Exhibit 4.28
EXECUTION COPY
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT is made as of the 26th day of February, 1998, by
and among Meditrust Corporation (the "REIT"), a Delaware corporation, Meditrust
Operating Company, a Delaware Corporation (the "OPCO") (the REIT and the OPCO,
each a "Company" and together the "Companies"), Merrill Lynch International
("MLI"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as agent acting
for the account of MLI ("Merrill Lynch" and, collectively with MLI, the "Merrill
Lynch Parties").
IN CONSIDERATION of the mutual covenants contained in this Purchase
Agreement, the Companies and the Merrill Lynch Parties hereby agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the terms and
conditions of this Purchase Agreement, the REIT has authorized the sale to MLI
of 8,500,000 shares of Class A Non-Voting Convertible Common Stock, $.10 par
value per share, of the REIT (the "REIT Shares") and the OPCO has authorized the
sale to MLI of 8,500,000 shares of Class A Non-Voting Convertible Common Stock,
$.10 par value per share, of the OPCO (the "OPCO Shares"), which REIT Shares and
OPCO Shares are paired as a unit consisting of one (1) REIT Share and one (1)
OPCO Share (hereinafter each such paired unit is referred to as a "Paired Share"
and the Paired Shares referred to in this sentence are herein called the
"Purchase Shares")). The REIT Shares will be converted on the earlier of (i) the
next Business Day (as defined below) following the date on which the
shareholders of the Companies shall have approved the merger transaction among
La Quinta Inns, Inc. and the Companies and (ii) the date of any termination of
the related merger agreement (the "Conversion Date") into shares of common
stock, par value $0.10 per share, of the REIT ("Voting REIT Shares"), and the
OPCO Shares will be converted on the Conversion Date into shares of common
stock, par value $0.10 per share, of the OPCO ("Voting OPCO Shares"). Voting
REIT Shares and Voting OPCO Shares will be paired and traded as a unit
consisting of one (1) Voting REIT Share and one (1) Voting OPCO Share
(hereinafter each such paired unit is referred to as a "Voting Paired Share").
In addition, the REIT and the OPCO may issue to MLI additional Voting Paired
Shares in settlement of certain of their obligations under that certain Purchase
Price Adjustment Mechanism Agreement (the "Adjustment Agreement"), dated as of
February 26, 1998, between the REIT, the OPCO and MLI (the "Additional Shares").
The Companies and the Merrill Lynch Parties agree, to the extent relevant to
their respective business and commercial activities and in the absence of an
administrative determination or judicial ruling to the contrary, to treat for
United States federal income tax and financial accounting purposes payments and
deliveries made under the Adjustment Agreement as adjustments to the purchase
price paid for the Purchase Shares pursuant to Section 2 hereof. The Voting
Paired Shares and the Additional Shares are hereinafter collectively called the
"Shares". After the Conversion Date, references to "Paired Shares" in this
Agreement shall mean Voting Paired Shares that have been issued upon the
conversion of Paired Shares.
1
SECTION 2. Agreement to Sell and Purchase the Purchase Shares. Subject to
the terms and conditions of this Purchase Agreement, on the Closing Date (as
defined in Section 3 hereof), the Companies will sell to MLI the Purchase Shares
for a per Paired Share purchase price equal to 98.00% of the Closing Price. The
"Closing Price" shall equal the closing price reported on the New York Stock
Exchange for a Voting Paired Share on February 19, 1998.
SECTION 3. Delivery of the Purchase Shares at the Closing.
3.1. Closing. The completion of the purchase and sale of the Purchase
Shares (the "Closing") shall occur as soon as practicable on or after the date
hereof on a business day to be agreed upon by the Companies and the Merrill
Lynch Parties, but in no event later than five business days after the execution
of this Purchase Agreement (hereinafter, the "Closing Date").
3.2. Conditions. At Closing, the Companies shall deliver to the Merrill
Lynch Parties one or more stock certificates registered in the name of MLI
representing the number of Purchase Shares set forth in Section 1 above.
The obligation of the Companies to complete the purchase and sale of the
Purchase Shares and deliver such stock certificate(s) to the Merrill Lynch
Parties at the Closing shall be subject to the following conditions, any one or
more of which may be waived by both of the Companies acting together: (i)
receipt by the Companies of Federal Funds (or other mutually agreed upon form of
payment) in the full amount of the purchase price for the Purchase Shares being
purchased hereunder, (ii) the accuracy in all material respects as of the
Closing Date, of the representations and warranties made by the Merrill Lynch
Parties herein and the fulfillment, in all material respects, of those
undertakings of the Merrill Lynch Parties to be fulfilled prior to the Closing,
(iii) execution and delivery of the Adjustment Agreement, (iv) receipt by the
Companies of a cross-receipt with respect to the Purchase Shares executed by
Merrill Lynch on behalf of MLI and (v) receipt by the Companies of a certificate
by an officer or authorized representative of Merrill Lynch to the effect that
the representations and warranties of the Merrill Lynch Parties set forth in
Section 5 hereof are true and correct as of the date of this Agreement and as of
the Closing Date.
The obligation of MLI to accept delivery of such stock certificate(s) and
to pay for the Purchase Shares evidenced thereby shall be subject to the
following conditions, any one or more of which may be waived by the Merrill
Lynch Parties: (i) the accuracy in all material respects, as of the Closing
Date, of the representations and warranties made by the Companies herein and the
fulfillment, in all material respects, of those undertakings of the Companies to
be fulfilled prior to the Closing, (ii) receipt by the Merrill Lynch Parties of
all opinions, letters and certificates to be delivered by the Companies pursuant
to this Purchase Agreement, (iii) execution and delivery of the Adjustment
Agreement, and (iv) receipt by the Merrill Lynch Parties of a cross-receipt with
respect to the purchase price for the Purchase Shares executed by the Companies.
2
SECTION 4. Representations, Warranties and Covenants of the Companies.
Except as disclosed in the reports, schedules, forms, statements and other
documents which have been filed with the Commission (as defined below) on or
before November 5, 1997 by Meditrust Corporation on prior to its merger with and
into Santa Anita Enterprises, Inc. pursuant to the Exchange Act (as defined
below) or in the Companies' SEC Filings (as defined below), the REIT and the
OPCO, jointly and severally, hereby represent and warrant to the Merrill Lynch
Parties, and covenant with the Merrill Lynch Parties, as follows:
4.1. Organization and Qualification of the Companies. The REIT has been
duly organized and is validly existing as a corporation in good standing under
the laws of Delaware with power and authority to own and lease its properties
and to conduct its business as currently conducted. The REIT is duly qualified
as a corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing or managing of property or the conduct of business, except
where the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, assets, business affairs or
business prospects of the Companies and the Subsidiaries (as defined below) of
the Companies considered as one enterprise. The OPCO has been duly organized and
is validly existing as a corporation in good standing under the laws of Delaware
with corporate power and authority to own and lease its properties and to
conduct its business as currently conducted. The OPCO is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing or managing of property or the conduct of business, except
where the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, assets, business affairs or
business prospects of the Companies and the Subsidiaries considered as one
enterprise. Entities in which the Companies directly or indirectly have at least
a 50% ownership interest are herein referred to as the "Subsidiaries," and each
individually, as a "Subsidiary."
4.2. Organization and Qualification of Subsidiaries. Each of the
Subsidiaries has been duly organized and is validly existing as a corporation,
limited partnership, or limited liability company, as the case may be, in good
standing under the laws of its respective jurisdiction of organization, with
full power and authority to own, lease and operate its properties and to conduct
the business in which it currently is engaged. Each of the Subsidiaries is duly
qualified as a foreign corporation, limited partnership, or limited liability
company, as the case may be, to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except where
the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, assets, business affairs or
business prospects of the Companies and the Subsidiaries considered as one
enterprise. All of the issued and outstanding shares of capital stock of each of
the corporate Subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable. The ownership by the Companies or the
Subsidiaries of the shares of capital stock
3
or limited partnership or equity interests, as the case may be, of each of the
Subsidiaries is as described in the Companies' SEC Filings.
4.3. Authorized Capital Stock. The REIT has 306,000,000 authorized shares
consisting of 270,000,000 REIT shares par value $0.10 per share, 6,000,000
shares of preferred stock, par value $0.10 per share, and 30,000,000 shares of
series common stock, par value $0.10 per share. The OPCO has 306,000,000
authorized shares, consisting of 270,000,000 OPCO shares, par value $0.10 per
share, 6,000,000 shares of preferred stock, par value $0.10 per share, and
30,000,000 shares of series common stock, par value $0.10 per share. As of
December 31, 1997, there were 88,127,925 Paired Shares outstanding, 4,331,396
REIT shares and 4,086,256 OPCO shares were reserved for issuance pursuant to
equity plans filed pursuant to the Companies' SEC Filings (as defined below).
The issued and outstanding Paired Shares of the Companies have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and conform to the description thereof in the
Companies' SEC Filings. Other than as described in the Companies' SEC Filings,
the REIT does not have outstanding any options to purchase, or other rights to
subscribe for or purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the REIT's stock, stock bonus and other stock plans or arrangements and the
options or other rights granted and exercised thereunder in the Companies' SEC
Filings accurately and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights.
4.4. Issuance, Sale and Delivery of the Shares. The Purchase Shares to be
sold by the Companies have been duly authorized for issuance and, when issued,
delivered and paid for in the manner set forth in this Purchase Agreement, will
be validly issued, fully paid and non-assessable. The Additional Shares have
been duly authorized and, if and when issued pursuant to the Adjustment
Agreement, will be validly issued, fully paid and non-assessable, Upon payment
of the purchase price and delivery of the Shares in accordance with this
Agreement, MLI will receive good, valid and marketable title to the Shares, free
and clear of all security interests, mortgages, pledges, liens, encumbrances and
claims. No approval of or authorization by the respective shareholders or boards
of directors of the Companies will be required for the issuance and/or sale of
the Shares to be sold by the Companies as contemplated herein or in the
Adjustment Agreement, except such as shall have been obtained on or before the
Closing Date. The issuance and/or sale of the Shares to the Merrill Lynch
Parties by the Companies pursuant to this Purchase Agreement or the Adjustment
Agreement (as the case may be), the compliance by the Companies with the other
provisions of this Purchase Agreement or the Adjustment Agreement and the
consummation of the other transactions contemplated hereby or thereby do not
require the consent, approval, authorization, registration or qualification of
or with any court, governmental authority or agency, except such as shall have
been obtained on or before the Closing Date or in connection with any Resale
Registration Statement filed with respect to any of the Shares.
4
The Companies meet and will continue to meet the requirements for use of Form
S-3 under the Securities Act, and the rules and regulations of the U.S.
Securities and Exchange Commission (the "Commission") under the Securities Act
(the "1933 Act Regulations"). The Companies have filed and will file all
documents which they are required to file under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations promulgated
thereunder (the "1934 Act Regulations") within the time periods prescribed by
the Exchange Act and the 1934 Act Regulations since December 31, 1996 and all
such documents (collectively, together with the Companies' registration
statements filed under the Securities Act which have been declared effective
since November 5, 1997 and have not been withdrawn, the "Companies' SEC
Filings") comply and will comply in all material respects with the requirements
of the Exchange Act and the 1934 Act Regulations, as applicable, and none of
such documents, when so filed, contained or will contain any untrue statement of
a material fact or omitted or will omit to state a 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. No Resale
Registration Statement filed in respect of any of the Shares, when so filed,
contained or will contain any untrue statement of a material fact or omitted or
will omit to state a 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.
4.5. Due Execution, Delivery and Performance by the Company. Each of the
Companies has full right, power and authority to enter into this Purchase
Agreement and the Adjustment Agreement and perform the transactions contemplated
hereby and thereby. This Purchase Agreement and the Adjustment Agreement have
been duly authorized, executed and delivered by the Companies. The execution and
delivery of the Purchase Agreement and the Adjustment Agreement by the Companies
and the consummation of the transactions and the performance of the obligations
herein and therein contemplated will not violate any provision of the
certificate of incorporation, bylaws, or other organizational documents of the
Companies, and will not conflict with, result in the breach or violation of, or
constitute, either by itself or upon notice or the passage of time or both, a
default under any material agreement, mortgage, deed of trust, credit agreement,
lease, franchise, license, indenture, note, permit or other instrument to which
either Company is a party or by which either Company or its respective
properties may be bound or affected, any statute or any authorization, judgment,
decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to either Company or
any of its respective properties other than violations, conflicts, breaches or
defaults that individually or in the aggregate would not have a material adverse
effect on the condition, financial or otherwise, or on the earnings, assets,
business affairs or business prospects of the Companies and the Subsidiaries
considered as one enterprise. No consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other governmental body
is required for the execution and delivery of this Purchase Agreement, the
Adjustment Agreement or the consummation of the transactions contemplated hereby
or thereby, except in connection with the filing of any Resale Registration
Statements pursuant to Section 7 below or for compliance with the blue sky laws
applicable to the offering of the Shares.
5
4.6. Accountants. The Companies' independent certified public accountants,
who have expressed their opinion with respect to the Most Recent Financial
Statements (as defined below) are independent accountants as required by the
Securities Act and the 1933 Act Regulations.
4.7. No Defaults. Except as to defaults, violations and breaches which
individually or in the aggregate would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, assets, business affairs or
business prospects of the Companies and the Subsidiaries considered as one
enterprise, none of the Companies nor any Subsidiary is in violation or default
of any provision of its declaration of trust, charter or bylaws, or other
organizational documents, and none of the aforementioned parties is in breach of
or default with respect to any provision of any agreement, judgment, decree,
order, mortgage, deed of trust, credit agreement, lease, franchise, license,
indenture, permit or other instrument to which it is a party or by which it or
any of its properties are bound.
4.8. No Actions. There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Companies, threatened against or affecting either Company
or any Subsidiary, any real property or improvements thereon owned or leased by
any of either Company or the Subsidiaries, including any property underlying
indebtedness held by the Companies (each, individually, a "Property" and
collectively, the "Properties"), or any officer of either Company or any of the
Subsidiaries that, if determined adversely to either Company or any Subsidiary,
any Property, including any property underlying indebtedness held by either
Company and any of the Subsidiaries, or any such officer or trust manager, would
reasonably be expected to (A) result in any material adverse change in the
condition, financial or otherwise, or in the earnings, assets, business affairs
or business prospects of the Companies and the Subsidiaries considered as one
enterprise or (B) materially and adversely affect the consummation of the
transactions contemplated by this Agreement or the Adjustment Agreement. There
is no pending legal or governmental proceeding to which either Company or any
Subsidiary is a party or of which any of their respective properties or assets
or any property, including any property underlying indebtedness held by either
Company or any of the Subsidiaries, is the subject, including ordinary routine
litigation incidental to the business, that is, considered in the aggregate,
material to the condition, financial or otherwise, or the earnings, assets,
business affairs or business prospects of the Companies and the Subsidiaries
considered as one enterprise.
4.9. Properties. (A) Each Company and the Subsidiaries, as the case may be,
has good and marketable title to all the properties and assets reflected as
owned by such entities in the Most Recent Financial Statements, and good and
marketable title to the improvements, if any, thereon and all other assets that
are required for the effective operation of such real property in the manner in
which they currently are operated; subject to no lien, mortgage, pledge, charge
or encumbrance of any king except (i) those, if any reflected in the Most Recent
Financial Statement, or (ii) those which would not have a material adverse
effect on the condition, financial or otherwise, or on the earnings, assets,
business affairs or
6
business prospects of or with respect to the Companies and the Subsidiaries
considered as one enterprise, (B) the leases of any real property and buildings
held under lease by either Company or any Subsidiary are in full force and
effect, and such entity is not in default in respect of any of the terms or
provisions of such leases and such entity has not received notice of the
assertion of any claim by anyone adverse to such entity's rights as lessee under
such leases, or affecting or questioning such entity's right to the continued
possession or use of the real property and buildings held under such leases or
of a default under such leases, in each case with such exceptions as would not
have a material adverse impact on the condition, financial or otherwise, or on
the earnings, assets, business affairs or business prospects of or with respect
to the Companies and the Subsidiaries considered as one enterprise; (C) none of
the Companies or any of the Subsidiaries or any tenant of any of the Properties
is in default under any of the leases pursuant to which any of the Companies or
the Subsidiaries, as lessor, leases its Property (and neither of the Companies
knows of any event which, but for the passage of time or the giving of notice,
or both, would constitute a default under any of such leases) other than such
defaults that would not have a material adverse effect on the condition,
financial or otherwise, or on the earnings, assets, business affairs or business
prospects of or with respect to the Companies and the Subsidiaries considered as
one enterprise; (D) no person has an option or right of first refusal to
purchase all or part of any Property or any interest therein, other than such
options or rights of first refusal which would not have a material adverse
effect on the condition, financial or otherwise, or on the earnings, assets,
business affairs or business prospects of or with respect to the Companies and
the Subsidiaries, considered as one enterprise; (E) each of the Properties
complies with all applicable codes, laws and regulations (including, without
limitation, building and zoning codes, laws and regulations and laws relating to
access to the Properties), except for such failures to comply that would not
individually or in the, aggregate have a material adverse impact on the
condition, financial or otherwise, or on the earnings, assets, business affairs
or business prospects of the Companies and the Subsidiaries considered as one
enterprise; and (F) neither the Companies has knowledge of any pending or
threatened condemnation proceedings, zoning change, or other proceeding or
action that will in any manner affect the size of, use of, improvements on,
construction on or access to the Properties, including any property underlying
indebtedness held by either Company or any of the Subsidiaries, except such
proceedings or actions that would not have a material adverse effect on the
condition, financial or otherwise, or on the earnings, assets, business affairs
or business prospects of the Companies and the Subsidiaries considered as one
enterprise.
4.10. REIT Qualification. The REIT qualified as a real estate investment
trust under the Internal Revenue Code of 1986, as amended (the Code"), with
respect to its taxable years ended December 31, 1995, December 31, 1996 and
December 31, 1997, and is organized in conformity with the requirements for
qualification as a real estate investment trust, and its manner of operation has
enabled it to meet the requirements for qualification as a real estate
investment trust as of the date hereof, and its proposed manner of operation
will enable it to meet the requirements for qualification as a real estate
investment trust in the future.
7
4.11. No Material Change. Since the date of the Most Recent Financial
Statements, and except as otherwise disclosed in the Companies' SEC Filings as
of the Closing Date, (i) no material casualty loss or material condemnation or
other material adverse event with respect to any Property or any of the
Subsidiaries, has occurred that is material to the Companies and the
Subsidiaries considered as one enterprise; (ii) none of the Companies, or the
Subsidiaries is in default in the payment of principal or interest on any
outstanding debt obligations; (iii) there has not been any change in the capital
stock of either Company or the Subsidiaries (other than the sale of the Purchase
Shares hereunder or those reserved for issuance pursuant to the Adjustment
Agreement, issuances pursuant to the incentive compensation plans of the
Companies), or any increase in the indebtedness of either Company or the
Subsidiaries that is material to such entities, considered as one enterprise;
(iv) and except for regular quarterly dividends or distributions on the REIT
Shares or the OPCO Shares, there has been no dividend or distribution of any
kind declared, paid or made by either Company; and (v) there has not been any
material adverse change in the condition, financial or otherwise, or in the
earnings, assets, business affairs or business prospects of the Companies and
the Subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business.
4.12. Intellectual Property. None of the Companies or the Subsidiaries is
required to own or possess trademarks, trade names, patent rights, copyrights,
licenses, approvals and governmental authorizations, which it does not already
own or possess to conduct its businesses as now conducted; and neither Company
has knowledge of any material infringement by it of trademark, trade name
rights, patent rights, copyrights, licenses, trade secrets or other similar
rights of others, and has not received any notice that any claim has been made
against the Companies regarding trademark, trade name, patent, copyright,
license, trade secrets or other infringement.
4.13. Compliance. Neither Company has been advised, or has reason to
believe, that either Company or any Subsidiary is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, except where failure to be so in compliance
would not materially adversely affect the condition, financial or otherwise, or
in the earnings, assets, business affairs or business prospects of the Companies
and the Subsidiaries, considered as one enterprise.
4.14. Taxes. The Companies and the Subsidiaries have filed all material
federal, state and foreign income and franchise tax returns which have been
required to be filed and has paid or accrued all taxes shown as due thereon
(except for those taxes which are being contested in good faith through
appropriate proceeding, for which adequate reserves have been established and as
to which the Merrill Lynch Parties have been notified in writing by the
Companies), and the Companies have no knowledge of any tax deficiency which has
been or might be asserted or threatened against the Companies and the
Subsidiaries which could materially adversely affect the business condition,
financial or otherwise, or in the earnings, assets, business affairs or business
prospects of the Companies and the Subsidiaries, considered as one enterprise.
8
4.15. Transfer Taxes. On the Closing Date, all stock transfer or other
taxes, if any (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Purchase Shares to be sold to MLI
hereunder will be, or will have been, fully paid or provided for by the
Companies and all laws imposing such taxes will be or will have been fully
complied with.
4.16. Investment Company. None of the Companies or any Subsidiary is
required to register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
4.17. Additional Information. The Companies represent and warrant that the
information contained in the following documents, which the Companies have
furnished to the Merrill Lynch Parties, or will furnish or make available upon
request prior to the Closing, is true and correct in all material respects as of
their respective filing dates:
(a) Joint Annual Report on Form 10-K for the year ended December 31,
1996, which Joint Annual Report includes the Companies' most recently
available audited financial statements together with the report thereon of
the independent certified public accountants (the "Most Recent Financial
Statements"),
(b) Joint Quarterly Reports on Form 10-Q, as amended if applicable,
for the quarters ended Much 31, 1997, June 30, 1997 and September 30, 1997;
(c) the Companies' proxy statements on Form 14A relating to (i) the
most recent Annual Meetings of the REIT's Shareholders and the OPCO's
Shareholders and (ii) any Special Meetings of the REIT's Shareholders and
the OPCO's Shareholders which occurred during the 12 month period prior to
the date hereof or for which a meeting date has been fixed and a proxy
statement distributed;
(d) all other documents, if any, filed by or with respect to the REIT
and the OPCO with the Commission since January 1, 1997 pursuant to Section
13, 15(d) or 16(a) of the Exchange Act; and
(e) a covenant compliance certification stating that none of the REIT,
the OPCO or the Subsidiaries are in default under any of their respective
credit agreements or other financing arrangements.
4.18. Legal Opinion. At or prior to the Closing, counsel to the Companies
will deliver their legal opinions dated the Closing Date to the Merrill Lynch
Parties in substantially the form of Exhibit A hereto.
9
4.19. ERISA. The Companies and the Subsidiaries are in compliance with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder ("ERISA"), except
for such failures to comply as would not singly or in the aggregate have a
material adverse effect on the condition, financial or otherwise, or on the
earnings, assets, business affairs or business prospects of or with respect to
the Companies and the Subsidiaries, considered as one enterprise. Neither a
Reportable Event (as defined under ERISA) nor a Prohibited Transaction (as
defined under ERISA) has occurred with respect to any Plan (as defined below) of
the Companies and/or their respective affiliates; no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated within the past
five years; to the Companies' knowledge, no circumstance exists which
constitutes grounds under Section 402 of ERISA entitling the Pension Benefit
Guaranty Corporation ("PBGC") to institute proceedings to terminate, or appoint
a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; the Companies and their affiliates have not completely or partially
withdrawn under Section 4201 or 4202 of ERISA from any Multiemployer Plan (as
defined therein); the Companies and their affiliates have met the minimum
funding requirements of Section 412 of the Code and Section 302 of ERISA with
respect to each Plan and there is no unfunded current liability (as defined
below) with respect to any Plan; the Companies and their affiliates have not
incurred any liability to the PBGC under ERISA (other than for the payment of
premiums under Section 4007 of ERISA); no part of the funds to be used by the
Companies in satisfaction of their obligations under this Purchase Agreement or
the Adjustment Agreement constitute "plan assets" of any "employee benefit plan"
within the meaning of ERISA or of any "plan" within the meaning of Section
4957(e)(I) of the Code, as interpreted by the Internal Revenue Service and the
U.S. Department of Labor in rules, regulations, releases and bulletins or as
interpreted under applicable case law. As used below, "Plan" means an "employee
benefit plan" or "plan" as described in Section 3(3) of ERISA; and "unfunded
current liability" has the meaning provided in Section 302(d)(8)(A) of ERISA.
4.20. Environmental Protection. Except as otherwise disclosed in the
Companies' SEC Filings and except for such exceptions as would not have a
material adverse impact on the condition, financial or otherwise, or on the
earnings, assets, business affairs or business prospects of the Companies and
the Subsidiaries considered as one enterprise, (A) each Property, including,
without limitation, the Environment (as defined below) associated with such
Property, is free of any Hazardous Substance (as defined below); (B) none of the
Companies or any Subsidiary has caused or suffered to occur any Release (as
defined below) of any Hazardous Substance into the Environment on, in, under or
from any Property, and to the Companies' knowledge, no condition exists on, in,
under or adjacent to any Property that is reasonably likely to result in the
incurrence of material liabilities or any material violations of any
Environmental Law (as defined below), give rise to the imposition of any Lien
(as defined below) under any Environmental Law, or cause or constitute a health,
safety or environmental hazard to any property, person or entity; (C) none of
the Companies or any Subsidiary intends to use their respective properties or
assets or any other real property for the purpose of handling, burying, storing,
retaining, refining, transporting, processing,
10
manufacturing, generating, producing, spilling, seeping, leaking, escaping,
leaching, pumping, pouring, emitting, emptying, discharging, injecting, dumping,
transferring or otherwise disposing of or dealing with a Hazardous Substance,
except for materials utilized in the ordinary course of business of the
properties, provided such use would not, in the ordinary course of business,
give rise to liability under any Environmental Law; (D) none of the Companies or
any Subsidiary has received any notice of a claim under or pursuant to any
Environmental Law or under common law pertaining to Hazardous Substances on or
originating from any Property; (E) none of the Companies or any Subsidiary has
received any notice from any Governmental Authority (as defined below) claiming
any violation of any Environmental Law; (F) no Property is included or, to the
knowledge of the Companies, proposed for inclusion on the National Priorities
List issued pursuant to CERCLA (as defined below) by the United States
Environmental Protection Agency (the "EPA") or on the Comprehensive
Environmental Response, Compensation, and Liability Information System database
maintained by the EPA, and has not otherwise been identified by the EPA as a
potential CERCLA removal, remedial or response site or included or, to the
knowledge of the Companies, proposed for inclusion on, any similar list of
potentially contaminated sites pursuant to any other Environmental Law and (G)
to the Companies' knowledge, there are no underground storage tanks located on
or in any Property.
As used herein, "Hazardous Substance" shall include, without limitation,
any hazardous substance, hazardous waste, toxic substance, pollutant, solid
waste or similarly designated materials, including, without limitation, oil,
petroleum or any petroleum-derived substance or waste, asbestos or
asbestos-containing materials, PCBs, pesticides, explosives, radioactive
materials, dioxins, urea formaldehyde insulation or any constituent of any such
substance, pollutant or waste, including any such substance, pollutant or waste
identified or regulated under any Environmental Law (including, without
limitation, materials listed in the United States Department of Transportation
Optional Hazardous Material Table, 49 C.F.R. ss. 172.101, as the same may now or
hereafter be amended, or in the EPA's List of Hazardous Substances and
Reportable Quantities, 40 C.F.R. Part 302, as the same may now or hereafter be
amended); "Environment" shall mean any surface water, drinking water, ground
water, land surface, subsurface strata, river sediment, buildings, structures,
and ambient, workplace and indoor air; "Environmental Law" shall mean the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. ss. 9601 et seq.) ("CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended (42 U.S.C. ss. 6901 et seq.), the Clean Air
Act, as amended (42 U.S.C. ss. 7401 et seq.), the Clean Water Act, as amended
(33 U.S.C. ss. 1251 et seq.), the Toxic Substances Control Act, as amended (15
U.S.C. ss. 2601 et seq.), the Occupational Safety and Health Act of 1970, as
amended (29 U.S.C. ss. 651 et seq.), the Hazardous Materials Transportation Act,
as amended (49 U.S.C. ss. 1801 et seq.), and all other federal, state and local
laws, ordinances, regulations, rules, orders, decisions and permits relating to
the protection of the environment or of human health from environmental effects;
"Governmental Authority" shall mean any federal, state or local governmental
office, agency or authority having the duty or authority to promulgate,
implement or enforce any Environmental Law; "Lien" shall mean with respect to
any Property, any mortgage, deed of trust, pledge, security interest, lion,
encumbrance, penalty,
11
fine, charge, assessment, judgment or other liability in, on or affecting such
Property; and "Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
emanating or disposing of any Hazardous Substance into the Environment,
including, without limitation, the abandonment or discard of barrels,
containers, tanks (including, without limitation, underground storage tanks) or
other receptacles containing or previously containing any Hazardous Substance or
any release, emission, discharge or similar term, as those terms are defined or
used in any Environmental Law.
4.21. Solvency. Immediately following (i) the execution of this Purchase
Agreement and the Adjustment Agreement, (ii) the purchase of the Purchase Shares
pursuant hereto and (iii) the completion of any other transaction contemplated
by this Purchase Agreement and the Adjustment Agreement, each of the Companies
will be solvent and able to pay its debts as they mature, will have capital
sufficient to carry on its business and all businesses in which it is to engage,
and will have assets which will have a present fair market valuation greater
than the amount of all of its liabilities. This Purchase Agreement and the
Adjustment Agreement have been executed and delivered by the Companies in good
faith and in exchange for reasonably equivalent value. Neither of the Companies
intends to incur debts beyond its ability to pay them as they become due. Each
of the Companies' assets and capital are now, and are expected in the future to
be, sufficient to pay the Companies' ongoing expenses as they are incurred and
to discharge all of the Companies' liabilities in the event that the business of
the Companies is required to be liquidated. The Companies have not entered into
this Purchase Agreement or the Adjustment Agreement or any transaction
contemplated hereby or thereby with an intent to hinder, delay or defraud
creditors of any persons or entity.
4.22. Certificate. At or prior to the Closing, each Company shall deliver
an officer's certificate to be dated the Closing Date in form and substance
satisfactory to the Merrill Lynch Parties to the effect that (i) the
representations and warranties of the Companies set forth in this Section 4 are
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date, (ii) the Companies have complied in all material
respects with all the agreements and satisfied in all material respects all the
conditions on their respective part to be performed or satisfied on or prior to
such Closing Date, (iii) none of the issued shares of capital stock of each of
the Companies was issued in violation of any preemptive rights of any security
holder of the Companies, (iv) except as set forth on a scheduled attached to
such certificate, all of the issued and outstanding capital stock of each
Subsidiary is owned by the Companies, direction or through subsidiaries, free
and clear of any security interest, mortgage, pledge, lien, encumbrance, or
claim and (v) non of the outstanding shares of capital stock of any Subsidiary
was issued in violation of preemptive or other similar rights of any security
holder of such Subsidiary.
4.23. Financial Statements. The Most Recent Financial Statements (including
the notes thereto) present fairly in all material respects the financial
position of the respective entity or entities presented therein at the
respective dates indicated and the results of their
12
operations for the respective periods specified, and except as otherwise stated
in the Most Recent Financial Statements, said financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis. The supporting schedules included in the Companies' SEC
Filings fairly present in all material respects the information required to be
stated therein. The financial information and data included in the Companies'
SEC Filings present fairly in all material respects the information included
therein and have been prepared on a basis consistent with that of the financial
statements included in the Companies' SEC Filings and the books and records of
the respective entities presented therein. The pro forma financial information
included in the Companies' SEC Filings has been prepared in accordance with the
applicable requirements of Rules 11-01 and 11-02 of Regulation S-X under the
Securities Act and other 1933 Act Regulations and American Institute of
Certified Public Accountants ("AICPA") guidelines with respect to pro forma
financial information and includes all adjustments necessary to present fairly
in all material respects the pro forma financial position of the respective
entity or entities presented therein at the respective dates indicated and the
results of their operations for the respective periods specified. Other than the
historical and pro forma financial statements (and schedule) included therein,
no other historical or pro forma financial statements (or schedules) are
required to be included in the Companies' SEC Filings. Except as reflected or
disclosed in the financial statements included in the Companies' SEC Filings,
none of the Companies or any of the Subsidiaries is subject to any material
indebtedness, obligation, or liability, contingent or otherwise.
4.24. Labor Disputes. No labor dispute with the employees of the Companies
Or any Subsidiary exists or, to the knowledge of the Companies is imminent.
4.25. Regulation M. None of the Companies, the Subsidiaries nor, to the
Companies' knowledge, any of their trust managers, directors, officers or
controlling persons, has taken or will take, directly or indirectly, any action
resulting in a material violation of Regulation M under the Exchange Act, or
designed to cause or result under the Exchange Act or otherwise in, or which has
constituted or which reasonably might be expected to constitute, the unlawful
stabilization or manipulation of the price of any security of either Company or
facilitation of the sale or resale of the Shares.
4.26. Regulation G. The Companies represent that the proceeds of the
Purchase Shares will not be used by the Companies, whether immediate, incidental
or ultimate, of buying or carrying a margin stock as such terms are defined in
Regulation G by the Board of Governors of the Federal Reserve System.
13
SECTION 5. Representations, Warranties and Covenants of Merrill Lynch or
MLI.
5.1. Investment. The Merrill Lynch Parties represent and warrant to, and
covenants with, the Companies that: (i) the Merrill Lynch Parties are
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares presenting an investment
decision like that involved in the purchase of the Purchase Shares, including
investments in securities issued by the Companies; (ii) MLI is acquiring the
number of Purchase Shares set forth in Section 2 above in the ordinary course of
its business and for its own account for investment (as defined for purposes of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations
thereunder) only and with no present intention of distributing any of such
Purchase Shares or any arrangement or understanding with any other persons
regarding the distribution of such Purchase Shares, (iii) neither Merrill Lynch
Party will directly or indirectly, sell or otherwise dispose of (or solicit any
offers to purchase or otherwise acquire) any of the Purchase Shares except in
compliance with the Securities Act and any applicable state securities or blue
sky laws; (iv) each Merrill Lynch Party has completed or caused to be completed
the Registration Statement Questionnaire and the Stock Certificate
Questionnaire, both attached hereto as Appendix I, for use in preparation of the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the effective date of the Resale
Registration Statement; (v) MLI has, in connection with its decision to purchase
the number of Purchase Shares set forth in Section 2 above, relied solely upon
the documents identified in Section 4.17, the information referred to in Section
7.7 and the representations and warranties of the Companies contained herein;
(vi) MLI has had access to such additional information, if any, concerning the
Companies as it has considered necessary in connection with their investment
decision to acquire the Purchase Shares; (vii) each of the Merrill Lynch Parties
is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or
(7) of Regulation D promulgated under the Securities Act; and (viii) the Merrill
Lynch Parties understand that until the appropriate Resale Registration
Statement has been declared effective by the Commission, the Shares will contain
a legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION
OF THE COMPANIES' COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT.
5.2. Resale. The Merrill Lynch Parties acknowledge and agree that they may
not effect any sales of the Shares until after the Conversion Date. The Merrill
Lynch Parties acknowledge and agree that in connection with any transfer of any
Shares they will provide to the transfer agent prompt notice of any Shares sold
Pursuant to a Resale Registration Statement or otherwise transferred in
compliance with applicable federal and state
14
securities laws. The Merrill Lynch Parties acknowledge that there may
occasionally be times when, subject to the provisions of Section 7.2(a), the
Companies must suspend the right of the Merrill Lynch Parties to effect sales of
the Shares through the use of the Resale Prospectus (as defined below) forming a
part of a Resale Registration Statement until such time as an amendment to such
Resale Registration Statement has been filed by the Companies and declared
effective by the Commission, or until such time as the Companies have filed an
appropriate report with the Commission pursuant to the Exchange Act (each, a
"Black-out Period"); provided that no Black-out Period shall exceed 90
consecutive days. The Merrill Lynch Parties hereby covenant that they will not
effect sales of any Shares pursuant to said Resale Prospectus during the period
commencing at the time at which the Companies give the Merrill Lynch Parties
written notice (which such notice shall have been given by the Companies as
promptly as practicable) of the suspension of the use of said Resale Prospectus
and ending at the time the Companies give the Merrill Lynch Parties written
notice that the Merrill Lynch Parties may thereafter effect sales pursuant to
said Resale Prospectus. The Merrill Lynch Parties further covenant to notify the
Companies promptly of the sale of all of the Shares.
5.3. Due Execution, Delivery and Performance of this Agreement. The Merrill
Lynch Parties further represent and warrant to, and covenant with, the Companies
that (i) each Merrill Lynch Party has full right, power, authority and capacity
to enter into this Agreement and to perform its obligations hereunder and
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and (ii) upon the execution and delivery of this Agreement, this Agreement shall
constitute a valid and binding obligation of the Merrill Lynch Parties
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except that the enforcement of the indemnification
agreements in Section 7.5 hereof may be limited by public policy.
5.4. Residence of Merrill Lynch. Merrill Lynch is organized in the State of
Delaware and has its principal place of business in the State of New York.
5.5. Certain Tax Considerations. MLI represents and warrants that it is
fully eligible for the benefits of the "Business Profits" or "Industrial and
Commercial Profits" provision, as the case may be, the "Interest" provision or
the "Other Income" provision (if any) of the 1975 United States-United Kingdom
Income Tax Treaty with respect to any payment described in such provisions and
received or to be received by it in connection with this Agreement and no such
payment is attributable to a trade or business carried on by it through a
permanent establishment in the United States.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Purchase Agreement,
all
15
covenants, agreements, representations and warranties made by the Companies and
the Merrill Lynch Parties herein shall survive the execution of this Purchase
Agreement, the Adjustment Agreement, the delivery to Merrill Lynch of the
Purchased Shares being purchased and the payment therefor and the consummation
of any other transactions contemplated hereby or thereby.
SECTION 7. Registration of the Shares; Compliance with the Securities Act.
7.1. Registration Procedures and Expenses. The Companies shall:
(a) prepare and file with the Commission a Resale Registration Statement
(as defined below) covering the resale by the Merrill Lynch Parties,
from time to time, of a number of Shares equal to the number of
Purchase Shares in any of the manners specified in the Adjustment
Agreement (the "Initial Resale Registration Statement") and use its
best efforts to obtain effectiveness of the Initial Resale
Registration Statement by the fifth Business Day (as defined in the
Adjustment Agreement) following the Conversion Date. If the total
number of Shares exceeds the number of Shares covered by the Initial
Resale Registration Statement, then the Companies shall promptly
prepare and file with the Commission such additional Resale
Registration Statement or Statements as shall be necessary to cover
the resale by the Merrill Lynch Parties of such excess Shares in the
same manner as contemplated by the Initial Registration Statement for
the Shares covered thereby (each, an "Additional Resale Registration
Statement"); provided that prior to issuing any such excess Shares to
the Merrill Lynch Parties, the Companies shall cause such Resale
Registration Statement to have become effective. For purposes of this
Purchase Agreement, "Resale Registration Statement" means the Initial
Resale Registration Statement, any Additional Resale Registration
Statement or any other registration statement under the Securities Act
on Form S-3 covering the resale by the Merrill Lynch Parties of up to
a specified number of Shares, filed and maintained continuously
effective by the Companies pursuant to the provisions of this Section
7, including the prospectus contained therein (the "Resale
Prospectus"), any amendments and supplements to such registration
statement, including all post-effective amendments thereto, and all
exhibits and all material incorporated by reference into such
registration statement;
(b) use its commercially reasonable best efforts to prevent the issuance
of any order suspending the effectiveness of such Resale
16
Registration Statement or Resale Prospectus or suspending the
qualification (or exemption from qualification) of any of the Shares
in any jurisdiction;
(c) prepare and file with the Commission such amendments and supplements
to each Resale Registration Statement and the Resale Prospectus as may
be reasonably requested by the Merrill Lynch Parties in order to
accomplish the public resale or other disposition of any Shares in
accordance with the terms of the Adjustment Agreement, or as may be
necessary to keep such Resale Registration Statement effective until
the date on which either (i) the Shares covered thereby have been sold
by or on behalf of the Merrill Lynch Parties or (ii) the Merrill Lynch
Parties have advised the Companies that they no longer require that
such Resale Registration Statement remain effective;
(d) furnish to the Merrill Lynch Parties with respect to the Shares
registered under any Resale Registration Statement such reasonable
number of copies of Resale Prospectuses, including any supplements and
amendments thereto, in order to facilitate the public sale or other
disposition of all or any of the Shares by the Merrill Lynch Parties;
(e) in order to facilitate the public sale or other disposition of all or
any of the Shares by the Merrill Lynch Parties, furnish to the Merrill
Lynch Parties with respect to the Shares registered under any Resale
Registration Statement, in connection with any such public sale or
other disposition, an opinion of counsel to the Companies covering the
matters set forth on Exhibit B-1 and B-2 hereto and such other
documents as the Merrill Lynch Parties may reasonably request
(including a comfort letter from the Companies' independent certified
public accountants and a certificate of bring down of representations
and warranties in connection with sale of Shares under the Resale
Registration Statement) (collectively, the "Resale Closing Documents")
(i) upon the effectiveness of the Initial Resale Registration
Statement, (ii) quarterly beginning promptly after the Companies'
filing of the Joint Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 in the case of any continuous offering of
Shares under any Resale Registration Statement, and (iii) in the event
the public sale or other disposition of the Shares is effected through
an underwritten offering or a block trade, as of the date of the
closing of any sale of such
17
Shares or date of pricing with respect to the sale of such Shares, as
applicable upon prior notice from the Merrill Lynch Parties to the
Companies as to which date applies; provided, however, that the
Companies shall not be required to deliver any Resale Closing
Documents in the event that the aggregate offering price of any Shares
offered in an underwritten offering or a block trade is less than
$20,000,000, unless as of the date of any such underwritten offering
or block sale, the Companies have not made any previous delivery of
Resale Closing Documents to the Merrill Lynch Parties in connection
with any other public sale or other disposition of the Shares;
(f) use its best efforts to prevent the happening of any event that would
cause any such Resale Registration Statement to contain a material
misstatement or omission or to be not effective and continuously
useable for resale of the Shares during the period that such Resale
Registration Statement is required to be effective and useable;
(g) file documents required of the Companies for normal blue sky clearance
in states specified in writing by the Merrill Lynch Parties, provided,
however, that the Companies shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which
it is not now so qualified or has not so consented;
(h) bear all expenses in connection with the procedures in paragraphs (a)
through (f) of this Section 7.1 and Section 7.2(a) and the
registration of the Shares pursuant to each Resale Registration
Statement, which expenses shall not include brokerage or underwriting
commissions and taxes of any kind (including without limitations,
transfer bonuses) with respect to any disposition, sale or transfer of
Shares sold by the Merrill Lynch Parties and for any legal, accounting
and other expenses incurred by the Merrill Lynch Parties which
expenses shall be borne by the Merrill Lynch Parties; and
(i) promptly file any necessary listing applications or amendments to
existing listing applications to cause any Shares registered under any
Resale Registration Statement to be listed or admitted to trading, on
or prior to the effectiveness of any Resale Registration Statement, on
the New York Stock Exchange or any national stock exchange or
automated quotation system on which the Paired Shares are then listed
or traded.
18
7.2. Covenants in Connection With Registration.
(a) The Companies hereby covenant with the Merrill Lynch Parties that (i)
the Companies shall not file any Resale Registration Statement or Resale
Prospectus or any amendment or supplement thereto, unless a copy thereof shall
have been first submitted to the Merrill Lynch Parties and the Merrill Lynch
Parties did not object thereto in good faith (provided that if the Merrill Lynch
Parties do not object within two business days of receiving any such material,
there shall be deemed to have been no objection thereto); (ii) the Companies
shall immediately notify the Merrill Lynch Parties of the issuance by the
Commission of any stop order suspending the effectiveness of such Resale
Registration Statement or the initiation of any proceedings for such purpose;
(iii) the Companies shall make every reasonable effort to promptly obtain the
withdrawal of any order suspending the effectiveness of such Resale Registration
Statement at the earliest possible moment; (iv) the Companies shall immediately
notify the Merrill Lynch Parties of the receipt of any notification with respect
to the suspension of the qualification of the Shares for sale under the
securities or blue sky laws of any jurisdiction or the initiation of any
proceeding for such purpose; and (v) the Companies shall immediately notify the
Merrill Lynch Parties in writing of the happening of any event or the failure of
any event to occur or the existence of any fact or otherwise which results in
any Resale Registration Statement, any amendment or post-effective amendment
thereto, the Resale Prospectus, any prospectus supplement, or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be, stated therein or
necessary to make the statements therein not misleading and promptly shall
prepare, file with the Commission and promptly furnish to the Merrill Lynch
Parties a reasonable number of copies of a supplement or post-effective
amendment to such Resale Registration Statement or the Resale Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Shares, the Resale
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading.
(b) The Merrill Lynch Parties shall cooperate with the Companies in
connection with the preparation of the Resale Registration Statement and shall
furnish to the Companies, in a timely manner, all information in their
possession or reasonably obtainable by them and necessary for inclusion in the
Resale Registration Statement (including, without limitation, information
relating to the ownership by each of them of Paired Shares and the plan of
distribution).
(c) The Merrill Lynch Parties shall notify the Companies at least two
business days prior to the earlier of the date on which they intend to commence
effecting any resales of Shares under a Resale Registration Statement or the
date of pricing with respect to the public sale or other disposition of any
Shares under a Resale Registration Statement effected through an underwritten
offering or block trade and if the Companies do not, within such two day period,
advise the Merrill Lynch Parties of the existence of any facts of the type
referred to in Section 7.2(a) above, then the Companies shall be deemed to have
certified and
19
represented to the Merrill Lynch Parties that no such facts then exist and the
Merrill Lynch Parties may rely on such certificate and representations in making
such sales. The preceding sentence shall in no way limit the Companies'
obligations under Section 7.2(a) above.
(d) the Companies shall cooperate with the Merrill Lynch Parties to
facilitate the timely preparation mid delivery of certificates representing the
Shares to be sold under the Resale Registration Statements and not bearing any
restrictive legends and in such denominations and registered in such names as
the Merrill Lynch Parties may reasonably request at least one Business Day prior
to the closing of any sale of the Shares.
(e) If the Companies notify the Merrill Lynch Parties that the Companies
wish the Merrill Lynch Parties to effect an underwritten offering or block trade
of Shares, (i) the Merrill Lynch Parties shall have the right to select the
managing underwriters or the executing dealer, as the case may be, who shall be
subject to the approval of the Companies, which approval shall not be
unreasonably withheld (it being understood that Merrill Lynch is, in any event,
reasonably acceptable to the Companies for this purpose) and (ii) the Companies
shall (A) enter into written agreements (including underwriting agreements) as
are customary in underwritten offerings or block trades, as the case may be; (B)
obtain an opinion of counsel to the Companies and other entities reasonably
requested by the underwriters or the executing dealer, as the case may be, and
updates thereof (which may be in the form of a reliance letter) in form and
substance reasonably satisfactory to the managing underwriters or the executing
dealer, as the case may be, and the Merrill Lynch Parties addressed to the
underwriters or the executing dealer, as the case may be, and the Merrill Lynch
Parties covering the matters customarily covered in opinions requested in
underwritten offerings or block trades, as the case may be, and such other
matters as may be reasonably requested by such underwriters or the executing
dealer, as the case may be, and the Merrill Lynch Parties (it being agreed that
the matters to be covered by such opinion may be subject to customary
qualifications and exceptions); (C) obtain "cold comfort" letters and updates
thereof in form and substance reasonably satisfactory to the managing
underwriters or the executing dealer, as the case may be, and the Merrill Lynch
Parties from the independent certified public accountants of the Companies (and,
if necessary, other independent certified public accountants of any affiliate or
Subsidiary of either of the Companies or of any business acquired by the
Companies for which financial statements and financial data are, or are required
to be, included in the Resale Registration Statement) addressed to each of the
underwriters or the executing dealer, as the case may be, and, if permitted by
applicable accounting rules and statements, the Merrill Lynch Parties, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings or
block trades, as the case may be, and such other matters as may be reasonably
requested by such underwriters or the executing dealer, as the case may be, in
accordance with Statement on Auditing Standards No. 72; (D) ensure that any
underwriting agreement contains indemnification provisions and procedures not
less favorable than that included herein (or such other provisions and
procedures acceptable to the Merrill Lynch Parties and the underwriters) with
respect to all parties to be indemnified pursuant to said section (including,
without limitation, the underwriters and the Merrill Lynch Parties); and (E)
deliver such other
20
documents as are customarily delivered in connection with closing of
underwritten offerings or block trades, as the case may be.
(f) The Companies will make reasonably available for inspection by the
Merrill Lynch Parties, any underwriter, agent or broker-dealer participating in
any disposition of Shares such information and corporate documents as shall be
reasonably necessary to enable them to exercise any applicable due diligence
responsibilities for the purposes of applicable law, and cause the officers of
the Companies and their "significant subsidiaries" (as that term is defined in
Regulation S-X) to be available, upon request at least two business days in
advance, to respond to questions relevant to such due diligence inquiries.
(g) The parties hereby acknowledge and agree that the Companies may suspend
the right of the Merrill Lynch Parties to effect sales of the Paired Shares
through use of the prospectus forming a part of a Resale Registration Statement
for a period of 90 days (or fewer if the Merrill Lynch Parties are notified to
that effect by the Companies) in connection with a public offering or a sale
pursuant to Rule 144A under the Securities Act (an "Offering") of Paired Shares
(or shares of capital stock convertible into Paired Shares) by the Companies (a
"Suspension Period"); provided that (i) there shall be no more than three
Suspension Periods during any 12-month period, and (ii) the total number of days
of all Suspension Periods during any 12-month period shall not exceed 120. The
Merrill Lynch Parties hereby covenant that they will not sell any Paired Shares
pursuant to said prospectus during a Suspension Period which shall commence at
the time the Companies give the Merrill Lynch Parties written notice of such
Suspension Period; provided further, that no Suspension Period shall be
applicable or in any way restrict the Merrill Lynch Parties after the occurrence
of the Maturity Date or a Price Decline Termination Event. The ability of the
Companies to suspend the right of the Merrill Lynch Parties to effect sales of
the Paired Shares pursuant to Section 7.2(g) shall not be, construed to limit
the Companies' rights under Section 5.2.
7.3. Extension of Required Effectiveness. In the event that the Companies
shall give any notice required by Section 7.2(a)(v) hereof, the period during
which the Companies are required to keep such Resale Registration Statement
effective and useable shall be extended by the number of days during the period
from and including the date of the giving of such notice to and including the
date when the Merrill Lynch Parties are advised in writing by the Companies that
the use of the Resale Prospectus may be resumed.
7.4. Transfer of Shares After Registration. The Merrill Lynch Parties agree
that they will not effect any disposition of the Shares and MLI agrees that it
will not effect any disposition of its right to purchase the Shares that would
constitute a sale within the meaning of the Securities Act or pursuant to any
applicable state securities or blue sky laws expect as contemplated in each
Resale Registration Statement referred to in Section 7.1 or except pursuant to
any exemption from the registration requirements of the Securities Act
(including, without limitation, Rule 144 promulgated thereunder and any
successor thereto) and that it will promptly notify the Companies of any changes
in the information set forth in
21
any such Resale Registration Statement regarding the Merrill Lynch Parties or
its plan of distribution.
7.5. Indemnification. For the purpose of this Section 7.5 only, the term
"Resale Registration Statement" shall include any final prospectus, exhibit,
supplement or amendment included in or relating to any Resale Registration
Statement referred to in Section 7.1.
(a) Indemnification by the Companies. Each of the Companies agrees, jointly
and severally, to indemnify and hold harmless the Merrill Lynch Parties and each
person, if any, who controls the Merrill Lynch Parties within the meaning of
Section 15 of the Securities Act, and any director, officer, employee or
affiliate thereof, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Resale Registration
Statement (or any amendment thereto), including the information deemed to
be part of any Resale Registration Statement pursuant to Rule 430A(b) of
the 1933 Act Regulations, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any related Resale Prospectus or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Companies shall not be
required under this subsection (i) to indemnify the Merrill Lynch Parties
with respect to any loss, liability, claim, damage or expense to the extent
such loss, liability, claim, damage or expense arises out of any untrue
statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Companies by the Merrill Lynch Parties specifically for inclusion in any
Resale Registration Statement or any related Resale Prospectus;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation or of any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever for which indemnification is provided under subsection (i)
above, if such settlement is effective with the written consent of the
Companies; and
(iii) against any and all expense whatsoever (including, without
limitation, the fees and other charges of counsel chosen by you) reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceedings by any governmental agency or body,
commenced or threatened, or any claim whatsoever for which indemnification
is provided under subsection (i) above, to the extent that any such expense
is not paid under subsection (i) or (ii) above.
22
(b) Indemnification by the Merrill Lynch Parties. The Merrill Lynch Patties
agree to indemnify and hold harmless the Companies, and each person, if any, who
controls the Companies within the meaning of Section 15 of the Securities Act,
and any trust manager, director, officer, employee or affiliate thereof, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section 7.5, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in any Resale Registration Statement (or any amendment thereto)
or any related Resale Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Companies by the Merrill Lynch Patties specifically for inclusion in any Resale
Registration Statement or any related Resale Prospectus.
(c) Proceedings. Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relive it from any liability which it
may have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action. If it so
elects within a reasonable time after receipt of such notice, an indemnifying
party, jointly with any other indemnifying parties receiving such notice, may
assume the defense of such action with counsel chosen by it and approved by the
indemnified parties defendant in such action, unless such indemnified parties
reasonably object to such assumption on the ground that the named parties to any
such action (including any impleaded parties) include both such indemnified
parties and an indemnifying party, and such indemnified parties reasonably
believe that there may be legal defenses available to them which are different
from or in addition to those available to such indemnifying party. If an
indemnifying party assumes the defense of such action, the indemnifying parties
shall not be liable for any fees and expenses of counsel for the indemnified
parties incurred thereafter in connection with such action. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 7.5 (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
23
If at any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7.5(a)(ii) effected without its written consent
if (i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(d) Contribution. If the indemnification provided for in this Section 7.5 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraph
(a), (b) or (c) of this Section 7.5 in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred to
herein, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Companies and the Merrill Lynch Parties from the
purchase and sale of the Shares or (ii) if the allocation provided in clause (i)
is not permitted by applicable law, in such proportion or as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Companies and the Merrill Lynch Parties in connection
with the statements or omissions or inaccuracies in the representations and
warranties in this Agreement which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The respective relative benefits received by the Companies on the one hand and
the Merrill Lynch Parties on the other shall be deemed to be in the same
proportion as the amount paid by the Merrill Lynch Parties to the Companies
pursuant to this Agreement and the Adjustment Agreement and the net proceeds
retained by the Merrill Lynch Parties from the transactions contemplated by this
Agreement and the Adjustment Agreement. The relative fault of the Companies and
the Merrill Lynch Parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or the alleged omission to state a material fact or the inaccurate or
the alleged inaccurate representation and/or warranty relates to information
supplied by the Companies or by the Merrill Lynch Parties and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (c) of this Section 7.5 any reasonable legal or other fees or expenses
incurred by such party in connection with investigating or defending any action
or claim. The provisions set forth in paragraph (c) of this Section 7.5 with
resect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this paragraph (c) provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under paragraph (c) for purposes of indemnification. The
Companies and the Merrill Lynch Parties agree that it would not be just and
equitable if contribution pursuant to this Section 7.5 were determined solely by
pro rata allocation or by any other method of allocation which does not take
account of the equitable
24
considerations referred to in this paragraph (d). Notwithstanding the provisions
of this Section 7.5, the Merrill Lynch Parties shall not be required to
contribute any amount in excess of the amount by which the aggregate net
proceeds retained by the Merrill Lynch Parties from the transactions
contemplated hereby and by the Adjustment Agreement exceeds the amount of any
damages that the Merrill Lynch Parties has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) Relationship Between the REIT and OPCO. The obligations set forth in
this Section 7.5 shall in no way limit the ability of the Companies to allocate
liability between themselves.
7.6. Information Available. So long as any Resale Registration Statement
covering the resale of any shares owned by the Merrill Lynch Parties is
effective, the Companies will furnish to the Merrill Lynch Parties:
(a) as soon as practicable after available, one copy of (i) their Joint
Annual Report to Shareholders, (ii) their Joint Annual Report on Form
10-K, (iii) their joint Quarterly Reports to Shareholders, (iv) their
joint quarterly reports on Form 10-Q, (v) a full copy of the
particular Resale Registration Statement covering the Shares (the
foregoing, in each case, excluding exhibits) and (iv) upon request,
any or all other filings made with the Commission by the Companies;
and
(b) upon the reasonable request of the Merrill Lynch Parties, a reasonable
number of copies of the Resale Prospectuses to supply to any other
party requiring such Resale Prospectuses;
and the Companies, upon the reasonable request of the Merrill Lynch Parties,
will meet with the Merrill Lynch Parties or a representative thereof at the
Companies' headquarters to discuss all information relevant for disclosure in
such Resale Registration Statement covering the Shares, subject to appropriate
confidentiality limitations.
7.7. Remedies. The Companies and the Merrill Lynch Parties acknowledge that
there would be no adequate remedy at law if the Companies fail to perform any of
their obligations under this Section 7, and accordingly agree that the Merrill
Lynch Parties, in addition to any other remedy to which it may be entitled at
law or in equity, shall be entitled to compel specific performance of the
obligations of the Companies under this Section 7, and the Companies hereby
waive the defense that a remedy at law would be adequate.
7.8. Notice Requirement. The REIT and the OPCO each covenants and agrees
that it will notify the Merrill Lynch Parties at any time it becomes aware that
as a
25
result of a change in the REIT's and the OPCO's capital stock the Merrill Lynch
Parties beneficially hold more than 4.9% of the REIT's and the OPCO's Paired
Shares.
SECTION 8. Broker's Fee. Other than any fees payable under or in connection
with the Adjustment Agreement, each of the parties hereto represents that, on
the basis of any actions and agreements by it, there are no brokers or finders
entitled to compensation in connection with the sale or issuance of the Shares
to MLI.
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified mail, by telegram or telecopy or sent by nationally
recognized overnight express courier postage prepaid, and shall be deemed given
when so mailed or for telecopies, when transmitted and receipt confirmed, and
shall be delivered as addressed as follows:
(a) if to the Companies, to:
197 First Avenue, Suite 300
Needham Heights, Massachusetts 02194
Attention: Chief Financial Officer
with copies so mailed to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Gilbert G. Menna, P.C.
or to such other person at such other place as the Companies shall
designate to Merrill Lynch in writing; and
(b) if to Merrill Lynch or MLI, to:
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Attention: David Moran
SECTION 10. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Companies and the Merrill
Lynch parties.
26
SECTION 11. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 12. Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
SECTION 13. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon (i) the successors of the Merrill Lynch Parties
and (ii) any assignee or transferee of rights and obligations of the Merrill
Lynch Parties pursuant to the Adjustment Agreement or this Agreement. A
transferee of the Merrill Lynch Parties pursuant to the Adjustment Agreement or
this Agreement, and any successor, assignee, or transferee, shall be held
subject to all of the terms of this Agreement. Except as set forth in this
Section 13, neither the Companies nor the Merrill Lynch Parties may assign any
of their respective rights, or delegate any of their respective duties under
this Agreement.
SECTION 14. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to the conflicts of law principles thereof.
SECTION 15. Transfer to Affiliate. Notwithstanding anything herein to the
contrary, MLI may transfer the Purchase Shares to any affiliate of MLI, together
with all of MLI's rights hereunder, provided that (i) such affiliate shall be an
"accredited investor" within the meaning of Rule 501 (a)(1), (2), (3) or (7) of
Regulation D promulgated under the Securities Act, and (ii) such transfer shall
be consistent with the investment representations set forth at Section 5.1
hereto. In the event of such an assignment such affiliate shall in all respects
be substituted for MLI as a party hereto.
SECTION 16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
MEDITRUST CORPORATION
By: /s/ MICHAEL S. BENJAMIN
------------------------------
Name: Michael S. Benjamin, Esq.
Title: Senior Vice President
MEDITRUST OPERATING COMPANY
By: /s/ MICHAEL J. BOHNEN
------------------------------
Name: Michael J. Bohnen
Title: Secretary
MERRILL LYNCH INTERNATIONAL
By: /s/ STEPHEN GUNDERSON
------------------------------
Name: Stephen Gunderson
Title: Vice President
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ GEORGE W. RHYNE
------------------------------
Name: George W. Rhyne
Title: Managing Director