Exhibit 4.29
PURCHASE PRICE ADJUSTMENT MECHANISM AGREEMENT
THIS PURCHASE PRICE ADJUSTMENT MECHANISM AGREEMENT is made as of the 26th
day of February, 1998, by and between Meditrust Corporation (the "REIT"),
Meditrust Operating Company ("OPCO," and together with the REIT, the
"Companies") and Merrill Lynch International ("MLI"), through its agent Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S").
The purpose of this Purchase Price Adjustment Mechanism Agreement is to set
forth the terms and conditions of the purchase price adjustment transaction (the
"Transaction") entered into between MLI and the Companies.
IN CONSIDERATION of the mutual representations, warranties and covenants
herein contained, and on the terms and subject to the conditions herein set
forth, the Companies and MLI hereby agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall have the meanings set
forth below:
(a) Ability to Settle in Paired Share. As of the date hereof, the
Companies have not, and after the date hereof, the Companies will not,
enter into any obligation that would contractually prohibit the Companies
from delivering Paired Shares pursuant to Sections 3.2, 4.2 or 5 of this
Agreement.
(b) Adjustment Shares. 8,500,000 million Paired Shares, as may be
adjusted from time to time pursuant to Section 1(b), reduced by the number
of Settlement Shares that are the subject of Settlement pursuant to Section
3.1 or Section 4.1.
(c) Certain Adjustments to Reference Price or Number of Adjustment
Shares. In the event of:
(i) a subdivision, consolidation or reclassification of the Paired
Shares, or a free distribution or dividend of any Paired Shares to all
existing holders of Paired Shares by way of bonus, capitalization or
similar issue;
(ii) a distribution or dividend to all existing holders of Paired
Shares of (A) additional Paired Shares or (B) other share capital or
securities granting right to payment of dividends and/or the proceeds
of liquidation of the Companies equally or proportionally with such
payments to holders of Paired Shares, an adjustment shall thereupon be
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effected to the Reference Price and/or the Adjustment Shares at the
time of such event with the intent that following such adjustment, the
value of this Transaction is economically equivalent to the value
immediately prior to the occurrence of the event causing the
adjustment.
(d) Block Sale. any privately negotiated sales of the Paired Shares
involving at least a block of such security (as defined in Rule 10b-18
under the Exchange Act) that are not effected to or through a broker or
dealer.
(e) Business Day. Any day other than Saturday, Sunday, or any other
day on which banking institutions in the States of Delaware or New York are
not open for business.
(f) Calculation Agent. MLI, whose calculations and determinations
shall be made in a reasonable manner.
(g) Closing Price. The last sale price of the Paired Shares on the
Relevant Exchange on the relevant date.
(h) Commission. The Securities and Exchange Commission.
(i) Compounding Period. Means each period commencing on and including:
(i) in the case of the first Compounding Period, the Initial
Settlement Date and ending on but excluding the first Reset Date, and
(ii) for each period thereafter, a Reset Date and ending on (but
excluding) the next following Reset Date.
(j) Date of Effectiveness. Means the date a resale registration
statement covering any resales of the Purchase Shares is declared effective
under the Securities Act by the Commission.
(k) Distribution Amount. Means, on each Reset Date, an amount in U.S.
Dollars equal to:
(i) the sum of all cash distributions paid on a single Paired Share
during the relevant Compounding Period; plus
(ii) an amount representing interest that could have been earned on
such distributions at the USD LIBOR rate having a designated maturity
of 1 month, plus Spread, for the period from the date that such
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distributions would have been received by a holder of such number of
Paired Shares until such Reset Date.
(l) DRIP Distribution. Sales to any Distribution Reinvestment Plan now
or hereafter established by the Companies, or to any agent acting on behalf
of such Plan, for sale to participants in such Plan.
(m) Effective Date. February 26, 1998.
(n) Exchange Act. The Securities Exchange Act of 1934, as amended.
(o) Exchange Trading Day. Each day on which the Relevant Exchange is
open for trading.
(p) Execution Price. The Closing Price on the Effective Date.
(q) Gradual Market Distribution. An offering of the Paired Shares into
the existing trading market for outstanding shares of the same class at
other than a fixed price on or through facilities of a national securities
exchange or to or through a market maker otherwise than on an exchange.
(r) Initial Price. Means,
(i) for the Compounding period ending on the first Reset Date, in
amount in U.S. Dollars equal to $32.625, and
(ii) for each subsequent Reset Date, the Reference Price as calculated
on or adjusted as of the prior Reset Date.
(s) Initial Settlement Date. February 26, 1998.
(t) Interim Settlement Amount. With respect to a given Reset Date,
means the amount by which the Reference Amount minus $10,000,000 exceeds
the product of (x) the Closing Price and (y) the number of Adjustment
Shares.
(u) Interim Settlement Shares. The Interim Settlement Amount divided
by the Closing Price on such Reset Date.
(v) Maturity Date. February 26, 1999.
(w) Paired Shares. Units consisting of one share of common stock, $.10
par value per share, of the REIT and one share of common stock, par value
$.10 per share, of OPCO, which shares are paired and traded as a unit.
Prior to the Date of Effectiveness, references to "Paired Shares" shall
also include units consisting of one
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share of Class A Non-Voting Convertible Common Stock, $.10 par value per
share, of the REIT and one share of Class A Non-Voting Convertible Common
Stock, $.10 par value per share, of OPCO, which shares are paired and
traded as a unit.
(x) Relevant Exchange. Means, with respect to any Exchange Trading
Day, the, principal Stock Exchange on which the Paired Shares are traded on
that day.
(y) Reference Amount. On each Reset Date, the Reference Price
multiplied by the Adjustment Shares or Settlement Shares, as applicable.
(z) Reference Price. On each Reset Date, the Reference Price shall be
determined by:
(i) compounding the Initial Price for each Compounding Period at USD
LIBOR rate plus Spread for a designated maturity of 1 month
(Actual/360 day count fraction) to such Reset Date and
(ii) subtracting the Distribution Amount at that date.
(aa) Reset Date. Means, through the final Settlement Date, (i) the
last day of each three-month period, beginning on May 31, 1998 (provided,
that if such day is not a Business Day then the Reset Date shall be the
next Business Day) and (ii) as to any Settlement Shares, each Settlement
Date.
(ab) Securities Act. The Securities Act of 1933, as amended.
(ac) Settlement. Has the meaning set forth in Section 3.1 or Section
4.1, as applicable.
(ad) Settlement Amount. The net sales proceeds realized by or on
behalf of MLI for all sales of Paired Shares in connection with any
Settlement, calculated as follows:
(iii) if the manner of Settlement Sale pursuant to Section 3.1 or 4.1
is an Underwritten Secondary Offering, the Settlement Amount will
equal the gross proceeds realized, not of a negotiated underwriting
discount;
(iv) if the manner of Settlement Sale pursuant to Section 3.1 or 4.1
is a Block Sale, the Settlement Amount will equal the gross sales
proceeds realized, net of a negotiated underwriting discount;
(v) if the manner of Settlement Sale pursuant to Section 3.1 or 4.1 is
a Gradual Market Distribution, the Settlement Amount will equal the
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gross sales proceeds realized from sales to the market over the period
of the distribution, net of a resale spread of 50 basis points;
(vi) if the manner of Settlement Sale pursuant to Section 3.1 or 4.1
is a DRIP Distribution, the Settlement Amount will equal the gross
sales proceeds realized from sales to any Purchase Agent for a Company
Distribution Reinvestment Plan, net of a resale spread of 50 basis
points;
(ae) Settlement Date. The date on which, in accordance with standard
market practice, the Paired Shares are delivered and the funds received in
respect of any Settlement in accordance with Section 3.2 or Price Decline
Termination Event in accordance with Section 4.2.
(af) Settlement Restriction Period. The period from and including the
Effective Date to and including the earlier of the date of the closing of
the merger transaction between the Companies and La Quinta and the date of
any termination of the related merger agreement.
(ag) Settlement Shares. The number of Adjustment Shares subject to
Settlement.
(ah) Spread. 75 basis points, subject to adjustment pursuant to
Section 6.2.
(ai) Stock Exchange. Means the New York Stock Exchange, the American
Stock Exchange or NASDAQ.
(aj) Underwritten Secondary Offering. An underwritten fixed price
offering of the Paired Shares.
(ak) USD LIBOR. The London Inter Bank Offered Rate in respect of U.S.
Dollars for the designated maturity as quoted on Page 3750 on the Telerate
Service (or such other page as may replace Page 3750 on that service) as of
11:00 a.m., London time, on the date on which it is to be determined.
Section 2. Representations and Warranties.
The representations and warranties of the Companies in Section 4 of the
Purchase Agreement, dated as of February 26, 1998 (the "Purchase
Agreement"), among the Companies, MLI and MLPF&S are hereby incorporated by
reference herein, and the Companies hereby so represent and warrant to MLI.
The provisions of Section 6 of the Purchase Agreement shall also be
applicable to any Paired Shares delivered to MLI under this Agreement.
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Section 3. Settlement.
3.1 Settlement Sale.
On any Reset Date, on any Exchange Trading Date that is one month or two
months following a Reset Date (in which case, the related Settlement (as
defined below) will include standard market interest breakage fees) or on
any other Exchange Trading Date agreed by both parties, up to and including
the Maturity Date, after the end of the Settlement Restriction Period, the
Companies may give telephonic notice to MLI to settle, and MLI shall
settle, in a commercially reasonable manner (which may require sales over a
period of more than 1 day), all or a portion of the Adjustment Shares
("Settlement"), as specified by the Companies, through sale of not less
than the number of Paired Shares, the sale of which would result in a
Settlement Amount equal to 100% of the Reference Amount on the Settlement
Date, and not more than the number of Paired Shares the sale of which would
result in a Settlement Amount equal, to 105% of the Reference Amount on the
Settlement Date, in any of the manners set forth below, as selected by the
Companies:
(i) an Underwritten Secondary Offering (for which the Companies
shall provide at least 21 Business Days prior notice to MLI);
(ii) a Block Sale (for which the Companies shall provide at least
3 Business Days prior notice to MLI);
(iii) a Gradual Market Distribution (for which the Companies
shall provide at least 1 Business Days prior notice to MLI); or
(iv) a DRIP Distribution (for which the Companies shall provide
at least 1 Business Days prior notice to MLI).
If the Companies do not specify a manner of sale, a Gradual Market
Distribution shall be used. Settlement procedures shall begin as soon as
commercially practicable, as determined by MLI, after MLI receives notice
from the Companies and no later than the first Exchange Trading Day after
expiration of the notice period unless otherwise agreed by the Companies
and MLI. At such time as the Companies deliver notice pursuant to this
Section 3.1, the Companies may direct MLI to sell not less than the number
of Paired Shares equal to the number of Settlement Shares, and MLI shall
comply with such direction in a commercially reasonable manner.
3.2 Settlement.
(a) If, on the Settlement Date, the Settlement Amount is greater than
the Reference Amount, MLI will pay the Companies an amount in cash or
Paired Shares (valued at the Closing Price on the Settlement Date) equal to
the difference.
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(b) If the number of Paired Shares sold by MLI pursuant to Section 3.1
is greater than the number of Settlement Shares, the Companies shall
deliver to MLI, on the Settlement Date, a number of Paired Shares equal to
the difference. If the number of Paired Shares sold by MLI pursuant to
Section 3.1 is less than the number of Settlement Paired Shares, MLI shall
deliver to the Companies, on the Settlement Date, a number of Paired Shares
equal to the difference.
(c) In all events, MLI will pay to the Companies an amount equal to
all cash distributions payable to holders of the Paired Shares but not paid
prior to the Settlement Date, on a number of Paired Shares equal to the
Settlement Shares, on the Business Day after the relevant distribution
payment date declared by the Board of Directors of the REIT and OPCO.
(d) If MLI, in connection with any Settlement, receives net sales
proceeds, as calculated pursuant to the definition of Settlement Amount,
from the sale of Paired Shares prior to the applicable Settlement Date,
MLI, on the Settlement Date, shall pay the Companies an amount in cash
representing interest that could have been earned on such net sales
proceeds at the USD LIBOR rate having a designated maturity of 1 month,
plus Spread, for the period from the date that such net sales proceeds are
received by MLI until such Settlement Date.
Section 4. Price Decline Termination Event.
4.1 Price Decline Termination Event Sale.
If the Closing Price on any Exchange Trading Day after the end of the
Settlement Restriction Period falls below any Termination Price listed in
the following schedule ("Price Decline Termination Event"), MLI will, at
its discretion, in a commercially reasonable manner (which may require
sales over a period of more than 1 day) following notice to the Companies,
settle the percentage of the Adjustment Shares indicated in the table below
("Settlement") through sale of not less than the number of Paired Shares,
the sale of which would result in a Settlement Amount equal to 100% of the
Reference Amount on the Settlement Date, and not more than the number of
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Paired Shares, the sale of which would result in a Settlement Amount equal
to 105% of the Reference Amount on the Settlement Date, in any of the
manners specified in Section 3.1:
Percentage of Adjustment
Shares to be Settled Termination Price
-------------------- -----------------
25% $25.50
50% $23.50
75% $21.50
100% $19.50
Settlement procedures shall commence on the date specified by MLI.
4.2 Price Decline Termination Event Settlement.
(a) If, on the Settlement Date, the Settlement Amount is greater than
the Reference Amount, MLI will pay the Companies an amount in cash equal to
the difference,
(b) If the number of Paired Shares sold by MLI pursuant to Section 4.1
is greater than the number of Settlement Shares, the Companies shall
deliver to MLI, on the Settlement Date, a number of Paired Shares equal to
the difference. If the number of Paired Shares sold by MLI pursuant to
Section 4.1 is less than the number of Settlement Shares, MLI shall deliver
to the Companies, on the Settlement Date, a number of Paired Shares equal
to the difference.
(c) In all events, MLI will pay to the Companies an amount equal to
all cash distributions payable to holders of the Paired Shares but not paid
prior to the Settlement Date, on a number of Paired Shares equal to the
Settlement Shares, on the Business Day after the relevant distribution
payment date declared by the Boards of Directors of the REIT and OPCO,
(d) If MLI, in connection with any Settlement, receives net sales
proceeds, as calculated pursuant to the definition of Settlement Amount,
from the sale of Paired Shares prior to the applicable Settlement Date,
MLI, on the Settlement Date, shall pay the Companies an amount in cash
representing interest that could have been earned on such net sales
proceeds at the USD LIBOR rate having a designated maturity of 1
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month, plus Spread, for the period from the date that such net sales
proceeds are received by MLI until such Settlement Date.
Section 5. Interim Settlements.
Within 5 Business Days following each Reset Date, the Companies shall
deliver the Interim Settlement Amount in Interim Settlement Shares to MLI
or its agent for deposit in a collateral account in the name of the Company
at MLPF&S or a custodian or depository designated by MLPF&S. Interim
Settlement Shares delivered after the fifth Business Day following the
termination of the Settlement Restriction Period shall be the subject of a
registration statement covering any sale of such interim Settlement Shares
by MLPF&S that has been declared effective under the Securities Act by the
Commission (an "Effective Registration Statement") Interim Settlement
Shares shall be registered in the stock register of the Companies as
instructed by MLI and shall be held by MLPF&S or a custodian or depository
designated by MLPF&S. If the Companies is unable to deliver Interim
Settlement Shares in accordance with the preceding sentence, the Companies
shall deliver "restricted" Interim Settlement Shares that are the subject
of an Effective Registration Statement in an amount equal to the Interim
Settlement Amount. If the restricted Interim Settlement Shares are not the
subject of an Effective Registration Statement required by the preceding
sentence, the Companies shall deliver additional Interim Settlement Shares
equal to 50% of the Interim Settlement Amount. At such time as the Interim
Settlement Shares are the subject of an Effective Registration Statement,
the Companies may elect to have returned all additional Interim Settlement
Shares delivered pursuant to the preceding sentence. On any Reset Date, if
Interim Settlement Shares are held by MLI, MLI shall deliver to the
Companies within five (5) Business Days after such Reset Date, the amount
in Interim Settlement Shares by which the amount in Interim Settlement
Shares held by MLI (valued at the Closing Price on such Reset Date) plus
any cash amounts in the collateral account exceeds the Interim Settlement
Amount (or 150% of the Interim Settlement Amount, in the event that MLI
holds restricted Interim Settlement Shares that are not the subject of an
Effective Registration Statement). Distributions on the Interim Settlement
Shares will be deposited in the collateral account at MLPF&S or a custodian
or depositary designated by MLPF&S. The cash amounts in the collateral
account will earn interest at the USD LIBOR rate having a designated
maturity of 1 month plus Spread. Upon final Settlement, MLI shall
immediately release all claims to cash and Interim Settlement Shares held
in the collateral account (including interest earned thereon) and deliver
such amounts and all Interim Settlement Shares to the Companies.
Section 6. Certain Covenants and Other Provisions.
6.1 Par Value.
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MLI shall pay to the Companies $.10 par value per share for each share
comprising a Paired Share delivered to MLI pursuant to this Agreement.
6.2 Limitation on MLPF&S Ownership of Paired Shares.
MLPF&S will manage the settlement process in such a way as to ensure that
MLPF&S will not be the beneficial owner, or be deemed to be the beneficial
owner, at any given time of a number of Paired Shares that is greater than
9.25% of the Companies' outstanding Paired Shares.
6.3 Allocation of Payments by the MLI.
When making any payment to the Companies pursuant to this Agreement, MLI
shall allocate such payment between the REIT and OPCO in the manner
specified by the Companies.
6.4 Purchase Price Adjustment Treatment.
The Companies and the MLI 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 this Agreement as adjustments to the purchase price
paid for the Purchase Shares pursuant to Section 2 of the Purchase
Agreement.
6.5 Resale Registration Statement.
Any Paired Shares delivered by the Companies to MLI pursuant to this
Agreement shall be the subject of a resale registration statement that has
been declared effective under the Securities Act by the Commission (an
"Effective Resale Registration Statement"). In addition, if the Paired
Shares delivered to MLI pursuant to the Purchase Agreement (the "Purchase
Shares") are not the subject of an Effective Resale Registration Statement
by May 29, 1998, the Spread shall increase, retroactively effective
commencing on the Initial Settlement Date, to 200 basis points. At such
time as the Purchase Shares are the subject of an Effective Resale
Registration Statement, the Spread shall be reduced, from and after such
time, to 75 basis points. The Companies further agree that they will cause
any resale registration statement to remain in effect until the earliest of
the date on which (i) the Adjustment Share Amount plus all of the Interim
Settlement Shares have been sold by or on behalf of MLI, or (ii) MLI has
advised the Companies that it no longer requires that such registration be
effective. The provisions of Section 5.2 and Section 7.2 of the Purchase
Agreement shall be deemed to apply to any resale registration statement
filed by the Companies pursuant to this Agreement.
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6.6 Delivery of Paired Shares.
The Companies covenant and agree with MLI that Paired Shares delivered by
the Companies pursuant to settlement events in accordance herewith will be
duly authorized, validly issued, fully paid and nonassessable. The issuance
of such Paired Shares will not require the consent, approval,
authorization, registration, or qualification of any government authority,
except such as shall have been obtained on or before the delivery date to
MLI in connection with any registration statement filed with respect to any
Paired Shares.
6.7 Securities Law Compliance.
Each party agrees that it will comply, in connection with this Transaction
and all related or contemporaneous sales and purchases of the Companies'
Paired Shares, with the applicable provisions of the Securities Act, the
Exchange Act and the rules and regulations thereunder.
6.8 Regulatory Compliance.
Each party agrees that if the delivery of Paired Shares upon settlement is
subject to any restriction imposed by a regulatory authority, it shall not
be an event of default, and the parties will negotiate in good faith a
procedure to effect settlement of such shares in a manner which complies
with any relevant rules of such regulatory authority and which is
satisfactory in form and substance to their respective counsel, subject to
Section 6.2 of this Agreement and Section 7 of the Purchase Agreement. Each
party further agrees that any sale pursuant to Section 3.1 may be delayed
or postponed if, in MLPF&S's judgement, such delay or postponement is
necessary to comply with the requirements of applicable law or regulation.
6.9 Settlement Transfer.
All settlements shall occur through DTC or any other mutually acceptable
depository.
6.10 Trading Authorization.
The following individuals and/or any individual authorized in writing by
the respective Treasurers of the Companies are authorized by the Companies
to provide trading instructions to MLI with regard to this transaction.
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For the REIT:
-------------
David Benson
Laurie Gerber
Michael Benjamin
Michael Bushee
For OPCO:
---------
Abraham Gosman
Michael Bohnen
The address, telephone number and facsimile number of each of these
individuals is: c/o Meditrust Companies, 197 First Avenue, Needham,
Massachusetts 02194, telephone: (781) 433-6000, and facsimile: (781)
433-1290.
6.11 Specific Performance.
The parties acknowledge and agree that the failure of the Companies or MLI
to deliver Paired Shares in accordance with the provisions hereof would
result in damage to the other party that could not be adequately
compensated by a monetary award. The parties therefore agree that, if
either party fails to deliver Paired Shares in accordance with the
provisions hereof, the other party may, in addition to all other remedies,
seek an order of specific performance from a court of appropriate
jurisdiction.
6.12 Governing Law.
The Agreement will be governed by and construed in accordance with the laws
of the State of New York without reference to choice of law doctrine.
6.13 Confidentiality.
Subject to the other applicable subsections of this Section 6, to any
contrary requirement of law and to the right of each party to enforce its
rights hereunder in any legal action, each party shall keep strictly
confidential and shall cause its employees and agents to keep strictly
confidential the terms of this Agreement and any information relating to or
concerning the other party which it or any of its agents or employees may
acquire pursuant to, or in the course of performing its obligation under,
any provision of this Agreement.
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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.
MERRILL LYNCH INTERNATIONAL
By: /s/ STEPHEN GUNDERSON
-------------------------------
Name: Stephen Gunderson
Title: Vice President
MEDITRUST OPERATING COMPANY
By: /s/ MICHAEL J. BOHNEN
-------------------------------
Name: Michael J. Bohnen
Title: Secretary
MEDITRUST CORPORATION
By: /s/ MICHAEL S. BENJAMIN
-------------------------------
Name: Michael s. Benjamin, Esq.
Title: Senior Vice President