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EXHIBIT NO. 2.1
PLAN AND AGREEMENT OF MERGER
DATED AS OF JUNE 8, 1998
by and among
HR ACQUISITION I CORPORATION,
HEALTHCARE REALTY TRUST INCORPORATED,
and
CAPSTONE CAPITAL CORPORATION
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Plan of Merger"), is
entered into as of June 8, 1998, by and among HR ACQUISITION I CORPORATION, a
Delaware corporation ("Buyer"), HEALTHCARE REALTY TRUST INCORPORATED, a Maryland
corporation ("HR"), and CAPSTONE CAPITAL CORPORATION, a Maryland corporation
("Target") (Buyer and Target being sometimes collectively referred to herein as
the "Constituent Entities").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Target, HR and
Buyer have approved the merger of Buyer with and into Target (the "Merger"),
upon the terms and subject to the conditions set forth in this Plan of Merger,
whereby all issued and outstanding shares of (i) Target common stock, par value
$.001 per share (the "Target Common Stock"), and (ii) Target 8 7/8% Series A
Cumulative Preferred Stock, par value $.001 per share (the "Target Series A
Preferred Stock" and, together with the Target Common Stock, the "Target
Stock"), not owned directly or indirectly by Target (other than restricted
shares of Target Common Stock to be redeemed as hereinafter provided), will be
converted into the Merger Consideration (as hereinafter defined); and
WHEREAS, each of Buyer, HR, and Target desires to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the
conditions set forth in this Plan of Merger, and in accordance with Section
3-101 et seq. of the Maryland General Corporation Law (the "MGCL") and in
accordance with Sections 251 and 252 of the Delaware General Corporation Law
(the "DGCL"), Buyer shall be merged with and into Target at the Effective Time
(as defined in Section 1.3). Following the Effective Time, the separate
corporate existence of Buyer shall cease and Target shall continue as the
surviving entity (the "Surviving Entity") under the name "HR Acquisition I
Corporation" and shall succeed to and assume all the rights and obligations of
Target and Buyer in accordance with the
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MGCL and the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time of the Merger, (a) the Surviving Entity shall
possess all assets and property of every description, and every interest
therein, wherever located, and the rights, privileges, immunities, powers,
franchises and authority, of a public as well as of a private nature, of each of
the Constituent Entities, (b) all obligations belonging to or due each of the
Constituent Entities shall be vested in, and become the obligations of, the
Surviving Entity without further act or deed, (c) title to any real estate or
any interest therein vested in either of the Constituent Entities shall not
revert or in any way be impaired by reason of the Merger, (d) all rights of
creditors and all liens upon any property of either of the Constituent Entities
shall be preserved unimpaired, and (e) the Surviving Entity shall be liable for
all of the debts and obligations of each of the Constituent Entities, and any
claim existing, or action or proceeding pending, by or against either of the
Constituent Entities may be prosecuted to judgment with right of appeal, as if
the Merger had not taken place.
Section 1.2 THE CLOSING. The closing of the Merger (the
"Closing") will take place at such time and on such date as is specified by the
parties (the "Closing Date"), which (subject to satisfaction or waiver of the
conditions set forth in Article VII) shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Section 7.1
(other than Section 7.1(d), which shall be satisfied at the Closing Date), at
such location as the parties may agree, unless another date is agreed to in
writing by the parties hereto.
Section 1.3 EFFECTIVE TIME. Subject to the provisions of this
Plan of Merger, the parties shall file articles of merger (the "Articles of
Merger") executed in accordance with Sections 3-109, 3-110 and 1-301 of the MGCL
and a certificate of merger (the "Certificate of Merger") executed in accordance
with Section 103 of the DGCL and shall make all other filings or records
required under the MGCL and the DGCL as soon as practical on or after the
Closing Date. The Merger shall become effective at such time as the Articles of
Merger are accepted for record by the State Department of Assessments and
Taxation of Maryland (the "SDAT") and the Certificate of Merger is accepted for
record by the Delaware Office of the Secretary of State, or at such other time
as Buyer and Target shall agree as specified in the Articles of Merger and the
Certificate of Merger but not exceeding 30 days after the later of the date the
Articles of Merger are accepted for record by the SDAT or the Certificate of
Merger is accepted for record by the Delaware Office of the Secretary of State
(the "Effective Time").
Section 1.4 EFFECT OF MERGER. The Merger shall have the effect
set forth in Section 3-114 of the MGCL and Section 259 of the DGCL.
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ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF
THE CONSTITUENT ENTITIES; EXCHANGE OF CERTIFICATES
Section 2.1 EFFECT ON STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
stock of either of the Constituent Entities:
(a) CANCELLATION OF TREASURY STOCK. Each share of
Target Stock that is owned by Target or by any subsidiary of
Target shall automatically be canceled and retired and shall
cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) CONVERSION OF TARGET COMMON STOCK AND TARGET
SERIES A PREFERRED STOCK. Subject to Section 2.2, each issued
and outstanding share of Target Common Stock (other than
restricted shares of Target Common Stock to be redeemed in
accordance with Section 2.1(c)) and each issued and
outstanding share of Target Series A Preferred Stock
(collectively, the "Exchanging Target Shares") shall be
converted into such number of shares of the common stock, par
value $.01 per share, of HR (the "HR Common Stock"), and
shares of the 8 7/8% Series A Cumulative Preferred Stock, par
value $.01 per share, of HR (the "HR Preferred Stock") (such
shares of HR Common Stock and HR Preferred Stock being
delivered in connection with the Merger referred to herein as
the "Merger Consideration") in accordance with the following
provisions:
(i) Each issued and outstanding share of Target
Common Stock (other than restricted shares of Target
Common Stock to be redeemed in accordance with Section
2.1(c) below) shall be converted into .8518 shares of HR
Common Stock (the "Common Stock Exchange Ratio"); and
(ii) Each issued and outstanding share of Target
Series A Preferred Stock, shall be converted into one
share of HR Preferred Stock having substantially the same
rights and preferences as the Target Series A Preferred
Stock (the "Preferred Stock Exchange Ratio").
As of the Effective Time, all such Exchanging Target Shares
shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder
of a certificate representing any Exchanging Target Shares
shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration and any cash in
lieu of fractional shares to be issued or paid in
consideration therefor with respect to the Exchanging Target
Shares
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upon surrender of such certificate in accordance with Section
2.2, without interest.
(c) RESTRICTED TARGET SHARES. Immediately prior to
the Effective Time, each outstanding restricted share of
Target Common Stock (whether vested or unvested) shall be
redeemed for cash in an amount of $24.33 per restricted share
of Target Common Stock. Such cash shall be provided by Target
from available cash resources or from Target borrowings. HR
agrees that any such borrowings will be repaid only from cash
flow generated from Target's operations and not from cash
furnished, directly or indirectly, by HR.
(d) STOCK OPTIONS. At the Effective Time, all rights
with respect to each option to purchase Target Common Stock
which is outstanding at the Effective Time, whether or not
then vested or exercisable, shall be purchased by Buyer for
cash in an amount equal to the excess of (i) $24.33 per share
of Target Common Stock over (ii) the stated exercise price of
such option.
(e) 10 1/2% DEBENTURES. On or before the Effective
Time, all of Target's 10 1/2% Convertible Subordinated
Debentures due 2000 (the "10 1/2% Debentures") which are
outstanding at the Effective Time shall remain outstanding in
accordance with the indenture pursuant to which the 10 1/2%
Debentures have been issued and the instruments by which such
10 1/2% Debentures are evidenced, in each case as the same may
have been amended or restated or otherwise modified in
accordance with the terms thereof, and HR shall assume each
and every obligation of Target contained in the indenture.
Each 10 1/2% Debenture shall be convertible into that number
of shares of HR Common Stock equal to the number of shares of
Target Common Stock into which such 10 1/2% Debenture was
convertible immediately prior to the Effective Time,
multiplied by the Common Stock Exchange Ratio; the indentures
and instruments pursuant to which such 10 1/2% Debentures have
been issued shall be amended or supplemented to provide for
the conversion of such 10 1/2% Debentures into HR Common
Stock, and such amendments shall provide for adjustments to
the conversion price for events subsequent to the Effective
Time that will be as nearly equal as may be practicable to the
conversion adjustments which currently apply to the 10 1/2%
Debentures.
(f) 6.55% DEBENTURES. All of Target's 6.55%
Convertible Subordinated Debentures due 2002 (the "6.55%
Debentures")which are outstanding at the Effective Time shall
remain outstanding in accordance with the indenture pursuant
to which the 6.55% Debentures have been issued and the
instruments by which such 6.55% Debentures are evidenced, in
each case as the same may have
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been amended or restated or otherwise modified in accordance
with the terms thereof, and HR shall assume each and every
obligation of Target contained in the indenture. Each 6.55%
Debenture shall be convertible into that number of shares of
HR Common Stock equal to the number of shares of Target
Common Stock into which such 6.55% Debenture was convertible
immediately prior to the Effective Time, multiplied by the
Common Stock Exchange Ratio. The indentures and instruments
pursuant to which such 6.55% Debentures into HR Common
Stock, and such amendments shall provide for adjustments to
the conversion price for events subsequent to the Effective
Time that will be as nearly equal as may be practicable to
the conversion adjustments which currently apply to the
6.55% Debentures.
(g) ANTI-DILUTION PROVISIONS. If after the date
hereof and prior to the Effective Time, the Board of Directors
of HR shall have declared a stock split (including a reverse
split) of HR Common Stock or a dividend payable in HR Common
Stock, or any other distribution of securities or dividend
payable in securities to holders of HR Common Stock with
respect to their HR Common Stock (including such a
distribution or dividend made in connection with a
recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction), then (i) the Common
Stock Exchange Ratio shall be appropriately adjusted to
reflect such stock split or dividend or other distribution of
securities and (ii) if such stock split, dividend or
distribution has a record date prior to the Effective Time,
then the number of shares of HR Common Stock to be issued
pursuant to Section 2.1(b)(i) shall be appropriately adjusted
to reflect such stock split, dividend or other distribution of
securities.
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time,
Buyer shall enter into an agreement with such bank or trust
company as may be designated by Buyer (the "Exchange Agent")
providing that Buyer shall deposit with the Exchange Agent as
of the Effective Time, for the benefit of the holders of
Exchanging Target Shares, for exchange in accordance with this
Article II, through the Exchange Agent, certificates
representing the Merger Consideration (the Merger
Consideration together with any distributions or dividends
with respect to such Merger Consideration with a record date
after the Effective Time and any cash to be paid in lieu of
fractional shares, being hereinafter referred to as the
"Exchange Fund").
(b) EXCHANGE PROCEDURES. As soon as reasonably
practicable after the Effective Time, the Surviving Entity
shall cause
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the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Target
Stock (the "Certificates") whose shares were converted into
the Merger Consideration pursuant to Section 2.1, (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 shall be in such form and have such other
provisions as Buyer may reasonably specify), and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed
by Buyer, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor
a certificate representing that number of whole shares of HR
Common Stock or HR Preferred Stock into which the shares of
Target Stock held by such holder have been converted pursuant
to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of Exchanging Target Shares
which are not registered in the transfer records of Target,
delivery of the Merger Consideration may be made to a person
other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be
properly endorsed or otherwise in proper form for transfer
and the person requesting such delivery shall pay any
transfer or other taxes required by reason of delivery of
the Merger Consideration to a person other than the
registered holder of such Certificate or establish to the
satisfaction of Buyer that such tax has been paid or is not
applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only that number of
whole shares of HR Common Stock or HR Preferred Stock into
which the shares of Target Stock represented by such
Certificate have been converted pursuant to the provisions
of this Article II and the right to receive upon such
surrender the amount of cash payable in lieu of any
fractional shares which the holder thereof has the right to
receive in respect of such Certificate pursuant to this
Article II. No interest will be paid or will accrue on any
cash payable in lieu of any fractional shares to holders of
Certificates pursuant to the provisions of this Article II.
Former stockholders of record of Target shall be entitled to
vote after the Effective Time at any meeting of HR
shareholders the number of shares of HR Common Stock or of
HR Preferred Stock, as applicable, into which their
respective shares of Target Common Stock or Target Series A
Preferred Stock are converted, regardless of whether such
holders have exchanged their
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Certificates for certificates representing shares of HR
Common Stock or of HR Preferred Stock, as applicable, in
accordance with this Section 2.2.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.
No dividends or other distributions with respect to the Merger
Consideration shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of HR Common Stock or
HR Preferred Stock represented thereby until the surrender of
such Certificate in accordance with this Article II. Following
surrender of any such Certificate, there shall be paid to the
holder of the certificate representing whole shares of HR
Common Stock or HR Preferred Stock issued in exchange
therefor, without interest, (i) at the time of such surrender,
the amount of any cash payable to such holder pursuant to
Section 2.2(e) and the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of HR
Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with
a payment date subsequent to such surrender payable with
respect to such whole shares of HR Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN EXCHANGING TARGET
SHARES. All shares of HR Common Stock or HR Preferred Stock
issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any
cash paid pursuant to Section 2.1, 2.2(c) or 2.2(e)) shall be
deemed to have been issued (and paid) in full satisfaction of
all rights pertaining to the Exchanging Target Shares
theretofore represented by such Certificates. If, after the
Effective Time, Certificates are presented to the Surviving
Entity or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except
as otherwise provided by law.
(e) NO FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of HR Common Stock or HR
Preferred Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of
a shareholder of HR. Notwithstanding any other provision of
this Plan of Merger, each holder of Exchanging Target Shares
exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of HR Common Stock
or HR Preferred Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without
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interest) in an amount equal to such fractional part of a
share of HR Common Stock multiplied by $28.5625.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to the holders of
the Certificates six months after the Effective Time shall be
delivered to Buyer, on demand, and any holders of the
Certificates who have not theretofore complied with this
Article II shall thereafter look only to Buyer for payment of
their claim for Merger Consideration and any dividends or
distributions with respect to HR Common Stock.
(g) NO LIABILITY. None of Buyer, HR, Target or the
Exchange Agent shall be liable to any person in respect of any
shares of HR Common Stock (or dividends or distributions with
respect thereto) or cash from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time
(or immediately prior to such earlier date on which any Merger
Consideration would otherwise escheat to or become the
property of any governmental entity), any such Merger
Consideration shall, to the extent permitted by applicable
law, become the property of the Surviving Entity, free and
clear of all claims or interest of any person previously
entitled thereto.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent
shall invest any cash included in the Exchange Fund in deposit
accounts or short-term money market instruments, as directed
by Buyer, on a daily basis. Any interest and other income
resulting from such investments shall be paid to Buyer.
Section 2.3 CERTIFICATE OF INCORPORATION OF THE SURVIVING
ENTITY. The Certificate of Incorporation of Buyer, effective as of the Effective
Time, shall become the Certificate of Incorporation of the Surviving Entity from
and after the Effective Time and until thereafter amended as provided by law.
Section 2.4 BYLAWS OF THE SURVIVING ENTITY. The Bylaws of
Buyer shall be the Bylaws of the Surviving Entity from and after the Effective
Time and until thereafter altered, amended or repealed in accordance with the
DGCL, the Certificate of Incorporation of Buyer and said Bylaws.
Section 2.5 DIRECTORS. The Board of Directors of Buyer at the
Effective Time shall, from and after the Effective Time, be the Board of
Directors of the Surviving Entity until their successors have been duly elected
or appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Entity's Certificate of Incorporation and
applicable law.
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Section 2.6 OFFICERS. The officers of Buyer at the Effective
Time shall, from and after the Effective Time, be the officers of the Surviving
Entity until their successors have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Entity's Certificate of Incorporation and Bylaws.
Section 2.7 ASSETS, LIABILITIES. At the Effective Time, the
assets, liabilities, reserves and accounts of each of the Constituent Entities
shall be taken upon the books of the Surviving Entity at the amounts at which
they respectively shall be carried on the books of the Constituent Entities
immediately prior to the Effective Time, except as otherwise set forth in this
Plan of Merger and subject to such adjustments, or elimination of intercompany
items, as may be appropriate in giving effect to the Merger in accordance with
generally accepted accounting principles.
Section 2.8 TAX TREATMENT. The Constituent Entities
acknowledge that for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Buyer and HR as follows (and
for purposes of this Article III, all references to "Target" shall be deemed to
include all Target Subsidiaries (as hereinafter defined) unless the context
otherwise requires):
Section 3.1 ORGANIZATION AND QUALIFICATION. Each of Target and
the Target Subsidiaries (as defined below in Section 3.3) is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, if a corporation, and is legally formed and validly existing
under the laws of the jurisdiction of its organization, if a trust, association,
partnership, limited liability company or business organization, and each has
the requisite corporate, trust or organizational power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. Target and each Target Subsidiary is registered or
qualified to do business and is in good standing in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such registration or qualification necessary, except where
the failure to be so registered or qualified and in good standing will not have
and would not reasonably be expected to have a material adverse effect (as
defined in Section 9.10 below) on Target. True, accurate and complete copies of
the charter and bylaws, if a corporation, and the partnership agreements or
other agreements and organizational documents, if a trust,
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association, partnership, limited liability company or business organization, of
Target and each Target Subsidiary, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Buyer.
Section 3.2 CAPITALIZATION.
(a) The authorized stock of Target consists of (i)
50,000,000 shares of Target Common Stock, and (ii) 10,000,000
shares of Target Preferred Stock, of which 3,450,000 shares
are classified as Target Series A Preferred Stock. As of the
date of this Plan of Merger, (i) 22,286,650 shares (including
99,900 restricted shares) of Target Common Stock were issued
and outstanding and (ii) 3,000,000 shares of Target Series A
Preferred Stock were issued and outstanding, and (iii) no
other shares of Target Preferred Stock were issued and
outstanding. All of the issued and outstanding shares of
Target Common Stock and Target Series A Preferred Stock are
validly issued and are fully paid, nonassessable and none have
been issued in violation of any preemptive rights of current
or former shareholders of Target. As of the date of this Plan
of Merger, Target holds 140,000 shares of Target Common Stock
in its treasury.
(b) Except as set forth on Exhibit 3.2 to the
Disclosure Schedule delivered by Target to Buyer
simultaneously with the execution and delivery of this Plan of
Merger (the "Target Disclosure Schedule"), all of the issued
and outstanding shares of stock of each Target Subsidiary is
owned by Target, free and clear of all liens, charges,
encumbrances, equities or claims and all of the issued and
outstanding shares of each Target Subsidiary are fully paid
and nonassessable. None of the outstanding shares of capital
stock of Target Subsidiaries has been issued in violation of
any preemptive rights of current or former shareholders of the
Target Subsidiaries.
(c) Except as set forth on Exhibit 3.2 to the Target
Disclosure Schedule or otherwise disclosed in the Target
Annual Report on Form 10-K for the fiscal year ended December
31, 1997, (i) there are no options, warrants or similar rights
granted, or debentures issued, by Target or any Target
Subsidiary or any other agreement to which Target or any
Target Subsidiary is a party providing for the issuance or
sale by it of any additional securities which would remain in
effect after the Effective Time, and (ii) there are no voting
trusts, proxies or other agreements or understandings to which
Target is a party or is bound with respect to the voting of
any shares of stock of Target or any Target Subsidiary.
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(d) Except as set forth on Exhibit 3.2 to the Target
Disclosure Schedule, there is no liability for dividends
declared or accumulated but unpaid with respect to any of the
shares of Target Common Stock or Target Series A Preferred
Stock.
Section 3.3 SUBSIDIARIES. Attached to the Target Disclosure
Schedule as Exhibit 3.3 is a list of all subsidiaries of Target (each a "Target
Subsidiary" and collectively, the "Target Subsidiaries") and their respective
states of incorporation or formation. Except as set forth on Exhibit 3.3 to the
Target Disclosure Schedule, neither Target nor any Target Subsidiary owns any
stock or other equity interests in, and does not control, directly or
indirectly, any other corporation, partnership, joint venture, limited liability
company, association or business organization. Except for Target Subsidiaries
which are limited partnerships or limited liability companies, each Target
Subsidiary is a "qualified REIT subsidiary" under Section 856 of the Code.
Except as set forth on Exhibit 3.3 to the Target Disclosure Schedule, neither
Target nor any Target Subsidiary is, or has been within the two years
immediately preceding the date of this Plan of Merger, a subsidiary or division
of another corporation (except Target), nor has Target or any Target Subsidiary
during such time owned, directly or indirectly, any shares of HR Common Stock.
Section 3.4 POWER AND AUTHORITY. Subject to the satisfaction
of the conditions precedent set forth herein, Target (a) has the corporate power
to execute, deliver and perform this Plan of Merger and all agreements and other
documents executed and delivered or to be executed and delivered by it pursuant
to this Plan of Merger, and (b) has taken all action required by its Charter,
Bylaws or otherwise, to authorize the execution, delivery and performance of
this Plan of Merger and such related documents. The execution and delivery of
this Plan of Merger has been approved by the Board of Directors of Target. This
Plan of Merger has been duly executed and delivered by Target and, assuming the
receipt of required stockholder and regulatory approvals and further assuming
that this Plan of Merger constitutes a valid and binding obligation of Buyer and
HR, constitutes a valid and binding obligation of Target, enforceable against
Target in accordance with its terms.
Section 3.5 NO VIOLATIONS. Except as set forth on Exhibit 3.5
to the Target Disclosure Schedule, the execution and delivery of this Plan of
Merger does not and, subject to the receipt of required stockholder approvals
(as set forth in Section 3.17) and regulatory approvals (as set forth in Section
3.6) and any other required third-party consents or approvals, the consummation
of the Merger will not, violate any provision of Target's Charter or Bylaws, or
any provisions of, or result in the acceleration of any obligation under, result
in the creation of any lien, charge, encumbrance or claim on any property or
assets of Target or Target Subsidiaries under any material mortgage, lien,
lease, agreement, instrument, order, arbitration award, judgment or decree to
which Target or any Target Subsidiary is a party, or by which it is bound, or
violate any restrictions of any kind
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to which it is subject which, if violated or accelerated, would have a material
adverse effect on Target.
Section 3.6 CONSENTS. Except for (i) the filing of the
Registration Statement and the Joint Proxy Statement (in each case as defined in
Section 6.2 below) with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, (ii) the acceptance for record of the Articles of
Merger by the SDAT and by the Delaware Office of the Secretary of State in
connection with the Merger, (iii) any required filings with or approvals from
applicable state environmental authorities and (iv) any required filings with or
approvals from applicable state health care regulation and licensing authorities
(the filings and approvals referred to in clauses (i) through (iv) being
collectively referred to as the "Target Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Plan of Merger by Target or the
consummation by Target of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a material adverse effect on Target. No filing or notice under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") is
required in connection with the execution and delivery of this Plan of Merger or
the consummation of the transactions contemplated hereby.
Section 3.7 TARGET PUBLIC INFORMATION. Target has heretofore
furnished Buyer with a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by it with the SEC
since January 1, 1997 (as any such documents have been amended since the time of
their original filing, the "Target SEC Documents"), which are all of the
documents (other than preliminary materials) that it was required to file from
such date through the date of this Plan of Merger. As of their respective dates,
the Target SEC Documents did not contain any untrue statements of material facts
or omit to state material facts required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the Target SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
under such statutes. The financial statements contained in the Target SEC
Documents, together with the notes thereto, have been prepared in accordance
with generally accepted accounting principles consistently followed throughout
the periods indicated (except, in the case of the unaudited financial
statements, as permitted by Form 10-Q), reflect all known liabilities of Target
required to be stated therein, including all known contingent liabilities as of
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the end of each period reflected therein, and present fairly the financial
condition of Target at said date and the consolidated results of operations and
cash flows of Target for the periods then ended. The consolidated balance sheet
of Target at December 31, 1997 included in the Target SEC Documents is herein
sometimes referred to as the "Target Balance Sheet." The consolidated financial
statements of Target at December 31, 1997 included in the Target SEC Documents
are herein sometimes referred to as the "Target Financial Statements."
Section 3.8 LEGAL PROCEEDINGS. Except as disclosed in the
Target SEC Documents or on Exhibit 3.8 to the Target Disclosure Schedule and,
except for actions in the ordinary course of business against space tenants for
breaches of space leases that either individually or in the aggregate will not
have a material adverse effect on Target, there is no material litigation,
governmental investigation or other proceeding pending or, to the best knowledge
of Target, threatened against or relating to Target, any Target Subsidiary, or
their respective properties or businesses or the transactions contemplated by
this Plan of Merger and, to the best knowledge of Target, no basis for any such
action exists.
Section 3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
disclosed on Exhibit 3.9 to the Target Disclosure Schedule, neither Target nor
any Target Subsidiary had, at December 31, 1997, and has not incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature (other than ordinary and recurring operating expenses),
except (a) liabilities, obligations or contingencies which are accrued or
reserved against in the Target Financial Statements or reflected in the notes
thereto and (b) liabilities, obligations or contingencies which (i) would not,
in the aggregate, have, or be reasonably expected to have, a material adverse
effect on Target, or (ii) have been discharged or paid in full prior to the date
hereof or will be discharged or paid in full prior to the Effective Time.
Section 3.10 CONTRACTS, ETC. Except as set forth on Exhibit
3.10 to the Target Disclosure Schedule:
(a) each material contract, lease, agreement and
arrangement to which Target or any Target Subsidiary is a
party is legally valid and binding in accordance with its
terms and in full force and effect. To the best knowledge of
Target, no party is in material default thereunder, and no
event has occurred which, but for the lapse of time or the
giving of notice, or both, would constitute a default
thereunder, except, in each case, where the invalidity of such
lease, contract, agreement or arrangement or the default or
breach thereunder or thereof would not, individually or in the
aggregate, have a material adverse effect on Target;
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(b) no contract or agreement to which Target or any
Target Subsidiary is a party will, by its terms, terminate as
a result of the transaction contemplated hereby or require any
consent from any obligor thereto in order to remain in full
force and effect immediately after the Effective Time, except
for contracts or agreements which, if terminated, would not
have a material adverse effect on Target; and
(c) neither Target nor any Target Subsidiary has
granted any right of first refusal or similar right in favor
of any third party with respect to any material portion of its
properties or assets or entered into any noncompetition
agreement or similar agreement restricting its ability to
engage in any business in any location.
Section 3.11 SUBSEQUENT EVENTS. Except as set forth on Exhibit
3.11 to the Target Disclosure Schedule or disclosed in the Target SEC Documents,
Target has not, since the date of the last-filed Target SEC Document:
(a) suffered any material adverse change;
(b) paid or satisfied any material obligation or
liability (absolute, accrued, contingent or otherwise) other
than (i) liabilities shown in the Target Financial Statements
or (ii) liabilities incurred since the date of the last-filed
Target SEC Document in the ordinary course of business, which
payment or satisfaction would have a material adverse effect
on Target;
(c) increased or established any reserve for taxes or
any other liability on its books or otherwise provided
therefor which would have a material adverse affect on Target,
except as may have been required due to income or operations
of Target since the date of the last-filed Target SEC
Document;
(d) sold, transferred, mortgaged, pledged or
subjected to any lien, charge or other encumbrance any of its
assets which are material to its consolidated business or
financial condition, other than in the ordinary course of
business;
(e) granted any material increase in salary payable
or to become payable by Target to any officer or employee,
consultant or agent (other than merit increases in the
ordinary course of business consistent with past practice), or
by means of any bonus or pension plan, contract or other
commitment, increased in any material respect the compensation
of any officer, employee, consultant or agent;
(f) except for this Plan of Merger and any other
agreement executed and delivered pursuant hereto, entered into
any material
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transaction other than in the ordinary course of business or
permitted under other Sections hereof;
(g) changed its authorized or issued capital stock;
granted any stock option, warrant or right to purchase of
shares of its capital stock; issued any security convertible
into its capital stock; granted any registration rights with
respect to any securities issued by Target; purchased,
redeemed, or otherwise acquired any securities issued by
Target; or declared or paid any dividend or other distribution
or payment in respect of shares of its capital stock, except
for payment of any dividends consistent with past practice;
(h) amended Target's Articles of Incorporation or
ByLaws;
(i) adopted or increased any profit sharing, bonus,
deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any
employees of Target; and
(j) entered into any agreement or understanding,
whether or not in writing, to do, or the result of which would
cause, any of the foregoing.
Section 3.12 TAXES. Except as set forth on Exhibit 3.12 to the
Target Disclosure Schedule:
(a) Target (i) has duly filed with the appropriate
governmental authorities all Tax Returns (as hereinafter
defined) required to be filed by it for all periods ending on
or prior to the Effective Time, and such tax returns are true,
correct and complete in all material respects, (ii) has duly
paid in full or made adequate provision for the payment of all
Taxes (as hereinafter defined) for all periods ending at or
prior to the Effective Time (whether or not shown on any Tax
Return), and (iii) has not filed for an extension to file any
Tax Return not yet filed. No claim has been made by any
authority in a jurisdiction where Target or any Target
Subsidiary does not file a Tax Return that Target or any
Target Subsidiary is or may be subject to tax in such
jurisdiction. No waivers of statutes of limitation have been
given by or requested with respect to any Taxes. Target has
not agreed to any extension of time with respect to any Tax
deficiency. The liabilities and reserves for Taxes reflected
in the Target Balance Sheet are adequate to cover all Taxes
for all periods ending on or prior to December 31, 1997 and
there are no liens for Taxes upon any property or asset of
Target, except for liens for Taxes not yet due. Target is not
a party to any agreement providing for the allocation or
sharing of Taxes with any entity except for certain of the
Target Leases and Target Mortgage Loans (in each case as
hereinafter defined) which provide
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that the lessee or mortgagor thereunder shall pay all taxes
assessed with respect to the Target Property (as hereinafter
defined) demised under such Target Leases or securing such
Target Mortgage Loans. Target has not, with regard to any
assets or property held, acquired or to be acquired by it,
filed a consent to the application of Section 341(f) of the
Code. Target has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party. Target has or will have,
by the Effective Time, received cash sufficient to satisfy
the requirements of Section 857(a) and Section 857(b)(3)(A)
of the Code and any applicable excise taxes relating to the
operation of Target for the taxable years of Target up to
the Effective Time.
(b) Target has not been notified that any tax returns
of Target or any Target Subsidiary are currently under audit
by the IRS or any state or local tax agency.
(c) Target has not been a member of any affiliated or
combined group of companies that files a consolidated,
affiliated, or other combined group Tax Return and Target has
no liability for the Taxes of any person under Treasury
Regulations 1.1502-6 (or any similar provision of non-federal
tax law) as a transferee or successor, by contract, or
otherwise, except for the Target Subsidiaries.
(d) For purposes of this Plan of Merger, the term
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including gross receipts, excise, property,
sales, withholding, social security, occupation, use, service,
service use, license, payroll, franchise, transfer and
recording taxes, fees and charges, imposed by the United
States, or any state, local or foreign government or
subdivision or agency thereof whether computed on a separate,
consolidated, unitary, combined or any other basis; and such
term shall include any interest, fines, penalties or
additional amounts attributable or imposed or with respect to
any such taxes, charges, fees, levies or other assessments,
and the term "Tax Return" shall mean any return, report or
other document or information required to be supplied to a
taxing authority in connection with Taxes.
Section 3.13 COMMISSIONS AND FEES. Except as set forth on
Exhibit 3.13 to the Target Disclosure Schedule, there are no valid claims for
brokerage commissions or finder's or similar fees in connection with the
transactions contemplated by this Plan of Merger which may be now or hereafter
asserted against Target resulting from any action taken by Target or its
stockholders, officers or directors, or any of them.
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Section 3.14 EMPLOYEE BENEFIT PLANS; EMPLOYMENT MATTERS.
Except as described in the Target SEC Documents or set forth on Exhibit 3.14 to
the Target Disclosure Schedule, Target has neither established nor maintains nor
is obligated to make contributions to or under or otherwise participate in (i)
any bonus or other type of incentive compensation plan, program, agreement,
policy, commitment, contract or arrangement (whether or not set forth in a
written document), (ii) any pension, profit-sharing, retirement or other plan,
program or arrangement, or (iii) any other employee benefit plan, fund or
program, including, but not limited to, those described in Section 3(3) of the
Employee Retirement Income Security Act of 1976, as amended ("ERISA"). All such
plans (individually, a "Plan" and collectively, the "Plans") have been operated
and administered in all material respects in accordance with, as applicable,
ERISA, the Code, Title VII of the Civil Rights Act of 1964, as amended, the
Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of
1967, as amended, and the related rules and regulations adopted by those federal
agencies responsible for the administration of such laws. No act or failure to
act by Target has resulted in a "prohibited transaction" (as defined in ERISA)
with respect to the Plans that is not subject to a statutory or regulatory
exception. No "reportable event" (as defined in ERISA) has occurred with respect
to any of the Plans which is subject to Title IV of ERISA. Target has not
previously made, is not currently making, and is not obligated in any way to
make, any contributions to any multi-employer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980.
Section 3.15 COMPLIANCE WITH LAWS IN GENERAL. Except as set
forth on Exhibit 3.15 to the Target Disclosure Schedule or disclosed in the
Target SEC Documents, neither Target nor any Target Subsidiary, nor (to Target's
best knowledge) any of Target's borrowers or lessees, has received any notices
of material violations of any federal, state or local laws, regulations or
ordinances relating to its business and operations, and no notice of any pending
inspection or violation of any such law, regulation or ordinance has been
received by Target or any Target Subsidiary which, if it were determined that a
violation had occurred, would have a material adverse effect on Target.
Section 3.16 LICENSES. Target and the Target Subsidiaries,
and, to the best knowledge of Target, their respective borrowers and lessees,
hold all licenses, permits, certificates and other regulatory approvals
(collectively, the "Licenses") which are needed or required by law with respect
to their businesses, operations and facilities as currently conducted, except
for permits, licenses, franchises, variances, exemptions, orders,
authorizations, consents and approvals the absence of which, alone or in the
aggregate, would not have a material adverse effect on Target. Except as set
forth on Exhibit 3.16 to the Target Disclosure Schedule and subject to
compliance with applicable securities laws, the consummation of the Merger will
not violate any law or regulation to which Target is subject which, if violated,
would have a material adverse effect on Target. Except for routine notices
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to state authorities that may be required upon a change of control of assisted
living facilities, nursing homes or inpatient rehabilitation hospitals and
except as set forth on Exhibit 3.16 to the Target Disclosure Schedule, Target
and the Target Subsidiaries and, to the best knowledge of Target, each of their
borrowers and lessees (i) has duly and currently filed all reports and other
information required to be filed with any federal, state or local governmental
or regulatory authority in connection with the Licenses, (ii) is not in
violation of the terms of any License, except for delays in filing reports or
violations which, alone or in the aggregate, would not have a material adverse
effect on Target, and (iii) is using and occupying each of the Target Properties
in a manner that complies with all applicable codes and zoning laws and
regulations, except where the failure to so comply would not have, or would not
be reasonably expected to have, a material adverse effect on Target.
Section 3.17 VOTE REQUIRED. The affirmative vote of the
holders of two-thirds of the outstanding shares of the Target Common Stock
entitled to vote thereon and the affirmative vote of the holders of two-thirds
of the outstanding shares of the Target Series A Preferred Stock are the only
votes of the holders of any class or series of Target equity securities
necessary to approve this Plan of Merger, the Merger and the transactions
contemplated hereby.
Section 3.18 CERTAIN INDEBTEDNESS. Except as disclosed on
Exhibit 3.18 to the Target Disclosure Schedule, neither Target nor any Target
Subsidiary is indebted for money borrowed, either directly or indirectly, from
any of its officers, directors, or any Affiliate (as defined below), in any
amount whatsoever; nor are any of its officers, directors, or Affiliates
indebted for money borrowed from Target or any Target Subsidiary, nor are there
any transactions of a continuing nature between Target or any Target Subsidiary
and any of its officers, directors, or Affiliates (other than by or through the
regular employment thereof by Target) not subject to cancellation which will
continue beyond the time the Merger becomes effective, including use of Target's
or any Target Subsidiary's assets for personal benefit with or without adequate
compensation. As used herein, the term "Affiliate" shall mean any Person (as
defined below) that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, the Person
specified. As used in the foregoing definition, the term (i) "control" shall
mean the power through the ownership of voting securities, contract, or
otherwise to direct the affairs of another Person and (ii) "Person" shall mean
an individual, firm, trust, association, corporation, limited liability company,
partnership, government (whether federal, state, local or other political
subdivision, or any agency or bureau of any of them) or other entity.
Section 3.19 NYSE LISTING. Each share of the Target Common
Stock and the Target Series A Preferred Stock is, and immediately prior to the
Effective Time will be, listed on the NYSE.
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Section 3.20 TARGET OWNERSHIP OF HR COMMON STOCK. Target is
not, and its "affiliates" and "associates" collectively are not, and will not be
as of the Effective Time, the "beneficial owner" (as such terms are defined in
rules and regulations under the Securities Act, the Exchange Act, and the MGCL)
of one percent or more of the outstanding shares of HR Common Stock.
Section 3.21 REIT QUALIFICATION. At all times during its
existence, Target has been, and as of the Effective Time Target will be,
organized in conformity with the requirements for qualification and, as of the
date hereof for all taxable periods has qualified, as a "real estate investment
trust" under the Code and the rules and regulations thereunder. Target has at
all times during its existence (i) met the 75%, 95% and (through the tax year
ended December 31, 1997) 30% income tests set forth in Section 856 of the Code,
(ii) met the 75% and 25% asset tests set forth in Section 856 of the Code, (iii)
distributed dividends to its stockholders at least equal to the 95% requirements
of Section 857 of the Code, and (iv) been in compliance with Section 856(c)(5)
of the Code.
Section 3.22 TITLE TO PROPERTIES. Target has good title to all
real property owned or leased by it (individually, a "Target Property" and
collectively, the "Target Properties"), and good title to all personal property
owned by it which is material to its business, in each case free and clear of
all liens, encumbrances, claims, security interests and defects, other than (i)
those items disclosed on Exhibit 3.22 to the Target Disclosure Schedule, (ii)
the Target Mortgages (as hereinafter defined), and (iii) those liens,
encumbrances, claims, security interests and defects which would not, either
individually or in the aggregate, have a material adverse effect on any Target
Property (including the present maintenance, operation, occupancy or use
thereof) (collectively, "Permitted Target Encumbrances").
Section 3.23 TITLE INSURANCE.
(a) Except as set forth on Exhibit 3.23 to the Target
Disclosure Schedule, (x) an owner's policy of title insurance
issued by a nationally recognized title insurance company in a
form and containing coverages customarily approved and
required by institutional investors has been obtained for each
Target Property, and (y) each owner's policy of title
insurance insures the fee simple or leasehold ownership
interest of Target or the appropriate Target Subsidiary in
each Target Property subject only to Permitted Target
Encumbrances and is in an amount at least equal to the sum of
(i) the cost of the acquisition of such Target Property and
(ii) any subsequent cost of the construction and installation
of the improvements made by Target located on such Target
Property (measured at the time of such construction).
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(b) Except as set forth on Exhibit 3.23 to the Target
Disclosure Schedule, a mortgagee's policy of title insurance
issued by a nationally recognized title insurance company in a
form and containing coverages customarily approved and
required by institutional investors and insuring title in the
priority listed on Exhibit 3.23 to the Target Disclosure
Schedule has been obtained for each Target Mortgage Loan (as
hereinafter defined). Each mortgagee's policy of title
insurance insures the mortgage interest of Target or the
appropriate Target Subsidiary in the real property encumbered
by the Target Mortgage Loan and is in an amount at least equal
to the amount of the Target Mortgage Loan.
Section 3.24 ENVIRONMENTAL MATTERS. Except as disclosed on
Exhibit 3.24 to the Target Disclosure Schedule, (a) all of the Target Properties
and any of the real properties encumbered by a Tenant Mortgage Loan (as defined
in Section 3.30) have been the subject of preliminary environmental assessments,
inspections or reviews, and (b) Target has no knowledge of (i) the unlawful
presence of any Hazardous Materials (as defined below) on any of the Target
Properties or any of the real properties encumbered by a Tenant Mortgage Loan
(as defined in Section 3.30) that would have a material adverse effect on any of
the Target Properties or any of the real properties encumbered by a Tenant
Mortgage Loan (as defined in Section 3.30) or (ii) any unlawful spills,
releases, discharges or disposal of Hazardous Materials that have occurred or
are presently occurring on any of Target Properties or any of the real
properties encumbered by a Tenant Mortgage Loan (as defined in Section 3.30) as
a result of any construction on or operation and use of any of Target Properties
or any of the real properties encumbered by a Tenant Mortgage Loan (as defined
in Section 3.30) that would have a material adverse effect. The term "Hazardous
Materials" means any material which has been determined by any applicable
governmental authority to be harmful to the health or safety of human or animal
life or vegetation, regardless of whether such material is found on or below the
surface of the ground, in any surface or underground water, airborne in ambient
air or in the air inside any structure built or located upon or below the
surface of the ground or in building materials or in improvements of any
structures, or in any personal property located or used in any such structure,
including all hazardous substances, imminently hazardous substances, hazardous
wastes, toxic substances, infectious wastes, pollutants and contaminants from
time to time defined, listed, identified, designated or classified as such under
any Environmental Laws. The term "Environmental Laws" means any federal, state
or local statute, regulation, rule or ordinance, and any judicial or
administrative interpretation thereof, regulating the use, generation, handling,
storage, transportation, discharge, emission, spillage or other release of
Hazardous Materials or relating to the protection of the environment.
Section 3.25 DEFECTS. Except as set forth on Exhibit 3.25 to
the Target Disclosure Schedule and except for routine matters that typically
arise in
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connection with new construction of the Target Properties to the best of
Target's knowledge without any independent investigation, there are no material
defects in the improvements located on any of the Target Properties or any of
the real properties encumbered by a Tenant Mortgage Loan (as defined in Section
3.30) including any defect in the foundation, structural systems, roof or the
electrical, plumbing, heating, ventilating or air conditioning systems included
within the improvements located on any of the Target Properties or any of the
real properties encumbered by a Tenant Mortgage Loan (as defined in Section
3.30) and there are no repairs or deferred maintenance required to be made
thereto.
Section 3.26 CONDEMNATION. There is no pending or, to the best
of Target's knowledge, threatened public or private condemnation or similar
proceeding affecting any of the Target Properties or any of the real properties
encumbered by a Tenant Mortgage Loan (as defined in Section 3.30) or any part
thereof which could have a material adverse effect upon the present maintenance,
operation, occupancy or use of any of the Target Properties or any of the real
properties encumbered by a Tenant Mortgage Loan (as defined in Section 3.30).
Section 3.27 TAXES AND ASSESSMENTS ON TARGET PROPERTIES. There
are no material unpaid real estate property taxes or assessments due and payable
against any Target Property. Neither Target nor any Target Subsidiary has
received any notice of assessment for public improvements with respect to or
relating to a Target Property.
Section 3.28 PROPERTIES AND LEASES. Exhibit 3.28 to the Target
Disclosure Schedule sets forth a complete and correct list of (i) all Target
Properties and (ii) all leases of Target Properties or any part thereof, other
than space subleases and occupancy agreements (each a "Target Tenant Lease" and
collectively, the "Target Tenant Leases") under a Target Lease (as hereinafter
defined), in effect on the date hereof (individually, a "Target Lease" and
collectively, the "Target Leases") and sets forth a complete and correct
description of the following:
(a) the location of the Target Property encumbered
by each Target Lease;
(b) the approximate square footage of the building
under each Target Lease;
(c) the name of the tenant and any guarantor under
each Target Lease;
(d) the date of each Target Lease and any amendment
or modification thereof, the commencement or amendment start
date of
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each Target Lease and the expiration date of the term of
each Target Lease;
(e) the amount of annual or monthly base rent and
additional rent due under each Target Lease and the amount, or
the basis of calculation thereof, of any scheduled increase or
other escalation in the annual and monthly base rent or
additional rent;
(f) any renewal, extension, expansion or cancellation
right of the tenant under each Target Lease; and
(g) any security deposit or outstanding rent
concession or abatement under each Target Lease.
There are no material leases, tenancies, licenses or other rights of occupancy
or use of Target Properties or any portion thereof except for Target Leases and
Target Tenant Leases and except as set forth on Exhibit 3.28 to the Target
Disclosure Schedule. Except as set forth on Exhibit 3.28 to the Target
Disclosure Schedule, each Target Lease is valid and enforceable, is in full
force and effect, has not been materially amended, modified or supplemented, and
the tenant thereunder has accepted its demised premises, is in actual possession
in the normal course and has commenced payment of rent and additional rent, if
applicable, therefor. Except as set forth on Exhibit 3.28 to the Target
Disclosure Schedule, each Target Lease provides that the tenant thereunder is
required to pay all or its pro rata share of the operating expenses, repairs and
maintenance, and taxes and insurance in connection with the maintenance,
ownership, use and occupancy of the Target Property demised thereunder. Neither
Target nor any Target Subsidiary is in default in the payment or performance of
any material obligation binding on Target or a Target Subsidiary under a Target
Lease and neither Target nor any Target Subsidiary has given notice of material
default to a tenant (which default has not previously been cured), nor does any
condition or event exist which with the giving of notice or the passage of time,
or both, would constitute a material default by Target or any Target Subsidiary
or, to the best of Target's knowledge, by a tenant under a Target Lease. Target
does not have any knowledge of any material claim, offset, right of recoupment
or defense available to a tenant under a Target Lease, and there have been no
material waivers by Target or any Target Subsidiary of any material default
under or breach of a Target Lease by a tenant. Except for Target Mortgages (as
hereinafter defined), neither Target nor any Target Subsidiary has assigned,
pledged, hypothecated or otherwise encumbered any of its right, title or
interest in and to a Target Lease or any rents payable thereunder.
Section 3.29 MORTGAGES. Exhibit 3.29 to the Target Disclosure
Schedule sets forth a complete and correct list of all mortgages, deeds of
trust, deeds to secure debt and other similar security interests encumbering any
Target Property or any part thereof (individually, a "Target Mortgage" and
collectively, the
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"Target Mortgages") and sets forth a complete and correct description of the
following:
(a) the location of each Target Property encumbered
by each Target Mortgage;
(b) the name of the obligor, each guarantor and the
holder of each Target Mortgage;
(c) the priority of each Target Mortgage and any
mortgage, deed of trust or other similar instrument that is
prior to each Target Mortgage;
(d) the date of each Target Mortgage and any
amendment or modification thereof;
(e) the original principal amount of the debt secured
by each Target Mortgage, the current rate of interest
thereunder and the current outstanding principal balance
thereof;
(f) the maturity date of the debt secured by each
Target Mortgage, the type of debt secured thereby and whether
any balloon payment is due at the maturity of the debt secured
thereby;
(g) the amount of the current monthly payment of
interest, principal or other amounts due under each Target
Mortgage and the amount of any other mandatory principal or
other payment due thereunder prior to the maturity date of the
debt secured thereby;
(h) any amount that has not been disbursed or
advanced to Target by the holder of a Target Mortgage that
such holder is obligated to disburse or advance;
(i) any prepayment premiums with respect to the
prepayment (full or partial) of the debt secured by each
Target Mortgage and the current penalty payable in connection
with any such prepayment; and
(j) the amount of any escrow deposits or other
deposits or payments held under each Target Mortgage by the
holder of each Target Mortgage.
There are no mortgages, deeds of trusts, deeds to secure debt or other similar
instruments encumbering any Target Property or any portion thereof except for
the Target Mortgages. Each Target Mortgage is valid and enforceable, is in full
force and effect, and has not been amended, modified or supplemented except as
set forth
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on Exhibit 3.29 to the Target Disclosure Schedule. All payments, installments
and charges due and payable under the Target Mortgages have been paid in full.
Neither Target nor any Target Subsidiary has received notice of material default
by Target or any Target Subsidiary (which default has not previously been cured)
from the holder of a Target Mortgage nor does any condition or event exist which
with the giving of notice or the passage of time, or both, would constitute a
material default by Target or any Target Subsidiary under a Target Mortgage.
Except as set forth on Exhibit 3.29 to the Target Disclosure Schedule, the
occurrence of any of the transactions contemplated by this Plan of Merger will
not require the consent or approval of the holder of a Target Mortgage and will
not violate, conflict with or constitute a default by Target or any Target
Subsidiary under a Target Mortgage or result in a condition or event which with
the giving of notice or the passage of time, or both, would constitute a default
by Target under a Target Mortgage.
Section 3.30 TARGET MORTGAGE LOANS. Exhibit 3.30 to the Target
Disclosure Schedule sets forth a complete and correct list of all loans made by
Target or any Target Subsidiary to others secured by a mortgage, deed of trust,
deed to secure debt or other similar instrument encumbering real property and
personalty related to such real property (individually, a "Target Mortgage Loan"
and collectively, the "Target Mortgage Loans") and sets forth a complete and
accurate description of the following:
(a) the location of the real property encumbered by
each Target Mortgage Loan;
(b) the name of the obligor, each guarantor and the
holder of each Target Mortgage Loan;
(c) the priority of each Target Mortgage Loan and any
mortgage, deed of trust, deed to secure debt or other similar
instrument that is prior to each Target Mortgage Loan;
(d) the date of each Target Mortgage Loan and any
amendment or modification thereof;
(e) the original principal amount of the debt secured
by each Target Mortgage Loan, the current rate of interest
thereunder and the current outstanding principal thereof;
(f) the maturity date of the debt secured by each
Target Mortgage Loan, the type of debt secured thereby and
whether any balloon payment is due at the maturity of the debt
secured thereby;
(g) the amount of the current monthly payment of
interest, principal or other amounts due under each Target
Mortgage Loan and
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the amount of any other mandatory principal or other payment
due thereunder prior to the maturity date of the debt
secured thereby;
(h) any amount that has not been disbursed or
advanced to the obligor under each Target Mortgage Loan by
Target or a Target Subsidiary that Target or a Target
Subsidiary is obligated to disburse or advance;
(i) any prepayment premiums with respect to the
prepayment (full or partial) of the debt secured by each
Target Mortgage Loan and the current penalty payable in
connection with any such prepayment; and
(j) the amount of any escrow deposits or other
deposits or payments held under each Target Mortgage Loan by
Target or a Target Subsidiary.
Except as set forth on Exhibit 3.30 to the Target Disclosure Schedule, there are
no loans made by Target or any Target Subsidiary to others secured by a
mortgage, deed of trust, deed to secure debt or other similar instruments
encumbering real property and personalty related to such real property, except
for Target Mortgage Loans. Target has good title to all Target Mortgage Loans,
in each case free and clear of all encumbrances senior to the Target Mortgage
Loans, claims, security interests and defects. Each Target Mortgage Loan is
valid and enforceable, is in full force and effect and has not been amended,
modified or supplemented, except as set forth in Exhibit 3.30 to the Target
Disclosure Schedule. All payments, installments and material charges due and
payable under each Target Mortgage Loan have been paid in full. Target is not in
material default in the payment or performance of any obligation under a Target
Mortgage Loan and has not given any notice of material default to an obligor
under a Target Mortgage Loan (which default has not previously been cured) nor
does any condition or event exist which with the giving of notice or the passage
of time, or both, would constitute a material default by an obligor under a
Target Mortgage Loan. To the best of Target's knowledge, no obligor under a
Target Mortgage Loan has a valid defense to the payment in full of such Target
Mortgage Loan nor is such Target Mortgage Loan subject to any valid right of
rescission, set-off, abatement, diminution, counterclaim or defense. There have
been no waivers by Target or any Target Subsidiary of any material default under
or breach of a Target Mortgage Loan by an obligor under a Target Mortgage Loan.
The occurrence of any of the transactions contemplated by this Plan of Merger
does not require the consent or approval of the obligor under a Target Mortgage
Loan and will not violate, conflict with or constitute a default by Target or
any Target Subsidiary under a Target Mortgage Loan or result in a condition or
event which with the giving of notice or the passage of time, or both, would
constitute a default by Target or any Target Subsidiary under a Target Mortgage
Loan.
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Section 3.31 OPINION OF FINANCIAL ADVISOR. The Board of
Directors of Target has received from a financial advisor satisfactory to
Target's Board of Directors an opinion to the effect that, as of the date of
this Plan of Merger, the Common Stock Exchange Ratio is fair, from a financial
point of view, to the holders of Target Common Stock. A written copy of such
opinion will be delivered by Target to Buyer prior to the date on which the
definitive proxy materials for the Joint Proxy Statement are filed with the SEC.
Section 3.32 INVESTMENT COMPANY ACT. Target is not, and as of
the Effective Time will not be, an "investment company" or company "controlled"
by "an investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 3.33 BOOKS AND RECORDS. The books of account, minute
books, stock record books and other records of Target, all of which have been
made available to Buyer and HR, are complete and correct and have been
maintained in accordance with the sound business practices and the requirements
of Section 13(b)(2) of the Exchange Act, including, but not limited to, the
maintenance of an adequate system of internal controls. The minute books of
Target contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors and
committees of the Board of Directors of Target and no meetings of any such
stockholders, Board of Directors or committees has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of HR. Target
has furnished HR with any annual management letters from Target's independent
certified public accountants for each of the last three years to the extent such
letters address the business conducted by Target.
Section 3.34 INTELLECTUAL PROPERTY. Target has no intellectual
property assets which are material to Target's operations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND HR
Buyer and HR represent and warrant to Target as follows:
Section 4.1 CORPORATE ORGANIZATION AND QUALIFICATION. Buyer is
legally formed and validly existing under the laws of the State of Delaware, and
has the requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
Buyer is registered or qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such registration or qualification
necessary, except where the
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failure to be so registered or qualified and in good standing will not have and
would not reasonably be expected to have a material adverse effect on Buyer.
Section 4.2 SUBSIDIARIES. Buyer does not own any stock or
other equity interests in, and does not control, directly or indirectly, any
other corporation, partnership, joint venture, limited liability company,
association or business organization.
Section 4.3 CORPORATE POWER AND AUTHORITY. Subject to the
satisfaction of the conditions precedent set forth herein Buyer (i) has the
power to execute, deliver and perform this Plan of Merger and all agreements and
other documents executed and delivered or to be executed and delivered by it
pursuant to this Plan of Merger, and (ii) has taken all action required by its
Certificate of Incorporation, Bylaws, or otherwise, to authorize the execution,
delivery and performance of this Plan of Merger and such related documents. The
execution and delivery of this Plan of Merger has been approved by the Board of
Directors of Buyer. This Plan of Merger has been duly executed and delivered by
Buyer and, assuming the receipt of required stockholder and regulatory approvals
and further assuming that this Plan of Merger constitutes a valid and binding
obligation of Target and HR, constitutes a valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms.
Section 4.4 NO VIOLATIONS. The execution and delivery of this
Plan of Merger does not and, subject to the receipt of required stockholder and
regulatory approvals and any other required third-party consents or approvals,
the consummation of the Merger will not, violate any provision of Buyer's
Certificate of Incorporation or Bylaws, or any provisions of, or result in the
acceleration of any obligation under, any material mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree, to which
Buyer is a party, or by which it is bound, or violate any restrictions of any
kind to which it is subject which, if violated or accelerated, would have a
material adverse effect on Buyer.
Section 4.5 CONSENTS. Except for (i) the filing of the
Registration Statement and the Joint Proxy Statement (in each case as defined in
Section 6.2 below) with the SEC pursuant to the Securities Act and the Exchange
Act, and the declaration of the effectiveness thereof by the SEC and filings
with various state blue sky authorities, (ii) the acceptance for record of the
Articles of Merger by the SDAT and the Certificate of Merger by the Delaware
Office of Secretary of State in connection with the Merger, (iii) any required
filings with or approvals from applicable state environmental authorities and
(iv) any required filings with or approvals from applicable state health care
regulation and licensing authorities (the filings and approvals referred to in
clauses (i) through (iv) being collectively referred to as the "Buyer Required
Statutory Approvals"), to Buyer's best knowledge, no declaration, filing or
registration with, or notice to, or authorization,
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consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Plan of Merger by Buyer or the
consummation by Buyer of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a material adverse effect on Buyer. No filing or notice under
the HSR Act is required in connection with the execution and delivery of this
Plan of Merger or the consummation of the transactions contemplated hereby.
Section 4.6 LEGAL PROCEEDINGS. There is no material
litigation, governmental investigation or other proceeding pending or, to the
best knowledge of Buyer, threatened against or relating to Buyer, or its
properties or businesses or the transactions contemplated by this Plan of Merger
and, to the best knowledge of Buyer, no basis for any such action exists.
Section 4.7 COMPLIANCE WITH LAWS IN GENERAL. Buyer has not
received any notices of material violations of any federal, state or local laws,
regulations or ordinances relating to its business and operations, and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Buyer which, if it were determined that a violation had
occurred, would have a material adverse effect on Buyer.
Section 4.8 LICENSES. Buyer holds all Licenses which are
needed or required by law with respect to its business, operations and
facilities as they are currently conducted, except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not have a
material adverse effect on Buyer.
Section 4.9 VOTE REQUIRED. A majority of the outstanding
shares of voting stock entitled to vote thereon is the only vote of the holders
of any class or series of Buyer's equity securities necessary to approve this
Plan of Merger, the Merger and the transactions contemplated hereby.
Section 4.10 INVESTMENT COMPANY ACT. Buyer is not, and as of
the Effective Time will not be, an "investment company" or company "controlled"
by "an investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 4.11 ORGANIZATION AND QUALIFICATION OF HR AND HR
SUBSIDIARIES. Each of HR and the subsidiaries of HR set forth in Exhibit 21 of
HR's Form 10-K for the year ended December 31, 1997 (each an "HR Subsidiary"
and, collectively, the "HR Subsidiaries") is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation,
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and each has the requisite corporate power to own its property and carry on its
business as it is now being conducted. HR and each HR Subsidiary is qualified to
transact business as a foreign corporation and is in good standing in all
jurisdictions in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not have
and would not reasonably be expected to have a material adverse effect on HR.
Section 4.12 POWER AND AUTHORITY. Subject to the satisfaction
of the conditions precedent set forth herein, HR (i) has the power to execute,
deliver and perform this Plan of Merger and all agreements and other documents
executed and delivered or to be executed and delivered by it pursuant to this
Plan of Merger, and (ii) has taken all action required by its Articles of
Incorporation, Bylaws or otherwise, to authorize the execution, delivery and
performance of this Plan of Merger and such related documents. The execution and
delivery of this Plan of Merger has been approved by the Board of Directors of
HR. This Plan of Merger has been duly executed and delivered by HR and, assuming
the receipt of required HR stockholder vote and regulatory approvals and further
assuming that this Plan of Merger constitutes a valid and binding obligation of
Buyer and Target, constitutes a valid and binding obligation of HR, enforceable
against HR in accordance with its terms.
Section 4.13 STATUS OF HR COMMON STOCK AND HR PREFERRED STOCK.
On and after the Effective Time, upon due and proper exchange of Exchanging
Target Shares therefor, the HR Common Stock and the HR Preferred Stock will be
validly authorized, duly issued, fully paid and nonassessable.
Section 4.14 AUTHORIZATION OF THE ISSUANCE OF THE HR COMMON
STOCK AND HR PREFERRED STOCK. HR has all requisite corporate power and authority
to issue the HR Common Stock and the HR Preferred Stock. No other corporate or
legal proceedings on the part of HR is necessary to approve and authorize the
issuance of the HR Common Stock and HR Preferred Stock, other than the approval
of the stockholders of HR in the case of the HR Common Stock.
Section 4.15 NO VIOLATIONS. The execution and delivery of this
Plan of Merger does not and, subject to the receipt of required stockholder and
regulatory approvals and any other required third-party consents or approvals,
the consummation of the Merger will not, violate any provision of HR's Articles
of Incorporation or Bylaws, or any provisions of, or result in the acceleration
of any obligation under, any material mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree, to which HR is a
party, or by which it is bound, or violate any restrictions of any kind to which
it is subject which, if violated or accelerated, would have a material adverse
effect on HR.
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Section 4.16 SEC DOCUMENTS OF HR. Since January 1, 1997, HR
has filed all required reports, registration statements, proxy statements and
other documents, together with any amendments required to be made thereto (as
such documents have been amended since the time of their original filing, the
"HR SEC Documents"). As of their respective dates, the HR SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such HR SEC Documents and none of the HR SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Section 4.17 NYSE LISTING. On the Closing Date, the HR Common
Stock and the HR Preferred Stock will have been approved for listing on the New
York Stock Exchange upon official notice of issuance.
Section 4.18 HR REIT QUALIFICATION. At all times during its
existence, HR has been, and as of the Effective Time HR will be, organized in
conformity with the requirements for qualification and, as of the date hereof
for all taxable periods has qualified, as a "real estate investment trust" under
the Code and the rules and regulations thereunder. HR has at all times during
its existence (i) met the 75%, 95% and (through the tax year ended December 31,
1997) 30% income tests set forth in Section 856 of the Code, (ii) met the 75%
and 25% asset tests set forth in Section 856 of the Code and (iii) distributed
dividends to its stockholders at least equal to the 95% requirements of Section
857 of the Code.
Section 4.19 HR NOT AN INVESTMENT COMPANY. HR is not, and as
of the Effective Time will not be, an "investment company" or company
"controlled" by "an investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 4.20 ABSENCE OF UNDISCLOSED LIABILITIES. HR did not,
at March 31, 1998, and has not incurred since that date, any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature
(other than ordinary and recurring operating expenses), except (a) liabilities,
obligations or contingencies which are accrued or reserved against in HR's
financial statements included in the HR SEC Documents or reflected in the notes
thereto and (b) liabilities, obligations or contingencies which (i) would not,
in the aggregate, have, or be reasonably expected to have, a material adverse
effect on HR, or (ii) have been discharged or paid in full prior to the date
hereof or will be discharged or paid in full prior to the Effective Time.
Section 4.21 OPINION OF FINANCIAL ADVISOR. The Board of
Directors of HR has received from a financial advisor satisfactory to HR's Board
of Directors
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an opinion to the effect that, as of the date of this Plan of Merger, the Common
Stock Exchange Ratio is fair, from a financial point of view, to the holders of
HR Common Stock. A written copy of such opinion will be delivered by HR to
Target prior to the date on which the definitive proxy materials for the Joint
Proxy Statement are filed with the SEC.
Section 4.22 VOTE REQUIRED. The affirmative vote of the
holders of a majority of all the votes cast at a meeting at which a quorum is
present is the only vote of the holders of any class or series of HR equity
securities necessary to approve this Plan of Merger, the Merger and the
transactions contemplated hereby.
Section 4.23 STATEMENTS OF INTENT. (i) HR has no plans or
intent to liquidate Target following the Merger; (ii) HR will cause Target to
continue the historic business of Target or to use a significant portion of
Target's historic business assets in a business following the Merger; and (iii)
HR does not plan to cause Target to issue additional shares of stock of Target
in such manner that would cause HR to lose control of Target under Section
368(c) of the Code following the Merger.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 CONDUCT OF BUSINESS BY TARGET PENDING THE MERGER.
Subject to compliance with applicable law, after the date hereof and prior to
the Closing Date or earlier termination of this Plan of Merger, unless Buyer and
HR shall otherwise agree in writing or as may be otherwise specifically
contemplated by this Plan of Merger, Target shall:
(a) conduct its business in the ordinary and usual
course of business and consistent with past practice;
(b) not amend or propose to amend its Articles of
Incorporation or Bylaws, or split, combine or reclassify its
outstanding stock, unless such action is necessary to preserve
its status as a REIT or a "qualified REIT subsidiary";
(c) not issue, sell, pledge or dispose of, or agree
to issue, sell, pledge or dispose of, any additional shares
of, or any options, warrants or rights of any kind to acquire
any shares of stock of Target of any class or any debt or
equity securities convertible into or exchangeable for such
stock or amend or modify the terms and conditions of any of
the foregoing, except that in the ordinary course of its
business and consistent with its past practices, Target may
issue shares upon exercise of outstanding options to purchase
Target Common Stock and
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in connection with the exercise of the rights to acquire
Target Common Stock as are described or referred to in
Section 3.2 above in accordance with the terms thereof,
including the right of holders of the 10 1/2% Debentures and
the 6.55% Debentures to convert such Debentures into Target
Common Stock;
(d) except as contemplated by Exhibit 5.1 to the
Target Disclosure Schedule, not (i) incur or become
contingently liable with respect to any indebtedness for
borrowed money, except in the ordinary course of business,
(ii) redeem, purchase, acquire or offer to purchase or acquire
any shares of its stock, other than as required by the
governing terms of such securities, (iii) take any action
which would jeopardize Target's status as a real estate
investment trust, (iv) make any acquisition of assets or
businesses, without HR's prior written consent, which shall
not be unreasonably withheld; provided, however, that HR will
not consent to any (a) investments in assisted living
facilities or skilled nursing facilities other than the
funding of commitments for such investments in existence on
the date of this Plan of Merger, (b) investments in
construction and/or development projects other than the
funding of commitments for such investments in existence on
the date of this Plan of Merger, (c) acquisitions or
investments which are not in the ordinary course of Target's
business, or (d) investments which, taken together with all
other assets, businesses, and investments of HR and Capstone,
would cause an event of default or breach of any material
agreement of HR, (v) sell any assets or businesses, in a
transaction or series of related transactions for a cost in
excess of $50,000, or (vi) enter into any contract, agreement,
commitment or arrangement with respect to any of the
foregoing;
(e) use reasonable efforts to preserve intact its
business organization and goodwill and business relationships
with all lessees, mortgagors, operators, suppliers,
distributors, customers, and others having business
relationships with Target and not engage in any action,
directly or indirectly, with the intent to adversely impact
the transactions contemplated by this Plan of Merger;
(f) subject to compliance with applicable law, confer
with one or more representatives of Buyer when requested, to
report on material operational matters and the general status
of ongoing operations of Target's business;
(g) not enter into or amend any employment,
severance, special pay arrangement with respect to termination
of employment or other similar arrangements or agreements with
any directors, officers, employees or other representatives,
or agree to do so;
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(h) other than in accordance with established
compensation adjustment policies and as contemplated by this
Plan of Merger, not increase the rate of remuneration payable
to any of its directors, officers, employees or other
representatives, or agree to do so, it being understood that
this Section 5.1(h) shall not preclude payment of bonuses
accrued as of the Closing Date in accordance with past
practice at the same rate as accrued during 1998 through the
date of this Plan of Merger not exceeding an aggregate of
$700,000 to persons (except Richard M. Scrushy, Michael D.
Martin and John W. McRoberts) who are employees of Target on
the Closing Date and who sign termination agreements
containing appropriate releases and confidentiality
provisions;
(i) except as may be contemplated by the terms
hereof, not adopt, enter into or amend any bonus, profit
sharing, compensation, stock option, pension, retirement,
deferred compensation, health care, employment or other
employee benefit plan, agreement, trust, fund or arrangement
for the benefit or welfare of any employee or retiree, except
as required to comply with changes in applicable law or as
contemplated by this Plan of Merger;
(j) file all required reports, including its
Quarterly Report on Form 10-Q for the quarter ending June 30,
1998, on or before the date prescribed for such reports
pursuant to the Exchange Act and cause such reports to comply
with the requirements of the Exchange Act; and
(k) maintain, in full force and effect, with all
premiums due thereon paid, policies of insurance covering all
of the insurable tangible assets and businesses of Target and
the Target Subsidiaries in amounts and as to foreseeable risks
usually insured against by persons operating similar
businesses under valid and enforceable policies of insurance
issued by insurers of recognized responsibility.
Section 5.2. NEGATIVE COVENANTS OF TARGET. Subject to
compliance with applicable laws, after the date hereof and prior to the Closing
Date or earlier termination of this Plan of Merger, unless Buyer and HR shall
otherwise agree in writing or as may be otherwise specifically contemplated by
this Plan of Merger, Target shall not:
(a) Incur any liabilities other than current
liabilities incurred in the ordinary course of business;
(b) Incur any mortgage, lien, pledge, hypothecation,
charge, encumbrance, or restriction of any kind, except liens
for taxes not due;
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(c) Become a party to any contract, or renew, extend,
or modify any existing contract, except in the ordinary course
of business;
(d) Make any capital expenditures, except for
ordinary repairs, maintenance, and replacement;
(e) Declare or pay any dividend on or make any other
distribution to stockholders, except for payment of any
dividends consistent with past practice;
(f) Pay or agree to pay any bonus, increase in
compensation, pension, or severance pay to any director,
stockholder, officer, consultant, agent, or employee, except
for bonuses accrued as of the Closing Date at the same rate as
accrued during 1998 through the date of this Plan of Merger in
accordance with past practice not exceeding an aggregate of
$700,000 to persons (except Richard M. Scrushy, Michael D.
Martin and John W. McRoberts) who are employees of Target on
the Closing Date and who sign termination agreements
containing appropriate releases and confidentiality
provisions;
(g) Discharge or satisfy any lien or encumbrance, or
pay any obligation or liability, except current liabilities
shown on the Target Balance Sheet, or incurred in the ordinary
course of business since the date of the Target Balance Sheet;
(h) Merge or consolidate with any other entity;
(i) Enter into any transactions or take any acts that
would constitute a breach of the representations, and
warranties contained in this Plan of Merger; and
(j) Institute, settle, or agree to settle any action
or proceeding before any court or governmental body.
Section 5.3 CONDUCT OF BUSINESS BY BUYER AND HR PENDING THE
MERGER. Subject to compliance with applicable law, after the date hereof and
prior to the Closing Date or earlier termination of this Plan of Merger, unless
Target shall otherwise agree in writing or as may be otherwise specifically
contemplated by this Plan of Merger, Buyer and HR shall conduct their respective
businesses in the ordinary and usual course of business and consistent with past
practice.
Section 5.4 NO SOLICITATION. Neither Target nor Target
Subsidiaries will, directly or indirectly, through any officer, director, agent
or otherwise, (i) solicit, initiate or encourage submission of proposals or
offers from any person relating to any acquisition or purchase of all or (other
than in the ordinary course of business) a material amount of the assets of, or
any equity interest in, Target or
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any merger, consolidation, or business combination with Target, or (ii) subject
to the obligations of Target's directors and officers under Section 2-405.1(a)
of the MGCL or under applicable law as advised by counsel, participate in any
discussions or negotiations regarding, or furnish to any other person any
information with respect to, any of the foregoing, or (iii) otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person to do or seek any of the foregoing. Target
shall promptly notify Buyer if any such proposal or offer, or any inquiry or
contact with any person with respect thereto, is made. Nothing contained herein
shall be construed to prohibit Target and its Board of Directors from taking any
particular position with respect to any such offer or proposal or from otherwise
withdrawing, modifying or amending its recommendation with respect to the
Merger, in each case to the extent required by the obligations of Target's
directors and officers under Section 2-405.1(a) of the MGCL or under applicable
law as advised by counsel, or from disclosing to its shareholders a position as
contemplated by Rule 14e-2 promulgated under the Exchange Act or from making
such other disclosure to shareholders which, in the judgment of its Board of
Directors on advice of counsel, may be required by law in connection with any
such proposal or offer.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 ACCESS TO INFORMATION; COOPERATION.
(a) ACCESS TO INFORMATION. Target shall afford to
Buyer, HR and their respective accountants, counsel, financial
advisors and other representatives (the "Buyer
Representatives") and Buyer and HR shall afford to Target and
its accountants, counsel, financial advisors and other
representatives (the "Target Representatives") full access
during normal business hours throughout the period prior to
the Effective Time to all of the properties, books, contracts,
commitments and records (including Tax returns) of Buyer, HR,
and Target, as appropriate, and, during such period, each
shall furnish promptly to the others (i) a copy of each
report, schedule and other document filed or received pursuant
to the requirements of federal or state securities laws or
filed with the SEC in connection with the transactions
contemplated by this Plan of Merger or which may have a
material effect on Buyer's, HR's or Target's business,
properties or financial condition, as appropriate, and (ii)
such other information concerning their respective businesses,
properties and financial condition as shall be reasonably
requested; provided that no investigation pursuant to this
Section 6.1 shall affect any representation or warranty made
herein or the conditions to the obligations of the respective
parties hereto to consummate the Merger. All non-public
documents and
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information furnished to Buyer, HR, or Target, as the case
may be, in connection with the transactions contemplated by
this Plan of Merger shall be deemed to have been received
pursuant to and shall be subject to the provisions of the
Confidentiality Agreement between HR and Target (the
"Confidentiality Agreement"), except that Buyer, HR and
Target may disclose such information as may be necessary in
connection with seeking Target Required Statutory Approvals,
Buyer Required Statutory Approvals, or the approval of
stockholders of Buyer, HR, or Target. Buyer and HR shall
promptly advise Target, and Target shall promptly advise
Buyer and HR, in writing of any change or the occurrence of
any event after the date of this Plan of Merger having, or
which, insofar as can reasonably be foreseen, in the future
may have, any material adverse effect on Buyer, HR, or Target.
(b) COOPERATION. Subject to the terms and conditions
herein provided, each of the parties hereto shall cooperate
and use their respective best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Plan of Merger, including using its best
efforts to identify and obtain all necessary or appropriate
waivers, consents and approvals to effect all necessary
registrations, filings and submissions (including Target
Required Statutory Approvals, Buyer Required Statutory
Approvals and any filings under federal and state securities
laws and to lift any injunction or other legal bar to the
Merger (and, in such case, to proceed with the Merger as
expeditiously as possible), subject, however, to obtaining the
necessary approvals by the stockholders of each of Target, HR,
and Buyer of this Plan of Merger and the transactions
contemplated hereby, and subject at all times to the duties of
the respective Boards of Directors of Target, HR, and Buyer.
(c) OTHER ACTIONS. Neither Target, HR, nor Buyer
shall knowingly or intentionally take any action, or omit to
take any action, if such action or omission would, or
reasonably might be expected to, result in any of its
representations and warranties set forth herein being or
becoming untrue in any material respect, or in any of the
conditions to the Merger set forth in this Plan of Merger not
being satisfied, or (unless such action is required by
applicable law) which would materially adversely affect the
ability of Target, HR, or Buyer to obtain any consents or
approvals required for the consummation of the Merger without
imposition of a condition or restriction which would have a
material adverse effect on the Surviving Entity or which would
otherwise materially impair the ability of Target, HR, or
Buyer to
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consummate the Merger in accordance with the terms of this
Plan of Merger or materially delay such consummation.
(d) CONTINUED QUALIFICATION AS A REAL ESTATE
INVESTMENT TRUST. From and after the date hereof through the
Effective Time, Target will maintain its qualification as a
"real estate investment trust" under the Code and the rules
and regulations thereunder. Without limiting the generality of
the foregoing, Target will make dividend distributions and all
other payments during its final taxable period sufficient to
satisfy the requirement of Section 857 of the Code.
Section 6.2 REGISTRATION STATEMENT; JOINT PROXY STATEMENT.
(a) Within 60 days after the execution of this Plan
of Merger, HR shall prepare and file with the SEC and any
other applicable regulatory bodies a Registration Statement on
Form S-4 with respect to the shares of HR Common Stock to be
issued in connection with the Merger (the "Registration
Statement"), and will otherwise proceed promptly to satisfy
the requirements of the Securities Act, including Rule 145
thereunder. Such Registration Statement shall contain a joint
proxy statement of HR and Target containing the information
required by the Exchange Act (the "Joint Proxy Statement"). HR
shall take all reasonable steps to cause the Registration
Statement to be declared effective and to maintain such
effectiveness until all of the shares covered thereby have
been distributed. HR shall promptly amend or supplement the
Registration Statement to the extent necessary in order to
make the statements therein not misleading or to correct any
misstatements which have become false or misleading. HR shall
use its best efforts to have the Joint Proxy Statement
approved by the SEC under the provisions of the Exchange Act.
HR shall provide Target with copies of all filings made
pursuant to this Section 6.2 and shall consult with Target on
responses to any comments made by the staff of the SEC with
respect thereto. If at any time prior to the Effective Time
any event or circumstance relating to Buyer or HR or their
respective officers or directors should be discovered by HR
which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement, HR
shall promptly inform Target.
(b) The information specifically designated as being
supplied by Target for inclusion in the Registration Statement
shall not, at the time the Registration Statement is declared
effective, at the time the Joint Proxy Statement is first
mailed to holders of Target Stock, at the time of the Special
Meetings (as defined below in Section 6.4) and at
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the Effective Time, 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 were made, not
misleading. The information specifically designated as being
supplied by Target for inclusion in the Joint Proxy Statement
to be sent to the holders of Target Stock in connection with
the Special Meetings shall not, at the date the Joint Proxy
Statement (or any amendment thereof or supplement thereto) is
first mailed to holders of Target Stock, at the time of the
Special Meetings and at the Effective Time, 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 were made, not misleading. If at any time
prior to the Effective Time any event or circumstance relating
to Target or its officers or directors, should be discovered
by Target which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy
Statement, Target shall promptly inform HR. All documents, if
any, that Target is responsible for filing with the SEC in
connection with the transactions contemplated herein will
comply as to form and substance in all material respects with
the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the
rules and regulations thereunder.
(c) The information specifically designated as being
supplied by Buyer or HR for inclusion in the Registration
Statement shall not, at the time the Registration Statement is
declared effective, at the time the Joint Proxy Statement is
first mailed to holders of Target Stock, at the time of the
Special Meetings and at the Effective Time, 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 were made, not misleading. The information
specifically designated as being supplied by Buyer or HR for
inclusion in the Joint Proxy Statement to be sent to the
holders of Target Stock in connection with the Special
Meetings shall not, at the date the Joint Proxy Statement (or
any amendment thereof or supplement thereto) is first mailed
to holders of Target Stock, at the time of the Special
Meetings or at the Effective Time, 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 the light of the circumstances
under which they are made, not misleading. If at any time
prior to the Effective Time any event or circumstance relating
to Buyer or HR or their respective officers or directors,
should be
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discovered by Buyer or HR which should be set forth in an
amendment to the Registration Statement or a supplement to
the Joint Proxy Statement, HR shall promptly inform Target
and shall promptly file such amendment to the Registration
Statement. All documents that HR is responsible for filing
with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in
all material respects with the applicable requirements of
the Securities Act and the rules and regulations thereunder
and the Exchange Act and the rules and regulations thereunder.
(d) Target shall furnish all information to HR with
respect to Target and the Target Subsidiaries as HR may
reasonably request for inclusion in the Registration
Statement, the Joint Proxy Statement and the Listing
Applications pertaining to the HR Common Stock and the HR
Preferred Stock, and shall otherwise cooperate with HR in the
preparation and filing of such documents.
Section 6.3 NYSE. HR shall use its best efforts to effect, at
or before the Effective Time, authorization for listing on the NYSE upon
official notice of issuance, of the HR Common Stock and the HR Preferred Stock.
Section 6.4 APPROVAL OF STOCKHOLDERS. Each of Buyer, HR, and
Target shall promptly take such action as may be required by their respective
governing documents and applicable law to obtain the requisite approval of this
Plan of Merger and the transactions contemplated hereby, and shall use their
respective best efforts to obtain approval and adoption of this Plan of Merger
and the transactions contemplated hereby as soon as practicable following the
date upon which the Registration Statement is declared effective by the SEC.
Subject to the duties of the respective Boards of Directors of Target, HR, and
Buyer under applicable law, and unless this Plan of Merger shall have been
validly terminated as provided herein, Buyer and Target shall, through their
respective Boards, recommend to their respective equity holders the approval of
this Plan of Merger and of the transactions contemplated by this Plan of Merger.
Without limiting the generality of the foregoing, each of Buyer, HR, and Target
will call, give notice of, convene and hold a meeting of its stockholders
(collectively, the "Special Meetings") as soon as practicable after the
effectiveness of the Registration Statement for the purpose of approving this
Plan of Merger (to the extent that such approval is required by applicable law
in order to consummate the Merger) and for such other purposes as may be
necessary; provided that nothing contained herein shall affect the right of
either Buyer, HR, or Target to take action by written consent in lieu of meeting
to the extent permitted by applicable law and their respective governing
documents.
Section 6.5 COMPLIANCE WITH THE SECURITIES ACT. Target shall
use its best efforts to cause each principal executive officer, each director
and each other
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person who is an "affiliate" (as such term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act) of Target to deliver to Buyer and HR on or
prior to the Effective Time a written agreement (an "Affiliate Agreement") to
the effect that such person will not offer to sell, sell or otherwise dispose of
any shares of HR Common Stock except, in each case, pursuant to an effective
registration statement or in compliance with Rule 145, as amended from time to
time, or in a transaction which, in the opinion of legal counsel satisfactory to
Buyer and HR, is exempt from the registration requirements of the Securities
Act.
Section 6.6 PUBLIC STATEMENTS. The parties shall consult with
each other prior to issuing any press release or any written public statement
with respect to this Plan of Merger or the transactions contemplated hereby and
shall not issue any such press release or written public statement prior to
review and approval by the other party, except that prior review and approval
shall not be required if, in the reasonable judgment of the party seeking to
issue such release or public statement, prior review and approval would prevent
the timely dissemination of such release or announcement in violation of any
applicable law, rule, regulation or policy of the NYSE. The parties shall issue
a joint press release, mutually acceptable to Buyer, HR, and Target, promptly
upon execution and delivery of this Plan of Merger.
Section 6.7 CERTAIN INFORMATION. For as long as any affiliate
(as defined for purposes of Rule 145 under the Securities Act) of Target holds
any HR Common Stock (but not for a period in excess of two years from the date
of consummation of the Merger), HR shall file with the SEC or otherwise make
publicly available all information about HR required pursuant to Rule 144(c)
under the Securities Act to enable such affiliate to resell such shares under
the provisions of Rule 145(d) under the Securities Act.
Section 6.9 ACCOUNTING METHODS. Neither Buyer, HR, nor Target
shall change, in any material respect, its methods of accounting in effect at
its most recent fiscal year end, except as required by changes in generally
accepted accounting principles as concurred in by both such parties' independent
accountants.
Section 6.10 NOTICE OF SUBSEQUENT EVENTS. Target shall notify
the other parties of any changes, additions or events which would cause any
material change in or material addition to any Exhibit to the Target Disclosure
Schedule delivered by Target under this Plan of Merger, promptly after the
occurrence of the same.
Section 6.11 RESIGNATION OF TARGET DIRECTORS. On or prior to
the Closing Date, Target shall deliver to Buyer evidence satisfactory to Buyer
of the
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resignation of the Directors of Target and all Target Subsidiaries, such
resignations to be effective on the Closing Date.
Section 6.12 BREAKUP FEE.
(a) (i) If this Plan of Merger is terminated for
any reason, after
(1) a tender or exchange offer for Target
Common Stock is announced by any corporation,
partnership, person, other entity, syndicate or
group (as defined in Section 13(d)(3) of the
Exchange Act) (collectively, "Persons") other
than Buyer or any of its affiliates, and
the Board of Directors of Target takes any
position under Rule 14e-2 under the Exchange Act
other than to recommend rejection of such offer;
or
(2) Target receives a proposal or offer from
any Person concerning: (x) a merger,
consolidation, sale of a material amount of
assets or other business combination not in the
ordinary course of business involving Target or
Target Subsidiaries, or (y) any transaction
involving transfer of beneficial ownership of
securities representing, or the right to
acquire beneficial ownership of or to vote
securities representing, more than 25% of the
total voting power of Target, and either:
(A) the Board of Directors resolves to
accept, or recommend acceptance of, such
proposal or offer, or determines such
proposal or offer to be more favorable to
the shareholders of Target than the Merger
as contemplated herein; or
(B) the Board of Directors, after a
reasonable time for consideration thereof,
does not resolve to reject or recommend
rejection of such proposal or offer; or
(3) in the absence of the announcement of a
tender or exchange offer and of any proposal or
offer, described in clauses (1) and (2) above,
Target withdraws, modifies or amends in any
respect its favorable recommendation of the
Merger, or the Board of Directors resolves to do
any of the foregoing (except that the foregoing
shall not apply to a change solely in the reasons
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for such recommendation, so long as Target and
its Board of Directors continue to recommend
acceptance of the Merger); or
(ii) if this Plan of Merger is terminated for any
reason, and:
(1) at any time after the date hereof,
within six months after such termination, any
Person, other than Buyer, HR or any HR
Subsidiary, shall have either: (x) directly or
indirectly acquired, or disclosed the direct or
indirect acquisition of, the beneficial ownership
of securities representing, or directly or
indirectly acquired, or disclosed the direct or
indirect possession of, the right to acquire
beneficial ownership of, or the right to vote,
securities representing 25% or more of the total
voting power of Target, or publicly announced its
intention to do any of the foregoing; (y)
commenced or publicly proposed a tender or
exchange offer for some portion or all of the
Target Common Stock, or publicly proposed any
merger, consolidation, acquisition of a material
amount of assets or other business combination
not in the ordinary course of business involving
Target or the Target Subsidiaries or publicly
proposed a transaction involving the transfer of
beneficial ownership of securities representing,
or of the right to acquire beneficial ownership
of or the right to vote, securities representing
more than 25% of the total voting power of
Target, or publicly announced its intention
to do any of the foregoing (any such commencement
or proposal being herein referred to as an
"Acquisition Proposal"); or (z) directly or
indirectly had discussions with Target or one or
more of its executive officers or directors (or
had discussions with any agents of the foregoing,
of which the principal was aware), with respect
to any of the transactions described in clauses
(x) or (y) above; and
(2) at any time, not later than six months
after the date of such termination, any Person
(whether or not a Person referred to in clause
(iii) (1) above), other than Buyer, HR or any of
their respective affiliates, either (x) directly
or indirectly acquires or discloses the direct
or indirect acquisition of securities
representing, or directly or indirectly acquires
or discloses the direct or indirect
possession of the right to acquire beneficial
ownership of
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or to vote securities representing, 25% or more
of the total voting power of Target; or (y)
consummates, or enters into an agreement with
Target or any of its affiliates or the Target
Subsidiaries with respect to, any Acquisition
Proposal, other than acquisitions by Target which
do not result in a change in ownership of
securities representing 25% or more of the total
voting power of Target;
then Target will, within five days after the first of any such
events to occur, (1) pay Buyer a fee of $20 million and (2)
reimburse HR and Buyer for all reasonable out-of-pocket
expenses and fees incurred by them (including fees payable to
their proposed lenders and investment bankers) or on their
behalf in connection with the Merger and the consummation of
all transactions contemplated by this Plan of Merger, and the
financing of such transactions, and incurred by financial
institutions and assumed by HR in connection with the
negotiation, preparation, execution and performance of this
Plan of Merger.
(b) If this Plan of Merger is terminated pursuant to
Section 8.1(c) because:
(i) any obligation, covenant, or agreement
of Target under this Plan of Merger shall have been
breached or not performed as required in any material
respect, by a willful and deliberate act or omission
by or on behalf of Target; or
(ii) any of the representations and
warranties of Target in this Plan of Merger
(including the Target Disclosure Schedule) shall not
have been accurate on the date of execution of this
Plan of Merger, except for inaccuracies which would
not, either individually or in the aggregate, have a
material adverse effect on Target,
then Target will, within five days of the first of any such
events to occur, reimburse HR and Buyer for all reasonable
out-of-pocket expenses and fees incurred by them (including
fees payable to their proposed lenders and investment bankers)
or on their behalf in connection with the Merger and the
consummation of all transactions contemplated by this Plan of
Merger, and the financing of such transactions, and incurred
by financial institutions and assumed by HR in connection with
the negotiation, preparation, execution, and performance of
this Plan of Merger.
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(c) If the Plan of Merger is terminated pursuant to
Section 8.1(c) because:
(i) any obligation, covenant, or agreement
of Buyer and HR under this Plan of Merger shall have
been breached or not performed as required in any
material respect, by a willful and deliberate act or
omission by or on behalf of Buyer and HR; or
(ii) any of the representations and
warranties of Buyer and HR in this Plan of Merger
shall not have been accurate on the date of execution
of this Plan of Merger, except for inaccuracies which
would not, either individually or in the aggregate,
have a material adverse effect on HR,
then Buyer and HR will, within five days of the first of any
such events to occur, reimburse Target for all reasonable
out-of-pocket expenses and fees incurred by it (including fees
payable to its investment bankers) or on its behalf in
connection with the Merger and the consummation of all
transactions contemplated by this Plan of Merger, and incurred
by Target in connection with the negotiation, preparation,
execution, and performance of this Plan of Merger.
(d) Except as aforesaid, all costs and expenses
incurred in connection with this Plan of Merger and the
transactions contemplated hereby shall be paid in accordance
with Section 6.16 hereof.
Section 6.13 TERMINATION OF EMPLOYEE BENEFIT PLANS. As soon as
practical, the Surviving Entity shall cause the termination of all pension,
profit-sharing and retirement Plans set forth on Exhibit 3.14 to the Target
Disclosure Schedule and take all necessary action to submit each such Plan to
the IRS for a determination that the termination of the Plan will not adversely
affect the qualification of each Plan and shall promptly pursue such
determination letter. Upon receipt of a letter from the IRS, the Surviving
Entity shall cause each of the trusts established to fund each Plan to be
promptly liquidated and shall cause the trustees to disburse all benefits to
participants pursuant to the terms of such Plans. All fees in connection with
such terminations and distributions, including but not limited to user fees,
attorneys' fees, accountants' fees and third-party administrators' fees shall be
paid by the Surviving Entity.
Section 6.14 ACQUISITION OF TARGET FURNITURE, FIXTURES AND
EQUIPMENT. Target and certain Target Subsidiaries will enter into an asset
purchase agreement with Orthopaedic Surgeons, Inc., a Delaware corporation
("OSI"), pursuant to which OSI will acquire at Closing all of the personal
property at Target's corporate headquarters used by Target or Target
Subsidiaries in the
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operation of the business as now conducted a list of which is set forth on
Schedule 6.14 including all furniture, fixtures and equipment but excluding the
split dollar life insurance policies on the life of John W. McRoberts and all
personal property located in any owned real estate. The consideration to be paid
for these assets will be (i) the assumption by OSI of all of Target's
obligations under that certain Office Lease dated June 28, 1994, as amended,
between Target and TMK Income Properties, L.P., a Delaware limited partnership
(successor in interest to Torchmark Development Corporation), (ii) the
assumption of all of Target's obligations under certain office equipment leases
a list of which is set forth on Schedule 6.14, and (iii) for the non-leased
assets, the sum of $350,000. HR agrees to give OSI the option to lease the
assets and sublease the facilities at fair market rents for a reasonable period
of time (not to exceed one year) to enable OSI to obtain capital financing. On
or prior to the date of purchase of the assets, Target shall obtain and deliver
to Buyer a release of Buyer and HR from any liability of Target under the
assumed leases effective as of the date of purchase. John W. McRoberts will
receive the policies of split dollar life insurance on his life without
additional consideration. Target agrees to make no further payments of premiums
on such policies.
Section 6.15. DIRECTORS AND OFFICERS INSURANCE. HR shall
provide to each officer and director of Target indemnification from acts or
omissions occurring prior to the Closing Date to the same extent as HR
indemnifies its officers and directors. Such indemnification shall be provided
through indemnification agreements which will be entered into at the Closing,
the form of which indemnification agreements will be provided to Target at least
ten days prior to the Closing. Buyer shall cause to be maintained in effect the
current policies of directors and officers liability insurance currently
maintained by Target.
Section 6.16 EXPENSES. Subject to Section 6.12, all costs and
expenses incurred in connection with this Plan of Merger and the transactions
contemplated hereby shall be paid by the party incurring such expenses (which
expenses of Target shall not exceed those set forth on Exhibit 3.9 to the Target
Disclosure Schedule), except that those expenses incurred in connection with
printing and distributing the Joint Proxy Statement shall be shared equally by
HR and Target.
Section 6.17 LIMITED LIABILITY COMPANY FORMATION. If requested
by Buyer at least ten days prior to the Closing Date, Target will form a
single-member limited liability company in each state designated by Buyer, and
Target shall contribute to such limited liability companies such properties and
assets of Target and Target Subsidiaries as are designated by Buyer.
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ARTICLE VII
CONDITIONS
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger and the
other transactions contemplated hereby shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions unless waived by the
parties hereto:
(a) Target shall have obtained the necessary approval
of its holders of Target Common Stock and Target Series A
Preferred Stock (voting as a separate class) of this Plan of
Merger and the transactions contemplated hereby;
(b) Buyer shall have obtained the necessary approval
of its stockholders of this Plan of Merger and the
transactions contemplated hereby;
(c) HR shall have obtained the necessary approval of
its stockholders of this Plan of Merger and the transactions
contemplated hereby, including the approval to issue the HR
Common Stock and the HR Preferred Stock;
(d) The Registration Statement pertaining to the HR
Common Stock and the HR Preferred Stock shall have become
effective in accordance with the provisions of the Securities
Act, and no stop order suspending such effectiveness shall
have been issued and remain in effect;
(e) Neither Buyer nor Target, nor any of their
respective subsidiaries, shall be subject to any order, decree
or injunction by a court of competent jurisdiction which (i)
prevents or materially delays the consummation of the Merger
or (ii) would impose any material limitation on the ability of
Buyer effectively to exercise full rights of ownership of the
Surviving Entity or any material portion of the assets or
business of Target and the Target Subsidiaries, taken as a
whole;
(f) All governmental consents, orders and approvals
legally required for the consummation of the Merger and the
transactions contemplated hereby, including Target Required
Statutory Approvals and Buyer Required Statutory Approvals,
shall have been obtained and be in effect at the Effective
Time, and all consents, orders and approvals legally required
for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained;
(g) The respective opinions of the financial advisors
described in Section 3.31 and Section 4.21 shall not have been
withdrawn,
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revoked or modified in any material respect as of the date of
the Joint Proxy Statement; and
(h) Each of Richard M. Scrushy, Michael D. Martin,
and John W. McRoberts shall execute and deliver the consulting
and non-competition agreements referred to on Exhibit 7.1(h)
to the Target Disclosure Schedule.
Section 7.2 CONDITIONS TO OBLIGATION OF TARGET TO EFFECT THE
MERGER. Unless waived by Target, the obligation of Target to effect the Merger
and the other transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Buyer and HR shall have performed in all material
respects their respective agreements contained in this Plan of
Merger required to be performed on or prior to the Closing
Date and the representations and warranties of Buyer and HR
contained in this Plan of Merger shall be true and correct,
except for inaccuracies which would not, either individually
or in the aggregate, have a material adverse effect on Buyer
or HR, on and as of (i) the date when made and (ii) the
Closing Date (except in the case of representations and
warranties expressly made solely with reference to a
particular date, which shall be true and correct as of the
date specified), and Target shall have received a certificate
of an officer of Buyer and HR to that effect;
(b) Target shall have received one or more legal
opinions from counsel to Buyer, dated the Closing Date, in
form and substance satisfactory to Target; and
(c) the HR Common Stock and the HR Preferred Stock
shall have been authorized for listing on the NYSE upon
official notice of issuance.
Section 7.3 CONDITIONS TO OBLIGATION OF BUYER AND HR TO EFFECT
THE MERGER. Unless waived by Buyer and HR, the obligations of Buyer and HR to
effect the Merger and the other transactions contemplated hereby shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:
(a) Target shall have performed in all material
respects its agreements contained in this Plan of Merger
required to be performed on or prior to the Closing Date and
the representations and warranties of Target contained in this
Plan of Merger shall be true and correct, except for
inaccuracies which would not, either individually or in the
aggregate, have a material adverse effect on Target, on and as
of (i) the
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date when made and (ii) the Closing Date (except in the case
of representations and warranties expressly made solely with
reference to a particular date which shall be true and correct
as of the date specified), and Buyer and HR shall have
received a certificate of an officer of Target to that effect;
(b) Buyer shall have received an opinion from Sirote
& Permutt, P.C., counsel to Target, dated the Closing Date, in
form and substance satisfactory to Buyer; and
(c) Buyer shall have received an opinion from Sirote
& Permutt, P.C., tax counsel to Target, dated the Closing
Date, in form and substance satisfactory to Buyer.
(d) All employment agreements between Target and its
officers (including without limitation, the Employment and
Non-Competition Agreement, dated November 1, 1996 between
Target and John W. McRoberts) shall be cancelled without
termination payment or other compensation. In lieu thereof,
the consulting and non-competition agreements referred to in
Section 7.1(h) shall be executed and delivered.
ARTICLE VIII
TERMINATION
Section 8.1 TERMINATION. This Plan of Merger may be terminated
at any time prior to the Closing Date, whether before or after approval by the
stockholders of Target and Buyer:
(a) by mutual consent of the respective Boards of
Directors of Target, HR, and Buyer, whether before or after a
vote of shareholders;
(b) by either Buyer, HR, or Target, so long as such
party has not breached any of its obligations hereunder
(except for such breaches as are immaterial), if the Merger
shall not have been consummated on or before December 31, 1998
(the "Termination Date");
(c) unilaterally by Buyer and HR or Target, (i) if
the other (A) fails to perform any covenant or agreement in
this Plan of Merger in any material respect, and does not cure
the failure, in all material respects within 15 business days
after the terminating party delivers written notice of the
alleged failure, or (B) fails to fulfill or complete a
condition to the obligations of that party (which condition is
not waived) by reason of a breach by that party of its
obligations hereunder, or (ii) if any condition to the
obligations of that party is not
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satisfied (other than by reason of a breach by that party of
its obligations hereunder), and it reasonably appears that the
condition cannot be satisfied prior to the Termination Date;
(d) unilaterally by Buyer or HR if Target, through
its Board of Directors in the exercise of its duties under
applicable law, either fails to recommend to Target's
stockholders the approval of this Plan of Merger and the
transactions contemplated hereby or withdraws such
recommendation; and
(e) unilaterally by either Buyer or Target upon
execution of a definitive agreement by Target in connection
with an Acquisition Proposal.
Section 8.2 EFFECT OF TERMINATION. In the event of termination
of this Plan of Merger by either Target, HR, or Buyer as provided in Section
8.1, this Plan of Merger shall forthwith become void and there shall be no
further obligation on the part of either Target, HR, or Buyer or their
respective officers or directors (except as set forth in this Section 8.2 and
Section 6.12 which shall survive such termination).
Section 8.3 AMENDMENT. This Plan of Merger may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto and in compliance with applicable law.
Section 8.4 EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties hereto may (i) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (iii) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties in this Plan of Merger shall terminate at the
Effective Time or upon the termination of this Plan of Merger pursuant to
Section 8.1, as the case may be. Each party agrees that, except for the
representations and warranties contained in this Plan of Merger and the Target
Disclosure Schedule, no party hereto has made any other representations or
warranties, and each party hereby disclaims any other representations and
warranties made by itself or any of
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its officers, directors, employees, agents, financial and legal advisors or
other representatives, with respect to the execution and delivery of this Plan
of Merger or the Merger contemplated herein, notwithstanding the delivery or
disclosure to any other party or any party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
Section 9.2 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
sent via a recognized overnight courier with delivery confirmed in writing or
sent via facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to Buyer and HR, to:
Healthcare Realty Trust Incorporated
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Attn: Roger O. West
Facsimile: (615) 269-8461
With a copy to:
Theodore W. Lenz, Esq.
Waller Lansden Dortch & Davis, PLLC
511 Union Street, Suite 2100
Nashville, Tennessee 37219
Facsimile: (615) 244-6804
(b) If to Target, to:
Capstone Capital Corporation
1000 Urban Center Drive, Suite 630
Birmingham, Alabama 35242
Attn: John W. McRoberts
Facsimile: (205) 967-9066
with a copy to:
Sirote & Permutt, P.C.
2222 Arlington Avenue South
Birmingham, Alabama 35205
Attn: John H. Cooper, Esq.
Facsimile: (205) 930-5301
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Section 9.3 SEVERABILITY. If any term or other provision of
this Plan of Merger is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this Plan
of Merger shall nevertheless remain in full force and effect so long as the
economic or legal substance of the Merger is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Plan of Merger so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner to the fullest extent permitted by applicable law in order that the
Merger may be consummated as originally contemplated to the fullest extent
possible.
Section 9.4 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this
Plan of Merger nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties hereto.
Subject to the preceding sentence, this Plan of Merger shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Notwithstanding anything contained in this Plan of Merger
to the contrary, nothing in this Plan of Merger, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and permitted assigns any rights or remedies under or by
reason of this Plan of Merger.
Section 9.5 INCORPORATION OF EXHIBITS. The Target Disclosure
Schedule and all Exhibits attached hereto and referred to herein are hereby
incorporated herein and made a part of this Plan of Merger for all purposes as
if fully set forth herein.
Section 9.6 GOVERNING LAW. THIS PLAN OF MERGER SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF MARYLAND (WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES).
Section 9.7 HEADINGS. The descriptive headings contained in
this Plan of Merger are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Plan of Merger.
Section 9.8 COUNTERPARTS. This Plan of Merger may be executed
and delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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Section 9.9 ENTIRE AGREEMENT. This Plan of Merger (including
the Exhibits and the Target Disclosure Schedule) and the Confidentiality
Agreement (which shall survive the termination of this Plan of Merger)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Plan of Merger shall be binding upon any party hereto unless made in
writing and signed by all parties hereto.
Section 9.10 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE
EFFECT." As used in this Plan of Merger, "material adverse change" or "material
adverse effect" means, when used in connection with Buyer, HR, any HR
Subsidiary, Target or any Target Subsidiary, any change, effect, event or
occurrence that has, or is reasonably likely to have, individually or in the
aggregate, a material adverse impact on the business or financial condition of
such Person and its subsidiaries taken as a whole.
Section 9.11 "INCLUDING." As used herein, the terms
"including" and "includes" means "including without limitation."
Section 9.12 PARTIES IN INTEREST. This Plan of Merger shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Plan of Merger, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Plan of Merger.
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IN WITNESS WHEREOF, each of Buyer, HR and Target has caused
this Plan of Merger to be signed by their respective officers thereunto duly
authorized as of the date first written above.
HR ACQUISITION I CORPORATION
By: /s/ Timothy Wallace
---------------------------------------
Name: Timothy Wallace
Title: Executive Vice President
HEALTHCARE REALTY TRUST
INCORPORATED
By: /s/ David R. Emery
---------------------------------------
Name: David R. Emery
Title: Chief Executive Officer
CAPSTONE CAPITAL CORPORATION
By: /s/ John W. McRoberts
---------------------------------------
Name: John W. McRoberts
Title: President
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