Health Care REIT, Inc. S-4
As filed with the Securities and Exchange Commission on
October 13, 2006
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
HEALTH CARE REIT,
INC.
(Exact Name of Registrant as
Specified in Its Charter)
|
|
|
|
|
Delaware
|
|
1-8923
|
|
34-1096634
|
(State or Other Jurisdiction
of
Incorporation or Organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification Number)
|
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
(Address, Including
Zip Code, and Telephone Number, Including Area Code, of
Registrants Principal Executive Offices)
George L. Chapman
Chairman and Chief Executive Officer
Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
(Name, Address,
Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
Copies to:
|
|
|
|
|
|
|
Mary Ellen Pisanelli, Esq.
Shumaker, Loop & Kendrick, LLP
North Courthouse Square
1000 Jackson
Toledo, Ohio 43604
(419) 241-9000
|
|
David J. Zampa, Esq.
Sidley Austin LLP
One South Dearborn
Chicago, Illinois 60603
(312) 853-7000
|
|
Fred S. Klipsch
Chairman and Chief Executive Officer
Windrose Medical Properties Trust
3502 Woodview Trace, Suite 210
Indianapolis, Indiana 46268
(317) 860-8180
|
|
David C. Wright, Esq.
Hunton & Williams LLP
Riverfront Plaza, East Tower
Richmond, Virginia 23219-4074
(804) 788-8200
|
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable
after this Registration Statement becomes effective.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION
FEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed Maximum
|
|
|
Proposed Maximum
|
|
|
Amount of
|
|
|
|
Amount to be
|
|
|
Offering
|
|
|
Aggregate
|
|
|
Registration
|
Title of Securities to be Registered
|
|
|
Registered
|
|
|
Price per Share
|
|
|
Offering Price
|
|
|
Fee
|
Common Stock, $1.00 par value
per
share(1)
|
|
|
10,296,731(2)
|
|
|
Not applicable
|
|
|
$405,281,580(3)
|
|
|
$43,366
|
7.5% Series G Cumulative
Convertible Preferred Stock, $1.00 par value per share
|
|
|
2,100,000(4)
|
|
|
Not applicable
|
|
|
$62,790,000(5)
|
|
|
$6,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Including such indeterminate number
of shares of the Registrants common stock as may from time
to time be issued upon conversion of the Registrants 7.5%
Series G Cumulative Convertible Preferred Stock, $1.00 par
value per share, registered hereunder.
|
|
(2)
|
|
The estimated maximum number of
shares of the Registrants common stock, $1.00 par
value per share, to be registered pursuant to this Registration
Statement is based on the product of
(i) (a) 21,123,283 outstanding common shares of
beneficial interest, $0.01 par value per share, of Windrose
Medical Properties Trust (Windrose) as of
October 12, 2006, (b) 680,766 Windrose common shares
issuable upon exercise of outstanding options to purchase
Windrose common shares and (c) 339,458.36 partnership units
of Windrose Medical Properties L.P. (Windrose OP)
held by limited partners of Windrose OP (other than Windrose,
the Registrant and their respective subsidiaries) and
(ii) the maximum exchange ratio of 0.4650 of a share of the
Registrants common stock for each Windrose common share
and each partnership unit of Windrose OP pursuant to the mergers
described herein.
|
|
(3)
|
|
Pursuant to Rules 457(c),
457(f)(1) and 457(f)(2) under the Securities Act of 1933, as
amended (the Securities Act), and solely for the
purpose of calculating the registration fee, the proposed
maximum aggregate offering price of the Registrants common
stock issuable is equal to (i) (a) 21,804,049 Windrose
common shares, which is the estimated maximum number of Windrose
common shares to be converted in the mergers described herein
and outstanding options to purchase Windrose common shares
multiplied by (b) $18.40, which was the average of the high
and low sale prices per Windrose common share on October 12,
2006, as reported on the New York Stock Exchange, plus
(ii) (a) 339,458.36 partnership units of Windrose LP
to be converted in the operating partnership merger described
herein multiplied by (b) $12.04, which was the book value
per partnership unit of Windrose OP on August 31, 2006.
|
|
(4)
|
|
The estimated maximum number of
shares of the Registrants 7.5% Series G Cumulative
Convertible Preferred Stock, $1.00 par value per share, to
be registered pursuant to this Registration Statement is based
on 2,100,000 outstanding 7.5% Series A Cumulative
Convertible Preferred Shares of Beneficial Interest,
$0.01 par value per share, of Windrose as of
October 12, 2006.
|
|
(5)
|
|
Pursuant to Rules 457(c) and
457(f)(1) under the Securities Act, and solely for purposes of
calculating the registration fee, the proposed maximum aggregate
offering price of the Registrants 7.5% Series G
Cumulative Convertible Preferred Stock issuable is equal to the
estimated maximum number of Windrose Series A preferred
shares to be converted in the merger described herein multiplied
by $ 29.90, which was the average of the high and low sale
price per Windrose Series A preferred share on October 12,
2006, as reported on the New York Stock Exchange.
|
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this proxy statement/prospectus is not complete
and may be changed. Health Care REIT, Inc. may not sell the
securities being offered by use of this proxy
statement/prospectus until the registration statement filed with
the Securities and Exchange Commission, of which this proxy
statement/prospectus is a part, is declared effective. This
proxy statement/prospectus is not an offer to sell these
securities and Health Care REIT, Inc. and Windrose Medical
Properties Trust are not soliciting an offer to buy these
securities in any jurisdiction where such offer, solicitation or
sale is prohibited.
|
SUBJECT
TO COMPLETION, DATED OCTOBER 13, 2006
PROXY STATEMENT/PROSPECTUS
3502 Woodview Trace, Suite 210
Indianapolis, Indiana 46268
Dear Shareholders:
I am pleased to invite you to a special meeting of shareholders
of Windrose Medical Properties Trust, or Windrose, to be held on
[ ], 2006, at [ ]
[a.m.]/[p.m.], local time, at [ ]. At the
special meeting, holders of Windrose common shares will be asked
to consider and vote on the proposed merger of Windrose with and
into Heat Merger Sub, LLC, which is a wholly-owned subsidiary of
Health Care REIT, Inc., or Health Care REIT.
If the merger is completed, Windrose will become a wholly-owned
subsidiary of Health Care REIT and Windrose common shares will
no longer be publicly traded. Upon completion of the merger, you
will receive, for each Windrose common share that you own, at
least 0.4509 but not more than 0.4650 of a newly-issued share of
Health Care REIT common stock, depending on the average volume
weighted average price per share of Health Care REIT common
stock on the New York Stock Exchange for 10 trading days,
selected by lot, from the 15 trading day period ending on and
including the fifth trading day prior to date that the merger is
completed. The formula for determining the appropriate fraction
of a share of Health Care REIT common stock to be issued in
exchange for each Windrose common share is set forth in detail
in the Agreement and Plan of Merger between Health Care REIT and
Windrose as described in the accompanying proxy
statement/prospectus.
Depending on the exchange ratio and the number of Windrose
common shares outstanding, Health Care REIT will issue a minimum
of approximately [ ] million and a maximum
of approximately [ ] million shares of
common stock. Therefore, immediately after completion of the
merger, former Windrose shareholders will own a minimum of
approximately [ ]% and a maximum of
approximately [ ]% of Health Care REITs
then-outstanding shares of common stock.
The exchange ratio may not be determined until after the date of
the special meeting. Therefore, at the time of the special
meeting, you may not know the precise number of shares of Health
Care REIT common stock that you will receive on the date the
merger is completed.
Health Care REIT common stock trades on the New York Stock
Exchange under the symbol HCN. Windrose common
shares trade on the New York Stock Exchange under the symbol
WRS. We urge you to obtain current market quotations
for Health Care REIT common stock and Windrose common shares
prior to voting on the merger proposal.
Windroses board of trustees has determined unanimously
that the merger is advisable on the terms set forth in the
merger agreement and approved unanimously the merger agreement.
Accordingly, Windroses board of trustees recommends
that you vote FOR the merger.
We cannot complete the merger unless holders of a majority of
the outstanding Windrose common shares vote to approve the
merger. Whether or not you plan to be present at the special
meeting, you may submit your proxy in the following three ways:
|
|
|
|
|
you may sign and return your proxy as soon as possible in the
enclosed self-addressed envelope so that your shares will be
voted;
|
|
|
|
you may submit your proxy through the Internet; or
|
|
|
|
you may submit your proxy by telephone.
|
Details for submitting your proxy through each of the above
methods are outlined in the enclosed proxy card. Your vote is
very important. If you do not submit your proxy or vote at the
meeting, it will have the same effect as voting
against the merger.
We encourage you to read the accompanying proxy
statement/prospectus carefully because it explains the proposed
merger, the documents related to the merger and other related
matters and provides information relating to Health Care REIT
and Windrose. In particular, please see the section titled
Risk Factors beginning on page 14 of this proxy
statement/prospectus. You can also obtain other information
about Health Care REIT and Windrose from documents each party
has filed with the Securities and Exchange Commission that are
incorporated by reference into this proxy statement/prospectus.
Sincerely,
Fred S. Klipsch
Chairman and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this proxy
statement/prospectus. Any representation to the contrary is a
criminal offense.
This proxy statement/prospectus is dated [ ],
2006, and is first being mailed to holders of Windrose common
shares on or about [ ], 2006.
REFERENCE
TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business
and financial information about Health Care REIT and Windrose
from documents that are not included in or delivered with this
document. You can obtain documents related to Health Care REIT
or Windrose that are referred to in this document, without
charge, by requesting them in writing or by telephone from the
appropriate company.
|
|
|
Health Care REIT, Inc.
|
|
Windrose Medical Properties Trust
|
One SeaGate, Suite 1500
|
|
3502 Woodview Trace, Suite 210
|
Toledo, Ohio 43604
|
|
Indianapolis, Indiana 46268
|
Attention: Erin C. Ibele
|
|
Attention: Daniel R. Loftus
|
Senior Vice President
|
|
Executive Vice President,
|
Administration and Corporate
Secretary
|
|
Secretary and General Counsel
|
(419)
247-2800
|
|
(317) 860-8180
|
In order to receive timely delivery of requested documents in
advance of the special meeting, you should make your request no
later
than ,
2006.
See Where You Can Find More Information beginning
on page 94.
TERMS
USED IN THIS PROXY STATEMENT/PROSPECTUS
Unless otherwise indicated or the context requires otherwise,
all references in this proxy statement/prospectus to the
following terms have the meaning given below:
Health Care REIT refers to Health Care REIT,
Inc., a Delaware corporation, and its consolidated subsidiaries.
Health Care REIT common stock refers to the
common stock, par value $1.00 per share, of Health Care
REIT.
Health Care REIT preferred stock refers to
the 7.5% Series G Cumulative Convertible Preferred Stock,
par value $1.00 per share, of Health Care REIT.
Heat Merger Sub refers to Heat Merger Sub,
LLC, a Delaware limited liability company and a wholly-owned
subsidiary of Health Care REIT.
Heat OP Merger Sub refers to Heat OP Merger
Sub, L.P., a Virginia limited partnership and a wholly-owned,
indirect subsidiary of Health Care REIT.
merger means the merger of Windrose with and
into Heat Merger Sub, with Heat Merger Sub continuing as the
surviving entity and as a wholly-owned subsidiary of Health Care
REIT.
operating partnership merger means the merger
of Heat OP Merger Sub with and into Windrose OP, with Windrose
OP continuing as the surviving entity and as a wholly-owned
subsidiary of Health Care REIT.
mergers mean the merger and the operating
partnership merger.
Windrose refers to Windrose Medical
Properties Trust, a Maryland real estate investment trust, and
its consolidated subsidiaries, including Windrose OP.
Windrose articles supplementary refers to the
articles supplementary for the Windrose preferred shares filed
with the Securities and Exchange Commission as an exhibit to
Windroses Registration Statement on
Form 8-A
filed on June 29, 2005.
Windrose common shares refers to the common
shares of beneficial interest, $0.01 par value per share,
of Windrose.
Windrose OP refers to Windrose Medical
Properties, L.P., a Virginia limited partnership and the
operating partnership of Windrose.
i
Windrose OP units refers to the partnership
units of Windrose OP held by limited partners of Windrose OP
(except partnership units held by Health Care REIT, Windrose or
any of their respective subsidiaries).
Windrose preferred shares refers to the 7.5%
Series A Cumulative Convertible Preferred Shares of
Beneficial Interest, $0.01 par value per share, of Windrose.
Windrose shareholders refers to holders of
Windrose common shares.
Unless otherwise indicated or the context requires otherwise,
all references in this proxy statement/prospectus to
we, us, our, or similar
references mean Health Care REIT, Windrose and each of their
respective subsidiaries.
ABOUT
THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus constitutes a proxy statement of
Windrose and has been mailed to you because you were a holder of
Windrose common shares or Windrose preferred shares on the
record date set by Windroses board of trustees and were
entitled to notice of a special meeting of Windrose
shareholders. Only Windrose shareholders as of the record date
are being asked to consider and vote upon a proposal to approve
the merger at the special meeting. This proxy
statement/prospectus also constitutes a prospectus of Health
Care REIT, which is part of the Registration Statement on
Form S-4
(Registration No. 333- )
filed by Health Care REIT with the U.S. Securities and
Exchange Commission (which we refer to in this proxy
statement/prospectus as the SEC) under the Securities Act of
1933, as amended (which we refer to in this proxy
statement/prospectus as the Securities Act), to register the
shares of Health Care REIT common stock and Health Care REIT
preferred stock to be issued to Windrose shareholders and
holders of Windrose OP units and Windrose preferred shares in
the mergers. Accordingly, this proxy statement/prospectus is
also being mailed to holders of Windrose preferred shares and
Windrose OP units.
All information contained in this proxy statement/prospectus
with respect to Health Care REIT has been provided by Health
Care REIT. All information contained in this proxy
statement/prospectus with respect to Windrose has been provided
by Windrose.
ii
A special meeting of shareholders of Windrose Medical Properties
Trust, a Maryland real estate investment trust, which we refer
to as Windrose, will be held at [ ]
[a.m.]/[p.m.], local time, on [ ], 2006 at
[ ]. At the special meeting, the holders of
Windrose common shares will be asked to consider and vote upon
the following proposals:
|
|
|
|
|
to approve the merger of Windrose with and into a wholly-owned
subsidiary of Health Care REIT, Inc., a Delaware corporation,
which we refer to as Health Care REIT, contemplated by the
Agreement and Plan of Merger, dated as of September 12,
2006, as amended by Amendment No. 1 to Agreement and Plan
of Merger, dated as of October 12, 2006, by and among
Health Care REIT, Heat Merger Sub, LLC, Heat OP Merger Sub,
L.P., Windrose and Windrose Medical Properties, L.P., which we
refer to as the merger agreement; and
|
|
|
|
to transact any other business that may properly come before the
special meeting, including any adjournment or postponement of
the special meeting.
|
The proposed merger is described in more detail in the attached
proxy statement/prospectus, which you should read in its
entirety before voting. A copy of the merger agreement, as
amended, is attached as Appendix A and
Appendix B to the attached proxy
statement/prospectus.
Only holders of Windrose common shares or Windrose preferred
shares as of the close of business (5:00 p.m., Eastern
time) on [ ], 2006, the record date for the
special meeting, are entitled to notice of the special meeting.
Only holders of Windrose common shares as of the record date
will be entitled to vote at the special meeting. Such
shareholders are entitled to one vote per Windrose common share
held on the record date. If you hold your shares in
street name through a broker or other nominee and
you want your vote counted, you must instruct your broker or
nominee to vote.
Windroses board of trustees has determined unanimously
that the merger is advisable subject to the terms and on the
conditions set forth in the merger agreement and approved
unanimously the merger agreement. Accordingly,
Windroses board of trustees unanimously recommends that
you vote FOR the merger. Approval of the merger
will require the affirmative vote of the holders of a majority
of the Windrose common shares outstanding on the record date.
It is important that you complete, sign, date and promptly
return the accompanying proxy card in the enclosed
self-addressed envelope, or submit a proxy by telephone or
through the Internet by following the instructions included with
the accompanying proxy card, whether or not you plan to attend
the special meeting in person. If you do attend the special
meeting and wish to vote in person, you may withdraw your proxy
at that time. Please do not send share certificates with your
proxy card.
This notice and the attached proxy statement/prospectus are
expected to be first mailed to Windrose shareholders on or about
[ ], 2006.
By Order of Windroses Board of Trustees,
Daniel R. Loftus
Executive Vice President, Secretary and General Counsel
Indianapolis, Indiana
[ ], 2006
iii
TABLE OF
CONTENTS
|
|
|
|
|
Page
|
|
|
i
|
|
|
i
|
|
|
ii
|
|
|
iii
|
|
|
vii
|
|
|
1
|
|
|
1
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|
5
|
|
|
5
|
|
|
5
|
|
|
5
|
|
|
5
|
|
|
5
|
|
|
6
|
|
|
7
|
|
|
8
|
|
|
8
|
|
|
8
|
|
|
8
|
|
|
9
|
|
|
10
|
|
|
11
|
|
|
12
|
|
|
13
|
|
|
14
|
|
|
14
|
|
|
16
|
|
|
19
|
|
|
21
|
|
|
22
|
iv
|
|
|
|
|
Page
|
|
|
22
|
|
|
22
|
|
|
22
|
|
|
22
|
|
|
22
|
|
|
23
|
|
|
23
|
|
|
23
|
|
|
24
|
|
|
24
|
|
|
25
|
|
|
25
|
|
|
25
|
|
|
30
|
|
|
33
|
|
|
35
|
|
|
40
|
|
|
41
|
|
|
41
|
|
|
42
|
|
|
42
|
|
|
42
|
|
|
44
|
|
|
44
|
|
|
44
|
|
|
44
|
|
|
45
|
|
|
45
|
|
|
45
|
|
|
45
|
|
|
46
|
|
|
46
|
|
|
46
|
|
|
46
|
|
|
47
|
|
|
48
|
|
|
49
|
|
|
50
|
|
|
56
|
|
|
58
|
|
|
59
|
|
|
60
|
|
|
60
|
|
|
66
|
v
APPENDICES
|
|
|
Appendix A
|
|
Agreement and Plan of Merger,
dated as of September 12, 2006, by and among Health Care
REIT, Heat Merger Sub, Heat OP Merger Sub, Windrose and Windrose
OP
|
Appendix B
|
|
Amendment No. 1 to Agreement
and Plan of Merger, dated as of October 12, 2006, among
Health Care REIT, Heat Merger Sub, Heat OP Merger Sub, Windrose
and Windrose OP
|
Appendix C
|
|
Form of Certificate of Designation
of 7.5% Series G Cumulative Convertible Preferred Stock, $1.00
par value per share, of Health Care REIT
|
Appendix D
|
|
Opinion of J.P. Morgan
Securities Inc.
|
vi
QUESTIONS
AND ANSWERS
What am I
being asked to vote on?
Windrose shareholders are being asked to vote to approve the
merger of Windrose with and into Heat Merger Sub, with Heat
Merger Sub continuing as the surviving entity. We refer to this
transaction as the merger. The merger will be carried out as
provided in the merger agreement, as amended. A copy of the
merger agreement is attached as Appendix A to this
proxy statement/prospectus and a copy of the amendment is
attached as Appendix B to this proxy
statement/prospectus. We refer to the merger agreement and the
amendment collectively as the merger agreement.
The merger agreement also provides for the merger of Heat OP
Merger Sub with and into Windrose OP, with Windrose OP
continuing as the surviving partnership. We refer to this
transaction as the operating partnership merger and we refer to
the operating partnership merger and the merger collectively as
the mergers. Holders of Windrose OP units are not being asked to
vote to approve the operating partnership merger. Under
applicable law and the First Amended and Restated Agreement of
Limited Partnership of Windrose OP, which we refer to as the
Windrose OP partnership agreement, Windrose, as the sole general
partner of Windrose OP, can effect the operating partnership
merger without the consent of the limited partners of Windrose
OP.
Holders of Windrose preferred shares are entitled to notice of
the special meeting of Windrose shareholders under Maryland law
but are not being asked to vote on the mergers at the special
meeting.
What will
I receive in the proposed transaction?
If the merger is completed, holders of Windrose common shares
issued and outstanding immediately prior to the effective time
of the merger (other than shares owned by Windrose and Health
Care REIT or any of their respective subsidiaries) will receive
for each Windrose common share held by such holder a fraction of
a share of Health Care REIT common stock equal to the quotient
determined by dividing $18.06 by the average of the volume
weighted average price per share of Health Care REITs
common stock on the New York Stock Exchange for 10 trading days,
selected by lot, from the 15 trading day period ending on and
including the fifth trading day prior to closing (which we refer
to as the exchange ratio), provided that the exchange ratio will
not be more than 0.4650 or less than 0.4509.
Depending on the exchange ratio and the number of Windrose
common shares outstanding, Health Care REIT will issue a minimum
of approximately [ ] million and a maximum
of approximately [ ] million shares of
common stock. Therefore, immediately after completion of the
merger, former Windrose shareholders will own a minimum of
approximately [ ]% and a maximum of
approximately [ ]% of Health Care REITs
then-outstanding shares of common stock.
The exchange ratio may not be determined until after the date of
the special meeting. Therefore, at the time of the special
meeting, you may not know the precise number of shares of Health
Care REIT common stock that you will receive on the date the
merger is completed.
You will not receive any fractional shares of Health Care REIT
common stock in the mergers. Instead, you will be paid cash
(without interest) in lieu of the fractional share to which you
would otherwise be entitled as described under The Merger
Agreement Conversion of Securities and Exchange of
Share Certificates Surrender of Certificates and
Windrose OP units. You will not be entitled to dividends,
voting rights or any other rights in respect of any fractional
share.
vii
Will the
shares of Health Care REIT common stock and Health Care REIT
preferred stock issued in the mergers be listed for trading on
the New York Stock Exchange?
Yes. At the effective times of the mergers, the shares of Health
Care REIT common stock and Health Care REIT preferred stock to
be issued in the mergers and the shares reserved for issuance
upon exercise of converted options will be listed, upon official
notice of issuance, on the New York Stock Exchange under the
symbol HCN and [ ],
respectively.
What are
the conditions to the mergers?
The merger agreement contains a number of conditions to the
completion of the mergers, including, among others, the approval
of the merger by Windroses shareholders, the
non-occurrence of a material adverse change with respect to
Health Care REIT or Windrose, the receipt of certain third party
consents to the mergers, the receipt of opinions of tax counsel
to Health Care REIT and Windrose with respect to the treatment
of the merger as a reorganization for federal income tax
purposes, the receipt of opinions of tax counsel to Health Care
REIT and Windrose with respect to Health Care REITs and
Windroses qualification as real estate investment trusts
for federal income tax purposes, and other conditions. A
description of the conditions to the completion of the mergers
appears under The Merger Agreement Conditions
to the Mergers. Completion of the mergers does not require
the approval of Health Care REITs stockholders or the
holders of Windrose preferred shares or Windrose OP units.
When is
the merger expected to occur?
Health Care REIT and Windrose expect that the merger will be
completed on or about [ ], 2006 if, at the
special meeting of Windrose shareholders, Windrose shareholders
approve the merger. The completion of the merger could be
delayed beyond this date due to certain factors beyond the
control of Health Care REIT and Windrose, including the receipt
of necessary third party consents to the mergers.
What does
Windroses board of trustees recommend?
Windroses board of trustees unanimously adopted a
resolution approving the merger agreement and declaring the
merger advisable on the terms set forth in the merger agreement.
Accordingly, Windroses board of trustees unanimously
recommends that you vote FOR the merger proposal.
What vote
is required to approve the merger?
It is a condition to the completion of the merger that
Windroses shareholders approve the merger by the required
vote. The affirmative vote of holders of a majority of the
Windrose common shares outstanding and entitled to vote at the
special meeting is required to approve the proposed merger.
Accordingly, your vote is important. If you fail to instruct
your broker or bank to vote your shares held in street name, or
if you abstain from voting, your action will have the same
effect as a vote against the proposed merger.
Will
Health Care REIT and Windrose coordinate the declaration and
payment of dividends on shares of Health Care REIT common stock
and Windrose common shares prior to the completion of the
merger?
Yes. In the merger agreement, Health Care REIT and Windrose have
agreed to coordinate the declaration and payment of dividends on
Health Care REIT common stock and Windrose common shares as
described under The Merger Agreement Covenants
and Agreements Dividends.
viii
Will
Windrose declare and pay a special dividend to holders of
Windrose preferred shares for the quarter in which the merger is
completed prior to the completion of the merger?
Yes. In the merger agreement, Windrose has agreed to declare and
pay a special dividend on Windrose preferred shares for the
quarter in which the merger is completed as described under
The Merger Agreement Covenants and
Agreements Dividends.
What
happens if I sell my Windrose common shares before the special
meeting?
The record date for the special meeting, [ ],
2006, is earlier than the date of the special meeting. If you
held your Windrose common shares on the record date but transfer
them prior to the effective time of the merger, you will retain
your right to vote at the special meeting but not the right to
receive the merger consideration for the Windrose common shares.
The right to receive such consideration will pass to the person
who owns your Windrose common shares when the merger becomes
effective.
Can I
convert my Windrose preferred shares and Windrose OP units prior
to completion of the mergers?
Yes. Pursuant to the Windrose articles supplementary, which set
forth the terms of the Windrose preferred shares, each Windrose
preferred share is convertible, in whole or in part, at any time
at the option of the holder at a conversion price of $15.75 per
common share, into 1.5873 Windrose common shares. Holders of
Windrose OP units can redeem their Windrose OP units, in whole
or in part, at any time for cash or Windrose common shares, in
the sole discretion of Windrose, as the sole general partner of
Windrose OP, subject to the terms and conditions set forth in
the Windrose OP partnership agreement.
How do I
convert my Windrose preferred shares prior to completion of the
mergers?
In accordance with the Windrose articles supplementary,
conversion of the Windrose preferred shares or a specified
portion thereof may be effected by delivering (i) written
notice of conversion, and (ii) certificates evidencing such
shares with a proper assignment of such certificate to Windrose
or in blank to the principal corporate trust office of
Continental Stock Transfer & Trust Company, the transfer
agent and registrar for the Windrose preferred shares. Holders
of Windrose preferred shares can contact Continental Stock
Transfer & Trust Company or Windrose by mail or phone by
using the following contact information:
Continental Stock Transfer & Trust Company
Attention: Windrose Medical Properties Trust
17 Battery Place
New York, NY 10004
(800) 509-5586
Windrose Medical Properties Trust
3502 Woodview Trace, Suite 210
Indianapolis, Indiana 46268
(317) 860-8180
What will
happen to my Windrose common shares after the merger?
Upon completion of the merger, each Windrose common share will
be converted into a fraction of a share of Health Care REIT
common stock equal to the exchange ratio. The conversion of your
Windrose common shares into Health Care REIT common stock in the
merger will result in differences between your rights as a
Windrose
ix
shareholder and your rights as a Health Care REIT stockholder as
described under Comparison of the Rights of Holders of
Windrose Common Shares and Health Care REIT Common Stock.
What will
happen to my Windrose preferred shares after the
merger?
Upon completion of the merger, each Windrose preferred share
will be converted into a share of a new series of Health Care
REIT convertible preferred stock having substantially similar
rights and preferences. The terms of the Health Care REIT
preferred stock are more fully described under
Capitalization and Description of Health Care REIT
Securities Description of the Health Care REIT
Preferred Stock.
What will
happen to Windrose OP units after the operating partnership
merger?
Upon completion of the operating partnership merger, each
Windrose OP unit will be converted into a fraction of a share of
Health Care REIT common stock equal to the exchange ratio.
If the
mergers are completed, when can I expect to receive the merger
consideration for my Windrose common shares, Windrose preferred
shares and Windrose OP units?
Health Care REIT expects that the exchange agent will distribute
a letter of transmittal to you promptly after the effective time
of the mergers. In order to receive the merger consideration,
you will need to properly complete and return to the exchange
agent such letter of transmittal and accompanying materials. See
The Merger Agreement Exchange of Certificates;
No Further Rights; Dividends; Lost, Stolen or Destroyed
Certificates Exchange of Share Certificates.
What
percentage of Health Care REIT will be owned by former Windrose
shareholders and holders of Windrose OP units immediately
following the mergers?
Depending on the exchange ratio and the number of Windrose
common shares and Windrose OP units outstanding at the effective
time of the merger, Health Care REIT will issue a minimum of
approximately [ ] million and a maximum of
approximately [ ] million shares of common
stock to Windrose shareholders and holders of Windrose OP units
in the mergers. Therefore, immediately after completion of the
merger, former Windrose shareholders and holders of Windrose OP
units will own a minimum of approximately [ ]%
and a maximum of approximately [ ]% of Health
Care REITs then-outstanding shares of common stock (such
estimated percentages based on the number of outstanding shares
of Health Care REIT common stock, Windrose common shares and
Windrose OP units as of [ ], 2006).
What do I
need to do now?
After carefully reviewing this document, if you held Windrose
common shares as of the record date, indicate on the enclosed
proxy card how you want to vote and sign and mail the completed
proxy card in the enclosed return envelope or submit your proxy
by telephone or via the Internet as soon as possible so that
your shares will be represented at the special meeting. If you
sign and send in your proxy and do not indicate how you want to
vote, your proxy will be voted in the manner that
Windroses board of trustees recommends.
How do I
authorize a proxy to vote by telephone or via the
Internet?
If your common shares are held in the name of a broker, bank or
other nominee (i.e., in street name), you
will receive instructions on voting your common shares from that
nominee. A number of brokers and banks participate in a program
provided through ADP Investor Communication Services that offers
telephone and Internet voting options. Telephone and Internet
voting procedures are designed to authenticate your identity,
allow you to authorize
x
a proxy to vote and confirm that your vote was properly
recorded. The giving of a proxy by telephone or via the Internet
will not affect your right to vote in person if you decide to
attend the special meeting and you hold your shares in your own
name. If you authorize a proxy to vote by Internet, you may
incur costs, such as usage charges from your Internet access
provider or telephone company (e.g., online fees). Please
do not return the enclosed proxy card if you are authorizing a
proxy to vote by telephone or via the Internet.
If my
broker holds my Windrose common shares in street name, will my
broker vote my shares for me?
No. Your broker will not be able to vote your Windrose common
shares unless you follow the directions your broker or bank
provides to you regarding how to vote your Windrose common
shares on the proposed merger.
Can I
change my vote after I have submitted my proxy by mail,
telephone or via the Internet?
Yes. You can change your vote at any time before your proxy is
voted at the special meeting. You can do this by:
|
|
|
|
|
sending a signed written notice to Windrose stating that you
would like to revoke your proxy;
|
|
|
|
completing and submitting a new proxy card with a later date;
|
|
|
|
submitting a new proxy by telephone or via the Internet; or
|
|
|
|
attending the special meeting and voting in person.
|
You may obtain an additional proxy card by writing Windrose
Medical Properties Trust, 3502 Woodview Trace,
Suite 210, Indianapolis, Indiana 46268, Attention:
Secretary.
If the common shares that you own are held on your behalf by a
broker, bank or other nominee, you must contact the nominee to
receive instructions as to how you may revoke your proxy.
Should I
send in my Windrose share certificates with my proxy
card?
No. Please DO NOT send your Windrose share certificates with
your proxy card. Rather, if the merger is approved, you will be
asked to send your Windrose share certificates to the exchange
agent, together with a completed, signed letter of transmittal
and any accompanying materials that will be provided to you
prior to completion of the merger, or, if your Windrose common
shares are held in street name, according to your
brokers instructions.
What
rights do I have if I oppose the merger?
You can vote against the merger by indicating a vote against the
proposal on your proxy card and signing and mailing your proxy
or by submitting your proxy by telephone or via the Internet in
accordance with the instructions provided, or by voting against
the merger in person at the special meeting. Pursuant to
Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland (which we refer to in this proxy
statement/prospectus as the Maryland REIT Law), you are not
entitled to dissenters or appraisal rights with respect to
the merger.
What are
the tax consequences to me of the proposed mergers?
Health Care REIT and Windrose intend that the merger will
qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as
amended (which we refer to in this proxy statement/prospectus as
the Code). If the merger so qualifies, then for
U.S. federal income tax purposes, (i) holders of
Windrose common shares will not recognize any gain or loss upon
the exchange of their Windrose common shares for Health Care
REIT common stock in the merger (except with respect to cash
received instead of a fractional share
xi
of Health Care REIT common stock), and (ii) holders of
Windrose preferred shares will not recognize any gain or loss
upon the exchange of their Windrose preferred shares for Health
Care REIT preferred stock in the merger.
The exchange of Windrose OP units for Health Care REIT common
stock pursuant to the operating partnership merger will be
treated as a taxable sale for federal income tax purposes, with
the holders of Windrose OP units recognizing gain or loss, as
the case may be. The determination of the gain or loss
recognized by a holder of Windrose OP units will be based on the
difference between the value of the Health Care REIT common
stock and cash received (plus an allocable share of Windrose
OPs liabilities) and the holders tax basis in the
Windrose OP units exchanged.
The tax consequences of the mergers in any case will depend on
your particular situation. For a summary of the
U.S. federal income tax consequences of the mergers to the
holders of Windrose common shares, Windrose preferred shares and
holders of Windrose OP units, please see
Summary Material U.S. Federal Income Tax
Considerations of the Mergers. You should consult your tax
adviser for a fuller understanding of the tax consequences of
the mergers to you.
Who will
solicit and pay the cost of soliciting proxies?
Windrose has retained Morrow & Co., Inc. to act as its
proxy solicitor to solicit proxies approving the merger proposal
from each of its shareholders on or about the date of mailing of
this proxy statement/prospectus. In addition to solicitations by
mail, Windroses or Health Care REITs respective
trustees or directors, officers and employees, and those of its
subsidiaries and affiliates, may solicit proxies from
shareholders by telephone or other electronic means or in
person. Windrose also will request that banking institutions,
brokerage firms, custodians, trustees, nominees, fiduciaries and
other like parties forward the solicitation materials to the
beneficial owners of Windrose common shares. Windrose generally
will bear the cost of the solicitation of proxies from its
shareholders. See The Special Meeting
Solicitation of Proxies; Solicitation Expenses.
Who can
help answer my questions regarding the special meeting or the
merger?
You can write or call Frederick L. Farrar or Daniel R. Loftus,
Windroses president, chief operating officer and treasurer
and executive vice president, secretary and general counsel,
respectively, at Windrose Medical Properties Trust,
3502 Woodview Trace, Suite 210, Indianapolis, Indiana
46268, telephone (317) 860-8180, Windroses proxy
solicitor, Morrow & Co., Inc. at Windrose Medical
Properties Trust, c/o Morrow & Co., Inc.,
470 West Avenue 3rd Floor, Stamford,
Connecticut 06902, telephone
1-800-607-0088,
or Scott A. Estes or Jeffrey H. Miller, Health Care REITs
senior vice president and chief financial officer and executive
vice president and general counsel, respectively, at Health Care
REIT, Inc., One SeaGate, Suite 1500, Toledo, Ohio
43604, telephone (419) 247-2800, with any questions about
the merger or Windroses special meeting.
xii
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information
that may be important to you. You should carefully read this
entire proxy statement/prospectus and the other documents to
which this document refers for a more complete understanding of
the matters being considered at the special meeting. See
Where You Can Find More Information in this proxy
statement/prospectus.
The
Companies
Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
Health Care REIT is a self-administered, equity real estate
investment trust, or REIT, that invests in health care and
senior housing facilities. Founded in 1970, Health Care REIT was
the first real estate investment trust to invest exclusively in
health care facilities.
As of June 30, 2006, Health Care REIT had
$2.96 billion of net real estate investments, inclusive of
credit enhancements, in 464 facilities located in 37 states
and managed by 57 different operators. At that date, the
portfolio included 35 independent living/continuing care
retirement communities, 203 assisted living facilities, 213
skilled nursing facilities and 13 specialty care facilities.
Health Care REIT seeks to increase funds from operations and
funds available for distribution and to enhance stockholder
value through relationship investing with public and private
regionally focused health care operators. The primary components
of this strategy are set forth below.
Relationship Investing. Health Care REIT
establishes relationships with, and provides financing to,
operators throughout their growth cycles. Health Care REIT
targets companies with experienced management teams, regionally
focused operations, substantial inside ownership interests or
venture capital backing and significant growth potential.
By maintaining close ties to operators, Health Care REIT is able
to structure investments designed to support an operators
business plan and monitor Health Care REITs investments on
an ongoing basis. Health Care REITs investments are
typically structured as master operating leases for the
acquisition and development of facilities in a geographic
region. Economic terms typically include annual rate increasers
and fair market value-based purchase options.
Portfolio Management. Portfolio strength is
derived from diversity by operator, property sector and
geographic location. Health Care REIT emphasizes long-term
investment structures that result in a predictable asset base
with attendant recurring income, funds from operations and funds
available for distribution. Generally, master leases have a 12
to 15 year term and mortgage loans provide three to eight
years of prepayment protection. Health Care REIT also regularly
monitors the portfolio with its proprietary database system.
Depth of Management. Health Care REITs
management team is comprised of eight individuals who have an
aggregate of approximately 153 years of experience in
health care and real estate finance. The management team has
successfully implemented Health Care REITs investment
strategy of emphasizing relationship financings with strong,
emerging operators.
Health Care REITs Internet address is
http://www.hcreit.com. The information on or connected to Health
Care REITs Internet Web site is not, and shall not be
deemed to be, a part of, or incorporated into, this proxy
statement/prospectus.
For additional information regarding Health Care REIT, see
Where You Can Find More Information on page 94.
1
Heat Merger Sub, LLC
c/o Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
Heat Merger Sub is a Delaware limited liability company and a
wholly-owned subsidiary of Health Care REIT. Heat Merger Sub was
formed on September 12, 2006 solely for the purpose of
effecting the merger. It has not carried on any activities other
than in connection with the merger agreement.
Heat OP Merger Sub, L.P.
c/o Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
Heat OP Merger Sub is a Virginia limited partnership and a
wholly-owned, indirect subsidiary of Health Care REIT. Heat OP
Merger Sub was organized on September 12, 2006 solely for
the purpose of effecting the operating partnership merger. It
has not carried on any activities other than in connection with
the merger agreement.
Windrose Medical Properties Trust
3502 Woodview Trace, Suite 210
Indianapolis, Indiana 46268
(317) 860-8180
Windrose is a self-managed specialty medical properties REIT.
Windrose was organized in March 2002 as a Maryland REIT with
perpetual existence and is taxed as a REIT under the federal
income tax laws. Windrose completed its initial public offering
and began operations in August 2002. Windrose was formed to
acquire, selectively develop, and manage specialty medical
properties, such as:
|
|
|
|
|
medical office buildings;
|
|
|
|
ambulatory surgery centers;
|
|
|
|
outpatient treatment and diagnostic facilities; and
|
|
|
|
specialty hospitals and treatment centers.
|
Windroses Internet address is http://www.windrosempt.com.
The information on or connected to Windroses Internet Web
site is not, and shall not be deemed to be, a part of, or
incorporated into, this proxy statement/prospectus.
For additional information regarding Windrose, see Where
You Can Find More Information on page 94.
Windrose Medical Properties, L.P.
c/o Windrose Medical Properties Trust, general partner
3502 Woodview Trace, Suite 210
Indianapolis, Indiana 46268
(317) 860-8180
Windrose owns its properties and conducts its business through
Windrose Medical Properties, L.P. (which we refer to in this
proxy statement/prospectus as Windrose OP). Windrose is the sole
general partner of, and owned as of June 30, 2006 a 98.4%
partnership interest in, Windrose OP. For additional information
regarding Windrose OP, see Where You Can Find More
Information on page 94.
2
The
Special Meeting
(Page [ ])
Date,
Time and Place; Purpose of the Special Meeting
A special meeting of Windrose shareholders will be held at
[ ], on [ ], 2006 at
[ ] [a.m.]/[p.m.], local time. At the special
meeting, the Windrose shareholders will be asked to consider and
vote upon a proposal to approve the merger described in this
proxy statement/prospectus and to consider and act upon any
other business that may properly come before the special meeting
(including any proposal to adjourn or postpone the special
meeting).
Record
Date; Voting Power
Windroses board of trustees has fixed the close of
business (5:00 p.m., Eastern time) on [ ],
2006 as the record date for determining the shareholders of
Windrose that are entitled to notice of, and to vote at, the
special meeting. Only holders of record of Windrose common
shares or Windrose preferred shares at the close of business on
the record date are entitled to notice of the special meeting.
Only holders of record of Windrose common shares at the close of
business on the record date are entitled to vote at the special
meeting. At the close of business on the record date, there were
[ ] Windrose common shares outstanding and
entitled to vote at the special meeting.
Windrose shareholders will have one vote on any matter that may
properly come before the special meeting for each Windrose
common share that they owned on the record date.
Required
Vote
Windroses amended and restated declaration of trust (which
we refer to in this proxy statement/prospectus as
Windroses declaration of trust) and bylaws require that
the merger be affirmatively approved by holders of a majority of
the Windrose common shares outstanding on the record date.
Although considered present for the purposes of determining a
quorum, abstentions and broker non-votes are not
counted as votes in favor of the merger and the other
transactions contemplated by the merger agreement and,
therefore, have the same effect as a vote against
the merger proposal.
In order for your Windrose common shares to be included in the
vote, you must submit your proxy for your shares by returning
the enclosed proxy card, or by telephone or through the Internet
by following the instructions included with your proxy card, or
you must vote in person at the special meeting. If you hold your
shares through a broker or other nominee, you may receive
separate voting instructions with the proxy statement. Your
broker or nominee may provide proxy submission through the
Internet or by telephone. Please contact your broker or nominee
to determine how to authorize your vote.
Voting
by Windroses Trustees and Executive Officers
At the close of business on the record date, Windroses
trustees and executive officers and their affiliates were
entitled to vote approximately [ ] Windrose
common shares (or approximately [ ]% of the
aggregate number of Windrose common shares outstanding on that
date). Fred S. Klipsch, Windroses chairman and chief
executive officer, and Frederick L. Farrar, Windroses
president, chief operating officer and treasurer, have agreed
pursuant to a support agreement to vote the Windrose common
shares that they own FOR the merger proposal.
Recommendation
of Windroses Board of Trustees
(Page [ ])
Windroses board of trustees believes that the merger is
advisable on the terms set forth in the merger agreement,
unanimously voted to approve the merger agreement and
unanimously recommends that you vote FOR the merger.
3
Opinion
of Windroses Financial Advisor
(Page [ ])
In deciding to approve the merger, Windroses board of
trustees considered the opinion of its financial advisor,
J.P. Morgan Securities Inc. (which we refer to in this
proxy statement/prospectus as JPMorgan), that, as of the date of
its opinion, and subject to and based on the considerations
referred to in its opinion, the exchange ratio is fair, from a
financial point of view, to holders of Windrose common shares.
The full text of this opinion is attached as Appendix D
to this proxy statement/prospectus. Windrose urges its
shareholders to read the opinion of JPMorgan in its entirety.
Interests
of Windroses Trustees and Executive Officers in the
Mergers
(Page [ ])
In considering the recommendation of Windroses board of
trustees with respect to the merger, you should be aware that
certain trustees and executive officers of Windrose have
interests in, and will receive benefits from, the merger and
certain other transactions contemplated by the merger agreement
that are different from, or in addition to, the interests of
Windrose shareholders generally. Windroses board of
trustees was aware of these interests and considered them, among
other matters, when approving the merger agreement, determining
that the merger is advisable and recommending that Windrose
shareholders vote to approve the merger. See Interests of
Windroses Trustees and Executive Officers in the
Mergers and Risk Factors Windroses
trustees and executive officers have interests and arrangements
that could have influenced their decisions to support or approve
the mergers.
Representation
on the Health Care REIT Board of Directors
(Page [ ])
Fred S. Klipsch, Windroses chairman and chief executive
officer, will be appointed to the Health Care REIT board of
directors upon completion of the merger, provided that such
appointment would not be in violation of any applicable legal
requirements or rules of the New York Stock Exchange. In the
event Mr. Klipsch cannot or will not serve on Health Care
REITs board, Windrose will nominate a replacement to be
appointed by the Health Care REIT board. Mr. Klipsch will
not receive compensation for his services as a director of
Health Care REIT during the term of his consulting agreement.
Comparison
of Rights of Holders of Windrose Common Shares and Health Care
REIT Common Stock
(Page [ ])
The conversion of Windrose common shares and Windrose OP units
into Health Care REIT common stock in the mergers will result in
differences between your rights as a Windrose shareholder,
governed by the Maryland REIT Law and Windroses
declaration of trust and bylaws, on the one hand, and your
rights as a Health Care REIT stockholder, governed by the
Delaware General Corporation Law, or DGCL, and Health Care
REITs certificate of incorporation and by-laws, on the
other. See Comparison of the Rights of Holders of Windrose
Common Shares and Health Care REIT Common Stock for a
discussion of these differences.
Summary
of the Terms of the Health Care REIT Preferred Stock
(Page [ ])
Each Windrose preferred share outstanding at the effective time
of the merger will be converted into one share of newly issued
preferred stock of Health Care REIT designated as the 7.5%
Series G Cumulative Convertible Preferred Stock. The Health
Care REIT preferred stock will have rights, preferences,
privileges and voting power substantially similar to those of
the Windrose preferred shares. See Capitalization and
Description of Health Care REIT Securities
Description of the Health Care REIT Preferred Stock for a
description of the dividend and liquidation rights and
preferences, voting rights, conversion rights and other rights
of holders of the Health Care REIT preferred stock and the
redemption provisions and restrictions on ownership and transfer
relating to the Health Care REIT preferred stock.
4
Material
U.S. Federal Income Tax Considerations of the Mergers
(Page [ ])
The merger is intended to qualify as a reorganization within the
provisions of Section 368(a) of the Code. If the merger so
qualifies, then for U.S. federal income tax purposes,
(i) Windrose shareholders who receive Health Care REIT
common stock in exchange for their Windrose common shares in the
merger are not expected to recognize any gain or loss, except
with respect to cash received instead of a fractional share of
Health Care REIT common stock, and (ii) holders of Windrose
preferred shares who receive Health Care REIT preferred stock in
exchange for their Windrose preferred shares in the merger are
not expected to recognize any gain or loss.
The exchange of Windrose OP units for Health Care REIT common
stock pursuant to the operating partnership merger will be
treated as a taxable sale of those units for U.S. federal
income tax purposes. As a result, holders of Windrose OP units
will recognize gain or loss, as the case may be, as a result of
the operating partnership merger. The sale of Windrose OP units
in the operating partnership merger and the transfer of
Windroses units in Windrose OP as a result of the merger
will not result in Windrose OP or Heat OP Merger Sub recognizing
gain or loss for federal income tax purposes.
Tax matters are complicated and Windrose shareholders and
holders of Windrose OP units are urged to read carefully the
section titled Material U.S. Federal Income Tax
Considerations and to consult their own tax advisors for a
fuller understanding of the tax consequences of their
participation in the mergers.
Accounting
Treatment
(Page [ ])
It is expected that the merger will be accounted for as a
purchase of Windrose by Health Care REIT under U.S. generally
accepted accounting principles (which we refer to in this proxy
statement/prospectus as GAAP). Under the purchase method of
accounting, the assets and liabilities of Windrose will be, as
of the completion of the merger, recorded at their respective
fair values and added to those of Health Care REIT.
Regulatory
Matters Related to the Merger and Operating Partnership Merger
(Page [ ])
No material regulatory approvals are required in order to
complete the mergers and the other transactions contemplated by
the merger agreement.
No
Dissenters or Appraisal Rights
(Page [ ])
Pursuant to the Maryland REIT Law, holders of Windrose common
shares are not entitled to any dissenters or appraisal
rights with respect to the merger.
Restrictions
on Solicitation
(Page [ ])
Subject to specified exceptions, the merger agreement precludes
Windrose and its subsidiaries and representatives, whether
directly or indirectly, from inviting, initiating, soliciting or
encouraging any inquiries, proposals, discussions or
negotiations or the making or implementation of any proposal or
offer with respect to, or engaging in any discussions or
negotiations that may reasonably be expected to lead to any
direct or indirect acquisition proposal (as defined in The
Merger Agreement Covenants and
Agreements No Solicitation).
Conditions
to the Mergers
(Page [ ])
The closing is subject to various closing conditions, including,
without limitation, (a) the approval of Windrose
shareholders, (b) the listing of the shares of common stock
to be issued in the mergers and the shares of Health Care REIT
common stock reserved for issuance upon exercise of converted
options on the New York Stock Exchange, (c) the
receipt of all specified consents and approvals, (d) the
performance in all material respects of all obligations
5
required to be performed by each party under the merger
agreement and (e) a bring-down of representations and
warranties and the absence of any material adverse change
affecting Windrose or Health Care REIT. In assessing whether a
change has a material adverse effect on Windrose or Health Care
REIT, among other items, the parties will not take into
consideration (i) conditions generally affecting the
healthcare industry or, with respect to a material adverse
effect on Health Care REIT, the skilled nursing or retirement
care industry, (ii) a decrease in the market price of
Windrose common shares or shares of Health Care REIT common
stock, (iii) changes in general national economic or
financial conditions or changes in the securities market in
general, (iv) a failure by either Windrose or Health Care
REIT to report earnings or revenue results consistent with its
historic earnings or revenue results, (v) changes in any
laws or regulations or accounting regulations or principles
applicable to Windrose or Health Care REIT, (vi) any
outbreak or escalation of armed hostilities or acts of
terrorism, (vii) the announcement, execution or
consummation of the merger agreement and the transactions
contemplated thereby or (viii) changes the adverse effects
of which are covered by insurance. Health Care REIT and Windrose
will not be precluded from claiming that a material adverse
effect has occurred with respect to an event or change
underlying either a decrease in the other partys share
price as described in (ii) above or a failure of the other
party to report earnings or revenue results as described in
(iv) above.
Termination
of the Merger Agreement
(Page [ ])
The merger agreement may be terminated at any time prior to the
effective times of the mergers:
|
|
|
|
|
by mutual written consent of Health Care REIT and Windrose;
|
|
|
|
by either Health Care REIT or Windrose if any governmental
agency has issued an order (which order Health Care REIT or
Windrose, as the case may be, has used its reasonable best
efforts to have vacated or reversed), permanently restraining,
enjoining or otherwise prohibiting the merger, and such order
has become final and unappealable;
|
|
|
|
by either Health Care REIT or Windrose if the Windrose
shareholders fail to approve the merger at the special meeting
or any adjournment thereof;
|
|
|
|
after March 12, 2007, by either Health Care REIT or
Windrose if the merger has not been completed by such date for
any reason; provided however, if the merger has not been
completed by such date due to failure to obtain certain required
consents or approvals set forth on specific schedules to the
merger agreement, neither party may terminate the merger
agreement until June 11, 2007 so long as the parties are
using their reasonable best efforts to obtain such consents or
approvals, subject to certain limitations;
|
|
|
|
by Health Care REIT, if (i) prior to obtaining the approval
of Windroses shareholders, Windroses board of
trustees or a committee thereof has made an adverse
recommendation; (ii) Windrose fails to call or hold the
special meeting; (iii) Windrose has intentionally and
materially breached any of its obligations under the
non-solicitation and superior acquisition proposal provisions
under the merger agreement; (iv) Windroses board of
trustees has approved or recommended an acquisition proposal
made by any person other than Health Care REIT or Heat Merger
Sub; or (v) Windrose has entered into a definitive
agreement with respect to an acquisition proposal;
|
|
|
|
by Windrose, if prior to the approval of the merger agreement at
the special meeting Windroses board of trustees has
approved, and Windrose concurrently enters into, a definitive
agreement with respect to a superior acquisition proposal,
subject to certain restrictions;
|
|
|
|
by Health Care REIT, if there has been a breach of any of the
representations, warranties, covenants or agreements of Windrose
contained in the merger agreement such that the conditions
precedent to Health Care REITs obligations to consummate
the merger set forth in the merger agreement are incapable of
being satisfied, which breach is not cured within 30 days
following written notice to Windrose, subject to certain
restrictions; or
|
6
|
|
|
|
|
by Windrose, if there has been a breach of any of the
representations, warranties, covenants or agreements of Health
Care REIT or Heat Merger Sub contained in the merger agreement
such that the conditions precedent to Windroses
obligations to consummate the merger set forth in the merger
agreement are incapable of being satisfied, which breach is not
cured within 30 days following written notice to Health
Care REIT, subject to certain restrictions.
|
Termination
Fees, Lender Consent Fees and Expense Reimbursements
(Page [ ])
Windrose will be obligated to pay Health Care REIT all or a
portion, as described below, of the following: (i) a
maximum termination fee equal to $16.9 million,
(ii) an amount up to $900,000, as reimbursement for fees
and expenses paid by Health Care REIT in connection with the
merger agreement and the merger, and (iii) an amount up to
$2.5 million, as reimbursement of Health Care REITs
expenses incurred in connection with obtaining certain third
party consents to the mergers, in the event that the merger
agreement is terminated:
|
|
|
|
|
by Health Care REIT, if:
|
|
|
|
|
|
prior to Windrose shareholders approval of the merger,
Windroses board of trustees makes an adverse
recommendation (but only if Health Care REIT terminates the
merger agreement prior to the date of the Windrose special
meeting);
|
|
|
|
Windrose fails to call or hold the special meeting;
|
|
|
|
Windroses board of trustees of Windrose approves or
recommends an acquisition proposal made by any person other than
Health Care REIT or Heat Merger Sub;
|
|
|
|
Windrose intentionally and materially breaches its obligations
under the non-solicitation and other acquisition proposal
provisions of the merger agreement; or
|
|
|
|
Windrose enters into a definitive agreement with respect to an
acquisition proposal; or
|
|
|
|
|
|
by Windrose, if, prior to the approval of the merger by Windrose
shareholders, Windroses board of trustees approves, and
Windrose enters into, a definitive agreement with respect to a
superior acquisition proposal.
|
Under any such scenario, Windrose will pay Health Care REIT 50%
of the termination fee at the time of the termination of the
merger agreement. If Windrose enters into a definitive agreement
with respect to, or completes, an acquisition proposal made by
a third party other than Health Care REIT or Heat Merger Sub
within the 12 months following the termination of the
merger agreement, Windrose will pay Health Care REIT the
remaining 50% of such termination fee and the other amounts
described above concurrent with the closing of such transaction.
Windrose will pay Health Care REIT 100% of the amounts described
above upon the completion of an acquisition proposal with a
third party other than Health Care REIT or Heat Merger Sub if:
|
|
|
|
|
an acquisition proposal has been received by Windrose or
publicly disclosed prior to the termination of the merger
agreement by Health Care REIT or Windrose for the reasons
described in the third or fourth bullet point under the heading
Termination of the Merger Agreement; and
|
|
|
|
within 12 months after such termination, Windrose entered
into a definitive agreement providing for the acquisition
proposal that was completed with the third party.
|
In the event that Health Care REIT terminates the merger
agreement for the reasons described in the seventh bullet point
under the heading Termination of the Merger
Agreement, Windrose will pay Health Care REIT up to
$3.0 million as reimbursement of Health Care REITs
expenses incurred in connection with the merger agreement and
the merger and up to $2.5 million as reimbursement for fees
and expenses paid by Health Care REITs in connection with
obtaining certain third party consents to the merger.
In the event that Windrose terminates the merger agreement for
the reasons described in the eighth bullet point under the
heading Termination of the Merger
Agreement, Health Care REIT will pay Windrose up to
$3.0 million as reimbursement of Windroses expenses
incurred in connection with the merger agreement.
7
Consulting
and Employment Agreements
(Page [ ])
Each of Fred S. Klipsch, Windroses chairman and chief
executive officer, and Frederick L. Farrar, Windroses
president, chief operating officer and treasurer, has entered
into a consulting agreement with Health Care REIT. Daniel R.
Loftus, Windroses executive vice president, secretary and
general counsel, has entered into an employment agreement with
Health Care REIT. See The Merger Agreement
Related Agreements Consulting and Employment
Agreements.
Support
Agreements
(Page [ ])
In connection with the merger agreement, each of Fred S. Klipsch
and Frederick L. Farrar has entered into a support agreement
with Health Care REIT, pursuant to which he has agreed, among
other things, to vote all of the Windrose common shares
beneficially owned by him, representing an aggregate of
approximately 1.4% of the outstanding Windrose common shares as
of September 12, 2006, in favor of the approval of the
merger agreement and the merger.
Tax
Indemnity Agreements
(Page [ ])
Each of Fred S. Klipsch and Frederick L. Farrar, Steve Klipsch
and Mike Klipsch, the sons of Mr. Klipsch, Charles Lanham,
a former Windrose trustee, Robin Barksdale, a current Windrose
employee, and O.B. McCoin, an executive vice president of
Windrose, has entered into separate tax indemnity agreements
with Health Care REIT as described under The Merger
Agreement Related Agreements Tax Indemnity
Agreements.
Listing
of Health Care REIT Common Stock and Health Care REIT Preferred
Stock
Health Care REIT will use its reasonable best efforts to cause
the shares of Health Care REIT common stock and Health Care REIT
preferred stock to be issued in the mergers and the shares
reserved for issuance upon exercise of converted options to be
listed, upon official notice of issuance, on the New York Stock
Exchange.
8
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA OF HEALTH CARE
REIT
The following selected historical consolidated financial data
for each of the years in the five-year period ended
December 31, 2005 have been derived from Health Care
REITs audited consolidated financial statements. These
financial statements have been audited by Ernst & Young
LLP, Health Care REITs independent registered public
accounting firm. The following selected historical consolidated
financial data as of and for the six months ended June 30,
2006 and 2005 have been derived from Health Care REITs
unaudited interim consolidated financial statements. In the
opinion of Health Care REITs management, the unaudited
interim consolidated financial statements have been prepared on
the same basis as the audited consolidated financial statements
and include all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial
position and results of operations as of such dates and for such
periods. Results for the interim periods are not necessarily
indicative of the results to be expected for the full year. This
information is only a summary, and you should read it together
with Health Care REITs historical consolidated financial
statements and notes thereto and the sections titled
Managements Discussion and Analysis of Financial
Condition and Results of Operations included in Health
Care REITs Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2006 and Health
Care REITs Current Report on
Form 8-K
filed May 10, 2006, which updates certain financial
information included in its Annual Report on
Form 10-K
for the year ended December 31, 2005, each of which is
incorporated by reference into this proxy statement/prospectus.
Amounts are in thousands, except per share data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Year Ended December 31
|
|
|
June 30
|
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
106,109
|
|
|
$
|
136,451
|
|
|
$
|
182,144
|
|
|
$
|
236,717
|
|
|
$
|
279,346
|
|
|
$
|
130,593
|
|
|
$
|
157,589
|
|
Income from continuing operations
available to common stockholders
|
|
|
36,695
|
|
|
|
45,056
|
|
|
|
58,728
|
|
|
|
68,381
|
|
|
|
56,533
|
|
|
|
15,123
|
|
|
|
39,430
|
|
Net income available to common
stockholders
|
|
|
47,044
|
|
|
|
55,191
|
|
|
|
70,732
|
|
|
|
72,634
|
|
|
|
62,692
|
|
|
|
16,198
|
|
|
|
42,313
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
1.20
|
|
|
$
|
1.23
|
|
|
$
|
1.35
|
|
|
$
|
1.33
|
|
|
$
|
1.04
|
|
|
$
|
0.28
|
|
|
$
|
0.66
|
|
Net income available to common
stockholders
|
|
$
|
1.54
|
|
|
$
|
1.50
|
|
|
$
|
1.62
|
|
|
$
|
1.41
|
|
|
$
|
1.16
|
|
|
$
|
0.30
|
|
|
$
|
0.71
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
1.18
|
|
|
$
|
1.21
|
|
|
$
|
1.33
|
|
|
$
|
1.31
|
|
|
$
|
1.04
|
|
|
$
|
0.28
|
|
|
$
|
0.65
|
|
Net income available to common
stockholders
|
|
$
|
1.52
|
|
|
$
|
1.48
|
|
|
$
|
1.60
|
|
|
$
|
1.39
|
|
|
$
|
1.15
|
|
|
$
|
0.30
|
|
|
$
|
0.70
|
|
Cash distributions per common share
|
|
$
|
2.34
|
|
|
$
|
2.34
|
|
|
$
|
2.34
|
|
|
$
|
2.385
|
|
|
$
|
2.46
|
|
|
$
|
1.22
|
|
|
$
|
1.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30
|
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net real estate investments
|
|
$
|
1,213,564
|
|
|
$
|
1,524,457
|
|
|
$
|
1,992,446
|
|
|
$
|
2,441,972
|
|
|
$
|
2,849,518
|
|
|
$
|
2,629,846
|
|
|
$
|
2,958,442
|
|
Total assets
|
|
|
1,267,543
|
|
|
|
1,591,482
|
|
|
|
2,184,088
|
|
|
|
2,552,171
|
|
|
|
2,972,164
|
|
|
|
2,739,939
|
|
|
|
3,062,112
|
|
Total debt
|
|
|
488,916
|
|
|
|
673,703
|
|
|
|
1,014,541
|
|
|
|
1,192,958
|
|
|
|
1,500,818
|
|
|
|
1,381,620
|
|
|
|
1,470,533
|
|
Total liabilities
|
|
|
509,673
|
|
|
|
694,250
|
|
|
|
1,034,409
|
|
|
|
1,216,892
|
|
|
|
1,541,408
|
|
|
|
1,425,974
|
|
|
|
1,516,174
|
|
Total stockholders equity
|
|
|
757,870
|
|
|
|
897,232
|
|
|
|
1,149,679
|
|
|
|
1,335,279
|
|
|
|
1,430,756
|
|
|
|
1,313,965
|
|
|
|
1,545,938
|
|
9
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA OF WINDROSE
The following selected historical consolidated financial data
for (i) each of the years in the three-year period ended
December 31, 2005 and for the period from August 16,
2002 (inception) to December 31, 2002 for Windrose and
(ii) the period from January 1, 2002 to
August 15, 2002 and the year ended December 31, 2001
for Windroses accounting predecessor have been derived
from Windroses audited consolidated financial statements.
These financial statements have been audited by KPMG LLP,
Windroses independent registered public accounting firm.
The following selected historical consolidated financial data as
of and for the six months ended June 30, 2006 and 2005 have
been derived from Windroses unaudited interim consolidated
financial statements. In the opinion of Windroses
management, the unaudited interim consolidated financial
statements have been prepared on the same basis as the audited
consolidated financial statements and include all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations
as of such dates and for such periods. Results for the interim
periods are not necessarily indicative of the results to be
expected for the full year. This information is only a summary
and you should read it together with Windroses historical
consolidated financial statements and notes thereto and the
sections titled Managements Discussion and Analysis
of Financial Condition and Results of Operations included
in Windroses Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2006 and
Windroses Annual Report on
Form 10-K
for the year ended December 31, 2005, each of which is
incorporated by reference into this proxy statement/prospectus.
Amounts are in thousands, except per share data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
January 1, 2002
|
|
|
August 16, 2002
|
|
|
Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
through
|
|
|
(inception) to
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
2001
|
|
|
August 15, 2002
|
|
|
December 31, 2002
|
|
|
2002
|
|
|
Year Ended December 31,
|
|
|
June 30,
|
|
|
|
(Predecessor)
|
|
|
(Predecessor)
|
|
|
(Windrose)
|
|
|
(Combined)
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues(1)
|
|
$
|
4,568
|
|
|
$
|
4,145
|
|
|
$
|
9,901
|
|
|
$
|
14,046
|
|
|
$
|
17,485
|
|
|
$
|
32,261
|
|
|
$
|
50,122
|
|
|
$
|
21,092
|
|
|
$
|
44,753
|
|
Income from continuing operations
available to common shareholders
|
|
|
(51
|
)
|
|
|
(1,016
|
)
|
|
|
43
|
|
|
|
(972
|
)
|
|
|
1,106
|
|
|
|
3,651
|
|
|
|
2,783
|
|
|
|
2,168
|
|
|
|
729
|
|
Net income available to common
shareholders
|
|
|
(51
|
)
|
|
|
(1,016
|
)
|
|
|
43
|
|
|
|
(972
|
)
|
|
|
1,248
|
|
|
|
4,053
|
|
|
|
4,018
|
|
|
|
3,409
|
|
|
|
729
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common shareholders
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.19
|
|
|
$
|
0.35
|
|
|
$
|
0.20
|
|
|
$
|
0.17
|
|
|
$
|
0.04
|
|
Net income available to common
shareholders
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.21
|
|
|
$
|
0.39
|
|
|
$
|
0.29
|
|
|
$
|
0.27
|
|
|
$
|
0.04
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common shareholders
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.18
|
|
|
$
|
0.34
|
|
|
$
|
0.20
|
|
|
$
|
0.16
|
|
|
$
|
0.04
|
|
Net income available to common
shareholders
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.20
|
|
|
$
|
0.38
|
|
|
$
|
0.29
|
|
|
$
|
0.26
|
|
|
$
|
0.04
|
|
Cash distributions per common share
|
|
|
|
|
|
|
|
|
|
$
|
0.00
|
|
|
|
|
|
|
$
|
0.61
|
|
|
$
|
0.88
|
|
|
$
|
0.90
|
|
|
$
|
0.45
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2001 (Predecessor)
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net real estate investments
|
|
$
|
0
|
|
|
$
|
63,565
|
|
|
$
|
162,105
|
|
|
$
|
303,128
|
|
|
$
|
667,841
|
|
|
$
|
399,646
|
|
|
$
|
686,170
|
|
Total assets
|
|
|
1,535
|
|
|
|
75,265
|
|
|
|
187,893
|
|
|
|
324,974
|
|
|
|
702,436
|
|
|
|
436,737
|
|
|
|
728,640
|
|
Total debt
|
|
|
687
|
|
|
|
9,664
|
|
|
|
76,893
|
|
|
|
187,134
|
|
|
|
435,147
|
|
|
|
218,054
|
|
|
|
424,493
|
|
Total liabilities
|
|
|
1,915
|
|
|
|
17,888
|
|
|
|
85,735
|
|
|
|
205,568
|
|
|
|
464,271
|
|
|
|
241,510
|
|
|
|
448,439
|
|
Total shareholders equity
|
|
|
(379
|
)
|
|
|
57,377
|
|
|
|
102,158
|
|
|
|
119,406
|
|
|
|
238,165
|
|
|
|
195,227
|
|
|
|
280,201
|
|
|
|
|
(1) |
|
Includes reclassifications to conform certain amounts with
Health Care REITs presentation. |
10
SELECTED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
DATA
The following selected unaudited pro forma condensed
consolidated financial data is presented as if the mergers were
completed at the beginning of the periods presented for income
statement purposes and on the date of the balance sheet for
balance sheet purposes. This data should be read in conjunction
with (i) the unaudited pro forma condensed consolidated
financial statements and notes appearing elsewhere in this proxy
statement/prospectus, (ii) Health Care REITs
historical consolidated financial statements and notes thereto
contained in its Current Report on
Form 8-K
filed on May 10, 2006, which updates certain financial
information included in its Annual Report on
Form 10-K
for the year ended December 31, 2005, and its Quarterly
Report on
Form 10-Q
for the quarterly period ended June 30, 2006 and
(iii) Windroses historical consolidated financial
statements and notes thereto contained in its Annual Report on
Form 10-K
for the year ended December 31, 2005 and its Quarterly
Report on
Form 10-Q
for the quarterly period ended June 30, 2006, each of which
have been incorporated by reference in this proxy
statement/prospectus. See Where You Can Find More
Information on page 94.
The unaudited pro forma condensed consolidated financial data
should be read in conjunction with the unaudited pro forma
condensed consolidated financial statements and notes appearing
in this proxy statement/prospectus under the heading
Unaudited Pro Forma Condensed Consolidated Financial
Statements beginning on
page F-1.
The pro forma amounts in the table below are presented for
illustrative purposes only. You should not rely on the pro forma
amounts as being indicative of the financial position or results
of operations of the combined company that would have actually
occurred had the mergers been completed as of the beginning of
the periods presented, nor is it necessarily indicative of the
future operating results or financial position of the combined
company. Amounts are in thousands, except per share data.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Six Months Ended
|
|
|
|
December 31
|
|
|
June 30
|
|
|
|
2005
|
|
|
2006
|
|
|
Operating Data
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
363,851
|
|
|
$
|
204,522
|
|
Income from continuing operations
|
|
|
72,369
|
|
|
|
50,629
|
|
Income from continuing operations
available to common stockholders
|
|
|
48,780
|
|
|
|
38,010
|
|
Other Data
|
|
|
|
|
|
|
|
|
Average number of common shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
63,879
|
|
|
|
69,640
|
|
Diluted
|
|
|
64,513
|
|
|
|
70,215
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.13
|
|
|
$
|
0.73
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
0.76
|
|
|
$
|
0.55
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.12
|
|
|
$
|
0.72
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
0.76
|
|
|
$
|
0.54
|
|
Cash distributions per common share
|
|
$
|
2.46
|
|
|
$
|
1.26
|
|
|
|
|
|
|
|
|
June 30
|
|
|
|
2006
|
|
|
Balance Sheet Data
|
|
|
|
|
Net real estate investments
|
|
$
|
3,843,772
|
|
Total assets
|
|
|
3,980,901
|
|
Total debt
|
|
|
1,933,294
|
|
Total liabilities
|
|
|
2,003,179
|
|
Total stockholders equity
|
|
|
1,977,722
|
|
11
COMPARATIVE
PER SHARE DATA
The table below presents, for the periods indicated, selected
historical per share data for Health Care REIT common stock and
Windrose common shares, as well as unaudited pro forma combined
per share amounts and unaudited pro forma combined per share
equivalent amounts for Windrose common shares after giving
effect to the mergers, under the purchase method of accounting,
assuming the issuance of 9,769,000 shares of Health Care
REIT common stock in the mergers. The pro forma financial
information provided below is presented as if the mergers were
completed at the beginning of the periods presented for income
statement purposes and on June 30, 2006 for balance sheet
purposes. The unaudited pro forma combined per share equivalent
amounts for Windrose have been calculated by multiplying the
unaudited pro forma combined per share amounts by 0.4579 (the
mid-point between the maximum and minimum exchange ratio).
You should read this information in conjunction with, and the
information is qualified in its entirety by, the consolidated
financial statements and accompanying notes of Health Care REIT
and Windrose and the unaudited pro forma condensed consolidated
financial statements and accompanying notes included in this
proxy statement/prospectus or incorporated by reference into
this proxy statement/prospectus. Please see Where You Can
Find More Information beginning on page 94 and
Unaudited Pro Forma Condensed Consolidated Financial
Statements beginning on
page F-1.
The pro forma amounts in the table below are presented for
illustrative purposes only. You should not rely on the pro forma
amounts as being indicative of the financial position or results
of operations of the combined company that actually would have
occurred had the mergers been completed as of the beginning of
the period presented, nor is it necessarily indicative of the
future operating results or financial position of the combined
company.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2005
|
|
|
2006
|
|
|
Health Care
REIT-Historical
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.04
|
|
|
$
|
0.66
|
|
Diluted
|
|
|
1.04
|
|
|
|
0.65
|
|
Dividends paid per common share
|
|
|
2.46
|
|
|
|
1.26
|
|
Book value per share at period end
|
|
|
24.62
|
|
|
|
24.73
|
|
Windrose-Historical
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common shareholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.20
|
|
|
$
|
0.04
|
|
Diluted
|
|
|
0.20
|
|
|
|
0.04
|
|
Dividends paid per common share
|
|
|
0.90
|
|
|
|
0.46
|
|
Book value per share at period end
|
|
|
13.70
|
|
|
|
13.42
|
|
Unaudited Pro Forma
Combined
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.76
|
|
|
$
|
0.55
|
|
Diluted
|
|
|
0.76
|
|
|
|
0.54
|
|
Dividends paid per common share
|
|
|
2.46
|
|
|
|
1.26
|
|
Book value per share at period end
|
|
|
24.62
|
|
|
|
27.36
|
|
Unaudited Pro Forma Combined
Windrose Equivalents
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common shareholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.35
|
|
|
$
|
0.25
|
|
Diluted
|
|
|
0.35
|
|
|
|
0.25
|
|
Dividends paid per common share
|
|
|
1.13
|
|
|
|
0.58
|
|
Book value per share at period end
|
|
|
11.27
|
|
|
|
12.53
|
|
12
COMPARATIVE
PER SHARE MARKET PRICE DATA
Health Care REIT common stock is listed on the New York Stock
Exchange under the symbol HCN. Windrose common
shares are listed on the New York Stock Exchange under the
symbol WRS. The table below sets forth the high, low
and closing sale prices per share of Health Care REIT common
stock and Windrose common shares as reported on the New York
Stock Exchange on September 12, 2006, the last full trading
day prior to the announcement of the merger agreement, and on
[ ], 2006, the most recent practicable date
prior to the mailing of this proxy statement/prospectus to the
Windrose shareholders. The table also sets forth the equivalent
price per share of Windrose common shares on September 12,
2006 and on [ ], 2006. The equivalent price per
share is equal to the high, low and closing sale price of a
share of Health Care REIT common stock, as reported on the New
York Stock Exchange, on each such date multiplied by 0.4579 (the
mid-point between the maximum and minimum exchange ratio). These
prices will fluctuate prior to the special meeting and the
completion of the mergers. Windrose shareholders are urged to
obtain current market quotations prior to making any decision
with respect to the mergers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care REIT
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Windrose Common Shares
|
|
|
Windrose Equivalents
|
|
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
September 12, 2006
|
|
$
|
40.12
|
|
|
$
|
39.33
|
|
|
$
|
40.05
|
|
|
$
|
15.25
|
|
|
$
|
14.85
|
|
|
$
|
15.18
|
|
|
$
|
18.37
|
|
|
$
|
18.01
|
|
|
$
|
18.34
|
|
[ ], 2006
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
The table below presents, for the periods indicated:
(1) the high and low sales prices per share of Health Care
REIT common stock and Windrose common shares as reported on the
New York Stock Exchange and (2) the cash dividends paid per
share of Health Care REIT common stock and Windrose common
shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care REIT
|
|
|
|
|
|
|
Common Stock
|
|
|
Windrose Common Shares
|
|
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
|
Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
40.65
|
|
|
$
|
35.77
|
|
|
$
|
0.585
|
|
|
$
|
12.87
|
|
|
$
|
12.25
|
|
|
$
|
0.220
|
|
Second Quarter
|
|
|
40.88
|
|
|
|
27.70
|
|
|
|
0.600
|
|
|
|
12.57
|
|
|
|
10.45
|
|
|
|
0.220
|
|
Third Quarter
|
|
|
35.20
|
|
|
|
31.11
|
|
|
|
0.600
|
|
|
|
13.32
|
|
|
|
10.96
|
|
|
|
0.220
|
|
Fourth Quarter
|
|
|
38.15
|
|
|
|
34.41
|
|
|
|
0.600
|
|
|
|
14.65
|
|
|
|
12.98
|
|
|
|
0.220
|
|
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
38.04
|
|
|
$
|
31.15
|
|
|
$
|
0.600
|
|
|
$
|
14.67
|
|
|
$
|
13.51
|
|
|
$
|
0.225
|
|
Second Quarter
|
|
|
37.99
|
|
|
|
31.69
|
|
|
|
0.620
|
|
|
|
14.16
|
|
|
|
13.10
|
|
|
|
0.225
|
|
Third Quarter
|
|
|
39.20
|
|
|
|
35.13
|
|
|
|
0.620
|
|
|
|
15.59
|
|
|
|
14.11
|
|
|
|
0.225
|
|
Fourth Quarter
|
|
|
37.37
|
|
|
|
33.35
|
|
|
|
0.620
|
|
|
|
15.31
|
|
|
|
14.10
|
|
|
|
0.225
|
|
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
38.50
|
|
|
$
|
33.68
|
|
|
$
|
0.620
|
|
|
$
|
15.75
|
|
|
$
|
14.51
|
|
|
$
|
0.225
|
|
Second Quarter
|
|
|
38.09
|
|
|
|
32.80
|
|
|
|
0.640
|
|
|
|
15.30
|
|
|
|
13.59
|
|
|
|
0.235
|
|
Third Quarter
|
|
|
40.12
|
|
|
|
34.55
|
|
|
|
0.640
|
|
|
|
17.68
|
|
|
|
14.24
|
|
|
|
0.235
|
|
Fourth Quarter (through
[ ], 2006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
RISK
FACTORS
In addition to the other information contained or
incorporated by reference in this proxy statement/prospectus,
you should consider the following risk factors in determining
how to vote at the special meeting of Windrose shareholders.
Risks
Relating to the Mergers
Windrose
will be subject to business uncertainties and contractual
restrictions while the mergers are pending.
The merger agreement restricts Windrose from making certain
acquisitions and taking other specified actions without the
consent of Health Care REIT until the mergers occur. These
restrictions may prevent Windrose from pursuing attractive
business opportunities that may arise prior to the completion of
the merger. Please see the section titled The Merger
Agreement Conduct of Business Pending the
Merger of this proxy statement/prospectus for a
description of the restrictive covenants applicable to Windrose.
Because
the market price of Health Care REIT common stock may fluctuate,
you cannot be certain of the precise value of the merger
consideration you will receive in the mergers.
Due to the manner in which the exchange ratio is calculated and
fluctuations in the market price of Health Care REIT common
stock, the precise number of shares of Health Care REIT common
stock to be received at closing, and the value of such shares,
is uncertain. If the mergers are completed, you will receive,
for each Windrose common share and each Windrose OP unit
that you own, a fraction of a share of Health Care REIT common
stock equal to the exchange ratio. The exchange ratio will
adjust to ensure that the fraction of a share of Health Care
REIT common stock you receive will be equal to $18.06 divided by
the average trading price for the 10 trading days, selected by
lot, during the applicable
15-trading
day period ending on and including the date that is five trading
days prior to the effective time of the merger, of a share of
Health Care REIT common stock so long as the average trading
price of a share of Health Care REIT common stock during the
selected 10 trading days is between $38.84 and $40.05 per
share. However, the market value of that fraction of a share of
Health Care REIT common stock you receive for each Windrose
common share and each Windrose OP unit may be less than $18.06,
as the trading price of Health Care REIT common stock for
purposes of determining the exchange ratio may be less than
$38.84, and the price of Health Care REIT common stock at the
closing may be less than the
average 10-day
trading price of Health Care REIT common stock used to determine
the exchange ratio.
If the average trading price for a share of Health Care REIT
common stock during the selected 10 trading days is less than
$38.84, the exchange ratio will no longer adjust upward, and you
will receive 0.4650 of a share of Health Care REIT common stock
for each Windrose common share and each Windrose OP unit that
you own regardless of how far below $38.84 the average trading
price is during the selected 10 trading days. This also
means that the value of the fraction of a share of Health Care
REIT common stock you will receive for each Windrose common
share and each Windrose OP unit could be less than $18.06 if the
market price of Health Care REIT common stock remains below
$38.84 when the merger is completed. The formula for calculating
the exchange ratio is set forth in the section titled The
Merger Agreement Conversion of Securities of
this proxy statement/prospectus.
The exchange ratio may not be determined until after the date of
the special meeting. Therefore, at the time of the special
meeting, you may not know the precise number of shares of Health
Care REIT common stock you will receive, or the value of such
shares, on the date the merger is completed. You are urged to
obtain a current market quotation for Health Care REIT common
stock prior to voting on the merger proposal.
Failure
to complete the mergers could negatively affect the stock price
and the future business and financial results of
Windrose.
Although the Windrose board of trustees has recommended that
Windrose shareholders approve the merger proposal, there is no
assurance that this proposal will be approved at the special
meeting or any adjournment or postponement of the special
meeting, and there is no assurance that Health Care REIT and
Windrose will receive the
14
necessary third party consents or satisfy the other conditions
to the completion of the mergers. If the mergers are not
completed for any reason, Windrose will be subject to several
risks, including the following:
|
|
|
|
|
The merger agreement contains certain termination rights for
Health Care REIT and Windrose. Upon termination of the merger
agreement under specified circumstances, Windrose will be
required to pay Health Care REIT all or a portion of the
following (i) a maximum termination fee equal to
$16.9 million, (ii) an amount up to $900,000, as
reimbursement for fees and expenses paid by Health Care REIT in
connection with the merger agreement and the merger, and
(iii) up to $2.5 million, as reimbursement of Health
Care REITs expenses incurred in connection with obtaining
certain third party consents to the mergers. If the merger
agreement is terminated due to Windroses breach of the
representations, warranties, covenants and agreements contained
in the merger agreement and such breach is not cured, Windrose
will be required to pay Health Care REITs
out-of-pocket
expenses incurred not to exceed $3.0 million and up to
$2.5 million, as reimbursement for fees and expenses paid
by Health Care REIT in connection with obtaining certain third
party consents to the mergers.
|
|
|
|
The current market price of Windrose common shares may reflect a
market assumption that the merger will occur, and a failure to
complete the merger could result in a decline in the market
price of Windrose common shares.
|
|
|
|
Many costs relating to the merger (such as legal, accounting and
a portion of its financial advisory fees) are payable by
Windrose whether or not the merger is completed.
|
|
|
|
There may be substantial disruption to the business of Windrose
and a distraction of its management and employees from
day-to-day
operations because matters related to the merger (including
integration planning) may require substantial commitments of
time and resources that could otherwise have been devoted to
other opportunities that could have been beneficial to Windrose.
|
|
|
|
Windrose will continue to face the risks that it currently faces
as an independent company, as further described in the documents
that Windrose has filed with the SEC that are incorporated by
reference into this proxy statement/prospectus.
|
In addition, Windrose will not realize any of the expected
benefits of having completed the merger. If the merger is not
completed, the risks described above may materialize and
materially adversely affect Windroses business, financial
results and financial condition and the market price of Windrose
common shares.
Windroses
trustees and executive officers have interests and arrangements
that could have influenced their decisions to support or approve
the mergers.
The interests of some of Windroses trustees and executive
officers are different from those of Windrose shareholders, and
Windroses trustees and executive officers may have
participated in arrangements that are different from, or in
addition to, those of Windrose shareholders. For a description
of the benefits Windroses trustees and executive officers
will receive in connection with the mergers, please see the
section titled The Mergers Interests of
Windroses Trustees and Executive Officers in the
Mergers of this proxy statement/prospectus.
The
merger agreement limits Windroses ability to pursue
alternatives to the mergers.
The merger agreement contains provisions that limit
Windroses ability to pursue alternatives to the mergers
with Health Care REIT. These provisions include a prohibition on
Windroses solicitation of any proposal or offer for a
competing transaction and a requirement that Windrose pay Health
Care REIT all or a portion of the following (i) a maximum
termination fee equal to $16.9 million, (ii) an amount
up to $900,000, as reimbursement for fees and expenses paid by
Health Care REIT in connection with the merger agreement and the
merger, and (iii) up to $2.5 million, as reimbursement
of Health Care REITs expenses incurred in connection with
obtaining certain third party consents to the mergers.
Health Care REIT required Windrose to agree to these provisions
as a condition to Health Care REITs willingness to enter
into the merger agreement. These provisions, however, might
discourage a third party that might have an interest in
acquiring all or a significant part of Windrose from considering
or proposing that
15
acquisition, even if that party was prepared to pay
consideration with a higher per share market price than the
current proposed merger consideration. Furthermore, a potential
competing acquiror might propose to pay a lower per share price
to Windrose shareholders than it would otherwise have proposed
to pay because of Windroses obligations in connection with
termination of the merger agreement.
The
market price of Health Care REIT common stock may decline as a
result of the mergers.
The market price of Health Care REITs common stock may
decline as a result of the mergers if Health Care REIT does not
achieve the perceived benefits of the mergers as rapidly or to
the extent anticipated by financial or industry analysts, or the
effect of the mergers on Health Care REITs financial
results is not consistent with the expectations of financial or
industry analysts.
After
the mergers are completed, Windrose shareholders who receive
Health Care REIT common stock in the mergers will have different
rights that may be less advantageous than their current rights
as a Windrose shareholder.
After the closing of the mergers, Windrose shareholders who
receive Health Care REIT common stock in the mergers will have
different rights than they currently have as a Windrose
shareholder. For a detailed discussion of your rights as a
stockholder of Health Care REIT and the significant differences
between your rights as a shareholder of Windrose and your rights
as a stockholder of Health Care REIT, see the section titled
Summary Comparison of the Rights of Holders of
Windrose Common Shares and Health Care REIT Common Stock
of this proxy statement/prospectus.
If the
merger agreement is terminated for any reason, Windrose will be
required to repay in full the amounts owed under the secured
revolving credit facility provided by Health Care REIT. This
subjects Windrose to certain risks, including the risk that
Windrose will have insufficient cash resources to operate its
properties and pay dividends to its shareholders.
If the merger agreement is terminated for any reason, Windrose
will be required to repay the principal amount outstanding under
the secured revolving line of credit provided by Health Care
REIT. The secured revolving line of credit permits Windrose to
borrow up to $125 million, except that after
January 10, 2007, if the merger has not been completed and
certain other conditions are satisfied, Windrose will be able to
borrow up to $150 million. See The Merger
Agreement Related Agreements Interim
Financing Agreements. Payments of principal and interest
on borrowings under this line of credit may leave Windrose with
insufficient cash resources to operate its properties or pay
distributions currently contemplated or necessary to maintain
its REIT qualification.
If Windrose does not have sufficient funds to repay the
indebtedness under this line of credit at maturity, it may be
necessary to refinance the debt through additional debt
financing, private or public offerings of debt securities or
additional equity financings. If, at the time of any
refinancing, prevailing interest rates or other factors result
in higher interest rates on refinancings, increases in interest
expense could adversely affect Windroses cash flows, and,
consequently, Windroses cash available for distribution to
its shareholders. If Windrose is unable to refinance the
indebtedness under this line of credit, it may be forced to
dispose of some of its properties or raise capital on
disadvantageous terms, potentially resulting in losses.
Risks
Relating to Health Care REIT
Real
property investments are subject to varying degrees of risk that
may adversely affect the business and operating results of
Health Care REIT after the merger.
The combined companys revenue and the value of its
properties may be adversely affected by a number of factors,
including:
|
|
|
|
|
the national economic climate;
|
|
|
|
local economic climates;
|
|
|
|
local real estate conditions;
|
16
|
|
|
|
|
changes in the healthcare industry or the senior care or housing
industry (including economic, legal and regulatory changes);
|
|
|
|
the perceptions of prospective tenants of the attractiveness of
the properties;
|
|
|
|
the combined companys ability to manage and maintain its
properties and secure adequate insurance; and
|
|
|
|
increases in operating costs (including real estate taxes and
utilities that are not paid directly by the tenants or passed
through to the tenants).
|
In addition, real estate values and income from properties are
also affected by factors such as applicable laws, including tax
laws, interest rate levels, and the availability of financing.
If the combined companys properties do not generate
revenue sufficient to meet operating expenses, including debt
service, tenant improvements, leasing commissions and other
capital expenditures, it may have to borrow additional amounts
to cover its expenses. This could harm the combined
companys cash flow and ability to make distributions to
its stockholders.
The
market price of Health Care REIT common stock after the mergers
may be affected by factors different from those affecting shares
of Windrose currently.
The businesses of Health Care REIT and Windrose are different
and, accordingly, the results of operations of Health Care REIT
and the market price of Health Care REITs common stock may
be affected by factors different from those currently affecting
the results of operations and market prices of Windrose common
shares. For a discussion of the business of Health Care REIT and
Windrose and of certain factors to consider in connection with
those businesses, see the documents incorporated by reference in
this proxy statement/prospectus and referred to under
Where You Can Find More Information.
The
operations of Health Care REIT and Windrose may not be
integrated successfully and the intended benefits of the mergers
may not be realized, which could have a negative impact on the
market price of Health Care REIT common stock after the
mergers.
The closing of the transaction poses risks for the ongoing
operations of Health Care REIT, including that:
|
|
|
|
|
following the mergers, Health Care REIT may not achieve expected
cost savings and operating efficiencies, such as the elimination
of redundant administrative costs;
|
|
|
|
the Windrose portfolio may not perform as well as Health Care
REIT anticipates due to various factors, including changes in
macro-economic conditions and the demand for specialty medical
properties;
|
|
|
|
unforeseen difficulties may arise in integrating Windrose assets
into the Health Care REIT portfolio due to differences in the
types of facilities in which Health Care REIT and Windrose
invest; and
|
|
|
|
Health Care REIT may not effectively integrate Windroses
operations and systems, including its accounting systems.
|
If Health Care REIT fails to successfully integrate Windrose
and/or to
realize the intended benefits of the transaction, the market
price of Health Care REIT common stock could decline from its
market price after the mergers.
If the
IRS successfully asserts that Health Care REIT was not or will
not continue to be qualified as a REIT, or that Windrose is not
a REIT at the effective time of the merger, Health Care REIT
would incur adverse tax consequences.
Health Care REIT has been organized as, and believes that its
past and present operations qualify it as, a REIT. In addition,
following the mergers, Health Care REIT intends to operate in a
manner that will allow it to continue to qualify as a REIT.
However, qualification as a REIT involves the application of
highly technical and complex Code provisions for which there are
only limited judicial or administrative interpretations and
involves the determination of various factual matters and
circumstances not entirely within Health Care REITs
control. If Health Care REIT fails to qualify as a REIT, it will
not be allowed a deduction for dividends paid to stockholders in
computing taxable income and would become subject to federal
income tax at regular corporate tax rates. In such an event, it
could be
17
subject to potentially significant tax liabilities. Unless
entitled to relief under certain statutory provisions, Health
Care REIT would also be disqualified from treatment as a REIT
for the four taxable years following the year in which it lost
its qualification. If Windrose fails to qualify as a REIT at the
time of the merger, Health Care REIT would be subject to tax at
the highest regular corporate rate on the built-in gain on each
Windrose asset existing at the time of the merger if Health Care
REIT were to dispose of the asset within the ten-year period
following the merger.
Health Care REITs business is subject to certain other
risks, which are discussed in its most recent Annual Report on
Form 10-K
under the headings Business, Risk
Factors and Managements Discussion and
Analysis of Financial Condition and Results of
Operations and are incorporated by reference in this
proxy statement/prospectus. See Where You Can Find More
Information.
18
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus may contain
forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements describe, among other things, the beliefs,
expectations, plans and strategies of Health Care REIT, Windrose
and the combined entity that are not based on historical facts.
These forward-looking statements concern and are based upon,
among other things:
|
|
|
|
|
the prospective merger of Health Care REIT and Windrose;
|
|
|
|
the possible increase in the size and composition of the
portfolios of each entity and the combined entity upon
completion of the mergers;
|
|
|
|
potential benefits associated with the proposed transaction;
|
|
|
|
the sale of properties;
|
|
|
|
the performance of the operators and tenants and properties of
each of Health Care REIT and Windrose;
|
|
|
|
the ability of each of Health Care REIT and Windrose to complete
the mergers, to integrate their operations and to achieve
expected savings and synergies;
|
|
|
|
the ability to make new investments and to maintain returns from
existing investments;
|
|
|
|
the ability to enter into agreements with new and existing
tenants;
|
|
|
|
the ability of each of Health Care REIT and Windrose to pay
dividends or make distributions;
|
|
|
|
the policies and plans of each of Health Care REIT and Windrose
regarding investments, financings and other matters;
|
|
|
|
the tax status of each of Health Care REIT and Windrose as a
REIT;
|
|
|
|
the ability of each of Health Care REIT and Windrose to
appropriately balance the use of debt and equity;
|
|
|
|
the ability of each of Health Care REIT and Windrose to access
capital markets or other sources of funds; and
|
|
|
|
the ability of each of Health Care REIT and Windrose and of the
combined entity to meet earnings guidance.
|
Forward-looking statements include any statement that includes
words such as may, will,
intend, should, believe,
expect, anticipate, project,
estimate or similar expressions. Forward-looking
statements are not guarantees of future performance and involve
risks and uncertainties. Expected results may not be achieved,
and actual results may differ materially from expectations. This
may be caused by various factors, including, but not limited to:
|
|
|
|
|
changes in economic or general business conditions;
|
|
|
|
the status of capital markets, including prevailing interest
rates;
|
|
|
|
issues facing the health care industry, including compliance
with, and changes to, regulations and payment policies and
operators difficulty in obtaining and maintaining adequate
liability and other insurance;
|
|
|
|
changes in financing terms;
|
|
|
|
competition within the health care and senior housing industries
and specialty medical property market;
|
|
|
|
negative developments in the operating results or financial
condition of operators and tenants;
|
|
|
|
the ability to transition or sell facilities with a profitable
result;
|
|
|
|
the failure of closings to occur as and when anticipated;
|
|
|
|
acts of God;
|
|
|
|
the ability to reinvest sale proceeds at sufficiently high
yields;
|
|
|
|
operator and tenant bankruptcies or insolvencies;
|
19
|
|
|
|
|
government regulations affecting the health care sector;
|
|
|
|
liability claims and insurance costs for operators and tenants;
|
|
|
|
unanticipated difficulties
and/or
expenditures relating to future acquisitions;
|
|
|
|
hostile acts of third parties;
|
|
|
|
changes in rules or practices governing financial reporting;
|
|
|
|
other factors affecting the completion of the mergers and
subsequent performance of the combined company, including REIT
laws and regulations, anti-takeover provisions and retention of
key management personnel;
|
|
|
|
unexpected delays in obtaining, or conditions to receipt of,
shareholder and third party approvals of the mergers;
|
|
|
|
delays in the implementation and execution of merger integration
plans;
|
|
|
|
unexpected costs or delays in the successful integration of the
IT systems and elimination of duplicative overhead and IT
costs; and
|
|
|
|
unanticipated developments relating to previously disclosed
lawsuits or similar matters.
|
In addition, the ability of the combined company to achieve the
expected revenues, accretion and synergy savings also will be
affected by the effects of competition (in particular the
response to the proposed transaction in the marketplace) and
other risks and uncertainties described from time to time in
Health Care REITs
and/or
Windroses public filings with the SEC. Neither Health Care
REIT nor Windrose assumes any obligation to update or revise any
forward-looking statements or to update the reasons why actual
results could differ from those projected in any forward-looking
statements.
20
RATIO OF
EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth Health Care REITs ratio of
earnings to combined fixed charges and preferred stock dividends
for the periods indicated. The ratio of earnings to combined
fixed charges and preferred stock dividends was computed by
dividing earnings by Health Care REITs combined fixed
charges and preferred stock dividends. For purposes of
calculating these ratios, earnings includes income
from continuing operations, excluding the equity earnings in a
less than 50% owned subsidiary, plus fixed charges and reduced
by capitalized interest. Fixed charges consists of
interest expensed and capitalized and the amortized premiums,
discounts and capitalized expenses related to indebtedness.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
June 30
|
|
|
|
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
|
|
|
Consolidated ratio of earnings to
combined fixed charges and preferred stock dividends (unaudited)
|
|
|
1.74
|
|
|
|
1.79
|
|
|
|
1.87
|
|
|
|
1.75
|
|
|
|
1.52
|
|
|
|
1.63
|
|
|
|
|
|
Health Care REIT issued 3,000,000 shares of
87/8%
Series B Cumulative Redeemable Preferred Stock in May 1998,
and 3,000,000 shares of Series C Cumulative
Convertible Preferred Stock in January 1999. Health Care REIT
issued 4,000,000 shares of
77/8%
Series D Cumulative Redeemable Preferred Stock in July 2003
and used the proceeds to redeem its outstanding Series B
Preferred Stock. During the year ended December 31, 2002,
the holder of the Series C Preferred Stock converted
900,000 shares into 878,049 shares of Health Care REIT
common stock, leaving 2,100,000 of such shares outstanding at
December 31, 2002. During the year ended December 31,
2003, the holder of the Series C Preferred Stock converted
2,100,000 shares into 2,048,781 shares of Health Care
REIT common stock, leaving no such shares outstanding at
December 31, 2003. Health Care REIT issued
1,060,000 shares of 6% Series E Cumulative Convertible
and Redeemable Preferred Stock in September 2003. During the
year ended December 31, 2003, certain holders of the
Series E Preferred Stock converted 229,556 shares into
175,714 shares of Health Care REIT common stock, leaving
830,444 of such shares outstanding at December 31, 2003.
During the year ended December 31, 2004, certain holders of
the Series E Preferred Stock converted 480,399 shares
into 367,724 shares of Health Care REIT common stock,
leaving 350,045 of such shares outstanding at December 31,
2004. During the year ended December 31, 2005, certain
holders of the Series E Preferred Stock converted
275,056 shares into 210,541 shares of Health Care REIT
common stock, leaving 74,989 of such shares outstanding at
December 31, 2005 and June 30, 2006. Health Care REIT
issued 7,000,000 shares of
75/8%
Series F Cumulative Redeemable Preferred Stock in September
2004.
21
THE
SPECIAL MEETING
This proxy statement/prospectus is being furnished to you in
connection with the solicitation of proxies by Windroses
board of trustees for use at the Windrose special meeting,
including any adjournment or postponement of the special
meeting. This proxy statement/prospectus is first being
furnished to Windrose shareholders on or about
[ ], 2006.
Date,
Time and Place
A special meeting of Windroses shareholders will be held
at [ ], on [ ], 2006 at
[ ] [a.m.]/[p.m.], local time.
Purpose
of the Special Meeting
At the special meeting, Windrose shareholders will be asked to
consider and vote upon a proposal to approve the merger
described in this proxy statement/prospectus and to consider and
act upon any other business that may properly come before the
special meeting (including any proposal to adjourn or postpone
the special meeting).
Record
Date; Voting Power
Windroses board of trustees has fixed the close of
business (5:00 p.m., Eastern time) on [ ],
2006 as the record date for determining the shareholders of
Windrose that are entitled to notice of, and to vote at, the
special meeting. Only holders of record of Windrose common
shares or Windrose preferred shares at the close of business on
the record date are entitled to notice of the special meeting.
Only Windrose shareholders at the close of business on the
record date are entitled to vote at the special meeting. At the
close of business on the record date, there were
[ ] Windrose common shares outstanding and
entitled to vote at the special meeting.
Windrose shareholders will have one vote on any matter that may
properly come before the special meeting for each Windrose
common share that they owned on the record date.
Quorum
A quorum will be present at the special meeting if holders of at
least [ ] Windrose common shares (which
represents a majority of the Windrose common shares outstanding
on the record date) are represented in person or by proxy at the
special meeting. Windrose common shares represented at the
special meeting but not voted, including Windrose common shares
for which proxies have been received but for which holders of
those shares have abstained and broker non-votes, will be
treated as present at the special meeting for the purpose of
determining the presence or absence of a quorum. When we refer
to broker non-votes, we are referring to shares held
by brokers or nominees as to which voting instructions have not
been received from the beneficial owners or persons entitled to
vote those shares and where the broker or nominee does not have
discretionary voting power.
A quorum is necessary in order to hold the special meeting. If a
quorum is not present at the special meeting, Windrose expects
to adjourn or postpone the meeting to solicit additional proxies.
Required
Vote
Windroses declaration of trust and bylaws require that the
merger be affirmatively approved by holders of a majority of the
Windrose common shares outstanding on the record date. Although
considered present for the purposes of determining a quorum,
abstentions and broker non-votes are not counted as
votes in favor of the merger and the other transactions
contemplated by the merger agreement and, therefore, have the
same effect as a vote against the merger proposal.
In order for your Windrose common shares to be included in the
vote, you must submit your proxy for your shares by returning
the enclosed proxy card, or by telephone or through the Internet
by following the instructions included with your proxy card, or
you must vote in person at the special meeting. If you hold your
shares through a broker or other nominee, you may receive
separate voting instructions with the proxy statement. Your
broker or
22
nominee may provide proxy submission through the Internet or by
telephone. Please contact your broker or nominee to determine
how to vote.
Because the affirmative vote of the holders of a majority of
the Windrose common shares outstanding on the record date is
needed to approve the merger proposal, the failure to submit
your proxy or vote in person will have the same effect as a vote
against the approval of the merger proposal.
Abstentions and broker non-votes also will have the
same effect as a vote against the approval of the
merger proposal. Accordingly, Windroses board of trustees
urges shareholders to complete, date, sign and return the
accompanying proxy card, or to submit a proxy by telephone or
through the Internet by following the instructions included in
your proxy card, or, in the event you hold your shares through a
broker or other nominee, by following the separate voting
instructions received from your broker or nominee.
Voting
by Windroses Trustees and Executive Officers
At the close of business on the record date, Windroses
trustees and executive officers and their affiliates were
entitled to vote approximately [ ] Windrose
common shares (or approximately [ ]% of the
aggregate number of Windrose common shares outstanding on that
date). Fred S. Klipsch, Windroses chairman and chief
executive officer, and Frederick L. Farrar, Windroses
president, chief operating officer and treasurer, have agreed
pursuant to a support agreement to vote the Windrose common
shares that they own FOR the merger proposal.
How to
Vote; Voting of Proxies
Votes may be cast in person or by proxy. Windrose common shares
represented by properly executed proxies received in time for
the special meeting will be voted at the special meeting in the
manner specified by such proxies. Proxies that are properly
executed by the record holder but otherwise do not contain
voting instructions will be voted in the manner that
Windroses board of trustees recommends. If other matters
properly come before the special meeting, the persons named in
such proxy will have authority to vote such matter in his or her
discretion. Windrose does not expect that any matter other than
as described in this proxy statement/prospectus will be brought
before the special meeting.
Absent specific instruction from the beneficial owners of
shares, brokers may not vote Windrose common shares with respect
to the merger proposal, any other matters that may properly come
before the special meeting or any adjournment of the special
meeting. For purposes of determining approval of the merger
proposal, abstentions and broker non-votes will have
the same effect as a vote against the merger
proposal.
Revocability
of Proxies
You can revoke your proxy at any time before the vote is taken
at the special meeting, except as otherwise described below. If
you have not voted through your broker or other nominee, you may
revoke your proxy before the proxy is voted by:
|
|
|
|
|
delivering, prior to the special meeting, to Windroses
secretary a duly executed written notice of revocation bearing a
later date or time than the proxy;
|
|
|
|
submitting in time for the special meeting another duly executed
proxy to Windroses secretary by mail bearing a later date;
|
|
|
|
submitting a new proxy by telephone or through the Internet at a
later time, but not later than [ ]
[a.m.]/[p.m.] (Eastern time) on [ ], 2006 or
the day before the meeting date, if the special meeting is
adjourned or postponed; or
|
|
|
|
attending the special meeting and voting in person; however,
simply attending the special meeting without voting will not
revoke an earlier proxy.
|
23
To submit a written notice of revocation or other communications
about revoking your proxy, or to request a new proxy card, you
should write to:
Windrose Medical Properties Trust
3502 Woodview Trace, Suite 210
Indianapolis, Indiana 46268
Attention: Secretary
If your Windrose common shares are held in street
name, you should follow the instructions of your broker or
nominee regarding the revocation of proxies. If your broker or
nominee allows you to submit a proxy by telephone or the
Internet, you may be able to change your vote by submitting a
proxy again by the telephone or the Internet.
If an adjournment occurs, it will have no effect on the ability
of shareholders as of the record date to exercise their voting
rights or to revoke any previously delivered proxies. Windrose
does not expect to adjourn the special meeting for a period of
time long enough to require the setting of a new record date for
such meeting.
Adjournments
and Postponements
Although it is not currently expected, the special meeting may
be adjourned or postponed for the purpose of soliciting
additional proxies. Any adjournment of the special meeting to a
date within 180 days of the record date may be made without
notice, other than by an announcement made at the special
meeting in accordance with Windroses declaration of trust
and bylaws. Any adjournment or postponement of the special
meeting for the purpose of soliciting additional proxies will
allow Windrose shareholders who have already sent in their
proxies to revoke them at any time prior to their use at the
special meeting, provided that such revocation is in compliance
with the instructions set forth above in the section titled
Revocability of Proxies.
Solicitation
of Proxies; Solicitation Expenses
Windrose has retained Morrow & Co., Inc. to act as its
proxy solicitor to solicit proxies approving the merger proposal
from each of its shareholders on or about the date of mailing of
this proxy statement/prospectus. In addition to solicitations by
mail, the trustees, officers and employees of Windrose and its
subsidiaries and affiliates, for no additional compensation, may
solicit proxies from shareholders by telephone or other
electronic means or in person. Windrose will pay approximately
$7,500 to Morrow & Co., Inc. to assist with the
solicitation of proxies. Morrow & Co., Inc. may solicit
proxies by telephone or other electronic means or in person.
Windrose also will reimburse Morrow & Co., Inc. for its
expenses in connection with this proxy solicitation, which
expenses will include a charge of $5.00 per shareholder for
telephonic solicitations. Windrose will also request that
banking institutions, brokerage firms, custodians, trustees,
nominees, fiduciaries and other like parties forward the
solicitation materials to the beneficial owners of Windrose
common shares held of record by such persons, and Windrose will,
upon request of such record holders, reimburse forwarding
charges and
out-of-pocket
expenses. Windrose will generally bear the cost of the
solicitation of proxies from its shareholders.
Windrose
shareholders should not send share certificates with their proxy
cards.
24
THE
MERGERS
General
This proxy statement/prospectus is being furnished to you in
connection with the proposed merger of (i) Windrose with
and into Heat Merger Sub, with Heat Merger Sub surviving the
merger as a subsidiary of Health Care REIT and (ii) Heat OP
Merger Sub with and into Windrose OP, with Windrose OP surviving
the merger as a subsidiary of Health Care REIT. The mergers will
be carried out as provided in the merger agreement. A copy of
the merger agreement, as amended, is attached as
Appendix A and Appendix B to this proxy
statement/prospectus and is incorporated by reference in this
proxy statement/prospectus.
This proxy statement/prospectus constitutes a proxy statement of
Windrose and has been sent to you because you were a holder of
Windrose common shares on the record date set by Windroses
board of trustees for notice of and for voting at a special
meeting of Windrose shareholders. Only holders of Windrose
common shares as of the record date are being asked to consider
and vote upon a proposal to approve the merger at the special
meeting. This proxy statement also has been sent to holders of
Windrose preferred shares as required by Maryland law even
though such shares are not entitled to vote with respect to the
merger. This proxy statement/prospectus also constitutes a
prospectus of Health Care REIT, which is a part of the
Registration Statement on
Form S-4
filed by Health Care REIT with the SEC under the Securities Act
in order to register the shares of Health Care REIT common stock
and Health Care REIT preferred stock to be issued to Windrose
shareholders and holders of Windrose OP units and Windrose
preferred shares in the mergers.
Background
of the Merger
From time to time over the past fifteen years, pre-dating the
formation of Windrose and its initial public offering in 2002,
officers of Windrose and Health Care REIT have collaborated on
various business transactions and enjoyed a positive working
relationship. On January 16, 2006, George L. Chapman,
chairman and chief executive officer of Health Care REIT, and
Raymond W. Braun, president of Health Care REIT, had dinner
with Fred S. Klipsch, chairman and chief executive officer of
Windrose, and Frederick L. Farrar, president, chief operating
officer and treasurer of Windrose, in Phoenix, Arizona, during
which Health Care REIT raised for the first time consideration
of a possible transaction involving the combination of the
companies. Health Care REIT and Windrose were in Phoenix,
Arizona attending separate conferences. The Windrose board was
not then considering any potential strategic alternative.
Messrs. Klipsch and Farrar advised Messrs. Chapman and
Braun that they would need to consider the matter further.
On February 21, 2006, Mr. Klipsch agreed to a meeting
with Mr. Chapman in Indianapolis to discuss preliminary
terms of a transaction, including, among other things, the
amount and type of consideration Health Care REIT would be
willing to offer to Windrose shareholders. Mr. Chapman
described Health Care REITs desire to acquire Windrose as
an operating platform, rather than simply an asset acquisition,
that would include the continued participation of
Windroses management.
On March 1, 2006, Windroses board of trustees held a
regularly scheduled meeting. After the meeting, Mr. Klipsch
met in an executive session with the board to discuss, among
other things, Windroses strategic operating plan as an
independent company as well as whether Windrose should consider
a potential strategic combination with another entity.
Mr. Klipsch informed Windroses board of the
preliminary discussions with Health Care REIT that had occurred
prior to the meeting. Windroses board discussed these
matters and authorized Windroses management to continue
exploratory discussions with Health Care REIT.
Messrs. Chapman and Klipsch further discussed the relative
merits of a transaction on two occasions by telephone in March
2006 and during a visit by Mr. Klipsch to Toledo, Ohio on
May 9, 2006 to meet with Mr. Chapman.
Messrs. Chapman and Klipsch discussed a strategic
transaction in which Windrose and its employees would become an
operating division of Health Care REIT rather than an asset
acquisition, possible terms of a merger transaction, including,
among other things, the amount and type of consideration payable
to Windrose shareholders, the amount of any
break-up
fee, Health Care REITs requirement that Windroses
senior management team continue working with the combined
company and preliminary potential compensation arrangements for
Messrs. Klipsch and Farrar, including payments under
Windroses existing change of control agreements. At that
25
time, Health Care REIT contemplated a transaction that would
provide Windrose shareholders with a premium of 10-15% over the
then current market price of Windrose common shares, which were
trading at approximately $15.00 per share.
Windroses board held a regularly scheduled meeting on
May 1, 2006. Mr. Klipsch updated the board on the
progression of the preliminary discussions and informed the
board that Health Care REIT had requested that the parties enter
into a confidentiality agreement so that Health Care REIT could
perform a more detailed due diligence investigation that would
permit it to determine whether it could make a more definitive
proposal. Windroses board authorized Windroses
management to enter into a confidentiality agreement and to
continue discussions with Health Care REIT.
On May 11, 2006, Health Care REIT and Windrose entered into
a confidentiality agreement providing for, among other things,
the confidential treatment of information provided by the other
party, a standstill provision with respect to the acquisition of
the other partys securities and a non-solicitation
provision with respect to the other partys officers.
On May 15, 2006, Mr. Braun, Scott A. Estes, senior
vice president and chief financial officer of Health Care REIT,
and Michael A. Crabtree, vice president and treasurer of Health
Care REIT, met with Mr. Farrar in Chicago, Illinois at
Health Care REITs request to conduct financial and
business due diligence in respect of Windrose.
On May 18, 2006, Windroses board of trustees held its
annual meeting following the 2006 annual meeting of
shareholders. Following the Windrose board meeting,
Mr. Klipsch met in an executive session of the board to
discuss the potential transaction with Health Care REIT as well
as engaging financial and legal advisors. The board authorized
management to contact potential financial and legal advisors for
Windrose.
On May 24, 2006, the board of directors of Health Care REIT
met telephonically with the executive management team of Health
Care REIT and the companys outside financial and legal
advisors. The executive management team briefed the board and
advisors on the progress of the preliminary discussions and the
preliminary due diligence findings regarding Windrose. The board
authorized Health Care REITs management to continue
discussions relating to the transaction.
On May 31, 2006, Messrs. Chapman, Braun, Estes,
Crabtree, Klipsch and Farrar had a telephone conference call to
discuss change in control payments for Windrose officers that
would result from the consummation of a combination of the
companies, including proposed retention agreements and
compensation for key Windrose employees and an explanation of
Health Care REITs compensation structure and perform
further financial due diligence of Windrose.
On June 5, 2006, Messrs. Chapman, Braun, Estes,
Crabtree, Klipsch and Farrar met in New York, New York during a
NAREIT conference to discuss further a possible transaction,
including the status of due diligence and merger consideration.
On June 6, 2006, Mr. Klipsch had discussions with an
independent trustee of Windrose regarding potential financial
advisors and following such discussions, Mr. Klipsch
contacted JPMorgan. On June 7, 2006, Messrs. Chapman,
Braun, Estes, Crabtree, Klipsch and Farrar met again in New York
to discuss financial due diligence, including projected future
performance of the companies. On June 8, 2006, on behalf of
Health Care REIT, Deutsche Bank Securities Inc., in its capacity
as financial advisor, provided Windrose information relating to
Health Care REIT and the proposed transaction.
On June 12, 2006, Windroses board held a meeting to
discuss the potential business combination with Health Care
REIT. Present at this meeting at the invitation of the board was
Windroses outside corporate and securities counsel,
Hunton & Williams LLP, and representatives of JPMorgan.
During this meeting, Mr. Klipsch updated the board on the
progression of the discussions between the parties.
Hunton & Williams advised the board as to its duties
and certain other legal matters in considering a potential
transaction. The JPMorgan representatives made a presentation
relating to JPMorgans qualifications, a summary of Health
Care REITs then current proposal, a market overview and
process and transaction considerations. Following the JPMorgan
presentation, the board directed management to engage JPMorgan
as financial advisor to Windrose and authorized management to
negotiate an engagement letter with JPMorgan. Windroses
board discussed with management and with Hunton &
Williams and JPMorgan whether the board was legally obligated to
pursue other potential transaction partners. Based on such
discussions and after discussing the proposed structure and
terms of the transaction and the strategic
26
nature of the proposed transaction with Health Care REIT,
Windroses board determined that it was in the best
interest of Windroses shareholders to continue to
negotiate with Health Care REIT for a strategic merger
transaction.
On June 13, 2006, Messrs. Chapman and Klipsch further
discussed the relative merits of a transaction by telephone. On
June 23, 2006, JPMorgan provided Deutsche Bank certain
financial due diligence information relating to Windrose.
On June 26, 2006, Windroses board held a meeting.
Present at the meeting were representatives of JPMorgan and
Hunton & Williams. At the meeting, JPMorgan presented
to the board a range of strategic alternatives, including
Windroses acquisition of other companies, Windroses
maintaining its current business plan and Windrose engaging in a
sale or merger transaction. The JPMorgan representatives
presented various valuation methodologies to the board.
Following the presentation, the board again discussed the
potential interest of other acquirors and merger partners and
the possibility of contacting other potential acquirors or
merger partners and determined to continue to negotiate with
Health Care REIT for a strategic merger transaction. Following
this discussion, the board authorized management and JPMorgan to
continue discussions with Health Care REIT and its advisors. The
board also discussed with JPMorgan the structure and amount of
the fee to be paid under the engagement letter with JPMorgan. On
June 26, 2006, Windrose engaged JPMorgan to serve as
Windroses exclusive financial advisor and requested that
Hunton & Williams serve as Windroses legal
counsel.
On June 26, 2006, Messrs. Chapman, Braun, Crabtree and
Estes and Jeffrey H. Miller, executive vice president and
general counsel of Health Care REIT, Charles A. Hiller,
associate general counsel of Health Care REIT, and Erin C.
Ibele, senior vice president administration and
corporate secretary of Health Care REIT, held a telephonic
meeting with the Health Care REIT board of directors. Also on
the call were Deutsche Bank and Health Care REITs outside
legal counsel, Shumaker Loop & Kendrick, LLP and Sidley
Austin LLP. Terms of a potential indication of interest letter
were discussed, and the officers of Health Care REIT provided
the board an update on the terms of a possible transaction. The
board of directors authorized management to continue to pursue
the transaction.
During their May and June meetings, Windrose and Health Care
REIT and their respective financial advisors had various
negotiations regarding the potential merger consideration to be
received by the Windrose shareholders as part of the proposed
merger. These discussions included the appropriate form of
consideration to be offered to Windrose shareholders, the
exchange ratio of Health Care REIT shares to Windrose common
shares and value protection measures that would help to mitigate
downside risk to Windrose shareholders. The parties also
discussed various alternatives for the merger consideration for
holders of Windrose LP units and Windrose preferred shares.
In connection with these negotiations, Windrose and Health Care
REIT and their respective financial advisors also discussed
possible terms relating to termination of the merger agreement
in the event that Windroses board desired to terminate the
merger agreement following its execution in order to enter into
an agreement with respect to a superior offer from another party.
On July 7, 2006, Windroses board held two conference
calls at which representatives of JPMorgan summarized the status
of negotiations with Health Care REIT. The Windrose board also
discussed entering into a 19-day exclusivity agreement with
Health Care REIT, as requested by Health Care REIT. After
discussions with its advisors, the Windrose board authorized
management to enter into such an agreement with Health Care REIT.
Health Care REIT and Windrose entered into an exclusivity
arrangement effective July 7, 2006. During the period from
July 8, 2006 through July 17, 2006, Health Care REIT
conducted financial and legal due diligence on Windrose.
On July 18, 2006, the board of directors of Health Care
REIT, its management and its financial and legal advisors met
telephonically to discuss the transaction. At the conclusion of
this meeting, the board authorized Health Care REIT management
to continue negotiations with Windrose.
On July 21, 2006, members of the management team and
financial and legal advisors for each of Health Care REIT and
Windrose held a conference call to discuss the status of the
discussions and to determine subsequent steps.
27
Deutsche Bank also sent JPMorgan a revised term sheet
summarizing certain details about the proposed transaction,
including a $17.00 per Windrose common share offer price
with an exchange ratio to be fixed at closing, representing a
16.5% premium to the Windrose closing stock price on such date,
a walk-away right for Windrose upon the occurrence
of certain events after the execution of the merger agreement
and a
break-up fee
equal to 4.0% of the equity value of the proposed transaction.
On July 24, 2006, members of Windroses senior
management met in Toledo, Ohio with Health Care REITs
management team to discuss business strategy and the timeline
for completing the remaining due diligence.
Windroses board met telephonically on July 25, 2006.
Mr. Klipsch and JPMorgan updated the board on the status of
the negotiations since the July 7, 2006 board calls.
Following these discussions, the board authorized management to
continue negotiations with Health Care REIT, to begin
negotiating a merger agreement and to extend the exclusivity
agreement.
On July 25, 2006, the parties agreed to extend the
exclusivity agreement through August 21, 2006 and
thereafter until the provision of notice by either party to the
other of its intent to terminate the exclusivity period. On
July 26, 2006, members of management of Health Care REIT
and Windrose held a conference call to discuss outstanding due
diligence items and third party consents related to the
outstanding debt of Windrose. Among other things, the parties
also discussed a walk-away right that would allow
Windroses board to terminate the merger agreement in the
event of a significant decline in the stock price of shares of
Health Care REIT common stock both on an absolute basis as well
as relative to an index of comparable, publicly traded companies.
On July 28, 2006, an initial draft of the merger agreement
was sent from the legal advisors of Health Care REIT to the
legal advisors of Windrose. During the ensuing period through
September 12, 2006, the parties and their advisors
negotiated the terms of the merger agreement.
On July 31, 2006, a conference call was held among the
parties and their advisors to discuss a timeline for the
transaction, including production of outstanding due diligence
items.
Windroses board held a regularly scheduled meeting on
August 1, 2006, during which it reviewed the status of the
merger discussions. Mr. Klipsch updated the board on the
status of negotiations and informed the board that
Windroses legal and financial advisors had received a
draft of the merger agreement. After discussing various matters
relating to the transaction, the board authorized management to
continue negotiations with Health Care REIT.
On August 4, 2006, Mr. Chapman sent Mr. Klipsch a
proposal detailing retention and compensation arrangements for
certain Windrose executive officers and initial drafts of
consulting and employment agreements for Messrs. Klipsch
and Farrar and Mr. Daniel R. Loftus, executive vice
president, secretary and general counsel of Windrose.
On August 10, 2006, Health Care REIT and its legal advisors
conducted legal due diligence in Indianapolis, Indiana on issues
related to Windroses real property, indebtedness and
general corporate and corporate governance matters. In
mid-August 2006, JPMorgan visited Health Care REITs Toledo
headquarters to conduct financial due diligence relating to
JPMorgans fairness opinion. On August 13, 2006,
Windroses legal advisors sent initial comments to the
initial draft of the merger agreement to Health Care REITs
legal advisors. During the ensuing period through
September 12, 2006, the parties and their advisors
negotiated the terms of the merger agreement and Health Care
REIT and its financial and legal advisors continued to conduct
due diligence on Windrose. On August 21 and 22, 2006,
representatives from Health Care REIT and Windrose met in
Chicago, Illinois with their legal advisors to discuss the
merger agreement in detail.
In early August 2006, Windroses management began
discussions with Health Care REITs management relating to
financing alternatives that would facilitate Windroses
ability to pursue property acquisitions during the time period
between the execution and completion of the merger. The parties
and their financial and legal advisors discussed various
potential funding structures. After further discussion by the
parties over the following weeks, the parties tentatively agreed
that Health Care REIT would provide a credit facility to a
Windrose subsidiary. See The Merger Agreement
Related Agreements Interim Financing for a
discussion of the interim financing arrangement between the
parties.
On August 29, 2006, the board of directors of Health Care
REIT, its management, including Messrs. Chapman, Braun,
Estes, Miller, Crabtree and Hiller and Ms. Ibele, and its
financial and legal advisors met telephonically to
28
discuss the status of the transaction, the valuation of Windrose
and other terms of the transaction and authorized management to
continue negotiations. The board of directors considered in its
discussion that the price of Health Care REITs common
stock was near its all-time high.
On August 29, 2006, Windroses board met to discuss
the terms of the merger, the proposed retention and compensation
agreements for Windroses management and the interim
financing. Mr. Klipsch and Windroses financial and
legal advisors summarized the status of the transaction and the
material terms of the draft merger agreement. Windroses
board discussed renegotiating the proposed offer price per
Windrose common share of $17.00 and the proposed fixed exchange
ratio in light of the increase in Health Care REITs stock
price since the commencement of negotiations, noting that the
stock price was approaching its all-time high. Windroses
board discussed the risks of a decline in Health Care
REITs stock price under a fixed exchange ratio and the
potential effect on the value per Windrose common share to be
received by Windrose shareholders in the merger. Following such
discussions, Windroses board instructed Windroses
management and JPMorgan to negotiate for an increase in the
offer price per Windrose common share or request certain value
protection measures that could protect Windrose shareholders
against a decline in the value of Health Care REITs stock.
The Windrose board also discussed the termination provisions and
the termination fees in the event that Windrose received a
superior offer after execution of the merger agreement.
Following these discussions, Windroses board authorized
management and JPMorgan to continue negotiations with Health
Care REIT to address these matters.
During the period following the August 29, 2006 meetings of
Windroses board of trustees and Health Care REITs
board of directors, Windrose, Health Care REIT and their
respective advisors had various negotiations relating to the
offer price per Windrose common share, the structure of the
exchange ratio and
walk-away
right and the termination provisions relating to the proposed
merger, including the termination fees payable to Health Care
REIT under certain scenarios. The parties also discussed other
unresolved issues related to the merger agreement.
On September 5, 2006, Windrose provided Health Care REIT an
initial draft of its disclosure letter to the merger agreement,
and on September 6, 2006, Health Care REIT provided
Windrose an initial draft of its disclosure letter to the merger
agreement. During the period from when the disclosure letters
were first delivered until the execution of the merger
agreement, the parties continued to negotiate and discuss the
disclosure letters in conjunction with their discussion of the
representations and warranties in the merger agreement.
On September 8, 2006, Windroses legal and accounting
advisors conducted diligence on Health Care REIT in Toledo,
Ohio, and Windroses management and legal advisors
conducted business due diligence telephonically.
On September 9, 2006, Messrs. Klipsch, Farrar and
Chapman held a telephone call in which they discussed a merger
consideration structure to be based on the closing prices of
each companys stock on September 12, 2006, a floating
exchange ratio and the elimination of the
walk-away
right, subject to board approval.
The Windrose board met on September 11, 2006 to discuss the
status of the merger agreement. Mr. Klipsch and
Windroses financial and legal advisors updated
Windroses board on the status of the discussions with
Health Care REIT and the terms of the merger agreement,
including the use of an asymmetrical collar around the exchange
ratio, the elimination of any
walk-away
right and certain adjustments to the termination fee provisions.
Following these discussions, Windroses board authorized
management and its financial advisors to finalize the remaining
outstanding issues in the merger agreement with Health Care REIT.
On September 12, 2006, the parties completed the
preparation and review of the disclosure letters to the merger
agreement.
On September 12, 2006, Windroses and Health Care
REITs respective management teams met in Toledo, Ohio to
resolve the outstanding issues in the merger agreement,
including the implied offer price per Windrose common share, the
structure of the exchange ratio, the termination provisions
relating to the proposed merger and the termination fees payable
to Health Care REIT under certain scenarios. The management
teams also resolved the outstanding issues in the interim
financing documents and the retention and compensation
arrangements for certain members of Windroses management
team.
After the close of the market on September 12, 2006,
Windroses board of trustees met telephonically, and
Mr. Klipsch and Windroses financial and legal
advisors updated the board on the proposed resolution of the
29
outstanding issues in the merger agreement. JPMorgan also
presented its analyses of the fairness of the merger
consideration to the holders of Windroses common shares
and its fairness opinion. Based on the totality of the
information presented and considered during its evaluation of
the merger and the merger agreement, Windroses board of
trustees, by unanimous vote of the trustees, approved the merger
agreement and authorized management to execute and deliver the
merger agreement.
On September 12, 2006, the compensation committee of the
board of directors of Health Care REIT met telephonically to
discuss and approve the consulting agreements to be entered into
between Health Care REIT and each of Messrs. Klipsch and
Farrar and the employment agreement to be entered into between
Health Care REIT and Mr. Loftus. Later the same day, the
board of directors of Health Care REIT, its management and its
financial and legal advisors met telephonically. Based upon the
totality of the information presented and considered during its
evaluation of the merger and the merger agreement, the board of
directors, by unanimous vote of the directors present, approved
the merger agreement and the transactions contemplated by the
merger agreement.
Later that evening, Health Care REIT and Windrose and certain of
their affiliates executed the merger agreement and the other
relevant parties executed the interim financing documents,
consulting agreements and support agreements. The following
morning, Health Care REIT and Windrose issued a joint press
release announcing the execution of the merger agreement. The
terms of the merger agreement are detailed below under The
Merger Agreement beginning on page 46 of this proxy
statement/prospectus.
Following announcement of the merger agreement, Health Care REIT
and Windrose received a number of inquiries from their
respective shareholders regarding the consideration for the
Windrose preferred shares in the merger. The merger agreement
initially provided that each holder of Windrose preferred shares
issued and outstanding immediately prior to the effective time
of the merger would receive for each Windrose preferred share
held by such holder a cash payment equal to the sum of
$25.00 per share plus an amount equal to any accrued and
unpaid dividends thereon to the effective time of the merger,
without interest. Maryland legal counsel engaged by Windrose
opined on September 12, 2006 that the foregoing treatment
did not violate the terms and provisions of the Windrose
articles supplementary. After Health Care REIT and Windrose
considered the matter further, however, they agreed in principle
on October 6, 2006 to amend the merger agreement to provide
that each such holder would instead receive one share of a new
series of Health Care REIT preferred stock having substantially
similar rights and preferences in accordance with the terms and
provisions of the Windrose articles supplementary. After such
consideration, Health Care REIT and Windrose executed an
amendment to the merger agreement on October 12, 2006 to
provide for this new merger consideration for the Windrose
preferred shares.
Windroses
Reasons for the Mergers and Recommendation of Windroses
Board of Trustees
Windroses board of trustees unanimously determined that
the merger is advisable on the terms set forth in the merger
agreement and unanimously approved the merger agreement on
September 12, 2006. In the course of its deliberations on
the mergers and the merger agreement, Windroses board of
trustees consulted with members of Windroses management
team and Windroses legal, financial, accounting and tax
advisors on various legal, business and financial matters.
Windroses board of trustees considered both
Windroses short-term and long-term interests, as well as
those of its shareholders. In concluding that the merger is
advisable on the terms set forth in the merger agreement,
Windroses board of trustees considered, among other
things, the following factors:
|
|
|
|
|
Value of Merger Consideration. Windroses
board of trustees considered the fact that the per share merger
consideration to holders of common shares and Windrose OP units
provided for in the merger agreement as of the date of the
merger agreement (based on the closing price of Health Care
REITs common stock on September 12, 2006) represented
a premium of approximately 19% over the last sale price for
Windrose common shares on September 12, 2006, which was the
last trading day before the announcement of the mergers. The
merger consideration represented a premium of approximately
[ ]% over the last sale price for Windrose
common shares on [ ], 2006. Windroses
board of trustees also considered the historical trading prices
of Windrose common shares and Health Care REITs common
stock, the partial downside protection provided by the floating
exchange ratio, and the expectation that the merger of Windrose
would qualify as a tax-free reorganization for federal income
tax purposes.
|
30
|
|
|
|
|
Opportunity to Participate in the Combined
Company. Windroses board of trustees
considered the fact that the all-stock merger consideration
offers holders of Windrose common shares and Windrose OP units
the opportunity to participate in the future growth of the
combined company and to continue to have an investment in the
healthcare real estate industry through a larger and more
diversified enterprise. The all-stock merger consideration also
would allow Windrose equity holders to participate in an
increase in value of the merger consideration prior to the
closing of the mergers if the market price of Health Care REIT
common stock increases above $40.05 per share.
Windroses board of trustees also considered the
possibility that Windrose shareholders and holders of Windrose
OP units could benefit from the merger as a strategic business
combination that could permit Windrose shareholders and holders
of Windrose OP units with the possibility of benefits resulting
from a more diversified mix of assets, synergies from the
combination, economies of scale, enhanced access to capital
through a combination with a much larger, investment grade rated
company with stronger credit ratings and less financial leverage
than Windrose, a broader and deeper investment pipeline, and an
expanded opportunity to develop properties internally for the
combined company.
|
|
|
|
Increase in Dividends. The Windrose board of
trustees considered the increase in dividends payable to
shareholders. Windrose declared a dividend to common
shareholders for the second quarter of 2006 of $0.235 per
common shares while Health Care REIT declared a second quarter
2006 dividend of $0.64 per share of common stock. Based on
the exchange ratio and assuming the continuation of Health Care
REITs current dividend rate, Windrose shareholders and
holders of Windrose OP units will receive an effective increase
in dividend payments after the mergers of 22.8% to 26.6%.
|
|
|
|
Synergies. The Windrose board of trustees
noted that there would be only approximately $1.0 to
2.0 million of annual cost synergies arising out of the
mergers, primarily as a result of the reduction of general and
administrative costs associated with being a public company.
Aside from saving costs related to being a public company, the
Windrose board of trustees noted that only minimal cost
synergies with respect to personnel would be obtained given that
Windrose would continue to operate as a separate division within
the combined company. It also was anticipated that certain
existing Windrose employees would be given the opportunity to
remain with the combined company or, if terminated, to receive
appropriate severance payments.
|
|
|
|
Other Available Strategic
Alternatives. Windroses board of trustees
reviewed possible alternatives to a negotiated merger with
Health Care REIT, including continuing to operate Windrose as an
independent company or seeking a business combination with
another company. In this regard, Windroses board of
trustees (i) noted that Windrose had not had any
substantive discussions with another potential buyer and
(ii) considered with its financial advisors other potential
combination candidates. However, no other transaction as timely
or as favorable seemed likely and no other transaction presented
as favorable a strategic combination of similar, yet
complementary, approaches and philosophies as the combination of
Windrose and Health Care REIT. In addition, Windroses
board of trustees considered Windroses strategic plan as
an independent company, and managements belief that
Windroses ability to pursue its plan would be enhanced by
the merger.
|
|
|
|
Terms of the Merger Agreement. The Windrose
board of trustees, with the assistance of its legal advisors,
reviewed the terms of the merger agreement, including:
|
|
|
|
|
|
the limited nature of the closing conditions included in the
merger agreement, including the absence of regulatory consents
and any financing contingency, and the inclusion of conditions
as to requisite approvals of the Windrose shareholders. In that
regard, Windroses board of trustees noted that the
transaction is not subject to approval by Health Care
REITs stockholders or holders of Windrose preferred shares
or Windrose OP units;
|
|
|
|
the ability of Windroses board of trustees to respond to
and engage in discussions or negotiations regarding unsolicited
third party acquisition proposals under specified circumstances
if the Windrose board of trustees concludes in good faith that
such proposal is reasonably likely to lead to a superior
acquisition proposal (as defined in The Merger
Agreement Additional Agreements No
Solicitation) and, under specified circumstances, to
withdraw its recommendation that the
|
31
|
|
|
|
|
shareholders vote in favor of approving the merger or to
recommend a superior acquisition proposal to the shareholders
and terminate the merger agreement to enter into an agreement
with respect to that superior acquisition proposal;
|
|
|
|
|
|
the obligation of Windrose to pay all or a portion of a
termination fee of $16.9 million, reimburse Health Care
REIT for fees and expenses paid in connection with obtaining
certain third party consents to the mergers in an amount up to
$2.5 million and pay out-of pocket expenses incurred by
Health Care REIT of up to $900,000 if the merger agreement is
terminated under certain circumstances, as described in
The Merger Agreement Termination Fee.
The Windrose board of trustees noted that both Windrose and
Health Care REIT are each obligated to reimburse the other party
for certain amounts up to specified limits if the merger
agreement is terminated due to a breach of the representations,
warranties, covenants or agreements contained in the merger
agreement. The Windrose board of trustees also noted that the
termination payment provisions of the merger agreement could
have the effect of discouraging alternative proposals for a
business combination with Windrose. On balance, however, the
Windrose board of trustees determined that the amount of the fee
that Windrose may be obligated to pay, and the circumstances
under which it may be payable, are typical for transactions of
this size and type and were a necessary aspect of ensuring
Health Care REITs entry into the merger agreement; and
|
|
|
|
the ability of Windroses management and employees to
continue to run the business consistent with past practices,
with some enumerated limitations, during the period between the
signing of the merger agreement and the closing of the mergers.
|
|
|
|
|
|
Interim Financing. The Windrose board of
trustees considered Health Care REITs obligation to
provide interim financing to Windrose so that it could continue
to fund acquisitions and developments within the boundaries of
the restrictive covenants contained in the merger agreement
during the period between the signing of the merger agreement
and the closing of the mergers. See The Merger
Agreement Related Agreements Interim
Financing for a discussion of the terms of the interim
financing. Windroses board of trustees also considered the
effect of the repayment provisions in certain instances that
could have the effect of discouraging alternative proposals for
a business combination with Windrose. On balance, however, the
Windrose board of trustees determined that the access to capital
during the period between the signing of the merger agreement
and the closing of the mergers outweighed the potential effect
of discouraging an alternative business combination proposal.
|
|
|
|
Continued Representation on Health Care REITs Board and
in Management. Fred S. Klipsch, the chairman and
chief executive officer of Windrose, will join Health Care
REITs board after completion of the mergers. In addition,
Mr. Klipsch, Frederick L. Farrar, the president, chief
operating officer and treasurer of Windrose, and Daniel R.
Loftus, the executive vice president, secretary and general
counsel of Windrose, will become executive officers of Health
Care REIT and the Windrose Medical Properties division of Health
Care REIT after completion of the mergers.
|
|
|
|
Due Diligence Review. The Windrose board of
trustees considered the results of the due diligence review of,
among other things, Health Care REITs business and
operations, results of operations, financial condition,
competitive position, management practices, outstanding legal
proceedings and compliance with health care laws and
regulations, as well as current industry, market, economic and
government regulatory conditions and trends. This due diligence
review was conducted on behalf of Windrose by Windroses
management, financial advisors and legal counsel.
|
|
|
|
JPMorgan Analysis and Fairness Opinion. The
presentations by and analyses of JPMorgan and the opinion of
JPMorgan given orally and confirmed in writing on
September 12, 2006 that the merger consideration provided
for in the merger agreement was, as of that date, fair from a
financial point of view to holders of Windrose common shares, as
more fully described below under the caption
Opinion of Windroses Financial
Advisor.
|
|
|
|
Potential Risks of the
Mergers. Windroses board of trustees
considered a number of potential risks associated with the
merger and the merger agreement in connection with its
evaluation of the mergers, some of which are described above in
this section, including:
|
32
|
|
|
|
|
the possibility that, due to the all-stock merger consideration,
the value of the merger consideration could decrease prior to
the closing of the mergers if the trading price of Health Care
REIT common stock decreases below $38.84 per share,
especially in light of the significant appreciation in the stock
price of Health Care REITs common stock during the period
between the initiation of discussions relating to the mergers
and the entry into the merger agreement;
|
|
|
|
the possibility that the mergers might not be completed as a
result of the failure to satisfy certain closing conditions,
including securing approvals from third parties and from
Windrose shareholders;
|
|
|
|
the risk that prior to completion or abandonment of the mergers,
Windrose is required to conduct its business only in the
ordinary course of business consistent with past practice and
subject to certain operational restrictions that could damage
Windroses business if the mergers are not completed;
|
|
|
|
the risks arising from the challenges of integrating the
businesses, management teams, strategies, cultures and
organizations of the two companies, including unanticipated
costs, diversion of managements attention, operational
interruptions or the loss of key employees or tenants;
|
|
|
|
the significant cost involved in connection with completing the
mergers, especially if the merger agreement is terminated and
the mergers are not completed or are abandoned; and
|
|
|
|
other applicable risks described above under Risk
Factors Risks Relating to the Mergers.
|
In the judgment of the Windrose board of trustees, however,
these potential risks were outweighed by the potential benefits
of the mergers described above.
The above discussion is not intended to be exhaustive, but does
set forth the material information and factors considered by
Windroses board of trustees in its consideration of the
merger and the merger agreement. Although each member of
Windroses board of trustees individually considered these
and other factors, Windroses board of trustees did not
collectively assign any specific or relative weights to the
factors considered and did not make any determination with
respect to any individual factor. Rather, Windroses board
of trustees made its recommendation based on the totality of
information presented to, and the investigation conducted by,
it. In considering the factors discussed above, individual
trustees may have given different weights to different factors.
Except as noted above, the possible negative impact on Windrose
was not quantified. The Windrose board of trustees collectively
made its determination based on the conclusions reached by its
members, in light of the factors that each of them considered
appropriate, that the merger is advisable on the terms set forth
in the merger agreement.
THE WINDROSE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF WINDROSE COMMON SHARES VOTE FOR
APPROVAL OF THE MERGER.
Opinion
of Windroses Financial Advisor
Pursuant to an engagement letter dated August 2, 2006,
Windrose retained JPMorgan as its financial advisor in
connection with the proposed merger.
At the meeting of the board of trustees of Windrose on
September 12, 2006, JPMorgan rendered its oral opinion,
subsequently confirmed in writing, to the board of trustees
that, as of such date and based upon and subject to the factors,
limitations and assumptions set forth in its opinion, the
exchange ratio in the proposed merger was fair, from a financial
point of view, to holders of Windrose common shares. No
limitations were imposed by the board of trustees upon JPMorgan
with respect to the investigations made or procedures followed
by it in rendering its opinion.
The full text of the written opinion of JPMorgan, dated
September 12, 2006, which sets forth, among other things,
the assumptions made, procedures followed, matters considered
and limits on the opinion and review undertaken in connection
with rendering its opinion, is included as Appendix D
to this proxy statement/prospectus and is incorporated
herein by reference. Holders of Windrose common shares are urged
to read the opinion in its entirety.
JPMorgans opinion is addressed to Windroses board of
trustees, is directed only to the exchange ratio in the proposed
merger and does not constitute a recommendation to any
shareholder of Windrose as to how such
33
shareholder should vote with respect to the proposed merger or
any other matter. JPMorgans opinion did not address the
underlying decision by Windrose or its board of trustees to
engage in the proposed merger. The summary of the opinion of
JPMorgan set forth in this proxy statement/prospectus is
qualified in its entirety by reference to the full text of such
opinion.
In arriving at its opinion, JPMorgan, among other things:
|
|
|
|
|
reviewed a draft dated September 12, 2006 of the merger
agreement;
|
|
|
|
reviewed certain publicly available business and financial
information concerning Windrose and Health Care REIT and the
industries in which they operate;
|
|
|
|
compared the financial and operating performance of Windrose and
Health Care REIT with publicly available information concerning
certain other companies JPMorgan deemed relevant and reviewed
the current and historical market prices of Windrose common
shares and Health Care REIT common stock and certain publicly
traded securities of such other companies;
|
|
|
|
reviewed certain internal financial analyses and forecasts
prepared by the managements of Windrose and Health Care REIT
relating to their respective businesses, as well as the
estimated amount and timing of the cost savings and related
expenses and synergies expected to result from the proposed
merger, which we refer to as the synergies;
|
|
|
|
performed such other financial studies and analyses and
considered such other information as JPMorgan deemed appropriate
for the purposes of its opinion; and
|
|
|
|
reviewed publicly available information relating to many
selected transactions in the industry. Given changes in the
interest rate environment and the fundamental differences
between different segments within the industry, no precedent
transactions were deemed by JPMorgan to be sufficiently
comparable so as to be relevant to the analysis.
|
JPMorgan also held discussions with certain members of the
managements of Windrose and Health Care REIT with respect to
certain aspects of the proposed merger, the past and current
business operations of Windrose and Health Care REIT, the
financial condition and future prospects and operations of
Windrose and Health Care REIT, the effects of the proposed
merger on the financial condition and future prospects of
Windrose and Health Care REIT, and certain other matters
JPMorgan believed necessary or appropriate to its inquiry.
In giving its opinion, JPMorgan relied upon and assumed, without
assuming responsibility or liability for independent
verification, the accuracy and completeness of all information
that was publicly available or was furnished to or discussed
with JPMorgan by Windrose and Health Care REIT or otherwise
reviewed by or for JPMorgan. JPMorgan did not conduct and was
not provided with any valuation or appraisal of any assets or
liabilities, and JPMorgan did not evaluate the solvency of
Windrose or Health Care REIT under any state, federal or foreign
laws relating to bankruptcy, insolvency or similar matters. In
relying on analyses and forecasts provided to it, including the
synergies, JPMorgan assumed that such analyses and forecasts
were reasonably prepared based on assumptions reflecting the
best currently available estimates and judgments by management
as to the expected future results of operations and financial
condition of Windrose and Health Care REIT to which such
analyses or forecasts related. JPMorgan expressed no view as to
such analyses or forecasts, including the synergies, or the
assumptions on which they were based. JPMorgan has also assumed
that the proposed merger will have the tax consequences
described in discussions with, and materials furnished to
JPMorgan by, representatives of Windrose, and that the other
transactions contemplated by the merger agreement will be
consummated as described in the merger agreement, and that the
definitive merger agreement will not differ in any material
respects from the draft thereof furnished to JPMorgan. JPMorgan
relied as to all legal matters relevant to rendering its opinion
upon the advice of counsel. JPMorgan further assumed that all
material governmental, regulatory or other consents and
approvals necessary for the consummation of the merger would be
obtained without any waiver of any condition to the completion
of the merger contained in the merger agreement.
JPMorgans opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made
available to JPMorgan as of, September 12, 2006. It should
be understood that subsequent developments may affect
JPMorgans opinion and that JPMorgan does not have any
obligation to update, revise or
34
reaffirm its opinion. JPMorgans opinion is limited to the
fairness, from a financial point of view, to holders of Windrose
common shares of the exchange ratio in the proposed merger, and
JPMorgan has expressed no opinion as to the fairness of the
proposed merger to, or any consideration of, the holders of any
other class of securities, creditors or constituencies of
Windrose, including the holders of Windrose OP units and the
Windrose preferred shares, or as to the underlying decision by
Windrose to engage in the proposed merger. JPMorgan expressed no
opinion as to the price at which Windrose common shares or
Health Care REIT common stock would trade at any future time.
JPMorgans opinion notes that it was not authorized to and
did not solicit any expressions of interest from any other
parties with respect to the sale of all or any part of Windrose
or any other alternative transaction.
Summary
of Certain Financial Analyses Conducted by JPMorgan
In connection with rendering its opinion to the board of
trustees, JPMorgan performed a variety of financial and
comparative analyses, including those described below. The
summary set forth below does not purport to be a complete
description of the analyses or data presented by JPMorgan. The
preparation of a fairness opinion is a complex process and is
not necessarily susceptible to partial analysis or summary
description. JPMorgan believes that the summary set forth below
and its analyses must be considered as a whole and that
selecting portions thereof, or focusing on information in
tabular format, without considering all of its analyses and the
narrative description of the analyses, could create an
incomplete view of the processes underlying its analyses and
opinion. The order of analyses described does not represent the
relative importance or weight given to those analyses by
JPMorgan. In arriving at its fairness determination, JPMorgan
considered the results of all the analyses and did not attribute
any particular weight to any factor or analysis considered by
it; rather, JPMorgan arrived at its opinion based on the results
of all the analyses undertaken by it and assessed as a whole.
JPMorgans analyses are not necessarily indicative of
actual values or actual future results that might be achieved,
which values may be higher or lower than those indicated.
Moreover, JPMorgans analyses are not and do not purport to
be appraisals or otherwise reflective of the prices at which
businesses actually could be bought or sold. Except as otherwise
noted, the following quantitative information, to the extent
that it is based on market data, is based on market data as it
existed on or before September 12, 2006 and is not
necessarily indicative of current market conditions.
JPMorgans opinion and financial analyses were only one of
the many factors considered by Windroses board of trustees
in its evaluation of the proposed merger and should not be
viewed as determinative of the views of Windroses board of
trustees or management with respect to the proposed merger or
the merger consideration. The consideration was determined
through negotiation between Windrose and Health Care REIT.
Historical Common Stock Performance and Exchange Ratio
Analysis: JPMorgans analysis of the
performance of Windrose common shares and Health Care REIT
common stock comprised a historical analysis of their respective
trading prices over the period from September 12, 2005 to
September 12, 2006, the last trading day prior to the
public announcement of the merger. During that twelve-month
period, Windrose common shares achieved a closing price high of
$15.75 per share and a closing price low of $13.59 per
share on February 9, 2006 and May 24, 2006,
respectively. During the same time period, Health Care REIT
common stock achieved a closing price high of $40.05 per
share and a closing price low of $32.88 per share on
September 12, 2006 and May 23, 2006, respectively.
JPMorgan noted that the ratio of the value of the Windrose
common shares to the value of Health Care REIT common stock as
calculated using the daily closing prices of Windrose common
shares and Health Care REIT common stock were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended on 9/12/2006
|
|
High (x)
|
|
|
Low (x)
|
|
|
Average (x)
|
|
|
Median (x)
|
|
|
1 week
|
|
|
0.3800
|
|
|
|
0.3749
|
|
|
|
0.3775
|
|
|
|
0.3785
|
|
1 month
|
|
|
0.4030
|
|
|
|
0.3749
|
|
|
|
0.3881
|
|
|
|
0.3886
|
|
3 months
|
|
|
0.4290
|
|
|
|
0.3749
|
|
|
|
0.4025
|
|
|
|
0.4038
|
|
6 months
|
|
|
0.4385
|
|
|
|
0.3749
|
|
|
|
0.4085
|
|
|
|
0.4074
|
|
1 year
|
|
|
0.4483
|
|
|
|
0.3749
|
|
|
|
0.4147
|
|
|
|
0.4131
|
|
|
|
|
|
|
JPMorgan noted that the range of the merger exchange ratio was
from 0.4509 to 0.4650 and that, as of September 12, 2006,
such ratio was 0.4509.
|
35
|
|
|
|
|
The purpose of this historical stock trading analysis is to
provide illustrative exchange ratios, or a measure of the
relative market values of Windrose common shares to Health Care
REIT common stock for the periods specified.
|
|
|
|
Publicly-Traded Comparable Company
Analysis: JPMorgan compared the financial and
operating performance of Windrose and Health Care REIT with
publicly available information of selected publicly traded
companies engaged in businesses which JPMorgan deemed relevant
to Windroses and Health Care REITs businesses. The
companies were as follows:
|
|
|
|
|
|
Health Care Property Investors, Inc.;
|
|
|
|
Ventas, Inc.;
|
|
|
|
Nationwide Health Properties, Inc.;
|
|
|
|
Healthcare Realty Trust Incorporated;
|
|
|
|
Senior Housing Properties Trust;
|
|
|
|
Omega Healthcare Investors, Inc.;
|
|
|
|
LTC Properties, Inc.;
|
|
|
|
Medical Properties Trust, Inc.;
|
|
|
|
Cogdell Spencer Inc.; and
|
|
|
|
Universal Health Realty Income Trust.
|
These companies were selected because, among other reasons, they
share similar business characteristics to Windrose and Health
Care REIT. However, none of the companies selected is identical
or directly comparable to Windrose or Health Care REIT.
Accordingly, JPMorgan made judgments and assumptions concerning
differences in financial and operating characteristics of the
selected companies and other factors that could affect the
public trading value of the selected companies.
For each of the selected companies, JPMorgan calculated:
|
|
|
|
|
Closing stock prices as of September 12, 2006 divided by
estimated FFO (FFO means Funds From Operations,
defined as net income (loss) (computed in accordance with GAAP),
excluding gains (or losses) from sales of properties, plus real
estate-related depreciation and amortization and other
comparable adjustments for Windroses portion of these
items related to unconsolidated entities and joint ventures) for
the calendar years 2006 and 2007, referred to as Price /
FFO multiple; and
|
|
|
|
Closing stock prices as of September 12, 2006 divided by
estimated FAD (FAD means Funds Available for
Distribution, defined as FFO excluding the non-cash
straight-line rental adjustments) for the calendar years 2006
and 2007, referred to as Price / FAD multiple.
|
The estimates of FFO and FAD for each of the selected companies
were based on publicly available estimates of certain securities
research analysts.
The following table reflects the results of the analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading Multiples Analysis
|
|
Range
|
|
|
Median
|
|
|
Average
|
|
|
Price / FFO (calendar year 2006)
|
|
|
12.2x 16.7
|
x
|
|
|
13.6
|
x
|
|
|
14.0x
|
|
Price / FFO (calendar year 2007)
|
|
|
10.3x 14.9
|
x
|
|
|
12.9
|
x
|
|
|
12.9x
|
|
Price / FAD (calendar year 2006)
|
|
|
13.1x 17.6
|
x
|
|
|
13.9
|
x
|
|
|
14.5x
|
|
Price / FAD (calendar year 2007)
|
|
|
12.0x 15.8
|
x
|
|
|
13.0
|
x
|
|
|
13.4x
|
|
Based on the Price / FFO multiple ranges set forth in the table
above, this analysis implied a range for Windrose common shares
of $14.60 to $17.40 per share and for Health Care REIT common
stock of $36.50 to $42.55 per share. JPMorgan noted that
the implied range of exchange ratios given these ranges was
0.345 to 0.475. Based on the Price / FAD multiple ranges set
forth in the table above, this analysis implied a range for
Windrose common
36
shares of $14.25 to $16.75 per share and for Health Care
REIT common stock of $38.20 to $44.10 per share. JPMorgan
noted that the implied range of exchange ratios given these
ranges was 0.325 to 0.440.
Relative Contribution Analysis: JPMorgan
reviewed the relative contribution of Windrose and Health Care
REIT to the forecasted net operating income, or NOI, FFO, FAD
and dividends of the combined company for the calendar year
2006. The calendar year 2006 forecasted NOI, FFO, FAD and
dividends for both Windrose and Health Care REIT were based on
management estimates. JPMorgan also reviewed contribution based
on Wall Street consensus estimates for calendar year 2006 FFO
and FAD. The relative contribution analysis did not take into
effect the impact of any synergies as a result of the proposed
merger.
JPMorgan adjusted the relative contribution percentages
resulting from NOI to reflect the relative capital structures
for each of Windrose and Health Care REIT, including the
conversion of outstanding Windrose preferred shares into
Windrose common shares on an economic basis (i.e., when
Windroses value per share exceeded $15.75). The adjusted
relative contribution percentages resulting from NOI as well as
the relative contribution percentages based on FFO, FAD and
dividends were used to determine the implied pro forma ownership
percentages, or pro forma ownership, of the combined
company for the common stockholders of Health Care REIT and
Windrose. The pro forma ownership percentages were used to
determine the implied exchange ratio of each Windrose common
share to Health Care REIT common stock. The following table
presents the results of the relative contribution analysis based
on management estimates and Wall Street consensus estimates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Implied
|
|
|
|
|
|
|
Ownership of the Combined Company
|
|
|
Implied
|
|
|
|
Windrose
|
|
|
Health Care REIT
|
|
|
Exchange
|
|
|
|
Shareholders
|
|
|
Stockholders
|
|
|
Ratio
|
|
|
Management
|
|
|
|
|
|
|
|
|
|
|
|
|
CY 2006 NOI
|
|
|
16.8
|
%
|
|
|
83.2
|
%
|
|
|
0.513
|
|
CY 2006 FFO
|
|
|
14.3
|
%
|
|
|
85.7
|
%
|
|
|
0.422
|
|
CY 2006 FAD
|
|
|
11.7
|
%
|
|
|
88.3
|
%
|
|
|
0.387
|
|
CY 2006 dividends
|
|
|
11.9
|
%
|
|
|
88.1
|
%
|
|
|
0.395
|
|
Wall Street Consensus
|
|
|
|
|
|
|
|
|
|
|
|
|
CY 2006 FFO
|
|
|
14.2
|
%
|
|
|
85.8
|
%
|
|
|
0.420
|
|
CY 2006 FAD
|
|
|
10.8
|
%
|
|
|
89.2
|
%
|
|
|
0.354
|
|
JPMorgan noted that the implied pro forma ownership of the
combined company based on the exchange ratio as of
September 12, 2006 of 0.4509 would be 84.9% for Health Care
REIT stockholders and 15.1% for Windrose shareholders.
Dividend Discount Model Analysis. JPMorgan
calculated ranges of implied equity value per share for both
Windrose common shares and Health Care REIT common stock by
performing dividend discount model analysis based on management
projections for the calendar years 2006 through 2011 for both
Windrose and Health Care REIT. The dividend discount model
analysis assumed a valuation date of December 31, 2006 and
did not take into effect the impact of any synergies as a result
of the proposed merger.
A dividend discount model analysis is a traditional method of
evaluating a stock by estimating the future dividends of a stock
and taking into consideration the time value of money with
respect to those future dividends by calculating the
present value of the estimated future dividends of
the stock. Present value refers to the current value
of one or more future dividends from a stock and is obtained by
discounting those future dividends or amounts by a discount rate
that takes into account macro-economic assumptions and estimates
of risk, the opportunity cost of capital, expected returns, the
capital structure of a company and other appropriate factors.
Other financial terms utilized below are terminal
value, which refers to the value of all future dividends
from a stock at a particular point in time.
In arriving at the estimated equity values per Windrose common
share, JPMorgan calculated terminal values per Windrose common
share as of December 31, 2011 by applying a range of
perpetual dividend growth rates of 1.75% to 2.25% and a range of
discount rates of 10.5% to 11.5%. The dividend per Windrose
common share for each of the calendar years 2007 through 2011
and the terminal value per Windrose share were then discounted
to
37
present values using a range of discount rates of 10.5% to 11.5%
in order to derive a range of equity values per Windrose common
share. In calculating an equity value per Windrose common share,
JPMorgan adjusted the equity value for the conversion of
outstanding Windrose preferred shares into common shares on an
economic basis (i.e., converted to common equity when the
value per Windrose common share exceeded $15.75 and treated as
debt when the value per Windrose common share was below $15.75).
In arriving at the estimated equity values per share of Health
Care REIT common stock, JPMorgan calculated terminal values as
of December 31, 2011 by applying a range of perpetual
dividend growth rates of 1.75% to 2.25% and a range of discount
rates of 9.0% to 10.0%. The dividend per share of Health Care
REIT common stock for each of the calendar years 2007 through
2011 and the terminal value per Windrose common share were then
discounted to present values using a range of discount rates of
9.0% to 10.0% in order to derive a range of equity values for
shares of Health Care REIT common stock.
Based on the assumptions set forth above, this analysis implied
a range for Windrose common shares of $14.90 to $17.00 per
share and for shares of Health Care REIT common stock of $33.55
to $40.15 per share. JPMorgan noted that the implied range
of exchange ratios given these ranges was 0.370 to 0.505.
JPMorgan noted that the range of the merger exchange ratio was
from 0.4509 to 0.4650 and that, as of September 12, 2006,
such ratio was 0.4509.
Net Asset Value Analysis. JPMorgan performed a
net asset value per share analysis for both Windrose and Health
Care REIT. In order to calculate the aggregate property value of
Windrose, JPMorgan valued the properties of Windrose by applying
market capitalization rates to calendar year 2007 estimated,
aggregated same-store NOI. Based on guidance from Windrose and
taking into consideration current market conditions, the
perceived quality of the properties as a whole and publicly
available information regarding capitalization rates, JPMorgan
applied capitalization rates of 7.50% to 7.75% to medical office
buildings, 8.25% to ambulatory surgery centers, and 8.50% to
hospitals to derive a range of aggregate property values for
Windrose. JPMorgan then added the estimated value of
Windroses other assets and subtracted:
|
|
|
|
|
debt of Windrose as of June 30, 2006 as reported in its
public filings;
|
|
|
|
other outstanding liabilities; and
|
|
|
|
marked-to-market
adjustment for Windroses debt
|
to derive estimates of Windroses aggregate net asset
value. JPMorgan calculated the implied net asset value per share
range by dividing the calculated aggregate net asset value by
the number of Windrose common shares outstanding as of
June 30, 2006 (including the dilutive effect of options at
the most current stock price), including the conversion of
outstanding Windrose preferred shares into common shares on an
economic basis (i.e., when the value per Windrose common
share exceeded $15.75).
In order to calculate the aggregate property value of Health
Care REIT, JPMorgan valued the properties of Health Care REIT by
applying market capitalization rates to calendar year 2007
estimated, aggregated net operating income. Based on guidance
from Health Care REIT and taking into consideration current
market conditions, the perceived quality of the properties as a
whole and publicly available information regarding
capitalization rates, JPMorgan selected capitalization rates of
7.50% to 8.25% to apply to Health Care REITs estimated
calendar year 2007 same store net operating income to derive a
range of aggregate property values for Health Care REIT.
JPMorgan then added the estimated value of Health Care
REITs other assets and subtracted:
|
|
|
|
|
debt of Health Care REIT as of June 30, 2006 as reported in
its public filings;
|
|
|
|
other outstanding liabilities; and
|
|
|
|
marked-to-market
adjustment for Health Care REITs debt
|
to derive estimates of Health Care REITs aggregate net
asset value. JPMorgan calculated the implied net asset value per
share range by dividing the calculated aggregate net asset value
by the number of shares of Health Care REIT common stock as of
June 30, 2006 (including the dilutive effect of options at
the most current stock price).
38
Based on the assumptions set forth above, this analysis implied
a range for Windrose common shares of $16.10 to $16.80 per
share and for shares of Health Care REIT common stock of $35.10
to $40.85 per share. JPMorgan noted that the implied range
of exchange ratios given these ranges was 0.395 to 0.480.
JPMorgan noted that the range of the merger exchange ratio was
from 0.4509 to 0.4650 and that, as of September 12, 2006,
such ratio was 0.4509.
Precedent Transactions and Premium Paid
Analysis: JPMorgan reviewed publicly-available
information relating to the following selected transactions:
Selected Transactions
100% stock transactions
Lexington Corporate Properties Trust / Newkirk Realty
Trust
Colonial Properties Trust / Cornerstone Realty
Pennsylvania REIT / Crown America
Cash and stock transactions
SL Green Realty Corp / Reckson Associates Realty Corp
Health Care Property Investors / CNL Retirement Properties
Brandywine Realty Trust / Prentiss Properties Trust
Prologis / Catellus Development Corp
Ventas / Provident Senior Living Trust
Camden Property Trust / Summit Properties
Simon Property Group / Chelsea Group
100% cash transactions
Kimco Realty / Pan Pacific Retail Properties
Centro Watt / Heritage Property Investment Trust
Brookfield Properties and Blackstone Group / Trizec
Properties
Blackstone Group / CarrAmerica Realty
Blackstone Group / MeriStar Hospitality
Morgan Stanley & Onex / Town and Country Trust
LBA Reality / Bedford Property Investors
GE Real Estate / Trizec / Arden Realty
CalEast Industrial Investors / Centerpoint Properties Trust
MSREs Prime Property Fund / AMLI Residential Trust
DRA Advisors / Capital Automotive REIT
DRA Advisors / CRT Properties
ING Clarion Partnership / Gables Residential Trust
Centro Properties Trust & Watt Commercial Properties /
Kramont REIT
Kimco and DRA Advisors JV / Price Legacy
General Growth Properties / The Rouse Company
Prologis and Eaton Vance / Keystone Property
Ventas / Elder Trust Realty Group
Hometown America LLC / Chateau Communities
CNL Hospitality / RFS Hotel Investors
JPMorgan calculated the premium paid in each of the above
transactions to the
1-day prior
unaffected price of the targets. The following table summarizes
the results of these calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consideration Type
|
|
High
|
|
|
Low
|
|
|
Average
|
|
|
Median
|
|
|
100% stock
|
|
|
7.3
|
%
|
|
|
(6.5
|
)%
|
|
|
(0.1
|
)%
|
|
|
(1.0
|
)%
|
Cash and stock
|
|
|
16.1
|
%
|
|
|
(1.5
|
)%
|
|
|
9.3
|
%
|
|
|
12.8
|
%
|
100% cash
|
|
|
35.0
|
%
|
|
|
(3.7
|
)%
|
|
|
13.5
|
%
|
|
|
14.8
|
%
|
39
Given changes in the interest rate environment and the
fundamental differences between different segments within the
industry, no precedent transactions were deemed by JPMorgan to
be sufficiently comparable so as to be relevant to the analysis.
Pro Forma Analysis. JPMorgan analyzed the pro
forma impact of the merger on estimated FFO per share and FAD
per share for Health Care REIT and Windrose for calendar years
2007 and 2008. The pro forma results were calculated as if the
merger were to close on December 31, 2006 and were based on
estimated earnings as well as potential synergies derived from
management for both Health Care REIT and Windrose. The following
table presents the accretion (dilution) analysis on Health Care
REITs and Windroses earnings per share for calendar
years 2007 and 2008, based on pro forma FFO per Windrose common
share and FAD per Windrose common share:
|
|
|
|
|
|
|
|
|
|
|
Accretion / (Dilution)
|
|
|
|
CY2007
|
|
|
CY2008
|
|
|
FFO per share
|
|
|
|
|
|
|
|
|
Health Care REIT
|
|
|
1.4
|
%
|
|
|
3.0
|
%
|
Windrose
|
|
|
(5.7
|
)%
|
|
|
(10.9
|
)%
|
FAD per share
|
|
|
|
|
|
|
|
|
Health Care REIT
|
|
|
0.9
|
%
|
|
|
1.7
|
%
|
Windrose
|
|
|
(3.0
|
)%
|
|
|
(5.5
|
)%
|
Value Creation Analysis. JPMorgan analyzed the
pro forma impact of the merger on the equity value per share of
Windrose common shares. The pro forma results were calculated as
if the merger were to close on December 31, 2006 and were
based on the unaffected price per Windrose common share on
September 12, 2006, prior to the public announcement by
Windrose and Health Care REIT of the merger. JPMorgan calculated
the potential increase (decrease) in the equity value per
Windrose common share based on the after-tax present value of
the expected synergies that could be achieved by the combined
company after taking into account the cost of achieving the
synergies and transaction expenses. The analysis was based on
the exchange ratio as of September 12, 2006 of 0.4509 and
on estimates derived from management estimates for synergies for
each of Windrose and Health Care REIT. Based on the assumptions
set forth above, this analysis implied value creation per
Windrose common share of up to $2.46 relative to its closing
price per share of $15.18 on September 12, 2006.
Miscellaneous
As a part of its investment banking business, JPMorgan and its
affiliates are continually engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions; investments for passive and control purposes;
negotiated underwritings; secondary distributions of listed and
unlisted securities; private placements; and valuations for
estate, corporate and other purposes.
JPMorgan was selected by Windrose as its financial advisor based
on JPMorgans qualifications, reputation and experience in
the valuation of businesses and securities in connection with
mergers and acquisitions and its familiarity with Windrose.
Windrose engaged JPMorgan to provide financial advisory services
to Windroses board of trustees in connection with the
merger, including, among other things, delivering its opinion.
Pursuant to the terms of the engagement letter, Windrose has
agreed to pay JPMorgan a fee of 0.75% of the aggregate
consideration, which includes the indebtedness of Windrose
assumed by Health Care REIT, to be paid in the merger if the
merger is completed. Such fee would have equaled approximately
$6.6 million on September 12, 2006, the date the
merger agreement was executed. While a customary portion of the
fee was paid upon announcement of the merger, a significant
portion of JPMorgans fee is contingent upon the completion
of the merger. In addition, Windrose has agreed to reimburse
JPMorgan for its reasonable expenses incurred in connection with
its engagement, including the reasonable fees of its counsel.
Such reimbursement will not exceed $60,000 without
Windroses prior consent. Windrose has agreed to indemnify
JPMorgan for certain liabilities arising out of its engagement,
including liabilities under federal securities laws.
JPMorgan and its affiliates have provided investment banking and
commercial banking services from time to time to Windrose,
Health Care REIT and their respective affiliates for which it
has received customary fees. Such past services for Health Care
REIT have included (i) acting as a participating lender in
a revolving credit facility in
40
2003, as amended and restated in 2005 and 2006, (ii) acting
as co-manager in two senior unsecured notes offerings in 2005
and (iii) acting as manager in a cumulative redeemable
preferred stock offering in 2004. Such past services for
Windrose have included acting as co-manager for a revolving
credit facility in 2003. JPMorgan noted that in the ordinary
course of its businesses, JPMorgan and its affiliates may
actively trade the debt and equity securities of Windrose and
Health Care REIT for its own account or for the accounts of
customers and, accordingly, it may at any time hold long or
short positions in such securities.
Health
Care REITs Reasons for the Mergers
In the course of reaching its decision on September 12,
2006 to approve the merger agreement and the issuance of shares
of Health Care REIT common stock to Windrose shareholders and
holders of Windrose OP units, the Health Care REIT board of
directors considered and reviewed with senior management and
outside financial and legal advisors a significant amount of
information and factors relevant to the merger, including but
not limited to the following:
|
|
|
|
|
the belief of Health Care REITs board, shared by Health
Care REITs management, that the portfolio of properties
that Health Care REIT would acquire from Windrose in the mergers
has positive long-term prospects;
|
|
|
|
the expertise of Windroses management team relating to
medical office buildings and other specialty medical properties;
|
|
|
|
the fact that the mergers, if consummated, would result in
Health Care REIT achieving a critical mass in a targeted new
asset class that would be complementary to Health Care
REITs existing portfolio;
|
|
|
|
the fact that the mergers, if consummated, would result in the
diversification of Health Care REITs asset base; and
|
|
|
|
the belief of Health Care REITs board of directors that
the overall terms of the merger agreement are fair to Health
Care REIT.
|
Health Care REITs board of directors also considered a
variety of risks and other potentially negative factors
concerning the merger. These factors included but were not
limited to the following:
|
|
|
|
|
the potential difficulties that Health Care REIT might
experience integrating the Windrose portfolio;
|
|
|
|
the risk that Windrose shareholders might not approve the merger;
|
|
|
|
the risk that the anticipated benefits of the mergers might not
be fully realized;
|
|
|
|
the risks to Health Care REIT associated with the provision of
interim financing to Windrose on the terms proposed in the event
that the mergers are not completed; and
|
|
|
|
the possible disruption to Health Care REITs business that
might result from the announcement of the mergers and the
resulting distraction of the attention of Health Care
REITs management.
|
The foregoing discussion of the information and factors
considered by Health Care REITs board of directors is not
intended to be exhaustive but, Health Care REIT believes,
includes all material factors considered by its board of
directors. The Health Care REIT board of directors did not
assign any specific or relative weight to the information it
reviewed in the course of its consideration. Based on the
factors outlined above, the board of directors determined that
the merger agreement and the transactions contemplated thereby
are advisable and in the best interests of Health Care REIT and
the holders of its common stock.
Interests
of Windroses Trustees and Executive Officers in the
Mergers
In considering the recommendation of Windroses board of
trustees with respect to the merger, you should be aware that,
as described below, certain executive officers and trustees of
Windrose have interests in, and will receive benefits from, the
mergers and certain other transactions contemplated by the
merger agreement that are different from, or in addition to, the
interests of Windrose shareholders generally. Windroses
board of trustees was aware of
41
the interests described below and considered them, among other
matters, when approving the merger agreement and recommending
that Windrose shareholders vote to approve the merger.
Representation
on the Health Care REIT Board of Directors
The merger agreement provides that Fred S. Klipsch,
Windroses current chairman of the board and chief
executive officer, will be appointed to the Health Care REIT
board of directors upon completion of the merger, provided that
such appointment would not be in violation of any applicable
legal requirements or rules of the New York Stock Exchange. In
the event the appointment of Mr. Klipsch would be in
violation of any applicable legal requirements or rules of the
New York Stock Exchange or if Mr. Klipsch is unwilling or
unable to serve, the Health Care REIT board of directors will
appoint a replacement nominated by Windrose, subject to the
consent of Health Care REIT, which consent will not unreasonably
be withheld. Mr. Klipsch will not receive compensation for
his services as a director of Health Care REIT during the term
of his consulting agreement.
New
Consulting and Employment Agreements with Health Care
REIT
Each of Messrs. Klipsch and Farrar has entered into a
consulting agreement with Health Care REIT as described under
The Merger Agreement Related
Agreements Consulting Agreements. Under these
agreements, Messrs. Klipsch and Farrar will be entitled to
receive certain material benefits, including, among other
things, an up front cash payment from Health Care REIT equal to
$1.68 million and $1.2 million payable to
Mr. Klipsch and Mr. Farrar, respectively. These cash
payments will be made in lieu of amounts payable to each of them
upon termination without cause or resignation for good reason
within 24 months of a change in control under the change in
control severance agreements effective August 22, 2002 and
the employment agreements dated February 21, 2005 between
Mr. Klipsch, Windrose and Windrose OP, and between
Mr. Farrar, Windrose and Windrose OP. In addition, Health
Care REIT has agreed to indemnify Messrs. Klipsch and
Farrar for any excise taxes assessed against these executive
officers under Section 4999 of the Code as a result of
benefits, payments, accelerated exercisability and vesting of
equity awards and other rights under the consulting agreements
or otherwise.
Daniel R. Loftus has entered into an employment agreement with
Health Care REIT as described under The Merger
Agreement Related Agreements Employment
Agreement. Mr. Loftuss employment agreement
with Health Care REIT supersedes the change in control severance
agreement, effective February 3, 2006, between
Mr. Loftus, Windrose and Windrose OP. Health Care REIT has
agreed to indemnify Mr. Loftus for any excise taxes
assessed against him under Section 4999 of the Code as a
result of benefits, payments, accelerated exercisability and
vesting of equity awards and other rights under the employment
agreement or otherwise.
Option
Vesting, Conversion of Options and Restricted Stock
Awards
Pursuant to the merger agreement, all outstanding options to
acquire Windrose common shares granted under the Windrose
Employee Share Purchase Plan and the Amended and Restated 2002
Stock Incentive Plan (or its predecessor 2002 Stock Incentive
Plan), which plans are referred to in this section as the
stock plans, will become fully vested and will be
converted into options to acquire the number of shares of Health
Care REIT common stock multiplied by the exchange ratio. The
Health Care REIT options will have the same general terms and
conditions as the Windrose options from which they were
converted, except that the per share exercise price of each
option to acquire shares of Health Care REIT common stock will
be determined by dividing the exercise price of each Windrose
option by the exchange ratio. As of the record date, the
executive officers and trustees of Windrose held in the
aggregate outstanding options to acquire [ ]
Windrose common shares that were granted pursuant to the stock
plans. Of these, options to acquire [ ]
Windrose common shares granted pursuant to the stock plans were
unvested as of the record date and will vest in full immediately
prior to the completion of the merger.
Pursuant to the merger agreement, any outstanding unvested
restricted Windrose common shares held by employees, executive
officers and trustees of Windrose that were granted under the
stock plans will become fully vested and will be converted into
the number of shares of Health Care REIT common stock obtained
by multiplying such number of restricted Windrose common shares
by the exchange ratio. Such shares of Health Care REIT common
stock shall not be subject to restriction or vesting. As of the
record date, the executive officers and trustees
42
of Windrose held in the aggregate [ ]
outstanding restricted Windrose common shares, which will vest
in full immediately prior to the completion of the merger.
The following table sets forth the estimated potential benefit
that each trustee and executive officer of Windrose will derive
as a result of the accelerated vesting of equity-based
compensation that will occur in connection with the merger. All
estimates are based on awards outstanding as of September 12,
2006 and assume a value of $18.06 per Windrose common share
underlying the options and a value of $18.06 for each restricted
Windrose common share. The last reported sale price of a
Windrose common share on the New York Stock Exchange on
September 12, 2006, the day before the merger was publicly
announced, was $15.18 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Benefit of
|
|
|
Total
|
|
|
|
|
|
|
Exercise
|
|
|
Benefit of
|
|
|
|
|
|
Accelerated
|
|
|
Potential
|
|
|
|
|
|
|
Price of
|
|
|
Accelerated
|
|
|
Unvested
|
|
|
Vesting of
|
|
|
Benefit of
|
|
|
|
|
|
|
Unvested
|
|
|
Vesting of
|
|
|
Shares of
|
|
|
Restricted
|
|
|
Accelerated
|
|
|
|
Unvested
|
|
|
Options
|
|
|
Options
|
|
|
Restricted
|
|
|
Stock
|
|
|
Vesting
|
|
Name(1)
|
|
Options
|
|
|
($)
|
|
|
($)
|
|
|
Stock
|
|
|
($)
|
|
|
($)
|
|
|
R. Walker Batts
|
|
|
5,560
|
|
|
$
|
13.74
|
|
|
$
|
24,031
|
|
|
|
483
|
|
|
$
|
8,723
|
|
|
$
|
32,754
|
|
Robert L.
Bowen(2)
|
|
|
4,000
|
|
|
$
|
14.70
|
|
|
|
13,440
|
|
|
|
|
|
|
|
|
|
|
|
13,440
|
|
Steve Buckeridge
|
|
|
9,820
|
|
|
$
|
14.23
|
|
|
|
37,632
|
|
|
|
900
|
|
|
|
16,254
|
|
|
|
53,886
|
|
Paula J. Conroy
|
|
|
11,600
|
|
|
$
|
14.76
|
|
|
|
38,248
|
|
|
|
800
|
|
|
|
14,448
|
|
|
|
52,696
|
|
Frederick L. Farrar
|
|
|
75,200
|
|
|
$
|
14.56
|
|
|
|
263,148
|
|
|
|
20,792
|
|
|
|
375,504
|
|
|
|
638,652
|
|
Bruce M.
Jacobson(2)
|
|
|
6,500
|
|
|
$
|
14.38
|
|
|
|
23,925
|
|
|
|
|
|
|
|
|
|
|
|
23,925
|
|
Fred S.
Klipsch(2)
|
|
|
102,800
|
|
|
$
|
14.62
|
|
|
|
353,447
|
|
|
|
31,325
|
|
|
|
565,730
|
|
|
|
919,177
|
|
Daniel R. Loftus
|
|
|
55,200
|
|
|
$
|
14.58
|
|
|
|
191,955
|
|
|
|
3,583
|
|
|
|
64,709
|
|
|
|
256,664
|
|
David L.
Maraman(2)
|
|
|
6,500
|
|
|
$
|
14.38
|
|
|
|
23,925
|
|
|
|
|
|
|
|
|
|
|
|
23,925
|
|
O.B. McCoin
|
|
|
24,000
|
|
|
$
|
14.32
|
|
|
|
89,715
|
|
|
|
1,833
|
|
|
|
33,104
|
|
|
|
122,819
|
|
Bryan A.
Mills(2)
|
|
|
5,500
|
|
|
$
|
14.81
|
|
|
|
17,865
|
|
|
|
|
|
|
|
|
|
|
|
17,865
|
|
Philip J. ODonnell
|
|
|
6,400
|
|
|
$
|
14.70
|
|
|
|
21,504
|
|
|
|
|
|
|
|
|
|
|
|
21,504
|
|
Jean L.
Wojtowicz(2)
|
|
|
6,500
|
|
|
$
|
14.38
|
|
|
|
23,925
|
|
|
|
|
|
|
|
|
|
|
|
23,925
|
|
Darell E.
Zink, Jr.(2)
|
|
|
6,500
|
|
|
$
|
14.38
|
|
|
|
23,925
|
|
|
|
|
|
|
|
|
|
|
|
23,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
326,080
|
|
|
|
|
|
|
$
|
1,146,685
|
|
|
|
59,716
|
|
|
$
|
1,078,472
|
|
|
$
|
2,225,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In addition to the individuals
listed above, Doug Hanson, Steve L. Horn and John Sweet were
employed by Windrose. Stephen Goldsmith served as a trustee
during 2005. However, all restricted share and option grants
have either been exercised or forfeited.
|
|
(2) |
|
Trustee
|
Tax
Indemnity Agreement
Messrs. Klipsch and Farrar, Steve Klipsch and Mike Klipsch,
sons of Mr. Klipsch, Charles Lanham, a former Windrose
trustee, Robin Barksdale, a current Windrose employee, and O.B.
McCoin, an executive vice president of Windrose, have entered
into separate agreements with Health Care REIT that provide for
the payment by Health Care REIT of a cash amount to such
individuals that represents their tax liability resulting from
the conversion of certain of their Windrose OP units into Health
Care REIT common stock upon completion of the operating
partnership merger plus a tax gross-up payment. See The
Merger Agreement Related Agreements Tax
Indemnity Agreements.
Support
Agreements
Each of Fred S. Klipsch and Frederick L. Farrar have entered
into a support agreement with Health Care REIT as described
under The Merger Agreement Related
Agreements Support Agreements.
43
Indemnification
and Insurance
In the merger agreement, Health Care REIT has agreed to cause
the surviving entity in the merger from and after the effective
time of the merger to provide exculpation and indemnification
for each present and former officer, director or trustee of
Windrose or its subsidiaries to the same extent as currently
provided in Windroses declaration of trust and bylaws.
Furthermore, Windrose is obligated to purchase, before the
completion of the merger, run off directors
and officers liability insurance for the benefit of
Windroses trustees and officers for a period of six years,
which will provide the trustees and officers with coverage on
terms no less favorable to Windroses trustees and officers
as is currently provided by Windrose to these trustees and
officers. For a more complete discussion of these provisions of
the merger agreement, see the section titled The Merger
Agreement Covenants and Agreements
Director and Officer Insurance and Indemnification of this
proxy statement/prospectus.
Completion
of the Merger
Health Care REIT and Windrose expect that the merger will be
completed on or about [ ], 2006 if, at the
special meeting of Windrose shareholders, Windrose shareholders
approve the merger. The completion of the merger could be
delayed beyond this date due to certain factors, including the
need for receipt of necessary third party consents. A
description of the conditions to the completion of the merger
appears below under The Merger Agreement
Conditions to the Mergers.
Vote
Required for Approval
It is a condition to the completion of the merger that
Windroses shareholders approve the merger proposal by the
required vote. Windroses declaration of trust and bylaws
require that the merger must be affirmatively approved by
holders of a majority of the Windrose common shares outstanding
and entitled to vote at the special meeting. A vote of the
holders of Health Care REIT common stock or holders of Windrose
preferred shares or Windrose OP units is not required to approve
the merger.
Anticipated
Accounting Treatment
It is expected that the merger will be accounted for as a
purchase by Health Care REIT of Windrose under U.S. GAAP. Under
the purchase method of accounting, the assets and liabilities of
the acquired company are, as of completion of the merger,
recorded at their respective fair values and added to those of
the acquiring company. Financial statements of Health Care REIT
issued after consummation of the merger will only reflect the
operations of Windrose after the merger and will not be restated
retroactively to reflect the historical financial position or
results of operations of Windrose.
All unaudited pro forma financial information contained in this
proxy statement/prospectus has been prepared using the purchase
method to account for the merger. The allocation of the purchase
price will be determined after the merger is completed and after
completion of an analysis to determine the assigned fair values
of Windroses tangible and identifiable intangible assets
and liabilities. In addition, estimates related to restructuring
and merger-related charges are subject to final decisions
related to combining Health Care REIT and Windrose. Accordingly,
the final purchase accounting adjustments and restructuring and
merger-related charges may be materially different from the
unaudited pro forma adjustments presented in this proxy
statement/prospectus.
Merger
Fees, Costs and Expenses
All expenses incurred in connection with the merger agreement
and the transactions contemplated by the merger agreement will
be paid by the party incurring those expenses. Notwithstanding
the foregoing, Windrose and Health Care REIT have agreed to pay
the other partys
out-of-pocket
expenses up to specified limits in certain circumstances if the
merger agreement is terminated by one of the parties. See
The Merger Agreement Termination Fee and
Expense Reimbursement.
44
Resale of
Health Care REIT Common Stock and Health Care REIT Preferred
Stock
The shares of Health Care REIT common stock and Health Care REIT
preferred stock issued in the mergers will be registered under
the Securities Act. These shares will be freely transferable
under the Securities Act, except for shares issued to persons
who may be deemed to be affiliates of Windrose for
purposes of Rule 145 under the Securities Act. Affiliates
may not sell their shares of Health Care REIT common stock or
Health Care REIT preferred stock acquired in the mergers except
pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with
Rule 145 promulgated under the Securities Act or another
applicable exemption from the registration requirements of the
Securities Act. Persons who may be deemed to be affiliates of
Windrose generally include individuals or entities that control,
are controlled by, or are under common control with, Windrose
and may include officers and trustees of Windrose as well as
principal shareholders of Windrose. Health Care REIT will
receive an affiliate agreement from persons deemed
to be affiliates of Windrose under
Section 2(11) of the Securities Act and Rule 145(c)
thereunder, which will provide that each affiliate of Windrose
will not sell, transfer or otherwise dispose of any shares of
Health Care REIT common stock or Health Care REIT preferred
stock issued to such person in connection with the mergers
except in compliance with the applicable provisions of the
Securities Act and the rules and regulations thereunder.
This document does not constitute a registration statement
covering resales of shares of Health Care REIT common stock by
persons who are otherwise restricted from selling their shares
of Health Care REIT common stock pursuant to Rule 144 or
Rule 145 of the Securities Act.
Regulatory
Matters Related to the Mergers
No material regulatory approvals are required in order to
consummate the mergers and the other transactions contemplated
by the merger agreement.
No
Dissenters or Appraisal Rights
The Maryland REIT Law provides that in some mergers,
shareholders who do not vote in favor of a merger and who comply
with a series of statutory requirements have the right to
receive, instead of the merger consideration, the fair value of
their shares as appraised by appraisers appointed by a Maryland
court or, in certain circumstances, by the court itself, payable
in cash. However, pursuant to the Maryland REIT Law, no
dissenters or appraisal rights are available to holders of
Windrose common shares with respect to the merger.
Stock
Exchange Listing and Related Matters
Health Care REIT has agreed to use its reasonable best efforts
to cause the shares of Health Care REIT common stock and Health
Care REIT preferred stock to be issued in the mergers to be
approved for listing, upon official notice of issuance, on the
New York Stock Exchange. Health Care REIT will file a
supplemental listing application with the New York Stock
Exchange after the date of this proxy statement/prospectus. It
is a condition to the merger that the Health Care REIT common
stock and Health Care REIT preferred stock to be issued in the
mergers shall have been approved for listing on the New York
Stock Exchange, subject to official notice of issuance.
45
THE
MERGER AGREEMENT
The following is a summary of selected material provisions of
the merger agreement. This summary is qualified in its entirety
by reference to the complete text of the merger agreement, as
amended, which is incorporated by reference in its entirety and
attached to this proxy statement/prospectus as
Appendix A and Appendix B. We urge you
to read carefully the merger agreement in its entirety.
The merger agreement has been attached to this proxy
statement/prospectus to provide you with information regarding
its terms. It is not intended to provide any other factual
information about Health Care REIT or Windrose. Such information
can be found elsewhere in this proxy statement/prospectus and in
the other public filings made by Health Care REIT and Windrose
with the SEC, which are available without charge at
http://www.sec.gov.
The merger agreement contains representations and warranties
made by and to the parties to the merger agreement as of
specific dates. The statements embodied in those representations
and warranties were made solely for purposes of the contract
between Health Care REIT and Windrose and may be subject to
important qualifications and limitations agreed to by Health
Care REIT and Windrose in connection with negotiating its terms.
In addition, certain representations and warranties are subject
to contractual standards of materiality that may be different
from what may be viewed as material to shareholders. The
representations and warranties may have been used for the
purpose of allocating risk between the parties rather than
establishing matters as facts. For the foregoing reasons, you
should not rely on the representations and warranties as
statements of factual information.
If the merger is approved by Windroses shareholders and
all other conditions to the mergers are satisfied or waived,
Windrose will merge with and into Heat Merger Sub, with Heat
Merger Sub continuing as the surviving entity following the
merger. Immediately prior to, and as a condition of, the merger,
Heat OP Merger Sub will merge with and into Windrose OP, with
Windrose OP continuing as the surviving partnership following
the operating partnership merger.
|
|
|
Closing
and Effective Time of the Merger
|
Unless otherwise agreed to by Health Care REIT and Windrose, the
merger will close on the first business day after all of the
conditions set forth in the merger agreement are either
satisfied or waived. The merger will become effective when the
articles of merger filed with the State Department of
Assessments and Taxation of Maryland and the certificate of
merger filed with the Secretary of State of Delaware have been
accepted for record in accordance with Maryland REIT Law and the
DGCL (or such other time as agreed to by Health Care REIT and
Windrose and designated in the articles of merger and the
certificate of merger). The operating partnership merger will
become effective when the articles of merger filed with the
State Corporation Commission of Virginia have been accepted for
record in accordance with the Virginia Revised Uniform Limited
Partnership Act.
Health Care REIT and Windrose are working to complete the merger
as quickly as possible. Because completion of the merger is
subject to certain conditions that are beyond the control of
Health Care REIT and Windrose, the parties cannot predict the
exact timing of the closing. Health Care REIT and Windrose
expect that the mergers will close on or about
[ ], 2006 if, at the special meeting of
Windrose shareholders, Windrose shareholders approve the merger.
The completion of the mergers could be delayed beyond this date
due to certain factors beyond the control of Health Care REIT
and Windrose, including the receipt of necessary third party
consents.
|
|
|
Conversion
of Windrose Common Shares, Preferred Shares and
OP Units
|
Windrose Common Shares. At the effective time
of the merger, each issued and outstanding Windrose common share
(other than the Windrose common shares to be cancelled as
described below) automatically will be converted into a fraction
of a duly authorized, validly issued, fully paid and
non-assessable share of Health Care REIT common stock equal to
the exchange ratio. The exchange ratio will be equal to the
quotient determined by dividing $18.06 by the parent stock price
(as defined below) and rounding the result to the nearest
1/10,000 of a share; provided, however, that if such
quotient is less than 0.4509, the exchange ratio will be 0.4509
and if such
46
quotient is greater than 0.4650, the exchange ratio will be
0.4650. For purposes of determining the exchange ratio, the
parent stock price is the average of the volume weighted average
price per share of Health Care REIT common stock on the New York
Stock Exchange, as reported on Bloomberg by typing
HCN.N<EQUITY>AQR<GO>, for 10 trading
days, selected by lot, from among the 15 consecutive trading
days ending on and including the fifth trading day prior to the
effective times of the mergers. As of the effective time of the
merger, each Windrose common share, when so converted, no longer
will be outstanding and automatically will be cancelled and
retired.
Upon completion of the merger, each Windrose common share and
each Windrose preferred share that is held by Windrose, Windrose
OP, any wholly-owned subsidiary of Windrose or Windrose OP,
Health Care REIT, Heat Merger Sub or any other wholly-owned
subsidiary of Health Care REIT automatically will be cancelled
and retired and will cease to exist. No consideration will be
delivered in exchange for such securities held by these entities
prior to the mergers.
Windrose Preferred Shares. Each Windrose
preferred share issued and outstanding immediately prior to the
effective time of the merger (other than the Windrose preferred
shares to be cancelled as described above) automatically will be
converted into a share of the 7.5% Series G Cumulative
Convertible Preferred Stock, $1.00 par value per share, of
Health Care REIT (which we refer to as the Health Care REIT
preferred stock). Immediately prior to the effective time of the
merger, the terms of the Health Care REIT preferred stock will
be set forth in an amendment to the Second Restated Certificate
of Incorporation of Health Care REIT, and such amendment will be
filed with the Secretary of State of the State of Delaware and
will be effective immediately prior to the effective time of the
merger. See Capitalization and Description of Health Care
REIT Securities Description of Health Care REIT
Preferred Stock for a description of the Health Care REIT
preferred stock.
Windrose OP Units. Each Windrose OP unit
issued and outstanding immediately prior to the effective time
of the operating partnership merger will automatically be
converted into a fraction of a duly authorized, validly issued,
fully paid and non-assessable share of Health Care REIT common
stock equal to the exchange ratio. As of the effective time of
the operating partnership merger, each Windrose OP unit, when so
converted, no longer will be outstanding and automatically will
be cancelled and retired.
No Fractional Shares. No fractional shares of
Health Care REIT common stock will be issued to the holders of
Windrose common shares or Windrose OP units in the mergers.
Instead of fractional shares, any holder of Windrose common
shares or Windrose OP units entitled to receive a fractional
share of Health Care REIT common stock will be paid cash in
respect of any fractional shares that would otherwise be
issuable. The amount of the cash payment will be equal to the
product of the fractional shares otherwise issuable to such
holder and the closing sale price of a share of Health Care REIT
common stock on the closing date of the merger, as reported on
the New York Stock Exchange.
|
|
|
Treatment
of Windrose Stock Options and Restricted Stock Awards
|
Windrose Stock Options. Each option to acquire
Windrose common shares that is outstanding immediately prior to
the effective time of the merger (which we refer to as a
pre-conversion option) will be fully vested in accordance with
the terms of Windroses Employee Share Purchase Plan,
Amended and Restated 2002 Stock Incentive Plan (or its
predecessor 2002 Stock Incentive Plan) and the agreement
evidencing such pre-conversion option at or prior to the
effective time of the merger. At the effective time of the
merger, each pre-conversion option will be converted into an
option to acquire shares of Health Care REIT common stock (which
we refer to as a converted option), with the number of shares of
Health Care REIT common stock subject to a converted option
equal to the number of Windrose common shares subject to the
pre-conversion option multiplied by the exchange ratio. The
exercise price of a converted option will be adjusted to equal
the exercise price of the pre-conversion option divided by the
exchange ratio. Each converted option will be evidenced by an
agreement substantially in the form of the agreements evidencing
the pre-conversion options.
Restricted Stock Awards. Each Windrose common
share subject to a restricted stock award that is outstanding
immediately prior to the effective time of the merger pursuant
to Windroses Amended and Restated 2002 Stock Incentive
Plan (or its predecessor 2002 Stock Incentive Plan) will be
fully vested at or prior to the effective time of the merger. At
the effective times of the mergers, holders of such Windrose
common
47
shares will be entitled to receive the same consideration with
respect to the merger as the holders of Windrose common shares.
|
|
|
Exchange
of Certificates; No Further Rights; Dividends; Lost, Stolen or
Destroyed Certificates
|
Exchange of Certificates. Health Care REIT
will deposit with Mellon Investor Services LLC, or another bank
or financial institution, cash and certificates evidencing
Health Care REIT common stock and Health Care REIT preferred
stock to be paid or issued to the holders of Windrose common
shares, Windrose preferred shares and Windrose OP units under
and as contemplated by the merger agreement. Promptly after the
completion of the mergers, the exchange agent will send each
record holder of a certificate evidencing a Windrose common
share, a Windrose preferred share or a Windrose OP unit a letter
of transmittal and instructions on how to surrender such
certificates. Thereafter, each holder of Windrose common shares,
Windrose preferred shares and Windrose OP units who returns a
duly executed transmittal letter and such other documents as are
reasonably required by the exchange agent and surrenders any
certificates evidencing such Windrose common shares, Windrose
preferred shares or Windrose OP units will receive the following:
|
|
|
|
|
in the case of a holder of Windrose common shares
and/or
Windrose OP units, a certificate or certificates evidencing the
number of whole shares of Health Care REIT common stock into
which the aggregate number of Windrose common shares
and/or
Windrose OP units owned by such holder have been converted
pursuant to the merger agreement, plus any cash that such holder
is entitled to in lieu of fractional shares of Health Care REIT
common stock and in respect of any dividends or other
distributions to which such holder is entitled; and
|
|
|
|
in the case of a holder of Windrose preferred shares, a
certificate or certificates evidencing the number of shares of
Health Care REIT preferred stock into which the aggregate number
of Windrose preferred shares owned by such holder have been
converted pursuant to the merger agreement and in respect of any
dividends or other distributions to which such holder is
entitled.
|
Any portion of the cash and certificates representing shares of
Health Care REIT common stock or Health Care REIT preferred
stock deposited with the exchange agent that remains
undistributed on the date that is six months after the
completion of the merger, may be delivered to Health Care REIT,
upon demand, and the holders of Windrose common shares, Windrose
preferred shares and Windrose OP units must thereafter look only
to Health Care REIT for payment of the merger consideration and
the preferred merger consideration.
Holders of Windrose common shares, Windrose preferred shares
and Windrose OP units should not send their certificates to the
exchange agent, Health Care REIT or Windrose. If the merger is
completed, you will receive a transmittal letter from the
exchange agent containing instructions for the exchange and
surrender of your certificates.
No Further Rights. From and after the
completion of the mergers, the holders of certificates
evidencing ownership of Windrose common shares, Windrose
preferred shares or Windrose OP units outstanding immediately
before the completion of the mergers will cease to have rights
with respect to such shares or units, as the case may be, except
as otherwise provided for in the merger agreement and under
applicable law. At the effective time of the mergers, the
Windrose stock transfer books and the Windrose OP partnership
interest transfer books will be closed. At such time, there will
be no further registration of transfers of (i) Windrose
common shares or Windrose preferred shares that were outstanding
immediately prior to the effective time of the merger on the
stock transfer books of Heat Merger Sub, the surviving entity
following the merger; or (ii) Windrose OP units that were
outstanding immediately prior to the effective time of the
operating partnership on the partnership interest transfer books
of Windrose OP, the surviving entity following the operating
partnership merger.
Dividends. No dividends or other distributions
declared with a record date after the effective time of the
merger on shares of Health Care REIT common stock or Health Care
REIT preferred stock will be paid with respect to any
certificate formerly representing Windrose common shares or
Windrose preferred shares until such certificate is surrendered
for exchange as provided above or a person claiming a
certificate to be lost, stolen or destroyed has complied with
the applicable provisions of the merger agreement. Promptly
following surrender of any such certificate, there will be paid
to the holder of the certificates representing whole shares of
Health Care
48
REIT common stock or Health Care REIT preferred stock issued in
exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions
with a record date after the effective time of the merger and a
payment date prior to such surrender but not paid, less the
amount of any withholding taxes, and (ii) at the
appropriate payment date or as promptly as practicable
thereafter, the amount of dividends or other distributions with
a record date after the effective time of the merger and a
payment date after the date of surrender, less the amount of any
withholding taxes. Health Care REIT will, no later than the
applicable dividend or distribution payment dates, set aside and
provide the exchange agent with the cash necessary to make the
payments described immediately above, which shall be held for
such purpose and for the sole benefit of the holders of shares
of Health Care REIT common stock or Health Care REIT preferred
stock.
Lost, Stolen or Destroyed Certificates. If any
certificate representing Windrose common shares, Windrose
preferred shares or Windrose OP units has been lost, stolen or
destroyed, the holder of such certificate must provide an
appropriate affidavit to the exchange agent in order to receive
consideration therefor in accordance with the merger agreement.
Health Care REIT also may require the owner of such lost, stolen
or destroyed certificate to deliver a bond as indemnity against
any claim that may be made against Health Care REIT or the
exchange agent with respect to any such lost, stolen or
destroyed certificate.
|
|
|
Representations
and Warranties
|
Representations and Warranties of
Windrose. The merger agreement contains
representations and warranties made by Windrose to Health Care
REIT. These representations and warranties relate to, among
other things:
|
|
|
|
|
corporate matters, including due organization and qualification;
|
|
|
|
authority relative to execution and delivery of the merger
agreement;
|
|
|
|
capitalization;
|
|
|
|
subsidiaries and other interests;
|
|
|
|
absence of conflicts with, or violations of, organizational
documents or other obligations as a result of the merger and
governmental filings, and consents necessary to complete the
merger;
|
|
|
|
compliance with applicable law;
|
|
|
|
the timely filing and accuracy of SEC reports and financial
statements;
|
|
|
|
the absence of changes;
|
|
|
|
legal proceedings;
|
|
|
|
tax matters;
|
|
|
|
employee matters;
|
|
|
|
information concerning properties;
|
|
|
|
material contracts;
|
|
|
|
environmental matters;
|
|
|
|
intellectual property;
|
|
|
|
the opinion of Windroses financial advisor;
|
|
|
|
brokers fees payable in connection with the merger;
|
|
|
|
insurance matters;
|
|
|
|
related party transactions; and
|
|
|
|
the accuracy of information supplied for inclusion in this proxy
statement/prospectus and other similar documents.
|
49
Representations and Warranties of Health Care
REIT. The merger agreement also contains
representations and warranties made by Health Care REIT to
Windrose. These representations and warranties relate to, among
other things
|
|
|
|
|
corporate matters, including due organization and qualification;
|
|
|
|
authority relative to execution and delivery of the merger
agreement;
|
|
|
|
capitalization;
|
|
|
|
subsidiaries;
|
|
|
|
absence of conflicts with, or violations of, organizational
documents or other obligations as a result of the merger and
governmental filings, and consents necessary to complete the
merger;
|
|
|
|
compliance with applicable law;
|
|
|
|
the timely filing and accuracy of SEC reports and financial
statements;
|
|
|
|
the absence of changes;
|
|
|
|
legal proceedings;
|
|
|
|
operations of Heat Merger Sub and Heat OP Merger Sub;
|
|
|
|
employee benefits;
|
|
|
|
environmental matters;
|
|
|
|
tax matters;
|
|
|
|
insurance matters;
|
|
|
|
the opinion of Health Care REITs financial advisor;
|
|
|
|
brokers fees payable in connection with the
merger; and
|
|
|
|
the accuracy of information supplied for inclusion in this proxy
statement/prospectus and other similar documents.
|
Conduct of Windroses Business Prior to the
Merger. Windrose has agreed that, until the
earlier of the termination of the merger agreement or the
effective times of the mergers, it will, and will cause each of
its subsidiaries to, conduct its business in the ordinary course
of business consistent with past practice. During the same
period, Windrose has also agreed that each of Windrose and its
subsidiaries will not, except (i) in connection with the
performance (including payment obligations) in the ordinary
course of business under contracts of Windrose or any of its
subsidiaries entered into prior to September 12, 2006 or
entered into on or after September 12, 2006 as permitted or
required by the merger agreement, (ii) as set forth on
Windroses disclosure letter attached to the merger
agreement, (iii) as consented to in writing by Health Care
REIT, which consent is not to be unreasonably withheld,
conditioned or delayed, or (iv) as expressly contemplated
in the merger agreement:
|
|
|
|
|
change its methods of accounting as in effect on June 30,
2006, except as may be required by GAAP or applicable law or as
recommended by its independent auditors, or pursuant to written
instructions, comments or orders from the SEC;
|
|
|
|
incur any indebtedness, other than refinancings or indebtedness
incurred pursuant to the interim financing arrangement with
Health Care REIT (see Related
Agreements Interim Financing) or pursuant to
lines of credit existing as of the date of the merger agreement;
|
|
|
|
make any loans or investments to any person other than a
subsidiary of Windrose;
|
|
|
|
sell or otherwise dispose of any properties;
|
50
|
|
|
|
|
modify or amend in any material respect, or terminate, any
material contracts, other than in the ordinary course of
business consistent with past practice;
|
|
|
|
make or agree to make any capital expenditures other than
(i) any capital expenditure of less than $50,000
individually or, together with other capital expenditures,
$200,000 in the aggregate, (ii) emergency repairs pursuant
to an obligation as landlord of a property or (iii) in
furtherance of leasing activity either as a renewal or a new
lease obligation;
|
|
|
|
acquire or enter into any option to acquire any real property or
commence construction or contract to construct or develop any
real estate project (or enter into a joint venture or similar
arrangement to do so);
|
|
|
|
merge or consolidate with, or acquire all or substantially all
of the assets of, or acquire the equity interests in, any person
or division thereof, except in connection with the acquisition
of real property otherwise permitted under the merger agreement;
|
|
|
|
amend its organizational documents or those of any subsidiary of
Windrose, other than in connection with obtaining certain
specified consents from third parties;
|
|
|
|
declare, set aside or pay any dividend or other distribution in
respect of any of its capital stock, other than (i) as
described under the heading Dividends,
(ii) dividends and distributions by a subsidiary to its
parent, (iii) a distribution per Windrose OP unit in the
same amount as a dividend per share of Windrose common shares as
described in the immediately following paragraph or
(iv) distributions by Windrose OP to Windrose sufficient to
permit Windrose to make distributions with respect to the
Windrose preferred shares in accordance with the terms thereof;
|
|
|
|
split, combine or reclassify the outstanding capital stock or
other equity interests of Windrose or its subsidiaries;
|
|
|
|
except in the ordinary course of business consistent with past
practice, (i) increase the compensation or fringe benefits
of any trustee, director or officer of Windrose or its
subsidiaries, (ii) increase the compensation or benefits
payable to Windroses or its subsidiaries employees
by an amount in excess of 4% or pay a bonus for performance to
any employee earning less than $70,000 per year in excess
of $4,000, (iii) except as otherwise provided in the merger
agreement, (a) adopt any new benefit plan, (b) grant
any award under any existing Windrose stock plan, or
(c) amend or otherwise increase, or accelerate the payment
or vesting of the amounts payable or to become payable under,
any existing Windrose benefit plan except as required by
applicable law, (iv) enter into or modify or amend any
employment or severance agreement with, or grant any new
severance or termination rights to, any officer, trustee,
director or employee, (v) make any loan or advance to any
trustee, director, executive officer or employee (other than
travel advances in the ordinary course of business) or
(vi) engage in a transaction with, or enter into, amend,
modify, terminate, waive or take any similar action with respect
to any contract with any officer, trustee or affiliate;
|
|
|
|
settle or otherwise compromise any shareholder derivative or
class action claims in connection with any of the transactions
contemplated by the merger agreement or any material legal
proceeding relating to Windrose or its subsidiaries or any of
their respective assets other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in
full in the audited consolidated financial statements of
Windrose as of December 31, 2005 or the unaudited financial
statements of Windrose as of June 30, 2006 and other than
collection matters in the ordinary course of business consistent
with past practice;
|
|
|
|
(i) make or rescind any express or deemed material election
relative to taxes or alter any method of tax accounting,
(ii) enter into any tax sharing, tax indemnity or tax
protection agreement, (iii) settle, compromise, enter into,
or agree to enter into a closing agreement or settle any
material federal, state, local or foreign tax liability,
(iv) extend the statute of limitations with respect to any
taxes of Windrose or any subsidiary thereof, (v) make or
rescind any material election relative to taxes, unless such
election or rescission is necessary to preserve the status of
Windrose as a REIT (or of any subsidiary thereof, as a
partnership) for federal income tax purposes or is consistent
with elections historically made by Windrose,
|
51
|
|
|
|
|
or (vi) take any action, or fail to take any action, which
can reasonably be expected to cause (a) Windrose to fail to
qualify as a REIT, or (b) any subsidiary thereof to cease
to be treated as a partnership for federal income tax purposes,
as a REIT, as a qualified REIT subsidiary under
Section 856(i) of the Code, as a disregarded entity under
Treasury Regulation
Section 301.7701-3,
or as a taxable REIT subsidiary under Section 856(l) of the
Code, as the case may be;
|
|
|
|
|
|
other than filing fees paid to governmental agencies in
connection with the mergers, make any payments or incur any
liability or obligation for the purpose of obtaining any consent
from any person to the mergers that will affect Health Care REIT
or Windrose to either of their material economic detriment;
|
|
|
|
waive the benefits of, or agree to modify in any material
manner, any standstill or similar agreement relating to Windrose
or any subsidiary thereof;
|
|
|
|
take any action that would reasonably be expected to result in
any of the conditions to the merger set forth in the merger
agreement not being satisfied; or
|
|
|
|
authorize, recommend, propose or announce an intention to do any
of the foregoing prohibited actions, or enter into any contract
to do any of the foregoing prohibited actions.
|
Conduct of Health Care REITs Business Prior to the
Merger. Until the earlier of the termination of
the merger agreement or the effective time of the merger, Health
Care REIT has also agreed that it will, and will cause its
subsidiaries to, conduct its business in the ordinary course of
business consistent with past practice. During the same period,
Health Care REIT has also agreed that each of Health Care REIT
and its subsidiaries will not, except (i) as consented to
in writing by Windrose, which consent is not to be unreasonably
withheld, conditioned or delayed, or (ii) as expressly
contemplated in the merger agreement:
|
|
|
|
|
change any of its methods, principles or practices of accounting
in effect at June 30, 2006, except as may be required by
GAAP or applicable law or as recommended by its independent
auditors, or pursuant to written instructions, comments or
orders from the SEC;
|
|
|
|
amend any of the its organizational documents in a manner that
adversely affects the holders of Windrose common shares or
Windrose OP units;
|
|
|
|
take any action that would reasonably be expected to result in
any of the conditions to the merger set forth in the merger
agreement not being satisfied;
|
|
|
|
merge or consolidate with, or acquire all or substantially all
of the assets of, or acquire the equity interests in, any person
or division thereof, if such transaction involves the issuance
of shares of Health Care REIT common stock, in whole or in part
as consideration in such transaction;
|
|
|
|
declare, set aside or pay any dividend or other distribution
payable in cash, shares, stock or property with respect to the
Health Care REIT common stock, other than in the ordinary course
of business consistent with past practice; or
|
|
|
|
authorize, recommend, propose or announce an intention to do any
of the foregoing prohibited actions, or enter into any contract
to do any of the foregoing prohibited actions.
|
Access to Information. Each of Windrose and
Health Care REIT will provide the other and its agents and
representatives with reasonable access, upon reasonable advance
notice and during normal business hours, to all their respective
properties, books, contracts, commitments, personnel, documents
and records and will furnish promptly to the other (i) a
copy of each report, schedule, registration statement and other
document filed by it prior to the effective time of the merger
pursuant to the requirements of federal or state securities laws
and (ii) all other information concerning its business,
properties and personnel as such other party may reasonably
request.
Obligation to Call and Hold the Windrose Special
Meeting. Windrose will call and hold the special
meeting of Windrose shareholders whether or not Windroses
board of trustees determines that the merger agreement or the
merger is no longer advisable, recommends the rejection of the
merger agreement or the merger by Windroses shareholders
or otherwise withdraws or materially modifies its recommendation
of the merger agreement or the merger in a manner adverse to
Health Care REIT and its stockholders (which we refer to as an
adverse
52
recommendation); provided, however, that Windrose will
have no obligation to call and hold the special meeting if the
merger agreement is terminated:
|
|
|
|
|
by Health Care REIT, if:
|
|
|
|
|
|
prior to obtaining Windrose shareholders approval of the
merger, Windroses board of trustees made an adverse
recommendation;
|
|
|
|
Windrose failed to call or hold the special meeting in
accordance with the terms of the merger agreement;
|
|
|
|
Windrose intentionally and materially breached any of its
obligations under the no solicitation and superior acquisition
proposal provisions of the merger agreement;
|
|
|
|
Windroses board of trustees approved or recommended an
acquisition proposal, as described below, made by any person
other than Health Care REIT or Heat Merger Sub;
|
|
|
|
Windrose entered into a definitive agreement with respect to an
acquisition proposal; or
|
|
|
|
|
|
by Windrose, if, prior to obtaining Windrose shareholders
approval of the merger, Windroses board of trustees
approved, and Windrose concurrently entered into, a definitive
agreement with respect to a superior acquisition proposal, as
described below (but only if Windrose is not then in breach of
any of its obligations under the no solicitation and superior
acquisition proposal provisions of the merger agreement and has
paid the full amount of the termination fee, lender consent fees
and parent expense reimbursement, as discussed below).
|
Consent Fees. In connection with obtaining
certain consents to the mergers from third parties, Health Care
REIT will pay up to $2.5 million in fees, make-whole
payments and
out-of-pocket
costs and expenses incurred by Windrose or any subsidiary
thereof or associated with the defeasance or redemption of such
indebtedness, but not including any fees or expenses associated
with internal counsel or fees and expenses in excess of $300,000
associated with outside counsel for either Health Care REIT or
Windrose.
Listing of Shares Issued in the
Mergers. Health Care REIT will use its reasonable
best efforts to cause the shares of Health Care REIT common
stock and Health Care REIT preferred stock issuable in the
mergers and shares reserved for issuance pursuant to the
exercise of converted options to be approved for listing, upon
official notice of issuance, on the New York Stock Exchange.
Resignations. Effective as of the closing of
the merger, Windrose will cause each member of Windroses
board of trustees to resign as a trustee. Upon the written
request of Health Care REIT, Windrose will cause any or all of
the trustees or directors
and/or
officers of each of its direct or indirect subsidiaries to
resign or be removed or, as to officers, to resign or be
terminated, effective as of the closing of the merger.
No Solicitation. Windrose will not, directly
or indirectly, through its representatives or otherwise:
|
|
|
|
|
invite, initiate, solicit or encourage any inquiries, proposals,
discussions or negotiations with respect to any acquisition
proposal, as described below;
|
|
|
|
engage in any discussions or negotiations with or provide any
confidential or non-public information or data to, or afford
access to properties, books or records to, any person relating
to, or that may reasonably be expected to lead to, an
acquisition proposal;
|
|
|
|
agree to, approve or recommend any acquisition proposal or enter
into any letter of intent, agreement in principle or agreement
relating to an acquisition proposal; or
|
|
|
|
propose publicly to agree to do any of the foregoing, or
otherwise facilitate any effort or attempt to make or implement
an acquisition proposal.
|
Windrose will notify Health Care REIT promptly (but in any event
within 24 hours) if Windrose, any of its subsidiaries or
any Windrose representative receives:
|
|
|
|
|
an acquisition proposal or any material amendment to a
previously received acquisition proposal;
|
53
|
|
|
|
|
any request for confidential or nonpublic information or data
relating to, or for access to the properties, books or records
of, Windrose or any of its subsidiaries by any person that has
made, or may be considering making, an acquisition
proposal; or
|
|
|
|
any oral or written expression that any of those activities,
discussions or negotiations are sought to be initiated or
continued with Windrose.
|
In addition, Windrose will keep Health Care REIT informed of the
status and the material terms of any such acquisition proposal,
indication or request.
In response to a bona fide, unsolicited, written acquisition
proposal from a third party that was not invited, initiated,
solicited or encouraged by Windrose, any of its subsidiaries or
any Windrose representative, Windroses board of trustees
may, and may authorize and permit its representatives to,
provide such third party with nonpublic information or
participate in discussions and negotiations with such third
party relating to such acquisition proposal, if and only to the
extent that:
|
|
|
|
|
Windroses board of trustees concludes in good faith, based
upon advice of its outside legal counsel, that such action is
required to discharge the boards duties under applicable
law;
|
|
|
|
a majority of Windroses board of trustees determines in
good faith, after consultation with its financial advisor and
outside legal counsel, that such acquisition proposal is
reasonably likely to result in a superior acquisition proposal,
as described below;
|
|
|
|
Windrose complies with all of its obligations under the merger
agreement;
|
|
|
|
prior to furnishing information to, or entering into
negotiations or discussions with, a third party, Windrose
provides notice to Health Care REIT to the effect that it is
furnishing information to, or entering into discussions with,
such third party; and
|
|
|
|
Windrose enters into a confidentiality agreement with such third
party, which contains material terms that are in all material
respects no less favorable to Windrose and no less restrictive
to such third party than those in the confidentiality agreement
currently in effect between Windrose and Health Care REIT.
|
If, prior to obtaining the approval of the Windrose shareholders
of the merger, the board of trustees of Windrose intends to
publicly approve or recommend, or proposes to publicly approve
or recommend, any superior acquisition proposal, or to cause
Windrose to enter into any agreement with respect to a superior
acquisition proposal (which we refer to as a competing
agreement), then at least five business days prior to taking
such action:
|
|
|
|
|
Windrose will provide Health Care REIT with written notice
advising Health Care REIT that it has received a superior
acquisition proposal that it intends to accept, specifying the
material terms and conditions of such superior acquisition
proposal, identifying the person making such superior
acquisition proposal and, if in writing, delivering to Health
Care REIT the most recent draft of the definitive competing
agreement and a summary of the material terms of any agreements
to which Windrose or any of its subsidiaries is or will be a
party; and
|
|
|
|
Windrose will cause its financial and legal advisors to
negotiate in good faith with Health Care REIT for up to five
business days to make adjustments in the terms and conditions of
the merger agreement.
|
If following the completion of such five business day period
Windroses board of trustees, in its sole judgment, has
determined in good faith, after consultation with its financial
advisors and outside legal counsel, that the adjusted terms are
not at least as favorable to the Windrose shareholders as the
superior acquisition proposal (taking into account all financial
and strategic considerations and other relevant factors,
including relevant legal, financial, regulatory and other
aspects of such proposals, and the conditions, prospects and
time required for completion of such proposal), then
Windroses board of trustees may:
|
|
|
|
|
publicly approve or recommend, or propose to approve or
recommend, such superior acquisition proposal;
|
|
|
|
withdraw or materially modify its recommendation of the merger
agreement or the merger in a manner adverse to Health Care REIT
or its stockholders; or
|
|
|
|
cause Windrose to enter into the competing agreement with
respect to such superior acquisition proposal.
|
54
For purposes of the merger agreement and this proxy
statement/prospectus, an acquisition proposal is any
direct or indirect:
|
|
|
|
|
merger, consolidation, business combination, reorganization,
recapitalization, liquidation, dissolution or similar
transaction;
|
|
|
|
sale, acquisition, tender offer, exchange offer (or the filing
of a registration statement under the Securities Act in
connection with such an exchange offer), share exchange or other
transaction or series of related transactions that, if
consummated, would result in the issuance of securities
representing, or the sale, exchange or transfer of, 15% or more
of the outstanding voting equity securities of Windrose or
equity interests in any subsidiary of Windrose (including,
without limitation, partnership interests and units); or
|
|
|
|
sale, lease, exchange, mortgage, pledge, transfer or other
disposition of any assets of Windrose or any subsidiary of
Windrose in one or a series of related transactions that, if
consummated, would result in the sale, lease, exchange,
mortgage, pledge, transfer or other disposition of more than 15%
of the consolidated assets of Windrose.
|
For purposes of the merger agreement and this proxy
statement/prospectus, a superior acquisition
proposal is a bona fide unsolicited written proposal made
by a third party to acquire, directly or indirectly, Windrose
and/or its
subsidiaries pursuant to a tender or exchange offer, merger,
share exchange, consolidation or sale of all or substantially
all of the assets of Windrose and its subsidiaries or otherwise:
|
|
|
|
|
on terms which a majority of Windroses board of trustees
determines in good faith, (i) after consultation with
Windroses financial advisors, are more favorable from a
financial point of view to Windroses shareholders than
those provided for in the merger (taking into account all the
terms and conditions of the proposal, including any
break-up
fees, expense reimbursement provisions and conditions to
consummation) and (ii) to be more favorable generally to
Windroses shareholders (taking into account all financial
and strategic considerations and other relevant factors,
including relevant legal, financial, regulatory and other
aspects of such proposals, and the conditions, prospects and
time required for completion of such proposal);
|
|
|
|
for which financing, to the extent required, in the reasonable
judgment of Windroses board of trustees is capable of
being obtained; and
|
|
|
|
which Windroses board of trustees determines in good faith
is reasonably capable of being completed.
|
Dividends. From and after the date of the
merger agreement and prior to the closing date of the merger,
Windrose will not make any dividend or distribution to the
holders of Windrose common shares or Windrose preferred shares,
and Windrose OP will not make any distribution to its partners,
without the prior written consent of Health Care REIT. However,
the prior written consent of Health Care REIT will not be
required for the authorization and payment of:
|
|
|
|
|
a quarterly dividend payable to Windrose shareholders in an
amount not to exceed $0.24 per Windrose common share
beginning with the quarter ended September 30, 2006 and for
each quarter thereafter ending prior to the effective times of
the mergers; and
|
|
|
|
a quarterly distribution payable to holders of Windrose
preferred shares in an amount equal to $0.46875 per
Windrose preferred share and having record and payment dates as
set forth in the Windrose articles supplementary prior to the
effective times of the mergers.
|
In addition, each of Health Care REIT and Windrose will declare
a dividend to its stockholders and holders of Windrose common
shares, respectively, the record date for which will be the
close of business on the last business day prior to the
effective time of the merger. The per share dividend amount
payable by each party will be an amount equal to such
partys most recent quarterly dividend rate, multiplied by
the number of days elapsed since the last dividend record date
for such holders through and including the day prior to the day
on which the effective time of the merger occurs, and divided by
the actual number of days in the calendar quarter in which such
dividend is declared. Windrose also will declare a special
dividend to its holders of Windrose preferred shares, the record
date for which will be the close of business on the last
business day prior to the effective time of the merger. The per
share dividend amount payable by Windrose will be an amount
equal to $0.46875 multiplied by the number of days elapsed since
the last dividend record date for holders of Windrose preferred
shares through and including the last
55
business day prior to the effective time of the merger, and
divided by the actual number of days in the calendar quarter in
which such dividend is declared.
Appointment of Director. At the effective time
of the merger, Health Care REITs board of directors will
appoint Fred S. Klipsch as a director of Health Care REIT,
provided that such appointment would not be in violation of any
applicable legal requirements or the rules of the New York Stock
Exchange, and that Mr. Klipsch is not unable or unwilling
to serve. If such appointment would violate any applicable legal
requirements or the rules of the New York Stock Exchange, or if
Mr. Klipsch is unable or unwilling to serve, Health Care
REITs board of directors will appoint a replacement
nominated by Windrose, subject to the consent of Health Care
REIT, which consent will not be unreasonably withheld.
Interim Financing. Health Care REIT has agreed
to provide financing to Windrose and its subsidiaries in
accordance with the interim financing agreements between
Windrose OP and Health Care REIT. For a discussion of these
agreements, see the section titled Related
Agreements Interim Financing.
Director and Officer Insurance and
Indemnification. From and after the effective
time of the mergers, Health Care REIT has agreed to provide
exculpation and indemnification for each present and former
officer, director or trustee of Windrose or its subsidiaries to
the same extent as currently provided in Windroses
declaration of trust and bylaws. In addition, Health Care REIT
has agreed that, at or prior to the effective time of the
merger, it will purchase tail directors and
officers liability insurance coverage for Windroses
trustees and officers for a period of six years following
the effective time, which will provide the trustees and officers
with the coverage amount and other terms comparable to those
currently provided by Windrose (including advancement of
expenses, if so provided). However, in fulfilling such insurance
obligations, Health Care REIT will not be required to expend for
such policies an annual premium amount that exceeds 300% of
the annual premiums currently paid by Windrose for such
insurance. If the cost of such insurance is greater
than 300% of the annual premiums currently paid by
Windrose, Health Care REIT is required to obtain a policy with
the greatest coverage available for a cost that does not exceed
300% of the annual premiums currently paid by Windrose.
|
|
|
Conditions
to the Mergers
|
Conditions to Each Partys Obligation to Effect the
Mergers. Each partys obligation to effect
the mergers is subject to the satisfaction or waiver of various
conditions that include the following:
|
|
|
|
|
Windroses shareholders having approved the merger;
|
|
|
|
no temporary restraining order, preliminary or permanent
injunction or other order or legal restraint or prohibition
being in effect and preventing the completion of the merger;
|
|
|
|
the shares of Health Care REIT common stock and Health Care REIT
preferred stock to be issued in the mergers and the shares of
Health Care REIT common stock reserved for issuance upon
exercise of converted options having been approved for listing
on the New York Stock Exchange, subject to official notice of
issuance;
|
|
|
|
the registration statement on
Form S-4,
of which this proxy statement/prospectus is a part, having been
declared effective by the SEC under the Securities Act and not
being the subject of any stop order or proceeding seeking a stop
order;
|
|
|
|
all specified consents and approvals having been obtained and
being in full force and effect;
|
|
|
|
each of the consulting and support agreements described below
being in full force and effect, subject to certain limited
exceptions; and
|
|
|
|
the operating partnership merger having been completed in
accordance with the terms of the merger agreement.
|
56
Conditions to Health Care REITs and Heat Merger
Subs Obligation to Effect the
Merger. Health Care REITs and Heat Merger
Subs obligation to effect the merger is subject to the
satisfaction or waiver of various conditions that include the
following:
|
|
|
|
|
certain representations and warranties made by Windrose to
Health Care REIT being true and correct in all respects on and
as of the date of the merger agreement and on and as of the
closing date as though made on the closing date (except to the
extent such representation or warranty is expressly limited by
its terms to another date, in which case such representation or
warranty shall be true and correct as of the specified date);
|
|
|
|
the other representations and warranties made by Windrose to
Health Care REIT being true and correct (without giving effect
to any materiality or material adverse effect qualifier therein)
on and as of the date of the merger agreement and on and as of
the closing date as though made on the closing date (except to
the extent such representation or warranty is expressly limited
by its terms to another date, in which case such representation
or warranty shall be true and correct as of the specified date),
except where the failure of such representations and warranties
to be true and correct, in the aggregate, would not reasonably
be expected to have a material adverse effect on Windrose;
|
|
|
|
each of Windrose and Windrose OP having performed in all
material respects all obligations required to be performed by it
under the merger agreement at or prior to the effective time of
the merger;
|
|
|
|
since the date of the merger agreement, there having been no
material adverse effect on Windrose;
|
|
|
|
Health Care REIT having received an opinion from
Hunton & Williams LLP, dated as of the closing date, to
the effect that, for Windroses short taxable year ended
December 31, 2002 through its taxable year ended
December 31, 2005, Windrose has qualified as a REIT under
the Code, and from January 1, 2006 through the closing
date, Windroses proposed method of operation will enable
it to continue to meet the requirements for qualification as a
REIT under the Code;
|
|
|
|
the defensive measures (as such term is defined in the merger
agreement) being made inapplicable to the merger and the other
transactions contemplated by the merger agreement; and
|
|
|
|
Health Care REIT having received an opinion from
Arnold & Porter LLP, special tax counsel to Health Care
REIT, dated as of the closing date, to the effect that on the
basis of the facts, representations and assumptions set forth or
referred to in such opinion, the merger will qualify as a
reorganization under the provisions of Section 368(a) of
the Code.
|
Conditions to Windroses Obligations to Complete the
Merger. Windroses obligation to effect the
merger is subject to the satisfaction or waiver of various
conditions that include the following:
|
|
|
|
|
certain representations and warranties made by Health Care REIT
to Windrose being true and correct in all respects on and as of
the date of the merger agreement and on and as of the closing
date as though made on the closing date (except to the extent
the representation or warranty is expressly limited by its terms
to another date, in which case such representation or warranty
shall be true and correct as of the specified date);
|
|
|
|
the other representations and warranties made by Health Care
REIT to Windrose being true and correct (without giving effect
to any materiality or material adverse effect qualifier therein)
on and as of the date of the merger agreement and on and as of
the closing date as though made on the closing date (except to
the extent such representation or warranty is expressly limited
by its terms to another date, in which case such representation
or warranty shall be true and correct as of the specified date),
except where the failure of such representations and warranties
to be true and correct, in the aggregate, would not reasonably
be expected to have a material adverse effect on Health Care
REIT;
|
|
|
|
each of Health Care REIT, Heat Merger Sub and Heat OP Merger Sub
having performed in all material respects all obligations
required to be performed by it under the merger agreement at or
prior to the effective time of the merger;
|
|
|
|
Windrose having received an opinion from Arnold &
Porter LLP, dated as of the closing date to the effect that
Health Care REIT has qualified to be taxed as a REIT under the
Code, for its taxable years ended December 31, 1998 through
December 31, 2005, and taking into account the merger,
Health Care REITs
|
57
|
|
|
|
|
organization and current and proposed method of operation will
enable it to continue to qualify as a REIT for its taxable year
ending December 31, 2006 and in the future;
|
|
|
|
|
|
Windrose having received an opinion from Hunton &
Williams LLP, dated as of the closing date, to the effect that
on the basis of the facts, representations and assumptions set
forth or referred to in such opinion, the merger will qualify as
a reorganization under the provisions of Section 368(a) of
the Code;
|
|
|
|
since the date of the merger agreement, there having been no
material adverse effect on Health Care REIT; and
|
|
|
|
Health Care REIT having filed the certificate of designation for
the Health Care REIT preferred stock in accordance with
applicable Delaware law and it having become effective.
|
Important Definitions. The merger agreement
provides that a material adverse effect, with respect to either
Windrose or Health Care REIT, means any change, event,
circumstance or development that, individually or in the
aggregate with other changes, events, circumstances or
developments, has or is reasonably likely to have a material
adverse effect on the business, properties, assets, financial
condition, results of operations, cash flow, liabilities or
operations of either Windrose or Health Care REIT and its
respective subsidiaries, taken as a whole, or prevents or
materially adversely affects the ability of either Windrose or
Health Care REIT to timely consummate the mergers; provided,
however, that to the extent any effect is caused by or
results from any of the following, it will not be taken into
account in determining whether there has been a material adverse
effect;
|
|
|
|
|
conditions generally affecting the healthcare industry or, with
respect to a material adverse effect on Health Care REIT, the
skilled nursing or retirement care industry;
|
|
|
|
a decrease in the market price of the Windrose common shares or
shares of Health Care REIT common stock;
|
|
|
|
changes in general national economic or financial conditions or
changes in the securities markets in general;
|
|
|
|
a failure by either Windrose or Health Care REIT to report
earnings or revenue results consistent with its historic
earnings or revenue results;
|
|
|
|
changes in any laws or regulations or accounting regulations or
principles applicable to Windrose or Health Care REIT;
|
|
|
|
any outbreak or escalation of armed hostilities or acts of
terrorism;
|
|
|
|
the announcement, execution or consummation of the merger
agreement and the transactions contemplated thereby; or
|
|
|
|
changes the adverse effects of which are covered by insurance.
|
Neither party will be precluded from claiming that a material
adverse effect has occurred with respect to an event or change
underlying either a decrease in the other partys share
price as described in the second bullet point above or a failure
of the other party to report earnings or revenue results as
described in the fourth bullet point above.
Termination
of the Merger Agreement
The merger agreement may be terminated at any time prior to the
effective times of the mergers:
|
|
|
|
|
by mutual written consent of Health Care REIT and Windrose;
|
|
|
|
by either Health Care REIT or Windrose if any governmental
agency has issued an order (which order Health Care REIT or
Windrose, as the case may be, has used its reasonable best
efforts to have vacated or reversed), permanently restraining,
enjoining or otherwise prohibiting the merger, and such order
has become final and unappealable;
|
|
|
|
by either Health Care REIT or Windrose if the Windrose
shareholders fail to approve the merger at the special meeting
or any adjournment thereof;
|
58
|
|
|
|
|
after March 12, 2007, by either Health Care REIT or
Windrose if the merger has not been completed by such date for
any reason; provided however, if the merger has not been
completed by such date due to failure to obtain certain required
consents or approvals set forth in specific sections of the
disclosure letters of Health Care REIT and Windrose to the
merger agreement, neither party may terminate the merger
agreement until June 11, 2007 so long as the parties are
using their reasonable best efforts to obtain such consents or
approvals; provided further, that neither party may terminate
the merger agreement until the expiration of any applicable cure
period for breaches by either party in effect on such date; and
provided further, that in any case the terminating party is not
in material breach of its representations, warranties, covenants
or agreements under the merger agreement in any manner that has
caused or resulted in the failure to consummate the merger on or
before such date;
|
|
|
|
by Health Care REIT, if (i) prior to obtaining the approval
of Windroses shareholders, Windroses board of
trustees or a committee thereof has made an adverse
recommendation; (ii) Windrose fails to call or hold the
special meeting; (iii) Windrose has intentionally and
materially breached any of its obligations under the
non-solicitation and superior acquisition proposal provisions
under the merger agreement; (iv) Windroses board of
trustees has approved or recommended an acquisition proposal
made by any person other than Health Care REIT or Heat Merger
Sub; or (v) Windrose has entered into a definitive
agreement with respect to an acquisition proposal;
|
|
|
|
by Windrose, if prior to the approval of the merger agreement at
the special meeting Windroses board of trustees has
approved, and Windrose concurrently enters into, a definitive
agreement with respect to a superior acquisition proposal, but
only if (i) Windrose is not then in breach of any of its
obligations under the non-solicitation and superior acquisition
proposal provisions under the merger agreement and
(ii) concurrently with such termination Windrose has paid
Health Care REIT the full amounts of the termination fee, lender
consent fees and expenses and parent expense reimbursement, as
discussed below;
|
|
|
|
by Health Care REIT, if there has been a breach of any of the
representations, warranties, covenants or agreements of Windrose
contained in the merger agreement such that the conditions
precedent to Health Care REITs obligations to consummate
the merger set forth in the merger agreement are incapable of
being satisfied, which breach is not cured within 30 days
following written notice to Windrose; provided, however,
that Health Care REIT will not have the right to terminate the
merger agreement if Health Care REIT, Heat Merger Sub or Heat OP
Merger Sub is then in breach of its representations, warranties,
covenants or agreements under the merger agreement such that the
conditions precedent to Windroses obligations to
consummate the merger set forth in the merger agreement are
incapable of being satisfied; or
|
|
|
|
by Windrose, if there has been a breach of any of the
representations, warranties, covenants or agreements of Health
Care REIT or Heat Merger Sub contained in the merger agreement
such that the conditions precedent to Windroses
obligations to consummate the merger set forth in the merger
agreement are incapable of being satisfied, which breach is not
cured within 30 days following written notice to Health
Care REIT; provided, however, that Windrose will not have
the right to terminate the merger agreement if Windrose or
Windrose OP is then in breach of its representations,
warranties, covenants or agreements under the merger agreement
such that the conditions precedent to Health Care REITs
obligations to consummate the merger set forth in the merger
agreement are incapable of being satisfied.
|
|
|
|
Termination
Fees, Lender Consent Fees and Expense Reimbursement
|
Windrose will be obligated to pay Health Care REIT all or a
portion, as described below, of the following: (i) a
maximum termination fee equal to $16.9 million,
(ii) an amount up to $900,000, as reimbursement for fees
and expenses paid by Health Care REIT in connection with the
merger agreement and the merger, and (iii) an amount up to
$2.5 million, as reimbursement of Health Care REITs
expenses incurred in connection with obtaining certain third
party consents to the mergers, in the event that the merger
agreement is terminated:
|
|
|
|
|
by Health Care REIT, if:
|
|
|
|
|
|
prior to Windrose shareholders approval of the merger,
Windroses board of trustees withdraws or materially
modifies its recommendation of the merger agreement or the
merger in a manner adverse to
|
59
|
|
|
|
|
Health Care REIT or its stockholders (but only if Health Care
REIT terminates the merger agreement prior to the date of the
Windrose special meeting);
|
|
|
|
|
|
Windrose fails to call or hold the special meeting;
|
|
|
|
Windroses board of trustees of Windrose approves or
recommends an acquisition proposal made by any person other than
Health Care REIT or Heat Merger Sub;
|
|
|
|
Windrose intentionally and materially breaches its obligations
under the non-solicitation and other acquisition proposal
provisions of the merger agreement; or
|
|
|
|
Windrose enters into a definitive agreement with respect to an
acquisition proposal; or
|
|
|
|
|
|
by Windrose, if, prior to the approval of the merger by Windrose
shareholders, Windroses board of trustees approves, and
Windrose enters into, a definitive agreement with respect to a
superior acquisition proposal.
|
Under any such scenario, Windrose will pay Health Care REIT 50%
of the termination fee at the time of the termination of the
merger agreement. If Windrose enters into a definitive agreement
with respect to, or completes, an acquisition proposal made by
a third party other than Health Care REIT or Heat Merger Sub
within the 12 months following the termination of the
merger agreement, Windrose will pay Health Care REIT the
remaining 50% of such termination fee and the other amounts
described above concurrent with the closing of such transaction.
Windrose will pay Health Care REIT 100% of the amounts described
above upon the completion of an acquisition proposal with a
third party other than Health Care REIT or Heat Merger Sub if:
|
|
|
|
|
an acquisition proposal has been received by Windrose or
publicly disclosed prior to the termination of the merger
agreement by Health Care REIT or Windrose for the reasons
described in the third or fourth bullet point under the heading
Termination of the Merger Agreement; and
|
|
|
|
within 12 months after such termination, Windrose entered
into a definitive agreement providing for the acquisition
proposal that was completed with the third party.
|
In the event that Health Care REIT terminates the merger
agreement for the reasons described in the seventh bullet point
under the heading Termination of the Merger
Agreement, Windrose will pay Health Care REIT up to
$3.0 million as reimbursement of Health Care REITs
expenses incurred in connection with the merger agreement and
the merger and up to $2.5 million as reimbursement for fees
and expenses paid by Health Care REITs in connection with
obtaining certain third party consents to the merger.
In the event that Windrose terminates the merger agreement for
the reasons described in the eighth bullet point under the
heading Termination of the Merger
Agreement, Health Care REIT will pay Windrose up to
$3.0 million as reimbursement of Windroses expenses
incurred in connection with the merger agreement.
Health Care REIT and Windrose may amend the merger agreement at
any time, but after approval of the merger by the Windrose
shareholders, no amendment of the merger agreement may be made
that by law requires further approval by the Windrose
shareholders without such further approval.
Related
Agreements
Support
Agreements
A summary of the material provisions of the support agreements
is provided below. You should read the support agreements in
their entirety, copies of which have been filed as exhibits to
the registration statement of which this proxy
statement/prospectus is a part.
On September 12, 2006, each of Messrs. Klipsch and
Farrar entered into a support agreement with Health Care REIT.
By entering into the support agreement, each of
Messrs. Klipsch and Farrar has agreed to vote all Windrose
60
common shares beneficially owned by him (including any such
shares acquired after the date of the support agreement,
including by conversion of Windrose OP units beneficially owned
by him):
|
|
|
|
|
in favor of the merger, the adoption of the merger agreement and
the approval of the terms thereof; and
|
|
|
|
against any other merger agreement or merger, consolidation,
combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or
by Windrose or any subsidiary thereof or any other acquisition
proposal or any action or agreement that would (i) result
in a breach of any covenant, representation or warranty or any
other obligation or agreement under the merger agreement,
(ii) in any manner impede, interfere with, delay,
discourage, postpone, frustrate, prevent, nullify or adversely
affect the merger, the merger agreement or any of the other
transactions contemplated by the merger agreement, or
(iii) change in any manner the voting rights of any class
of beneficial interests of Windrose.
|
Each of Messrs. Klipsch and Farrar has appointed George L.
Chapman, Chairman and Chief Executive Officer of Health Care
REIT, and William C. Ballard, Director of Health Care REIT, as
irrevocable proxies and
attorneys-in-fact
to vote the Windrose common shares beneficially owned by him in
the manner indicated in the two bullet points above.
As of September 12, 2006, Mr. Klipsch beneficially
owned 109,701 Windrose common shares and 143,414 Windrose
OP units. As of September 12, 2006, Mr. Farrar
beneficially owned 44,320 Windrose common shares and 7,079
Windrose OP units. These Windrose common shares and Windrose OP
units (assuming the redemption of these Windrose OP units for
Windrose common shares) represent in the aggregate approximately
1.38% of all of the outstanding Windrose common shares (assuming
the redemption of these Windrose OP units for Windrose common
shares) as of September 12, 2006.
Neither Mr. Klipsch nor Mr. Farrar was paid any
additional consideration in connection with entering into his
support agreement.
Each of Messrs. Klipsch and Farrar has agreed, subject to
certain limited exceptions, not to (i) sell, transfer,
pledge, assign or otherwise dispose of (including by gift),
(ii) enter into any contract, option or other arrangement
(including any profit-sharing arrangement) to do any of the
foregoing, or (iii) enter into any voting arrangement,
whether by proxy, voting agreement or otherwise, with respect
to, any Windrose common shares or Windrose OP units
beneficially owned by him.
The support agreements will terminate on the earlier to occur of
(i) the effective time of the merger and (ii) the
termination of the merger agreement.
Consulting
and Employment Agreements
Consulting Agreement with Fred S. Klipsch. Health Care
REIT entered into a consulting agreement with Windroses
chairman and chief executive officer, Fred S. Klipsch, dated
September 12, 2006, to be effective as of the consummation
of the mergers. A copy of this agreement has been filed as an
exhibit to the registration statement of which this proxy
statement/prospectus is a part.
Under the agreement, which has a two-year term, Mr. Klipsch
will be retained as the Vice Chairman of Health Care REIT and
paid a base consulting fee of $350,000 in the first year and
$250,000 in the second year. Each year during the term of the
agreement, Mr. Klipsch will be eligible to receive a
performance bonus based on the achievement of performance
measures to be determined by the compensation committee of the
Health Care REIT board of directors, with the targeted amount of
such bonus being 60% to 120% of his base consulting fee. For
2006, Mr. Klipsch will be paid a bonus of $210,000 in cash
by Health Care REIT, if such amount has not already been paid by
Windrose or Windrose OP at the time the agreement becomes
effective. Mr. Klipschs reasonable business expenses
incurred in promoting Health Care REITs business also will
be reimbursed.
A retention bonus of $975,500 in cash and $930,000 in Health
Care REIT common stock will be paid to Mr. Klipsch under
the agreement, on the later of the effective date of the
agreement or January 2, 2007. Mr. Klipsch cannot sell
any of these shares of Health Care REIT common stock until after
the first anniversary of the grant date and can sell no more
than 50% of these securities between the first and second
anniversaries of the grant date. He also will receive a payment,
on the later of the effective date of the agreement or
January 2, 2007, of $1.7 million in
61
cash in lieu of amounts payable to him upon a change in control
under a change in control severance agreement and an employment
agreement among Mr. Klipsch, Windrose and Windrose OP,
other than the payment of: (i) unpaid accrued salary
through the effective date of the agreement, (ii) earned
but unpaid bonus and (iii) unpaid expenses incurred by
Mr. Klipsch on behalf of Windrose or Windrose OP.
Under the agreement, if Mr. Klipschs service is
terminated by him or Health Care REIT before the end of the
two-year term for any reason, he will be entitled to receive his
base consulting fee and performance bonus amounts accrued or
earned but unpaid as of such date. He also will be entitled to
receive a monthly severance payment (or, in the case of
termination for disability, monthly disability payments) equal
to his monthly base consulting fee for the remainder of the term
(or, in the case of termination for disability, until he returns
to active service to Health Care REIT, if applicable). In the
event of disability, Mr. Klipsch may be entitled to
additional payments under Health Care REITs disability
plans and policies, and any such payments will reduce the
payments due under the agreement. In addition, in exchange for
not competing with Health Care REIT for the two-year period
following the termination of Mr. Klipschs service for
any reason, Mr. Klipsch will receive $600,000, payable in
eight quarterly payments of $75,000. If Mr. Klipschs
service terminates due to his death, his surviving spouse or
other designated beneficiary will be entitled to receive a lump
sum payment equal to the present value of the amounts which
would have been payable to Mr. Klipsch as a result of the
termination of his service and for not competing with Health
Care REIT. In addition, all stock options, restricted stock or
other awards held by Mr. Klipsch under Health Care
REITs stock plans will fully vest and, in the case of
stock options, become exercisable in full.
Heath Care REIT will indemnify Mr. Klipsch for any excise
taxes assessed against him under Section 4999 of the Code
as a result of payments or benefits provided under the agreement
or any other plan, agreement or arrangement with Health Care
REIT, Windrose, Windrose OP or their affiliates. Health Care
REIT also will indemnify Mr. Klipsch for any liability with
respect to the guarantees executed by Mr. Klipsch in favor
of Wells Fargo, as trustee, regarding the loan on
Windroses Mount Vernon, Georgia facility.
Consulting Agreement with Frederick L. Farrar. Health
Care REIT entered into a consulting agreement with
Windroses president, chief operating officer and
treasurer, Frederick L. Farrar, dated September 12, 2006,
to be effective as of the consummation of the mergers. A copy of
this agreement has been filed as an exhibit to the registration
statement of which this proxy statement/prospectus is a part.
Under the agreement, which has a two-year term, Mr. Farrar
will be retained as an Executive Vice President of Health Care
REIT and President of its Medical Properties Division and paid a
base consulting fee of $300,000 per year. Each year during
the term of the agreement, Mr. Farrar will be eligible to
receive a performance bonus based on the achievement of
performance measures to be determined by the compensation
committee of the Health Care REIT board of directors, with the
targeted amount of such bonus being 30% to 75% of his base
consulting fee. For 2006, Mr. Farrar will be paid a bonus
of $150,000 in cash by Health Care REIT, if such amount has not
already been paid by Windrose or Windrose OP at the time the
agreement becomes effective. In the discretion of the
compensation committee of the Health Care REIT board of
directors, Mr. Farrar will be eligible to receive awards
under Health Care REITs 2005 Long-Term Incentive Plan,
however, the target range for such award is between 35% and 75%
of his base consulting fee and performance bonus, and any such
award would vest over two years. Mr. Farrars
reasonable business expenses incurred in promoting Health Care
REITs business also will be reimbursed.
A retention bonus of $529,500 in cash and $500,000 in Health
Care REIT common stock will be paid to Mr. Farrar under the
agreement, on the later of the effective date of the agreement
or January 2, 2007. Mr. Farrar cannot sell any of
these shares of Health Care REIT common stock until after the
first anniversary of the grant date and can sell no more than
50% of these securities between the first and second
anniversaries of the grant date. He also will receive a payment,
on the later of the effective date of the agreement or
January 2, 2007, of $1.2 million in cash in lieu of
amounts payable to him upon a change in control under a change
in control severance agreement and an employment agreement among
Mr. Farrar, Windrose and Windrose OP, other than the
payment of: (i) unpaid accrued salary through the effective
date of the agreement, (ii) earned but unpaid bonus and
(iii) unpaid expenses incurred by Mr. Farrar on behalf
of Windrose or Windrose OP.
Under the agreement, if Mr. Farrars service is
terminated by him or Health Care REIT before the end of the
two-year term for any reason, he will be entitled to receive his
base consulting fee and performance bonus amounts
62
accrued or earned but unpaid as of such date. He will also be
entitled to receive a monthly severance payment (or, in the case
of termination for disability, monthly disability payments)
equal to his monthly base consulting fee for the remainder of
the term (or, in the case of termination for disability, until
he returns to active service to Health Care REIT, if
applicable). In the event of disability, Mr. Farrar may be
entitled to additional payments under Health Care REITs
disability plans and policies, and any such payments will be
reduce the payments due under the agreement. If the termination
is involuntary and without cause, any stock awards granted under
Health Care REITs 2005 Long-Term Incentive Plan will
become fully vested and, in the case of stock options,
exercisable. In addition, in exchange for not competing with
Health Care REIT for the two-year period following the
termination of Mr. Farrars service for any reason,
Mr. Farrar will receive $300,000, payable in eight
quarterly payments of $37,500. If Mr. Farrars service
terminates due to his death, his surviving spouse or other
designated beneficiary will be entitled to receive a lump sum
payment equal to the present value of the amounts which would
have been payable to Mr. Farrar as a result of the
termination of his service and for not competing with Health
Care REIT. In addition, all stock options, restricted stock or
other awards held by Mr. Farrar under Health Care
REITs stock plans will fully vest and, in the case of
stock options, become exercisable in full.
Heath Care REIT will indemnify Mr. Farrar for any excise
taxes assessed against him under Section 4999 of the Code
as a result of payments or benefits provided under the agreement
or any other plan, agreement or arrangement with Health Care
REIT, Windrose, Windrose OP or their affiliates. Health Care
REIT also will indemnify Mr. Farrar for any liability with
respect to the guarantees executed by Mr. Farrar in favor
of Wells Fargo, as trustee, regarding the loan on
Windroses Mount Vernon, Georgia facility.
Employment Agreement with Daniel R. Loftus. Health Care
REIT entered into an employment agreement with Windroses
executive vice president, secretary and general counsel, Daniel
R. Loftus, dated September 12, 2006, to be effective as of
the consummation of the mergers. A copy of this agreement has
been filed as an exhibit to the registration statement of which
this proxy statement/prospectus is a part.
Under the agreement, which has a two-year term that will be
automatically extended for successive two-year periods unless
Health Care REIT or Mr. Loftus provides written notice at
least six months prior to the expiration of the then current
two-year term, Mr. Loftus will be employed as a Senior Vice
President of Health Care REIT and the Executive Vice President
of its Medical Properties Division and paid a base salary of
$260,000 in the first year and $267,800 in the second year. Each
year during the term of the agreement, Mr. Loftus will be
eligible to receive a performance bonus based on the achievement
of performance measures to be determined by the compensation
committee of the Health Care REIT board of directors, with the
targeted amount of such bonus being 25% to 50% of his base
salary. For 2006, Mr. Loftus will be paid a bonus of
$94,000 in cash by Health Care REIT, if such amount has not
already been paid by Windrose or Windrose OP at the time the
agreement becomes effective. In addition, a retention bonus of
$266,750 in cash and $200,000 in Health Care REIT common stock
will be paid to Mr. Loftus under the agreement, on the
later of the effective date of the agreement or January 2,
2007.
In the discretion of the compensation committee of the Health
Care REIT board of directors, Mr. Loftus will be eligible
to receive awards under Health Care REITs 2005 Long-Term
Incentive Plan, however, the target range for such award is
between 25% and 70% of his base salary and performance bonus. He
will also receive health insurance, life insurance and
disability coverage provided to key employees, reimbursement of
his reasonable business expenses and three weeks of vacation
each year. Mr. Loftus also may participate in the executive
compensation, retirement and welfare benefit plans and programs
generally applicable to executive officers of Health Care REIT,
to the extent not duplicative of any benefits provided by the
agreement.
Under the agreement, if Mr. Loftuss employment is
terminated by him or Health Care REIT before the end of the
two-year term for any reason, including if he is terminated for
cause or voluntarily terminates his employment: (i) he will
be entitled to receive his base salary, performance bonus and
vacation payments accrued or earned but unpaid with respect to
fiscal years or other periods preceding the termination date
(with respect to the most recently ended fiscal year with
respect to the performance bonus, in the case of termination by
Health Care REIT for cause) and (ii) he will receive any
nonforfeitable benefits payable under Health Care REITs
deferred compensation, incentive or other benefit plans. If the
termination is by Health Care REIT without cause, or by
Mr. Loftus under circumstances which under the agreement
are deemed to be equivalent to an involuntary termination,
Mr. Loftus also will receive (i) his base salary for
the remainder of the term, which payments will be reduced by the
63
compensation he receives from any replacement position he
obtains, (ii) accelerated vesting and exercisability of any
stock options, restricted stock or other awards granted under
Health Care REITs 2005 Long-Term Incentive Plan and
(iii) continued health, life and disability coverage at
Health Care REITs expense for the remainder of the term
(but not less than six months), or, if earlier, until the date
he obtains comparable coverage from another employer. In the
event of termination due to disability, Mr. Loftus also
will receive his base salary for the remainder of the term, or
until he returns to active employment with any employer, which
payments will be reduced by any amounts paid under Health Care
REITs disability plans and policies. If
Mr. Loftuss employment terminates due to his death,
his surviving spouse or other designated beneficiary will be
entitled to receive a lump sum payment equal to the present
value of the amounts which would have been payable to
Mr. Loftus as a result of the termination of his employment
by Health Care REIT without cause. In addition, if
Mr. Loftuss employment is terminated for any reason
prior to the end of the first term of the agreement, or if the
agreement is not extended for a second term, Mr. Loftus (or
his surviving spouse or other designated beneficiary) will
receive a lump sum payment of $288,000. If the agreement is
extended for two years, and Mr. Loftus is terminated during
the extended two year term, or the agreement is not subsequently
extended for an additional two-year period, a lump sum payment
of $144,000 will be paid to Mr. Loftus under the same terms
and conditions as the $288,000 payment. If Health Care REIT
requests that Mr. Loftus relocate from Indianapolis,
Indiana to Nashville, Tennessee, then Health Care REIT will
reimburse Mr. Loftus for his reimbursable moving expenses.
Health Care REIT will indemnify Mr. Loftus for any excise
taxes assessed against him under Section 4999 of the Code
as a result of payments or benefits provided under the agreement
or any other plan, agreement or arrangement with Health Care
REIT, Windrose, Windrose OP or their affiliates.
Interim
Financing
As of September 12, 2006, Health Care REIT agreed to
provide Windrose OP with a $125.0 million secured revolving
line of credit pursuant to the terms of a loan agreement. The
revolving credit facility is available to fund future real
estate acquisitions and related closing costs payable by
Windrose OP and its subsidiaries. If the merger does not close
by January 10, 2007 and certain other conditions are
satisfied, the maximum amount of this credit facility may be
increased, at Windrose OPs option, to $150.0 million.
Windrose OPs obligations under the credit facility have
been guaranteed by Windrose pursuant to an unconditional and
continuing guaranty of Windrose in favor of Health Care REIT.
Pursuant to the promissory note made by Windrose OP in favor of
Health Care REIT, interest accrues on the principal amount
outstanding under the credit facility at a rate equal to LIBOR
plus 2.5%, subject to adjustment (as discussed below) (which we
refer to as the stated interest rate). Except as discussed
below, the credit facility requires the monthly payment of
interest only at a rate equal to LIBOR plus 1.6% (which we refer
to as the current interest rate). If Windrose and Health Care
REIT complete the merger, Windrose OP will be obligated to repay
the outstanding principal balance of the loan, accrued and
unpaid interest at a rate equal to the current interest rate,
and all other amounts payable by Windrose OP under the credit
facility, in cash at closing. If the merger is completed,
Windrose OP will not be required to repay the amount equal to
the difference between the amount of interest accrued at the
stated interest rate and the amount of interest accrued at the
current interest rate.
If the merger agreement is terminated for any reason, the stated
interest rate will be increased by 0.2% beginning on the date
that is 91 days after the date the merger agreement is
terminated. The stated interest rate will continue to increase
by 0.2% each month beginning in the second full month after the
date that is 91 days after the date the merger agreement is
terminated. Upon the termination of the merger agreement, the
principal amount outstanding under the credit facility and
accrued and unpaid interest will be repaid as follows:
|
|
|
|
|
If the merger agreement is terminated because of a superior
acquisition proposal or because Windroses board of
trustees makes an adverse recommendation, the loan will be
repaid in full upon the earliest of: (i) the execution of a
definitive agreement with respect to a superior acquisition
proposal; (ii) the completion of an acquisition proposal;
or (iii) in the case of an adverse recommendation, the date
the merger agreement is terminated.
|
|
|
|
If the merger agreement is terminated at any time when an
acquisition proposal has been made, the loan will be repaid in
full upon the earliest of: (i) the execution of a
definitive agreement with respect to any
|
64
|
|
|
|
|
acquisition proposal; (ii) completion of any acquisition
proposal; or (iii) 12 months after the date the merger
agreement is terminated.
|
|
|
|
|
|
If the merger agreement is terminated for any other reason and
no acquisition proposal has been made, the loan will be repaid
in full on the date that is 12 months after the date the
merger agreement is terminated, in cash except that Windrose OP
may, at its option, repay up to 40% of the principal amount of
the loan by issuing to Health Care REIT preferred units of
limited partnership interest in Windrose OP, subject to the
terms and conditions set forth in the loan agreement.
|
Windrose OP may prepay all or any portion of the outstanding
principal balance of the loan, all accrued and unpaid interest
and all other amounts payable by Windrose OP on any date without
payment of any prepayment fee. In addition, the loan agreement
contains customary events of default. Whenever any event of
default occurs, Health Care REIT may, among other remedies,
declare the outstanding principal balance of the loan, all
accrued and unpaid interest and all other amounts payable by
Windrose OP under the credit facility immediately due and
payable, without notice. All such amounts will bear interest at
the default rate, which is equal to the stated interest rate
plus 4.0% per annum, from the date of the event of default
until paid.
Pursuant to the terms of a mortgage, security agreement,
assignment of leases and rents and fixture filing, Windrose OP
has granted Health Care REIT a lien on certain real estate
assets acquired by Windrose OP with borrowings under the credit
facility and a security interest in the related personal
property. The mortgage also provides that if Windrose OPs
credit agreement with The Huntington National Bank is
terminated, Windrose OP will grant Health Care REIT a lien on
and security interest in the property securing the indebtedness
under the Huntington credit facility.
The foregoing description of certain terms of the interim
financing is only a summary and you should read it together with
Windroses Current Report on
Form 8-K
(including all of the exhibits) filed on September 15,
2006, which is incorporated by reference into this proxy
statement/prospectus.
Tax
Indemnity Agreements
Each of Fred S. Klipsch, Frederick L. Farrar and Steve Klipsch
and Mike Klipsch, the sons of Mr. Klipsch, Charles Lanham,
a former Windrose trustee, Robin Barksdale, a current Windrose
employee, and O.B. McCoin, an executive vice president of
Windrose, have entered into separate tax indemnity agreements
with Health Care REIT with respect to the exchange of certain of
their Windrose OP units for Health Care REIT common stock as
part of the operating partnership merger. Each of those
individuals received Windrose OP units in connection with the
contribution of assets to Windrose OP as part of the Windrose
initial public offering. Some of those individuals own Windrose
OP units that are not covered by these tax indemnity agreements.
Pursuant to the tax indemnity agreements, Health Care REIT has
agreed to pay each of these individuals a cash amount intended
to equal such persons estimated tax liability attributable
to the exchange of Windrose OP units for Health Care REIT common
stock in the operating partnership merger plus a tax
gross-up
amount.
65
MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
Introduction
The following summary discusses the material U.S. federal
income tax consequences of the merger and the operating
partnership merger. This summary is based on current law, is for
general information only and is not tax advice. This discussion
is based on the Code, applicable Treasury Regulations, judicial
authority, and administrative rulings and practice, all as
currently in effect and which are subject to change or differing
interpretations, possibly with retroactive effect. This summary
assumes that Windrose common shares, Windrose preferred shares
and Windrose OP units are held as capital assets for
U.S. federal income tax purposes. This summary is not
intended to be a complete description of all of the
U.S. federal income tax consequences of the merger or the
operating partnership merger. In addition, except as
specifically set forth below, this summary does not discuss any
state or local income taxation or foreign income taxation or
other tax consequences. This discussion does not address all of
the aspects of U.S. federal income taxation that may be
relevant to a particular holder of Windrose common shares,
Windrose preferred shares or Windrose OP units in light of their
personal circumstances, or to holders of Windrose common shares,
Windrose preferred shares or Windrose OP units that are subject
to special treatment under U.S. federal income tax laws,
including but not limited to:
|
|
|
|
|
dealers in securities or foreign currencies, financial
institutions, insurance companies or tax-exempt organizations;
|
|
|
|
persons who are subject to the alternative minimum tax, or who
elect to apply a
mark-to-market
method of accounting;
|
|
|
|
persons that hold their Windrose common shares, Windrose
preferred shares or Windrose OP units as part of a hedge,
straddle, constructive sale or conversion transaction;
|
|
|
|
persons whose functional currency is not the U.S. dollar;
|
|
|
|
persons who are not United States persons (as
defined in Section 7701(a)(30) of the Code);
|
|
|
|
persons that are, or hold their Windrose common shares, Windrose
preferred shares or Windrose OP units through partnerships or
other pass-through entities; or
|
|
|
|
holders of options granted by Windrose or persons who acquired
Windrose common shares or Windrose preferred shares through the
exercise of employee stock options or otherwise as compensation.
|
THE U.S. FEDERAL INCOME TAX LAWS ARE COMPLEX, AND A
SHAREHOLDERS OR UNITHOLDERS INDIVIDUAL CIRCUMSTANCES
MAY AFFECT THE SHAREHOLDERS OR UNITHOLDERS TAX
CONSEQUENCES. CONSEQUENTLY, ALL HOLDERS OF HEALTH CARE REIT
STOCK RECEIVED IN THE MERGER OR THE OPERATING PARTNERSHIP MERGER
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES TO THEM OF THE MERGER AND THE OPERATING
PARTNERSHIP MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF
FEDERAL, STATE AND LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS TO
THEIR PARTICULAR CIRCUMSTANCES.
U.S. Federal
Income Tax Consequences of the Merger
General
The following is a summary of the material anticipated
U.S. federal income tax consequences of the merger of
Windrose with and into Heat Merger Sub, with Heat Merger Sub
continuing as the surviving entity in the merger and a wholly
owned subsidiary of Health Care REIT. This summary is generally
applicable to holders of Windrose common shares and Windrose
preferred shares who are U.S. persons (as defined in
Section 7701(a)(30) of the Code) and who hold their
Windrose common shares and Windrose preferred shares as capital
assets for U.S. federal income tax purposes.
In addition to the Code, applicable Treasury regulations,
judicial authority, and administrative rulings and practice, all
as in effect as of the date of this document, this summary is
based on representations, covenants, and
66
assumptions as to factual matters provided by Windrose and
Health Care REIT to Hunton & Williams LLP, special tax
counsel to Windrose, and Arnold & Porter LLP, special
tax counsel to Health Care REIT. The failure of any such factual
representations, covenants or assumptions to be true, accurate,
and complete in all material respects, may adversely affect the
accuracy of the statements and conclusions described in this
discussion.
Although the merger is, for state law purposes, a merger of
Windrose with and into Heat Merger Sub, Heat Merger Sub is
ignored as a separate entity for U.S. federal income tax
purposes, and thus the merger will be treated for
U.S. federal income tax purposes as a merger of Windrose
directly into Health Care REIT. The merger is intended to
qualify as a reorganization under the provisions of
Section 368(a) of the Code, and the income tax consequences
summarized below are based on the assumption that the merger
will qualify as a reorganization. Arnold & Porter LLP
and Hunton & Williams LLP each is of the opinion that,
on the basis of certain facts, representations, and assumptions,
the merger will qualify as a reorganization under the provisions
of Section 368(a) of the Code. In addition, the obligations
of Health Care REIT and Windrose to complete the merger are
conditioned upon the receipt by each of an opinion from
Arnold & Porter LLP and Hunton & Williams LLP,
respectively, that on the basis of the facts, representations
and assumptions set forth or referred to in such opinions, the
merger will qualify as a reorganization under the provisions of
Section 368(a) of the Code. In rendering these opinions,
Arnold & Porter LLP and Hunton & Williams
LLP may rely upon customary representations of Health Care REIT
and Windrose reasonably requested by counsel, including those
contained in customary tax representation letters.
No ruling has been or will be requested from the Internal
Revenue Service (which we refer to as the IRS) with respect to
the tax consequences of the merger. Moreover, the opinions of
Arnold & Porter LLP and Hunton & Williams
LLP described in this discussion are not binding on the IRS, and
no assurance can be given that the IRS would not assert, or that
a court would not sustain, a position contrary to any of the tax
consequences set forth below.
Federal
Income Tax Consequences of the Merger to Windrose
Shareholders
The treatment of the merger as a reorganization under
Section 368(a) of the Code will have the following
U.S. federal income tax consequences to holders of Windrose
common shares and Windrose preferred shares:
|
|
|
|
|
Exchange of Windrose Common Shares for Health Care REIT
Common Stock. Windrose shareholders who receive
Health Care REIT common stock in exchange for their Windrose
common shares in the merger will not recognize any gain or loss
with respect to shares of Health Care REIT common stock received
(except with respect to cash received instead of a fractional
share interest in Health Care REIT common stock, as discussed
below). The aggregate tax basis of the Health Care REIT common
stock received by a holder of Windrose common shares in the
merger (including fractional shares deemed received and redeemed
as described below) will be the aggregate tax basis of the
Windrose common shares surrendered in exchange therefor reduced
by any basis allocable to any fractional share for which cash is
received. A Windrose shareholders holding period in the
Health Care REIT common stock received in the merger in exchange
for Windrose common shares will include the holding period for
the Windrose common shares surrendered in exchange therefor.
|
|
|
|
Exchange of Windrose Preferred Shares for Health Care REIT
Preferred Stock. Holders of Windrose preferred
shares who receive Health Care REIT preferred stock in exchange
for their Windrose preferred shares in the merger will not
recognize any gain or loss with respect to shares of Health Care
REIT preferred stock received. The aggregate tax basis of the
Health Care REIT preferred stock received by a holder of
Windrose preferred shares in the merger will be the aggregate
tax basis of the Windrose preferred shares surrendered in
exchange therefor. The holding period in the Health Care REIT
preferred stock received in the merger in exchange for Windrose
preferred shares will include the holding period for the
Windrose preferred shares surrendered in exchange therefor.
|
|
|
|
Cash in Lieu of Fractional Shares. Cash
received in the merger by a holder of Windrose common shares
instead of a fractional share of Health Care REIT common stock
will be treated as though the fractional share had been received
and then redeemed for cash, and in general gain or loss will be
recognized, measured by the difference between the amount of
cash received and the portion of the basis of the Windrose
common shares allocable to such fractional interest. Such gain
or loss generally will be long-term capital gain or loss
|
67
|
|
|
|
|
if the holding period for such Windrose common shares was more
than one year as of the effective date of the merger.
|
Federal
Income Tax Consequences of the Merger to the
Entities
No gain or loss will be recognized by Health Care REIT, Heat
Merger Sub or Windrose as a result of the merger if the merger
qualifies as a reorganization under Section 368(a) of the
Code. The merger will result in a technical termination of
Windrose OP under Section 708(b)(l)(B) of the Code. The
technical termination of Windrose OP for federal income tax
purposes will not cause Windrose OP, Windrose or Health Care
REIT to recognize any gain or loss.
Backup
Withholding
In general, merger consideration that includes cash (i.e., cash
paid in the merger in lieu of fractional shares of Health Care
common stock) will be subject to information reporting to the
IRS. In addition, backup withholding at the applicable rate,
currently 28%, will generally apply to such merger consideration
if the exchanging Windrose shareholder fails to properly certify
that it is not subject to backup withholding, generally on a
substitute IRS
Form W-9.
Certain holders, including, among others,
U.S. corporations, are not subject to information reporting
or backup withholding, but they may still need to furnish an IRS
Form W-9
or otherwise establish an exemption. Any amount withheld as
backup withholding from payments to an exchanging Windrose
shareholder will be creditable against the shareholders
U.S. federal income tax liability, provided that it timely
furnishes the required information to the IRS. Windrose
shareholders should consult their tax advisors as to their
qualifications for exemption from backup withholding and the
procedure for obtaining such an exemption.
Federal
Income Tax Consequences of the Merger if the Merger Does Not
Qualify as a Reorganization
It is a condition to consummation of the merger that Health Care
REIT and Windrose receive opinions of counsel that the merger
will qualify as a reorganization under the provisions of
Section 368(a) of the Code, but these opinions will not be
binding upon the IRS or the courts.
If the merger fails to qualify as a reorganization, then the tax
consequences to Windrose shareholders are as follows:
|
|
|
|
|
a holder of Windrose common shares would recognize gain or loss,
as applicable, equal to the difference between (1) the
aggregate fair market value of the Health Care REIT common stock
received by such holder in the merger plus any cash received
instead of a fractional share of Health Care REIT common stock,
and (2) the shareholders adjusted basis in its
Windrose common shares; and
|
|
|
|
a holder of Windrose preferred shares would recognize gain or
loss, as applicable, equal to the difference between
(1) the aggregate fair market value of the shares of Health
Care REIT preferred stock received by such holder in the merger,
and (2) the shareholders adjusted basis in its
Windrose preferred shares.
|
If the merger fails to qualify as a reorganization, but Windrose
qualifies as a REIT at the time of the merger, Windrose would
not incur a tax liability so long as Windrose has made
distributions (which would be deemed to include for this purpose
the fair market value of the Health Care REIT shares issued
pursuant to the merger) to Windrose shareholders in an amount at
least equal to the net income or gain on the deemed sale of its
assets to Health Care REIT. In the event that such distributions
were not sufficient to eliminate all of Windroses tax
liability as a result of the deemed sale of its assets to Health
Care REIT, Health Care REIT would be liable for any remaining
tax owed by Windrose as a result of the merger.
If the merger fails to qualify as a reorganization and Windrose
fails to qualify as a REIT at the time of the merger, Windrose
would generally recognize gain or loss on the deemed transfer of
its assets to Health Care REIT and Health Care REIT, as its
successor, could incur a very significant current tax liability.
If the merger qualifies as a reorganization and Windrose fails
to qualify as a REIT at the time of the merger, Health Care REIT
would be subject to tax on the built-in gain on each Windrose
asset existing at the time of the
68
merger if Health Care REIT were to dispose of the Windrose asset
within the ten-year period following the merger. Such tax would
be imposed at the highest regular corporate rate in effect at
the date of the disposition.
REIT
Qualification of Health Care REIT and Windrose
As a condition to the completion of the merger,
Hunton & Williams LLP will deliver an opinion to Health
Care REIT to the effect that for Windroses short taxable
year ended December 31, 2002 through its taxable year ended
December 31, 2005, Windrose qualified as a REIT under the
Code, and from January 1, 2006 through the closing date of
the merger, Windroses organization and current and
proposed method of operation will enable Windrose to continue to
meet the requirements for qualification as a REIT under the
Code. This opinion will not be binding on the IRS or the courts.
The opinion of Hunton & Williams LLP relies on
customary representations made by Windrose about factual matters
relating to the organization and operation of Windrose, Windrose
OP and their subsidiaries. In addition, this opinion is based on
factual representations of Windrose concerning its business and
properties as set forth in this joint proxy statement/prospectus
and the other documents incorporated by reference in this joint
proxy statement/prospectus. If Windrose did not qualify as a
REIT in any of its prior tax years, Windrose would be liable for
(and, as successor to Windrose in the merger, Health Care REIT
would be obligated to pay any) federal income tax on its income
earned in any year that it did not qualify as a REIT.
As a condition to the completion of the merger,
Arnold & Porter LLP will deliver an opinion to Windrose
to the effect that Health Care REIT qualified to be taxed as a
REIT under Sections 856 through 860 of the Code for its
taxable years ended December 31, 1998 through
December 31, 2005, and taking into account the merger,
Health Care REITs organization and current and proposed
method of operation will enable Health Care REIT to continue to
qualify as a REIT for its taxable year ending December 31,
2006 and in the future. This opinion will not be binding on the
IRS or the courts.
The opinion of Arnold & Porter LLP relies upon
customary representations made by Health Care REIT about factual
matters relating to the organization and operation of Health
Care REIT and its subsidiaries. In addition, this opinion is
based upon factual representations of Health Care REIT
concerning its business and properties as set forth in this
joint proxy statement/prospectus and the other documents
incorporated by reference in this joint proxy
statement/prospectus. Finally, the portion of the
Arnold & Porter LLP opinion that addresses the
qualification of Health Care REIT as a REIT following the merger
is based in part upon the opinion of Hunton & Williams
LLP described above relating to the qualification of Windrose as
a REIT currently and at the closing of the merger and the
factual representations made by Windrose in connection with the
Hunton & Williams LLP opinion.
Health Care REIT intends to continue to operate in a manner to
qualify as a REIT following the merger, but there is no
guarantee that Health Care REIT will qualify or remain qualified
as a REIT. Qualification and taxation as a REIT depend upon
Health Care REITs ability to meet, through actual annual
(or, in some cases, quarterly) operating results, requirements
relating to income, asset ownership, distribution levels and
diversity of share ownership, and the various REIT qualification
requirements imposed under the Code. Arnold & Porter
LLP will not review Health Care REITs compliance with
these tests on a continuing basis. Given the complex nature of
the REIT qualification requirements, the ongoing importance of
factual determinations and the possibility of future changes in
the circumstances of Health Care REIT, Health Care REIT cannot
guarantee that its actual operating results will satisfy the
requirements for taxation as a REIT under the Code for any
particular tax year.
Failure
to Qualify
Specified cure provisions may be available to Health Care REIT
in the event that Health Care REIT discovers a violation of a
provision of the Code that would otherwise result in its failure
to qualify as a REIT. Except with respect to violations of the
REIT income tests and assets tests, and provided the violation
is due to reasonable cause and not due to willful neglect, these
cure provisions generally impose a $50,000 penalty for each
violation in lieu of a loss of REIT status. If Health Care REIT
fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions of the Code do not apply, Health Care REIT
will be required to pay tax, including any applicable
alternative minimum tax, on its taxable income at regular
corporate tax rates. Distributions to Health Care REITs
stockholders in any year in which Health Care REIT fails to
qualify as a REIT will not be deductible by Health Care
69
REIT, and Health Care REIT will not be required to distribute
any amounts to its stockholders. As a result, Health Care REIT
anticipates that its failure to qualify as a REIT would reduce
the cash available for distribution by it to its stockholders.
In addition, if Health Care REIT fails to qualify as a REIT, all
distributions to Health Care REITs stockholders will be
taxable as regular corporate dividends to the extent of Health
Care REITs current and accumulated earnings and profits.
In this event, subject to certain limitations under the Code,
corporate distributees may be eligible for the
dividends-received deduction. Unless entitled to relief under
specific statutory provisions, Health Care REIT will also be
disqualified from taxation as a REIT for the four taxable years
following the year in which Health Care REIT lost its
qualification. It is not possible to state whether in all
circumstances Health Care REIT would be entitled to this
statutory relief.
Tax
Liabilities and Attributes Inherited from Windrose
If Windrose failed to qualify as a REIT for any of its taxable
years, Windrose would be liable for (and, as successor to
Windrose in the merger, Health Care REIT would be obligated to
pay) federal income tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates.
Furthermore, after the merger, the asset and income tests will
apply to all of Health Care REITs assets, including the
assets Health Care REIT acquires from Windrose, and to all of
Health Care REITs income, including the income derived
from the assets Health Care REIT acquires from Windrose. As a
result, the nature of the assets that Health Care REIT acquires
from Windrose and the income Health Care REIT derives from those
assets may have an effect on Health Care REITs tax status
as a REIT.
Qualification as a REIT requires Windrose to satisfy numerous
requirements, some on an annual and others on a quarterly basis,
as described above with respect to Health Care REIT. There are
only limited judicial and administrative interpretations of
these requirements and qualification as a REIT involves the
determination of various factual matters and circumstances which
were not entirely within Windroses control.
U.S. Federal
Tax Consequences of the Operating Partnership Merger
General
The following is a summary of the material anticipated
U.S. federal income tax consequences of the operating
partnership merger. This summary is generally applicable to
holders of Windrose OP units (other than Health Care REIT,
Windrose or their respective subsidiaries) who are
U.S. persons (as defined in Section 7701(a)(30) of the
Code) and who hold their Windrose OP units as capital assets for
U.S. federal income tax purposes (which holders we refer to
as the unitholders). In the operating partnership merger, each
Windrose OP unit issued and outstanding prior to the operating
partnership merger (other than Windrose OP units held by
Windrose, Health Care REIT or any of their respective
subsidiaries) will be converted into, and cancelled in exchange
for, a fraction of a share of Health Care REIT common stock
equal to the exchange ratio. Although the operating partnership
merger is, for state law purposes, a merger of Heat OP Merger
Sub with and into Windrose OP, the operating partnership merger
will be treated for federal income tax purposes as a sale of
Windrose OP units by the unitholders to Health Care REIT and
Warrior OP Holdco, LLC.
No ruling has been or will be requested from the IRS, and no
opinions of counsel will be issued, with respect to the tax
consequences of the operating partnership merger. Accordingly,
no assurance can be given that the IRS would not assert, or that
a court would not sustain, a position contrary to any of the tax
consequences set forth below.
Federal
Income Tax Consequences of the Operating Partnership Merger to
Unitholders
The exchange of Windrose OP units for Health Care REIT common
stock pursuant to the operating partnership merger will be
treated as a sale of those units for federal income tax
purposes. That sale will be fully taxable to unitholders and
such holders will be treated as realizing for tax purposes an
amount equal to the sum of the cash and the fair market value of
the Health Care REIT common stock received in connection with
the operating partnership merger plus the amount of Windrose
OPs liabilities allocable to the unitholders
Windrose OP units at the time of the exchange.
70
Tax Treatment of Unitholders Generally. The
determination of gain or loss from the sale of Windrose
OP units pursuant to the operating partnership merger will
be based on the difference between the amount considered
realized for federal income tax purposes and the tax basis of
the unitholders Windrose OP units. See
Basis of Windrose OP units. The
amount realized will be measured by the sum of the
cash and fair market value of the Health Care REIT common stock
received plus the amount of any Windrose OP liabilities
allocable to the unitholders Windrose OP units exchanged.
To the extent that the amount realized exceeds the
unitholders basis in their Windrose OP units, such
unitholders will recognize gain. It is possible that the amount
of gain recognized or even the tax liability resulting from such
gain could exceed the amount of cash and the fair market value
of any Health Care REIT common stock received in connection with
the operating partnership merger.
Except as described below, any gain or loss recognized in
connection with the operating partnership merger will be treated
as gain or loss attributable to the sale or disposition of a
capital asset. Such gain or loss generally will constitute
long-term capital gain or loss if the unitholder has held such
Windrose OP units for more than one year. To the extent,
however, that the amount realized is attributable to a
unitholders share of unrealized receivables of
Windrose OP (as defined in section 751 of the Code) that
exceeds the basis attributable to those assets, such excess will
be treated as ordinary income. Unrealized receivables include,
to the extent not previously included in Windrose OPs
income, any rights to payment for services rendered or to be
rendered. Unrealized receivables also include amounts that would
be subject to recapture as ordinary income if Windrose OP had
sold its assets at their fair market value at the time of the
operating partnership merger. In addition, a portion of any
long-term gain recognized by unitholders who are individuals,
trusts or estates may be characterized as unrecaptured
Section 1250 gain, which would be subject to tax at a
maximum rate of 25%, rather than the maximum 15% rate generally
applicable to long-term capital gains.
Unitholders also will be allocated their proportionate share of
Windrose OPs taxable income for the portion of Windrose
OPs taxable year ending with the date of the closing of
the operating partnership merger, and unitholders will have to
report such income notwithstanding the exchange of their
Windrose OP units. However, as discussed below under
Basis of Windrose OP units, any income
allocated to a unitholders Windrose OP units with respect
to the portion of the taxable year prior to the closing of the
operating partnership merger will increase the unitholders
adjusted tax basis in its Windrose OP units for purposes of
calculating gain and loss on the operating partnership merger.
A unitholders initial tax basis in the Health Care REIT
common stock received in the operating partnership merger will
be equal to the sum of the cash received and the fair market
value of such shares of Health Care REIT common stock on the
effective date of the operating partnership merger, and such
unitholders holding period in those shares of Health Care
REIT common stock will commence the day after the operating
partnership merger.
Tax Treatment of Unitholders Entitled to Tax Indemnity
Payments. Certain unitholders who contributed
assets to Windrose OP in connection with Windroses initial
public offering are parties to tax indemnity agreements with
Health Care REIT. Health Care REIT has agreed to pay to each
unitholder subject to a tax indemnity agreement a cash amount
(which we refer to as the adjustment amount) intended to equal
the unitholders estimated tax liability attributable to
the exchange of Windrose OP units for Health Care REIT common
stock in the operating partnership merger plus a tax
gross-up
amount. Although the tax treatment of the adjustment amount is
not entirely clear, it is likely to be treated as ordinary
income.
Basis of Windrose OP units. In general, a
unitholder who at the time of the transactions resulting in the
issuance of the Windrose OP units contributed a partnership
interest or other property to Windrose OP in exchange for
Windrose OP units will have an initial basis in the Windrose OP
units (which we refer to as the initial basis) equal to its
basis in the contributed partnership interest or other property.
A unitholders initial basis in its Windrose OP units
generally is increased by (i) such unitholders share
of Windrose OPs taxable income and (ii) increases in
its share of liabilities of Windrose OP (including any increase
in its share of liabilities occurring in connection with the
transactions resulting in the issuance of the Windrose OP
units). Generally, such unitholders basis in its Windrose
OP units is decreased (but not below zero) by (A) its share
of Windrose OP distributions, (B) decreases in its share of
liabilities of Windrose OP (including any decrease in its share
of liabilities of Windrose OP occurring in connection with the
transactions resulting in the issuance of the Windrose OP
units), (C) its share of losses of Windrose OP and
(D) its share of nondeductible expenditures of Windrose OP
that are not chargeable to capital.
71
Federal
Income Tax Consequences of the Operating Partnership Merger to
the Entities
Neither Windrose OP nor Heat OP Merger Sub will recognize any
gain or loss as a result of the operating partnership merger.
Backup
Withholding
In general, operating partnership merger consideration
(including any adjustment amounts) will be subject to
information reporting to the IRS. In addition, backup
withholding at the applicable rate, currently 28%, will
generally apply to such operating partnership merger
consideration if the exchanging unitholder fails to properly
certify that it is not subject to backup withholding, generally
on a substitute IRS
Form W-9.
Certain unitholders, including, among others,
U.S. corporations, are not subject to information reporting
or backup withholding, but they may still need to furnish an IRS
Form W-9
or otherwise establish an exemption. Any amount withheld as
backup withholding from payments to a unitholder will be
creditable against the unitholders U.S. federal
income tax liability, provided that it timely furnishes the
required information to the IRS. Unitholders should consult
their tax advisors as to their qualifications for exemption from
backup withholding and the procedure for obtaining such an
exemption.
72
DESCRIPTION
OF HEALTH CARE REIT
Health Care REIT is a self-administered, equity real estate
investment trust that invests in health care and senior housing
facilities. Founded in 1970, Health Care REIT was the first real
estate investment trust to invest exclusively in health care
facilities.
As of June 30, 2006, Health Care REIT had
$2.96 billion of net real estate investments, inclusive of
credit enhancements, in 464 facilities located in 37 states
and managed by 57 different operators. At that date, the
portfolio included 35 independent living/continuing care
retirement communities, 203 assisted living facilities, 213
skilled nursing facilities and 13 specialty care facilities.
Health Care REIT seeks to increase funds from operations and
funds available for distribution and to enhance stockholder
value through relationship investing with public and private
regionally focused health care operators. The primary components
of this strategy are set forth below.
Relationship Investing. Health Care REIT
establishes relationships with, and provide financing to,
operators throughout their growth cycles. It targets companies
with experienced management teams, regionally focused
operations, substantial inside ownership interests or venture
capital backing and significant growth potential.
By maintaining close ties to operators, Health Care REIT is able
to structure investments designed to support an operators
business plan and monitor Health Care REITs investments on
an ongoing basis. Health Care REITs investments are
typically structured as master operating leases for the
acquisition and development of facilities in a geographic
region. Economic terms typically include annual rate increasers
and fair market value-based purchase options.
Portfolio Management. Portfolio strength is
derived from diversity by operator, property sector and
geographic location. Health Care REIT emphasizes long-term
investment structures that result in a predictable asset base
with attendant recurring income, funds from operations and funds
available for distribution. Generally, master leases have a 12
to 15 year term and mortgage loans provide three to eight
years of prepayment protection. Health Care REIT also regularly
monitors the portfolio with its proprietary database system.
Depth of Management. Health Care REITs
management team is comprised of eight individuals who have an
aggregate of approximately 153 years of experience in
health care and real estate finance. The management team has
successfully implemented Health Care REITs investment
strategy of emphasizing relationship financings with strong,
emerging operators.
Additional Information. Health Care
REITs Internet address is http://www.hcreit.com. The
information on or connected to Health Care REITs Internet
Web site is not, and shall not be deemed to be, a part of, or
incorporated into, this proxy statement/prospectus. For
additional information regarding Health Care REITs
business, please see the information under the heading
Business in Health Care REITs most
recent Annual Report on
Form 10-K,
which is incorporated by reference in this prospectus.
73
Heat Merger Sub, LLC
c/o Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
Heat Merger Sub is a Delaware limited liability company and a
wholly-owned subsidiary of Health Care REIT. Heat Merger Sub was
organized on September 12, 2006 solely for the purpose of
effecting the merger. It has not carried on any activities other
than in connection with the merger agreement.
Heat OP Merger Sub, L.P.
c/o Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
Heat OP Merger Sub is a Virginia limited partnership and a
wholly-owned, indirect subsidiary of Health Care REIT. Heat OP
Merger Sub was organized on September 12, 2006 solely for
the purpose of effecting the merger. It has not carried on any
activities other than in connection with the merger agreement.
74
DESCRIPTION
OF WINDROSE
Windrose
Medical Properties Trust
Windrose is a self-managed specialty medical properties real
estate investment trust, or REIT. Windrose was organized in
March 2002 as a Maryland REIT with perpetual existence and is
taxed as a REIT under the federal income tax laws. Windrose
completed its initial public offering and began operations in
August 2002. Windrose was formed to acquire, selectively develop
and manage specialty medical properties such as:
|
|
|
|
|
Medical Office Buildings. Medical office
buildings are office and clinic facilities, often located near
hospitals or on hospital campuses, specifically constructed and
designed for the use of physicians and other health care
personnel to provide services to their patients. Medical office
buildings typically contain sole and group physician practices
and may hold laboratory and other patient services, including
ambulatory surgery centers.
|
|
|
|
Ambulatory Surgery Centers. Ambulatory surgery
centers are used for general or specialty surgical procedures
not requiring an overnight stay in a hospital. In addition to
surgery facilities, ambulatory surgery centers typically include
a single group office
and/or
clinic space.
|
|
|
|
Outpatient Treatment and Diagnostic
Facilities. Outpatient treatment and diagnostic
facilities provide treatments and care not typically provided in
physician offices or clinics, such as gastrointestinal endoscopy
care, oncology treatment, kidney dialysis and other similar
services.
|
|
|
|
Specialty Hospitals. Specialty hospitals focus
and specialize in providing care for certain conditions and
performing certain procedures, such as cardiovascular and
orthopedic surgery. Specialty hospitals may include long-term
acute care hospitals that provide care for patients requiring
extended hospital stays and specialized care and observation
more efficiently and economically than traditional acute care
hospitals.
|
Windrose
Medical Properties, L.P.
Windroses operating partnership, Windrose Medical
Properties, L.P. (which we refer to in this proxy
statement/prospectus as Windrose OP), was formed in May 2002
under the Virginia Revised Uniform Limited Partnership Act.
Windrose owns its properties and conducts its business through
Windrose OP. Windrose serves as the sole general partner of
Windrose OP. As of June 30, 2006, Windrose owned an
approximate 98.4% interest in Windrose OP.
Hospital
Affiliates Development Corporation
Windroses taxable REIT subsidiary, Hospital Affiliates
Development Corporation, or HADC, was incorporated in 1989 in
Indiana. Its predecessor was incorporated in 1976. HADC conducts
business throughout the United States and, to a lesser
extent, internationally. HADCs primary objective is the
development of specialty medical properties for Windrose, but
HADC also provides these services for third-parties. HADC
develops and constructs new
build-to-suit
or multi-tenant facilities. HADC earns fees from third-parties
by providing services such as property development, facility
planning, medical equipment planning and implementation
services, real estate brokerage, leasing services and property
management. Neither Windrose nor Windrose OP can undertake
material amounts of third-party development and construction
activities directly under applicable REIT tax rules. HADC pays
income taxes at regular corporate rates on its taxable income.
75
Windroses
Portfolio
Windroses portfolio of specialty medical and other
properties includes a total of 89 buildings. These buildings
consist of 83 specialty medical buildings and six commercial
office buildings and an aggregate of approximately
3.3 million rentable square feet as of June 30, 2006.
The following table summarizes Windroses portfolio as of
June 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Rentable
|
|
Property
Type(1)
|
|
Buildings
|
|
|
Square Feet
|
|
|
Specialty Medical
Properties:
|
|
|
|
|
|
|
|
|
Medical Office Buildings
|
|
|
74
|
|
|
|
2,774,273
|
|
Ambulatory Surgery Centers
|
|
|
4
|
|
|
|
107,099
|
|
Outpatient Treatment and
Diagnostic Facilities
|
|
|
4
|
|
|
|
160,855
|
|
Specialty Hospitals and Treatment
Centers
|
|
|
1
|
|
|
|
126,946
|
|
Other Properties:
|
|
|
|
|
|
|
|
|
Commercial Office Properties
|
|
|
6
|
|
|
|
152,837
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
89
|
|
|
|
3,322,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain properties have multiple
specialty medical uses (e.g., medical office buildings
and ambulatory surgery center combinations). For purposes of
this table, property types are listed by their primary
functional purpose.
|
CAPITALIZATION
AND DESCRIPTION OF HEALTH CARE REIT SECURITIES
Authorized
Stock
Health Care REITs certificate of incorporation provides
that it may issue 150,000,000 shares of capital stock,
consisting of 125,000,000 shares of Health Care REIT common
stock and 25,000,000 shares of preferred stock,
$1.00 par value per share. At the close of business on
[ ], 2006,
(i) [ ] shares of Health Care REIT
common stock were issued and outstanding,
(ii) [ ] shares of preferred stock
were issued and outstanding,
(iii) [ ] shares of Health Care REIT
common stock were held in the treasury of Health Care REIT,
(iv) [ ] shares of Health Care REIT
common stock were reserved for issuance upon exercise of options
to purchase Health Care REIT common stock (Health Care
REIT Stock Options) issued and outstanding pursuant to
Health Care REITs Stock Plan for Non-Employee Directors,
2005 Long-Term Incentive Plan and 1995 Stock Incentive Plan
(together, and each as amended, the Health Care REIT Stock
Plans), (v) [ ] shares of
Health Care REIT common stock were reserved for additional
awards pursuant to Health Care REIT Stock Plans,
(vi) [ ] shares of Health Care REIT
common stock were reserved for issuance upon conversion of
certain preferred stock and
(vii) [ ] shares of Health Care REIT
common stock were reserved for issuance under Health Care
REITs Amended and Restated Dividend Reinvestment and Stock
Purchase Plan. As of the close of business on
[ ], 2006, except as set forth above, no shares
of Health Care REIT common stock were issued, reserved for
issuance or outstanding, no Health Care REIT Stock Options have
been granted and no phantom stock or other contractual rights
the value of which is determined in whole or in part by the
value of any capital stock of the Health Care REIT were
outstanding.
Description
of Health Care REIT Common Stock
The following is a summary of certain terms of Health Care REIT
common stock. Because this summary is not complete, you should
refer to Health Care REITs certificate of incorporation
and by-laws, which documents provide additional information
regarding Health Care REIT common stock. Copies of Health Care
REITs certificate of incorporation and by-laws, as
amended, are incorporated by reference as exhibits to the
registration statement of which this prospectus is a part.
Common stockholders are entitled to receive dividends when
declared by the board of directors and after payment of, or
provision for, full cumulative dividends on and any required
redemptions of shares of preferred stock then outstanding.
Common stockholders have one vote per share, and there are no
cumulative voting rights. If Health Care REIT is voluntarily or
involuntarily liquidated or dissolved, common stockholders are
to share ratably
76
in Health Care REITs distributable assets remaining after
the satisfaction of all of Health Care REITs debts and
liabilities and the preferred stockholders prior
preferential rights. Common stockholders do not have preemptive
rights. The common stock will be, when issued in the mergers,
fully paid and nonassessable. The common stock is subject to
restrictions on transfer under certain circumstances described
in Health Care REITs by-laws. The transfer agent for
Health Care REIT common stock is Mellon Investor Services LLC.
The rights, preferences and privileges of holders of Health Care
REIT common stock are subject to, and may be adversely affected
by, the rights of the holders of shares of any series of Health
Care REIT preferred stock which are outstanding or which Health
Care REIT may designate and issue in the future.
Description
of Health Care REIT Preferred Stock
The terms and provisions of the Health Care REIT preferred stock
being issued in connection with the merger (which we also refer
to as the Series G preferred stock) will be stated in a
certificate of designation substantially in the form of
Appendix C to this proxy statement/prospectus (which
we refer to as the certificate of designation), which will be
completed and filed as an amendment to Health Care REITs
certificate of incorporation on the effective date of the
merger. The following summary of the material terms and
provisions of the Series G preferred stock does not purport
to be complete and is qualified in its entirety by reference to
the form of certificate of designation as well as by reference
to Health Care REITs certificate of incorporation, Health
Care REITs by-laws and the applicable provisions of the
DGCL. The terms and provisions of the Series G preferred
stock are substantially similar to the terms and provisions of
the Windrose preferred shares that will be cancelled in the
merger, which terms and provisions are stated in the Windrose
articles supplementary that are incorporated by reference into
this proxy statement/prospectus.
Title
and Authorized Number
The full title of the Series G preferred stock will be 7.5%
Series G Cumulative Convertible Preferred Stock,
$1.00 par value per share. The number of authorized shares
of Series G preferred stock will be the number of Windrose
preferred shares outstanding immediately prior to the effective
time of the merger.
Maturity
The Series G preferred stock will have no stated maturity
and will not be subject to any sinking fund or mandatory
redemption.
Rank
The Series G preferred stock will, with respect to dividend
rights and rights upon liquidation, dissolution or winding up of
Health Care REIT, rank:
|
|
|
|
|
prior or senior to the Health Care REIT common stock, Health
Care REITs Junior Participating Preferred Stock,
Series A, and all other equity securities of Health Care
REIT ranking junior to the Series G preferred stock with
respect to dividend rights or rights upon liquidation,
dissolution or winding up of Health Care REIT;
|
|
|
|
on a parity with Health Care REITs Series C
Cumulative Convertible Preferred Stock,
77/8%
Series D Cumulative Redeemable Preferred Stock, 6.0%
Series E Cumulative Convertible and Redeemable Preferred
Stock,
75/8%
Series F Cumulative Redeemable Preferred Stock and all
other equity securities of Health Care REIT the terms of which
specifically provide that such securities rank on a parity with
the Series G preferred stock with respect to dividend
rights and rights upon liquidation, dissolution or winding up of
Health Care REIT (all of which are referred to below as the
parity shares);
|
|
|
|
junior to all classes or series of equity securities of Health
Care REIT the terms of which specifically provide that such
securities rank senior to the Series G preferred stock with
respect to dividend rights or rights upon liquidation,
dissolution or winding up of Health Care REIT; and
|
|
|
|
junior to all existing and future indebtedness of Health Care
REIT.
|
77
Dividends
Holders of the Series G preferred stock will be entitled to
receive, when and as authorized and declared by Health Care
REITs board of directors, or a duly authorized committee
thereof, out of funds legally available for the payment of
dividends, preferential cumulative cash dividends at the rate of
7.5% per year of the $25.00 base liquidation preference per
share (equivalent to a fixed annual amount of $1.875 per
share).
Dividends on the Series G preferred stock will be
cumulative and will begin to accrue from the date the merger is
completed and will be payable in arrears on or about the
15th day of January, April, July and October of each year,
or, if not a business day, the next succeeding business day
(which we refer to as a dividend payment date). Any quarterly
dividend payable on the Series G preferred stock for any
partial dividend period will be computed on the basis of a
360-day year
consisting of twelve
30-day
months. Dividends will be payable to holders of record at the
close of business on the applicable record date, which will be
the last day of the calendar month first preceding the
applicable dividend payment date or such other date designated
by Health Care REITs board of directors for the payment of
dividends that is not more than 30 nor less than 10 days
prior to such dividend payment date (which we refer to as a
dividend record date).
No dividends on the Series G preferred stock shall be
authorized by Health Care REITs board of directors or paid
or set apart for payment at such time as the terms and
provisions of any agreement of Health Care REIT, including any
agreement relating to 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.
Notwithstanding the foregoing, dividends on the Series G
preferred stock will accrue whether or not Health Care REIT has
earnings, whether or not there are funds legally available for
the payment of such dividends, whether or not such dividends are
declared and whether or not such dividends are prohibited by
agreement. Accrued but unpaid dividends on the Series G
preferred stock will not bear interest and holders of the
Series G preferred stock will not be entitled to any
dividends in excess of full cumulative dividends described
above. Except as set forth in the next sentence, no dividends
will be declared or paid or set apart for payment on Health Care
REIT common stock or any other equity securities of Health Care
REIT ranking, as to dividends, on a parity with or junior to the
Series G preferred stock (other than a dividend in Health
Care REIT common stock or in shares of any other equity security
of Health Care REIT ranking junior to the Series G
preferred stock as to dividends and upon liquidation) 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 is set apart for such payment
on the Series G preferred stock for all past dividend
periods and the then current dividend period. When dividends are
not paid in full (or a sum sufficient for such full payment is
not so set apart) upon the Series G preferred stock and the
shares of any other series of preferred stock ranking on a
parity as to dividends with the Series G preferred stock,
all dividends declared upon the Series G preferred stock
and any other series of preferred stock ranking on a parity as
to dividends with the Series G preferred stock shall be
declared pro rata.
Except as provided in the immediately preceding paragraph,
unless full cumulative dividends on the Series G preferred
stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof is set
apart for payment for all past dividend periods and the then
current dividend period, no dividends (other than in Health Care
REIT common stock or other equity securities of Health Care REIT
ranking junior to the Series G preferred stock as to
dividends and upon liquidation) shall be declared or paid or set
aside for payment nor shall any other distribution be declared
or made upon Health Care REIT common stock or any other
securities of Health Care REIT ranking junior to or on a parity
with the Series G preferred stock as to dividends or upon
liquidation, nor shall any Health Care REIT common stock or any
other equity securities of Health Care REIT ranking junior to or
on a parity with the Series G preferred stock as to
dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration by Health Care REIT
(except by conversion into or exchange for Health Care REIT
common stock or any other equity securities of Health Care REIT
ranking junior to the Series G preferred stock as to
dividends and upon liquidation or redemptions for the purpose of
preserving Health Care REITs qualification as a REIT).
Holders of Series G preferred stock will not be entitled to
any dividend in excess of full cumulative dividends on the
Series G preferred stock.
78
Liquidation
Preference
Upon the voluntary or involuntary liquidation, dissolution or
winding up of Health Care REITs affairs, the holders of
Series G preferred stock will be entitled to be paid out of
Health Care REITs assets legally available for
distribution to its stockholders as follows:
|
|
|
|
|
a base liquidation preference of $25 per share in cash or
property at its fair market value as determined by Health Care
REITs board of directors, plus an amount equal to any
accrued and unpaid dividends to the date of payment, but without
interest, before any distribution of assets is made to holders
of Health Care REIT common stock or any other equity securities
of Health Care REIT that rank junior to the Series G
preferred stock as to liquidation rights; or
|
|
|
|
in the event (i) Health Care REIT is liquidated or
dissolved in a merger, acquisition or sale of all or
substantially all of its assets prior to June 30, 2010 and
(ii) a majority of the Health Care REIT common stock is
converted into the right to receive cash, property or other
consideration at a price, or having a fair market value, of less
than 105% of the conversion price (as defined below under the
heading Conversion) then in effect, the
holders of Series G preferred stock will be entitled to be
paid out of assets legally available for distribution to Health
Care REITs stockholders a stepped up liquidation
preference of $26.25 per share in cash or property at its
fair market value as determined by Health Care REITs board
of directors, plus an amount equal to any accrued and unpaid
dividends to the date of payment, but without interest, before
any distribution of assets is made to holders of Health Care
REIT common stock or any other equity securities of Health Care
REIT that ranks junior to the Series G preferred stock as
to liquidation rights.
|
Health Care REIT will promptly provide to the holders of
Series G preferred stock written notice of any event
triggering the right to receive such liquidation preference.
After payment of the full amount of the liquidation preference,
plus any accrued and unpaid dividends to which holders of the
Series G preferred stock are entitled, the holders of
Series G preferred stock will have no right or claim to any
of Health Care REITs remaining assets.
A consolidation or merger of Health Care REIT with or into any
other corporation, trust or entity or of any other corporation
with or into Health Care REIT, the sale, lease or conveyance of
all or substantially all of Health Care REITs property or
business or a statutory share exchange will not be deemed to
constitute a liquidation, dissolution or winding up of Health
Care REIT unless the liquidation, dissolution or winding up is
effected in connection with, or a step in a series of
transactions by which, a consolidation or merger of Health Care
REIT is effected.
If, upon any liquidation, dissolution or winding up of Health
Care REIT, the assets of Health Care REIT or proceeds thereof
distributable among the holders of the Series G preferred
stock are insufficient to pay the liquidation preference of the
Series G preferred stock as described above and liquidating
payments on all other classes and series of parity shares, then
such assets, or the proceeds thereof, shall be distributed among
the holders of the Series G preferred stock and any such
other parity shares in proportion to the amounts that would be
payable on the Series G preferred stock and any such other
parity shares if all amounts payable thereon were paid in full.
Upon any liquidation, dissolution or winding up of Health Care
REIT, after payment shall have been made in full to the holders
of the Series G preferred stock and any parity shares, the
holders of the Series G preferred stock and any parity
shares will not be entitled to share in any assets remaining for
distribution to stockholders of Health Care REIT.
Redemption
The Series G preferred stock will not be redeemable prior
to June 30, 2010. On and after June 30, 2010, Health
Care REIT, at its option, upon not less than 30 nor more than
60 days written notice, may redeem the Series G
preferred stock, in whole or in part, at any time or from time
to time, for cash at a redemption price of $25.00 per
share, plus all accrued and unpaid dividends thereon to the date
fixed for redemption (which we refer to as the redemption date),
without interest. No Series G preferred stock may be
redeemed except with assets legally available for the payment of
the redemption price.
If notice of redemption of any shares of Series G preferred
stock is given and the funds necessary for redemption set aside
in trust for the benefit of the holders of the shares of
Series G preferred stock called for
79
redemption, then from and after the redemption date dividends
will cease to accrue on such shares of Series G preferred
stock, such shares of Series G preferred stock shall no
longer be deemed outstanding and all rights of the holders of
such shares will terminate, except the right to receive the
redemption price. If less than all of the outstanding
Series G preferred stock is to be redeemed, the
Series G preferred stock to be redeemed shall be selected
pro rata or by any other equitable method determined by Health
Care REIT.
Unless full cumulative dividends on all Series G 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 and the then
current dividend period, no Series G preferred stock shall
be redeemed unless all outstanding Series G preferred stock
is simultaneously redeemed, and Health Care REIT shall not
purchase or otherwise acquire directly or indirectly any
Series G preferred stock (except by exchange for equity
securities of Health Care REIT ranking junior to the
Series G preferred stock as to dividends and upon
liquidation); provided, however, that the foregoing shall not
prevent the purchase by Health Care REIT of Series G
preferred stock in order to ensure that Health Care REIT
continues to meet the requirements for qualification as a REIT,
or the purchase or acquisition of Series G preferred stock
pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding Series G preferred stock. So
long as no dividends are in arrears on the Series G
preferred stock, Health Care REIT may repurchase from time to
time any of the outstanding shares of Series G preferred
stock in open market transactions that have been authorized by
Health Care REITs board of directors and effected in
compliance with applicable law.
Notice of redemption will be given by publication in a 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 30 nor more than 60 days prior to the redemption
date. A similar notice will be mailed by Health Care REIT,
postage prepaid, not less than 30 nor more than 60 days
prior to the redemption date, addressed to the respective
holders of record of the Series G preferred stock to be
redeemed at their respective addresses as they appear on the
share transfer records of Health Care REIT. No failure to give
such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption
of any Series G preferred stock except as to the holder to
whom notice was defective or not given. Each notice shall state:
(i) the redemption date; (ii) the redemption price;
(iii) the number of shares of Series G preferred stock
to be redeemed; (iv) the place or places where the
certificates for the Series G preferred stock are to be
surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date. If less than all of the
Series G preferred stock held by any holder is to be
redeemed, the notice mailed to such holder shall also specify
the number of shares of Series G preferred stock held by
such holder to be redeemed.
Immediately prior to any redemption of Series G preferred
stock, Health Care REIT shall pay, in cash, any accumulated and
unpaid dividends through the redemption date, unless a
redemption date falls after a dividend record date and prior to
the corresponding dividend payment date, in which case each
holder of Series G preferred stock at the close of business
on such dividend record date shall be entitled to the dividend
payable on such shares on the corresponding dividend payment
date notwithstanding the redemption of such shares before such
dividend payment date.
Subject to applicable law and the limitation on purchases
described above when dividends on the Series G preferred
stock are in arrears, Health Care REIT may, at any time and from
time to time, purchase any Series G preferred stock in the
open market, by tender or by private agreement.
All Series G preferred stock redeemed, purchased or
otherwise acquired by Health Care REIT shall be retired and
reclassified as authorized but unissued preferred stock, without
designation as to class or series, and may thereafter be
reissued as any class or series of preferred stock.
Voting
Rights
Holders of the Series G preferred stock will not have any
voting rights, except as set forth below or as otherwise
required by law.
Whenever dividends on any Series G preferred stock shall be
in arrears in an aggregate amount equivalent to six or more
quarterly dividends, whether or not consecutive (which we refer
to as a preferred dividend default), the
80
number of directors then constituting Health Care REITs
board of directors shall increase by two (if not already
increased by reason of a similar arrearage with respect to any
parity preferred (as defined below)). In the event of such an
increase in the number of directors, the holders of
Series G preferred stock will be entitled to vote (voting
separately as a class with holders of all other series of Health
Care REIT preferred stock ranking on a parity with the
Series G preferred stock as to dividends or upon
liquidation (which we refer to as parity preferred) upon which
like voting rights have been conferred and are exercisable), in
order to fill the vacancies thereby created, for the election of
a total of two additional directors (which we refer to as
preferred share directors) at a special meeting called by the
holders of record of at least 20% of the Series G preferred
stock or by the holders of any series of parity preferred so in
arrears with like voting rights (unless such request is received
less than 90 days before the date fixed for the next annual
or special meeting of stockholders) or at the next annual
meeting of stockholders, and at each subsequent annual meeting
at which a preferred share director is to be elected until all
dividends accumulated on such Series G preferred stock and
parity preferred with like voting rights for the past dividend
periods and the dividend for the then current dividend period
shall have been fully paid or declared and a sum sufficient for
the payment thereof set aside for payment. If and when all
accumulated dividends and the dividend for the then current
dividend period on the Series G preferred stock shall have
been paid in full or declared and set aside for payment in full,
the holders thereof shall no longer have the voting rights
described above (but may have these voting rights in the future
in the event of another preferred dividend default) and, if all
accumulated dividends and the dividend for the then current
dividend period have been paid in full or declared and set aside
for payment in full on all series of parity preferred upon which
like voting rights have been conferred and are exercisable, the
term of office of each preferred share director so elected shall
terminate and the number of directors then constituting the
board of directors shall decrease accordingly. Any preferred
share director may be removed at any time with or without cause
by, and shall not be removed otherwise than by the vote of, the
holders of record of a majority of the outstanding Series G
preferred stock when they have the voting rights described above
(voting separately as a class with holders of all series of
parity preferred upon which like voting rights have been
conferred and are exercisable). So long as a preferred dividend
default shall continue, any vacancy in the office of a preferred
share director may be filled by written consent of the preferred
share director remaining in office, or if none remains in
office, by a vote of the holders of record of a majority of the
outstanding shares of Series G preferred stock when they
have the voting rights described above (voting separately as a
class with all series of parity preferred upon which like voting
rights have been conferred and are exercisable). The preferred
share directors shall each be entitled to one vote per director
on any matter.
So long as any Series G preferred stock remains
outstanding, Health Care REIT will not, without the affirmative
vote or consent of the holders of at least two-thirds of the
Series G preferred stock, given in person or by proxy,
either in writing or at a meeting (voting separately as a class):
|
|
|
|
|
amend, alter or repeal any provisions of the certificate of
designation for the Series G preferred stock or other
provisions of Health Care REITs certificate of
incorporation, whether by merger, consolidation or otherwise
(which we refer to as an event), so as to materially and
adversely affect any right, preference, privilege or voting
power of the Series G preferred stock or the holders
thereof; or
|
|
|
|
authorize, create or issue, or increase the authorized or issued
amount of, any class or series of equity security or rights to
subscribe to or acquire any class or series of equity security,
in each case ranking senior to the Series G preferred stock
with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up of Health
Care REIT, or reclassify any equity securities into any such
shares;
|
provided, however, that with respect to the occurrence of any
event, so long as the Series G preferred stock (or any
equivalent class or series of stock or shares issued by the
surviving corporation or entity in any merger or consolidation
to which Health Care REIT became a party) remains outstanding
with the terms thereof materially unchanged, the occurrence of
any such event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting power of
holders of the Series G preferred stock. Further, none of
the following will be deemed to materially and adversely affect
the rights, preferences, privileges or voting powers of holders
of Series G preferred stock:
|
|
|
|
|
any increase in the amount of Health Care REITs currently
authorized preferred stock;
|
81
|
|
|
|
|
the authorization, increase in the number of authorized shares
of or issuance of any other class of preferred stock of Health
Care REIT or any series of any class of preferred stock of
Health Care REIT, in each case ranking on a parity with or
junior to the Series G preferred stock with respect to
payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up; or
|
|
|
|
any merger or consolidation in which Health Care REIT is not the
surviving entity if, as a result of the merger or consolidation,
the holders of Series G preferred stock receive cash in the
amount of their liquidation preference in exchange for each
share of their Series G preferred stock.
|
Each share of Series G preferred stock shall have one vote
per share on the matters set forth above, except when any other
class or series of preferred stock shall have the right to vote
with the Series G preferred stock as a single class on a
matter, then:
|
|
|
|
|
the Series G preferred stock and such other class or series
shall each have one vote per $25.00 of liquidation preference on
the matter; or
|
|
|
|
in the event that the vote is with respect to a transaction in
which the holders of the Series G preferred stock would be
entitled to receive the stepped up liquidation preference as
described above and have a right to vote on the matter as
described above, the holders of the Series G preferred
stock will have 1.05 votes per $25.00 of liquidation preference.
|
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 shares
of Series G preferred stock shall have been redeemed or
called for redemption upon proper notice and sufficient funds
shall have been deposited in trust to effect such redemption.
Except as described above, the Series G preferred stock
will not have any relative, participating, optional or other
special voting rights and powers, and the consent of holders of
Series G preferred stock shall not be required for any
corporate action, including any merger or consolidation
involving Health Care REIT or a sale of all or substantially all
of Health Care REITs assets, irrespective of the effect
that such merger, consolidation or sale may have upon the
rights, preferences or voting power of the holders of
Series G preferred stock.
Conversion
Shares of Series G preferred stock will be convertible, in
whole or in part, at any time, at the option of the holders
thereof, into the number of fully paid and nonassessable shares
of Health Care REIT common stock obtained by dividing the
aggregate base liquidation preference of the shares of
Series G preferred stock by a conversion price equal to the
quotient of $15.75 divided by the exchange ratio in the merger
(equivalent to a conversion rate equal to the product of 1.5873
times the exchange ratio in the merger), subject to adjustment
as described below, which is referred to as the conversion
price. The right to convert Series G preferred stock called
for redemption will terminate at the close of business on the
redemption date unless Health Care REIT defaults in making
certain payments in connection with the redemption.
Conversions may be effected by delivering certificates
evidencing Series G preferred stock, together with written
notice of conversion and a proper assignment of such certificate
to Health Care REIT or in blank, to the office or agency to be
maintained by Health Care REIT for that purpose.
Each conversion will be deemed to have been effected immediately
prior to the close of business on the date on which the notice
of conversion and the certificates for the Series G
preferred stock being converted shall have been received by
Health Care REIT or Health Care REITs agent as described
above (and if applicable, payment of any amount equal to the
dividend payable on such shares shall have been received by
Health Care REIT or its agent as described below), and the
conversion shall be at the conversion price in effect at such
time and on such date.
Holders of Series G preferred stock who convert their
Series G preferred stock will not be entitled to, nor will
the conversion rate be adjusted for, any accumulated and unpaid
dividends, whether or not in arrears. Holders of Series G
preferred stock at the close of business on a dividend record
date will be entitled to receive the dividend payable on such
shares on the corresponding dividend payment date
notwithstanding the conversion of such shares following such
dividend record date and prior to such dividend payment date.
However, Series G preferred stock
82
surrendered for conversion during the period between the close
of business on any dividend record date and ending with the
opening of business on the corresponding dividend payment date
(except shares converted after the issuance of a notice of
redemption with respect to a redemption date during such period
or coinciding with such dividend payment date, which will be
entitled to such dividend) must be accompanied by payment of an
amount equal to the dividend payable on such shares on such
dividend payment date. A holder of Series G preferred stock
on a dividend record date who (or whose transferee) tenders any
such shares for conversion into Health Care REIT common stock on
such dividend payment date will receive the dividend payable on
such Series G preferred stock on such date, and the
converting holder need not include payment of the amount of such
dividend upon surrender of Series G preferred stock for
conversion.
Fractional shares of Health Care REIT common stock will not be
issued upon conversion of Series G preferred stock. In lieu
thereof, Health Care REIT will pay a cash adjustment based on
the current market price of the Health Care REIT common stock on
the trading day immediately preceding the conversion date.
Conversion
Price Adjustments
The conversion price as described above will be subject to
adjustment upon certain events, including:
|
|
|
|
|
the payment of dividends (and other distributions) to holders of
Health Care REIT common stock in Health Care REIT common stock;
|
|
|
|
the issuance to all holders of Health Care REIT common stock of
certain rights or warrants entitling them to subscribe for or
purchase Health Care REIT common stock at a price per share less
than the fair market value (as defined in the certificate of
designation for the Series G preferred stock) per share of
Health Care REIT common stock;
|
|
|
|
subdivisions, combinations and reclassifications of Health Care
REIT common stock; and
|
|
|
|
distributions to all holders of Health Care REIT common stock of
any equity securities of Health Care REIT (other than Health
Care REIT common stock) or evidence of indebtedness or assets of
Health Care REIT (including securities or cash, but excluding
those dividends, rights, warrants and distributions referred to
in the bullet points above and dividends and distributions paid
in cash out of surplus of Health Care REIT as defined under
Delaware law).
|
In addition to the foregoing adjustments, Health Care REIT will
be permitted to reduce the conversion price as its board of
directors considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of shares
or share rights will not be taxable to holders of Health Care
REIT common stock or, if that is not possible, to diminish any
income taxes that are otherwise payable because of such event.
In case Health Care REIT shall be a party to any transaction
(including, without limitation, a merger, consolidation,
statutory share exchange, tender offer for all or substantially
all of its common stock or sale of all or substantially all of
its assets), in each case as a result of which Health Care REIT
common stock will be converted into the right to receive stock,
securities or other property (including cash or any combination
thereof), each share of Series G preferred stock, if
convertible after the consummation of the transaction, will
thereafter be convertible into the kind and amount of stock,
securities and other property receivable (including cash or any
combination thereof) upon the consummation of such transaction
by a holder of that number of shares of Health Care REIT common
stock or fraction thereof into which one share of Series G
preferred stock was convertible immediately prior to such
transaction (assuming such holder of common stock failed to
exercise any rights of election and received per share of common
stock the kind and amount of stock, securities or other property
received per share of common stock by a plurality of
non-electing shares of common stock). Health Care REIT may not
become a party to any such transaction unless the terms thereof
are consistent with the foregoing.
No adjustment of the conversion price is required to be made
unless such adjustment would require a cumulative increase or
decrease of at least 1% or more of the conversion price. Any
adjustments not so required to be made will be carried forward
and taken into account in subsequent adjustments; provided,
however, that any such
83
adjustments will be made not later than such time as may be
required to preserve the tax-free nature of a distribution to
the holders of Health Care REIT common stock. The conversion
price will not be adjusted:
|
|
|
|
|
upon the issuance of any Health Care REIT common stock or rights
to acquire Health Care REIT common stock pursuant to any present
or future employee, director or consultant incentive or benefit
plan or program for Health Care REIT or any of its subsidiaries;
|
|
|
|
upon the issuance of any Health Care REIT common stock pursuant
to any present or future plan providing for the reinvestment of
dividends or interest payable on common stock or indebtedness of
Health Care REIT and the investment of additional optional
amounts under any plan;
|
|
|
|
for a change in the par value of Health Care REIT common
stock; or
|
|
|
|
for accumulated and unpaid dividends.
|
Restrictions
on Ownership and Transfer
The Series G preferred stock will be subject to
restrictions on ownership and transfer as set forth in
Article VI of Health Care REITs by-laws.
Article VI provides that no person may have beneficial
ownership of more than 9.8% of the outstanding shares of Health
Care REIT common stock or beneficial ownership of shares of any
class of Health Care REITs capital stock with an aggregate
market value exceeding 9.8% of the aggregate market value of all
outstanding shares of all classes of Health Care REITs
capital stock. Article VI further provides that no
securities may be issued or transferred to or for the benefit of
any person if, following such issuance or transfer, such
persons beneficial ownership of Health Care REIT capital
stock would exceed either of the foregoing limits. In the event
of an issuance or transfer in violation of such restrictions,
the issuance or transfer shall be valid only with respect to the
amount of the securities that does not result in a violation of
such restrictions. For purposes of the application of such
restrictions to any person, any convertible securities
beneficially owned by such person shall be treated as if all the
capital stock conversion or purchase rights thereof had been
exercised. If a person nonetheless acquires Health Care REIT
securities in excess of either of such stock ownership limits,
the person will be deemed to have acted as an agent of Health
Care REIT in acquiring the excess securities to hold them on
behalf of Health Care REIT. As the equivalent of treasury
securities, the excess securities shall not be entitled to any
voting rights, shall not be considered to be outstanding for
quorum or voting purposes, and shall not be entitled to receive
dividends, interest or any other distribution with respect to
such securities. Upon a transfer of the excess securities to any
person in a transaction not in violation of Health Care
REITs limitations on stock ownership, Health Care REIT
shall pay or distribute to the transferee any distributions on
the excess securities not previously paid or distributed.
No
Preemptive Rights
No holder of Series G preferred stock shall be entitled to
any preemptive or subscription rights with respect to any future
issuances of Health Care REIT capital stock.
84
COMPARISON
OF THE RIGHTS OF HOLDERS OF WINDROSE COMMON
SHARES AND
HEALTH CARE REIT COMMON STOCK
The rights of the holders of shares of Health Care REIT common
stock are presently governed by the Delaware General Corporation
Law, or DGCL, and Health Care REITs certificate of
incorporation and by-laws. The rights of holders of Windrose
common shares are currently governed by the Maryland REIT Law
and Windroses declaration of trust and bylaws. Subject to
the terms of the First Amended and Restated Agreement of Limited
Partnership of Windrose OP, which is referred to as the
partnership agreement, holders of Windrose OP units (other than
Windrose and its subsidiaries) may redeem their Windrose OP
units for cash or, at Windroses election, Windrose common
shares. To the extent Windrose issues common shares upon such
redemption, the rights of a limited partner of Windrose OP with
respect to such common shares would be governed by the Maryland
REIT Law and Windroses declaration of trust and bylaws.
Upon completion of the mergers, shareholders of Windrose common
shares and holders of Windrose OP units will receive shares of
Health Care REIT common stock in exchange for their Windrose
common shares and Windrose OP units. As a result, the rights of
former holders of Windrose common shares and former holders of
Windrose OP units will be governed by the DGCL and Health Care
REITs certificate of incorporation and by-laws.
The following is a summary of the material differences between
the current rights of holders of Windrose common shares and the
rights of holders of Health Care REIT common stock. This summary
may not contain all of the information that is important to you
and it is not intended to be a complete discussion of the
respective rights of holders of Windrose common shares and
holders of Health Care REIT common stock. This summary is
qualified in its entirety by reference to the DGCL, the Maryland
REIT Law and the various documents of Windrose and Health Care
REIT to which we refer in this summary. We urge you to carefully
read this entire proxy statement/prospectus, the relevant
provisions of the DGCL, the Maryland REIT Law and the other
documents to which we refer in this proxy statement/prospectus
for a more complete understanding of the differences between
being a Windrose shareholder and being a Health Care REIT
stockholder. See the section titled Where You Can Find
More Information.
|
|
|
_
_
|
Authorized and Issued
Shares
|
_
_
|
|
|
|
Health Care REITs
certificate of incorporation authorizes the issuance of up to
125,000,000 shares of common stock, par value $1.00
per share, and 25,000,000 shares of preferred stock,
par value $1.00 per share.
|
|
Windroses declaration of
trust authorizes the issuance of up to 100,000,000 common shares
of beneficial interest, par value $0.01 per share, and
20,000,000 preferred shares of beneficial interest, par value
$0.01 per share.
|
|
|
|
Under the DGCL, Health Care
REITs board of directors may adopt a resolution proposing
and declaring it advisable to amend the certificate of
incorporation to increase or decrease the number of authorized
shares of stock of any class or series. Such an amendment is
subject to the approval of a majority of Health Care REITs
stockholders in accordance with the requirements of the DGCL.
|
|
As permitted by the Maryland REIT
Law, Windroses declaration of trust provides that
Windroses board of trustees, without any action by
Windroses stockholders, may amend the declaration of trust
to increase or decrease the aggregate number of shares or the
number of shares of any class or series that Windrose has
authority to issue.
|
|
|
|
As of
,
2006, there were
shares of Health Care REIT common stock issued and
outstanding and 4,000,000 shares of 7.875% Series D
Cumulative Redeemable Preferred Stock, 74,989 shares of 6%
Series E Cumulative Convertible and Redeemable Preferred
Stock and 7,000,000 shares of 7.625% Series F
Cumulative Redeemable Preferred Stock issued and outstanding.
|
|
As of
,
2006, there were common shares issued and outstanding and 7.5%
Series A Cumulative Convertible Preferred Shares, par
value $0.01 per share, issued and outstanding.
|
85
|
|
|
_
_
|
Number and Classes of Directors
or Trustees
|
_
_
|
|
|
|
Health Care REITs by-laws
provide that Health Care REITs board of directors consists
of not less than three nor more than 15 members, with the exact
number to be fixed from time to time by the board of directors.
|
|
Windroses declaration of
trust provides that the number of trustees of the trust shall
not be less than seven nor more than 10, with the exact
number to be fixed from time to time by the board of trustees.
|
|
|
|
There are currently eight
directors serving on Health Care REITs board of directors,
which shall be increased to nine upon consummation of the
merger.
|
|
There are currently seven trustees
serving on Windroses board of trustees.
|
|
|
|
Health Care REITs directors
are divided into three classes, known as Class I, Class
II and Class III, respectively, with the term of
office of one class expiring in each year.
|
|
Currently, Windroses
trustees are divided into three classes, with one class of
trustees elected at each annual meeting to hold office for a
term of three years and until their successors are duly elected
and qualify. Beginning at the 2007 annual meeting of
shareholders and thereafter, all trustees will be elected to
hold office for a term expiring at the next succeeding annual
meeting of shareholders and until their successors are duly
elected and qualify.
|
_
_
|
Removal of Directors or
Trustees
|
_
_
|
|
|
|
Health Care REITs by-laws
provide that a director may be removed only for good cause at a
meeting of stockholders by the affirmative vote of holders of at
least a majority of the outstanding shares of stock entitled to
vote in the election of directors. Notice of the proposed action
must have been provided in the notice to stockholders calling
for the meeting for the stockholders to take such action. Under
Health Care REITs by-laws, good cause means conviction of
a felony or a determination by a court of competent jurisdiction
of negligence or misconduct in the performance of the
directors duties to Health Care REIT in a manner
determined by Health Care REITs board of directors to be
of substantial importance to Health Care REIT.
|
|
Windroses declaration of
trust provides that, subject to the rights of holders of one or
more classes or series of preferred shares to elect or remove
one or more trustees, a trustee may be removed at any time, with
or without cause, at a meeting of the shareholders, by the
affirmative vote of the holders of at least two-thirds of the
shares then outstanding and entitled to vote generally in the
election of trustees. However, vacancies may only be filled by
the board of trustees as provided below.
|
_
_
|
Vacancies on Board of Directors
or Trustees
|
_
_
|
|
|
|
Any vacancy occurring on Health
Care REITs board of directors for any reason, including
the resignation, death or removal from office of a director or
an increase in the number of directors, may be filled by a
majority of the directors then in office, although less than a
quorum. Any vacancy in the board that remains at the time of a
meeting of stockholders for the election of directors may be
filled by vote of the stockholders at such meeting in the same
manner and subject to the same prior notice requirements as
apply generally to the nomination and election of directors by
the stockholders.
|
|
Windroses bylaws provide
that, except as provided by Windroses board of trustees in
setting the terms of any class or series of preferred shares,
any vacancy occurring on Windroses board of trustees may
be filled only by a majority of the trustees then in office,
although less than a quorum.
|
86
|
|
|
_
_
|
Notice of Stockholder and
Shareholder Proposals and
Nominations
|
_
_
|
|
|
|
Health Care REITs by-laws
specify certain conditions for the submission by a stockholder
of a matter for consideration at the annual meeting of
stockholders and nominations by stockholders of persons for
election to Health Care REITs board of directors. For a
matter to be considered at a meeting, (i) the
stockholder must have given timely notice of the proposal, in
writing, containing the information required by the by-laws, to
the secretary of Health Care REIT, and (ii) the business
must be a proper matter for stockholder action under the DGCL.
|
|
Nominations of individuals to be
elected as trustees and business to be considered at an annual
meeting may be proposed by shareholders only if notice
containing the information specified by Windroses bylaws
is provided timely and the business is a proper matter for
shareholder action under the Maryland REIT Law. Notice may be
provided only by a shareholder who was a shareholder of record
both at the time of the provision of notice and at the time of
the meeting who is entitled to vote at the meeting. Nominations
of individuals to be elected as trustees at a special meeting
may be provided by shareholders only if Windroses board of
trustees has determined that trustees will be elected at such
meeting.
|
|
|
|
A stockholders notice must
have been delivered to or mailed and received at the principal
executive offices of Health Care REIT not more than 120
days prior to the meeting and not less than 45 days
before the date on which Health Care REIT first mailed or
otherwise gave notice for the prior years annual meeting,
provided that, if during the prior year Health Care REIT did not
hold an annual meeting, or if the date of the annual meeting for
the current year has changed more than 30 days from the
date of the annual meeting in the prior year, then notice must
have been received by Health Care REIT not later than the close
of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or public
disclosure of the date of the meeting was given or made,
whichever occurs first.
|
|
To be timely, notice must be
delivered to the secretary at Windroses principal
executive office by not later than the close of business on the
90th day prior to the first anniversary of the date of
mailing of the notice for the preceding years annual
meeting nor earlier than the close of business on the 120th
day prior to the first anniversary of the date of mailing
of the notice for the preceding years annual meeting;
provided that, if Windrose has advanced or delayed the date of
its annual meeting by more than 30 days from the date of
the prior years annual meeting, then notice must have been
received not later than the close of business on the later of
the 90th day prior to the date of mailing of the notice
for such annual meeting or 10th day following the day on
which public announcement of the date of such meeting was first
made.
|
_
_
|
Calling of Special Meetings of
Stockholders and
Shareholders
|
_
_
|
|
|
|
Except as otherwise required by
law and subject to the rights of holders of any class or series
of stock having a preference over the common stock as to
dividends or upon liquidation, special meetings of stockholders
of Health Care REIT may be called only by the board of directors
pursuant to a resolution approved by a majority of the entire
board of directors.
|
|
Windroses bylaws provide
that a special meeting may be called by Windroses board of
trustees, the president, the chief executive officer or
Windroses board of trustees. The bylaws also provide that
the secretary of Windrose may call a special meeting of
shareholders in accordance with provisions of the bylaws upon
the written request of the shareholders entitled to cast not
less than a majority of all the votes entitled to be cast at
such meeting.
|
_
_
|
Voting
|
_
_
|
|
|
|
Health Care REITs
certificate of incorporation and by-laws and the DGCL contain no
similar restrictions.
|
|
Subject to the rights of holders
of shares of any class or series, shareholders of Windrose are
entitled to vote only with respect to (i) election and
removal of trustees, (ii) amendment of the declaration of
trust, (iii) termination of Windrose, (iv) merger or
consolidation
|
87
|
|
|
|
|
of Windrose, or the sale or
disposition of substantially all of the assets of Windrose or
(v) any other matter that the Windrose board of trustees
has declared advisable and directed be submitted to the
shareholders.
|
|
|
|
When a quorum is present at any
meeting, the vote of the holders of a majority of the shares of
stock represented and entitled to vote at the meeting shall
decide any question brought before the meeting (unless the
provisions of the DGCL or Health Care REITs certificate of
incorporation or by-laws require a different vote). The
candidates receiving the greatest number of votes shall be
elected as directors.
|
|
When a quorum is present at any
meeting, a majority of the votes cast is sufficient to approve a
matter unless the provisions of the Maryland REIT Law or
Windroses declaration of trust provide for a different
vote. A plurality of all of the votes cast is sufficient to
elect a trustee.
|
_
_
|
Action by Written
Consent
|
_
_
|
|
|
|
Under Health Care REITs
certificate of incorporation, any action required or permitted
to be taken by Health Care REITs stockholders must be
effected at an annual or special meeting of the stockholders and
may not be effected by written consent.
|
|
Windroses bylaws provide
that any action required or permitted to be taken at a meeting
of shareholders may be taken without a meeting if a consent in
writing, setting forth such actions, is signed by all of the
shareholders entitled to vote on the matter, and such consent is
filed with the minutes of proceedings of the shareholders.
|
_
_
|
Extraordinary Transactions and
Business Combinations
|
_
_
|
|
|
|
Under the DGCL, a merger or
consolidation of a corporation into or with another entity or a
sale of all or substantially all of a corporations assets
must be authorized by the board of directors and approved by the
affirmative vote of its stockholders with a majority of all the
votes entitled to be cast on the matter.
|
|
Under Maryland REIT Law and
Windroses declaration of trust, Windrose generally cannot
dissolve or merge with another entity unless advised and
approved by the board of trustees and approved by the
affirmative vote of shareholders holding at least a majority of
the shares entitled to vote on the matter.
|
|
|
|
Health Care REITs by-laws
provide that the affirmative vote of the holders of at least 75%
of the voting power of the then outstanding shares of capital
stock of Health Care REIT entitled to vote generally in the
election of directors, voting together as a single class, is
required in order to enter into a merger, consolidation, or sale
or other disposition of substantially all of Health Care
REITs assets, in one transaction or a series of
transactions, with a stockholder or an affiliate of a
stockholder that owns 5% or more of Health Care REITs
voting stock. These voting requirements also apply to any
reclassification or recapitalization that has the effect of
increasing the proportionate share of the outstanding shares of
any class of Health Care REITs equity securities held by a
5% stockholder or an affiliate of such a stockholder and any
plan or proposal of liquidation or dissolution proposed by or on
behalf of a 5% stockholder or an affiliate of such a
stockholder. These voting requirements do not apply to the
foregoing
|
|
The Maryland REIT Law and
Windroses declaration of trust and bylaws contain no
comparable provisions.
|
88
|
|
|
transactions if (i)
Health Care REIT is, at the time of the transaction and
throughout the preceding 12 months, the owner of a
majority of each class of the outstanding equity securities of
the 5% stockholder; or (ii) the transaction has been
approved by majority of the members of Health Care REITs
board of directors, who at the time such approval is given, were
not affiliates or nominees of the 5% stockholder; or (iii)
the aggregate amount of the cash and other consideration
to be received by holders of Health Care REITs voting
stock in the transaction is at least equal to the highest per
share price paid by the 5% stockholder for any shares acquired
by the 5% stockholder within the two-year period immediately
prior to the first public announcement of the proposed
transaction or in the transaction in which the 5% stockholder
became a 5% stockholder, whichever is higher, and the
consideration to be received by holders of a particular class of
outstanding voting stock is in cash or in the same form as the
5% stockholder used to acquire the largest number of shares of
such voting stock previously acquired by the 5% stockholder.
|
|
|
|
|
|
Section 203 of the DGCL
prohibits a Delaware corporation listed on a national securities
exchange from engaging in a business combination
with an interested stockholder for a period of three
years after the time the person became an interested stockholder
unless: (i) prior to such time, the board of
directors approved either the business combination or the
transaction in which the stockholder became an interested
stockholder; or (ii) upon becoming an interested
stockholder, the stockholder owned at least 85% of the
corporations outstanding voting stock (excluding shares
held by persons who are both directors and officers and shares
held by certain employee benefit plans); or (iii) the
business combination is approved by both the board of directors
and holders of at least
662/3%
of the corporations outstanding voting stock (excluding
shares owned by the interested stockholder) at a meeting of
stockholders and not by written consent. For these purposes, the
term business combination includes mergers,
consolidations, sales of assets and other similar transactions
with an interested stockholder and the term interested
stockholder means a person who, together with its
affiliates and associates, owns (or, under certain
circumstances, has owned within the prior three years) 15% or
more of the outstanding voting stock of the corporation. A
corporation may elect not to be governed by Section 203;
however, Health Care REIT has not made this election.
|
|
Maryland law prohibits
business combinations with an interested
shareholder or an affiliate of an interested shareholder for
five years after the most recent date on which the interested
shareholder becomes an interested shareholder. These business
combinations include a merger, consolidation, share exchange,
or, in circumstances specified in the statute, an asset transfer
or issuance or reclassification of equity securities. Maryland
law defines an interested shareholder as: (i) any person
who beneficially owns 10% or more of the voting power of the
trusts shares; or (ii) an affiliate or associate of
the trust who, at any time within the two-year period prior to
the date in question, was the beneficial owner of 10% or more of
the voting power of the trusts then outstanding voting
shares. A person is not an interested shareholder if the board
of trustees approved in advance the transaction by which the
person otherwise would have become an interested shareholder.
However, in approving a transaction, the board of trustees may
provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined
by the board of trustees.
After the five-year prohibition, any business combination
between the trust and an interested shareholder generally must
be recommended by the board of trustees and approved by the
affirmative vote of at least: (i) 80% of the votes
entitled to be
|
89
|
|
|
|
|
cast by holders of the
trusts then outstanding shares of beneficial interest; and
(ii) two-thirds of the votes entitled to be cast by
holders of the trusts voting shares other than shares held
by the interested shareholder with whom or with whose affiliate
the business combination is to be effected or shares held by an
affiliate or associate of the interested shareholder.
These super-majority vote requirements do not apply if the
trusts common shareholders receive a minimum price, as
defined under Maryland law, for their shares in the form of cash
or other consideration in the same form as previously paid by
the interested shareholder for its shares. The statute permits
various exemptions from its provisions, including business
combinations that are exempted by the board of trustees before
the time that the interested shareholder becomes an interested
shareholder.
Windroses board of trustees has exempted the merger from
the business combination provisions of Maryland law by
resolution.
|
_
_
|
Amendment of
Charter/Declaration of
Trust
|
_
_
|
|
|
|
Under the DGCL, an amendment of
Health Care REITs certificate of incorporation must be
approved by Health Care REITs board of directors and by
the affirmative vote at a meeting by stockholders of a majority
of the outstanding shares entitled to vote on the matter. In
addition, under the DGCL, the holders of the outstanding shares
of a class are entitled to vote as a class upon a proposed
amendment, whether or not entitled to vote thereon by the
certificate of incorporation, if the amendment would increase or
decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such
class, or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them
adversely. If any proposed amendment would alter or change the
powers, preferences or special rights of one or more series of
any class so as to affect them adversely, but would not so
affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class
for purposes of this provision.
|
|
As authorized by the Maryland REIT
Law, Windroses declaration of trust provides that
amendments to Windroses declaration of trust must be
approved by the affirmative vote of a majority of all the votes
entitled to be cast on the matter, except that any amendment to
certain provisions of the declaration of trust regarding (i)
the number and election of trustees, (ii) the
resignation or removal of trustees, (iii) the
classification of preferred shares, (iv) classified or
reclassified shares, (v) the restriction and transfer of
ownership of shares or (vi) approval of amendments to the
declaration of trust by the shareholders must be approved by the
affirmative vote of two-thirds of all the votes entitled to be
cast on the matter.
Windroses declaration of trust provides that the trustees
may amend the declaration of trust without any action by the
shareholders as provided in the declaration of trust and in the
Maryland REIT Law. The Maryland REIT Law provides that the board
of trustees, with the approval of two thirds of its members, may
amend the declaration of trust from time to time to qualify as a
real estate investment trust under the Internal Revenue Code or
under the Maryland REIT Law. The Maryland REIT Law and
Windroses declaration of trust provides that a majority of
the entire board of trustees may amend the declaration of trust
to change the name of the trust or to change the
|
90
|
|
|
|
|
name or other designation or the
par value of any class or series of stock of the corporation and
the aggregate par value of the stock of the trust.
|
_
_
|
Amendment of
By-laws
|
_
_
|
|
|
|
Health Care REITs by-laws
may be amended or repealed or new by-laws may be adopted by
either the stockholders or Health Care REITs board of
directors. Any amendment by Health Care REITs board of
directors must be approved by a majority of the directors then
in office. Any amendment by the stockholders must be approved by
holders of capital stock having a majority of the voting power
in the election of directors of all outstanding Health Care REIT
capital stock, voting together as a single class, except that
the approval of 75% of such holders is required for any
amendment to the provisions of the by-laws concerning (i)
the number of directors, classification of Health Care
REITs board of directors, vacancies in Health Care
REITs board of directors, or removal of directors, (ii)
restrictions on issuance and transfer of stock, or (iii)
business combinations.
|
|
Windroses board of trustees,
without any action by the shareholders of Windrose, has the
exclusive power to adopt, amend and repeal any provision of the
bylaws or to make new bylaws.
|
_
_
|
Control Share
Acquisitions
|
_
_
|
|
|
|
Health Care REITs
certificate of incorporation and by-laws and the DGCL do not
contain similar provisions relating to control share
acquisitions.
|
|
Windroses bylaws contain a
provision exempting from the Maryland control share acquisition
statute any acquisition by any person of shares of beneficial
interest of the trust. This provision may be repealed, in whole
or in part, at any time, whether before or after an acquisition
of control shares.
|
_
_
|
Indemnification
|
_
_
|
|
|
|
The DGCL permits and Health Care
REITs by-laws require it to indemnify any current or past
director or officer who was or is a party or is threatened to be
made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative, because he or she is or was a director, officer,
employee or agent of Health Care REIT, or is or was serving at
Health Care REITs request as a director, officer,
employee, trustee, partner, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise, against expenses (including
attorneys fees), judgments, fines, penalties and amounts
paid in settlement, actually and reasonably incurred or suffered
by him or her in connection with such threatened, pending or
completed action, suit or proceeding if the person acted in good
faith and in a manner the
|
|
Maryland law and Windroses
declaration of trust permit Windrose, and its bylaws obligate
it, to indemnify, and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to, its present and
former trustees and officers and any individual who, while a
trustee or officer and at Windroses request, serves or has
served another entity, employee benefit plan or any other
enterprise as a trustee, director, officer, partner or
otherwise, against liabilities and reasonable expenses actually
incurred by them in any proceeding unless: (i) the act or
omission of the trustee or officer was material to the matter
giving rise to the proceeding and was committed in bad faith; or
(ii) was the result of active and deliberate dishonesty;
or (iii) the trustee or officer actually received an
improper personal benefit in money, property or services; or
(iv) in a criminal
|
91
|
|
|
person reasonably believed to be
in or not opposed to the best interests of Health Care REIT and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe the persons conduct was
unlawful. In an action by or in the right of Health Care REIT
itself, indemnification is available only for expenses actually
and reasonably incurred with the defense or settlement of the
action or suit and is not available in respect of any claim,
issue or matter as to which the person has been adjudged to be
liable to Health Care REIT unless and only to the extent that
the Delaware Court of Chancery or the court in which such action
or suit was brought shall determine that, despite the
adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses that the court deems proper.
|
|
proceeding, the trustee or
officer had reasonable cause to believe that the act or omission
was unlawful.
|
|
|
|
Expenses incurred by a current or
past director or officer in defending or investigating a
threatened or pending action, suit or proceeding will be paid by
Health Care REIT in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or
on behalf of such person to repay such amount unless it is
ultimately determined that he or she is entitled to be
indemnified by Health Care REIT.
|
|
Windroses declaration of
trust and bylaws also permit it to indemnify and advance
expenses to any person who served a predecessor of Windrose in
any of the capacities described above and to any employee or
agent of Windrose or its predecessors.
|
|
|
|
Under the DGCL, Health Care REIT
may indemnify and advance expenses to its employees and agents
to the same extent as described above for current and past
directors and officers. Except in connection with a claim by a
person to enforce his or her rights to indemnification under the
by-laws, Health Care REIT is not obligated to indemnify any
person in connection with a proceeding initiated by such person
unless the proceeding was authorized or consented to by Health
Care REITs board of directors.
|
|
Maryland law prohibits Windrose
from indemnifying its present and former trustees and officers
for an adverse judgment in a derivative action or for a judgment
of liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification
and then only for expenses. Windroses bylaws and Maryland
law require it, as a condition to advancing expenses in certain
circumstances, to obtain: (i) a written affirmation by
the trustee or officer of his or her good faith belief that he
or she has met the standard of conduct necessary for
indemnification; and (ii) a written undertaking to repay the
amount reimbursed if the standard of conduct is not met.
|
_
_
|
Limitation of
Liability
|
_
_
|
|
|
|
As permitted by the DGCL, Health
Care REITs certificate of incorporation provides that the
directors of Health Care REIT shall not be personally liable to
Health Care REIT or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability
(i) for a breach of a directors duty of
loyalty to Health Care REIT or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional
misconduct or a
|
|
The Maryland REIT Law permits a
Maryland REIT to include in its declaration of trust a provision
limiting the liability of trustees and officers to the trust and
its shareholders for money damages, except for liability
resulting from (i) actual receipt of an improper benefit
or profit in money, property or services or (ii) active and
deliberate dishonesty established by a final judgment and which
is material to the cause of action. Windroses declaration
of trust contains a provision that eliminates
|
92
|
|
|
knowing violation of law, (iii)
under Section 174 of the DGCL, or (iv) for any
transaction from which a director derived an improper personal
benefit.
|
|
trustees and officers
liability to the maximum extent permitted by Maryland law.
|
_
_
|
Inspection of
Records
|
_
_
|
|
|
|
Under the DGCL, any stockholder
may, for any proper purpose, inspect a corporations stock
ledger, a list of its stockholders and its other books and
records, and make copies of and extracts from such records. A
stockholder may exercise this inspection right only upon written
demand under oath and the inspection may occur only during
regular business hours.
|
|
Under the Maryland REIT Law, a
shareholder has the same right to inspect the records of a real
estate investment trust as a stockholder of a Maryland
corporation under the Maryland General Corporation Law, or MGCL.
|
|
|
|
The DGCL requires that Health Care
REIT make a list of stockholders available for inspection by
stockholders in connection with any meeting of stockholders,
which list must include the name of each stockholder entitled to
vote at the meeting, the address of each such stockholder and
the number of shares held. The list may be inspected by any
stockholder for any purpose related to the meeting for a period
of at least 10 days prior to the meeting on an electronic
network or during ordinary business hours at the principal place
of business of Health Care REIT.
|
|
The MGCL provides that one or more
persons who have been holders of record for more than six months
of at least 5% of the outstanding stock of any class of a
Maryland corporation are entitled to inspect and copy the
corporations books of account and stock ledger and receive
a written statement of the corporations affairs and a
verified list of stockholders. Any stockholder of a Maryland
corporation, holder of a voting trust certificate in a
corporation, or his or her agent may inspect and copy during
usual business hours the bylaws, minutes of the proceedings of
the stockholders, annual statement of affairs and voting trust
agreements on file at the corporations principal office.
Any stockholder of a Maryland corporation or a holder of a
voting trust certificate in a corporation may present a written
request for a statement showing all stock and securities issued
by a corporation during a specified period of not more than 12
months before the date of request. Within 20 days of
such request, a Maryland corporation is required to prepare and
have available on file at its principal office a sworn statement
by its president or treasurer or one of its vice presidents or
assistant treasurers which states the number of shares or
amounts of each class of stock or other securities issued during
the specified period, the consideration received per share or
unit and the value of any consideration other than money as set
forth in a resolution of the board of directors.
|
93
LEGAL
MATTERS
The validity of the shares of Health Care REIT common stock and
Health Care REIT preferred stock to be issued in connection with
the mergers will be passed upon by Shumaker, Loop &
Kendrick, LLP, counsel to Health Care REIT. Certain federal
income tax matters regarding the status of Health Care REIT as a
REIT, and the material United States federal income tax matters
described under Material U.S. Federal Income Tax
Considerations will be passed on by Arnold &
Porter LLP. Certain federal income tax matters regarding the
status of Windrose as a REIT will be passed on by
Hunton & Williams LLP.
EXPERTS
Ernst & Young LLP, independent registered public
accounting firm, has audited Health Care REITs
consolidated financial statements and schedules included in
Health Care REITs Current Report on
Form 8-K
dated May 10, 2006, as of December 31, 2005 and 2004,
and each of the three years in the period ended
December 31, 2005, and managements assessment of the
effectiveness of Health Care REITs internal control over
financial reporting as of December 31, 2005 included in
Health Care REITs Annual Report on
Form 10-K
for the year ended December 31, 2005, as set forth in their
reports included therein, which are incorporated by reference in
this prospectus and elsewhere in the registration statement.
Health Care REITs financial statements and schedules and
managements assessment are incorporated by reference in
reliance upon Ernst & Young LLPs reports, given
on their authority as experts in accounting and auditing.
The consolidated financial statements and related financial
statement schedule of Windrose Medical Properties Trust and
Subsidiaries as of December 31, 2005 and 2004, and for each
of the years in the three-year period ended December 31,
2005, and managements assessment of the effectiveness of
internal control over financial reporting as of
December 31, 2005 have been incorporated by reference
herein and in the registration statement in reliance upon the
reports of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
OTHER
MATTERS
As of the date of this proxy statement/prospectus,
Windroses board of trustees is not aware of any matters to
be presented for action at the special meeting other than the
matters set forth above. If any other matters do properly come
before the meeting or any adjournment thereof, it is intended
that the persons named in the proxy will vote in accordance with
their judgment on such matters.
WHERE YOU
CAN FIND MORE INFORMATION
This prospectus is part of a registration statement that Health
Care REIT has filed with the SEC covering the securities that
may be offered under this prospectus. The registration
statement, including the attached exhibits and schedules,
contains additional relevant information about the securities.
Additionally, Health Care REIT and Windrose each file annual,
quarterly and current reports, proxy statements and other
information with the SEC, all of which are made available, free
of charge, on Health Care REITs Internet Web site at
http://www.hcreit.com or Windroses Internet Web site at
http://www.windrosempt.com as soon as reasonably practicable
after they are filed with, or furnished to, the SEC. The
information on or connected to Health Care REITs and
Windroses Internet Web site is not, and shall not be
deemed to be, a part of, or incorporated into this proxy
statement/prospectus. You can review these SEC filings and the
registration statement by accessing the SECs Internet Web
site at http://www.sec.gov. You also may read and copy the
registration statement and any reports, statements or other
information on file at the SECs public reference room at
100 F Street, N.E., Washington, D.C. 20549. You can request
copies of those documents upon payment of a duplicating fee to
the SEC. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
rooms. These filings with the SEC are also available through the
New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
94
INCORPORATION
OF INFORMATION FILED WITH THE SEC
General
The SEC allows each of Health Care REIT and Windrose to
incorporate by reference the information Health Care
REIT and Windrose file with the SEC, which means:
|
|
|
|
|
Health Care REIT and Windrose consider incorporated documents to
be part of this proxy statement/prospectus;
|
|
|
|
Health Care REIT and Windrose may disclose important information
to you by referring you to those documents; and
|
|
|
|
information Health Care REIT or Windrose subsequently files with
the SEC will automatically update and supersede the information
in this proxy statement/prospectus.
|
Documents
Incorporated by Reference by Health Care REIT
This proxy statement/prospectus incorporates by reference the
following documents filed by Health Care REIT with the SEC:
|
|
|
|
|
Annual Report on
Form 10-K
for the year ended December 31, 2005;
|
|
|
|
Definitive Proxy Statement for the 2006 Annual Meeting of
Stockholders filed on March 28, 2006;
|
|
|
|
Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2006;
|
|
|
|
Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on January 27, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on February 21, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on March 23, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on April 7, 2006 (except that the information
furnished pursuant to Item 7.01 of
Form 8-K
and the exhibit relating to such information are not
incorporated into this proxy statement/prospectus by reference);
|
|
|
|
Current Report on
Form 8-K
filed on May 10, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on June 5, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on September 13, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on September 15, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on September 26, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on October 6, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on October 13, 2006;
|
|
|
|
The description of Health Care REITs common stock as set
forth in the registration statement filed under the Exchange Act
on
Form 8-A
on June 17, 1985, including any amendment or report for the
purpose of updating such description;
|
|
|
|
The description of Health Care REITs
77/8%
Series D Cumulative Redeemable Preferred Stock as set forth
in the registration statement filed under the Exchange Act on
Form 8-A/A
on July 8, 2003, including any amendment or report for the
purpose of updating such description;
|
|
|
|
The description of Health Care REITs
75/8%
Series F Cumulative Redeemable Preferred Stock as set forth
in the registration statement filed under the Exchange Act on
Form 8-A
on September 10, 2004, including any amendment or report
for the purpose of updating such description; and
|
95
|
|
|
|
|
All subsequent documents filed by Health Care REIT under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this proxy statement/prospectus and before the
date this offering is terminated.
|
Documents
Incorporated by Reference by Windrose
This proxy statement/prospectus incorporates by reference the
following documents filed by Windrose with the SEC:
|
|
|
|
|
Annual Report on
Form 10-K
for the year ended December 31, 2005;
|
|
|
|
Definitive Proxy Statement for the 2006 Annual Meeting of
Shareholders filed on April 10, 2006;
|
|
|
|
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2006;
|
|
|
|
Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on February 2, 2006 (except that the information
included in Item 7.01 (including Exhibit 99.1 thereto)
shall not be deemed incorporated by reference into this proxy
statement/prospectus);
|
|
|
|
Current Report on
Form 8-K
filed on February 7, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on March 7, 2006 (except that the information
included in Item 7.01 (including Exhibit 99.1 there)
shall not be deemed incorporated by reference into this proxy
statement/prospectus);
|
|
|
|
Current Report on
Form 8-K
filed on March 28, 2006 (except that the information
included in Item 7.01 (including Exhibit 99.1 thereto)
shall not be deemed incorporated by reference into this proxy
statement/prospectus);
|
|
|
|
Current Report on
Form 8-K
filed on April 3, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on April 6, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on April 14, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on May 24, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on August 8, 2006 (except that the information
included in Item 7.01 (including Exhibit 99.1 thereto)
shall not be deemed incorporated by reference into this proxy
statement/prospectus);
|
|
|
|
Current Report on
Form 8-K
filed on September 13, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on September 15, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on September 25, 2006;
|
|
|
|
Current Report on
Form 8-K
filed on October 6, 2006;
|
|
|
|
Current Report on Form 8-K filed on October 13, 2006;
|
|
|
|
The description of Windrose common shares as set forth in the
registration statement filed under the Exchange Act on Form 8-A
on June 28, 2002, including any amendment or report for the
purpose of updating such description;
|
|
|
|
The description of Windrose preferred shares as set forth in the
registration statement filed under the Exchange Act on Form 8-A
on June 29, 2005, including any amendment or report for the
purpose of updating such description; and
|
|
|
|
All subsequent documents filed by Windrose under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this proxy statement/prospectus and before the
special meeting of the Windrose shareholders.
|
96
This prospectus summarizes material provisions of contracts and
other documents to which Health Care REIT or Windrose refer.
Since this prospectus may not contain all the information that
you may find important, you should review the full text of those
documents. Upon request, Health Care REIT and Windrose will
provide each person receiving this prospectus a free copy,
without exhibits, of any or all documents incorporated by
reference into this prospectus. You may direct such requests to:
|
|
|
Erin C. Ibele
|
|
Daniel R. Loftus
|
Senior Vice
President-Administration and Corporate Secretary
|
|
Executive Vice President,
Secretary and
General Counsel
|
Health Care REIT, Inc.
|
|
Windrose Medical Properties Trust
|
One SeaGate, Suite 1500
|
|
3502 Woodview Trace, Suite 210
|
Toledo, Ohio 43604
|
|
Indianapolis, Indiana 46268
|
(419)
247-2800
|
|
(317) 860-8180
|
Neither Health Care REIT nor Windrose has authorized anyone
to give any information or make any representation about the
merger or their companies that is different from, or in addition
to, that contained in this proxy statement/prospectus or in any
of the materials that have been incorporated into this proxy
statement/prospectus. Therefore, if anyone gives you information
of this sort, you should not rely on it. If you are in a
jurisdiction where offers to exchange or sell, or solicitations
of offers to exchange or purchase, the securities offered by
this proxy statement/prospectus or the solicitation of proxies
is unlawful, or if you are a person to whom it is unlawful to
direct these types of activities, then the offer presented in
this proxy statement/prospectus does not extend to you. The
information contained in this proxy statement/prospectus speaks
only as of the date of this proxy statement/prospectus unless
the information specifically indicates that another date
applies.
97
Health
Care REIT, Inc.
Unaudited
Pro Forma Condensed Consolidated Financial Statements
The unaudited pro forma condensed consolidated financial
statements presented below have been prepared based on certain
pro forma adjustments to the historical consolidated financial
statements of Health Care REIT and Windrose as of and for the
six months ended June 30, 2006 and for the year ended
December 31, 2005. The historical consolidated financial
statements of Health Care REIT are contained in its Annual
Report on
Form 10-K
for the year ended December 31, 2005, its Quarterly Report
on
Form 10-Q
for the quarterly period ended June 30, 2006 and its
Current Report on
Form 8-K
filed on May 10, 2006, which modifies certain financial
information included in its Annual Report on
Form 10-K
for the year ended December 31, 2005, each of which is
incorporated by reference into this proxy statement/prospectus.
The historical consolidated financial statements of Windrose are
contained in its Annual Report on
Form 10-K
for the year ended December 31, 2005 and its Quarterly
Report on
Form 10-Q
for the quarterly period ended June 30, 2006, each of which
is incorporated by reference into this proxy
statement/prospectus. The accompanying unaudited pro forma
condensed consolidated balance sheet as of June 30, 2006
has been prepared as if the merger of Health Care REIT and
Windrose and the issuance of equity securities by Health Care
REIT to finance the acquisition of Windrose had occurred as of
that date.
The accompanying unaudited pro forma condensed consolidated
statements of income for the six months ended June 30, 2006
and for the year ended December 31, 2005 have been prepared
as if the merger had occurred as of January 1, 2005 and
reflects the issuance of Health Care REIT common stock and
Health Care REIT preferred stock in the mergers. In addition,
the Windrose historical operations have been adjusted to reflect
the historical combined operating results of all properties
acquired by Windrose during 2005 for the period January 1,
2005 through the date of acquisition by Windrose and all
properties acquired by Windrose during the first six months of
2006 for the period January 1, 2005 through
December 31, 2005 and January 1, 2006 through the date
of acquisition by Windrose. The allocation of the aggregate
purchase price, including assumed liabilities, of Windrose as
reflected in these unaudited pro forma condensed consolidated
financial statements has been based upon preliminary estimates
of the fair value of assets acquired and liabilities assumed. In
the opinion of Health Care REITs and Windroses
management, all significant adjustments necessary to reflect the
effects of the merger that can be factually supported within the
SEC regulations covering the preparation of pro forma financial
statements have been made.
A final determination of the fair values of Windroses
assets and liabilities, which cannot be made prior to the
completion of the transactions, will be based on the actual net
tangible and intangible assets of Windrose that exist as of the
date of completion of the mergers. Consequently, amounts
preliminarily allocated to assets and liabilities could change
significantly from those used in the pro forma condensed
consolidated financial statements presented below.
The unaudited pro forma condensed consolidated financial
statements are provided for informational purposes only. The
unaudited pro forma condensed consolidated financial statements
are not necessarily and should not be assumed to be an
indication of the results that would have been achieved had the
transactions been completed as of the dates indicated or that
may be achieved in the future. The unaudited pro forma condensed
consolidated balance sheet does not include restructuring
charges and other related liabilities that may result from
Health Care REITs integration of Windrose following
completion of the mergers. In addition to the uncertainties
discussed above, the impact of integration activities, the
timing of completion of the mergers and other changes in
Windroses net tangible and intangible assets that occur
prior to completion of the mergers could cause material
differences in the information presented. Furthermore, following
completion of the mergers, Health Care REIT expects to apply its
own methodologies and judgments in accounting for the assets and
liabilities acquired and assumed in the mergers., Those
judgments and methodologies may differ from those reflected in
Windroses historical financial statements and the
unaudited pro forma condensed consolidated financial statements
and notes thereto that follow.
The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the respective
historical financial statements and the notes thereto of Health
Care REIT and Windrose, which are incorporated by reference in
this proxy statement/prospectus. See the section entitled
Where You Can Find More Information for more
information on where you can obtain copies of the documents
incorporated by reference into this proxy statement/prospectus.
F-2
Health
Care REIT, Inc.
Unaudited
Pro Forma Condensed Consolidated Balance Sheet
June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care REIT
|
|
|
Windrose
|
|
|
Pro Forma
|
|
|
Consolidated
|
|
|
|
Historical(A)
|
|
|
Historical(B)
|
|
|
Adjustments(C)
|
|
|
Pro Forma
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Real estate investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land improvements
|
|
$
|
270,810
|
|
|
$
|
47,867
|
|
|
$
|
12,012
|
(D)
|
|
$
|
330,689
|
|
Buildings & improvements
|
|
|
2,758,358
|
|
|
|
634,130
|
|
|
|
148,945
|
(D)
|
|
|
3,541,433
|
|
Acquired lease intangibles
|
|
|
|
|
|
|
37,080
|
|
|
|
3,905
|
(D)
|
|
|
40,985
|
|
Construction in progress
|
|
|
75,822
|
|
|
|
1,391
|
|
|
|
|
|
|
|
77,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,104,990
|
|
|
|
720,468
|
|
|
|
164,862
|
|
|
|
3,990,320
|
|
Less accumulated depreciation
|
|
|
(317,869
|
)
|
|
|
(24,052
|
)
|
|
|
24,052
|
(D)
|
|
|
(317,869
|
)
|
Less accumulated lease intangible
amortization
|
|
|
|
|
|
|
(10,246
|
)
|
|
|
10,246
|
(D)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real property owned
|
|
|
2,787,121
|
|
|
|
686,170
|
|
|
|
199,160
|
|
|
|
3,672,451
|
|
Loans receivable
|
|
|
178,282
|
|
|
|
|
|
|
|
|
|
|
|
178,282
|
|
Less allowance for losses on loans
receivable
|
|
|
(6,961
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171,321
|
|
|
|
0
|
|
|
|
0
|
|
|
|
171,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net real estate investments
|
|
|
2,958,442
|
|
|
|
686,170
|
|
|
|
199,160
|
|
|
|
3,843,772
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments
|
|
|
5,070
|
|
|
|
1,000
|
|
|
|
|
|
|
|
6,070
|
|
Deferred loan expenses
|
|
|
11,523
|
|
|
|
3,295
|
|
|
|
(1,732
|
)(E)
|
|
|
13,086
|
|
Cash and cash equivalents
|
|
|
15,200
|
|
|
|
11,312
|
|
|
|
|
|
|
|
26,512
|
|
Receivables and other assets
|
|
|
71,877
|
|
|
|
26,863
|
|
|
|
(7,279
|
)(F)
|
|
|
91,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,670
|
|
|
|
42,470
|
|
|
|
(9,011
|
)
|
|
|
137,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,062,112
|
|
|
$
|
728,640
|
|
|
$
|
190,149
|
|
|
$
|
3,980,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under unsecured lines of
credit arrangements
|
|
$
|
146,000
|
|
|
|
|
|
|
$
|
43,650
|
(G)
|
|
$
|
189,650
|
|
Senior unsecured notes
|
|
|
1,193,355
|
|
|
|
|
|
|
|
|
|
|
|
1,193,355
|
|
Secured debt
|
|
|
131,178
|
|
|
$
|
373,493
|
|
|
|
(8,223
|
)(H)
|
|
|
496,448
|
|
Liability to subsidiary trust
issuing preferred securities
|
|
|
|
|
|
|
51,000
|
|
|
|
2,841
|
(I)
|
|
|
53,841
|
|
Accrued expenses and other
liabilities
|
|
|
45,641
|
|
|
|
18,006
|
|
|
|
4,055
|
(J)
|
|
|
67,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,516,174
|
|
|
|
442,499
|
|
|
|
42,323
|
|
|
|
2,000,996
|
|
Minority interest
|
|
|
|
|
|
|
5,940
|
|
|
|
(3,757
|
)(K)
|
|
|
2,183
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
276,875
|
|
|
|
21
|
|
|
|
52,479
|
(L)
|
|
|
329,375
|
|
Common stock
|
|
|
62,446
|
|
|
|
209
|
|
|
|
9,511
|
(L)
|
|
|
72,215
|
|
|
|
|
|
|
|
|
|
|
|
|
49
|
(M)
|
|
|
|
|
Capital in excess of par value
|
|
|
1,450,531
|
|
|
|
301,892
|
|
|
|
71,745
|
(L)
|
|
|
1,825,719
|
|
|
|
|
|
|
|
|
|
|
|
|
1,901
|
(M)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(350
|
)(N)
|
|
|
|
|
Treasury stock
|
|
|
(2,714
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,714
|
)
|
Cumulative net income
|
|
|
883,082
|
|
|
|
14,039
|
|
|
|
(5,673
|
)(N)
|
|
|
877,409
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,039
|
)(L)
|
|
|
|
|
Cumulative dividends
|
|
|
(1,125,810
|
)
|
|
|
(36,543
|
)
|
|
|
36,543
|
(L)
|
|
|
(1,125,810
|
)
|
Accumulated other comprehensive
income
|
|
|
|
|
|
|
583
|
|
|
|
(583
|
)(L)
|
|
|
0
|
|
Other equity
|
|
|
1,528
|
|
|
|
|
|
|
|
|
|
|
|
1,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,545,938
|
|
|
|
280,201
|
|
|
|
151,583
|
|
|
|
1,977,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
3,062,112
|
|
|
$
|
728,640
|
|
|
$
|
190,149
|
|
|
$
|
3,980,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
unaudited
pro forma condensed consolidated financial statements.
F-3
Health
Care REIT, Inc.
Unaudited
Pro Forma Condensed Consolidated Statement of Income
For the Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care REIT
|
|
|
Windrose
|
|
|
Pro Forma
|
|
|
Consolidated
|
|
|
|
Historical(O)
|
|
|
Adjusted(P)
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
250,805
|
|
|
$
|
80,120
|
|
|
$
|
1,979
|
(Q)
|
|
$
|
332,904
|
|
Interest income
|
|
|
23,993
|
|
|
|
|
|
|
|
|
|
|
|
23,993
|
|
Development and project management
fees
|
|
|
|
|
|
|
2,134
|
|
|
|
|
|
|
|
2,134
|
|
Transaction fees and other income
|
|
|
4,548
|
|
|
|
272
|
|
|
|
|
|
|
|
4,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
279,346
|
|
|
|
82,526
|
|
|
|
1,979
|
|
|
|
363,851
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
79,409
|
|
|
|
26,558
|
|
|
|
1,434
|
(R)
|
|
|
107,401
|
|
Depreciation and amortization
|
|
|
79,167
|
|
|
|
19,972
|
|
|
|
7,591
|
(S)
|
|
|
106,730
|
|
Property operating expenses
|
|
|
|
|
|
|
20,788
|
|
|
|
|
|
|
|
20,788
|
|
Property taxes
|
|
|
|
|
|
|
6,835
|
|
|
|
|
|
|
|
6,835
|
|
Cost of sales and project costs
|
|
|
|
|
|
|
1,327
|
|
|
|
|
|
|
|
1,327
|
|
General and administrative expenses
|
|
|
16,967
|
|
|
|
5,137
|
|
|
|
225
|
(T)
|
|
|
22,329
|
|
Loan expense
|
|
|
2,710
|
|
|
|
864
|
|
|
|
(628
|
)(U)
|
|
|
2,946
|
|
Loss on extinguishment of debt
|
|
|
21,484
|
|
|
|
|
|
|
|
|
|
|
|
21,484
|
|
Provision for loan losses
|
|
|
1,200
|
|
|
|
|
|
|
|
|
|
|
|
1,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
200,937
|
|
|
|
81,481
|
|
|
|
8,622
|
|
|
|
291,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
and minority interests
|
|
|
78,409
|
|
|
|
1,045
|
|
|
|
(6,643
|
)
|
|
|
72,811
|
|
Income tax (expense) benefit
|
|
|
(282
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
(331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority
interests
|
|
|
78,127
|
|
|
|
996
|
|
|
|
(6,643
|
)
|
|
|
72,480
|
|
Minority interests
|
|
|
|
|
|
|
(262
|
)
|
|
|
151
|
(K)
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
78,127
|
|
|
|
734
|
|
|
|
(6,492
|
)
|
|
|
72,369
|
|
Preferred stock dividends
|
|
|
21,594
|
|
|
|
1,995
|
|
|
|
|
|
|
|
23,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations available to common stockholders
|
|
$
|
56,533
|
|
|
$
|
(1,261
|
)
|
|
$
|
(6,492
|
)
|
|
$
|
48,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
54,110
|
|
|
|
13,620
|
|
|
|
9,769
|
(V)
|
|
|
63,879
|
|
Diluted
|
|
|
54,499
|
|
|
|
14,016
|
|
|
|
10,014
|
(V)
|
|
|
64,513
|
|
Income (loss) from continuing
operations available to common stockholders(W):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.04
|
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
$
|
0.76
|
|
Diluted
|
|
$
|
1.04
|
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
$
|
0.76
|
|
The accompanying notes are an integral part of these
unaudited
pro forma condensed consolidated financial statements.
F-4
Health
Care REIT, Inc.
Unaudited
Pro Forma Condensed Consolidated Statement of Income
For the six months ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care REIT
|
|
|
Windrose
|
|
|
Pro Forma
|
|
|
Consolidated
|
|
|
|
Historical(O)
|
|
|
Adjusted(P)
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
146,817
|
|
|
$
|
45,092
|
|
|
$
|
747
|
(Q)
|
|
$
|
192,656
|
|
Interest income
|
|
|
8,742
|
|
|
|
|
|
|
|
|
|
|
|
8,742
|
|
Development and project management
fees
|
|
|
|
|
|
|
924
|
|
|
|
|
|
|
|
924
|
|
Transaction fees and other income
|
|
|
2,030
|
|
|
|
170
|
|
|
|
|
|
|
|
2,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
157,589
|
|
|
|
46,186
|
|
|
|
747
|
|
|
|
204,522
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
47,101
|
|
|
|
14,658
|
|
|
|
(496
|
)(R)
|
|
|
61,263
|
|
Depreciation and amortization
|
|
|
47,183
|
|
|
|
10,873
|
|
|
|
2,910
|
(S)
|
|
|
60,966
|
|
Property operating expenses
|
|
|
|
|
|
|
10,287
|
|
|
|
|
|
|
|
10,287
|
|
Property taxes
|
|
|
|
|
|
|
3,276
|
|
|
|
|
|
|
|
3,276
|
|
Cost of sales and project costs
|
|
|
|
|
|
|
751
|
|
|
|
|
|
|
|
751
|
|
General and administrative expenses
|
|
|
11,279
|
|
|
|
3,713
|
|
|
|
113
|
(T)
|
|
|
15,105
|
|
Loan expense
|
|
|
1,418
|
|
|
|
527
|
|
|
|
(409
|
)(U)
|
|
|
1,536
|
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Provision for loan losses
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
107,481
|
|
|
|
44,085
|
|
|
|
2,118
|
|
|
|
153,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
and minority interests
|
|
|
50,108
|
|
|
|
2,101
|
|
|
|
(1,371
|
)
|
|
|
50,838
|
|
Income tax (expense) benefit
|
|
|
(12
|
)
|
|
|
33
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority
interests
|
|
|
50,096
|
|
|
|
2,134
|
|
|
|
(1,371
|
)
|
|
|
50,859
|
|
Minority interests
|
|
|
|
|
|
|
(257
|
)
|
|
|
27
|
(K)
|
|
|
(230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
50,096
|
|
|
|
1,877
|
|
|
|
(1,344
|
)
|
|
|
50,629
|
|
Preferred stock dividends
|
|
|
10,666
|
|
|
|
1,953
|
|
|
|
|
|
|
|
12,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations available to common stockholders
|
|
$
|
39,430
|
|
|
$
|
(76
|
)
|
|
$
|
(1,344
|
)
|
|
$
|
38,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
59,871
|
|
|
|
18,801
|
|
|
|
9,769
|
(V)
|
|
|
69,640
|
|
Diluted
|
|
|
60,201
|
|
|
|
19,199
|
|
|
|
10,014
|
(V)
|
|
|
70,215
|
|
Income (loss) from continuing
operations available to common stockholders(W):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.66
|
|
|
$
|
0.00
|
|
|
|
|
|
|
$
|
0.55
|
|
Diluted
|
|
$
|
0.65
|
|
|
$
|
0.00
|
|
|
|
|
|
|
$
|
0.54
|
|
The accompanying notes are an integral part of these
unaudited
pro forma condensed consolidated financial statements.
F-5
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements
(A) The historical consolidated balance sheet of Health
Care REIT is contained in its Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2006 on file with
the SEC and is incorporated by reference into this proxy
statement/prospectus.
(B) The historical consolidated balance sheet of Windrose
is contained in its Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2006 on file with
the SEC and is incorporated by reference into this proxy
statement/prospectus. Includes the following reclassifications
to conform certain Windrose amounts with Health Care REITs
presentation:
|
|
|
|
|
Prepaid expenses, Receivables on construction
and consulting contracts, Receivables from tenants,
net of allowance, Revenues in excess of
billings, Straight-line rent receivable, net of
allowance, and Escrow deposits and other
assets have been reclassified to Receivables and
other assets.
|
|
|
|
Billings in excess of revenues earned,
Accounts payable and accrued expenses, Tenant
security deposits and prepaid rents, and Other
liabilities have been reclassified to Accrued
expenses and other liabilities.
|
(C) In the merger, each Windrose common shareholder will
receive shares of Health Care REIT common stock as determined by
an exchange ratio to be determined by dividing $18.06 by the
volume-weighted average price per share of Health Care REIT
common stock for the 10 trading days, selected by lot, from the
15 trading day period ending on and including the fifth trading
day prior to the closing of the transaction. The exchange ratio
is subject to a floor of 0.4509 and a ceiling of 0.4650 which
correlates to Health Care REIT common stock prices per share of
$40.05 and $38.84, respectively. For purposes of the unaudited
pro forma condensed consolidated balance sheet presentation, the
total purchase price is based on the number of shares of
Windrose common stock outstanding at June 30, 2006 after
giving effect to the conversion of all of the Windrose OP units
outstanding on June 30, 2006, an exchange ratio of 0.4579
and market price per share of Health Care REIT common stock of
$39.44. The exchange ratio and price per share represents the
average of the high and low of the respective ranges.
In addition, at the effective time of the merger, to the extent
that Windrose preferred shares have not been converted into
Windrose common shares, each holder of Windrose 7.5%
Series A Cumulative Convertible Preferred Shares will
receive an equivalent number of shares of Health Care REIT 7.5%
Series G Cumulative Convertible Preferred Stock. For
purposes of the unaudited pro forma condensed consolidated
balance sheet presentation, the total purchase price is based on
the number of Windrose preferred shares outstanding at
June 30, 2006 and a price per share of Health Care REIT
preferred stock of $25.00.
F-6
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements (Continued)
The calculation of the merger consideration and total purchase
price is as follows (in thousands, except price per share):
|
|
|
|
|
Calculation of Windrose
purchase price:
|
|
|
|
|
Issuance of Health Care REIT
common stock:
|
|
|
|
|
Windrose outstanding common shares
as of June 30, 2006
|
|
|
20,885
|
|
Conversion of Windrose OP units
into Windrose common shares
|
|
|
343
|
|
|
|
|
|
|
Total estimated outstanding
Windrose common shares
|
|
|
21,228
|
|
Estimated exchange ratio
|
|
|
0.4579
|
|
|
|
|
|
|
Issuance of shares of Health Care
REIT common stock
|
|
|
9,720
|
|
Estimated Health Care REIT common
stock price per share
|
|
$
|
39.44
|
|
|
|
|
|
|
Value of Health Care REIT common
stock issuance
|
|
$
|
383,357
|
|
Issuance of Health Care REIT
preferred stock:
|
|
|
|
|
Issuance of Health Care REIT
preferred stock
|
|
|
2,100
|
|
Estimated Health Care REIT
preferred stock price per share
|
|
$
|
25.00
|
|
|
|
|
|
|
Value of Health Care REIT
preferred stock issuance
|
|
$
|
52,500
|
|
|
|
|
|
|
Total merger consideration
|
|
$
|
435,857
|
|
Windrose secured debt outstanding
as of June 30, 2006 at book value
|
|
|
424,493
|
|
Adjustment to record Windrose
secured debt at fair value (see Notes G, H and I)
|
|
|
10,218
|
|
All other Windrose liabilities as
of June 30, 2006 at book value
|
|
|
18,006
|
|
Adjustment to record Windrose
liabilities at fair value (see Note J)
|
|
|
4,055
|
|
Windrose minority interest as of
June 30, 2006 at book value
|
|
|
5,940
|
|
Adjustment to record Windrose
minority interest at fair value (see Note K)
|
|
|
(3,757
|
)
|
Estimated fees and other expenses
related to the merger
|
|
|
30,000
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
924,812
|
|
|
|
|
|
|
The estimated fees and other expenses related to the merger are
as follows (in thousands):
|
|
|
|
|
Advisory fees
|
|
$
|
12,953
|
|
Change in control payments
|
|
|
12,163
|
|
Debt assumption fees and costs
|
|
|
1,563
|
|
Legal, accounting and other fees
and costs
|
|
|
3,321
|
|
|
|
|
|
|
Total
|
|
$
|
30,000
|
|
|
|
|
|
|
(D) Windroses real estate assets have been adjusted
to their estimated fair market values as of June 30, 2006.
Windroses historical accumulated depreciation balance has
been eliminated when real estate assets are recorded at their
fair market value. A final determination of the fair values of
Windroses assets and liabilities, which cannot be made
prior to the completion of the transactions, will be based on
the actual net tangible and intangible assets of Windrose that
exist as of the date of completion of the transactions.
Consequently, amounts preliminarily allocated to assets and
liabilities could change significantly from those used in the
pro forma condensed consolidated financial statements presented
below.
F-7
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements (Continued)
(E) Adjustments to Windroses historical deferred loan
expenses, as follows (in thousands):
|
|
|
|
|
Deferral of costs associated with
debt assumed in the merger
|
|
$
|
1,563
|
|
Elimination of historical deferred
loan expenses
|
|
|
(3,295
|
)
|
|
|
|
|
|
|
|
$
|
(1,732
|
)
|
|
|
|
|
|
(F) Adjustments to Windroses historical receivables
and other assets, as follows (in thousands):
|
|
|
|
|
Recognition of non-compete
contract intangibles
|
|
$
|
900
|
|
Elimination of historical
straight-line rent balance, net of allowance
|
|
|
(7,434
|
)
|
Elimination of historical deferred
leasing commissions, net of accumulated amortization
|
|
|
(745
|
)
|
|
|
|
|
|
|
|
$
|
(7,279
|
)
|
|
|
|
|
|
(G) Borrowings under unsecured lines of credit arrangements
will be used to fund certain costs of the merger to be paid in
cash aggregating $28,050,000 and to payoff $15,600,000 of
Windrose variable-rate secured debt outstanding at June 30,
2006.
(H) Adjustments to Windroses historical secured debt,
as follows (in thousands):
|
|
|
|
|
Elimination of historical fair
market value adjustment
|
|
$
|
1,956
|
|
Recognition of current fair market
value adjustment
|
|
|
5,421
|
|
Payoff variable-rate secured debt
(see Note G above)
|
|
|
(15,600
|
)
|
|
|
|
|
|
|
|
$
|
(8,223
|
)
|
|
|
|
|
|
Secured debt, net of the variable-rate secured debt payoffs,
will be assumed by Health Care REIT in the merger.
Windroses secured debt that will be assumed will be
recorded at its estimated fair market value based on Health Care
REIT managements estimates of the interest rate that would
be available to Health Care REIT for the issuance of debt with
similar terms and maturities. Health Care REITs management
considers the interest rates on the assumed debt to be above
market for debt that would be incurred with similar terms and
maturities.
(I) Adjustment to the Windrose liability to a subsidiary
trust issuing preferred securities to its estimated fair market
value based on Health Care REIT managements estimate of
the interest rate that would be available to Health Care REIT
for the issuance of debt with similar terms and maturity as the
preferred securities issued by Windroses subsidiary trust.
The liability to Windroses subsidiary trust issuing the
preferred securities will be assumed by Health Care REIT in the
merger. Health Care REITs management considers the
interest rate on the assumed liability to be above market.
(J) Adjustments to Windroses historical accrued
expenses and other liabilities, as follows (in thousands):
|
|
|
|
|
Recognition of liabilities
associated with the acquired in-place leases that have
below-market rental rates
|
|
$
|
5,702
|
|
Recognition of non-compete
contract liability
|
|
|
900
|
|
Elimination of historical
intangible liabilities, net of accumulated amortization
|
|
|
(2,547
|
)
|
|
|
|
|
|
|
|
$
|
4,055
|
|
|
|
|
|
|
(K) Adjustment reflects the elimination of the historical
balances applicable to the minority interest in Windrose OP.
Windrose OP units will be exchanged for Health Care REIT common
stock in connection with the operating partnership merger. The
remaining amounts represent minority interest applicable to
other joint ventures.
F-8
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements (Continued)
(L) Adjustments represent the elimination of historical
Windrose balances and the issuance of shares of Health Care REIT
common and preferred stock in the merger. The shares of Health
Care REIT common and preferred stock issued in the mergers are
valued as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Preferred
|
|
|
Number of shares issued
|
|
|
9,720
|
|
|
|
2,100
|
|
Assumed price of Health Care REIT
stock
|
|
$
|
39.44
|
|
|
$
|
25.00
|
|
|
|
|
|
|
|
|
|
|
Value of shares issued
|
|
$
|
383,357
|
|
|
$
|
52,500
|
|
|
|
|
|
|
|
|
|
|
The shares of Health Care REIT common stock issued are recorded
as follows (in thousands):
|
|
|
|
|
Par value, $1.00 par value
per share
|
|
$
|
9,720
|
|
Capital in excess of par
|
|
|
373,637
|
|
|
|
|
|
|
Value of shares issued
|
|
$
|
383,357
|
|
|
|
|
|
|
(M) Adjustments represent the issuance of Health Care REIT
common stock related to certain costs associated with the
merger. The shares of Health Care REIT common stock issued are
valued as follows (in thousands, except per share data):
|
|
|
|
|
Number of shares issued
|
|
|
49
|
|
Assumed price of shares of Health
Care REIT common stock
|
|
$
|
39.44
|
|
|
|
|
|
|
Value of shares issued
|
|
$
|
1,950
|
|
|
|
|
|
|
The shares of Health Care REIT common stock issued are recorded
as follows (in thousands):
|
|
|
|
|
Par value, $1.00 par value
per share
|
|
$
|
49
|
|
Capital in excess of par
|
|
|
1,901
|
|
|
|
|
|
|
Value of shares issued
|
|
$
|
1,950
|
|
|
|
|
|
|
(N) Adjustment represents the accounting treatment of
certain non-recurring costs of the merger aggregating
approximately $6,023,000. Approximately $5,673,000 of these
costs represent retention bonuses and related excise taxes for
certain Windrose officers and approximately $350,000 of these
costs represent estimated equity issuance costs.
(O) The historical consolidated statements of income of
Health Care REIT are contained in its Current Report on
Form 8-K
filed May 10, 2006, which updates certain financial
information included in its Annual Report on
Form 10-K
for the year ended December 31, 2005, and its Quarterly
Report on
Form 10-Q
for the quarterly period ended June 30, 2006 on file with
the SEC and are incorporated by reference into this proxy
statement/prospectus. Income taxes have been reclassified from
General and administrative to a separate line item.
F-9
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements (Continued)
(P) The following table represents the Windrose adjusted
unaudited pro forma consolidated statement of income for the
year ended December 31, 2005 to include the pre-acquisition
historical results of operations for Windrose acquisitions
during 2005 and the six months ended June 30, 2006 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Windrose
|
|
|
2005 Acquisitions
|
|
|
2006 Acquisitions
|
|
|
Pro Forma
|
|
|
Windrose
|
|
|
|
Historical(1)
|
|
|
Historical(2)
|
|
|
Historical(3)
|
|
|
Adjustments
|
|
|
Adjusted
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
47,720
|
|
|
$
|
28,892
|
|
|
$
|
2,959
|
|
|
$
|
549
|
(4)
|
|
$
|
80,120
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Development and project management
fees
|
|
|
2,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,134
|
|
Transaction fees and other income
|
|
|
268
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
50,122
|
|
|
|
28,896
|
|
|
|
2,959
|
|
|
|
549
|
|
|
|
82,526
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
12,205
|
|
|
|
9,600
|
|
|
|
|
|
|
|
4,753
|
(5)
|
|
|
26,558
|
|
Depreciation and amortization
|
|
|
11,362
|
|
|
|
8,959
|
|
|
|
|
|
|
|
(349
|
)(6)
|
|
|
19,972
|
|
Property operating expenses
|
|
|
10,077
|
|
|
|
8,659
|
|
|
|
2,052
|
|
|
|
|
|
|
|
20,788
|
|
Property taxes
|
|
|
4,345
|
|
|
|
2,367
|
|
|
|
123
|
|
|
|
|
|
|
|
6,835
|
|
Cost of sales and project costs
|
|
|
1,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,327
|
|
General and administrative expenses
|
|
|
5,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,137
|
|
Loan expense
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
192
|
(7)
|
|
|
864
|
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Provision for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
45,125
|
|
|
|
29,585
|
|
|
|
2,175
|
|
|
|
4,596
|
|
|
|
81,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
and minority interests
|
|
|
4,997
|
|
|
|
(689
|
)
|
|
|
784
|
|
|
|
(4,047
|
)
|
|
|
1,045
|
|
Income tax (expense) benefit
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority
interests
|
|
|
4,948
|
|
|
|
(689
|
)
|
|
|
784
|
|
|
|
(4,047
|
)
|
|
|
996
|
|
Minority interests
|
|
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
|
(92
|
)(8)
|
|
|
(262
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
4,778
|
|
|
|
(689
|
)
|
|
|
784
|
|
|
|
(4,139
|
)
|
|
|
734
|
|
Preferred stock dividends
|
|
|
1,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations available to common stockholders
|
|
$
|
2,783
|
|
|
$
|
(689
|
)
|
|
$
|
784
|
|
|
$
|
(4,139
|
)
|
|
$
|
(1,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The historical consolidated statement of income of Windrose is
contained in its Annual Report on
Form 10-K
for the year ended December 31, 2005 on file with the SEC
and is incorporated by reference into this proxy
statement/prospectus. Includes the following reclassifications
to conform certain Windrose amounts with Health Care REITs
presentation: |
|
|
|
|
|
Amortization of deferred loan expenses has been reclassified
from Interest expense to Loan expense.
|
F-10
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements (Continued)
|
|
|
|
|
Interest income and Gain on interest rate
swap have been reclassified to Transaction fees and
other income.
|
|
|
|
Other expense has been reclassified to General
and administrative expenses.
|
|
|
|
(2) |
|
Reflects historical combined operating results of all properties
acquired by Windrose during 2005 for the period January 1,
2005 through the date of acquisition by Windrose. |
|
(3) |
|
Reflects historical combined operating results of all properties
acquired by Windrose during 2006 for the period January 1,
2005 through December 31, 2005. |
|
(4) |
|
Reflects the adjustments to recognize straight-line rent
adjustments and amortization of above/below market lease
intangibles from the assumed Windrose acquisition date of
January 1, 2005. |
|
(5) |
|
Reflects the adjustments to recognize incremental increases in
interest expense associated with debt assumed
and/or
incurred in connection with Windrose acquisitions and to
recognize interest expense resulting from the amortization of
the premium/discounts recognized at the Windrose acquisition
dates to adjust any assumed debt to fair market value. |
|
(6) |
|
Reflects adjustments to conform depreciation methodologies and
to recognize incremental changes in real estate depreciation
expense and amortization expense related to the recording of
Windroses intangible assets associated with acquired
leases at their fair market values at the assumed Windrose
acquisition date of January 1, 2005. |
|
(7) |
|
Reflects adjustments to recognize loan expense resulting from
the amortization of deferred loan expenses associated with the
debt assumption costs of the Windrose acquisitions. |
|
(8) |
|
Reflects the additional minority interest resulting from the
change in operating income based on the weighted-average
minority ownership percentage of the operating partnership. |
F-11
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements (Continued)
The following table represents the Windrose adjusted unaudited
pro forma consolidated statement of income for the six months
ended June 30, 2006 to include the pre-acquisition
historical results of operations for Windrose acquisitions
during the six months ended June 30, 2006 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Windrose
|
|
|
2006 Acquisitions
|
|
|
Pro Forma
|
|
|
Windrose
|
|
|
|
Historical(1)
|
|
|
Historical(2)
|
|
|
Adjustments
|
|
|
Adjusted
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
43,659
|
|
|
$
|
1,332
|
|
|
$
|
101
|
(3)
|
|
$
|
45,092
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Development and project management
fees
|
|
|
924
|
|
|
|
|
|
|
|
|
|
|
|
924
|
|
Transaction fees and other income
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
44,753
|
|
|
|
1,332
|
|
|
|
101
|
|
|
|
46,186
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
13,794
|
|
|
|
|
|
|
|
864
|
(4)
|
|
|
14,658
|
|
Depreciation and amortization
|
|
|
10,439
|
|
|
|
355
|
|
|
|
79
|
(5)
|
|
|
10,873
|
|
Property operating expenses
|
|
|
9,396
|
|
|
|
891
|
|
|
|
|
|
|
|
10,287
|
|
Property taxes
|
|
|
3,225
|
|
|
|
51
|
|
|
|
|
|
|
|
3,276
|
|
Cost of sales and project costs
|
|
|
751
|
|
|
|
|
|
|
|
|
|
|
|
751
|
|
General and administrative expenses
|
|
|
3,713
|
|
|
|
|
|
|
|
|
|
|
|
3,713
|
|
Loan expense
|
|
|
514
|
|
|
|
|
|
|
|
13
|
(6)
|
|
|
527
|
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Provision for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
41,832
|
|
|
|
1,297
|
|
|
|
956
|
|
|
|
44,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and
minority interests
|
|
|
2,921
|
|
|
|
35
|
|
|
|
(855
|
)
|
|
|
2,101
|
|
Income tax (expense) benefit
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interests
|
|
|
2,954
|
|
|
|
35
|
|
|
|
(855
|
)
|
|
|
2,134
|
|
Minority interests
|
|
|
(272
|
)
|
|
|
|
|
|
|
15
|
(7)
|
|
|
(257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
2,682
|
|
|
|
35
|
|
|
|
(840
|
)
|
|
|
1,877
|
|
Preferred stock dividends
|
|
|
1,953
|
|
|
|
|
|
|
|
|
|
|
|
1,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
729
|
|
|
$
|
35
|
|
|
$
|
(840
|
)
|
|
$
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The historical consolidated statement of income of Windrose is
contained in its Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2006 on file with
the SEC and is incorporated by reference into this proxy
statement/prospectus. Includes the following reclassifications
to conform certain Windrose amounts with Health Care REITs
presentation: |
|
|
|
|
|
Amortization of deferred loan expenses has been reclassified
from Interest expense to Loan expense.
|
|
|
|
Interest income and Gain on interest rate
swap have been reclassified to Transaction fees and
other income.
|
|
|
|
Other expense has been reclassified to General
and administrative expenses.
|
|
|
|
(2) |
|
Reflects historical combined operating results of all properties
acquired by Windrose during 2006 for the period January 1,
2006 through the date of acquisition by Windrose. |
F-12
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements (Continued)
|
|
|
(3) |
|
Reflects the adjustments to recognize straight-line rent
adjustments and amortization of above/below market lease
intangibles from the assumed Windrose acquisition date of
January 1, 2005. |
|
(4) |
|
Reflects the adjustments to recognize incremental increases in
interest expense associated with debt assumed
and/or
incurred in connection with Windrose acquisitions and to
recognize interest expense resulting from the amortization of
the premium/discounts recognized at the Windrose acquisition
dates to adjust any assumed debt to fair market value. |
|
(5) |
|
Reflects adjustments to conform depreciation methodologies and
to recognize incremental changes in real estate depreciation
expense and amortization expense related to the recording of
Windroses intangible assets associated with acquired
leases at their fair market values at the assumed Windrose
acquisition date of January 1, 2005. |
|
(6) |
|
Reflects adjustments to recognize loan expense resulting from
the amortization of deferred loan expenses associated with the
debt assumption costs of the Windrose acquisitions. |
|
(7) |
|
Reflects the additional minority interest resulting from the
change in operating income based on the weighted-average
minority ownership percentage of the operating partnership. |
(Q) Adjustments to rental income are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2005
|
|
|
2006
|
|
|
Recognize the total minimum lease
payments provided under the acquired leases on a straight-line
basis over the remaining term from the assumed merger date of
January 1, 2005
|
|
$
|
4,650
|
|
|
$
|
2,730
|
|
Recognize the amortization of
above/below market lease intangibles
|
|
|
(563
|
)
|
|
|
(282
|
)
|
Eliminate Windroses adjusted
historical straight-line rent adjustment
|
|
|
(3,911
|
)
|
|
|
(2,360
|
)
|
Eliminate Windroses adjusted
historical amortization of above/below market lease intangibles
|
|
|
1,803
|
|
|
|
659
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,979
|
|
|
$
|
747
|
|
|
|
|
|
|
|
|
|
|
(R) Adjustments to interest expense are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2005
|
|
|
2006
|
|
|
Incremental increase in interest
expense associated with draws on unsecured lines of credit to
fund merger related costs
|
|
$
|
1,760
|
|
|
$
|
880
|
|
Adjust interest expense resulting
from the amortization of the liability recognized at the merger
date to adjust the assumed Windrose secured debt to fair market
value
|
|
|
(1,246
|
)
|
|
|
(623
|
)
|
Eliminate Windroses adjusted
historical amortization of fair market value adjustments
|
|
|
920
|
|
|
|
(753
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,434
|
|
|
$
|
(496
|
)
|
|
|
|
|
|
|
|
|
|
The pro forma increase in interest expense associated with draws
on unsecured lines of credit to fund merger related costs is
calculated using market rates Health Care REIT management
believes would have been available to Health Care REIT for the
unsecured lines of credit as of September 12, 2006 (the
date that the merger agreement was executed). The assumed
interest rate associated with draws on unsecured lines of credit
was 6.275%.
F-13
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements (Continued)
(S) Adjustments to depreciation and amortization are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2005
|
|
|
2006
|
|
|
Incremental increase in real
estate depreciation expense as a result of the recording of
Windroses real estate at its estimated fair market value
at the assumed merger date of January 1, 2005
|
|
$
|
4,838
|
|
|
$
|
1,752
|
|
Incremental increase in
amortization expense as a result of the recording of
Windroses intangible assets associated with acquired
leases at their estimated fair market values at the assumed
merger date of January 1, 2005
|
|
|
2,753
|
|
|
|
1,158
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,591
|
|
|
$
|
2,910
|
|
|
|
|
|
|
|
|
|
|
The following useful lives were assumed to compute the
adjustments to depreciation and amortization:
|
|
|
|
|
Land improvements = 15 years
|
|
|
|
Buildings and building improvements = 40 years
|
|
|
|
Tenant improvements = 5 years
|
|
|
|
Acquired lease intangibles = 5 years
|
(T) General and administrative expenses are adjusted to
include the amortization of non-compete contract intangibles.
Individuals covered under the non-compete agreement have a two
year consulting contract. The non-compete contracts extend for
two years beyond the applicable termination date. Thus, a four
year period was used to compute amortization expense.
Management of Health Care REIT expects that the merger will
create general and administrative cost savings, including costs
associated with corporate administrative functions. There can be
no assurance that Health Care REIT will be successful in
achieving these anticipated cost savings. No estimate of these
expected future cost savings has been included in the pro forma
financial statements. Such adjustments cannot be factually
supported within the SEC regulations governing the preparation
of pro forma financial statements until such time as the
operations of the companies have been fully integrated.
(U) Adjustments to loan expense are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2005
|
|
|
2006
|
|
|
Recognize loan expense resulting
from the amortization of the deferred loan expenses associated
with the debt assumption costs in the merger
|
|
$
|
236
|
|
|
$
|
118
|
|
Elimination of Windroses
adjusted historical loan expenses
|
|
|
(864
|
)
|
|
|
(527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(628
|
)
|
|
$
|
(409
|
)
|
|
|
|
|
|
|
|
|
|
An estimated remaining term of 6.6 years was assumed to
compute the amortization of deferred loan expenses associated
with the debt assumption costs in the merger.
(V) The pro forma basic weighted-average shares outstanding
are the historical basic weighted-average shares outstanding of
Health Care REIT for the periods presented, adjusted for the
assumed issuance of 9,769,000 shares of Health Care REIT
common stock on a weighted-average basis for the year ended
December 31, 2005 and the six months ended June 30,
2006. The pro forma diluted weighted-average shares outstanding
include the potentially
F-14
Health
Care REIT, Inc.
Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements (Continued)
dilutive impact of 245,000 options on a weighted-average basis
for the year ended December 31, 2005 and the six months
ended June 30, 2006.
(W) The calculations of basic and diluted income from
continuing operations available to common stockholders per share
are as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
Health Care REIT
|
|
|
Windrose
|
|
|
Health Care REIT
|
|
|
|
Historical
|
|
|
Adjusted
|
|
|
Pro Forma
|
|
|
Income (loss) from continuing
operations
|
|
$
|
78,127
|
|
|
$
|
734
|
|
|
$
|
72,369
|
|
Less: preferred stock dividends
|
|
|
(21,594
|
)
|
|
|
(1,995
|
)
|
|
|
(23,589
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations available to common stockholders
|
|
$
|
56,533
|
|
|
$
|
(1,261
|
)
|
|
$
|
48,780
|
|
Weighted-average shares used to
calculate basic earnings per share
|
|
|
54,110
|
|
|
|
13,620
|
|
|
|
63,879
|
|
Incremental weighted-average
effect of potentially dilutive instruments
|
|
|
389
|
|
|
|
396
|
|
|
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to
calculate diluted earnings per share
|
|
|
54,499
|
|
|
|
14,016
|
|
|
|
64,513
|
|
Income (loss) from continuing
operations available to common stockholders per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.04
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.76
|
|
Diluted
|
|
$
|
1.04
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2006
|
|
|
|
Health Care REIT
|
|
|
Windrose
|
|
|
Health Care REIT
|
|
|
|
Historical
|
|
|
Adjusted
|
|
|
Pro Forma
|
|
|
Income (loss) from continuing
operations
|
|
$
|
50,096
|
|
|
$
|
1,877
|
|
|
$
|
50,629
|
|
Less: preferred stock dividends
|
|
|
(10,666
|
)
|
|
|
(1,953
|
)
|
|
|
(12,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations available to common stockholders
|
|
$
|
39,430
|
|
|
$
|
(76
|
)
|
|
$
|
38,010
|
|
Weighted-average shares used to
calculate basic earnings per share
|
|
|
59,871
|
|
|
|
18,801
|
|
|
|
69,640
|
|
Incremental weighted-average
effect of potentially dilutive instruments
|
|
|
330
|
|
|
|
398
|
|
|
|
575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to
calculate diluted earnings per share
|
|
|
60,201
|
|
|
|
19,199
|
|
|
|
70,215
|
|
Income (loss) from continuing
operations available to common stockholders per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.66
|
|
|
$
|
0.00
|
|
|
$
|
0.55
|
|
Diluted
|
|
$
|
0.65
|
|
|
$
|
0.00
|
|
|
$
|
0.54
|
|
F-15
Appendix A
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
HEALTH CARE REIT, INC.,
HEAT MERGER SUB, LLC,
HEAT OP MERGER SUB, L.P.,
WINDROSE MEDICAL PROPERTIES TRUST
AND
WINDROSE MEDICAL PROPERTIES, L.P.
DATED AS OF SEPTEMBER 12, 2006
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE
I.
|
|
THE MERGERS
|
|
|
A-2
|
|
Section
1.1.
|
|
The Merger
|
|
|
A-2
|
|
Section
1.2.
|
|
The OP Merger
|
|
|
A-2
|
|
Section
1.3.
|
|
Closing
|
|
|
A-2
|
|
Section
1.4.
|
|
Effective Times
|
|
|
A-2
|
|
Section
1.5.
|
|
Constituent Documents
|
|
|
A-2
|
|
Section
1.6.
|
|
Officers of Surviving Entity
|
|
|
A-2
|
|
|
|
|
|
|
|
|
ARTICLE
II.
|
|
EFFECT OF THE MERGERS; EXCHANGE OF
CERTIFICATES
|
|
|
A-3
|
|
Section
2.1.
|
|
Effect of Mergers on Equity
|
|
|
A-3
|
|
Section
2.2.
|
|
Conversion
|
|
|
A-3
|
|
Section
2.3.
|
|
Exchange of Certificates and
Related Requirements
|
|
|
A-4
|
|
Section
2.4.
|
|
Adjustment of Exchange Ratio
|
|
|
A-6
|
|
Section
2.5.
|
|
Lost Certificates
|
|
|
A-6
|
|
Section
2.6.
|
|
Further Assurances
|
|
|
A-6
|
|
|
|
|
|
|
|
|
ARTICLE
III.
|
|
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
|
|
|
A-6
|
|
Section
3.1.
|
|
Organization, Standing and Power
of the Company and Company OP
|
|
|
A-7
|
|
Section
3.2.
|
|
Company Subsidiaries (other than
Company OP)
|
|
|
A-7
|
|
Section
3.3.
|
|
Capital Structure
|
|
|
A-8
|
|
Section
3.4.
|
|
Other Interests
|
|
|
A-9
|
|
Section
3.5.
|
|
Authority; Board Action
|
|
|
A-9
|
|
Section
3.6.
|
|
No Conflict or Violation; Consents
|
|
|
A-10
|
|
Section
3.7.
|
|
SEC Documents; Financial
Statements; Undisclosed Liabilities
|
|
|
A-11
|
|
Section
3.8.
|
|
Absence of Certain Changes or
Events
|
|
|
A-12
|
|
Section
3.9.
|
|
Litigation
|
|
|
A-13
|
|
Section
3.10.
|
|
Properties
|
|
|
A-13
|
|
Section
3.11.
|
|
Tenant Matters
|
|
|
A-15
|
|
Section
3.12.
|
|
Environmental Matters
|
|
|
A-16
|
|
Section
3.13.
|
|
Related Party Transactions
|
|
|
A-17
|
|
Section
3.14.
|
|
Employee Benefits
|
|
|
A-17
|
|
Section
3.15.
|
|
Employee Matters
|
|
|
A-19
|
|
Section
3.16.
|
|
Taxes
|
|
|
A-19
|
|
Section
3.17.
|
|
Compliance with Legal Requirements
|
|
|
A-21
|
|
Section
3.18.
|
|
Material Contracts
|
|
|
A-22
|
|
Section
3.19.
|
|
Investment Company Act of 1940
|
|
|
A-23
|
|
Section
3.20.
|
|
Intellectual Property
|
|
|
A-23
|
|
Section
3.21.
|
|
Insurance
|
|
|
A-23
|
|
Section
3.22.
|
|
Certain Payments
|
|
|
A-24
|
|
Section
3.23.
|
|
Brokers
|
|
|
A-24
|
|
Section
3.24.
|
|
Opinion of Financial Advisor
|
|
|
A-24
|
|
Section
3.25.
|
|
Information Supplied
|
|
|
A-24
|
|
Section
3.26.
|
|
No Other Representations or
Warranties
|
|
|
A-24
|
|
A-i
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE
IV.
|
|
REPRESENTATIONS AND WARRANTIES OF
PARENT
|
|
|
A-25
|
|
Section
4.1.
|
|
Organization, Standing and Power
of Parent
|
|
|
A-25
|
|
Section
4.2.
|
|
Organization, Standing and Power
of Merger Sub
|
|
|
A-25
|
|
Section
4.3.
|
|
The Parent Subsidiaries
|
|
|
A-25
|
|
Section
4.4.
|
|
Capital Structure
|
|
|
A-25
|
|
Section
4.5.
|
|
Authority
|
|
|
A-26
|
|
Section
4.6.
|
|
No Conflict or Violation; Consents
|
|
|
A-27
|
|
Section
4.7.
|
|
SEC Documents; Financial Statements
|
|
|
A-28
|
|
Section
4.8.
|
|
Absence of Certain Changes or
Events
|
|
|
A-29
|
|
Section
4.9.
|
|
Taxes
|
|
|
A-29
|
|
Section
4.10.
|
|
Compliance with Legal Requirements
|
|
|
A-29
|
|
Section
4.11.
|
|
Merger Sub and OP Merger Sub
Operations
|
|
|
A-29
|
|
Section
4.12.
|
|
Litigation
|
|
|
A-29
|
|
Section
4.13.
|
|
Investment Company Act of 1940
|
|
|
A-30
|
|
Section
4.14.
|
|
Opinion of Financial Advisor
|
|
|
A-30
|
|
Section
4.15.
|
|
No Ownership of Company Common
Stock
|
|
|
A-30
|
|
Section
4.16.
|
|
Employee Benefits
|
|
|
A-30
|
|
Section
4.17.
|
|
Environmental Matters
|
|
|
A-31
|
|
Section
4.18.
|
|
Related Party Transactions
|
|
|
A-32
|
|
Section
4.19.
|
|
Insurance
|
|
|
A-32
|
|
Section
4.20.
|
|
Brokers
|
|
|
A-33
|
|
Section
4.21.
|
|
Information Supplied
|
|
|
A-33
|
|
Section
4.22.
|
|
No Other Representations or
Warranties
|
|
|
A-33
|
|
|
|
|
|
|
|
|
ARTICLE
V.
|
|
COVENANTS
|
|
|
A-33
|
|
Section
5.1.
|
|
Conduct of the Companys
Business Pending Mergers
|
|
|
A-33
|
|
Section
5.2.
|
|
Conduct of Business of Parent
|
|
|
A-36
|
|
Section
5.3.
|
|
Access to Information;
Confidentiality
|
|
|
A-36
|
|
Section
5.4.
|
|
Notices of Certain Events
|
|
|
A-37
|
|
Section
5.5.
|
|
Estoppel Certificates
|
|
|
A-37
|
|
Section
5.6.
|
|
Reorganization Qualification
|
|
|
A-37
|
|
|
|
|
|
|
|
|
ARTICLE
VI.
|
|
ADDITIONAL COVENANTS
|
|
|
A-37
|
|
Section
6.1.
|
|
Proxy Statement/Prospectus; the
Company Shareholders Meeting
|
|
|
A-37
|
|
Section
6.2.
|
|
Company Equity Plans
|
|
|
A-39
|
|
Section
6.3.
|
|
Reasonable Best Efforts; Consents
and Approvals
|
|
|
A-39
|
|
Section
6.4.
|
|
Listing of Shares
|
|
|
A-40
|
|
Section
6.5.
|
|
Resignations
|
|
|
A-40
|
|
Section
6.6.
|
|
No Solicitation
|
|
|
A-40
|
|
Section
6.7.
|
|
Taxes
|
|
|
A-42
|
|
Section
6.8.
|
|
Affiliate Letter
|
|
|
A-42
|
|
Section
6.9.
|
|
Dividends
|
|
|
A-42
|
|
Section
6.10.
|
|
Section 16 Matters
|
|
|
A-43
|
|
Section
6.11.
|
|
Merger Sub Compliance
|
|
|
A-43
|
|
Section
6.12.
|
|
Appointment of Director
|
|
|
A-43
|
|
A-ii
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
Section
6.13.
|
|
Delisting
|
|
|
A-43
|
|
Section
6.14.
|
|
Interim Financing
|
|
|
A-43
|
|
Section
6.15.
|
|
Amendment to Partnership Agreement
|
|
|
A-43
|
|
|
|
|
|
|
|
|
ARTICLE
VII.
|
|
CONDITIONS
|
|
|
A-43
|
|
Section
7.1.
|
|
Conditions to Each Partys
Obligation to Effect the Mergers
|
|
|
A-43
|
|
Section
7.2.
|
|
Conditions to Obligations of
Parent and Merger Sub
|
|
|
A-44
|
|
Section
7.3.
|
|
Conditions to Obligations of the
Company
|
|
|
A-45
|
|
|
|
|
|
|
|
|
ARTICLE
VIII.
|
|
EMPLOYEE BENEFITS AND POST-CLOSING
COVENANTS
|
|
|
A-46
|
|
Section
8.1.
|
|
Employee Plans and Other Employee
Arrangements
|
|
|
A-46
|
|
Section
8.2.
|
|
Indemnification of Company
Officers and Trustees
|
|
|
A-46
|
|
|
|
|
|
|
|
|
ARTICLE
IX.
|
|
TERMINATION AND FEES
|
|
|
A-47
|
|
Section
9.1.
|
|
Termination
|
|
|
A-47
|
|
Section
9.2.
|
|
Effect of Termination
|
|
|
A-48
|
|
Section
9.3.
|
|
Fees and Expenses
|
|
|
A-48
|
|
|
|
|
|
|
|
|
ARTICLE
X.
|
|
GENERAL PROVISIONS
|
|
|
A-50
|
|
Section
10.1.
|
|
Nonsurvival of Representations and
Warranties
|
|
|
A-50
|
|
Section
10.2.
|
|
Amendment
|
|
|
A-50
|
|
Section
10.3.
|
|
Notices
|
|
|
A-51
|
|
Section
10.4.
|
|
Assignment and Parties in Interest
|
|
|
A-51
|
|
Section
10.5.
|
|
Announcements
|
|
|
A-51
|
|
Section
10.6.
|
|
Entire Agreement
|
|
|
A-52
|
|
Section
10.7.
|
|
Descriptive Headings
|
|
|
A-52
|
|
Section
10.8.
|
|
Counterparts
|
|
|
A-52
|
|
Section
10.9.
|
|
Governing Law; Venue
|
|
|
A-52
|
|
Section
10.10.
|
|
Construction; Certain Definitions
|
|
|
A-52
|
|
Section
10.11.
|
|
Severability
|
|
|
A-55
|
|
Section
10.12.
|
|
Specific Performance
|
|
|
A-55
|
|
EXHIBITS
|
|
|
|
|
Exhibit A
|
|
|
|
Delaware Certificate of Merger
|
Exhibit B
|
|
|
|
Maryland Certificate of Merger
|
Exhibit C
|
|
|
|
OP Certificate of Merger
|
Exhibit D
|
|
|
|
Form of Company Affiliate Letter
|
Exhibit E
|
|
|
|
Company OP Partnership Agreement
Amendment
|
Exhibit F
|
|
|
|
Form of Hunton & Williams
LLP REIT Opinion
|
Exhibit G
|
|
|
|
Form of Arnold & Porter
LLP REIT Opinion
|
A-iii
INDEX OF
DEFINED TERMS
|
|
|
|
|
Defined Term
|
|
Section
|
|
Acquisition Proposal
|
|
|
6.6(a)(i)
|
|
Adjusted Terms
|
|
|
6.6(c)
|
|
Adverse Recommendation
|
|
|
9.1(e)
|
|
Affected Employees
|
|
|
8.1
|
|
Affiliate
|
|
|
3.13
|
|
Agreement
|
|
|
Preamble
|
|
Applicable Date
|
|
|
3.7(a)
|
|
Board
|
|
|
3.5(c)
|
|
Business Day
|
|
|
10.10(a)
|
|
Certificates of Merger
|
|
|
Recitals
|
|
Certificates
|
|
|
2.3(b)
|
|
Closing Date
|
|
|
1.3
|
|
Closing
|
|
|
1.3
|
|
Code
|
|
|
Recitals
|
|
Company
|
|
|
Preamble
|
|
Company Affiliate Letter
|
|
|
6.8
|
|
Company Audited Financials
|
|
|
3.7(d)
|
|
Company Authorized Preferred
|
|
|
3.3(a)
|
|
Company Common Shares
|
|
|
2.2(b)
|
|
Company Disclosure Letter
|
|
|
Article III
|
|
Company Environmental Reports
|
|
|
3.12(a)
|
|
Company Expense Reimbursement
|
|
|
9.3(h)
|
|
Company Expense Reimbursement Tax
Opinion
|
|
|
9.3(h)
|
|
Company Financial Advisor
|
|
|
3.23
|
|
Company Intellectual Property
|
|
|
3.20
|
|
Company Interim Financials
|
|
|
3.7(d)
|
|
Company Leased Properties
|
|
|
3.10(a)
|
|
Company Material Adverse Effect
|
|
|
10.10(b)
|
|
Company OP
|
|
|
Preamble
|
|
Company OP Organizational Documents
|
|
|
3.1(c)
|
|
Company OP Partnership Agreement
|
|
|
3.1(c)
|
|
Company OP Units
|
|
|
2.2(f)
|
|
Company Organizational Documents
|
|
|
3.1(b)
|
|
Company Owned Properties
|
|
|
3.10(a)
|
|
Company Permit
|
|
|
3.6(a)(iii)
|
|
Company Preferred Shares
|
|
|
2.2(d)
|
|
Company Properties
|
|
|
3.10(a)
|
|
Company Property Material Adverse
Effect
|
|
|
10.10(c)
|
|
Company Shareholder Approval
|
|
|
3.5(a)
|
|
Company Shareholders Meeting
|
|
|
3.25
|
|
Company Stock Options
|
|
|
3.3(a)
|
|
Company Stock Plans
|
|
|
3.3(a)
|
|
Company Subsidiaries
|
|
|
3.2(a)
|
|
A-iv
|
|
|
|
|
Defined Term
|
|
Section
|
|
Company Title Insurance Policy
|
|
|
3.10(c)
|
|
Competing Agreement
|
|
|
6.6(c)
|
|
Confidentiality Agreement
|
|
|
5.3
|
|
Constituent Entities
|
|
|
1.1
|
|
Consulting Agreement
|
|
|
Recitals
|
|
Contract
|
|
|
3.18(a)(ii)
|
|
Converted Option
|
|
|
6.2(a)
|
|
Declaration
|
|
|
3.1(b)
|
|
Defensive Measures
|
|
|
3.5(c)
|
|
Delaware Certificate of Merger
|
|
|
Recitals
|
|
DLLCA
|
|
|
1.1
|
|
Effective Times
|
|
|
1.4
|
|
Employee Plan
|
|
|
3.14
|
|
Entity Law
|
|
|
1.1
|
|
Environmental Laws
|
|
|
3.12(b)
|
|
ERISA Affiliate
|
|
|
3.14
|
|
ERISA
|
|
|
3.14
|
|
Exchange Act
|
|
|
3.6(b)
|
|
Exchange Agent
|
|
|
2.3(a)
|
|
Exchange Fund
|
|
|
2.3(a)
|
|
Exchange Ratio
|
|
|
2.2(c)
|
|
Filed Company SEC Documents
|
|
|
3.7
|
|
Filed Parent SEC Documents
|
|
|
4.7(a)
|
|
Financial Statement Date
|
|
|
3.7(d)
|
|
First REIT Year
|
|
|
3.16(c)
|
|
GAAP
|
|
|
3.7(d)
|
|
Governmental Agency
|
|
|
3.6(a)(ii)
|
|
Group Member
|
|
|
3.14
|
|
Hazardous Substances
|
|
|
3.12(c)
|
|
Indebtedness
|
|
|
10.10(d)
|
|
Indemnified Parties
|
|
|
8.2(a)
|
|
Insurance Policies
|
|
|
3.21
|
|
Interim Financing
|
|
|
6.14
|
|
IRS
|
|
|
3.14(b)
|
|
Knowledge
|
|
|
10.10
|
|
Legal Requirement
|
|
|
3.6(a)(ii)
|
|
Lender Consent Fees
|
|
|
6.3(c)
|
|
Liabilities
|
|
|
3.7(d)
|
|
Liens
|
|
|
3.2
|
|
made available
|
|
|
10.10(a)
|
|
Maryland Certificate of Merger
|
|
|
Recitals
|
|
Material Contract
|
|
|
3.18(a)
|
|
Maximum Termination Fee
|
|
|
9.3(f)
|
|
Merger Effective Time
|
|
|
1.4
|
|
A-v
|
|
|
|
|
Defined Term
|
|
Section
|
|
Merger Sub
|
|
|
Preamble
|
|
Merger
|
|
|
Recitals
|
|
Mergers
|
|
|
Recitals
|
|
Microbial Matter
|
|
|
3.12(d)
|
|
Multiemployer Plan
|
|
|
3.14(d)
|
|
NYSE
|
|
|
6.4
|
|
OP Certificate of Merger
|
|
|
Recitals
|
|
OP Charter
|
|
|
3.1(c)
|
|
OP Merger Constituent Entities
|
|
|
1.2
|
|
OP Merger Effective Time
|
|
|
1.4
|
|
OP Merger Entity Law
|
|
|
1.2
|
|
OP Merger Sub
|
|
|
Preamble
|
|
OP Merger
|
|
|
Recitals
|
|
Order
|
|
|
3.9
|
|
Parent
|
|
|
Preamble
|
|
Parent Disclosure Letter
|
|
|
Article IV
|
|
Parent Environmental Reports
|
|
|
4.17
|
|
Parent ERISA Affiliate
|
|
|
4.16(d)
|
|
Parent Expense Reimbursement
|
|
|
9.3(g)
|
|
Parent Financial Advisor
|
|
|
4.20
|
|
Parent Group Member
|
|
|
4.16
|
|
Parent Material Adverse Effect
|
|
|
10.10(e)
|
|
Parent Permits
|
|
|
4.6(a)(iii)
|
|
Parent Plan
|
|
|
4.16
|
|
Parent Preferred Stock
|
|
|
4.4
|
|
Parent Properties
|
|
|
4.17
|
|
Parent Series D Preferred
Stock
|
|
|
4.4
|
|
Parent Series E Preferred
Stock
|
|
|
4.4
|
|
Parent Series F Preferred
Stock
|
|
|
4.4
|
|
Parent Shares
|
|
|
2.2(c)
|
|
Parent Stock Plans
|
|
|
4.4(a)
|
|
Parent Stock Options
|
|
|
4.4(a)
|
|
Parent Stock Price
|
|
|
2.2(c)
|
|
Parent Stock Price Average
|
|
|
9.1(i)
|
|
Parent Subsidiaries
|
|
|
4.3
|
|
past practice
|
|
|
10.10(a)
|
|
Pension Plan
|
|
|
3.14
|
|
Permitted Liens
|
|
|
3.10(a)
|
|
Person
|
|
|
10.10(f)
|
|
Pre-Conversion Option
|
|
|
6.2(a)
|
|
Exchange Fund
|
|
|
2.3(a)
|
|
Preferred Merger Consideration
|
|
|
2.2(d)
|
|
Property Restrictions
|
|
|
3.10(a)
|
|
Proxy Statement/Prospectus
|
|
|
6.1(a)
|
|
A-vi
|
|
|
|
|
Defined Term
|
|
Section
|
|
Qualifying Income
|
|
|
9.3(f)
|
|
REIT
|
|
|
3.16
|
|
REIT Requirements
|
|
|
9.3(f)
|
|
Rent Rolls
|
|
|
3.10(g)
|
|
Representatives
|
|
|
5.3(a)
|
|
S-4
Registration Statement
|
|
|
6.1(a)
|
|
Sarbanes-Oxley Act
|
|
|
3.7(a)
|
|
SEC
|
|
|
3.7(a)
|
|
Securities Act
|
|
|
10.10(f)
|
|
Shares
|
|
|
2.2(b)
|
|
Space Lease
|
|
|
3.10(g)
|
|
Stock Equivalents
|
|
|
3.3(a)
|
|
Subsidiary
|
|
|
10.10(f)
|
|
Subsidiary Organizational Documents
|
|
|
3.2(b)
|
|
Subtitle 2
|
|
|
3.5(c)
|
|
Superior Acquisition Proposal
|
|
|
6.6(d)
|
|
Support Agreement
|
|
|
Recitals
|
|
Surviving Entity
|
|
|
1.1
|
|
Surviving Partnership
|
|
|
1.2
|
|
Tail Insurance
|
|
|
8.2(b)
|
|
Tax Return
|
|
|
3.16(r)
|
|
Taxes
|
|
|
3.16(r)
|
|
Termination Fee
|
|
|
9.3(f)
|
|
Termination Fee Tax Opinion
|
|
|
9.3(f)
|
|
Title 8
|
|
|
1.1
|
|
Title IV Plan
|
|
|
3.14(e)
|
|
Transfer
|
|
|
6.6(a)(i)
|
|
Transfer and Gains Taxes
|
|
|
6.7(a)
|
|
Welfare Plan
|
|
|
3.14
|
|
A-vii
AGREEMENT
AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this
Agreement) is made and entered into as of
September 12, 2006 by and among Health Care REIT, Inc., a
Delaware corporation (Parent), Heat Merger
Sub, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of Parent (Merger
Sub), Heat OP Merger Sub, L.P., a Virginia limited
partnership and a wholly-owned, indirect subsidiary of Parent
(OP Merger Sub), Windrose Medical Properties
Trust, a Maryland real estate investment trust (the
Company), and Windrose Medical Properties,
L.P., a Virginia limited partnership and the operating limited
partnership of the Company (Company OP).
RECITALS:
WHEREAS, the board of directors of Parent and the board of
trustees of the Company deem it advisable and in the best
interests of their respective equityholders for Parent and the
Company to combine their businesses by the merger of the Company
with and into Merger Sub on the terms and subject to the
conditions set forth in this Agreement, with Merger Sub
continuing as the surviving entity and a wholly-owned,
subsidiary of Parent (the Merger);
WHEREAS, the Company, as the sole general partner of Company OP,
and Merger Sub, as the sole general partner of OP Merger Sub,
deem it advisable and in the best interest of their respective
limited partners that, immediately prior to the Merger, OP
Merger Sub shall merge with and into Company OP on the terms and
subject to the conditions set forth in this Agreement, with
Company OP continuing as the surviving entity (the OP
Merger and, together with the Merger, the
Mergers) and a wholly-owned, indirect
subsidiary of Parent after the Mergers;
WHEREAS, immediately prior to the Merger, Merger Sub and the
Company shall execute a Certificate of Merger in substantially
the form attached hereto as Exhibit A (the
Delaware Certificate of Merger) and shall
file such certificate in accordance with Delaware law to
effectuate the Merger;
WHEREAS, immediately prior to the Merger, Merger Sub and the
Company shall execute Articles of Merger in substantially the
form attached hereto as Exhibit B (the
Maryland Certificate of Merger and, together
with the Delaware Certificate of Merger, the
Certificates of Merger) and shall file such
articles in accordance with Maryland law to effectuate the
Merger;
WHEREAS, immediately prior to the OP Merger, OP Merger Sub and
Company OP shall execute Articles of Merger substantially in the
form attached hereto as Exhibit C (the OP
Certificate of Merger) and shall file such articles in
accordance with Virginia law to effectuate the OP Merger;
WHEREAS, Parent, Merger Sub and the Company intend that the
Merger qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended (the Code), and that this Agreement
constitutes a plan of reorganization within the
meaning of the Treasury Regulation promulgated thereunder;
WHEREAS, to induce Parent, Merger Sub and OP Merger Sub to enter
into this Agreement, concurrently herewith, the chief executive
officer and the chief operating officer of the Company are
entering into Consulting Agreements with Parent dated as of the
date hereof and effective as of the Effective Time (each, a
Consulting Agreement);
WHEREAS, to induce Parent, Merger Sub and OP Merger Sub to enter
into this Agreement, concurrently herewith, the chief executive
officer and the chief operating officer of the Company are
entering into Support Agreements with Parent dated as of the
date hereof (each, a Support
Agreement); and
WHEREAS, Parent, Merger Sub, OP Merger Sub, the Company and
Company OP desire to make certain representations, warranties
and agreements in connection with the Mergers.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE I.
THE MERGERS
Section 1.1. The
Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with
the Delaware Limited Liability Company Act (the
DLLCA) and Title 8 of the Corporations
and Associations Article of the Annotated Code of Maryland
(Title 8 and, together with the DLLCA,
the Entity Law), at the Merger Effective
Time, the Company shall be merged with and into Merger Sub, with
Merger Sub as the surviving entity (the Surviving
Entity) and a wholly-owned subsidiary of Parent.
Merger Sub and the Company are collectively referred to as the
Constituent Entities.
Section 1.2. The
OP Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with
the Virginia Revised Uniform Limited Partnership Act, as amended
(the OP Merger Entity Law), at the OP Merger
Effective Time, OP Merger Sub shall be merged with and into
Company OP, with Company OP as the surviving entity (the
Surviving Partnership) and a wholly-owned
subsidiary of Parent. OP Merger Sub and Company OP are
collectively referred to as the OP Merger Constituent
Entities.
Section 1.3. Closing.
The closing of the Mergers (the Closing)
shall take place at 10:00 a.m., Central Time, on the first
Business Day after satisfaction or waiver of the conditions set
forth in Article VII (other than those conditions
that by their terms are to be satisfied at the Closing), unless
another time and date are agreed to in writing by the parties
hereto (the Closing Date). The Closing shall
take place at the offices of Sidley Austin LLP, One South
Dearborn, Chicago, Illinois 60603, unless another place is
agreed to in writing by the parties hereto.
Section 1.4. Effective
Times. As early as practicable on the
Closing Date, (i) Merger Sub and the Company shall file the
Certificates of Merger in accordance with all requirements under
the Entity Law, and shall make all other filings and recordings
required under the Entity Law and (ii) OP Merger Sub and
Company OP shall file the OP Certificate of Merger in accordance
with all requirements under the OP Merger Entity Law, and make
all other filings and recordings required under the OP Merger
Entity Law. The Merger shall become effective (the
Merger Effective Time) on the Closing Date at
such time as the Certificates of Merger are accepted for record
in accordance with all requirements under the Entity Law (or at
such later date and time as may be specified in the Certificates
of Merger), and, immediately prior to the Merger Effective Time,
the OP Merger shall become effective (the OP Merger
Effective Time and, collectively with the Merger
Effective Time, the Effective Times) on the
Closing Date at such time as the OP Certificate of Merger is
accepted for record in accordance with all requirements under
the OP Merger Entity Law (or at such later date and time as may
be specified in the OP Certificate of Merger). The Merger shall
have the effects specified in this Agreement, the Certificates
of Merger and the applicable provisions of the Entity Law. The
OP Merger shall have the effects specified in this Agreement,
the OP Certificate of Merger and the applicable provisions of
the OP Merger Entity Law. Without limiting the generality of the
foregoing and subject to the terms of this Agreement,
(i) at the Merger Effective Time, all the respective
properties, rights, privileges, powers and franchises of the
Constituent Entities shall vest in the Surviving Entity, and all
debts, liabilities and duties of the Constituent Entities shall
become the debts, liabilities and duties of the Surviving Entity
and (ii) at the OP Merger Effective Time, all the
respective properties rights, privileges, powers and franchises
of the OP Merger Constituent Entities shall vest in the
Surviving Partnership, and all debts, liabilities and duties of
the OP Merger Constituent Entities shall become the debts,
liabilities and duties of the Surviving Partnership.
Section 1.5. Constituent
Documents. The constituent documents of
Merger Sub in effect at the Merger Effective Time shall be the
constituent documents of the Surviving Entity until thereafter
amended in accordance with applicable Delaware law and the terms
thereof. The constituent documents of Company OP in effect at
the OP Merger Effective Time shall be the constituent
documents of the Surviving Partnership until thereafter amended
in accordance with applicable Virginia law and the terms thereof.
Section 1.6. Officers
of Surviving Entity. The officers of Merger
Sub at the Merger Effective Time shall become the initial
officers of the Surviving Entity as of the Merger Effective
Time, to hold office in accordance with
A-2
the constituent documents of the Surviving Entity until their
successors are duly appointed and qualified or until their
earlier death, resignation or removal.
ARTICLE II.
EFFECT OF
THE MERGERS; EXCHANGE OF CERTIFICATES
Section 2.1. Effect
of Mergers on Equity. At the Effective Times,
by virtue of the Mergers and without any action on the part of
the Constituent Entities or OP Merger Constituent Entities, the
holders of any partnership or membership interests, shares of
capital stock or beneficial interests of the Constituent
Entities or OP Merger Constituent Entities shall be treated as
set forth in this Article II and in accordance with
the terms of this Agreement.
Section 2.2. Conversion.
(a) Membership Interests of Merger
Sub. The membership interests of Merger Sub
issued and outstanding immediately prior to the Merger Effective
Time shall remain issued, outstanding and unchanged as validly
issued membership interests of the Surviving Entity after the
Merger Effective Time.
(b) Treasury Stock and Parent Owned
Stock. Each common share of beneficial
interest in the Company, $0.01 par value per share (the
Company Common Shares, or a
Share and, collectively, the
Shares) and each Company Preferred Share that
is held by the Company, Company OP or by any wholly-owned
Subsidiary of the Company or Company OP and each Share and each
Company Preferred Share that is held by Parent, Merger Sub or
any other wholly-owned Subsidiary of Parent shall automatically
be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Each
Share issued and outstanding immediately prior to the Merger
Effective Time (other than Shares to be cancelled in accordance
with Section 2.2(b)) shall be converted into a
fraction of a duly authorized, validly issued, fully paid and
non-assessable share of common stock, par value $1.00 per
share, of Parent (a Parent Share and
collectively, the Parent Shares) equal to the
quotient determined by dividing $18.06 by the Parent Stock Price
(as defined below) and rounding the result to the nearest
1/10,000 of a share (the Exchange Ratio);
provided, however, that if such quotient is less
than 0.4509, the Exchange Ratio will be 0.4509 and if such
quotient is greater than 0.4650, the Exchange Ratio will be
0.4650. For the purposes of this Section 2.2, the
term Parent Stock Price means the average of
the volume weighted average price per Parent Share on the NYSE,
as reported on Bloomberg by typing HCN.N <EQUITY>
AQR <GO>, for ten (10) trading days, selected
by lot, from among the fifteen (15) consecutive trading
days ending on (and including) the date that is five trading
days prior to the Effective Times. As of the Merger Effective
Time, all such Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired,
and each holder of a certificate formerly representing any such
Shares shall cease to have any rights with respect thereto,
except the right to receive any dividends or distributions in
accordance with Section 2.3(c), certificates
representing the Parent Shares into which such Shares are
converted and any cash, without interest, in lieu of fractional
shares to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with
Section 2.3(d).
(d) Preferred Merger
Consideration. Each of the 7.5%
Series A Cumulative Convertible Preferred Shares of
Beneficial Interest of the Company, $.01 par value per
share (the Company Preferred Shares), issued
and outstanding immediately prior to the Merger Effective Time
(other than the Company Preferred Shares to be cancelled in
accordance with Section 2.2(b)) shall automatically be
converted into the right to receive from the Surviving Entity
the sum of the Base Liquidation Preference (as defined in the
Declaration as $25.00) plus an amount equal to any
accrued and unpaid dividends thereon to the Merger Effective
Time, without interest (the Preferred Merger
Consideration). As of the Merger Effective Time, all
such Company Preferred Shares, when so converted, shall no
longer be outstanding and shall automatically be cancelled and
retired, and each holder of a certificate formerly representing
any such Company Preferred Shares shall cease to have any rights
with respect thereto, except the right to receive the Preferred
Merger Consideration upon surrender of such certificate in
accordance with Section 2.3(d).
(e) Partnership Interests of OP Merger
Sub. The general partner interests of OP
Merger Sub issued and outstanding immediately prior to the OP
Merger Effective Time shall automatically be cancelled and
retired and
A-3
shall cease to exist. The limited partner interests of OP Merger
Sub issued and outstanding immediately prior to the OP Merger
Effective Time shall remain issued, outstanding and unchanged as
validly issued limited partner interests of the Surviving
Partnership after the OP Merger Effective Time.
(f) Company Owned Company
OP Units. Each unit of partnership
interest in Company OP (the Company
OP Units) that is outstanding immediately prior
to the OP Merger Effective Time that is held by the Company or
by any Company Subsidiary and each Company OP Unit that is
outstanding immediately prior to the OP Merger Effective Time
that is held by Parent, Merger Sub, OP Merger Sub or any other
Subsidiary of Parent shall remain issued, outstanding and
unchanged as validly issued partnership interests of the
Surviving Partnership after the OP Merger Effective Time.
(g) Company OP Units. Each
Company OP Unit issued and outstanding immediately prior to
the OP Merger Effective Time (other than Company OP Units
held by the Company, Company OP, any Company Subsidiary, Parent
or any Subsidiary of Parent) shall automatically be converted
into a fraction of a duly authorized, validly issued, fully paid
and non-assessable Parent Share equal to the Exchange Ratio. As
of the OP Merger Effective Time, all such Company OP Units,
when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired, and each holder of any
such Company OP Units shall cease to have any rights with
respect thereto, except the right to receive any dividends or
distributions in accordance with Section 2.3(c),
certificates representing the Parent Shares into which such
Company OP Units are converted and any cash, without
interest, in lieu of fractional shares to be issued or paid in
consideration therefor.
Section 2.3. Exchange
of Certificates and Related Requirements.
(a) Exchange Fund. At the Merger
Effective Time, Parent shall deposit, or shall cause to be
deposited, with a banking or other financial institution
selected by Parent and reasonably acceptable to the Company (the
Exchange Agent), (i) for the benefit of
the holders of Shares and Company OP Units, for exchange in
accordance with this Article II, certificates
representing the Parent Shares to be issued in connection with
the Mergers pursuant to Section 2.2 and an amount of
cash sufficient to permit the Exchange Agent to make the
necessary payments of cash in lieu of fractional shares pursuant
to this Section 2.3 (such cash and certificates for
Parent Shares, together with any dividends or distributions with
respect thereto (relating to record dates for such dividends or
distributions after the Merger Effective Time as provided in
Section 2.3(c)), being hereinafter referred to as
the Exchange Fund) in exchange for
outstanding Shares and Company OP Units, and (ii) for
the benefit of holders of Company Preferred Shares, for exchange
in accordance with this Article II, cash in an
amount sufficient to make the payments to such holders
contemplated by Section 2.2(d) (such cash being
hereinafter referred to as the Preferred Exchange
Fund).
(b) Exchange Procedure. As soon
as practicable after the Merger Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record of a
certificate or certificates representing Shares or Company
Preferred Shares (the Certificates) or of
Company OP Units (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent) and, (ii) if
applicable, instructions for use in effecting the surrender of
the Certificates in exchange for the consideration (and any
unpaid distributions and dividends) contemplated by
Section 2.2 and this Section 2.3,
including cash in lieu of fractional Parent Shares. Upon
(i) surrender of a Certificate for cancellation to the
Exchange Agent, if applicable, and (ii) delivery by such a
holder of such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange
Agent, such holder, if a holder of a Certificate representing
Shares or of Company OP Units, shall be entitled to receive
promptly in exchange therefor (x) a certificate
representing that number of whole Parent Shares, (y) a
check representing the amount of cash in lieu of fractional
shares, if any, and (z) unpaid dividends and distributions
with respect to the Parent Shares as provided for in
Section 2.3(c), if any, that such holder has the
right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article II or in
respect of such Company OP Units and, if a holder of a
Certificate representing Company Preferred Shares, shall be
entitled to receive promptly in exchange therefor the Preferred
Merger Consideration in cash with respect to each Company
Preferred Share represented by such Certificate, in all such
cases after giving effect to any required withholding Tax. No
interest will be paid or accrued on the cash payable to holders
of Shares, Company OP Units or Company Preferred Shares. In
the event of a transfer of ownership of Shares, Company
OP Units or Company Preferred Shares that is not registered
in the
A-4
transfer records of the Company or Company OP, a certificate
representing the proper number of Parent Shares, together with a
check for the cash to be paid pursuant to this
Section 2.3, or the Preferred Merger Consideration,
may be issued to such a transferee if such Certificate shall be
properly endorsed or such Certificate or Company OP Units
shall otherwise be in proper form for transfer and the
transferee shall pay any transfer or other Taxes required by
reason of the payment to a Person other than the registered
holder of such Certificate or Company OP Units or establish
to the satisfaction of Parent that such Tax has been paid or is
not applicable. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect
to the making of such payment under the Code or under any
provision of state, local or foreign Tax law. To the extent that
amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Person in respect of which
such deduction and withholding was made.
(c) Dividends. No dividends or
other distributions declared with a record date after the Merger
Effective Time on Parent Shares shall be paid with respect to
any Shares represented by a Certificate until such Certificate
is surrendered for exchange as provided herein or a Person
claiming a Certificate to be lost, stolen or destroyed has
complied with the provisions of Section 2.5.
Promptly following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing
whole Parent Shares issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the
Merger Effective Time theretofore payable with respect to such
whole Parent Shares and not paid, less the amount of any
withholding Taxes which may be required thereon, and
(ii) at the appropriate payment date or as promptly as
practicable thereafter, the amount of dividends or other
distributions with a record date after the Merger Effective
Time, but prior to such surrender or compliance and a payment
date subsequent to such surrender or compliance payable with
respect to such whole Parent Shares, less the amount of any
withholding Taxes which may be required thereon. Parent will, no
later than the applicable dividend or distribution payment
dates, set aside and provide the Exchange Agent with the cash
necessary to make the payments contemplated by this
Section 2.3(c), which shall be held for such purpose
and for the sole benefit of such holders of Parent Shares.
(d) No Fractional Securities. No
fractional Parent Shares shall be issued pursuant hereto. In
lieu of the issuance of any fractional Parent Shares, cash
adjustments will be paid to holders in respect of any fractional
Parent Shares that would otherwise be issuable, and the amount
of such cash adjustment shall be equal to the product obtained
by multiplying such holders fractional Parent Share that
would otherwise be issuable by the closing price per share of
Parent Shares on the New York Stock Exchange Composite Tape on
the Closing Date as reported by The Wall Street Journal
(Northeast edition) (or, if not reported thereby, any other
authoritative source).
(e) No Further Ownership Rights in
Shares. All Parent Shares issued or cash
paid upon the surrender for exchange of Certificates or Company
OP Units in accordance with the terms of this
Article II (including any cash paid pursuant to this
Section 2.3) shall be deemed to have been issued in
full satisfaction of all rights pertaining to the Shares or
Company Preferred Shares theretofore represented by such
Certificates or Company OP Units. At the Merger Effective Time,
the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock
transfer books of the Surviving Entity of the Shares or Company
Preferred Shares that were outstanding immediately prior to the
Merger Effective Time. At the OP Merger Effective Time, the
partnership interest transfer books of Company OP shall be
closed, and there shall be no further registration of transfers
on the partnership interest transfer books of the Surviving
Partnership of the Company OP Units that were outstanding
immediately prior to the OP Merger Effective Time. If, after the
Merger Effective Time, Certificates are presented to the
Surviving Entity or the Exchange Agent for any reason, they
shall be cancelled and exchanged as provided in this
Article II.
(f) Termination of Exchange
Funds. Any portion of the Exchange Fund or
Preferred Exchange Fund (including the proceeds of any
investments thereof and any Parent Shares) which remains
undistributed to the holders of Shares, Company Preferred Shares
or Company OP Units, as applicable, for six months after
the Merger Effective Time may be delivered to Parent, upon
demand, and any holders of Shares, Company Preferred Shares or
Company OP Units who have not theretofore complied with
this Article II and the instructions set forth in
the letter of transmittal mailed to such holders after the
Merger Effective Time or the OP Merger Effective Time shall
thereafter look only to Parent or its agent (subject to
abandoned property, escheat or other similar laws) for payment
of their Parent Shares or the Preferred Merger Consideration, as
applicable, cash and unpaid dividends and
A-5
distributions on Parent Shares deliverable in respect of each
Share or Company OP Unit such holder holds as determined
pursuant to this Agreement, in each case, without any interest
thereon.
(g) No Liability. None of Parent,
Merger Sub, OP Merger Sub, the Company, Company OP or the
Exchange Agent shall be liable to any Person in respect of any
amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Section 2.4. Adjustment
of Exchange Ratio. In the event that Parent
changes or establishes a record date for changing the number of
Parent Shares issued and outstanding as a result of a stock
split, stock dividend, recapitalization, merger, subdivision,
reclassification, combination or similar transaction with
respect to the outstanding Parent Shares and the record date
therefor shall be prior to the Effective Times, the Exchange
Ratio applicable to the Mergers and any other calculations based
on or relating to Parent Shares shall be appropriately adjusted
to reflect such stock split, stock dividend, recapitalization,
merger, subdivision, reclassification, combination or similar
transaction.
Section 2.5. Lost
Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent or the Exchange
Agent, the posting by such Person of a bond, in such reasonable
amount as Parent or the Exchange Agent may direct as indemnity
against any claim that may be made against them with respect to
such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Parent Shares,
Preferred Merger Consideration and any cash in lieu of
fractional Parent Shares to which the holders thereof are
entitled pursuant to Section 2.3(b) and any
dividends or other distributions to which the holders thereof
are entitled pursuant to Section 2.3(c).
Section 2.6. Further
Assurances.
(a) If at any time after the Merger Effective Time the
Surviving Entity shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or
things are necessary, desirable or proper (i) to vest,
perfect or confirm, of record or otherwise, in the Surviving
Entity its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties, permits,
licenses or assets of either of the Constituent Entities, or
(ii) otherwise to carry out the purposes of this Agreement,
the Surviving Entity and its proper officers and directors or
their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Entities,
all such deeds, bills of sale, assignments and assurances and to
do, in the name and on behalf of either Constituent Entity, all
such other acts and things as may be necessary, desirable or
proper to vest, perfect or confirm the Surviving Entitys
right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such
Constituent Entity and otherwise to carry out the purposes of
this Agreement.
(b) If at any time after the OP Merger Effective Time the
Surviving Partnership shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other
acts or things are necessary, desirable or proper (i) to
vest, perfect or confirm, of record or otherwise, in the
Surviving Partnership its right, title or interest in, to or
under any of the rights, privileges, powers, franchises,
properties, permits, licenses or assets of either of the OP
Merger Constituent Entities, or (ii) otherwise to carry out
the purposes of this Agreement, the Surviving Partnership and
the proper officers and directors of the Surviving Entity, as
the sole general partner of the Surviving Partnership, or their
designees shall be authorized to execute and deliver, in the
name and on behalf of either of the OP Merger Constituent
Entities, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of either OP
Merger Constituent Entity, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm
the Surviving Partnerships right, title or interest in, to
or under any of the rights, privileges, powers, franchises,
properties or assets of such OP Merger Constituent Entity and
otherwise to carry out the purposes of this Agreement.
ARTICLE III.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or subsections
of the disclosure letter delivered by the Company to Parent
concurrently with the execution of this Agreement (the
Company Disclosure Letter) (it being
A-6
agreed that disclosure of any item in any section or subsection
of the Company Disclosure Letter shall be deemed disclosure with
respect to any other section or subsection to which the
relevance of such item is reasonably apparent), the Company
represents and warrants to Parent, Merger Sub and OP Merger Sub
as follows:
Section 3.1. Organization,
Standing and Power of the Company and Company
OP.
(a) The Company (i) is a real estate investment trust
duly organized, validly existing and in good standing under the
laws of the State of Maryland and has the requisite power and
authority to carry on its business as it is now being conducted
and (ii) is duly qualified to do business in each
jurisdiction where the character of the properties owned,
operated or leased or the nature of its activities make such
qualification necessary, except in the case of clause (ii)
for any such failure which, when taken together with all other
such failures would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(b) The Company has made available to Parent complete and
correct copies of its Amended and Restated Declaration of Trust
(including all amendments and articles supplementary thereto)
(the Declaration) and Amended and Restated
Bylaws (together with the Declaration, the Company
Organizational Documents).
(c) Company OP (i) is a limited partnership duly
organized, validly existing and in good standing under the laws
of the State of Virginia and has the requisite power and
authority to carry on its business as it is now being conducted
and (ii) is duly qualified to do business in each
jurisdiction where the character of the properties owned,
operated or leased or the nature of its activities make such
qualification necessary, except in the case of clause (ii)
for any such failure which, when taken together with all other
such failures would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(d) Company OP has made available to Parent complete and
correct copies of its Certificate of Limited Partnership (the
OP Charter) and First Amended and Restated
Agreement of Limited Partnership (including amendments thereto)
(the Company OP Partnership Agreement and,
together with the OP Charter, the Company OP
Organizational Documents).
Section 3.2. Company
Subsidiaries (other than Company OP).
(a) Each Subsidiary of the Company (the Company
Subsidiaries) other than Company OP is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite corporate or
similar power and authority to own, operate or lease the
properties that it purports to own, operate or lease and to
carry on its business as it is now being conducted, and is duly
qualified as a foreign entity to do business, and is in good
standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such
failure to be duly qualified or in good standing which, when
taken together with all other such failures, would not,
individually or in the aggregate, be reasonably expected to have
a Company Material Adverse Effect. Section 3.2(a) of
the Company Disclosure Letter sets forth the following
information for each Company Subsidiary other than Company OP,
if applicable: (i) its name and jurisdiction of
incorporation or organization and (ii) the type of and
percentage interest held, directly or indirectly, by the Company
in such Company Subsidiary.
(b) Except as set forth on Section 3.2(b) of
the Company Disclosure Letter, all the outstanding shares of
capital stock of, or other equity interest in, to the extent
owned directly or indirectly by the Company, each Company
Subsidiary other than Company OP have been validly issued and
are (A) fully paid and nonassessable, (B) owned by the
Company or by another Company Subsidiary, and (C) except as
set forth in the Subsidiary Organizational Documents, owned free
and clear of any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security
interest, mortgage, deed of trust, deed to secure debt, right of
first refusal, encumbrance or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of stock or equity interest
ownership (collectively, Liens). True and
correct copies of the articles of incorporation, by-laws,
partnership agreements, joint venture agreements and operating
agreements or similar organizational documents of each Company
Subsidiary, as amended to the date hereof (the
Subsidiary Organizational Documents), have
been previously made available to Parent.
A-7
Section 3.3. Capital
Structure.
(a) The authorized capital stock of the Company consists of
100,000,000 Shares and 20,000,000 preferred shares of
beneficial interest, par value $0.01 per share (the
Company Authorized Preferred). At the close
of business on September 11, 2006,
(i) 21,123,733 Shares were issued and outstanding,
including 76,100 Shares that are currently subject to
restricted stock awards under the Company Stock Plans,
(ii) no Shares were held by the Company in its treasury,
(iii) 680,766 Shares were reserved for issuance
pursuant to outstanding options to purchase Company Common
Shares (options to purchase Company Common Shares being
Company Stock Options) granted under the
Companys Amended and Restated 2002 Stock Incentive Plan
(or its predecessor 2002 Stock Incentive Plan) and Employee
Share Purchase Plan (together, and each as amended, the
Company Stock Plans), (iv) 2,100,000
Company Preferred Shares were issued and outstanding and
3,333,333 Company Common Shares were reserved for issuance upon
conversion of Company Preferred Shares,
(v) 1,492,853 Shares were reserved for the grant of
additional awards under the Company Stock Plans,
(vi) 2,990,709 Shares were reserved for issuance under
the Companys Direct Stock Purchase and Dividend
Reinvestment Plan, (vii) 339,458 Shares were reserved
for issuance upon redemption of Company OP Units and
(viii) 1,044,400 Shares were reserved for issuance
under the Companys Continuous Offering Program pursuant to
the Companys Registration Statement on
Form S-3
(Registration
No. 333-125213).
As of the close of business on September 11, 2006, except
as set forth above or under the Companys Deferred
Compensation Plan, no Shares were issued, reserved for issuance
or outstanding, no Company Stock Options have been granted and
there are not any phantom stock or other contractual rights the
value of which is determined in whole or in part by the value of
any capital stock of the Company (Stock
Equivalents). Since September 11, 2006 and on or
prior to the date of this Agreement, except for the exercise of
any Company Stock Options referred to in clause (iii)
above, the Company has not issued any Shares or made any grant
of awards under the Company Stock Plans or the Companys
Deferred Compensation Plan or authorized or entered into any
Contract to do any of the foregoing. There are no outstanding
stock appreciation rights with respect to the capital stock of
the Company. Each outstanding Share is, and each Share which may
be issued pursuant to the Company Stock Plans will be, when
issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Other than
the Company Common Shares and the Company Authorized Preferred,
including the Company Preferred Shares, there are no other
authorized classes of capital stock of the Company. Other than
the Company Preferred Shares, there are no outstanding bonds,
debentures, notes or other indebtedness of the Company having
the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matter on which
holders of Company Common Shares may vote. Except as set forth
above or in Section 3.3(a) of the Company Disclosure
Letter, as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which
the Company or any Company Subsidiary is a party or by which any
of them is bound obligating the Company or any Company
Subsidiary to issue, deliver or sell or create, or cause to be
issued, delivered or sold or created, additional shares of
capital stock, Company Stock Options or other voting securities
or Stock Equivalents of the Company or of any of its Company
Subsidiaries (other than Company OP) or obligating the Company
or any Company Subsidiary (other than Company OP) to issue,
grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking.
As of the date of this Agreement, other than as set forth in the
Company OP Partnership Agreement, the Subsidiary Organizational
Documents, the Declaration or Section 3.3(a) of the
Company Disclosure Letter, there are no outstanding contractual
obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital
stock or other equity interest of the Company or any Company
Subsidiary. Other than the Support Agreements, the Subsidiary
Organizational Documents or Section 3.3(a) of the
Company Disclosure Letter, there are no outstanding agreements
to which the Company, a Company Subsidiary or any of their
respective officers or directors is a party concerning the
voting of any capital stock of the Company or any of its Company
Subsidiaries.
(b) As of the date hereof, the issued and outstanding
partnership interests of Company OP consist of 339,458 Company
OP Units designated as common partnership units and
2,100,000 Company OP Units designated as 7.5% Series A
cumulative convertible preferred limited partnership units. The
Company is the sole general partner of Company OP and as of the
date hereof holds Company OP Units representing 98.4184% of
the outstanding Company OP Units. As of the close of
business on September 11, 2006, except as set forth above,
no Company OP Units were issued, reserved for issuance
(other than in connection with the issuance of Shares by the
Company as required by the Company OP Partnership Agreement) or
outstanding and there are not any phantom stock or other
A-8
contractual rights the value of which is determined in whole or
in part by the value of any Company OP Units. There are no
outstanding stock appreciation or similar rights with respect to
the Company OP Units. Each outstanding Company OP Unit
is duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights, and any capital
contributions required to be made by the holders thereof have
been made. There are no outstanding bonds, debentures, notes or
other indebtedness of Company OP having the right to vote (or
convertible into, or exchangeable for, securities having the
right to vote) on any matter on which the holders of Company
OP Units may vote. Except as set forth above or in the
Company OP Partnership Agreement, as of the date of this
Agreement, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of
any kind to which the Company or any Company Subsidiary is a
party or by which any of them is bound obligating the Company or
any Company Subsidiary to issue, deliver or sell or create, or
cause to be issued, delivered or sold or created, additional
Company OP Units or obligating the Company or any Company
Subsidiary to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking.
(c) All dividends or distributions on the Company Common
Shares, Company Preferred Shares and Company OP Units which
have been authorized or declared prior to the date hereof have
been paid in full (except to the extent such dividends have been
publicly announced and are not yet due and payable).
Section 3.4. Other
Interests. Neither the Company nor any
Company Subsidiary owns directly or indirectly any interest or
investment (whether equity or debt) in any Person (other than in
the Company Subsidiaries and investments in short-term
investment securities, Subsidiaries or securities in a publicly
traded company held for investment by the Company or any of its
Subsidiaries and consisting of less than 1% of the outstanding
capital stock of such company).
Section 3.5. Authority;
Board Action.
(a) The Company has the requisite trust power and authority
to enter into this Agreement, and subject to the affirmative
vote of a majority of the outstanding Company Common Shares
entitled to vote thereon to approve the Merger (the
Company Shareholder Approval), to consummate
the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and consummation by the Company
of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company,
subject to the Company Shareholder Approval. This Agreement has
been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, assuming this
Agreement is enforceable against Parent, Merger Sub and OP
Merger Sub, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium,
liquidation, conservatorship or other similar laws affecting the
enforcement of creditors rights generally and except that
the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before
which any proceeding therefor may be brought.
(b) Company OP has the requisite partnership power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by Company OP and consummation by Company OP of
the transactions contemplated hereby have been duly authorized
by all necessary action on the part of Company OP. This
Agreement has been duly executed and delivered by Company OP and
constitutes the valid and binding obligation of Company OP,
enforceable against Company OP in accordance with its terms,
assuming this Agreement is enforceable against Parent, Merger
Sub and OP Merger Sub, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, liquidation, conservatorship or other similar laws
affecting the enforcement of creditors rights generally
and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of
the court before which any proceeding therefor may be brought.
(c) The board of trustees (the Board) of
the Company (at a meeting duly called and held) has by the
unanimous vote of all trustees: (i) declared that the
Merger is advisable on the terms set forth herein,
(ii) recommended the approval of the Merger by the holders
of Company Common Shares, (iii) directed that the Merger be
submitted for consideration by the Companys shareholders
at the Company Shareholders Meeting even if the Board later
withdraws its recommendation, as authorized by
Section 8-501.1(f)
of Title 8, and (iv) assuming the accuracy of
Parents representations and warranties in
Section 4.15, taken all necessary steps if
A-9
any are required to render the following (the Defensive
Measures) inapplicable to the Merger and the
transactions contemplated by this Agreement: (A) the
Maryland Business Combination Act, the Maryland Control Share
Acquisition Act, and Subtitle 8 of Title 3 of the
Corporations and Associations Article of the Annotated Code of
Maryland; (B) any appraisal rights under Subtitle 2 of
Title 3 of the Corporations and Associations Article of the
Annotated Code of Maryland (Subtitle 2);
and (C) any ownership limit in the Company Organizational
Documents. No other fair price,
moratorium, control share acquisition or
any other anti-takeover statute or similar statute enacted under
the state or federal laws of the United States is, to the
Knowledge of the Company, applicable to the Merger or the
transactions contemplated by this Agreement as of the date of
this Agreement.
(d) The Company, in its capacity as the general partner of
Company OP, has approved the OP Merger in accordance with
applicable OP Merger Entity Law and the last paragraph of
Article XI of the Company OP Partnership Agreement.
Section 3.6. No
Conflict or Violation; Consents.
(a) Neither the execution and delivery of this Agreement
nor the consummation of the Mergers in accordance with the terms
of this Agreement will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
any provision of the Company Organizational Documents, Company
OP Organizational Documents or the comparable charter or
organizational documents of any Company Subsidiary listed on
Schedule 3.6(a) of the Company Disclosure Letter;
(ii) assuming the consents, approvals, orders,
authorizations, registrations, declaration, filing or permits
referred to in Section 3.6(b) are duly and timely
made or obtained, contravene, conflict with or result in a
violation of any constitution, law, rule, ordinance, regulation,
statute, judgment, decree or order (Legal
Requirement) applicable to the Company with respect to
this Agreement or the consummation of the transactions
contemplated hereby of (A) federal, state, county, local or
municipal government or administrative agency or political
subdivision thereof, (B) any governmental agency,
authority, board, bureau, commission, department or
instrumentality, (C) any court or administrative tribunal,
(D) any non-governmental agency, tribunal or entity that is
vested by a governmental agency with applicable jurisdiction, or
(E) any arbitration tribunal or other non-governmental
authority with applicable jurisdiction (each entity in
clauses (A)-(E), a Governmental Agency);
(iii) assuming the consents, approvals, orders,
authorizations, registrations, declarations, filings or permits
referred to in Section 3.6(b) are duly and timely
made or obtained, contravene, conflict with, result in a
violation of, or give any Governmental Agency the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any
permit, approval, consent, authorization, license, variance, or
permission required by a Governmental Agency under any Legal
Requirement with respect to the Company, any Company Subsidiary
or any of their respective operations or assets, including
certificates of occupancy for the Company Properties
(Company Permit);
(iv) except as set forth in Section 3.6(a)(iv)
of the Company Disclosure Letter, cause the Company, Company OP,
Parent, Merger Sub or OP Merger Sub to become subject to, or to
become liable for the payment of, any Tax under or result in any
liability under a Tax protection agreement or Tax indemnity
agreement with respect to the Company or Company OP;
(v) assuming the consents, approvals, orders,
authorizations, registrations, declaration, filing or permits
referred to in Section 3.6(b) are duly and timely
made or obtained, contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract to which the Company or any
Company Subsidiary is a party; or
(vi) assuming the consents, approvals, orders,
authorizations, registrations, declaration, filing or permits
referred to in Section 3.6(b) are duly and timely
made or obtained, result in the imposition or creation of any
Lien (other than a Permitted Lien) upon or with respect to any
of the assets owned or used by the Company or any Company
Subsidiary;
A-10
except in the case of each of clauses (ii), (iii), (iv),
(v) and (vi) above as would not reasonably be expected
to have a Company Material Adverse Effect.
(b) Except (i) as disclosed on the appropriate
subsection of Section 3.6(b) of the Company
Disclosure Letter or as otherwise set forth in the Company
Disclosure Letter with respect to this Section 3.6,
(ii) for applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the Exchange
Act) (including the filing with the SEC of the Proxy
Statement relating to any required approval by the holders of
the Company Common Shares of this Agreement), the Securities Act
or filings required pursuant to any state securities or
blue sky laws, (iii) for (A) the filing
and acceptance for record of the Certificates of Merger as
required by applicable Entity Law and the OP Certificate of
Merger as required by applicable OP Merger Entity Law and
(B) the Company Shareholder Approval, no consent, approval,
order or authorization of, or registration, declaration, filing
with, notice to, or permit from, any Governmental Agency or any
other Person, is required pursuant to any Legal Requirement or
under the terms of any Contract or Company Permit by or on
behalf of the Company or any of the Company Subsidiaries in
connection with the execution and delivery of this Agreement or
the consummation or performance of the Mergers, other than such
consents, approvals, orders, authorizations, registrations,
declarations, filings, notices or permits the failure to obtain
or make which would not reasonably be expected to have a Company
Material Adverse Effect.
Section 3.7. SEC
Documents; Financial Statements; Undisclosed
Liabilities.
(a) The Company has filed with or furnished to the
Securities and Exchange Commission (SEC) and
has heretofore made available to Parent (by public filing with
the SEC or otherwise) true and complete copies of all reports,
schedules, forms, statements and other documents required to be
filed with or furnished to the SEC by the Company since
August 15, 2002 (the Applicable Date)
and prior to the date hereof (collectively, the Filed
Company SEC Documents). As of its respective date,
except as set forth in Section 3.7(a) of the Company
Disclosure Letter, each Filed Company SEC Document complied in
all material respects with the requirements of the Exchange Act,
the Securities Act or the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act), as the case may be, as
and to the extent applicable thereto, and the rules and
regulations of the SEC promulgated thereunder applicable to such
Filed Company SEC Document. Except to the extent that
information contained in any Filed Company SEC Document has been
revised or superseded by a later Filed Company SEC Document,
none of the Filed Company SEC Documents contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
(b) The consolidated financial statements of the Company
included in the Filed Company SEC Documents complied as of their
respective dates in all material respects with the then
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in
accordance with GAAP (except in the case of the unaudited
statements, as permitted by
Form 10-Q
and
Form 8-K
under the Exchange Act) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the
notes thereto) and fairly presented in all material respects the
consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and their consolidated
cash flows for the periods then ended, all in accordance with
GAAP (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments
described therein). The Company has made available to Parent
complete and correct copies of (i) all management
representation letters delivered by the Company or its
management to the Companys auditors in connection with the
audit of the Companys 2005 consolidated financial
statements and (ii) all material correspondence with the
SEC from January 1, 2004 to the date hereof.
(c) The Company maintains disclosure controls and
procedures required by
Rule 13a-15
or 15d-15
under the Exchange Act. Such disclosure controls and procedures
are effective to ensure that information required to be
disclosed by the Company is recorded and reported on a timely
basis to the individuals responsible for the preparation of the
Companys filings with the SEC and other public disclosure
documents. The Company maintains internal control over financial
reporting (as defined in
Rule 13a-15
or 15d-15,
as applicable, under the Exchange Act). Such internal control
over financial reporting is effective in providing reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with GAAP and includes policies and procedures that
(i) pertain to the maintenance of records that in
reasonable detail
A-11
accurately and fairly reflect the transactions and dispositions
of the assets of the Company, (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and
that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and
trustees of the Company, and (iii) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
Companys assets that could have a material effect on its
financial statements. The Company has disclosed, based on the
most recent evaluation of its chief executive officer, chief
operating officer and its chief financial officer prior to the
date hereof, to the Companys auditors and the audit
committee of the Companys Board (A) any significant
deficiencies in the design or operation of its internal controls
over financial reporting that are reasonably likely to adversely
affect the Companys ability to record, process, summarize
and report financial information and has identified for the
Companys auditors and audit committee of the
Companys Board any material weaknesses in internal control
over financial reporting and (B) any fraud, whether or not
material, that involves management or other employees who have a
significant role in the Companys internal control over
financial reporting. The Company has made available to Parent
(i) a summary of any such disclosure made by management to
the Companys auditors and audit committee since the
Applicable Date and (ii) any communication since the
Applicable Date made by management or the Companys
auditors to the audit committee required or contemplated by
listing standards of the NYSE, the audit committees
charter or professional standards of the Public Company
Accounting Oversight Board. Since the Applicable Date, no
material complaints from any source regarding accounting,
internal accounting controls or auditing matters, and no
material concerns from Company employees regarding questionable
accounting or auditing matters, have been received by the
Company. The Company has made available to Parent a summary of
all complaints or concerns relating to other matters made since
the Applicable Date through the Companys whistleblower hot
line or equivalent system for receipt of employee concerns
regarding possible violations of law. No attorney representing
the Company or any Company Subsidiary, whether or not employed
by the Company or any Company Subsidiary, has reported evidence
of a violation of securities laws, breach of fiduciary duty or
similar violation by the Company or any of its officers,
directors, trustees, employees or agents to the Companys
chief legal officer, audit committee (or other committee
designated for the purpose) of the Board or the Board pursuant
to the rules adopted pursuant to Section 307 of the
Sarbanes-Oxley Act or any Company policy contemplating such
reporting. The representations in this
Section 3.7(c) are subject to the exceptions set
forth in Section 3.7(c) of the Company Disclosure
Letter.
(d) Neither the Company nor any of the Company Subsidiaries
has any liabilities or obligations of any nature (whether known
or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated and whether due or to become due) (collectively,
Liabilities) that are material, other than
Liabilities to the extent (i) reflected, accrued or
reserved for on the audited consolidated balance sheet included
in the audited consolidated financial statements of the Company
(the Company Audited Financials) as of
December 31, 2005 contained in the
Form 10-K
filed by the Company with the SEC on March 17, 2006,
(ii) reflected, accrued or reserved for on the unaudited
balance sheet included in the unaudited financial statements of
the Company as of June 30, 2006 (the Financial
Statement Date and such financial statements, the
Company Interim Financials) contained in the
Form 10-Q
filed by the Company with the SEC on August 8, 2006,
(iii) incurred in the ordinary course of business after the
Financial Statement Date, (iv) relating to payment or
performance obligations under Contracts in accordance with the
terms and conditions thereof which are not required by generally
accepted accounting principles (GAAP) to be
reflected on a regularly prepared balance sheet,
(v) incurred in connection with this Agreement or the
transactions contemplated hereby or (vi) arising out of or
related to acquisition and development agreements and leases or
other contracts and transactions listed on
Section 3.7(d) of the Company Disclosure Letter.
Section 3.8. Absence
of Certain Changes or Events. Except as
disclosed on Section 3.8 of the Company Disclosure
Letter or in the Filed Company SEC Documents (excluding any
disclosures set forth in any risk factor section, in any section
relating to forward looking statements and any other disclosures
included therein that are cautionary, predictive or
forward-looking in nature), since the Financial Statement Date
through the date hereof, the Company and the Company
Subsidiaries: (a) have conducted their business only in the
ordinary course of business consistent with the past practice;
and (b) there has not been (i) any Company Material
Adverse Effect, (ii) any occurrence or circumstance that
with the passage of time would, individually or in the
aggregate, reasonably be expected to result in a Company
Material Adverse Effect or (iii) any action which would
have constituted a breach
A-12
of clause (a), (c), (d), (j), (l), (m), or (q) (as it
relates to the foregoing clauses) of Section 5.1 if
such Section 5.1 had applied since the Financial
Statement Date.
Section 3.9. Litigation.
Except as disclosed on Section 3.9 of the Company
Disclosure Letter, as of the date of this Agreement, there is no
(a) suit, action or proceeding pending or, to the Knowledge
of the Company, threatened against the Company or any Company
Subsidiary involving or relating to any current or former
assets, properties or operations of the Company or any Company
Subsidiary or the transactions contemplated by this Agreement,
or (b) judgment, decree, injunction, rule or order (an
Order) of any Governmental Agency or
arbitrator outstanding against the Company or any Company
Subsidiary, except in the case of clauses (a) or
(b) above as would not reasonably be expected to have a
Company Material Adverse Effect. No claim is pending or has been
made under any trustees or officers liability
insurance policy maintained at any time by the Company or any of
the Company Subsidiaries.
Section 3.10. Properties.
(a) Section 3.10(a) of the Company Disclosure
Letter identifies all real property owned by the Company or any
Company Subsidiary (the Company Owned
Properties) and the type of ownership interest
therein. The Company has made available to Parent a copy of the
deed or other conveyance instrument for each Company Owned
Property.
(b) Section 3.10(b) of the Company Disclosure
Letter identifies all real property leased by the Company or any
Company Subsidiary, including ground leases, as lessee or
sublessee (the Company Leased Properties and,
together with the Company Owned Properties, the Company
Properties). The Company has made available to Parent
a copy of the lease or sublease and all amendments thereto and
notice or memorandum of lease, where applicable, for each
Company Leased Property.
(c) Section 3.10(c) of the Company Disclosure
Letter lists every parcel of real property for which the Company
or the Company Subsidiaries has a Contract to buy or lease as
lessee or sublessee any such parcel of real property at some
future date, and Company has made available to Parent a copy of
each such Contract.
(d) As of the date hereof, except as would not constitute a
Company Material Adverse Effect or except as provided on
Section 3.10(d) of the Company Disclosure Letter or
in the Company Title Insurance Policies or deeds referenced
therein, the Company or a Company Subsidiary owns fee simple
title to each of the Company Owned Properties or has a valid
leasehold interest in each of the Company Leased Properties free
and clear of any rights of way, easements, encumbrances,
restrictive covenants, agreements, laws, ordinances and
regulations affecting improvements, use or occupancy, or
reservations of an interest in title (collectively,
Property Restrictions) and other Liens,
except for the following (collectively, the Permitted
Liens): (i) Property Restrictions imposed or
promulgated by Legal Requirements with respect to real property,
including zoning regulations, provided they do not prohibit the
current use of any Company Property or such Property
Restrictions are otherwise insured over by the Company
Title Insurance Policies, (ii) Liens and Property
Restrictions disclosed in the Company Title Insurance
Policies, deeds referenced therein or surveys of Company
Properties (in each case copies of which disclosing each Lien or
Property Restriction in the possession of the Company or
otherwise as requested by Parent have been made available to
Parent), (iii) mechanics, carriers,
workmens, repairmens and similar Liens incurred in
the ordinary course of business, (iv) with respect to real
property, any title exception disclosed in any Company
Title Insurance Policy (whether material or immaterial),
Liens and obligations arising under the Material Contracts
(including but not limited to any Lien securing mortgage debt
reflected in the Company Audited Financials or the Company
Interim Financials or otherwise set forth in the Company
Disclosure Letter) and any other Lien that does not interfere
materially with the current use of such property (assuming its
continued use in the manner in which it is currently used),
(v) matters that would be disclosed on current title
reports or surveys that arise or have arisen in the ordinary
course of business after the effective date of the applicable
Company Title Insurance Policy, provided that the Company
has no Knowledge of any such matters that have not been
disclosed in documents made available to Parent, (vi) Liens
for Taxes that are not yet due and payable
and/or
(vi) Property Restrictions or Liens due to Space Leases.
(e) Neither the Company nor any Company Subsidiary has
received notice of any defaults by the Company or any Company
Subsidiary with respect to any Company Leased Property, and to
the Knowledge of the Company no
A-13
material defaults exist. To the Knowledge of the Company or any
Company Subsidiary, there are no defaults of any ground lessor
or sublessor with respect to any Company Leased Property (and no
event has occurred which, with due notice or lapse of time or
both, would constitute such a default), except those defaults
that would not reasonably be expected to have a Company Material
Adverse Effect.
(f) To the Knowledge of the Company, each Company Permit or
other agreement, easement or other right which is necessary to
permit the lawful use and operation of the buildings and
improvements on any of the Company Properties or which is
necessary to permit the lawful use and operation of all
driveways, roads and other means of egress and ingress to and
from any of the Company Properties has been obtained and is in
full force and effect, except as shown on Company
Title Insurance Policies, deeds referenced therein and
surveys of Company Properties made available to Parent, and
except as would not reasonably be expected to have a Company
Material Adverse Effect.
(g) Except as shown on Company Title Insurance
Policies and surveys of Company Properties made available to
Parent, the existence, ownership and operation of the Company
Properties, to the Knowledge of the Company, do not violate any
Property Restriction or encroach upon property owned by others,
other than such violations or encroachments which would not
reasonably be expected to have a Company Material Adverse Effect.
(h) Except as otherwise set forth in the Company Disclosure
Letter, no Company Property is under development as of the date
hereof.
(i) The Company has made available to Parent a true and
correct copy of a policy of title insurance for each of the
Company Properties, except for the Company Properties set forth
in Section 3.10(i) of the Company Disclosure Letter
for which the Company has made available to Parent a title
commitment for each such Company Property (each a
Company Title Insurance Policy). Each of
the Company Title Insurance Policies has been issued
insuring the Companys or the applicable Company
Subsidiarys fee simple title to the applicable Company
Owned Properties or leasehold interests in the applicable
Company Leased Properties in amounts at least equal to the
purchase price thereof paid by the Company or the Company
Subsidiary therefor, and, to the Knowledge of the Company, such
policies are, at the date hereof, valid, in full force and
effect and no claim has been made against any such policy. A
true and correct copy of the most current version of the survey
in the Companys possession or control for each of the
Company Properties has been made available to Parent.
(j) Except as listed in Section 3.10(j) of the
Company Disclosure Letter or the property condition reports
previously made available to Parent, (i) to the Knowledge
of the Company, each Company Property is in good operating
condition and repair and is structurally sound and free of
latent or patent structural, mechanical or other significant
defects, with no alterations or repairs being required thereto
under applicable Legal Requirements or insurance company
requirements, except for repairs and alterations required in the
ordinary course of business or as reflected in the
Companys budgets for operations and capital expenditures;
(ii) no Company Property has suffered any uninsured
casualty or other damage that has not been repaired or is not
contemplated to be repaired within the Company Propertys
current budgets for operations and capital expenditures; and
(iii) each Company Property is otherwise adequate in all
material respects (whether physical, structural, legal,
practical or otherwise) for its current use, operation and
occupancy, except in each case set forth in this subsection,
where the failure to meet the foregoing standards would not
reasonably be expected to have a Company Material Adverse Effect.
(k) Except as set forth on Section 3.10(k) of
the Company Disclosure Letter or which, individually or in the
aggregate, would not reasonably be expected to have a Company
Property Material Adverse Effect, neither the Company nor any of
the Company Subsidiaries has received any written notice nor has
Knowledge to the effect that (i) any condemnation or
rezoning proceedings are pending or threatened with respect to
any portion of any of the Company Properties or (ii) any
zoning, building or similar Legal Requirement is or will be
violated for any property by the existence, continued
maintenance, operation or use of any buildings or other
improvements on any of the Company Properties or by the
continued maintenance, operation or use of the parking areas for
such Company Properties, except as set forth in the Company
Title Insurance Policies or surveys made available to
Parent.
(l) True and correct copies of all currently effective
management agreements and all amendments thereto for the Company
Properties have been made available to Parent.
A-14
(m) The rent rolls of the Company Properties as of
June 30, 2006 (the Rent Rolls) have been
made available to Parent. Except as disclosed in
Section 3.10(m) of the Company Disclosure Letter or
otherwise set forth in the Company Disclosure Letter, to the
Knowledge of the Company, and for discrepancies that, either
individually or in the aggregate, would not reasonably be
expected to have a Company Property Material Adverse Effect, the
information set forth in the Rent Rolls is true, accurate and
complete in all material respects as of the date thereof. Except
as disclosed in Section 3.10(m) of the Company
Disclosure Letter, (i) to the Knowledge of the Company,
neither the Company nor any Company Subsidiary is in default
under a lease under which the Company or a Company Subsidiary is
the lessor or the sublessor in effect as of the date of the Rent
Rolls (a Space Lease) which default would
reasonably be expected to result in a Company Property Material
Adverse Effect, and (ii) neither the Company nor a Company
Subsidiary has received written notice or a copy of a written
notice from any tenant under any Space Lease claiming that the
Company or the applicable Company Subsidiary is currently in
default under its obligations as landlord under any such Space
Lease which default or defaults would reasonably be expected to
result in a Company Property Material Adverse Effect. Each Space
Lease listed on the Rent Rolls is in full force and effect, and,
to the Knowledge of the Company, no Space Lease has been
assigned except as set forth on the Rent Rolls, in each case
except as would not reasonably be expected to have a Company
Property Material Adverse Effect. The Company has made available
to Parent true, correct and complete copies of all Space Leases
listed on the Rent Rolls in effect as of the date of the Rent
Rolls, including all amendments and guaranties related thereto,
except where such failure pertains to a document that does not
materially affect the terms and conditions of the applicable
Space Lease. Except as set forth on Section 3.10(m)
of the Company Disclosure Letter, to the Knowledge of the
Company, no tenant under any Space Lease for more than 25% of
the rentable square footage of a Company Property is in material
default under such Space Lease, and no such tenant is currently
contesting amounts due under any Space Lease, other than
ordinary course disputes regarding common area maintenance
charges. Neither the Company nor any Company Subsidiary has
received any advance payment of rent (other than for the current
month and one (1) month in advance or security deposits) or
applied any security deposit made by a tenant under a Space
Lease in an amount greater than $10,000.00, except as shown on
Section 3.10(m) of the Company Disclosure Letter.
(n) Except as set forth on Section 3.10(n) of
the Company Disclosure Letter or which would not reasonably be
expected to have a Company Material Adverse Effect, there are no
Tax abatements or extraordinary exemptions specifically
affecting the Company Properties, and the Company and the
Company Subsidiaries have not received any written notice of
(and the Company does not have any Knowledge of) any proposed
increase in the assessed valuation of any of the Company
Properties or of any proposed public improvement assessments for
Tax years ending from and after the date of this Agreement or
that have not been reflected in the Companys Financial
Statements.
(o) Except as would not otherwise constitute a Company
Material Adverse Effect, the Company and each Company Subsidiary
has good and sufficient title to, or is permitted to use under
valid and existing licenses or leases, all their personal
properties and assets reflected in their books and records as
being owned, licensed or leased by them (including those
reflected in the Companys Financial Statements, except as
since sold or otherwise disposed of in the ordinary course of
business) or used by them in the ordinary course of business,
free and clear of all liens and encumbrances, except such as are
reflected in the Company Audited Financials or the Company
Interim Financials, and the notes thereto, and except for Liens
for current Taxes not yet due and payable, Indebtedness
outstanding on the date hereof or incurred thereafter in
accordance with the terms hereof or Liens that are normal to the
business of the Company and the Company Subsidiaries and are
not, in the aggregate, material in relation to the assets of the
Company on a consolidated basis and except also for such
imperfections of title or leasehold interest, or other Liens as
do not materially interfere with the present use of the
properties subject thereto or affected thereby.
(p) Except as disclosed in Section 3.10(p) of
the Company Disclosure Letter or as would not otherwise
constitute a Company Material Adverse Effect, neither the
Company nor any Company Subsidiary is liable for any leasing
commissions relating to any Space Lease other than commissions
in the ordinary course of business consistent with past practice.
Section 3.11. Tenant
Matters. To the Knowledge of the Company, no
tenant under any Space Lease that operates a hospital,
ambulatory surgery center, in-patient or out-patient facility at
a Company Property has provided
A-15
written notice to the Company that such tenant is the subject of
any investigation, proceeding or examination by any Governmental
Agency concerning an actual or alleged violation of any Legal
Requirement.
Section 3.12. Environmental
Matters.
(a) The Company has made available to Parent true and
complete copies of the final versions of all environmental
investigations, compliance audits and asbestos surveys, and
reports of environmental testing or analysis made by or on
behalf of the Company or any of the Company Subsidiaries with
respect to the Company and the Company Subsidiaries, their past
and present operations, and the Company Properties currently in
the possession or control of the Company or any Company
Subsidiary (the Company Environmental
Reports). Except as disclosed in
Section 3.12(a) of the Company Disclosure Letter or
as set forth in the Company Environmental Reports or as would
not reasonably be expected to have a Company Material Adverse
Effect, to the Knowledge of the Company, (i) no Hazardous
Substances have been used, stored, manufactured, treated or
processed on or about any Company Property by or at the
direction of the Company or any of the Company Subsidiaries
except in material compliance with Environmental Law and in the
ordinary course of business; (ii) there has been no release
or threatened release of any Hazardous Substance on, in, under,
or from any Company Property by the Company or any of the
Company Subsidiaries which requires any disclosure,
investigation, remediation, monitoring, maintenance, abatement
or deed or use restriction, or which will give rise to any other
Liability or diminution in value under any Environmental Laws;
(iii) neither the Company nor any Company Subsidiary nor
former Company Subsidiary has arranged for the disposal of any
Hazardous Substance at, or transported any Hazardous Substance
to, any site for which the Company or any Company Subsidiary or
any former Company Subsidiary has received notice that it is or
may be liable under Environmental Laws; (iv) each Company
Property is in material compliance with all Environmental Laws;
(v) neither the Company nor any Company Subsidiary has
received any notice of material violation or potential material
Liability under any Environmental Laws from any Person or any
Governmental Agency inquiry, request for information, or demand
letter under any Environmental Law relating to Company
Properties, nor is the Company or any Company Subsidiary subject
to any material Orders, agreements, settlements or other such
obligations arising under Environmental Laws, nor are there any
material administrative, civil or criminal actions, suits,
proceedings or investigations pending or threatened against the
Company under any Environmental Law; (vi) no Lien has been
recorded on any Company Property by any Governmental Agency
under any Environmental Law (other than any Permitted Lien);
(vii) since the date of the Company Environmental Reports,
neither the Company nor any Company Subsidiary has installed (or
caused or permitted to be installed) any underground storage
tanks or friable asbestos containing materials in any of the
Company Properties; and (viii) the Company has received no
written complaints directed to the Company relating to air
quality or Microbial Matter at any Company Property and the
Company has no Knowledge of any materially adverse condition
related to Microbial Matter at any Company Property;
provided, however, that the Company makes no
representation or warranty under this
Section 3.12(a) with respect to the activities of
its tenants under Space Leases, any other activities that occur
on the Company Properties, or the contents of the Company
Properties other than activities by the Company or any Company
Subsidiary or contents maintained by the Company or any Company
Subsidiary on the Company Properties.
(b) Environmental Laws shall mean
any Legal Requirement relating to: (i) emissions,
discharges, spills, releases or threatened releases of Hazardous
Substances into the ambient environment; (ii) the
treatment, storage, disposal, manufacture, transportation or
shipment of Hazardous Substances; (iii) the regulation of
storage tanks; (iv) the management of asbestos; or
(v) pollution or the protection of human health, the
environment and natural resources.
(c) Hazardous Substances shall
mean all substances, wastes, pollutants, contaminants and
materials potentially harmful to human health, the environment
or natural resources or otherwise regulated or defined or
designated as hazardous, extremely hazardous or toxic pursuant
to any Environmental Law, including, without limitation:
(i) all substances, wastes, pollutants, contaminants and
materials regulated, or defined or designated as hazardous,
extremely or imminently hazardous, dangerous or toxic, under the
following federal statutes and their state counterparts, as well
as their statutes implementing regulations: the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and
A-16
Recovery Act, 42 U.S.C. Section 6901 et seq., the
Toxic Substances Control Act, 15 U.S.C. Section 2601
et. seq., the Clean Water Act, 33 U.S.C. Section 1251
et seq., the Clean Air Act, 42 U.S.C. Section 7401 et
seq., the Emergency Planning and Community Right to Know Act,
42 U.S.C. Section 11001 et seq., the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq., the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
Section 136 et seq., the Atomic Energy Act, 42 U.S.C.
Section 2014 et seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Section 5101 et seq.;
(ii) petroleum and petroleum products including crude oil
and any fractions thereof;
(iii) natural gas, synthetic gas, and any mixtures
thereof; and
(iv) radon, radioactive substances, asbestos, urea
formaldehyde, polychlorinated biphenyls, asbestos,
asbestos-containing materials and Microbial Matter.
(d) Microbial Matter shall mean
all fungi, bacterial or viral matter which reproduces through
the release of spores or the splitting of cells or other means,
including, but not limited to, mold, mildew and viruses, whether
or not such Microbial Matter is living.
Section 3.13. Related
Party Transactions. Other than as disclosed
in the Companys Definitive Proxy Statement filed with the
SEC on April 10, 2006 or in Section 3.13 of the
Company Disclosure Letter, there are no Contracts between the
Company and any Person who is an officer, trustee (or person
occupying a similar position in any other entity) or Affiliate
of the Company or any of the Company Subsidiaries, any member of
the immediate family (as such term is defined in
Item 404 of
Regulation S-K)
of any of the foregoing or any entity of which any of the
foregoing is an Affiliate that are required to be disclosed
pursuant to Item 404 of
Regulation S-K.
Any such Contracts, copies of all of which have previously been
made available to Parent, are listed on Section 3.13
of the Company Disclosure Letter. As used in this Agreement, the
term Affiliate shall have the meaning
ascribed to such term in Rule 405 promulgated under the
Securities Act.
Section 3.14. Employee
Benefits. As used herein, the term
Employee Plan includes any pension,
retirement, savings, disability, medical, dental, health, life,
death benefit, group insurance, profit sharing, deferred
compensation, stock option, stock loan, bonus, incentive,
vacation pay, tuition reimbursement, severance pay, or other
employee benefit plan, trust, agreement, contract, arrangement,
policy or commitment (including, without limitation, any pension
plan (Pension Plan), as defined in
Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended and the rules and regulations promulgated
thereunder (ERISA), and any welfare plan
(Welfare Plan) as defined in
Section 3(1) of ERISA), whether any of the foregoing is
funded, insured or self-funded, written or oral,
(i) sponsored or maintained by the Company or the Company
Subsidiaries (each a Group Member) and
covering any Group Members active or former employees (or
their beneficiaries), (ii) to which any Group Member is a
party or by which any Group Member (or any of the rights,
properties or assets thereof) is bound or (iii) with
respect to which any current Group Member may otherwise have any
material Liability (whether or not such Group Member still
maintains such Employee Plan). Each Employee Plan is listed on
Section 3.14(a) of the Company Disclosure Letter.
(a) Except as would not reasonably be expected to have a
Company Material Adverse Effect, no Group Member has any
Liability under any Welfare Plan that provides for continuing
benefits or coverage for any participant or any beneficiary of a
participant after such participants termination of
employment, except as may be required by Section 4980B of
the Code or Section 601 et seq. of ERISA, or under any
other applicable Legal Requirement.
(b) Except as would not reasonably be expected to have a
Company Material Adverse Effect, each Employee Plan complies in
all material respects with the applicable requirements of ERISA,
the Code and any other applicable Legal Requirement governing
such Employee Plan, and each Employee Plan has at all times been
properly administered in all material respects in accordance
with ERISA, the Code and all such other applicable Legal
Requirements, and in accordance with its terms. Each Pension
Plan that is intended to be qualified is qualified under
Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service
(IRS) stating that the form of such Pension
Plan meets the applicable requirements of Section 401(a) of
the Code and that the form of trust associated with such Pension
Plan meets the applicable requirements for tax exemption under
Section 501(a) of the Code and, except as would not
reasonably be expected to have a Company Material Adverse
A-17
Effect, no event has occurred that would jeopardize the
qualified status of any such plan or the tax exempt status of
any such trust under Sections 401(a) and
Section 501(a) of the Code, respectively. Except as would
not reasonably be expected to have a Company Material Adverse
Effect, no lawsuits, claims (other than routine claims for
benefits) or complaints to, or by, any Person or Governmental
Agency with respect to any Employee Plan have been filed or are
pending, the Company has received no notice of such a lawsuit,
claim or complaint and, to the Knowledge of the Company, there
is no fact or contemplated event that would be expected to give
rise to any such lawsuit, claim (other than routine claims for
benefits) or complaint with respect to any Employee Plan.
Without limiting the foregoing, the following are true with
respect to each Employee Plan, except as would not reasonably be
expected to have a Company Material Adverse Effect:
(i) all Group Members have timely filed or caused to be
filed every material return, report, statement, notice,
declaration and other document required by ERISA, the Code or
any other Legal Requirement or Governmental Agency (including,
without limitation, the IRS and the U.S. Department of
Labor) with respect to each such Employee Plan, each of such
filings has been complete and accurate in all material respects
and no Group Member has incurred any material Liability in
connection with such filings;
(ii) all Group Members have timely delivered or caused to
be delivered to every participant, beneficiary and other party
entitled to such material, all material plan descriptions,
returns, reports, schedules, notices, statements and similar
materials, including, without limitation, summary plan
descriptions and summary annual reports, as are required under
Title I of ERISA, the Code, or both, and no Group Member
has incurred any material Liability in connection with such
deliveries; and
(iii) all contributions and payments with respect to
Employee Plans that are required to be made by a Group Member
with respect to periods ending on or before the Closing Date
(including periods from the first day of the current plan or
policy year to the Closing Date) have been, or will be, made or
accrued before the Closing Date in accordance with the
appropriate plan document, actuarial report, collective
bargaining agreements or insurance contracts or arrangements or
as otherwise required by ERISA or the Code.
(c) With respect to each such Employee Plan, to the extent
applicable, the Company has previously made available to Parent
true and complete copies of (A) plan documents and summary
plan descriptions, or any and all other material documents that
establish the existence of the plan, trust, arrangement,
contract, policy or commitment, and all amendments thereto,
(B) the most recent determination letter, if any, received
from the IRS, (C) the three most recent Form 5500
Annual Reports (and all schedules and reports relating thereto)
and (D) all related trust agreements, insurance contracts
or other funding agreements that implement each such Employee
Plan.
(d) With respect to each Employee Plan, there has not
occurred, and no Person or entity is contractually bound to
enter into, any prohibited transaction within the
meaning of Section 4975(c) of the Code or Section 406
of ERISA, which transaction is not exempt from
Section 4975(c) of the Code or Section 406 of ERISA
pursuant to a statutory or administrative exemption and that
would subject a Group Member to a material excise tax or penalty.
(e) None of the Employee Plans is a multiemployer plan, as
defined in Section 3(37) of ERISA (Multiemployer
Plan). None of the Group Members or any trade or
business (whether or not incorporated) which is or has ever been
treated as a single employer with any Group Member under
Section 414(b), (c), (m) or (o) of the Code
(ERISA Affiliate) has incurred any liability
due to a complete or partial withdrawal from a Multiemployer
Plan or due to the termination or reorganization of a
Multiemployer Plan, except for any such liability which has been
satisfied in full, and no events have occurred and no
circumstances exist that would be expected to result in any such
Liability to any Group Member or ERISA Affiliate.
(f) None of the Employee Plans is a single-employer plan,
as defined in Section 4001(a)(15) of ERISA, that is subject
to Title IV of ERISA (Title IV
Plan), and no Group Member or ERISA Affiliate has ever
maintained a Title IV Plan. No Liability under
Title IV of ERISA has been or is expected to be incurred by
any Group Member or ERISA Affiliate.
(g) With respect to each Employee Plan maintained or
sponsored by any Group Member or ERISA Affiliate, such plans
provide the plan sponsor the authority to amend or terminate the
plan at any time, subject to applicable requirements of ERISA,
the Code and other Legal Requirements.
A-18
(h) Except as disclosed on Section 3.14(h) of
the Company Disclosure Letter, none of the Company or any of its
Subsidiaries is a party to any agreement or arrangement that
could reasonably be expected to result, separately or in the
aggregate, in the actual or deemed payment by the Company or any
of its Subsidiaries of any excess parachute payments
within the meaning of Section 280G of the Code.
Section 3.15. Employee
Matters.
(a) A copy of each employee handbook of the Company has
previously been made available to Parent. Such handbooks fairly
and accurately summarize all material employee policies,
vacation policies and payroll practices of the Company and the
Company Subsidiaries. Neither the Company nor any of the Company
Subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or
understanding with a labor union or other labor organization,
nor has the Company or any of the Company Subsidiaries agreed
that any unit of their employees is appropriate for collective
bargaining. No union or other labor organization has been
certified as bargaining representative for any of the
Companys or the Company Subsidiaries employees. To
the Knowledge of the Company there are no organizational efforts
with respect to the formation of a collective bargaining unit
presently being made or threatened involving employees of the
Company or any of the Company Subsidiaries.
(b) Set forth on Section 3.15(b) of the Company
Disclosure Letter is a true and complete list of Contracts which
provide for all cash and non-cash payments, rights to property
or other contract rights that will become payable, accelerated
or vested to or in each executive officer or trustee (or person
occupying a similar position in any other entity) of the Company
or any Company Subsidiary as a result of the Mergers, to the
extent the value of such payments and rights in the aggregate
with respect to such person exceeds $25,000. Except as described
on Section 3.15(b) of the Company Disclosure Letter,
there is no employment or severance contract, or other agreement
requiring payments, cancellation of indebtedness or other
obligation to be made as a result of the consummation of any of
the transactions contemplated by this Agreement, either alone or
upon the occurrence of subsequent events, with respect to any
executive officer or trustee of the Company or any the Company
Subsidiary.
Section 3.16. Taxes. Except
as set forth on Section 3.16 of the Company
Disclosure Letter:
(a) Each of the Company and the Company Subsidiaries has
timely filed all material Tax Returns (including all federal and
state income Tax Returns) required to be filed by it with the
appropriate Governmental Agency (taking into account all validly
and duly obtained extensions of time to file) and has timely
paid (or the Company has paid on its behalf) all material Taxes
(including all federal and state income Taxes) required to be
paid (whether or not shown on such filed Tax Returns). Such Tax
Returns are true, correct and complete in all material respects.
The Company has established in its books and records reserves or
accrued liabilities or expenses that are adequate for payment of
all Taxes for which the Company or any Company Subsidiary is
liable but are not yet due and payable. No material deficiency
for any Taxes has been proposed, asserted or assessed by any
Governmental Agency, or, to the Knowledge of the Company,
threatened. Except as set forth on Section 3.16 of
the Company Disclosure Letter, no Tax audits, examinations or
similar proceedings involving Taxes are ongoing, scheduled to
commence, or occurred on or after January 1, 2001.
(b) To the Knowledge of the Company, no claim has been made
in writing by a Governmental Agency in a jurisdiction where the
Company or any Company Subsidiary does not file Tax Returns such
that the Company or the Company Subsidiary is or may be subject
to taxation by that jurisdiction.
(c) Since the beginning of the Companys short taxable
year ended December 31, 2002 (the First REIT
Year), the Company has taken all actions required to
be taken in order to qualify as a real estate investment
trust within the meaning of Section 856(a) of the
Code (a REIT), including, but not limited to,
paying all dividends required to be paid. Since the beginning of
the First REIT Year, the Company has incurred no liability for
Taxes under Sections 857(b), 860(c) or 4981 of the Code,
including, without limitation, any tax arising from a prohibited
transaction described in Section 857(b)(6) of the Code or
any tax arising from redetermined rents,
redetermined deductions and excess
interest described in Section 857(b)(7) of the Code,
and neither the Company nor any Company Subsidiary has incurred
any liability for Taxes other than in the ordinary course of
business consistent with past practice. No event has occurred,
and no condition or circumstance exists, which presents a
material risk that any material Tax described in the preceding
sentence will be imposed upon the Company or any Company
A-19
Subsidiary or presents a material risk that the Companys
status as a real estate investment trust will be jeopardized.
The Company has not relied upon Sections 856(c)(6),
856(c)(7), or 856(g)(4) of the Code to qualify as a REIT.
(d) All material amounts of Taxes which the Company or
Company Subsidiaries are required by any applicable Legal
Requirement to withhold or collect, including Taxes required to
have been withheld in connection with amounts paid or owing to
an employee, independent contractor, creditor, shareholder or
other third party and sales, gross receipts and use taxes, have
been duly withheld or collected and, to the extent required,
have been paid over to the proper Governmental Agency or are
held in separate bank accounts for such purpose. The Company and
the Company Subsidiaries have duly and timely filed all Tax
Returns with respect to such withheld Taxes. To the Knowledge of
the Company, there are no encumbrances for Taxes upon the assets
of the Company or the Company Subsidiaries except for statutory
encumbrances for Taxes not yet due.
(e) Neither the Company nor any Company Subsidiary has any
liability for Taxes of any Person other than the Company or
Company Subsidiaries under (i) Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign Legal
Requirement) or as a transferee or successor by contract or
otherwise, or (ii) any Tax sharing agreement, Tax
protection agreement, Tax indemnification agreement or similar
contract or arrangement other than solely with the Company or
the Company Subsidiaries. Section 3.16(e) of the
Company Disclosure Letter identifies all contribution, Tax
indemnity, Tax protection, Tax allocation, Tax sharing and
similar agreements entered into by the Company, Company OP or
any other Company Subsidiary.
(f) The Company and each Company Subsidiary that is treated
as a corporation for U.S. federal income tax purposes has
disclosed to the IRS all positions taken on their federal income
Tax Returns which could give rise to a substantial
understatement of Tax under Section 6662 of the Code.
(g) Since the beginning of the First REIT Year, the Company
has always been, and will be through the Closing Date, a REIT
within the meaning of Section 856 of the Code. The Company
has neither taken nor omitted to take any action that could
result in a reasonable challenge to its status as a REIT and, to
the Knowledge of the Company, no such challenge is pending or
has been threatened in writing. Neither the Company nor any
Company Subsidiary actually or constructively owned or owns, for
purposes of Section 856(d) of the Code, 10% or more of the
equity of any tenant other than a taxable REIT subsidiary (as
defined in Section 856(l) of the Code) of the Company.
(h) Except as set forth in Section 3.16(h) of
the Company Disclosure Letter, all of the Company Subsidiaries
(including any predecessor entities) are and have always been
classified as partnerships or disregarded entities for federal
tax purposes. Neither the Company nor any Company Subsidiaries
holds outstanding securities subject to the restrictions in
subclause (iii) of Section 856(c)(4)(B) (other than
those excluded by Section 856(m)(1) of the Code) in an
entity, other than in any Company Subsidiary.
(i) Neither the Company nor any Company Subsidiary holds
any asset the disposition of which would be subject to rules
similar to Section 1374 of the Code as a result of
(i) an election under IRS Notice 88-19 or Treasury
Regulation Section 1.337(d)-5
or 1.337(d)-6 or (ii) application of Treasury
Regulation Section 1.337(d)-7.
(j) To the Knowledge of the Company, the Company is a
domestically-controlled qualified investment entity
within the meaning of Section 897(h) of the Code.
(k) No property owned by the Company or any Company
Subsidiary is (i) tax-exempt use property
within the meaning of Section 168(h)(1) of the Code,
(ii) tax-exempt bond financed property within
the meaning of Section 168(g)(5) of the Code,
(iii) subject to a Section 467 rental
agreement as defined in Section 467 of the Code or
(iv) subject to any provision of state, local or foreign
law comparable to any of the provisions listed in this
Section 3.16(k).
(l) Neither the Company nor any Company Subsidiary has
constituted either a distributing corporation or a
controlled corporation (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355
of the Code (i) in the two (2) years prior to the date
of this Agreement or (ii) in a distribution which could
otherwise constitute part of a plan or series
of related transactions (within the meaning of
Section 355(e) of the Code) in conjunction with the
transactions contemplated by this Agreement.
A-20
(m) Neither the Company, any Company Subsidiary nor any
other Person on their behalf has (i) agreed to or is
required to make any adjustments pursuant to Section 481(a)
of the Code or any similar provision of Legal Requirement or has
any Knowledge that any Governmental Agency has proposed any such
adjustment, or has any application pending with any Governmental
Agency requesting permission for any changes in accounting
methods that relate to the Company or any Company Subsidiary,
(ii) executed or entered into a closing agreement pursuant
to Section 7121 of the Code or any similar provision of
Legal Requirement with respect to the Company or any Company
Subsidiary, (iii) requested any extension of time within
which to file any Tax Return, which Tax Return has since not
been filed, (iv) granted any currently effective extension
of the statute of limitations for the assessment or collection
of Taxes, or otherwise entered into or filed any currently
effective agreements, arrangements, waivers or objections
extending the statutory period or providing for an extension of
time with respect to the assessment or reassessment of Taxes or
the filing of any Tax Return, or any payment of Taxes,
(v) granted to any Person any power of attorney that is
currently in force with respect to any Tax matter, or
(vi) received a ruling from any Governmental Entity in
respect of Taxes or signed an agreement in respect of Taxes with
any Governmental Entity.
(n) Neither the Company nor any Company Subsidiary (other
than a taxable REIT subsidiary under Section 856(l) of the
Code) has ever been included in any affiliated group
within the meaning of Section 1504(a) of the Code (or any
similar group defined under a similar provision of state, local
or foreign law).
(o) Neither the Company nor any Company Subsidiary has
taken or agreed to take any action or is aware of any fact or
circumstance that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(p) Section 3.16(p) of the Company Disclosure
Letter identifies all private letter ruling submissions to the
IRS, all private letter rulings issued by the IRS and all other
agreements entered into with the IRS (including all closing
agreements).
(q) The Company has not at any time been party to a
tax-free reorganization with another corporation and has not
succeeded to any C Corporation earnings and profits from any
source.
(r) No Company Subsidiary that is a taxable REIT subsidiary
under Section 856(l) of the Code has directly or indirectly
operated or managed any lodging facility or health care
facility, or provided to any other Person (under franchise,
license or otherwise) rights to any brand name under which any
lodging facility or health care facility is operated within the
meaning of Section 856(l)(3) of the Code.
For purposes of this Agreement, Taxes shall
mean (i) any federal, state, local, foreign or other tax,
assessment, levy, lien, fee, or other like assessments or
charges of any kind whatsoever imposed by a Governmental Agency,
including, without limitation, any income, gross receipts,
excise, employment, sales, use, transfer, license, payroll,
franchise, severance, stamp, withholding, Social Security,
unemployment, real property, personal property, property gains,
registration, capital stock, value added, single business,
occupation, workers compensation, alternative or add-on
minimum, estimated, or other tax, (ii) any interest and any
penalties, additions to tax or additional amounts imposed by any
Governmental Agency in connection with (A) any item
described in clause (i) or this clause (ii) or
(B) the failure to comply with any requirement imposed with
respect to any Tax Return, and (iii) any obligation with
respect to Taxes described in clause (i) and/or
(ii) above payable by reason of contract, assumption,
transferee or successor liability, operation of any applicable
Legal Requirement or Treasury
Regulation Section 1.1502-6
(or any predecessor or successor thereof or any analogous or
similar provision under Legal Requirement); and Tax
Return shall mean any returns, reports, declarations,
elections, designations, notices, filings, estimates,
information returns, forms and statements filed or required to
be filed in respect of any Taxes, including any schedules
thereto and any amendments thereof. For purposes of this
Section 3.16, any reference to the Company or any
Company Subsidiary shall include any Person that merged with,
converted into or was liquidated into, the Company or Company
Subsidiary, as the case may be.
Section 3.17. Compliance
with Legal Requirements.
(a) Except as set forth in the Filed Company SEC Documents
(excluding any disclosures set forth in any risk factor section,
in any section relating to forward looking statements and any
other disclosures included therein that are cautionary,
predictive or forward-looking in nature) or on
Section 3.17(a) of the Company Disclosure Letter and
except for environmental matters, which are exclusively
addressed in Section 3.12, to the Knowledge of the
A-21
Company, the Company and the Company Subsidiaries are in
compliance with all applicable Legal Requirements, except for
such non-compliance as would not reasonably be expected to have
a Company Material Adverse Effect.
(b) Except as set forth on Section 3.17(b) of
the Company Disclosure Letter and except for environmental
matters, which are exclusively addressed in
Section 3.12, to the Knowledge of the Company,
(i) the Company and Company Subsidiaries have obtained all
Company Permits necessary or appropriate for the operations of
the Company and the Company Subsidiaries as currently conducted,
(ii) all such Company Permits are in full force and effect,
(iii) no proceeding is pending or threatened to revoke or
limit any such Company Permit and (iv) the Company is in
compliance with all of the terms and requirements of each
Company Permit, except as would not reasonably be expected to
have a Company Material Adverse Effect. Except as set forth on
Section 3.17(b) of the Company Disclosure Letter and
except for environmental matters, which are exclusively
addressed in Section 3.12, neither the Company nor
any Company Subsidiary has received any written notice or other
written communication from any Governmental Agency or any other
Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any term or
requirement of any Company Permit, or (B) any actual,
proposed, possible, or potential revocation, withdrawal,
suspension, cancellation or termination of, or modification to,
any Company Permit, except such as would not reasonably be
expected to have a Company Material Adverse Effect. To the
Knowledge of the Company, no investigation or review by any
Governmental Agency with respect to the Company or any Company
Subsidiary is pending or threatened.
Section 3.18. Material
Contracts.
(a) Copies of all Material Contracts of the Company and all
Company Subsidiaries have been made available to Parent or,
other than in respect of Contracts described in
clause (ii)(A) below, will be made available to Parent
within ten (10) days after the date of this Agreement. For
the purposes of this Agreement, Material
Contract of the Company or any Company Subsidiary
means:
(i) any Contract for the lease of personal property
providing for lease payments in excess of $50,000 per annum
individually or $200,000 per annum in the aggregate, whether the
Company or a Company Subsidiary is a lessee or a lessor;
(ii) any (A) written or oral contract, agreement,
commitment, instrument or guaranty (each, a
Contract) to which the Company or a Company
Subsidiary is a party for Indebtedness, including any loan
agreement, mortgage, indenture, note, bond, debenture or
capitalized lease obligation evidencing Indebtedness of the
Company or any of its Subsidiaries to any other Person, other
than any such Contract or Contracts evidencing Indebtedness that
is outstanding or that may be drawn by the Company or any
Company Subsidiary in aggregate principal amount not exceeding
$100,000 individually or $300,000 in the aggregate,
(B) interest rate cap, interest rate collar, interest rate
swap, currency hedging transaction or other Contract relating to
a similar transaction to which the Company or any of its
Subsidiaries is a party or an obligor with respect thereto or
(C) Contract that requires the Company or any Company
Subsidiary to maintain any amount of Indebtedness with respect
to any of the Company Properties;
(iii) any Contract evidencing any capital expenditure or
transaction entered into by the Company or any of the Company
Subsidiaries that expressly provides for total payments by or
liability of the Company and the Company Subsidiaries in excess
of $100,000 individually or $300,000 per annum in the aggregate;
(iv) any other Contract filed or required to be filed with
the SEC pursuant to Item 601(b)(10) of
Regulation S-K;
(v) any Contract that contains any (A) provision that
materially restricts the Companys or any Company
Subsidiarys ability to conduct its business in any
particular location or (B) non-competition provision with
respect to any line of business in which the Company or any
Company Subsidiary may be engaged;
(vi) any Contract relating to material indemnification by
the Company or any Company Subsidiary of any trustee, director
or officer of the Company or any Company Subsidiary;
(vii) any Contract pursuant to which the Company or such
Company Subsidiary manages or provides services with respect to
any real properties other than Company Properties;
A-22
(viii) any Contract (other than the Space Leases) providing
for the sale or lease of, or option to sell or lease, any
Company Properties or any Contract (other than the Space Leases
or the Company Leases) providing for the purchase of or lease,
or option to purchase or lease, by the Company or any Company
Subsidiary, on the one hand, or the other party thereto, on the
other hand, any real estate at some future date; and
(ix) any Contract on a national or regional basis with any
real estate broker relating to the sale of, option to sell,
purchase of, or option to purchase any real estate.
(b) Except as would not reasonably be expected to have a
Company Material Adverse Effect, each Material Contract of the
Company or a Company Subsidiary is valid, binding and
enforceable in all material respects against the Company or the
Company Subsidiary party thereto and, to the Knowledge of the
Company and assuming the due authorization and valid execution
and delivery by the other parties thereto, the other parties
thereto, in accordance with its terms, and in full force and
effect, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting the enforcement of creditors
rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may
be brought.
(c) Except as would not reasonably be expected to have a
Company Material Adverse Effect, or as set forth on
Section 3.18(c) of the Company Disclosure Letter,
there are no material defaults by the Company or the Company
Subsidiary party thereto, nor, to the Knowledge of the Company,
any other parties thereto, under any Material Contract of the
Company or any Company Subsidiary (and no event has occurred
which, with due notice or lapse of time or both, would
constitute such a material default).
Section 3.19. Investment
Company Act of 1940. Neither the Company nor
any of the Company Subsidiaries is, or at the Merger Effective
Time will be, required to be registered as an investment company
under the Investment Company Act of 1940, as amended.
Section 3.20. Intellectual
Property. Except as would not, individually
or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, (a) the Company and the Company
Subsidiaries own, or are licensed or otherwise possess valid
rights to use, all patents, trademarks, service marks, trade
names, trade secrets, domain names, computer software,
copyrights, inventions, processes, discoveries, formulas,
research and development, and applications and registrations for
any of the foregoing, in each case, which are material to the
conduct of the business of the Company and the Company
Subsidiaries taken as a whole (collectively, the
Company Intellectual Property); (b) to
the Knowledge of the Company, there are no conflicts with or
infringements of any Company Intellectual Property by any
Person, and the conduct of the business of the Company and the
Company Subsidiaries does not conflict with or infringe any
intellectual property or other proprietary right of any Person;
and (c) there are neither any outstanding nor, to the
Knowledge of the Company, threatened disputes or disagreements
with respect to any of the Company Intellectual Property.
Section 3.21. Insurance.
The Company has made available to Parent copies of insurance
policies and all fidelity bonds or other insurance service
contracts (the Insurance Policies) in the
Companys possession providing coverage for all Company
Properties and Company Leased Properties. Except for those
matters that have not had and would not reasonably be expected
to have a Company Material Adverse Effect, or as set forth on
Section 3.21 of the Company Disclosure Letter, there
is no claim for coverage by the Company pending under any of the
Insurance Policies that has been denied or disputed by the
insurer. Except for those matters that have not had and would
not reasonably be expected to have a Company Material Adverse
Effect, all premiums payable under all Insurance Policies have
been paid, and the Company has otherwise complied in all
material respects with the terms and conditions of all the
Insurance Policies. To the Knowledge of the Company, such
Insurance Policies are valid and enforceable in accordance with
their terms and are in full force and effect. The Company
reviews its insurance coverages on an annual basis in a
commercially reasonable manner. Neither the Company nor any
Company Subsidiary has received written notice from any
insurance carrier suspending, revoking or modifying (or
threatening any such action) any Insurance Policy which has not
been replaced on substantially similar terms prior to the date
of such suspension, revocation or modification. Neither the
Company nor any Company Subsidiary has received from any
insurance carrier which carries insurance on the Company
Properties or any Board of Fire Underwriters any written notice
of or has Knowledge of any defect or inadequacy in connection
with any Company
A-23
Property or its operation or requiring or recommending any
repairs or work to be done on such Company Property that if not
repaired or remedied would reasonably be expected to have a
Company Material Adverse Effect.
Section 3.22. Certain
Payments. Neither the Company nor any
Company Subsidiary, nor, to the Knowledge of the Company, any of
their respective trustees, directors, officers, agents or
employees, or any Representative or other Person associated with
or acting for or on behalf of the Company or any Company
Subsidiary, has directly or indirectly made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or
other payment to any Person, private or public, regardless of
form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, or (iii) to
obtain special concessions, or for special concessions already
obtained, for or in respect of the Company or any Company
Subsidiary, in any such case, in violation of any Legal
Requirement.
Section 3.23. Brokers.
No broker, investment banker, financial advisor or other person,
other than J.P. Morgan Securities Inc. (the
Company Financial Advisor), is entitled to
any brokers, finders, financial advisors or
other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by
or on behalf of the Company or any Company Subsidiary. The
Company has delivered a copy of its engagement letter with the
Company Financial Advisor to Parent.
Section 3.24. Opinion
of Financial Advisor. The Board has received
the opinion of the Company Financial Advisor to the effect that,
as of the date hereof and subject to the various assumptions and
limitations set forth therein, the Exchange Ratio is fair, from
a financial point of view, to the holders of Company Common
Shares, a copy of which opinion in the form in which it has been
or will be delivered to the Company has been delivered to Parent
for informational purposes, it being understood and acknowledged
by Parent that such opinion has been rendered for the benefit of
the Board, and is not intended to, and may not, be relied upon
by Parent, its Affiliates, their respective shareholders or any
other Person.
Section 3.25. Information
Supplied. None of the information to be
supplied by the Company or its Representatives specifically for
inclusion or incorporation by reference in the
S-4
Registration Statement or the Proxy Statement/Prospectus will,
at the time the
S-4
Registration Statement is declared effective by the SEC or on
the date the Proxy Statement/Prospectus is first mailed to the
holders of the Company Common Shares or at the time of the
meeting of the Companys shareholders to consider the
Merger (the Company Shareholders Meeting),
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading. All
documents that the Company is responsible for filing with any
Governmental Agency will comply in all material respects with
the provisions of applicable law as to the information required
to be contained therein. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to the
information supplied or to be supplied by Parent or its
Affiliates for inclusion or incorporation by reference in the
S-4
Registration Statement or the Proxy Statement/Prospectus.
Section 3.26. No
Other Representations or Warranties. Except
for the representations and warranties contained in this
Article III, Parent and Merger Sub acknowledge that
neither the Company nor any other Person or entity on behalf of
the Company has made, and neither Parent, Merger Sub or OP
Merger Sub has relied upon, any representation or warranty,
whether express or implied, with respect to the Company or any
of its Subsidiaries or their respective businesses, affairs,
assets, liabilities, financial condition, results of operations,
future operating or financial results, estimates, projections,
forecasts, plans or prospects (including the reasonableness of
the assumptions underlying such estimates, projections,
forecasts, plans or prospects) or with respect to the accuracy
or completeness of any other information provided or made
available to Parent, Merger Sub and OP Merger Sub by or on
behalf of the Company. Parent, Merger Sub and OP Merger Sub
acknowledge that there are uncertainties inherent in attempting
to make such estimates, projections and other forecasts and
plans that Parent, Merger Sub and OP Merger Sub are taking full
responsibility for making their evaluation of the adequacy and
accuracy of all estimates, projections and other forecasts and
plans so furnished to them (including the reasonableness of the
assumptions underlying such estimates, projections, forecasts or
plans). Neither the Company nor any other Person or entity will
have, or be subject to, any liability or indemnification
obligation to Parent, Merger Sub, OP Merger Sub or any other
Person or entity resulting from the distribution in written or
verbal communications to Parent, Merger Sub or OP Merger Sub or
use by Parent, Merger Sub or OP Merger Sub of,
A-24
any such information, including any information, documents,
estimates, projections, forecasts, plans, prospects, forward
looking statements or other material made available to Parent,
Merger Sub or OP Merger Sub in online data rooms,
confidential information memoranda or management interviews and
presentations in expectation of the transactions contemplated by
this Agreement, except to the extent any such information is
explicitly the subject of a representation or warranty in this
Article III, including the Company Disclosure Letter.
ARTICLE IV.
REPRESENTATIONS
AND WARRANTIES OF PARENT
Except as set forth in the corresponding sections or subsections
of the disclosure letter delivered by Parent to the Company
concurrently with the execution of this Agreement (the
Parent Disclosure Letter) (it being agreed
that disclosure of any item in any section or subsection of the
Parent Disclosure Letter shall be deemed disclosure with respect
to any other section or subsection to which the relevance of
such item is reasonably apparent), Parent represents and
warrants to the Company and Company OP as follows:
Section 4.1. Organization,
Standing and Power of Parent.
(a) Parent (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority to
carry on its business as it is now being conducted and
(ii) is duly qualified to do business in each jurisdiction
where the character of the properties owned, operated or leased
or the nature of its activities make such qualification
necessary, except in the case of clause (ii) for any such
failure which, when taken together with all other such failures
would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
(b) Parent has made available to the Company complete and
correct copies of its Second Restated Certificate of
Incorporation (as amended and supplemented) and Amended and
Restated By-Laws and of Merger Subs Certificate of
Formation and Limited Liability Company Agreement.
(c) OP Merger Sub has made available to the Company
complete and correct copies of its Certificate of Limited
Partnership and its Agreement of Limited Partnership (including
any amendments thereto).
Section 4.2. Organization,
Standing and Power of Merger Sub. Merger Sub
(a) is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has the requisite limited liability company power
and authority to carry on its business as it is now being
conducted and (b) is duly qualified as a foreign entity to
do business, and is in good standing, in each jurisdiction where
the character of the properties owned, operated or leased or the
nature of its activities make such qualification necessary,
except in the case of clause (b) for any such failure to be
duly qualified or in good standing which, when taken together
with all other such failures, would not, individually or in the
aggregate, reasonably be expected to have a Parent Material
Adverse Effect.
Section 4.3. The
Parent Subsidiaries. Except as set forth in
Section 4.3 of the Parent Disclosure Letter, all the
outstanding shares of capital stock of, or other equity interest
in, to the extent owned directly or indirectly by Parent, each
Subsidiary of Parent (the Parent
Subsidiaries) have been validly issued and are
(A) fully paid and nonassessable, (B) owned by Parent
or by another Parent Subsidiary, and (C) owned free and
clear of any Liens. Each Parent Subsidiary is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite corporate or
similar power and authority to carry on its business as now
being conducted, and is duly qualified as a foreign entity to do
business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the
nature of its activities makes such qualification necessary,
except for such failure to be duly qualified or in good standing
which, when taken together with all other such failures, would
not, individually or in the aggregate, be reasonably expected to
have a Parent Material Adverse Effect.
Section 4.4. Capital
Structure.
(a) Parent is authorized to issue 150,000,000 shares
of capital stock, consisting of 125,000,000 Parent Shares,
25,000,000 shares of preferred stock, $1.00 par value
per share (the Parent Preferred Stock), of
which
A-25
4,000,000 shares have been designated 7.875% Series D
Cumulative Redeemable Preferred Stock (Parent
Series D Preferred Stock), 1,060,000 shares
have been designated 6% Series E Cumulative Convertible and
Redeemable Preferred Stock (Parent Series E
Preferred Stock) and 7,000,000 shares have been
designated 7.625% Series F Cumulative Redeemable Preferred
Stock (Parent Series F Preferred Stock).
At the close of business on September 11, 2006,
(i) 62,955,103 Parent Shares were issued and outstanding,
(ii) 4,000,000 shares of Parent Series D
Preferred Stock, 74,989 shares of Parent Series E
Preferred Stock and 7,000,000 shares of Parent
Series F Preferred Stock were issued and outstanding,
(iii) 76,247 Parent Shares were held in the treasury of
Parent, (iv) 629,243 Parent Shares were reserved for
issuance upon exercise of options to purchase Parent Shares
(Parent Stock Options) issued and outstanding
pursuant to Parents Stock Plan for Non-Employee Directors,
2005 Long-Term Incentive Plan and 1995 Stock Incentive Plan
(together, and each as amended, the Parent Stock
Plans), (v) 1,970,217 Parent Shares were reserved
for additional awards pursuant to Parent Stock Plans,
(vi) 57,401 Parent Shares were reserved for issuance upon
conversion of Parent Series E Preferred Stock and
(vii) 1,743,576 Parent Shares were reserved for issuance
under Parents Amended and Restated Dividend Reinvestment
and Stock Purchase Plan. As of the close of business on
September 11, 2006, except as set forth above, no Parent
Shares were issued, reserved for issuance or outstanding, no
Parent Stock Options have been granted and there are not any
phantom stock or other contractual rights the value of which is
determined in whole or in part by the value of any capital stock
of the Parent. Since September 11, 2006 and on or prior to
the date of this Agreement, except for the exercise of any
Parent Stock Options referred to in clause (iii) above,
Parent has not issued any Parent Shares or made any grant of
awards under the Parent Stock Plans or authorized or entered
into any Contract to do any of the foregoing. There are no
outstanding stock appreciation rights with respect to the
capital stock of Parent. Each outstanding Parent Share is, and
each Parent Share which may be issued pursuant to the Parent
Stock Plans will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to
preemptive rights. Other than the Parent Shares and Parent
Preferred Stock, there are no other authorized classes of
capital stock of Parent. Other than the Parent Preferred Shares,
there are no outstanding bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote)
on any matter on which holders of Parent Shares may vote. Except
as set forth above or on Section 4.4(a) of the
Parent Disclosure Letter, as of the date of this Agreement,
there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any
kind to which Parent or any Parent Subsidiary is a party or by
which any of them is bound obligating Parent or any Parent
Subsidiary to issue, deliver or sell or create, or cause to be
issued, delivered or sold or created, additional shares of
capital stock, Parent Stock Options or other voting securities
or Stock Equivalents of Parent or of any Parent Subsidiary or
obligating Parent or any Parent Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. As of
the date of this Agreement, except as set forth in
Section 4.4(a) of the Parent Disclosure Letter,
there are no outstanding contractual obligations of Parent or
any Parent Subsidiary to repurchase, redeem or otherwise acquire
any shares of capital stock of Parent or any Parent Subsidiary.
There are no outstanding agreements to which Parent, a Parent
Subsidiary or any of their respective officers or directors is a
party concerning the voting of any capital stock of Parent or
any of Parent Subsidiary.
(b) The Parent Shares, when issued in accordance with the
terms of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and not subject to
preemptive rights.
Section 4.5. Authority.
(a) Each of Parent, Merger Sub and OP Merger Sub has the
requisite corporate, limited liability company or partnership
power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent, Merger Sub and OP
Merger Sub, and the consummation by Parent, Merger Sub and OP
Merger Sub of the transactions contemplated hereby, have been
duly authorized by all necessary action on the part of Parent,
Merger Sub and OP Merger Sub. No shareholder approval by the
shareholders of Parent is required by Entity Law or the rules of
the NYSE for the consummation of the Mergers or the issuance of
the Parent Shares hereunder. This Agreement has been duly
executed and delivered by Parent, Merger Sub or OP Merger Sub,
as applicable, and constitutes a valid and binding obligation of
Parent, Merger Sub or OP Merger Sub, as applicable, enforceable
against Parent, Merger Sub or OP Merger Sub, as applicable, in
accordance with its terms, assuming this Agreement is
enforceable against the Company and Company OP, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent
A-26
conveyance, moratorium, liquidation, conservatorship and similar
applicable laws relating to or affecting creditors generally or
by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
(b) The board of directors of Parent (at a meeting duly
called and held) has by the unanimous vote of all directors
present declared that the Merger is advisable on the terms set
forth herein.
Section 4.6. No
Conflict or Violation; Consents.
(a) Neither the execution and delivery of this Agreement
nor the consummation of the Mergers in accordance with the terms
of this Agreement will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
any provision of (a) the Second Restated Certificate of
Incorporation (as amended and supplemented) or Amended and
Restated By-Laws of Parent (b) the Certificate of Formation
or Limited Liability Company Agreement of Merger Sub,
(c) the Certificate of Limited Partnership or Partnership
Agreement of OP Merger Sub or (d) the comparable charter or
organizational documents of any Parent Subsidiary listed on
Schedule 4.6(a) of the Parent Disclosure Letter;
(ii) assuming the consents, approvals, orders,
authorizations, registrations, declarations, filings or permits
referred to in Section 4.6(b) are duly and timely
made or obtained, contravene, conflict with, or result in a
violation of any Legal Requirement applicable to Parent with
respect to this Agreement or the consummation of the
transactions contemplated hereby of any Governmental Agency;
(iii) assuming the consents, approvals, orders,
authorizations, registrations, declarations, filings or permits
referred to in Section 4.6(b) are duly and timely
made or obtained, contravene, conflict with, or result in a
violation of, or give any Governmental Agency the right to
revoke, withdraw, suspend, cancel, terminate or modify, any
permit, approval, consent, authorization, license, variance or
permission required by a Governmental Agency under any Legal
Requirement with respect to Parent, any Parent Subsidiary or any
of their respective operations or assets, including certificates
of occupancy for Parents properties (Parent
Permits);
(iv) assuming the consents, approvals, orders,
authorizations, registrations, declaration, filing or permits
referred to in Section 4.6(b) are duly and timely
made or obtained, contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract to which Parent or any Parent
Subsidiary is a party; or
(v) assuming the consents, approvals, orders,
authorizations, registrations, declaration, filing or permits
referred to in Section 4.6(b) are duly and timely
made or obtained, result in the imposition or creation of any
Lien (other than a Permitted Lien) upon or with respect to any
of the assets owned or used by Parent or any Parent Subsidiary;
except in the case of each of clauses (ii), (iii),
(iv) and (v) above as would not as would not
reasonably be expected to have a Parent Material Adverse Effect.
(b) Except for (i) the filing with the SEC of the
S-4
Registration Statement or other applicable requirements, if any,
of the Exchange Act or the Securities Act or filings required
pursuant to any state securities or blue sky laws,
(ii) the filing and acceptance for record of the
Certificates of Merger as required by applicable Entity Law and
(iii) the filing of the OP Certificate of Merger as
required by applicable OP Merger Entity Law, or as disclosed on
Section 4.6(b) of the Parent Disclosure Letter, or
as otherwise set forth in the Parent Disclosure Letter with
respect to Section 4.6, no consent, approval, order
or authorization of, or registration, declaration, filing with,
notice to, or permit from, any Governmental Agency or any other
Person, is required pursuant to any Legal Requirement or under
the terms of any Contract or Parent Permit by or on behalf of
Parent or any of the Parent Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation or
performance of the Mergers, other than such consents, approvals,
orders, authorizations, registrations, declarations, filings,
notices or permits which the failure to obtain or make would not
reasonably be expected to have a Parent Material Adverse Effect.
A-27
Section 4.7. SEC
Documents; Financial Statements.
(a) Parent has filed with or furnished to the SEC, and has
heretofore made available to the Company (by public filing with
the SEC or otherwise) true and complete copies of, all reports,
schedules, forms, statements and other documents required to be
filed with or furnished to the SEC by Parent since the
Applicable Date and prior to the date hereof (collectively, the
Filed Parent SEC Documents). As of its
respective date, except as set forth in
Section 4.7(a) of the Parent Disclosure Letter, each
Filed Parent SEC Document complied in all material respects with
the requirements of the Exchange Act or the Securities Act or
the Sarbanes-Oxley Act, as the case may be, as and to the extent
applicable thereto, and the rules and regulations of the SEC
promulgated thereunder applicable to such Filed Parent SEC
Document. Except to the extent that information contained in any
Filed Parent SEC Document filed and publicly available prior to
the date of this Agreement has been revised or superseded by a
later Filed Parent SEC Document, none of the Filed Parent SEC
Documents contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements of Parent
included in the Filed Parent SEC Documents complied as of their
respective dates in all material respects with the then
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in
accordance with GAAP (except in the case of the unaudited
statements, as permitted by
Form 10-Q
and
Form 8-K
under the Exchange Act) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the
notes thereto) and fairly presented in all material respects the
consolidated financial position of Parent and its consolidated
Subsidiaries as of the dates thereof and the consolidated
results of their operations and their consolidated cash flows
for the periods then ended, all in accordance with GAAP
(subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments
described therein). Parent has made available to the Company
complete and correct copies of (i) all management
representation letters delivered by Parent or its management to
Parents auditors in connection with the audit of
Parents 2005 consolidated financial statements and
(ii) all material correspondence with the SEC from the
Applicable Date to the date hereof.
(c) Parent maintains disclosure controls and procedures
required by
Rule 13a-15
or 15d-15
under the Exchange Act. Such disclosure controls and procedures
are effective to ensure that information required to be
disclosed by Parent is recorded and reported on a timely basis
to the individuals responsible for the preparation of the
Parents filings with the SEC and other public disclosure
documents. Parent maintains internal control over financial
reporting (as defined in
Rule 13a-15
or 15d-15,
as applicable, under the Exchange Act). Such internal control
over financial reporting is effective in providing reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with GAAP and includes policies and procedures that
(i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of Parent, (ii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
GAAP, and that receipts and expenditures of Parent are being
made only in accordance with authorizations of management and
directors of Parent, and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use or disposition of Parents assets that
could have a material effect on its financial statements. Parent
has disclosed, based on the most recent evaluation of its chief
executive officer and its chief financial officer prior to the
date hereof, to Parents auditors and the audit committee
of the Parents Board (A) any significant deficiencies
in the design or operation of its internal controls over
financial reporting that are reasonably likely to adversely
affect Parents ability to record, process, summarize and
report financial information and has identified for
Parents auditors and audit committee of Parents
Board any material weaknesses in internal control over financial
reporting and (B) any fraud, whether or not material, that
involves management or other employees who have a significant
role in the Companys internal control over financial
reporting. Parent has made available to the Company (i) a
summary of any such disclosure made by management to
Parents auditors and audit committee since the Applicable
Date and (ii) any communication since the Applicable Date
made by management or Parents auditors to the audit
committee required or contemplated by listing standards of the
NYSE, the audit committees charter or professional
standards of the Public Company Accounting Oversight Board.
Since the Applicable Date, no material complaints from any
source regarding accounting, internal accounting controls or
auditing matters, and no material concerns from Parent employees
regarding questionable accounting or auditing
A-28
matters, have been received by the Parent. Parent has made
available to Company a summary of all complaints or concerns
relating to other matters made since the Applicable Date through
Parents whistleblower hot line or equivalent system for
receipt of employee concerns regarding possible violations of
law. No attorney representing Parent or any Parent Subsidiary,
whether or not employed by Parent or any Parent Subsidiary, has
reported evidence of a violation of securities laws, breach of
fiduciary duty or similar violation by the Parent or any of its
officers, directors, employees or agents to Parents chief
legal officer, audit committee (or other committee designated
for the purpose) of the Board or the Board pursuant to the rules
adopted pursuant to Section 307 of the Sarbanes-Oxley Act
or any Parent policy contemplating such reporting.
Section 4.8. Absence
of Certain Changes or Events. Except as
disclosed in the Filed Parent SEC Documents(excluding any
disclosures set forth in any risk factor section, in any section
relating to forward looking statements and any other disclosures
included therein that are cautionary, predictive or
forward-looking in nature), since June 30, 2006 through the
date hereof, Parent and the Parent Subsidiaries have conducted
their business only in the ordinary course of business
consistent with past practice and there has not been
(i) any Parent Material Adverse Effect, (ii) any
occurrence or circumstance that with the passage of time would,
individually or in the aggregate, reasonably be expected to
result in a Parent Material Adverse Effect or (iii) any
action which would have constituted a breach of clause (a),
(d), (e) or (f) (as it relates to the foregoing
clauses) of Section 5.2 if such
Section 5.2 had applied since June 30, 2006.
Section 4.9. Taxes.
(a) Each of Parent and the Parent Subsidiaries has timely
filed all material Tax Returns (including all federal and state
income Tax Returns) required to be filed by it with the
appropriate Governmental Agency (taking into account all validly
and duly obtained extensions of time to file), and such material
Tax Returns are true, correct, and complete in all material
respects.
(b) Each of Parent and the Parent Subsidiaries has timely
paid (or Parent has paid on its behalf) all material Taxes
(including all federal and state income Taxes) required to be
paid (whether or not shown on such filed Tax Returns).
(c) Neither Parent nor any Parent Subsidiary is the subject
of any audit, examination, or similar proceeding in respect of
federal income Taxes, and to the Knowledge of Parent, no audit,
examination or other proceeding in respect of federal income
Taxes involving Parent or any Parent Subsidiary is being
considered by the IRS.
(d) Parent has always been, and will be through the Closing
Date be, a REIT within the meaning of Section 856 of the
Code and has satisfied all requirements to qualify as a REIT
under the Code. Parent has neither taken nor omitted to take any
action that could result in a reasonable challenge to its status
as a REIT.
(e) Neither Parent nor Merger Sub has taken or agreed to
take any action or is aware of any fact or circumstance that
might prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the
Code.
Section 4.10. Compliance
with Legal Requirements. Except as set forth
in the Filed Parent SEC Documents (excluding any disclosures set
forth in any risk factor section, in any section relating to
forward looking statements and any other disclosures included
therein that are cautionary, predictive or forward-looking in
nature) and except for environmental matters, which are
exclusively addressed in Section 4.17, to the
Knowledge of Parent, Parent and the Parent Subsidiaries are in
compliance with all applicable Legal Requirements, except for
such non-compliance as would not reasonably be expected to have
a Parent Material Adverse Effect.
Section 4.11. Merger
Sub and OP Merger Sub Operations. Merger Sub
and OP Merger Sub were formed solely for the purpose of engaging
in the transactions contemplated by this Agreement and neither
Merger Sub or OP Merger Sub has engaged in any business
activities or conducted any operations other than in connection
with the transactions contemplated by this Agreement. As of the
Merger Effective Time and the OP Merger Effective Time,
respectively, all of the outstanding membership interests and
partnership interests, respectively, of Merger Sub and OP Merger
Sub will be owned directly or indirectly by Parent.
Section 4.12. Litigation.
Except as disclosed on Section 4.12 of the Parent
Disclosure Letter, as of the date of this Agreement, there is no
(a) suit, action or proceeding pending or, to the Knowledge
of Parent, threatened
A-29
against Parent or any Parent Subsidiary involving or relating to
any current or former assets, properties or operations of Parent
or any Parent Subsidiary or the transactions contemplated by
this Agreement or (b) Order of any Governmental Agency or
arbitrator outstanding against Parent or any Parent Subsidiary,
except in the case of clauses (a) or (b), as would not,
individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect. No claim is pending or has
been made under any directors or officers liability
insurance policy maintained at any time by Parent or any of the
Parent Subsidiaries.
Section 4.13. Investment
Company Act of 1940. Neither Parent nor any
of the Parent Subsidiaries is, or at the Effective Times will
be, required to be registered as an investment company under the
Investment Company Act of 1940, as amended.
Section 4.14. Opinion
of Financial Advisor. Parents Board
has received the opinion of the Parent Financial Advisor to the
effect that, as of the date hereof and subject to the various
assumptions and limitations set forth therein, the Exchange
Ratio is fair, from a financial point of view, to Parent, a copy
of which opinion in the form in which it has been or will be
delivered to Parent has been delivered to the Company for
informational purposes, it being understood and acknowledged by
the Company that such opinion has been rendered for the benefit
of Parent, and is not intended to, and may not, be relied upon
by any other Person.
Section 4.15. No
Ownership of Company Common Stock. Neither
Parent nor any Parent Subsidiary owns any Company Common Shares
or other securities of the Company.
Section 4.16. Employee
Benefits. As used herein, the term
Parent Plan includes any pension, retirement,
savings, disability, medical, dental, health, life, death
benefit, group insurance, profit sharing, deferred compensation,
stock option, stock loan, bonus, incentive, vacation pay,
tuition reimbursement, severance pay, or other employee benefit
plan, trust, agreement, contract, arrangement, policy or
commitment (including, without limitation, any Pension Plan and
any Welfare Plan), whether any of the foregoing is funded,
insured or self-funded, written or oral, (i) sponsored or
maintained by Parent or the Parent Subsidiaries (each a
Parent Group Member) and covering any Parent
Group Members active or former employees (or their
beneficiaries), (ii) to which any Parent Group Member is a
party or by which any Parent Group Member (or any of the rights,
properties or assets thereof) is bound or (iii) with
respect to which any current Parent Group Member may otherwise
have any material Liability (whether or not such Parent Group
Member still maintains such Parent Plan).
(a) Except as would not reasonably be expected to have a
Parent Material Adverse Effect, no Parent Group Member has any
Liability under any Welfare Plan that provides for continuing
benefits or coverage for any participant or any beneficiary of a
participant after such participants termination of
employment, except as may be required by Section 4980B of
the Code or Section 601 et seq. of ERISA, or under any
other applicable Legal Requirement.
(b) Except as would not reasonably be expected to have a
Parent Material Adverse Effect, each Parent Plan complies in all
material respects with the applicable requirements of ERISA, the
Code and any other applicable Legal Requirement governing such
Parent Plan, and each Parent Plan has at all times been properly
administered in all material respects in accordance with ERISA,
the Code and all such other applicable Legal Requirements, and
in accordance with its terms. Each Pension Plan that is intended
to be qualified is qualified under Section 401(a) of the
Code, has received a favorable determination letter from the IRS
stating that the form of such Pension Plan meets the applicable
requirements of Section 401(a) of the Code and that the
form of trust associated with such Pension Plan meets the
applicable requirements for tax exemption under
Section 501(a) of the Code and, except as would not
reasonably be expected to have a Parent Material Adverse Effect,
no event has occurred that would jeopardize the qualified status
of any such plan or the tax exempt status of any such trust
under Sections 401(a) and Section 501(a) of the Code,
respectively. Except as would not reasonably be expected to have
a Parent Material Adverse Effect, no lawsuits, claims (other
than routine claims for benefits) or complaints to, or by, any
Person or Governmental Agency with respect to any Parent Plan
have been filed or are pending, Parent has received no notice of
such a lawsuit, claim or complaint and, to the Knowledge of
Parent, there is no fact or contemplated event that would be
expected to give rise to any such lawsuit, claim (other than
routine claims for benefits) or complaint with respect to any
Parent Plan.
A-30
Without limiting the foregoing, the following are true with
respect to each Parent Plan, except as would not reasonably be
expected to have a Parent Material Adverse Effect:
(i) all Parent Group Members have filed or caused to be
filed every material return, report, statement, notice,
declaration and other document required by ERISA, the Code or
any other Legal Requirement or Governmental Agency (including,
without limitation, the IRS and the Department of Labor) with
respect to each such Parent Plan, each of such filings has been
complete and accurate in all material respects and no Parent
Group Member has incurred any material Liability in connection
with such filings;
(ii) all Parent Group Members have timely delivered or
caused to be delivered to every participant, beneficiary and
other party entitled to such material, all material plan
descriptions, returns, reports, schedules, notices, statements
and similar materials, including, without limitation, summary
plan descriptions and summary annual reports, as are required
under Title I of ERISA, the Code, or both, and no Parent
Group Member has incurred any material Liability in connection
with such deliveries; and
(iii) all contributions and payments with respect to Parent
Plans that are required to be made by a Parent Group Member with
respect to periods ending on or before the Closing Date
(including periods from the first day of the current plan or
policy year to the Closing Date) have been, or will be, made or
accrued before the Closing Date in accordance with the
appropriate plan document, actuarial report, collective
bargaining agreements or insurance contracts or arrangements or
as otherwise required by ERISA or the Code.
(c) With respect to each such Parent Plan, to the extent
applicable, Parent has previously made available to the Company
true and complete copies of (A) plan documents and summary
plan descriptions, or any and all other material documents that
establish the existence of the plan, trust, arrangement,
contract, policy or commitment, and all amendments thereto,
(B) the most recent determination letter, if any, received
from the IRS, (C) the three most recent Form 5500
Annual Reports (and all schedules and reports relating thereto)
and (D) all related trust agreements, insurance contracts
or other funding agreements that implement each such Parent Plan.
(d) With respect to each Parent Plan, there has not
occurred, and no Person or entity is contractually bound to
enter into, any prohibited transaction within the
meaning of Section 4975(c) of the Code or Section 406
of ERISA, which transaction is not exempt from
Section 4975(c) of the Code or Section 406 of ERISA
pursuant to a statutory or administrative exemption and that
would subject a Parent Group Member to a material excise tax or
penalty.
(e) None of the Parent Plans is a Multiemployer Plan. None
of the Parent Group Members or any trade or business (whether or
not incorporated) which is or has ever been treated as a single
employer with any Parent Group Member under Section 414(b),
(c), (m) or (o) of the Code (Parent ERISA
Affiliate) has incurred any liability due to a
complete or partial withdrawal from a Multiemployer Plan or due
to the termination or reorganization of a Multiemployer Plan,
except for any such liability which has been satisfied in full,
and no events have occurred and no circumstances exist that
would be expected to result in any such Liability to any Parent
Group Member or Parent ERISA Affiliate.
(f) None of the Parent Plans is a Title IV Plan, and
no Parent Group Member or Parent ERISA Affiliate has ever
maintained a Title IV Plan. No Liability under
Title IV of ERISA has been or is expected to be incurred by
any Parent Group Member or Parent ERISA Affiliate.
(g) Except as disclosed on Section 4.16(g) of
the Parent Disclosure Letter, with respect to each Parent Plan
maintained or sponsored by any Parent Group Member or Parent
ERISA Affiliate, such plans provide the plan sponsor the
authority to amend or terminate the plan at any time, subject to
applicable requirements of ERISA, the Code and other Legal
Requirements.
(h) Except as disclosed on Section 4.16(h) of
the Parent Disclosure Letter, none of Parent or any of its
Subsidiaries is a party to any agreement or arrangement that
could reasonably be expected to result, separately or in the
aggregate, in the actual or deemed payment by Parent or any of
its Subsidiaries of any excess parachute payments
within the meaning of Section 280G of the Code.
Section 4.17. Environmental
Matters. Parent has made available to the
Company true and complete copies of the final versions of all
environmental investigations, compliance audits and asbestos
surveys, and reports of
A-31
environmental testing or analysis made by or on behalf of Parent
or any of the Parent Subsidiaries with respect to Parent and the
Parent Subsidiaries, their past and present operations, and the
Parents properties currently in the possession or control
of Parent or any Parent Subsidiary (the Parent
Environmental Reports). Except as disclosed in
Section 4.17 of the Parent Disclosure Letter or as
set forth in the Parent Environmental Reports or as would not
reasonably be expected to have a Parent Material Adverse Effect,
to the Knowledge of Parent, (i) no Hazardous Substances
have been used, stored, manufactured, treated or processed on or
about any real property owned or leased by Parent (such
properties, the Parent Properties) by or on
behalf of Parent or any of the Parent Subsidiaries except in
material compliance with Environmental Law and in the ordinary
course of business; (ii) there has been no release or
threatened release of any Hazardous Substance on, in, under, or
from any Parent Property which requires any disclosure,
investigation, remediation, monitoring, maintenance, abatement
or deed or use restriction, or which will give rise to any other
Liability or diminution in value under any Environmental Laws;
(iii) neither Parent nor any Parent Subsidiary nor former
Parent Subsidiary has arranged for the disposal of any Hazardous
Substance at, or transported any Hazardous Substance to, any
site for which Parent or any Parent Subsidiary or any former
Parent Subsidiary has received notice that it is or may be
liable under Environmental Laws; (iv) each Parent Property
is in material compliance with all Environmental Laws;
(v) neither Parent nor any Parent Subsidiary has received
any notice of material violation or potential material Liability
under any Environmental Laws from any Person or any Governmental
Agency inquiry, request for information, or demand letter under
any Environmental Law relating to the Parent Properties, nor is
Parent or any Parent Subsidiary subject to any material Orders,
agreements, settlements or other such obligations arising under
Environmental Laws, nor are there any material administrative,
civil or criminal actions, suits, proceedings or investigations
pending or threatened against Parent under any Environmental
Law; (vi) no Lien has been recorded on any Parent Property
by any Governmental Agency under any Environmental Law (other
than any Permitted Lien); (vii) since the date of the
Parent Environmental Reports, neither the Parent nor any Parent
Subsidiary has installed (or caused or permitted to be
installed) any underground storage tanks or friable asbestos
containing materials in any of the Parent Properties; and
(viii) Parent has received no written complaints directed
to Parent relating to air quality or Microbial Matter at any
Parent property and Parent has no Knowledge of any materially
adverse condition related to Microbial Matter at any Parent
Property; provided, however, that Parent makes no
representation or warranty under this Section 4.17
with respect to the activities of its tenants under leases where
the Parent or a Parent Subsidiary is the lessor or sublessor,
any other activities that occur on the Parent Properties, or the
contents of the Parent Properties other than activities by the
Parent or any Parent Subsidiary or contents maintained by the
Parent or any Parent Subsidiary on the Parent Properties.
Section 4.18. Related
Party Transactions. Other than as disclosed
in the Parents Definitive Proxy Statement filed with the
SEC on March 28, 2006 or in Section 4.18 of the
Parent Disclosure Letter, there are no Contracts between the
Parent and any Person who is an officer, director (or person
occupying a similar position in any other entity) or Affiliate
of Parent or any of the Parent Subsidiaries, any member of the
immediate family (as such term is defined in
Item 404 of
Regulation S-K)
of any of the foregoing or any entity of which any of the
foregoing is an Affiliate that are required to be disclosed
pursuant to Item 404 of
Regulation S-K.
Any such Contracts, copies of all of which have previously been
made available to the Company, are listed on
Section 4.18 of the Parent Disclosure Letter.
Section 4.19. Insurance.
Except for those matters that have not had and would not
reasonably be expected to have a Parent Material Adverse Effect
or as set forth on Section 4.19 of the Parent
Disclosure Letter, there is no claim for coverage by Parent
pending under any of its Insurance Policies that has been denied
or disputed by the insurer. Except for those matters that have
not had and would not reasonably be expected to have a Parent
Material Adverse Effect, all premiums payable under all such
Insurance Policies have been paid, and Parent has otherwise
complied in all material respects with the terms and conditions
of all such Insurance Policies. To the Knowledge of Parent, such
Insurance Policies are valid and enforceable in accordance with
their terms and are in full force and effect. Parent reviews its
insurance coverages on an annual basis in a commercially
reasonable manner. Neither Parent nor any Parent Subsidiary has
received written notice from any insurance carrier suspending,
revoking or modifying (or threatening any such action) any such
Insurance Policy which has not been replaced on substantially
similar terms prior to the date of such suspension, revocation
or modification. Neither Parent nor any Parent Subsidiary has
received from any insurance carrier which carries insurance on
the Parents properties or any Board of Fire Underwriters
any written notice of or has Knowledge of any defect or
inadequacy in connection with any
A-32
Parent Property or its operation or requiring or recommending
any repairs or work to be done on such Parent Property that if
not repaired or remedied would reasonably be expected to have a
Parent Material Adverse Effect.
Section 4.20. Brokers. No
broker, investment banker or other person, other than Deutsche
Bank Securities Inc. (the Parent Financial
Advisor), is entitled to any brokers,
finders or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent, for which fee or
commission Parent or any Parent Subsidiary may be liable.
Section 4.21. Information
Supplied. None of the information to be
supplied by Parent or its Representatives specifically for
inclusion or incorporation by reference in the
S-4
Registration Statement or the Proxy Statement/Prospectus will,
at the time the
S-4
Registration Statement is declared effective by the SEC or on
the date the Proxy Statement/Prospectus is first mailed to the
holders of Company Common Shares or at the time of the Company
Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
misleading. All documents that Parent is responsible for filing
with the SEC in connection with the transactions contemplated
herein will comply as to form, in all material respects, with
the provisions of the Exchange Act, and each such document
required to be filed with any Governmental Agency other than the
SEC will comply in all material respects with the provisions of
applicable law as to the information required to be contained
therein. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to the information
supplied or to be supplied by the Company or any Affiliate
thereof for inclusion or incorporation by reference in the
S-4
Registration Statement or the Proxy Statement/Prospectus.
Section 4.22. No
Other Representations or Warranties. Except
for the representations and warranties contained in this
Article IV, the Company and Company OP acknowledge
that neither Parent nor any other Person or entity on behalf of
Parent has made, and neither Company nor Company OP has relied
upon, any representation or warranty, whether express or
implied, with respect to Parent or any of its Subsidiaries or
their respective businesses, affairs, assets, liabilities,
financial condition, results of operations, future operating or
financial results, estimates, projections, forecasts, plans or
prospects (including the reasonableness of the assumptions
underlying such estimates, projections, forecasts, plans or
prospects) or with respect to the accuracy or completeness of
any other information provided or made available to the Company
and Company OP by or on behalf of Parent. Company and Company OP
acknowledge that there are uncertainties inherent in attempting
to make such estimates, projections and other forecasts and
plans, that Company and Company OP are taking full
responsibility for making their own evaluation of the adequacy
and accuracy of all estimates, projections and other forecasts
and plans so furnished to them (including the reasonableness of
the assumptions underlying such estimates, projections,
forecasts or plans). Neither Parent nor any other Person or
entity will have, or be subject to, any liability or
indemnification obligation to the Company, Company OP or any
other Person or entity resulting from the distribution in
written or verbal communications to the Company or Company OP or
use by the Company or Company OP of, any such information,
including any information, documents, estimates, projections,
forecasts, plans, prospects, forward looking statements or other
material made available to the Company or Company OP in online
data rooms, confidential information memoranda or
management interviews and presentations in expectation of the
transactions contemplated by this Agreement, except to the
extent any such information is explicitly the subject of a
representation or warranty in this Article IV,
including the Parent Disclosure Letter.
ARTICLE V.
COVENANTS
Section 5.1. Conduct
of the Companys Business Pending
Mergers.
During the period from the date hereof until the Effective Times
or earlier termination of this Agreement according to its terms,
the Company shall, and shall cause each of the Company
Subsidiaries to, conduct its business only in the ordinary
course of business consistent with past practice and in
compliance with all Legal Requirements and Contracts to which
the Company or any Company Subsidiary is a party.
Notwithstanding the foregoing, during the period from the date
hereof until the Effective Times or earlier termination of this
Agreement according to its terms, except (w) in connection
with the performance (including payment obligations) in the
ordinary course of
A-33
business under Contracts of the Company or any of the Company
Subsidiaries entered into prior to the date hereof or entered
into on or after the date hereof as permitted or required by
this Agreement, (x) as set forth on Section 5.1
of the Company Disclosure Letter, (y) as consented to in
writing by Parent, which consent shall not unreasonably be
withheld, conditioned or delayed, or (z) as expressly
contemplated herein, the Company shall not, and shall cause each
of the Company Subsidiaries to not:
(a) change in any material manner any of its methods,
principles or practices of accounting in effect at the Financial
Statement Date, except as may be required by GAAP or Legal
Requirements or as recommended by the Companys independent
auditors, or pursuant to written instructions, comments or
orders from the SEC;
(b) other than (i) any refinancings of existing
Indebtedness on terms no less favorable in the aggregate to the
Company and the Company Subsidiaries than the terms of the
existing Indebtedness being refinanced, (ii) Indebtedness
that is incurred pursuant to the Interim Financing or
(iii) Indebtedness incurred under lines of credit existing
as of the date hereof in accordance with the terms thereof as of
the date hereof, incur, become subject to or assume or agree to
incur, become subject to or assume any Indebtedness;
(c) make any loans, advances or capital contributions to,
or investments in, any other Person (other than to (x) any
Person that is a Company Subsidiary as of the date hereof or any
Person that becomes a wholly-owned Subsidiary of the Company or
Company OP or a Subsidiary controlled by the Company or Company
OP after the date hereof or (y) as permitted by
Section 5.1(k));
(d) sell or otherwise dispose of any Company Property;
(e) modify or amend in any material respect or terminate
any Material Contract, modify or amend in any respect that would
reasonably be likely to result in a Company Property Material
Adverse Effect or terminate any Space Lease, modify or amend in
any material respect or terminate any lease for a Company Leased
Property or modify or amend any Contract identified in
Section 3.23 to increase the basis for calculation
of fees payable to the Persons thereunder, or enter into any new
Material Contract, in each case other than in the ordinary
course of business consistent with past practice or as otherwise
permitted by this Section 5.1;
(f) make or agree to make any capital expenditure
(i) in excess of $50,000 individually and $200,000 in the
aggregate, (ii) unless in the nature of an emergency repair
pursuant to a valid landlord obligation to repair under a Space
Lease, or (iii) unless in furtherance of leasing activity
either as a renewal or a new lease obligation, including
commitments to tenant improvements not provided for in
Section 5.1 of the Company Disclosure Letter after
the date hereof not in excess of $1,000,000 in the aggregate
(increasing to $1,500,000 in the aggregate during the period
between (y) January 10, 2007 and (z) either the
completion of the Mergers or termination of this Agreement);
(g) (i) acquire, enter into any option to acquire, or
exercise an option or other right or election or enter into any
Contract for the acquisition of any real property
(ii) commence construction of, or enter into any Contract
to develop or construct, any real estate projects or
(iii) enter into any Contract with respect to a joint
venture or similar arrangement to effect any of the foregoing;
(h) except in connection with the acquisition of real
property permitted hereunder, merge or consolidate with, acquire
all or substantially all of the assets of, or acquire the
beneficial ownership of a majority of the outstanding capital
stock or other equity interest in any Person or division thereof;
(i) amend the Company Organizational Documents or the
articles of incorporation, by-laws, partnership agreement, joint
venture agreement or comparable charter or organization document
of the Company or any Company Subsidiary, except as required to
obtain the consents set forth on Section 3.6(b) of
the Company Disclosure Letter;
(j) (i) declare, set aside or pay any dividend or
other distribution payable in cash, shares, stock or property
with respect to the Companys shares of beneficial interest
or capital stock or other equity interests of any Company
Subsidiary, other than (1) pursuant to
Section 6.9, (2) dividends and distributions by
a Company Subsidiary to its parent, (3) a distribution per
Company OP Unit in the same amount as a dividend per share
of Company Common Shares permitted pursuant to clause (1)
above, with the same record and payment dates as such dividend
on Company Common Shares or (4) distributions by the
Company OP to the Company sufficient
A-34
to permit the Company to make distributions with respect to the
Company Preferred Shares in accordance with the Declaration;
(ii) redeem, purchase or otherwise acquire directly or
indirectly any of the Companys shares of beneficial
interest (or options, warrants, calls, commitments or rights of
any kind to acquire any shares of beneficial interest of the
Company) or capital stock or other equity interests of any
Company Subsidiary, except for deemed transfers of Company
excess shares required under the Declaration in order to
preserve the status of the Company as a REIT under the Code and
except pursuant to the terms of options, warrants or other
securities outstanding on the date hereof, including the Company
Preferred Shares, or upon redemption of Company OP Units in
accordance with the Company OP Partnership Agreement;
(iii) issue, sell, pledge, dispose of or encumber any
additional shares of beneficial interest of the Company or
capital stock or other equity interests of any Company
Subsidiary, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of beneficial interest or capital stock
of any class of the Company or the Company Subsidiaries, except
pursuant to the terms of options, warrants or other securities
outstanding on the date hereof, including the Company Preferred
Shares, or upon redemption of Company OP Units in
accordance with the Company OP Partnership Agreement; or
(iv) split, combine or reclassify the outstanding capital
stock or other equity interests of the Company or of its
Subsidiaries;
(k) except as in the ordinary course of business consistent
with past practice, including compensation increases, bonuses
and awards under the Companys Stock Plans,
(i) increase in any manner the compensation or fringe
benefits of any trustee, director or officer of the Company or
any Company Subsidiary or pay any benefit not required by any
plan or arrangement as in effect as of the date hereof;
(ii) increase the compensation or benefits payable or to
become payable to the Companys employees or employees of
any of the Companys Subsidiaries by an amount in excess of
4% or pay a bonus for performance to any employee earning less
than $70,000 per year in excess of $4,000;
(iii) except as otherwise provided herein, (1) adopt
any new Employee Plan, (2) grant any award under any
existing Company Stock Plan, or (3) amend or otherwise
increase, or accelerate the payment or vesting of the amounts
payable or to become payable under, any existing Employee Plan
except as required by Legal Requirements; (iv) enter into
or modify or amend any employment or severance agreement with,
or grant any new severance or termination rights to, any
officer, trustee, director or employee; (v) make any loan
or advance to any trustee, director, executive officer or
employee (other than travel advances in the ordinary course of
business); or (vi) engage in a transaction with, or enter
into, amend, modify, terminate, waive or take any similar action
with respect to any Contract with a Person described in
Section 3.13;
(l) settle or otherwise compromise any shareholder
derivative or class action claims arising out of or in
connection with any of the transactions contemplated by this
Agreement or any material litigation, arbitration or other
judicial or administrative dispute or proceeding relating to the
Company, any of the Company Subsidiaries or any of their
respective assets other than the payment, discharge or
satisfaction of Liabilities reflected or reserved against in
full in the Company Audited Financials or the Company Interim
Financials and other than collection matters in the ordinary
course of business consistent with past practice;
(m) (i) make or rescind any express or deemed material
election relative to Taxes or alter any method of Tax
accounting, (ii) enter into any Tax sharing, Tax indemnity
or Tax protection agreement, (iii) settle, compromise,
enter into, or agree to enter into a closing agreement or settle
any material federal, state, local or foreign Tax liability,
(iv) extend the statute of limitations with respect to any
Taxes of the Company or any Company Subsidiary, (v) make or
rescind any material election relative to Taxes, unless such
election or rescission is necessary to preserve the status of
the Company as a REIT (or of any Company Subsidiary, as a
partnership) for federal income tax purposes or is consistent
with elections historically made by the Company, or
(vi) take any action, or fail to take any action, which can
reasonably be expected to cause (1) the Company to fail to
qualify as a REIT, or (2) any Company Subsidiary to cease
to be treated as a partnership for federal income tax purposes,
as a REIT, as a qualified REIT subsidiary under
Section 856(i) of the Code, as a disregarded entity under
Treasury
Regulation Section 301.7701-3,
or as a taxable REIT subsidiary under Section 856(l) of the
Code, as the case may be;
(n) other than filing fees paid to Governmental Agencies in
connection with the Mergers, make any payments or incur any
Liability or obligation for the purpose of obtaining any consent
from any Person to the Mergers that will affect Parent or the
Company to either of their material economic detriment;
A-35
(o) waive the benefits of, or agree to modify in any
material manner, any standstill or similar agreement relating to
the Company or the Company Subsidiaries;
(p) take any action that would reasonably be expected to
result in any of the conditions to the Merger set forth in
Article VII not being satisfied; or
(q) authorize, recommend, propose or announce an intention
to do any of the foregoing prohibited actions, or enter into any
Contract to do any of the foregoing prohibited actions.
Section 5.2. Conduct
of Business of Parent.
During the period from the date hereof until the Effective Times
or earlier termination of this Agreement according to its terms,
Parent shall, and shall cause each of the Parent Subsidiaries
to, conduct its business only in the ordinary course of business
consistent with past practice and in compliance with all Legal
Requirements and Contracts to which Parent or any Parent
Subsidiary is a party. Notwithstanding the foregoing, during the
period from the date hereof until the Effective Times or earlier
termination of this Agreement according to its terms, except
(x) as consented to in writing by the Company, which
consent shall not unreasonably be withheld, conditioned or
delayed, or (y) as expressly contemplated herein, Parent
shall not, and shall cause each of the Parent Subsidiaries to
not:
(a) change any of its methods, principles or practices of
accounting in effect at the Financial Statement Date, except as
may be required by GAAP or Legal Requirements or as recommended
by Parents independent auditors, or pursuant to written
instructions, comments or orders from the SEC;
(b) amend any of the Parents organizational documents
in a manner that adversely affects the holders of Company Common
Shares or Company OP Units;
(c) take any action that would reasonably be expected to
result in any of the conditions to the Merger set forth in
Article VII not being satisfied;
(d) merge or consolidate with, acquire all or substantially
all of the assets of, or acquire the beneficial ownership of a
majority of the outstanding capital stock or other equity
interest in any Person or division thereof, if such transaction
involves the issuance of Parent Shares, in whole or in part as
consideration in such transaction;
(e) declare, set aside or pay any dividend or other
distribution payable in cash, shares, stock or property with
respect to the Parent Shares, other than in the ordinary course
of business consistent with past practice; or
(f) authorize, recommend, propose or announce an intention
to do any of the foregoing prohibited actions, or enter into any
Contract to do any of the foregoing prohibited actions.
Section 5.3. Access
to Information; Confidentiality.
(a) Prior to the Effective Times, each of the Company and
Parent shall, and shall cause each of its Subsidiaries to,
afford to the other party and to the officers, employees,
accountants, counsel, financial advisers, brokers, consultants
and other representatives (collectively,
Representatives) of such other party,
reasonable access during normal business hours upon reasonable
advance notice, prior to the Effective Times, to all their
respective properties, including for the purpose of performing
any environmental investigation that Parent or the Company
shall, in its sole discretion, deem reasonably necessary or
advisable, books, Contracts, commitments, personnel, documents
and records and, during such period, each of the Company and
Parent shall, and shall cause each of its Subsidiaries to,
furnish promptly to the other party (i) a copy of each
report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of
federal or state securities laws and (ii) all other
information concerning its business, properties and personnel as
such other party may reasonably request.
(b) Each of the Company and Parent shall, and shall cause
its Subsidiaries to, use its reasonable best efforts to cause
its Representatives to hold any nonpublic information in
confidence to the extent required by, and in accordance with,
and will comply with the confidentiality provisions of, the
agreement between Parent and the Company dated May 11, 2006
(the Confidentiality Agreement).
A-36
(c) Each of the Company and Parent hereby agrees to
indemnify the other party for any loss, damages or claims that
arise as a result of such other partys or its respective
Representatives actions while performing the activities
set forth in this Section 5.3.
Section 5.4. Notices
of Certain Events. Each of the Company and
Parent shall promptly notify the other:
(a) of any notice or other communication from any Person,
other than those disclosed or set forth herein or in the Company
Disclosure Letter or the Parent Disclosure Letter,
(i) alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by
this Agreement or (ii) making allegations which, if true,
would cause any representation or warranty made by it contained
in this Agreement that is qualified as to
materiality, Company Material Adverse
Effect or Parent Material Adverse Effect (as
applicable) to be untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified to be
untrue or inaccurate in any material respect;
(b) of any notice or other communication from any
Governmental Agency in connection with the transactions
contemplated by this Agreement;
(c) of any actions, suits, claims, investigations or
proceedings commenced or, to its Knowledge, threatened that
relate to the consummation of the transactions contemplated by
this Agreement;
(d) if there shall have been a breach of any of its
representations, warranties, covenants or agreements contained
in this Agreement such that the conditions set forth in
Section 7.2(a) or (b) or
Section 7.3(a) or (b), as applicable, are
reasonably likely to be incapable of being satisfied;
(e) of any notice of default under any Material Contract by
or to any Person and of any audit, investigation or inquiry by
the IRS or the SEC
and/or any
state tax or securities authorities or agencies; and
(f) if such party has Knowledge of a breach of any of the
other partys representations, warranties, covenants or
agreements contained in this Agreement such that the conditions
set forth in Section 7.2(a) or (b) or
Section 7.3(a) or (b), as applicable, are
reasonably likely to be incapable of being satisfied;
provided that the failure by either Parent or the Company
to provide notice under this Section 5.4(f) shall in
no event adversely affect such partys rights under this
Agreement, including under Section 9.1(g) or
(h).
Section 5.5. Estoppel
Certificates. Prior to the Merger Effective
Time, the Company shall use commercially reasonable efforts to
procure an estoppel certificate, in a form to be reasonably
agreed upon by Parent and the Company, from the tenant under
each Space Lease listed on Section 5.5 of the
Company Disclosure Letter. Prior to the Merger Effective Time,
the Company shall use its commercially reasonable efforts to
procure an estoppel certificate, in a form to be reasonably
agreed upon by Parent and the Company, from each ground lessor
or ground sublessor of a Company Leased Property listed on
Section 5.5 of the Company Disclosure Letter.
Section 5.6. Reorganization
Qualification. Each of the Company, Company
Subsidiaries, Company OP, Parent, Merger Sub and OP Merger Sub
shall use its reasonable best efforts to cause the Merger to
qualify, and shall not take any action which could prevent the
Merger from qualifying, as a reorganization within the meaning
of Section 368(a) of the Code.
ARTICLE VI.
ADDITIONAL
COVENANTS
Section 6.1. Proxy
Statement/Prospectus; the Company Shareholders
Meeting.
(a) As soon as reasonably practicable after the date
hereof, Parent and the Company shall promptly prepare a proxy
statement and prospectus (the Proxy
Statement/Prospectus) constituting a part of a
registration statement relating to the issuance of Parent Shares
in the Mergers and upon exercise of Converted Options after the
Merger Effective Time (the S-4 Registration
Statement), and Parent shall file with the SEC the
S-4
Registration Statement as promptly as practicable thereafter.
Parent and the Company shall cooperate in providing all of the
information required to be disclosed in such
S-4
Registration Statement, including the preparation of any
required pro forma financial information. Each of Parent and the
Company shall use its reasonable best efforts to have the
S-4
A-37
Registration Statement declared effective by the SEC under the
Securities Act as promptly as practicable after such filing. The
Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its
Subsidiaries, directors, trustees, executive officers,
equityholders or partners, as applicable, and such other matters
as may be reasonably necessary or advisable in connection with
the S-4
Registration Statement or the Proxy Statement/Prospectus. The
Proxy Statement/Prospectus shall include the recommendation of
the Board in favor of approval and adoption of this Agreement
and the Merger, except to the extent the Board shall have
withdrawn or modified its approval or recommendation of this
Agreement as permitted by Section 6.6.
The Company shall use its reasonable best efforts to cause the
Proxy Statement/Prospectus to be mailed to the holders of
Company Common Shares and Company OP Units as promptly as
practicable after the
S-4
Registration Statement becomes effective but in no event until
after the expiration of the First Walk-Away Exercise Period. The
parties shall promptly provide copies, consult with each other
and prepare written responses with respect to any written
comments received from the SEC with respect to the
S-4
Registration Statement and the Proxy Statement/Prospectus and
advise one another of any oral comments received from the SEC.
(b) Parent and the Company shall make all necessary filings
with respect to the Mergers and the transactions contemplated
hereby under the Securities Act and the Exchange Act and
applicable blue sky laws and the rules and regulations
thereunder. Each party will advise the other, promptly after it
receives notice thereof, of the time when the
S-4
Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Parent Shares issuable in
connection with the Mergers for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the
Proxy Statement/Prospectus or the
S-4
Registration Statement or comments thereon and responses thereto
or requests by the SEC for additional information. No amendment
or supplement to the Proxy Statement/Prospectus or the
S-4
Registration Statement shall be filed without the approval of
Parent and the Company, which approval shall not be unreasonably
withheld or delayed; provided that, with respect to
documents filed by Parent or the Company which are incorporated
by reference in the Proxy Statement/Prospectus or the
S-4
Registration Statement, this right of approval shall apply only
with respect to information relating to the other party. If at
any time prior to the Merger Effective Time, any information
relating to Parent or the Company, or any of their respective
Affiliates, officers, trustees or directors, should be
discovered by Parent or the Company that should be set forth in
an amendment or supplement to the Proxy Statement/Prospectus or
the S-4
Registration Statement so that such documents would not include
any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading,
the party which discovers such information shall promptly notify
the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed
with the SEC and, to the extent required by law, disseminated to
the holders of Company Common Shares and Company OP Units.
(c) The Company shall, in accordance with applicable Legal
Requirements and the Company Organizational Documents, as soon
as reasonably practicable following the date hereof, duly call,
give notice of, convene and hold the Company Shareholders
Meeting for the purpose of obtaining the Company Shareholder
Approval. The Company will, through its Board, recommend to its
shareholders approval of this Agreement and the Merger;
provided, that prior to the Company Shareholders Meeting,
such recommendation may be withdrawn, modified or amended as
provided in Section 6.6. The Company shall use all
commercially reasonable efforts, including retaining and
directing a proxy solicitation firm reasonably satisfactory to
Parent to solicit proxies in connection with the Company
Shareholders Meeting, making its executive officers available to
meet in person or by teleconference or other electronic means
with shareholders of the Company and such other efforts as are
customarily used by similarly situated parties in transactions
substantially similar to the transactions contemplated by this
Agreement, to solicit and obtain from shareholders of the
Company proxies with respect to the approval of the Merger in
accordance with applicable Legal Requirements and the Company
Organizational Documents, and take all other action necessary
or, in the reasonable opinion of Parent, advisable to secure any
vote or consent of shareholders required by Entity Law and the
Company Organizational Documents to effect the Merger.
A-38
(d) The Company shall call and hold the Company
Shareholders Meeting whether or not the Board at any time
subsequent to the date hereof determines that this Agreement or
the Merger, is no longer advisable, recommends the rejection
thereof by the Company shareholders, or otherwise makes an
Adverse Recommendation; provided, however, that
the Company shall have no obligation to call and hold the
Company Shareholders Meeting if this Agreement is terminated in
accordance with Section 9.1(e) or
Section 9.1(f) hereof.
Section 6.2. Company
Equity Plans.
(a) Each option to acquire Company Common Shares that is
outstanding immediately prior to the Merger Effective Time (a
Pre-Conversion Option) shall be fully vested
in accordance with the terms of the Companys Employee
Share Purchase Plan, Amended and Restated 2002 Stock Incentive
Plan (or its predecessor 2002 Stock Incentive Plan) and the
agreement evidencing such Pre-Conversion Option at or prior to
the Merger Effective Time. At the Merger Effective Time, each
Pre-Conversion Option shall be converted into an option to
acquire Parent Shares (a Converted Option),
with the number of Parent Shares subject to a Converted Option
equal to the number of Company Common Shares subject to the
Pre-Conversion Option multiplied by the Exchange Ratio. The
exercise price of a Converted Option will be adjusted to equal
the exercise price of the Pre-Conversion Option divided by the
Exchange Ratio. Each Converted Option will be evidenced by an
agreement substantially in the form of the agreements evidencing
the Pre-Conversion Options.
(b) Each Company Common Share subject to a restricted stock
award that is outstanding immediately prior to the Merger
Effective Time pursuant to the Companys Amended and
Restated 2002 Stock Incentive Plan (or its predecessor 2002
Stock Incentive Plan) shall be fully vested at or prior to the
Merger Effective Time. At the Effective Times, holders of such
Company Common Shares shall be entitled to receive the same
consideration with respect to the Merger as the holders of
Company Common Shares.
Section 6.3. Reasonable
Best Efforts; Consents and Approvals.
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable
under or in compliance with applicable Legal Requirements to
consummate and make effective the transactions contemplated by,
and comply with their applicable covenants set forth in, this
Agreement, including using reasonable best efforts (which shall
not require any party to make
out-of-pocket
payments to third parties) to obtain all necessary waivers,
consents and approvals from any Person, including, without
limitation the Company obtaining those set forth in
Section 3.6 of the Company Disclosure Letter, to
effect all necessary registrations and filings and to lift any
injunction or other legal bar to the Mergers (and, in such case,
to proceed with the Mergers as expeditiously as possible).
Notwithstanding anything to the contrary herein, the Company
shall not, without the consent of Parent, be permitted to obtain
any consent that will affect Parent or the Company to either of
their material economic detriment, including any modification of
any Contract or Company Permit. Each party shall promptly inform
the other party of any communication with, and any proposed
understanding, undertaking, or agreement with, any Governmental
Agency regarding any such filings or any such transaction.
Neither party shall participate in any meeting with any
Governmental Agency in respect of any such filings,
investigation, or other inquiry without giving the other party
notice of the meeting and, to the extent permitted by such
Governmental Agency, the opportunity to attend and participate.
(b) In connection with the obtaining of consents from third
parties or obviating the need to obtain such consents, if
requested by Parent, the Company shall or shall cause the
Company Subsidiaries to execute any documents, agreements and
instruments and take such other actions to the extent
practicable, in accordance with applicable Legal Requirements
and the Companys Organizational Documents and the
applicable formation and governing contracts of the Company
Subsidiaries (including forming Subsidiaries and transferring
properties or assets of the Company to such Subsidiaries), all
in such order, form and substance as reasonably requested by
Parent.
(c) In connection with the obtaining of the consent from
third parties in respect of Indebtedness of the Company or any
Company Subsidiary or any Company Lease, in each case, as set
forth on Section 6.3(c) of the Company Disclosure
Letter, or obviating the need to obtain such consents, Parent
shall pay up to $2.5 million in fees, make-whole payments
and
out-of-pocket
costs and expenses incurred by the Company or any Company
Subsidiary or associated with the defeasance or redemption of
such Indebtedness, but not including (i) any fees or
A-39
expenses associated with internal counsel or (ii) fees or
expenses in excess of $300,000 associated with external counsel
for either Parent or the Company (such amount actually paid, the
Lender Consent Fees).
Section 6.4. Listing
of Shares. Parent shall use its reasonable
best efforts to cause the Parent Shares to be issued in the
Mergers to be approved for listing, upon official notice of
issuance, on the New York Stock Exchange
(NYSE). Parent shall also use its reasonable
best efforts to cause the Parent Shares issuable upon exercise
of a Converted Option to be approved for listing, upon official
notice of issuance, on the NYSE.
Section 6.5. Resignations. Effective
as of the Closing, the Company shall cause each trustee of the
Company to resign as a trustee. Upon the written request of
Parent, (i) the Company shall cause any or all of the
trustees or directors (or persons occupying similar positions in
any limited liability company or other entity)
and/or
officers of each direct or indirect Company Subsidiary to resign
or be removed or, as to officers, to resign or be terminated,
effective as of the Closing, and (ii) if the Company or any
of its affiliated entities has the right to appoint any director
(or person occupying a similar position in any limited liability
company or other entity) or to cause the resignation or
termination of any officer of any other entity in which the
Company (directly or indirectly) owns an equity interest, the
Company shall cause, effective as of the Closing, such director
to resign or to be removed
and/or such
officer to resign or be terminated.
Section 6.6. No
Solicitation.
(a) Subject to Section 6.6(b), on and after the
date hereof and prior to the Merger Effective Time, the Company
agrees that:
(i) neither the Company nor any Company Subsidiary shall
invite, initiate, solicit or encourage, directly or indirectly,
any inquiries, proposals, discussions or negotiations or the
making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to the Company
shareholders or holders of Company OP Units) with respect
to any direct or indirect (A) merger, consolidation,
business combination, reorganization, recapitalization,
liquidation, dissolution or similar transaction, (B) sale,
acquisition, tender offer, exchange offer (or the filing of a
registration statement under the Securities Act in connection
with such an exchange offer), share exchange or other
transaction or series of related transactions that, if
consummated, would result in the issuance of securities
representing, or the sale, exchange or transfer of, 15% or more
of the outstanding voting equity securities of the Company or
equity interests in any Company Subsidiary (including, without
limitation, partnership interests and units), or (C) sale,
lease, exchange, mortgage, pledge, transfer or other disposition
(Transfer) of any assets of the Company or
any Company Subsidiary in one or a series of related
transactions that, if consummated, would result in the Transfer
of more than 15% of the consolidated assets of the Company (any
such proposal or offer being hereinafter referred to as an
Acquisition Proposal), or engage in any
discussions or negotiations with or provide any confidential or
non-public information or data to, or afford access to
properties, books or records to, any Person relating to, or that
may reasonably be expected to lead to, an Acquisition Proposal,
or agree to, approve or recommend any Acquisition Proposal or
enter into any letter of intent, agreement in principle or
agreement relating to an Acquisition Proposal, or propose
publicly to agree to do any of the foregoing, or otherwise
facilitate any effort or attempt to make or implement an
Acquisition Proposal;
(ii) the Company and the Company Subsidiaries shall
immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons
conducted heretofore with respect to any of the foregoing
(including any Acquisition Proposal) and use their reasonable
best efforts to inform each Company Representative of the
obligations undertaken in this Section 6.6 and use
their reasonable best efforts or, in the case of any Company
Representative that constitutes a third party legal, accounting
or financial advisor, their commercially reasonable efforts, to
cause each such Company Representative to comply with such
obligations; and
(iii) the Company shall (A) notify Parent promptly
(but in any event within 24 hours), orally and in writing,
if the Company, any Company Subsidiary or any Company
Representative receives (1) an Acquisition Proposal or any
material amendment or change in any previously received
Acquisition Proposal, (2) any request for confidential or
nonpublic information or data relating to, or for access to the
properties, books or records of, the Company or any Company
Subsidiary by any Person that has made, or to such partys
A-40
knowledge may be considering making, an Acquisition Proposal, or
(3) any oral or written expression that any such
activities, discussions or negotiations are sought to be
initiated or continued with the Company, and, as applicable,
include in such notice the identity of the Person making such
Acquisition Proposal, indication or request and the material
terms of such Acquisition Proposal, indication or request; and
(B) keep Parent informed on a prompt basis of the status
and material terms of (including all material changes to the
status or material terms of) any such Acquisition Proposal,
indication or request.
(b) Notwithstanding Section 6.6(a), prior to
obtaining the Company Shareholder Approval, the Board shall not
be prohibited from furnishing information to, or entering into
discussions or negotiations with, any Person that makes a bona
fide written Acquisition Proposal to the Board after the date
hereof which was not invited, initiated, solicited or
encouraged, directly or indirectly, by the Company, any Company
Subsidiary or any Company Representative on or after the date
hereof if, and only to the extent that, (i) the Board
concludes in good faith, based upon advice of its outside legal
counsel, that such action is required to discharge the
Boards duties to the Company and its shareholders under
Entity Law, (ii) a majority of the Board determines in good
faith, after consultation with its financial advisors of
nationally recognized reputation and outside legal counsel, that
such Acquisition Proposal is reasonably likely to result in a
Superior Acquisition Proposal, (iii) the Company complies
with all of its obligations under this Agreement,
(iv) prior to furnishing such information to, or entering
into discussions or negotiations with, such Person, the Company
provides written notice to Parent to the effect that it is
furnishing information to, or entering into discussions with
such Person, and (v) the Company enters into a
confidentiality agreement with such Person the material terms of
which are (without regard to the terms of such Acquisition
Proposal) in all material respects no less favorable to the
Company, and no less restrictive to the Person making such
Acquisition Proposal, than those contained in the
Confidentiality Agreement but which confidentiality agreement
permits disclosure to Parent of the identity of the Person
making such Acquisition Proposal and the material terms of such
Acquisition Proposal.
(c) If, prior to obtaining the Company Shareholder
Approval, the Board or any committee thereof intends:
(i) to publicly approve or recommend, or propose to
publicly approve or recommend, any Superior Acquisition
Proposal, or (ii) to cause the Company to enter into any
agreement with respect to any Superior Acquisition Proposal
(other than any confidentiality agreement as contemplated by
Section 6.6(b)) (a Competing
Agreement), then at least five Business Days prior to
taking such action: (A) the Company shall provide Parent
with written notice advising Parent that the Board has received
a Superior Acquisition Proposal that it intends to accept,
specifying the material terms and conditions of such Superior
Acquisition Proposal, identifying the Person or Persons making
such Superior Acquisition Proposal and, if in writing,
delivering to Parent the most recent draft of such definitive
Competing Agreement and a summary of the material terms of any
agreement to which the Company or any Company Subsidiary is a
party that is integrated therewith, in its possession, and
(B) the Company shall, and shall cause its financial and
legal advisors to, negotiate in good faith with Parent for up to
five (5) Business Days to make adjustments in the terms and
conditions of this Agreement (the Adjusted
Terms). If following the completion of such five
(5) Business Day period the Board, in its sole judgment,
has determined in good faith, after consultation with its
financial advisors of nationally recognized reputation and
outside legal counsel, that the Adjusted Terms are not at least
as favorable to the Company shareholders as the Superior
Acquisition Proposal (taking into account all financial and
strategic considerations and other relevant factors, including
relevant legal, financial, regulatory and other aspects of such
proposals, and the conditions, prospects and time required for
completion of such proposal), then the Board or any committee
thereof may: (i) publicly approve or recommend, or propose
to approve or recommend, such Superior Acquisition Proposal;
(ii) make an Adverse Recommendation or (iii) cause the
Company to enter into a Competing Agreement with respect to such
Superior Acquisition Proposal.
(d) For all purposes of this Agreement, Superior
Acquisition Proposal means a bona fide unsolicited
written proposal made by a third party to acquire, directly or
indirectly, the Company
and/or the
Company Subsidiaries pursuant to a tender or exchange offer,
merger, share exchange, consolidation or sale of all or
substantially all of the assets of the Company and the Company
Subsidiaries or otherwise (i) on terms which a majority of
the Board determines in good faith, (A) after consultation
with the Companys financial advisors of nationally
recognized reputation, are more favorable from a financial point
of view to the Company shareholders than those provided for in
the Merger (taking into account all the terms and conditions of
the proposal, including any
break-up
fees, expense reimbursement provisions and conditions to
consummation) and (B) to be more favorable generally to the
Company
A-41
shareholders (taking into account all financial and strategic
considerations and other relevant factors, including relevant
legal, financial, regulatory and other aspects of such
proposals, and the conditions, prospects and time required for
completion of such proposal), (ii) for which financing, to
the extent required, in the reasonable judgment of the Board is
capable of being obtained and (iii) which the Board
determines in good faith is reasonably capable of being
consummated.
(e) Nothing in this Section 6.6 or any other
provision of this Agreement shall prohibit the Company or the
Companys Board from (a) taking and disclosing to its
shareholders a position with respect to a tender or exchange
offer by a third party pursuant to
Rules 14d-9
and
Rule 14e-2
or Item 1012(a) of
Regulation M-A
promulgated under the Exchange Act (or any similar communication
to shareholders in connection with the making or amendment of a
tender or exchange offer) or (b) complying with its
disclosure obligations under U.S. federal or state
securities laws with regard to an Acquisition Proposal.
(f) Nothing in this Section 6.6 shall
(i) permit the Company to terminate this Agreement (except
as expressly provided in Article IX) or
(ii) except as expressly provided herein, affect any other
obligations of the Company under this Agreement.
Section 6.7. Taxes.
(a) Parent and the Company shall cooperate, and shall cause
their respective Subsidiaries to cooperate, in the preparation,
execution and filing of all returns, questionnaires,
applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock
transfer or stamp Taxes, any transfer, recording, registration
and other fees and any similar Taxes that become payable in
connection with the transactions contemplated by this Agreement
(including with any related interest, penalties or additions to
tax, Transfer and Gains Taxes) and shall
cooperate in attempting to minimize such Transfer and Gains
Taxes.
(b) The Company will consult with and provide Parent the
opportunity to review and comment upon all federal income Tax
Returns required to be filed after the date hereof by the
Company and Company OP with respect to Taxes, and shall not file
any such federal income Tax Returns without the prior review and
comment of Parent, which shall not be unreasonably delayed;
provided, however, that the Company may file a Tax
Return prior to receipt of comments from Parent if necessary to
ensure such Tax Return is timely filed. From the date hereof
until the Merger Effective Time, each of the Company and the
Company Subsidiaries will duly and timely file all Tax Returns
and other documents required by it to be filed with federal,
state and local Tax authorities, subject to extensions permitted
by law and properly granted by the appropriate authority;
provided that such extensions do not adversely affect the
Companys status as a REIT under the Code, and
provided, further, that the Company notifies
Parent that it or any of its Company Subsidiaries is availing
itself of any federal or state extensions.
Section 6.8. Affiliate
Letter. On or prior to the date of the
Company Shareholders Meeting, the Company will deliver to Parent
a letter (the Company Affiliate Letter)
identifying all persons who the Company believes are
affiliates of the Company for purposes of
Rule 145 under the Securities Act. On or prior to the
Closing Date, the Company will use its commercially reasonable
efforts to cause each person identified as an
affiliate in the Company Affiliate Letter to deliver
a written agreement, in the form attached hereto as
Exhibit D.
Section 6.9. Dividends.
(a) From and after the date of this Agreement and prior to
the Closing, the Company shall not make any dividend or
distribution to its shareholders, and Company OP shall not make
any distribution to its partners, in each case without the prior
written consent of Parent in its sole discretion;
provided, however, that the prior written consent
of Parent shall not be required for the authorization and
payment of (i) regular quarterly distributions not to
exceed $0.24 per Company Common Share per quarter to the
holders thereof for the quarter ending September 30, 2006
and for each quarter thereafter ending prior to the Effective
Times (with regular declaration and payment dates); (ii) a
special dividend required by the Code for the Company to
maintain its qualification as a REIT or necessary to eliminate
any federal Tax liability, after giving effect to any payments
made or to be made pursuant to clause (i); (iii) a
distribution per Company OP Unit in the same amount as a
dividend per Company Common Share permitted pursuant to
clauses (i) and (ii) above, with the same record and
payment dates as such dividends on Company Common Shares,
(iv) a quarterly distribution of $0.46875 per Company
Preferred Share on record and payment dates set forth in the
Declaration prior to the Effective Times (with regular
declaration and payment dates);
A-42
(v) distributions from Company OP to the Company sufficient
to permit the Company to make the distributions with respect to
the Company Preferred Shares described in clause (iv) above.
(b) Each of Parent and the Company shall declare a dividend
to their respective shareholders, the record date for which
shall be the close of business on the last Business Day prior to
the Merger Effective Time. The per share dividend amount payable
by each party shall be an amount equal to such partys most
recent quarterly dividend rate, multiplied by the number of days
elapsed since the last dividend record date through and
including the day prior to the day on which the Merger Effective
Time occurs, and divided by the actual number of days in the
calendar quarter in which such dividend is declared.
(c) In the event that a distribution with respect to the
Company Common Shares and the Company Preferred Shares permitted
by this Section 6.9 (including pursuant to
Section 6.9(b) above) has (i) a record date
prior to the Effective Times and (ii) has not been paid as
of the Effective Times, the holders of Company Common Shares and
Company Preferred Shares shall be entitled to receive such
distribution from the Company at the time such shares are
exchanged pursuant to Article II of this Agreement.
Section 6.10. Section 16
Matters. Each of the Company, Parent and
Merger Sub shall use its commercially reasonable efforts to
cause the transactions contemplated by this Agreement (including
any dispositions of Company Common Shares, Company Preferred
Shares, Pre-Conversion Options, Converted Options, Company
OP Units or any derivative securities with respect to such
securities in connection herewith) by any individual who is a
trustee or officer of the Company, to be exempt under
Rule 16b-3
promulgated under the Exchange Act, including any such actions
specified in that certain No-Action Letter, dated
January 12, 1999, issued by the SEC regarding such matters.
Section 6.11. Merger
Sub Compliance. Parent shall cause Merger
Sub to comply with all of Merger Subs obligations under or
relating to this Agreement. Merger Sub shall not engage in any
activities not in connection with the Merger.
Section 6.12. Appointment
of Director. Effective as of the Merger
Effective Time, the Board of Parent shall appoint FK as a
director of Parent; provided that such appointment would
not be in violation of any applicable Legal Requirements or the
rules of the NYSE; provided further that, if the
appointment of FK would so be in violation of any applicable
Legal Requirements or the rules of the NYSE or if FK is
unwilling or unable to serve, the Board of Parent shall appoint
a replacement nominated by the Company, subject to the consent
of Parent, which consent shall not be unreasonably withheld.
Section 6.13. Delisting.
Parent shall cause the Companys securities to be delisted
from the NYSE and de-registered under the Exchange Act as soon
as practicable following the Effective Times.
Section 6.14. Interim
Financing. Parent shall provide financing to
the Company and the Company Subsidiaries in accordance with the
loan agreement between Company OP and Parent of even date
herewith (the Interim Financing).
Section 6.15. Amendment
to Partnership Agreement. Following the OP
Merger Effective Time and prior to the Merger Effective Time,
Warrior, in its capacity as the general partner of the Surviving
Partnership at such time, shall, and Parent shall cause Warrior
LP Holdco, LLC, a Delaware limited liability company and a
wholly-owned Parent Subsidiary, in its capacity as the limited
partner of the Surviving Partnership, to, enter into an
amendment to the Company OP Partnership Agreement in the form
attached hereto as Exhibit E.
ARTICLE VII.
CONDITIONS
Section 7.1. Conditions
to Each Partys Obligation to Effect the
Mergers. The obligations of each party to
effect the Mergers shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions (other
A-43
than Section 7.1(g), which shall not be a condition
to the OP Merger), any one or more of which may be waived in
writing jointly by Parent and the Company to the extent
permissible by applicable Legal Requirements:
(a) The Company Shareholder
Approval. The Company shall have received
the Company Shareholder Approval.
(b) No Injunctions or Restraints.
No temporary restraining order, preliminary or permanent
injunction or other Order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other transactions
contemplated hereby shall be in effect.
(c) NYSE Listing. The Parent
Shares to be issued in the Mergers and the Parent Shares to be
reserved for issuance upon exercise of Converted Options shall
have been approved for listing on the NYSE, subject to official
notice of issuance.
(d) Effectiveness of the
S-4
Registration Statement. The
S-4
Registration Statement shall have been declared effective by the
SEC under the Securities Act. No stop order suspending the
effectiveness of the
S-4
Registration Statement shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated and not
concluded or withdrawn.
(e) Consents. All consents and
approvals listed on Section 7.1(e) of the Company
Disclosure Letter and the Parent Disclosure Letter shall have
been obtained and shall be in full force and effect.
(f) Consulting and Support
Agreements. Each of the Consulting
Agreements and Support Agreements shall be in full force and
effect, unless an individual party to any such agreement shall
have become disabled or deceased.
(g) Company OP Merger. The OP
Merger shall have been consummated in accordance with the terms
hereof.
Section 7.2. Conditions
to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are
subject to the following additional conditions, any one or more
of which may be waived in writing by Parent:
(a) Representations and
Warranties. The representations and
warranties of the Company contained in Sections 3.1,
3.2, 3.3, 3.5, 3.6(a)(i) and
3.23 shall be true and correct in all respects on and as
of the date hereof and on and as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date
(except to the extent the representation or warranty is
expressly limited by its terms to another date, in which case
such representation or warranty shall be true and correct as of
the specified date), and the other representations and
warranties of the Company contained in this Agreement shall be
true and correct (without giving effect to any
materiality or Company Material Adverse
Effect qualifier therein) on and as of the date hereof and
on and as of the Closing Date, with the same force and effect as
if made on and as of the Closing Date (except to the extent the
representation or warranty is expressly limited by its terms to
another date, in which case such representation or warranty
shall be true and correct as of the specified date), except
where the failure of such representations and warranties to be
true and correct, in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect, and Parent
shall have received a certificate signed on behalf of the
Company by its chief executive officer or its chief operating
officer, in such capacity, to such effect.
(b) Performance of Obligations of the Company and
Company OP. Each of the Company and Company
OP shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior
to the Merger Effective Time, and Parent shall have received a
certificate signed on behalf of the Company by its chief
executive officer or its chief operating officer, in such
capacity, to such effect.
(c) Material Adverse Effect. Since
the date hereof, there shall have been no Company Material
Adverse Effect.
(d) Tax Opinion Relating to REIT
Status. Parent shall have received an opinion
from Hunton & Williams LLP (or other such law firm of
national standing), dated as of the Closing Date, in the form of
Exhibit F hereto, to the effect that, for its short
taxable year ended December 31, 2002 through its taxable
year ending December 31, 2005, the Company qualified as a
REIT under the Code, and from January 1, 2006 through the
Closing Date, the Companys proposed method of operation
will enable the Company to continue to meet the requirements for
A-44
qualification as a REIT under the Code. The opinion will also
provide that Arnold & Porter LLP (or other such law
firm of national standing) may rely upon the same in rendering
its tax opinion described in
Section 7.3(c).
(e) Defensive Measures. The
Defensive Measures shall not be applicable to the Merger and the
transactions contemplated by this Agreement.
(f) Tax Opinion Relating to the
Merger. Parent shall have received an opinion
from Arnold & Porter LLP, special tax counsel to Parent
(or other such law firm of national standing), dated as of the
Closing Date, to the effect that on the basis of the facts,
representations and assumptions set forth or referred to in such
opinion, the Merger will qualify as a reorganization under the
provisions of Section 368(a) of the Code. In rendering this
opinion, counsel shall be entitled to rely upon customary
representations of the Company and Parent reasonably requested
by counsel, including those contained in customary tax
representation letters.
Section 7.3. Conditions
to Obligations of the Company. The obligation
of the Company to effect the Merger and to consummate the other
transactions contemplated to occur on the Closing Date is
further subject to the following conditions, any one or more of
which may be waived in writing by the Company:
(a) Representations and
Warranties. The representations and
warranties of Parent contained in Sections 4.1,
4.2, 4.3, 4.4, 4.5, 4.6(a)(i)
and 4.20 shall be true and correct in all respects on
and as of the date hereof and on and as of the Closing Date,
with the same force and effect as if made on and as of the
Closing Date (except to the extent the representation or
warranty is expressly limited by its terms to another date, in
which case such representation or warranty shall be true and
correct as of the specified date), and the other representations
and warranties of Parent contained in this Agreement shall be
true and correct (without giving effect to any
materiality or Parent Material Adverse
Effect qualifier therein) on and as of the date hereof and
on and as of the Closing Date, with the same force and effect as
if made on and as of the Closing Date (except to the extent the
representation or warranty is expressly limited by its terms to
another date, in which case such representation or warranty
shall be true and correct as of the specified date), except
where the failure of such representations and warranties to be
true and correct, in the aggregate, would not reasonably be
expected to have a Parent Material Adverse Effect, and the
Company shall have received a certificate signed on behalf of
Parent by its chief executive officer or its chief financial
officer, in such capacity, to such effect.
(b) Performance of Obligations of Parent, Merger Sub
and OP Merger Sub. Parent, Merger Sub and OP
Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement
at or prior to the Merger Effective Time, and the Company shall
have received a certificate signed on behalf of Parent by its
chief executive officer or its chief financial officer, in such
capacity, to such effect.
(c) Tax Opinion Relating to REIT
Status. The Company shall have received an
opinion from Arnold & Porter LLP (or other such law
firm of national standing), dated as of the Closing Date, in the
form of Exhibit G hereto, to the effect that Parent
qualified to be taxed as a REIT under Sections 856 through
860 of the Code, for its taxable years ended December 31,
1998 through December 31, 2005, and taking into account the
Merger, Parents organization and current and proposed
method of operation will enable Parent to continue to qualify as
a REIT for its taxable year ending December 31, 2006 and in
the future. Arnold & Porter LLP (or other such law firm
of national standing) may also rely upon the customary
officers certificate provided by the Company to
Hunton & Williams LLP (or other such law firm of
national standing), which shall also be addressed to
Arnold & Porter LLP, in connection with the tax opinion
described in Section 7.2(d).
(d) Tax Opinion Relating to the
Merger. The Company shall have received an
opinion from Hunton & Williams LLP (or other such law
firm of national standing), dated as of the Closing Date, to the
effect that on the basis of the facts, representations and
assumptions set forth or referred to in such opinion, the Merger
will qualify as a reorganization under the provisions of
Section 368(a) of the Code. In rendering this opinion,
counsel shall be entitled to rely upon customary representations
of the Company and Parent reasonably requested by counsel,
including those contained in customary tax representation
letters.
(e) Material Adverse Effect. Since
the date hereof, there shall have been no Parent Material
Adverse Effect.
A-45
ARTICLE VIII.
EMPLOYEE
BENEFITS AND POST-CLOSING COVENANTS
Section 8.1. Employee
Plans and Other Employee Arrangements. After
the Merger Effective Time, all Persons employed by the Company
and the Company Subsidiaries immediately prior to the Effective
Times (Affected Employees) shall continue to
participate in the Employee Plans that are employee
benefit plans (as defined in Section 3(3) of ERISA)
or shall be eligible to participate in the same manner as other
similarly situated employees of Parent or a Parent Subsidiary in
any corresponding Parent Plans that are employee benefit
plans (as defined in Section 3(3) of ERISA). With
respect to each such Parent Plan, service with the Company or
any Company Subsidiary (as applicable) shall be included for all
purposes, including eligibility to participate and vesting (if
applicable), but not for purposes of benefit accrual under any
Parent Plan that is an employee pension benefit plan (as defined
in Section 3(2) of ERISA). With respect to medical benefits
provided by Parent or any Parent Subsidiary on and after the
Closing Date to an Affected Employee, limitations on benefits
related to preexisting conditions shall be waived to the extent
that coverage for such preexisting condition would not have
otherwise been limited under the Employee Plans prior to the
Closing Date, and each Affected Employee shall be credited for
any
out-of-pocket
amounts and deductibles paid during the calendar year that
included the Closing Date under such Company or Company
Subsidiary Plan. Nothing contained in this
Section 8.1 shall be deemed to obligate Parent, the
Company or their respective Subsidiaries to continue the
employment or benefits with respect to any Person employed by
the Company or any Company Subsidiary as of the Merger Effective
Time or for any period of time thereafter. Nothing herein shall
limit the ability of Parent to amend or terminate any employee
benefit plan sponsored or maintained by Parent at any time
hereafter, or the ability of the Company or any Company
Subsidiary after the Merger Effective Time to amend or terminate
any Employee Plan.
Section 8.2. Indemnification
of Company Officers and Trustees.
(a) From and after the Effective Time, the Surviving Entity
shall provide exculpation and indemnification for each person
who is now or has been at any time prior to the date hereof or
who becomes prior to the Effective Time, an officer, director or
trustee of the Company or any Company Subsidiary (the
Indemnified Parties) which is the same as the
exculpation and indemnification provided to the Indemnified
Parties by the Company (including advancement of expenses, if so
provided) in the Company Organizational Documents, as in effect
at the close of business on the date hereof, which exculpation
and indemnification shall not be amended, repealed or otherwise
modified in a manner that would adversely affect the rights
thereunder of individuals who were, at any time prior to the
Effective Times, directors, trustees, officers or employees of
the Company or any Company Subsidiary; provided, that such
exculpation and indemnification covers actions on or prior to
the Effective Times, including, without limitation, all
transactions contemplated by this Agreement.
(b) Prior to the Merger Effective Time, the Company shall
obtain and fully pay the premium for the extension of
(i) the Companys existing directors and
executive officers insurance policies, and (ii) the
Companys existing fiduciary liability insurance policies
(collectively the Tail Insurance), for a
claims reporting or discovery period of at least six years from
and after the Effective Times from an insurance company or
companies with the same or better credit rating from AM Best
Company as the Companys current insurance companies on its
existing directors, officers and trustees
insurance policies and fiduciary liability insurance policies,
with terms, conditions, retentions and limits of liability that
are at least as favorable as such existing policies, with
respect to any actual or alleged error, misstatement, misleading
statement, act, omission, neglect, breach of duty, or any matter
claimed against a director, trustee or officer of the Company
solely by reason of their serving in such capacity, that existed
or occurred at or prior to the Effective Times (including in
connection with this Agreement or the transactions or actions
contemplated hereby); provided, however, that in
no event shall the Company expend for such policies an annual
premium amount in excess of 300% of the annual premiums
currently paid by the Company for such insurance. If the Company
and the Surviving Entity for any reason fail to obtain such
tail insurance policies as of the Effective Times,
the Surviving Entity shall obtain such policies and, pending the
effectiveness of such policies, continue to maintain in effect
for a period of at least six years from and after the Effective
Times the Tail Insurance in place as of the date hereof with
benefits and levels of coverage at least as favorable as
provided in the Companys existing policies as of the date
hereof, or the Surviving Entity shall, use reasonable best
efforts to purchase comparable Tail Insurance for such six-year
period with benefits and levels of coverage at least as
A-46
favorable as provided in the Companys existing policies as
of the date hereof; provided, however, that in no
event shall the Surviving Entity be required to expend for such
policies an annual premium amount in excess of 300% of the
annual premiums currently paid by the Company for such
insurance; and, provided further that if the
annual premiums of such insurance coverage exceed such amount,
the Surviving Entity shall obtain a policy with the greatest
coverage available for a cost not exceeding such amount.
(c) The provisions of this Section 8.2 shall
not be terminated or modified after the Effective Times in such
a manner as to adversely affect any Indemnified Party, his or
her heirs and his or her personal representatives to which this
Section 8.2 applies, without the consent of such
Indemnified Party, his or her heirs and his or her personal
representatives. The provisions of this Section 8.2
are intended to be for the benefit of, and shall be enforceable
by, each Indemnified Party, his or her heirs and his or her
personal representatives and shall be binding on all successors
and assigns of Parent, the Surviving Entity and the Company.
Parent agrees to pay all costs and expenses (including fees and
expenses of counsel) that may be incurred by any Indemnified
Party or his or her heirs or his or her personal representatives
in successfully enforcing the indemnity or other obligations of
Parent under this Section 8.2. The provisions of
this Section 8.2 shall survive the Merger and are in
addition to any other rights to which an Indemnified Party may
be entitled.
(d) If either the Surviving Entity or any of its successors
or assigns (i) consolidates with or merges with or into any
other Person and shall not be the continuing or surviving
corporation, partnership or other entity of such consolidation
or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in
each such case, proper provision shall be made so that the
successors and assigns of the Surviving Entity assumes the
obligations set forth in this Section 8.2. The
parties acknowledge and agree that Parent guarantees the payment
and performance of the Surviving Entitys obligations
pursuant to this Section 8.2.
ARTICLE IX.
TERMINATION
AND FEES
Section 9.1. Termination. This
Agreement may be terminated at any time prior to the Effective
Times:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any Governmental
Agency shall have issued an Order (which Order each party hereto
shall use its reasonable best efforts to have vacated or
reversed), in each case permanently restraining, enjoining or
otherwise prohibiting the Merger, and such Order shall have
become final and unappealable;
(c) by either Parent or the Company if the Company
shareholders fail to approve the Merger at the Company
Shareholders Meeting or any adjournment thereof;
(d) after March 12, 2007, by either Parent or the
Company if the Merger shall not have been consummated by such
date for any reason; provided however, if the
Merger shall not have been consummated by such date due to
failure to obtain the consents or approvals set forth on
Section 7.1(e) of the Company Disclosure Letter or
Section 7.1(e) of the Parent Disclosure Letter,
neither party may terminate this Agreement until June 11,
2007 so long as the parties are using their reasonable best
efforts to obtain such consents or approvals; provided
further, that neither party may terminate this Agreement
until the expiration of any cure period described in
Section 9.1(g) or (h) in effect on such date;
and provided further, that in any case the
terminating party is not in material breach of its
representations, warranties, covenants or agreements under this
Agreement in any manner that shall have caused or resulted in
the failure to consummate the Merger on or before such date;
(e) by Parent, if (i) prior to obtaining the Company
Shareholder Approval, the Board or a committee thereof shall
have withdrawn or materially modified its recommendation of this
Agreement or the Merger in a manner adverse to Parent or its
stockholders or shall have resolved to do so (an
Adverse Recommendation); (ii) the
Company shall fail to call or hold the Company Shareholders
Meeting in accordance with Section 6.1;
(iii) the Company shall have intentionally and materially
breached any of its obligations under Section 6.6,
(iv) the Board shall have approved or recommended an
Acquisition Proposal made by any Person other than Parent or
Merger Sub; or (v) the Company shall have entered into a
definitive agreement with respect to an Acquisition Proposal;
A-47
(f) by the Company, if prior to the approval of this
Agreement at the Company Shareholders Meeting the Board shall
have approved, and the Company shall concurrently enter into, a
definitive agreement with respect to a Superior Acquisition
Proposal, but only if (i) the Company is not then in breach
of Section 6.6, and (ii) concurrently with such
termination the Company shall have made payment of the full
amounts required by Section 9.3;
(g) by Parent, if there shall have been a breach of any of
the representations, warranties, covenants or agreements of the
Company contained in this Agreement such that the conditions set
forth in Section 7.2(a) or (b) are incapable
of being satisfied, which breach is not cured within thirty
(30) days following written notice to the Company;
provided that Parent shall not have the right to
terminate this Agreement pursuant to this
Section 9.1(g) if Parent, Merger Sub or OP Merger
Sub is then in breach of its representations, warranties,
covenants or agreements under this Agreement such that the
conditions set forth in Section 7.3(a) or (b)
are incapable of being satisfied; or
(h) by the Company, if there shall have been a breach of
any of the representations, warranties, covenants or agreements
of Parent or Merger Sub contained in this Agreement such that
the conditions set forth in Section 7.3(a) or
(b) are incapable of being satisfied, which breach is not
cured within thirty (30) days following written notice to
Parent; provided that the Company shall not have the
right to terminate this Agreement pursuant to this
Section 9.1(h) if the Company or Company OP is then
in breach of its representations, warranties, covenants or
agreements under this Agreement such that the conditions set
forth in Section 7.2(a) or (b) are incapable
of being satisfied.
Section 9.2. Effect
of Termination. In the event of termination
of this Agreement by either Parent or the Company, as provided
in Section 9.1, this Agreement shall forthwith
become void and of no further force and effect without any
liability or obligation on the part of Parent, Merger Sub, OP
Merger Sub, the Company or Company OP, except as provided in
Sections 5.3(b) and (c),
Sections 9.2 and 9.3 and
Article X, which provisions shall survive the
termination; provided, however, that nothing
herein shall relieve any party from any liability for any
willful or knowing breach hereof.
Section 9.3. Fees
and Expenses.
(a) Except as provided in paragraphs (b), (c),
(d) and (e) below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses
(including brokers or finders fees and the expenses
of its representatives).
(b) If any of the conditions set forth in
paragraph (c) or (d) below are satisfied, then
the Company shall, subject to and in accordance with such
paragraphs, pay to Parent, by wire transfer of immediate
available funds to an account specified by Parent, the
Termination Fee (or portion thereof) and the amount of the
Lender Consent Fees or the Parent Expense Reimbursement then due.
(c) The Company shall pay the Termination Fee, the Parent
Expense Reimbursement and Lender Consent Fees as follows:
(i) if Parent terminates this Agreement pursuant to the
provisions of Section 9.1(e) (but with respect to a
termination pursuant to Section 9.1(e)(i) only if
terminated prior to the Company Shareholders Meeting) or if the
Company terminates this Agreement pursuant to the provisions of
Section 9.1(f), the Company shall pay Parent 50% of
the Termination Fee, which payment shall be made concurrent with
any such termination by the Company and on the same day as any
such termination by Parent, and if within twelve
(12) months following such termination the Company enters
into a definitive agreement providing for, or consummates, an
Acquisition Proposal (whether or not such Acquisition Proposal
is the same Acquisition Proposal which had been received or
publicly disclosed at the time of termination of this
Agreement), then the Company shall, concurrent with consummating
such transaction, pay to Parent the other 50% of the Termination
Fee, the Parent Expense Reimbursement and Lender Consent
Fees); or
(ii) if an Acquisition Proposal is received by the Company
or publicly disclosed after the date hereof and prior to the
termination hereof, and thereafter Parent or the Company
terminates this Agreement pursuant to
Section 9.1(c), and within twelve (12) months
following such termination, the Company enters into a definitive
agreement providing for, or consummates, an Acquisition Proposal
(whether or not such Acquisition Proposal
A-48
is the same Acquisition Proposal which had been received or
publicly disclosed at the time of termination of this
Agreement), the Company shall, concurrent with consummating such
transaction, pay to Parent the Termination Fee, the Parent
Expense Reimbursement and Lender Consent Fees; or
(iii) if an Acquisition Proposal is received by the Company
or publicly disclosed after the date hereof and prior to the
termination hereof, and thereafter Parent or the Company
terminates this Agreement pursuant to
Section 9.1(d), and within twelve (12) months
following such termination, the Company enters into a definitive
agreement providing for, or consummates, an Acquisition Proposal
(whether or not such Acquisition Proposal is the same
Acquisition Proposal which had been received or publicly
disclosed at the time of termination of this Agreement), the
Company shall, concurrent with consummating such transaction,
pay to Parent the Termination Fee, the Parent Expense
Reimbursement and Lender Consent Fees.
(d) The Company shall pay the Parent Expense Reimbursement
(or the portion thereof described below) and the Lender Consent
Fees to Parent if Parent terminates this Agreement pursuant to
Section 9.1(g). The payment of the Parent Expense
Reimbursement and the Lender Consent Fees shall be made on the
same day as any such termination by Parent.
(e) The Parent shall pay to the Company, by wire transfer
of immediate available funds to an account specified by the
Company, the Company Expense Reimbursement if the Company
terminates this Agreement pursuant to
Section 9.1(h). The payment of the Company Expense
Reimbursement shall be made on the same day as any such
termination by the Company.
(f) Termination Fee shall be an amount
equal to the lesser of (i) $16,900,000 (the
Maximum Termination Fee) and (ii) the
sum of (A) the maximum amount that can be paid to Parent
without causing it to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as
if the payment of such amount did not constitute income
described in Sections 856(c)(2) and 856(c)(3) of the Code
(Qualifying Income), as determined by
independent accountants to Parent, and (B) in the event
Parent receives a letter from outside counsel (the
Termination Fee Tax Opinion) indicating that
Parents receipt of the Maximum Termination Fee would
either constitute Qualifying Income or would be excluded from
gross income within the meaning of Sections 856(c)(2) and
(3) of the Code (the REIT Requirements)
or that the receipt by Parent of the excess of the Maximum
Termination Fee over the amount payable in
clause (A) following the receipt of such opinion would
not be deemed constructively received prior thereto, the Maximum
Termination Fee less the amount payable under
clause (A) above. In the event that Parent is not able
to receive the Maximum Termination Fee, the Company shall place
the unpaid amount in escrow and shall not release any portion
thereof to Parent unless and until the Company receives, from
time to time, any one or combination of the following:
(i) a letter from Parents independent accountants
indicating the maximum amount that can be paid at that time to
Parent without causing Parent to fail to meet the REIT
Requirements or (ii) a Termination Fee Tax Opinion
indicating the maximum amount that can be paid at that time to
as Qualifying Income, as gross income that is excluded under the
REIT Requirements or as amounts not constructively received
prior to such time, in either of which events the Company shall
pay to Parent the lesser of the unpaid Maximum Termination Fee
or the maximum amount stated in the letter referred to in
(i) above or the opinion referred to in (ii) above.
(g) The Parent Expense Reimbursement
shall be an amount equal to the lesser of (i) Parents
out-of-pocket
expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation,
all attorneys, accountants, consultants and
investment bankers fees and expenses and all financing and
commitment fees), not to exceed $900,000 (or, in respect of
Parent Expense Reimbursement payable pursuant to
Section 9.3(d), $3,000,000), and (ii) the sum
of (A) the maximum amount that can be paid to Parent
without causing it to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as
if the payment of such amount did not constitute Qualifying
Income, as determined by independent accountants to Parent, and
(B) in the event Parent receives a Termination Fee Tax
Opinion indicating that Parents receipt of the Parent
Expense Reimbursement would either constitute Qualifying Income
or would be excluded from gross income within the meaning of the
REIT Requirements or that receipt by Parent of the excess of the
Parent Expense Reimbursement over the amount payable under
clause (A) following the receipt of such opinion would
not be deemed constructively received prior thereto, the Parent
Expense Reimbursement less the amount payable under
clause (A) above. In the event that Parent is not able
to receive the full Parent Expense Reimbursement, the Company
shall pay Parent the
A-49
unpaid amount within two (2) Business Days after receipt,
from time to time, of any one or combination of the following:
(i) a letter from Parents independent accountants
indicating the maximum amount that can be paid at that time to
Parent without causing Parent to fail to meet the REIT
Requirements or (ii) a Termination Fee Tax Opinion
indicating the maximum amount that can be paid at that time to
Parent as Qualifying Income, as gross income that is excluded
under the REIT Requirements or as amounts not constructively
received prior to such time, in either of which events the
Company shall pay to Parent the lesser of the unpaid Parent
Expense Reimbursement or the maximum amount stated in the letter
referred to in (i) above or the opinion referred to in
(ii) above.
(h) The Company Expense Reimbursement
shall be an amount equal to the lesser of (i) the
Companys
out-of-pocket
expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation,
all attorneys, accountants, consultants and
investment bankers fees and expenses and all financing and
commitment fees), not to exceed $3,000,000, and (ii) the
sum of (A) the maximum amount that can be paid to the
Company without causing it to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as
if the payment of such amount did not constitute Qualifying
Income, as determined by independent accountants to the Company,
and (B) in the event the Company receives a letter from
outside counsel (the Company Expense Reimbursement Tax
Opinion) indicating that the Companys receipt of
the Company Expense Reimbursement would either constitute
Qualifying Income or would be excluded from gross income within
the meaning of the REIT Requirements or that the receipt by the
Company of the excess of the Company Expense Reimbursement over
the amount payable under clause (A) following the
receipt of such opinion would not be deemed constructively
received prior thereto, the Company Expense Reimbursement less
the amount payable under clause (A) above. In the
event that the Company is not able to receive the full Company
Expense Reimbursement, Parent shall pay the Company the unpaid
amount within two (2) Business Days after receipt, from
time to time, of any one or combination of the following:
(i) a letter from the Companys independent
accountants indicating the maximum amount that can be paid at
that time to the Company without causing the Company to fail to
meet the REIT Requirements or (ii) a Company Expense
Reimbursement Tax Opinion indicating the maximum amount that can
be paid at that time to the Company as Qualifying Income, as
gross income that is excluded under the REIT Requirements or as
amounts not constructively received prior to such time, in
either of which events Parent shall pay to the Company the
lesser of the unpaid Company Expense Reimbursement or the
maximum amount stated in the letter referred to in
(i) above or the opinion referred to in (ii) above.
(i) In the event that either Parent or the Company is
required to commence litigation to seek all or a portion of the
amounts payable under this Section 9.3, and Parent
or the Company prevails in such litigation, Parent or the
Company, as the case may be, shall be entitled to receive, in
addition to all amounts that it is otherwise entitled to receive
under this Section 9.3, all expenses (including,
without limitation, attorneys fees) which it has incurred
in enforcing its rights hereunder.
(j) The obligation of either Parent or the Company to pay
amounts under this Section 9.3 shall terminate three
(3) years from the date of this Agreement, provided each
partys obligation to pay any amounts under this
Section 9.3 shall have accrued within the applicable
time period set forth in this
Section 9.3.
ARTICLE X.
GENERAL
PROVISIONS
Section 10.1. Nonsurvival
of Representations and Warranties. None of
the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement confirming the
representations and warranties in this Agreement shall survive
(i) the Effective Times or (ii) except as provided in
the proviso to Section 9.2 as it may relate to a
willful or knowing breach of representations, warranties and
covenants, the termination of this Agreement in accordance with
Section 9.1. This Section 10.1 shall not
limit any covenant or agreement of the parties which by its
terms contemplates performance after the Effective Times,
including the indemnification obligations set forth in
Section 8.2.
Section 10.2. Amendment. This
Agreement may be amended by the parties hereto, by or pursuant
to action taken by their respective boards of directors or
trustees, as applicable, at any time before or after the Company
Shareholders Approval, but, after the Company Shareholder
Approval, no amendment shall be made which reduces
A-50
the consideration, or which under applicable Legal Requirements
requires the approval of the Companys shareholders without
first obtaining such approval. This Agreement may not be amended
except by an instrument in writing signed by each of the parties
hereto.
Section 10.3. Notices. All
notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given
(a) when delivered personally to the recipient,
(b) one (1) Business Day after the date when sent to
the recipient by reputable express courier service (charges
prepaid) for overnight delivery to the recipient or
(c) five (5) Business Days after the date when mailed
to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Company and to Parent and
Merger Sub at the addresses indicated below:
|
|
|
If to the Company or Company
OP:
|
|
Windrose Medical Properties
Trust
3502 Woodview Trace
Suite 210
Indianapolis, Indiana 46268
Attention: Fred S. Klipsch
|
With a copy to:
(which shall not
constitute notice)
|
|
Hunton & Williams LLP
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Attention: David C. Wright, Esq.
|
If to Parent, Merger Sub or OP
Merger Sub:
|
|
Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
Attention: George L. Chapman
|
With a copy to:
(which shall not
constitute notice)
|
|
Shumaker, Loop &
Kendrick, LLP
North Courthouse Square
1000 Jackson
Toledo, Ohio 43624-1573
Attention: Mary Ellen Pisanelli, Esq.
|
and a copy to:
(which shall not
constitute notice)
|
|
Sidley Austin LLP
One South Dearborn
Chicago, Illinois 60603
Attention: David J. Zampa, Esq.
|
or to such other address as either party hereto may, from time
to time, designate in writing delivered pursuant to the terms of
this Section.
Section 10.4. Assignment
and Parties in Interest.
(a) Neither this Agreement nor any of the rights, duties,
or obligations of any party hereunder may be assigned or
delegated (by operation of law or otherwise) by any party hereto
except with the prior written consent of each other party hereto
or except as expressly set forth herein.
(b) Except for the Indemnified Parties, who following the
Effective Times are express third party beneficiaries of
Section 8.2, this Agreement shall not confer any
rights or remedies upon any person or entity other than the
parties hereto and their respective permitted successors and
assigns.
Section 10.5. Announcements. All
press releases or other written public statements with respect
to the transactions contemplated by this Agreement prior to the
Closing Date shall be approved by both Parent and the Company
prior to the issuance thereof; provided that either party
may make any public disclosure it believes in good faith is
required by Legal Requirement or rule of any stock exchange on
which its securities are traded (in
A-51
which case the disclosing party shall use its reasonable best
efforts to advise the other party prior to making such
disclosure and to provide the other party a reasonable
opportunity to review the proposed disclosure).
Section 10.6. Entire
Agreement. This Agreement (including the
Exhibits, schedules, Company Disclosure Letter and Parent
Disclosure Letter attached hereto) constitutes the entire
agreement among the parties hereto with respect to the subject
matter hereof, supersedes and is in full substitution for any
and all prior agreements and understandings among them relating
to such subject matter, and no party shall be liable or bound to
the other party hereto in any manner with respect to such
subject matter by any warranties, representations, indemnities,
covenants, or agreements except as specifically set forth herein
or in accordance with the Confidentiality Agreement. The
Exhibits and schedules to this Agreement, the Company Disclosure
Letter and the Parent Disclosure Letter are hereby incorporated
and made a part hereof and are an integral part of this
Agreement.
Section 10.7. Descriptive
Headings. The descriptive headings of the
several sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction
of any of the provisions hereof.
Section 10.8. Counterparts. For
the convenience of the parties, any number of counterparts of
this Agreement may be executed by any two or more parties
hereto, and each such executed counterpart shall be, and shall
be deemed to be, an original, but all of which shall constitute,
and shall be deemed to constitute, in the aggregate but one and
the same instrument.
Section 10.9. Governing
Law; Venue.
(a) Except to the extent the Merger is governed by Entity
Law and the OP Merger is governed by the OP Merger Entity Law,
this Agreement and the legal relations between the parties
hereto shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and
performed therein regardless of the laws that might otherwise
govern under applicable conflicts or choice of law rules.
(b) Any proceeding seeking to enforce any provision of, or
based on any right arising out of, this Agreement may be, but
shall not be required to be, brought against any of the parties
in the courts of the State of Delaware.
(c) Each party to this Agreement waives, to the fullest
extent permitted by applicable Legal Requirements, any right it
may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement.
Section 10.10. Construction;
Certain Definitions.
(a) The language used in this Agreement shall be deemed to
be the language chosen by the parties to express their mutual
intent, and no rule of construction shall be applied against any
party. Unless otherwise specifically stated: (i) a term has
the meaning assigned to it by this Agreement;
(ii) including means including but not limited
to; (iii) or is disjunctive but not
exclusive; (iv) words in the singular include the plural,
and in the plural include the singular; (v) provisions
apply to successive events and transactions;
(vi) $ means the currency of the
United States of America; (vii) written or
writing includes
e-mail
and other similar forms of electronic communication;
(viii) Knowledge of any Person means the
actual knowledge after reasonable inquiry of the persons listed
in Section 10.10(a) of the Company Disclosure Letter
and, in the case of Parent, the persons listed in
Section 10.10(a) of the Parent Disclosure Letter;
(ix) Business Day means any day, other
than a Saturday, Sunday or other day on which banks are required
or permitted to close in New York, New York; (x) made
available means provided physically, made available in an
electronic or virtual data room or otherwise delivered in a
physical or electronic format; and (xi) past
practice of a party means the most current practice of
such party existing as of the date hereof; provided,
however, that the use of such term shall not preclude
continuing enhancements and improvements after the date hereof
to a partys processes and procedures to fully implement
its lease administration process, fully implement its JD Edwards
accounting system or otherwise engage in process and procedures
improvements.
(b) As used in this Agreement, a Company Material
Adverse Effect shall mean any change, event,
circumstance or development that, individually or in the
aggregate with other changes, events, circumstances or
developments, (i) has or is reasonably likely to have a
material adverse effect on the business, properties, assets,
financial condition, results of operations, cash flow,
liabilities or operations of the Company and the Company
A-52
Subsidiaries taken as a whole or (ii) prevents or
materially adversely affects the ability of the Company to
timely consummate the Mergers; provided, however,
that to the extent any effect is caused by or results from any
of the following, it shall not be taken into account in
determining whether there has been a Company Material Adverse
Effect:
(i) conditions generally affecting the healthcare industry
or any segment thereof (including economic, legal and regulatory
changes), provided that such change, event, circumstance
or development does not disproportionately adversely affect the
Company and the Company Subsidiaries compared to other similarly
situated companies (by size or otherwise) operating in such
industry or segment;
(ii) any decrease in the market price of Company Common
Shares, provided that the exception in this clause shall
not prevent or otherwise affect a determination that any change,
event, circumstance or development underlying such decrease had
or contributed to a Company Material Adverse Effect;
(iii) changes in general national economic or financial
conditions or changes in the securities markets in general;
(iv) a failure by the Company to report earnings or revenue
results in any quarter ending on or after the date hereof
consistent with the Companys historic earnings or revenue
results in any previous fiscal quarter or published guidance
with respect thereto, provided that the exception in this
clause shall not prevent or otherwise affect a determination
that any change, event, circumstance or development underlying
such failure had or contributed to a Company Material Adverse
Effect;
(v) changes in any laws or regulations or accounting
regulations or principles applicable to the Company and the
Company Subsidiaries;
(vi) any outbreak or escalation of armed hostilities
(including any declaration of war by the United States) or acts
of terrorism;
(vii) the announcement, execution or consummation of this
Agreement and the transactions contemplated hereby;
(viii) any change, event, circumstance or development the
adverse effects of which are substantially covered by
insurance; or
(ix) the matters specifically described or incorporated by
reference on Section 10.10(b) of the Company
Disclosure Letter.
(c) As used in this Agreement, a Company Property
Material Adverse Effect shall mean, in respect of any
Company Property, any change, event, circumstance or development
that, individually or in the aggregate with other changes,
events, circumstances or developments, has or is reasonably
likely to have an adverse effect on the annualized net operating
income of such Company Property by at least 10% (it being
understood and agreed by the parties that the annualized net
income of any Company Property shall equal the net operating
income of such Company Property for the
12-month
period ended June 30, 2006 (or, if such property
constituted a Company Property for less than such
12-month
period, the net operating income of such Company Property for
the number of days that such property constituted a Company
Property multiplied by a fraction the numerator of which is 365
and the denominator of which is such number of days owned by the
Company or any Company Subsidiary); provided,
however, that to the extent any effect is caused by or
results from any matter described in clauses (i) through
(ix) of the proviso to the definition of Company Material
Adverse Effect, it shall not be taken into account in
determining whether there has been a Company Property Material
Adverse Effect.
(d) As used in this Agreement,
Indebtedness of any Person means
(i) indebtedness for borrowed money, (ii) obligations
issued, undertaken or assumed as the deferred purchase price of
property or services other than trade accounts arising in the
ordinary course of business, (iii) reimbursement
obligations with respect to surety bonds, letters of credit (to
the extent not collateralized with cash or cash equivalents),
bankers acceptances and similar instruments (in each case,
whether or not matured), (iv) obligations evidenced by
notes, including promissory notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or
businesses, (v) indebtedness created or arising under any
conditional sale or other
A-53
title retention agreement, or incurred as financing, in either
case with respect to property acquired by the Person,
(vi) indebtedness referred to in clauses (i) through
(v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to
be secured by) any encumbrance upon or in property (including
accounts and contracts rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of
such Indebtedness and (vii) all agreements, undertakings or
arrangements by which any Person guarantees, endorses or
otherwise becomes or is contingently liable for (by direct or
indirect agreement, contingent or otherwise, to provide funds
for payment, to supply funds to, or otherwise invest in, a
debtor, or otherwise assure a creditor against loss) the
Indebtedness or other similar obligation or liability of any
other Person, or guarantees the payment of dividends or other
distributions upon the equity securities or interest of any
other Person.
(e) As used in this Agreement, a Parent Material
Adverse Effect shall mean any change, event,
circumstance or development that, individually or in the
aggregate with other changes, events, circumstances or
developments, (i) has or is reasonably likely to have a
material adverse effect on the business, properties, assets,
financial condition, results of operations, cash flow,
liabilities or operations of the Parent and the Parent
Subsidiaries taken as a whole or (ii) prevents or
materially adversely affects the ability of Parent to timely
consummate the Mergers; provided, however, that to
the extent any effect is caused by or results from any of the
following, it shall not be taken into account in determining
whether there has been a Company Material Adverse Effect:
(i) conditions generally affecting the healthcare industry
or any segment thereof or the skilled nursing or retirement care
industry or any segment thereof (including economic, legal and
regulatory changes), provided that such change, event,
circumstance or development does not disproportionately
adversely affect Parent and the Parent Subsidiaries compared to
other similarly situated companies (by size or otherwise)
operating in any such industry or segment;
(ii) any decrease in the market price of Parent Shares,
provided that the exception in this clause shall not
prevent or otherwise affect a determination that any change,
event, circumstance or development underlying such decrease had
or contributed to a Parent Material Adverse Effect;
(iii) changes in general national economic or financial
conditions or changes in the securities markets in general;
(iv) a failure by Parent to report earnings or revenue
results in any quarter ending on or after the date hereof
consistent with Parents historic earnings or revenue
results in any previous fiscal quarter or published guidance
with respect thereto, provided that the exception in this
clause shall not prevent or otherwise affect a determination
that any change, event, circumstance or development underlying
such failure had or contributed to a Parent Material Adverse
Effect;
(v) changes in any laws or regulations or accounting
regulations or principles applicable to Parent and the Parent
Subsidiaries;
(vi) any outbreak or escalation of armed hostilities
(including any declaration of war by the United States) or acts
of terrorism;
(vii) the announcement, execution or consummation of this
Agreement and the transactions contemplated hereby;
(viii) any change, event, circumstance or development the
adverse effects of which are substantially covered by
insurance; or
(ix) the matters specifically described or incorporated by
reference on Section 10.10(e) of the Parent
Disclosure Letter.
(f) As used in this Agreement,
Subsidiary of any Person means (x) any
corporation, partnership, limited liability company, joint
venture or other legal entity of which such Person (either
directly or through or together with another Subsidiary of such
Person), (A) owns capital stock or other equity interests
having ordinary voting power to elect a majority of the board of
directors (or equivalent) of such Person, (B) controls the
management of which, directly or indirectly, through one or more
intermediaries, (C) directly or indirectly through
Subsidiaries owns more
A-54
than 50% of the equity interests or (D) is a general
partner, and (y) any subsidiary as such term is
defined in
Section 1-02(x)
of
Regulation S-X
promulgated under the Securities Act of 1933, as amended (the
Securities Act); and
Person means an individual, corporation,
partnership, limited liability company, joint venture,
association, trust, unincorporated organization or any other
legal entity or Governmental Agency.
Section 10.11. Severability. In
the event that any one or more of the provisions contained in
this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent
permitted by Legal Requirements, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement or any other such instrument. Furthermore, in lieu of
any such invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and
enforceable.
Section 10.12. Specific
Performance. Without limiting or waiving in
any respect any rights or remedies of any of the parties hereto
under this Agreement now or hereinafter existing at law or in
equity or by statute, each of the parties hereto shall be
entitled to seek specific performance of the obligations to be
performed by the other in accordance with the provisions of this
Agreement.
[The remainder of this page intentionally left blank.]
A-55
IN WITNESS WHEREOF, Parent, Merger Sub, OP Merger Sub, the
Company and Company OP have caused this Agreement to be signed
by their respective officers thereunto duly authorized all as of
the date first written above.
HEALTH CARE REIT, INC.
|
|
|
|
By:
|
/s/ George
L. Chapman
|
Name: George L. Chapman
|
|
|
|
Title:
|
Chairman and Chief Executive Officer
|
HEAT MERGER SUB, LLC
|
|
|
|
By:
|
HEALTH CARE REIT, INC.
|
Its: Sole member
|
|
|
|
By:
|
/s/ George
L. Chapman
|
Name: George L. Chapman
|
|
|
|
Title:
|
Chairman and Chief Executive Officer
|
HEAT OP MERGER SUB, L.P.
Its: General partner
|
|
|
|
By:
|
HEALTH CARE REIT, INC.
|
Its: Sole member
|
|
|
|
By:
|
/s/ George
L. Chapman
|
Name: George L. Chapman
|
|
|
|
Title:
|
Chairman and Chief Executive Officer
|
A-56
WINDROSE MEDICAL PROPERTIES TRUST
Name: Fred S. Klipsch
|
|
|
|
Title:
|
Chairman and Chief Executive Officer
|
WINDROSE MEDICAL PROPERTIES, L.P.
By: WINDROSE MEDICAL PROPERTIES TRUST
Its: General partner
Name: Fred S. Klipsch
|
|
|
|
Title:
|
Chairman and Chief Executive Officer
|
A-57
Appendix B
AMENDMENT
NO. 1
TO
AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this
Amendment) dated as of October 12, 2006, by and
among Health Care REIT, Inc., a Delaware corporation
(Parent), Heat Merger Sub, LLC, a Delaware
limited liability company and a wholly-owned subsidiary of
Parent (Merger Sub), Heat OP Merger Sub,
L.P., a Virginia limited partnership and a wholly-owned,
indirect subsidiary of Parent (OP Merger
Sub), Windrose Medical Properties Trust, a Maryland
real estate investment trust (the Company),
and Windrose Medical Properties, L.P., a Virginia limited
partnership and the operating limited partnership of the Company
(Company OP).
WHEREAS, Parent, Merger Sub, OP Merger Sub, Company and Company
OP are parties to that certain Agreement and Plan of Merger,
dated as of September 12, 2006, as the same is amended
hereby and may be further amended, modified or supplemented from
time to time (the Merger Agreement);
WHEREAS, pursuant to Section 10.2 of the Merger
Agreement, the parties desire to amend the Merger Agreement as
provided in this Amendment; and
WHEREAS, capitalized terms not otherwise defined herein shall
have the meaning set forth in the Merger Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be
legally bound hereby, Parent, Merger Sub, OP Merger Sub, Company
and Company OP hereby agree as follows:
Section 1. Amendments
to the Merger Agreement.
(A) Article II of the Merger Agreement
is hereby amended and restated in its entirety to read as
follows:
Section 2.1. Effect of Mergers on
Equity. At the Effective Times, by virtue of
the Mergers and without any action on the part of the
Constituent Entities or OP Merger Constituent Entities, the
holders of any partnership or membership interests, shares of
capital stock or beneficial interests of the Constituent
Entities or OP Merger Constituent Entities shall be treated as
set forth in this Article II and in accordance with the
terms of this Agreement.
Section 2.2. Conversion.
(a) Membership Interests of Merger
Sub. The membership interests of Merger Sub
issued and outstanding immediately prior to the Merger Effective
Time shall remain issued, outstanding and unchanged as validly
issued membership interests of the Surviving Entity after the
Merger Effective Time.
(b) Treasury Stock and Parent Owned
Stock. Each common share of beneficial
interest in the Company, $0.01 par value per share (the
Company Common Shares, or a
Share and, collectively, the
Shares) and each Company Preferred Share that
is held by the Company, Company OP or by any wholly-owned
Subsidiary of the Company or Company OP and each Share and each
Company Preferred Share that is held by Parent, Merger Sub or
any other wholly-owned Subsidiary of Parent shall automatically
be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Each
Share issued and outstanding immediately prior to the Merger
Effective Time (other than Shares to be cancelled in accordance
with Section 2.2(b)) shall be converted into a fraction of
a duly authorized, validly issued, fully paid and non-assessable
share of common stock, par value $1.00 per share, of Parent
(a Parent Share and collectively, the
Parent Shares) equal to the quotient
determined by dividing $18.06 by the Parent Stock Price (as
defined below) and rounding the result to the nearest 1/10,000
of a share (the Exchange Ratio); provided,
however, that if such quotient is less than 0.4509, the Exchange
Ratio will be 0.4509 and if such quotient is greater than
0.4650, the Exchange Ratio will
B-1
be 0.4650. For the purposes of this Section 2.2, the
term Parent Stock Price means the average of
the volume weighted average price per Parent Share on the NYSE,
as reported on Bloomberg by typing HCN.N <EQUITY>
AQR <GO>, for ten (10) trading days, selected
by lot, from among the fifteen (15) consecutive trading
days ending on (and including) the date that is five trading
days prior to the Effective Times. As of the Merger Effective
Time, all such Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired,
and each holder of a certificate formerly representing any such
Shares shall cease to have any rights with respect thereto,
except the right to receive any dividends or distributions in
accordance with Section 2.3(c), certificates
representing the Parent Shares into which such Shares are
converted and any cash, without interest, in lieu of fractional
shares to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with
Section 2.3(d).
(d) Conversion of Company Preferred
Shares. Each of the 7.5% Series A
Cumulative Convertible Preferred Shares of Beneficial Interest
of the Company, $.01 par value per share (the
Company Preferred Shares), issued and
outstanding immediately prior to the Merger Effective Time
(other than the Company Preferred Shares to be cancelled in
accordance with Section 2.2(b)) shall automatically
be converted into one share of 7.5% Series G Cumulative
Convertible Preferred Stock, $1.00 par value per share, of
Parent (the New Parent Preferred Stock).
Immediately prior to the Merger Effective Time, the terms of the
New Parent Preferred Stock shall be set forth in an amendment to
the Second Restated Certificate of Incorporation of Parent,
substantially in the form set forth in Exhibit H
hereto (the Certificate of Designation) and
such amendment shall be filed with the Secretary of State of the
State of Delaware and shall be effective immediately prior to
the Merger Effective Time.
(e) Partnership Interests of OP Merger
Sub. The general partner interests of OP
Merger Sub issued and outstanding immediately prior to the OP
Merger Effective Time shall automatically be cancelled and
retired and shall cease to exist. The limited partner interests
of OP Merger Sub issued and outstanding immediately prior to the
OP Merger Effective Time shall remain issued, outstanding and
unchanged as validly issued limited partner interests of the
Surviving Partnership after the OP Merger Effective Time.
(f) Company Owned Company
OP Units. Each unit of partnership
interest in Company OP (the Company OP Units)
that is outstanding immediately prior to the OP Merger Effective
Time that is held by the Company or by any Company Subsidiary
and each Company OP Unit that is outstanding immediately
prior to the OP Merger Effective Time that is held by Parent,
Merger Sub, OP Merger Sub or any other Subsidiary of Parent
shall remain issued, outstanding and unchanged as validly issued
partnership interests of the Surviving Partnership after the OP
Merger Effective Time.
(g) Company OP Units. Each
Company OP Unit issued and outstanding immediately prior to
the OP Merger Effective Time (other than Company OP Units
held by the Company, Company OP, any Company Subsidiary, Parent
or any Subsidiary of Parent) shall automatically be converted
into a fraction of a duly authorized, validly issued, fully paid
and non-assessable Parent Share equal to the Exchange Ratio. As
of the OP Merger Effective Time, all such Company OP Units,
when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired, and each holder of any
such Company OP Units shall cease to have any rights with
respect thereto, except the right to receive any dividends or
distributions in accordance with Section 2.3(c),
certificates representing the Parent Shares into which such
Company OP Units are converted and any cash, without interest,
in lieu of fractional shares to be issued or paid in
consideration therefor.
Section 2.3. Exchange
of Certificates and Related Requirements.
(a) Exchange Fund. At the Merger
Effective Time, Parent shall deposit, or shall cause to be
deposited, with a banking or other financial institution
selected by Parent and reasonably acceptable to the Company (the
Exchange Agent), (i) for the benefit of
the holders of Shares and Company OP Units, for exchange in
accordance with this Article II, certificates
representing the Parent Shares to be issued in connection with
the Mergers pursuant to Section 2.2 and an amount of
cash sufficient to permit the Exchange Agent to make the
necessary payments of cash in lieu of fractional shares pursuant
to this Section 2.3 (such cash and certificates for
Parent Shares, together with any dividends or distributions with
respect thereto (relating to record dates for such dividends or
distributions after the Merger Effective Time as provided in
Section 2.3(c)), being
B-2
hereinafter referred to as the Exchange Fund)
in exchange for outstanding Shares and Company OP Units,
and (ii) for the benefit of holders of Company Preferred
Shares, for exchange in accordance with this
Article II, certificates representing the shares of
New Parent Preferred Stock to be issued in connection with the
Merger (such certificates for shares of New Parent Preferred
Stock, together with any dividends or distributions with respect
thereto (relating to record dates for such dividends or
distributions after the Merger Effective Time as provided in
Section 2.3(c)), being hereinafter referred to as
the Preferred Exchange Fund) to be issued
pursuant to Section 2.2 and paid pursuant to this
Section 2.3 in exchange for outstanding Company
Preferred Shares.
(b) Exchange Procedure. As soon
as practicable after the Merger Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record of a
certificate or certificates representing Shares or Company
Preferred Shares (the Certificates) or of
Company OP Units (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent) and, (ii) if
applicable, instructions for use in effecting the surrender of
the Certificates in exchange for the consideration (and any
unpaid distributions and dividends) contemplated by
Section 2.2 and this Section 2.3,
including cash in lieu of fractional Parent Shares. Upon
(i) surrender of a Certificate for cancellation to the
Exchange Agent, if applicable, and (ii) delivery by such a
holder of such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange
Agent, such holder, if a holder of a Certificate representing
Shares or Company OP Units, shall be entitled to receive
promptly in exchange therefor (x) a certificate
representing that number of whole Parent Shares, (y) a
check representing the amount of cash in lieu of fractional
shares, if any, and (z) unpaid dividends and distributions
with respect to the Parent Shares as provided for in
Section 2.3(c), if any, that such holder has the
right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article II or in
respect of such Company OP Units and, if a holder of a
Certificate representing Company Preferred Shares, shall be
entitled to receive promptly in exchange therefor (x) a
certificate representing that number of shares of New Parent
Preferred Stock and (y) unpaid dividends and distributions
with respect to the New Parent Preferred Stock as provided for
in Section 2.3(c), if any, that such holder has the
right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article II, in
all such cases after giving effect to any required withholding
Tax. No interest will be paid or accrued on the cash payable to
holders of Shares, Company OP Units or Company Preferred
Shares. In the event of a transfer of ownership of Shares,
Company OP Units or Company Preferred Shares that is not
registered in the transfer records of the Company or Company OP,
a certificate representing the proper number of Parent Shares or
shares of New Parent Preferred Stock, together with a check for
the cash to be paid pursuant to this Section 2.3,
may be issued to such a transferee if such Certificate shall be
properly endorsed or such Certificate or Company OP Units
shall otherwise be in proper form for transfer and the
transferee shall pay any transfer or other Taxes required by
reason of the payment to a Person other than the registered
holder of such Certificate or Company OP Units or establish
to the satisfaction of Parent that such Tax has been paid or is
not applicable. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect
to the making of such payment under the Code or under any
provision of state, local or foreign Tax law. To the extent that
amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Person in respect of which
such deduction and withholding was made.
(c) Dividends. No dividends or
other distributions declared with a record date after the Merger
Effective Time on Parent Shares or shares of New Parent
Preferred Stock shall be paid with respect to any Shares or
Company Preferred Shares represented by a Certificate until such
Certificate is surrendered for exchange as provided herein or a
Person claiming a Certificate to be lost, stolen or destroyed
has complied with the provisions of Section 2.5.
Promptly following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing
whole Parent Shares or shares of New Parent Preferred Stock
issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other
distributions with a record date after the Merger Effective Time
theretofore payable with respect to such whole Parent Shares or
shares of New Parent Preferred Stock and not paid, less the
amount of any withholding Taxes which may be required thereon,
and (ii) at the appropriate payment date or as promptly as
practicable
B-3
thereafter, the amount of dividends or other distributions with
a record date after the Merger Effective Time, but prior to such
surrender or compliance and a payment date subsequent to such
surrender or compliance payable with respect to such whole
Parent Shares, less the amount of any withholding Taxes which
may be required thereon. Parent will, no later than the
applicable dividend or distribution payment dates, set aside and
provide the Exchange Agent with the cash necessary to make the
payments contemplated by this Section 2.3(c), which
shall be held for such purpose and for the sole benefit of such
holders of Parent Shares or shares of New Parent Preferred Stock.
(d) No Fractional Securities. No
fractional Parent Shares shall be issued pursuant hereto. In
lieu of the issuance of any fractional Parent Shares, cash
adjustments will be paid to holders in respect of any fractional
Parent Shares that would otherwise be issuable, and the amount
of such cash adjustment shall be equal to the product obtained
by multiplying such holders fractional Parent Share that
would otherwise be issuable by the closing price per share of
Parent Shares on the New York Stock Exchange Composite Tape on
the Closing Date as reported by The Wall Street Journal
(Northeast edition) (or, if not reported thereby, any other
authoritative source).
(e) No Further Ownership Rights in
Shares. All Parent Shares or shares of New
Parent Preferred Stock issued or cash paid upon the surrender
for exchange of Certificates or Company OP Units in
accordance with the terms of this Article II (including any
cash paid pursuant to this Section 2.3) shall be
deemed to have been issued in full satisfaction of all rights
pertaining to the Shares or Company Preferred Shares theretofore
represented by such Certificates or Company OP Units. At
the Merger Effective Time, the stock transfer books of the
Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the
Surviving Entity of the Shares or Company Preferred Shares that
were outstanding immediately prior to the Merger Effective Time.
At the OP Merger Effective Time, the partnership interest
transfer books of Company OP shall be closed, and there shall be
no further registration of transfers on the partnership interest
transfer books of the Surviving Partnership of the Company OP
Units that were outstanding immediately prior to the OP Merger
Effective Time. If, after the Merger Effective Time,
Certificates are presented to the Surviving Entity or the
Exchange Agent for any reason, they shall be cancelled and
exchanged as provided in this Article II.
(f) Termination of Exchange
Funds. Any portion of the Exchange Fund or
Preferred Exchange Fund (including the proceeds of any
investments thereof and any Parent Shares or shares of New
Parent Preferred Stock) which remains undistributed to the
holders of Shares, Company Preferred Shares or Company
OP Units, as applicable, for six months after the Merger
Effective Time may be delivered to Parent, upon demand, and any
holders of Shares, Company Preferred Shares or Company
OP Units who have not theretofore complied with this
Article II and the instructions set forth in the
letter of transmittal mailed to such holders after the Merger
Effective Time or the OP Merger Effective Time shall thereafter
look only to Parent or its agent (subject to abandoned property,
escheat or other similar laws) for payment of their Parent
Shares or shares of New Parent Preferred Stock, as applicable,
cash and unpaid dividends and distributions on Parent Shares
deliverable in respect of each Share, Company Preferred Share or
Company OP Unit such holder holds as determined pursuant to
this Agreement, in each case, without any interest thereon.
(g) No Liability. None of Parent,
Merger Sub, OP Merger Sub, the Company, Company OP or the
Exchange Agent shall be liable to any Person in respect of any
amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Section 2.4. Adjustment
of Exchange Ratio. In the event that Parent
changes or establishes a record date for changing the number of
Parent Shares issued and outstanding as a result of a stock
split, stock dividend, recapitalization, merger, subdivision,
reclassification, combination or similar transaction with
respect to the outstanding Parent Shares and the record date
therefor shall be prior to the Effective Times, the Exchange
Ratio applicable to the Mergers and any other calculations based
on or relating to Parent Shares, including the conversion ratio
applicable to the New Parent Preferred Stock specified in the
Certificate of Designation, shall be appropriately adjusted to
reflect such stock split, stock dividend, recapitalization,
merger, subdivision, reclassification, combination or similar
transaction.
B-4
Section 2.5. Lost
Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent or the Exchange
Agent, the posting by such Person of a bond, in such reasonable
amount as Parent or the Exchange Agent may direct as indemnity
against any claim that may be made against them with respect to
such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Parent Shares or
shares of New Parent Preferred Stock and any cash in lieu of
fractional Parent Shares to which the holders thereof are
entitled pursuant to Section 2.3(b) and any
dividends or other distributions to which the holders thereof
are entitled pursuant to Section 2.3(c).
Section 2.6. Further
Assurances.
(a) If at any time after the Merger Effective Time the
Surviving Entity shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or
things are necessary, desirable or proper (i) to vest,
perfect or confirm, of record or otherwise, in the Surviving
Entity its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties, permits,
licenses or assets of either of the Constituent Entities, or
(ii) otherwise to carry out the purposes of this Agreement,
the Surviving Entity and its proper officers and directors or
their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Entities,
all such deeds, bills of sale, assignments and assurances and to
do, in the name and on behalf of either Constituent Entity, all
such other acts and things as may be necessary, desirable or
proper to vest, perfect or confirm the Surviving Entitys
right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such
Constituent Entity and otherwise to carry out the purposes of
this Agreement.
(b) If at any time after the OP Merger Effective Time the
Surviving Partnership shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other
acts or things are necessary, desirable or proper (i) to
vest, perfect or confirm, of record or otherwise, in the
Surviving Partnership its right, title or interest in, to or
under any of the rights, privileges, powers, franchises,
properties, permits, licenses or assets of either of the OP
Merger Constituent Entities, or (ii) otherwise to carry out
the purposes of this Agreement, the Surviving Partnership and
the proper officers and directors of the Surviving Entity, as
the sole general partner of the Surviving Partnership, or their
designees shall be authorized to execute and deliver, in the
name and on behalf of either of the OP Merger Constituent
Entities, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of either OP
Merger Constituent Entity, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm
the Surviving Partnerships right, title or interest in, to
or under any of the rights, privileges, powers, franchises,
properties or assets of such OP Merger Constituent Entity and
otherwise to carry out the purposes of this Agreement.
(B) Section 4.4(b) of the Merger Agreement is
hereby amended and restated in its entirety to read as follows:
The Parent Shares and shares of New Parent Preferred
Stock, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights.
(C) Section 4.6(b) of the Merger Agreement is
hereby amended and restated in its entirety to read as follows:
Except for (i) the filing with the SEC of the
S-4
Registration Statement or other applicable requirements, if any,
of the Exchange Act or the Securities Act or filings required
pursuant to any state securities or blue sky laws,
(ii) the filing and acceptance for record of the
Certificates of Merger as required by applicable Entity Law
(iii) the filing of the OP Certificate of Merger as
required by applicable OP Merger Entity Law, and (iv) the
filing and acceptance for record of the Certificate of
Designation as required by applicable Delaware law, or as
disclosed on Section 4.6(b) of the Parent Disclosure
Letter, or as otherwise set forth in the Parent Disclosure
Letter with respect to Section 4.6, no consent,
approval, order or authorization of, or registration,
declaration, filing with, notice to, or permit from, any
Governmental Agency or any other Person, is required pursuant to
any Legal Requirement or under the terms of any Contract or
Parent Permit by or on behalf of Parent or any of the Parent
Subsidiaries in connection with the execution and delivery of
this Agreement or the consummation or performance of the
Mergers, other than such consents, approvals, orders,
authorizations, registrations,
B-5
declarations, filings, notices or permits which the failure to
obtain or make would not reasonably be expected to have a Parent
Material Adverse Effect.
(D) Section 6.1(a) of the Merger Agreement is
hereby amended and restated in its entirety to read as follows:
(a) As soon as reasonably practicable after the date
hereof, Parent and the Company shall promptly prepare a proxy
statement and prospectus (the Proxy
Statement/Prospectus) constituting a part of a
registration statement relating to the issuance of Parent Shares
and New Parent Preferred Stock in the Mergers and the issuance
of Parent Shares upon exercise of Converted Options after the
Merger Effective Time (the S-4 Registration
Statement), and Parent shall file with the SEC the
S-4
Registration Statement as promptly as practicable thereafter.
Parent and the Company shall cooperate in providing all of the
information required to be disclosed in such
S-4
Registration Statement, including the preparation of any
required pro forma financial information. Each of Parent and the
Company shall use its reasonable best efforts to have the
S-4
Registration Statement declared effective by the SEC under the
Securities Act as promptly as practicable after such filing. The
Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its
Subsidiaries, directors, trustees, executive officers,
equityholders or partners, as applicable, and such other matters
as may be reasonably necessary or advisable in connection with
the S-4
Registration Statement or the Proxy Statement/Prospectus. The
Proxy Statement/Prospectus shall include the recommendation of
the Board in favor of approval and adoption of this Agreement
and the Merger, except to the extent the Board shall have
withdrawn or modified its approval or recommendation of this
Agreement as permitted by Section 6.6. The Company
shall use its reasonable best efforts to cause the Proxy
Statement/Prospectus to be mailed to the holders of Company
Common Shares, Company Preferred Shares and Company
OP Units as promptly as practicable after the
S-4
Registration Statement becomes effective. The parties shall
promptly provide copies, consult with each other and prepare
written responses with respect to any written comments received
from the SEC with respect to the
S-4
Registration Statement and the Proxy Statement/Prospectus and
advise one another of any oral comments received from the
SEC.
(E) Section 6.4 of the Merger Agreement is
hereby amended and restated in its entirety to read as follows:
Parent shall use its reasonable best efforts to cause the
Parent Shares and New Parent Preferred Stock to be issued in the
Mergers to be approved for listing, upon official notice of
issuance, on the New York Stock Exchange
(NYSE). Parent shall also use its reasonable
best efforts to cause the Parent Shares issuable upon exercise
of a Converted Option or upon conversion of any New Parent
Preferred Stock to be approved for listing, upon official notice
of issuance, on the NYSE.
(F) Section 6.9(b) is hereby amended and
restated in its entirety to read as follows:
(b) Parent shall declare a dividend to holders of Parent
Shares and the Company shall declare a dividend to holders of
Company Common Shares and Company Preferred Shares, the record
date for which shall be the close of business on the last
Business Day prior to the Merger Effective Time. The per share
dividend amount payable with respect to the Parent Shares and
the Company Common Shares shall be an amount equal to the then
most recent quarterly dividend payable with respect to such
shares multiplied by the number of days elapsed since the last
dividend record date for such shares through and including the
day prior to the day on which the Merger Effective Time occurs,
and divided by the actual number of days in the calendar quarter
in which such dividend is declared. The per share dividend
amount payable with respect to the Company Preferred Shares
shall be an amount equal to $0.46875 multiplied by the number of
days elapsed since the last Company Preferred Shares dividend
record date through and including the day prior to the day on
which the Merger Effective Time occurs, and divided by the
actual number of days in the calendar quarter in which such
dividend is declared.
(G) Section 7.1(c) is hereby amended and
restated in its entirety to read as follows:
(c) NYSE Listing. The Parent
Shares and New Parent Preferred Stock to be issued in the
Mergers and the Parent Shares to be reserved for issuance upon
exercise of Converted Options shall have been approved for
listing on the NYSE, subject to official notice of issuance.
B-6
(H) A new Section 7.3(e) shall be added to the
Merger Agreement and shall read as follows:
(e) Certificate of Designation.
Parent shall have filed the Certificate of Designation in
accordance with applicable Delaware law and it shall be
effective.
(I) A new Exhibit H
Certificate of Designation of 7.5% Series G Cumulative
Convertible Preferred Stock, in the form attached hereto
as Exhibit A, shall be added to the Merger Agreement.
Section 2. Authority.
(a) The Company has the requisite trust power and authority
to enter into this Amendment, and subject to the Company
Shareholder Approval, to consummate the transactions
contemplated hereby. The execution and delivery of this
Amendment by the Company and consummation by the Company of the
transactions contemplated hereby have been duly authorized by
all necessary action on the part of the Company, subject to the
Company Shareholder Approval. This Amendment has been duly
executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable against the
Company in accordance with its terms, assuming this Amendment is
enforceable against Parent, Merger Sub and OP Merger Sub, except
as enforcement may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, liquidation,
conservatorship or other similar laws affecting the enforcement
of creditors rights generally and except that the
availability of equitable remedies, including specific
performance, is subject to the discretion of the court before
which any proceeding therefor may be brought.
(b) Company OP has the requisite partnership power and
authority to enter into this Amendment and to consummate the
transactions contemplated hereby. The execution and delivery of
this Amendment by Company OP and consummation by Company OP of
the transactions contemplated hereby have been duly authorized
by all necessary action on the part of Company OP. This
Amendment has been duly executed and delivered by Company OP and
constitutes the valid and binding obligation of the Company OP,
enforceable against Company OP in accordance with its terms,
assuming this Amendment is enforceable against Parent, Merger
Sub and OP Merger Sub, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, liquidation, conservatorship or other similar laws
affecting the enforcement of creditors rights generally
and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of
the court before which any proceeding therefor may be brought.
(c) Each of Parent, Merger Sub and OP Merger Sub has the
requisite corporate, limited liability company or partnership
power and authority to enter into this Amendment and to
consummate the transactions contemplated hereby. The execution
and delivery of this Amendment by Parent, Merger Sub and OP
Merger Sub, and the consummation by Parent, Merger Sub and OP
Merger Sub of the transactions contemplated hereby, have been
duly authorized by all necessary action on the part of Parent,
Merger Sub and OP Merger Sub, except that the consummation by
Parent of the filing of the Certificate of Designation and
issuance of the New Parent Preferred Stock pursuant to
Section 1(A) of this Amendment will be duly
authorized by all necessary action on the part of Parent on or
prior to October 17, 2006, and Parent will promptly notify
the Company in writing following such action. No stockholder
approval by the stockholders of Parent is required by Entity Law
or the rules of the NYSE for the issuance of the New Parent
Preferred Stock. This Amendment has been duly executed and
delivered by Parent, Merger Sub or OP Merger Sub, as applicable,
and constitutes a valid and binding obligation of Parent, Merger
Sub or OP Merger Sub, as applicable, enforceable against Parent,
Merger Sub or OP Merger Sub, as applicable, in accordance with
its terms, assuming this Amendment is enforceable against the
Company and the Company OP, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium, liquidation, conservatorship or other
similar laws affecting the enforcement of creditors rights
generally and except that the availability of equitable
remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may
be brought.
Section 3. No
Other Change. Except as otherwise provided
herein, all of the terms, covenants and other provisions of the
Merger Agreement shall continue to be in full force and effect
in accordance with their respective terms. After the date
hereof, all references to the Merger Agreement shall refer to
the Merger Agreement (including the Exhibits, schedules, Company
Disclosure Letter and Parent Disclosure Letter attached
thereto), as amended by this Amendment.
B-7
Section 4. No
Waiver or Consent. Except as specifically
set forth herein, the execution and delivery hereof by the
parties hereto shall not constitute a consent or waiver of any
provisions of the Merger Agreement. No waiver by any party of
any breach or violation or, default under or inaccuracy in any
representation, warranty or covenant hereunder or under the
Merger Agreement, whether intentional or not, will be deemed to
extend to any prior or subsequent breach, violation, default of,
or inaccuracy in, any such representation, warranty or covenant
hereunder or thereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence. No delay
or omission on the part of any party in exercising any right,
power or remedy under this Amendment or the Merger Agreement
will operate as a waiver thereof.
Section 5. Counterparts.
For the convenience of the parties, any number of counterparts
of this Amendment may be executed by any two or more parties
hereto, and each such executed counterpart shall be, and shall
be deemed to be, an original, but all of which shall constitute,
and shall be deemed to constitute, in the aggregate but one and
the same instrument.
Section 6. Governing
Law. (a) Except to the extent the
Merger is governed by Entity Law and the OP Merger is governed
by the OP Merger Entity Law, this Amendment and the legal
relations between the parties hereto shall be governed by and
construed in accordance with the laws of the State of Delaware
applicable to contracts made and performed therein regardless of
the laws that might otherwise govern under applicable conflicts
or choice of law rules.
(b) Any proceeding seeking to enforce any provision of, or
based on any right arising out of, this Agreement may be, but
shall not be required to be, brought against any of the parties
in the courts of the State of Delaware.
(c) Each party to this Amendment waives, to the fullest
extent permitted by applicable Legal Requirements, any right it
may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Amendment.
[The rest of this page has intentionally been left blank]
B-8
IN WITNESS WHEREOF, the parties have caused this Amendment
No. 1 to Agreement and Plan of Merger to be duly executed
by their respective authorized officers as of the day and year
first above written.
HEALTH CARE REIT, INC.
|
|
|
|
By:
|
/s/ George
L. Chapman
|
Name: George L. Chapman
|
|
|
|
Title:
|
Chairman and Chief Executive Officer
|
HEAT MERGER SUB, LLC
By: HEALTH CARE REIT, INC.
Its: Sole member
|
|
|
|
By:
|
/s/ George
L. Chapman
|
Name: George L. Chapman
|
|
|
|
Title:
|
Chairman and Chief Executive Officer
|
HEAT OP MERGER SUB, L.P.
By: HEAT MERGER SUB, LLC
Its: General partner
By: HEALTH CARE REIT, INC.
Its: Sole member
|
|
|
|
By:
|
/s/ George
L. Chapman
|
Name: George L. Chapman
|
|
|
|
Title:
|
Chairman and Chief Executive Officer
|
WINDROSE MEDICAL PROPERTIES TRUST
|
|
|
|
By:
|
/s/ Frederick
L. Farrar
|
Name: Frederick L. Farrar
|
|
|
|
Title:
|
President, Chief Operating Officer
and Treasurer
|
B-9
WINDROSE MEDICAL PROPERTIES, L.P.
By: WINDROSE MEDICAL PROPERTIES TRUST
Its: General partner
|
|
|
|
By:
|
/s/ Frederick
L. Farrar
|
Name: Frederick L. Farrar
|
|
|
|
Title:
|
President, Chief Operating Officer
and Treasurer
|
B-10
Appendix C
FORM
OF
CERTIFICATE OF DESIGNATION
OF
7.5% SERIES G CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
HEALTH CARE REIT, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned duly authorized officer of Health Care REIT,
Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the
Corporation), does hereby certify that, pursuant to
authority conferred upon the Board of Directors of the
Corporation (the Board) by the Second Restated
Certificate of Incorporation of the Corporation, as amended and
supplemented, and pursuant to Section 151 of the General
Corporation Law of the State of Delaware, the Board, acting by
unanimous written consent effective as
of ,
2006, adopted a resolution (i) authorizing a new series of
the Corporations previously authorized Preferred Stock,
$1.00 par value per share (the Preferred
Stock), and (ii) providing for the designations,
preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions
thereof,
of shares
[the number of Windrose preferred shares outstanding as of
the merger effective time] of 7.5% Series G Cumulative
Convertible Preferred Stock of the Corporation, as follows:
RESOLVED, that the Corporation is authorized to
issue shares
[the number of Windrose preferred shares outstanding as of
the merger effective time] of 7.5% Series G Cumulative
Convertible Preferred Stock, $1.00 par value per share,
which shall have the following powers, designations, preferences
and other special rights:
Section 1. Designation
and Number. A series of Preferred Stock,
designated the 7.5% Series G Cumulative Convertible
Preferred Stock (the Series G Preferred
Stock), is hereby established. The number of authorized
shares of Series G Preferred Stock shall be [the number
of Windrose preferred shares outstanding as of the merger
effective time].
Section 2. Maturity. The
Series G Preferred Stock has no stated maturity and will
not be subject to any sinking fund or mandatory redemption.
Section 3. Rank. The
Series G Preferred Stock will, with respect to dividend
rights and rights upon liquidation, dissolution or winding up of
the Corporation, rank (a) prior or senior to the
Corporations Junior Participating Preferred Stock,
Series A, the common stock of the Corporation, par value
$1.00 per share (the Common Stock) and to all equity
securities of the Corporation ranking junior to the
Series G Preferred Stock with respect to dividend rights or
rights upon liquidation, dissolution or winding up of the
Corporation (the Junior Shares); (b) on a
parity with the Corporations Series C Cumulative
Convertible Preferred Stock, the Corporations
77/8%
Series D Cumulative Redeemable Preferred Stock, the
Corporations 6.0% Series E Cumulative Convertible and
Redeemable Preferred Stock, the Corporations
75/8%
Series F Cumulative Redeemable Preferred Stock and all
other equity securities issued by the Corporation the terms of
which specifically provide that such equity securities rank on a
parity with the Series G Preferred Stock with respect to
dividend rights and rights upon liquidation, dissolution or
winding up of the Corporation (the Parity Shares),
(c) junior to equity securities issued by the Corporation
to the extent that the terms of such equity securities
specifically provide that such equity securities rank senior to
the Series G Preferred Stock with respect to dividend
rights or rights upon liquidation, dissolution or winding up of
the Corporation (the Senior Shares), and
(d) junior to all existing and future indebtedness of the
Corporation. The term equity securities does not
include convertible debt securities, which will rank senior to
the Series G Preferred Stock prior to conversion.
C-1
Section 4. Dividends.
(a) Holders of Series G Preferred Stock shall be
entitled to receive, when and as authorized by the Board
Directors, or a duly authorized committee thereof, and declared
by the Corporation out of funds of the Corporation legally
available for payment, preferential cumulative cash dividends at
the rate of 7.5% per annum of the Base Liquidation
Preference (as defined below) per share (equivalent to a fixed
annual amount of $1.875 per share). Such dividends shall be
cumulative and shall begin to accrue from the date of original
issue of the Series G Preferred Stock and shall be payable
quarterly in arrears on or about the 15th day of January,
April, July and October of each year (or, if not a business day,
the next succeeding business day, each a Dividend Payment
Date) for the period ending on such Dividend Payment Date.
Business day shall mean any day other than a
Saturday, Sunday or other day on which commercial banks in the
City of New York are authorized or required to close. Any
quarterly dividend payable on the Series G Preferred Stock
for any partial dividend period will be computed on the basis of
twelve
30-day
months and a
360-day
year. Dividends will be payable in arrears to holders of record
as they appear on the share records of the Corporation at the
close of business on the applicable record date, which shall be
the last day of the calendar month first preceding the
applicable Dividend Payment Date or such other date designated
by the Board of Directors for the payment of dividends that is
not more than 30 nor less than 10 days prior to such
Dividend Payment Date (each, a Dividend Record Date).
(b) No dividends on Series G Preferred Stock shall be
authorized by the Board of Directors or declared or paid or set
apart for payment by the Corporation at such time as the terms
and provisions of 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.
(c) Notwithstanding the foregoing, dividends on the
Series G Preferred Stock will accrue 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 and whether or not such is
prohibited by agreement. Accrued but unpaid dividends on the
Series G Preferred Stock will not bear interest and holders
of the Series G Preferred Stock will not be entitled to any
distributions in excess of full cumulative distributions
described above. Except as set forth in the next sentence, no
dividends will be declared or paid or set apart for payment on
any shares of Common Stock of the Corporation or any other
series of Preferred Stock ranking, as to dividends, on a parity
with or junior to the Series G Preferred Stock (other than
a dividend in Common Stock of the Corporation or any other
equity securities of the Corporation ranking junior to the
Series G Preferred Stock as to dividends and upon
liquidation) 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 is set apart for
such payment on the Series G Preferred Stock for all past
dividend periods and the then current dividend period. When
dividends are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon the Series G
Preferred Stock and the shares of any other series of Preferred
Stock ranking on a parity as to dividends with the Series G
Preferred Stock, all dividends declared upon the Series G
Preferred Stock and any other series of Preferred Stock ranking
on a parity as to dividends with the Series G Preferred
Stock shall be declared pro rata so that the amount of dividends
declared per share of the Series G Preferred Stock and such
other series of Preferred Stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the
Series G Preferred Stock and such other series of Preferred
Stock (which shall not include any accrual in respect of unpaid
dividends for prior dividend periods if such Preferred Stock
does not have a cumulative dividend) bear to each other.
(d) Except as provided in the immediately preceding
paragraph, unless full cumulative dividends on the Series G
Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is
set apart for payment for all past dividend periods and the then
current dividend period, no dividends (other than in Common
Stock of the Corporation or other equity securities of the
Corporation ranking junior to the Series G Preferred Stock
as to dividends and upon liquidation) shall be declared or paid
or set aside for payment nor shall any other distribution be
declared or made upon the Common Stock, or any other equity
securities of the Corporation ranking junior to or on a parity
with the Series G Preferred Stock as to dividends or upon
liquidation, nor shall any Common Stock, or any other equity
securities of the Corporation ranking junior to or on a parity
with the Series G Preferred Stock as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of
C-2
any such shares) by the Corporation (except by conversion into
or exchange for other equity securities of the Corporation
ranking junior to the Series G Preferred Stock as to
dividends and upon liquidation or redemption for the purpose of
preserving the Corporations qualification as a real estate
investment trust under the Internal Revenue Code of 1986, as
amended). Holders of Series G Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or
stock, in excess of full cumulative dividends on the
Series G Preferred Stock as provided above. Any dividend
payment made on the Series G Preferred Stock shall first be
credited against the earliest accrued but unpaid dividend due
with respect to such shares which remains payable.
(e) If, for any taxable year, the Corporation elects to
designate as capital gain dividends (as defined in
Section 857 of the Code) any portion (the Capital
Gains Amount) of the dividends (as determined for federal
income tax purposes) paid or made available for the year to
holders of all classes of shares (the Total
Dividends), then the portion of the Capital Gains Amount
that shall be allocable to the holders of Series G
Preferred Stock shall be the amount that the total dividends (as
determined for federal income tax purposes) paid or made
available to the holders of the Series G Preferred Stock
for the year bears to the Total Dividends. The Corporation will
make a similar allocation for each taxable year with respect to
any undistributed long-term capital gains of the Corporation
that are to be included in its stockholders long-term
capital gains, based on the allocation of the Capital Gains
Amount that would have resulted if such undistributed long-term
capital gains had been distributed as capital gains
dividends by the Corporation to its stockholders.
Section 5. Liquidation
Preference.
(a) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the
holders of the Series G Preferred Stock are entitled to be
paid out of the assets of the Corporation legally available for
distribution to its stockholders a liquidation preference of
(x) $25 per share (the Base Liquidation
Preference) in cash or property at its fair market value
as determined by the Board of Directors, or (y) in the
event the Corporation shall be a party to a Transaction, as
defined in subparagraph 8(e), prior to June 30, 2010
in which a majority of the Common Stock of the Corporation is
converted into the right to receive cash, property or other
consideration at a price, or having a fair market value, as
determined by the Board of Directors, per share, of less than
105% of the Conversion Price in effect at the time of any such
Transaction, $26.25 per share in cash or property at its
fair market value, as determined by the Board of Directors (the
Stepped Up Liquidation Preference), plus in each
case, an amount equal to any accrued and unpaid dividends to the
date of payment, but without interest, before any distribution
of assets is made to holders of the Corporations Common
Stock or any other equity securities of the Corporation that
rank junior to the Series G Preferred Stock as to
liquidation rights. Notwithstanding the foregoing, unless the
Corporation is a party to a Transaction prior to June 30,
2010, the liquidation preference on or after June 30, 2010
shall be the Base Liquidation Preference plus an amount equal to
the accrued and unpaid dividends to the date of payment, but
without interest, before any distribution of assets is made to
holders of the Corporations Common Stock or any other
equity securities of the Corporation that rank junior to the
Series G Preferred Stock as to liquidation rights. The
Corporation will promptly provide to the holders of the
Series G Preferred Stock written notice of any event
triggering the right to receive such Liquidation Preference.
After payment of the full amount of the Liquidation Preference,
plus any accrued and unpaid dividends to which they are
entitled, the holders of the Series G Preferred Stock will
have no right or claim to any of the remaining assets of the
Corporation. The consolidation or merger of the Corporation with
or into any other corporation, trust or entity or of any other
corporation with or into the Corporation, the sale, lease or
conveyance of all or substantially all of the property or
business of the Corporation or a statutory share exchange, shall
not be deemed to constitute a liquidation, dissolution or
winding up of the Corporation, unless a liquidation, dissolution
or winding up of the Corporation is effected in connection with,
or as a step in a series of transactions by which, a
consolidation or merger of the Corporation is effected.
(b) If upon any liquidation, dissolution or winding up of
the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the holders of Series G
Preferred Stock shall be insufficient to pay in full the above
described preferential amount and liquidating payments on all
other classes and series of Parity Shares, then such assets, or
the proceeds thereof, shall be distributed among the holders of
Series G Preferred Stock and any such other Parity Shares
ratably in the same proportion as the respective amounts that
would be payable on such Series G Preferred Stock and any
such other Parity Shares if all amounts payable thereon were
paid in full.
C-3
(c) Upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the
holders of Series G Preferred Stock and any Parity Shares,
any other series or class or classes of Junior Shares shall be
entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Series G Preferred
Stock and any Parity Shares shall not be entitled to share
therein.
Section 6. Redemption.
(a) The Series G Preferred Stock is not redeemable
prior to June 30, 2010. On and after, June 30, 2010,
the Corporation, at its option, upon not less than 30 nor more
than 60 days written notice, may redeem the
Series G Preferred Stock, in whole or in part, at any time
or from time to time, for cash at a redemption price equal to
the Base Liquidation Preference, per share, plus all accrued and
unpaid dividends thereon to the date fixed for redemption (the
Redemption Date), without interest. No
Series G Preferred Stock may be redeemed except with assets
legally available for the payment of the redemption price.
Holders of Series G Preferred Stock to be redeemed shall
surrender such Series G Preferred Stock at the place
designated in such notice and shall be entitled to the
redemption price and any accrued and unpaid dividends payable
upon such redemption following such surrender. If notice of
redemption of any of the Series G Preferred Stock has been
given and if the funds necessary for such redemption have been
set aside, separate and apart from other funds, by the
Corporation in trust for the pro rata benefit of the holders of
any Series G Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to
accrue on such Series G Preferred Stock, such Series G
Preferred Stock shall no longer be deemed outstanding and all
rights of the holders of such shares will terminate, except the
right to receive the redemption price. If less than all of the
outstanding Series G Preferred Stock is to be redeemed, the
Series G Preferred Stock to be redeemed shall be selected
pro rata (as nearly as may be practicable without creating
fractional shares) or by any other equitable method determined
by the Corporation.
(b) Unless full cumulative dividends on all Series G
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 and the then current dividend period, no Series G
Preferred Stock shall be redeemed unless all outstanding shares
of Series G Preferred Stock are simultaneously redeemed and
the Corporation shall not purchase or otherwise acquire directly
or indirectly any Series G Preferred Stock (except by
exchange for equity securities of the Corporation ranking junior
to the Series G Preferred Stock as to dividends and upon
liquidation); provided, however, that the foregoing shall not
prevent the purchase by the Corporation of any Series G
Preferred Stock in order to ensure that the Corporation
continues to meet the requirements for qualification as a real
estate investment trust under the Internal Revenue Code, or the
purchase or acquisition of Series G Preferred Stock
pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Series G Preferred
Stock. So long as no dividends are in arrears on the
Series G Preferred Stock, the Corporation shall be entitled
at any time and from time to time to repurchase any
Series G Preferred Stock in open market transactions duly
authorized by the Board of Directors of the Corporation and
effected in compliance with applicable laws.
(c) Notice of redemption of the Series G Preferred
Stock shall be given by publication in a 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 30
nor more than 60 days prior to the Redemption Date. A
similar notice shall be mailed by the Corporation to each holder
of record of the Series G Preferred Stock to be redeemed by
first class mail, postage prepaid at such holders address
as the same appears on the share records of the Corporation. No
failure to give such notice or any defect therein or in the
mailing thereof shall affect the validity of the proceedings for
the redemption of any Series G Preferred Stock except as to
the holder to whom notice was defective or not given. Each
notice shall state: (i) the Redemption Date;
(ii) the redemption price; (iii) the number of shares
of Series G Preferred Stock to be redeemed; (iv) the
place or places where the certificates for the Series G
Preferred Stock are to be surrendered for payment of the
redemption price; and (v) that dividends on the shares to
be redeemed will cease to accrue on such redemption date. If
less than all of the Series G Preferred Stock held by any
holder is to be redeemed, the notice mailed to such holder shall
also specify the number of shares of Series G Preferred
Stock held by such holder to be redeemed.
(d) Immediately prior to any redemption of Series G
Preferred Stock, the Corporation shall pay, in cash, any
accumulated and unpaid dividends through the
Redemption Date, unless a Redemption Date falls after
a Dividend
C-4
Record Date and prior to the corresponding Dividend Payment
Date, in which case each holder of Series G Preferred Stock
at the close of business on such Dividend Record Date shall be
entitled to the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the
redemption of such shares before such Dividend Payment Date.
(e) The Series G Preferred Stock has no stated
maturity and will not be subject to any sinking fund or
mandatory redemption provisions.
(f) Subject to applicable law and the limitation on
purchases when dividends on the Series G Preferred Stock
are in arrears, the Corporation may, at any time and from time
to time, purchase any Series G Preferred Stock in the open
market, by tender or by private agreement.
(g) All Series G Preferred Stock redeemed, purchased
or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and reclassified as authorized but
unissued Preferred Stock, without designation as to class or
series, and may thereafter be reissued as any class or series of
Preferred Stock.
Section 7. Voting
Rights.
(a) Holders of the Series G Preferred Stock will not
have any voting rights, except as set forth below or as
otherwise required by law.
(b) Whenever dividends on any Series G Preferred Stock
shall be in arrears in an aggregate amount equivalent to six or
more quarterly dividends, whether or not consecutive (a
Preferred Dividend Default), the number of directors
then constituting the Board of Directors shall increase by two
(if not already increased by reason of a similar arrearage with
respect to any Parity Preferred (as hereinafter defined)). In
the event of such an increase in the number of directors, the
holders of the Series G Preferred Stock will be entitled to
vote (voting separately as a class with holders of all other
series of Preferred Stock ranking on a parity with the
Series G Preferred Stock as to dividends or upon
liquidation (Parity Preferred) upon which like
voting rights have been conferred and are exercisable), in order
to fill the vacancies thereby created, for the election of a
total of two additional directors of the Corporation (the
Preferred Share Directors) at a special meeting
called by the holders of record of at least 20% of the
Series G Preferred Stock or by the holders of any series of
Parity Preferred so in arrears with like voting rights (unless
such request is received less than 90 days before the date
fixed for the next annual or special meeting of the
stockholders) or at the next annual meeting of stockholders, and
at each subsequent annual meeting at which a Preferred Share
Director is to be elected until all dividends accumulated on
such Series G Preferred Stock and Parity Preferred with
like voting rights for the past dividend periods and the
dividend for the then current dividend period shall have been
fully paid or declared and a sum sufficient for the payment
thereof set aside for payment. In the event the directors of the
Corporation are divided into classes, each such vacancy shall be
apportioned among the classes of directors to prevent stacking
in any one class and to insure that the number of directors in
each of the classes of directors are as equal as possible. If
and when all accumulated dividends and the dividend for the then
current dividend period on the Series G Preferred Stock
shall have been paid in full or declared and set aside for
payment in full, the holders thereof shall be divested of the
foregoing voting rights (subject to revesting in the event of
each and every Preferred Dividend Default) and, if all
accumulated dividends and the dividend for the then current
dividend period have been paid in full or set aside for payment
in full on all series of Parity Preferred upon which like voting
rights have been conferred and are exercisable, the term of
office of each Preferred Share Director so elected shall
terminate and the number of directors then constituting the
Board of Directors shall decrease accordingly. Any Preferred
Share Director may be removed at any time with or without cause
by, and shall not be removed otherwise than by the vote of, the
holders of record of a majority of the outstanding Series G
Preferred Stock when they have the voting rights described above
(voting separately as a class with holders of all series of
Parity Preferred upon which like voting rights have been
conferred and are exercisable).
So long as a Preferred Dividend Default shall continue, any
vacancy in the office of a Preferred Share Director may be
filled by written consent of the Preferred Share Director
remaining in office, or if none remains in office, by a vote of
the holders of record of a majority of the outstanding shares of
Series G Preferred Stock when they have the voting rights
described above (voting separately as a class with all series of
Parity Preferred upon which like voting rights have been
conferred and are exercisable). The Preferred Share Directors
shall each be entitled to one vote per director on any matter.
C-5
(c) So long as any Series G Preferred Stock remains
outstanding, the Corporation will not, without the affirmative
vote or consent of the holders of at least two-thirds of the
Series G Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (voting
separately as a class):
(i) amend, alter or repeal any of the provisions of this
Certificate of Designation or other provisions of the
Corporations Second Restated Certificate of Incorporation,
as amended and supplemented, whether by merger, consolidation or
otherwise (an Event), so as to materially and
adversely affect any right, preference, privilege or voting
power of the Series G Preferred Stock or the holders
thereof; or
(ii) authorize, create or issue, or increase the authorized
or issued amount of, any class or series of equity security or
rights to subscribe to or acquire any class or series of equity
security, in each case ranking senior to the Series G
Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding
up, or reclassify any equity securities into any such shares;
provided, however, that with respect to the occurrence of any
Event set forth above, so long as the Series G Preferred
Stock (or any equivalent class or series of stock or shares
issued by the surviving corporation or entity in any merger or
consolidation to which the Corporation became a party) remains
outstanding with the terms thereof materially unchanged, the
occurrence of any such Event shall not be deemed to materially
and adversely affect such rights, preferences, privileges or
voting power of holders of the Series G Preferred Stock;
and provided, further, that (i) any increase in the amount
of the authorized Preferred Stock, (ii) the authorization
or issuance of any other series of Preferred Stock, any increase
in the amount of authorized shares of any series of Preferred
Stock, or the authorization, increase in the amount of
authorized shares of or issuance of any new class of preferred
stock of the Corporation or any series thereof, in each case
ranking on a parity with or junior to the Series G
Preferred Stock with respect to payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up, or (iii) any merger or consolidation in which the
Corporation is not the surviving entity if, as a result of the
merger or consolidation, the holders of Series G Preferred
Stock receive cash in the amount of the Liquidation Preference
in exchange for each share of their Series G Preferred
Stock, shall not be deemed to materially and adversely affect
such rights, preferences, privileges or voting powers.
(d) With respect to the exercise of the above described
voting rights, each share of Series G Preferred Stock shall
have one vote per share, except that when any other class or
series of Preferred Stock shall have the right to vote with the
Series G Preferred Stock as a single class, then the
Series G Preferred Stock and such other class or series
shall each have one vote per $25 of liquidation preference, or,
in the event that the vote is with respect to a Transaction
which the holders of the Series G Preferred Stock would be
entitled to receive the Stepped Up Liquidation Preference,
pursuant to subparagraph 5(a), the Series G Preferred
Stock shall have 1.05 votes per $25 of liquidation preference.
(e) 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 shares of Series G Preferred Stock shall have
been redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect
such redemption.
(f) Except as expressly stated in these terms of the
Series G Preferred Stock, the Series G Preferred Stock
shall not have any relative, participating, optional or other
special voting rights and powers and the consent of the holders
thereof shall not be required for the taking of any corporate
action, including but not limited to, any merger or
consolidation involving the Corporation or a sale of all or
substantially all of the assets of the Corporation, irrespective
of the effect that such merger, consolidation or sale may have
upon the rights, preferences or voting power of the holders of
the Series G Preferred Stock.
Section 8. Conversion.
(a) Subject to and upon compliance with the provisions of
this subparagraph (8), a holder of Series G Preferred
Stock shall have the right, at the holders option, at any
time to convert such shares, in whole or in part, into the
number of fully paid and nonassessable shares of Common Stock
obtained by dividing the aggregate Base Liquidation Preference
of such shares by $[15.75 divided by the Merger Exchange
Ratio], the conversion price per share of Common Stock at
which the Series G Preferred Stock is convertible into
Common Stock, as such price may be adjusted pursuant to
subsection (d) of this subparagraph (8) (the
Conversion Price) (as in effect at the time
C-6
and on the date provided for in the last paragraph of
subsection (b) of this subparagraph (8)) by
delivering such shares to be converted, such delivery to be made
in the manner provided in subsection (b) of this
subparagraph (8); provided, however, that the right to
convert shares called for redemption pursuant to
subparagraph (6) shall terminate at the close of
business on the Redemption Date fixed for such redemption,
unless the Corporation shall default in making payment of any
amounts payable upon such redemption under
subparagraph (6) hereof.
(b) In order to exercise the conversion right, the holder
of each share of Series G Preferred Stock to be converted
shall deliver the certificate evidencing such share, duly
endorsed or assigned to the Corporation or in blank, at the
office of the Transfer Agent, accompanied by written notice to
the Corporation that the holder thereof elects to convert such
share of Series G Preferred Stock. Unless the shares
issuable on conversion are to be issued in the same name as the
name in which such share of Series G Preferred Stock is
registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to
the Corporation, duly executed by the holder or such
holders duly authorized agent and an amount sufficient to
pay any transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes
have been paid).
Holders of Series G Preferred Stock at the close of
business on a Record Date will be entitled to receive the
dividend payable on such shares on the corresponding Dividend
Payment Date notwithstanding the conversion of such shares
following such Record Date and prior to such Dividend Payment
Date. However, Series G Preferred Stock surrendered for
conversion during the period between the close of business on
any Record Date and ending with the opening of business on the
corresponding Dividend Payment Date (except shares converted
after the issuance of a notice of redemption with respect to a
Redemption Date during such period or coinciding with such
Dividend Payment Date, which will be entitled to such dividend
on the Dividend Payment Date) must be accompanied by payment of
an amount equal to the dividend payable on such shares on such
Dividend Payment Date. A holder of Series G Preferred Stock
on a Record Date who (or whose transferee) tenders any such
shares for conversion into Common Stock on such Dividend Payment
Date will receive the dividend payable by the Corporation on
such Series G Preferred Stock on such date, and the
converting holder need not include payment of the amount of such
dividend upon surrender of Series G Preferred Stock for
conversion.
As promptly as practicable after the surrender of certificates
for Series G Preferred Stock as aforesaid, the Corporation
shall issue and shall deliver at such office to such holder, or
on his written order, a certificate or certificates for the
number of full shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of
this subparagraph (8), and any fractional interest in
respect of a share of Common Stock arising upon such conversion
shall be settled as provided in subsection (c) of this
subparagraph (8). Each conversion shall be deemed to have
been effected immediately prior to the close of business on the
date on which the certificates for Series G Preferred Stock
shall have been delivered and such notice (and if applicable,
payment of an amount equal to the dividend payable on such
shares as described above) received by the Corporation as
aforesaid, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at
such time on such date, and such conversion shall be at the
Conversion Price in effect at such time and on such date, unless
the share transfer books of the Corporation shall be closed on
that date, in which event such person or persons shall be deemed
to have become such holder or holders of record at the opening
of business on the next succeeding day on which such share
transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date on which such
certificates for Series G Preferred Stock have been
surrendered and such notice received by the Corporation.
(c) No fractional shares or scrip representing fractions of
a share of Common Stock shall be issued upon conversion or the
Series G Preferred Stock. Instead of any fractional
interest in a share of Common Stock that would otherwise be
deliverable upon the conversion of a share of Series G
Preferred Stock, the Corporation shall pay to the holder of such
share an amount in cash based upon the Current Market Price (as
defined below) of Common Stock on the Trading Day (as defined
below) immediately preceding the date of conversion. If more
than one share of Series G Preferred Stock shall be
surrendered for conversion at one time by the same holder, the
number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number
of shares of Series G Preferred Stock so surrendered.
Current Market Price of publicly traded Common Stock
or any other class of security of the Corporation or any other
issuer for any day shall mean the last reported sales price,
regular way, on such day or, if no sale takes place on such day,
the average of the reported closing bid and asked
C-7
prices on such day, regular way, in either case as reported on
the New York Stock Exchange (NYSE) or, if such
security is not listed or admitted for trading on the NYSE, on
the principal national securities exchange on which such
security is listed or admitted for trading or, if not listed or
admitted for trading on any national securities exchange, on the
Nasdaq National Market or, if such security is not quoted on the
Nasdaq National Market, the average of the closing bid and asked
prices on such day in the
over-the-counter
market as reported by Nasdaq or, if bid and asked prices for
such security on such day shall not have been reported through
Nasdaq, the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in
such security and selected for such purpose by the Chief
Executive Officer of the Corporation or the Board of Directors
or, if such security is not so listed or quoted, as determined
in good faith at the sole discretion of the Chief Executive
Officer of the Corporation or the Board of Directors, which
determination shall be final, conclusive and binding.
Trading Day shall mean any day on which the
securities in question are traded on the NYSE, or if such
securities are not listed or admitted for trading on the NYSE,
on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted
for trading on any national securities exchange, on the Nasdaq
National Market, or if such securities are not quoted on such
Nasdaq National Market, in the applicable securities market in
which the securities are traded.
(d) The Conversion Price shall be adjusted from time to
time as follows:
(i) If the Corporation shall (A) make a payment of
dividends or distributions to holders of Common Stock of the
Corporation in Common Stock, (B) subdivide its outstanding
Common Stock into a greater number of shares, (C) combine
its outstanding Common Stock into a smaller number of shares or
(D) issue any shares of Common Stock by reclassification of
its Common Stock, the Conversion Price shall be adjusted so that
the holder of any Series G Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the
number of shares of Common Stock that such holder would have
owned or have been entitled to receive after the happening of
any of the events described above had such shares been converted
immediately prior to the record date in the case of a dividend
or distribution or the effective date in the case of a
subdivision, combination or reclassification. An adjustment made
pursuant to this subsection (i) shall become effective
immediately after the opening of business on the day next
following the record date (except as provided in
paragraph (h) below) in the case of a distribution and
shall become effective immediately after the opening of business
on the day next following the effective date in the case of a
subdivision, combination or reclassification. Such adjustment(s)
shall be made successively whenever any of the events listed
above shall occur.
(ii) If the Corporation shall issue rights, options or
warrants to all holders of Common Stock entitling them (for a
period expiring within 45 days after the record date fixed
for such issuance) to subscribe for or purchase Common Stock (or
securities convertible into or exchangeable for Common Stock) at
a price per share less than the Fair Market Value (as defined
below) per share of Common Stock on the record date for the
determination of stockholders entitled to receive such rights,
options or warrants, then the Conversion Price shall be adjusted
to equal the price determined by multiplying (A) the
Conversion Price in effect immediately prior to the opening of
business on the Business Day next following the date fixed for
such determination by (B) a fraction, the numerator of
which shall be the sum of (I) the number of shares of
Common Stock outstanding on the close of business on the date
fixed for such determination and (II) the number of shares
of Common Stock that could be purchased at the Current Market
Price (as defined below) on the date fixed for such
determination with the aggregate proceeds to the Corporation
from the exercise of such rights, options or warrants, and the
denominator of which shall be the sum of (x) the number of
shares of Common Stock outstanding on the close of business on
the date fixed for such determination and (y) the number of
additional shares of Common Stock offered for subscription or
purchase pursuant to such rights, options or warrants. Such
adjustment shall be made successively whenever any such rights,
options or warrants are issued, and shall become effective
immediately after the opening of business on the day next
following the record date for any such rights, options, or
warrants issued (except as provided in
subsection (h) below). In determining whether any
rights, options or warrants entitle the holders of Common Stock
to subscribe for or purchase Common Stock at less than the Fair
Market Value, there shall be taken into account any
consideration received by the Corporation upon issuance and upon
exercise of such rights, options or warrants, the value of such
consideration, if other than cash, to be determined by the Chief
Executive Officer of the Corporation or
C-8
the Board of Directors whose decision is final, conclusive, and
binding. Any adjustment(s) made pursuant to this
subsection (ii) shall become effective immediately
after the opening of business on the business day next following
such record date. Such adjustment(s) shall be made successively
whenever any of the events listed above shall occur. Fair
Market Value shall mean the fair market value as
determined in good faith at the sole discretion of the Chief
Executive Officer or the Board of Directors, which determination
shall be final, conclusive and binding.
(iii) If the Corporation shall distribute to all holders of
its Common Stock any equity securities of the Corporation (other
than Common Stock) or evidence of its indebtedness or assets
(including securities or cash, but excluding cash distributions
paid out of the surplus of the Corporation, determined on the
basis of the most recent annual or quarterly consolidated cost
basis and current value basis and consolidated balance sheets of
the Corporation and its consolidated subsidiaries available at
the time of the declaration of the distribution) or rights or
warrants to subscribe for or purchase any of its securities
(excluding those rights and warrants issued to all holders of
Common Stock entitling them for a period expiring within
45 days after the record date referred to in
subsection (ii) above to subscribe for or purchase
Common Stock, which rights and warrants are referred to in and
treated under subsection (ii) above) (any of the
foregoing being hereinafter in this
subsection (iii) called the Securities),
then in each case the Conversion Price shall be adjusted so that
it shall equal the price determined by multiplying (A) the
Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders
entitled to receive such distribution by (B) a fraction,
the numerator of which shall be the Current Market Price per
share of Common Stock on the record date described in the
immediately following paragraph less the then Fair Market Value
of the equity securities or assets or evidences of indebtedness
so distributed or of such rights or warrants applicable to one
share of Common Stock, and the denominator of which shall be the
Current Market Price per share of Common Stock on the record
date described in the immediately following paragraph.
Such adjustment shall become effective immediately at the
opening of business on the business day next following (except
as provided in subsection (h) below) the record date
for the determination of stockholders entitled to receive such
distribution. For the purposes of this subsection (iii),
the distribution of a Security which is distributed not only to
the holders of the Common Stock on the date fixed for the
determination of stockholders entitled to such distribution of
such Security, but also is distributed with each share of Common
Stock delivered to a person converting a share of Series G
Preferred Stock after such determination date, shall not require
an adjustment of the Conversion Price pursuant to this
subsection (iii); provided that on the date, if any, on
which a person converting a share of Series G Preferred
Stock would no longer be entitled to receive such Security with
a share of Common Stock (other than as a result of the
termination of all such Securities), a distribution of such
Securities shall be deemed to have occurred, and the Conversion
Price shall be adjusted as provided in this
subsection (iii) (and such day shall be deemed to be
the date fixed for the determination of the stockholders
entitled to receive such distribution and the record
date within the meaning of the two preceding sentences).
Such adjustment(s) shall be made successively whenever any of
the events listed above shall occur.
(iv) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative
increase or decrease of at least 1% in such price; provided,
however, that any adjustments that by reason of this
subsection (iv) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment until made; and provided, further, that any
adjustment shall be required and made in accordance with the
provisions of this subparagraph (8) (other than this
subsection (iv)) not later than such time as may be
required in order to preserve the tax-free nature of a
distribution to the holders of Common Stock. Notwithstanding any
other provisions of this subparagraph (8), the Corporation
shall not be required to make any adjustment to the Conversion
Price (A) upon the issuance of any Common Stock or options
or rights to purchase Common Stock pursuant to any present or
future employee, director or consultant incentive or benefit
plan or program of the Corporation or any of its subsidiaries;
(B) upon the issuance of any Common Stock pursuant to any
present or future plan providing for the reinvestment of
dividends or interest payable on Common Stock or indebtedness of
the Corporation and the investment of additional optional
amounts in Common Stock under any plan; (C) upon a change
in the par value of the Common Stock of the Corporation; or
(D) for accumulated and unpaid dividends on the
Series G Preferred Stock or on any other equity securities
of
C-9
the Corporation. All calculations under this
subparagraph (8) shall be made to the nearest cent
(with $.005 being rounded upward) or to the nearest one-tenth of
a share (with .05 of a share being rounded upward), as the case
may be.
(v) Current Market Price of publicly traded
Common Stock or other security of the Corporation or any other
issuer for any day shall mean the last reported sales price,
regular way, on such day or, if no sale takes place on such day,
the average of the reported closing bid and asked prices on such
day, regular way, in either case as reported on the New York
Stock Exchange (NYSE) or, if such security is not
listed or admitted for trading on the NYSE, on the principal
national securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading
on any national securities exchange, on the Nasdaq National
Market or, if such security is not quoted on the Nasdaq National
Market, the average of the closing bid and asked prices on such
day in the
over-the-counter
market as reported by Nasdaq or, if bid and asked prices for
such security on such day shall not have been reported through
Nasdaq, the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in
such security and selected for such purpose by the Chief
Executive Officer of the Corporation or the Board of Directors
or, if such security is not so listed or quoted, as determined
in good faith at the sole discretion of the Chief Executive
Officer of the Corporation or the Board of Directors, which
determination shall be final, conclusive and binding.
(e) If the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation, statutory
share exchange, tender offer for all or substantially all of the
Common Stock, sale of all or substantially all of the
Corporations assets or recapitalization of the Common
Stock and excluding any transaction as to which
subsection (d)(i) of this
subparagraph (8) applies (each of the foregoing being
referred to herein as a Transaction), in each case
as a result of which Common Stock shall be converted into the
right to receive shares, stock, securities or other property
(including cash or any combination thereof), each share of
Series G Preferred Stock which is not converted into the
right to receive shares, stock, securities or other property in
connection with such Transaction shall thereafter be convertible
into the kind and amount of shares, stock, securities and other
property receivable (including cash or any combination thereof)
upon the consummation of such Transaction by a holder of that
number of shares of Common Stock or fraction thereof into which
one share of Series G Preferred Stock was convertible
immediately prior to such Transaction, assuming such holder of
Common Stock (i) is not a person with which the Corporation
consolidated or into which the Corporation merged or which
merged into the Corporation or to which such sale or transfer
was made, as the case may be (a Constituent Person),
or an affiliate of a Constituent Person and (ii) failed to
exercise his or her rights of election, if any, as to the kind
or amount of such, stock, securities and other property
(including cash) receivable upon consummation of such
Transaction (each a Non-Electing Share) (provided
that if the kind or amount of shares, stock, securities and
other property (including cash) receivable upon consummation of
such Transaction by each Non-Electing Share is not the same for
each Non-Electing Share, then the kind and amount of shares,
stock, securities and other property (including cash) receivable
upon consummation of such Transaction for each Non-Electing
Share shall be deemed to be the kind and amount so receivable
per share by a plurality of the Non-Electing Shares). The
Corporation shall not be a party to any Transaction unless the
terms of such Transaction are consistent with the provisions of
this subsection (e), and it shall not consent or agree to
the occurrence of any Transaction until the Corporation has
entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of
the Series G Preferred Stock, that will require such
successor or purchasing entity, as the case may be, to make
provision in its certificate or articles of incorporation or
other constituent documents to the end that the provisions of
this subsection (e) shall thereafter correspondingly
be made applicable as nearly as may reasonably be, in relation
to any shares of stock or other securities or property
thereafter deliverable upon conversion of the Series G
Preferred Stock. The provisions of this
subsection (e) shall similarly apply to successive
Transactions.
(f) If:
(i) the Corporation shall declare a distribution on the
Common Stock other than in cash out of the surplus of the
Corporation, determined on the basis of the most recent annual
or quarterly consolidated cost basis and current value basis and
consolidated balance sheets of the Corporation and its
consolidated subsidiaries available at the time of the
declaration of the distribution; or
C-10
(ii) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe
for or purchase any shares of any class or any other rights or
warrants; or
(iii) there shall be any reclassifications of the Common
Stock (other than an event to which subsection (d)(i) of
this subparagraph (8) applied) or any consolidation or
merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or
a statutory share exchange involving the conversion or exchange
of Common Stock into securities or other property, or a self
tender offer by the Corporation for all or substantially all of
its outstanding Common Stock, or the sale or transfer of all or
substantially all of the assets of the Corporation as an
entirety and for which approval of any stockholder of the
Corporation is required; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
then the Corporation shall cause to be filed with the transfer
agent for the Series G Preferred Stock and shall cause to
be mailed to the holders of the Series G Preferred Stock at
their addresses as shown on the share records of the
Corporation, as promptly as possible, but at least 15 days
prior to the applicable date hereinafter specified, a notice
stating (A) the record date as of which the holders of
Common Stock of record to be entitled to such distribution or
grant of rights or warrants are to be determined, provided,
however, that no such notification need be made in respect of a
record date for a distribution or grant of rights unless the
corresponding adjustment in the Conversion Price would be an
increase or decrease of at least 1%, or (B) the date on
which such reclassification, consolidation, merger, statutory
share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities
or other property, if any, deliverable upon such
reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding
up. Failure to give or receive such notice or any defect therein
shall not affect the legality or validity of the proceedings
described in this subparagraph (8).
(g) Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall promptly file with the transfer
agent for the Series G Preferred Stock an officers
certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment, which certificate shall be conclusive
evidence of the correctness of such adjustment absent manifest
error. Promptly after delivery of such certificate, the
Corporation shall prepare a notice of such adjustment of the
Conversion Price, setting forth the adjusted Conversion Price
and the effective date on which such adjustment becomes
effective and shall mail such notice of such adjustment of the
Conversion Price to each holder of the Series G Preferred
Stock at such holders last address as shown on the share
records of the Corporation.
(h) In any case in which subsection (d) of this
subparagraph (8) provides that an adjustment shall
become effective on the date next following the record date for
an event, the Corporation may defer until the occurrence of such
event (I) issuing to the holder of any Series G
Preferred Stock converted after such record date and before the
occurrence of such event the additional Common Stock issuable
upon such conversion by reason of the adjustment required by
such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and
(II) fractionalizing any share of Series G Preferred
Stock and/or
paying to such holder any amount of cash in lieu of any fraction
pursuant to subsection (c) of this
subparagraph (8).
(i) There shall be no adjustment of the Conversion Price in
case of the issuance of any equity securities of the Corporation
in a reorganization, acquisition or other similar transaction
except as specifically set forth in this subparagraph (8).
If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one subsection of this
subparagraph (8), only one adjustment shall be made, and
such adjustment shall be the amount of adjustment that has the
highest absolute value.
(j) If the Corporation shall take any action affecting the
Common Stock, other than an action described in this
subparagraph (8), that in the opinion of the Board of
Directors would materially and adversely affect the conversion
rights of the holders of the Series G Preferred Stock, the
Conversion Price for the Series G Preferred Stock may be
adjusted, to the extent permitted by law, in such manner, if
any, and at such time, as the Board of Directors, in its sole
discretion, may determine to be equitable in the circumstances.
C-11
(k) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, out of
the aggregate of its authorized but unissued Common Stock, for
the purpose of effecting conversion of the Series G
Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding Series G
Preferred Stock not theretofore converted. For purposes of this
subsection (k), the number of shares of Common Stock that
shall be deliverable upon the conversion of all outstanding
Series G Preferred Stock shall be computed as if at the
time of computation all such outstanding shares were held by a
single holder.
The Corporation covenants that any Common Stock issued upon
conversion of the Series G Preferred Stock shall be validly
issued, fully paid and nonassessable. Before taking any action
that would cause an adjustment reducing the Conversion Price
below the then par value of the Common Stock deliverable upon
conversion of the Series G Preferred Stock, the Corporation
will take any action that, in the opinion of its counsel, may be
necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable Common Stock at such adjusted
Conversion Price.
The Corporation shall use its reasonable best efforts to list
the Common Stock required to be delivered upon conversion of the
Series G Preferred Stock, prior to such delivery, upon each
national securities exchange, if any, upon which the outstanding
Common Stock is listed at the time of such delivery.
(l) The Corporation will pay any and all documentary stamp
or similar issue or transfer taxes payable in respect of the
issue or delivery of Common Stock or other securities or
property on conversion of the Series G Preferred Stock
pursuant hereto; provided, however, that the Corporation shall
not be required to pay any tax that may be payable in respect of
any transfer involved in the issue or delivery of Common Stock
or other securities or property in a name other than that of the
holder of the Series G Preferred Stock to be converted, and
no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to
the reasonable satisfaction of the Corporation, that such tax
has been paid.
In addition to the foregoing adjustments, the Corporation shall
be entitled to make such reductions in the Conversion Price, in
addition to those required herein, as it in its discretion
considers to be advisable in order that any share distributions,
subdivisions of shares, reclassification or combination of
shares, distribution of rights, options, warrants to purchase
shares or securities, or a distribution of other assets (other
than cash distributions) will not be taxable or, if that is not
possible, to diminish any income taxes that are otherwise
payable because of such event.
Section 9. Restrictions
on Ownership and Transfer. The Series G
Preferred Stock shall be subject to the restrictions on
ownership and transfer set forth in Article VI of the
Amended and Restated By-Laws of the Corporation, as amended from
time to time. Any person who violates such restrictions in
acquiring actual or constructive ownership of shares of
Series G Preferred Stock is required to give notice thereof
immediately to the Corporation and provide the Corporation with
such other information as the Corporation may request in order
to determine the effect of such acquisition on the
Corporations status as a REIT. All certificates
representing shares of the Series G Preferred Stock shall
be marked with a legend sufficient under the laws of the State
of Delaware to provide a purchaser of such shares with notice of
the restrictions on transfer under Article VI of the
Amended and Restated By-Laws. Nothing in Article VI of the
Amended and Restated By-Laws shall preclude the settlement of
any transactions entered into through the facilities of the New
York Stock Exchange or any other national securities exchange or
automated inter-dealer quotation system. The fact that
settlement of any transaction takes place shall not, however,
negate the effect of any provision of Article VI of the
Amended and Restated By-Laws, and any transferee, and the shares
of capital stock transferred to such transferee in such a
transaction, shall be subject to all of the provisions and
limitations in Article VI of the Amended and Restated
By-Laws.
Section 10. Exclusion
of Other Rights. Except as may otherwise be
required by law, the Series G Preferred Stock shall not
have any voting powers, preferences or relative, participating,
optional or other special rights, other than those specifically
set forth in these terms of the Series G Preferred Stock
(as such terms may be amended from time to time) or in the
Corporations Second Restated Certificate of Incorporation,
as amended and supplemented. The Series G Preferred Stock
shall have no preemptive or subscription rights.
C-12
Section 11. Headings
of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and
shall not affect the interpretation of any of the provisions
hereof.
Section 12. Severability
of Provisions. If any voting powers,
preferences or relative, participating, optional and other
special rights of the Series G Preferred Stock or
qualifications, limitations or restrictions thereof set forth in
these terms of the Series G Preferred Stock (as such terms
may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule of law or
public policy, all other voting powers, preferences and
relative, participating, optional and other special rights of
Series G Preferred Stock and qualifications, limitations
and restrictions thereof set forth in these terms of the
Series G Preferred Stock (as so amended) which can be given
effect without the invalid, unlawful or unenforceable voting
powers, preferences or relative, participating, optional or
other special rights of Series G Preferred Stock or
qualifications, limitations and restrictions thereof shall be
given such effect. None of the voting powers, preferences or
relative participating, optional or other special rights of the
Series G Preferred Stock or qualifications, limitations or
restrictions thereof herein set forth shall be deemed dependent
upon any other such voting powers, preferences or relative,
participating, optional or other special right of Series G
Preferred Stock or qualifications, limitations or restrictions
thereof unless so expressed herein.
IN WITNESS WHEREOF, the undersigned has executed and subscribed
this certificate and does affirm the foregoing as true under the
penalties of perjury this day
of , .
George L. Chapman
Chairman of the Board and
Chief Executive Officer
ATTEST:
Erin C. Ibele
Senior Vice President Administration and
Corporate Secretary
C-13
Appendix D
September 12, 2006
The Board of Directors
Windrose Medical Properties Trust
3502 Woodview Trace, Suite 210
Indianapolis, IN 46268
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of common shares of
beneficial interest, $0.01 par value per share (the
Company Common Stock), of Windrose Medical
Properties Trust, a Maryland real estate investment trust (the
Company) of the Exchange Ratio (as defined below) in
the proposed acquisition (the Acquisition) of the
Company by Health Care REIT, Inc., a Delaware corporation (the
Merger Partner). Pursuant to the Agreement and Plan
of Merger (the Agreement), among the Company,
Windrose Medical Properties, L.P., a Virginia limited
partnership and the operating limited partnership of the Company
(Company OP), the Merger Partner, Parent Merger Sub,
LLC, a Delaware limited liability company wholly-owned
subsidiary of Merger Partner (Merger Sub) and OP
Merger Sub, L.P., a Virginia limited partnership and
wholly-owned subsidiary of the Merger Partner (OP Merger
Sub), the Company will merge with and into Merger Sub and
become a wholly-owned subsidiary of the Merger Partner. Each
outstanding share of Company Common Stock, other than shares of
Company Common Stock held in treasury or owned by the Merger
Partner and its affiliates, will be converted into the right to
receive shares of Merger Partners common stock, par value
$1.00 per share (the Merger Partner Common
Stock) at an exchange ratio (the Exchange
Ratio) being the quotient determined by dividing $18.06 by
the Parent Stock Price (as defined in the Agreement) but not
less than 0.4509 or more than 0.4650. Each of the 7.5%
Series A Cumulative Convertible Preferred Shares of
Beneficial Interest of the Company, $0.01 par value per
share, will be converted into the right to receive the Preferred
Merger Consideration (as defined in the Agreement). Immediately
prior to the merger described above, OP Merger Sub will merge
with and into Company OP and each outstanding limited partner
interest in Company OP will automatically be converted into a
fraction of a share of Merger Partner Common Stock at the
Exchange Ratio.
In arriving at our opinion, we have (i) reviewed a draft
dated September 12, 2006 of the Agreement;
(ii) reviewed certain publicly available business and
financial information concerning the Company and the Merger
Partner and the industries in which they operate;
(iii) compared the proposed financial terms of the
Acquisition with the publicly available financial terms of
certain transactions involving companies we deemed relevant and
the consideration received for such companies;
(iv) compared the financial and operating performance of
the Company and the Merger Partner with publicly available
information concerning certain other companies we deemed
relevant and reviewed the current and historical market prices
of the Company Common Stock and the Merger Partner Common Stock
and certain publicly traded securities of such other companies;
(v) reviewed certain internal financial analyses and
forecasts prepared by the managements of the Company and the
Merger Partner relating to their respective businesses, as well
as the estimated amount and timing of the cost savings and
related expenses and synergies expected to result from the
Acquisition (the Synergies); and (vi) performed
such other financial studies and analyses and considered such
other information as we deemed appropriate for the purposes of
this opinion.
In addition, we have held discussions with certain members of
the management of the Company and the Merger Partner with
respect to certain aspects of the Acquisition, the past and
current business operations of the Company and the Merger
Partner, the financial condition and future prospects and
operations of the Company and the Merger Partner, the effects of
the Acquisition on the financial condition and future prospects
of the Company and the Merger Partner, and certain other matters
we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed, without
assuming responsibility or liability for independent
verification, the accuracy and completeness of all information
that was publicly available or was furnished to or discussed
with us by the Company and the Merger Partner or otherwise
reviewed by or for us. We have not conducted or been provided
with any valuation or appraisal of any assets or liabilities,
nor have we
D-1
evaluated the solvency of the Company or the Merger Partner
under any state or federal laws relating to bankruptcy,
insolvency or similar matters. In relying on financial analyses
and forecasts provided to us, including the Synergies, we have
assumed that they have been reasonably prepared based on
assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of
operations and financial condition of the Company and the Merger
Partner to which such analyses or forecasts relate. We express
no view as to such analyses or forecasts (including the
Synergies) or the assumptions on which they were based. We have
also assumed that the Acquisition will have the tax consequences
described in discussions with, and materials furnished to us by,
representatives of the Company, and that the other transactions
contemplated by the Agreement will be consummated as described
in the Agreement, and that the definitive Agreement will not
differ in any material respects from the draft thereof furnished
to us. We have relied as to all legal matters relevant to
rendering our opinion upon the advice of counsel. We have
further assumed that all material governmental, regulatory or
other consents and approvals necessary for the consummation of
the Acquisition will be obtained without any adverse effect on
the Company or the Merger Partner or on the contemplated
benefits of the Acquisition.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. It should be understood that
subsequent developments may affect this opinion and that we do
not have any obligation to update, revise, or reaffirm this
opinion. Our opinion is limited to the fairness, from a
financial point of view, to the holders of the Company Common
Stock of the Exchange Ratio in the proposed Acquisition and we
express no opinion as to the fairness of the Acquisition to, or
any consideration of, the holders of any other class of
securities, creditors or other constituencies of the Company or
as to the underlying decision by the Company to engage in the
Acquisition. We are expressing no opinion herein as to the price
at which the Company Common Stock or the Merger Partner Common
Stock will trade at any future time.
We note that we were not authorized to and did not solicit any
expressions of interest from any other parties with respect to
the sale of all or any part of the Company or any other
alternative transaction.
We have acted as financial advisor to the Company with respect
to the proposed Acquisition and will receive a fee from the
Company for our services, a substantial portion of which will
become payable only if the proposed Acquisition is consummated.
In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. We and our affiliates
have provided investment banking and commercial banking services
from time to time to Merger Partner and the Company. Such past
services for the Merger Partner have included (i) acting as
a participating lender in a revolving credit facility in 2003,
as amended in 2005 and 2006, (ii) acting as co-manager in
two senior unsecured notes offerings in 2005 and
(iii) acting as manager in a cumulative redeemable
preferred stock offering in 2004. Such past services for the
Company have included acting as co-manager for a revolving
credit facility in 2003. In the ordinary course of our
businesses, we and our affiliates may actively trade the debt
and equity securities of the Company or the Merger Partner for
our own account or for the accounts of customers and,
accordingly, we may at any time hold long or short positions in
such securities.
On the basis of and subject to the foregoing, it is our opinion
as of the date hereof that the Exchange Ratio in the proposed
Acquisition is fair, from a financial point of view, to the
holders of the Company Common Stock.
D-2
This letter is provided to the Board of Directors of the Company
in connection with and for the purposes of its evaluation of the
Acquisition. This opinion does not constitute a recommendation
to any shareholder of the Company as to how such shareholder
should vote with respect to the Acquisition or any other matter.
This opinion may not be disclosed, referred to, or communicated
(in whole or in part) to any third party for any purpose
whatsoever except with our prior written approval. This opinion
may be reproduced in full in any proxy or information statement
mailed to shareholders of the Company but may not otherwise be
disclosed publicly in any manner without our prior written
approval.
Very truly yours,
J.P. MORGAN SECURITIES INC.
J.P. Morgan Securities Inc.
J918042
D-3
PART II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION
OF DIRECTORS AND OFFICERS.
Section 7 of Health Care REITs (the
Company) Second Restated Certificate of
Incorporation, as amended, provides that its directors will not
be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the
directors duty of loyalty to the Company or its
stockholders, (2) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (3) under Section 174 of the General
Corporation Law of Delaware (the DGCL), or
(4) for any transaction from which the director derived any
improper personal benefit. Section 7 also provides that if
the DGCL is amended to further eliminate or limit the personal
liability of directors, then the liability of our directors will
be eliminated or limited to the extent permitted by the DGCL, as
so amended. The Second Restated Certificate of Incorporation
also states that any repeal or modification of the foregoing
paragraph by our stockholders will not adversely affect any
right or protection of our directors existing at the time of
such repeal or modification.
Our Amended and Restated By-Laws provide that we will indemnify,
to the extent permitted by the DGCL, any current or past
director or officer of the Company who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he
or she is or was a director, officer, employee or agent of the
Company, or is or was serving at our request as a director,
officer, employee, trustee, partner, agent or fiduciary of
another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, against expenses
(including attorneys fees), judgments, fines, penalties
and amounts paid in settlement, actually and reasonably incurred
by him or her in connection with such threatened, pending or
completed action, suit or proceeding. Our Amended and Restated
By-Laws further obligate us to pay all expenses incurred by a
current or past director or officer in defending or
investigating a threatened or pending action, suit or proceeding
of the nature referenced above in advance of the final
disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that he or she is
not entitled to be indemnified by us as provided above. Under
these provisions, however, we are not obligated to indemnify any
person in connection with a proceeding initiated by such person
unless such proceeding is in connection with a claim by such
person to enforce rights as stated above or was authorized or
consented to by our Board of Directors.
We have entered into indemnification agreements with our
directors, executive officers and officers to assure them that
they will be indemnified to the extent permitted by the Second
Restated Certificate of Incorporation, Amended and Restated
By-Laws and Delaware law. The indemnification agreements cover,
subject to certain exceptions and limitations, any and all
expenses, judgments, fines, penalties, and amounts paid in
settlement, provide for the prompt advancement of all expenses
incurred in connection with any threatened, pending or completed
action, suit or proceeding, or any inquiry or investigation, and
obligate the director, executive officer or officer to reimburse
us for all amounts so advanced if it is subsequently determined,
as provided in the indemnification agreements, that the
director, executive officer or officer is not entitled to
indemnification.
Delaware law requires indemnification in cases where a director
or officer has been successful in defending any claim or
proceeding and permits indemnification, even if a director or
officer has not been successful, in cases where the director or
officer acted in good faith and in a manner that he or she
reasonably believed was in, or not opposed to, the best
interests of the corporation. To be indemnified with respect to
criminal proceedings, the director or officer must also have had
no reasonable cause to believe that his or her conduct was
unlawful. In the case of a claim by a third party (i.e., a party
other than the corporation), Delaware law permits
indemnification for expenses (including attorneys fees),
judgments, fines, and amounts paid in settlement. In the case of
a claim by, or in the right of, the corporation (including
stockholder derivative suits), indemnification under the DGCL is
limited to expenses (including attorneys fees) and no
indemnification of expenses is permitted if the director or
officer is adjudged liable to the corporation unless a court
determines that, despite such adjudication but in view of all of
the circumstances, such indemnification is nonetheless proper.
Delaware law also permits the advancement of expenses to
directors and officers upon receipt of an undertaking to repay
all amounts so advanced if it is ultimately
II-1
determined that the director or officer has not met the
applicable standard of conduct and is, therefore, not entitled
to be indemnified.
We maintain indemnification insurance that provides for
reimbursement of indemnification payments properly and lawfully
made to our directors and officers and coverage, subject to
certain exceptions and limitations, for directors and officers
in situations where we cannot or do not indemnify them.
|
|
ITEM 21.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES.
|
(a) Exhibits: The following is a list of
all the exhibits filed as part of, or incorporated by reference
into, this registration statement.
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger dated
as of September 12, 2006 among Health Care REIT, Heat
Merger Sub, Heat OP Merger Sub, Windrose and Windrose OP (filed
with the Commission as Exhibit 2.1 to Health Care
REITs
Form 8-K
filed September 15, 2006, and incorporated herein by
reference thereto).
|
|
|
|
|
|
|
|
|
|
|
|
2
|
.2
|
|
Amendment No. 1 to Agreement
and Plan of Merger, dated as of October 12, 2006, among
Health Care REIT, Heat Merger Sub, Heat OP Merger Sub, Windrose
and Windrose OP (filed with the Commission as Exhibit 2.1
to Health Care REITs
Form 8-K
filed October 13, 2006, and incorporated herein by
reference thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.1
|
|
Second Restated Certificate of
Incorporation of Health Care REIT (filed with the Commission as
Exhibit 3.1 to the Health Care REITs
Form 10-K
filed March 20, 2000, and incorporated herein by reference
thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.2
|
|
Certificate of Amendment of Second
Restated Certificate of Incorporation of Health Care REIT (filed
with the Commission as Exhibit 3.1 to the Health Care
REITs
Form 10-K
filed March 20, 2000, and incorporated herein by reference
thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.3
|
|
Certificate of Amendment of Second
Restated Certificate of Incorporation of Health Care REIT (filed
with the Commission as Exhibit 3.1 to the Health Care
REITs
Form 8-K
filed June 13, 2003, and incorporated herein by reference
thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.4
|
|
Amended and Restated By-Laws of
Health Care REIT (filed with the Commission as Exhibit 3.1
to Health Care REITs
Form 8-K
filed September 8, 2004, and incorporated herein by
reference thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.5
|
|
Form of Certificate of Designation
of 7.5% Series G Cumulative Convertible Preferred Stock,
$1.00 par value per share, of Health Care REIT.
|
|
|
|
|
|
|
|
|
|
|
|
5
|
.1
|
|
Opinion of Shumaker,
Loop & Kendrick, LLP.*
|
|
|
|
|
|
|
|
|
|
|
|
8
|
.1
|
|
Tax Opinion of Arnold &
Porter LLP regarding the qualification of the merger as a
reorganization for federal income tax purposes and related
federal income tax consequences.*
|
|
|
|
|
|
|
|
|
|
|
|
8
|
.2
|
|
Tax Opinion of Hunton &
Williams LLP regarding the qualification of the merger as a
reorganization for federal income tax purposes and related
federal income tax consequences.*
|
|
|
|
|
|
|
|
|
|
|
|
8
|
.3
|
|
Opinion of Arnold &
Porter LLP regarding the qualification of Health Care REIT as a
REIT for federal income tax purposes.*
|
|
|
|
|
|
|
|
|
|
|
|
8
|
.4
|
|
Opinion of Hunton &
Williams LLP regarding the qualification of Windrose as a REIT
for federal income tax purposes.*
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.1
|
|
Consulting Agreement dated as of
September 12, 2006 between Health Care REIT and Fred S.
Klipsch.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.2
|
|
Consulting Agreement dated as of
September 12, 2006 between Health Care REIT and Frederick
L. Farrar.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.3
|
|
Employment Agreement dated as of
September 12, 2006 between Health Care REIT and Daniel R.
Loftus.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.4
|
|
Support Agreement, dated as of
September 12, 2006, by Fred S. Klipsch of Windrose for the
benefit of Health Care REIT.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.5
|
|
Support Agreement, dated as of
September 12, 2006, by Frederick L. Farrar of Windrose for
the benefit of Health Care REIT.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.6
|
|
Tax Indemnity Letter Agreement
dated as of September 12, 2006 between Health Care REIT and
Fred S. Klipsch.
|
|
|
|
|
|
II-2
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
10
|
.7
|
|
Tax Indemnity Letter Agreement
dated as of September 12, 2006 between Health Care REIT and
Frederick L. Farrar.
|
|
|
|
|
|
|
|
|
|
|
|
12
|
.1
|
|
Statement Regarding Computation of
Ratios of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
|
|
|
|
|
|
|
|
|
|
|
|
21
|
.1
|
|
List of subsidiaries of Health
Care REIT.*
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.1
|
|
Consent of Ernst & Young
LLP, independent registered public accounting firm, with respect
to Health Care REIT.
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.2
|
|
Consent of KPMG LLP, independent
registered public accounting firm, with respect to Windrose.
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.3
|
|
Consent of Shumaker,
Loop & Kendrick, LLP to the use of their opinion as an
exhibit to this Registration Statement is included in their
opinion filed herewith as Exhibit 5.1.*
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.4
|
|
Consent of Arnold &
Porter LLP to the use of their tax opinion as an exhibit to this
Registration Statement is included in their opinion filed
herewith as Exhibit 8.1.*
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.5
|
|
Consent of Hunton &
Williams LLP to the use of their tax opinion as an exhibit to
this Registration Statement is included in their opinion filed
herewith as Exhibit 8.2.*
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.1
|
|
Power of Attorney executed by
William C. Ballard, Jr. (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.2
|
|
Power of Attorney executed by Pier
C. Borra (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.3
|
|
Power of Attorney executed by
Thomas J. DeRosa (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.4
|
|
Power of Attorney executed by
Jeffrey H. Donahue (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.5
|
|
Power of Attorney executed by
Peter J. Grua (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.6
|
|
Power of Attorney executed by
Sharon M. Oster (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.7
|
|
Power of Attorney executed by R.
Scott Trumbull (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.8
|
|
Power of Attorney executed by
George L. Chapman (Director, Chairman of the Board and Chief
Executive Officer and Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.9
|
|
Power of Attorney executed by
Scott A. Estes (Senior Vice President and Chief Financial
Officer and Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.10
|
|
Power of Attorney executed by Paul
D. Nungester, Jr. (Vice President and Controller and Principal
Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
|
99
|
.1
|
|
Form of Proxy of Windrose.
|
|
|
|
* |
|
To be filed by amendment. |
(b) Financial Statement Schedules:
Not applicable.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price
II-3
represent no more than a 20% change in the maximum aggregate
offering price set forth in the Calculation of
Registration Fee table in the effective Registration
Statement; and
II-3.1
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser, each prospectus
filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A (§230.430A of this
chapter), shall be deemed to be part of and included in the
Registration Statement as of the date it is first used after
effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the
Registration Statement or made in a document incorporated or
deemed incorporated by reference into the Registration Statement
or prospectus that is part of the Registration Statement will,
as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in
the Registration Statement or prospectus that was part of the
Registration Statement or made in any such document immediately
prior to such date of first use.
(5) That, for the purpose of determining liability of the
Registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities, the undersigned
Registrant undertakes that in a primary offering of securities
of the undersigned Registrant pursuant to this Registration
Statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered
or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to
the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned Registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned Registrant or used
or referred to by the undersigned Registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned Registrant or its securities provided by or on
behalf of the undersigned Registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned Registrant to the purchaser.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrants annual report
pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(d) The Registrant undertakes that every prospectus
(i) that is filed pursuant to paragraph
(c) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is
used in connection with
II-4
an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement
and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(e) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(f) The undersigned Registrant hereby undertakes to respond
to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of
this form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information in
documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the
request.
(g) The undersigned Registrant hereby undertakes to supply
by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toledo, State of Ohio, on
October 13, 2006.
HEALTH CARE REIT, INC.
|
|
|
|
By:
|
/s/ George
L. Chapman
|
Name: George L. Chapman
|
|
|
|
Title:
|
Chairman of the Board and
|
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
/s/ William
C. Ballard, Jr.*
William
C. Ballard, Jr.
|
|
Director
|
|
October 13, 2006
|
|
|
|
|
|
/s/ Pier
C. Borra*
Pier
C. Borra
|
|
Director
|
|
October 13, 2006
|
|
|
|
|
|
/s/ Thomas
J. DeRosa*
Thomas
J. DeRosa
|
|
Director
|
|
October 13, 2006
|
|
|
|
|
|
/s/ Jeffrey
H. Donahue*
Jeffrey
H. Donahue
|
|
Director
|
|
October 13, 2006
|
|
|
|
|
|
/s/ Peter
J. Grua*
Peter
J. Grua
|
|
Director
|
|
October 13, 2006
|
|
|
|
|
|
/s/ Sharon
M. Oster*
Sharon
M. Oster
|
|
Director
|
|
October 13, 2006
|
|
|
|
|
|
/s/ R.
Scott Trumbull*
R.
Scott Trumbull
|
|
Director
|
|
October 13, 2006
|
|
|
|
|
|
/s/ George
L. Chapman
George
L. Chapman
|
|
Chairman, Chief Executive Officer
and Director (Principal Executive Officer)
|
|
October 13, 2006
|
|
|
|
|
|
/s/ Scott
A. Estes*
Scott
A. Estes
|
|
Senior Vice President and Chief
Financial Officer (Principal Financial Officer)
|
|
October 13, 2006
|
II-6
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
/s/ Paul
D. Nungester, Jr.*
Paul
D. Nungester, Jr.
|
|
Vice President and Controller
(Principal Accounting Officer)
|
|
October 13, 2006
|
|
|
|
|
|
|
|
*
|
|
/s/ George
L. Chapman
George
L. Chapman
Attorney-in-Fact
|
|
|
|
October 13, 2006
|
II-7
INDEX TO
EXHIBITS
|
|
|
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger dated
as of September 12, 2006 among Health Care REIT, Heat
Merger Sub, Heat OP Merger Sub, Windrose and Windrose OP (filed
with the Commission as Exhibit 2.1 to Health Care
REITs
Form 8-K
filed September 15, 2006, and incorporated herein by
reference thereto).
|
|
|
|
|
|
|
|
|
|
|
|
2
|
.2
|
|
Amendment No. 1 to Agreement
and Plan of Merger, dated as of October 12, 2006, among
Health Care REIT, Heat Merger Sub, Heat OP Merger Sub, Windrose
and Windrose OP (filed with the Commission as Exhibit 2.1
to Health Care REITs
Form 8-K
filed October 13, 2006, and incorporated herein by
reference thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.1
|
|
Second Restated Certificate of
Incorporation of Health Care REIT (filed with the Commission as
Exhibit 3.1 to the Health Care REITs
Form 10-K
filed March 20, 2000, and incorporated herein by reference
thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.2
|
|
Certificate of Amendment of Second
Restated Certificate of Incorporation of Health Care REIT (filed
with the Commission as Exhibit 3.1 to the Health Care
REITs
Form 10-K
filed March 20, 2000, and incorporated herein by reference
thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.3
|
|
Certificate of Amendment of Second
Restated Certificate of Incorporation of Health Care REIT (filed
with the Commission as Exhibit 3.1 to the Health Care
REITs
Form 8-K
filed June 13, 2003, and incorporated herein by reference
thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.4
|
|
Amended and Restated By-Laws of
Health Care REIT (filed with the Commission as Exhibit 3.1
to Health Care REITs
Form 8-K
filed September 8, 2004, and incorporated herein by
reference thereto).
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.5
|
|
Form of Certificate of Designation
of 7.5% Series G Cumulative Convertible Preferred Stock,
$1.00 par value per share, of Health Care REIT.
|
|
|
|
|
|
|
|
|
|
|
|
5
|
.1
|
|
Opinion of Shumaker,
Loop & Kendrick, LLP.*
|
|
|
|
|
|
|
|
|
|
|
|
8
|
.1
|
|
Tax Opinion of Arnold &
Porter LLP regarding the qualification of the merger as a
reorganization for federal income tax purposes and related
federal income tax consequences.*
|
|
|
|
|
|
|
|
|
|
|
|
8
|
.2
|
|
Tax Opinion of Hunton &
Williams LLP regarding the qualification of the merger as a
reorganization for federal income tax purposes and related
federal income tax consequences.*
|
|
|
|
|
|
|
|
|
|
|
|
8
|
.3
|
|
Opinion of Arnold &
Porter LLP regarding the qualification of Health Care REIT as a
REIT for federal income tax purposes.*
|
|
|
|
|
|
|
|
|
|
|
|
8
|
.4
|
|
Opinion of Hunton &
Williams LLP regarding the qualification of Windrose as a REIT
for federal income tax purposes.*
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.1
|
|
Consulting Agreement dated as of
September 12, 2006 between Health Care REIT and Fred S.
Klipsch.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.2
|
|
Consulting Agreement dated as of
September 12, 2006 between Health Care REIT and Frederick
L. Farrar.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.3
|
|
Employment Agreement dated as of
September 12, 2006 between Health Care REIT and Daniel R.
Loftus.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.4
|
|
Support Agreement, dated as of
September 12, 2006, by Fred S. Klipsch of Windrose for the
benefit of Health Care REIT.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.5
|
|
Support Agreement, dated as of
September 12, 2006, by Frederick L. Farrar of Windrose for
the benefit of Health Care REIT.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.6
|
|
Tax Indemnity Letter Agreement
dated as of September 12, 2006 between Health Care REIT and
Fred S. Klipsch.
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.7
|
|
Tax Indemnity Letter Agreement
dated as of September 12, 2006 between Health Care REIT and
Frederick L. Farrar.
|
|
|
|
|
|
|
|
|
|
|
|
12
|
.1
|
|
Statement Regarding Computation of
Ratios of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
|
|
|
|
|
|
|
|
|
|
|
|
21
|
.1
|
|
List of subsidiaries of Health
Care REIT.*
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.1
|
|
Consent of Ernst & Young
LLP, independent registered public accounting firm, with respect
to Health Care REIT.
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.2
|
|
Consent of KPMG LLP, independent
registered public accounting firm, with respect to Windrose.
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.3
|
|
Consent of Shumaker,
Loop & Kendrick, LLP to the use of their opinion as an
exhibit to this Registration Statement is included in their
opinion filed herewith as Exhibit 5.1.*
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.4
|
|
Consent of Arnold &
Porter LLP to the use of their tax opinion as an exhibit to this
Registration Statement is included in their opinion filed
herewith as Exhibit 8.1.*
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.5
|
|
Consent of Hunton &
Williams LLP to the use of their tax opinion as an exhibit to
this Registration Statement is included in their opinion filed
herewith as Exhibit 8.2.*
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.1
|
|
Power of Attorney executed by
William C. Ballard, Jr. (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.2
|
|
Power of Attorney executed by Pier
C. Borra (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.3
|
|
Power of Attorney executed by
Thomas J. DeRosa (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.4
|
|
Power of Attorney executed by
Jeffrey H. Donahue (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.5
|
|
Power of Attorney executed by
Peter J. Grua (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.6
|
|
Power of Attorney executed by
Sharon M. Oster (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.7
|
|
Power of Attorney executed by R.
Scott Trumbull (Director)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.8
|
|
Power of Attorney executed by
George L. Chapman (Director, Chairman of the Board and Chief
Executive Officer and Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.9
|
|
Power of Attorney executed by
Scott A. Estes (Senior Vice President and Chief Financial
Officer and Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
|
24
|
.10
|
|
Power of Attorney executed by Paul
D. Nungester, Jr. (Vice President and Controller and Principal
Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
|
99
|
.1
|
|
Form of Proxy of Windrose.
|
|
|
|
* |
|
To be filed by amendment. |