 |  |
Use these links to rapidly review the documentTable of ContentsTABLE OF CONTENTS
TABLE OF CONTENTS
As filed with the Securities and Exchange Commission on April 11, 2011December 1, 2014
Registration No. 333-[ • ]333-198789
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective
Amendment No. 2 to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VENTAS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | ||||
(State or other jurisdiction of incorporation or organization) | 6798 (Primary Standard Industrial Classification Code Number) | 61-1055020 (I.R.S. Employer Identification |
353 N. Clark Street, Suite 3300
Chicago, Illinois 60654
(877) 483-6827
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
T. Richard Riney, Esq.
General Counsel
Ventas, Inc.
10350 Ormsby Park Place, Suite 300
Louisville, Kentucky 40223
(502) 357-9000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
| ||||
Robin Panovka, Esq. |
|
| ||
Approximate date of commencement of the proposed sale of the securities to the public:
As soon as practicable after this Registration Statement becomes effective and upon completion of the merger described in the enclosed document.herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
CALCULATION OF REGISTRATION FEE Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o
| Title of Each Class of Securities to be Registered | Amount to be Registered(1) | Proposed Maximum Offering Price Per Share(2) | Proposed Maximum Aggregate Offering Price(3) | Amount of Registration Fee(4) | ||||
|---|---|---|---|---|---|---|---|---|
Common Stock, par value $0.25 per share | 103,107,047 | N/A | $5,501,401,914 | $638,713 | ||||
| ||||||||
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such datesdate as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Information contained hereinThe information in this proxy statement/prospectus is subject to completion or amendment. A registration statement relating to these securitiesthe shares of Ventas common stock to be issued in connection with the merger has been filed with the Securities and Exchange Commission. These securities may not be sold, nor may offers to buy these securities be accepted, prior to the timeuntil the registration statement becomesfiled with the Securities and Exchange Commission is effective. This document shallproxy statement/prospectus is not constitute an offer to sell or thethese securities nor should it be considered a solicitation of anyan offer to buy nor shall there be any sale of these securities in any jurisdiction in which suchwhere the offer solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.is not permitted.
PRELIMINARY—SUBJECT TO COMPLETION—COMPLETION, DATED APRIL 11, 2011
| |
MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANTDECEMBER 1, 2014
The boardPROXY STATEMENT/PROSPECTUS
To the Stockholders of directors ofAmerican Realty Capital Healthcare Trust, Inc.:
Ventas, Inc., which we refer to as Ventas, and the board of directors of Nationwide Health Properties,American Realty Capital Healthcare Trust, Inc., which we refer to as NHP,HCT, have approved aentered into an agreement and plan of merger agreement, dated as of February 27, 2011,June 1, 2014, as it may be amended from time to time, which we refer to as the merger agreement and a copy of which is attached as Annex A to this proxy statement/prospectus and incorporated herein by reference. The merger agreement provides for the merger of NHPHCT with and into a direct wholly owned subsidiary of Ventas. As a resultVentas, at which time the separate existence of HCT will cease. We refer to the foregoing transaction as the merger. The merger agreement also provides for the merger of an indirect wholly owned subsidiary of Ventas with and into American Realty Capital Healthcare Trust Operating Partnership, L.P., which we refer to as HCT OP, with HCT OP continuing as the surviving partnership.
Pursuant to the terms and subject to the conditions set forth in the merger agreement, at the effective time of the merger, each share of common stock, par value $0.01 per share, of HCT issued and outstanding immediately prior to the effective time (other than shares held by HCT, Ventas or any of their respective wholly owned subsidiaries, which will acquire NHP and its subsidiaries.
If the merger is completed, NHP stockholdersbe cancelled) will havebe converted into the right to receive, 0.7866pursuant to an election made by the holder of such stock, subject to proration as described below: (i) $11.33 in cash; or (ii) 0.1688 shares of Ventas common stock, par value $0.25 per share. In no event will the aggregate consideration paid in cash be paid on more than 10% of the shares of HCT common stock issued and outstanding as of immediately prior to the consummation of the merger (including restricted shares). If the aggregate elections for payment in cash exceed such limit, then the amount of cash consideration paid with respect to cash elections will be reduced on a pro rata basis, with the remaining consideration paid in shares of Ventas common stock. Non-electing stockholders will receive 0.1688 shares of Ventas common stock for each share of NHPHCT common stock they own at closing, with cash paid in lieuheld by such holder. Under the merger agreement, (i) each restricted share of fractional shares. This exchange ratio is fixed and will not be adjusted to reflectHCT common stock price changesoutstanding immediately prior to closingthe effective time of the merger. Ventas common stockmerger will, immediately prior to such effective time, vest in full and, NHP common stock are both listedat such effective time, be converted into the right to receive the merger consideration determined in accordance with the merger agreement and traded on(ii) each limited partnership unit in HCT OP outstanding immediately prior to the New York Stock Exchange, undereffective time of the ticker symbols "VTR" and "NHP," respectively. Based onmerger of HCT OP will be converted into 0.1688 units of a newly created class of limited partnership units of the closing pricesurviving partnership. Subject to the terms of the limited partnership agreement of the surviving partnership, each limited partnership unit of the surviving partnership will be redeemable for one share of Ventas common stock, onor, at the New York Stock Exchange, or the NYSE, on February 25, 2011, the last trading day before public announcementelection of Ventas, an equivalent amount in cash.The value of the merger, the exchange ratio of 0.7866 represented approximately $44.99 in Ventas common stock for each share of NHP common stock. Based on the Ventas closing price on [ • ], 2011, the 0.7866 exchange ratio represented approximately $[ • ] in Ventas common stock for each share of NHP common stock. Ventas stockholders will continue to own their existing Ventas shares.The valuecomponent of the merger consideration will fluctuate with changes in the market price of Ventas common stock. We urge you to obtain current market quotations of Ventas common stock and NHP common stock.
Based on the number of shares of NHP common stock outstanding on the record date for the stockholder meetings, Ventas expects to issue approximately [ • ] shares of Ventas common stock to NHP stockholders in the merger, and expects to reserve approximately [ • ] additional shares of Ventas common stock for issuance in connection with equity awards and other arrangements that Ventas will assume in connection with the merger. Upon completion of the merger, we estimate that current Ventas stockholders will own approximately 65% of the combined company and former NHP stockholders will own approximately 35% of the combined company.
At the special meeting of Ventas stockholders, Ventas stockholders will be asked to vote to approve the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and an amendment to the Ventas charter to increase the number of authorized shares of Ventas common stock, which approvals are necessary to effectis listed on the merger. AtNew York Stock Exchange under the special meeting of NHP stockholders, NHP stockholders will be asked to vote to adopt the merger agreementsymbol "VTR," and approve the merger and the other transactions contemplated by the merger agreement.
We cannot complete the merger unless the stockholders of both of our companies approve the respective proposals related to the merger.Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the Ventas or NHP special meeting, as applicable, in person, please vote your shares as promptly as possible by (1) accessing the Internet website specified on your proxy card, (2) calling the toll-free number specified on your proxy card, or (3) signing and returning all proxy cards that you receive in the postage-paid envelope provided, so that your shares may be represented and voted at the Ventas or NHP special meeting, as applicable. If you are an NHP stockholder, please note that a failure to vote your shares is the equivalent of a vote against the merger. If you are a Ventas stockholder, please note that a failure to vote your shares is equivalent to a vote against the issuance of shares of Ventasfor HCT common stock, to NHP stockholders in connection withwhich is quoted on the merger andNasdaq Global Select Market under the Ventas charter amendment to increase the number of authorized shares of Ventas common stock.symbol "HCT."
The Ventas board of directors unanimously recommends that the Ventas stockholders vote "FOR" the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and "FOR" the Ventas charter amendment to increase the number of authorized shares of Ventas common stock. The NHP board of directors unanimously recommends that the NHP stockholders vote "FOR" the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement.
The obligations of Ventas and NHPHCT to complete the merger are subject to the satisfaction or waiver of several conditions set forth in the merger agreement, including approval of the merger by the affirmative vote of at least a majority of the shares of HCT common stock outstanding as of the record date (described below). Accordingly, at the special meeting of HCT stockholders, HCT stockholders will be asked to consider and vote on: (i) a proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement; and (ii) a proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger.
The record date for determining the stockholders entitled to receive notice of, and to vote at, the HCT special meeting is the close of business on October 28, 2014. Approval of the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement requires the affirmative vote of at least a majority of the outstanding shares of HCT common stock entitled to vote on such proposal. Approval of the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger requires the affirmative vote of a majority of the votes cast on such proposal.
The HCT board of directors has unanimously (i) determined that the merger agreement and the merger are advisable and fair to, and in the best interests of, HCT and its stockholders and (ii) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement and, therefore, unanimously recommends that HCT stockholders vote "FOR" the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, and "FOR" the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger.
Your vote is important. Whether or not you expect to attend the HCT special meeting in person, please authorize a proxy to vote your shares as promptly as possible by completing, signing, dating and mailing your proxy card in the pre-addressed postage-paid envelope provided or authorizing your proxy by one of the other methods specified in this proxy statement/prospectus or the accompanying notice. If your shares of common stock are held in "street name" by your broker or other nominee, only your broker or other nominee can vote your shares and the vote cannot be cast unless you provide instructions to your broker or other nominee on how to vote or you obtain a legal proxy from your broker or other nominee. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your shares. You may revoke your proxy at any time before it is voted.
Authorizing a proxy will ensure that your shares are represented and voted at the special meeting if you do not attend in person. Please note that a failure to vote your shares will have the same effect as a vote against the merger agreement, the merger and the other transactions contemplated by the merger agreement. More
This proxy statement/prospectus contains important information about Ventas, NHPHCT, HCT's special meeting, the merger agreement, the merger and the other transactions contemplated by the merger is contained in this joint proxy statement/prospectus.agreement.Ventas and NHPWe encourage you to read this entire joint proxy statement/prospectus carefully before voting, including the section entitled "Risk Factors" beginning on page 16.26.
We look forward to the successful combination of Ventas and NHP.[ ], 2014
 |   | |||
Neither the Securities and Exchange Commission, which we refer to as the SEC, nor any state securities commissionregulatory authority has approved or disapproved of the merger or the securities to be issued under this joint proxy statement/prospectus or determined thathas passed upon the adequacy or accuracy of this joint proxy statement/prospectus is accurate or complete.prospectus. Any representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated [ • ], 20112014 and is first being mailed to theHCT stockholders of Ventas and stockholders of NHP on or about [ • ], 2011.2014.
Ventas, Inc.405 Park Avenue, 14th Floor
New York, New York 10022
(212) 415-6500
NOTICE OF SPECIAL MEETING OF STOCKHOLDERSTo Be Held OnTO BE HELD ON [ • ], 20112014
DearTo the Stockholders of Ventas,American Realty Capital Healthcare Trust, Inc.:
We are pleased to invite you to attend theA special meeting of the stockholders of Ventas,American Realty Capital Healthcare Trust, Inc., a DelawareMaryland corporation, which we refer to as HCT, will be held at [ • ], on [ • ], 2011,2014, commencing at [ • ],] a.m., local time, to consider and vote uponon the following matters:
Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the Ventas special meeting.
Holders of record of shares of Ventas common stock at the close of business on [ • ], 2011 are entitled to notice of, and may vote at, the special meeting and any adjournments of the special meeting.
The proposals to approve the issuance of Ventas common stock to NHP stockholders and the Ventas charter amendment each require the affirmative vote of the holders of a majority of the outstanding shares of Ventas common stock. The merger cannot be completed without the approval by Ventas stockholders of both of these proposals. A proposal to adjourn the Ventas special meeting would require the affirmative vote of holders of a majority of the shares of Ventas common stock represented, in person or by proxy, at the Ventas special meeting and entitled to vote on the proposal.
Your vote is important. Whether or not you expect to attend the Ventas special meeting in person, we urge you to vote your shares as promptly as possible by (1) accessing the Internet website specified on your proxy card, (2) calling the toll-free number specified on your proxy card, or (3) signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the Ventas special meeting. If your shares are held in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction card furnished by the record holder of your shares.
| ||
Chicago, Illinois[ • ], 2011
Nationwide Health Properties, Inc.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERSTo Be Held On [ • ], 2011
Dear Stockholders of Nationwide Health Properties, Inc.:
We are pleased to invite you to attend a special meeting of stockholders of Nationwide Health Properties, Inc., a Maryland corporation, which will be held at [ • ], on [ • ], 2011, at [ • ] local time, to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of February 27, 2011, by and among Ventas, its wholly owned subsidiary, Needles Acquisition LLC, and NHP, as such agreement may be amended from time to time, a copy of which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice, and approve the merger of NHP with and into Needles Acquisition LLC and the other transactions contemplated by the Agreement and Plan of Merger.
Please refer to the attached joint proxy statement/prospectus for further information with respect to the proposal to adopt the Agreement and Plan of Merger and approve the merger of NHP with and into Needles Acquisition LLC and the other transactions contemplated by the Agreement and Plan of Merger.
Holders of record of shares of NHP common stock at the close of business on [ • ], 2011 are entitled to vote at the special meeting.
The proposal to adopt the Agreement and Plan of Merger and approve the merger and the other transactions contemplated by the Agreementmerger agreement; and Plan
We will not transact any other business at the special meeting. Only holders of record of HCT common stock at the close of business on October 28, 2014 are entitled to receive notice of, and to vote at, the HCT special meeting.
Approval of the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement requires the affirmative vote of record holders of two-thirdsat least a majority of the outstanding shares of NHPHCT common stock.stock entitled to vote on such proposal.
Approval of the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger requires the affirmative vote of a majority of the votes cast on such proposal.
YourThe HCT board of directors has unanimously (i) determined that the merger agreement and the merger are advisable and fair to, and in the best interests of, HCT and its stockholders and (ii) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement and, therefore, unanimously recommends that you vote is important."FOR" the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, and "FOR" the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger.
Whether or not you expectplan to attend the NHP special meeting in person, we urge you toplease vote your shares as promptly as possible by (1) accessing the Internet website specified oncompleting, signing, dating and mailing your proxy card (2)in the pre-addressed postage-paid envelope provided or, if the option is available to you, calling the toll-free telephone number specifiedlisted on your proxy card or (3) signing and returningaccessing the Internet website described in the instructions on the enclosed proxy card in the postage-paid envelope provided, soto authorize your proxy. Authorizing a proxy will assure that your shares may beare represented and voted at the NHP special meeting. if you do not attend in person. If your shares of HCT common stock are held in the name of a bank,"street name" by your broker or other fiduciary,nominee, please follow the instructions on the voting instruction card furnisheddirections provided by your broker or other nominee regarding how to instruct the record holder.holder to vote your shares. You may revoke your proxy at any time before it is voted. Please review the proxy statement/prospectus accompanying this notice for more complete information regarding the merger and the special meeting of HCT stockholders.
| ||
Newport Beach, CaliforniaBy Order of the Board of Directors of American Realty Capital Healthcare Trust, Inc.
New York, New York
[ • ], 20112014
Edward M. Weil, Jr.
Secretary
This joint proxy statement/prospectus incorporates by reference important business and financial information about Ventas and NHPabout HCT from other documents filed with the SEC that are not included in or delivered with this joint proxy statement/prospectus. See "Where You Can Find More Information; Incorporation by Reference" beginning on page 127.
This information is available to you without charge upon yourwritten or oral request. You can obtain the documents incorporated by reference into this joint proxy statement/prospectus by requesting them from Ventas's or NHP's proxy solicitor in writing or by telephone from the appropriate company at the following addresses and telephone numbers:
| Attention: Corporate Secretary | ||
| 405 Park Avenue, 14th Floor | 353 North Clark Street, Suite 3300 | |
| New York, New York 10022 | Chicago, Illinois 60654 | |
| (212) 415-6500 | (877) | |
| http://www.archealthcaretrust.com |
Investors may also consult Ventas's or NHP's website for more information concerning Information contained on the merger described in this joint proxy statement/prospectus. Ventas's websitewebsites specified above iswww.ventasreit.com. NHP's website iswww.nhp-reit.com. Additional information is available atwww.sec.gov. Information included on these websites is expressly not incorporated by reference into this joint proxy statement/prospectus.
If you would likeYou may also request information from American National Stock Transfer, LLC, an entity under common ownership with HCT, which we refer to request copiesas ANST, or D.F. King & Co., Inc., HCT's proxy solicitor, which we refer to as D.F. King, at the following addresses and telephone numbers:
| D.F. King & Co., Inc. | American National Stock Transfer, LLC | |
| 48 Wall St., 22nd Floor New York, NY 10005 | 405 Park Avenue, Concourse Level New York, New York 10022 | |
For Questions, HCT | For Questions, HCT | |
| Stockholders May Call: (866) 796-7180 | Stockholders May Call: (877) 373-2522, Option 2 | |
| Banks and Brokers Call Collect: (212) 269-5550 | Banks and Brokers Call: (877) 373-2522, Option 2 |
To receive timely delivery of anythe requested documents please do so by [ • ], 2011 in order to receive them beforeadvance of the special meetings.
For more information, see "Where You Can Find More Information" beginning on page 131.meeting, please make your request no later than [ ], 2014.
This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed by Ventas with the Securities and Exchange Commission, which we refer to as the SEC, by Ventas (File No. 333-[ • ]), constitutes a prospectus of Ventas under Section 5for purposes of the Securities Act of 1933, as amended, (whichwhich we refer to as the Securities Act),Act, with respect to the shares of Ventas common stock to be issued to NHPHCT stockholders as required by the Agreement and Planin exchange for shares of Merger, dated as of February 27, 2011, by and among Ventas, Needles Acquisition LLC, a wholly owned subsidiary of Ventas, and NHP, as such agreement may be amended from timeHCT common stock pursuant to time and which we refer to as the merger agreement. A copy of the merger agreement is attached as Annex A to this jointThis proxy statement/prospectus. This documentprospectus also constitutes a joint proxy statement under Section 14(a)of HCT for purposes of the Securities Exchange Act of 1934, as amended, (whichwhich we refer to as the Exchange Act). It also constitutes a notice of meeting with respect to the special meeting of Ventas stockholdersAct, and a notice of meeting with respect to the special meeting of NHP stockholders, at which Ventas stockholders and NHP stockholders will be asked to vote upon certain proposals to approve the merger of NHP with and into Needles Acquisition LLC and certain related matters.HCT stockholders.
You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in or incorporated by reference into this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated [ • ], 2011.2014. You should not assume that the information contained in orthis proxy statement/prospectus is accurate as of any other date, nor should you assume that the information incorporated by reference into this joint proxy statement/prospectus is accurate as of any date other than the date on the front cover of those documents.such incorporated document. Neither our mailing of this joint proxy statement/prospectus to Ventas stockholders or NHPHCT stockholders nor the issuance by Ventas of shares of its common stock in connection withto HCT stockholders pursuant to the merger agreement will create any implication to the contrary.
ii
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding Ventas has been provided by Ventas and information contained in this joint proxy statement/prospectus regarding NHPHCT has been provided by NHP.HCT.
iii
TABLE OF CONTENTS
| | Page | ||||
|---|---|---|---|---|---|
QUESTIONS AND ANSWERS | |||||
SUMMARY | |||||
The Companies | |||||
The Merger and the Merger Agreement | |||||
Election Procedures | 10 | ||||
| 11 | ||||
Summary of Risk Factors Related to the Merger | |||||
The HCT Special | |||||
Opinion of HCT's Financial Advisor | 12 | ||||
Stock Ownership of Directors and Executive Officers of HCT | 12 | ||||
Certain Fees and Expense Reimbursements Payable in Connection with the Merger | 12 | ||||
Interests of HCT's Directors and Executive Officers in the Merger | 13 | ||||
Termination of Certain Agreements | 14 | ||||
Listing of Shares of Ventas Common Stock | 14 | ||||
No Stockholder Appraisal Rights | 14 | ||||
Conditions to Completion of the Merger | |||||
| |||||
No Solicitation and Change in Recommendation | 15 | ||||
Termination | 15 | ||||
Break-up Fee and Expense Reimbursement | 16 | ||||
Material U.S. Federal Income Tax Consequences of the Merger | 17 | ||||
Accounting Treatment of the Merger | 17 | ||||
Comparison of Rights of Ventas Stockholders and HCT Stockholders | 17 | ||||
Litigation Related to the Merger | 17 | ||||
Selected Historical Financial | |||||
Selected Historical Financial | |||||
Summary Unaudited Pro Forma Condensed Consolidated Financial Information | |||||
| |||||
Comparative Ventas and HCT Market Price and Dividend Information | 24 | ||||
RISK FACTORS | |||||
Risk Factors Relating to the Merger | |||||
Risk Factors Relating to Ventas Following the Merger | |||||
| 31
| |||||
| |||||
| |||||
| |||||
CAUTIONARY STATEMENT | |||||
THE COMPANIES | |||||
Ventas, Inc. | |||||
| |||||
| |||||
Stripe OP, LP | 38 | ||||
American Realty Capital Healthcare Trust, Inc. | 38 | ||||
Ventas Unaudited Pro Forma Portfolio Information | 39 | ||||
THE | |||||
Date, Time, Place and | |||||
Purpose of the | |||||
Recommendation of the HCT Board | |||||
| |||||
Vote Required for Approval; Quorum | |||||
| 41
| |||||
Abstentions and Broker Non-Votes | |||||
| |||||
| 42
| |||||
| |||||
Shares Held in | |||||
| |||||
| 43
| |||||
| |||||
| |||||
| |||||
| |||||
ivi
| | Page | ||||
|---|---|---|---|---|---|
| |||||
| 43
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
Solicitation of Proxies | |||||
| |||||
| |||||
Recommendation of the HCT Board | 44 | ||||
Advisory Vote Regarding Merger-Related Compensation | 44 | ||||
Recommendation of the HCT Board | 44 | ||||
THE MERGER | |||||
Effects of the Merger | |||||
Background of the Merger | |||||
Recommendation of the HCT Board and Its Reasons for the Merger | 52 | ||||
Ventas's Reasons for the | |||||
| 56
| |||||
Opinion of | |||||
| |||||
Stock Ownership of Directors and Executive Officers of HCT | 68 | ||||
| 68 | ||||
Interests of | |||||
| 68 | ||||
| |||||
Regulatory Approvals Required for the Merger | |||||
| |||||
| 71
| |||||
| |||||
Listing of Ventas Common Stock | 71 | ||||
| 71 | ||||
| 71 | ||||
| |||||
| |||||
Partnership Merger | 72 | ||||
| 73 | ||||
Representations and Warranties | 76 | ||||
| 78 | ||||
Conditions to Completion of the Merger | 79 | ||||
Covenants and Agreements | 81 | ||||
Termination of the Merger Agreement | |||||
Miscellaneous Provisions | 96 | ||||
First Amendment to the Merger Agreement | 96 | ||||
MATERIAL | 97 | ||||
Material U.S. Federal Income Tax Consequences of the Merger | 98 | ||||
LITIGATION RELATED TO THE MERGER | 101 | ||||
NO APPRAISAL RIGHTS | 102 | ||||
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | |||||
| |||||
| |||||
| |||||
DESCRIPTION OF VENTAS, INC. CAPITAL STOCK | 124 | ||||
Authorized Capital Stock | 124 | ||||
Description of Ventas Common Stock | 124 | ||||
Certain Anti-Takeover Provisions | 124 | ||||
Transfer Agent and Registrar | 125 | ||||
New York Stock Exchange Listing | 125 | ||||
STOCKHOLDER PROPOSALS | 126 | ||||
HCT 2015 Annual Stockholder Meeting and Stockholder Proposals | 126 | ||||
LEGAL MATTERS | 126 | ||||
vii
| | Page | |||
|---|---|---|---|---|
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| 126 | |||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
Ventas | ||||
| 126
| ||||
| ||||
| ||||
WHERE YOU CAN FIND MORE | ||||
| A-1 | |||
| B-1 | |||
| C-1 | |||
| ||||
| ||||
| ||||
| ||||
viiii
The following are answers to some questions that you as a stockholder of Ventas or NHP, may have regarding the merger and the other mattersproposals being considered at the stockholder meetings of Ventas and NHP. Ventas and NHPHCT special meeting. We urge you to read carefully this entire proxy statement/prospectus, including the remainder ofAnnexes, and the other documents referred to or incorporated by reference into this joint proxy statement/prospectus because the information in this section does not provide all of the information that might be important to youyou.
Unless stated otherwise or the context otherwise requires, in this proxy statement/prospectus: all references to HCT are to American Realty Capital Healthcare Trust, Inc., a Maryland corporation, together with respectits subsidiaries; all references to Ventas are to Ventas, Inc., a Delaware corporation, together with its subsidiaries; all references to Merger Sub or the surviving company are to Stripe Sub, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Ventas; all references to OP Merger Sub are to Stripe OP, LP, a Delaware limited partnership and an indirect wholly owned subsidiary of Ventas; all references to HCT OP or the surviving partnership are to American Realty Capital Healthcare Trust Operating Partnership, L.P., a Delaware limited partnership; all references to the merger agreement are to the Agreement and Plan of Merger, dated as of June 1, 2014, by and among Ventas, Merger Sub, OP Merger Sub, HCT OP and HCT, as it may be amended from time to time, a copy of which is attached as Annex A to this proxy statement/prospectus and incorporated herein by reference; all references to the merger are to the merger of HCT with and into Merger Sub pursuant to the terms of the merger agreement; all references to the partnership merger are to the merger of OP Merger Sub with and into HCT OP pursuant to the terms of the merger agreement; and all references to the mergers are to the merger and the other matters being considered atpartnership merger, collectively.
References to "we" or "our" and other similar references in this joint proxy statement/prospectus refer to both Ventas and NHP before completion of the merger.
Q: Why am I receiving this joint proxy statement/prospectus?
In the merger, each share of HCT common stock issued and outstanding immediately prior to the acquisitioneffective time (other than shares held by HCT, Ventas or any of NHP bytheir respective wholly owned subsidiaries, which will be cancelled) will be converted into the right to receive, at the election of the holder of such stock, subject to proration as described below, (i) $11.33 in cash or (ii) 0.1688 shares of common stock of Ventas, par value $0.25 per share, which we refer to as the Exchange Ratio. In no event will the aggregate consideration paid in cash be paid with respect to more than 10% of the shares of HCT common stock issued and outstanding as of immediately prior to the consummation of the merger (including restricted shares), as described under "The Merger Agreement—Consideration to be Received in the Merger—Merger Consideration" beginning on page 73. If the aggregate elections for payment in cash exceed such limit, then the amount of cash consideration paid with respect to cash elections will be reduced on a pro rata basis, with the remaining consideration paid in shares of Ventas common stock. Cash will be paid in lieu of any fractional shares.
Each restricted share of HCT common stock granted pursuant to HCT's equity plans that is outstanding immediately prior to the effective time will, immediately prior to such effective time, vest in full, and the restrictions with respect thereto will lapse. Each such restricted share will be deemed an issued and outstanding share of HCT common stock as of immediately prior to the effective time and will be entitled to receive the merger consideration determined in accordance with the merger agreement dated as of February 27, 2011, that is described in this joint proxy statement/prospectus. A copyand otherwise subject to the terms and conditions of the merger agreement, is attached toincluding the election and proration provisions.
The value of the stock component of the merger consideration will fluctuate between the date of this joint proxy statement/prospectus as Annex A.
In order to completeand the completion of the merger NHP stockholders must vote to adoptwith changes in the market price of Ventas common stock. Examples of the potential effects of these fluctuations on the stock
component of the merger agreement and approveconsideration are illustrated in the following table, based upon a range of hypothetical market prices of Ventas common stock.
The prices set forth in the following table have been included for illustrative purposes only. The market price of Ventas common stock at the effective time of the merger may be less than $60.00 or more than $70.00, and we cannot give any assurances as to the other transactions contemplated byprice or value of Ventas common stock prior to, at or following the merger agreement, and Ventas stockholders must vote to approveeffective time of the issuance ofmerger.
Illustrative Market Price of Ventas Common Stock | Exchange Ratio(1) | Value of Per Share Consideration(2) | |||||
|---|---|---|---|---|---|---|---|
$60.00 | 0.1688 | $ | 10.13 | ||||
$61.00 | 0.1688 | $ | 10.30 | ||||
$62.00 | 0.1688 | $ | 10.47 | ||||
$63.00 | 0.1688 | $ | 10.63 | ||||
$64.00 | 0.1688 | $ | 10.80 | ||||
$65.00 | 0.1688 | $ | 10.97 | ||||
$66.00 | 0.1688 | $ | 11.14 | ||||
$67.00 | 0.1688 | $ | 11.31 | ||||
$67.13 | 0.1688 | $ | 11.33 | ||||
$68.00 | 0.1688 | $ | 11.48 | ||||
$69.00 | 0.1688 | $ | 11.65 | ||||
$70.00 | 0.1688 | $ | 11.82 | ||||
stock shown in the first column multiplied by the Exchange Ratio. This table does not give effect to cash paid in lieu of fractional shares.
Your vote is important. We encourage you to vote as soonpromptly as possible.
Q: How do I vote?
If you holdrecord date, there were 169,316,247 shares of HCT common stock of Ventas or NHP in the name of a broker, bank or nominee, please follow the voting instructions provided by your broker, bank or nominee to ensure that your shares are represented at the special meeting.
vii
Q: What am I being askedoutstanding and entitled to vote upon?at the HCT special meeting, held by approximately 2,528 holders of record. Each share of HCT common stock is entitled to one vote on each proposal presented at the HCT special meeting.
NHP Stockholders. NHP stockholders are being asked to vote to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement.
The merger cannot be completed without the approval by Ventas stockholders and NHP stockholders of each of their respective proposals.
Q: What happens if the market price of Ventas common stock or NHP common stock changes before the closing of the merger?
Q: Will Ventas and NHP coordinate the declaration and payment of dividends prior to the completion of the merger?
Q: What vote is required to approve each proposal?the proposals at the HCT special meeting?
NHP Special Meeting. The proposal to adopt the merger agreement, and approve the merger and the other transactions contemplated by the merger agreement requires the affirmative vote of holders of two-thirdsat least a majority of the outstanding shares of NHPHCT common stock.
viii
Q: Do NHP stockholders have appraisal rights in connection with the merger?
Q: How many votes do I have?
NHP Stockholders. You are entitled to one vote for each share of NHP common stock that you owned as of the record date. As of the close of business on [ • ], 2011, there were approximately [ • ] outstanding shares of NHP common stock. As of that date, approximately [ • ]% of the outstanding shares of NHP common stock were beneficially owned by the directors and executive officers of NHP.
Q: What will happen if I fail to vote, I abstain from voting or I fail to instruct my broker, bank or nominee how to vote?
NHP Stockholders. �� If you are an NHP stockholder and fail to vote, fail to instruct your broker or nominee to vote, or abstain from voting, it will have the same effect as a vote against the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement.
Q: What constitutes a quorum?
Your vote is important. We encourage you to vote your shares as promptly as possible.
NHP Special Meeting. Stockholders who hold a majority of the total number of shares of NHP common stock issued and outstanding on the record date must be present or represented by proxy to constitute a quorum to organize the NHP special meeting.
Q: If my shares are held in "street name" by my broker or other nominee, will my broker or other nominee vote my shares of HCT common stock for me? What happens if I do not vote for a proposal?
Abstentions and broker non-votes, if any, will have the same effect as votes "AGAINST" the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, but will have no effect on the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of common stock of Ventas or NHP on behalf of their customers
ixHCT in connection with the merger, as long as a quorum is present at the HCT special meeting.
may not give
as the election deadline.
If you choose eitherdo not return a properly completed and signed election form by the election deadline, your shares of HCT common stock will be considered "non-electing shares" and will be converted into the first two methods, you must submit your notice of revocation or your new proxyright to the Corporate Secretaryreceive shares of Ventas orcommon stock in accordance with the Corporate Secretary of NHP, as appropriate, no later thanprocedures specified in the beginning of the applicable special meeting. If your shares are held in street name by your broker or nominee, you should contact them to change your vote.
merger agreement.
Q: When do you expectTable of Contents
read the discussion under the heading "Material U.S. Federal Income Tax Consequences" beginning on page 97 of this proxy statement/prospectus and consult their tax advisors as to the U.S. federal income tax consequences of the merger, as well as the effects of any other federal, state, local and non-U.S. tax laws.
The HCT Board unanimously recommends that HCT stockholders vote "FOR" the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement and "FOR" the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger. For a more complete description of the recommendation of the HCT Board, see "The Merger—Recommendation of the HCT Board and Its Reasons for the Merger" beginning on page 52 of this proxy statement/prospectus.
In order forIf you hold your shares through a broker or other nominee, please refer to your proxy card or voting instruction card forwarded by your broker or other nominee to see which voting options are available to you.
The method by which you authorize a proxy will in no way limit your right to vote at the HCT special meeting if you later decide to attend the meeting in person. However, if your shares of HCT common stock are held in the name of a broker or other nominee, you must obtain a "legal proxy," executed in your favor, from your broker or other nominee to be representedable to vote in person at the Ventas or NHPHCT special meeting. Obtaining a legal proxy may take several days.
x
If your shares of HCT common stock are held through a broker or other nominee and you desire to change your vote or vote in person, you should contact your broker or other nominee for instructions on how to do so.
Q: If I am an NHP stockholder that holds certificated sharesincluding multiple copies of NHP common stock, do I need to do anything now with my common stock certificates?
No. Upon completion of the merger, shares of NHP common stock held in book-entry form will be automatically converted into whole shares of Ventas common stock in book-entry form and the exchange agent will deliver to holders of book-entry shares cash in lieu of any fractional shares of Ventas common stock.
Q: If I am a Ventas stockholder, do I need to do anything with respect to my common stock certificates or book-entry shares?
Q: Do I need identification to attend the Ventas or NHP meeting in person?
Q: Who can help answer my questions?
American Realty Capital Healthcare Trust, Inc.
Attention: Secretary
405 Park Avenue, 14th Floor
New York, New York 10022
(212) 415-6500
http://www.archealthcaretrust.com
You can also contact the proxy solicitor hired by HCT as follows:
D.F. King & Co., Inc.
48 Wall St., 22nd Floor
New York, NY 10005
For Questions, HCT
Stockholders May Call: (866) 796-7180
Banks and Brokers Call Collect: (212) 269-5550
To Vote Toll-Free, HCT Stockholders May Call: (800) 690-6903
xi
ThisThe following summary highlights some of the information contained elsewhere in this joint proxy statement/prospectus andprospectus. This summary may not contain all of the information that is important to you. For a more complete description of the merger agreement, the merger, and the other transactions contemplated by the merger agreement, Ventas and NHP urgeHCT encourage you to read carefully the remainder of this jointentire proxy statement/prospectus, including the attached annexes,Annexes. Ventas and HCT also encourage you to read the other documents toinformation incorporated by reference into this proxy statement/prospectus, which includes important business and financial information about Ventas and HCT that has been filed with the Securities and Exchange Commission, which we have referred you because this section does not provide allrefer to as the SEC. You may obtain the information that might be important to you with respect toincorporated by reference into this proxy statement/prospectus, without charge, by following the merger and the related matters being considered at the applicable special meeting. See alsoinstructions in the section entitled "Where You Can Find More Information" beginning on page 131. We have included page references to direct you to a more complete description of the topics presented in this summary.Information; Incorporation by Reference."
Ventas, Inc.111 S. Wacker Drive, Suite 4800Chicago, Illinois 60606(877) 483-6827
Ventas, together with its subsidiaries, is a real estate investment trust, which we refer to as a REIT, with a geographically diversehighly diversified portfolio of seniors housing and healthcare properties inlocated throughout the United States, Canada and Canada.the United Kingdom. As of September 30, 2014, Ventas owned more than 1,500 properties (including properties classified as held for sale), including seniors housing communities, medical office buildings, which we refer to as MOBs, skilled nursing and other facilities, and hospitals, and it had two new properties under development. Ventas is an S&P 500 company, and its common stock is listed on the NYSE.
Ventas primarily acquires and owns seniors housing and healthcare properties and leases them to unaffiliated tenants or operates them through independent third-party managers. As of September 30, 2014, Ventas leased a total of 907 properties (excluding MOBs and properties classified as held for sale) to various healthcare operating companies under "triple-net" or "absolute-net" leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and engaged independent operators, such as Atria Senior Living, Inc., which we refer to as Atria, and Sunrise Senior Living, LLC, which we refer to, together with its subsidiaries, as Sunrise, to manage a total of 270 of Ventas's seniors housing communities pursuant to long-term management agreements. Ventas's two largest tenants, Brookdale Senior Living Inc. and Kindred Healthcare, Inc., leased from Ventas 161 properties (excluding six properties included in investments in unconsolidated entities) and 86 properties, respectively, as of September 30, 2014.
Through its Lillibridge Healthcare Services, Inc. subsidiary and its ownership interest in PMB Real Estate Services LLC, Ventas also provides MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, Ventas makes secured and unsecured loans and other investments relating to seniors housing and healthcare operators or properties.
Ventas was incorporated in Kentucky in 1983, commenced operations in 1985 and reorganized as a Delaware corporation in 1987. Ventas operates through three reportable business segments: triple-net leased properties, senior living operations and medical office building, or MOB operations.
As of December 31, 2010, Ventas's portfolio consisted of 602 assets: 240 seniors housing communities, 187 skilled nursing facilities, 40 hospitals and 135 medical office buildings, and other properties in 43 U.S. states, the District of Columbia and two Canadian provinces. With the exception of Ventas's seniors housing communities thatprincipal executive offices are managed by independent third parties, such as Sunrise, pursuant to long-term management agreements and certain of its MOBs, including those acquired in connection with Ventas's acquisition of Lillibridge Healthcare Services, Inc. (which we refer to as Lillibridge), Ventas leases its properties to healthcare operating companies under "triple-net" or "absolute-net" leases, which require the tenants to pay all property-related expenses. Ventas also had real estate loan and other investments relating to seniors housing and healthcare companies or properties as of December 31, 2010.
Ventas's primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third-party managers. Through its Lillibridge subsidiary, Ventas also provides management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States.
In October 2010, Ventas signed a definitive agreement to acquire substantially all of the real estate assets of privately owned Atria Senior Living Group, Inc., which, together with its affiliates (including One Lantern Senior Living Inc), we refer to as Atria, for a total purchase price of $3.1 billion, comprised of $1.35 billion of Ventas common stock (a fixed 24.96 million shares), $150 million in cash and the assumption or repayment of $1.6 billion of net debt. We refer to the acquisition of substantially all of the real estate assets of Atria as the Atria Acquisition. Ventas will acquire from Atria 118 private pay seniors housing communities located primarily in affluent coastal markets such as the New York metropolitan area, New England and California. Atria, based in Louisville, Kentucky, is owned by private equity funds managed by Lazard Real Estate Partners LLC, which we refer to as LREP. Prior to the closing, Atria will spin off its management company, which will continue to operate the acquired
assets under long-term management agreements with Ventas. Completion of the transaction is subject to certain conditions. Ventas expects to complete the transaction in the first half of 2011, although Ventas cannot assure you that the transaction will close on such timetable or at all.
Additional information about Ventas353 N. Clark Street, Suite 3300, Chicago, Illinois 60654, and its subsidiariestelephone number is included in documents incorporated by reference in this joint proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 131.
NHP (See page 26)
Nationwide Health Properties, Inc.610 Newport Center Drive, Suite 1150Newport Beach, California 92660Telephone: (949) 718-4400(877) 483-6827.
NHP, a Maryland corporation incorporated on October 14, 1985, is a REIT that, together with its subsidiaries, invests in healthcare-related real estate, primarily senior housing, long-term care properties and medical office buildings.
NHP's operations are organized into two segments—triple-net leases and multi-tenant leases. In the triple-net leases segment, NHP invests in healthcare-related properties and leases the facilities to unaffiliated tenants under "triple-net" and generally "master" leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In the multi-tenant leases segment, NHP invests in healthcare related properties that have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). During 2010, 2009 and 2008, the multi-tenant leases segment was comprised exclusively of MOBs. In addition, but to a much lesser extent because NHP views the risks of this activity to be greater due to less favorable bankruptcy treatment and other factors, from time to time, NHP extends mortgage loans and other financing to operators. For the twelve months ended December 31, 2010, approximately 93% of NHP's revenues were derived from its leases, with the remaining 7% from its mortgage loans and other financing activities.
As of December 31, 2010, NHP had investments in 663 healthcare facilities, one land parcel, two development projects and two assets held for sale located in 42 states.
Additional information about NHP and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 131.
Needles Acquisition LLC (See page 26)
Needles Acquisition LLC, a wholly owned subsidiary of Ventas,Merger Sub is a Delaware limited liability company and a direct wholly owned subsidiary of Ventas that was formed on February 24, 2011 for the purpose of effecting the merger. Upon completion ofentering into the merger NHP will be merged with and into Needles Acquisition LLC and the name of the resulting company will be Nationwide Health Properties, LLC.
Needles Acquisition LLCagreement. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement.
OP Merger Sub is a Delaware limited partnership and an indirect wholly owned subsidiary of Ventas that was formed for the purpose of entering into the merger agreement. OP Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement.
Additional information about Ventas and its subsidiaries is included in documents incorporated by reference into this proxy statement/prospectus. See "Where You Can Find More Information; Incorporation by Reference" on page 127.
American Realty Capital Healthcare Trust, Inc. (See page 38)
HCT is a Maryland corporation incorporated on August 23, 2010 that elected to be taxed as a REIT for U.S. federal income tax purposes commencing with its initial taxable year ended December 31, 2011. In February 2011, HCT commenced its initial public offering, or IPO, on a "reasonable best efforts" basis of up to 150.0 million shares of common stock, at a price of $10.00 per share, subject to certain volume and other discounts. HCT closed its IPO in April 2013 and listed its common stock on the Nasdaq Global Select Market, which we refer to as Nasdaq, under the symbol "HCT" on April 7, 2014.
HCT invests primarily in real estate serving the healthcare industry in the United States. HCT owns a diversified portfolio of healthcare-related real estate, focusing predominantly on MOBs and seniors housing communities. Additionally, HCT selectively invests across the healthcare continuum in hospitals, post-acute care facilities and other properties. As of September 30, 2014, HCT owned 153 properties and one preferred equity investment, located in 31 states and comprised of 7.9 million rentable square feet.
Substantially all of HCT's business is conducted through HCT OP. HCT has no direct employees and has retained American Realty Capital Healthcare Advisors, LLC, which we refer to as the Advisor, to manage its affairs on a day-to-day basis. HCT has retained American Realty Capital Healthcare Properties, LLC, which we refer to as the Property Manager, to serve as its property manager. Realty Capital Securities, LLC, which we refer to as RCS, served as the dealer manager of the IPO and continues to provide HCT with various strategic investment banking services. The Advisor, Property Manager and RCS are under common control with HCT's sponsor, American Realty Capital V, LLC, which we refer to as the Sponsor and, as a result thereof, they are related parties.
HCT's principal executive offices are located at 405 Park Avenue, 14th Floor, New York, New York 10022, and its telephone number is (212) 415-6500.
The Merger and the Merger Agreement
A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. Ventas (See pages 45 and NHP encourage you to read the entire merger agreement carefully because it is the principal document governing the merger.
Form of Merger (See page 38)72)
Subject to the terms and conditions of the merger agreement, at the effective time of the merger, NHPwhich we refer to as the effective time, HCT will be mergedmerge with and into Needles Acquisition LLC. Needles Acquisition LLC will be theMerger Sub, with Merger Sub surviving entity in the merger and, following completion of the merger, will continue to exist under the name Nationwide Health Properties, LLC as a direct wholly owned subsidiary of Ventas.
Consideration Immediately following the effective time, OP Merger Sub will merge with and into HCT OP, with HCT OP surviving the partnership merger and Merger Sub as its sole general partner. We refer to be Received in the Merger; Treatment of NHP Stock Options and Other Equity-Based Awards (See pages 38 and 65)
Upon completioneffective time of the partnership merger NHP stockholdersas the partnership merger effective time.
In the merger, each share of HCT common stock issued and outstanding immediately prior to the effective time (other than shares held by HCT, Ventas or any of their respective wholly owned subsidiaries, which will be cancelled) will be converted into the right to receive, 0.7866at the election of the holder of such stock, subject to proration as described below, (i) $11.33 in cash or (ii) a number of shares of Ventas common stock for each shareequal to the Exchange Ratio. In no event will the aggregate consideration paid in cash be paid with respect to more than 10% of NHPthe shares of HCT common stock they own at closing, with cash paid in lieuissued and outstanding as of fractional shares. The exchange ratio is fixed and will not be adjusted for changes inimmediately prior to the market value of the common stock of NHP or Ventas. Because of this, the implied value of the consideration to NHP stockholders will fluctuate between now and the completion of the merger. Based on the closing price of Ventas common stock on the NYSE of $57.05 on February 25, 2011, the last trading day before public announcementconsummation of the merger (including restricted shares). If the exchange ratioaggregate elections for payment in cash exceed such limit, then the amount of 0.7866 represented approximately $44.99 in Ventas common stock for each share of NHP common stock. Based on the closing price of Ventas common stock on the NYSE of $[ • ] on [ • ], 2011, the latest practicable date before the date of this joint proxy statement/prospectus, the exchange ratio of 0.7866 represented approximately $[ • ] in Ventas common stock for each share of NHP common stock. See "Comparative Stock Prices and Dividends" on page 114.cash
Upon completion of the merger, (i) each of NHP's outstanding stock options will become fully vested and, in Ventas's discretion, either be (A) cashed out based on the option spread or (B) assumed by Ventas, on the same terms and conditions (subject to adjustment for the exchange ratio), provided that stock options granted to Mr. Pasquale and certain other senior executives in February 2011 will be assumed by Ventas on the same terms and conditions (subject to adjustment for the exchange ratio); (ii) each NHP restricted stock unit will vest in full and be cashed out based on the exchange ratio, provided that (a) restricted stock units granted to Mr. Pasquale and certain other senior executives in February 2011 will be assumed by Ventas on the same terms and conditions (subject to adjustment for the exchange ratio) and (b) certain restricted stock units granted to Messrs. Khoury and Bradley will vest and be settled in accordance with their terms; (iii) each share of NHP restricted stock will vest in full and be converted into Ventas common stock, based on the exchange ratio; (iv) NHP performance shares will vest under the relevant award agreements in respect of the shortened performance period ending as of the closing of the merger and be converted into Ventas common stock based on the exchange ratio; and (v) dividend equivalent rights granted in connection with any NHP award will become fully vested and be paid out.
Material United States Federal Income Tax Consequences of the Merger (See page 97)
The merger is intended to qualify as a reorganization, within the meaning of Section 368(a) of the Code. Assuming the merger qualifies as a reorganization, a U.S. holder of NHP common stock generally will not recognize any gain or loss upon receipt of Ventas common stock in exchange for NHP common stock in the merger, except with respect to cash received in lieu of a fractional share of Ventas common stock. It is a condition to the completion of the merger that Ventas and NHP receive
written opinions from their respective counsel
consideration paid with respect to cash elections will be reduced on a pro rata basis, with the remaining consideration paid in shares of Ventas common stock. Cash will be paid in lieu of any fractional shares. The value of the cash consideration may be higher or lower than the value of the stock consideration at the time of the completion of the merger.
Each restricted share of HCT common stock granted pursuant to HCT's equity plans that is outstanding immediately prior to the effect thateffective time will, immediately prior to such effective time, vest in full, and the restrictions with respect thereto will lapse. Each such restricted share will be deemed an issued and outstanding share of HCT common stock as of immediately prior to the effective time and will be entitled to receive the merger will qualify as a reorganization, withinconsideration determined in accordance with and otherwise subject to the meaning of Section 368(a) of the Code.
Tax matters are very complicatedterms and the tax consequencesconditions of the merger to each NHP stockholder may depend on such stockholder's particular factsagreement, including the election and circumstances. NHP stockholders are urged to consult their tax advisors to understand fully the tax consequences to themproration provisions.
If 10% or more of the merger. See "Material United States Federal Income Tax Consequencesoutstanding shares of HCT common stock elect to receive cash consideration, the aggregate value of the Merger" beginningmerger consideration to be received by HCT stockholders would be approximately $2.03 billion, consisting of approximately $191.8 million in cash consideration and $1.84 billion in stock consideration, based on page 97.
Recommendations by the number of shares of outstanding HCT common stock on October 28, 2014 and based on the closing trading price of Ventas Boardcommon stock on November 28, 2014. Based on the number of Directors (See page 46)
After carefulshares of outstanding HCT common stock on October 28, 2014, in no event would HCT stockholders receive more than approximately $191.8 million in cash consideration in the aggregate, excluding any cash payments in lieu of fractional shares of Ventas common stock. If no outstanding shares of HCT common stock elect to receive cash consideration, the Ventas boardaggregate value of directors, on February 27, 2011, unanimously approved and adopted the merger agreement. For the factors consideredconsideration to be received by the Ventas boardHCT stockholders would be approximately $2.04 billion, consisting entirely of directorsstock consideration, excluding any cash payments in reaching its decision to approve the merger agreement, see the section entitled "The Merger—Ventas's Reasons for the Merger; Recommendation by the Ventas Boardlieu of Directors" beginning on page 46.The Ventas board of directors unanimously recommends that the Ventas stockholders vote "FOR" the issuance offractional shares of Ventas common stock, based on the number of shares of outstanding HCT common stock on October 28, 2014 and based on the closing trading price of Ventas common stock on November 28, 2014.
On September 15, 2014, the parties to NHP stockholdersthe merger agreement entered into the first amendment to the merger agreement, as described on page 96.
Copies of the merger agreement and the first amendment thereto are attached as Annex A and Annex B, respectively, to this proxy statement/prospectus and incorporated herein by reference. Ventas and HCT encourage you to carefully read the merger agreement, as amended, in its entirety because it is the principal document governing the merger.
Election Procedures (See page 75)
A holder of HCT common stock may indicate such holder's election to receive cash or shares of Ventas common stock in connection with the merger by indicating such election on the form of election, which will be mailed to each holder of HCT common stock as of October 28, 2014, as well as stockholders of record who purchase shares of HCT common stock subsequent to such date and "FOR"prior to the Ventas charter amendmentelection deadline described below, if any. Such form of election will allow each HCT stockholder to increasespecify the number of authorized shares of HCT common stock in respect of which such HCT stockholder elects to receive Ventas common stock atand the Ventas special meeting. Thenumber of shares of HCT common stock in respect of which such HCT stockholder elects to receive cash, subject to proration in accordance with the merger cannot be completed withoutagreement. To make a proper election, HCT stockholders must complete the approval by Ventas stockholdersform of bothelection and return it, along with any certificates representing such stockholder's shares of these proposals.
RecommendationHCT common stock and any additional documents specified in the form of election, to the exchange agent by the NHPelection deadline.
Recommendation of the HCT Board of Directors (See page 48)41)
After careful consideration, The HCT Board has unanimously (i) determined that the NHP boardmerger agreement and the merger are advisable and fair to, and in the best interests of, directors, on February 27, 2011,HCT and its stockholders and (ii) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement.
The HCT Board unanimously declaredrecommends that HCT stockholders vote "FOR" the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, and "FOR" the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger.
Summary of Risk Factors Related to the Merger (See page 26)
You should consider carefully the risk factors, together with all of the other information contained in or incorporated by reference into this proxy statement/prospectus before deciding how to vote. The risks related to the merger and the related transactions are described under the caption "Risk Factors—Risk Factors Relating to the Merger" beginning on page 26.
HCT Special Meeting (See page 41)
The HCT special meeting will be held at [ ], on [ ], 2014, commencing at [ ] a.m., local time.
Holders of record of HCT common stock at the close of business on October 28, 2014, which we refer to as the record date, are entitled to notice of, and to vote at, the HCT special meeting. On the record date, there were 169,316,247 shares of HCT common stock outstanding and entitled to vote at the HCT special meeting, held by approximately 2,528 holders of record.
At the HCT special meeting, the presence in person or by proxy of stockholders entitled to cast a majority of the votes entitled to be advisable and approvedcast at such meeting on any matter will constitute a quorum. Abstentions, if any, but not broker non-votes, will be counted in determining whether a quorum is present at the merger agreement. ForHCT special meeting.
Approval of the factors considered by the NHP board of directors in reaching its decisionproposal to approve the merger agreement, see the section entitled "The Merger—NHP's Reasons for the Merger; Recommendation by the NHP Board of Directors" beginning on page 48.The NHP board of directors unanimously recommends that the NHP stockholders vote "FOR" the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement requires the affirmative vote of at the NHP special meeting.
Opinion of Ventas's Financial Advisor (See page 51)
Centerview Partners LLC. On February 27, 2011, atleast a meetingmajority of the Ventas boardoutstanding shares of directors heldHCT common stock entitled to evaluate the merger, Centerview Partners LLC, which we refer to as Centerview Partners, delivered its oral opinion, which was later confirmed by delivery of a written opinion dated February 27, 2011, to the Ventas board of directors that, as of February 27, 2011 and based upon and subject to the assumptions and limitations set forth in the opinion, the exchange ratio of 0.7866 was fair, from a financial point of view, to Ventas. The full text of Centerview Partners's written opinion, dated February 27, 2011, is attached as Annex C to this joint proxy statement/prospectus. Centerview Partners's written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered, and limitationsvote on the review undertaken by Centerview Partners in rendering its opinion. The summary of Centerview Partners's written opinion below is qualified in its entirety by reference to the full textsuch proposal. Approval of the written opinion. Centerview Partners's opinion is addressedproposal to approve, on a non-binding, advisory basis, the Ventas boardcompensation that may be paid or become payable to named executive officers of directors for its benefit and use in connection with its evaluation of the merger. Centerview Partners's opinion relates only to the fairness, from a financial point of view, to Ventas of the exchange ratio provided for in the merger and does not constitute a recommendation to any stockholder of Ventas as to how such stockholder should vote or act with respect to the merger or any other matter.
Opinion of NHP's Financial Advisor (See page 56)
J.P. Morgan Securities LLC, which we refer to as J.P. Morgan, delivered its opinion to the NHP board of directors that, as of February 27, 2011, and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth therein, the exchange ratio of 0.7866 provided for in the proposed merger was fair, from a financial point of view, to the holders of NHP common stock. The full text of the written opinion of J.P. Morgan, dated February 27, 2011, which sets forth the assumptions made, procedures followed, factors considered, and qualifications and limitations on the review undertaken by J.P. Morgan in connection with its opinion, is attached as Annex D to this joint proxy statement/prospectus. The opinion of J.P. Morgan was directed to the NHP board of directors for the information and assistance of the NHP board of directors in connection with its evaluation of the merger and addressed only the fairness as of the date of the opinion, from a financial point of view, of the exchange ratio to the holders of NHP common stock. The opinion of J.P. Morgan was not intended to, and does not constitute a recommendation to any NHP stockholder as to how such stockholder should vote or act with respect to the merger or any other matter. Neither J.P. Morgan's opinion, nor the summary thereof or of J.P. Morgan's financial analyses set forth in this joint proxy statement/prospectus, is being provided for the use of any Ventas stockholder, nor does it constitute a recommendation to any stockholder of Ventas as to how such stockholder should vote or act with respect to the issuance of shares of Ventas common stock to NHP stockholdersHCT in connection with the merger or any other matter.requires the affirmative vote of a majority of the votes cast on the proposal.
See page 41 for a description of the effect of abstentions and broker non-votes with respect to the above proposals.
Financial Interests Your vote is very important. You are encouraged to vote as promptly as possible. If you properly submit your proxy but do not indicate how your shares of NHP's DirectorsHCT common stock should be voted on a matter, the shares of HCT common stock represented by your properly executed proxy will be voted as the HCT Board recommends and, Executive Officers intherefore, "FOR" the Merger (See page 65)
NHP's directors and executive officers have financial interests inproposal to approve the merger that are different from, or in addition to, the interests of NHP stockholders generally. The NHP board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, and the merger, in approving the merger agreement, and in recommending to NHP stockholders that the merger agreement be adopted and that the merger and the other transactions contemplated by the merger agreement, and "FOR" the proposal to approve, on a non-binding, advisory basis, the compensation that may be approved.paid or become payable to named executive officers of HCT in connection with the merger. If you do not provide voting instructions to your broker or other nominee, your shares of HCT common stock will NOT be voted at the meeting and will be considered broker non-votes.
Please see
Opinion of HCT's Financial Advisor (See page 57)
HCT has retained Citigroup Global Markets Inc., which we refer to as Citi, as its financial advisor in connection with the proposed merger. In connection with this engagement, HCT requested that Citi evaluate the fairness, from a financial point of view, of the merger consideration to be received pursuant to the merger agreement by holders of HCT common stock (other than Ventas and its affiliates and affiliates of HCT, which we refer to as excluded holders). On June 1, 2014, at a meeting of the HCT Board held to evaluate the merger, Citi delivered to the HCT Board an oral opinion, confirmed by delivery of a written opinion dated June 1, 2014, to the effect that, as of that date and based on and subject to various assumptions, matters considered, procedures followed and limitations and qualifications described in its opinion, the merger consideration to be received pursuant to the merger agreement by holders of HCT common stock (other than excluded holders) was fair, from a financial point of view, to such holders.
The full text of Citi's written opinion, dated June 1, 2014, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached as Annex C to this proxy statement/prospectus and is incorporated herein by reference.Citi's opinion was provided for the information of the HCT Board (in its capacity as such) in connection with its evaluation of the merger consideration from a financial point of view and did not address any other terms, aspects or implications of the merger. Citi was not requested to consider, and its opinion did not address, the underlying business decision of HCT to effect the merger or related transactions, the relative merits of the merger or related transactions as compared to any alternative business strategies that might exist for HCT or the effect of any other transaction in which HCT might engage or consider. Citi's opinion is not intended to be and does not constitute a recommendation as to how any stockholder should vote or act on any matter relating to the proposed merger or otherwise.
See "The Merger—Opinion of HCT's Financial Advisor" beginning on page 57.
Stock Ownership of Directors and Executive Officers of HCT (See page 68)
At the close of business on the record date, the directors and executive officers of HCT and their affiliates held 272,998 shares of HCT common stock, collectively representing 0.2% of the shares of HCT common stock issued and outstanding and entitled to vote on that date.
Certain Fees and Expense Reimbursements Payable in Connection with the Merger (See page 68)
As of the date of this filing, the following fees and expense reimbursements are payable by HCT in connection with the merger:
Entity | Description | Amount | ||
|---|---|---|---|---|
RCS Capital | Provision of financial advisory and strategic services to HCT prior to the consummation of the merger pursuant to the HCT Investment Banking Services Agreement between HCT and RCS Capital, the investment banking and capital markets division of RCS. | 0.25% of the transaction value of the merger |
Entity | Description | Amount | ||
|---|---|---|---|---|
American Realty Capital Healthcare Special Limited Partnership, LLC | Upon closing of the merger, HCT OP will issue 5,613,374 OP Units to American Realty Capital Healthcare Special Limited Partnership, LLC. In addition, at closing, the Advisor will forfeit the Award LTIP Units (as defined in the 2014 Multi-Year Outperformance Agreement, which we refer to as the OPP), the Third Amended and Restated Advisory Agreement, which we refer to as the Advisory Agreement, will terminate without the requisite 60-day notice, the Property Management and Leasing Agreement, which we refer to as the Management Agreement, will terminate without the requisite 60-day notice, and American Realty Capital Healthcare Special Limited Partnership, LLC will contribute its right to distributions from HCT OP, as evidenced by the Listing Note Agreement, to HCT OP. | 5,613,374 OP Units |
Interests of NHP'sHCT's Directors and Executive Officers in the Merger (See page 68)
In considering the recommendation of the HCT Board to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, HCT stockholders should be aware that HCT's directors and executive officers have certain interests in the merger that may be different from, or in addition to, the interests of HCT stockholders generally. These interests may create potential conflicts of interest. The HCT Board was aware of these interests and considered them, among other matters, in reaching its decision to approve the merger agreement, the merger and the transactions contemplated by the merger agreement. See "The Merger—Interests of HCT's Directors and Executive Officers in the Merger" beginning on page 65 for additional information about these financial interests.
Board68 of Directors and Management Following the Merger (See page 68)this proxy statement/prospectus.
Ventas hasIn connection with the merger, on May 23, 2014, HCT entered into a letter agreement with RCS Capital, the investment banking and capital markets division of RCS, pursuant to which RCS Capital agreed to take all necessary actionact as financial advisor to cause three members of NHP's current board of directorsHCT in connection with a possible sale or acquisition transaction involving HCT. In connection with the letter agreement and the services provided by RCS Capital thereunder, HCT agreed to be appointedpay RCS Capital an amount equal to the Ventas board of directors, effective as0.25% of the closingtransaction value of the merger. OneHCT also agreed to reimburse RCS for reasonable out-of-pocket expenses arising in connection with the merger. See "The Merger—Interests of these persons willHCT's Directors and Executive Officers in the Merger—HCT Investment Banking Services Agreement" on page 69.
In addition to the foregoing, if the merger were consummated as of November 28, 2014, an aggregate of 225,905 restricted shares of HCT common stock held by HCT's directors, including 40,000 restricted shares held by Nicholas S. Schorsch, Executive Chairman of the HCT Board, would vest in full immediately prior to the effective time and be NHP's Chairman, Presidententitled to receive the merger consideration as described above. For an estimate of the amount that would be payable to Mr. Schorsch upon the vesting of his restricted shares, see "The Merger—Interests of HCT's Directors and ChiefExecutive Officers in the Merger—Merger-Related Compensation for a Named Executive Officer Douglas M. Pasquale. The other persons will be individuals who are acceptable toof HCT" on page 70.
Each of RCS Capital and RCS is an entity under common control with the Nominating and Corporate Governance Committee of the Ventas board of directors. Those individuals have not yet been selected as of the date of this joint proxy statement/prospectus.Advisor.
Ventas currently anticipates that all of the existing executive officers of Ventas will remain executive officers of Ventas following the merger. As of the date of this joint proxy statement/prospectus, Ventas has not finalized any arrangements with current executive officers of NHP with respect to their employment by the combined company. If none of the current executive officers of NHP remain employed by Ventas following the merger, it is anticipated that the associated severance costs would be approximately $[ • ] based on calculations made as of [ • ]. However, it is expected that Douglas M. Pasquale will serve as a senior advisor to Ventas to ensure an orderly transition.
Regulatory Approvals RequiredTermination of Certain Agreements (See page 69)
In connection with the merger, HCT entered into amendments terminating the OPP, the Advisory Agreement, the Management Agreement and the Listing Note Agreement. See "The Merger—Interests of HCT's Directors and Executive Officers in the Merger—Termination of Advisory Agreement, Property Management Agreement, Listing Note Agreement and OPP" on page 69.
Listing of Shares of Ventas Common Stock (See page 71)
Approval of the listing on the NYSE of the shares of Ventas common stock to be issued to HCT stockholders pursuant to the merger agreement, subject to official notice of issuance, is a condition to each party's obligation to complete the merger. Ventas has agreed to use its reasonable best efforts to cause the shares of Ventas common stock to be issued to HCT stockholders pursuant to the merger agreement to be approved for listing on the NYSE, subject to official notice of issuance, prior to the effective time of the merger. If the merger is completed, shares of HCT common stock will be delisted from Nasdaq and thereafter will be deregistered under the Exchange Act.
No Stockholder Appraisal Rights in the Merger (See page 68)102)
Neither Ventas stockholders nor NHP is aware of any regulatory approvals thatHCT stockholders are expectedentitled to prevent the consummation ofexercise appraisal rights in connection with the merger. See "The Merger—Regulatory Approvals Required for the Merger" beginning"No Appraisal Rights" on page 68.102.
Expected Timing of the Merger (See page 76)
We currently expect to complete the merger in the third quarter of 2011, subject to receipt of required stockholder and regulatory approvals and the satisfaction or waiver of the other closing conditions summarized below.
Conditions to Completion of the Merger (See page 91)79)
As more fully described in this joint proxy statement/prospectus and in the merger agreement, the completion of the merger depends on aA number of conditions beingmust be satisfied or waived, where legally permissible, waived.before the merger can be consummated. These conditions include, among others:
We cannot be certain Neither Ventas nor HCT can give any assurance as to whether or when all of the conditions to the consummation of the merger will be satisfied or waived or whetherthat the merger will be completed.occur.
Termination
For more information regarding the conditions to the consummation of the merger and a complete list of such conditions, see "The Merger AgreementAgreement—Conditions to Completion of the Merger" beginning on page 79.
Regulatory Approvals Required for the Merger (See page 71)
The merger may be subject to the regulatory requirements of municipal, state and federal, domestic or foreign, governmental agencies and authorities. Ventas's obligation to complete the merger is conditioned on the receipt of certain required regulatory approvals. See "The Merger—Regulatory Approvals Required for the Merger" beginning on page 71.
No Solicitation and Change in Recommendation (See page 85)
Under the merger agreement, HCT has agreed not to, and to cause its subsidiaries not to (and not authorize and use reasonable best efforts to cause its officers, directors, managers and other representatives not to), directly or indirectly, (i) solicit, initiate, knowingly encourage or knowingly facilitate any inquiry, discussion, offer or request that constitutes, or could reasonably be expected to lead to, an acquisition proposal, (ii) engage in any discussions or negotiations regarding, or furnish to any third party any non-public information in connection with, or knowingly facilitate in any way any effort by, any third party in furtherance of any acquisition proposal or inquiry, (iii) approve or recommend an acquisition proposal, or enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or any other similar agreement providing for or relating to an acquisition proposal, or (iv) propose or agree to do any of the foregoing.
However, prior to the approval of the merger agreement and the merger by HCT stockholders, HCT may, under certain specified circumstances, engage in discussions or negotiations with and provide non-public information regarding itself to a third party making an unsolicited, bona fide written acquisition proposal. Under the merger agreement, HCT is required to notify Ventas promptly, and within 24 hours, if it receives any acquisition proposal or inquiry or any request for non-public information.
Prior to the approval of the merger agreement and the merger by HCT stockholders, the HCT Board may, under certain specified circumstances, withdraw its recommendation of the merger if (i) HCT receives an unsolicited bona fide acquisition proposal that the HCT Board determines in good faith, after consultation with outside legal counsel and financial advisors, constitutes a superior proposal and if the HCT Board determines in good faith, after consultation with outside legal counsel, that failure to take such action would be inconsistent with the directors' duties under applicable law or (ii) in response to certain intervening events which were not reasonably foreseeable as of or prior to the date of the merger agreement, the HCT Board determines in good faith, after consultation with outside legal counsel, that failure to take such action would be inconsistent with the directors' duties under applicable law.
For more information regarding the limitations on HCT and the HCT Board to consider other acquisition proposals, see "The Merger Agreement—Covenants and Agreements—No Solicitation of Transactions by HCT" beginning on page 85.
Ventas and NHPHCT may mutually agree to terminate the merger agreement before completing the merger, even after approval of the Ventas stockholders or approval ofmerger agreement and the NHPmerger by HCT stockholders.
In addition, either Ventas or NHP (so long as it is not at fault)HCT may decide to terminate the merger agreement if:
agreement has not been a principal cause of, or resulted in, such delay, and provided further that either party can extend the outside date for up to four successive one-month periods in certain circumstances;
HCT may also terminate the merger agreement:
Ventas may also terminate the merger agreement priorif:
For more information regarding the rights of Ventas and HCT to Ventas; (2) NHP approves, adopts or recommends any NHP Acquisition Proposal (as defined below underterminate the merger agreement, see "The Merger—TheMerger Agreement—Termination of the Merger Agreement" beginning on page 75); (3) NHP fails to include its recommendation for the merger in its SEC filings; (4) NHP fails to publicly recommend against any NHP Acquisition Proposal within ten business days of Ventas's request; (5) NHP materially or willfully breaches its no-shop obligation or its obligation to hold a stockholders meeting; or (6) NHP enters into an agreement concerning a competing proposal.93.
ExpensesBreak-up Fee and Termination FeesExpense Reimbursement (See page 94)95)
Generally, all fees and expenses incurred in connection with the merger and the transactions contemplated by the merger agreement will be paid by the party incurring those expenses. The merger agreement provides that, if the merger agreement is terminated under certain circumstances, Ventas or NHPHowever, HCT may be obligated to pay the other party a termination fee of $175 million plus $20 million in expense reimbursement. In certain circumstances, even if the termination fee is not payable, Ventas or NHP may be requiredan amount equal to pay $20$10.0 million in expense reimbursement in certain circumstances. Additionally, the merger agreement provides for the payment to Ventas of a break-up fee by HCT in the other party. Seeamount of $55 million in certain circumstances.
For more information regarding the section entitledexpense reimbursement and the break-up fee, see "The Merger—The Merger Agreement—Termination of the Merger Agreement—Termination Payment: Break-up Fee and Expenses Payable by NHP to Ventas"Expense Reimbursement" beginning on page 9495.
Material U.S. Federal Income Tax Consequences of the Merger (See page 97)
The parties intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code, and "—Termination Feeit is a condition to the completion of the merger that Ventas and Expenses Payable byHCT receive written opinions from their respective counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Assuming the merger qualifies as a reorganization, U.S. holders of HCT common stock generally will not recognize gain or loss for U.S. federal income tax purposes upon the exchange of their HCT common stock for solely Ventas common stock pursuant to NHP"the merger, except with respect to cash received in lieu of fractional shares of Ventas common stock. U.S. holders of HCT common stock generally will recognize gain or loss if they exchange their shares of HCT common stock solely for cash in the merger. Generally, U.S. holders of HCT common stock will recognize gain, but not loss, if they exchange their shares of HCT common stock for a combination of Ventas common stock and cash, but their taxable gain in that case will not exceed the cash they receive in the merger.
For further discussion of the material U.S. federal income tax consequences of the merger, see "Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 95 for a complete discussion97.
All holders of HCT common stock should consult their tax advisors to determine the tax consequences to them (including the application and effect of any other federal, state, local or non-U.S. income and other tax laws) of the circumstances under which a termination fee and/or expense reimbursement will be required to be paid.
Accounting Treatment (See page 68)merger.
Ventas prepares its financial statements in
Accounting Treatment of the Merger (See page 71)
In accordance with accounting principlesU.S. generally accepted in the United States,accounting principles, which we refer to as GAAP. TheGAAP, Ventas will account for the merger using the acquisition method of accounting, with Ventas treated as the acquirer of HCT for accounting purposes. Under acquisition accounting, the assets acquired and liabilities assumed will be accounted for by applyingrecorded as of the acquisition method. Pleasedate, at their respective fair values, and added to those of Ventas. Any excess of purchase price over the fair values will be recorded as goodwill. Consolidated financial statements of Ventas issued after the merger would reflect HCT's fair values after the completion of the merger, but will not be restated retroactively to reflect the historical consolidated financial position or results of operations of HCT.
Comparison of Rights of Ventas Stockholders and HCT Stockholders (See page 117)
At the effective time, HCT stockholders who receive shares of Ventas common stock as merger consideration will become stockholders of Ventas and, accordingly, their rights will be governed by Ventas's charter and bylaws and the laws of the State of Delaware. Ventas's charter and bylaws contain provisions that are different from HCT's charter and bylaws in various ways.
For a summary of certain differences between the rights of Ventas stockholders and the rights of HCT stockholders, see the section entitled "Accounting Treatment""Comparison of Rights of Ventas Stockholders and HCT Stockholders" beginning on page 68.
No Appraisal Rights (See page 71)
Under the Maryland General Corporation Law, in connection with the merger, NHP stockholders are not entitled to exercise the right of objecting stockholders to receive the fair value of their shares.117.
Litigation RelatingRelated to the Merger (See page 69)101)
As of April 8, 2011, purportedPurported stockholders of NHPHCT have filed seventhirteen (13) putative class action lawsuits against NHP,HCT, its directors, Ventas, Merger Sub and in certain cases, Ventas and Needles Acquisition LLCOP Merger Sub challenging the merger.merger, and alleging that the HCT Board breached its fiduciary duties by approving the merger agreement. Some of these lawsuits also name other parties, including HCT's CEO and other HCT-related entities, as additional defendants. Certain of these lawsuits also purport to assert derivative claims on behalf of HCT against its directors, Ventas, Merger Sub and OP Merger Sub, and certain of these lawsuits purport to assert claims relating to HCT's disclosures in the proxy filed with the SEC. The lawsuits seek various forms of relief, including to enjoinan injunction prohibiting the merger directand, in the defendants to exercise certain alleged duties, rescind the merger agreement, impose a constructive trust in favor of the class upon any benefits improperly received by the defendants, and awardalternative, awarding the plaintiffs damages and expenses. For more information about litigation related to the merger, see "The Merger—Litigation Relating"Litigation Related to the Merger" beginning on page 69.
The Ventas Special Meeting (See page 27)101.
The Ventas special meeting will be held at [ • ], on [ • ], 2011, at [ • ] local time. At the Ventas special meeting, Ventas stockholders will be asked to vote on the following matters:
You may vote at the Ventas special meeting if you owned shares of Ventas common stock at the close of business on the record date, [ • ], 2011. You may cast one vote for each share of common stock that you owned on the record date. On that date, there were [ • ] shares of Ventas common stock outstanding and entitled to vote.
The proposals to approve the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and to approve the Ventas charter amendment each require the affirmative vote of the holders of a majority of the outstanding shares of Ventas common stock. The merger cannot be completed without the approval by Ventas stockholders of both of these proposals. The proposal to approve any adjournments of the Ventas special meeting, if necessary, for the purpose of soliciting additional proxies requires the affirmative vote of the holders of a majority of the shares of Ventas common stock represented, in person or by proxy, at the Ventas special meeting.
On the record date, approximately [ • ]% of the outstanding shares of Ventas common stock was held by Ventas directors and executive officers and their affiliates. Ventas currently expects that its directors and executive officers will vote their shares in favor of the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and the Ventas charter amendment, although none has entered into any agreements obligating them to do so.
The NHP Special Meeting (See page 34)
The special meeting of NHP stockholders will be held at [ • ], on [ • ], 2011, at [ • ] local time. At the special meeting, stockholders of NHP will be asked to adopt the Agreement and Plan of Merger, dated as of February 27, 2011, among Ventas, Needles Acquisition LLC, and NHP and to approve the merger of NHP with and into Needles Acquisition LLC and the other transactions contemplated by the merger agreement.
You may vote at the NHP special meeting if you owned shares of NHP common stock at the close of business on the record date, [ • ], 2011. On that date, there were [ • ] shares of NHP common stock outstanding and entitled to vote. You may cast one vote for each share of NHP common stock that you owned on the record date.
The affirmative vote of the holders of at least two-thirds of the outstanding shares of NHP common stock on the record date is required to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement. In the event that there are not sufficient votes to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement, the Chairman of the NHP special meeting is authorized to adjourn the meeting (from time to time in his discretion) in order to solicit additional proxies.
On the record date, approximately [ • ]% of the outstanding shares of NHP common stock was held by NHP directors and executive officers and their affiliates. NHP currently expects that its directors and executive officers will vote their shares in favor of the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement, although none has entered into any agreements obligating them to do so.
Rights of NHP Stockholders Will Change as a Result of the Merger (See page 118)
NHP stockholders will have different rights once they become stockholders of the combined company, due to differences between the governing documents of Ventas and NHP. These differences are described in detail under "Comparison of Rights of Ventas Stockholders and NHP Stockholders" beginning on page 118.
Before voting at the Ventas or NHP special meeting, you should carefully consider all of the information contained in or incorporated by reference into this joint proxy statement/prospectus, including the risk factors set forth under the heading "Risk Factors" beginning on page 16 or described in Ventas's and NHP's Annual Reports on Form 10-K for the year ended December 31, 2010 and other reports filed with the SEC, which are incorporated by reference into this joint proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 131.
Selected Historical Financial DataInformation of Ventas
The following table sets forth selected consolidated financial information for Ventas. The selected balance sheet and statement of income data as of December 31 of and for each of the years in the five-year period ended December 31, 20102013 have been derived from Ventas's audited consolidated financial statements incorporated herein by reference. The selected statement of income data for the nine months ended September 30, 2013 and September 30, 2014, and the selected balance sheet data as of December 31 for each of the years in the five-year period ended December 31, 2010September 30, 2014 have been derived from Ventas's auditedunaudited consolidated financialsfinancial statements incorporated herein by reference. The following information should be read together with Ventas's audited consolidated financial statements,Annual Report on Form 10-K for the notes related theretoyear ended December 31, 2013, as amended by Amendment No. 1 to its Annual Report on Form 10-K/A, Ventas's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 and management's related reports on Ventas's financial condition and performance, all of which are contained in Ventas's reportsother information that Ventas has filed with the SEC and incorporated herein by reference. See "Where You Can Find More Information"Information; Incorporation by Reference" beginning on page 131.127.
| | For the Nine Months Ended September 30, | For the Year Ended December 31, | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2014 | 2013 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||
| | (In thousands, except per share data) | |||||||||||||||||||||
Operating Data | ||||||||||||||||||||||
Rental income | $ | 1,071,489 | $ | 979,875 | $ | 1,325,984 | $ | 1,178,849 | $ | 793,802 | $ | 517,652 | $ | 475,000 | ||||||||
Resident fees and services | 1,141,781 | 1,039,876 | 1,406,005 | 1,227,124 | 865,800 | 445,157 | 421,058 | |||||||||||||||
Interest expense | 277,811 | 244,635 | 334,484 | 288,276 | 223,804 | 169,981 | 170,232 | |||||||||||||||
Property-level operating expenses | 882,820 | 821,571 | 1,109,632 | 966,422 | 645,082 | 314,985 | 302,813 | |||||||||||||||
General, administrative and professional fees | 93,638 | 84,757 | 115,106 | 98,510 | 74,537 | 49,830 | 38,830 | |||||||||||||||
Income from continuing operations attributable to common stockholders, including real estate dispositions | 366,060 | 381,233 | 488,930 | 307,835 | 362,308 | 211,570 | 185,038 | |||||||||||||||
Discontinued operations | 2,517 | (36,164 | ) | (35,421 | ) | 54,965 | 2,185 | 34,597 | 81,457 | |||||||||||||
Net income attributable to common stockholders | 368,577 | 345,069 | 453,509 | 362,800 | 364,493 | 246,167 | 266,495 | |||||||||||||||
Per Share Data | ||||||||||||||||||||||
Income from continuing operations attributable to common stockholders, including real estate dispositions: | ||||||||||||||||||||||
Basic | $ | 1.24 | $ | 1.30 | $ | 1.67 | $ | 1.05 | $ | 1.59 | $ | 1.35 | $ | 1.22 | ||||||||
Diluted | 1.23 | 1.29 | 1.66 | 1.04 | 1.57 | 1.34 | 1.21 | |||||||||||||||
Net income attributable to common stockholders: | ||||||||||||||||||||||
Basic | 1.25 | 1.18 | 1.55 | 1.24 | 1.60 | 1.57 | 1.75 | |||||||||||||||
Diluted | 1.24 | 1.17 | 1.54 | 1.23 | 1.58 | 1.56 | 1.74 | |||||||||||||||
Dividends declared per common share | 2.175 | 2.01 | 2.735 | 2.48 | 2.30 | 2.14 | 2.05 | |||||||||||||||
Weighted average shares used in computing earnings per common share: | ||||||||||||||||||||||
Basic | 293,965 | 292,308 | 292,654 | 292,064 | 228,453 | 156,608 | 152,566 | |||||||||||||||
Diluted | 296,411 | 294,788 | 295,110 | 294,488 | 230,790 | 157,657 | 152,758 | |||||||||||||||
Other Data | ||||||||||||||||||||||
Net cash provided by operating activities | $ | 919,972 | $ | 835,429 | $ | 1,194,755 | $ | 992,816 | $ | 773,197 | $ | 447,622 | $ | 422,101 | ||||||||
Net cash used in investing activities | (1,236,170 | ) | (1,178,101 | ) | (1,282,760 | ) | (2,169,689 | ) | (997,439 | ) | (301,920 | ) | (1,746 | ) | ||||||||
Net cash provided by (used in) financing activities | 282,021 | 329,495 | 114,996 | 1,198,914 | 248,282 | (231,452 | ) | (490,180 | ) | |||||||||||||
FFO(1) | 929,692 | 903,393 | 1,208,458 | 1,024,567 | 824,851 | 421,506 | 393,409 | |||||||||||||||
Normalized FFO(1) | 987,806 | 907,086 | 1,220,709 | 1,120,225 | 776,963 | 453,981 | 409,045 | |||||||||||||||
| | As of and for the Years Ended December 31,(1) | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||
| | (In thousands, except per share data) | ||||||||||||||||||
Operating Data | |||||||||||||||||||
Rental income | $ | 539,572 | $ | 496,568 | $ | 476,815 | $ | 454,496 | $ | 378,763 | |||||||||
Resident fees and services | 446,301 | 421,058 | 429,257 | 282,226 | — | ||||||||||||||
Interest expense | 178,863 | 176,990 | 202,624 | 194,752 | 125,737 | ||||||||||||||
Property-level operating expenses | 315,953 | 302,813 | 306,944 | 198,125 | 3,171 | ||||||||||||||
General, administrative and professional fees | 49,830 | 38,830 | 40,651 | 36,425 | 26,136 | ||||||||||||||
Income from continuing operations attributable to common stockholders | 218,370 | 193,120 | 174,054 | 130,242 | 118,001 | ||||||||||||||
Discontinued operations | 27,797 | 73,375 | 48,549 | 143,439 | 13,153 | ||||||||||||||
Net income attributable to common stockholders | 246,167 | 266,495 | 222,603 | 273,681 | 131,154 | ||||||||||||||
Per Share Data | |||||||||||||||||||
Income from continuing operations attributable to common stockholders, basic | $ | 1.39 | $ | 1.27 | $ | 1.24 | $ | 1.06 | $ | 1.13 | |||||||||
Net income attributable to common stockholders, basic | $ | 1.57 | $ | 1.75 | $ | 1.59 | $ | 2.23 | $ | 1.26 | |||||||||
Income from continuing operations attributable to common stockholders, diluted | $ | 1.38 | $ | 1.26 | $ | 1.24 | $ | 1.06 | $ | 1.13 | |||||||||
Net income attributable to common stockholders, diluted | $ | 1.56 | $ | 1.74 | $ | 1.59 | $ | 2.22 | $ | 1.25 | |||||||||
Dividends declared per common share | $ | 2.14 | $ | 2.05 | $ | 2.05 | $ | 1.90 | $ | 1.58 | |||||||||
Balance Sheet Data | |||||||||||||||||||
Real estate investments, at cost | $ | 6,747,699 | $ | 6,399,421 | $ | 6,256,562 | $ | 6,380,703 | $ | 3,707,837 | |||||||||
Cash and cash equivalents | 21,812 | 107,397 | 176,812 | 28,334 | 1,246 | ||||||||||||||
Total assets | 5,758,021 | 5,616,245 | 5,771,418 | 5,718,475 | 3,256,021 | ||||||||||||||
Senior notes payable and other debt | 2,900,044 | 2,670,101 | 3,136,998 | 3,346,531 | 2,312,021 | ||||||||||||||
Other Data | |||||||||||||||||||
Net cash provided by operating activities | $ | 447,622 | $ | 422,101 | $ | 379,907 | $ | 404,600 | $ | 238,867 | |||||||||
Net cash used in investing activities | (301,920 | ) | (1,746 | ) | (136,256 | ) | (1,175,192 | ) | (481,974 | ) | |||||||||
Net cash (used in) provided by financing activities | (231,452 | ) | (490,180 | ) | (95,979 | ) | 802,675 | 242,712 | |||||||||||
| | As of and for the Years Ended December 31,(1) | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||
| | (In thousands, except per share data) | ||||||||||||||||||
Non-GAAP Financial Measures Reconciliation | |||||||||||||||||||
Net income attributable to common stockholders | $ | 246,167 | $ | 266,495 | $ | 222,603 | $ | 273,681 | $ | 131,154 | |||||||||
Adjustments: | |||||||||||||||||||
Real estate depreciation and amortization | 203,966 | 198,841 | 228,778 | 224,028 | 107,253 | ||||||||||||||
Real estate depreciation related to noncontrolling interest | (6,217 | ) | (6,349 | ) | (6,251 | ) | (3,749 | ) | — | ||||||||||
Real estate depreciation related to unconsolidated entities | 2,367 | — | — | — | — | ||||||||||||||
Discontinued operations: | |||||||||||||||||||
Gain on sale of real estate assets | (25,241 | ) | (67,305 | ) | (39,026 | ) | (129,478 | ) | — | ||||||||||
Depreciation on real estate assets | 464 | 1,727 | 6,253 | 9,736 | 10,985 | ||||||||||||||
FFO(2) | 421,506 | 393,409 | 412,357 | 374,218 | 249,392 | ||||||||||||||
Adjustments: | |||||||||||||||||||
Reversal of contingent liability | — | — | (23,328 | ) | — | (1,769 | ) | ||||||||||||
Provision for loan losses | — | — | 5,994 | — | — | ||||||||||||||
Income tax expense (benefit) | 2,930 | (3,459 | ) | (17,616 | ) | (29,095 | ) | — | |||||||||||
Loss (gain) on extinguishment of debt | 9,791 | 6,080 | (2,398 | ) | (88 | ) | 1,273 | ||||||||||||
Merger-related expenses and deal costs | 19,243 | 13,015 | 4,460 | 2,979 | — | ||||||||||||||
Amortization of other intangibles | 511 | — | — | — | — | ||||||||||||||
Net gain on sale of marketable equity securities | — | — | — | (864 | ) | (1,379 | ) | ||||||||||||
Gain on foreign currency hedge | — | — | — | (24,314 | ) | — | |||||||||||||
Preferred stock issuance costs | — | — | — | 1,750 | — | ||||||||||||||
Bridge loan fee | — | — | — | 2,550 | — | ||||||||||||||
Rent reset costs | — | — | — | — | 7,361 | ||||||||||||||
Normalized FFO(2) | $ | 453,981 | $ | 409,045 | $ | 379,469 | $ | 327,136 | $ | 254,878 | |||||||||
because it allows investors, analysts and Ventas management to compare Ventas's operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by unanticipated items. items and other events such as transactions and litigation. In some cases, Ventas provides information about identified non-cash components of FFO and normalized FFO because it allows investors, analysts and management to assess the impact of those items on Ventas's financial statements.
Ventas uses the National Association of Real Estate Investment Trusts, which we refer to as NAREIT, definition of FFO. NAREIT defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate property, including gain on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures arewill be calculated to reflect FFO on the same basis. Ventas defines normalized FFO as FFO excluding the following income and expense items (which may be recurring in nature): (a) gains and losses on the sales of real property assets; (b) merger-related costs and expenses, including amortization of intangibles, and transition and integration expenses, and deal costs and expenses, including expenses and recoveries if any, relating to Ventas's lawsuit against HCP, Inc. and the issuance of preferred stock or bridge loan fees; (c)its acquisition lawsuits; (b) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of Ventas'sits debt; (d)(c) the non-cash effect of income tax benefits or expenses; (e)expenses and derivative transactions that have non-cash mark-to-market impacts on its Consolidated Statements of Income; (d) the impact of future unannounced acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions; (f)(e) the reversal or incurrencefinancial impact of contingent liabilities; (g)consideration, severance-related costs, charitable donations made to the Ventas Charitable Foundation, gains and losses for non-operational foreign currency hedge agreements;agreements and (h) one-timechanges in the fair value of financial instruments; and (f) expenses in connection with rent reset process with Kindred Healthcare, Increlated to the re-audit and re-review of its subsidiaries. historical financial statements and related matters.
FFO and normalized FFO presented herein arein this proxy statement/prospectus, or otherwise disclosed, by Ventas may not necessarilybe identical to FFO and normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same definitions. FFO and normalized FFO (or either measure adjusted for non-cash items) should not be considered alternatives to net income (determined in accordance with GAAP) as indicators of Ventas's financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of Ventas's liquidity, nor are FFO and normalized FFO (or either measure adjusted for non-cash items) necessarily indicative of sufficient cash flow to fund all of Ventas's needs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Normalized Funds from Operations" included in Item 7 of Ventas's Annual Report on Form 10-K for the year ended December 31, 20102013, as amended by Amendment No. 1 to its Annual Report on Form 10-K/A, incorporated by reference in this proxy statement/prospectus for a reconciliation of these measuresFFO and normalized FFO to Ventas's GAAP earnings.
| | | As of December 31, | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | As of September 30, 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||
| | (In thousands) | ||||||||||||||||||
Balance Sheet Data | |||||||||||||||||||
Real estate investments at cost | $ | 22,759,785 | $ | 21,403,592 | $ | 19,745,607 | $ | 17,830,262 | $ | 6,747,699 | $ | 6,399,421 | |||||||
Cash and cash equivalents | 64,595 | 94,816 | 67,908 | 45,807 | 21,812 | 107,397 | |||||||||||||
Total assets | 20,651,165 | 19,731,494 | 18,980,000 | 17,271,910 | 5,758,021 | 5,616,245 | |||||||||||||
Senior notes payable and other debt | 10,469,106 | 9,364,992 | 8,413,646 | 6,429,116 | 2,900,044 | 2,670,101 | |||||||||||||
Selected Historical Financial DataInformation of NHPHCT
The following table sets forth selected consolidated financial information for NHP.HCT. The selected statement of income statement data for eachthe years ended December 31, 2013, 2012 and 2011 and the period from August 23, 2010 (date of the five years endedinception) to December 31, 2010 and the selected balance sheet data as of December 31, for each of the years in the five-year period ended December 31,2013, 2012, 2011 and 2010 have been derived from NHP'sHCT's audited consolidated financial statements incorporated herein by reference. The selected statement of income data for the nine months ended September 30, 2013 and September 30, 2014, and the selected balance sheet data as of September 30, 2014 have been derived from HCT's unaudited consolidated financial statements incorporated herein by reference. The following information should be read together with NHP's audited consolidated financial statements,HCT's Annual Report on Form 10-K for the notes related theretoyear ended December 31, 2013, HCT's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 and management's related reports on NHP's financial condition and performance, all of which are contained in NHP's reportsother information that HCT has filed with the SEC and incorporated herein by reference. See "Where You Can Find More Information"Information; Incorporation by Reference" beginning on page 131.127.
| | | | | | | For the Period from August 23, 2010 (date of inception) to December 31, 2010 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | For the Nine Months Ended September 30, | For the Year Ended December 31, | |||||||||||||||||
Operating Data(In thousands, except share and per share data) | 2014 | 2013 | 2013 | 2012 | 2011 | ||||||||||||||
Total revenues | $ | 194,367 | $ | 76,762 | $ | 125,353 | $ | 35,738 | $ | 3,314 | $ | — | |||||||
Operating expenses: | |||||||||||||||||||
Property operating and maintenance | 81,032 | 26,576 | 46,665 | 6,564 | 863 | — | |||||||||||||
Operating fees to affiliates | 5,063 | — | — | 987 | — | — | |||||||||||||
Acquisition and transaction related | 36,144 | 7,858 | 13,606 | 9,433 | 3,415 | — | |||||||||||||
Vesting of Class B units for asset management services | 12,917 | — | — | — | — | — | |||||||||||||
Fair value of listing note | 56,400 | — | — | — | — | — | |||||||||||||
General and administrative | 7,874 | 2,928 | 4,613 | 905 | 429 | 1 | |||||||||||||
Depreciation and amortization | 93,262 | 41,548 | 67,456 | 19,320 | 1,535 | — | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total operating expenses | 292,692 | 78,910 | 132,340 | 37,209 | 6,242 | 1 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Operating loss | (98,325 | ) | (2,148 | ) | (6,987 | ) | (1,471 | ) | (2,928 | ) | (1 | ) | |||||||
Other income (expenses): | |||||||||||||||||||
Interest expense | (20,593 | ) | (10,754 | ) | (15,843 | ) | (9,184 | ) | (1,191 | ) | — | ||||||||
Income from preferred equity investment and investment securities and interest income | 1,115 | 609 | 958 | 18 | 2 | — | |||||||||||||
Gain (Loss) on sale of investment securities | (129 | ) | — | (300 | ) | — | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total other expenses | (19,607 | ) | (10,145 | ) | (15,185 | ) | (9,166 | ) | (1,189 | ) | — | ||||||||
| | | | | | | | | | | | | | | | | | | | |
Net loss: | (117,932 | ) | (12,293 | ) | (22,172 | ) | (10,637 | ) | (4,117 | ) | (1 | ) | |||||||
Net loss (income) attributable to non-controlling interests | 1,487 | (46 | ) | (58 | ) | 2 | 32 | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Net loss attributable to stockholders | $ | (116,445 | ) | $ | (12,339 | ) | $ | (22,230 | ) | $ | (10,635 | ) | $ | (4,085 | ) | $ | (1 | ) | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Other data: | |||||||||||||||||||
Cash flows provided by (used in) operations | $ | 53,150 | $ | 29,243 | $ | 53,011 | $ | 7,793 | $ | (2,161 | ) | $ | (1 | ) | |||||
Cash flows used in investing activities | (514,563 | ) | (729,135 | ) | (942,718 | ) | (452,546 | ) | (53,348 | ) | — | ||||||||
Cash flows provided by financing activities | 391,418 | 994,934 | 979,285 | 453,584 | 60,547 | 1 | |||||||||||||
Per share data: | |||||||||||||||||||
Net loss per common share attributable to stockholders, basic and diluted | $ | (0.66 | ) | $ | (0.09 | ) | $ | (0.15 | ) | $ | (0.43 | ) | $ | (2.48 | ) | NM | |||
Distributions declared per common share | 0.51 | 0.51 | 0.68 | 0.68 | 0.66 | $ | — | ||||||||||||
Weighted-average number of common shares outstanding, basic and diluted | 175,234,437 | 142,163,876 | 151,683,551 | 25,008,063 | 1,649,649 | 20,000 | |||||||||||||
NM—not meaningful.
| | As of and for the Years Ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||
| | (In thousands, except per share data) | ||||||||||||||||
Operating Data | |||||||||||||||||
Revenues | $ | 439,251 | $ | 383,853 | $ | 360,869 | $ | 296,461 | $ | 214,928 | |||||||
Income from continuing operations | 137,224 | 121,800 | 102,423 | 126,044 | 47,004 | ||||||||||||
Discontinued operations | 4,899 | 27,258 | 165,584 | 98,202 | 138,152 | ||||||||||||
Net income | 142,123 | 149,058 | 268,007 | 224,246 | 185,156 | ||||||||||||
Preferred stock dividends | — | (5,350 | ) | (7,637 | ) | (13,434 | ) | (15,163 | ) | ||||||||
Net income attributable to NHP common stockholders | 143,766 | 143,040 | 260,501 | 211,024 | 170,414 | ||||||||||||
Dividends paid on common stock | 223,452 | 187,799 | 171,496 | 150,819 | 120,406 | ||||||||||||
Per Share Data | |||||||||||||||||
Diluted income from continuing operations attributable to NHP common stockholders | $ | 1.11 | $ | 1.06 | $ | 0.95 | $ | 1.23 | $ | 0.41 | |||||||
Diluted net income attributable to NHP common stockholders | 1.15 | 1.31 | 2.63 | 2.31 | 2.19 | ||||||||||||
Dividends paid on common stock | 1.82 | 1.76 | 1.76 | 1.64 | 1.54 | ||||||||||||
Balance Sheet Data | |||||||||||||||||
Investments in real estate, net | $ | 3,698,274 | $ | 3,031,383 | $ | 3,124,299 | $ | 2,961,442 | $ | 2,583,515 | |||||||
Total assets | 4,092,624 | 3,647,075 | 3,458,125 | 3,144,353 | 2,704,814 | ||||||||||||
Borrowings under unsecured senior credit facility | 175,000 | — | — | 41,000 | 139,000 | ||||||||||||
Senior notes | 991,633 | 991,633 | 1,056,233 | 1,166,500 | 887,500 | ||||||||||||
Notes and bonds payable | 362,624 | 431,456 | 435,199 | 340,150 | 355,411 | ||||||||||||
NHP stockholders' equity | 2,299,827 | 2,033,099 | 1,760,667 | 1,482,693 | 1,243,809 | ||||||||||||
Other Data | |||||||||||||||||
Net cash provided by operating activities | $ | 295,741 | $ | 247,145 | $ | 243,838 | $ | 220,886 | $ | 171,932 | |||||||
Net cash used in investing activities | $ | (708,454 | ) | $ | (1,900 | ) | $ | (111,088 | ) | $ | (375,364 | ) | $ | (654,819 | ) | ||
Net cash provided by (used in) financing activities | $ | 90,026 | $ | 54,783 | $ | (69,907 | ) | $ | 159,190 | $ | 487,577 | ||||||
Diluted weighted average shares outstanding | 124,339 | 108,547 | 98,763 | 90,987 | 77,566 | ||||||||||||
Reconciliation of Funds from Operations(1) | |||||||||||||||||
Net income | $ | 142,123 | $ | 149,058 | $ | 268,007 | $ | 224,246 | $ | 185,156 | |||||||
Net loss (income) attributable to noncontrolling interests | 1,643 | (668 | ) | 131 | 212 | 421 | |||||||||||
Preferred stock dividends | — | (5,350 | ) | (7,637 | ) | (13,434 | ) | (15,163 | ) | ||||||||
Real estate related depreciation | 135,245 | 123,666 | 118,603 | 100,340 | 77,714 | ||||||||||||
Depreciation in income from unconsolidated joint ventures | 4,793 | 5,209 | 4,768 | 1,703 | — | ||||||||||||
Gain on sale of facilities, net | (16,948 | ) | (23,908 | ) | (154,995 | ) | (118,114 | ) | (96,791 | ) | |||||||
Funds from operations available to common stockholders | $ | 266,856 | $ | 248,007 | $ | 228,877 | $ | 194,953 | $ | 151,337 | |||||||
| | As of September 30, | As of December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance Sheet Data(In thousands) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Total real estate investments, at cost | $ | 2,236,387 | $ | 1,663,953 | $ | 677,589 | $ | 165,041 | $ | — | ||||||
Total assets | 2,148,337 | 1,734,573 | 690,668 | 172,315 | 844 | |||||||||||
Mortgage notes payable | 303,831 | 259,348 | 200,095 | 110,721 | — | |||||||||||
Credit facility | 619,400 | — | 26,000 | — | — | |||||||||||
Note payable | — | — | 2,500 | 2,500 | — | |||||||||||
Total liabilities | 1,026,496 | 298,829 | 243,381 | 118,490 | 645 | |||||||||||
Total equity | 1,121,841 | 1,435,744 | 447,287 | 53,825 | 199 | |||||||||||
Additionally, funds from operations is used by NHP and widely used by industry analysts as a measure of operating performance for equity REITs. NHP therefore discloses funds from operations, although it is a measurement that is not defined by GAAP. NHP calculates funds from operations in accordance with the definition used by NAREIT. Funds from operations does not represent cash generated from operating activities as defined by GAAP (funds from operations does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity.
Summary Unaudited Pro Forma Condensed Consolidated Financial Information
The following table shows summary unaudited pro forma condensed consolidated financial information about the combined financial condition and operating results of Ventas and NHPHCT after giving effect to the mergermergers and Ventas's and HCT's 2014 and 2013 acquisitions and other investments, dispositions and significant debt activity (including the Atria Acquisition.previously announced acquisition of 29 independent living seniors housing communities located in Canada from Holiday Retirement in a separate transaction for a purchase price of CAD 957 million in cash, which we refer to as the Holiday acquisition, and Ventas's April 2014 issuance and sale of $700 million aggregate principal amount of senior notes). The unaudited pro forma financial information assumes that the merger ismergers are accounted for by applyingusing the acquisition method.method of accounting. The unaudited pro forma condensed consolidated balance sheet data gives effect to the mergermergers and the Atria AcquisitionHoliday acquisition as if they boththe transactions had occurred on December 31, 2010.September 30, 2014. The unaudited pro forma condensed consolidated statement of income statement data gives effect to the mergermergers and Ventas's and HCT's 2014 and 2013 acquisitions and other investments, dispositions and significant debt activity (including the Atria AcquisitionHoliday acquisition and Ventas's April 2014 issuance and sale of $700 million aggregate principal amount of senior notes) as if they boththe transactions had occurred on January 1, 2010,2013, in each case based on the most recent valuation data available. The summary unaudited pro forma condensed consolidated financial information listedshown below has been derived from and should be read in conjunction with (1) the more detailed unaudited pro forma condensed consolidated financial information, including the notes thereto, appearing elsewhere in this joint proxy statement/prospectus and (2) the historical consolidated financial statements and related notes of both Ventas and NHP, incorporated herein by reference, and (3) the historical consolidated financial statements and related notes of Atria Senior Living Group, Inc. and One Lantern Senior Living Inc, which we refer to as One Lantern,HCT, incorporated herein by reference. See "Unaudited Pro Forma Condensed Consolidated Financial Statements" beginning on page 100103 and "Where You Can Find More Information"Information; Incorporation by Reference" beginning on page 131.
| | As of and for the Year Ended December 31, 2010 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Ventas Historical | Ventas Pro Forma for the Atria Acquisition | NHP Historical | Total Pro Forma | ||||||||||
| | (In thousands, except per share data) | |||||||||||||
Operating Data | ||||||||||||||
Rental income | $ | 539,572 | $ | 565,781 | $ | 409,854 | $ | 1,019,922 | ||||||
Resident fees and services | 446,301 | 1,046,840 | — | 1,046,840 | ||||||||||
Interest expense | 178,863 | 259,373 | 97,329 | 315,107 | ||||||||||
Property-level operating expenses | 315,953 | 756,687 | 39,536 | 795,616 | ||||||||||
Income from continuing operations attributable to common stockholders | 218,370 | 140,313 | 138,867 | 246,637 | ||||||||||
Per Share Data | ||||||||||||||
Income from continuing operations attributable to common stockholders per common share: | ||||||||||||||
Basic | $ | 1.39 | $ | 0.75 | $ | 1.14 | $ | 0.86 | ||||||
Diluted | $ | 1.38 | $ | 0.75 | $ | 1.12 | $ | 0.85 | ||||||
Shares used in computing earnings per common share: | ||||||||||||||
Basic | 156,608 | 187,130 | 121,687 | 286,611 | ||||||||||
Diluted | 157,657 | 188,179 | 124,339 | 289,746 | ||||||||||
Balance Sheet Data | ||||||||||||||
Net real estate investments | 5,444,114 | 8,702,770 | 3,861,512 | 16,112,629 | ||||||||||
Total assets | 5,758,021 | 9,211,903 | 4,092,624 | 16,888,988 | ||||||||||
Senior notes payable and other debt | 2,900,044 | 4,577,855 | 1,529,257 | 6,043,430 | ||||||||||
Total equity | 2,390,205 | 3,984,552 | 2,333,110 | 9,545,577 | ||||||||||
Other Data | ||||||||||||||
FFO(1) | 421,506 | 541,535 | 266,856 | 893,891 | ||||||||||
Normalized FFO(1) | 453,981 | 550,717 | 286,285 | 922,577 | ||||||||||
The summary unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and is based on assumptions and estimates considered appropriate by Ventas's management; however, it is not necessarily indicative of the combined operatingwhat Ventas's consolidated financial condition or results or financial position thatof operations actually would have occurred if suchbeen assuming the transactions had been consummated onas of the dates and in accordance with the assumptions described herein,indicated, nor is it necessarily indicativedo they purport to represent Ventas's consolidated financial position or results of the combined company'soperations for future operating results or financial position.periods. The unaudited pro forma condensed consolidated financial information does not give effect to (1)include the impact of any potential revenue enhancements or cost synergies that could result frommay be achieved in the mergertransactions or the Atria Acquisition or (2) any transaction or integration costs relatingstrategies that management may consider in order to the merger or the Atria Acquisition.continue to efficiently manage Ventas's operations. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed consolidated financial information, the preliminary allocationallocations of the pro forma purchase price reflected in the unaudited pro forma condensed consolidated financial information isare subject to adjustment and may vary significantly from the definitive allocation of the final purchase price that will be recorded subsequent to the completion of the merger. Themergers. A final determination of the final purchase pricefair values of the assets acquired and liabilities assumed will be based on the numberactual valuations of sharesthe tangible and intangible assets and liabilities that exist as of NHP common stock outstanding and Ventas's stock price at closing.the date of completion of the acquisition. Future results may vary significantly from the results reflected in such statements.
| | As of September 30, 2014 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | Ventas Historical | HCT Historical | Total Pro Forma | |||||||
| | (In thousands) | |||||||||
Balance Sheet Data | ||||||||||
Net real estate investments | $ | 19,421,537 | $ | 2,055,108 | $ | 22,143,638 | ||||
Total assets | 20,651,165 | 2,148,337 | 23,597,965 | |||||||
Senior notes payable and other debt | 10,469,106 | 926,843 | 11,595,550 | |||||||
Total equity | 8,623,173 | 1,121,841 | 10,298,766 | |||||||
| | For the Nine Months Ended September 30, 2014 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Ventas Historical | Pro Forma for Ventas 2014 Transactions | HCT Historical | Pro Forma for HCT 2014 Transactions | Total Pro Forma | |||||||||||
| | (In thousands, except per share data) | |||||||||||||||
Operating Data | ||||||||||||||||
Rental income | $ | 1,071,489 | $ | 1,085,575 | $ | 97,638 | $ | 105,708 | $ | 1,191,202 | ||||||
Resident fees and services | 1,141,781 | 1,228,456 | 96,120 | 115,299 | 1,343,755 | |||||||||||
Interest expense | 277,811 | 309,040 | 20,593 | 20,952 | 325,979 | |||||||||||
Property-level operating expenses | 882,820 | 926,481 | 85,486 | 98,826 | 1,025,307 | |||||||||||
Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions | 366,060 | 346,364 | (116,445 | ) | (107,176 | ) | 338,005 | |||||||||
Per Share Data | ||||||||||||||||
Income (loss) from continuing operations attributable to common stockholders per common share, including real estate dispositions: | ||||||||||||||||
Basic | $ | 1.24 | $ | 1.18 | $ | (0.66 | ) | $ | (0.61 | ) | $ | 1.06 | ||||
Diluted | 1.23 | 1.17 | (0.66 | ) | (0.61 | ) | 1.05 | |||||||||
Shares used in computing earnings per common share: | ||||||||||||||||
Basic | 293,965 | 293,965 | 175,234 | 175,234 | 319,688 | |||||||||||
Diluted | 296,411 | 296,411 | 175,234 | 175,234 | 323,325 | |||||||||||
Other Data | ||||||||||||||||
FFO(1) | $ | 929,692 | $ | 969,609 | $ | (23,368 | ) | $ | (1,659 | ) | $ | 1,040,796 | ||||
Normalized FFO(1) | 987,806 | 1,012,521 | 13,907 | 27,457 | 1,111,722 | |||||||||||
| | For the Year Ended December 31, 2013 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Ventas Historical | Pro Forma for Ventas 2014 and 2013 Transactions | HCT Historical | Pro Forma for HCT 2014 and 2013 Transactions | Total Pro Forma | |||||||||||
| | (In thousands, except per share data) | |||||||||||||||
Operating Data | ||||||||||||||||
Rental income | $ | 1,325,984 | $ | 1,402,040 | $ | 76,955 | $ | 140,063 | $ | 1,542,058 | ||||||
Resident fees and services | 1,406,005 | 1,604,943 | 47,698 | 149,830 | 1,754,773 | |||||||||||
Interest expense | 334,484 | 404,611 | 15,843 | 19,821 | 425,885 | |||||||||||
Property-level operating expenses | 1,109,632 | 1,217,658 | 45,965 | 116,800 | 1,334,458 | |||||||||||
Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions | $ | 488,930 | $ | 501,063 | $ | (22,230 | ) | $ | (740 | ) | $ | 518,090 | ||||
Per Share Data | ||||||||||||||||
Income (loss) from continuing operations attributable to common stockholders per common share, including real estate dispositions: | ||||||||||||||||
Basic | $ | 1.67 | $ | 1.71 | $ | (0.15 | ) | $ | (0.00 | ) | $ | 1.63 | ||||
Diluted | 1.66 | 1.70 | (0.15 | ) | (0.00 | ) | 1.61 | |||||||||
Shares used in computing earnings per common share: | ||||||||||||||||
Basic | 292,654 | 292,654 | 151,684 | 151,684 | 318,377 | |||||||||||
Diluted | 295,110 | 295,110 | 151,684 | 151,684 | 322,024 | |||||||||||
Other Data | ||||||||||||||||
FFO(1) | $ | 1,208,458 | $ | 1,313,199 | $ | 44,745 | $ | 150,411 | $ | 1,479,453 | ||||||
Normalized FFO(1) | 1,220,709 | 1,307,726 | 58,875 | 149,302 | 1,455,575 | |||||||||||
Equivalent andUnaudited Comparative Per Share Information
The following table setstables set forth, as of and for the nine months ended September 30, 2014 and the year ended December 31, 20102013, selected unaudited per share information for Ventas common stock on a historical and pro forma basis, giving effect to the merger and the Atria Acquisition,bases and for NHPHCT common stock on a historical and pro forma equivalent basis.bases, after giving effect to the mergers and Ventas's and HCT's 2014 and 2013 acquisitions and other investments, dispositions and significant debt activity (including the Holiday acquisition and Ventas's April 2014 issuance and sale of $700 million aggregate principal amount of senior notes) as if the transactions occurred on January 1, 2013. Except for the historical information as of and for the year ended December 31, 2010,2013, the information in the table is unaudited. You should read the table below togetherin conjunction with theVentas's and HCT's historical consolidated financial statements and related notes of Ventas and NHP contained in their respective Annual Reports on Form 10-K forreports filed with the year ended December 31, 2010,SEC, which are incorporated by reference intoin this joint proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 131.
The Ventas pro forma income from continuing operations attributable to common stockholders per common share was calculated using the methodology described below under the heading "Unaudited Pro Forma Condensed Consolidated Financial Statements," and is subject to all the assumptions, adjustments and limitations described thereunder. The Ventas pro forma cash dividends per common share represent Ventas's historical cash dividends per common share. The Ventas pro forma book value per share was calculated by dividing total pro forma combined Ventas and NHP common stockholders' equity by pro forma equivalent common shares. The NHPHCT pro forma equivalent perinformation shows the effect of the
mergers from the perspective of a holder of HCT common share amounts werestock and was calculated by multiplying the Ventas pro forma amounts by the exchange ratioExchange Ratio of 0.7866.0.1688.
The pro forma per share data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transactions had been consummated at the beginning of the earliest period presented, nor is it necessarily indicative of future operating results or financial position. The pro forma adjustments are estimates based upon information and assumptions available at the date of this proxy statement/prospectus.
| | Ventas | NHP | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Historical | Pro Forma | Historical | Pro Forma | |||||||||
For the Year Ended December 31, 2010 | |||||||||||||
Income from continuing operations attributable to common stockholders per common share, basic | $ | 1.39 | $ | 0.86 | $ | 1.14 | $ | 0.68 | |||||
Income from continuing operations attributable to common stockholders per common share, diluted | $ | 1.38 | $ | 0.85 | $ | 1.12 | $ | 0.67 | |||||
Cash dividends declared per common share | $ | 2.14 | $ | 2.14 | $ | 1.82 | $ | 1.68 | |||||
As of December 31, 2010 | |||||||||||||
Book value per common share | $ | 15.20 | $ | 37.20 | $ | 18.48 | $ | 29.26 | |||||
| | Ventas | HCT | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Historical | Pro Forma | Historical | Pro Forma Equivalent | |||||||||
As of or for the Nine Months Ended September 30, 2014 | |||||||||||||
Income (loss) from continuing operations attributable to common stockholders per common share, including real estate dispositions: | |||||||||||||
Basic | $ | 1.24 | $ | 1.06 | $ | (0.66 | ) | $ | 0.18 | ||||
Diluted | 1.23 | 1.05 | (0.66 | ) | 0.18 | ||||||||
Distributions declared per common share | 2.175 | 2.175 | 0.51 | 0.37 | |||||||||
Book value per common share | 29.29 | 32.17 | 6.63 | 5.43 | |||||||||
As of or for the Year Ended December 31, 2013 | |||||||||||||
Income (loss) from continuing operations attributable to common stockholders per common share, including real estate dispositions: | |||||||||||||
Basic | $ | 1.67 | $ | 1.63 | $ | (0.15 | ) | $ | 0.28 | ||||
Diluted | 1.66 | 1.61 | (0.15 | ) | 0.27 | ||||||||
Distributions declared per common share | 2.735 | 2.735 | 0.68 | 0.46 | |||||||||
Book value per common share | 29.89 | — | 7.96 | — | |||||||||
Comparative Ventas and HCT Market Price and Dividend Information
Ventas's Market Price and Dividend Data
Ventas's common stock is listed on the NYSE under the symbol "VTR." This table sets forth, for the periods indicated, the high and low closing sales prices per share of VTR's common stock, as reported by the NYSE, and distributions declared per share of Ventas common stock.
| | Price Per Share of Common Stock | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | Distribution Declared Per Share(1) | |||||||||
| | High | Low | ||||||||
2012 | ||||||||||
First Quarter | $ | 58.98 | $ | 53.68 | $ | 0.62 | ||||
Second Quarter | 63.12 | 54.06 | 0.62 | |||||||
Third Quarter | 67.33 | 61.94 | 0.62 | |||||||
Fourth Quarter | 65.36 | 61.82 | 0.62 | |||||||
2013 | ||||||||||
First Quarter | $ | 73.20 | $ | 64.68 | $ | 0.67 | ||||
Second Quarter | 82.93 | 64.38 | 0.67 | |||||||
Third Quarter | 72.16 | 58.86 | 0.67 | |||||||
Fourth Quarter | 67.33 | 55.26 | 0.725 | |||||||
2014 | ||||||||||
First Quarter | $ | 63.67 | $ | 56.79 | $ | 0.725 | ||||
Second Quarter | 68.40 | 61.29 | 0.725 | |||||||
Third Quarter | 66.04 | 60.70 | 0.725 | |||||||
Fourth Quarter (through November 28, 2014) | 71.55 | 62.48 | – | |||||||
HCT's Market Price Data and Dividend Data
HCT's common stock became listed on Nasdaq under the symbol "HCT" on April 7, 2014. This table sets forth, for the periods indicated, the high and low closing sales prices per share of HCT's common stock, as reported on Nasdaq, and dividends declared per HCT common share.
| | Price Per Share of Common Stock | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | Dividend Declared Per Common Share(1) | |||||||||
| | High | Low | ||||||||
2012 | ||||||||||
First Quarter | N/A | N/A | $ | 0.17 | ||||||
Second Quarter | N/A | N/A | 0.17 | |||||||
Third Quarter | N/A | N/A | 0.17 | |||||||
Fourth Quarter | N/A | N/A | 0.17 | |||||||
2013 | ||||||||||
First Quarter | N/A | N/A | $ | 0.17 | ||||||
Second Quarter | N/A | N/A | 0.17 | |||||||
Third Quarter | N/A | N/A | 0.17 | |||||||
Fourth Quarter | N/A | N/A | 0.17 | |||||||
2014 | ||||||||||
First Quarter | N/A | N/A | $ | 0.17 | ||||||
Second Quarter | $ | 10.98 | $ | 9.50 | 0.17 | (2) | ||||
Third Quarter | 10.98 | 10.30 | 0.17 | |||||||
Fourth Quarter (through November 28, 2014) | 11.43 | 10.55 | 0.17 | |||||||
If Ventas continues to pay cash distributions at the annualized rate of $2.90 per share following completion of the merger, this dividend, from the perspective of a holder of HCT common stock, would be equivalent to an annualized distribution of approximately $0.49 per share of HCT common stock, based on the Exchange Ratio of 0.1688.
The following table sets forth the per share closing sales prices of Ventas common stock and HCT common stock as reported on the NYSE and Nasdaq, respectively, on May 30, 2014, the last full trading day before the public announcement of the execution of the merger agreement by Ventas and HCT, and on [ ], 2014, the latest practicable trading day before the date of this proxy statement/prospectus. The following table also includes the equivalent market value per share of HCT common stock on May 30, 2014, and on [ ], 2014, determined by multiplying the per share price of Ventas common stock by the Exchange Ratio:
| | Ventas Common Stock | HCT Common Stock | Implied Value | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
May 30, 2014 | $ | 66.80 | $ | 9.95 | $ | 11.28 | ||||
[ ] | [ ] | [ ] | [ ] | |||||||
The market price of Ventas common stock will fluctuate between the date of this proxy statement/prospectus and the effective time of the merger.
Following the transaction, Ventas expects that its common stock will continue to be listed on the NYSE. Ventas has agreed to use its reasonable best efforts to cause the shares of Ventas common stock to be issued to HCT stockholders pursuant to the merger agreement to be approved for listing on the NYSE, subject to official notice of issuance, prior to the effective time of the merger. If the merger is completed, shares of HCT common stock will be delisted from Nasdaq and thereafter deregistered under the Exchange Act.
In addition to the other information included andcontained in or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in the section entitled "Cautionary Statement RegardingConcerning Forward-Looking Statements,"Statements" beginning on page 34, you should carefully consider the following risks before deciding whether to vote for (i) if you are a Ventas stockholder, the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and the Ventas charter amendment, or (ii) if you are an NHP stockholder, the adoptioneach of the merger agreement and approval ofproposals to be voted on at the merger and other transactions contemplated by the merger agreement.HCT special meeting. In addition, you should read and consider the risks associated with each of Ventas's and HCT's businesses, which can be found in Ventas's and HCT's respective reports filed with the businesses of VentasSEC and NHPincorporated by reference into this proxy statement/prospectus, because these risks will also affect the combined company. These risks can be found in Ventas's and NHP's respective Annual Reports on Form 10-K for the year ended December 31, 2010 and other reports filed by Ventas and NHP with the SEC, which are incorporated by reference into this joint proxy statement/prospectus. You should also read and consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference into this joint proxy statement/prospectus. See "Where You Can Find More Information"Information; Incorporation by Reference" beginning on page 131.127.
Risk Factors Relating to the Merger
The exchange ratio in the merger is fixed and will not be adjusted in the event of any change in either Ventas's common stock price or NHP'sHCT's common stock price.
Upon the closingconsummation of the merger, each share of NHPHCT common stock issued and outstanding immediately prior to the effective time of the merger (other than shares held by HCT, Ventas or any of their respective wholly owned subsidiaries, which will be cancelled) will be converted into the right to receive 0.7866per share, at the election of the holder of such stock, subject to proration, (i) $11.33 in cash or (ii) a sharenumber of shares of Ventas common stock with cash paid in lieu of fractional shares. This exchange ratioequal to the Exchange Ratio. The Exchange Ratio was fixed in the merger agreement and will not be adjusted for changes in the market priceprices of either Ventas common stock or NHPHCT common stock. Changes in the market price of Ventas common stock prior to the merger will affect the market value of the merger consideration that NHPreceived by HCT stockholders willwhose shares are converted into the right to receive on the dateshares of Ventas common stock upon completion of the merger. Stock price changes may result from a variety of factors (many of which are beyond our control)the control of Ventas or HCT), including the following factors:including:
The market price of Ventas common stock at the closingconsummation of the merger may vary from its price on the date the merger agreement was executed, on the date of this joint proxy statement/prospectus and on the date of the HCT special meetings of Ventas and NHP.meeting. As a result, the market value of the mergerstock consideration represented by the exchange ratio will also vary. For example, based on the range of closing prices of Ventas common stock during the period from February 25, 2011,May 30, 2014, the last trading day before public announcement of the merger, through [ • ], 2011,2014, the latest practicable date before the date of this joint proxy statement/prospectus, the exchange ratioExchange Ratio of 0.78660.1688 shares of Ventas common stock represented a market value for HCT common stock ranging from a low of $[ • ] to a high of $[ • ].] per share. The market for Ventas common stock has, from time to time, experienced price and volume fluctuations, and investors in Ventas common stock may experience a decrease in the value of their shares. Factors such as Ventas's operating performance and the performance of similar companies, actual or anticipated differences in operating results, changes in
market valuations of similar companies, strategic decisions by Ventas, including the merger, or strategic decisions by Ventas's competitors, the realization of any of the other risk factors described herein or incorporated by reference into this proxy statement/prospectus, and other factors, including factors unrelated to Ventas's performance such as general market conditions and changes in interest rates that may impact other companies including Ventas's competitors, could cause the market price of Ventas common stock to fluctuate.
Because the merger will be completed after the date of the HCT special meetings,meeting, at the time of yourthe special meeting, you will not know the exact market value of the Ventas common stock that NHPHCT stockholders electing to receive Ventas common stock will receive upon completion of the merger. You should considerIn addition, the following two risks:
If you elect to receive cash consideration, you cannot be certain of the form of merger consideration that you will receive for all of your shares.
In no event will the aggregate consideration paid in cash be paid with respect to more than 10% of the shares of HCT common stock issued and outstanding as of immediately prior to the consummation of the merger (including restricted shares). If the aggregate elections for payment in cash exceed such limit, then the amount of cash consideration paid with respect to cash elections will be reduced on a pro rata basis, with the remaining consideration paid in shares of Ventas common stock to be issued per sharestock. If such proration is required, holders of NHPHCT common stock is fixed, NHP stockholders cannot be surewho elected to receive cash may receive a portion of the market value of thetheir consideration in Ventas common stock they will receive upon completionstock.
The merger and the transactions related thereto are subject to approval by common stockholders of HCT.
Consummation of the merger orrequires the market valueapproval by HCT stockholders of Ventasthe merger agreement and the merger, which requires the affirmative vote of at least a majority of the outstanding shares of HCT common stock entitled to vote on such proposal at any time after the completion of the merger.
HCT special meeting. If the required vote is not obtained, either Ventas or HCT may terminate the merger does not occur, one of the companies may incur payment obligations to the other.agreement.
If the merger agreement is terminated, under certain circumstances, Ventas or NHPHCT may be obligated to pay the other party a termination fee of $175 million plus $20Ventas $10.0 million in expense reimbursement. Inreimbursements. Additionally, under certain circumstances, even if the termination fee is not payable, Ventas or NHPHCT may be requiredobligated to pay $20Ventas a break-up fee in the amount of $55.0 million in(with the $10.0 million expense reimbursement to the other party.credited against such break-up fee if previously paid). See "The Merger Agreement—Termination of the Merger Agreement—Termination Payment: Break-up Fee and Expenses Payable by NHP to Ventas"Expense Reimbursement" beginning on page 94 and "—Termination Fee and Expenses Payable by Ventas to NHP" beginning on page 95.95 of this proxy statement/prospectus.
Failure to complete the merger could negatively impact the stock prices and the future businessbusinesses and financial results of Ventas and NHP.HCT.
Failure to consummate the merger could negatively impact Ventas's and HCT's future businesses and financial results, and, in that event, the market price of each party's common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the merger will be consummated. If the merger is not completed, theconsummated for any reason, Ventas's and HCT's ongoing businesses of Ventas and NHP could be adversely affected, and each of Ventas and NHPHCT will be subject to several risks, including the following:
If the merger is not completed, theseconsummated, Ventas and HCT will not achieve the expected benefits thereof and will be subject to the risks described above, which could materially affect the business,Ventas's and HCT's respective businesses, financial results and stock prices of Ventas or NHP.prices.
The pendency of the merger could adversely affect the business and operations of Ventas and NHP.HCT.
In connection with the pending merger, some customerstenants, operators, borrowers, managers or vendors of each of Ventas and NHPor HCT may delay or defer decisions, which could negatively impact the revenues, earnings, cash flows and expenses of Ventas and NHP,HCT, regardless of whether the merger is completed. Similarly, current and prospective employees of Ventas and NHP may experience uncertainty about their future roles with the combined company following the merger, which may materially adversely affect the ability of each of Ventas and NHP to attract and retain key personnel during the pendency of the merger. In addition, due to operating covenants in the merger agreement, each of Ventas and NHPHCT may be unable, during the pendency of the merger, to pursue certain strategic transactions, undertake certain significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business, even if such actions would prove beneficial.
Some of theThe directors and executive officers of NHPHCT have interests in seeing the merger completed that are different from, or in addition to, those of the other NHPHCT stockholders.
Some of theThe directors and executive officers of NHPHCT have arrangements that provide them with interests in the merger that are different from, or in addition to, those of theHCT stockholders of NHP. These interests include, among other things, the continued service as a director or an executive officer of the combined company, severance benefits and the immediate vesting of certain stock-based awards.generally. These interests, among other things, may influence the directors and executive officers of NHPHCT to support or approve the merger. See "The Merger—Financial Interests of NHP'sHCT's Directors and Executive Officers in the Merger" beginning on page 65.68.
The merger agreement contains provisions that could discourage a potential competing acquirer of either NHP or VentasHCT or could result in any competing proposal being at a lower price than it might otherwise be.
The merger agreement contains "no shop" provisions that, subject to limited exceptions, restrict NHP'sHCT's ability to solicit, encourage, facilitate, or discuss competing third-party proposals to acquire all, or a significant part, of NHP. Further, even if the NHP board of directors withdraws or qualifies its recommendation for the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement, it will still be required to submit the matter to a vote of its stockholders at its special meeting.HCT. In addition, Ventas generally has an opportunity to offer to modify the terms of the proposed merger in response to any competing acquisition proposals that may be made before the NHP board of directorsHCT Board may withdraw or qualify its recommendation.recommendation or terminate the merger agreement to enter into an acquisition agreement with respect to a superior proposal. Upon termination of the merger agreement in somecertain circumstances, one of the partiesHCT may be required to pay a termination fee and/or expense reimbursementpayment to the other party.Ventas. See "The Merger—The Merger Agreement—Covenants and Agreements—No Solicitation of Transactions by NHP"HCT" beginning on page 85 "—and "The Merger Agreement—Termination of the Merger Agreement—Termination Payment: Break-up Fee and Expenses Payable by NHP to Ventas" beginning on page 94, and "—Termination Fee and Expenses Payable by Ventas to NHP"Expense Reimbursement" beginning on page 95.
These provisions could discourage a potential competing acquirer that might have an interest in acquiring all, or a significant part, of NHP or VentasHCT from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expensecost of the termination fee and/or expense reimbursement or break-up fee that may become payable in certain circumstances.
There may be unexpected delays in the consummation of the merger, which could impact Ventas's ability to timely achieve the benefits associated with the merger.
The merger is currently expected to close in January 2015, assuming that all of the conditions in the merger agreement are satisfied or waived. The merger agreement provides that either Ventas or HCT may terminate the merger agreement if the merger has not occurred by January 31, 2015 (subject
to the right of each of Ventas and HCT to extend this date for up to four successive one-month periods in certain circumstances). Certain events may delay the consummation of the merger. Some of the events that could delay the consummation of the merger include difficulties in obtaining the approval of HCT stockholders or satisfying the other closing conditions to which the merger is subject. Ventas and HCT can neither assure you that the conditions to the completion of the merger will be satisfied or waived, if permitted, or that any adverse effect, event, development or change will not occur, nor can they provide any assurances as to whether or when the merger will be completed.
The ownership percentages of Ventas and HCT stockholders will be diluted by the merger.
The merger will dilute the ownership percentages of the current Ventas stockholders and will result in HCT stockholders having an ownership stake in Ventas that is smaller than their current stake in HCT. In connection with the merger, Ventas expects to issue approximately 25.7 million shares of its common stock to the holders of HCT common stock, excluding 1.2 million shares of Ventas common stock that may be issued upon redemption of the limited partnership units of the surviving partnership, assuming the merger consideration is paid in the form of shares of Ventas common stock in respect of 90% of the shares of HCT common stock, based on the number of shares of HCT common stock outstanding on the record date. Ventas stockholders and the former HCT stockholders are currently expected to hold approximately 92% and 8%, respectively, of the total number of shares of Ventas common stock outstanding immediately after the merger, based on the number of shares of common stock of each of Ventas and HCT outstanding on the record date and assuming that the merger consideration is paid in the form of shares of Ventas common stock in respect of 90% of the shares of HCT common stock and that neither party issues any additional shares of common stock prior to the completion of the merger. Consequently, Ventas stockholders and HCT stockholders, as a general matter, will have less influence over the management and policies of Ventas after the merger than each group exercises over the management and policies of Ventas and HCT, as applicable, immediately prior to the merger.
An adverse judgment in a lawsuit challenging the merger may prevent the merger from becoming effective or from becoming effective within the expected timeframe.
Stockholders of HCT may file lawsuits challenging the merger, which may name Ventas as a defendant. To date, thirteen (13) such lawsuits have been filed in the Circuit Court for Baltimore City, Maryland, in the Supreme Court of the State of New York, County of New York and in the United States District Court for the District of Maryland. All of these lawsuits name HCT, the HCT Board, Ventas, Merger Sub and OP Merger Sub as defendants. Some of these lawsuits also name other parties, including HCT's CEO and other HCT-related entities, as additional defendants. All of the named plaintiffs claim to be HCT stockholders and purport to represent all holders of HCT common stock. Each complaint generally alleges that the HCT Board breached fiduciary duties owed to the plaintiffs and the other public stockholders of HCT, and that Ventas, Merger Sub and/or OP Merger Sub aided and abetted those breaches. Several of these complaints purport to assert both direct and derivative claims; certain complaints also purport to assert a claim for breach of contract, waste of corporate assets or unjust enrichment, and certain of the complaints purport to assert claims relating to HCT's disclosures in the proxy filed with the SEC. Among other remedies, the complaints seek injunctive relief prohibiting the defendants from completing the proposed merger or, in the event that an injunction is not awarded, unspecified money damages, costs and attorneys' fees.
Ventas and HCT cannot assure you as to the outcome of such lawsuits, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the merger on the agreed-upon terms, such an injunction may delay the completion of the merger in the expected timeframe, or may prevent it from being completed
altogether. Whether or not any plaintiff's claim is successful, this type of litigation is often expensive and diverts management's attention and resources, which could adversely affect the operation of Ventas's and HCT's businesses.
HCT's unaudited prospective financial information is based on various assumptions that may not prove to be correct.
The unaudited prospective financial information set forth under "The Merger—Certain Unaudited Prospective Financial Information of HCT" beginning on page 65 is based on assumptions of, and information available to, HCT at the time it was prepared. Such information can be adversely affected by inaccurate assumptions or by known or unknown risks and uncertainties, many of which are beyond HCT's control. Many factors mentioned in this proxy statement/prospectus could affect HCT or the combined company's future results. HCT stockholders are urged to review the SEC filings of HCT for a description of the risk factors with respect to the business of HCT. See "Cautionary Statement Concerning Forward-Looking Statements" beginning on page 34 and "Where You Can Find More Information; Incorporation by Reference" beginning on page 127. As a result of these contingencies, actual future results may vary materially from HCT's estimates. In view of these uncertainties, the inclusion of certain of HCT's unaudited prospective financial information in this proxy statement/prospectus is not and should not be viewed as a representation that the forecasted results will be achieved.
The unaudited prospective financial information presented herein was prepared solely for internal use and not prepared with a view toward public disclosure or toward compliance with published guidelines of any regulatory or professional body. Further, any forward-looking statement speaks only as of the date on which it is made. Neither HCT nor Ventas undertakes any obligation to update the unaudited prospective financial information herein to reflect events or circumstances after the date such unaudited prospective financial information was prepared or to reflect the occurrence of anticipated or unanticipated events or circumstances.
The unaudited prospective financial information included in this proxy statement/prospectus has been prepared by HCT's management. Neither HCT's independent registered public accounting firm nor any other independent accountants have compiled, examined or performed any procedures with respect to HCT's unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of the independent registered public accounting firm of HCT contained in HCT's Annual Report on Form 10-K for the year ended December 31, 2013, which is incorporated by reference into this proxy statement/prospectus, relates to the historical financial information of HCT. It does not extend to the unaudited prospective financial results and should not be read to do so. See "The Merger—Certain Unaudited Prospective Financial Information of HCT" beginning on page 65 for more information.
Counterparties to certain significant agreements with HCT may have consent rights in connection with the mergers.
HCT is party to certain agreements that give the counterparty certain rights, including consent rights, in connection with "change in control" transactions or otherwise. Under certain of these agreements, the mergers may constitute a "change in control" or otherwise give rise to consent rights and, therefore, the counterparty may assert its rights in connection with the mergers. Any such counterparty may request modifications of its agreements as a condition to granting a waiver or consent under those agreements, and there can be no assurance that such counterparties will not exercise their rights under the agreements, including termination rights where available. In addition, the failure to obtain consent under one agreement may be a default under other agreements and, thereby, trigger rights of the counterparties to such other agreements, including termination rights where available.
Ventas may incur adverse tax consequences if HCT has failed or fails to qualify as a REIT for U.S. federal income tax purposes.
If HCT has failed or fails to qualify as a REIT for U.S. federal income tax purposes and the merger is completed, Ventas may inherit significant tax liabilities and could lose its own REIT status should disqualifying activities continue after the merger.
There can be no assurance that future events, none of which are currently known, will not occur with respect to American Realty Capital Properties, Inc., which we refer to as ARCP, an entity previously sponsored by the parent of American Realty Capital V, LLC, which we refer to as the Sponsor, regarding certain accounting errors previously disclosed by ARCP which may have an impact on HCT.
ARCP, which is a separate public, listed company, recently filed a Current Report on Form 8-K announcing that its audit committee had concluded that the previously issued financial statements and other financial information contained in certain public filings of ARCP should no longer be relied upon as a result of certain accounting errors. ARCP's former chief financial officer and its former chief accounting officer have resigned. ARCP has initiated an investigation into these matters that is ongoing. ARCP's former chief financial officer does not have a current role in the management of the Sponsor's or HCT's business, but served as HCT's chief financial officer from August 2010 to December 2013. This person, along with one of HCT's existing executive officers/director (who currently serves as a director of ARCP), was involved in the oversight of HCT's financial reporting in prior periods in 2013 and 2012.
HCT's historical financial statements have been timely filed and incorporated by reference in this document. Although there has been no suggestion that the events at ARCP are related to HCT's financial statements, the audit committee of HCT recently engaged a separate audit firm to perform certain forensic procedures related to HCT's historical financial statements. HCT and its audit committee believe that HCT's historical financial statements fairly present in all material respects the financial condition of HCT and its consolidated subsidiaries. However, there can be no assurance that future events, none of which are currently known, will not occur with respect to ARCP that could have an impact on HCT.
Risk Factors Relating to Ventas Following the Merger
Ventas expects to incur substantial expenses related to the merger.
Ventas expects tomay incur substantial expenses in connection with completingconsummating the merger and integrating theHCT's business, operations, networks, systems, technologies, policies and procedures of NHP with those of Ventas. There are several systems that must be integrated, including accounting and finance, payroll and benefits, and asset management.its own. While Ventas has assumed thatexpects to incur a certain level of transaction and integration expenses, would be incurred, there are a number of factors beyond itsVentas's control that could affect the total amount or the timing of its integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Moreover, Ventas expects to commence these integration initiatives before it has completedAs a similar integration of assets it expects to acquire in the Atria Acquisition, which could cause both of these integration initiatives to be delayed or rendered more costly or disruptive than would otherwise be the case. Due to these factors,result, the transaction and integration expenses associated with the merger could, particularly in the near term, exceed the savings that Ventas expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the businesses following the completion of the merger. As a result of these expenses, Ventas expects to take charges against its earnings before and after the completion of the merger. The charges taken after the merger are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.
Following the merger, the combined company may be unable to integrate successfully the businesses of Ventas and NHP and realize the anticipated benefits of the merger or do so within the anticipated timeframe.
The merger involves the combination of two companies which currently operate as independent public companies. Even though the companies are operationally similar, the combined company will be required to devote significant management attention and resources to integrating the business practices and operations of Ventas and NHP. It is possible that the integration process could result in the distraction of the combined company's management, the disruption of the combined company's ongoing business or inconsistencies in the combined company's operations, services, standards, controls, procedures and policies, any of which could adversely affect the ability of the combined company to maintain relationships with customers, vendors and employees or to fully achieve the anticipated benefits of the merger.
The future results of the combined company will suffer if the combined company does not effectively manage its expanded portfolio and operations following the merger.
Following the merger, the combined company mayVentas will have an expanded portfolio and operations and likely will continue to expand its operations through additional acquisitions and other strategic transactions, some of which may involve complex challenges. The future success of the combined companyVentas will depend, in part, upon its ability to manage its expansion opportunities, integrate new operations into its existing business in an efficient and timely manner, successfully monitor its operations, costs, regulatory compliance and
service quality, and maintain other necessary internal controls. The combined company cannot assure youThere can be no assurance that itsVentas's expansion or acquisition opportunities will be successful, or that the combined companyit will realize its expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.
The merger will result in changes to the board of directors of the combined company.
Upon completion of the merger, the composition of the board of directors of the combined company will be different than the current boards of Ventas and NHP. The Ventas board of directors currently consists of nine directors and upon the consummation of the Atria Acquisition, a
representative of LREP will join the Ventas board. Upon the consummation of the merger, three NHP directors, including Douglas M. Pasquale, will also be added to the Ventas board of directors. This new composition of the board of directors of the combined company may affect the future decisions of the combined company.
Following the merger, the combined companyVentas may be unable to retain key employees.
The successintegrate successfully HCT's business and realize the anticipated benefits of Ventas after the merger or do so within the anticipated timeframe. The merger involves the combination of two companies that currently operate as independent public companies. Even though the companies are operationally similar, Ventas will dependbe required to devote significant management attention and resources to integrating HCT's business practices and operations with its own. The integration process could distract management, disrupt Ventas's ongoing business or result in part upon itsinconsistencies in Ventas's operations, services, standards, controls, procedures and policies, any of which could adversely affect Ventas's ability to retain key NHPmaintain relationships with its tenants, operators, borrowers, managers, vendors and Ventas employees. Key employees may depart either before or afterto fully achieve the merger becauseanticipated benefits of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the merger. Accordingly, no assurance can be given that Ventas, NHP and, following the merger, the combined company will be able to retain key employees to the same extent as in the past.
The market price of Ventas common stock may decline as a result of the merger.merger, and the merger will likely result in a reduction in per share equivalent dividend payments for holders of HCT common stock who receive stock consideration.
The market price of Ventas common stock may decline as a result of the merger if the combined companyVentas does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts, or the effect of the merger on Ventas's financial results is not consistent with the expectations of financial or industry analysts. In addition, if the merger is consummated, Ventas's stockholders will own interests in a company operating an expanded business with a different mix of properties, risks and liabilities. Current stockholders may not wish to continue to invest in Ventas if the merger is consummated, or for other reasons may wish to dispose of some or all of their shares of Ventas common stock. If, following the consummation of the merger, there is selling pressure on Ventas common stock that exceeds demand at the market price, the price of Ventas common stock could decline.
If Ventas continues to pay quarterly cash dividends at the current annualized rate of $2.90 per share after the merger, this dividend, from the perspective of a holder of HCT common stock, would be equivalent to an annualized dividend of approximately $0.49 per share of HCT common stock, based on the Exchange Ratio of 0.1688. This amount is approximately 28% less than HCT's current annualized dividend rate of $0.68 per share of HCT common stock.
Following the merger, the combined company may be unable to retain key employees.
The success of Ventas after the merger will depend in part upon its ability to retain key employees. Key employees may depart either before or after the merger because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Ventas following the merger. Accordingly, there can be no assurance that Ventas will be able to retain key employees following the merger to the same extent as in the past.
After the merger is completed, NHPHCT stockholders who receive Ventas common stock in the merger will have different rights that may be less favorable than their current rights as NHPHCT stockholders.
After the closing of the merger, NHPHCT stockholders who receive Ventas common stock in the merger will have different rights than they currently have as NHPHCT stockholders. For a detailed discussion of yourthe significant differences between rights as a stockholder of Ventas and the significant differences between your rights as a stockholder of NHP and your rights as a stockholder of Ventas,HCT, see "Comparison of Rights of Ventas Stockholders and NHPHCT Stockholders" beginning on page 118.117.
Ventas cannot assure you that it will be able to continue paying dividendsdistributions at the current rate.
As noted elsewhere in this joint proxy statement/prospectus, Ventas plansexpects to continue its current dividenddistribution practices following the merger. However, Ventas stockholders may not receive the same dividendsdistributions following the merger for various reasons, including the following:
Ventas's stockholders have no contractual or other legal right to dividendsdistributions that have not been declared.
The merger will likely result in a reduction in per share equivalent dividend payments for holders of NHP common stock after the merger.
If Ventas continues to pay quarterly cash dividends at the rate of $0.575 per share after the merger, this dividend, from the perspective of a holder of NHP common stock, would be equivalent to a quarterly dividend of approximately $0.45 per share of NHP common stock, based on the exchange ratio of 0.7866, which is approximately 6% less than NHP's most recent quarterly dividend of $0.48 per share of NHP common stock.
In connection with the announcement of the merger agreement, seven lawsuits have been filed and are pending, as of April 8, 2011, seeking, among other things, to enjoin the merger and rescind the merger agreement, and an adverse judgment in any of the lawsuits may prevent the merger from becoming effective within the expected timeframe (if at all).
As of April 8, 2011, purported stockholders of NHP have filed seven lawsuits against NHP, its directors, and, in certain cases, Ventas and Needles Acquisition LLC challenging the merger. The lawsuits seek various forms of relief, including to enjoin the merger, direct the defendants to exercise certain alleged duties, rescind the merger agreement, impose a constructive trust in favor of the class upon any benefits improperly received by the defendants, and award the plaintiffs damages and expenses. If the plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the merger on the agreed upon terms, the injunction may prevent the completion of the merger in the expected timeframe (if it is completed at all). For more information about litigation related to the merger, see "The Merger—Litigation Relating to the Merger" beginning on page 69.
Counterparties to certain significant agreements with NHP may have consent rights in connection with the merger.
NHP is party to certain agreements that give the counterparty certain rights, including consent rights, in connection with "change in control" transactions. Under certain of these agreements, the merger will constitute a change in control and, therefore, the counterparty may assert its rights in connection with the merger. Any such counterparty may request modifications of its agreements as a condition to granting a waiver or consent under those agreements and there can be no assurance that such counterparties will not exercise their rights under the agreements, including termination rights where available. While Ventas may request changes in the structure of the merger to avoid triggering such rights, Ventas could incur additional costs or suffer losses in connection with the exercise of any such rights or any modifications of such agreements, including any costs associated with effectuating any such changes in the structure of the merger. For more information about Ventas's right to request changes to the merger structure, see "The Merger—The Merger Agreement—Form, Effective Time and Closing of the Merger" beginning on page 76.
Ventas may incur adverse tax consequences if NHP has failed or fails to qualify as a REIT for U.S. federal income tax purposes.
If NHP has failed or fails to qualify as a REIT for U.S. federal income tax purposes and the merger is completed, Ventas may incur significant tax liabilities, and Ventas could lose its REIT status should disqualifying activities continue after the merger.
REITs are subject to a range of complex organizational and operational requirements.
As REITs, each of Ventas and NHPHCT must distribute to its stockholders with respect to each taxable year at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), without regard to its stockholders. Other restrictions applythe deduction for dividends paid and excluding net capital gain. A REIT must also meet certain requirements with respect to a REIT'sthe nature of its income and assets.assets and the ownership of its stock. For any taxable year that Ventas or NHPHCT fails to qualify as a REIT, it will not be allowed a deduction for dividends paid to its stockholders in computing taxable income and thus would become subject to U.S. federal income tax as if it were a regular taxable corporation. In such an event, Ventas or NHP,HCT, as the case may be, could be subject to potentially significant tax liabilities. Unless entitled to relief under certain statutory provisions, Ventas or NHP,HCT, as the case may be, would also be disqualified from treatment as a REIT for the four taxable years following the year in which it lost its qualification. If Ventas or NHPHCT failed to qualify as a REIT, the market price of Ventas common stock may decline, and Ventas may need to reduce substantially the amount of distributions to its stockholders because of its potentially increased tax liability.
Ventas and NHP Face Other Risks
HCT face other risks.
The risks listeddescribed above are not exhaustive, and you should be aware that following the merger, Ventas and NHPHCT will face various other risks, including those discussed in Ventas's and HCT's respective reports filed by Ventas and NHP with the SEC.SEC that are incorporated by reference into this proxy statement/prospectus. See "Where You Can Find More Information"Information; Incorporation by Reference" beginning on page 131.127.
CAUTIONARY STATEMENT REGARDINGCONCERNING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus includeincludes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act.Act of 1934, as amended. All statements regarding Ventas's, NHP'sHCT's or their respective tenants', operators', managers'borrowers' or borrowers'managers' expected future financial position,condition, results of operations, cash flows, funds from operations, dividends and dividend plans, financing opportunities and plans, capital markets transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, merger integration, growth opportunities, dispositions, expected lease income, continued qualification as a real estate investment trust,REIT, plans and objectives of management for future operations and statements that include words such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may," "could," "should," "will" and other similar expressions are forward-looking statements. SuchThese forward-looking statements are inherently uncertain, and security holders must recognize that actual results may differ from the companies'Ventas's or HCT's expectations. Except to the extent required by applicable law, neither Ventas nor NHP undertakes a duty to update such
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, many of which speak only as of the date on which they are made.
difficult to predict and beyond Ventas's and NHP's actual future resultsHCT's control. These include the factors described above in "Risk Factors" and trends may differ materially depending on a variety of factors discussedunder the caption "Risk Factors" in their filingsVentas's and HCT's respective reports filed with the SEC. These factors include without limitation:SEC and incorporated by reference into this proxy statement/prospectus, as well as:
Many of these factors are beyond the controlShould one or more of the companiesrisks or uncertainties described above or elsewhere in reports incorporated herein by reference occur, or should underlying assumptions prove incorrect, actual results and their management. Due to these risks and uncertainties, there can be no assurances that the results anticipated by the forecasts or otherplans could differ materially from those expressed in any forward-looking statements of Ventas or NHP will occur, that their respective judgments or assumptions will prove correct, or that unforeseen developments will not occur. Accordingly, youstatements. You are cautioned not to place undue reliance uponon these statements, which speak only as of the date of this proxy statement/prospectus or the date of any forecasts or otherdocument incorporated by reference into this proxy statement/prospectus, as applicable.
All forward-looking statements, expressed or implied, included in this proxy statement/prospectus are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Ventas, HCT or persons acting on their behalf may issue.
Except as otherwise required by applicable law, Ventas and HCT disclaim any duty to update any forward-looking statements, all of Ventas or NHP.which are expressly qualified by the statements in this section. See also "Where You Can Find More Information; Incorporation by Reference" beginning on page 127.
111 S. Wacker Drive, Suite 4800Chicago, Illinois 60606(877) 483-6827
Ventas, together with its subsidiaries, is a real estate investment trust, which we refer to as a REIT, with a geographically diversehighly diversified portfolio of seniors housing and healthcare properties inlocated throughout the United States, Canada and Canada.the United Kingdom. As of September 30, 2014, Ventas owned more than 1,500 properties (including properties classified as held for sale), including seniors housing communities, medical office buildings, which we refer to as MOBs, skilled nursing and other facilities, and hospitals, and it had two new properties under development. Ventas is an S&P 500 company, and its common stock is listed on the NYSE.
Ventas primarily acquires and owns seniors housing and healthcare properties and leases them to unaffiliated tenants or operates them through independent third-party managers. As of September 30, 2014, Ventas leased a total of 907 properties (excluding MOBs and properties classified as held for sale) to various healthcare operating companies under "triple-net" or "absolute-net" leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and engaged independent operators, such as Atria Senior Living, Inc., which we refer to as Atria, and Sunrise Senior Living, LLC, which we refer to, together with its subsidiaries, as Sunrise, to manage a total of 270 of Ventas's seniors housing communities pursuant to long-term management agreements. Ventas's two largest tenants, Brookdale Senior Living Inc. and Kindred Healthcare, Inc., leased from Ventas 161 properties (excluding six properties included in investments in unconsolidated entities) and 86 properties, respectively, as of September 30, 2014.
Through its Lillibridge Healthcare Services, Inc. subsidiary and its ownership interest in PMB Real Estate Services LLC, Ventas also provides MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, Ventas makes secured and unsecured loans and other investments relating to seniors housing and healthcare operators or properties.
Ventas was incorporated in Kentucky in 1983, commenced operations in 1985 and reorganized as a Delaware corporation in 1987. Ventas operates through three reportable business segments: triple-net leased properties, senior living operations and MOB operations.
As of December 31, 2010, Ventas's portfolio consisted of 602 assets: 240 senior housing communities, 187 skilled nursing facilities, 40 hospitalsprincipal executive offices are located at 353 N. Clark Street, Suite 3300, Chicago, Illinois 60654, and 135 MOBs and other properties in 43 U.S. states, the District of Columbia and two Canadian provinces. With the exception of Ventas's seniors housing communities that are managed by independent third parties, such as Sunrise, pursuant to long-term management agreements and certain of its MOBs, including those acquired in connection with Ventas's Lillibridge acquisition, Ventas leases its properties to healthcare operating companies under "triple-net" or "absolute-net" leases, which require the tenants to pay all property-related expenses. Ventas also had real estate loan and other investments relating to seniors housing and healthcare companies or properties as of December 31, 2010.
Ventas primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third party managers. Through its Lillibridge subsidiary, Ventas also provides management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States.
In October 2010, Ventas signed a definitive agreement to acquire substantially all of the real estate assets of privately-owned Atria for a total purchase price of $3.1 billion, comprised of $1.35 billion of Ventas common stock (a fixed 24.96 million shares), $150 million in cash and the assumption or repayment of $1.6 billion of net debt. Ventas will acquire from Atria 118 private pay seniors housing communities located primarily in affluent coastal markets such as the New York metropolitan area, New England and California. Atria, based in Louisville, Kentucky,telephone number is owned by private equity funds managed by LREP. Prior to the closing, Atria will spin off its management company, which will continue to operate the acquired assets under long-term management agreements with Ventas. Completion of the transaction is subject to certain conditions. Ventas expects to complete the transaction in the first half of 2011, although Ventas cannot assure you that the transaction will close on such timetable or at all.(877) 483-6827.
Additional information about Ventas and its subsidiaries is included in documents incorporated by reference ininto this joint proxy statement/prospectus. See "Where You Can Find More Information" beginningInformation; Incorporation by Reference" on page 131.
Nationwide Health Properties, Inc.610 Newport Center Drive, Suite 1150Newport Beach, California 92660Telephone: (949) 718-4400
NHP, a Maryland corporation incorporated on October 14, 1985, is a REIT that, together with its subsidiaries, invests in healthcare related real estate, primarily seniors housing, long-term care properties and medical office buildings.
NHP's operations are organized into two segments—triple-net leases and multi-tenant leases. In the triple-net leases segment, NHP invests in healthcare-related properties and leases the facilities to unaffiliated tenants under "triple-net" and generally "master" leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In the multi-tenant leases segment, NHP invests in healthcare related properties that have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). During 2010, 2009 and 2008, the multi-tenant leases segment was comprised exclusively of MOBs. In addition, but to a much lesser extent because NHP views the risks of this activity to be greater due to less favorable bankruptcy treatment and other factors, from time to time, NHP extends mortgage loans and other financing to operators. For the twelve months ended December 31, 2010, approximately 93% of NHP's revenues were derived from its leases, with the remaining 7% from its mortgage loans and other financing activities.
As of December 31, 2010, NHP had investments in 663 healthcare facilities, one land parcel, two development projects and two assets held for sale located in 42 states.
Additional information about NHP and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 131.
Needles AcquisitionStripe Sub, LLC
Needles AcquisitionStripe Sub, LLC, a wholly owned subsidiary of Ventas,which we refer to as Merger Sub, is a Delaware limited liability company and a direct wholly owned subsidiary of Ventas that was formed on February 24, 2011 for the purpose of effecting the merger. Upon completion ofentering into the merger NHP will be merged with and into Needles Acquisition LLC, and the name of the surviving entity will be Nationwide Health Properties, LLC.
Needles Acquisition LLCagreement. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. Merger Sub's offices are located at c/o Ventas, Inc. 10350 Ormsby Park Place, Suite 300, Louisville, Kentucky 40223, and its telephone number is (502) 357-9000.
Stripe OP, LP, which we refer to as OP Merger Sub, is a Delaware limited partnership and an indirect wholly owned subsidiary of Ventas that was formed for the purpose of entering into the merger agreement. OP Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. OP Merger Sub's offices are located at c/o Ventas, Inc. 10350 Ormsby Park Place, Suite 300, Louisville, Kentucky 40223, and its telephone number is (502) 357-9000.
American Realty Capital Healthcare Trust, Inc.
HCT is a Maryland corporation incorporated on August 23, 2010 that elected to be taxed as a REIT for U.S. federal income tax purposes commencing with its initial taxable year ended December 31, 2011. In February 2011, HCT commenced its IPO on a "reasonable best efforts" basis of up to 150.0 million shares of common stock, at a price of $10.00 per share, subject to certain volume and other discounts. HCT closed its IPO in April 2013 and listed its common stock on Nasdaq under the symbol "HCT" on April 7, 2014.
HCT invests primarily in real estate serving the healthcare industry in the United States. HCT owns a diversified portfolio of healthcare-related real estate, focusing predominantly on MOBs and seniors housing communities. Additionally, HCT selectively invests across the healthcare continuum in hospitals, post-acute care facilities and other properties. As of September 30, 2014, HCT owned 153 properties and one preferred equity investment, located in 31 states and comprised of 7.9 million rentable square feet.
Substantially all of HCT's business is conducted through HCT OP. HCT has no direct employees and has retained American Realty Capital Healthcare Advisors, LLC, which we refer to as the Advisor, to manage its affairs on a day-to-day basis. HCT has also retained American Realty Capital Healthcare Properties, LLC, which we refer to as the Property Manager, to serve as its property manager. RCS served as the dealer manager of the IPO and continues to provide HCT with various strategic investment banking services. The Advisor, Property Manager and RCS are under common control with American Realty Capital V, LLC, which we refer to as the Sponsor, and, as a result thereof, they are related parties.
HCT's principal executive offices are located at 405 Park Avenue, 14th Floor, New York, New York 10022, and its telephone number is (212) 415-6500.
Ventas Unaudited Pro Forma Portfolio Information
The charts below reflect the property type, geographic and operator/manager diversification of Ventas's portfolio of properties and other investments based on third quarter 2014 annualized net operating income, which we refer to as NOI, and on a pro forma basis after giving effect to the mergers and the Holiday acquisition as if the transactions had occurred on July 1, 2014. This unaudited pro forma portfolio information is presented for illustrative purposes only and is not necessarily indicative of what Ventas's portfolio composition actually would have been assuming the transactions had been consummated as of the date indicated, nor is it necessarily indicative of Ventas's future portfolio composition. The unaudited pro forma portfolio information has been derived from and should be read in conjunction with Ventas's unaudited consolidated financial statements and the related notes thereto as of and for the three months ended September 30, 2014, included in Ventas's Quarterly Report on Form 10-Q for the quarter then ended, filed with the SEC on October 24, 2014, and HCT's unaudited consolidated financial statements and the related notes thereto as of and for the nine months ended September 30, 2014, included in HCT's Quarterly Report on Form 10-Q for the quarter then ended, filed with the SEC on October 31, 2014, each of which is incorporated herein by reference. See "Where You Can Find More Information; Incorporation by Reference" beginning on page 127.
As used herein, NOI is defined as total revenues, less interest and other income, property-level operating expenses and medical office building services costs. Ventas considers NOI an important supplemental measure to net income (as determined in accordance with GAAP) because it allows investors, analysts and management to assess Ventas's unlevered property-level operating results and to compare Ventas's operating results with the operating results of other real estate companies and between periods on a consistent basis. You should not consider NOI as an alternative to net income (as determined in accordance with GAAP) as an indicator of Ventas's financial performance or as an alternative to cash flow from operating activities (as determined in accordance with GAAP) as a measure of Ventas's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of Ventas's needs.
| Property Type Diversification(1)(2) | Geographic Diversification(1)(2) | |
 |  |
Operator/Manager Diversification(1)(2) | ||
 | ||
In addition, on a pro forma basis after giving effect to the mergers and the Holiday acquisition as if the transactions had occurred on July 1, 2014, and assuming the applicable leases are not renewed or otherwise extended, approximately 85% of Ventas's lease revenue would be derived from leases whose terms contractually expire after 2017.
Date, Time, Place and PlacePurpose of the HCT Special Meeting
The special meeting of VentasHCT stockholders will be held at [ • ], on [ • ], 2011,2014, commencing at [ • ] a.m., local time.
Purpose The purpose of the Ventas Special Meeting
At the VentasHCT special meeting Ventas stockholders will be asked is:
Recommendation of the HCT Board of Directors of Ventas
The Ventas board of directorsHCT Board has unanimously has(i) determined that the merger, the merger agreement and the transactions contemplated by the merger agreement, including the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and the Ventas charter amendment, are advisable and fair to, and in the best interests of, VentasHCT and its stockholders and has unanimously(ii) approved the merger agreement, the merger and the other transactions contemplated thereby andby the charter amendment.
merger agreement. The Ventas board of directorsHCT Board unanimously recommends that the Ventas stockholdersyou vote "FOR" the issuanceproposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, and "FOR" the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of shares of Ventas common stock to NHP stockholdersHCT in connection with the mergermerger. For the reasons for this recommendation, see "The Merger—Recommendation of the HCT Board and "FOR"Its Reasons for the Ventas charter amendment to increase the number of authorized shares of Ventas common stock. The merger cannot be completed without the approval by Ventas stockholders of both of these proposals.Merger" beginning on page 52.
Ventas Record Date; Stock Entitled toWho Can Vote at the HCT Special Meeting
The HCT Board has fixed the close of business on October 28, 2014, as the record date for determining the HCT stockholders entitled to receive notice of, and to vote at, the HCT special meeting and any postponements or adjournments thereof. Only holders of record of shares of VentasHCT common stock at the close of business on [ • ], 2011, the record date for the Ventas special meeting, will beare entitled to receive notice of, and to vote at, the VentasHCT special meeting or any adjournments thereof. You may cast one vote for each share of Ventas common stock that you owned on the record date.
meeting. On the record date, there were a total of [ • ]169,316,247 shares of VentasHCT common stock outstanding and entitled to votebe voted at the VentasHCT special meeting. Onmeeting, held by approximately 2,528 holders of record.
Each share of HCT common stock is entitled to one vote on each proposal at the record date, approximately [ • ]%HCT special meeting.
Vote Required for Approval; Quorum
Approval of the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement requires the affirmative vote of at least a majority of the outstanding shares of VentasHCT common stock was held by Ventas directors andentitled to vote on such proposal. Approval of the non-binding, advisory proposal to approve the compensation that may be paid or become payable to named executive officers and their respective affiliates. Ventas currently expects that its directors and executive officers will vote their shares in favor of the issuance of shares of Ventas common stock to NHP stockholdersHCT in connection with the merger requires the affirmative vote of a majority of the votes cast on the proposal.
At the close of business on the record date, the directors and executive officers of HCT and their affiliates held 272,998 shares of HCT common stock, collectively representing 0.2% of the outstanding shares of HCT common stock entitled to vote on that date.
HCT's bylaws provide that at any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all votes entitled to be cast at such meeting on any matter will constitute a quorum. Shares that are voted, shares that are held by holders who are present at the meeting in person or by proxy and who do not vote or abstain and abstentions are treated as being
present at the HCT special meeting for purposes of determining whether a quorum is present. If a quorum is not established at the meeting, the chairman of the meeting may adjourn the meeting without setting a future date or, from time to time, to a date not more than 120 days after the original record date without notice other than announcement at the meeting.
Abstentions and Broker Non-Votes
Abstentions, but not broker non-votes, will be counted in determining the presence of a quorum. Abstentions and broker non-votes, if any, will have the same effect as votes cast "AGAINST" the proposal to approve the merger agreement, the merger and the Ventas charter amendment, although none has entered into any agreements obligatingother transactions contemplated by the merger agreement, but will have no effect on the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger.
HCT stockholders may submit their votes for or against the proposals submitted at the HCT special meeting in person or by proxy. HCT stockholders may authorize a proxy in the following ways:
HCT stockholders should refer to their proxy cards or the information forwarded by their broker or other nominee to see which options are available to them.
The Internet and telephone proxy authorization procedures are designed to authenticate stockholders and to allow them to confirm that their instructions have been properly recorded. If you authorize a proxy over the Internet or by telephone, then you need not return a written proxy card or voting instruction card by mail. The Internet and telephone facilities available to record holders will close at 11:59 p.m. Eastern time on [ ], 2014.
The method by which HCT stockholders authorize a proxy will in no way limit their right to vote at the HCT special meeting if they later decide to attend the meeting and vote in person. If shares of HCT common stock are held in the name of a broker or other nominee, HCT stockholders must obtain a "legal proxy," executed in their favor, from the broker or other nominee (which may take several days), to be able to vote in person at the HCT special meeting.
All shares of HCT common stock entitled to vote and represented by properly completed proxies received prior to the HCT special meeting, and not revoked, will be voted at the special meeting as instructed on the proxies.If HCT stockholders of record do so.not indicate how their shares of HCT common stock should be voted on a proposal, the shares of HCT common stock represented by their properly executed proxy will be voted in accordance with the recommendation of the HCT Board. The HCT Board recommends that you vote "FOR" the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, and "FOR" the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger. If you do not provide voting instructions to your broker or other nominee, your shares of HCT common stock will NOT be voted and will be considered broker non-votes.
QuorumShares Held in "Street Name"
Stockholders whoIf HCT stockholders hold a majority of the total number of shares of VentasHCT common stock issued and outstanding on the record date must be present or represented by proxy to constitute a quorum to organize the Ventas special meeting. All shares of Ventas common stock represented at the Ventas special meeting, including abstentions and broker non-votes (shares held bythrough a broker or other nominee that are represented at the meeting, but with respectand wish to whichvote such shares, they must return their voting instructions to the broker or other nominee.
If HCT stockholders hold shares of HCT common stock through a broker or other nominee is not instructed byand wish to attend the HCT special meeting, they must obtain a "legal proxy" from their broker or other nominee identifying them as the beneficial owner of such shares of HCT common stock and authorizing them to vote on the particular proposal),vote.
Shares of HCT common stock held by brokers and other nominees will NOT be treated as present for purposes of determining the presencevoted unless such HCT stockholders instruct such brokers or absence of a quorumother nominees how to organize the Ventas special meeting.vote.
Required VoteRevocation of Proxies or Voting Instructions
The issuanceHCT stockholders of record may change their vote or revoke their proxy at any time before it is exercised at the HCT special meeting by:
HCT stockholders who hold shares of VentasHCT common stock to NHP stockholders in connection withthrough a broker or other nominee may revoke their voting instructions by following the merger and the Ventas charter amendment each require the affirmative vote of the holders of a majority of the outstanding shares of Ventas common stock. The merger cannot be completed without the approvalinstructions provided by Ventas stockholders of both of these proposals. The approval of any adjournments of the Ventas special meeting, if necessary, for the purpose of soliciting additional proxies requires the affirmative vote of the holders of a majority of the shares of Ventas common stock present,their broker or represented by proxy, at the Ventas special meeting.other nominee.
Abstentions and Broker Non-VotesTabulation of the Votes
If you are a Ventas stockholder and fail to vote, fail to instruct your broker, bank or nominee to vote, or abstain from voting, itHCT will haveappoint an Inspector of Election for the same effect as a vote against the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and against the Ventas charter amendment to increase the number of authorized shares of Ventas common stock, but it will have no effect on the approval of any adjournments of theHCT special meeting if necessary.to determine the presence of a quorum and to tabulate the votes.
Voting at the Special MeetingSolicitation of Proxies
Whether or not you plan to attend the Ventas special meeting, please vote your sharesThe solicitation of Ventas common stock. If your shares of Ventas common stock are held in your name, you may vote in person at the Ventas special meeting or by proxy.
If you plan to attend the Ventas special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares of Ventas common stock are held in "street name," which means your shares of Ventas common stock are held of record by a broker, bank or other nominee, and you wish to vote at the Ventas special meeting, you must bring to the Ventas special meeting a proxyproxies from the record holder (your broker, bank or nominee) of the shares of Ventas common stock authorizing you to vote at the Ventas special meeting.
A proxy cardHCT stockholders is enclosed for your use. Ventas requests that you sign the accompanying proxy card and return it promptly in the enclosed postage-paid envelope. You may also vote your shares by telephone or through the Internet. Information and applicable deadlines for voting by telephone or through the Internet are set forth on the enclosed proxy card. When the accompanying proxy card is returned properly executed, the shares of Ventas common stock represented by it will be voted at the Ventas special meeting or any adjournments thereof in accordance with the instructions contained in the proxy.
If a proxy card is signed and returned without an indication as to how the shares of Ventas common stock represented by the proxy are to be voted with regard to a particular proposal, the Ventas common stock represented by the proxy will be voted in favor of each such proposal. At the date hereof, Ventas management has no knowledge of any business that will be presented for consideration at the special meeting and which would be required to be set forth in this joint proxy statement/prospectus, other than the matters set forth in Ventas's accompanying Notice of Special Meeting of Stockholders. In accordance with Ventas's bylaws and the Delaware General Corporation Law, which we refer to as Delaware law, business transacted at the Ventas special meeting will be limited to those matters set forth in such notice. Nonetheless, if any other matter is properly presented at the Ventas special meeting for consideration, it is intended that the persons named in the enclosed proxy and acting thereunder will vote in accordance with their best judgment on such matter.
Your vote is important. Accordingly, please sign and return the enclosed proxy card whether or not you plan to attend the Ventas special meeting in person.
If you hold your shares of Ventas common stock in a stock brokerage account or if your shares are held by a bank or nominee (that is, in "street name"), you must provide the record holder of your shares with instructions on how to vote your shares if you wish them to be counted. Please follow the voting instructions provided by your broker, bank or nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Ventas or by voting in person at the Ventas special meeting unless you provide to Ventas a "legal proxy," which you must obtain from your broker, bank or nominee. Further, brokers who hold shares of Ventas common stockmade on behalf of their customers may not vote those shares without specific instructions from their customers.
If you are a Ventas stockholder and you do not instruct your broker, bank or nominee on how to vote any of your shares held in street name, your broker, bank or nominee may not vote those shares, whichthe HCT Board. HCT will have the same effect as a vote against the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and the Ventas charter amendment to increase the number of authorized shares of Ventas common stock, but will have no effect on the approval of any adjournments of the Ventas special meeting, if necessary.
Revocability of Proxies or Voting Instructions
If you are a holder of record on the record date for the Ventas special meeting, you have the power to revoke your proxy at any time before your proxy is voted at the Ventas special meeting. You can revoke your proxy in one of three ways:
If you choose either of the first two methods, your notice of revocation or your new proxy must be received by Ventas's General Counsel at 10350 Ormsby Park Place, Suite 300, Louisville, Kentucky 40223, no later than the beginning of the Ventas special meeting. If you have voted your shares by telephone or through the Internet, you may revoke your prior telephone or Internet vote by recording a different vote using the telephone or Internet, or by signing and returning a proxy card dated as of a date that is later than your last telephone or Internet vote.
In accordance with the merger agreement,pay the cost of proxy solicitation for the Ventas special meeting will be borne by Ventas. In addition to the use of the mail, proxies may be solicited bysoliciting proxies. Directors, officers and directors and regular employees of Ventas, without additional remuneration,HCT may solicit proxies on behalf of HCT in person or by personal interview, telephone, facsimile or otherwise. Ventasother means, for which they will also requestnot receive any additional compensation. HCT has engaged D.F. King to assist it in the solicitation of proxies for a fee of $12,500 plus out-of-pocket expenses. Pursuant to the HCT letter agreement, HCT will pay to RCS and ANST an aggregate amount of $1.85 million in consideration for the services provided under the HCT letter agreement, including additional assistance in the solicitation of proxies. See "The Merger—Interests of HCT's Directors and Executive Officers in the Merger" beginning on page 68.
HCT will reimburse brokerage firms and other custodians, nominees custodians and fiduciaries to forwardfor their expenses incurred in sending proxies and proxy materials to the beneficial owners of shares held of record on the record date and will provide customary reimbursement to such firms for the cost of forwarding these materials. Ventas has retained Innisfree M&A Incorporated to assist in its solicitation of proxies and has agreed to pay them a fee of $[ • ] plus reasonable expenses for these services.HCT common stock.
VENTAS PROPOSALS SUBMITTED TO HCT STOCKHOLDERS
PROPOSAL 1: APPROVAL OF THE ISSUANCE OF SHARES OF VENTAS COMMON STOCKMerger Proposal
Ventas is asking its stockholders to approve the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger. For a detailed discussion of the terms and conditions of the merger, see "The Merger—The Merger Agreement" beginning on page 75. As discussed in the section entitled "The Merger—Ventas's Reasons for the Merger; Recommendation by the Ventas Board of Directors," beginning on page 46, after careful consideration, the Ventas board of directors, by a unanimous vote of all directors, approved the merger agreement and declared the merger agreement and the transactions contemplated thereby (including the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger) to be advisable and in the best interests of Ventas and its stockholders.
Required Vote
Approval of the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger requires the affirmative vote of holders of a majority of the outstanding shares of Ventas common stock. For purposes of this proposal, a failure to vote, a failure to instruct your broker, bank or nominee to vote or an abstention from voting will have the same effect as a vote against the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger.
The Ventas board of directors unanimously recommends that Ventas stockholders vote "FOR" the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger.
The consummation of the merger is conditioned on the approval of the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and the Ventas charter amendment that is described in Proposal 2.
PROPOSAL 2: APPROVAL OF THE VENTAS CHARTER AMENDMENT (Proposal 1 on the HCT Proxy Card)
Ventas proposes to amend its charter to increase the number of authorized shares of Ventas common stock. Currently, the Ventas charter authorizes an aggregate of 310,000,000 shares of capital stock, consisting of 300,000,000 shares of Ventas common stock and 10,000,000 shares of Ventas preferred stock. Completion of the merger requires approval of the charter amendment because the number of shares of Ventas common stock to be issued to NHP stockholders in connection with the merger, together with the number of shares of Ventas common stock outstanding or reserved for issuance, will exceed the current aggregate number of authorized shares of Ventas common stock.
If the charter amendment is approved, upon filing of the charter amendment with the Secretary of State of Delaware:
Ventas intends to file the charter amendment, if approved, with the Secretary of State of Delaware prior to the effectiveness of the merger. A copy of the proposed charter amendment is attached to this joint proxy statement/prospectus as Annex B. You are urged to read the charter amendment in full.
Required Vote
Approval of the Ventas charter amendment requires the affirmative vote of the holders of a majority of the outstanding shares of Ventas common stock. For purposes of this proposal, a failure to vote, a failure to instruct your bank, broker or nominee to vote or an abstention from voting will have the same effect as a vote against the charter amendment.
The Ventas board of directors unanimously recommends that Ventas stockholders vote "FOR" the Ventas charter amendment.
The consummation of the merger is conditioned on the approval of the Ventas charter amendment and the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger that is described in Proposal 1.
PROPOSAL 3: ADJOURNMENT OF THE VENTAS SPECIAL MEETING
VentasHCT stockholders are being asked to approve any adjournments of the Ventas special meeting, if necessary, to solicit additional proxies in favor of the above proposals if there are insufficient votes at the time of such adjournment to approve such proposals.
If, at the Ventas special meeting, the number of shares of Ventas common stock present, or represented by proxy, and voting in favor of the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and the Ventas charter amendment is insufficient to approve such proposals, Ventas may move to adjourn the Ventas special meeting in order to enable the Ventas board of directors to solicit additional proxies for the approval of such proposals.
Ventas is asking its stockholders to authorize the holder of any proxy solicited by the Ventas board of directors to vote in favor of granting discretionary authority to the proxy holders, and each of them individually, to adjourn the Ventas special meeting to another time and place for the purpose of soliciting additional proxies. If the Ventas stockholders approve this proposal, Ventas could adjourn the Ventas special meeting and any adjourned session of the Ventas special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from Ventas stockholders who have previously voted.
Required Vote
Approval of any adjournments of the Ventas special meeting, if necessary, to solicit additional proxies requires the affirmative vote of the holders of a majority of the shares of Ventas common stock represented, in person or by proxy, at the Ventas special meeting and entitled to vote on the proposal. For purposes of this proposal, a failure to vote, a failure to instruct your broker, bank or nominee to vote or an abstention from voting will have no effect.
The Ventas board of directors unanimously recommends that Ventas stockholders vote "FOR" any adjournments of the Ventas special meeting, if necessary.
The special meeting of NHP stockholders is scheduled to be held at [ • ], on [ • ], 2011, at [ • ] local time.
Purpose of the NHP Special Meeting
The special meeting of NHP stockholders is being held to adopt the Agreement and Plan of Merger, dated as of February 27, 2011, by and among Ventas, its wholly owned subsidiary, Needles Acquisition LLC, and NHP and to approve the merger of NHP with and into Needles Acquisition LLC and the other transactions contemplated by the merger agreement.
Recommendation of the Board of Directors of NHP
The board of directors of NHP has unanimously declared that the merger agreement, and merger are advisable and fair to, and in the best interests of, NHP and its stockholders, and has unanimously approved the merger agreement.
The NHP board of directors unanimously recommends that NHP stockholders vote "FOR" the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement.
NHP Record Date; Stock Entitled to Vote
Only holders of record of shares of NHP common stock at For detailed information regarding this proposal, see the close of business on [ • ], 2011 are entitled to notice of, and to vote at, the NHP special meeting and at any adjournment of the meeting. This date is referred to as the record date for the meeting.
On the record date, there were [ • ] shares of NHP common stock outstanding and entitled to vote at the NHP special meeting.
As of the record date for NHP's special meeting, the directors and executive officers of NHP as a group owned and were entitled to vote approximately [ • ] shares of NHP common stock, or approximately [ • ]% of the outstanding shares of NHP common stock on that date. NHP currently expects that NHP's directors and executive officers will vote their shares in favor of adoptinginformation about the merger agreement and approving the merger throughout this proxy statement/prospectus, including the information set forth in sections entitled "The Merger" beginning on page 45 and the other transactions contemplated by the merger agreement, although none of them has entered into any agreements obligating them to do so.
A quorum is necessary to hold a valid special meeting of NHP stockholders. A quorum will be present at the NHP special meeting if the holders of a majority of the outstanding shares of NHP common stock entitled to vote"The Merger Agreement" beginning on the record date are present, in person or by proxy. If there are insufficient votes at the NHP special meeting to approve the merger, NHP expects the chairman of the meeting to adjourn the special meeting (from time to time in his discretion) in order to solicit additional proxies. Abstentions and broker non-votes will be counted as present for purposes of determining whether a quorum is present.
The adoptionpage 72. Copies of the merger agreement and the first amendment thereto are attached as Annex A and Annex B, respectively, to this proxy statement/prospectus.
Pursuant to the merger agreement, approval of this proposal by HCT stockholders is a condition to the consummation of the merger. In the event this proposal is not approved by HCT stockholders, the merger cannot be consummated even if the other proposals related to the merger are approved.
Approval of the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement requires the affirmative vote of the holders of two-thirdsat least a majority of the outstanding shares of NHPHCT common stock.
Table of Contentsstock entitled to vote on such proposal.
Abstentions and Broker Non-VotesRecommendation of the HCT Board
If you are an NHP stockholder and fail to vote, fail to instruct your broker, bank or nominee to vote, or abstain from voting, it will have the same effect as a vote against the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement.
Whether or not you plan to attend the NHP special meeting, please vote your shares of NHP common stock. If your shares of NHP common stock are held in your name, you may vote in person at the NHP special meeting or by proxy.
If you plan to attend the NHP special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares of NHP common stock are held in "street name," which means your shares of NHP common stock are held of record by a broker, bank or other nominee, and you wish to vote at the NHP special meeting, you must bring to the NHP special meeting a proxy from the record holder (your broker, bank or nominee) of the shares of NHP common stock authorizing you to vote at the NHP special meeting.
A proxy card is enclosed for your use. NHP requests that you sign the accompanying proxy card and return it promptly in the enclosed postage-paid envelope. You may also vote your shares by telephone or through the Internet. Information and applicable deadlines for voting by telephone or through the Internet are set forth on the enclosed proxy card. When the accompanying proxy card is returned properly executed, the shares of NHP common stock represented by it will be voted at the NHP special meeting or any adjournment thereof in accordance with the instructions contained in the proxy.
If a proxy card is signed and returned without an indication as to how the shares of NHP common stock represented by the proxy are to be voted with regard to the proposal, the NHP common stock represented by the proxy will be voted in favor of the proposal. At the date hereof, NHP management has no knowledge of any business that will be presented for consideration at the special meeting and which would be required to be set forth in this joint proxy statement/prospectus, other than the matters set forth in NHP's accompanying Notice of Special Meeting of Stockholders. In accordance with NHP's bylaws and the Maryland General Corporation Law, which we refer to as Maryland law, business transacted at the NHP special meeting will be limited to those matters set forth in such notice. Nonetheless, if any other matter is properly presented at the NHP special meeting for consideration, it is intended that the persons named in the enclosed proxy and acting thereunder will vote in accordance with their best judgment on such matter.
Your vote is important. Accordingly, please sign and return the enclosed proxy card whether or not you plan to attend the NHP special meeting in person.
If you hold your shares of NHP common stock in a stock brokerage account or if your shares are held by a bank or nominee (that is, in "street name"), you must provide the record holder of your shares with instructions on how to vote your shares if you wish them to be counted. Please follow the voting instructions provided by your broker, bank or nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to NHP or by voting in person at the NHP
special meeting unless you provide to NHP a "legal proxy," which you must obtain from your broker, bank or nominee. Further, brokers who hold shares of NHP common stock on behalf of their customers may not vote those shares without specific instructions from their customers.
If you are an NHP stockholder and you do not instruct your broker, bank or nominee on how to vote any of your shares held in street name, your broker, bank or nominee may not vote those shares, which will have the same effect as a vote against the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement.
Revocability of Proxies or Voting Instructions
If you are a holder of record on the record date for the NHP special meeting, you have the power to revoke your proxy at any time before your proxy is voted at the NHP special meeting. You can revoke your proxy in one of three ways:
If you choose either of the first two methods, your notice of revocation or your new proxy must be received by NHP's Corporate Secretary at 610 Newport Center Drive, Suite 1150, Newport Beach, California 92660 no later than the beginning of the NHP special meeting. If you have voted your shares by telephone or through the Internet, you may revoke your prior telephone or Internet vote by recording a different vote using the telephone or Internet, or by signing and returning a proxy card dated as of a date that is later than your last telephone or Internet vote.
In accordance with the merger agreement, the cost of proxy solicitation for the NHP special meeting will be borne by NHP. In addition to the use of the mail, proxies may be solicited by officers and directors and regular employees of NHP, without additional remuneration, by personal interview, telephone, facsimile or otherwise. NHP will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares of NHP common stock held of record on the record date and will provide customary reimbursement to such firms for the cost of forwarding these materials. NHP has retained MacKenzie Partners, Inc. to assist in its solicitation of proxies and has agreed to pay them a fee of approximately $[ • ] plus reasonable expenses for these services.
PROPOSAL: ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER
NHP is asking its stockholders to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement. For a detailed discussion of the terms and conditions of the merger, see "The Merger—The Merger Agreement" beginning on page 75. As discussed in the section entitled "The Merger—NHP's Reasons for the Merger; Recommendation by the NHP Board of Directors," beginning on page 48, after careful consideration, the NHP board of directors, by a unanimous vote, approved the merger agreement and declared the merger agreement and the transactions contemplated by the merger agreement, including the merger, to be advisable and fair to and in the best interests of NHP and its stockholders.
Required Vote
Adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement requires the affirmative vote of two-thirds of the outstanding shares of NHP common stock. For purposes of this proposal, a failure to vote, a failure to instruct your broker, bank or nominee or an abstention from voting will have the same effect as a vote against the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement.
The NHP board of directorsHCT Board unanimously recommends that NHPHCT stockholders vote "FOR" the adoption ofproposal to approve the merger agreement, and approval of the merger and the other transactions contemplated by the merger agreement.
Advisory Vote Regarding Merger-Related Compensation
(Proposal 2 on the HCT Proxy Card)
The consummationDodd-Frank Act and Rule 14a-21(c) under the Exchange Act require HCT to provide its stockholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT that is based on or otherwise relates to the merger. Information required by Item 402(t) of Regulation S-K concerning this compensation, subject to certain assumptions described therein, is presented under the heading "The Merger—Interests of HCT's Directors and Executive Officers in the Merger—Merger-Related Compensation for a Named Executive Officer of HCT."
Accordingly, HCT stockholders are being asked to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger, as disclosed in this proxy statement/prospectus in the table entitled "Golden Parachute Compensation," including the associated narrative discussion and footnotes.
Approval of this proposal is not a condition to completion of the merger. Accordingly, any compensation subject to this vote would still be payable regardless of the outcome of this advisory vote, subject only to the conditions applicable thereto.
Approval of the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger is conditionedrequires the affirmative vote of a majority of the votes cast on the adoptionproposal.
Recommendation of the merger agreement and approvalHCT Board
The HCT Board unanimously recommends HCT stockholders vote "FOR" the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to named executive officers of HCT in connection with the merger and the other transactions contemplated by the merger agreement by the NHP stockholders.merger.
The following is a description of the material aspects of the merger. While Ventas and HCT believe that the following description covers the material terms of the merger, the description may not contain all of the information that is important to you. Ventas and HCT encourage you to carefully read this entire proxy statement/prospectus, including the merger agreement attached to this proxy statement/prospectus as Annex A and incorporated herein by reference, for a more complete understanding of the merger.
The merger involves NHP merging with and into Needles Acquisition LLC, a wholly owned subsidiary of Ventas formed for the purpose of effecting the merger. Needles Acquisition LLC will be the surviving entity in the merger and will continue to be a wholly owned subsidiary of Ventas with the name Nationwide Health Properties LLC.
In the merger, each outstanding share of NHP common stock (other than shares owned by any wholly owned subsidiary of NHP, Ventas or any subsidiary of Ventas, which will be cancelled) will be converted into the right to receive 0.7866 shares of Ventas common stock for each share of NHP common stock owned at the effective time of the merger, with cash paid in lieu of fractional shares. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to closing of the merger. Ventas stockholders will continue to hold their existing Ventas shares.
As part of its normal strategic planning process, each year for the past several years, the NHP board of directors held a special board meeting, or allocated large amounts of time in one or more regular board meetings, to consider and discuss strategic planning. At these meetings, the NHP board has from time to time considered various strategic alternatives, including corporate merger and acquisition opportunities within the healthcare real estate sector. In recent years, this strategic planning process led to an increased emphasis on building NHP's business development staff, which contributed to a robust acquisition pipeline, focused on smaller and mid-size property acquisitions. The strategic planning process also led to NHP's entrance into the medical office building, which we refer to as MOB, segment, which evolved in 2008 into NHP's agreements with Pacific Medical Buildings, LLC, which we refer to as PMB, under which NHP acquired nearly 1.9 million square feet of medical office space, and may acquire additional MOBs developed by PMB in the future. Additionally, in the course of the strategic planning process, during 2010, NHP evaluated and considered several larger and potentially transformative transactions.
In late July and early August 2010, NHP management initiated its annual strategic review process, with the intent of specifically evaluating the effect on its business model of the changing healthcare real estate landscape and resulting new potential opportunities and challenges for NHP, reviewing NHP's existing growth plans, and exploring various other new growth initiatives in an effort to continue to maximize long-term value for NHP stockholders. Over the preceding several years, NHP management had been successful in acquiring relatively modest-sized healthcare properties through sale/leasebacks with private regional operators. At the same time, certain other healthcare REITs had focused on larger transactions involving not only sale/leasebacks, but also strategic debt investments and participation in operations through management agreements with operators, including under the REIT Improvement Diversification and Empowerment Act of 2007, which we refer to as RIDEA. NHP management further considered its options for participating in these competitive transactions, as well as various other growth initiatives and acquisition opportunities consistent with its market outlook. During 2010, NHP management became increasingly concerned about its ability to compete effectively relative to certain larger healthcare REITs and its lack of success in pursuing certain larger acquisitions. NHP management believed that, unless NHP altered its investment approach, NHP would have difficulty competing for acquisitions with the other larger healthcare REITs.
On August 3, 2010, as a part of the NHP board's regular quarterly meeting, NHP's financial advisor, J.P. Morgan, provided the NHP board with a capital markets update and reviewed general market trends in the REIT industry,Board and the changing healthcare real estate landscape. J.P. Morgan also reviewed potential merger and acquisition activity in the healthcare REIT industry, including the range of opportunities that might be available for an acquisition or merger of NHP. To provide
additional perspective, another financial advisor made a presentation at the same meeting, focusing on healthcare REITs and operators, and provided financial analysis on specific merger opportunities. After considerable discussion by the NHP board, including discussion in executive session, the NHP board indicated that it would be receptive to considering a merger or acquisition transaction. The NHP board directed NHP management to develop more precise information about the opportunities and risks entailed in maintaining NHP as a stand-alone entity, as compared to alternative courses of action. The NHP board of directors indicated it was comfortable with J.P. Morgan based on its prior experience working with NHP, as well as the insight it had demonstrated in recent presentations to the NHP board, and selected J.P. Morgan as the financial advisor on this matter.
On October 18, 2010, the NHP board of directors held an all-day special meeting for the exclusive purpose of further discussing its strategic options. At this meeting, the NHP board discussed NHP's performance and operating history over the previous seven years, NHP's strategic business plans for the next seven years, and what results might be achievable through pursuit of those plans, as well as the risks and uncertainties in achieving long-term projected results. In considering NHP's strategic business plans for the next seven years, the NHP board considered the results of the extensive review conducted by NHP management and J.P. Morgan following the August 2010 board meeting with respect to NHP's stand-alone opportunities and risks, as compared to various strategic alternatives that might be available to NHP, including potential mergers and acquisitions. At the meeting, J.P. Morgan made a presentation regarding the healthcare real estate industry, specific acquisition opportunities, and various other merger and acquisition opportunities. At the conclusion of the meeting, the NHP board agreed that it would be prudent to investigate specific merger and acquisition possibilities and instructed management to coordinate with J.P. Morgan to initiate contact with a select group of large healthcare REITs with which a combination could be favorable for NHP stockholders and which were capable of executing such a transaction. After consultation with J.P. Morgan, the NHP board determined that three healthcare REITs met these criteria—Ventas and two other healthcare REITs, referred to herein as "Company A" and "Company B".
On October 22, 2010, NHP management discussed with representatives of J.P. Morgan and NHP's outside legal counsel, Skadden, Arps, Slate, Meagher & Flom LLP, which we refer to as Skadden Arps, a plan for a process by which J.P. Morgan, on behalf of NHP, would contact the three selected strategic merger candidates to gauge interest in a potential transaction involving NHP. During the weeks of October 25 and November 1, at the direction of NHP, representatives of J.P. Morgan conducted in-person meetings and/or telephonic discussions with the chief executive officers of Ventas, Company A and Company B.
At its regular quarterly board meeting held on November 3 and 4, 2010, the NHP board of directors discussed a number of topics, including further discussion of NHP's strategic business plans and potential merger and acquisition opportunities. J.P. Morgan provided an update of its discussions with Ventas, Company A and Company B. A representative of Skadden Arps attended the meeting and discussed the board's duties in considering a possible transaction.
On November 10, 2010, at the direction of NHP, representatives of J.P. Morgan met with the chief executive officer of Company A to further discuss the strategic merits of a potential combination and to address specific questions.
During the week of November 14, 2010, while attending the NAREIT annual convention in New York, Mr. Pasquale and representatives of J.P. Morgan met separately withHCT Board have each of Ms. Cafaro, the chairman and chief executive officer of Ventas, and the chief executive officers of Company A and Company B. In each of these meetings, the parties discussed in general terms the potential for a strategic transaction and addressed specific questions with respect to a potential combination. The discussions with Ventas and Company A contemplated their acquisition of NHP, but because of Company B's relative size, the discussions with it contemplated a "merger of equals" transaction.
In mid-November 2010, Skadden Arps negotiated the terms of a confidentiality agreement with counsel for each of Ventas, Company A and Company B. On November 19 and 20, 2010, NHP entered into confidentiality agreements with Ventas and Company A, respectively. Following execution of their respective confidentiality agreements, each of Ventas and Company A was provided access to a virtual data room that contained limited non-public information about NHP. Company B did not sign a confidentiality agreement; however, both parties agreed to continue discussions based on publicly available information. On November 21, 2010, J.P. Morgan, at the direction of NHP, asked each of Ventas and Company A to provide a preliminary non-binding indication of its interest in a transaction with NHP by December 8, 2010.
Throughout the remainder of November 2010, J.P. Morgan had several communications with the chief executive officer of Company B, including sharing a combination analysis and discussing specific terms related to a potential combination.
On November 29, 2010, the NHP board of directors held a special telephonic meeting. At the meeting, representatives of J.P. Morgan reported to the NHP board regarding meetings with executives of the three healthcare REITs. Representatives of Skadden Arps described the confidentiality agreements that were entered into with Ventas and Company A. Representatives of J.P. Morgan described the information made available to Ventas and Company A in the virtual data room and the anticipated process with both of them, including the request for preliminary proposals by December 8, 2010. J.P. Morgan further reported on its ongoing discussions with Company B and the information made available to it, including the combination analysis and specific draft terms provided.
In early December 2010, in discussions with J.P. Morgan, Company B indicated that it was not interested in continuing to discuss a transaction with NHP. NHP and its representatives continued to have discussions with representatives of both Ventas and Company A, addressing specific questions related to the information provided.
On December 8, 2010, Company A submitted to J.P. Morgan a non-binding indication of interest pursuant to which it would acquire all outstanding shares of NHP common stock in exchange for shares of Company A common stock at a fixed exchange ratio that was equivalent to $43.94 per share of NHP common stock, based on the closing price of Company A's common stock the previous day, noted as a 24.4% premium.
On December 13, 2010, Ventas submitted a non-binding indication of interest to J.P. Morgan to acquire all outstanding shares of NHP common stock in exchange for shares of Ventas common stock at a fixed exchange ratio of 0.800, which was equivalent to $40.28 per share of NHP common stock, based on the $50.35 closing price of Ventas common stock that day.
On December 15, 2010, the NHP board of directors held a special meeting to discuss the specific terms of the proposals received from Ventas and Company A. In attendance at the meeting were senior officers of NHP and representatives of J.P. Morgan and Skadden Arps. A representative of Skadden Arps described the due diligence materials that had been made available to Ventas and Company A. Representatives of J.P. Morgan discussed merger activity involving healthcare REITs as well as other private company real estate acquisitions. They also updated the board regarding the decision of Company B to discontinue discussions with NHP. Representatives of J.P. Morgan described the preliminary non-binding indications of interest that had been received from each of Ventas and Company A, noting that, based on the most recent quarterly dividend payments made by each party, the proposal from Ventas would result in a 9% decline in pro forma dividend payments to NHP stockholders, while the proposal from Company A would result in a 29% increase. J.P. Morgan reviewed a number of other statistics relating to NHP, Ventas, Company A and the healthcare REIT industry in general. J.P. Morgan also discussed the potential accretion or dilution of funds from operations and adjusted funds from operations of each of Ventas and Company A based on different exchange ratios, noting that the transaction proposed by Ventas was expected to be accretive to Ventas
and the transaction proposed by Company A was expected to be dilutive to Company A. NHP's management team presented the board with updated financial projections, which had also been provided to Ventas and Company A. The board discussed the recent decline in NHP's share price and the impact that might have on the discussions with Ventas and Company A. The board concluded the meeting with a determination that NHP's management and advisors should continue the due diligence process and discussions with both Ventas and Company A and continue to encourage them to improve upon their respective proposals.
In response to a request from Ms. Cafaro, on December 20, 2010, NHP agreed to amend its confidentiality agreement with Ventas to permit information to be provided to two executives of the funds managed by LREP that are parties to Ventas's agreement to acquire substantially all of the real estate assets of Atria, and who are affiliated with Atria. After the confidentiality agreement was amended, Mr. Pasquale spoke with one of the LREP executives regarding the proposed transaction. Throughout the period leading up to the execution of the merger agreement, Ventas regularly consulted with these representatives of the funds regarding the proposed transaction, and the two individuals engaged directly in discussions with members of NHP's management and representatives of J.P. Morgan.
During the last two weeks of December 2010, NHP's management and J.P. Morgan had several significant and detailed discussions with the management teams and advisors of each of Ventas and Company A regarding the documentation and information made available to Ventas and Company A in a virtual data room and otherwise responding to information requests and specific questions relating to the documentation and other information provided.
On January 4, 2011, in response to J.P. Morgan's request for an update to its proposal, Ventas submitted a revised non-binding proposal to J.P. Morgan pursuant to which it would acquire all outstanding shares of NHP common stock at $44 per share, payable in shares of Ventas common stock, with the exchange ratio to be determined at the time of execution of a definitive agreement. Ventas's proposal represented a 23% premium to NHP's ten-day average share price as of the date of the letter, and implied an exchange ratio of 0.827, based on Ventas's closing price of $53.20 on that day.
On January 7, 2011, in response to J.P. Morgan's request for an update to Company A's proposal, the financial advisor to Company A indicated to J.P. Morgan that Company A would revise its proposal to acquire all outstanding shares of NHP common stock in exchange for shares of Company A common stock to reflect an exchange ratio range which, based on Company A's share price on January 7, 2011, was the equivalent of between $42.86 and $47.50 per share of NHP common stock. The advisor to Company A cited the pro forma FFO dilution to Company A at the fixed exchange ratio previously proposed as the rationale for the revised range.
On January 7, 2011, at the direction of NHP, J.P. Morgan met with the financial advisors of Ventas and Company A and provided them with a term sheet setting forth certain terms of a potential merger agreement with NHP proposed by NHP. On January 9, 2011, Ventas's financial advisor, Centerview Partners, provided J.P. Morgan with a revised version of the term sheet with Ventas's comments, which reflected that Ventas's view of those terms of the merger agreement was generally consistent with that of NHP (including agreement that the exchange ratio would be determined based on the trailing 10-day volume weighted average price of Ventas's common stock on the business day preceding the date of the merger agreement), except that Ventas increased the termination fee payable by NHP if it accepted a superior proposal from 2.0% to 3.5% of the merger consideration, and indicated that it would not pay a break-up fee to NHP if Ventas's shareholders voted against the transaction. Company A did not comment in writing on the proposed term sheet, however through their advisors commented verbally that it had no material issues with the terms provided and would seek to negotiate specific points later.
On January 10, 2011, the NHP board of directors held a special telephonic meeting to discuss the revised proposals made by Ventas and Company A. Senior officers of NHP and representatives of
J.P. Morgan and Skadden Arps were present at the meeting. A representative of J.P. Morgan described the revised proposals from Ventas and Company A, as well as the due diligence investigation that each company had conducted and the focus of each company's extensive ongoing due diligence questions and requests.
In response to a request from J.P. Morgan, made at the direction of NHP, that Company A narrow its proposal range, the chief executive officer of Company A spoke directly with an NHP director on January 11, 2011, and communicated Company A's desire to move forward within the exchange ratio range provided on January 7, 2011. On January 12, 2011, Company A's advisors communicated to J.P. Morgan that Company A would narrow its proposed exchange ratio range by maintaining the top end of the previously proposed range and increasing the low end of the range. Based on Company A's share price on January 12, 2011, the revised exchange ratio range provided by Company A was the equivalent of between $44.17 and $46.95 per share of NHP common stock.
On January 12, 2011, NHP management and representatives of J.P. Morgan met in person with Ms. Cafaro and several other Ventas executives and Ventas's financial advisors to discuss Ventas's proposal of January 4, 2011, provided further information related to the NHP business, and answered certain outstanding business and financial questions.
On January 13, 2011, the NHP board of directors held a special meeting to discuss the proposals from Ventas and Company A. In attendance at the meeting were certain senior officers of NHP and representatives of J.P. Morgan and Skadden Arps and, by telephone, representatives of NHP's Maryland counsel, Venable LLP, which we refer to as Venable. At the meeting, representatives of Skadden Arps and Venable discussed the duties applicable to the board in considering the two proposals. Representatives of J.P. Morgan updated the board regarding the status of due diligence activities, and the terms of the current proposals from both Ventas and Company A. Representatives of J.P. Morgan also discussed with the board a wide range of financial data, including the capitalization rate implied by the current proposals. Senior officers of NHP reviewed with the board their revised projections and the assumptions underlying those projections, including the level of acquisitions necessary to achieve the projected results. The board also discussed the value of having representatives of Ventas and Company A make presentations directly to the NHP board of directors, giving the board an opportunity to meet the senior management of those companies. The board also discussed some of the terms that were likely to be part of a transaction with Ventas or Company A. At the conclusion of the meeting, the board encouraged NHP's management and advisors to continue the discussions with Ventas and Company A, and indicated a desire to obtain a price of $46 per share, based on the exchange ratio at the time of execution of a definitive agreement.
On January 14, 2011, at the direction of NHP, representatives of J.P. Morgan contacted financial advisors to Ventas and Company A, and indicated that the NHP board of directors desired to obtain a price of $46 per share based on an exchange ratio to be set at signing. In response, Ventas's financial advisor indicated to J.P. Morgan that Ventas was not willing to pay $46 per share, that an impasse existed and that any potential increase in price would be subject to Ventas completing its due diligence review and financial analysis.
On January 20, 2011, on behalf of NHP, J.P. Morgan provided Ventas with an initial draft of a merger agreement. On January 24, 2011, NHP and Ventas entered into a confidentiality agreement relating to information about Ventas that NHP had requested.
During the following weeks, representatives of Ventas reiterated to NHP that substantial due diligence issues remained outstanding, including with regard to NHP's tenant Hearthstone Senior Services, L.P., which we refer to as Hearthstone, and would need to be addressed before Ventas would be willing to consider any increase in price.
On February 1, 2011, at NHP's request, Ventas's outside legal counsel, Wachtell, Lipton, Rosen & Katz, which we refer to as Wachtell, provided Skadden Arps with initial comments on the draft merger agreement on behalf of Ventas. On February 3, 2011, representatives of Skadden Arps and Wachtell had a conference call to discuss the draft merger agreement. Following these discussions, Wachtell and Skadden Arps acknowledged that a number of key terms in the merger agreement remained to be resolved, including provisions related to deal protection, a "force the vote" provision that Ventas had requested and the size of a break-up fee.
On February 3, 2011, representatives of NHP, J.P. Morgan, Skadden Arps and NHP's outside real estate counsel, Sherry, Meyerhoff, Hanson & Crance LLP, had a conference call with representatives of Ventas, Centerview Partners and Wachtell to discuss various outstanding diligence issues, including with regard to tenants, leases, business plan, change of control provisions, indebtedness, employee benefits and various consents and approvals necessary for a transaction. At the conclusion of the call, NHP and its advisors agreed to investigate and respond with respect to certain issues raised by Ventas.
On February 8, 2011, at the direction of NHP, J.P. Morgan provided Company A with a draft merger agreement for its review. On February 11, 2011, representatives of Skadden Arps had a conference call with outside legal counsel to Company A to discuss specific terms of the draft merger agreement. J.P. Morgan had several calls with Company A's advisors, addressing questions and attempting to further narrow the exchange ratio range previously provided.
On February 8, 2011, at the direction of NHP, representatives of J.P. Morgan informed Ventas and Company A that their respective bids were still inadequate and insufficiently detailed and that, if they could present a proposal with adequate value and a specific price or exchange ratio for NHP shares, they would be invited to make a presentation to the NHP board of directors. Both Ventas and Company A accepted the invitation to present to NHP's board on February 22, 2010, subject to improvement in pricing and providing more detail on their offers.
On February 11, 2011, Skadden Arps distributed to Ventas and Wachtell a revised draft of the merger agreement. The revised draft did not include the "force the vote" provision and certain other key terms that Ventas had required in its initial comments to the merger agreement.
On February 14, 2011, Ms. Cafaro and Mr. Pasquale continued their discussions regarding, among other things, NHP's business and the potential benefits of a possible transaction to both Ventas and NHP, and possible solutions to the transaction terms and due diligence items that were impeding progress.
In mid-February 2011, it became clear that Hearthstone would be unable to pay the rent then due under its leases with NHP, and on February 15, 2011, Hearthstone asked NHP to amend certain terms of the leases to make rents achievable. Mr. Pasquale informed both Ms. Cafaro and the chief executive officer of Company A of Hearthstone's failure to pay rent and its request to modify the leases. The chief executive officer of Company A indicated that Company A continued to be interested in pursuing a merger with NHP notwithstanding Hearthstone's failure to pay its rent, but recognized that additional due diligence would be required to understand the impact of the Hearthstone situation. Ms. Cafaro indicated to Mr. Pasquale that the financial model on which Ventas had based its proposal assumed a lower rent amount from Hearthstone than the amount contractually due under its leases, and that Ventas would support a restructuring of the terms of the Hearthstone leases that would reduce the rents payable thereunder to an amount supported by current operations and, in exchange for the rent reduction, provide NHP with, among other things, the right to terminate its leases with Hearthstone and transition its management in an orderly manner at any time without cause.
On February 15, 2011, NHP and representatives of J.P. Morgan held a conference call with Company A and its advisors to review key schedules recently posted to the virtual data room and to
address outstanding questions. Company A and its advisors did not express any significant concerns regarding the findings of its due diligence investigations to date.
On February 18, 2011, NHP and representatives of J.P. Morgan held several conference calls with Ventas regarding accounting, tax, finance, compensation and benefits, information technology and enterprise risk management matters. In addition, NHP and representatives of J.P. Morgan held a conference call with Ms. Cafaro and Ventas's President, Raymond J. Lewis, to discuss an overview of Ventas's strategic plan.
On February 19, 2011, having made progress with regard to various key issues, Ventas submitted a revised non-binding proposal, subject to the approval of the Ventas board of directors, to acquire all outstanding shares of NHP common stock at $44 per share, payable in shares of Ventas common stock, with an exchange ratio that would be determined at the time a merger agreement was entered into, based on the volume weighted average price of Ventas common stock over the preceding ten trading days. The offer implied an exchange ratio of 0.781 based on Ventas's closing price of $56.36 on February 18, 2011, the most recent trading day prior to the date of Ventas's proposal, and an exchange ratio of 0.806 based on the trailing 10-day volume weighted average price of Ventas common stock on the day preceding the date of the proposal. The proposal indicated that, by this time, Ventas had substantially completed its due diligence investigation of NHP. Additionally, at this time, Ventas began to provide confidential information about Ventas to NHP and its advisors.
On February 21, 2011, the chief executive officer of Company A informed Mr. Pasquale that Company A was not prepared to confirm a definitive proposal. Financial advisors to Company A had previously indicated to J.P. Morgan that Company A was concerned about the pro forma dilution to Company A that would result from a potential transaction in the exchange ratio range that Company A had last provided which, based on Company A's share price on the last trading day prior to February 21, 2011, was the equivalent of between $45.56 and $48.42 per share of NHP common stock. It was also acknowledged that Company A would not be invited to present at the board meeting the following day. The chief executive officer and financial advisors of Company A placed phone calls to representatives of NHP between February 22, 2011 and February 27, 2011, indicating Company A's continuing interest in a potential transaction with NHP and making overtures toward continued discussions. However, following NHP's request, Company A did not narrow, modify or confirm the exchange ratio range it had previously proposed.
On February 22, 2011, the NHP board of directors held a special meeting. In attendance at the meeting were senior officers of NHP, and representatives of J.P. Morgan and Skadden Arps. At the meeting, Ms. Cafaro, Mr. Lewis, and Ventas's Senior Vice President and Chief Investment Officer, John D. Cobb, made a presentation to the NHP board, and answered questions from NHP's directors. Following the departure of the Ventas representatives, the NHP board of directors discussed the Ventas proposal and recent developments. Representatives of J.P. Morgan reviewed with the NHP board a wide range of financial data as part of reviewing the Ventas proposal, including the capitalization rates implied by the proposal. J.P. Morgan also reviewed Ventas's and NHP's stock price performance, noting that Ventas's stock price had outperformed its peers' (including NHP's) stock price since December 15, 2010, as well as over a one-year period. Although Ventas's proposal of $44 per share in Ventas stock was at a nominal price slightly lower than the price the NHP board had hoped for after the January 13, 2011 board meeting, the NHP board recognized that the proposed transaction with Ventas was in the best interests of NHP and its stockholders. At the conclusion of the meeting, the NHP board determined that NHP's management and advisors should continue negotiations with Ventas, with a view to finalizing a merger agreement.
On February 23, 2011, Mr. Pasquale and representatives of J.P. Morgan met with Ms. Cafaro, Messrs. Lewis and Cobb and a representative of Centerview Partners and discussed the basis upon which NHP would be prepared to move forward to finalize a merger agreement. NHP agreed for the first time that the merger agreement would include the "force the vote" provision that Ventas had
requested, and Ventas agreed for the first time that the termination fee would only be 3.0% of the merger consideration and that no third party or governmental consents would be conditions to closing. The parties also agreed that the exchange ratio would be determined based on the trailing 10-day volume weighted average price of Ventas's common stock on the business day preceding the date of the merger agreement.
Between February 23 and February 27, 2011, Ventas's and NHP's representatives and legal advisors conducted telephonic and in-person negotiations on the terms of a definitive merger agreement. During this time, senior management of Ventas and NHP, and each party's legal and financial advisors, worked to finalize their respective due diligence investigations and conducted negotiations on the terms of the definitive merger agreement.
On February 24, 2011, the NHP board of directors held a special telephonic meeting. At this meeting, NHP's lead independent director, Robert Paulson, updated the other directors regarding the status of negotiations with Ventas and Hearthstone, based upon information he had received that day from Mr. Pasquale and representatives of J.P. Morgan.
On February 25, 2011, NHP and Hearthstone executed definitive agreements implementing the revised lease terms.
On February 25, 2011, representatives of NHP, J.P. Morgan, Ventas and Centerview Partners met to continue NHP's due diligence and reviewed specifically Ventas's business plan, financial projections, growth estimates and balance sheet. In addition, NHP management and representatives of J.P. Morgan met to continue NHP's due diligence and reviewed specifically Ventas's asset management systems and capabilities.
On February 27, 2011, the Ventas board of directors held a special meeting to discuss the proposed merger with NHP. At the meeting, Ventas management provided an update to the Ventas board on the negotiation of the proposed merger and the results of its due diligence review of NHP, and reviewed the strategic rationale and anticipated benefits of the proposed transaction to Ventas stockholders. Representatives of Centerview Partners reviewed their financial analysis of the merger and answered questions from the directors. In its presentation, Centerview Partners noted that, although the nominal $44 of consideration per share of NHP common stock offered by Ventas had not changed since Ventas's proposal of January 4, 2011, the agreed-upon exchange ratio and the total number of Ventas shares to be issued in the merger were lower than the exchange ratio and total number of Ventas shares implied by the January 4th proposal because of a subsequent increase in Ventas's stock price. Centerview Partners then delivered its oral opinion, later confirmed in writing, to the Ventas board that, as of February 27, 2011, and based upon and subject to the assumptions and limitations set forth in the opinion, the exchange ratio of 0.7866 was fair, from a financial point of view, to Ventas. Representatives of Wachtell then reviewed the material terms of the proposed merger agreement. Following discussions and deliberations by Ventas's board, the Ventas board unanimously approved the merger agreement and the transactions contemplated by the merger agreement.
On February 27, 2011, the NHP board of directors held a special meeting at the Los Angeles office of Skadden Arps to discuss the terms of the proposed merger with Ventas. Mr. Pasquale and representatives of Skadden Arps updated the board on the status of the negotiations over the weekend, and reviewed the terms of the merger agreement. At the meeting, representatives of J.P. Morgan reviewed its financial analysis of the merger and answered questions from the directors. J.P. Morgan then rendered its oral opinion to the NHP board of directors that, as of February 27, 2011, and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth in its opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of NHP common stock. J.P. Morgan subsequently confirmed its oral opinion by delivering its written opinion, dated February 27, 2011, to the NHP board of directors. After additional discussions and deliberations, the NHP board unanimously determined that the merger agreement, the merger and
the other transactions contemplated by the merger agreement were advisable and fair to and in the best interests of NHP and its stockholders and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. In the merger, HCT will merge with and into Merger Sub, with Merger Sub surviving the merger as a direct wholly owned subsidiary of Ventas. Immediately after the effective time, OP Merger Sub will merge with and into HCT OP, with HCT OP surviving the partnership merger and Merger Sub as its sole general partner.
In the merger, each share of HCT common stock issued and outstanding immediately prior to the effective time of the merger (other than shares held by HCT, Ventas or any of their respective wholly owned subsidiaries, which will be cancelled) will be converted into the right to receive per share, at the election of the holder of such stock, subject to proration as described below, (i) $11.33 in cash or (ii) a number of shares of Ventas common stock equal to the Exchange Ratio. In no event will the aggregate consideration paid in cash be paid with respect to more than 10% of the shares of HCT common stock issued and outstanding as of immediately prior to the consummation of the merger (including restricted shares). If the aggregate elections for payment in cash exceed such limit, then the amount of cash consideration paid with respect to cash elections will be reduced on a pro rata basis, with the remaining consideration paid in shares of Ventas common stock. Cash will be paid in lieu of any fractional shares. The NHPvalue of the cash consideration may be higher or lower than the value of the stock consideration at the time of the completion of the merger.
Each restricted share of HCT common stock granted pursuant to HCT's equity plans that is outstanding immediately prior to the effective time will, immediately prior to the effective time, vest in full, and the restrictions with respect thereto will lapse. Each such restricted share will be deemed an issued and outstanding share of HCT common stock as of immediately prior to the effective time and will be entitled to receive the merger consideration determined in accordance with the merger agreement and otherwise subject to the terms and conditions of the merger agreement, including the election and proration provisions.
HCT was formed on August 23, 2010 as a non-exchange traded, externally-advised REIT, with a focus on the acquisition of medical office buildings and healthcare-related facilities. On February 18, 2011, HCT commenced its initial public offering, which we refer to as the HCT IPO, on a "reasonable best efforts" basis to sell up to 150 million shares of common stock, $0.01 par value per share, at a price of $10.00 per share, subject to certain volume and other discounts.
As of May 12, 2011, HCT had raised proceeds sufficient to break escrow in connection with the HCT IPO and on April 26, 2013, HCT closed the HCT IPO following the successful achievement of its target equity capital raise of $1.8 billion.
On March 15, 2013, HCT announced that the HCT Board had engaged Merrill Lynch, Pierce, Fenner & Smith, Inc., which we refer to as BofA Merrill Lynch, and RCS Capital, a division of RCS, an affiliate of the Advisor, to assist in evaluating potential financing and strategic alternatives consistent with HCT's long-term business strategy.
Following their engagement, BofA Merrill Lynch and RCS Capital analyzed potential strategic alternatives for HCT during the course of summer and autumn 2013, while HCT's management continued the process of assembling HCT's property portfolio. Throughout the process of considering
strategic alternatives, the HCT Board consulted with HCT's management, legal counsel and financial advisors.
On December 6, 2013, HCT announced that the HCT Board, upon consultation with BofA Merrill Lynch and RCS Capital, determined that it was in the best interests of HCT to proceed with its previously announced potential financing and strategic alternatives consistent with its long-term business strategy, which included, among other options, a listing on a national stock exchange.
On February 24, 2014, at the suggestion of Mr. D'Arcy, the Advisor's Chief Executive Officer, Mr. D'Arcy and Debra Cafaro, Ventas's Chief Executive Officer, met at the offices of Ventas in Chicago. The meeting was arranged for the purpose of getting Mr. D'Arcy and Ms. Cafaro, as two CEOs in a common industry, together to discuss generally the companies' portfolios, the healthcare industry and market trends. In addition to Ms. Cafaro, Manisha Bathija, Ventas's Senior Investment Officer, was present at the meeting. At the meeting, Mr. D'Arcy shared with Ms. Cafaro and Ms. Bathija public information about HCT, and the participants discussed very preliminarily the compatibility of HCT's and Ventas's portfolios. No acquisition or similar proposal was made at the meeting by any of the participants. Following the meeting, HCT and Ventas shared additional publicly available information regarding one another.
At meetings of the HCT Board and its audit committee on February 24, 2014 and February 28, 2014, HCT's management and legal advisors provided the HCT Board and audit committee further updates regarding the listing process. At a meeting of the HCT Board held on March 23, 2014, the HCT Board approved the following actions in anticipation of HCT's listing process: (i) acceptance of Mr. Schorsch's resignation as Chief Executive Officer of HCT and his appointment as Executive Chairman of the HCT Board; (ii) Mr. D'Arcy's appointment as HCT's Chief Executive Officer; (iii) Edward F. Lange Jr.'s appointment as HCT's Chief Financial Officer and Chief Operating Officer; and (iv) Peter M. Budko's resignation as Executive Vice President of HCT.
On March 30, 2014, HCT's management and representatives of BofA Merrill Lynch and RCS Capital provided the HCT Board with an overview of HCT's liquidity process, the listing of HCT's common stock on NASDAQ, HCT's portfolio strategy and competition in the healthcare REIT industry. Representatives of Proskauer Rose LLP, HCT's legal advisors in connection with the proposed transactions and regular outside counsel, which we refer to as Proskauer, were also present at the meeting. After lengthy discussion, the HCT Board approved moving forward with HCT's expedited listing on NASDAQ on or about April 7, 2014, along with a concurrent tender offer for its shares.
On March 31, 2014, HCT announced its intention to list on NASDAQ, and on April 7, 2014, the HCT common stock was listed on NASDAQ, which we refer to as the HCT Listing. Concurrent with the HCT Listing, HCT commenced a tender offer for up to 13,636,364 shares of its common stock at $11.00 per share, which we refer to as the HCT Tender Offer.
In accordance with the terms of the limited partnership agreement of HCT OP, effective August 27, 2010, and as amended and restated on November 12, 2012, upon the HCT Listing, the SLP was entitled to receive upon redemption of its special limited partnership interest in the HCT OP an aggregate amount equal to the difference between (i) 15% of the amount by which (a) the sum of (I) the "market value" of all issued and outstanding shares of HCT common stock plus (II) the sum of all distributions paid by HCT to its stockholders prior to the HCT Listing exceeded (b) the sum of (I) the total gross proceeds of all of HCT's public offerings of its common stock plus (II) an amount of cash that, if distributed to the stockholders who purchased shares of HCT's common stock in such offerings, would have provided such stockholders a 6% cumulative, non-compounded, pre-tax annual return on the gross proceeds raised in all such offerings minus (ii) any distributions received by the SLP pursuant to particular provisions of the partnership agreement prior to the date on which the HCT Listing occurred, which amount we refer to as the SLP Listing Interest. For purposes of calculating the SLP Listing Interest, "market value" was to be calculated based on the average market value of shares of HCT common stock issued and outstanding at the time of the HCT Listing over the
30-day period beginning 180 days after the HCT Listing. The SLP Listing Interest was reflected in a Listing Note Agreement dated the date of the HCT Listing between the HCT OP and the SLP.
At the time of the HCT Listing, the following arrangements were in place and continue to be in place:
During April 2014, Ms. Cafaro and Mr. Schorsch had preliminary conversations regarding HCT's business and its existing portfolio as well as a potential acquisition of HCT by Ventas. HCT's management advised members of the HCT Board of the conversations and Ventas's potential interest in a transaction with HCT. The first conversation took place shortly after HCT's March 31, 2014 announcement of its intention to list on NASDAQ. On April 8, 2014, Ms. Cafaro and Mr. Schorsch participated in the NYU School of Professional Studies Schack Institute of Real Estate 19th Annual REIT Symposium in New York City. At a pre-symposium speakers' dinner on April 7, 2014, Ms. Cafaro and Mr. Schorsch were introduced to each other very briefly and did not discuss a potential transaction or the respective businesses of Ventas and HCT. During the symposium on April 8, 2014, Ms. Cafaro spoke with an executive whom she knew at another company with which Mr. Schorsch was affiliated, and asked whether it would make any sense to meet further with Mr. Schorsch to get to know him better and, if appropriate, to learn more about HCT. The executive arranged for an in-person meeting that day. Ms. Cafaro, accompanied by Ms. Bathija, met with Mr. Schorsch at his office in New York City for approximately one hour. During this meeting, Ms. Cafaro and Mr. Schorsch spent most of the time discussing their personal and professional backgrounds, his strategy and larger businesses, and toward the end of the meeting, and only briefly, Ms. Cafaro and Ms. Bathija asked about HCT's portfolio, and Ms. Cafaro expressed interest in learning more about HCT and in the possibility of exploring a strategic business combination between Ventas and HCT. Mr. Schorsch stated that he believed the company would be willing to provide due diligence information regarding HCT and its business to Ventas, subject to the negotiation and execution of a mutually acceptable non-disclosure agreement.
Following the April 8, 2014 meeting, HCT and Ventas negotiated and entered into a non-disclosure agreement on April 9, 2014, which we refer to as the NDA.
Following the execution of the NDA, and over the course of the ensuing two weeks, Ventas requested and received business, financial and legal due diligence information from HCT, including non-public information on HCT, its operations and operators, financial performance, capital structure, contracts and real estate. In addition, Ventas held several telephonic diligence meetings with HCT's senior management to review this information, including detailed discussions of historical financial information and growth expectations, operators and managers and the terms of the agreements with such operators and managers, capital structure, acquisition pipeline, terms of affiliate agreements, and accounting and financial reporting practices. In mid-April, Ventas also retained Centerview Partners LLC, which we refer to as Centerview, as its financial advisor in connection with a potential acquisition of HCT.
During the weekend of April 18, 2014, Ms. Cafaro and Mr. Schorsch had a telephonic conversation during which Ms. Cafaro indicated a preliminary valuation in the range of $10.75 to $11.00 per share "gross," with the amount to be received by HCT shareholders to be adjusted for any amounts that may be payable with respect to certain affiliate agreements, subject to the satisfactory completion of due diligence by Ventas as well as Ventas Board approval. Mr. Schorsch declined to consider this preliminary indication of interest because he believed the valuation reflected therein was too low, in light of his view of the value of the portfolio and the then current stock trading price of HCT, among other things. Several days later, during the week of April 21, 2014, after further analysis, Ms. Cafaro communicated to Mr. Schorsch by telephone Ventas's potential interest in exploring a transaction for enhanced consideration of $11.00 to $11.25 per share, again on a "gross" basis and subject to the completion of due diligence and Ventas Board approval. Mr. Schorsch declined to consider this revised preliminary indication of interest as well on the basis that the valuation reflected therein remained too low for the reasons indicated in his previous conversation with Ms. Cafaro.
During March, April and May 2014, the HCT Board, together with HCT's management and advisors, evaluated and negotiated the terms of a possible business combination transaction in which HCT would have acquired a third party unrelated to Ventas, which we refer to as the Unrelated Possible Acquisition. The third party was a large healthcare REIT, which we refer to as the Unrelated Party, with assets that were complementary to those of HCT, and completion of such transaction would have resulted in HCT significantly expanding its portfolio of properties. To complete the transaction HCT would have had to, among other things, enter into asset-based financing arrangements.
On May 2, 2014, the HCT Tender Offer expired and a total of 70,239,505 shares of HCT's common stock were properly tendered and not properly withdrawn at the purchase price of $11.00 per share. In accordance with the terms and conditions of the HCT Tender Offer, HCT accepted for purchase 13,636,364 shares of HCT's common stock at a purchase price of $11.00 per share, for an aggregate cost of approximately $150,000,000, excluding fees and expenses relating to the tender offer.
On May 23, 2014, Ms. Cafaro and John Cobb, Ventas's Executive Vice President and Chief Investment Officer, called Mr. Schorsch and conveyed Ventas's interest in acquiring all outstanding shares of common stock of HCT. The Ventas indication of interest contemplated merger consideration of $11.75 per share "gross", assuming 169.3 million outstanding HCT shares on a fully-diluted basis. The amount to be received by HCT stockholders would be adjusted for any amounts payable with respect to certain affiliate agreements, with the consideration to consist of Ventas common stock at a fixed exchange ratio based on the five-day volume-weighted average price, which we refer to as VWAP, of Ventas's common stock as of May 22, 2014 close. Ms. Cafaro and Mr. Cobb indicated that Ventas would consider allowing HCT stockholders to elect to receive cash consideration with respect to up to 10% of the outstanding HCT shares.
On May 23, 2014, the HCT Board held a special telephonic meeting, at which HCT's management, representatives of Proskauer, and RCS Capital were present, to discuss the Unrelated Possible Acquisition and inform the HCT Board about the offer from Ventas. At the meeting:
With respect to the possible business combination transaction with Ventas, HCT's Board discussed the proposed transaction, including the transaction structure and material transaction terms, with considerable attention paid to the potential that such proposal might result in substantial long-term value creation for HCT's stockholders. The HCT Board also discussed: (i) current market conditions; (ii) the mix of consideration in the Ventas offer; and (iii) that the Ventas proposal did not contemplate a lock-up of HCT's stockholders.
At the conclusion of the May 23, 2014 meeting, the HCT Board authorized Mr. Schorsch and HCT's management to continue to explore the possible business combination transaction with Ventas as well as the Unrelated Possible Acquisition. HCT management was also authorized to enter into an exclusivity agreement with Ventas with respect to the possible acquisition of HCT.
Following the HCT Board meeting, Ventas' and HCT's respective representatives convened a telephonic meeting to discuss transaction structure, key terms and relevant financial information and other due diligence materials. Subsequent to such conversation, an exclusivity agreement with respect to the potential sale of HCT to Ventas was distributed.
On May 24, 2014, HCT signed an exclusivity agreement with Ventas with respect to HCT's potential acquisition by Ventas. The exclusivity agreement provided for an exclusivity period through May 29, 2014. Also on that date, HCT retained Venable LLP, which we refer to as Venable, as Maryland counsel to HCT.
Beginning on May 23, 2014, Ventas conducted detailed financial, business, operational and legal due diligence on HCT. As part of such process HCT provided Ventas and its advisors access to senior HCT management, as well as access to HCT's online data room, which contained business, financial and legal due diligence information on HCT, its operators and its real estate. Between May 23 and June 1, 2014, Ventas, with assistance from its advisors, reviewed these materials, conducted due diligence and engaged in diligence discussions regarding HCT's business with HCT's senior management. Also between May 23 and June 1, 2014, HCT, with assistance from its advisors, conducted financial, business, operation and legal due diligence on Ventas based on publicly available information. HCT's management and advisors were also provided access to senior Ventas management.
On May 26, 2014, Ventas's legal advisor, Wachtell, Lipton, Rosen & Katz, which we refer to as Wachtell Lipton, delivered to HCT and Proskauer, a proposed form of merger agreement between HCT and Ventas.
From May 26 to June 1, 2014, representatives of HCT and Ventas engaged in extensive negotiations regarding the terms of the merger agreement. The negotiations focused on, among other things, the conditions to closing, the scope of certain restrictions on the conduct of HCT's business prior to closing, and the details of the no shop and termination provisions in the merger agreement.
The HCT Board held a special telephonic meeting on May 26, 2014, at which it received updates on both the possible business combination transaction with Ventas and the Unrelated Possible Acquisition. At such meeting, HCT's management and representatives of Proskauer, Citi and RCS Capital were present and the HCT Board discussed the key terms of the possible business combination transaction with Ventas, including the transaction structure, the fixing of an exchange ratio based on the five-day VWAP of Ventas's common stock as of the close of trading on May 22, 2014, the initial draft of the merger agreement, the status of the due diligence review and the status of negotiations with Ventas and its advisors. At the conclusion of the meeting, the HCT Board authorized HCT's management to continue more advanced negotiations with Ventas as well as with respect to the Unrelated Possible Acquisition.
As part of the due diligence investigations, representatives of HCT and Ventas's management met at the offices of Wachtell Lipton on May 27, 2014 to discuss due diligence of the companies. This discussion included a detailed review of HCT's operations, tax compliance matters, historical and
expected growth, financial and accounting practices and legal information, including a review of HCT's acquisition pipeline. During this meeting, HCT and Ventas also discussed each of HCT's operators and managers in detail, including a review of the company and management, financial performance, accounting and financial reporting practices and terms of material agreements.
Also on May 27, 2014, the legal representatives of HCT and Ventas's management met at the offices of Wachtell Lipton to discuss and resolve certain issues in the merger agreement.
During the course of discussions between HCT and the relevant third party concerning the Unrelated Possible Acquisition, HCT and the third party disagreed with respect to several key terms, including terms relating to financing, closing conditions and termination provisions of any such transaction.
On May 28, 2014, HCT held its annual shareholders meeting in New York City and following such meeting the HCT Board held a meeting to discuss both the possible business combination transaction with Ventas and the Unrelated Possible Acquisition. At such meeting, which was also attended by HCT's management and representatives of Proskauer, Citi and RCS Capital:
Following careful consideration of the material open issues in the Unrelated Possible Acquisition, including the failure of HCT and the third party to make progress regarding several material terms with respect to the Unrelated Possible Acquisition, the HCT Board determined that HCT's management should terminate discussions with respect to such transaction.
With respect to the possible business combination transaction with Ventas, the HCT Board discussed the status of the due diligence review, the status of negotiations with Ventas and its advisors as well as the recent fluctuation in Ventas's stock price, which closed at $67.24 on May 27, and finalizing HCT's outstanding share, OP Unit and LTIP Unit count (which would affect the aggregate per share consideration to be paid). The HCT Board determined that HCT's management should continue negotiations with Ventas.
On May 28, 2014, representatives of HCT's and Ventas's management met at the New York City office of Wachtell Lipton to continue discussions relating to due diligence and outstanding issues in the merger agreement.
Between May 28 and May 31, 2014, Proskauer and Wachtell Lipton exchanged revised drafts of the merger agreement and together with HCT's and Ventas's management teams participated in numerous telephonic negotiation sessions. The discussions and negotiations focused on, among other things, the structure of the partnership merger, the treatment of the Listing Note Agreement, the OPP, the Advisory Agreement and the Management Agreement at closing, the deal protection provisions with respect to the merger, the treatment of each party's regular dividend prior to closing, the scope of certain restrictions on the conduct of HCT's businesses prior to closing, certain conditions and delay rights with respect to closing, including in relation to the receipt of lender consents and regulatory approvals and the scope of the parties' representations and warranties.
On May 29, 2014, the Ventas Board held a special telephonic meeting at which Ventas's management and representatives of Wachtell Lipton and Centerview were present, to review and consider the possible business combination transaction with HCT. At the meeting:
At the conclusion of the May 29, 2014 meeting, following a lengthy presentation regarding the proposed transaction and related terms, and after extensive discussion and consideration, the Ventas Board preliminarily approved the merger agreement and the transactions contemplated thereby, including the merger, and established a Transaction Committee of the Ventas Board, which we refer to as the Transaction Committee, to exercise the power and authority of the Ventas Board to provide final approval of the possible business combination transaction with HCT and the merger agreement, following satisfactory completion of due diligence and the finalization of the transaction documents.
The members of the Transaction Committee were selected by the Ventas Board taking into consideration the experience of each member and based on the flexibility of their schedules over the ensuing weekend, during which the Ventas Board and management anticipated that the proposed transaction would be finalized, so that a meeting could be held on short notice. The duty and purpose of the Transaction Committee was to oversee the final stages of negotiations and due diligence, and the committee was authorized to confirm the completion of due diligence and confirm final approval of the merger agreement and related transaction documents in substantially the form presented to the Ventas Board at the May 29, 2014 meeting, with such changes and additions as the Transaction Committee might approve.
The HCT Board held a special telephonic meeting on May 30, 2014, at which it extensively discussed the outstanding issues in the merger agreement. At the meeting:
At the conclusion of the May 30, 2014 meeting, and after extensive discussion, the HCT Board authorized HCT's management to continue negotiations with Ventas and attempt to resolve the remaining outstanding issues.
On May 31, 2014, Wachtell Lipton circulated a revised draft of the merger agreement and along with representatives from Proskauer and HCT's and Ventas's management teams participated in a telephonic negotiation session.
On June 1, 2014, the HCT Board held a special telephonic meeting to consider approval of the merger agreement and the transactions contemplated by the merger agreement. Prior to this meeting, the HCT Board was provided with materials relating to the proposed business combination transaction with Ventas, including a draft merger agreement and a summary thereof. At the meeting:
Following this discussion, the independent members of the HCT Board convened in private session with representatives of Proskauer and Venable to further discuss aspects relating to the merger agreement including Ventas' requirement that amounts due under the Listing Note Agreement and the OPP be liquidated and the Advisory Agreement and Management Agreement be terminated concurrently with the merger and the Advisor's proposal related thereto. The independent directors considered amounts payable to the Advisor, the SLP and the affiliates under the OPP and each of the Advisory, Management and Listing Note Agreements. Following careful consideration of the Advisor's proposal and after extensive discussions, including discussions with Proskauer and Venable, HCT's independent directors unanimously determined to approve the proposed amendments to the Listing Note Agreement, the OPP, the Advisory Agreement and the Management Agreement.
Following a careful consideration of the proposed merger agreement, and after extensive discussion, including discussions with its financial and legal advisors, the HCT Board unanimously determined that the terms and provisions of the merger agreement negotiated with Ventas were fair and advisable to, and in the best interest of, HCT stockholders, unanimously approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, and unanimously resolved unanimously to recommend to NHP'sthat HCT stockholders that they vote to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger.
On May 30, 2014, the Transaction Committee held a meeting to consider approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger. Following extensive discussion with Ventas's management team, Centerview and Wachtell Lipton regarding the status of the due diligence and the terms and provisions of the merger agreement and the other transaction agreements, the Transaction Committee determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, were in the best interest of, Ventas and its stockholders and approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, and resolved to ratify, adopt and approve the resolutions of the Ventas Board approving the merger agreement and the transactions contemplated by the merger agreement, including the merger.
The merger agreement was executed by the parties on the night of June 1, 2014. Prior to the opening of trading on the New York Stock Exchange and NASDAQ on June 2, 2014, HCT and Ventas issued a joint press release announcing the execution of the merger agreement.
Recommendation of the HCT Board and Its Reasons for the Merger
The HCT Board has unanimously (i) determined that the merger agreement and the merger are advisable and fair to, and in the best interests of HCT and its stockholders and (ii) approved the execution, delivery and performance of the merger agreement, the merger and the other transactions contemplated by the merger agreement. The decision of the HCT Board to enter into the merger
Lateragreement was the result of careful consideration by the HCT Board of numerous factors, including the following material factors:
The HCT Board also identified and considered the following risks and considerations in its deliberations:
The HCT Board also considered the interests that certain executive officers and directors of HCT may have with respect to the merger in addition to their interests as stockholders of HCT generally (see the section entitled "—Interests of HCT's Directors and Executive Officers in the Merger" beginning on page 68 of this proxy statement/prospectus), which the HCT Board considered as being neutral in its evaluation of the proposed transaction.
Although the foregoing discussion sets forth the material factors considered by the HCT Board in reaching its recommendation, it may not include all of the factors considered by the HCT Board, and each director may have considered different factors or given different weights to different factors. In view of the variety of factors and the amount of information considered, the HCT Board did not find it practicable to, and did not, make specific assessments of, quantify or otherwise assign relative weights to the specific factors considered in reaching its recommendation. The HCT Board realized that there can be no assurance about future results, including results expected or considered in the factors above. However, the HCT Board concluded that the positive factors described above significantly outweighed the neutral and negative factors described above. The recommendation was made after consideration of all of the factors as a whole. This explanation of HCT's reasons for the merger and the other information presented in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled "Cautionary Statement Concerning Forward-Looking Statements" beginning on page 34 of this proxy statement/prospectus.
THE HCT BOARD HAS UNANIMOUSLY (I) DETERMINED THAT THE MERGER AGREEMENT AND THE MERGER ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF HCT AND ITS STOCKHOLDERS AND (II) APPROVED THE EXECUTION, DELIVERY AND PERFORMANCE OF THE MERGER AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. ACCORDINGLY, THE HCT BOARD UNANIMOUSLY RECOMMENDS THAT THE HCT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
In considering the recommendation of the HCT Board with respect to the merger, you should be aware that certain of HCT's directors and officers have arrangements that cause them to have interests in the transaction that are different from, or are in addition to, the interests of HCT stockholders generally. See the section entitled "—Interests of HCT's Directors and Executive Officers in the Merger" beginning on page 68 of this proxy statement/prospectus.
Ventas's Reasons for the Merger; Recommendation by the Ventas Board of DirectorsMerger
After careful consideration, the Ventas boardBoard and the Transaction Committee of directors, by a unanimous vote of all directors, at a meeting held on February 27, 2011,the Board approved the merger agreement and the transactions contemplated thereby, including the merger. In reaching itstheir decision, the Ventas board of directorsBoard and the Transaction Committee consulted with Ventas's senior management and its financial and legal advisors and considered a number of factors that the board of directorsthey believed supported itstheir decision, including the following material factors:
Ventas's proposal of January 4, 2011, the agreed-upon exchange ratioBoard's and the total number of Ventas shares to be issued in the merger were lower than the exchange ratio and total number of Ventas shares implied by the January 4th proposal because of a subsequent increase in Ventas's stock price.
The Ventas board of directorsBoard and the Transaction Committee also considereddeliberated on a variety of risks and other potentially negative factorsconsiderations concerning the merger agreement and the merger, including the following:
The above discussion of the factors considered by the Ventas board of directorsBoard and the Transaction Committee is not intended to be exhaustive, but does set forth the material factors considered by the Ventas board of directors.exhaustive. In reaching itstheir determination, the Ventas board of directorsBoard and the Transaction Committee did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Ventas board of directorsBoard and the Transaction Committee considered all these factors as a whole, including its discussions with, and inquiry of, Ventas's management and financial and legal advisors, and overall considered these factors to be favorable to, and to support, itstheir determination. The Ventas board
Opinion of directors also relied on the experience of Centerview Partners, Ventas'sHCT's Financial Advisor
HCT has retained Citi as its financial advisor for its opinion as toin connection with the proposed merger. In connection with this engagement, HCT requested that Citi evaluate the fairness, from a financial point of view, to Ventas of the exchange ratio.
For the reasons set forth above, the Ventas board of directors unanimously approved the merger agreement and the transactions contemplated thereby. The Ventas board of directors unanimously recommends that the Ventas stockholders vote "FOR" the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and "FOR" the Ventas charter amendment.
NHP's Reasons for the Merger; Recommendation by the NHP Board of Directors
After careful consideration, the NHP board of directors, by a unanimous vote of all directors, at a meeting held on February 27, 2011, approved the merger agreement. In the course of reaching its unanimous decision to approve the merger agreement and recommend adoption by the NHP stockholders of the merger agreement and approval by the NHP stockholders of the merger and the other transactions contemplated by the merger agreement, the NHP board of directors consulted with NHP's senior management and NHP's financial and legal advisors and considered a number of factors that the NHP board of directors believed supported its decision, including the following material factors:
The NHP board of directors also considered a variety of risks and other potentially negative factors concerning the merger agreement and the merger, including the following:
In addition to considering the factors described above, the NHP board of directors considered the fact that some of NHP's directors and executive officers have other interests in the merger that are different from, or in addition to, the interests of NHP's stockholders generally, as discussed under "Financial Interests of NHP's Directors and Executive Officers in the Merger" beginning on page 65 of this joint proxy statement/prospectus.
The above discussion of the factors considered by the NHP board of directors is not intended to be exhaustive, but does set forth material factors considered by the NHP board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the NHP board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative or specific weight or values to any of these factors, and individual directors may have given different weights to different factors. The NHP board of directors viewed its position and recommendation as being based on an overall analysis of the totality of the information available to it, including discussions with, and inquiry of, NHP's management and financial and legal advisors, and overall considered these factors to be favorable to, and to support, its determination.
This explanation of NHP's reasons for the merger and other information presented in this section is forward-looking in nature and should be read in light of the "Cautionary Statement Regarding Forward-Looking Statements" beginning on page 23 of this joint proxy statement/prospectus.
For the reasons set forth above, the NHP board of directors unanimously declared that the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable and fair to, and in the best interests of, NHP and its stockholders and unanimously approved the merger agreement. The NHP board of directors unanimously recommends to NHP's stockholders that they vote "FOR" the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement.
Opinion of Ventas's Financial Advisor
(other than excluded holders). On February 27, 2011,June 1, 2014, at a meeting of the Ventas board of directorsHCT Board held to evaluate the merger, Centerview PartnersCiti delivered to the Ventas board of directorsHCT Board an oral opinion, which was confirmed by Centerview Partners by delivery of a written opinion dated February 27, 2011,June 1, 2014, to the effect that, as of that date and based on and subject to various assumptions, matters considered, procedures followed and limitations and qualifications described in its written opinion, the exchange ratio provided for in connection withmerger consideration to be received pursuant to the merger agreement by holders of HCT common stock (other than excluded holders) was fair, from a financial point of view, to Ventas.such holders.
The full text of theCiti's written opinion, of Centerview Partners to the Ventas board of directors,dated June 1, 2014, which describes among other things, the assumptions made, procedures followed, factorsmatters considered and limitations on the review undertaken, is attached as Annex C to this joint proxy statement/prospectus. The following summaryprospectus and is incorporated herein by reference.Citi's opinion was provided for the information of the Centerview Partners opinion is qualified inHCT Board (in its entirety by reference to the full text of the opinion. Centerview Partners delivered its opinion to the Ventas board of directors for the benefit and use of the Ventas board of directorscapacity as such) in connection with its considerationevaluation of the merger.
The opinionmerger consideration from a financial point of view and financial analyses of Centerview Partners dodid not address any other aspectterms, aspects or implications of the merger. Citi was not requested to consider, and its opinion did not address, the underlying business decision of HCT to effect the merger or related transactions, the relative merits of the merger (including, without limitation,or related transactions as compared to any alternative business strategies that might exist for HCT or the fairnesseffect of any other transaction in which HCT might engage or appropriateness of the exchange ratioconsider. Citi's opinion is not intended to NHP)be and dodoes not constitute a recommendation to any stockholder of any party to the merger as to how any stockholder should vote or act on any matter relating to the proposed merger or otherwise.
vote or act on any matter relating to the merger. The opinion and financial analyses of Centerview Partners were prepared for and delivered to the Ventas board of directors and did not evaluate the merger or the exchange ratio from the point of view of any party other than Ventas. The opinion and financial analyses of Centerview Partners were not intended to be used by NHP's stockholders in evaluating the merger or the exchange ratio.
In connection with renderingarriving at its opinion, Centerview Partners, among other things:Citi:
In arriving atrendering its opinion, Centerview PartnersCiti assumed and relied, without independent verification, upon the accuracy and completeness of the foregoingall financial and other information without independent verification of such information. Centerview Partners relied onand data publicly available or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of the external manager of HCT and the management of each of Ventas and NHP that they were not aware of any factsrelevant information that was omitted or circumstances that remained undisclosed to Citi. With respect to financial forecasts and other information and data relating to HCT provided to or otherwise reviewed by or discussed with Citi, Citi was advised by the external manager of HCT, and assumed, with HCT's consent, that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of such external manager as to the future financial performance of HCT. As the HCT Board was aware, Citi was not provided with, and Citi did not have access to, internal forecasts and estimates relating to Ventas prepared by the management of Ventas and, accordingly, Citi was directed to utilize for purposes of its analyses publicly available forecasts and estimates provided to Citi by or otherwise reviewed by Citi with or discussed with Citi by the external manager of HCT and the management of Ventas. With respect to publicly available financial forecasts and other information and data relating to Ventas, Citi was advised by the management of Ventas, and assumed, with HCT's consent, that such publicly available financial forecasts and other information and data were a reasonable basis upon which to evaluate the future financial performance of Ventas. Citi further assumed, with HCT's consent, that the financial results reflected in such financial forecasts and other information and data utilized in Citi's analyses would make such information inaccuratebe realized in the amounts and at the times projected. Citi relied, at HCT's direction, upon the assessments of the external manager of HCT as to (i) the potential impact on HCT and Ventas of certain market trends and recent developments in, and prospects for, the commercial real estate market and related credit and financial markets, (ii) existing and future relationships, agreements or arrangements with, and the ability to attract and retain, key lessees and
misleadingrelated contracts and (iii) potential future acquisitions (including the timing and amount thereof) of commercial properties contemplated to be undertaken by HCT as reflected in the financial forecasts and other information and data utilized in Citi's analyses. Citi assumed, with HCT's consent, that there would be no developments with respect to any such matters that would have an adverse effect on HCT, Ventas or the merger or related transactions or that otherwise would be meaningful in any respect material to Centerview Partners'sits analyses or opinion. In connectionCiti also assumed, with HCT's consent, that any proration of or adjustment to the opinion, Centerview Partnersmerger consideration would not in any respect be meaningful to Citi's analyses or opinion.
Citi did not conduct anymake and was not provided with an independent valuationevaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of NHP orHCT, Ventas or concerningany other entity and did not make any physical inspection of the solvencyproperties or fair valueassets of NHPHCT, Ventas or Ventas, and Centerview Partners wasany other entity. Citi also did not furnished with any such valuation or appraisal. With respect to the financial forecasts provided to and examined by Centerview Partners, Centerview Partners noted that projecting future results of any company is inherently subject to uncertainty. With respect to the financial forecasts provided to Centerview Partners and utilized in its analyses relating to NHP and Ventas, including anymake an analysis of, information relating to anticipated strategic, financial and/or operational benefits expected to result from the merger, Centerview Partners assumed, with the consent of Ventas, that the forecasts had been reasonably prepared to reflect the best currently available estimates and judgments of the management of NHP and Ventas as to the future financial performance of NHP and Ventas, respectively. Centerview Partners assumed no responsibility for and expressed nodid not express any opinion or view as to, any forecasts reviewed by Centerview Partnersthe adequacy or the assumptions on which they were based. Financial forecastssufficiency of allowances or reserves for NHP that Centerview Partners assumed and relied upon in rendering its opinion were furnished to Centerview Partners by NHP's management (as adjusted by Ventas's management) and financial forecasts for Ventas that Centerview Partners assumed and relied upon in rendering its opinion were furnished to Centerview Partners by Ventas's management. Centerview Partners assumed, with Ventas's consent, that Ventas's pending Atria Acquisition will be consummated upon the terms and conditions set forth in the definitive merger agreement, dated as of October 21, 2010,losses with respect to such acquisition, without any waiverleases, loans, debt securities, derivative financial instruments or modification ofother matters, and Citi assumed, with HCT's consent, that any such termsallowances or conditionsreserves for losses were, and on a pro forma basis would be, in any respect materialthe aggregate appropriate to Centerview Partners's opinion.
Centerview Partners's opinion was necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to Centerview Partners as of, the date of its opinion. Subsequent circumstances, events or developments may affect the opinion, and Centerview Partners does not have any responsibility or obligation to update, revise or reaffirm its opinion based on subsequent circumstances, events or developments. Centerview Partners does not express any opinion as to the prices at which shares of Ventas's common stock may trade at any time subsequent to the announcement of the merger.
In rendering its opinion, Centerview Partnerscover such losses. Citi assumed, with Ventas'sHCT's consent, that the merger willand related transactions (including the operating partnership merger) would be consummated onin accordance with the terms set forth inof the merger agreement and in compliance with all applicable laws and other relevant documents or requirements, without any waiver, modification or modificationamendment of any material termsterm, condition or conditions. Centerview Partners also assumed, with Ventas's consent,agreement, and that, in the course of obtaining the necessary governmental, regulatory or third partythird-party approvals, consents, releases, waivers and consentsagreements for the merger will notand related transactions, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on NHPHCT, Ventas, the merger or related transactions or that otherwise would be meaningful in any respect to Citi's opinion or analyses. Citi was advised by HCT, and assumed, with HCT's consent, that HCT has operated in conformity with the requirements for qualification as a real estate investment trust for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2011 and that Ventas has operated in conformity with the requirements for qualification as a real estate investment trust for U.S. federal income tax purposes commencing with its taxable year ended December 31, 1999, and that the merger and related transactions would not adversely affect such status or on the contemplated benefits expected to be derived from the merger. Centerview Partnersoperations of HCT or Ventas. Citi did not express any view or opinion as to any tax or other consequences that might result fromthe actual value of Ventas common stock when issued in the merger nor doesor the opinion address any legal, tax, regulatory or accounting matters, as toprices at which Ventas has obtained such advice as it deemed necessary from qualified professionals. Centerview Partnerscommon stock (or any other securities of Ventas) or HCT common stock (or any other securities of HCT) would trade or otherwise be transferable at any time. Citi also assumed, at the direction of Ventas,with HCT's consent, that the merger will qualifywould be treated as a tax-free reorganization for U.S. federal income tax purposes. TheCiti did not express any opinion with respect to accounting, tax, regulatory, legal or similar matters and relied, with HCT's consent, upon the assessments of the external manager and other advisors of HCT and representatives of Ventas as to such matters.
Citi's opinion addressed only the fairness, from a financial point of view to Ventas, onand as of the date of theits opinion, of the exchange ratio provided for in connection withmerger consideration (to the merger. Centerview Partners expressed no view or opinion as toextent expressly specified therein) and did not address any other terms, or other aspects or implications of the merger (other than, to the extent expressly specified in the opinion, the exchange ratio provided for in connection with the merger),or related transactions, including, without limitation, the form of the merger consideration or the form or structure of the merger or related transactions, the form or structure, or financial or other terms, of the operating partnership merger or any acquisitions or any other agreementsagreement, arrangement or arrangementsunderstanding to be entered into in connection with or otherwise contemplated by the merger. In addition, Centerview Partnersmerger or related transactions or otherwise. Citi was not requested to, and it did not, undertake a third-party solicitation process on HCT's behalf with respect to the acquisition of all or a part of HCT. Citi expressed no view or opinion as to, and its opinion did not address, the underlying business decision of HCT to effect the merger or related transactions, the relative merits of the merger or related transactions as compared to any alternative business strategies that might exist for HCT or the effect of any other transaction in which HCT might engage or consider. Citi also expressed no view as to, and its opinion did not address, (i) the fairness (financial or otherwise) of the amount or nature of, or any other aspects relatingaspect of any compensation to the compensation toexternal manager of HCT or any officers, directors or employees of any parties to the merger or related transactions, or any class of such persons, relative to the exchange ratio provided formerger consideration or otherwise or (ii) any consideration that would be received in connection with the merger or otherwise.
Centerview Partners's opinion was provided forwith the benefit and usemerger or related transactions by the holders of any class of securities, creditors or other constituencies of any party to the Ventas board of directorsmerger or related transactions or other amounts that would be payable in connection with its considerationthe merger or related transactions, including any promote fee or other amount that would be payable to the external manager of HCT. Citi's opinion was necessarily based upon information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Citi as of the merger. Thedate of its opinion. Citi expressed no opinion does not constitute a recommendationor view as to any stockholder of Ventas as to how any such stockholder should vote or act on any matter relating to the merger. In addition, Centerview Partners's opinion does not address the relative meritspotential effects of the merger as compared to any other transaction or business strategyvolatility experienced by the credit, financial and stock markets, and the industries in which HCT and Ventas might engageoperate, on HCT, Ventas, the merger or the meritsrelated transactions. The issuance of the underlying decision by Ventas to engage in the merger. Centerview Partners'sCiti's opinion was approvedauthorized by the Centerview Partners LLC Fairness Opinion Committee.
Financial Analyses of Centerview PartnersCiti's fairness opinion committee.
The following isIn preparing its opinion, Citi performed a brief summaryvariety of the material financial and comparative analyses, that Centerview Partners deemed to be appropriate for this typeincluding those described below. The summary of merger and that were reviewed with the Ventas board of directors in connection with rendering Centerview Partners's opinion. The following summary, however, doesanalyses below is not purport to be a complete description of allCiti's opinion or the financial analyses performed by Centerview Partnersunderlying, and factors considered in connection with, rendering its opinion, nor does the order of analyses described represent relative importance or weight given to those analyses by Centerview Partners.
The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by Centerview Partners, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by Centerview Partners. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by Centerview Partners.
Relative Historical Stock Price Ratio Analysis. Centerview Partners reviewed the history of the trading prices of NHP common stock relative to Ventas common stock over the three-year period ended February 25, 2011. For each trading day during such three-year period, the trading price of NHP common stock was divided by the trading price of Ventas common stock to calculate an implied exchange ratio. The implied high and low exchange ratios based on this analysis were 1.068x and 0.669x.
Relative Analyst Price Target Analysis. Centerview Partners reviewed selected analyst price targets found in publicly available equity research for NHP common stock and Ventas common stock. In each instance, the analyst price target for NHP was divided by the analyst price target for Ventas to calculate an implied exchange ratio. The following table sets forth the implied mean, median, high and low exchange ratios based on the selected analyst price targets for NHP and Ventas common stock:
| |||||||||||||
Relative Net Asset Value Analysis. Centerview Partners reviewed selected net asset value, or NAV, estimates found in publicly available equity research for NHP common stock and Ventas common stock and calculated the implied exchange ratios of NHP common stock to Ventas common stock based upon such estimates. The following table sets forth the implied mean, median, high and low exchange ratios based on the selected NAV estimates for Ventas and NHP common stock:
| |||||||||||||
Relative Contribution Analysis. Centerview Partners reviewed and compared the relative contributions of Ventas and NHP to the combined company based on estimated funds from operations,
or FFO, and estimated funds available for distribution, or FAD, for the calendar years 2011, 2012 and 2013, based on projections for NHP provided by NHP (as adjusted by Ventas) and projections for Ventas provided by Ventas. Centerview Partners compared these ratios to the implied pro forma ownership of the combined company of 65% by the current Ventas stockholders and 35% by the NHP stockholders (assuming consummation of the Atria Acquisition). The analysis implied that between 2011 and 2013: (1) NHP's contribution to FFO would range from 34% to 38% and Ventas's contribution to FFO would range from 66% to 62%, implying high and low exchange ratios of 0.877x and 0.775x; and (2) NHP's contribution to FAD would range from 35% to 39% and Ventas's contribution to FAD would range from 65% to 61%, implying high and low exchange ratios of 0.919x and 0.814x.
Relative Discounted Cash Flow Analysis. Centerview Partners calculated the implied exchange ratio of NHP common stock to Ventas common stock based on an illustrative discounted cash flow analysis. The discounted cash flow analysis was based on projections for NHP provided by NHP (as adjusted by Ventas) and projections for Ventas provided by Ventas (assuming consummation of the Atria Acquisition). Centerview Partners calculated terminal values by using an estimated free cash flow perpetuity growth rate of 3.00% for NHP and 4.00% for Ventas. The cash flows and terminal values were then discounted to an illustrative present value using discount rates of 9.0% to 10.0% for NHP and 9.75% to 10.75% for Ventas. Centerview Partners calculated the implied per share equity values of NHP common stock and Ventas common stock based upon the discounted cash flow analysis. The low implied per share equity value of NHP common stock was then divided by the high implied per share equity value of Ventas common stock, to determine the low implied exchange ratio, and the high implied per share equity value of NHP common stock was then divided by the low implied per share equity value of Ventas common stock, to determine the high implied exchange ratio. This calculation indicated the following high and low implied exchange ratios based upon the discounted cash flow analysis:
| |||||||
Pro Forma Analysis of the Merger. Centerview Partners analyzed certain pro forma effects of the merger, including, among other things, the impact of the merger on FFO and FAD per share estimates for Ventas, using projections for NHP provided by NHP (as adjusted by Ventas) and projections for Ventas provided by Ventas (assuming consummation of the Atria Acquisition). The pro forma merger analysis implied that the merger would be immediately accretive to Ventas's FFO per share and FAD per share, after taking into account purchase accounting adjustments required by GAAP.
Miscellaneous
As noted above, the discussion set forth above is a summary of the material financial analyses presented by Centerview Partners to the Ventas board of directors in connection with its opinion and is not a comprehensive description of all analyses undertaken by Centerview Partners in connection with itsCiti's opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. Centerview PartnersCiti arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Citi believes that itsthe analyses summarized above must be considered as a whole. Centerview Partners further believeswhole and that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Centerview Partners'ssuch analyses and its opinion. The fact that any specific analysis has been referred to in the summary above is
not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.
In performing its analyses, Centerview PartnersCiti considered industry performance, general business, economic, market and economicfinancial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of HCT. No company, business or transaction reviewed is identical or directly comparable to HCT, Ventas, their respective businesses or the merger and NHP.related transactions and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics, market conditions and other factors that could affect the public trading, acquisition or other values of the companies, business segments or transactions reviewed.
The estimates ofcontained in Citi's analyses and the future performance of Ventas and NHP in or underlying Centerview Partners's analysesvaluation ranges resulting from any particular analysis are not necessarily indicative of actual values or actualpredictive of future results or values, which may be significantly more or less favorable than those estimates or those suggested by Centerview Partners'ssuch analyses. TheseIn addition, analyses were prepared solely as part of Centerview Partners's analysis of the fairness, from a financial point of view, to Ventas of the exchange ratio provided for in connection with the merger and were providedrelating to the Ventas boardvalue of directors in connection with the delivery of Centerview Partners's opinion. The analysesbusinesses or securities do not purport to be appraisals or to reflect the prices at which a company mightbusinesses or securities actually may be sold or the prices at which any securities have traded or may trade at any time in the future.acquired. Accordingly, the estimates used in, and the ranges of valuations resultingresults derived from, any particular analysis described aboveCiti's analyses are inherently subject to substantial uncertaintyuncertainty.
Citi was not requested to, and shouldit did not, be taken to be Centerview Partners's viewrecommend the specific consideration payable in the merger. The type and amount of the actual values of Ventas or NHP.
The exchange ratio provided forconsideration payable in connection with the merger waswere determined through negotiations between Ventas and NHP, rather than by any financial advisor, and was approved by the Ventas board of directors. The decision to enter into the merger agreement was solely that of the Ventas board of directors. As described above, Centerview Partners's opinion and analyses were only one of many factors considered by the Ventas board of directors in its evaluation of the merger and should not be viewed as determinative of the views of the Ventas board of directors or management with respect to the merger or the exchange ratio.
Under the terms of a letter agreement, Ventas engaged Centerview Partners to act as its financial advisor in connection with the merger. Pursuant to the letter agreement, Ventas has agreed to pay Centerview Partners a transaction fee of $20 million. A portion of the fee equal to $4 million was contingent and payable upon the delivery of the opinion and Ventas's execution of a definitive agreement regarding the potential acquisition of NHP. A portion of the fee equal to $16 million is payable upon consummation of the merger. Ventas took the existence of these contingent fees into account when considering the analyses, advice and opinion of its financial advisor. Ventas also has agreed to reimburse Centerview Partners's expenses and to indemnify Centerview Partners against certain liabilities arising out of its engagement. Centerview Partners has in the past performed, and may continue to perform, investment banking services for Ventas and its affiliates, in each case, for customary compensation.
Opinion of NHP's Financial Advisor
At the meeting of the NHP board of directors on February 27, 2011, J.P. Morgan rendered its oral opinion to the NHP board of directors that, as of such date and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth in its written opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of NHP common stock. J.P. Morgan subsequently confirmed its oral opinion by delivering its written opinion, dated February 27, 2011, to the NHP board of directors. No limitations were imposed by the NHP board of directors upon J.P. Morgan with respect to the investigations made or procedures followed by it in rendering its opinion.
The full text of the written opinion of J.P. Morgan, dated February 27, 2011, which sets forth, among other things, the assumptions made, procedures followed, factors considered, and qualifications and limitations on the review undertaken by J.P. Morgan in rendering its opinion, is attached to this joint proxy statement/prospectus as Annex D. The summary of J.P. Morgan's opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion.
NHP stockholders should read the full opinion carefully and in its entirety. J.P. Morgan's opinion is addressed to the NHP board of directors, is directed only to the fairness, from a financial point of view, of the exchange ratio in the merger to holders of NHP common stock as of the date of the opinion, and does not address any other aspect of the transactions contemplated by the merger agreement. J.P. Morgan provided its advisory services and opinion for the information and assistance of the NHP board of directors in connection with its consideration of the merger. The opinion of J.P. Morgan does not constitute a recommendation as to how any NHP stockholder should vote with respect to the merger. In addition, this opinion does not in any manner address the price at which NHP common stock or Ventas common stock will trade at any time subsequent to the date of the opinion. J.P. Morgan's opinion was approved by J.P. Morgan's fairness committee. Neither J.P. Morgan's opinion, nor the summary thereof or of J.P. Morgan's financial analyses set forth in this document, is being provided for the use of any Ventas stockholder and does not constitute a recommendation as to how any Ventas stockholder should vote with respect to the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger or any other matter.
In arriving at its opinion, J.P. Morgan, among other things:
In addition, J.P. Morgan held discussions with certain members of the management of NHP and Ventas with respect to certain aspects of the merger, and the past and current business operations of NHP and Ventas, the financial condition and future prospects and operations of NHP and Ventas, the effects of the merger on the financial condition and future prospects of Ventas and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by NHP and Ventas or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (nor did J.P. Morgan assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of NHP or Ventas under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, J.P. Morgan assumed that they had been reasonably prepared based on assumptions reflecting the best then-available estimates and judgments by management as to the expected future results of operations and financial condition of
NHP and Ventas to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan also assumed that each of the merger and the other transactions contemplated by the merger agreement will qualify as a tax-free reorganization for U.S. federal income tax purposes, and will be consummated as described in the merger agreement, and that the definitive merger agreement does not differ in any material respects from the draft thereof furnished to J.P. Morgan. J.P. Morgan also assumed that the representations and warranties made by NHP and Ventas in the merger agreement and the related agreements are and will be true and correct in all respects material to J.P. Morgan's analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to NHP with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on NHP or Ventas, or on the contemplated benefits of the merger.
J.P. Morgan's opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of J.P. Morgan's opinion. It should be understood that subsequent developments may affect J.P. Morgan's opinion, and J.P. Morgan does not have any obligation to update, revise or reaffirm its opinion. J.P. Morgan's opinion is limited to the fairness, from a financial point of view, to the holders of NHP common stock of the exchange ratio in the merger, and J.P. Morgan expressed no opinion as to the fairness of the merger to, or any consideration to be paid to, the holders of any other class of securities, creditors or other constituencies of NHP or as to the underlying decision by NHP to engage in the merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors or employees of any party to the merger, or any class of such persons, relative to the exchange ratio applicable to the holders of NHP common stock or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which NHP common stock or Ventas common stock will trade at any time subsequent to the date of the opinion.
The terms of the merger agreement, including the exchange ratio, were determined through arm's-length negotiations between NHPHCT and Ventas and the decision to enter into the merger agreement was solely that of the NHP boardHCT Board. Citi's opinion was only one of directors and the Ventas board of directors. J.P. Morgan's opinion and financial analyses were among the many factors considered by the NHP board of directorsHCT Board in its evaluation of the merger and related transactions and should not be viewed as determinative of the views of the NHPsuch board of directors or managementthe external manager of HCT with respect to the merger or related transactions or the exchange ratio.consideration payable in the merger or related transactions.
In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methods in reaching its opinion. The following isrepresents a brief summary of certainthe material financial analyses prepared and reviewed with the HCT Board in connection with Citi's opinion, dated June 1, 2014.The summary set forth below does not purport to be a complete description of the financial analyses undertakenperformed by, J.P. Morgan and delivered tounderlying the NHP boardopinion of, directors on February 27, 2011, which analyses were among those considered by J.P. Morgan in connection with delivering its opinion. J.P. Morgan's financial analyses that were delivered toCiti, nor does the NHP board of directors prior to its meeting on February 27, 2011 were based on an assumed exchange ratio of 0.787 shares of Ventas common stock per share of NHP common stock. J.P. Morgan rendered its opinion using the final exchange ratio of 0.7866 shares of Ventas common stock per share of NHP common stock. Some of the summariesorder of the financial analyses described represent the relative importance or weight given to those financial analyses by Citi. Certain financial analyses summarized below include information presented in tabular format. The tables are not intended to stand alone, and inIn order to more fully understand the financial analyses, used by J.P. Morgan, the tables must be read together with the full text of each summary.summary as the tables alone
do not constitute a complete description of the financial analyses. Considering the data set forthin the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the financial analyses, could create a misleading or incomplete view of J.P. Morgan'ssuch financial analyses.
Table None of ContentsHCT, Ventas, Citi or any other person assumes responsibility if future results are different from those described, whether or not any such difference is material.
Historical Exchange Ratio Analysis
J.P. Morgan calculated (1) For purposes of the implied historical exchange ratios duringfinancial analyses summarized below, the one-year period ended February 25, 2011 by dividingterm "implied merger consideration" refers to the daily closing pricevalue of the merger consideration of $11.33 and assumes that (i) 10% of the outstanding shares of HCT common stock would be converted into the right to receive $11.33 per share in cash and (ii) 90% of NHPthe outstanding shares of HCT common stock by thatwould be converted into the right to receive 0.1688 of a share of Ventas common stock for each trading day during that period and (2) thebased on Ventas's volume weighted average of those daily implied historical exchange ratiosclosing stock price for the one-week, one-month, three-month, six-month,five-day period ended May 22, 2014 of $67.13.
HCT Financial Analyses
Selected Public Companies Analysis. Citi reviewed publicly available financial and one-year periods ending February 25, 2011. J.P. Morgan also noted the low and high exchange ratios for each period referenced in clause (2) abovestock market information of HCT and the resulting premiumsfollowing six selected companies that Citi in its professional judgment considered generally relevant for comparative purposes as U.S. publicly traded companies with operations in the healthcare REIT industry, consisting of the proposed exchange ratio to the average exchange ratios for each such period. The analysis resultedthree largest (based on market capitalization as of May 30, 2014) U.S. publicly traded companies with diversified operations in the following implied exchange ratios for the periods indicated, as compared to the exchange ratio of 0.7866x provided for in the merger:
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
J.P. Morgan noted that a historical exchange ratio analysis is not a valuation methodologyhealthcare REIT industry and that such analysis was presented merely for reference purposes.
Contribution Analysis
J.P. Morgan analyzed the contribution of each of Ventas and NHP to the pro forma combined companythree U.S. publicly traded companies with respect to EBITDA (defined as earnings before interest, taxes, depreciation and amortization including joint ventures' contribution to EBITDA at ownership share), estimated FFO and estimated adjusted funds fromMOB-focused operations, or AFFO, for calendar year 2011, which is referred to as CY11. Earnings metrics were adjusted to include the full-year impact of certain acquisitions based on publicly available information. For purposes of the contribution analysis, J.P. Morgan assumed that the contribution with respect to EBITDA reflected each company's contribution to the combined company's pro forma firm value. Equity value contributions and relative ownership interests were then derived by adjusting firm value contributions for outstanding net debt, preferred equity and non-controlling interests of both companies. J.P. Morgan further assumed that the contributions with respect to FFO and AFFO reflected each company's contribution to the combined company's pro forma equity value and relative ownership interests. Synergies were not taken into account in the contribution analysis. The analyses yielded the following pro forma diluted equity value contributions
and ownership interests with respect to EBITDA, FFO and AFFO and implied exchange ratios ranging from a low of 0.683x to a high of 0.833x, as follows:
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
| |||||
Public Trading Analysis
Using publicly available information, including estimated AFFO per share for CY11 published by equity research analysts and adjusted to include the full-year impact of certain acquisitions, including Ventas's Atria Acquisition and certain acquisitions by NHP in December 2010 and January 2011, J.P. Morgan analyzed certain trading multiples of otherHCT selected publicly traded REITs. None of the selected companies are identical to NHP. However, the selected companies were chosen because they are publicly traded REITs with operations that, for purposes of J.P. Morgan's analysis, may be considered similar to those of NHP. These companies were as follows:companies:
For each of these other REITs, J.P. Morgan calculated theCiti reviewed enterprise values (calculated as equity values based on closing stock prices on May 30, 2014, plus debt, preferred stock and non-controlling interests and less cash and cash equivalents) as a multiple of equity market pricenext 12 months (as of March 31, 2014) estimated earnings before interest, taxes, depreciation and amortization, which we refer to as estimated EBITDA. Citi also reviewed closing stock prices on May 30, 2014 as a multiple of next 12 months (as of March 31, 2014) Wall Street research analysts' consensus estimated funds from operations per share, which we refer to as estimated FFO per share, and Wall Street research analysts' consensus estimated adjusted FFO per share, which we refer to as estimated AFFO per share. Citi further reviewed the median estimatequotient of its CY11next 12 months (as of March 31, 2014) estimated net operating income divided by implied estimated operating real estate values (calculated as equity values based on closing stock prices on May 30, 2014 plus estimated tangible liabilities less estimated tangible assets), which we refer to as the implied cap rate. The overall low to high next 12 months estimated EBITDA, estimated FFO per share and estimated AFFO per share multiples observed for the HCT selected companies were 15.0x to 17.6x (with a mean of 16.7x), 13.5x to 16.8x (with a mean of 15.1x) and 15.0x to 18.9x (with a mean of 16.9x), respectively. The overall low to high next 12 months estimated implied cap rates observed for the HCT selected companies were 7.1% to 5.8% (with a mean of 6.2%). Citi then applied such low to high ranges of next 12 months estimated EBITDA, estimated FFO per share and estimated AFFO per share multiples and next 12 months estimated implied cap rates derived from the HCT selected companies to corresponding data of HCT, both excluding unidentified acquisitions of commercial real estate properties by HCT, which we refer to as reported by equity research analysts asHCT unidentified acquisitions, and pro forma for $250 million (as of February 25, 2011. J.P. Morgan also analyzedJune 30, 2014) of HCT unidentified acquisitions. Citi noted that, (i) excluding HCT unidentified acquisitions, HCT's next 12 months estimated EBITDA, estimated FFO per share and estimated AFFO
per share multiples at the same tradingimplied merger consideration were 17.8x, 16.2x and 17.6x, respectively, and next 12 months estimated implied cap rate at the implied merger consideration was 5.6% and (ii) including HCT unidentified acquisitions, HCT's next 12 months estimated EBITDA, estimated FFO per share and estimated AFFO per share multiples for NHPat the implied merger consideration were 17.1x, 15.1x and 16.7x, respectively, and next 12 months estimated implied cap rate at the implied merger consideration was 5.8%. Financial data of the HCT selected companies were based on public filings and other publicly available information. Financial data of HCT was based on internal forecasts and estimates of the external manager of HCT, public filings and other publicly available information. Balance sheet data of HCT was adjusted for the HCT Tender Offer. This analysis indicated the following approximate implied per share equity research analystvalue reference ranges for HCT, as compared to the implied merger consideration:
| | Implied Per Share Equity Value Reference Ranges (Excluding HCT Unidentified Acquisitions) | | | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Based on Next 12 Months Estimated EBITDA | Based on Next 12 Months Estimated FFO | Based on Next 12 Months Estimated AFFO | Based on Next 12 Months Estimated Implied Cap Rate | Implied Merger Consideration | | |||||||||||
| $ | 8.91 - $11.20 | $ | 9.42 - $11.78 | $ | 9.67 - $12.18 | $ | 8.16 - $10.68 | $ | 11.33 | ||||||||
| | Implied Per Share Equity Value Reference Ranges (Including HCT Unidentified Acquisitions) | | | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Based on Next 12 Months Estimated EBITDA | Based on Next 12 Months Estimated FFO | Based on Next 12 Months Estimated AFFO | Based on Next 12 Months Estimated Implied Cap Rate | Implied Merger Consideration | | |||||||||||
| $ | 9.22 - $11.82 | $ | 10.09 - $12.62 | $ | 10.17 - $12.82 | $ | 8.25 - $11.09 | $ | 11.33 | ||||||||
Selected Precedent Transactions Analysis. Citi reviewed financial data and data provided by NHP management. Synergies were not taken into accountrelating to the following ten selected transactions publicly announced from April 2005 to June 2014 with transaction values ranging from $800 million to $8 billion, which Citi in its professional judgment considered generally relevant for comparative purposes as transactions involving the acquisition of U.S. target companies with operations in the public trading analysis.
The following presentshealthcare REIT industry, which we refer to as the results of this analysis:selected transactions:
Announcement Date | ||||||
|---|---|---|---|---|---|---|
| Target | ||||||
• Health Care REIT, Inc. | • Sunrise Senior Living, LLC | |||||
• Ventas, Inc. | • Cogdell Spencer, Inc. | |||||
| February 28, 2011 |
J.P. Morgan applied a range of these multiples to the CY11 AFFO per share estimates for NHP and Ventas per median equity research estimates, which resulted in the following range of implied share prices for each share of NHP and Ventas, rounded to the nearest $0.50, as compared to the (1) closing price per share of NHP common stock on February 25, 2011 of $38.96, (2) closing price per share of Ventas common stock on February 25, 2011 of $57.19 and (3) implied price per share of NHP
•
Health Care REIT, Inc.
•
Genesis HealthCare, LLC
common stock of $44.99 based on the exchange ratio of 0.7866x provided for in the merger applied to the closing price per share of Ventas common stock on February 25, 2011:
| | | CY11 AFFO per share | |||||||
|---|---|---|---|---|---|---|---|---|---|
| | | Multiple | Implied share price | ||||||
| NHP | High | 17.0x | $ | 40.50 | |||||
| Low | 15.0x | $ | 36.00 | ||||||
Ventas | High | 19.5x | $ | 57.50 | |||||
| Low | 17.5x | $ | 51.50 | ||||||
J.P. Morgan compared the results of the implied equity values per share for Ventas and NHP. For each comparison, J.P. Morgan compared the highest equity value per share for NHP to the highest equity value per share for Ventas to derive the highest exchange ratio implied by each pair of estimates. J.P. Morgan also compared the lowest equity value per share for NHP to the lowest equity value per share for Ventas to derive the lowest exchange ratio implied by each pair of estimates. The implied exchange ratios resulting from this analysis, as compared to the exchange ratio of 0.7866x provided for in the merger, were:
| ||||||
| ||||||
| February 28, 2011 | July 1, 2011 | • Ventas, Inc. | • Nationwide Health Properties, LLC | |||
| December 13, 2010 | April 8, 2011 | • HCP, Inc. | • HCR ManorCare, Inc. | |||
| October 22, 2010 | May 12, 2011 | • Ventas, Inc. | • Atria Senior Living Group, Inc. | |||
| January 14, 2007 | April 26, 2007 | • Ventas, Inc. | • Sunrise Senior Living REIT | |||
| September 12, 2006 | December 20, 2006 | • Health Care REIT, Inc. | • Windrose Medical Properties Trust | |||
| May 1, 2006 | October 5, 2006 | • Health Care Property Investors, Inc. | • CNL Retirement Properties, Inc. | |||
| April 12, 2005 | June 7, 2005 | • Ventas, Inc. | • Provident Senior Living Trust | |||
Dividend Discount Analysis
J.P. Morgan performed a dividend discount analysis Citi reviewed transaction values of NHP's common stock and Ventas's common stock using three-year projections for each companythe selected transactions (calculated as provided by each company's management, and seven-year extrapolations thereof that were reviewed and approved by NHP's managemententerprise values implied for the purposetarget companies based on the consideration payable in the selected transactions) as a multiple of determining the fully dilutedtarget companies' next 12 months estimated implied equity value per sharecap rate. The overall low to high next 12 months estimated implied cap rates observed for the selected transactions were 8.3% to 5.9% (with a mean of each company. The dividend per share payout ratios (as a percentage6.9%). Citi noted that the average next 12 months estimated implied cap rates observed for selected transactions involving 50% or more stock consideration was 6.7% and involving 50% or more cash consideration was 7.0%. Citi then applied the low to high range of AFFO per share) for NHP that were provided to J.P. Morgan for 2011, 2012, 2013, 2014 and 2015 through 2020, respectively, were as follows: 80.0%; 80.0%; 80.0%; 82.5%; and 85.0%. The dividend per share payout ratios (as a percentage of AFFO per share) for Ventas that were provided to J.P. Morgan for 2011, 2012, 2013, 2014 and 2015 through 2020, respectively, were as follows: 77.5%; 76.2%; 75.7%; 77.9%; and 80.0%. A dividend discount analysis is a method of evaluatingnext 12 months estimated implied cap rates derived from the equity value of a company using estimates of future dividends to shareholders generated by the company and taking into consideration the time value of money with respect to those future dividends by calculating their "present value." "Present value" refersselected transactions to the current valuenext 12 months (as of the future dividends to shareholders paid by the companyMarch 13, 2014) estimated net operating income of HCT, both excluding HCT unidentified acquisitions and is obtained by discounting those future dividends back to the present using a discount ratepro forma for $250 million (as of June 30, 2014) of HCT unidentified acquisitions. Citi noted that, takes into account macro-economic assumptions, estimates of risk, the opportunity cost of capital and other appropriate factors.
Based on the dividends NHP was projected to distribute during fiscal years 2011 through 2020, J.P. Morgan discounted the dividend stream to present values using a range of discount rates from 9.50% to 10.50%, which was chosen by J.P. Morgan based upon an analysis of the cost of equity for NHP. J.P. Morgan also calculated a range of terminal values for the company at the end of the 10-year period ending fiscal year 2020 by applying a perpetual dividend growth rate ranging from 2.50% to 3.25% and discounted the terminal value using a range of discount rates from 9.50% to 10.50%. "Terminal value" refers to the capitalized value of all future dividends to shareholders paid by the company for periods beyond the financial forecast. Synergies were not taken into account in the dividend discount analysis.
Based(i) excluding HCT unidentified acquisitions, HCT's next 12 months estimated implied cap rate at the implied merger consideration was 5.6% and (ii) including HCT unidentified acquisitions, HCT's next 12 months estimated implied cap rate at the implied merger consideration was 5.8%. Financial data of the selected transactions were based on public filings and other publicly available information. Financial data of HCT was based on internal forecasts and estimates of the dividends Ventasexternal manager of HCT, public filings and other publicly available information. This analysis indicated the following approximate implied per share equity value reference ranges for HCT, as compared to the implied merger consideration:
| | Implied Per Share Equity Value Reference Range (Excluding Unidentified Acquisitions) | Implied Per Share Equity Value Reference Range (Including Unidentified Acquisitions) | Implied Merger Consideration | | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| $ | 6.43 - $10.53 | $ | 6.31 - $10.92 | $ | 11.33 |
| |||||
Discounted Cash Flow Analysis. Citi performed a discounted cash flow analysis of HCT in which Citi calculated the estimated present value of standalone unlevered free cash flows that HCT was projectedforecasted to distributegenerate during the second quarter of the fiscal year ending December 31, 2014 through the full fiscal year ending December 31, 2018, both excluding HCT unidentified acquisitions and pro forma for $250 million (as of June 30, 2014) of HCT unidentified acquisitions during the second quarter of the fiscal year ending December 31, 2014 and $500 million of additional HCT unidentified acquisitions per year during the fiscal years 2011ending December 31, 2015 through 2020, J.P. Morgan discounted the dividend stream to present values using a rangeDecember 31, 2018. The terminal value of discount rates from 9.50% to 10.50%, which was chosen by J.P. Morgan based upon an analysis of the cost of equity for Ventas. J.P. Morgan also calculated a range of terminal values for the companyHCT's net operating income at the end of the 10-yearforecast period ending fiscal year 2020 by applyingwas estimated using a perpetual dividendperpetuity growth rate of 2.5%. Citi then applied terminal implied cap rates ranging from 4.00%7.0% to 4.75% and discounted6.0%, taking into account, based on Citi's professional judgment, among other things, the implied cap rates (as of May 30, 2014) of the HCT selected companies, to the estimated terminal annual net operating income of HCT to calculate the terminal value of HCT. Such terminal value and unlevered free cash flows that HCT was forecasted to generate during the forecast period were then discounted to present value (as of March 31, 2014) using a range of discount rates ranging from 9.50%8.25% to 10.50%.
The9.25% derived from a weighted average cost of capital calculation. Financial data of HCT was based on internal forecasts and estimates of the external manager of HCT, public filings and other publicly available information. Balance sheet data of HCT was adjusted for the HCT Tender Offer. This analysis yieldedindicated the following approximate implied per share equity value per share,reference ranges for HCT, as compared to the implied price per share of NHP common stock of $44.99 based on the exchange ratio of 0.7866x provided for in the merger applied to the closing price per share of Ventas common stock on February 25, 2011:consideration:
| | NHP | Ventas | |||||
|---|---|---|---|---|---|---|---|
High | $ | 42.00 | $ | 60.50 | |||
Low | $ | 34.00 | $ | 46.00 | |||
| | Implied Per Share Equity Value Reference Range (Excluding Unidentified Acquisitions) | Implied Per Share Equity Value Reference Range (Including Unidentified Acquisitions) | Implied Merger Consideration | | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| $ | 8.28 - $10.31 | $ | 8.09 - $12.05 | $ | 11.33 |
| |||||
J.P. Morgan comparedVentas Financial Analysis
Selected Public Companies Analysis. Citi reviewed publicly available financial and stock market information of Ventas and the resultsfollowing selected companies that Citi in its professional judgment considered generally relevant for NHPcomparative purposes as U.S. publicly traded companies with operations in the healthcare REIT industry, consisting of the two largest U.S. publicly traded companies (based on market capitalization as of May 30, 2014) with diversified operations in the healthcare REIT industry, excluding Ventas, which we refer to as the results for Ventas. For each comparison, J.P. Morgan compared the highest equity valueVentas selected companies:
Citi reviewed enterprise values as a multiple of next 12 months (as of March 31, 2014) estimated EBITDA. Citi also reviewed closing stock prices on May 30, 2014 as a multiple of next 12 months (as of March 31, 2014) estimated FFO per share for NHP to the highest equity valueand estimated AFFO per share for Ventas to derive the lowest exchange ratio implied by each pair of estimates. J.P. Morgan also compared the lowest equity value per share for NHP to the lowest equity value per share for Ventas to derive the highest exchange ratio implied by each pair of estimates. The implied exchange ratios resulting from this analysis, as compared to the exchange ratio of 0.7866x provided for in the merger, were:
| ||||
| ||||
| ||||
Net Asset Value Analysis
J.P. Morgan prepared a per share net asset value analysis for NHP using forward 12 months cash net operating income and asset and liability balances as of December 31, 2010, adjusted to include the full year impact of certain acquisitions by NHP in December 2010 and January 2011, as provided by NHP. J.P. Morgan applied a weighted average range of capitalization rates of 7.34% to 8.34% to the last quarter annualized cash net operating income, excluding net operating income from investments made late in the fourth quarter of 2010, for the portfolio to arrive at an aggregate value for the property portfolio at December 31, 2010. The capitalization rate range represented the weighted average capitalization rates provided by equity research analysts, weighted by NHP's corresponding net operating income contribution by property type. To this aggregate value amount, J.P. Morgan added the value of other tangible real estate and non-real estate assets, including certain acquisitions by NHP in December 2010 and January 2011 and mortgage loans. From gross asset value, J.P. Morgan deducted debt balances and other tangible liabilities. This analysis implied a net asset value per share of $27.50 to $32.00 per share.
J.P. Morgan prepared a per share net asset value analysis for Ventas using forward 12 months cash net operating income and asset and liability balances as of December 31, 2010, as provided in Ventas's public filings, adjusted to include the full-year impact of certain acquisitions, including Ventas's Atria Acquisition at its purchase price. J.P. Morgan applied a weighted average range of capitalization rates of 7.33% to 8.33% to the last quarter annualized cash net operating income for the portfolio to arrive at an aggregate value for the property portfolio at December 31, 2010. The capitalization rate range represented the weighted average capitalization rates provided by equity research analysts, weighted by Citi further reviewed
next 12 months (as of March 31, 2014) estimated implied cap rates. The overall low to high next 12 months estimated EBITDA, estimated FFO per share and estimated AFFO per share observed for the Ventas selected companies were 15.8x to 17.5x (with a mean of 16.6x), 13.7x to 15.3x (with a mean of 14.5x) and 15.9x to 17.2x (with a mean of 16.5x), respectively. The overall low to high next 12 months estimated implied cap rates observed for the Ventas selected companies were 6.1% to 6.0% (with a mean of 6.0%). Citi then applied such low to high ranges of next 12 months estimated EBITDA, estimated FFO per share and estimated AFFO per share multiples and next 12 months estimated implied cap rates derived from the Ventas selected companies to corresponding data of Ventas. Citi noted that Ventas's corresponding net operating income contribution by property type. To this aggregate value amount, J.P. Morgan addednext 12 months estimated EBITDA, estimated FFO per share and estimated AFFO per share multiples were 17.1x, 15.1x and 16.5x, respectively, and next 12 months estimated implied cap rate was 6.0%. Financial data of the value of other tangible real estate and non-real estate assets, including Ventas's Atria Acquisition and loan receivables. From gross asset value, J.P. Morgan deducted debt balancesVentas selected companies were based on public filings and other tangible liabilities.publicly available information. Financial data of Ventas was based on publicly available Wall Street research analyst estimates, public filings and other publicly available information. This analysis indicated the following approximate implied per share equity value reference ranges for Ventas, as compared to Ventas's volume weighted average closing stock price for the five-day period ended May 22, 2014:
| Implied Per Share Equity Value Reference Ranges | | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Based on Next 12 Months Estimated EBITDA | Based on Next 12 Months Estimated FFO | Based on Next 12 Months Estimated AFFO | Based on Next 12 Months Estimated Implied Cap Rate | Volume Weighted Average Price as of May 22, 2014 | ||||||
| $59.34 - $69.52 | $60.64 - $67.99 | $64.29 - $69.59 | $66.12 - $67.24 | $ | 67.13 | |||||
Other Information
Citi also observed certain additional factors that were not considered part of Citi's financial analyses with respect to its opinion but were referenced for informational purposes, including, among other things, the following:
The implied exchange ratios resulting from this analysis,selected transactions relative to the closing stock prices of such companies one day prior to the transaction announcement date, which indicated a range of premiums of 8.4% to 62.4% (with a mean of 27.7%) as compared to the exchange ratio13.9% premium implied by the implied merger consideration of 0.7866x provided for in the merger, were:
| ||||
| ||||
| ||||
Value Creation Analysis
Intrinsic Value. J.P. Morgan prepared a value creation analysis that compared the intrinsic equity value$11.33 per share of Ventas common stock based on the dividend discount analysis to the pro forma combined company equity value per share. The pro forma combined company equity value per share was equal to: (1) (a) the mid-point intrinsic equity valueclosing price of NHP, plus (b) the mid-point intrinsic equity value of Ventas, plus (c) the present value of expected synergies calculated by discounting the expected cash flows from NHP management's estimated $24 million of synergies, growing at a rate equal to (i) NHP's budgeted growth rate for G&A expenses for 2012, (ii) a straight line decrease of such growth rate from the budgeted growth rate for 2013 to 2% in 2019, (iii) 2% for 2020, and (iv) 1.25% for a terminal period, by a discount rate of 10% based on the blended midpoint of discount rates utilized in the dividend discount analyses for Ventas and NHP, less (d) $100 million of estimated costs to achieve such synergies and transaction-related expenses; divided by (2) pro forma diluted outstanding shares ofHCT common stock of the combined company. There can be no assurance that the synergies, estimated cost to achieve such synergies or estimated transaction-related expenses will not be substantially greater or less than the NHP management estimate described above. The value creation analysis at the exchange ratio of 0.7866x provided for in the merger yielded accretion to the holders of NHP common stock of 7.5%.
Market Value. J.P. Morgan prepared a value creation analysis that compared the closing share price of NHP's common stock on February 25, 2011 to the pro forma combined company equity value$9.95 per share for the merger. The pro forma combined company equity value per share was equal to: (1) (a) the market equity value of NHP as of February 25, 2011, plus (b) the market equity value of Ventas as of February 25, 2011, plus (c) the value of expected synergies calculated by applying a blended FFO multiple of NHPon May 30, 2014; and Ventas (based on market capitalization) of 17.1x to NHP management's estimate of $24 million of synergies, less (d) $100 million of estimated costs to achieve such synergies and transaction-related expenses; divided by (2) pro forma diluted outstanding shares of common stock of the combined company. There can be no assurance that the synergies, estimated cost to achieve such synergies or estimated transaction-related expenses will not be substantially greater or less than the NHP management estimate described above. The value creation analysis at the exchange ratio of 0.7866x provided for in the merger yielded accretion to the holders of NHP common stock of 12.3%.
The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses or focusing on information in
tabular format, in each case, without considering allMiscellaneous
In connection with Citi's services as HCT's financial advisor, HCT has agreed to pay Citi an aggregate fee of $8.5 million, of which $3.25 million was payable upon delivery of its analyses as a whole, could create an incomplete viewopinion and $5.25 million is payable contingent upon consummation of the processes underlying the analysesmerger. In addition, HCT has agreed to reimburse Citi for certain expenses, including reasonable fees and expenses of counsel, and to indemnify Citi and certain related parties against liabilities, including liabilities under federal securities laws, arising from Citi's engagement.
Citi and its opinion. As a result,affiliates in the ranges of valuations resulting from any particular analysis past have provided, currently are providing and in the future may provide services to HCT, Ventas and/or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of NHP or Ventas. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion. Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan's analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold. Except as otherwise noted, the foregoing quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before February 25, 2011, and is not necessarily indicative of current market conditions. J.P. Morgan's opinion and financial analyses was only one of the many factors considered by the NHP board of directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of the NHP board of directors or management with respectrespective affiliates unrelated to the proposed merger, or the merger consideration. The consideration was determined through negotiation between NHP and Ventas.
As a part of its investment banking business, J.P. Morganfor which services Citi and its affiliates are continually engagedreceived and may receive compensation including, during the two-year period prior to the date of its opinion, having acted or acting (i) as financial advisor to American Realty Capital Properties, Inc., which we refer to as ARCP, in connection with certain merger and acquisition transactions and matters, (ii) as an underwriter, bookrunner, manager and/or sales or distribution agent, as applicable, with respect to certain securities offerings of ARCP, Ventas and/or their respective affiliates and (iii) as a lender, arranger, bookrunner, documentation agent and/or administrative agent under certain credit facilities of ARCP, Ventas and/or their respective affiliates. Prior to ARCP becoming internally managed on January 8, 2014, or the ARCP Internalization Date, the external advisor to ARCP was an affiliate of HCT's advisor. For these services rendered during such two-year period, Citi received aggregate fees of approximately $37.5 million from ARCP (which amount includes $20.8 million in fees received after the ARCP Internalization Date) and approximately $9.2 million from Ventas. In the ordinary course of business, Citi and its affiliates may actively trade or hold the securities of HCT, Ventas and their respective affiliates for its own account or for the account of its customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with HCT, Ventas and their respective affiliates.
HCT selected Citi to act as its financial advisor in connection with the proposed merger based on Citi's reputation, experience and familiarity with HCT and its business. Citi is an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. J.P. Morgan was selected on the basis of such experience and its familiarity with NHP to advise NHP in connection with the merger and to deliver a fairness opinion to the NHP board of directors addressing only the fairness from a financial point of view of the exchange ratio to the holders of shares of NHP common stock pursuant to the merger agreement as of the date of such opinion.
For services rendered in connection with the merger (including the delivery of its opinion), NHP has agreed to pay J.P. Morgan a fee of 0.47% of the total consideration in the merger, approximately $[ • ] million based on the market price of Ventas common stock as of [ • ], 2011, $7 million of which was payable upon the earlier of public announcement of a transaction or delivery by J.P. Morgan of its opinion, and the remainder of which is contingent upon the consummation of the merger. NHP took the existence of these contingent fees into account when considering the analyses, advice and opinion of its financial advisor. In addition, NHP has agreed to reimburse J.P. Morgan for certain expenses incurred in connection with its services, including the fees and disbursements of counsel, and has agreed to indemnify J.P. Morgan against certain liabilities, including liabilities arising under the federal securities laws.
During the two years preceding the date of its opinion, J.P. Morgan and its affiliates have had commercial and investment banking relationships with NHP and Ventas, for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included executing open market repurchases by NHP of certain of its outstanding debt securities in May 2010. In addition, J.P. Morgan's commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of NHP and a lender under outstanding credit facilities of Ventas and also provides treasury and cash management services to each of NHP and Ventas, for which it receives customary compensation or other financial benefits. J.P. Morgan's asset management affiliate also provides asset and wealth management services to NHP for customary compensation. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities of NHP or
Ventas for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities.
Financial Interests of NHP's Directors and Executive Officers in the Merger
NHP's directors and executive officers have financial interests in the merger that are different from, or in addition to, the interests of NHP stockholders generally. The NHP board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, in approving the merger agreement, and in recommending to NHP stockholders that the merger agreement be adopted and the merger and the other transactions contemplated by the merger agreement be approved.
Stock Options
In connection with the merger, each outstanding NHP stock option will become fully vested and exercisable as of the closing of the merger and will, in the discretion of Ventas, either (a) be exchanged for a cash payment based on the spread of the option (calculated using a formula based on a 10-day volume weighted average of Ventas's stock price) or (b) be assumed by Ventas based on the stock option's existing terms and conditions after taking into account its acceleration of vesting and exercisability and subject to adjustment for the exchange ratio, except that stock options granted to Mr. Pasquale in February 2011 will be assumed by Ventas and remain outstanding in accordance with their terms (as adjusted to reflect the exchange ratio). Pursuant to the terms of his employment agreement (described below), Mr. Pasquale's stock options (including stock options granted to him in February 2011) would become fully exercisable upon his resignation for any reason during the period six-months prior to and three years following the closing, and as such all of his unvested stock options have been included in the chart below. Assuming a merger completion date of [ • ], 2011, the number of unvested stock options held by NHP's executive officers which will vest in connection with the merger is set forth in the table below. The NHP directors do not hold any outstanding NHP stock options.
| ||||
| ||||
| ||||
Restricted Stock Units
In connection with the merger all NHP restricted stock units, including restricted stock units held by Mr. Pasquale which were granted pursuant to the terms of dividend equivalent rights associated with previously granted restricted stock units, will vest in full and be cashed out based on the exchange ratio, except that (i) restricted stock units granted to Mr. Pasquale in February 2011 will be assumed by Ventas and remain outstanding in accordance with their terms and (ii) restricted stock units granted to Messrs. Khoury and Bradley on April 23, 2007 will vest and be settled in accordance with their terms (in each case, as adjusted to reflect the exchange ratio). Pursuant to the terms of his employment agreement (described below), Mr. Pasquale would be entitled to full vesting and settlement of his restricted stock units (including restricted stock units granted to him in February 2011) upon his resignation for any reason during the period six-months prior to and three years following the closing, and as such all of his unvested restricted stock units have been included in the chart below. Messrs. Khoury and Bradley were granted restricted stock units on April 23, 2007, and additional restricted stock units were credited pursuant to the terms of associated dividend equivalent rights. The terms of such grants provide for the accelerated vesting of a portion of the units upon a change in control event, with the number of units so accelerated determined based on the year in which the change in control event occurs.
Assuming a merger completion date of [ • ], 2011 and that Mr. Pasquale resigns immediately following the merger, the number of unvested restricted stock units held by each of NHP's executive officers and directors which will vest in connection with the merger is set forth in the table below.
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
Performance Shares
In connection with the merger, vesting of each grant of NHP performance shares will accelerate under the award agreements in respect of the shortened performance period ending as of the closing of the merger, and the shares earned in respect of such accelerated vesting will be converted into Ventas common stock, based on the exchange ratio. Assuming a merger completion date of [ • ], 2011, the number of performance shares held by each of NHP's executive officers which are expected to vest in the merger is set forth in the table below. The NHP directors do not hold any outstanding NHP performance shares.
| ||||
| ||||
| ||||
Employment Agreement with Mr. Pasquale
NHP is party to an employment agreement with Mr. Pasquale which provides that in the event Mr. Pasquale's employment is terminated during the employment term either by NHP other than for "cause" or "disability" or by Mr. Pasquale for "good reason" (which includes resignation for any reason during the period six-months prior to and three years following a "change in control" of NHP) (as those terms are defined in the employment agreement), Mr. Pasquale will be entitled to severance pay that includes: (1) any accrued but unpaid base salary through the termination date; (2) a pro-rated portion of the annual bonus for the year of separation; (3) an amount equal to three times Mr. Pasquale's highest base salary during any of the last three full fiscal years prior to the termination date, payable in equal monthly installments over the three-year period following the termination date; (4) an amount equal to three times the average annual bonus earned by Mr. Pasquale over the last three full fiscal years prior to the termination date, payable in equal annual installments over the three-year period following the termination date; (5) for a period of three years following the termination date, continuation of all benefits in place as of the date of termination for Mr. Pasquale, with terms no less favorable, in the aggregate, than the most favorable of those provided to Mr. Pasquale during the year immediately preceding the termination date; (6) accelerated vesting of Mr. Pasquale's equity-based awards to the extent outstanding on the termination date and not otherwise vested; (7) any performance-based dividend equivalents on then-outstanding stock options for
the three-year period following the termination date; (8) payment of any compensation previously deferred (including matching contributions and earnings) by Mr. Pasquale in accordance with the provisions of NHP's Deferred Compensation Plan; and (9) in the event that Mr. Pasquale's separation benefits (whether under his employment agreement or any other plan or arrangement) are subject to the excise tax imposed under Section 4999 of the Code, a gross-up payment so that the net amount of such payment (after taxes) he receives is sufficient to pay the excise tax due. If the employment of Mr. Pasquale was terminated immediately following the merger under circumstances giving rise to the right to receive the separation benefits, the approximate value of the payments and benefits to be provided under the employment agreement would be approximately as follows:
| ||||||||||||||||
Change in Control Agreements
NHP is party to change in control agreements with each of Messrs. Khoury and Bradley which provide that, if within six months prior to or three years following a "change in control" of NHP the executive's employment is terminated by NHP without "cause" or by the executive for "good reason" (as those terms are defined in the change in control agreements), then the executive will be entitled to receive the following separation benefits: (1) an amount equal to three times the executive's highest annual base salary during any of the last three full fiscal years prior to separation, payable in equal monthly installments over the three-year period following separation; (2) an amount equal to three times the average annual bonus earned by the executive over the last three full fiscal years prior to separation, payable in equal annual installments over the three-year period following separation; (3) continued medical and life insurance benefits for three years following separation, on terms no less favorable in the aggregate than the most favorable of those provided to the executive during the year immediately preceding the separation; (4) accelerated vesting of all outstanding stock-based awards (except that, as described above, restricted stock units granted to Messrs. Khoury and Bradley on April 23, 2007 will vest and be settled in accordance with their terms); (5) performance-based dividend equivalents on outstanding stock options for the three-year period following separation; and (6) any compensation previously deferred by the executive in accordance with the provisions of the plan under which such compensation was deferred. If the executive's separation benefits (whether under the change in control agreement or any other plan or arrangement) are subject to the excise tax imposed under Section 4999 of the Code, the change in control agreements provide that NHP will make an additional payment to the executive so that the net amount of such payment (after taxes) received by the executive is sufficient to pay the excise tax due. The consummation of the merger will constitute a "change in control" for purposes of the change in control agreements. If the employment of Messrs. Khoury and Bradley was terminated immediately following the merger under circumstances giving rise to the right to receive the separation benefits, the approximate value of the payments and benefits to be provided under the change in control agreements would be approximately as follows:
| ||||||||||||||||
| ||||||||||||||||
Board of Directors and Management Following the Merger
Ventas has agreed to take all necessary action to cause three members of NHP's current board of directors to be appointed to the Ventas board of directors, effective as of the closing of the merger. One of these persons will be NHP's Chairman, President and Chief Executive Officer, Douglas M. Pasquale. The other persons will be individuals who are acceptable to the Nominating and Corporate Governance Committee of Ventas. Those individuals have not yet been selected as of the date of this joint proxy statement/prospectus.
Ventas currently anticipates that all of the existing executive officers of Ventas will remain executive officers of Ventas following the merger. As of the date of this joint proxy statement/prospectus, Ventas has not finalized any arrangements with existing executive officers of NHP with respect to their employment by the combined company. If none of the existing executive officers of NHP remains employed by Ventas following the merger, it is anticipated that the associated severance costs would be approximately $[ • ] based on calculations made as of [ • ], 2011. However, it is expected that Douglas M. Pasquale will serve as a senior advisor to Ventas to ensure an orderly transition.
Ventas prepares its financial statements in accordance with GAAP. The merger will be accounted for by applying the acquisition method, which requires the identification of the acquirer, the determination of the acquisition date, the recognition and measurement, at fair value, of the identifiable assets acquired, liabilities assumed and any noncontrolling interest in the consolidated subsidiaries of the acquiree and recognition and measurement of goodwill or a gain from a bargain purchase. The accounting guidance for business combinations, referred to as ASC 805, provides that in a business combination involving the exchange of equity interests, the entity issuing the equity interests is usually the acquirer; however, all pertinent facts and circumstances must be considered, including the relative voting rights of the stockholders of the constituent companies in the combined entity, the composition of the board of directors and senior management of the combined company, the relative size of the company and the terms of the exchange of equity interests in the business combination, including payment of a premium.
Based on the fact that Ventas is the entity issuing the equity securities, that upon completion of the merger it is estimated that current Ventas stockholders will own approximately 65% of the combined company and former NHP stockholders will own approximately 35% of the combined company and that Ventas board members and senior management will represent the majority of the board and senior management of the combined company, and based on the terms of the merger, with NHP stockholders receiving a premium (as of the trading day immediately preceding the merger announcement) over the fair market value of their shares on such date, Ventas is considered the acquirer for accounting purposes. Therefore, Ventas will recognize and measure, at fair value, the identifiable assets acquired, liabilities assumed and any noncontrolling interests in the consolidated subsidiaries of NHP, and Ventas will recognize and measure goodwill and any gain from a bargain purchase, in each case, upon completion of the merger.
Regulatory Approvals Required for the Merger
Based upon applicable statutes and communications with state regulators, certain states where NHP tenants hold licenses from state health care facility licensing agencies will require notices in connection with the merger. Some states may require that updated information be filed concerning the ownership of the properties. One state will require the filing and approval of a certificate of need application. Another state could require an application that could trigger an inspection of three
facilities. To date, we have no reason to believe that any required filing will be rejected or that any approvals will not be obtained in advance of the planned closing date.
Litigation Relating to the Merger
In the weeks following the announcement of the merger on February 28, 2011, purported stockholders of NHP filed seven lawsuits against NHP and its directors. Six of these lawsuits also named Ventas as a defendant and five named Needles Acquisition LLC as a defendant. The purported stockholder plaintiffs commenced these actions in two jurisdictions: the Superior Court of the State of California, Orange County, which we refer to as the California State Court; and the Circuit Court for Baltimore City, Maryland, which we refer to as the Maryland State Court. All of these actions were brought as putative class actions, and two also purport to assert derivative claims on behalf of NHP. All of these stockholder complaints allege that NHP's directors breached certain alleged duties to NHP's stockholders by approving the merger agreement, and certain complaints allege that NHP aided and abetted those breaches. Those complaints that name Ventas and Needles Acquisition LLC allege that Ventas and Needles Acquisition LLC aided and abetted the purported breaches of certain alleged duties by NHP's directors. All of the complaints request an injunction of the merger. Certain of the complaints also seek damages.
In the California State Court, the following actions were filed purportedly on behalf of NHP stockholders: on February 28, 2011, a putative class action entitledPalma v. Nationwide Health Properties, Inc., et al.; on March 3, 2011, a putative class action entitledBarker v. Nationwide Health Properties, Inc., et al.; and on March 3, 2011, a putative class action entitledDavis v. Nationwide Health Properties, Inc., et al., which was subsequently amended on March 11, 2011 under the captionDavids v.Nationwide Health Properties, Inc., et al. Each action names NHP and members of the NHP board of directors as defendants. TheBarker andDavids actions also name Ventas as a defendant, and theDavids action names Needles Acquisition LLC as a defendant. Each complaint alleges, among other things, that NHP's directors breached certain alleged duties by approving the merger agreement between NHP and Ventas because the proposed transaction purportedly fails to maximize stockholder value and provides the directors personal benefits not shared by NHP stockholders. ThePalma andDavids actions allege that NHP aided and abetted those purported breaches; theBarker andDavids actions allege that Ventas aided and abetted those purported breaches; and theDavids action alleges that Needles Acquisition LLC aided and abetted those purported breaches. Along with other relief, the complaints seek an injunction against the closing of the proposed merger. On March 22, 2011, the parties to thePalma,Barker, andDavids actions signed a Stipulation and Proposed Order on Consolidation of Related Actions providing for consolidation of all three actions. On April 4, 2011, the defendants in all three actions demurred and moved to stay the proceedings in favor of parallel litigation pending in the Maryland State Court.
In the Maryland State Court, the following actions were filed purportedly on behalf of NHP stockholders: on March 7, 2011, a putative class action entitledCrowley v. Nationwide Health Properties, Inc., et al.; on March 10, 2011, a putative class action entitledTaylor v. Nationwide Health Properties, Inc., et. al.; on March 17, 2011, a putative class action entitledHaughey Family Trust v.Pasquale, et al.; and on March 31, 2011, a putative class action entitledRappaport v.Pasquale, et al. All four actions name NHP, its directors, Ventas and Needles Acquisition LLC as defendants. All four actions allege, among other things, that NHP's directors breached certain alleged duties by approving the merger agreement between NHP and Ventas because the proposed transaction purportedly fails to maximize stockholder value and provides certain directors personal benefits not shared by NHP stockholders. TheHaughey andRappaport actions allege that NHP, Ventas and Needles Acquisition LLC aided and abetted those purported breaches; theCrowley action alleges that NHP and Ventas aided and abetted those purported breaches, and theTaylor action alleges that Ventas and Needles Acquisition LLC aided and abetted those purported breaches. In addition to asserting direct
claims on behalf of a putative class of NHP shareholders, theHaughey andRappaport actions purport to bring derivative claims on behalf of NHP, asserting breaches of certain alleged duties by NHP's directors in connection with their approval of the proposed transaction. All four actions seek to enjoin the proposed merger, and theTaylor action seeks damages.
On March 30, 2011, pursuant to stipulation of the parties, the Maryland State Court entered an order consolidating the Crowley, Taylor and Haughey actions. On April 1, 2011, pursuant to stipulation of the parties, the Maryland State Court entered an order: (i) certifying a class of NHP shareholders; and (ii) providing for the plaintiffs to file a consolidated amended complaint.
NHP, its directors, Ventas and Needles Acquisition LLC believe that each of these actions is without merit.
Exchange of Shares in the Merger
At or prior to the effective time of the merger, Ventas will appoint an exchange agent to handle the exchange of shares of NHP common stock for shares of Ventas common stock. As promptly as practicable after the effective time of the merger, the exchange agent will send to each holder of record of NHP common stock at the effective time of the merger who holds shares of NHP common stock in certificated form a letter of transmittal and instructions for effecting the exchange of NHP common stock certificates for the merger consideration the holder is entitled to receive under the merger agreement. Upon surrender of stock certificates for cancellation along with the executed letter of transmittal and other documents described in the instructions, an NHP stockholder will receive any whole shares of Ventas common stock such holder is entitled to receive and cash in lieu of any fractional shares of Ventas common stock such holder is entitled to receive. After the effective time of the merger, NHP will not register any transfers of shares of NHP common stock.
Upon completion of the merger, shares of NHP common stock held in book-entry form will be automatically converted into whole shares of Ventas common stock in book-entry form and the exchange agent will deliver to holders of book-entry shares cash in lieu of any fractional shares of Ventas common stock such holder is entitled to receive.
Ventas stockholders need not take any action with respect to their stock certificates or book-entry shares.
Each company plans to continue its current dividend policy until the closing of the merger. Ventas currently pays an annualized dividend equating to $2.30 per share and NHP currently pays an annualized dividend equating to $1.92 per share. Following the closing of the merger, Ventas expects to continue its current dividend policy for stockholders of the combined company, subject to the discretion of the Ventas board of directors, which reserves the right to change Ventas's dividend policy at any time and for any reason. See "Risk Factors—Risk Factors Relating to Ventas Following the Merger—Ventas cannot assure you that it will be able to continue paying dividends at the current rate" on page 20. NHP and Ventas have each agreed to declare a prorated dividend to their respective stockholders for the period between the record date of their last dividend and the closing, at the same rate as their respective dividends for the prior period. The record and payment date for the pro rata dividend will be the close of business on the last business day prior to the effective time of the merger. For additional information on the treatment of dividends under the merger agreement, see "The Merger—The Merger Agreement—Covenants and Agreements—Dividends" on page 87.
Listing of Ventas Common Stock
It is a condition to the completion of the merger that the shares of Ventas common stock issuable in connection with the merger be approved for listing on the NYSE, subject to official notice of issuance.
De-Listing and Deregistration of NHP Common Stock
After the merger is completed, the NHP common stock currently listed on the NYSE will cease to be listed on the NYSE and will be deregistered under the Exchange Act.
Arrangements Between Ventas and NHP Prior to the Merger
Atria, which has agreed to sell to Ventas substantially all of its real estate assets, is a party to confidentiality agreements, lease agreements and other commercial arrangements with NHP. Neither Ventas nor NHP views any of these arrangements as material to Ventas or NHP.
Under Section 3-202 of Maryland law, holders of NHP common stock may not exercise the rights of objecting stockholders to receive the fair value of their shares in connection with the merger because the shares of NHP are listed on the NYSE.
Under Section 262 of Delaware law, the holders of Ventas common stock are not entitled to appraisal rights in connection with the merger or the matters to be voted upon at the Ventas special meeting.
Certain VentasUnaudited Prospective Financial Information of HCT
Ventas does not, as a matter of course, make public internal prospective financial analysis and information due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with the evaluation of the merger, Ventas provided the NHP board of directors and management and J.P. Morgan with hypothetical, unaudited financial information for Ventas for fiscal years 2011 through 2013, which we refer to as the Ventas case. The Ventas case is speculative by its nature and is based on numerous assumptions, including with regard to the volume of, and returns on, acquisitions, borrowing costs and cost of equity, which are inherently uncertain and beyond the knowledge and control of Ventas management. Ventas has included below a summary of the Ventas case to give Ventas stockholders and NHP stockholders access to certain non-public information that was furnished to third parties. A subset of this information not reflecting the impact of future acquisition activity was also made available to the Ventas board of directors and Centerview Partners in connection with their evaluation of the merger.
The inclusion of the Ventas case should not be regarded as an indication that any of Ventas, NHP, Centerview Partners, J.P. Morgan or any other recipient of this information considered, or now considers, it to be predictive of actual future results. The Ventas case is subjective in many respects and there can be no assurance that the results indicated will be realized or that actual results will not be significantly higher or lower than estimated. Since the Ventas case covers multiple years, such information by its nature becomes less predictive with each successive year.
Ventas stockholders and NHP stockholders are urged to review Ventas's SEC filings for a description of risk factors with respect to Ventas's business. See "Cautionary Statement Regarding Forward-Looking Statements" beginning on page 23 and "Where You Can Find More Information" beginning on page 131. The Ventas case was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with published guidelines of the SEC, the guidelines
established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, or GAAP.
Neither Ernst & Young LLP nor any other independent accountants, have compiled, examined or performed any procedures with respect to the the Ventas case, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of Ernst & Young LLP contained in Ventas's Annual Report on Form 10-K for the year ended December 31, 2010, which is incorporated by reference into this joint proxy statement/prospectus, relates to Ventas's historical financial information. It does not extend to the Ventas case and should not be read to do so. Furthermore, the Ventas case does not take into account any circumstances or events occurring after the date it was prepared.
The following table presents a summary of the Ventas case:
| | 2011 | 2012 | 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | (In thousands) | |||||||||
Revenues | $ | 1,604,571 | $ | 1,917,624 | $ | 2,083,928 | ||||
Normalized EBIT (Excluding Gains and Losses) | 526,222 | 620,975 | 716,347 | |||||||
Net Income Attributable to Common Stockholders | 197,936 | 428,753 | 397,711 | |||||||
Normalized FFO | 588,003 | 694,245 | 777,132 | |||||||
Normalized FAD | 552,466 | 657,929 | 744,496 | |||||||
Normalized FFO is a non-GAAP financial measure that Ventas defines as net income, computed in accordance with GAAP, excluding gains or losses from sales of real estate property, plus real estate depreciation and amortization expenses and after adjustments for unconsolidated partnerships and joint ventures, and excluding certain income and expense items (which may be recurring in nature). Normalized FAD is a non-GAAP financial measure that Ventas defines as normalized FFO excluding straight-line rental adjustments and routine capital expenditures.
The inclusion of the above information in this joint proxy statement/prospectus should not be regarded as an indication that Ventas, NHP, Centerview Partners or J.P. Morgan, or their respective officers, directors and other affiliates consider such information to be an accurate prediction of future events or necessarily achievable. The estimates and assumptions underlying the Ventas case involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions and future business decisions that may not be realized and that are inherently speculative and subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among others, the risks and uncertainties described under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" beginning on pages 16 and 23, respectively, and in Ventas's Annual Report on Form 10-K for the year ended December 31, 2010, which is incorporated by reference into this joint proxy statement/prospectus. All of these uncertainties and contingencies are difficult to predict and many of them are beyond the control of Ventas and/or NHP and will be beyond the control of the combined company. There can be no assurance that the underlying assumptions will prove to be accurate or that the estimated results will be realized, and actual results likely will differ, and may differ materially, from those reflected in the Ventas case, whether or not the merger is completed. None of Ventas, NHP, Centerview Partners or J.P. Morgan or their respective officers, directors and other affiliates has made any representations regarding the Ventas case.
In addition, although presented with numerical specificity, the above information reflects numerous assumptions and estimates as to future events made by Ventas management that Ventas management believed were reasonable at the time the Ventas case was prepared, but which may not accurately predict future events. The above information does not give effect to the merger. Ventas stockholders and NHP stockholders are urged to review Ventas's most recent SEC filings for a description of Ventas's results of operations and financial condition and capital resources during 2010, including
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in Ventas's Annual Report on Form 10-K for the year ended December 31, 2010, which is incorporated by reference into this joint proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 131 of this joint proxy statement/prospectus.
Readers of this joint proxy statement/prospectus are cautioned not to place undue reliance on the information set forth above. No representation is made by Ventas, NHP or any other person to any Ventas stockholder or any NHP stockholder regarding the ultimate performance of Ventas compared to the information included in the Ventas case. The inclusion of the Ventas case in this joint proxy statement/prospectus should not be regarded as an indication that such information will be an accurate prediction of future events, and the information should not be relied on as such.
VENTAS DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE INFORMATION TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH INFORMATION ARE NO LONGER APPROPRIATE, EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW.
Certain NHP Financial Information
NHPHCT does not as a matter of course make public long-term projections as to future revenues, earnings or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, NHPHCT is including these projections that were made availableprovided to the NHP board of directors, the Ventas board of directors and management, J.P. Morgan and/or Centerview PartnersHCT's financial advisor for use in connection with its financial analysis and opinion described in the evaluationsection entitled "—Opinion of the merger.HCT's Financial Advisor." The inclusion of this information should not be regarded as an indication that any of NHP,HCT, Ventas, J.P. Morgan, Centerview Partnerstheir respective advisors or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results.
The projections areunaudited prospective financial information of HCT was, in general, prepared solely for internal use and is subjective in many respects. As a result, there can be no assurance that the
prospective results will be realized or that actual results will not be significantly higher or lower than estimated. SinceBecause the projections coverunaudited prospective financial information covers multiple years, such information by its nature becomes less predictive with each successive year. NHP stockholders and Ventas
HCT stockholders are urged to review the SEC filings of NHPHCT for a description of the risk factors with respect to the business of NHP.HCT. See "Cautionary Statement RegardingConcerning Forward-Looking Statements" beginning on page 2334 and "Where You Can Find More Information"Information; Incorporation by Reference" beginning on page 131.127. The projections were notunaudited prospective financial information was neither prepared with a view toward public disclosure, nor were theywas it prepared with a view toward compliance with published guidelines of the SEC the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, or U.S. GAAP.
Neither Ernst & Young LLPthe independent registered public accounting firm of HCT nor any other independent accountants haveaccountant has compiled, examined, or performed any audit or other procedures with respect to the projectionsunaudited prospective financial results contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of Ernst & Young LLPthe independent registered public accounting firm of HCT contained in NHP'sHCT's Annual Report on Form 10-K for the year ended December 31, 2010,2013, which is incorporated by reference into this joint proxy statement/prospectus, relates to the historical financial information of NHP.HCT. It does not extend to the projectionsunaudited prospective financial information and should not be read to do so.
Furthermore, the projections dounaudited prospective financial information does not take into account any circumstances or events occurring after the respective dates on which they wereit was prepared.
In November 2010, NHP's management prepared projections for NHP's internal use, which were provided during Readers of this proxy statement/prospectus are cautioned not to place undue reliance on the course of Ventas's due diligence process to Ventas, Centerview Partners and J.P. Morgan. The November 2010 projectionsunaudited prospective financial information set forth below werebelow. No representation is made by HCT, Ventas or any other person to any HCT stockholder regarding the ultimate performance of HCT compared to the results included in the unaudited prospective financial information presented below. The inclusion of unaudited prospective financial information in this proxy statement/prospectus should not used by J.P. Morganbe regarded as an indication that the unaudited prospective financial information will be necessarily predictive of actual future events, and such information should not be relied on as such.
The following tables present selected unaudited prospective financial data for the 12 months ending June 30, 2015 and the fiscal years ending 2014 through 2018 under both a "base" case and a "base plus growth" case. The base case represented the HCT standalone business model with known acquisitions in the first half of fiscal year 2014, and no further acquisitions through fiscal year 2018. The base plus growth case represented the HCT standalone business model and provided for known asset acquisitions in the first half of fiscal year 2014, plus unidentified asset acquisitions for the second half of fiscal year 2014 and the balance of the business plan through fiscal year 2018.
Base Case (In millions) | Next 12 Months | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash NOI | $ | 150 | $ | 148 | $ | 153 | $ | 158 | $ | 161 | $ | 164 | |||||||
EBITDA | 152 | 151 | 153 | 155 | 156 | 157 | |||||||||||||
FFO | 123 | 124 | 125 | 127 | 129 | 131 | |||||||||||||
AFFO | 114 | 114 | 117 | 120 | 124 | 127 | |||||||||||||
Base Plus Growth Case (In millions) | Next 12 Months | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash NOI | $ | 169 | $ | 165 | $ | 210 | $ | 251 | $ | 293 | $ | 339 | |||||||
EBITDA | 173 | 169 | 214 | 258 | 299 | 344 | |||||||||||||
FFO | 132 | 128 | 158 | 192 | 223 | 255 | |||||||||||||
AFFO | 120 | 116 | 141 | 170 | 198 | 229 | |||||||||||||
connection with For the preparationpurposes of J.P. Morgan's fairness opinion. The following table presents selectedthe unaudited prospective financial information for the fiscal years ending 2011 through 2013:information:
| | Forecast for Fiscal Year Ending December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | 2011 | 2012 | 2013 | |||||||
| | (In thousands) | |||||||||
Revenue | $ | 526,558 | $ | 682,659 | $ | 869,543 | ||||
Income from Continuing Operations | 176,756 | 243,490 | 306,872 | |||||||
Net Income Attributable to NHP Common Stockholders | 191,665 | 254,701 | 322,150 | |||||||
Adjusted Diluted FFO | 343,199 | 421,400 | 518,775 | |||||||
Adjusted Diluted FAD | 342,463 | 418,971 | 513,683 | |||||||
In February 2011, NHP's management updated their November 2010 projections to reflect current information and assumptions. In updating the projections, NHP's management assumed different market conditions, including higher interest rates, and a lower rent amount from Hearthstone. These projections were provided to J.P. Morgan and used by J.P. Morgan in connection with the preparation of its fairness opinion. These projections were not provided to Ventas
| | Forecast for Fiscal Year Ending December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | 2011 | 2012 | 2013 | |||||||
| | (In thousands) | |||||||||
Revenue | $ | 526,891 | $ | 676,440 | $ | 858,836 | ||||
Income from Continuing Operations | 170,128 | 238,004 | 300,629 | |||||||
Net Income Attributable to NHP Common Stockholders | 190,366 | 264,663 | 337,690 | |||||||
Adjusted Diluted FFO | 338,784 | 416,055 | 512,621 | |||||||
Adjusted Diluted FAD | 332,554 | 414,376 | 508,946 | |||||||
Adjusted Diluted FFO and Adjusted Diluted FAD are non-GAAP measures that NHP believes are important to understanding NHP's operations. NHP believes Adjusted Diluted FFOcash basis, which is an important supplemental measure of operating performance because it excludesNOI after eliminating the effects of straight-lining of rent and the amortization of above-and below-market leases.
In preparing the foregoing projections, NHPunaudited prospective financial results, HCT's management made a number of assumptions and estimates regarding, among other things, future interest rates, NHP'sthe volume and returns associated with investment activity, use of leverage and attendant costs associated with debt capital sourced to fund investments, the availability and cost of equity capital sourced to fund investments, future stock price, the level of future investments by NHP and the yield to be achieved on such investments, financing of future investments, including leverage ratios, future propertyasset sales by NHP, future mortgage and receivable loan payoffs to NHP, the ability to refinance certain of NHP's outstanding secured and unsecured debt and the terms of any such refinancing, and future lease renewals, purchase option exercises, capital expenditureslevels of corporate related general and dividend rates. NHP management believed theseadministrative expenses.
The assumptions made in preparing the unaudited prospective financial information may not accurately reflect future conditions. The estimates and estimates were reasonable atassumptions underlying the time the projections were prepared, but these assumptionsunaudited prospective financial information involve judgments with respect to, among other things, future economic, competitive, regulatory and estimatesfinancial market conditions and future business decisions that may not be realized and that are
inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among others, the risks and uncertainties described under "Risk Factors" and "Cautionary Statement RegardingConcerning Forward-Looking Statements" beginning on pages 16 and 23, respectively, and in NHP's Annual Report on Form 10-K for the year ended December 31, 2010,above, all of which is incorporated by reference into this joint proxy statement/prospectus. All of these uncertainties and contingencies are difficult to predict and many of which are beyond the control of NHP and/or VentasHCT and will be beyond the control of the combined company.
Readers of this joint proxy statement/prospectus are cautioned HCT's management believes these assumptions and estimates were reasonably prepared but these assumptions may not to place undue reliance on the projections set forth above. The inclusion of the above projections in this joint proxy statement/prospectus should not be regarded as an indication that NHP, Ventas, J.P. Morgan, Centerview Partners or their respective officers, directors and other affiliates consider such information to be an accurate prediction of future events or necessarily achievable. There can be no assurance that the underlying assumptions will prove to be accurate or thatand the projected results willmay not be realized, and actual results likely will differ, and may differ materially, from those reflected in the projections,unaudited prospective financial information, whether or not the merger is completed. In addition,HCT believes that no material change in its operations, performance or projections has occurred since Citi delivered its opinion, and HCT does not anticipate any material changes in its operations or performance before the above projections do not give effect to the merger. None of NHP, Ventas, J.P. Morgan, Centerview Partners or their respective officers, directors and other affiliates has made any representations regarding the performance of NHP compared to the information included in the above projections.HCT stockholder meeting.
NHP stockholders and Ventas stockholders are urged to review NHP's most recent SEC filings for a description of NHP's results of operations and financial condition and capital resources during 2010, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in NHP's Annual Report on Form 10-K for the year ended December 31, 2010, which is incorporated by reference into this joint proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 131.
NHPHCT DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE PROJECTIONSUNAUDITED PROSPECTIVE FINANCIAL RESULTS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH PROJECTIONSTHE UNAUDITED PROSPECTIVE FINANCIAL RESULTS ARE NO LONGER APPROPRIATE, EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW.
Stock Ownership of Directors and Executive Officers of HCT
At the close of business on the record date, the directors and executive officers of HCT and their affiliates held 272,998 shares of HCT common stock, collectively representing 0.2% of the shares of HCT common stock issued and outstanding and entitled to vote on that date.
Certain Fees and Expense Reimbursements Payable in Connection with the Merger
As of the date of this filing, the following fees and expense reimbursements are payable in connection with the merger:
Entity | Description | Amount | ||
|---|---|---|---|---|
RCS Capital | Provision of financial advisory and strategic services to HCT prior to the consummation of the merger pursuant to the HCT Investment Banking Services Agreement between HCT and RCS Capital, the investment banking and capital markets division of RCS. | 0.25% of the transaction value of the merger | ||
American Realty Capital Healthcare Special Limited Partner, LLC | Upon closing of the merger, HCT OP will issue 5,613,374 OP Units to American Realty Capital Healthcare Special Limited Partnership, LLC. In addition, at closing, the Advisor will forfeit the Award LTIP Units (as defined in the 2014 Multi-Year Outperformance Agreement, which we refer to as the OPP), the Third Amended and Restated Advisory Agreement, which we refer to as the Advisory Agreement, will terminate without the requisite 60-day notice, the Property Management and Leasing Agreement, which we refer to as the Management Agreement, will terminate without the requisite 60-day notice, and American Realty Capital Healthcare Special Limited Partnership, LLC will contribute its right to distributions from HCT OP, as evidenced by the Listing Note Agreement, to HCT OP. | 5,613,374 OP Units |
Each of RCS Capital and RCS is an entity under common control with the Advisor.
Interests of HCT's Directors and Executive Officers in the Merger
In considering the recommendation of the HCT Board to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, HCT stockholders should be aware that HCT's directors and executive officers have certain interests in the merger that may be different from, or in addition to, the interests of HCT stockholders generally. These interests may create potential conflicts of interest. The HCT Board was aware of these interests and considered them, among other matters, in reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement. These interests are described in further detail below. Except as otherwise noted, amounts specified below have been calculated assuming that the merger was consummated on November 28, 2014.
HCT Investment Banking Services Agreement
On May 23, 2014, HCT entered into a letter agreement with RCS Capital, the investment banking and capital markets division of RCS (we refer to this letter agreement as the HCT Investment Banking Services Agreement), pursuant to which RCS Capital agreed to act as financial advisor to HCT in connection with a possible sale or acquisition transaction involving HCT. In connection with the HCT Investment Banking Services Agreement and the services provided by RCS Capital thereunder, HCT agreed to pay RCS Capital an amount equal to 0.25% of the Transaction Value (as defined below), which we refer to as the Transaction Fee, of an acquisition transaction, payable upon the consummation of such acquisition transaction. For purposes of the HCT Investment Banking Services Agreement, "Transaction Value," means the sum of (i) the value of the merger consideration, (ii) the aggregate value of any debt, capital lease and preferred equity security obligations assumed, retired, cancelled or defeased in connection with the merger and (iii) the amount of any fees, expenses and promote paid. HCT also agreed to reimburse RCS Capital for reasonable out-of-pocket expenses arising in connection with the merger, regardless of whether the merger is consummated. The HCT Investment Banking Services Agreement may be terminated by HCT or RCS Capital at any time with or without cause upon delivery of written notice. In the event that the HCT Investment Banking Services Agreement is terminated, RCS Capital will be entitled to the Transaction Fee then due and payable and any expenses incurred prior to such termination. In addition, RCS Capital will be entitled to the Transaction Fee if the merger is consummated at any time prior to the earlier of (i) the date on which RCS Capital resigns its engagement or is terminated for cause and (ii) 18 months from the date of any other termination of the HCT Investment Banking Services Agreement by HCT. If, during the term of RCS Capital's engagement or within 18 months thereafter, the merger agreement is terminated prior to the consummation of the merger or the merger is not otherwise consummated and HCT receives a break-up fee in connection with such non-consummation, HCT will pay RCS Capital 30% of such break-up fee less expenses incurred by HCT in connection with the merger. RCS Capital and RCS are under common control with the Advisor. Certain directors and officers of HCT also have interests in RCS Capital and RCS.
Termination of Advisory Agreement, Property Management Agreement, Listing Note Agreement and OPP
In connection with the merger, HCT entered into amendments terminating the following agreements:
Upon closing of the merger, the Advisor will forfeit the Award LTIP Units (as defined in the OPP), the Advisory Agreement will terminate without the requisite 60-day notice, the Management Agreement will terminate without the requisite 60-day notice, and the SLP will contribute its right to distributions from HCT OP, as evidenced by the Listing Note Agreement, to HCT OP. At closing, HCT OP will issue to the SLP 5,613,374 OP Units (as defined in the Listing Note Agreement).
At the partnership merger effective time, each HCT OP limited partnership unit issued and outstanding immediately prior to the partnership merger effective time, including the 5,613,374 units to
be issued to the SLP and 1,443,897 limited partnership units currently held by individual affiliates of the Advisor, will be converted into a number of a newly created class of units of the surviving partnership equal to the Exchange Ratio. Subject to the terms of the limited partnership agreement of the surviving partnership, each limited partnership unit in the surviving partnership will be entitled to distributions payable in respect of one share of Ventas common stock and will be redeemable for one share of Ventas common stock, or, at the election of Ventas, an equivalent amount in cash.
Certain directors and officers of HCT have interests in the Advisor, the SLP and the Property Manager.
Treatment of HCT Restricted Shares
Under the merger agreement, each restricted share of HCT common stock held by a director or executive officer of HCT that is outstanding immediately prior to the effective time will, immediately prior to the effective time, vest in full, and the restrictions with respect thereto will lapse. Each such restricted share will be deemed an issued and outstanding share of HCT common stock as of immediately prior to the effective time and will be entitled to receive the merger consideration determined in accordance with the merger agreement and otherwise subject to the terms and conditions of merger agreement, including the election and proration provisions.
If the merger were consummated as of November 28, 2014, an aggregate of 225,905 restricted shares of HCT common stock held by the directors, including 40,000 restricted shares held by Nicholas S. Schorsch, Executive Chairman of the HCT Board, would vest in full immediately prior to the consummation of the merger and be entitled to receive the merger consideration as described above. For an estimate of the amount that would be payable to Mr. Schorsch upon the vesting of his restricted shares, see "—Merger-Related Compensation for a Named Executive Officer of HCT" below.
Merger-Related Compensation for a Named Executive Officer of HCT
The table below sets forth the estimated amount of compensation that Nicholas S. Schorsch, Executive Chairman of the HCT Board, and a named executive officer of HCT, could receive that is based on or otherwise relates to the merger, which we refer to as the golden parachute compensation. The golden parachute compensation payable to Mr. Schorsch is subject to a non-binding, advisory vote of HCT's stockholders, as described above in "Proposals Submitted to HCT Stockholders—Advisory Vote Regarding Merger-Related Compensation." For a description of the treatment of outstanding restricted shares of HCT held by HCT's directors, see "—Interests of HCT's Directors and Executive Officers in the Merger—Treatment of HCT Restricted Shares" above. None of the other named executive officers received, or will receive, any golden parachute compensation.
The following table sets forth the amount that may be paid to Mr. Schorsch in connection with the merger, assuming: (1) the merger was consummated on November 28, 2014 and (2) a merger consideration value of $11.33 per share of HCT common stock (see footnote 1 to the table). The amount shown below is an estimate based on multiple assumptions made for purposes of disclosure in this proxy statement/prospectus. The actual amounts to be received by Mr. Schorsch may differ materially from the amounts set forth below.
Name | Equity ($)(1) | Total ($) | |||||
|---|---|---|---|---|---|---|---|
Nicholas S. Schorsch | 453,200 | 453,200 | |||||
and each such share of HCT common stock will be entitled to the per share cash or stock merger consideration, subject to Mr. Schorsch's election and the terms of the merger agreement. The treatment of restricted shares of HCT common stock in the merger is further described in the section above entitled "—Interests of HCT's Directors and Executive Officers in the Merger—Treatment of HCT Restricted Shares." The disclosed aggregate dollar value assumes a price per share of HCT common stock of $11.33, which represents the fixed dollar amount to be received by Mr. Schorsch if he elects to receive cash merger consideration, subject to the terms of the merger agreement. If Mr. Schorsch elects to receive stock merger consideration, subject to the terms of the merger agreement, then the aggregate dollar value will be $436,320, which assumes a price per share of HCT common stock of $10.908 (based on the average closing market price of HCT common stock over the first five business days following the first public announcement of the merger).
Regulatory Approvals Required for the Merger Agreement
The merger may be subject to certain regulatory requirements of municipal, state and federal, domestic or foreign, governmental agencies and authorities, including those relating to the offer and sale of securities. Ventas's obligation to complete the merger is conditioned on the receipt of certain required regulatory approvals.
In accordance with GAAP, Ventas will account for the mergers using the acquisition method of accounting with Ventas treated as the acquiror of HCT for accounting purposes. Under acquisition accounting, the assets acquired and liabilities assumed will be recorded as of the acquisition date, at their respective fair values, and added to those of Ventas. Any excess of purchase price over the fair values will be recorded as goodwill. Consolidated financial statements of Ventas issued after the mergers would reflect HCT's fair values after the completion of the mergers, but will not be restated retroactively to reflect the historical consolidated financial position or results of operations of HCT.
Listing of Ventas Common Stock
Ventas will use its reasonable best efforts to cause the shares of Ventas common stock to be issued in the merger to be approved for listing on the NYSE, subject to official notice of issuance, prior to the completion of the merger. Approval of the listing on the NYSE of the shares of Ventas common stock to be issued in the merger, subject to official notice of issuance, is a condition to each party's obligation to complete the merger.
Deregistration of HCT Common Stock
If the merger is completed, HCT common stock will be delisted from Nasdaq and deregistered under the Exchange Act, and HCT will no longer file periodic reports with the SEC.
Restrictions on Sales of Shares of Ventas Common Stock Received in the Merger
Shares of Ventas common stock issued in the merger will not be subject to any restrictions on transfer arising under the Securities Act, except for shares of Ventas common stock issued to any HCT stockholder who may be deemed to be an "affiliate" of Ventas after the completion of the merger. This proxy statement/prospectus does not cover resales of Ventas common stock received by any person upon the completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any resale.
The following is a summaryThis section of this proxy statement/prospectus describes the material terms and conditionsprovisions of the merger agreement. agreement and the first amendment thereto, which are attached as Annex A and Annex B, respectively, to this proxy statement/prospectus and incorporated herein by reference. As a stockholder, you are not a third-party beneficiary of the merger agreement and therefore you may not directly enforce any of its terms and conditions.
This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. This summary is qualified in its entirety by referenceVentas and HCT urge you to carefully read the merger agreement, a copy of which is attached as Annex A to, and incorporated by reference into, this joint proxy statement/prospectus. The rights and obligations of the parties are governed by the express terms and conditionsfull text of the merger agreement, and not by this summary or any other information contained in this joint proxy statement/prospectus. You are urged to readas amended, because it is the merger agreement carefully and in its entirety before making any decisions regardinglegal document that governs the merger.
Explanatory Note Regarding the Merger Agreement and the Summary of the Merger Agreement: Representations, Warranties and Covenants in the Merger Agreement Are Not Intended to Function as Public Disclosures
The merger agreement and the summary of its terms in this joint proxy statement/prospectus have been included onlyis not intended to provide you with information about the terms and conditions of the merger agreement. The terms and information in the merger agreement are not intended to provide any other public disclosure of factual information about Ventas NHP or any of their respective subsidiaries, affiliates or businesses. The representations, warranties and covenants contained in the merger agreement are made by Ventas, NHP and Needles Acquisition LLC only for purposes of the merger agreement and as of specific dates and were qualified and subject to certain limitations and exceptions agreed to by Ventas, NHP and Needles Acquisition LLC in connection with negotiating the terms of the merger agreement.HCT. In particular, the assertions embodied in your review of the representations and warranties contained in the merger agreement (and summarized below) are qualified by information each of Ventas and describedHCT filed with the SEC on or after January 1, 2013 and prior to the date of the merger agreement, as well as by certain confidential disclosure letters each of the parties delivered to the other in this summary, it is importantconnection with the signing of the merger agreement that modify, qualify and create exceptions to bear in mind that the representations and warranties were made solely for the benefit of the parties toset forth in the merger agreementagreement. Moreover, some of those representations and were negotiated forwarranties may not be accurate or complete as of any specified date, may apply contractual standards of materiality in a way that is different from what may be viewed as material by investors or that is different from standards of materiality generally applicable under the purposeU.S. federal securities laws, and are not intended as statements of fact, but rather as a way of allocating contractual risk among the parties to the merger agreement rather than to establish matters as facts.agreement. The representations and warranties may also be subject to a contractual standard of materiality or material adverse effect different from those generally applicable to stockholders and reports and documents filed with the SEC, and, in some cases, they may be qualified by disclosures made by one party to the other which are not necessarily reflected in the merger agreement or other public disclosures made by Ventas or NHP. The representations and warranties contained in the merger agreement do not survive the effective time of the merger. Moreover, information concerning the subject matter of the representations, warranties and covenants, which do not purport to be accurate as of the date of this joint proxy statement/prospectus, may have changed since the dateprovisions of the merger agreement and subsequent developments or new information may not be fully reflectedthe description of such provisions in public disclosures of Ventas or NHP.
For the foregoing reasons, the representations, warranties and covenants or any descriptions of those provisionsthis proxy statement/prospectus should not be read alone or relied upon as characterizations of the actual state of facts or condition of NHP or Ventas or any of their respective subsidiaries or affiliates. Instead, such provisions or descriptionsbut instead should be read only in conjunction with the other information provided elsewherecontained in the reports, statements and filings that each of Ventas and HCT file with the SEC and the other information in this document or incorporated by reference into this joint proxy statement/prospectus. See "Where You Can Find More Information"Information; Incorporation by Reference" beginning on page 131.127.
Form, Effective Time and ClosingConsummation of the Merger
The merger agreement provides for the merger of NHPHCT with and into Needles Acquisition LLC,Merger Sub, upon the terms and subject to the conditions set forth in the merger agreement. Needles Acquisition LLCMerger Sub will be the surviving entity in the merger and, following completion of the merger, will continue to exist under the name Nationwide Health Properties,Stripe Sub, LLC as a wholly owneddirect subsidiary of Ventas. The merger will become effective upon the later of the time of filing of articles of merger with, and acceptance for record of articles of merger by, the State Department of Assessments and Taxation of the State of Maryland and the filing of a certificate of merger with the Secretary of State of the State of Delaware or at a later date and time agreed to by Ventas and NHPHCT and specified in the articles of merger and certificate of merger.
Subject to certain limitations, if requested by Ventas, the merger agreement provides that NHP will (i) agree to, and cooperate in the implementation of, certain reorganization transactions necessary to implement a holding company structure for NHP and to any corresponding changes to the structure of the transactions contemplated by the merger agreement and (ii) cooperate with Ventas with respect to any other reasonable changes regarding the structure of the transaction.
The merger agreement provides that the closingconsummation of the merger will take place on the secondthird business day following the date on which the last of the conditions to closingconsummation of the merger (described under "The Merger Agreement—Conditions to Completion of the Merger") have been satisfied or waived (other than the conditions that by their terms are to be satisfied at the consummation of the merger, but subject to the satisfaction or waiver of those conditions), provided that in no event will Ventas or Merger Sub be required to consummate the merger until the earlier of: (i) the date that is five business days after certain third-party consents have been obtained, and (ii) the outside date (as defined below).
The merger agreement also provides for the merger of OP Merger Sub, an indirect subsidiary of Ventas, with and into HCT OP, upon the terms and conditions set forth in the merger agreement. HCT OP will be the surviving entity in the partnership merger and, following completion of the
waived (other thanpartnership merger, will continue to exist as an indirect subsidiary of Ventas. The partnership merger will become effective upon the conditions that by their nature are to be satisfied atfiling of a certificate of merger with the closingSecretary of State of the merger, but subject to the fulfillmentState of Delaware or waiver of those conditions). However, in the event that Ventas directs NHP to prepay certain of its outstanding indebtedness and the earliest permitted date for such prepayment is after the then-scheduled closing date, or if any regulatory approvals or significant third-party consents have not been obtained, Ventas may, onat a one-time basis, defer the closing until the earliest to occur of (a) such earliest permitted prepayment date, (b) 30 days after the previously scheduled closinglater date and (c) October 31, 2011.
Organizational Documents of the Surviving Entity
Upon completion of the merger,time agreed to by Ventas and HCT and specified in the certificate of formation andmerger. The parties to the merger agreement have agreed to cause the partnership merger to become effective immediately after the effective time of the merger. The merger agreement also provides that the limited liability companypartnership agreement of Needles Acquisition LLCHCT OP will be amended and restated, effective at the partnership merger effective time.
At the partnership merger effective time, the general partnership interest in effect asOP Merger Sub held by Merger Sub and the limited partnership interest in OP Merger Sub held by an affiliate of Merger Sub will be automatically cancelled and the general partnership interest in HCT OP held by HCT will remain outstanding and constitute the only outstanding general partnership interest in the surviving partnership. Under Delaware law and HCT OP's limited partnership agreement, the merger of HCT with and into Merger Sub automatically transfers the general partnership interest in HCT OP held by HCT to Merger Sub, and Merger Sub will automatically become the general partner of the surviving partnership at the partnership merger effective time. In addition, the merger agreement provides that, at the partnership merger effective time, each HCT OP limited partnership unit issued and outstanding immediately prior to the partnership merger effective time, including the 5,613,374 units to be issued to the SLP and 1,443,897 limited partnership units currently held by individual affiliates of the Advisor, will be converted into a number of a newly created class of limited partnership units in the certificatesurviving partnership equal to the Exchange Ratio. Subject to the terms of formation and limited liability companypartnership agreement of the surviving entity.
Merger Consideration; Conversion or Cancellation of Sharespartnership, each limited partnership unit in the surviving partnership will be entitled to distributions payable in respect of one share of Ventas common stock and will be redeemable for one share of Ventas common stock, or, at the election of Ventas, an equivalent amount in cash.
Consideration to Be Received in the Merger
Merger Consideration
If the merger is completed, each issued and outstanding share of NHPHCT common stock (other than shares of NHPHCT common stock owned by HCT, any wholly owned subsidiary of NHP,HCT, Ventas or any wholly owned subsidiary of Ventas, which will be cancelled) will be converted automatically into the right to receive, 0.7866at the election of each such stockholder, subject to proration as described below, either (i) $11.33 in cash, or (ii) a number of shares of Ventas common stock which we referequal to the Exchange Ratio. In no event will cash consideration be paid with respect to more than 10% of the shares of HCT common stock issued and outstanding as of immediately prior to the consummation of the merger (including restricted shares). If the aggregate elections for payment in this joint proxy statement/prospectuscash exceed 10% of the number of shares of HCT common stock issued and outstanding as of immediately prior to the exchange ratio. No fractionalconsummation of the merger, then the amount of cash consideration paid on cash elections will be reduced on a pro rata basis, with the remaining consideration paid in shares of Ventas common stock. The value of the cash consideration may be higher or lower than the value of the stock will be issued. Insteadconsideration at the time of the completion of the merger.
In lieu of any fractional shares, NHPHCT stockholders will receive cash, without interest, in an amount determinedequal to the product of (i) such fractional part of a share of Ventas common stock, multiplied by multiplying(ii) the fractional interest to which such holder would otherwise be entitled by the volume weighted averageper share closing price of Ventas common stock on the NYSE on the date of the closing of the merger, as reported inThe Wall Street Journal. Similarly, in lieu of any fractional limited partnership units in the surviving partnership, each holder of HCT OP limited partnership units will receive cash, without interest, in an amount equal to the product of (i) such fractional part of a share of limited partnership unit, multiplied by (ii) the per share closing price of Ventas common stock on the NYSE on the date of the closing of the merger, as reported inThe Wall Street Journal.
Ventas intends to pay for cash elections by HCT stockholders using a combination of available cash on hand and borrowings under Ventas's unsecured revolving credit facility.
Proration Adjustment of the 10 trading daysMerger Consideration
The maximum number of shares of HCT common stock that may be converted into the right to receive cash consideration equals 10% (rounded down to the nearest whole share) of the number of shares of HCT common stock issued and outstanding immediately prior to the closing.effective time of the merger (including restricted shares).
If the aggregate elections for payment in cash exceed 10% of the number of shares of HCT common stock issued and outstanding as of immediately prior to the effective time of the merger, then the amount of cash consideration paid on cash elections will be reduced on a pro rata basis, with the remaining consideration paid in shares of Ventas common stock.
In such case, each HCT stockholder who elected to receive stock consideration or who made no election will receive the stock consideration, and each HCT stockholder who elected to receive cash consideration in respect of all or a portion of such stockholder's HCT common stock, which we refer to as the cash election shares, will receive cash in respect of a number of such stockholder's cash election shares equal to the product obtained by multiplying (A) the number of such stockholder's cash election shares by (B) a fraction, the numerator of which is the maximum number of shares of HCT common stock that may be converted into the right to receive cash consideration (i.e., 10% of the number of shares of HCT common stock issued and outstanding as of immediately prior to the effective time of the merger) and the denominator of which is the number of shares of HCT common stock in respect of which a cash election has been made by all HCT stockholders, with the remaining number of such stockholder's cash election shares being converted into the right to receive the stock consideration.
By way of example, before any cash payment for fractional shares of Ventas common stock, an illustrative HCT stockholder who has elected to receive cash consideration for 1,000 shares of its HCT common stock would receive the following consideration in exchange for such cash election shares:
Procedures forTable of Contents
Conversion of Shares; Surrendering NHP Stock CertificatesHCT Shares
The conversion of NHPHCT common stock into the right to receive the merger consideration will occur automatically at the effective time of the merger. In accordance with the merger agreement, Ventas will appoint an exchange agent to handle the payment and delivery of the merger consideration the stock award payments, anyand cash payments in relation to NHP's equity awards, and the cash payments to be delivered in lieu of fractional shares. On or before the effective time of the merger, Ventas will deliverUpon proper surrender to the exchange agent certificates representingof a share of HCT common stock for exchange and cancellation, together with a properly completed and signed letter of transmittal (in the case of certificated shares of HCT common stock), the holder of such share will be entitled to receive the merger consideration in respect of such share of HCT common stock.
Elections as to Form of Consideration; Form of Election
A form of election, which will be mailed to each holder of record of HCT common stock as of October 28, 2014, as well as to stockholders of record who purchase shares of HCT common stock subsequent to such date and prior to the election deadline, if any, will allow record holders of HCT common stock to make a cash or stock election in respect of each share of HCT common stock that they hold. HCT stockholders should return their properly completed and signed form of election in accordance with the instructions provided prior to the election deadline.
Unless otherwise agreed by HCT and Ventas and publicly announced, the election deadline will be 5:00 p.m., local time (in the city in which the exchange agent is located) on the later of (i) the date immediately prior to the HCT special meeting and (ii) the date that Ventas and HCT agree is two business days prior to the expected closing date. HCT and Ventas will publicly announce the anticipated election deadline at least five but not more than 15 business days prior to the election deadline.
HCT stockholders who wish to elect the type of merger consideration they will receive in the merger should carefully review and follow the instructions set forth in the form of election. If it is determined that any purported cash election or stock election was not properly made, the purported election will be deemed to be of no force or effect and the holder making the purported election will be deemed not to have made an election for these purposes, unless a proper election is subsequently made on a timely basis. If an HCT stockholder does not make a valid election for cash or stock, the merger consideration paid to such stockholder will be in the form of Ventas common stock sufficient to pay the merger consideration and the stock award payments and cash sufficient to pay any cash payments in respectstock.
To make a valid election, each HCT stockholder must submit a properly completed form of equity awards and the cash to be delivered in lieu of fractional shares. As promptly as practicable after the effective time, but in no event later than two business days thereafter, the surviving entity will causeelection so that it is actually received by the exchange agent on or prior to send (a) to each record holderthe election deadline in accordance with the instructions on the form of NHPelection. The form of election must be accompanied by certificates representing such stockholder's shares of HCT common stock, if any, and any additional documents specified in the form of election. Generally, an election may be revoked or changed by written notice received by the exchange agent prior to the election deadline accompanied by a properly completed and signed revised form of election or the withdrawal prior to the election deadline of the documents previously provided to the exchange agent. HCT stockholders will not be entitled to make, revoke or change any election following the election deadline. After an election is validly made with respect to any shares of HCT common stock, any subsequent transfer of such shares will automatically revoke the election.
Promptly after the completion of the merger, the exchange agent will send a letter of transmittal to those persons who were HCT stockholders of record at the effective time of the merger a letterand hold certificated shares of transmittalHCT common stock, if any, and who did not submit their certificates along with their form of election. This mailing will contain instructions explainingon how to effect the surrender NHPof shares of HCT common stock certificatesnot previously surrendered prior to the election deadline in exchange agent, (b) to eachfor the consideration that the holder of an NHP stock option, a certificate representing an option to acquire shares of Ventas common stock or a check or direct deposit due and payable in respect of such option, (c) to each holder of an NHP restricted stock unit, a certificate representing a rollover restricted stock unit or a check or direct deposit due and payable in respect of such restricted stock unit, (d) to each holder of a share of NHP restricted stock, a certificate representing shares of Ventas common stock due and payable in respect of such shares of NHP common stock, (e)is entitled to each holder of an NHP performance share, a certificate representing shares of Ventas common stock due and payable in respect of such NHP performance shares, and (f) to each holder of an NHP dividend equivalent right,receive under the payments due in respect of such dividend equivalent rights.
Each NHP stockholder that surrenders its stock certificate to the exchange agent together with a duly completed letter of transmittal, and each NHP stockholder that holds book-entry shares of NHPmerger agreement. Upon
common stock,proper surrender of a share for exchange and cancellation to the exchange agent, together with a properly completed and signed letter of transmittal, and delivery of any other documents specified in the letter of transmittal, the holder of such share will receive the merger consideration due toelected by such HCT stockholder, (including cash in lieu of any fractional shares). After the effective time of the merger, each certificate that previously represented shares of NHP common stock will only represent the right to receive the merger consideration into which those shares of NHP common stock have been converted.
Treatment of NHP Stock Options and Other Equity Awards
Each outstanding NHP stock option will become fully vested and exercisable as of the closing of the merger and will, in the sole discretion of Ventas, be treated in either of the following ways: (a) exchanged for a cash payment equal to the excess, if any, of (1) the product of (x) the exchange ratio and (y) the volume weighted average price of Ventas common stock for the 10 trading days immediately prior to the closing date, over (2) the exercise price of the stock option; or (b) assumed by Ventas, on the same terms and conditions after taking into account the acceleration of vesting and exercisability and subject to proration adjustment for the exchange ratio, provided that stock options granted to Mr. Pasquale and certain other senior executives in February 2011 will not accelerate and will be assumed by Ventas and remain outstanding in accordance with their terms (as adjusted to reflect the exchange ratio).merger agreement.
Treatment of HCT Restricted Shares
Each outstanding NHP restricted stock unit will vest in full and be converted into the right to receive an amount in cash equal to the product of (a) the exchange ratio per share of NHPHCT common stock subject to such restricted stock unit and (b) the volume weighted average price of Ventas common stock for the 10 trading days immediately prior to the closing date, provided that (i) restricted stock units granted to Mr. Pasquale and certain other senior executives in February 2011 will not accelerate and will be assumed by Ventas and remain outstanding in accordance with their terms and (ii) restricted stock units granted to Messrs. Khoury and Bradley on April 23, 2007 will vest and be settled in accordance with their terms (as adjusted to reflect the exchange ratio).
Each outstanding share of NHP restricted stock will fully vest and will be converted into the right to receive a number of shares of Ventas common stock based on the exchange ratio.
Each NHP performance share will fully vest under the award agreements in respect of the shortened performance period ending as of the closing of the merger, and the shares earned in respect of such accelerated vesting will be converted into Ventas common stock, based on the exchange ratio.
Any dividend equivalent right granted in connection with another award pursuant to an NHP compensation plan whichHCT's equity plans that is outstanding will become fully vested immediately prior to the effective time will, effective immediately prior to the effective time, vest in full, and the restrictions with respect thereto will lapse. Each such restricted share will be deemed an issued and outstanding share of HCT common stock as of immediately prior to the effective time and will be entitled to receive the merger consideration determined in accordance with the merger agreement and otherwise subject to the terms and conditions of the merger agreement, including the election and all NHP dividend equivalent rights will be paid in accordance with their terms.proration provisions.
All payments under the merger agreement are subject to applicable withholding requirements.
Representations and Warranties
The merger agreement contains a number of representations and warranties made by NHP,HCT and HCT OP, on the one hand, and Ventas, Merger Sub and Needles Acquisition LLC,OP Merger Sub, on the other hand. The representations and warranties were made by the parties as of the date of the merger agreement and do not survive the effective time of the merger. Certain of these representations and warranties are subject to specified exceptions and qualifications contained in the merger agreement, as well as information contained in the documents that each of Ventas and HCT filed with the SEC on or after January 1, 2013 and prior to the effective date of the merger agreement and information contained in the confidential disclosure letters delivered in connection therewith. See "The Merger Agreement—Explanatory Note Regardingwith the Merger Agreement and the Summary of the Merger Agreement: Representations, Warranties and Covenants in the Merger Agreement Are Not Intended to Function as Public Disclosures" beginning on page 76.merger agreement.
Representations and Warranties of NHPHCT and HCT OP
NHPHCT and HCT OP made representations and warranties in the merger agreement relating to, among other things:
Ventas, Merger Sub and Needles Acquisition LLCOP Merger Sub made representations and warranties in the merger agreement relating to, among other things:
Definition of "Material Adverse Effect"
Many of the representations of NHP,HCT, HCT OP, Ventas, Merger Sub and Needles Acquisition LLCOP Merger Sub are qualified by a "material adverse effect" standard (that is, they will not be deemed to be untrue or incorrect unless their failure to be true or correct, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect).standard. For the purposes of the merger agreement, "material adverse effect" means any event, circumstance, change or effect (a)(i) that is material and adverse to the business, assets, properties, liabilities, financial condition (financial or otherwise) or results of operations of NHPHCT and its subsidiaries, taken as a whole, or Ventas and its subsidiaries, (including Needles Acquisition LLC), taken as a whole, as the case may be, or (b)(ii) that will, or would reasonably be expected to, prevent or materially impair the ability of NHP,HCT, Ventas or Needles Acquisition LLCMerger Sub, as the case may be, to consummate the merger before October 31, 2011.the outside date. However, anyfor purposes of clause (i), a material adverse effect will not include an event, circumstance, change or effect
will not be considered a material adverse effect to the extent arising out of or resulting from the following:
except to the extent,which, (i) in the case of the second, third, fourth, fifth and tenth bullet points above, that such changes do not disproportionately affect NHPHCT and its subsidiaries, taken as a whole, or Ventas and its subsidiaries, taken as a whole, as applicable, relative to other similarly situated participants in the healthcare REIT industryindustries in the United Stateswhich HCT and its subsidiaries, or Ventas and its subsidiaries, as applicable, operate generally, and (ii) in the case of the fourth and eighth bullet pointspoint above, that such changes do not disproportionately affect NHPHCT and its subsidiaries, taken as a whole, or Ventas and its subsidiaries, taken as a whole, as applicable, relative to
other participants in the healthcare REIT industryindustries in which HCT and its subsidiaries, or Ventas and its subsidiaries, as applicable, operate, in the geographic regions in which NHPHCT and its subsidiaries, or Ventas and its subsidiaries, as applicable, operate, own or lease properties.
Covenants and Agreements
Conduct of Business of NHP Pending the Merger
NHP has agreed to certain restrictions on it and its subsidiaries until the earlier of the effective time of the merger or the valid termination of the merger agreement. In general, except with Ventas's prior written approval (not to be unreasonably withheld) or as otherwise expressly required or permitted by the merger agreement or required by law, NHP has agreed that, it will, and will cause each of its subsidiaries to, conduct its business in the ordinary course and in a manner consistent with past practice in all material respects, and use its reasonable best efforts to maintain its material assets and properties in their current condition (normal wear and tear and damage caused by casualty or by reasons outside of NHP's or its subsidiaries' control excepted), preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties, keep available the services of its present officers and key employees and maintain the status of NHP as a
REIT. Without limiting the foregoing, NHP has also agreed that, except with Ventas's prior written approval (not to be unreasonably withheld), to the extent required by law, or as otherwise expressly required or permitted by the merger agreement, it will not, and it will not cause or permit any of its subsidiaries to:
Conduct of Business of Ventas Pending the Merger
Ventas has agreed to certain restrictions on it and its subsidiaries until the earlier of the effective time of the merger or the valid termination of the merger agreement. In general, except with NHP's prior written approval (not to be unreasonably withheld) or as otherwise expressly required or
permitted by the merger agreement or required by law, Ventas has agreed that, it will, and will cause each of its subsidiaries to, conduct its business in the ordinary course and in a manner consistent with past practice in all material respects, and use its reasonable best efforts to maintain its material assets and properties in their current condition (normal wear and tear and damage caused by casualty or by reasons outside of Ventas's or its subsidiaries' control excepted), preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties, keep available the services of its present officers and key employees and maintain the status of Ventas as a REIT. Without limiting the foregoing, Ventas has also agreed that, except with NHP's prior written approval (not to be unreasonably withheld), to the extent required by law, or as otherwise expressly required or permitted by the merger agreement, it will not, and it will not cause or permit any of its subsidiaries to:
No Solicitation of Transactions by NHP
NHP will not and it will cause its subsidiaries and its and their officers and directors, managers or the equivalent not to, and it will use its reasonable best efforts to cause any other representatives of NHP or any of its subsidiaries not to directly or indirectly (i) solicit, initiate, knowingly encourage or knowingly facilitate any inquiry, discussion, offer or request that constitutes, or could reasonably be expected to lead to, an NHP Acquisition Proposal (except for purposes of this paragraph, references in such definition to "20%" are replaced by "5%"), (ii) engage in any discussions or negotiations regarding, or furnish to any third party any non-public information in connection with, or otherwise cooperate in any way with, or knowingly facilitate in any way any effort by, any third party in connection with any NHP Acquisition Proposal or inquiry, (iii) approve or recommend an NHP Acquisition Proposal, or enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or any other similar agreement (other than a customary confidentiality agreement containing terms no less favorable to NHP than the terms of NHP's confidentiality agreement with Ventas entered into in accordance with the limitations described below) providing for or relating to an NHP Acquisition Proposal, or (iv) propose or agree to do any of the foregoing.
For the purposes of the merger agreement, "NHP Acquisition Proposal" means, subject to certain exceptions, any proposal or offer for (or expression by a third party that it is considering or may engage in), whether in one transaction or a series of related transactions, (i) any merger, consolidation, share exchange, business combination or similar transaction involving NHP or any of its subsidiaries, (ii) any sale, lease, exchange, mortgage, pledge, license, transfer or other disposition, directly or indirectly, by merger, consolidation, sale of equity interests, share exchange, joint venture, business combination or otherwise, of any assets of NHP or any of its subsidiaries representing 20% or more of the consolidated assets of NHP and its subsidiaries, taken as a whole as determined on a book-value basis, (iii) any issue, sale or other disposition of (including by way of merger, consolidation, joint venture, business combination, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 20% or more of the voting power of NHP, (iv) any tender offer or exchange offer in which any person or "group" (as defined in Rule 13d-3 promulgated under the Exchange Act) seeks to acquire beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange Act), or the right to acquire beneficial ownership, of 20% or more of the outstanding shares of any class of voting securities of NHP, (v) any recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to NHP in which a third party acquires beneficial ownership of 20% or more of the outstanding shares of any class of voting securities of NHP, or (vi) any transaction similar in form, substance or purpose to any of the foregoing.
Notwithstanding the restrictions set forth above, the merger agreement provides that, at any time prior to the approval of the merger by NHP stockholders, NHP may, in response to an unsolicited bona fide written NHP Acquisition Proposal from a third party made after February 27, 2011 that did not result from a breach of the merger agreement, (i) furnish non-public information to such third party pursuant to a customary confidentiality agreement containing terms no less favorable to NHP
than the terms of NHP's confidentiality agreement with Ventas (provided that all such information is simultaneously provided or made available to Ventas if it has not been provided or made available previously) and (ii) engage in discussions or negotiations with such third party and its representatives if the NHP board of directors determines in good faith, after consultation with its financial and legal advisors, that the NHP Acquisition Proposal constitutes, or could reasonably be expected to lead to, a superior proposal (as defined below) and the NHP board of directors determines in good faith, after consultation with legal counsel, that failure to take such action would be reasonably likely to be inconsistent with the directors' duties under applicable law.
NHP must notify Ventas promptly (but in no event later than 24 hours) after receipt of any NHP Acquisition Proposal or any request for nonpublic information relating to NHP or any of its subsidiaries by any third party, or any inquiry from any person or entity seeking to have discussions or negotiations with NHP relating to a possible NHP Acquisition Proposal. NHP must also promptly, and in any event within 24 hours, notify Ventas if it enters into discussions or negotiations concerning any NHP Acquisition Proposal or provides nonpublic information or data to any person and keep Ventas informed of the status and terms of any proposals, offers, discussions or negotiations on a current basis, including by providing a copy of all related material documentation or correspondence.
Except as described below, the NHP board of directors may not (i) withhold, withdraw, qualify or modify (or publicly propose to withhold, withdraw, qualify or modify), in a manner adverse to Ventas or Needles Acquisition LLC, the NHP board's recommendation to NHP stockholders that they adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement, (ii) approve, adopt or recommend (or publicly propose to approve, adopt or recommend) any NHP Acquisition Proposal, (iii) fail to include the NHP board's recommendation in this joint proxy statement/prospectus, (iv) fail to publicly recommend against any NHP Acquisition Proposal within 10 business days of the request of Ventas and to reaffirm the NHP board's recommendation within 10 business days, or (v) approve, adopt, declare advisable or recommend, or cause or permit NHP to enter into, an alternative acquisition agreement (other than a customary confidentiality agreement containing terms no less favorable to NHP than the terms of NHP's confidentiality agreement with Ventas entered into in accordance with the limitations described above). In this joint proxy statement/prospectus, we refer to (i) through (iv) above as an "adverse recommendation change." Notwithstanding the foregoing, at any time prior to obtaining the approval of NHP's stockholders, the NHP board of directors may effect an adverse recommendation change if it (A) has received an NHP Acquisition Proposal that, in the good faith determination of the NHP board of directors, after consultation with its financial and legal advisors, constitutes a superior proposal (subject to the matching right described below), and (B) determines in good faith, after consultation with its financial and legal advisors, that failure to take such action would be inconsistent with the directors' duties under applicable law.
For the purposes of the merger agreement, "superior proposal" means any bona fide written NHP Acquisition Proposal (except that, for purposes of this definition, the references in the definition of "NHP Acquisition Proposal" to "20%" are replaced by "50%") made by a third party on terms that the NHP board of directors determines in good faith, after consultation with NHP's financial and legal advisors, taking into account all financial, legal, regulatory and any other aspects of the transaction described in such proposal, including the identity of the person or entity making the proposal, as well as any changes to the financial terms of the merger agreement proposed by Ventas and Needles Acquisition LLC in response to such proposal or otherwise, to be more favorable to NHP and its stockholders (solely in their capacity as stockholders) from a financial point of view than the transactions contemplated by the merger agreement.
The NHP board of directors is not entitled to effect an adverse recommendation change unless (i) NHP has provided a written notice to Ventas that NHP intends to take such action and describing the material terms and conditions of (and attaching a complete copy of) the superior proposal that is
the basis of such action, (ii) during the following three business days, NHP negotiates with Ventas in good faith (if desired by Ventas) to adjust the terms of the merger agreement so that the superior proposal giving rise to the notice is no longer a superior proposal and (iii) the NHP board of directors has subsequently determined in good faith, after consultation with its financial and legal advisors, that the superior proposal giving rise to the notice continues to constitute a superior proposal. Upon any material amendment to the superior proposal giving rise to the notice, NHP is required to deliver a new notice and commence a new negotiation period of two business days.
The merger agreement required NHP to immediately cease any existing discussions, negotiations or communications conducted before the execution of the merger agreement with respect to any NHP Acquisition Proposal and requires NHP to enforce any confidentiality or standstill provisions or provisions of similar effect that NHP may have against third parties. NHP must also use all reasonable efforts to cause third parties who were furnished confidential information regarding NHP in connection with the solicitation of or discussions regarding an NHP Acquisition Proposal within the six months prior to the execution of the merger agreement to promptly return or destroy such information.
Form S-4, Joint Proxy Statement/Prospectus; Stockholders Meetings
NHP and Ventas agreed to prepare and cause to be filed with the SEC the joint proxy statement included in this joint proxy statement/prospectus and NHP and Ventas agreed to prepare, and Ventas to file, a registration statement on Form S-4 with respect to the merger, which includes this joint proxy statement/prospectus, in each case as promptly as reasonably practicable. NHP and Ventas also agreed to use their reasonable best efforts to have the Form S-4 declared effective under the Securities Act as promptly as practicable after filing and to keep the Form S-4 effective for so long as necessary to complete the merger.
NHP and Ventas each agreed to use their reasonable best efforts to cause this joint proxy statement/prospectus to be mailed to their stockholders and to hold their respective stockholder meetings as soon as reasonably practicable after the Form S-4 is declared effective. NHP further agreed to include in the joint proxy statement/prospectus its recommendation to its stockholders that they adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement and to use its reasonable best efforts to obtain the its stockholder approval. Ventas also agreed to include its recommendation that the Ventas stockholders approve the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and the Ventas charter amendment and to use its reasonable best efforts to obtain such approvals.
NHP has agreed that, unless the merger agreement has been validly terminated, its obligation to hold the NHP stockholder meeting will not be affected by the commencement, public proposal, public disclosure or communication to NHP of any NHP Acquisition Proposal or by any adverse recommendation change.
Dividends
NHP and Ventas have each agreed to declare a prorated dividend to their respective stockholders for the period between the record date of their last dividend and the closing, at the same rate as their respective dividends for the prior period. The record and payment date for the pro rata dividend will be the close of business on the last business day prior to the effective time of the merger.
Ventas Board of Directors
Ventas has agreed to take all necessary action to increase the size of its board of directors as of the effective time of the merger to add Douglas M. Pasquale and two other members of the NHP board of directors who are acceptable to the Nominating and Corporate Governance Committee of Ventas's board of directors.
Efforts to Complete Transactions; Consents
Both Ventas and NHP have agreed to use their reasonable best efforts to take all actions and do all things necessary, proper or advisable under applicable laws or pursuant to any contract or agreement to consummate and make effective, as promptly as practicable, the merger, including obtaining all necessary actions or nonactions, waivers, consents and approvals from governmental authorities or other persons or entities in connection with the merger and the other transactions contemplated by the merger agreement and defending any lawsuits or other legal proceedings challenging the merger agreement or the merger or other transactions contemplated by the merger agreement.
Ventas and NHP have agreed to provide any necessary notices to third parties and to use their reasonable best efforts to obtain any third-party consents that are necessary, proper or advisable to consummate the merger.
Access to Information; Confidentiality
The merger agreement requires both NHP and Ventas to provide to the other, upon reasonable notice and during normal business hours, reasonable access to its properties, offices, books, contracts, commitments, personnel and records, and each of NHP and Ventas are required to furnish reasonably promptly to the other a copy of each report, schedule, registration statement and other document filed prior to closing pursuant to federal or state securities laws and all other information concerning its business, properties and personnel as the other party may reasonably request.
Further, Ventas has the right, at its own expense and subject to the terms of any NHP leases, to reasonable access during normal business hours and upon reasonable advance notice in order to prepare or cause to be prepared surveys, inspections, engineering studies, environmental assessments and other tests, examination or studies with respect to NHP's properties that Ventas deems reasonably necessary, so long as such access does not unduly interfere with NHP's ordinary conduct of business. Ventas has agreed to indemnify NHP for any losses, costs or damages caused by such access.
Each of NHP and Ventas has agreed to hold, and to cause its representatives and affiliates to hold, any non-public information in confidence to the extent required by the terms of its existing confidentiality agreements.
Each of NHP and Ventas has agreed to give prompt written notice to the other upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or to any of its subsidiaries which could reasonably be expected to have, individually or in the aggregate, a material adverse effect, or if unremedied by the effective time of the merger, would cause or constitute a material breach of any of its representations, warranties or covenants in the merger agreement, and to use its reasonable best efforts to prevent or promptly remedy the same.
Notification of Certain Matters; Transaction Litigation
NHP and Ventas have agreed to provide prompt notice to the other of any notice received from any governmental authority in connection with the merger agreement or the transactions contemplated by the merger agreement, including the merger, or from any person or entity alleging that its consent is or may be required in connection with any such transaction.
Each of NHP and Ventas has agreed to provide prompt notice to the other if any representation or warranty made by it in the merger agreement becomes untrue or inaccurate such that the applicable closing conditions would reasonably be expected to be incapable of being satisfied by October 31, 2011, or if it fails to comply with or satisfy in any material respect any covenant, condition or agreement contained in the merger agreement.
Each of NHP and Ventas has agreed to provide prompt notice to the other of any actions, suits, claims, investigations or proceedings commenced or threatened against, relating to or involving such party or any of its subsidiaries in connection with the merger agreement, the merger or the other transactions contemplated by the merger agreement. Each has agreed to allow the other the opportunity to reasonably participate in the defense and settlement of any stockholder litigation and not to agree to a settlement of any stockholder litigation without the other's consent (not to be unreasonably withheld), unless the settlement involves only the payment of money and the amount of the settlement is fully covered by insurance proceeds.
Employee Matters
For a period of one year following the merger, Ventas has agreed to provide, or cause to be provided, to NHP's employees (i) a salary at least equal to that in effect immediately prior to the merger, and (ii) employee benefits (other than any incentive compensation, equity-based compensation, defined benefit pension benefits and retiree medical benefits) that are, in the aggregate, no less favorable than the benefits provided to similarly situated employees of Ventas under its benefit plans.
Ventas has agreed to provide, or cause to be provided, to each employee of NHP who is a participant in a severance pay plan of NHP and whose employment is involuntarily terminated in a severance-qualifying manner during the one-year period following the merger with severance benefits that are no less favorable, in the aggregate, than the severance benefits that would have been provided to such employee immediately prior to the merger (provided that such severance benefits will not be provided to any NHP employee who is party to an employment agreement that otherwise provides for severance benefits).
Employee benefits accrued under NHP's benefits plans will carry over and be credited to employees under the employee benefits plans of Ventas. Following the completion of the merger, Ventas has agreed to recognize covered employees' service with NHP to the same extent recognized by NHP immediately prior to the completion of the merger for purposes of determining eligibility to participate, vesting, benefit accrual and determination of level of benefits under any Ventas benefit plans. NHP employees will be immediately eligible to participate in Ventas benefit plans to the extent such benefit plans replace coverage under comparable NHP benefit plans and for purposes of any Ventas benefit plan that provides medical, dental, pharmaceutical and/or vision benefits to a covered employee, Ventas has agreed to cause all pre-existing conditions exclusions and actively-at-work requirements to be waived to the same extent such conditions and requirements would have been waived under an analogous NHP benefit plan. Ventas has agreed to use reasonable efforts to take into account any expenses incurred by a covered employee during the portion of the plan year prior to the merger for the purposes of satisfying all deductible, co-insurance, co-payment and maximum out-of-pocket requirements under the Ventas benefit plans.
Stock Exchange Listing
Ventas has agreed to use its reasonable best efforts to cause the shares of its common stock to be issued in connection with the merger to be approved for listing on the NYSE, subject to official notice of issuance, prior to the effective time of the merger.
Indemnification of Directors and Officers; Insurance
For a period of six years after the effective time of the merger, pursuant to the terms of the merger agreement, Ventas and the surviving entity will indemnify NHP's officers and directors to the fullest extent permitted by law with respect to all acts or omissions by them in their capacities as such at any time prior to the effective time of the merger.
Prior to the effective time of the merger, NHP has agreed to (or, if NHP is unable to, Ventas has agreed to cause the surviving entity in the merger to) obtain and pay for a non-cancelable extension of NHP's existing directors' and officers' insurance policies and NHP's existing fiduciary liability insurance policies covering at least six years after the merger with respect to any claim related to any period or time prior to the merger with terms and limits of liability that are no less favorable than the coverage provided under NHP's existing policies, as long as the annual premium does not exceed 110% of the annual premium under NHP's existing policies.
If NHP or the surviving entity does not obtain a "tail" policy as of the effective time of the merger, the surviving entity will maintain in effect, for a period of at least six years after the merger, NHP's existing policies in effect on February 27, 2011 on terms and limits of liability that are no less favorable than the coverage provided on that date. Notwithstanding the foregoing, (i) neither Ventas nor the surviving entity will be required to pay annual premiums in excess of 300% of the current annual premium paid by NHP for such insurance, and (ii) if the annual premiums exceed 300%, Ventas or the surviving entity will be obligated to obtain a policy with the greatest coverage available for a cost not exceeding 300% of the current annual premium.
Public Announcements
Ventas, Needles Acquisition LLC and NHP have agreed, subject to certain exceptions, to consult with, and receive consent (not to be unreasonably withheld) from, each other before issuing any press release or otherwise making any public statements or filings with respect to the merger agreement or any of the transactions contemplated by the merger agreement.
Other Covenants and Agreements
The merger agreement contains certain other covenants and agreements, including covenants related to:
Conditions to Completion of the Merger
The obligation of each of NHP,HCT, HCT OP, Ventas, Merger Sub and Needles Acquisition LLCOP Merger Sub to complete the merger is subject to the satisfaction or waiver, at or prior to the effective time of the merger, of the following conditions:
The obligation of Ventas, Merger Sub and Needles Acquisition LLCOP Merger Sub to complete the merger is subject to the satisfaction or waiver, at or prior to the effective time, of the following additional conditions:
would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on NHP;
HCT;
Additional Closing Conditions for NHP'sthe Benefit of HCT
The obligation of NHPHCT and HCT OP to complete the merger is subject to the satisfaction or waiver, at or prior to the effective time, of the following additional conditions:
Conduct of Business of HCT Pending the Merger
HCT and HCT OP have agreed to certain restrictions on themselves and their subsidiaries until the earlier of the effective time of the merger or the valid termination of the merger agreement. In general, except with Ventas's prior written approval (not to be unreasonably withheld, delayed or conditioned) or as otherwise expressly required or permitted by the merger agreement or required by law, each of HCT and HCT OP has agreed that it will, and will cause each of its subsidiaries to, conduct its business in all material respects in the ordinary course and in a manner consistent with past practice, and use its reasonable best efforts to maintain its material assets and properties in their current condition (normal wear and tear and damage caused by casualty or by reasons outside of HCT's or its subsidiaries' control excepted), preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties, keep available the services of its present officers, maintain its insurance policies and maintain the status of HCT as a REIT. HCT has also agreed to use its commercially reasonable efforts to obtain legal opinions of Proskauer that are conditions to the obligations of Ventas, Merger Sub and OP Merger Sub and HCT and HCT OP, as applicable, to complete the merger, to deliver an officer's certificate in connection with opinions of Proskauer and Wachtell Lipton on the effective date of the Form S-4 registration statement satisfying the requirements of Item 601 of Regulation S-K under the Securities Act and on the closing date of the merger, as applicable, and to deliver an officer's certificate that meets certain requirements in connection with the opinion of Proskauer regarding HCT's qualification and taxation as a REIT under the Code. Without limiting the foregoing, HCT has also agreed that, subject to certain exceptions, except with Ventas's prior written approval (not to be unreasonably withheld, delayed or conditioned), to the extent required by law, or as otherwise expressly required or permitted by the merger agreement, it will not, and it will not cause or permit any of its subsidiaries to:
may be reasonably necessary to comply with the merger agreement, provided that the terms are reasonably acceptable to Ventas;
be expected to be adverse to HCT or to prevent or impair its ability to consummate the mergers;
Conduct of Business of Ventas Pending the Merger
Ventas, Merger Sub and OP Merger Sub have agreed to certain restrictions on themselves and Ventas's subsidiaries until the earlier of the effective time of the merger or the valid termination of the merger agreement. Ventas, Merger Sub and OP Merger Sub have agreed to use their commercially reasonable efforts to obtain the legal opinions of a nationally recognized tax counsel and Wachtell Lipton that are conditions to the obligations of HCT and HCT OP and Ventas, Merger Sub and OP Merger Sub, respectively, to complete the merger and to deliver an officer's certificate in connection with opinions of Proskauer and Wachtell Lipton on the effective date of the Form S-4 registration statement satisfying the requirements of Item 601 of Regulation S-K under the Securities Act and on the closing date of the merger, as applicable, and to deliver an officer's certificate of Ventas in connection with the opinion of a nationally recognized tax counsel that is a condition to the obligations of HCT and HCT OP to complete the merger. Without limiting the foregoing, each of Ventas, Merger Sub and OP Merger Sub has also agreed that, subject to certain exceptions, except with HCT's prior written approval (not to be unreasonably withheld, delayed or conditioned), to the extent required by law, or as otherwise expressly required or permitted by the merger agreement, it will not, and it will not cause or permit any of its subsidiaries to:
subsidiary under the applicable provisions of Section 856 of the Code as of the date of the merger agreement, to be so treated; or
No Solicitation of Transactions by HCT
HCT will not, and HCT will cause its subsidiaries not to, and will not authorize and will use reasonable best efforts to cause its and their officers and directors, managers or the equivalent, and any of their other representatives not to, directly or indirectly through another person, (i) solicit, initiate, knowingly encourage or knowingly facilitate any inquiry, discussion, offer or request that constitutes, or could reasonably be expected to lead to, an acquisition proposal, (ii) engage in any discussions or negotiations regarding, or furnish to any third party any non-public information in connection with, or knowingly facilitate in any way any effort by, any third party in furtherance of any acquisition proposal or inquiry relating to an acquisition proposal, (iii) approve or recommend an acquisition proposal, or enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or any other similar agreement (other than a confidentiality agreement containing provisions as to the treatment of confidential information that are no less favorable in any material respect to HCT and its subsidiaries than the terms of the confidentiality agreement between HCT and Ventas entered into in accordance with the limitations described below) providing for or relating to an acquisition proposal, or (iv) propose or agree to do any of the foregoing.
For the purposes of the merger agreement, "acquisition proposal" means, subject to certain exceptions, any bona fide inquiry, proposal or offer made by any person or entity, whether in one transaction or a series of related transactions, relating to (i) any merger, consolidation, share exchange, business combination or similar transaction involving HCT or its subsidiaries, (ii) any sale, lease, exchange, mortgage, pledge, license, transfer or other disposition, directly or indirectly, by merger, consolidation, sale of equity interests, share exchange, joint venture, business combination or otherwise, of any assets of HCT or its subsidiaries representing 15% or more of the consolidated assets of HCT or its subsidiaries taken as a whole as determined on a book-value basis, (iii) any issue, sale or other disposition of (including by way of merger, consolidation, joint venture, business combination, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 15% or more of the voting power of HCT, (iv) any tender offer or exchange offer in which any person or "group" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) seeks to acquire beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), or the right to acquire beneficial ownership, of 15% or more of the outstanding shares of any class of voting securities of HCT, or (v) any recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to HCT in which a third party acquires beneficial ownership of 15% or more of the outstanding shares of any class of voting securities of HCT.
Notwithstanding the restrictions set forth above, the merger agreement provides that, at any time prior to the approval of the merger agreement and the merger by HCT stockholders, HCT may, directly or indirectly, in response to an unsolicited bona fide written acquisition proposal from a third party made after the date of the merger agreement, (i) furnish non-public information to such third party pursuant to a confidentiality agreement containing provisions as to the treatment of confidential information that are no less favorable in any material respect to HCT and its subsidiaries than the terms of HCT's confidentiality agreement with Ventas (provided that such confidentiality agreement expressly permits HCT and its subsidiaries to comply with any provision of the merger agreement and does not contain any provision that adversely affects the rights of HCT or any of its subsidiaries under the merger agreement upon their compliance with any provision of the merger agreement and,
provided, further, that all such information is provided to Ventas prior to or substantially at the same time that such information is provided to such third party if it has not been provided previously) and (ii) engage in discussions or negotiations with such third party and its representatives if the HCT Board determines in good faith, after consultation with outside legal counsel and financial advisors, that the acquisition proposal constitutes, or is reasonably likely to result in, a superior proposal (as defined below).
HCT must notify Ventas promptly (but in no event later than 24 hours) after receipt of any acquisition proposal or any request for non-public information relating to HCT or any of its subsidiaries by any third party, or any inquiry from any person or entity seeking to have discussions or negotiations with HCT relating to a possible acquisition proposal. HCT must also promptly, and in any event within 24 hours, notify Ventas if it enters into discussions or negotiations concerning any acquisition proposal or provides non-public information or data to any person and keep Ventas informed of the status and material terms of any such proposals, offers, discussions or negotiations on a current basis, including by providing a copy of all related material documentation or material correspondence.
Except as described below, neither the HCT Board nor any committee thereof may (i) withhold, withdraw, modify or qualify (or publicly propose to withhold, withdraw, modify or qualify), in a manner adverse to Ventas, Merger Sub or OP Merger Sub, the HCT Board's recommendation to HCT stockholders that they approve the merger agreement and the merger, (ii) approve, adopt or recommend (or publicly propose to approve, adopt or recommend) any acquisition proposal, (iii) fail to include the HCT Board's recommendation in this proxy statement/prospectus or any Schedule 14D-9, as applicable, (iv) fail to publicly recommend against any acquisition proposal within five business days of the request of Ventas and/or to reaffirm the HCT Board's recommendation within five business days of the request of Ventas, or such fewer number of days as remains prior to the HCT special meeting (provided that Ventas is not permitted to make such a request on more than one occasion in respect of each acquisition proposal and on more than one occasion in respect of each material modification to an acquisition proposal), or (v) approve, adopt, declare advisable or recommend (or agree to, resolve or propose to approve, adopt, declare advisable or recommend) or cause or permit HCT or any of its subsidiaries to enter into, an alternative acquisition agreement (other than a confidentiality agreement entered into in accordance with the limitations described above). In this proxy statement/prospectus, we refer to clauses (i) through (iv) above as an "adverse recommendation change."
Notwithstanding the foregoing, (A) at any time prior to obtaining the approval of HCT's stockholders, if the HCT Board (x) has received an unsolicited bona fide acquisition proposal that did not result from a breach of the provisions described above and that, in the good faith determination of the HCT Board, after consultation with outside legal counsel and financial advisors, constitutes a superior proposal (after giving effect to any adjustments offered by Ventas in exercising its matching right described below), and such acquisition proposal is not withdrawn, and (y) determines in good faith, after consultation with outside legal counsel, that failure to take such action would be inconsistent with the directors' duties under applicable law, then HCT may terminate the merger agreement in order to enter into an alternative acquisition agreement with respect to such superior proposal (provided that HCT pays to Ventas the break-up fee described below) or make an adverse recommendation change, including approving or recommending such superior proposal; or (B) in response to an intervening event, if the HCT Board determines in good faith, after consultation with outside legal counsel, that failure to take such action would be inconsistent with the directors' duties under applicable law, HCT may make an adverse recommendation change.
For the purposes of the merger agreement, "superior proposal" means any bona fide written acquisition proposal (except that, for purposes of this definition, the references in the definition of "acquisition proposal" to "15%" are replaced by "50%") made by a third party on terms that the HCT Board determines in good faith, after consultation with HCT's outside legal counsel and financial
advisors, taking into account all financial, legal, regulatory and any other aspects of the transaction described in such proposal that the HCT Board deems relevant, including the identity of the person or entity making the proposal, any break-up fees, expense reimbursement provisions and conditions to consummation, as well as any changes to the financial terms of the merger agreement proposed by Ventas in response to such proposal or otherwise, to be (i) more favorable to HCT and its stockholders (solely in their capacity as stockholders) from a financial point of view than the transactions contemplated by the merger agreement and (ii) reasonably likely to receive all required governmental approvals on a timely basis and otherwise reasonably capable of being completed on the terms proposed.
For purposes of the merger agreement, "intervening event" means any material event or development or material change in circumstances first occurring after the date of the merger agreement and prior to receipt of the HCT stockholder approval, to the extent that such event, development or change in circumstances was not reasonably foreseeable (or if foreseeable, the consequences of which were not reasonably foreseeable) as of or prior to the date of the merger agreement, excluding, however, (i) the receipt, existence or terms of an acquisition proposal or any matter relating thereto or consequence thereof or (ii) changes in the market price or trading volume of common stock of HCT or Ventas or the fact that HCT meets or exceeds (or that Ventas fails to meet or exceed) internal or published projections, forecasts or revenue or earnings predictions for any period, except that the underlying causes of such event will not be excluded.
The HCT Board is not entitled to effect an adverse recommendation change or terminate the merger agreement in order to enter into an alternative acquisition agreement in respect of a superior proposal unless, with respect to any superior proposal or intervening event, (i) HCT has provided a written notice to Ventas, Merger Sub and OP Merger Sub that it intends to take such action, specifying in reasonable detail the reasons therefor and describing the material terms and conditions of (and attaching a complete copy of) the superior proposal that is the basis of such action, if applicable, (ii) during the following three business days, HCT negotiates with Ventas, Merger Sub and OP Merger Sub in good faith (if desired by Ventas, Merger Sub and OP Merger Sub) to adjust the terms of the merger agreement so that the adverse recommendation change or termination of the merger agreement is no longer necessary and (iii) the HCT Board has subsequently determined in good faith, after consultation with its outside legal counsel and financial advisors that (a) in the case of an adverse recommendation change due to a superior proposal, the superior proposal giving rise to the notice continues to constitute a superior proposal, and (b) in the case of an adverse recommendation change due to a superior proposal or an intervening event, after consultation with outside legal counsel, that failure to take such action would be inconsistent with the directors' duties under applicable law. Any material change to the terms of such superior proposal, including any change to the financial terms, and any material change to the facts and circumstances relating to an intervening event, will require a new notice and give rise to a new match right for Ventas.
The merger agreement does not prohibit HCT or the HCT Board, directly or indirectly through its representatives, from disclosing to HCT's stockholders a position contemplated by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act or making any disclosure to its stockholders if the HCT Board has determined, after consultation with outside legal counsel, that the failure to do so would be inconsistent with applicable law (provided that any disclosure other than a "stop, look and listen" or similar communication of the type contemplated by Rule 14d-9(f) promulgated under the Exchange Act, an express rejection of any applicable acquisition proposal or an express reaffirmation of the recommendation of the HCT Board to the HCT stockholders to vote in favor of the approval of the merger agreement and the merger will be deemed to be an adverse recommendation change).
The merger agreement required HCT to immediately cease any existing discussions, negotiations or communications conducted before the execution of the merger agreement with respect to any acquisition proposal and requires HCT and its subsidiaries to enforce any confidentiality or standstill
provisions or provisions of similar effect that they may have against third parties. HCT must also use all reasonable best efforts to cause third parties who were furnished confidential information regarding HCT and its subsidiaries in connection with the solicitation of or discussions regarding an acquisition proposal within the six months prior to the execution of the merger agreement to promptly return or destroy such information (to the extent they are entitled to have such information returned or destroyed).
Form S-4, Proxy Statement/Prospectus; Stockholders Meetings
HCT and Ventas agreed to prepare and cause to be filed with the SEC a registration statement on Form S-4 with respect to the merger, which includes this proxy statement/prospectus, as promptly as reasonably practicable. HCT and Ventas also agreed to use their reasonable best efforts to (i) have the Form S-4 registration statement declared effective under the Securities Act as promptly as practicable after filing, (ii) ensure that the Form S-4 registration statement complies in all material respects with the applicable provisions of the Exchange Act and Securities Act, and (iii) keep the Form S-4 registration statement effective for so long as necessary to complete the merger.
HCT agreed to use its reasonable best efforts to cause this proxy statement/prospectus to be mailed to its stockholders entitled to vote at the HCT special meeting and to hold its special meeting as soon as practicable after the Form S-4 registration statement is declared effective. HCT further agreed to include in this proxy statement/prospectus its recommendation to its stockholders that they approve the merger agreement, the merger and the other transactions contemplated by the merger agreement and to use its reasonable best efforts to obtain its stockholder approval, unless the HCT Board makes an adverse recommendation change in accordance with the provisions of the merger agreement described above.
Efforts to Complete Transactions; Consents
Each of HCT, Ventas, Merger Sub and OP Merger Sub has agreed to use its reasonable best efforts to take all actions and do all things necessary, proper or advisable under applicable laws or pursuant to any contract or agreement to consummate and make effective, as promptly as practicable, the mergers and the other transactions contemplated by the merger agreement, including obtaining all necessary actions or nonactions, waivers, consents (including lender consents) and approvals from governmental authorities or other persons or entities in connection with the mergers and the other transactions contemplated by the merger agreement, making all necessary government filings and submissions, executing and delivering all additional instruments necessary to consummate the mergers and the transactions contemplated by the merger agreement, and defending any lawsuits or other legal proceedings challenging the merger agreement, the mergers or the other transactions contemplated by the merger agreement.
Each of HCT, Ventas, Merger Sub and OP Merger Sub has agreed to provide any necessary notices to third parties and to use its reasonable best efforts to obtain any third-party consents that are necessary, proper or advisable to consummate the mergers. Each of the parties to the merger agreement is required to furnish to the other such necessary information and reasonable assistance as the other may request in connection with the preparation of any required governmental filings or submissions and will cooperate in responding to any inquiry from a governmental authority, including promptly informing the other parties of such inquiry, consulting in advance before making any presentations or submissions to a governmental authority, and supplying each other with copies of all material correspondence, filings or communications between either party and any governmental authority with respect to the merger agreement. To the extent reasonably practicable, the parties or their representatives will have the right to review in advance and each of the parties will consult the others on, all the information relating to the other and each of their affiliates that appears in any filing made with, or written materials submitted to, any governmental authority in connection with the
mergers and the other transactions contemplated by the merger agreement, except that confidential, competitively sensitive business information may be redacted from such exchanges. To the extent reasonably practicable, none of the parties to the merger agreement will, nor will they permit their respective representatives to, participate independently in any meeting or engage in any substantive conversation with any governmental authority in respect of any filing, investigation or other inquiry without giving the other party prior notice of such meeting or conversation and, to the extent permitted by applicable law, without giving the other parties the opportunity to attend or participate (whether by telephone or in person) in any such meeting with such governmental authority.
Ventas agreed to provide assistance, furnish information to and otherwise cooperate with HCT as HCT reasonably requests in connection with any actions contemplated to be taken by HCT to obtain lender consents, including by agreeing to provide, from and after the closing, customary non-recourse carve-out, or "bad boy," guarantees, unless Ventas elects to exclude such lender consents from the applicable provisions of the merger agreement that relate to lender consents.
Access to Information; Confidentiality
The merger agreement requires HCT to provide, with limited exceptions, to Ventas, Merger Sub and OP Merger Sub and their representatives, upon reasonable notice and during normal business hours, reasonable access to HCT's properties, offices, books, contracts, commitments, personnel and records, and HCT is required to furnish reasonably promptly to Ventas, Merger Sub and OP Merger Sub and their representatives a copy of each report, schedule, registration statement and other document filed prior to closing pursuant to federal or state securities laws and all other information concerning its business, properties and personnel as they may reasonably request, as well as certain additional access reasonably requested to confirm the accuracy of certain representations and warranties of HCT.
Ventas, Merger Sub and OP Merger Sub have agreed to hold, and to cause its representatives and affiliates to hold, any non-public information in confidence to the extent required by the terms of its existing confidentiality agreement.
Notification of Certain Matters; Transaction Litigation
HCT, on the one hand, and Ventas, Merger Sub and OP Merger Sub, on the other hand, have agreed to provide prompt notice to the other of any notice received from any governmental authority in connection with the merger agreement or the transactions contemplated by the merger agreement, including the mergers, or from any person or entity alleging that its consent is or may be required in connection with any such transaction.
HCT, on the one hand, and Ventas, Merger Sub and OP Merger Sub, on the other hand, have agreed to provide prompt notice to the other if any representation or warranty made by it in the merger agreement becomes untrue or inaccurate such that the applicable closing conditions would reasonably be expected to be incapable of being satisfied by the outside date, if it fails to comply with or satisfy in any material respect any covenant, condition or agreement contained in the merger agreement or, if, to its knowledge, the occurrence of any state of facts, change, development, event or condition would cause, or reasonably be expected to cause, any of the conditions to closing not to be satisfied or satisfaction to be materially delayed.
Each party has agreed to give prompt written notice to the others upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or to any of its subsidiaries which could reasonably be expected to have, individually or in the aggregate, a material adverse effect on HCT or Ventas, as applicable.
HCT, on the one hand, and Ventas, Merger Sub and OP Merger Sub, on the other hand, have agreed (i) to provide prompt notice to the other of any actions, suits, claims, investigations or proceedings commenced or threatened against, relating to or involving such party or any of its subsidiaries in connection with the merger agreement, the mergers or the other transactions contemplated by the merger agreement, and (ii) to allow the other the opportunity to reasonably participate in the defense and settlement of any stockholder litigation and not to agree to a settlement of any stockholder litigation without the other's consent (not to be unreasonably withheld).
Termination of Advisory and Other Agreements
Concurrently with the execution of the merger agreement, HCT entered into an amendment to the Advisory Agreement dated as of April 7, 2014 by and among HCT, HCT OP and the Advisor, which we refer to as the advisory agreement amendment. Under the advisory agreement amendment, the parties to the Advisory Agreement agreed to terminate the Advisory Agreement immediately prior to, and contingent upon, the closing of the merger without the need for the 60 days' advance notice required under the Advisory Agreement. The advisory agreement amendment will, however, automatically terminate and be of no further force or effect if the merger agreement is terminated in accordance with its terms. Also, concurrently with the execution of the merger agreement, HCT entered into an amendment to the Property Management Agreement dated February 18, 2011, by and among HCT, HCT OP and the Property Manager, which we refer to as the property management agreement amendment. Under the property management agreement amendment, the parties agreed to terminate the Property Management Agreement immediately prior to, and contingent upon, the closing of the merger. The property management agreement amendment will, pursuant to its terms, automatically terminate and be of no further force or effect if the merger agreement is terminated in accordance with its terms. Also, concurrently with the execution of the merger agreement, HCT OP and the SLP entered into an amendment to the Listing Note Agreement, which we refer to as the listing note amendment, to provide that: (1) immediately prior to, and contingent upon, the closing of the merger, the SLP will be deemed to have contributed its right to distributions from HCT OP pursuant to its special limited partner interest in HCT OP, the amount of which distributions are evidenced by the Listing Note Agreement, to HCT OP in exchange for 5,613,374 limited partnership units in HCT OP; and (2) the Listing Note Agreement will terminate upon receipt by the SLP of such limited partnership units. The listing note amendment will, pursuant to its terms, automatically terminate and be of no further force or effect if the merger agreement is terminated in accordance with its terms. Also, concurrently with the execution of the merger agreement, HCT, HCT OP and the Advisor entered into an agreement terminating the OPP, which we refer to as the OPP termination agreement. Under the OPP termination agreement, the OPP will terminate without payment to the Advisor effective as of immediately prior to the effective time contingent on the occurrence of the effective time. The advisory agreement amendment, the property management agreement amendment, the listing note amendment, and the OPP termination agreement are referred to collectively as the "termination agreements." The termination agreements were entered into pursuant to the requirements of the merger agreement, and, as described above, it is a condition to the obligation of Ventas, Merger Sub and OP Merger Sub to complete the merger that the termination agreements remain in full force and effect and that no provision thereof has been amended, modified or waived. See "The Merger Agreement—Conditions to Completion of the Merger" beginning on page 79.
Immediately prior to the closing of the merger, HCT will deliver to the Advisor and the Property Manager all amounts owed to them under the Advisory Agreement and the Management Agreement, respectively, and HCT will cause the Advisor, the SLP, the Property Manager, and any other affiliates of HCT or of the Advisor to execute a full and unconditional release of any claims or liabilities whatsoever that they may have against HCT, any of its subsidiaries, Ventas, any affiliate of Ventas or the surviving entity in the merger (in each case, other than indemnification rights in favor of the Advisor or its affiliates that, as of the date of the merger agreement, exist under such agreements).
None of HCT OP, HCT nor any subsidiaries of HCT may make any payment or distribution of any kind to the SLP, the Advisor, or any of their affiliates pursuant to the Listing Note Agreement, other than at the closing of the merger as expressly provided in the listing note amendment. In addition, except as expressly contemplated by the merger agreement, neither HCT nor any of its subsidiaries may make any payment or distribution to the Advisor, the SLP, the Property Manager, any affiliate of HCT, any affiliate of the Advisor, or certain other entities other than (x) compensation payable to the Advisor and the Property Manager in the ordinary course consistent with past practice (other than in connection with the transactions contemplated by the merger agreement) in accordance with such agreements as in effect on the date of the merger agreement, (y) distributions permitted by the merger agreement in respect of the limited partnership units and LTIP Units held by such entities in accordance with the terms of the HCT OP partnership agreement and the OPP, respectively, and (z) certain fees and expenses payable to RCS Capital pursuant to the RCS Capital letter agreement.
Ventas has agreed to use its reasonable best efforts to cause the shares of Ventas common stock to be issued in connection with the merger to be approved for listing on the NYSE, subject to official notice of issuance, prior to the effective time of the merger.
Indemnification of Directors and Officers; Insurance
For a period of six years after the effective time of the merger, pursuant to the terms of the merger agreement and subject to certain limitations, the surviving entity will indemnify, defend and hold harmless among others, each officer and director of HCT, for actions or omissions at or prior to the effective time of the merger in their capacity as such, including with respect to the transactions contemplated by the merger agreement.
Prior to the effective time of the merger, HCT has agreed to (or, if HCT is unable to, Ventas has agreed to cause the surviving entity in the merger to) obtain and pay for a non-cancelable extension of the coverage afforded by HCT's existing directors' and officers' liability insurance policies and HCT's existing fiduciary liability insurance policies covering at least six years after the effective time of the merger with respect to any claim related to any period of time at or prior to the effective time of the merger from one or more insurance carriers with terms and retentions that are no less favorable in the aggregate than the coverage provided under HCT's existing policies, as long as the annual premium does not exceed, for any one year, 300% of the annual aggregate premium(s) under HCT's existing policies.
If HCT or the surviving entity does not obtain a "tail" policy as of the effective time of the merger, (i) the surviving entity will maintain in effect, for a period of at least six years after the effective time of the merger, HCT's existing policies in effect on the date of the merger agreement, on terms and limits of liability that are no less favorable in the aggregate than the coverage provided on the date of the merger agreement or (ii) Ventas will provide, or cause the surviving entity to provide, for a period of at least six years after the effective time of the merger, comparable D&O insurance from one or more insurance carriers with terms and retentions that are no less favorable in the aggregate than the coverage provided under HCT's existing policies, or, if substantially equivalent insurance coverage is unavailable, the best available coverage. Notwithstanding the foregoing, (i) neither Ventas nor the surviving entity will be required to pay annual premiums in excess of (for any one year) 300% of the annual premium currently paid by HCT for such insurance, and (ii) if the annual premiums exceed such amount, Ventas or the surviving entity will be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount.
Ventas, Merger Sub, OP Merger Sub, HCT and HCT OP have agreed, subject to certain exceptions, that they and their respective affiliates will consult with, and receive consent (not to be unreasonably withheld, conditioned or delayed) from, each other before issuing any press release or otherwise making any public statements or filings with respect to the merger agreement or any of the transactions contemplated by the merger agreement.
HCT has agreed to, and to cause its subsidiaries to and use commercially reasonable efforts to cause their respective representatives to, cooperate with Ventas, Merger Sub and OP Merger Sub in connection with any efforts to arrange debt financing or maintain, and amend or increase, their existing credit facilities, for (in whole or in part) satisfying the obligations of Ventas to pay (i) any cash consideration and other amounts due by Ventas, Merger Sub or OP Merger Sub under the merger agreement, (ii) any expenses and (iii) the refinancing of HCT's credit agreement or any other indebtedness of HCT or its subsidiaries.
Other Covenants and Agreements
The merger agreement contains certain other covenants and agreements, including covenants related to:
Termination of the Merger Agreement
The merger agreement may be terminated at any time before the effective time of the merger by the mutual written agreement of Ventas and NHP.HCT.
The merger agreement may also be terminated prior to the effective time of the merger by either Ventas or NHPHCT if:
that this termination right will not be available to a party if the issuance of such order was primarily due to the failure of such party to perform any of its obligations under the merger agreement);
or
The failure of a party to perform its obligations includes, in the case of Ventas, the failure of Merger Sub and OP Merger Sub and, in the case of HCT, the failure of HCT OP, to do so.
The merger agreement may also be terminated prior to the effective time of the merger by Ventas if:
The merger agreement may also be terminated prior to the effective time of the merger by HCT:
by NHP, or (iii) NHP enters into an agreement providing for or relating to an NHP Acquisition Proposal other than a customary confidentiality agreement containing terms no less favorable to NHP than the terms of NHP's confidentiality agreement with Ventas entered into in accordance with the limitations described above under "—No Solicitation of Transactions by NHP" (provided that the termination right under clauses (i) and (ii) will not be available after NHP's stockholders approve the transaction).
Termination by NHP
The merger agreement may also be terminated prior to the effective time of the merger by NHP if Ventas or Needles Acquisition LLC has breached in any material respect any of its representations, warranties, covenants or agreements in the merger agreement that would, or would reasonably be expected to, result in a failure of NHP's condition to closing the merger related to the accuracy of Ventas's and Needles Acquisition LLC's representations and warranties or Ventas's and Needles Acquisition LLC'sOP Merger Sub's material performance of or compliance with their obligations under the merger agreement and such breach either (x) cannot be cured by October 31, 2011Ventas, Merger Sub or (y) hasOP Merger Sub on or before the outside date or, if curable, is not been cured by Ventas, Merger Sub or OP Merger Sub within 20 days after
receiving written notice of such breach or failure (provided that this termination right will not be available to NHPHCT if NHPHCT is then in a similar breach thatof any of its representations, warranties, covenants or agreements set forth in the merger agreement and such breach would result in the failure of Ventas's condition to closingconsummation of the merger related to the accuracy of NHP'sHCT's representations and warranties or NHP'sHCT's material performance of or compliance with its obligations under the merger agreement).; or
Termination
NHPHCT has agreed to pay Ventas a terminationbreak-up fee in the amount of $175$55.0 million plus $20 million as an expense reimbursement to Ventas (unless the expense amount is previously paid as described below) if:
agreement other than a customary confidentiality agreement containing terms no less favorabletermination Ventas would have been permitted to NHP than the terms of NHP's confidentiality agreement with Ventas entered into in accordance with the limitations described above under "—No Solicitation of Transactions by NHP."
NHP has also agreed to pay the expense amount of $20 million to Ventas, if Ventas or NHP terminatesterminate the merger agreement duepursuant to the failure of NHP's stockholders to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement, within two business days after such termination (rather than when a termination fee, if any, becomes payable to Ventas)clause (A).
Termination Fee and Expenses Payable by Ventas to NHP
VentasHCT has agreed to pay a termination fee of $175reimburse Ventas for expenses in an amount equal to $10.0 million plus $20 million as an expense reimbursement to NHP (unless the expense amount is previously paid as described below) if all of the following events have occurred:
A "Ventas Acquisition Proposal" hasvoted upon. In the same meaning as an "NHP Acquisition Proposal," exceptevent that the words "NHP and/or any of its subsidiaries" are replaced with the word "Ventas," the reference to "20%" is replaced with "50%" and transactions in which Ventas is the acquiring party are not included.
Ventas has also agreed to pay $20 million as an expense reimbursement is paid to NHP, if NHP or Ventas, terminatesand the merger agreement duebreak-up fee subsequently becomes payable pursuant to the failure of Ventas's stockholders to approvesecond bullet above, the issuance of shares of Ventas common stock to NHP stockholders in connection withexpense reimbursement will be credited against the merger and the Ventas charter amendment, within two business days after such termination (rather than when a terminationbreak-up fee if any, becomes payable to NHP).subsequently payable.
Payment of Expenses; Specific Performance; Modification or Amendment; Waiver of Conditions; Governing LawMiscellaneous Provisions
Other than as described above under "—Termination"Termination Payment: Break-up Fee and Expenses Payable by NHP to Ventas" and "—Termination Fee and Expenses Payable by Ventas to NHP,Expense Reimbursement," the merger agreement provides that each party will pay its own fees and expenses in connection with the merger agreement, except that NHPHCT and Ventas will share equally all expenses related to the printing, filing and distribution of this joint proxy statement/
prospectus and the registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part (other than attorneys' and accountants' fees).
The parties to the merger agreement are entitled to seek injunctions, specific performance and other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement in addition to any and all other remedies at law or in equity.
The parties to the merger agreement may amend the merger agreement by written agreement executed and delivered by their duly authorized officers, provided that, after adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement by NHP's stockholders or the approval of the issuance of shares of Ventas common stock to NHP stockholders in connection with the merger and the Ventas charter amendment by Ventas'sHCT's stockholders, no amendment may be made which changes the form or amount of the consideration to be delivered to the holders of NHPHCT common stock or which by law or in accordance with the rules of any stock exchange requires further approval by NHP's or Ventas'sHCT's stockholders, without the approval of such stockholders.
Prior to the effective time of the merger, HCT or HCT OP, on the one hand, and Ventas, Merger Sub or NHPOP Merger Sub, on the other hand, may extend the time for performance of any obligation of the other or waive any inaccuracy in the representations and warranties of the other or the other party'stheir compliance with any agreement or condition contained in the merger agreement, to the extent permitted by law.
The merger agreement is governed by the laws of the State of Maryland (without giving effect to choice of law principles thereof).
IF YOU ARE A VENTAS STOCKHOLDER, THE VENTAS BOARDFirst Amendment to the Merger AgreementRECOMMENDS THAT YOU VOTE "FOR" THE ISSUANCE OF SHARES OFVENTAS COMMON STOCK TO NHP STOCKHOLDERS IN CONNECTION WITH THE MERGERAND "FOR" THE VENTAS CHARTER AMENDMENT TO INCREASE THE NUMBER OFAUTHORIZED SHARES OF VENTAS COMMON STOCK. THE MERGER CANNOT BE COMPLETED WITHOUT THE APPROVAL BY VENTAS STOCKHOLDERS OF BOTH OF THESE PROPOSALS.
IF YOU ARE AN NHP STOCKHOLDER, THE NHP BOARDRECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. On September 15, 2014, Ventas, Merger Sub, OP Merger Sub, HCT and HCT OP entered into the first amendment to the merger agreement. The amendment provides that, subject to the satisfaction of the closing conditions set forth in the merger agreement, Ventas, Merger Sub and OP Merger Sub are not required to consummate the transactions contemplated under the merger agreement until the earlier of the date that is five business days after the receipt of certain third-party consents and the outside date.
MATERIAL UNITED STATESU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following generalis a discussion sets forthof the anticipated material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of NHPHCT common stock. This discussion does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any United States federal laws other than those pertaining to income tax nor does it address tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010.
This discussion is based upon the Code, theTreasury regulations promulgated under the Code, (whichwhich we refer to as the Treasury regulations)Regulations, and courtreported judicial and administrative rulings and decisions all as in effect onas of the date of this joint proxy statement/prospectus. These laws mayprospectus, all of which are subject to change, retroactively or prospectively, and to possibly retroactively, and anydiffering interpretations. Any such change could affect the accuracyvalidity of the statements and conclusions set forth in this discussion.
This discussion addresses only those NHP common stockholders that hold their NHP common stock as a capital asset underdoes not address (i) U.S. federal taxes other than income taxes, (ii) state, local or non-U.S. taxes or (iii) tax reporting requirements applicable to the Code (generally, property held for investment). Further,merger. In addition, this discussion does not purport to address all aspects ofthe U.S. federal income taxation that may be relevant to you in light of your particular circumstances or that may beother tax considerations applicable to you if youholders of Ventas or HCT common stock that are subject to special treatment under the U.S. federal income tax laws,law, including, if you are:for example:
Determining the actual tax consequences of the merger to youa U.S. holder of HCT common stock may be complex. They will depend on yourthe holder's specific situation and on factors that are not within the control of Ventas or NHP. YouHCT. U.S. holders should consult with yourtheir tax advisoradvisors as to the tax consequences of the merger in yourtheir particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, foreign or other tax laws and of changes in those laws.
ForGenerally, for purposes of this discussion, the terma "U.S. holder" meansis a beneficial owner of NHP common stockperson that is, for U.S. federal income tax purposes (i) purposes:
more U.S. persons have the authority to control all substantial decisions of the trust or (b) such(2) the trust has made a valid election in effect under current Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposesperson.
If a partnership or (iv) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source.
The U.S. federal income tax consequences to a partner in an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes and that holds NHPVentas or HCT common stock, the U.S. federal income tax treatment of a partner generally will depend onupon the status of the partner and the activities of the partnership. Partners inA partnership or entity treated as a partnership for U.S. federal income tax purposes holding NHPVentas or HCT common stock, and the partners in such partnership, should consult their own tax advisors.
Material U.S. Federal Income Tax Consequences of the Merger
Generally
The parties Ventas and HCT intend for the merger to qualify as a reorganization for U.S. federal income tax purposes.within the meaning of Section 368(a) of the Code. It is a condition to theVentas's obligation of Ventas to complete the merger that Ventas receive an opinion from Wachtell Lipton, Rosen & Katz, dated the closing date, substantiallyspecial counsel to Ventas, to the effect that, for U.S. federal income tax purposes, the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to theHCT's obligation of NHP to complete the merger that NHPHCT receive an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, dated the closing date, substantiallyProskauer, special counsel to HCT, to the effect that, for U.S. federal income tax purposes, the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. These opinions will be based on representation letters providedfactual representations made by Ventas and NHPHCT, and on customary factual assumptions. NeitherThese tax opinions represent the legal judgment of the opinions described above will beoutside counsel to Ventas and HCT and are not binding on the Internal Revenue Service which we refer to as the IRS. Ventas and NHP have not sought and will not seek any(the "IRS").
No ruling from the IRS regarding any mattershas been or will be requested relating to the tax consequences of the merger, and as a result, there can be no assurance that the IRS willwould not assert, or that a court would not sustain, a position contrary to any ofdescribed herein or the conclusions set forth below.in the tax opinions. If the condition relating to either tax opinion to be delivered at closing is waived, this proxy statement/prospectus will be amended and recirculated.
The U.S. federal income tax consequences of the merger to a U.S. holder of HCT common stock generally will depend on whether the U.S. holder exchanges its HCT common stock for cash, Ventas common stock or a combination of cash and Ventas common stock.
U.S. Federal Income Tax Consequences to Holders
Provided the merger is treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, upon exchanging your NHPCode:
Exchange Solely for Cash. A U.S. holder of HCT common stock for Ventas common stock (other thanwho receives solely cash received in lieu of a fractional share), you generally will not recognize gain or loss. The aggregate tax basis in theexchange for shares of Ventas common stock that you receive in the merger, including any fractional share interests deemed received and sold as described below, will equal your aggregate adjusted tax basis in the NHP common stock you surrender. Your holding period for the shares of Ventas common stock that you receive in the merger (including any fractional share interest deemed received and sold as described below) will include your holding period for the shares of NHP common stock that you surrender in the exchange.
Cash Instead of a Fractional Share
If you receive cash instead of a fractional share of Ventas common stock, you will be treated as having received the fractional share of VentasHCT common stock pursuant to the merger and then as having sold that fractional share of Ventas common stock for cash. As a result, you generally will recognize gain or loss equal to the difference between the amount of cash received and such holder's adjusted U.S. federal income tax basis in the basis allocableshares of HCT common stock surrendered.
Exchange Solely for Ventas Common Stock. A U.S. holder of HCT common stock who receives solely shares of Ventas common stock in exchange for shares of HCT common stock pursuant to yourthe merger generally will not recognize any gain or loss except in respect of cash received in lieu of a fractional share of Ventas common stock (as discussed below).
Exchange for Ventas Common Stock and Cash. A U.S. holder of HCT common stock who receives a combination of Ventas common stock and cash in exchange for shares of HCT common stock pursuant to the merger generally will recognize gain (but not loss) in an amount equal to the lesser of (1) the amount of gain realized (i.e., the excess of the sum of the amount of cash, other than cash received in lieu of a fractional share of Ventas common stock, and the fair market value of the Ventas common stock received pursuant to the merger over such holder's adjusted U.S. federal income tax basis in its shares of HCT common stock surrendered) and (2) the amount of cash received pursuant to the merger (excluding any cash received in lieu of a fractional share of Ventas common stock).
If a U.S. holder of HCT common stock acquired different blocks of HCT common stock at different times or different prices, any gain or loss must be determined separately for each block of HCT common stock. U.S. holders should consult their tax advisors regarding the manner in which cash and Ventas common stock received in the merger should be allocated among different blocks of HCT common stock.
Character of Gain or Loss. Any gain or loss recognized in connection with the merger generally will constitute capital gain or loss and will be long-term capital gain or loss if the U.S. holder's holding period with respect to the HCT common stock surrendered is more than one year at the effective time of the merger. Long-term capital gain of certain non-corporate taxpayers, including individuals, is generally taxed at preferential rates. The deductibility of capital losses is subject to limitations. In some cases, if a U.S. holder of HCT common stock actually or constructively owns Ventas common stock other than Ventas common stock received pursuant to the merger, the recognized gain could be treated as having the effect of a distribution of a dividend under the tests set forth above. Thisin Section 302 of the Code, in which case such gain would be treated as dividend income to the extent of the U.S. holder's ratable share of accumulated earnings and profits as calculated for U.S. federal income tax purposes. Because the possibility of dividend treatment depends upon each holder's particular circumstances, including the application of constructive ownership rules, U.S. holders of HCT common stock should consult their tax advisors regarding the application of the foregoing rules to their particular circumstances.
Holding Period and Basis in Ventas Common Stock. The aggregate U.S. federal income tax basis of Ventas common stock received (including fractional shares deemed received and redeemed as described below) in the merger will be equal to the aggregate adjusted U.S. federal income tax basis of the shares of HCT common stock surrendered therefor, reduced by the amount of any cash received by the U.S. holder pursuant to the merger (excluding any cash received in lieu of a fractional share of Ventas common stock) and increased by the amount of gain (including any portion of the gain that is treated as a dividend as described above but excluding any gain or loss resulting from the deemed redemption of fractional shares described below), if any, recognized by the U.S. holder on the exchange. The holding period of the Ventas common stock (including fractional shares deemed received and redeemed as described below) will include the holding period of the shares of HCT common stock surrendered. U.S. holders holding blocks of HCT common stock acquired at different time or difference prices should consult their tax advisors with respect to identifying the bases and holding periods of the particular shares of Ventas common stock received in the merger.
Cash Received Instead of Fractional Shares. A U.S. holder of HCT common stock who receives cash in lieu of a fractional share of Ventas common stock generally will be treated as having received such fractional share and then as having received such cash in redemption of the fractional share. Gain or loss generally will be recognized for U.S. federal income tax purposes based on the difference between the amount of cash received instead of the fractional share and the portion of the U.S. holder's aggregate adjusted U.S. federal income tax basis of the shares of HCT common stock surrendered which is allocable to the fractional share. Such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if as of the effective date of the merger, the holding period for thesuch shares (including the holding period of NHPHCT common
stock surrendered therefor) is greatermore than one year.year at the effective time of the merger. The deductibility of capital losses is subject to limitations.
Additional Medicare Tax. U.S. holders of HCT common stock that are individuals, trusts or estates and whose modified adjusted gross income exceeds certain thresholds generally will be subject to an additional 3.8% tax with regard to dividends on and "net gains" from the disposition of HCT common stock pursuant to the merger. U.S. holders of HCT common stock should consult their tax advisors with respect to the applicability of this tax.
Backup Withholding. Certain U.S. holders of HCT common stock may be subject to backup withholding of U.S. federal income tax with respect to any cash received pursuant to the merger. Backup withholding will not apply, however, to a U.S. holder of HCT common stock that furnishes a correct taxpayer identification number and certifies that it is not subject to backup withholding on IRS Form W-9 (or substitute Form W-9) or is otherwise exempt from backup withholding and provides appropriate proof of the applicable exemption. Backup withholding is not an additional tax and any amounts withheld will be allowed as a refund or credit against the U.S. holder's U.S. federal income tax liability, if any, provided that the holder timely furnishes the required information to the IRS.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL OF THE POTENTIAL TAX CONSEQUENCES OF THE MERGER. HOLDERS OF HCT COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS AND THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER APPLICABLE TAX LAWS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
Backup WithholdingLITIGATION RELATED TO THE MERGER
If you are a non-corporate holder of NHP common stock you may be subject to information reporting and backup withholding (currently at a rate of 28%) on any cash payments you receive. You generally will not be subject to backup withholding, however, if you:
Any amounts withheld under the backup withholding rules generally will be allowed as a refund or credit against your U.S. federal income tax liability, provided you timely furnish the required information to the IRS.
This summary of certain material U.S. federal income tax consequencesannouncement of the merger ison June 2, 2014, purported stockholders of HCT filed thirteen (13) putative class action lawsuits naming HCT and its directors, Ventas, Merger Sub, and OP Merger Sub as defendants. Some complaints also name HCT's Chief Executive Officer, American Realty Capital V, LLC, American Realty Capital Healthcare Advisors, LLC, American Realty Healthcare Special Limited Partnership, LLC, and Realty Capital Securities, LLC as additional defendants. Certain of these lawsuits also purport to assert derivative claims on behalf of HCT against particular defendants, including HCT's directors, certain HCT-related entities referenced above, Ventas, Merger Sub and OP Merger Sub. The purported stockholder plaintiffs have commenced these actions in three jurisdictions: the Circuit Court for general information onlyBaltimore City, Maryland ("Maryland State Court"), the Supreme Court of the State of New York, County of New York ("New York State Court") and is not tax advice. You are urgedthe United States District Court for the District of Maryland. All of these stockholder complaints generally allege that HCT's directors breached certain fiduciary duties to consult your tax advisor with respectHCT's stockholders by approving the merger agreement, and that Ventas aided and abetted those breaches. Several of these complaints purport to assert both direct and derivative claims; certain complaints also assert a claim for breach of contract, waste of corporate assets or unjust enrichment. All of these complaints request an injunction of the application of U.S. federal income tax laws to your particular situation as well as any tax consequences arisingmerger and, in the alternative, damages.
In the Maryland State Court, the following actions were filed by purported HCT stockholders:Holzerv. American Realty Healthcare Capital Trust, Inc., et al.; Romano v.American Realty Healthcare Capital Trust, Inc., et al.;Brennerv. American Realty Capital Healthcare Trust, Inc., et al.; Hamillv.American Realty Healthcare Capital Trust, Inc., et al.;Stanleyv. American Realty Healthcare Capital Trust, Inc., et al.; Shinev. American Realty Healthcare Capital Trust, Inc., et al.;Uhlv. American Realty Healthcare Capital Trust, Inc., et al.; Kuov. American Realty Healthcare Capital Trust, Inc., et al.; Florv. American Realty Healthcare Capital Trust, Inc., et al.; andAbbasiv. American Realty Healthcare Capital Trust, Inc., et al. On August 20, 2014, these actions were consolidated under the U.S. federal estate or gift tax rules, or undercaptionIn re: American Realty Capital, Healthcare Trust, Inc. Shareholder & Derivative Litigation, Case No. 24-C-14-003534. On October 17, 2014, Plaintiffs in the lawsconsolidated action filed a consolidated amended complaint. The consolidated amended complaint includes, among other things, claims relating to HCT's disclosures in the proxy statement filed with the SEC.
In New York State Court, the following actions were filed by purported HCT stockholders:Schindler v.Burns, et al. andFrey v.American Realty Capital Healthcare Trust, Inc., et al.
One action was filed in the United States District Court of any state, local, foreign orMaryland:Rosenzweig v.Schorsch, et al. On October 31, 2014, Plaintiff in theRosenzweig action filed an amended complaint which includes, among other taxing jurisdiction.things, claims relating to HCT's disclosures in the proxy statement filed with the SEC.
HCT, its directors, Ventas, Merger Sub and OP Merger Sub believe that each of these actions is without merit.
Holders of HCT common stock may not exercise the rights of objecting stockholders to receive the fair value of their shares in connection with the merger because, as permitted by the MGCL, HCT's charter provides that stockholders shall not be entitled to exercise any appraisal rights unless the HCT Board, upon the affirmative vote of a majority of the board, shall determine that such rights apply. The HCT Board has made no such determination.
VENTAS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTSAs of and For the Year Ended December 31, 2010
On October 22, 2010, Ventas announced that it had entered into a definitive agreement to acquire 118 private pay seniors housing communities owned and/or operated by Atria (including assets owned by Atria's affiliate, One Lantern) from funds affiliated with LREP for a purchase price of approximately $3 billion, comprised of $1.35 billion in Ventas common stock (a fixed 24.96 million shares based on Ventas's 10-day volume weighted average price as of October 20, 2010 of $54.09), $150 million in cash and the assumption or repayment of approximately $1.6 billion of debt and capital lease obligations, less assumed cash.
On February 28, 2011, Ventas announced that it had entered into a definitive agreement to acquire NHP in a stock-for-stock transaction valued at approximately $7 billion. Under the terms of the agreement, in the merger, NHP stockholders will receive a fixed exchange ratio of 0.7866 shares of Ventas common stock for each share of NHP common stock they own.
The following unaudited pro forma condensed consolidated financial information sets forth:
Certain assets and liabilities of Atria and One Lantern included in the historical consolidated financial information consisting primarily of certain working capital, property leases, insurance items
and property management services will not be acquired and have been so reflected in the pro forma adjustments. Also, certain intercompany activity between Atria, One Lantern and NHP has been eliminated in the pro forma adjustments.
These unaudited pro forma condensed consolidated financial statements arehave been prepared for informational purposes only and are based on assumptions and estimates considered appropriate by Ventas's management; however, they are not necessarily indicative of what Ventas's consolidated financial condition or results of operations actually would have been assuming the transactions had been consummated as of the dates indicated, nor do they purport to represent theVentas's consolidated financial position or results of operations for future periods. These unaudited pro forma condensed consolidated financial statements do not include the impact of any synergies that may be achieved in the transactions or any strategies that management may consider in order to continue to efficiently manage Ventas's operations. This pro forma condensed consolidated financial information should be read in conjunction with:
The acquisition of Atria, One Lantern and NHPHCT will be accounted for using the acquisition method of accounting.accounting in accordance with Accounting Standards Codification Topic 805,Business Combinations. The total purchase price of approximately $10$2.9 billion will be allocated to the assets ultimately acquired and liabilities ultimately assumed based upon their respective fair values. The allocations of the purchase pricesprice reflected in these unaudited pro forma condensed consolidated financial statements have not been finalized and are based upon preliminary estimates of these fair values, which is the best available information at the current time. A final determination of the fair values of the assets acquired and liabilities assumed, which cannot be made prior to the completion of the acquisitions, which are anticipated to occur during 2011,acquisition, will be based on the actual valuations of the tangible and intangible assets and liabilities that exist as of the datesdate of completion of the acquisitions.acquisition. Consequently, amounts preliminarily allocated to identifiable tangible and intangible assets and liabilities could change significantly from those used in the unaudited pro forma condensed consolidated financial statements and could result in a material change in depreciation and amortization of tangible and intangible assets and liabilities.
The completion of the valuations,valuation, the allocationsallocation of purchase price, the impact of ongoing integration activities, the timing of completion of the acquisitionsacquisition and other changes in tangible and intangible assets and liabilities that occur prior to completion of the acquisitionsacquisition could cause material differences in the information presented.
VENTAS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 2010
(In thousands)
| | Ventas Historical | Atria Historical(A) | One Lantern Historical(B) | Atria and One Lantern Acquisition Adjustments(C) | Ventas Pro Forma for the Atria and One Lantern Acquisition | NHP Historical(D) | NHP Acquisition Adjustments(E) | Total Pro Forma | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets: | |||||||||||||||||||||||||||
Net real estate investments | $ | 5,444,114 | $ | 1,053,595 | $ | 721,489 | $ | 1,483,572 | (F) | $ | 8,702,770 | $ | 3,861,512 | $ | 3,548,347 | (O) | $ | 16,112,629 | |||||||||
Cash and cash equivalents | 21,812 | 143,833 | 27,858 | (104,333 | )(G) | 89,170 | 59,591 | 749 | (P) | 149,510 | |||||||||||||||||
Escrow deposits and restricted cash | 38,940 | 29,142 | 33,250 | (13,320 | )(G) | 88,012 | 7,285 | (4,202 | )(Q) | 91,095 | |||||||||||||||||
Deferred financing costs, net | 19,533 | 11,384 | 4,064 | (15,448 | )(H) | 19,533 | 8,566 | (8,566 | )(H) | 19,533 | |||||||||||||||||
Other | 233,622 | 121,132 | 9,940 | (52,276 | )(I) | 312,418 | 155,670 | 48,133 | (R) | 516,221 | |||||||||||||||||
Total assets | $ | 5,758,021 | $ | 1,359,086 | $ | 796,601 | $ | 1,298,195 | $ | 9,211,903 | $ | 4,092,624 | $ | 3,584,461 | $ | 16,888,988 | |||||||||||
Liabilities and equity: | |||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||
Senior notes payable and other debt | $ | 2,900,044 | $ | 1,067,521 | $ | 661,519 | $ | (51,229) | (J) | $ | 4,577,855 | $ | 1,529,257 | $ | (63,682 | )(S) | $ | 6,043,430 | |||||||||
Accrued interest | 19,296 | 555 | 5,229 | (418 | )(G) | 24,662 | 23,728 | (137 | )(Q) | 48,253 | |||||||||||||||||
Accounts payable and other liabilities | 207,143 | 78,157 | 45,916 | 12,422 | (K) | 343,638 | 127,341 | 401,623 | (T) | 872,602 | |||||||||||||||||
Deferred income taxes | 241,333 | 28,642 | — | 11,221 | (L) | 281,196 | — | — | 281,196 | ||||||||||||||||||
Total liabilities | 3,367,816 | 1,174,875 | 712,664 | (28,004 | ) | 5,227,351 | 1,680,326 | 337,804 | 7,245,481 | ||||||||||||||||||
Redeemable OP unitholder interests | — | — | — | — | — | 79,188 | 18,742 | (U) | 97,930 | ||||||||||||||||||
Commitments and contingencies | |||||||||||||||||||||||||||
Equity: | |||||||||||||||||||||||||||
Total stockholders' equity | 2,386,726 | 184,211 | 49,149 | 1,360,987 | (M) | 3,981,073 | 2,299,827 | 3,145,043 | (V) | 9,425,943 | |||||||||||||||||
Noncontrolling interest | 3,479 | — | 34,788 | (34,788 | )(N) | 3,479 | 33,283 | 82,872 | (W) | 119,634 | |||||||||||||||||
Total equity | 2,390,205 | 184,211 | 83,937 | 1,326,199 | 3,984,552 | 2,333,110 | 3,227,915 | 9,545,577 | |||||||||||||||||||
Total liabilities and equity | $ | 5,758,021 | $ | 1,359,086 | $ | 796,601 | $ | 1,298,195 | $ | 9,211,903 | $ | 4,092,624 | $ | 3,584,461 | $ | 16,888,988 | |||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
VENTAS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 2010
(In thousands, except per share amounts)
| | Ventas Historical | Ventas 2010 Transactions Adjustments(X) | Pro Forma for Ventas 2010 Transactions | Atria Historical(A) | One Lantern Historical(B) | Atria and One Lantern Acquisition Adjustments(C) | Ventas Pro Forma for the Atria and One Lantern Acquisition | NHP Historical(D) | NHP 2010 Transactions Adjustments(X) | Pro Forma for NHP 2010 Transactions | NHP Acquisition Adjustments(E) | Total Pro Forma | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues: | |||||||||||||||||||||||||||||||||||||||
Rental income: | |||||||||||||||||||||||||||||||||||||||
Triple-net leased | $ | 469,825 | $ | 260 | $ | 470,085 | $ | — | $ | — | $ | — | $ | 470,085 | $ | 307,567 | $ | 20,845 | $ | 328,412 | $ | 13,464 | (EE) | $ | 811,961 | ||||||||||||||
Medical office buildings | 69,747 | 25,949 | 95,696 | — | — | — | 95,696 | 102,287 | 12,376 | 114,663 | (2,398 | )(FF) | 207,961 | ||||||||||||||||||||||||||
| 539,572 | 26,209 | 565,781 | — | — | — | 565,781 | 409,854 | 33,221 | 443,075 | 11,066 | 1,019,922 | ||||||||||||||||||||||||||||
Resident fees and services | 446,301 | 1,619 | 447,920 | 466,773 | 165,463 | (33,316 | )(Y) | 1,046,840 | — | — | — | — | 1,046,840 | ||||||||||||||||||||||||||
Medical office building services revenue | 14,098 | 14,098 | 28,196 | — | — | — | 28,196 | — | — | — | — | 28,196 | |||||||||||||||||||||||||||
Income from loans and investments | 16,412 | 1,024 | 17,436 | — | — | — | 17,436 | 26,402 | 5,678 | 32,080 | (100 | )(GG) | 49,416 | ||||||||||||||||||||||||||
Interest and other income | 484 | 19 | 503 | 77,789 | 820 | (78,318 | )(Y) | 794 | 2,977 | (1 | ) | 2,976 | — | 3,770 | |||||||||||||||||||||||||
Total revenues | 1,016,867 | 42,969 | 1,059,836 | 544,562 | 166,283 | (111,634 | ) | 1,659,047 | 439,233 | 38,898 | 478,131 | 10,966 | 2,148,144 | ||||||||||||||||||||||||||
Expenses: | |||||||||||||||||||||||||||||||||||||||
Interest | 178,863 | 9,178 | 188,041 | 71,604 | 47,236 | (47,508 | )(Z) | 259,373 | 97,329 | (3,329 | ) | 94,000 | (38,266 | )(HH) | 315,107 | ||||||||||||||||||||||||
Depreciation and amortization | 205,600 | 14,845 | 220,445 | 52,138 | 22,663 | 109,093 | (AA) | 404,339 | 134,522 | 18,276 | 152,798 | 108,859 | (II) | 665,996 | |||||||||||||||||||||||||
Property-level operating expenses: | |||||||||||||||||||||||||||||||||||||||
Senior living | 291,831 | 1,443 | 293,274 | 395,796 | 109,277 | (75,565 | )(BB) | 722,782 | — | — | — | (3,039 | )(Q) | 719,743 | |||||||||||||||||||||||||
Medical office buildings | 24,122 | 9,783 | 33,905 | — | — | — | 33,905 | 39,536 | 2,432 | 41,968 | — | 75,873 | |||||||||||||||||||||||||||
| 315,953 | 11,226 | 327,179 | 395,796 | 109,277 | (75,565 | ) | 756,687 | 39,536 | 2,432 | 41,968 | (3,039 | ) | 795,616 | ||||||||||||||||||||||||||
Medical office building services costs | 9,518 | 9,518 | 19,036 | — | — | — | 19,036 | — | — | — | — | 19,036 | |||||||||||||||||||||||||||
General, administrative and professional fees | 49,830 | 7,981 | 57,811 | 47,558 | 749 | (48,307 | )(Y) | 57,811 | 31,057 | — | 31,057 | — | 88,868 | ||||||||||||||||||||||||||
Foreign currency loss | 272 | — | 272 | — | — | — | 272 | — | — | — | — | 272 | |||||||||||||||||||||||||||
Loss (gain) on extinguishment of debt | 9,791 | — | 9,791 | 2 | — | (2 | )(Y) | 9,791 | (75 | ) | — | (75 | ) | 75 | (JJ) | 9,791 | |||||||||||||||||||||||
Other | — | — | — | 6,009 | 19,607 | (85 | )(Y) | 25,531 | — | — | — | — | 25,531 | ||||||||||||||||||||||||||
Merger related expenses and deal costs | 19,243 | — | 19,243 | — | — | — | 19,243 | 5,118 | — | 5,118 | — | 24,361 | |||||||||||||||||||||||||||
Total expenses | 789,070 | 52,748 | 841,818 | 573,107 | 199,532 | (62,374 | ) | 1,552,083 | 307,487 | 17,379 | 324,866 | 67,629 | 1,944,578 | ||||||||||||||||||||||||||
Income (loss) before (loss) income from unconsolidated entities, income taxes, discontinued operations and noncontrolling interest | 227,797 | (9,779 | ) | 218,018 | (28,545 | ) | (33,249 | ) | (49,260 | ) | 106,964 | 131,746 | 21,519 | 153,265 | (56,663 | ) | 203,566 | ||||||||||||||||||||||
(Loss) income from unconsolidated entities | (664 | ) | (664 | ) | (1,328 | ) | — | 130 | (130 | )(Y) | (1,328 | ) | 5,478 | (12 | ) | 5,466 | (869 | )(KK) | 3,269 | ||||||||||||||||||||
Income tax (expense) benefit | (5,201 | ) | (39 | ) | (5,240 | ) | 7,560 | — | 32,303 | (CC) | 34,623 | — | — | — | — | 34,623 | |||||||||||||||||||||||
Income (loss) from continuing operations | 221,932 | (10,482 | ) | 211,450 | (20,985 | ) | (33,119 | ) | (17,087 | ) | 140,259 | 137,224 | 21,507 | 158,731 | (57,532 | ) | 241,458 | ||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interest | 3,562 | (3,616 | ) | (54 | ) | — | (5,907 | ) | 5,907 | (N) | (54 | ) | (1,643 | ) | (317 | ) | (1,960 | ) | (3,165 | )(KK) | (5,179 | ) | |||||||||||||||||
Income (loss) from continuing operations attributable to common stockholders | $ | 218,370 | $ | (6,866 | ) | $ | 211,504 | $ | (20,985 | ) | $ | (27,212 | ) | $ | (22,994 | ) | $ | 140,313 | $ | 138,867 | $ | 21,824 | $ | 160,691 | $ | (54,367 | ) | $ | 246,637 | ||||||||||
Income from continuing operations attributable to common stockholders per common share: | |||||||||||||||||||||||||||||||||||||||
Basic | $ | 1.39 | n/a | $ | 1.35 | n/a | n/a | n/a | $ | 0.75 | $ | 1.14 | n/a | $ | 1.27 | n/a | $ | 0.86 | |||||||||||||||||||||
Diluted | $ | 1.38 | n/a | $ | 1.34 | n/a | n/a | n/a | $ | 0.75 | $ | 1.12 | n/a | $ | 1.24 | n/a | $ | 0.85 | |||||||||||||||||||||
Shares used in computing earnings per common share: | |||||||||||||||||||||||||||||||||||||||
Basic | 156,608 | — | 156,608 | n/a | n/a | 30,522 | (DD) | 187,130 | 121,687 | 4,782 | 126,469 | 99,481 | (LL) | 286,611 | |||||||||||||||||||||||||
Diluted | 157,657 | — | 157,657 | n/a | n/a | 30,522 | (DD) | 188,179 | 124,339 | 4,782 | 129,121 | 101,567 | (LL) | 289,746 | |||||||||||||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.presented herein.
VENTAS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2014
(In thousands)
| | Ventas Historical | HCT Historical (A) | HCT Acquisition Adjustments (B) | | Total Pro Forma | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets | |||||||||||||||
Net real estate investments | $ | 19,421,537 | $ | 2,055,108 | $ | 666,993 | (C) | $ | 22,143,638 | ||||||
Cash and cash equivalents | 64,595 | 33,452 | — | 98,047 | |||||||||||
Escrow deposits and restricted cash | 78,746 | 3,135 | — | 81,881 | |||||||||||
Deferred financing costs, net | 64,898 | 17,735 | (17,735 | ) | (D) | 64,898 | |||||||||
Other assets | 1,021,389 | 38,907 | 149,205 | (E) | 1,209,501 | ||||||||||
| | | | | | | | | | | | | | | | |
Total assets | $ | 20,651,165 | $ | 2,148,337 | $ | 798,463 | $ | 23,597,965 | |||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Liabilities and equity | |||||||||||||||
Liabilities: | |||||||||||||||
Senior notes payable and other debt | $ | 10,469,106 | $ | 926,843 | $ | 199,601 | (F) | $ | 11,595,550 | ||||||
Accrued interest | 69,112 | 1,581 | — | 70,693 | |||||||||||
Accounts payable and other liabilities | 965,240 | 98,072 | (34,849 | ) | (G) | 1,028,463 | |||||||||
Deferred income taxes | 361,454 | — | — | 361,454 | |||||||||||
| | | | | | | | | | | | | | | | |
Total liabilities | 11,864,912 | 1,026,496 | 164,752 | 13,056,160 | |||||||||||
Redeemable OP unitholder and noncontrolling interests | 163,080 | — | 79,959 | (H) | 243,039 | ||||||||||
Commitments and contingencies | |||||||||||||||
Equity: | |||||||||||||||
Total Ventas stockholders' equity | 8,548,796 | 1,110,084 | 565,509 | (I) | 10,224,389 | ||||||||||
Noncontrolling interest | 74,377 | 11,757 | (11,757 | ) | (J) | 74,377 | |||||||||
| | | | | | | | | | | | | | | | |
Total equity | 8,623,173 | 1,121,841 | 553,752 | 10,298,766 | |||||||||||
| | | | | | | | | | | | | | | | |
Total liabilities and equity | $ | 20,651,165 | $ | 2,148,337 | $ | 798,463 | $ | 23,597,965 | |||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
VENTAS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the nine months ended September 30, 2014
(In thousands, except per share amounts)
| | Ventas Historical | Ventas 2014 Transactions Adjustments (K) | Pro Forma for Ventas 2014 Transactions | HCT Historical (A) | HCT 2014 Transactions Adjustments (K) | Pro Forma for HCT 2014 Transactions | HCT Acquisition Adjustments (B) | | Total Pro Forma | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues: | |||||||||||||||||||||||||||
Rental income: | |||||||||||||||||||||||||||
Triple-net leased | $ | 724,778 | $ | 14,295 | $ | 739,073 | $ | 23,562 | $ | 6,294 | $ | 29,856 | $ | 196 | (L) | $ | 769,125 | ||||||||||
Medical office buildings | 346,711 | (209 | ) | 346,502 | 74,076 | 1,776 | 75,852 | (277 | ) | (L) | 422,077 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1,071,489 | 14,086 | 1,085,575 | 97,638 | 8,070 | 105,708 | (81 | ) | 1,191,202 | |||||||||||||||||||
Resident fees and services | 1,141,781 | 86,675 | 1,228,456 | 96,120 | 19,179 | 115,299 | — | 1,343,755 | |||||||||||||||||||
Medical office building and other services revenue | 18,240 | — | 18,240 | — | — | — | — | 18,240 | |||||||||||||||||||
Income from loans and investments | 39,435 | 2,313 | 41,748 | 986 | — | 986 | (18 | ) | (M) | 42,716 | |||||||||||||||||
Interest and other income | 814 | (2 | ) | 812 | — | — | — | — | 812 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | 2,271,759 | 103,072 | 2,374,831 | 194,744 | 27,249 | 221,993 | (99 | ) | 2,596,725 | ||||||||||||||||||
Expenses: | |||||||||||||||||||||||||||
Interest | 277,811 | 31,229 | 309,040 | 20,593 | 359 | 20,952 | (4,013 | ) | (N) | 325,979 | |||||||||||||||||
Depreciation and amortization | 585,636 | 45,158 | 630,794 | 93,262 | 12,440 | 105,702 | (25,971 | ) | (O) | 710,525 | |||||||||||||||||
Property-level operating expenses: | |||||||||||||||||||||||||||
Senior living | 762,993 | 43,700 | 806,693 | 69,773 | 12,853 | 82,626 | — | 889,319 | |||||||||||||||||||
Medical office buildings | 119,827 | (39 | ) | 119,788 | 15,713 | 487 | 16,200 | — | 135,988 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 882,820 | 43,661 | 926,481 | 85,486 | 13,340 | 98,826 | — | 1,025,307 | ||||||||||||||||||||
Medical office building services costs | 9,565 | — | 9,565 | — | — | — | — | 9,565 | |||||||||||||||||||
General, administrative and professional fees | 93,638 | (23 | ) | 93,615 | 6,743 | — | 6,743 | — | 100,358 | ||||||||||||||||||
Loss on extinguishment of debt, net | 5,079 | (243 | ) | 4,836 | — | — | — | — | 4,836 | ||||||||||||||||||
Merger-related expenses and deal costs | 37,108 | (8,893 | ) | 28,215 | 36,144 | (8,159 | ) | 27,985 | — | 56,200 | |||||||||||||||||
Other | 25,321 | — | 25,321 | 69,317 | — | 69,317 | (69,317 | ) | (P) | 25,321 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | 1,916,978 | 110,889 | 2,027,867 | 311,545 | 17,980 | 329,525 | (99,301 | ) | 2,258,091 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) before income from unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interest | 354,781 | (7,817 | ) | 346,964 | (116,801 | ) | 9,269 | (107,532 | ) | 99,202 | 338,634 | ||||||||||||||||
Income from unconsolidated entities | 549 | (218 | ) | 331 | — | — | — | — | 331 | ||||||||||||||||||
Income tax (expense) benefit | (4,820 | ) | 6,066 | 1,246 | (1,131 | ) | — | (1,131 | ) | 1,102 | (Q) | 1,217 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations | 350,510 | (1,969 | ) | 348,541 | (117,932 | ) | 9,269 | (108,663 | ) | 100,304 | 340,182 | ||||||||||||||||
Gain (loss) on real estate dispositions | 16,514 | (17,508 | ) | (994 | ) | — | — | — | — | (994 | ) | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations, including real estate dispositions | 367,024 | (19,477 | ) | 347,547 | (117,932 | ) | 9,269 | (108,663 | ) | 100,304 | 339,188 | ||||||||||||||||
Net income (loss) attributable to noncontrolling interest | 964 | 219 | 1,183 | (1,487 | ) | — | (1,487 | ) | 1,487 | (R) | 1,183 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions | $ | 366,060 | $ | (19,696 | ) | $ | 346,364 | $ | (116,445 | ) | $ | 9,269 | $ | (107,176 | ) | $ | 98,817 | $ | 338,005 | ||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations attributable to common stockholders per common share, including real estate dispositions: | |||||||||||||||||||||||||||
Basic | $ | 1.24 | $ | — | $ | 1.18 | $ | (0.66 | ) | $ | — | $ | (0.61 | ) | N/A | $ | 1.06 | ||||||||||
Diluted | $ | 1.23 | $ | — | $ | 1.17 | $ | (0.66 | ) | $ | — | $ | (0.61 | ) | N/A | $ | 1.05 | ||||||||||
Weighted average shares used in computing earnings per common share: | |||||||||||||||||||||||||||
Basic | 293,965 | — | 293,965 | 175,234 | — | 175,234 | 25,723 | (S) | 319,688 | ||||||||||||||||||
Diluted | 296,411 | — | 296,411 | 175,234 | — | 175,234 | 26,914 | (S) | 323,325 | ||||||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
VENTAS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 2013
(In thousands, except per share amounts)
| | Ventas Historical | Ventas 2014 and 2013 Transactions Adjustments (K) | Pro Forma for Ventas 2014 and 2013 Transactions | HCT Historical (A) | HCT 2014 and 2013 Transactions Adjustments (K) | Pro Forma for HCT 2014 and 2013 Transactions | HCT Acquisition Adjustments (B) | | Total Pro Forma | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues: | ||||||||||||||||||||||||||||
Rental income: | ||||||||||||||||||||||||||||
Triple-net leased | $ | 875,877 | $ | 70,099 | $ | 945,976 | $ | 12,880 | $ | 27,926 | $ | 40,806 | $ | 261 | (L | ) | $ | 987,043 | ||||||||||
Medical office buildings | 450,107 | 5,957 | 456,064 | 64,075 | 35,182 | 99,257 | (306 | ) | (L | ) | 555,015 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1,325,984 | 76,056 | 1,402,040 | 76,955 | 63,108 | 140,063 | (45 | ) | 1,542,058 | ||||||||||||||||||||
Resident fees and services | 1,406,005 | 198,938 | 1,604,943 | 47,698 | 102,132 | 149,830 | — | 1,754,773 | ||||||||||||||||||||
Medical office building and other services revenue | 17,809 | 596 | 18,405 | — | — | — | — | 18,405 | ||||||||||||||||||||
Income from loans and investments | 58,208 | (3,233 | ) | 54,975 | 569 | — | 569 | (13 | ) | (M | ) | 55,531 | ||||||||||||||||
Interest and other income | 2,047 | 1 | 2,048 | 89 | — | 89 | — | 2,137 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | 2,810,053 | 272,358 | 3,082,411 | 125,311 | 165,240 | 290,551 | (58 | ) | 3,372,904 | |||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||
Interest | 334,484 | 70,127 | 404,611 | 15,843 | 3,978 | 19,821 | 1,453 | (N | ) | 425,885 | ||||||||||||||||||
Depreciation and amortization | 721,959 | 117,354 | 839,313 | 67,456 | 84,176 | 151,632 | (1,924 | ) | (O | ) | 989,021 | |||||||||||||||||
Property-level operating expenses: | ||||||||||||||||||||||||||||
Senior living | 956,684 | 104,957 | 1,061,641 | 33,151 | 64,703 | 97,854 | — | 1,159,495 | ||||||||||||||||||||
Medical office buildings | 152,948 | 3,069 | 156,017 | 12,814 | 6,132 | 18,946 | — | 174,963 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1,109,632 | 108,026 | 1,217,658 | 45,965 | 70,835 | 116,800 | — | 1,334,458 | |||||||||||||||||||||
Medical office building services costs | 8,315 | — | 8,315 | — | — | — | — | 8,315 | ||||||||||||||||||||
General, administrative and professional fees | 115,106 | (22 | ) | 115,084 | 4,089 | — | 4,089 | — | 119,173 | |||||||||||||||||||
Loss on extinguishment of debt, net | 1,201 | 243 | 1,444 | — | — | — | — | 1,444 | ||||||||||||||||||||
Merger-related expenses and deal costs | 21,634 | (7,276 | ) | 14,358 | 13,606 | (15,239 | ) | (1,633 | ) | — | 12,725 | |||||||||||||||||
Other | 18,732 | — | 18,732 | — | — | — | — | 18,732 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | 2,331,063 | 288,452 | 2,619,515 | 146,959 | 143,750 | 290,709 | (471 | ) | 2,909,753 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) before loss from unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interest | 478,990 | (16,094 | ) | 462,896 | (21,648 | ) | 21,490 | (158 | ) | 413 | 463,151 | |||||||||||||||||
Loss from unconsolidated entities | (508 | ) | 493 | (15 | ) | — | — | — | — | (15 | ) | |||||||||||||||||
Income tax benefit (expense) | 11,828 | 10,691 | 22,519 | (524 | ) | — | (524 | ) | 17,296 | (Q | ) | 39,291 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations | 490,310 | (4,910 | ) | 485,400 | (22,172 | ) | 21,490 | (682 | ) | 17,709 | 502,427 | |||||||||||||||||
Gain on real estate dispositions | — | 17,508 | 17,508 | — | — | — | — | 17,508 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations, including real estate dispositions | 490,310 | 12,598 | 502,908 | (22,172 | ) | 21,490 | (682 | ) | 17,709 | 519,935 | ||||||||||||||||||
Net income attributable to noncontrolling interest | 1,380 | 465 | 1,845 | 58 | — | 58 | (58 | ) | (R | ) | 1,845 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions | $ | 488,930 | $ | 12,133 | $ | 501,063 | $ | (22,230 | ) | $ | 21,490 | $ | (740 | ) | $ | 17,767 | $ | 518,090 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations attributable to common stockholders per common share, including real estate dispositions: | ||||||||||||||||||||||||||||
Basic | $ | 1.67 | $ | — | $ | 1.71 | $ | (0.15 | ) | $ | — | $ | (0.00 | ) | N/A | $ | 1.63 | |||||||||||
Diluted | $ | 1.66 | $ | — | $ | 1.70 | $ | (0.15 | ) | $ | — | $ | (0.00 | ) | N/A | $ | 1.61 | |||||||||||
Weighted average shares used in computing earnings per common share: | ||||||||||||||||||||||||||||
Basic | 292,654 | — | 292,654 | 151,684 | — | 151,684 | 25,723 | (S | ) | 318,377 | ||||||||||||||||||
Diluted | 295,110 | — | 295,110 | 151,684 | — | 151,684 | 26,914 | (S | ) | 322,024 | ||||||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
VENTAS, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—BASIS OF PRO FORMA PRESENTATION
Ventas is a REIT with a geographically diverse portfolio of seniors housing and healthcare properties in the United States, Canada and Canada.the United Kingdom. The historical consolidated financial statements of Ventas include the accounts of Ventas and its wholly owned subsidiaries and joint venture entities over which it exercises control.
On October 22, 2010,June 2, 2014, Ventas announced that it had entered into a definitive agreement to acquire 118 private pay seniors housing communities owned and/or operated by Atria (including assets owned by Atria's affiliate, One Lantern) from funds affiliated with LREP for a purchase priceall of approximately $3 billion, comprisedthe outstanding shares of $1.35 billion in Ventas common stock (a fixed 24.96 million shares based on Ventas's 10-day volume weighted average price as of October 20, 2010 of $54.09), $150 million in cash and the assumption or repayment of approximately $1.6 billion of debt and capital lease obligations, less assumed cash.
On February 28, 2011, Ventas announced that it had entered into a definitive agreement to acquire NHPHCT in a stock-for-stockstock and cash transaction valued at approximately $7 billion. Under$2.9 billion, or $11.33 per HCT share, including investments expected to be made by HCT prior to the termsacquisition, substantially all of the agreement, in the merger, NHP stockholders will receive a fixed exchange ratio of 0.7866 shares of Ventas common stock for each share of NHP common stock they own.which have now been completed.
NOTE 2—ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
Equity to be issued (24.96 million shares at $54.09 per share)(1) | $ | 1,350 | ||
Cash to be paid (assumed to be funded with borrowings from Ventas's unsecured revolving credit facilities) | 150 | |||
Assumption or repayment of net debt, including capital lease obligations | 1,626 | |||
Purchase price | $ | 3,126 | ||
Equity to be issued (26.9 million shares at $67.13 per share) | $ | 1,806 | ||
Cash to be paid (assumed to be funded with borrowings under Ventas's unsecured revolving credit facility) | 192 | |||
Assumption or repayment of net debt | 930 | |||
| | | | | |
Estimated purchase price | $ | 2,928 | ||
| | | | | |
| | | | | |
Land and improvements | $ | 333 | ||
Buildings and improvements | 2,174 | |||
Acquired lease intangibles | 215 | |||
| | | | | |
Estimated fair value of net real estate investments | $ | 2,722 | ||
| | | | | |
| | | | | |
VENTAS, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 2—ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
Equity to be issued (126.3 million shares of NHP common stock and 2.2 million Class A limited partnership units at $44.99 per share)(1) | $ | 5,778 | ||
Assumption of debt(2) | 1,614 | |||
Purchase price | $ | 7,392 | ||
Write-off of HCT's historical fair value of debt adjustments | $ | (4 | ) | |
Fair value of debt adjustment recorded in connection with the acquisition | 11 | |||
HCT debt anticipated to be repaid at closing | (620 | ) | ||
Anticipated borrowings under Ventas's unsecured revolving credit facility | 812 | |||
| | | | | |
Pro forma adjustment to debt | $ | 199 | ||
| | | | | |
| | | | | |
Land | $ | 608 | ||
Buildings and improvements | 2,470 | |||
Acquired lease intangibles | 125 | |||
Construction in progress | 55 | |||
Estimated value of net real estate investments | $ | 3,258 | ||
NOTE 3—ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
VENTAS, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 2—3—ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETSTATEMENTS OF INCOME (Continued)
Write-off Atria's and One Lantern's historical fair market value of debt adjustment | $ | 29 | ||
Fair market value of debt adjustment recorded in connection with the acquisition | 49 | |||
Debt not assumed as part of the acquisition included in the historical consolidated financial information | (58 | ) | ||
Net adjustment allocated for the acquired capital lease obligations | 26 | |||
Atria and/or One Lantern debt anticipated to be repaid at closing | (176 | ) | ||
Anticipated borrowings on unsecured revolving credit facility(1) | 386 | |||
Ventas debt repaid with proceeds from its February 2011 equity issuance | (307 | ) | ||
Pro forma adjustment to debt | $ | (51 | ) | |
| | For the Nine Months Ended September 30, 2014 | For the Year Ended December 31, 2013 | |||||
|---|---|---|---|---|---|---|---|
Write-off of HCT's historical fair value of debt adjustments | $ | 1 | $ | 1 | |||
Fair value of debt adjustment recorded in connection with the acquisition | (2 | ) | (4 | ) | |||
HCT debt anticipated to be repaid at closing | (5 | ) | (1 | ) | |||
Anticipated borrowings under Ventas's unsecured revolving credit facility | 7 | 10 | |||||
Write-off of HCT's deferred financing costs | (5 | ) | (4 | ) | |||
| | | | | | | | |
Pro forma adjustment to interest expense | $ | (4 | ) | $ | 2 | ||
| | | | | | | | |
| | | | | | | | |
| HCT Acquisition Adjustments | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | Weighted Average Useful Life (Years) | For the Nine Months Ended September 30, 2014 | For the Year Ended December 31, 2013 | |||||||
Elimination of HCT's historical and pro forma depreciation and amortization | N/A | $ | (105,702 | ) | $ | (151,632 | ) | |||
Ventas's HCT Acquisition Adjustments for depreciation and amortization, by asset type: | ||||||||||
Site improvements | 9.1 | 6,647 | 8,863 | |||||||
Building and improvements | 33.4 | 52,185 | 69,580 | |||||||
Furniture and equipment | 5.0 | 4,878 | 6,504 | |||||||
In-place lease intangibles | 6.3 | 16,021 | 64,761 | |||||||
| | | | | | | | | | | |
Total | N/A | 79,731 | 149,708 | |||||||
| | | | | | | | | | | |
Adjustment for depreciation and amortization | N/A | $ | (25,971 | ) | $ | (1,924 | ) | |||
| | | | | | | | | | | |
| | | | | | | | | | | |
VENTAS, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 2—3—ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETSTATEMENTS OF INCOME (Continued)
Land | $ | 1,287 | ||
Buildings and improvements | 5,653 | |||
Acquired lease intangibles | 418 | |||
Construction in progress | 18 | |||
Loans receivable | 310 | |||
Investments in unconsolidated entities | 85 | |||
Elimination of Atria and One Lantern assets leased from NHP that were classified as capital lease assets | (361 | ) | ||
Pro forma adjustment to net real estate investments | $ | 7,410 | ||
Fair market value of debt adjustment allocated for the acquisition | $ | 66 | ||
Borrowings on unsecured revolving credit facility for estimated transaction costs to be paid related to the NHP acquisition | 100 | |||
Elimination of promissory note between Atria and NHP | (23 | ) | ||
Elimination of capital lease obligations between Atria, One Lantern and NHP | (207 | ) | ||
Pro forma adjustment to debt | $ | (64 | ) | |
VENTAS, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 2—ADJUSTMENTS TO 4—FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS (Continued)
Ventas's historical and pro forma FFO and normalized FFO for the nine months ended September 30, 2014 and the year ended December 31, 2013 are summarized as follows (in thousands):
VENTAS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
$434.8 million of various lease intangibles, which primarily include below market operating lease intangibles, all of which are based onFFO AND NORMALIZED FFO
For the preliminary fair value calculations.
NOTE 3—VENTAS AND NHP 2010 TRANSACTIONS ADJUSTMENTS
NOTE 4—ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOMEamounts)
| | Ventas Historical | Ventas 2014 Transactions Adjustments | Pro Forma for Ventas 2014 Transactions | HCT Historical | HCT 2014 Transactions Adjustments | Pro Forma for HCT 2014 Transactions | HCT Acquisition Adjustments | Total Pro Forma | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions | $ | 366,060 | $ | (19,696 | ) | $ | 346,364 | $ | (116,445 | ) | $ | 9,269 | $ | (107,176 | ) | $ | 98,817 | $ | 338,005 | ||||||
Discontinued operations | 2,517 | (3,738 | ) | (1,221 | ) | — | — | — | — | (1,221 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) attributable to common stockholders | 368,577 | (23,434 | ) | 345,143 | (116,445 | ) | 9,269 | (107,176 | ) | 98,817 | 336,784 | ||||||||||||||
Adjustments: | |||||||||||||||||||||||||
Real estate depreciation and amortization | 580,879 | 45,158 | 626,037 | 93,077 | 12,440 | 105,517 | (25,971 | ) | 705,583 | ||||||||||||||||
Real estate depreciation related to noncontrolling interest | (7,808 | ) | — | (7,808 | ) | — | — | — | — | (7,808 | ) | ||||||||||||||
Real estate depreciation related to unconsolidated entities | 4,460 | — | 4,460 | — | — | — | — | 4,460 | |||||||||||||||||
(Gain) loss on real estate dispositions | (16,514 | ) | 17,508 | 994 | — | — | — | — | 994 | ||||||||||||||||
Discontinued operations: | |||||||||||||||||||||||||
Gain on real estate dispositions | (1,442 | ) | 1,037 | (405 | ) | — | — | — | — | (405 | ) | ||||||||||||||
Depreciation on real estate assets | 1,540 | (352 | ) | 1,188 | — | — | — | — | 1,188 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
FFO | 929,692 | 39,917 | 969,609 | (23,368 | ) | 21,709 | (1,659 | ) | 72,846 | 1,040,796 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||||
Change in fair value of financial instruments | 4,636 | — | 4,636 | — | — | — | — | 4,636 | |||||||||||||||||
Non-cash income tax expense (benefit) | 4,420 | (6,066 | ) | (1,646 | ) | 1,131 | — | 1,131 | (1,102 | ) | (1,617 | ) | |||||||||||||
Loss on extinguishment of debt, net | 4,528 | (243 | ) | 4,285 | — | — | — | — | 4,285 | ||||||||||||||||
Merger-related expenses, deal costs and re-audit costs | 43,764 | (8,893 | ) | 34,871 | 36,144 | (8,159 | ) | 27,985 | — | 62,856 | |||||||||||||||
Amortization of other intangibles | 766 | — | 766 | — | — | — | — | 766 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Normalized FFO | $ | 987,806 | $ | 24,715 | $ | 1,012,521 | $ | 13,907 | $ | 13,550 | $ | 27,457 | $ | 71,744 | $ | 1,111,722 | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
VENTAS, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4—ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOMEFUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS (Continued)
Ventas's historical and pro forma FFO and normalized FFO per diluted share outstanding for the following adjustmentsnine months ended September 30, 2014 follows (in millions)thousands, except per share amounts)(1):
| | Ventas Historical | Total Pro Forma | |||||
|---|---|---|---|---|---|---|---|
Income from continuing operations attributable to common stockholders, including real estate dispositions | $ | 1.23 | $ | 1.05 | |||
Discontinued operations | 0.01 | (0.00 | ) | ||||
| | | | | | | | |
Net income attributable to common stockholders | 1.24 | 1.04 | |||||
Adjustments: | |||||||
Real estate depreciation and amortization | 1.96 | 2.18 | |||||
Real estate depreciation related to noncontrolling interest | (0.03 | ) | (0.02 | ) | |||
Real estate depreciation related to unconsolidated entities | 0.02 | 0.01 | |||||
(Gain) loss on real estate dispositions | (0.06 | ) | 0.00 | ||||
Discontinued operations: | |||||||
Gain on real estate dispositions | (0.00 | ) | (0.00 | ) | |||
Depreciation on real estate assets | 0.01 | 0.00 | |||||
| | | | | | | | |
FFO | 3.14 | 3.22 | |||||
Adjustments: | |||||||
Change in fair value of financial instruments | 0.02 | 0.01 | |||||
Non-cash income tax expense (benefit) | 0.01 | (0.01 | ) | ||||
Loss on extinguishment of debt, net | 0.02 | 0.01 | |||||
Merger-related expenses, deal costs and re-audit costs | 0.15 | 0.19 | |||||
Amortization of other intangibles | 0.00 | 0.00 | |||||
| | | | | | | | |
Normalized FFO | $ | 3.33 | $ | 3.44 | |||
| | | | | | | | |
| | | | | | | | |
Dilutive shares outstanding used in computing FFO and normalized FFO per common share | 296,411 | 323,325 | |||||
| | For the Year Ended December 31, 2010 | |||
|---|---|---|---|---|
Elimination of historical interest expense on debt not assumed as part of the acquisition | $ | (5 | ) | |
Fair market value of debt adjustment allocated for the acquisition | (14 | ) | ||
Elimination of historical interest related to Atria and/or One Lantern deferred financing fees | (4 | ) | ||
Elimination of Atria's and/or One Lantern's historical interest expense on debt anticipated to be repaid at closing | (13 | ) | ||
Additional interest expense on borrowings on unsecured revolving credit facility | 13 | |||
Ventas debt repaid with proceeds from its February 2011 equity issuance | (19 | ) | ||
Net adjustment allocated for the acquired capital lease obligations | (5 | ) | ||
Pro forma adjustment to interest | $ | (47 | ) | |
VENTAS, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4—ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)
| | For the Year Ended December 31, 2010 | |||
|---|---|---|---|---|
Fair market value of debt adjustment allocated for the acquisition | $ | (26 | ) | |
Elimination of historical interest expense related to NHP deferred financing fees | (4 | ) | ||
Elimination of interest expense from a promissory note between Atria and NHP | (1 | ) | ||
Elimination of Atria and One Lantern capital lease obligation interest | (10 | ) | ||
Additional interest on borrowings on unsecured revolving credit facility | 3 | |||
Pro forma adjustment to interest | $ | (38 | ) | |
VENTAS, INC.NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (Continued)(Unaudited)
NOTE 5—FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS (Continued)
Ventas's historical and pro forma
VENTAS, INC.
UNAUDITED PRO FORMA FFO and normalizedAND NORMALIZED FFO for
For the year ended December 31, 2010 are summarized as follows (in thousands):2013
(In thousands, except per share amounts)
| | | Ventas Historical | Ventas 2010 Transactions Adjustments(X) | Pro Forma for Ventas 2010 Transactions | Atria Historical(A) | One Lantern Historical(B) | Atria and One Lantern Acquisition Adjustments(C) | Ventas Pro Forma for the Atria and One Lantern Acquisition | NHP Historical(D) | NHP 2010 Transactions Adjustments(X) | Pro Forma for NHP 2010 Transactions | NHP Acquisition Adjustments(E) | Total Pro Forma | Ventas Historical | Ventas 2014 and 2013 Transactions Adjustments | Pro Forma for Ventas 2014 and 2013 Transactions | HCT Historical | HCT 2014 and 2013 Transactions Adjustments | Pro Forma for HCT 2014 and 2013 Transactions | HCT Acquisition Adjustments | Total Pro Forma | |||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Income (loss) from continuing operations attributable to common stockholders | $ | 218,370 | $ | (6,866 | ) | $ | 211,504 | $ | (20,985 | ) | $ | (27,212 | ) | $ | (22,994 | ) | $ | 140,313 | $ | 138,867 | $ | 21,824 | $ | 160,691 | $ | (54,367 | ) | $ | 246,637 | |||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions | $ | 488,930 | $ | 12,133 | $ | 501,063 | $ | (22,230 | ) | $ | 21,490 | $ | (740 | ) | $ | 17,767 | $ | 518,090 | ||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations | Discontinued operations | 27,797 | (2,556 | ) | 25,241 | — | — | — | 25,241 | 4,899 | (3,836 | ) | 1,063 | — | 26,304 | (35,421 | ) | 3,069 | (32,352 | ) | — | — | — | — | (32,352 | ) | ||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to common stockholders | Net income (loss) attributable to common stockholders | 246,167 | (9,422 | ) | 236,745 | (20,985 | ) | (27,212 | ) | (22,994 | ) | 165,554 | 143,766 | 17,988 | 161,754 | (54,367 | ) | 272,941 | 453,509 | 15,202 | 468,711 | (22,230 | ) | 21,490 | (740 | ) | 17,767 | 485,738 | ||||||||||||||||||||||||||||||||||||
Adjustments: | Adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real estate depreciation and amortization | 716,412 | 117,354 | 833,766 | 66,975 | 84,176 | 151,151 | (1,924 | ) | 982,993 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real estate depreciation related to noncontrolling interest | (10,512 | ) | — | (10,512 | ) | — | — | — | — | (10,512 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Real estate depreciation related to unconsolidated entities | 6,543 | — | 6,543 | — | — | — | — | 6,543 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on re-measurement of equity interest upon acquisition, net | (1,241 | ) | — | (1,241 | ) | — | — | — | — | (1,241 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on real estate dispositions | — | (17,508 | ) | (17,508 | ) | — | — | — | — | (17,508 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on real estate dispositions | (4,059 | ) | (1,241 | ) | (5,300 | ) | — | — | — | — | (5,300 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation on real estate assets | 47,806 | (9,066 | ) | 38,740 | — | — | — | — | 38,740 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real estate depreciation and amortization | 203,966 | 14,845 | 218,811 | 52,138 | 22,663 | 109,093 | 402,705 | 133,992 | 18,276 | 152,268 | 108,859 | 663,832 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Real estate depreciation and amortization related to noncontrolling interest | (6,217 | ) | — | (6,217 | ) | — | — | — | (6,217 | ) | (1,099 | ) | (2,005 | ) | (3,104 | ) | (2,656 | ) | (11,977 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Real estate depreciation and amortization related to unconsolidated entities | 2,367 | 2,367 | 4,734 | — | — | — | 4,734 | 4,793 | — | 4,793 | 878 | 10,405 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sale of real estate assets | (25,241 | ) | — | (25,241 | ) | — | — | — | (25,241 | ) | (16,948 | ) | — | (16,948 | ) | — | (42,189 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Depreciation on real estate assets | 464 | (464 | ) | — | — | — | — | — | 2,352 | (1,473 | ) | 879 | — | 879 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
FFO | FFO | 421,506 | 7,326 | 428,832 | 31,153 | (4,549 | ) | 86,099 | 541,535 | 266,856 | 32,786 | 299,642 | 52,714 | 893,891 | 1,208,458 | 104,741 | 1,313,199 | 44,745 | 105,666 | 150,411 | 15,843 | 1,479,453 | ||||||||||||||||||||||||||||||||||||||||||
Adjustments: | Adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of financial instruments | 449 | — | 449 | — | — | — | — | 449 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-cash income tax (benefit) expense | (11,828 | ) | (10,691 | ) | (22,519 | ) | 524 | — | 524 | (17,296 | ) | (39,291 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Loss on extinguishment of debt, net | 1,048 | 243 | 1,291 | — | — | — | — | 1,291 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Merger-related expenses, deal costs and re-audit costs | 21,560 | (7,276 | ) | 14,284 | 13,606 | (15,239 | ) | (1,633 | ) | — | 12,651 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of other intangibles | 1,022 | — | 1,022 | — | — | — | — | 1,022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 2,930 | 39 | 2,969 | (7,560 | ) | — | (32,303 | ) | (36,894 | ) | — | — | — | — | (36,894 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Loss (gain) on extinguishment of debt | 9,791 | — | 9,791 | 2 | — | (2 | ) | 9,791 | (75 | ) | — | (75 | ) | 75 | 9,791 | |||||||||||||||||||||||||||||||||||||||||||||||||
Merger-related expenses and deal costs | 19,243 | — | 19,243 | — | — | — | 19,243 | 5,118 | — | 5,118 | — | 24,361 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss on interest rate swap | — | — | — | — | 16,020 | — | 16,020 | — | — | — | — | 16,020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of other intangibles | 511 | 511 | 1,022 | — | — | — | 1,022 | — | — | — | — | 1,022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on re-measurement of equity interest upon acquisition, net | — | — | — | — | — | — | — | (620 | ) | — | (620 | ) | — | (620 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Impairments | — | — | — | — | — | — | — | 15,006 | — | 15,006 | — | 15,006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
Normalized FFO | Normalized FFO | $ | 453,981 | $ | 7,876 | $ | 461,857 | $ | 23,595 | $ | 11,471 | $ | 53,794 | $ | 550,717 | $ | 286,285 | $ | 32,786 | $ | 319,071 | $ | 52,789 | $ | 922,577 | $ | 1,220,709 | $ | 87,017 | $ | 1,307,726 | $ | 58,875 | $ | 90,427 | $ | 149,302 | $ | (1,453 | ) | $ | 1,455,575 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
NOTE 5—4—FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS (Continued)
Ventas's historical and pro forma FFO and normalized FFO per diluted share outstanding for the year ended December 31, 20102013 follows (in thousands, except per share amounts)(1):
| | Ventas Historical | Total Pro Forma | |||||
|---|---|---|---|---|---|---|---|
Income from continuing operations attributable to common stockholders, including real estate dispositions | $ | 1.66 | $ | 1.61 | |||
Discontinued operations | (0.12 | ) | (0.10 | ) | |||
| | | | | | | | |
Net income attributable to common stockholders | 1.54 | 1.51 | |||||
Adjustments: | |||||||
Real estate depreciation and amortization | 2.43 | 3.05 | |||||
Real estate depreciation related to noncontrolling interest | (0.04 | ) | (0.03 | ) | |||
Real estate depreciation related to unconsolidated entities | 0.02 | 0.02 | |||||
Gain on re-measurement of equity interest upon acquisition, net | (0.00 | ) | (0.00 | ) | |||
Gain on real estate dispositions | — | (0.05 | ) | ||||
Discontinued operations: | |||||||
Gain on real estate dispositions | (0.01 | ) | (0.02 | ) | |||
Depreciation on real estate assets | 0.16 | 0.12 | |||||
| | | | | | | | |
FFO | 4.09 | 4.59 | |||||
Adjustments: | |||||||
Change in fair value of financial instruments | 0.00 | 0.00 | |||||
Non-cash income tax benefit | (0.04 | ) | (0.12 | ) | |||
Loss on extinguishment of debt, net | 0.00 | 0.00 | |||||
Merger-related expenses, deal costs and re-audit costs | 0.07 | 0.04 | |||||
Amortization of other intangibles | 0.00 | 0.00 | |||||
| | | | | | | | |
Normalized FFO | $ | 4.14 | $ | 4.52 | |||
| | | | | | | | |
| | | | | | | | |
Dilutive shares outstanding used in computing FFO and normalized FFO per common share | 295,110 | 322,024 | |||||
| | Ventas Historical | Ventas Pro Forma for the Atria and One Lantern Acquisition | NHP Historical(D) | Total Pro Forma | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Income from continuing operations attributable to common stockholders | $ | 1.39 | $ | 0.75 | $ | 1.12 | $ | 0.85 | |||||||
Discontinued operations | 0.18 | 0.13 | 0.04 | 0.09 | |||||||||||
Net income attributable to common stockholders | 1.56 | 0.88 | 1.15 | 0.94 | |||||||||||
Adjustments: | |||||||||||||||
Real estate depreciation and amortization | 1.29 | 2.14 | 1.08 | 2.29 | |||||||||||
Real estate depreciation related to noncontrolling interest | (0.04 | ) | (0.03 | ) | (0.01 | ) | (0.04 | ) | |||||||
Real estate depreciation and amortization related to unconsolidated entities | 0.02 | 0.03 | 0.04 | 0.04 | |||||||||||
Discontinued operations: | |||||||||||||||
Gain on sale of real estate assets | (0.16 | ) | (0.13 | ) | (0.14 | ) | (0.15 | ) | |||||||
Depreciation on real estate assets | 0.00 | — | 0.02 | 0.00 | |||||||||||
FFO | 2.67 | 2.88 | 2.14 | 3.09 | |||||||||||
Adjustments: | |||||||||||||||
Income tax expense (benefit) | 0.02 | (0.20 | ) | — | (0.13 | ) | |||||||||
Loss on extinguishment of debt | 0.06 | 0.05 | (0.00 | ) | 0.03 | ||||||||||
Merger-related expenses and deal costs | 0.12 | 0.10 | 0.04 | 0.08 | |||||||||||
Loss on interest rate swap | — | 0.09 | — | 0.06 | |||||||||||
Amortization of other intangibles | 0.00 | 0.01 | — | 0.00 | |||||||||||
Gain on re-measurement of equity interest upon acquisition, net | — | — | (0.00 | ) | (0.00 | ) | |||||||||
Impairments | — | — | 0.12 | 0.05 | |||||||||||
Normalized FFO | $ | 2.88 | $ | 2.93 | $ | 2.30 | $ | 3.18 | |||||||
Diluted shares outstanding used in computing FFO and normalized FFO per common share | 157,657 | 188,179 | 124,514 | 289,746 | |||||||||||
ProUnaudited pro forma FFO and normalized FFO are presented herein for informationinformational purposes only and wereare based on available information and assumptions that Ventas's management believes to be reasonable; however, they are not necessarily indicative of what Ventas's FFO or normalized FFO actually would have been assuming the transactions had occurred as of the dates indicated.
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. However, since real estate values historically have risen or fallen with market conditions, many industry investors deem presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. To overcome this
VENTAS, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 5—4—FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS (Continued)
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values, instead, have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. To overcome this problem, Ventas considers FFO and normalized FFO to be appropriate measures of operating performance of an equity REIT. Further,In particular, Ventas believes that normalized FFO providesis useful information because it allows investors, analysts and Ventas management to compare Ventas's operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by unanticipated items.items and other events such as transactions and litigation. In some cases, Ventas provides information about identified non-cash components of FFO and normalized FFO because it allows investors, analysts and Ventas management to assess the impact of those items on Ventas's financial results.
Ventas uses the National Association of Real Estate Investment Trusts, which we refer to as NAREIT, definition of FFO. NAREIT defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate property, including gain on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures arewill be calculated to reflect FFO on the same basis. Ventas defines "normalized FFO"normalized FFO as FFO excluding the following income and expense items (which may be recurring in nature): (a) gains and losses on the sales of real property assets; (b) merger-related costs and expenses, including amortization of intangibles, and transition and integration expenses, and deal costs and expenses, including expenses and recoveries if any, relating to Ventas's lawsuit against HCP, Inc.; (c)acquisition lawsuits; (b) the impact of any expenses related to asset impairment and valuationsvaluation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of Ventas's debt; (d)(c) the non-cash effect of income tax benefits or expenses; (e)expenses and derivative transactions that have non-cash mark-to-market impacts on Ventas's consolidated statements of income; (d) the impact of future unannounced acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions; (f)(e) the financial impact of contingent consideration, severance-related costs, charitable donations made to the Ventas Charitable Foundation, gains and losses for non-operational foreign currency hedge agreements and changes in the non-operational hedge agreements;fair value of financial instruments; and (g) any gains or losses on re-measurement(f) expenses related to the re-audit and re-review of equity interests upon acquisition.Ventas's historical financial statements and related matters.
FFO and normalized FFO presented herein aremay not necessarilybe identical to FFO and normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same definitions. FFO and normalized FFO should not be considered as alternatives to net income (determined in accordance with GAAP) as indicators of Ventas's financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of Ventas's liquidity, nor is FFO and normalized FFO necessarily indicative of sufficient cash flow to fund all of Ventas's needs. Ventas believes that in order to facilitate a clear understanding of Ventas's consolidated historical operating results, FFO and normalized FFO should be examined in conjunction with net income as presented in the Unaudited Pro Forma Consolidated Condensed Financial Statements.unaudited pro forma condensed consolidated financial statements.
COMPARATIVE STOCK PRICES COMPARISON OF RIGHTS OF VENTAS STOCKHOLDERS
AND DIVIDENDSHCT STOCKHOLDERS
The rights of HCT stockholders are governed by the MGCL and HCT's charter and bylaws, and the rights of Ventas stockholders are governed by the Delaware General Corporation Law, which we refer to as the DGCL, Ventas's Amended and Restated Certificate of Incorporation, as amended, which we refer to as the Ventas Charter, and Ventas's Fourth Amended and Restated By-Laws, as amended, which we refer to as the Ventas Bylaws. As a result of the merger, HCT stockholders who receive shares of Ventas common stock as merger consideration will become stockholders of Ventas and, NHP common stock are traded onaccordingly, their rights will be governed by the NYSE underDGCL, the symbols "VTR"Ventas Charter and "NHP", respectively.the Ventas Bylaws. The following table presents trading information for Ventas common stock and NHP common stock on February 25, 2011, the last trading day before the executionis a summary of the merger agreement, and [ • ], 2011, the latest practicable trading day beforematerial differences as of the date of this joint proxy statement/prospectus.
| | VTR Common Stock | NHP Common Stock | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Date | High | Low | Close | High | Low | Close | |||||||||||||
February 25, 2011 | $ | 57.24 | $ | 56.34 | $ | 57.19 | $ | 38.96 | $ | 38.09 | $ | 38.96 | |||||||
[•], 2011 | $ | [ ] | $ | [ ] | $ | [ ] | $ | [ ] | $ | [ ] | $ | [ ] | |||||||
For illustrative purposes,prospectus between the following table provides NHP equivalent per share information on eachrights of HCT stockholders and the specified dates. NHP equivalent per share amounts are calculated by multiplyingrights of Ventas per share amounts bystockholders. These differences arise from differences between the exchange ratiorespective charters and bylaws of 0.7866.HCT and Ventas and differences between the DGCL and the MGCL.
| | VTR Common Stock | NHP Equivalent Per Share | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Date | High | Low | Close | High | Low | Close | |||||||||||||
February 25, 2011 | $ | 57.24 | $ | 56.34 | $ | 57.19 | $ | 45.02 | $ | 44.32 | $ | 44.99 | |||||||
[•], 2011 | $ | [ ] | $ | [ ] | $ | [ ] | $ | [ ] | $ | [ ] | $ | [ ] | |||||||
Market PricesCertain Differences between the Rights of Ventas Stockholders and Dividend DataHCT Stockholders
�� The following tables set forthchart is only a summary of certain material differences between the high and low sales pricesrights of Ventas common stockstockholders and NHP common stock as reported onHCT stockholders and does not purport to be a complete description of all of the NYSE,differences. Please consult the MGCL, the DGCL, and the quarterly cash dividends declared per share,respective charters and bylaws, each as amended, restated, supplemented or otherwise modified from time to time, of Ventas and HCT for eacha more complete understanding of the quarterly periods indicated.
Ventasthese differences.
| | High | Low | Dividend | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
2009 | ||||||||||
First Quarter | $ | 33.49 | $ | 19.13 | $ | 0.5125 | ||||
Second Quarter | 32.40 | 21.66 | 0.5125 | |||||||
Third Quarter | 40.23 | 27.41 | 0.5125 | |||||||
Fourth Quarter | 44.91 | 36.19 | 0.5125 | |||||||
2010 | ||||||||||
First Quarter | $ | 49.24 | $ | 40.36 | $ | 0.535 | ||||
Second Quarter | 50.33 | 43.14 | 0.535 | |||||||
Third Quarter | 53.89 | 45.77 | 0.535 | |||||||
Fourth Quarter | 56.20 | 48.53 | 0.535 | |||||||
2011 | ||||||||||
First Quarter | $ | 57.45 | $ | 50.98 | $ | 0.575 | ||||
Second Quarter (through April 8, 2011) | 54.74 | 53.31 | — | |||||||
| Ventas | HCT | |
|---|---|---|
| Authorized Stock | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
Ventas is authorized to issue: | HCT is authorized to issue: | |
600,000,000 shares of common stock, par value $0.25 per share, of which 294,333,210 shares were issued and outstanding as of October 28, 2014. | 300,000,000 shares of common stock, par value $0.01 per share, of which 169,316,247 shares were issued and outstanding as of October 28, 2014. | |
10,000,000 shares of preferred stock, par value $1.00 per share, of which no shares were issued and outstanding as of October 28, 2014. | 50,000,000 shares of preferred stock, par value $0.01 per share, of which no shares were issued and outstanding as of October 28, 2014. | |
| Ventas | HCT | |
|---|---|---|
| Amendment of Charter | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
The affirmative vote of the holders of a majority of the outstanding shares entitled to vote is required to amend the Ventas Charter, according to the DGCL. Under the DGCL, the holders of the outstanding shares of a class are entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would increase or decrease the aggregate number of authorized shares of such class, increase or decrease the par value of the shares of such class, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. If any proposed amendment would alter or change the powers, preferences or special rights of one or more series of any class so as to affect them adversely, but will not so affect the entire class, then only the shares of the series so affected by the amendment are considered a separate class for the purposes of this provision. Additionally, the Ventas Charter provides that the provisions on "Restrictions of Ownership and Transfer; Designation of Excess Shares" contained in Article IX of the Ventas Charter may be amended only by the affirmative vote of the holders of not less than two-thirds of the votes entitled to be cast by the holders of shares entitled to vote generally in the election of directors. | The approval of the HCT Board and the affirmative vote of a majority of all of the votes entitled to be cast on the matter is required to amend the HCT charter (other than amendments to the charter that do not require stockholder approval under the MGCL, including a change in HCT's name, change in par value per share and an increase or decrease in the aggregate number of authorized shares of stock or the number of authorized shares of any class or series of stock of HCT). However, any amendment to the requirement that directors may be removed only for cause must be declared advisable by the HCT Board and approved by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter. | |
Bylaws Amendments | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
The Ventas Bylaws may be amended (i) by the affirmative vote of the holders of at least two-thirds of the voting power of all shares entitled to vote in the election of directors or (ii) by action of the board of directors at a regular or special meeting thereof. Any bylaws made by the Ventas Board may be amended or repealed by action of the stockholders at any annual or special meeting of stockholders. | The HCT bylaws provide that the HCT Board has the exclusive power to adopt, alter, or repeal any provisions of the bylaws and to make new bylaws. | |
| | High | Low | Dividend | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
2009 | ||||||||||
First Quarter | $ | 28.81 | $ | 18.16 | $ | 0.44 | ||||
Second Quarter | 28.38 | 21.46 | 0.44 | |||||||
Third Quarter | 33.79 | 24.23 | 0.44 | |||||||
Fourth Quarter | 35.92 | 29.73 | 0.44 | |||||||
2010 | ||||||||||
First Quarter | $ | 36.82 | $ | 31.43 | $ | 0.44 | ||||
Second Quarter | 37.33 | 30.91 | 0.45 | |||||||
Third Quarter | 39.94 | 34.34 | 0.46 | |||||||
Fourth Quarter | 41.48 | 33.55 | 0.47 | |||||||
2011 | ||||||||||
First Quarter | $ | 44.05 | $ | 35.62 | $ | 0.48 | ||||
Second Quarter (through April 8, 2011) | 42.85 | 41.63 | — | |||||||
| Ventas | HCT | |
|---|---|---|
| Number and Term of Directors | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
Currently, there are eleven directors on the Ventas Board. | Currently, there are five directors on the HCT Board. | |
The number of directors may be changed from time to time by a majority of the entire board of directors, but in no event will be less than three nor more than 13. | The number of directors may be changed from time to time by a majority of the entire board of directors, but in no event will it be less than the minimum number required by the MGCL nor more than 15. | |
Removal of Directors | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
The Ventas Bylaws provide that any director or the entire Ventas Board may be removed with or without cause, at any time, by the affirmative vote of the holders of record of a majority of the outstanding shares of stock entitled to vote in the election of directors, at a special meeting of the stockholders called for that purpose. | The HCT charter provides that any director or the entire HCT Board may be removed from office at any time, but only for cause and then only by affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors. | |
Filling Vacancies on the Board | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
The Ventas Bylaws provide that if any vacancy occurs on the Ventas Board for any reason, including, but not limited to, the resignation, removal or death of a director or an increase in the number of authorized directors, a majority of the directors remaining in office, although less than a quorum, may elect a successor for the unexpired term and until his or her successor is elected and qualified. | The HCT bylaws provide that any vacancy on the HCT Board may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which the vacancy occurred until a successor is elected and qualified. | |
Limits on Ownership and Transfer of Shares | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
Except with regard to persons exempted by the Ventas Board, no person shall acquire or hold, directly or indirectly, beneficial ownership in excess of 9.0% of the number or value of the outstanding shares of Ventas common stock or in excess of 9.9% of the number or value of the outstanding shares of Ventas preferred stock. Any transfer of shares that would result in Ventas's shares being beneficially owned by fewer than 100 persons is void ab initio. | Except with regard to persons exempted by the HCT Board, no person shall beneficially or constructively own shares of HCT in excess of 9.8% (in value or number of shares, whichever is more restrictive) of the aggregate outstanding shares of any class or series of capital stock of HCT. In addition, no person may constructively own shares to the extent that it would result in HCT being "closely held" within the meaning of Section 856(h) of the Code. Any transfer of shares that would result in HCT's shares being beneficially owned by fewer than 100 persons is void ab initio. | |
| Ventas | HCT | |
|---|---|---|
| Appraisal Rights | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
Under Delaware law, stockholders who dissent from a merger or consolidation of the corporation have the right to demand and receive payment of the fair value of their stock, as appraised by the Delaware Chancery Court; provided, however, that dissenters' rights are inapplicable (i) to stockholders of a surviving corporation whose vote is not required to approve the merger or consolidation, and (ii) to any class of stock listed on a national securities exchange or held of record by more than 2,000 stockholders, unless, in either case, such stockholders are required in the merger to accept in exchange for their shares anything other than (1) shares of the surviving corporation or depository receipts in respect thereof, (2) stock of another corporation which is either listed on a national securities exchange or held of record by more than 2,000 holders, or depository receipts in respect thereof, (3) cash in lieu of fractional shares or depository receipts of such corporations, or (4) or any combination of the above. | Under Maryland law, dissenting holders may have, subject to satisfying certain procedures, the right to receive a cash payment representing the fair value of their shares of stock under certain circumstances. As permitted by the MGCL, however, HCT's charter includes a provision opting out of the appraisal rights statute, thereby precluding stockholders from exercising the rights of an "objecting stockholder" unless HCT's board of directors determines that appraisal rights apply, with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which holders would otherwise be entitled to exercise appraisal rights. | |
Special Meetings of Stockholders | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
The Ventas Bylaws provide that special meetings of stockholders may be called only by the Ventas Board or the chairman of the Ventas Board. | The HCT Bylaws provide that each of the chairman of the HCT Board, the chief executive officer of HCT, the president of HCT and the HCT Board may call a special meeting of stockholders. In addition, subject to the satisfaction of certain procedural requirements specified therein, the HCT Bylaws require the secretary of HCT to call a special meeting of stockholders to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting. | |
| Ventas | HCT | |
|---|---|---|
| State Takeover Defense Statutes | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
Section 203 of the DGCL prohibits a public Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the time at which such person became an interested stockholder unless: (i) prior to such time, the board of directors approved either the business combination or transaction in which the stockholder became an interested stockholder; or (ii) upon becoming an interested stockholder, the stockholder owned at least 85% of the corporation's outstanding voting stock other than shares held by directors who are also officers and certain employee benefit plans; or (iii) the business combination is approved by both the board of directors and by holders of at least two-thirds of the corporation's outstanding voting stock (at a meeting and not by written consent), excluding shares owned by the interested stockholder. For these purposes, a "business combination" includes mergers, asset sales and other similar transactions with an "interested stockholder," and "interested stockholder" means a stockholder that, together with its affiliates and associates, owns (or, under certain circumstances, has owned within the prior three years) more than 15% of the outstanding voting stock. Although Section 203 permits a corporation to elect not to be governed by its provisions, Ventas has not made this election. | Under the MGCL, certain "business combinations" (including a merger, consolidation, statutory share exchange and, in certain circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and any person who beneficially owns 10% or more of the voting power of the corporation's outstanding voting stock, or an affiliate or associate of the corporation who beneficially owned 10% or more of the voting power of the corporation's then outstanding stock at any time within the preceding two years, in each case referred to as an "interested stockholder," or an affiliate thereof, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter, any such business combination must be recommended by the board of directors and approved by the affirmative vote of at least (i) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (ii) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder or its affiliates or associates. The super-majority vote requirements do not apply, however, to business combinations that are approved or exempted by the board of directors prior to the time that the interested stockholder becomes an interested stockholder or if the business combination satisfies certain minimum price, form-of-consideration and procedural requirements. | |
As permitted by the MGCL, the HCT Board has by resolution exempted business combinations (1) between HCT and any person, provided that such business combination is first approved by the HCT Board (including a majority of directors who are not affiliates or associates of such person) and (2) between HCT and its sponsor, its advisor, its operating partnership or any of their respective affiliates. Consequently, the five-year prohibition and the supermajority vote requirements will not apply to such business combinations. | ||
| Ventas | HCT | |
|---|---|---|
| HCT has opted out of the MGCL's control share acquisitions act. | ||
Under Subtitle 8 of Title 3 of the MGCL (which we refer to as Subtitle 8), a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors may elect to be subject, by provision in its charter or bylaws or by resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions: (i) a classified board, (ii) a two-thirds vote requirement for removing a director, (iii) a requirement that the number of directors be fixed only by vote of the directors, (iv) that any and all vacancies on the board of directors may be filled only by the remaining directors, even if the remaining directors do not constitute a quorum, and for the remainder of the full term of the class of directors in which the vacancy occurred, and (v) a majority requirement for the calling of a special meeting of stockholders. | ||
Pursuant to Subtitle 8, HCT has elected to provide that vacancies on its board may be filled only by a majority of the remaining directors and any director elected to fill a vacancy may serve for the remainder of the full term of the directorship in which the vacancy occurred. Through provisions in its charter and bylaws unrelated to Subtitle 8, HCT already vests in its board the exclusive power to fix the number of directorships. | ||
Exclusive Forum Provision | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
The Ventas Bylaws do not include an exclusive forum provision. | HCT's bylaws provide that, unless the HCT Board consents in writing, derivative claims, breach of director or officer duty claims, claims pursuant to the MGCL or HCT's charter and bylaws and claims governed by the internal affairs doctrine must be brought in the Circuit Court for Baltimore City, Maryland (or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division). | |
| Ventas | HCT | |
|---|---|---|
| Exculpation and Indemnification of Directors and Officers | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
The Ventas Charter provides that Ventas will indemnify any person who (a) was or is made or threatened to be made a party to any proceeding because he or she is or was a Ventas director or officer, or (b) is or was serving at the request of Ventas as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise, against all expenses, liabilities and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by him or her in connection with such proceeding. Expenses incurred by such a person in his or her capacity as one of Ventas's directors or officers (and not in any other capacity in which service was or is rendered by such person while a director or officer) in defending a proceeding may be paid by Ventas in advance of the final disposition as authorized by the Ventas Board in a specific case upon receipt of an undertaking by or on behalf of that person to repay such amounts, unless it is ultimately determined that such person is entitled to be indemnified as authorized by the DGCL. Expenses incurred by a person in any capacity other than as one of Ventas's officers or directors may be paid in advance of the final disposition of a proceeding on such terms and conditions, if any, as the Ventas Board deems appropriate. Pursuant to Section 102(b)(7) of the DGCL, the Ventas Charter eliminates certain liability of its directors for breach of their fiduciary duty of care. | HCT's charter contains a provision which eliminates its directors' and officers' liability for money damages to the maximum extent permitted by Maryland law. HCT's charter authorizes, and HCT's bylaws obligate, HCT to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of HCT and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity or (b) any individual who, while a director or officer of HCT and at the request of HCT, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity. | |
Copies of the charters and bylaws of Ventas and HCT are available, without charge, to any person, including any beneficial owner to whom this proxy statement/prospectus is delivered, by following the instructions set forth under "Where You Can Find More Information; Incorporation by Reference."
DESCRIPTION OF VENTAS, INC. CAPITAL STOCK
The following discussion is a summary of the terms of the capital stock of Ventas and should be read in conjunction with "Comparison of Rights of Ventas Stockholders and NHPHCT Stockholders" beginning on page 118. This117. The summary isset forth below does not meantpurport to be complete and is subject to and is qualified in its entirety by reference to the relevant provisions of Delaware lawthe DGCL, the Ventas Charter and Ventas's organizational documents.the Ventas Bylaws. You are urged to read those documents carefully. Copies of the Ventas charterCharter and the fourth amended and restated bylaws of Ventas which we refer to as the Ventas bylaws,Bylaws are incorporated by reference into this joint proxy statement/prospectus as exhibits to the registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, and will be sent to stockholders of Ventas and NHP stockholdersHCT upon request. See "Where You Can Find More Information"Information; Incorporation by Reference" beginning on page 131.127.
The Ventas charter provides thatCharter authorizes Ventas mayto issue up to 310,000,000610,000,000 shares of its capital stock, consisting of up to 300,000,000600,000,000 shares of common stock, par value $0.25 per share, and up to 10,000,000 shares of preferred stock, par value $1.00 per share. As of [ • ], 2011, [ • ]October 28, 2014, 294,333,210 shares of Ventas common stock were issued and outstanding and no shares of Ventas preferred stock were outstanding. If the proposed charter amendment is adopted, upon filing of the charter amendment with the Secretary of State of Delaware, the total number of authorized shares of Ventas capital stock will be increased from 310,000,000 to 610,000,000, the total number of authorized shares of Ventas common stock will be increased from 300,000,000 to 600,000,000issued and the total number of authorized shares of Ventas preferred stock will remain at 10,000,000 shares.outstanding. Ventas may issue additional shares of common stock from time to time in acquisitions and other transactions.
All outstanding shares of Ventas common stock are, and the shares of Ventas common stock to be issued in connection with the merger will be, duly authorized, fully paid and non-assessable.
Description of Ventas Common Stock
Subject to the preferential rights of any other shares of capital stock and to certain provisions of the Ventas charter,Charter, holders of shares of common stock are entitled to receive distributions if, as and when authorized and declared by the Ventas board of directorsBoard out of assets legally available therefor and to share ratably in Ventas's assets legally available for distribution to Ventas stockholders in the event of liquidation, dissolution or winding-up of Ventas after payment of, or adequate provision for, all of Ventas's known debts and liabilities. Ventas currently expects to continue to make quarterly distributions, and from time to time it may make additional distributions.
Holders of shares of Ventas common stock are entitled to one vote per share on all matters on which the holders of common stock are entitled to vote. Holders of shares of Ventas common stock have no conversion, sinking fund, redemption or preemptive rights to subscribe for any of Ventas securities. Subject to certain provisions of the Ventas charter,Charter, shares of Ventas common stock have equal distribution, liquidation and other rights.
Certain Anti-Takeover Provisions
In order to preserve Ventas's ability to maintain REIT status, the Ventas charterCharter provides that if a person acquires beneficial ownership of more than 9%, in number or value, of the outstanding shares of Ventas common stock or beneficial ownership of more than 9.9%, in number or value, of the outstanding shares of Ventas preferred stock, the shares that are beneficially owned in excess of such 9% limitlimits are considered to be "excess shares." Excess shares are automatically deemed transferred to a trust for the benefit of a charitable institution or other qualifying organization selected by the Ventas board of directors.Board. The trust is entitled to all dividends with respect to the excess shares and the trustee may exercise all voting power over the excess shares. Ventas has the right to buy the excess shares for a purchase price equal to the
lesser of (1) the price per share in the transaction that created the excess shares, or (2) the market price on the date Ventas buys the shares, and itVentas may defer payment of the purchase price for up to five years. If Ventas does not purchase the excess shares, the trustee of the trust is required to transfer the excess shares at the direction of the Ventas board of directors.Board. The owner of the
excess shares is entitled to receive the lesser of the proceeds from the sale of the excess shares or the original purchase price for such excess shares, and any additional amounts are payable to the beneficiary of the trust. Ventas's board of directorsThe Ventas Board may grant waivers from the excess share limitations.
The transfer agent and registrar for Ventas common stock is Wells Fargo Bank, National Association.
New York Stock Exchange Listing
Ventas common stock is listed and traded on the NYSE under the symbol "VTR." It is a condition to the completion of the merger that the shares of Ventas common stock to be issued in connection with the merger be approved for listing on the NYSE, subject to official notice of issuance.
COMPARISON OF RIGHTS OF VENTAS STOCKHOLDERSAND NHP STOCKHOLDERS
If the merger is consummated, stockholders of NHP will become stockholders of Ventas. The rights of Ventas stockholders are governed by and subject to the provisions of Delaware law and the charter and bylaws of Ventas, rather than the provisions of Maryland law and the charter and bylaws of NHP. The following is a summary of the material differences between the rights of holders of Ventas common stock and the rights of holders of NHP common stock, but does not purport to be a complete description of those differences or a complete description of the terms of the Ventas common stock subject to issuance in connection with the merger. The following summary is qualified in its entirety by reference to the relevant provisions of (i) Delaware law, (ii) Maryland law, (iii) the Ventas charter, (iv) the Articles of Restatement of NHP, which we refer to as the NHP charter, (v) the Ventas bylaws, (vi) the amended and restated bylaws of NHP, which we refer to as the NHP bylaws, and (vii) the description of Ventas common stock contained in Ventas's Form 8-A filed with the Commission on January 23, 1992, and any amendment or report filed with the SEC for the purpose of updating such description.
This section does not include a complete description of all differences among the rights of Ventas stockholders and NHP stockholders, nor does it include a complete description of the specific rights of such holders. Furthermore, the identification of some of the differences in the rights of such holders as material is not intended to indicate that other differences that may be equally important do not exist. You are urged to read carefully the relevant provisions of Delaware law and Maryland law, as well as the governing corporate instruments of each of Ventas and NHP, copies of which are available, without charge, to any person, including any beneficial owner to whom this joint proxy statement/prospectus is delivered, by following the instructions listed under "Where You Can Find More Information," beginning on page 131.
Ventas
Ventas is currently authorized under the Ventas charter to issue up to 310,000,000 shares of capital stock, consisting of up to 300,000,000 shares of common stock, $0.25 par value per share, and up to 10,000,000 shares of preferred stock, $1.00 par value per share. If the proposed charter amendment is approved, upon filing of the charter amendment with the Secretary of State of Delaware, the total number of authorized shares of Ventas capital stock will be increased from 310,000,000 to 610,000,000, the total number of authorized shares of Ventas common stock will be increased from 300,000,000 to 600,000,000, and the total number of authorized shares of Ventas preferred stock will remain at 10,000,000 shares.
Common Stock. Under the Ventas charter, each share of Ventas common stock, including those to be issued in connection with the merger, entitles the holder thereof to one vote per share on all matters duly submitted to stockholders for their vote or consent.
Preferred Stock. Under the Ventas charter, the Ventas board of directors is authorized, without stockholder action, to issue preferred stock from time to time and to establish the designations, preferences and relative, optional or other special rights and qualifications, limitations and restrictions thereof, as well as to establish and fix variations in the relative rights as between holders of any one or more series thereof. As of [ • ], 2011, there were no shares of Ventas preferred stock outstanding.
NHP
NHP is authorized under the NHP charter to issue an aggregate of 205,000,000 shares of capital stock, consisting of 200,000,000 shares of common stock, $0.10 par value per share, and 5,000,000 shares of preferred stock, $1.00 par value per share.
Common Stock. Under the NHP charter, the holders of NHP common stock are entitled to one vote per share on all matters duly submitted to stockholders for their vote or consent.
Preferred Stock. Under the NHP charter and subject to limitations prescribed by Maryland law, the NHP board of directors is authorized, without stockholder action, to issue preferred stock, which we refer to as NHP preferred stock. NHP preferred stock may be issued by the NHP board of directors from time to time in one or more series, each of which is to have the powers, preferences and relative rights and qualifications, limitations or restrictions as are stated in the NHP charter or related articles supplementary. As of [ • ], 2011, there were no shares of NHP preferred stock outstanding.
Cumulative Voting and Election of Directors
Neither holders of Ventas common stock nor holders of NHP common stock have the right to cumulate their votes with respect to the election of directors.
Ventas
Each Ventas director is elected by a majority of votes cast, which means that the number of votes cast "for" a director's election must exceed the number of votes cast "against" that director's election (with abstentions and broker non-votes not counted as a vote cast either "for" or "against" that director's election) unless the election is contested, in which case directors are elected by the vote of a plurality of the shares entitled to vote and present or represented by proxy at the meeting.
NHP
A plurality of all the votes cast at a meeting of stockholders at which a quorum is present is sufficient to elect an NHP director.
Size of the Board of Directors
Ventas
Under the Ventas charter, the number of directors of Ventas is fixed in the manner described in the Ventas bylaws. The Ventas bylaws currently provide that the number of directors shall not be less than three nor more than 11, as determined by the board. There are currently nine directors serving on the Ventas board of directors. Upon the consummation of the Atria Acquisition, a representative of LREP will join the Ventas board of directors. Upon the consummation of the merger, three NHP directors, including Douglas M. Pasquale, will join the Ventas board of directors. In connection with the merger, the Ventas bylaws will be amended to increase the maximum number of directors allowed to serve on the Ventas board of directors.
NHP
The NHP charter and bylaws provide that the NHP board of directors may establish the number of directors of the company as long as the number is not less than five. The number of directors is fixed by the NHP board of directors from time to time. There are currently eight directors serving on the NHP board of directors.
Staggered Boards and Term of Directors
Ventas
Ventas directors are not divided into classes and hold office until the next annual meeting of stockholders or until their earlier resignation, removal from office or death.
NHP
The NHP charter divides the NHP board of directors into three classes, each having three-year terms that expire in successive years. As the term of each class expires, stockholders elect directors in that class for a term of three years and until their successors are duly elected and qualified. The directors in the other two classes continue in office, serving the remaining portion of their respective three-year term.
Ventas
The Ventas bylaws provide that any director or the entire Ventas board of directors may be removed with or without cause, at any time, by the affirmative vote of the holders of record of a majority of the outstanding shares of stock entitled to vote in the election of directors, at a special meeting of the stockholders called for that purpose.
NHP
The NHP charter provides that a director may be removed by the vote or written consent of the holders of at least two-thirds of the outstanding shares entitled to vote in the election of directors. Under Section 2-406(b)(3) of Maryland law, a director may not be removed without cause.
Vacancies on the Board of Directors
Ventas
The Ventas bylaws provide that if any vacancy occurs on the Ventas board of directors for any reason, including, but not limited to, the resignation, removal or death of a director or an increase in the number of authorized directors, a majority of the directors remaining in office, although less than a quorum, may elect a successor for the unexpired term and until his or her successor is elected and qualified.
NHP
The NHP bylaws provide that a majority of the directors remaining on the NHP board of directors may fill any vacancy, other than a vacancy caused by removal, even if the remaining directors do not constitute a quorum. The NHP stockholders entitled to vote for the election of directors at an annual or special meeting of NHP stockholders may fill a vacancy resulting from the removal of a director.
Standard of Conduct for Directors
Ventas
With respect to Ventas, under Delaware law, the standards of conduct for directors have developed through written opinions of the Delaware courts in cases decided by them. Generally, directors of a Delaware corporation are subject to a duty of loyalty, a duty of care and a duty of candor to the corporation's stockholders. The duty of loyalty requires directors to refrain from self-dealing. According to the Delaware Supreme Court, the duty of care requires "directors in managing the corporate affairs
to use that amount of care which ordinarily careful and prudent men would use in similar circumstances," and the duty of candor requires directors "to disclose fully and fairly all material information within the board's control when it seeks stockholder action." Later case law has established "gross negligence" as the test for breach of the standard for the duty of care in the process of decision-making by directors.
NHP
With respect to NHP, the standard of conduct for directors is set forth in Section 2-405.1(d)-(g) of Maryland law, which requires that a director of a Maryland corporation perform his or her duties in good faith with a reasonable belief that the director's actions are in the best interests of the corporation and with the care of an ordinarily prudent person in a like position under similar circumstances. Maryland law provides that a director is presumed to satisfy this standard of conduct.
Amendment of Charter and Bylaws
Ventas
The affirmative vote of the holders of a majority of the outstanding shares entitled to vote is required to amend the Ventas charter, according to Delaware law. Under Delaware law, the holders of the outstanding shares of a class is entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would increase or decrease the aggregate number of authorized shares of such class, increase or decrease the par value of the shares of such class, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. If any proposed amendment would alter or change the powers, preferences or special rights of one or more series of any class so as to affect them adversely, but will not so affect the entire class, then only the shares of the series so affected by the amendment are considered a separate class for the purposes of this provision. Additionally, the Ventas charter provides that the provisions on "Restrictions of Ownership and Transfer; Designation of Excess Shares" contained in Article IX of the Ventas charter may be amended only by the affirmative vote of the holders of not less than two-thirds of the votes entitled to be cast by the holders of shares entitled to vote generally in the election of directors.
The Ventas bylaws may be amended (i) by the affirmative vote of the holders of at least 662/3% of the voting power of all shares entitled to vote in the election of directors or (ii) by action of the board of directors at a regular or special meeting thereof. Any bylaws made by the Ventas board of directors may be amended or repealed by action of the stockholders at any annual or special meeting of stockholders.
NHP
The NHP charter may be amended only if the amendment is declared advisable by the NHP board of directors and approved by NHP stockholders by the affirmative vote of the holders of at least two-thirds of the shares entitled to vote on the amendment. However, the provisions relating to (i) business combinations, (ii) board of directors classification and removal and (iii) redemption, as described, respectively, in Sections 2, 3 and 4 of Article V of the NHP charter, may be amended only with the affirmative vote of the holders of at least 90% of the shares entitled to vote on the amendment.
The NHP bylaws may be amended by the affirmative vote of (i) the holders of a majority of the outstanding NHP shares entitled to vote on the amendment or (ii) a majority of the NHP board of directors, except that the NHP board of directors cannot amend the provisions relating to the number of independent directors, approval of transactions by independent directors, duties of independent
directors and composition of the investment committee as described, respectively, in Sections 2, 12 and 13 of Article III and Section 4 of Article IV of the NHP bylaws.
Stockholder Action Without a Meeting
Ventas
The Ventas charter and bylaws provide that action may be taken without a meeting of Ventas stockholders, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of 80% of the outstanding Ventas shares entitled to vote. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent must be given to those stockholders who have not consented in writing.
NHP
The NHP bylaws provide that any action to be taken by the stockholders other than the election of directors may be taken without a meeting, if, and only if, prior to such action, all stockholders entitled to vote thereon consent in writing to such action being taken.
Ventas
Under the Ventas bylaws, special meetings of stockholders, unless otherwise prescribed by statute, may be called at any time only by the Ventas board of directors or the chairman of the Ventas board of directors.
NHP
Under the NHP bylaws, special meetings can be called by the chairman of the NHP board of directors, the Chief Executive Officer, the President or by a majority of the NHP board of directors. A special meeting may also be called by the Secretary upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.
Ventas
The Ventas bylaws allow stockholders to submit business or a proposal (including but not limited to, the nomination of any person for election as a director). To be properly brought before an annual meeting of stockholders, the stockholder must have given timely notice thereof in writing to Ventas's Secretary. To be timely, a stockholder's notice must be delivered to or mailed and received at Ventas's principal executive offices not earlier than 150 nor later than 120 days prior to the first anniversary of the date of the preceding year's annual meeting;provided,however, that if the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year's annual meeting or if no annual meeting was held in the preceding year, notice by the stockholder to be timely must be so delivered not earlier than 150 days prior to the date of the annual meeting nor later than either 120 days prior to the date of such annual meeting or 10 days following the day on which public announcement of the date of such meeting is first made. The public announcement of a postponement or adjournment of an annual meeting will not commence a new time period for the giving of a stockholder's notice as described above. For a stockholder seeking to nominate a candidate for director, the notice must describe various matters regarding the nominee, including name, address, occupation and number of shares held, and other specified matters. For a stockholder seeking to propose other business, the notice must include a description of the proposed business, the reasons for the proposal and other specified matters.
NHP
Under the NHP bylaws, for nominations or other business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary and such other business must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder's notice must be delivered to NHP's Secretary at NHP's principal executive office not earlier than 150 days nor later than 120 days prior to the first anniversary of the date of mailing of the notice for the preceding year's annual meeting;provided,however, that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year's annual meeting, notice by the stockholder to be timely must be so delivered not earlier than 150 days prior to the date of the annual meeting and not later than the later of 120 days prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. The public announcement of a postponement or adjournment of an annual meeting will not commence a new time period for the giving of a stockholder's notice as described above. For a stockholder seeking to nominate a candidate for director, the notice must describe various matters regarding the nominee, including name, address, occupation and number of shares held, and other specified matters. For a stockholder seeking to propose other business, the notice must include a description of the proposed business, the reasons for the proposal and other specified matters.
Limitation of Liability of Directors and Officers
Ventas
As permitted by Delaware law, the Ventas charter provides that the directors of Ventas will not be personally liable to Ventas or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for a breach of a director's duty of loyalty to Ventas or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of Delaware law, or (iv) for any transaction from which a director derived an improper personal benefit.
NHP
The NHP charter provides that the liability of NHP directors and officers for money or other damages is limited to the fullest extent permitted by Maryland law. Therefore, NHP directors and officers shall have no liability for money or other damages except to the extent that (i) it is proven that the director or officer actually received an improper benefit or profit, or (ii) a judgment or other final adjudication adverse to the director or officer is entered in a proceeding based on a finding in the proceeding that the action, or failure to act, of the director or officer, was the result of active and deliberate dishonesty, and was material to the cause of action.
Ventas
To the fullest extent authorized by Delaware law, the Ventas charter provides that Ventas will indemnify any person who was or is made a party to or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative because he or she is or was one of Ventas's directors or officers, or is or was serving at Ventas's request as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise, against all expenses, liabilities and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by him or her in connection with such proceeding.
In Delaware, indemnification is mandatory where a present or former director or officer has been successful on the merits or otherwise in any suit or matter covered by the indemnification statute (Section 145(c) of Delaware law). It covers expenses (including attorney's fees) actually and reasonably incurred by the director or officer in the matter. Permissive indemnification (Section 145(a), (b) and (d) of Delaware law) is authorized upon a determination that the corporate representative has met the applicable standard of conduct required,i.e., that he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and that, with respect to any criminal proceeding, he had no reason to believe his conduct was unlawful.
Additionally, Ventas may provide by action of its board of directors through agreement, resolution or by a provision in its bylaws, indemnification of its employees and agents with substantially the same scope and effect as the indemnification provided for directors and officers. Expenses incurred by such a person in his or her capacity as one of Ventas's directors or officers (and not in any other capacity in which service was or is rendered by such person while a director or officer) in defending a proceeding may be paid by Ventas in advance of the final disposition of such proceeding as authorized by the Ventas board of directors in a specific case upon receipt of an undertaking by or on behalf of that person to repay such amounts unless it is ultimately determined that such person is entitled to be indemnified by Ventas as authorized by Delaware law. Expenses incurred by a person in any capacity other than one of Ventas's officers or directors may be paid in advance of the final disposition of a proceeding on such terms and conditions, if any, as the Ventas board of directors deems appropriate.
NHP
The NHP charter and bylaws provide for indemnification of NHP officers and directors against liabilities to the fullest extent permitted by Maryland law, as amended from time to time. Under Maryland law, a corporation may indemnify any director or officer made a party to any proceeding by reason of service as a director or officer unless it is established that (i) the act or omission of such person was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; or (ii) such person actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, such person had reasonable cause to believe that the act or omission was unlawful. The indemnity may include judgments, penalties, fines, settlements and reasonable expenses actually incurred by the director or officer in connection with the proceeding;provided,however, that if the proceeding is one by, or in the right of, the corporation, indemnification is not permitted with respect to any proceeding in which the director or officer had been adjudged to be liable to the corporation unless approved by a court (except where the individual is adjudged to be liable on the basis of improper receipt of a personal benefit). The termination of any proceeding by conviction, upon a plea ofnolo contendere or its equivalent or upon an entry of an order of probation prior to judgment creates a rebuttable presumption that the director or officer did not meet the requisite standard of conduct required for permitted indemnification. The termination of any proceeding by judgment, order or settlement, however, does not create a presumption that the director or officer failed to meet the requisite standard of conduct for permitted indemnification. Unless limited by the charter, if a director or officer has been successful, on the merits or otherwise, in the defense of any such proceeding, or in the defense of any claim, issue or matter in the proceeding, such director or officer must be indemnified by the corporation for his or her reasonable expenses, including attorney's fees incurred in such defense. Whether or not director or officer has met the standard of care described above, a court may order such indemnification as it shall deem proper.
Ventas
With respect to Ventas, under Delaware law, dividends may be declared by the board of directors of a corporation and paid out of surplus, and, if no surplus is available, out of any net profits for the then current fiscal year or the preceding fiscal year, or both,provided that such payment would not reduce capital below the amount of capital represented by all classes of outstanding stock having a preference as to the distribution of assets upon liquidation of the corporation. Ventas's charter provides that, after the requirements regarding preferential dividends or amounts are met for any series of preferred stock entitled to them, holders of Ventas common stock are entitled to dividends or distributions, if any, as may be declared from time to time by the Ventas board of directors.
NHP
With respect to NHP, Maryland law permits a corporation, subject to any restriction in its charter, to make any distribution authorized by the board of directors unless, after the distribution, the corporation would not be able to pay its debts as they become due in the usual course of business or the corporation's total assets would be less than the sum of its total liabilities, plus the amount that would be needed if the corporation were dissolved at the time of the distribution to satisfy senior liquidation preferences. In determining whether a distribution is permitted, the board of directors may rely either on (i) financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances or (ii) a fair valuation or other method that is reasonable under the circumstances. In addition, the corporation is permitted to make a distribution so long as the distribution is made from (i) the net earnings of the corporation for the fiscal year in which the distribution is made, (ii) its net earnings for the preceding fiscal year or (iii) the sum of its net earnings for the preceding eight fiscal quarters.
Stockholder Rights; Stockholder Lists
Ventas
With respect to Ventas, under Delaware law, any stockholder may for any proper purpose, inspect a corporation's stock ledger, a list of its stockholders and its other books and records, and may make copies of and extracts from the record. A stockholder may exercise this right only upon written demand under oath. The inspection must occur during regular business hours. The Ventas bylaws provide that at least 10 days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting shall be open to the examination of any stockholder, for any purpose germane to the meeting. The Ventas bylaws also require that the list be produced and kept at the time and place of the meeting during the whole time thereof, and the list may be inspected by any stockholder who is present at the meeting.
NHP
With respect to NHP, pursuant to Maryland law, one or more persons who together are and have been stockholders of record of a corporation for at least six months and in total hold at least 5% of the outstanding stock of any class may inspect and copy the corporation's books of account and stock ledger, request a written statement of the corporation's affairs and request a list of the corporation's stockholders. In addition, any stockholder of a Maryland corporation may (i) inspect and copy the bylaws, minutes of the proceedings of stockholders, annual statement of affairs, and voting trust agreements and (ii) request the corporation provide a sworn statement showing all stock, as well as any other securities, issued and all consideration received by the corporation during the preceding 12 months.
Ventas
The merger approval procedure in Delaware begins with the adoption of a resolution by the board of directors of each of two or more corporations approving an agreement of merger and declaring the merger advisable (Section 251(b) of Delaware law). This agreement must then be approved by the affirmative vote of the holders of a majority of the outstanding shares entitled to vote at an annual or special meeting of each corporation (Section 251(c) of Delaware law), and no class vote is required unless provided in the certificate of incorporation. Unless otherwise provided in the certificate of incorporation, a stockholder vote is not required in the case of a Delaware corporation surviving a merger if (i) the agreement of merger does not amend in any respect the certificate of incorporation of the corporation, (ii) each share of stock outstanding immediately prior to the effective date of the merger is to be an identical outstanding or treasury share of the surviving corporation after the effective date of the merger and (iii) either (A) no shares of common stock of the surviving corporation and no shares, securities or obligations convertible into such stock are to be issued or delivered under the agreement of merger or (B) the authorized and unissued shares or the treasury shares of common stock of the surviving corporation to be issued or delivered under the agreement of merger plus those initially issuable upon conversion of any other shares, securities or obligations to be issued or delivered under such plan, do not exceed 20% of the shares of common stock of the corporation outstanding immediately prior to the effective date of the merger (Section 251(f) of Delaware law).
NHP
The merger approval procedure in Maryland begins with the adoption, by the board of directors of each corporation, of a resolution declaring that the proposed merger is advisable and that the merger is to be submitted for consideration at either an annual or special meeting of the stockholders. After notice is given to all of the stockholders stating that the purpose of the meeting will be to consider the proposed merger, the proposed merger must be approved by the affirmative vote of two-thirds of all votes entitled to be cast, unless a different proportion is provided in the charter of the corporation, but not less than a majority. The NHP charter does not provide for a different proportion for merger approval.
Ventas
As a Delaware corporation, Ventas is subject to the provisions of Section 203 of Delaware law. In general, Section 203 prohibits a public Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the time at which such person became an interested stockholder unless: (i) prior to such time, the board of directors approved either the business combination or transaction in which the stockholder became an interested stockholder; or (ii) upon becoming an interested stockholder, the stockholder owned at least 85% of the corporation's outstanding voting stock other than shares held by directors who are also officers and certain employee benefit plans; or (iii) the business combination is approved by both the board of directors and by holders of at least 662/3% of the corporation's outstanding voting stock (at a meeting and not by written consent), excluding shares owned by the interested stockholder. For these purposes, a "business combination" includes mergers, asset sales and other similar transactions with an "interested stockholder," and "interested stockholder" means a stockholder that, together with its affiliates and associates, owns (or, under certain circumstances, has owned within the prior three years) more than 15% of the outstanding voting stock. Although Section 203 permits a corporation to elect not to be governed by its provisions, Ventas has not made this election.
NHP
The Maryland Business Combination Act, which we refer to as the MBCA, provides, as a general rule, that, unless an exemption from the MBCA applies, a corporation may not engage in any "business combinations" with an interested stockholder or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in certain circumstances specified in the MBCA, an asset transfer or issuance or reclassification of equity securities, liquidation or dissolution plans, and receipt of certain benefits by the interested stockholder. Maryland law defines an "interested stockholder" as (i) any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the company's shares, or (ii) an affiliate of the company who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the company's then outstanding voting stock. A person is not an "interested stockholder" under the business combination provisions of Maryland law if the board of directors approved in advance the transaction by which such person would otherwise have become an interested stockholder. Even if a business combination between a corporation and an interested stockholder is not prohibited by the general rule, it must be recommended by the corporation's board of directors and approved by the affirmative vote of at least (a) 80% of the votes entitled to be cast by holders of outstanding shares of the corporation's voting stock and (b) two-thirds of the votes entitled to be cast by holders of the corporation's voting stock other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or by an affiliate or associate of the interested stockholder. These super-majority vote requirements do not apply if the corporation's common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. None of these provisions of Maryland law will apply, however, to business combinations that are approved or exempted by the corporation's board of directors prior to the time that the interested stockholder becomes an interested stockholder.
Additionally, the NHP charter contains a supermajority business combination vote requirement. The affirmative vote of the holders of not less than 90% of the outstanding shares of voting stock of NHP is required to approve a business combination of NHP with a greater than 10% shareholder. However, such 90% voting requirement is not applicable if: (i) the NHP board of directors by unanimous vote or written consent expressly approves in advance the acquisition of voting stock or approved the business combination prior to the 10% stockholder becoming a 10% stockholder; or (ii) the business combination is solely between NHP and another corporation, 100% of the voting stock of which is owned directly or indirectly by NHP.
Ventas
None of the Ventas charter, the Ventas bylaws or Delaware law includes a control share acquisition provision.
NHP
With respect to NHP, Maryland law provides that "control shares" of a corporation acquired in a "control share acquisition" have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast, excluding shares owned by an acquiring person, by an officer of the corporation or an employee of the corporation who is also a director of the corporation. "Control shares" are voting shares of stock which, if aggregated with all other voting shares of stock previously acquired by a person, or over which such person is able to directly or indirectly exercise voting power,
except solely by revocable proxy, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:
Generally, "control share acquisition" means the acquisition of control shares. A person who has made or proposes to make a control share acquisition may require the board of directors to call a special meeting of stockholders to consider voting rights for the shares if the person agrees to pay the corporation's expenses of the meeting. The meeting must be held within 50 days of demand. If no request for a meeting is made, the corporation may present the question at any stockholders' meeting.
If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then, subject to conditions and limitations, the corporation may redeem any or all of the control shares (unless the charter or bylaws provide otherwise), except those for which voting rights previously have been approved, for fair value. Fair value is determined without regard to the absence of voting rights for control shares, as of the date of the last control share acquisition or of any meeting of stockholders at which the voting rights of control shares are considered and not approved. Unless the charter or bylaws provide otherwise, before a control acquisition has occurred, if voting rights for control shares are approved at a stockholders meeting and the acquiring person becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise the rights of objecting stockholders to receive the fair value of their shares. The fair value of the shares as determined for this purpose may not be less than the highest price per share paid in the control share acquisition. Certain limitations and restrictions otherwise applicable to the exercise of dissenters' rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction, or to acquisitions approved or exempted by its charter or bylaws. The NHP bylaws have exempted any shares of NHP stock that are acquired by Cohen & Steers Capital Management, Inc. or its associates from the application of the control share acquisition statute.
Neither Ventas nor NHP has in effect a stockholder rights plan.
Ventas
With respect to Ventas, under Delaware law, stockholders who dissent from a merger or consolidation of the corporation have the right to demand and receive payment of the fair value of their stock, as appraised by the Delaware Chancery Court (Section 262 of Delaware law). Delaware law provides that dissenters' rights are inapplicable (i) to stockholders of a surviving corporation whose vote is not required to approve the merger or consolidation, and (ii) to any class of stock listed on a national securities exchange or designated as a Nasdaq National Market security or held of record by over 2,000 stockholders, unless, in either case, such stockholders are required in the merger to accept in exchange for their shares anything other than (1) shares of the surviving corporation, (2) stock of another corporation which is either listed on a national securities exchange or designated as a Nasdaq National Market security, (3) cash in lieu of fractional shares of such corporations, or (4) or any combination of the above. Neither the Ventas charter nor the Ventas bylaws contains any additional provisions relating to dissenters' rights of appraisal. Holders of Ventas stock may not be entitled to
appraisal rights in connection with mergers or consolidations involving Ventas, depending on the consideration payable in connection therewith.
NHP
With respect to NHP, except for transactions governed by the MBCA described above, no objecting stockholder rights are available if the corporation's shares are listed on a national securities exchange unless stockholders, in exchange for their shares, are receiving cash (other than in lieu of fractional shares), or consideration other than stock or depositary receipts of the successor, in a merger, consolidation or share exchange in which the directors and executive officers were the beneficial owners, in the aggregate, of 5% or more of the outstanding voting stock of the corporation at any time during the prior year and the stock held by the directors and executive officers, or any of them, is converted or exchanged in the transaction for stock of a person, or an affiliate of a person, who is a party to the transaction on terms that are not otherwise available to all holders. This provision does not apply when the directors' and/or executive officers' stock is held in a compensatory plan or arrangement approved by the board of directors and the treatment of the stock in the transaction is approved by the board (Section 3-202(d) of the Maryland law). Neither the NHP charter nor the NHP bylaws contain any additional provisions relating to the rights of objecting stockholders.
Constituency and Related Provisions
Ventas
None of the Ventas charter, the Ventas bylaws or Delaware law allows the Ventas board of directors to consider the effect of the potential acquisition of control on constituencies other than the corporation and its stockholders, such as employees, suppliers, customers and creditors of the corporation and on communities in which offices or other establishments of the corporation are located.
NHP
With respect to NHP, under Maryland law, the charter may include a provision permitting the directors, in considering a potential acquisition of control of the corporation, to consider the effect of the potential acquisition on the corporation's stockholders, employees, customers, creditors, suppliers and communities in which offices or other establishments of the corporation are located. Accordingly, directors may reject an offer because of the effect that the acquisition would have on non-stockholder constituencies or accept a lower priced offer that the directors believe is more favorable to all of the corporation's constituencies. The NHP charter does not include such a provision. However, Maryland law also states that the inclusion or absence of such a provision does not create an inference as to what factors may be considered by the board of directors.
HCT 2015 Annual Stockholder Meeting and Stockholder Proposals
If the merger ismergers are completed on the expected timetable, NHPHCT does not intend to hold a 20112015 annual meeting of its stockholders. However, if the merger is not completed, or if NHPHCT is otherwise required to do so under applicable law, NHPHCT would hold a 20112015 annual meeting of stockholders. Because NHP's 2011Rule 14a-8 under the Exchange Act addresses when a company must include a stockholder's proposal in its proxy statement and identify the proposal in its form of proxy when the company holds an annual or special meeting if it is held, is not expectedof stockholders. Under Rule 14a-8, in order for a stockholder proposal to be held until after the date that is 30 days following the first anniversary of NHP's 2010 annual meeting, the deadlineconsidered for inclusion of any stockholder proposal in the proxy statement and form of proxy for NHP's 2011card relating to HCT's 2015 annual meeting of stockholders, the proposal must be received at HCT's principal executive offices no later than December 29, 2014. Any proposal received after the applicable time in the previous sentence will be considered untimely.
For any proposal that is a reasonable time before NHP begins to print and mail itsnot submitted for inclusion in HCT's proxy materialsmaterial for the 20112015 annual meeting. In ordermeeting of stockholders but is instead sought to be includedpresented directly at that meeting, Rule 14a-4(c) under the Exchange Act permits HCT's management to exercise discretionary voting authority under proxies it solicits unless HCT receive timely notice of the proposal in the proxy statement, such proposals must complyaccordance with the requirements as to form and substance established by the SEC for such proposals and the notice and other requirementsprocedures set forth in the NHPHCT bylaws. In addition,Under the HCT bylaws, for a stockholder who wishes to make a proposal at NHP's 2011 annual meeting must comply with the notice and other requirements set forth in the NHP bylaws. Pursuant to the NHP bylaws, that notice must have been submitted in writing and delivered to the secretary of NHP not later than the later of 120 days prior to the date of the annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.
Stockholder proposals intended to be presentedproperly submitted for presentation at the Ventas 2012HCT's 2015 annual meeting of stockholders, HCT's secretary must be received by Ventas no later thanreceive written notice of the proposal at HCT's principal executive offices during the period beginning on November 29, 2011 in order to be included2014 and ending at 5:00 p.m., Eastern Time, on December 29, 2014. Any proposal received after the applicable time in the proxy statement and form of proxy relating to that meeting. In order toprevious sentence will be included in the proxy statement, such proposals must comply with the requirements as to form and substance established by the SEC for such proposals. A stockholder who wishes to make a proposal at the Ventas annual meeting without submitting the proposal in the proxy statement and form of proxy relating to that meeting must comply with the notice and other requirements set forth in the Ventas bylaws. Pursuant to the Ventas bylaws, that notice must have been submitted in writing and delivered to the secretary of Ventas between December 14, 2011 and January 13, 2012.considered untimely.
The validity of the shares of Ventas common stock to be issued in the merger will behave been passed upon for Ventas by Wachtell, Lipton, Rosen & Katz. Certain U.S. federal income tax consequences relating to the merger willhave also bebeen passed upon for Ventas by Wachtell, Lipton, Rosen & Katz and for NHPHCT by Skadden, Arps, Slate, Meagher & FlomProskauer Rose LLP.
The consolidated financial statements and schedule of Ventas appearing in Ventas's Annual Report (Form 10-K)as of and for each of the yearyears ended December 31, 2010 (including the financial statement schedule appearing therein),2013 and 2012 and management's assessment of the effectiveness of Ventas's internal control over financial reporting as of December 31, 20102013 have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
The consolidated statements of income, comprehensive income, equity, and cash flows of Ventas, Inc. for the year ended December 31, 2011 and the 2011 information in the financial statement Schedule III, included in Amendment No. 1 to Ventas, Inc.'s Annual Report on Form 10-K/A have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reportsits report thereon, included therein, and incorporated herein by reference. Such consolidated statements of income, comprehensive income, equity, and cash flows of Ventas, Inc. for the year ended December 31, 2011 and the 2011 information in the financial statementsstatement Schedule III, included in Amendment No. 1 to Ventas, Inc.'s Annual Report on Form 10-K/A are incorporated herein by reference in reliance upon such reportsreport given on the authority of such firm as experts in accounting and auditing.
The audited consolidated financial statements and financial statement schedule of Atria Senior Living Group, Inc. and subsidiaries and One Lantern Senior Living Inc and subsidiaries as of and for the years ended December 31, 2010 and 2009,HCT incorporated by reference in this joint proxy statement/prospectus and elsewhere in the registration statement have been so incorporated by reference to Ventas's Current Report on Form 8-K, filed on April 11, 2011, have been audited by Deloitte & Touchein reliance upon the report of Grant Thornton LLP, independent auditorsregistered public accountants, upon the authority of said firm as statedexperts in their reports, which are incorporated herein by reference. Such financial statements havegiving said report.
been incorporated by reference herein in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of NHP appearing in NHP's Annual Report (Form 10-K) for the year ended December 31, 2010 (including the financial statement schedule appearing therein), and the effectiveness of NHP's internal control over financial reporting as of December 31, 2010 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
As of the date of this joint proxy statement/prospectus, neither the Ventas board of directors nor the NHP board of directors knows of any matters that will be presented for consideration at either the Ventas special meeting or the NHP special meeting other than as described in this joint proxy statement/prospectus. In accordance with Ventas's bylaws, NHP's bylaws, Delaware law and Maryland law, business transacted at the Ventas special meeting and the NHP special meeting will be limited to those matters set forth in the respective accompanying notice of special meeting. Nonetheless, if any other matter is properly presented at the Ventas special meeting or the NHP special meeting, or any adjournments or postponements of such meetings, and are voted upon, including matters incident to the conduct of the meeting, the enclosed proxy card will confer discretionary authority on the individuals named therein as proxies to vote the shares represented thereby as to any such other matters. It is intended that the persons named in the enclosed proxy card and acting thereunder will vote in accordance with their best judgment on any such matter.
WHERE YOU CAN FIND MORE INFORMATIONINFORMATION; INCORPORATION BY REFERENCE
Ventas and NHPHCT file annual, quarterly and current reports proxy statements and other information with the SEC under the Exchange Act. YouSEC. Ventas stockholders and HCT stockholders may read and copy any of thisthese reports, statements or other information filed by Ventas and HCT at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC also maintains an Internetinternet website that contains reports, proxy and information statements, and other information regarding issuers, including Ventas and NHP,HCT, who file electronically with the SEC. The address of that site iswww.sec.gov.
Investors may also consult Ventas's or NHP's website for more information concerning the merger described in this joint proxy statement/prospectus. Ventas's website iswww.ventasreit.comhttp://www.sec.gov. NHP's website iswww.nhp-reit.com. Information included on these websites is not incorporated by reference into this joint proxy statement/prospectus.
Ventas has filed with the SEC a registration statement of which this joint proxy statement/prospectus forms a part. The registration statement registerson Form S-4 to register with the SEC the shares of Ventas common stock to be issued to NHPHCT stockholders pursuant to the merger agreement. This proxy statement/prospectus forms a part of that registration statement and constitutes a prospectus of Ventas, in connection with the merger.addition to being a proxy statement of HCT for its special meeting. The registration statement, including the exhibits and schedules, thereto, contains additional relevant information about Ventas common stock. Theand HCT. As allowed by SEC rules, and regulationsthis proxy statement/prospectus does not contain all of the SEC allow Ventas and NHP to omit certain information includedyou can find in the registration statement from this joint proxy statement/prospectus.or the exhibits and schedules to the registration statement.
In addition, theThe SEC allows Ventas and NHPHCT to "incorporate by reference" information into this proxy statement/prospectus. This means that Ventas and HCT can disclose important information to you by referring you to other documentsanother document filed separately with the SEC. ThisThe information incorporated by reference is considered to be a part of this joint proxy statement/prospectus, except for any information that is superseded by information that is included directly in this jointproxy statement/prospectus or incorporated by reference subsequent to the date of this proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference the documents listed below that Ventas hasand HCT have previously filed with the SEC;provided,however, that we are not incorporating by reference, in each case, any documents, portions of documents or information deemed to have been furnished and not filed in accordance with SEC rules. The documents listed belowSEC. They contain important information about Ventas itsand HCT and the financial condition or other matters.of each company.
Ventas SEC Filings (File No. 001-10989) | Period and/or Date Filed | |
|---|---|---|
| Annual Report on Form 10-K | Fiscal year ended December 31, 2013 (as amended by Annual Report on Form 10-K/A) | |
Quarterly Report on Form 10-Q | Quarter ended March 31, 2014 (as amended by Quarterly Report on Form 10-Q/A); quarter ended June 30, 2014; and quarter ended September 30, 2014 | |
Current Reports on Form 8-K or 8-K/A | February 14, 2014; March 13, 2014; April 15, 2014; April 17, 2014; April 25, 2014 (two filings on this date); May 16, 2014; June 2, 2014; June 5, 2014; July 9, 2014; July 11, 2014; August 12, 2014; September 2, 2014; September 16, 2014 (two filings on this date); September 18, 2014 (two filings on this date); September 29, 2014; October 24, 2014; October 29, 2014; and December 1, 2014 (in each case, other than the portions of those documents not deemed to be filed) | |
Definitive Proxy Statement on Schedule 14A | Filed on April 4, 2014 | |
Description of Ventas capital stock included in its Registration Statement on Form 8-A, including any subsequently filed amendments and reports filed for the purpose of updating such descriptions | Filed on January 23, 1992, as amended |
HCT SEC Filings (File No. 000-54688) | Period and/or Date Filed | |
|---|---|---|
| Annual Report on Form 10-K | Fiscal year ended December 31, 2013 | |
Quarterly Report on Form 10-Q | Quarter ended March 31, 2014; quarter ended June 30, 2014; and quarter ended September 30, 2014 | |
Current Reports on Form 8-K or 8-K/A | January 14, 2014; February 25, 2014; February 27, 2014; March 27, 2014; April 1, 2014; April 3, 2014 (two filings on this date); April 7, 2014; April 8, 2014; April 9, 2014; April 15, 2014; April 28, 2014; May 5, 2014; May 14, 2014; May 28, 2014; June 2, 2014 (two filings on this date); June 3, 2014; June 5, 2014; June 30, 2014; July 15, 2014; July 30, 2014; August 12, 2014; August 29, 2014; September 16, 2014; September 26, 2014; October 31, 2014 (the first filing on this date); and November 28, 2014 (in each case other than the portions of those documents not deemed to be filed) | |
Definitive Proxy Statement on Schedule 14A | Filed on April 28, 2014 |
In addition, Ventas incorporatesand HCT incorporate by reference herein any future filings it makesadditional documents that they may file with the SEC underpursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial registration statement and prior to effectiveness of the registration statement and between the date of this joint proxy statement/prospectus and prior to the effective date of the merger. SuchHCT's special stockholder meeting (other than information furnished pursuant to Item 2.02 or Item 7.01 of any Current Report on Form 8-K or exhibits filed under Item 9.01 relating to those Items, unless expressly stated otherwise therein). These documents are considered to be a part ofinclude periodic reports, such as annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Ventas has supplied all information contained in or incorporated by reference into this joint proxy statement/prospectus effective as of the date such documents are filed. In the event of conflictingrelating to Ventas and Merger Sub, and HCT has supplied all information contained in these documents, the information in the latest filed document should be considered correct.this proxy statement/prospectus relating to HCT.
You can obtain any of the documents listed above from the SEC, through the SEC's website at the address described above or from VentasDocuments incorporated by requesting them in writing or by telephone at the following address:
General CounselVentas, Inc.10350 Ormsby Park PlaceSuite 300Louisville, Kentucky 40223Telephone: (502) 357-9000
These documentsreference are available from Ventas without charge upon written or oral request, excluding any exhibits to themthose documents, unless the exhibit is specifically listedincorporated by reference as an exhibit to the registration statement of which this joint proxy statement/prospectus forms a part. You can obtain any of these documents by requesting them in writing or by telephone from the appropriate company at:
Ventas, Inc.
Attention: Corporate Secretary
353 North Clark Street, Suite 3300
Chicago, Illinois 60654
(877) 483-6827
http://www.ventasreit.com
This joint proxy statement/prospectus also incorporates by reference the documents listed below that NHP has previously filed with the SEC;American Realty Capital Healthcare Trust, Inc.
Attention: Secretary
405 Park Avenue, 14th Floor
New York, New York 10022
(212) 415-6500providedhttp://www.archealthcaretrust.com,however, that we are not incorporating by reference, in each case, any documents, portion of documents or information deemed to have been furnished and not filed in accordance with SEC rules. The documents listed below contain important information about NHP, its financial condition or other matters.
In addition, NHP incorporates by reference any future filings it makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this joint proxy statement/prospectus and prior to the date of the NHP special meeting. Such documents are considered to be a
part of this joint proxy statement/prospectus, effective as In order to receive timely delivery of the daterequested documents in advance of HCT's special stockholder meeting, we must receive such documents are filed. In the event of conflicting information in these documents, the information in the latest filed document should be considered correct.
You can obtain any of these documents from the SEC, through the SEC's website at the address described above, or NHP will provide you with copies of these documents, without charge, upon written or oral request to:
Nationwide Health Properties, Inc.610 Newport Center DriveSuite 1150Newport Beach, CA 92660Attention: Investor RelationsTelephone: (949) 718-4400
If you are a stockholder of Ventas or a stockholder of NHP and would like to request documents, please do so by no later than [ • ], 2011 to receive them before the Ventas special meeting and the NHP special meeting.2014. If you request any documents from Ventas or NHP,HCT, Ventas or NHP, as applicable,HCT will mail them to you by first classfirst-class mail, or another equally prompt means, within one business day after Ventas or NHPHCT receives your request.
This document You may also obtain these documents at the SEC's website,http://www.sec.gov, and may obtain certain of these documents at Ventas's website,www.ventasreit.com, by selecting "Investor Relations" and then selecting "SEC Filings," and at HCT's website,www.archealthcaretrust.com, by selecting "Investors" and then selecting "Public Filings" and then selecting "SEC Filings." Information not filed with the SEC, but contained on Ventas's website or HCT's website, is a prospectus ofexpressly not incorporated by reference into this proxy statement/prospectus.
Ventas and is a jointHCT are not incorporating the contents of the websites of the SEC, Ventas, HCT or any other person into this proxy statement ofstatement/prospectus. Ventas and NHPHCT are providing only the information about how to obtain certain documents that are incorporated by reference into this proxy statement/prospectus at these websites for theyour convenience.
Ventas special meeting and the NHP special meeting. Neither Ventas nor NHP hasHCT have not authorized anyone to give any information or make any representation about the merger or Ventas or NHPtheir companies that is different from, or in addition to, that contained in this joint proxy statement/prospectus or in any of the materials that Ventas or NHP hasare incorporated by reference into this joint proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this proxy statement/prospectus or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement/prospectus does not extend to you. The information contained in this joint proxy statement/prospectus speaksis accurate only as of the date of this joint proxy statement/prospectus, unless the information specifically indicates that another date applies.
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
By and Among
VENTAS, INC.,
NEEDLES ACQUISITIONSTRIPE SUB, LLC,
andSTRIPE OP, LP,
NATIONWIDE HEALTH PROPERTIES,AMERICAN REALTY CAPITAL HEALTHCARE TRUST, INC.,
AND
AMERICAN REALTY CAPITAL HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P.
Dated as of February 27, 2011June 1, 2014
| | | Page | ||||
|---|---|---|---|---|---|---|
Article I DEFINITIONS | ||||||
| A-2
| ||||||
Section 1.1 | Definitions | |||||
Article II THE MERGERS | ||||||
A-12
| ||||||
Section 2.1 |
| |||||
Section 2.2 | Closing | |||||
Section 2.3 | Effective Time | |||||
Section 2.4 | Organizational Documents of the Surviving Entity and Surviving Partnership | |||||
Section 2.5 | Tax Consequences | |||||
Section 2.6 |
| |||||
Article III EFFECT OF THE MERGERS | ||||||
A-15
| ||||||
Section 3.1 | Effect | |||||
Section 3.2 |
| |||||
Section 3.3 |
| |||||
Section 3.4 |
| |||||
Section 3.5 |
| A-19 | ||||
Section 3.6 |
| A-19 | ||||
Section 3.7 |
| A-19 | ||||
| Termination of Exchange Fund | A-20 | ||||
Section 3.9 | No Liability | A-20 | ||||
Section 3.10 | Equity Awards | A-20 | ||||
Section 3.11 | Withholding Rights | A-20 | ||||
Section 3.12 | Lost Certificates | A-21 | ||||
Section 3.13 | Dissenters' Rights | A-21 | ||||
Section 3.14 | Fractional Shares | A-21 | ||||
Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY OPERATING PARTNERSHIP | A-21 | |||||
Section 4.1 | Organization and Qualification; Subsidiaries | |||||
Section 4.2 | Organizational Documents | |||||
Section 4.3 | Capital Structure | |||||
Section 4.4 | Authority | |||||
Section 4.5 | No Conflict; Required Filings and Consents | |||||
Section 4.6 | Permits; Compliance With Law | |||||
Section 4.7 | SEC Filings; Financial Statements | |||||
Section 4.8 | Disclosure Documents | |||||
Section 4.9 | Absence of Certain Changes or Events | |||||
Section 4.10 | Employee Benefit Plans | |||||
Section 4.11 | Labor and Other Employment Matters | |||||
Section 4.12 | Material Contracts | |||||
Section 4.13 | Litigation | |||||
Section 4.14 | Environmental Matters | |||||
Section 4.15 | Intellectual Property | |||||
Section 4.16 | Properties | |||||
Section 4.17 | Taxes | |||||
Section 4.18 | Insurance | |||||
|
| |||||
A-i
| | | Page | |||||||
|---|---|---|---|---|---|---|---|---|---|
Section 4.19 | Opinion of Financial Advisor | A-38 | |||||||
Section 4.20 | Takeover Statutes | ||||||||
Section 4.21 | Vote Required | ||||||||
Section 4.22 | Brokers | ||||||||
Section 4.23 | Investment Company Act | ||||||||
Section 4.24 | Affiliate Transactions | ||||||||
Section 4.25 | Advisor | A-39 | |||||||
Section 4.26 | [Reserved] | A-40 | |||||||
Section 4.27 | [Reserved] | A-40 | |||||||
Section 4.28 | [Reserved] | A-40 | |||||||
Section 4.29 | Fees and Disbursements | A-40 | |||||||
Section 4.30 | No Other Representations or Warranties | ||||||||
Article V | |||||||||
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB | A-41 | ||||||||
Section 5.1 | Organization and Qualification; Subsidiaries | ||||||||
Section 5.2 | Organizational Documents | ||||||||
Section 5.3 | Capital Structure | ||||||||
Section 5.4 | Authority | ||||||||
Section 5.5 | No Conflict; Required Filings and Consents | ||||||||
Section 5.6 | Permits; Compliance With Law | ||||||||
Section 5.7 | SEC Filings; Financial Statements | ||||||||
Section 5.8 | Disclosure Documents | ||||||||
Section 5.9 | Absence of Certain Changes or Events | ||||||||
Section 5.10 |
| ||||||||
Section 5.11 |
| ||||||||
|
| ||||||||
|
| ||||||||
|
| ||||||||
|
| ||||||||
|
| ||||||||
| Taxes | A-47 | |||||||
Section |
| ||||||||
| Vote Required | ||||||||
Section | Brokers | ||||||||
Section | Investment Company Act | ||||||||
Section | Sufficient Funds | ||||||||
Section | Ownership of Merger Sub; No Prior Activities | ||||||||
Section |
| ||||||||
Section |
| ||||||||
Section | No Other Representations or Warranties | ||||||||
Article VI | |||||||||
COVENANTS AND AGREEMENTS | A-48 | ||||||||
Section 6.1 | Conduct of Business by the Company | ||||||||
Section 6.2 | Conduct of Business by Parent and Merger Sub | ||||||||
Section 6.3 | Preparation of Form S-4 and | ||||||||
Section 6.4 | Access to Information; Confidentiality | ||||||||
Section 6.5 |
| ||||||||
Section 6.6 | Appropriate Action; Consents; Filings | ||||||||
Section 6.7 | Notification of Certain Matters; Transaction Litigation | ||||||||
Section 6.8 |
| ||||||||
Section 6.9 | Public Announcements | A-63 | |||||||
Section 6.10 | Directors' and Officers' Indemnification and Insurance | ||||||||
|
| ||||||||
Section 6.11 | Certain Tax Matters | ||||||||
Section 6.12 | Merger Sub | A-65 | |||||||
Section 6.13 | Section 16 Matters | A-65 | |||||||
Section 6.14 | Stock Exchange Listing | A-65 | |||||||
Section 6.15 | Voting of Shares | A-66 | |||||||
A-ii
| | | Page | |||||||
|---|---|---|---|---|---|---|---|---|---|
Section | Termination of Company Equity Plans | A-66 | |||||||
Section 6.17 | Financing | A-66 | |||||||
Section 6.18 | Dividends | A-66 | |||||||
Section 6.19 | Treatment of Outstanding Indebtedness; Payoff Letter | A-67 | |||||||
Section |
| ||||||||
|
| ||||||||
|
| ||||||||
|
| ||||||||
|
| ||||||||
Article VII CONDITIONS | |||||||||
A-68
| |||||||||
Section 7.1 | Conditions to the Obligations of Each Party | ||||||||
Section 7.2 | Conditions to the Obligations of Parent and Merger Sub | ||||||||
Section 7.3 | Conditions to the Obligations of the Company | ||||||||
Article VIII | |||||||||
TERMINATION, AMENDMENT AND WAIVER | A-70 | ||||||||
Section 8.1 | Termination | ||||||||
Section 8.2 | Effect of Termination | A-72 | |||||||
Section 8.3 |
| A-73 | |||||||
Section 8.4 | Amendment | A-75 | |||||||
Section 8.5 | Waiver | A-75 | |||||||
Section 8.6 | Fees and Expenses | A-76 | |||||||
| Transfer Taxes | A-76 | |||||||
Article IX GENERAL PROVISIONS | A-76 | ||||||||
Section 9.1 | Non-Survival of Representations and Warranties | A-76 | |||||||
Section 9.2 | Notices | A-76 | |||||||
Section 9.3 | Interpretation; Certain Definitions | A-77 | |||||||
Section 9.4 | Severability | ||||||||
Section 9.5 | Assignment; Delegation | ||||||||
Section 9.6 | Entire Agreement | ||||||||
Section 9.7 | No Third-Party Beneficiaries | A-78 | |||||||
Section 9.8 | Specific Performance | A-78 | |||||||
Section 9.9 | Counterparts | ||||||||
Section 9.10 | Governing Law | ||||||||
Section 9.11 | Consent to Jurisdiction | ||||||||
Section 9.12 | WAIVER OF JURY TRIAL | A-79 | |||||||
Section 9.13 | Consents and Approvals | A-80 | |||||||
Exhibit A | Term Sheet for Amended and Restated Limited Partnership Agreement | |||||
Schedule 6.11(c) | Certain Tax Matters |
A-iii
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 27, 2011June 1, 2014 (this "Agreement"), is made by and among Ventas, Inc., a Delaware corporation ("Parent"), Needles AcquisitionStripe Sub, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Parent ("Merger Sub"), and Nationwide Health Properties,Stripe OP, LP ("OP Merger Sub"), a Delaware limited partnership, American Realty Capital Healthcare Trust, Inc., a Maryland corporation (the "Company") and American Realty Capital Healthcare Trust Operating Partnership, L.P. (the "Company Operating Partnership").
WHEREAS, the Company is a Maryland corporation operating as a real estate investment trust for U.S. federal income tax purposes;
WHEREAS, Parent is a Delaware corporation operating as a real estate investment trust for U.S. federal income tax purposes;
WHEREAS, the parties hereto wish to effect a business combination transaction in which the Company will be merged with and into Merger Sub, with Merger Sub being the surviving entity (the "Merger"), and each outstanding share of common stock, $0.01 par value $0.10 per share (the "Company Common Stock"), of the Company will be converted into the right to receive the Merger Consideration, (as defined herein), upon the terms and subject to the conditions set forth in this Agreement and in accordance with the MGCL and the DLLCA;
WHEREAS, the respective boardsparties also wish to effect a merger of directors ofOP Merger Sub with and into the Company Operating Partnership, with the Company Operating Partnership continuing as the surviving partnership (the "Partnership Merger" and Parent havetogether with the Merger, the "Mergers") upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DRULPA;
WHEREAS, the Company Board has approved this Agreement, the Merger and the other transactions contemplated by this Agreement and declared that this Agreement, the Merger and the other transactions contemplated by this Agreement are advisable;
WHEREAS, the respective boards of directors ofParent Board has approved this Agreement, the CompanyMerger and Parent have directedthe other transactions contemplated by this Agreement and declared that this Agreement, the Merger and the other transactions contemplated by this Agreement are advisable;
WHEREAS, the Company Board has directed that the Merger and, to the extent stockholder approval is required, the other transactions contemplated by this Agreement, be submitted for consideration at meetingsa meeting of their respectivethe Company's stockholders and havehas resolved to recommend that their respectivethe Company's stockholders vote to approve this Agreement and the Merger and, to the extent stockholder approval is required, the other transactions contemplated by this Agreement;
WHEREAS, Parent, in its capacity as the sole member of Merger Sub, has taken all actions required for the execution of this Agreement by Merger Sub and to adopt and approve this Agreement and to approve the consummation by Merger Sub of the Merger and the other transactions contemplated by this Agreement;
WHEREAS, the Company, as the sole general partner of the Company Operating Partnership, and Merger Sub, as the sole general partner of OP Merger Sub, have each separately approved this Agreement, the Partnership Merger and the transactions contemplated by this Agreement and declared that this Agreement, the Partnership Merger and the other transactions contemplated by this Agreement are advisable, and the Company has determined that the Partnership Merger and the other transactions contemplated by this Agreement are fair to, advisable and in the best interests of the holders of units of limited partnership interests in the Company Operating Partnership (the "OP Units");
WHEREAS, for United StatesU.S. federal income tax purposes, (and, where applicable, state and local income tax purposes), the parties intendit is intended that the Merger willshall qualify as a reorganization"reorganization" under, and within the meaning of, Section 368(a) of the Internal Revenue Code, of 1986, as amended (the "Code") and that this Agreement is intended to be and is hereby adopted as a plan"plan of reorganizationreorganization" for the Merger for purposes of Sections 354 and 361 of the Code; and
WHEREAS, each of the Company, Parent and Merger Subparties hereto desire to make certain representations, warranties, covenants and agreements in connection with the Merger,Mergers, and also to prescribe various conditions to the Merger.Mergers.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants and subject to the conditions herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
"1989 Plan" shall mean the Company's 1989 Stock Option Plan, as amended and restated.
"2005 Plan" shall mean the Company's 2005 Performance Incentive Plan, as amended.
"Acceptable Confidentiality Agreement" shall mean a customary confidentiality agreement containing termsthat contains provisions as to the treatment of confidential information that are no less favorable in any material respect to the Company and the other Company Entities than the terms set forththose contained in the Company Confidentiality Agreement;provided,however, that such confidentiality agreement shall expressly permit any Company Entity's compliance with any provision of this Agreement, and shall not prohibitcontain any provision that adversely affects the rights of the Company Entity thereunder upon compliance by the Company Entity with any provision of the provisions ofSection 6.5.this Agreement.
"Action" shall mean any claim, action, suit, charge, demand, directive, inquiry, subpoena, proceeding, arbitration, mediation or other investigation.
"Affiliate" of a specified Person shall mean a Person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.
"Aggregate Cash ConsiderationBenefit Plan" shall mean any "employee benefit plan" (within the summeaning of (i) the Cash Option Payment, if applicable,Section 3(3) of ERISA) and (ii) the aggregate amountany employment, consulting, termination, severance, change in control, separation, retention stock option, restricted stock, profits interest unit, outperformance, stock purchase, deferred compensation, bonus, incentive compensation, fringe benefit, health, medical, dental, disability, accident, life insurance, welfare benefit, cafeteria, vacation, paid with respecttime off, perquisite, retirement, pension, or savings or any other compensation or employee benefit plan, agreement, program, policy or other arrangement, whether or not subject to fractional shares in accordance withSection 3.7.
"Atria Agreement" shall mean that certain Merger Agreement, dated as of October 21, 2010, by and among Parent, Ventas SL I, LLC, Ventas SL II, LLC, Ventas SL III, LLC, Atria Holdings LLC, Lazard Senior Housing Partners LP, LSHP Coinvestment Partnership I LP, Atria Senior Living Group, Inc., One Lantern Senior Living Inc, and LSHP Coinvestment I Inc.ERISA.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day on which all banking institutions in New York, New York or Los Angeles, California are authorized or obligated by Law or executive order to close.close (provided that, with respect to filings to be made with the SEC, a day on which such a filing is to be made is a Business Day only if the SEC is open to accept filings).
"Code" shall mean the U.S. Internal Revenue Code of 1986, as amended.
"Company Benefit Plan" shall mean each material "employee pension benefit plan" (as defined in Section 3(2) of ERISA), each material "employee welfare benefit plan" (as defined in Section 3(1) of ERISA), each employment, termination or severance agreement and each other material plan, arrangement or policy (written or oral) relating to stock options, stock purchases, deferred compensation, bonus, severance, retention, fringe benefits, cash- or equity-based incentive, health, medical, dental, disability, accident, life insurance, vacation, paid time off, perquisite, severance, change of control, retention, employment, separation, retirement, pension, or savings or other employee benefits, in each case maintained or contributed to, or required to be maintained or contributed to, by the Company or the Company Subsidiaries, other than any Multiemployer Plan or any plan, arrangement or policy mandated by applicable Law.
"Company ConfidentialityCredit Agreement" shall mean the letter agreement,First Amended and Restated Senior Unsecured Credit Agreement, dated November 19, 2010,as of July 24, 2013, by and among American Realty Capital Healthcare Trust Operating Partnership, L.P., Key Bank National Association, as agent for the lenders, and the parties thereto, as amended from time to time, betweenby the CompanyFirst Amendment thereto, dated as of January 23, 2014 and Parent.the Second Amendment thereto, dated as of April 7, 2014.
"Company Employment AgreementEntities" shall mean the Company and the Company Subsidiaries.
"Company Equity Plans" shall mean each contract or agreement (whether written or unwritten) of the Company or any Company Subsidiary with or addressed to any individual who is rendering or has rendered services thereto as an employee, director or consultant pursuant to which any Company or Subsidiary has any actual or contingent liability or obligation to provide compensation and/or benefits in consideration for past, present or future services.following: (i) the Employee and Director Incentive Restricted Share Plan of American Realty Capital Healthcare Trust, Inc., (ii) the American Realty Capital Healthcare Trust, Inc. 2011 Stock Option Plan, and (iii) the OPP Agreement.
"Company Material Adverse Effect" shall mean any event, circumstance, change or effect (a) that is material and adverse to the business, assets, properties, liabilities, financial condition (financial or otherwise) or results of operations of the Company and the Company Subsidiaries, taken as a whole or (b) that will, or would reasonably be expected to, prevent or materially impair the ability of the Company Parent or Merger Sub to consummate the MergerMergers before the Outside Date;provided,however, that for purposes of clause (a) "Company Material Adverse Effect" shall not include any event, circumstance, change or effect to the extent arising out of or resulting from (i) any failure of the Company to meet any internal or external projections or forecasts or any decrease in the market pricenet asset value of the Company Common Stock (it being understood and agreed that any event, circumstance, change or effect giving rise to such failure or decrease shallmay otherwise be taken into account in determining whether there has been a Company Material Adverse Effect), (ii) any events, circumstances, changes or effects that affect the healthcare REIT industryindustries in which the Company and the Company Subsidiaries operate generally, (iii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (iv) any changes in the
legal or regulatory conditions, in the geographic regions in which the Company and the Company Subsidiaries operate or own or lease properties, (v) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage, (vi) the negotiation, execution or announcement of this Agreement, or the consummation or anticipation of the MergerMergers or other transactions contemplated hereby, including the impact of any of the foregoing on relationships, contractual or otherwise, with tenants, suppliers, lenders, investors, future partners or employees, (vii) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request or with the prior written consent of an executive officer of Parent, (viii) earthquakes, hurricanes, floods or other natural disasters, (ix) any damage or destruction of any Company Property that is substantially covered by insurance, or (x) changes in Law or GAAP or the interpretation thereof, which in the case of each of clauses (ii), (iii), (iv), (v) and (x) do not disproportionately affect the Company and the Company Subsidiaries, taken as a whole, relative to other similarly situated participants in the healthcare REIT industryindustries in which the United States,Company and the Company Subsidiaries operate, and in the case of clauses (iv) andclause (viii) do not disproportionately affect the Company and the Company Subsidiaries, taken as a whole, relative to other participants in the healthcare REIT industryindustries in which the Company and the Company Subsidiaries operate in the geographic regions in which the Company and the Company Subsidiaries operate or own or lease properties.
"Company Option" shall mean any outstanding option to purchase shares of Company Common Stock under any of the Company Plans.
"Company Performance Share" shall mean any shares of Company Common Stock that are subject to performance-based conditions granted pursuant to the Company Plans.
"Company Plans" shall mean the 1989 Plan and the 2005 Plan.
"Company Restricted Stock" shall mean any shares of Company Common Stock that are subject to restrictions on transfer and/or forfeiture granted pursuant to the Company Plans or otherwise.
"Company Restricted Stock UnitShares" shall mean any restricted stock unitsshares granted pursuant to the Company Plans.Equity Plans, as in effect as of the date hereof.
"Company Severance Pay Plan" shall mean a Company Benefit Plan that is (i) an employee welfare benefit plan" within the meaning of Section 3(1) of ERISA and (2) constitutes a "severance pay plan" that satisfies each of the conditions set forth in Department of Labor Regulation Section 2510.3-2.
"Company Stockholder Meeting" shall mean the meeting of the holders of shares of Company Common Stock for the purpose of seeking the Company Stockholder Approval, including any postponement andor adjournment thereof.
"Company Subsidiary" shall mean (a)the Company Operating Partnership and any corporation, of which more than fifty percent (50%) of the outstanding voting securities is directly or indirectly owned by the Company, (b) anyother partnership, limited liability company, joint venture, business trust, real estate investment trust or other organization, whether incorporated or unincorporated, or other legal entity of which more than fifty percent (50%) of(a) the total equity interest isCompany and/or the Company Operating Partnership directly or indirectly ownedowns or controls at least a majority of the capital stock or other equity interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions, (b) the Company or of which the Company and/or any Person that is a Company Subsidiary by reason of the application of clause (a) or clause (c) of this definition of "Company Subsidiary" is a general partner, manager, managing member, trustee, director or the equivalent, (c) the Company and/or the Company Operating Partnership, directly or indirectly, holds a majority of the beneficial, equity, capital, profits or other economic interest, and (c) MS NHP Mass, Inc.(d) all of the joint ventures listed onSection 1.1 of the Company Disclosure Letter of which the Company or a Company Subsidiary is the managing member.
"Company Title Insurance PolicyThird Party" shall mean each policyany Person or group of title insurance insuring the Company's or the applicable Company Subsidiary's (or the applicable predecessor's) title to or leasehold interest in Company Properties, subject to the matters and printed exceptions set forth inPersons other than the Company Title Insurance Policies.and its Affiliates.
"Confidentiality AgreementsAgreement" shall mean the letter agreement, dated April 9, 2014, between the Company Confidentiality Agreement and Parent, concerning the Parent Confidentiality Agreement.disclosure of certain information concerning the Company, as amended, modified or supplemented from time to time.
"control" (including the terms "controlled by" and "under common control with") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and
policies of a person,Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.
"Delaware Secretary" shall mean the Secretary of State of the State of Delaware.
"DLLCA" shall mean the Delaware Limited Liability Company Act.Act, as amended.
"DRULPA" shall mean the Delaware Revised Uniform Limited Partnership Act, as amended.
"Environmental Law" shall mean any Law (including common law) relating to the pollution or protection of the environment (including air, surface water, groundwater, land surface or subsurface land), or human health or safety (as such matters relate to Hazardous Materials)Substances), including Laws relating to the use, handling, presence, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.Substances.
"Environmental Permit" shall mean any permit, approval, license or other authorization required under any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" shall mean with respect to any entity, trade or business (whether or not incorporated) that, together with any other entity, trade or business that(whether or not incorporated), is or was at the relevant time,required to be treated as a member of a group described insingle employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business, or that is, or was at the relevant time, a member of the same "controlled group" as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.amended, and the rules and regulations promulgated thereunder.
"Expense AmountExchange Ratio" shall mean $20,000,000.0.1688.
"Expenses" shall mean all expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates)Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, and filing of the Form S-4, the preparation, printing, filing and mailing of the Joint Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Form S-4 and the Joint Proxy Statement, the solicitation of stockholder approvals, engaging the services of the Exchange Agent, obtaining third party consents, any other filings with the SEC and all other matters related to the closing of the MergerMergers and the other transactions contemplated by this Agreement.
"GAAP" shall mean the United States generally accepted accounting principles.
"Governmental Authority" shall mean any United States (federal, state or local) or foreign government, arbitration panel, or any governmental or quasi-governmental, regulatory, judicial or administrative authority, board, bureau, agency, commission (including the IRS and any other U.S. federal authority, board, bureau, agency, commission or other body and any state, local and/or foreign Tax authority, board, bureau, agency, commission or other body) or self-regulatory organization.
"Hazardous Substances" shall mean (i) those substances listed in, defined in or regulated under any Environmental Law, including without limitation, the following federal statutes and their state counterparts, as each may
be amended from time to time, and all regulations thereunder: the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic Substances Control Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; and (iii) polychlorinated biphenyls, mold, methane, asbestos, and radon.
"Indebtedness" shall mean, with respect to any Person, without duplication, (i) all indebtedness, notes payable, accrued interest payable or other obligations for borrowed money, whether secured or unsecured, (ii) all indebtedness evidenced by a note, bond, debenture or other similar instrument or debt security, (iii) all obligations under conditional sale or other title retention agreements, or incurred as financing, in either case with respect to property acquired by such Person, (iii)(iv) all obligations issued, undertaken or assumed as the deferred purchase price for any property or assets, (iv)(v) all obligations under capital leases, (v)(vi) all obligations in respect of bankers acceptances or letters of credit, (vi)(vii) all obligations under
interest rate cap, swap, collar or similar transaction or currency hedging transactions (valued at the termination value thereof), and (viii) any indebtedness or obligations of another Person (the "Other Person") of the type referred to in the foregoing clauses (i) through (vii) (A) that is guaranteed by such Person or (B) in respect of which such Person pledges its assets or provides any guaranteeother credit support, or (C) in respect of anywhich such Person has promised to maintain or cause to be maintained the financial position or financial covenants of such Other Person or to purchase such indebtedness of such Other Person, together, in the case of each of the foregoing, whether or not evidenced by a note, mortgage, bond, indenture or similar instrument.with all accrued and unpaid interest, premiums, penalties, breakage costs, make-whole amounts and other fees and expenses (if any) relating thereto.
"Indemnitee" shall mean any individual who, onat or prior to the Effective Time, was an officer, director, partner, member, trustee or trusteeagent of the Company or served on behalf of the Company as an officer, director, partner, member or trustee of any of the Company Subsidiaries.
"Intellectual Property" shall mean all United States and foreign (i) patents, patent applications, invention disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) trademarks, service marks, trade dress, logos, trade names, corporate names, Internet domain names, design rights and other source identifiers, together with the goodwill symbolized by any of the foregoing, (iii) copyrightable works and copyrights, (iv) confidential and proprietary information, including trade secrets, know-how, ideas, formulae, models and methodologies, (v) all rights in the foregoing and in other similar intangible assets, and (vi) all applications and registrations for the foregoing.
"Intervening Event" shall mean any material event or development or material change in circumstances first occurring after the date of this Agreement and prior to receipt of the Company Stockholder Approval, to the extent that such event, development or change in circumstances was not reasonably foreseeable (or if foreseeable, the consequences of which were not reasonably foreseeable) as of or prior to the date of this Agreement;provided,however, that in no event shall the following events, developments or changes in circumstances constitute an Intervening Event: (A) the receipt, existence or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof or (B) changes in the market price or trading volume of the Company Common Stock or Parent Common Stock or the fact that the Company meets or exceeds (or that Parent fails to meet or exceed) internal or published projections, forecasts or revenue or earnings predictions for any period;provided,however, that the underlying causes of such change or fact shall not be excluded by this clause (B).
"Investment Company Act" shall mean the Investment Company Act of 1940, as amended.amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the United States Internal Revenue Service.Service or any successor agency.
"knowledge" shall mean the actual knowledge of the following officers and employees of the Company and Parent Parties, as applicable, after inquiry reasonable under the circumstances: (i) for the Company: Douglas M. Pasquale, Abdo H. Khoury, Donald D. Bradley, and Roger E. Laty;each person identified as an executive officer of the Company in the Company's 2014 proxy statement; and (ii) for Parent: Debra A. Cafaro, Raymond J. Lewis, T. Richard Riney and Brian K. Wood.any of the Parent Parties: each person identified as an executive officer of Parent in Parent's 2014 proxy statement.
"Law" shall mean any and all domestic (federal, state or local) or foreign laws, rules, regulations, orders, judgments or decrees promulgated by any Governmental Authority.
"Lender Consents" shall mean the consents and approvals required pursuant to the terms of any Indebtedness of the Company or any of the Company Subsidiaries as a result of the execution and delivery of this Agreement by the Company or the performance of this Agreement and the consummation of the Mergers and the other transactions contemplated hereby by the Company, which consents and approvals shall be in form and substance reasonably satisfactory to Parent.
"Lien" shall mean with respect to any asset (including any security), any mortgage, deed of trust, claim, condition, covenant, lien, pledge, charge, security interest, preferential arrangement, option or other third party right (including right of first refusal or first offer), restriction, right of way, easement, or title defect or encumbrance of any kind in respect of such asset, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.
"LTIP Unit" shall mean an OP Unit designated as an LTIP Unit under the Company Operating Partnership Agreement, as in effect as of the date hereof, that was issued to the Company Advisor pursuant to the terms and conditions of the OPP Agreement.
"MGCL" shall mean the Maryland General Corporation Law.Law, as amended from time to time.
"Minimum Distribution Dividend" shall mean a distribution with respect to the Company'seither (i) any taxable year of the Company ending aton or prior to the Closing Date or (ii) any taxable year of Parent ending on or prior to the last day of Parent's taxable year that includes the Merger, and, in each case, which is required to be paid by the Company or Parent, as applicable, prior to the Effective Time which is sufficient to allow the Company to (i)(a) satisfy the distribution requirements set forth in Section 857(a) of the Code and (ii)(b) avoid, to the extent possible, the imposition of income tax under Section 857(b) of the Code and the imposition of excise tax under Section 4981 of the Code.
"Multiemployer PlanNASDAQ" shall mean any "multiemployer plan" within the meaning of Section 3(37) of ERISA.
"NHP/PMB" shall mean NHP/PMB L.P., a Delaware limited partnership.
"NHP/PMB Partnership Agreement" shall mean that certain Amended and Restated Agreement of Limited Partnership of NHP/PMB, dated as of April 1, 2008, as amended.NASDAQ Stock Market.
"NYSE" shall mean the New York Stock Exchange.
"OPP Agreement" shall mean the American Realty Capital Healthcare Trust, Inc. 2014 Advisor Multi-Year Outperformance Agreement, made as of April 7, 2014, between the Company, the Company Operating Partnership and the Company Advisor, as in effect on the date hereof subject toSection 3.10(b).
"Order" shall mean a judgment, order or decree of a Governmental Authority.
"Parent Benefit PlanEntities" shall mean each material "employee pension benefit plan" (as defined in Section 3(2) of ERISA), each material "employee welfare benefit plan" (as defined in Section 3(1) of ERISA), each employment, termination or severance agreementParent and each other material plan, arrangement or policy (written or oral) relating to stock options, stock purchases, deferred
compensation, bonus, severance, retention, fringe benefits, cash- or equity-based incentive, health, medical, dental, disability, accident, life insurance, vacation, paid time off, perquisite, severance, change of control, retention, employment, separation, retirement, pension, or savings or other employee benefit, in each case maintained or contributed to, or required to be maintained or contributed to, by Parent or the Parent Subsidiaries, other than any Multiemployer Plan or any plan, arrangement or policy mandated by applicable Law.
"Parent Confidentiality Agreement" shall mean the letter agreement, dated January 25, 2011, as amended from time to time, between Parent and the Company.including Merger Sub.
"Parent LeaseEquity Plans" means each of the following: (i) the Ventas 2000 Incentive Compensation Plan (Employee Plan), as amended (formerly known as the 1997 Incentive Compensation Plan); (ii) the Ventas, Inc. 2004 Stock Plan for Directors, as amended; (iii) the Ventas Employee and Director Stock Purchase Plan, as amended; (iv) the Ventas, Inc. 2006 Incentive Plan, as amended; (v) the Ventas, Inc. 2006 Stock Plan for Directors, as amended; (vi) the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, as amended; (vii) the Ventas, Inc. 2012 Incentive Plan; (viii) the Ventas Nonemployee Directors' Deferred Stock Compensation Plan, as amended; and (ix) the Ventas Executive Deferred Stock Compensation Plan, as amended.
"Parent Expense Amount" shall mean each lease and sublease that was in effect as of December 31, 2010 and to which Parent, Merger Sub or the other Parent Subsidiaries are parties as lessors or sublessors with respect to each of the applicable Parent Properties.ten million dollars ($10,000,000).
"Parent Material Adverse Effect" shall mean any event, circumstance, change or effect (a) that is material and adverse to the business, assets, properties, liabilities, financial condition (financial or otherwise) or results of operations of the Parent Merger Sub and the other Parent Subsidiaries, taken as a whole or (b) that will, or would reasonably be expected to, prevent or materially impair the ability of the Company, Parent or Merger SubParties to consummate the MergerMergers before the Outside Date;provided,however, that for purposes of clause (a) "Parent Material Adverse Effect" shall not include any event, circumstance, change or effect to the extent arising out of or resulting from (i) any failure of Parent to meet any internal or external projections or forecasts or any decrease in the market price of the Parent Common Stock (it being understood and agreed that any event, circumstance, change or effect giving rise to such failure or decrease shallmay otherwise be taken into account in determining whether there has been a Parent Material Adverse Effect), (ii) any events, circumstances, changes or effects that affect the healthcare REIT industryindustries in which Parent and the Parent Subsidiaries operate generally, (iii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (iv) any changes in the legal or regulatory conditions, in the geographic regions in which Parent and the Parent Subsidiaries operate or own or lease properties, (v) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage, (vi) the negotiation, execution or announcement of this Agreement, or the consummation or anticipation of the MergerMergers or other transactions contemplated hereby, including the impact of any of the foregoing on relationships, contractual or otherwise, with tenants, suppliers, lenders, investors, future partners or employees, (vii) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request or with the prior written consent of an executive officer of the Company, (viii) earthquakes, hurricanes, floods or other natural disasters, (ix) any damage or destruction of any real property owned or leased (as lessee or sublessee), including ground leased, by Parent Propertyor any Parent Subsidiary (including any buildings, structures and other improvements and fixtures located on or under such real property and any easements, rights and other appurtenances to such real property) that is substantially covered by insurance, or (x) changes in Law or GAAP or the interpretation thereof, which in the case of each of clauses (ii), (iii), (iv), (v) and (x) do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other similarly situated participants in the healthcare REIT industryindustries in which Parent and the United States,Parent Subsidiaries operate generally, and in the case of clauses (iv) andclause (viii) do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other participants in the healthcare REIT industryindustries in which Parent and the Parent Subsidiaries operate in the geographic regions in which Parent and the Parent Subsidiaries operate or own or lease properties.
"Parent Material Contract" shall mean each contract or agreement in effect as of the date of this Agreement to which Parent or any Parent Subsidiary is a party (specifically excluding (x) any contract or agreement that will no longer be in effect following the Closing and (y) any contract or agreement that is, or at the Closing will be, terminable-at-will (as defined below) or terminable upon not more than ninety (90) days' notice by Parent or any Parent Subsidiary without penalty) that is required to be filed as an exhibit to the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and Current Reports on Form 8-K subsequent thereto filed by Parent SEC Filingsas of the date hereof pursuant to Items 601(b)(2), (4), (9) and (10) of Regulation S-K promulgated by the SEC. A contract or agreement is "terminable-at-will", as that expression is used in this definition if it expressly provides that it is terminable-at-will, regardless of whether any covenant of good faith and fair dealing may be implied as a matter of law in connection with the termination thereof.
"Parent Stockholder MeetingParties" shall mean the meeting of the holders of shares of Parent, Common Stock for the purpose of seeking the Parent Stockholder Approval, including any postponementMerger Sub and adjournment thereof.OP Merger Sub.
"Parent Subsidiary" shall mean (a) any corporation, of which more than fifty percent (50%) of the outstanding voting securities is directly or indirectly owned by Parent, or (b) anyother partnership, limited liability company, joint venture, business trust, real estate investment trust or other organization, whether incorporated or unincorporated, or other legal entity of which more than fifty percent (50%) of the total equity interest is(a) Parent directly or indirectly ownedowns or controls at least a majority of the capital stock or other equity interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions, (b) Parent or of which Parent and/or any Person that is a Parent Subsidiary by reason of the application of clause (a) or clause (c) of this
definition of "Parent Subsidiary" is a general partner, manager, managing member, trustee, director or the equivalent.equivalent, or (c) Parent, directly or indirectly, holds a majority of the beneficial, equity, capital, profits or other economic interest.
"Parent Title Insurance PolicyPer Share Cash Amount" shall mean each policy of title insurance insuring Parent's or the applicable Parent Subsidiary's (or the applicable predecessor's) title to or leasehold interest in Parent Properties, subject to the matters and printed exceptions set forth in the Parent Title Insurance Policies.$11.33.
"Person" shall mean an individual, corporation, partnership, limited partnership, limited liability company, person (including without limitation, a "person""person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or other entity or a governmentGovernmental Authority or a political subdivision, agency or instrumentality of a government.Governmental Authority.
"Representative" shall mean, with respect to any Person, such Person's directors, officers, employees, consultants, advisors (including without limitation, attorneys, accountants, consultants, investment bankers, and financial advisors), agents and other representatives.representatives (including, with respect to the Company, the Company Advisor and its directors, officers and employees).
"Sarbanes-Oxley Act" shall mean the Sarbanes-Oxley Act of 2002, as amended.
"SEC" shall mean the United States Securities and Exchange Commission (including the staff thereof).
"Securities Act" shall mean the Securities Act of 1933, as amended.amended, and the rules and regulations promulgated thereunder.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of Regulation S-X (17 C.F.R. Part 210).
"Tax" or "Taxes" shall mean any and all federal, state, local or foreign or other taxes of any kind, together with any interest, penalties and additions to tax, imposed by any Governmental Authority, including taxes on or with respect to income, franchises, gross receipts, gross income, property, sales, use, transfer, capital stock, escheat, payroll, employment, unemployment, alternative or add on minimum, estimated and net worth, and taxes in the nature of excise, withholding, backup withholding and value added taxes.
"Tax Return" shall mean any return, report or similar statement, together with any attached exhibit or schedule that is provided or required to be provided to a Governmental Authority with respect to Taxes, including information returns, refunds claims, amended returns and declarations of estimated Tax.
"Termination Fee" shall mean fifty-five million dollars ($55,000,000).
"Termination Payment" shall mean the Parent Expense Amount or the sum of the Termination Fee, andas the Expense Amount, as applicable and payable pursuant toSection 8.3.context may require.
"Third Party" shall mean any Person or group of Persons other than Parent, Merger Sub and their respective Affiliates.
"VWAP of Parent Common Stock" shall mean the volume weighted average price of Parent Common Stock for the ten (10) trading days immediately prior to the Closing Date, starting with the opening of trading on the first trading day to the closing of the last trading day prior to the Closing Date, as reported by Bloomberg.
(b) The following terms shall have the respective meanings set forth in the Section set forth below opposite such term:
| Acceptable Confidentiality Agreement | Section 1.1(a) | |
| Acquisition Proposal | Section 6.5(h)(i) | |
| Action | Section 1.1(a) | |
| Adverse Recommendation Change | Section 6.5(d) | |
| Advisory Agreement | Section 4.25 | |
| Affiliate | Section 1.1(a) | |
| Preamble | ||
| Allocation Agreement | Section | |
| Alternative Acquisition Agreement | Section 6.5(a) | |
| Articles of Merger | Section 2.3(a) | |
| Section 1.1(a) | ||
| Book-Entry Share | Section 3.1(b) | |
| Business Day | Section 1.1(a) | |
| Cash | Section | |
| Cash Conversion Number | Section 3.2(a) | |
| Cash Election | Section 3.1(a)(ii)(1) | |
| Cash Election Number | Section 3.2(b)(i) | |
| Cash Election Shares | Section 3.1(a)(ii)(1) | |
| Certificate | Section 3.1(b) | |
| Section | ||
| Class | Section | |
| Closing | Section 2.2 | |
| Closing Date | Section 2.2 | |
| Code | ||
| Company | Preamble | |
| Company | Section | |
| Company | Section | |
| Company Board | Section 4.4(a) | |
| Company Bylaws | Section 4.2 | |
| Company Charter | Section 4.2 | |
| Company Common Stock | Recitals | |
| Company | Section 1.1(a) | |
| Company Disclosure Letter | Article IV | |
| Company | Section | |
| Company | Section 1.1(a) | |
| Company Insurance Policies | Section 4.18 | |
| Company Leases | Section | |
| Company Material Adverse Effect | Section 1.1(a) | |
| Company Material Contract | Section 4.12(a) | |
| Company | Preamble | |
| Company Operating Partnership Agreement | Section | |
| Company Permits | Section 4.6(a) | |
| Company Permitted Liens | Section 4.16(b) | |
| Company Preferred Stock | Section 4.3(a) | |
| Company Properties | Section 4.16(a) | |
| Company Property | Section 4.16(a) |
| Company Recommendation | Section 4.4(a) | |
| Company Restricted | Section 1.1(a) |
| Company SEC Filings | Section 4.7(a) | |
| Company Stockholder Approval | Section 4.21 | |
| Company Stockholder Meeting | Section 1.1(a) | |
| Company Subsidiary | Section 1.1(a) | |
| Company Subsidiary Partnership | Section 4.17(i) | |
| Company Tax Protection Agreements | Section | |
| Company Tax Representation Letter | Section 6.1(b) | |
| Company Third Party | Section | |
| Company Title Insurance Policies | Section 4.16(g) | |
| Company Title Insurance Policy | Section | |
| Confidentiality | Section 1.1(a) | |
| control | Section 1.1(a) | |
| D&O Insurance | Section | |
| Debt Financing | Section 6.17 | |
| Delaware Secretary | Section 1.1(a) | |
| Section | ||
| Section 1.1(a) | ||
| Effective Time | Section 2.3(a) | |
| Election | Section 3.3(a) | |
| Election Deadline | Section 3.3(d) | |
| Environmental Law | Section 1.1(a) | |
| Environmental Permit | Section 1.1(a) | |
| ERISA | Section 1.1(a) | |
| ERISA Affiliate | Section 1.1(a) | |
| Exchange Act | Section 1.1(a) | |
| Exchange Agent | Section | |
| Exchange Agent Agreement | Section 3.3(d) | |
| Exchange Fund | Section | |
| Exchange Ratio | ||
| Section 1.1(a) | ||
| Expenses | Section 1.1(a) | |
| Form of Election | Section 3.3(b) | |
| Form S-4 | Section 4.5(b) | |
| Frontier | Section 4.17(c) | |
| Funded Debt Payoff Amount | Section 6.19 | |
| GAAP | Section 1.1(a) | |
| Governmental Authority | Section 1.1(a) | |
| Hazardous Substances | Section 1.1(a) | |
| HCT II | Section 4.25 | |
| Holder | Section 3.3 | |
| Indebtedness | Section 1.1(a) | |
| Indemnitee | Section 1.1(a) | |
| Inquiry | Section 6.5(a) | |
| Intellectual Property | Section 1.1(a) | |
| Interim Period | Section 6.1(a) | |
| Intervening Event | Section 1.1(a) | |
| Investment Company Act | Section 1.1(a) | |
| IRS | Section 1.1(a) | |
| knowledge | Section 1.1(a) | |
| Law | Section 1.1(a) | |
| Section | ||
| Lien | Section 1.1(a) |
| Listing Agreement | Section | |
| Section | ||
| LTIP Unit | Section 1.1(a) | |
| Mailing Date | Section 3.3(c) | |
| Management Agreement | Section 4.25 | |
| Manager | Section 4.25 | |
| MD Courts | Section 9.11(a) | |
| Merger | Recitals | |
| Merger Consideration | Section |
| 3.1(a)(ii) | ||
| Merger Sub | Preamble | |
| Merger Sub | Section 3.1(c) | |
| Mergers | Recitals | |
| MGCL | Section 1.1(a) | |
| Minimum Distribution Dividend | Section 1.1(a) | |
| Section 1.1(a) | ||
| Section | ||
| Notice of | Section 6.5(e) | |
| NYSE | Section 1.1(a) | |
| Preamble | ||
| OPP Agreement | Section | |
| OPP Termination Agreement | Section 3.10(b) | |
| OP Units | Recitals | |
| Order | Section 1.1(a) | |
| Other Company Subsidiary | Section 4.1(c) | |
| Outside Date | Section 8.1(b)(i) | |
| Parent | Preamble | |
| Parent | Section | |
| Parent Board | Section | |
| Parent Bylaws | Section 5.2 | |
| Parent Charter | Section 5.2 | |
| Parent Common Stock | Section | |
| Parent Disclosure Letter | Article V | |
| Parent | Section | |
| Parent | Section 1.1(a) | |
| Parent Expense Amount | Section 1.1(a) | |
| Parent Material Adverse Effect | Section 1.1(a) | |
| Parent Material Contract | Section | |
| Parent Parties | Section 1.1(a) | |
| Parent Permits | Section 5.6(a) | |
| Parent Preferred Stock | Section 5.3(a) | |
| Parent | Section | |
| Parent SEC Filings | Section 5.7(a) | |
| Parent | ||
| Section 1.1(a) | ||
| Parent | Section | |
| Section | ||
| Recitals | ||
| Partnership Merger Effective Time | Section | |
| Section 1.1(a) | ||
| Person | Section 1.1(a) | |
| Proxy Statement | Section 4.5(b) | |
| Qualified REIT Subsidiary | Section 4.1(c) |
| Qualifying Income | Section 8.3(d)(i) | |
| REIT | Section 4.17(b) | |
| Relevant Company Partnership Interest | Section 4.17(i) | |
| Representative | Section 1.1(a) | |
| Section | ||
| Sarbanes-Oxley Act | Section 1.1(a) |
| SDAT | Section 2.3(a) | |
| SEC | Section 1.1(a) | |
| Securities Act | Section 1.1(a) | |
| Section | ||
| Special Limited Partner | Section 4.25 | |
| Specified Company Leases | Section 4.16(f) | |
| Stock Consideration | Section 3.1(a)(ii)(2) | |
| Stock Election | Section 3.1(a)(ii)(2) | |
| Stock Election Shares | Section 3.1(a)(ii)(2) | |
| Superior Proposal | Section 6.5(h) | |
| Surviving Entity | Section | |
| Section | ||
| Surviving Partnership Agreement | Section 6.20 | |
| Tax | Section 1.1(a) | |
| Tax Return | Section 1.1(a) | |
| Taxable REIT Subsidiary | Section 4.1(c) | |
| Taxes | Section 1.1(a) | |
| Termination Agreements | Section 6.8 | |
| Termination Fee | Section | |
| Termination | Section 8.3(d) | |
| Termination Payment | Section 1.1(a) | |
| Termination Payor | Section 8.3(d)(i) | |
| Third Party | Section 1.1(a) | |
| Section |
Section 2.1 Merger.The Mergers.
(a) Upon the terms and subject to the conditions of this Agreement, and in accordance with the MGCL and the DLLCA, at the Effective Time, the Company shall be merged with and into Merger Sub, whereupon the separate existence of the Company shall cease, and Merger Sub shall continue under the name "Nationwide Health Properties,"Stripe Sub, LLC" as the surviving entity in the Merger (the "Surviving EntityExchange Ratio") and shall be governed by the laws of the State of Delaware. The Merger shall have the effects specified in the MGCL and the DLLCA.
Section 2.2 Closing. mean 0.1688.
(a) The closing"Expenses" shall mean all expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, and filing of the Merger (the "Closing") shall occur as promptly as practicable (but in no event later thanForm S-4, the second (2nd) Business Day) after allpreparation, printing, filing and mailing of the conditions set forth inArticle VII (other than those conditions that by their terms are required to be satisfied or waived at the Closing, but subject to the satisfaction or waiver of such conditions) shall have been satisfied or waived by the party entitled to the benefit of the sameProxy Statement and subject to the foregoing, shall take place at such timeall SEC and on a date to be specified by the parties (the "Closing Date"). The Closing shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Suite 3400, Los Angeles, California, 90071, or at such other place as agreed to by the parties hereto.
(b) If (i) Parent has directed or intends to direct the Company or any of the Company Subsidiaries to give notice of prepayment or defeasance of any of the Company's Indebtedness and the earliest permitted prepayment or defeasance date for any of such Indebtedness falls after the then-scheduled Closing Date or (ii) any regulatory approvals or significant third party consents shall not have been obtained, then on a one-time basis, Parent may, by written notice to the Company at least three (3) Business Days prior to the then scheduled Closing Date, defer the Closing Date until a date no later than the earliest to occur of (x) such earliest permitted prepayment or defeasance date (in the case of clause (i)), (y) thirty (30) days after the previously-scheduled Closing Date, and (z) the Outside Date (such deferred Closing, a "Delayed Closing"). In the event that Parent causes a Delayed Closing as contemplated by thisSection 2.2(b), all references in this Agreement to the Closing (except the references in the preceding sentence) shall be deemed references to the Delayed Closing and the Closing Date shall be deemed to occur on the date on which the Delayed Closing occurs.
(a) At the Closing, the Company, Parent and Merger Sub shall (i) cause articles of merger with respect to the Merger (the "Articles of Merger") to be duly executed and filed with the State Department of Assessments and Taxation of Maryland (the "SDAT") as provided under the MGCL, (ii) cause a certificate of merger with respect to the Merger (the "Certificate of Merger") to be duly executed and filed with the Delaware Secretary as provided under the DLLCA and (iii) make any other filings, recordings or publications required to be made by the Company or Merger Sub under the MGCL or DLLCAfiling fees incurred in connection with the Merger. The Merger shall become effective following the close of business on the Closing Date, with such date and time specified in the Articles of MergerForm S-4 and the CertificateProxy Statement, the solicitation of Merger, or on suchstockholder approvals, engaging the services of the Exchange Agent, obtaining third party consents, any other datefilings with the SEC and time, notall other matters related to exceed thirty-one (31) days from the filing, as shall be agreed to byclosing of the Company and Parent and specified in the Articles of Merger, following acceptance for record by SDAT,Mergers and the Certificate of Merger, following acceptance by the Delaware Secretary (such date and time being hereinafter referred to as the "Effective Time").
(b) The Merger shall have the effects set forth in the MGCL, the DLLCA and this Agreement. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, the Surviving Entity shall possess all properties, rights, privileges, powers and franchises of the Company and Merger Sub, and all of the claims, obligations, liabilities, debts and duties of the Company and Merger Sub shall become the claims, obligations, liabilities, debts and duties of the Surviving Entity.
Section 2.4 Organizational Documents. Subject toSection 6.9, at the Effective Time, the certificate of formation and limited liability company agreement of Merger Sub, as in effect immediately prior to the Effective Time, shall be the certificate of formation and limited liability company agreement of the Surviving Entity, until thereafter amended in accordance with applicable Law and the applicable provisions of such certificate of formation and limited liability company agreement.
Section 2.5 Tax Consequences. It is intended that, for U.S. federal income tax purposes, the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement be, and is hereby adopted as, a plan of reorganization for purposes of Sections 354 and 361 of the Code.
Section 2.6 Transaction Structure. Notwithstanding anything in this Agreement to the contrary, the Company shall, if requested by Parent at least five (5) Business Days prior to the Company Stockholder Meeting, (a) agree to, and cooperate in the implementation of, certain reorganization transactions by the Company prior to the Effective Time, including any transactions that may be necessary to implement a holding company structure for the Company, (b) agree to, and cooperate in the implementation of, any changes to the structure of theother transactions contemplated by this Agreement,Agreement.
"GAAP" shall mean the United States generally accepted accounting principles.
"Governmental Authority" shall mean any United States (federal, state or local) or foreign government, arbitration panel, or any governmental or quasi-governmental, regulatory, judicial or administrative authority, board, bureau, agency, commission (including the IRS and any other U.S. federal authority, board, bureau, agency, commission or other body and any state, local and/or foreign Tax authority, board, bureau, agency, commission or other body) or self-regulatory organization.
"Hazardous Substances" shall mean (i) those substances listed in, defined in or regulated under any Environmental Law, including (i) changing the directionfollowing federal statutes and their state counterparts, as each may
be amended from time to time, and all regulations thereunder: the Merger so thatResource Conservation and Recovery Act, the Company isComprehensive Environmental Response, Compensation and Liability Act, the Surviving Entity,Toxic Substances Control Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act and the Clean Air Act; (ii) adding new parties to the Agreement in the event that the holding company structure contemplated by clause (a) is implemented, orpetroleum and petroleum products, including crude oil and any fractions thereof; and (iii) switching to an exchange offer plus back-end merger structure,polychlorinated biphenyls, mold, methane, asbestos, and (c) cooperate with Parentradon.
"Indebtedness" shall mean, with respect to any Person, without duplication, (i) all indebtedness, notes payable, accrued interest payable or other reasonable changes regardingobligations for borrowed money, whether secured or unsecured, (ii) all indebtedness evidenced by a note, bond, debenture or other similar instrument or debt security, (iii) all obligations under conditional sale or other title retention agreements, or incurred as financing, in either case with respect to property acquired by such Person, (iv) all obligations issued, undertaken or assumed as the structuredeferred purchase price for any property or assets, (v) all obligations under capital leases, (vi) all obligations in respect of bankers acceptances or letters of credit, (vii) all obligations under interest rate cap, swap, collar or similar transaction or currency hedging transactions (valued at the termination value thereof), and (viii) any indebtedness or obligations of another Person (the "Other Person") of the transactions contemplated herein (intype referred to in the foregoing clauses (i) through (vii) (A) that is guaranteed by such Person or (B) in respect of which such Person pledges its assets or provides any other credit support, or (C) in respect of which such Person has promised to maintain or cause to be maintained the financial position or financial covenants of such Other Person or to purchase such indebtedness of such Other Person, together, in the case of each of the foregoing, clauses (a) through (c), such cooperationwith all accrued and unpaid interest, premiums, penalties, breakage costs, make-whole amounts and other fees and expenses (if any) relating thereto.
"Indemnitee" shall include entering into appropriate amendmentsmean any individual who, at or prior to the Effective Time, was an officer, director, partner, member, trustee or agent of the Company or served on behalf of the Company as an officer, director, partner, member or trustee of any of the Company Subsidiaries.
"Intellectual Property" shall mean all United States and foreign (i) patents, patent applications, invention disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) trademarks, service marks, trade dress, logos, trade names, corporate names, Internet domain names, design rights and other source identifiers, together with the goodwill symbolized by any of the foregoing, (iii) copyrightable works and copyrights, (iv) confidential and proprietary information, including trade secrets, know-how, ideas, formulae, models and methodologies, (v) all rights in the foregoing and in other similar intangible assets, and (vi) all applications and registrations for the foregoing.
"Intervening Event" shall mean any material event or development or material change in circumstances first occurring after the date of this Agreement and prior to receipt of the Company Disclosure Letter and seeking a private letter ruling from the IRS with respect to any reorganization by the Company or other changeStockholder Approval, to the structureextent that such event, development or change in circumstances was not reasonably foreseeable (or if foreseeable, the consequences of which were not reasonably foreseeable) as of or prior to the transactions contemplated bydate of this Agreement);Agreement;provided,however, that such cooperation contemplated by thisSection 2.6in no event shall not (w) havethe following events, developments or changes in circumstances constitute an Intervening Event: (A) the receipt, existence or terms of an Acquisition Proposal or any adverse impact onmatter relating thereto or consequence thereof or (B) changes in the Company, (x) altermarket price or change the amount or kindtrading volume of the consideration to be issued to holders of Company Common Stock, (y) adversely affect the tax consequences of the Merger to holders of Company Common Stock or (z) materially impedeParent Common Stock or delay consummationthe fact that the Company meets or exceeds (or that Parent fails to meet or exceed) internal or published projections, forecasts or revenue or earnings predictions for any period;provided,however, that the underlying causes of such change or fact shall not be excluded by this clause (B).
"Investment Company Act" shall mean the Merger.Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the United States Internal Revenue Service or any successor agency.
"knowledge" shall mean the actual knowledge of the following officers and employees of the Company and Parent Parties, as applicable, after inquiry reasonable under the circumstances: (i) for the Company: each person identified as an executive officer of the Company in the Company's 2014 proxy statement; and (ii) for any of the Parent Parties: each person identified as an executive officer of Parent in Parent's 2014 proxy statement.
"Law" shall mean any and all domestic (federal, state or local) or foreign laws, rules, regulations, orders, judgments or decrees promulgated by any Governmental Authority.
"Lender Consents" shall mean the consents and approvals required pursuant to the terms of any Indebtedness of the Company or any of the Company Subsidiaries as a result of the execution and delivery of this Agreement by the Company or the performance of this Agreement and the consummation of the Mergers and the other transactions contemplated hereby by the Company, which consents and approvals shall be in form and substance reasonably satisfactory to Parent.
"Lien" shall mean with respect to any asset (including any security), any mortgage, deed of trust, claim, condition, covenant, lien, pledge, charge, security interest, preferential arrangement, option or other third party right (including right of first refusal or first offer), restriction, right of way, easement, or title defect or encumbrance of any kind in respect of such asset, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.
"LTIP Unit" shall mean an OP Unit designated as an LTIP Unit under the Company Operating Partnership Agreement, as in effect as of the date hereof, that was issued to the Company Advisor pursuant to the terms and conditions of the OPP Agreement.
"MGCL" shall mean the Maryland General Corporation Law, as amended from time to time.
"Minimum Distribution Dividend" shall mean a distribution with respect to either (i) any taxable year of the Company ending on or prior to the Closing Date or (ii) any taxable year of Parent ending on or prior to the last day of Parent's taxable year that includes the Merger, and, in each case, which is required to be paid by the Company or Parent, as applicable, prior to the Effective Time to (a) satisfy the distribution requirements set forth in Section 857(a) of the Code and (b) avoid, to the extent possible, the imposition of income tax under Section 857(b) of the Code and the imposition of excise tax under Section 4981 of the Code.
"NASDAQ" shall mean the NASDAQ Stock Market.
"NYSE" shall mean the New York Stock Exchange.
"OPP Agreement" shall mean the American Realty Capital Healthcare Trust, Inc. 2014 Advisor Multi-Year Outperformance Agreement, made as of April 7, 2014, between the Company, the Company Operating Partnership and the Company Advisor, as in effect on the date hereof subject toSection 3.10(b).
"Order" shall mean a judgment, order or decree of a Governmental Authority.
"Parent Entities" shall mean Parent and the Parent Subsidiaries, including Merger Sub.
"Parent Equity Plans" means each of the following: (i) the Ventas 2000 Incentive Compensation Plan (Employee Plan), as amended (formerly known as the 1997 Incentive Compensation Plan); (ii) the Ventas, Inc. 2004 Stock Plan for Directors, as amended; (iii) the Ventas Employee and Director Stock Purchase Plan, as amended; (iv) the Ventas, Inc. 2006 Incentive Plan, as amended; (v) the Ventas, Inc. 2006 Stock Plan for Directors, as amended; (vi) the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, as amended; (vii) the Ventas, Inc. 2012 Incentive Plan; (viii) the Ventas Nonemployee Directors' Deferred Stock Compensation Plan, as amended; and (ix) the Ventas Executive Deferred Stock Compensation Plan, as amended.
"Parent Expense Amount" shall mean ten million dollars ($10,000,000).
"Parent Material Adverse Effect" shall mean any event, circumstance, change or effect (a) that is material and adverse to the business, assets, properties, liabilities, financial condition or results of operations of the Parent and the Parent Subsidiaries, taken as a whole or (b) that will, or would reasonably be expected to, prevent or materially impair the ability of the Parent Parties to consummate the Mergers before the Outside Date;provided,however, that for purposes of clause (a) "Parent Material Adverse Effect" shall not include any event, circumstance, change or effect to the extent arising out of or resulting from (i) any failure of Parent to meet any internal or external projections or forecasts or any decrease in the market price of the Parent Common Stock (it being understood and agreed that any event, circumstance, change or effect giving rise to such failure or decrease may otherwise be taken into account in determining whether there has been a Parent Material Adverse Effect), (ii) any events, circumstances, changes or effects that affect the industries in which Parent and the Parent Subsidiaries operate generally, (iii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (iv) any changes in legal or regulatory conditions, (v) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage, (vi) the negotiation, execution or announcement of this Agreement, or the consummation or anticipation of the Mergers or other transactions contemplated hereby, (vii) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request or with the prior written consent of an executive officer of the Company, (viii) earthquakes, hurricanes, floods or other natural disasters, (ix) any damage or destruction of any real property owned or leased (as lessee or sublessee), including ground leased, by Parent or any Parent Subsidiary (including any buildings, structures and other improvements and fixtures located on or under such real property and any easements, rights and other appurtenances to such real property) that is substantially covered by insurance, or (x) changes in Law or GAAP or the interpretation thereof, which in the case of each of clauses (ii), (iii), (iv), (v) and (x) do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other similarly situated participants in the industries in which Parent and the Parent Subsidiaries operate generally, and in the case of clause (viii) do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other participants in the industries in which Parent and the Parent Subsidiaries operate in the geographic regions in which Parent and the Parent Subsidiaries operate or own or lease properties.
"Parent Material Contract" shall mean each contract or agreement in effect as of the date of this Agreement to which Parent or any Parent Subsidiary is a party (specifically excluding (x) any contract or agreement that will no longer be in effect following the Closing and (y) any contract or agreement that is, or at the Closing will be, terminable-at-will (as defined below) or terminable upon not more than ninety (90) days' notice by Parent or any Parent Subsidiary without penalty) that is required to be filed as an exhibit to the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and Current Reports on Form 8-K subsequent thereto filed by Parent as of the date hereof pursuant to Items 601(b)(2), (4), (9) and (10) of Regulation S-K promulgated by the SEC. A contract or agreement is "terminable-at-will", as that expression is used in this definition if it expressly provides that it is terminable-at-will, regardless of whether any covenant of good faith and fair dealing may be implied as a matter of law in connection with the termination thereof.
"Parent Parties" shall mean Parent, Merger Sub and OP Merger Sub.
"Parent Subsidiary" shall mean any corporation, other partnership, limited liability company, joint venture, business trust, real estate investment trust or other organization, whether incorporated or unincorporated, or other legal entity of which (a) Parent directly or indirectly owns or controls at least a majority of the capital stock or other equity interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions, (b) Parent and/or any Person that is a Parent Subsidiary by reason of the application of clause (a) or clause (c) of this
definition of "Parent Subsidiary" is a general partner, manager, managing member, trustee, director or the equivalent, or (c) Parent, directly or indirectly, holds a majority of the beneficial, equity, capital, profits or other economic interest.
"Per Share Cash Amount" shall mean $11.33.
"Person" shall mean an individual, corporation, partnership, limited partnership, limited liability company, person (including a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or other entity or a Governmental Authority or a political subdivision, agency or instrumentality of a Governmental Authority.
"Representative" shall mean, with respect to any Person, such Person's directors, officers, employees, consultants, advisors (including attorneys, accountants, consultants, investment bankers, and financial advisors), agents and other representatives (including, with respect to the Company, the Company Advisor and its directors, officers and employees).
"Sarbanes-Oxley Act" shall mean the Sarbanes-Oxley Act of 2002, as amended.
"SEC" shall mean the United States Securities and Exchange Commission (including the staff thereof).
"Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of Regulation S-X (17 C.F.R. Part 210).
"Tax" or "Taxes" shall mean any and all federal, state, local or foreign or other taxes of any kind, together with any interest, penalties and additions to tax, imposed by any Governmental Authority, including taxes on or with respect to income, franchises, gross receipts, gross income, property, sales, use, transfer, capital stock, escheat, payroll, employment, unemployment, alternative or add on minimum, estimated and net worth, and taxes in the nature of excise, withholding, backup withholding and value added taxes.
"Tax Return" shall mean any return, report or similar statement, together with any attached exhibit or schedule that is provided or required to be provided to a Governmental Authority with respect to Taxes, including information returns, refunds claims, amended returns and declarations of estimated Tax.
"Termination Fee" shall mean fifty-five million dollars ($55,000,000).
"Termination Payment" shall mean the Parent Expense Amount or the Termination Fee, as the context may require.
"Third Party" shall mean any Person or group of Persons other than Parent, Merger Sub and their respective Affiliates.
(b) The following terms shall have the respective meanings set forth in the Section set forth below opposite such term:
| Acceptable Confidentiality Agreement | Section 1.1(a) | |
| Acquisition Proposal | Section 6.5(h)(i) | |
| Action | Section 1.1(a) | |
| Adverse Recommendation Change | Section 6.5(d) | |
| Advisory Agreement | Section 4.25 | |
| Affiliate | Section 1.1(a) | |
| Agreement | Preamble | |
| Allocation Agreement | Section 4.25 | |
| Alternative Acquisition Agreement | Section 6.5(a) | |
| Articles of Merger | Section 2.3(a) | |
| Benefit Plan | Section 1.1(a) | |
| Book-Entry Share | Section 3.1(b) | |
| Business Day | Section 1.1(a) | |
| Cash Consideration | Section 3.1(a)(ii)(1) | |
| Cash Conversion Number | Section 3.2(a) | |
| Cash Election | Section 3.1(a)(ii)(1) | |
| Cash Election Number | Section 3.2(b)(i) | |
| Cash Election Shares | Section 3.1(a)(ii)(1) | |
| Certificate | Section 3.1(b) | |
| Certificate of Merger | Section 2.3(a) | |
| Class C Units | Section 3.1(e) | |
| Closing | Section 2.2 | |
| Closing Date | Section 2.2 | |
| Code | Section 1.1(a) | |
| Company | Preamble | |
| Company Additional Dividend Amount | Section 6.18(a) | |
| Company Advisor | Section 4.25 | |
| Company Board | Section 4.4(a) | |
| Company Bylaws | Section 4.2 | |
| Company Charter | Section 4.2 | |
| Company Common Stock | Recitals | |
| Company Credit Agreement | Section 1.1(a) | |
| Company Disclosure Letter | Article IV | |
| Company Entities | Section 1.1(a) | |
| Company Equity Plans | Section 1.1(a) | |
| Company Insurance Policies | Section 4.18 | |
| Company Leases | Section 4.16(e) | |
| Company Material Adverse Effect | Section 1.1(a) | |
| Company Material Contract | Section 4.12(a) | |
| Company Operating Partnership | Preamble | |
| Company Operating Partnership Agreement | Section 2.4 | |
| Company Permits | Section 4.6(a) | |
| Company Permitted Liens | Section 4.16(b) | |
| Company Preferred Stock | Section 4.3(a) | |
| Company Properties | Section 4.16(a) | |
| Company Property | Section 4.16(a) | |
| Company Recommendation | Section 4.4(a) | |
| Company Restricted Shares | Section 1.1(a) |
| Company SEC Filings | Section 4.7(a) | |
| Company Stockholder Approval | Section 4.21 | |
| Company Stockholder Meeting | Section 1.1(a) | |
| Company Subsidiary | Section 1.1(a) | |
| Company Subsidiary Partnership | Section 4.17(i) | |
| Company Tax Protection Agreements | Section 4.17(i) | |
| Company Tax Representation Letter | Section 6.1(b) | |
| Company Third Party | Section 1.1(a) | |
| Company Title Insurance Policies | Section 4.16(g) | |
| Company Title Insurance Policy | Section 4.16(g) | |
| Confidentiality Agreement | Section 1.1(a) | |
| control | Section 1.1(a) | |
| D&O Insurance | Section 6.10(c) | |
| Debt Financing | Section 6.17 | |
| Delaware Secretary | Section 1.1(a) | |
| DLLCA | Section 1.1(a) | |
| DRULPA | Section 1.1(a) | |
| Effective Time | Section 2.3(a) | |
| Election | Section 3.3(a) | |
| Election Deadline | Section 3.3(d) | |
| Environmental Law | Section 1.1(a) | |
| Environmental Permit | Section 1.1(a) | |
| ERISA | Section 1.1(a) | |
| ERISA Affiliate | Section 1.1(a) | |
| Exchange Act | Section 1.1(a) | |
| Exchange Agent | Section 3.3(d) | |
| Exchange Agent Agreement | Section 3.3(d) | |
| Exchange Fund | Section 3.4 | |
| Exchange Ratio | Section 1.1(a) | |
| Expenses | Section 1.1(a) | |
| Form of Election | Section 3.3(b) | |
| Form S-4 | Section 4.5(b) | |
| Frontier | Section 4.17(c) | |
| Funded Debt Payoff Amount | Section 6.19 | |
| GAAP | Section 1.1(a) | |
| Governmental Authority | Section 1.1(a) | |
| Hazardous Substances | Section 1.1(a) | |
| HCT II | Section 4.25 | |
| Holder | Section 3.3 | |
| Indebtedness | Section 1.1(a) | |
| Indemnitee | Section 1.1(a) | |
| Inquiry | Section 6.5(a) | |
| Intellectual Property | Section 1.1(a) | |
| Interim Period | Section 6.1(a) | |
| Intervening Event | Section 1.1(a) | |
| Investment Company Act | Section 1.1(a) | |
| IRS | Section 1.1(a) | |
| knowledge | Section 1.1(a) | |
| Law | Section 1.1(a) | |
| Lender Consents | Section 1.1(a) | |
| Lien | Section 1.1(a) |
| Listing Agreement | Section 4.25 | |
| Listing Termination Agreement | Section 6.8 | |
| LTIP Unit | Section 1.1(a) | |
| Mailing Date | Section 3.3(c) | |
| Management Agreement | Section 4.25 | |
| Manager | Section 4.25 | |
| MD Courts | Section 9.11(a) | |
| Merger | Recitals | |
| Merger Consideration | Section 3.1(a)(ii) | |
| Merger Sub | Preamble | |
| Merger Sub Interests | Section 3.1(c) | |
| Mergers | Recitals | |
| MGCL | Section 1.1(a) | |
| Minimum Distribution Dividend | Section 1.1(a) | |
| NASDAQ | Section 1.1(a) | |
| Non-Electing Shares | Section 3.1(a)(ii)(3) | |
| Notice of Adverse Recommendation Change | Section 6.5(e) | |
| NYSE | Section 1.1(a) | |
| OP Merger Sub | Preamble | |
| OPP Agreement | Section 4.25 | |
| OPP Termination Agreement | Section 3.10(b) | |
| OP Units | Recitals | |
| Order | Section 1.1(a) | |
| Other Company Subsidiary | Section 4.1(c) | |
| Outside Date | Section 8.1(b)(i) | |
| Parent | Preamble | |
| Parent Additional Dividend Amount | Section 6.18(a) | |
| Parent Board | Section 5.4(a) | |
| Parent Bylaws | Section 5.2 | |
| Parent Charter | Section 5.2 | |
| Parent Common Stock | Section 3.1(a)(ii)(2) | |
| Parent Disclosure Letter | Article V | |
| Parent Entities | Section 1.1(a) | |
| Parent Equity Plans | Section 1.1(a) | |
| Parent Expense Amount | Section 1.1(a) | |
| Parent Material Adverse Effect | Section 1.1(a) | |
| Parent Material Contract | Section 1.1(a) | |
| Parent Parties | Section 1.1(a) | |
| Parent Permits | Section 5.6(a) | |
| Parent Preferred Stock | Section 5.3(a) | |
| Parent REIT Counsel | Section 7.3(e) | |
| Parent SEC Filings | Section 5.7(a) | |
| Parent Subsidiary | Section 1.1(a) | |
| Parent Tax Representation Letter | Section 6.2(a) | |
| Partnership Certificate of Merger | Section 2.3(b) | |
| Partnership Merger | Recitals | |
| Partnership Merger Effective Time | Section 2.3(b) | |
| Per Share Cash Amount | Section 1.1(a) | |
| Person | Section 1.1(a) | |
| Proxy Statement | Section 4.5(b) | |
| Qualified REIT Subsidiary | Section 4.1(c) |
| Qualifying Income | Section 8.3(d)(i) | |
| REIT | Section 4.17(b) | |
| Relevant Company Partnership Interest | Section 4.17(i) | |
| Representative | Section 1.1(a) | |
| Required Regulatory Approvals | Section 5.5(b) | |
| Sarbanes-Oxley Act | Section 1.1(a) | |
| SDAT | Section 2.3(a) | |
| SEC | Section 1.1(a) | |
| Securities Act | Section 1.1(a) | |
| Significant Subsidiary | Section 1.1(a) | |
| Special Limited Partner | Section 4.25 | |
| Specified Company Leases | Section 4.16(f) | |
| Stock Consideration | Section 3.1(a)(ii)(2) | |
| Stock Election | Section 3.1(a)(ii)(2) | |
| Stock Election Shares | Section 3.1(a)(ii)(2) | |
| Superior Proposal | Section 6.5(h)(ii) | |
| Surviving Entity | Section 2.1(a) | |
| Surviving Partnership | Section 2.1(b) | |
| Surviving Partnership Agreement | Section 6.20 | |
| Tax | Section 1.1(a) | |
| Tax Return | Section 1.1(a) | |
| Taxable REIT Subsidiary | Section 4.1(c) | |
| Taxes | Section 1.1(a) | |
| Termination Agreements | Section 6.8 | |
| Termination Fee | Section 1.1(a) | |
| Termination Payee | Section 8.3(d)(i) | |
| Termination Payment | Section 1.1(a) | |
| Termination Payor | Section 8.3(d)(i) | |
| Third Party | Section 1.1(a) | |
| Transfer Taxes | Section 8.7 |
Section 3.12.1 Effect on Shares.The Mergers.
At(a) Upon the terms and subject to the conditions of this Agreement, and in accordance with the MGCL and the DLLCA, at the Effective Time, by virtue of the Company shall be merged with and into Merger and without any action onSub, whereupon the partseparate existence of the Company Parent,shall cease, and Merger Sub orshall continue under the holder of any securities ofname "Stripe Sub, LLC" as the Company, Parent orsurviving entity in the Merger Sub:
(a) Cancellation of Company Securities. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time that is held by any wholly owned Company Subsidiary, by Parent or by any Parent Subsidiary shall automatically be canceled and retired and shall cease to exist, and no payment shall be made with respect thereto.
(b) Conversion of Company Securities. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance withSection 3.1(a)) shall automatically be converted into the right to receive 0.7866 shares (the "Exchange Ratio" shall mean 0.1688.
"Expenses" shall mean all expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, and filing of the Form S-4, the preparation, printing, filing and mailing of the Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Form S-4 and the Proxy Statement, the solicitation of stockholder approvals, engaging the services of the Exchange Agent, obtaining third party consents, any other filings with the SEC and all other matters related to the closing of the Mergers and the other transactions contemplated by this Agreement.
"GAAP" shall mean the United States generally accepted accounting principles.
"Governmental Authority" shall mean any United States (federal, state or local) or foreign government, arbitration panel, or any governmental or quasi-governmental, regulatory, judicial or administrative authority, board, bureau, agency, commission (including the IRS and any other U.S. federal authority, board, bureau, agency, commission or other body and any state, local and/or foreign Tax authority, board, bureau, agency, commission or other body) or self-regulatory organization.
"Hazardous Substances" shall mean (i) those substances listed in, defined in or regulated under any Environmental Law, including the following federal statutes and their state counterparts, as each may
be amended from time to time, and all regulations thereunder: the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic Substances Control Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; and (iii) polychlorinated biphenyls, mold, methane, asbestos, and radon.
"Indebtedness" shall mean, with respect to any Person, without duplication, (i) all indebtedness, notes payable, accrued interest payable or other obligations for borrowed money, whether secured or unsecured, (ii) all indebtedness evidenced by a note, bond, debenture or other similar instrument or debt security, (iii) all obligations under conditional sale or other title retention agreements, or incurred as financing, in either case with respect to property acquired by such Person, (iv) all obligations issued, undertaken or assumed as the deferred purchase price for any property or assets, (v) all obligations under capital leases, (vi) all obligations in respect of bankers acceptances or letters of credit, (vii) all obligations under interest rate cap, swap, collar or similar transaction or currency hedging transactions (valued at the termination value thereof), and (viii) any indebtedness or obligations of another Person (the "Other Person") of the type referred to in the foregoing clauses (i) through (vii) (A) that is guaranteed by such Person or (B) in respect of which such Person pledges its assets or provides any other credit support, or (C) in respect of which such Person has promised to maintain or cause to be maintained the financial position or financial covenants of such Other Person or to purchase such indebtedness of such Other Person, together, in the case of each of the foregoing, with all accrued and unpaid interest, premiums, penalties, breakage costs, make-whole amounts and other fees and expenses (if any) relating thereto.
"Indemnitee" shall mean any individual who, at or prior to the Effective Time, was an officer, director, partner, member, trustee or agent of the Company or served on behalf of the Company as an officer, director, partner, member or trustee of any of the Company Subsidiaries.
"Intellectual Property" shall mean all United States and foreign (i) patents, patent applications, invention disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) trademarks, service marks, trade dress, logos, trade names, corporate names, Internet domain names, design rights and other source identifiers, together with the goodwill symbolized by any of the foregoing, (iii) copyrightable works and copyrights, (iv) confidential and proprietary information, including trade secrets, know-how, ideas, formulae, models and methodologies, (v) all rights in the foregoing and in other similar intangible assets, and (vi) all applications and registrations for the foregoing.
"Intervening Event" shall mean any material event or development or material change in circumstances first occurring after the date of this Agreement and prior to receipt of the Company Stockholder Approval, to the extent that such event, development or change in circumstances was not reasonably foreseeable (or if foreseeable, the consequences of which were not reasonably foreseeable) as of or prior to the date of this Agreement;provided,however, that in no event shall the following events, developments or changes in circumstances constitute an Intervening Event: (A) the receipt, existence or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof or (B) changes in the market price or trading volume of the Company Common Stock or Parent Common Stock or the fact that the Company meets or exceeds (or that Parent fails to meet or exceed) internal or published projections, forecasts or revenue or earnings predictions for any period;provided,however, that the underlying causes of such change or fact shall not be excluded by this clause (B).
"Investment Company Act" shall mean the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the United States Internal Revenue Service or any successor agency.
"knowledge" shall mean the actual knowledge of the following officers and employees of the Company and Parent Parties, as applicable, after inquiry reasonable under the circumstances: (i) for the Company: each person identified as an executive officer of the Company in the Company's 2014 proxy statement; and (ii) for any of the Parent Parties: each person identified as an executive officer of Parent in Parent's 2014 proxy statement.
"Law" shall mean any and all domestic (federal, state or local) or foreign laws, rules, regulations, orders, judgments or decrees promulgated by any Governmental Authority.
"Lender Consents" shall mean the consents and approvals required pursuant to the terms of any Indebtedness of the Company or any of the Company Subsidiaries as a result of the execution and delivery of this Agreement by the Company or the performance of this Agreement and the consummation of the Mergers and the other transactions contemplated hereby by the Company, which consents and approvals shall be in form and substance reasonably satisfactory to Parent.
"Lien" shall mean with respect to any asset (including any security), any mortgage, deed of trust, claim, condition, covenant, lien, pledge, charge, security interest, preferential arrangement, option or other third party right (including right of first refusal or first offer), restriction, right of way, easement, or title defect or encumbrance of any kind in respect of such asset, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.
"LTIP Unit" shall mean an OP Unit designated as an LTIP Unit under the Company Operating Partnership Agreement, as in effect as of the date hereof, that was issued to the Company Advisor pursuant to the terms and conditions of the OPP Agreement.
"MGCL" shall mean the Maryland General Corporation Law, as amended from time to time.
"Minimum Distribution Dividend" shall mean a distribution with respect to either (i) any taxable year of the Company ending on or prior to the Closing Date or (ii) any taxable year of Parent ending on or prior to the last day of Parent's taxable year that includes the Merger, and, in each case, which is required to be paid by the Company or Parent, as applicable, prior to the Effective Time to (a) satisfy the distribution requirements set forth in Section 857(a) of the Code and (b) avoid, to the extent possible, the imposition of income tax under Section 857(b) of the Code and the imposition of excise tax under Section 4981 of the Code.
"NASDAQ" shall mean the NASDAQ Stock Market.
"NYSE" shall mean the New York Stock Exchange.
"OPP Agreement" shall mean the American Realty Capital Healthcare Trust, Inc. 2014 Advisor Multi-Year Outperformance Agreement, made as of April 7, 2014, between the Company, the Company Operating Partnership and the Company Advisor, as in effect on the date hereof subject toSection 3.10(b).
"Order" shall mean a judgment, order or decree of a Governmental Authority.
"Parent Entities" shall mean Parent and the Parent Subsidiaries, including Merger Sub.
"Parent Equity Plans" means each of the following: (i) the Ventas 2000 Incentive Compensation Plan (Employee Plan), as amended (formerly known as the 1997 Incentive Compensation Plan); (ii) the Ventas, Inc. 2004 Stock Plan for Directors, as amended; (iii) the Ventas Employee and Director Stock Purchase Plan, as amended; (iv) the Ventas, Inc. 2006 Incentive Plan, as amended; (v) the Ventas, Inc. 2006 Stock Plan for Directors, as amended; (vi) the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, as amended; (vii) the Ventas, Inc. 2012 Incentive Plan; (viii) the Ventas Nonemployee Directors' Deferred Stock Compensation Plan, as amended; and (ix) the Ventas Executive Deferred Stock Compensation Plan, as amended.
"Parent Expense Amount" shall mean ten million dollars ($10,000,000).
"Parent Material Adverse Effect" shall mean any event, circumstance, change or effect (a) that is material and adverse to the business, assets, properties, liabilities, financial condition or results of operations of the Parent and the Parent Subsidiaries, taken as a whole or (b) that will, or would reasonably be expected to, prevent or materially impair the ability of the Parent Parties to consummate the Mergers before the Outside Date;provided,however, that for purposes of clause (a) "Parent Material Adverse Effect" shall not include any event, circumstance, change or effect to the extent arising out of or resulting from (i) any failure of Parent to meet any internal or external projections or forecasts or any decrease in the market price of the Parent Common Stock (it being understood and agreed that any event, circumstance, change or effect giving rise to such failure or decrease may otherwise be taken into account in determining whether there has been a Parent Material Adverse Effect), (ii) any events, circumstances, changes or effects that affect the industries in which Parent and the Parent Subsidiaries operate generally, (iii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (iv) any changes in legal or regulatory conditions, (v) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage, (vi) the negotiation, execution or announcement of this Agreement, or the consummation or anticipation of the Mergers or other transactions contemplated hereby, (vii) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request or with the prior written consent of an executive officer of the Company, (viii) earthquakes, hurricanes, floods or other natural disasters, (ix) any damage or destruction of any real property owned or leased (as lessee or sublessee), including ground leased, by Parent or any Parent Subsidiary (including any buildings, structures and other improvements and fixtures located on or under such real property and any easements, rights and other appurtenances to such real property) that is substantially covered by insurance, or (x) changes in Law or GAAP or the interpretation thereof, which in the case of each of clauses (ii), (iii), (iv), (v) and (x) do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other similarly situated participants in the industries in which Parent and the Parent Subsidiaries operate generally, and in the case of clause (viii) do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other participants in the industries in which Parent and the Parent Subsidiaries operate in the geographic regions in which Parent and the Parent Subsidiaries operate or own or lease properties.
"Parent Material Contract" shall mean each contract or agreement in effect as of the date of this Agreement to which Parent or any Parent Subsidiary is a party (specifically excluding (x) any contract or agreement that will no longer be in effect following the Closing and (y) any contract or agreement that is, or at the Closing will be, terminable-at-will (as defined below) or terminable upon not more than ninety (90) days' notice by Parent or any Parent Subsidiary without penalty) that is required to be filed as an exhibit to the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and Current Reports on Form 8-K subsequent thereto filed by Parent as of the date hereof pursuant to Items 601(b)(2), (4), (9) and (10) of Regulation S-K promulgated by the SEC. A contract or agreement is "terminable-at-will", as that expression is used in this definition if it expressly provides that it is terminable-at-will, regardless of whether any covenant of good faith and fair dealing may be implied as a matter of law in connection with the termination thereof.
"Parent Parties" shall mean Parent, Merger Sub and OP Merger Sub.
"Parent Subsidiary" shall mean any corporation, other partnership, limited liability company, joint venture, business trust, real estate investment trust or other organization, whether incorporated or unincorporated, or other legal entity of which (a) Parent directly or indirectly owns or controls at least a majority of the capital stock or other equity interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions, (b) Parent and/or any Person that is a Parent Subsidiary by reason of the application of clause (a) or clause (c) of this
definition of "Parent Subsidiary" is a general partner, manager, managing member, trustee, director or the equivalent, or (c) Parent, directly or indirectly, holds a majority of the beneficial, equity, capital, profits or other economic interest.
"Per Share Cash Amount" shall mean $11.33.
"Person" shall mean an individual, corporation, partnership, limited partnership, limited liability company, person (including a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or other entity or a Governmental Authority or a political subdivision, agency or instrumentality of a Governmental Authority.
"Representative" shall mean, with respect to any Person, such Person's directors, officers, employees, consultants, advisors (including attorneys, accountants, consultants, investment bankers, and financial advisors), agents and other representatives (including, with respect to the Company, the Company Advisor and its directors, officers and employees).
"Sarbanes-Oxley Act" shall mean the Sarbanes-Oxley Act of 2002, as amended.
"SEC" shall mean the United States Securities and Exchange Commission (including the staff thereof).
"Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of Regulation S-X (17 C.F.R. Part 210).
"Tax" or "Taxes" shall mean any and all federal, state, local or foreign or other taxes of any kind, together with any interest, penalties and additions to tax, imposed by any Governmental Authority, including taxes on or with respect to income, franchises, gross receipts, gross income, property, sales, use, transfer, capital stock, escheat, payroll, employment, unemployment, alternative or add on minimum, estimated and net worth, and taxes in the nature of excise, withholding, backup withholding and value added taxes.
"Tax Return" shall mean any return, report or similar statement, together with any attached exhibit or schedule that is provided or required to be provided to a Governmental Authority with respect to Taxes, including information returns, refunds claims, amended returns and declarations of estimated Tax.
"Termination Fee" shall mean fifty-five million dollars ($55,000,000).
"Termination Payment" shall mean the Parent Expense Amount or the Termination Fee, as the context may require.
"Third Party" shall mean any Person or group of Persons other than Parent, Merger Sub and their respective Affiliates.
(b) The following terms shall have the respective meanings set forth in the Section set forth below opposite such term:
| Acceptable Confidentiality Agreement | Section 1.1(a) | |
| Acquisition Proposal | Section 6.5(h)(i) | |
| Action | Section 1.1(a) | |
| Adverse Recommendation Change | Section 6.5(d) | |
| Advisory Agreement | Section 4.25 | |
| Affiliate | Section 1.1(a) | |
| Agreement | Preamble | |
| Allocation Agreement | Section 4.25 | |
| Alternative Acquisition Agreement | Section 6.5(a) | |
| Articles of Merger | Section 2.3(a) | |
| Benefit Plan | Section 1.1(a) | |
| Book-Entry Share | Section 3.1(b) | |
| Business Day | Section 1.1(a) | |
| Cash Consideration | Section 3.1(a)(ii)(1) | |
| Cash Conversion Number | Section 3.2(a) | |
| Cash Election | Section 3.1(a)(ii)(1) | |
| Cash Election Number | Section 3.2(b)(i) | |
| Cash Election Shares | Section 3.1(a)(ii)(1) | |
| Certificate | Section 3.1(b) | |
| Certificate of Merger | Section 2.3(a) | |
| Class C Units | Section 3.1(e) | |
| Closing | Section 2.2 | |
| Closing Date | Section 2.2 | |
| Code | Section 1.1(a) | |
| Company | Preamble | |
| Company Additional Dividend Amount | Section 6.18(a) | |
| Company Advisor | Section 4.25 | |
| Company Board | Section 4.4(a) | |
| Company Bylaws | Section 4.2 | |
| Company Charter | Section 4.2 | |
| Company Common Stock | Recitals | |
| Company Credit Agreement | Section 1.1(a) | |
| Company Disclosure Letter | Article IV | |
| Company Entities | Section 1.1(a) | |
| Company Equity Plans | Section 1.1(a) | |
| Company Insurance Policies | Section 4.18 | |
| Company Leases | Section 4.16(e) | |
| Company Material Adverse Effect | Section 1.1(a) | |
| Company Material Contract | Section 4.12(a) | |
| Company Operating Partnership | Preamble | |
| Company Operating Partnership Agreement | Section 2.4 | |
| Company Permits | Section 4.6(a) | |
| Company Permitted Liens | Section 4.16(b) | |
| Company Preferred Stock | Section 4.3(a) | |
| Company Properties | Section 4.16(a) | |
| Company Property | Section 4.16(a) | |
| Company Recommendation | Section 4.4(a) | |
| Company Restricted Shares | Section 1.1(a) |
| Company SEC Filings | Section 4.7(a) | |
| Company Stockholder Approval | Section 4.21 | |
| Company Stockholder Meeting | Section 1.1(a) | |
| Company Subsidiary | Section 1.1(a) | |
| Company Subsidiary Partnership | Section 4.17(i) | |
| Company Tax Protection Agreements | Section 4.17(i) | |
| Company Tax Representation Letter | Section 6.1(b) | |
| Company Third Party | Section 1.1(a) | |
| Company Title Insurance Policies | Section 4.16(g) | |
| Company Title Insurance Policy | Section 4.16(g) | |
| Confidentiality Agreement | Section 1.1(a) | |
| control | Section 1.1(a) | |
| D&O Insurance | Section 6.10(c) | |
| Debt Financing | Section 6.17 | |
| Delaware Secretary | Section 1.1(a) | |
| DLLCA | Section 1.1(a) | |
| DRULPA | Section 1.1(a) | |
| Effective Time | Section 2.3(a) | |
| Election | Section 3.3(a) | |
| Election Deadline | Section 3.3(d) | |
| Environmental Law | Section 1.1(a) | |
| Environmental Permit | Section 1.1(a) | |
| ERISA | Section 1.1(a) | |
| ERISA Affiliate | Section 1.1(a) | |
| Exchange Act | Section 1.1(a) | |
| Exchange Agent | Section 3.3(d) | |
| Exchange Agent Agreement | Section 3.3(d) | |
| Exchange Fund | Section 3.4 | |
| Exchange Ratio | Section 1.1(a) | |
| Expenses | Section 1.1(a) | |
| Form of Election | Section 3.3(b) | |
| Form S-4 | Section 4.5(b) | |
| Frontier | Section 4.17(c) | |
| Funded Debt Payoff Amount | Section 6.19 | |
| GAAP | Section 1.1(a) | |
| Governmental Authority | Section 1.1(a) | |
| Hazardous Substances | Section 1.1(a) | |
| HCT II | Section 4.25 | |
| Holder | Section 3.3 | |
| Indebtedness | Section 1.1(a) | |
| Indemnitee | Section 1.1(a) | |
| Inquiry | Section 6.5(a) | |
| Intellectual Property | Section 1.1(a) | |
| Interim Period | Section 6.1(a) | |
| Intervening Event | Section 1.1(a) | |
| Investment Company Act | Section 1.1(a) | |
| IRS | Section 1.1(a) | |
| knowledge | Section 1.1(a) | |
| Law | Section 1.1(a) | |
| Lender Consents | Section 1.1(a) | |
| Lien | Section 1.1(a) |
| Listing Agreement | Section 4.25 | |
| Listing Termination Agreement | Section 6.8 | |
| LTIP Unit | Section 1.1(a) | |
| Mailing Date | Section 3.3(c) | |
| Management Agreement | Section 4.25 | |
| Manager | Section 4.25 | |
| MD Courts | Section 9.11(a) | |
| Merger | Recitals | |
| Merger Consideration | Section 3.1(a)(ii) | |
| Merger Sub | Preamble | |
| Merger Sub Interests | Section 3.1(c) | |
| Mergers | Recitals | |
| MGCL | Section 1.1(a) | |
| Minimum Distribution Dividend | Section 1.1(a) | |
| NASDAQ | Section 1.1(a) | |
| Non-Electing Shares | Section 3.1(a)(ii)(3) | |
| Notice of Adverse Recommendation Change | Section 6.5(e) | |
| NYSE | Section 1.1(a) | |
| OP Merger Sub | Preamble | |
| OPP Agreement | Section 4.25 | |
| OPP Termination Agreement | Section 3.10(b) | |
| OP Units | Recitals | |
| Order | Section 1.1(a) | |
| Other Company Subsidiary | Section 4.1(c) | |
| Outside Date | Section 8.1(b)(i) | |
| Parent | Preamble | |
| Parent Additional Dividend Amount | Section 6.18(a) | |
| Parent Board | Section 5.4(a) | |
| Parent Bylaws | Section 5.2 | |
| Parent Charter | Section 5.2 | |
| Parent Common Stock | Section 3.1(a)(ii)(2) | |
| Parent Disclosure Letter | Article V | |
| Parent Entities | Section 1.1(a) | |
| Parent Equity Plans | Section 1.1(a) | |
| Parent Expense Amount | Section 1.1(a) | |
| Parent Material Adverse Effect | Section 1.1(a) | |
| Parent Material Contract | Section 1.1(a) | |
| Parent Parties | Section 1.1(a) | |
| Parent Permits | Section 5.6(a) | |
| Parent Preferred Stock | Section 5.3(a) | |
| Parent REIT Counsel | Section 7.3(e) | |
| Parent SEC Filings | Section 5.7(a) | |
| Parent Subsidiary | Section 1.1(a) | |
| Parent Tax Representation Letter | Section 6.2(a) | |
| Partnership Certificate of Merger | Section 2.3(b) | |
| Partnership Merger | Recitals | |
| Partnership Merger Effective Time | Section 2.3(b) | |
| Per Share Cash Amount | Section 1.1(a) | |
| Person | Section 1.1(a) | |
| Proxy Statement | Section 4.5(b) | |
| Qualified REIT Subsidiary | Section 4.1(c) |
| Qualifying Income | Section 8.3(d)(i) | |
| REIT | Section 4.17(b) | |
| Relevant Company Partnership Interest | Section 4.17(i) | |
| Representative | Section 1.1(a) | |
| Required Regulatory Approvals | Section 5.5(b) | |
| Sarbanes-Oxley Act | Section 1.1(a) | |
| SDAT | Section 2.3(a) | |
| SEC | Section 1.1(a) | |
| Securities Act | Section 1.1(a) | |
| Significant Subsidiary | Section 1.1(a) | |
| Special Limited Partner | Section 4.25 | |
| Specified Company Leases | Section 4.16(f) | |
| Stock Consideration | Section 3.1(a)(ii)(2) | |
| Stock Election | Section 3.1(a)(ii)(2) | |
| Stock Election Shares | Section 3.1(a)(ii)(2) | |
| Superior Proposal | Section 6.5(h)(ii) | |
| Surviving Entity | Section 2.1(a) | |
| Surviving Partnership | Section 2.1(b) | |
| Surviving Partnership Agreement | Section 6.20 | |
| Tax | Section 1.1(a) | |
| Tax Return | Section 1.1(a) | |
| Taxable REIT Subsidiary | Section 4.1(c) | |
| Taxes | Section 1.1(a) | |
| Termination Agreements | Section 6.8 | |
| Termination Fee | Section 1.1(a) | |
| Termination Payee | Section 8.3(d)(i) | |
| Termination Payment | Section 1.1(a) | |
| Termination Payor | Section 8.3(d)(i) | |
| Third Party | Section 1.1(a) | |
| Transfer Taxes | Section 8.7 |
(a) Upon the terms and subject to the conditions of this Agreement, and in accordance with the MGCL and the DLLCA, at the Effective Time, the Company shall be merged with and into Merger Sub, whereupon the separate existence of the Company shall cease, and Merger Sub shall continue under the name "Stripe Sub, LLC" as the surviving entity in the Merger (the "Surviving Entity") and shall be governed by the laws of the State of Delaware. The Merger shall have the effects specified in the MGCL, the DLLCA and this Agreement. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, the Surviving Entity shall possess all properties, rights, privileges, powers and franchises of the Company and Merger Sub, and all of the claims, obligations, liabilities, debts and duties of the Company and Merger Sub shall become the claims, obligations, liabilities, debts and duties of the Surviving Entity.
(b) Upon the terms and subject to the conditions of this Agreement, and in accordance with the DRULPA, at the Partnership Merger Effective Time, OP Merger Sub shall be merged with and into the Company Operating Partnership, whereupon the separate existence of OP Merger Sub shall cease, and the Company Operating Partnership shall continue as the surviving entity in the Partnership Merger (the "Surviving Partnership") and shall be governed by the laws of the State of Delaware. The
Partnership Merger shall have the effects specified in the DRULPA and this Agreement. Without limiting the generality of the foregoing, and subject thereto, from and after the Partnership Merger Effective Time, the Surviving Partnership shall possess all properties, rights, privileges, powers and franchises of the Company Operating Partnership and OP Merger Sub, and all of the claims, obligations, liabilities, debts and duties of the Company Operating Partnership and OP Merger Sub shall become the claims, obligations, liabilities, debts and duties of the Surviving Partnership.
Section 2.2 Closing. The closing of the Mergers (the "Closing") shall occur at 10:00 a.m. (Eastern time), on the third (3rd) Business Day after all of the conditions set forth inArticle VII (other than those conditions that by their terms are required to be satisfied or waived at the Closing, but subject to the satisfaction or waiver of such conditions) shall have been satisfied or waived by the party entitled to the benefit of the same or at such other time and date as shall be agreed upon by the parties hereto;provided,however, that notwithstanding the satisfaction or waiver of all of the conditions set forth inArticle VII (other than those conditions that by their terms are required to be satisfied or waived at the Closing), in no event shall Parent, Merger Sub or OP Merger Sub be required to consummate the Mergers until the later of:
(a) the earlier of (i) the date that is five (5) Business Days after the receipt of (A) the Lender Consents (other than any such consents that, in the aggregate, relate to Indebtedness for which the aggregate principal amount does not exceed the amount set forth inSection 2.2(a) of the Company Disclosure Letter) and (B) the Required Regulatory Approvals (which shall have been obtained and remain in full force and effect, and all waiting periods relating to such approvals, authorizations and consents shall have expired or been terminated);provided,further, that in the event that the Closing is delayed pursuant to any provision of the previous proviso, if Parent and Merger Sub are prepared to consummate the Merger at any time prior to the Outside Date, Parent shall deliver written notice to the Company stating that it is prepared to consummate the Closing and the Closing shall occur on the third (3rd) Business Day following the delivery of such notice; and
(b) the Outside Date;
(subject, in the case of either (a) or (b), to the satisfaction or waiver (by the party hereto entitled to grant such waiver) of all of the conditions set forth inArticle VII as of the date determined pursuant to this proviso). The date on which the Closing occurs is referred to in this Agreement as the "Closing Date". The Closing shall take place at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd St., New York, NY, 10019, or at such other place as agreed to by the parties hereto.
(a) Prior to the Closing, Parent shall prepare and, on the Closing Date, the Company, Parent and Merger Sub shall (i) cause articles of merger with respect to the Merger (the "Articles of Merger") to be duly executed and filed with and accepted for record by the State Department of Assessments and Taxation of Maryland (the "SDAT") as provided under the MGCL, (ii) cause a certificate of merger with respect to the Merger (the "Certificate of Merger") to be duly executed and filed with the Delaware Secretary as provided under the DLLCA and (iii) make any other filings, recordings or publications required to be made by the Company or Merger Sub under the MGCL or DLLCA in connection with the Merger. The Merger shall become effective at the later of the time the Articles of Merger are accepted for record by the SDAT and the Certificate of Merger shall have been duly filed with the Delaware Secretary on the Closing Date or on such other date and time (not to exceed thirty (30) days from the date the Articles of Merger are accepted for record by the SDAT and the Certificate of Merger is duly filed with the Delaware Secretary) as shall be agreed to by the Company and Parent and specified in the Articles of Merger and Certificate of Merger (the date and time the Merger becomes effective being the "Effective Time"), it being understood and agreed that the parties shall cause the Effective Time to occur on the Closing Date.
(b) Prior to the Closing, Parent shall prepare and, on the Closing Date immediately after the filing of the Articles of Merger, the parties shall (i) cause a certificate of merger with respect to the Partnership Merger (the "Partnership Certificate of Merger") to be duly executed and filed with the Delaware Secretary as provided under the DRULPA and (ii) make any other filings, recordings or publications required to be made under the DRULPA in connection with the Partnership Merger. The Partnership Merger shall become effective upon such time as the Partnership Certificate of Merger has been filed with the Delaware Secretary, or at such later time as shall be agreed to by the parties and specified in the Partnership Certificate of Merger (the date and time the Partnership Merger becomes effective being the "Partnership Merger Effective Time"), it being understood and agreed that the parties shall cause the Partnership Merger Effective Time to occur immediately after the Effective Time.
Section 2.4 Organizational Documents of the Surviving Entity and Surviving Partnership. At the Effective Time, the certificate of formation and limited liability company agreement of Merger Sub, as in effect immediately prior to the Effective Time, shall be the certificate of formation and limited liability company agreement of the Surviving Entity, until thereafter amended in accordance with applicable Law and the applicable provisions of such certificate of formation and limited liability company agreement. At the Partnership Merger Effective Time, the Second Amended and Restated Agreement of Limited Partnership of the Company Operating Partnership (the "Company Operating Partnership Agreement"), as in effect immediately prior to the Partnership Merger Effective Time, shall be amended and restated in its entirety in accordance withSection 6.20 and as so amended and restated shall be the limited partnership agreement of the Surviving Partnership until thereafter amended in accordance with applicable Law and the applicable provisions thereof. Following the Partnership Merger Effective Time, the certificate of limited partnership of the Company Operating Partnership shall be the certificate of limited partnership of the Surviving Partnership until further amended in accordance with the DRULPA.
Section 2.5 Tax Consequences. It is intended that, for U.S. federal income tax purposes, the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement be, and is hereby adopted as, a plan of reorganization for purposes of Sections 354 and 361 of the Code.
Section 2.6 Subsequent Actions.
(a) If at any time after the Effective Time the Surviving Entity shall determine, in its sole and absolute discretion, that any actions are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Entity its right, title or interest in, to or under any of the rights or properties of the Company acquired or to be acquired by the Surviving Entity as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, then the members, officers and managers of the Surviving Entity shall be authorized to take all such actions as may be necessary or desirable to vest all right, title or interest in, to or under such rights or properties in the Surviving Entity or otherwise to carry out this Agreement.
(b) If at any time after the Partnership Merger Effective Time the Surviving Partnership shall determine, in its sole and absolute discretion, that any actions are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Partnership its right, title or interest in, to or under any of the rights or properties of the Company Operating Partnership acquired or to be acquired by the Surviving Partnership as a result of, or in connection with, the Partnership Merger or otherwise to carry out this Agreement, then the general partner of the Surviving Partnership shall be authorized to take all such actions as may be necessary or desirable to vest all right, title or interest in, to or under such rights or properties in the Surviving Entity or otherwise to carry out this Agreement.
Article III
EFFECT OF THE MERGERS
Section 3.1 Effect of the Mergers.
(a) At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holder of any securities of the Company, Parent or Merger Sub:
(i) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time that is held by the Company, any wholly owned Company Subsidiary, by Parent or any wholly owned Parent Subsidiary shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and no payment shall be made with respect thereto.
(ii) Subject toSection 3.1(d) and3.2, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares cancelled pursuant toSection 3.1(a)(i)) shall be converted, at the election of the holder thereof, in accordance with the procedures set forth inSection 3.3, into the right to receive the following consideration (collectively, the "Merger Consideration"), in each case without interest:
(1) for each share of Company Common Stock with respect to which an election to receive cash has been effectively made and not revoked or deemed revoked pursuant to thisArticle III (a "Cash Election"), the right to receive in cash from Parent an amount (the "Cash Consideration") equal to the Per Share Cash Amount (such shares collectively, the "Cash Election Shares"), subject toSection 3.2(b);
(2) for each share of Company Common Stock with respect to which an election to receive validly issued, fully paid and non-assessable shares of common stock, par value $0.25 per share, of Parent (the "Parent Common Stock"), has been effectively made and not revoked or deemed revoked pursuant to thisArticle III (a "Stock Election" and such shares collectively, the "Stock Election Shares") or which is otherwise to receive shares of Parent subjectCommon Stock in accordance with the terms of this Agreement, the right to adjustment as provided inSection 3.1(d)receive from Parent a number of shares of Parent Common Stock equal to the Exchange Ratio (the "MergerStock Consideration").; and
(3) for each share of Company Common Stock other than Cash Election Shares and Stock Election Shares (collectively, the "Non-Electing Shares"), the right to receive from Parent the Stock Consideration.
(b) All shares of Company Common Stock, when so converted pursuant toSection 3.1(a)(ii), shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate (a "Certificate") or book-entry share registered in the transfer books of the Company (a "Book-Entry Share") that immediately prior to the Effective Time represented shares of Company Common Stock shall cease to have any rights with respect to such Company Common Stock other than the right to receive the Merger Consideration in accordance withSection 3.23.5, including the right, if any, to receive, pursuant toSection 3.73.14, cash in lieu of fractional shares of Parent Common Stock into which such shares of Company Common Stock have been converted pursuant to thisSection 3.1(b)3.1(a)(ii), together with the amounts, if any, payable pursuant toSection 3.2(d)3.7.
(c) Treatment of Merger Sub Membership Interests. All membership interests ofin Merger Sub (the "Merger Sub Interests"), issued and outstanding immediately prior to the Effective Time shall remain as the only issued and outstanding membership interests ofin the Surviving Entity.
(d) Adjustments. Without limiting the other provisions of this Agreement and subject toSection 6.1(b)6.1(c)(ii) andSection 6.1(b)6.1(c)(iii), if at any time during the period between the date of this Agreement and the Effective Time, the Company should split, combine or otherwise reclassify the shares of Company Common Stock, or make a dividend or other distribution in shares of Company Common Stock
(including any dividend or otherwise change theother distribution of securities convertible into Company Common Stock into anyStock), or engage in a reclassification, reorganization, recapitalization or exchange or other securities,like change, then (without limiting any other rights of the Parent or Merger SubParties hereunder), the Merger Consideration and any Option Payment, Restricted Stock Unit Payment, Restricted Stock Payment and/or Performance Share Payment to be received in the form of Parent Common Stock (each such payment, a "Stock Award Payment") shall be ratably adjusted to reflect fully the effect of any such change. Without limiting the other provisions of this Agreement and subject toSection 6.2(b)(ii) andSection 6.2(b)(iii), if at any time during the period between the date of this Agreement and the Effective Time, Parent should split, combine or otherwise reclassify the shares of Parent Common Stock, or make a distribution in shares of Parent Common Stock (including any dividend or otherwise change theother distribution of securities convertible into Parent Common Stock intoStock), or engage in a reclassification, reorganization, recapitalization or exchange or other securities,like change, then the Exchange RatioMerger Consideration shall be ratably adjusted to reflect any such change.
(e) At the Partnership Merger Effective Time, by virtue of the Partnership Merger and without any action on the part of the Company Operating Partnership, OP Merger Sub or the holder of any unit of limited partnership interest in the Company Operating Partnership or OP Merger Sub: (i) the general partnership interest of the Company Operating Partnership shall remain outstanding and constitute the only outstanding general partnership interest in the Surviving Partnership; (ii) the general partnership interest of OP Merger Sub and each unit of limited partnership interest of OP Merger Sub issued and outstanding immediately prior to the Partnership Merger Effective Time shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and no payment shall be made with respect thereto; and (iii) each OP Unit issued and outstanding immediately prior to the Partnership Merger Effective Time, including the 5,613,374 OP Units to be issued in respect of the termination of the Listing Agreement, shall be converted into such number of Class C Units (as defined in the Surviving Partnership Agreement to be entered into in accordance withSection 6.20) ("Class C Units") of the Surviving Partnership as is equal to the Exchange Ratio;provided, that immediately prior to the actions in this clause (iii), the Special Limited Partner shall be treated as having contributed its right to distributions from the Company Operating Partnership pursuant to its special limited partnership interest in the Company Operating Partnership, the amount of which distributions is evidenced by the Listing Agreement, to the Company Operating Partnership in exchange for 5,613,374 OP Units in a transaction intended to qualify as a contribution of property pursuant to Section 721 of the Code, and such contribution shall cause the capital accounts of the partners of the Company Operating Partnership to be "booked-up" in accordance with Treasury Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), to the extent possible, as of immediately prior to the Partnership Merger Effective Time which "book-up" shall be allocated to the partners in accordance with the allocations provisions of the Company Operating Partnership Agreement.
Section 3.2 Exchange Fund; Exchange AgentProration..
(a) PriorNotwithstanding any other provision contained in this Agreement, the maximum number of shares of Company Common Stock that may be converted into the right to receive the Cash Consideration pursuant to thisArticle III (the "Cash Conversion Number"), shall be equal to the product (rounded down to the nearest whole share) of ten percent (10%) times the number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time (including Company Restricted Shares). All other shares of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Company Common Stock to be cancelled as provided inSection 3.1(a)(i)) shall be converted into the right to receive the Stock Consideration.
(b) Within two (2) Business Days after the Effective Time, Parent shall instruct the Exchange Agent to effect the allocation among former holders of Company Common Stock of rights to receive the Cash Consideration and the Stock Consideration as follows:
(i) If the aggregate number of shares of Company Common Stock with respect to which Cash Elections shall have been made (the "Cash Election Number") exceeds the Cash Conversion Number, then all Stock Election Shares and all Non-Electing Shares shall be converted into the
right to receive the Stock Consideration and Cash Election Shares held by a holder thereof will be converted into the right to receive the Cash Consideration in respect of that number of Cash Election Shares equal to the product obtained by multiplying (A) the number of Cash Election Shares held by such holder by (B) a fraction, the numerator of which is the Cash Conversion Number and the denominator of which is the Cash Election Number (with the Exchange Agent to determine, consistent withSection 3.2(a), whether fractions of Cash Election Shares shall be rounded up or down), with the remaining number of such holder's Cash Election Shares being converted into the right to receive the Stock Consideration; and
(ii) If the Cash Election Number is less than or equal to the Cash Conversion Number, then all Cash Election Shares shall be converted into the right to receive the Cash Consideration and the Non-Electing Shares and Stock Election Shares shall be converted into the right to receive the Stock Consideration.
Section 3.3 Election Procedures. Each holder of record of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time, and (each holder of Company Restricted Shares (any of the foregoing, a "Holder") shall have the right, subject to the limitations set forth in thisArticle III, to submit an election on or prior to the Election Deadline in accordance with the following procedures:
(a) Each Holder may specify in a request made in accordance with the provisions of thisSection 3.3 (herein called an "Election") (i) the number of shares of Company Common Stock owned by such Holder with respect to which such Holder desires to make a Stock Election and (ii) the number of shares of Company Common Stock owned by such Holder with respect to which such Holder desires to make a Cash Election.
(b) Parent shall prepare a form reasonably acceptable to the Company (the "Form of Election"), which shall be mailed by the Company to record holders of Company Common Stock and delivered to holders of Company Restricted Shares so as to permit those Holders to exercise their right to make an Election prior to the Election Deadline.
(c) The Company shall mail or cause to be mailed or delivered, as applicable, the Form of Election to record holders of Common Stock and holders of Company Restricted Shares as of the record date for the Company Stockholder Meeting not less than twenty (20) Business Days prior to the anticipated Election Deadline (the "Mailing Date"). Parent shall make available one or more Forms of Election as may reasonably be requested from time to time by all persons who become holders of record of Company Common Stock during the period following the record date for the Company Stockholder Meeting and prior to the Election Deadline.
(d) Prior to the Mailing Date, Parent shall appoint an exchange agent, which shall be a bank or trust company reasonably satisfactoryacceptable to the Company to act as exchange agent (the "Exchange Agent"), for the paymentpurpose of receiving Elections and exchanging shares of Company Common Stock represented by Certificates for Merger Consideration, pursuant to an exchange agent agreement entered into prior to the Mailing Date (the "Exchange Agent Agreement"). Any Election shall have been made properly only if the Exchange Agent shall have received, by the Election Deadline, a Form of Election properly completed and signed and accompanied by Certificates representing the shares of Company Common Stock to which such Form of Election relates, duly endorsed in blank or otherwise in form acceptable for transfer on the books of the Company or by an appropriate customary guarantee of delivery of such Certificates, as set forth in such Form of Election, from a firm that is an "eligible guarantor institution" (as defined in Rule 17Ad-15 under the Exchange Act);provided, that such Certificates are in fact delivered to the Exchange Agent by the time required in such guarantee of delivery, and, in the case of Book-Entry Shares, any additional documents specified in the procedures set forth in the Form of Election. Failure to deliver shares of Company Common Stock covered by such a guarantee of delivery within the time set forth on such guarantee shall be deemed to invalidate any otherwise properly made
Election, unless otherwise determined by Parent, in its sole and absolute discretion. As used herein, unless otherwise agreed in advance by the Company and Parent, "Election Deadline" means 5:00 p.m. local time (in the city in which the principal office of the Exchange Agent is located) on the later of (i) the date immediately prior to the Company Stockholder Meeting and (ii) the date that Parent and the Company shall agree is two (2) Business Days prior to the expected Closing Date. The Company and Parent shall issue a press release reasonably satisfactory to each of them announcing the anticipated date of the Election Deadline not more than fifteen (15) Business Days before, and at least five (5) Business Days prior to, the Election Deadline. If the Closing is delayed to a subsequent date, the Election Deadline shall be similarly delayed to a subsequent date (which shall be the second (2nd) Business Day prior to the Closing Date) and the Company and Parent shall cooperate to promptly publicly announce such rescheduled Election Deadline and Closing.
(e) Any Holder may, at any time prior to the Election Deadline, change or revoke his or her Election by written notice received by the Exchange Agent prior to the Election Deadline accompanied by a properly completed and signed revised Form of Election or by withdrawal prior to the Election Deadline of his or her Certificates, or of the guarantee of delivery of such Certificates, or any documents in respect of Book-Entry Shares, previously deposited with the Exchange Agent. After an Election is validly made with respect to any shares of Company Common Stock or Company Restricted Shares, any subsequent transfer of such shares of Company Common Stock or Company Restricted Shares shall automatically revoke such Election. Notwithstanding anything to the contrary in this Agreement, all Elections shall be automatically deemed revoked upon receipt by the Exchange Agent of written notification from Parent or the Company that this Agreement has been terminated in accordance withArticle VIII. Subject to the terms of the Exchange Agent Agreement and this Agreement, the Exchange Agent shall have reasonable discretion to determine if any Election is not properly made with respect to any shares of Company Common Stock or Company Restricted Shares (neither Parent nor the Company nor the Exchange Agent being under any duty to notify any stockholder of any such defect); in the event the Exchange Agent makes such a determination, such Election shall be deemed to be not in effect, and the shares of Company Common Stock or Company Restricted Shares covered by such Election shall, for purposes hereof, be deemed to be Non-Electing Shares, unless a proper Election is thereafter timely made with respect to such shares.
(f) Subject to the terms of the Exchange Agent Agreement, Parent and the Company, in the exercise of their reasonable discretion, shall have the joint right to make all determinations, not inconsistent with the terms of this Agreement, governing (i) the manner and extent to which Elections are to be taken into account in making the determinations prescribed bySection 3.2, (ii) the issuance and delivery of certificates representing the number of shares of Parent Common Stock into which shares of Company Common Stock or Company Restricted Shares are converted into the right to receive in the Merger Consideration,and (iii) the method of payment of cash for shares of Company Common Stock Award Payments andconverted into the Aggregateright to receive the Cash Consideration as providedand cash in lieu of fractional shares of Parent Common Stock.
Section 3.4Section 3.1(b) Deposit of Merger Consideration. andSection 3.3. OnAt or beforeprior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with the Exchange Agent (i) certificates representing the shares of Parent Common Stock sufficient to pay the Merger Consideration and the Stock Award Payments,
and (ii) cash in immediately available funds in an amount sufficient to pay the Aggregate Cash Consideration (such certificates representing shares of Parent Common Stock and cash amounts, the "Aggregate Merger Consideration", and such Aggregate Merger Consideration as deposited with the Exchange Agent, the "Exchange Fund"), in each case, for the benefit of the holders of shares of Company Common Stock Company Options,and Company Restricted Shares at the Effective Time, for exchange in accordance with thisArticle III, (i) evidence of Parent Common Stock Units,in book-entry form issuable pursuant toSection 3.1(a) equal to the aggregate Stock Consideration and (ii) immediately available funds equal to the aggregate Cash Consideration (together with, to the extent then determinable, any cash payable in lieu of fractional shares pursuant toSection 3.14) (collectively, the "Exchange Fund") and Parent shall instruct the Exchange Agent to timely pay the Cash Consideration and cash in lieu of Company Restricted Stock and Company Performance Shares. In the eventfractional shares, in accordance with this Agreement. The cash portion of the Exchange Fund shall be insufficient to make the payments contemplatedinvested bySection 3.3, Parent shall promptly deposit, or cause to be deposited, additional funds with the Exchange Agent in an amount which is equal toas directed by Parent or the deficiency in the amount required to make such payment. Parent shall cause the Exchange Agent to make,Surviving Entity. Interest and the Exchange Agent shall make, payments of the Merger Consideration, amounts in respect of Company Options, Company Restricted Stock Units, shares of Company Restricted Stock and Company Performance Shares and any amounts payable in respect of dividends or distributionsother income on shares of Parent Common Stock in accordance withSection 3.2(d) or otherwise payable pursuant toSection 3.7 out of the Exchange Fund in accordance with this Agreement and the Articles of Merger and the Certificate of Merger. The Exchange Fund shall not be used for any other purpose. Any and all interest earned on cash deposited in the Exchange Fund shall be the sole and exclusive property of Parent and the Surviving
Entity and shall be paid to Parent or the Surviving Entity.Entity, as Parent directs. No investment of the Exchange Fund shall relieve Parent, the Surviving Entity or the Exchange Agent from making the payments required by thisArticle III, and following any losses from any such investment, Parent shall promptly provide additional funds to the Exchange Agent to the extent necessary to satisfy Parent's obligations hereunder for the benefit of the holders of shares of Company Common Stock at the Effective Time, which additional funds will be deemed to be part of the Exchange Fund.
(b)Section 3.5 Delivery of Merger Consideration. As soon as reasonably practicable after the Effective Time and in any event not later than the fifth (5th) Business Day following the Effective Time, the Exchange Agent shall mail to each holder of record of a Certificate or Book-Entry Share immediately prior to the Effective Time a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates or Book-Entry Shares shall pass, only upon delivery of the Certificates or Book-Entry Shares to the Exchange Agent) and instructions for use in effecting the surrender of the Certificates or Book-Entry Shares in exchange for the Merger Consideration, in such form as the Company and Parent may reasonably agree. Upon proper surrender of a Certificate or Book-Entry Share for exchange and cancellation to the Exchange Agent, together with a letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate or Book-Entry Share shall be entitled to receive in exchange therefor the Merger Consideration (which, to the extent it is Stock Consideration, shall be in non-certificated book-entry form) in respect of the shares of Company Common Stock formerly represented by such Certificate or Book-Entry Share and such Certificate or Book-Entry Share so surrendered shall forthwith be cancelled. No interest will be paid or accrued for the benefit of holders of the Certificates or Book-Entry Shares on the Merger Consideration payable upon the surrender of the Certificates or Book-Entry Shares.
Section 3.6 Share Transfer Books. At the Effective Time, the share transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of shares of Company Common Stock. From and after the Effective Time, personsPersons who held shares of Company Common Stock or Company Restricted Shares immediately prior to the Effective Time shall cease to have rights with respect to such shares, except as otherwise provided for herein. On or after the Effective Time, any Certificates presented to the Exchange Agent or the Surviving Entity for any reason shall be cancelled and exchanged for the Merger Consideration with respect to the shares of Company Common Stock formerly represented thereby.
(i) As promptly as practicable following the Effective Time (but in no event later than two (2) Business Days thereafter), the Surviving Entity shall cause the Exchange Agent to mail (and to make available for collection by hand) (A) to each holder of record of a Certificate (x) a letter of transmittal (a "Letter of Transmittal"), which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass only upon proper delivery of the Certificates (or affidavits of loss in lieu thereof) to the Exchange Agent, and which Letter of Transmittal shall be in such form and have such other provisions as the Surviving Entity may reasonably specify, and (y) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration into which the number of shares of Company Common Stock previously represented by such Certificate shall have been converted pursuant to this Agreement, together with any amounts payable in respect of dividends or distributions on shares of Parent Common Stock in accordance withSection 3.2(d) (which instructions shall provide that, at the election of the surrendering holder, (1) Certificates may be surrendered by hand delivery or otherwise or (2) the Merger Consideration in exchange therefor, together with any amounts payable in respect of dividends or distributions on shares of Parent Common Stock in accordance withSection 3.2(d), may be collected by hand by the surrendering holder or by check or wire transfer to the surrendering holder), (B) to each holder of a Company Option, a certificate representing an option to acquire shares of Parent Common Stock or a check or direct deposit, in each case in an amount due and payable to such holder pursuant toSection 3.3(a) in respect of such Company Option, (C) to each holder of a Company Restricted Stock Unit, a certificate representing a Rollover RSU or a check or direct deposit, in each case in an amount due and payable to such holder pursuant toSection 3.3(b) in respect of such Company Restricted Stock Unit, (D) to each holder of a share of Company Restricted Stock, a certificate representing shares of Parent Common Stock in an amount due and payable to such holder pursuant toSection 3.3(c) in respect of such share of Company Restricted Stock, (E) to each holder of a Company Performance Share,
a certificate representing shares of Parent Common Stock in an amount due and payable to such holder pursuant toSection 3.3(d) in respect of such Company Performance Share, and (F) to each holder of a Company DER, the payment due and payable to such holder pursuant toSection 3.3(e).
(ii) Upon surrender of a Certificate (or affidavit of loss in lieu thereof) for cancellation to the Exchange Agent, together with a Letter of Transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each share of Company Common Stock formerly represented by such Certificate pursuant to the provisions of thisArticle III plus any cash such holder is entitled to receive in lieu of fractional shares of Parent Common Stock that such holder has the right to receive pursuant to the provisions ofSection 3.1(b) and any amounts that such holder has the right to receive in respect of dividends or distributions on shares of Parent Common Stock in accordance withSection 3.7, to be mailed, made available for collection by hand or delivered by wire transfer, within two (2) Business Days following the later to occur of (A) the Effective Time or (B) the Exchange Agent's receipt of such Certificate (or affidavit of loss in lieu thereof), and the Certificate (or affidavit of loss in lieu thereof) so surrendered shall be forthwith canceled. The Exchange Agent shall accept such Certificates (or affidavits of loss in lieu thereof) upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Until surrendered as contemplated by thisSection 3.2, each Certificate shall be deemed, at any time after the Effective Time, to represent only the right to receive, upon such surrender, the Merger Consideration as contemplated by thisArticle III. No interest shall be paid or accrued for the benefit of holders of the Certificates on the Merger Consideration payable upon the surrender of the Certificates.
(iii) As promptly as practicable following the Effective Time (but in no event later than two (2) Business Days thereafter), the Surviving Entity shall cause the Exchange Agent (A) to issue to each holder of Book-Entry Shares that number of uncertificated whole shares of Parent Common Stock that such holder is entitled to receive pursuant toSection 3.1(b) in respect of such Book-Entry Shares, and (B) to issue and deliver to each holder of Book-Entry Shares a check or wire transfer for any amounts payable in respect of dividends or distributions on shares of Parent Common Stock in accordance withSection 3.2(d) and any other amount such holder is entitled to receive in lieu of fractional shares of Parent Common Stock that such holder has the right to receive pursuant to the provisions ofSection 3.1(b), in each case without such holder being required to deliver a Certificate or an executed Letter of Transmittal to the Exchange Agent, and such Book-Entry Shares shall then be canceled. No interest shall be paid or accrued for the benefit of holders of Book-Entry Shares on the Merger Consideration payable in respect of the Book-Entry Shares.
(iv) In the event of a transfer of ownership of shares of Company Common Stock that is not registered in the transfer records of the Company, it shall be a condition of payment that any Certificate surrendered in accordance with the procedures set forth in thisSection 3.2(c) shall be properly endorsed or shall be otherwise in proper form for transfer, or any Book-Entry Share shall be properly transferred, and that the Person requesting such payment shall have paid any Transfer Taxes and other Taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate or Book-Entry Share surrendered or shall have established to the satisfaction of Parent that such Tax either has been paid or is not applicable.
(d) Dividends with Respect to Parent Common Stock. No dividends or other distributions with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock issuable hereunder,with respect to such Certificate in accordance with this Agreement, and all such dividends and other distributions shall be paid by Parent to the Exchange Agent and shall be included in the Exchange Fund, in each case until the surrender of such Certificate (or affidavit of loss in lieu thereof) in accordance with this Agreement. FollowingSubject to applicable Laws, following surrender of any such Certificate (or affidavit of loss in lieu thereof) there shall be paid to the record holder thereofof the shares of Parent Common Stock, if any, issued in addition to the other amounts payable hereunderexchange therefor, without interest, (i) promptly after the time of such surrender, the amount ofall dividends orand other distributions payable in respect of any such shares of Parent Common Stock with a record date after the Effective Time theretoforeand a payment date on or prior to the date of such surrender and not previously paid with respect to such whole shares of Parent Common Stock to which such holder is entitled pursuant to this Agreement and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such whole shares of Parent Common Stock.
(e) Section 3.8 Termination of Exchange Fund. Any portion of the Exchange Fund (including any interest and other income received with respect thereto) which remains undistributed to the former holders of shares of Company Common Stock or Company Restricted Shares on the first (1st)(1st) anniversary of the Effective Time shall be delivered to Parent, upon demand, and any former holders of shares of Company Common Stock or Company Restricted Shares who have not theretofore received any Merger Consideration (including any cash in lieu of fractional shares and any applicable dividends or other distributions with respect to Parent Common Stock) to which they are entitled under thisArticle III shall thereafter look only to Parent and the Surviving Entity for payment of their claims with respect thereto.
(f)Section 3.9 No Liability. None of Parent, Merger Sub, the Company, the Surviving Entity, OP Merger Sub, the Company Operating Partnership, the Surviving Partnership or the Exchange Agent, or any employee, officer, director, agent or Affiliate of any of them, shall be liable to any holder of shares of Company Common Stock in respect of any partcash that would have otherwise been payable in respect of any Certificate or Book-Entry Share from the Merger ConsiderationExchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by holders of any such shares immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Authority shall, to the extent permitted by applicable Law, become the property of the Surviving Entity, free and clear of any claims or interest of any such holders or their successors, assigns or personal representatives previously entitled thereto.
(g)Section 3.10 Investment of Exchange Fund. The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Parent or, after the Effective Time, the Surviving Entity;provided,however, that (i) no such investment shall relieve Parent or the Exchange Agent from making the payments required by thisArticle III and, to the extent that there are losses with respect to such investments, or the Exchange Fund diminishes for other reasons below the level required to make prompt payments of the Aggregate Merger Consideration as contemplated hereby, Parent shall promptly replace or restore the portion of the Exchange Fund lost through investments or other events so as to ensure that the Exchange Fund is, at all times, maintained at a level sufficient to make such payments, (ii) no such investment shall have maturities that could prevent or delay payments to be made pursuant to this Agreement, and (iii) such investments shall be in short-term obligations of the United States of America with maturities of no more than thirty (30) days or guaranteed by the United States of America and backed by the full faith and credit of the United States of America. Any net profit resulting from, or interest or income produced by, such investments, shall be property of, and paid to, the Surviving Entity.
Section 3.3 Stock Options; Restricted Stock Units; Restricted Stock; Performance Shares; Dividend Equivalent Rights.Equity Awards.
(a) Treatment of Stock Options.Company Restricted Shares. At the Effective Time, without any action on the part of any holder or theEach Company eachRestricted Share that is outstanding Company Option (whether or not then vested or exercisable) shall be vested and exercisable as of the Effective Time and, in the sole discretion of Parent, shall be treated in accordance with either (i) or (ii), except that the Company Options set forth on
Section 3.3(a) of the Company Disclosure Letter shall not become fully vested and exercisable and shall be treated in accordance with (ii):
(i) Each outstanding Company Option as of the Effective Time shall thereafter be exchanged for a cash payment by the Parent or the Surviving Entity as promptly as practicable following the Effective Time (but in no event later than three (3) Business Days thereafter) equal to the excess, if any, of (1) the product of (x) the Exchange Ratio and (y) the VWAP of Parent Common Stock over (2) the exercise price per share of Company Common Stock subject to such Company Option, less any required withholding Taxes (which may be covered by withholding shares) (the "Cash Option Payment"), and the holder of any such Company Option shall cease to have any right thereunder to acquire any equity interest in the Company, Company Subsidiary, Parent, Surviving Entity or any of their Affiliates; or
(ii) Each outstanding Company Option, as of the Effective Time, shall be assumed by Parent, without any action on the part of any holder or the Company, and will otherwise continue to have, and be subject to, the same terms and conditions (after taking into account any acceleration of vesting and exercisability provided in the foregoing provisions of thisSection 3.3(a)) as were applicable immediately prior to the Effective Time as set forth in the applicable Company Plan (including any applicable award agreement, other agreement or other document evidencing such Company Option) immediately prior to the Effective Time, except that, from and after the Effective Time, (A) each such Company Option will be exercisable for that number of whole shares of Parent Common Stock equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such Company Option as of immediately prior to the Effective Time and (y) the Exchange Ratio, and (B) the per share exercise price for the shares of Parent Common Stock issuable upon exercise of such assumed Company Option will be equal to the quotient (rounded to the nearest whole cent) determined by dividing (x) the exercise price of each share of Company Common Stock at which the assumed Company Options were exercisableshall, effective immediately prior to the Effective Time, by (y) the Exchange Ratio.
Parent shall notify the Company in writing, at least five (5) Business Days prior to the Effective Time regarding whether Company Options shall be treated in accordance with (i) or (ii) of thisSection 3.3(a). Amounts payable pursuant toSection 3.3(a)(i) or(ii), as applicable, are referred to herein as the "Option Payment".
(b) Treatment of Restricted Stock Units.
(i) Each Company Restricted Stock Unit which is outstanding and unvested immediately prior to the Effective Time shall become fully vested and all restrictions with respect thereto shall lapse immediately prior to the Effective Time;provided,however, that the Company Restricted Stock Units listed onSection 3.3(b)(i) of the Company Disclosure Letter shall vest, and their restrictions shall lapse, solely in accordance with their terms; andprovided,further,however, that the Company Restricted Stock Units set forth onSection 3.3(b)(ii) of the Company Disclosure Letter (the "Rollover RSUs") shall not become fully vested and their restrictions shall not fully lapse, and they shall be treated in accordance withSection 3.3(b)(ii) hereof. Each Company Restricted Stock Unit for which vesting accelerates and restrictions lapse at the Effective Time shall be canceled by virtue of the Mergeroccurrence of the Closing and without any action on the part of any holder of any Company Restricted Stock UnitShare, vest in consideration forfull, and the right at the Effective Time to receive, as promptly as practicable following the Effective Time (but in no event later than three (3) Business Days thereafter), a cash amountrestrictions with respect thereto equal to the product of (A) the number of sharesshall lapse. Each such Company Restricted Share shall be deemed an issued and outstanding share of Company Common Stock previously subject to such Company Restricted Stock Unit and (B) the product of (x) the Exchange Ratio and (y) the VWAP of Parent Common Stock, less any required withholding Taxes (which may be covered by withholding shares) (the "Restricted Stock
Unit Payment"). As of the Effective Time, all Company Restricted Stock Units (other than Rollover RSUs) shall no longer be outstanding and shall automatically terminate and cease to exist, and each holder of a Company Restricted Stock Unit (other than a Rollover RSU) shall cease to have any rights with respect thereto, except the right to receive the Restricted Stock Unit Payment.
(ii) Each outstanding Rollover RSU, as of the Effective Time, shall be assumed by Parent, without any action on the part of any holder or the Company, and will otherwise continue to have, and be subject to, the same terms and conditions (including vesting terms and conditions) as were applicable immediately prior to the Effective Time as set forth in the applicable Company Plan (including any applicable award agreement, other agreement or the document evidencing such Rollover RSU) immediately prior to the Effective Time, except that, from and after the Effective Time, each Rollover RSU will relate to a number of whole shares of Parent Common Stock equal to the product (rounded down to the nearest whole number) of (A) the number of shares of Company Common Stock subject to such Rollover RSU as of immediately prior to the Effective Time and (B)shall be entitled to receive the Exchange Ratio.
(c)Merger Consideration determined in accordance with this Agreement and otherwise subject to the terms and conditions of this Agreement (including Treatment of Restricted Stock.Section 3.1 Each shareandSection 3.3). Any amounts withheld with respect to the Restricted Shares pursuant toSection 3.11 shall be withheld first from the aggregate Cash Consideration payable in respect of such holder's Company Restricted Stock which is outstanding immediately priorShares.
(b) LTIP Units. The parties to the Effective Time shall become fully vested and all restrictions with respect thereto shall lapseOPP Agreement have as of the date hereof, entered into an agreement to terminate the OPP Agreement (without payment thereunder to the Company Advisor or any of its Affiliates) effective as of immediately prior to the Effective Time and each such share of Company Restricted Stock shall be converted into a number of shares of Parent Common Stock equal to the Exchange Ratio in accordance with Section 3.1(b) of this Agreement without any actioncontingent on the part of the holder of any share of Company Restricted Stock (the "Restricted Stock Payment"). Asoccurrence of the Effective Time each holder(the "OPP Termination Agreement"). A true, correct and complete copy of shares of Company Restricted Stock shall ceasethe OPP Termination Agreement has been provided to have any rights with respect thereto, except the right to receive shares of Parent Common Stock.Parent.
(d) Treatment of Performance Shares. With respect (c) Notwithstanding anything to any Company Performance Shares outstanding immediatelythe contrary contained herein, prior to the Effective Time, the performance periodCompany shall terminate immediately priortake all actions necessary to effectuate the Effective Time and the number of Company Performance Shares subject to the award which shall vest as of the Effective Time shall be determined in accordance with the relevant award agreement based on the Company's actual performance for the shortened performance period. Each Company Performance Share for which vesting accelerates and restrictions lapse at the Effective Time shall be converted into a number of shares of Parent Common Stock equal to the Exchange Ratio in accordance withSection 3.1(b) of this Agreement without any action on the part of the holder of any share of Company Performance Shares (the "Performance Share Payment"). Any Company Performance Shares subject to the award which do not vest after giving effect to the first sentenceprovisions of thisSection 3.3(d)3.10 shall terminate as of the Effective Time and each holder thereof shall cease to have any rights with respect thereto..
(e) Dividend Equivalent Rights. Any dividend equivalent right granted in connection with another award pursuant to a Company Plan which is outstanding (whether or not vested), immediately prior to the Effective Time, whether denominated in restricted stock units or otherwise (each, a "Company DER"), shall, if unvested, become fully vested immediately prior to the Effective Time and all Company DERs shall be paid in accordance with their terms (any such payment, the "DER Payment"). As of the Effective Time, all Company DERs shall no longer be outstanding and shall automatically terminate and cease to exist, and each holder thereof shall cease to have any rights with respect thereto, except the right to receive the DER Payment.
(f) Company Assumed Awards. As soon as reasonably practicable after the Effective Time, but in no event later than five (5) Business Days following the Effective Time, Parent shall deliver to each holder of any Rollover RSU or Company Option treated in accordance withSection 3.3(a)(ii) (each such Rollover RSU or Company Option, a "Company Assumed Award") an appropriate notice setting forth such holder's rights pursuant to such Company Assumed Award. Unless the shares of Parent
Common Stock issuable upon exercise or settlement of the Company Assumed Awards are otherwise covered by an existing registration statement on Form S-8 immediately upon the Effective Time, Parent shall prepare and file with the SEC such a registration statement with respect to such shares of Parent Common Stock no later than ten (10) Business Days following the Effective Time and Parent shall exercise reasonable best efforts to maintain the effectiveness of such registration statement for so long as such Company Assumed Awards remain outstanding (subject to blackout periods and similar restrictions in accordance with Parent's policies). The Company and its counsel shall reasonably cooperate with and assist Parent in the preparation of any such registration statement.
Section 3.43.11 Withholding Rights. Each and any Parent Party, the Company, the Surviving Entity, the Company Operating Partnership, the Surviving Partnership or the Exchange Agent, as applicable, shall be entitled to deduct and withhold from the Merger Consideration and any other amounts or property otherwise payable or distributable to any Person pursuant to this Agreement to any holder of shares of Company Common Stock, Company Options, Company Restricted Stock Units, shares of Company Restricted Stock, Company Performance Shares and Company DERs, such amounts or property (or portions thereof) as such Parent Party, the Company, the Surviving Entity, the Surviving Partnership or the Exchange Agent is required to deduct and withhold with respect to the making of such payment or distribution under the Code, and the rules and regulations promulgated thereunder, or any provision of applicable Tax Law. To the extent that amounts are so deducted or withheld and paid over to the appropriate Governmental Authority by a Parent Party, the Company, the Surviving Entity, the Surviving Partnership or the Exchange Agent, as applicable, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the personPerson in respect of which such
deduction and withholding was made by the Parent Party, the Company, the Surviving Entity or the Exchange Agent, as applicable.
Section 3.53.12 Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, then upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Entity, the posting by such Person of a bond in such reasonable and customary amount as the Surviving Entity may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration to which the holder thereof is entitled pursuant to thisArticle III.
Section 3.63.13 Dissenters' Rights. No dissenters' or appraisal rights shall be available with respect to the MergerMergers or the other transactions contemplated by this Agreement, so long as the provisions of Section 3-202(c)(1)(ii) of the MGCL are applicable to the transaction.Agreement.
Section 3.73.14 Fractional Shares. No certificate or scrip representing fractional shares of Parent Common Stock or Class C Units of the Surviving Partnership shall be issued upon the surrender for exchange of Certificates or with respect to Book-Entry Shares or otherwise, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. Notwithstanding any other provision of this Agreement, (i) each holder of shares of Company Common Stock converted pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock and (ii) each holder who would otherwise have been entitled to receive a fraction of a Class C Unit of the Surviving Partnership shall receive (aggregating for this purpose all the shares of Parent Common Stock or Class C Units, as applicable, that such holder is entitled to receive hereunder), in lieu thereof, cash, without interest, in an amount equal to the product of (a) such fractional part of a share of Parent Common Stock or Class C Unit, as applicable, multiplied by (b) the VWAPper share closing price of Parent Common Stock.
Stock on the Closing Date on the NYSE, as reported in The Wall Street Journal.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE COMPANY OPERATING PARTNERSHIP
Except (a) as set forth in the disclosure letter that has been prepared by the Company and delivered by the Company to the Parent Parties in connection with the execution and delivery of this Agreement (the "Company Disclosure Letter") (it being agreed that disclosure of any item in any Section of the Company Disclosure Letter with respect to any Section or subsection ofArticle IV of this Agreement shall be deemed disclosed with respect to any other Section or subsection ofArticle IV of this Agreement to the extent the applicability of such relationshipdisclosure is reasonably apparent,provided that nothing in the Company Disclosure Letter is intended to broaden the scope of any representation or warranty of the Company made herein), or (b) as disclosed in publicly available Company SEC Filings, publicly available, filed with, or furnished to, as applicable, the SEC on or after January 1, 20102013 and prior to the date of this Agreement (excluding any risk factor disclosures contained in such documents under the heading "Risk Factors" and any disclosure of risks or other matters included in any "forward-looking statements" disclaimer or other statements that are cautionary, predictive or forward-looking in nature), the Company and the Company Operating Partnership hereby representsjointly and warrantsseverally represent and warrant to the Parent and Merger SubParties that:
Section 4.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized,incorporated, validly existing and in good standing under the laws of the State of Maryland and has the requisite organizationalcorporate power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. The Company is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(b) Each Company Subsidiary is duly incorporated or organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted.conducted, except, with respect only to each Company Subsidiary that would not constitute a Significant Subsidiary, for such failures to be so organized, in good standing or have certain power and authority that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. Each Company Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(c) Section 4.1(c) of the Company Disclosure Letter sets forth a true and complete list of the Company Subsidiaries and each other corporate or non-corporate subsidiary in which the Company owns any direct or indirect voting, capital, profits or other beneficial interest ("Other Company Subsidiary"), including a list of each Company Subsidiary or Other Company Subsidiary that is a "qualified REIT subsidiary" within the meaning of Section 856(i)(2) of the Code ("Qualified REIT Subsidiary") or a "taxable REIT subsidiary" within the meaning of Section 856(l) of the Code ("Taxable REIT Subsidiary"), together with (i) the jurisdiction of incorporation or organization, as the case may be, of each Company Subsidiary and each Other Company Subsidiary, (ii) the type of and percentage of voting, equity, profits, capital and other beneficial interest held, directly or indirectly, by the Company in and to each Company Subsidiary and each Other Company Subsidiary, (iii) the names of and the type of and percentage of voting, equity, profits, capital and other beneficial interest held by any Person other than the Company or a Company Subsidiary in each Company Subsidiary and, to the knowledge of the Company, each Other Company Subsidiary, and (iv) the classification for United StatesU.S. federal income tax purposes of each Company Subsidiary and, to the knowledge of the Company, each Other Company Subsidiary.
(d) NeitherExcept as set forth inSection 4.1(d) of the Company Disclosure Letter, neither the Company nor any Company Subsidiary, directly or indirectly, owns any interest or investment (whether equity or debt) in any personPerson (other than equity interests in the Company Subsidiaries or Other Company Subsidiaries, loans to any Taxable REIT Subsidiary of the Company and investments in short-term investment securities)bank time deposits and money market accounts).
(e) Except as set forth inSection 4.1(e) of the Company Disclosure Letter, the Company has not exempted any "Person" from the "Aggregate Share Ownership Limit" or established or increased an "Excepted Holder Limit," as such terms are defined in the Company Charter, which exemption or Excepted Holder Limit is currently in effect.
(f) There are no partners of the Company Operating Partnership other than the Company, American Realty Capital Healthcare Advisors, LLC, American Realty Capital Healthcare Special Limited Partnership, LLC and Healthcare Advisors Profit Plan LLC.Section 4.1(f) of the Company Disclosure Letter sets forth the number of partnership units held by each partner in the Company Operating Partnership. The Company is the sole general partner of the Company Operating Partnership.
Section 4.2 Organizational Documents. The Company has made available to Parent complete and correct copies of (i)(a) the Company's articles of incorporation, as amended and supplemented to datecharter (the "Company Charter") and the Company's Bylawsbylaws, as amended to date (the "Company Bylaws"), and (ii)(b) the organizational documents of each Company Subsidiary (other than the applicable certificate of formation), each as in effect on the date hereof.
Section 4.3 Capital Structure.
(a) The authorized capital stock of the Company consists of 200,000,000300,000,000 shares of Company Common Stock and 5,000,00050,000,000 shares of preferred stock, $0.01 par value $1.00 per share (the "Company Preferred Stock"). At the close of business on February 24, 2011,May 30, 2014, (i) 126,462,665169,316,257 shares of Company Common Stock were issued and outstanding (ii) no shares of(including 225,905 Company Preferred Stock were issuedRestricted Shares), and outstanding, (iii) 1,458,24817,576,015 shares of Company Common Stock were reserved for issuance pursuant to the terms of outstanding awards granted pursuant to the Company Plans, (iv) 3,815,976 shares of Company Common Stock are available for grant under the Company Plans, (v) 2,673,641 shares of Company Common Stock were reserved for issuance upon redemption of Class A Partnership Units of NHP/PMB ("Class A Units"), (vi) 345,639 shares of Company Common Stock were reserved for issuance under the Company's Dividend Reinvestment and Stock Purchase Plan, and (vii) 1,322,200 shares of Company Common Stock were reserved for issuance under the Company's at-the-market equity offering program.Equity Plans. All issued and outstanding shares of the capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable, and no class of capital stock of the Company is entitled to preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of shares of Company Common Stock may vote.Section 4.3(a) of the Company Disclosure Letter, sets forth a complete and correct list,for each holder of Company Restricted Shares outstanding as of the date of this Agreement of(A) the total number of outstanding (A) Company Options,name with respect to the holder (B) Company Restricted Stock Units, (C) Company Restricted Stock, (D) Company Performance Shares, and (E) Company DER and (F) the number of shares of Company Common Stock subject to each outstanding Company Option, the name of the holder, the exercise price, the grant date, and the general terms and conditions including vesting provisions and exercise period of Company Options and the Company Benefit Plan under which such Company Options were granted;Restricted Shares held by such holder, (C) the numberdate of sharesgrant of Company Common Stock subject to each outstanding award ofsuch Company Restricted Stock UnitsShares, and Company Restricted Stock, the name of the holder, the grant date, and the general terms and conditions including(D) the vesting schedule and the other material terms of each award offor such Company Restricted Stock Units and Company Restricted Stock, as applicable, and the Company Benefit Plan under which Company Restricted Stock Units and Company Restricted Stock, as applicable, were granted; the number of shares of Company Common Stock subject to each Company Performance Shares award, the name of the holder, the grant date, and the general terms and conditions including the vesting schedule and other material terms of such Company Performance Shares award and the Company Benefit Plan under Company Performance Shares award were granted; and any other rights to purchase or receive Company Common Stock granted under the Company Benefit Plans or otherwise and the names and positions of the holders, the grant date and the terms thereof and the Company Benefit Plan under which such rights were granted.Shares. There are no other rights, to purchaseoptions, stock or receiveunit appreciation rights, phantom stock or units, restricted stock units, dividend equivalents or similar rights with respect to the Company Common Stock granted under the Company Benefit Plans or otherwise other than the Company Options, Company Restricted Stock Units, Company Restricted Stock, Company Performance Shares, and Company DERsas disclosed onSection 4.3(a) of the Company Disclosure Letter. Immediately priorEach Company Restricted Share grant and each LTIP Unit grant was made in accordance in all material respects with the terms of the Company Equity Plans and applicable Law. Prior to the Closing (and as close to Closing as reasonably practicable), the Company will provide to Parent a complete and correct list that contains the information required to be provided inSection 4.3(a) of the Company Disclosure ScheduleLetter, that is correct and complete as of the Closing Date.date such list is provided;provided,however, that delivery of such updated schedule shall not cure any breach of thisSection 4.3(a) for purposes of determining whether the applicable closing condition has been satisfied. There are 1,443,897 OP Units issued and outstanding (other than 5,613,374 OP Units to be issued in respect of the termination of the Listing Agreement), (ii) no Class B OP Units issued and outstanding and (iii) 9,219,108 LTIP Units issued and outstanding, each of which LTIP Units is owned of record and beneficially by the Company Advisor, and each of which LTIP Units shall be forfeited immediately prior to the Effective Time. Except as set forth in the preceding sentence, there are no other partnership interests or other equity or ownership interests in the Company Operating Partnership and there are no existing options, warrants, calls, subscriptions, convertible securities or other securities, agreements, commitments or obligations of any character relating to the partnership interests or other equity or ownership interests in the Company Operating Partnership or other securities which would require the Company Operating Partnership to issue or sell any partnership interests or other equity or ownership interests in the Company Operating Partnership.
(b) All of the outstanding shares of capital stock of each of the Company Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and nonassessable. All equity interests in each of the Company Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued. All shares of capital stock of (or other ownership interests in) each of the Company
Subsidiaries whichthat may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and nonassessable. Except as set forth inSection 4.1(c) of the Company Disclosure Letter, the Company owns, directly or indirectly, all of the issued and outstanding capital stock and other ownership interests of each of the Company Subsidiaries, free and clear of all encumbrances other than statutory or other liens for Taxes or assessments which are not yet due or delinquent or the validity of which is being contested in good
faith by appropriate proceedings and for which adequate reserves are being maintained, and there are no existing options, warrants, calls, subscriptions, convertible securities or other securities, agreements, commitments or obligations of any character relating to the outstanding capital stock or other securities of any Company Subsidiary or which would require any Company Subsidiary to issue or sell any shares of its capital stock, ownership interests or securities convertible into or exchangeable for shares of its capital stock or ownership interests.
(c) Except as set forth in thisSection 4.3, or inSection 4.3(a) of the Company Disclosure Letter, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, rights of first refusal, arrangements or undertakings of any kind to which the Company or any Company Subsidiary is a party or by which any of them is bound, obligating the Company or any Company Subsidiary to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional shares of Company Common Stock, shares of Company Preferred Stock or other equity securities or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any equity security of the Company or any of the Company Subsidiaries or obligating the Company or any Company Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, right of first refusal, arrangement or undertaking. AsExcept as set forth inSection 4.3(c) of the Company Disclosure Letter, as of the date of this Agreement, except as expressly provided in the NHP/PMB Partnership Agreement, there are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock, shares of Company Preferred Stock Class A Units or other equity securities of the Company or any Company Subsidiary (other than in satisfaction of withholding Tax obligations pursuant to certain awards outstanding under the Company Equity Plans in the event the grantees otherwise fail to satisfy withholding Tax obligations). Neither the Company nor any Company Subsidiary is a party to or to the knowledge of the Company, bound by any agreements or understandings concerning the voting (including voting trusts and proxies) of any capital stock of the Company or any of the Company Subsidiaries.
(d) All dividends or other distributions on the shares of Company Common Stock and Company Preferred Stock and Class A Units and any material dividends or other distributions on any securities of any Company Subsidiary which have been authorized or declared prior to the date hereof have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).
(a) TheEach of the Company and the Company Operating Partnership has the requisite organizationalcorporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to receipt of the Company Stockholder Approval, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the Company Operating Partnership and the consummation by the Company and the Company Operating Partnership of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate and partnership action, as applicable, and the Company has approved this Agreement and the Partnership Merger as the sole general partner of the Company Operating Partnership, and the limited partners of the Company Operating Partnership have approved this Agreement, the Merger, the Partnership Merger, and the transactions contemplated by this Agreement (including the amendment and restatement of the Company Operating Partnership Agreement in the form of the Surviving Partnership Agreement) by the consent of the limited partners holding more than a majority of the percentage interest of all limited partners, and no other corporate or partnership proceedings on the part of the Company or the Company Operating Partnership are necessary to authorize this Agreement or the MergerMergers or to consummate the transactions contemplated hereby, subject with respect to the Merger, to receipt of the Company Stockholder Approval, and the filing of the Articles of Merger with and acceptance for record of the Articles of Merger withby the SDAT and the due filing of the Certificate of Merger and the Partnership Certificate of Merger with the Delaware Secretary. The Company's board of directors (the "Company Board"), at a duly held meeting, has, by unanimous vote of all of the Company Board members voting,
(i) duly and validly authorized the execution and delivery of this Agreement and declared advisable the consummation of the Merger and the other transactions contemplated hereby, (ii) directed that the Merger and, to the extent stockholder approval is required, the other transactions contemplated hereby be submitted for consideration at the Company Stockholder Meeting, and (iii) resolved to
recommend that the stockholders of the Company vote in favor of the adoption of this Agreement and the approval of the Merger and, to the extent stockholder approval is required, the other transactions contemplated hereby (the "Company Recommendation") and to include such recommendation in the Joint Proxy Statement, subject toSection 6.5.
(b) This Agreement has been duly executed and delivered by the Company and the Company Operating Partnership and, assuming due authorization, execution and delivery by each of Parent, Merger Sub and OP Merger Sub, constitutes a legally valid and binding obligation of the Company and the Company Operating Partnership, enforceable against the Company and the Company Operating Partnership in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law)Law).
Section 4.5 No Conflict; Required Filings and Consents.
(a) TheExcept as set forth inSection 4.5(a) of the Company Disclosure Letter, the execution and delivery of this Agreement by the Company and the Company Operating Partnership does not, and the performance of this Agreement and the consummation of the MergerMergers and the other transactions contemplated hereby by the Company and the Company Operating Partnership will not, (i) assuming receipt of the Company Stockholder Approval, conflict with or violate any provision of (A) the Company Charter or the Company Bylaws or the Company Operating Partnership Agreement or (B) any equivalent organizational or governing documents of any Company Subsidiary, (ii) assuming that all consents, approvals, authorizations and permits described inSection 4.5(b) have been obtained, all filings and notifications described inSection 4.5(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to the Company or any other Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound, or (iii) require any consent or approval (except as contemplated bySection 4.5(b)) under, result in any breach of or any loss of any benefit or material increase in any cost or obligation of the Company or any Company Subsidiary under, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, acceleration, cancellation or cancellationpayment (including disposition or similar fees) (with or without notice or the lapse of time or both) of, or give rise to any right of purchase, first offer or forced sale under or result in the creation of a Lien on any property or asset of the Company or any Company Subsidiary pursuant to, any note, bond, mortgage, debt instrument, indenture, contract, agreement, ground lease, license, permit or other legally binding obligation to which the Company or any Company Subsidiary is a party, except, as to clauses (i)(B), (ii) and (iii), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.Effect (provided that, for the avoidance of doubt, for purposes of thisSection 4.5(a) the exceptions set forth in clauses (vi) and (vii) of the definition of "Company Material Adverse Effect" shall not apply to any such conflicts, violations, breaches, defaults or other occurrences in determining whether a Company Material Adverse Effect has occurred).
(b) The execution and delivery of this Agreement by the Company and the Company Operating Partnership does not, and the performance of this Agreement by the Company and the Company Operating Partnership will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) the filing with the SEC of (A) a joint proxy statement in preliminary and definitive form relating to the Company Stockholder Meeting and the Parent Stockholder Meeting (together with any amendments or supplements thereto, the "Joint Proxy Statement") and of a registration statement
on Form S-4 pursuant to which the offer and sale of shares of Parent Common Stock in the MergerMergers will be registered pursuant to the Securities Act and in which the Joint Proxy Statement will be included as a prospectus (together with any amendments or supplements thereto, the "Form S-4"), and declaration of effectiveness of the Form S-4, and (B) such reports under, and other compliance with, the Exchange Act (and the rules and regulations promulgated thereunder) and the Securities Act (and the rules and regulations promulgated thereunder) as may be required in connection with this Agreement and the transactions contemplated hereby, (ii) as may be required under the rules and regulations of the NYSE, (iii) the filing of the Articles of Merger with and the acceptance for record by SDAT of the Articles of Merger by the SDAT pursuant to the MGCL, (iv)(iii) the due filing of the Certificate of Merger and the acceptance for record byPartnership Certificate of Merger with the Delaware Secretary, of the Certificate of Merger pursuant to the DLLCA, (v)(iv) such filings and approvals as may be required by any applicable state securities or "blue sky" Laws, (vi)(v) such filings as may be required in connection with state and local transfer Taxes, (vi) as may be required under the rules and regulations of the NYSE or NASDAQ, and (vii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect.
Section 4.6 Permits; Compliance With Law.
(a) Except for the authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances that are the subject ofSection 4.14 orSection 4.164.15, which are addressed solely in those Sections, the Company and each Company Subsidiary is in possession of all authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances of any Governmental Authority and accreditation and certification agencies, bodies or other organizations, including building permits and certificates of occupancy, necessary for the Company and each Company Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as it is being conducted as of the date hereof (the "Company Permits"), and all such Company Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the Company Permits, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. All applications required to have been filed for the renewal of the Company Permits have been duly filed on a timely basis with the appropriate Governmental Authority, and all other filings required to have been made with respect to such Company Permits have been duly made on a timely basis with the appropriate Governmental Authority, except in each case for failures to file which, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary has received any claim or notice nor has any knowledge indicating that the Company or any Company Subsidiary is currently not in compliance with the terms of any such Company Permits, except where the failure to be in compliance with the terms of any such Company Permits, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(b) Neither the Company nor any Company Subsidiary is or has been in conflict with, or in default or violation of (i) any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound (except for Laws addressed inSection 4.10,Section 4.11,Section 4.14,Section 4.15 orSection 4.17), or (ii) any Company Permits (except for the Company Permits addressed inSection 4.14 orSection 4.164.15), except in each case for any such conflicts, defaults or violations that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
Section 4.7 SEC Filings; Financial Statements.
(a) The Company has filed with, or furnished (on a publicly available basis) to, the SEC all forms, reports, schedules, statements and documents required to be filed or furnished by it under the Securities Act or the Exchange Act, as the case may be, including any amendments or supplements thereto, from and after January 1, 20092012 (collectively, the "Company SEC Filings"). Each Company SEC Filing, as amended or supplemented, if applicable, (i) as of its date, or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the applicable rules and regulations of the SEC thereunder, and (ii) did not, at the time it was filed (or became effective in the case of registration statements), or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, no Company Subsidiary is separately subject to the periodic reporting requirements of the Exchange Act.
(b) Each of the consolidated financial statements contained or incorporated by reference in the Company SEC Filings (as amended, supplemented or restated, if applicable), including the related notes and schedules, was prepared (except as indicated in the notes thereto) in accordance with GAAP applied on a consistent basis throughout the periods indicated, and each such consolidated financial statement presented fairly, in all material respects, the consolidated financial position, results of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited quarterly financial statements, to normal year-end adjustments).
(c) The records, systems, controls, data and information of the Company and the Company Subsidiaries that are used in the system of internal accounting controls described in the following sentence are recorded, stored, maintained and operated under means that are under the exclusive ownership and direct control of the Company or the Company Subsidiaries or accountants, except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a materially adverse effect on the system of internal accounting controls. The Company and the Company Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including that: (1) transactions are executed only in accordance with management's authorization; (2) transactions are recorded as necessary to permit preparation of the financial statements of the Company and the Company Subsidiaries and to maintain accountability for the assets of the Company and the Company Subsidiaries; (3) access to such assets is permitted only in accordance with management's authorization; (4) the reporting of such assets is compared with existing assets at regular intervals; and (5) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. The Company's principal executive officer and its principal financial officer have disclosed to the Company's auditors and the audit committee of the Company Board (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial data, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls, and the Company has made available to Parent copies of any material written materials relating to the foregoing. The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 promulgated under the Exchange Act) designed to ensure that material information relating to the Company required to be included in reports filed under the Exchange Act, including its consolidated subsidiaries,
is made known to the Company's principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, and, to the knowledge of the Company, such disclosure controls and procedures are effective in timely alerting the Company's principal executive officer and its principal financial officer to material information required to be included in the Company's periodic reports required under the Exchange Act. Since the enactment of the Sarbanes-Oxley Act, none of the Company or any Company Subsidiary has made any prohibited loans to any director or executive officer of the Company (as defined in Rule 3b-7 promulgated under the Exchange Act).
(d) NoneExcept as and to the extent disclosed or reserved against on the Company's most recent balance sheet (or, in the notes thereto) included in the Company SEC Filings, none of the Company or its consolidated subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities or obligations (i) expressly contemplated by or under this Agreement, including without limitationSection 6.1 hereof, (ii) incurred in the ordinary course of business consistent with past practice since the most recent balance sheet set forth in the Company SEC Filings made through and including the date of this Agreement, (iii) described in any section of the Company Disclosure Letter or (iv) that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(e) ToExcept as set forth inSection 4.7(e) of the Company Disclosure Letter, to the knowledge of the Company, none of the Company SEC Filings is as of the date hereof the subject of ongoing SEC review and the Company has not received any comments from the SEC with respect to any of the Company SEC Filings since January 1, 2009 which remain unresolved, nor has it received any inquiry or information request from the SEC as of the date hereof as to any matters affecting the Company which has not been adequately addressed. The Company has made available to Parent true and complete copies of all written comment letters from the staff of the SEC received since January 1, 2009 through the date of this Agreement relating to the Company SEC Filings and all written responses of the Company thereto through the date of this Agreement. None of the Company SEC Filings as of the date hereof is the subject of any confidential treatment request by the Company.
Section 4.8 Disclosure Documents.
(a) None of the information supplied or to be supplied in writing by or on behalf of the Company or any Company Subsidiary for inclusion or incorporation by reference in (i) the Form S-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time such document is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Joint Proxy Statement will, at the date it is first mailed to the stockholders of the Company, and of Parent, at the time of the Company Stockholder Meeting and the Parent Stockholder Meeting, at the time the Form S-4 is declared effective by the SEC or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. All documents that the Company is responsible for filing with the SEC in connection with the transactions contemplated herein, to the extent relating to the Company or any Company Subsidiary or other information supplied by or on behalf of the Company or any Company Subsidiary for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act or Exchange Act, as applicable, and the rules and regulations of the SEC thereunder and each such document required to be filed with any Governmental Authority (other than the SEC) will comply in all material respects with the provisions of any applicable Law as to the information required to be contained therein.
(b) The representations and warranties containedNotwithstanding anything to the contrary in thisSection 4.8 will not applyor this Agreement, the Company makes no representation or warranty with respect to statements made or incorporated, or omissions included, in the Form S-4 or the Joint Proxy Statement to the extent based upon information supplied to the Company by or on behalf of Parent or Merger Sub.
Section 4.9 Absence of Certain Changes or Events. Since September 30, 2010,Between December 31, 2013 and the date hereof, except as contemplated by this Agreement or as set forth inSection 4.9 of the Company Disclosure Letter, (a) the Company and each Company Subsidiary has conducted its business in all material respects in the ordinary course consistent with past practice, (b) except as set forth onSection 6.1(b) of the Company Disclosure Letter, neither the Company nor any Company Subsidiary has taken any action that it would not be permitted to take aftercourse. Between December 31, 2013 and the date of this Agreement without the prior written consent of Parent pursuant toSection 6.1(b)(i),Section 6.1(b)(iii),Section 6.1(b)(vii),Section 6.1(b)(viii),Section 6.1(b)(ix),Section 6.1(b)(xiii),Section 6.1(b)(xv) orSection 6.1(b)(xx), or agreed to do any of the foregoing, and (c)hereof, there has not been any Company Material Adverse Effect or any effect, event, development or
circumstance that, individually or in the aggregate with all other effects, events, developments and changes, would reasonably be expected to result in a Company Material Adverse Effect.
Section 4.10 Employee Benefit Plans.
(a) Other than the Company Equity Plans, the Company and the Company Subsidiaries do not, and are not required to, and have not and have never been required to, maintain, sponsor or contribute to any Benefit Plans. Except as individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, none of Company, any Company Subsidiary or any of their respective ERISA Affiliates has incurred any obligation or liability with respect to or under any employee benefit plan, program or arrangement (including any agreement, program, policy or other arrangement under which any current or former employee, director or consultant has any present or future right to benefits), which has created or will create any obligation with respect to, or has resulted in or will result in any liability to Parent, Merger Sub, OP Merger Sub or any of their respective subsidiaries.
(b) Except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect: (i) each Company Equity Plan has been maintained and administered in compliance with its terms and with applicable Law, including ERISA and the Code to the extent applicable thereto; (ii) all contributions or other amounts payable by the Company or any Company Subsidiary as of the date hereof with respect to each Company Equity Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP (other than with respect to amounts not yet due); and (iii) there are no pending, threatened or, to the knowledge of Company, anticipated claims (other than non-material claims for benefits in accordance with the terms of the Company Equity Plans and appeals of such claims) by, on behalf of or against any of the Company Equity Plans or any trusts related thereto that could reasonably be expected to result in any liability of the Company or any Company Subsidiary.
(a) (c) Except as provided in this Agreement or applicable Law or as set forth inSection 4.104.10(c) of the Company Disclosure Letter, sets forth a true and complete list of each material Company Benefit Plan and Company Employment Agreement. Company has delivered or made available to Parent a true, correct and complete copy of each material Company Benefit Plan and Company Employment Agreement and, with respect thereto, if applicable, (A) all amendments, trust (or other funding vehicle) agreements, summary plan descriptions and insurance contracts, (B) the most recent annual report (Form 5500 series including, where applicable, all schedules and actuarial and accountants' reports) filed with the IRS and the most recent actuarial report or other financial statement relating to such Company Benefit Plan, and (C) the most recent determination letter from the IRS.
(b) Each Company Benefit Plan and Company Employment Agreement has been administered in all material respects in accordance with its terms and all applicable Laws, including ERISA and the Code and in compliance with Section 409Aconsummation of the Code to avoid income inclusion under Section 409A(a)(1)transactions contemplated by this Agreement will not, either alone or in combination with another event, (i) entitle any current or former employee, consultant or officer of Company or any of the Code.
(c) Each Company Benefit Plan that is intendedSubsidiaries to qualify under Section 401(a) of the Code has either received a favorable determination letterseverance pay, or any other payment from the IRS as to its qualified statusCompany or may rely upon an opinion letter for a prototype plan and, to the Company's knowledge, there is no fact, event or existing circumstances that would adversely affect the qualified status of any such Company Benefit Plan. To the Company's knowledge, neither the Company nor any Company Subsidiary, has engaged in a non-exempt prohibited transaction (withinor (ii) accelerate the meaningtime of Section 406payment or vesting, or increase the amount of ERISA or Section 4975 of the Code) with respect to any Company Benefit Plan that could result in material liability to the Company and the Company Subsidiaries, taken as a whole. No material suit, administrative proceeding, action or other litigation has been brought, or to the knowledge of the Company, is threatened against or with respectcompensation due to any such Company Benefit Plan, including any auditemployee, consultant or inquiry by the IRS or United States Department of Labor (other than routine benefits claims).officer.
(d) None of the Company, any Company SubsidiariesSubsidiary or any of their respective ERISA Affiliates maintains, contributes to, or participates in, or has ever during the past six (6) years maintained, contributed to, or participated in, or otherwise has any obligation or liability in connection with: (i) an employee pension benefit plana "pension plan" under Section 3(2) of ERISA that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, (ii) a "multiemployer plan" (as defined in Section 3(37) of ERISA), (iii) a "multiple employer welfare arrangement" (as defined in Section 3(40) of ERISA), or (iv) a "multiple employer plan" (as defined in Section 413(c) of the Code) or a "multiemployer plan" (as defined in Section 3(37) of ERISA), (iii) any plan or arrangement which provides post-employment retiree medical or welfare benefits, except as required by applicable Law; or (iv) any plan established or maintained outside of the United States or for the benefit of current or former employees of the Company or any Company Subsidiaries residing outside the United States..
(e) Except as set forth inSection 4.10(e) of the Company Disclosure Letter, neitheror as individually or in the executionaggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, no amount that could be received (whether in cash or property or the vesting of this Agreement norproperty) as a result of the consummationMerger or any of the other transactions contemplated hereby will: (A) entitle(alone or in combination with any employee, director or consultant of the Company or Company Subsidiaries to severance pay orother event) by any increasePerson who is a "disqualified individual" (as such term is defined in severance payTreasury Regulation Section 1.280G-1) under any of the Company Benefit Plans or Company Employment Agreements upon any termination of employment on or after the date of this Agreement, (B) accelerate the time of payment, vesting or funding or result in any payment of compensation or benefits under, or increase the amount or value of any payment to any employee, officer or director of any Company or Company Subsidiary, orarrangement could limit the right to amend, merge, terminate or receive a reversion of assets from any Company Benefit Plan or related trust or (C) result in payments or benefits under any Company Benefit Plan or Company Employment Agreement which would not be deductible under Section 162(m) or Section 280G of the Code. The Company has delivered to Parent
the most recent analysisTable of PricewaterhouseCoopers, advisor to the Company,Contents
characterized as to implications of Sections 280G and 4999an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code on each applicable "disqualified individual" of the consummation of the transactions contemplated hereby (assuming that the employment of each such disqualified individual were terminated upon the Closing)Code).
(f) Except as set forth inSection 4.10(f) of the Company Disclosure Letter, there are no material funded benefit obligationsneither the Company nor any Company Subsidiary has any indemnity obligation with respect to the Company Equity Plans for any Taxes imposed under Section 4999 or 409A of the Company or the Company Subsidiaries under a Company Benefit Plan for which contributions have not been made or properly accrued and there are no material unfunded benefit obligations under a Company Benefit Plan that have not been accounted for by reserves or otherwise reflected as may be required in the consolidated financial statements in the Company SEC Filings made through and including the date of this Agreement.Code.
(g) Except as individually or in the aggregate have not had and would not reasonably be expected to have a Company Material Adverse Effect, each Company Equity Plan has been operated and administered in compliance with Section 409A of the Code.
(h) The Company has delivered or made availableEquity Plans are not mandated by a government other than the United States and are not subject to Parentthe Laws of a true and complete descriptionjurisdiction outside of the terms and conditions of each Company Severance Pay Plan.United States.
Section 4.11 Labor and Other Employment Matters. The Company and each Company Subsidiary is in compliance with all applicable Laws in all material respects with respect to labor, employment, fair employment practices, terms and conditions of employment, workers' compensation, occupational safety and health, plant closings, wages and hours and immigration. Neither the Company nor any Company Subsidiary is a party to, or bound by any, collective bargaining agreement and no labor union has, been certified to represent any employee of the Company or any Company Subsidiary, or has applied, or threatened to apply, to represent or is attempting to organize so as to represent such employees, includingever had, any representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened to be brought or filed, with the National Labor Relations Board or any other labor relations tribunal or authority. There is no pending or, to the knowledge of the Company, threatened work stoppage, slowdown lockouts, material arbitrations or material grievances, labor strike or other material labor disputes against the Company or any Company Subsidiary.employees.
Section 4.12 Material Contracts.
(a) Except for contracts listed inSection 4.12 of the Company Disclosure Letter or filed as exhibits to the Company SEC Filings, as of the date of this Agreement, neither the Company nor any Company Subsidiary is a party to or bound by any contract that, as of the date hereof:
(i) is required to be filed as an exhibit to the Company's Annual Report on Form 10-K pursuant to Item 601(b)(2), (4), (9) or (10) of Regulation S-K promulgated by the SEC;
(ii) obligates the Company or any Company Subsidiary to make non-contingent aggregate annual expenditures (other than principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $1,000,000 and is not cancelable within ninety (90) days without material penalty to the Company or any Company Subsidiary, except for any Company Lease or any ground lease affecting any Company Property;
(iii) contains any non-compete or exclusivity provisions with respect to any line of business or geographic area that restricts the business of the Company or any Company Subsidiary, or that otherwise restricts the lines of business conducted by the Company or any Company Subsidiary or the geographic area in which the Company or any Company Subsidiary may conduct business;business, except for any Company Lease or any ground lease affecting any Company Property, recorded property declarations, reciprocal easement agreements or restrictive covenant agreements that contain non-compete or exclusivity provisions that do not in any way restrict activities of the Company or any Company Subsidiary outside of a twenty-five mile radius of the applicable Company Property;
(iv) other than the Company Charter and the Company Bylaws, is an agreement which obligates the Company or any Company Subsidiary to indemnify any past or present directors, officers, trustees, employees and agents of the Company or any Company Subsidiary pursuant to which the Company or any Company Subsidiary is the indemnitor, other than any operating agreements or property management agreements or any similar agreement pursuant to which a Company Subsidiary that is not wholly owned, directly or indirectly, by the Company provides such an indemnification to any such directors, officers, trustees,
employees or agents in connection with the indemnification by such non-wholly owned Company Subsidiary of the Company or another Company Subsidiary thereunder;
(v) constitutes a debtan Indebtedness obligation of the Company or any Company Subsidiary with a principal amount outstanding as of the date hereof greater than $25,000,000;$2,000,000;
(vi) would prohibit or materially delay the consummation[Reserved];
Table of the Merger as contemplated by this Agreement;Contents
(vii) requires the Company or any Company Subsidiary to dispose of or acquire assets or properties (other than in connection with the expiration of a Company Lease or a ground lease affecting a Company Property) with a fair market value in excess of $5,000,000,$1,000,000, or involves any pending or contemplated merger, consolidation or similar business combination transaction, except for any Company Lease or any ground lease affecting any Company Property;
(viii) constitutes an interest rate cap, interest rate collar, interest rate swap or other contract or agreement relating to a forward, swap or other hedging transaction;transaction of any type, whether or not entered into for bona fide hedging purposes;
(ix) is an agreement, arrangement or understanding between the Company or any Company Subsidiary, on the one hand, and the Company Advisor, or any Affiliate of the Company or of the Company Advisor, on the other hand;
(x) sets forth the operational terms of a joint venture, partnership, limited liability company with a Company Third Party member or strategic alliance of the Company or any Company Subsidiary; or
(x)(xi) constitutes a loan to any Person (other than a wholly owned Company Subsidiary) by the Company or any Company Subsidiary (other than advances made pursuant to and expressly disclosed in the Company Leases or pursuant to any disbursement agreement, development agreement, or development addendum entered into in connection with a Company Lease with respect to the development, construction, or equipping of Company Properties or the funding of improvements to Company Properties) in an amount in excess of $5,000,000.$2,000,000.
Each contract of the type described above in thisSection 4.12(a), whether or not listed onSection 4.12 of the Company Disclosure Letter (and, for the avoidance of doubt, including any contract filed as an exhibit to the Company SEC Filings that is not listed onSection 4.12 of the Company Disclosure Letter but otherwise is of the type described in clauses (i) through (xi) above) to which the Company or any Company Subsidiary is a party or by which it is bound as of the date hereof is referred to herein as a "Company Material Contract".
(b) Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, each Company Material Contract is legal, valid, binding and enforceable on the Company and each Company Subsidiary that is a party thereto and, to the knowledge of the Company, each other party thereto, and is in full force and effect, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). Except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, the Company and each Company Subsidiary has performed all obligations required to be performed by it prior to the date hereof under each Company Material Contract and, to the knowledge of the Company, each other party thereto has performed all obligations required to be performed by it under such Company Material Contract prior to the date hereof. None of the Company or any Company Subsidiary, nor, to the knowledge of the Company, any other party thereto, is in material breach or violation of, or default under, any Company Material Contract, and no event has occurred that with notice or lapse of time or both would constitute a violation, breach or default under any Company Material Contract, except where in each case such breach, violation or default is not reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary has received notice of any violation or default under any Company Material Contract, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 4.13 Litigation. Except as individually or in the aggregate, hashave not had and would not reasonably be expected to have a Company Material Adverse Effect, or as set forth inSection 4.13 of the date of this Agreement,Company Disclosure Letter (a) there is no suit, arbitration, inquiry, claim, action or proceedingAction pending or, to the knowledge of the Company, threatened, by or before any Governmental Authority, nor, to the knowledge of the Company, is there any investigation pending or threatened by any Governmental Authority, in each case, against the Company or any Company Subsidiary, and (b) neither the Company nor any Company Subsidiary, nor
any of the Company's or any Company Subsidiary's respective property, is subject to any outstanding judgment, order, writ, injunction or decree of any Governmental Authority.
Section 4.14 Environmental Matters.
(a) Except as individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect:Effect, or as set forth inSection 4.14 of the Company Disclosure Letter or in any Phase I or Phase II report listed inSection 4.14(a)(preamble) of the Company Disclosure Letter and made available to Parent prior to the date hereof in the electronic data room created by the Company in connection with this Agreement and the transactions contemplated hereby:
(i) The Company and each Company Subsidiary are in compliance with applicableall Environmental Laws,Laws.
(ii) The Company and each Company Subsidiary have applied for all Environmental Permits necessary to conduct their current operations and are in compliance with their respective Environmental Permits.Permits, and all such Environmental Permits are in good standing.
(ii)(iii) Neither the Company nor any Company Subsidiary has received any written notice, demand, letter or claim alleging that the Company or any such Company Subsidiary is in violation of, or liable under, any Environmental Law or that any judicial, administrative or compliance order has been issued against the Company or any Company Subsidiary which remains unresolved. There is no litigation, investigation, request for information or other proceeding pending, or, to the knowledge of the Company, threatened against the Company and any Company Subsidiary under any applicable Environmental Law.
(iii) Neither(iv) Except with respect to conditions included in "no further action letters" made available to Parent prior to the date hereof, neither the Company nor any Company Subsidiary has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial, administrative or compliance order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous MaterialsSubstances and no investigation, litigation or other proceeding is pending or, to the knowledge of the Company, threatened against the Company or any Company Subsidiary under any applicable Environmental Law.
(iv)(v) Neither the Company nor any Company Subsidiary has assumed, by contract or, to the knowledge of the Company, by operation of Law, any liability under any Environmental Law or relating to any Hazardous Materials,Substances, or is an indemnitor in connection with any threatened or asserted claim by any third-party indemnitee for any liability under any Environmental Law or relating to any Hazardous Materials.Substances.
(v)(vi) Neither the Company nor any Company Subsidiary has caused, and to the knowledge of the Company, no Company Third Party has caused any release of a Hazardous MaterialSubstance that would be required to be investigated or remediated by the Company or any Company Subsidiary under any Environmental Law.
(vii) There is no site to which the Company or any Company Subsidiary has transported or arranged for the transport of Hazardous Substances which, to the knowledge of the Company, is or may become the subject of any Action under Environmental Law.
(b) None of the transactions contemplated by this Agreement will trigger any filing requirement or other action under any Environmental Law.
(b)(c) ThisSection 4.14 contains the exclusive representations and warranties of the Company with respect to environmental matters.
Section 4.15 Intellectual Property.
(a) Except as set forth inSection 4.15(a) of the Company Disclosure Letter sets forth a correct and complete list of all material Intellectual Property registrations and applications for registration owned by the Company.
(b) Exceptor as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, (i) the Company and the Company Subsidiaries own or are licensed or otherwise possess valid rights to use all Intellectual Property necessary to conduct the business of the Company and the Company Subsidiaries as it is currently conducted, (ii) the conduct of the business of the Company and the Company Subsidiaries as it is currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any Company Third Party, (iii) there are no pending or, to the knowledge of the Company, threatened claims with respect to any of the Intellectual Property rights owned by the Company or any Company Subsidiary, and (iv) to the knowledge of the Company, no Company Third Party is currently infringing or misappropriating Intellectual Property owned by the Company or any Company Subsidiary. The Company and the Company Subsidiaries are taking all actions that theyare reasonably believe are necessary to maintain and protect each material item of Intellectual Property that they own.
(c)(b) ThisSection 4.15 contains the exclusive representations and warranties of the Company with respect to intellectual property matters.
(a) Section 4.16(a) (Part I) of the Company Disclosure Letter sets forth a list of the common nameaddress of each facility and real property owned or leased (as lessee or sublessee), including ground leased, by the Company or any Company Subsidiary as lessee or sublessee, as of the date of this Agreement (all such real property interests, together with all buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances to such real property, are individually referred to herein as a "Company Property" and collectively referred to herein as the "Company Properties").Section 4.16(a) (Part II) of the Company Disclosure Letter sets forth a list of the address of each facility and real property which, as of the date of this Agreement, is under contract or signed letter of intent by the Company or a Company Subsidiary for purchase or sale by the Company or such Company Subsidiary or which is required under a binding contract to be leased or subleased by the Company or a Company Subsidiary after the date of this Agreement. Except as set forth inSection 4.16(a) (Part II) of the Company Disclosure Letter, there are no real properties that the Company or any Company Subsidiary is obligated to buy, lease or sublease at some future date.Section 4.16(a) (Part III) of the Company Disclosure Letter sets forth a list of all commissions, fees and other amounts payable (or to become payable) in connection with the disposition of each Company Property that is currently under contract for sale, being marketed or held for sale by the Company or a Company Subsidiary.
(b) The Company or a Company Subsidiary owns good and validmarketable fee simple title or leasehold title (as applicable) to each of the Company Properties, in each case, free and clear of Liens, except for Company Permitted Liens that have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. For the purposes of this Agreement, "Company Permitted Liens" shall mean any (i) Liens relating to any Indebtedness incurred in the ordinary course of business consistent with past practice, (ii) Liens that result from any statutory or other Liens for Taxes or assessments that are not yet subject to penalty or the validity of which is being contested in good faith by appropriate proceedings (iii) any Company Material Contracts or other service contracts, management agreements, leasing commission agreements, agreements or obligations set forth inSection 4.16(l)and for which there are adequate reserves on the financial statements of the Company Disclosure Letter, or Company Leases or ground leases or air rights affecting any Company Property, (iv)(if such reserves are required pursuant to GAAP), (iii) Liens
imposed or promulgated by Law or any Governmental Authority, including zoning regulations, permits and licenses, (v)(iv) Liens that are disclosed on the existing Company Title Insurance Policies made available by or on behalf of the Company or any Company Subsidiary to Parent prior to the date hereof (vi)and, with respect to leasehold interests, Liens on the underlying fee or leasehold interest of the applicable ground lessor, lessor or sublessor, (v) any cashiers', landlords', workers', mechanics', carriers', workmen's, repairmen's and materialmen's liens and other similar Liens imposed by Law and incurred in the ordinary course of business consistent with past practice that are not yet subject to penalty or the validity of which is being contested in good faith by appropriate proceedings, and (vii)(vi) any other Liens limitations, restrictions or title defects that do not materially impair the value of the applicable Company Property or the continued use and operation of the applicable Company Property as currently used and operated.Section 4.16(b)
(c) To the knowledge of the Company, Disclosure Letter describesexcept as has not had and would not reasonably be expected to have a Company Material Adverse Effect, the material Company Permitted Liens which are being contested in good faith by appropriate proceedings.
(c) The Company Properties (x) are supplied with utilities and other services as necessary to permitreasonably required for their continued operation as they are now being operated and (y) are to the knowledge of the Company, in working order sufficient for their normal operation in the manner currently being operated and without any material structural defects other than as may be disclosed in any physical condition reports that have been made available to Parent, and (z) are, to the knowledge of the Company, adequate and suitable for the purposes for which they are presently being used.Parent.
(d) To the knowledge of the Company, except as has not had and would not reasonably be expected to have a Company Material Adverse Effect, each of the Company Properties has sufficient access to and from publicly dedicated streets for its current use and operation, without any constraints that interfere with the normal use, occupancy and operation thereof.
(e) Neither the Company nor any of the Company Subsidiaries has received (i) written notice that any certificate, permit or license from any Governmental Authority having jurisdiction over any of the Company Properties or any agreement, easement or other right of an unlimited duration that is necessary to permit the lawful use and operation of the buildings and improvements on any of the Company Properties or that is necessary to permit the lawful use and operation of all utilities, parking areas, retention ponds, driveways, roads and other means of egress and ingress to and from any of the
Company Properties is not in full force and effect as of the date of this Agreement, except for such failures to be in full force and effect that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, or of any pending written threat of modification or cancellation of any of same, that would reasonably be expected to have a Company Material Adverse Effect, or (ii) written notice of any uncured violation of any Laws affecting any of the Company Properties which, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
(f) No certificate, variance, permit or license from any Governmental Authority having jurisdiction over any of the Company Properties or any agreement, easement or other right that is necessary to permit the current use of the buildings and improvements on any of the Company Properties or that is necessary to permit the current use of all parking areas, driveways, roads and other means of egress and ingress to and from any of the Company Properties has failed to be obtained or is not in full force and effect, and neither the Company nor any Company Subsidiary has received written notice of any outstanding threat of modification or cancellation of any such certificate, variance, permit or license, except for each of the foregoing as, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(g) Neither the Company nor any Company Subsidiary has received any written notice to the effect that (i) any condemnation or rezoning proceedings are pending or threatened with respect to any of the Company Properties, or (ii) any zoning regulation or ordinance (including with respect to parking), Board of Fire Underwriters rules, building, fire, health or other Law has been violated (and remains in violation) for any Company Property, except for each of the foregoing as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect.
(h) Except for discrepancies, errors or omissions that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, (i) the rent rolls for each of the Company Properties, that constitute medical office buildings operated by or on behalf of the Company or any Company Subsidiaries ("Company MOBs"), dated as of December 31, 2010,April 30, 2014, which rent rolls have previously been made available by or on behalf of the Company or any Company Subsidiary to Parent, and the schedules with respect to the Company Properties subject to triple-net leases, which schedules have previously been made available to Parent, correctly (i) reference each lease or sublease that was in effect as of December 31, 2010April 30, 2014 and to which the Company or the Company Subsidiaries are parties as lessors or sublessors with respect to each of the applicable Company Properties (all leases or subleases (including any triple-net leases), together with all amendments, modifications, supplements, renewals, exercise of options and extensions related thereto, the "Company Leases"), and (ii) identifySection 4.16(e) of the Company Disclosure Letter sets forth the current rent currently payableannualized and security deposit amounts currently held underfor each Company Lease (which security deposits are in all material respects in the amounts required by the applicable Company Leases.Lease).
(i)(f) True and complete in all material respects copies of (i) all ground leases affecting the interest of the Company or any Company Subsidiary in the Company Properties and (ii) all Company Leases with(collectively, the Company's top fifteen (15) tenants, based on rental payments to the Company (or the Company's pro rata share of such rental payments in the case of non-wholly-owned Company Subsidiaries), with respect to Company Properties subject to triple-net leases, and (iii) all Company Leases for Company MOBs that relate to in excess of ten thousand (10,000) square feet of net rentable area (the "MaterialSpecified Company Leases"), in each case in effect as of the date hereof, together with all amendments, modifications, supplements, renewals and extensions through the date hereof related thereto, have been made available to Parent. Except as set forth onSection 4.16(i)4.16(f) of the Company Disclosure Letter or as hasindividually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, (1) neither the Company nor any Company Subsidiary is and, to the knowledge of the Company, no other party is in breach or violation of, or default under, any MaterialSpecified Company Lease, (2) no event has occurred which would result in a breach or violation of, or a default under, any Material Company Lease by the
Company or any Company Subsidiary, or, to the knowledge of the Company, any other party thereto (in each case, with or without notice or lapse of time or both) and no tenant under a Material Company Lease is in monetary default under such Material Company Lease, (3) no tenant under a Company Lease is the beneficiary or has the right to become a beneficiary of a loan or forbearance from the Company or any Company Subsidiary in excess of $5,000,000 in the aggregate, (4) neither the Company nor any Company Subsidiary is in receipt of any rent under any Company Lease paid more than thirty (30) days before such rent is due and payable, and (5)(3) each MaterialSpecified Company Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect with respect to the Company or a Company Subsidiary and, to the knowledge of the Company, with respect to the other parties thereto, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at Law).
(j) To the knowledge of the Company, except as set forth onSection 4.16(j) of the Company Disclosure Letter, there are no Tax abatements or exemptions specifically affecting the Company Properties, and the Company and the Company Subsidiaries have not received any written notice of (and the Company and the Company Subsidiaries do not have any knowledge of) any proposed increase in the assessed valuation of any of the Company Properties or of any proposed public improvement assessments that will result in the Taxes or assessments payable in the next tax period increasing by an amount material to the Company and the Company Subsidiaries, considered as a whole.
(k) Except as set forth inSection 4.16(k) of the Company Disclosure Letter or as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, as of the date of this Agreement, no purchase option has been exercised under any Company Lease for which the purchase has not closed prior to the date of this Agreement.
(l) Except for Company Permitted Liens or as set forth inSection 4.16(l) of the Company Disclosure Letter, (i) there are no unexpired option to purchase agreements, rights of first refusal or first offer or any other rights to purchase or otherwise acquire any Company Property or any portion thereof that would materially adversely affect the Company's, or the Company Subsidiary's, ownership, ground lease or right to use a Company Property subject to a Material Company Lease, and (ii) there are no other outstanding rights or agreements to enter into any contract for sale, ground lease or letter of intent to sell or ground lease any Company Property or any portion thereof that is owned by any Company Subsidiary, which, in each case, is in favor of any party other than the Company or a Company Subsidiary (a "Company Third Party").
(m) Except as set forth inSection 4.16(m) of the Company Disclosure Letter or pursuant to a Company Lease or any ground lease affecting any Company Property, neither Neither the Company nor any Company Subsidiary is a party to any agreement pursuant to which theoral Company or anyLease.
(g) The Company and each Company Subsidiary, managesas applicable, is in possession of title insurance policies or managesvalid marked-up title commitments evidencing title insurance with respect to each Company Property (each, a "Company Title Insurance Policy" and, collectively, the development of any real property for any "Company Third Party.Title Insurance Policies
(n)"). A copy of each Company Title Insurance Policy in the possession of the Company has been made available to Parent. No written claim has been made against any Company Title Insurance Policy, which, individually or in the aggregate, has had or would be reasonably expectedmaterial to have aany Company Material Adverse Effect.Property.
(o) (h) To the knowledge of the Company,Section 4.16(o)4.16(h) of the Company Disclosure Letter lists (i) to the knowledge of theeach Company each of the Company PropertiesProperty which areis (i) under development as of the date hereof, and describes the status of such development as of the date hereof, and (ii) which is subject to the knowledge of the Company, all real properties under contract or currently proposeda binding agreement for acquisition, development or commencement of construction by the Company or a Company Subsidiary, pursuantin each case other than those pertaining to binding agreements, ascapital repairs, replacements and other similar correction of deferred maintenance items in the date hereof.ordinary course of business being performed by the Company or a Company Subsidiary that are individually in the amount of $1,000,000 or less.
(p)(i) The Company and the Company Subsidiaries have good and valid title to, or a valid and enforceable leasehold interest in, or other right to use, all personal property owned, used or held for use by them as of the date of this Agreement (other than property owned by tenants and used or held in connection with the applicable tenancy), except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. None of the Company's or any of the Company Subsidiaries' ownership of or leasehold interest in any such personal property is subject to any Liens, except for Company Permitted Liens and Liens that have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(q)(j) Section 4.16(q)4.16(j) of the Company Disclosure Letter lists the parties currently providing third-party property management services to the Company or a Company Subsidiary and the number of facilities currently managed by each such party.
(k) [Reserved]
(l) No condemnation, eminent domain, rezoning or similar proceeding has occurred or is pending or, to the knowledge of the Company, threatened with respect to any owned Company Property or Company Lease, except for condemnation, eminent domain, rezoning or similar proceedings that have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(m) Except for Company Permitted Liens and except as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, there are no other outstanding rights or agreements to enter into any contract for sale, ground lease or letter of intent to sell or ground lease any Company Property or any portion thereof that is owned by any Company Subsidiary, which, in each case, is in favor of any party other than the Company or a Company Subsidiary.
Section 4.17 Taxes. Except as expressly set forth inSection 4.17 of the Company Disclosure Letter:
(a) The Company and each Company Subsidiary has (i) duly and timely filed (or there have been filed on their behalf) with the appropriate Governmental Authority all U.S. federal and all other material Tax Returns required to be filed by them, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were and are true, correct and complete in all material respects, and correct, subject(ii) duly and timely paid in each case to such exceptions as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. The Company and each Company Subsidiary has duly paidfull (or there has been duly and timely paid in full on their behalf), or made adequate provisionsprovision for, all material amounts of Taxes required to be paid by them.
them, whether or not shown (or required to be shown) on any Tax Return. True and materially complete copies of all U.S. federal income Tax Returns that have been filed with the IRS by the Company and each Company Subsidiary with respect to the taxable years ending on or after December 31, 2011 have been provided or made available to representatives of Parent.
(b) The Company (i) for allits taxable years commencing with the Company's initial taxable year that ended on December 31, 2011 and through and including its taxable year ended December 31, 1985 through December 31, 2010,2013 has been subject to taxation as a real estate investment trust within the meaning of Sectionand under the provisions of Sections 856et seq. of the Code (a "REIT") and has satisfied all requirements to qualify as a REIT, and has so qualified, for U.S. federal Tax purposes for such taxable years; (ii) has operated since January 1, 20112014 to the date hereof in such a manner consistent with the requirements for qualification and taxationso as to qualify as a REIT;REIT for U.S. federal Tax purposes; (iii) intends to continue to operate (including with regard to the REIT distribution requirements in the taxable year that includes and/or that ends on the Closing Date) through to the Merger (and the consummation thereof) in such a manner so as to qualify as a REIT for its taxable year that will end with the Merger;Merger (and consummation thereof); and (iv) except as set forth inSection 4.17(b) of the Company Disclosure Letter, has not taken or omitted to take any action that couldwould reasonably be expected to result in a challenge by the IRS or any other Governmental Authority to its status as a REIT, and no such challenge is pending or, threatened in writing. Noto the Company's knowledge, threatened.
(c) None of the Company and any of its Affiliates are or have been related, directly or indirectly, to any extent, to Frontier Management, LLC, any of its Affiliates, or its owner ("Frontier"), and none of the Company and any of its Affiliates has or has had any relationship, contractual or otherwise, with Frontier, other than pursuant to the agreements listed onSection 4.17(c) of the Company Disclosure Letter.
(d) Each Company Subsidiary isand Other Company Subsidiary has been since the later of its acquisition or formation and continues to be treated for U.S. federal and state income Tax purposes as (i) a partnership (or a disregarded entity) and not as a corporation for United States federal income tax purposes, other thanor an association or publicly traded partnership taxable as a corporation, that qualifies as(ii) a "qualifiedQualified REIT subsidiary" withinSubsidiary, or (iii) a Taxable REIT Subsidiary.
(e) Neither the meaningCompany nor any Company Subsidiary holds, directly or indirectly, any asset the disposition of which would be subject to (or to rules similar to) Section 856(i)(2)1374 of the Code, as a "taxable REIT subsidiary" within the meaning of Section 856(l) of the Code, or as a REIT.Code.
(c)(f) (i) There are no disputes, audits, examination, investigations by any Governmental Authority or other proceedings pending with regard to(or threatened in writing), or claims asserted, for and/or in respect of any material Taxes or material Tax Returns of the Company or any Company Subsidiary;Subsidiary and neither the Company nor any Company Subsidiary is a party to any litigation or administrative proceeding relating to Taxes; (ii) no deficiency for Taxes of the Company or any Company Subsidiary has been claimed, proposed or assessed in writing or, to the knowledge of the Company, threatened, by any Governmental Authority, which deficiency has not yet been settled, except for such deficiencies which are being contested in good faith or with respect to which the failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect; (iii) neither the Company nor any Company Subsidiary has extended or waived any statute of limitations with respect to Taxes or agreed to(nor granted any extension or waiver of) the limitation period for the assessment or collection of time with respect to any Tax assessment or deficiency for any open tax year; andthat has not since expired; (iv) neither the Company nor any Company Subsidiary currently is the beneficiary of any extension of time within which to file any material Tax Return that remains unfiled; (v) neither the Company Subsidiariesnor any Company Subsidiary has received a written claim by any Governmental Authority in any jurisdiction where any of them does not file Tax Returns or pay any Taxes that it is or may be subject to taxation by that jurisdiction and (vi) neither the Company nor any Company Subsidiary has entered into any "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).
(d) Each Company Subsidiary that is a partnership, joint venture, or limited liability company and which has not elected to be a "taxable REIT subsidiary" has been since its formation treated for United States federal income tax purposes as a partnership or disregarded entity, as the case may be, and not as a corporation or an association taxable as a corporation.
(e) NeitherTable of Contents
(g) Since the Company's formation, (i) neither the Company nor any Company Subsidiary holds any asset the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code.
(f) Since its inception, (i) the Company and the Company Subsidiaries have nothas incurred any liability for material Taxes under SectionSections 857(b), 857(f), 860(c) or 4981 of the Code which have not been previously paid,Code; and (ii) neither the Company nor any Company Subsidiary has incurred any material liability for any other Taxes other than (x) in the ordinary course of business or consistent with past practice, or (y) transfer or similar Taxes arising in connection with salesacquisitions or dispositions of property. No event has occurred, and no condition or circumstance exists, which presents a material risk that any material amount of Tax described in the previous sentence will be imposed upon the Company or any Company Subsidiary.
(g)(h) The Company and theeach Company Subsidiaries haveSubsidiary has complied in all material respects with all applicable Laws rules and regulations relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, 3102 and 3402 of the Code or similar provisions under any state and foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate taxing authoritiesGovernmental Authorities any and all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.
(h) The(i) There are no Company Tax Protection Agreements (as hereinafter defined) listed inSection 4.17(h) of the Company Disclosure Letter are the only such agreementscurrently in force, at the date of this Agreement, and as of the date of this Agreement, no personPerson has raised, in writing, or to the knowledge of the Company threatened to raise, a material claim against the Company or any Company Subsidiary for any breach of any Company Tax Protection Agreements.Agreement and none of the transactions contemplated by this Agreement will give rise to any liability or obligation to make any payment under any Company Tax Protection Agreement. As used herein, "Company Tax Protection Agreements" means any written agreement to which the Company or any Company Subsidiary is a party and pursuant to which:which (i) any liability to holdersany direct or indirect holder of Class A Unitspartnership units of the Company Operating Partnership or any other partnership interest in any Company Subsidiary Partnership ("Relevant Company Partnership Interest") relating to Taxes may arise, whether or not as a result of the consummation of the transactions contemplated by this Agreement; and/or (ii) in connection with the deferral of income Taxes of a direct or indirect holder of Class A Units, thea Relevant Company or the Company Subsidiaries havePartnership Interest, a party to such agreement has agreed to (A) maintain a minimum level of debt or continue a particular debt, (B) retain or not dispose of assets for a period of time that has not since expired, (C) make or refrain from making Tax elections, (D) operate (or refrain from operating) in a particular manner, (E) use (or refrain from using) a specified method of taking into account book-tax disparities under Section 704(c) of the Code with respect to one or more assets of such party or any of its direct or indirect subsidiaries, (F) use (or refrain from using) a particular method for allocating one or more liabilities of such party or any of its direct or indirect subsidiaries under Section 752 of the Code and/or (D)(G) only dispose of assets in a particular manner.manner; (iii) any Person has been or is required to be given the opportunity to guaranty, indemnify or assume debt of such Company Subsidiary Partnership or any direct or indirect subsidiary of such Company Subsidiary Partnership or are so guarantying or indemnifying, or have so assumed, such debt; and/or (iv) any other agreement that would require any Company Subsidiary Partnership or the general partner, manager, managing member or other similarly-situated Person of such Company Subsidiary Partnership or any direct or indirect subsidiary of such Company Subsidiary Partnership to consider separately the interests of the limited partners, members or other beneficial owners of such Company Subsidiary Partnership or the holder of interests in such Company Subsidiary Partnership in connection with any transaction or other action. As used herein, "Company Subsidiary Partnership" means a Company Subsidiary or Other Company Subsidiary that is a partnership for U.S. federal income tax purposes.
(i)(j) There are no material Tax Liens upon any property or assets of the Company or any Company Subsidiary except Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established.established in accordance with GAAP.
(j)(k) Neither the Company nor any Company Subsidiary has requested, has received or is subject to any written ruling of a Governmental Authority or has entered into any written agreement with a Governmental Authority with respect to any Taxes.
(k)(l) There are no Tax allocation or sharing agreements or similar arrangements with respect to or involving the Company or any Company Subsidiary, and after the Closing Date neither the Company nor any Company Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date.Date, in each case, other than customary provisions of commercial or credit agreements and Company Tax Protection Agreements.
(l)(m) Neither the Company nor any Company Subsidiary (A) has been a member of an affiliated group filing a consolidated U.S. federal income Tax Return (other than a group the common parent of which was the Company) or (B) has any liability for the Taxes of any Person (other than the Company or any Company Subsidiary) under Treasury RegulationRegulations Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.
(m)(n) Neither the Company nor any Company Subsidiary has participated in any "listed transaction" within the meaning of Treasury RegulationRegulations Section 1.6011-4(b)(2).
(n) As(o) Neither the Company nor any Company Subsidiary (other than Taxable REIT Subsidiaries) has or has had any earnings and profits attributable to such entity or any other corporation in any non-REIT year within the meaning of Section 857 of the date of this Agreement, theCode.
(p) The Company is not aware of any fact or circumstance that could reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(o)(q) Neither the Company nor any of the Company Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (A) in the two (2) years prior to the date of this Agreement or (B) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with transactions contemplated by this Agreement.
(p) The amount of the Company's liabilities does not exceed the aggregate basis of the Company's assets, as determined for United States federal income Tax purposes.
Section 4.18 Insurance. TheExcept as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company has made available to Parent copies of all materialMaterial Adverse Effect, the insurance policies and all material(including title insurance policies, fidelity bonds or other insurance service contracts incontracts) covering the Company's possession providing coverage for all material Company Properties (the "Company Insurance Policies"). are sufficient in order for the Company to comply with all applicable Laws and the requirements of any Specified Company Lease. Except for those matters thatas individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, there is no claim for coverage by the Company or any Company Subsidiary pending under any of the Company Insurance Policies that has been denied or disputed by the insurer. Except for those matters thatas individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, all premiums payable under all Company Insurance Policies have been paid, and the Company and the Company Subsidiaries have otherwise complied in all material respects with the terms and conditions of all the Company Insurance Policies. To the knowledge of the Company, such Company Insurance Policies are valid and enforceable in accordance with their terms and are in full force and effect. No written notice of cancellation or termination has been received by the Company or any Company Subsidiary with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation.
Section 4.19 Opinion of Financial Advisor. The Company Board has received the oral opinion of J.P. Morgan Securities LLC ("J.P. Morgan")Citigroup Global Markets Inc., to be confirmed in writing, to the effect that, as of the date of such opinion and based on and subject to the assumptions, qualifications, limitations and limitationsother matters set forth therein,in such written opinion, the Exchange RatioMerger Consideration to be paid to the holders of the Company
Common Stock (other than Parent and its Affiliates and Affiliates of the Company) is fair, from a financial point of view, to the holders of shares of Company Common Stock.such holders.
Section 4.20 Takeover Statutes. Assuming the accuracyNone of the representations and warranties set forthCompany or any Company Subsidiary is, nor at any time during the last two (2) years has been, an "interested stockholder" of Parent as defined inSection 5.24,3-601 of the MGCL. The Company Board has (a) taken all action necessary to render inapplicable to the MergerMerger: (i) the restrictions on business combinations contained inprovisions of Subtitle 6 of Title 3 of the MGCL, and in Article V, Section 2 of the Company Charter. The restrictions on control share acquisitions contained in(ii) Subtitle 7 of Title 3 of the MGCL are not applicable to the Merger. Noand (iii) any other "business combination," "control share acquisition," "fair price," "moratorium" or other takeover or anti-takeover statute or similar federal or state Law (collectively, "Takeover Statutes") are applicable to this Agreement,Law; and (b) incorporated the Mergerrequisite exemptions in the Company Bylaws or by resolution of the other transactions contemplated by this Agreement.Company Board.
Section 4.21 Vote Required. The affirmative vote of the holders of not less than two-thirds (2/3) of all outstanding shares of Company Common Stock entitled to vote thereoncast a majority of all the votes entitled to be cast on the matter (the "Company Stockholder Approval") is the only vote of the holders of any class or series of shares of capital stock of the Company necessary to adopt this Agreement and approve the Merger, andthe Partnership Merger or the other transactions contemplated hereby. No vote of the holders of any limited partnership units of the Company Operating Partnership is necessary to approve the Merger, the Partnership Merger or the other transactions contemplated hereby.
Section 4.22 Brokers. NoExcept as set forth inSection 4.22 of the Company Disclosure Letter, no broker, finder or investment banker (other than Citigroup Global Markets Inc., J.P. Morgan)Morgan Securities, LLC, and RCS Capital, a division of Realty Capital Securities, LLC), in an amount not to exceed the amount set forth inSection 4.22 of the Company Disclosure Letter pursuant to the terms of the engagement letter between the Company and each of Citigroup Global Markets Inc. J.P. Morgan Securities, LLC, and RCS Capital, a division of Realty Capital Securities, LLC, a true, complete and correct copy of which has been provided to Parent) is entitled to any brokerage, finder's or other fee or commission in connection with the MergerMergers based upon arrangements made by or on behalf of the Company or any Company Subsidiary.
Section 4.23 Investment Company Act. Neither the Company nor any Company Subsidiary is required to be registered as an investment company under the Investment Company Act.
Section 4.24 Affiliate Transactions. Except as set forth inSection 4.24 of the Company Disclosure Letter or in the Company SEC Filings made through and including the date of this Agreement or as permitted by this Agreement, from January 1, 20102012 through the date of this Agreement there have been no transactions, agreements, arrangements or understandings between the Company or any Company Subsidiary, on the one hand, and any Affiliates (other than Company Subsidiaries) of the Company or other Persons, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K promulgated by the SEC.
Section 4.25 Advisor. American Realty Capital Healthcare Advisors, LLC (the "Company Advisor") is the Company's advisor. The Company has provided Parent with a true, correct and complete copy of each of the Third Amended and Restated Advisory Agreement, dated as of April 7, 2014 by and among the Company, Company Operating Partnership and Company Advisor (the "Advisory Agreement"); the Company Operating Partnership Agreement; the Listing Note Agreement (the "Listing Agreement"), dated April 7, 2014, between the Company, the Company Operating Partnership and American Realty Capital Healthcare Special Limited Partnership, LLC (the "Special Limited Partner"); the OPP Agreement; the Investment Opportunity Allocation Agreement (the "Allocation Agreement"), dated as of April 9, 2013 by and among the Company and American Realty Capital Healthcare Trust II, Inc ("HCT II"); the Property Management and Leasing Agreement (the "Management Agreement"), dated February 18, 2011, by and among the Company, the Company OP and American Realty Capital Healthcare Properties LLC. (the "Manager") and any amendments and extensions thereto. Prior to the Closing, the Company shall cause the Advisor and each Affiliate of the
Advisor to deliver to the Company any contracts and records in its possession or control to the extent they pertain to the business of the Company and its Subsidiaries. Notwithstanding anything to the contrary set forth herein, between the date hereof and the Closing, the Company shall be permitted to (x) pay compensation payable to the Company Advisor and the Manager between the date hereof and the Closing in the ordinary course consistent with past practice (other than in connection with the transactions contemplated hereby) in accordance with the existing Advisory Agreement and the Management Agreement and (y) make distributions permitted bySection 6.1(c)(iii) payable in respect of the OP Units and LTIP Units in accordance with the terms of the Company Operating Partnership Agreement and the OPP Agreement, respectively, and (z) pay fees and expenses payable to RCS Capital, a division of Realty Capital Securities, LLC that are included in the amount set forth onSection 4.29 of the Company Disclosure Letter. Other than payments and distributions made in accordance with the preceding sentence, and except as otherwise expressly contemplated by this Agreement, includingSection 6.8, no Company Entity shall make any payments or distributions to the Company Advisor, the Special Limited Partner, the Healthcare Advisors Profit Plan LLC, HCT II, the Manager, or any Affiliate of the Company or of the Company Advisor prior to the Effective Time.
Section 4.29 Fees and Disbursements. Other than fees and expenses with respect to or arising from any Action in connection with the transactions contemplated hereby, the obtainment of consents in connection with the transactions contemplated hereby, prepayment penalties, assumption costs, defeasance costs, make whole payments or similar amounts associated with Indebtedness arising as a result of the transactions contemplated hereby, indemnification liabilities (including any indemnification liabilities to any service provider entitled to any indemnification from the Company or any Company Subsidiary, but excluding any indemnification liabilities incurred in connection with any actions pursuant to which the Company Advisor or the Special Limited Partner have any obligations to indemnify Parent), and accounting expenses, all transaction expenses incurred by the Company and any Company Subsidiary in connection with the Mergers and the other transactions contemplated by this Agreement, including fees payable to Citigroup Global Markets Inc., RCS Capital, a division of Realty Capital Securities, LLC, J.P. Morgan Securities, LLC, Proskauer Rose LLP, Venable LLP and other professional advisors, shall not exceed the amount set forth onSection 4.29 of the Company Disclosure Letter.
Section 4.30No Other Representations or Warranties. Except for the representations and warranties contained inArticle V, the Company and the Company Operating Partnership each acknowledges that neither Parent, any Parent Party nor any other Person or entity on behalf of Parent has made, and the Company hasand the Company Operating Partnership have not relied upon, any representation or warranty, whether express or implied, with respect to Parent or any of the Parent Subsidiaries or their respective businesses, affairs, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or with respect to the accuracy or completeness of any other information provided or made available to the Company or the Company Operating Partnership by or on behalf of Parent.
ARTICLEArticle V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except (a) as set forth in the disclosure letter that has been prepared by the Parent Parties and delivered by the Parent Parties to the Company in connection with the execution and delivery of this Agreement (the "Parent Disclosure Letter") (it being agreed that disclosure of any item in any Section of the Parent Disclosure Letter with respect to any Section or subsection ofArticle V of this Agreement shall be deemed disclosed with respect to any other Section or subsection ofArticle V of this Agreement to the extent the applicability of such relationshipdisclosure is reasonably apparent,provided that nothing in the Parent Disclosure Letter is intended to broaden the scope of any representation or warranty of Parent or Merger Sub made herein), or (b) as disclosed in publicly available Parent SEC Filings, publicly available, filed with, or furnished to, as applicable, the SEC on or after January 1, 20102013 and prior to the date of this Agreement (excluding any risk factor disclosures contained in such documents under the heading "Risk Factors" and any disclosure of risks or other matters included in any "forward-looking statements" disclaimer or other statements that are cautionary, predictive or forward-looking in nature), the Parent and Merger SubParties hereby jointly and severally represent and warrant to the Company that:
Section 5.1 Organization and Qualification; Subsidiaries.
(a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Parent is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(b) Merger Sub is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Merger Sub is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification,
licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(c) Each Parent Subsidiary (other than Merger Sub) is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted, except for such failures to be so organized, in good standing or have certain power and authority that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. Each Parent Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
Section 5.2 Organizational Documents. Parent has made available to the Company complete and correct copies of (i)(a) Parent's Amended and Restated Certificate of Incorporation, as amendedcharter (the "Parent Charter"), and Fourth Amended and Restated Bylawsbylaws, as amended to date (the "Parent Bylaws"), (ii)and (b) Merger Sub's certificate of formation and limited liability company agreement, and (iii) the organizational documents of each of Parent's "significant subsidiaries" (as such term is defined in Rule 1-02 of Regulation S-X), each as in effect on the date hereof.formation.
Section 5.3 Capital Structure.
(a) As of the date of this Agreement, thehereof, The authorized capital stock of Parent consists of 300,000,000(i) 600,000,000 shares of Parent Common Stock and (ii) 10,000,000 shares of preferred stock, par value $1.00 per share (the "Parent Preferred Stock" and, together with the Parent Common Stock, the "Parent Stock"). At the close of business on February 24, 2011, (i) 162,920,669May 29, 2014, (A) 294,353,748 shares of Parent Common Stock were issued and outstanding (ii) 50,966(which includes 462,815 shares of restricted stock granted pursuant to the Parent Equity Plans), (B) 366 shares of Parent Common Stock were held by Parent in its treasury, (iii)(C) no shares of Parent Preferred Stock were issued and outstanding, (iv) 24,172,074(D) 101,411 shares of Parent Common Stock were reserved for issuance under Parent's Distribution Reinvestmentin respect of outstanding restricted stock units granted and Stock Purchase Plan, 5,257,637 shares of Parent Common Stock were reserved for future issuance or grant underdeferred units issued pursuant to the Parent BenefitEquity Plans, 1,987,878(E) 3,133,956 shares of Parent Common Stock were reserved for issuance upon exercise of outstanding options and 71,848 shares ofto purchase Parent Common Stock were reserved for conversion or settlement of outstanding stock units undergranted pursuant to the Parent BenefitEquity Plans, (v) 1,819,582 shares of Parent Common Stock were reserved for issuance upon conversion of Parent's convertible senior notes due 2011, and (vi) 24,958,543(F) 10,424,979 shares of Parent Common Stock were reserved for issuance pursuant to future grants or issuances under the Atria Agreement.Parent Equity Plans, (G) 24,099,658 shares of Parent Common Stock were reserved for issuance under the Ventas, Inc. Dividend, Reinvestment and Stock Purchase Plan, and (H) 2,075,679 shares of Parent Common Stock were reserved for issuance to holders of NHP/PMB L.P. Class A Partnership Units upon redemption. All issued andof the outstanding shares of the capital stock of Parent Common Stock are duly authorized, validly issued, fully paid and non-assessable, and all shares of Parent Common Stock to be issued as the MergerStock Consideration, or as Stock Award Payments, when so issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable. No class or series of capital stock of Parent is entitled to preemptive rights. Except as disclosed inSection 5.3(a) of the Parent Disclosure Letter, there are no outstanding bonds, debentures, notes or other indebtedness of Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of shares of Parent Common Stock may vote.
(b) At the close of business on February 24, 2011, allAll of the Merger Sub Interests wereare owned by, and have always been owned by, Parent. All of the Merger Sub Interests are duly authorized and validly issued, and are not entitled to
preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of Merger Sub having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of Merger Sub Interests may vote.
(c) All of the outstanding shares of capital stock of each of the Parent Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and nonassessable. All equity interests in each of the Parent Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued. All shares of capital stock of (or other ownership interests in) each of the Parent Subsidiaries whichthat may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and nonassessable.
(d) Except as set forth in thisSection 5.35.3(c), as of the dateParent Disclosure Letter, Parent owns, directly or indirectly, all of this Agreement,the issued and outstanding capital stock and other ownership interests of each of the Parent Subsidiaries that is a Significant Subsidiary, free and clear of all encumbrances other than statutory or other liens for Taxes or assessments which are not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves are being maintained, and there are no securities,existing options, warrants, calls, rights,subscriptions, convertible securities or other securities, agreements, commitments agreements, rights of first refusal, arrangements or undertakingsobligations of any kindcharacter relating to which Parent, Merger Sub or any other Parent Subsidiary is a party or by which any of them is bound, obligating Parent, Merger Sub or any other Parent Subsidiary to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional shares of Parent Stock or Merger Sub Interests or other equity securities or phantomthe outstanding capital stock or other contractual rights the value of which is determined in whole or in part by the value of any equity security of Parent, Merger Sub or any of the other Parent Subsidiaries or obligating Parent, Merger Sub or any other Parent Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, right of first refusal, arrangement or undertaking. As of the date of this Agreement, there are no outstanding contractual obligations of Parent, Merger Sub or any other Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of Parent Stock, or other equity securities or interests of Parent, Merger Sub or any other Parent Subsidiary (other than in satisfaction of withholding Tax obligations pursuant to certain awards outstanding under the Parent Plans). Neither Parent, Merger Sub nor any other Parent Subsidiary is a party to or, to the knowledge of Parent, bound by any agreements or understandings concerning the voting (including voting trusts and proxies) of any Merger Sub Interests or capital stock of Parent, or equity interests in any of the other Parent Subsidiaries.
(e) All dividends or distributions on the shares of Parent Stock and any material dividends or distributions on any securities of any Parent Subsidiary or which have been authorizedwould require any Parent Subsidiary to issue or declared prior to the date hereof have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).sell any shares of its capital stock, ownership interests or securities convertible into or exchangeable for shares of its capital stock or ownership interests.
(a) Each of Parent, OP Merger Sub and Merger Sub has the requisite organizationalcorporate, limited liability company or limited partnership power and authority, as applicable, to execute and deliver this Agreement, to perform its obligations hereunder and subject to receipt of the Parent Stockholder Approval, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by each of Parent, OP Merger Sub and Merger Sub and the consummation by each of Parent, OP Merger Sub and Merger Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate, limited partnership and limited liability company action, and no other corporate, limited partnership or limited liability company proceedings on the part of Parent, OP Merger Sub or Merger Sub, as applicable, are necessary to authorize this Agreement or the MergerMergers or to consummate the transactions contemplated hereby, subject with respect to the issuancefiling of Parent Common Stock in connectionthe Articles of Merger with and acceptance for record of the Articles of Merger by the SDAT and the due filing of the Certificate of Merger and Partnership Certificate of Merger with the Merger and the amendmentDelaware Secretary. Parent's board of the Parent Charter to increase the authorized number of shares of Parent Common Stockdirectors (the "Charter AmendmentParent Board"), to receipt of the Parent Stockholder Approval. The Parent Board, at a duly held meeting, has, (i) directed thatby unanimous vote of all of the issuanceParent Board members voting, duly and validly authorized the execution and delivery of Parent Common Stock in connection withthis Agreement and declared advisable the Merger and the Charter Amendment be submitted for consideration by the stockholders of Parent at the Parent Stockholder Meeting, and (ii) resolved to recommend that the stockholders of Parent vote in favor of approval of the issuance of Parent Common Stock in connection with the Merger and the Charter
Amendment (the "Parent Recommendation") and to include such recommendation in the Joint Proxy Statement, subject to Section 6.3(d).other transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by each of Parent, OP Merger Sub and Merger Sub and, assuming due authorization, execution and delivery by the Company and the Company Operating Partnership, constitutes a legally valid and binding obligation of each of Parent, OP Merger Sub and Merger Sub, enforceable against Parent, OP Merger Sub and Merger Sub in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law)Law).
Section 5.5 No Conflict; Required Filings and Consents.
(a) TheExcept as set forth inSection 5.5(a) of the Parent Disclosure Letter, the execution and delivery of this Agreement by each of Parent, OP Merger Sub and Merger Sub does not, and the performance of this Agreement and the consummation of the Merger, the Charter AmendmentMergers and the other transactions contemplated hereby by each of Parent, OP Merger Sub and Merger Sub will not, (i) assuming receipt of the Parent Stockholder Approval, conflict with or violate any provision of (A) the Parent Charter or the Parent Bylaws or Merger Sub's chartercertificate of formation or bylawslimited liability company agreement or (B) any equivalent organizational or governing documents of any other Parent Subsidiary, (ii) assuming that all consents, approvals, authorizations and permits described inSection 5.5(b) have been obtained, all filings and notifications described inSection 5.5(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to Parent, Merger Sub, or any other Parent Subsidiary or by which any property or asset of Parent, Merger Sub, or any other Parent Subsidiary is bound, or (iii) require any consent or approval under, result in any breach of or any loss of any benefit or material increase in any cost or obligation of Parent, or any Parent Subsidiary under, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, acceleration, cancellation or cancellationpayment (including disposition or similar fees) (with or without notice or the lapse of time or both) of, or give rise to any right of purchase, first offer or forced sale under or result in the creation of a Lien on any property or asset of Parent, Merger Sub, or any other Parent Subsidiary pursuant to, any note, bond, debt instrument, indenture, contract, agreement, ground lease, license, permit or other legally binding obligation to which Parent, Merger Sub or any other Parent Subsidiary is a party, except, as to clauses (i)(B), (ii) and (iii), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by each of Parent, OP Merger Sub and Merger Sub does not, and the performance of this Agreement by each of Parent, OP Merger Sub and Merger Sub will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) the filing with the SEC of (A) the Joint Proxy Statement and the Form S-4 and the declaration of effectiveness of the Form S-4, and (B) such reports under, and other compliance with, the Exchange Act (and the rules and regulations promulgated thereunder) and the Securities Act (and the rules and regulations promulgated thereunder) as may be required in connection with this Agreement and the transactions contemplated hereby, (ii) as may be required under the rules and regulations of the NASDAQ or the NYSE, (iii) the filing of the Articles of Merger with and the acceptance for record by SDAT of the Articles of Merger by the SDAT pursuant to the MGCL, (iv) the due filing of the Certificate of Merger and the acceptance for record by the Delaware Secretary of thePartnership Certificate of Merger pursuant to the DLLCA, (v) the filing of the Charter Amendment with the Delaware Secretary, (vi)(v) such filings and approvals as may be required by any applicable state securities or "blue sky" Laws, (vii)(vi) such filings as may be required in connection with state and local transfer Taxes, (vii) the filings, consents, authorizations and approvals set forth onSection 5.5(b) of the Parent Disclosure Letter (the "Required Regulatory Approvals") and (viii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.
Section 5.6 Permits; Compliance With Law.
(a) Except for the authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances that are the subject ofSection 5.14 orSection 5.16, which are addressed solely in those Sections, Parent, Merger Sub and each other Parent Subsidiary is in possession of all authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances of any Governmental Authority and accreditation and certification agencies, bodies or other organizations, including building permits and certificates of occupancy, necessary for Parent, Merger Sub and each other Parent Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as it is being conducted as of the date hereof (the "Parent Permits"), and all such Parent Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the Parent Permits, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. All applications required to have been filed for the renewal of Parent Permits have been duly filed on a timely basis with the appropriate Governmental Authority, and all other filings required to have been made with respect to such Parent Permits have been duly made on a timely basis with the appropriate Governmental Authority, except in each case for failures to file which, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. Neither Parent nor any Parent Subsidiary has received any claim or notice nor has any knowledge indicating that Parent or any Parent Subsidiary is currently not in compliance with the terms of any such Parent Permits, except where the failure to be in compliance with the terms of any such Parent Permits, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(b) None of Parent, Merger Sub or any other Parent Subsidiary is or has been in conflict with, or in default or violation of (i) any Law applicable to Parent, Merger Sub or any other Parent Subsidiary or by which any property or asset of Parent, Merger Sub or any other Parent Subsidiary is bound, (except for Laws addressed inSection 5.10,Section 5.11,Section 5.14,Section 5.15 orSection 5.17), or (ii) any Parent Permits, (except for Parent Permits addressed inSection 5.14 orSection 5.16), except in each case for any such conflicts, defaults or violations that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
Section 5.7 SEC Filings; Financial Statements.
(a) Parent has filed with, or furnished (on a publicly available basis) to, the SEC all forms, reports, schedules, statements and documents required to be filed or furnished by it under the Securities Act or the Exchange Act, as the case may be, including any amendments or supplements
thereto, from and after January 1, 20092012 (collectively, the "Parent SEC Filings"). Each Parent SEC Filing, as amended or supplemented, if applicable, (i) as of its date, or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the applicable rules and regulations of the SEC thereunder, and (ii) did not, at the time it was filed (or became effective in the case of registration statements), or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, neither Merger Sub nor any other Parent Subsidiary is separately subject to the periodic reporting requirements of the Exchange Act.
(b) Each of Parent'sthe consolidated financial statements contained or incorporated by reference in the Parent SEC Filings (as amended, supplemented or restated, if applicable), including the related notes and schedules, was prepared (except as indicated in the notes thereto) in accordance with GAAP
applied on a consistent basis throughout the periods indicated, and each such consolidated financial statement presented fairly, in all material respects, the consolidated financial position, results of operations, stockholders' equity and cash flows of Parent and its consolidated subsidiaries as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited quarterly financial statements, to normal year-end adjustments).
(c) The records, systems, controls, data and information of Parent and the Parent Subsidiaries that are used in the system of internal accounting controls described in the following sentence are recorded, stored, maintained and operated under means that are under the exclusive ownership and direct control of Parent or the Parent Subsidiaries or accountants, except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a materially adverse effect on the system of internal accounting controls. Parent and the Parent Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including that: (1) transactions are executed only in accordance with management's authorization; (2) transactions are recorded as necessary to permit preparation of the financial statements of Parent and the Parent Subsidiaries and to maintain accountability for the assets of Parent and the Parent Subsidiaries; (3) access to such assets is permitted only in accordance with management's authorization; (4) the reporting of such assets is compared with existing assets at regular intervals; and (5) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. Parent's principal executive officer and its principal financial officer have disclosed to Parent's auditors and the audit committee of the Board of Directors of Parent (the "Parent Board") (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect Parent's ability to record, process, summarize and report financial data, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent's internal controls, and Parent has made available to the Company copies of any material written materials relating to the foregoing. Parent has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 promulgated under the Exchange Act) designed to ensure that material information relating to Parent required to be included in reports filed under the Exchange Act, including its consolidated subsidiaries, is made known to Parent's principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, and, to the knowledge of Parent, such disclosure controls and procedures are effective in timely alerting Parent's principal executive officer and its principal financial officer to material information required to be included in Parent's periodic reports required under the Exchange Act. Since the enactment of the Sarbanes-Oxley Act, none of Parent, Merger Sub or any other Parent
Subsidiary has made any prohibited loans to any director or executive officer of Parent (as defined in Rule 3b-7 promulgated under the Exchange Act).
(d) NoneExcept as and to the extent disclosed or reserved against on Parent's most recent balance sheet (or, in the notes thereto) included in the Parent SEC Filings, none of Parent or its consolidated subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities or obligations (i) expressly contemplated by or under this Agreement, including without limitationSection 6.2 hereof, (ii) incurred in the ordinary course of business consistent with past practice since the most recent balance sheet set forth in the Parent SEC Filings made through and including the date of this Agreement, (iii) described in any section of the Parent Disclosure Letter or (iv) that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(e) ToExcept as set forth inSection 5.7(e) of the Parent Disclosure Letter, to the knowledge of Parent, none of the Parent SEC Filings is as of the date hereof the subject of ongoing SEC review and Parent has not received any comments from the SEC with respect to any of the Parent SEC Filings since January 1, 2009 which remains unresolved, nor has it received any inquiry or information request from the SEC as of the date hereof as to any matters affecting Parent which has not been adequately addressed.
Parent has made available to the Company true and complete copies of all written comment letters from the staff of the SEC received since January 1, 2010 through the date of this Agreement relating to the Parent SEC Filings and all written responses of Parent thereto through the date of this Agreement. None of the Parent SEC Filings as of the date hereof is the subject of any confidential treatment request by Parent.
Section 5.8 Disclosure Documents.
(a) None of the information supplied or to be supplied in writing by or on behalf of Parent, Merger Sub or any other Parent Subsidiary for inclusion or incorporation by reference in (i) the Form S-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time such document is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Joint Proxy Statement will, at the date it is first mailed to the stockholders of the Company, and of Parent, at the time of the Company Stockholder Meeting and the Parent Stockholder Meeting, at the time the Form S-4 is declared effective by the SEC or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. All documents that Parent is responsible for filing with the SEC in connection with the transactions contemplated herein, to the extent relating to Parent or any Parent Subsidiary or other information supplied by or on behalf of Parent or any Parent Subsidiary for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act or Exchange Act, as applicable and the rules and regulations of the SEC thereunder and each such document required to be filed with any Governmental Authority (other than the SEC) will comply in all material respects with the provisions of any applicable Law as to the information required to be contained therein.
(b) The representations and warranties containedNotwithstanding anything to the contrary in thisSection 5.8 will not applyor this Agreement, neither Parent nor Merger Sub makes any representation or warranty with respect to statements made or incorporated, or omissions included, in the Form S-4 or the Joint Proxy Statement to the extent based upon information supplied to Parent by or on behalf of the Company.
Section 5.9 Absence of Certain Changes or Events.Events Since. Between December 31, 2010,2013 and the date hereof, except as contemplated by this Agreement (a)or set forth onSection 5.9 of the Parent Disclosure Letter, Parent, Merger Sub and each other Parent Subsidiary has conducted its business in all material respects in the ordinary course consistent with past practice, (b) except as set forth onSection 6.2(b) of the Parent Disclosure Letter, none of Parent, Merger Sub or any other Parent Subsidiary has taken any action that it would not be permitted to take aftercourse. Between December 31, 2013 and the date of this Agreement without the prior written consent of the Company pursuant toSection 6.2(b)(i),Section 6.2(b)(iii),Section 6.2(b)(vi) orSection 6.2(b)(x), or agreed to do any of the foregoing, and (c)hereof, there has not been any Parent Material Adverse Effect or any effect, event, development or circumstance that, individually or in the aggregate with all other effects, events, developments and changes, would reasonably be expected to result in a Parent Material Adverse Effect.
Section 5.10 Certain ERISA Matters.Litigation. Except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect or as set forth inSection 5.10 Noneof the Parent Disclosure Letter, (a) there is no Action pending or, to the knowledge of Parent, threatened, nor, to the knowledge of Parent, is there any investigation pending or threatened by any Governmental Authority, in each case, against Parent, Merger Sub or any other Parent Subsidiary, and (b) none of Parent, Merger Sub or any other Parent Subsidiary, hasnor any liability for any prohibited transaction or accumulated funding deficiency (within the meaning of Section 412 of the Code)Parent or any complete or partial withdrawal liability with respect to any pension, profit sharing or other plan whichParent Subsidiary's respective property, is subject to ERISA, to whichany outstanding judgment, order, writ, injunction or decree of any Governmental Authority.
Section 5.11 Taxes. Except as expressly set forth inSection 5.11 of the Parent Merger Sub or any otherDisclosure Letter:
(a) Parent and each Parent Subsidiary makes or ever has made a contribution(i) duly and intimely filed (or there have been filed on their behalf) with the appropriate Governmental Authority all U.S. federal and all other Tax Returns required to be filed by them, taking into account any extensions of time within which any employee of Parent, Merger Sub or any other Parent Subsidiary is or has ever been a participant, which in each case has had or would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. With respect tofile such plans, Parent, Merger SubTax Returns, and each other Parent Subsidiary is in complianceall such Tax Returns were and are true, correct and complete in all respects, withand (ii) duly and timely paid in full (or there has been duly and timely paid in full on their behalf), or made adequate provision for, all applicable provisionsamounts of ERISA, other thanTaxes required to be paid by them, whether or not shown (or required to be shown) on any Tax Return, except, in each case, as has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) Parent (i) for all of its taxable years commencing with Parent's initial taxable year that ended on December 31, 1999 and through and including its taxable year ended December 31, 2013 has been subject to taxation as a REIT and has satisfied all requirements to qualify as a REIT, and has so qualified, for U.S. federal Tax purposes for all such taxable years; (ii) has operated since January 1, 2014 to the date hereof in such a manner so as to qualify as a REIT for U.S. federal Tax purposes; (iii) intends to continue to operate (including with regard to the REIT distribution requirements in the taxable year that includes the Closing Date) in such a manner so as to qualify as a REIT for its taxable year that will end December 31 of the year that includes the Merger (and consummation thereof); and (iv) has not taken or omitted to take any action that would reasonably be expected to result in a challenge by the IRS or any other Governmental Authority to its status as a REIT, and no such challenge is pending or, to Parent's knowledge, threatened.
(c) Neither Parent nor any Parent Subsidiary has participated in any "listed transaction" within the meaning of Treasury Regulations Section 1.6011-4(b)(2).
(d) Parent is not aware of any fact or circumstance that could reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 5.12 Vote Required. No vote of the holders of Parent Common Stock is required to approve this Agreement or the transactions contemplated hereby.
Section 5.115.13 Absence of Labor Dispute.Brokers. No labor dispute, strike, walkoutbroker, finder or investment banker is entitled to any brokerage, finder's or other labor disturbancefee or commission in connection with the Mergers based upon arrangements made by the employeesor on behalf of Parent, Merger Sub or any other Parent Subsidiary, other than Centerview Partners, LLC and any other brokerage, finder or Affiliate existsinvestment banker the fees or commissions of which shall be paid by Parent, Merger Sub or another Parent Subsidiary.
Section 5.14 Investment Company Act. None of Parent, Merger Sub or any other Parent Subsidiary is required to be registered as an investment company under the knowledgeInvestment Company Act.
Section 5.15 Sufficient Funds. At the Effective Time, Parent will have available, and Parent will provide Merger Sub with sufficient cash or lines of credit available to pay (i) the Cash Consideration, (ii) any cash in lieu of fractional shares of Parent Common Stock pursuant toSection 3.14 and (iii) any and all other amounts required to be paid in connection with the consummation of the Parent, is imminent.transactions contemplated by this Agreement, including the Mergers, and any related fees and expenses.
Section 5.125.16 Ownership of Merger Sub; No Prior Activities.
(a) Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. All of the interests of Merger Sub are owned directly by Parent.
(b) Except for the obligations or liabilities incurred in connection with its organization and the transactions contemplated by this Agreement, Merger Sub has not, and will not have prior to the Effective Time, incurred, directly or indirectly through any subsidiary or Affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
Section 5.17 Takeover Statutes. None of Parent, Merger Sub or any other Parent Subsidiary is, nor at any time during the last two (2) years has been, an "interested stockholder" of the Company as defined in Section 3-601 of the MGCL.
Section 5.18 Material Contracts.Contracts. All Parent Material Contracts have been filed as exhibits to the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and Current Reports on Form 8-K subsequent thereto filed by Parent SEC Filings made through and includingas of the date of this Agreement. Each Parent Material Contract is in full force and effect and is valid, binding and enforceable against Parent and/or any Parent Subsidiary party thereto, and, to the knowledge of Parent, each other party thereto in accordance with its terms, except for such failures to be in such full force and effect or to be valid, binding and enforceable as are not reasonably likely to have, individually or in the aggregate, a Parent Material Adverse Effect. None of Parent or any Parent Subsidiary, nor, to the knowledge of Parent, any other party thereto, is in material breach or violation of, or default under, any Parent Material Contract, and no event has occurred that with notice or lapse of time or both would constitute a violation, breach or default under any Parent Material Contract, except where in each case such breach, violation or default is not reasonably likely to have, individually or in the aggregate, a Parent Material Adverse Effect. NoneExcept as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, none of Parent or any Parent Subsidiary has received any written notice of an event of default pursuant to the terms of any Parent Material Contract.
Section 5.13 Litigation. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect, as of the date of this Agreement, (a) there is no suit, arbitration, inquiry, claim, action or proceeding pending or, to the knowledge of Parent, threatened by or before any Governmental Authority, nor, to the knowledge of Parent, is there any investigation pending by any Governmental Authority, in each case, against Parent, Merger Sub or any other Parent Subsidiary, and (b) none of Parent, Merger Sub or any other Parent Subsidiary, nor any of Parent or any Parent Subsidiary's respective property, is subject to any outstanding judgment, order, writ, injunction or decree of any Governmental Authority.
Section 5.14 Environmental Matters.
(a) Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect:
(i) Parent and each Parent Subsidiary are in compliance with applicable Environmental Laws, have applied for all Environmental Permits necessary to conduct their current operations and are in compliance with their respective Environmental Permits.
(ii) Neither Parent nor any Parent Subsidiary has received any written notice, demand, letter or claim alleging that Parent or any such Parent Subsidiary is in violation of, or liable under, any Environmental Law or that any judicial, administrative or compliance order has been issued against Parent or any Parent Subsidiary which remains unresolved. There is no litigation, investigation, request for information or other proceeding pending, or, to the knowledge of Parent, threatened against Parent and any Parent Subsidiary under any applicable Environmental Law.
(iii) Neither Parent nor any Parent Subsidiary has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial, administrative or compliance order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and no investigation, litigation or other proceeding is pending or, to the knowledge of Parent, threatened against Parent or any Parent Subsidiary under any applicable Environmental Law.
(iv) Neither Parent nor any Parent Subsidiary has assumed, by contract or operation of Law, any liability under any Environmental Law or relating to any Hazardous Materials, or is an indemnitor in connection with any threatened or asserted claim by any third-party indemnitee for any liability under any Environmental Law or relating to any Hazardous Materials.
(v) Neither Parent nor any Parent Subsidiary has caused, and to the knowledge of Parent, no Third Party has caused any release of a Hazardous Material that would be required to be investigated or remediated by Parent or any Parent Subsidiary under Environmental Law.
(b) ThisSection 5.14 contains the exclusive representations and warranties of Parent and Merger Sub with respect to environmental matters.
Section 5.15 Intellectual Property.
(a) Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect, (i) Parent, Merger Sub and the other Parent Subsidiaries own or are licensed or otherwise possess valid rights to use all Intellectual Property necessary to conduct the business of Parent, Merger Sub and the other Parent Subsidiaries as it is currently conducted, (ii) the conduct of the business of Parent, Merger Sub and the other Parent Subsidiaries as it is currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any Third Party, (iii) there are no pending or, to the knowledge of Parent, threatened claims with respect to any of the Intellectual Property rights owned by Parent, Merger Sub or any other Parent Subsidiary, and (iv) to the knowledge of Parent, no Third Party is currently infringing or misappropriating Intellectual Property owned by Parent, Merger Sub or any other Parent Subsidiary. Parent, Merger Sub and the other Parent Subsidiaries are taking all actions that they reasonably believe are necessary to maintain and protect each material item of Intellectual Property that they own.
(b) ThisSection 5.15 contains the exclusive representations and warranties of Parent and Merger Sub with respect to intellectual property matters.
(a) Parent or a Parent Subsidiary owns good and valid fee simple title or leasehold title (as applicable) to each of the real properties reflected as an asset on the most recent balance sheet of Parent included in the Parent SEC Documents in which Parent holds an equity interest of more than twenty percent (20%) (each a "Parent Property" and collectively the "Parent Properties"), in each case, free and clear of Liens, except for Parent Permitted Liens that have not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. For the purposes of this Agreement, "Parent Permitted Liens" shall mean any (i) Liens relating to any Indebtedness incurred in the ordinary course of business, (ii) Liens that result from any statutory or other Liens for Taxes or assessments that are not yet subject to penalty or the validity of which is being contested in good faith by appropriate proceedings, (iii) any Parent Material Contracts or other service contracts, management agreements, leasing commissions, agreements set forth inSection 5.16(j) of the Parent Disclosure Letter, Parent Leases or ground leases or air rights affecting any Parent Property, (iv) Liens imposed or promulgated by Law or any Governmental Authority, including zoning regulations, permits and licenses, (v) Liens that are disclosed on existing title policies, (vi) any cashiers', landlords', workers', mechanics', carriers', workmen's, repairmen's and materialmen's liens and other similar Liens imposed by Law and incurred in the ordinary course of business consistent with past practice that are not yet subject to penalty or the validity of which is being contested in good faith by appropriate proceedings, and (vii) any other Liens, limitations, restrictions or title defects that do not materially impair the value of the Parent Property or the continued use and operation of the Parent Property as currently used and operated.
(b) The Parent Properties (x) are supplied with utilities and other services as necessary to permit their continued operation as they are now being operated, (y) are, to the knowledge of Parent, in working order sufficient for their normal operation in the manner currently being operated and without any material structural defects other than as may be disclosed in any physical condition reports that have been made available to the Company, and (z) are, to the knowledge of Parent, adequate and suitable for the purposes for which they are presently being used.
(c) To the knowledge of Parent, each of the Parent Properties has sufficient access to and from publicly dedicated streets for its current use and operation, without any constraints that interfere with the normal use, occupancy and operation thereof.
(d) None of Parent, Merger Sub or any of the other Parent Subsidiaries has received (i) written notice that any certificate, permit or license from any Governmental Authority having jurisdiction over any of the Parent Properties or any agreement, easement or other right of an unlimited duration that is necessary to permit the lawful use and operation of the buildings and improvements on any of the Parent Properties or that is necessary to permit the lawful use and operation of all utilities, parking areas, retention ponds, driveways, roads and other means of egress and ingress to and from any of the Parent Properties is not in full force and effect as of the date of this Agreement, except for such failures to be in full force and effect that, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect, or of any pending written threat of modification or cancellation of any of same, that would reasonably be expected to have a Parent Material Adverse Effect, or (ii) written notice of any uncured violation of any Laws affecting any of the Parent Properties which, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.
(e) No certificate, variance, permit or license from any Governmental Authority having jurisdiction over any of the Parent Properties or any agreement, easement or other right that is necessary to permit the current use of the buildings and improvements on any of the Parent Properties or that is necessary to permit the current use of all parking areas, driveways, roads and other means of egress and ingress to and from any of the Parent Properties has failed to be obtained or is not in full force and effect, and none of Parent, Merger Sub or any other Parent Subsidiary has received written notice of any outstanding threat of modification or cancellation of any such certificate, variance, permit or license, except for each of the foregoing as, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(f) None of Parent, Merger Sub or any other Parent Subsidiary has received any written notice to the effect that (i) any condemnation or rezoning proceedings are pending or threatened with respect to any of the Parent Properties, or (ii) any zoning regulation or ordinance (including with respect to parking), Board of Fire Underwriters rules, building, fire, health or other Law has been violated (and remains in violation) for any Parent Property, except for each of the foregoing as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(g) True and complete in all material respects copies of all ground leases affecting the interest of Parent or any Parent Subsidiary in the Parent Properties and all leases and subleases to which Parent or the other Parent Subsidiaries are parties that are required to be filed as exhibits to the Parent SEC Filings pursuant to Item 601(b)(10) of Regulation S-K promulgated by the SEC (the "Material Parent Leases") in effect as of the date hereof, together with all amendments, modifications, supplements, renewals and extensions related thereto, have been made available to the Company. Except as has not had and would not reasonably be expected to have a Parent Material Adverse Effect, (1) none of Parent, Merger Sub or any other Parent Subsidiary is and, to the knowledge of Parent, no other party is in breach or violation of, or default under, any Material Parent Lease, (2) no event has occurred which would result in a breach or violation of, or a default under, any Material Parent Lease by Parent, Merger Sub or any other Parent Subsidiary, or, to the knowledge of Parent, any other party thereto (in each case, with or without notice or lapse of time or both) and no tenant under a Material Parent Lease is in monetary default under such Material Parent Lease, (3) no tenant under a Material Parent Lease is the beneficiary or has the right to become a beneficiary of a loan or forbearance from the Parent, Merger Sub or any other Parent Subsidiary in excess of $5,000,000 in the aggregate, (4) none of Parent, Merger Sub or any other Parent Subsidiary is in receipt of any rent under any Parent Lease paid more than 30 days before such rent is due and payable, and (5) to the knowledge of Parent, each Material Parent Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect with respect to Parent, Merger Sub or any other Parent Subsidiary and with respect to the other parties thereto, except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar Laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law).
(h) Except as set forth onSection 5.16(h) of the Parent Disclosure Letter, there are no Tax abatements or exemptions specifically affecting Parent Properties, and Parent and the Parent Subsidiaries have not received any written notice of (and Parent and the Parent Subsidiaries do not have any knowledge of) any proposed increase in the assessed valuation of any of the Parent Properties or of any proposed public improvement assessments that will result in the Taxes or assessments payable in the next tax period increasing, except in each case for any such Taxes or assessment that have not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(i) Except as set forth inSection 5.16(i) of the Parent Disclosure Letter or as has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, as of the date of this Agreement, no purchase option has been exercised under any Parent Lease for which the purchase has not closed prior to the date of this Agreement.
(j) Except for Parent Permitted Liens, as set forth inSection 5.16(j) of the Parent Disclosure Letter, or as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, (i) there are no unexpired option to purchase agreements, rights of first refusal or any other rights to purchase or otherwise acquire any Parent Property or any portion thereof that would materially adversely affect Parent's, or the Parent Subsidiary's, ownership, ground lease or right to use a Parent Property subject to a Material Parent Lease, and (ii) there are no other outstanding rights or agreements to enter into any contract for sale, ground lease or letter of intent to sell or ground lease any Parent Property or any portion thereof that is owned by any Parent Subsidiary, which, in each case, is in favor of any party other than Parent or a Parent Subsidiary (a "Parent Third Party").
(k) No written claim has been made against any Parent Title Insurance Policy, which individually or in the aggregate, has had or would be reasonably expected to have a Parent Material Adverse Effect.
(l) Parent, Merger Sub and the other Parent Subsidiaries have good and valid title to, or a valid and enforceable leasehold interest in, or other right to use, all personal property owned, used or held for use by them as of the date of this Agreement (other than property owned by tenants and used or held in connection with the applicable tenancy), except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. None of Parent's, Merger Sub's or any other Parent Subsidiaries' ownership of or leasehold interest in any such personal property is subject to any Liens, except for Parent Permitted Liens and Liens that have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(a) Parent, Merger Sub and each other Parent Subsidiary has filed with the appropriate Governmental Authority all Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were complete and correct, subject in each case to such exceptions as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. Parent and each Parent Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions for, all material Taxes required to be paid by them.
(b) Parent (i) for all taxable years commencing with Parent's taxable year ended December 31, 1999 through December 31, 2010, has been subject to taxation as a REIT and has satisfied all requirements to qualify as a REIT for such years; (ii) has operated since January 1, 2011 to the date hereof in a manner consistent with the requirements for qualification and taxation as a REIT; (iii) intends to continue to operate in such a manner as to qualify as a REIT for its taxable year ending
December 31, 2011; and (iv) has not taken or omitted to take any action that could reasonably be expected to result in a challenge by the IRS or any other Governmental Authority to its status as a REIT, and no such challenge is pending or threatened in writing. No Parent Subsidiary is a corporation for United States federal income tax purposes, other than a corporation that qualifies as a "qualified REIT subsidiary" within the meaning of Section 856(i)(2) of the Code, or as a "taxable REIT subsidiary" within the meaning of Section 856(l) of the Code.
(c) (i) There are no audits, investigations by any Governmental Authority or other proceedings pending with regard to any material Taxes or Tax Returns of Parent, Merger Sub or any other Parent Subsidiary; (ii) no deficiency for Taxes of Parent, Merger Sub or any other Parent Subsidiary has been claimed, proposed or assessed in writing or, to the knowledge of Parent, threatened, by any Governmental Authority, which deficiency has not yet been settled, except for such deficiencies which are being contested in good faith or with respect to which the failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect; (iii) none of Parent, Merger Sub or any other Parent Subsidiary has waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency for any open tax year; and (iv) none of Parent, Merger Sub or any of the other Parent Subsidiaries has entered into any "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).
(d) Each Parent Subsidiary that is a partnership, joint venture, or limited liability company and which has not elected to be a "taxable REIT subsidiary" has been since its formation treated for United States federal income tax purposes as a partnership or disregarded entity, as the case may be, and not as a corporation or an association taxable as a corporation.
(e) None of Parent, Merger Sub or any other Parent Subsidiary holds any asset the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code.
(f) Since its inception, (i) Parent, Merger Sub and the other Parent Subsidiaries have not incurred any liability for material Taxes under Section 860(c) or 4981 of the Code which have not been previously paid, and (ii) none of Parent, Merger Sub or any other Parent Subsidiary has incurred any material liability for Taxes other than (x) in the ordinary course of business or consistent with past practice, or (y) transfer or similar Taxes arising in connection with sales of property.
(g) Parent, Merger Sub and the other Parent Subsidiaries have complied, in all material respects, with all applicable Laws, rules and regulations relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446 and 3402 of the Code or similar provisions under any foreign Laws) and have duly and timely withheld and have paid over to the appropriate taxing authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.
(h) There are no Parent Tax Protection Agreements (as hereinafter defined) in force at the date of this Agreement, and, as of the date of this Agreement, no person has raised in writing, or to the knowledge of Parent threatened to raise, a material claim against Parent, Merger Sub or any other Parent Subsidiary for any breach of any Parent Tax Protection Agreements. As used herein, "Parent Tax Protection Agreements" means any written agreement to which Parent, Merger Sub or any other Parent Subsidiary is a party pursuant to which: (i) any liability to holders of limited partnership interests in a Parent Subsidiary Partnership relating to Taxes may arise, whether or not as a result of the consummation of the transactions contemplated by this Agreement; and/or (ii) in connection with the deferral of income Taxes of a holder of limited partnership interests in a Parent Subsidiary Partnership, Parent, Merger Sub or the other Parent Subsidiaries have agreed to (A) maintain a minimum level of debt or continue a particular debt, (B) retain or not dispose of assets for a period of time that has not since expired, (C) make or refrain from making Tax elections, and/or (D) only dispose of assets in a particular manner. As used herein, "Parent Subsidiary Partnership" means a Parent Subsidiary that is a partnership for United States federal income tax purposes.
(i) There are no Tax Liens upon any property or assets of Parent, Merger Sub or any other Parent Subsidiary except Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established.
(j) Neither Parent nor any Parent Subsidiary has requested, has received or is subject to any written ruling of a Governmental Authority or has entered into any written agreement with a Governmental Authority with respect to any Taxes.
(k) There are no Tax allocation or sharing agreements or similar arrangements with respect to or involving Parent or any Parent Subsidiary, and after the Closing Date neither Parent nor any Parent Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date.
(l) Neither Parent nor any Parent Subsidiary (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Parent) or (B) has any liability for the Taxes of any Person (other than Parent or any Parent Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.
(m) Neither Parent nor any Parent Subsidiary has participated in any "listed transaction" within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
(n) As of the date of this Agreement, Parent is not aware of any fact or circumstance that could reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(o) Neither Parent nor any of the Parent Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (A) in the two years prior to the date of this Agreement or (B) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with transactions contemplated by this Agreement.
Section 5.18 Insurance. Except for those matters that have not had and would not reasonably be expected to have a Parent Material Adverse Effect, there is no claim for coverage by Parent, Merger Sub or any other Parent Subsidiary pending under the material insurance policies and the material fidelity bonds or other insurance service contracts in Parent's possession providing coverage for all material Parent Properties (the "Parent Insurance Policies") that has been denied or disputed by the insurer. Except for those matters that have not had and would not reasonably be expected to have a Parent Material Adverse Effect, all premiums payable under all Parent Insurance Policies have been paid, and Parent, Merger Sub and the other Parent Subsidiaries have otherwise complied in all material respects with the terms and conditions of all the Parent Insurance Policies. To the knowledge of Parent, such Parent Insurance Policies are valid and enforceable in accordance with their terms and are in full force and effect and no written notice of cancellation or termination has been received by the Parent or any Parent Subsidiary with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation.
Section 5.19 Vote Required. The affirmative vote of the holders of not less than a majority in voting power of the outstanding shares of Parent Common Stock to approve the Charter Amendment and the issuance of Parent Common Stock in connection with the Merger (the "Parent Stockholder Approval") is the only vote of the holders of any class or series of shares of capital stock of Parent or Merger Sub necessary to adopt this Agreement and approve the Merger and the other transactions contemplated hereby, including the issuance of Parent Common Stock in connection with the Merger and the Charter Amendment.
Section 5.20 Brokers. No broker, finder or investment banker (other than Centerview Partners LLC) is entitled to any brokerage, finder's or other fee or commission in connection with the Merger based upon arrangements made by or on behalf of Parent, Merger Sub or any other Parent Subsidiary.
Section 5.21 Investment Company Act. None of Parent, Merger Sub or any other Parent Subsidiary is required to be registered as an investment company under the Investment Company Act.
Section 5.22 Sufficient Funds. Parent has available, and Parent will provide Merger Sub at the Effective Time, sufficient cash or lines of credit available to pay the Aggregate Cash Consideration payable hereunder, any and all other amounts required to be paid in connection with the consummation of the transactions contemplated by this Agreement, including the Merger, and any related fees and expenses.
Section 5.23 Ownership of Merger Sub; No Prior Activities.
(a) Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. All of the interests of Merger Sub are owned directly or indirectly by Parent.
(b) Except for the obligations or liabilities incurred in connection with its organization and the transactions contemplated by this Agreement, Merger Sub has not, and will not have prior to the Effective Time, incurred, directly or indirectly, through any subsidiary or Affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
Section 5.24 Ownership of Company Common Stock. None of Parent, Merger Sub or any other Parent Subsidiary is, nor at any time during the last two years has been, an "interested stockholder" of the Company as defined in Section 3-601 of the MGCL or a "Related Person" under Article V, Section 2 of the Company Charter.
Section 5.25 Affiliate Transactions. Except as set forth in the Parent SEC Filings made through and including the date of this Agreement or as permitted by this Agreement, from January 1, 2010 through the date of this Agreement there have been no transactions, agreements, arrangements or understandings between Parent or any Parent Subsidiary, on the one hand, and any Affiliates (other than Parent Subsidiaries) of Parent or other Persons, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K promulgated by the SEC.
Section 5.26 No Other Representations or Warranties.Warranties. Except for the representations and warranties contained inArticle IV, each of Parent, OP Merger Sub and Merger Sub acknowledge that neither the Company, the Company Operating Partnership nor any other Person or entity on behalf of the Company or the Company Operating Partnership has made, and neithernone of Parent, norOP Merger Sub or Merger Sub has relied upon, any representation or warranty, whether express or implied, with respect to the Company or any of the Company Subsidiaries or their respective businesses, affairs, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or with respect to the accuracy or completeness of any other information provided or made available to Parent, OP Merger Sub or Merger Sub by or on behalf of the Company.Company or the Company Operating Partnership.
Section 6.1 Conduct of Business by the Company.Company.
(a) The Company and the Company Operating Partnership each covenants and agrees that, between the date of this Agreement and the earlier to occur of the Effective Time and the date, if any, on which this Agreement is terminated pursuant toSection 8.1 (the "Interim Period"), except to the extent required by Law, as may be agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuant to this Agreement, or as set forth inSection 6.1(a) orSection 6.1(c)of the Company Disclosure Letter,
the Company shall, and shall cause each of the other Company SubsidiariesEntities to, (i) conduct its business in all material respects in the ordinary course and in a manner consistent with past practice (including performance of its obligations under each of the categories of Contracts described in all material respects,Section 6.1(c)(xxii)), and (ii) use its reasonable best efforts to maintain its material assets and properties in their current condition (normal wear and tear and damage caused by casualty or by any reason outside of the Company's or the Company Subsidiaries' control excepted), preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties, keep available the services of its present officers, and key employees,maintain all Company Insurance Policies, and maintain the status of the Company as a REIT. The consent of Parent shall be deemed to have been given for purposes of thisSection 6.1(a) andSection 6.1(c) if Parent does not object in writing within five (5) Business Days from the date on which the written request for such consent is provided by the Company to Parent.
(b) The Company shall (i) use its commercially reasonable efforts to obtain the opinions of counsel referred toSection 7.2(e) andSection 7.3(f), (ii) deliver to Proskauer Rose LLP and Wachtell, Lipton, Rosen & Katz an officer's certificate, dated as of the effective date of the Form S-4 and the Closing Date, respectively, and signed by an officer of the Company, containing representations of the Company as shall be reasonably necessary or appropriate to enable Wachtell, Lipton, Rosen & Katz and Proskauer Rose LLP to render the opinions described inSection 7.2(f) andSection 7.3(f), respectively, on the effective date of the Form S-4, satisfying the requirements of Item 601 of Regulation S-K under the Securities Act, and on the Closing Date, (a "Company Tax Representation Letter") and (iii) deliver to Proskauer Rose LLP an officer's certificate, dated as of the Closing Date, signed by an officer of the Company and the Company Operating Partnership and in form and substance reasonably satisfactory to Parent, containing representations of the Company and the Company Operating Partnership (x) as shall be reasonably necessary or appropriate to enable Proskauer Rose LLP to render the opinion described inSection 7.2(e) on the Closing Date and (y) which reflect reasonable due inquiry with the assistance of nationally recognized tax counsel and/or a "Big Four" accounting firm.
(c) Without limiting the foregoing, the Company covenants and agrees that, during the Interim Period, except to the extent required by Law, as may be agreedconsented to in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuant to this Agreement, or as set forth inSection 6.1(b)6.1(a), 6.1(c) or6.1(e) of the Company Disclosure Letter, the Company shall not, and shall not cause or permit any other Company SubsidiaryEntity to, do any of the following:
(i) amend or propose to amend the Company Charter or Company Bylaws (or such equivalent organizational or governing documents of any Company Subsidiary), waive the stock ownership limit under the Company Charter or create an Excepted Holder Limit (as defined in the Company Charter);
(ii) split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of the Company or any Company Subsidiary;Subsidiary (other than any wholly-owned Company Subsidiary);
(iii) declare, set aside or pay any dividend on or make any other distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of the Company or any Company Subsidiary or other equity securities or ownership interests in the Company or any Company Subsidiary, except for (A) the declaration and payment by the Company of distributions pursuantmonthly dividends in accordance with past practice at a rate not toSection 6.12, exceed an annualized rate of $0.68 per share of Company Common Stock, (B) the declaration and payment by the CompanyOperating Partnership of regular quarterly dividends at a rate not to exceed $0.48monthly distributions per OP Unit and LTIP Unit in the same amount as the dividend per share of Company Common Stock (each a "permitted pursuant to clause (A) above (it being
understood that, pursuant to Section 5.02(a)(i) of the Company Operating Partnership Agreement as in effect on the date hereof, in the case of distributions on LTIP Units, the amount to be distributed shall be only ten percent (10%) of such permissible dividend per share amount, and it being further understood that no distributions or payments shall be made in respect of LTIP Units at any time following the date hereof other than as set forth in this parenthetical, and that no distributions or payments shall be made in respect of LTIP Units as of and following termination of the OPP Agreement in accordance withCompany Quarterly DividendSection 3.10(b)"), (C) the declaration and payment of regular distributions that are required to be made in respect of Partnership Units of NHP/PMB, (D) the declaration and payment of dividends or other distributions to the Company by any directly or indirectly wholly owned Company Subsidiary, and (E)(D) distributions by any Company Subsidiary that is not wholly owned, directly or indirectly, by the Company, in accordance with the requirements of the organizational documents of such Company Subsidiary. NotwithstandingSubsidiary, and (E) dividend equivalents accrued or paid with respect to the foregoingCompany Restricted Shares (to the extent permitted under the terms of the applicable award agreement);provided,however, that, notwithstanding the restriction on dividends and other distributions in thisSection 6.1(c)(iii), and subject to the provisions ofSection 6.126.18, the Company and any Company Subsidiary shall be permitted to make distributions, including under Sections 857, 858 or 860 of the Code, reasonably necessary for the Company to maintain its status as a REIT under the Code andor avoid or reduce the imposition of any corporateentity level taxincome or excise Tax under the Code;
(iv) redeem, repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interests of the Company or a Company Subsidiary, other than (A) the redemption or exchange of Class A Units for cash or shares of Company Common Stock pursuant to and in accordance with the provisions of the NHP/PMB Partnership Agreement, (B) the acquisition by the Company of shares of Company Common Stock in connection with the surrender of shares of Company Common Stock by holders of Company Options in order to pay the exercise price of the Company Option and Taxes withheld in connection with the exercise of
Company Options, (C) the withholding of shares of Company Common Stock to satisfy withholding Tax obligations with respect to awards granted pursuant to the Company Equity Plans, and (D)including the acquisition by the Company in the ordinary course of business consistent with past practice in connection with terminated employeesvesting of Company Options and Company Restricted Stock Units in connection with the forfeiture of such awardsShares or (B) pursuant to the termsSection 5.7 of the Company Plans and in any event at a price per share not in excess of the fair market value of such award;Charter;
(v) except (A) for transactions among the Company and one or moreissuances by a wholly owned Company SubsidiariesSubsidiary to the Company or among one or moreanother wholly owned Company Subsidiaries,Subsidiary, or (B) as otherwise contemplated inSection 6.1(b)6.1(c)(vi), issue, sell, pledge, dispose, encumber or grant any shares of the Company's or any of the Company Subsidiaries' capital stock, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of the Company's or any of the Company Subsidiaries' capital stock or other equity interests;provided,however, that NHP/PMB may issue Class A Units pursuant to existing agreements, and the Company may issue shares of Company Common Stock (A) upon the vesting of any Company Restricted Stock, the exercise of any Company Option, or payment of any Company Restricted Stock Unit outstanding as of the date of this Agreement or as may be granted after the date of this Agreement underSection 6.1(b)(vi), (B) pursuant to the Company Benefit Plans to the extent required under the terms of such Company Benefit Plans as in effect as of the date of this Agreement, and (C) in exchange for Class A Units, pursuant to and in accordance with the provisions of the NHP/PMB Partnership Agreement;
(vi) grant, confer, award, except as may be specifically required under a Company Employment Agreement executed prior to the date of this Agreement or a Company Benefit Plan and which, in each case, is describedset forth onSection 6.1(b)6.1(c)(vi) of the Company Disclosure Letter, grant, confer, award, or modify the terms of any options,Company Restricted Shares or LTIP Units (except as set forth in Section 3.10(b)), convertible securities, restricted stock units, restricted stock, performance shares, equity-based compensation or other rights to acquire, or denominated in, any of the Company's or any of the Company Subsidiaries' capital stock or take any action not otherwise contemplated by this Agreement to cause to be exercisable any otherwise unexercisable option under any existing stock plan ofother equity securities or amend or modify the Company or any Company SubsidiaryEquity Plans (except (i) as explicitly required by the terms of any unexercisable options or other equity awards outstanding on the date of this Agreement, and (ii) customary grants made to newly hired employees or with respect to promotions,set forth in each case in the ordinary course of business consistent with past practice)Section 3.10(b));
(vii) acquire or agree to acquire (including by merger, consolidation or acquisition of stock or assets) any real property, personal property (other than personal property at a total cost of less than $500,000 in the aggregate), corporation, partnership, limited liability company, other business organization or any division or material amount of assets thereof, except (A) acquisitions by the Company or any wholly owned Company Subsidiary of or from an existing wholly owned Company Subsidiary, or (B) the consummationexcept as permitted or required underSection 6.1(e);
(viii) sell, pledge, lease, assign, transfer, dispose of acquisitions pursuantor encumber, or effect a deed in lieu of foreclosure with respect to, existing agreementsany property or assets, except for involuntary liens arising by operation of law that would not be material to whichany Company Property or any assets of the Company or any Company Subsidiary isSubsidiary;
(ix) other than (A) amending loan agreements as contemplated or necessary to comply withSection 6.19 hereof (provided that such amendments are in form and substance reasonably acceptable to Parent) or (B) the assumption of Indebtedness as a party; (C)result of the consummation of the acquisitions described oncontemplated bySection 6.1(b)(vii)6.1(e) ofhereof (it being understood that the Company Disclosure Letter; or (D) acquisitions not exceeding $10,000,000 individually or $100,000,000 in the aggregate;
(viii) sell, pledge, lease, dispose of or encumber any property or assets, except (A) as listed onSection 6.1(b)(viii) ofand the Company Disclosure Letter, or (B) pursuantSubsidiaries shall use reasonable best efforts in connection with such assumption to an obligation arising under
obtain any agreement referencedrequired Lender Consent inSection 4.16(l) respect of the Company Disclosure Letter;
(ix)such Indebtedness), incur, create, assume, refinance, replace or assumeprepay any Indebtedness for borrowed money or issue or amend the terms of any debt securitiesIndebtedness for borrowed money of the Company or any of the Company Subsidiaries or assume, guarantee or endorse, or otherwise become responsible (whether directly, contingently or otherwise) for the Indebtedness of any other person or entityPerson (other than a wholly owned Company Subsidiary), except (A) Indebtedness incurred under the Company's existing revolving credit facility (B) Indebtedness incurredof the Company Credit Agreement in the ordinary course of business consistent with past practice in an aggregate amount not to refinance or refund any existing Indebtedness or Indebtedness
permitted under this Agreement,exceed $1,500,000 for general corporate purposes and (C) Indebtedness incurred in ordersuch additional amounts as may be necessary to financeconsummate the acquisitions set forth inof real property pursuant toSection 6.1(b)(ix)6.1(e) and the payment of dividends or other distributions pursuant toSection 6.1(c)(iii) of the Company Disclosure Letter, in the amounts set forth therein and in an amount not exceeding the aggregate purchase price of such acquisitions and related transaction costs;Letter;
(x) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, employees, Affiliates, agents or consultants), or make any change in its existing borrowing or lending arrangements for or on behalf of any of such Persons, whether pursuantor enter into any "keep well" or similar agreement to a Company Benefit Plan or otherwise,maintain the financial condition of another entity, other than (A) by the Company or a wholly owned Company Subsidiary to the Company or a wholly owned Company Subsidiary, and (B) loans or advances required to be made under any of the Company Leases or ground leases affecting thelease pursuant to which any third party is a lessee or sublessee on any Company Properties;Property;
(xi) enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any Company Material Contract (or any Contract that, if existing as of the date hereof, would be a Company Material Contract), other than (A) any termination or Company Lease except (A) such as would not have an adverse economic impact onrenewal in accordance with the Company in excess of an aggregate of $500,000 per year in the case of recurring payment obligations or $5,000,000 in the aggregate in the caseterms of any non-recurring payment obligations and would not otherwise impose or renewexisting Company Material Contract that occurs automatically without any material restriction onaction by the Company or any Company Subsidiary, (B) the entry into any Lender Consent or (C) as may be reasonably necessary to comply with the terms of this Agreement,provided that the terms are reasonably acceptable to Parent;
(xii) except as set forth inSection 6.1(c)(xii) of the Company Disclosure Letter, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any material rightrights or claim, and (B)claims under, any Company Lease (or any lease for real property that, if existing as set forth onSection 6.1(b)(xi) of the date hereof, would be a Company Disclosure Letter;provided,howeverLease), thatexcept for (A) entering into any new lease or renewing any Company Lease in the ordinary course of business consistent with past practice on market terms and where the aggregate annual payments under any such new lease or Company may modify, amendLease are less than $500,000, or terminate(B) terminating any property management agreement pursuant to which the Company is the recipient of property management services,Lease as a result of a default by the counterparty to such Company Lease (in accordance with the terms of such Company Lease and subject to any default of the other party or parties thereto;applicable cure period therein);
(xii)(xiii) waive, release, assign any material rights or claims or make any payment, direct or indirect, of any other liability of the Company or any Company Subsidiary in an amount in excess of $5,000,000, before the same comes due in accordance with its terms, other than in the ordinary course of business and consistent with past practice;
(xiii)(xiv) settle or compromise (A) any legal action, suit, investigation, arbitration or arbitration proceeding, in each case made or pending against the Company or any of the Company Subsidiaries including relating to Taxes, other(other than settlements providing solely for the payment of money damages whereto the amount paid (afterextent not exceeding, individually or in the application of any insurance proceeds actually received or appropriate credits are applied from self-insurance reserves, if any) in settlement or compromiseaggregate, $100,000 that does not exceedinvolve the thresholds set forth onSection 6.1(b)(xiii)imposition of the Company Disclosure Letter and that (x) do not require any material actionsinjunctive or impose any material restrictions on the business or operations of the Company and the Company Subsidiaries, (y) provide for the complete release of the Company and the Company Subsidiaries of all claims and (z) do not provide for any admission of liability byequitable relief against the Company or any Company Subsidiaries andSubsidiary or an admission of liability or wrongdoing), or (B) any legal action, suit or proceeding involving any present, former or purported holder or group of holders of the Company Common Stock other than in accordance withSection 6.7;
(xiv)Table of Contents
(xv) except as required pursuant to existing written Company Employment Agreements or Company Benefit Plans in effect as of the date hereof, or as otherwise required by Law,Section 3.10,Section 4.29,Section 6.8, andSection 6.16 (A) hire, pay any compensation to, or terminate any officer, director (other than payments to directors consistent with past practice), consultant, advisor or directoremployee of the Company or any Company Subsidiary or promote or appoint any Person to a position of officer or director of the Company or any Company Subsidiary; (B) increase the compensation, perquisites or other benefits payable or to become payable to any current or former employees, directors or officers of the Company or any Company Subsidiary, (C) grant any severance or termination pay to, or enter into any severance agreement with, any employee, director or officer of the Company or any Company Subsidiary, (D) enter into any Company Employment Agreement or other employment, change of control, severance or retention agreement with any current or former employee,executive officer or director of the Company or any Company Subsidiary, in each case, other than payments required pursuant to the terms of the Advisory Agreement as in effect on the date hereof, (B) increase, or (E) accelerate the vesting or payment of, the compensation payable or
the benefits provided to or to becomeother benefits payable or provided to any current or former employees,the Company's directors, orexecutive officers, consultants (including, for the avoidance of doubt, the Company or any Company Subsidiary, or (F) establish, adopt, enter into or amend any employee benefit plan, Company Benefit Plan, Company Employment Agreement, collective bargaining agreement, plan, trust, fund, policy or arrangement with, or for the benefit of, any current or former directors, officersAdvisor) or employees, or (C) enter into, amend or adopt any of their beneficiaries;Benefit Plan;
(xv)(xvi) fail to maintain all financial books and records in all material respects in accordance with GAAP (or any interpretation thereof) or make any material change to its methods of accounting in effect at September 30, 2010,December 31, 2013, except as required by a change in GAAP (or any interpretation thereof) or in applicable Law;Law, or make any change with respect to accounting policies, unless required by GAAP or the SEC;
(xvi)(xvii) enter into any new line of business material to the Company and the Company Subsidiaries, taken as a whole;business;
(xvii)(xviii) fail to duly and timely file all material reports and other material documents required to be filed with allNASDAQ, the SEC, or any other Governmental Authorities and other authorities (including the New York Stock Exchange),Authority, subject to extensions permitted by Law;Law or applicable rules and regulations;
(xix) except as set forth inSection 6.1(c)(xix) of the Company Disclosure Letter, take any action, or fail to take any action, which action or failure would reasonably be expected to cause (A) the Company to fail to qualify as a REIT or (B) any Company Subsidiary (1) to cease to be treated as any of (x) a partnership or disregarded entity for U.S. federal income tax purposes or (y) a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be or (2) that is not treated as a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code as the date hereof to be so treated;
(xx) adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except by a Company Subsidiary in connection with any acquisitions permitted pursuant toSection 6.1(e) in a manner that would not reasonably be expected to be adverse to the Company or to prevent or impair the ability of the Company to consummate the Mergers;
(xviii)(xxi) form any new funds, joint ventures or non-traded real estate investment trusts or other pooled investment vehicles;
(xxii) take any action to cause the termination or amendment or waiver of any provision of any advisory Contract, property management Contract, dealer manager agreement, soliciting dealer agreement (including, in each case, related addendums) or similar Contract to which the Company or any Company Subsidiary is a party;
(xxiii) amend or modify the compensation terms or any other obligations of the Company contained in the engagement letter with each of Citigroup Global Markets Inc., J.P. Morgan Securities, LLC, and RCS Capital, a division of Realty Capital Securities, LLC in a manner adverse to the Company, any Company Subsidiary or Parent or engage other financial advisers in connection with the transactions contemplated by this Agreement;
(xxiv) except as set forth inSection 6.1(c)(xxiv) of the Company Disclosure Letter, make, change or rescind any election relating to Taxes, change a material method of Tax accounting, amend any material Tax Return, settle or compromise any material federal, state, local or foreign income Tax liability, audit, claim or assessment, enter into any material closing agreement related to Taxes, or knowingly
surrender any right to claim anya material refund of Taxes, except in each case (A) unless required by Law or (B)as necessary or appropriate to (x) to preserve the Company's qualification as a REIT under the Code or (y) to qualify or preserve the status of any Company Subsidiary as a disregarded entity or partnership for United StatesU.S. federal income tax purposes or as a qualifiedQualified REIT subsidiarySubsidiary or a taxableTaxable REIT subsidiarySubsidiary or a REIT under the applicable provisions of Section 856 of the Code, as the case may be;
(xix) take any action that could,Code; or fail to take any action, the failure of which could, reasonably be expected to cause (A) the Company to fail to qualify as a REIT or (B) any Company Subsidiary to cease to be treated as any of (1) a partnership or disregarded entity for federal income tax purposes or (2) a qualified REIT subsidiary, a taxable REIT subsidiary or a REIT under the applicable provisions of Section 856 of the Code, as the case may be;
(xx) take any action that could, or fail to take any action, the failure of which could, reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;
(xxi) adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except (A) by a Company Subsidiary in connection with any acquisitions permitted pursuant toSection 6.1(b)(vii) in a manner that would not reasonably be expected to be adverse to the Company or to prevent or impair the ability of the Company to consummate the Merger or (B) for the merger, dissolution and liquidation of Company Subsidiaries in the ordinary course of business consistent with past practice, which, individually or in the aggregate, would not reasonably be expected to be material to the Company;
(xxii) permit any material insurance policy to terminate or lapse without replacing such policy with comparable coverage or amend or cancel any material insurance policy;
(xxiii) initiate or consent to any material zoning reclassification of any real property or any other material change to any approved site plan, special use permit, planned development approval or other land use entitlement affecting any Company Property;
(xxiv) take, or agree to commit to take, any action that would reasonably be expected to result in any of the conditions to the Merger set forth inArticle VII not being satisfied; or
(xxv) authorize, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.
(c)(d) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit the Company from taking any action (i) at any time or from time to time, that in the reasonable judgment of the Company Board, upon advice of counsel to the Company, is reasonably necessary for the Company to avoid incurring entity level income or excise Taxes under the Code or to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the Effective Time, including without limitation, making dividend or other distribution payments to stockholders of the Company in accordance with this Agreement.Agreement or otherwise, or (ii) with the prior written consent of Parent (which consent shall not be unreasonably withheld, delayed or conditioned), as is reasonably necessary to minimize the risk that the gross income of the Company and the Company Operating Partnership does not qualify as gross income under Section 856(c)(2) and/or Section 856(c)(3) of the Code.
(e) The Company has caused the transfer and assignment to the Company or a Company Entity of all of the rights, interests and obligations of each Affiliate of the Company or other acquiring party that is not a Company Entity in each of the letters of intent or purchase and sale agreements listed onSection 6.1(e) of the Company Disclosure Letter, and in the event that any such transfer or assignment has not been properly completed as of the date hereof, the Company shall as promptly as practicable (and in any event prior to the Closing) effect such transfer or assignment. The Company shall, and shall cause each of the Company Entities and the Company's Affiliates or other acquiring party (on behalf of the Company Entities) to (a) if requested or consented to by Parent, use reasonable best efforts to negotiate and execute purchase and sale agreements in the name of the Company or, if requested by Parent, a Subsidiary of the Company, generally reflecting the terms of the letters of intent listed onSection 6.1(e) of the Company Disclosure Letter and other customary or reasonable provisions which are agreed upon on the basis of an arm's length negotiation in consultation with Parent, and (b) use commercially reasonable efforts to take all actions within its and their control reasonably necessary to consummate the closing of the transactions contemplated by the purchase and sale agreements listed onSection 6.1(e) of the Company Disclosure Letter pursuant to the terms of such purchase and sale agreements;provided,however, that in the case of clause (a), the Company, the Company Entities and the Company's Affiliates will not enter into any definitive agreement or otherwise become subject to any binding obligation in connection with such letters of intent or purchase and sale agreements without Parent's prior written consent (it being agreed that Parent will not unreasonably delay its decision as to whether to grant such consent upon request).
(f) If requested by Parent at least forty-five (45) days prior to the anticipated Closing Date, the Company shall dispose of the properties listed inSection 6.1(f) of the Company Disclosure Letter without any continuing obligations or liabilities of any Company Entity with respect thereto, for no less than $40 million in cash.
Section 6.2 Conduct of Business by Parent.Parent and Merger Sub.
(a) The Parent Parties shall (i) use their commercially reasonable efforts to obtain the opinions of counsel referred to inSection 7.3(e) andSection 7.2(f), (ii) deliver to Wachtell, Lipton, Rosen & Katz and Proskauer Rose LLP an officer's certificate, dated as of the effective date of the Form S-4 and the Closing Date, respectively, and signed by an officer of Parent, containing representations of Parent as shall be reasonably necessary or appropriate to enable Wachtell, Lipton, Rosen & Katz and Proskauer Rose LLP to render the opinion described inSection 7.2(f) andSection 7.3(f), respectively, on the effective date of the Form S-4, satisfying the requirements of Item 601 of Regulation S-K under the Securities Act, and on the Closing Date (a "Parent Tax Representation Letter"), and (iii) deliver to Parent REIT Counsel (as defined below) an officer's certificate, dated as of the effective Date of the Form S-4 and the Closing Date, respectively, and signed by an officer of Parent, containing representations of Parent as shall be reasonably necessary or appropriate to enable Parent REIT Counsel (as defined below) to render the opinion described inSection 7.3(e) on the effective date of the Form S-4, satisfying the requirements of Item 601 of Regulation S-K under the Securities Act, and on the Closing Date.
(b) Without limiting the foregoing, each Parent Party covenants and agrees that, during the Interim Period, except to the extent required by Law, as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuantconsented to this Agreement, or as set forth inSection 6.2(a) of the Parent Disclosure Letter, Parent shall, and shall cause each of the Parent Subsidiaries to, (i) conduct its business in the ordinary course and in a manner consistent with past practice in all material respects, and (ii) use its reasonable best efforts to maintain its material assets and properties in their current condition (normal wear and tear and damage caused by casualty or by any reason outside of Parent's or the Parent Subsidiaries' control excepted), preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties, keep available the services of its present officers and key employees, and maintain the status of Parent as a REIT.
(b) Without limiting the foregoing, Parent covenants and agrees that, during the Interim Period, except to the extent required by Law, as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuant to this Agreement, or as set forth inSection 6.2(b) of the Parent Disclosure Letter, the Parent Parties shall not, and shall not cause or permit any of the other Parent SubsidiariesEntities to, do any of the following:
(i) except for the Charter Amendment, amend or propose to amendAmend the Parent Charter or Parent Bylaws (or such equivalent organizational or governing documentsin a manner that would adversely affect the economic benefits of any Parent Subsidiary materialthe Mergers to Parent and the Parent Subsidiaries, considered as a whole, if such amendment would be adverse to Parent or the Company);holders of Company Common Stock;
(ii) split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of Parent, Merger Sub or any other Parent Subsidiary;
(iii) declare, set aside or pay any dividend on or make any other distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of Parent or other equity securities or ownership interests in Parent, except for (A) the declaration and payment of distributions pursuant toSection 6.12, (B) the declaration and payment by Parent of regular quarterly dividends at a rate not to exceed $0.575 per share of Parent Common Stock (each a "Parent Quarterly Dividend"), (C) the declaration and payment of dividends or distributions made to Parent by any wholly owned Parent Subsidiary and (D) the declaration and payment of dividends or distributions made by any Parent Subsidiary that is a joint venture. Notwithstanding the foregoing and subject to the provisions ofSection 6.12, the Parent and any Parent Subsidiary shall be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for the Parent to maintain its status as a REIT under the Code and avoid or reduce the imposition of any corporate level tax or excise Tax under the Code;
(iv) except for transactions among Parent and one or more wholly owned Parent Subsidiaries or among one or more wholly owned Parent Subsidiaries, or as otherwise contemplated inSection 6.2(b)(iv) or in connection with the payment of the AggregateOP Merger Consideration, issue, sell, pledge, dispose, encumber or grant any shares of its or the Parent Subsidiaries' capital stock, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of Parent's or any of the Parent Subsidiaries' capital stock or other equity interests;provided,however,
that Parent may issue shares of Parent Common Stock (A) pursuant to the Parent Benefit Plans to the extent required under the terms of such Parent Benefit Plans as in effect as of the date of this Agreement, (B) in order to finance acquisitions permitted pursuant toSection 6.2(b)(vi),provided that the aggregate net proceeds from the shares of Parent Common Stock issued pursuant to thisSection 6.2(b)(iv)(B) shall be no greater than the aggregate amount paid (including expenses incurred) by Parent or any Parent Subsidiary in connection with the acquisitions made pursuant toSection 6.2(b)(vi), and (C) otherwise in the ordinary course and in a manner consistent with past practice;
(v) grant, confer or award, except in the ordinary course of business consistent with past practice and except as may be required under agreements executed prior to the date of this Agreement described onSection 6.2(b)(v) or under any existing Parent Benefit Plan, options, convertible securities, restricted stock units, restricted stock, performance shares, equity-based compensation or other rights to acquire, or denominated in, any of Parent's or any of the Parent Subsidiaries' capital stock or take any action not otherwise contemplated by this Agreement to cause to be exercisable any otherwise unexercisable option under any existing stock plan of Parent or any Parent Subsidiary (except as otherwise provided by the terms of any unexercisable options or other equity awards outstanding on the date of this Agreement or otherwise permitted to be granted under clause (A), (B) or (C) below), other than (A) grants to be made in accordance with Parent's customary schedule or as otherwise approved by Parent's Compensation Committee, (B) customary grants made to newly hired employees or with respect to promotions or Parent's equity compensation review process, in each of the above case in the ordinary course of business consistent with past practice, or (C) in connection with this Merger or any other acquisition by Parent or any Parent Subsidiary with a Third Party permitted by this Agreement;Sub;
(vi) acquire or agree to acquire (including by merger, consolidation or acquisition of stock or assets), any real property, corporation, partnership, limited liability company, other business organization or any division or material amount of assets thereof that would, or would reasonably be expected to, prevent or materially impair the ability of Parent or Merger Sub to consummate the Merger before the Outside Date;
(vii)(iii) adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except (A) by a Parent Subsidiary in connection with any acquisitions permitted pursuant toSection 6.2(b)(vi) in a manner that would not reasonably be expected to be adverse to Parent or to prevent or impair the ability of Parent to consummate the Merger or (B) for the merger, dissolution and liquidation of Parent Subsidiaries in the ordinary course of business consistent with past practice, which, individually or in the aggregate, would not reasonably be expected to be material to Parent;reorganization;
(viii) fail to duly and timely file all material reports and other material documents required to be filed with all Governmental Authorities and other authorities (including the New York Stock Exchange), subject to extensions permitted by Law;
(ix)(iv) take any action, that could, or fail to take any action, thewhich action or failure of which could,would reasonably be expected to cause (A) Parent to fail to qualify as a REIT or (B) any Parent Subsidiary (1) to cease to be treated as any of (1)(x) a partnership or disregarded entity for U.S. federal income tax purposes or (2)(y) a qualifiedQualified REIT subsidiary, a taxable REIT subsidiarySubsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
(x) take any actionbe or (2) that could, or fail to take any action, the failure of which could, reasonably be expected to prevent the Merger from qualifyingis not treated as a reorganization withinTaxable REIT Subsidiary under the meaningapplicable provisions of Section 368(a)856 of the Code;
(xi) take, or agree to commit to take, any action that would reasonably be expected to result in anyCode as of the conditionsdate hereof to the Merger set forth inArticle VII not being satisfied;be so treated; or
(xii)(v) authorize, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.
(c) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit Parent from taking any action, at any time or from time to time, that in the reasonable judgment of the Parent Board, upon advice of counsel to Parent, is reasonably necessary for Parent to continue to avoid incurring entity level income or excise Taxes under the Code or to maintain its qualification as a REIT under the Code, for any period or portion thereof ending on or prior to the Effective Time, including without limitation, making dividend or other distribution payments to stockholders of Parent in accordance with this Agreement.Agreement or otherwise.
Section 6.3 Preparation of Form S-4 and Joint Proxy Statement; Stockholder Meetings.Meeting.
(a) As promptly as reasonably practicable following the date of this Agreement, (i) the Company and Parent shall jointly prepare and cause to be filed with the SEC the Joint Proxy Statement, and (ii) the Company and Parent shall prepare, and Parent shall cause to be filed with the SEC, the Form S-4, which will include the Joint Proxy Statement as a prospectus. Each of the Company and Parent shall use its reasonable best
efforts to (x) have the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing, (y) ensure that the Form S-4 complies in all material respects with the applicable provisions of the Exchange Act and the Securities Act, and (z) keep the Form S-4 effective for so long as necessary to complete the Merger.Mergers. Each of the Company and Parent shall furnish all information concerning itself, its Affiliates and the holders of its capital stock to the other and provide such other assistance as may be reasonably requested in connection with the preparation, filing and distribution of the Form S-4 and Joint Proxy Statement. The Form S-4 and Joint Proxy Statement shall include all information reasonably requested by such other party to be included therein. Each of the Company and Parent shall promptly notify the other upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Form S-4 or Joint Proxy Statement, and shall, as promptly as practicable after receipt thereof, provide the other with copies of all correspondence between it and its Representatives, on the one hand, and the SEC, on the other hand.hand, and all written comments with respect to the Proxy Statement or the Form S-4 received from the SEC and advise the other party of any oral comments with respect to the Proxy Statement or the Form S-4 received from the SEC. Each of the Company and Parent shall use its reasonable best efforts to respond as promptly as practicable to any comments from the SEC with respect to the Joint Proxy Statement and Parent shall use its reasonable best efforts to respond as promptly as practicable to any comment from the SEC with respect to the Form S-4. Notwithstanding the foregoing, prior to filing the Form S-4 (or any amendment or supplement thereto) or mailing the Joint Proxy Statement (or any amendment or supplement thereto) or responding to any comments offrom the SEC with respect thereto, each of the Company and Parent (i) shall cooperate and provide the other ana reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response) and (ii) shall include in such document or response all comments reasonably proposed by the other.. Parent shall advise the Company, promptly after it receives notice thereof, of the time of effectiveness of the Form S-4, the issuance of any stop order relating thereto or the suspension of the qualification of the Parent Common Stock issuable in connection with the MergerMergers for offering or sale in any jurisdiction, and Parent and the Company shall use itstheir reasonable best efforts to have any such stop order or suspension lifted, reversed or otherwise terminated. Parent shall also take any other action (other than qualifying to do business in any jurisdiction in which it is not now so qualified) required to be taken under the Securities Act, the Exchange Act, any applicable foreign or state securities or "blue sky" Laws and the rules and regulations thereunder in connection with the issuance of the Parent Common Stock in the Merger, and the Charter Amendment, and the Company shall furnish all information concerning the Company and the holders of its capital stockthe Company Common Stock as may be reasonably requested in connection with any such actions.
(b) If, at any time prior to the Effective Time,receipt of the Company Stockholder Approval, any information relating to the Company or Parent, or any of their respective Affiliates, should be discovered by the Company or Parent which, in the reasonable judgment of the Company or Parent, should be set forth in an amendment of, or a supplement to, any of the Form S-4 or the Joint Proxy Statement, so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties hereto, and the Company and Parent shall cooperate in the prompt filing with the SEC of any necessary amendment of, or supplement to, the Joint Proxy Statement or the Form S-4 and, to the extent required by Law, in disseminating the information contained in such amendment or supplement to stockholders of the Company and the stockholders of Parent. Nothing in thisSection 6.3(b) shall limit the obligations of any party underSection 6.3(a). For purposes ofSection 4.8,Section 5.8 and thisSection 6.3, any information concerning or related to the Company, its Affiliates or the Company Stockholder Meeting will be deemed to have been provided by the Company, and any information concerning or related to Parent or its Affiliates or the Parent Stockholder Meeting will be deemed to have been provided by Parent.
(c) As promptly as reasonably practicable following the date of this Agreement, the Company shall, in accordance with applicable Law and the Company Charter and Company Bylaws, establish a record date for, duly call, give notice of, convene and hold the Company Stockholder Meeting. The Company shall use its reasonable best efforts to cause the Joint Proxy Statement to be mailed to the stockholders of the Company entitled to vote at the Company Stockholder Meeting and to hold the Company
Stockholder Meeting as soon as reasonably practicable after the Form S-4 is declared effective under the Securities Act. The Company shall, through the Company Board, recommend to its stockholders that they give the Company Stockholder Approval, include such recommendation in the Joint Proxy Statement and solicit and use its reasonable best efforts to obtain the Company Stockholder Approval, except to the extent that the Company Board shall have made an Adverse Recommendation Change as permitted bySection 6.5 (c).6.5(d) Nothing contained in this Agreement shall be deemed to relieve the Company of its obligation to submit the Merger to its stockholders for a vote on the approval thereof. The Company agrees that, unless this Agreement shall have been terminated in accordance with;Section 8.1provided,however, its obligationsthe Company's obligation to hold the Company Stockholder Meeting pursuant to thisSection 6.3(c) shall not be affected by the commencement, public proposal, public disclosure or communication to the Company of any Company Acquisition Proposal or by any Adverse Recommendation Change.
(d) As promptly as reasonably practicable following the date of this Agreement, Parent shall, in accordance with applicable Law and the Parent Charter and Parent Bylaws, establish a record date for, duly call, give notice of, convene and hold the Parent Stockholder Meeting. Parent shall use its reasonable best efforts to cause the Joint Proxy Statement to be mailed to the stockholders of Parent and to hold the ParentCompany Stockholder Meeting as soon as reasonably practicable aftershall be unconditional unless this Agreement is terminated in accordance with its terms and shall not be affected by any Adverse Recommendation Change. Notwithstanding the Form S-4 is declared effective under the Securities Act. Parent shall, through the Parent Board, recommend to its stockholders that they give the Parent Stockholder Approval, include such recommendation in the Joint Proxy Statement, and solicit and use its reasonable best efforts to obtain the Parent Stockholder Approval.
(e) The Company and Parent will use their respective reasonable best efforts to holdforegoing provisions of thisSection 6.3(c), if, on a date for which the Company Stockholder Meeting andis scheduled, the ParentCompany has not received proxies representing a sufficient number of shares of Company Common Stock to obtain the Company Stockholder Approval, whether or not a quorum is present, the Company shall have the right to make one or more successive postponements or adjournments of the Company Stockholder Meeting;provided that the Company Stockholder Meeting on the sameis not postponed or adjourned to a date and as soon as practicablethat is more than (i) thirty (30) days after the date of this Agreement.for which the Company Stockholder Meeting was originally scheduled (excluding any adjournments or postponements required by applicable Law) or (ii) one hundred twenty (120) days after the record date for the Company Stockholder Meeting.
Section 6.4 Access to Information; Confidentiality.
(a) During the Interim Period, to the extent permitted by applicable Law, and contracts, and subject to the reasonable restrictions imposed from time to time upon advice of counsel, each of the Company and Parent shall, and shall cause each of the Parent Subsidiaries and theother Company Subsidiaries, respectively,Entities to, (x) afford to the other partyParent Parties and to thetheir Representatives of such other party reasonable access during normal business hours and upon reasonable advance notice to all of their respective properties, offices, books, contracts, commitments, personnel and records and, during such period, each of the Company and Parent shall and shall cause each of the other Company Subsidiaries and the Parent Subsidiaries, respectively,Entities to, furnish reasonably promptly to the other partyParent Parties (i) a copy of each report, schedule, registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities Laws, and (ii) all other information (financial or otherwise) concerning its business, properties and personnel as such other partythe Parent Parties may reasonably request. Subjectrequest and (y) afford to the termsParent Parties and to any nationally recognized accounting firm selected by Parent access to all of their properties, offices, books, contracts, commitments, personnel and records, and any other items as the Parent Parties or such accounting firm may reasonably request to enable the Parent Parties and such accounting firm to reasonably confirm the accuracy of the Company Leases, Parent, at its own expense, shall have the right to such reasonable access during normal business hoursrepresentations and upon reasonable advance noticewarranties in order to prepare or cause to be prepared surveys, inspections, engineering studies, environmental assessmentsSection 4.17(b)(i) and other tests, examination or studies with respectSection 4.17(b)(ii), in each case, without regard to the Company Property that Parent deems to be reasonably necessary, so long as such access does not unduly interfere withCompany's receipt of the Company's ordinary conduct of business; provided, that Parent indemnify the Company for any losses, costs or damages caused by such access.ruling described inSchedule 6.11(c). Notwithstanding the foregoing, neither the Company nor Parent shall not be required by thisSection 6.4 to provide the other partyParent Parties or thetheir Representatives of such other party with access to or to disclose information (w) relating to the consideration, negotiation and performance of this Agreement and related agreements, (x) that is subject to the terms of a confidentiality agreement with a third party entered into prior to the date of this Agreement or entered into after the date of this Agreement in the ordinary course of business consistent with past practice (provided,however, that the withholding partyCompany shall use its reasonable best efforts to obtain the required consent of such third party to such access or disclosure), (y) the disclosure of which would violate any Law or fiduciarylegal duty of the party or any of its representatives (provided,however, that the withholding partyCompany shall use its reasonable best efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of any Law or fiduciarystatutory duty) or (z) that is subject to any attorney-client, attorney work product or other legal privilege (provided,however, that the withholding partyCompany shall use its reasonable best efforts to allow for such access or disclosure to the maximum extent that does not result in a loss of any such attorney-client, attorney work product or other legal privilege). EachThe Parent Parties will use their reasonable best efforts to minimize any disruption to the businesses of the Company that may result from the requests for access, data and information hereunder.
(b) The Parent Parties will hold, and will cause itstheir Representatives and Affiliates to hold, any nonpublic information, including any information exchanged pursuant to thisSection 6.4, in confidence
to the extent required by and in accordance with, and will otherwise comply with, the terms of the Confidentiality Agreements. Each of the Company and Parent agree to give prompt written notice to the other upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of the Company Subsidiaries or the Parent Subsidiaries, respectively, which (i) could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or a Parent Material Adverse Effect, as the case may be, or (ii) if unremedied by the Effective Time, would cause or constitute a material breach of any of its representations, warranties, or covenants contained herein, and to use its reasonable best efforts to prevent or promptly to remedy the same;provided,however, that no such notification shall affect the representations and warranties of any party or relieve any party of any breach of any such representation or warranty or affect the remedies available to the party receiving notice hereunder.Agreement.
Section 6.5 Company Acquisition Proposals.
(a) Subject to the other provisions of thisSection 6.5, during the Interim Period, the Company agrees that it shall not, and shall cause each of the other Company Subsidiaries,Entities not to, and shall not authorize and shall use reasonable best efforts to cause its and their officers and directors, managers or equivalent, not to, and shall use its reasonable best efforts to cause any other Representatives of the Company or the Company Subsidiaries not to, directly or indirectly through another Person, (i) solicit, initiate, knowingly encourage or knowingly facilitate any inquiry, discussion, offer or request that constitutes, or could reasonably be expected to lead to, a Companyan Acquisition Proposal (provided that for purposes of thisSection 6.5(a), the references in the definition of Company Acquisition Proposal to "twenty percent (20%)" shall be deemed to be five percent (5%)) (an "Inquiry"), (ii) engage in any discussions or negotiations regarding, or furnish to any Third Party any non-public information in connection with, or otherwise cooperate in any way with, or knowingly facilitate in any way any effort by, any Third Party in connection with,furtherance of any Company Acquisition Proposal or Inquiry, (iii) approve or recommend a Companyan Acquisition Proposal, or enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or other similar definitive agreement (other than an Acceptable Confidentiality Agreement entered into in accordance with thisSection 6.5) providing for or relating to a Companyan Acquisition Proposal (an "Alternative Acquisition Agreement"), or (iv) propose or agree to do any of the foregoing.
(b) Notwithstanding anything to the contrary in thisSection 6.5(b)6.5, at any time prior to obtaining the Company Stockholder Approval, the Company may, directly or indirectly through any Representative, in response to an unsolicitedbona fide written Company Acquisition Proposal by a Third Party made after the date of this Agreement (that did not result from a breach of thisSection 6.5) (i) furnish non-public information to such Third Party (and such Third Party's Representatives) making a Companyan Acquisition Proposal (provided,however, that (A) prior to so furnishing such information, the Company receives from the Third Party an executed Acceptable Confidentiality Agreement, and (B) any non-public information concerning the Company or the Company SubsidiariesEntities that is provided to such Third Party shall, to the extent not previously provided to Parent or Merger Sub, be provided to Parent or Merger Sub prior to or simultaneously with providing itsubstantially at the same time that such information is provided to such Third Party), and (ii) engage in discussions or negotiations with such Third Party (and such Third Party's Representatives) with respect to the Company Acquisition Proposal if, in the case of each of clauses (i) and (ii): (x), the Company Board determines in good faith, after consultation with itsoutside legal counsel and financial and legal advisors, that such Company Acquisition Proposal constitutes, or could reasonably be expected to lead to, a Superior Proposal, and (y) the Company Board determines in good faith, after consultation with legal counsel, that failure to take such action would beis reasonably likely to be inconsistent with the directors' duties under applicable Law; provided, however, thatresult in, each of the foregoing clauses (i) and (ii), such Company Acquisition Proposal was not solicited in violation ofSection 6.5.a Superior Proposal.
(c) The Company shall notify Parent promptly (but in no event later than 24twenty-four (24) hours) after receipt of any Company Acquisition Proposal or any request for nonpublic information relating to the Company or any Company SubsidiaryEntities by any Third Party, or any Inquiry from any Person seeking to have discussions or negotiations with the Company relating to a possible Company Acquisition Proposal. Such notice shall be made orally and confirmed in writing, and shall indicate the identity of the Third Party making the Company Acquisition Proposal, request or Inquiry and the material terms and conditions of any Acquisition Proposals, Inquiries, proposals or offers (including a copy thereof if in writing and any related documentation or correspondence). The Company shall also promptly, and in any event within 24twenty-four (24) hours, notify Parent orally and in writing, if it enters into discussions or negotiations concerning any Company Acquisition Proposal or provides nonpublic information or data to any personPerson in accordance with thisSection 6.5(c) and keep the other partyParent reasonably informed of the status and material terms of any such proposals, offers, discussions or negotiations on a current basis, including by providing a copy of all material documentation or material correspondence relating thereto.
(d) Except as permitted by thisSection 6.5(d), neither the Company Board nor any committee thereof shall (i) withhold, withdraw, qualifymodify or modifyqualify (or publicly propose to withhold, withdraw, qualifymodify or modify)qualify), in a manner adverse to any Parent or Merger Sub,Party, the Company Recommendation,
(ii) approve, adopt or recommend (or publicly propose to approve, adopt or recommend) any Company Acquisition Proposal, (iii) fail to include the Company Recommendation in the Joint Proxy Statement or any Schedule 14D-9, as applicable, (iv) fail to publicly recommend against any Company Acquisition Proposal within ten (10) business daysfive (5) Business Days of the request of Parent andand/or fail to reaffirm the Company Recommendation within ten (10) businessfive (5) Business Days of the request of Parent, or such fewer number of days as remains prior to the Company Stockholders Meeting (provided that Parent shall not be permitted to make such request (x) on more than one (1) occasion in respect of each Acquisition Proposal and (y) on more than one (1) occasion in respect of each material modification to an Acquisition Proposal, if any) (any of the actions described in clauses(i),(ii),(iii) and(iv) of thisSection 6.5(d), an "Adverse Recommendation Change"), or (v) approve, adopt, declare advisable or recommend (or agree to, resolve or propose to approve, adopt, declare advisable or recommend), or cause or permit theany Company Entity to enter into, any Alternative Acquisition Agreement (other than an Acceptable Confidentiality Agreement entered into in accordance with thisSection 6.5). Notwithstanding anything to the contrary set forth in this Agreement (A) at any time prior to obtaining the Company Stockholder Approval, the Company Board shall be permitted to effect an Adverse Recommendation Change if the Company Board (x) has received a Companyan unsolicited bona fide Acquisition Proposal (that did not result from a breach of thisSection 6.5) that, in the good faith determination of the Company Board, after consultation with itsoutside legal counsel and financial and legal advisors, constitutes a Superior Proposal, after having complied with, and giving effect to all of the adjustments which may be offered by the Parent and Merger SubParties pursuant toSection 6.5(e), and
such Acquisition Proposal is not withdrawn, and (y) determines in good faith, after consultation with its financial andoutside legal advisors,counsel, that failure to take such action would be inconsistent with the directors' duties under applicable Law.Law, then in such case the Company may (i) terminate this Agreement pursuant toSection 8.1(c)(ii) or (ii) make an Adverse Recommendation Change, including approving or recommending such Superior Proposal to the Company's stockholders, and, in the case of a termination, the Company may immediately prior to or concurrently with such termination of this Agreement, enter into an Alternative Acquisition Agreement with respect to such Superior Proposal; or (B) in response to an Intervening Event, if the Company Board determines in good faith, after consultation with outside legal counsel, that failure to take such action would be inconsistent with the directors' duties under applicable Law, the Company may make an Adverse Recommendation Change,provided,that, in the event of any termination by the Company pursuant toSection 8.1(c)(ii) or by Parent pursuant toSection 8.1(d)(ii), as may be applicable, the Company complies with its obligation to pay the Termination Fee pursuant toSection 8.3(a).
(e) The Company Board shall not be entitled to effect an Adverse Recommendation Change as permitted underpursuant toSection 6.5(d) or terminate this Agreement pursuant toSection 8.1(c)(ii) unless (i) the Company has provided a written notice (a "Notice of Superior ProposalAdverse Recommendation Change") to the Parent and Merger SubParties that the Company intends to take such action, specifying in reasonable detail the reasons therefor and, in the case of an Adverse Recommendation Change pursuant toSection 6.5(d)(A), describing the material terms and conditions of, and attaching a complete copy of, the Superior Proposal that is the basis of such action (it being understood that such material terms shall include the identity of the Third Party), (ii) during the three (3) Business Day period following Parent's and Merger Sub'sthe Parent Parties' receipt of the Notice of Superior Proposal,Adverse Recommendation Change, the Company shall, and shall cause its Representatives to, negotiate with the Parent and Merger SubParties in good faith (to the extent the Parent and Merger SubParties desire to negotiate) to make such adjustments in the terms and conditions of this Agreement so that such Superior Proposal ceases to constitute a Superior Proposal,Adverse Recommendation Change or termination of this Agreement is no longer necessary, and (iii) following the end of the three (3) Business Day period, the Company Board shall have determined in good faith, after consultation with itsoutside legal counsel and financial and legal advisors, taking into account any changes to this Agreement proposed in writing by the Parent and Merger SubParties in response to the Notice of Superior ProposalAdverse Recommendation Change or otherwise, (x) that in the case of an Adverse Recommendation Change pursuant toSection 6.5(d)(A), the Superior Proposal giving rise to the Notice of Superior ProposalAdverse Recommendation Change continues to constitute a Superior Proposal.Proposal, and (y) in the case of an Adverse Recommendation Change pursuant to eitherSection 6.5(d)(A) orSection 6.5(d)(B), after
consultation with outside legal counsel, that failure to take such action would be inconsistent with the directors' duties under applicable Law. Any amendmentmaterial change to the terms of such Superior Proposal, including any change to the financial terms, orand any other material amendment of such Superior Proposalchange to the facts and circumstances relating to an Intervening Event, as applicable, shall require a new Notice of Superior Proposal,Adverse Recommendation Change and the Company shall be required to comply again with the requirementsprovisions of thisSection 6.5(e);provided,however, that references shall again apply with respect to the three (3) Business Day period above shall then be deemed to be references to a two (2) Business Day period.such Superior Proposal or Intervening Event, as applicable.
(f) Nothing contained in thisSection 6.5 or elsewhere in this Agreement shall prohibit the Company or the Company Board, directly or indirectly through its Representatives, from disclosing to the Company's stockholders a position contemplated by Rule 14e-2(a) andor Rule 14d-9 promulgated under the Exchange Act; Act or making any disclosure to its stockholders if the Company Board has determined, after consultation with outside legal counsel, that the failure to do so would be inconsistent with applicable Law;provided,however, that any disclosure other than a "stop, look and listen" or similar communication of the type contemplated by Rule 14d-9(f) promulgated under the Exchange Act, an express rejection of any applicable Company Acquisition Proposal or an express reaffirmation of the Company Recommendation to the Company's stockholders in favor of the Merger shall be deemed to be an Adverse Recommendation Change.
(g) TheUpon execution of this Agreement, the Company shall, and shall cause each of the other Company Subsidiaries (other than any Company Subsidiary in which the Company directly or indirectly owns 25% or less of the outstanding equity interests)Entities, and its and their officers and directors, managers or equivalent, and shall use its reasonable best efforts to cause any other Representatives of the Company or the Company Subsidiaries to (i) immediately cease any existing discussions, negotiations or communications with any Person conducted heretofore with respect to any Company Acquisition Proposal and (ii) take such action as is necessary to enforce any confidentiality or "standstill"standstill provisions or provisions of similar effect to which theany Company or any of the Company SubsidiariesEntity is a party or of which theany Company or any of the Company SubsidiariesEntity is a beneficiary. The Company shall use all reasonable best efforts to cause all Third Parties who have been furnished confidential information regarding theany Company Entity in connection with the solicitation of or discussions regarding a Companyan Acquisition Proposal within the six (6) months prior to the date of this Agreement to promptly return or destroy such information (to the extent that the Company isthey are entitled to have such information returned or destroyed).
(h) For purposes of this Agreement:
(i) "Company Acquisition Proposal" shall mean any bona fide inquiry, proposal or offer for (or expressionmade by a Third Party that it is considering or may engage in),any Person, whether in one transaction or a series of related transactions, relating to (i) any merger, consolidation, share exchange, business combination or similar transaction involving the Company or any of the Company Subsidiaries,Entities, (ii) any sale, lease, exchange, mortgage, pledge, license, transfer or other disposition, directly or indirectly, by merger,
consolidation, sale of equity interests, share exchange, joint venture, business combination or otherwise, of any assets of the Company or any Company SubsidiaryEntity representing twentyfifteen percent (20%(15%) or more of the consolidated assets of the Company and the Company Subsidiaries,Entities, taken as a whole as determined on a book-value basis, (iii) any issue, sale or other disposition of (including by way of merger, consolidation, joint venture, business combination, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing twentyfifteen percent (20%(15%) or more of the voting power of the Company, (iv) any tender offer or exchange offer in which any Person or "group""group" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) shall seek to acquire beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), or the right to acquire beneficial ownership, of twentyfifteen percent (20%(15%) or more of the outstanding shares of any class of voting securities of the Company, or (v) any recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to the Company in which a Third Party shall acquire beneficial ownership of twentyfifteen percent (20%(15%) or more of the outstanding shares of any class of voting securities of the Company or (vi) any transaction which is similar in form, substance or purpose to any of the foregoing transactions;Company;provided,however, that the term "Company Acquisition"Acquisition Proposal" shall not include (x) the MergerMergers or the other transactions contemplated by this Agreement or (y) any proposal or offer relating to any existing purchase option, rightAgreement.
(ii) "Superior Proposal" shall mean abona fide written Company Acquisition Proposal (except that, for purposes of this definition, the references in the definition of "Company Acquisition"Acquisition Proposal" to "twenty"fifteen percent (20%(15%)" shall be replaced by "fifty percent (50%)") made by a Third Party on terms that the Company Board determines in good faith, after consultation with the Company's financialoutside legal counsel and legalfinancial advisors, taking into account all financial, legal, regulatory and any other aspects of the transaction described in such proposal that the Company Board deems relevant, including the identity of the Person making such proposal, any break-up fees, expense reimbursement provisions and conditions to consummation, as well as any changes to the financial terms of this Agreement proposed by the Parent and Merger SubParties in response to such proposal or otherwise, to be (A) more favorable to the Company and the Company's stockholders (solely in their capacity as such) from a financial point of view than the transactions contemplated by this Agreement.Agreement and (B) reasonably likely to receive all required governmental approvals on a timely basis and otherwise reasonably capable of being completed on the terms proposed.
Section 6.6 Appropriate Action; Consents; Filings.
(a) Upon the terms and subject to the conditions set forth in this Agreement, (includingSection 6.5),the Company and each of the CompanyParent Parties shall and Parent shall (and shall cause the other Company SubsidiariesEntities and the other Parent Subsidiaries,Entities, respectively, to)to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things necessary, proper or advisable under applicable Law or pursuant to any contract or agreement to consummate and make effective, as promptly as practicable, the MergerMergers and the other transactions contemplated by this Agreement, including (i) the taking of all actions necessary to cause the conditions to Closing set forth inArticle VII to be satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers, consents (including the Lender Consents) and approvals from Governmental Authorities or other Persons necessary in connection with the consummation of the MergerMergers and the other transactions contemplated by this Agreement and the making of all necessary registrations and filings (including filings with Governmental Authorities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority or other Persons necessary in connection with the consummation of the MergerMergers and the other transactions contemplated by this Agreement (including promptly responding to all requests by a Governmental Authority or other Person for additional information in support of any such filing or request for approval or waiver), (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the MergerMergers or the other transactions contemplated by this Agreement, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed, the
avoidance of each and every impediment under any antitrust, merger control, competition or trade regulation Law that may be asserted by any Governmental Authority with respect to the MergerMergers so as to enable the Closing to occur as soon as reasonably possible, and (iv) the execution and delivery of any additional instruments necessary to consummate the MergerMergers and the other transactions contemplated by this Agreement and to fully carry out the purposes of this Agreement.
(b) In connection with and without limiting the foregoing, each of the Parent Parties and the Company shall give (or shall cause the other Parent SubsidiariesEntities or the other Company Subsidiaries,Entities, respectively, to give) any notices to Third Parties, and each of the Parent Parties and the Company shall use, and cause each of itstheir respective Affiliates to use, its reasonable best efforts, and the Company shall use its reasonable best efforts to cooperate with Parent in its efforts to obtain any Third Party consents not covered bySection 6.6(a) that are necessary, proper or advisable to consummate the Merger;provided,however, that Parent shall promptly reimburse the Company for any expenses and costs incurred in connection with the Company's or its Affiliates' obligations under thisSection 6.6(b).Mergers. Each of the parties hereto will furnish to the other such necessary information and reasonable assistance as the other may request in connection with the preparation of any required governmental filings or submissions and will cooperate in responding to any inquiry from a Governmental Authority, including immediatelypromptly informing the other partyparties of such inquiry, consulting in advance before making any presentations or submissions to a Governmental Authority, and supplying
each other with copies of all material correspondence, filings or communications between either party and any Governmental Authority with respect to this Agreement. To the extent reasonably practicable, the parties or their Representatives shall have the right to review in advance and permitted by aeach of the parties will consult the others on, all the information relating to the other and each of their Affiliates that appears in any filing made with, or written materials submitted to, any Governmental Authority each partyin connection with the Mergers and the other transactions contemplated by this Agreement, except that confidential competitively sensitive business information may be redacted from such exchanges. To the extent reasonably practicable, none of the parties hereto shall, nor shall they permit representativestheir respective Representatives to, participate independently in any meeting or engage in any substantive conversation with any Governmental Authority in respect of any filing, investigation or other inquiry without giving the other party prior notice of such meeting or conversation and, to the extent permitted by applicable Law, without giving the other parties the opportunity to attend or participate in meetings (whether by telephone or in person) in any such meeting with such Governmental Authority. Notwithstanding the foregoing, obtaining any approval or consent from any third party pursuant to thisSection 6.6(b) shall not be considered a condition to the obligations of Parent and Merger Sub to consummate the Merger.
(c) In connection with obtaining the Lender Consents, and without limitation of the foregoing, the Parent Parties shall, and Parent shall cause the other Parent Entities to, furnish such information and provide such assistance to, and otherwise cooperate with, the Company, in each case, as the Company may reasonably request, in connection with any actions contemplated to be taken by the Company with respect to obtaining the Lender Consents, including by agreeing to provide, from and after the Closing, customary non-recourse carve-out or "bad boy," guaranties with respect to events that are customarily the subject of such guaranties. The Parent Parties agree that the Company shall be expressly entitled to incur and pay any customary fees and expenses reasonably necessary to obtain the Lender Consents. Notwithstanding the foregoing, Parent may elect to exclude any Lender Consent from the provisions of thisSection 6.6(c);provided, that the amount of Indebtedness to which such excluded Lender Consent relates shall not be applied toward the threshold set forth inSection 2.2(a).
(d) Notwithstanding anything to the contrary in this Agreement, in connection with obtaining any approval or consent from any Person (other than any Governmental Authority) with respect to the Merger, without the prior written consent of Parent, none of the Company,parties hereto, any of the other Company SubsidiariesEntities or any of the Company'sother Parent Entities, or Company Subsidiary'sany of the their respective Representatives, shall be obligated to pay or commit to pay to such Person whose approval or consent is being solicited any cash or other consideration, make any accommodation or commitment or incur any liability or other obligation to such Person.Person (unless expressly required by a written agreement that was entered into prior to the date hereof with such Person), unless such party is promptly reimbursed for such payment. The Companyparties shall cooperate with Parent and the Purchaser with respect to accommodations that may be requested or appropriate to obtain such consents.
Section 6.7 Notification of Certain Matters; Transaction Litigation.
(a) The Company shall give prompt notice to the Parent Parties, and the Parent Parties shall give prompt notice to the Company, of any notice or other communication received by such party from any Governmental Authority in connection with this Agreement, the MergerMergers or the other transactions contemplated by this Agreement, or from any Person alleging that the consent of such Person is or may be required in connection with the MergerMergers or the other transactions contemplated by this Agreement.
(b) The Company shall give prompt notice to the Parent Parties, and the Parent Parties shall give prompt notice to the Company, if (i) any representation or warranty made by it contained in this Agreement becomes untrue or inaccurate such that it would be reasonable to expect that the applicable closing conditions would reasonably expected to be incapable of being satisfied by the Outside Date or (ii) it fails to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement;provided,however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations
of the parties under this Agreement. Without limiting the foregoing, the Company shall give prompt notice to the Parent Parties, and the Parent Parties shall give prompt notice to the Company, if, to the knowledge of such party, the occurrence of any state of facts, change, development, event or condition would cause, or would reasonably be expected to cause, any of the conditions to Closing set forth herein not to be satisfied or satisfaction to be materially delayed. Notwithstanding anything to the contrary in this Agreement, the failure by the Company or the Parent Parties to provide such prompt notice under thisSection 6.7(b) shall not constitute a breach of covenant for purposes ofSection 7.2(b) orSection 7.3(b).
(c) Each of the parties hereto agrees to give prompt written notice to the other parties upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of the other Company Entities or the other Parent Entities, respectively, which could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or a Parent Material Adverse Effect, as the case may be.
(d) The Company shall give prompt notice to the Parent Parties, and the Parent Parties shall give prompt notice to the Company, of any actions, suits, claims, investigations or proceedingsAction commenced or, to such party's knowledge, threatened against, relating to or involving such party or any of the other Company Subsidiaries
Entities or the other Parent Subsidiaries,Entities, respectively, which relate to this Agreement, the MergerMergers or the other transactions contemplated by this Agreement. The Company shall give the Parent Parties the opportunity to reasonably participate in the defense and settlement of any stockholder litigation against the Company and/or its directors relating to this Agreement and the transactions contemplated hereby, and no such settlement shall be agreed to without Parent's prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed), unless such settlement involves only the payment of money and the amount of such settlement shall be fully covered by insurance proceeds.. The Parent Parties shall give the Company the opportunity to reasonably participate in the defense and settlement of any stockholder litigation against the Parent Parties and/or itstheir directors relating to this Agreement and the transactions contemplated hereby, and no such settlement shall be agreed to without the Company's prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed), unless such settlement involves only the payment of money and the amount of such settlement shall be fully covered by insurance proceeds..
Section 6.8 Termination of Advisory and Other Agreements. On the date hereof, the Company or another Company Entity, as applicable, has entered into amendments to the Advisory Agreement, the Listing Agreement (the "Listing Termination Agreement"), the Management Agreement, and any other agreements between the Company or any of the Company Entities, on the one hand, and the Advisor, the Special Limited Partner, the Manager, or any other Affiliate of the Company or of the Company Advisor, on the other hand (other than the Company Operating Partnership Agreement), terminating all such agreements effective immediately prior to, and contingent upon, the Closing (such agreements, together with the OPP Termination Agreement, the "Termination Agreements"), and such terminations shall be without any liability to the Company, any of the Company Entities, Parent, any Affiliate of Parent, or the Surviving Entity. The Company has provided to Parent true, correct and complete copies of the Termination Agreements. Immediately prior to the Closing, the Company shall deliver to the Company Advisor and the Manager all amounts owed to such Person under the Advisory Agreement and the Management Agreement, respectively, and in exchange for such payments, the Company shall cause the Company Advisor, the Special Limited Partner, the Manager, and any other Affiliates of the Company or of the Company Advisor to execute a full and unconditional release of any claims or liabilities whatsoever that they may have against the Company, any of the Company Entities, Parent, any Affiliate of Parent, or the Surviving Entity, including without limitation any claims arising under (i) the Advisory Agreement, (ii) the Listing Agreement, (iii) the OPP Agreement, (iv) the Investment Opportunity Allocation Agreement, dated as of April 9, 2013 by and among the Company and American Realty Capital Healthcare Trust II, Inc., (v) the Management Agreement and (vi) the Company Operating Partnership Agreement (for the avoidance of doubt, excluding any claims to receive the Class C Units to which they are entitled under the terms of this Agreement (in each case, other than indemnification rights in favor of the Company Advisor or its Affiliates that, as of the date
hereof, exist under such agreements). Prior to the termination of this Agreement in accordance with its terms, neither the Company Operating Partnership nor any other Company Entity shall make any payment or distribution of any kind to the Special Limited Partner, the Company Advisor, or any of their Affiliates pursuant to the Listing Agreement, other than at the Closing as expressly provided in Section 2(b) of the Listing Termination Agreement.
Section 6.9Public Announcements. The Company, ParentFor so long as this Agreement is in effect, the parties hereto shall, and Merger Sub shall cause their respective Affiliates to, to the extent reasonably practicable, consult with each other before issuing any press release or otherwise making any public statements or filings with respect to this Agreement or any of the transactions contemplated hereby, and none of the parties shall issue any such press release or make any such public statement or filing prior to obtaining the other parties' consent (which consent shall not be unreasonably withheld, conditioned or delayed);provided,however, that a party may, without obtaining the other parties' consent, issue such press release or make such public statement or filing as may be required by Law, Order or the applicable rules of any stock exchange or the applicable provisions of any listing agreement of any party hereto. If for any reason it is not practicable to consult with the other party before making any public statement with respect to this Agreement or any of the transactions contemplated hereby, then the party making such statement shall not make a statement that is inconsistent with public statements or filings to which the other party had previously consented.consented;provided,further, that such consultation and consent shall not be required with respect to any release, communication or announcement specifically permitted without the other party's consent bySection 6.5.
Section 6.96.10 Directors' and Officers' Indemnification and Insurance.
(a) ParentFrom and Merger Sub agree that all rightsafter the Effective Time, the Surviving Entity shall provide exculpation, indemnification and advancement of expenses for each Indemnitee, which is at least as favorable in scope and amount to such Indemnitee as the exculpation, indemnification and indemnification for acts or omissions occurring at oradvancement of expenses provided to such Indemnitee by the Company and the Company Subsidiaries immediately prior to the Effective Time whether asserted or claimed prior to, at or after the Effective Time (including any matters arising in connection with the transactions contemplated by this Agreement), now existing in favor of the current or former directors, officers, partners, members, trustees or employees, as the case may be, of the Company or the Company Subsidiaries as provided in the Company Charter orand the Company Bylaws or each of the Company Subsidiaries' respective articles or certificates of incorporation or bylaws (or comparable organizational or governing documents) or in any agreement shall surviveas the Merger and shall continue in full force and effect in accordance with their terms. Parent and the Surviving Entity shall (and Parent shall cause the Surviving Entity to) (i) indemnify, defend and hold harmless, and advance expenses to, Indemnitees with respect to all acts or omissions by them in their capacities as such at any time prior to the Effective Time, to the fullest extent required by: (x) the Company Charter or Company Bylaws, or the articles or certificates of incorporation or bylaws (or comparable organizational or governing documents) of any of the Company Subsidiaries, in each case may be, as in effect on the date of this Agreement, (y) anyAgreement;provided that such exculpation, indemnification agreementand advancement of expenses covers actions or omissions at or prior to the Company or the Company Subsidiaries or other applicable contract as in effect on the date ofEffective Time, including all transactions contemplated by this Agreement and listed in the Company Disclosure Letter, or (z) applicable Law, and (ii) not amend, repeal or otherwise modify any such provisions referenced in subsections (i)(x) and (y) above in any manner that would adversely affect the rights thereunder of any Indemnitees.Agreement.
(b) Without limiting or being limited by the provisions ofSection 6.9(a)6.10(a), during the period commencing as of the Effective Time and ending on the sixth (6th) anniversary of the Effective Time, Parent and the Surviving Entity shall (and Parent shall cause the Surviving Entity to): (i) indemnify, defend and hold harmless each Indemnitee against and from any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation,Action, whether civil, criminal, administrative or investigative, to the extent such claim, action, suit, proceeding or investigationAction arises out of or pertains to (x) any action or omission or alleged action or omission in such Indemnitee's capacity as a director, officer, partner, member, trustee, employee or employeeagent of the Company or any of the Company Subsidiaries, or (y) this Agreement andor any of the transactions contemplated hereby, including the Merger; and (ii) pay in advance of the final disposition of any such claim, action, suit, proceeding or investigationAction the expenses (including attorneys' fees)fees and any expenses incurred by any Indemnitee in connection with enforcing any rights with respect to indemnification) of any Indemnitee uponwithout the requirement of any bond or other security, in each case to the fullest extent permitted by Law, but subject to Parent's and the Surviving Entity's receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified. Notwithstanding anything to the contrary contained in thisSection 6.9(b) or elsewhere in this Agreement, neither Parent nor the Surviving Entity shall (and Parent shall cause the Surviving Entity not to) settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any claim, action, suit, proceeding or investigation for which indemnification may be sought under thisSection 6.9(b) unless such settlement, compromise, consent or termination includes an unconditional release of all Indemnitees from all liability arising out of such claim, action, suit, proceeding or investigation, and does not include an admission of fault or wrongdoing by any Indemnitee. Notwithstanding anything to the contrary set forth in this Agreement, Parent or the Surviving Entity (i) shall not be liable for any settlement effected without their prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned) and (ii) shall not have any obligation hereunder to any Indemnitee to the extent that a court of competent jurisdiction shall determine in a
final and non-appealable order that such indemnification is prohibited by applicable Law, in which case the Indemnitee shall promptly refund to Parent or the Surviving Entity the amount of all such expenses theretofore advanced pursuant hereto.
(c) Prior to the Effective Time, the Company shall, in consultation with Parent, or, if the Company is unable to, Parent shall cause the Surviving Entity as of the Effective Time to, obtain and fully pay the premium for the non-cancellable extension of the directors' and officers' liability coverage ofafforded by the Company's existing directors' and officers' liability insurance policies and the Company's existing fiduciary liability insurance policies (collectively, the "D&O Insurance"), in each case, for a claims reporting or discovery period of at least six (6) years from and after the Effective Time with respect to any claim related to any period orof time at or prior to the Effective Time from anone or more insurance carriercarriers with the same or better Best's credit rating as the Company's current insurance carrier with respect to D&O Insurance with terms, conditions retentions and limits of liabilityretentions that are no less favorable in the aggregate than the coverage provided under the Company's existing policies and with policy limits of liability that are no lesslower than the limits on the Company's existing policies as long as the annual premium in the aggregate does not exceed 110%in any one year three hundred percent (300%) of the annual premiumaggregate premium(s) under the Company's existing policies. If the Company or the Surviving Entity for any reason fails to obtain such "tail""tail" insurance policies as of the Effective Time, (i) the Surviving Entity shall continue to maintain in effect, for a period of at least six (6) years from and after the Effective Time, the D&O Insurance in place as of the date hereof with the Company's current insurance carrier or with an insurance carrier with the same or better Best's credit rating as the Company's current insurance carrier with respect to D&O Insurance with terms, conditions, retentions and limits of liability that are no less favorable in the aggregate than the coverage provided under the Company's existing policies as of the date hereof, or (ii) Parent shall provide, or shall cause the Surviving Entity to provide, for a period of not less than six (6) years after the Effective Time, the Indemnitees who are insured under the Company's D&O Insurance with comparable D&O Insurance that provides coverage for eventsacts or omissions occurring at or prior to the Effective Time from an insurance carrier with the same or better credit rating as the Company's current insurance carrier, that is no less favorable in the aggregate than the existing policy of the Company (which may be provided under Parent's D&O Insurance policy) or, if substantially equivalent insurance coverage is unavailable, the best available coverage;provided,however, that Parent and the Surviving Entity shall not be required to pay an annual premium for the D&O Insurance in excess of 300%(for any one year) three hundred percent (300%) of the annual premium currently paid by the Company for such insurance;insurance as of the date hereof; andprovided,further, that if the annual premiums of such insurance coverage exceed such amount, Parent or the Surviving Entity shall be
obligated to obtain a policy with the greatest coverage available, with respect to matters occurring prior to the Effective Time, for a cost not exceeding such amount.
(d) The Indemnitees to whom thisSection 6.96.10 applies shall be third partyare third-party beneficiaries of thisSection 6.96.10. The provisions of thisSection 6.96.10 are intended toshall be for the benefit of each Indemnitee and his or her successors, heirs, executors, trustees, fiduciaries, administrators or representatives. Parent shall pay all reasonable expenses, including attorney'sattorneys' fees, that may be incurred by any Indemnitee in successfully enforcing the indemnity and other obligations provided in thisSection 6.96.10.
(e) The rights of each Indemnitee under thisSection 6.96.10 shall be in addition to any rights such personPerson or any employee of the Company or any Company Subsidiary may have under the Company Charter, the Company Bylaws or the certificate of incorporation or bylaws (or equivalent organizational or governing documents) of any of the Company Subsidiaries, or the Surviving Entity or any of its subsidiaries, or under any applicable Law or under any agreement of any IndemniteeIndemnitee. Nothing in this Agreement is intended to, shall be construed to or shall release, waive or impair any employeerights to directors' and officers' insurance claims under any policy that is or has been in existence with respect to the Company or anyits officers, directors and employees, it being understood and agreed that the
Table of the Company Subsidiaries listedContents
indemnification provided for in thisSection 4.12(a)(iv)6.10 the Company Disclosure Letter.is not prior to, or in substitution for, any such claims under any such policies.
(f) Notwithstanding anything contained inSection 9.1 orSection 9.7 to the contrary, thisSection 6.96.10 shall survive the consummation of the Merger indefinitely and shall be binding, jointly and severally, on all successors and assigns of Parent, the Surviving Entity and its subsidiaries, and shall be enforceable by the Indemnitees and their successors, heirs or representatives. In the event that Parent or the Surviving Entity or any of its successors or assigns consolidates with or merges into any other personPerson and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or transfers or conveys all or a majority of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of Parent or the Surviving Entity, as applicable, shall succeed to the obligations set forth in thisSection 6.96.10. The parties acknowledge and agree that Parent hereby guarantees the payment and performance of the Surviving Entity's obligations pursuant to thisSection 6.96.10.
Section 6.10 Employee Benefit Matters.
(a) During the one (1)-year period commencing at the Effective Time, Parent shall, or shall cause the Surviving Entity to, provide to employees and former employees of the Company and any of the Company Subsidiaries ("Company Employees") (i) a base salary or wage rate at least equal to the Company Employees' base salary or wage rate in effect as of immediately prior to the Effective Time and (ii) employee benefits (other than any incentive compensation, equity-based compensation, defined benefit pension benefits and retiree medical benefits) that are, in the aggregate, no less favorable than the employee benefits (other than any incentive compensation, equity-based compensation, defined benefit pension benefits and retiree medical benefits) provided to similarly situated employees of Parent and its Subsidiaries under the Parent Benefit Plans.
(b) Parent shall provide, or shall cause the Surviving Entity to provide, to each Company Employee who is a participant in a Company Severance Pay Plan immediately prior to the Effective Time and whose employment with the Surviving Entity, Company Subsidiaries and its Affiliates is involuntarily terminated in a severance-qualifying manner during the one (1)-year period following the Effective Time, severance benefits that are no less favorable, in the aggregate, than the severance benefits, if any, that would have been provided to such Company Employee pursuant to the terms of a Company Severance Pay Plan upon such an involuntary severance-qualifying termination of employment immediately prior to the Effective Time; provided that no such severance benefits shall be provided to any Company Employee who is a party to a Company Employment Agreement that otherwise provides for severance benefits.
(c) For purposes of eligibility and vesting, benefit accrual and determination of level of benefits under the compensation and benefit plans, programs agreements and arrangements of Parent, the
Company, the Parent Subsidiaries, the Company Subsidiaries, the Surviving Entity and any of its subsidiaries or any respective Affiliate thereof providing benefits to any Company Employees after the Closing, and in which such Company Employees did not participate prior to the Effective Time (the "New Plans"), including for purposes of accrual of vacation and other paid time off and severance benefits under New Plans (but excluding any New Plan that is established after the Closing that does not recognize service prior to its adoption), each Company Employee shall be credited with his or her years of service with the Company, the Company Subsidiaries and their respective Affiliates (and any additional service with any predecessor employer) before the Closing, to the same extent as such Company Employee was entitled, before the Closing, to credit for such service under any similar Company Benefit Plan, except where such credit would result in a duplication of benefits. In addition, and without limiting the generality of the foregoing: (i) each Company Employee shall be immediately eligible to participate, without any waiting time, in any and all New Plans to the extent coverage under such New Plan replaces coverage under a comparable Company Benefit Plan in which such Company Employee participated immediately before such replacement; and (ii) for purposes of each New Plan providing medical, dental, pharmaceutical and/or vision benefits to any Company Employee, Parent shall cause all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such employee and his or her covered dependents except to the extent such pre-existing conditions and actively-at-work requirements would apply under the analogous Company Benefit Plan, and Parent shall use reasonable efforts to cause any eligible expenses incurred by such Company employee and his or her covered dependents under a Company Benefit Plan during the portion of the plan year prior to the Effective Time to be taken into account under such New Plan for purposes of satisfying all deductible, co-insurance, co-payment and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan.
(d) For the avoidance of doubt and notwithstanding anything to the contrary herein or in any Company Benefit Plan, for purposes of any Company Benefit Plan listed inSection 6.10 of the Company Disclosure Letter, the Closing shall be deemed to constitute a "change in control" or "change of control."
(e) Nothing contained herein shall be construed as requiring, and the Company shall take no action that would have the effect of requiring, Parent or the Surviving Entity to continue any specific employee benefit plans or to continue the employment of any specific person. The provisions of thisSection 6.10 are solely for the benefit of the parties to this Agreement, and no current or former director, officer, employee or independent contractor or any other person shall be a third-party beneficiary of thisSection 6.10, and nothing herein shall be construed as an amendment to any Plan or other compensation or benefit plan or arrangement for any purpose.
Section 6.11 Certain Tax Matters.
(a) Each of Parent and the Company shall use theirits reasonable best efforts to cause the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code, including by executing and delivering the officers' certificates referred to therein.herein and reporting consistently for all federal, state, and local income Tax or other purposes. None of Parent or the Company shall take any action, or fail to take any action, that couldwould reasonably be expected to cause the Merger to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code.
(b) The Company and its Affiliates shall, with Parent's prior consent (which consent shall not be unreasonably withheld, conditioned or delayed), take any actions, including making or causing its subsidiaries to make elections pursuant to Treasury Regulations Section 301.7701-3(c)(1)(i) and Section 856(l) of the Code, as are reasonably necessary to preserve its qualification as a REIT, and the Company and its Affiliates shall cooperate with Parent and its Representatives in taking any such actions as Parent may reasonably request.
(c) Parent and the Company shall take the actions described inSchedule 6.11(c).
Section 6.12 Merger Sub. Parent shall take all actions necessary to (a) cause the other Parent Parties to perform their obligations under this Agreement and to consummate the Mergers on the terms and conditions set forth in this Agreement, and (b) ensure that, prior to the Effective Time, Merger Sub shall not conduct any business or make any investments or incur or guarantee any indebtedness other than as specifically contemplated by this Agreement. The Company shall take all actions necessary to cause the Company Operating Partnership to perform its obligations under this Agreement and to consummate the Mergers on the terms and conditions set forth in this Agreement.
Section 6.13 Section 16 Matters. Prior to the Effective Time, the Company and Parent shall, as applicable, take all such steps to cause any dispositions of Company Common Stock or acquisitions of Parent Common Stock (including derivative securities related to such stock) resulting from the Merger and the other transactions contemplated by this Agreement by each officer or director who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act. Upon request, the Company shall promptly furnish Parent with all requisite information for Parent to take the actions contemplated by thisSection 6.13.
Section 6.14 Stock Exchange Listing. Parent shall use its reasonable best efforts to cause the shares of Parent Common Stock to be issued in the Mergers to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Effective Time.
Section 6.15 Voting of Shares. Parent shall vote all shares of Company Common Stock beneficially owned by it or any of the Parent Subsidiaries as of the record date for the Company Stockholder Meeting, if any, in favor of approval of the Merger.
Section 6.16 Termination of Company Equity Plans. Unless otherwise notified by Parent in writing, prior to the Effective Time, the Company shall take or cause to be taken any and all actions necessary or appropriate to terminate the Company Equity Plans effective no later than immediately prior to the Effective Time, contingent on the occurrence of the Effective Time.
Section 6.17 Financing. The Company shall, and shall cause the other Company Entities to, and shall use commercially reasonable efforts to cause their respective Representatives to, cooperate with the Parent Parties in any of their efforts to arrange debt financing or maintain, and amend and/or increase, any Parent Entities' existing credit facilities (collectively, the "Debt Financing"), for (in whole or part) satisfying Parent's obligations to pay (a) any Cash Consideration and other amounts due by the Parent Parties hereunder, (b) any Expenses and (c) the refinancing of the Company Credit Agreement or any other Indebtedness of the Company or any of the Company Subsidiaries;provided that such cooperation does not unreasonably interfere with the ongoing operations of the Company and the Company Subsidiaries. None of the representations, warranties or covenants of the Company shall be deemed breached or violated by any action taken by the Company at the request of any Parent Party pursuant to thisSection 6.17. Anything in thisSection 6.17 to the contrary notwithstanding, until the Effective Time occurs, neither the Company nor any of the Company Subsidiaries, nor any of their respective officers or directors, as the case may be, shall (i) be required to pay any commitment or other similar fee in connection with any proposed Debt Financing, (ii) enter into any definitive agreement related to any proposed Debt Financing containing any material obligation that is not conditioned upon consummation of the Mergers or (iii) unless promptly reimbursed by Parent, be required to incur any other out of pocket expenses in connection with the Debt Financing. Parent shall promptly reimburse the Company for all reasonable out of pocket costs incurred by the Company or any of the Company Subsidiaries or their respective Representatives in connection with any action taken by any of them at the request of the Parent Parties or their financing sources pursuant to, and in accordance with, thisSection 6.17, and shall indemnify and hold harmless the Company, the Company Subsidiaries and their respective Representatives from and against any and all damages, losses, costs, liabilities or expenses suffered or incurred by any of them in connection with the arrangement of the Debt Financing and any information used in connection therewith (other than information provided by the Company or any of the Company Subsidiaries) and all other actions taken by the Company, the Company Subsidiaries and their respective Representatives at the request of Parent pursuant to this Section 6.17, except to the extent finally determined by a court of competent jurisdiction to have arisen from any Company Entity's or their respective Representatives' fraud, gross negligence, willful misconduct, intentional misrepresentation or bad faith. Notwithstanding anything to the contrary provided herein or in the Confidentiality Agreement, that Parent Entities and their Representatives shall be permitted to disclose information consistent with customary practices in connection with the Debt Financing subject to customary confidentiality arrangements.
(a) Each of Parent and the Company shall declare a dividend to their respective stockholders, the record and payment date for which shall be the close of business on the last Business Day prior to the Effective Time.Time, in each case, subject to funds being legally available therefor. The per share dividend amount payable by the Company shall be an amount equal to (i) the Company's most recent quarterlymonthly dividend, multiplied by the number of days elapsed since the last dividend record date through and including the day prior to the day on which the Effective Time occurs, and divided by the actual number of days in the calendar quartermonth in which such dividend is
declared, plus (ii) if necessary to enable the Company to make aggregate dividend distributions during its final taxable period equal to the Minimum Distribution Dividend, an additional amount (the "Company Additional Dividend
Amount") necessary so that the aggregate dividend payable is equal to the Minimum Distribution Dividend.Dividend, plus (iii) the Parent Additional Dividend Amount, if any, divided by the quotient of (A) one (1) divided by (B) the Exchange Ratio. The per share dividend amount payable by Parent shall be an amount equal to (i) Parent's most recent quarterly dividend, multiplied by the number of days elapsed since the last dividend record date through and including the day prior to the day on which the Effective Time occurs, and divided by the actual number of days in the calendar quarter in which such dividend is declared, plus (ii) the Company Additional Dividend Amount, if any, divided by the Exchange Ratio.Ratio, plus (iii) if necessary to enable Parent to make aggregate dividend distributions during the taxable year that includes the Closing Date equal to the Minimum Distribution Dividend, an additional amount (the "Parent Additional Dividend Amount") necessary so that the aggregate dividend payable is equal to the Minimum Distribution Dividend. If the Company determines it is necessary to declare the Additional Dividend Amount, the Company shall notify Parent of such determination at least ten (10) days prior to the Company Stockholder Meeting.
(b) Subject toSection 6.18(a), Parent shall not make, declare or set aside any dividend or other distribution to its stockholders other than the authorization and payment of (i) distributions at its stated dividend or distribution rates with respect to the Parent Preferred Stock and (ii) regular quarterly cash distributions in respect of Parent Common Stock at an annual rate not in excess of $2.90 per share (with such increases in such annual rate as may be approved by Parent's board of directors from time to time).
(c) In the event that a distribution or dividend with respect to the shares of Company Common Stock permitted under the terms of this Agreement (including pursuant toSection 6.1(b)(iii) andSection 6.12(a) above) has (i) a record date prior to the Effective Time and (ii) has not been paid as of the Effective Time, the holders of shares of Company Common Stock shall be entitled to receive such distribution or dividend from the Company at the time such shares are exchanged pursuant toArticle III of this Agreement.
Section 6.136.19 Merger Sub.Treatment of Outstanding Indebtedness; Payoff Letter. Parent shall take all actions necessary to (a) cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement, and (b) ensure that, prior to the Effective Time, Merger Sub shall not conduct any business or make any investments other than as specifically contemplated by this Agreement, or incur or guarantee any indebtedness.
Section 6.14 Section 16 Matters. Assuming that the Company delivers to Parent, in a timely fashion prior to the Effective Time, all requisite information necessary for Parent and Merger Sub to take the actions contemplated by thisSection 6.14, the Company, Parent and Merger Sub each shall take all such steps as may be necessary or appropriate to ensure that (a) any dispositions of Company Common Stock (including derivative securities related to such stock) resulting from the Merger and the other transactions contemplated by this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act withWith respect to the Company immediatelyCredit Agreement and any other Indebtedness of the Company or any of the Company Subsidiaries identified by Parent in writing at least ten (10) Business Days prior to the Effective Time are exempt under Rule 16b-3 promulgated underClosing Date, (i) the Exchange Act,Company shall, or shall cause the applicable Company Subsidiary to, use reasonable best efforts to deliver all notices and (b)take other actions required to facilitate the termination of commitments in respect of such Indebtedness, repayment in full of all obligations in respect of such Indebtedness and release of any acquisitions of Parent Common Stock (including derivative securities related to such stock) resulting fromLiens and guarantees in connection therewith on the MergerClosing Date and (ii) the other transactions contemplated by this Agreement by each individual who may become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Parent are exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 6.15 Stock Exchange Listing. ParentCompany shall use its reasonable best efforts to causedeliver to Parent a customary payoff letter with respect to the sharesCompany Credit Agreement and each such other series of Indebtedness, executed by the lenders thereunder (or the applicable agent thereunder on their behalf), in form and substance reasonably satisfactory to Parent, Common Stock to be issued in the Merger to be approved for listing on the NYSE, subject to official notice of issuance,no later than three (3) Business Days prior to the Effective Time.Closing Date (or such later date as Parent may agree in writing, but in any event, on or prior to the Closing Date), setting forth all amounts (including the outstanding principal, accrued and unpaid interest and all prepayment, defeasance or other fees and penalties) required to be paid by the Company or any other Company Entity under the Company Credit Agreement to cause the termination thereof on the Closing Date and the release of all Liens, if any, in connection therewith on the assets of the Company or any Company Subsidiary or otherwise on the business or operations of the Company or any of the Company Subsidiaries (collectively, the "Funded Debt Payoff Amount"). Notwithstanding anything to the contrary in this Agreement, no Company Entity shall be obligated, by virtue of this Agreement, to make any prepayments with respect to the amounts outstanding under the Company Credit Agreement (i) prior to the Closing Date and (ii) unless Parent or Merger Sub provides funds to the Company in an amount sufficient to, or places in escrow or otherwise pays on behalf of such Company Entity, the Funded Debt Payoff Amount.
Section 6.166.20 Voting of Shares.Partnership Agreement. Parent shall vote all shares of Company Common Stock beneficially owned by it or any ofWithin twenty (20) Business Days after the Parent Subsidiaries as of the record date for the Company Stockholder Meeting in favor of adoption of this Agreement, Parent and approvalthe Company shall cooperate in good faith and use their reasonable best efforts
to revise the existing Company Partnership Agreement in a manner consistent withExhibit A, which agreement shall become the limited partnership agreement of the Merger. The Company shall vote all shares of Parent Common Stock beneficially owned by it or any ofSurviving Partnership at the Company Subsidiaries as of the record date for the Parent Stockholder Meeting in favor of adoption of this Agreement, approval of thePartnership Merger issuance of shares of Parent Common Stock in connection therewith and the Charter Amendment.
Section 6.17 Parent Board of Directors. Parent shall take all necessary action to cause, as of the Effective Time (as so amended and restated, the persons described in"Section 6.17Surviving Partnership Agreement of the Company Disclosure Letter to be added to the Parent Board.
Section 7.1 Conditions to the Obligations of Each Party. The respective obligations of each party to effect the MergerMergers and to consummate the other transactions contemplated by this Agreement shall be subject to the satisfaction or (to the extent permitted by Law) waiver by each of the parties, at or prior to the Effective Time, of the following conditions:
(a) Stockholder Approvals. Each of theThe Company Stockholder Approval and the Parent Stockholder Approval shall have been obtained.
(b) No Restraints. No Governmental Authority in the United States shall have enacted, issued, promulgated, enforced or entered any Law, or Order (whether temporary, preliminary or permanent) which is thenor other legal restraint or prohibition entered, enacted, promulgated, enforced or issued by any Governmental Authority of competent jurisdiction shall be in effect and has the effect of making the Mergerwhich prohibits, makes illegal, enjoins, or otherwise restricting, preventingrestricts, prevents or prohibitingprohibits the consummation of the MergerMergers or otherwise restraining, enjoining, preventing, prohibiting or making illegal the acquisition of some or allany of the shares of Company Common Stocktransactions contemplated by Parent.this Agreement.
(c) Form S-4. The Form S-4 shall have becomebeen declared effective by the SEC under the Securities Act and no stop order suspending the effectiveness of the Form S-4 shall have been issued by the SEC and no proceedings for that purpose shall have been initiated or be threatened by the SEC that hashave not been withdrawn.
(d) Listing. The shares of Parent Common Stock to be issued in the MergerMergers shall have been authorized for listing on the NYSE, subject to official notice of issuance.
Section 7.2 Conditions to the Obligations of Parent and Merger Sub. The respective obligations of the Parent and Merger SubParties to effect the MergerMergers and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or (to the extent permitted by Law) waiver by Parent, at or prior to the Effective Time, of the following additional conditions:
(a) Representations and Warranties. (i) The representations and warranties set forth inSection 4.1(a)4.1 (Organization and Qualification; Subsidiaries),Section 4.3(a) (Capital Structure) (except for the first two sentences and the last two sentences),Section 4.4 (Authority),Section 4.19 (Opinion of Financial Advisor),Section 4.20 (Takeover Statute)Statutes),Section 4.21 (Vote Required),Section 4.22 (Brokers),Section 4.25 (Advisor) andSection 4.234.29 (Investment Company Act)(Fees and Disbursements) shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, (ii) the representations and warranties set forth in the first two sentences and the last two sentences ofSection 4.3(a) (Capital Structure) shall be true and correct in all but de minimis respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, (iii) Parent shall be reasonably satisfied that the representations and (iii)warranties set forth inSection 4.17(b)(i) andSection 4.17(b)(ii) shall be true and correct in all respects (notwithstanding anything contained inSection 4.17(b) of the Company Disclosure Letter) as of the Effective Time, as though made as of the Effective Time (it being understood that this condition shall automatically be satisfied if the ruling described inSchedule 6.11(c) is obtained, and the failure to obtain such ruling shall not in and of itself be determinative in concluding that this condition has not been satisfied), and (iv) each of the other representations and warranties of the Company and the Company Operating Partnership contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, except (x) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date, and (y) in the case of clause (iii)(iv) where the failure of such representations
or warranties to be true and correct (without giving effect to any materiality or "Company Material Adverse Effect" qualifications set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) Agreements and Covenants. The Company and the Company Operating Partnership shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date.
(c) Officer's Certificate. The Company shall have delivered to Parent a certificate, dated the date of the Closing and signed by its chief executive officer or another senior officer on behalf of the Company, certifying to the effect that the conditions set forth inSection 7.2(a) andSection 7.2(b) have been satisfied.
(d) Absence of Material Adverse Effect. Since the date of this Agreement, there shall not have been any event, change or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
(e) REIT Opinion. ParentThe Company shall have received a written opinion of Skadden, Arps, Slate, Meagher & FlomProskauer Rose LLP on which Parent shall be entitled to rely, dated as of the Closing Date and in form and substance reasonably satisfactory to Parent, to the effect that, commencing with the Company's taxable year that ended on December 31, 1999,2011, the Company washas been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its actual method of operation has enabled the Company to meet, through the Closing Date,Effective Time, the requirements for qualification and taxation as a REIT under the Code, which opinion will be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in an officer's certificate executed by the Company.Company provided pursuant to, and as described in, Section 6.1(b).
(f) Section 368 Opinion. Parent shall have received the written opinion of its special counsel, Wachtell, Lipton, Rosen & Katz, dated as of the Closing Date and in form and substance reasonably satisfactory to Parent, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, counselWachtell, Lipton, Rosen & Katz may require and rely upon customary representations contained in certificates of officers of Parent, the Company Tax Representation Letter and Merger Sub, reasonably satisfactoryParent Tax Representation Letter. The condition set forth in formthisSection 7.2(f) shall not be waivable after receipt of the Company Stockholder Approval, unless further stockholder approval is obtained with appropriate disclosure.
(g) Regulatory Approvals. All Required Regulatory Approvals shall have been obtained and substanceremain in full force and effect, and all waiting periods relating to it.such Required Regulatory Approvals shall have expired or been terminated.
(h) Termination Agreements. The Termination Agreements shall be in full force and effect, and no provision thereof shall have been amended, modified or waived.
Section 7.3 Conditions to the Obligations of the Company. The obligations of the Company and the Company Operating Partnership to effect the MergerMergers and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or (to the extent permitted by Law) waiver by the Company, at or prior to the Effective Time, of the following additional conditions:
(a) Representations and Warranties. (i) The representations and warranties set forth inSection 5.1(a) and(b)5.1 (Organization and Qualification; Subsidiaries),Section 5.3(a) (Capital Structure) (except the first two sentences),Section 5.4 (Authority),Section 5.195.12 (Vote Required),Section 5.205.13 (Brokers) and;Section 5.215.14 (Investment Company Act) andSection 5.17 (Takeover Statutes) shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, (ii) the representations and warranties set forth in the first two sentences ofSection 5.3(a) (Capital Structure) shall be true and correct in all but de minimis respects as of the date
of this Agreement and as of the Effective Time, as though made as of the Effective Time, and (iii) each of the other representations and warranties of the Parent and Merger SubParties contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, except (x) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date, and (y) in the case of clause (iii) where the failure of such representations or warranties to be true and correct (without giving effect to any materiality or "Parent Material Adverse Effect" qualifications set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) Agreements and Covenants. The Parent and Merger SubParties shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date.
(c) Officer's Certificate. Parent shall have delivered to the Company a certificate, dated the date of the Closing and signed by its chief executive officer or another senior officer on behalf of Parent, certifying to the effect that the conditions set forth inSection 7.3(a) andSection 7.3(b) have been satisfied.
(d) Absence of Material Adverse Effect. Since the date of this Agreement, there shall not have been any event, change or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.
(e) REIT Opinion. The CompanyParent shall have received a written opinion of Willkie Farr & Gallagher LLP, or othernationally recognized tax counsel reasonably acceptable to the Company ("Parent REIT Counsel") on which the Company shall be entitled to rely, dated as of the Closing Date and in form and substance reasonably satisfactory to the Company, to the effect that, commencing with Parent's taxable year that ended on December 31, 1999, Parent washas been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and its actual method of operation has enabled, and its proposed method of operation will enable Parent to continue to meet the requirements for qualification and taxation as a REIT under the Code, which opinion will be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in an officer's certificate executed by Parent.Parent and provided pursuant to Section 6.2(a).
(f) Section 368 Opinion. The Company shall have received a written opinion of its special counsel, Skadden, Arps, Slate, Meagher & FlomProskauer Rose LLP, dated as of the Closing Date and in form and substance reasonably satisfactory to the Company, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, counselProskauer Rose LLP may require and rely upon customary representations contained in certificates of officers of Parent, the Company Tax Representation Letter and Merger Sub, reasonably satisfactoryParent Tax Representation Letter. The condition set forth in form and substance to it.thisSection 7.3(f) shall not be waivable after receipt of the Company Stockholder Approval, unless further stockholder approval is obtained with appropriate disclosure.
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after receipt of the Company Stockholder Approval or the Parent Stockholder Approval (except as otherwise expressly noted), as follows:
(a) by mutual written agreement of each of Parent and the Company; or
(b) by either Parent or the Company, if:
(i) the Effective Time shall not have occurred on or before October5:00 P.M. (Eastern Time) on January 31, 20112015 (the "Outside Date");,provided,however, that the right to terminate this Agreement pursuant to thisSection 8.1(b)(i) shall not be available to any party if the failure of such party (and in the case of Parent, including the failure of Merger Sub)the other Parent Parties, and in the case of the Company, including the failure of the Company Operating Partnership) to perform any of its obligations under this Agreement has been a principal cause of, or resulted in, the failure of the MergerMergers to be consummated on or before such date;provided,further, that if, on the Outside Date, any of the conditions to the Closing set forth inSection 7.2(a)(iii) orSection 7.2(g) shall not have been satisfied or waived by Parent but all other conditions to the Closing set forth inSection 7.1 andSection 7.2 shall have been satisfied, then the Company or Parent, by written notice delivered to the other prior to 5:00 P.M. (Eastern Time) on January 31, 2015, may elect to extend the Outside Date until 5:00 P.M. (Eastern Time) on February 28, 2015, and such time and date shall become the Outside Date for purposes of this Agreement;provided,further, that if, on February 28, 2015, any of the conditions to the Closing set forth inSection 7.2(a)(iii) orSection 7.2(g) shall not have been satisfied or waived by Parent but all other conditions to the Closing set forth inSection 7.1 andSection 7.2 shall have been satisfied, then the Company or Parent, by written notice delivered to the other prior to 5:00 P.M. (Eastern Time) on February 28, 2015, may elect to extend the Outside Date until 5:00 P.M. (Eastern Time) on March 31, 2015, and such time and date shall become the Outside Date for purposes of this Agreement;provided,further, that if, on March 31, 2015, any of the conditions to the Closing set forth inSection 7.2(a)(iii) orSection 7.2(g) shall not have been satisfied or waived by Parent but all other conditions to the Closing set forth inSection 7.1 andSection 7.2 shall have been satisfied, then the Company or Parent, by written notice delivered to the other prior to 5:00 P.M. (Eastern Time) on March 31, 2015, may elect to extend the Outside Date until 5:00 P.M. (Eastern Time) on April 30, 2015, and such time and date shall become the Outside Date for purposes of this Agreement;provided,further, that if, on April 30, 2015, any of the conditions to the Closing set forth inSection 7.2(a)(iii) orSection 7.2(g) shall not have been satisfied or waived by Parent but all other conditions to the Closing set forth inSection 7.1 andSection 7.2 shall have been satisfied, then the Company or Parent, by written notice delivered to the other prior to 5:00 P.M. (Eastern Time) on April 30, 2015, may elect to extend the Outside Date until 5:00 P.M. (Eastern Time) on May 31, 2015, and such date shall become the Outside Date for purposes of this Agreement; or
(ii) any Governmental Authority of competent jurisdiction shall have issued an Order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such Order or other action shall have become final and non-appealable;provided,however, that the right to terminate this Agreement under thisSection 8.1(b)(ii) shall not be available to a party if the issuance of such final, non-appealable Order was primarily due to the failure of such party (and in the case of Parent, including the failure of Merger Sub)the other Parent Parties, and in the case of the Company, including the failure of the Company Operating Partnership) to perform any of its obligations under this Agreement;Agreement, including pursuant toSection 6.6; or
(iii) the Company Stockholder Approval shall not have been obtained at a duly held Company Stockholder Meeting or at(including any adjournment or postponement thereofthereof) at which this Agreementthe Merger and the other transactions contemplated hereby have been voted upon, provided that the right to terminate this Agreement under thisSection 8.1(b)(iii) shall not be available to the Companya party if the failure to obtain such Company Stockholder Approval was primarily due to such party's failure (and in the Company'scase of Parent, including the failure of any other Parent Party, and in the case of the Company, including the failure of the Company Operating Partnership) to perform any of its obligations under this Agreement; orAgreement.
(iv) the Parent Stockholder Approval shall not have been obtained at a duly held Parent Stockholder Meeting or at any adjournment or postponement thereof at which this Agreement and the transactions contemplated hereby have been voted upon, provided that the right to terminate this Agreement under thisSection 8.1(b)(iv) shall not be available to Parent if the failure to obtain such Parent Stockholder Approval was primarily due to Parent's failure to perform anyTable of its obligations under this Agreement; orContents
(c) by the Company,Company:
(i) if any Parent or Merger SubParty shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements set forth in this Agreement, which breach or failure to perform (x) would, or would reasonably be expected to, result in a failure of a condition set forth inSection 7.3(a) orSection 7.3(b) and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by the Parent Parties within twenty (20) days of receipt by Parent of written notice of such breach or failure; provided that the Company shall not have the right to terminate this Agreement pursuant to thisSection 8.1(c)(i) if the Company is then in breach of any of its respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in eitherSection 7.2(a) orSection 7.2(b) would not be satisfied; or
(ii) at any time prior to the receipt of the Company Stockholder Approval in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal in accordance withSection 6.5(d);provided, that such termination shall be null and void unless the Company shall concurrently pay the Termination Fee in accordance withSection 8.3.
(d) by Parent, if:
(i) the Company or the Company Operating Partnership shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements set forth in this Agreement (other than the representations and warranties inSection 4.17(b)(i) orSection 4.17(b)(ii)), which breach or failure to perform (x) would, or would reasonably be expected to, result in a failure of a condition set forth inSection 7.2(a) orSection 7.2(b) and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by the Company within twenty (20) days of receipt by the Company of written notice of such breach or failure; provided that Parent shall not have the right to terminate this Agreement pursuant to thisSection 8.1(d)(i) if any Parent or Merger Sub areParty is then in breach of any of their respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in eitherSection 7.3(a) orSection 7.3(b) would not be satisfied,satisfied; or
(ii) (x) the Company Board shall have made an Adverse Recommendation Change or (y) the Company shall have materially or willfully breached any of its obligations underSection 6.3 andSection 6.5 or (z)its obligations pursuant to the third sentence ofSection 6.3(c), which material breach, in each case in this clause (y), if curable by the Company, enters intoshall not have been fully cured by the Company within five (5) calendar days following the Company's receipt of written notice of such material breach (provided that any material breach pursuant to this clause (y) that results in an Alternative Acquisition Agreement (other than an Acceptable Confidentiality Agreement entered into in accordance withSection 6.5), providedProposal that the right to terminate under Section 8.1(d)(ii)(x) and (y)is publicly disclosed shall not be available after the receipt of the Company Stockholder Approval.curable).
Section 8.2 Effect of Termination.Termination. In the event that this Agreement is terminated and the Merger and the other transactions contemplated by this Agreement are abandoned pursuant toSection 8.1, written notice thereof shall be given to the other party or parties, specifying the provisions hereof pursuant to which such termination is made and describing the basis therefor in reasonable detail, and this Agreement shall forthwith become null and void and of no further force or effect whatsoever without liability on the part of any party hereto (or any of the other Company Subsidiaries,Entities, the other Parent SubsidiariesEntities or any of the Company's or Parent's respective Representatives), and all rights and obligations of any party hereto shall cease;provided,however, that, notwithstanding anything in the foregoing to the contrary, (a) no such termination shall relieve any party hereto of any liability or damages resulting from or arising out of any fraud or willful orand intentional breach of this Agreement;Agreement and (b) the Confidentiality Agreements,Agreement, thisSection 8.2,Section 8.3,Section 8.6,Article IX and the definitions of all defined terms appearing in such sections shall survive any termination of this Agreement pursuant toSection 8.1. If this Agreement is terminated as provided herein, all filings,
applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agencyGovernmental Authority or other personPerson to which they were made.
Section 8.3 Termination Fee.Fees and Expenses.
(a) If, but only if, the Agreement is terminated:
(i) by either the Company or Parent pursuant toSection 8.1(b)(i) orSection 8.1(b)(iii) or by Parent pursuant toSection 8.1(d)(i) and (A) in the case of a termination pursuant toSection 8.1(b)(i), the Parent Stockholder Approval shall have been obtained and the Company Stockholder Approval shall not have been obtained prior to such termination, and (B) the Companyin any such case (x) receives or has received a Company Acquisition Proposal after the date of this Agreement, which proposal hasan Acquisition Proposal shall have been made to the Company or any Person shall have publicly announced an intention (whether or not conditional) to make an Acquisition Proposal with respect to the Company (and such Acquisition Proposal or publicly announced intention shall not have been publicly announcedwithdrawn without qualification before such termination), and (y) the Company, within twelve (12) months of the termination of this Agreement, consummates a transaction regarding, or executes a definitive agreement which is later consummated with respect to, a Companyan Acquisition Proposal (whether or not the same Acquisition Proposal as that referred to in clause (x)), then the Company shall pay, or cause to be paid, to Parent, a fee equal to $175,000,000 (the "the Termination Fee,") plus, if not previously paid pursuant to the proviso below, the Expense Amount, by wire transfer of same day funds to an account designated by Parent, not later than the earlier of the execution of a definitive agreement with respect to and the consummation of such transaction arising from such Company Acquisition Proposal;provided,,however,, that for purposes of thisSection 8.3(a)(i), the references to "twenty"fifteen percent (20%(15%)" in the definition of Company Acquisition Proposal shall be deemed to be references to "fifty percent (50%)"; andor
provided,further, that in the event that the Agreement is terminated (ii) by either the Company or Parent pursuant toSection 8.1(b)(iii), the Company shall pay, or cause to be paid, to Parent the Parent Expense Amount (by wire transfer to an account designated by Parent) within two (2) Business Days of such termination rather than when the Termination Fee becomes payable to Parent (if ever);termination; or
(ii)(iii) by either the Company or Parent pursuant toSection 8.1(b)(i) orSection 8.1(b)(iv) or by the Company pursuant toSection 8.1(c) and (A) in the case of a termination pursuant toSection 8.1(b)(i)(iii), and (x) after the Company Stockholder Approvaldate of this Agreement, an Acquisition Proposal shall have been obtained andmade to the Parent Stockholder ApprovalCompany or any Person shall have publicly announced an intention (whether or not conditional) to make an Acquisition Proposal with respect to the Company (and such Acquisition Proposal or publicly announced intention shall not have been obtained prior to such termination,publicly withdrawn without qualification before the Company Stockholder Meeting), and (B) Parent (x) receives or has received abona fide Parent Acquisition Proposal, which proposal has been publicly announced and (y) the Company, within twelve (12) months of the termination of this Agreement, consummates a transaction regarding, or executes a definitive agreement which is later consummated with respect to, a Parentan Acquisition Proposal (whether or not the same Acquisition Proposal as that referred to in clause (x)), then Parentthe Company shall pay or cause to be paid, to the CompanyParent the Termination Fee plus,(less, if not previously paid pursuant toSection 8.3(a)(ii) above, the proviso below, theParent Expense Amount,Amount), by wire transfer of same day funds to an account designated by the Company,Parent, not later than the earlier of the execution of a definitive agreement with respect to and the consummation of such transaction arising from such Parent Acquisition Proposal;provided,however, that for purposes of thisSection 8.3(a)(iii), the references to "fifteen percent (15%)" in the event thatdefinition of Acquisition Proposal shall be deemed to be references to "fifty percent (50%)"; or
(iv) by the Agreement is terminated by either the Company or Parent pursuant toSection 8.1(b)(iv), Parent shall pay, or cause to be paid, to the Company the Expense Amount (by wire transfer to an account designated by the Company) within two (2) Business Days of such termination rather than when the Termination Fee becomes payable to the Company (if ever); or
(iii) by Parent pursuant toSection 8.1(d)8.1(c)(ii), then the Company shall pay, or cause to be paid, to Parent the Termination Fee, together withby wire transfer of same day funds to an account designated by Parent as a condition to the Expense Amount,effectiveness of such termination; or
(v) by Parent pursuant toSection 8.1(d)(ii) (or by the Company pursuant toSection 8.1(b)(iii) and at the time of such termination Parent would have been permitted to terminate this Agreement pursuant toSection 8.1(d)(ii)) then the Company shall pay, or cause to be paid, to Parent the Termination Fee, by wire transfer of same day funds to an account designated by Parent, within two (2) Business Days of such termination.
(b) Notwithstanding anything to the contrary set forth in this Agreement, the parties agree that:
(i) under no circumstances shall the Company or Parent be required to pay the Termination FeePayment earlier than one (1) full Business Day after receipt of appropriate wire transfer instructions from the party entitled to payment; and
(ii) under no circumstances shall the Company or Parent be required to pay the Termination Fee on more than one occasion.
(c) Each of the parties hereto acknowledges that (i) the agreements contained in thisSection 8.3 are an integral part of the transactions contemplated by this Agreement, (ii) the Termination FeePayment is not a penalty, but is liquidated damages, in a reasonable amount that will compensate the Company or Parent as the case may be, in the circumstances in which such fee is payable for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated hereby, which amount would otherwise be impossible to calculate with precision, and (iii) without these agreements, the partiesParent would not enter into this Agreement; accordingly, if the Company or Parent, as the case may be, fails to timely pay any amount due pursuant to thisSection 8.3 and, in order to obtain such payment, either the Company or Parent as the case may be, commences a suit that results in a judgment against the other partyCompany for the payment of any amount set forth in thisSection 8.3, such paying partythe Company shall pay the other partyParent its costs and Expenses in connection with such suit, together with interest on such amount at the annual rate of tenfive percent (10%(5%) for the period from the date such payment was required to be made through the date such payment was actually received, or such lesser rate as is the maximum permitted by applicable Law.
(d) (i) If one party to this Agreementthe Company (the "Termination Fee Payor") is required to pay another party to this AgreementParent (the "Termination Fee Payee") athe Termination Payment such Termination Payment shall be paid into escrow on the date such payment is required to be paid by the Termination Fee Payor pursuant to this Agreement by wire transfer of immediately available funds to an escrow account designated in accordance with thisSection 8.3(d). In the event that the Termination Fee Payor is obligated to pay the Termination Fee Payee the Termination Payment, the amount payable to the Termination Fee Payee in any tax year of the Termination Fee Payee shall not exceed the lesser of (i) the Termination Payment ofpayable to the Termination Fee Payee, and (ii) the sum of (A) the maximum amount that can be paid to the Termination Fee Payee without causing the Termination Fee Payee to fail to meet the requirements of Section 856(c)(2) and (3) of the Code for the relevant tax year, determined as if the payment of such amount did not constitute income described in Sections 856(c)(2) or 856(c)(3) of the Code ("Qualifying Income") and the Termination Payee has $1,000,000 of income from unknown sources during such year which is not Qualifying Income (in addition to any known or anticipated income which is not Qualifying Income), in each case, as determined by the Termination Fee Payee's independent accountants, plus (B) in the event the Termination Fee Payee receives either (x) a letter from the Termination Fee Payee's counsel indicating that the Termination Fee Payee has received a ruling from the IRS as described below in thisSection 8.3(d) or (y) an opinion from the Termination Fee Payee's outside counsel as described below in thisSection 8.3(d), an amount equal to the excess of the Termination Payment less the amount payable under clause (A) above.
(ii) To secure the Termination Fee Payor's obligation to pay these amounts, the Termination Fee Payor shall deposit into escrow an amount in cash equal to the Termination Payment with an escrow agent selected by the Termination Fee Payor on such terms (subject to thisSection 8.3(d)) as shall be mutually agreed upon by the Termination Fee Payor, the Termination Fee Payee and the escrow agent. The payment or deposit into escrow of the Termination Payment pursuant to thisSection 8.3(d) shall be made at the time the Termination Fee Payor is obligated to pay the Termination Fee Payee such amount pursuant toSection 8.3 by wire transfer. The escrow agreement shall provide that the Termination Payment in escrow or any portion thereof shall not be released to the Termination Fee Payee unless the escrow agent receives any one or combination of the following: (i) a letter from the Termination Fee Payee's independent accountants indicating the maximum amount that can be paid by
the escrow agent to the Termination Fee Payee without causing the Termination Fee Payee to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code determined as if the payment of such amount did not constitute Qualifying Income and the Termination Payee has $1,000,000 of income from unknown sources during such year which is not Qualifying Income (in addition to any known or anticipated income which is not Qualifying Income), in which case the escrow agent shall release such amount to the Termination Fee Payee, or (ii) a letter from the Termination Fee Payee's counsel indicating that (A) the Termination Fee Payee received a ruling from the IRS holding that the receipt by the Termination Fee Payee of the Termination Payment would either constitute Qualifying Income or would be excluded from gross income within the meaning of Sections 856(c)(2) and (3) of the Code or (B) the Termination Fee
Payee's outside counsel has rendered a legal opinion to the effect that the receipt by the Termination Fee Payee of the Termination Payment wouldshould either constitute Qualifying Income or wouldshould be excluded from gross income within the meaning of Sections 856(c)(2) and (3) of the Code, in which case the escrow agent shall release the remainder of the Termination Payment to the Termination Fee Payee. The Termination Fee Payor agrees to amend thisSection 8.3(d) at the reasonable request of the Termination Fee Payee in order to (i) maximize the portion of the Termination Payment that may be distributed to the Termination Fee Payee hereunder without causing the Termination Fee Payee to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code, (ii) improve the Termination Fee Payee's chances of securing a favorable ruling described in thisSection 8.3(d)or (iii)(ii) assist the Termination Fee Payee in obtaining a favorable ruling or legal opinion from its outside counsel, in each case, as described in thisSection 8.3(d). Any amount of the Termination Payment that remains unpaid as of the end of a taxable year shall be paid as soon as possible during the following taxable year, subject to the foregoing limitations of thisSection 8.3(d), provided that the obligation of the Termination Fee Payor to pay the unpaid portion of the Termination Payment shall terminate on the December 31 following the date which is four years from the date of this Agreement..
(e) For purposes of this Agreement: "Parent Acquisition Proposal" shall have the same meaning as "Company Acquisition Proposal with the word "Parent" replacing the words "the Company and/or any of the Company Subsidiaries"mutatis mutandis;provided,however, that for purposes of the definition of Parent Acquisition Proposal, (i) the reference to "twenty percent (20%)" in the definition of Company Acquisition Proposal shall be deemed to be reference to "fifty percent (50%)" and (ii) transactions in which Parent is the acquiring party shall not be included.
Section 8.4 Amendment.Amendment. Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the parties hereto by action taken or authorized by their respective boards of directors (or similar governing body or entity) at any time before or after receipt of the Company Stockholder Approval or the Parent Stockholder Approval and prior to the Effective Time;provided,however, that after the Company Stockholder Approval or the Parent Stockholder Approval has been obtained, there shall not be (a) any amendment of this Agreement that changes the amount or the form of the consideration to be delivered under this Agreement to the holders of Company Common Stock, or which by applicable Law or in accordance with the rules of any stock exchange requires the further approval of the stockholders of the Company or Parent without such further approval of such stockholders, or (b) any amendment or change not permitted under applicable Law. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.
Section 8.5 Waiver.Waiver. At any time prior to the Effective Time, subject to applicable Law, any party heretothe Parent Parties, on the one hand, and the Company and the Company Operating Partnership, on the other hand, may (a) extend the time for the performance of any obligation or other act of any other party hereto,the others, (b) waive any inaccuracy in the representations and warranties of the other partyothers contained herein or in any document delivered pursuant hereto, and (c) subject to the proviso ofSection 8.4, waive compliance with any agreement of the others or any condition of such parties contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. Notwithstanding the foregoing, no failure or delay by the Company, the Company Operating Partnership, Parent, OP Merger Sub or Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.
Section 8.6 Fees and Expenses. Except as otherwise provided in this Agreement, all Expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses,Expenses, whether or not the transactions contemplated by this Agreement are consummated;provided,however, that the Company and Parent shall share equally all Expenses related to the printing and filing of the Form S-4 and the printing, filing and distribution of the Joint Proxy Statement, other than attorneys' and accountants' fees.
Section 8.7ARTICLE IX
Transfer Taxes. Parent and the Company shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer or stamp taxes, any transfer, recording, registration and other fees and any similar taxes that become payable in connection with the transactions contemplated by this Agreement (together with any related interests, penalties or additions to Tax, "Transfer Taxes"), and shall cooperate in attempting to minimize the amount of Transfer Taxes. From and after the Effective Time, the Surviving Entity shall pay or cause to be paid, without deduction or withholding from any consideration or amounts payable to holders of the Company Common Stock, all Transfer Taxes.
Section 9.1 Non-Survival of Representations and Warranties. None of the representations or warranties in this Agreement or any certificate or other writing delivered pursuant to this Agreement, including any rights arising out of any breach of such representations or warranties, shall survive the earlier of (a) the Effective Time.Time or (b) termination of this Agreement (except, in the case of termination, as set forth inSection 8.2), and after such time there shall be no liability in respect thereof (except, in the case of termination, as set forth inSection 8.2), whether such liability has accrued prior to or after such expiration of the representations and warranties. ThisSection 9.1 does not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time or the termination of this Agreement. The Confidentiality Agreement and the Parent Confidentiality Agreement will survive termination of this Agreement in accordance with its terms.
Section 9.2 Notices. AnyExcept for any notice that is specifically required by the terms of this Agreement to be delivered orally, any notice, request, claim, demand and other communicationscommunication hereunder shall be sufficient if in writing and shall be deemed to have been duly given or made as follows: (a) if personally delivered to an authorized representative of the recipient, when actually delivered to such authorized representative; (b) if sent (i) by facsimile transmission (providing confirmation of transmission), when transmitted, or if sent by e-mail of a pdf attachment, (providedupon acknowledgement of receipt of such notice by the intended recipient (provided that any notice received by facsimile or e-mail transmission or otherwise at the addressee's location on any Business Day after 5:00 p.m. (Pacific time)(in the time zone of the recipient) or any day other than a Business Day shall be deemed to have been received at 9:00 a.m. (Pacific time) on the next Business Day), or (ii); (c) if sent by reliable overnight delivery service (with(such as DHL or Federal Express) with proof of service), hand delivery orservice, upon receipt of proof of delivery; and (d) if sent by certified or registered mail (return receipt requested and first-class postage prepaid), upon receipt; provided, in each case, such notice, request, claim, demand or other communication is addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with thisSection 9.2):
if to Parentthe Company or Merger Sub:the Company Operating Partnership prior to the Closing:
American Realty Capital Healthcare Trust, Inc.
405 Park Avenue, 14th Floor
New York, New York 10022
Fax: (212) 415-6507; and (646) 861-7743
Phone: (212) 415-6501
Attention: Nicholas S. Schorsch and James A. Tanaka
Email: nschorsch@arlcap.com; and jtanaka@rcscapital.com
with a copy (which shall not constitute notice) to:
Proskauer Rose LLP
Eleven Times Square
New York, New York 10036
Phone: (212) 969-3000
Fax: (212) 969-2900
Attention: Peter M. Fass, Esq., Steven L. Lichtenfeld, Esq., and
Daniel I. Ganitsky, Esq.
Email: PFass@proskauer.com; SLichtenfeld@proskauer.com; and DGanitsky@proskauer.com
if to the Company:Parent Parties:
Ventas, Inc.
10350 Ormsby Park Place, Suite 300
Louisville, Kentucky 40223
Fax: (502) 357-9029
Phone: (502) 357-9029
Attention: T. Richard Riney, Esq.
Email: rriney@ventasreit.com
with a copy (which shall not constitute notice) to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd St
New York, New York 10019
Phone: (212) 403-1000
Fax: (212) 403-2000
Attention: Robin Panovka, Esq. and Ronald Chen, Esq.
Email: RPanovka@WLRK.com; and RCChen@wlrk.com
Section 9.3 Interpretation; Certain Definitions. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. References to "this Agreement" shall include the Company Disclosure Letter and the Parent Disclosure Letter. When a reference is made in this Agreement to an Article, Section, Appendix, Annex or Exhibit, such reference shall be to an Article or Section of, or an Appendix, Annex or Exhibit to, this Agreement, unless otherwise indicated. The table of contents and headings for this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other instrument made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law as from time to time amended, modified or supplemented, including (in the case of statutes) by succession of comparable successor Laws. References to a personPerson are also to its successors and permitted assigns. All references to "dollars" or "$" refer to currency of the United States of America.America (unless otherwise expressly provided herein).
Section 9.4 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any present or future Law or public policy, (a) such term or other provision shall be fully separable, (b) this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a part hereof, and (c) all other conditions and provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable term or other provision or by its severance herefrom so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect promptly the original intent of the parties as closely as possible in a mutually acceptable manner in order that transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible.
Section 9.5 Assignment; Delegation. NeitherOther than to the Surviving Entity, neither this Agreement nor any rights, interests or obligations hereunder shall be assigned or delegated, in whole or in part, by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties hereto (except to the Surviving Entity).hereto.
Section 9.6 Entire Agreement. This Agreement (including the exhibits, annexesExhibits, Annexes and appendicesAppendices hereto) constitutes, together with the Confidentiality Agreement, the entire agreement between the parties with respect to the subject matter hereof and thereof and supersedes all prior agreements and
understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof.
Section 9.7 No Third-Party Beneficiaries. This Agreement is not intended to and shall not confer any rights or remedies upon any personPerson other than the parties hereto and their respective successors and permitted assigns, except for the provisions ofSection 6.96.10. (from and after the Effective Time), which shall be to the benefit of the parties referred to in such section. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto. Any inaccuracies in such representations and warranties are subject to waiver by the parties hereto in accordance withSection 8.5 without notice or liability to any other person.Person. The representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties hereto. Accordingly, personsPersons other than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
Section 9.8 Specific Performance. The parties hereto agree that irreparable damage, for which monetary damages (even if available) would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate the MergerMergers and the other transactions contemplated by this Agreement) in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties acknowledge and agree that the parties shall be entitled to seek an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at Law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other party has an adequate remedy at Law or that any award of specific performance is not an appropriate remedy for any reason at Law or in equity. Any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction.
Section 9.9 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission or by e-mail of a pdf attachment shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 9.10 Governing Law. This Agreement and all actions, proceedings or counterclaimsActions (whether based on contract, tort or otherwise), directly or indirectly, arising out of or relating to this Agreement or the actions of Parent, Merger Sub or the Companyparties hereto in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the lawsLaws of the State of Maryland, without giving effect to any choice or conflict of Laws provision or rule (whether of the State of Maryland or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Maryland.
Section 9.11 Consent to Jurisdiction.
(a) Each of the parties hereto hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of Maryland and to the jurisdiction of the United States District Court for the State of Maryland (the "MD Courts"), for the purpose of any action, proceeding or counterclaimAction (whether based on contract, tort or otherwise), directly or indirectly, arising out of or relating to this Agreement or the actions of the parties hereto in the negotiation, administration, performance and enforcement thereof, and each of the parties hereto hereby irrevocably agrees that all claims in respect to such action or proceedingAction may be heard and determined exclusively in any Maryland state or federal court.MD Court.
(b) Each of the parties hereto (i) irrevocably consents to the service of the summons and complaint and any other process in any other action or proceedingAction relating to the transactions contemplated by this Agreement, on behalf of itself or its property, in the manner provided by personal delivery of copies of such process to such partySection 9.2 and nothing in thisSection 9.11 shall affect the right of any party to serve legal process in any other manner permitted by Law, (ii) consents to submit itself to the personal jurisdiction of any United States federal court located in the State of Maryland or any Maryland state courtMD Courts in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (iii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such courtMD Court and (iv) agrees that it will not bring any actionAction relating to this Agreement or the transactions contemplated by this Agreement in any court other than any United States federal court located in the State of Maryland or any Maryland state court.MD Courts. Each of Parent, Merger Sub and the Companyparty hereto agrees that a final judgment in any action or proceedingAction shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
�� Section 9.12 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE OUT OF OR RELATING TO THIS AGREEMENT (INCLUDING WITH RESPECT TO THE DEBT FINANCING) IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE), DIRECTLY OR INDIRECTLY, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING WITH RESPECT TO THE DEBT FINANCING), OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF. EACH OF THE PARTIES HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THISSECTION 9.12.9.12.
[
Section 9.13 Consents and Approvals. For any matter under this Agreement requiring the consent or approval of any party to be valid and binding on the parties hereto, such consent or approval must be in writing.
[Remainder of page intentionally left blank; signature page followspages follow.].]
IN WITNESS WHEREOF, Parent, Merger Sub and the Companyparties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.authorized, as of the date first above written.
| VENTAS, INC. | ||||||
|
| |||||
| Name: | ||||||
| Title: | Chief | |||||
| ||||||
|
| |||||
By: | VENTAS, INC., its sole member | |||||
|
| |||||
| Name: | ||||||
| Title: | Chief | |||||
| ||||||
|
| |||||
By: | /s/ | |||||
| Name: | ||||||
| Title: | Chief | |||||
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
| AMERICAN REALTY CAPITAL HEALTHCARE TRUST, INC. | ||||||
By: | /s/ THOMAS P. D'ARCY | |||||
| Name: | Thomas P. D'Arcy | |||||
| Title: | Chief Executive Officer | |||||
AMERICAN REALTY CAPITAL HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P. | ||||||
By: | AMERICAN REALTY CAPITAL HEALTHCARE TRUST, INC., its general partner | |||||
By: | /s/ THOMAS P. D'ARCY | |||||
| Name: | Thomas P. D'Arcy | |||||
| Title: | Chief Executive Officer | |||||
[Signature Page to Agreement and Plan of Merger]
CERTIFICATEFIRST AMENDMENT TO AGREEMENT AND PLAN OF AMENDMENTOF THEAMENDED AND RESTATED CERTIFICATE OF INCORPORATIONOFVENTAS, INC.A DELAWARE CORPORATIONMERGER
Amendment"), dated as of September 15, 2014, is made by and among Ventas, Inc., a Delaware corporation organized("Parent"), Stripe Sub, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Parent, Stripe OP, LP, a Delaware limited partnership, American Realty Capital Healthcare Trust, Inc., a Maryland corporation and American Realty Capital Healthcare Trust Operating Partnership, L.P. (each, a "Party", and collectively, the "Parties"). Capitalized terms used herein and not otherwise defined shall have the same meanings as set forth in the Agreement and Plan of Merger, dated as of June 1, 2014, by and among the Parties (the "Agreement").
WHEREAS, Section 8.4 of the Agreement provides that amendments may be made to the Agreement by execution of an instrument in writing signed by each of the Parties; and
WHEREAS, the Parties wish to amend the Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements and provisions herein contained, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Amendment to Section 2.2. Section 2.2 of the Agreement is deleted in its entirety and replaced with the following:
"Closing. The closing of the Mergers (the "Closing") shall occur at 10:00 a.m. (Eastern time), on the third (3rd) Business Day after all of the conditions set forth inArticle VII (other than those conditions that by their terms are required to be satisfied or waived at the Closing, but subject to the satisfaction or waiver of such conditions) shall have been satisfied or waived by the party entitled to the benefit of the same or at such other time and date as shall be agreed upon by the parties hereto;provided,however, that notwithstanding the satisfaction or waiver of all of the conditions set forth inArticle VII (other than those conditions that by their terms are required to be satisfied or waived at the Closing), in no event shall Parent, Merger Sub or OP Merger Sub be required to consummate the Mergers until the earlier of:
(a) the date that is five (5) Business Days after the receipt of the Lender Consents (other than any such consents that, in the aggregate, relate to Indebtedness for which the aggregate principal amount does not exceed the amount set forth inSection 2.2(a) of the Company Disclosure Letter);provided,further, that in the event that the Closing is delayed pursuant to any provision of the previous proviso, if Parent and Merger Sub are prepared to consummate the Merger at any time prior to the Outside Date, Parent shall deliver written notice to the Company stating that it is prepared to consummate the Closing and the Closing shall occur on the third (3rd) Business Day following the delivery of such notice; and
(b) the Outside Date;
(subject, in the case of either (a) or (b), to the satisfaction or waiver (by the party hereto entitled to grant such waiver) of all of the conditions set forth inArticle VII as of the date determined pursuant to this proviso). The date on which the Closing occurs is referred to in this Agreement as the "Closing Date". The Closing shall take place at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd St., New York, NY, 10019, or at such other place as agreed to by the parties hereto."
2. Amendment to Section 6.10(c). The following words in Section 6.10(c) of the Agreement are deleted:
"and the Company's existing underfiduciary liability insurance policies".
3. Full Force and Effect; Amendment. Except as expressly amended hereby, each term, provision and Exhibit of the Agreement will and does remain in full force and effect. This Amendment may not be amended except by an instrument in writing signed by the Parties.
4. Interpretation. The Parties have participated jointly in the negotiation and drafting of this Amendment. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Amendment shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the lawsauthorship of any provision of this Amendment. When a reference is made in this Amendment to a Section, such reference shall be to a Section of this Amendment, unless otherwise indicated. The headings for this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of this Amendment.
5. Severability. If any term or other provision of this Amendment is invalid, illegal or incapable of being enforced under any present or future Law or public policy, (a) such term or other provision shall be fully separable, (b) this Amendment shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a part hereof, and (c) all other conditions and provisions of this Amendment shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable term or other provision or by its severance herefrom so long as the economic or legal substance of the transactions contemplated by this Amendment is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Amendment so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that transactions contemplated by this Amendment be consummated as originally contemplated to the fullest extent possible.
6. Counterparts. This Amendment may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile transmission or by e-mail of a pdf attachment shall be effective as delivery of a manually executed counterpart of this Amendment.
7. Governing Law. This Amendment and all Actions (whether based on contract, tort or otherwise), directly or indirectly, arising out of or relating to this Amendment or the actions of any Party in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the Laws of the State of Delaware (the "Corporation"), does hereby certify as follows:
FIRST: That, in accordance with the provisionsMaryland, without giving effect to any choice or conflict of Section 242 of the General Corporation LawLaws provision or rule (whether of the State of Delaware (the "DGCL"),Maryland or any other jurisdiction) that would cause the Board of Directorsapplication of the Corporation (the "Laws of any jurisdiction other than the State of Maryland.
8.Board Consent to Jurisdiction.") duly adopted resolutions setting forth a proposed amendment (this "Amendment")
(a) Each of the Parties hereby irrevocably submits to the Amended and Restated Certificate of Incorporationexclusive jurisdiction of the Corporation, as previously amended, declaringMD Courts, for the purpose of any Action (whether based on contract, tort or otherwise), directly or indirectly, arising out of or relating to this Amendment advisable and calling a special meetingor the actions of the stockholdersParties in the negotiation, administration, performance and enforcement thereof, and each of the Corporation for consideration of, among other things, this Amendment. The resolution setting forthParties hereby irrevocably agrees that all claims in respect to such Action may be heard and determined exclusively in the proposed amendment is as follows:MD Courts.
RESOLVED, that the Amended and Restated Certificate of Incorporation, as amended, (b) Each of the CorporationParties (i) irrevocably consents to the service of the summons and complaint and any other process in any other Action relating to the transactions contemplated by this Amendment, on behalf of itself or its property, in the manner provided in Section 9.2 of the Agreement for the giving of notice, and nothing in thisSection 8 shall affect the right of any Party to serve legal process in any other manner permitted by Law, (ii) consents to submit itself to the
personal jurisdiction of the MD Courts in the event any dispute arises out of this Amendment or the transactions contemplated by this Amendment, (iii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such MD Court and (iv) agrees that it will not bring any Action relating to this Amendment or the transactions contemplated by this Amendment in any court other than the MD Courts. Each of the Parties agrees that a final judgment in any Action shall be further amendedconclusive and may be enforced in other jurisdictions by deletingsuit on the first paragraph of Article IV thereofjudgment or in its entirety andany other manner provided by substituting in lieu thereof the following:Law.
9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE OUT OF OR RELATING TO THIS AMENDMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE), DIRECTLY OR INDIRECTLY, ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF. EACH OF THE PARTIES CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.
"The total number of shares of stock that the Corporation shall have authority to issue is 610,000,000 shares, of which 600,000,000 shall be shares of common stock, having a par value of twenty-five cents per share (the "Common Shares"), and 10,000,000 shall be shares of preferred stock, having a par value of one dollar per share (the "Preferred Shares"). The designations, voting powers and relative rights and preferences of the two classes of shares of stock shall be as set forth below."
SECOND: That thereafter, pursuant to resolution of the Board, a special meeting of the stockholders of the Corporation was duly called and held upon notice in accordance with Section 222 of the DGCL, at which meeting the necessary number of shares as required by the DGCL were voted in favor of this Amendment.
THIRD: That this Amendment was duly adopted in accordance with the provisions of Section 242 of the DGCL.[Signature Page Follows]
IN WITNESS WHEREOF, the Corporation hasParties hereto have caused this certificateAmendment to be signedexecuted by atheir respective officers thereunto duly authorized, officer this dayas of , 2011.the date first above written.
| VENTAS, INC. | ||||||
By: | /s/ RICHARD A. SCHWEINHART | |||||
| Name: | Richard A. Schweinhart | |||||
| Title: | Chief Financial Officer | |||||
STRIPE OP, LP | ||||||
By: | STRIPE SUB, LLC, its general partner | |||||
By: | VENTAS, INC., its sole member | |||||
By: | /s/ RICHARD A. SCHWEINHART | |||||
| Name: | Richard A. Schweinhart | |||||
| Title: | Executive Vice President and Chief Financial Officer | |||||
STRIPE SUB, LLC | ||||||
By: | VENTAS, INC., its sole member | |||||
By: | /s/ RICHARD A. SCHWEINHART | |||||
| Name: | Richard A. Schweinhart | |||||
| Title: | Executive Vice President and Chief Financial Officer | |||||
[Signature Page to First Amendment to Agreement and Plan of Merger]
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.
| AMERICAN REALTY CAPITAL HEALTHCARE TRUST, INC. | ||||||
By: | /s/ THOMAS P. D'ARCY | |||||
| Name: | Thomas P. D'Arcy | |||||
| Title: | Chief Executive Officer | |||||
AMERICAN REALTY CAPITAL HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P. | ||||||
By: | AMERICAN REALTY CAPITAL HEALTHCARE TRUST, INC., its general partner | |||||
By: | /s/ THOMAS P. D'ARCY | |||||
| Name: | Thomas P. D'Arcy | |||||
| Title: | Chief Executive Officer | |||||
[Signature Page to First Amendment to Agreement and Plan of Merger]
February 27, 2011June 1, 2014
The Board of Directors
American Realty Capital Healthcare Trust, Inc.
405 Park Avenue
New York, NY 10022
The Board of Ventas, Inc.111 South Wacker DriveSuite 4800Chicago, Illinois 60606
Members of the Board:
We understand that Ventas, Inc. ("Ventas") proposes to enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), by and among Ventas, Needles Acquisition LLC, a wholly owned subsidiary of Ventas ("Merger Sub"), and Nationwide Health Properties, Inc. ("NHP"), pursuant to which, among other things, NHP will merge (the "Merger") with and into Merger Sub and each outstanding share of common stock, par value $0.10 per share, of NHP ("NHP Common Stock") will be converted into the right to receive 0.7866 (the "Exchange Ratio") shares of common stock, par value $0.25 per share, of Ventas ("Ventas Common Stock"). The terms and conditions of the Merger are more fully set forth in the Merger Agreement.Directors:
You have requested our opinion as to the fairness, from a financial point of view, to Ventasholders of the Exchange Ratiocommon stock of American Realty Capital Healthcare Trust, Inc. ("ARCHT"), other than Ventas, Inc. ("Ventas") and its affiliates and affiliates of ARCHT, of the Merger Consideration (defined below) provided for pursuant to the terms and subject to the conditions set forth in connectionthe Agreement and Plan of Merger, dated as of June 1, 2014 (the "Agreement"), among Ventas, Stripe Sub, LLC, a wholly owned subsidiary of Ventas ("Merger Sub"), Stripe OP, LP, a wholly owned subsidiary of Ventas ("OP Merger Sub"), ARCHT and American Realty Capital Healthcare Trust Operating Partnership, L.P. ("ARCHT OP"). As more fully described in the Agreement, (i) ARCHT will be merged with and into Merger Sub (the "Merger"), with Merger Sub as the Merger.surviving corporation, and (ii) each outstanding share of the common stock, par value $0.01 per share, of ARCHT ("ARCHT Common Stock") will be converted into the right to receive, at the election of the holder thereof, either (A) 0.1688 (the "Exchange Ratio") of a share of the common stock, par value $0.25 per share, of Ventas ("Ventas Common Stock") or (B) $11.33 in cash (such consideration payable in the Merger, the "Merger Consideration"), subject to certain adjustments and proration procedures set forth in the Agreement (as to which we express no opinion). The Agreement also provides that OP Merger Sub will merge with and into ARCHT OP (such merger, the "Operating Partnership Merger"), with ARCHT OP as the surviving entity.
In arriving at our opinion, we have, among other things:
The Board of Directors
American Realty Capital Healthcare Trust, Inc.
June 1, 2014
Page 2
In arriving atrendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of the foregoingall financial and other information without independent verification of such information. We have relied onand data publicly available or provided to or otherwise reviewed by or discussed with us and upon the assurances of the external manager of ARCHT and the management of each of Ventas and NHP that they are not aware of any factsrelevant information that has been omitted or circumstances that would make such information inaccurate or misleading in any respect materialremains undisclosed to our opinion. In connection with this opinion, we have not conducted any independent valuation or appraisal of any of the assets or liabilities (contingent or otherwise) of NHP or Ventas, or concerning the solvency or fair value of NHP or Ventas and we have not been furnished with any such valuation or appraisal.us. With respect to the financial forecasts and other information and data relating to ARCHT provided to and examinedor otherwise reviewed by or discussed with us, we note that projecting future resultshave been advised by the external manager of any company is inherently subject to uncertainty. With respect to the financial forecasts provided to usARCHT and utilized in our analyses relating to NHP and Ventas, including any analysis of information relating to anticipated strategic, financial and/or operational benefits expected to result from the Merger, we have assumed, with theyour consent, of Ventas, that they have beensuch forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the managementexternal manager of NHP and VentasARCHT as to the future financial performance of NHPARCHT. As you are aware, we have not been provided with, and we did not have access to, internal forecasts and estimates relating to Ventas prepared by the management of Ventas and, accordingly, we have been directed to utilize for purposes of our analyses publicly available forecasts and estimates provided to us by or otherwise reviewed by us with or discussed with us by the external manager of ARCHT and the management of Ventas. With respect to such publicly available financial forecasts and other information and data relating to Ventas, we have been advised by the management of Ventas, and we have assumed, with your consent, that such publicly available forecasts and other information and data are a reasonable basis upon which to evaluate the future financial performance of Ventas. We further have assumed, with your consent, that the financial results reflected in the financial forecasts and other information and data utilized in our analyses will be realized in the amounts and at the times projected. We have relied, at your direction, upon the assessments of the external manager of ARCHT as to (i) the potential impact on ARCHT and Ventas respectively.of certain market trends and recent developments in, and prospects for, the commercial real estate market and related credit and financial markets, (ii) existing and future relationships, agreements and arrangements with, and the ability to attract and retain, key lessees and related contracts and (iii) potential future acquisitions (including the timing and amount thereof) of commercial properties contemplated to be undertaken by ARCHT as reflected in the financial forecasts and other information and data utilized in our analyses. We assumehave assumed, with your consent, that there will be no responsibility for anddevelopments with respect to any such matters that would have an adverse effect on ARCHT, Ventas or the Merger or related transactions or that otherwise would be meaningful in any respect to our analyses or opinion. We also have assumed, with your consent, that any proration of or adjustment to the Merger Consideration will not in any respect be meaningful to our analyses or opinion.
We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of ARCHT, Ventas or any other entity nor have we made any physical inspection of the properties or assets of ARCHT, Ventas or any other entity. We also have not made an analysis of, nor do we express noany opinion or view as to, the adequacy or sufficiency of allowances or reserves for losses with respect to leases, loans, debt securities, derivative financial instruments or any forecasts reviewed by usother matters, and we have assumed, with your consent, that any such allowances or reserves for losses are, and on a pro forma basis will be, in the assumptions on which they are based. Financial forecasts for NHP that we assumed and relied upon in rendering our opinion herein were furnishedaggregate appropriate to us by NHP's management (as adjusted by Ventas's management) and financial forecasts for Ventas that we assumed and relied upon in rendering our opinion herein were furnished to us by Ventas's management.cover such losses. We have assumed, with Ventas's consent, that Ventas's pending acquisition of Atria Senior Living Group, Inc. and certain of its subsidiaries and affiliates will be consummated upon the terms and conditions set forth in the definitive merger agreement, dated as of October 21, 2010, with respect to such acquisition, without any waiver or modification of any such terms or conditions in any respect material to our opinion.
Our opinion is necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to us as of, the date hereof. Subsequent circumstances, events or developments may affect our opinion, and we do not have any responsibility or obligation to update, revise or reaffirm this opinion based on subsequent circumstances, events or developments. We do not express any opinion as to the prices at which shares of Ventas Common Stock may trade at any time subsequent to the announcement of the Merger.
In rendering our opinion, we have assumed, with Ventas'syour consent, that the Merger and related transactions (including the Operating Partnership Merger) will be consummated onin accordance with the terms set forthof the Agreement and in the Merger Agreement,compliance with all applicable laws and other relevant documents or requirements, without any waiver, modification or modificationamendment of any material termsterm, condition or conditions. We also have assumed, with Ventas's consent,agreement and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases, waivers and consentsagreements for the Merger and related transactions, no delay, limitation, restriction or
The Board of Directors
American Realty Capital Healthcare Trust, Inc.
June 1, 2014
Page 3
condition will notbe imposed that would have an adverse effect on NHPARCHT, Ventas, the Merger or related transactions or that otherwise would be meaningful in any respect to our analyses or opinion. We have been advised by ARCHT, and we have assumed, with your consent, that ARCHT has operated in conformity with the requirements for qualification as a real estate investment trust for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2011 and that Ventas has operated in conformity with the requirements for qualification as a real estate investment trust for U.S. federal income tax purposes commencing with its taxable year ended December 31, 1999, and that the Merger and related transactions will not adversely affect such status or on the contemplated benefits expected to be derived from the Merger.operations of ARCHT or Ventas. We doare not expressexpressing any view or opinion as to any tax or other consequences that might result fromthe actual value of Ventas Common Stock when issued in the Merger nor does our opinion addressor the prices at which Ventas Common Stock (or any legal, tax, regulatoryother securities of Ventas) or accounting matters, as to which we understand that Ventas has obtained such advice as it deemed necessary from qualified professionals.
YouARCHT Common Stock (or any other securities of ARCHT) will trade or otherwise be transferable at any time. We also have advised usassumed, with your consent, that the Merger will qualifybe treated as a tax-free reorganization for U.S. federal income tax purposes. ThisWe are not expressing any opinion with respect to accounting, tax, regulatory, legal or similar matters and we have relied, with your consent, upon the assessments of the external manager and other advisors of ARCHT and representatives of Ventas as to such matters.
Our opinion addresses only the fairness, from a financial point of view to Ventas, onand as of the date hereof, of the Exchange Ratio provided for in connection withMerger Consideration (to the Merger. We express no view or opinion as toextent expressly specified herein) and does not address any other terms, or other aspects or implications of the Merger (other than, to the extent expressly specified herein, the Exchange Ratio provided for in connection with the Merger),or related transactions, including, without limitation, the form of the Merger Consideration or the form or structure of the Merger or related transactions, the form or structure, or financial or other terms, of the Operating Partnership Merger or any acquisitions or any other agreementsagreement, arrangement or arrangementsunderstanding to be entered into in connection with or otherwise contemplated by the Merger.Merger or related transactions or otherwise. In addition,connection with our engagement, we were not requested to, and we did not, undertake a third-party solicitation process on ARCHT's behalf with respect to the acquisition of all or a part of ARCHT. We express no view or opinion as to, and our opinion does not address, the underlying business decision of ARCHT to effect the Merger or related transactions, the relative merits of the Merger or related transactions as compared to any alternative business strategies that might exist for ARCHT or the effect of any other transaction in which ARCHT might engage or consider. We also express no view as to, and our opinion does not address, (i) the fairness (financial or otherwise) of the amount or nature of, or any other aspects relatingaspect of any compensation or other payments to the compensation toexternal manager of ARCHT or any officers, directors or employees of any parties to the Merger or related transactions, or any class of such persons, relative to the Exchange Ratio provided forMerger Consideration or otherwise or (ii) any consideration to be received in connection with the Merger or otherwise.related transactions by the holders of any class of securities, creditors or other constituencies of any party to the Merger or related transactions or other amounts payable in connection with the Merger or related transactions, including any promote fee or other amount payable to the external manager of ARCHT. Our opinion is necessarily based upon information available to us, and financial, stock market and other conditions and circumstances existing and disclosed to us, as of the date hereof. As you are aware, the credit, financial and stock markets have experienced, and the industries in which ARCHT and Ventas operate continue to experience, volatility and we express no opinion or view as to any potential effects of such volatility on ARCHT, Ventas, the Merger or related transactions.
We haveCitigroup Global Markets Inc. has acted as financial advisor to VentasARCHT in connection with the proposed Merger and will receive a fee for oursuch services, a portion of which is payable upon the rendering of this opinion and a substantialprincipal portion of which is contingent upon consummation of the Merger. Ventas has agreed to reimburse our expenses and indemnify us against certain liabilities arisingWe also will receive a fee in connection with the delivery of this opinion. We and our engagement.
We have performedaffiliates in the past have provided, currently are providing and we may continue to perform in the future may
The Board of Directors
American Realty Capital Healthcare Trust, Inc.
June 1, 2014
Page 4
provide investment banking and other financial services to ARCHT, Ventas and/or their respective affiliates unrelated to the Merger, for Ventas or its affiliates, in each case, for customary compensation.
It is understood that this letterwhich services we and our affiliates have received and may receive compensation, including, during the two-year period prior to the date hereof, having acted or acting (i) as financial advisor to ARCHT's affiliate, American Realty Capital Properties, Inc. ("ARCP"), in connection with certain merger and acquisition transactions and matters, (ii) as an underwriter, bookrunner, manager and/or sales or distribution agent, as applicable, with respect to certain securities offerings of ARCP, Ventas and/or their respective affiliates, and (iii) as a lender, arranger, bookrunner, documentation agent and/or administrative agent under certain credit facilities of ARCP, Ventas and/or their respective affiliates. In the ordinary course of business, we and our affiliates may actively trade or hold the securities of ARCHT, Ventas and their respective affiliates for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. In addition, we and our affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with ARCHT, Ventas and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the benefit and useinformation of the Board of Directors of VentasARCHT (in its capacity as such) in connection with its considerationevaluation of the proposed Merger. Our opinion is not intended to be and does not constitute a recommendation to any stockholder of Ventas as to how any such stockholder should vote or act on any mattermatters relating to the Merger. In addition, our opinion does not address the relative merits of theproposed Merger as compared to any other transaction or business strategy in which Ventas might engage or the merits of the underlying decision by Ventas to engage in the Merger. This opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.otherwise.
Based upon and subject to the foregoing, including the various assumptionsour experience as investment bankers, our work as described above and limitations set forth herein,other factors we deemed relevant, we are of the opinion that, onas of the date hereof, the Exchange Ratio provided for in connection withMerger Consideration pursuant to the MergerAgreement is fair, from a financial point of view, to Ventas.
February 27, 2011
The Board of DirectorsNationwide Health Properties, Inc.610 Newport Center DriveSuite 1150Newport Beach, CA 92660
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of common stock, par value $0.10 per share (the "CompanyARCHT Common Stock"), of Nationwide Health Properties, Inc. (the "Company") of the Exchange Ratio (as defined below) in the proposed merger (the "Transaction") of the Company with a wholly-owned subsidiary ofStock (other than Ventas Inc. (the "Acquiror"). Pursuant to the Agreement and Plan of Merger (the "Agreement"), among the Company, the Acquiror and its subsidiary, Needles Acquisition LLC ("Acquisition Sub"), the Company will be merged with Acquisition Sub,affiliates and each outstanding shareaffiliates of Company Common Stock, other than shares of Company Common Stock owned by any wholly owned Company subsidiary, the Acquiror or any Acquiror subsidiary, will be converted into the right to receive 0.7866 shares (the "Exchange Ratio") of the Acquiror's common stock, par value $0.25 per share (the "Acquiror Common Stock")ARCHT).
In connection with preparing our opinion, we have (i) reviewed a draft dated February 25, 2011 of the Agreement; (ii) reviewed certain publicly available business and financial information concerning the Company and the Acquiror and the industries in which they operate; (iii) compared the proposed financial terms of the Transaction with the publicly available financial terms of certain transactions involving companies we deemed relevant and the consideration paid for such companies; (iv) compared the financial and operating performance of the Company and the Acquiror with publicly available information concerning certain other companies we deemed relevant and reviewed the current and historical market prices of the Company Common Stock and the Acquiror Common Stock and certain publicly traded securities of such other companies; (v) reviewed certain internal financial analyses and forecasts prepared by or at the direction of the managements of the Company and the Acquiror relating to their respective businesses as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the Transaction; and (vi) performed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of the management of the Company and the Acquiror with respect to certain aspects of the Transaction, and the past and current business operations of the Company and the Acquiror, the financial condition and future prospects and operations of the Company and the Acquiror, the effects of the Transaction on the financial condition and future prospects of the Company and the Acquiror, and certain other matters we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with us by the Company and the Acquiror or otherwise reviewed by or for us, and we have not independently verified (nor have we assumed responsibility or liability for independently verifying) any such information or its accuracy or completeness. We have not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the solvency of the Company or the Acquiror under any state or
federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to us or derived therefrom, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company and the Acquiror to which such analyses or forecasts relate. We express no view as to such analyses or forecasts or the assumptions on which they were based. We have also assumed that the Transaction and the other transactions contemplated by the Agreement will qualify as a tax-free reorganization for United States federal income tax purposes, and will be consummated as described in the Agreement, and that the definitive Agreement will not differ in any material respects from the draft thereof furnished to us. We have also assumed that the representations and warranties made by the Company and the Acquiror in the Agreement and the related agreements are and will be true and correct in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or the Acquiror or on the contemplated benefits of the Transaction.
Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, to the holders of the Company Common Stock of the Exchange Ratio in the proposed Transaction and we express no opinion as to the fairness of the Transaction to, or any consideration to be paid to, the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the Exchange Ratio applicable to the holders of the Company Common Stock in the Transaction or with respect to the fairness of any such compensation. We are expressing no opinion herein as to the price at which the Company Common Stock or the Acquiror Common Stock will trade at any future time.
We have acted as financial advisor to the Company with respect to the proposed Transaction and will receive a fee from the Company for our services, a substantial portion of which will become payable only if the proposed Transaction is consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. During the two years preceding the date of this letter, we and our affiliates have had commercial or investment banking relationships with the Company and the Acquiror, for which we and such affiliates have received customary compensation. Such services during such period have included executing open market repurchases by the Company of certain of its outstanding debt securities in May 2010. In addition, our commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of the Company and a lender under outstanding credit facilities of the Acquiror and also provides treasury and cash management services to each of the Company and the Acquiror, for which it receives customary compensation or other financial benefits. Our asset management affiliate also provides asset and wealth management services to the Company for customary compensation. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities of the Company or the Acquiror for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Exchange Ratio in the proposed Transaction is fair, from a financial point of view, to the holders of the Company Common Stock.
The issuance of this opinion has been approved by a fairness opinion committee of J.P. Morgan Securities LLC. This letter is provided to the Board of Directors of the Company (in its capacity as such) in connection with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote with respect to the Transaction or any other matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. This opinion may be reproduced in full in any proxy or information statement mailed to shareholders of the Company but may not otherwise be disclosed publicly in any manner without our prior written approval.
Very truly yours,
J.P. MORGAN SECURITIES LLC
/s/ J.P. Morgan Securities LLCCITIGROUP GLOBAL MARKETS INC.
CITIGROUP GLOBAL MARKETS INC.
PARTPart II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware lawDGCL empowers Ventas to, and Article VII of the Ventas charterCharter provides that Ventas will, indemnify any person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), because he or she is or was one of Ventas's directors or officers, or is or was serving at Ventas's request as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise, against all expenses, liabilities and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by him or her in connection with such Proceeding. Ventas may provide by action of the Ventas board of directors through agreement, resolution or by a provision in the Ventas bylaws,Bylaws, indemnification of Ventas's employees and agents with substantially the same scope and effect as the indemnification provided in Article VII of the Ventas charter.Charter.
Expenses incurred by such a person in his or her capacity as one of Ventas's directors or officers (and not in any other capacity in which service was or is rendered by such person while a director or officer) in defending a Proceeding may be paid by Ventas in advance of the final disposition of such Proceeding as authorized by the Ventas board of directors in a specific case upon receipt of an undertaking by or on behalf of that person to repay such amounts, unless it is ultimately determined that such person is entitled to be indemnified by Ventas as authorized by Delaware law. Expenses incurred by a person in any capacity other than as one of Ventas's officers or directors may be paid in advance of the final disposition of a Proceeding on such terms and conditions, if any, as the Ventas board of directors deems appropriate.
Pursuant to Section 102(b)(7) of Delaware law,the DGCL, the Ventas charterCharter eliminates certain liability of Ventas's directors for breach of their fiduciary duty of care. Article VI of the Ventas charterCharter provides that neither Ventas nor Ventas's stockholders may recover monetary damages from Ventas's directors for breach of the duty of care in the performance of their duties as Ventas's directors. Article VI does not, however, eliminate the liability of Ventas's directors (i) for a breach of the director's duty of loyalty, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of Delaware lawthe DGCL (relating to unlawful distributions), or (iv) for any improper personal benefit.
The indemnification provided for by Article VII of the Ventas charterCharter is a contract right and continues as to persons who cease to be directors, officers, employees or agents and inures to the benefit of the heirs, executors and administrators of such persons. No amendment to the Ventas charterCharter or repeal of any article thereof increases the liability of any of Ventas's directors or officers for acts or omissions of such persons occurring prior to such amendment or repeal.
The right to indemnification conferred by Article VII of the Ventas charterCharter is not exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to actions taken in his or her official capacity and in any other capacity while holding such office.
Ventas may purchase and maintain insurance on behalf of any person who is or was one of Ventas's directors, officers, employees or agents, or is or was serving at Ventas's request as a director, trustee, officer, partner, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him or her and incurred by him or her in such capacity or arising out of his or her status as such, whether or not Ventas would
II-1
have the power or be obligated to indemnify him or her against such liability under the provisions of Article VII of the Ventas charterCharter or Delaware law.the DGCL.
Ventas currently has in effect directors' and officers' liability insurance policies. These policies cover any negligent act, error or omission of a director or officer, subject to certain exclusions and limitations.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to Ventas's directors and officers pursuant to the foregoing provisions or otherwise, Ventas has been advised that, although the validity and scope of the governing statute have not been tested in court, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In addition, indemnification may be limited by state securities laws.
Item 21. Exhibits and Financial Statement Schedules
A list of the exhibits included as part of this registration statement is set forth in the Exhibit Index that immediately precedes such exhibits and is incorporated herein by reference.
(a) The undersigned registrant hereby undertakes:undertakes as follows:
(1) toTo file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by sectionSection 10(a)(3) of the Securities Act;Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SECCommission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) that,That, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;thereof.
(3) toTo remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;offering.
(4) that,That, for the purpose of determining liability under the Securities Act of 1933, as amended, to any purchaser,purchaser: if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectusprospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date
II-2
it is first used after effectiveness;provided, however,, that no statement made in a registration statement or prospectus that is part of
II-2
the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) thatThat, for the purpose of determining liability of the registrant under the Securities Act of 1933, as amended, to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b)The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, as amended, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended), that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus, which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuerregistrant undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Itemsitems of the applicable form.
(c) The undersigned registrant undertakes that every prospectusprospectus: (i) that is filed pursuant to paragraph (a)the immediately preceding paragraph, or (ii) that purports to meet the requirements of sectionSection 10(a)(3) of the Securities Act of 1933, as amended, and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to thisthe registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(d)II-3
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange CommissionSEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-3
(e) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(f) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form,Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first-classfirst class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in thisthe registration statement when it became effective.
II-4
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statementRegistration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on April 11, 2011.December 1, 2014.
VENTAS, INC. | ||||
By: | /s/ DEBRA A. CAFARO | |||
Name: Debra A. Cafaro | ||||
| Title: Chairman Chief Executive Officer | ||||
The undersigned officers and directors of Ventas, Inc. hereby severally constitute and appoint Debra A. Cafaro and T. Richard Riney, and each of them, his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, severally, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statementRegistration Statement has been signed below by the following persons in the capacities indicated and on the dates indicated.date of this Registration Statement.
Signature | Title | |||
|---|---|---|---|---|
| /s/ DEBRA A. CAFARO Debra A. Cafaro | Chairman (Principal Executive Officer) | |||
/s/ | Executive Vice President, Chief Financial Officer and Acting Chief Accounting Officer (Principal Financial Officer Accounting Officer) | |||
Douglas Crocker II | Director | |||
* Ronald G. Geary | ||||
* Jay M. Gellert | Director | |||
* Richard I. Gilchrist | Director | |||
* Matthew J. Lustig | Director | |||
* Douglas M. Pasquale | Director |
II-5
Signature | Title | |||
|---|---|---|---|---|
Robert D. Reed | Director | |||
Glenn J. Rufrano | Director | |||
James D. Shelton | Director |
*By: | /s/ |
II-6
| Exhibit | Description | ||||
|---|---|---|---|---|---|
| 2.1 | Agreement and Plan of Merger, dated as of | ||||
2.2 | First Amendment to Agreement and Plan of Merger, | ||||
3.1 | Amended and Restated Certificate of Incorporation, as amended, of Ventas, Inc. | ||||
3.2 | Fourth Amended and Restated Bylaws, as amended, of Ventas, Inc. | ||||
4.1 | Specimen common stock | ||||
4.2 | Ventas, Inc. Distribution Reinvestment and Stock Purchase | ||||
II-7
| 5.1 | |||||
Opinion of Wachtell, Lipton, Rosen & | |||||
8.1 | |||||
8.2 | Tax Opinion of | ||||
23.1 | Consent of | ||||
23.2 | Consent of | ||||
23.3 | Consent of | ||||
23.4 | Consent of Grant Thornton LLP, independent registered public accounting firm.* | ||||
23.5 | Consent of KPMG LLP, independent registered public accounting firm.* | ||||
23.6 | Consent of Ernst & Young LLP, independent registered public accounting firm.* | ||||
24.1 | |||||
99.1 | Consent of | ||||
99.2 | |||||
Form of Proxy of | |||||
II-8