Common Stock at such times and in such amounts as the
Board of Directors of the Corporation in its discretion shall determine.
(d) Upon the dissolution, liquidation or winding up of the Corporation,
subject to the rights, if any, of the holders of any outstanding series of
Preferred Stock or Series Common Stock or any class or series of stock having a
preference over or the right to participate with the Common Stock with respect
to the distribution of assets of the Corporation upon such dissolution,
liquidation or winding up of the Corporation, the holders of the Common Stock,
as such, shall be entitled to receive the assets of the Corporation available
for distribution to its stockholders ratably in proportion to the number of
shares held by them.
SECTION 5. The terms and conditions applicable to shares of Excess Stock
are set forth in Article Thirteenth hereof.
FIFTH. [DELETED].
SIXTH. By-laws. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is expressly
authorized, without stockholder approval, to make, alter or repeal the by-laws
of the Corporation.
SEVENTH. Right to Amend Certificate. The Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Certificate, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
EIGHTH. [DELETED].
NINTH:
Part 1. Vote Required for Certain Business Combinations
1.1. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or any other Article of this Certificate of
Incorporation, and except as otherwise expressly provided in Part 2 of this
Article Ninth:
(a) any merger or consolidation of the Corporation or any Subsidiary
with (i) any Interested Stockholder or (ii) any other corporation (whether or
not itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an Interested Stockholder;
or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value of $5,000,000 or more; or
(c) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair Market Value
of $5,000,000 or more, other than the issuance of securities by the Corporation
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or any Subsidiary upon the conversion of convertible securities of the
Corporation or any Subsidiary into stock of the Corporation or any Subsidiary;
or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(e) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder;
shall require the affirmative vote of the holders of at least (a) 80% of the
combined voting power of the then outstanding shares of stock of all classes
and series of the Corporation entitled to vote in the election of directors
(the "Voting Stock"), and (b) a majority of the combined voting power of the
then outstanding shares of Voting Stock held by persons who are Disinterested
Stockholders, provided, however, that the majority vote requirement of this
clause (b) shall not be applicable if the Business Combination is approved by
the affirmative vote of the holders of not less than 90% of combined voting
power of the then outstanding shares of Voting Stock. The foregoing affirmative
vote requirements are hereinafter referred to as the "Special Vote
Requirement." The Special Vote Requirement shall be applicable notwithstanding
the fact that no vote may be required, or that a lesser percentage may be
specified, by law or in any agreement with any national securities exchange or
otherwise.
1.2. Definition of "Business Combination." The term "Business Combination"
as used in this Article Ninth shall mean any transaction which is referred to
in any one or more of clauses (a) through (e) of Section 1.1.
Part 2. When Special Vote Requirement Is Not Applicable
The provisions of Part 1 of this Article Ninth shall not be applicable to
any particular Business Combination, and such Business Combination shall
require only such affirmative vote as is required by law and any other Article
of this Certificate of Incorporation, if all of the conditions specified in
either of the following Sections 2.1 and 2.2 are met:
2.1. Approval by Continuing Directors. The Business Combination shall have
been approved by a majority of the Continuing Directors.
2.2. Price and Procedural Requirements. All of the following conditions
shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of Common Stock in such
Business Combination shall be at least equal to the higher of (i) the highest
price paid for any share of Common Stock by any person who is an Interested
Stockholder within the two-year period immediately prior to the time of the
first public announcement of the proposed Business Combination (the
"Announcement Date") or in the transaction in which such person became an
Interested Stockholder, whichever price is the higher; or (ii) the Fair Market
Value per share of the Corporation's Common Stock on the Announcement Date or
on the date on which the Interested Stockholder became an Interested
Stockholder (the "Determination Date"), whichever is higher. The price paid for
any share of Common Stock shall be the amount of cash plus the Fair Market
Value of any other consideration to be received therefor, determined at the
time of payment thereof.
(b) The aggregate amount of the cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration
other than cash to be received in such Business Combination by holders of
securities of the Corporation other than Common Stock shall be at least equal
to the higher of (i) if applicable, the highest preferential amount to which
the holders of such securities are entitled in the event of any voluntary
liquidation, dissolution or winding up of the Corporation, (ii) the highest
price paid for any of such securities by any person who is an Interested
Stockholder within the two-year period immediately prior to the Announcement
Date or in the
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transaction in which such person became an Interested Stockholder, whichever
price is higher, (iii) the Fair Market Value of such securities on the
Announcement Date or the Determination Date, whichever is higher, or (iv) if
such securities are convertible into or exchangeable for shares of Common
Stock, the amount per share of such Common Stock determined pursuant to the
foregoing paragraph (a) reduced by any amount payable by the holders of such
securities in accordance with the terms of such securities, per share, upon
such conversion or exchange, multiplied by the total number of shares of Common
Stock into which or for which such securities are convertible or exchangeable.
(c) The consideration to be received by holders of a particular class of
outstanding Voting Stock (including Common Stock) shall be in cash or in the
same forms the Interested Stockholder has previously paid for shares of such
class of Voting Stock. If the Interested Stockholder has paid for shares of any
class of Voting Stock with varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either cash or the form
of consideration used to acquire the largest number of shares of such class of
Voting Stock previously acquired by it.
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (i)
there shall have been (1) no reduction in the annual rate of dividends paid on
the Common Stock (except as necessary to reflect any subdivision of the Common
Stock), except as approved by a majority of the Continuing Directors, and (2)
an increase in such annual rate of dividends necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing the
number of outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the Continuing
Directors; and (ii) such Interested Stockholder shall have not become the
beneficial owner of any additional shares of Voting Stock except as part of the
transaction which results in such Interested Stockholder becoming an Interested
Stockholder.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantages provided by the Corporation, whether in anticipation of
or in connection with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934 and the rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to all stockholders
of the Corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent provisions).
Part 3. Certain Definitions
For the purposes of this Article Ninth:
3.1. A "person" shall mean any individual, firm, corporation, partnership,
trust or other entity.
3.2. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(a) is the beneficial owner, directly or indirectly, of more than 10% of
the combined voting power of the then outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10% or more of the combined voting power of
the then outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any shares of Voting
Stock which were at any time within the two-year period immediately prior to
the date in question beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of
the Securities Act of 1933.
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3.3. A person shall be a "beneficial owner" of any Voting Stock:
(a) which such person or any of its Affiliates or Associates beneficially
owns, directly or indirectly; or
(b) which such person or any of its Affiliates or Associates has (i) the
right to acquire (whether such right is exercisable immediately or only after
the passage of time), pursuant to any agreement, arrangement or understanding
or upon the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (ii) the right to vote or to direct the vote pursuant
to any agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
3.4. For the purposes of determining whether a person is an Interested
Stockholder pursuant to Section 3.2, the number of shares of Voting Stock
deemed to be outstanding shall include shares deemed owned through application
of Section 3.3 but shall not include any other shares of Voting Stock which may
be issuable to other persons pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
3.5. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on January 1, 1984.
3.6. "Subsidiary" means any corporation of which more than a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for purposes of the definition of
Interested Stockholder set forth in Section 3.2, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity security is
owned by the Corporation, by a Subsidiary, or by the Corporation and one or
more Subsidiaries.
3.7. "Continuing Director" means any member of the Board of Directors of
the Corporation who is unaffiliated with, and not a nominee of, the Interested
Stockholder and was a member of the Board of Directors of the Corporation prior
to the time that the Interested Stockholder became an Interested Stockholder
and any successor of a Continuing Director who is unaffiliated with, and not a
nominee of, the Interested Stockholder and who is recommended to succeed a
Continuing Director by a majority of Continuing Directors then on the Board of
Directors of the Corporation.
3.8. "Disinterested Stockholder" means a holder of Voting Stock who is not
an Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder and whose shares are not deemed owned by an Interested Stockholder
through application of Section 3.3.
3.9. "Fair Market Value" means: (a) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such quotations
are available, the Fair Market Value on the date in question of a share of such
stock as determined by a majority of the Continuing Directors in good faith;
and (b) in the case of stock of any class of securities not traded on any
securities exchange or in the over-the-counter market or in the case of
property other than cash or stock, the Fair Market Value of such securities or
property on the date in question as determined by a majority of the Continuing
Directors in good faith. If the stock is paired for purposes of trading with
that of any other corporation, the Fair Market Value of the paired stock shall
be determined pursuant to the pairing or other agreement which provides for the
determination of the relative values of the stock of the Corporation and the
stock of such other corporation, after determining the Fair Market Value of the
paired stock as set forth above.
3.10. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration to be received" as used in Sections 2.2(a),
(b) and (c) shall include the shares of Common Stock and/or the shares of any
other class of outstanding Voting Stock retained by the holders of such shares.
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Part 4. Directors' Duty to Determine Certain Facts
The majority of the Continuing Directors of the Corporation shall have the
power and duty to determine for the purpose of this Article Ninth, on the basis
of information known to them after reasonable inquiry, all facts necessary to
determine the applicability of the various provisions of this Article Ninth,
including (A) whether a person is an Interested Stockholder, (B) the number of
shares of Voting Stock beneficially owned by any person, (C) whether a person
is an Affiliate or Associate of another, (D) whether the requirements of
Section 2.2 have been met with respect to any Business Combination, and (E)
whether the assets which are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value of $5,000,000 or more; and the good faith determination of a
majority of the Continuing Directors shall be conclusive and binding for all
purposes of this Article Ninth.
Part 5. No Effect on Fiduciary Obligations of Interested Stockholders
Nothing contained in this Article Ninth shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
Part 6. Amendment, Repeal, Inconsistent Provisions
Notwithstanding any other provisions of law or of this Certificate of
Incorporation or the by-laws of the Corporation which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of securities which may be required by law or
by this Certificate of Incorporation, any proposal to amend or repeal, or adopt
any provisions inconsistent with, this Article Ninth of this Certificate of
Incorporation shall require for approval the affirmative vote of at least (a)
80% of the combined voting power of the then outstanding Shares of Voting Stock
and (b) a majority of the combined voting power of the then outstanding shares
of Voting Stock held by persons who are Disinterested Stockholders, provided
that the majority vote requirement of this clause (b) shall not be applicable
if the proposal is approved by the affirmative vote of not less than 90% of the
combined voting power of the then outstanding shares of Voting Stock.
TENTH:
(a) The number of directors shall be as provided in the by-laws. The
Board of Directors of the Corporation shall be divided into three classes,
designated Class I, Class II and Class III, such classes to be as nearly equal
in number as possible and to have the number provided in the by-laws. At the
annual meeting of stockholders in 1986, Directors of Class I shall be elected
to hold office for a term expiring at the next succeeding annual meeting,
Directors of Class II shall be elected to hold office for a term expiring at
the second succeeding annual meeting, and Directors of Class III shall be
elected to hold office for a term expiring at the third succeeding annual
meeting. Thereafter at each annual meeting of stockholders, directors shall be
chosen for a term of three years to succeed those whose terms then expire and
shall hold office until the third following annual meeting of stockholders and
until the election of their respective successors. Any vacancy on the Board of
Directors of the Corporation, whether arising through death, resignation or
removal of a director or through an increase in the number of directors of any
class, shall be filled by a majority vote of all the remaining directors. The
term of office of any director elected to fill such a vacancy shall expire at
the expiration of the term of office of directors of the class in which the
vacancy occurred. Notwithstanding any other provision of this Article, and
except as otherwise required by law, whenever the holders of any one or more
series of Preferred Stock or other securities of the Corporation shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the term of office, the filling of vacancies and other features of
such directorships shall be governed by the terms of this Certificate of
Incorporation applicable thereto, and unless the terms of this Certificate of
Incorporation expressly provide otherwise, such directorships shall be in
addition to the number of directors provided in the by-laws and such directors
shall not be classified pursuant to this Article.
(b) Any action required or permitted to be taken by holders of stock of
the Corporation must be taken at a meeting of such holders and may not be taken
by consent in writing. The by-laws of the Corporation may be amended by the
stockholders only by the affirmative vote of at least 80% of the voting power
of the Corporation. Notwithstanding
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any other provision of law or of this Certificate of Incorporation or the
by-laws of the Corporation which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of securities which may be required by law or by this
Certificate of Incorporation, any proposal to amend or repeal, or adopt any
provisions inconsistent with, this Article Tenth shall require for approval the
affirmative vote of at least 80% of the voting power of the Corporation.
ELEVENTH:
The Board of Directors of the Corporation shall base the response of this
Corporation to any proposed Business Combination on the evaluation by the Board
of Directors of the Corporation of what is in the best interest of this
Corporation. In evaluating what is in the best interest of this Corporation,
the Board of Directors of the Corporation shall consider:
(a) The best interest of the stockholders. For this purpose, the Board
of Directors of the Corporation shall consider among other factors, not only
the consideration offered in the proposed Business Combination in relation to
the then current market price of this Corporation's stock, but also in relation
to the then current value of this Corporation in a freely negotiated
transaction and in relation to the then current estimate by the Board of
Directors of the future value of this Corporation as an independent entity; and
(b) Such other factors as the Board of Directors of the Corporation
determines to be relevant, including, among other factors, the social, legal
and economic effects on the communities in which this Corporation and its
subsidiaries operate and are located.
TWELFTH:
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as director.
Any repeal or modification of this Article shall not result in any
liability for a director with respect to any action or omission occurring prior
to such repeal or modification.
THIRTEENTH:
Section 13.1. Restrictions on Ownership and Transfer of Equity Stock.
(a) Definitions. For purposes of this Article Thirteenth and Article
Fourteenth 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).
"Common Stock" shall mean the common stock, par value $.10 per share of
the Corporation.
"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
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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.
"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.
"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 of the Corporation 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 14.2(c) by the value of a paired
share most recently determined under Section 14.2(c) (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 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 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.
"Permitted Transferee" shall mean any Person designated as a Permitted
Transferee in accordance with the provisions of Section 13.2(h).
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"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).
"Realty" shall mean Meditrust Corporation, a Delaware corporation.
"Realty Common Stock" shall mean the common stock, par value $.10 per
share of Realty.
"Realty Equity Stock" shall mean Realty Common Stock and preferred stock
of any designation, par value $.10 per share of Realty.
"Restriction Termination Date" shall mean the first day on which the Board
of Directors of Realty determines that it is no longer in the best interests of
Realty 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 Realty in accordance with Article Fourteenth.
(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
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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 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 of the Corporation, 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 of the Corporation 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).
(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.
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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 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 Realty) of any shares of any class or series of
Realty stock that are paired with a class or series of shares of Equity Stock,
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pursuant to Article Fourteenth, 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 Realty, pursuant to Article Fourteenth.
(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 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 Realty 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 of the Corporation 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-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.
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(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 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.
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(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 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 Realty's status as a REIT
and to ensure compliance with the requirements of Article Fourteenth and
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 of the Corporation 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 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,
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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 Article Fourteenth of the respective
Certificates of Incorporation of each company, except in combination with an
equal number of shares of the other company in accordance with the respective
Certificates of Incorporation of each company, 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, 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.
FOURTEENTH:
Section 14.1 Transfer of Shares. Until the restrictions and limitations
set forth in this Article Fourteenth shall have been terminated in the manner
hereinafter provided:
(a) Except as provided herein, no shares of Equity Stock shall be
transferable, and they shall not be transferred on the books of the
Corporation, unless (i) a simultaneous transfer is made by the same transferor
to the same transferee, or (ii) such transferor has previously arranged with
Realty for the transfer to the transferee, of the same number of shares of
Realty Equity Stock, except that the Corporation may transfer Equity Stock
acquired by it from Realty to a person to whom Realty simultaneously issues the
same number of Equity Stock.
(b) Each certificate evidencing ownership of shares of Realty Equity
Stock shall be deemed to evidence, in addition, the same number of shares of
Equity Stock.
(c) Notwithstanding the foregoing, any shares of Equity Stock issued
after the date of the filing of this Certificate, which are issued on an
unpaired basis by the Corporation pursuant to the terms of Section 14.7 of this
Certificate, may be transferred without compliance with Section 14.1(a) and may
be evidenced solely by a certificate which is not deemed to evidence a like
number of shares of Realty Equity Stock as required by Section 14.1(b).
Section 14.2 Issuance of Shares. Until such time as the pairing of the
outstanding shares of Common Stock and the outstanding shares of Realty Common
Stock in accordance with this Article Fourteenth (the "Pairing" and each paired
share a "Paired Share") shall have been terminated in the manner herein
provided:
(a) Except as provided herein, the Corporation shall not issue or agree
to issue any shares of Equity Stock to any person except Realty unless
effective provision has been made for the simultaneous issuance or transfer to
the same person of the same number of shares of Realty Equity Stock and for the
pairing of such shares of the Corporation and Realty and unless the Corporation
and Realty have agreed on the manner and basis of allocating the consideration
to be received upon such issuance between the Corporation and Realty or, if
allocation of such consideration between them is not practicable, on the
payment by one company to the other of cash or other consideration in lieu
thereof. Any such allocation or payment shall be based on the respective fair
market values of the Equity Stock and Realty Equity Stock.
(b) As desired from time to time, but not less often than once each
calendar year, the Corporation and Realty shall jointly arrange for the
determination of the fair market value as of a date specified by the
Corporation and Realty (the "valuation date") of the Common Stock outstanding
on the valuation date. The amount so determined (the "fair market value of the
Common Stock") shall thereafter be used in all calculations pursuant to this
Section 14.2 until a new determination is made. The fair market value of each
share of Realty Common Stock shall be determined by subtracting the fair market
value of one share of Common Stock from the average of the closing sale prices
of a Paired
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Share over the principal exchange on which the Paired Shares are listed, or if
not listed, then the average of the last bid prices in the over-the-counter
market during the ten business days prior to any date of determination of the
fair market value of Realty Common Stock.
Section 14.3. Stock Certificates; Transfer Agents and Registrars. Until
such time as the Pairing shall have been terminated in the manner herein
provided, except in the case of shares of Equity Stock issued to Realty or
Equity Stock issued pursuant to Section 14.7, each certificate which is issued
evidencing shares of Equity Stock shall be printed "back-to-back" with a
certificate evidencing the same number of Realty Equity Stock, shall bear a
conspicuous legend (on the face thereof) referring to the restrictions on the
transfer of the shares evidenced thereby contained in the By-laws of the
Corporation, and shall be in a form which satisfies the requirements of the
laws of Delaware and which has been approved by the Board of Directors of the
Corporation.
Section 14.4. Stock Dividends, Reclassifications, etc. Until such time as
the Pairing shall have been terminated in the manner herein provided, the
Corporation shall not declare or pay any stock dividend consisting in whole or
in part of Equity Stock, issue any rights or warrants to purchase any shares of
Equity Stock, or subdivide, combine or otherwise reclassify the shares of
Equity Stock, unless Realty simultaneously takes the same or equivalent action
with respect to the Realty Equity Stock, to the end that the outstanding Equity
Stock and the outstanding shares of Realty Equity Stock will at all times be
effectively paired on a one-for-one basis as contemplated herein.
Section 14.5. Shares in Excess of the Ownership Limit or in Violation of
the Transfer Restrictions; Designation of Trustee and Beneficiaries. Until such
time as the Board of Directors of the Corporation determines that it is no
longer in the best interest of the Corporation to cooperate with Realty to
qualify under the Code as a REIT:
(a) Upon the conversion of a share of any class or series of Equity
Stock of the Corporation into a share of Excess Stock of the Corporation in
accordance with the provisions of Article Thirteenth, if such share of Equity
Stock was paired prior to its conversion into Excess Stock, the corresponding
paired share of that same class or series of Equity Stock of Realty shall be
simultaneously converted into a share of Excess Stock of Realty; such shares of
Excess Stock of Realty and the Corporation shall be paired and shall be
simultaneously transferred to a Trust.
(b) Upon the conversion of a share of Excess Stock of the Corporation
into a share of Equity Stock of the Corporation of the same class or series
from which such Excess Stock was converted in accordance with the provisions of
Article Thirteenth, if such share of Excess Stock was paired prior to its
conversion from Equity Stock into Excess Stock, the corresponding paired share
of Excess Stock of Realty shall be simultaneously converted into a share of
Equity Stock of Realty of the same class or series from which such Excess Stock
was converted and such shares of Equity Stock shall be paired.
(c) With respect to an offer made by a Trust pursuant to Article
Thirteenth to the Corporation to purchase shares of Excess Stock from a Trust
pursuant to Article Thirteenth, in the case of shares of Excess Stock that are
paired, the Corporation shall accept such offer with respect to its shares of
Excess Stock without the agreement of Realty to accept such offer with respect
to the corresponding paired shares of its Excess Stock.
(d) The Trustee of each Trust shall be designated by mutual agreement of
the Board of Directors of the Corporation and the Board of Directors of Realty.
(e) The Beneficiary with respect to each Trust shall be designated by
mutual agreement of the Board of Directors of the Corporation and the Board of
Directors of Realty.
(f) At such time that the Board of Directors of Realty no longer deems
it in the best interests of Realty to attempt to, or continue to, qualify under
the Code as a REIT, the Ownership Limit and the Transfer Restrictions shall
cease to have effect, as provided in Article Thirteenth.
Section 14.7. Unpaired Shares.
(a) Shares of capital stock of any class or series other than Common
Stock, irrespective of whether such shares are convertible into Paired Shares,
may be issued by the Corporation to any person without effective provision
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for the simultaneous issuance or transfer to the same person of the same number
of shares of that same class or series of capital stock of Realty and without
effective provision for the pairing of such shares of capital stock of the
Corporation and Realty, as the Board of Directors of the Corporation shall in
its sole discretion determine (any such shares of capital stock of any class or
series issued by the Corporation pursuant to this Section 14.7 are referred to
herein as "Unpaired Shares").
(b) Unpaired Shares may be transferred on the books of the Corporation
without a simultaneous transfer to the same transferee of any shares of any
other class or series of capital stock of Realty.
Section 14.8. Merger, Sale of Assets, etc. Until such time as the Pairing
shall have been terminated in the manner provided herein, the Corporation will
not be a party to any merger, consolidation, sale of assets, liquidation or
other form or reorganization pursuant to which shares of Common Stock are
converted, redeemed, exchanged or otherwise changed unless Realty is also a
party to such transaction.
Section 14.9. Waiver and Termination. The Board of Directors of the
Corporation is hereby authorized to waive, or repeal or make inapplicable the
restrictions and limitations set forth in this Article Fourteenth in its
entirety or in any provision of this Article Fourteenth.
Section 14.10. Severability. Each provision of this Article Fourteenth
shall be severable and in adverse determination as to any provision shall in no
way affect the validity of any other provision.
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CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
JUNIOR PARTICIPATING PREFERRED STOCK
I. DESIGNATION AND AMOUNT
The shares of such series shall be designated as "Junior Participating
Preferred Stock" (the "Junior Preferred Stock") and the number of shares
constituting the Junior Preferred Stock shall be 200,000. Such number of shares
may be increased or decreased by resolution of the Board of Directors of the
Corporation; provided, that no decrease shall reduce the number of shares of
Junior Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise
of outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Junior
Preferred Stock.
II. DIVIDENDS AND DISTRIBUTIONS
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Junior
Preferred Stock with respect to dividends, the holders of shares of Junior
Preferred Stock, in preference to the holders of Common Stock, par value $.10
per share (the "Common Stock"), of the Corporation, and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board of
Directors of the Corporation out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March, June, September
and December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Junior Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Junior Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Junior Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Junior
Preferred Stock as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Junior Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the
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<PAGE>
time outstanding. The Board of Directors of the Corporation may fix a record
date for the determination of holders of shares of Junior Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date fixed for
the payment thereof.
III. VOTING RIGHTS
The holders of shares of Junior Preferred Stock shall have the following
voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Junior Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein, in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Junior Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Except as set forth herein, in the Corporation's Certificate of
Incorporation or as otherwise provided by law, holders of Junior Preferred
Stock shall have no voting rights.
IV. CERTAIN RESTRICTIONS
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Junior Preferred Stock as provided in Section II are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Junior Preferred Stock outstanding shall
have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred Stock,
except dividends paid ratably on the Junior Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Junior Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares
of Junior Preferred Stock, or any shares of stock ranking on a parity with
the Junior Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors of
the Corporation) to all holders of such shares upon such terms as the Board
of Directors of the Corporation, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
IV purchase or otherwise acquire such shares at such time and in such manner.
V. REACQUIRED SHARES
Any shares of Junior Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of Incorporation,
in any other Certificate of Designations creating a series of Preferred Stock
or any similar stock or as otherwise required by law.
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VI. LIQUIDATION, DISSOLUTION OR WINDING UP
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock unless, prior thereto, the holders of shares of Junior
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Junior Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Junior Preferred Stock, except distributions made ratably on the Junior
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Junior Preferred Stock were entitled immediately
prior to such event under the proviso in clause (1) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
VII. CONSOLIDATION, MERGER, ETC.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Junior Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of shares of
Junior Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
VIII. REDEMPTION
The shares of Junior Preferred Stock shall not be redeemable.
IX. RANK
The Junior Preferred Stock shall rank, with respect to the payment of
dividends and the distribution of assets, junior to all series of any other
class of the Corporation's Preferred Stock.
X. AMENDMENT
The Certificate of Incorporation of the Corporation shall not be amended
in any manner which would alter or change the powers, preferences or special
rights of the Junior Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Junior Preferred Stock, voting together as a single series.
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<PAGE>
CERTIFICATE OF POWERS, DESIGNATIONS, PREFERENCES AND
RIGHTS OF SERIES A NON-VOTING CONVERTIBLE COMMON STOCK
1. Designation and Amount. There shall be a series of undesignated Series
Common Stock of the Corporation designated as "Series A Non-Voting Convertible
Common Stock" and the number of shares constituting such series shall be ten
million (10,000,000). The number of shares designated as shares of Series A
Non-Voting Convertible Common Stock may be increased or decreased by the Board
of Directors of the Corporation without a vote of stockholders. Except as
otherwise expressly provided herein, all shares of Series A Non-Voting
Convertible Common Stock shall be identical to shares of Common Stock (as
defined in Article FOURTH of the Certificate of Incorporation of the
Corporation, as amended (the "Certificate of Incorporation")) and shall entitle
the holders thereof to the same rights and privileges.
2. Voting. The holders of Series A Non-Voting Convertible Common Stock
shall not have any right to vote, except as required under applicable law and,
except as required by law, the holders of Common Stock and Series A Non-Voting
Convertible Common Stock shall vote together as a single class on all matters
as to which holders of Series A Non-Voting Convertible Common Stock are
entitled to vote as set forth herein. Except as required by law or as set forth
herein, the holders of Series A Non-Voting Convertible Common Stock (to the
extent permitted by this Section 2), Common Stock (to the extent permitted by
the Certificate of Incorporation), Preferred Stock (to the extent permitted by
the Certificate of Incorporation) and Series Common Stock (to the extent
permitted by the Certificate of Incorporation) shall vote together as a single
class on all matters submitted to the stockholders for a vote.
3. Dividends. Subject to applicable law, the holders of Series A
Non-Voting Convertible Common Stock shall be entitled to receive such dividends
out of funds legally available therefor at such times and in such amounts as
the Board of Directors of the Corporation may determine in its sole discretion
shall be paid with respect to the Common Stock, with each share of Common Stock
and each share of Series A Non-Voting Convertible Common Stock sharing
share-for-share in such dividends (with each share of Series A Non-Voting
Convertible Common Stock being equal to the number of shares of Common Stock
into which it would then be convertible on the record date for such dividend)
except that if dividends are declared which are payable in shares of Common
Stock or Series A Non-Voting Convertible Common Stock, dividends shall be
declared which are payable at the equivalent rate in both classes of stock and
the dividends payable in shares of Common Stock shall be payable to the holders
of that class of stock and the dividends payable in shares of Series A
Non-Voting Convertible Common Stock shall be payable to the holders of that
class of stock.
4. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary
(a "Liquidation Event"), after the payment or provision for payment of all
debts and liabilities of the Corporation and all preferential amounts to which
the holders of Preferred Stock or Series Common Stock, if any, are entitled
with respect to the distribution of assets in liquidation, the holders of
Series A Non-Voting Convertible Common Stock shall be entitled to share ratably
with the holders of Common Stock (with each share of Series A Non-Voting
Convertible Common Stock being equal to the number of shares of Common Stock
into which it would then be convertible on the effective date of such
Liquidation Event) in the remaining assets of the Corporation available for
distribution.
5. Conversion of Series A Non-Voting Convertible Common Stock.
(a) Automatic Conversion. Each share of Series A Non-Voting Convertible
Common Stock shall be automatically converted, without the payment of any
additional consideration, into fully paid and non-assessable shares of Common
Stock at the rate of one share of Common Stock for each share of Series A
Non-Voting Convertible Common Stock so converted (the "Series A Non-Voting
Conversion Rate") as of the date (the "Conversion Date") that is the earlier to
occur of (i) the next Business Day (as defined below) following the date on
which the shareholders of the Corporation and of Meditrust Corporation
("Meditrust Corporation") shall have approved the merger transaction (the
"Merger") among La Quinta Inns, Inc. ("La Quinta"), Meditrust Corporation and
the Corporation, and (ii) the date of any termination of the Agreement and Plan
of Merger dated as of January 3, 1998 and among La Quinta, Meditrust
Corporation and the Corporation relating to the Merger in accordance with the
terms thereof. As used herein,
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the term "Business Day" means any day other than Saturday, Sunday, or any other
day on which banking institutions in the States of Delaware or New York are not
open for business.
(b) Procedure for Conversion. As of the Conversion Date, all outstanding
shares of Series A Non-Voting Convertible Common Stock shall be converted
automatically without any further action by the holders of Series A Non-Voting
Convertible Common Stock and whether or not the certificates representing such
shares of Series A Non-Voting Convertible Common Stock are surrendered to the
Corporation or its transfer agent. On the Conversion Date, all rights with
respect to the Series A Non-Voting Convertible Common Stock so converted shall
terminate, except any of the rights of the holders thereof, in accordance with
the procedures herein, to receive certificates for the number of shares of
Common Stock into which such Series A Non-Voting Convertible Common Stock has
been converted. The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable on the Conversion Date unless
certificates evidencing such shares of the Series A Non-Voting Convertible
Common Stock being converted, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto),
are surrendered at the principal executive office of the Corporation (or the
offices of the transfer agent for the Series A Non-Voting Convertible Common
Stock or such office or offices of an agent for conversion as may from time to
time be designated by notice to the holders of the Series A Non-Voting
Convertible Common Stock by the Corporation), together with written notice by
the holder of such Series A Non-Voting Convertible Common Stock stating the
name or names (with addresses) and denominations in which the certificate or
certificates for Common Stock shall be issued and shall include instructions
for delivery thereof. Upon such surrender of a certificate representing Series
A Non-Voting Convertible Common Stock following its automatic conversion, the
Corporation shall issue and send by hand delivery, by courier or by first class
mail (postage prepaid) to the holder thereof or to such holder's designee, at
the address designated by such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled upon
conversion. In the event that there shall have been surrendered a certificate
or certificates representing Series A Non-Voting Convertible Common Stock, only
part of which are to be converted, the Corporation shall issue and send to such
holder or such holder's designee, in the manner set forth in the preceding
sentence, a new certificate or certificates representing the number of shares
of Series A Non-Voting Convertible Common Stock which shall not have been
converted. If the certificate or certificates for Common Stock are to be issued
in a name other than the name of the registered holder of the Series A
Non-Voting Convertible Common Stock surrendered for conversion, the Corporation
shall not be obligated to issue or deliver any certificate unless and until the
holder of the Series A Non-Voting Convertible Common Stock surrendered has paid
to the Corporation the amount of any tax that may be payable in respect of any
transfer involved in such issuance or has established to the satisfaction of
the Corporation that such tax has been paid.
(c) Reservation of Stock Issuable Upon Conversion. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of
the shares of Series A Non-Voting Convertible Common Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Non-Voting Convertible Common
Stock.
6. Adjustments.
(a) Changes in Common Stock. In the event the Corporation shall (i) pay a
dividend in or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of its shares of Common Stock any shares of the Corporation, the Series A
Non-Voting Conversion Rate in effect immediately prior thereto shall be adjusted
so that the holder of a share of Series A Non-Voting Convertible Common Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock which it would have owned or have been entitled to
receive after the happening of any of the events described above had such share
of Series A Non-Voting Convertible Common Stock been converted on or immediately
prior to the record date for such dividend or the effective date of such
subdivision, combination or reclassification, as the case may be.
(b) Changes in Series A Non-Voting Convertible Common Stock. In the event
that the Corporation shall (i) pay a dividend in or make a distribution in
shares of its Series A Non-Voting Convertible Common Stock, (ii) subdivide
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its outstanding shares of Series A Non-Voting Convertible Common Stock, (iii)
combine its outstanding shares of Series A Non-Voting Convertible Common Stock
into a smaller number of shares, or (iv) issue by reclassification of its
shares of Series A Non-Voting Convertible Common Stock any shares of the
Corporation, the Series A Non-Voting Conversion Rate in effect immediately
prior thereto shall be adjusted so that the holder of a share of Series A
Non-Voting Convertible Common Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock which it would have
owned or have been entitled to receive after the happening of any of the events
described above had such share of Series A Non-Voting Convertible Common Stock
been converted on or immediately prior to the record date for such dividend or
the effective date of such subdivision, combination or reclassification, as the
case may be.
(c) General. An adjustment made pursuant to this Section 6 shall become
effective immediately after the record date (in the case of a dividend or
distribution in shares of capital stock) and shall become effective immediately
after the effective date (in the case of a subdivision, combination or
reclassification). No adjustment in accordance with this Section 6 shall be
required unless such adjustment would require an increase or decrease in any
conversion rate of at least 0.1%; provided, however, that any adjustments which
by reason of this clause are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
7. Notices. In the event that the Corporation provides any notice, report
or statement to the holders of Common Stock or Series A Non-Voting Convertible
Common Stock (in their capacity as such), the Corporation shall at the same
time provide a copy of any such notice, report or statement to each record
holder of outstanding Series A Non-Voting Convertible Common Stock.
8. Status of Acquired Shares. Shares of Series A Non-Voting Convertible
Common Stock acquired by the Corporation (upon conversion or otherwise) will be
restored to the status of authorized but unissued shares of undesignated Series
Common Stock.
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<PAGE>
I, , of the Corporation, for the purpose of amending and
restating the Corporation's Certificate of Incorporation pursuant to the
General Corporation Law of the State of Delaware, do execute this certificate,
hereby declaring and certifying that this is my act and deed on behalf of the
Corporation this day of , 1999.
By:
-------------------------
Name:
Title:
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ANNEX C
Form of
PAIRING AGREEMENT
(as amended)
THIS AGREEMENT (the "Pairing Agreement") is dated as of the 20th of
December, 1979, as amended by the First Amendment to Pairing Agreement, dated
November 6, 1997, as further amended by the Second Amendment to Pairing
Agreement, dated February 6, 1998, as further amended by the Third Amendment to
Pairing Agreement, dated July 17, 1998, by and between Santa Anita Realty
Enterprises, Inc. ("Realty"), a Delaware corporation, and Santa Anita Operating
Company ("Operating Company"), a Delaware corporation.
RECITALS
Realty and Operating Company are wholly-owned subsidiaries of Santa Anita
Consolidated, Inc. ("Santa Anita"), a California corporation. Santa Anita,
Realty and Operating Company have proposed a related series of transactions
consisting principally of: (i) the merger of Santa Anita with and into Realty,
pursuant to which each outstanding share of Santa Anita common stock, no par
value ("Santa Anita Common Stock"), will be converted into one share of Realty
common stock, $.10 par value ("Realty Common Stock") (the "Merger"): (ii) the
distribution by Realty, immediately after the Merger becomes effective of the
Operating Company common stock, $.10 par value ("Operating Company Common
Shares"), which it receives in the Merger to the holders of the outstanding
share of Realty Common Stock, on a share-for-share basis (the "Distribution");
and (iii) the pairing of the outstanding shares of Realty Common Stock and the
Operating Company Common Shares so that they are transferable only in units
(the "Units"), each Unit consisting of one share of Realty Common Stock and one
Operating Company Common Share (the "Pairing").
The by-laws of Realty and Operating Company each provide that, commencing
on the effective date of the Merger and the Distribution, the shares of Realty
Common Stock and the Operating Company Common Shares are not transferable, and
shall not be transferred on the books of Realty or Operating Company, as the
case may be, except in combination with an equal number of share of the other
company, with the exception of certain shares of Realty Common Stock and
Operating Company Common Shares to be received by shareholders of Santa Anita
whose ownership of Operating Company Common Shares after the Distribution would
otherwise cause Realty to be deemed to own in excess of 9.25% of the Operating
Company Common Shares.
Realty and Operating Company wish to enter into this Pairing Agreement for
the purpose of further effectuating the Pairing, including the establishment of
the terms and conditions which will govern the issuance and the transfer of
shares of Realty Common Stock and Operating Company Common Shares after the
effective date of the Merger and the Distribution.
COVENANTS
1. Transfer of Shares. Subject to the provisions of Section 10 hereof,
commencing at the time when the Distribution becomes effective (the "Effective
Time of the Pairing") and continuing until such time as the Pairing shall have
been terminated in the manner herein provided:
(a) No shares of Realty Common Stock shall be transferable, and they
shall not be transferred on the books of Realty, unless (i) a simultaneous
transfer is made by the same transferor to the same transferee, or (ii)
such transferor has previously arranged with Realty for the transfer to the
transferee, of the same number of Operating Company Common Shares, except
that Operating Company may transfer shares of Realty Common Stock acquired
by it from Realty to a person to whom Operating Company simultaneously
issues the same number of Operating Company Common Shares.
(b) No Operating Company Common Shares shall be transferable, and they
shall not be transferred on the books of Operating Company, unless (i) a
simultaneous transfer is made by the same transferor to the same
transferee, or (ii) such transferor has previously arranged with Realty for
the transfer to the transferee, of the same number of shares of Realty
Common Stock except that Realty may transfer Operating Company Common
Shares
<PAGE>
acquired by it from Operating Company to a person to whom Realty
simultaneously issues the same number of shares of Realty Common Stock.
(c) Except for certificates representing Realty Common Stock described in
Section 10 hereof, each certificate evidencing ownership of shares of
Realty Common Stock (including certificates representing shares of Santa
Anita Common Stock that were converted into shares of Realty Common Stock
in the Merger) issued and not canceled prior to the Effective Time of the
Pairing shall be deemed to evidence, in addition, the same number of
Operating Company Common Shares.
(d) Except for certificates representing Realty Common Stock described in
Section 10 hereof, any registered holder of a certificate evidencing
ownership of share of Realty Common Stock (including certificates
representing shares of Santa Anita that were converted into share of Realty
Common Stock in the Merger) issued prior to the Effective Time of the
Pairing may, upon request and presentation of said certificate to the
transfer agent for the Realty Common Stock, obtain in substitution therefor
a certificate or certificates registered in such holder's name evidencing
the same number of shares of Realty Common Stock and a like number of
Operating Company Common Shares.
2. Issuance of Shares. Subject to the provisions of Section 10 hereof,
commencing at the Effective Time of the Pairing and continuing until such time
as the Pairing shall have been terminated in the manner herein provided:
(a) Realty shall not issue or agree to issue any shares of Realty Common
Stock to any person except Operating Company unless effective provision has
been made for the simultaneous issuance or transfer to the same person of
the same number of Operating Company Common Shares and for the pairing of
such shares of Realty and Operating Company and unless Realty and Operating
Company has agreed on the manner and basis of allocating the consideration
to be received upon such issuance between Realty and Operating Company or,
if allocation of such consideration between them is not practicable, on the
payment by one company to the other of cash or other consideration in lieu
thereof. Any such allocation or payment shall be based or the respective
fair market values of the Realty Common Stock and the Operating Company
Common Shares.
(b) Operating Company shall not issue or agree to issue any Operating
Company Common Shares to any person except Realty unless effective
provision has been made for the simultaneous issuance or transfer to the
same person of the same number of shares of Realty Common Stock and for the
pairing of such share of Operating Company and Realty and unless Operating
Company and Realty have agreed on the manner and basis of allocating the
consideration to be received upon such issuance between Operating Company
and Realty or, if allocation of such consideration between them is not
practicable, on the payment by one company to the other of cash or other
consideration in lieu thereof. Any such allocation or payment shall be
based on the respective fair market values of the Realty Common Stock and
the Operating Company Common Shares.
(c) Realty shall not issue any shares of its common stock upon exercise
of a stock option assumed by Realty in the Merger or granted by Realty
after the Merger, unless the exercising optionee produces evidence that
Operating Company will simultaneously issue a number of Operating Company
Common Shares to the exercising optionee equal to the number of shares of
Realty Common Stock issued by Realty to the optionee pursuant to such
exercise. In connection with any issuance by Operating Company of its
common stock to an exercising optionee, the optionee shall pay to Operating
Company the fair market value of each Operating Company Common Share so
issued at the date of grant of such option, notwithstanding the provisions
of subsection (a) of this Section 2.
(d) Upon the exercise of any stock option granted by Santa Anita prior to
the Merger and assumed by Operating Company or granted by Operating Company
after the Merger, Realty agrees, upon request by management of Operating
Company, that it will simultaneously issue a number of shares of Realty
Common Stock to Operating Company or to the exercising optionee equal to
the number of Operating Company Common Shares issued by Operating Company
pursuant to such exercise, and Operating Company agrees to pay to Realty
the fair market value of each share of Realty Common Stock so issued at the
date of grant of such option, notwithstanding the provisions of subsection
(a) of this Section 2.
C-2
<PAGE>
(e) As desired from time to time, but not less often than once each
calendar year beginning with January 1, 1981, Realty and Operating Company
shall jointly arrange for the determination of the fair market value as of
a date specified by Realty and Operating Company (the "valuation date") of
the Operating Company Common Shares outstanding on the valuation date. The
amount so determined (the "fair market value of the Operating Company
Shares") shall thereafter be used in all calculations pursuant to this
Section 2 until a new determination is made. The fair market value of the
Operating Company Shares as determined by Paine, Webber, Jackson & Curtis
Incorporated as of the Effective Time of the Pairing shall be used in all
calculations hereunder prior to a new determination pursuant to this
paragraph. The fair market value of each share of Realty Common Stock shall
be determined by subtracting the fair market value of one Operating Company
Common Share from the average of the closing sale prices of a Unit over the
principal exchange on which the Units are listed, or if not listed, then
the average of the last bid pieces in the over-the-counter market, during
the ten business days prior to any date of determination of the fair market
value of Realty Common Stock.
3. Stock Certificates; Transfer Agents and Registrars. Commencing at the
Effective Time of Pairing and continuing until such time as the Pairing shall
have been terminated in the manner herein provided:
(a) With the exception of the unpaired Realty Common Stock described in
Section 10 hereof, each certificate which is issued evidencing shares of
Realty Common Stock shall be printed "back-to-back" with a certificate
evidencing the same number of Operating Company Common Shares, shall bear a
conspicuous legend (on the face thereof) referring to the restrictions on
the transfer of the shares evidenced thereby contained in the by-laws of
Realty, and shall be in a form which satisfies the requirements of the laws
of Delaware and which has been approved by the board of directors of
Realty.
(b) With the exception of the unpaired Operating Company Common Shares
described in Section 10 hereof, each certificate which is issued evidencing
Operating Company Common Shares shall be printed "back-to-back" with a
certificate evidencing the same number of shares of Realty Common Stock,
shall bear a conspicuous legend (on the face thereof) referring to the
restrictions on the transfer of the shares evidenced thereby contained in
the by-laws of Operating Company, and shall be in a form which satisfies
the requirements of the laws of Delaware and which has been approved by the
board of directors of Operating Company.
(c) Realty and Operating Company shall appoint the same transfer agents
and registrars for the shares of Realty Common Stock and the Operating
Company Common Shares, respectively.
4. Registrations.
(a) Realty agrees to cause its class of Realty Common Stock to be duly
registered with the Securities and Exchange Commission pursuant to Section
12 of the Securities Exchange Act of 1934.
(b) Operating Company agrees to cause its class of Operating Company
Common Shares to be duly registered with the Securities and Exchange
Commission pursuant to Section 12 of the Securities Exchange Act of 1934.
5. Stock Dividends, Reclassifications, etc. Commencing at the Effective
Time of the Pairing and continuing until such time as the Pairing shall have
been terminated in the manner herein provided:
(a) Realty shall not declare or pay any stock dividend consisting in
whole or in part of Realty Common Stock, issue any rights or warrants to
purchase any shares of Realty Common Stock, or subdivide, combine or
otherwise reclassify the shares of Realty Common Stock, unless Operating
Company simultaneously takes the same or equivalent action with respect to
the Operating Company Common Shares, to the end that the outstanding shares
of Realty Common Stock and Operating Company Common Shares will at all
times be effectively "paired" on a one-for-one basis as contemplated
herein.
(b) Operating Company shall not declare or pay any stock dividend
consisting in whole or in part of Operating Company Common Shares, issue
any rights or warrants to purchase any Operating Company Common Shares, or
subdivide, combine or otherwise reclassify the Operating Company Common
Shares, unless Realty
C-3
<PAGE>
simultaneously takes the same or equivalent action with respect to the
Realty Common Stock, to the end that the outstanding Operating Company
Common Shares and the outstanding shares of Realty Common Stock will at all
times be effectively "paired" on a one-for-one basis as contemplated
herein.
6. Merger, Sale of Assets, etc. Commencing at the Effective Time of the
Pairing and continuing until such time as the Pairing shall have been
terminated in the manner provided herein, neither Realty nor Operating Company
will be a party to any merger, consolidation, sale of assets, liquidation or
other form or reorganization pursuant to which either the shares of Realty
Common Stock or the Operating Company Common Shares, as the case may be, are
converted, redeemed, exchanged or otherwise changed unless the other party
hereto (Operating Company or Realty, as the case may be) is also a party to
such transaction.
7. Repurchase of Shares. Commencing at the Effective Time of the Pairing
and continuing until such time as the Pairing shall have been terminated in the
manner provided herein:
(a) If at any time the direct or indirect ownership of the Realty Common
Stock has or may become concentrated to an extent which is not in
conformity with the requirements of Section 856 of the Internal Revenue
Code of 1954, as amended, or similar provisions of successor statutes (the
"Code"), the board of directors of Realty shall call for purchase from such
stockholders of such number of shares as may be necessary to maintain or
bring the direct or indirect ownership of the Realty Common Stock into
conformity with the requirements of the Code and shall refuse to register
any transfer of shares of Realty Common Stock to any person whose
acquisition of such shares would result in Realty being unable to conform
to the requirements of the Code.
(b) If at any time the direct or indirect ownership of the Operating
Company Common Shares has or may become concentrated to an extent which is
not in conformity with the requirements of the Code pertaining to Realty,
the board of directors of Operating Company shall call for purchase from
such stockholders of such number of shares as may be necessary to maintain
or bring the direct or indirect ownership of the Operating Company Common
Shares into conformity with the requirements of the Code pertaining to
Realty and shall refuse to register any transfer of Operating Company
Common Shares to any person whose acquisition of such shares would result
in Realty being unable to conform to the requirement of the Code.
The provisions of this Section 7 shall apply to all outstanding Realty
Common Stock and Operating Company Common Stock notwithstanding any other
provision of this Pairing Agreement.
8. Termination. This Pairing Agreement and the Pairing may be terminated
by action of the board of directors of either Realty or of Operating Company
upon 30 days' written notice to the other party hereto that such termination
has been approved by the affirmative vote of the holders of two-thirds of the
outstanding shares of Realty Common Stock (if terminated by Realty) or of the
holders of two-thirds of the outstanding Operating Company Common Shares (if
terminated by Operating Company). In the event of termination, the parties
agree to cooperate to effect a separation of the paired securities so as to
permit the separate issuance and transfer thereof, and, in that connection,
appropriate provision shall be made to honor any outstanding commitments to
issue additional shares of Realty Common Stock and Operating Company Common
Shares.
9. Preferred Stock, Series Common Stock and Excess Stock. The terms
"Realty Common Stock" and "Operating Company Common Shares," as used in this
Pairing Agreement, shall include, respectively, any preferred stock or series
common stock of Realty or Operating Company which is convertible into Realty
Common Stock or Operating Company Common Shares (the "Convertible Equity
Stock") and shall also include any REIT Excess Stock or OPCO Excess Stock
issued as a result of the conversion of Realty Common Stock, Operating Common
Shares or Convertible Equity Stock, to the end that such Convertible Equity
Stock, REIT Excess Stock or OPCO Excess Stock, as the case may be, shall be
paired in the same manner as, and be subject to the same conditions,
limitations, restrictions and requirements as the Realty Common Stock and
Operating Company Common Shares under this Pairing Agreement.
10. Unpaired Shares. Subject to Section 7 hereof, notwithstanding any
other provision of this Agreement, the Pairing shall not apply to those
Operating Company Common Shares and shares of Realty Common Stock received by
any stockholder of Santa Anita whose ownership of Operating Company Common
Shares would be deemed, after
C-4
<PAGE>
application of the attribution rules of the Internal Revenue Code of 1954, to
result in Realty owning, directly or indirectly, in excess of 9.25% of the
outstanding Operating Company Common Shares to the extent that such ownership
would cause Realty, directly or indirectly, to be deemed to own, after
application of such attribution rules, in excess of 9.25% of the total number
of shares of Operating Company. The provisions of this Pairing Agreement and
the Pairing shall apply to all other shares held by such stockholder. This
Section 10 shall apply only to the extent that (i) the Operating Company Common
Shares (or the right to receive such Operating Company Common Shares) are sold
and ownership by the transferee will not cause Realty to own, directly or
indirectly, under attribution rules of the Internal Revenue Code of 1954, more
than 9.25% of the outstanding Operating Company Common Shares; (ii) holders of
unpaired shares enter into agreement, prior to the effective date of the Merger
and the Distribution, satisfactory to the boards of directors of Realty,
Operating Company and Santa Anita, providing that such shares not be
transferable by sale or other means, without arranging for such shares to be
paired with an equal number of shares of the other corporation, unless such
sale is made to Realty or Operating Company; and (iii) such stockholders
execute a waiver as to any claims he or she may have arising out of the close
business relationship between Realty and Operating Company and claims arising
out of conflicts of interest inherent in such business relationship. Subsequent
shares acquired by any such shareholder shall be subject in full to the terms
of this Pairing Agreement notwithstanding the provisions of this Section 10.
11. Amendment. This Pairing Agreement may be amended by action of the
Board of Directors both Realty and Operating Company, provided that any such
action shall be approved by the affirmative vote of the holders of two-thirds
of the outstanding shares of Realty Common Stock and the holders of two-thirds
of the outstanding Operating Company Common Shares if such amendment shall
permit a separation of the paired securities so as to allow the separate
issuance and transfer thereof other than as provided herein.
C-5
<PAGE>
IN WITNESS WHEREOF the parties hereto have set their hands and seals to
this Pairing Agreement as of the date first mentioned above.
MEDITRUST CORPORATION
By
-----------------------------
Name:
Title:
MEDITRUST OPERATING COMPANY
By
----------------------------
Name:
Title:
C-6
<PAGE>
[PRELIMINARY FORM OF PROXY]
[To be released as soon as practicable, but not sooner than on or about
March 29, 1999]
PROXY FOR SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON , 1999
MEDITRUST CORPORATION
197 First Avenue
Needham, Massachusetts 02494
SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING
OF STOCKHOLDERS
The undersigned hereby appoints David F. Benson and Michael S.
Benjamin, and each of them acting singly, with full power of substitution,
attorneys and proxies to represent the undersigned at the Special Meeting of
Stockholders of Meditrust Corporation to be held on , 1999
and at any adjournment or postponement thereof with all power which the
undersigned would possess if personally present, and to vote all shares of
common stock of Meditrust Corporation which the undersigned may be entitled to
vote at said meeting upon the matters set forth in the Notice of Special Meeting
in accordance with the following instructions and with discretionary authority
on such other matters as may be properly come before the Special Meeting or any
adjournment or postponement thereof. All previously dated proxies are hereby
revoked.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER SPECIFIED
HEREIN. IF NO SPECIFICATION IS MADE THE PROXIES INTEND TO VOTE FOR EACH OF THE
PROPOSALS.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED POSTAGE-PAID ENVELOPE.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
PROPOSALS
MEDITRUST CORPORATION:
1. To approve and adopt the Amended and Restated Certificate of
Incorporation of Meditrust Corporation. Approval and adoption of the
Amended and Restated Certificate of Incorporation is conditioned on the
approval of the termination of the Pairing Agreement.
2. To approve the termination of the Pairing Agreement, dated as of
December 20, 1979, as amended. Approval of the termination of the
Pairing Agreement is conditioned on the approval and adoption, and
subsequent filing, of the Amended and Restated Certificate of
Incorporation of Meditrust Corporation.
|X| Please mark
votes as in
this example.
PLEASE REFER ABOVE FOR EXPLANATION OF PROPOSALS SET FORTH BELOW
Meditrust Corporation:
FOR AGAINST ABSTAIN
1. To approve and adopt the Amended |_| |_| |_|
and Restated Certificate
of Incorporation
FOR AGAINST ABSTAIN
2. To approve and adopt the |_| |_| |_|
Termination of the Pairing
Agreement
MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT |_|
In Signing, please write name(s) exactly as appearing in the imprint on this
card. For shares held jointly, each joint owner should sign. If signing as
executor, or in any other representative capacity, or as an officer of a
corporation, please indicate your full title as such.
Signature: Date:
--------------------------------------- --------------------
<PAGE>
[PRELIMINARY FORM OF PROXY]
[To be released as soon as practicable, but not sooner than on or about
March 29, 1999]
PROXY FOR SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON , 1999
MEDITRUST OPERATING COMPANY
197 First Avenue
Needham, Massachusetts 02494
SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING
OF STOCKHOLDERS
The undersigned hereby appoints David F. Benson and Michael S.
Benjamin, and each of them acting singly, with full power of substitution,
attorneys and proxies to represent the undersigned at the Special Meeting of
Stockholders of Meditrust Operating Company to be held on , 1999
and at any adjournment or postponement thereof with all power which the
undersigned would possess if personally present, and to vote all shares of
common stock of Meditrust Operating Company which the undersigned may be
entitled to vote at said meeting upon the matters set forth in the Notice of
Special Meeting in accordance with the following instructions and with
discretionary authority on such other matters as may be properly come before the
Special Meeting or any adjournment or postponement thereof. All previously dated
proxies are hereby revoked.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER SPECIFIED
HEREIN. IF NO SPECIFICATION IS MADE THE PROXIES INTEND TO VOTE FOR EACH OF THE
PROPOSALS.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED POSTAGE-PAID ENVELOPE.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
PROPOSALS
MEDITRUST OPERATING COMPANY:
1. To approve and adopt the Amended and Restated Certificate of
Incorporation of Meditrust Operating Company. Approval and adoption
of the Amended and Restated Certificate of Incorporation is conditioned
on the approval of the termination of the Pairing Agreement.
2. To approve the termination of the Pairing Agreement, dated as of
December 20, 1979. Approval of the termination of the Pairing Agreement
is conditioned on the approval and adoption, and subsequent filing, of
the Amended and Restated Certificate of Incorporation of Meditrust
Operating Company.
|X| Please mark
votes as in
this example.
PLEASE REFER ABOVE FOR EXPLANATION OF PROPOSALS SET FORTH BELOW
Meditrust Operating Company:
FOR AGAINST ABSTAIN
1. To approve and adopt the |_| |_| |_|
Amended and Restated
Certificate of Incorporation
FOR AGAINST ABSTAIN
2. To approve and adopt the |_| |_| |_|
Termination of the Pairing
Agreement
MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT |_|
In Signing, please write name(s) exactly as appearing in the imprint on this
card. For shares held jointly, each joint owner should sign. If signing as
executor, or in any other representative capacity, or as an officer of a
corporation, please indicate your full title as such.
Signature: Date:
----------------------------------------- -----------------
[Preliminary Additional Solicitation Materials]
[To be released as soon as practicable but not sooner
than on or about March 29, 1999]
- --------------------------------------------------------------------------------
Life Care Center of Longmont, Longmont, Colorado
- --------------------------------------------------------------------------------
STOCKHOLDER BROCHURE
REGARDING THE
COMPREHENSIVE RESTRUCTURING PLAN
- --------------------------------------------------------------------------------
La Quinta Inn & Suites, Addison, Texas
- --------------------------------------------------------------------------------
<PAGE>
The Meditrust Companies are furnishing this brochure to our stockholders
concurrently with the Joint Proxy Statement for the Special Meetings of
Stockholders to be held on , 1999. This brochure is not a substitute for
the information presented in the Joint Proxy Statement. You are urged to read
the Joint Proxy Statement, including its Annexes, in its entirety.
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary ............................................................. 1
Introduction ........................................................ 2
The Plan ............................................................ 2
The Record to Date .................................................. 3
Risks Related to the Implementation and Effects of the Plan ......... 5
The Corporate Document Proposals .................................... 6
Conclusion .......................................................... 8
How to Vote ......................................................... 9
</TABLE>
Forward Looking Statements Legend
Certain matters discussed within this brochure may constitute "forward-looking
statements" within the meaning of the federal securities laws. Although
Meditrust Corporation ("Meditrust") and Meditrust Operating Company ("Operating
Company", and together with Meditrust, "The Meditrust Companies") believe the
statements are based on reasonable assumptions, they can give no assurance that
their expectations will be attained. Actual results and the 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 conditions of the
capital markets at the time of the proposed spin-off of the health care
division, the identification of satisfactory prospective buyers for the
non-strategic assets which have not yet been sold and the availability of
financing for such prospective buyers, the availability of equity and debt
financing for The Meditrust Companies' capital investment program, interest
rates, competition for hotel services and health care facilities in a given
market and other risks detailed from time to time in the filings of The
Meditrust Companies with the Securities and Exchange Commission, including the
Joint Annual Report on Form 10-K/A for the year ended December 31, 1997 and
other periodic filings under the Securities Exchange Act of 1934, as amended.
Photo Captions:
Front Cover (top): Life Care Center of Longmont, Longmont, Colorado
Front Cover (bottom): La Quinta Inn & Suites, Addison, Texas
Back Cover (top): La Quinta Inn, Orlando, Florida
Back Cover (bottom): Life Care Center of Las Vegas, Las Vegas, Nevada
<PAGE>
Summary
On November 12, 1998, Meditrust Corporation ("Meditrust") and Meditrust
Operating Company ("Operating Company") announced a comprehensive restructuring
plan (the "Plan"). This brochure contains a brief description of the Plan,
including a discussion of the status of our efforts in implementing the Plan.
As part of the Plan, the Boards of Directors of Meditrust and Operating Company
(together "The Meditrust Companies" and each a "Company") have adopted certain
proposals which will revise each of The Meditrust Companies' corporate
documents to permit us to issue unpaired shares of capital stock, as well as, if
appropriate, in the future permit the Board of Directors of each of The
Meditrust Companies to waive or terminate the pairing of our capital stock. As
described in more detail in the accompanying Joint Proxy Statement, you will be
asked to approve these two important proposals at the Special Meetings of
Stockholders to be held on , , 1999. The two proposals that will be
submitted for your approval are summarized as follows:
o The Meditrust Companies' Restated Certificates of Incorporation, as amended
to date (the "Existing Certificates"), will be amended and restated in their
entirety. The existing provisions will be contained in the Amended and
Restated Certificates of Incorporation (the "Amended Certificates") and new
provisions increasing the amount of our authorized common stock and
providing for the pairing of the common stock of Meditrust and Operating
Company with each other will be added. The Amended Certificates will not
contain any new so-called "anti-takeover" devices.
o The Pairing Agreement, as amended, by and between Meditrust and Operating
Company will be terminated. The termination of the Pairing Agreement will
not, however, terminate the paired share structure of The Meditrust Companies
because of the pairing provisions that will be added to the Amended
Certificates. The termination of the Pairing Agreement will automatically
terminate those provisions of the By-laws of each of The Meditrust Companies
that require the pairing of certain classes of The Meditrust Companies'
capital stock.
Adoption of these proposals will enable each of The Meditrust Companies to
issue unpaired shares of its capital stock. The ability to issue unpaired
shares will permit each of The Meditrust Companies to:
o more efficiently engage in capital raising and formation transactions by
matching the specific needs of each Company with the investment criteria of
the investment community;
o efficiently respond in a timely manner to the challenges presented by
recently adopted federal legislation which limits the use of the paired share
structure by providing the flexibility to adopt, subject to then applicable
law, the structure or structures best suited to serve the long-term goals of
The Meditrust Companies; and
o capitalize on further opportunities to enhance stockholder value through
acquisitions that are consistent with our growth strategy.
As part of capital raising transactions, either of The Meditrust Companies may
be permitted to issue unpaired capital stock, subject to applicable real estate
investment trust ("REIT") qualification tests. As previously announced in
connection with the Plan, these proposals may also permit certain existing
stockholders affiliated with Thomas M. Taylor & Co. and other entities and
individuals associated with certain members of the Bass family, including
Thomas M. Taylor, the Interim Chairman of the Boards of Directors of The
Meditrust Companies (the "Bass Group"), to increase their ownership in
Meditrust up to an aggregate of 13%, again subject to applicable REIT
qualification tests.
Your Boards of Directors unanimously recommend that you vote "FOR" both of the
proposals by signing, dating and promptly returning the enclosed proxy cards in
the enclosed postage-paid envelope.
The proposals and their potential effects are described fully in the
accompanying Joint Proxy Statement. This brochure should not be viewed as a
substitute for the Joint Proxy Statement, which you are encouraged to read in
its entirety.
<PAGE>
Introduction
On November 12, 1998, The Meditrust Companies announced that the Boards of
Directors approved a comprehensive restructuring plan for our real estate
portfolio. The Plan is designed to strengthen The Meditrust Companies'
financial position and clarify our investment and operating strategy by
focusing on the health care and lodging business segments, our two most
prominent business segments. These segments are also the businesses that The
Meditrust Companies and our management teams know best and from which we
believe we can best create long-term value for our stockholders.
The Plan
The Plan has a number of components, several of which have been
successfully completed or are well on their way to successful completion. The
Plan, as announced on November 12, 1998, includes the following components:
"This restructuring makes strategic sense. We believe it will focus
Meditrust on its core competencies, provide financial and operating
flexibility, and enhance shareholder value."
Thomas M. Taylor,
Interim Chairman of the Boards of Directors.
o Separate Primary Businesses -- The Meditrust Companies intend to pursue
the separation of the health care and lodging business segments. This
separation will be accomplished through the spin-off of a new separately
traded, publicly listed REIT, which will engage principally in the health
care financing business. After the spin-off, which The Meditrust
Companies intend to complete during the latter part of 1999, The
Meditrust Companies' stockholders will continue to hold stock in The
Meditrust Companies, which will be focused on the lodging business, as
well as stock in a newly-created, publicly traded health care REIT. We
expect that the lodging business will, concurrently with the spin-off,
change its name and the new health care REIT will retain an affiliation
to the "Meditrust" name.
o Sell Non-Strategic Assets -- The Meditrust Companies will sell over $1
billion of non-strategic assets.
o Reduce Debt Through Asset Sales -- The Meditrust Companies will use
approximately $550 million of the proceeds from the sales of
non-strategic assets to reduce The Meditrust Companies' debt.
o Settle Forward Equity Transaction -- The Meditrust Companies reached an
agreement with certain affiliates of Merrill Lynch & Co. (the "Merrill
Lynch Entities") that allows them to complete the settlement of The
Meditrust Companies' only forward equity investment transaction ("FEIT").
o Continue to Operate in Paired Share Structure -- The Meditrust Companies
intend to continue to utilize the paired share structure to operate the
health care and lodging businesses until the completion of the spin-off.
After completion of the spin-off, The Meditrust Companies will use the
paired share structure to operate the lodging business. Because of
restrictions imposed by recently adopted federal legislation on our
growth using the paired share structure, The Meditrust Companies may
need to implement a structure other than the paired share structure. The
approval and adoption of the proposals presented in the Joint Proxy
Statement will provide The Meditrust Companies with the ability to
implement such an alternative structure for the lodging business in the
most timely manner. Implementation of the components of the Plan is not
contingent upon approval of the proposals submitted for stockholder
approval.
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o Reduce Capital Investments -- The Meditrust Companies will reduce capital
investments in new assets to reflect current industry operating
conditions.
o Reset The Meditrust Companies' Annual Dividend -- The Meditrust Companies
reset their 1999 annual dividend to $1.84 per paired common share, an
amount that is sustainable and comparable to The Meditrust Companies'
peer groups.
o Record Non-Recurring Charges -- The Meditrust Companies recorded
non-recurring charges of $248 million in the third quarter of 1998 and
approximately $100 million in the fourth quarter of 1998.
By its terms, the Plan is clearly a departure from The Meditrust
Companies' strategy of the recent past, which was to expand through a series of
acquisitions in various business segments. Pursuant to the Plan, we have
divested, or are in the process of divesting, several of these business
segments to return to our two primary business segments, health care and
lodging. The Plan will significantly transform The Meditrust Companies from
what we were just six months ago. If we are able to successfully implement the
Plan, it will result in your ownership of interests in the health care and
lodging business segments, providing you with access to the potential
rewards and risks inherent in each.
The Record to Date
Since the announcement of the Plan approximately five months ago, The
Meditrust Companies have been actively implementing its components and have
successfully completed, or will soon successfully complete, a number of the
component parts as discussed below.
"We are delivering on our promises ahead of our original schedule. These
asset sales are a key step towards settling our forward equity obligation,
reducing near-term debt obligations and strengthening our balance sheet. We are
confident that Meditrust and our stockholders will soon realize the benefits of
our comprehensive restructuring plan."
David F. Benson, President
o Sale of Non-Strategic Assets -- We began actively pursuing the sale of
approximately $1 billion of non-strategic assets during the fourth
quarter of 1998. Since The Meditrust Companies announced the Plan, we
have sold (i) the Santa Anita Racetrack and its related operations for
$126 million in gross proceeds, (ii) art work acquired in the acquisition
of the Santa Anita Companies for gross proceeds of $11 million, (iii) a
fifty percent (50%) joint venture interest in the Santa Anita Fashion
Park for gross proceeds of $40 million and (iv) 58 health care properties
or health care investments for aggregate gross proceeds of $436 million.
In addition, on February 10, 1998, we entered into an agreement to sell
the Cobblestone Golf Group ("Cobblestone"), our golf division, to an
affiliate of ClubCorp, Inc. and American Golf Corporation for an
aggregate purchase price of approximately $393 million. We expect that
this sale will be consummated by the end of the first quarter of 1999.
o Reduction of Debt through Asset Sales -- We have applied substantially
all of the net proceeds from our recent sales of non-strategic assets to
the repayment of outstanding debt, including our senior credit facility,
and to the settlement of the FEIT, as described below. Our stated goal is
to reduce our outstanding debt by approximately $550 million. In January,
we repaid $24 million of mortgages and $250 million of our credit
facility, which would otherwise have been due on April 30, 1999. In
addition, we anticipate using a portion of the net proceeds from the sale
of Cobblestone to repay $250 million under our credit facility which
would otherwise be due in July, 1999.
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"We are delighted to have successfully resolved our forward equity transaction.
Resolution of this matter is another step in the implementation of our
restructuring plan . . . ."
David F. Benson, President
o Settlement of FEIT -- On February 26, 1998, we entered into the FEIT with
the Merrill Lynch Entities, pursuant to which the Merrill Lynch Entities
purchased shares of non-voting convertible securities of Meditrust. The
purchase was subject to a purchase price adjustment in which The
Meditrust Companies would be required to deliver additional shares of
paired common stock of The Meditrust Companies ("Paired Shares") if the
market price of the Paired Shares stock at the time of any interim or
final adjustment was lower than the original purchase price. Such an
additional issuance would have a dilutive effect on the capital stock of
The Meditrust Companies. The net proceeds of approximately $272 million
raised from the FEIT were used to repay existing indebtedness. We have
entered into a comprehensive agreement which provides for settlement of
the FEIT. This settlement did not increase the amount of money which has
been paid or will be paid by or on behalf of The Meditrust Companies to
the Merrill Lynch Entities. We have settled a substantial portion of our
FEIT in cash. We anticipate using a portion of the net proceeds from the
sale of Cobblestone to settle the remaining approximately $89 million of
our original FEIT.
o Reduction of Capital Investments -- We have reduced our capital
investment program over the near term, reflecting current conditions in
the lodging and health care industries. We believe that our new strategic
focus, together with our asset sales, which include the sale of the Santa
Anita Racetrack and the pending sale of Cobblestone, will enable The
Meditrust Companies to grow under a reduced level of capital investments
through 1999 and have the financial flexibility to respond quickly to new
opportunities.
Health Care: The Meditrust Companies intend to remain one of the
leading providers of financing to the health care industry and will
continue to seek opportunities to invest or acquire in those areas
of the health care industry experiencing expansion and
profitability. Although our projected $200 million for new health
care investments in 1999 is less than our annual investments in
recent years, we believe that this level of investment is
appropriate in the current capital markets.
Lodging: One of the attributes that made La Quinta Inns, Inc. ("La
Quinta") attractive to The Meditrust Companies was the significant
capital improvements of approximately $270 million that had
occurred at La Quinta during the mid to late 1990s. Our lodging
business will continue to benefit from the opening of 57 Inns &
Suites hotels during the past 22 years and the opening in 1999 of
13 Inns & Suites hotels currently under construction. Upon
completion of the hotels currently under construction, we will own
and operate 233 La Quinta Inns and 70 La Quinta Inns & Suites
hotels, with a total of approximately 39,000 rooms. We do not
presently plan to proceed with further development efforts or to
enter new segments of the lodging industry until industry market
conditions improve. With the significant capital improvements
completed in recent years, we will focus on internal efficiencies
and growth. However, going forward, we will evaluate development
and acquisition investment opportunities as they arise.
o Reset of Annual Dividend -- The Meditrust Companies announced on November
12, 1998 that they expected their annual dividend in 1999 to be at least
$1.84 per Paired Share. The Meditrust Companies noted that the new
dividend is sustainable, is comparable to their peer groups' payout
ratios and, compared to our prior dividend, the adjustment will provide
approximately $90 million in additional cash from operations. On January
14, 1999 the Board of Directors of Meditrust declared a $.46 per share
dividend to stockholders of record on January 29, 1999 payable February
16, 1999.
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Risks Related to the Implementation and Effects of the Plan
We believe that the successful implementation of the Plan is in the best
long-term interests of The Meditrust Companies and our stockholders. However,
there are a number of potentially negative or adverse factors that you should be
aware of in connection with both the implementation of the Plan, as well as the
effects of the Plan. Although you are not being asked to ratify or approve the
Plan, in the Joint Proxy Statement you are being asked to approve certain
proposals related to The Meditrust Companies' corporate documents that will
impact component parts of the Plan, particularly the entities which will operate
the lodging business segment after the spin-off of the new health care REIT.
Implementation: The Plan involves a number of component parts that require
a substantial commitment of our resources to implement. In order to
successfully implement each part of the Plan, a significant amount of the
available time and effort of the management of The Meditrust Companies must be
utilized. For example, each transaction involving the sale of a non-strategic
asset requires that the personnel who oversee that asset or group of assets not
only continue to operate that asset consistent with past practice, but also
that they prepare it for sale, meet with potential buyers, negotiate, and/or
assist in the negotiation with the ultimate buyer. In addition, The Meditrust
Companies have expended, and will continue to expend significant financial
resources to implement the Plan. Each transaction of the type described above
generally involves the payment of fees and expenses of outside professionals,
including investment bankers, attorneys, independent accountants and
consultants.
Our ability to successfully implement the Plan is also impacted by
external factors, such as: (i) the performance of the economy generally and
real estate markets in particular, (ii) the ability of The Meditrust Companies
to access the capital markets, (iii) changes in applicable law and (iv) the
identification of satisfactory buyers of non-strategic assets. We currently
anticipate that the spin-off of the new health care REIT will be completed by
the end of 1999. After the spin-off, each of the lodging and health care
business segments will need to separately access the capital markets to the
extent that additional capital is required. However, we can not be certain that
the capital markets will be amenable to the spin-off and the creation of the
two distinct, separately traded entities. In addition, changes in the capital
markets, which are beyond our control, may materially impact our ability to
successfully implement the spin-off, as well as other component parts of the
Plan.
Effects: The structure of The Meditrust Companies will be significantly
altered from our structure today and from our structure six months ago. Today,
each holder of paired shares of The Meditrust Companies owns interests in a
combined business which owns and invests in health care properties and owns and
operates lodging properties. Until recently, The Meditrust Companies also owned
and operated a horse racing facility and related property. After completion of
the Plan, and assuming you continue to hold the securities issued to you in the
spin-off, you will own an equity interest in a lodging business and in a
separate health care financing business. The lodging business and the health
care financing business will be operated independently, they will be financed
separately and their securities will be traded independently on the New York
Stock Exchange. You will no longer hold an interest in either the horse racing
or golfing businesses as these businesses have been, or will be sold. In
addition, the health care financing business will be somewhat smaller than it
has been historically, as certain non-strategic assets, most of which relate to
the health care business, have been sold and the funding of new health care
investments has been reduced as part of our reduction of capital expenditures.
Finally, assuming approval of the proposals presented in the Joint Proxy
Statement, the lodging business in which you currently hold an interest through
your ownership of paired shares will likely be restructured at some point in the
future after the spin-off is completed in order to respond to the recently
enacted federal legislation. The ability to change to an alternative structure
will be largely impacted by the approval of the proposals presented in the Joint
Proxy Statement. Although the proposals and how they impact and interact with
the Plan are generally summarized below, we encourage you to read the Joint
Proxy Statement and the accompanying Annexes in their entirety.
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The Corporate Document Proposals
Background: On November 5, 1997, the predecessor to Meditrust acquired The
Santa Anita Companies. The Santa Anita Companies enjoyed, at that time, the
benefits of a unique organizational structure referred to as a "paired share
structure." The shares of the capital stock of the two companies that made up
The Santa Anita Companies were "paired." As a result, these shares of capital
stock sold and traded together as a single unit referred to as a "paired
share." The paired share structure provided certain benefits, at the time of
the acquisition of The Santa Anita Companies, as it linked an operating company
with a REIT. A REIT may own and lease real estate, but it generally may not
conduct an operating business on the real property that it owns. By linking a
REIT, which can own and lease real property, with an operating company, which
can operate a business on the underlying real estate, the owners of the paired
shares retained the economic benefits (and, consequently, assumed the related
risks) associated with owning and operating the real estate. Consequently,
operating profits which normally would accrue to a third party operator instead
were earned by a company which was owned by the REIT's stockholders.
Meditrust's predecessor, together with other REITs, saw the benefits that
this unique structure provided to the REIT's stockholders and acquired The
Santa Anita Companies. The acquisition was structured as a merger of Meditrust
into The Santa Anita Companies to preserve the paired share structure. As a
result, the corporate organizational and governing documents of The Santa Anita
Companies, each of which was originally prepared nearly twenty years ago,
became the corporate and organizational documents of The Meditrust Companies.
At the time of the acquisition of The Santa Anita Companies in November
1997, these organizational and governing documents were viewed as somewhat
outdated and inflexible, given the developments that had been made in corporate
practice, as well as tax law, related to REITs generally and paired share REITs
specifically. At the time, Meditrust's predecessor determined that if the
structure could be utilized immediately it should be put to use rather than
making an attempt to revise these inherited, inflexible documents. Accordingly,
the unique paired share structure was immediately implemented by The Meditrust
Companies with announcements on January 3, 1998 and January 11, 1998,
respectively, of the acquisitions of La Quinta, an independent, publicly traded
corporation that focused on the ownership, operation and development of hotel
properties, and Cobblestone Holdings, Inc., an independent company that owned,
operated and developed golf course properties. The acquisitions of La Quinta
and Cobblestone Holdings, Inc. were consummated by The Meditrust Companies on
July 17, 1998 and May 29, 1998, respectively.
Implementation of these proposals will allow The Meditrust Companies to
adopt an alternative structure in response to the Reform Act.
Changes in the Law Diminished the Benefits of the Paired Share
Structure: On July 22, 1998, the President of the United States signed into law
the Internal Revenue Service Restructuring and Reform Act of 1998 (the "Reform
Act"). The Reform Act includes provisions which greatly diminish the ability of
the various paired share entities to continue to use this previously
grandfathered structure for further growth and value creation. Although the
acquisitions of La Quinta and Cobblestone Holdings, Inc. were "grandfathered"
(i.e., The Meditrust Companies and their stockholders could enjoy the benefits
of the paired share structure for these acquisitions), further growth by The
Meditrust Companies is substantially limited by the Reform Act. In particular,
these restrictions as a practical matter prevent the Operating Company from
operating hotels or golf courses acquired in the future either by Meditrust or
the Operating Company. Although the benefits of continued growth through the
use of the paired share structure are now limited, unless the proposals are
approved we will be forced to continue to operate and raise capital pursuant to
the existing corporate documents, which were largely intended to maintain this
paired share structure. Such limitation may over time adversely affect our
competitive position and financial condition.
The Proposed Changes to the Corporate Documents: The Meditrust Companies'
organizational and governing documents were originally drafted nearly twenty
years ago and were largely designed to, among other
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things, preserve the unique paired share structure of The Santa Anita
Companies. Since these corporate documents were originally drafted and put in
place, a number of changes have occurred that caused these documents to become
outdated, but more importantly, inflexible. The Boards of Directors of The
Meditrust Companies now recommend that you approve and adopt new organizational
and governing documents that will succeed certain of the documents inherited
from The Santa Anita Companies. The proposals will not include any new
anti-takeover devices. Rather, the proposals will make it easier to raise
capital and to respond to the challenges presented by the Reform Act and its
limitations on the continued use of the paired share structure. In addition,
the proposals may provide us with further opportunities to enhance stockholder
value.
The proposals to restructure The Meditrust Companies' corporate documents will
not add any anti-takeover devices.
If you approve the proposals to restructure our corporate documents, which
are described in detail in the Joint Proxy Statement, they will do the
following:
o Amend and restate The Meditrust Companies' Certificates of Incorporation to
increase the amount of authorized common stock and to provide for the
pairing of the capital stock of The Meditrust Companies.
o Terminate the Pairing Agreement, which will also automatically terminate
certain provisions of each of The Meditrust Companies' By-laws.
The Effect of the Proposed Changes to The Meditrust Companies' Corporate
Documents: The proposed changes to The Meditrust Companies' corporate documents
are designed principally to enable each of The Meditrust Companies to issue
unpaired shares of each of their capital stock and, when and if appropriate, to
terminate the pairing of their capital stock. The ability to issue unpaired
capital stock will permit us to engage in more flexible capital raising and
formation transactions that are not presently permitted under our existing
organizational and governing documents. Such flexibility may allow us to raise
additional capital through investments from investors that may exceed the 9.25%
Ownership Limit in the Existing Certificates. Approval and adoption of the
proposals will also permit The Meditrust Companies when, as and if appropriate
and permitted under applicable law, to raise additional capital by allowing
certain members of the Bass Group, including Thomas M. Taylor, the Interim
Chairman of the Boards of Directors of The Meditrust Companies, to increase
their holdings in Meditrust up to an aggregate of 13%. Notwithstanding the
foregoing, no assurance can be made that any such investments will be made. In
addition, the revised organizational and governing documents will permit us to
respond in a timely manner to the challenges presented by the Reform Act and
its limitations on the use of the paired share structure.
The proposals to restructure The Meditrust Companies' corporate documents
will enable each of The Meditrust Companies to issue unpaired shares of capital
stock and, in certain circumstances, to terminate the pairing of our capital
stock, which will permit us to:
o more efficiently engage in capital raising
o efficiently respond in a timely manner to the challenges presented by the
Reform Act and its limitations on the use of the paired share structure
o capitalize on further opportunities to enhance stockholder value through
acquisitions that are consistent with The Meditrust Companies' growth
strategy
o Capital Raising -- The changes to our corporate documents will enable The
Meditrust Companies to issue unpaired securities, including securities that
are convertible into common stock, and to facilitate capital raising. We
will be able to structure offerings of our securities that will more
appropriately match each of The Meditrust Companies' needs with the
investment criteria of various segments of the investment community. We
believe our ability to
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structure offerings that better meet the criteria of potential investors
should have the benefit of achieving more efficient and cost-effective
capital raising.
o Efficient and Timely Response to the Reform Act -- The changes to our
corporate documents will permit us to efficiently respond in a timely manner
to the challenges presented by the Reform Act. The Reform Act diminishes our
ability to continue to use the paired share structure for further growth and
future value creation. Our present corporate documents do not permit us to
engage in certain transactions that may be appropriate responses to the
limitations imposed by the Reform Act. For example, one response to the
limitations imposed by the Reform Act may be to "destaple" The Meditrust
Companies, for which either Meditrust or Operating Company would issue
unpaired equity securities in excess of fifty percent of the value of the
outstanding equity securities. Such independent issuance of securities is not
currently permitted under The Meditrust Companies' current corporate
documents.
o Enhance Stockholder Value Through Transactions that are Consistent with The
Meditrust Companies' Focused Strategy -- The changes in The Meditrust
Companies' corporate documents will permit us, when, as and if appropriate,
to engage in transactions that will enhance stockholder value. For example,
under the proposed corporate documents, Meditrust will be better able to
structure an acquisition of a company that fits within its growth strategy on
a fully tax-free basis.
Conclusion
In the Joint Proxy Statement, we are asking you to consider changes to our
organizational and governing documents that are designed to enable us to engage
in cost-effective capital raising and formation transactions and to respond to
the challenges presented by the Reform Act. We believe that because of the
changes in the capital markets generally, and in the real estate industry
specifically, the most cost-effective and desirable way to raise capital in the
future will be to match each of The Meditrust Companies' needs with the criteria
of potential investors. In addition, we believe that in order to efficiently
respond in a timely manner to the challenges presented by the Reform Act, we
will need to be governed by corporate documents that will provide us the
flexibility to implement a structure that will ultimately enhance stockholder
value. We believe that our current corporate documents restrict both of these
types of efforts to further our long-term goals and enhance stockholder value.
Accordingly, we have proposed the changes to the corporate documents that are to
be considered at each of our Special Meetings of Stockholders to be held May
1999. We urge you to read the accompanying Joint Proxy Statement in its entirety
as you consider these proposals. Once you have done so, we ask you to sign and
return the enclosed proxy cards as soon as possible.
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How to Vote
The Meditrust Companies' Boards of Directors unanimously recommend that
you vote "FOR" each of these proposals by signing, dating and promptly
returning the enclosed proxy cards in the enclosed postage-paid
envelope.
The vote of each stockholder is important. You are urged to mark, date and sign
the accompanying proxy cards and return them in the enclosed postage-paid
envelope as soon as possible.
You may vote either "FOR" the proposals, "AGAINST" the proposals, or
"ABSTAIN" from voting on the proposals.
If you sign and return the proxy cards without clearly indicating an
"AGAINST" vote or without clearly indicating that you "ABSTAIN" from voting,
you will be deemed to have voted "FOR" the approval and adoption of the
amendment and restatement of the Certificates of Incorporation and "FOR" the
termination of the Pairing Agreement.
If you indicate you wish to "ABSTAIN" from voting with respect to the
approval and adoption of the amendment and restatement of the Certificates of
Incorporation, it will have the same effect as a vote "AGAINST" the approval
and adoption of the amendment and restatement of the Certificates of
Incorporation.
If you indicate you wish to "ABSTAIN" from voting with respect to the
termination of the Pairing Agreement, it will have the same effect as a vote
"AGAINST" the termination of the Pairing Agreement.
The failure to return properly executed proxy cards will have the same
effect as voting "AGAINST" the approval and adoption of the amendment and
restatement of the Certificates of Incorporation and "AGAINST" the termination
of the Pairing Agreement, unless you vote in person at the Special Meetings of
Stockholders.
Detailed information about the proposals is set forth in the accompanying
Joint Proxy Statement, which you are urged to read carefully in its entirety,
including the section captioned "Risk Factors" beginning on page 4 of the Joint
Proxy Statement. If you have any questions or need assistance in completing
your proxy cards, please call D.F. King & Co., Inc., our proxy solicitor, toll
free at 1-800-848-3410.
YOUR VOTE IS IMPORTANT. PLEASE ACT PROMPTLY.
IMPORTANT
If your shares are held for you by a broker or bank, only your broker or bank
can vote your shares, but only after receiving specific voting instructions from
you. Accordingly, please sign and return the accompanying voting instruction
form in the enclosed envelope as soon as possible.
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La Quinta Inn, Orlando, Florida
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[BACK COVER]
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Life Care Center of Las Vegas, Las Vegas, Nevada
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