<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1999
REGISTRATION NO. 333-69703
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 4 TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SENIOR HOUSING PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
--------------------------
400 CENTRE STREET
NEWTON, MASSACHUSETTS 02458
(617) 796-8350
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
DAVID J. HEGARTY, PRESIDENT
SENIOR HOUSING PROPERTIES TRUST
400 CENTRE STREET
NEWTON, MASSACHUSETTS 02458
(617) 796-8350
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
ALEXANDER A. NOTOPOULOS, JR., ESQ.
SULLIVAN & WORCESTER LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: The
securities will be distributed as soon as practicable after the effective date
of this Registration Statement.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
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. / /
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. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
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<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
NO ONE MAY BUY OR SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 17, 1999
PROSPECTUS
HRPT PROPERTIES TRUST
SPIN-OFF OF SENIOR HOUSING PROPERTIES TRUST
THROUGH DISTRIBUTION OF 13,190,763 COMMON SHARES
To the Shareholders of HRPT Properties Trust:
On or shortly after October , 1999, we will distribute to you shares of
our subsidiary, Senior Housing Properties Trust, as a special distribution. You
will receive one share of Senior Housing for every 10 shares of HRPT you own on
October , 1999, the record date for the spin-off.
We own a diversified portfolio of 175 office buildings that cost $2.5
billion and 93 senior housing properties that cost $770 million. We believe that
there are attractive investment opportunities available in both office buildings
and senior housing properties. By distributing the Senior Housing shares to our
shareholders we will create two separately focused companies which we believe
can take better advantage of their respective growth opportunities and may be
more attractive to investors than a combined company. Our board of trustees has
unanimously approved the spin-off as being in the best interests of our
shareholders.
Senior Housing's shares will be separately listed on the New York Stock
Exchange under the symbol "SNH." HRPT's shares will continue to trade on the New
York Stock Exchange under the symbol "HRP." The spin-off of Senior Housing's
shares will be the first public distribution of those shares. Accordingly, we
can provide no assurance to you as to what their market price may be.
This prospectus includes a description of the spin-off, as well as
information about HRPT and Senior Housing after the spin-off. YOU SHOULD READ IT
CAREFULLY, ESPECIALLY THE SECTION ENTITLED "RISK FACTORS" THAT BEGINS ON PAGE 13
WHICH DESCRIBES VARIOUS RISKS ASSOCIATED WITH YOUR OWNERSHIP OF SENIOR HOUSING
SHARES, INCLUDING:
- There is no established share price for Senior Housing shares and they may
trade for less than fair value.
- Some of Senior Housing's tenants have experienced problems which may
impair their abilities to pay rent.
- Some of Senior Housing's properties are subject to burdensome regulations.
- Senior Housing's ability to grow will depend upon access to capital which
is not assured.
- Senior Housing's investment advisor may have an incentive to recommend
investments to raise fees.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Senior Housing common shares or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
We are furnishing this prospectus to provide information to HRPT
shareholders who will receive Senior Housing shares in the spin-off. This
prospectus is not intended as a solicitation to buy or sell any securities of
HRPT or Senior Housing. On behalf of HRPT, we thank you for your continued
support. On behalf of Senior Housing, we welcome you as a new shareholder.
Sincerely,
<TABLE>
<S> <C>
John A. Mannix David J. Hegarty
President-Elect of HRPT Properties Trust President of Senior Housing Properties Trust
</TABLE>
The date of this prospectus is September , 1999
<PAGE>
HRPT OFFICE BUILDINGS AFTER THE SPIN-OFF
[art] [art]
BRIDGEPOINT SQUARE (5 Buildings) HERALD SQUARE
Austin, TX Washington, DC
441,740 Square Feet, Built 1986-97 187,832 Square Feet, Built 1991
Major Tenant: Motorola, Inc. Major Tenant: InterAmerican Bank
[art]
MELLON BANK CENTER
Philadelphia, PA
1,284,524 Square Feet, Built 1990
Major Tenant: Mellon Bank
[art] [art]
THE PAVILION PUTNAM PLACE (2 Buildings)
Mineola, NY Quincy/Braintree, MA
252,000 Square Feet, Built 1971-90 222,726 Square Feet, Built 1988
Major Tenant: Winthrop University Major Tenant: Putnam Investments,
Hospital Inc.
SENIOR HOUSING PROPERTIES AFTER THE SPIN-OFF
[art] [art]
MARRIOTT INTERNATIONAL, INC. MARRIOTT INTERNATIONAL, INC.
STRATFORD COURT OF BOCA RATON BRIGHTON GARDENS OF SUN CITY
Boca Raton, FL Sun City, AZ
347 Units, Built 1994 148 Units, Built 1990
[art]
BROOKDALE LIVING COMMUNITIES, INC.
THE HALLMARK
Chicago, IL
341 Units, Built 1990
[art] [art]
BROOKDALE LIVING COMMUNITIES, INC. INTEGRATED HEALTH SERVICES, INC.
PARK PLACE BLUE HILL CARE CENTER
Spokane, WA Blue Hill, NE
200 Units, Built 1993 81 Units, Built 1967
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE SPIN-OFF
<TABLE>
<S> <C>
Q: HOW MANY SHARES OF SENIOR HOUSING WILL I RECEIVE?
A: In the spin-off we will distribute to you one share of Senior Housing for every 10
shares of HRPT you own.
Q: WHAT IS SENIOR HOUSING PROPERTIES TRUST?
A: Senior Housing is currently a wholly owned REIT subsidiary of HRPT. It owns 93 senior
housing properties that cost $770 million. Senior Housing's largest investment is $326
million in 14 senior living communities leased to Marriott International, Inc. until
2013.
Q: WHAT ARE SENIOR HOUSING SHARES WORTH?
A: The value of the Senior Housing shares you receive will be determined by their trading
price after the spin-off. We do not know what the trading price will be and we can
provide no assurances as to value.
Q: WHAT WILL HRPT DO AFTER THE SPIN-OFF?
A: HRPT currently owns 175 office buildings that cost $2.5 billion. After the spin-off,
HRPT's principal business will be buying, owning and leasing office buildings.
Q: WHAT WILL SENIOR HOUSING DO AFTER THE SPIN-OFF?
A: Senior Housing will own and lease its portfolio of senior housing properties. It has
arranged a bank credit facility, some of which may be used to purchase new senior
housing properties.
Q: HOW WILL DISTRIBUTIONS CHANGE?
A: We do not expect any change in your combined distribution rate. Currently HRPT's annual
distribution is $1.52 per share. After the spin-off HRPT's annual distribution will be
$1.28 per share, and Senior Housing's annual distribution will be $2.40 per share.
Because you will receive one Senior Housing share for every 10 HRPT shares you own,
your total distributions will be unchanged as a result of the spin-off. The third
quarter 1999 cash distribution of $0.32 per HRPT share and $0.60 per Senior Housing
share will be paid to shareholders of record on October , 1999. Cash distributions
are paid about 30 days after the record date.
Q: WILL MY SHARES CONTINUE TO BE LISTED ON THE NEW YORK STOCK EXCHANGE?
A: HRPT's shares will continue to be listed on the NYSE under the symbol "HRP." Senior
Housing's shares also will be listed on the NYSE under the symbol "SNH."
Q: WHAT ARE THE TAX CONSEQUENCES TO ME OF THE SPIN-OFF?
A: The Senior Housing shares you receive will be treated for tax purposes like all other
distributions you receive from HRPT. The taxable value of this distribution will be
determined by the trading price of Senior Housing shares at the time of the spin-off.
Q: WHAT DO I HAVE TO DO TO RECEIVE MY SENIOR HOUSING SHARES?
A: No action by you is required. You do not need to pay any money or surrender your HRPT
shares to receive Senior Housing shares. The number of HRPT shares you own will not
change. If your HRPT shares are held in a brokerage account, your Senior Housing shares
will be credited to that account. If your HRPT shares are held in certificated form, a
certificate representing your Senior Housing shares will be mailed to you. No cash
distributions will be paid and fractional shares will be issued as necessary.
Q: WHERE CAN I GET MORE INFORMATION?
A: You should read this prospectus carefully. You can also call (877) ASK-HRPT.
</TABLE>
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 7
The Companies........................................................... 7
Risk Factors............................................................ 8
HRPT Growth Strategy.................................................... 9
Senior Housing Growth Strategy.......................................... 11
Distributions........................................................... 11
Principal Places of Business............................................ 11
Summary Pro Forma Consolidated Financial Information.................... 12
RISK FACTORS.............................................................. 13
There is no established share price for Senior Housing shares and they
may trade for less than fair value.................................... 13
Some of Senior Housing's tenants have experienced problems which may
impair their abilities to pay rent.................................... 13
Some of Senior Housing's properties are subject to burdensome
regulations........................................................... 13
Senior Housing's ability to grow will depend upon access to capital
which is not assured.................................................. 14
Senior Housing's investment advisor may have an incentive to recommend
investments to raise fees and there will be other conflicts of
interest.............................................................. 14
HRPT may be able to control Senior Housing shareholder decisions........ 14
The spin-off will result in benefits to HRPT which could adversely
affect Senior Housing................................................. 15
Ownership limitations and anti-takeover provisions affecting Senior
Housing may prevent shareholders from receiving a takeover premium.... 15
Real estate ownership creates risks and liabilities..................... 16
Changes at Marriott could adversely affect Senior Housing............... 16
The federal income tax treatment of the spin-off is uncertain........... 16
THE SPIN-OFF.............................................................. 17
Key Dates............................................................... 17
Distribution Agent...................................................... 17
Listing and Trading of Senior Housing Shares............................ 17
Background and Reasons for the Spin-Off................................. 17
Manner of Effecting the Spin-Off........................................ 18
The Transaction Agreement............................................... 18
INFORMATION ABOUT HRPT PROPERTIES TRUST AFTER THE SPIN-OFF................ 20
HRPT Investments........................................................ 20
Commercial Office Buildings........................................... 20
Government Office Buildings........................................... 20
Medical and Biotechnology Buildings................................... 20
Equity Investment in Hospitality Properties Trust..................... 21
Equity Investment in Senior Housing Properties Trust.................. 21
Pending Acquisitions.................................................. 21
Development Activities................................................ 21
Location of HRPT Office Buildings....................................... 22
HRPT Tenants............................................................ 23
HRPT Lease Expirations.................................................. 25
HRPT Management......................................................... 26
Additional Information About HRPT....................................... 27
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION ABOUT SENIOR HOUSING PROPERTIES TRUST......................... 28
General................................................................. 28
Growth Strategy......................................................... 28
History and Management.................................................. 29
Senior Housing Real Estate Market....................................... 29
Types of Properties..................................................... 30
Government Regulations and Rate Setting................................. 31
Competition............................................................. 34
SENIOR HOUSING DISTRIBUTION POLICY........................................ 36
SENIOR HOUSING PROPERTIES................................................. 39
SENIOR HOUSING TENANTS.................................................... 44
Marriott International, Inc............................................. 44
Integrated Health Services, Inc......................................... 45
Mariner Post-Acute Network, Inc......................................... 45
Brookdale Living Communities, Inc....................................... 46
Genesis Health Ventures, Inc............................................ 46
Privately Owned Tenants................................................. 47
SENIOR HOUSING LEASES..................................................... 48
Lease Terms............................................................. 49
SENIOR HOUSING SELECTED HISTORICAL FINANCIAL INFORMATION.................. 51
SENIOR HOUSING SELECTED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION...... 52
SENIOR HOUSING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................... 52
Pro Forma Results of Operations......................................... 53
Historical Results of Operations........................................ 53
Liquidity and Capital Resources......................................... 54
Year 2000............................................................... 56
Quantitative and Qualitative Disclosures About Market Risk.............. 57
SENIOR HOUSING MANAGEMENT................................................. 59
Senior Housing Trustees and Executive Officers.......................... 59
Committees of the Board of Trustees..................................... 60
Compensation of the Trustees and Officers............................... 60
Incentive Share Award Plan.............................................. 60
Limitation of Liability and Indemnification............................. 61
Reit Management and the Advisory Agreement.............................. 61
Related Party Transactions.............................................. 64
LEGAL PROCEEDINGS......................................................... 65
SENIOR HOUSING POLICIES................................................... 65
Investment Policies..................................................... 65
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Disposition Policies.................................................... 66
Financing Policies...................................................... 66
Conflict of Interest Policies........................................... 67
Policies with Respect to Other Activities............................... 68
MATERIAL PROVISIONS OF MARYLAND LAW AND OF
SENIOR HOUSING'S DECLARATION OF TRUST AND BYLAWS........................ 69
Trustees................................................................ 69
Advance Notice of Trustee Nominations and New Business.................. 69
Meetings of Shareholders................................................ 70
Liability and Indemnification of Trustees and Officers.................. 70
Shareholder Liability................................................... 71
Maryland Asset Requirements............................................. 71
Transactions with Affiliates............................................ 71
Voting by Shareholders.................................................. 71
Restrictions on Transfer of Shares...................................... 71
Business Combinations................................................... 73
Control Share Acquisitions.............................................. 74
Amendment to the Declaration of Trust, Dissolution and Mergers.......... 75
Anti-takeover Effect of Maryland Law and of the Declaration of Trust and
Bylaws................................................................ 76
DESCRIPTION OF SENIOR HOUSING SECURITIES.................................. 76
General................................................................. 76
Common Shares........................................................... 77
SENIOR HOUSING PRINCIPAL SHAREHOLDERS..................................... 77
FEDERAL INCOME TAX AND ERISA CONSEQUENCES................................. 78
General................................................................. 78
Federal Income Tax Consequences of the Spin-Off to Our Shareholders..... 80
Federal Income Tax Consequences of the Spin-Off to HRPT................. 83
Federal Income Taxation of Senior Housing and its Shareholders.......... 87
Backup Withholding and Information Reporting............................ 100
Other Tax Consequences.................................................. 101
ERISA Consequences for Senior Housing and its Shareholders.............. 102
LEGAL MATTERS............................................................. 104
EXPERTS................................................................... 104
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..................................... 104
FORWARD LOOKING STATEMENTS................................................ 104
WHERE YOU CAN FIND ADDITIONAL INFORMATION................................. 105
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
6
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SOME INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION ABOUT THE SPIN-OFF
WHICH MAY BE IMPORTANT TO YOU. TO BETTER UNDERSTAND THE SPIN-OFF YOU SHOULD
CAREFULLY REVIEW THIS ENTIRE DOCUMENT. REFERENCES IN THIS PROSPECTUS TO "WE,"
"US," "OUR" OR "HRPT" MEAN HRPT PROPERTIES TRUST AND ITS SUBSIDIARIES.
REFERENCES TO "SENIOR HOUSING" MEAN SENIOR HOUSING PROPERTIES TRUST AND ITS
SUBSIDIARIES. UNLESS OTHERWISE INDICATED, THE INFORMATION PRESENTED IN THIS
PROSPECTUS REFLECTS EVENTS WHICH HAVE OCCURRED OR WILL HAVE OCCURRED BY THE
EFFECTIVE DATE OF THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART
AND ASSUMES THAT NONE OF HRPT'S SUBORDINATED CONVERTIBLE DEBENTURES ARE
CONVERTED INTO HRPT SHARES BEFORE THE SPIN-OFF.
THE COMPANIES
We are a real estate investment trust, a REIT, which owns a diversified
portfolio of 175 office buildings costing $2.5 billion and 93 senior housing
properties costing $770 million. We also own four million shares of Hospitality
Properties Trust, another NYSE-listed REIT which invests in hotels, that we
founded in 1995. Our current book capitalization includes $1.8 billion of equity
and $1.2 billion of debt. Our current distribution rate is $1.52 per share per
year, payable $0.38 per share per quarter.
HRPT BEFORE THE SPIN-OFF
[CHART]
Our subsidiary, Senior Housing, owns all of our senior housing properties.
Senior Housing is also a REIT. We own all 26 million Senior Housing shares
outstanding and Senior Housing owes us $200 million. We will distribute 13.2
million of our Senior Housing shares to our shareholders on the basis of one
Senior Housing share for every 10 HRPT shares held. Senior Housing has entered a
new bank credit facility for $350 million; it will borrow $200 million under
this facility and pay its debt to us; and $150 million will be available for new
investments by Senior Housing. After the spin-off we will establish a new annual
distribution rate of $1.28 per HRPT share, payable $0.32 per share per quarter;
and Senior Housing will establish a new annual distribution rate of $2.40 per
share, payable $0.60 per share per quarter.
<TABLE>
<S> <C>
HRPT AFTER THE SPIN-OFF SENIOR HOUSING AFTER THE SPIN-OFF
[CHART] [CHART]
</TABLE>
7
<PAGE>
RISK FACTORS
Your ownership of Senior Housing shares will involve risks, including the
following:
- NO ESTABLISHED SHARE PRICE. There is no established share price for Senior
Housing shares. The Senior Housing shares will be traded on the NYSE but we
do not know the price at which they will trade. Senior Housing shares may
trade for less than their fair value.
- POSSIBLE TENANT DEFAULTS. Several of Senior Housing's tenants have recently
reported significant losses, particularly Mariner Post-Acute Network, Inc.,
Integrated Health Services, Inc. and Genesis Health Ventures, Inc.
Properties leased to Mariner, Integrated and Genesis represent 11%, 29% and
2% of Senior Housing's total investments, respectively. One of our tenants,
Frontier Group, Inc., which leases 2% of Senior Housing's total investments,
has recently filed for reorganization under Chapter 11 of the Bankruptcy
Code. If these tenants fail to pay rent, Senior Housing may be unable to pay
its cash distributions to shareholders or to carry out its business plan.
- PROPERTIES SUBJECT TO BURDENSOME REGULATIONS. Some of Senior Housing's
properties are highly regulated. Approximately 57% of the tenant revenues at
Senior Housing's properties are paid by Medicare and Medicaid. Changes in
these regulations or in the amounts of payments available under Medicare and
Medicaid programs may restrict Senior Housing's tenants' ability to pay
rent.
- FAILURE OF GROWTH STRATEGY. Senior Housing's growth strategy depends upon
its ability to raise additional capital and to invest in new properties. No
assurance can be provided that capital will be available at reasonable costs
or that Senior Housing will be able to purchase and lease additional
properties.
- CONFLICTS OF INTEREST. Senior Housing's managing trustees, Barry M. Portnoy
and Gerard M. Martin, own its investment advisor, Reit Management &
Research, Inc. Senior Housing pays Reit Management based in part on the
amount of investments. Reit Management and Messrs. Portnoy and Martin might
have an incentive to cause Senior Housing to acquire assets in order to
raise advisory fees.
- DOMINANT SHAREHOLDER. Upon completion of the spin-off, HRPT will own 49% of
Senior Housing's outstanding shares. This ownership will enable HRPT to have
a significant influence over Senior Housing shareholder decisions.
- BENEFITS TO HRPT. The completion of the spin-off will result in benefits to
HRPT. For example, when HRPT's properties were transferred to Senior
Housing, Senior Housing agreed to pay $200 million to HRPT. After the
spin-off Senior Housing will borrow $200 million to pay this debt.
- OWNERSHIP LIMITATIONS AND ANTI-TAKEOVER PROVISIONS. Other than HRPT,
shareholders are prohibited from owning more than 9.8% of Senior Housing.
Senior Housing's declaration of trust and bylaws contain other provisions
that inhibit a change of control. Because of these limitations Senior
Housing shareholders may be unable to realize a change of control premium
for their shares.
- LIABILITIES OF REAL ESTATE OWNERSHIP. Senior Housing's business will be
subject to risks associated with real estate ownership, including the need
for regular maintenance and repairs, the need for capital expenditures and
possible environmental hazards.
- DEPENDENCE UPON MARRIOTT. Forty-two percent of Senior Housing's investments
are in properties leased to Marriott. An adverse change in Marriott's
financial condition or its operations of the leased properties would
adversely affect Senior Housing's ability to pay distributions.
- TAX RISKS. The federal tax law does not clearly address REIT spin-offs. If
the IRS successfully challenges our reporting of the spin-off, you may have
to pay more taxes.
8
<PAGE>
HRPT GROWTH STRATEGY
After the spin-off, we will be principally focused upon managing and growing
our office building investments. Most of our investments are in multi-tenant
commercial office buildings. We sometimes invest in office buildings leased to
medical providers and government agencies because these types of tenants often
are willing to sign long term leases and have a history of regular renewals. We
prefer to invest in central business districts because there are usually
barriers to new development in those locations. We believe this strategy adds
stability to our portfolio and increases the long term appreciation potential of
our properties.
HRPT OFFICE INVESTMENTS
<TABLE>
<S> <C>
EDGAR REPRESENTATION OF DATA POINTS USED IN
PRINTED GRAPHIC
Commercial Office Tenants $1,589 million 64%
U.S. Government $446 million 18%
Medical and Biotechnology Tenants $445 million 18%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Central Business Districts $1,578
million 64%
Suburban Areas $902 million 36%
</TABLE>
Our 175 office buildings are located in 27 states and the District of
Columbia. Five market areas contain about two-thirds of our office portfolio:
HRPT GEOGRAPHIC DIVERSIFICATION
<TABLE>
<CAPTION>
MARKET AREA NO. OF BUILDINGS INVESTMENT SQUARE FEET
- ----------------------------------- ----------------- --------------------- ---------------------
(000S)
<S> <C> <C> <C> <C> <C>
Philadelphia, PA................... 17 $530,288 (21%) 3,541,006 (19%)
Austin, TX......................... 25 301,534 (12%) 2,653,088 (15%)
Washington, DC..................... 16 409,322 (17%) 2,177,901 (12%)
Boston, MA......................... 30 191,946 (8%) 1,603,149 (9%)
Southern CA........................ 17 250,351 (10%) 1,126,171 (6%)
Other markets...................... 70 796,106 (32%) 7,128,393 (39%)
--- ---------- --------- ---------- ---------
Total.............................. 175 $2,479,547 (100%) 18,229,708 (100%)
--- ---------- --------- ---------- ---------
--- ---------- --------- ---------- ---------
</TABLE>
9
<PAGE>
Two criteria have historically guided our management and acquisitions of
office buildings and are likely to do so in the future. First, we prefer to
lease to high credit quality tenants. Approximately 52% of our office rents are
paid by tenants who are investment grade rated, including 19% from the U.S.
Government. An additional 10% of our office rents come from publicly owned
companies which are not investment grade rated; and many of our remaining
tenants are large law, accounting and other professional service firms which we
believe have strong credit characteristics. Second, we generally prefer to lease
office buildings for longer rather than shorter terms. Only 20% of our leases
expire in the next three years. Almost half of our leases have remaining terms
of seven or more years.
<TABLE>
<S> <C>
HRPT OFFICE TENANT CREDIT QUALITY HRPT OFFICE LEASE EXPIRATIONS
(BY PERCENTAGE OF RENT) (BY PERCENTAGE OF RENT)
EDGAR REPRESENTATION OF DATA POINTS USED IN
PRINTED GRAPHIC
Investment Grade 52%
Other Public Companies 10%
Private Tenants 38%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Over 10 years 27%
7-9 years 22%
4-6 years 31%
3 years or less 20%
</TABLE>
At this time we have no plans to undertake speculative development, but we
are exploring some build-to-suit opportunities on land which we own. Generally,
we have only acquired development sites as ancillary property incident to our
purchases of developed income producing properties. We estimate the total
development potential of land which we own at approximately 2.9 million square
feet of office space.
10
<PAGE>
SENIOR HOUSING GROWTH STRATEGY
Senior Housing's 93 properties are leased to nine tenants. Ninety-seven
percent of Senior Housing's investments are leased to subsidiaries of public
companies which have guaranteed the lease obligations. The leases for 91 of
these properties extend to at least 2005. Senior Housing's largest tenant is
Marriott International, Inc. The following chart shows Senior Housing properties
leased to tenants by historical investment at cost and current lease
expirations.
SENIOR HOUSING INVESTMENTS
- - $770 million total assets
- - 42% leased to Marriott
- - 97% leased to public
companies
- - leases for 99% expire
in 2005 or after
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Marriott International 14 Properties $326 million Lease expires 2013 42%
Brookdale Living Communities 4 Properties $102 million Lease expires 2019 13%
Mariner Post-Acute Network 26 Properties $96 million Lease expires 2012 11%
Integrated Health Services Lease No. 1 31 Properties $66 million Lease expires
2010 9%
Integrated Health Services Lease No. 2 11 Properties $152 million Lease expires
2006 20%
Genesis Health Ventures 1 Property $13 million - 2% Lease expires 2008 2%
Other Operators 4 Properties $25 million - 3% Leases expire 2001-2005 3%
</TABLE>
The aging of the U.S. population, the increasing percentage of women who
work away from home, the high divorce rate and societal mobility are demographic
facts which tend to increase demand for specialized senior housing properties.
Senior Housing hopes to profit from this increasing demand by buying properties
specially designed to meet the needs of aged residents. Senior Housing expects
that its leases will require rents which exceed its cost of capital and which
increase as the properties' gross revenues increase.
A new Medicare rate setting program that is now being implemented has had
negative impacts upon the financial performance of several of Senior Housing's
tenants. Senior Housing believes that these tenants will pay their lease
obligations, or, if they do not do so, that Senior Housing may be able to re-let
most of these properties to new tenants who will pay comparable rents. In the
future, Senior Housing intends to focus new investments in properties which are
not dependent upon government payment programs. At the same time, however,
Senior Housing believes that the new, lower Medicare rates have reduced the
prices of many nursing homes to levels which may present attractive long term
investment opportunities.
DISTRIBUTIONS
After the spin-off, HRPT's new distribution rate will be $1.28 per share per
year, payable $0.32 per share per quarter. Senior Housing's distribution rate
will be $2.40 per share per year, payable $0.60 per share per quarter. The third
quarter 1999 cash distribution of $0.32 per HRPT share and $0.60 per Senior
Housing share will be paid to shareholders of record on October , 1999. Cash
distributions are paid about 30 days after the record date. We expect that, on
an annualized basis, approximately 17% of HRPT's new distributions and 19% of
Senior Housing's distributions will constitute returns of capital.
PRINCIPAL PLACES OF BUSINESS
HRPT and Senior Housing maintain their principal places of business at 400
Centre Street, Newton, MA 02458. HRPT's phone number is (617) 332-3990. Senior
Housing's phone number is (617) 796-8350.
11
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table presents the pro forma impact of the spin-off on HRPT's
income statement and balance sheet and the pro forma income statement and
balance sheet of Senior Housing as a separate company. The Senior Housing
statements include pro rata allocations of interest and general and
administrative expenses for historical periods. In the opinion of management,
the methods of allocation are reasonable. It is impossible to estimate all
operating costs that Senior Housing would incur as a separate company. For
additional information about the amounts appearing in this table, see the
Unaudited Pro Forma Consolidated Financial Statements and notes thereto on pages
F-2 through F-13.
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED, AMOUNTS IN 000S, EXCEPT PER SHARE DATA)
----------------------------------------------------
HRPT SENIOR HOUSING
------------------------------------ --------------
SPIN-OFF
HISTORICAL ADJUSTMENTS PRO FORMA PRO FORMA
----------- ----------- ---------- --------------
<S> <C> <C> <C> <C>
INCOME STATEMENTS
Rental income...................................... $203,335 $(42,409) $160,926 $42,409
Interest and other income.......................... 7,619 (2,881) 4,738 2,881
----------- ----------- ---------- --------------
Total revenues..................................... 210,954 (45,290) 165,664 45,290
----------- ----------- ---------- --------------
Operating expense.................................. 50,548 -- 50,548 --
Interest expense................................... 39,525 (5,600) 33,925 7,531
Depreciation and amortization...................... 37,314 (11,207) 26,107 11,207
General and administrative......................... 9,849 (2,259) 7,590 2,259
----------- ----------- ---------- --------------
Total expenses..................................... 137,236 (19,066) 118,170 20,997
----------- ----------- ---------- --------------
Income before equity in earnings of
Hospitality Properties and Senior Housing........ 73,718 (26,224) 47,494 24,293
Equity in earnings of Hospitality Properties....... 4,029 -- 4,029 --
Equity in earnings of Senior Housing............... -- 11,976 11,976 --
----------- ----------- ---------- --------------
Net income (1)..................................... $77,747 $(14,248) $63,499 $24,293
----------- ----------- ---------- --------------
----------- ----------- ---------- --------------
Average basic shares outstanding................... 131,778 131,778 26,000
----------- ---------- --------------
----------- ---------- --------------
Average diluted shares outstanding................. 143,159 143,159 26,000
----------- ---------- --------------
----------- ---------- --------------
PER SHARE DATA:
Basic and diluted income (1)..................... $0.59 $0.48 $0.93
----------- ---------- --------------
----------- ---------- --------------
Distributions.................................... $0.76 $0.64 $1.20
----------- ---------- --------------
----------- ---------- --------------
BALANCE SHEETS
Real estate investments............................ $3,006,521 $(732,393) $2,274,128 $732,393
Accumulated depreciation........................... (184,992) 105,823 (79,169) (105,823)
----------- ----------- ---------- --------------
2,821,529 (626,570) 2,194,959 626,570
Real estate mortgages.............................. 60,530 (37,638) 22,892 37,638
Investment in Hospitality Properties............... 108,242 -- 108,242 --
Investment in Senior Housing....................... -- 220,548 220,548 --
Cash and equivalents............................... 26,984 (26,593) 391 16,593
Other assets....................................... 84,869 (9,918) 74,951 9,918
----------- ----------- ---------- --------------
$3,102,154 $(480,171) $2,621,983 $690,719
----------- ----------- ---------- --------------
----------- ----------- ---------- --------------
Bank credit facility............................... $-- $-- $-- $200,000
Senior notes payable............................... 957,513 (200,000) 757,513 --
Mortgage notes payable............................. 23,985 -- 23,985 --
Convertible subordinated debentures................ 204,863 -- 204,863 --
Other liabilities.................................. 103,093 (43,360) 59,733 43,360
Shareholders' equity............................... 1,812,700 (236,811) 1,575,889 447,359
----------- ----------- ---------- --------------
$3,102,154 $(480,171) $2,621,983 $690,719
----------- ----------- ---------- --------------
----------- ----------- ---------- --------------
</TABLE>
- ------------------------------
(1) Excludes an HRPT gain on sale of properties of $8.3 million, or $0.06 per
share, and loss on equity transaction of Hospitality Properties of $711,000,
or $0.01 per share, for the six months ended June 30, 1999.
12
<PAGE>
RISK FACTORS
Your ownership of Senior Housing shares will involve various risks. The
following is a listing of the material risks:
THERE IS NO ESTABLISHED SHARE PRICE FOR SENIOR HOUSING SHARES AND THEY MAY TRADE
FOR LESS THAN FAIR VALUE.
There is no established share price for Senior Housing shares. The
distribution of Senior Housing shares is not being underwritten by an investment
bank or otherwise. The Senior Housing shares will be traded on the NYSE but we
do not know the price at which they will trade. We do not know if an active
market for Senior Housing shares will develop. Accordingly, Senior Housing
shares' trading price may not reflect their fair value.
SOME OF SENIOR HOUSING'S TENANTS HAVE EXPERIENCED PROBLEMS WHICH MAY IMPAIR
THEIR ABILITIES TO PAY RENT.
Some of Senior Housing's tenants have recently reported significant losses.
Mariner Post-Acute Network, Inc., which leases 11% of Senior Housing's
investments and pays 18% of Senior Housing pro forma rents, reported a loss of
$405.7 million for the quarter ended June 30, 1999. Integrated Health Services,
Inc., which leases 29% of Senior Housing's investments and pays 30% of Senior
Housing pro forma rents, reported a loss of $4.6 million for the quarter ended
June 30, 1999. Genesis Health Ventures, Inc., which leases 2% of Senior
Housing's investments and pays 2% of Senior Housing's pro forma rents, reported
a loss of $1.0 million for the quarter ended June 30, 1999. One of Senior
Housing's smaller tenants, The Frontier Group, a privately held company which
leases 2% of Senior Housing's investments and pays 2% of Senior Housing's pro
forma rents, filed on July 14, 1999 for reorganization under Chapter 11 of the
Bankruptcy Code. If these tenants fail to pay rent, Senior Housing may be unable
to pay its cash distributions to shareholders or to carry out its business plan.
Because leases for multiple properties to an affiliated group of tenants are
subject to cross default at the election of Senior Housing, a lease default
affecting one property owned by Senior Housing may result in multiple defaults
for material amounts of rent.
SOME OF SENIOR HOUSING'S PROPERTIES ARE SUBJECT TO BURDENSOME REGULATIONS.
Forty-five percent of Senior Housing's total investments are in healthcare
facilities. Investing in healthcare facilities involves the following material
risks:
- COMPLEX REGULATIONS. Detailed specifications for the physical
characteristics of healthcare properties are mandated by various
governmental authorities. Changes in these regulations may require major
capital expenditures. Because Senior Housing's healthcare properties are
triple net leased to tenants, Senior Housing has only limited control over
the maintenance of its properties. Senior Housing regularly monitors
compliance by its tenants with applicable healthcare regulations. Although
Senior Housing has in the past periodically become aware that some tenants
may not have been in full compliance with these regulations, Senior
Housing is not aware of any pending regulatory action against any of its
properties which is likely to prevent their continued operations. Senior
Housing's triple net leases require its tenants to comply with applicable
regulations affecting its properties. Nevertheless, if its tenants fail to
perform these obligations, Senior Housing may be required to do so in
order to maintain the value of its investments.
- DEPENDENCE ON GOVERNMENT PROGRAMS. Approximately 57% of the tenant
revenues at Senior Housing's properties are paid by Medicare and Medicaid.
The Medicare program recently
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<PAGE>
implemented a prospective payment system for skilled nursing facilities,
which replaces cost-based reimbursements. The Medicare prospective payment
system is being gradually implemented over a three-year period which began
on July 1, 1998, and has already had a negative impact upon the income of
many nursing homes. Many state Medicaid programs have implemented similar
prospective payment systems. The Balanced Budget Act of 1997 restricted
the right of operators of healthcare facilities to challenge state
Medicaid rates in federal courts. Whenever Medicare or Medicaid rates are
reduced, Senior Housing's tenants' ability to pay rent could be
jeopardized.
- SPECIAL PURPOSE BUILDINGS. Senior Housing's properties were specifically
designed for senior housing. If these properties cannot be operated as
senior housing facilities, finding alternative uses for these properties
may be difficult and costly.
SENIOR HOUSING'S ABILITY TO GROW WILL DEPEND UPON ACCESS TO CAPITAL WHICH IS NOT
ASSURED.
As a REIT, Senior Housing is required to distribute 95% of its taxable
income and cannot fund capital needs with income from operations. Senior
Housing's growth strategy requires that it raise additional capital to invest in
new properties. Senior Housing's ability to raise capital in the future will
depend not only upon its performance but also upon capital market conditions
which are beyond its control. Moreover, there are several other REITs and
finance companies that now aggressively compete to purchase and lease senior
housing properties. Accordingly, Senior Housing's growth strategy may not
succeed.
SENIOR HOUSING'S INVESTMENT ADVISOR MAY HAVE AN INCENTIVE TO RECOMMEND
INVESTMENTS TO RAISE FEES AND THERE WILL BE OTHER CONFLICTS OF INTEREST.
Conflicts of interest have arisen and will continue to arise in Senior
Housing's business, including the following:
- Barry M. Portnoy and Gerard M. Martin, who are Senior Housing's managing
trustees, own Reit Management, its investment advisor. Reit Management has
approximately 180 employees and has experience acquiring and managing
properties for two other publicly owned REITs. Senior Housing believes
that the depth of management talent available to it through its advisory
contract with Reit Management will provide Senior Housing with a
competitive advantage and that the fees payable to Reit Management are
commercially reasonable. Nonetheless, Senior Housing did not negotiate its
advisory agreement at arms' length. The advisory fee paid to Reit
Management will be based in part upon the amount of new investments made
by Senior Housing. This fee structure might encourage Reit Management to
advocate acquisitions when doing so is not in the best interests of Senior
Housing.
- In addition to serving as Senior Housing's managing trustees, Messrs.
Portnoy and Martin are managing trustees of HRPT and Hospitality
Properties. They also have business interests separate from these other
REITs. Similarly, Reit Management also acts as the investment advisor to
HRPT and Hospitality Properties and has other business interests. These
various business activities will compete for management time.
HRPT MAY BE ABLE TO CONTROL SENIOR HOUSING SHAREHOLDER DECISIONS.
Upon completion of the spin-off, HRPT will own 49% of Senior Housing's
outstanding shares. Accordingly, HRPT will have a significant influence over
Senior Housing shareholder decisions. This influence may result in decisions
that may not serve the best interests of Senior Housing's other shareholders.
14
<PAGE>
THE SPIN-OFF WILL RESULT IN BENEFITS TO HRPT WHICH COULD ADVERSELY AFFECT SENIOR
HOUSING.
The completion of the spin-off will result in substantial benefits to HRPT,
including the following:
- When HRPT transferred its properties to Senior Housing, Senior Housing
became indebted to HRPT for $200 million. After the spin-off, Senior
Housing will borrow $200 million under its bank credit facility and pay
this debt to HRPT. HRPT will not be liable for any of Senior Housing's
debt.
- Upon completion of the spin-off, Reit Management will become Senior
Housing's investment advisor. Assuming the spin-off is completed on
September 30, 1999, the pro forma advisory fee that Senior Housing will
pay to Reit Management from the completion of the spin-off through
December 31, 1999, the initial term of the agreement, will be
approximately $1.0 million, or $3.9 million on an annualized basis. HRPT's
advisory fees to Reit Management will be reduced by the same amount.
- HRPT currently owns 26 million of Senior Housing's shares. Upon completion
of the spin-off, HRPT will distribute 13.2 million of these shares to its
shareholders and will retain 12.8 million shares. By retaining these
shares, HRPT will be able to participate in Senior Housing's future
success through distributions and any appreciation in Senior Housing's
share price.
- HRPT has agreed not to sell any of its Senior Housing shares for one year
after the spin-off. If HRPT decides to sell thereafter, these sales could
depress the market value of Senior Housing shares.
OWNERSHIP LIMITATIONS AND ANTI-TAKEOVER PROVISIONS AFFECTING SENIOR HOUSING MAY
PREVENT SHAREHOLDERS FROM RECEIVING A TAKEOVER PREMIUM.
Senior Housing's declaration of trust prohibits any shareholder other than
HRPT, Reit Management and their affiliates from owning more than 9.8% of its
outstanding common shares. This provision of the declaration of trust may help
Senior Housing comply with REIT tax requirements. This provision will also
inhibit a change of control of Senior Housing. Its declaration of trust and
bylaws contain other provisions that may increase the difficulty of acquiring
control of Senior Housing by means of a tender offer, open market purchases, a
proxy fight or otherwise, if the acquisition is not approved by Senior Housing's
board of trustees. These other anti-takeover provisions include the following:
- a staggered board of trustees with three separate classes;
- the two-thirds majority shareholder vote required for removal of trustees;
- the availability of additional shares that the board of trustees may
authorize and issue on terms that it determines;
- advance notice procedures with respect to nominations of trustees and
shareholder proposals; and
- the facts that only the board of trustees may call shareholder meetings
and that shareholders are not entitled to act without a meeting.
For all of these reasons, Senior Housing's shareholders may be unable to
realize a change of control premium for their shares.
15
<PAGE>
REAL ESTATE OWNERSHIP CREATES RISKS AND LIABILITIES.
Senior Housing's business will be subject to the following material risks
associated with real estate acquisitions and ownership:
- casualty losses, some of which may be uninsured;
- lease expirations which are not renewed or for properties which can only
be relet at lower rents;
- costs relating to maintenance and repair, and the need to make capital
expenditures due to changes in governmental regulations, including the
Americans with Disabilities Act; and
- environmental hazards created by tenants or abutters for which Senior
Housing may be liable.
CHANGES AT MARRIOTT COULD ADVERSELY AFFECT SENIOR HOUSING.
Forty-two percent of Senior Housing's investments are in properties leased
to Marriott. Today we regard Marriott as a strong credit tenant and its leased
properties are performing well. Nonetheless, the Marriott leases extend for a
long period through 2013. Marriott's financial condition and the performance of
its leased properties may change. Because the investment in properties leased to
Marriott represents such a large percentage of Senior Housing's total
investments, any adverse change in Marriott's financial condition or its
operations of the leased properties would adversely affect Senior Housing's
ability to pay distributions to shareholders.
THE FEDERAL INCOME TAX TREATMENT OF THE SPIN-OFF IS UNCERTAIN.
The Internal Revenue Code does not provide definitive guidance on valuing
Senior Housing shares and on taxing REIT spin-offs. We will perform all our tax
reporting, including statements sent to the IRS and to you, on the basis of our
valuation assumptions and our counsel's opinion on how the spin-off is likely to
be taxed. If the IRS successfully challenges our positions on these issues, we
may be required to amend our reporting and you may have to pay more federal
income taxes.
16
<PAGE>
THE SPIN-OFF
KEY DATES
<TABLE>
<CAPTION>
DATES ACTIVITY
- ------------------------ ----------------------------------------------------------------------------
<S> <C>
September , 1999...... PROSPECTUS MAILING DATE. The date the registration statement of which this
prospectus is a part is declared effective by the SEC. We will mail this
prospectus to you on or about this date.
October , 1999........ RECORD DATE. HRPT shareholders of record on this date will receive one
Senior Housing share for every 10 HRPT shares owned. We expect that a "when
issued" market on the NYSE for Senior Housing shares may begin two business
days before the record date. If a "when issued" market develops for Senior
Housing shares, HRPT shares will begin to trade "when issued/ex
distribution."
October , 1999........ DISTRIBUTION DATE. We expect to deliver 13.2 million shares of Senior
Housing to the distribution agent on this date, and the spin-off will be
completed. If you hold HRPT shares in a brokerage account, your Senior
Housing shares will be credited to your account. If you hold HRPT shares in
certificated form, a certificate representing your Senior Housing shares
will be mailed to you; the mailing process is expected to take about 30
days. If a "when issued" and "when issued/ex distribution" market has
developed for Senior Housing and HRPT shares, respectively, it will cease on
this date; and thereafter those shares will trade in the regular way.
</TABLE>
DISTRIBUTION AGENT
The distribution agent for the spin-off is State Street Bank and Trust
Company, c/o Boston EquiServe, P.O. Box 8200, Boston, Massachusetts 02266-8200;
telephone (800) 426-5523.
LISTING AND TRADING OF SENIOR HOUSING SHARES
Senior Housing shares have been approved for listing on the NYSE. We expect
that trading on a "when issued" basis may commence on or about October , 1999.
A "when-issued" market will permit you and others to trade Senior Housing shares
on the NYSE before the shares are distributed.
There is not currently a public market for Senior Housing shares. Prices at
which the Senior Housing shares may trade cannot be predicted. Until and unless
an orderly market for Senior Housing shares develops, the prices at which
trading in the shares occurs may fluctuate significantly. The prices at which
Senior Housing shares trade may be influenced by many factors, including, among
others, the depth and liquidity of the market which develops, investor
perception of Senior Housing's business and growth prospects, the market for
REIT shares generally, Senior Housing's distribution policy and general market
conditions.
BACKGROUND AND REASONS FOR THE SPIN-OFF
HRPT was founded in 1986 to invest in senior housing real estate. For the
past few years, however, most of our investments have been in commercial office
buildings. In 1998 we concluded that a renewed emphasis on senior housing
properties was appropriate. We believe there are attractive investment
opportunities now available in both commercial office buildings and senior
housing. Also in 1998, based upon conversations with our shareholders and with
potential investors,
17
<PAGE>
we became convinced that many REIT investors prefer to invest in companies that
are focused upon one type of property rather than diversified companies.
In December 1998, we determined to divide HRPT into two separate public
companies, one focused upon office buildings and one focused upon senior
housing. Our original plan was to distribute one share of Senior Housing to our
shareholders for every 10 shares of HRPT owned and to simultaneously complete an
initial public offering of an additional 11 million shares of Senior Housing.
Recently, we abandoned our plans for an initial public offering of Senior
Housing shares. Nonetheless, we continue to believe that two separate companies,
one focused upon office buildings and one focused upon senior housing
properties, may be able to take better advantage of their respective growth
opportunities. For this reason, in July 1999 we determined to proceed with this
spin-off. Because we are not selling any shares of Senior Housing at this time,
HRPT will retain a larger percentage ownership of Senior Housing than it had
planned to retain in December 1998. Our board of trustees has unanimously
approved the spin-off as being in the best interests of our shareholders.
MANNER OF EFFECTING THE SPIN-OFF
In order to effect the spin-off, we and Senior Housing have taken and expect
to take various actions, including the following:
- In December 1998 we organized Senior Housing as a Maryland REIT which is
100% owned by HRPT. At the time it was organized, Senior Housing had 26.4
million shares outstanding. Since that time some of these shares have been
cancelled and there are now 26 million shares outstanding.
- In June and July 1999 we transferred title to 93 senior housing
investments to other 100% owned REIT subsidiaries of HRPT. These senior
housing subsidiaries were newly created and all their assets and
liabilities relate to these 93 investments.
- In July 1999 Senior Housing accepted a commitment for a new bank credit
facility for up to $350 million. This line of credit is currently
effective.
- On September 1, 1999, HRPT transferred 100% of the ownership of its senior
housing subsidiaries to Senior Housing. In consideration of these
transfers, Senior Housing and one of its subsidiaries agreed to pay $200
million to HRPT. On the date the spin-off is completed 13.2 million shares
of Senior Housing will be distributed to HRPT shareholders.
- Shortly after completion of the spin-off, Senior Housing will borrow $200
million under its bank credit facility and pay its formation debt to HRPT.
HRPT intends to use this $200 million to prepay senior debt.
THE TRANSACTION AGREEMENT
In order to evidence the actions necessary to effect the spin-off and to
govern their relations after the spin-off, HRPT and Senior Housing entered a
transaction agreement. The form of this transaction agreement has been filed
with the SEC as an exhibit to the registration statement of which this
prospectus is a part. If you want more information about the actions which have
been and will be taken to effect the spin-off or about the agreements between
HRPT and Senior Housing
18
<PAGE>
concerning their future relations, you should read the entire transaction
agreement. The provisions of the transaction agreement are summarized as
follows:
- Interest on the $200 million formation debt from Senior Housing and its
subsidiary to HRPT is charged at the same rate as HRPT's weighted average
cost of debt. On September 1, 1999, this interest rate was 7.1% per annum.
- The formation debt will be due and payable by Senior Housing to HRPT
within 10 days after the spin-off. If the formation debt is not timely
paid Senior Housing will be required to secure this debt.
- On the spin-off date, HRPT will make an additional capital contribution to
Senior Housing, in cash, of $1 million, plus $169,500 times the number of
days from and including July 1, 1999, to and excluding the spin-off date.
- HRPT will indemnify Senior Housing with respect to any liability relating
to any property transferred to Senior Housing which arises from litigation
pending at the time of the spin-off.
- Senior Housing will indemnify HRPT from any liability relating to any
property transferred by HRPT to Senior Housing which arises after the
spin-off.
- HRPT and Senior Housing have agreed not to compete with each other.
Specifically, so long as: (a) HRPT remains a more than 10% shareholder of
Senior Housing; (b) HRPT and Senior Housing engage the same investment
advisor; or (c) HRPT and Senior Housing have one or more common managing
trustees; then
--HRPT will not invest in properties involving senior housing without the
prior consent of Senior Housing's independent trustees;
--Senior Housing will not invest in office buildings, including medical
office buildings or clinical laboratory buildings, without the prior
approval of HRPT's independent trustees; and
--If a particular investment involves both senior housing and office
components the character of the investment will be determined by building
area, excluding common areas, unless the boards of trustees of both Senior
Housing and HRPT otherwise agree at that time. Also, these non-competition
provisions will not apply to any investments held by HRPT at the time of
the spin-off.
- HRPT and Senior Housing will cooperate to enforce the ownership
limitations in their respective declarations of trust as may be
appropriate to continue their tax status as REITs and otherwise.
- HRPT and Senior Housing will cooperate to file future tax returns
including appropriate allocations of taxable income, expenses and other
tax attributes.
- HRPT will not sell any of its retained 12.8 million Senior Housing shares
for a period of at least one year following the spin-off without the
consent of Senior Housing's independent trustees.
- HRPT will pay all expenses of the spin-off including the costs of
distributing Senior Housing shares to its shareholders, legal and
accounting charges, SEC filing fees, NYSE listing fees and the up-front
costs of establishing Senior Housing's bank credit facility.
19
<PAGE>
INFORMATION ABOUT HRPT PROPERTIES TRUST AFTER THE SPIN-OFF
HRPT is a REIT that acquires, owns and leases office buildings. After the
spin-off we will own 175 office buildings which had an original cost of $2.5
billion. Of these, 89 are commercial office buildings which had an original cost
of almost $1.6 billion, 28 are buildings leased to the U.S. Government which had
an original cost of $446 million and 58 are medical office and biotechnology
buildings which had an original cost of $445 million. We will also own 4 million
shares of Hospitality Properties and 12.8 million shares of Senior Housing.
HRPT INVESTMENTS
COMMERCIAL OFFICE BUILDINGS. Almost $1.6 billion of our total investments
in office buildings are in multi-tenant commercial buildings. We believe that
current business trends have created favorable investment opportunities for
commercial office properties: some institutional investors have begun disposing
of their direct ownership of properties and investing in more liquid real estate
securities; purchasers of distressed properties in the early 1990s are now
divesting their improved assets; and many businesses are selling their owned
real estate to invest proceeds in core activities. Moreover, unlike many REITs
that buy commercial office buildings, our focus is to acquire stabilized office
buildings with long term leases to strong credit tenants rather than buildings
that might afford turnaround potential because of vacancies or short term
leases.
GOVERNMENT OFFICE BUILDINGS. Over $400 million of our investments in office
buildings are in buildings majority leased to the U.S. Government. Most U.S.
Government office space requirements are managed by the General Services
Administration, the GSA. Most large GSA leases are for initial terms of 10 to 20
years plus renewal options for an additional 5 to 20 years. Many GSA leases
permit the Government to terminate by notice given any time after a so-called
"firm term." The weighted average remaining firm term for our Government tenants
is approximately six years. From 1980 to September 1996, the amount of space
leased by the GSA increased from 139 million square feet to 146 million square
feet. We believe that the GSA's demand for leased space will continue to be
strong as a result of federal budget pressure to limit capital expenditures and
the need to use funds available for capital expenditures to modernize GSA-owned
buildings, over half of which exceed 50 years of age. Based upon the
Government's investments in tenant improvements to our properties, the high cost
of relocation and the stability of the missions and space requirements of the
Government agencies that occupy our properties, we believe that there is a high
probability of GSA lease renewals for our properties through their renewal
options, and in many cases beyond those periods. Moreover, because of the
locations of many of these Government leased buildings and the high standards to
which they have been built, we may be able to lease most of these buildings to
commercial users at comparable or higher rents in the event the Government
terminates or fails to renew any of these leases.
MEDICAL AND BIOTECHNOLOGY BUILDINGS. Over $400 million of our investments
in office buildings are leased to medical providers and to companies engaged in
biotech research and development. The largest of our multi-tenant medical office
buildings is the Cedars Sinai Medical Towers in Los Angeles, California, which
includes 330,715 square feet leased to 115 separate medical practice groups.
This property includes two garages with parking for over 1,600 cars and is
attached by a footbridge to Cedars Sinai Medical Center, one of the largest
hospitals in the western United States. It is our experience that most medical
tenants regularly renew leases at locations which are convenient for the
physicians and their patients. For example, the Cedars Sinai Medical Towers'
current occupancy is almost 100% and, during the early 1990s when many Southern
California office properties suffered occupancy declines, the occupancy at this
property was never below 91%. Similarly, we currently own several biotech
properties in the areas of San Diego, California and
20
<PAGE>
Boston, Massachusetts. The tenants at these buildings have often invested large
amounts in leasehold improvements which would make their relocation difficult
and expensive. Accordingly, it is our expectation that these tenants will
regularly renew expiring leases.
EQUITY INVESTMENT IN HOSPITALITY PROPERTIES TRUST. We have invested $100
million in 4 million common shares of Hospitality Properties, which constitute
7.1% of the total Hospitality Properties common shares outstanding. Hospitality
Properties is a REIT in the business of owning hotels and leasing them to hotel
operating companies. We organized Hospitality Properties in February 1995 as an
outgrowth of our relationship with Host Marriott Corporation and Marriott
International, Inc., which arose from our previous investment in retirement
communities leased to Marriott International. Since August 1995, Hospitality
Properties has successfully completed several public offerings of shares and on
September 1, 1999, had a total market capitalization of $1.9 billion.
Hospitality Properties currently owns or has commitments to purchase 210 hotels,
which are located in 35 states and contain 28,451 rooms. We receive
distributions on our Hospitality Properties shares at the current annual rate of
$2.76 per share. Our financial reports include our share of Hospitality
Properties' operating results using the equity method of accounting. Hospitality
Properties shares are listed on the NYSE, and on September 1, 1999 the last
reported sale price for Hospitality Properties common shares was $25.50 per
share.
EQUITY INVESTMENT IN SENIOR HOUSING PROPERTIES TRUST. After the spin-off
HRPT will retain 12.8 million shares of Senior Housing, which will constitute
49% of the total Senior Housing shares outstanding. Senior Housing is expected
to pay distributions at an initial annual rate of $2.40 per share. HRPT's
financial reports will include Senior Housing operating results using the equity
method of accounting. HRPT does not intend to invest additional money in Senior
Housing, and as Senior Housing grows its investments and issues additional
shares to raise capital we expect that HRPT's ownership percentage of Senior
Housing will decline. We have agreed not to sell these shares, without the
consent of Senior Housing's independent trustees, for a period of one year
following the spin-off transaction. Thereafter, depending upon market
conditions, HRPT may sell these shares to raise capital to invest in additional
office buildings.
PENDING ACQUISITIONS. As of September 1, 1999 we had entered into purchase
agreements to acquire 13 additional office properties for $81.4 million. We
expect to buy these properties during the remainder of 1999, subject to the
satisfactory completion of our diligence. In the normal course of our business
we regularly evaluate opportunities to acquire properties. We currently have
several investment opportunities under consideration. We may acquire additional
office buildings involving material amounts in the future.
DEVELOPMENT ACTIVITIES. HRPT regularly has several million dollars worth of
construction activity underway. Most of this work is tenant fit out, repairs,
maintenance and redevelopment types of construction activities. We believe that
we have the capacity to develop commercial office buildings, but to date we have
not done any speculative development. We currently own a large tract of land in
Austin, Texas and another tract of land in the area of Pittsburgh,
Pennsylvania's new airport which are appropriate for office building
development. Also, several of the office buildings we own have sufficient
adjacent land for new office development. The two large sites and all of the
development sites we own are ancillary investments to existing, fully developed
office buildings. We are currently exploring the possibility of doing
build-to-suit developments on some of our developable land. We estimate that
land we own can support development of approximately 2.9 million square feet of
new office space.
21
<PAGE>
LOCATION OF HRPT OFFICE BUILDINGS
We own 175 office buildings located in 27 states and the District of
Columbia.
[MAP]
<TABLE>
<CAPTION>
NO. OF NO. OF
STATE BUILDINGS STATE BUILDINGS
- -------------------------- ------------- INVESTMENT -------------------------- ------------- INVESTMENT
----------- -----------
(000S) (000S)
<S> <C> <C> <C> <C> <C>
Alaska.................... 1 $1,000 New Hampshire............. 1 $22,147
Arizona................... 6 51,475 New Jersey................ 4 29,947
California................ 18 254,278 New Mexico................ 6 30,298
Colorado.................. 2 20,931 New York.................. 9 266,270
Connecticut............... 2 14,326 Ohio...................... 1 15,275
Delaware.................. 2 58,931 Oklahoma.................. 6 46,262
District of Columbia...... 5 207,855 Pennsylvania.............. 23 582,548
Florida................... 4 11,618 Rhode Island.............. 1 8,010
Georgia................... 1 2,984 Tennessee................. 1 22,325
Kansas.................... 1 5,949 Texas..................... 28 326,315
Maryland.................. 8 164,013 Virginia.................. 4 54,107
Massachusetts............. 29 169,799 Washington................ 2 21,388
Minnesota................. 7 68,504 West Virginia............. 1 4,898
Missouri.................. 1 7,776 Wyoming................... 1 10,318
--- -----------
Total..................... 175 $2,479,547
--- -----------
--- -----------
</TABLE>
22
<PAGE>
We intentionally diversify our office investments geographically. At the
same time, we attempt to acquire multiple properties in selected markets to
promote economic efficiencies. We define a market area to include the geographic
area which we believe can be efficiently managed from one central location. The
market areas of the United States which constitute five percent or more of our
total office investments are as follows:
<TABLE>
<CAPTION>
MARKET AREA NO. OF BUILDINGS SQUARE FEET
- --------------------------------- --------------------- INVESTMENT ----------------
----------------
(000S)
<S> <C> <C> <C>
Philadelphia, PA................. 17 $530,288 (21%) 3,541,006 (19%)
Austin, TX....................... 25 301,534 (12%) 2,653,088 (15%)
Washington, DC................... 16 409,322 (17%) 2,177,901 (12%)
Boston, MA....................... 30 191,946 (8%) 1,603,149 (9%)
Southern CA...................... 17 250,351 (10%) 1,126,171 (6%)
</TABLE>
HRPT TENANTS
HRPT prefers to lease its properties to strong credit tenants. Our largest
tenant is the U.S. Government. Fifty-two percent of our office rent is derived
from companies whose senior unsecured obligations are rated investment grade.
Ten percent of our office rent comes from other public companies that are not
rated investment grade but for whom credit evaluation information is readily
available. Approximately 27% of our private company tenants are large law,
accounting and professional service firms which we believe have strong credit
characteristics but which are not investment grade rated.
<TABLE>
<CAPTION>
PERCENTAGE OF
TENANT OFFICE RENT(1)
- ----------------------------------------------------------------------- ---------------
<S> <C>
U.S. Government........................................................ 18.5%
Other investment grade tenants......................................... 33.9%
Other publicly owned tenants........................................... 10.0%
-----
Subtotal investment grade and publicly owned tenants................... 62.4%
Other tenants.......................................................... 37.6%
-----
Total.................................................................. 100.0%
-----
-----
</TABLE>
- ------------------------
(1) Percentage of office rent is based on leases in effect on July 31, 1999.
About 71% of our office rent is gross rent; 10% of our office rent is net
rent; most of our Government leases require modified gross rent.
Accordingly, the data shown in this table is not necessarily indicative of
contributions to our net operating income.
23
<PAGE>
Other than the U.S. Government, no tenant accounts for more than 5% of our
office rents. The following is a list of all our other tenants who are
responsible for 1% or more of our rents:
<TABLE>
<CAPTION>
PERCENTAGE OF
TENANT OFFICE RENT
- --------------------------------------------------------------------- -----------------
<S> <C>
SmithKline Beecham plc............................................... 4.0%
Health Insurance Plan of New York.................................... 2.8%
Solectron Corporation................................................ 2.7%
FMC Corporation...................................................... 2.4%
PNC Bank Corp........................................................ 2.2%
Mellon Bank Corporation.............................................. 2.0%
Motorola, Inc........................................................ 1.9%
Ballard Spahr Andrews & Ingersoll, LLP............................... 1.6%
Chase Corporation.................................................... 1.6%
Fallon Health Clinics, Inc........................................... 1.4%
Raytheon Company..................................................... 1.4%
Cedars Sinai Medical Center.......................................... 1.3%
Marsh & McLennan Companies, Inc...................................... 1.3%
The Limited, Inc..................................................... 1.2%
Capital Cities Media, Inc............................................ 1.1%
</TABLE>
24
<PAGE>
HRPT LEASE EXPIRATIONS
HRPT generally prefers to enter into longer term leases with periodic rent
adjustments rather than short term or fixed rate leases. The following table
sets forth the percentage of our office rent and occupied square feet
represented by leases that expire in the years indicated.
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF OCCUPIED OF OCCUPIED
YEAR OFFICE RENT SQUARE FEET(2) SQUARE FEET
- ------------------------------------------------- OFFICE RENT(1) --------------- --------------- ---------------
---------------
(000s)
<S> <C> <C> <C> <C>
1999............................................. $7,194 2.0% 249,433 1.4%
2000............................................. 24,095 6.6% 1,008,413 5.7%
2001............................................. 43,906 12.0% 1,787,704 10.1%
2002............................................. 28,980 7.9% 1,225,962 6.9%
2003............................................. 44,470 12.2% 1,819,422 10.2%
2004............................................. 40,046 10.9% 1,831,473 10.3%
2005............................................. 30,551 8.4% 1,565,720 8.8%
2006............................................. 25,732 7.0% 1,247,197 7.0%
2007............................................. 22,923 6.3% 1,428,692 8.0%
2008............................................. 7,392 2.0% 306,789 1.7%
2009 and thereafter.............................. 90,415 24.7% 5,320,862 29.9%
--------------- ----- --------------- -----
Totals........................................... $365,704 100.0% 17,791,667 100.0%
--------------- ----- --------------- -----
--------------- ----- --------------- -----
</TABLE>
- ------------------------
(1) Office rent represents rents due under leases that existed as of July 31,
1999. Total rent for office properties for the year ended December 31, 1998,
was $245,955,000, and total rent for office properties for the six months
ended June 30, 1999 was $158,889,000. About 71% of our office rent is gross
rent; 10% of our office rent is net rent; most of our Government leases
require modified gross rent. Accordingly, the rent shown in this table is
not necessarily indicative of contributions to our net operating income.
(2) Represents square feet occupied as of July 31, 1999. This 17.8 million
square feet of occupied space accounts for 98% of our total office space
available for rent.
25
<PAGE>
HRPT MANAGEMENT
After the spin-off, the trustees and executive officers of HRPT will be as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- --------------------------------------------------
<S> <C> <C>
Barry M. Portnoy............... 54 Managing Trustee (term will expire in 2002)
Gerard M. Martin............... 64 Managing Trustee (term will expire in 2000)
Rev. Justinian Manning, C.P.... 73 Independent Trustee (term will expire in 2000)
Patrick F. Donelan............. 57 Independent Trustee (term will expire in 2001)
Vacancy........................ Independent Trustee (term will expire in 2002)
John A. Mannix................. 43 President and Chief Operating Officer
John Popeo..................... 39 Treasurer, Chief Financial Officer and Secretary
David M. Lepore................ 39 Senior Vice President
</TABLE>
BARRY M. PORTNOY has been a managing trustee of both HRPT and Hospitality
Properties since their organization in 1986 and 1995, respectively. Mr. Portnoy
is also a Director and 50% owner of Reit Management. Mr. Portnoy has been
actively involved in real estate and real estate finance activities as an
attorney, investor and manager for over 20 years. Mr. Portnoy was a partner in
the law firm of Sullivan & Worcester LLP, Boston, Massachusetts from 1978
through March 31, 1997, and he served as Chairman of that firm from 1994 through
March 1997.
GERARD M. MARTIN has been a managing trustee of both HRPT and Hospitality
Properties since their organization in 1986 and 1995, respectively. Mr. Martin
is also a Director and 50% owner of Reit Management. Mr. Martin has been active
in the real estate and senior housing industries as a developer, owner and
manager for approximately 30 years. During the past five years, Mr. Martin's
principal employment has been as a managing trustee of HRPT and Hospitality
Properties.
THE REVEREND JUSTINIAN MANNING, C.P. has been, since September 1990, the
pastor of St. Gabriel's parish in Brighton, Massachusetts. He is also on the
Board of Directors of Charlesview, a low and moderate income housing program. He
is past Treasurer and a former Director of St. Paul's Benevolent, Educational
and Missionary Institute, a New Jersey corporation, which oversees foundations
in various states and the Institute's Overseas Missions. He was formerly on the
Board of Directors of St. Paul's Monastery Manor in Pittsburgh, Pennsylvania, a
congregate housing facility. He belonged to the Provincial Council of the
Passionist Provincialate and is the former Director of Consolidation for the
Community.
PATRICK F. DONELAN has been since 1998 a Director of Dresdner Kleinwort
Benson, and since 1996 an Executive Vice President of Dresdner Kleinwort Benson
North America LLC, a New York based bank, which is a subsidiary of Dresdner Bank
AG of Germany. Prior to 1996 Mr. Donelan was Chairman of Kleinwort Benson North
America, Inc., a subsidiary of Kleinwort Benson Ltd. of England, which was
acquired by Dresdner Bank AG in 1995.
VACANCY. Currently our third independent trustee is Dr. Bruce Gans. Upon
completion of this spin-off Dr. Gans will resign from HRPT and be elected an
independent trustee of Senior Housing. We intend to elect a third independent
trustee after Dr. Gans resigns, but we have not yet selected anyone to fill this
position.
JOHN A. MANNIX will become our President and Chief Operating Officer upon
completion of the spin-off. Mr. Mannix has served as our Executive Vice
President since May 1998. Mr. Mannix has been a Vice President of our investment
advisor, Reit Management, and its affiliates since 1989. Mr. Mannix is a member
of the Urban Land Institute.
JOHN POPEO will become our Treasurer, Chief Financial Officer and Secretary
upon completion of the spin-off. Mr. Popeo has been the Treasurer and Chief
Financial Officer of Reit Management
26
<PAGE>
since 1997. Prior to 1997, he was employed by The Beacon Companies from 1988
through 1992 and as Vice President and Controller from 1996 through 1997. From
1992 through 1996 he was employed by First Winthrop Corp. as Vice President and
Controller. Mr. Popeo has held various positions in the real estate industry
from 1985 through 1988, prior to which he was employed by the public accounting
firm of Laventhol and Horwath. Mr. Popeo is a certified public accountant.
DAVID M. LEPORE is our Senior Vice President. Mr. Lepore is responsible for
building operations, leasing and acquisition diligence for our properties. Mr.
Lepore has been employed in various capacities by our investment advisor, Reit
Management, since 1992. Prior to 1992 he was employed by The Beacon Companies.
Mr. Lepore is a member of Building Owners and Managers Association and is a
certified Real Property Administrator.
ADDITIONAL INFORMATION ABOUT HRPT
If you would like more information about HRPT than is included in this
prospectus, you should study the public information which we have filed with the
SEC.
27
<PAGE>
INFORMATION ABOUT SENIOR HOUSING PROPERTIES TRUST
GENERAL
Senior Housing is a REIT organized under Maryland law to acquire, own and
lease senior apartments, congregate communities, assisted living properties and
nursing homes. Senior Housing owns 93 properties which have 13,571 units and are
leased to nine different tenants.
GROWTH STRATEGY
The population of the United States is aging. Senior Housing believes that
this demographic fact will increase the demand for existing senior apartments,
congregate communities, assisted living properties and nursing homes and
encourage development of new properties. Senior Housing's basic business plan is
to profit from the increasing demand in two ways. First, Senior Housing intends
to purchase additional properties and lease them at initial rents that are
greater than its costs of acquisition capital. Second, Senior Housing intends to
structure leases that provide for periodic rental increases based in part upon
gross operating revenue increases at its properties.
A primary purpose of the spin-off is to form a new REIT with a strong core
of senior housing real estate and a management team dedicated to take advantage
of present market conditions. To facilitate these efforts two senior officers of
Senior Housing's investment advisor will devote approximately 75% of their
business time to growing Senior Housing's business. David J. Hegarty is
currently the President and Chief Operating Officer of both Reit Management and
HRPT and a Director of Reit Management. Ajay Saini is currently a Vice President
of Reit Management and Treasurer and Chief Financial Officer of HRPT. Upon
completion of the spin-off, Messrs. Hegarty and Saini will resign their
positions at HRPT and assume similar positions at Senior Housing. Mr. Hegarty
will remain an officer and a Director of Reit Management and Mr. Saini will
remain an officer of Reit Management. Other personnel of Reit Management
including Senior Housing's managing trustees, Messrs. Portnoy and Martin, will
also devote a significant part of their time to assist in Senior Housing's
growth efforts.
Senior Housing believes that current market conditions make a focus on
senior housing investments appropriate at this time for the following reasons:
- A large number of new properties developed by start up assisted living
companies during the past few years have been completed and are now
available for investment with limited start up risks.
- The current shortage of debt and equity capital for real estate
investments associated with healthcare has reduced the financing options
available to all senior housing property owners and limited the amount of
new development activities being undertaken.
- The combination of the foregoing circumstances has made prices of senior
housing properties, especially nursing homes, more attractive than they
have been during the past three years.
Senior Housing will use bank loans initially to fund its acquisitions.
Periodically, Senior Housing will repay the bank loans with long term debt or
equity issuances. For more information about Senior Housing's bank credit
facility, see "Senior Housing Policies--Financing Policies" on page 66 of this
prospectus.
28
<PAGE>
HISTORY AND MANAGEMENT
Senior Housing is currently a 100% owned subsidiary of HRPT. There are 26
million shares of Senior Housing outstanding. As part of the spin-off HRPT will
distribute 13.2 million Senior Housing shares to HRPT's shareholders on the
basis of one Senior Housing share for every 10 HRPT shares owned on the record
date of October , 1999. After the spin-off Senior Housing will be a separate
public company, 51% owned by the public and 49% owned by HRPT, and Senior
Housing's shares will trade on the NYSE. For more information about the
formation of Senior Housing, see "The Spin-Off" on page 17 of this prospectus.
Senior Housing's operations will be conducted by its investment advisor. The
investment advisor has approximately 180 full time employees, including a
headquarters management staff, four regional offices and other personnel located
throughout the United States. Based upon 13 years of investing and managing
senior housing real estate through HRPT and four years of operating Hospitality
Properties, Reit Management and its principals have experience in managing REITs
to produce increasing distributions and have extensive contacts in the senior
housing industry. Senior Housing believes that this experience and these
contacts will allow Senior Housing to keep abreast of industry developments and
learn of business opportunities as they occur.
The principals of Reit Management, Barry M. Portnoy and Gerard M. Martin,
founded HRPT in 1986 as a public company with $63 million invested in seven
healthcare properties leased to two tenants. Since 1986, under the direction of
Messrs. Portnoy and Martin and other personnel of Reit Management, HRPT has made
51 consecutive quarterly distributions and has increased its distribution rate
13 times. In 1995 Reit Management organized Hospitality Properties, a REIT that
invests in hotel properties. At its initial public offering in August 1995,
Hospitality Properties had $329 million invested in 37 hotels leased to one
tenant. Since it was founded in 1995, Hospitality Properties has raised
approximately $2 billion of capital, paid 16 consecutive quarterly distributions
and increased its distribution rate 11 times. YOU SHOULD NOTE THAT THE PAST
SUCCESS OF REIT MANAGEMENT AND ITS AFFILIATE IN MANAGING HRPT AND HOSPITALITY
PROPERTIES IS NOT NECESSARILY INDICATIVE OF WHAT SENIOR HOUSING'S PERFORMANCE
WILL BE. IN PARTICULAR, HRPT AND HOSPITALITY PROPERTIES HAVE OPERATED IN MARKET
CONDITIONS WHICH ARE SUBSTANTIALLY DIFFERENT FROM THE MARKET CONDITIONS IN WHICH
SENIOR HOUSING WILL OPERATE.
SENIOR HOUSING REAL ESTATE MARKET
DEMAND GROWTH. Senior Housing believes that three important demographic
trends will increase demand for senior apartments, congregate communities,
assisted living properties and nursing homes for the foreseeable future:
- First, the U.S. Census Bureau has projected that the U.S. population over
age 85 will increase from 3.1 million in 1990, to 4.3 million in 2000, to
5.7 million in 2010 and to 6.5 million in 2020. As people age they have an
increasing need for the type of assistance with daily living activities
that is provided in senior apartments, congregate communities, assisted
living properties and nursing homes. This is because old age is usually
accompanied by various physical disabilities and because the aging process
sometimes is accompanied by Alzheimer's disease and other forms of
dementia that require specialized, secure housing.
- Second, societal changes during the past 35 years in the U.S. have made
senior housing more often required than in historical periods. The
increasing percentage of women working away from their homes, the high
divorce rate and societal mobility have all combined to make traditional
arrangements of family care for aging relatives less available. These
social trends show no sign of reversal in the foreseeable future.
29
<PAGE>
- Third, economic factors appear to encourage demand for specialized senior
housing properties. Although some people extol the benefits of homemaker
services and home healthcare, it is generally more economically efficient
to congregate the elderly in properties with specialized services than to
bring those services to diverse locations. Similarly, the cost containment
pressure to reduce lengths of stay for the elderly in high cost
specialized properties such as hospitals has increased the need for
intermediate care properties.
PAYMENT ISSUES. Since the introduction of the Medicare and Medicaid
programs in the late 1960s, governments have become the principal payment source
for senior housing properties in which healthcare services are provided, such as
nursing homes. In the past few years a number of federal and state laws have
been enacted to reduce the growth of Medicare and Medicaid expenditures. These
laws have made it less profitable to own and operate senior housing properties
in which healthcare services are provided.
Senior Housing believes that the net effect of the increasing demand for
senior housing properties and the payment limitations in the Medicare and
Medicaid programs may make it increasingly profitable to own and operate senior
housing properties which are able to attract residents who use private resources
to pay occupancy costs and increasingly less profitable to own and operate
senior housing properties which depend upon the Medicare and Medicaid programs.
TYPES OF PROPERTIES
Senior Housing expects to invest in properties which offer four types of
senior housing accommodations, including some properties that combine more than
one type in a single building or campus.
SENIOR APARTMENTS. Senior apartments are marketed to residents who are
generally capable of caring for themselves. Residence is generally restricted on
the basis of age. Purpose built properties may have special function rooms,
concierge services, high levels of security and centralized call buttons for
emergency use. Tenants at these properties who need healthcare or assistance
with the activities of daily living are expected to contract independently for
those services with homemakers or home healthcare companies.
CONGREGATE COMMUNITIES. Congregate communities also provide a high level of
privacy to residents and require residents to be capable of relatively high
degrees of independence. Unlike a senior apartment property, a congregate
community usually bundles several services as part of a regular monthly
charge--for example, one or two meals per day in a central dining room, weekly
maid service or a social director. Additional services are generally available
from staff employees on a fee-for-service charge basis. In some congregate
communities, separate parts of the property are dedicated to assisted living or
nursing services.
ASSISTED LIVING PROPERTIES. Assisted living properties are typically
comprised of one bedroom suites which include private bathrooms and efficiency
kitchens. Services provided usually include three meals per day in a central
dining room, daily housekeeping, laundry, medical reminders and 24 hour
availability of assistance with the activities of daily living such as dressing
and bathing. Professional nursing and healthcare services are usually available
at the facility on call or at regularly scheduled times. Since the early 1990s
there has been an explosive growth in the number of small public companies
developing purpose built assisted living properties. Many of those properties
have recently been completed and are now fully occupied and appropriate
investments for Senior Housing.
30
<PAGE>
NURSING HOMES. Nursing homes generally provide extensive nursing and
healthcare services similar to those available in hospitals, without the high
costs associated with operating theaters, emergency rooms or intensive care
units. A typical purpose built nursing home includes mostly two-bed rooms with a
separate toilet in each room and shared dining and bathing facilities. Some
private rooms are often available for those residents who can afford to pay
higher rates or for patients whose medical conditions require segregation.
Nursing homes are generally staffed by licensed nursing professionals 24 hours
per day.
During the past few years nursing home owners and operators have faced two
significant business challenges. First, the rapid expansion of the assisted
living industry which started in the early 1990s has attracted a number of
residents away from nursing homes. This was especially significant because the
residents who elected assisted living facilities had often previously been the
most profitable residents in the nursing homes--residents who required a lesser
amount of care and who were able to pay higher private rates rather than
government rates. According to a 1998 study by SMG Marketing Group, Inc., the
average occupancy of U.S. nursing homes declined from 93% in 1994 to about 88%
in 1997.
The second major challenge arose as a result of Medicare and Medicaid cost
containment laws beginning in 1994, particularly 1997 federal legislation that
required the Medicare program to implement a prospective payment program for
various subacute services provided in skilled nursing homes. Implementation of
this Medicare prospective payment program began on July 1, 1998. Prior to the
prospective payment program Medicare paid nursing home operators based upon
audited costs for services provided. The prospective payment system sets
Medicare rates based upon government estimated costs of treating specified
medical conditions. Although it is possible that a nursing home may increase its
profit if it is able to provide quality services at below average costs, Senior
Housing believes that the effect of the new Medicare rate setting methodology
will be to reduce the profitability of Medicare services in nursing homes. This
belief is based on similar Medicare changes that were implemented for hospitals
during the 1980s. Several of Senior Housing's tenants have recently reported
significant operating losses, particularly Mariner Post-Acute Network, Inc.,
Integrated Health Services, Inc. and Genesis Health Ventures, Inc.
Starting in 1995 HRPT formed the opinion that the market value of nursing
home properties did not adequately reflect the negative impact of then current
and emerging market conditions. For this reason beginning in 1996 HRPT began to
limit its nursing home purchases and to dispose of nursing home properties which
were dependent upon subacute services paid by Medicare. Senior Housing now
believes that the market is in the process of taking account of these factors
and adjusting the prices of nursing home properties. Senior Housing also
believes that the demographic factors described above combined with the adjusted
pricing levels may make nursing home properties attractive investments at this
time. Senior Housing expects to focus its future assisted living and nursing
home investments in facilities that have a high percentage of non-government
revenues. When Senior Housing invests in assisted living properties and nursing
homes that are dependent upon government revenues it will attempt to set the
purchase prices and rents at levels which are securely covered by existing and
projected cash flows from its tenants' operations.
GOVERNMENT REGULATIONS AND RATE SETTING
SENIOR APARTMENTS. Generally, government programs do not pay for housing in
senior apartments. Rents are paid from the residents' private resources.
Accordingly, the government regulations that apply to these types of properties
are generally limited to zoning, building and fire codes, Americans with
Disabilities Act requirements and other life safety type regulations applicable
to residential real estate. Government rent subsidies and government assisted
development financing
31
<PAGE>
for low income senior housing are exceptions to these general statements. The
development and operation of subsidized senior housing properties are subject to
numerous governmental regulations. While it is possible that Senior Housing may
purchase and lease some subsidized senior apartment properties, it does not
expect these investments to be a major part of its future business, and today it
owns no properties where rent subsidies are applicable.
CONGREGATE COMMUNITIES. Senior Housing understands that generally
government benefits are not available to congregate communities and the resident
charges in these properties are paid from private resources. However, a number
of Federal Supplemental Security Income program benefits pay housing costs for
elderly or disabled residents to live in these types of residential facilities.
The Social Security Act requires states to certify that they will establish and
enforce standards for any category of group living arrangement in which a
significant number of supplemental security income residents reside or are
likely to reside. Categories of living arrangements which may be subject to
these state standards include congregate facilities and assisted living
properties. Because congregate communities usually offer common dining
facilities, in many locations they are required to obtain licenses applicable to
food service establishments in addition to complying with land use and life
safety requirements. In many states, congregate communities are licensed by
state health departments, social service agencies, or offices on aging with
jurisdiction over group residential facilities for seniors. To the extent that
congregate communities maintain units in which assisted living or nursing
services are provided, these units are subject to applicable state regulations.
In some states, insurance or consumer protection agencies regulate congregate
communities in which residents pay entrance fees or prepay other costs.
ASSISTED LIVING. According to the National Academy for State Health Policy,
by early 1999, 32 states provided Medicaid payments for residents in some
assisted living properties under waivers granted by the Health Care Finance
Administration of the U.S. Department of Health and Human Services or under
Medicaid state plans and three other states are planning to do so. Because rates
paid to assisted living property operators are lower than rates paid to nursing
home operators some states use this waiver program as a means of lowering the
cost of services for residents who may not need the higher intensity of medical
care provided in nursing homes. States that administer Medicaid programs for
assisted living facilities are responsible for monitoring the services at and
physical conditions of the participating properties. Different states apply
different standards in these matters, but generally Senior Housing believes
these monitoring processes are similar to the concerned states' inspection
processes for nursing homes.
Because of the large number of states using Medicaid to purchase services at
assisted living properties, it is not surprising that a majority of states have
adopted licensing standards applicable to assisted living facilities. According
to a 1998 study by the National Academy for State Health Policy, 33 states had
taken steps to implement assisted living policies as of June 1998, and 11 others
had instituted processes to study the issue. According to the National
Conference of State Legislatures, 32 states planned to consider legislation
related to assisted living during 1999. State regulatory models vary; there is
no national consensus on a definition of assisted living, and no uniform
approach by the states to regulating assisted living facilities. Some state
licensing standards apply to assisted living facilities whether or not they
accept Medicaid funding. Moreover, the 1998 National Academy for State Health
Policy study referenced above found that several states require certificates of
need from state health planning authorities before new assisted living
properties may be developed. Also, the study found that three states have
adopted moratoria on the development of new assisted living facilities. Based on
Senior Housing's analysis of current economic and regulatory trends, it believes
that assisted living properties that become dependent upon Medicaid payments for
a majority of their revenues will decline in value because Medicaid rates will
fail to keep up with
32
<PAGE>
increasing costs. For the same reason, Senior Housing also believes that
assisted living properties located in states that adopt certificate of need
requirements or otherwise restrict the development of new assisted living
properties will increase in value because these limitations upon development
will help ensure higher occupancy and higher non-governmental rates.
Accordingly, Senior Housing intends to focus new investments in assisted living
properties that are not overly dependent upon governmental revenues and that are
in areas where there are barriers to competition created by certificate of need
laws or otherwise.
One federal government study was recently completed and another is currently
underway to provide background information and make recommendations regarding
the regulation of, and the possibility of increased governmental funding for,
the assisted living industry. In April 1999, the General Accounting Office
issued a report to the Senate Special Committee on Aging and the Committee held
hearings on consumer protection and quality of care issues in assisted living
facilities. The GAO studied assisted living facilities in four states and found
a variety of residential settings serving a wide range of resident health and
care needs. The GAO found that providers often give consumers insufficient
information to determine whether a particular facility can meet their needs and
that state licensing and oversight approaches vary widely. The GAO anticipates
that as the states increase the use of Medicaid to pay for assisted living,
federal financing will likewise grow, and these trends will focus more public
attention on the place of assisted living in the continuum of long-term care and
upon state standards and compliance approaches. The second study is being
conducted by the Department of Health and Human Services' Assistant Secretary
for Planning and Evaluation and is expected to touch upon all aspects of the
assisted living industry including quality of care and financing. The 1998
National Academy for State Health Policy study referenced above and an April
1999 report on a national survey of assisted living facilities are part of this
second study, which is expected to be completed during 1999. Senior Housing
cannot predict whether these studies will result in governmental policy changes
or new legislation, or what impact any changes may have. Based upon its analysis
of current economic and regulatory trends, Senior Housing does not believe that
the federal government is likely to have a material impact upon the current
regulatory environment in which the assisted living industry operates unless it
also undertakes expanded funding obligations; and Senior Housing does not
believe a materially increased financial commitment from the federal government
is presently likely. However, it does anticipate that assisted living facilities
will increasingly be licensed and regulated by the various states, and that with
the absence of federal standards, the states' policies will continue to vary
widely.
NURSING HOMES. About 67% of all nursing home revenues in 1997 came from
government Medicare and Medicaid programs. Nursing homes are also among the most
highly regulated businesses in the country. The federal and state governments
regularly monitor the quality of care provided at nursing homes and regularly
inspect the physical condition of nursing home properties. These periodic
inspections and occasional changes in life safety and physical plant
requirements sometimes require nursing home owners to spend money for capital
improvements. These mandated capital improvements have in the past usually
resulted in Medicare and Medicaid rate adjustments, albeit on the basis of
amortization of expenditures over extended useful lives of the improvements.
However, under the new Medicare payment system capital costs are part of the
prospective rate and will not be facility specific. Other recent legislative and
regulatory actions with respect to state Medicaid rates and the Medicare
prospective payment system which began being phased in during 1998 are limiting
the reimbursement levels for some nursing home and other eldercare services. At
the same time federal enforcement and oversight of nursing homes is increasing,
thereby making licensing and certification of these facilities more rigorous.
These actions have adversely affected the
33
<PAGE>
revenues and increased the expenses of many nursing home operators, including
several of Senior Housing's tenants.
The federal Health Care Financing Administration, HCFA, has begun to
implement an initiative to increase the effectiveness of Medicare/Medicaid
nursing facility survey and enforcement activities. HCFA's initiative follows
its July 1998 report to Congress on the effectiveness of the survey and
enforcement system, several March 1999 reports by HCFA's Office of Inspector
General concerning quality of care in nursing homes, a July 1998 General
Accounting Office investigation which found inadequate care in a significant
proportion of California nursing homes, a March 1999 GAO report which
recommended that HCFA and the states strengthen their compliance and enforcement
practices to better ensure that nursing homes provide adequate care, and recent
hearings by the Senate Special Committee on Aging on these issues. HCFA plans to
focus survey and enforcement efforts at nursing homes with repeat violations of
Medicare/Medicaid standards, including chain-operated facilities with patterns
of noncompliance. HCFA also plans to require state agencies to use enforcement
sanctions and remedies more promptly and effectively when substandard care is
identified. HCFA is increasing its oversight of state survey agencies. In
addition HCFA has adopted new regulations expanding federal and state authority
to impose civil money penalties in instances of noncompliance. Medicare/Medicaid
survey results for each nursing home are being posted on the internet. Federal
efforts to target fraud and abuse by Medicare and Medicaid providers have also
increased. An adverse determination concerning any tenant's license or
eligibility for Medicare or Medicaid reimbursement could restrict its ability to
pay rent.
Most states also limit the number of nursing homes by requiring developers
to obtain certificates of need before new facilities may be built. Even in those
states such as California and Texas that have eliminated certificate of need
laws, the state health authorities usually have retained other means of limiting
new nursing home development. Examples of these other means are the use of
licensing laws or limitations upon participation in the state Medicaid program.
Senior Housing believes that these governmental limitations generally make
nursing home properties more valuable by extending their useful lives and
limiting competition.
COMPETITION
Several REITs which own apartments have focused some of their investments on
senior apartments. In addition, there are several publicly owned REITs that
today focus upon investing in healthcare real estate. Also, some asset based
finance companies and banks have marketing programs to provide sale leaseback
and mortgage financing for these types of properties. Some of these competitors
have resources that are greater than those which Senior Housing has and some
have a lower cost of capital. For example, Pacific Gulf Properties, Inc. is an
established REIT with $876 million in total assets that develops and owns senior
housing properties. Healthcare Property Investors, Inc., with assets of $1.5
billion, and Nationwide Health Properties, Inc., with assets of $1.4 billion,
both emphasize investments in assisted living properties and both have good
access to debt capital because of their investment grade ratings. Also, GMAC, a
finance affiliate of General Motors Corporation, has a group of personnel that
focus upon making nursing home mortgage loans. Nonetheless, Senior Housing
believes that it will be able to successfully compete for new investments for at
least five reasons:
First, Senior Housing will commence business with a large and diversified
portfolio of properties that are subject to long term leases.
Second, unlike most of its competitors, Senior Housing will be exclusively
focused on senior housing properties. Senior Housing does not intend to invest
in medical office buildings or any properties which do not benefit from the
projected aging of the American population.
34
<PAGE>
Third, current market conditions have created an opportunity for a new
market entrant to invest in senior housing properties. A large number of
recently developed properties are currently available for purchase. Concerns
about the new Medicare prospective payment system have limited capital for new
development and have reduced financing alternatives available to some of Senior
Housing's competitors and prospective tenants. These same concerns have caused
nursing homes to be revalued so that purchase prices and rents can be set at
levels which are well covered by current and projected property operations.
Fourth, Senior Housing's proposed methods of doing business are intended to
be attractive to prospective sellers and tenants. Senior Housing intends to do
business with sellers and tenants who are unaffiliated with it and to retain the
financial flexibility to work with tenants to meet their business requirements.
Some of Senior Housing's REIT competitors are under common control with large
tenants which compete with other prospective tenants. This fact often makes
sellers and tenants reluctant to disclose to their competitors the operating
information necessary for a successful transaction. Some of the finance
companies that target healthcare property investments and some healthcare REITs
that emphasize mortgage lending depend upon the asset backed bond markets for
funding. Asset backed financing has historically afforded borrowers and tenants
limited flexibility to adjust mortgage or lease terms to accommodate changes in
the tenants' businesses during long term leases. Although Senior Housing may
borrow on a secured basis, it expects to retain title to all of its property
investments in order to be able to work with tenants to meet their business
requirements.
Finally, and perhaps most importantly, Senior Housing's investment advisor,
Reit Management, and Messrs. Portnoy, Martin, Hegarty and Saini have experience
and contacts in the senior housing real estate market based upon their history
of acquiring and managing senior housing investments through HRPT.
35
<PAGE>
SENIOR HOUSING DISTRIBUTION POLICY
After completion of the spin-off, Senior Housing intends to make regular
quarterly distributions to shareholders. The initial distribution of $0.60 per
Senior Housing share will relate to the 1999 third quarter and will be paid to
Senior Housing shareholders of record on October , 1999. Cash distributions
are paid about 30 days after the record date. Senior Housing intends to maintain
this rate for one year following the spin-off unless its operating results
differ materially from what it now expects. Senior Housing expects that this
distribution rate will exceed its minimum distribution requirement to maintain
REIT status and will exceed its earnings. Distributions in excess of earnings
represent return of capital for federal income tax purposes. Assuming that its
distribution rate remains unchanged for the next year, and that its earnings for
this period are as estimated in the table below, Senior Housing estimates that
approximately 19% of its annual distributions in its first year of operations
will be a return of capital. The percent of annual distributions which will be a
return of capital for tax purposes will vary from tax year to tax year. Under
current law, distributions in excess of earnings which are a return of capital
are not taxable but these amounts reduce a shareholder's basis in his shares,
and, accordingly, increase taxable gains when shares are sold. For a more
detailed discussion of the tax consequences of Senior Housing's distributions,
see "Federal Income Tax and ERISA Consequences" beginning on page 78 of this
prospectus.
The initial distribution rate was set based upon Senior Housing's estimate
of the cash available for distribution and FFO it believes it will realize from
its existing properties during the year following the spin-off. All future
distributions will be set by its board of trustees. When deciding the amount of
future distributions Senior Housing expects its board of trustees will primarily
consider the actual cash available for distribution and FFO realized and
projections of future cash available for distribution and FFO. However, in
making these decisions the board may consider capital requirements, the legal
requirements that REITs distribute at least 95% of net taxable earnings and
other factors the board deems relevant from time to time. The amounts of future
cash available for distribution, FFO and distributions are not now known or
knowable and they cannot be assured.
The following table sets forth Senior Housing's calculation of estimated
earnings, FFO and cash available for distribution for the twelve months
following the spin-off. In making these estimates Senior Housing has started its
calculation with historical audited operating results and made adjustments to
reflect known events which have occurred and events which it expects to occur at
or shortly after the completion of the spin-off. In this calculation no effect
is shown from changes in working capital, I.E., changes in current assets or
current liabilities, because these changes are not expected to be material.
Similarly, except for the $200 million to be borrowed under Senior Housing's
bank credit facility, no effect is shown from possible future financing or
investing activities because these activities cannot now be estimated. In
considering this table you should recognize that FFO and cash available for
distribution may not be as good a measure of operating performance as earnings
determined according to generally accepted accounting principles, or GAAP.
Similarly, FFO and cash available for distribution are not intended to
substitute for cash flow determined according to GAAP. Cash available for
distribution and FFO are presented because Senior Housing believes they will be
a basis used by investors to compare Senior Housing's operating results with
those of other REITs, because they were used to set the initial distribution
rate and because Senior Housing expects they will be important considerations
used by Senior Housing's board of trustees to determine future distributions.
36
<PAGE>
CALCULATION OF ESTIMATED EARNINGS, FFO AND CASH AVAILABLE
FOR DISTRIBUTION FOR THE TWELVE MONTHS FOLLOWING THE SPIN-OFF
(000s except per share amounts and percentages)
<TABLE>
<CAPTION>
PRO FORMA
----------
<S> <C>
Net income for the year ended December 31, 1998........................................... $51,691
Plus: net income for the six months ended June 30, 1999................................. 24,293
Less: net income for the six months ended June 30, 1998................................. (25,219)
----------
Net income for the 12 months ended June 30, 1999.......................................... 50,765
Plus adjusted real estate depreciation for the 12 months following completion of the
spin-off (1)............................................................................ 20,466
----------
FFO for the 12 months following completion of the spin-off (2)............................ 71,231
Net effect of non-cash rents (3).......................................................... (3,076)
----------
Estimated cash flow from operating activities for the 12 months following completion of
the spin-off (4)........................................................................ $68,155
----------
----------
Estimated cash available for distribution for the 12 months following completion of the
spin-off................................................................................ $68,155
----------
----------
Estimated cash distributions for the 12 months following completion of the spin-off (5)... $62,400
----------
----------
Initial annual distribution per share (5)................................................. $2.40
----------
----------
Estimated percentage of distributions in excess of net income for the 12 months following
completion of the spin-off, I.E., return of capital (6)................................. 18.6%
----------
----------
Distribution payout ratio of estimated cash available for distribution for the 12 months
following completion of the spin-off (7)................................................ 91.6%
----------
----------
</TABLE>
- ------------------------
(1) Pro forma real estate depreciation for the year ended December 31, 1998, of
$18.5 million plus pro forma real estate depreciation for the six months
ended June 30, 1999, of $11.2 million minus pro forma real estate
depreciation for the six months ended June 30, 1998, of $9.2 million.
(2) Funds from operations or "FFO," as defined in the white paper on funds from
operations which was approved by the Board of Governors of NAREIT in March
1995, is net income computed in accordance with GAAP, before gains or losses
from sales of properties and extraordinary items, plus depreciation and
amortization and after adjustment for unconsolidated partnerships and joint
ventures. Senior Housing considers FFO to be an appropriate measure of
performance for an equity REIT, along with cash flow from operating
activities, financing activities and investing activities, because it
provides investors with an indication of an equity REIT's ability to incur
and service debt, make capital expenditures, pay distributions and fund
other cash needs. Senior Housing computes FFO in accordance with the
standards established by NAREIT which may not be comparable to FFO reported
by other REITs that do not define the term in accordance with the current
NAREIT definition or that interpret the current NAREIT definition
differently. FFO does not represent cash generated by operating activities
in accordance with GAAP and should not be considered as an alternative to
net income, determined in accordance with GAAP, as an indication of
financial performance or the cash flow from operating activities, determined
in accordance with GAAP, as a measure of liquidity.
37
<PAGE>
(3) Represents the difference between annual rental revenue calculated in
accordance with GAAP and cash amounts currently being paid by tenants.
(4) For purposes of this presentation there are assumed to be no significant
sources or uses of cash for investing and financing activities for the 12
months following completion of the spin-off because Senior Housing is not
now able to estimate these sources and uses.
(5) Based on a total of 26 million shares to be outstanding after the spin-off
and assuming no additional shares are issued and that the distribution rate
remains unchanged.
(6) This estimated percentage is calculated as the excess of estimated cash
distributions for the 12 months following the spin-off of $62,400,000 over
pro forma net income for the 12 months ended June 30, 1999, of $50,765,000
divided by estimated cash distributions for the 12 months following the
spin-off of $62,400,000.
(7) The distribution payout ratio of estimated pro forma FFO for the 12 months
following completion of the spin-off will be 87.6%.
38
<PAGE>
SENIOR HOUSING PROPERTIES
Senior Housing has investments totaling $770 million in 93 properties
located in 26 states:
[CHART]
<TABLE>
<CAPTION>
NO. OF NO. OF
STATE PROPERTIES STATE PROPERTIES
- ------------------------- --------------- INVESTMENT ------------------------- --------------- INVESTMENT
----------- ----------
(000S) (000S)
<S> <C> <C> <C> <C> <C>
Arizona.................. 6 $42,861 Missouri................. 2 $3,788
California............... 8 53,879 Nebraska................. 10 10,667
Colorado................. 8 34,348 New Jersey............... 1 13,007
Connecticut.............. 6 53,762 New York................. 1 10,700
Florida.................. 5 131,990 North Carolina........... 3 6,389
Georgia.................. 4 12,308 Ohio..................... 1 3,445
Illinois................. 2 98,742 Pennsylvania............. 1 15,598
Iowa..................... 6 8,207 South Dakota............. 3 7,589
Kansas................... 1 1,320 Texas.................... 1 12,410
Louisiana................ 1 18,887 Virginia................. 3 57,666
Maryland................. 1 33,080 Washington............... 2 19,542
Massachusetts............ 4 69,562 Wisconsin................ 8 33,904
Michigan................. 2 9,135 Wyoming.................. 3 7,245
-- ----------
Total 93 $770,031
-- ----------
-- ----------
</TABLE>
39
<PAGE>
The following table presents information about the 93 properties that Senior
Housing owns, grouped by tenant:
<TABLE>
<CAPTION>
BUILT/
LOCATION PROPERTY TYPE RENOVATED(1) UNITS/BEDS(2)
- ---------------------------------- ----------------- --------------- --------------- HISTORICAL
INVESTMENT
AT COST(3)
-----------
(000S)
<S> <C> <C> <C> <C>
MARRIOTT INTERNATIONAL, INC.
Scottsdale, AZ Assisted Living 1990 148 $9,926
Sun City, AZ Assisted Living 1990 148 11,916
Laguna Hills, CA Congregate Care 1991 402 31,791
Boca Raton, FL Congregate Care 1999 347 44,836
Deerfield Beach, FL Congregate Care 1986 288 16,935
Fort Myers, FL Congregate Care 1987 463 23,905
Palm Harbor, FL Congregate Care 1992 319 33,863
Port St. Lucie, FL Assisted Living 1993 128 12,451
Arlington Heights, IL Congregate Care 1986 363 36,742
Silver Spring, MD Congregate Care 1992 351 33,080
Bellaire, TX Assisted Living 1991 145 12,410
Arlington, VA Congregate Care 1992 419 18,889
Charlottesville, VA Congregate Care 1991 315 29,829
Virginia Beach, VA Assisted Living 1990 114 8,948
------ -----------
3,950 325,521
BROOKDALE LIVING COMMUNITIES, INC.
Mesa, AZ Congregate Care 1985 185 14,800
Chicago, IL Congregate Care 1990 341 62,000
Brighton, NY Congregate Care 1988 103 10,700
Spokane, WA Congregate Care 1993 200 14,350
------ -----------
829 101,850
MARINER POST-ACUTE NETWORK, INC.
Phoenix, AZ Nursing Home 1984 127 3,185
Yuma, AZ Nursing Home 1984 128 2,326
Yuma, AZ Congregate Care 1984 65 708
Fresno, CA Nursing Home 1985 180 3,503
Lancaster, CA Nursing Home 1994 99 3,488
Newport Beach, CA Nursing Home 1994 167 4,128
Stockton, CA Nursing Home 1991 122 3,136
Tarzana, CA Nursing Home 1969 192 3,060
Thousand Oaks, CA Nursing Home 1970 124 3,454
Van Nuys, CA Nursing Home 1984 58 1,319
Lakewood, CO Nursing Home 1985 175 4,721
Littleton, CO Nursing Home 1965 230 5,576
Concord, NC Nursing Home 1990 110 2,216
Wilson, NC Nursing Home 1990 119 2,402
Winston-Salem, NC Nursing Home 1990 80 1,771
Huron, SD Nursing Home 1977 163 3,256
Huron, SD Congregate Care 1968 59 1,014
Sioux Falls, SD Nursing Home 1979 139 3,319
Brookfield, WI Nursing Home 1995 226 12,697
Clintonville, WI Nursing Home 1965 78 1,761
Clintonville, WI Nursing Home 1969 109 1,747
Madison, WI Nursing Home 1987 73 1,887
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
BUILT/
LOCATION PROPERTY TYPE RENOVATED(1) UNITS/BEDS(2)
- ---------------------------------- ----------------- --------------- ---------------
HISTORICAL
INVESTMENT
AT COST(3)
-----------
(000S)
<S> <C> <C> <C> <C>
Milwaukee, WI Nursing Home 1983 215 $5,043
Milwaukee, WI Nursing Home 1997 102 1,601
Pewaukee, WI Nursing Home 1969 237 3,416
Waukesha, WI Nursing Home 1995 105 5,752
------ -----------
3,482 86,486
INTEGRATED HEALTH SERVICES, INC.
(LEASE NO. 1)
Canon City, CO (4) Nursing Home/
Senior Apartments 1984 157 6,520
Colorado Springs, CO Nursing Home 1996 132 5,481
Delta, CO Nursing Home 1978 100 3,737
Grand Junction, CO Nursing Home 1986 120 4,408
Grand Junction, CO Nursing Home 1995 82 3,905
College Park, GA Nursing Home 1985 100 3,025
Dublin, GA Nursing Home 1968 130 4,504
Glenwood, GA Nursing Home 1972 62 1,742
Marietta, GA Nursing Home 1973 109 3,037
Clarinda, IA Nursing Home 1968 117 1,823
Council Bluffs, IA Nursing Home 1963 62 1,217
Mediapolis, IA Nursing Home 1973 62 2,121
Pacific Junction, IA Nursing Home 1978 12 343
Winterset, IA (4) Nursing Home/
Senior Apartments 1995 118 2,703
Ellinwood, KS Nursing Home 1972 59 1,320
Tarkio, MO Nursing Home 1996 95 2,455
Ainsworth, NE (5) Nursing Home 1995 50 447
Ashland, NE (5) Nursing Home 1996 101 1,859
Blue Hill, NE (5) Nursing Home 1996 81 1,125
Edgar, NE (5) Nursing Home 1995 54 139
Grand Island, NE Nursing Home 1996 80 1,934
Gretna, NE (5) Nursing Home 1995 62 944
Lyons, NE (5) Nursing Home 1974 84 814
Milford, NE (5) Nursing Home 1970 66 908
Sutherland, NE (5) Nursing Home 1995 62 1,276
Waverly, NE (5) Nursing Home 1995 50 1,221
Laramie, WY Nursing Home 1986 144 4,022
Worland, WY (4) Nursing Home/
Senior Apartments 1996 99 3,223
------ -----------
2,450 66,253
INTEGRATED HEALTH SERVICES, INC.
(LEASE NO. 2)
Cheshire, CT (6) Nursing Home 1971 210 9,459
Waterbury, CT (6) Nursing Home 1974 180 10,941
New Haven, CT (6) Nursing Home 1971 195 17,870
Slidell, LA (7) Nursing Home 1989 118 18,887
Middleboro, MA Nursing Home 1987 124 17,523
Worcester, MA Nursing Home 1990 173 18,769
Boston, MA Nursing Home 1985 201 24,978
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
BUILT/
LOCATION PROPERTY TYPE RENOVATED(1) UNITS/BEDS(2)
- ---------------------------------- ----------------- --------------- ---------------
HISTORICAL
INVESTMENT
AT COST(3)
-----------
(000S)
<S> <C> <C> <C> <C>
Hyannis, MA Nursing Home 1982 142 $8,292
Howell, MI (7) Nursing Home 1985 189 4,956
Farmington, MI (7) Nursing Home 1991 153 4,179
Canonsburg, PA Nursing Home 1990 140 15,598
------ -----------
1,825 151,452
GENESIS HEALTH VENTURES, INC.
Burlington, NJ Nursing Home 1994 150 13,007
------ -----------
150 13,007
PRIVATE COMPANY TENANTS
St. Joseph, MO Nursing Home 1976 120 1,333
Seattle, WA Nursing Home 1964 103 5,192
Waterford, CT Nursing Home 1989 148 5,253
Killingly, CT Nursing Home 1989 190 6,060
Willimantic, CT Nursing Home 1989 124 4,179
Grove City, OH Nursing Home 1965 200 3,445
------ -----------
885 25,462
------ -----------
TOTAL PORTFOLIO 13,571 $770,031
------ -----------
------ -----------
</TABLE>
- ------------------------
(1) The dates presented are the later of the date of original construction or
the date of substantial renovation as evidenced by capital expenditures in
excess of 20% of HRPT's historical investment.
(2) Units/beds are a customary measure of property values used in the senior
housing industry.
(3) Represents HRPT's historical costs before depreciation.
(4) Two properties are located at each of these locations.
(5) These properties are mortgage investments. HRPT had nominal price purchase
options for all these mortgaged properties which have been assigned to
Senior Housing.
(6) These three properties are managed by Integrated Health. Under this
management agreement, Integrated has guaranteed the rent for these
properties and that rent obligation is subject to cross default with other
obligations under Integrated's Lease No. 2.
(7) These properties are mortgage investments. The mortgage collateral secures
all Integrated's obligations under Lease No. 2 and the mortgages are subject
to cross default with Integrated's other obligations under this lease.
42
<PAGE>
The following table presents operating information about the occupancy,
gross revenues and revenue sources of Senior Housing's properties grouped by
leases and the amount of annual rents payable to Senior Housing under these
leases:
<TABLE>
<CAPTION>
PROPERTY LEVEL OPERATING INFORMATION(1)
-------------------------------------------------
PERCENTAGE OF
FACILITY REVENUES
SENIOR FROM SOURCES OTHER
HOUSING FACILITY FACILITY THAN
TENANT RENTS OCCUPANCY REVENUES MEDICARE/MEDICAID
- ------------------------------------------------ ----------- --------------- --------- ---------------------
<S> <C> <C> <C> <C>
(IN 000S) (IN 000S)
Marriott International, Inc..................... $ 30,894 93% $ 132,802 94%
Brookdale Living Communities, Inc............... 11,074 95% 21,226 100%
Mariner Post-Acute Network, Inc................. 16,716 84% 142,423 22%
Integrated Health Services, Inc.................
(Lease No. 1) 8,826 79% 70,419 33%
Integrated Health Services, Inc.................
(Lease No. 2) 18,085 82% 100,821 12%
Genesis Health Ventures, Inc.................... 1,444 97% 9,141 32%
Private Company Tenants......................... 3,489 81% 44,954 16%
--
----------- --------- ---
$ 90,528 86% $ 521,786 43%
--
--
----------- --------- ---
----------- --------- ---
</TABLE>
- ------------------------
(1) Represents actual data for the one year period ended June 30, 1999, except
for Marriott data, which is for the 36 week period ended September 9, 1998,
the most recent data available to Senior Housing, annualized. Actual
Marriott facility revenue for the 36 week period ended September 9, 1998,
was $92.6 million; for the one year period ended December 31, 1997, the most
recent full year period for which Marriott data is available to Senior
Housing, facility occupancy was 96%, facility revenue was $128.6 million and
the percent of facility revenue from sources other than Medicare/Medicaid
was 93%.
43
<PAGE>
SENIOR HOUSING TENANTS
Senior Housing's financial condition depends, in part, upon the financial
condition of its tenants. Senior Housing's largest tenant is Marriott.
Ninety-six percent of Senior Housing's rent is paid by public companies. If you
want more information about any of Senior Housing's publicly owned tenants you
should study the public information which they have filed with the SEC. The
following charts show Senior Housing's mix of tenants on the basis of annual
current rent:
<TABLE>
<CAPTION>
BY ANNUAL RENT
<S> <C>
- - $91 million total current
rent EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
- - 96% of rent comes from
public companies
- - 34% of rent comes from
Marriott
- - leases for 99% expire
in 2005 or after
<CAPTION>
MARRIOTT INTERNATIONAL $30.9
MILLION 34%
<S> <C>
Brookdale Living Communities $11.1 million 12%
Mariner Post-Acute Network $16.7 million 18%
Integrated Health Services Lease No. 1 $8.8
million 10%
Integrated Health Services Lease No. 2 $18.1
million 20%
Genesis Health Ventures $1.4 million 2%
Other Operators $3.5 million 4%
</TABLE>
MARRIOTT INTERNATIONAL, INC.
Marriott is a NYSE listed company. Marriott's major businesses are
developing, operating and managing hotels, senior housing properties and
time-share resorts. Senior Housing currently owns 14 congregate communities and
assisted living properties with 3,950 units that are leased to subsidiaries of
Marriott. The annual rent under this lease is $30.9 million, which is 34% of
Senior Housing's total annual rent. Marriott International, Inc. has guaranteed
all of these lease obligations to Senior Housing.
The following table presents summary financial information of Marriott from
its Annual Report on Form 10-K for the year ended January 1, 1999, and Quarterly
Report on Form 10-Q for the period ended June 18, 1999.
SUMMARY FINANCIAL INFORMATION OF MARRIOTT INTERNATIONAL, INC.
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF OR FOR THE
AS OF OR FOR THE YEAR ENDED 24 WEEKS ENDED
------------------------------------- ------------------------
JANUARY 3, JANUARY 2, JANUARY 1, JUNE 19, JUNE 18,
1997 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
Sales..................................... $ 5,738 $ 7,236 $ 7,968 $ 3,642 $ 3,937
<S> <C> <C> <C> <C> <C>
Net income................................ 270 324 390 190 214
Total assets.............................. 5,161 6,233 6,559
Debt...................................... 422 1,267 1,178
</TABLE>
44
<PAGE>
INTEGRATED HEALTH SERVICES, INC.
Integrated is a NYSE listed company. Integrated's major businesses are
operating nursing homes and providing home healthcare services. Senior Housing
currently owns 27 nursing homes and three senior apartments with 3,205 units
that are leased to subsidiaries of Integrated. In addition, Senior Housing has
mortgage investments secured by 12 nursing homes with 1,070 units. Annual rent
of $22.8 million and interest of $4.1 million total to $26.9 million, or 30% of
Senior Housing's total annual revenues. These 42 properties are divided into two
pools, and the obligations under the leases and mortgages within each pool are
subject to cross default and collateralization covenants with all other
properties in the same pool. Integrated has guaranteed all of these lease and
mortgage obligations to Senior Housing.
The following table presents summary financial information of Integrated
from its Annual Report on Form 10-K for the year ended December 31, 1998, and
Quarterly Report on Form 10-Q for the period ended June 30, 1999.
SUMMARY FINANCIAL INFORMATION OF INTEGRATED HEALTH SERVICES, INC.
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
AS OF OR FOR THE YEAR ENDED
DECEMBER 31, JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
Total revenue...................................... $ 1,204 $ 1,403 $ 2,972 $ 1,502 $ 1,244
<S> <C> <C> <C> <C> <C>
Earnings (loss) from continuing operations......... 48 3 137 83 (11)
Net earnings (loss)................................ 46 (34) (68) 79 (11)
Total assets....................................... 5,002 5,393 5,404
Debt............................................... 3,219 3,383 3,451
</TABLE>
MARINER POST-ACUTE NETWORK, INC.
Mariner is a NYSE listed company. Mariner's principal business is operating
nursing homes. Senior Housing currently owns 24 nursing homes and two congregate
communities with 3,482 units that are leased to subsidiaries of Mariner. The
annual rent under this lease is $16.7 million, which is 18% of Senior Housing's
total annual rent. Mariner has guaranteed all of these lease obligations to
Senior Housing.
The following table presents summary financial information of Mariner from
its Annual Report on Form 10-K for the year ended September 30, 1998, and
Quarterly Report on Form 10-Q for the period ended June 30, 1999.
SUMMARY FINANCIAL INFORMATION OF MARINER POST-ACUTE NETWORK, INC.
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED
AS OF OR FOR THE YEAR ENDED
SEPTEMBER 30, JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue.............................................. $ 1,114 $ 1,140 $ 2,036 $ 1,403 $ 1,775
Net income (loss)........................................ 43 44 (210) (46) (524)
Total assets............................................. 874 3,037 2,596
Debt..................................................... 253 1,978 822
</TABLE>
45
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
Brookdale is a Nasdaq listed company. Brookdale's principal business is
operating senior housing and congregate communities. Senior Housing currently
owns four congregate communities with 829 units that are leased to a subsidiary
of Brookdale. The annual rent under this lease is $11.1 million, which is 12% of
Senior Housing's total annual rent. Brookdale has guaranteed all of these lease
obligations to Senior Housing.
The following table presents summary financial information of Brookdale from
its Annual Report on Form 10-K for the year ended December 31, 1998, and
Quarterly Report on Form 10-Q for the period ended June 30, 1999.
SUMMARY FINANCIAL INFORMATION OF BROOKDALE LIVING COMMUNITIES, INC.
(IN 000S)
<TABLE>
<CAPTION>
AS OF OR FOR THE AS OF OR FOR THE
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997(1) 1998 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total revenue............................................. $30,237 $77,701 $35,549 $51,634
Net income................................................ 445 6,654 2,632 5,397
Total assets.............................................. 183,169 244,633 339,451
Debt...................................................... 96,167 106,877 192,729
</TABLE>
- ------------------------
(1) Total revenue and net income are for the period from May 7, 1997 (inception)
through December 31, 1997.
GENESIS HEALTH VENTURES, INC.
Genesis is a NYSE listed company. Genesis' major businesses are operating
nursing homes, congregate communities and assisted living properties. Senior
Housing currently owns one nursing home with 150 units that is leased to a
subsidiary of Genesis. The annual rent under this lease is $1.4 million, which
is 2% of Senior Housing's total annual rent.
The following table presents summary financial information of Genesis from
its Annual Report on Form 10-K for the year ended September 30, 1998, and
Quarterly Report on Form 10-Q for the period ended June 30, 1999.
SUMMARY FINANCIAL INFORMATION OF GENESIS HEALTH VENTURES, INC.
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF OR FOR THE
AS OF OR FOR THE NINE MONTHS ENDED
YEAR ENDED
SEPTEMBER 30, JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
Total net revenue..................................... $ 671 $ 1,100 $ 1,405 $ 999 $ 1,409
<S> <C> <C> <C> <C> <C>
Net income (loss)..................................... 37 48 (24) 41 2
Total assets.......................................... 1,434 2,627 2,698
Debt.................................................. 660 1,408 1,503
</TABLE>
46
<PAGE>
PRIVATELY OWNED TENANTS
In addition to the publicly owned tenants described above, Senior Housing
currently leases six nursing homes with 885 beds to four separate private
company tenants. These leases require total annual rent of $3.5 million. None of
these private companies has significant net worth or significant other business
activities.
Four of Senior Housing's properties leased to two of these private tenants
were originally leased to Sun Healthcare Group, Inc. These properties have been
subleased and the new tenants have assumed direct responsibility for these
leases. Sun has also remained obligated under the leases. The following table
presents summary financial information of Sun from its Annual Report on Form
10-K for the year ended December 31, 1998, and Quarterly Report on Form 10-Q for
the period ended June 30, 1999.
SUMMARY FINANCIAL INFORMATION OF SUN HEALTHCARE GROUP, INC.
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
AS OF OR FOR THE YEAR ENDED
DECEMBER 31, JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total net revenue........................................ $ 1,316 $ 2,011 $ 3,088 $ 1,494 $ 1,274
Net income (loss)........................................ 22 35 (754) 9 (702)
Total assets............................................. 2,579 2,468 1,833
Debt..................................................... 1,546 1,863 1,929
</TABLE>
On July 14, 1999, one of Senior Housing's private company tenants, The
Frontier Group, filed for reorganization under Chapter 11 of the Bankruptcy
Code. Frontier leases three nursing homes from Senior Housing for total rent of
$2.1 million per year. Sun Healthcare is also obligated under this lease. Based
upon the six months ended June 30, 1999 information available to Senior Housing,
one of these nursing homes produced operating income in excess of its allocated
rent, one facility produced operating income equal to 92% of its allocated rent
and one facility with occupancy of only 69% had operating losses. Senior Housing
is preparing to collect its rent, including arrearages of approximately
$711,500, from Frontier or Sun and, if necessary, to operate these properties
for its own account until these properties are leased to a substitute tenant.
47
<PAGE>
SENIOR HOUSING LEASES
The following table presents information about Senior Housing's leases
(dollars in thousands except guarantee information):
<TABLE>
<CAPTION>
INTEGRATED INTEGRATED
MARRIOTT BROOKDALE MARINER LEASE NO. 1 LEASE NO. 2 GENESIS
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF PROPERTIES 14 4 26 31 11 1
NUMBER OF BEDS/UNITS 3,950 829 3,482 2,450 1,825 150
LOCATED IN NO. OF STATES 7 4 6 7 5 1
HISTORICAL INVESTMENT $325,521 $101,850 $86,486 $66,253 $151,452 $13,007
TENANT Subsidiaries Subsidiary of Subsidiaries Subsidiaries Subsidiaries Subsidiary of
of Marriott Brookdale of Mariner of Integrated of Integrated Genesis
CURRENT ANNUAL RENT $30,894 $11,074 $16,716 $8,826 $18,085 $1,444
RENT INCREASE FORMULA 4.5% of 10% of CPI based CPI based 3% of $13 per annum
increase in increases in increases increases increases in increase
gross gross gross
revenues revenues revenues
starting in starting in
1999 2000
CURRENT LEASE EXPIRATION 2013 2019 2013 2010 2006 2005
RENEWAL OPTIONS All or none; All or none; All or none; All or none; All or none; All or none;
4 for 5 years 2 for 25 2 for 10 2 for 13 2 for 10 2 for 10
each years each years each years each years each years each
and 1 for 5
years
CROSS DEFAULT PROVISION Yes Yes Yes Yes Yes N/A
SUBORDINATED MANAGEMENT FEE Yes Yes Yes Yes Yes Yes
GUARANTEES Public Public Public Public Public A multi-
company company company company company property
parent has parent has parent has parent has parent has parent
guaranteed guaranteed guaranteed guaranteed guaranteed company of
the lease. the lease. the lease. In the lease. the lease. the tenant
addition, has
there is a guaranteed
$15 million the lease. In
security addition,
deposit and a there is a
pledge of $235,000
other assets. security
deposit.
<CAPTION>
PRIVATE
COMPANIES TOTAL
---------- ---------
<S> <C> <C>
NUMBER OF PROPERTIES 6 93
NUMBER OF BEDS/UNITS 885 13,571
LOCATED IN NO. OF STATES 4 26
HISTORICAL INVESTMENT $25,462 $770,031
TENANT Four Nine
private tenants
companies
CURRENT ANNUAL RENT $3,489 $90,528
RENT INCREASE FORMULA Various
CURRENT LEASE EXPIRATION 2001, 2001-2019
2003, 2005
RENEWAL OPTIONS Various
CROSS DEFAULT PROVISION N/A
SUBORDINATED MANAGEMENT FEE Yes
GUARANTEES Various
affiliates
of the
private
company
tenants
have
provided
guarantees.
In
addition,
Sun
Healthcare
is
obligated
on four of
these
leases.
</TABLE>
48
<PAGE>
LEASE TERMS
All of Senior Housing's leases are so called "triple net" leases which
require the tenants to maintain Senior Housing's properties during the lease
terms and to indemnify it for liability which may arise by reason of its
ownership of the properties. The following is a summary of material terms of
Senior Housing's leases in addition to the terms set forth in the foregoing
chart. Senior Housing's material leases have been filed with the SEC as exhibits
to its registration statement on Form S-11 of which this prospectus is a part.
If you want more information about these leases you should review these
documents.
CROSS DEFAULT. Whenever Senior Housing leases more than one property to a
single tenant or a group of affiliated tenants all those leases are cross
defaulted. There are two lease combinations with Integrated. The obligations for
all of the properties under each of the lease combinations are subject to cross
default, but the two lease combinations are themselves not subject to cross
default. Integrated has guaranteed both lease combinations.
ALL OR NONE RENEWAL OPTIONS. Whenever Senior Housing leases more than one
property to a single tenant or a group of affiliated tenants, lease renewal
options may only be exercised on an all or none basis. This means that a tenant
or group of affiliated tenants cannot decide to exercise renewal options for
strong performing properties unless it also renews the leases for all other
leased properties. The two Integrated lease combinations may be separately
renewed for all properties in each combination of leases.
MAINTENANCE AND ALTERATIONS. All of Senior Housing's tenants are required
to maintain, at their expense, the leased properties in good order and repair,
including structural and nonstructural maintenance. Except in the case of
properties leased to Marriott, capital alterations and additions to any leased
property which exceed a threshold amount of aggregate cost may only be made with
Senior Housing's prior consent. Any alterations or improvements made to any
leased property during the terms of the leases become Senior Housing's property,
subject to Senior Housing's obligation to pay to the tenants unamortized costs
at lease termination. At the end of the leases, Senior Housing's tenants are
required to surrender their leased properties in substantially the same
condition as existed on the commencement dates of the leases, subject to any
permitted alterations and subject to ordinary wear and tear.
ASSIGNMENT. Senior Housing's consent is generally required for any
assignment or sublease of its properties. In the event of a subletting, the
initial tenant remains liable under the lease and all guarantees and other
security remain in place.
ENVIRONMENTAL MATTERS. Senior Housing's tenants are required, at their
expense, to remove and dispose of any hazardous substance at the leased
properties in compliance with all applicable environmental laws and regulations
and to pay any costs Senior Housing incurs in connection with removal and
disposal. Each tenant has indemnified Senior Housing for any claims asserted as
a result of the presence of hazardous substances at any property and from a
violation or alleged violation of any applicable environmental law or
regulation.
INDEMNIFICATION AND INSURANCE. Each tenant has agreed to indemnify Senior
Housing from all claims arising from Senior Housing's ownership or their use of
its properties. Each tenant is required to maintain insurance on Senior
Housing's properties covering:
- comprehensive general liability for damage to property or bodily injury
arising out of the ownership, use, occupancy or maintenance of the
properties;
49
<PAGE>
- commercial property "all risk" liability for damage to improvements,
merchandise, trade fixtures, furnishings, equipment and personal property;
- workers' compensation liability;
- business interruption loss;
- in some cases, medical malpractice; and
- other losses customarily insured by businesses similar to the business
conducted at Senior Housing's properties.
The leases require that Senior Housing be named as an additional insured under
these policies.
DAMAGE, DESTRUCTION OR CONDEMNATION. In the event any of Senior Housing's
properties is damaged by fire, or other casualty or is taken for a public use,
Senior Housing receives all insurance or taking proceeds and its tenants are
required to pay any difference between the amount of proceeds and the historical
investment by Senior Housing or HRPT in the affected property. In the event of
material destruction or condemnation, some tenants have a right to purchase the
affected property for amounts at least equal to Senior Housing's or HRPT's
historical investment in the property.
EVENTS OF DEFAULT. Events of default under Senior Housing's leases include
the following:
- the failure of the tenant to pay rent when due;
- the failure of the tenant to perform key terms, covenants or conditions of
its lease and the continuance thereof for a specified period after written
notice;
- the occurrence of events of insolvency with respect to the tenant;
- the failure of the tenant to maintain required insurance coverages; or
- the revocation of any material license necessary for the tenant's
operation of Senior Housing's property.
REMEDIES. Upon the occurrence of any event of default, Senior Housing may:
- terminate the affected lease and accelerate the rent;
- terminate the tenant's rights to the affected property, relet the property
and recover from the tenant the difference between the amount of rent
which would have been due under the applicable lease and the rent received
under the reletting; and
- make any payment or perform any act required to be performed by the tenant
under its lease.
The defaulting tenant is obligated to reimburse Senior Housing for all payments
made and all costs and expenses incurred in connection with any exercise of the
foregoing remedies.
GROUND LEASE TERMS. The land underlying two of Senior Housing's properties
is leased. Senior Housing's leases require its tenants to pay and perform all
obligations arising under these ground leases. These ground leases terminate on
2086 and 2079. The annual rents payable under the ground leases in 1998 totaled
$138,100. If Senior Housing's tenants fail to pay the applicable ground rent,
Senior Housing may have to do so in order to protect its investment in these
properties.
50
<PAGE>
SENIOR HOUSING SELECTED HISTORICAL FINANCIAL INFORMATION
The following table presents selected historical financial information and
other data for the properties owned by Senior Housing. This financial data has
been derived from HRPT's historical financial statements for the years ended
December 31, 1994 through 1998, and the unaudited historical financial
statements for the six-month periods ended June 30, 1998 and 1999. Per share
data has not been presented because Senior Housing was not a publicly held
company during the periods presented. Senior Housing is currently a 100% owned
subsidiary of HRPT, and none of its properties are encumbered by debt. The
following table includes pro rata allocations of interest expense and general
and administrative expenses for historical periods. In the opinion of Senior
Housing's management, the methods used for allocating interest and general and
administrative expenses are reasonable. However, it is impossible to estimate
all operating costs that Senior Housing would have incurred as a separate public
company. Accordingly, the net income and funds from operations shown are not
necessarily indicative of results that Senior Housing will realize as a separate
company. Additionally, year to year comparisons are impacted by property
acquisitions during the historical periods. For more information see Senior
Housing Properties Trust's Consolidated Historical Financial Statements and
notes thereto appearing on pages F-14 to F-22.
<TABLE>
<CAPTION>
(000s except property data)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- --------- --------- ---------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental income............... $46,429 $62,586 $66,202 $78,463 $82,542 $40,324 $42,409
Interest and other income... 1,554 4,018 4,240 5,708 5,764 2,886 2,881
---------- ---------- ---------- --------- --------- ---------- ----------
Total revenues............ 47,983 66,604 70,442 84,171 88,306 43,210 45,290
---------- ---------- ---------- --------- --------- ---------- ----------
Expenses:
Interest.................... 5,430 16,937 14,719 16,958 19,293 9,263 9,992
Depreciation................ 9,711 14,748 15,383 17,826 18,297 9,102 11,207
General and
administrative............ 2,691 3,857 3,899 4,664 4,480 2,174 2,259
---------- ---------- ---------- --------- --------- ---------- ----------
Total expenses............ 17,832 35,542 34,001 39,448 42,070 20,539 23,458
---------- ---------- ---------- --------- --------- ---------- ----------
Net income.................... $30,151 $31,062 $36,441 $44,723 $46,236 $22,671 $21,832
---------- ---------- ---------- --------- --------- ---------- ----------
---------- ---------- ---------- --------- --------- ---------- ----------
OTHER DATA:
Properties at end of
period.................... 68 76 83 88 93 88 93
Operating activities cash
flows..................... $44,150 $48,331 $51,308 $91,094 $60,236 $31,975 $32,808
Investing activities cash
flows..................... (319,704) (39,301) (105,566) (19,663) 306 135 188
Financing activities cash
flows..................... 275,554 (9,030) 54,258 (71,431) (60,403) (32,110) (32,967)
Funds from operations(1).... 39,862 45,810 51,824 62,549 64,533 31,773 33,039
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
----------------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 1998 1999
----------- ----------- ----------- --------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total real estate investments
(before depreciation)....... $ 579,633 $ 624,738 $ 730,304 $ 759,121 $ 770,219 $ 758,986 $ 770,031
Total assets (after
depreciation)............... 556,668 587,701 679,201 692,586 686,296 682,682 674,294
</TABLE>
- ------------------------------
(1) Funds from operations or "FFO," as defined in the white paper on funds from
operations which was approved by the Board of Governors of NAREIT in March
1995, is net income computed in accordance with GAAP, before gains or losses
from sales of properties and extraordinary items, plus depreciation and
amortization and after adjustment for unconsolidated partnerships and joint
ventures. Senior Housing considers FFO to be an appropriate measure of
performance for an equity REIT, along with cash flow from operating
activities, financing activities and investing activities, because it
provides investors with an indication of an equity REIT's ability to incur
and service debt, make capital expenditures, pay distributions and fund
other cash needs. Senior Housing computes FFO in accordance with the
standards established by NAREIT which may not be comparable to FFO reported
by other REITs that do not define the term in accordance with the current
NAREIT definition or that interpret the current NAREIT definition
differently. FFO does not represent cash generated by operating activities
in accordance with GAAP and should not be considered as an alternative to
net income, determined in accordance with GAAP, as an indication of
financial performance or the cash flow from operating activities, determined
in accordance with GAAP, as a measure of liquidity.
51
<PAGE>
SENIOR HOUSING SELECTED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table presents selected pro forma financial information for
Senior Housing for the year ended December 31, 1998, and the six months ended
June 30, 1999, to reflect the effects of the spin-off. For more information see
the Unaudited Pro Forma Consolidated Financial Statements appearing on pages F-8
through F-13.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1998 1999
------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING DATA: (000S EXCEPT PER SHARE DATA)
Revenues:
Rental income.................................................................... $ 84,003 $ 42,409
Interest and other income........................................................ 5,764 2,881
------------ -------
Total revenues................................................................. 89,767 45,290
------------ -------
Expenses:
Interest......................................................................... 15,063 7,531
Depreciation..................................................................... 18,490 11,207
General and administrative....................................................... 4,523 2,259
------------ -------
Total expenses................................................................. 38,076 20,997
------------ -------
Net income......................................................................... $ 51,691 $ 24,293
------------ -------
------------ -------
Earnings per share................................................................. $1.99 $0.93
------------ -------
------------ -------
</TABLE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1999
-------------
(UNAUDITED)
(000S)
<S> <C>
BALANCE SHEET DATA:
Total real estate investments (before depreciation)................................................ $ 770,031
Total assets (after depreciation).................................................................. 690,719
Bank credit facility............................................................................... 200,000
</TABLE>
SENIOR HOUSING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion presents an analysis of the results of operations
of the properties owned by Senior Housing for the years ended December 31, 1996,
1997 and 1998, the six month periods ended June 30, 1998 and 1999, and the pro
forma results of operations of Senior Housing for the year ended December 31,
1998, and the six months ended June 30, 1999. This discussion includes
references to funds from operations. Funds from operations, or "FFO," as defined
in the white paper on funds from operations which was approved by the Board of
Governors of NAREIT in March 1995, is net income computed in accordance with
GAAP, before gains or losses from sales of properties and extraordinary items,
plus depreciation and amortization and after adjustment for unconsolidated
partnerships and joint ventures. Senior Housing considers FFO to be an
appropriate measure of performance for an equity REIT, along with cash flow from
operating activities, financing activities and investing activities, because it
provides investors with an indication of an equity REIT's ability to incur and
service debt, make capital expenditures, pay distributions and fund other cash
needs. Senior Housing computes FFO in accordance with the standards established
by NAREIT which may not be comparable to FFO reported by other REITs that do not
define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently. FFO does not represent cash
generated by operating activities in accordance
52
<PAGE>
with GAAP and should not be considered as an alternative to net income,
determined in accordance with GAAP, as an indication of financial performance or
the cash flow from operating activities, determined in accordance with GAAP, as
a measure of liquidity.
PRO FORMA RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999. For the pro forma six months ended June 30,
1999, giving effect to the spin-off and the related transactions, revenues would
have been $45.3 million, total expenses would have been $21.0 million and net
income would have been $24.3 million or $0.93 per share. Compared to historical
results total expenses and interest expense decreased by $2.5 million. Interest
expense decreased due to lower interest expense from pro forma borrowings of
$200 million under Senior Housing's bank credit facility compared to the
allocated portion of historical allocated interest expense incurred by HRPT.
On a pro forma basis for the six months ended June 30, 1999, funds from
operations would have been $35.5 million. The pro forma average shares
outstanding would have been 26 million.
YEAR ENDED DECEMBER 31, 1998. For the pro forma year ended December 31,
1998, giving effect to the spin-off and the related transactions, revenues would
have been $89.8 million, total expenses would have been $38.1 million and net
income would have been $51.7 million or $1.99 per share. Compared to historical
results, total revenue increased by $1.5 million and total expenses decreased by
$4.0 million. Revenue increased due to rent generated from the acquisition of
five properties in 1998. Total expenses decreased primarily because of reduced
interest expense of $4.2 million. Interest expense decreased due to lower
interest expense from pro forma borrowings of $200 million under Senior
Housing's bank credit facility compared to allocated historical interest expense
incurred by HRPT.
On a pro forma basis for the year ended December 31, 1998, funds from
operations would have been $70.2 million. The pro forma average shares
outstanding would have been 26 million.
HISTORICAL RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999, COMPARED TO 1998. For the six months ended
June 30, 1999, compared to the six months ended June 30, 1998, total revenues
increased by $2.1 million, total expenses increased by $2.9 million and net
income decreased by $839,000. Total revenues increased due to rent generated
from the acquisition of five properties subsequent to June 30, 1998. Total
expenses increased primarily because of higher depreciation of $2.1 million due
to property acquisitions and higher allocated interest expense as a result of
increased borrowings by HRPT. Net income was $21.8 million and $22.7 million for
the six months ended June 30, 1999 and 1998, respectively. There were no shares
outstanding during these periods. On pro forma 26 million average shares
outstanding net income per share would have been $0.84 and $0.87 for the six
months ended June 30, 1999 and 1998, respectively.
Funds from operations increased by $1.3 million for the six months ended
June 30, 1999, compared to the prior period due to income from five properties
acquired subsequent to June 30, 1998.
YEAR ENDED DECEMBER 31, 1998, COMPARED TO 1997. For the year ended December
31, 1998, compared to the year ended December 31, 1997, total revenues increased
by $4.1 million, total expenses increased by $2.6 million and net income
increased by $1.5 million. Total revenues increased due to rent generated from
the acquisition of five properties during 1998 and the full year impact of the
rent generated from five properties acquired during 1997. Total expenses
increased primarily because of higher allocated interest expense of $2.3
million, which resulted from increased
53
<PAGE>
borrowings by HRPT. Net income was $46.2 million and $44.7 million for the year
ended December 31, 1998 and 1997, respectively. There were no shares outstanding
during these periods. On pro forma 26 million average shares outstanding net
income per share would have been $1.78 and $1.72 for the year ended December 31,
1998 and 1997, respectively.
Funds from operations increased by $2.0 million for the year ended December
31, 1998, compared to the prior period due to income from five properties
acquired during 1998 and the full year impact of income from five properties
acquired during 1997.
YEAR ENDED DECEMBER 31, 1997, COMPARED TO 1996. For the year ended December
31, 1997, compared to the year ended December 31, 1996, total revenues increased
by $13.7 million, total expenses increased by $5.4 million and net income
increased by $8.3 million. Total revenues increased due to rent generated from
the acquisition of five properties during 1997 and the full year impact of the
rent generated from seven properties acquired during 1996. Total expenses
increased primarily because of higher allocated interest expense of $2.2
million, which resulted from increased borrowings by HRPT, and higher
depreciation expense of $2.4 million due to property acquisitions. Net income
was $44.7 million and $36.4 million for the year ended December 31, 1997 and
1996, respectively. There were no shares outstanding during these periods. On
pro forma 26 million average shares outstanding net income per share would have
been $1.72 and $1.40 for the year ended December 31, 1997 and 1996,
respectively.
Funds from operations increased by $10.7 million for the year ended December
31, 1997, compared to the prior period due to the income from the acquisition of
five properties during 1997 and the full year impact of income from seven
properties acquired during 1996.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, Senior Housing had cash and cash equivalents of $168,000
and prior to the spin-off Senior Housing will receive at least $16.4 million
from HRPT. For the six months ended June 30, 1999 and 1998, cash flows from
operating activities were $32.8 million and $32.0 million, respectively, cash
flows from investing activities were $188,000 and $135,000, respectively, and
cash used for financing activities was $33.0 million and $32.1 million,
respectively. Senior Housing expects the cash transferred to it and future cash
flow from operating activities will be sufficient to meet its short term and
long term working capital requirements including its first distribution of $15.6
million or $0.60 per share for the quarter ending on September 30, 1999, which
it expects to pay during the fourth quarter of 1999.
For the twelve months subsequent to the spin-off, Senior Housing expects
that cash flows from operating activities and the availability of amounts under
its bank credit facility will be sufficient to meet its short term and long term
liquidity requirements for operations, working capital and distributions.
Senior Housing has accepted a commitment for a $350 million, three-year,
interest only bank credit facility. This bank credit facility will be secured by
first mortgages on 18 of Senior Housing's properties. The interest rate will be
LIBOR plus 2.0% per annum and will increase by 0.25% if Senior Housing's debt to
total capital, as defined, exceeds 50%. The bank credit facility will be
available for acquisitions, working capital and for general business purposes.
Senior Housing will have the ability to repay and redraw amounts under this bank
credit facility until its maturity in 2002. Senior Housing's bank credit
facility documentation will have customary representations, warranties,
covenants and event of default provisions. The material restrictive financial
covenants will require Senior Housing to:
- limit debt to no more than 60% of total capital, as defined;
54
<PAGE>
- maintain a ratio of net income plus interest expense and depreciation to
interest expense of at least 1.5; and
- maintain a tangible net worth, as defined, of $450 million, subject to
increases based on equity issuances.
After the spin-off Senior Housing will borrow $200 million under this bank
credit facility to pay the formation debt to HRPT and will have $150 million
available for acquisitions, working capital and general business purposes.
Total assets decreased by $12.0 million from $686.3 million as of December
31, 1998, to $674.3 million as of June 30, 1999. The decrease is primarily due
to depreciation on real estate properties.
After completion of the spin-off, in both the short term and the long term
Senior Housing intends to acquire additional senior housing properties. These
purchases will be initially funded with excess working capital, if any,
generated by Senior Housing and proceeds of borrowings under the bank credit
facility. After properties are acquired, bank credit facility borrowings may be
repaid with long term debt or equity capital. After completion of the spin-off,
Senior Housing expects to have: $200 million of debt outstanding; book equity of
$447.4 million; and total real estate assets, at historical cost, of $770
million. In these circumstances, Senior Housing believes that it will have
sufficient access to capital markets to meet its growth objectives and refinance
its debt as needed. Of course, however, access to growth capital will depend
upon numerous facts, including some beyond Senior Housing's control; and Senior
Housing can provide no assurance that it will be able to raise additional
capital in sufficient amounts, or at appropriate costs, to fund growth or to
repay debt in both the short term and the long term.
INFLATION. Inflation might have both positive and negative impacts upon
Senior Housing's business. Inflation might cause the value of Senior Housing's
real estate investments to increase. Similarly, in an inflationary environment,
the percentage rents which Senior Housing receives based upon CPI increases or
as a percentage of its tenants' revenues should increase and rent yields Senior
Housing could charge for new investments would likely increase. Offsetting these
benefits, inflation might cause the costs Senior Housing pays for equity and
debt capital to increase. To mitigate the adverse impact of increased costs of
debt capital in the event of material inflation Senior Housing may purchase
interest rate cap contracts whenever it has a large amount of floating rate debt
outstanding and it believes material interest rate increases are likely to
occur. On balance, Senior Housing does not believe that the modest inflation
which it expects may occur in the U.S. economy during the next few years will
have any material effect on its business.
DEFLATION. Deflation would have business consequences to Senior Housing
which are the inverse of the impact of inflation. If new construction costs
decline, the value of Senior Housing's existing real estate investments may
decline. The value of Senior Housing's long term minimum rent leases might
increase but some tenants might have trouble paying Senior Housing's rent in a
deflationary environment, and the amounts of its percentage rent increases might
decline or disappear. Deflation might lower Senior Housing's costs of debt
capital; however, deflation's impact on Senior Housing's cost of equity capital
is uncertain. Senior Housing does not believe that the U.S. economy is likely to
experience serious deflation in the foreseeable future. Senior Housing believes
that modest deflation would have no effect upon its business and serious
deflation would have a negative effect upon its business.
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YEAR 2000
The in-house computer systems are limited to software and hardware developed
by third parties and installed, operated and monitored by Senior Housing's
investment advisor, Reit Management. All of the computer systems, which are
limited to information systems, were installed within the last two years. All of
the critical enterprise wide systems are warrantied in writing to be year 2000
compliant by the manufacturers and have been tested by Reit Management. These
systems include the network hardware, the network operating system, the desktop
operating system, business application software, financial accounting software
and communication software. Other than those operated by its tenants, Senior
Housing has no critical non information technology systems, and no such systems
are provided to it by Reit Management. All costs associated with Senior
Housing's computer systems are borne by Reit Management.
All of Senior Housing's properties are leased on a triple net basis and are
not managed by Senior Housing. Ninety-seven percent of Senior Housing's tenants
are operated by public companies which have filed reports containing year 2000
preparedness information with the SEC. The leases require the tenants to conduct
the daily operations of the properties and the scope of the tenants'
responsibility includes ensuring preparedness for the year 2000. Because of its
leases, the only actions that Senior Housing can take with respect to its
properties are to inquire of its tenants, monitor its tenants' SEC filings and
evaluate their year 2000 preparedness plans for all systems, including financial
and nonfinancial systems such as elevators, heating and ventilation and life
safety systems. Six of the nine Senior Housing tenants that operate 97% of
Senior Housing's investments have responded in writing to Senior Housing's
inquiries regarding their preparedness for issues related to the year 2000.
Based on these responses and tenant public disclosures which Senior Housing has
reviewed, Senior Housing believes that its tenants are in the process of
studying their systems and the systems for their vendors, suppliers and service
providers to ensure preparedness but none of Senior Housing's tenants has yet
reported they are year 2000 compliant. Current levels of preparedness are varied
and include partially completed inventory and assessment of potential risks,
testing, implementation of plans for remediation and reprogramming. While Senior
Housing believes that the efforts of its tenants described in their responses
and in their public filings will be adequate to address year 2000 concerns,
there can be no guarantee that all tenant operations and those of their vendors
and payors, including federal and state Medicare and Medicaid systems, will be
year 2000 compliant on a timely basis and will not have a material effect on
Senior Housing.
If Senior Housing's efforts and the efforts of its vendors, customers and
tenants, and their customers and vendors to prepare for the year 2000 were
ineffective, the operation of Senior Housing's properties could be subject to
significant adverse effects, including, but not limited to, loss of business and
growth opportunities, reduced revenues and increased expenses which might cause
operating losses to its tenants. Continued or severe operating losses may cause
one or more of Senior Housing's tenants to default on their leases. Numerous
lease defaults could jeopardize Senior Housing's ability to maintain its
financial results of operations, meet its financial, operating and capital
obligations and timely pay its distributions to shareholders.
In particular, the worst case scenario which Senior Housing can envision at
this time is that some of its tenants may be unable to pay their rents on a
timely basis because some of their payment sources, such as Medicare or
Medicaid, are delayed. In these circumstances, Senior Housing may be unable to
meet its debt obligations or to timely pay distributions.
Senior Housing does not currently have a contingency plan in place in the
event it, or its tenants, do not successfully remedy year 2000 compliance issues
that are identified in a timely manner or fail to identify any year 2000 issues.
Senior Housing will evaluate the status of its year
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2000 compliance plan during the fourth quarter of 1999 and determine whether a
contingency plan is necessary.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Senior Housing is exposed to market changes in interest rates. Because
interest on all its outstanding debt is at a floating rate, changes in interest
rates will not affect the value of outstanding debt instruments. However,
changes in interest rates will affect Senior Housing's operating results. For
example, the interest rate payable on Senior Housing's pro forma outstanding
indebtedness of $200 million at June 30, 1999, would have been 7.25% per annum.
An immediate 10% change in that interest rate, or 72.5 basis points, would
increase or decrease Senior Housing's costs by $1.5 million, or $0.06 per share
per year:
IMPACT OF CHANGES IN INTEREST RATES
(IN 000S)
<TABLE>
<CAPTION>
INTEREST RATE TOTAL INTEREST
PER YEAR OUTSTANDING DEBT EXPENSE PER YEAR
--------------- ---------------- ----------------
<S> <C> <C> <C>
At June 30:.................................................... 7.25% $ 200,000 $ 14,500
10% Reduction:................................................. 6.53% 200,000 13,060
10% Increase:.................................................. 7.98% 200,000 15,960
</TABLE>
The foregoing table presents a so called "shock" analysis which assumes that
the interest rate change by 10%, or 72.5 basis points, is in effect for a whole
year. If interest rates were to change gradually over one year the impact would
be less.
Senior Housing borrows in U.S. dollars and all of its current borrowings are
subject to interest at LIBOR plus a premium. Accordingly, Senior Housing is
vulnerable to changes in U.S. dollar based short term rates, specifically LIBOR.
During the past few months short term U.S. dollar based interest rates have
tended to rise, increasing by about 50 basis points. Senior Housing is unable to
predict the direction or amount of interest rate changes during the next year.
Senior Housing has decided not to purchase an interest rate cap or other hedge
to protect against future rate increases, but it may enter such agreements in
the future. Also, it may incur additional debt at floating or fixed rates, which
would increase its exposure to market changes in interest rates.
Senior Housing currently owns mortgage receivables with a carrying value of
$37.6 million. When comparable term market interest rates decline the value of
these receivables increases; when comparable term market interest rates rise the
value of those receivables declines. Using discounted cash flow analyses at
weighted average estimated per year market rates for December 31, 1998, and June
30, 1999, of 10% and 10.75%, respectively, the estimated fair values of Senior
Housing's pro forma mortgage receivables were as follows:
<TABLE>
<CAPTION>
CARRYING VALUE
OF MORTGAGE ESTIMATED
VALUATION DATE RECEIVABLES FAIR VALUE
- -------------------------------------------------------------------------------------- -------------- -----------
(IN 000S)
<S> <C> <C>
December 31, 1998..................................................................... $ 37,826 $ 40,525
June 30, 1999......................................................................... 37,638 38,522
</TABLE>
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An immediate 10% change in the market rate of interest, or 108 basis points,
applicable to Senior Housing mortgage receivables at June 30,1999, would affect
the fair value of those receivables as follows:
<TABLE>
<CAPTION>
CARRYING VALUE
INTEREST RATE OF MORTGAGE ESTIMATED
PER YEAR RECEIVABLES FAIR VALUE
------------- -------------- -----------
(IN 000S)
<S> <C> <C> <C>
Estimated market:....................................................... 10.75% $ 37,638 $ 38,522
10% reduction:.......................................................... 9.67% 37,638 41,123
10% increase:........................................................... 11.83% 37,638 36,161
</TABLE>
If the market rate changes occurred gradually over time, the effect of these
changes would be realized gradually. Because Senior Housing's mortgage
receivables are fixed rate instruments, changes in market interest rates will
have no effect on Senior Housing's operating results unless these receivables
are sold. At this time Senior Housing expects to hold its existing mortgages to
their maturity and not to realize any profit or loss from trading these mortgage
receivables. Also, Senior Housing does not presently expect to expand its
mortgage investments.
The interest rate changes which affect the valuations of Senior Housing's
mortgages are U.S. dollar long term rates for corporate obligations of companies
with ratings similar to Senior Housing's mortgagors.
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SENIOR HOUSING MANAGEMENT
SENIOR HOUSING TRUSTEES AND EXECUTIVE OFFICERS
Senior Housing has two categories of trustees: (1) managing trustees who are
employees of Reit Management and involved in Senior Housing's day-to-day
activities; and (2) independent trustees who are not employees of Reit
Management and not involved in Senior Housing's day-to-day activities. Senior
Housing's bylaws require that a majority of its trustees be independent
trustees. Also, although it is not required by Senior Housing's bylaws, it is
Senior Housing's policy that the same person may not simultaneously serve as an
independent trustee of both Senior Housing and HRPT so long as HRPT owns more
than 10% of the shares of Senior Housing. The bylaws and this policy do not
prohibit former trustees, officers, employees or persons otherwise affiliated
with HRPT or Reit Management from serving as independent trustees of Senior
Housing.
After completion of the spin-off, Senior Housing's trustees and executive
officers will be as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ------------------------------------------------------------
<S> <C> <C>
Barry M. Portnoy.............. 54 Managing Trustee (term will expire in 2000)
Gerard M. Martin.............. 64 Managing Trustee (term will expire in 2001)
Bruce M. Gans, M.D............ 52 Independent Trustee (term will expire in 2000)
Arthur G. Koumantzelis........ 68 Independent Trustee (term will expire in 2002)
Vacancy....................... Independent Trustee (term will expire in 2001)
David J. Hegarty.............. 42 President, Chief Operating Officer and Secretary
Ajay Saini.................... 39 Treasurer and Chief Financial Officer
</TABLE>
BARRY M. PORTNOY has been a managing trustee of both HRPT and Hospitality
Properties since their organization in 1986 and 1995, respectively. Mr. Portnoy
is also a Director and 50% owner of Reit Management. Mr. Portnoy has been
actively involved in real estate and real estate finance activities as an
attorney, investor and manager for over 20 years. Mr. Portnoy was a partner in
the law firm of Sullivan & Worcester LLP, Boston, Massachusetts from 1978
through March 31, 1997, and he served as Chairman of that firm from 1994 through
March 1997.
GERARD M. MARTIN has been a managing trustee of both HRPT and Hospitality
Properties since their organization in 1986 and 1995, respectively. Mr. Martin
is also a Director and 50% owner of Reit Management. Mr. Martin has been active
in the real estate and senior housing industries as a developer, owner and
manager for approximately 30 years. During the past five years, Mr. Martin's
principal employment has been as a managing trustee of HRPT and Hospitality
Properties.
BRUCE M. GANS, M.D. has been Senior Vice President for Continuing Care,
Chairman of Physical Medicine and Rehabilitation at North Shore Long Island
Jewish Health System and Professor of Physical Medicine and Rehabilitation at
the Albert Einstein College of Medicine since April 1999. Prior to April 1999
Dr. Gans was a Professor and Chairman of the Department of Physical Medicine and
Rehabilitation at Wayne State University and a Senior Vice President of the
Detroit Medical Center since 1989. Dr. Gans has been a trustee of HRPT since
1995. Upon completion of the spin-off, Dr. Gans will resign from HRPT and will
become one of Senior Housing's independent trustees.
ARTHUR G. KOUMANTZELIS has been President and Chief Executive Officer of
Gainesborough Investments LLC, a private investment company, since June 1998.
From 1990 to 1998, Mr. Koumantzelis was Senior Vice President and Chief
Financial Officer of Cumberland Farms, Inc., a private company engaged in the
convenience store business and in the distribution and retail sale
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of gasoline. Mr. Koumantzelis has been a trustee of Hospitality Properties since
its initial public offering in 1995, and was a trustee of HRPT from 1992 through
August 1995. Upon completion of the spin-off, Mr. Koumantzelis will become one
of Senior Housing's independent trustees.
VACANCY. Following the completion of the spin-off, Senior Housing intends to
elect another independent trustee. At this time, no person has been selected to
fill this position.
DAVID J. HEGARTY is the President, Chief Operating Officer and Secretary of
Senior Housing. Mr. Hegarty is also, and has been since 1994, the President,
Chief Operating Officer and Secretary of HRPT. Upon completion of the spin-off,
Mr. Hegarty will resign from HRPT. Mr. Hegarty is also a Director and the
President and Secretary of Reit Management and will continue in these positions
after the spin-off. Mr. Hegarty has served HRPT, Reit Management and their
affiliates in various capacities since 1987, prior to which he was an audit
manager with Ernst & Young LLP. Mr. Hegarty is a certified public accountant.
AJAY SAINI is the Treasurer and Chief Financial Officer of Senior Housing.
Mr. Saini is also, and has been since 1994, the Treasurer and Chief Financial
Officer of HRPT. Upon completion of the spin-off, Mr. Saini will resign from
HRPT. Mr. Saini is also a Vice President of Reit Management and will continue in
this position after the spin-off. Mr. Saini has served HRPT, Reit Management and
their affiliates in various capacities since June 1990, prior to which he was
employed by Ernst & Young LLP. Mr. Saini is a certified public accountant.
COMMITTEES OF THE BOARD OF TRUSTEES
Promptly following completion of the spin-off, the board of trustees will
establish an audit committee that will consist of independent trustees. The
audit committee will make recommendations concerning the engagement of
independent public accountants, review the plans and results of the audit
engagement, approve professional services provided by the independent public
accountants, consider the appropriateness of audit and nonaudit fees charged by
Senior Housing's accountants and review the adequacy of Senior Housing's
internal accounting controls.
The entire board of trustees will function as a compensation committee to
implement Senior Housing's incentive share award plan described below.
COMPENSATION OF THE TRUSTEES AND OFFICERS
Senior Housing will pay its independent trustees an annual fee of $20,000,
plus a fee of $500 for each meeting attended. Each independent trustee will
automatically receive an annual grant of 500 common shares after the completion
of the spin-off, or upon initial election to fill the current vacant position,
and at the first meeting of the board of trustees following each annual meeting
of shareholders, commencing in 2000. In addition, Senior Housing will pay the
independent trustee serving as chairman of the audit committee $2,000 per year.
This position is expected to rotate annually among the independent trustees.
Senior Housing will also reimburse expenses its trustees incur in attending
meetings. Senior Housing's managing trustees and officers are employees of Reit
Management and they will not receive compensation directly from Senior Housing,
except reimbursement of expenses and under the incentive share award plan.
INCENTIVE SHARE AWARD PLAN
Senior Housing has adopted an incentive share award plan and has reserved
1.3 million shares to grant to its independent trustees, officers and
consultants, including employees of Reit Management, but not Reit Management
itself which will be paid under its contract described below. Senior Housing has
established the incentive share award plan to ensure that its independent
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trustees, officers and others responsible for its operations have similar
interests with shareholders. In addition, the incentive share award plan will
permit Senior Housing to compensate affiliates for the performance of services
and duties in addition to those compensated by Reit Management.
As discussed above, the independent trustees will automatically receive
grants of 500 common shares per year as part of their annual compensation. In
granting other incentive share awards, the board of trustees intends to consider
a range of factors regarding potential grantees, including the complexity and
duration of tasks performed and the amount and terms of common shares previously
granted. The vesting schedule of each incentive share award will be determined
at the time of grant. No awards will be granted under the incentive share award
plan before completion of the spin-off, and no individuals have yet been
selected to receive any awards.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Under Senior Housing's declaration of trust and bylaws, its trustees,
officers and employees are entitled to indemnification. You can find more
information about indemnification of trustees, officers and employees in the
section entitled "Material Provisions of Maryland Law and of Senior Housing's
Declaration of Trust and Bylaws" on page 69 of this prospectus.
REIT MANAGEMENT AND THE ADVISORY AGREEMENT
REIT MANAGEMENT. Reit Management is a Delaware corporation owned by Barry
M. Portnoy and Gerard M. Martin. Its principal place of business is 400 Centre
Street, Newton, Massachusetts and its telephone number is (617) 928-1300. Reit
Management has approximately 180 full time employees including a headquarters
staff, four regional offices and other personnel located throughout the United
States. Reit Management also acts as the investment advisor to HRPT and
Hospitality Properties.
The directors of Reit Management are Barry M. Portnoy, Gerard M. Martin and
David J. Hegarty. The officers of Reit Management are David J. Hegarty,
President and Secretary, John G. Murray, Executive Vice President, John A.
Mannix, Vice President, Thomas M. O'Brien, Vice President, Ajay Saini, Vice
President, David M. Lepore, Vice President, Jennifer B. Clark, Vice President,
and John Popeo, Treasurer. A biographical summary of the officers of Reit
Management who are not described above under "--Senior Housing Trustees and
Executive Officers" or under "Information about HRPT After the Spin-off--HRPT
Management" on page 26 of this prospectus follows:
JOHN G. MURRAY, age 38, is the Executive Vice President of Reit Management.
Mr. Murray also is and has been the President, Chief Operating Officer and
Secretary of Hospitality Properties since 1996. Mr. Murray has served in various
capacities for HRPT, Reit Management and their affiliates since 1993. Prior to
1993, Mr. Murray was Director of Finance, Business Analysis and Planning at
Fidelity Brokerage Services, Inc. from 1992 to 1993 and Director of Acquisitions
from 1990 through 1991. Prior to 1990, Mr. Murray was employed by Ernst & Young
LLP. Mr. Murray is a certified public accountant.
THOMAS M. O'BRIEN, age 33, is and has been a Vice President of Reit
Management since 1996. Mr. O'Brien is and also has been the Treasurer and Chief
Financial Officer of Hospitality Properties since 1996. Prior to 1996, Mr.
O'Brien was employed by Arthur Andersen LLP for eight years. Mr. O'Brien is a
certified public accountant.
JENNIFER B. CLARK, age 38, is a Vice President of Reit Management. Ms. Clark
joined Reit Management in July 1999 and will be primarily responsible for
leasing HRPT's office buildings.
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From 1994 to July 1999, Ms. Clark's principal employment was as a partner
specializing in real estate law at the law firm of Sullivan & Worcester LLP,
counsel to Reit Management and its affiliates, including HRPT, Hospitality
Properties and Senior Housing.
THE ADVISORY AGREEMENT. The following is a summary of Senior Housing's
advisory agreement with Reit Management. Although it is a summary of the
material terms, it does not contain all the information that may be important to
you. If you would like more information, you should read the entire agreement,
which has been filed with the SEC as an exhibit to the registration statement of
which this prospectus is a part.
Reit Management is required to use its best efforts to present Senior
Housing with a continuing and suitable investment program consistent with Senior
Housing's investment policies. Subject to its duty of overall management and
supervision, the board of trustees has delegated to Reit Management the power
and duty to:
- provide research and economic and statistical data in connection with
Senior Housing's investments and recommend changes in Senior Housing's
investment policies when appropriate;
- investigate and evaluate investment, financing and refinancing
opportunities and make recommendations concerning specific investments to
the trustees;
- manage Senior Housing's short-term investments including the acquisition
and sale of money market instruments;
- administer Senior Housing's day-to-day operations including the leasing of
Senior Housing's properties and relations with Senior Housing's tenants;
- investigate, negotiate and enter contracts for the purchase, lease or
servicing of real estate and related interests, on Senior Housing's behalf
in furtherance of Senior Housing's investment objectives;
- investigate, negotiate and enter contracts for the financing and
refinancing of investments, on Senior Housing's behalf in furtherance of
the financing objectives of Senior Housing;
- act as attorney-in-fact or agent in acquiring and disposing of Senior
Housing's real estate investments, and in handling, prosecuting and
settling any of Senior Housing's claims;
- monitor Senior Housing's real property and other investments as would be
done by a prudent owner;
- monitor all third-party services provided to Senior Housing as would be
done by a prudent owner;
- administer the day-to-day bookkeeping and accounting functions as are
required for the management of Senior Housing's assets, contract for
audits and prepare or cause to be prepared reports required by any
governmental authority in connection with the conduct of Senior Housing's
business;
- provide office space, office equipment and the use of accounting or
computing equipment when required;
- provide personnel necessary for the performance of the foregoing services;
and
- upon request by the trustees, make reports of its performance of the
foregoing services.
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In performing its services under the advisory agreement, Reit Management may
use facilities, personnel and support services of various of its affiliates.
Under the advisory agreement, Reit Management assumes no responsibility
other than to render the services described therein in good faith and is not
responsible for any action of the Senior Housing board of trustees in following
or declining to follow any advice or recommendation of Reit Management. In
addition, Senior Housing has agreed to indemnify Reit Management, its
shareholders, directors, officers, employees and affiliates against liabilities
relating to acts or omissions of Reit Management undertaken on Senior Housing's
behalf in good faith.
The initial term of the advisory agreement expires on December 31, 1999.
Renewals or extensions of the advisory agreement will be subject to the periodic
approval of a majority of the independent trustees. Under the advisory
agreement, Reit Management and Messrs. Portnoy and Martin have agreed not to
provide advisory services to, or serve as a director or officer of, any other
REIT which is principally engaged in the business of owning and leasing senior
apartments, congregate communities, assisted living or nursing home properties
or to make competitive direct investments in these types of properties, in each
case, without the consent of Senior Housing's independent trustees.
COMPENSATION TO REIT MANAGEMENT. The board of trustees, acting by a
majority vote of the independent trustees, will determine the amount of
compensation paid to Reit Management when it determines whether to renew, extend
or amend the advisory agreement, based on factors it deems appropriate. These
factors are expected to include:
- the size of the advisory fee in relation to the size, composition, quality
and profitability of Senior Housing's investments;
- the success of Reit Management in generating opportunities that meet
Senior Housing's investment objectives;
- the quality and extent of services and advice furnished by Reit
Management;
- the rates charged by others performing comparable services; and
- the costs of similar services incurred by other REITs.
The advisory agreement currently provides for an annual advisory fee and an
annual incentive fee. The advisory fee is payable monthly and reconciled
annually. The advisory fee is equal to the sum of 0.5% of the historical cost of
the assets transferred to Senior Housing by HRPT, plus 0.7% of Senior Housing's
real estate investments up to an additional $250 million made after the
completion of the spin-off, plus 0.5% of Senior Housing's real estate
investments exceeding these amounts. The annual incentive fee is equal to 15% of
the annual increase in Senior Housing's funds from operations per share times
the weighted average number of shares outstanding on a diluted basis in each
year; provided however, the annual incentive fee shall be no more than $0.02
times the weighted average number of shares. The annual incentive fees payable
to Reit Management will be paid in Senior Housing's shares at market value. No
incentive fees will be payable for 1999.
The advisory agreements currently in effect between Reit Management and HRPT
and between Reit Management and Hospitality Properties are substantially similar
to the advisory agreement between Reit Management and Senior Housing. Upon
completion of the spin-off, Reit Management's contract with HRPT will be amended
to make clear that HRPT's historical cost of real estate assets used to
calculate the advisory fees payable by HRPT will exclude HRPT's investment in
Senior Housing. Accordingly, the advisory fees paid by HRPT will decline by an
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amount equal to the fees payable by Senior Housing, and the total fees payable
to Reit Management will be unchanged as a result of the spin-off.
Senior Housing is not expected to have any employees or administrative
officers separate from Reit Management. Services which might otherwise be
provided by employees will be provided to Senior Housing by employees of Reit
Management. Similarly, office space will be provided to Senior Housing by Reit
Management. Although Senior Housing does not expect to have significant general
and administrative operating expenses in addition to fees payable to Reit
Management, Senior Housing will be required to pay various other expenses,
including the costs and expenses of acquiring, owning and disposing of Senior
Housing's real estate interests. These costs and expenses include acquisition
and disposition diligence, audit and legal fees, the costs of borrowing money
and the costs of securities listing, transfer, registration, compliance with
public reporting requirements and shareholder communications generally. Also,
Senior Housing will pay the fees of its independent trustees.
RELATED PARTY TRANSACTIONS
Senior Housing is currently a 100% owned subsidiary of HRPT. Senior
Housing's managing trustees, Barry M. Portnoy and Gerard M. Martin, also own
Reit Management, and act as managing trustees of HRPT. As a result of these
relationships, HRPT and Messrs. Portnoy and Martin have material interests in
transactions with Senior Housing, including the following:
- Senior Housing is indebted to HRPT for $200 million. After the spin-off
Senior Housing will borrow $200 million under its bank credit facility and
pay this $200 million formation debt to HRPT.
- Upon completion of the spin-off, Reit Management will become Senior
Housing's investment advisor. Assuming the spin-off is completed on
September 30, 1999, the pro forma advisory fee that Senior Housing will
pay to Reit Management from the completion of the spin-off through the
initial term of the agreement on December 31, 1999, will be approximately
$1.0 million, or $3.9 million on an annualized basis. HRPT's advisory fees
to Reit Management will be reduced by the same amount.
- After the spin-off, HRPT will retain 12.8 million of Senior Housing
shares. By retaining these shares, HRPT will be able to participate in
Senior Housing's future success through distributions and appreciation, if
any, in the price of these shares.
- Three of the eleven properties included in the Integrated Health Services
Lease No. 2 are leased by a corporation owned by Messrs. Portnoy and
Martin. Integrated manages these properties under contracts which expire
in 2006 and are renewable thereafter. Under these management arrangements,
Integrated is financially responsible for the operation of these three
properties and has guaranteed the lease obligations due to Senior Housing.
Integrated's obligations for these leases are subject to cross default and
cross collateralization with other lease and mortgage obligations of
Integrated to Senior Housing included in Integrated's Lease No. 2. Messrs.
Portnoy and Martin have not received, and do not expect to receive, net
economic benefits from their ownership of this tenant entity, and they are
not obligated for these leases to Senior Housing. The arrangement by which
an entity owned by Messrs. Portnoy and Martin became a tenant for these
three properties was established in 1994 in order to facilitate licensing
for a predecessor of Integrated.
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LEGAL PROCEEDINGS
Senior Housing has a limited operating history and is not currently a party
to any legal proceedings. Senior Housing is not aware of any material legal
proceeding affecting its properties for which it might become liable. Moreover,
HRPT has agreed to indemnify Senior Housing for any pending litigation affecting
the properties transferred to Senior Housing.
SENIOR HOUSING POLICIES
The following discussion sets forth Senior Housing's policies regarding
investments, dispositions, financings, conflicts of interest and other
activities. The board of trustees has set these policies and although there is
no current intention to do so, the board of trustees may amend or revise these
policies at any time without a vote of shareholders.
INVESTMENT POLICIES
ACQUISITIONS. Senior Housing intends to buy additional senior apartments,
congregate communities, assisted living properties and nursing homes. It is
Senior Housing's policy to acquire assets primarily for income and secondarily
for their appreciation potential. In making future acquisitions, Senior Housing
will consider a range of factors including:
- the acquisition price of the proposed property;
- the estimated replacement cost of the proposed property;
- proposed lease terms;
- the financial strength and operating reputation of the proposed tenant;
- historical and projected cash flows of the property to be acquired;
- the location and competitive market environment of the proposed property;
- the physical condition of the proposed property and its potential for
redevelopment or expansion; and
- the price segment and payment sources in which the proposed property is
operated.
Senior Housing intends to acquire properties which will enhance the
diversity of its portfolio in respect to tenants, types of services provided and
locations. Senior Housing has no policies which specifically limit the
percentage of its assets which may be invested in any individual property, in
any one type of property, in properties leased to any one tenant or in
properties leased to an affiliated group of tenants.
OTHER INVESTMENTS IN REAL ESTATE. Senior Housing expects to emphasize
direct wholly owned investments in fee interests. However, circumstances may
arise in which Senior Housing may invest in leaseholds, joint ventures,
mortgages and other real estate interests. Senior Housing may invest in real
estate joint ventures if it concludes that by doing so it may benefit from the
participation of co-venturers or that Senior Housing's opportunity to
participate in the investment is contingent on the use of a joint venture
structure. Senior Housing may invest in participating, convertible or other
types of mortgages if it concludes that by doing so it may benefit from the cash
flow or appreciation in the value of a property which is not available for
purchase.
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DISPOSITION POLICIES
From time to time Senior Housing may consider the sale of one or more of its
properties. Future disposition decisions, if any, will be made based on a number
of factors including the following:
- the proposed sale price;
- the strategic fit of the property with the rest of Senior Housing's
portfolio;
- potential opportunities to increase revenues by reinvesting sale proceeds;
- the potential for, or the existence of, any environmental or regulatory
problems affecting a particular property;
- Senior Housing's alternative capital needs; and
- the maintenance of Senior Housing's qualification as a REIT under the
Internal Revenue Code.
Integrated holds purchase options on four of the nursing homes included in
the Integrated Lease No. 2. Under the options, Integrated has the right to
purchase one of these properties per year commencing in February 2000. The
purchase option prices for these properties are approximately equal to their
historical costs. It is presently unknown if Integrated intends to purchase
these properties.
FINANCING POLICIES
Senior Housing has accepted a commitment for a bank credit facility. This
bank credit facility will enable Senior Housing to borrow up to $350 million.
The facility will require payment of interest only at LIBOR plus a premium. The
maturity of this facility will be in three years ending in late 2002. Two
hundred million dollars will be borrowed under this facility shortly after the
spin-off and used to pay Senior Housing formation debt to HRPT. The balance of
$150 million under this facility will be available to Senior Housing after the
spin-off to fund new acquisitions and for general business purposes. This bank
credit facility will be secured by first mortgages upon, and a collateral
assignment of leases from, 18 properties owned by Senior Housing. This bank
credit facility has several covenants typically found in revolving loan
facilities including covenants to maintain a minimum net worth and minimum
collateral value and which prohibit Senior Housing from incurring debt in excess
of 60% of its total capital. This bank credit facility has been entered into by
Senior Housing. A copy of the credit facility documentation has been filed as an
exhibit to the registration statement of which this prospectus is part. If you
want more information concerning this bank credit facility you should refer to
that filing.
Senior Housing intends to use this bank credit facility to fund future
acquisitions and for working capital. Periodically, Senior Housing expects to
repay amounts drawn under the bank credit facility with proceeds of equity and
long term debt offerings. Senior Housing's organizational documents do not limit
the amount of indebtedness it may incur. At present Senior Housing expects to
maintain a capital structure in which Senior Housing's debt will not exceed 60%
of its total capital. Senior Housing will consider future equity offerings when,
in its judgment, doing so will improve its capital structure without materially
adversely affecting the market value of its shares. During the next few years
Senior Housing expects to lower its target maximum debt to capitalization ratio
to 50% and to achieve an investment grade rating for its debt obligations; but
it does not expect this to happen until it has operated as an independent public
company for several years. Until it achieves an investment grade rating, Senior
Housing expects that the least costly debt capital
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available to it will be secured debt and that most of its debt will be secured.
In the future, Senior Housing may modify its current financing policies in light
of then current economic conditions, relative costs of debt and equity capital,
acquisition opportunities and other factors; and its intended ratio of debt to
total capital may change.
CONFLICT OF INTEREST POLICIES
Senior Housing has adopted several policies to mitigate existing and
potential conflicts of interest, as follows:
<TABLE>
<CAPTION>
CONFLICT POLICY
- ------------------------------------ ------------------------------------------------
<S> <C>
Reit Management is also the invest- Mr. Hegarty, HRPT's current President and Chief
ment advisor for HRPT and Operating Officer, and Mr. Saini, HRPT's current
Hospitality Properties and has other Treasurer and Chief Financial Officer will
business interests. Messrs. Portnoy resign from HRPT and assume similar positions at
and Martin will be managing trustees Senior Housing. They will devote approximately
of Senior Housing, HRPT and 75% of their business time to Senior Housing.
Hospitality Properties and have Reit Management and Messrs. Portnoy and Martin
other business interests. Messrs. have agreed not to provide advisory services or
Hegarty and Saini will be officers serve as trustees or officers of any other REIT
of Senior Housing and Reit which is principally engaged in owning and
Management. Conflicts arise in the leasing senior apartments, congregate
allocation of management time. communities, assisted living properties or
nursing homes, or to make competitive direct
investments in these types of properties, in
each case, without the consent of Senior
Housing's independent trustees.
Messrs. Portnoy and Martin own, and The continuation of the advisory agreement and
Messrs. Hegarty and Saini are the fees payable to Reit Management will be
employed by, Reit Management. The subject to periodic review and approval by
fees paid by Senior Housing to Reit Senior Housing's independent trustees. The
Management are based in part upon incentive fees payable to Reit Management will
the size of Senior Housing's be based upon increases in FFO per share and
investment portfolio. These will be paid in shares of Senior Housing.
circumstances might provide an
economic incentive for Reit
Management and Messrs. Portnoy,
Martin, Hegarty and Saini to
encourage Senior Housing's
investments to raise fees.
After the spin-off, HRPT will own HRPT does not intend to purchase additional
12.8 million shares, 49%, of Senior shares of Senior Housing. Over time, as Senior
Housing's shares. This will afford Housing issues shares to fund its growth, HRPT's
HRPT considerable influence over ownership percentage will decline. So long as
Senior Housing shareholder actions. HRPT owns over 10% of Senior Housing's shares,
Sales of these shares by HRPT could no one will serve simultaneously as an
depress the market price of Senior independent trustee of both Senior Housing and
Housing's shares. HRPT. HRPT has agreed to not sell its Senior
Housing shares for one year following the
spin-off without the consent of Senior Housing's
independent trustees.
</TABLE>
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<TABLE>
<CAPTION>
CONFLICT POLICY
- ------------------------------------ ------------------------------------------------
<S> <C>
Mr. Portnoy, one of the Senior Hous- Mr. Portnoy will not participate in the review
ing's managing trustees, was a or approval of any fees payable by Senior
partner and chairman of Sullivan & Housing to Sullivan & Worcester, LLP.
Worcester, LLP, Senior Housing's
counsel. Mr. Portnoy retired from
that firm in 1997 and will receive
payments from that firm for the next
five years in respect of his
retirement.
Other conflicts may develop from A majority of Senior Housing's board of trustees
time to time. will consist of independent trustees who are not
employees of Reit Management and who do not
participate in its day to day activities. No
trustee or officer will participate in decisions
made by Senior Housing in which he or she has a
material adverse interest. It is Senior
Housing's policy that officers and trustees will
disclose their adverse interests to the board of
trustees, and the board of trustees, acting
without the participation of any trustee holding
the adverse interest, will determine whether the
adverse interest is material. Reit Management
and all the trustees and officers of Senior
Housing are required by applicable laws to act
in accordance with their fiduciary
responsibilities to Senior Housing, and it is
Senior Housing's policy that those laws be
followed.
</TABLE>
POLICIES WITH RESPECT TO OTHER ACTIVITIES
Senior Housing expects to operate in a manner that will not subject it to
regulation under the Investment Company Act of 1940. Except for the possible
acquisition of other REITs which are engaged in similar businesses, Senior
Housing does not currently intend to invest in the securities of other companies
for the purpose of exercising control, to underwrite securities of other
companies or to trade actively in loans or other investments.
Senior Housing may make investments other than as previously described,
although it does not currently intend to do so. Senior Housing has authority to
repurchase or otherwise reacquire its shares or other securities it issues and
may do so in the future. In the future, Senior Housing may issue shares or other
securities in exchange for property. Also, although it has no current intention
to do so, Senior Housing may make loans to third parties, including to Senior
Housing's trustees and officers and to joint ventures in which it participates.
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MATERIAL PROVISIONS OF MARYLAND LAW AND OF
SENIOR HOUSING'S DECLARATION OF TRUST AND BYLAWS
Senior Housing is organized as a perpetual life Maryland real estate
investment trust. The following is a summary of Senior Housing's declaration of
trust and bylaws and several provisions of Maryland law. Because it is a
summary, it does not contain all the information that may be important to you.
If you want more information, you should read Senior Housing's entire
declaration of trust and bylaws, copies of which are exhibits to the
registration statement of which this prospectus is a part or refer to the
provisions of Maryland law.
TRUSTEES
Senior Housing's declaration and bylaws provide that the board of trustees
will establish the number of trustees. There may not be less than three nor more
than seven trustees. In the event of a vacancy, a majority of the remaining
trustees will fill the vacancy, except that a majority of the entire board of
trustees must fill a vacancy resulting from an increase in the number of
trustees. Senior Housing's bylaws require that a majority of its trustees will
be independent trustees except for temporary periods due to vacancies.
Senior Housing's declaration of trust divides the board of trustees into
three classes. The initial term of the first class will expire in 2000; the
initial term of the second class will expire in 2001; and the initial term of
the third class will expire in 2002. Beginning in 2000, shareholders will elect
trustees of each class for three-year terms upon the expiration of their current
terms. Shareholders will elect only one class of trustees each year. Senior
Housing believes that classification of the board will help to assure the
continuity of Senior Housing's business strategies and policies. There will be
no cumulative voting in the election of trustees. Consequently, at each annual
meeting of shareholders, the holders of a majority of Senior Housing's shares
will be able to elect all of the successors of the class of trustees whose terms
expire at that meeting.
The classified board provision could have the effect of making the
replacement of incumbent trustees more time consuming and difficult. At least
two annual meetings of shareholders will generally be required to effect a
change in a majority of the board of trustees.
The declaration of trust provides that a trustee may be removed with or
without cause by the affirmative vote of at least two-thirds of the shares
entitled to be cast in the election of trustees. This provision precludes
shareholders from removing incumbent trustees unless they can obtain a
substantial affirmative vote of shares.
ADVANCE NOTICE OF TRUSTEE NOMINATIONS AND NEW BUSINESS
Senior Housing's bylaws provide that nominations of persons for election to
the board of trustees and proposals for business to be considered at shareholder
meetings may be made only in Senior Housing's notice of the meeting, by the
board of trustees, or by a shareholder who is entitled to vote at the meeting
and has complied with the advance notice procedures set forth in the bylaws.
Under Senior Housing's bylaws, a shareholder's notice of nominations for
trustee or other matters to be considered at a shareholders meeting must be
delivered to Senior Housing's secretary at Senior Housing's principal office not
later than the close of business on the 90th day and not earlier than the 120th
day prior to the first anniversary of the preceding year's annual meeting. In
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from the anniversary date, or if Senior Housing
has not previously held an annual meeting, a shareholder's notice must be
delivered not later than the later of 90 days prior to the annual meeting or the
10th day following the day on which Senior Housing first makes a public
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announcement of the date of the meeting. Any notice from a shareholder of
nominations for trustee or other matters to be considered at a shareholder
meeting must contain the following:
- as to each person nominated for election as a trustee, all information
relating to the person that is required to be disclosed in solicitations
of proxies for election of trustees or otherwise required by Regulation
14A under the Securities Exchange Act of 1934, together with the nominee's
written consent to being named in the proxy statement as a nominee and to
serving as a trustee if elected;
- as to other business that the shareholder proposes to bring before the
meeting, a brief description of the business, the reasons for conducting
the business and any material interest in the business of the shareholder
and of the beneficial owner, if any, on whose behalf the proposal is made;
and
- as to the shareholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made, the name and address
of the shareholder and beneficial owner and the number of Senior Housing's
shares which (s)he or they own beneficially and of record.
MEETINGS OF SHAREHOLDERS
Under Senior Housing's bylaws, Senior Housing's annual meeting of
shareholders will take place on the second Thursday of May of each year, unless
a different date is set by the board of trustees. All meetings of shareholders
may be called only by the board of trustees.
LIABILITY AND INDEMNIFICATION OF TRUSTEES AND OFFICERS
To the maximum extent permitted by Maryland law, Senior Housing's
declaration of trust and bylaws include provisions limiting the liability of
Senior Housing's present and former trustees, officers and shareholders for
damages and obligating Senior Housing to indemnify them against any claim or
liability to which they may become subject by reason of their status or actions
as present or former Senior Housing trustees, officers or shareholders. Senior
Housing's bylaws also obligate it to pay or reimburse the people described above
for reasonable expenses in advance of final disposition of a proceeding.
Maryland law permits a real estate investment trust to indemnify and advance
expenses to its trustees, officers, employees and agents to the same extent
permitted by the Maryland General Corporation Law for directors and officers of
Maryland corporations. The Maryland corporation statute permits a corporation to
indemnify its present and former directors and officers against judgments,
penalties, fines, settlements and reasonable expenses incurred in connection
with any proceeding to which they may be made a party by reason of their service
in those capacities. However, a Maryland corporation is not permitted to provide
this type of indemnification if the following is established:
- the act or omission of the director or officer 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;
- the director or officer actually received an improper personal benefit in
money, property or services; or
- in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.
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The Maryland corporation statute permits a corporation to advance reasonable
expenses to a director or officer upon the corporation's receipt of the
following:
- a written affirmation by the director or officer of his good faith belief
that he has met the standard of conduct necessary for indemnification by
the corporation; and
- a written undertaking by him or on his behalf to repay the amount paid or
reimbursed by the corporation if it is ultimately determined that this
standard of conduct was not met.
The SEC has expressed the opinion that indemnification of trustees, officers
or persons otherwise controlling a company for liabilities arising under the
Securities Act of 1933 is against public policy and is therefore unenforceable.
SHAREHOLDER LIABILITY
Under the Maryland REIT statute, a shareholder is not personally liable for
the obligations of a real estate investment trust solely as a result of his
status as a shareholder. Senior Housing's declaration of trust provides that no
shareholder will be liable for any debt, claim, demand, judgment or obligation
of any kind of, against or with respect to, Senior Housing by reason of being a
shareholder. Despite these facts, Senior Housing's legal counsel has advised it
that in some jurisdictions the possibility exists that shareholders of a trust
entity such as Senior Housing may be held liable for acts or obligations of the
trust. While Senior Housing intends to conduct its business in a manner designed
to minimize potential shareholder liability, it can give no assurance that you
can avoid liability in all instances in all jurisdictions. Senior Housing's
trustees do not intend to provide insurance covering these risks to Senior
Housing's shareholders.
MARYLAND ASSET REQUIREMENTS
To maintain Senior Housing's qualification as a real estate investment
trust, the Maryland REIT statute requires that at least 75% of the value of
Senior Housing's assets be real estate, mortgages or mortgage-related
securities, government securities, cash and cash equivalent items, including
short-term securities and receivables. The Maryland REIT statute also prohibits
Senior Housing from using or applying land for farming, agricultural,
horticultural or similar purposes. These provisions of the Maryland REIT statute
have been repealed effective October 1, 1999.
TRANSACTIONS WITH AFFILIATES
Senior Housing's declaration of trust allows it to enter into contracts and
transactions of any kind with any person, including any of Senior Housing's
trustees, officers, employees or agents or any person affiliated with them.
Other than general legal principles applicable to self-dealing by fiduciaries,
there are no prohibitions in Senior Housing's declaration or bylaws which would
prohibit dealings between Senior Housing and its affiliates.
VOTING BY SHAREHOLDERS
Whenever shareholders are required or permitted to take any action by a
vote, the action may only be taken by a vote at a shareholders meeting. Under
Senior Housing's declaration and bylaws shareholders do not have the right to
take any action by written consents instead of a vote.
RESTRICTIONS ON TRANSFER OF SHARES
Senior Housing's declaration of trust restricts the amount of shares that
individual shareholders may own. These restrictions are intended to assist with
REIT compliance under the Internal Revenue Code and otherwise to promote Senior
Housing's orderly governance. These restrictions do
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not apply to HRPT, Reit Management or their affiliates. All certificates
evidencing Senior Housing shares will bear a legend referring to these
restrictions.
Senior Housing's declaration of trust provides that no person may own, or be
deemed to own by virtue of the attribution provisions of the Internal Revenue
Code, more than 9.8% of the number or value of Senior Housing's outstanding
shares. Senior Housing's declaration also prohibits any person from beneficially
or constructively owning shares if that ownership would result in Senior Housing
being closely held under Section 856(h) of the Internal Revenue Code or would
otherwise cause it to fail to qualify as a REIT.
Senior Housing's board of trustees, in its discretion, may exempt a proposed
transferee from the share ownership limitation. So long as the board of trustees
determines that it is in Senior Housing's best interest to qualify as a REIT,
the board may not grant an exemption if the exemption would result in Senior
Housing failing to qualify as a REIT. In determining whether to grant an
exemption, the board of trustees may consider, among other factors, the
following:
- the general reputation and moral character of the person requesting an
exemption;
- whether the person's ownership of shares would adversely affect Senior
Housing's ability to acquire additional properties; and
- whether granting an exemption would adversely affect any of Senior
Housing's existing contractual arrangements or business policies.
In addition, the board of trustees may require rulings from the Internal Revenue
Service, opinions of counsel, affidavits, undertakings or agreements it deems
advisable in order to make the foregoing decisions.
If a person attempts a transfer of Senior Housing's shares in violation of
the ownership limitations described above, then that number of shares which
would cause the violation will be automatically transferred to a trust for the
exclusive benefit of one or more charitable beneficiaries designated by Senior
Housing. The prohibited owner will not acquire any rights in these excess
shares, will not benefit economically from ownership of any excess shares, will
have no rights to distributions and will not possess any rights to vote. This
automatic transfer will be deemed to be effective as of the close of business on
the business day prior to the date of the violative transfer.
Within 20 days of receiving notice from Senior Housing that its shares have
been transferred to an excess share trust, the excess share trustee will sell
the shares held in the excess share trust to a person designated by the excess
share trustee whose ownership of the shares will not violate the ownership
limitations set forth in Senior Housing's declaration of trust. Upon this sale,
the interest of the charitable beneficiary in the shares sold will terminate and
the excess share trustee will distribute the net proceeds of the sale to the
prohibited owner and to the charitable beneficiary as follows:
- The prohibited owner will receive the lesser of:
(1) the price paid by the prohibited owner for the shares or, if the
prohibited owner did not give value for the shares in connection with the
event causing the shares to be held in the excess share trust, E.G., a
gift, devise or other similar transaction, the market price of the shares
on the day of the event causing the shares to be transferred to the
excess share trust; and
(2) the net price received by the excess share trustee from the sale of the
shares held in the excess share trust.
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- Any net sale proceeds in excess of the amount payable to the prohibited
owner shall be paid to the charitable beneficiary.
If, prior to Senior Housing's discovery that shares of beneficial interest
have been transferred to the excess share trust, a prohibited owner sells those
shares, then:
(1) those shares will be deemed to have been sold on behalf of the excess
share trust; and
(2) to the extent that the prohibited owner received an amount for those
shares that exceeds the amount that the prohibited owner was entitled to
receive from a sale by an excess share trustee, the prohibited owner must
pay the excess to the excess share trustee upon demand.
Also, shares of beneficial interest held in the excess share trust will be
offered for sale to Senior Housing, or its designee, at a price per share equal
to the lesser of:
(1) the price per share in the transaction that resulted in the transfer to
the excess share trust or, in the case of a devise or gift, the market
price at the time of the devise or gift; and
(2) the market price on the date Senior Housing or its designee accepts the
offer.
Senior Housing will have the right to accept the offer until the excess share
trustee has sold the shares held in the excess share trust. The net proceeds of
the sale to Senior Housing will be distributed similar to any other sale by an
excess share trustee.
Every owner of more than 5% of all classes or series of Senior Housing's
shares is required to give written notice to Senior Housing within 30 days after
the end of each taxable year stating the name and address of the owner, the
number of shares of each class and series of Senior Housing's shares which the
owner beneficially owns, and a description of the manner in which those shares
are held. If the Internal Revenue Code or applicable tax regulations specify a
threshold below 5%, this notice provision will apply to those persons who own
Senior Housing's shares of beneficial interest at the lower percentage. In
addition, each shareholder is required to provide Senior Housing upon demand
with any additional information that it may request in order to determine Senior
Housing's status as a REIT, to determine Senior Housing's compliance with the
requirements of any taxing authority or government and to determine and ensure
compliance with the foregoing share ownership limitations.
The restrictions described above will not preclude the settlement of any
transaction entered into through the facilities of the NYSE or any other
national securities exchange or automated inter-dealer quotation system. The
declaration of trust provides, however, that the fact that the settlement of any
transaction occurs will not negate the effect of any of the foregoing
limitations and any transferee in this kind of transaction will be subject to
all of the provisions and limitations described above.
BUSINESS COMBINATIONS
The Maryland corporation statute contains a provision which regulates
business combinations with interested shareholders. This provision applies to
Maryland real estate investment trusts like Senior Housing. Under the Maryland
corporation statute, business combinations such as mergers, consolidations,
share exchanges and the like between a Maryland real estate investment trust and
an interested shareholder are prohibited for five years after the most recent
date on which the shareholder becomes an interested shareholder. Under the
statute the following persons are deemed to be interested shareholders:
- any person who beneficially owns 10% or more of the voting power of the
trust's shares;
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- an affiliate or associate of the trust who, at any time within the
two-year period prior to the date in question, was the beneficial owner of
10% or more of the voting power of the then outstanding voting shares of
the trust; or
- an affiliate of an interested shareholder.
After the five-year prohibition period has ended, a business combination
between a trust and an interested shareholder must be recommended by the board
of trustees of the trust and must receive the following shareholder approvals:
- the affirmative vote of at least 80% of the votes entitled to be cast; and
- the affirmative vote of at least two-thirds of the votes entitled to be
cast by holders of shares other than shares held by the interested
shareholder with whom or with whose affiliate or associate the business
combination is to be effected.
The second shareholder approval is not required if the trust's shareholders
receive the minimum price set forth in the Maryland corporation statute for
their shares and the consideration is received in cash or in the same form as
previously paid by the interested shareholder for its shares.
The foregoing provisions of the Maryland corporation statute do not apply,
however, to business combinations that are approved or exempted by the board of
trustees of the trust prior to the time that the interested shareholder becomes
an interested shareholder. Senior Housing's board of trustees has adopted a
resolution that any business combination between Senior Housing and any other
person is exempted from the provisions of the Maryland corporation statute
described in the preceding paragraphs, provided that the business combination is
first approved by the board of trustees, including the approval of a majority of
the members of the board of trustees who are not affiliates or associates of the
acquiring person. This resolution, however, may be altered or repealed in whole
or in part at any time.
CONTROL SHARE ACQUISITIONS
The Maryland corporation statute contains a provision which regulates
control share acquisitions. This provision also applies to Maryland real estate
investment trusts. The Maryland corporation statute provides that control shares
of a Maryland real estate investment trust acquired in a control share
acquisition have no voting rights except to the extent that the acquisition is
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of beneficial interest owned by the acquiror, by officers or by
trustees who are employees of the trust. Control shares are voting shares of
beneficial interest which, if aggregated with all other shares of beneficial
interest previously acquired by the acquiror, or in respect of which the
acquiror is able to exercise or direct the exercise of voting power, would
entitle the acquiror to exercise voting power in electing trustees within one of
the following ranges of voting power:
- one-fifth or more but less than one-third,
- one-third or more but less than a majority, or
- a majority or more of all voting power.
An acquiror must obtain the necessary shareholder approval each time he acquires
control shares in an amount sufficient to cross one of the thresholds noted
above.
Control shares do not include shares which the acquiring person is entitled
to vote as a result of having previously obtained shareholder approval by virtue
of a revocable proxy. The Maryland corporation statute provides a list of
exceptions from the definition of control share acquisition.
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A person who has made or proposes to make a control share acquisition, upon
satisfaction of the conditions set forth in the statute, including an
undertaking to pay expenses, may compel the board of trustees of the trust to
call a special meeting of shareholders to be held within 50 days of demand to
consider the voting rights of the shares. If no request for a meeting is made,
the trust may itself present the matter at any shareholders 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
the trust may redeem any or all of the control shares for fair value determined
as of the date of the last control share acquisition by the acquiror or of any
meeting of shareholders at which the voting rights of those shares are
considered and not approved. The right of the trust to redeem any or all of the
control shares is subject to conditions and limitations listed in the statute.
The trust may not redeem shares for which voting rights have previously been
approved. Fair value is determined without regard to the absence of voting
rights for the control shares. If voting rights for control shares are approved
at a shareholders meeting and the acquiror becomes entitled to vote a majority
of the shares entitled to vote, all other shareholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of these
appraisal rights may not be less than the highest price per share paid by the
acquiror in the control share acquisition.
The control share acquisition statute does not apply to the following:
- shares acquired in a merger, consolidation or share exchange if the trust
is a party to the transaction; or
- acquisitions approved or exempted by a provision in the declaration of
trust or bylaws of the trust adopted before the acquisition of shares.
Senior Housing's bylaws contain a provision exempting any and all
acquisitions by any person of Senior Housing's shares of beneficial interest
from the control share acquisition statute. This provision may be amended or
eliminated at any time in the future.
AMENDMENT TO THE DECLARATION OF TRUST, DISSOLUTION AND MERGERS
Under the Maryland REIT statute, a real estate investment trust generally
cannot dissolve, amend its declaration of trust or merge, unless these actions
are approved by at least two-thirds of all shares entitled to be cast on the
matter. The statute allows a trust's declaration of trust to set a lower
percentage, so long as the percentage is not less than a majority. Senior
Housing's declaration of trust provides for approval of any of the foregoing
actions by a majority of shares entitled to vote on these actions provided the
action in question has been approved by the Senior Housing board of trustees.
The declaration of trust further provides that if permitted in the future by
Maryland law, the majority required to approve any of the foregoing actions will
be the majority of shares voted. Under the Maryland REIT statute, a declaration
of trust may permit the trustees by a two-thirds vote to amend the declaration
of trust from time to time to qualify as a real estate investment trust under
the Internal Revenue Code or the Maryland REIT statute without the affirmative
vote or written consent of the shareholders. Senior Housing's declaration of
trust permits this type of action by the board of trustees. The declaration of
trust also permits the board of trustees to effect changes in Senior Housing's
unissued shares, as described more fully below, and to change the company's name
without shareholder approval, and provides that, to the extent permitted in the
future by Maryland law, the board of trustees may amend any other provision of
the declaration of trust without shareholder approval.
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ANTI-TAKEOVER EFFECT OF MARYLAND LAW AND OF THE DECLARATION OF TRUST AND BYLAWS
The following provisions in Senior Housing's declaration and bylaws and in
Maryland law could delay or prevent a change in control of Senior Housing:
- the limitation on ownership and acquisition of more than 9.8% of Senior
Housing shares;
- the classification of the board of trustees into classes and the election
of each class for three-year staggered terms;
- the requirement of a two-thirds majority vote of shareholders for removal
of trustees;
- the facts that the board can increase the size of the board to create a
vacancy and fill it and that shareholders are not entitled to act without
a meeting;
- the provision that only the board of trustees may call meetings of
shareholders;
- the advance notice requirements for shareholder nominations for trustees
and other proposals;
- the control share acquisitions provisions of Maryland law, if the
applicable provisions in Senior Housing's bylaws are rescinded;
- the business combination provisions of Maryland law, if the applicable
resolution of the board of trustees is rescinded or if the board of
trustees' approval of a combination is not obtained; and
- the ability of the board of trustees to authorize and issue additional
shares, including additional classes of shares with rights defined at the
time of issuance, without shareholder approval.
DESCRIPTION OF SENIOR HOUSING SECURITIES
The following is a summary description of the material terms of Senior
Housing's shares of beneficial interest. Because it is a summary, it does not
contain all of the information that may be important to you. If you want more
information, you should read Senior Housing's declaration of trust and bylaws,
copies of which are exhibits to the registration statement of which this
prospectus is a part.
GENERAL
Senior Housing's declaration of trust provides that it may issue up to 50
million shares of beneficial interest, $0.01 par value per share, all of which
have been classified as common shares. Upon completion of the spin-off, 26
million common shares will be issued and outstanding.
As permitted by the Maryland REIT statute, Senior Housing's declaration of
trust also contains a provision permitting the board of trustees, without any
action by Senior Housing's shareholders, to amend the declaration of trust to
increase or decrease the total number of shares of beneficial interest, to issue
new and different classes of shares in any amount or to reclassify any unissued
shares into other classes or series of classes that it chooses. Senior Housing
believes that giving these powers to its board of trustees will provide it with
increased flexibility in structuring possible future financings and acquisitions
and in meeting other business needs which might arise. Although the board of
trustees has no intention at the present time of doing so, it could authorize
Senior Housing to issue a class or series that could, depending upon the terms
of the class or series, delay or prevent a change in control of Senior Housing.
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COMMON SHARES
All Senior Housing common shares to be distributed in the spin-off will be
duly authorized, fully paid and nonassessable. Subject to the preferential
rights of any other class or series of shares which may be issued and to the
provisions of the declaration of trust regarding the restriction of the
ownership of shares of beneficial interest, holders of common shares are
entitled to the following:
- to receive distributions on their shares if, as and when authorized and
declared by Senior Housing's board of trustees out of assets legally
available for distribution; and
- to share ratably in Senior Housing's assets legally available for
distribution to its shareholders in the event of its liquidation,
dissolution or winding up after payment of or adequate provision for all
of its known debts and liabilities.
Subject to the provisions of the declaration of trust regarding the
restriction on the transfer of shares of beneficial interest, each outstanding
common share entitles the holder to one vote on all matters submitted to a vote
of shareholders, including the election of trustees.
Holders of common shares have no preference, conversion, exchange, sinking
fund, redemption or appraisal rights.
Shareholders will have no preemptive rights to subscribe for any of Senior
Housing's securities. Subject to the provisions of the declaration of trust
regarding the restriction on ownership of shares of beneficial interest, common
shares will have equal distribution, liquidation and other rights.
SENIOR HOUSING PRINCIPAL SHAREHOLDERS
The following table displays information regarding the beneficial ownership
of Senior Housing's common shares by each person Senior Housing knows to own
beneficially more than 5% of its outstanding common shares, each of Senior
Housing's trustees and executive officers and all of Senior Housing's trustees
and executive officers as a group. Unless otherwise noted, each person or entity
has sole voting and investment power with respect to all shares shown.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
BENEFICIAL OWNERSHIP AFTER THE
BEFORE THE SPIN-OFF SPIN-OFF(5)
---------------------- -------------------
NUMBER NUMBER
NAME AND ADDRESS(1) OF SHARES PERCENT OF SHARES PERCENT
- ---------------------------------------------------------------------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C>
HRPT.................................................................. 26,000,000 100 % 12,809,237 49.3%
Barry M. Portnoy (2).................................................. -- -- 12,927,159 49.7%
Gerard M. Martin (2).................................................. -- -- 12,927,159 49.7%
Bruce M. Gans, M.D.................................................... -- -- 200 *
Arthur G. Koumantzelis................................................ -- -- 319 *
David J. Hegarty (3).................................................. -- -- 2,670 *
Ajay Saini (4)........................................................ -- -- 1,352 *
All Trustees and executive officers as a group (six persons).......... -- -- 12,936,185 49.8%
</TABLE>
- ------------------------
* Less than 1%.
(1) The address of HRPT is 400 Centre Street, Newton, Massachusetts 02458. The
address of each other named person or entity is c/o Senior Housing
Properties Trust, 400 Centre Street, Newton, Massachusetts 02458.
(2) Messrs. Portnoy and Martin are each managing trustees of HRPT. Accordingly,
Messrs. Portnoy and Martin may be deemed to have beneficial ownership of the
shares indicated in the table as owned by HRPT. Messrs. Portnoy and Martin
indirectly will jointly own 113,437 shares. Each of Messrs. Portnoy and
Martin individually own 4,485 shares.
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(3) Includes 230 shares held jointly by Mr. Hegarty and his wife.
(4) Includes 50 shares in Mr. Saini's IRA account and two shares as custodian
for Mr. Saini's minor daughter.
(5) The number of shares and percentages presented assumes that 131.9 million
HRPT shares are outstanding on the record date. If all of the outstanding
HRPT convertible subordinated debentures were converted at $18 per share to
HRPT common shares on or prior to the record date, the number of shares and
applicable percentages would be as follows: HRPT, 11.7 million shares
(44.9%); Barry M. Portnoy, 11.8 million shares (45.3%); Gerard M. Martin
11.8 million shares (45.3%); and all trustees and executive officers as a
group (six persons), 11.8 million shares (45.4%).
FEDERAL INCOME TAX AND ERISA CONSEQUENCES
GENERAL
The following summary description of federal income tax and ERISA
consequences relating to HRPT, Senior Housing and their respective shareholders
supplements the description of these matters in our annual report on Form 10-K
for the year ended December 31, 1998. Sullivan & Worcester LLP, Boston,
Massachusetts, has rendered a legal opinion that the discussions in this section
are accurate in all material respects and fairly summarize the federal income
tax and ERISA issues of the spin-off, and the opinions of counsel referred to in
this section represent Sullivan & Worcester LLP's opinions on those subjects.
Specifically, subject to the qualifications and assumptions contained in its
opinions and in this prospectus, Sullivan and Worcester LLP has rendered
opinions to the effect that:
- we have been organized and have qualified as a REIT under the Internal
Revenue Code of 1986, as amended, for our 1987 through 1998 taxable years,
and our current investments and plan of operation will enable us to
continue to meet the requirements for qualification and taxation as a REIT
under the Internal Revenue Code; our actual qualification as a REIT,
however, will depend upon our ability to meet, and our meeting, through
actual annual operating results and distributions, the various REIT
qualification tests imposed under the Internal Revenue Code;
- under the Department of Labor's ERISA "plan assets" regulations, our
common shares are publicly offered securities and our assets will not be
deemed plan assets under ERISA;
- for its 1999 taxable year that commences on the date of the spin-off,
Senior Housing will be organized as a REIT under the Internal Revenue
Code, and its current investments and plan of operation will enable it to
meet the requirements for qualification and taxation as a REIT under the
Internal Revenue Code; Senior Housing's actual qualification as a REIT,
however, will depend upon its ability to meet, and its meeting, through
actual annual operating results and distributions, the various REIT
qualification tests imposed under the Internal Revenue Code; and
- under the plan assets regulations, Senior Housing's common shares will be
publicly offered securities and its assets will not be deemed plan assets
under ERISA.
These opinions are conditioned upon the assumption that our and Senior Housing's
leases, our and Senior Housing's declarations of trust and Bylaws, the
transaction agreement, and all other legal documents to which we or Senior
Housing are or have been a party to have been and will be complied with by all
parties to these documents, upon the accuracy and completeness of the factual
matters described in this prospectus, and upon factual representations we and
Senior Housing have
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made. The opinions of Sullivan & Worcester LLP are based on the law as it exists
today, but the law may change in the future, possibly with retroactive effect.
Also, an opinion of counsel is not binding on the Internal Revenue Service or
the courts, and the IRS or a court could take a position different from that
expressed by counsel.
The following summary of federal income tax and ERISA consequences is based
on existing law, and is limited to investors who own our shares and Senior
Housing shares as investment assets rather than as inventory or as property used
in a trade or business. The summary does not discuss the particular tax
consequences that might be relevant to you if you are subject to special rules
under the federal income tax law, for example if you are:
- a bank, life insurance company, regulated investment company, or other
financial institution,
- a broker or dealer in securities or foreign currency,
- a person who has a functional currency other than the U.S. dollar,
- a person who acquires our shares or Senior Housing shares in connection
with his employment or other performance of services,
- a person subject to alternative minimum tax,
- a person who owns our shares or Senior Housing shares as part of a
straddle, hedging transaction, or conversion transaction, or
- except as specifically described in the following summary, a tax-exempt
entity or a foreign person.
The sections of the Internal Revenue Code that govern the federal income tax
qualification and treatment of a REIT and its shareholders are complex. This
presentation is a summary of applicable Internal Revenue Code provisions,
related rules and regulations and administrative and judicial interpretations,
all of which are subject to change, possibly with retroactive effect. Future
legislative, judicial, or administrative actions or decisions could affect the
accuracy of statements made in this summary. Neither we nor Senior Housing has
sought a ruling from the IRS with respect to any matter described in this
summary, and neither we nor Senior Housing can assure you that the IRS or a
court will agree with the statements made in this summary. In addition, the
following summary is not exhaustive of all possible tax consequences, and does
not discuss any state, local, or foreign tax consequences. For all these
reasons, we urge you and any prospective acquiror of Senior Housing shares to
consult with a tax advisor about the federal income tax and other tax
consequences of the acquisition, ownership and disposition of our shares, as
well as the acquisition, ownership and disposition of Senior Housing shares.
Federal income tax consequences may differ depending on whether or not a
person is a "U.S. person." For purposes of this summary, a U.S. person for
federal income tax purposes is:
- a citizen or resident of the United States, including an alien individual
who is a lawful permanent resident of the United States or meets the
substantial presence residency test under the federal income tax laws,
- a corporation, partnership or other entity treated as a corporation or
partnership for federal income tax purposes, that is created or organized
in or under the laws of the United States, any state thereof or the
District of Columbia, unless otherwise provided by Treasury regulations,
- an estate the income of which is subject to federal income taxation
regardless of its source, or
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- a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust, or electing trusts in existence on August 20, 1996 to the
extent provided in Treasury regulations,
whose status as a U.S. person is not overridden by an applicable tax treaty.
FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF TO OUR SHAREHOLDERS
IN GENERAL. Our distribution of Senior Housing shares in the spin-off will
affect us and our shareholders in the same manner as any other distribution of
cash or property we make. These tax consequences are summarized below:
- We generally are not subject to tax on our net income to the extent we
distribute it to our shareholders.
- Distributions to you out of our current or accumulated earnings and
profits that we do not designate as capital gain dividends generally will
be taken into account by you as ordinary income dividends. To the extent
of our net capital gain for the taxable year, we may designate dividends
as capital gain dividends that will be taxable to you as long-term capital
gain.
- Distributions in excess of our current and accumulated earnings and
profits will not be taxable to you to the extent that they do not exceed
your adjusted basis in our shares, but rather will reduce the adjusted
basis in those shares.
- Distributions in excess of our current and accumulated earnings and
profits that exceed your adjusted basis in our shares generally will be
taxable as capital gain from the sale of those shares.
- Our current earnings and profits for a year will be allocated among each
of the distributions for that year, in proportion to the amount of each
distribution.
- Because we are a REIT, neither our ordinary income dividends nor our
capital gain dividends will qualify for any dividends received deduction
for our corporate shareholders.
Accordingly, the spin-off of Senior Housing shares will be treated as a
distribution by us to our shareholders in the amount of the fair market value of
the Senior Housing shares distributed. We expect that a portion of this
distribution will be taxable to you as a dividend and a portion will be treated
as a tax-free reduction in your adjusted basis in our shares. You will have a
tax basis in the Senior Housing shares you receive equal to their fair market
value at the time of the spin-off, and your holding period in those shares
commences on the day after the spin-off.
We believe that for all federal income tax purposes each Senior Housing
share may be properly valued on the distribution date as the average of the
reported high and low trading prices for Senior Housing shares in the public
market on that date, and we will perform all our tax reporting, including
statements supplied to you and to the IRS, on the basis of this average price,
called the distribution price. However, it is possible that for federal income
tax purposes the fair market value of a Senior Housing share that we distribute
will differ from the fair market value of a Senior Housing share received by you
in the distribution. Because of the factual nature of the value of the Senior
Housing shares distributed by us and the value of the Senior Housing shares
received by each of you, our counsel is unable to render an opinion on these
values.
As described in more detail below, although existing authority does not
provide definitive guidance on valuing Senior Housing shares or on whether
Section 351(a) applies to the spin-off, on
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the basis of our valuation assumptions and our counsel's opinion that Section
351(a) likely applies, we will:
- recognize a significant portion of the gains, but none of the losses, on
Senior Housing's properties and other assets; and
- recognize gains but not losses on our distribution of Senior Housing
shares.
We will perform all our tax reporting, including statements sent to the IRS and
to you, on this basis, but we could in the future be required to amend these tax
reports if the IRS successfully challenges our valuation assumptions or our
counsel's interpretation of the federal income tax laws. Gains that we recognize
in the spin-off will increase our 1999 current earnings and profits, and this
will increase the total amount of our 1999 distributions, including the
distribution of Senior Housing shares, that is taxable as a dividend to you.
Computing the amount of these gains and the additional taxable dividend amount
is a complex calculation which requires information, including the distribution
price for Senior Housing shares at the time of the spin-off and market values
for Senior Housing properties and other assets at the time of the spin-off, that
is not available at this time. Based on our current market value assumptions, on
the total number of our shares presently outstanding, and on an assumed
distribution price for Senior Housing shares of $24 per share, we estimate that
if you own one of our common shares for the entire 1999 calendar year, then as a
result of the Senior Housing spin-off you will have an additional taxable
dividend of approximately $1.20 per share. For higher Senior Housing share
distribution prices, the additional taxable dividend amount would be higher, and
for lower distribution prices the additional taxable dividend amount would be
lower. Based on our current assumptions, we estimate that the additional taxable
dividend may fluctuate by up to $0.20 per HRPT share for each $1 fluctuation in
the distribution price for Senior Housing shares. However, a definitive
additional taxable dividend computation will not be possible until after the
spin-off.
To the extent we can, we intend to designate a portion of any additional
taxable dividend as a capital gain dividend that generally will be subject to
tax at the maximum capital gain rates of 20% and 25% in the case of our
noncorporate shareholders.
TAXATION OF TAX-EXEMPT ENTITIES. Tax-exempt entities are generally not
subject to federal income taxation except to the extent of their "unrelated
business taxable income," often referred to as UBTI, as defined in Section
512(a) of the Internal Revenue Code. As with our other distributions, the
distribution of Senior Housing shares to you if you are a tax-exempt entity
should generally not constitute UBTI, provided that you have not financed the
acquisition of our shares with acquisition indebtedness within the meaning of
Section 514 of the Internal Revenue Code. However, if you are a tax-exempt
pension trust, including a so-called 401(k) plan but excluding an individual
retirement account or government pension plan, that owns more than 10% by value
of a pension-held REIT, then you may have to report a portion of the dividends
that you receive from the REIT as UBTI. Although we cannot provide complete
assurance on this matter, we believe that we have not been and will not become a
pension-held REIT.
TAXATION OF NON-U.S. PERSONS. If you are a non-U.S. person, the spin-off of
Senior Housing shares will generally be taxable to you in the same manner as any
other distribution of cash or property that we make to you. The rules governing
the federal income taxation of non-U.S. persons are complex, and the following
discussion is intended only as a summary of these rules. If you are a non-U.S.
person, we urge you to consult with your own tax advisor to determine the impact
of federal, state, local, and foreign tax laws, including any tax return filing
and other reporting requirements, with respect to the spin-off of Senior Housing
shares and your investment in our shares.
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You will generally be subject to regular federal income tax in the same
manner as a U.S. person with respect to the spin-off of Senior Housing shares
and your investment in our shares, if this investment is effectively connected
with your conduct of a trade or business in the United States. In addition, if
you are a corporate shareholder, your income that is effectively connected with
a trade or business in the United States may also be subject to the 30% branch
profits tax under Section 884 of the Internal Revenue Code, which is payable in
addition to regular federal corporate income tax. The balance of this summary
addresses only those non-U.S. persons whose investment in our common shares is
not effectively connected with the conduct of a trade or business in the United
States.
We are not at this time designating the distribution of Senior Housing
shares as a capital gain dividend that is subject to 35% withholding for
non-U.S. persons, and accordingly the 30% or applicable lower treaty rate
withholding will be imposed upon the fair market value of Senior Housing shares
that we distribute to you. We or other applicable withholding agents will
collect the amount required to be withheld by reducing to cash for remittance to
the IRS a sufficient portion of the Senior Housing shares that you would
otherwise receive, and you will bear the brokerage or other costs for this
withholding procedure. Because we cannot determine our current and accumulated
earnings and profits until the end of our taxable year, withholding at the rate
of 30% or applicable lower treaty rate will be imposed on the gross fair market
value of the Senior Housing shares distributed to you. Notwithstanding this and
other withholding on distributions in excess of our current and accumulated
earnings and profits, these distributions are a nontaxable return of capital to
the extent that they do not exceed your adjusted basis in our shares, and the
nontaxable return of capital will reduce your adjusted basis in these shares. To
the extent that distributions in excess of current and accumulated earnings and
profits exceed your adjusted basis in our shares, the distributions will give
rise to tax liability only if you would otherwise be subject to tax on any gain
from the sale or exchange of our shares. Your gain from the sale or exchange of
our shares will not be taxable if:
- our shares are "regularly traded" within the meaning of Treasury
regulations under Section 897 of the Internal Revenue Code and you have at
all times during the preceding five years owned 5% or less by value of our
outstanding shares, or
- we are a "domestically controlled REIT" within the meaning of Section 897
of the Internal Revenue Code.
Although we cannot provide complete assurance on this matter, we believe that
our shares are regularly traded and that we are a domestically controlled REIT.
You may seek a refund of amounts withheld on distributions to you in excess of
our current and accumulated earnings and profits, provided that you furnish the
required information to the IRS.
We expect that a portion of some or all of our 1999 distributions will be
treated for federal income tax purposes as attributable to our dispositions of
United States real property interests. To the extent that a portion of any of
our distributions, including the distribution of Senior Housing shares, is
attributable to our disposition of United States real property interests, you
will be subject to tax on this portion as though it were gain effectively
connected with a trade or business in the United States. Accordingly, you will
be taxed on these amounts at the capital gain rates applicable to a U.S. person,
subject to any applicable alternative minimum tax and to a special alternative
minimum tax in the case of nonresident alien individuals; you will be required
to file a United States federal income tax return reporting these amounts, even
if applicable withholding is imposed as described below; and if you are a
corporation, you may owe the 30% branch profits tax under Section 884 of the
Internal Revenue Code in respect of these amounts.
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We and other applicable withholding agents will be required to withhold from
distributions to shareholders that are non-U.S. persons, and to remit to the
IRS, 35% of the maximum amount of any distribution that could be designated by
us as a capital gain dividend. In addition, if we designate prior distributions
as capital gain dividends, then subsequent distributions up to the amount of the
designated prior distributions will be treated as capital gain dividends for
purposes of the 35% withholding rule. After the close of our 1999 taxable year,
we expect to designate to the maximum extent possible a portion of one or more
of our 1999 distributions as capital gain dividends, and accordingly 35%
withholding will be imposed upon our subsequent distributions to non-U.S.
persons to that extent.
The amount of any tax withheld on distributions to you is creditable against
your United States federal income tax liability, and any amount of tax withheld
in excess of that tax liability may be refunded if you file an appropriate claim
for refund with the IRS. New Treasury regulations will alter reporting of and
withholding on distributions paid to you with respect to our shares. Under
recent administrative guidance, these new Treasury regulations are to be
effective generally for payments made after December 31, 2000. Among other
changes, the new Treasury regulations generally require non-U.S. persons and
withholding agents to use the new IRS Forms W-8 series, rather than the
predecessor IRS Forms W-8, 1001 and 4224.
FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF TO HRPT
The Internal Revenue Code imposes upon us various REIT qualification tests
comparable to those imposed upon Senior Housing and discussed below. While we
believe that we have operated and will operate in a manner to satisfy the
various REIT qualification tests, counsel has not reviewed and will not review
our compliance with these tests on a continuing basis. The following discussion
summarizes REIT qualification and taxation issues under the Internal Revenue
Code implicated by our spin-off of Senior Housing shares.
IN GENERAL. So long as Senior Housing and its subsidiaries remain our
wholly owned direct or indirect subsidiaries, they will be qualified REIT
subsidiaries under Section 856(i) of the Internal Revenue Code or, equivalently,
noncorporate entities that are taxed as part of us under regulations issued
under Section 7701 of the Internal Revenue Code. During these periods Senior
Housing and its subsidiaries will not be taxpayers separate from HRPT for
federal income tax purposes. Under the transaction agreement, the federal income
tax liabilities and federal income tax filings for Senior Housing and its
subsidiaries for these periods are the responsibility of HRPT.
When we cease to wholly own Senior Housing and its subsidiaries as a result
of the spin-off of Senior Housing shares, the following will be deemed to have
occurred for federal income tax purposes:
- Immediately preceding the spin-off of Senior Housing shares, we disposed
of the properties and assets of Senior Housing and its subsidiaries in an
exchange, called a deemed exchange, in which our aggregate amount realized
equaled the sum of the fair market value of the total number of Senior
Housing shares owned by us immediately preceding the spin-off, plus the
promissory obligations owing to us from Senior Housing immediately
preceding the spin-off, including the then outstanding balance of
principal and accrued interest on the formation debt, plus the aggregate
amount of liabilities that are associated with the Senior Housing
properties and assets and that remain the responsibility of Senior Housing
and its subsidiaries after the spin-off.
- Immediately after the deemed exchange, we distributed to our shareholders
13.2 million of the Senior Housing shares we were treated as having
received in the deemed exchange.
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VALUING SENIOR HOUSING SHARES. Our aggregate amount realized in the deemed
exchange and our tax consequences upon the distribution of Senior Housing shares
both depend on the fair market value of the Senior Housing shares. Under
applicable judicial precedent, it is possible that for federal income tax
purposes the following three valuations may differ:
- the per share fair market value of the Senior Housing shares we are
treated as receiving in the deemed exchange;
- the per share fair market value of the Senior Housing shares that we
distribute; and
- the average of the reported high and low trading prices for the Senior
Housing shares in the public market on the date of the spin-off, called
the distribution price.
Because of the factual nature of the value of the Senior Housing shares,
Sullivan & Worcester LLP is unable to render an opinion on these values. We
believe that for all federal income tax purposes the per share fair market value
of Senior Housing shares may be properly valued at the distribution price.
Accordingly, the distribution price will be used for all our tax reporting,
including for purposes of computing the aggregate amount realized in the deemed
exchange and for purposes of computing any gain or loss we may have on the
distribution of Senior Housing shares. We may be required to amend these tax
reports, including those sent to our shareholders, if the IRS successfully
challenges our valuation assumptions.
TAXATION OF THE DEEMED EXCHANGE. The Internal Revenue Code and applicable
authorities do not provide definitive guidance on whether Section 351(a) applies
to the deemed exchange. Sullivan & Worcester LLP has opined that it is likely
that the deemed exchange is an exchange under Section 351(a) which will be a
partially taxable transaction in which our losses are not recognized, and in
which our gains are recognized only to the extent of the value of property other
than Senior Housing shares, including the outstanding balance of principal and
accrued interest on the formation debt, that we receive in the deemed exchange.
We expect that the then outstanding balance on the formation debt will be
sufficiently large so that we will recognize a significant portion of our gains
realized in the deemed exchange.
However, if the deemed exchange is not an exchange under Section 351(a),
then the deemed exchange will be a fully taxable transaction in which our gains
are recognized in full immediately, and in which our losses are recognized in
full when we own 50% or less of both the voting power and the value of Senior
Housing's outstanding stock. Although the IRS could assert that a control
premium causes us to own more than 50% of the value of Senior Housing even
though we own less than half of its shares, we believe that our ownership of
Senior Housing will be below the 50% voting and valuation thresholds immediately
after the spin-off. Because of the factual nature of valuations, our counsel is
unable to render an opinion on values. Whether or not the deemed exchange is an
exchange under Section 351(a) also will have an impact on our tax basis in the
Senior Housing shares that we distribute and those that we retain, as well as on
Senior Housing's initial tax bases and depreciation schedule in its properties
and assets, all as described below.
Whether the deemed exchange is an exchange under Section 351(a) depends upon
the application of rules that foreclose Section 351(a) treatment for property
transfers to a REIT that accomplish diversification. Thus, under Section
1.351-1(c) of the Treasury Regulations, if the deemed exchange and our
distribution of Senior Housing shares result, directly or indirectly, in HRPT
diversifying its ownership of the Senior Housing properties and assets, then the
deemed exchange
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will not be an exchange under Section 351(a). For this purpose, there is no
proscribed diversification if either:
- there is no plan or intention for Senior Housing to issue more than a de
minimis number of shares following the spin-off, or
- the Senior Housing portfolio of properties and assets is already
sufficiently diversified.
Although it is contemplated that Senior Housing will issue additional shares in
the future to raise capital and grow as an independent REIT, at the time of the
spin-off we expect there to be no specific plan for raising additional capital.
In addition, we believe that the Senior Housing portfolio is diversified for
purposes of these rules, given the properties' diversity in geography, size,
age, operating history and remaining lease terms. While it is true that the
Senior Housing properties are at present leased to only a modest number of
tenants, we believe this does not detract from the diversified nature of the
Senior Housing portfolio because the owner of the portfolio continues to have an
economic stake in each individual property through its residual interest in each
property at the expiration of that property's lease term, and receiving rent, in
respect of a significant number of properties in the portfolio, that is based in
part on the gross revenues which the tenant is able to derive from that
property. Further, we believe that the Senior Housing portfolio's modest number
of tenants is consistent with the business model of several other publicly
traded REITs and with prudent real estate investment practices generally. Based
on these and other representations we made regarding the diversity of the Senior
Housing portfolio, our counsel has opined that it is likely that the deemed
exchange will be an exchange described in Section 351(a), and we will perform
all our tax reporting, including statements supplied to our shareholders and to
the IRS, accordingly. We may be required to amend these tax reports, including
those sent to our shareholders, if the IRS successfully challenges our position
that the deemed exchange is an exchange described in Section 351(a). We expect
to ensure our 1999 and future compliance with the 95% REIT distribution
requirements of the Internal Revenue Code by making distributions to our
shareholders that are sufficient regardless of whether the deemed exchange is an
exchange described under Section 351(a).
Regardless of whether Section 351(a) governs the deemed exchange, the
aggregate amount realized in the deemed exchange, as well as the property other
than Senior Housing shares that we receive in the deemed exchange, will be
allocated among the assets of Senior Housing in proportion to their relative
fair market values. With respect to each Senior Housing asset, we will realize
gain or loss, as the case may be, equal to the difference between the aggregate
amount realized in the deemed exchange allocable to that asset and our adjusted
tax basis in that asset. If Section 351(a) applies to the deemed exchange, then
we will recognize any realized gain in a Senior Housing asset only to the extent
of that asset's allocable share of the property we receive in the deemed
exchange other than Senior Housing shares, and we will not recognize any
realized loss in a Senior Housing asset. We and our wholly owned direct and
indirect subsidiaries have held the Senior Housing assets for investment with a
view to long-term income production and capital appreciation, and the conversion
of Senior Housing into a separate REIT by means of the spin-off of Senior
Housing shares represents a new, unique opportunity to maximize the value of our
investment in the Senior Housing assets. We therefore believe that our gains on
Senior Housing assets in the deemed exchange will be gains from assets held for
investment. Accordingly, our gains on realty or mortgages on real property will
be qualifying gross income under the 75% and 95% gross income tests of Section
856(c)(2)-(3) of the Internal Revenue Code. Although our gains on personalty
other than mortgages will not be qualifying income under either the 75% or the
95% gross income test, we expect to recognize little or no gain of this type.
However, if any of our gains on Senior Housing assets in the deemed exchange
were to be characterized as gains from the disposition of inventory or
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other property held primarily for sale to customers, these gains would be
subject to the 100% penalty tax of Section 857(b)(6) of the Internal Revenue
Code. In addition, some of the Senior Housing assets in the deemed exchange were
acquired in carryover basis transactions from C corporations within the last ten
years. Accordingly, we are subject to a REIT-level federal tax on the gains on
these assets, which federal tax we anticipate to be less than $1 million. Our
payment of this REIT-level federal tax will constitute a deduction for us in
computing the amount of our income that we must distribute to our shareholders
and in computing the portion of our distributions to our shareholders that
constitutes taxable income rather than a return of capital.
TAXATION OF THE DISTRIBUTION. Our distribution of Senior Housing shares in
the spin-off will be treated in the same manner as any other distribution of
cash or property that we may make. Thus, the distribution of Senior Housing
shares together with our other 1999 distributions will entitle us to a dividends
paid deduction to the extent of our earnings and profits for the year, assuming
as expected that these distributions exceed our earnings and profits. In
addition, we will recognize gain from the distribution of these Senior Housing
shares equal to the excess, if any, of the fair market value of the total number
of Senior Housing shares that we distribute, over our tax basis in those
distributed Senior Housing shares. In contrast, we will not recognize loss on
the distribution even if our tax basis in the distributed Senior Housing shares
exceeds their fair market value.
Under applicable judicial precedent, it is possible that for federal income
tax purposes the per share fair market value of the Senior Housing shares we
distribute will differ from the distribution price. In addition, our counsel is
unable to render an opinion on the fair market value of the total number of
Senior Housing shares that we distribute because of the factual nature of value
determinations. However, on the basis of valuation assumptions described above,
the fair market value of the total number of Senior Housing shares that we
distribute may be computed as the distribution price multiplied by the number of
Senior Housing shares distributed. Our tax basis in the distributed Senior
Housing shares is computed as described below and depends upon whether Section
351(a) governs the deemed exchange.
Any gain that we recognize on our distribution of Senior Housing shares will
be qualifying gross income under the 75% and 95% gross income tests of Section
856(c)(2)-(3) of the Internal Revenue Code, provided that we are not treated as
holding the distributed Senior Housing shares as inventory or other property
held primarily for sale to customers. If any of this gain were characterized as
the sale of inventory or other property held primarily for sale to customers,
this would not affect our ability to satisfy the 75% and 95% gross income tests,
but the recharacterized gain would be subject to the 100% penalty tax of Section
857(b)(6) of the Internal Revenue Code. Although we can provide no assurance on
this matter, because we and our wholly owned direct and indirect subsidiaries
have held the Senior Housing properties and assets for investment with a view to
long-term income production and capital appreciation, and because the conversion
of Senior Housing into a separate REIT by means of the distribution of Senior
Housing shares represents a new, unique opportunity to maximize the value of our
investment in the Senior Housing properties and assets, we do not believe that
we have held the Senior Housing shares as inventory or other property held
primarily for sale to customers.
If we are correct that the deemed exchange is governed by Section 351(a),
then our tax basis in the 100% of the Senior Housing shares that we own
immediately prior to the distribution of Senior Housing shares will be equal to,
and our tax basis in each individual Senior Housing share will be its pro rata
share of, the following sum:
(1) our aggregate adjusted tax bases in the Senior Housing properties and
assets immediately prior to the deemed exchange; plus
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(2) all gains that we recognize in the deemed exchange; minus
(3) Senior Housing's promissory obligations owing to us immediately
preceding the spin-off, including the then outstanding balance of
principal and accrued interest on the formation debt; minus
(4) the aggregate amount of liabilities that are associated with the Senior
Housing properties and assets and that remain the responsibility of
Senior Housing and its subsidiaries after the spin-off.
As described above, we believe that each Senior Housing share we receive in the
deemed exchange may be valued at the distribution price, and we expect that a
significant portion of the realized gains, but none of the realized losses, in
the deemed exchange will be recognized. Accordingly, we expect that our tax
basis in each of the Senior Housing shares that we own immediately prior to the
distribution will be, at most, only a few dollars per share below the
distribution price, and may possibly exceed the distribution price. Under these
circumstances, we could recognize gain but no loss on our distribution of Senior
Housing shares.
Alternatively, if the deemed exchange is not governed by Section 351(a), our
tax basis in the 100% of the Senior Housing shares that we own immediately prior
to the spin-off will be their fair market value as determined for purposes of
computing our aggregate amount realized in the deemed exchange. Accordingly, in
the spin-off we would be distributing Senior Housing shares that each have a
fair market value and tax basis equal to the distribution price, and so we would
not recognize any gain or loss in the distribution.
OUR CONTINUED INVESTMENTS IN SENIOR HOUSING. After the distribution of
Senior Housing shares, we will continue to own Senior Housing shares, and we
expect Senior Housing to qualify as a REIT under the Internal Revenue Code. For
so long as it qualifies as a REIT, our continued investment in Senior Housing
shares will count favorably toward the 75%, 25%, 10%, and 5% gross assets tests
of Section 856(c)(4) of the Internal Revenue Code; similarly, the dividend
income we receive on Senior Housing shares will count as qualifying income for
us under the 75% and 95% gross income tests of Section 856(c)(2)-(3) of the
Internal Revenue Code.
We expect Senior Housing to pay off the formation debt soon after our
spin-off of Senior Housing shares, but if it does not do so, then we will
exercise our rights to have the formation debt adequately secured, within 20
days of the spin-off, by mortgages on the real property owned by one or more of
Senior Housing's subsidiaries. Accordingly, we expect that if the formation debt
is not paid in full soon after the spin-off, then our investment in the
formation debt, as adequately secured by mortgages on real estate, will also
count favorably toward the 75%, 25%, 10%, and 5% gross assets tests of Section
856(c)(4) of the Internal Revenue Code, and similarly the interest income from
the formation debt will count as qualifying income for us under the 75% and 95%
gross income tests of Section 856(c)(2)-(3) of the Internal Revenue Code.
The transaction agreement contains provisions that require Senior Housing
and HRPT to refrain from taking actions that may jeopardize each other's
qualification as a REIT under the Internal Revenue Code.
FEDERAL INCOME TAXATION OF SENIOR HOUSING AND ITS SHAREHOLDERS
IN GENERAL. Senior Housing will elect to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code commencing with its 1999 taxable
year. Senior Housing's 1999 taxable year will begin when it ceases to be wholly
owned by HRPT and will end on December 31, 1999. Senior Housing's REIT election,
assuming continuing compliance with the federal income tax
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qualification tests summarized below, continues in effect for subsequent taxable
years. Although no assurance can be given, Senior Housing believes that it will
be organized and will operate in a manner that qualifies it to be taxed under
the Internal Revenue Code as a REIT.
As a REIT, Senior Housing generally will not be subject to federal income
tax on its net income distributed as dividends to its shareholders.
Distributions to Senior Housing shareholders generally will be includable in
their income as dividends to the extent the distributions do not exceed Senior
Housing's current or accumulated earnings and profits. A portion of these
dividends may be treated as capital gain dividends, as explained below. No
portion of any dividends will be eligible for the dividends received deduction
for corporate shareholders. Distributions in excess of current or accumulated
earnings and profits generally will be treated for federal income tax purposes
as a return of capital to the extent of a recipient shareholder's basis in its
shares, and will reduce this basis.
Senior Housing's counsel, Sullivan & Worcester LLP, has opined that Senior
Housing will be organized as a REIT under the Internal Revenue Code for its 1999
taxable year, and that its current investments and plan of operation will enable
it to meet the requirements for qualification and taxation as a REIT under the
Internal Revenue Code. Senior Housing's actual qualification and taxation as a
REIT will depend upon its ability to meet the various REIT qualification tests
imposed under the Internal Revenue Code and summarized below. While Senior
Housing believes that it will operate in a manner to satisfy the various REIT
qualification tests, counsel has not reviewed and will not review compliance
with these tests on a continuing basis. If Senior Housing fails to qualify as a
REIT in any year, it will be subject to federal income taxation as if it were a
domestic corporation, and its shareholders will be taxed like shareholders of
ordinary corporations. In this event, Senior Housing could be subject to
significant tax liabilities, and the amount of cash available for distribution
to its shareholders may be reduced or eliminated.
If Senior Housing qualifies for taxation as a REIT and distributes to its
shareholders at least 95% of its "real estate investment trust taxable income,"
computed by excluding any net capital gain and before taking into account any
dividends paid deduction for which it is eligible, it generally will not be
subject to federal corporate income taxes on the amount distributed. However,
even if Senior Housing qualifies for federal income taxation as a REIT, it may
be subject to federal tax in the following circumstances:
- Senior Housing will be taxed at regular corporate rates on any
undistributed "real estate investment trust taxable income," including its
undistributed net capital gains.
- If Senior Housing's alternative minimum taxable income exceeds its taxable
income, it may be subject to the corporate alternative minimum tax on its
items of tax preference.
- If Senior Housing has net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in the
ordinary course of business or other nonqualifying income from foreclosure
property, it will be subject to tax on this income at the highest regular
corporate rate, which is currently 35%.
- If Senior Housing has net income from prohibited transactions, including
sales or other dispositions of inventory or property held primarily for
sale to customers in the ordinary course of business other than
foreclosure property, it will be subject to tax on this income at
a 100% rate.
- If Senior Housing fails to satisfy the 75% gross income test or the 95%
gross income test discussed below, but nonetheless maintains its
qualification as a REIT, it will be subject to tax
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at a 100% rate on the greater of the amount by which it fails the 75% or
the 95% test, multiplied by a fraction intended to reflect its
profitability.
- If Senior Housing fails to distribute for any calendar year at least the
sum of 85% of its REIT ordinary income for that year, 95% of its REIT
capital gain net income for that year, and any undistributed taxable
income from prior periods, it will be subject to a 4% excise tax on the
excess of the required distribution over the amounts actually distributed.
- If Senior Housing acquires an asset from a corporation in a transaction in
which its basis in the asset is determined by reference to the basis of
the asset in the hands of a present or former C corporation, and if it
subsequently recognizes gain on the disposition of this asset during the
ten-year period beginning on the date on which the asset ceased to be
owned by the C corporation, then Senior Housing will pay tax at the
highest regular corporate tax rate, which is currently 35%, on the lesser
of the excess of the fair market value of the asset over the C
corporation's basis in the asset on the date the asset ceased to be owned
by the C corporation, or the gain recognized in the disposition.
If Senior Housing invests in properties in foreign countries, its profits
from these investments will generally be subject to tax in the countries where
those properties are located. The nature and amount of this taxation will depend
on the laws of the countries where the properties are located. If Senior Housing
operates as it currently intends, then it will distribute its taxable income to
its shareholders and it will not pay federal corporate income tax, and thus it
generally cannot recover the cost of foreign taxes imposed on its foreign
investments by claiming foreign tax credits against its federal income tax
liability. Nor can Senior Housing pass through to its shareholders any foreign
tax credits.
If Senior Housing fails to qualify for federal income taxation as a REIT in
any taxable year, then it will be subject to federal taxes in the same manner as
an ordinary corporation. Distributions to its shareholders in any year in which
it fails to qualify as a REIT will not be deductible, nor will these
distributions be required to be made. In that event, to the extent of current
and accumulated earnings and profits, all distributions to Senior Housing
shareholders will be taxable as ordinary dividend income, and subject to
limitations in the Internal Revenue Code, will be eligible for the dividends
received deduction for corporate recipients. Senior Housing would also generally
be disqualified from federal income taxation as a REIT for the four taxable
years following disqualification. Failure to qualify for federal income taxation
as a REIT for even one year could result in Senior Housing incurring substantial
indebtedness or liquidating substantial investments in order to pay the
resulting corporate-level taxes.
GENERAL REIT QUALIFICATION REQUIREMENTS. Section 856(a) of the Internal
Revenue Code defines a REIT as a corporation, trust or association:
(1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares or
by transferable certificates of beneficial interest;
(3) that would be taxable, but for Sections 856 through 859 of the Internal
Revenue Code, as an ordinary domestic corporation;
(4) that is neither a financial institution nor an insurance company subject
to special provisions of the Internal Revenue Code;
(5) the beneficial ownership of which is held by 100 or more persons;
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(6) that is not "closely held" as defined under the personal holding company
stock ownership test, as described below; and
(7) that meets other tests regarding income, assets and distributions, all
as described below.
Section 856(b) of the Internal Revenue Code provides that conditions (1) to (4),
inclusive, must be met during the entire taxable year and that condition (5)
must be met during at least 335 days of a taxable year of 12 months, or during a
pro rata part of a taxable year of less than 12 months. Section 856(h)(2) of the
Internal Revenue Code provides that conditions (5) and (6) need not be met for
Senior Housing's 1999 taxable year, which taxable year commences on the date of
the spin-off. Senior Housing believes that it will satisfy conditions (1) to
(6), inclusive, for its 1999 taxable year, and that it will continue to satisfy
those conditions in future taxable years. There can, however, be no assurance in
this regard.
By reason of condition (6) above, Senior Housing will fail to qualify as a
REIT for a taxable year if at any time during the last half of the year more
than 50% in value of its outstanding shares is owned directly or indirectly by
five or fewer individuals. To help comply with condition (6), Senior Housing's
declaration of trust contains provisions restricting transfers of its shares.
Similarly, for the purpose of HRPT maintaining its own qualification as a REIT
under the Tax Code, HRPT's declaration of trust contains comparable provisions
that limit concentrated ownership of shares in HRPT. In addition, commencing
with its 1999 taxable year, if Senior Housing complies with applicable Treasury
regulations for ascertaining the ownership of its outstanding shares and does
not know, or exercising reasonable diligence would not have known, that it
failed condition (6), then it will be treated as satisfying condition (6). Also,
Senior Housing's failure to comply with these applicable Treasury regulations
for ascertaining ownership of its outstanding shares may result in a penalty of
$25,000, or $50,000 for intentional violations. Accordingly, Senior Housing
intends to comply with these Treasury regulations, and to request annually from
record holders of significant percentages of its shares information regarding
the ownership of its shares. Under Senior Housing's declaration of trust, its
shareholders are required to respond to these requests for information.
The rule that an entity will fail to qualify as a REIT for a taxable year if
at any time during the last half of the year more than 50% in value of its
outstanding shares is owned directly or indirectly by five or fewer individuals
is relaxed in the case of pension trusts owning shares in a REIT. Shares in a
REIT held by a pension trust are treated as held directly by the pension trust's
beneficiaries in proportion to their actuarial interests in the pension trust.
Consequently, five or fewer pension trusts could own more than 50% of the
interests in an entity without jeopardizing that entity's federal income tax
qualification as a REIT. However, as discussed below, if a REIT is a
"pension-held REIT," each pension trust owning more than 10% of the REIT's
shares by value generally will be taxed on a portion of the dividends received
from the REIT, based on the ratio of
(1) the REIT's gross income for the year that would be unrelated trade or
business income if the REIT were a qualified pension trust, to
(2) the REIT's total gross income for the year.
SENIOR HOUSING'S SUBSIDIARIES AND PARTNERSHIPS. Section 856(i) of the
Internal Revenue Code provides that any corporation 100% of whose stock is held
by a REIT is a qualified REIT subsidiary and shall not be treated as a separate
corporation. The assets, liabilities and items of income, deduction and credit
of a qualified REIT subsidiary are treated as the REIT's. Senior Housing
believes that each of its direct and indirect wholly owned subsidiaries will
either be a qualified REIT subsidiary within the meaning of Section 856(i) of
the Internal Revenue Code, or a noncorporate entity that for federal income tax
purposes is not treated as separate from its owner under regulations issued
under Section 7701 of the Internal Revenue Code. Thus, in applying all the
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federal income tax REIT qualification requirements described in this summary,
Senior Housing's direct and indirect wholly owned subsidiaries are ignored, and
all assets, liabilities and items of income, deduction and credit of its direct
and indirect wholly owned subsidiaries are treated as Senior Housing's.
Senior Housing may invest in real estate through one or more limited or
general partnerships or limited liability companies that are treated as
partnerships for federal income tax purposes. In the case of a REIT that is a
partner in a partnership, regulations under the Internal Revenue Code provide
that, for purposes of the REIT qualification requirements regarding income and
assets discussed below, the REIT is deemed to own its proportionate share of the
assets of the partnership corresponding to the REIT's proportionate capital
interest in the partnership and is deemed to be entitled to the income of the
partnership attributable to this proportionate share. In addition, for these
purposes, the character of the assets and gross income of the partnership
generally retain the same character in the hands of the REIT. Accordingly,
Senior Housing's proportionate share of the assets, liabilities, and items of
income of each partnership in which it is a partner are treated as Senior
Housing's for purposes of the income tests and asset tests discussed below. In
contrast, for purposes of the distribution requirement discussed below, Senior
Housing must take into account as a partner its distributive share of the
partnership's income as determined under the general federal income tax rules
governing partners and partnerships under Sections 701 through 777 of the
Internal Revenue Code.
INCOME TESTS. There are two gross income requirements for qualification as
a REIT under the Internal Revenue Code:
- First, at least 75% of Senior Housing's gross income, excluding gross
income from sales or other dispositions of property held primarily for
sale, must be derived from investments relating to real property,
including "rents from real property" as defined under Section 856 of the
Internal Revenue Code, mortgages on real property, or shares in other
REITs. When Senior Housing receives new capital in exchange for its shares
or in a public offering of five-year or longer debt instruments, income
attributable to the temporary investment of this new capital in stock or a
debt instrument, if received or accrued within one year of its receipt of
the new capital, is generally also qualifying income under the 75% test.
- Second, at least 95% of Senior Housing's gross income, excluding gross
income from sales or other dispositions of property held primarily for
sale, must be derived from a combination of items of real property income
that satisfy the 75% test described above, dividends, interest, payments
under interest rate swap or cap agreements, options, futures contracts,
forward rate agreements, or similar financial instruments, and gains from
the sale or disposition of stock, securities, or real property.
For purposes of these two requirements, income derived from a "shared
appreciation provision" in a mortgage loan is generally treated as gain
recognized on the sale of the property to which it relates. Although Senior
Housing will use its best efforts to ensure that the income generated by its
investments will be of a type which satisfies both the 75% and 95% gross income
tests, there can be no assurance in this regard.
In order to qualify as "rents from real property" under Section 856 of the
Internal Revenue Code, several requirements must be met:
- First, the amount of rent received generally must not be based on the
income or profits of any person, but may be based on receipts or sales.
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- Second, rents do not qualify if the REIT owns 10% or more of the tenant,
whether directly or after application of attribution rules. While Senior
Housing intends not to lease property to any party if rents from that
property would not qualify as rents from real property, application of the
10% ownership rule is dependent upon complex attribution rules and
circumstances that may be beyond Senior Housing's control. For example, an
unaffiliated third party's ownership directly or by attribution of 10% or
more of Senior Housing's shares, or 10% or more of HRPT's shares for so
long as HRPT owns 10% or more of Senior Housing, as well as 10% or more of
the stock of a Senior Housing lessee, would result in that lessee's rents
not qualifying as rents from real property. Senior Housing's declaration
of trust disallows transfers or purported acquisitions, directly or by
attribution, of its shares that could result in disqualification as a REIT
under the Internal Revenue Code and permits its trustees to repurchase the
shares to the extent necessary to maintain Senior Housing's status as a
REIT under the Internal Revenue Code. Similarly, for the purpose of HRPT
maintaining its own qualification as a REIT under the Internal Revenue
Code, HRPT's declaration of trust contains provisions that generally limit
concentrated ownership of HRPT's shares to 8.5% or below. Furthermore, the
transaction agreement provides that HRPT will not take any actions that
may jeopardize Senior Housing's REIT status under the Internal Revenue
Code. Nevertheless, there can be no assurance that these provisions in
Senior Housing's and HRPT's declarations of trust and the provisions of
the transaction agreement will be effective to prevent REIT status under
the Internal Revenue Code from being jeopardized under the 10% lessee
affiliate rule. Furthermore, there can be no assurance that Senior Housing
will be able to monitor and enforce these restrictions, nor will Senior
Housing's shareholders necessarily be aware of ownership of shares
attributed to them under the Internal Revenue Code's attribution rules.
- Third, in order for rents to qualify, Senior Housing generally must not
manage the property or furnish or render services to the tenants of the
property, except through an independent contractor from whom Senior
Housing derives no income. There is an exception to this rule permitting a
REIT to perform customary tenant services of the sort which a tax-exempt
organization could perform without being considered in receipt of
"unrelated business taxable income" as defined in Section 512(b)(3) of the
Internal Revenue Code. In addition, a DE MINIMIS amount of noncustomary
services will not disqualify income as "rents from real property" so long
as the value of the impermissible services does not exceed 1% of the gross
income from the property.
- Fourth, if rent attributable to personal property leased in connection
with a lease of real property is 15% or less of the total rent received
under the lease, then the rent attributable to personal property will
qualify as rents from real property; if this 15% threshold is exceeded,
the rent attributable to personal property will not so qualify. The
portion of rental income treated as attributable to personal property is
determined according to the ratio of the tax basis of the personal
property to the total tax basis of the real and personal property which is
rented.
Senior Housing believes that all or substantially all its rents will qualify as
rents from real property for purposes of Section 856 of the Internal Revenue
Code.
In order to qualify as mortgage interest on real property for purposes of
the 75% test, interest must derive from a mortgage loan secured by real property
with a fair market value at least equal to the amount of the loan. If the amount
of the loan exceeds the fair market value of the real property, the interest
will be treated as interest on a mortgage loan in a ratio equal to the ratio of
the fair market value of the real property to the total amount of the mortgage
loan.
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Any gain Senior Housing realizes on the sale of property held as inventory
or other property held primarily for sale to customers in the ordinary course of
business will be treated as income from a prohibited transaction that is subject
to a penalty tax at a 100% rate. This prohibited transaction income also may
have an adverse effect upon Senior Housing's ability to satisfy the 75% and 95%
gross income tests for federal income tax qualification as a REIT. Senior
Housing cannot provide assurances as to whether or not the IRS might
successfully assert that one or more of its dispositions is subject to the 100%
penalty tax. However, Senior Housing believes that any occasional disposition of
assets that it might make will not be subject to the 100% penalty tax, because
it intends to:
- own its assets for investment with a view to long-term income production
and capital appreciation;
- engage in the business of developing, owning and operating its existing
properties and acquiring, developing, owning and operating new properties;
and
- make occasional dispositions of its assets consistent with its long-term
investment objectives.
If Senior Housing fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
that year if:
- its failure to meet the test was due to reasonable cause and not due to
willful neglect;
- it reports the nature and amount of each item of its income included in
the 75% or 95% gross income tests for that taxable year on a schedule
attached to its tax return; and
- any incorrect information on the schedule was not due to fraud with intent
to evade tax.
It is impossible to state whether in all circumstances Senior Housing would be
entitled to the benefit of this relief provision for the 75% and 95% gross
income tests. Even if this relief provision did apply, a special tax equal to
100% is imposed upon the greater of the amount by which Senior Housing failed
the 75% test or the 95% test, multiplied by a fraction intended to reflect its
profitability.
ASSET TESTS. At the close of each quarter of each taxable year, Senior
Housing must also satisfy three percentage tests relating to the nature of its
assets:
- First, at least 75% of the value of Senior Housing's total assets must
consist of real estate assets, cash and cash items, shares in other REITs,
government securities, and stock or debt instruments purchased with
proceeds of a stock offering or an offering of its debt with a term of at
least five years, but only for the one-year period commencing with its
receipt of the offering proceeds.
- Second, not more than 25% of Senior Housing's total assets may be
represented by securities other than those securities that count favorably
toward the preceding 75% asset test.
- Third, of the investments included in the preceding 25% asset class, the
value of any one issuer's securities that Senior Housing owns may not
exceed 5% of the value of its total assets, and Senior Housing may not own
more than 10% of any one issuer's outstanding voting securities.
When a failure to satisfy the above asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. Senior Housing intends to maintain records of the value of its
assets to document its compliance with the above three asset tests, and to take
actions as may be required to cure any failure to satisfy the tests within 30
days after the close of any quarter.
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ANNUAL DISTRIBUTION REQUIREMENTS. In order to qualify for taxation as a
REIT under the Internal Revenue Code, Senior Housing is required to make annual
distributions other than capital gain dividends to its shareholders in an amount
at least equal to the excess of:
(A) the sum of 95% of Senior Housing's "real estate investment trust taxable
income," as defined in Section 857 of the Internal Revenue Code, but
computed without regard to the dividends paid deduction and net capital
gain, and 95% of Senior Housing's net income after tax, if any, from
property received in foreclosure, over
(B) the sum of Senior Housing's qualifying noncash income, E.G., imputed
rental income or income from transactions inadvertently failing to
qualify as like-kind exchanges.
These distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before Senior Housing timely files its
tax return for the earlier taxable year and if paid on or before the first
regular distribution payment after that declaration. Dividends declared in
October, November, or December and paid during the following January will be
treated as having been both paid and received on December 31 of the prior
taxable year. A distribution which is not pro rata within a class of Senior
Housing's beneficial interests entitled to a distribution, or which is not
consistent with the rights to distributions among Senior Housing's classes of
beneficial interests, is a preferential distribution that is not taken into
consideration for purposes of the distribution requirements, and accordingly the
payment of a preferential distribution could affect Senior Housing's ability to
meet the distribution requirements. Taking into account Senior Housing's
distribution policies, including any dividend reinvestment plan it may adopt,
Senior Housing expects that it will not make any preferential distributions. The
distribution requirements may be waived by the IRS if a REIT establishes that it
failed to meet them by reason of distributions previously made to meet the
requirements of the 4% excise tax discussed below. To the extent that Senior
Housing does not distribute all of its net capital gain and all of its real
estate investment trust taxable income, as adjusted, it will be subject to tax
on undistributed amounts.
In addition, Senior Housing will be subject to a 4% excise tax to the extent
it fails within a calendar year to make required distributions to its
shareholders of 85% of its ordinary income and 95% of its capital gain net
income plus the excess, if any, of the "grossed up required distribution" for
the preceding calendar year over the amount treated as distributed for that
preceding calendar year. For this purpose, the term "grossed up required
distribution" for any calendar year is the sum of Senior Housing's taxable
income for the calendar year without regard to the deduction for dividends paid
and all amounts from earlier years that are not treated as having been
distributed under the provision.
If Senior Housing does not have enough cash or other liquid assets to meet
the 95% distribution requirements, it may find it necessary to arrange for new
debt or equity financing to provide funds for required distributions, or else
its REIT status for federal income tax purposes could be jeopardized. Senior
Housing can provide no assurance that financing would be available for these
purposes on favorable terms.
If Senior Housing fails to distribute sufficient dividends for any year, it
may be able to rectify this failure by paying "deficiency dividends" to
shareholders in a later year. These deficiency dividends may be included in
Senior Housing's deduction for dividends paid for the earlier year, but an
interest charge would be imposed upon it for the delay in distribution. Although
Senior Housing may be able to avoid being taxed on amounts distributed as
deficiency dividends, it will remain liable for the 4% excise tax discussed
above.
DEPRECIATION AND FEDERAL INCOME TAX TREATMENT OF LEASES. For properties
purchased after the spin-off, Senior Housing's initial tax basis will generally
be its acquisition cost. Senior Housing will
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generally depreciate its real property on a straight-line basis over 40 years
and its personal property, if any, over 12 years. These depreciation schedules
may vary for properties that Senior Housing acquires through tax-free or
carryover basis acquisitions.
Senior Housing's initial tax bases and depreciation schedules for its assets
at the time of the spin-off will depend upon whether the deemed exchange that
results from the spin-off is an exchange under Section 351(a) of the Internal
Revenue Code. Assuming Section 351(a) treatment, Senior Housing will carry over
HRPT's tax basis and depreciation schedule in each Senior Housing asset, and to
the extent that HRPT recognizes gain on a Senior Housing asset in the deemed
exchange, Senior Housing will have additional tax basis in that asset which it
will depreciate as described above for newly purchased assets. In contrast, if
Section 351(a) treatment does not apply to the deemed exchange, then Senior
Housing will be treated as though it acquired all its assets at the time of the
spin-off in a fully taxable acquisition, thereby acquiring aggregate tax bases
in these assets equal to the aggregate amount realized by HRPT in the deemed
exchange, and Senior Housing will depreciate these tax bases as described above
for newly purchased assets. Senior Housing believes, and Sullivan & Worcester
LLP has opined that it is likely that the deemed exchange will be an exchange
under Section 351(a), and Senior Housing will perform all its tax reporting
accordingly. Senior Housing may be required to amend these tax reports,
including those sent to its shareholders, if the IRS successfully challenges its
position that the deemed exchange is an exchange under Section 351(a). Senior
Housing intends to comply with the 95% REIT distribution requirements in 1999
and future years regardless of whether the deemed exchange is an exchange under
Section 351(a).
Senior Housing will be entitled to depreciation deductions from its
facilities only if it is treated for federal income tax purposes as the owner of
the facilities. This means that the leases of the facilities must be classified
for federal income tax purposes as true leases, rather than as sales or
financing arrangements, and Senior Housing believes this to be the case. In
addition, in the case of sale-leaseback arrangements, the IRS could assert that
Senior Housing realized prepaid rental income in the year of purchase to the
extent that the value of a leased property exceeds the purchase price for that
property. Because of the lack of clear precedent, Senior Housing cannot provide
assurances as to whether the IRS might successfully assert the existence of
prepaid rental income in any of its sale-leaseback transactions.
Additionally, Section 467 of the Internal Revenue Code, which concerns
leases with increasing rents, may apply to those of Senior Housing's leases
which provide for rents that increase from one period to the next. Section 467
of the Internal Revenue Code provides that in the case of a so-called
"disqualified leaseback agreement" rental income must be accrued at a constant
rate. Where constant rent accrual is required, Senior Housing could recognize
rental income from a lease in excess of cash rents and, as a result, encounter
difficulty in meeting the 95% distribution requirement. Disqualified leaseback
agreements include leaseback transactions where a principal purpose for
providing increasing rent under the agreement is the avoidance of federal income
tax. Recently issued Treasury regulations provide that rents will not be treated
as increasing for tax avoidance purposes where the increases are based upon a
fixed percentage of lessee receipts. Therefore, the additional rent provisions
in Senior Housing's leases that are based on a fixed percentage of lessee
receipts generally should not cause the leases to be disqualified leaseback
agreements under Section 467.
TAXATION OF SHAREHOLDERS. As long as Senior Housing qualifies as a REIT for
federal income tax purposes, a distribution to its shareholders that Senior
Housing does not designate as a capital gain dividend will be treated as an
ordinary income dividend to the extent that it is made out of current or
accumulated earnings and profits. Distributions made out of Senior Housing's
current or
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accumulated earnings and profits that Senior Housing properly designates as
capital gain dividends will be taxed as long-term capital gains, as discussed
below, to the extent they do not exceed actual net capital gain for the taxable
year. However, corporate shareholders may be required to treat up to 20% of any
capital gain dividend as ordinary income under Section 291 of the Internal
Revenue Code. In addition, Senior Housing may elect to retain net capital gain
income and treat it as constructively distributed. In that case,
(1) Senior Housing will be taxed at regular corporate capital gains tax
rates on retained amounts,
(2) each shareholder will be taxed on its designated proportionate share of
Senior Housing's retained net capital gains as though that amount were
distributed and designated a capital gain dividend,
(3) each shareholder will receive a credit for its designated proportionate
share of the tax that Senior Housing pays,
(4) each shareholder will increase its adjusted basis in its Senior Housing
shares by the excess of the amount of its proportionate share of these
retained net capital gains over its proportionate share of this tax that
Senior Housing pays, and
(5) both Senior Housing and its corporate shareholders will make
commensurate adjustments in their respective earnings and profits for
federal income tax purposes.
If Senior Housing elects to retain its net capital gains in this fashion, it
will notify its shareholders of the relevant tax information within 60 days
after the close of the affected taxable year. For noncorporate shareholders,
long-term capital gains are generally taxed at maximum rates of 20% or 25%,
depending upon the type of property disposed of and the previously claimed
depreciation with respect to this property.
Distributions in excess of current or accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
shareholder's adjusted basis in the shareholder's Senior Housing shares, but
will reduce the shareholder's basis in those shares. To the extent that these
excess distributions exceed the adjusted basis of a shareholder's shares, they
will be included in income as capital gain, with long-term gain generally taxed
to noncorporate shareholders at a maximum rate of 20%. No shareholder may
include on his federal income tax return any of Senior Housing's net operating
losses or any of its capital losses.
Dividends that Senior Housing declares in October, November or December of a
taxable year to shareholders of record on a date in those months will be deemed
to have been received by shareholders on December 31 of that taxable year,
provided Senior Housing actually pays these dividends during the following
January. Also, items that are treated differently for regular and alternative
minimum tax purposes are to be allocated between a REIT and its shareholders
under Treasury regulations which are to be prescribed. It is possible that these
Treasury regulations will require tax preference items to be allocated to Senior
Housing shareholders with respect to any accelerated depreciation or other tax
preference items that Senior Housing claims.
The sale or exchange of Senior Housing shares will result in recognition of
gain or loss in an amount equal to the difference between the amount realized
and the shareholder's adjusted basis in the shares sold or exchanged. This gain
or loss will be capital gain or loss, and will be long-term capital gain or loss
if the shareholder's holding period in the shares exceeds one year. In addition,
any loss upon a sale or exchange of Senior Housing shares held for six months or
less will generally be treated as a long-term capital loss to the extent of
Senior Housing long-term capital gain dividends during the holding period.
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Noncorporate shareholders who borrow funds to finance their acquisition of
Senior Housing shares could be limited in the amount of deductions allowed for
the interest paid on the indebtedness incurred. Under Section 163(d) of the
Internal Revenue Code, interest paid or accrued on indebtedness incurred or
continued to purchase or carry property held for investment is generally
deductible only to the extent of the investor's net investment income. A
shareholder's net investment income will include ordinary income dividend
distributions received from Senior Housing and, if an appropriate election is
made by the shareholder, capital gain dividend distributions received from
Senior Housing; however, distributions treated as a nontaxable return of the
shareholder's basis will not enter into the computation of net investment
income.
TAXATION OF TAX-EXEMPT SHAREHOLDERS. In Revenue Ruling 66-106, the IRS ruled
that amounts distributed by a REIT to a tax-exempt employees' pension trust did
not constitute "unrelated business taxable income," even though the REIT may
have financed some its activities with acquisition indebtedness. Although
revenue rulings are interpretive in nature and subject to revocation or
modification by the IRS, based upon the analysis and conclusion of Revenue
Ruling 66-106, Senior Housing's distributions made to shareholders that are
tax-exempt pension plans, individual retirement accounts, or other qualifying
tax-exempt entities should not constitute unrelated business taxable income,
unless the shareholder has financed its acquisition of its shares with
"acquisition indebtedness" within the meaning of the Internal Revenue Code.
Special rules apply to tax-exempt pension trusts, including so-called 401(k)
plans but excluding individual retirement accounts or government pension plans,
that own more than 10% by value of a "pension-held REIT" at any time during a
taxable year. The pension trust may be required to treat a percentage of all
dividends received from the pension-held REIT during the year as unrelated
business taxable income. This percentage is equal to the ratio of
(1) the pension-held REIT's gross income derived from the conduct of
unrelated trades or businesses, determined as if the pension-held REIT
were a tax-exempt pension fund, less direct expenses related to that
income, to
(2) the pension-held REIT's gross income from all sources, less direct
expenses related to that income,
except that this percentage shall be deemed to be zero unless it would otherwise
equal or exceed 5%. A REIT is a pension-held REIT if:
- the REIT is "predominantly held" by tax-exempt pension trusts, and
- the REIT would otherwise fail to satisfy the "closely held" ownership
requirement discussed above if the stock or beneficial interests in the
REIT held by tax-exempt pension trusts were viewed as held by tax-exempt
pension trusts rather than by their respective beneficiaries.
A REIT is predominantly held by tax-exempt pension trusts if at least one
tax-exempt pension trust owns more than 25% by value of the REIT's stock or
beneficial interests, or if one or more tax-exempt pension trusts, each owning
more than 10% by value of the REIT's stock or beneficial interests, own in the
aggregate more than 50% by value of the REIT's stock or beneficial interests.
Because of the restrictions in Senior Housing's declaration of trust regarding
the ownership concentration of its shares, and because of the restrictions in
HRPT's declaration of trust regarding the ownership concentration of HRPT's
shares, Senior Housing believes that it will not be a pension-held REIT.
However, because Senior Housing's shares and HRPT's shares will be publicly
traded, Senior Housing cannot completely control whether or not it is or will
become a pension-held REIT.
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TAXATION OF NON-U.S. PERSONS. The rules governing the federal income
taxation of non-U.S. persons are complex, and the following discussion is
intended only as a summary of these rules. If you are a non-U.S. person, we urge
you to consult with your own tax advisor to determine the impact of federal,
state, local, and foreign tax laws, including any tax return filing and other
reporting requirements, with respect to your investment in Senior Housing
shares.
In general, a non-U.S. person will be subject to regular federal income tax
in the same manner as a U.S. person with respect to its investment in Senior
Housing shares if that investment is effectively connected with the non-U.S.
person's conduct of a trade or business in the United States. In addition, a
corporate non-U.S. person that receives income that is or is deemed effectively
connected with a trade or business in the United States may also be subject to
the 30% branch profits tax under Section 884 of the Internal Revenue Code, which
is payable in addition to regular federal corporate income tax. The balance of
this discussion on the federal income taxation of non-U.S. persons addresses
only those non-U.S. persons whose investment in Senior Housing shares is not
effectively connected with the conduct of a trade or business in the United
States.
A distribution by Senior Housing to a non-U.S. person that is not
attributable to gain from the sale or exchange of a United States real property
interest and that is not designated as a capital gain dividend will be treated
as an ordinary income dividend to the extent that it is made out of current or
accumulated earnings and profits. A distribution of this type will generally be
subject to federal income tax and withholding at the rate of 30%, or the lower
rate that may be specified by a tax treaty if the non-U.S. person has in the
manner prescribed by the IRS demonstrated its entitlement to benefits under a
tax treaty. Because Senior Housing cannot determine its current and accumulated
earnings and profits until the end of the taxable year, withholding at the rate
of 30% or applicable lower treaty rate will be imposed on the gross amount of
any distribution to a non-U.S. person that Senior Housing makes and does not
designate a capital gain dividend. Notwithstanding this withholding on
distributions in excess of Senior Housing current and accumulated earnings and
profits, these distributions are a nontaxable return of capital to the extent
that they do not exceed the non-U.S. person's adjusted basis in Senior Housing
shares, and the nontaxable return of capital will reduce the adjusted basis in
these shares. To the extent that distributions in excess of current and
accumulated earnings and profits exceed the non-U.S. person's adjusted basis in
Senior Housing shares, the distributions will give rise to tax liability if the
non-U.S. person would otherwise be subject to tax on any gain from the sale or
exchange of these shares, as discussed below. A non-U.S. person may seek a
refund of amounts withheld on distributions to him in excess of Senior Housing's
current and accumulated earnings and profits, provided that the required
information is furnished to the IRS.
For any year in which Senior Housing qualifies as a REIT, distributions that
are attributable to gain from the sale or exchange of a United States real
property interest are taxed to a non-U.S. person as if these distributions were
gains effectively connected with a trade or business in the United States
conducted by the non-U.S. person. Accordingly, a non-U.S. person will be taxed
on these amounts at the normal capital gain rates applicable to a U.S. person,
subject to any applicable alternative minimum tax and to a special alternative
minimum tax in the case of nonresident alien individuals; the non-U.S. person
will be required to file a United States federal income tax return reporting
these amounts, even if applicable withholding is imposed as described below; and
corporate non-U.S. persons may owe the 30% branch profits tax under Section 884
of the Internal Revenue Code in respect of these amounts. Senior Housing will be
required to withhold from distributions to non-U.S. persons, and remit to the
IRS, 35% of the maximum amount of any distribution that could be designated as a
capital gain dividend. In addition, for purposes of this withholding rule, if
Senior Housing designates prior distributions as capital gain dividends, then
subsequent distributions up to the amount of the designated prior distributions
will be treated as
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capital gain dividends. The amount of any tax withheld is creditable against the
non-U.S. person's federal income tax liability, and any amount of tax withheld
in excess of that tax liability may be refunded provided that an appropriate
claim for refund is filed with the IRS.
Tax treaties may reduce the withholding obligations on Senior Housing
distributions. Under some treaties, however, rates below 30% generally
applicable to ordinary income dividends from United States corporations may not
apply to ordinary income dividends from a REIT. If the amount of tax withheld by
Senior Housing with respect to a distribution to a non-U.S. person exceeds the
shareholder's federal income tax liability with respect to the distribution, the
non-U.S. person may file for a refund of the excess from the IRS. In this
regard, note that the 35% withholding tax rate on capital gain dividends
corresponds to the maximum income tax rate applicable to corporate non-U.S.
persons but is higher than the 20% and 25% maximum rates on capital gains
generally applicable to noncorporate non-U.S. persons. Generally effective with
respect to distributions paid after December 31, 2000, new Treasury regulations
alter the information reporting and backup withholding rules applicable to
non-U.S. persons and provide presumptions under which a non-U.S. person is
subject to backup withholding and information reporting until Senior Housing or
the applicable withholding agent receives certification from the shareholder of
its non-U.S. person status. In some instances, these certification requirements
are more detailed and more involved than those applicable under current Treasury
regulations. The new Treasury regulations also provide special rules to
determine whether, for purposes of determining the applicability of a tax
treaty, Senior Housing's distributions to a non-U.S. person that is an entity
should be treated as paid to the entity or to those owning an interest in that
entity, and whether the entity or its owners are entitled to benefits under the
tax treaty. The general thrust of the new Treasury regulations and their
proposed effective date is to encourage non-U.S. persons and withholding agents
to use as soon as possible the new IRS Forms W-8 series, rather than the
predecessor IRS Forms W-8, 1001, and 4224, and to require use of the new IRS
Forms W-8 series for payments made after December 31, 2000.
If Senior Housing shares are not "United States real property interests"
within the meaning of Section 897 of the Internal Revenue Code, a non-U.S.
person's gain on sale of these shares generally will not be subject to federal
income taxation, except that a nonresident alien individual who was present in
the United States for 183 days or more during the taxable year will be subject
to a 30% tax on this gain. Senior Housing shares will not constitute a United
States real property interest if Senior Housing is a "domestically controlled
REIT." A domestically controlled REIT is a REIT in which at all times during the
preceding five-year period less than 50% in value of its shares is held directly
or indirectly by foreign persons. Senior Housing believes that it will be a
domestically controlled REIT and thus a non-U.S. person's gain on sale of its
shares will not be subject to federal income taxation. However, because these
shares will be publicly traded, and because the shares of HRPT are publicly
traded, Senior Housing can provide no assurance that it will be a domestically
controlled REIT. If Senior Housing is not a domestically controlled REIT, a
non-U.S. person's gain on sale of Senior Housing shares will not be subject to
federal income taxation as a sale of a United States real property interest, if
that class of shares is "regularly traded," as defined by applicable Treasury
regulations, on an established securities market like the New York Stock
Exchange, and the non-U.S. person has at all times during the preceding five
years owned 5% or less by value of that class of shares. If the gain on the sale
of Senior Housing shares were subject to federal income taxation, the non-U.S.
person will generally be subject to the same treatment as a U.S. person with
respect to its gain, will be required to file a United States federal income tax
return reporting that gain, and in the case of corporate non-U.S. persons might
owe branch profits tax under Section 884 of the Internal Revenue Code. In any
event, a purchaser of Senior Housing shares from a non-U.S. person will not be
required to withhold on the purchase price if the
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purchased shares are regularly traded on an established securities market or if
Senior Housing is a domestically controlled REIT. Otherwise, the purchaser of
Senior Housing shares may be required to withhold 10% of the purchase price paid
to the non-U.S. person and to remit the withheld amount to the IRS.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting and backup withholding may apply to distributions or
proceeds paid to HRPT and Senior Housing shareholders under the circumstances
discussed below. Because the spin-off of Senior Housing shares is an in-kind
distribution on HRPT shares, we or other applicable withholding agents will have
to collect any applicable backup withholding by reducing to cash for remittance
to the IRS a sufficient portion of the Senior Housing shares that the HRPT
shareholder would otherwise receive, and the HRPT shareholder will bear the
brokerage or other costs for this withholding procedure. Amounts withheld under
backup withholding are generally not an additional tax and may be refunded or
credited against the REIT shareholder's federal income tax liability, provided
that it furnishes the required information to the IRS.
A U.S. person will be subject to backup withholding at a 31% rate when it
receives distributions on HRPT or Senior Housing shares or proceeds upon the
sale, exchange, redemption, retirement or other disposition of HRPT or Senior
Housing shares, unless the U.S. person properly executes under penalties of
perjury an IRS Form W-9 or substantially similar form that:
- provides the U.S. person's correct taxpayer identification number; and
- certifies that the U.S. person is exempt from backup withholding because
it is a corporation or come within another exempt category, it has not
been notified by the IRS that it is subject to backup withholding, or it
has been notified by the IRS that it is no longer subject to backup
withholding.
If the U.S. person does not provide its correct taxpayer identification number
on the IRS Form W-9 or substantially similar form, it may be subject to
penalties imposed by the IRS and the REIT may also have to withhold a portion of
any capital gain distributions paid to it. Unless the U.S. person has
established on a properly executed IRS Form W-9 or substantially similar form
that it is a corporation or comes within another exempt category, distributions
on HRPT or Senior Housing shares paid to it during the calendar year, and the
amount of tax withheld if any, will be reported to it and to the IRS.
Distributions on HRPT or Senior Housing shares to a non-U.S. person during
each calendar year, and the amount of tax withheld if any, will generally be
reported to the non-U.S. person and to the IRS. This information reporting
requirement applies regardless of whether the non-U.S. person is subject to
withholding on distributions on HRPT or Senior Housing shares or whether the
withholding was reduced or eliminated by an applicable tax treaty. Also,
distributions paid to a non-U.S. person on HRPT or Senior Housing shares may be
subject to backup withholding at a 31% rate, unless the non-U.S. person properly
certifies its non-U.S. person status on an IRS Form W-8 or substantially similar
form in the manner described above. Similarly, information reporting and 31%
backup withholding will not apply to proceeds a non-U.S. person receives upon
the sale, exchange, redemption, retirement or other disposition of HRPT or
Senior Housing shares, if the non-U.S. person properly certifies its non-U.S.
person status on an IRS Form W-8 or substantially similar form. Even without
having executed an IRS Form W-8 or substantially similar form, however, in some
cases information reporting and 31% backup withholding will not apply to
proceeds that a non-U.S. person receives upon the sale, exchange, redemption,
retirement or other disposition of HRPT or Senior Housing shares if the non-U.S.
person receives those proceeds
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through a broker's foreign office. As described above, new Treasury regulations
alter the information reporting and backup withholding rules applicable to
non-U.S. persons for payments made after December 31, 2000, and in general these
new Treasury Regulations replace IRS Forms W-8, 1001, and 4224 with the new IRS
Forms W-8 series. For a non-U.S. person whose income and gain on HRPT or Senior
Housing shares is effectively connected to the conduct of a United States trade
or business, a slightly different rule may apply to proceeds received upon the
sale, exchange, redemption, retirement or other disposition of HRPT or Senior
Housing shares. Until the non-U.S. person complies with the new Treasury
regulations, information reporting and 31% backup withholding may apply in the
same manner as to a U.S. person, and thus the non-U.S. person may have to
execute an IRS Form W-9 or substantially similar form to prevent the backup
withholding.
OTHER TAX CONSEQUENCES
HRPT's, Senior Housing's and their respective shareholders' federal income
tax treatment may be modified by legislative, judicial, or administrative
actions at any time, which actions may be retroactive in effect. The rules
dealing with federal income taxation are constantly under review by the
Congress, the IRS and the Treasury Department, and statutory changes as well as
promulgation of new regulations, revisions to existing regulations, and revised
interpretations of established concepts occur frequently. No prediction can be
made as to the likelihood of passage of new tax legislation or other provisions
either directly or indirectly affecting HRPT, Senior Housing or their respective
shareholders. Revisions in federal income tax laws and interpretations of these
laws could adversely affect the tax consequences of an investment in HRPT or
Senior Housing shares. HRPT, Senior Housing and their respective shareholders
may also be subject to state or local taxation in various state or local
jurisdictions, including those in which HRPT, Senior Housing or their respective
shareholders transact business or reside. State and local tax consequences may
not be comparable to the federal income tax consequences discussed above.
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ERISA CONSEQUENCES FOR SENIOR HOUSING AND ITS SHAREHOLDERS
FIDUCIARY OBLIGATIONS. Fiduciaries of a pension, profit-sharing or other
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, ERISA, must consider the following:
- whether their investment in Senior Housing shares satisfies the
diversification requirements of ERISA;
- whether the investment is prudent in light of possible limitations on the
marketability of Senior Housing shares;
- whether they have authority to acquire Senior Housing shares under the
applicable governing instrument and Title I of ERISA; and
- whether the investment is otherwise consistent with their fiduciary
responsibilities.
Trustees and other fiduciaries of an ERISA plan may incur personal liability
for any loss suffered by the plan on account of a violation of their fiduciary
responsibilities. In addition, these fiduciaries may be subject to a civil
penalty of up to 20% of any amount recovered by the plan on account of a
violation. Fiduciaries of any IRA, Roth IRA, Keogh Plan or other qualified
retirement plan not subject to Title I of ERISA, referred to as "non-ERISA
plans," should consider that a plan may only make investments that are
authorized by the appropriate governing instrument. Fiduciary shareholders
should consult their own legal advisors if they have any concern as to whether
the investment is consistent with the foregoing criteria.
PROHIBITED TRANSACTIONS. Fiduciaries of ERISA plans and persons making the
investment decision for an IRA or other non-ERISA plan should consider the
application of the prohibited transaction provisions of ERISA and the Internal
Revenue Code in making their investment decision. Sales and other transactions
between an ERISA plan or a non-ERISA plan, and persons related to it are
prohibited transactions. The particular facts concerning the sponsorship,
operations and other investments of an ERISA plan or non-ERISA plan may cause a
wide range of other persons to be treated as disqualified persons or parties in
interest with respect to it. A prohibited transaction, in addition to imposing
potential personal liability upon fiduciaries of ERISA plans, may also result in
the imposition of an excise tax under the Internal Revenue Code or a penalty
under ERISA upon the disqualified person or party in interest with respect to
the plan. If the disqualified person who engages in the transaction is the
individual on behalf of whom an IRA or Roth IRA is maintained or his
beneficiary, the IRA or Roth IRA may lose its tax-exempt status and its assets
may be deemed to have been distributed to the individual in a taxable
distribution on account of the prohibited transaction, but no excise tax will be
imposed. Fiduciary shareholders should consult their own legal advisors if they
have any concern as to whether the ownership of Senior Housing shares involves a
prohibited transaction.
SPECIAL FIDUCIARY AND PROHIBITED TRANSACTIONS CONSEQUENCES. The Department
of Labor, which has administrative responsibility over ERISA plans as well as
non-ERISA plans, has issued a regulation defining "plan assets." The regulation
generally provides that when an ERISA or non-ERISA plan acquires a security that
is an equity interest in an entity and that security is neither a "publicly
offered security" nor a security issued by an investment company registered
under the Investment Company Act of 1940, the ERISA plan's or non-ERISA plan's
assets include both the equity interest and an undivided interest in each of the
underlying assets of the entity, unless it is established either that the entity
is an operating company or that equity participation in the entity by benefit
plan investors is not significant.
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Each class of Senior Housing shares--that is, its common shares and any
class of preferred shares that it may issue in the future--must be analyzed
separately to ascertain whether it is a publicly offered security. The
regulation defines a publicly offered security as a security that is "widely
held," "freely transferable" and either part of a class of securities registered
under the Securities Exchange Act of 1934, or sold under an effective
registration statement under the Securities Act of 1933, provided the securities
are registered under the Securities Exchange Act of 1934 within 120 days after
the end of the fiscal year of the issuer during which the offering occurred.
Senior Housing shares will be registered under the Securities Exchange Act of
1934.
The regulation provides that a security is "widely held" only if it is part
of a class of securities that is owned by 100 or more investors independent of
the issuer and of one another. However, a security will not fail to be "widely
held" because the number of independent investors falls below 100 subsequent to
the initial public offering as a result of events beyond the issuer's control.
Senior Housing expects its common shares to be widely held.
The regulation provides that whether a security is "freely transferable" is
a factual question to be determined on the basis of all relevant facts and
circumstances. The regulation further provides that, where a security is part of
an offering in which the minimum investment is $10,000 or less, some
restrictions on transfer ordinarily will not, alone or in combination, affect a
finding that these securities are freely transferable. The restrictions on
transfer enumerated in the regulation as not affecting that finding include:
- any restriction on or prohibition against any transfer or assignment which
would result in a termination or reclassification for federal or state tax
purposes, or would otherwise violate any state or federal law or court
order;
- any requirement that advance notice of a transfer or assignment be given
to the issuer and any requirement that either the transferor or
transferee, or both, execute documentation setting forth representations
as to compliance with any restrictions on transfer which are among those
enumerated in the regulation as not affecting free transferability,
including those described in the preceding clause of this sentence;
- any administrative procedure which establishes an effective date, or an
event prior to which a transfer or assignment will not be effective; and
- any limitation or restriction on transfer or assignment which is not
imposed by the issuer or a person acting on behalf of the issuer.
Senior Housing believes that the restrictions imposed under the declaration
of trust on the transfer of shares do not result in the failure of its shares to
be "freely transferable." Furthermore, Senior Housing believes that at present
there exist no other facts or circumstances limiting the transferability of its
shares which are not included among those enumerated as not affecting their free
transferability under the regulation, and Senior Housing does not expect or
intend to impose in the future, or to permit any person to impose on its behalf,
any limitations or restrictions on transfer which would not be among the
enumerated permissible limitations or restrictions.
Assuming that each class of Senior Housing's shares will be "widely held"
and that no other facts and circumstances exist which restrict transferability
of these shares, Senior Housing has received an opinion of counsel that its
shares will not fail to be "freely transferable" for purposes of the regulation
due to the restrictions on transfer of the shares under Senior Housing's
declaration of trust and that under the regulation the shares are publicly
offered securities and Senior Housing's assets will not be deemed to be "plan
assets" of any ERISA plan or non-ERISA plan that invests in Senior Housing
shares.
103
<PAGE>
LEGAL MATTERS
Sullivan & Worcester LLP, Boston, Massachusetts, the lawyers for Senior
Housing, have issued an opinion about the legality of the shares. Sullivan &
Worcester LLP will rely, as to certain matters of Maryland law, upon an opinion
of Ballard Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland. Barry M. Portnoy
was a partner and chairman of the firm of Sullivan & Worcester LLP until March
31, 1997 and is one of Senior Housing's managing trustees. Mr. Portnoy is also a
managing trustee of HRPT, Hospitality Properties and a director and 50% owner of
Reit Management, the investment advisor to Senior Housing, a director and
significant shareholder of one of Senior Housing's tenants. Jennifer B. Clark, a
vice president at Reit Management, was a partner of Sullivan & Worcester LLP
until July 1, 1999. Sullivan & Worcester LLP represents Senior Housing, HRPT,
Hospitality Properties, Reit Management and their affiliates on various matters.
Ballard Spahr Andrews & Ingersoll LLP is a tenant of HRPT and is counsel to the
agent of Senior Housing's bank credit facility.
EXPERTS
The consolidated financial statements and schedules of Senior Housing
Properties Trust at December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998, appearing in this prospectus and
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
FORWARD LOOKING STATEMENTS
This prospectus contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Those statements appear in a number of places in this prospectus and
include statements regarding the intent, belief or expectations of HRPT, Senior
Housing, their trustees or their officers with respect to the declaration or
payment of dividends, the consummation of additional acquisitions, policies and
plans of HRPT and Senior Housing regarding investments, dispositions,
financings, conflicts of interest or other matters, HRPT's and Senior Housing's
qualification and continued qualification as real estate investment trusts or
trends affecting their businesses, financial condition or results of operations.
HRPT and Senior Housing caution you that these forward looking statements are
not guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from the forward looking statements as a result of
various factors. These factors include, without limitation, changes in financing
terms, HRPT's or Senior Housing's ability or inability to complete acquisitions
and financing transactions, results of operations of HRPT's and Senior Housing's
properties and general changes in economic conditions not presently
contemplated. The "Risk Factors" and "Senior Housing Management's Discussion and
Analysis of Financial Condition and Results of Operations" sections of this
prospectus identify other important factors that could cause these differences.
104
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Senior Housing has filed with the SEC a registration statement, of which
this prospectus is a part, on Form S-11 under the Securities Act of 1933. This
prospectus does not contain all the information set forth in the registration
statement. Statements contained in this prospectus as to the content of any
contract or other document filed as an exhibit are not necessarily complete, and
you should consult the copy of those contracts or other documents filed as
exhibits to the registration statement. For further information regarding Senior
Housing, please read the registration statement and the exhibits and schedules
thereto.
You may read and copy the registration statement and its exhibits and
schedules at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. When the Form S-11 becomes effective, Senior Housing
will be subject to the reporting requirements of the Securities Exchange Act of
1934 and the reports, proxy statements and other information filed by Senior
Housing with the SEC can then be inspected and copied at the SEC's Public
Reference Room. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. You may access the
electronic filing of the registration statement and its exhibits and schedules
on the SEC's internet site, http://www.sec.gov.
Senior Housing intends to make available to its shareholders annual reports
containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each year.
------------------------
You should rely only on the information contained in this prospectus. We
have not, and the Senior Housing has not, authorized any person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. HRPT and Senior Housing
believe that the information contained in this prospectus is accurate as of the
date on the cover. Changes may occur after that date, and neither HRPT nor
Senior Housing will update the information except as is required in the normal
course of their respective public disclosure practices. You should assume that
HRPT's and Senior Housing's business, financial condition, results of operations
and prospects may have changed since the date appearing on the cover of this
prospectus.
------------------------
The amended and restated declaration of trust establishing Senior Housing
Properties Trust, dated September, 1999, a copy of which, together with all
amendments thereto, is filed in the office of the State Department of
Assessments and Taxation of Maryland, provides that the name "Senior Housing
Properties Trust" refers to the trustees under Senior Housing's declaration as
trustees, but not individually or personally, and that no trustee, officer,
shareholder, employee or agent of Senior Housing shall be held to any personal
liability for any obligation of, or claim against, Senior Housing. All persons
dealing with Senior Housing shall look only to the assets of Senior Housing for
the payment of any sum or the performance of any obligation.
------------------------
The amended and restated declaration of trust establishing HRPT, dated July
1, 1994, a copy of which, together with all amendments thereto, is filed in the
office of the State Department of Assessments and Taxation of Maryland, provides
that the name "HRPT Properties Trust" refers to the trustees under HRPT's
declaration as trustees, but not individually or personally, and that no
trustee, officer, shareholder, employee or agent of HRPT shall be held to any
personal liability for any obligation of, or claim against, HRPT. All persons
dealing with HRPT shall look only to the assets of HRPT for the payment of any
sum or the performance of any obligation.
105
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<S> <C>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF HRPT PROPERTIES TRUST
Introduction to unaudited pro forma consolidated financial statements.............. F-2
Unaudited pro forma consolidated balance sheet as of June 30, 1999................. F-3
Unaudited pro forma consolidated statement of income for the six months ended June
30, 1999......................................................................... F-4
Unaudited pro forma consolidated statement of income for the year ended December
31, 1998......................................................................... F-5
Notes to unaudited pro forma consolidated financial statements..................... F-6
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF SENIOR HOUSING PROPERTIES
TRUST
Introduction to unaudited pro forma consolidated financial statements.............. F-8
Unaudited pro forma consolidated balance sheet as of June 30, 1999................. F-9
Unaudited pro forma consolidated statement of income for the six months ended June
30, 1999......................................................................... F-10
Unaudited pro forma consolidated statement of income for the year ended December
31, 1998......................................................................... F-11
Notes to unaudited pro forma consolidated financial statements..................... F-12
CONSOLIDATED FINANCIAL STATEMENTS OF SENIOR HOUSING PROPERTIES TRUST AND FINANCIAL
STATEMENT SCHEDULES
Report of independent auditors..................................................... F-14
Consolidated balance sheets as of December 31, 1997 and 1998 and June 30, 1999
(unaudited)...................................................................... F-15
Consolidated statements of income for each of the three years in the period ended
December 31, 1998 and for the six months ended June 30, 1998 and 1999
(unaudited)...................................................................... F-16
Consolidated statements of ownership interest of HRPT Properties Trust for each of
the three years in the period ended December 31, 1998 and for the six months
ended June 30, 1999 (unaudited).................................................. F-17
Consolidated statements of cash flows for each of the three years in the period
ended December 31, 1998 and for the six months ended June 30, 1998 and 1999
(unaudited)...................................................................... F-18
Notes to consolidated financial statements......................................... F-19
Schedule III--Real Estate and Accumulated Depreciation............................. S-1
Schedule IV--Mortgage Loans on Real Estate......................................... S-3
</TABLE>
F-1
<PAGE>
HRPT PROPERTIES TRUST
INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheet at June 30,
1999 is intended to present the financial position of HRPT Properties Trust as
if the transactions described in the notes had been completed as of June 30,
1999. The following unaudited pro forma consolidated statements of income are
intended to present the results of operations of HRPT as if these transactions
had been completed as of January 1, 1998.
These unaudited pro forma consolidated financial statements are not
necessarily indicative of what the actual consolidated financial position or
results of operations of HRPT would have been as of the date or for the periods
indicated, nor do they represent our expected consolidated financial position or
results of operations for any future period. Differences would result from,
among other considerations, future changes in HRPT's investments, changes in
rent which we receive, changes in interest rates and changes in the capital
structure of HRPT. For more information about the financial condition and
results of operations of HRPT, please refer to the financial statements of HRPT
filed with the SEC, including the audited consolidated financial statements for
the year ended December 31, 1998, included in HRPT's Current Report on Form 8-K
dated March 5, 1999, and the unaudited consolidated financial statements for the
quarter ended June 30, 1999, included in HRPT's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999.
F-2
<PAGE>
HRPT PROPERTIES TRUST
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------- ------------- -----------
<S> <C> <C> <C>
ASSETS
Real estate properties:
Land................................................. $378,714 $(69,673) $309,041
Buildings and improvements........................... 2,627,807 (662,720) 1,965,087
------------- ------------- -----------
3,006,521 (732,393) 2,274,128
Accumulated depreciation............................. (184,992) 105,823 (79,169)
------------- ------------- -----------
2,821,529 (626,570)(B) 2,194,959
Real estate mortgages.................................. 60,530 (37,638)(B) 22,892
Investment in Hospitality Properties................... 108,242 -- 108,242
Investment in Senior Housing........................... -- 220,548(C) 220,548
Cash and cash equivalents.............................. 26,984 (26,593)(D) 391
Other assets, net...................................... 84,869 (9,918)(B) 74,951
------------- ------------- -----------
$3,102,154 $(480,171) $2,621,983
------------- ------------- -----------
------------- ------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank credit facility................................... $-- $-- $--
Senior notes payable, net.............................. 957,513 (200,000)(E) 757,513
Mortgage notes payable................................. 23,985 -- 23,985
Convertible subordinated debentures.................... 204,863 -- 204,863
Other liabilities...................................... 51,252 (756)(B) 50,496
Deferred rents and other deferred revenues............. 32,509 (27,369)(B) 5,140
Security deposits...................................... 19,332 (15,235)(B) 4,097
Shareholders' equity:
Preferred shares of beneficial interest; $0.01 par
value; 50,000,000 shares authorized; none issued..... -- -- --
Common shares of beneficial interest; $0.01 par value;
150,000,000 shares authorized; 131,894,626 shares
issued and outstanding............................... 1,319 -- 1,319
Additional paid-in capital............................. 1,971,168 -- 1,971,168
Cumulative net income.................................. 643,924 (10,000)(G) 633,924
Cumulative distributions............................... (803,711) (226,811)(F) (1,030,522)
------------- ------------- -----------
Total shareholders' equity........................... 1,812,700 (236,811) 1,575,889
------------- ------------- -----------
$3,102,154 $(480,171) $2,621,983
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
See accompanying notes.
F-3
<PAGE>
HRPT PROPERTIES TRUST
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------- ------------- -----------
<S> <C> <C> <C>
Revenues:
Rental income...................................... $203,335 $(42,409) $160,926
Interest and other income.......................... 7,619 (2,881) 4,738
------------- ------------- -----------
Total revenues............................... 210,954 (45,290)(H) 165,664
------------- ------------- -----------
Expenses:
Operating expenses................................. 50,548 -- 50,548
Interest........................................... 39,525 (5,600)(I) 33,925
Depreciation and amortization...................... 37,314 (11,207)(J) 26,107
General and administrative......................... 9,849 (2,259)(K) 7,590
------------- ------------- -----------
Total expenses............................... 137,236 (19,066) 118,170
------------- ------------- -----------
Income before equity in earnings of
Hospitality Properties and Senior Housing, and gain
on sale of properties............................ 73,718 (26,224) 47,494
Equity in earnings of Hospitality Properties........... 4,029 -- 4,029
Equity in earnings of Senior Housing................... -- 11,976(L) 11,976
Loss on equity transaction of Hospitality Properties... (711) -- (711)
------------- ------------- -----------
Income before gain on sale of properties............... 77,036 (14,248) 62,788
Gain on sale of properties............................. 8,307 -- 8,307
------------- ------------- -----------
Net income............................................. $85,343 $(14,248) $71,095
------------- ------------- -----------
------------- ------------- -----------
Weighted average shares outstanding.................... 131,778 -- 131,778
------------- ------------- -----------
------------- ------------- -----------
Basic and diluted earnings per share:
Income before gain on sale of properties........... $0.58 $0.48
------------- -----------
------------- -----------
Net income......................................... $0.65 $0.54
------------- -----------
------------- -----------
</TABLE>
See accompanying notes.
F-4
<PAGE>
HRPT PROPERTIES TRUST
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------- ------------- -----------
<S> <C> <C> <C>
Revenues:
Rental income...................................... $340,851 $(82,542) $258,309
Interest and other income.......................... 15,703 (5,764) 9,939
------------- ------------- -----------
Total revenues............................... 356,554 (88,306)(H) 268,248
------------- ------------- -----------
Expenses:
Operating expenses................................. 77,536 -- 77,536
Interest........................................... 64,326 (12,400)(I) 51,926
Depreciation and amortization...................... 60,764 (18,297)(J) 42,467
General and administrative......................... 17,172 (4,480)(K) 12,692
------------- ------------- -----------
Total expenses............................... 219,798 (35,177) 184,621
------------- ------------- -----------
Income before equity in earnings of Hospitality
Properties and Senior Housing, and extraordinary
item................................................. 136,756 (53,129) 83,627
Equity in earnings of Hospitality Properties........... 7,687 -- 7,687
Equity in earnings of Senior Housing................... -- 25,484(L) 25,484
Gain on equity transaction of Hospitality Properties... 2,213 -- 2,213
------------- ------------- -----------
Income before extraordinary item....................... 146,656 (27,645) 119,011
Extraordinary item--early extinguishment of debt....... (2,140) -- (2,140)
------------- ------------- -----------
Net income............................................. $144,516 $(27,645) $116,871
------------- ------------- -----------
------------- ------------- -----------
Weighted average shares outstanding.................... 119,867 -- 119,867
------------- ------------- -----------
------------- ------------- -----------
Basic and diluted earnings per share:
Income before extraordinary item................... $1.22 $0.99
------------- -----------
------------- -----------
Net income......................................... $1.21 $0.98
------------- -----------
------------- -----------
</TABLE>
See accompanying notes.
F-5
<PAGE>
HRPT PROPERTIES TRUST
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
A. Represents the historical consolidated balance sheet and consolidated
statements of income of HRPT Properties Trust ("HRPT") as of the date and
for the periods presented.
CONSOLIDATED BALANCE SHEET ADJUSTMENTS
B. Represents elimination of HRPT's historical carrying value of 93 senior
housing investments and related assets and liabilities transferred by HRPT
to Senior Housing Properties Trust ("Senior Housing").
C. Represents adjustments to reflect HRPT's investment in Senior Housing after
the spin-off and related transactions using the equity method of accounting,
calculated as follows:
<TABLE>
<CAPTION>
Net historical carrying value of 93 senior housing investments and
related assets and liabilities transferred to Senior Housing (see note
B)...................................................................... $630,934
<S> <C>
Estimated cash transferred by HRPT to Senior Housing (see note D)........ 16,425
Cash payment by Senior Housing of the formation debt to HRPT (see note
E)...................................................................... (200,000)
Distribution by HRPT of Senior Housing shares to HRPT shareholders (see
note F)................................................................. (226,811)
---------
HRPT's equity investment in Senior Housing............................... $220,548
---------
---------
</TABLE>
D. Represents the net cash effect of the spin-off and related transactions,
calculated as follows:
<TABLE>
<CAPTION>
Senior Housing cash at June 30, 1999..................................... $(168)
<S> <C>
Estimated cash transferred to Senior Housing from HRPT................... (16,425)
Estimated transaction costs paid by HRPT (not reimbursed by Senior
Housing)................................................................ (10,000)
Cash received by HRPT from Senior Housing to pay the formation debt (see
note E)................................................................. 200,000
Cash used by HRPT to prepay HRPT senior debt outstanding (see note E).... (200,000)
---------
$(26,593)
---------
---------
</TABLE>
E. After completion of the spin-off, Senior Housing will borrow $200,000 under
its bank credit facility to pay the Senior Housing formation debt due HRPT
of $200,000. This adjustment reflects the application of these proceeds by
HRPT to prepay HRPT senior debt outstanding.
F. Represents the distribution of Senior Housing shares to HRPT shareholders on
the basis of one Senior Housing share for each 10 HRPT shares outstanding,
calculated as follows:
<TABLE>
<CAPTION>
Net historical carrying value of 93 senior housing investments and
related assets and liabilities transferred to Senior Housing (see note
B)...................................................................... $630,934
<S> <C>
Estimated cash transferred to Senior Housing............................. 16,425
Cash received by HRPT from Senior Housing to pay the formation debt (see
note E)................................................................. (200,000)
---------
447,359
Multiplied by:
Senior Housing shares distributed to HRPT shareholders (13.19 million)
as a percentage of total Senior Housing shares outstanding (26
million)................................................................ X 50.7%
---------
$226,811
---------
---------
</TABLE>
F-6
<PAGE>
HRPT PROPERTIES TRUST
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
G. Represents estimated transaction costs of $10 million to be expensed by HRPT.
These expenses are not reflected in the pro forma statements of income
because they are not recurring.
CONSOLIDATED STATEMENTS OF INCOME ADJUSTMENTS
H. Represents historical rent, interest and other income realized by HRPT from
properties transferred to Senior Housing.
I. Represents the reduction in HRPT's interest expense, calculated as follows:
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
HRPT's senior notes prepaid (see note E)........................... $200,000 $200,000
Multiplied by:
Historical interest rate of debt to be prepaid.................... X 5.6% X 6.2%
--------- ------------
Reduction in HRPT's interest expense............................... $5,600 $12,400
--------- ------------
--------- ------------
</TABLE>
J. Represents the historical depreciation expense related to the properties
transferred to Senior Housing.
K. Represents the amount of HRPT's general and administrative expense allocated
to the properties transferred to Senior Housing. This allocation is based
upon HRPT's advisory fee formula and other costs allocated pro rata to the
historical cost of the transferred assets compared to HRPT's historical cost
of all its properties. Management believes that this method of allocating
general and administrative expenses is reasonable.
L. Represents HRPT's share of the pro forma consolidated net income of Senior
Housing (presented on pages F-10 and F-11), calculated as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1999 1998
--------------- -------------
<S> <C> <C>
Senior Housing pro forma net income........................... $ 24,293 $ 51,691
Multiplied by:
HRPT's ownership of Senior Housing shares (12.81 million) as
a percentage of total Senior Housing shares outstanding (26
million)..................................................... X 49.3% X 49.3%
------- -------------
Equity in earnings of Senior Housing.......................... $ 11,976 $ 25,484
------- -------------
------- -------------
</TABLE>
F-7
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheet at June 30,
1999, is intended to present the financial position of Senior Housing Properties
Trust as if the transactions described in the notes had been completed as of
June 30, 1999. The following unaudited pro forma consolidated statements of
income are intended to present the results of operations of Senior Housing as if
these transactions had been completed as of January 1, 1998.
These unaudited pro forma consolidated financial statements are not
necessarily indicative of the expected consolidated financial position or
results of operations of Senior Housing for any future period. Differences could
result from many factors, including future changes in Senior Housing's
investments, changes in interest rates and changes in the capital structure of
Senior Housing. This pro forma information should be read in conjunction with
the audited Consolidated Financial Statements of Senior Housing Properties Trust
and notes thereto appearing on pages F-14 through F-22 and with "Senior Housing
Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus.
F-8
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------- ------------- -----------
<S> <C> <C> <C>
ASSETS
Real estate properties:
Land............................................... $69,673 $-- $69,673
Buildings and improvements......................... 662,720 -- 662,720
------------- ------------- -----------
732,393 -- 732,393
Accumulated depreciation........................... (105,823) -- (105,823)
------------- ------------- -----------
626,570 -- 626,570
Real estate mortgages.................................. 37,638 -- 37,638
Cash and cash equivalents.............................. 168 16,425(B) 16,593
Other assets........................................... 9,918 -- 9,918
------------- ------------- -----------
$674,294 $16,425 $690,719
------------- ------------- -----------
------------- ------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank credit facility................................... $-- $200,000(C) $200,000
Deferred rents and other deferred revenues............. 27,369 -- 27,369
Security deposits...................................... 15,235 -- 15,235
Other liabilities...................................... 756 -- 756
Shareholders' equity:
Common shares of beneficial interest; $0.01 par value;
50,000,000 shares authorized; 26,000,000 pro forma
shares issued and outstanding........................ -- 260(D) 260
Additional paid-in capital............................. -- 447,099(E) 447,099
Ownership interest of HRPT Properties Trust............ 630,934 (630,934)(F) --
------------- ------------- -----------
Total shareholders' equity....................... 630,934 (183,575) 447,359
------------- ------------- -----------
$674,294 $16,425 $690,719
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
See accompanying notes.
F-9
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------- ------------- -----------
<S> <C> <C> <C>
Revenues:
Rental income...................................... $42,409 $-- $42,409
Interest and other income.......................... 2,881 -- 2,881
------------- ------------- -----------
Total revenues............................... 45,290 -- 45,290
------------- ------------- -----------
Expenses:
Interest........................................... 9,992 (2,461)(G) 7,531
Depreciation....................................... 11,207 -- 11,207
General and administrative......................... 2,259 -- 2,259
------------- ------------- -----------
Total expenses............................... 23,458 (2,461) 20,997
------------- ------------- -----------
Net income............................................. $21,832 $2,461 $24,293
------------- ------------- -----------
------------- ------------- -----------
Weighted average shares outstanding.................... 26,000(H) 26,000
------------- -----------
------------- -----------
Earnings per share..................................... $0.93
-----------
-----------
</TABLE>
See accompanying notes.
F-10
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------- ------------- -----------
<S> <C> <C> <C>
Revenues:
Rental income........................................ $82,542 $1,461 $84,003
Interest and other income............................ 5,764 -- 5,764
------------- ------------- -----------
Total revenues..................................... 88,306 1,461(I) 89,767
------------- ------------- -----------
Expenses:
Interest............................................. 19,293 (4,230)(G) 15,063
Depreciation......................................... 18,297 193(I) 18,490
General and administrative........................... 4,480 43(I) 4,523
------------- ------------- -----------
Total expenses..................................... 42,070 (3,994) 38,076
------------- ------------- -----------
Net income............................................. $46,236 $5,455 $51,691
------------- ------------- -----------
------------- ------------- -----------
Weighted average shares outstanding.................... 26,000(H) 26,000
------------- -----------
------------- -----------
Earnings per share..................................... $1.99
-----------
-----------
</TABLE>
See accompanying notes.
F-11
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
A. Represents the historical consolidated balance sheet and consolidated
statements of income of Senior Housing Properties Trust ("Senior Housing")
as presented on pages F-15 and F-16.
CONSOLIDATED BALANCE SHEET ADJUSTMENTS
B. Represents the net cash effect of the spin-off and related transactions on
Senior Housing, calculated as follows:
<TABLE>
<CAPTION>
Estimated cash transferred by HRPT to Senior Housing..................... $16,425
<S> <C>
Borrowing under Senior Housing's bank credit facility (see note C)....... 200,000
Payment by Senior Housing of the formation debt due to HRPT.............. (200,000)
---------
$16,425
---------
---------
</TABLE>
C. Represents the borrowing of $200,000 under Senior Housing's bank credit
facility. The proceeds from this borrowing will be used to pay Senior
Housing's formation debt due to HRPT.
D. Represents the $0.01 per share par value of the 26 million Senior Housing
shares issued and outstanding as of the spin-off date.
E. Represents the adjustments from the spin-off and related transactions to
Senior Housing's equity, calculated as follows:
<TABLE>
<CAPTION>
Ownership interest of HRPT Properties Trust.............................. $630,934
<S> <C>
Payment by Senior Housing of the formation debt due to HRPT (see note
C)...................................................................... (200,000)
Estimated cash transferred to Senior Housing from HRPT (see note B)...... 16,425
---------
Senior Housing equity (includes $220,548 of HRPT's equity investment and
$226,811 distributed in the spin-off)................................... 447,359
Par value of Senior Housing shares outstanding (see note D).............. (260)
---------
Additional paid-in capital............................................... $447,099
---------
---------
</TABLE>
F. Represents reclassification of balance of Ownership Interest of HRPT related
to the spin-off, calculated as follows:
<TABLE>
<CAPTION>
Formation debt due HRPT paid by Senior Housing (see note C).............. $(200,000)
<S> <C>
Estimated cash transferred to Senior Housing from HRPT................... 16,425
Par value of Senior Housing's 26 million shares outstanding (see note
D)...................................................................... (260)
Senior Housing's additional paid-in capital (see note E)................. (447,099)
---------
$(630,934)
---------
---------
</TABLE>
F-12
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF INCOME ADJUSTMENTS
G. Represents adjustments to interest expense from the spin-off and related
transactions, calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1999 1998
----------------- ------------
<S> <C> <C>
HRPT interest expense allocated to the Senior Housing
properties................................................ $(9,992) $(19,293)
Interest expense on Senior Housing's $200,000 borrowing
under its bank credit facility (see note C)............... 7,531 15,063
----------------- ------------
$(2,461) $(4,230)
----------------- ------------
----------------- ------------
</TABLE>
The HRPT interest expense allocation to Senior Housing is the historical
amount of HRPT's total interest expense times a fraction, the numerator of
which is the historical cost of HRPT's senior housing properties and the
denominator of which is the historical cost of all HRPT's properties, each
calculated on an average basis for the periods presented. Management
believes this method of allocating interest expense is reasonable.
The interest rate payable by Senior Housing is LIBOR plus a premium, or 7.25%
as of June 30, 1999. Interest expense also includes a fee on the unused
portion of the bank credit facility of 0.375%, or $281 for the six months
ended June 30, 1999, and $563 for the year ended December 31, 1998. The
effect of a 1/8% change in interest rates, on pro forma borrowings will
change interest expense by $250.
H. As of the date of the spin-off, Senior Housing will have 26 million shares
issued and outstanding.
I. Represents rental income, depreciation and general and administrative
expenses arising from the acquisition of five of the Senior Housing
properties in September 1998, as if the properties had been acquired on
January 1, 1998.
F-13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholder of Senior Housing Properties Trust:
We have audited the accompanying consolidated balance sheets of Senior
Housing Properties Trust as of December 31, 1998 and 1997, and the related
consolidated statements of income, ownership interest of HRPT Properties Trust
and cash flows for each of the three years in the period ended December 31,
1998. Our audits also included the financial statement schedules listed in the
Index at F-1. These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Senior Housing
Properties Trust at December 31, 1998 and 1997, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
July 1, 1999, except for Note 1,
as to which the date is September 1, 1999
F-14
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE
AS OF DECEMBER 31, 30,
-------------------- ------------
1997 1998 1999
--------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Real estate properties:
Land.................................................... $68,265 $69,673 $69,673
Buildings and improvements.............................. 652,722 662,720 662,720
--------- --------- ------------
720,987 732,393 732,393
Accumulated depreciation................................ (74,213) (94,616) (105,823)
--------- --------- ------------
646,774 637,777 626,570
Real estate mortgages..................................... 38,134 37,826 37,638
Cash and cash equivalents................................. -- 139 168
Other assets.............................................. 7,678 10,554 9,918
--------- --------- ------------
$692,586 $686,296 $674,294
--------- --------- ------------
--------- --------- ------------
LIABILITIES AND OWNERSHIP INTEREST
Deferred rents and other deferred revenues................ $29,721 $28,266 $27,369
Security deposits......................................... 15,235 15,235 15,235
Other liabilities......................................... 692 726 756
Ownership interest of HRPT Properties Trust............... 646,938 642,069 630,934
--------- --------- ------------
$692,586 $686,296 $674,294
--------- --------- ------------
--------- --------- ------------
</TABLE>
See accompanying notes.
F-15
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
------------------------------- ------------------------
1996 1997 1998 1998 1999
--------- --------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income.......................... $ 66,202 $ 78,463 $ 82,542 $ 40,324 $ 42,409
Interest and other income.............. 4,240 5,708 5,764 2,886 2,881
--------- --------- --------- ----------- -----------
Total revenues....................... 70,442 84,171 88,306 43,210 45,290
--------- --------- --------- ----------- -----------
Expenses:
Interest............................... 14,719 16,958 19,293 9,263 9,992
Depreciation........................... 15,383 17,826 18,297 9,102 11,207
General and administrative............. 3,899 4,664 4,480 2,174 2,259
--------- --------- --------- ----------- -----------
Total expenses....................... 34,001 39,448 42,070 20,539 23,458
--------- --------- --------- ----------- -----------
Net income............................... $ 36,441 $ 44,723 $ 46,236 $ 22,671 $ 21,832
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
</TABLE>
See accompanying notes.
F-16
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OWNERSHIP INTEREST OF
HRPT PROPERTIES TRUST
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Balance at December 31, 1995...................................................... $ 573,793
Net income...................................................................... 36,441
Owner contribution, net......................................................... 54,258
---------
Balance at December 31, 1996...................................................... 664,492
Net income...................................................................... 44,723
Owner distribution, net......................................................... (62,277)
---------
Balance at December 31, 1997...................................................... 646,938
Net income...................................................................... 46,236
Owner distribution, net......................................................... (51,105)
---------
Balance at December 31, 1998...................................................... 642,069
Net income (unaudited).......................................................... 21,832
Owner distribution, net (unaudited)............................................. (32,967)
---------
Balance at June 30, 1999 (unaudited).............................................. $ 630,934
---------
---------
</TABLE>
See accompanying notes.
F-17
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
------------------------------- ----------------------
1996 1997 1998 1998 1999
--------- --------- --------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income................................ $36,441 $44,723 $46,236 $22,671 $21,832
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation............................ 15,383 17,826 18,297 9,102 11,207
Changes in assets and liabilities:
Other assets.......................... (1,317) (2,394) (2,876) 667 636
Deferred rents and other deferred
revenues............................ 723 22,087 (1,455) (496) (897)
Security deposits..................... 34 8,815 -- -- --
Other liabilities..................... 44 37 34 31 30
--------- --------- --------- ---------- ----------
Cash provided by operating activities... 51,308 91,094 60,236 31,975 32,808
--------- --------- --------- ---------- ----------
Cash Flows From Investing Activities:
Real estate acquisitions and
improvements............................ (105,094) (19,799) (2) -- --
Investments in mortgage loans............. (700) (124) -- -- --
Repayments of mortgage loans.............. 228 260 308 135 188
--------- --------- --------- ---------- ----------
Cash (used for) provided by investing
activities............................ (105,566) (19,663) 306 135 188
--------- --------- --------- ---------- ----------
Cash Flows From Financing Activities:
Owner's net contribution (distribution)... 54,258 (71,431) (60,403) (32,110) (32,967)
--------- --------- --------- ---------- ----------
Cash provided by (used for) financing
activities............................ 54,258 (71,431) (60,403) (32,110) (32,967)
--------- --------- --------- ---------- ----------
Increase in cash and cash equivalents....... -- -- 139 -- 29
Cash and cash equivalents at beginning of
period.................................... -- -- -- -- 139
--------- --------- --------- ---------- ----------
Cash and cash equivalents at end of
period.................................... $-- $-- $139 $-- $168
--------- --------- --------- ---------- ----------
--------- --------- --------- ---------- ----------
Non-Cash Investing Activities:
Real estate acquisitions.................. $-- $(9,154) $(9,298) $-- $--
Non-Cash Financing Activities:
Owner's contributions..................... -- 9,154 9,298 -- --
</TABLE>
See accompanying notes.
F-18
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
The consolidated financial statements of Senior Housing Properties Trust
include the accounts of 81 properties and 12 mortgage receivables (the
"Properties") and of Senior Housing Properties Trust ("Senior Housing Trust").
The Properties and Senior Housing Trust are collectively referred to as "Senior
Housing". These consolidated financial statements are presented as if Senior
Housing was a legal entity separate from HRPT Properties Trust ("HRPT");
however, no such entity exists.
HRPT organized Senior Housing Trust, a 100% owned subsidiary, as a Maryland
real estate investment trust on December 16, 1998. At the time of its
organization, Senior Housing Trust issued 26.4 million shares to HRPT for
consideration of $263,748. Subsequently, 0.4 million shares were cancelled and
26 million shares are currently issued and outstanding.
As of the dates and for the periods presented, the Properties were owned by
HRPT. On or about June 30, 1999, the Properties were transferred by HRPT to
several of its 100% owned subsidiaries. Effective as of September 1, 1999, HRPT
transferred 100% ownership of the several subsidiaries which own the Properties
to Senior Housing Trust. HRPT is in the process of distributing 13.2 million of
its 26 million Senior Housing Trust shares to HRPT's shareholders (the
"Spin-Off"). Senior Housing Trust has filed a registration statement on Form
S-11 with the Securities and Exchange Commission to effect the Spin-Off.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. All of Senior Housing is owned by HRPT, and HRPT's
historical basis has been presented. Substantially all of the rental income and
mortgage interest income received by HRPT from the tenants and mortgagors of
Senior Housing is deposited in and commingled with HRPT's general funds. Capital
investments and other cash required by Senior Housing are provided by HRPT.
Interest expense is allocated based on HRPT's historical interest expense as a
percentage of HRPT's average historical costs of real estate investments.
General and administrative costs of HRPT are allocated to Senior Housing based
on HRPT's investment advisory agreement formula and other costs are allocated
based on historical costs as a percentage of HRPT's average historical costs of
real estate investments. In the opinion of management, the methods for
allocating interest and general and administrative expenses are reasonable. It
is not practicable to estimate additional costs that would have been incurred by
Senior Housing as a separate entity.
REAL ESTATE PROPERTIES AND MORTGAGE INVESTMENTS. Depreciation on real
estate properties is expensed on a straight-line basis over estimated useful
lives of up to 40 years for buildings and improvements and up to 12 years for
personal property. Impairment losses on properties are recognized where
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by the properties are less than the carrying amount of concerned
properties. The determination of net realizable value includes consideration of
many factors including income to be earned from the property, holding costs
(exclusive of interest), estimated selling prices, and prevailing economic and
market conditions. Based upon these factors, the accompanying financial
statements include no impairment losses.
REVENUE RECOGNITION. Rental income from operating leases is recognized on a
straight-line basis over the life of the lease agreements. Interest income is
recognized as earned over the terms of the real estate mortgages. Percentage
rent and supplemental mortgage interest income is recognized as
F-19
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
earned. For interim periods, percentage rent and supplemental mortgage interest
income are accrued prior to achievement of specified targets when the
achievement of the targets is probable. For the years ended December 31, 1996,
1997 and 1998, percentage rent and supplemental mortgage interest income
aggregated $2.6 million, $2.9 million and $2.9 million, respectively. For the
six months ended June 30, 1998 and 1999, percentage rent and supplemental
mortgage interest income aggregated $1.4 million (unaudited) and $2.0 million
(unaudited), respectively.
USE OF ESTIMATES. Preparation of these financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that may affect the amounts reported in these
financial statements and related notes. The actual results could differ from
these estimates.
INCOME TAXES. Throughout the periods presented herein, Senior Housing's
operations were included in HRPT's income tax returns. HRPT is a real estate
investment trust under the Internal Revenue Code of 1986, as amended.
Accordingly, it is not subject to Federal income taxes provided it distributes
its taxable income and meets other requirements for qualifying as a real estate
investment trust. However, it is subject to state and local taxes on its income
and property. Upon completion of the Spin-Off, Senior Housing intends to qualify
as a real estate investment trust under the Internal Revenue Code of 1986, as
amended.
NOTE 3. REAL ESTATE PROPERTIES
The owned Properties are leased on triple net bases, pursuant to
noncancellable, fixed term operating leases expiring between 2001 to 2019.
Generally, the leases to a single tenant or group of affiliated tenants are
cross-defaulted and cross-guaranteed, and provide for all or none tenant renewal
options at existing rates followed by several market rate renewal terms. These
triple net leases generally require the lessee to pay all property operating
costs.
The future minimum lease payments to be received during the current terms of
the leases, as of December 31, 1998, are approximately $79.4 million in 1999,
$80.1 million in 2000, $80.1 million in 2001, $81.7 million in 2002, $81.9
million in 2003 and $686.6 million thereafter.
NOTE 4. REAL ESTATE MORTGAGES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage notes receivable due December 2016................. $8,800 $8,769
Mortgage note receivable due January 2013................... 883 883
Mortgage note receivable due December 2010.................. 19,184 18,992
Mortgage notes receivable due January 2006.................. 9,267 9,182
---------- ----------
$38,134 $37,826
---------- ----------
---------- ----------
</TABLE>
At December 31, 1998, the interest rates on these notes receivable ranged
from 10.1% to 13.75% per annum.
F-20
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. COMMITMENTS AND CONTINGENCIES
At December 31, 1998 and June 30, 1999, HRPT had total commitments
aggregating $3.7 million to fund or finance improvements to the Properties. Upon
completion of the Spin-Off, Senior Housing Trust will assume these commitments.
NOTE 6. TRANSACTIONS WITH AFFILIATES
HRPT has entered an investment advisory agreement with Reit Management &
Research, Inc. ("Reit Management"). Reit Management provides investment,
management and administrative services to HRPT, and will provide similar
services to Senior Housing Trust. Reit Management is owned by Gerard M. Martin
and Barry M. Portnoy, who also serve as managing trustees of HRPT and will serve
as managing trustees of Senior Housing Trust. Reit Management is paid by HRPT
based on a formula amount of gross invested assets of HRPT. Investment advisory
fees paid by HRPT to Reit Management during 1996, 1997 and 1998 with respect to
Senior Housing's invested assets were $3.2 million, $3.7 million and $3.8
million, respectively. Reit Management is also entitled to an incentive fee paid
in restricted shares based on a formula. Concurrent with the Spin-Off, Senior
Housing Trust will enter a separate agreement with Reit Management on
substantially similar terms.
NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS AND COMMITMENTS
The financial statements presented include mortgage investments, rents
receivable, other liabilities and security deposits. Except as follows, the fair
values of the financial instruments and commitments to fund improvements were
not materially different from their carrying values at December 31, 1997 and
1998:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------------ ------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate mortgages................................... $ 38,134 $ 40,466 $ 37,826 $ 40,525
Commitments to fund improvements........................ -- 6,207 -- 3,707
</TABLE>
The fair values of the real estate mortgages are based on estimates using
discounted cash flow analyses and currently prevailing market rates. The fair
value of the commitments represent the actual amounts committed.
F-21
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. CONCENTRATION OF CREDIT RISK
The assets included in these financial statements are primarily income
producing senior housing real estate located throughout the United States. The
following is a summary of the significant lessees and mortgagees as of and for
the years ended December 31, 1997 and 1998:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1997
-------------------------- --------------------------
INVESTMENT % OF TOTAL REVENUE % OF TOTAL
----------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Marriott International, Inc......... $ 325,521 43% $ 30,365 36%
Integrated Health Services, Inc..... 218,201 29 24,962 30
Brookdale Living Communities,
Inc............................... 101,850 13 10,514 13
Mariner Post-Acute Network, Inc..... 75,080 10 12,441 15
All others.......................... 38,469 5 4,930 6
----------- ----- ----------- -----
$ 759,121 100% $ 83,212 100%
----------- ----- ----------- -----
----------- ----- ----------- -----
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998
-------------------------- --------------------------
INVESTMENT % OF TOTAL REVENUE % OF TOTAL
----------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Marriott International, Inc......... $ 325,521 42% $ 30,270 35%
Integrated Health Services, Inc..... 217,893 29 26,841 31
Brookdale Living Communities,
Inc............................... 101,850 13 11,074 13
Mariner Post-Acute Network, Inc..... 86,486 11 13,620 15
All others.......................... 38,469 5 4,952 6
----------- ----- ----------- -----
$ 770,219 100% $ 86,757 100%
----------- ----- ----------- -----
----------- ----- ----------- -----
</TABLE>
F-22
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST TO
GROSS AMOUNT CARRIED AT
COMPANY COSTS DECEMBER 31, 1998
------------------ CAPITALIZED -----------------------------
BUILDINGS SUBSEQUENT BUILDINGS
AND TO AND
LOCATION STATE LAND EQUIPMENT ACQUISITION LAND EQUIPMENT TOTAL(1)
- ----------------------------------- ----- ------- --------- ---------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Mesa AZ $1,480 $13,320 $-- $1,480 $13,320 $14,800
Phoenix AZ 655 2,525 5 655 2,530 3,185
Scottsdale AZ 979 8,807 140 990 8,936 9,926
Sun City AZ 1,174 10,569 173 1,189 10,727 11,916
Yuma AZ 103 604 1 103 605 708
Yuma AZ 223 2,100 3 223 2,103 2,326
Fresno CA 738 2,577 188 738 2,765 3,503
Laguna Hills CA 3,132 28,184 475 3,172 28,619 31,791
Lancaster CA 601 1,859 1,028 601 2,887 3,488
Newport Beach CA 1,176 1,729 1,223 1,176 2,952 4,128
Stockton CA 382 2,750 4 382 2,754 3,136
Tarzana CA 1,277 977 806 1,278 1,782 3,060
Thousand Oaks CA 622 2,522 310 622 2,832 3,454
Van Nuys CA 716 378 225 718 601 1,319
Canon City CO 292 6,228 -- 292 6,228 6,520
Colorado Springs CO 245 5,236 -- 245 5,236 5,481
Delta CO 167 3,570 -- 167 3,570 3,737
Grand Junction CO 204 3,875 329 204 4,204 4,408
Grand Junction CO 6 2,583 1,316 136 3,769 3,905
Lakewood CO 232 3,766 723 232 4,489 4,721
Littleton CO 185 5,043 348 185 5,391 5,576
Cheshire CT 520 7,380 1,559 520 8,939 9,459
Killingly CT 240 5,360 460 240 5,820 6,060
New Haven CT 1,681 14,953 1,236 1,681 16,189 17,870
Waterbury CT 1,003 9,023 915 1,003 9,938 10,941
Waterford CT 86 4,714 453 86 5,167 5,253
Willimantic CT 134 3,566 479 166 4,013 4,179
Boca Raton FL 4,404 39,633 799 4,474 40,362 44,836
Deerfield Beach FL 1,664 14,972 299 1,690 15,245 16,935
Fort Myers FL 2,349 21,137 419 2,385 21,520 23,905
Palm Harbor FL 3,327 29,945 591 3,379 30,484 33,863
Port St. Lucie FL 1,223 11,009 219 1,242 11,209 12,451
College Park GA 300 2,702 23 300 2,725 3,025
Dublin GA 442 3,982 80 442 4,062 4,504
Glenwood GA 174 1,564 4 174 1,568 1,742
Marietta GA 300 2,702 35 300 2,737 3,037
Clarinda IA 77 1,453 293 77 1,746 1,823
Council Bluffs IA 225 893 99 225 992 1,217
Mediapolis IA 94 1,776 251 94 2,027 2,121
Pacific Junction IA 32 306 5 32 311 343
Winterset IA 111 2,099 493 111 2,592 2,703
Arlington Heights IL 3,621 32,587 534 3,665 33,077 36,742
Chicago IL 6,200 55,800 -- 6,200 55,800 62,000
Ellinwood KS 130 1,137 53 130 1,190 1,320
Boston MA 2,164 20,836 1,978 2,164 22,814 24,978
Hyannis MA 829 7,463 -- 829 7,463 8,292
Middleboro MA 1,771 15,752 -- 1,771 15,752 17,523
Worcester MA 1,829 15,071 1,869 1,829 16,940 18,769
Silver Spring MD 3,229 29,065 786 3,301 29,779 33,080
St. Joseph MO 111 1,027 195 111 1,222 1,333
Tarkio MO 102 1,938 415 102 2,353 2,455
Concord NC 90 2,126 -- 90 2,126 2,216
<CAPTION>
ORIGINAL
ACCUMULATED DATE CONSTRUCTION
LOCATION DEPRECIATION(2) ACQUIRED DATE
- ----------------------------------- --------------- -------- ------------
<S> <C> <C> <C>
Mesa $680 12/27/96 1985
Phoenix 471 6/30/92 1963
Scottsdale 1,033 5/16/94 1990
Sun City 1,218 6/17/94 1990
Yuma 112 6/30/92 1984
Yuma 386 6/30/92 1984
Fresno 646 12/28/90 1963
Laguna Hills 3,072 9/9/94 1975
Lancaster 610 12/28/90 1969
Newport Beach 592 12/28/90 1962
Stockton 507 6/30/92 1968
Tarzana 403 12/28/90 1969
Thousand Oaks 639 12/28/90 1965
Van Nuys 154 12/28/90 1969
Canon City 201 9/26/97 1970
Colorado Springs 169 9/26/97 1972
Delta 115 9/26/97 1963
Grand Junction 650 12/30/93 1968
Grand Junction 513 12/30/93 1978
Lakewood 970 12/28/90 1972
Littleton 1,224 12/28/90 1965
Cheshire 2,626 11/1/87 1963
Killingly 1,970 5/15/87 1972
New Haven 3,423 5/11/92 1971
Waterbury 2,097 5/11/92 1974
Waterford 1,814 5/15/87 1965
Willimantic 1,307 5/15/87 1965
Boca Raton 4,664 5/20/94 1994
Deerfield Beach 1,762 5/16/94 1986
Fort Myers 2,354 8/16/94 1984
Palm Harbor 3,523 5/16/94 1992
Port St. Lucie 1,295 5/20/94 1993
College Park 220 5/15/96 1985
Dublin 312 5/15/96 1968
Glenwood 116 5/15/96 1972
Marietta 211 5/15/96 1967
Clarinda 254 12/30/93 1968
Council Bluffs 164 4/1/95 1963
Mediapolis 303 12/30/93 1973
Pacific Junction 32 4/1/95 1978
Winterset 375 12/30/93 1973
Arlington Heights 3,550 9/9/94 1986
Chicago 2,848 12/27/96 1990
Ellinwood 126 4/1/95 1972
Boston 6,788 5/1/89 1968
Hyannis 1,677 5/11/92 1972
Middleboro 3,501 5/1/88 1970
Worcester 5,522 5/1/88 1970
Silver Spring 3,319 7/25/94 1992
St. Joseph 154 6/4/93 1976
Tarkio 336 12/30/93 1970
Concord 483 9/10/98 1990
</TABLE>
S-1
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST TO
GROSS AMOUNT CARRIED AT
COMPANY COSTS DECEMBER 31, 1998
------------------ CAPITALIZED -----------------------------
BUILDINGS SUBSEQUENT BUILDINGS
AND TO AND
LOCATION STATE LAND EQUIPMENT ACQUISITION LAND EQUIPMENT TOTAL(1)
- ----------------------------------- ----- ------- --------- ---------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Wilson NC $27 $2,375 $-- $27 $2,375 $2,402
Winston-Salem NC 75 1,696 -- 75 1,696 1,771
Grand Island NE 119 1,446 369 119 1,815 1,934
Burlington NJ 1,300 11,700 7 1,300 11,707 13,007
Brighton NY 1,070 9,630 -- 1,070 9,630 10,700
Grove City OH 332 3,081 32 332 3,113 3,445
Canonsburg PA 1,499 13,493 606 1,518 14,080 15,598
Huron SD 45 968 1 45 969 1,014
Huron SD 144 3,108 4 144 3,112 3,256
Sioux Falls SD 253 3,062 4 253 3,066 3,319
Bellaire TX 1,223 11,010 177 1,238 11,172 12,410
Arlington VA 1,859 16,734 296 1,885 17,004 18,889
Charlottesville VA 2,936 26,422 471 2,976 26,853 29,829
Virginia Beach VA 881 7,926 141 893 8,055 8,948
Seattle WA 256 4,869 67 256 4,936 5,192
Spokane WA 1,035 13,315 -- 1,035 13,315 14,350
Brookfield WI 834 3,849 8,014 834 11,863 12,697
Clintonville WI 14 1,695 38 14 1,733 1,747
Clintonville WI 49 1,625 87 30 1,731 1,761
Madison WI 144 1,633 110 144 1,743 1,887
Milwaukee WI 232 1,368 1 232 1,369 1,601
Milwaukee WI 277 3,883 -- 277 3,883 4,160
Pewaukee WI 984 2,432 -- 984 2,432 3,416
Waukesha WI 68 3,452 2,232 68 5,684 5,752
Laramie WY 191 3,632 199 191 3,831 4,022
Worland WY 132 2,503 588 132 3,091 3,223
------- --------- ---------- ------- --------- --------
Total $69,030 $628,080 $35,283 $69,673 $662,720 $732,393
------- --------- ---------- ------- --------- --------
------- --------- ---------- ------- --------- --------
<CAPTION>
ORIGINAL
ACCUMULATED DATE CONSTRUCTION
LOCATION DEPRECIATION(2) ACQUIRED DATE
- ----------------------------------- --------------- -------- ------------
<S> <C> <C> <C>
Wilson $538 9/10/98 1990
Winston-Salem 381 9/10/98 1990
Grand Island 150 4/1/95 1963
Burlington 952 9/29/95 1994
Brighton 492 12/27/96 1988
Grove City 430 6/4/93 1965
Canonsburg 3,622 3/1/91 1985
Huron 177 6/30/92 1968
Huron 567 6/30/92 1968
Sioux Falls 561 6/30/92 1960
Bellaire 1,291 5/16/94 1991
Arlington 1,895 7/25/94 1992
Charlottesville 3,048 6/17/94 1991
Virginia Beach 931 5/16/94 1990
Seattle 785 11/1/93 1964
Spokane 581 5/7/97 1993
Brookfield 1,928 12/28/90 1964
Clintonville 389 12/28/90 1960
Clintonville 387 12/28/90 1965
Madison 390 12/28/90 1920
Milwaukee 281 9/10/98 1970
Milwaukee 769 3/27/92 1969
Pewaukee 518 9/10/98 1963
Waukesha 1,036 12/28/90 1958
Laramie 595 12/30/93 1964
Worland 431 12/30/93 1970
---------------
Total $94,616
---------------
---------------
</TABLE>
(1) Aggregate cost for federal income tax purposes is approximately $706,576.
(2) Depreciation is provided for on buildings and improvements for periods
ranging up to 40 years and on equipment up to 12 years.
Reconciliation of the carrying amount of real estate and equipment and
accumulated depreciation at the beginning of the period:
<TABLE>
<CAPTION>
REAL ESTATE
AND ACCUMULATED
EQUIPMENT DEPRECIATION
-------------- ------------
<S> <C> <C>
Balance at January 1, 1996 $ 586,940 $ 41,004
Additions 105,094 15,383
-------------- ------------
Balance at December 31, 1996 692,034 56,387
Additions 28,953 17,826
-------------- ------------
Balance at December 31, 1997 720,987 74,213
Additions 11,406 20,403
-------------- ------------
Balance at December 31, 1998 $ 732,393 $ 94,616
-------------- ------------
-------------- ------------
</TABLE>
S-2
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OF LOANS
SUBJECT TO
FINAL FACE VALUE DELINQUENT
INTEREST MATURITY OF CARRYING VALUE PRINCIPAL
LOCATION RATE DATE PERIODIC PAYMENT TERMS MORTGAGE OF MORTGAGE(1) OR INTEREST
- ----------------- ------------ ---------- ----------------------------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Farmington, MI 11.50% 1/1/06 Principal and interest, $4,200 $4,200 $--
payable monthly in arrears.
$3.8 million due at maturity.
Howell, MI 11.50% 1/1/06 Principal and interest, 4,982 4,982 --
payable monthly in arrears.
$4.5 million due at maturity.
Lyons, NE 10.09% 12/31/16 Principal and interest, 1,563 1,563 --
Milford, NE payable monthly in arrears.
$835 due at maturity.
Ainsworth, NE 10.64% 12/31/16 Principal and interest, 5,154 5,154 --
Ashland, NE payable monthly in arrears.
Blue Hill, NE $2.8 million due at maturity.
Gretna, NE
Sutherland, NE
Waverly, NE
Ainsworth, NE 11.00% 12/31/16 Principal and interest, 2,052 2,052 --
Ashland, NE payable monthly in arrears.
Blue Hill, NE $1.1 million due at maturity.
Edgar, NE
Gretna, NE
Sutherland, NE
Waverly, NE
Lyons, NE
Milford, NE
Slidell, LA 11.00% 12/31/10 Principal and interest, 18,992 18,992 --
payable monthly in arrears.
$13.9 million due at
maturity.
Milwaukee, WI 13.75% 1/31/13 Interest only, payable 883 883 --
monthly in arrears. $883 due
at maturity.
---------- -------------- -----------
$37,826 $37,826 $--
---------- -------------- -----------
---------- -------------- -----------
</TABLE>
(1) Also represents cost for federal income tax purposes.
Reconciliation of the carrying amount of mortgage loans at the beginning of
the period:
<TABLE>
<CAPTION>
<S> <C>
Balance at January 1, 1996 $ 37,798
New mortgage loans 700
Collections of principal (228)
-------
Balance at December 31, 1996 38,270
New mortgage loans 124
Collections of principal (260)
-------
Balance at December 31, 1997 38,134
Collections of principal (308)
-------
Balance at December 31, 1998 $ 37,826
-------
-------
</TABLE>
- ------------------------------
OTHER SCHEDULES
Other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the combined
financial statements, including notes thereto.
S-3
<PAGE>
HRPT OFFICE BUILDINGS AFTER THE SPIN-OFF
[art] [art]
CEDARS SINAI MEDICAL OFFICE WOODMONT OFFICE CENTER
TOWERS AND GARAGES (4 Buildings) Rockville, MD
Los Angeles, CA 187,616 Square Feet, Built 1986
330,715 Square Feet, Built 1979 Significant Tenant: U.S. Government
Major Tenant: Cedars Sinai Hospital -FDA
[art]
PNC BANK BUILDING
Philadelphia, PA
826,220 Square Feet, Built 1983
Significant Tenant: PNC Bank
[art] [art]
109 BROOKLINE AVE. MEMPHIS PLACE
Boston, MA Memphis, TN
287,546 Square Feet, Built 1988 203,089 Square Feet, Built 1985
Significant Tenant: Beth Israel Significant Tenant: Dept. of Justice
Deaconess Hospital
SENIOR HOUSING PROPERTIES AFTER THE SPIN-OFF
[art] [art]
BROOKDALE LIVING COMMUNITIES, INC. MARRIOTT INTERNATIONAL, INC.
THE GABLES OF BRIGHTON VILLA VALENCIA
Brighton, NY Laguna Hills, CA
103 Units, Built 1988 402 Units, Built 1975
[art]
MARRIOTT INTERNATIONAL, INC.
CALUSA HARBOUR
Ft. Meyers, FL
463 Units, Built 1984
[art] [art]
MARINER POST-ACUTE NETWORK, INC. MARRIOTT INTERNATIONAL, INC.
LA MESA CARE CENTER THE COLONNADES
Yuma, AZ Charlottesville, VA
128 Units, Built 1984 315 Units, Built 1991
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HRPT PROPERTIES TRUST
SPIN-OFF
OF
SENIOR HOUSING PROPERTIES TRUST
THROUGH DISTRIBUTION
OF
13,190,763
COMMON SHARES OF BENEFICIAL INTEREST
---------------------
PROSPECTUS
-----------------------------
SEPTEMBER , 1999
Until , 1999 (25 days after the date of this prospectus), all
dealers that effect transactions in these securities may be required to deliver
this prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND SECTION DISTRIBUTION.
The following table itemizes the expenses incurred in connection with the
distribution of the common shares being registered. All of these expenses will
be paid by HRPT Properties Trust. All the amounts shown are estimates except the
Securities and Exchange Commission registration fee and the New York Stock
Exchange listing fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
<S> <C>
SEC Registration Fee................................................. $78,952
New York Stock Exchange Listing Fee.................................. 158,100
Transfer Agent's and Registrar's Fees................................ 30,000
Printing and Engraving Fees.......................................... 200,000
Legal Fees and Expenses (other than Blue Sky)........................ 750,000
Accounting Fees and Expenses......................................... 200,000
Blue Sky Fees and Expenses (including fees of counsel)............... 10,000
Miscellaneous Expenses............................................... 50,000
----------
Total................................................................ $1,477,052
----------
----------
</TABLE>
ITEM 32. SALES TO SPECIAL PARTIES.
See Item 33.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES.
On December 16, 1998, Senior Housing was initially capitalized through the
issuance of 26,374,760 shares to HRPT Properties Trust in exchange for
$263,747.60. HRPT is currently the sole shareholder of Senior Housing. The
26,374,760 shares currently outstanding were purchased for investment and for
the purpose of organizing Senior Housing. On July 30, 1999, HRPT surrendered
374,760 Senior Housing shares and they were cancelled and returned to the status
of authorized but unissued. Senior Housing believes that the issuance and sale
of these securities are exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Maryland REIT law permits a Maryland real estate investment trust to
include in its Declaration of Trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders for money damages except
for liability resulting from (a) actual receipt of an improper benefit or profit
in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
Declaration of Trust of Senior Housing contains such a provision which
eliminates such liability to the maximum extent permitted by the Maryland REIT
law.
The Declaration of Trust of Senior Housing requires it, to the maximum
extent permitted by Maryland law, to indemnify, and pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to, (a) any individual
who is a present or former trustee or officer of Senior Housing or (b) any
individual who, while a trustee of Senior Housing and at the request of Senior
Housing, serves or has served as a trustee, director, officer or partner of
another real estate investment trust, corporation, partnership, joint venture,
trust, employee benefit plan or other
II-1
<PAGE>
enterprise from and against any claim or liability to which such person may
become subject or which such person may incur by reason of his or her status or
actions as a present or former trustee or officer of Senior Housing. The Bylaws
of Senior Housing obligate it, to the maximum extent permitted by Maryland law,
to indemnify any present or former Trustee or officer (including any individual
who while a Trustee or officer at the express request of Senior Housing serves
or has served another real estate investment trust, corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, shareholder, partner or trustee of such real estate
investment trust, corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) (a) who has been successful, on the merits or
otherwise, in the defense of a proceeding to which he was made a party by reason
of such status or service in such capacity, against reasonable expenses incurred
by him in connection with the proceeding and (b) against any claim or liability
to which he may become subject by reason of such status or actions in such
capacity. The Declaration of Trust and Bylaws also permit Senior Housing to
indemnify and advance expenses to any person who served a predecessor of Senior
Housing in any of the capacities described above and to any employee or agent of
Senior Housing or a predecessor of Senior Housing. The Bylaws require Senior
Housing to indemnify a trustee or officer who has been successful, on the merits
or otherwise, in the defense of any proceeding to which he is made a party by
reason of his service in that capacity.
The Maryland REIT law permits a Maryland real estate investment trust to
indemnify and advance expenses to its trustees, officers, employees and agents
to the same extent as permitted by the Maryland General Corporation Law (the
"MGCL") for directors and officers of Maryland corporations. The MGCL permits a
corporation to indemnify its present and former directors and officers, among
others, against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service in those or other capacities unless it
is established that (a) the act or omission of the director or officer was
material to the matter giving rise to the proceeding and (i) was committed in
bad faith or (ii) was the result of active and deliberate dishonesty, (b) the
director or officer actually received an improper personal benefit in money,
property or services or (c) in the case of any criminal proceeding, the director
or officer had reasonable cause to believe that the act or omission was
unlawful. However, under the MGCL, a Maryland corporation may not indemnify a
director for an adverse judgment in a suit by or in the right of the corporation
or for a judgment of liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification and then only for
expenses. In addition, the MGCL permits a corporation to advance reasonable
expenses to a director or officer upon the corporation's receipt of (a) a
written affirmation by the director or officer of his good faith belief that he
has met the standard of conduct necessary for indemnification by the corporation
and (b) a written undertaking by him or on his behalf to repay the amount paid
or reimbursed by the corporation if it shall ultimately be determined that the
standard of conduct was not met.
ITEM 35. TREATMENT OF PROCEEDS FROM SHARES BEING REGISTERED.
Senior Housing will not receive any proceeds from the distribution of the
common shares being registered, because they are being distributed by HRPT to
its shareholders.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Reference is made to Page F-1 of the Prospectus filed as part of this
Registration Statement.
II-2
<PAGE>
(b) Exhibits.
<TABLE>
<C> <S>
2.1 Form of Transaction Agreement between Senior Housing Properties Trust and HRPT
Properties Trust. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT)
3.1 Declaration of Trust of Senior Housing Properties Trust dated December 16, 1998.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
3.2 Form of Amended and Restated Declaration of Trust of Senior Housing Properties
Trust. (FILED HEREWITH)
3.3 Bylaws of Senior Housing Properties Trust. (PREVIOUSLY FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT)
3.4 Form of Amended and Restated Bylaws of Senior Housing Properties Trust. (FILED
HEREWITH)
4.1 Form of share certificate representing common shares of Senior Housing Properties
Trust. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
5.1 Opinion of Sullivan & Worcester LLP. (PREVIOUSLY FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT)
5.2 Opinion of Ballard Spahr Andrews & Ingersoll, LLP. (PREVIOUSLY FILED AS AN
EXHIBIT TO THE REGISTRATION STATEMENT)
8.1 Opinion of Sullivan & Worcester LLP re: tax matters. (PREVIOUSLY FILED AS AN
EXHIBIT TO THE REGISTRATION STATEMENT)
10.1 Form of Advisory Agreement between Senior Housing and Reit Management & Research,
Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.2 Form of Senior Housing Properties Trust 1999 Incentive Share Award Plan.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.3 Form of Promissory Note from SPTMRT Properties Trust, as maker, to HRPT
Properties Trust, as holder. (CONTAINED IN EXHIBIT 2.1)
10.4 Commitment Letter and Summary of Terms and Conditions for $350 million Secured
Credit Facility from Dresdner Bank to Senior Housing Properties Trust.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.5 Master Lease Agreement, dated as of December 27, 1996, between Health and
Retirement Properties Trust and BLC Property, Inc. (PREVIOUSLY FILED AS AN
EXHIBIT TO THE REGISTRATION STATEMENT)
10.6 Guaranty Agreement, dated as of December 27, 1996, by Brookdale Living
Communities, Inc., Brookdale Living Communities of Illinois, Inc., Brookdale
Living Communities of New York, Inc., and Brookdale Living Communities of
Arizona, Inc. in favor of Health and Retirement Properties Trust. (PREVIOUSLY
FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.7 First Amendment to Master Lease Agreement and Incidental Documents, dated as of
May 7, 1997, by and among Health and Retirement Properties Trust, BLC Property,
Inc., Brookdale Living Communities of Washington, Inc., Brookdale Living
Communities of Arizona, Inc., Brookdale Living Communities of Illinois, Inc.,
Brookdale Living Communities of New York, Inc., Brookdale Living Communities,
Inc, The Prime Group, Inc., Prime International, Inc., PGLP, Inc., Prime Group
Limited Partnership, and Prime Group II, L.P. (PREVIOUSLY FILED AS AN EXHIBIT
TO THE REGISTRATION STATEMENT)
10.8 Representative Lease for properties leased to subsidiaries of Marriott
International, Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT)
10.9 Representative Guaranty of Tenant Obligations, dated as of October 8, 1993, by
Marriott International, Inc. in favor of HMC Retirement Properties, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.10 Representative First Amendment to Lease for properties leased to subsidiaries of
Marriott International, Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT)
10.11 Representative Assignment and Assumption of Leases, Guarantees and Permits for
properties leased to subsidiaries of Marriott International, Inc. (PREVIOUSLY
FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.12 Representative Second Amendment of Lease for properties leased to subsidiaries of
Marriott International, Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT)
10.13 Representative First Amendment of Guaranty by Marriott International, Inc., dated
as of May 16, 1994, in favor of HMC Retirement Properties, Inc. (PREVIOUSLY
FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.14 Assignment of Lease, dated as of June 16, 1994, by HMC Retirement Properties,
Inc. in favor of Health and Rehabilitation Properties Trust. (PREVIOUSLY FILED
AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.15 Third Amendment to Facilities Lease, dated as of June 30, 1994, between HMC
Retirement Properties, Inc. and Marriott Senior Living Services, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.16 Third Amendment to Facilities Lease, dated as of June 30, 1994, between HMC
Retirement Properties, Inc. and Marriott Senior Living Services, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.17 Consent and Modification Agreement, dated as of October 10, 1997, between
Marriott International, Inc., Marriott Senior Living Services, Inc., New
Marriott MI, Inc., Health and Retirement Properties Trust, and Church Creek
Corporation. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.18 Master Lease Document, General Terms and Conditions dated as of December 28,
1990, between Health and Rehabilitation Properties Trust and AMS Properties,
Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.19 Representative Lease for properties leased to Mariner Post-Acute Network, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.20 Lease dated as of March 27, 1992, between Health and Rehabilitation Properties
Trust and AMS Properties, Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT)
10.21 Amendment to Master Lease Document dated as of December 29, 1993 between Health
and Rehabilitation Properties Trust and AMS Properties, Inc. (PREVIOUSLY FILED
AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.22 Amendment to AMS Properties, Inc. Facility Leases dated as of October 1, 1994
between Health and Retirement Properties Trust and AMS Properties, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.23 Amendment to AMS Properties, Inc. Facility Leases dated October 31, 1997 between
Health and Retirement Properties Trust and AMS Properties, Inc. (PREVIOUSLY
FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.24 Representative Lease for properties leased to Mariner Post-Acute Network, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.25 Master Lease Agreement dated as of June 30, 1992 by and between Health and
Rehabilitation Properties Trust and GCI Health Care Centers, Inc. (PREVIOUSLY
FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.26 Amended and Restated HRP Shares Pledge Agreement, dated as of June 30, 1992,
between Health and Retirement Properties Trust and AMS Properties, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.27 Amended and Restated Voting Trust Agreement, dated as of June 30, 1992 from AMS
Properties, Inc. to HRPT Advisors, Inc., as voting trustee. (PREVIOUSLY FILED
AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.28 Representative Lease for properties leased to Mariner Post-Acute Network, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.29 Representative Lease for properties leased to Mariner Post-Acute Network, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.30 Amendment to Master Lease Document dated as of December 29, 1993 between Health
and Rehabilitation Properties Trust and GCI Health Care Centers, Inc.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.31 Amendment to GCI Health Care Centers, Inc., Master Lease Document and Facility
Leases dated as of October 1, 1994 between Health and Retirement Properties
Trust and GCI Health Care Centers, Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT)
10.32 Amendment to GCI Health Care Centers, Inc. Facility Leases dated October 31, 1997
between Health and Retirement Properties Trust and GCI Health Care Centers,
Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.33 Guaranty, Cross Default and Cross Collateralization Agreement, dated as of June
30, 1992, by and among AMS Properties, Inc., CGI Health Care Centers, Inc. and
Health and Rehabilitation Properties Trust. (PREVIOUSLY FILED AS AN EXHIBIT TO
THE REGISTRATION STATEMENT)
10.34 Guaranty, dated as of October 31, 1997, by Grancare Inc. in favor of Health and
Retirement Properties Trust. (PREVIOUSLY FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT)
10.35 Guaranty, dated as of October 31, 1997, by Paragon Health Network, Inc. in favor
of Health and Retirement Properties Trust. (PREVIOUSLY FILED AS AN EXHIBIT TO
THE REGISTRATION STATEMENT)
10.36 Amended, Restated and Consolidated Master Lease Document, dated as of September
24, 1997, between Health and Retirement Properties Trust and ECA Holdings,
Inc., Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc., and College
Park/SCC, Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.37 Guaranty By Integrated Health Services, Inc., dated as of September 24, 1997, by
Integrated Health Services, Inc., in favor of Health and Retirement Properties
Trust. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.38 Representative Lease Agreement for properties leased to Integrated Health
Services, Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.39 Representative Lease Agreement for properties leased to Integrated Health
Services, Inc. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
10.40 Guaranty, dated as of February 11 1994, by Horizon Healthcare Corporation in
favor of Health and Rehabilitation Properties Trust. (PREVIOUSLY FILED AS AN
EXHIBIT TO THE REGISTRATION STATEMENT)
10.41 Consent, Assumption and Guaranty Agreement, dated as of December 31, 1997, by and
among Integrated Health Services, Inc., IHS Acquisition No. 108, Inc., IHS
Acquisition No. 112, Inc., IHS Acquisition No. 113, Inc., IHS Acquisition No.
135, Inc., IHS Acquisition No. 148, Inc., IHS Acquisition No. 152, Inc., IHS
Acquisition No. 153, Inc., IHS Acquisition No. 154, Inc., IHS Acquisition No.
155, Inc., IHS Acquisition No. 175, Inc., Healthsouth Corporation, Horizon
Healthcare Corporation, Health and Retirement Properties Trust, and Indemnity
Collection Corporation. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT)
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
10.42 Form of Revolving Loan Agreement, dated as of September 15, 1999, among Senior
Housing Properties Trust, Dresdner Bank AG, the Other Lenders Party Thereto,
SPTMRT Properties Trust and SPTBrook Properties Trust, together with Exhibits
and Form of Mortgage, Form of Deed of Trust and Form of Pledge Agreement.
(FILED HEREWITH)
21.1 List of Subsidiaries. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT)
23.1 Consent of Ernst & Young LLP. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT)
23.2 Consent of Sullivan & Worcester LLP. (CONTAINED IN EXHIBITS 5.1 AND 8.1)
24.1 Power of Attorney. (SEE SIGNATURE PAGE TO THE REGISTRATION STATEMENT)
27.1 Financial Data Schedule. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT)
27.2 Financial Data Schedule. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT)
27.3 Financial Data Schedule. (PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT)
99.1 Consent of Bruce M. Gans, M.D. to being named as a Trustee nominee. (PREVIOUSLY
FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
99.2 Consent of Arthur G. Koumantzelis to being named as a Trustee nominee.
(PREVIOUSLY FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT)
</TABLE>
ITEM 37. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to trustees, officers and controlling
persons of Senior Housing pursuant to the foregoing provisions, or otherwise,
Senior Housing has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by Senior Housing of expenses incurred or paid by a trustee, officer
or controlling persons of Senior Housing in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, Senior Housing 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 of whether
such indemnification is against public policy as expressed in the Securities Act
of 1933, as amended, and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act of 1933, as amended, shall be deemed to be
part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, as amended, each post-effective amendment that contains a form of
prospectus 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.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Senior Housing certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-11 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newton, Commonwealth of Massachusetts, on
September 17, 1999.
<TABLE>
<S> <C> <C>
SENIOR HOUSING PROPERTIES TRUST
By: /s/ DAVID J. HEGARTY
-----------------------------------------
David J. Hegarty
PRESIDENT AND CHIEF OPERATING OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons on behalf
of Senior Housing and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Managing Trustee September 17, 1999
Barry M. Portnoy
*
- ------------------------------ Managing Trustee September 17, 1999
Gerard M. Martin
/s/ DAVID J. HEGARTY
- ------------------------------ President and Chief September 17, 1999
David J. Hegarty Operating Officer
*
- ------------------------------ Chief Financial Officer September 17, 1999
Ajay Saini and Treasurer
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ DAVID J. HEGARTY
-------------------------
David J. Hegarty
AS ATTORNEY IN FACT
</TABLE>
II-7
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
FORM OF
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: Senior Housing Properties Trust, a Maryland real estate
investment trust (the "Trust") formed under Title 8 of the Corporations and
Associations Article of the Annotated Code of Maryland (as amended and in effect
from time to time, and including any successor title thereto, "Title 8"),
desires to amend and restate its Declaration of Trust as currently in effect and
as hereinafter amended. All references in the Declaration of Trust to specific
sections of Title 8 shall include applicable successor provisions.
SECOND: The following provisions are all the provisions of the
Declaration of Trust currently in effect and as hereinafter amended:
ARTICLE I
FORMATION
The Trust is a real estate investment trust within the meaning of Title
8. It is also intended that the Trust shall carry on a business as a "qualified
REIT subsidiary" as described in the REIT provisions of the Code (as defined in
Article VII below), for so long as it is wholly owned by HRPT Properties Trust
and thereafter shall qualify and carry on business as a "real estate investment
trust" as described therein. The Trust shall not be deemed to be a general
partnership, limited partnership, joint venture, joint stock company or a
corporation, but nothing herein shall preclude the Trust from being treated for
tax purposes as an association under the Code; nor shall the Trustees or
shareholders or any of them for any purpose be, nor be deemed to be, nor be
treated in any way whatsoever as, liable or responsible hereunder as partners or
joint venturers.
ARTICLE II
NAME
The name of the Trust is:
Senior Housing Properties Trust
Under circumstances in which the Board of Trustees of the Trust (the
"Board of Trustees" or "Board") determines that the use of the name of the
Trust is not practicable, the Trust may use any other designation or name for
the Trust. To the extent permitted by Maryland law, the Board of Trustees
may amend the Declaration of Trust to change the name of the Trust without
any action by the shareholders.
<PAGE>
ARTICLE III
PURPOSES AND POWERS
Section 3.1 Purposes. The purposes for which the Trust is formed are to
invest in and to acquire, hold, manage, administer, control and dispose of
property and interests in property, including, without limitation or obligation,
engaging in business as a real estate investment trust under the Code.
Section 3.2 Powers. The Trust shall have all of the powers granted to
real estate investment trusts by Title 8 and all other powers set forth in the
Declaration of Trust which are not inconsistent with law and are appropriate to
promote and attain the purposes set forth in the Declaration of Trust.
ARTICLE IV
RESIDENT AGENT
The name of the resident agent of the Trust in the State of Maryland is
James J. Hanks, Jr., whose post office address is c/o Ballard Spahr Andrews &
Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland 21202. The
resident agent is a citizen of and resides in the State of Maryland. The Trust
may change such resident agent from time to time as the Board of Trustees shall
determine. The Trust may have such offices or places of business within or
outside the State of Maryland as the Board of Trustees may from time to time
determine.
ARTICLE V
BOARD OF TRUSTEES
Section 5.1 Powers. Subject to any express limitations contained in the
Declaration of Trust or in the Bylaws, (a) the business and affairs of the Trust
shall be managed under the direction of the Board of Trustees and (b) the Board
shall have full, exclusive and absolute power, control and authority over any
and all property of the Trust. The Board may take any action as in its sole
judgment and discretion is necessary or appropriate to conduct the business and
affairs of the Trust. The Declaration of Trust shall be construed with the
presumption in favor of the grant of power and authority to the Board. Any
construction of the Declaration of Trust or determination made in good faith by
the Board concerning its powers and authority hereunder shall be conclusive.
The enumeration and definition of particular powers of the Trustees included in
the Declaration of Trust or in the Bylaws shall in no way be construed or deemed
by inference or otherwise in any manner to exclude or limit the powers conferred
upon the Board or the Trustees under the general laws of the State of Maryland
or any other applicable laws.
The Board, without any action by the shareholders of the Trust, shall
have and may exercise, on behalf of the Trust, without limitation, the power to
terminate the status of the Trust as a real estate investment trust under the
Code; to determine that compliance with any restriction or limitations on
ownership and transfers of shares of the Trust's beneficial interest set forth
in Article
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<PAGE>
VII of the Declaration of Trust is no longer required in order for the Trust to
qualify as a real estate investment trust; to adopt, amend and repeal Bylaws not
inconsistent with law or this Declaration of Trust; to elect officers in the
manner prescribed in the Bylaws; to solicit proxies from holders of shares of
beneficial interest of the Trust; and to do any other acts and deliver any other
documents necessary or appropriate to the foregoing powers.
Section 5.2 Number and Classification.
Section 5.2.1 The number of trustees of the Trust (hereinafter
the "Trustees") initially shall be two (2). On the first date on which the
Trust shall have more than one shareholder of record, the number of the Trustees
shall automatically and without further action by the Board of Trustees increase
to five (5), which number may thereafter be increased or decreased pursuant to
the Bylaws of the Trust; provided, however, that no such increase or decrease
shall result in the Trust having fewer than three (3) or more than seven (7)
Trustees. Any vacancies in the Board of Trustees shall be filled by a majority
of the Trustees then in office, except that a majority of the entire Board of
Trustees must fill a vacancy resulting from an increase in the number of
Trustees.
Section 5.2.2 On the first date on which the Trust shall have
more than one shareholder of record, the Board of Trustees shall be classified
into three groups: Group I, Group II and Group III. The number of Trustees in
each group shall be determined by the Board in accordance with the Bylaws;
provided that the number of Trustees in any one group shall not exceed the
number of Trustees in any other group by more than one. The Trustees in Group I
shall serve for a term ending at the first annual meeting of shareholders
following the end of the Trust's fiscal year ending December 31, 1999, each
Trustee in Group II shall serve for a term ending at the following annual
meeting of shareholders and the Trustee in Group III shall serve for a term
ending at the second following annual meeting of shareholders. After the
respective terms of the groups indicated, each such group of Trustees shall be
elected for successive terms ending at the annual meeting of shareholders held
during the third year after election.
Section 5.2.3 The names and business addresses of the initial
Trustees who shall serve as Trustees are as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Gerard M. Martin c/o Reit Management & Research, Inc.
400 Centre Street
Newton, Massachusetts 02458
Barry M. Portnoy c/o Reit Management & Research, Inc.
400 Centre Street
Newton, Massachusetts 02458
</TABLE>
Section 5.2.4 The Trustees may fill any vacancy, whether
resulting from an increase in the number of Trustees or otherwise, on the Board
in the manner provided in the Bylaws. It shall not be necessary to list in the
Declaration of Trust the names and addresses of any Trustees hereinafter
elected. No reduction in the number of Trustees shall have the effect of
removing any Trustee from
-3-
<PAGE>
office prior to the expiration of his or her term. Subject to the provisions of
Section 5.3, each Trustee shall hold office until the election and qualification
of his or her successor. There shall be no cumulative voting in the election of
Trustees.
Section 5.3 Resignation or Removal. Any Trustee may resign by written
notice to the Board, effective upon execution and delivery to the Trust of such
written notice or upon any future date specified in the notice. A Trustee may
be removed at any time with or without cause, at a meeting of the shareholders,
by the affirmative vote of the holders of not less than two-thirds (2/3) of the
Shares (as defined in Section 6.1 below) then outstanding and entitled to vote
generally in the election of Trustees. A Trustee judged incompetent or for whom
a guardian or conservator has been appointed shall be deemed to have resigned as
of the date of such adjudication or appointment.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1 Authorized Shares. The beneficial interest of the Trust
shall be divided into shares of beneficial interest (the "Shares"). The Trust
has authority to issue 50,000,000 Shares, all of which are initially comprised
of common shares of beneficial interest, $.01 par value per share ("Common
Shares"). If shares of one class are classified or reclassified into shares of
another class of shares pursuant to this Article VI, the number of authorized
shares of the former class shall be automatically decreased and the number of
shares of the latter class shall be automatically increased, in each case by the
number of shares so classified or reclassified, so that the aggregate number of
shares of beneficial interest of all classes that the Trust has authority to
issue shall not be more than the total number of shares of beneficial interest
set forth in the second sentence of this paragraph. The Board of Trustees,
without any action by the shareholders of the Trust, may amend the Declaration
of Trust from time to time to increase or decrease the aggregate number of
Shares or the number of Shares of any class or series, including preferred
shares of beneficial interest ("Preferred Shares"), that the Trust has authority
to issue.
Section 6.2 Common Shares. Subject to the provisions of Article VII,
each Common Share shall entitle the holder thereof to one vote on each matter
upon which holders of Common Shares are entitled to vote. The Board of Trustees
may reclassify any unissued Common Shares from time to time in one or more
classes or series of Shares.
Section 6.3 Preferred Shares. The Board of Trustees may classify any
unissued Preferred Shares and reclassify any previously classified but unissued
Preferred Shares of any series from time to time, in one or more series of
Shares.
Section 6.4 Classified or Reclassified Shares. Prior to issuance of
classified or reclassified Shares of any class or series, the Board of Trustees
by resolution shall (a) designate that class or series; (b) specify the number
of Shares to be included in the class or series; (c) set, subject to the
provisions of Article VII, the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms and conditions of redemption for each class or series;
and (d) cause the Trust to file articles supplementary with the State Department
of Assessments and Taxation of Maryland (the "SDAT"). Any of the terms of any
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<PAGE>
class or series of Shares set pursuant to clause (c) of this Section 6.4 may be
made dependent upon facts ascertainable outside the Declaration of Trust
(including the occurrence of any event, determination or action by the Trust or
any other person or body) and may vary among holders thereof, provided that the
manner in which such facts or variations shall operate upon the terms of such
class or series of Shares is clearly and expressly set forth in the articles
supplementary filed with the SDAT.
Section 6.5 Authorization by Board of Share Issuance. The Board of
Trustees may authorize the issuance from time to time of Shares of any class or
series, whether now or hereafter authorized, or securities or rights convertible
into Shares of any class or series, whether now or hereafter authorized, for
such consideration (whether in cash, property, past or future services,
obligation for future payment or otherwise) as the Board of Trustees may deem
advisable (or without consideration), subject to such restrictions or
limitations, if any, as may be set forth in this Declaration of Trust or the
Bylaws of the Trust.
Section 6.6 Dividends and Distributions. The Board of Trustees may from
time to time authorize and declare to shareholders such dividends or
distributions, in cash or other assets of the Trust or in securities of the
Trust or from any other source as the Board of Trustees in its discretion shall
determine. Shareholders shall have no right to any dividend or distribution
unless and until authorized and declared by the Board. The exercise of the
powers and rights of the Board of Trustees pursuant to this Section 6.6 shall be
subject to the provisions of any class or series of Shares at the time
outstanding.
Section 6.7 General Nature of Shares. All Shares shall be personal
property entitling the shareholders only to those rights provided in the
Declaration of Trust. The shareholders shall have no interest in the property
of the Trust and shall have no right to compel any partition, division, dividend
or distribution of the Trust or of the property of the Trust. The death of a
shareholder shall not terminate the Trust or affect its continuity nor give his
or her legal representative any rights whatsoever, whether against or in respect
of other shareholders, the Trustees or the trust estate or otherwise, except the
sole right to demand and, subject to the provisions of the Declaration of Trust,
the Bylaws and any requirements of law, to receive a new certificate for Shares
registered in the name of such legal representative, in exchange for the
certificate held by such shareholder. The Trust is entitled to treat as
shareholders only those persons in whose names Shares are registered as holders
of Shares on the beneficial interest ledger of the Trust.
Section 6.8 Fractional Shares. The Trust may, without the consent or
approval of any shareholder, issue fractional Shares, eliminate a fraction of a
Share by rounding up or down to a full Share, arrange for the disposition of a
fraction of a Share by the person entitled to it or pay cash for the fair value
of a fraction of a Share.
Section 6.9 Declaration and Bylaws. All shareholders are subject to the
provisions of the Declaration of Trust and the Bylaws of the Trust.
Section 6.10 Divisions and Combinations of Shares. Subject to an
express provision to the contrary in the terms of any class or series of
beneficial interest hereafter authorized, the Board of Trustees shall have the
power to divide or combine the outstanding shares of any class or series of
beneficial interest, without a vote of shareholders.
-5-
<PAGE>
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1 DEFINITIONS. For the purpose of this Article VII, the
following terms shall have the following meanings:
AFFILIATE. The term "Affiliate" shall mean, with respect to any Person,
another Person controlled by, controlling or under common control with such
Person.
AGGREGATE SHARE OWNERSHIP LIMIT. The term "Aggregate Share Ownership
Limit" shall mean 9.8 percent in value or in number of the aggregate of the
outstanding Equity Shares. The value of the outstanding Equity Shares shall be
determined by the Board of Trustees in good faith, which determination shall be
conclusive for all purposes hereof.
BENEFICIAL OWNERSHIP. The term "Beneficial Ownership" shall mean
ownership of Equity Shares by a Person, whether the interest in Equity Shares is
held directly or indirectly (including by a nominee), and shall include, but not
be limited to, interests that would be treated as owned through the application
of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code.
The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall
have the correlative meanings.
BUSINESS DAY. The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law, regulation or
executive order to close.
CHARITABLE BENEFICIARY. The term "Charitable Beneficiary" shall mean one
or more beneficiaries of the Charitable Trust as determined pursuant to
Section 7.3.6, provided that each such organization must be described in
Section 501(c)(3) of the Code and contributions to each such organization must
be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of
the Code. If the Code shall cease to define a charitable organization,
"Charitable Beneficiary" shall mean an entity organized to do work for
charitable purposes and not for profit.
CHARITABLE TRUST. The term "Charitable Trust" shall mean any trust
provided for in Section 7.3.1.
CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time. All references to specific sections of the Code
shall include applicable successor provisions.
COMMON SHARE OWNERSHIP LIMIT. The term "Common Share Ownership Limit"
shall mean 9.8 percent (in value or in number of shares, whichever is more
restrictive) of the aggregate outstanding Common Shares. The number and value
of outstanding Common Shares shall be determined by the Board of Trustees in
good faith, which determination shall be conclusive for all purposes.
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<PAGE>
CONSTRUCTIVE OWNERSHIP. The term "Constructive Ownership" shall mean
ownership of Equity Shares by a Person, whether the interest in Equity Shares is
held directly or indirectly (including by a nominee), and shall include, but not
be limited to, interests that would be treated as owned through the application
of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code.
The terms "Constructive Owner," "Constructively Owns" and "Constructively Owned"
shall have the correlative meanings.
DECLARATION OF TRUST. The term "Declaration of Trust" shall mean these
Articles of Amendment and Restatement as accepted for record by the SDAT, and
any amendments thereto.
EQUITY SHARES. The term "Equity Shares" shall mean Shares of all classes
or series, including, without limitation, Common Shares and Preferred Shares.
EXCEPTED HOLDER. The term "Excepted Holder" shall mean a shareholder of
the Trust for whom an Excepted Holder Limit is created by this Article VII or by
the Board of Trustees pursuant to Section 7.2.7.
EXCEPTED HOLDER LIMIT. The term "Excepted Holder Limit" shall mean,
provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board of Trustees pursuant to Section 7.2.7, and
subject to adjustment pursuant to Section 7.2.8, the percentage limit
established by the Board of Trustees pursuant to Section 7.2.7.
HRPT. The term "HRPT" shall mean HRPT Properties Trust, a Maryland real
estate investment trust, or any successor thereto by merger or consolidation, or
any transferee of all or substantially all of its assets.
INITIAL DATE. The term "Initial Date" shall mean the date upon which
these Articles of Amendment and Restatement containing this Article VII is
accepted for record by the SDAT.
MARKET PRICE. The term "Market Price" on any date shall mean, with
respect to any class or series of outstanding Equity Shares, the Closing Price
for such Equity Shares on such date. The "Closing Price" on any date shall mean
the last sale price for such Equity Shares, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, for such Equity Shares, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the NYSE or, if such Equity Shares are not listed or
admitted to trading on the NYSE, as reported on the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such Equity Shares are listed or admitted
to trading or, if such Equity Shares are not listed or admitted to trading on
any national securities exchange, the last quoted price, or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal other
automated quotation system that may then be in use or, if such Equity Shares are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in such
Equity Shares selected by the Board of Trustees or, in the event that no trading
price is available for such Equity Shares, the fair market value of Equity
Shares, as determined in good faith by the Board of Trustees.
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<PAGE>
NYSE. The term "NYSE" shall mean the New York Stock Exchange.
PERSON. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including, but not limited to, a trust qualified
under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust
permanently set aside for or to be used exclusively for the purposes described
in Section 642(c) of the Code, association, private foundation within the
meaning of Section 509(a) of the Code, joint stock company or other entity and
also includes a group as that term is used for purposes of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, and a group to which an
Excepted Holder Limit applies.
PROHIBITED OWNER. The term "Prohibited Owner" shall mean, with respect
to any purported Transfer, any Person who, but for the provisions of
Section 7.2.1, would Beneficially Own or Constructively Own Equity Shares, and
if appropriate in the context, shall also mean any Person who would have been
the record owner of Equity Shares that the Prohibited Owner would have so owned.
REIT. The term "REIT" shall mean a real estate investment trust within
the meaning of Section 856 of the Code.
RESTRICTION TERMINATION DATE. The term "Restriction Termination Date"
shall mean the first day after the Initial Date on which the Board of Trustees
determines that it is no longer in the best interests of the Trust for the
restrictions and limitations on Beneficial Ownership, Constructive Ownership and
Transfers of Equity Shares set forth herein to apply.
RMR. The term "RMR" shall mean REIT Management & Research, Inc., the
Trust's investment advisor, or any successor investment advisor to the Trust.
SDAT. The term "SDAT" shall mean the State Department of Assessments and
Taxation of Maryland.
TRANSFER. The term "Transfer" shall mean any issuance, sale, transfer,
gift, assignment, devise or other disposition, as well as any other event that
causes any Person to acquire Beneficial Ownership or Constructive Ownership, or
any agreement to take any such actions or cause any such events, of Equity
Shares or the right to vote or receive dividends on Equity Shares, including (a)
the granting or exercise of any option (or any disposition of any option), (b)
any disposition of any securities or rights convertible into or exchangeable for
Equity Shares or any interest in Equity Shares or any exercise of any such
conversion or exchange right and (c) Transfers of interests in other entities
that result in changes in Beneficial or Constructive Ownership of Equity Shares;
in each case, whether voluntary or involuntary, whether owned of record,
Constructively Owned or Beneficially Owned and whether by operation of law or
otherwise. The terms "Transferring" and "Transferred" shall have the
correlative meanings.
TRUSTEE. The term "Trustee" shall mean the Person unaffiliated with the
Trust and a Prohibited Owner, that is appointed by the Trust to serve as trustee
of the Charitable Trust.
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<PAGE>
Section 7.2 EQUITY SHARES.
Section 7.2.1 OWNERSHIP LIMITATIONS. During the period
commencing on the Initial Date and prior to the Restriction Termination Date:
(a) BASIC RESTRICTIONS.
(i) (1) No Person, other than an Excepted Holder and
other than HRPT, RMR and their affiliates, shall Beneficially Own or
Constructively Own Equity Shares in excess of the Aggregate Share Ownership
Limit, (2) no Person, other than an Excepted Holder and other than HRPT, RMR and
their affiliates, shall Beneficially Own or Constructively Own Common Shares in
excess of the Common Share Ownership Limit and (3) no Excepted Holder shall
Beneficially Own or Constructively Own Equity Shares in excess of the Excepted
Holder Limit for such Excepted Holder.
(ii) No Person shall Beneficially or Constructively Own
Equity Shares to the extent that such Beneficial or Constructive Ownership of
Equity Shares would result in the Trust being "closely held" within the meaning
of Section 856(h) of the Code (without regard to whether the ownership interest
is held during the last half of a taxable year), or otherwise failing to qualify
as a REIT (including, but not limited to, Beneficial or Constructive Ownership
that would result in the Trust owning (actually or Constructively) an interest
in a tenant that is described in Section 856(d)(2)(B) of the Code if the income
derived by the Trust from such tenant would cause the Trust to fail to satisfy
any of the gross income requirements of Section 856(c) of the Code).
(iii) Subject to Section 7.4, notwithstanding any other
provisions contained herein, any Transfer of Equity Shares (whether or not such
Transfer is the result of a transaction entered into through the facilities of
the NYSE or any other national securities exchange or automated inter-dealer
quotation system) that, if effective, would result in Equity Shares being
beneficially owned by less than 100 Persons (determined under the principles of
Section 856(a)(5) of the Code) shall be void AB INITIO, and the intended
transferee shall acquire no rights in such Equity Shares.
(b) TRANSFER IN TRUST. If any Transfer of Equity Shares occurs
which, if effective, would result in any Person Beneficially Owning or
Constructively Owning Equity Shares in violation of Section 7.2.1(a)(i) or (ii),
(i) then that number of Equity Shares the Beneficial or
Constructive Ownership of which otherwise would cause such Person to violate
Section 7.2.1(a)(i) or (ii) (rounded up to the nearest whole share) shall be
automatically transferred to a Charitable Trust for the benefit of a Charitable
Beneficiary, as described in Section 7.3, effective as of the close of business
on the Business Day prior to the date of such Transfer, and such Person shall
acquire no rights in such Equity Shares; or
(ii) if the transfer to the Charitable Trust described in
clause (i) of this sentence would not be effective for any reason to prevent the
violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that number of
Equity Shares that otherwise would cause any Person to violate
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<PAGE>
Section 7.2.1(a)(i) or (ii) shall be void AB INITIO, and the intended transferee
shall acquire no rights in such Equity Shares.
Section 7.2.2 REMEDIES FOR BREACH. If the Board of Trustees or
any duly authorized committee thereof shall at any time determine in good faith
that a Transfer or other event has taken place that results in a violation of
Section 7.2.1 or that a Person intends to acquire or has attempted to acquire
Beneficial or Constructive Ownership of any Equity Shares in violation of
Section 7.2.1 (whether or not such violation is intended), the Board of Trustees
or a committee thereof shall take such action as it deems advisable to refuse to
give effect to or to prevent such Transfer or other event, including, without
limitation, causing the Trust to redeem Equity Shares, refusing to give effect
to such Transfer on the books of the Trust or instituting proceedings to enjoin
such Transfer or other event; PROVIDED, HOWEVER, that any Transfers or attempted
Transfers or other events in violation of Section 7.2.1 shall automatically
result in the transfer to the Charitable Trust described above, and, where
applicable, such Transfer (or other event) shall be void AB INITIO as provided
above irrespective of any action (or non-action) by the Board of Trustees or a
committee thereof.
Section 7.2.3 NOTICE OF RESTRICTED TRANSFER. Any Person who
acquires or attempts or intends to acquire Beneficial Ownership or Constructive
Ownership of Equity Shares that will or may violate Section 7.2.1(a), or any
Person who would have owned Equity Shares that resulted in a transfer to the
Charitable Trust pursuant to the provisions of Section 7.2.1(b), shall
immediately give written notice to the Trust of such event, or in the case of
such a proposed or attempted transaction, give at least 15 days prior written
notice, and shall provide to the Trust such other information as the Trust may
request in order to determine the effect, if any, of such Transfer.
Section 7.2.4 OWNERS REQUIRED TO PROVIDE INFORMATION. From the
Initial Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (or such lower
percentage as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding Equity Shares, within 30 days after the end of
each taxable year, shall give written notice to the Trust stating the name and
address of such owner, the number of Equity Shares and other Equity Shares
Beneficially Owned and a description of the manner in which such shares are
held. Each such owner shall provide to the Trust such additional information as
the Trust may request in order to determine the effect, if any, of such
Beneficial Ownership on the Trust's status as a REIT and to ensure compliance
with the Aggregate Share Ownership Limit.
(b) each Person who is a Beneficial or Constructive Owner of
Equity Shares and each Person (including the shareholder of record) who is
holding Equity Shares for a Beneficial or Constructive Owner shall provide to
the Trust such information as the Trust may request, in good faith, in order to
determine the Trust's status as a REIT and to comply with requirements of any
taxing authority or governmental authority or to determine such compliance.
Section 7.2.5 REMEDIES NOT LIMITED. Subject to Section 5.1 of
the Declaration of Trust, nothing contained in this Section 7.2 shall limit the
authority of the Board of Trustees to take such other action as it deems
necessary or advisable to protect the Trust and the interests of its
shareholders in preserving the Trust's status as a REIT.
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Section 7.2.6 AMBIGUITY. In the case of an ambiguity in the
application of any of the provisions of this Section 7.2, Section 7.3 or any
definition contained in Section 7.1, the Board of Trustees shall have the power
to determine the application of the provisions of this Section 7.2 or
Section 7.3 with respect to any situation based on the facts known to it. In
the event Section 7.2 or 7.3 requires an action by the Board of Trustees and the
Declaration of Trust fails to provide specific guidance with respect to such
action, the Board of Trustees shall have the power to determine the action to be
taken so long as such action is not contrary to the provisions of Sections 7.1,
7.2 or 7.3.
Section 7.2.7 EXCEPTIONS.
(a) Subject to Section 7.2.1(a)(ii), the Board of Trustees, in
its sole discretion, may exempt a Person from the Aggregate Share Ownership
Limit and the Common Share Ownership Limit, as the case may be, and may (but is
not required to) establish or increase an Excepted Holder Limit for such Person
if:
(i) the Board of Trustees obtains such representations
and undertakings from such Person as are reasonably necessary to ascertain that
no individual's Beneficial or Constructive Ownership of such Equity Shares will
violate Section 7.2.1(a)(ii);
(ii) such Person does not and represents that it will not
own, actually or Constructively, an interest in a tenant of the Trust (or a
tenant of any entity owned or controlled by the Trust) that would cause the
Trust to own, actually or Constructively, more than a 9.9% interest (as set
forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board of
Trustees obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain this fact (for this purpose, a tenant from
whom the Trust (or an entity owned or controlled by the Trust) derives (and is
expected to continue to derive) a sufficiently small amount of revenue such
that, in the opinion of the Board of Trustees, rent from such tenant would not
adversely affect the Trust's ability to qualify as a REIT, shall not be treated
as a tenant of the Trust); and
(iii) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action which is
contrary to the restrictions contained in Sections 7.2.1 through 7.2.6) will
result in such Equity Shares being automatically transferred to a Charitable
Trust in accordance with Sections 7.2.1(b) and 7.3.
(b) Prior to granting any exception pursuant to
Section 7.2.7(a), the Board of Trustees may require a ruling from the Internal
Revenue Service, or an opinion of counsel, in either case in form and substance
satisfactory to the Board of Trustees in its sole discretion, as it may deem
necessary or advisable in order to determine or ensure the Trust's status as a
REIT. Notwithstanding the receipt of any ruling or opinion, the Board of
Trustees may impose such conditions or restrictions as it deems appropriate in
connection with granting such exception.
(c) In determining whether to grant any exemption pursuant to
Section 7.2.7(a), the Board of Trustees may consider, among other factors, (i)
the general reputation and moral character of the person requesting an
exemption, (ii) whether ownership of shares would be direct or through ownership
attribution, (iii) whether the person's ownership of shares would adversely
affect the Trust's ability to acquire additional properties or engage in other
business and (iv) whether
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granting an exemption for the person requesting an exemption would adversely
affect any of the Trust's existing contractual arrangements.
(d) Subject to Section 7.2.1(a)(ii), an underwriter which
participates in a public offering or a private placement of Equity Shares (or
securities convertible into or exchangeable for Equity Shares) may Beneficially
Own or Constructively Own Equity Shares (or securities convertible into or
exchangeable for Equity Shares) in excess of the Aggregate Share Ownership
Limit, the Common Share Ownership Limit or both such limits, but only to the
extent necessary to facilitate such public offering or private placement.
(e) The Board of Trustees may only reduce the Excepted Holder
Limit for an Excepted Holder: (1) with the written consent of such Excepted
Holder at any time, or (2) pursuant to the terms and conditions of the
agreements and undertakings entered into with such Excepted Holder in connection
with the establishment of the Excepted Holder Limit for that Excepted Holder.
No Excepted Holder Limit shall be reduced to a percentage that is less than the
Common Share Ownership Limit for an Excepted Holder without the written consent
of such Excepted Holder.
Section 7.2.8 INCREASE IN AGGREGATE SHARE OWNERSHIP AND COMMON
SHARE OWNERSHIP LIMITS. The Board of Trustees may from time to time increase
the Common Share Ownership Limit and the Aggregate Share Ownership Limit.
Section 7.2.9 LEGEND. Each certificate for Equity Shares shall
bear substantially the following legend:
The shares evidenced by this certificate are subject to
restrictions on Beneficial and Constructive Ownership and
Transfer for the purpose, among others, of the Trust's
maintenance of its status as a Real Estate Investment Trust
(a "REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"). Subject to certain further
restrictions and except as expressly provided in the
Trust's Declaration of Trust, (i) no Person may
Beneficially or Constructively Own Common Shares of the
Trust in excess of 9.8 percent (in value or number of
shares) of the outstanding Common Shares of the Trust
unless such Person is an Excepted Holder (in which case the
Excepted Holder Limit shall be applicable); (ii) no Person
may Beneficially or Constructively Own Equity Shares of the
Trust in excess of 9.8 percent of the value of the total
outstanding Equity Shares of the Trust, unless such Person
is an Excepted Holder (in which case the Excepted Holder
Limit shall be applicable); (iii) no Person may
Beneficially or Constructively Own Equity Shares that would
result in the Trust being "closely held" under
Section 856(h) of the Code or otherwise cause the Trust to
fail to qualify as a REIT; and (iv) no Person may Transfer
Equity Shares if such Transfer would result in Equity
Shares of the Trust being owned by fewer than 100 Persons.
Any Person who Beneficially or Constructively Owns or
attempts to Beneficially or Constructively Own Equity
Shares which cause or will cause a Person to Beneficially
or Constructively Own Equity Shares in excess or in
violation of the above limitations must immediately notify
the Trust. If any of the restrictions on transfer or
ownership are violated, the Equity
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Shares represented hereby will be automatically transferred to a
Trustee of a Charitable Trust for the benefit of one or more
Charitable Beneficiaries. In addition, upon the occurrence of
certain events, attempted Transfers in violation of the
restrictions described above may be void AB INITIO. All
capitalized terms in this legend have the meanings defined in the
Trust's Declaration of Trust, as the same may be amended from time
to time, a copy of which, including the restrictions on transfer
and ownership, will be furnished to each holder of Equity Shares
of the Trust on request and without charge.
Instead of the foregoing legend, the certificate may state that
the Trust will furnish a full statement about certain restrictions on
transferability to a shareholder on request and without charge.
Section 7.3 TRANSFER OF EQUITY SHARES IN TRUST.
Section 7.3.1 OWNERSHIP IN TRUST. Upon any purported Transfer or
other event described in Section 7.2.1(b) that would result in a transfer of
Equity Shares to a Charitable Trust, such Equity Shares shall be deemed to have
been transferred to the Trustee as trustee of a Charitable Trust for the
exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the
Trustee shall be deemed to be effective as of the close of business on the
Business Day prior to the purported Transfer or other event that results in the
transfer to the Charitable Trust pursuant to Section 7.2.1(b). The Trustee
shall be appointed by the Trust and shall be a Person unaffiliated with the
Trust and any Prohibited Owner. Each Charitable Beneficiary shall be designated
by the Trust as provided in Section 7.3.6.
Section 7.3.2 STATUS OF SHARES HELD BY THE TRUSTEE. Equity
Shares held by the Trustee shall be issued and outstanding Equity Shares of the
Trust. The Prohibited Owner shall have no rights in the shares held by the
Trustee. The Prohibited Owner shall not benefit economically from ownership of
any shares held in trust by the Trustee, shall have no rights to dividends or
other distributions and shall not possess any rights to vote or other rights
attributable to the shares held in the Charitable Trust.
Section 7.3.3 DIVIDEND AND VOTING RIGHTS. The Trustee shall have
all voting rights and rights to dividends or other distributions with respect to
Equity Shares held in the Charitable Trust, which rights shall be exercised for
the exclusive benefit of the Charitable Beneficiary. Any dividend or other
distribution paid prior to the discovery by the Trust that Equity Shares have
been transferred to the Trustee shall be paid with respect to such Equity Shares
to the Trustee upon demand and any dividend or other distribution authorized but
unpaid shall be paid when due to the Trustee. Any dividends or distributions so
paid over to the Trustee shall be held in trust for the Charitable Beneficiary.
The Prohibited Owner shall have no voting rights with respect to shares held in
the Charitable Trust and, subject to Maryland law, effective as of the date that
Equity Shares have been transferred to the Trustee, the Trustee shall have the
authority (at the Trustee's sole discretion) (i) to rescind as void any vote
cast by a Prohibited Owner prior to the discovery by the Trust that Equity
Shares have been transferred to the Trustee and (ii) to recast such vote in
accordance with the desires of the Trustee acting for the benefit of the
Charitable Beneficiary; provided, however, that if the Trust has already taken
irreversible trust action, then the Trustee shall not have the authority
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to rescind and recast such vote. Notwithstanding the provisions of this Article
VII, until the Trust has received notification that Equity Shares have been
transferred into a Charitable Trust, the Trust shall be entitled to rely on its
share transfer and other shareholder records for purposes of preparing lists of
shareholders entitled to vote at meetings, determining the validity and
authority of proxies and otherwise conducting votes of shareholders.
Section 7.3.4 SALE OF SHARES BY TRUSTEE. Within 20 days of
receiving notice from the Trust that Equity Shares have been transferred to the
Charitable Trust, the Trustee of the Charitable Trust shall sell the shares held
in the Charitable Trust to a person, designated by the Trustee, whose ownership
of the shares will not violate the ownership limitations set forth in
Section 7.2.1(a). Upon such sale, the interest of the Charitable Beneficiary in
the shares sold shall terminate and the Trustee shall distribute the net
proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary
as provided in this Section 7.3.4. The Prohibited Owner shall receive the
lesser of (1) the price paid by the Prohibited Owner for the shares or, if the
Prohibited Owner did not give value for the shares in connection with the event
causing the shares to be held in the Charitable Trust (E.G., in the case of a
gift, devise or other such transaction), the Market Price of the shares on the
day of the event causing the shares to be held in the Charitable Trust and (2)
the price per share received by the Trustee from the sale or other disposition
of the shares held in the Charitable Trust. Any net sales proceeds in excess of
the amount payable to the Prohibited Owner shall be immediately paid to the
Charitable Beneficiary. If, prior to the discovery by the Trust that Equity
Shares have been transferred to the Trustee, such shares are sold by a
Prohibited Owner, then (i) such shares shall be deemed to have been sold on
behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner
received an amount for such shares that exceeds the amount that such Prohibited
Owner was entitled to receive pursuant to this Section 7.3.4, such excess shall
be paid to the Trustee upon demand.
Section 7.3.5 PURCHASE RIGHT IN SHARES TRANSFERRED TO THE
TRUSTEE. Equity Shares transferred to the Trustee shall be deemed to have been
offered for sale to the Trust, or its designee, at a price per share equal to
the lesser of (i) the price per share in the transaction that resulted in such
transfer to the Charitable Trust (or, in the case of a devise or gift, the
Market Price at the time of such devise or gift) and (ii) the Market Price on
the date the Trust, or its designee, accepts such offer. The Trust shall have
the right to accept such offer until the Trustee has sold the shares held in the
Charitable Trust pursuant to Section 7.3.4. Upon such a sale to the Trust, the
interest of the Charitable Beneficiary in the shares sold shall terminate and
the Trustee shall distribute the net proceeds of the sale to the Prohibited
Owner.
Section 7.3.6 DESIGNATION OF CHARITABLE BENEFICIARIES. By
written notice to the Trustee, the Trust shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Charitable
Trust such that Equity Shares held in the Charitable Trust would not violate the
restrictions set forth in Section 7.2.1(a) in the hands of such Charitable
Beneficiary.
Section 7.4 NYSE TRANSACTIONS. Nothing in this Article VII shall
preclude the settlement of any transaction entered into through the facilities
of the NYSE or any other national securities exchange or automated inter-dealer
quotation system. The fact that the settlement of any transaction occurs shall
not negate the effect of any other provision of this Article VII and any
transferee in such a transaction shall be subject to all of the provisions and
limitations set forth in this Article VII.
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Section 7.5 ENFORCEMENT. The Trust is authorized specifically to seek
equitable relief, including injunctive relief, to enforce the provisions of this
Article VII.
Section 7.6 NON-WAIVER. No delay or failure on the part of the Trust or
the Board of Trustees in exercising any right hereunder shall operate as a
waiver of any right of the Trust or the Board of Trustees, as the case may be,
except to the extent specifically waived in writing.
ARTICLE VIII
SHAREHOLDERS
Section 8.1 MEETINGS. There shall be an annual meeting of the
shareholders, to be held on proper notice at such time (after the delivery of
the annual report) and convenient location as shall be determined by or in the
manner prescribed in the Bylaws, for the election of the Trustees, if required,
and for the transaction of any other business within the powers of the Trust.
Except as otherwise provided in the Declaration of Trust, special meetings of
shareholders may be called in the manner provided in the Bylaws. Shareholders
meetings, including the annual meeting and any special meetings, may be called
only by the Board of Trustees. If there are no Trustees, the officers of the
Trust shall promptly call a special meeting of the shareholders entitled to vote
for the election of successor Trustees. Any meeting may be adjourned and
reconvened as the Trustees determine or as provided in the Bylaws.
Section 8.2 VOTING RIGHTS. Subject to the provisions of any class or
series of Shares then outstanding, the shareholders shall be entitled to vote
only on the following matters: (a) election of Trustees as provided in
Section 5.2 and the removal of Trustees as provided in Section 5.3; (b)
amendment of the Declaration of Trust as provided in Article X; (c) termination
of the Trust as provided in Section 12.2; (d) merger or consolidation of the
Trust to the extent required by Title 8, or the sale or disposition of
substantially all of the Trust Property, as provided in Article XI; and (e) such
other matters with respect to which the Board of Trustees has adopted a
resolution declaring that a proposed action is advisable and directing that the
matter be submitted to the shareholders for approval or ratification. Except
with respect to the foregoing matters, no action taken by the shareholders at
any meeting shall in any way bind the Board of Trustees.
Section 8.3 PREEMPTIVE AND APPRAISAL RIGHTS. Except as may be provided
by the Board of Trustees in setting the terms of classified or reclassified
Shares pursuant to Section 6.4, or as may otherwise be provided by contract, no
holder of Shares shall, as such holder, (a) have any preemptive right to
purchase or subscribe for any additional Shares of the Trust or any other
security of the Trust which it may issue or sell or (b) have any right to
require the Trust to pay him the fair value of his Shares in an appraisal or
similar proceeding.
Section 8.4 EXTRAORDINARY ACTIONS. Except as specifically provided in
Section 5.3 (relating to removal of Trustees) and subject to Section 8.5,
notwithstanding any provision of law permitting or requiring any action to be
taken or authorized by the affirmative vote of the holders of a greater number
of votes, any such action shall be effective and valid if taken or approved by
(i) the affirmative vote of holders of Shares entitled to cast a majority of all
the votes entitled to be cast on
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the matter, or (ii) if Maryland law hereafter permits the effectiveness of a
vote described in this clause (ii), the affirmative vote of a majority of the
votes cast on the matter.
Section 8.5 BOARD APPROVAL. The submission of any action to the
shareholders for their consideration shall first be approved or advised by the
Board of Trustees, and the shareholders shall not otherwise be entitled to act
thereon.
Section 8.6 ACTION BY SHAREHOLDERS WITHOUT A MEETING. To the extent, if
any, permitted by the Bylaws of the Trust, any action required or permitted to
be taken by the shareholders may be taken without a meeting by the written
consent of the shareholders entitled to cast a sufficient number of votes to
approve the matter as required by statute, the Declaration of Trust or the
Bylaws of the Trust, as the case may be.
ARTICLE IX
LIABILITY LIMITATION, INDEMNIFICATION
AND TRANSACTIONS WITH THE TRUST
Section 9.1 LIMITATION OF SHAREHOLDER LIABILITY. No shareholder shall
be liable for any debt, claim, demand, judgment or obligation of any kind of,
against or with respect to the Trust by reason of his being a shareholder, nor
shall any shareholder be subject to any personal liability whatsoever, in tort,
contract or otherwise, to any person in connection with the property or the
affairs of the Trust by reason of his being a shareholder.
Section 9.2 LIMITATION OF TRUSTEE AND OFFICER LIABILITY. To the maximum
extent that Maryland law in effect from time to time permits limitation of the
liability of trustees and officers of a real estate investment trust, no current
or former Trustee or officer of the Trust shall be liable to the Trust or to any
shareholder for money damages. Neither the amendment nor repeal of this
Section 9.2, nor the adoption or amendment of any other provision of the
Declaration of Trust inconsistent with this Section 9.2, shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption. In the absence of any Maryland statute limiting the liability of
trustees and officers of a Maryland real estate investment trust for money
damages in a suit by or on behalf of the Trust or by any shareholder, or arising
by reason of his or her action on behalf of the Trust, no Trustee or officer of
the Trust shall be liable to the Trust or to any shareholder for money damages
except to the extent that (a) the Trustee or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (b) a
judgment or other final adjudication adverse to the Trustee or officer is
entered in a proceeding based on a finding in the proceeding that the Trustee's
or officer's action or failure to act was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding.
Section 9.3 EXPRESS EXCULPATORY CLAUSES AND INSTRUMENTS. Any written
instrument creating an obligation of the Trust shall, to the extent practicable,
include a reference to this Declaration and provide that neither the
shareholders nor the Trustees nor any officers, employees or agents (including
the Trust's advisor, the "Advisor") of the Trust shall be liable thereunder and
that all
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persons shall look solely to the trust estate for the payment of any claim
thereunder or for the performance thereof; however, the omission of such
provision from any such instrument shall not render the shareholders, any
Trustee, or any officer, employee or agent (including the Advisor) of the Trust
liable, nor shall the shareholders, any Trustee or any officer, employee or
agent (including the Advisor) of the Trust be liable to anyone for such
omission.
Section 9.4 INDEMNIFICATION. The Trust shall, to the maximum extent
permitted by Maryland law in effect from time to time, indemnify, and pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to, (a) any individual who is a present or former shareholder, Trustee or
officer of the Trust or (b) any individual who, while a Trustee of the Trust and
at the request of the Trust, serves or has served as a trustee, director,
officer, partner, employee or agent of another real estate investment trust,
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise from and against any claim or liability to which such person
may become subject or which such person may incur by reason of his status as a
present or former shareholder, Trustee or officer of the Trust. The Trust shall
have the power, with the approval of its Board of Trustees, to provide such
indemnification and advancement of expenses to a person who served a predecessor
of the Trust in any of the capacities described in (a) or (b) above and to any
employee or agent of the Trust or a predecessor of the Trust.
Section 9.5 TRANSACTIONS BETWEEN THE TRUST AND ITS TRUSTEES, OFFICERS,
EMPLOYEES AND AGENTS. (a) Subject to any express restrictions adopted by the
Trustees in the Bylaws or by resolution, the Trust may enter into any contract
or transaction of any kind, whether or not any of its Trustees, officers,
employees or agents has a financial interest in such transaction, with any
person, including any Trustee, officer, employee or agent of the Trust or any
person affiliated with a Trustee, officer, employee or agent of the Trust or in
which a Trustee, officer, employee or agent of the Trust has a material
financial interest.
(b) To the extent permitted by Maryland law, a contract or other
transaction between the Trust and any Trustee or between the Trust and RMR or
any other corporation, trust, firm, or other entity in which any Trustee is a
director or trustee or has a material financial interest shall not be void or
voidable if:
(i) The fact of the common directorship, trusteeship or
interest is disclosed or known to:
(A) The Board of Trustees or a proper committee thereof,
and the Board of Trustees or such Committee authorizes, approves
or ratifies the contract or transaction by the affirmative vote of
a majority of disinterested Trustees, even if the disinterested
Trustees constitute less than a quorum; or
(B) The shareholders entitled to vote, and the contract
or transaction is authorized, approved, or ratified by a majority
of the votes cast by the shareholders entitled to vote other than
the votes of shares owned of record or beneficially by the
interested trustee, corporation, trust, firm or other entity; or
(C) The contract or transaction is fair and reasonable
to the Trust.
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(ii) Common or interested trustees or the shares owned by them
or by an interested corporation, trust, firm or other entity may be
counted in determining the presence of a quorum at a meeting of the Board
of Trustees or a committee thereof or at a meeting of the shareholders,
as the case may be, at which the contract or transaction is authorized,
approved or ratified.
(c) The failure of a contract or other transaction between the Trust and
any Trustee or between the Trust and RMR or any other corporation, trust, firm,
or other entity in which any Trustee is a director or trustee or has a material
financial interest to satisfy the criteria set forth in Section 9.5(b) shall not
create any presumption that such contract or other transaction is void, voidable
or otherwise invalid, and any such contract or other transaction shall be valid
to the fullest extent permitted by Maryland law. To the fullest extent
permitted by Maryland law, (i) the fixing by the Board of Trustees of
compensation for a Trustee (whether as a Trustee or in any other capacity) and
(ii) Section 9.4 of this Declaration of Trust or any provision of the Bylaws or
any contract or transaction requiring or permitting indemnification (including
advancing of expenses) in accordance with terms and procedures not materially
less favorable to the Trust than those described in Section 2-418 (or any
successor section thereto) of the Maryland General Corporation Law (as in effect
at the time such provision was adopted or such contract or transaction was
entered into or as it may thereafter be in effect) shall be deemed to have
satisfied the criteria set forth in Section 9.5(b).
Section 9.6 RIGHT OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS TO OWN
SHARES OR OTHER PROPERTY AND TO ENGAGE IN OTHER BUSINESS. Subject to any
restrictions which may be adopted by the Trustees in the Bylaws or otherwise:
Any Trustee or officer, employee or agent of the Trust may acquire, own, hold
and dispose of Shares in the Trust, for his or her individual account, and may
exercise all rights of a shareholder to the same extent and in the same manner
as if he or she were not a Trustee or officer, employee or agent of the Trust.
Any Trustee or officer, employee or agent of the Trust may, in his or her
personal capacity or in the capacity of trustee, officer, director, stockholder,
partner, member, advisor or employee of any Person or otherwise, have business
interests and engage in business activities similar to or in addition to those
relating to the Trust, which interests and activities may be similar to and
competitive with those of the Trust and may include the acquisition,
syndication, holding, management, development, operation or disposition, for his
own account, or for the account of such Person or others, of interests in
mortgages, interests in real property, or interests in Persons engaged in the
real estate business. Each Trustee, officer, employee and agent of the Trust
shall be free of any obligation to present to the Trust any investment
opportunity which comes to him or her in any capacity other than solely as
Trustee, officer, employee or agent of the Trust even if such opportunity is of
a character which, if presented to the Trust, could be taken by the Trust. Any
Trustee or officer, employee or agent of the Trust may be interested as trustee,
officer, director, stockholder, partner, member, advisor or employee of, or
otherwise have a direct or indirect interest in, any Person who may be engaged
to render advice or services to the Trust, and may receive compensation from
such Person as well as compensation as Trustee, officer, employee or agent or
otherwise hereunder. None of these activities shall be deemed to conflict with
his or her duties and powers as Trustee or officer, employee or agent of the
Trust.
Section 9.7 PERSONS DEALING WITH TRUSTEES, OFFICERS, EMPLOYEES OR
AGENTS. Any act of the Trustees or of the officers, employees or agents of the
Trust purporting to be done in their capacity as such, shall, as to any Persons
dealing with such Trustees, officers, employees or agents, be
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conclusively deemed to be within the purposes of this Trust and within the
powers of such Trustees or officers, employees or agents. No Person dealing
with the Board or any of the Trustees or with the officers, employees or agents
of the Trust shall be bound to see to the application of any funds or property
passing into their hands or control. The receipt of the Board or any of the
Trustees, or of authorized officers, employees or agents of the Trust, for
moneys or other consideration, shall be binding upon the Trust.
Section 9.8 RELIANCE. The Trustees and the officers, employees and
agents of the Trust may consult with counsel and the advice or opinion of such
counsel shall be full and complete personal protection to all the Trustees and
the officers, employees and agents of the Trust in respect of any action taken
or suffered by them in good faith and in reliance on or in accordance with such
advice or opinion. In discharging their duties, Trustees or officers, employees
or agents of the Trust, when acting in good faith, may rely upon financial
statements of the Trust represented to them to fairly present the financial
position or results of operations of the Trust by the chief financial officer of
the Trust or the officer of the Trust having charge of its books of account, or
stated in a written report by an independent certified public accountant fairly
to present the financial position or results of operations of the Trust. The
Trustees and the officers, employees and agents of the Trust may rely, and shall
be personally protected in acting, upon any instrument or other document
believed by them to be genuine.
ARTICLE X
AMENDMENTS
Section 10.1 GENERAL. The Trust reserves the right from time to time to
make any amendment to the Declaration of Trust, now or hereafter authorized by
law, including any amendment altering the terms or contract rights, as expressly
set forth in the Declaration of Trust, of any Shares, except that the provisions
governing the personal liability of the shareholders, Trustees and of the
officers, employees and agents of the Trust and the prohibition of assessments
upon shareholders may not be amended in any respect that could increase the
personal liability of such shareholders, Trustees or officers, employees and
agents of the Trust. All rights and powers conferred by the Declaration of
Trust on shareholders, Trustees and officers are granted subject to this
reservation. An amendment to the Declaration of Trust (a) shall be signed and
acknowledged by at least a majority of the Trustees, or an officer duly
authorized by at least a majority of the Trustees, (b) shall be filed for record
as provided in Section 13.5 and (c) shall become effective as of the later of
the time the SDAT accepts the amendment for record or the time established in
the amendment, not to exceed thirty (30) days after the amendment is accepted
for record. All references to the Declaration of Trust shall include all
amendments thereto.
Section 10.2 BY TRUSTEES. The Trustees may amend this Declaration of
Trust from time to time, in the manner provided by Title 8, without any action
by the shareholders, to qualify as a real estate investment trust under the Code
or under Title 8 and as otherwise provided in Section 8-501(e) of Title 8 and
the Declaration of Trust. If permitted by Maryland law as in effect from time
to time, the Trustees may amend this Declaration of Trust from time to time in
any other respect, in accordance with such law, without any action by the
shareholders.
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Section 10.3 BY SHAREHOLDERS. Except as otherwise provided in Section
10.2 and subject to the following sentence, any amendment to this Declaration of
Trust must first be advised by the Board of Trustees and then shall be valid
only if approved by (i) the affirmative vote of a majority of all the votes
entitled to be cast on the matter or (ii) if Maryland law hereafter permits the
effectiveness of a vote described in this clause (ii), the affirmative vote of a
majority of the votes cast on the matter. Any amendment to Section 5.2.2 or 5.3
or to this sentence of the Declaration of Trust shall be valid only if approved
by the Board of Trustees and then by the affirmative vote of two-thirds (2/3) of
all votes entitled to be cast on the matter.
ARTICLE XI
MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY
Subject to the provisions of any class or series of Shares at the time
outstanding, the Trust may (a) merge with or into another entity, (b)
consolidate with one or more other entities into a new entity or (c) sell,
lease, exchange or otherwise transfer all or substantially all of the trust
property. Any such action must first be approved by the Board of Trustees and,
after notice to all shareholders entitled to vote on the matter, by (i) the
affirmative vote of a majority of all the votes entitled to be cast on the
matter or (ii) if Maryland law hereafter permits the effectiveness of a vote
described in this clause (ii), the affirmative vote of a majority of the votes
cast on the matter
ARTICLE XII
DURATION AND TERMINATION OF TRUST
Section 12.1 DURATION. The Trust shall continue perpetually unless
terminated pursuant to Section 12.2.
Section 12.2 TERMINATION.
(a) Subject to the provisions of any class or series of Shares
at the time outstanding, after approval by a majority of the entire Board of
Trustees, the Trust may be terminated at any meeting of shareholders by (i) the
affirmative vote of a majority of all the votes entitled to be cast on the
matter or (ii) or if hereafter expressly authorized by Title 8, the affirmative
vote of a majority of the votes cast on the matter. Upon the termination of the
Trust:
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under the Declaration of Trust
shall continue, including the powers to fulfill or discharge the Trust's
contracts, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining property of the Trust to
one or more persons at public or private sale for consideration which may
consist in whole or in part of cash, securities
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<PAGE>
or other property of any kind, discharge or pay its liabilities and do all other
acts appropriate to liquidate its business.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
agreements as they deem necessary for their protection, the Trust may distribute
the remaining property of the Trust among the shareholders so that after payment
in full or the setting apart for payment of such preferential amounts, if any,
to which the holders of any Shares at the time outstanding shall be entitled,
the remaining property of the Trust shall, subject to any participating or
similar rights of Shares at the time outstanding, be distributed ratably among
the holders of Common Shares at the time outstanding.
(b) After termination of the Trust, the liquidation of its
business and the distribution to the shareholders as herein provided, a majority
of the Trustees shall execute and file with the Trust's records a document
certifying that the Trust has been duly terminated and the Trustees shall be
discharged from all liabilities and duties hereunder, and the rights and
interests of all shareholders shall cease.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 GOVERNING LAW. The Declaration of Trust is executed and
delivered with reference to the laws of the State of Maryland, and the rights of
all parties and the validity, construction and effect of every provision hereof
shall be subject to and construed according to the laws of the State of
Maryland.
Section 13.2 RELIANCE BY THIRD PARTIES. Any certificate shall be final
and conclusive as to any person dealing with the Trust if executed by the
Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying
to: (a) the number or identity of Trustees, officers of the Trust or
shareholders; (b) the due authorization of the execution of any document; (c)
the action or vote taken, and the existence of a quorum, at a meeting of the
Board of Trustees or shareholders; (d) a copy of the Declaration of Trust or of
the Bylaws as a true and complete copy as then in force; (e) an amendment to the
Declaration of Trust; (f) the termination of the Trust; or (g) the existence of
any fact relating to the affairs of the Trust. No purchaser, lender, transfer
agent or other person shall be bound to make any inquiry concerning the validity
of any transaction purporting to be made by the Trust on its behalf or by any
officer, employee or agent of the Trust.
Section 13.3 SEVERABILITY.
(a) The provisions of the Declaration of Trust are severable,
and if the Board of Trustees shall determine, with the advice of counsel, that
any one or more of such provisions (the "Conflicting Provisions") are in
conflict with the Code, Title 8 or other applicable federal or state laws, the
Conflicting Provisions, to the extent of the conflict, shall be deemed never to
have constituted a part of the Declaration of Trust, even without any amendment
of the Declaration of Trust pursuant to Article X and without affecting or
impairing any of the remaining provisions of the Declaration of Trust or
rendering invalid or improper any action taken or omitted (including but
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<PAGE>
not limited to the election of Trustees) prior to such determination. No
Trustee shall be liable for making or failing to make such a determination. In
the event of any such determination by the Board of Trustees, the Board shall
amend the Declaration of Trust in the manner provided in Section 10.2.
(b) If any provision of the Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such holding shall apply only to
the extent of any such invalidity or unenforceability and shall not in any
manner affect, impair or render invalid or unenforceable such provision in any
other jurisdiction or any other provision of the Declaration of Trust in any
jurisdiction.
Section 13.4 CONSTRUCTION. In the Declaration of Trust, unless the
context otherwise requires, words used in the singular or in the plural include
both the plural and singular and words denoting any gender include all genders.
The title and headings of different parts are inserted for convenience and shall
not affect the meaning, construction or effect of the Declaration of Trust. In
defining or interpreting the powers and duties of the Trust and its Trustees and
officers, reference may be made by the Trustees or officers, to the extent
appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3
of the Corporations and Associations Article of the Annotated Code of Maryland.
In furtherance and not in limitation of the foregoing, in accordance with the
provisions of Title 3, Subtitles 6 and 7, of the Corporations and Associations
Article of the Annotated Code of Maryland, the Trust shall be included within
the definition of "corporation" for purposes of such provisions.
Section 13.5 RECORDATION. The Declaration of Trust and any amendment
hereto shall be filed for record with the SDAT and may also be filed or recorded
in such other places as the Trustees deem appropriate, but failure to file for
record the Declaration of Trust or any amendment hereto in any office other than
in the State of Maryland shall not affect or impair the validity or
effectiveness of the Declaration of Trust or any amendment hereto. A restated
Declaration of Trust shall, upon filing, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration of Trust and the various amendments thereto.
THIRD: The amendment to and restatement of the Declaration of Trust of
the Trust as hereinabove set forth have been duly advised by the Board of
Trustees and approved by the shareholders of the Trust as required by law.
FOURTH: The total number of shares of beneficial interest which the
Trust has authority to issue has not been amended by this amendment and
restatement.
The undersigned President acknowledges these Articles of Amendment and
Restatement to be the trust act of the Trust, and as to all matters or facts
required to be verified under oath, the undersigned President acknowledges, that
to the best of his knowledge, information and belief, these matters and facts
are true in all material respects and that this statement is made under the
penalties for perjury.
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<PAGE>
IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment and
Restatement to be signed in its name and on its behalf by its President and
attested to by its Assistant Secretary on this ______ day of September, 1999.
ATTEST: SENIOR HOUSING PROPERTIES TRUST
(SEAL)
- ---------------------------- --------------------------
Assistant Secretary President
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<PAGE>
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SENIOR HOUSING PROPERTIES TRUST
--------------
FORM OF
AMENDED AND RESTATED BYLAWS
--------------
As Amended and Restated _________, 1999
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.1 Principal Office . . . . . . . . . . . . . . . . . .1
Section 1.2 Additional Offices . . . . . . . . . . . . . . . . .1
ARTICLE II MEETINGS OF SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . .1
Section 2.1 Place. . . . . . . . . . . . . . . . . . . . . . . .1
Section 2.2 Annual Meeting . . . . . . . . . . . . . . . . . . .1
Section 2.3 Special Meetings . . . . . . . . . . . . . . . . . .1
Section 2.4 Notice of Regular or Special Meetings. . . . . . . .1
Section 2.5 Notice of Adjourned Meetings . . . . . . . . . . . .2
Section 2.6 Scope of Notice. . . . . . . . . . . . . . . . . . .2
Section 2.7 Organization of Shareholder Meetings . . . . . . . .2
Section 2.8 Quorum . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.9 Voting . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.10 Proxies . . . . . . . . . . . . . . . . . . . . . .3
Section 2.11 Voting Rights . . . . . . . . . . . . . . . . . . .3
Section 2.12 Voting of Shares by Certain Holders . . . . . . . .3
Section 2.13 Inspectors. . . . . . . . . . . . . . . . . . . . .4
Section 2.14 Reports to Shareholders . . . . . . . . . . . . . .4
Section 2.15 Nominations and Proposals by Shareholders . . . . .4
Section 2.16 No Shareholder Actions by Written Consent . . . . .6
Section 2.17 Voting by Ballot. . . . . . . . . . . . . . . . . .6
ARTICLE III TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 3.1 General Powers; Qualifications; Trustees
Holding Over . . . . . . . . . . . . . . . . . . .6
Section 3.2 Independent Trustees . . . . . . . . . . . . . . . .7
Section 3.3 Managing Trustees. . . . . . . . . . . . . . . . .7
Section 3.4 Number . . . . . . . . . . . . . . . . . . . . . . .7
Section 3.5 Annual and Regular Meetings. . . . . . . . . . . . .7
Section 3.6 Special Meetings . . . . . . . . . . . . . . . . . .7
Section 3.7 Notice . . . . . . . . . . . . . . . . . . . . . . .7
Section 3.8 Quorum . . . . . . . . . . . . . . . . . . . . . . .8
Section 3.9 Voting . . . . . . . . . . . . . . . . . . . . . . .8
Section 3.10 Telephone Meetings. . . . . . . . . . . . . . . . .8
Section 3.11 Informal Action by Trustees . . . . . . . . . . . .8
Section 3.12 Wavier of Notice. . . . . . . . . . . . . . . . . .8
Section 3.13 Vacancies . . . . . . . . . . . . . . . . . . . . .8
Section 3.14 Compensation; Financial Assistance. . . . . . . . .9
Section 3.15 Removal of Trustees . . . . . . . . . . . . . . . 10
Section 3.16 Loss of Deposits. . . . . . . . . . . . . . . . . 10
Section 3.17 Surety Bonds. . . . . . . . . . . . . . . . . . . 10
Section 3.18 Reliance. . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 3.19 Interested Trustee Transactions . . . . . . . . . 10
Section 3.20 Qualifying Shares Not Required. . . . . . . . . . 10
Section 3.21 Certain Rights of Trustees, Officers, Employees
and Agents. . . . . . . . . . . . . . . . . . . 10
Section 3.22 Certain Transactions. . . . . . . . . . . . . . . 10
ARTICLE IV COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.1 Number; Tenure and Qualifications. . . . . . . . . 10
Section 4.2 Powers . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.3 Meetings . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 Telephone Meetings . . . . . . . . . . . . . . . . 11
Section 4.5 Informal Action by Committees. . . . . . . . . . . 11
Section 4.6 Vacancies. . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.1 General Provisions . . . . . . . . . . . . . . . . 11
Section 5.2 Removal and Resignation. . . . . . . . . . . . . . 12
Section 5.3 Vacancies. . . . . . . . . . . . . . . . . . . . . 12
Section 5.4 Chief Executive Officer. . . . . . . . . . . . . . 12
Section 5.5 Chief Operating Officer. . . . . . . . . . . . . . 12
Section 5.6 Chief Financial Officer. . . . . . . . . . . . . . 12
Section 5.7 Chairman and Vice Chairman of the Board. . . . . . 12
Section 5.8 President. . . . . . . . . . . . . . . . . . . . . 13
Section 5.9 Vice Presidents. . . . . . . . . . . . . . . . . . 13
Section 5.10 Secretary . . . . . . . . . . . . . . . . . . . . 13
Section 5.11 Treasurer . . . . . . . . . . . . . . . . . . . . 13
Section 5.12 Assistant Secretaries and Assistant Treasurers. . 13
ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS . . . . . . . . . . . . . 14
Section 6.1 Contracts. . . . . . . . . . . . . . . . . . . . . 14
Section 6.2 Checks and Drafts. . . . . . . . . . . . . . . . . 14
Section 6.3 Deposits . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.1 Certificates . . . . . . . . . . . . . . . . . . . 14
Section 7.2 Transfers. . . . . . . . . . . . . . . . . . . . . 15
Section 7.3 Replacement Certificate. . . . . . . . . . . . . . 15
Section 7.4 Closing of Transfer Books or Fixing of Record
Date . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.5 Share Ledger . . . . . . . . . . . . . . . . . . . 16
Section 7.6 Fractional Shares; Issuance of Units . . . . . . . 16
ARTICLE VIII FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IX DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.1 Authorization. . . . . . . . . . . . . . . . . . . 16
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<PAGE>
Section 9.2 Contingencies. . . . . . . . . . . . . . . . . . . 16
ARTICLE X SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10.1 Seal. . . . . . . . . . . . . . . . . . . . . . . 17
Section 10.2 Affixing Seal . . . . . . . . . . . . . . . . . . 17
ARTICLE XI INDEMNIFICATION AND ADVANCE OF EXPENSES . . . . . . . . . . . . 17
ARTICLE XII WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE XIII THE ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 13.1 Employment of Advisor . . . . . . . . . . . . . . 18
Section 13.2 Other Activities of Advisor . . . . . . . . . . . 18
Section 13.3 Advisor Compensation. . . . . . . . . . . . . . . 18
ARTICLE XIV AMENDMENT OF BYLAWS . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 15.1 References to Declaration of Trust. . . . . . . . 19
Section 15.2 Inspection of Bylaws. . . . . . . . . . . . . . . 19
</TABLE>
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<PAGE>
SENIOR HOUSING PROPERTIES TRUST
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL OFFICE. The principal office of the Trust shall be
located at such place or places as the Board of Trustees may designate.
Section 1.2 ADDITIONAL OFFICES. The Trust may have additional offices at
such places as the Board of Trustees may from time to time determine or the
business of the Trust may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1 PLACE. All meetings of shareholders shall be held at the
principal office of the Trust or at such other place within the United States
as is designated by the Trustees or the Chairman or President, given either
before or after the meeting and filed with the Secretary of the Trust.
Section 2.2 ANNUAL MEETING. An annual meeting of the shareholders for
the election of Trustees and the transaction of any business within the
powers of the Trust shall be held on the second Thursday in May or such other
date as the Board of Trustees may set, after delivery to the shareholders of
the annual report, referred to in Section 2.14, at a convenient location and
on proper notice, and at the time set by the Trustees, beginning with the
year 2000. Failure to hold an annual meeting does not invalidate the Trust's
existence or affect any otherwise valid acts of the Trust.
Section 2.3 SPECIAL MEETINGS. Special meetings of shareholders may be
called only by a majority of the Trustees. If there shall be no Trustees,
the officers of the Trust shall promptly call a special meeting of the
shareholders entitled to vote for the election of successor Trustees. No
business shall be transacted by the shareholders at a special meeting other
than business that is either (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Trustees (or any duly
authorized committee thereof) or (ii) otherwise properly brought before the
shareholders by or at the direction of the Trustees.
Section 2.4 NOTICE OF REGULAR OR SPECIAL MEETINGS. Written notice
specifying the place, day and hour of any regular or special meeting, the
purposes of the meeting, and all other matters required by law shall be given
to each shareholder of record entitled to vote, either personally or by
sending a copy thereof by mail, telegraph or telecopier, charges prepaid, to
his address appearing on the books of the Trust or theretofore given by him
to the Trust for the purpose of notice or, if no address appears or has been
given, addressed to the place where the principal office of the Trust
<PAGE>
is situated. If mailed, such notice shall be deemed to be given when
deposited in the U.S. mail addressed to the shareholder at his post office
address as it appears on the records of the Trust, with postage thereon
prepaid. It shall be the duty of the Secretary to give notice of each Annual
Meeting of the Shareholders at least fifteen (15) days and not more than
sixty (60) days before the date on which it is to be held. Whenever an
officer has been duly requested by the Trustees to call a special meeting of
shareholders, it shall be his duty to fix the date and hour thereof, which
date shall be not less than twenty (20) days and not more than sixty (60)
days after the receipt of such request, and to give notice of such special
meeting within ten (10) days after receipt of such request.
Section 2.5 NOTICE OF ADJOURNED MEETINGS. It shall not be necessary to
give notice of the time and place of any adjourned meeting or of the business
to be transacted thereat other than by announcement at the meeting at which
such adjournment is taken, except that when a meeting is adjourned for more
than 120 days after the original record date, notice of the adjourned meeting
shall be given as in the case of an original meeting.
Section 2.6 SCOPE OF NOTICE. No business shall be transacted at an
annual or special meeting of shareholders except as specifically designated
in the notice and otherwise properly brought before the shareholders by or at
the direction of the Trustees.
Section 2.7 ORGANIZATION OF SHAREHOLDER MEETINGS. At every meeting of
the shareholders, the chairman of the board, if there be one, shall conduct
the meeting or, in the case of vacancy in office or absence of the chairman
of the board, one of the following officers present shall conduct the meeting
in the order stated: the vice chairman of the board, if there be one, the
president, the vice presidents in their order of rank and seniority, or a
chairman chosen by the shareholders entitled to cast a majority of the votes
which all shareholders present in person or by proxy are entitled to cast.
The secretary, or, in his absence, an assistant secretary, or in the absence
of both the secretary and assistant secretaries, a person appointed by the
chairman shall act as secretary for all shareholder meetings.
Section 2.8 QUORUM. At any meeting of shareholders, the presence in
person or by proxy of shareholders entitled to cast a majority of all the
votes entitled to be cast at such meeting shall constitute a quorum; but this
section shall not affect any requirement under any statute or the Declaration
of Trust for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the shareholders,
the shareholders entitled to vote at such meeting, present in person or by
proxy, shall have the power to adjourn the meeting from time to time to a
date not more than 120 days after the original record date. At such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 2.9 VOTING. A majority of all the votes cast at a meeting of
shareholders duly called and at which a quorum is present shall be sufficient
to elect a Trustee. Each share may be voted for as many individuals as there
are Trustees to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of shareholders duly called
and at which a quorum is present shall be sufficient to approve any other
matter which may properly
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<PAGE>
come before the meeting, unless more than a majority of the votes cast is
required herein or by statute or by the Declaration of Trust.
Section 2.10 PROXIES. A shareholder may cast the votes entitled to be
cast by the shares owned of record by him either in person or by proxy
executed by the shareholder or by his duly authorized agent in any manner
permitted by law. Such proxy shall be filed with such officer of the Trust
as the Trustees shall have designated for such purpose for verification prior
to such meeting. Any proxy relating to the Trust's shares of beneficial
interest shall be valid until the expiration date therein or, if no
expiration is so indicated, for such period as is permitted pursuant to
Maryland law. At a meeting of shareholders, all questions concerning the
qualification of voters, the validity of proxies, and the acceptance or
rejection of votes, shall be decided by the Secretary of the meeting unless
inspectors of election are appointed pursuant to Section 2.13 in which event
such inspectors shall pass upon all questions and shall have all other duties
specified in said section.
Section 2.11 VOTING RIGHTS. The Board of Trustees shall fix the date
for determination of shareholders entitled to vote at a meeting of
shareholders. If no date is fixed for the determination of the shareholders
entitled to vote at any meeting of shareholders, only persons in whose names
shares entitled to vote stand on the share records of the Trust at the
opening of business on the day of any meeting of shareholders shall be
entitled to vote at such meeting.
Section 2.12 VOTING OF SHARES BY CERTAIN HOLDERS. Shares of the Trust
registered in the name of a corporation, partnership, trust or other entity,
if entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed
by any of the foregoing individuals, unless some other person who has been
appointed to vote such shares pursuant to a bylaw or a resolution of the
governing board of such corporation or other entity or agreement of the
partners of the partnership presents a certified copy of such bylaw,
resolution or agreement, in which case such person may vote such shares. Any
trustee or other fiduciary may vote shares registered in his name as such
fiduciary, either in person or by proxy.
Shares of the Trust directly or indirectly owned by it shall not be
voted at any meeting and shall not be counted in determining the total number
of outstanding shares entitled to be voted at any given time, unless they are
held by it in a fiduciary capacity, in which case they may be voted and shall
be counted in determining the total number of outstanding shares at any given
time.
The Trustees may adopt by resolution a procedure by which a shareholder
may certify in writing to the Trust that any shares registered in the name of
the shareholder are held for the account of a specified person other than the
shareholder. The resolution shall set forth the class of shareholders who
may make the certification, the purpose for which the certification may be
made, the form of certification and the information to be contained in it; if
the certification is with respect to a record date or closing of the share
transfer books, the time after the record date or closing of the share
transfer books within which the certification must be received by the Trust;
and any other provisions with respect to the procedure which the Trustees
consider necessary or desirable. On receipt of such certification, the
person specified in the certification shall be regarded
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<PAGE>
as, for the purposes set forth in the certification, the shareholder of
record of the specified shares in place of the shareholder who makes the
certification.
Notwithstanding any other provision contained herein or in the
Declaration of Trust or these Bylaws, Title 3, Subtitle 7 of the Corporations
and Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to any acquisition by any person of shares of
beneficial interest of the Trust. This section may be repealed, in whole or
in part, at any time, whether before or after an acquisition of control
shares and, upon such repeal, may, to the extent provided by any successor
bylaw, apply to any prior or subsequent control share acquisition.
Section 2.13 INSPECTORS. At any meeting of shareholders, the chairman
of the meeting may appoint one or more persons as inspectors for such
meeting. Such inspectors shall ascertain and report the number of shares
represented at the meeting based upon their determination of the validity and
effect of proxies, count all votes, report the results and perform such other
acts as are proper to conduct the election and voting at the meeting.
Each report of an inspector shall be in writing and signed by him or by
a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall
be the report of the inspectors. The report of the inspector or inspectors
on the number of shares represented at the meeting and the results of the
voting shall be PRIMA FACIE evidence thereof.
Section 2.14 REPORTS TO SHAREHOLDERS. The Trustees shall submit to the
shareholders at or before the annual meeting of shareholders a report of the
business and operations of the Trust during such fiscal year containing
financial statements of the Trust, accompanied by the report of an
independent certified public accountant, and such further information as the
Trustees may determine is required pursuant to any law or regulation to which
the Trust is subject. Within the earlier of twenty (20) days after the
annual meeting of shareholders or 120 days after the end of the fiscal year
of the Trust, the Trustees shall place the annual report on file at the
principal office of the Trust and with any governmental agencies as may be
required by law and as the Trustees may deem appropriate.
Section 2.15 NOMINATIONS AND PROPOSALS BY SHAREHOLDERS.
Section 2.15.1 ANNUAL MEETINGS OF SHAREHOLDERS. (a) Nominations
of persons for election to the Board of Trustees and the proposal of business
to be considered by the shareholders may be made at an annual meeting of
shareholders (i) pursuant to the Trust's notice of meeting, (ii) by or at the
direction of the Trustees or (iii) by any shareholder of the Trust who was a
shareholder of record both at the time of giving of notice provided for in
this Section 2.15.1 and at the time of the annual meeting, who is entitled to
vote at the meeting and who complied with the notice procedures set forth in
this Section 2.15.1.
(b) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to Section 2.15.1(a)(iii),
the shareholder must have given timely notice thereof in writing to the
secretary of the Trust at the principal executive offices of the Trust
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and such other business must otherwise be a proper matter for action by
shareholders as determined by the Board of Trustees. To be timely, a
shareholder's notice shall be delivered to the secretary at the principal
executive offices of the Trust not later than the close of business on the
90th day nor earlier than the close of business on the 120th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more
than thirty (30) days or delayed by more than sixty (60) days from such
anniversary date or if the Trust has not previously held an annual meeting,
notice by the shareholder to be timely must be so delivered not earlier than
the close of business on the 120th day prior to such annual meeting and not
later than the close of business on the later of: (i) the 90th day prior to
such annual meeting, or (ii) the 10th day following the day on which public
announcement of the date of such meeting is first made by the Trust. In no
event shall the public announcement of a postponement or adjournment of an
annual meeting to a later date or time commence a new time period for the
giving of a shareholder's notice as described above. A shareholder's notice
shall set forth (i) as to each person whom the shareholder proposes to
nominate for election or reelection as a Trustee, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Trustees in an election contest, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as
a Trustee if elected; (ii) as to any other business that the shareholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
shareholder and of the beneficial owner, if any, on whose behalf the proposal
is made; and (iii) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (x) the
name and address of such shareholder, as they appear on the Trust's books,
and of such beneficial owner and (y) the number of each class of shares of
the Trust which are owned beneficially and of record by such shareholder and
such beneficial owner.
(c) Notwithstanding anything in the second sentence of Section
2.15.1(b) to the contrary, in the event that the number of Trustees to be
elected to the Board of Trustees is increased and there is no public
announcement by the Trust naming all of the nominees for Trustee or
specifying the size of the increased Board of Trustees at least one hundred
(100) days prior to the first anniversary of the preceding year's annual
meeting, a shareholder's notice required by this Section 2.15.1 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the secretary at the
principal executive offices of the Trust not later than the close of business
on the 10th day following the day on which such public announcement is first
made by the Trust.
Section 2.15.2 SPECIAL MEETINGS OF SHAREHOLDERS. Only such
business shall be conducted at a special meeting of shareholders as shall
have been brought before the meeting pursuant to the Trust's notice of
meeting. Nominations of persons for election to the Board of Trustees may be
made at a special meeting of shareholders at which Trustees are to be elected
(i) pursuant to the Trust's notice of meeting, (ii) by or at the direction of
the Board of Trustees or (iii), provided that the Board of Trustees has
determined that Trustees shall be elected at such special meeting, by any
shareholder of the Trust who was a shareholder of record both at the time of
giving
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of notice provided for in this Section 2.15.2 and at the time of the special
meeting, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 2.15.2. In the event the Trust
calls a special meeting of shareholders for the purpose of electing one or
more Trustees to the Board of Trustees, any such shareholder may nominate a
person or persons (as the case may be) for election to such position as
specified in the Trust's notice of meeting, if the shareholder's notice
containing the information required by Section 2.15.1(b) shall be delivered
to the secretary at the principal executive offices of the Trust not earlier
than the close of business on the 120th day prior to such special meeting and
not later than the close of business on the later of: (i) the 90th day prior
to such special meeting, or (ii) the 10th day following the day on which
public announcement is first made of the date of the special meeting and of
the nominees proposed by the Trustees to be elected at such meeting. In no
event shall the public announcement of a postponement or adjournment of a
special meeting to a later date or time commence a new time period for the
giving of a shareholder's notice as described above.
Section 2.15.3 GENERAL. (1) Only such persons who are nominated
in accordance with the procedures set forth in this Section 2.15 shall be
eligible to serve as Trustees and only such business shall be conducted at a
meeting of shareholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 2.15. The chairman
of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made
or proposed, as the case may be, in accordance with the procedures set forth
in this Section 2.15 and, if any proposed nomination or business is not in
compliance with this Section 2.15, to declare that such nomination or
proposal shall be disregarded.
(2) For purposes of this Section 2.15, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed
by the Trust with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 2.15,
a shareholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with respect
to the matters set forth in this Section 2.15. Nothing in this Section 2.15
shall be deemed to affect any right of a shareholder to request inclusion of
a proposal in, nor the right of the Trust to omit a proposal from, the
Trust's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2.16 NO SHAREHOLDER ACTIONS BY WRITTEN CONSENT. Shareholders
shall not be authorized or permitted to take any action required or permitted
to be taken at a meeting of shareholders by written consent, and may take
such action only at an annual or special meeting as provided by Maryland law
and the Declaration of Trust and hereby.
Section 2.17 VOTING BY BALLOT. Voting on any question or in any
election may be VIVA VOCE unless the chairman of the meeting officer shall
order or any shareholder shall demand that voting be by ballot.
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ARTICLE III
TRUSTEES
Section 3.1 GENERAL POWERS; QUALIFICATIONS; TRUSTEES HOLDING OVER. The
business and affairs of the Trust shall be managed under the direction of its
Board of Trustees. A Trustee shall be an individual at least twenty-one (21)
years of age who is not under legal disability. In case of failure to elect
Trustees at an annual meeting of the shareholders, the Trustees holding over
shall continue to direct the management of the business and affairs of the
Trust until their successors are elected and qualify.
Section 3.2 INDEPENDENT TRUSTEES. A majority of the Trustees holding
office shall at all times be Independent Trustees (as defined below);
PROVIDED, HOWEVER, that upon a failure to comply with this requirement as a
result of the creation of a temporary vacancy which must be filled by an
Independent Trustee, whether as a result of enlargement of the Board of
Trustees or the resignation, removal or death of a Trustee who is an
Independent Trustee, such requirement shall not be applicable. An
Independent Trustee is one who is not an employee of the Trust's investment
advisor (as defined in Article XIII), and who is not involved in the Trust's
day-to-day activities.
Section 3.3 MANAGING TRUSTEES. Any Trustee who is not an Independent
Trustee may be designated a Managing Trustee by the Board of Trustees.
Section 3.4 NUMBER. At any regular meeting or at any special meeting
called for that purpose, a majority of the entire Board of Trustees may
establish, increase or decrease the number of Trustees.
Section 3.5 ANNUAL AND REGULAR MEETINGS. An annual meeting of the
Trustees shall be held immediately after and at the same place as the annual
meeting of shareholders, no notice other than this Bylaw being necessary.
The time and place of the annual meeting of the Trustees may be changed by
the Board of Trustees. The Trustees may provide, by resolution, the time and
place, either within or without the State of Maryland, for the holding of
regular meetings of the Trustees without other notice than such resolution.
Section 3.6 SPECIAL MEETINGS. Special meetings of the Trustees may be
called at any time by the chairman of the board, any Managing Trustee or the
president and shall be called by request of any two (2) Trustees then in
office. The person or persons authorized to call special meetings of the
Trustees may fix any place, either within or without the State of Maryland,
as the place for holding any special meeting of the Trustees called by them.
Section 3.7 NOTICE. Notice of any special meeting shall be given by
written notice delivered personally, telegraphed, facsimile-transmitted or
mailed to each Trustee at his business or residence address. Personally
delivered or telegraphed notices shall be given at least twenty-four (24)
hours prior to the meeting. Notice by mail shall be deposited in the U.S.
mail in the place in which the principal office of the Trust is located at
least seventy-two (72) hours prior to the
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meeting. Telephone or facsimile-transmission notice shall be given at least
forty-eight (48) hours prior to the meeting. If mailed, such notice shall be
deemed to be given when deposited in the U.S. mail properly addressed, with
postage thereon prepaid. If given by telegram, such notice shall be deemed
to be given when the telegram is delivered to the telegraph company.
Telephone notice shall be deemed given when the Trustee is personally given
such notice in a telephone call to which he is a party.
Facsimile-transmission notice shall be deemed given upon completion of the
transmission of the message to the number given to the Trust by the Trustee
and receipt of a completed answer-back indicating receipt. Neither the
business to be transacted at, nor the purpose of, any annual, regular or
special meeting of the Trustees need be stated in the notice, unless
specifically required by statute or these Bylaws.
Section 3.8 QUORUM. A majority of the Trustees shall constitute a
quorum for transaction of business at any meeting of the Trustees, provided
that, if less than a majority of such Trustees are present at a meeting, a
majority of the Trustees present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to the
Declaration of Trust or these Bylaws, the vote of a majority of a particular
group of Trustees is required for action, a quorum must also include a
majority of such group.
The Trustees present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough Trustees to leave less than a quorum.
Section 3.9 VOTING. The action of the majority of the Trustees present
at a meeting at which a quorum is present shall be the action of the
Trustees, unless the concurrence of a greater proportion is required for such
action by specific provision of an applicable statute, the Declaration of
Trust or these Bylaws.
Section 3.10 TELEPHONE MEETINGS. Trustees may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person
at the meeting. Such meeting shall be deemed to have been held at a place
designated by the Trustees at the meeting.
Section 3.11 INFORMAL ACTION BY TRUSTEES. Unless specifically
otherwise provided in the Declaration of Trust, any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting, if a majority of the Trustees shall individually or collectively
consent in writing to such action. Such written consent or consents shall be
filed with the records of the Trust and shall have the same force and effect
as the affirmative vote of such Trustees at a duly held meeting of the
Trustees at which a quorum was present.
Section 3.12 WAVIER OF NOTICE. The actions taken at any meeting of the
Trustees, however called and noticed or wherever held, shall be as valid as
though taken at a meeting duly held after regular call and notice if a quorum
is present and if, either before or after the meeting, each of the Trustees
not present signs a written waiver of notice, a consent to the holding of
such meeting or
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an approval of the minutes thereof. All such waivers, consents or approvals
shall be lodged with the Trust records or made a part of the minutes of the
meeting.
Section 3.13 VACANCIES: GROUPS. If for any reason any or all the
Trustees cease to be Trustees, such event shall not terminate the Trust or
affect these Bylaws or the powers of the remaining Trustees hereunder (even
if fewer than three (3) Trustees remain). Any vacancy shall be filled, at
any regular meeting or at any special meeting called for that purpose, by a
majority of the remaining Trustees, except that a vacancy resulting from an
increase in the number of Trustees shall be filled by a majority of the
entire Board of Trustees. Any individual so elected as Trustee shall hold
office for the unexpired term of the Trustee he is replacing. The term of a
trustee elected to fill a newly created position shall be set by the Board of
Trustees at the time the position is created by designating the new position
as Group I, Group II or Group III as set forth in the Declaration of Trust.
Section 3.14 COMPENSATION; FINANCIAL ASSISTANCE.
Section 3.14.1 COMPENSATION. The Trustees shall be entitled to
receive such reasonable compensation for their services as Trustees as the
Trustees may determine from time to time. Trustees may be reimbursed for
expenses of attendance, if any, at each annual, regular or special meeting of
the Trustees or of any committee thereof; and for their expenses, if any, in
connection with each property visit and any other service or activity
performed or engaged in as Trustee. The Trustees shall be entitled to
receive remuneration for services rendered to the Trust in any other
capacity, and such services may include, without limitation, services as an
officer of
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the Trust, services as an employee of the Advisor (as defined in Article
XIII), legal, accounting or other professional services, or services as a
broker, transfer agent or underwriter, whether performed by a Trustee or any
person affiliated with a Trustee.
Section 3.14.2 FINANCIAL ASSISTANCE TO TRUSTEES. The Trust may
lend money to, guarantee an obligation of or otherwise assist a Trustee or a
trustee of its direct or indirect subsidiary. The loan, guarantee or other
assistance may be with or without interest, unsecured, or secured in any
manner that the Board of Trustees approves, including a pledge of shares.
Section 3.15 REMOVAL OF TRUSTEES. The shareholders may, at any time,
remove any Trustee in the manner provided in the Declaration of Trust.
Section 3.16 LOSS OF DEPOSITS. No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings
and loan association, or other institution with whom moneys or shares have
been deposited.
Section 3.17 SURETY BONDS. Unless specifically required by law, no
Trustee shall be obligated to give any bond or surety or other security for
the performance of any of his duties.
Section 3.18 RELIANCE. Each Trustee, officer, employee and agent of
the Trust shall, in the performance of his duties with respect to the Trust,
be fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel or upon reports made to the Trust by any of
its officers or employees or by the Advisor (as defined in Article XIII),
accountants, appraisers or other experts or consultants selected by the
Trustees or officers of the Trust, regardless of whether such counsel or
expert may also be a Trustee.
Section 3.19 INTERESTED TRUSTEE TRANSACTIONS. Section 2-419 of the
Maryland General Corporation Law (the "MGCL") shall be available for and
apply to any contract or other transaction between the Trust and any of its
Trustees or between the Trust and any other trust, corporation, firm or other
entity in which any of its Trustees is a trustee or director or has a
material financial interest.
Section 3.20 QUALIFYING SHARES NOT REQUIRED. Trustees need not be
shareholders of the Trust.
Section 3.21 CERTAIN RIGHTS OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. The Trustees shall have no responsibility to devote their full time
to the affairs of the Trust. Any Trustee or officer, employee or agent of
the Trust, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar or in addition to those
of or relating to the Trust.
Section 3.22 CERTAIN TRANSACTIONS. Notwithstanding any other provision
in the Bylaws, no determination shall be made by the Trustees nor shall any
transaction be entered into by the Trust which would cause any shares or
other beneficial interest in the Trust not to constitute "transferable
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shares" or "transferable certificates of beneficial interest" under Section
856(a)(2) of the Internal Revenue Code of 1986, as amended (the "Code") or
which would cause any distribution to constitute a preferential dividend as
described in Section 562(c) of the Code.
ARTICLE IV
COMMITTEES
Section 4.1 NUMBER; TENURE AND QUALIFICATIONS. The Board of Trustees
may appoint from among its members an audit committee and other committees,
composed of one (1) or more Trustees, to serve at the pleasure of the Board
of Trustees.
Section 4.2 POWERS. The Trustees may delegate to committees appointed
under Section 4.1 any of the powers of the Trustees, except as prohibited by
law.
Section 4.3 MEETINGS. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint another Trustee to act in the place of such
absent member. Notice of committee meetings shall be given in the same manner
as notice for special meetings of the Board of Trustees.
One-third, but not less than one, of the members of any committee shall
be present in person at any meeting of such committee in order to constitute
a quorum for the transaction of business at such meeting, and the act of a
majority present at a meeting at the time of such vote if a quorum is then
present shall be the act of such committee. The Board of Trustees may
designate a chairman of any committee, and such chairman or any two members
of any committee may fix the time and place of its meetings unless the Board
shall otherwise provide. In the absence or disqualification of any member of
any such committee, the members thereof present at any meeting and not
disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another Trustee to act at the meeting in the place of
such absent or disqualified members.
Each committee shall keep minutes of its proceedings and shall report
the same to the Board of Trustees at the next succeeding meeting, and any
action by the committee shall be subject to revision and alteration by the
Board of Trustees, provided that no rights of third persons shall be affected
by any such revision or alteration.
Section 4.4 TELEPHONE MEETINGS. Members of a committee of the Trustees
may participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
Section 4.5 INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Trustees may be
taken without a meeting, if a consent in writing to such action is signed by
each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
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Section 4.6 VACANCIES. Subject to the provisions hereof, the Board of
Trustees shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace
any absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
Section 5.1 GENERAL PROVISIONS. The officers of the Trust shall
include a president, a secretary and a treasurer and may include a chairman
of the board, a vice chairman of the board, a chief executive officer, a
chief operating officer, a chief financial officer, one or more vice
presidents, one or more assistant secretaries and one or more assistant
treasurers. In addition, the Trustees may from time to time appoint such
other officers with such powers and duties as they shall deem necessary or
desirable. The officers of the Trust shall be elected annually by the
Trustees at the first meeting of the Trustees held after each annual meeting
of shareholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as may be convenient.
Each officer shall hold office until his successor is elected and qualifies
or until his death, resignation or removal in the manner hereinafter
provided. Any two or more offices except president and vice president may be
held by the same person. In their discretion, the Trustees may leave
unfilled any office except that of president and secretary. Election of an
officer or agent shall not of itself create contract rights between the Trust
and such officer or agent.
Section 5.2 REMOVAL AND RESIGNATION. Any officer or agent of the Trust
may be removed by the Trustees if in their judgment the best interests of the
Trust would be served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Any officer of the
Trust may resign at any time by giving written notice of his resignation to
the Trustees, the chairman of the board, the president or the secretary. Any
resignation shall take effect at any time subsequent to the time specified
therein or, if the time when it shall become effective is not specified
therein, immediately upon its receipt. The acceptance of a resignation shall
not be necessary to make it effective unless otherwise stated in the
resignation. Such resignation shall be without prejudice to the contract
rights, if any, of the Trust.
Section 5.3 VACANCIES. A vacancy in any office may be filled by the
Trustees for the balance of the term.
Section 5.4 CHIEF EXECUTIVE OFFICER. The Trustees may designate a
chief executive officer from among the elected officers. The chief executive
officer shall have responsibility for implementation of the policies of the
Trust, as determined by the Trustees, and for the administration of the
business affairs of the Trust. In the absence of both the chairman and vice
chairman of the board, the chief executive officer shall preside over the
meetings of the Trustees at which he shall be present. The Managing
Trustees, or either of them, may be designated to function as the chief
executive officer of the Trust.
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Section 5.5 CHIEF OPERATING OFFICER. The Trustees may designate a
chief operating officer from among the elected officers. Said officer will
have the responsibilities and duties as set forth by the Trustees or the
chief executive officer.
Section 5.6 CHIEF FINANCIAL OFFICER. The Trustees may designate a
chief financial officer from among the elected officers. Said officer will
have the responsibilities and duties as set forth by the Trustees or the
chief executive officer.
Section 5.7 CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The chairman of
the board shall preside over the meetings of the Trustees and of the
shareholders at which he shall be present and shall in general oversee all of
the business and affairs of the Trust. In the absence of the chairman of the
board, the vice chairman of the board shall preside at such meetings at which
he shall be present. The chairman and the vice chairman of the board may
execute any deed, mortgage, bond, contract or other instrument, except in
cases where the execution thereof shall be expressly delegated by the
Trustees or by these Bylaws to some other officer or agent of the Trust or
shall be required by law to be otherwise executed. The chairman of the board
and the vice chairman of the board shall perform such other duties as may be
assigned to him or them by the Trustees. In the absence of a chairman and
vice chairman or none is appointed, the Managing Trustees, or either of them,
shall act as chairman.
Section 5.8 PRESIDENT. The president shall preside over the meetings
of the shareholders at which he shall be present. The president may execute
any deed, mortgage, bond, contract or other instrument, except in cases where
the execution thereof shall be expressly delegated by the Trustees or by
these Bylaws to some other officer or agent of the Trust or shall be required
by law to be otherwise executed; and in general shall perform all duties
incident to the office of president and such other duties as may be
prescribed by the Trustees from time to time.
Section 5.9 VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there
be more than one vice president, the vice presidents in the order designated
at the time of their election or, in the absence of any designation, then in
the order of their election) shall perform the duties of the president and
when so acting shall have all the powers of and be subject to all the
restrictions upon the president; and shall perform such other duties as from
time to time may be assigned to him by the president or by the Trustees. The
Trustees may designate one or more vice presidents as executive vice
president, senior vice president or as vice president for particular areas of
responsibility.
Section 5.10 SECRETARY. The secretary shall (a) keep the minutes of
the proceedings of the shareholders, the Trustees and committees of the
Trustees in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the trust records and of the seal of
the Trust; (d) keep a register of the post office address of each shareholder
which shall be furnished to the secretary by such shareholder; (e) maintain
at the principal office of the Trust a share register, showing the ownership
and transfers of ownership of all shares of the Trust, unless a transfer
agent is employed to maintain and does maintain such a share register; and
(f) in general perform such other duties
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as from time to time may be assigned to him by the chief executive officer,
the president or by the Trustees.
Section 5.11 TREASURER. The treasurer shall have the custody of the
funds and securities of the Trust and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Trust and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Trust in such depositories as may be designated by the Trustees.
He shall disburse the funds of the Trust as may be ordered by the
Trustees, taking proper vouchers for such disbursements, and shall render to
the president and Trustees, at the regular meetings of the Trustees or
whenever they may require it, an account of all his transactions as treasurer
and of the financial condition of the Trust.
Section 5.12 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform
such duties as shall be assigned to them by the secretary or treasurer,
respectively, or by the president or the Trustees. The assistant treasurers
shall, if required by the Trustees, give bonds for the faithful performance
of their duties in such sums and with such surety or sureties as shall be
satisfactory to the Trustees.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 6.1 CONTRACTS. The Trustees may authorize any officer or agent
to enter into any contract or to execute and deliver any instrument in the
name of and on behalf of the Trust and such authority may be general or
confined to specific instances. Any agreement, deed, mortgage, lease or
other document executed by one or more of the Trustees or by an authorized
person shall be valid and binding upon the Trustees and upon the Trust when
authorized or ratified by action of the Trustees.
Section 6.2 CHECKS AND DRAFTS. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Trust shall be signed by such officer or agent of the Trust in
such manner as shall from time to time be determined by the Treasurer or by
the Trustees.
Section 6.3 DEPOSITS. All funds of the Trust not otherwise employed
shall be deposited from time to time to the credit of the Trust in such
banks, trust companies or other depositories as the Treasurer or the Trustees
may designate.
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ARTICLE VII
SHARES
Section 7.1 CERTIFICATES. Ownership of shares shall be evidenced by
certificates. Each shareholder shall be entitled to a certificate or
certificates, in such form as the Trustees shall from time to time approve,
which shall represent and certify the number of shares of each class of
beneficial interests held by him in the Trust. Unless otherwise determined
by the Trustees, such certificates shall be signed by the chief executive
officer, the president or a vice president and countersigned by the secretary
or an assistant secretary or the treasurer or an assistant treasurer and may
be sealed with the seal, if any, of the Trust. The signatures may be either
manual or facsimile. Certificates shall be consecutively numbered; and if
the Trust shall from time to time issue several classes of shares, each class
may have its own number series. A certificate is valid and may be issued
whether or not an officer who signed it is still an officer when it is
issued. There shall be filed with each transfer agent a copy of the form of
certificate as approved by the Trustees, certified by the chairman, president
or secretary, and such form shall continue to be used unless and until the
Trustees approve some other form. Each certificate representing shares which
are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion
of the assets upon liquidation or which are redeemable at the option of the
Trust, shall have a statement of such restriction, limitation, preference or
redemption provision, or a summary thereof, plainly stated on the
certificate. In lieu of such statement or summary, the Trust may set forth
upon the face or back of the certificate a statement that the Trust will
furnish to any shareholder, upon request and without charge, a full statement
of such information.
Section 7.2 TRANSFERS. Certificates shall be treated as negotiable and
title thereto and to the shares they represent shall be transferred by
delivery thereof to the same extent as those of a Maryland stock corporation.
Upon surrender to the Trust or the transfer agent of the Trust of a share
certificate duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, the Trust shall issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
The Trust shall be entitled to treat the holder of record of any share
or shares as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the
State of Maryland.
Notwithstanding the foregoing, transfers of shares of beneficial
interest of the Trust will be subject in all respects to the Declaration of
Trust and all of the terms and conditions contained therein.
Section 7.3 REPLACEMENT CERTIFICATE. Any officer designated by the
Trustees may direct a new certificate to be issued in place of any
certificate previously issued by the Trust alleged to have been lost, stolen
or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing
the issuance of a new certificate, an officer designated by the Trustees may,
in his discretion and as a condition precedent
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to the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or the owner's legal representative to advertise the same in such
manner as he shall require and/or to give bond, with sufficient surety, to
the Trust to indemnify it against any loss or claim which may arise as a
result of the issuance of a new certificate.
Section 7.4 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Trustees may set, in advance, a record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders
or determining shareholders entitled to receive payment of any dividend or
the allotment of any other rights, or in order to make a determination of
shareholders for any other proper purpose.
In lieu of fixing a record date, the Trustees may provide that the share
transfer books shall be closed for a stated period but not longer than twenty
(20) days. If the share transfer books are closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days before
the date of such meeting.
If no record date is fixed and the share transfer books are not closed
for the determination of shareholders, (a) the record date for the
determination of shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the day on which the
notice of meeting is mailed or the 30th day before the meeting, whichever is
the closer date to the meeting; and (b) the record date for the determination
of shareholders entitled to receive payment of a dividend or an allotment of
any other rights shall be the close of business on the day on which the
resolution of the Trustees, declaring the dividend or allotment of rights, is
adopted.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof.
Section 7.5 SHARE LEDGER. The Trust shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, a
share ledger containing the name and address of each shareholder and the
number of shares of each class held by such shareholder.
Section 7.6 FRACTIONAL SHARES; ISSUANCE OF UNITS. The Trustees may
issue fractional shares or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any
other provision of the Declaration of Trust or these Bylaws, the Trustees may
issue units consisting of different securities of the Trust. Any security
issued in a unit shall have the same characteristics as any identical
securities issued by the Trust, except that the Trustees may provide that for
a specified period securities of the Trust issued in such unit may be
transferred on the books of the Trust only in such unit.
ARTICLE VIII
FISCAL YEAR
The Fiscal year of the Trust shall be the calendar year.
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ARTICLE IX
DISTRIBUTIONS
Section 9.1 AUTHORIZATION. Dividends and other distributions upon the
shares of beneficial interest of the Trust may be authorized and declared by
the Trustees, subject to the provisions of law and the Declaration of Trust.
Dividends and other distributions may be paid in cash, property or shares of
the Trust, subject to the provisions of law and the Declaration of Trust.
Section 9.2 CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any funds of the Trust available
for dividends or other distributions such sum or sums as the Trustees may
from time to time, in their absolute discretion, think proper as a reserve
fund for contingencies or for any other purpose as the Trustees shall
determine to be in the best interest of the Trust, and the Trustees may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
SEAL
Section 10.1 SEAL. The Trustees may authorize the adoption of a seal
by the Trust. The seal shall have inscribed thereon the name of the Trust
and the year of its formation. The Trustees may authorize one or more
duplicate seals and provide for the custody thereof.
Section 10.2 AFFIXING SEAL. Whenever the Trust is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the
word "(SEAL)" adjacent to the signature of the person authorized to execute
the document on behalf of the Trust.
ARTICLE XI
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Trust shall indemnify (a) any Trustee, officer or shareholder or
any former Trustee, officer or shareholder (including among the foregoing,
for all purposes of this Article XI and without limitation, any individual
who, while a Trustee, officer or shareholder and at the express request of
the Trust, serves or has served another real estate investment trust,
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a director, officer, shareholder, partner or trustee of
such real estate investment trust, corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise) who has been successful, on
the merits or otherwise, in the defense of a proceeding to which he was made
a party by reason of service in such capacity, against reasonable expenses
incurred by him in connection with the proceeding, (b) any Trustee or officer
or any former Trustee or officer against any claim or liability to which he
may become liable or subject by reason of such status or actions in such
capacity and (c) each shareholder or former
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shareholder against any claim or liability to which he may become subject by
reason of such status. In addition, the Trust shall, without requiring a
preliminary determination of the ultimate entitlement to indemnification, pay
or reimburse, in advance of final disposition of a proceeding, reasonable
expenses incurred by a Trustee, officer or shareholder or former Trustee,
officer or shareholder made a party to a proceeding by reason such status,
provided that, in the case of a Trustee or officer, the Trust shall have
received (i) a written affirmation by the Trustee or officer of his good
faith belief that he has met the applicable standard of conduct necessary for
indemnification by the Trust as authorized by Maryland law and (ii) a written
undertaking by him or on his behalf to repay the amount paid or reimbursed by
the Trust if it shall ultimately be determined that the applicable standard
of conduct was not met. The Trust may, with the approval of its Trustees,
provide such indemnification or payment or reimbursement of expenses to any
Trustee, officer or shareholder or any former Trustee, officer or shareholder
who served a predecessor of the Trust and to any employee or agent of the
Trust or a predecessor of the Trust. Neither the amendment nor repeal of
this Article, nor the adoption or amendment of any other provision of the
Declaration of Trust or these Bylaws inconsistent with this Article, shall
apply to or affect in any respect the applicability of this Article with
respect to any act or failure to act which occurred prior to such amendment,
repeal or adoption.
Any indemnification or payment or reimbursement of the expenses
permitted by these Bylaws shall be furnished in accordance with the
procedures provided for indemnification or payment or reimbursement of
expenses, as the case may be, under Section 2-418 of the MGCL for directors
of Maryland corporations. The Trust may provide to Trustees, officers and
shareholders such other and further indemnification or payment or
reimbursement of expenses, as the case may be, to the fullest extent
permitted by the MGCL, as in effect from time to time, for directors of
Maryland corporations.
ARTICLE XII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the Declaration
of Trust or Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any
meeting shall constitute a waiver of notice of such meeting, except where
such person attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
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ARTICLE XIII
THE ADVISOR
Section 13.1 EMPLOYMENT OF ADVISOR. The Trustees are not and shall not
be required personally to conduct the business of the Trust, and the Trustees
shall have the power to appoint, employ or contract with any person
(including one or more of themselves or any corporation, partnership, or
trust in which one or more of them may be Trustees, officers, stockholders,
partners or trustees) as the Trustees may deem necessary or proper for the
transaction of the business of the Trust. The Trustees may therefore employ
or contract with such person (herein referred to as the "Advisor") and may
grant or delegate such authority to the Advisor as the Trustees may in their
sole discretion deem necessary or desirable without regard to whether such
authority is normally granted or delegated by boards of trustees or boards of
directors of business corporations. The Advisor shall be required to use its
best efforts to supervise the operation of the Trust in a manner consistent
with the investment policies and objectives of the Trust as established from
time to time by the Trustees.
The Trustees shall have the power to determine the terms and
compensation of the Advisor or any other person whom it may cause the Trust
to employ or with whom it may cause the Trust to contract for advisory
services. The Trustees may exercise broad discretion in allowing the Advisor
to administer and regulate the operations of the Trust, to act as agent for
the Trust, to execute documents on behalf of the Trustees and to make
executive decisions which conform to general policies and general principles
previously established by the Trustees.
Section 13.2 OTHER ACTIVITIES OF ADVISOR. The Advisor shall not be
required to administer the Trust as its sole and exclusive function and may
have other business interests and may engage in other activities similar or
in addition to those relating to the Trust, including the rendering of advice
or services of any kind to other investors or any other persons (including
other real estate investment trusts) and the management of other investments.
The Trustees may request the Advisor to engage in certain other activities
which complement the Trust's investments, and the Advisor may receive
compensation or commissions therefor from the Trust or other persons.
Neither the Advisor nor any affiliate of the Advisor shall be obligated
to present any particular investment opportunities to the Trust, even if such
opportunities are of a character such that, if presented to the Trust, they
could be taken by the Trust, and, subject to the foregoing, each of them
shall be protected in taking for its own account or recommending to others
any such particular investment opportunity.
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Section 13.3 ADVISOR COMPENSATION. The Trustees, including a majority of
the Independent Trustees, shall at least annually review generally the
performance of the Advisor in order to determine whether the compensation which
the Trust has contracted to pay to the Advisor is reasonable in relation to the
nature and quality of services performed and whether the provisions of the
advisory contract with the Advisor are being carried out. Each such
determination shall be based on such of the following and other factors as the
Trustees (including the Independent Trustees) deem appropriate:
(a) the size of the advisory fee in relation to the size, composition
and profitability of the portfolio of the Trust;
(b) the success of the Advisor in generating opportunities that meet
the investment objectives of the Trust;
(c) the rates charged to other real estate investment trusts and to
investors other than real estate investment trusts by advisors performing
similar services;
(d) the quality and extent of service and advice furnished by the
Advisor; and
(e) the performance of the investment portfolio of the Trust,
including income, conservation or appreciation of capital, frequency of problem
investments and competence in dealing with distress situations.
ARTICLE XIV
AMENDMENT OF BYLAWS
Except for any change for which the Declaration or these Bylaws require
approval by more than a majority vote of the Trustees, these Bylaws may be
amended or repealed or new or additional Bylaws may be adopted only by the
vote or written consent of a majority of the Trustees.
ARTICLE XV
MISCELLANEOUS
Section 15.1 REFERENCES TO DECLARATION OF TRUST. All references to the
Declaration of Trust shall include any amendments thereto.
Section 15.2 INSPECTION OF BYLAWS. The Trustees shall keep at the
principal office for the transaction of business of the Trust the original or a
cop ty of the Bylaws as amended or otherwise altered to date, certified by the
Secretary, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
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U.S. $350,000,000
REVOLVING LOAN AGREEMENT
among
SENIOR HOUSING PROPERTIES TRUST
(Borrower)
DRESDNER BANK AG
(Administrative Agent and Lender)
THE OTHER LENDERS PARTY HERETO
SPTMRT PROPERTIES TRUST
(Guarantor)
and
SPTBROOK PROPERTIES TRUST
(Guarantor)
Dated as of September 15, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
SECTION 1.
DEFINITIONS
<S> <C> <C>
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.
AMOUNT AND TERMS OF REVOLVING LOANS
2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2 Notes; Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.3 Advance of Initial Loan; Procedure for Borrowings . . . . . . . . . . . . . 26
2.4 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.5 Duration of Interest Period; Notice of Continuation/Conversion. . . . . . . 29
2.6 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.7 Termination or Reduction of Commitment. . . . . . . . . . . . . . . . . . . 31
2.8 Optional Prepayments; Mandatory Prepayments . . . . . . . . . . . . . . . . 31
2.9 Computation of Interest and Fees. . . . . . . . . . . . . . . . . . . . . . 33
2.10 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.11 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.12 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.13 Change in Law Rendering Eurodollar Tranches or Alternate Rate
Tranches Unlawful; Failure to Give Notice of Continuation . . . . . . . . . 39
2.14 Eurodollar Availability . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.15 Compensation and Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.
SECURITY
3.1 Mortgages; Environmental Agreement; Title Insurance . . . . . . . . . . . . 43
3.2 Assignments of Leases, Rents and Lease Guaranties . . . . . . . . . . . . . 43
3.3 Share Pledge Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.4 Financing Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.5 Additional Subsidiary Guaranties . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.
CONDITIONS PRECEDENT
4.1 Required Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.2 Up Front Compensation and Expenses. . . . . . . . . . . . . . . . . . . . . 48
4.3 Additional Conditions Precedent to Initial Loan . . . . . . . . . . . . . . 48
i
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<CAPTION>
SECTION PAGE
<S> <C> <C>
4.4 Conditions Precedent to Loans . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.
REPRESENTATIONS AND WARRANTIES OF BORROWER AND GUARANTOR
5.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.2 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . 50
5.3 Existence; Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . 50
5.4 Tenants, Credit Support Obligors, Advisor, Compliance with Laws . . . . . . 50
5.5 Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . 51
5.6 No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.7 No Material Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.8 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.9 Properties; Leases; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.10 No Burdensome Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . 56
5.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.12 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.13 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.15 Status as REIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.16 Restrictions on Incurring Indebtedness. . . . . . . . . . . . . . . . . . . 57
5.17 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.18 Compliance with Environmental Laws. . . . . . . . . . . . . . . . . . . . . 58
5.19 Pollution; Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . 58
5.20 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.21 Declaration of Trust, By-Laws; Advisory Agreement . . . . . . . . . . . . . 59
5.22 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.23 Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.24 Offering, Etc., of Securities . . . . . . . . . . . . . . . . . . . . . . . 60
5.25 Review of Year 2000 Issue . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.26 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.
AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTORS
6.1 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . 61
6.3 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.4 Conduct of Business; Maintenance of Existence; Compliance
with Contracts and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.5 Leases, Mortgage Interests, Credit Support Agreements . . . . . . . . . . . 63
6.6 No Change in Properties; Maintenance of Properties; Insurance . . . . . . . 64
6.7 Inspection of Properties; Books and Records; Discussions. . . . . . . . . . 64
6.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ii
<PAGE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
6.9 Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.10 Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.11 REIT Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.13 Changes in GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.14 Hedging Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.15 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.16 Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.17 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.
NEGATIVE COVENANTS OF BORROWER AND GUARANTORS
7.1 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.2 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
7.3 Merger, Sale of Assets, Etc.; Sale of Properties; Other Actions . . . . . . 69
7.4 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . 70
7.5 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.6 Accounting Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.7 Change in Nature of Business. . . . . . . . . . . . . . . . . . . . . . . . 71
7.8 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.9 No Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.10 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.11 Chief Executive Office. . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.12 Amendment of Declaration of Trust; Amendment and
Waiver of Leases and Lease Guaranties . . . . . . . . . . . . . . . . . . . 71
SECTION 8.
EVENTS OF DEFAULT
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
8.2 Annulment of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.3 Cooperation by Borrower and Guarantor . . . . . . . . . . . . . . . . . . . 75
SECTION 9.
LOAN AGENTS
9.1 Appointment of Administrative Agent; Loan Agents. . . . . . . . . . . . . . 75
SECTION 10.
SPTMRT AND SPTBROOK GUARANTY
10.1 Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
iii
<PAGE>
SECTION 11.
GENERAL
11.1 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
11.2 Submission to Jurisdiction; Waiver of Jury Trial, etc . . . . . . . . . . . 83
11.3 Notices; Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . 85
11.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.5 Syndication Contingency . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.6 No Waivers; Cumulative Remedies; Entire Agreement;
Headings; Counterparts; Severability. . . . . . . . . . . . . . . . . . . . 89
11.7 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.8 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.9 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . 90
11.10 Adjustments; Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
11.12 Nonliability of Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . 93
</TABLE>
EXHIBITS
EXHIBIT A - FORM OF PROMISSORY NOTE
EXHIBIT B - FORM OF NOTICE OF BORROWING
EXHIBIT C - FORM OF NOTICE OF CONTINUATION/CONVERSION
EXHIBIT D - FORM OF ASSIGNMENT AGREEMENT
EXHIBIT E - FORM OF ADDITIONAL SUBSIDIARY GUARANTY
EXHIBIT F - FORM OF SUBORDINATION AGREEMENT
SCHEDULES
Schedule 1 - LENDERS' COMMITMENTS, PRO RATA SHARES
AND LENDING OFFICES
Schedule 2 - DESCRIPTIONS OF MARRIOTT PROPERTIES
Schedule 3 - DESCRIPTIONS OF BROOKDALE PROPERTIES
Schedule 4 - BORROWER'S SUBSIDIARIES
Schedule 5 - PERMITTED EXCEPTIONS
Schedule 6 - NON-CURRENT MORTGAGE INTEREST AGREEMENTS
iv
<PAGE>
REVOLVING LOAN AGREEMENT
This REVOLVING LOAN AGREEMENT dated as of September 15, 1999
(this "Agreement") is made by and among SENIOR HOUSING PROPERTIES TRUST, a
Maryland real estate investment trust ("Borrower"), DRESDNER BANK AG, a
German banking corporation acting through its New York Branch, as
Administrative Agent (the "Administrative Agent"), DRESDNER BANK AG, a German
banking corporation acting through its New York Branch and its Grand Cayman
Branch, as Lender, the other Lenders hereafter becoming parties to this
Agreement by assignment or otherwise (each, together with Dresdner Bank AG
acting in such capacity, a "Lender" and, collectively, "Lenders"), and SPTMRT
PROPERTIES TRUST, a Maryland real estate investment trust ("SPTMRT" and
"Guarantor"), and SPTBROOK PROPERTIES TRUST, a Maryland real estate
investment trust ("SPTBROOK" and "Guarantor").
A. Borrower was organized December 16, 1998 as a wholly-owned
subsidiary of HRPT Properties Trust, a Maryland real estate investment trust
("HRPT"). Concurrently with the execution and delivery of this Agreement,
Borrower is being spun off by HRPT. In anticipation of HRPT's spin-off of
Borrower, HRPT formed other wholly-owned subsidiaries and transferred
properties to them as follows: (i) HRPT formed SPTMRT and transferred 14
properties (nine congregate care properties and five assisted living
properties) that are leased under 14 separate but substantially similar
leases to subsidiaries of Marriott International, Inc. ("Marriott") as more
fully described herein (the "Marriott Properties"), (ii) HRPT formed
SPTBROOK Properties Trust, a Maryland real estate investment trust, and
transferred four congregate care properties master leased to a subsidiary of
Brookdale Living Communities, Inc. ("Brookdale"), (iii) HRPT formed SPTMNR
Properties Trust, a Maryland real estate investment trust, and transferred 24
nursing home properties and two congregate care properties leased to one or
more subsidiaries of Mariner Post-Acute Network, Inc., (iv) HRPT formed
SPTIHS1 Properties Trust and SPTIHS2 Properties Trust, each a Maryland real
estate investment trust, and transferred 27 nursing home properties and three
senior housing properties leased to, and 12 nursing home properties mortgaged
by, one or more subsidiaries of Integrated Health Services, Inc., (v) HRPT
formed SPTSUN I Properties Trust and SPTSUN II Properties Trust, each a
Maryland real estate investment trust, and transferred four nursing home
properties leased to one or more subsidiaries of Sun Healthcare Group, Inc.,
(vi) HRPT formed SPTGEN Properties Trust, a Maryland real estate investment
trust, and transferred a nursing home leased to a subsidiary of Genesis
Health Ventures, Inc., and (vii) HRPT formed SPTMISC Properties Trust, a
Maryland real estate investment trust, and transferred two nursing home
properties leased to other tenants. As part of HRPT's spin-off of Borrower,
(1) HRPT is transferring to Borrower all of HRPT's capital shares of the
above-described subsidiaries (including both Guarantors), (2) HRPT is
distributing approximately one-half of its shares of Borrower to HRPT's
shareholders and is retaining in its portfolio its remaining shares of
Borrower, and (3) Borrower is borrowing $200,000,000 from Lenders under this
Agreement and using the entire proceeds of such borrowing to repay formation
debt owing to HRPT by SPTMRT and Borrower.
B. The Marriott Properties consist of 14 properties (nine
congregate care properties and five assisted living properties) more fully
described in SCHEDULE 2 hereto, of which 10 properties are leased to Marriott
Senior Living Services, Inc. and four are leased to Marriott Continuing Care,
Inc.,
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each a wholly owned subsidiary of Marriott (collectively, the "Marriott
Tenants"), under 14 separate Facilities Lease Agreements dated as of October
8, 1993, as amended (collectively, the "Marriott Leases") with initial terms
expiring December 31, 2013. The Marriott Tenants' obligations under each of
the Marriott Leases are guarantied by Marriott under 14 separate Guaranties
of Tenant Obligations dated as of October 8, 1993 (collectively, the
"Marriott Lease Guaranties").
C. The Brookdale Properties consist of four congregate care
retirement community properties more fully described in SCHEDULE 3 hereto
which are leased to BLC Property, Inc., a wholly owned subsidiary of
Brookdale (the "Brookdale Master Tenant"), under a Master Lease Agreement
dated as of December 27, 1996, as amended (the "Brookdale Master Lease") with
an initial term expiring December 31, 2019. The four Brookdale Properties
are subleased, respectively, by the Brookdale Master Tenant to Brookdale
Living Communities of Washington, Inc., Brookdale Living Communities of
Arizona, Inc., Brookdale Living Communities of Illinois, Inc. and Brookdale
Living Communities of New York, Inc. (collectively, the "Brookdale
Subtenants") under a separate sublease for each Brookdale Property
(collectively, the "Brookdale Subleases"). The Brookdale Master Tenant's
obligations under the Brookdale Master Lease are guarantied by Brookdale and
the Brookdale Subtenants under a Guaranty Agreement dated as of December 27,
1996, as amended (the "Brookdale Lease Guaranty").
D. Borrower and Guarantors have asked Lenders to make a
$350,000,000 secured revolving loan facility available to Borrower for the
purpose of making loans to Borrower from time to time up to an aggregate
principal amount outstanding up to $350,000,000 (the "Loans") upon the terms
and conditions hereinafter set forth for the general corporate purposes of
Borrower and its subsidiaries, including the initial $200,000,000 Loan
described in paragraph A above. Among other things, the Loans will be (i)
secured by a mortgage or deed of trust and security agreement and an
assignment of leases, rents and lease guaranties with respect to each of the
14 Marriott Properties and each of the four Brookdale Properties, (ii)
guarantied by Guarantors under this Agreement, and (iii) secured by pledges
of all of the issued and outstanding shares of SPTMRT and SPTBROOK.
NOW, THEREFORE, in consideration of the foregoing and intending
to be legally bound, the parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the
following terms shall have the meanings specified in this Section, unless the
context otherwise requires:
"ADDITIONAL SUBSIDIARY GUARANTOR" means a Subsidiary of
Borrower other than SPTMRT and SPTBROOK which executes an Additional
Subsidiary Guaranty and becomes an additional guarantor of and surety for the
Obligations pursuant to Section 3.5; PROVIDED that a Subsidiary of Borrower
shall cease to be an Additional Subsidiary Guarantor if and when its
Additional Subsidiary Guaranty is released.
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"ADDITIONAL SUBSIDIARY GUARANTY" means a Guaranty in the form
of EXHIBIT E.
"ADMINISTRATIVE AGENT" means Dresdner Bank AG acting in its
capacity as Administrative Agent under this Agreement, and any successor to
Dresdner Bank AG in such capacity.
"ADVISOR" means RMR or such other Person as shall act as an
advisor to Borrower, whether pursuant to the Advisory Agreement, or an
agreement analogous to the Advisory Agreement.
"ADVISORY AGREEMENT" means the RMR Advisory Agreement dated as
of September 15, 1999 between Borrower and RMR, as amended, supplemented,
modified and replaced from time to time in a manner not inconsistent with the
terms hereof or of the Subordination Agreement, pursuant to which the Advisor
acts as advisor to Borrower.
"AFFILIATE" means, with respect to a particular Person, (a) any
Person which, directly or indirectly, is in Control of, is Controlled by, or is
under common Control with such particular Person, or (b) any Person who is a
director or officer or trustee (i) of such particular Person, (ii) of any
Subsidiary of such particular Person or (iii) of any Person described in
clause (a) above.
"AGREEMENT" means this Revolving Loan Agreement, as amended,
supplemented and modified from time to time in accordance herewith.
"ALTERNATE RATE", in respect of any Tranche, means the rate
or rates of interest agreed pursuant to Section 2.13 or 2.14, as the case may
be, between Borrower and Lenders to be applicable to such Tranche; PROVIDED
that in the absence of such agreement under the circumstances specified in
Section 2.13 or 2.14, as the case may be, the Alternate Rate shall be equal
to the Base Rate.
"ALTERNATE RATE TRANCHE" means a Tranche of the Loans the
interest on which is computed by reference to the Alternate Rate.
"APPLICABLE MARGIN" means (a) with respect to Base Rate
Tranches, 0% per annum, and (b) with respect to Eurodollar Tranches, and
Alternate Rate Tranches that are not Base Rate Tranches, (i) 2.00% per annum
so long as the ratio of Total Debt to Total Capitalization is less than 0.50
to 1 based on the most recent audited or unaudited consolidated financial
statements of Borrower and related calculations provided to Administrative
Agent pursuant to Sections 6.1 and 6.2(b) and (ii) 2.25% per annum so long as
the ratio of Total Debt to Total Capitalization is equal to or greater than
0.50 to 1 based on the most recent audited or unaudited consolidated
financial statements of Borrower and related calculations provided to
Administrative Agent pursuant to Sections 6.1 and 6.2(b). Any change in the
Applicable Margin pursuant to clause (b) of this definition shall take effect
on the date of delivery of the respective financial statements and related
calculations showing the corresponding change in the ratio of Total Debt to
Total Capitalization.
"APPRAISAL" means an appraisal using methodologies acceptable to
Administrative
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Agent at the time such appraisal is or was made and performed by
a Recognized Appraiser.
"APPRAISED VALUE" of any Property shall mean (a) in the case
of any Fee Interest, the lesser of (i) the value placed upon such Property
pursuant to the most recent Appraisal thereof based on a valuation of the Fee
Interest subject to the Lease(s) thereof and (ii) the value placed upon such
Property pursuant to the most recent Appraisal thereof based on a valuation
of the Fee Interest free and clear of the Lease thereof and determined by
discounting to present value the Property's future projected net cash flow,
PROVIDED that in the case where the most recent Appraisal only values the Fee
Interest under either subclause (i) or subclause (ii) of this clause (a) but
not both, the Appraised Value shall mean the value so placed on the Fee
Interest under either subclause (i) or subclause (ii) of this clause (a),
whichever is applicable; (b) in the case of a Leasehold Interest, the lesser
of (i) the value placed upon such Property pursuant to the most recent
Appraisal thereof based on a valuation of the Leasehold Interest subject to
the Lease thereof, and (ii) the value placed upon such Property pursuant to
the most recent Appraisal thereof based on a valuation of the Leasehold
Interest free and clear of the Lease thereof and determined by discounting to
present value the Property's future projected net cash flow, PROVIDED that in
the case where the most recent Appraisal only values the Leasehold Interest
under either subclause (i) or subclause (ii) of this clause (b) but not both,
the Appraised Value shall mean the value so placed on the Leasehold Interest
under either subclause (i) or subclause (ii) of this clause (b), whichever is
applicable; and (c) in the case of a Mortgage Interest, the value placed upon
the Mortgaged Property covered by such Mortgage Interest pursuant to the most
recent Appraisal thereof based on a valuation of such Mortgaged Property free
and clear of such Mortgage Interest and determined by discounting to present
value the future projected net cash flow of such Mortgaged Property; PROVIDED
that, in case of each Appraisal under clause (a), (b) or (c) above, there
shall be added to the value set forth therein the sum of amounts advanced by
Borrower or any of its Subsidiaries for any improvement to the respective
Property or Mortgaged Property since the date of such Appraisal that is not
accounted for in such Appraisal.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in
substantially the form of EXHIBIT C.
"ASSIGNMENTS OF LEASES, RENTS AND LEASE GUARANTIES" has the
meaning set forth in Section 3.2.
"BASE RATE" means a fluctuating interest rate per annum as
shall be in effect from time to time, which rate per annum shall at all times
be equal to the greater of:
(i) the prime rate of interest announced by
Administrative Agent at its New York Branch office from time to
time, changing when and as said prime rate changes; and
(ii) the sum of one-half of one percent (0.5%) and
the Federal Funds Rate in effect from time to time, changing
when and as such Federal Funds Rate changes.
"BASE RATE LOAN" means a Loan initially designated and made
as a Loan on which the interest is calculated by reference to the Base Rate
and constituting a Base Rate Tranche.
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"BASE RATE TRANCHE" means a Tranche of the Loans the interest
on which is computed by reference to the Base Rate.
"BORROWER" has the meaning set forth in the first paragraph of
this Agreement.
"BORROWING DATE" means, with respect to a Loan, the Business
Day specified in a Notice of Borrowing as the date on which Borrower requests
Lenders to make such Loan hereunder.
"BROOKDALE" has the meaning set forth in recital paragraph A of
this Agreement.
"BROOKDALE LEASE GUARANTORS" means Brookdale, the Brookdale
Subtenants and the Prime Entities.
"BROOKDALE LEASE GUARANTY" has the meaning set forth in recital
paragraph C of this Agreement.
"BROOKDALE MASTER LEASE" has the meaning set forth in recital
paragraph C of this Agreement.
"BROOKDALE MASTER TENANT" has the meaning set forth in recital
paragraph C of this Agreement.
"BROOKDALE PROPERTIES" has the meaning set forth in recital
paragraph A of this Agreement.
"BROOKDALE SUBLEASES" has the meaning set forth in recital
paragraph C of this Agreement.
"BROOKDALE SUBTENANTS" has the meaning set forth in recital
paragraph C of this Agreement.
"BUSINESS" means (i) with respect to Borrower, the business
of Borrower and its Subsidiaries which consists of the acquisition,
ownership, leasing and disposition of properties that are leased to
unaffiliated tenants, and the acquisition, ownership and disposition of
mortgages and/or mortgage interests in properties that are owned by
unaffiliated Persons, including, without limitation, Senior Housing
Properties, (ii) with respect to SPTMRT, its ownership of the Marriott
Properties and activities incidental thereto, and (iii) with respect to
SPTBROOK, its ownership of the Brookdale Properties and activities incidental
thereto.
"BUSINESS DAY" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York City or London, England are
authorized or required by law or executive order to remain closed or on which
banks are not open for dealings in U.S. Dollar deposits in the London
interbank market.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, any
obligation of such
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Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property which obligation is
required to be classified or accounted for as a capital lease obligation on a
balance sheet of such Person prepared in accordance with GAAP and, for
purposes of this Agreement, the amount of such obligation at any date shall
be the outstanding amount thereof at such date, determined in accordance with
GAAP.
"CASH FLOW" means, for any period and any Person in respect
of one or more Properties and/or Mortgaged Properties as to which such Person
is a Tenant or Mortgagor, the sum (without duplication of counting) of (i)
Income Before Extraordinary Items, (ii) Consolidated Interest Charges payable
to Borrower or any of its Subsidiaries in the case of a Mortgaged Property,
(iii) depreciation expenses, (iv) amortization expenses, (v) other non-cash
items reducing Income Before Extraordinary Items, (vi) all payments required
to be made to Borrower or any of its Subsidiaries under a Lease, including,
without limitation, fixed rent, participation rent, additional rent and
amounts paid to Borrower or any of its Subsidiaries in respect of operating
expenses, taxes based on the ownership of real property, insurance premiums
and/or any other costs or expenses of the relevant lessor or sublessor, (vii)
subordinated expenses paid to any Affiliate of the Tenant or Mortgagor of
such Property relating to management, accounting or other similar fees, and
(viii) to the extent otherwise included in the calculation of Income Before
Extraordinary Items, any Restricted Payment, LESS non-cash items increasing
Income Before Extraordinary Items, for such period attributable to such
Properties and/or Mortgaged Properties.
"CLOSING DATE" means the date of execution and delivery of
this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
"COLLATERAL COVERAGE RATIO" means, with respect to the
Marriott Properties and the Brookdale Properties as a combined group, the
ratio of (a) the lesser of (i) the Cash Flow of the Marriott Tenants
attributable to the Marriott Properties for the most recent four quarter
period for which the requisite financial reports of the Marriott Tenants are
available, plus the Cash Flow of the Brookdale Master Tenant attributable to
the Brookdale Properties for the most recent four quarter period for which
the requisite financial reports of the Brookdale Master Tenant are available,
and (ii) the sum of all payments required to be made by the Marriott Tenants
to SPTMRT under the Marriott Leases and by the Brookdale Master Tenant to
SPTBROOK under the Brookdale Master Lease in respect of minimum rent, fixed
rent, alternative rent, expansion rent or percentage rent (including
additional rent in the nature of percentage rent) for the corresponding
periods over which such Cash Flows are measured, to (b) interest, on a
notional principal amount equal to the aggregate amount of the Commitments,
calculated for a 12-month period at a rate equal to the greater of (i) the
10-year Treasury rate as published in the most recent edition of THE WALL
STREET JOURNAL, plus 2% per annum, or (ii) 9% per annum.
"COMMISSION" means the United States Securities and Exchange
Commission or any successor to the responsibilities of such commission.
"COMMITMENT" has the meaning set forth in Section 2.1(b).
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"COMMON SHARES" means Borrower's common shares of beneficial
interest.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section
11.11.
"CONSOLIDATED EBITDA" means, for any period with respect to
Borrower and its Subsidiaries, the sum of the amounts for such period of (i)
Consolidated Net Income, (ii) Consolidated Interest Charges, (iii) provisions
for current taxes imposed on or measured by income or which are capital or
franchise taxes that are comparable to or in lieu of income taxes, (iv) total
depreciation expense, (v) total amortization expense and (vi) all other
noncash items reducing Consolidated Net Income, all of the foregoing as
determined on a consolidated basis for Borrower and its Subsidiaries in
conformity with GAAP.
"CONSOLIDATED FIXED CHARGES" means, for any period with
respect to Borrower and its Subsidiaries on a consolidated basis, the sum of
the amounts for such period of (i) Consolidated Interest Charges and (ii) the
aggregate of all scheduled principal payments on outstanding Indebtedness
made or required to be made during such period (but excluding balloon
payments of principal due upon the stated maturity of any Indebtedness), all
of the foregoing as determined on a consolidated basis for Borrower and its
Subsidiaries in conformity with GAAP.
"CONSOLIDATED INTEREST CHARGES" of a Person for any period
means the sum of (i) the aggregate interest accrued and payable in cash,
securities or otherwise on all Indebtedness of such Person and its
Subsidiaries, if any, on a consolidated basis for such period, PLUS (ii) the
aggregate amount of debt discount, debt premium or other amounts analogous to
interest accruing during or attributable to such period, whether or not
payable during such period, including without limitation all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing and net costs under Hedging Agreements, all
of the foregoing as determined on a consolidated basis in conformity with
GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the net
income (or loss) of Borrower and its Subsidiaries on a consolidated basis for
such period determined in conformity with GAAP; PROVIDED that there shall be
excluded (i) the income (or loss) of any Person (other than a Subsidiary of
Borrower) in which any other Person (other than Borrower or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Borrower or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of Borrower or
is merged into or consolidated with Borrower or any of its Subsidiaries or
that Person's assets are acquired by Borrower or any of its Subsidiaries,
(iii) the income of any Subsidiary of Borrower to the extent that the
declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, (iv)
any net extraordinary or unusual gains or net extraordinary or unusual losses
and (v) any gains or losses on the sale of properties.
"CONSOLIDATION AGREEMENT" means the Consolidation Agreement
dated as of the date hereof among Borrower, Guarantors and Administrative
Agent, under which Borrower has
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agreed, among other thing, to advance sums to Guarantors if and as necessary
for payment of their trade payables.
"CONTINGENT OBLIGATION" means, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("PRIMARY OBLIGATIONS")
of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly
or indirectly, including, without limitation, and obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation
or (ii) to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary obligor,
(c) to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the payment of, or the
ability of the primary obligor to make payment of, such primary obligation,
or (d) otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof; PROVIDED that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"CONTRACTUAL OBLIGATION" means, as to any Person, the
Certificate of Incorporation and By-Laws or other organizational or governing
documents of such Person, and any provision of any security issued by such
Person, or of any agreement, instrument or undertaking to which such Person
is a party or by which it or any of its property is bound.
"CONTROL" (including with correlative meanings the terms
"CONTROLLING", "CONTROLLED BY" and "under common Control with"), as applied to
any Person, means the possession of the power, direct or indirect, (i) to vote
20% or more of the securities having ordinary voting power for the election of
directors or trustees of such Person, or (ii) to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise.
"CREDIT SUPPORT AGREEMENTS" means each of the Lease Guaranties,
Mortgage Guaranties, Pledges and Sublease Agreements, and any other agreements
or instruments providing assurances in any form, in each case in respect of any
Person's obligations under a Lease or Mortgage Interest Agreement.
"CREDIT SUPPORT OBLIGORS" means the obligors in respect of the
Credit Support Agreements.
"CROSS GUARANTIED ASSETS" means a group of Properties and/or
Mortgage Interests as to which the various Tenants and/or Mortgagors have
guarantied each other's obligations to Borrower and/or any of Borrower's
Subsidiaries and have agreed to cross-default such obligations and/or
cross-collateralize those obligations to the extent of any security or credit
support that has been provided for such obligations or a group of Properties
and/or Mortgage Interests operated by
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a single Tenant or Mortgagor as to which such Tenant or Mortgagor has agreed
to cross-default all of its obligations to Borrower and/or any of Borrower's
Subsidiaries and to cross-collateralize those obligations to the extent of
any security or credit support that has been provided for such obligations.
"DECLARATION OF TRUST" means the Declaration of Trust
establishing Borrower dated December 16, 1998, as such Declaration of Trust
may be amended, supplemented and modified from time to time, and (ii) with
respect to each Guarantor, the Declaration of Trust establishing that
Guarantor dated January 14, 1999, as such Declaration of Trust may be
amended, supplemented and modified from time to time.
"DEFAULT" means any of the events specified in Section 8.1,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"DOCUMENTATION AGENT" has the meaning set forth in Section
9.1(b).
"ENVIRONMENTAL AGREEMENT" has the meaning set forth in Section
3.1.
"ENVIRONMENTAL LAWS" means all statutes, ordinances, orders,
rules and regulations having effect in any domestic or foreign jurisdiction
relating to environmental matters, including, without limitation, those
relating to fines, orders, injunctions, penalties, damages, contribution,
cost recovery compensation, losses or injuries resulting from the Release or
threatened Release of Hazardous Materials and to the generation, use,
storage, transportation or disposal of Hazardous Materials, in any manner
applicable to Borrower or any Tenant or Mortgagor or any of the Properties or
Mortgaged Properties, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section
9601 ET SEQ.), the Hazardous Material Transportation Act (49 U.S.C. Section
1801 ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 ET SEQ.), the Federal Water Pollution Control Act (33 U.S.C. Section
1251 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), the Occupational
Safety and Health Act (29 U.S.C. Section 651 ET SEQ.) and the Emergency
Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 ET SEQ.),
each as amended or supplemented, and any analogous future or present local,
municipal, state and federal statutes and regulations promulgated pursuant
thereto, each as in effect as of the date of determination.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA AFFILIATE" means (i) any corporation which is an
entity under common control with Borrower within the meaning of Section 4001
of ERISA or a member of a controlled group of corporations within the meaning
of Section 414(b) of the Code of which Borrower is a member; (ii) any trade
or business (whether or not incorporated) which is a member of a group of
trades or businesses under common control within the meaning of Section
414(c) of the Code of which Borrower is a member; and (iii) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of the
Code of which Borrower, any corporation described in clause (i) above or any
trade or business described in clause (ii) above is a member.
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"EURODOLLAR LOAN" means a Loan initially designated and made
as a Loan on which the interest is computed by reference to the LIBO Rate and
constituting a Eurodollar Tranche.
"EURODOLLAR TRANCHE" means a Tranche of the Loans the interest
on which is computed by reference to the LIBO Rate.
"EVENT OF DEFAULT" means any of the events specified in Section
8.1; PROVIDED that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
"EXCLUDED TAXES" has the meaning set forth in Section
2.10(d)(5).
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published
for such day (or, if such day is not a day for which such rate is published,
for the next preceding day for which it is published) by the Federal Reserve
Bank of New York.
"FEE AND EXPENSE LETTERS" means (a) the letter dated
September 15, 1999 from Dresdner Bank AG to HRPT, accepted by HRPT as of
September 15, 1999, setting forth HRPT's obligations to pay, on behalf of
Borrower, (i) to Dresdner Bank AG a nonrefundable up front fee (in
installments, with the final installment due on the Closing Date) with
respect to the secured revolving credit facility provided under this
Agreement, and (ii) certain expenses incurred by Dresdner Bank AG in
connection with the negotiation, documentation, review, closing and initial
advance of such facility and the subsequent syndication thereof, and (b) the
letter dated September 15, 1999 from Dresdner Bank AG to Borrower, accepted
by Borrower as of September 15, 1999, setting forth Borrower's obligations to
pay to Dresdner Bank AG certain nonrefundable administration fees on the
Closing Date and on each anniversary of the Closing Date until all the
Commitments have terminated and all Obligations have been paid in full in
cash.
"FEE INTERESTS" means any land and any buildings, structures,
improvements and fixtures owned beneficially in fee simple by Borrower or any
of its Subsidiaries, and any equipment located thereon or used in connection
therewith and/or all personalty (including, without limitation, franchises)
related thereto, in each case owned by Borrower or any of its Subsidiaries,
and all other real estate interests, owned beneficially by Borrower or any of
its Subsidiaries.
"FINAL REPAYMENT DATE" means the later of (i) the Termination
Date and (ii) such date as the Loans have been paid in full.
"FIXED CHARGES" means, for any period and any Person in
respect of one or more Properties and/or Mortgaged Properties as to which
such Person is the Tenant or Mortgagor, the sum (without duplication of
counting) of (i) Consolidated Interest Charges, (ii) all payments required to
be made as lessee or sublessee under the terms of any Lease or other lease
agreement, including without limitation fixed rent, participation rent and
additional rent in respect of operating expenses, taxes based on the
ownership of real property, insurance premiums and/or any other costs or
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expenses of the relevant lessor or sublessor, including subordinate
management fees and home office costs, and (iii) scheduled payments of
principal of Indebtedness or payments of amounts equivalent to principal, in
each case of such Person, for such period and attributable to such Properties
and/or Mortgaged Properties.
FOREIGN LENDER" has the meaning set forth in Section
2.10(d)(5).
"GAAP" means, subject to the provisions of Section 1.2,
generally accepted accounting principles set forth in the Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements by the Financial Accounting Standards Board or in
such other statement by such other entity as may be approved by a significant
segment of the accounting profession, which are applicable to the
circumstances as of the date in question; and the requirement that such
principles be applied on a consistent basis shall mean that the accounting
principles observed in the current period are comparable in all material
respects to those applied in a preceding period.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, and any entity exercising
executives legislative, judicial, regulatory or administrative functions of
or pertaining to government, and any corporation or other entity owned or
Controlled (through stock or capital ownership or otherwise) by any of the
foregoing.
"GROUND LEASE" means the Retirement Community Development and
Lease Agreement between UREF Retirement Corporation, as Lessor, and Borrower,
as Lessee, dated as of April 1, 1989, evidenced by a Memorandum of Lease
dated June 2, 1994 between UREF Retirement Corporation and HMC Retirement
Properties, Inc. recorded June 30, 1994 in Deed Book 1414 at page 559 in the
Land Records of Albemarle County, Virginia, as amended, modified and
supplemented from time to time. Marriott Corporation was the original Lessee
under the Ground Lease. Host Marriott Corporation succeeded to the interest
of Marriott Corporation as Lessee under the Ground Lease, and then assigned
that interest to HMC Retirement Properties, Inc. by Assignment of Lease dated
October 7, 1993, HMC Retirement Properties, Inc. assigned its interest in the
Ground Lease to HRPT by Assignment of Lease dated June 16, 1994. HRPT
assigned its interest in the Ground Lease to SPTMRT by Assignment and
Assumption of Ground Lease dated June 30, 1999.
"GUARANTOR" means SPTMRT or SPTBROOK, and "GUARANTORS"
means SPTMRT and SPTBROOK.
"HAZARDOUS MATERIAL" means (a) any chemical, material,
substance or waste defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", "restricted hazardous waste", or "toxic substances" or any other
formulations intended to define, list or classify substances by reason of
deleterious properties under any applicable Environmental Laws, (b)
biomedical waste, (c) any oil, petroleum or petroleum derived substance, any
drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, any flammable substances
or explosives, any radioactive materials, any toxic wastes or substances or
any other materials or pollutants which (i) pose a hazard to any property of
Borrower or any of its Subsidiaries or any Tenant or Mortgagor
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or any of its Subsidiaries or to Persons on or about such property or (ii)
cause any such property to be in violation if any Environmental Laws, (d)
asbestos in any form which is or could become friable, urea formaldehyde foam
insulation, electrical equipment which contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of fifty parts per
million, and (e) any other chemical, material, substance or waste, exposure
to which is prohibited, limited or regulated by any Governmental Authority or
may or could pose a hazard to the health and safety of the owners, occupants
or any Persons surrounding any of the Properties or Mortgaged Properties.
"HEDGING AGREEMENTS" means interest rate swap agreements,
interest rate collar agreements and other agreements or arrangements designed
to protect a Person and/or its Subsidiaries against fluctuations in interest
rates.
"HRPT"has the meaning set forth in recital paragraph A of this
Agreement.
"INCOME BEFORE EXTRAORDINARY ITEMS" means, for any period and
any Person in respect of one or more Properties and/or Mortgaged Properties
as to which such Person is the Tenant or Mortgagor thereof, the net income
(or loss) of such Person for such period attributable to such Properties
and/or Mortgaged Properties, excluding any extraordinary items (net of taxes)
and including amounts paid or provided for income taxes or deferred income
taxes by or on behalf of such Person attributable to such Properties and/or
Mortgaged Properties, all as determined in conformity with GAAP.
"INDEBTEDNESS" means, with respect to any Person, and without
duplication, (i) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person for borrowed money or other
extensions of credit or evidenced by bonds, debentures, notes or similar
instruments (whether or not the recourse of the lender is to the whole of the
assets of such Person or to only a portion thereof), (ii) all reimbursement
obligations and other liabilities (contingent or otherwise) of such Person
with respect to letters of credit or bankers' acceptances issued for the
account of such Person or with respect to Hedging Agreements or securities
repurchase agreements, (iii) all obligations and other liabilities
(contingent or otherwise) of such Person with respect to any conditional
sale, installment sale or other title retention agreement, purchase money
mortgage or security interest, or otherwise to pay the deferred purchase
price of property or services (except trade accounts payable and accrued
expenses arising in the ordinary course of business) or in respect of any
sale and leaseback arrangement, (iv) all Capitalized Lease Obligations of
such Person, (v) all Contingent Obligations of such Person, (vi) all surety
and other bonds and deposits, and all obligations and other liabilities
secured by a Lien or other encumbrance on any asset of such Person (even
though such Person has not assumed or otherwise become liable for the payment
thereof), and (vii) all obligations to purchase, redeem or acquire any
capital shares of such Person or its Subsidiaries that, by their terms or by
the terms of any security into which they are convertible or exchangeable,
are, or upon the happening of any event or the passage of time would be,
required to be redeemed or repurchased by such Person or its Subsidiaries,
including at the option of the holder, in whole or in part, or has, or upon
the happening of an event or passage of time would have, a redemption or
similar payment due, on or prior to the first anniversary of the Termination
Date.
"INDEPENDENT TRUSTEES" has the meaning set forth in the
respective Declaration of
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Trust.
"INITIAL LOAN" means the Loan in the principal amount of
$200,000,000 made and advanced under this Agreement on the Closing Date pursuant
to Section 2.3(a).
"INSOLVENCY EVENT", with respect to any Person, means that
(i) such Person shall have suspended or discontinued its business or commented
any case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or
(B) seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or such Person
shall have made a general assignment for the benefit of its creditors; or
(ii) there shall have been commenced against such Person any case, proceeding or
other action of a nature referred to in clause (i) above which (A) results in
the entry of an order for relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall have been commenced against such Person any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its assets,
which results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (iv) such Person shall have taken any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii) or (iii) above; or (v) such Person
shall generally not be paying, or shall have been unable to pay, or shall have
admitted in writing its inability to pay, its debts as they become due.
"INTEREST PAYMENT DATE" means, subject to Section 2.10 hereof,
(i) in the case of a Eurodollar Tranche, the last day of each Interest Period;
PROVIDED that in the case of each Interest Period of more than three months
duration, "Interest Payment Date" shall also include each date that is three
months, or an integral multiple thereof, after commencement of such Interest
Period; and (ii) in the case of an Alternate Rate Tranche or Base Rate Tranche,
the last Business Day of March, June, September and December of each year and
the date such Tranche (or any portion thereof) is converted in accordance with
the terms hereof into a Base Rate Tranche or Eurodollar Tranche, in the case of
an Alternate Rate Tranche, or an Alternate Rate Tranche or Eurodollar Tranche,
in the case of a Base Rate Tranche.
"INTEREST PERIOD" means with respect to each Eurodollar Tranche,
and subject to Section 2.10, a one, two, three or six month period (or such
other period as shall be agreed by all the Lenders) as selected at the option of
Borrower pursuant to a Notice of Borrowing or Notice of Continuation/Conversion;
PROVIDED that:
1.1.0.1 no Interest Period may be selected which expires
later than the Termination Date;
1.1.0.2 any Interest Period which begins on the last
Business Day of a
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calendar month (or on a day with respect to which there is no
numerically corresponding day in the calendar month at the end
of such Interest Period) shall, subject to the foregoing
proviso, end on the last Business Day of a calendar month;
1.1.0.3 if any Interest Period would otherwise end on a
day which is not a Business Day, it shall end on the next
Business Day in the same calendar month, or if none, on the
preceding Business Day;
1.1.0.4 in the case of immediately successive Interest
Periods applicable to a Eurodollar Tranche continued as such
pursuant to a Notice of Continuation, each successive Interest
Period shall commence on the day on which the next preceding
Interest Period expires;
1.1.0.5 there shall be no more than seven (7) Interest
Periods outstanding at any one time; and
1.1.0.6 in the event Borrower fails to specify an
Interest Period for any Eurodollar Tranche in the applicable
Notice of Borrowing or Notice of Continuation/Conversion,
Borrower shall be deemed to have selected an Interest Period of
one month.
"INTEREST RATE DETERMINATION DATE" means each date for
calculating the LIBO Rate for purposes of determining the interest rate in
respect of an Interest Period, which shall be the second Business Day prior to
the first day of the related Interest Period.
"LEASE GUARANTIES" means the Marriott Lease Guaranties, the
Brookdale Lease Guaranty and each other guaranty or other similar undertaking
issued by any Person in respect of any of the obligations of a Tenant under a
Lease.
"LEASE GUARANTOR" means Marriott with respect to the Marriott
Leases, the Brookdale Lease Guarantors with respect to the Brookdale Master
Lease, and each other obligor under any other Lease Guaranty.
"LEASEHOLD INTERESTS" means any leasehold estate in any land
and/or any buildings, structures, improvements and fixtures owned by Borrower or
any of its Subsidiaries and any equipment owned by Borrower and located thereon
or used in connection therewith and/or all personalty (including, without
limitation, franchises) related thereto owned beneficially by Borrower or any of
its Subsidiaries.
"LEASES" means the Marriott Leases, the Brookdale Master Lease
and any other leases or subleases relating to one or more Properties in respect
of which Borrower or any of its Subsidiaries is a lessor.
"LENDER" has the meaning set forth in the first paragraph of
this Agreement and includes Persons becoming parties as Lender to this Agreement
by virtue of, and as Assignee under,
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an Assignment Agreement.
"LENDING OFFICE" means the branch or Affiliate office or offices
of each Lender designated as the Lending Office(s) of such Lender on SCHEDULE 1
and each other branch or Affiliate office as such Lender may designate as its
Lending Office(s) from time to time by notice to Administrative Agent and
Borrower.
"LIBO RATE" means, for any Eurodollar Tranche and Interest
Period, the rate per annum (rounded upwards, if necessary, to the nearest one
hundredth of one percent) quoted by Administrative Agent, as of approximately
11:00 A.M. (London time) on the Interest Rate Determination Date for such
Interest Period, in the London interbank market for U.S. Dollar deposits in an
amount comparable to the principal amount of such Eurodollar Tranche with a term
comparable to such Interest Period.
"LIEN" means, as to any Person, any mortgage, lien (statutory or
otherwise), pledge, adverse claim, charge, security interest, assignment,
deposit agreement or other encumbrance in or on, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capitalized Lease
Obligation with respect to any property or asset of such Person, or the signing
or filing of a financing statement which names such Person as debtor, or the
signing of any security agreement authorizing any other party as the secured
party thereunder to file any financing statement.
"LOANS" has the meaning set forth in recital paragraph D of this
Agreement.
"LOAN AGENTS" has the meaning set forth in Section 9.1(a).
"LOAN DOCUMENTS" means, collectively, this Agreement (including,
without limitation, the guaranty in Section 10), the Notes, the Fee and Expense
Letters, the Mortgages, the Assignments of Leases, Rents and Lease Guaranties,
the Environmental Agreement, the Share Pledge Agreement, the Consolidation
Agreement, any Additional Subsidiary Guaranties delivered pursuant to Section
3.5 from time to time, the Subordination Agreement, and any other agreements,
documents or instruments delivered pursuant to or in connection with any of the
foregoing, as such agreements, documents or instruments may be amended, modified
or supplemented from time to time.
"MAC" means, with respect to any Property or Mortgage Interest,
any material adverse effect on or change in (a) the business, operations,
assets, prospects or financial condition or other condition of (i) such Property
or Mortgage Interest, (ii) any Tenant of such Property (or in the case of a
Property with more than one Tenant, the Tenants of such Property taken as a
whole), (iii) any Mortgagor of such Mortgage Interest or (iv) any Credit Support
Obligor of such Property or Mortgage Interest, (b) Administrative Agent's or any
Lender's rights and remedies under the Loan Documents, (c) the ability of any
Tenant of such Property (or in the case of a Property with more than one Tenant,
the Tenants of such Property taken as a whole), or any Mortgagor of such
Mortgage Interest, or any Credit Support Obligor of such Property or Mortgage
Interest, to perform its obligations under the Loan Documents or under the
Leases, the Mortgage Interest Agreements or
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the Credit Support Agreements in respect of such Property or Mortgage
Interest, or (d) in the case of any Marriott Property or Brookdale Property,
the amount which Lenders would be likely to receive (after giving effect to
delays in payment and costs of enforcement) in a foreclosure of the Mortgage
on, or other liquidation of, such Property.
"MAJORITY LENDERS" means, at any particular time, Lenders
having more than 66 2/3% of the principal amount of the Loan then outstanding.
"MARRIOTT" has the meaning set forth in recital paragraph A
of this Agreement.
"MARRIOTT LEASE GUARANTIES" has the meaning set forth in
recital paragraph B of this Agreement.
"MARRIOTT LEASES" has the meaning set forth in recital
paragraph B of this Agreement.
"MARRIOTT PROPERTIES" has the meaning set forth in recital
paragraph A of this Agreement.
"MARRIOTT TENANTS" has the meaning set forth in recital
paragraph B of this Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, assets, prospects or financial condition or
other condition of (i) Borrower and its Subsidiaries taken as a whole, (ii)
the Marriott Properties and Brookdale Properties taken as a whole, or (iii)
the Properties and Mortgage Interests taken as a whole, (b) Administrative
Agent's or any Lender's rights and remedies under the Loan Documents, (c) the
ability of Borrower, either Guarantor, any of Borrower's other Subsidiaries
or the Advisor to perform its respective obligations under the Loan
Documents, the Advisory Agreement, the Leases, the Mortgage Interest
Agreements or the Credit Support Agreements, (d) the ability of the Marriott
Tenants and Marriott (taken as a whole) to perform their obligations under
the Marriott Leases and the Marriott Lease Guaranties, (e) the ability of
the Brookdale Tenant and the Brookdale Lease Guarantors (taken as a whole) to
perform their obligations under the Brookdale Lease and the Brookdale Lease
Guaranty, or (f) the ability of the Tenants, Mortgagors and Credit Support
Obligors (taken as a whole) to perform their obligations under the Leases,
the Mortgage Interest Agreements and the Credit Support Agreements.
"MORTGAGE GUARANTIES" means each guarantee, letter of credit
or other similar undertaking issued by any Person in respect of any of the
obligations of a Mortgagor under a Mortgage Interest Agreement.
"MORTGAGE GUARANTORS" means the obligors in respect of the
Mortgage Guaranties.
"MORTGAGE INTEREST" means any interest of Borrower or any of
its Subsidiaries as lender and as mortgagee or beneficiary, as applicable, in
respect of a loan secured in whole or in part by a Lien on any land or any
buildings, structures, improvements and fixtures (including any
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leasehold estate with respect thereto).
"MORTGAGE INTEREST AGREEMENT" means any agreement, note,
mortgage, deed of trust and/or other document creating, evidencing or
securing a Mortgage Interest.
"MORTGAGED PROPERTY" means any land and any building,
structure, improvements and fixtures (including any leasehold estate with
respect thereto) with respect to which Borrower or any of its Subsidiaries
has a Mortgage Interest.
"MORTGAGES" has the meaning set forth in Section 3.1.
"MORTGAGOR" means, in the case of a Mortgage Interest, the
obligor or obligors in respect of such Mortgage Interest.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of
the preceding five plan years made or accrued an obligation to make
contributions.
"MULTIPLE EMPLOYER PLAN" means an employee benefit plan,
other than a Multiemployer Plan, subject to Title IV of ERISA to which
Borrower or any ERISA Affiliate, and at least one employer other than
Borrower or an ERISA Affiliate, is making or accruing an obligation to make
contributions or, in the event that any such plan has been terminated, to
which Borrower or any ERISA Affiliate made or accrued an obligation to make
contributions during any of the five plan years preceding the date of
termination of such plan.
"NET PROPERTY PROCEEDS" means (a) the gross proceeds received
by or for the account of Borrower, either Guarantor or any other Subsidiary
of Borrower of any sale, lease or other disposition of its Fee Interest or
Leasehold Interest in any Property, minus the reasonable out-of-pocket fees
and expenses (including attorneys' fees and expenses) incurred by Borrower,
either Guarantor or any other Subsidiary of Borrower in connection with such
sale or other disposition, (b) all insurance proceeds paid and received by or
for the account of Borrower, either Guarantor or any other Subsidiary of
Borrower on account of the loss of or damage of any such Fee Interest or
Leasehold Interest, to the extent such proceeds are not applied to the
replacement or restoration of such assets, and (c) all proceeds received by
or for the account of Borrower, either Guarantor or any other Subsidiary of
Borrower arising from the taking by condemnation or eminent domain of any
such Fee Interest or Leasehold Interest, to the extent such proceeds are not
applied to the replacement or restoration of such assets; PROVIDED, however
that the proceeds from the disposition of, or any condemnation or casualty
involving, any Fee Interest or Leasehold Interest of any Subsidiary of
Borrower not a Guarantor shall be net of any amount applied to repay any
Indebtedness to the extent such Indebtedness is secured a mortgage or deed of
trust on such Fee Interest or Leasehold Interest and is required by its terms
to be repaid as a result of such event.
"NET SECURITIES PROCEEDS" with respect to any private or
public offering of securities or any borrowing from one or more financial
institutions, means the gross proceeds thereof received
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by or for the account of Borrower net of underwriting discounts and
commissions and reasonable out-of-pocket fees and expenses incurred in
connection with such offering or borrowing; PROVIDED that, in the case of a
securities offering or borrowing by a Subsidiary of Borrower concurrently
with the acquisition by such Subsidiary of substantially all of its assets
from Persons who are not Affiliates of Borrower, Net Securities Proceeds
shall not include the proceeds of such securities offering or borrowing
applied to the acquisition costs of such assets not in excess of the fair
market value thereof, as determined in good faith by Borrower, plus related
costs and expenses.
"NOTES" has the meaning set forth in Section 2.2(a).
"NOTICE OF BORROWING" means a notice substantially in the
form of EXHIBIT C delivered by Borrower to Administrative Agent pursuant to
Section 2.23(b) with respect to a proposed borrowing hereunder.
"NOTICE OF CONTINUATION/CONVERSION" means a notice
substantially in the form of EXHIBIT C delivered by Borrower to
Administrative Agent pursuant to Section 2.5(b) with respect to a
continuation or conversion of one or more Tranches.
"OBLIGATIONS" means and includes all principal and interest
payment obligations and all other advance repayment obligations, fee payment
obligations, indemnity obligations, cost payment obligations, debts,
liabilities, contingent obligations and other obligations, covenants and
duties owing by Borrower to Lenders or Administrative Agent of any kind or
nature, present or future, arising under this Agreement or any other Loan
Document. Such term includes, without limitation, all principal, interest,
fees, charges, expenses, attorneys' fees and other sums chargeable to
Borrower by Lenders or Administrative Agent under this Agreement or any other
Loan Document.
"OTHER PROPERTIES" means the Properties other than the
Marriott Properties and Brookdale Properties.
"OTHER REAL PROPERTY" has the meaning set forth in Section
6.12.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA, or any successor to
the responsibilities of such corporation.
"PERMITTED EXCEPTIONS" means those exceptions to title set
forth on SCHEDULE 5.
"PERSON" means an individual, partnership, limited liability
company, corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.
"PLAN" means an employee benefit plan, other than a
Multiemployer Plan, maintained for or covering any employees of Borrower or
any ERISA Affiliate and subject to Title IV of ERISA.
"PLEDGES" means any pledge or grant of a Lien to secure any
of the obligations of
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a Mortgagor under a Mortgage Interest Agreement, a Tenant under a Lease, a
Mortgage Guarantor under a Mortgage Guaranty, a Lease Guarantor under a Lease
Guaranty or a Subtenant under a Sublease Agreement, each as amended,
supplemented or modified from time to time.
"PREFERRED SHARES" means Borrower's preferred shares of
beneficial interest authorized under its Declaration of Trust.
"PROCESS AGENT" has the meaning set forth in Section 11.2.
"PROPERTIES" means the Marriott Properties, the Brookdale
Properties and each of the other properties in which Borrower or any of its
Subsidiaries has a Fee Interest or a Leasehold Interest.
"PRO RATA SHARE" means, with respect to each Lender as of the
date of determination, the percentage obtained by dividing (i) the Commitment
of that Lender as of such date by (ii) the Commitments of all Lenders as of
such date; PROVIDED that if the Commitments have been terminated at such
time, such Pro Rata Share shall be the percentage obtained by dividing (i)
that Lender's portion of the aggregate amount of the Loans outstanding as of
such date by (ii) the aggregate amount of the Loans outstanding from all
Lenders as of such date.
"REAL PROPERTY PERMITS" means, in respect of any Property or
Mortgaged Property, all certificates of occupancy, permits, licenses,
franchises, approvals and authorizations from all Governmental Authorities
having jurisdiction over such Property or Mortgaged Property or any portion
thereof, the absence of which could materially impair the use of such
Property or Mortgaged Property for the purposes for which it is currently
used, and from all insurance companies and fire rating and similar boards and
organizations required to have been issued to Borrower (or its predecessor as
owner of such Property) or the Tenant (in the case of a Property) or the
Mortgagor (in the case of a Mortgaged Property) to enable such Property or
Mortgaged Property or any portion thereof to be lawfully occupied and used in
all material respects as currently so occupied or used.
"REAL PROPERTY STATEMENT" means a certificate of a Responsible
Officer of Borrower providing each of the following:
1.1.1 a list of each Property and certifying the acquisition
cost and the Appraised Value thereof;
1.1.2 a list of each Mortgaged Property, the Appraised Value
thereof and the then outstanding principal amount due to Borrower or any of its
Subsidiaries from the Mortgagor thereof;
1.1.3 (1) with respect to each Property and Mortgaged
Property, certification as to the ratio of (A) the Cash Flow of the Tenant
(or Subtenant) or Mortgagor thereof (as applicable) over the four most recent
financial quarters (or, if financial reporting for such Cash Flow is provided
on an annual basis, over its last reported financial year) attributable to
that Property or Mortgaged Property to its (B) Fixed Charges over the same
period for such Property or Mortgaged Property; and (2) with respect to the
Marriott Properties as a group, the Brookdale Properties as a group and each
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other group of Cross Guaranteed Assets, certification as to the ratio of (A)
the Cash Flow of the Marriott Tenants, the Brookdale Master Tenant or other
applicable group of Tenants (or Subtenants) or Mortgagors determined on an
aggregate basis over their respective four most recent financial quarters (or
last reported financial year, as the case may be) to (B) its Fixed Charges
over the same period; and
1.1.4 with respect to each Property and Mortgaged Property,
certification that there has been no MAC other than any MAC which has ceased
to be in effect or is disclosed in reasonable detail in such certificate.
"RECOGNIZED APPRAISER" means a qualified and recognized
professional appraiser as may be selected by Administrative Agent, having at
least five years' prior experience in performing real estate appraisals in
the geographic area where the property being appraised is located and having
a recognized expertise in appraising properties of the same general type and
character as the property which is being appraised.
"RELEASE" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge,
dispersal, leaching or migration of any Hazardous Materials into the indoor
or outdoor environment (including, without limitation, the abandonment or
disposal of any barrels, containers or other closed receptacles containing
any Hazardous Materials), or into or out of any Property or Mortgaged
Property, including the movement of any Hazardous Material through the air,
soil, surface water, groundwater or property.
"REPORTABLE EVENT" means a "reportable event" within the
meaning of Section 4043 of ERISA (other than a "reportable event" for which
the 30-day notice to PBGC requirement has been waived by regulation of PBGC).
"REQUIREMENT OF LAW" means, as to any Person, any law,
treaty, rule or regulation, or judgment, order, directive or other
determination of any arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its
properties or to which such Person or any of its property is subject.
"RESPONSIBLE OFFICER" means, with respect to any matter
(including financial matters), the chairman, vice chairman, president, chief
executive officer, chief financial officer, executive vice president or
treasurer of Borrower, either Guarantor and/or the Advisor, as applicable.
"RESTRICTED PAYMENT" means (a) every dividend or other
distribution of assets, properties, cash, rights, obligations or securities
paid, made, declared or authorized by Borrower or any of its Subsidiaries or
in respect of any of the Common Shares, the Preferred Shares or other equity
securities of Borrower, or any class of Borrower's equity securities, or for
the benefit of holders of any thereof in their capacity as such; (b) every
payment by or for the account of Borrower or any of its Subsidiaries in
connection with the redemption, purchase, retirement, defeasance or other
acquisition of any Common Shares, Preferred Shares or other equity securities
of Borrower or options, warrants or other rights to acquire any of
Borrower's equity securities; (c) every payment (i) of principal, interest,
fees or other amounts in respect of any Indebtedness of Borrower or any of
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its Subsidiaries to any Affiliate of Borrower, (ii) in respect of the
redemption, purchase, retirement, defeasance or other acquisition from an
Affiliate of Borrower of any Indebtedness of Borrower, or (iii) of fees in
respect of advisory services rendered to Borrower or any of its Subsidiaries
by the Advisor; (d) every direct or indirect investment by Borrower (by means
of capital contribution, advance, loan or otherwise) in an Affiliate of
Borrower or any Person which becomes an Affiliate of Borrower after or as a
result of such investment (but not including investments by Borrower in its
direct wholly owned Subsidiaries); and (e) every payment by or for the
account of Borrower or any of its Subsidiaries in connection with the
redemption, purchase, retirement, defeasance or other acquisition for value,
directly or indirectly, prior to any scheduled maturity, scheduled repayment
or scheduled sinking fund payment, of Indebtedness which is subordinate in
right of payment to the Loans or the Notes.
"RMR" means REIT Management & Research, Inc., a Delaware
corporation.
"SENIOR HOUSING PROPERTIES" means senior housing facilities
(including, without limitation, senior housing apartments) , retirement
communities, congregate care properties, assisted living facilities and
nursing homes and properties and facilities incidental thereto.
"SHARE PLEDGE AGREEMENT" has the meaning set forth in Section
3.3.
"SOLVENT" means, with respect to any Person on a particular
date, that on such date (i) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person (whether or not required to be
reflected on a balance sheet prepared in accordance with GAAP), (ii) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured, (iii) such Person is able to
realize upon its assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (iv) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature, and (v) such Person is not engaged in business
or a transaction for which such Person's property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"SPTBROOK" has the meaning set forth in the first paragraph
of this Agreement
"SPTMRT" has the meaning set forth in the first paragraph of
this Agreement
"SUBLEASE AGREEMENT" means any Brookdale Sublease or any
other agreement pursuant to which a Person subleases all, or a material
portion, of a Property from a Tenant, as such agreement is amended,
supplemented or modified from time to time.
"SUBORDINATION AGREEMENT" means the Subordination Agreement
dated as of the
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date hereof among Administrative Agent, the Advisor and Borrower,
substantially in the form of EXHIBIT F, as amended, supplemented, modified
and replaced from time to time in a manner not inconsistent with the terms
hereof.
"SUBSIDIARY" means, as to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a contingency)
to elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly, through
one or more intermediaries, or both, by such Person.
"SUBTENANT" means the sublessee in respect of a Sublease
Agreement and includes each Brookdale Subtenant in respect of its Brookdale
Sublease.
"SYNDICATION AGENT" has the meaning set forth in Section
9.1(b).
"TANGIBLE NET WORTH" means, with respect to Borrower and its
Subsidiaries, the sum of (a) the excess of total assets over total
liabilities of such Persons on a consolidated basis, such total assets and
total liabilities each to be determined consistent with the principles
applied in the preparation of the financial statements referred to in Section
5.1 and (b) the historical depreciation recorded by HRPT and/or its
subsidiaries on the real properties held by Borrower and its Subsidiaries to
the extent such depreciation has not otherwise been added back in calculating
Borrower's total assets under clause (a) above; EXCLUDING, HOWEVER, from the
determination of total assets (i) goodwill, organizational expenses,
capitalized software, research and development expenses, trademarks, trade
names, copyrights, patents, patent applications, licenses and rights in any
thereof, and other similar intangibles, (ii) all prepaid expenses, deferred
charges or unamortized debt discount and expense, (iii) all reserves carried
and not deducted from assets, (iv) treasury stock and shares of beneficial
interest and capital stock, obligations or other securities of, or capital
contributions to, or investments in, any Subsidiary, (v) securities which are
not readily marketable, (vi) cash held in a sinking or other analogous fund
established for the purpose of redemption, purchase, retirement, defeasance,
acquisition or prepayment of Common Shares, Preferred Shares or other equity
securities, capital stock or Indebtedness, (vii) any write-up in the book
value of any asset resulting from a revaluation thereof subsequent to the
date of this Agreement, (viii) leasehold improvements not recoverable at the
expiration of the respective lease (to the extent that the useful life of
such improvements is greater than the term of such lease), and (ix) any items
not included in clauses (i) through (viii) above which are treated as
intangibles in conformity with GAAP.
"TAXES" has the meaning set forth in Section 2.10(d)(5).
"TENANT" means, in respect of any Property, the master lessee
(including the Brookdale Master Tenant in respect of the Brookdale Master
Lease), lessee (including the respective Marriott Tenant in respect of each
Marriott Lease) or Subtenant (including the Brookdale Subtenant in respect of
each Brookdale Sublease) thereof, as the case may be and as indicated by the
context, other than Borrower under the Ground Lease.
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"TERMINATION DATE" means September 15, 2002.
"TERMINATION EVENT" means (i) a Reportable Event or an event
described in Section 4062(e) of ERISA, or (ii) the withdrawal of Borrower or
any ERISA Affiliate from a Multiple Employer Plan during a plan year in which
it was a "substantial employer", as such term is defined in Section
4001(a)(2) of ERISA, or the incurrence of liability by Borrower or any ERISA
Affiliate under Section 4064 of ERISA upon the termination of a Multiple
Employer Plan, (iii) the filing of a notice of intent to terminate a Plan or
the treatment of a Plan amendment as a termination under Section 4041 of
ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC
under Section 4042 of ERISA, (v) the withdrawal of Borrower or any ERISA
Affiliate from any Multiemployer Plan, or (vi) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
"TITLE COMPANY" means Lawyers Title Insurance Corporation.
"TITLE INSURANCE POLICIES" means 18 title insurance policies,
each one relating to one of the Properties and naming Administrative Agent on
behalf of the Lenders as the insured, issued by the Title Company in the form
of an American Land Title Association Standard Loan Policy (1970, revised
1984), insuring that on the Closing Date fee simple title to each of the
Properties (or, in the case of the Charlottesville, Virginia Property, a
ground leasehold estate in such Property under the Ground Lease) and each
Mortgage is a valid first lien on the Property covered thereby, insured up to
the respective amount shown for such Property on SCHEDULE 3, with such
endorsements and on such other terms as may be required pursuant to Section
3.1.
"TOTAL CAPITALIZATION" means the sum of (i) the total
liabilities and the total shareholders' equity of Borrower and its
Subsidiaries on a consolidated basis, such total liabilities and total
shareholders' equity each to be determined as at the close of the most recent
fiscal quarter for which financial statements have been provided pursuant to
Section 6.1, consistent with GAAP and the principles applied in the
preparation of the financial statements referred to in Section 5.1, (ii) the
accumulated depreciation expense recorded by HRPT and/or its Subsidiaries on
their books prior to the Closing Date of the assets transferred by HRPT to
Borrower or any of its Subsidiaries, and (iii) the accumulated depreciation
expense of the Borrower and its Subsidiaries recorded on their books after
the Closing Date.
"TOTAL DEBT" of Borrower and its Subsidiaries means and
includes, as of any date as of which the amount thereof is to be determined,
without duplication (i) all items which in accordance with GAAP would be
required to be included on the liabilities side of a consolidated balance
sheet of Borrower and its Subsidiaries at such date (except that, for
purposes of this definition, the liabilities of Borrower and its Subsidiaries
for any security deposits held pursuant to lease agreements with lease terms
ending after the Termination Date shall be excluded) and (ii) to the extent
not otherwise included in (i) above, all Indebtedness of Borrower and its
Subsidiaries as of such date determined on a consolidated basis.
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"TRANCHE" means a portion of the Loans designated for bearing
interest computed by reference to the Eurodollar Rate, by reference to the
Base Rate or by reference to the Alternate Rate.
"U.S. DOLLARS" or "$" shall mean the lawful currency of the
United States of America.
"YEAR 2000 ISSUE" means any significant risk that computer
hardware or software used in Borrower's, or any of its Subsidiaries' or the
Advisor's, businesses or operations will not, in the case of dates or time
periods occurring after December 31, 1999, function at least as effectively
as in the case of dates or time periods occurring prior to January 1, 2000.
1.2 OTHER DEFINITIONAL PROVISIONS.
1.2.1 All terms defined in this Agreement shall have the
meanings assigned to them herein when used in the Notes or any certificate or
other document made or delivered pursuant hereto, unless otherwise defined
therein.
1.2.2 As used herein and in the Notes and other Loan
Documents, and any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms not defined in Section 1.1, and
accounting terms partly defined in Section 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP.
1.2.3 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.
Section, exhibit and schedule references in this Agreement are to the
respective sections, exhibits and schedules of this Agreement unless
otherwise specified. In this Agreement, where appropriate, the singular
shall include the plural and the plural shall include the singular.
1.2.4 References to any time of the day in this Agreement
shall refer to eastern standard time or eastern daylight saving time, as in
effect in New York, New York on such day. Any reference in this Agreement to
a document or instrument shall mean such document or instrument and all
exhibits and schedules thereto, as amended or supplemented from time to time.
Any reference in this Agreement to any Person as a party to any document or
instrument shall include its successors and assigns to such status.
SECTION 2
AMOUNT AND TERMS OF REVOLVING LOANS
2.1 LOANS.
2.1.1 Each Lender severally (and not jointly) agrees,
subject to the terms and conditions hereof, to make and advance to or for the
account of the Borrower from time to time
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during the period from the Closing Date to and including the Termination Date
such Lender's Pro Rata Share of the Loans, and to maintain its Pro Rata Share
of the Loans outstanding to Borrower until the Termination Date.
2.1.2 Each Lender's commitment to make and maintain its Pro
Rata Share of the Loans to Borrower pursuant to this Section 2.1 is herein
called its "COMMITMENT" and such commitments of all Lenders in the aggregate
are herein called the "COMMITMENTS". The amount of each Lender's Commitment
is set forth opposite its name on SCHEDULE 1 and the aggregate amount of the
Commitments on the Closing Date is $350,000,000; PROVIDED that (i) each
Lender's Commitment is subject to assignment as provided in Section 11.4(e),
(ii) the aggregate amount of the Commitments shall be reduced from time to
time by the amount of any reductions thereto made pursuant to Section 2.7 or
2.8(b), and (iii) Lenders shall have no obligation to make or maintain Loan
hereunder to the extent any such Loan would cause the aggregate amount of the
Loans then outstanding to exceed the Commitments.
2.1.3 Each Lender's Commitment shall expire on the
Termination Date and the Loans and all other amounts owed hereunder and under
the Notes shall be paid in full no later than Termination Date.
2.1.4 Subject to the terms and conditions hereof, Borrower
may borrow, repay or prepay Loans and reborrow the amounts so repaid, all
under and in accordance with this Section 2
2.2 NOTES; TERMINATION DATE.
2.2.1 The Pro Rata Share of the Loans of each Lender
pursuant hereto shall be evidenced by, and be repayable with interest in
accordance with the terms of, a promissory note of Borrower substantially in
the form of EXHIBIT A, with appropriate insertions, payable to the order of
such Lender in the principal amount of the Commitment of such Lender
(together with any promissory notes issued in exchange therefor upon
assignment pursuant to Section 11.4, individually a "NOTE" and collectively,
the "NOTES"), which shall be dated the Closing Date and be duly completed,
executed and delivered by Borrower. The Pro Rata Share of the Loans of each
Lender pursuant hereto shall be made and maintained by such Lender's Lending
Office(s) as designated by such Lender from time to time. Each Lender is
authorized to endorse at any time the date and amount of its Pro Rata Share
of the Tranches of the Loans and conversions and continuations thereof, the
date and amount of each payment of principal with respect to its Pro Rata
Share of the Tranches of the Loans and its Pro Rata Share of the Tranches of
the Loans that are Base Rate Tranches, Eurodollar Tranches or Alternate Rate
Tranches, on the schedule annexed to and constituting a part of such Lender's
Note, which endorsements shall constitute PRIMA FACIE evidence of the
accuracy of the information endorsed.
2.2.2 The entire outstanding balance of all outstanding
Loans and each of the Notes shall mature and Borrower shall repay the
outstanding principal amount of the Loans and the Notes in full together with
all unpaid interest accrued thereon on the Termination Date (or earlier as
hereinafter provided) (or if such day is not a Business Day, the next
preceding Business Day), and the Loans shall be subject to payment and
prepayment as provided in Sections 2.10 and 2.8.
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2.3 ADVANCE OF INITIAL LOAN; PROCEDURE FOR BORROWINGS.
2.3.1 Lenders will advance the Initial Loan for the account
of Borrower in the principle amount of $200,000,000 subject to and in
accordance with the terms and conditions of this Agreement. The Borrower
will cause the proceeds of the Initial Loan to be applied to repay formation
debt owing by SPTMRT and Borrower to HRPT.
2.3.2 Each Loan (including the Initial Loan) shall be
initiated either as a Base Rate Loan or a Eurodollar Loan as stipulated by
Borrower, subject to the terms of this Agreement. Whenever Borrower desires
to borrow additional amounts under Section 2.1, it shall deliver a Notice of
Borrowing to Administrative Agent substantially in the form of EXHIBIT B no
later than 12:00 noon (New York time) in the case of a Base Rate Loan at
least one Business Day, and in the case of a Eurodollar Loan at least three
Business Days, in advance of the proposed Borrowing Date. The Notice of
Borrowing shall set forth (1) the proposed Borrowing Date (which shall be a
Business Day), (2) the amount of the Loan requested (which amount shall be in
a minimum aggregate amount of $1,000,000 and integral multiples of $500,000,
(3) whether such Loan will be a Base Rate Loan or a Eurodollar Loan and, if a
Eurodollar Loan is specified, the initial Interest Period requested for such
Eurodollar Loan, (4) the account of Borrower to which the net proceeds of the
requested Loan are to be credited, and (5) a certification of Borrower that
(i) the representations and warranties of Borrower, each Guarantor and each
Additional Subsidiary Guarantor, if any, contained in the Loan Documents are
true, correct and accurate in all material respects to the same extent as
though made on and as of the date of such Notice of Borrowing unless stated
in the relevant Loan Document to relate to a specific earlier date, in which
case such representations and warranties shall be true, correct and complete
in all material respects as of such earlier date, (ii) no event has occurred
and is continuing or would result from the proposed borrowing that would
constitute a Default or Event of Default, (iii) the amount of the proposed
borrowing will not cause the aggregate outstanding principal amount of the
Loans to exceed the Commitments currently in effect, (iv) the purposes to
which the proceeds of the proposed borrowing will be applied are as set forth
in such Notice of Borrowing (which shall be of specificity reasonably
satisfactory to Administrative Agent) and are in compliance with this
Agreement, and (v) the Collateral Coverage Ratio is at least 1.20 to 1 (as
demonstrated in the calculation thereof attached to such Notice of Borrowing,
which calculation shall be in form and detail reasonably satisfactory to
Administrative Agent). In lieu of delivering the above-described Notice of
Borrowing, Borrower may give Administrative Agent telephonic notice (which
telephonic notice shall be followed immediately with a notice by facsimile
telecopy) by the time specified for a Notice of Borrowing above; PROVIDED
that such notice shall be promptly confirmed in writing by delivery of a
Notice of Borrowing to Administrative Agent on or before the applicable
Borrowing Date; PROVIDED FURTHER that in the event of a discrepancy between a
Notice of Borrowing and such telephonic notice, the telephonic notice shall
govern. Except as otherwise provided in Sections 2.13 and 2.14, a Notice of
Borrowing (or telephonic notice in lieu thereof as provided above) shall be
irrevocable, and Borrower shall be bound to make the borrowing specified in
such Notice of Borrowing (or telephonic notice in lieu thereof as provided
above) in accordance therewith. Neither Administrative Agent nor any Lender
shall incur any liability to any Person (including Borrower or any of its
Subsidiaries) in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or
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other Person authorized to borrow on behalf of Borrower or otherwise acting
in good faith under this Section 2.3, and upon funding of a Loan by Lenders
in accordance with this Agreement pursuant to any such telephonic notice
Borrower shall have effected the borrowing of such Loan hereunder.
2.3.3 All Loans shall be made by Lenders simultaneously and
proportionately to their respective Pro Rata Shares, it being understood that
no Lender shall be responsible for any default by any other Lender in that
other Lender's obligation to advance its Pro Rata Share of a Loan nor shall
the Commitment of any Lender to make a Loan hereunder be increased or
decreased as a result of a default by any other Lender in that other Lender's
obligation to advance its Pro Rata Share of a Loan.
2.3.4 Promptly after receipt by Administrative Agent of a
Notice of Borrowing pursuant to Section 2.3(b) (or telephonic notice in lieu
thereof followed immediately with a notice by facsimile telecopy) and in any
event not later than 2:00 p.m. (New York time) on the preceding Business Day
(in the case of a Base Rate Loan) or at least three Business Days (in the
case of Eurodollar Loan) in advance of the proposed Borrowing Date,
Administrative Agent shall notify each Lender of the relevant details of the
proposed borrowing. Each Lender shall make its Pro Rata Share of such Loan
available to Administrative Agent, in immediately available funds, at the
account specified by Administrative Agent to the Lenders, not later than
11:00 A.M. (New York time) on the Borrowing Date specified in the applicable
Notice of Borrowing. Upon satisfaction or waiver of the applicable conditions
precedent specified in Sections 4.1 and 4.2, Administrative Agent shall make
the proceeds of such Loan available to Borrower on such Borrowing Date by
causing an amount of immediately available funds equal to the proceeds of all
such Loan received by Administrative Agent from Lenders to be credited to the
account specified by Borrower in the Notice of Borrowing.
2.3.5 Unless Administrative Agent shall have been notified
by any Lender prior to the Borrowing Date for any Loan that such Lender does
not intend to make available to Administrative Agent the amount of such
Lender's Pro Rata Share of such Loan on such Borrowing Date (and any such
notice shall be without prejudice to any rights of Borrower against such
Lender hereunder), Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Borrowing Date and
Administrative Agent may, in its sole discretion, but shall not be obligated
to, make available to Borrower a corresponding amount on such Borrowing Date.
If such corresponding amount is not in fact made available to Administrative
Agent by such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest
thereon, for each day from such Borrowing Date until the date such amount is
paid to Administrative Agent, at the Base Rate. If such Lender does not pay
such corresponding amount forthwith upon Administrative Agent's demand
therefor, Administrative Agent shall promptly notify Borrower and Borrower
shall immediately pay such corresponding amount to Administrative Agent,
together with interest thereon for each day from such Borrowing Date until
the date such amount is paid to Administrative Agent, at the Base Rate.
Nothing in this Section 2.3(f) shall be deemed to relieve any Lender from its
obligation to fulfill its Commitment hereunder or to prejudice any rights
that Borrower may have against any Lender as a result of any default by such
Lender hereunder.
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2.4 INTEREST.
2.4.1 GENERALLY. Each Loan shall be a Eurodollar Loan
(constituting a Eurodollar Tranche) or a Base Rate Loan (constituting a Base
Rate Tranche) as selected by Borrower at the time the Notice of Borrowing
therefor is given pursuant to Section 2.3(b), subject to continuation or
conversion by Borrower pursuant to Section 2.5, except for any portion of a
Eurodollar Tranche which is converted to an Alternative Rate Tranche pursuant
to Section 2.13 or 2.14. The Loans shall bear interest on the unpaid
principal amount thereof from the Closing Date to maturity (whether by
acceleration or otherwise), at the interest rates specified as follows:
2.4.1.1 in the case of a Eurodollar Tranche, at an
interest rate per annum for and during each Interest Period
equal to the LIBO Rate for such Interest Period plus the
Applicable Margin in effect from time to time;
2.4.1.2 in the case of a Base Rate Tranche, at an
interest rate per annum equal to the Base Rate in effect from
time to time plus the Applicable Margin in effect from time to
time; and
2.4.1.3 in the case of an Alternate Rate Tranche, at an
interest rate per annum equal to the Alternate Rate in effect
from time to time plus the Applicable Margin in effect from
time to time.
Borrower shall pay interest on the unpaid principal amount of the Loans
outstanding from time to time, in arrears, (i) on each Interest Payment Date,
(ii) on the Termination Date, (iii) in the currency required by Section 2.10,
and (iv) in accordance with Section 2.4(b) (where applicable). In addition,
Borrower shall pay accrued interest on the principal amount of any portion of
the Loans paid or prepaid in accordance with this Section 2 on the date of
any such payment or prepayment.
2.4.2 DEFAULT INTEREST. If Borrower shall default in the
payment of the principal of or interest on any portion of the Loans or any
other amount becoming due hereunder or under any of the Loan Documents,
Borrower shall on demand from time to time pay interest (to the extent
permitted by law in the case of interest on overdue interest) on such
defaulted amount accruing from and including the date of such default
(without reference to any period of grace) up to and including the date of
actual payment (after as well as before judgment) at a rate per annum which
is the sum of (i) two percent (2%) PLUS (ii) the greatest of the LIBO Rate,
the Alternate Rate or the Base Rate PLUS (iii) the Applicable Margin.
Interest under this Section 2.4(b) shall be payable upon demand.
2.4.3 INTEREST DETERMINATION. Upon determining the LIBO
Rate for each Interest Period, the Alternate Rate for any period or the Base
Rate in effect from time to time, Administrative Agent shall promptly notify
Borrower and Lenders thereof by telephone (confirmed promptly in writing) or
in writing. Such determination shall, in the absence of manifest error, be
conclusive and binding upon Borrower and Lenders.
2.5 DURATION OF INTEREST PERIOD; NOTICE OF
CONTINUATION/CONVERSION.
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2.5.1 Borrower may, pursuant to the applicable Notice of
Continuation/Conversion, select an Interest Period to be applicable to each
Eurodollar Tranche.
2.5.2 Subject to the provisions of Sections 2.13 and 2.14,
Borrower shall have the option (i) to convert at any time all or any part of
outstanding Base Rate Tranches to Eurodollar Tranches or (ii) upon the
expiration of any Interest Period applicable to Eurodollar Tranches, to
continue all or any portion of such Tranches as Eurodollar Tranches or
convert all or any portion of such Tranches to Base Rate Tranches, as the
case may be, and the succeeding Interest Period(s) of such continued Tranches
shall commence on the most recent Interest Payment Date therefor; PROVIDED
that Tranches may be continued as, or converted to, Eurodollar Tranches with
a particular Interest Period only in an aggregate amount equal to $1,000,000
and integral multiples of $100,000 in excess of that amount; PROVIDED FURTHER
that Eurodollar Tranches or any portion thereof may only be converted into
Base Rate Tranches on the expiration date of the Interest Period(s)
applicable thereto; and PROVIDED FURTHER that (i) no event has occurred and
is continuing or would result from such Tranche continuation/conversion that
would constitute a Default or Event of Default, and (ii) the representations
and warranties of Borrower, each Guarantor and each Additional Subsidiary
\Guarantor, if any, contained in the Loan Documents shall be true, correct
and complete in all material respects on and as of the proposed
continuation/conversion date to the same extent as though made on and as of
that date unless stated in such section to relate to a specific earlier date,
in which case such representations and warranties shall be true, correct and
complete in all material respects as of such earlier date. All conversions
and continuations of Tranches shall be made simultaneously and on a pro rata
basis by Lenders in accordance with their respective Pro Rata Shares.
2.5.3 Borrower shall deliver a Notice of
Continuation/Conversion to Administrative Agent substantially in the form of
EXHIBIT C no later than 12:00 noon (New York City time) at least three
Business Days in advance of the proposed continuation/conversion date (in the
case of a conversion to, or a continuation of, Eurodollar Tranches) or at
least three Business Days in advance of the proposed conversion date (in the
case of a conversion to Base Rate Tranches). A Notice of
Continuation/Conversion shall set forth (1) the proposed
continuation/conversion date (which shall be a Business Day), (2) the amount
and nature of the proposed continuation/conversion, (3) in the case of a
continuation of, or conversion to, a Eurodollar Tranche, the requested
Interest Period, and (4) a certification of Borrower that (i) the
representations and warranties of Borrower, each Guarantor and each
Additional Subsidiary Guarantor, if any, contained in the Loan Documents are
true, correct and accurate in all material respects to the same extent as
though made on and as of the date of such Notice of Continuation/Conversion
unless stated in such Loan Documents to relate to a specific earlier date, in
which case such representations and warranties shall be true, correct and
complete in all material respects as of such earlier date, and (ii) no event
has occurred and is continuing or would result from the proposed
continuation/conversion that would constitute a Default or Event of Default.
In lieu of delivering the above-described Notice of Continuation/Conversion,
Borrower may give Administrative Agent telephonic notice by the time
specified for delivery of a Notice of Continuation/Conversion above (which
telephonic notice shall be followed immediately with a notice by facsimile
telecopy); PROVIDED that in the event of a discrepancy between a Notice of
Continuation/Conversion and such telephonic notice, such telephonic notice
shall govern.
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2.5.4 Promptly after receipt by Administrative Agent of a
Notice of Continuation/Conversion pursuant to this Section 2.5 (or telephonic
notice followed immediately with a notice by facsimile telecopy), and in any
event not later than 2:00 p.m. (New York City time) at least three Business
Days in advance of the proposed continuation/conversion date, Administrative
Agent shall notify each Lender of the relevant details of the proposed,
continuation/conversion.
2.5.5 Neither Administrative Agent nor any Lender shall
incur any liability to any Person (including Borrower) in acting upon any
telephonic notice referred to above that Administrative Agent believes in
good faith to have been given by a duly authorized officer or other Person
authorized to act on behalf of Borrower or for otherwise acting in good faith
under this Section 2.5, and upon the continuation and/or conversion (as
applicable) of any Tranche in accordance with this Agreement pursuant to any
such telephonic notice, Borrower shall have effected a continuation and/or
conversion (as applicable) hereunder of such Tranche.
2.5.6 Except as otherwise provided in Sections 2.13 and
2.14, a Notice of Continuation/Conversion (or telephonic notice in lieu
thereof) shall be irrevocable from and after the giving thereof, and Borrower
shall be bound to effect a continuation and/or conversion (as applicable) in
accordance therewith.
2.6 FEES.
2.6.1 UP FRONT FEE AND EXPENSE. Borrower shall cause HRPT
to pay to Dresdner Bank AG on the Closing Date pursuant to the Fee and
Expense Letter of HRPT (i) an up front fee in the amount set forth in the Fee
and Expense Letter of HRPT and (ii) the expenses (including legal fees and
expenses) incurred by Dresdner Bank AG in connection with the negotiation,
documentation, review and closing of the transactions contemplated by this
Agreement and the Initial Loan hereunder and the subsequent syndication of
Lenders' rights and obligations under this Agreement and the other Loan
Documents.
2.6.2 ADMINISTRATION FEE. On the Closing Date and on each
anniversary of the Closing Date until all Commitments have terminated and all
Obligations have been paid in full in cash, Borrower shall pay to
Administrative Agent a nonrefundable administration fee in the amount set
forth in the Fee and Expense Letter of Borrower as compensation for
Administrative Agent's services as Administrative Agent.
2.6.3 QUARTERLY COMMITMENT FEES. On December 1, 1999 and
quarterly on each March 1, June 1, September 1 and December 1 thereafter up
to the Termination Date and on the Termination Date, Borrower shall pay to
Administrative Agent for the accounts of Lenders (based on each Lender's
average daily Pro Rata Share) a commitment fee computed at the rate of 37.5
basis points (0.375%) per annum on the average daily unused portion of the
aggregate Commitments (the aggregate Commitments, less the aggregate
outstanding principal amount of the Loans) during the preceding quarterly
period (or portion thereof in the case of the first such payment and in the
case of a Termination Date occurring on a day other than a March 1, June 1,
September 1 or December 1).
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2.7 TERMINATION OR REDUCTION OF COMMITMENT. Borrower
shall have the right, upon not less than five Business Days' notice to
Administrative Agent, to terminate the Commitments or, from time to time, to
reduce the Commitments (any such reduction to be allocated to each Lender
according to its Pro Rata Share), to the extent, in either case, that the
Commitments are undrawn. Any such reduction shall be in an amount of
$1,000,000 or any integral multiple thereof and shall reduce permanently the
aggregate amount of the Commitments then in effect.
2.8 OPTIONAL PREPAYMENTS; MANDATORY PREPAYMENTS.
2.8.1 Subject to Sections 2.8(e) and 2.15, Borrower may, at
its option, prepay the Loans on any Business Day in whole or in part, without
premium, upon at least three Business Days', in the case of Eurodollar
Tranches, or one Business Day's, in the case of Base Rate Tranches, prior
written notice to Administrative Agent, specifying the amount of prepayment.
Each notice of prepayment pursuant to this clause (a) shall be irrevocable
and the payment amount specified in such notice shall be due and payable on
the date specified in U.S. Dollars, together with accrued interest to such
date on the amount prepaid and all amounts (if any) payable pursuant to
Section 2.15. Partial prepayments of the Loans pursuant to this clause (a)
shall be in an aggregate principal amount of $1,000,000 or integral multiples
of $100,000 in excess of that amount.
2.8.2 If, in the view of Administrative Agent,
substantiated by Appraisals, the aggregate Appraised Value of the Marriott
Properties and Brookdale Properties decreases (including, without limitation,
any decrease as a result of an exclusion of a Marriott Property or Brookdale
Property for purposes of this Section pursuant to Section 7.3 of a Mortgage)
such that the ratio of the aggregate amount of the Commitments to the
aggregate Appraised Value of such Properties exceeds 70%, (i) then upon
written notice from Administrative Agent to Borrower and Lenders of such
decrease in Appraised Value, the aggregate amount of the Commitments shall
reduce to an amount equal to 70% of the Appraised Value of such Properties as
stipulated by Administrative Agent in such notice, and the Commitment of each
Lender shall reduce by an amount equal to its Pro Rata Share (determined
immediately prior to such notice) of such reduction in the aggregate amount
of the Commitments, and (ii) if after such reduction of the Commitments the
aggregate outstanding principal amount of the Loans exceeds the aggregate
amount of the Commitments, then Borrower shall, within 30 days of receipt of
written notice from Administrative Agent of such decrease in Appraised Value,
prepay a portion of the principal of the Loans sufficient to reduce the
outstanding principal amount of the Loans to an amount equal to the aggregate
amount of the Commitments as so reduced. Borrower shall provide prompt
written notice to Administrative Agent of the date any such required
prepayment will be made. Prepayments of the Loans pursuant to this clause
(b) shall be in an aggregate principal amount of $1,000,000 or integral
multiples of $100,000 in excess of that amount.
2.8.3 In the event of any sale or other disposition of any
interest in any Property giving rise to Net Property Proceeds, on the final
Business Day of the first Interest Period to expire after the closing of such
sale or other disposition, or, if such closing occurs at a time when there
are no Eurodollar Tranches outstanding, on the final Business Day of the
month during which such closing occurs, Borrower shall apply an amount equal
to all of such Net Property Proceeds to the prepayment of the Loans; PROVIDED
that (1) prior to such prepayment of the Loans such Net Property
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Proceeds (i) shall, upon receipt, be delivered immediately to Administrative
Agent and (ii) shall, in the case of Net Property Proceeds arising from any
sale or other disposition of any Marriott Property or Brookdale Property, be
subject to the lien of the respective Mortgage; (2) with respect to a
particular transaction or a related series of transactions giving rise to Net
Property Proceeds, prepayment of the Loans shall be required from such Net
Property Proceeds only to the extent that the same exceed $5,000,000; and (3)
Borrower shall provide written notice to the Administrative Agent on the date
of such closing of such sale or other disposition in excess of $5,000,000
which sets forth the amount of such Net Property Proceeds. Partial
prepayments of the Loans pursuant to this clause (c) shall be in an aggregate
principal amount of $5,000,000 or integral multiples of $100,000 in excess of
that amount.
2.8.4 In the event of any private or public offering or
series of offerings of securities, or any borrowing or series of borrowings
from one or more financial institutions, by Borrower or any of its
Subsidiaries giving rise to Net Securities Proceeds in an aggregate amount of
not less than $1,000,000, on the final Business Day of the first Interest
Period to expire after the closing of such offering of securities or
borrowing, or, if such closing occurs at a time when there are no Eurodollar
Tranches outstanding, on the final Business Day of the month during which
such closing occurs, Borrower shall apply an amount equal to all of such Net
Securities Proceeds to the prepayment of the Loans; PROVIDED that, (1) prior
to such prepayment of the Loans, such Net Securities Proceeds shall, upon
receipt, be delivered immediately to the Administrative Agent, and (2)
Borrower shall provide written notice to Administrative Agent on or about the
date of such closing of such offering of securities or borrowing which sets
forth the amount of such Net Securities Proceeds. Partial prepayments of the
Loans pursuant to this clause (d) shall be in an aggregate principal amount
of $1,000,000 or integral multiples of $100,000 in excess of that amount.
2.8.5 Subject to the provisions of Section 2.10, any
payments or prepayments of the Loans pursuant to this Section 2.8 or any
other provision of any Loan Document shall be applied FIRST to any amounts
payable with respect thereto pursuant to Section 2.15, SECOND to the payment
of accrued and unpaid interest on the principal amount of the Loans up to and
including the date of prepayment, and THIRD to the principal amount of the
Loans. Subject to the requirements of the preceding sentence, Borrower may
designate the application of any prepayments of principal of the Loans to the
Eurodollar Tranches, Base Rate Tranches and/or Alternate Rate Tranches, as it
may select, PROVIDED that if Borrower does not designate such application,
such prepayments shall be applied (x) first to outstanding Base Rate
Tranches, (y) second to outstanding Alternate Rate Tranches and (z) third to
outstanding Eurodollar Tranches.
2.9 COMPUTATION OF INTEREST AND FEES. Fees and other
amounts other than interest calculated on the basis of a rate per annum shall
be computed on the basis of a 360-day year for the actual days elapsed.
Interest on the Base Rate Tranches and on the Alternate Rate Tranches, in
each case, calculated by reference to the prime rate, shall be computed on
the basis of a 365-day year for the actual days elapsed. Interest on the
Eurodollar Tranches and interest on the Alternate Rate Tranches and the Base
Rate Tranches, in each case where interest is not calculated by reference to
the prime rate, shall be computed on the basis of a 360-day year for the
actual days elapsed.
2.10 PAYMENTS.
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2.10.1 GENERAL. Except as contemplated by this Agreement,
the borrowing by Borrower from Lenders and each payment (including each
prepayment) by Borrower on account of principal of and interest on the Loans,
shall be made for the account of each Lender according to its Pro Rata Share;
PROVIDED that payments to Lenders of interest based upon the Alternate Rate
shall be allocated appropriately to account for difference among Lenders'
respective costs of funds. All payments (including prepayments) by Borrower
on account of principal, interest, fees, costs, indemnities or other amounts
payable hereunder or under any of the Loan Documents shall be made to
Administrative Agent for the account of the applicable Lenders or the Loan
Agents at the account of Administrative Agent specified in Section 11.3(b)
and in immediately available funds in U.S. Dollars prior to 12:00 noon (New
York City time) on the date when due. Any amounts received after such time
on any date may, in the discretion of Administrative Agent, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon. Each payment or prepayment hereunder and under the Notes
and the other Loan Documents shall be made without set-off or counterclaim.
Administrative Agent will distribute each payment to the applicable Lenders
promptly upon receipt thereof (and in any event on the same Business Day as
the date when received, if such payment is received at or prior to 12:00 noon
(New York City time)). Each payment by Administrative Agent to a Lender
shall be made for the account of such Lender's Lending Office as designated
by such Lender to Administrative Agent in writing from time to time.
Whenever any payment to be made hereunder or under any Loan Document,
including, without limitation, any principal of or interest on any Loan,
shall become due and payable, or whenever the last day of any Interest Period
would otherwise occur, on a day which is not a Business Day, such payment
shall be made and the last day of such Interest Period shall occur on the
next succeeding Business Day and such extension of time shall in such case be
included in computing interest on such payment; PROVIDED that if such
extension would cause any such payment to be made in the next succeeding
calendar month, or the last day of such Interest Period to occur in the next
succeeding calendar month, such payment shall be made, and the last day of
such Interest Period shall occur, on the next preceding Business Day.
2.10.2 ASSUMPTION AS TO PAYMENT. Unless Administrative
Agent shall have received notice from Borrower prior to the date on which any
payment is due to Administrative Agent for the account of Lenders hereunder
that Borrower will not make such payment, Administrative Agent may assume
that Borrower has made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to Lenders the amount due.
In such event, if Borrower has not in fact made such payment, then each
Lender severally agrees to repay to Administrative Agent forthwith on demand
the amount so distributed to such Lender with interest thereon, for each day
from and including the date such amount was distributed to it to but
excluding the date of payment to Administrative Agent, at the greater of the
Federal Funds Rate and a rate determined by Administrative Agent in
accordance with banking industry rules on interbank compensation.
2.10.3 APPLICATION OF PAYMENTS DURING DEFAULT. During the
continuance of any Default, Administrative Agent may, but shall be under no
obligation to, apply all payments received by Administrative Agent from
Borrower pursuant to any of the Loan Documents in the following order of
payment regardless of the application designated by Borrower: FIRST to any
interest owing under Section 2.4(b) or under any of the Loan Documents other
than interest owing on the Loan and
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the Notes referred to below, SECOND to any fees then payable to
Administrative Agent or Lenders, THIRD to any amounts owing pursuant to
Section 11.9, FOURTH to any amounts owing pursuant to Section 2.12 or 2.15,
FIFTH to any other sums (other than principal on the Loans and the Notes and
interest thereon referred to below) owing under any of the Loan Documents,
SIXTH to any interest owing on the Loans and Notes, and SEVENTH to the
repayment of the principal of the Loans and the Notes as designated by
Administrative Agent; PROVIDED that if such application is other than in
accordance with any express designation by Borrower, Administrative Agent
shall promptly notify Borrower of such application.
2.10.4 TAXES.
(1) Any and all payments by or on account of any
obligation of Borrower hereunder or under the Notes shall be made free and
clear of and without deduction for any Taxes; PROVIDED that if Borrower (or
any Guarantor) shall be required to deduct any Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section) Administrative Agent and each Lender (as the case
may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) Borrower shall make such deductions and (iii)
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with the applicable law.
(2) Borrower shall indemnify Administrative Agent and
each Lender, within 10 days after written demand therefor, for the full
amount of any Taxes paid by Administrative Agent or any Lender on or with
respect to any payment by or on account of any obligation of Borrower
hereunder (including any Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to Borrower by any Lender or by Administrative Agent on
its own behalf or on behalf of any Lender, shall be conclusive absent
manifest error.
(3) As soon as practicable after any payment of Taxes by
Borrower to a Governmental Authority, Borrower shall deliver to
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably
satisfactory to Administrative Agent.
(4) Any Foreign Lender that is entitled to an exemption
from or reduction of withholding tax under the law of the jurisdiction in
which Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement and the Notes shall, on
or promptly following the date it becomes a party to this Agreement by
execution and delivery hereof or by execution and delivery of an Assignment
Agreement, as of the case may be, and from time to time thereafter as
requested in writing by Borrower (but only so long thereafter as such Lender
remains lawfully able to do so), provide each of Administrative Agent and
Borrower with two original Internal Revenue Service forms 1001 or 4224, or
(in the case of a Lender that has
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certified in writing to Administrative Agent that it is not a "bank" as
defined in Section 881(c)(3)(A) of the Code) form W-8 (and, if such Lender
delivers a form W-8, a certificate representing that such Lender is not a
"bank" for purposes of Section 881(c) of the Code, is not a 10% shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of Borrower and is
not a controlled foreign corporation related to Borrower (within the meaning
of Section 864(d)(4) of the Code)), as appropriate, or any successor or other
form prescribed by the Internal Revenue Service, certifying that such Lender
is exempt from or entitled to a reduced rate of United States withholding tax
on payments pursuant to this Agreement or the Notes or, in the case of a
Lender providing a form W-8, certifying that such Lender is a foreign
corporation, partnership, estate or trust. If the forms provided by a Lender
at the time such Lender first becomes a party to this Agreement indicate a
United States interest withholding tax rate in excess of zero, withholding
tax at such rate shall be considered excluded from Taxes unless and until
such Lender provides the appropriate form certifying that a lesser rate
applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; PROVIDED,
however, that, if at the date of execution and delivery of an Assignment
Agreement pursuant to which a Lender becomes a party to this Agreement, the
assignor Lender was entitled to payments under subsection (1) in respect of
United States withholding tax with respect to interest accrued at such date,
then, to such extent, the term Taxes shall include (in addition to
withholding taxes that may be imposed in the future or other amounts
otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to such Lender on such date.
(5) As used in this Section 2.10(d), the following terms
have the means indicated:
"Excluded Taxes" means, with respect to Administrative Agent,
any Lender or any other recipient of any payment to be made by or on account
of any obligation of Borrower hereunder, (a) income or franchise taxes
imposed on (or measured by) its net income by the United States of America,
or by the jurisdiction under the laws of which such recipient is organized or
in which its principal office is located or, in the case of any Lender, in
which its Lending Office is located and (b) in the case of a Foreign Lender,
any withholding tax that is imposed on amounts payable to such Foreign Lender
at the time such Foreign Lender becomes a party to this Agreement (or
designates a new Lending Office) or is attributable to such Foreign Lender's
failure to comply with Section 2.10(d)(4), except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive additional
amounts from Borrower with respect to such withholding tax pursuant to
Section 2.10(d)(1).
"Foreign Lender" means any Lender that is organized under the
laws of a jurisdiction outside the United States.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority, other than Excluded Taxes.
2.11 USE OF PROCEEDS. The proceeds of the Initial Loan
shall be used by Borrower to pay the formation debt owing by SPTMRT and
Borrower to HRPT. The proceeds of Loans after the Initial Loan shall be used
by Borrower (either directly or indirectly through intercompany advances of
such proceeds to its Subsidiaries) for (a) the acquisition of Senior Housing
Properties,
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(b) the acquisition or funding of mortgage interests in Senior Housing
Properties, or (c) its general business purposes consistent with Section 6.4,
except that no proceeds of Loans shall be used for the acquisition of
properties, or the acquisition or funding of mortgage interests in
properties, that are not Senior Housing Properties or for activities
incidental thereto; PROVIDED that no Subsidiary which is not an Additional
Subsidiary Guarantor may receive any such proceeds directly or indirectly,
except (i) as otherwise provided in Section 3.5 in connection with a release
of an Additional Subsidiary Guaranty, and (ii) if a Subsidiary of Borrower
which is not an Additional Subsidiary Guarantor has entered into a financing
with a third party creditor involving the acquisition (from Persons who are
not Affiliates of Borrower) and concurrent financing of substantially all of
such Subsidiary's assets and such assets consist entirely of Fee Interests,
Leasehold Interests and Mortgage Interests in Senior Housing Properties, then
proceeds of Loans may be applied to finance Borrower's equity interest in
such Subsidiary, PROVIDED FURTHER that Borrower will not thereafter permit
such Subsidiary to own or acquire any properties or mortgage interests in
properties that are not Senior Housing Properties so long as all or any
portion of such equity interest is financed by proceeds of Loans.
2.12 INCREASED COSTS.
2.12.1 If any Requirement of Law or other event or
condition, or any amendment, modification or interpretation thereof
(including, without limitation, any request, recommendation, guideline or
policy, whether or not having the force of law, of or from any central bank
or other Governmental Authority), in any such case, adopted, effective, made
or issued after the date hereof (but in any event including, without
limitation, Regulation D as currently in effect or as amended hereafter or
any analogous provisions (or provisions having an analogous effect) of the
laws, rules or regulations (or interpretations thereof) of or any
Governmental Authority) by any authority charged with the administration or
interpretation thereof:
2.12.1.1 subjects Administrative Agent or any
Lender or any branch or Affiliate of Administrative Agent or
any Lender to any tax (except Excluded Taxes), fee, deduction,
duty, withholding, levy, impost or other charge or reduction of
any nature, on or with respect to, or which Administrative Agent
or such Lender in its sole discretion deems applicable or
attributable to this Agreement, any Note, any of the other Loan
Documents, its Commitment or its Pro Rata Share of the Loans, or
interest, fees or other amounts attributable thereto or to any
of the foregoing; or
2.12.1.2 changes the basis of taxation of
payments to any Lender or any branch or Affiliate of any Lender
of principal of and/or interest on its Pro Rata Share of the
Loans and/or other fees and amounts payable hereunder or under
any of the Loan Documents or with respect hereto or thereto
(including in any event imposition of or change in any
withholding taxes, but excluding any Excluded Taxes); or
2.12.1.3 imposes upon, modifies, requires, makes
or deems applicable to any Lender, or any of its branches or
Affiliates, any regular, special, supplementary or other
reserve or deposit requirement, insurance assessment or similar
requirement against or affecting any assets held by, or
liabilities of, or
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deposits with or for the account of, such Lender or such branch
or Affiliate, with respect to or which Administrative Agent or
such Lender in its sole discretion deems applicable or
attributable to this Agreement, any Note, any of the other Loan
Documents, its Commitment or its Pro Rata Share of the Loans, or
interest, fees or other amounts attributable thereto or to any
of the foregoing; or
2.12.1.4 imposes, modifies or deems applicable
any condition or requirement upon or causes in any manner the
addition of any supplement to, or increase of any kind to, the
capital or cost base of Administrative Agent or any Lender or
any of its branches or Affiliates, for extending or maintaining
its Commitment or its Pro Rata Share of the Loans which results
in an increase in the capital requirement supporting such
Commitment or its Pro Rata Share of the Loans, or imposes upon,
modifies, requires, makes or deems applicable to Administrative
Agent or such Lender or any such branch or Affiliate any capital
requirement, increased capital requirement or similar
requirement, with respect to or which Administrative Agent or
such Lender in its sole discretion deems applicable or
attributable to this Agreement, any Note, any of the other Loan
Documents, its Commitment or its Pro Rata Share of the Loans, or
interest, fees or other amounts attributable thereto or to any
of the foregoing; or
2.12.1.5 imposes upon Agent, Administrative Agent
or any Lender or any of its branches or Affiliates any other
conditions with respect to, or allocable or attributable in good
faith by Administrative Agent or such Lender to, this Agreement,
any Note, any of the other Loan Documents or its Pro Rata Share
of the Loans or its Commitment or such interest, fees or other
amounts;
and the result of any of the foregoing, based solely upon the good faith
determination and allocation by Administrative Agent or any Lender, as the case
may be, of costs, decreased benefits and/or reduced amount of payments, is to
increase the cost or decrease the benefit, in any way, to Administrative Agent
or such Lender or any branch or Affiliate of Administrative Agent or such
Lender, as the case may be, of funding or maintaining its Commitment or its
share of the Loans hereunder, or to reduce the amount of any payment (whether of
principal, interest, or otherwise) received or receivable by Administrative
Agent or such Lender or any branch or Affiliate of Administrative Agent or such
Lender, or to require Administrative Agent or such Lender, as the case may be or
any branch or Affiliate of Administrative Agent or such Lender, as the case may
be, to make any payment, then and in any such case:
(1) Administrative Agent or such Lender, as the case
may be, shall promptly notify Borrower and the other Lenders in
writing of the happening of such event;
(2) Administrative Agent or such Lender, as the case
may be, shall promptly deliver to Borrower and the other Lenders
a certificate stating the change or event which has occurred or
the reserve or capital requirements or other conditions which
have been imposed on Administrative Agent or such Lender or
branch or
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Affiliate of Administrative Agent or such Lender, as the case
may be, or the request, recommendation, guideline or policy with
which it has complied, together with the date thereof, the
amount of such increased cost, decreased benefit or reduction in
payment and, to the extent practicable, the calculation (or
manner of calculation) of such increased cost, decreased benefit
or reduction in payment; and
(3) Borrower shall pay Administrative Agent or such
Lender, as the case may be, promptly on demand such an amount or
amounts as:
(A) in the case of events referred to in
clauses (i), (ii), (iii) and (v) and, if applicable,
clause (iv) above, shall be sufficient to compensate it
or such branch or Affiliate for all such increased costs
and/or payments and/or decreased benefits, and/or
reduced amount of payment; and/or
(B) in the case of events referred to in
clause (iv) above, shall be an amount equal to the
reduction, as reasonably determined by Administrative
Agent or such Lender, as the case may be, in the
after-tax rate of return on Administrative Agent's or
such Lender's capital resulting from any such capital or
increased capital or similar requirement, all as
certified by Administrative Agent or such Lender, as the
case may be, in said written notice to Borrower. Such
certification shall be conclusive and binding on
Borrower absent manifest error.
2.12.2 The certificate of Administrative Agent or such Lender
as to the additional amounts payable pursuant to this Section 2.12 delivered to
Borrower shall constitute PRIMA FACIE evidence of the amount thereof.
Administrative Agent and each Lender agree to use reasonable efforts, as
determined by Administrative Agent or such Lender, as the case may be, to avoid
or minimize the payment by Borrower of any additional amounts under this Section
2.12. The protection provided by this Section 2.12 shall be available to
Administrative Agent and each Lender regardless of any possible contention of
invalidity or inapplicability of the Requirement of Law, interpretation,
recommendation, guideline, policy or event or condition which has been imposed
or has occurred. In the event that, after Borrower shall have paid any
additional amount under this Section 2.12 with respect to the Loans,
Administrative Agent or such Lender shall have successfully contested such
Requirement of Law, interpretation, recommendation, guideline, policy or event
or condition then, to the extent that Administrative Agent or such Lender will
be placed in the same position it was in prior to the incurrence of the
increased cost or reduction in amount received or receivable (on an after-tax
basis), but without giving effect to interest which may have been earned on the
additional amount paid by Borrower (but with interest to the extent actually
earned by Administrative Agent or such Lender, as the case may be, on such
amount as determined by Administrative Agent or such Lender), Administrative
Agent or such Lender, as the case may be, shall refund to Borrower such
additional amount (with such interest, if any).
2.13 CHANGE IN LAW RENDERING EURODOLLAR TRANCHES OR ALTERNATE
RATE TRANCHES UNLAWFUL; FAILURE TO GIVE NOTICE OF CONTINUATION.
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2.13.1 Notwithstanding anything to the contrary herein
contained, in the event that any Requirement of Law or any change in any
existing Requirement of Law or in the interpretation thereof by any Governmental
Authority charged with the administration thereof, in any case adopted, issued
or effective after the date thereof, (i) shall make it unlawful for any Lender
to fund or maintain any portion of the Eurodollar Tranches or to give effect to
its obligations as contemplated hereby with respect to its making or maintaining
its Pro Rata Share of the Eurodollar Tranches, or (ii) shall make it unlawful
for any Lender to fund or maintain any portion of the Alternate Rate Tranches or
to give effect to its obligations as contemplated hereby with respect to funding
or maintaining its Pro Rata Share of the Alternate Rate Tranches, such Lender
shall, upon the happening of such event, notify Administrative Agent, the other
Lenders and Borrower thereof in writing stating the reason therefor and the
effective date of such event, and (x) upon the effectiveness of any such event
referred to in clause (i) above, the obligation of such Lender to make or
maintain its Pro Rata Share of the Eurodollar Tranches to Borrower shall
forthwith be suspended for the duration of such illegality and during such
illegality such Lender shall, upon payment of any amounts owing under Section
2.15 with respect to such conversion, convert its share of the Eurodollar
Tranches to Alternate Rate Tranches or (upon effectiveness of any such event
referred to in clause (ii) above and during the continuance of such event) Base
Rate Tranches, and (y) upon the effectiveness of any such event referred to in
clause (ii), the obligation of such Lender to make or maintain its Pro Rata
Share of the Alternate Rate Tranches to Borrower shall forthwith be suspended
for the duration of such illegality and during such illegality such Lender
shall, upon payment of any amounts owing under Section 2.15 with respect to such
conversion, convert its share of the Alternate Rate Tranches to Base Rate
Tranches. If and when such illegality with respect thereto ceases to exist,
such suspension shall cease and such affected Lender shall similarly notify
Administrative Agent, the other Lenders and Borrower and the Alternate Rate
Tranche or Base Rate Tranche into which such share of the Eurodollar Tranches or
Alternate Rate Tranches (as applicable) was converted pursuant to this Section
2.13 shall be reconverted to a Eurodollar Tranche or Alternate Rate Tranche,
respectively, on the first day of the next succeeding Interest Period.
2.13.2 If Borrower fails to give a valid Notice of
Continuation/Conversion in respect of any portion of a Eurodollar Tranche
which is not repaid in accordance with the terms hereof at the end of the
relevant Interest Period in respect thereto, such portion shall be converted
automatically into a Base Rate Tranche; PROVIDED that if Borrower
subsequently gives a valid Notice of Continuation/Conversion in respect of
such Base Rate Tranche, such Tranche shall be converted into a Eurodollar
Tranche in accordance with the requirements for a continuation/conversion
under Section 2.5.
2.13.3 If any Tranche is converted to an Alternate Rate Tranche
pursuant to this Section 2.13, Borrower and Lenders, acting through
Administrative Agent, shall enter into negotiations in good faith with a view to
agreeing upon a substitute basis for determining the rate or rates of interest
from time to time applicable to such Tranche, which shall be acceptable to each
Lender, and the rate or rates so determined shall constitute the Alternate Rate
for that Tranche from the date of such conversion. If, however, Borrower and
the Majority Lenders fail to agree to such substitute basis within 30 days after
such conversion, such Tranche shall be deemed to have been converted to a Base
Rate Tranche.
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2.14 EURODOLLAR AVAILABILITY.
2.14.1 In the event, and on each occasion, that on the day two
Business Days prior to the commencement of any Interest Period for any
Eurodollar Tranche, Administrative Agent shall have determined (which
determination shall, in the absence of manifest error, be conclusive and binding
upon Borrower) that U.S. Dollar deposits in the amount of the principal amount
of the Eurodollar Tranche which is to have such Interest Period are not
generally available in the London interbank market, or that the rate at which
such U.S. Dollar deposits are being offered will not accurately reflect the cost
to any Lender of funding or maintaining such principal amount of such Eurodollar
Tranche during such Interest Period, or that reasonable means do not exist for
ascertaining the LIBO Rate, (i) Administrative Agent shall, as soon as
practicable thereafter, give written or telephonic notice (which telephonic
notice shall be followed immediately with a notice by facsimile telecopy) of
such determination to Lenders and Borrower, (ii) such principal amount of such
Eurodollar Tranche shall automatically be converted, as of the last day of the
Interest Period during which such determination is made, to an Alternate Rate
Tranche subject to the last sentence of this paragraph, and (iii) any request by
Borrower for such Eurodollar Tranche pursuant to Section 2.3 shall thereupon,
and until the circumstances giving rise to such notice no longer exist (as
notified by Administrative Agent to Borrower and Lenders), be deemed a request
for an Alternate Rate Tranche. If at any time Administrative Agent shall have
determined (which determination shall, in the absence of manifest error, be
conclusive and binding upon Borrower) that any contingency has occurred which
adversely affects the London interbank market or that any Requirement of Law or
any change in any existing Requirement of Law or in the interpretation thereof
or other circumstance affecting Lenders or the London interbank market makes the
funding or maintaining of the Eurodollar Tranches impracticable, (1)
Administrative Agent shall, as soon as practicable thereafter, give written or
telephonic notice (which telephonic notice shall be followed immediately with a
notice by facsimile telecopy) of such determination to Lenders and Borrower, (2)
the Eurodollar Tranches shall automatically be converted, as of the last day of
each Interest Period during which such determination is made and in each case in
respect of the principal amount of the Eurodollar Tranches having an Interest
Period ending on such date, to Alternate Rate Tranches, subject to the last
sentence of this paragraph, and (3) any request by Borrower for the Eurodollar
Tranches pursuant to Section 2.3 shall thereupon, and until the circumstances
giving rise to such notice no longer exist (as notified by Administrative Agent
to Borrower and Lenders), be deemed a request for Alternate Rate Tranches. If,
in the circumstances specified in this paragraph or in Section 2.13,
Administrative Agent determines that there is no reasonable alternate source for
funding or maintaining the Eurodollar Tranches, and no reasonable basis for
determining the Alternate Rate, or source of funding or maintaining Alternate
Rate Tranches, is available or practicable, then Administrative Agent shall
promptly so notify the other Lenders and Borrower, and each outstanding
Eurodollar Tranche shall, on the last day of the Interest Period then applicable
to it, be converted to a Base Rate Tranche.
2.14.2 If any Tranche is converted to an Alternate Rate Tranche
pursuant to this Section 2.14, Borrower and Lenders, acting through
Administrative Agent, shall enter into negotiations in good faith with a view to
agreeing upon a substitute basis for determining the rate or rates of interest
from time to time applicable to such Tranche, which shall be acceptable to each
Lender, and the rate or rates so determined shall constitute the Alternate Rate
for that Tranche from the date of such conversion. If, however, Borrower and
Majority Lenders fail to agree to such substitute basis within 30 days after
such conversion, such Tranche shall be deemed to have been converted to a Base
Rate Tranche.
2.15 COMPENSATION AND INDEMNITY.
2.15.1 Borrower shall pay to Administrative Agent for the
account of each Lender within 30 days of receipt of a written request of such
Lender (which request shall be delivered to Borrower and Administrative Agent,
shall set forth the basis thereof and shall be conclusive and binding for all
purposes provided that the determinations thereof are made on a reasonable
basis), such amount or amounts as shall compensate such Lender for any loss,
cost, expense or liability which such Lender reasonably determines are
attributable to (1) any payment, prepayment or conversion of a Eurodollar
Tranche made for any reason (including, without limitation, acceleration of the
Loans pursuant to Section 8.1) on a date other than the last day of the Interest
Period for such Tranche, or (2) any failure by Borrower for any reason
(including, but not limited to, failure of any of the conditions precedent
specified in Section 2.5 to be satisfied) to continue or convert a Eurodollar
Tranche on the date for such continuation or conversion specified in the related
notice given pursuant to Section 2.5. Without limiting the effect of the
preceding sentence, such compensation shall include an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount so paid, prepaid or converted or not continued or converted for
the period from the date of such payment, prepayment or conversion or failure to
continue or convert to the last day of the Interest Period for such Tranche (or,
in the case of a failure to continue or convert, the Interest Period for such
Tranche which would have commenced on the date specified for the corresponding
continuation or conversion) at the applicable rate of interest for such Tranche
provided for herein over (ii) the interest component of the amount
Administrative Agent would have quoted in the London interbank market for U.S.
Dollar deposits in amounts comparable to such principal amount and with terms
comparable to such period (as reasonably determined by such Lender).
2.15.2 In addition to and furtherance of the foregoing,
Borrower shall indemnify each Lender on demand for, from and against any actual
loss (including, without limitation, any loss of anticipated profits) or expense
(including but not limited to any loss or expense sustained or incurred in
liquidating or employing or redeploying deposits from third parties acquired to
effect or maintain any Tranche or any portion thereof) which such Lender or its
branch or Affiliate may sustain or incur as a consequence of (i) any default in
payment or prepayment of the principal amount of the Loans, any Tranche thereof
or any portion thereof or interest accrued thereon, as and when due and payable
(at the due date thereof, by irrevocable notice of payment or prepayment, or
otherwise), (ii) the effect of the occurrence of any Event of Default upon the
Loans, (iii) the payment or prepayment of any principal amount of the Loans or
any Tranche thereof or the conversion of any portion of any Eurodollar Tranche
to an Alternate Rate Tranche or Base Rate Tranche on any day other than the last
day of an Interest Period or the payment of any interest on such Tranche, or
portion thereof, on a day other than an Interest Payment Date for such Tranche
or (iv) any failure of Borrower to accept a Tranche or continue or convert a
Tranche after delivery of a notice requesting a continuation or conversion under
Section 2.5 or any failure by Borrower to satisfy any of the conditions
precedent to the making or the continuing or conversion of a Tranche (other than
any such conditions that are waived in accordance with the provisions hereof).
The determination of each Lender of any amount payable under this Section 2.15
shall, in the absence of manifest error, be conclusive and binding upon
Borrower.
SECTION 3
SECURITY
3.1 MORTGAGES; ENVIRONMENTAL AGREEMENT; TITLE INSURANCE.
SPTMRT or SPTBROOK, as applicable, will execute and deliver to or in favor of
Administrative Agent on behalf of Lenders with respect to each Marriott Property
and Brookdale Property a mortgage and security agreement or a deed of trust and
security agreement dated as of the date hereof (each such mortgage and security
agreement or deed of trust and security agreement being herein called a
"Mortgage" and, collectively, the "Mortgages") encumbering the respective
Property with a first lien in Administrative Agent's favor on behalf of Lenders
as security for the payment and performance of the Obligations. In connection
with the Mortgages, Borrower and Guarantors will execute and deliver to
Administrative Agent on behalf of Lenders an environmental indemnity agreement
dated as of the date hereof relating to the Properties encumbered by the
Mortgages (the "Environmental Agreement"). Each Mortgage shall be insured in
the respective amount set forth in SCHEDULE 3 for the related Property, at
Borrower's expense, by the Title Insurance Policies. The Title Insurance
Policies shall contain (i) such endorsements as Administrative Agent may
require, including, without limitation, survey endorsements and tie-in
endorsements, (ii) no exception for creditors rights, and (iii) such other
provisions as Administrative Agent may reasonably require. Except as approved
by Administrative Agent in writing prior to the Closing Date, the Title
Insurance Policies shall not contain any survey exceptions, exceptions for
rights of parties in possession (other than the Marriott Tenants under the
Marriott Leases and the Brookdale Master Tenant and Brookdale Subtenants under
the Brookdale Master Lease and Brookdale Subleases), easements not of record or
installments of taxes or special assessments (other than taxes and special
assessments not then payable), or any other exceptions to coverage not approved
by Administrative Agent. Borrower will obtain reinsurance agreements with
direct access in form, substance and amounts satisfactory to Administrative
Agent. The primary carrier of the Title Insurance Policies and any companies
providing reinsurance shall be subject to the approval of Administrative Agent.
In addition to the liens of the Mortgages on the Marriott Properties and
Brookdale Properties, each Mortgage shall grant to Administrative Agent on
behalf of Lenders security interests in all right, title and interest of SPTMRT
or SPTBROOK (as applicable) in and to (1) all construction materials delivered
to the respective Property but not yet incorporated therein, now owned or
hereafter acquired, (2) all machinery, equipment, fixtures, furnishings,
furniture, appliances, general intangibles, accounts and other personalty, now
owned or hereafter acquired, and intended to be incorporated into or used in
connection with construction or operation of the respective Property or
otherwise relating thereto, and (3) all insurance on all the foregoing and the
proceeds of any sale or exchange of the foregoing in whole or in part.
3.2 ASSIGNMENTS OF LEASES, RENTS AND LEASE GUARANTIES. As
additional security for the payment and performance of the Obligations, SPTMRT
or SPTBROOK, as applicable, will execute and deliver to Administrative Agent on
behalf of Lenders with respect to
<PAGE>
each Marriott Property and Brookdale Property an assignment of leases, rents
and lease guaranties dated as of the date hereof (each such assignment of
leases, rents and lease guaranties being herein called an "Assignment of
Leases, Rents and Lease Guaranties" and, collectively, the "Assignments of
Leases, Rents and Lease Guaranties"), assigning to Administrative Agent on
behalf of Lenders, the Lease and the Lease Guaranty relating to such Property
and all other present and future leases and subleases of all or any part of
such Property, all security for the payment of rent, all agreements to lease
all or any part of such Property and all guaranties of rent or agreements to
maintain rent with respect to all or any part of such Property. The Lease for
each Marriott Property and Brookdale Property (i) shall include a consent by
the Tenant thereof to the respective Mortgage and the respective Assignment
of Leases, Rents and Lease Guaranties, (ii) shall be a triple net lease on
the form of lease for such Property delivered to Administrative Agent
pursuant to Section 4.1, and (iii) shall include subordination and attornment
provisions in favor of Administrative Agent and Lenders.
3.3 SHARE PLEDGE AGREEMENT. As security for its Loan
payment and other obligations under this Agreement, the Notes and the
Environmental Agreements, Borrower will execute and deliver to Administrative
Agent on behalf of Lenders, a Pledge and Security Agreement dated as of the date
hereof (the "Share Pledge Agreement") pledging to Administrative Agent on behalf
of Lenders all of the issued and outstanding shares of SPTMRT and SPTBROOK.
3.4 FINANCING STATEMENTS. Borrower and Guarantors will
execute and deliver such financing statements and continuation statements under
the Uniform Commercial Code of the respective states or other applicable law as
Administrative Agent may specify from time to time in order to perfect and
maintain perfection of Administrative Agent's and Lenders' security interests
under the Mortgages, the Assignments of Leases, Rents and Lease Guaranties and
the Share Pledge Agreement, and will pay the costs of filing the same in such
public offices as Administrative Agent may designate.
3.5 ADDITIONAL SUBSIDIARY GUARANTIES. Borrower will not
make any intercompany advance (direct or indirect) of proceeds of a Loan to or
for the benefit of a Subsidiary of Borrower other than SPTMRT and SPTBROOK,
unless Borrower has given Administrative Agent at least five (5) Business Days
written notices of such advance (including the proposed date, amount and purpose
of such advance) and complied with the preconditions to such advance set forth
in this Section. As a precondition to any intercompany advance (directly or
indirectly) of the proceeds of a Loan to or for the benefit of a Subsidiary of
Borrower other than SPTMRT and SPTBROOK, and as a precondition to the advance of
any Loan for such purpose, Borrower will (a) cause such other Subsidiary (i) to
execute and deliver to Administrative Agent and Lenders an Additional Subsidiary
Guaranty by which such Subsidiary shall guarantee and become surety for the
payment of the Loans to the extent of such advance to such Subsidiary and the
accrued interest and other amounts payable hereunder allocable thereto and (ii)
to deliver to Administrative Agent and Lenders such officers' certificates and
opinions of counsel as Administrative Agent may reasonably request with respect
thereto or (b) certify and demonstrate to the reasonable satisfaction of
Administrative Agent that the use of such Loan proceeds meets the conditions of
clause (ii) of the proviso of Section 2.11. Administrative Agent on behalf of
Lenders will, upon written request of Borrower and an Additional Subsidiary
Guarantor, release the Additional Subsidiary Guaranty of
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such Additional Subsidiary Guarantor if either (1) the Loans(s) or portion(s)
thereof guarantied under such Additional Subsidiary Guaranty, together with
all accrued interest and other amounts payable under this Agreement in
connection therewith, have been paid in full in cash designated by Borrower
to Administrative Agent at the time of such payment for application to such
purpose, or (2) such Additional Subsidiary Guarantor has entered into a
financing with a third party creditor involving substantially all of its
assets and applied the entire gross proceeds of such financing (net of
underwriting discounts and commissions and reasonable out-of-pocket fees and
expenses incurred in connection therewith) as provided in Section 2.8(d) to
the prepayment of the Loans (including, to the extent of available proceeds,
the prepayment in whole or in part of the Loan(s) or portion(s) thereof
guarantied under such Additional Subsidiary Guaranty and accrued interest)
and Administrative Agent has received such verifications with respect to such
prepayment as Administrative Agent may reasonably require, PROVIDED that,
following such prepayment, Borrower will not permit such Subsidiary to
acquire any Fee Interests, Leasehold Interests or Mortgage Interests in
properties that are not Senior Housing Properties unless any remaining unpaid
balance of such Loan(s) or portions thereof have been paid in full in cash
designated by Borrower to Administrative Agent at the time of such payment
for application to such purpose. Any such release shall be effected by
delivery of a written instrument to such effect by Administrative Agent to
such Additional Subsidiary Guarantor and Borrower (with copies to Lenders).
SECTION 4
CONDITIONS PRECEDENT
4.1 REQUIRED DOCUMENTATION. As a condition to the
effectiveness of this Agreement and the funding of the Initial Loan, all
documents and legal matters in connection with the transactions contemplated by
this Agreement and the other Loan Documents shall be satisfactory in form and
substance to Administrative Agent and its counsel, and Administrative Agent
shall have received each of the following in form and substance satisfactory to
Administrative Agent, with counterparts or copies for each Lender:
4.1.1 AGREEMENT, NOTES, FEE AND EXPENSE LETTERS. Counterparts
of this Agreement duly executed by duly authorized officers of Borrower,
Guarantors, Lenders and Administrative Agent, complete with all Exhibits and
Schedules; for the account of each Lender, a Note conforming to the requirements
hereof and duly executed by a duly authorized officer of Borrower; and the Fee
and Expense Letters duly executed by duly authorized officers of Borrower and
HRPT, as applicable.
4.1.2 SECURITY DOCUMENTS. Counterparts of the Mortgages, the
Environmental Agreement, the Assignments of Leases, Rents and Lease Guaranties,
the Share Pledge Agreement, the Consolidation Agreement and the financing
statements required under Section 3.4, all of which shall be duly executed and
delivered and, if required, acknowledged and in recordable form; PROVIDED that
the Mortgages and the Assignments of Leases, Rents and Lease Guaranties shall be
held in escrow by the Title Company, and the Share Pledge Agreement and the
financing statements shall be held in escrow by Administrative Agent, in each
case pending release for delivery and presentation for recordation and filing in
the appropriate public records, as applicable, pursuant to Section 4.3.
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<PAGE>
4.1.3 LEGAL OPINIONS. Favorable opinions of Sullivan &
Worcester LLP, as counsel to Borrower, Guarantors, Borrower's other
Subsidiaries, HRPT and the Advisor, and of local counsel with respect to
Guarantors and each of the Marriott Properties and Brookdale Properties, with
respect to Borrower, Guarantors, Borrower's other Subsidiaries, HRPT, the
Advisor and the Loan Documents, addressed to Administrative Agent and Lenders
and dated the Closing Date.
4.1.4 ORGANIZATIONAL DOCUMENTS. Certified copies of the
Declaration of Trust, the by-laws and all resolutions of the Board of Trustees
of Borrower and the Declaration of Trust, the by-laws and all resolutions of the
Board of Trustees of each Guarantor. Such resolutions shall approve this
Agreement and the other Loan Documents to which Borrower or the respective
Guarantor is a party and the transactions contemplated hereby and thereby, and
of all documents evidencing other necessary corporate action and approvals, if
any, of Governmental Authorities with respect to this Agreement and the other
Loan Documents and the transactions contemplated hereby and thereby.
4.1.5 GOOD STANDING AND EXISTENCE. Certificates of the
appropriate governmental officials of the State of Maryland, each dated a recent
date on or prior to the Closing Date, to the effect that Borrower and Guarantors
are validly existing and are in good standing with respect to payment of
franchise and similar taxes and are duly qualified to transact business therein.
4.1.6 ADVISORY AGREEMENT AND SUBORDINATION AGREEMENT. Copies
of the Advisory Agreement, certified by a Responsible Officer, and a counterpart
of the Subordination Agreement.
4.1.7 MARRIOTT AND BROOKDALE LEASES AND LEASE GUARANTIES.
Copies of the Marriott Leases, the Marriott Lease Guaranties, the Brookdale
Master Lease, the Brookdale Subleases and the Brookdale Lease Guaranty for each
of the Marriott Properties and Brookdale Properties, and a copy of the Ground
Lease, each certified by a Responsible Officer of Borrower.
4.1.8 ESTOPPEL CERTIFICATES. Estoppel certificates from the
Ground Lessor with respect to the Ground Lease and from the Marriott Tenants,
Marriott, the Brookdale Master Tenant and the Brookdale Lease Guarantors with
respect to the Marriott Leases, the Marriott Lease Guaranties, the Brookdale
Master Lease and the Brookdale Lease Guaranty.
4.1.9 REAL PROPERTY STATEMENT. A Real Property Statement
dated the Closing Date.
4.1.10 TITLE INSURANCE. Pro forma commitments for the Title
Insurance Policies for each of the Marriott Properties and Brookdale Properties,
issued by the title agent for the Title Company, together with evidence that the
required reinsurance has been reserved.
4.1.11 EVIDENCE OF INSURANCE. Evidence that the insurance
required by Sections 6.6 of this Agreement, and by the Marriott Leases and the
Brookdale Master Lease, is in effect as therein required with respect to each of
the Marriott Properties and Brookdale Properties, as applicable, with the
Administrative Agent named as an additional insured or mortgagee and loss payee
as appropriate.
4.1.12 FINANCIAL STATEMENTS. The financial statements of
Borrower and Guarantors
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<PAGE>
described in Section 5.1, certified by Responsible Officers of Borrower and
Guarantors, respectively; and copies of the most recent publicly available
audited and unaudited financial statements of Marriott and Brookdale.
4.1.13 SURVEYS. A current survey and legal description for
each of the Marriott Properties and Brookdale Properties, certified to
Administrative Agent and the Title Company, by a surveyor on a certificate
satisfactory to Administrative Agent, and evidence as to whether the respective
Property is located in a Special Flood Hazard Area as defined by the United
States Department of Housing and Urban Development.
4.1.14 APPRAISALS. An Appraisal for each of the Marriott
Properties and Brookdale Properties, in an aggregate amount for all such
Properties not less than $500,000,000.
4.1.15 PHASE I REPORTS. A Phase I Environmental Report for
each of the Marriott Properties and Brookdale Properties, prepared at the
expense of Borrower, concerning the quality and condition of the respective
Property conducted by a firm satisfactory to Administrative Agent, which shall
be free of qualification and accompanied by a letter from such firm to
Administrative Agent and Lenders to the effect that Administrative Agent and
Lenders may rely on such report as though it were addressed to them.
4.1.16 PROJECT CERTIFICATES. Copies of the occupancy
certificate and the certificate of need, if applicable, for each of the Marriott
Properties and Brookdale Properties, issued by the appropriate Governmental
Authorities, except for any such certificate which Borrower has advised
Administrative Agent in writing prior to the Closing Date is unavailable.
4.1.17 UCC SEARCHES. Searches of such public records as
Administrative Agent may require showing no Liens against the Marriott
Properties and Brookdale Properties (or related personal property or fixtures),
the Marriott Leases, the Marriott Lease Guaranties, the Brookdale Master Lease,
the Brookdale Lease Guaranty or any other property of either Guarantor other
than the Liens of the Loan Documents.
4.1.18 COMPLIANCE LETTERS. With respect to each Marriott
Property and Brookdale Property, evidence of compliance with applicable zoning
laws, and no violations of local laws and codes, applicable to such Property.
4.1.19 POST-CLOSING LETTER. If applicable and acceptable to
Administrative Agent in its sole and absolute discretion a post-closing letter
covering such matters set forth in this Section 4.1 to be completed within such
set time limits after the Closing Date as Administrative Agent may require.
4.1.20 ADDITIONAL DOCUMENTS. Such other approvals, opinions or
documents as Administrative Agent may reasonably request.
4.2 UP FRONT COMPENSATION AND EXPENSES. As further
condition to the effectiveness of this Agreement and the finding of the Initial
Loan, Administrative Agent shall have
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<PAGE>
received payment of the up front fee and expenses payable pursuant to section
2.6(a) and the first annual administrative fee payable pursuant to Section
2.6(b).
4.3 ADDITIONAL CONDITIONS PRECEDENT TO INITIAL LOAN. As
additional conditions precedent to making the Initial Loan, Administrative Agent
shall have received each of the following in form and substance satisfactory to
Administrative Agent:
4.3.1 SECURITY DOCUMENTS. The Mortgages, the Assignments of
Leases, Rents and Lease Guaranties, the Share Pledge Agreement and the financing
statements delivered into escrow pursuant to Section 4.1(b) shall have been
released from escrow and recorded or presented for recordation or filing in the
appropriate public records, as applicable;
4.3.2 LEGAL OPINION. Favorable opinions of Sullivan &
Worcester LLP, as counsel to Borrower, Guarantors, Borrower's other
Subsidiaries, HRPT and the Advisor, and of local counsel with respect to
Guarantors and each of the Marriott Properties and Brookdale Properties, with
respect to Borrower, Guarantors and the Loan Documents, addressed to
Administrative Agent and Lenders, dated the date of advance of the Initial Loan
and in the forms of such opinions submitted to Administrative Agent on the
Closing Date for purposes of this Section 4.2.
4.3.3 TITLE INSURANCE. Endorsed commitments for the Title
Insurance Policies for each of the Marriott Properties and Brookdale Properties,
issued by the title agent for the Title Company, each in the form of the
applicable pro forma commitment delivered to Administrative Agent pursuant to
Section 4.1(j) and dated the date of the advance of the Initial Loan, with
premiums paid thereon, together with evidence that the required reinsurance has
been reserved; provided that any exception for real estate taxes in any such
commitment must state that no such taxes are delinquent as the date of the
advance of the Initial Loan.
4.3.4 ADDITIONAL DOCUMENTS. Such other approvals, opinions or
documents as Administrative Agent may reasonably request.
4.4 CONDITIONS PRECEDENT TO LOANS. The obligations of
Lenders to make the Initial Loan and each subsequent Loan on the Borrowing Date
therefor are subject to the following further conditions precedent:
4.4.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by Borrower or either Guarantor herein or made by Borrower,
either Guarantor or any Additional Subsidiary Guarantor in the other Loan
Documents or which are contained in any certificate, document or financial or
other statement furnished at any time under or in connection with any of the
Loan Documents, shall be true, correct and accurate in all material respects on
and as of such Borrowing Date as if made on and as of such date unless stated to
relate to a specific earlier date, in which case such representations and
warranties shall be true, correct and complete in all material respects as of
such earlier dates.
4.4.2 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of
Default shall have occurred and be continuing on such Borrowing Date either
before or after giving effect to such Loan.
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4.4.3 LEGALITY OF LOAN. The making of the Loans hereunder
by Lenders and the acquisition of the Notes shall be permitted as of such
Borrowing Date by all applicable Requirements of Law and shall not subject
any Lender to any penalty or other onerous condition in or pursuant to any
such Requirement of Law or result in a Material Adverse Effect.
4.4.4 NO MATERIAL ADVERSE EFFECT. No Material Adverse Effect
shall have occurred since June 30, 1999.
4.4.5 SOLVENCY. Both immediately before and immediately after
the making of such Loan, Borrower, each Guarantor and each Additional Subsidiary
Guarantor, if any, shall be Solvent.
4.4.6 COLLATERAL COVERAGE RATIO. The Collateral Coverage
Ratio is at least 1.20 to 1.
4.4.7 BORROWING CERTIFICATE. Administrative Agent shall have
received, with a counterpart for each Lender, a Notice of Borrowing, dated such
Borrowing Date, substantially in the form of EXHIBIT B, with appropriate
insertions and attachments satisfactory in form and substance to Administrative
Agent and its counsel, executed by a Responsible Officer.
4.4.8 BORROWING LIMITS. After the making of such Loan on such
Borrowing Date, the aggregate outstanding principal amount of all Loans shall
not exceed the aggregate amount of the Commitments.
4.4.9 ADDITIONAL SUBSIDIARY GUARANTIES. Additional Subsidiary
Guaranties if and as required by Section 3.5 duly executed and delivered by the
respective Additional Subsidiary Guarantors, together with such officers'
certificates and opinions of counsel as Administrative Agent may reasonably
request with respect thereto.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF BORROWER AND GUARANTOR
In order to induce Lenders to enter into this Agreement and to
make the Loans, Borrower and Guarantors hereby covenant, represent and warrant
to Administrative Agent and each Lender (for which purpose, Borrower and
Guarantors shall be charged with and deemed to have the knowledge of HRPT and
the Advisor) that:
5.1 FINANCIAL CONDITION. The unaudited consolidated balance
sheet of Borrower and its Subsidiaries as of the Closing Date, the unaudited
balance sheet of each Guarantor as of the Closing Date, and the unaudited pro
forma consolidated balance sheet of Borrower and its Subsidiaries as of June 30,
1999 and the related unaudited pro forma consolidated statement of income for
the fiscal quarter ended on such date, together with an unaudited pro forma
consolidated statement of income for the fiscal year ended December 31, 1998,
copies of which have been furnished to Administrative Agent, are complete and
correct and present fairly the pro forma
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financial conditions of Borrower and its Subsidiaries on a consolidated basis
as of such dates. All such financial statements, including the adjustments
set forth therein, have been prepared in accordance with GAAP applied
consistently (except as disclosed therein). Borrower and its Subsidiaries
have no material Contingent Obligation, contingent liability or liability for
taxes, long-term lease or unusual forward or long-term commitment, which is
not reflected in the foregoing statements or in the notes thereto.
5.2 NO MATERIAL ADVERSE EFFECT. Since June 30, 1999 (a)
there has been no Material Adverse Effect, and no event has occurred and no
condition exists which could reasonably be expected to have a Material Adverse
Effect, and (b) no dividends or other distributions have been declared by
Borrower, and no Common Shares, Preferred Shares or other equity securities of
Borrower have been redeemed, retired, purchased or otherwise acquired for value
by Borrower or any of its Subsidiaries, the payment of which could result in a
Default or Event of Default.
5.3 EXISTENCE; COMPLIANCE WITH LAW. Each of Borrower and
its Subsidiaries (including each Guarantor) (a) is, in the case of Borrower and
its Subsidiaries described in recital paragraph A of this Agreement, a real
estate investment trust duly organized, validly existing and in good standing
under the laws of the State of Maryland and, in the case of each such other
Subsidiary, a corporation, real estate investment trust or limited liability
company, as the case may be, duly organized, validly and existing and in good
standing under the laws of its respective jurisdiction of formation, (b) has
full power and authority and the legal right to own its property, to lease (as
lessee) the property that it leases as lessee, to lease (as lessor) or sublease
the property it owns and/or leases (as lessee) and to conduct the business in
which it is currently engaged, (c) is duly qualified and is in good standing
under the laws of each jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except to the extent
that the failure to be so qualified or in good standing is not reasonably likely
to have, in the aggregate, a Material Adverse Effect, and (d) is in compliance
with all Requirements of Law except to the extent that the failure to comply
therewith is not reasonably likely to have, in the aggregate, a Material Adverse
Effect.
5.4 TENANTS, CREDIT SUPPORT OBLIGORS, ADVISOR, COMPLIANCE
WITH LAWS.
5.4.1 To the best knowledge and belief of Borrower and its
Subsidiaries, each Tenant (including each Marriott Tenant, the Brookdale Master
Tenant and each Brookdale Subtenant) (i) has full power and authority and the
legal right to own, lease (or sublease) and operate (as applicable) the Property
or Properties it leases (or subleases) and to conduct the business in which it
is currently engaged with respect to such Property or Properties, (ii) is duly
qualified or licensed and is in good standing under the laws of each
jurisdiction where its ownership, lease (or sublease) or operation of any
Property requires such qualification, except, in the case of any Other Property,
to the extent the failure to be so qualified, licensed or in good standing is
not reasonably likely to have a MAC, and (iii) is in compliance with all
Requirements of Law applicable to the Property or Properties leased (or
subleased) by it, or applicable to the operation thereof, except to the extent
that the failure to comply therewith is not reasonably likely to have (i) the
case of any Marriott Property or Brookdale Property, a MAC, or (ii) in the case
of all Properties, in the aggregate, a Material Adverse Effect.
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5.4.2 To the best knowledge and belief of Borrower and its
Subsidiaries, each of the Credit Support Obligors (including Marriott and the
Brookdale Lease Guarantors) (i) has full power and authority and legal right to
conduct the business in which it is presently engaged and to perform its
obligations under the Credit Support Agreements to which it is a party, and (ii)
is in compliance with all Requirements of Law, except, in the case of clauses
(i) and (ii), to the extent that the failure to comply therewith is not
reasonably likely to have, in the aggregate, a Material Adverse Effect.
5.4.3 To the best knowledge and belief of Borrower, the
Advisor (i) has full power and authority and legal right to conduct the business
in which it is presently engaged and to perform its obligations under the
Advisory Agreement, (ii) is duly qualified or licensed and is in good standing
under the laws of each jurisdiction where the conduct of its business requires
such qualification, except to the extent that the failure to be so qualified,
licensed or in good standing is not reasonably likely to have, in the aggregate,
a Material Adverse Effect, and (iii) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith is not reasonably
likely to have, in the aggregate, a Material Adverse Effect.
5.5 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of
Borrower and Guarantors has the power and authority and the legal right to make,
deliver and perform each of the Loan Documents to which it is a party and, in
the case of Borrower, to borrow hereunder and, in the case of each Guarantor,
guarantee the obligations of Borrower under the Loan Documents; and Borrower and
Guarantors have taken all necessary action to authorize the borrowing and
guaranty hereunder, on the terms and conditions of the Loan Documents, and each
of Borrower and Guarantors has taken all necessary action to authorize the
execution, delivery and performance of each of the Loan Documents to which it is
a party. No consent or authorization of, filing with, or other act by or in
respect of any Governmental Authority is required in connection with the
borrowing or guaranty hereunder or with the execution, delivery, performance,
validity or enforceability of the Loan Documents other than such recordations
and filings with such public offices of Governmental Authorities as are normally
required to perfect liens of the types created thereby under applicable law.
This Agreement and the other Loan Documents have been duly executed and
delivered on behalf of Borrower and Guarantors, as applicable, and this
Agreement and the other Loan Documents constitute legal, valid and binding
obligations of Borrower and Guarantors, as applicable, enforceable against
Borrower and Guarantors, as applicable, in accordance with their terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally.
5.6 NO LEGAL BAR. The execution, delivery and performance
of this Agreement and the other Loan Documents, the borrowing and the guaranty
hereunder and the use of the proceeds thereof, will not violate any Requirement
of Law or any Contractual Obligation of Borrower, either Guarantor or any of
Borrower's other Subsidiaries, and will not result in, or require, the creation
or imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or Contractual Obligation other than pursuant
to the Loan Documents.
5.7 NO MATERIAL LITIGATION. No litigation, investigation or
proceeding of or
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before any arbitrator or Governmental Authority is pending or, to the best
knowledge and belief of Borrower and its Subsidiaries, threatened by or
against Borrower, either Guarantor or any of Borrower's other Subsidiaries
or against any of their respective properties or revenues or, to the best
knowledge and belief of Borrower and its Subsidiaries, by or against any of
the Tenants, Mortgagors, Marriott, any Brookdale Lease Guarantor or any of
the other Credit Support Obligors or against any of their respective
properties (a) with respect to this Agreement or any of the other Loan
Documents, any of the Leases, the Mortgage Interest Agreements or the Credit
Support Agreements, or any of the transactions contemplated hereby or thereby
or (b) relating to any of the Properties or Mortgaged Properties or the
ownership or the operation thereof or the conduct of business thereon as
presently conducted, which, in the case of clause (a) or (b), is reasonably
likely to have, in the aggregate, a MAC with respect to any Marriott Property
or Brookdale Property or a Material Adverse Effect.
5.8 NO DEFAULT. Neither Borrower, SPTMRT, SPTBROOK nor any
of Borrower's other Subsidiaries is in default under or with respect to any
Contractual Obligation in any respect which could have a MAC with respect to any
Marriott Property or Brookdale Property or a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
5.9 PROPERTIES; LEASES; ETC.
5.9.1 In the case of each Marriott Property and Brookdale
Property which is a Fee Interest, SPTMRT or SPTBROOK, as applicable, has good
record, marketable and indefeasible fee simple absolute title to such Fee
Interest. In the case of the Marriott Property which is a Leasehold Interest,
SPTMRT has good record and marketable title to such Leasehold Interest. In the
case of each Marriott Property and Brookdale Property, the title thereto of
SPTMRT or SPTBROOK, as applicable, is free and clear of all Liens and other
matters affecting title, except for the Mortgages, the Assignments of Leases,
Rents and Lease Guaranties, Permitted Encumbrances and such other matters as are
set forth in the Title Insurance Policies. None of the Marriott Properties and
Brookdale Properties is located in a Special Flood Hazard Area as defined by the
United States Department of Housing and Urban Development, except as set forth
in the surveys thereof delivered to Administrative Agent pursuant to Section
4.1. In the case of each Other Property which is a Fee Interest, Borrower or
one of its Subsidiaries has good record, marketable and indefeasible fee simple
absolute title to such Fee Interest. In the case of each Other Property which
is a Leasehold Interest, Borrower or one of its Subsidiaries has good record and
marketable title to such Leasehold Interest. In the case of each Mortgage
Interest, Borrower or one of its Subsidiaries owns such Mortgage Interest and
the same is supported by a valid and enforceable mortgage lien on the Mortgaged
Property subject thereto. In the case of each Mortgage Interest in respect of
which all or any part of the Mortgaged Property is a fee interest in land and/or
buildings, structures, improvements and fixtures, the Mortgagor with respect to
such Mortgaged Property has good record, marketable and indefeasible fee simple
absolute title to such Mortgaged Property. In the case of each Mortgage
Interest in respect of which all or any part of the Mortgaged Property is a
leasehold estate, the Mortgagor with respect to such Mortgaged Property has good
record and marketable title to such leasehold estate.
5.9.2 The buildings, structures and other improvements located
on each Marriott Property and Brookdale Property are in good operating condition
and repair (ordinary wear and tear
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which are not such as to materially adversely affect the operations of the
business conducted thereon, excepted), free of any material structural or
engineering defects known to Borrower or either Guarantor and are suitable
for their present uses, except for any conditions disclosed to Administrative
Agent in writing which are not reasonably likely to have, in the aggregate, a
MAC with respect to any Marriott Property or Brookdale Property. The
buildings, structures, and other improvements located on each Other Property
are in good operating condition and repair (ordinary wear and tear which are
not such as to materially and adversely affect the operations of the business
conducted thereon, excepted), free of any material structural or engineering
defects known to Borrower or any of its Subsidiaries on the date hereof and
are suitable for their present uses, subject to such exceptions which are not
reasonably likely to have, in the aggregate, a Material Adverse Effect.
5.9.3 Each Marriott Property and Brookdale Property includes
rights of ingress from and egress to a public street. All water, sewer, gas,
electricity, telephone and other utilities serving each Marriott Property and
Brookdale Property are supplied directly to such Property by public utilities
and enter such Property through adjoining public streets or, if they pass
through adjoining private land, do so in accordance with valid public easements
which inure to the benefit of SPTMRT or SPTBROOK, as applicable, subject to such
exceptions which are not reasonably likely to have, in the aggregate, a MAC with
respect to any Marriott Property or Brookdale Property. All of such utilities
are presently installed and operating and are in good and safe condition,
subject to such exceptions which are not reasonably likely to have, in the
aggregate, a MAC with respect to any Marriott Property or Brookdale Property.
All material assessments for public improvements that have been made against any
Marriott Property or Brookdale Property have been paid or provided for, except
that in the case of any assessments that are payable in installments, all
installments due have been paid or provided for, subject to such exceptions
which are not reasonably likely to have, in the aggregate, a MAC with respect to
any Marriott Property or Brookdale Property. With respect to each Other
Property and Mortgaged Property, all water, sewer, gas, electricity, telephone
and other utilities serving such Property or Mortgaged Property are supplied
directly to such Property or Mortgaged Property by public utilities and enter
such Property or Mortgaged Property through adjoining public streets or, if they
pass through adjoining private land, do so in accordance with valid public
easements which inure to the benefit of Borrower or one of its Subsidiaries (in
the case of a Property) or a Mortgagor's benefit (in the case of a Mortgagor
Property), subject to such exceptions which are not reasonably likely to have,
in the aggregate, a Material Adverse Effect. All of such utilities are
presently installed and operating and are in good and safe condition, subject to
such exceptions which are not reasonably likely to have, in the aggregate, a
Material Adverse Effect. All material assessments for public improvements that
have been made against any Other Property or Mortgaged Property have been paid
or provided for, except that in the case of any assessments that are payable in
installments, all installments due have been paid or provided for, subject to
such exceptions which are not reasonably likely to have, in the aggregate, a
Material Adverse Effect.
5.9.4 Neither Borrower, SPTMRT, SPTBROOK, any other Subsidiary
of Borrower, HRPT nor the Advisor, or, to the best knowledge and belief of
Borrower and its Subsidiaries, any Tenant, has received notice of any pending,
threatened or contemplated condemnation proceeding or similar taking affecting
any of the Properties or Mortgaged Properties or any portion thereof, or any
sale or other disposition of any of the Properties or Mortgaged Properties or
any portion thereof
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in lieu of condemnation or similar taking, except as disclosed to
Administrative Agent in writing from time to time.
5.9.5 Each Marriott Property and Brookdale Property, and the
use thereof pursuant to the related Lease, comply with, and are lawful,
permitted and confirming uses under, all applicable building, fire, safety,
subdivision, zoning, sewer, environmental, health, insurance and other laws,
ordinances, rules, regulations and plan approval conditions of any Governmental
Authority, subject to such exceptions which are not reasonably likely to have,
in the aggregate, a MAC with respect to any Marriott Property or Brookdale
Property.
5.9.6 With respect to each of the Marriott Properties and
Brookdale Properties, all Real Property Permits have been issued and are in full
force and effect, subject to such exceptions which are not reasonably likely to
have, in the aggregate, a MAC with respect to such Property. Neither Borrower,
SPTMRT, SPTBROOK, the Advisor nor HRPT has received or been informed by a third
party, including the respective Tenants, Marriott and the Brookdale Lease
Guarantors, of the receipt by it of any notice from any Governmental Authority
having jurisdiction over any of the Marriott Properties and Brookdale
Properties or any portion thereof or from any insurance company or fire rating
or similar board or organization threatening a suspension, revocation,
modification or cancellation of any Real Property Permit, except as has been
disclosed to Administrative Agent in writing and is not reasonably likely to
have, in the aggregate, a MAC with respect to any Marriott Property or Brookdale
Property.
5.9.7 With respect to each Other Property and Mortgaged
Property, all Real Property Permits have been issued and are in full force and
effect, subject to such exceptions which are not reasonably likely to have, in
the aggregate, a Material Adverse Effect. Neither Borrower nor any of its
Subsidiaries has received or been informed by a third party, including the
Tenant or Mortgagor of any such Property or Mortgaged Property, of the receipt
by it of any notice from any Governmental Authority having jurisdiction over any
such Property or Mortgaged Property or any portion thereof or from any insurance
company or fire rating or similar board or organization threatening a
suspension, revocation, modification or cancellation of any Real Property
Permit, subject to such exceptions which are not reasonably likely to have, in
the aggregate, a Material Adverse Effect.
5.9.8 The copies of the Ground Lease, the Marriott Leases, the
Marriott Lease Guaranties, the Brookdale Master Lease, the Brookdale Subleases
and the Brookdale Lease Guaranty delivered to Administrative Agent pursuant to
Section 4.1 are true and complete copies of such documents as modified, amended,
supplemented, transferred and assigned as of the Closing Date. There are no
agreements or understandings between Borrower, SPTMRT, SPTBROOK, the Advisor or
HRPT and any of the Marriott Tenants, Marriott, the Brookdale Master Tenant or
the Brookdale Lease Guarantors with respect to any of the Marriott Properties
and Brookdale Properties other than the Marriott Leases, the Marriott Lease
Guaranties, the Brookdale Master Lease, the Brookdale Subleases and the
Brookdale Lease Guaranty, and there are no leases, subleases, agreements to
lease or occupancy agreements relating to any of the Marriott Properties and
Brookdale Properties other than the Ground Lease and the Marriott Leases, the
Brookdale Master Lease and the Brookdale Subleases.
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5.9.9 Each of the Marriott Leases, the Marriott Lease
Guaranties, the Brookdale Master Lease and the Brookdale Lease Guaranty is in
full force and effect and is a legally valid and binding obligation of the
respective Tenant, Marriott or the Brookdale Lease Guarantors, as applicable.
Neither Guarantor has mortgaged, pledged or otherwise encumbered any of the
Marriott Leases, the Marriott Lease Guaranties, the Brookdale Master Lease or
the Brookdale Lease Guaranty or its right to obtain rental interest or other
payments thereunder except for the Mortgages and the Assignments of Leases,
Rents and Lease Guaranties and the other Liens permitted by Section 7.9.
Neither Borrower, SPTMRT, SPTBROOK, the Advisor nor HRPT has collected any rents
becoming due under any Marriott Lease more than three (3) months in advance or
the Brookdale Master Lease more than 30 days in advance. All rents and other
sums and charges payable by the Tenants under the Marriott Leases and the
Brookdale Master Lease are current, no notice of default or termination under
any such Lease is outstanding, no termination event or condition or uncured
default on the part of SPTMRT, SPTBROOK or any Tenant exists under any such
Lease and, to the best knowledge and belief of Borrower and Guarantors, no event
has occurred which, with the giving of notice or the lapse of time or both,
would constitute such a default or termination event or condition or uncured
default on the part of SPTMRT, SPTBROOK or any Tenant under any such Lease. All
payments required from Marriott or the Brookdale Lease Guarantors in respect of
any Marriott Lease Guaranty or the Brookdale Lease Guaranty are current, no
notice of default or acceleration under any Marriott Lease Guaranty or the
Brookdale Lease Guaranty is outstanding, and no default or condition or uncured
default on the part of Marriott or any Brookdale Lease Guarantor exists under
any Marriott Lease Guaranty or the Brookdale Lease Guaranty. As to all of the
Marriott Leases and the Brookdale Master Lease, Guarantors have performed all of
their respective repair and maintenance obligations (if any) and, to the best
knowledge and belief of Borrower and Guarantors, each Tenant under each such
Lease (and the Brookdale Subleases) has performed all of its repair and
maintenance obligations.
5.9.10 Each of the Leases, Mortgage Interest Agreements and
Credit Support Agreements relating to Other Properties and Mortgage Interests is
in full force and effect and is a legally valid and binding obligation of
Borrower or one of its Subsidiaries and the other parties thereto, subject to
such exceptions which are not reasonably likely to have, in the aggregate, a
Material Adverse Effect. As of the Closing Date, neither Borrower nor any of
its Subsidiaries has mortgaged, pledged or otherwise encumbered any of the
Leases with respect to Other Properties or Mortgage Interest Agreements or its
right to obtain rental interest or other payments thereunder. Neither Borrower
nor any of its Subsidiaries has collected any rents becoming due under any Lease
relating to Other Properties more than 30 days in advance. All rent and other
sums and charges payable by the Tenant under each Lease with respect to Other
Properties are current, no notice of default or termination under any such Lease
is outstanding, no termination event or condition or uncured default on the part
of a Tenant exists under any such Lease, and no event of default has occurred
which, with the giving of notice or the lapse of time or both, would constitute
such a default or termination event or condition or uncured default on the part
of Borrower or its Subsidiaries or any Tenant (as the case may be), subject to
such exceptions which are not reasonably likely to have, in the aggregate, a
Material Adverse Effect. Except as set forth on SCHEDULE 6, all payments
required from any Mortgagor under any Mortgage Interest Agreement to which it is
a party are current, no notice of default or acceleration under any such
Mortgage Interest Agreement is outstanding, no
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default or condition or uncured default on the part of any Mortgagor exists
under any Mortgage Interest Agreement, and no event of default has occurred
which, with the giving of notice or the lapse of time or both, would
constitute such a default or termination event or condition or uncured
default on the part of any Mortgagor, subject to such exceptions which are
not reasonably likely to have, in the aggregate, a Material Adverse Effect.
All payments required from any Credit Support Obligor in respect of any
Credit Support Agreement for the Lease of any Other Property or for a
Mortgage Interest are current, no notice of default or acceleration under any
such Credit Support Agreement is outstanding, and no default or condition or
uncured default on the part of such Credit Support Obligor exists under any
such Credit Support Agreement, subject to such exceptions which are not
reasonably likely to have, in the aggregate, a Material Adverse Effect. As
to all of the Leases with respect to the Other Properties, Borrower and each
of its Subsidiaries has performed all of its repair and maintenance
obligations (if any) and, to the best knowledge and belief of Borrower, each
Tenant and Mortgagor under each such Lease and Mortgage to which it is a
party has performed all of its repair and maintenance obligations, subject to
such exceptions which are not reasonably likely to have, in the aggregate, a
Material Adverse Effect.
5.9.11 Borrower and each of its Subsidiaries has good record
and marketable title in fee simple to or valid mortgage interests in all its
real property, other than the Properties and Mortgaged Properties, as to which
Borrower has made the representation set forth in Section 5.9(a), and good title
to all its other property other than the Properties, and, as of the Closing
Date, none of such property is subject to any Lien for borrowed money.
5.10 NO BURDENSOME RESTRICTIONS. No Contractual Obligation
of Borrower, any Guarantor or any of Borrower's other Subsidiaries or, to
Borrower's and its Subsidiaries' best knowledge and belief, of any of the
Tenants or the Mortgagors, and no Requirement of Law, currently has, or insofar
as Borrower and Guarantors may reasonably foresee may have, a MAC with respect
to any Marriott Property or Brookdale Property or a Material Adverse Effect.
5.11 TAXES. Each of Borrower, Guarantors and Borrower's
other Subsidiaries has filed or caused to be filed all tax returns which to the
best knowledge and belief of Borrower and Guarantors are required to be filed,
and has paid or caused to be paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than those the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of Borrower, SPTMRT, SPTBROOK or such other Subsidiary); and no tax Liens
have been filed and, to the knowledge of Borrower and Guarantors, no claims are
being asserted with respect to any such taxes, fees or other charges and there
are no matters under discussion with any Governmental Authority that, in any
such case, could result in a material additional liability for taxes and which
would reasonably be expected to have a Material Adverse Effect.
5.12 FEDERAL REGULATIONS. Neither Borrower, SPTMRT, SPTBROOK
nor any of Borrower's other Subsidiaries is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any
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"margin stock" within the respective meanings of each of the quoted terms
under Regulation U of the Board of Governors of the Federal Reserve System as
now and from time to time hereafter in effect. No part of the proceeds of
the Loans will be used for "purchasing" or "carrying" "margin stock" as so
defined or for any purpose which violates, or which would be inconsistent
with, the provisions of the Regulations of such Board of Governors. If
requested by Administrative Agent, Borrower will furnish to Administrative
Agent and each Lender a statement in conformity with the requirements of
Federal Reserve Form U-1 referred to in said Regulation U to the foregoing
effect.
5.13 EMPLOYEES. Neither Borrower, SPTMRT, SPTBROOK nor any
of Borrower's other Subsidiaries has any employees and none of them has ever
engaged any employees.
5.14 ERISA. No ERISA Affiliate has been, since July 1, 1974,
an "employer", as defined in Section 3(5) of ERISA, in respect of any Plan or
making contributions to any Multiemployer Plan.
5.15 STATUS AS REIT. Upon completion of the spin-off of
Borrower by HRPT and at the time of the advance of the Initial Loan, Borrower
and its Subsidiaries will be organized in conformity with the requirements for
qualification of Borrower as a real estate investment trust under Sections 856
through 860 of the Code. Borrower is in a position to qualify for its taxable
year ending December 31, 1999 as a real estate investment trust under Sections
856 through 860 of the Code and its proposed methods of operation will enable it
to so qualify. Each Guarantor is a "qualified REIT subsidiary" of Borrower
under Section 856(i) of the Code or an entity disregarded as an entity separate
from its owner under the Treasury Regulations under Section 7701 of the Code.
5.16 RESTRICTIONS ON INCURRING INDEBTEDNESS. Neither
Borrower, SPTMRT, SPTBROOK nor any of Borrower's other Subsidiaries is (a) an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended, or (b) a
"holding company" as defined in, or otherwise subject to, regulation under the
Public Utility Holding Company Act of 1935. Neither Borrower, SPTMRT nor
SPTBROOK is subject to regulation under any federal or state statute or
regulation which limits its ability to incur the indebtedness or give the
guaranty described in this Agreement.
5.17 SUBSIDIARIES. Neither Guarantor has any Subsidiaries.
SCHEDULE 4 sets forth a complete and accurate list of all of Borrower's
Subsidiaries showing as of the Closing Date (as to each Subsidiary) the
jurisdiction of its formation, the number of shares of each class of capital
stock authorized, and the number outstanding, and the percentage of each class
of capital stock owned by Borrower, all of which capital stock is owned free and
clear of all Liens as of the Closing Date other than the Stock Pledge Agreement.
All of the issued and outstanding shares of capital stock of Borrower's
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable. Each Guarantor is a wholly owned Subsidiary of Borrower.
5.18 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as fully and
specifically disclosed in the Phase I Environmental Reports delivered to
Administrative Agent pursuant to Section 4.1, each of the Marriott Properties
and Brookdale Properties is in compliance with all
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applicable Environmental Laws, and, to the best knowledge and belief of
Borrower and Guarantors, each Tenant of each of the Marriott Properties and
Brookdale Properties is and has always been in compliance with all applicable
Environmental Laws with respect to the conduct of its business and the
ownership and operation of such Property, subject to such exceptions which
could not have, in the aggregate, a MAC with respect to any Marriott Property
or Brookdale Property. Each of the Other Properties and the Mortgaged
Properties is and has always been in compliance with all applicable
Environmental Laws, and, to the best knowledge and belief of Borrower, each
Tenant of the Other Properties and each Mortgagor of the Mortgaged Properties
is in compliance with all applicable Environmental Laws with respect to the
conduct of its business and the ownership of such Other Properties and
Mortgaged Properties, except for such noncompliance which, in the aggregate,
could not have a Material Adverse Effect.
5.19 POLLUTION; HAZARDOUS MATERIALS. In connection with the
acquisition and ownership of the interests of Borrower and its Subsidiaries in
the Properties and the Mortgage Interests, Borrower and its Subsidiaries have
made (or confirmed that HRPT and its Subsidiaries, as the predecessor owners,
have made) and will continue to make such inquiries, and they have (or confirmed
that HRPT and its Subsidiaries have) caused and will continue to cause such
testing, surveying, inspection or other actions with respect to each Property
and Mortgaged Property as is necessary or appropriate in connection with
Hazardous Materials which might be present in the air, soil, surface water or
groundwater at such Property or Mortgaged Property. Except as fully and
specifically disclosed in the Phase I Environmental Reports delivered to
Administrative Agent pursuant to Section 4.1 or as otherwise are not reasonably
likely to have, in the aggregate, a MAC with respect to any Marriott Property or
Brookdale Property, and except with respect to the Other Properties and the
Mortgaged Properties as in the aggregate are not reasonably likely to have a
Material Adverse Effect, there are not, and, to the best knowledge of Borrower
and its Subsidiaries, have not previously been, any Hazardous Materials present
in the air, soil, surface water or groundwater at any Property or Mortgaged
Property, and no Hazardous Materials (except Hazardous Materials maintained in
accordance with all Requirements of Law and necessary for the business
operations of the respective Property, including, without limitation, petroleum
used for heating oil and certain medications) are used in the operation of any
Property. To the best knowledge of Borrower and Guarantor, there is no claim or
notice of violation, alleged violation, noncompliance, liability or potential
liability with respect to any Hazardous Materials or failure to comply with
Environmental Laws relating to any Marriott Property or Brookdale Property and
no judicial proceeding or governmental or administrative action pending or
threatened with respect to any Hazardous Materials or failure to comply with
Environmental Laws to which Borrower or either Guarantor may be named a party in
connection with any Marriott Property or Brookdale Property, except as fully and
specifically disclosed in the Phase I Environmental Reports delivered to
Administrative Agent pursuant to Section 4.1 or as has been fully and
specifically disclosed to Administrative Agent and in the aggregate, if
adversely determined, would not be reasonably likely to have a MAC with respect
to any Marriott Property or Brookdale Property. To the best knowledge of
Borrower there are no claims or notices of violation, alleged violation,
noncompliance, liability or potential liability with respect to any Hazardous
Materials or failure to comply with Environmental Laws relating to any Other
Property or Mortgaged Property and no judicial proceedings or governmental or
administrative actions pending or threatened with respect to any Hazardous
Materials or failure to comply with Environmental Laws to which Borrower or any
of
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its Subsidiaries may be named a party in connection with any Other Property
or Mortgaged Property, except as in the aggregate, if adversely determined,
would not be reasonably likely to have a Material Adverse Effect.
5.20 SECURITIES LAWS. None of the Common Shares, Preferred
Shares or other equity securities of Borrower has been issued in violation of
the Securities Act of 1933, as amended, or the securities or "blue sky" or other
applicable laws or regulations of any applicable jurisdiction.
5.21 DECLARATION OF TRUST, BY-LAWS; ADVISORY AGREEMENT. The
copies of the Declarations of Trust and by-laws of Borrower, and of each
Guarantor, and the Advisory Agreement which have been furnished to
Administrative Agent are true, correct and complete copies thereof as amended
and in effect on the Closing Date.
5.22 DISCLOSURES. Neither the financial statements referred
to in Section 5.1, nor this Agreement, any other Loan Document, or any other
written statement furnished by or on behalf of Borrower or either Guarantor to
Administrative Agent or any Lender in connection with the transactions
contemplated hereby or thereby, contains any untrue statement of a material fact
or omits a material fact necessary to make the statements contained therein or
herein not misleading.
5.23 CERTIFICATION. Subject to such exceptions as have been
fully and specifically disclosed to Administrative Agent and are not reasonably
likely to have a MAC with respect to any Marriott Property or Brookdale
Property, to the best knowledge of Borrower and Guarantors, (a) each Marriott
Tenant and Brookdale Subtenant with respect to each Property that it operates
(1) is validly licensed under applicable law (to the extent required thereby) to
operate such Property and to conduct the business in which it is currently
engaged at such Property, (2) has received all applicable certificates of need,
determinations of need and other similar approvals (all of which are in full
force and effect with respect such Property), and (3) except in the case where
participation in Medicare or Medicaid or any similar program is deemed
undesirable in the reasonable business judgment of the respective Tenant, is
validly certified or approved for participation in Medicare and Medicaid, or
such other program, by the applicable federal and state authorities and is a
party to provider agreements with respect to its participation in Medicare and
Medicaid, or such other program, which provider agreements are in full force and
effect, in each case only to the extent that such Property is of a character
eligible for participation in Medicare or Medicaid or such other program, and
(b) no proceedings have been initiated or notices issued to suspend or revoke
any such license, approval, certification or provider agreement, except for
notices of deficiency which are issued and corrected in the ordinary course of
business. Subject to such exceptions which, in the aggregate, are not
reasonably likely to have a Material Adverse Effect, to the best knowledge of
Borrower, (a) each Tenant with respect to each Other Property that it operates,
and each Mortgagor with respect to each Mortgaged Property that it owns, (1) is
validly licensed under applicable law (to the extent required thereby) to
operate such Property or Mortgaged Property and to conduct the business in which
it is currently engaged at such Other Property or Mortgaged Property, (2) has
received all applicable certificates of need, determinations of need or other
similar approvals (all of which are in full force and effect with respect to
such Other Property or Mortgaged Property), and (3) except in the case where
participation in Medicare or Medicaid or any similar program is deemed
undesirable in the reasonable business judgment of the respective Tenant or
Mortgagor, is validly
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certified or approved for participation in Medicare and Medicaid, or such
other program, by the applicable federal and state authorities and is a party
to provider agreements with respect to its participation in Medicare and
Medicaid, or such other program, which provider agreements are in full force
and effect, in each case only to the extent that such Other Property or
Mortgaged Property is of a character eligible for participation in Medicare
or Medicaid or such other program, and (b) no proceedings have been initiated
or notices issued to suspend or revoke any such license, approval,
certification or provider agreement, except for notices of deficiency which
are issued and corrected in the ordinary course of business.
5.24 OFFERING, ETC., OF SECURITIES. Neither Borrower nor any
agent with the authority of Borrower has offered any securities similar to the
Notes, nor solicited any offer to buy any such securities, in a manner which
would render the offering, sale or issuance of the Notes subject to the
registration requirements of the Securities Act of 1933, as amended.
5.25 REVIEW OF YEAR 2000 ISSUE. Borrower has reviewed its
operations and those of its Subsidiaries, the Advisor and their major commercial
counterparties with a view to assessing whether Borrower's or any of its
Subsidiaries' respective businesses will, in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data, be vulnerable to a Year 2000 Issue. Based on such review,
Borrower has no reason to believe that a Material Adverse Effect will occur with
respect to Borrower's, either Guarantor's or any of Borrower's other
Subsidiaries' businesses or operations resulting from a Year 2000 Issue.
5.26 SOLVENCY. Each of Borrower, SPTMRT and SPTBROOK is and,
after giving effect to the transactions contemplated by the Loan Documents, will
be Solvent.
SECTION 6
AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTORS
So long as the Loans or any portion thereof remain outstanding
and unpaid or any other amount is owing to any Lender or Administrative Agent
hereunder or under any other Loan Document, Borrower and Guarantors agree as
follows and covenant that, except to the extent Administrative Agent shall
otherwise consent in writing on behalf of Lenders, each of the following
covenants shall be performed and complied with by Borrower, Guarantors and
Borrower's other Subsidiaries as applicable:
6.1 FINANCIAL STATEMENTS. Borrower and Guarantors will
furnish to Administrative Agent, with sufficient copies for each Lender:
6.1.1 as soon as available, but in any extent within 90 days
after the end of each fiscal year of Borrower and Guarantors, and, with respect
to Marriott and Brookdale, upon receipt thereof by Borrower or either Guarantor,
a copy of each of the following: the audited consolidated balance sheet for
Borrower and its Subsidiaries, the unaudited consolidating balance sheets for
Borrower and its Subsidiaries, and the audited consolidated balance sheets of
Marriott and Brookdale, each as at the end of such year, and the related
statements of income, shareholders'
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equity and cash flows for such year for Borrower and its consolidated
Subsidiaries, for each Guarantor, for Marriott and for Brookdale, setting
forth in each case in comparative form the figures for the previous year,
certified without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by independent certified
public accountants of nationally recognized standing; and
6.1.2 as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each fiscal
year of Borrower and Guarantors, and, with respect to Marriott and Brookdale,
upon receipt thereof by Borrower or either Guarantor, copies of each of the
following: the unaudited consolidated balance sheet for Borrower, the unaudited
consolidating balance sheets for Borrower and its Subsidiaries, and the
unaudited consolidated balance sheets for Marriott and Brookdale, each as at the
end of each such quarter, and the related unaudited statements of income,
shareholders' equity and cash flows for such quarterly period and the portion of
the fiscal year through such date for Borrower and its Subsidiaries, for each
Guarantor, for Marriott and for Brookdale, setting forth in each case in
comparative form the figures for the previous year, certified by a responsible
officer of such entity as being fairly stated and complete and correct in all
material respects (subject to normal year-end audit adjustments); all such
financial statements referred to in clauses (a) and (b) above to be complete and
correct in all material respects and be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION. Borrower and
Guarantors will furnish to Administrative Agent, with sufficient copies for each
Lender:
6.2.1 concurrently with the delivery of the annual financial
statements of Borrower and its Subsidiaries referred to in Section 6.1(a) above,
a certificate of Borrower's independent certified public accountants certifying
such financial statements of Borrower and its Subsidiaries stating that in
making the examinations necessary therefor, no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
6.2.2 concurrently with the delivery of the annual and
quarterly financial statements of Borrower and its Subsidiaries referred to in
Sections 6.1(a) and (b) above, (i) a certificate of a Responsible Officer of
Borrower and Guarantors (A) stating that, to the best of such officer's
knowledge, Borrower and Guarantors during such period have observed or performed
all of their respective covenants and other agreements, and satisfied every
condition, contained in the Loan Documents to be observed, performed or
satisfied by them, and that such officer has obtained no knowledge of any
Default or Event of Default except as specified in such certificate, and (B)
showing in detail the calculations supporting such statement in respect of
Sections 7.1(a), 7.1(b) and 7.1(c) (including, without limitation, certification
and details as to all Indebtedness of Borrower and its Subsidiaries, if any),
and (ii) a Real Property Statement;
6.2.3 not less than 10 days prior to the date of any proposed
sale of a Property, a written report signed by a Responsible Officer of the
Borrower describing in reasonable detail, (i) the Property, (ii) the amount and
use of proceeds from such disposition and (iii) the reasons for such
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disposition;
6.2.4 within 45 days after the end of each calendar quarter, a
written report signed by a Responsible Officer describing in reasonable detail
any acquisitions or dispositions by Borrower and its Subsidiaries of any
Property or Mortgaged Property or any other material property, which shall
include, without limitation, (i) in the case of each acquisition, a description
of (A) the geographic area and type of Property, Mortgaged Property or other
property, (B) the current and anticipated cash flow from such Property,
Mortgaged Property or other property, (C) the Tenants of such Property,
Mortgaged Property or other property and (D) the financing of such acquisition,
(ii) in the case of each disposition, a description of (A) the amount and use of
proceeds from such disposition and (B) the reasons for the disposition, and
(iii) a copy of the appraisal of the Property, Mortgaged Property or other
property acquired or disposed of;
6.2.5 within 30 days prior to the first day of each fiscal
year of Borrower, a copy of the projections by Borrower of the operating budget
and cash flow of Borrower and its Subsidiaries for such fiscal year, such
projections to be accompanied by a certificate of a Responsible Officer to the
effect that such projections have been prepared on the same basis as the
financial statements of Borrower and its Subsidiaries then current and that such
officer has no reason to believe they are incorrect or misleading in any
material respect;
6.2.6 promptly after the same are sent, copies of all
financial statements and reports which Borrower sends to its holders of Common
Shares, Preferred Shares or other equity securities, and promptly after the same
are filed by Borrower copies of all financial statements and reports which
Borrower or any of its Subsidiaries may make to, or file with, the Commission or
any successor or analogous Governmental Authority; and
6.2.7 promptly, such additional financial and other
information respecting the financial or other condition of the Marriott Tenants,
Marriott, the Brookdale Master Tenant, Brookdale, the other Brookdale Lease
Guarantors, any other Tenant, any Mortgagor, any other Credit Support Obligor,
the Advisor, either Guarantor or Borrower or any of its Subsidiaries or the
status or condition of any of the Properties or Mortgaged Properties or the
operation thereof which Borrower or any of its Subsidiaries is entitled to or
can otherwise reasonably obtain, as Administrative Agent may from time to time
reasonably request.
6.3 PAYMENT OF OBLIGATIONS. Each of Borrower and Guarantors
will (and Borrower will cause each of its other Subsidiaries to) pay, discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all its Indebtedness and other obligations of whatever nature,
except when the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of Borrower, SPTMRT or SPTBROOK,
as applicable.
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6.4 CONDUCT OF BUSINESS; MAINTENANCE OF EXISTENCE;
COMPLIANCE WITH CONTRACTS AND LAWS. Subject to the provisions of Section 7.3,
each of Borrower and Guarantors will (and Borrower will cause each of its other
Subsidiaries to) (a) continue to engage solely in its Business; (b) preserve,
renew and keep in full force and effect its existence and take all reasonable
action to maintain all rights, privileges and franchises necessary or desirable
in the normal conduct of its Business; and (c) comply with all Contractual
Obligations and Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, have a MAC with respect to any
Marriott Property or Brookdale Property or a Material Adverse Effect.
6.5 LEASES, MORTGAGE INTERESTS, CREDIT SUPPORT AGREEMENTS.
Borrower will cause Guarantors to, and Guarantors will, (a) perform and comply
with all of their respective obligations under the Marriott Leases and the
Brookdale Master Lease; (b) maintain the Marriott Leases, the Marriott Lease
Guaranties, the Brookdale Master Lease and the Brookdale Master Guaranty in full
force and effect and enforce the obligations of the Tenants under such Leases,
and Marriott and the Brookdale Lease Guarantors under such Lease Guaranties, in
a timely manner; and (c) give notice to Administrative Agent of each waiver of
any provision of and each amendment or modification of any such Lease or Lease
Guaranty, and of each renewal or termination thereof, together with a copy of
such waiver, amendment, modification, renewal or termination. Borrower and its
Subsidiaries will (i) maintain the Leases, Mortgage Interests and Credit Support
Agreements with respect to the Other Properties and the Mortgaged Properties in
full force and effect and enforce the obligations of the Tenants under such
Leases, the Mortgagors under the Mortgage Interests and the Credit Support
Obligors under such Credit Support Agreements in a timely manner and (ii) obtain
the consent of Administrative Agent in connection with any materially adverse
change in or waiver of any obligation of any Tenant, Mortgagor or Credit Support
Obligor contained in, or any right or remedy of Borrower or any of its
Subsidiaries under, any such Lease, Mortgage Interest Agreement or Credit
Support Agreement, including, without limitation, any renewal, amendment,
modification or termination thereof, EXCEPT to the extent that the failure to
comply with this sentence could not, in the aggregate, have a Material Adverse
Effect.
6.6 NO CHANGE IN PROPERTIES; MAINTENANCE OF PROPERTIES;
INSURANCE. Borrower and Guarantors will (a) not permit any material change (or
change in design) in any Marriott Property or Brookdale Property or any change
in the business nature or management of any Marriott Property or Brookdale
Property, except as permitted by the Marriott Leases and Brookdale Master Lease;
(b) cause the Tenants of such Properties to keep such Properties in good working
order and condition as and to the extent required by the Leases thereof; and (c)
cause the Tenants thereof to maintain with financially sound and reputable
insurance companies insurance with respect to such Properties and their
businesses of such a nature, with such terms and in such amounts, as are
required by the Leases thereof, with Administrative Agent (on behalf of Lenders)
named as an additional insured or mortgagee or loss payee, as appropriate.
Borrower shall furnish to each Lender, upon written request, full information as
to the insurance carried with respect to each Marriott Property and Brookdale
Property. Borrower and its Subsidiaries will keep all property useful and
necessary to their business in good working order and condition; maintain or
cause each Tenant of the Other Properties to maintain with financially sound and
reputable insurance companies insurance with respect to its property and
business of such a nature, with such terms and in such amounts, as is customary
in the case of business entities of established reputation engaged in the same
or similar
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business similarly situated against loss or damage of the kinds and in the
amounts customarily insured against and for by such business entities; and
cause the Mortgagors of each of its Mortgaged Properties to maintain
comparable insurance. Borrower shall furnish to each Lender, upon written
request, full information as to the insurance carried with respect to the
Other Properties.
6.7 INSPECTION OF PROPERTIES; BOOKS AND RECORDS;
DISCUSSIONS. Each of Borrower, Guarantors and Borrower's other Subsidiaries
will keep proper books of record and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to their Business and activities; and
permit representatives of Administrative Agent and, after the occurrence of a
Default, any Lender, to visit and inspect any of its properties and examine and
make abstracts from any of its books and records at any reasonable time and as
often as may reasonably be desired, and to discuss the business, operations,
properties, prospects and financial and other conditions of Borrower, Guarantors
and Borrower's other Subsidiaries with officers and employees of Borrower,
Guarantors and such other Subsidiaries and the Advisor and with Borrower's
independent certified public accountants.
6.8 NOTICES. Borrower and Guarantors will promptly, and in
any event within 10 Business Days after Borrower or either Guarantor obtains
knowledge thereof, give notice to Administrative Agent and each Lender:
6.8.1 of the occurrence of any Default or Event of Default;
6.8.2 of (i) any default or event of default or termination,
under any Lease, Mortgage Interest Agreement, Credit Support Agreement or any
other Contractual Obligation of or in favor of Borrower, either Guarantor or any
of Borrower's other Subsidiaries which could have a MAC with respect to any
Marriott Property or Brookdale Property or a Material Adverse Effect, (ii) any
litigation, investigation or proceeding which may exist at any time between
Borrower, either Guarantor, any other Subsidiary of Borrower or any Tenant,
Mortgagor or Credit Support Obligor and any Governmental Authority or other
Person, which if adversely determined could have a MAC with respect to any
Marriott Property or Brookdale Property or a Material Adverse Effect, and (iii)
any offer by any Marriott Tenant or the Brookdale Master Tenant or any of their
Affiliates to purchase a Marriott Property or Brookdale Property;
6.8.3 of any litigation or proceeding affecting Borrower or
either Guarantor in which the amount involved is $10,000,000 or more with
respect to Borrower or its Subsidiaries, or $1,000,000 or more with respect to
either Guarantor, and is not fully covered by insurance or in which injunctive
or similar relief is sought;
6.8.4 of the following events, as soon is possible and in any
event within 30 days after Borrower knows or has reason to know thereof
(PROVIDED that with respect to any Multiemployer Plan in which neither Borrower
nor any ERISA Affiliate is a substantial employer Borrower shall only be deemed
to have knowledge of facts concerning which it has actual knowledge): (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Plan or (ii) the institution of proceedings or the taking or expected taking of
any other action by
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PBGC or Borrower or any ERISA Affiliate to terminate or withdraw from any
Plan, and in addition to such notice, deliver to each Lender whichever of the
following may be applicable: (A) a certificate of the chief financial officer
or treasurer of Borrower setting forth details as to such Reportable Event
and the action that Borrower or the ERISA Affiliate proposes to take with
respect thereto, together with a copy of any notice of such Reportable Event
that may be required to be filed with PBGC, or (B) any notice delivered by
PBGC evidencing its intent to institute such proceedings or any notice to
PBGC that such Plan is to be terminated, as the case may be;
6.8.5 of the adoption by Borrower or any ERISA Affiliate of
any Plan or of any Plans maintained by any Person that becomes an ERISA
Affiliate after the Closing Date;
6.8.6 of the occurrence or existence of any event or condition
which could reasonably be expected to have, or which has had, a MAC with respect
to any Marriott Property or Brookdale Property or a Material Adverse Effect; and
6.8.7 of the occurrence or existence of any event or condition
which would cause any of the representations and warranties set forth in Section
5.9 to be untrue if repeated after the occurrence, or during the existence, of
such event or condition.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Borrower, SPTMRT or SPTBROOK, as applicable, proposes to
take with respect thereto. For all purposes of clause (d) of this Section,
Borrower shall be deemed to have all knowledge or knowledge of all facts
attributable to the administrator of such Plan.
6.9 APPRAISALS. From time to time during the term of
this Agreement, Administrative Agent may, in its sole discretion, order an
Appraisal of one or more of the Marriott Properties and Brookdale Properties.
Any such Appraisal shall be at Borrower's cost if (i) Administrative Agent shall
have obtained a letter from an expert appraiser or evaluator of real property to
the effect that, or Administrative Agent shall otherwise in good faith have
determined that, facts or circumstances exist, or changes in market conditions
have occurred, as a result of which there exists a reasonable possibility that
Appraisals of the Marriott Properties and Brookdale Properties might result in
the aggregate Appraised Values of the Marriott Properties and the Brookdale
Properties giving rise to a required prepayment of the Loans pursuant to Section
2.8(b) or (ii) an Event of Default has occurred.
6.10 MEETINGS. Within 100 days after the end of each fiscal
year of Borrower, one or more Responsible Officers of Borrower, Guarantors and
the Advisor shall attend an annual informational meeting with Lenders, for the
purpose of answering reasonable questions from any Lender and/or Administrative
Agent relating to the Properties and/or the Loan Documents, to be held at
Borrower's cost and at such time and place to be determined by Administrative
Agent as reasonably requested by Administrative Agent; PROVIDED that each Lender
shall bear the costs of transportation and accommodation for any of its
representatives attending such meeting.
6.11 REIT REQUIREMENTS. Each Guarantor will at all times
remain a "qualified
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REIT subsidiary" of Borrower under Section 856(i) of the Code. Borrower and
its Subsidiaries will operate their Business at all times so as to satisfy or
be deemed to have satisfied all requirements necessary for Borrower to
qualify as a real estate investment trust under Sections 856 through 860 of
the Code. Borrower and its Subsidiaries will maintain adequate records so as
to comply with all record-keeping requirements relating to Borrower's
qualification as a real estate investment trust as required by the Code and
applicable regulations of the Department of the Treasury promulgated
thereunder and will properly prepare and timely file with the Internal
Revenue Service all returns and reports required thereby. Borrower will
request from its shareholders all shareholder information required by the
Code and applicable regulations of the Department of Treasury promulgated
thereunder.
6.12 INDEMNIFICATION. Borrower and Guarantors will
indemnify, defend (with counsel reasonably satisfactory to Administrative Agent)
and hold Administrative Agent, each Lender and the directors, officers,
shareholders, employees and agents of each of them harmless for, from and
against any claims (including without limitation third party claims for personal
injury or real or personal property damage), actions, administrative
proceedings, judgments, damages, punitive damages, penalties, fines, costs,
expenses disbursements, liabilities (including sums paid in settlements of
claims), obligations, interest or losses, including reasonable attorneys' fees,
consultant fees and expert fees, that arise at any time (including, without
limitation, at any time after the payment of the Notes) directly or indirectly
from or in connection with the presence, suspected presence, release or
suspected release of any Hazardous Material in the air, soil, surface water or
groundwater at or from the real property or any portion thereof with respect to
any one or more Properties or Mortgaged Properties, or any other real property
in which Borrower or any of its Subsidiaries has an interest ("OTHER REAL
PROPERTY"). Without limiting the generality of the foregoing, the
indemnification provided by this Section shall specifically cover (a) costs,
including capital, operating and maintenance costs, incurred in connection with
any investigation or monitoring of site conditions or any clean-up, remediation,
removal or restoration work required or performed by any federal, state or local
governmental agency or political subdivision or performed by any
non-governmental Person, including any Tenant or Mortgagor of a Property or
Mortgaged Property, because of the presence, suspected presence, release or
suspected release of Hazardous Material in the air, soil, surface water or
groundwater at or from a Property, a Mortgaged Property or Other Real Property
and (b) costs incurred in connection with (i) Hazardous Material present or
suspected to be present in the air, soil, surface water or groundwater at a
Property, a Mortgaged Property or Other Real Property before the Closing Date,
(ii) Hazardous Material that migrates, flows, percolates, diffuses or in any way
moves onto or under or from a Property, a Mortgaged Property or Other Real
Property after the Closing Date, and (iii) Hazardous Material present at a
Property, a Mortgaged Property or Other Real Property as a result of any
release, discharge, disposal, dumping, spilling or leaking (accidental or
otherwise) onto or from such Property, Mortgaged Property or Other Real Property
before or after the Closing Date by any Person.
6.13 CHANGES IN GAAP. In the event of a change in GAAP which
would cause the financial covenants set forth herein to provide less protection
to Lenders than presently provided for hereunder, such change shall not be given
effect for purposes of the financial covenants set forth in Section 7.1 and the
reporting required hereby to demonstrate compliance with such financial
covenants, unless (i) the parties hereto agree to reset such financial covenants
to maintain the
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protection to Lenders equivalent to that in place prior to such change and
(ii) execute one or more amendments to this Agreement to effect such reset.
6.14 HEDGING ARRANGEMENTS. Borrower shall only enter into
such Hedging Agreements as are (in Borrower's reasonable judgment) necessary for
the hedging or other protection to exposure of Borrower and its Subsidiaries,
and not those which are of a purely speculative nature. Neither Guarantor shall
enter into any Hedging Agreement.
6.15 YEAR 2000. Borrower and its Subsidiaries have taken
and shall take all action necessary to assure that its data processing and
information technology systems and those of the Advisor, are capable of
effectively processing data and information, including dates, on and after
January 1, 2000, and shall not cease to perform, or provide or cause any
software and/or system which is material to the operations of Borrower,
Guarantors, any of Borrower's other Subsidiaries or the Advisor or any
interface therewith to provide invalid or incorrect results as a result of
date functionality and/or data, or otherwise experience any degradation of
performance or functionality and/or data, or otherwise experience any
degradation of performance or functionality arising from, relating to or
including date functionality and/or data which represents or references
different centuries or more than one century or leap years and that all such
systems shall effectively and accurately manage and manipulate data derived
from, involving or relating in any way to dates including single century
formulas and multi-century or leap year formulas, and will not cause an
abnormally ending scenario within such systems or in any software and/or
system with which such systems interface, or generate incorrect values or
invalid results involving such dates.
6.16 ADVISOR. Borrower shall maintain RMR as the sole Advisor
of Borrower and its Subsidiaries pursuant to and in accordance with the Advisory
Agreement and shall not (i) amend, supplement or modify the Advisory Agreement
in any material respect, (ii) enter into any replacement Advisory Agreement, or
(iii) make any payment to the Advisor in violation of the Subordination
Agreement.
6.17 FURTHER ASSURANCES. Borrower and Guarantors will execute
and deliver from time to time such further instruments and take such further
actions as may be reasonably required by Administrative Agent to carry out the
purposes and provisions of this Agreement and the other Loan Documents and to
assure Administrative Agent and Lenders of the security rights in their favor
contemplated by Section 3.
SECTION 7
NEGATIVE COVENANTS OF BORROWER AND GUARANTORS
So long as the Loans or any portion thereof remain
outstanding and unpaid or any other amount is owing to any Lender or
Administrative Agent hereunder or under any other Loan Document, Borrower and
Guarantors agree as follows and covenant that, except to the extent
Administrative Agent shall otherwise consent in writing on behalf of Lenders,
each of the following covenants shall be observed and complied with by
Borrower, Guarantors and Borrower's other Subsidiaries, as applicable:
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7.1 FINANCIAL COVENANTS. Borrower will not:
7.1.1 TANGIBLE NET WORTH. Suffer or permit Tangible Net
Worth at any time to be less than the aggregate of (i) $450,000,000 plus (ii)
75 % of the Net Securities Proceeds of all offering and issuances of equity
securities (including without limitation of Common Shares and Preferred
Shares) by Borrower in one or more transactions received after the Closing
Date.
7.1.2 FIXED CHARGE COVERAGE. Suffer or permit the ratio of
(i) Consolidated EBITDA to (ii) Consolidated Fixed Charges for any fiscal
quarter of Borrower to be less than 1.5 to 1.
7.1.3 INTEREST COVERAGE. Suffer or permit the ratio of (i)
Consolidated EBITDA to (ii) Consolidated Interest Charges for any fiscal
quarter of Borrower to be less than 2.0 to 1.
7.1.4 TOTAL DEBT TO TOTAL CAPITALIZATION. Suffer or permit
the ratio of the Total Debt to Total Capitalization to be greater than 0.60
to 1 at any time.
7.2 RESTRICTED PAYMENTS. Borrower and Guarantors will
not (and Borrower will not permit any of its other Subsidiaries to):
7.2.1 Declare, make or pay any Restricted Payment except
where (i) no Default or Event of Default is continuing either before or after
giving effect to such Restricted Payment and (ii) Borrower has sufficient
funds or availability under its credit facilities to pay the next installment
of interest payable in respect of the Loans.
7.2.2 Directly or indirectly make any payment of
Indebtedness of Borrower or any of its Subsidiaries in contravention of the
terms of any agreement or instrument subordinating or purporting to
subordinate any rights to receive payments in respect of any Indebtedness of
Borrower or such Subsidiary to any rights to receive payments under this
Agreement.
7.3 MERGER, SALE OF ASSETS, ETC.; SALE OF PROPERTIES;
OTHER ACTIONS.
7.3.1 Borrower will not (and will not permit any of its
Subsidiaries to) cause to be organized or assist in organizing any Person
under the laws of any jurisdiction to acquire all or substantially all of its
assets, terminate, wind up, liquidate or dissolve its affairs or enter into
any reorganization, merger or consolidation or, in the case of Borrower, take
any other action whatsoever under or pursuant to Articles 11 and 12 of its
Declaration of Trust or agree to do any of the foregoing at any future time,
EXCEPT that (1) Borrower may acquire all of the capital shares or all or
substantially all of the assets of such Person, (2) any Additional Subsidiary
Guarantor may acquire (including acquisitions by merger with such Additional
Subsidiary Guarantor as the survivor) all or substantially all of the assets
of a Subsidiary of Borrower (other than Guarantors or another Person so long
as (i) such assets consist of Senior Housing Properties, (ii) no Default or
Event of Default has accrued and is continuing or will result from such
acquisition, and (iii) immediately after such acquisition such Additional
Subsidiary Guarantor is in full compliance with the terms of its Additional
Subsidiary Guaranty), (3) any Subsidiary of Borrower (other than Guarantors)
or any
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other Person may reorganize, merge or consolidate with Borrower so long as
Borrower is the surviving entity, (4) any Subsidiary of Borrower may acquire
(including acquisitions by merger so long as the survivor is a wholly-owned
Subsidiary of Borrower) all or substantially all of the assets of another
Subsidiary of Borrower (other than Guarantors and Additional Subsidiary
Guarantors) or another Person, or all of the capital shares of another
Person, so long as no Default or Event of Default has occurred and is
continuing or will result from such acquisition, and (5) any Subsidiary of
Borrower (other than Guarantors) may be dissolved so long as Borrower
receives the assets, if any, thereof.
7.3.2 Borrower will not (and will not permit any of its
Subsidiaries to) convey, sell, lease or otherwise dispose of (1) any Fee
Interests, Leasehold Interests, Mortgage Interests or other interests in
properties or (2) any substantial part of its properties or assets (other
than the Properties) or (3) any shares of any of its Subsidiaries; EXCEPT (A)
as permitted by Section 7.3(a) and (B) in the case of Subsidiaries other than
Guarantors, if (i) the consideration therefor shall be equal to the fair
market value thereof (or, in the case of a Mortgage Interest where the
consideration is less than fair market value, the Board of Trustees of
Borrower or the board of trustees or directors of the relevant Subsidiary of
Borrower shall have determined that the consideration received or to be
received is in an amount consistent with the best financial interests of
Borrower or such Subsidiary, as the case may be) and no Default or Event of
Default results therefrom or (ii) such conveyance, sale, lease or other
disposition is pursuant to the exercise of an option contained in a Lease.
7.3.3 Neither Guarantor will cause to be organized or
assist in organizing any Person under the laws of any jurisdiction to acquire
all or substantially all of its assets, terminate, wind up, liquidate or
dissolve its affairs or enter into any reorganization, merger or
consolidation or take any other action whatsoever under or pursuant to the
Declaration of Trust of such Guarantor or otherwise with respect to any of
the foregoing.
7.3.4 Neither Guarantor will convey, sell, lease or
otherwise dispose of any of the Marriott Properties or Brookdale Properties
or its other interests in or incidental to such Properties, except as
required under the Marriot Leases or the Brookdale Master Lease. Each
Guarantor will, within five (5) Business Days (10 Business Days in the case
of clause (iii) below) of the date it receives any notice of termination of a
Marriott Lease or the Brookdale Master Lease and/or any irrevocable offer to
purchase a Marriott Property or Brookdale Property delivered by a Tenant to
such Guarantor under the Lease thereof or otherwise, provide to
Administrative Agent (i) written notice of such Guarantor's receipt of such
notice of termination and/or irrevocable offer to purchase, (ii) copies of
such notice of termination and/or irrevocable offer to purchase, and (iii) a
complete statement of the response such Guarantor proposes to give and the
action it proposes to take with respect thereto.
7.3.5 Anything in Section 7.3(d) to the contrary
notwithstanding, SPTMRT will at all times be in compliance with Section 1.03A
of each of the Marriott Leases, and shall not suffer or permit to occur or
exist any event or condition that would permit any Marriott Tenant to
exercise its right to terminate any Marriott Lease pursuant to Section 1.03B
thereof.
7.3.6 Neither Guarantor will acquire any tangible or
intangible property other than
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the Marriott Properties and Brookdale Properties, respectively, and the
tangible and intangible properties, rights and interests incidental to its
ownership of such Properties.
7.4 TRANSACTIONS WITH AFFILIATES. Borrower and
Guarantors will not (and Borrower will not permit any other Subsidiary to)
enter into or be a party to any transaction directly or indirectly with or
for the benefit of any Affiliate of Borrower, other than (i) in the ordinary
course of business and (ii) for fair consideration and on terms no less
favorable to Borrower or the applicable Guarantor or other Subsidiary than
are available in an arm's-length transaction from unaffiliated third parties
and (iii) if the Independent Trustees of Borrower or the applicable Guarantor
or other Subsidiary determine in their reasonable good faith judgment that
such transaction is in the best interests of Borrower or the applicable
Guarantor or other Subsidiary, as applicable, based on full disclosure of
all relevant facts and circumstances.
7.5 SUBSIDIARIES. Without the prior written consent of
Administrative Agent, (a) Borrower will not create, or permit to exist, any
Subsidiary of Borrower other than (1) Guarantors and those other Subsidiaries
named on SCHEDULE 4 and (2) any other Subsidiary (i) the majority of the
equity interests (except directors' qualifying shares) and voting interests
of which are owned directly or indirectly by Borrower and (ii) which is
engaged in the Business of Borrower and its Subsidiaries; (b) neither
Guarantor will create, or permit to exist, any Subsidiary of such Guarantor;
and (c) neither Guarantor will cease to be a wholly owned Subsidiary of
Borrower (i.e., Borrower will continue to own 100% of the issued and
outstanding Common Shares and Preferred Shares and other capital shares, if
any, of each Guarantor, subject to the Stock Pledge Agreement).
7.6 ACCOUNTING CHANGES. Borrower and its Subsidiaries
will not make any significant change in accounting treatment and reporting
practices, except as required by GAAP or with which Borrower's independent
certified public accountants have agreed. Borrower will advise
Administrative Agent sufficiently in advance of any proposed change to permit
representatives of Administrative Agent to discuss the proposed change with
the officers of Borrower.
7.7 CHANGE IN NATURE OF BUSINESS. Neither Borrower,
SPTMRT, SPTBROOK nor any other Subsidiary of Borrower will make any material
change in the nature of its Business as presently conducted (where a
"material change" shall mean the conduct of any business which is outside the
definition of "Business" in this Agreement with respect to Borrower,
Guarantors and Borrower's other Subsidiaries, as applicable, regardless of
the amount or size of such new business).
7.8 INDEBTEDNESS. Neither Guarantor (nor any Additional
Subsidiary Guarantor so long as it remains an Additional Subsidiary
Guarantor) will incur, or suffer or permit to exist, any Indebtedness of such
Guarantor or Additional Subsidiary Guarantor other than the Indebtedness
evidenced by the Loan Documents and intercompany Indebtedness owing to
Borrower.
7.9 NO LIENS. Neither Guarantor (nor any Additional
Subsidiary Guarantor so long as it remains an Additional Subsidiary
Guarantor) will create, or suffer or permit to exist, after the Closing Date
any Lien on any Property, Lease or Lease Guaranty or any other tangible or
intangible property of such Guarantor or Additional Subsidiary Guarantor,
except (i) the Liens evidenced by the Loan Documents and (ii) Permitted
Exceptions.
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7.10 FISCAL YEAR. Borrower will not change the fiscal
year end of Borrower or any of its Subsidiaries from December 31 to any other
date.
7.11 CHIEF EXECUTIVE OFFICE. Borrower will not change the
name of Borrower or the chief executive office of Borrower, and neither
Guarantor will change its name or its chief executive office, unless Borrower
has given Administrative Agent at least 15 Business Days prior written notice
of such change.
7.12 AMENDMENT OF DECLARATION OF TRUST; AMENDMENT AND
WAIVER OF LEASES AND LEASE GUARANTIES. Borrower will not amend, supplement
or otherwise modify the Declaration of Trust of Borrower, and neither
Guarantor will amend, supplement or otherwise modify the Declaration of Trust
of such Guarantor, in a manner which would be reasonably likely to cause a
Material Adverse Effect. Neither Guarantor will, without the prior written
consent of Administrative Agent, (i) amend, supplement or modify any Marriott
Lease, any Marriott Lease Guaranty, the Brookdale Master Lease or the
Brookdale Lease Guaranty in any material respect, (ii) renew any Marriott
Lease or the Brookdale Master Lease (other than extensions of the terms
thereof as provided therein) or terminate any Marriott Lease, any Marriott
Lease Guaranty, the Brookdale Master Lease or the Brookdale Lease Guaranty,
or (iii) waive any material obligation of any Tenant or Marriott or Brookdale
Lease Guarantor under any Marriott Lease, Marriott Lease Guaranty, the
Brookdale Master Lease or the Brookdale Lease Guaranty or any material right
or remedy of such Guarantor or any material event of default thereunder.
SECTION 8
EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT. Upon the occurrence of any of the
following events (each an "Event of Default"):
8.1.1 PAYMENTS. Borrower shall fail to pay any principal
of or interest on any Note, or Borrower or either Guarantor shall fail to pay
any other amount payable hereunder or under any other Loan Document, when due
in accordance with the terms hereof or thereof; or
8.1.2 REPRESENTATIONS AND WARRANTIES. Any representation
or warranty made or deemed made by Borrower or either Guarantor herein or by
any Person in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement or any other Loan Document shall
prove to have been incorrect in any material respect on or as of the date
made or deemed made; or
8.1.3 CERTAIN COVENANT DEFAULTS. Borrower or either
Guarantor shall default in the observance or performance of any agreement
contained in Section 2.11, Section 6.16 or Section 7, or the Advisor shall
default in the observance or performance of any material provision of the
Subordination Agreement; or
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8.1.4 CERTAIN OTHER COVENANT DEFAULTS. Borrower, either
Guarantor or any other party to a Loan Document (other than Administrative
Agent and Lenders) shall default in the observance or performance of any
other provision of this Agreement or any other Loan Document, and such
default shall continue unremedied for a period of 30 days after written
notice thereof is given by Administrative Agent to Borrower; or
8.1.5 CROSS-DEFAULT. Borrower or any of its Subsidiaries
shall (i) default in any payment of principal of or interest on any
Indebtedness (other than the Notes) in respect of money borrowed or
Capitalized Lease Obligations or incurred for the deferred purchase price of
property or services or evidenced by a note, debenture or other similar
written obligation to pay money, or in the payment of any Contingent
Obligation (other than the guaranty of Guarantors given in Section 10 and the
guaranty obligations of Additional Subsidiary Guarantors under Additional
Subsidiary Guaranties, which shall be subject to Section 8.1(d)), beyond the
period of grace (not to exceed 30 days), if any, provided in the instrument
or agreement under which such Indebtedness, Capitalized Lease Obligation or
Contingent Obligation was created, or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness, Capitalized Lease Obligation or Contingent Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur, the effect of which default or other
event is to cause, or to permit the holder or holders of such Indebtedness,
Capitalized Lease Obligation or beneficiary or beneficiaries of such
Contingent Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness or Capitalized Lease Obligation to become due
prior to its stated maturity or such Contingent Obligation to become payable;
PROVIDED that the provisions of this Section 8.1(e) shall not apply with
respect to any Indebtedness or Capitalized Lease Obligation of a Subsidiary
of Borrower other than Guarantors incurred to finance the acquisition cost of
certain real property or tangible personal property and secured by a Lien on
such property, for the payment of which Indebtedness or Capitalized Lease
Obligation recourse is strictly limited to such property and no recourse may
be had, directly or indirectly, to or against Borrower or any of its other
Subsidiaries or any of their property other than the property financed by
such Indebtedness or Capitalized Lease Obligation and subject to the Lien
thereof; or
8.1.6 QUALIFICATION AS REIT. Either Administrative Agent
or the Majority Lenders shall determine in good faith, and shall give notice
to Borrower that Borrower has at any time ceased to be in a position to
qualify, or has not qualified, as a real estate investment trust for any of
the purposes of the provisions of the Code applicable to real estate
investment trusts, or that either Guarantor or any Additional Subsidiary
Guarantor has ceased to qualify as a "qualified REIT subsidiary" of Borrower
under the Code; PROVIDED that no Event of Default under this Section 8.l(f)
shall be deemed to have occurred and be continuing if, within 10 days after
notice of any such determination is given to Borrower, Borrower shall have
furnished Lenders with an opinion of its tax counsel (who shall be
satisfactory to the Majority Lenders, PROVIDED that the Majority Lenders may
not unreasonably withhold their approval) to the effect that Borrower or the
respective Guarantor or Additional Subsidiary Guarantor, as applicable, is
then in a position to so qualify, or has so qualified, as the case may be,
which opinion shall not contain any material qualification unsatisfactory to
the Majority Lenders; or
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8.1.7 INSOLVENCY, ETC. An Insolvency Event shall occur
with respect to Borrower, either Guarantor, any Additional Subsidiary
Guarantor or any of Borrower's other Subsidiaries or the Advisor, Marriott or
Brookdale (or any other Brookdale Lease Guarantor); or
8.1.8 ERISA. (i) Any Person shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975
of the Code) involving any Plan, (ii) any "accumulated funding deficiency"
(as defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan, (iii) a Termination Event shall occur or (iv) any other
event or condition shall occur or exist with respect to a Plan or a
Multiemployer Plan; and in each case in clauses (i) through (iv) above, such
event or condition, together with all other such events or conditions, if
any, could subject Borrower or any of its Subsidiaries to any tax, penalty or
other liabilities in the aggregate material in relation to the business,
operations, property or financial or other condition of Borrower and its
Subsidiaries, taken as a whole; or
8.1.9 CERTAIN JUDGMENTS. One or more judgments or decrees
shall be entered against Borrower or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance, except for
reasonable and customary deductibles) of $10,000,000 or more with respect to
Borrower and its Subsidiaries, or $1,000,000 or more with respect to either
Guarantor, and either (x) all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal or (y) funds in the
amount of the liability thereunder (not paid or fully covered by insurance)
shall not have been deposited in escrow with Administrative Agent upon terms
and conditions satisfactory to Administrative Agent, in each case under
clause (x) or (y) above, within 60 days from the entry thereof; or
8.1.10 CERTAIN OWNERSHIP OF BORROWER. Barry M. Portnoy and
Gerard M. Martin (or any Person in respect of which either or both of them
own more than 50% of the securities having ordinary voting power for the
election of directors) shall cease at any time to hold beneficially and of
record, in the aggregate, at least 100,000 shares of the issued and
outstanding Common Shares and each other class of equity securities of
Borrower (adjusted for any division, reclassification or stock dividend in
respect of Common Shares) or such lesser amount as shall be approved by
Administrative Agent; or
8.1.11 CHANGE OF CONTROL OF ADVISOR. At any time, neither
Barry M. Portnoy nor Gerard M. Martin nor both acting together shall have the
power to direct the management and policies of the Advisor; or
8.1.12 ADVISOR. RMR shall cease to be the sole Advisor to
Borrower and its Subsidiaries pursuant to and in accordance with the Advisory
Agreement without Administrative Agent's prior written consent, or the
Advisory Agreement shall be materially amended, supplemented, modified or
replaced without Administrative Agent's prior written consent, or Borrower or
any of its Subsidiaries shall make a payment to the Advisor in violation of
the Subordination Agreement; or
8.1.13 BINDING EFFECT OF LOAN DOCUMENTS. Borrower shall
cease to be, or shall assert that it is not, bound by and in accordance with
the terms of this Agreement and the Notes; or the
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guaranty of either Guarantor under Section 10 shall be terminated or
otherwise shall cease to be in full force and effect or shall cease to give
Lenders the rights, powers and privileges purported to be created thereby, or
either Guarantor shall cease to be, or shall assert that it is not, bound by
and in accordance with the terms of this Agreement;
then, and in any such event, (1) if such event is an Event of Default specified
in paragraph (g) above, automatically the Loans (with accrued interest thereon)
and all other amounts owing under this Agreement, the Notes and any other Loan
Document shall immediately become due and payable, and (b) if such event is any
other Event of Default, Administrative Agent may, or upon the request of the
Majority Lenders, Administrative Agent shall, by notice of default to Borrower,
declare the Loans (with accrued interest thereon) and all other amounts owing
under this Agreement, the Notes and any other Loan Document to be due and
payable forthwith, whereupon the same shall immediately become due and payable.
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
8.2 ANNULMENT OF ACCELERATION. If payment on the Loans and
the Notes is accelerated in accordance with Section 8.1, then and in every such
case, the Majority Lenders may, by an instrument delivered to Borrower (and to
Administrative Agent, as applicable, to the extent it is not participating in
the giving of notice) annul such acceleration and the consequences thereof;
PROVIDED that at the time such acceleration is annulled:
8.2.1 all arrears or interest on the Loans and the Notes and
all other sums payable in respect of the Loans and pursuant to this Agreement,
the Notes and each other Loan Document (except any principal of or interest or
premium on the Loans and the Notes and other sums which have become due and
payable only by reason of such acceleration) shall have been duly paid; and
8.2.2 every other Default or Event of Default shall have been
duly waived or otherwise cured;
PROVIDED, FURTHER, that no such annulment shall extend to or affect any
subsequent Default or Event of Default or impair any right consequent thereon.
8.3 COOPERATION BY BORROWER AND GUARANTOR. To the extent
that they lawfully may, Borrower and Guarantors agree that none of them will at
any time insist upon or plead, or in any manner whatever claim or take any
benefit or advantage of any applicable present or future stay, extension or
moratorium law, which may affect observance or performance of the provisions of
this Agreement or of any Note or any other Loan Document.
SECTION 9
LOAN AGENTS
9.1 APPOINTMENT OF ADMINISTRATIVE AGENT; LOAN AGENTS.
9.1.1 Each Lender hereby irrevocably designates and appoints
Dresdner Bank AG,
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New York Branch, as Administrative Agent (Administrative Agent and any
Syndication Agent or Documentation Agent appointed hereunder collectively
being the "Loan Agents") under this Agreement and the Loan Documents and the
other documents or instruments delivered pursuant to or in connection
herewith or therewith, and each Lender hereby irrevocably authorizes each
Loan Agent, for such Lender, to take such action on behalf of such Lender
under the provisions of the Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to such Loan Agent by the
terms of the Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in the Loan Documents, no Loan Agent shall have any duties or
responsibilities other than those expressly set forth in (or, in the case of
any Syndication Agent or Documentation Agent, pursuant to) the Loan
Documents, nor any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into the Loan Documents or otherwise exist against any Loan
Agent. No Loan Agent shall have any liability to any Person under this
Agreement or the Loan Documents except in its capacity as a Lender.
9.1.2 Administrative Agent may, in its discretion and with the
consent of Borrower (not to be unreasonably withheld), appoint any Lender as
Syndication Agent hereunder ("Syndication Agent") and/or any Lender as
Documentation Agent hereunder ("Documentation Agent"), in each case with such
duties, if any, as Administrative Agent may delegate to such Syndication Agent
or Documentation Agent, as the case may be. Any such appointment shall be made
by written instrument made by Administrative Agent and accepted by the
Syndication Agent or Documentation Agent, as the case may be, duly executed by
their duly authorized officers, copies of which shall be delivered to Lenders
and Borrower. No Syndication Agent or Documentation Agent shall have any duties
in such capacity, except such duties, if any, as are expressly set forth in
such instrument of appointment.
9.1.3 Each Loan Agent may execute any of its duties under the
Loan Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. No Loan
Agent shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
9.1.4 No Loan Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it under or in connection with
the Loan Documents (except to the extent its gross negligence or willful
misconduct) or (ii) responsible in any manner to any Lender for any recitals,
statements, representations or warranties made by Borrower, either Guarantor or
any of Borrower's other Subsidiaries or any other Person contained in the Loan
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by any Loan Agent under or in connection with,
the Loan Documents (including, without limitation, any Appraisal or valuation or
any certificate or other report relating to the value of any Property), or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of the Loan Documents or otherwise or for any failure of Borrower, either
Guarantor or any of Borrower's other Subsidiaries or any other Person to perform
its obligations under the Loan Documents. The Loan Agents shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, the Loan
Documents, or to inspect the properties,
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books or records of Borrower , either Guarantor or any of Borrower's other
Subsidiaries or any other Person or to insure, protect or preserve any of the
property of Borrower, either Guarantor or any of Borrower's other
Subsidiaries or any other Person.
9.1.5 Each Loan Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation reasonably believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to Borrower, either Guarantor or any of
Borrower's other Subsidiaries), independent accountants and other experts
selected by such Loan Agent or the other Loan Agent. Each Loan Agent may deem
and treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with such Loan Agent.
9.1.6 Each Loan Agent shall be fully justified in failing or
refusing to take any action under the Loan Documents unless it shall first
receive such advice or concurrence of the Majority Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Each Loan Agent shall in all
cases be fully protected in acting, or in refraining from acting, under the Loan
Documents in accordance with a request of the Majority Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all Lenders and all future holders of the Notes.
9.1.7 No Loan Agent shall be deemed to have knowledge or
notice of the occurrence of any Event of Default or event, act or condition
which with notice or lapse of time, or both, would constitute an Event of
Default hereunder unless such Loan Agent shall have received notice from another
Loan Agent, a Lender or Borrower referring to this Agreement, describing such
event, act or condition or Event of Default and stating that such notice is a
"notice of default". In the event that a Loan Agent receives such a notice,
such Loan Agent shall give prompt notice thereof to Lenders and to any other
Loan Agents. Each Loan Agent shall take such action with respect to the rights
and remedies given to such Loan Agent pursuant to the terms of the Loan
Documents as shall be reasonably directed by the Majority Lenders; PROVIDED
that, unless and until such Loan Agent shall have received such directions, such
Loan Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, as it shall deem advisable in the best interests of Lenders.
9.1.8 Each Lender expressly acknowledges that no Loan Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
any Loan Agent hereinafter taken or hereinbefore taken in connection with this
Agreement, including any review of the affairs of Borrower, either Guarantor or
any of Borrower's other Subsidiaries, shall be deemed to constitute any
representation or warranty by that Loan Agent to any Lender. Each Lender
represents to the Loan Agents that it has, independently and without reliance
upon any Loan Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation
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into the business, operations, property, financial and other condition and
creditworthiness of Borrower, Guarantors and Borrower's other Subsidiaries,
each Tenant, each Mortgagor, Marriott, the Brookdale Lease Guarantors and the
other Credit Support Obligors, and made its own decision to make its Pro Rata
Share of the Loans hereunder and enter into this Agreement, and that it has
satisfied itself independently, without reliance on any Loan Agent or any of
Loan Agent's officers, directors, employees, agents, attorneys-in-fact or
affiliates, as to the compliance of the transactions contemplated hereby with
all legal and regulatory requirements applicable to such Lender. Each Lender
also represents that it will, independently and without reliance upon any
Loan Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other
condition and creditworthiness of Borrower, Guarantors and Borrower's other
Subsidiaries, each Tenant, each Mortgagor, Marriott, the Brookdale Lease
Guarantors and the other Credit Support Obligors. Except for notices,
reports and other documents expressly required to be furnished to Lenders by
that Loan Agent hereunder, no Loan Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition
or creditworthiness of Borrower, either Guarantor, any of Borrower's other
Subsidiaries, any Tenant, any Mortgagor, Marriott, any Brookdale Lease
Guarantor or any other Credit Support Obligor which may come into its
possession or the possession of any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
9.1.9 Each Lender agrees to indemnify, defend (with counsel
selected by each Loan Agent) and hold each Loan Agent in its capacity as such
(to the extent not reimbursed by Borrower or Guarantors and without limiting the
obligation of Borrower and Guarantors to do so), and such Loan Agent's
respective officers, directors, shareholders, employees and agents, ratably
according to the Pro Rata Share percentage set forth opposite its name on
SCHEDULE 1, harmless for, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including without
limitation at any time following the payment of the Notes) be imposed on,
incurred by or asserted against such Loan Agent in any way relating to or
arising out of the Loan Documents or the transactions contemplated thereby or
any action taken or omitted by such Loan Agent under or in connection with any
of the foregoing; PROVIDED that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting primarily from
such Loan Agent's willful misconduct or gross negligence. The agreements in
this Section shall survive the payment of the Notes.
9.1.10 Each Loan Agent and its affiliates may make loans to and
generally engage in any kind of business with Borrower, Guarantors, Borrower's
other Subsidiaries, Tenants, Mortgagors, Marriott, Brookdale and other Credit
Support Obligors as though such Loan Agent were not a Loan Agent hereunder.
With respect to its Pro Rata Share of the Loans made or extended by it and any
Note issued to it, Administrative Agent shall have the same rights and powers
under this Agreement as any Lender and may exercise the same as though it were
not a Loan Agent. The terms "Lender" and "Lenders" shall include Administrative
Agent in its capacity as a Lender under this Agreement.
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9.1.11 A Loan Agent may resign as Loan Agent upon 30 days
written notice to the Lenders and the other Loan Agent. In the event that a
Loan Agent shall enter receivership, then Lenders (other than a Lender which is
acting as such Loan Agent, if applicable) may, by unanimous consent, remove such
Loan Agent as Loan Agent under this Agreement. If a Loan Agent shall resign as
such Loan Agent under this Agreement or a Loan Agent shall be removed, then the
Majority Lenders shall within 30 days of such resignation or removal or, in the
absence of such appointment, the resigning or removed Loan Agent shall, appoint
a successor Loan Agent for Lenders, whereupon such successor shall succeed to
the rights, powers and duties of such Loan Agent, and the term "Administrative
Agent", "Syndication Agent" or "Documentation Agent," as applicable, shall mean
such successor Loan Agent effective upon its appointment, and the former Loan
Agent's rights, powers and duties as Loan Agent shall be terminated, without any
other or further act or deed on the part of such former Loan Agent or any of the
parties to this Agreement or any holders of the Notes. After any retiring Loan
Agent's resignation hereunder as Loan Agent or any Loan Agent's removal, the
provisions of this Section 9.1 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was a Loan Agent under this
Agreement.
9.1.12 Each Lender agrees to use its best efforts promptly upon
an officer responsible for the administration of this Agreement becoming aware
of any development or other information which may have a Material Adverse Effect
or MAC to notify the Loan Agents and the other Lenders of the same. Each Loan
Agent agrees that it shall promptly deliver to each Lender copies of all
notices, demands, statements and communications which such Loan Agent gives to
Borrower or either Guarantor, except for routine notices of payment due under
the Loan Documents and other miscellaneous notices, demands, statements and
communications, the failure of delivery of which to each Lender would not have a
material adverse effect on any Lender. The foregoing notwithstanding, no Loan
Agent shall have any liability to any Lender, nor shall a cause of action arise
against any Loan Agent, as a result of the failure of such Loan Agent to deliver
to any Lender any notice, demand, statement or communication required to be
delivered by it under this Section 9.1(l), except to the extent such failure is
due to the gross negligence or willful misconduct of such Loan Agent.
9.1.13 Each Loan Agent shall endeavor to exercise the same care
in administering the Loan Documents as it exercises with respect to similar
transactions in which it is involved and where no other co-lenders or
participants are involved; PROVIDED that the liability of such Loan Agent for
failing to do so shall be limited as provided in the preceding paragraphs of
this Section 9.1.
9.1.14 Each Lender agrees that, as between it and the Loan
Agents, any Loan Document, or other report or document with respect to which the
approval of such Lender is required hereunder, sent to it for review shall be
deemed consented to by it for purposes of any approval thereof by any Loan Agent
if such Lender does not give to such Loan Agent written notice of its objection
thereto within five Business Days of its receipt thereof. The foregoing shall
be for the benefit of such Loan Agent only and shall not be deemed a consent
under any other provision of this Agreement or to confer any rights on Borrower,
either Guarantor or any of Borrower's other Subsidiaries under this Agreement in
any manner whatsoever.
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SECTION 10
SPTMRT AND SPTBROOK GUARANTY
10.1 GUARANTY. In order to induce Lenders to enter into this
Agreement and to make the Loans to Borrower hereunder, and to induce the Loan
Agents to act in such capacity hereunder, Guarantors agree as follows:
10.1.1 Each Guarantor hereby unconditionally and irrevocably
guarantees, as primary obligor and not merely as surety, the full and punctual
payment (whether at stated maturity, upon acceleration or otherwise) of the
principal of and interest (including, without limitation, interest which, but
for the filing of a petition in bankruptcy with respect to Borrower, would
accrue hereunder) on the Loans, and the full and punctual payment of all other
amounts payable by Borrower under this Agreement, the Notes and the other Loan
Documents (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy Code). Upon
failure by Borrower to pay punctually any such amount, Guarantors shall
forthwith on demand by Administrative Agent pay the amount not so paid as if
Guarantors instead of Borrower were expressed to be the principal obligor. The
obligations of Guarantors hereunder are joint and several obligations of
Guarantors. Guarantors acknowledge that the giving by them of this guaranty is
a condition precedent to the making of the Loans to Borrower and also
acknowledge that the obligations guaranteed are being incurred for, and will
inure to, their benefit.
10.1.2 The obligations of Guarantors hereunder shall be
unconditional, irrevocable, direct and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by (and, to the fullest extent permitted by law, each Guarantor waives
its rights in connection with):
10.1.2.1 any extension, increase, renewal,
settlement, compromise, waiver or release in respect of any
obligation of Borrower or any guarantor (including, without
limitation, the other Guarantor or any Additional Subsidiary
Guarantor) hereunder or under any Note or any other Loan
Document, by operation of law or otherwise;
10.1.2.2 any modification or amendment of,
supplement to or agreement or stipulation with respect to this
Agreement, any Note or any other Loan Document;
10.1.2.3 any election of remedies, including,
without limitation, any election of remedies which impairs or
eliminates any subrogation or reimbursement rights such
Guarantor might otherwise have to proceed against Borrower or
any guarantor (including, without limitation, the other
Guarantor or any Additional Subsidiary Guarantor), including,
without limitation, any limitation on any right such Guarantor
might have to exercise any rights of Lenders and the Loan Agents
under the Loan Documents;
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10.1.2.4 any right such Guarantor might have
under applicable law to revoke this Agreement in whole or in
part and to assert an offset to its liability based on the fair
value or fair market value of any of the Properties;
10.1.2.5 any Loan Agent's or Lender's waiver of
or failure to enforce any of the terms, covenants or conditions
contained in the Loan Documents or in any modification thereof;
10.1.2.6 any discharge, release, exchange,
subordination, impairment, non-perfection or invalidity of any
direct or indirect security or Lien on any real or personal
property then held by or for the benefit of Lenders as security
for the Loan Documents;
10.1.2.7 any additional security taken for the
Loans, this Agreement, the Notes or Borrower's obligations
under the Loan Documents;
10.1.2.8 any foreclosure or other realization on
any security for the Loans, this Agreement, the Notes or the
Loan Documents, regardless of the effect upon any subrogation,
contribution or reimbursement rights such Guarantor might have
against Borrower, any other guarantor (including, without
limitation, the other Guarantor or any Additional Subsidiary
Guarantor) or any other Person;
10.1.2.9 any change in the trust existence,
structure or ownership of Borrower, or any insolvency,
bankruptcy, reorganization or other similar proceeding
affecting Borrower or its assets or any resulting release or
discharge of any obligation of Borrower contained in this
Agreement, any Note or any other Loan Document;
10.1.2.10 the existence of any claim, set-off or
other rights which such Guarantor may have at any time against
Borrower, any Lender, any Loan Agent, any other guarantor
(including without limitation, the other Guarantor or any
Additional Subsidiary Guarantor) or any other Person, whether
in connection herewith or any unrelated transactions; PROVIDED
that nothing herein shall prevent the assertion of any such
claim by separate suit or compulsory counterclaim;
10.1.2.11 any invalidity or unenforceability
relating to or against Borrower for any reason of this
Agreement, any Note or any other Loan Document, or any
provision of applicable law or regulation purporting to
prohibit the payment by Borrower of the principal of or
interest on the Loans or any other amount payable by Borrower
under this Agreement, any Note or any other Loan Document; or
10.1.2.12 any other act or omission to act or
delay of any kind by Borrower, any Lender, any Loan Agent or
any other Person or any other circumstance whatsoever which
might, but for the provisions of this Section 10.1(b),
constitute a legal or equitable discharge of or defense to such
Guarantor's obligations hereunder.
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Without limiting the generality of the foregoing, each Guarantor agrees that
its liability under this Agreement shall continue even if any Loan Agent or
Lender alters any obligations under the Loan Documents in any respect or
Lenders' or such Guarantor's remedies or rights against Borrower are in any
way impaired or suspended without such Guarantor's consent, and each
Guarantor waives any and all rights, benefits and defenses it may have under
applicable law with respect thereto.
10.1.3 The liability of Guarantors under this Agreement is
not conditioned or contingent upon the genuineness, validity, regularity or
enforceability of the Loan Documents, at law, in equity or otherwise.
Guarantors' liability hereunder may be larger in amount and more burdensome
than that of Borrower, and each Guarantor waives any and all rights, benefits
and defenses it may have under applicable law with respect thereto. No
Guarantor's liability hereunder shall be limited or affected in any way by
any impairment or any diminution or loss of value of any security, guaranty
or collateral for the Loan Documents, whether caused by hazardous substances
or otherwise, any Loan Agent's or Lender's failure to perfect a security
interest in such security or collateral or any disability or other defense of
Borrower or any other guarantor (including, without limitation, the other
Guarantor or any Additional Subsidiary Guarantor).
10.1.4 Guarantors' obligations hereunder shall remain in
full force and effect until this Agreement shall have terminated and the
principal of and interest on the Loans and all other amounts payable by
Borrower hereunder and under the Notes and the other Loan Documents shall
have been paid in full. Each Guarantor agrees that its guarantee hereunder
shall continue to be effective or be reinstated, as the case may be, if at
any time payments, or any part thereof, of principal of or interest on the
Loans or any other obligation of Borrower, any other guarantor (including
without limitation, the other Guarantor or any Additional Subsidiary
Guarantor) is rescinded or must otherwise be restored by either Loan Agent
or any Lender upon the bankruptcy or reorganization of Borrower or any such
other guarantor or otherwise.
10.1.5 Guarantors hereby irrevocably waive to the extent
permitted by applicable law (i) all notices to Guarantors, to Borrower or to
any other Person not expressly provided for herein, including, but not
limited to, notices of the acceptance of this Agreement or the creation,
renewal, extension, modification, accrual of any of the Loan Documents and
enforcement of any right or remedy with respect thereto, and notice of any
other matters relating thereto; (ii) diligence and demand of payment,
presentment, protest, dishonor and notice of dishonor; (iii) any statute of
limitations affecting either Guarantor's liability hereunder or the
enforcement hereof; (iv) any duty on the part of any Loan Agent or Lender to
disclose to Guarantors any facts any Loan Agent or Lender may now or
hereafter know about Borrower, regardless of whether any Loan Agent or Lender
has reason to believe that any such facts materially increase the risk beyond
that which Guarantors intend to assume, or has reason to believe that such
facts are unknown to Guarantors, or has a reasonable opportunity to
communicate such facts to Guarantors, since Guarantors acknowledge that they
are fully responsible for being and keeping informed of the financial
condition of Borrower and of all circumstances bearing on the risk of
nonperformance of any obligations hereby guaranteed; (v) any defense arising
because of any Loan Agent's or Lender's election, in any case under of the
United States Bankruptcy Code, of the application of Section 1111(b)(2) of
the United States Bankruptcy Code; (vi) any defense based upon any borrowing
or grant of a security interest under
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Section 364 of the United States Bankruptcy Code; and (vii) all principles or
provisions of law which conflict with the terms of this Agreement (including
any other suretyship defense that may be available to either Guarantor).
Guarantors further agree that the Loan Agents and Lenders may enforce this
Agreement upon and after the occurrence of an Event of Default,
notwithstanding (1) the existence of any dispute between Borrower and any
Loan Agent or Lender with respect to the existence of such Event of Default
or performance of Borrower's or either Guarantor's obligations under the Loan
Documents, or any counterclaim, setoff or other claim which Borrower or
either Guarantor may allege against any Loan Agent or Lender with respect
thereto, or (2) the existence of any dispute between either Guarantor and
Borrower, or any counterclaim, setoff or other claim which either Guarantor
may allege against Borrower with respect thereto.
10.1.6 Each Guarantor agrees that the Loan Agents and
Lenders may enforce this Agreement against such Guarantor without the
necessity of resorting to or exhausting any security or collateral and
without the necessity of proceeding against the Borrower or any other
guarantor (including, without limitation, the other Guarantor or any
Additional Subsidiary Guarantor). Each Guarantor hereby waives any and all
benefits they may have under any applicable law, including, without
limitation, any right to require the Loan Agents and Lenders to proceed
against Borrower, to proceed against any other guarantor, to foreclose any
lien on any real or personal property, to exercise any right or remedy under
the Loan Documents or to pursue any other remedy or to enforce any other
right.
10.1.7 Each Guarantor irrevocably waives any and all rights
to which it may be entitled, by operation of law or otherwise, upon making
any payment hereunder to be subrogated to the rights of the payee against
Borrower with respect to such payment or against any direct or indirect
security therefor, or otherwise to be reimbursed, indemnified or exonerated
by or for the account of Borrower in respect thereof.
SECTION 11
GENERAL
11.1 CHOICE OF LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONTRACTS UNDER AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK),
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
11.2 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL,
ETC. NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, THE NOTES OR ANY
OTHER LOAN DOCUMENT, EACH OF BORROWER AND GUARANTORS HEREBY IRREVOCABLY (a)
SUBMITS TO THE NON-EXCLUSIVE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL
COURT IN THE STATE OF NEW YORK IN ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING
RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS;
(b)
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AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT, ACTION OR OTHER LEGAL
PROCEEDING MAY BE HEARD AND DETERMINED IN, AND ENFORCED IN AND BY, ANY SUCH
COURT; (c) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO VENUE IN
ANY SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM; (d) AGREES TO
SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, OR IN ANY OTHER MANNER PERMITTED BY LAW, TO ANY THEN ACTIVE
AGENT FOR SERVICE OF PROCESS ("PROCESS AGENT") AT ANY SPECIFIED ADDRESS OR TO
BORROWER OR EITHER GUARANTOR, AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH
HEREIN OR TO SUCH OTHER ADDRESS OF WHICH ADMINISTRATIVE AGENT SHALL HAVE BEEN
NOTIFIED IN WRITING (SUCH SERVICE TO BE EFFECTIVE ON THE EARLIER OF RECEIPT
THEREOF OR, IN THE CASE OF SERVICE BY MAIL, THE FIFTH DAY AFTER DEPOSIT OF
SUCH SERVICE IN THE MAILS AS AFORESAID), AND HEREBY WAIVES ANY CLAIM OF ERROR
ARISING OUT OF SERVICE OF PROCESS BY ANY METHOD PROVIDED FOR HEREIN OR ANY
CLAIM THAT SUCH SERVICE WAS NOT EFFECTIVELY MADE; (e) AGREES THAT THE FAILURE
OF ITS PROCESS AGENT TO GIVE ANY NOTICE OF ANY SUCH SERVICE OF PROCESS TO IT
SHALL NOT IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR ANY JUDGMENT BASED
THEREON; (f) TO THE EXTENT THAT BORROWER OR EITHER GUARANTOR HAS ACQUIRED, OR
HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY SUCH COURT OR
FROM LEGAL PROCESS THEREIN, WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, SUCH IMMUNITY; (g) WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, IN CONNECTION WITH, OR WITH RESPECT TO, ANY SUIT, ACTION OR
OTHER LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OF THE
OTHER LOAN DOCUMENTS, (i) ANY CLAIM THAT IT IS IMMUNE FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT
IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO IT OR ANY OF ITS
PROPERTY, (ii) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, (iii) ANY RIGHT TO A JURY TRIAL, AND (iv) ANY
RIGHT TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, DIRECT DAMAGES; AND (h)
AGREES THAT ADMINISTRATIVE AGENT AND EACH LENDER SHALL HAVE THE RIGHT TO
BRING ANY LEGAL PROCEEDINGS (INCLUDING A PROCEEDING FOR ENFORCEMENT OF A
JUDGMENT ENTERED BY ANY OF THE AFOREMENTIONED COURTS) AGAINST BORROWER OR
EITHER GUARANTOR IN ANY OTHER COURT OR JURISDICTION IN ACCORDANCE WITH
APPLICABLE LAW. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF ADMINISTRATIVE AGENT AND EACH LENDER TO BRING ANY ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OF THE OTHER
LOAN DOCUMENTS IN THE COURTS OF ANY OTHER JURISDICTION OR THE RIGHT, IN
CONNECTION WITH ANY LEGAL ACTION OR PROCEEDING WHATSOEVER, TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED
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BY LAW. EACH OF BORROWER AND GUARANTORS HEREBY IRREVOCABLY DESIGNATES THE
FIRM OF CORPORATION SERVICE COMPANY, WITH OFFICES AT 2 WORLD TRADE CENTER,
SUITE 8746, NEW YORK, NEW YORK 10048, AS ITS PROCESS AGENT TO RECEIVE SERVICE
OF ANY AND ALL PROCESS AND DOCUMENTS ON ITS BEHALF IN ANY LEGAL PROCEEDING IN
THE STATE OF NEW YORK, AND SUCH PROCESS AGENT, BY SEPARATE INSTRUMENT, HAS
AGREED TO SO ACT AS PROCESS AGENT FOR SERVICE OF PROCESS. IF SUCH PROCESS
AGENT SHALL FOR ANY REASON FAIL TO ACT, OR BE PREVENTED FROM ACTING, AS
PROCESS AGENT, NOTICE THEREOF SHALL IMMEDIATELY BE GIVEN TO ADMINISTRATIVE
AGENT BY REGISTERED OR CERTIFIED MAIL, AND BORROWER AND GUARANTORS AGREE
PROMPTLY TO DESIGNATE ANOTHER PROCESS AGENT IN THE CITY OF NEW YORK,
SATISFACTORY TO ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, TO SERVE IN PLACE
OF SUCH PROCESS AGENT AND DELIVER TO ADMINISTRATIVE AGENT WRITTEN EVIDENCE OF
SUCH SUBSTITUTE PROCESS AGENT'S ACCEPTANCE OF SUCH DESIGNATION. SUCH ACTING
PROCESS AGENT SHALL NEVERTHELESS CONTINUE TO SERVE AS PROCESS AGENT UNTIL ITS
SUCCESSOR IS DULY APPOINTED. EACH OF ADMINISTRATIVE AGENT AND LENDERS HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (A) ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT, ANY OF THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS AND (B) ANY
RIGHT TO CLAIM OR RECOVER IN ANY ACTION ARISING UNDER OR IN CONNECTION WITH
THIS AGREEMENT, ANY OF THE NOTES OR ANY OF THE OTHER FINANCING DOCUMENTS ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, DIRECT DAMAGES.
11.3 NOTICES; CERTAIN PAYMENTS.
11.3.1 All notices, consents and other communications to
Borrower, either Guarantor, Administrative Agent or any Lender relating
hereto to be effective shall be in writing and shall be deemed made (i) if by
certified or registered mail, return receipt requested, or facsimile, when
received, (ii) if by telex, when sent answerback received, and (iii) if by
courier, when receipted for, in each case addressed to them as follows or at
such other address as either of them may designate by written notice to the
other:
If to Borrower and/or Guarantors:
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attention: Messrs. David J. Hegarty and Ajay Saini
Telecopier: (617) 332-2261
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with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A.. Notopoulos, Jr., Esq.
Telecopier: (617) 338-2880
If to Administrative Agent:
Dresdner Bank AG
New York Branch
75 Wall Street
New York, New York 10005
Attention: Andrew P. Nesi and Birgit Anderson
Telephone: (212) 429-2201/2747
Telecopier: (212) 429-2129
with copies to the following additional address with
respect to all notices under Section 2:
Dresdner Bank AG, New York Branch
75 Wall Street
New York, NY 10005
Attention: Credit Services Department
Telephone: (212) 429-2288
Telecopier: (212) 429-2130
If to Lenders:
to the addresses specified opposite such Lenders'
respective names on SCHEDULE 1, or in any applicable
Assignment Agreement.
Any failure by Administrative Agent or any Lender to provide a copy of any
notice to the second address of Borrower and Guarantors shown above shall not
effect the validity of such notice if delivered to the first address of
Borrower and Guarantors shown above.
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11.3.2 All payments on account of the Loans and the related
Notes pursuant hereto or pursuant to the other Loan Documents shall be made to
the account of the Administrative Agent at:
Dresdner Bank AG
New York Branch
75 Wall Street
New York, New York 10005
ABA No. 026008303
For further credit to Account No. NYB121757/15
Reference: Senior Housing Properties Trust
together with irrevocable instructions to Administrative Agent to apply such
payments under this Agreement. Administrative Agent may by written notice to
Borrower and Guarantors specify or change its account and address for payment
instructions hereunder.
11.4 SUCCESSORS AND ASSIGNS.
11.4.1 This Agreement, the Notes and the other Loan Documents
(including all covenants, representations, warranties, rights, powers,
privileges and remedies made or granted herein or therein) shall inure to the
benefit of, and be enforceable by Administrative Agent and each Lender and their
respective successors and assigns, except as otherwise expressly provided in
this Agreement.
11.4.2 Neither Borrower nor either Guarantor may directly or
indirectly assign or transfer (whether by agreement, by operation of law or
otherwise) any of its rights or obligations and liabilities hereunder without
the prior written consent of each Lender.
11.4.3 Each Lender may make, carry or transfer its Commitment
and Pro Rata Share of the Loans at, to or for the account of, any of its branch
or agency offices or the office of one or more of its Affiliates.
11.4.4 Each Lender may sell participations in all or any part
of its Commitment and Pro Rata Share of the Loans and its interest hereunder and
under its Note and the other Loan Documents to another bank or Person; PROVIDED
that (1) such Lender shall remain a Lender hereunder for purposes of the Loan
Documents and the participant shall not be a Lender with respect to such
participation, (2) the participant shall not have any rights under this
Agreement or any Note or any other Loan Document (the participant's rights
against such Lender in respect of such participation to be those set forth in
the agreement executed by such Lender in favor of such participant relating
thereto) and (3) the terms of the agreement pursuant to which any such
participation is created shall not confer upon the participant any right to vote
its interest as a participant in respect of any matter relating to the Loans
other than (i) any extension of the maturity of the respective Note or the time
of payment of interest thereon, (ii) any reduction of the rate of interest
payable hereunder or under the respective Note, or (iii) any increase of such
participant's share of the Loans resulting from an increase of such Lender's Pro
Rata Share hereunder.
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11.4.5 With the prior written consent of Administrative Agent
(not to be unreasonably withheld) each Lender may assign its rights and delegate
its obligations under this Agreement and the other Loan Documents and all or any
part of its Commitment and Pro Rata Share of the Loans and its interest
hereunder and under its Note and the other Loan Documents to another bank or
other Person in amounts not less than $5,000,000 (or any lesser amount in the
case of an assignment by one Lender to another Lender) to any one assignee, in
which event upon notice thereof by such Lender to Borrower and Administrative
Agent, upon delivery to Administrative Agent of a copy of an Assignment
Agreement executed by the assigning Lender and the assignee, together with a
processing fee of $3,500 payable by the assignor or the assignee to the
Administrative Agent, and upon surrender of the Note subject to such assignment,
(1) Borrower shall execute a new Note to the assignee Lender in an amount equal
to the portion of the principal of the Loans so assigned and, if the assigning
Lender is assigning less than its entire Commitment and Pro Rata Share of the
Loans, a new Note to the assigning Lender in an amount equal to the portion of
the principal of the Loans retained by such assigning Lender hereunder, (2) the
assignee Lender shall have, to the extent of such assignment (unless otherwise
provided in the Assignment Agreement), the rights and benefits of such Lender
hereunder and to such extent shall be deemed a "Lender" for all purposes of this
Agreement and the other Loan Documents, and (3) Administrative Agent shall
adjust SCHEDULE 1 accordingly and send copies thereof to Borrower, Guarantors
and the other Lenders. The assignor Lender shall be relieved of its obligations
thereafter accruing hereunder to the extent of such assignment (and if the
assigning Lender no longer holds any rights or obligations under this Agreement,
such assigning Lender shall cease to be a "Lender" hereunder except that its
rights under Section 2.12, 2.15 and 11.9 shall not be affected).
11.4.6 Each Lender agrees that it shall not assign or offer to
assign interests in its Note in such a manner as would require that the Notes be
registered under applicable securities laws. Each Lender represents that it is
acquiring its Note for investment and not with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act of 1933, as amended; PROVIDED that the disposition of the Notes in
accordance with the other provisions of this Section 11.4 shall at all times
remain within Lenders' control.
11.4.7 Subject to the provisions of Section 11.11, each Lender
may furnish any information concerning Borrower, Guarantors and Borrower's other
Subsidiaries, the Advisor, the Tenants, the Mortgagors, Marriott, the Brookdale
Lease Guarantors and the other Credit Support Obligors in the possession of such
Lender from time to time to assignees and participants (including prospective
assignees and participants).
11.5 SYNDICATION CONTINGENCY. Notwithstanding anything to
the contrary contained herein, in the event that syndication to additional
Lenders of the Loans and Lenders' rights and obligations under this Agreement
and the other Loan Documents cannot be achieved through assignments pursuant to
Section 11.4, in a manner and to an extent and on terms satisfactory to
Administrative Agent and Lenders, due to the terms, conditions or structure of
this Agreement and the other Loan Documents, Borrower and Guarantors will
cooperate with Administrative Agent and Lenders in developing and agreeing to
mutually acceptable alternative terms and conditions and/or an alternative
structure that will permit satisfactory syndication of the Loans and Lenders'
rights and
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obligations under this Agreement and the other Loan Documents, including, but
not limited to, changing the structure, pricing, financial covenants and
maturity of the Loans, and Borrower and Guarantors agree to cooperate with
Administrative Agent and Lenders to achieve such satisfactory syndication;
PROVIDED, however, that the amount of the Commitments shall remain unchanged.
11.6 NO WAIVERS; CUMULATIVE REMEDIES; ENTIRE AGREEMENT;
HEADINGS; COUNTERPARTS; SEVERABILITY.
11.6.1 No action, failure, delay or omission by Administrative
Agent or any Lender in exercising any rights, powers, privileges and remedies
under this Agreement, the Notes or any other Loan Document, or otherwise, shall
constitute a waiver of, or impair, any of the rights, powers, privileges or
remedies of Administrative Agent or any Lender hereunder or thereunder.
11.6.2 No single or partial exercise of any such right, power,
privilege or remedy shall preclude any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy. Such rights, powers,
privileges and remedies are cumulative and not exclusive of any rights, powers,
privileges and remedies provided by law or otherwise available, including, but
not limited to, rights to specific performance (to the extent permitted by law)
or any covenant or agreement contained in this Agreement or any of the other
Loan Documents. No waiver of any such right, power, privilege or remedy shall
be effective unless given in writing by the Majority Lenders or as otherwise
provided in Section 11.8. No waiver of any such right, power, privilege or
remedy shall be deemed a waiver of any other right, power, privilege or remedy
hereunder or thereunder. Every right, power, privilege and remedy given by this
Agreement, any Note or any other Loan Document or by applicable law to
Administrative Agent or any Lender may be exercised from time to time and as
often as may be deemed expedient by Administrative Agent or any Lender.
11.6.3 This Agreement, the Notes and the other Loan Documents
constitute the entire agreement of the parties relating to the subject matter
hereof and thereof and there are no verbal agreements relating hereto or
thereto. Section headings herein shall have no legal effect.
11.6.4 This Agreement may be executed in any number of separate
counterparts, each of which shall be deemed an original and all of which taken
together shall be deemed to constitute one and the same instrument.
11.6.5 In the event any one or more of the provisions contained
in this Agreement or any Notes or any other Loan Documents should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall not
in any way be affected or impaired thereby. The parties will endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
11.7 SURVIVAL. The obligations of Borrower under Sections
2.6, 2.10, 2.12, 2.15, 6.12 and 11.9 and all other indemnification and expense
reimbursement obligations of Borrower under this Agreement (and the obligations
of Guarantors under Section 10 in respect of such
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obligations of Borrower) shall survive the repayment of the Loans and the
cancellation of the Notes and the termination of the other obligations of
Borrower and Guarantors hereunder and under the other Loan Documents. All
representations and warranties made hereunder, under the other Loan Documents
and in any document, certificate or statement delivered pursuant hereto,
thereto or in connection herewith or therewith shall survive the execution
and delivery of this Agreement and the Notes and the funding of the Loans.
11.8 AMENDMENTS AND WAIVERS. With the written consent of the
Majority Lenders, Administrative Agent and Borrower may, from time to time,
enter into written amendments, supplements or modifications hereto or to any of
the other Loan Documents and with the written consent of the Majority Lenders,
Administrative Agent on behalf of Lenders may execute and deliver to Borrower a
written instrument waiving, on such terms and conditions as Administrative Agent
may specify in such instrument, any of the requirements of this Agreement, the
Notes or the other Loan Documents or any Default or Event of Default and its
consequences; PROVIDED that no such waiver and no such amendment, supplement or
modification shall (a) extend the maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or reduce or postpone the due
date for the principal amount thereof or any other amount payable in connection
herewith, or amend, modify or waive any provision of this Section or reduce the
percentage specified in the definition of Majority Lenders, or consent to the
assignment or transfer by Borrower or either Guarantor of any of its rights and
obligations under this Agreement, in each case without the written consent of
all Lenders, (b) amend, modify or waive any provision of Section 9 or otherwise
change any of the rights or obligations of either or both of the Loan Agents
under any of the Loan Documents without the written consent of the affected Loan
Agent or Loan Agents (as applicable) at the time, or (c) with respect to Section
7.7, amend, modify or waive any provision thereof in a manner which permits
Guarantors to own, operate, acquire or fund real property interests or
facilities other than the Marriott Properties and the Brookdale Properties and
interests incidental thereto, in each case without the consent of all Lenders.
In the case of any waiver, Borrower, Guarantors, Administrative Agent and
Lenders shall be restored to their former position and rights hereunder and
under the outstanding Notes and the other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default or Event of Default,
or impair any right consequent thereon.
11.9 PAYMENT OF EXPENSES AND TAXES. Borrower will (a) pay or
reimburse each of Administrative Agent on demand for all its reasonable
out-of-pocket costs and expenses incurred in connection with the negotiation,
preparation, execution, syndication and administration of, and any amendment,
supplement or modification to, this Agreement, the Notes and the other Loan
Documents or other documents prepared in connection herewith, the consummation
of the transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of counsel to Administrative
Agent, (b) pay or reimburse each Lender and Administrative Agent on demand for
all its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes, the other Loan
Documents and any such other documents, including, without limitation,
reasonable fees and disbursements of counsel to Administrative Agent and
Lenders, (c) pay, indemnify, and to hold each Lender and Administrative Agent
and their respective officers, directors, employees and agents harmless for,
from and against, any and all recording and filing fees and any and all
liabilities with
88
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respect to, or resulting from any delay in paying, stamp, documentary,
excise, property and other taxes, if any, which may be payable or determined
to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under
or in respect of, this Agreement, the Notes, the other Loan Documents and any
such other documents, and (d) pay, indemnify, and hold each Lender,
Administrative Agent and their respective officers, directors, employees and
agents harmless for, from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to
the execution, delivery, enforcement, performance and administration of, or
in any other way arising out of or relating to, this Agreement, the Notes,
the other Loan Documents and any such other documents, including, without
limitation, any claim resulting or to the extent arising out of the presence
of Hazardous Materials in or about any of the Properties or Mortgaged
Properties (all the foregoing, collectively, the "Indemnified Liabilities"),
PROVIDED that Borrower shall have no obligation hereunder with respect to
Indemnified Liabilities to the extent arising from (i) the willful misconduct
or gross negligence of any Lender or (ii) legal proceedings commenced against
any such Lender by any security holder or creditor of such Lender arising out
of and based upon rights afforded any such security holder or creditor solely
in its capacity as such.
11.10 ADJUSTMENTS; SETOFF.
11.10.1 If any Lender (a "BENEFITTED LENDER") shall at
any time receive any payment of all or part of its Pro Rata Share of the
Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 8.1(g), or otherwise) in a
greater proportion than any such payment to or collateral received by any
other Lenders, if any, in respect of such other Lenders' Pro Rata Shares of
the Loans, or interest thereon, such benefitted Lender shall purchase for
cash from the other Lenders such portion of each such other Lender's Pro Rata
Share of the Loans, or shall provide such other Lenders with the benefits of
any such collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each such other Lender; PROVIDED that if
all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such recovery, but
without interest. Borrower and Guarantors expressly consent to the foregoing
arrangements and agree that each Lender so purchasing a portion of another
Lender's Pro Rata Share of the Loans may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.
11.10.2 In addition to any rights and remedies of
Lenders provided by law, each Lender shall have the right, without prior
notice to Borrower and Guarantors, any such notice being expressly waived by
Borrower and Guarantors to the extent permitted by applicable law, upon
11.10.2.1 the filing of a petition under any of
the provisions of the federal bankruptcy act or amendments
thereto, by or against,
11.10.2.2 the making of an assignment for the
benefit of creditors by,
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11.10.2.3 the application for the appointment, or
the appointment, of any receiver of, or of any of the property
of,
11.10.2.4 the issuance of any execution against
any of the property of,
11.10.2.5 the issuance of a subpoena or order, in
supplementary proceedings, against or with respect to any of the
property of, and/or
11.10.2.6 the issuance of a warrant of attachment
against any of the property of,
Borrower or either Guarantor, to set off and apply against any indebtedness,
whether matured or unmatured, of Borrower or either Guarantor to such Lender,
any amount owing from such Lender to Borrower or either Guarantor, at or at any
time after, the happening of any of the above-mentioned events, and the
aforesaid right of set off may be exercised by such Lender against Borrower
and/or either of or both Guarantors or against any trustee in bankruptcy, debtor
in possession, assignee for the benefit of creditors, receiver, or execution,
judgment or attachment creditor of Borrower or either Guarantor, or against
anyone else claiming, through or against Borrower or either Guarantor or such
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set off shall not have been
exercised by such Lender prior to the making, filing or issuance, or service
upon such Lender of, or of notice of, any such petition, assignment for the
benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena or order of warrant. Each Lender
agrees promptly to notify Borrower or the respective Guarantor (as applicable)
and Administrative Agent after any such set off and application made by such
Lender; PROVIDED that the failure to give such notice shall not affect the
validity of such set off and application. The proceeds of any set off or
application pursuant to this Section 11.10(b) shall be distributed in
accordance with the Section 11.10(a).
11.11 CONFIDENTIALITY. Neither Administrative Agent nor any
Lender shall disclose any Confidential Information to any Person without the
consent of Borrower or the Advisor, other than (a) to Administrative Agent's and
Lenders' affiliates, officers, directors, employees, investors, agents and
advisors and to actual or prospective Lenders and participants, and then only on
a confidential basis, (b) as required by any law, rule or regulation or judicial
process and (c) as requested or required by any state, federal or foreign
authority or examiner regulating any Lender. "CONFIDENTIAL INFORMATION" means
information that Borrower, any of its Subsidiaries, HRPT or the Advisor
furnishes to Administrative Agent or any Lender that is proprietary in nature,
including financial information, projections and business plans, and other
information that is marked, labeled or otherwise identified as confidential, but
does not include any such information that is or becomes generally available to
the public other than as a result of a breach by Administrative Agent or any
Lender of its obligations under this Section or that is or becomes available to
Administrative Agent or any Lender from a source other than Borrower, any of its
Subsidiaries, HRPT or the Advisor.
11.12 NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST
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ESTABLISHING BORROWER, DATED DECEMBER 16, 1998, AND THE DECLARATIONS OF TRUST
ESTABLISHING GUARANTORS, EACH DATED JANUARY 14, 1999, COPIES OF WHICH, TOGETHER
WITH ALL AMENDMENTS THERETO ARE DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, RESPECTIVELY PROVIDE THAT THE NAMES
"SENIOR HOUSING PROPERTIES TRUST", "SPTMRT PROPERTIES TRUST" AND "SPTBROOK
PROPERTIES TRUST" REFER TO THE TRUSTEES UNDER THE RESPECTIVE DECLARATION OF
TRUST AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF BORROWER OR EITHER GUARANTOR SHALL BE
HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR
CLAIM AGAINST, BORROWER OR EITHER GUARANTOR, RESPECTIVELY.
[Remainder of page left blank intentionally]
91
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York, by their proper and duly
authorized officers as of the day and year first above written.
SENIOR HOUSING PROPERTIES TRUST,
a Maryland real estate investment trust
By__________________________________________
Name:
Title:
SPTMRT PROPERTIES TRUST,
a Maryland real estate investment trust
By__________________________________________
Name:
Title:
SPTBROOK PROPERTIES TRUST,
a Maryland real estate investment trust
By__________________________________________
Name:
Title:
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<PAGE>
DRESDNER BANK AG, NEW YORK BRANCH,
AS ADMINISTRATIVE AGENT
By__________________________________________
Name:
Title:
By__________________________________________
Name:
Title:
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH, AS A LENDER
By__________________________________________
Name:
Title:
By__________________________________________
Name:
Title:
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<PAGE>
EXHIBIT A
[FORM]
PROMISSORY NOTE
$_______________ New York, New York
------------------
FOR VALUE RECEIVED, the undersigned, SENIOR HOUSING PROPERTIES
TRUST, a real estate investment trust organized under the laws of the State of
Maryland ("Borrower"), hereby unconditionally promises to pay to the order of
________________________ ("Lender") in lawful money of the United States of
America and in immediately available funds, on the Termination date, the lesser
of (a) ___________________________________ or (b) the unpaid outstanding
principal amount from time to time of Lender's Pro Rata Share of the Loans to
Borrower pursuant to the Revolving Loan Agreement hereinafter referred to.
The undersigned further agrees to pay interest in like money
on the unpaid principal amount of Lender's Pro Rata Share of the Loans
(including, without limitation, any interest accrued and unpaid as of the date
of this Note) on the dates and at the rate or rates provided for in the
Revolving Loan Agreement until paid in full (both before and after judgment).
The holder of this Note is authorized to endorse from time to time the date and
amount of Lender's Pro Rata Share of the Loans, any conversions or continuations
thereof, each payment of principal with respect thereto and whether such Loans
are Base Rate Loans, Eurodollar Loans or Alternate Rate Loans on the schedule
annexed hereto and made a part hereof, or on a continuation thereof which shall
be attached hereto and made a part hereof, which endorsements shall constitute
PRIMA FACIE evidence of the accuracy of the information endorsed. Any failure to
make any such endorsement, however, shall not limit or otherwise affect the
obligations of Borrower under this Note.
All payments of principal and interest hereunder shall be made
without set-off or counterclaim to the account of the Administrative Agent
referred to below designated in or pursuant to the Revolving Loan Agreement for
payments thereunder for the benefit of Lender.
This Note is one of the Notes referred to in the Revolving
Loan Agreement dated as of September 15, 1999 among Borrower, Dresdner Bank AG,
New York Branch, as Administrative Agent, Lender and the other Lenders party
thereto, and SPTMRT Properties Trust and SPTBROOK Properties Trust, as
Guarantors (as the same has been or may be amended, restated, supplemented or
otherwise modified from time to time, the "Revolving Loan Agreement"). The
holder of this Note is entitled to the benefits of the Revolving Loan Agreement.
Terms defined in the Revolving Loan Agreement and not otherwise defined herein
are used herein with the same meanings. Reference is made to the Revolving Loan
Agreement for provisions for the prepayment hereof and the acceleration of the
maturity hereof.
A-1
<PAGE>
Borrower promises to pay all costs and expenses, including
reasonable attorneys fees, incurred in the collection or enforcement of this
Note. Borrower hereby waives diligence, presentment, protest, demand and notice
of every kind and, to the full extent permitted by law, the right to plead any
statute of limitations as a defense to any demand hereunder.
THE DECLARATION OF TRUST ESTABLISHING BORROWER, DATED DECEMBER
16, 1998, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "SENIOR HOUSING PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, BORROWER.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
SENIOR HOUSING PROPERTIES TRUST, a
Maryland real estate investment trust
By:___________________________________
Name:
Title:
A-2
<PAGE>
SCHEDULE TO PROMISSORY NOTE
<TABLE>
<CAPTION>
Date of Loan, Amount of Eurodollar Rate,
Conversion or Loan, Conversion Base Rate or Amount of Notation
Continuation or Continuation Alternate Rate Loan Principal Repaid Made By
------------ --------------- ------------------- ---------------- -------
<S> <C> <C> <C> <C>
</TABLE>
A-3
<PAGE>
EXHIBIT B
[FORM]
NOTICE OF BORROWING
Pursuant to that certain Revolving Loan Agreement dated as of
September 15, 1999 (such agreement, as it has been or may be amended, restated,
supplemented or otherwise modified from time to time, the "Revolving Loan
Agreement") among Senior Housing Properties Trust ("Borrower"), Dresdner Bank
AG, New York Branch, as Administrative Agent, Dresdner Bank AG, New York Branch
and Grand Cayman Branch, as Lender, and the other Lenders Party thereto, and
SPTMRT Properties Trust and SPTBROOK Properties Trust, as Guarantors, this
certificate constitutes Borrower's request and Notice of Borrowing under Section
2.3(b) of the Revolving Loan Agreement for the borrowing described below (the
"Borrowing"). Capitalized terms used herein without definition shall have the
respective meanings assigned to those terms in the Revolving Loan Agreement. The
information relating to the Borrowing required by Section 2.3(b) of the
Revolving Loan Agreement is as follows:
(1) The proposed Borrowing Date is ___________.
(2) The proposed Borrowing is of [$ _____________ in
Eurodollar Loans] [and] [$ ___________ in Base Rate Loans].
(3) The initial Interest Period for the Eurodollar Loan, if
applicable, is [one, two, three or six months] [state other period to which
Lenders have agreed].
(4) The account of Borrower to which the net proceeds of the
requested Loan are to be credited is:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
ABA No. 011-0000-28
Account Name: Senior Housing Properties Trust
Account No.: 6174-776-2
[or give details of other account]
(5) Borrower hereby certifies to Administrative Agent and
Lenders that:
(i) The representations and warranties of Borrower, each
Guarantor and each Additional Subsidiary Guarantor, if any, contained in the
Loan Documents are true, correct and accurate in all material respects to the
same extent as though made on and as of the date hereof unless stated in the
relevant Loan Document to relate to a specific earlier date, in which case such
representations and warranties are true, correct and complete in all material
respects as of such earlier date.
B-1
<PAGE>
(ii) No event has occurred and is continuing that
constitutes, or would result from the proposed Borrowing that would constitute,
a Default or Event of Default.
(iii) The amount of the proposed Borrowing will not cause
the aggregate outstanding principal amount of the Loans to exceed the
Commitments currently in effect.
(iv) The purposes to which the proceeds of the proposed
Borrowing will be applied are as follows: ______________________________________
________________________________________________________________________________
________________________________________________________________________________
Such purposes are in compliance with the Revolving Loan Agreement.
(v) The Collateral Coverage ratio is at least 1.20 to 1
(as demonstrated in the calculation thereof attached hereto).
[Borrower confirms to you pursuant to Section 2.3(b) of the
Revolving Loan Agreement that Borrower has irrevocably given telephonic notice
of such borrowing under the Revolving Loan Agreement pursuant to the telephone
conversation on __________ between _____________ and _________________.]
DATED: ___________________ SENIOR HOUSING PROPERTIES TRUST, a
Maryland real estate investment trust
By: _______________________________
Name:
Title:
B-2
<PAGE>
EXHIBIT C
[FORM]
NOTICE OF CONTINUATION/CONVERSION
Pursuant to that Revolving Loan Agreement dated as of
September 15, 1999 (such agreement, as it has been or may be amended, restated,
supplemented or otherwise modified from time to time, the "Revolving Loan
Agreement") among Senior Housing Properties Trust ("Borrower"), Dresdner Bank
AG, New York Branch and Grand Cayman Branch, as Lender, and the other Lenders
party thereto, and SPTMRT Properties Trust and SPTBROOK Properties Trust, as
Guarantors, this certificate constitutes Borrower's request and Notice of
Continuation/Conversion under Section 2.5(c) of the Revolving Loan Agreement for
the continuation of and/or conversion to the Tranche(s) specified below.
Capitalized terms used herein without definition shall have the respective
meanings assigned to those terms in the Revolving Loan Agreement. The
information relating to the continuation and/or conversion required by Section
2.5(c) of the Revolving Loan Agreement is as follows:
(1) The date for the [continuation] [and] [conversion] shall
be ______________.
(2) Borrower hereby requests to [continue as Eurodollar
Tranche(s) $________________ in aggregate principal amount of the outstanding
Eurodollar Tranche(s), the current Interest Period of which ends on
____________, 19__] [and] [convert to [a Base Rate Tranche] [a Eurodollar
Tranche] $______________ in aggregate principal amount of the outstanding
[Eurodollar Tranche(s), the current Interest Period of which ends on
___________] [Base Rate Tranche(s)][Alternate Rate Tranche(s)].
(3) In the case of a continuation of or conversion to a
Eurodollar Tranche, the Interest Period for such continued or converted (as
applicable) Eurodollar Tranche is requested to be [a one, two, three or six
months] [state other period, to which Lenders have agreed].
(4) In the case of a continuation of or conversion to a
Eurodollar Tranche, Borrower hereby certifies to Administrative Agent and
Lenders that:
(i) The representations and warranties of Borrower, each
Guarantor and each Additional Subsidiary Guarantor, if any, contained in the
Loan Documents are true, correct and accurate in all material respects to the
same extent as though made on and as of the date hereof unless stated in the
relevant Loan Document to relate to a specific earlier date, in which case such
representations and warranties are true, correct and complete in all material
respects as of such earlier date.
(ii) No event has occurred and is continuing that
constitutes, or would result from the proposed Borrowing that would constitute,
a Default or Event of Default.
C-1
<PAGE>
[Borrower confirms to you pursuant to Section 2.5(c) of
the Revolving Loan Agreement that Borrower has irrevocably given telephonic
notice of such continuation/conversion under the Revolving Loan Agreement
pursuant to the telephone conversation on ____________ between _____________ and
______________.]
DATED: __________________ SENIOR HOUSING PROPERTIES TRUST, a
Maryland real estate investment trust
By: _______________________________
Name:
Title:
C-2
<PAGE>
EXHIBIT D
[FORM]
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by
and between the parties designated as Assignor ("Assignor") and Assignee
("Assignee") above the signatures of such parties on the Schedule of Terms
attached hereto and hereby made an integral part hereof (the "Schedule of
Terms") and relates to the Revolving Loan Agreement dated as of September 15,
1999 by and among Senior Housing Properties Trust, Dresdner Bank AG, as
Administrative Agent and a Lender, the other financial institutions party
thereto as Lenders, and SPTMRT Properties Trust and SPTBROOK Properties Trust,
as Guarantors (as amended, supplemented or otherwise modified to the date hereof
and as it may hereafter be amended, supplemented and otherwise modified from
time to time, the "Revolving Loan Agreement"). The terms defined therein and not
otherwise defined herein are used herein as defined in the Revolving Loan
Agreement.
IN CONSIDERATION of the agreements, provisions and covenants
herein contained, Assignor and Assignee hereby agree as follows:
SECTION 1. ASSIGNMENT AND ASSUMPTION.
(a) Effective upon the Settlement Date specified in item 4 of the
Schedule of Terms (the "Settlement Date"), Assignor hereby sells and assigns to
Assignee, without recourse, representation or warranty (except as expressly set
forth herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Revolving Loan Agreement and the other Loan Documents with
respect to Assignor's Commitment and outstanding Pro Rata Share of the Loans,
which represents, as of the Settlement Date, the percentage interest specified
in item 3 of the Schedule of Terms of all rights and obligations of Lenders
arising under the Revolving Loan Agreement and the other Loan Documents with
respect to the Commitments and outstanding Loans (the "Assigned Share").
(b) In consideration of the assignment described above, Assignee
hereby agrees to pay to Assignor, on the Settlement Date, the principal amount
of the outstanding Loans included within the Assigned Share, such payment to be
made by wire transfer of immediately available funds in accordance with the
applicable payment instructions set forth in item 5 of the Schedule of Terms.
(c) Assignor hereby represents and warrants that item 3 of the
Schedule of Terms correctly sets forth the aggregate amount of the Commitments,
the aggregate outstanding principal amount Loans and the Pro Rata Share
corresponding to the Assigned Share.
(d) Assignor and Assignee hereby agree that, upon giving effect
to the assignment and assumption described above, (i) Assignee shall be a party
to the Revolving Loan Agreement and shall have all of the rights and obligations
of a Lender under the Loan Documents, and shall be deemed to have made all of
the covenants and agreements of a Lender contained in the Loan
D-1
<PAGE>
Documents, arising out of or otherwise relating to the Assigned Share, and (ii)
Assignor shall be absolutely released from any of such obligations, covenants
and agreements assumed or made by Assignee in respect of the Assigned Share.
Assignee hereby acknowledges and agrees that the agreement set forth in this
Section l(d) is expressly made for the benefit of Borrower, Guarantors,
Administrative Agent, Assignor and the other Lenders and their respective
successors and permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations as
Lender with respect to the Assigned Share, (ii) any other assignments by
Assignor of a portion of its rights and obligations with respect to the
Commitments and the outstanding Loans shall have no effect on the Commitments,
the outstanding Loans and the Pro Rata Share corresponding to the Assigned Share
as set forth in item 3 of the Schedule of Terms or on the interest of Assignee
in the outstanding Loans corresponding thereto, and (iii) from and after the
Settlement Date, Administrative Agent shall make all payments under the
Revolving Loan Agreement in respect of the Assigned Share (including all
payments of principal and accrued but unpaid interest and commitment fees with
respect thereto) (A) in the case of any such interest and fees that shall have
accrued prior to the Settlement Date, to Assignor, and (B) in all other cases,
to Assignee; PROVIDED that Assignor and Assignee shall make payments directly to
each other to the extent necessary to effect any appropriate adjustments in any
amounts distributed to Assignor and/or Assignee by Administrative Agent under
the Loan Documents in respect of the Assigned Share in the event that, for any
reason whatsoever, the payment of consideration contemplated by Section 1(b)
occurs on a date other than the Settlement Date.
(f) Pursuant to Section 11.4(e) of the Revolving Loan Agreement,
upon receipt by Borrower of notice of this Agreement and presentation to
Borrower of a new Note payable to Assignee in an amount equal to the portion of
the aggregate principal of the Loans assigned hereby and, if Assignor is
assigning less than its entire Commitment and Pro Rata Share of the Loans, a new
Note payable to Assignor in an amount equal to the portion of the principal of
the Loans retained by Assignor hereunder, together with a request of
Administrative Agent to execute and deliver the same, Borrower shall execute and
deliver such new Note or Notes to Assignor and, if so applicable, to Assignee,
in replacement of Assignor's existing Note (which shall thereupon be cancelled).
SECTION 2. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Assignor represents and warrants that it is the legal and
beneficial owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the
execution, effectiveness, genuineness, validity, enforceability, collectibility
or sufficiency of any of the Loan Documents or for any representations,
warranties, recitals or statements made therein or made in any written or oral
statements or in any financial or other statements, instruments, reports or
certificates or any other documents furnished or made by Assignor to Assignee or
by or on behalf of Borrower, either Guarantor or any other Person to Assignor or
Assignee in connection with the Loan Documents and the transactions contemplated
thereby or for the financial condition or business affairs of Borrower,
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Guarantors or any other Person liable for the payment of any obligations under
the Revolving Loan Agreement, or the value of the Marriott Properties, the
Brookdale Properties or any other collateral security for the Loans; and
Assignor shall not be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained in any of the Loan Documents or as to the use of the proceeds of the
Loans or as to the existence or possible existence of any Default or Event of
Default.
(c) Assignee represents and warrants that it has experience and
expertise in the making of loans such as the Loans; that it has acquired the
Assigned Share for its own account in the ordinary course of its business and
without a view to distribution of the Loans within the meaning of the Securities
Act or the Exchange Act or other federal securities laws (it being understood
that, subject to the provisions of Section 11.4 of the Revolving Loan Agreement,
the disposition of the Assigned Share or any interests therein shall at all
times remain within its exclusive control); and that it has received, reviewed
and approved copies of the Revolving Loan Agreement (including all Exhibits and
Schedules thereto) and such other Loan Documents as it has requested.
(d) Assignee represents and warrants that it has received from
Assignor such financial information regarding Borrower and its Subsidiaries and
the collateral security for the Loans (including, without limitation,
Guarantors, the Marriott Properties, the Brookdale Properties, the Marriott
Leases, the Brookdale Master Lease, the Marriott Tenants, Marriott, the
Brookdale Master Tenant and the Brookdale Lease Guarantors) as is available to
Assignor and as Assignee has requested; that it has made its own independent
investigation of the financial condition and affairs of the Borrower and its
Subsidiaries and the collateral security for the Loans (including, without
limitation, Guarantors, the Marriott Properties, the Brookdale Properties, the
Marriott Leases, the Brookdale Master Lease, the Marriott Tenants, Marriott, the
Brookdale Master Tenant and the Brookdale Lease Guarantors) in connection with
the assignment evidenced by this Agreement; and that it has made and shall
continue to make its own appraisal of the creditworthiness of the Borrower and
its Subsidiaries and the collateral security for the Loans (including, without
limitation, Guarantors, the Marriott Properties, the Brookdale Properties, the
Marriott Leases, the Brookdale Master Lease, the Marriott Tenants, Marriott, the
Brookdale Master Tenant and the Brookdale Lease Guarantors). Assignor shall have
no duty or responsibility, either initially or on a continuing basis, to make
any such investigation or any such appraisal on behalf of Assignee or to provide
Assignee with any other credit or other information with respect thereto,
whether coming into its possession before the making of the Initial Loan or at
any time or times thereafter, and Assignor shall not have any responsibility
with respect to the accuracy of or the completeness of any information provided
to Assignee.
(e) Each party to this Agreement represents and warrants to the
other party hereto that it has fall power and authority to enter into this
Agreement and to perform its obligations hereunder in accordance with the
provisions hereof; that this Agreement has been duly authorized, executed and
delivered by such party; and that this Agreement constitutes a legal, valid and
binding obligation of such party enforceable against such party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity.
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SECTION 3. MISCELLANEOUS.
(a) Each of Assignor and Assignee hereby agrees from time to
time, upon request of the other such party hereto, to take such additional
actions and to execute and deliver such additional documents and instruments as
such other party may reasonably request to effect the transactions contemplated
by, and to carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party (including, if applicable, any party required to evidence its consent
to or acceptance of this Agreement) against whom enforcement of such change,
waiver, discharge or termination is sought.
(c) Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the notice address of each of
Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to
either such party, such other address as shall be designated by such party in a
written notice delivered to the other such party. In addition, the notice
address of Assignee set forth on the Schedule of Terms shall serve as the
initial notice address of Assignee for purposes of subsection 11.3 of the
Revolving Loan Agreement.
(d) In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
9-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
(f) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(h) This Agreement shall become effective upon the date (the
"Effective Date") upon which all of the following conditions are satisfied: (i)
the execution of a counterpart hereof by each
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of Assignor and Assignee, (ii) the receipt of a written acknowledgment from
Borrower and Administrative Agent as evidence of their notice of the assignment
effected hereby, and (iii) the receipt by Administrative Agent of the processing
fee referred to in Section 11.4(d) of the Revolving Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.
[Remainder of page intentionally left blank]
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SCHEDULE OF TERMS
(1) BORROWER: Senior Housing Properties Trust
(2) NAME AND DATE OF REVOLVING LOAN AGREEMENT: Revolving Loan Agreement dated as
of September 15, 1999 by and among Senior Housing Properties Trust, Dresdner
Bank AG, as Administrative Agent and a Lender, the other financial institutions
party thereto as Lenders, and SPTMRT Properties Trust and SPTBROOK Properties
Trust, as Guarantors.
(3) AMOUNTS:
Re: Loans
(a) Aggregate Commitments of all Lenders: $__________
(b) Assigned Share/Pro Rata Share: __________%
(c) Amount of Assigned Share of Commitments: $__________
(d) Amount of Assigned Share of outstanding Loans: $__________
(4) SETTLEMENT DATE: ____________________
(5) PAYMENT INSTRUCTIONS:
ASSIGNOR: ASSIGNEE:
______________________ _______________________
______________________ _______________________
______________________ _______________________
Attention: ___________ Attention: ____________
Reference: ___________ Reference:____________
(6) NOTICE ADDRESSES:
ASSIGNOR: ASSIGNEE:
______________________ _______________________
______________________ _______________________
______________________ _______________________
______________________ _______________________
(7) SIGNATURES:
[NAME OF ASSIGNOR], as Assignee [NAME OF ASSIGNEE], as Assignor
By: __________________________ By:______________________________
Name: Name:
Title: Title:
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RECEIPT OF NOTICE ACKNOWLEDGED BY:
SENIOR HOUSING PROPERTIES TRUST,
a Maryland real estate investment trust
By: _______________________________
Name:
Title:
DRESDNER BANK AG, New York Branch,
as Administrative Agent
By:________________________________
Name:
Title:
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EXHIBIT E
[FORM]
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "AGREEMENT") dated as of
___________ is made by _____________________ PROPERTIES TRUST, a Maryland real
estate investment trust (together with its successors and assigns, "GUARANTOR"),
in favor of DRESDNER BANK AG, a German banking corporation acting through its
New York Branch, as Administrative Agent (including any successor Administrative
Agent under the Revolving Credit Agreement described below, "ADMINISTRATIVE
AGENT") for itself as a lender and the other lenders now or hereafter from time
to time parties to the Revolving Loan Agreement described below (collectively,
"LENDERS"), and Lenders.
A. Guarantor is a wholly-owned subsidiary of Senior Housing
Properties Trust, a Maryland real estate investment trust ("BORROWER"). Borrower
and its subsidiaries, SPTMRT Properties Trust and SPTBROOK Properties Trust,
have asked Lenders to make a $350,000,000 secured revolving loan facility
available to Borrower for the purpose of making loans to Borrower from time to
time up to an aggregate principal amount outstanding of $350,000,000 (the
"LOANS") for certain business purposes of Borrower and its subsidiaries
("SUBSIDIARIES"), pursuant to a Revolving Loan Agreement dated as of September
15, 1999 among Borrower, Administrative Agent, Lenders and SPTMRT Properties
Trust and SPTBROOK Properties Trust, as Guarantors (as amended, supplemented or
otherwise modified to the date hereof and as it may hereafter be amended,
supplemented and otherwise modified from time to time, the "REVOLVING LOAN
AGREEMENT") under which Borrower has issued notes to Lenders in the aggregate
principal amount of $350,000,000 to evidence the Loans (as the same may be
amended, modified and replaced from time to time, the "NOTES"). The payment of
the Loans and Notes and all other amounts payable from time to time under the
Revolving Loan Agreement, the Notes and the other LOAN DOCUMENTS (which term is
used herein as defined in the Revolving Loan Agreement) and the performance of
Borrower's obligations thereunder are (i) jointly and severally guaranteed by
SPTMRT Properties Trust and SPTBROOK Properties Trust under the Revolving Loan
Agreement and (ii) secured by mortgage and security agreements or deeds of trust
and security agreements on each of the properties of SPTMRT Properties Trust and
SPTBROOK Properties Trust.
B. Under the Revolving Loan Agreement, as a precondition to
any intercompany advance (directly or indirectly) of the proceeds of a Loan to
or for the benefit of a Subsidiary other than SPTMRT or SPTBROOK, and as a
precondition to the advance of any Loan for such purpose, Borrower is required
to cause such other Subsidiary to execute and deliver to Administrative Agent
and Lenders an Additional Subsidiary Guaranty by which such Subsidiary shall
guarantee and become surety for the payment of the Loans to the extent of such
advance to or for the benefit of such Subsidiary and the accrued interest and
other amounts payable under the Revolving Loan Agreement allocable thereto.
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C. Borrower proposes to advance, or direct Lenders to advance,
(directly or indirectly) to or for the benefit of Guarantor proceeds of one or
more Loans in a maximum aggregate advance amount up to $___________ (such
amount, or such greater aggregate amount of proceeds of one or more Loans as
shall have been advanced by Borrower and/or Lenders directly or indirectly to or
for the benefit of Guarantor from time to time and not repaid to Lenders, is
herein called the "GUARANTEED LOAN AMOUNT"). Pursuant to the Revolving Loan
Agreement, and as a precondition to such advance Borrower, Administrative Agent
and Lenders have required Guarantor to execute and deliver this Guaranty.
NOW, THEREFORE, in consideration of the Commitments of Lenders
to make Loans to Borrower pursuant and subject to the terms and conditions of
the Revolving Loan Agreement, and in consideration of the advance of a portion
of the proceeds thereof to Guarantor, Guarantor hereby agrees as follows:
SECTION 1. DEFINITIONS.
1.1 As used herein the following terms shall have the
following meanings:
"ADMINISTRATIVE AGENT" has the meaning set forth in the first
paragraph hereof and shall include any other Lender appointed to act as
administrative agent under the Revolving Loan Agreement instead of such
Administrative Agent.
"BORROWER" has the meaning set forth in the first paragraph
hereof.
"GUARANTEED LOAN AMOUNT" has the meaning set forth in recital
clause C.
"LENDERS" has the meaning set forth in the first paragraph
hereof.
"LOANS" has the meaning set forth in recital clause A hereof.
"LOAN DOCUMENTS" has the meaning set forth in the Revolving
Loan Agreement.
"NOTES" has the meaning set forth in recital clause A hereof.
"PRINCIPAL GUARANTORS" means SPTMRT Properties Trust and
SPTBROOK Properties Trust, each a Maryland real estate investment trust and a
wholly-owned subsidiary of Borrower.
"REVOLVING LOAN AGREEMENT" has the meaning set forth in
recital clause A hereof.
1.2 All terms used in this Agreement and defined in the
Revolving Loan Agreement and not otherwise defined herein shall have the
meanings set forth in the Revolving Loan Agreement. 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
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Agreement, and section, schedule and exhibit references are to this Agreement
unless otherwise specified and, where appropriate, the singular shall include
the plural.
SECTION 2. GUARANTY.
2.1 Guarantor hereby unconditionally and irrevocably
guarantees, as primary obligor and not merely as surety, the full and punctual
payment (whether at stated maturity, upon acceleration or otherwise) of the
principal of and interest (including, without limitation, interest which, but
for the filing of a petition in bankruptcy with respect to Borrower, would
accrue under the Revolving Loan Agreement) on the Loans, and the full and
punctual payment of all other amounts payable by Borrower under the Revolving
Loan Agreement and the Notes (including amounts that would become due but for
the operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code); PROVIDED that Guarantor's liability hereunder shall be limited
to a portion of the principal amount of the Loans equal to the Guaranteed Loan
Amount and the interest and other amounts payable under the Revolving Loan
Agreement and/or the Notes and reasonably allocable to such principal, IT BEING
UNDERSTOOD AND AGREED, however, that neither Administrative Agent nor Lenders
shall be required to establish traceability of any particular principal or
Tranches of the Loans to the Guaranteed Loan Amount, or of interest and other
amounts payable under the Loan Agreement and Notes allocable thereto, and that
the determinations by Administrative Agent of such principal and interest and
other amounts allocable thereto shall be final and binding on Guarantor,
Borrower, Principal Guarantors any other Additional Subsidiary Guarantors and
Lenders, absent manifest error. Upon failure by Borrower to pay punctually any
such principal, interest or other amount, Guarantor shall forthwith on demand by
Administrative Agent pay the amount not so paid as if Guarantor instead of
Borrower were expressed to be the principal obligor, subject, however, to the
foregoing limit. Guarantor acknowledges that the giving by it of this guaranty
is a condition precedent to the making of the Loans to Borrower and also
acknowledges that the obligations guaranteed are being incurred for, and will
inure to, its benefit.
2.2 The obligations of Guarantor hereunder shall be
unconditional, irrevocable, direct and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by (and, to the fullest extent permitted by law, Guarantor waives its
rights in connection with):
(i) any extension, increase, renewal, settlement,
compromise, waiver or release in respect of any obligation of Borrower or any
guarantor (including, without limitation, Principal Guarantors or other any
Additional Subsidiary Guarantor) under the Revolving Loan Agreement, any Note or
any other Loan Document, by operation of law or otherwise;
(ii) any modification or amendment of, supplement to or
agreement or stipulation with respect to the Revolving Loan Agreement, any Note
or any other Loan Document;
(iii) any election of remedies, including, without
limitation, any election of remedies which impairs or eliminates any subrogation
or reimbursement rights Guarantor might otherwise have to proceed against
Borrower or any guarantor (including, without limitation, Principal Guarantors
or any other Additional Subsidiary Guarantor), including, without limitation,
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any limitation on any right Guarantor might have to exercise any rights of
Lenders and the Loan Agents under the Loan Documents;
(iv) any right Guarantor might have under applicable law
to revoke this Agreement in whole or in part;
(v) any Loan Agent's or Lender's waiver of or failure to
enforce any of the terms, covenants or conditions contained in the Loan
Documents or in any modification thereof;
(vi) any discharge, release, exchange, subordination,
impairment, non-perfection or invalidity of any direct or indirect security or
Lien on any real or personal property then held by or for the benefit of Lenders
as security for the Loan Documents;
(vii) any additional security taken for the Loans, the
Revolving Loan Agreement, the Notes or Borrower's or either Principal
Guarantor's obligations under the Loan Documents;
(viii) any foreclosure or other realization on any
security for the Loans, the Revolving Loan Agreement, the Notes or the Loan
Documents, regardless of the effect upon any subrogation, contribution or
reimbursement rights Guarantor might have against Borrower, any other guarantor
(including, without limitation, Principal Guarantors or any other Additional
Subsidiary Guarantor) or any other Person;
(ix) any change in the trust existence, structure or
ownership of Borrower, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting Borrower or its assets or any resulting release or
discharge of any obligation of Borrower contained in the Revolving Loan
Agreement, any Note or any other Loan Document;
(x) the existence of any claim, set-off or other rights
which Guarantor may have at any time against Borrower, any Lender, any Loan
Agent, any other guarantor (including without limitation, Principal Guarantors
or any other Additional Subsidiary Guarantor) or any other Person, whether in
connection herewith or any unrelated transactions; PROVIDED that nothing herein
shall prevent the assertion of any such claim by separate suit or compulsory
counterclaim;
(xi) any invalidity or unenforceability relating to or
against Borrower for any reason of the Revolving Loan Agreement, any Note or any
other Loan Document, or any provision of applicable law or regulation purporting
to prohibit the payment by Borrower of the principal of or interest on the Loans
or any other amount payable by Borrower under the Revolving Loan Agreement, any
Note or any other Loan Document; or
(xii) any other act or omission to act or delay of any
kind by Borrower, any Lender, any Loan Agent or any other Person or any other
circumstance whatsoever which might, but for the provisions of this Section 2.2,
constitute a legal or equitable discharge of or defense to Guarantor's
obligations hereunder.
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Without limiting the generality of the foregoing, Guarantor agrees that its
liability under this Agreement shall continue even if any Loan Agent or Lender
alters any obligations under the Loan Documents in any respect or Lenders' or
Guarantor's remedies or rights against Borrower are in any way impaired or
suspended without Guarantor's consent, and Guarantor waives any and all rights,
benefits and defenses it may have under applicable law with respect thereto.
2.3 The liability of Guarantor under this Agreement is not
conditioned or contingent upon the genuineness, validity, regularity or
enforceability of the Loan Documents, at law, in equity or otherwise.
Guarantor's liability hereunder may be larger in amount and more burdensome than
that of Borrower with respect to the Guaranteed Loan Amount, and Guarantor
waives any and all rights, benefits and defenses it may have under applicable
law with respect thereto. Guarantor's liability hereunder shall not be limited
or affected in any way by any impairment or any diminution or loss of value of
any security, guaranty or collateral for the Loan Documents, whether caused by
hazardous substances or otherwise, any Loan Agent's or Lender's failure to
perfect a security interest in such security or collateral or any disability or
other defense of Borrower or any other guarantor (including, without limitation,
Principal Guarantors or any other Additional Subsidiary Guarantor).
2.4 Guarantor's obligations hereunder shall remain in full
force and effect until all Commitments under the Revolving Loan Agreement shall
have terminated and the principal of and interest on the Guarantied Loan Amount
and all other amounts payable by Borrower under the Revolving Loan Agreement,
the Notes and the other Loan Documents with respect thereto shall have been paid
in full. Guarantor agrees that its guarantee hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payments, or any
part thereof, of principal of or interest on the Guarantied Loan Amount or any
other obligation of Borrower with respect thereto, any other guarantor
(including without limitation, Principal Guarantors or any other Additional
Subsidiary Guarantor) is rescinded or must otherwise be restored by either Loan
Agent or any Lender upon the bankruptcy or reorganization of Borrower or any
such other guarantor or otherwise.
2.5 Guarantor hereby irrevocably waives to the extent
permitted by applicable law (i) all notices to Guarantor, to Borrower or to any
other Person not expressly provided for herein or in the Revolving Loan
Agreement, including, but not limited to, notices of the acceptance of this
Agreement or the creation, renewal, extension, modification, accrual of any of
the Loan Documents and enforcement of any right or remedy with respect thereto,
and notice of any other matters relating thereto; (ii) diligence and demand of
payment, presentment, protest, dishonor and notice of dishonor; (iii) any
statute of limitations affecting Guarantor's liability hereunder or the
enforcement hereof; (iv) any duty on the part of any Loan Agent or Lender to
disclose to Guarantor any facts any Loan Agent or Lender may now or hereafter
know about Borrower, regardless of whether any Loan Agent or Lender has reason
to believe that any such facts materially increase the risk beyond that which
Guarantor intends to assume, or has reason to believe that such facts are
unknown to Guarantor, or has a reasonable opportunity to communicate such facts
to Guarantor, since Guarantor acknowledges that it is fully responsible for
being and keeping informed of the financial condition of Borrower and of all
circumstances bearing on the risk of nonperformance of any obligations hereby
guaranteed; (v) any defense arising because of any Loan Agent's or Lender's
election, in any case under of the
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United States Bankruptcy Code, of the application of Section 1111(b)(2) of the
United States Bankruptcy Code; (vi) any defense based upon any borrowing or
grant of a security interest under Section 364 of the United States Bankruptcy
Code; and (vii) all principles or provisions of law which conflict with the
terms of this Agreement (including any other suretyship defense that may be
available to Guarantor). Guarantor further agrees that the Loan Agents and
Lenders may enforce this Agreement upon and after the occurrence of an Event of
Default, notwithstanding (1) the existence of any dispute between Borrower and
any Loan Agent or Lender with respect to the existence of such Event of Default
or performance of Borrower's or either Principal Guarantor's obligations under
the Loan Documents, or any counterclaim, setoff or other claim which Borrower,
either Principal Guarantor or Guarantor may allege against any Loan Agent or
Lender with respect thereto, or (2) the existence of any dispute between
Guarantor and Borrower, or any counterclaim, setoff or other claim which
Guarantor may allege against Borrower with respect thereto.
2.6 Guarantor agrees that the Loan Agents and Lenders may
enforce this Agreement against Guarantor without the necessity of resorting to
or exhausting any security or collateral and without the necessity of proceeding
against Borrower or any other guarantor (including, without limitation,
Principal Guarantors or any other Additional Subsidiary Guarantor). Guarantor
hereby waives any and all benefits it may have under any applicable law,
including, without limitation, any right to require the Loan Agents and Lenders
to proceed against Borrower, to proceed against any other guarantor, to
foreclose any lien on any real or personal property, to exercise any right or
remedy under the Loan Documents or to pursue any other remedy or to enforce any
other right.
2.7 Guarantor irrevocably waives any and all rights to which
it may be entitled, by operation of law or otherwise, upon making any payment
hereunder to be subrogated to the rights of the payee against Borrower with
respect to such payment or against any direct or indirect security therefor, or
otherwise to be reimbursed, indemnified or exonerated by or for the account of
Borrower in respect thereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
3.1 Guarantor represents, warrants and covenants to
Administrative Agent and Lenders that:
(a) Guarantor has full power, authority and legal right to
execute, deliver and perform this Agreement, and the execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of Guarantor, do not require any authorization or other action on
the part of its shareholders, do not require any approval or consent of any
trustee or holders of any indebtedness or obligations of Guarantor (other than
those, if any, which have been obtained) and will not violate any Requirement of
Law or Contractual Obligation applicable to Guarantor;
(b) no consent, authorization of, filing with, or other act by
or in respect of any Governmental Authority, is required in connection with the
authorization, execution, delivery and
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performance by Guarantor of this Agreement (other than those which have been
obtained and are in full force and effect);
(c) this Agreement constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
applicable to, and in any proceeding under such laws relating to, Guarantor as
debtor or insolvent;
(d) Guarantor has received complete copies of the Revolving
Loan Agreement and the other Loan Documents; and
(e) the proceeds of Loan(s) will be used for the purposes set
forth in Annex I hereto.
SECTION 4. COVENANTS.
4.1 MAINTENANCE OF EXISTENCE. Guarantor will (a) maintain its
existence as a Maryland real estate investment trust in good standing and as a
wholly-owned Subsidiary of Borrower and (b) not dissolve or otherwise dispose of
all or substantially all of its assets.
4.2 COMPLIANCE WITH LAWS. Guarantor will comply in all
material respects with all laws, rules, regulations and orders of any
Governmental Authority applicable to Guarantor or any of its operations or
assets, except for any such laws, rules, regulations and orders which the
Guarantor is contesting in good faith by appropriate proceedings and the
noncompliance with which during such contest would not reasonably be expected to
have a material adverse effect on Guarantor or its operations or assets if the
result of such contest were adverse to Guarantor.
4.3 MAINTENANCE OF GOVERNMENTAL AUTHORIZATIONS. Guarantor will
maintain in full force and effect all material governmental and other
authorizations, approvals, consents, permits, licenses, certifications and
qualifications reasonably necessary for the conduct of its business and
ownership of its properties.
4.4 VISITATION RIGHTS. Upon reasonable notice, Guarantor will,
at any reasonable time and from time to time during normal business hours,
permit Administrative Agent or its agents or representatives to examine and make
copies of and abstracts from the records, and books of account of, Guarantor and
to discuss the affairs, finances and accounts of Guarantor with its officers and
accountants.
4.5 KEEPING OF BOOKS. Guarantor will keep proper books of
record and account, in which full and correct entries shall be made of financial
transactions and the assets and operations of Guarantor in accordance with GAAP.
4.6 COMPLIANCE WITH REVOLVING LOAN AGREEMENT. Guarantor will
comply with each covenant of Borrower in the Revolving Loan Agreement relating
to Guarantor as a Subsidiary
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of Borrower or as an Additional Subsidiary Guarantor, as if Guarantor were a
party to the Revolving Loan Agreement and made such covenants directly with
respect to itself, including, without limitation, Section 7.8 of the Revolving
Loan Agreement (prohibiting Indebtedness of Guarantor other than Indebtedness
evidenced by the Loan Documents and intercompany Indebtedness owing to Borrower)
and Section 7.9 of the Revolving Loan Agreement (prohibiting Liens on the
property of Guarantor except Liens evidenced by the Loan Documents and Permitted
Exceptions).
SECTION 5. MISCELLANEOUS.
5.1 CHOICE OF LAW. THIS AGREEMENT SHALL BE A CONTRACT UNDER
AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
5.2 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.
NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, GUARANTOR HEREBY
IRREVOCABLY (a) SUBMITS TO THE NON-EXCLUSIVE PERSONAL JURISDICTION OF ANY STATE
OR FEDERAL COURT IN THE STATE OF NEW YORK IN ANY SUIT, ACTION OR OTHER LEGAL
PROCEEDING RELATING TO THIS AGREEMENT; (b) AGREES THAT ALL CLAIMS IN RESPECT OF
ANY SUCH SUIT, ACTION OR OTHER LEGAL PROCEEDING MAY BE HEARD AND DETERMINED IN,
AND ENFORCED IN AND BY, ANY SUCH COURT; (c) WAIVES ANY OBJECTION THAT IT MAY NOW
OR HEREAFTER HAVE TO VENUE IN ANY SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM; (d) AGREES TO SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, OR BY TELEX, OR IN ANY OTHER
MANNER PERMITTED BY LAW, TO ANY THEN DESIGNATED AGENT FOR SERVICE OF PROCESS
("PROCESS AGENT") AT ANY SPECIFIED ADDRESS OR TO GUARANTOR AT ITS ADDRESS SET
FORTH HEREIN OR TO SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL
HAVE BEEN NOTIFIED IN WRITING (SUCH SERVICE TO BE EFFECTIVE ON THE EARLIER OF
RECEIPT THEREOF OR, IN THE CASE OF SERVICE BY MAIL, THE FIFTH DAY AFTER DEPOSIT
OF SUCH SERVICE IN THE MAILS AS AFORESAID), AND HEREBY WAIVES ANY CLAIM OF ERROR
ARISING OUT OF SERVICE OF PROCESS BY ANY METHOD PROVIDED FOR HEREIN OR ANY CLAIM
THAT SUCH SERVICE WAS NOT EFFECTIVELY MADE; (e) AGREES THAT THE FAILURE OF ITS
PROCESS AGENT FOR SERVICE OF PROCESS TO GIVE ANY NOTICE OF ANY SUCH SERVICE OF
PROCESS TO IT SHALL NOT IMPAIR OR EFFECT THE VALIDITY OF SUCH SERVICE OR ANY
JUDGMENT BASED THEREON; (f) TO THE EXTENT THAT GUARANTOR HAS ACQUIRED, OR
HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY SUCH COURT OR FROM
LEGAL PROCESS THEREIN, WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, SUCH IMMUNITY; (g) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, IN CONNECTION WITH, OR WITH RESPECT TO, ANY SUIT, ACTION OR OTHER LEGAL
PROCEEDING RELATING TO THIS AGREEMENT, (i) ANY CLAIM THAT IT IS IMMUNE FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT
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IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO IT OR ANY OF ITS
PROPERTY, (ii) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF ANY SUCH COURT, (iii) ANY RIGHT TO A JURY TRIAL, AND (iv) ANY RIGHT TO CLAIM
OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, DIRECT DAMAGES; AND (h) AGREES THAT THE
ADMINISTRATIVE AGENT SHALL HAVE THE, RIGHT TO BRING ANY LEGAL PROCEEDINGS
(INCLUDING A PROCEEDING FOR ENFORCEMENT OF A JUDGMENT ENTERED BY ANY OF THE
AFOREMENTIONED COURTS) AGAINST GUARANTOR IN ANY OTHER COURT OR JURISDICTION IN
ACCORDANCE WITH APPLICABLE LAW. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS
SECTION SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT TO BRING ANY ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT IN THE COURTS OF ANY OTHER JURISDICTION
OR THE RIGHT, IN CONNECTION WITH ANY LEGAL ACTION OR PROCEEDING WHATSOEVER, TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. GUARANTOR HEREBY
IRREVOCABLY DESIGNATES CORPORATION SERVICE COMPANY, WITH OFFICES AT 2 WORLD
TRADE CENTER, SUITE 8746, NEW YORK, NEW YORK 10048, AS ITS PROCESS AGENT TO
RECEIVE SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS ON ITS BEHALF IN ANY LEGAL
PROCEEDING IN THE STATE OF NEW YORK, AND SUCH PROCESS AGENT, BY SEPARATE
INSTRUMENT, HAS AGREED TO SO ACT AS PROCESS AGENT FOR SERVICE OF PROCESS. IF
SUCH PROCESS AGENT SHALL FOR ANY REASON FAIL TO ACT, OR BE PREVENTED FROM
ACTING, AS SUCH PROCESS AGENT, NOTICE THEREOF SHALL IMMEDIATELY BE GIVEN TO THE
ADMINISTRATIVE AGENT BY REGISTERED OR CERTIFIED MAIL AND GUARANTOR AGREES
PROMPTLY TO DESIGNATE ANOTHER PROCESS AGENT IN THE CITY OF NEW YORK,
SATISFACTORY TO THE ADMINISTRATIVE AGENT TO SERVE IN PLACE OF SUCH PROCESS AGENT
AND DELIVER TO THE ADMINISTRATIVE AGENT WRITTEN EVIDENCE OF SUCH SUBSTITUTE
PROCESS AGENT'S ACCEPTANCE OF SUCH DESIGNATION. SUCH ACTING PROCESS AGENT SHALL
NEVERTHELESS CONTINUE TO SERVE AS PROCESS AGENT UNTIL ITS SUCCESSOR IS DULY
APPOINTED.
5.3 NOTICES; CERTAIN PAYMENTS. (a) All notices, consents and
other communications to Borrower, Guarantor or Administrative Agent and/or
Lenders relating hereto to be effective shall be in writing and shall be deemed
made (i) if by mail or facsimile, when received, (ii) if by telex, when sent
answerback received, and (iii) if by courier, when receipted for, in each case
addressed to them as follows or at such other address as either of them may
designate by written notice to the other:
If to Guarantor:
________________ Properties Trust
c/o Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attention: Messrs. David J. Hegarty and Ajay Saini
Telecopier: (617) 332-2261
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<PAGE>
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Jr.
Telecopier: (617) 338-2880
If to Administrative Agent and/or Lenders:
Dresdner Bank AG
New York Branch
75 Wall Street
New York, NY 10005
Attention: Andrew P. Nesi, Vice President
Birgit Anderson, Assistant Treasurer
Telephone: (212) 429-2201/2747
Telecopier: (212) 429-2129
Any failure by Administrative Agent or any Lender to provide a copy of any
notice to the second address of Guarantor shown above shall not effect the
validity of such notice if delivered to the first address of Guarantor shown
above.
(b) All payments to Administrative Agent or Lenders required
to be made hereunder shall be made to Administrative Agent for the account of
Lenders at:
Dresdner Bank AG
New York Branch
75 Wall Street
New York, New York 10005
ABA No. 026008303
For further credit to Account No. NYB121757/15
Reference: Senior Housing Properties Trust
together with irrevocable instructions to Administrative Agent to apply such
payment under this Agreement and the Revolving Loan Agreement. The
Administrative Agent may by written notice to Guarantor specify or change its
account and address for payment instructions hereunder.
5.4 NO WAIVERS; CUMULATIVE REMEDIES; ENTIRE AGREEMENT;
HEADINGS; SUCCESSORS AND ASSIGNS; COUNTERPARTS; SEVERABILITY. No action,
failure, delay or omission by Administrative Agent or Lenders in exercising any
rights and remedies under the Revolving Loan Agreement or any of the other Loan
Documents, this Agreement or otherwise, shall constitute a waiver of, or impair,
any of the rights or privileges of Administrative Agent or any Lender hereunder.
No single or partial exercise of any such right or remedy shall preclude any
other or further exercise thereof or the
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exercise of any other right or remedy. Such rights and remedies are cumulative
and not exclusive of any rights and remedies provided by law or otherwise
available. No waiver of any such right or remedy shall be effective unless given
in writing by Administrative Agent on behalf of Lenders. No waiver of any such
right or remedy shall be deemed a waiver of any other right or remedy hereunder
or thereunder. Every right and remedy given by this Agreement or by applicable
law to or for the benefit of Administrative Agent and Lenders may be exercised
from time to time and as often as may be deemed expedient by Administrative
Agent on behalf of Lenders. Except as expressly set forth herein, this Agreement
and the Revolving Loan Agreement to the extent provided herein constitute the
entire agreement of the parties relating to the subject matter hereof and there
are no verbal agreements relating hereto. Section headings herein shall have no
legal effect. This Agreement (including all covenants, representations,
warranties, privileges, rights, and remedies made or granted herein) shall inure
to the benefit of, and be enforceable by, Administrative Agent on behalf of each
Lender and its successors and assigns, except as otherwise expressly provided in
the Revolving Loan Agreement. Guarantor may not directly or indirectly assign or
transfer (whether by agreement, by operation of law or otherwise) any of its
rights or obligations and liabilities hereunder without the prior written
consent of Administrative Agent. Each Lender may grant participations in or
otherwise assign, sell or dispose of, any of its rights hereunder to the extent
permitted by and in accordance with the provisions of the Revolving Loan
Agreement. This Agreement may be executed in any number of separate
counterparts, each of which shall be deemed an original and all of which taken
together shall be defined to constitute one and the same instrument. In the
event any one or more of the provisions contained in this Agreement should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein or therein shall
not in any way be affected or impaired thereby; and the parties hereto shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
5.5 SURVIVAL. The obligations of Guarantor under this
Agreement shall survive the repayment of the Loans and the cancellation of the
Notes and the termination of the other Loan Documents, in the circumstances
described in Section 2.4.
5.6 COSTS, EXPENSES AND TAXES. Guarantor agrees to pay on
demand all reasonable costs and expenses of Administrative Agent and Lenders,
including without limitation reasonable counsel fees and expenses, if any, in
connection with the enforcement of this Agreement. In addition, Guarantor shall
pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution and delivery of this Agreement, and
shall indemnify and hold Administrative Agent and Lenders harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
5.7 NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST
ESTABLISHING GUARANTOR DATED _______________, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME
"_______________ PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT
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INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF GUARANTOR SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, GUARANTOR.
5.8 RELEASE. Administrative Agent on behalf of Lenders will,
upon written request of Borrower and Guarantor, release this Guaranty if either
(a) the Guarantied Loan Amount, together with all accrued interest and other
amounts payable under the Revolving Loan Agreement in connection therewith, have
been paid in full in cash designated by Borrower to Administrative Agent at the
time of such payment for application to such purpose, or (b) Guarantor has
entered into a financing with a third party creditor involving substantially all
of its assets and applied the entire gross proceeds of such financing (net of
underwriting discounts and commissions and reasonable out-of-pocket fees and
expenses incurred in connection therewith) as provided in Section 2.8(d) of the
Revolving Loan Agreement to the prepayment of the Loans (including, to the
extent of available proceeds, the prepayment in whole or in part of the
Guarantied Loan Amount and accrued interest) and Administrative Agent has
received such verifications with respect to such prepayment as Administrative
Agent may require. Any such release shall be effected by delivery of a written
instrument by Administrative Agent to such effect to Guarantor and Borrower
(with copies to Lenders).
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IN WITNESS WHEREOF, Guarantor has caused this Agreement to be
duly executed and delivered as of the day and year first above written.
____________________ PROPERTIES TRUST, a
Maryland real estate investment trust
By: __________________________________________
Name:
Title:
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<PAGE>
ANNEX I
to
ADDITIONAL SUBSIDIARY GUARANTY
Statement of Uses of Loan Proceeds
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<PAGE>
EXHIBIT F
[FORM]
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT") dated as of
September 15, 1999 is made by and among REIT MANAGEMENT & RESEARCH, INC., a
Delaware corporation (together with its successors and assigns, the
"SUBORDINATED CREDITOR"), DRESDNER BANK AG, a German banking corporation acting
through its New York Branch, as Administrative Agent (including any successor
Administrative Agent under the Revolving Credit Agreement described below, the
"ADMINISTRATIVE AGENT") for itself as a lender and the other lenders
(collectively, the "LENDERS") now or hereafter from time to time parties to the
Revolving Loan Agreement described below and the other holders or obligees from
time to time of or with respect to the Senior Obligations (as defined below) as
beneficiaries hereof (the Administrative Agent, Lenders and such other holders
and obligees, together the "SENIOR CREDITORS" and each a "SENIOR CREDITOR"), and
SENIOR HOUSING PROPERTIES TRUST, a Maryland real estate investment trust
(together with its successors and assigns, the "BORROWER").
A. The Borrower and its subsidiaries, SPTMRT Properties Trust
and SPTBROOK Properties Trust, have asked the Lenders to make a $350,000,000
secured revolving loan facility available to the Borrower for the purpose of
making loans to the Borrower from time to time up to an aggregate principal
amount outstanding of $350,000,000 (the "LOANS") for certain business purposes
of the Borrower and its subsidiaries, pursuant to a Revolving Loan Agreement
dated as of the date hereof among the Borrower, the Administrative Agent, the
Lenders and SPTMRT Properties Trust and SPTBROOK Properties Trust, as Guarantors
(as the same may hereafter be amended, supplemented and otherwise modified from
time to time, the "REVOLVING LOAN AGREEMENT") under which the Borrower is
issuing notes to Lenders in the aggregate principal amount of $350,000,000 to
evidence the Loans (as the same may be amended, modified and replaced from time
to time, the "NOTES"). The payment of the Loans and Notes and all other amounts
payable from time to time under the Revolving Loan Agreement, the Notes and the
other LOAN DOCUMENTS (which term is used herein as defined in the Revolving Loan
Agreement) and the performance of the Borrower's obligations thereunder are
being (i) jointly and severally guaranteed by SPTMRT Properties Trust and
SPTBROOK Properties Trust under the Revolving Loan Agreement and (ii) secured by
mortgage and security agreements or deeds of trust and security agreements on
each of the properties of SPTMRT Properties Trust and SPTBROOK Properties Trust.
B. Pursuant to the Advisory Agreement (as defined below), the
Borrower has engaged the Subordinated Creditor for the purposes of, among other
things, providing to the Borrower and its Subsidiaries advisory, management and
administrative services with respect to the properties of Borrower and its
Subsidiaries.
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C. It is a condition precedent to the Lenders' obligation to
make or continue Loans to the Borrower pursuant to the Revolving Loan Agreement
that the Advisor and the Borrower enter into this Agreement.
NOW, THEREFORE, in consideration of the Commitments of the
Lenders to make Loans to the Borrower pursuant and subject to the terms and
conditions of the Revolving Loan Agreement, and in consideration of the mutual
agreements set forth herein, the parties hereto hereby agree as follows:
SECTION 1.
1.1 As used herein the following terms shall have the
following meanings:
"ADDITIONAL SUBSIDIARY GUARANTY" has the meaning set forth in
the Revolving Loan Agreement.
"ADMINISTRATIVE AGENT" has the meaning set forth in the first
paragraph hereof and shall include any other Senior Creditor appointed to act as
administrative agent under the Revolving Loan Agreement instead of such
Administrative Agent.
"ADVISORY AGREEMENT" means the Advisory Agreement, dated as of
September 15, 1999 between the Borrower and the Subordinated Creditor, as
amended, supplemented, modified or replaced from time to time in a manner not
inconsistent with the terms hereof or of the Revolving Loan Agreement.
"BORROWER" has the meaning set forth in the first paragraph
hereof.
"GUARANTORS" means SPTMRT Properties Trust and SPTBROOK
Properties Trust, each a Maryland real estate investment trust and a
wholly-owned subsidiary of the Borrower.
"LENDERS" has the meaning set forth in the first paragraph
hereof.
"LOANS" has the meaning set forth in recital clause A hereof.
"LOAN DOCUMENTS" has the meaning set forth in the Revolving
Loan Agreement.
"NOTES" has the meaning set forth in recital clause A hereof.
"REVOLVING LOAN AGREEMENT" has the meaning set forth in
recital clause A hereof.
"SENIOR CREDITOR" has the meaning set forth in the first
paragraph hereof.
"SENIOR OBLIGATIONS" means (a) the principal amount of, and
accrued interest on (including, without limitation, any interest which accrues
or would accrue after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of
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the Borrower, whether or not allowed as a claim in such case, proceeding or
other action), the Loans and the Notes, and (b) all other indebtedness,
obligations and liabilities of the Borrower, either of the Guarantors or any
Additional Subsidiary Guarantor to the Administrative Agent or any of the
Lenders now existing or hereafter incurred or created under the Notes, the
Revolving Loan Agreement and any other Loan Document.
"SUBORDINATED CREDITOR" has the meaning set forth in the first
paragraph hereof.
"SUBORDINATED OBLIGATIONS" means any and all fees,
commissions, compensation and other amounts (other than reimbursements for
reasonable out of pocket expenses of the Advisor) payable to the Advisor or any
of its affiliates from time to time pursuant to the Advisory Agreement or any
other agreement now or hereafter entered into by the Borrower (and/or any of its
Subsidiaries) and the Advisor.
1.2 All terms used in this Agreement and defined in the
Revolving Loan Agreement and not otherwise defined herein shall have the
meanings set forth in the Revolving Loan Agreement. 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, and section, schedule and exhibit references are to this Agreement
unless otherwise specified and, where appropriate, the singular shall include
the plural.
SECTION 2.
2.1 The Subordinated Creditor agrees, for itself and any
future holder of the Subordinated Obligations, that the Subordinated
Obligations are and shall at all times during the term hereof be expressly
subordinate and junior in right of payment (as defined in Section 2.2) to all
Senior Obligations, and that it shall not at any time during such term file
or participate in the filing of any petition to initiate proceedings under
the United States Bankruptcy Code, 11 U.S.C. Section 101 ET SEQ., against the
Borrower or any of its Subsidiaries.
2.2 "Subordinate and junior in right of payment" shall mean
that:
(a) At any time prior to the payment in full of all Senior
Obligations, no direct or indirect payment on account of the Subordinated
Obligations shall be made, no property or assets of the Borrower or any of its
Subsidiaries shall be applied to the satisfaction of the Subordinated
Obligations, in whole or in part, and the Subordinated Creditor shall not take,
demand, receive or institute legal proceedings to recover, and neither Borrower
nor any of its Subsidiaries shall make, give or permit, directly or indirectly,
by set-off, redemption, purchase or in any other manner, any payment or security
for the whole or any part of the Subordinated Obligations (all of the foregoing
actions being hereinafter referred to as "Restricted Actions"), if at the time
of or immediately after giving effect to such Restricted Action a Default or an
Event of Default exists or would exist and is or would be continuing.
(b) (i) In the event of any distribution, division or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any substantial part
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of the property, assets or business of the Borrower or any of its Subsidiaries
or the proceeds thereof, to any creditor or creditors of the Borrower or any of
its Subsidiaries other than in the ordinary course of business or as permitted
in the Revolving Loan Agreement or (ii) upon any indebtedness of the Borrower or
any of its Subsidiaries becoming due and payable (or a proof of claim in respect
thereof being filed in any applicable proceeding) by reason of any liquidation,
dissolution or other winding up of the Borrower or any of its Subsidiaries or
its business or by reason of any sale, receivership, insolvency, reorganization
or bankruptcy proceedings, assignment for the benefit of creditors, arrangement
or any proceeding by or against the Borrower or any of its Subsidiaries for any
relief under any bankruptcy, reorganization or insolvency law or laws, federal
or state, or any law, federal or state, relating to the relief of debtors,
readjustment of indebtedness, reorganization, composition or extension, or (iii)
in the event that any amounts owing under the Revolving Loan Agreement, the
Notes or any of the other Loan Documents have become, or have been declared to
be, due and payable (and have not been paid in accordance with their terms),
then and in any such event, any payment or distribution of any kind or character
in respect of the Borrower or any of its Subsidiaries, whether in cash, property
or securities, which, but for the subordination provisions contained herein,
would otherwise be payable or deliverable to the Subordinated Creditor pursuant
to or in respect of the Subordinated Obligations, shall instead be paid over or
delivered to the Administrative Agent on behalf of the Senior Creditors which
have Senior Obligations which are then due and payable (or in respect of which a
proof of claim has been filed in any applicable proceeding) and promptly be
applied (subject to applicable law) as a payment or prepayment on account of the
Senior Obligations which are then due and payable pro rata in accordance with
the amounts thereof then due and payable (or in respect of which a proof of
claim has been filed in any applicable proceeding) and in the order of priority
for payment of Senior Obligations set forth in the Revolving Loan Agreement, and
the Subordinated Creditor shall not receive any such payment or distribution or
any benefit therefrom unless and until the Senior Obligations which are then due
and payable (or in respect of which a proof of claim has been filed in any
applicable proceeding) shall have been fully and finally paid and satisfied.
SECTION 3.
3.1 The Subordinated Creditor irrevocably authorizes and
empowers the Administrative Agent on behalf of the Senior Creditors under the
circumstances set forth in clause (i) or (ii) of Section 2.2(b), to demand, sue
for, collect and receive every such payment or distribution referred to in such
Section and give acquittance therefor, and take such other proceedings, in the
name of the Senior Creditors or in the name of the Subordinated Creditor or
otherwise, as the Administrative Agent may deem reasonably necessary or
advisable for the enforcement of the subordination provisions of this Agreement.
The Subordinated Creditor hereby agrees, under the circumstances set forth in
clause (i) or (ii) of Section 2.2(b), duly and promptly to take such action as
may be reasonably requested at any time and from time to time by the
Administrative Agent to file appropriate proofs of claim in respect of the
Subordinated Obligations, and to execute and deliver such powers of attorney,
assignments or other instruments as may be reasonably requested by the
Administrative Agent in order to enable the Administrative Agent on behalf of
the Senior Creditors to enforce any and all claims upon or in respect of the
Subordinated Obligations and to collect and receive any and all payments or
distributions which may be payable or deliverable at any time upon or in respect
of the Subordinated Obligations. Any such amounts
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<PAGE>
received by the Administrative Agent shall be applied (subject to applicable
law) to the payment of the Senior Obligations PRO RATA in accordance with the
amounts thereof then due and payable (or in respect of which proofs of claim
have been filed in any applicable proceeding) and in the order of priority for
payment of Senior Obligations set forth in the Revolving Loan Agreement.
3.2 Should any payment or distribution or security, or the
proceeds of any thereof, be collected or received by the Subordinated Credit or
pursuant to or in respect of the Subordinated Obligations, and such collection
or receipt is at the time prohibited hereunder (or the making of such payment or
distribution was so prohibited on the date of making thereof), the Subordinated
Creditor will forthwith turn over the same to the Administrative Agent, in the
form received (except for the endorsement or the assignment of the Subordinated
Creditor when necessary) and, until so turned over, the same shall be held in
trust by the Subordinated Creditor as the property of the Senior Creditors. Any
such amounts received by the Administrative Agent shall be applied (subject to
applicable law) to the payment of the Senior Obligations PRO RATA in accordance
with the amounts thereof then due and payable (or in respect of which proofs of
claim have been filed in any applicable proceeding) and in the order of priority
for payment of Senior Obligations set forth in the Revolving Loan Agreement.
3.3 (a) Subject to the provisions of Section 3.3(b), the
Subordinated Creditor shall be subrogated to the rights of the Senior Creditors
to receive payments or distributions of cash, property or securities made on the
Senior Obligations until the Senior Obligations shall be paid in full; and, for
the purposes of such subrogation, payments or distributions to the Senior
Creditors of any cash, property or securities to which the Subordinated Creditor
would be entitled except for the provisions of this Agreement shall, as between
the Borrower and its creditors other than the Senior Creditors and the
Subordinated Creditor, be deemed to be a payment by the Borrower to or on
account of Subordinated Obligations, it being understood that the provisions of
this Agreement are and are intended solely for the purpose of defining the
relative rights of the Subordinated Creditor, on the one hand, and the Senior
Creditors, on the other hand. The purpose of this Section 3.3 is to grant to the
Subordinated Creditor the same rights against the Borrower with respect to the
aggregate amount of such payments or distributions as the Senior Creditors would
have against the Borrower if such aggregate amount were considered overdue
Senior Obligations.
(b) Notwithstanding any payment or payments made by the
Subordinated Creditor hereunder or any application of funds of the Subordinated
Creditor by the Administrative Agent or any Senior Creditor, the Subordinated
Creditor shall not be entitled to be subrogated to any of the rights of any
Senior Creditor against the Borrower or any of its Subsidiaries or against or
under any collateral security or guarantee or right of offset held by or for the
benefit of any Senior Creditor for the payment of the Senior Obligations, nor
shall the Subordinated Creditor seek any reimbursement from the Borrower or any
of its Subsidiaries or against or under any collateral security or guarantee or
right of offset in respect of payments made by the Subordinated Creditor
hereunder, until all amounts owing to each Senior Creditor by the Borrower or
any of its Subsidiaries for or on account of the Senior Obligations are finally
paid in full in cash.
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SECTION 4.
4.1 The Subordinated Creditor represents, warrants and
covenants to the Administrative Agent and the Lenders that:
(a) The Advisory Agreement delivered to the Administrative
Agent on the date hereof has been duly and validly executed and constitutes the
only Contractual Obligation of the Borrower (or any of its Subsidiaries) to the
Advisor and of the Advisor to the Borrower (or any of its Subsidiaries);
(b) Subordinated Obligations currently or hereafter payable to
the Subordinated Creditor by the Borrower (or any of its Subsidiaries) (i) are
or will be payable free and clear of any security interests, liens, charges or
encumbrances whatsoever arising from, through or under the Subordinated Creditor
other than the interest of the Senior Creditors under this Agreement, and (ii)
are or will be payable solely and exclusively to the Subordinated Creditor and
to no other Person (other than to the Administrative Agent on behalf of the
Senior Creditors hereunder);
(c) the Subordinated Creditor has full power, authority and
legal right to execute, deliver and perform this Agreement, and the execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of the Subordinated Creditor, do not require any
authorization or other action on the part of its shareholders, do not require
any approval or consent of any trustee or holders of any indebtedness or
obligations of the Subordinated Creditor (other than those which have been
obtained) and will not violate any Requirement of Law or Contractual Obligation
applicable to the Subordinated Creditor;
(d) no consent, authorization of, filing with, or other act by
or in respect of any Governmental Authority, is required in connection with the
authorization, execution, delivery and performance by the Subordinated Creditor
of this Agreement (other than those, if any, which have been obtained and are in
full force and effect); and
(e) this Agreement constitutes a legal, valid and binding
obligation of the Subordinated Creditor, enforceable against the Subordinated
Creditor in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally applicable to, and in any proceeding under such laws
relating to, the Subordinated Creditor as debtor or insolvent.
4.2 The Borrower represents, warrants and covenants to the
Administrative Agent and the Lenders that:
(a) the Borrower has full power, authority and legal right to
execute, deliver and perform this Agreement, and the execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Borrower, do not require any authorization or other action on
the part of its shareholders, do not require any approval or consent of any
trustee or holders of any indebtedness or obligations of the Borrower (other
than those which have been
F-6
<PAGE>
obtained) and will not violate any Requirement of Law or Contractual Obligation
applicable to the Borrower;
(b) no consent, authorization of, filing with, or other act by
or in respect of any Governmental Authority, is required in connection with the
authorization, execution, delivery and performance by the Borrower of this
Agreement (other than those which have been obtained and are in full force and
effect); and
(c) this Agreement constitutes a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as may be limited by bankruptcy, insolvency. reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
applicable to, and in any proceeding under such laws relating to, the Borrower
as debtor or insolvent.
SECTION 5.
5.1 No payment or payments made by the Borrower, either
Guarantor or any other Person or received or collected by the Administrative
Agent or any Senior Creditor from the Borrower, either Guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction or payment of the
Senior Obligations shall be deemed to modify, reduce, release or otherwise
affect the obligations of the Subordinated Creditor hereunder or the
subordination provided for herein which shall, notwithstanding any such payment
or payments, continue until the Senior Obligations are paid in full in cash. The
Subordinated Creditor hereby consents and agrees that, without the necessity of
any reservation of rights against the Subordinated Creditor and without notice
to or further assent by the Subordinated Creditor, any demand for payment of any
of the Senior Obligations made by the Administrative Agent or any Senior
Creditor may be rescinded in whole or in part by the Administrative Agent or
such Senior Creditor and any of the Senior Obligations continued, and the Senior
Obligations, or the liability of any other party upon or for any part thereof,
and the Revolving Loan Agreement, other Loan Documents or any other collateral
security document, collateral security or guarantee from time to time therefor
or relating thereto, or other document or right with aspect thereto, with
respect to the Senior Creditors or any particular Senior Creditor may, from time
to time, in whole or in part, be renewed, extended, amended, modified,
supplemented, accelerated, compromised, waived, sold, exchanged or be
surrendered or released or terminated or be unconsummated, or otherwise dealt
with in any manner specified above or otherwise, in whole or in part, as such
Senior Creditor or Senior Creditors or the Administrative Agent may deem
advisable from time to time, all without the necessity of any reservations of
rights against the Subordinated Creditor and without notice to or further assent
by the Subordinated Creditor, which will remain bound hereunder and all without
affecting the subordination provided for herein, notwithstanding any of the
foregoing events or circumstances. The Administrative Agent and the Senior
Creditors shall have no obligation or duty to take, accept, protect, secure,
perfect, preserve or insure, or enforce or make demand in respect of, any
security interest, pledge, mortgage, deed of trust or other lien or encumbrance,
collateral security document or collateral security at any time held or
contemplated to be held as security for, or any guarantee or contemplated
guarantee of, the Senior Obligations. When making any demand hereunder against
the Subordinated Creditor, the
F-7
<PAGE>
Administrative Agent may in its sole discretion but shall be under no obligation
to, make a similar demand on the Borrower, either Guarantor, any Additional
Subsidiary Guarantor or any other obligor, or proceed against any collateral
security or under any collateral security document or guarantee or other
document or right, and any failure by the Administrative Agent to make any such
demand or to collect any payments from the Borrower, either Guarantor, any
Additional Subsidiary Guarantor or any such other obligor or proceed against any
collateral security or under any collateral security document or guarantee or
other document or right, or any release of the Borrower, either Guarantor, any
Additional Subsidiary Guarantor or such obligor or under or in respect of any
collateral security or any collateral security document or guarantee or other
document or right, shall not affect the subordination provided for herein or
relieve the Subordinated Creditor of its obligations or liabilities hereunder,
and shall not impair or affect the rights and remedies, express or implied, or
as a matter of law, of the Administrative Agent or any Senior Creditor against
the Subordinated Creditor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
5.2 The Subordinated Creditor irrevocably waives any and all
notice of the creation, renewal, extension or accrual of any of the Senior
Obligations and notice of or proof of reliance by any Senior Creditor upon this
Agreement, and the Senior Obligations, existing and future, and all dealings
between the Borrower, any of its Subsidiaries or the Subordinated Creditor and
the Administrative Agent and each Senior Creditor, and any of them, shall
conclusively be deemed and presumed to have been created, contracted, incurred,
had or consummated in reliance upon this Agreement. The Subordinated Creditor
irrevocably waives notice of or proof of reliance on this Agreement and
diligence, protest, demand for payment and notice of default or nonpayment and
any other notice or demand whatsoever or upon the Borrower, any of its
Subsidiaries or the Subordinated Creditor with respect to the Senior Obligations
and any right to notice of resale of any collateral security (if any), and, in
respect of the Administrative Agent and the Senior Creditors, any other rights
of a "debtor" under the Uniform Commercial Code as in effect from time to time
in the State of New York, The Commonwealth of Massachusetts or any other
relevant jurisdiction (collectively, the "UCC"), and irrevocably agrees not to
assert in any suit, action or other legal proceeding relating to this Agreement,
or otherwise, that it has, in respect of the Administrative Agent and the Senior
Creditors, status as, or any rights of, a "debtor" under the UCC, or any defense
to or discharge of its obligations hereunder or the subordination contemplated
herein based on any such rights. This Agreement shall be construed as a
continuing, absolute, unconditional and irrevocable subordination without regard
to the validity, regularity or enforceability of any of the Loan Documents, any
of the Senior Obligations or any security interest, pledge, mortgage or other
lien or encumbrance, or other collateral security or collateral security
document, or any guarantee therefor or other document or right with respect
thereto at any time or from time to time held by or in favor of any Senior
Creditor and without regard to any defense, set-off or counterclaim which may at
any time be available to or be assessed by the Borrower, any of its
Subsidiaries, the Subordinated Creditor or any other Person against the
Administrative Agent or any Senior Creditor, or any other circumstance
whatsoever (with or without notice to or knowledge of the Borrower, any of its
Subsidiaries or the Subordinated Creditor or any other Person) which
constitutes, or might be considered to constitute, an equitable or legal
discharge or defense of the Borrower or any of its Subsidiaries for or to any of
the Senior Obligations, or an equitable or legal discharge or defense of the
Subordinated Creditor under this Agreement or otherwise, in bankruptcy or in
reorganization
F-8
<PAGE>
or in any other instance, and the obligations and liabilities of the
Subordinated Creditor hereunder and the subordination contemplated herein shall
not be conditioned or contingent upon the pursuit by the Administrative Agent,
any Senior Creditor or any other Person at any time of any right or remedy
against the Borrower or any of its Subsidiaries or against any other Person
which may be or become liable in respect of all or any part of the Senior
Obligations or against or under any security interest, pledge, mortgage, deed of
trust or other lien or encumbrance, or other collateral security or collateral
security document, or any guarantee or other document or right with respect
thereto. This Agreement shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the Borrower, the
Guarantors, any Additional Subsidiary Guarantors and the Subordinated Creditor
and the successors and assigns thereof, and shall inure to the benefit of each
Senior Creditor, and its successors, endorsees, transferees and assigns, until
the Revolving Loan Agreement and all other Loan Documents have been terminated
in accordance with their terms and all the Senior Obligations and the
obligations and liabilities of the Subordinated Creditor under this Agreement
shall have been satisfied by final payment in cash or performance in full.
5.3 This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Senior Obligations is rescinded or must otherwise be restored or
returned by any Senior Creditor upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower, either Guarantor, any Additional
Subsidiary Guarantor or the Subordinated Creditor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower, either Guarantor, any Additional Subsidiary Guarantor
or the Subordinated Creditor or any substantial part of their respective
property, or for any other reason whatsoever, all as though such payments had
not been made.
SECTION 6.
6.1 The Subordinated Creditor will not (a) sell, assign or
otherwise transfer, in whole or in part, the Subordinated Obligations or any
interest therein to any Person unless (i) such Person has expressly acknowledged
to the Administrative Agent, in writing in form and substance satisfactory to
the Administrative Agent, the subordination provided for herein and agrees to be
bound by all the terms hereof, and (ii) the Subordinated Creditor has expressly
guaranteed to the Administrative Agent, in writing in form and substance
satisfactory to the Administrative Agent, the performance by such Person or such
Person's obligations under Section 3.2 of this Agreement; or (b) create, incur
or suffer to exist any security interest, lien, charge or other encumbrance
whatsoever upon the Subordinated Obligations in favor of any Person unless the
Subordinated Creditor has obtained the prior written consent of the
Administrative Agent (which consent may be withheld in the Administrative
Agent's sole discretion) and such Person expressly acknowledges to the
Administrative Agent in writing the subordination provided for herein and agrees
to be bound by all of the terms hereof. Without the prior written consent of the
Administrative Agent, the Subordinated Creditor and the Borrower (and the
Borrower's Subsidiaries) will not amend or supplement the Advisory Agreement as
in effect on the date hereof or enter into any other agreement that directly or
indirectly (a) increases the Subordinated Obligations payable to the Advisor or
modifies the basis on which any Subordinated Obligations are payable in a manner
which could increase the Subordinated Obligations payable to the Advisor or
provides for any
F-9
<PAGE>
additional Subordinated Obligations to be paid to the Advisor, or (b) provides
for or results in Subordinated Obligations becoming due and payable earlier than
is contemplated by the Advisory Agreement as in effect on the date hereof or (c)
provides for or results in any services of the Advisor contemplated by the
Advisory Agreement being performed by any Person (including any Affiliate of the
Advisor) other than the Advisor.
6.2 Except as otherwise expressly set forth herein, this
Agreement is intended to create a relationship among independent contractors and
nothing in this Agreement shall be deemed to create a fiduciary, agency or trust
relationship in favor of the Advisor or the Borrower or any of its Subsidiaries.
6.3 The Advisor hereby acknowledges receipt of copies of the
Revolving Loan Agreement and all other Loan Documents.
SECTION 7.
7.1 CHOICE OF LAW. THIS AGREEMENT SHALL BE A CONTRACT UNDER
AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
7.2 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.
NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, THE SUBORDINATED CREDITOR
HEREBY IRREVOCABLY (a) SUBMITS TO THE NONEXCLUSIVE PERSONAL JURISDICTION OF ANY
STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN ANY SUIT, ACTION OR OTHER
LEGAL PROCEEDING RELATING TO THIS AGREEMENT; (b) AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH SUIT, ACTION OR OTHER LEGAL PROCEEDING MAY BE HEARD AND
DETERMINED IN, AND ENFORCED IN AND BY, ANY SUCH COURT; (c) WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO VENUE IN ANY SUCH COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM; (d) AGREES TO SERVICE OF PROCESS IN ANY SUCH
PROCEEDING BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, OR BY TELEX, OR IN
ANY OTHER MANNER PERMITTED BY LAW, TO ANY THEN DESIGNATED AGENT FOR SERVICE OF
PROCESS ("PROCESS AGENT") AT ANY SPECIFIED ADDRESS OR TO THE SUBORDINATED
CREDITOR AT ITS ADDRESS SET FORTH HEREIN OR TO SUCH OTHER ADDRESS OF WHICH THE
ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED IN WRITING (SUCH SERVICE TO BE
EFFECTIVE ON THE EARLIER OF RECEIPT THEREOF OR, IN THE CASE OF SERVICE BY MAIL,
THE FIFTH DAY AFTER DEPOSIT OF SUCH SERVICE IN THE MAILS AS AFORESAID), AND
HEREBY WAIVES ANY CLAIM OF ERROR ARISING OUT OF SERVICE OF PROCESS BY ANY METHOD
PROVIDED FOR HEREIN OR ANY CLAIM THAT SUCH SERVICE WAS NOT EFFECTIVELY MADE; (e)
AGREES THAT THE FAILURE OF ITS PROCESS AGENT FOR SERVICE OF PROCESS TO GIVE ANY
NOTICE OF ANY SUCH SERVICE OF PROCESS TO IT SHALL NOT IMPAIR OR EFFECT THE
VALIDITY OF SUCH SERVICE OR ANY JUDGMENT BASED THEREON; (f) TO THE EXTENT THAT
THE
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<PAGE>
SUBORDINATED CREDITOR HAS ACQUIRED, OR HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM
JURISDICTION OF ANY SUCH COURT OR FROM LEGAL PROCESS THEREIN, WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY; (g) WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN CONNECTION WITH, OR WITH RESPECT
TO, ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THIS AGREEMENT, (i)
ANY CLAIM THAT IT IS IMMUNE FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION
OR OTHERWISE) WITH RESPECT TO IT OR ANY OF ITS PROPERTY, (ii) ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, (iii) ANY RIGHT
TO A JURY TRIAL, AND (iv) ANY RIGHT TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
DIRECT DAMAGES; AND (h) AGREES THAT THE ADMINISTRATIVE AGENT SHALL HAVE THE,
RIGHT TO BRING ANY LEGAL PROCEEDINGS (INCLUDING A PROCEEDING FOR ENFORCEMENT OF
A JUDGMENT ENTERED BY ANY OF THE AFOREMENTIONED COURTS) AGAINST THE SUBORDINATED
CREDITOR IN ANY OTHER COURT OR JURISDICTION IN ACCORDANCE WITH APPLICABLE LAW.
NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF
THE ADMINISTRATIVE AGENT TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT IN THE COURTS OF ANY OTHER JURISDICTION OR THE RIGHT, IN CONNECTION
WITH ANY LEGAL ACTION OR PROCEEDING WHATSOEVER, TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW. THE SUBORDINATED CREDITOR HEREBY IRREVOCABLY
DESIGNATES CORPORATION SERVICE COMPANY, WITH OFFICES AT 2 WORLD TRADE CENTER,
SUITE 8746, NEW YORK, NEW YORK 10048, AS ITS PROCESS AGENT TO RECEIVE SERVICE OF
ANY AND ALL PROCESS AND DOCUMENTS ON ITS BEHALF IN ANY LEGAL PROCEEDING IN THE
STATE OF NEW YORK, AND SUCH PROCESS AGENT, BY SEPARATE INSTRUMENT, HAS AGREED TO
SO ACT AS PROCESS AGENT FOR SERVICE OF PROCESS, IF SUCH PROCESS AGENT SHALL FOR
ANY REASON FAIL TO ACT, OR BE PREVENTED FROM ACTING, AS SUCH PROCESS AGENT,
NOTICE THEREOF SHALL IMMEDIATELY BE GIVEN TO THE ADMINISTRATIVE AGENT BY
REGISTERED OR CERTIFIED MAIL AND THE SUBORDINATED CREDITOR AGREES PROMPTLY TO
DESIGNATE ANOTHER PROCESS AGENT IN THE CITY OF NEW YORK, SATISFACTORY TO THE
ADMINISTRATIVE AGENT TO SERVE IN PLACE OF SUCH PROCESS AGENT AND DELIVER TO THE
ADMINISTRATIVE AGENT WRITTEN EVIDENCE OF SUCH SUBSTITUTE PROCESS AGENT'S
ACCEPTANCE OF SUCH DESIGNATION. SUCH ACTING PROCESS AGENT SHALL NEVERTHELESS
CONTINUE TO SERVE AS PROCESS AGENT UNTIL ITS SUCCESSOR IS DULY APPOINTED.
ADMINISTRATIVE AGENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, (A) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT AND (B) ANY RIGHT TO CLAIM OR RECOVER IN ANY
ACTION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, DIRECT DAMAGES.
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<PAGE>
7.3 NOTICES; CERTAIN PAYMENTS. (a) All notices, consents and
other communications to the Borrower, the Subordinated Creditor or the
Administrative Agent relating hereto to be effective shall be in writing and
shall be deemed made (i) if by mail or facsimile, when received, (ii) if by
telex, when sent answerback received, and (iii) if by courier, when receipted
for, in each case addressed to them as follows or at such other address as
either of them may designate by written notice to the other:
If to the Borrower:
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attention: Messrs. David J. Hegarty and Ajay Saini
Telecopier: (617) 332-2261
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Jr.
Telecopier: (617) 338-2880
If to the Subordinated Creditor:
REIT Management & Research, Inc.
400 Centre Street
Newton, Massachusetts 02158
Attention: Jennifer B. Clark, Esq.
Telecopier: (617) 928-1305
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Jr.
Telecopier: (617) 338-2880
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<PAGE>
If to the Administrative Agent:
Dresdner Bank AG
New York Branch
75 Wall Street
New York, NY 10005
Attention: Andrew P. Nesi, Vice President
Birgit Anderson, Assistant Treasurer
Telephone: (212) 429-2201/2747
Telecopier: (212) 429-2129
Any failure by the Administrative Agent to provide a copy of any notice to the
second address of the Borrower or the Subordinated Creditor shown above shall
not effect the validity of such notice if delivered to the first address of the
Borrower or the Subordinated Creditor, as applicable, shown above.
(b) All payments to the Administrative Agent or the Senior
Creditors required to be made hereunder shall be made to the Administrative
Agent for the account of the Senior Creditors at:
Dresdner Bank AG
New York Branch
75 Wall Street
New York, New York 10005
ABA No. 026008303
For further credit to Account No. NYB121757/15
Reference: Senior Housing Properties Trust
together with irrevocable instructions to the Administrative Agent to apply such
payment under this Agreement. The Administrative Agent may by written notice to
the Borrower and the Subordinated Creditor specify or change its account and
address for payment instructions hereunder.
7.4 NO WAIVERS; CUMULATIVE REMEDIES; ENTIRE AGREEMENT;
HEADINGS; SUCCESSORS AND ASSIGNS; COUNTERPARTS; SEVERABILITY. No action,
failure, delay or omission by the Administrative Agent in exercising any rights
and remedies under the Revolving Loan Agreement or any of the other Loan
Documents, this Agreement or otherwise, shall constitute a waiver of, or impair,
any of the rights or privileges of any Senior Creditor hereunder. No single or
partial exercise of any such right or remedy shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. Such rights and
remedies are cumulative and not exclusive of any rights and remedies provided by
law or otherwise available. No waiver of any such right or remedy shall be
effective unless given in writing by the Administrative Agent. No waiver of any
such right or remedy shall be deemed a waiver of any other right or remedy
hereunder or thereunder. Every right and remedy given by this Agreement or by
applicable law to or for the benefit of any Senior Creditor may be exercised
from time to time and as often as may be deemed expedient by the Administrative
Agent on behalf of such Senior Creditor. Except as expressly set forth herein,
this Agreement constitutes
F-13
<PAGE>
the entire agreement of the parties relating to the subject matter hereof and
there are no verbal agreements relating hereto. Section headings herein shall
have no legal effect. This Agreement (including all covenants, representations,
warranties, privileges, rights, and remedies made or granted herein) shall inure
to the benefit of, and be enforceable by, the Administrative Agent on behalf of
each Senior Creditor and its successors and assigns, except as otherwise
expressly provided in this Agreement. The Subordinated Creditor may not directly
or indirectly assign or transfer (whether by agreement, by operation of law or
otherwise) any of its rights or obligations and liabilities hereunder without
the prior written consent of the Administrative Agent. Each Senior Creditor may
grant participations in or otherwise assign, sell or dispose of, any of its
rights hereunder to the extent permitted by and in accordance with the
provisions of the Revolving Loan Agreement. This Agreement may be executed in
any number of separate counterparts, each of which shall be deemed an original
and all of which taken together shall be defined to constitute one and the same
instrument. In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired thereby; and the
parties hereto shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
7.5 SURVIVAL. The obligations of the Subordinated Creditor and
the Borrower under this Agreement shall survive the repayment of the Loans and
the cancellation of the Notes and the termination of the other Loan Documents
and the Senior Obligations, in the circumstances described in Section 5.3.
7.6 FURTHER ASSURANCES. The Subordinated Creditor and the
Borrower agree to execute and deliver such further documents and to do such
other acts and things as the Administrative Agent may reasonably request in
order fully to effect the purposes of this Agreement.
7.7 NO RESCISSION; WAIVERS. The subordination provisions
contained herein are for the benefit of the Administrative Agent and the Senior
Creditors and their respective successors and assigns as holders from time to
time of Senior Obligations and may not be rescinded or cancelled or modified in
any way; and, unless otherwise expressly provided for herein, no provision of
this Agreement may be waived or changed without the express prior written
consent thereto of the Administrative Agent.
7.8 REQUIRED LEGENDS. The Borrower and Subordinated Creditor
will cause each executed copy of the Advisory Agreement, any instrument or other
writing evidencing any of the obligations arising thereunder and any amendment,
modification or supplement thereto to bear a statement or legend to the effect
that the Subordinated Obligations are subordinate and junior in right of payment
to the Senior Obligations in the manner and to the extent herein set forth.
7.9 STATUS AS SENIOR OBLIGATIONS. For purposes of this
Agreement, Senior Obligations shall cease to be such, or the outstanding
principal amount thereof shall be deemed reduced, only (i) upon actual receipt
by the Subordinated Creditor of a notice from the holder or holders of such
Senior Obligations or obligee or obligees with respect thereto terminating the
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constitution of such indebtedness, obligations and/or liabilities as senior
obligations under this Agreement or reducing the amount of such indebtedness,
obligations and/or liabilities so constituted or (ii) when the Senior
Obligations have in fact been finally paid in full and the Revolving Loan
Agreement and all other Loan Documents have been terminated in accordance with
their terms and the Subordinated Creditor shall have received notice from the
Administrative Agent of such fact. The Administrative Agent shall within seven
Business Days following receipt of a written request therefor from the
Subordinated Creditor confirm in writing to the Subordinated Creditor whether or
not the Senior Obligations have ceased to be such pursuant to clause (ii) of the
preceding sentence. At the request of the Administrative Agent, the Subordinated
Creditor will confirm in writing to any Senior Creditor that the indebtedness,
obligations and/or liabilities held by such Senior Creditor and constituted as
Senior Obligations hereunder are Senior Obligations. However, the failure or
refusal of the Subordinated Creditor to issue any such confirmation shall not
affect the status as Senior Obligations of any indebtedness, obligations and/or
liabilities constituting Senior Obligations in accordance with the provisions of
this Agreement.
7.10 NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST
ESTABLISHING THE BORROWER, DATED DECEMBER 16, 1998, A COPY OF WHICH, TOGETHER
WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT
THE NAME "SENIOR HOUSING PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE
DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND
THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE BORROWER SHALL
BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF,
OR CLAIM AGAINST, THE BORROWER.
[remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
SENIOR HOUSING PROPERTIES
TRUST, a Maryland real estate investment trust
By: __________________________________________
Name:
Title:
REIT MANAGEMENT & RESEARCH, INC.
By: __________________________________________
Name:
Title:
DRESDNER BANK AG, New York Branch,
as Administrative Agent on behalf of the
Senior Creditors
By: __________________________________________
Name:
Title:
By: __________________________________________
Name:
Title:
F-16
<PAGE>
SCHEDULE 1
LENDERS', LENDING OFFICES, COMMITMENTS AND PRO RATA SHARES AND
<TABLE>
<CAPTION>
Commitment
Lender and Lending Office Amount Pro Rata Share
- ------------------------- ---------- --------------
<S> <C> <C>
Dresdner Bank AG, New York $350,000,000 100%
Branch and Grand Cayman Branch
75 Wall Street
New York, NY 10005
Attention: Andrew Nesi/Birgit Anderson
Telephone: (212) 429-2201/2747
Telecopier: (212) 429-2129
</TABLE>
S1-1
<PAGE>
SCHEDULE 2
DESCRIPTIONS OF MARRIOTT PROPERTIES
<TABLE>
<CAPTION>
Property Legal Description
-------- -----------------
<S> <C> <C>
MARRIOTT PROPERTIES
1. Scottsdale, Maricopa County, Arizona. See Attached.
2. Virginia Beach, City of Virginia Beach, Virginia. See attached.
3. Deerfield Beach/Horizon Club, Broward County, See attached.
Florida.
4. Bellaire/Houston, Harris County, Texas. See attached.
5. Palm Harbour, Pinellas County, Florida. See attached.
6. Calusa Harbour, Lee County, Florida. See attached.
7. Villa Valencia, Orange County, California. See attached.
8. Port St. Lucie, St. Lucie County, Florida. See attached.
9. Church Creek, Cook County, Illinois. See attached.
10. The Jefferson, Arlington County, Virginia. See attached.
11. The Colonnades, Albermarle County, Virginia. See attached.
12. Sun City, Maricopa County, Arizona. See attached.
13. Bedford Court, Montgomery County, Maryland. See attached.
14. Boca Pointe, Palm Beach, Florida. See attached.
</TABLE>
S2-1
<PAGE>
SCHEDULE 3
DESCRIPTIONS OF BROOKDALE PROPERTIES
<TABLE>
<S> <C> <C>
Brookdale Properties
- --------------------
1. East Mesa, Arizona. See attached.
2. Rochester, New York See attached.
3. Chicago, Illinois. See attached.
4. Spokane, Washington. See attached.
</TABLE>
S3-1
<PAGE>
SCHEDULE 4
BORROWER'S SUBSIDIARIES
As of the date of the funding of the Initial Loan, the Borrower has the
following subsidiaries:
<TABLE>
<CAPTION>
Name of Jurisdiction of Shares % Owned Directly
Subsidiary Incorporation Shares Authorized Outstanding or Indirectly
---------- --------------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C>
1. SPTIHS Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
2. SPTMISC Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
3. SPTMNR Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
4. SPTMRT Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
5. SPTSUN Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
6. SPTSUN II Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
7. SPTBROOK Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
8. SPTGEN Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
9. HRES1 Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
10 HRES2 Maryland 1,000 common stock 1,000 100%
Properties Trust ($.01 par value)
</TABLE>
S4-1
<PAGE>
SCHEDULE 5
PERMITTED EXCEPTIONS
1. Liens of landlords, mechanics, materialmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith; PROVIDED that, in each case, any such Lien is not
reasonably likely to cause a MAC; and PROVIDED FURTHER that, in the case of any
Liens being so contested, (i) the amount secured thereby is not material in
relation to the Appraised Value of the affected Property, (ii) such Property
would not be in any danger of being sold, forfeited or lost by reason of such
contest; (iii) no insurance coverage required to be maintained pursuant to this
Agreement shall be cancelled or jeopardized as a result of the contest; and (iv)
if required by Administrative Agent, Borrower or the respective Guarantor shall
have furnished to Administrative Agent a bond, or other security satisfactory to
Administrative Agent, to protect Lenders from any liability to which it may be
exposed as a result of such contest.
2. In the case of a Property, all Leases for such Property and the rights of the
Tenants under such Leases and any Credit Support Agreements relating to such
Leases.
3. Liens for taxes, assessments, water rates, sewer or other governmental
charges or claims, the payment of which is not, at the time, due.
4. Easements, rights-of-way, rights of access, encroachments upon or by any
Property, in each case, as shown in the Title Insurance Policies.
5. Easements, rights-of-way, restrictions, minor defects, encroachments or
irregularities in title and other similar charges or encumbrances that, in
respect of any Property, could not reasonably be likely to result in a MAC.
6. Liens resulting from equipment financings or similar security arrangements
entered into by a Tenant.
S5-1
<PAGE>
SCHEDULE 6
NON-CURRENT MORTGAGE INTEREST AGREEMENTS
None.
S6-1
<PAGE>
This document was prepared by and
after recording should be returned to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attn: Alicia B. Clark, Esquire
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPTBROOK PROPERTIES TRUST, as MORTGAGOR
to
DRESDNER BANK AG, Administrative Agent for itself as
a lender and for certain other lenders, as MORTGAGEE
-----------------------------------
MORTGAGE AND
SECURITY AGREEMENT
-----------------------------------
Dated: September 15, 1999
Street Address: 2960 North Lake Shore Drive
Chicago, Illinois
Permanent Index Number: 14-28-203-029
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Article 1 - GRANTS OF SECURITY...........................................................................2
Section 1.1 Property Mortgaged.................................................................2
Section 1.2 Assignment of Leases and Rents.....................................................5
Section 1.3 Security Agreement.................................................................5
Section 1.4 Pledge of Monies Held..............................................................5
Article 2 - DEBT AND OBLIGATIONS SECURED.................................................................6
Section 2.1 Debt...............................................................................6
Section 2.2 Other Obligations..................................................................6
Section 2.3 Debt and Other Obligations.........................................................7
Section 2.4 Payments...........................................................................7
Article 3 - SPTBROOK COVENANTS...........................................................................7
Section 3.1 Payment of Debt....................................................................7
Section 3.2 Incorporation by Reference.........................................................7
Section 3.3 Insurance..........................................................................7
Section 3.4 Payment of Taxes, Etc.............................................................11
Section 3.5 Condemnation......................................................................12
Section 3.6 Leases and Rents..................................................................13
Section 3.7 Maintenance of Property...........................................................13
Section 3.8 Waste.............................................................................14
Section 3.9 Compliance With Laws..............................................................14
Section 3.10 Books and Records................................................................15
Section 3.11 Payment For Labor and Materials. ...............................................15
Section 3.12 Performance of Other Agreements. ...............................................15
Section 3.13 Change of Name, Identity or Structure............................................16
Section 3.14 Existence........................................................................16
Article 4 - SPECIAL COVENANTS...........................................................................16
Section 4.1 Property Use......................................................................16
Section 4.2 Restoration After Casualty/Condemnation...........................................16
Article 5 - REPRESENTATIONS AND WARRANTIES..............................................................20
Section 5.1 Warranty of Title.................................................................20
Section 5.2 Authority.........................................................................21
Section 5.3 Legal Status and Authority........................................................21
Section 5.4 Validity..........................................................................21
Section 5.5 Litigation........................................................................21
Section 5.6 Status of Property................................................................22
Section 5.7 No Foreign Person.................................................................22
Section 5.8 Separate Tax Lot..................................................................22
i
<PAGE>
Section 5.9 Leases...........................................................................22
Section 5.10 Mailing Address..................................................................23
Section 5.11 Illegal Activity.................................................................23
Article 6 - DEBTOR/CREDITOR RELATIONSHIP................................................................23
Section 6.1 Relationship of SPTBROOK and Lender...............................................23
Article 7 - FURTHER ASSURANCES..........................................................................23
Section 7.1 Recording of Security Instrument, Etc.............................................23
Section 7.2 Further Acts, Etc.................................................................24
Section 7.3 Changes in Tax, Debt Credit and Documentary Stamp Laws. .........................24
Section 7.4 Estoppel Certificates.............................................................25
Section 7.5 Flood Insurance...................................................................25
Section 7.6 Amended Financing Statements......................................................25
Article 8 - DUE ON SALE/ENCUMBRANCE.....................................................................26
Section 8.1 No Sale/Encumbrance...............................................................26
Section 8.2 Sale/Encumbrance Defined..........................................................26
Section 8.3 Lender's Rights...................................................................26
Article 9 - DEFAULT.....................................................................................26
Section 9.1 Events of Default.................................................................26
Article 10 - RIGHTS AND REMEDIES........................................................................27
Section 10.1 Remedies.........................................................................27
Section 10.2 Application of Proceeds..........................................................30
Section 10.3 Right to Cure Defaults...........................................................30
Section 10.4 Actions and Proceedings..........................................................30
Section 10.5 Recovery of Sums Required To Be Paid.............................................30
Section 10.6 Examination of Books and Records.................................................31
Section 10.7 Other Rights, Etc................................................................31
Section 10.8 Right to Release Any Portion of the Property.....................................32
Section 10.9 Violation of Laws................................................................32
Section 10.10 Right of Entry...................................................................32
Article 11 - ENVIRONMENTAL HAZARDS......................................................................32
Section 11.1 Environmental Covenants..........................................................32
Section 11.2 Lender's Rights..................................................................33
Article 12 - INDEMNIFICATION............................................................................34
Section 12.1 General Indemnification..........................................................34
Section 12.2 Mortgage and/or Intangible Tax...................................................35
Section 12.3 Environmental Indemnification....................................................35
Section 12.4 Duty to Defend; Attorneys' Fees and Other Fees and Expenses......................36
ii
<PAGE>
Article 13 - WAIVERS....................................................................................36
Section 13.1 Waiver of Counterclaim...........................................................36
Section 13.2 Marshalling and Other Matters....................................................36
Section 13.3 Waiver of Notice.................................................................37
Section 13.4 Waiver of Statute of Limitations.................................................37
Section 13.5 Sole Discretion of Lender........................................................37
Section 13.6 Survival.........................................................................37
Section 13.7 Waiver of Trial By Jury..........................................................37
Article 14 - NOTICES....................................................................................38
Section 14.1 Notices...........................................................................38
Article 15 - APPLICABLE LAW.............................................................................39
Section 15.1 CHOICE OF LAW; CONSENT OF JURISDICTION...........................................39
Section 15.2 Usury Laws.......................................................................39
Section 15.3 Provisions Subject to Applicable Law. ..........................................39
Section 15.4 Inapplicable Provision...........................................................39
Article 16 - COSTS......................................................................................40
Section 16.1 Attorney's Fees for Enforcement..................................................40
Article 17 - DEFINITIONS................................................................................40
Section 17.1 General Definitions..............................................................40
Section 17.2 Headings, Etc. .................................................................40
Article 18 - MISCELLANEOUS PROVISIONS...................................................................40
Section 18.1 No Oral Change...................................................................40
Section 18.2 Liability........................................................................41
Section 18.3 Duplicate Originals; Counterparts................................................41
Section 18.4 Number and Gender................................................................41
Section 18.5 Entire Agreement.................................................................41
Section 18.6 Nonliability of Trustees.........................................................41
Article 19 - LOCAL LAW PROVISIONS.......................................................................41
Section 19.1 Local Law Provisions.............................................................41
Exhibits -
Exhibit A - Description of Land
Exhibit B - Local Law Provisions
Definitions
</TABLE>
iii
<PAGE>
The terms set forth below are defined in the following Sections of this Security
Instrument or in the Loan Agreement (defined in the Recitals):
ADA: Subsection 3.10(a)
Applicable Law: Subsection 3.10(a)
Attorneys' Fees/Counsel Fees: Section 17.1
Bankruptcy Code: Subsection 1.1(f)
Brookdale Master Lease: Recitals
Brookdale Lease Guaranty: Recitals
Brookdale Master Tenant: Recitals
Brookdale Subtenants: Recitals
Business Day: Section 14.1
Casualty Amount: Subsection 4.2(a)(i)
Casualty Consultant: Subsection 4.2(b)(iii)
Casualty Retainage: Subsection 4.2(b)(iv)
Collateral: Section 1.3
Debt: Section 2.1
Default Rate: Section 10.3
Environmental Law: Defined in the Loan Agreement
Environmental Liens: Section 11.2
ERISA: Subsection 4.2(a)
Escrow Fund: Section 3.5
Event of Default: Section 9.1
Force Majeure: Subsection 4.2(b)
Hazardous Material: Defined in the Loan Agreement
HRPT: Recitals
Improvements: Subsection 1.1(c)
Indemnified Parties: Section 12.1
Insurance Premiums: Subsection 3.3(b)
Land: Subsection 1.1(a)
Leases: Subsection 1.1(f)
Lender: Preamble
Loan Agreement: Recitals
Loan Documents: Recitals
Loans: Recitals
Losses: Section 12.1
Net Proceeds: Subsection 4.2(b)
Net Proceeds Deficiency: Subsection 4.2(b)(vi)
Loan Agreement: Recitals
Losses: Section 12.1
Notes: Recitals
Obligations: Section 2.3
Other Charges: Subsection 3.4(a)
Other Obligations: Section 2.2
Other Security Documents: Section 3.2
iv
<PAGE>
Permitted Exceptions: Section 5.1
Person: Section 17.1
Personal Property: Subsection 1.1(e)
Policies/Policy: Subsection 3.3(b)
Property: Section 1.1
Qualified Insurer: Subsection 3.3(b)
Rating Agency: Subsection 3.3(b)
Release: Defined in the Loan Agreement
Remediation: Section 11.1
Rents: Subsection 1.1(f)
Restoration: Subsection 3.3(d)
Security Instrument: Preamble
SHPT: Recitals
SPTBROOK: Preamble
SPTMRT: Recitals
Taxes: Subsection 3.4(a)
Tenant: Section 3.6
Uniform Commercial Code: Subsection 1.1(e)
v
<PAGE>
THIS MORTGAGE AND SECURITY AGREEMENT (this "SECURITY INSTRUMENT") is made
as of September 15, 1999, by SPTBROOK PROPERTIES TRUST, a Maryland real estate
investment trust with its principal place of business at 400 Centre Street,
Newton, Massachusetts 02158, as mortgagor ("SPTBROOK"), to DRESDNER BANK AG, a
German banking corporation acting through its New York Branch, as Administrative
Agent for itself as a lender and for the other lenders under the Loan Agreement
described below, with an address at 75 Wall Street, New York, New York 10005
("LENDER").
RECITALS:
A. SPTBROOK's affiliate, Senior Housing Properties Trust ("SHPT"), was
organized on December 16, 1998 as a wholly-owned subsidiary of HRPT
Properties Trust, a Maryland real estate investment trust ("HRPT").
Commencing with or promptly following the execution and delivery of this
Security Instrument, SHPT is being spun off by HRPT. In anticipation of
HRPT's spin-off of SHPT, (1) HRPT formed other wholly-owned subsidiaries
and transferred properties to them, including, among others, the following:
(i) HRPT formed SPTMRT Properties Trust, a Maryland real estate investment
trust ("SPTMRT") and transferred 14 properties (nine congregate care
properties and five assisted living properties) that are leased under 14
separate leases to subsidiaries of Marriott International, Inc. (the
"SPTMRT PROPERTIES") and (ii) HRPT formed SPTBROOK and transferred four
congregate care properties master leased to a subsidiary of Brookdale
Living Communities, Inc. (the "SPTBROOK PROPERTIES"), and (2) HRPT
transferred to SHPT all of HRPT's capital shares of such subsidiaries
(including both SPTMRT and SPTBROOK). As part of HRPT's spin-off of SHPT,
(a) HRPT is distributing approximately one-half of its shares of SHPT to
HRPT's shareholders and is retaining in its portfolio the remainder of its
shares of SHPT and (b) SHPT is borrowing $200,000,000 from Lender and using
the entire proceeds of such borrowing to pay formation debt owing to HRPT
by SPTMRT and SHPT.
B. SHPT, SPTMRT and SPTBROOK have asked Lender to make a $350,000,000 secured
revolving loan facility available to SHPT for the purpose of making loans
to SHPT from time to time up to an aggregate principal amount outstanding
of $350,000,000 (the "LOANS") for certain business purposes of SHPT and its
subsidiaries, including the initial $200,000,000 Loan described in
paragraph A above, pursuant to a Revolving Loan Agreement dated as of the
date hereof among SHPT, Lender, Dresdner Bank AG and the other lenders
party thereto from time to time, SPTMRT and SPTBROOK (as the same may be
amended, supplemented and modified from time to time the "LOAN AGREEMENT")
under which SHPT is issuing notes to Lender in the aggregate principal
amount of $350,000,000 to evidence the Loans (as the same may be amended,
modified and replaced from time to time, the "NOTES"). One or more Notes
may be assigned in whole or in part by one lender to another lender from
time to time under the Loan Agreement and thereupon replaced with new Notes
reflecting such assignments in accordance with the terms of the Loan
1
<PAGE>
Agreement. Loans made under the Loan Agreement may be advanced, repaid and
readvanced in whole or in part from time to time subject to the terms and
conditions of the Loan Agreement. It is the intent of SPTBROOK and Lender
that all such Notes and Loans outstanding from time to time and SPTBROOK's
guaranty obligations in respect thereof shall be secured by this Security
Instrument. As used herein, depending on the context, "LENDER" means (i)
Dresdner Bank AG, as Administrative Agent (including any successor
Administrative Agent under the Loan Agreement) acting for and on behalf of
itself as a lender and for the other lenders under the Loan Agreement or
(ii) Dresdner Bank AG and the other lenders under the Loan Agreement in
their capacities as such lenders.
C. The payment of the Loans and Notes and all other amounts payable from time
to time under the Loan Agreement, the Notes and the other LOAN DOCUMENTS
(which term is used herein as defined in the Loan Agreement) and the
performance of SHPT's obligations thereunder are being (i) jointly and
severally guaranteed by SPTMRT and SPTBROOK under the Loan Agreement and
(ii) secured by mortgage and security agreements or deeds of trust and
security agreements on each of the SPTMRT Properties and the SPTBROOK
Properties (including the Property defined in Section 1.1).
D. The SPTBROOK Properties are leased to BLC Property, Inc. (the "BROOKDALE
MASTER TENANT"), a wholly owned subsidiary of Brookdale Living Communities,
Inc. under a Master Lease Agreement dated as of December 27, 1996, as
amended (the "BROOKDALE MASTER LEASE") with an initial term expiring
December 31, 2019. The four Brookdale Properties are subleased,
respectively, by the Brookdale Master Tenant to Brookdale Living
Communities of Washington, Inc., Brookdale Living Communities of Arizona,
Inc., Brookdale Living Communities of Illinois, Inc. and Brookdale Living
Communities of New York, Inc. (collectively, the "BROOKDALE SUBTENANTS")
under a separate sublease for each Brookdale Property. The Brookdale Master
Tenant's obligations under the Brookdale Master Lease are guarantied by
Brookdale Living Communities, Inc. and the Brookdale Subtenants under a
Guaranty Agreement dated as of December 27, 1996, as amended (the
"BROOKDALE LEASE GUARANTY"). The Brookdale Properties subject to the
Brookdale Master Lease include the Land and Improvements (defined below),
which are subleased by the Brookdale Master Tenant to Brookdale Living
Communities of Illinois, Inc.
E. SPTBROOK desires to secure the payment of the Debt (defined in Section 2.1)
and the performance of all other obligations of SPTBROOK and SHPT under the
Loan Agreement and the other Loan Documents.
2
<PAGE>
ARTICLE 1 - GRANTS OF SECURITY
Section 1.1 PROPERTY MORTGAGED. SPTBROOK does hereby irrevocably mortgage,
grant, bargain, sell, pledge, assign, warrant, transfer and convey to Lender,
and grant a security interest to Lender in, the following property, rights,
interests and estates now owned or hereafter acquired by SPTBROOK (collectively,
the "PROPERTY"):
(a) LAND. The real property described in EXHIBIT A attached hereto and made a
part hereof (the "LAND");
(b) ADDITIONAL LAND. All additional lands, estates and development rights
hereafter acquired by SPTBROOK for use in connection with the Land and the
development of the Land that may, from time to time, by supplemental
mortgage or otherwise be expressly made subject to the lien of this
Security Instrument;
(c) IMPROVEMENTS. The buildings, structures, fixtures, additions, enlargements,
extensions, modifications, repairs, replacements and improvements now or
hereafter erected or located on the Land (the "IMPROVEMENTS");
(d) EASEMENTS. All easements, rights-of-way or use, rights, strips and gores of
land, streets, ways, alleys, passages, sewer rights, water, water courses,
water rights and powers, air rights and development rights, and all
estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any
way now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land, to the center line thereof and
all the estates, rights, titles, interests, dower and rights of dower,
curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of SPTBROOK of, in and to the Land
and the Improvements and every part and parcel thereof, with the
appurtenances thereto;
(e) FIXTURES AND PERSONAL PROPERTY. All machinery, equipment, furniture,
furnishings, fixtures (including, but not limited to all heating, air
conditioning, plumbing, lighting, communications and elevator fixtures) and
other property of every kind and nature whatsoever owned by SPTBROOK, or in
which SPTBROOK has or shall have an interest, now or hereafter located upon
the Land or the Improvements, or appurtenant thereto, and used in
connection with the present or future operation and occupancy of the Land
and the Improvements, and all building equipment, materials and supplies of
any nature whatsoever owned by SPTBROOK, or in which SPTBROOK has or shall
have an interest, now or hereafter located upon the Land and the
Improvements, or appurtenant thereto, or used in connection with the
present or future operation and occupancy of the Land and the Improvements,
and the right, title and interest of SPTBROOK in and to any other tangible
property which may be subject to any
3
<PAGE>
security interests, as defined in the Uniform Commercial Code, as adopted
and enacted by the state or states where any of the Property is located
(the "UNIFORM COMMERCIAL CODE"), and all proceeds and products of the above
(collectively, the "PERSONAL PROPERTY");
(f) LEASES AND RENTS. All leases (including master leases, leases and
subleases) and other agreements affecting the use, enjoyment or occupancy
of all or any part of the Land or the Improvements heretofore or hereafter
entered into whether before or after the filing by or against SPTBROOK of
any petition for relief under 11 U.S.C. [sec] 101 et seq. (the "BANKRUPTCY
CODE"), as the same may be amended from time to time, all lease guarantees,
other guarantees, letters of credit and any other credit support given by
any guarantor in connection therewith, and all cash or securities deposited
under leases to secure the performance by the lessees of their obligations
thereunder (collectively the "LEASES") and all right, title and interest of
SPTBROOK, its successors and assigns therein and thereunder, including,
without limitation, the Brookdale Master Lease and the Brookdale Lease
Guaranty [insofar as they relate to the Property]; and all rents,
additional rents, revenues, issues and profits (including all oil and gas
or other mineral royalties and bonuses) from the Land, the Improvements and
the Leases whether paid or accruing before or after the filing by or
against SPTBROOK of any petition for relief under the Bankruptcy Code
(collectively the "RENTS"); and all proceeds from the sale or other
disposition of the Leases and the right to receive and apply the Rents;
(g) CONDEMNATION AWARDS. All awards or payments, including interest thereon,
which may heretofore and hereafter be made with respect to the Property,
whether from the exercise of the right of eminent domain (including, but
not limited to any transfer made in lieu of or in anticipation of the
exercise of the right), or for a change of grade, or for any other injury
to or decrease in the value of the Property;
(h) INSURANCE PROCEEDS. All proceeds of and any unearned premiums on any
insurance policies covering the Property, including, without limitation,
the right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property;
(i) TAX CERTIORARI. All refunds, rebates or credits in connection with a
reduction in real estate taxes and assessments charged against the Property
as a result of tax certiorari or any applications or proceedings for
reduction;
(j) RIGHTS. The right, in the name and on behalf of SPTBROOK, to commence any
action or proceeding to protect the interest of Lender in the Property and
while an Event of Default (defined in Section 9.1) remains uncured, to
appear in and defend any action or proceeding brought with respect to the
Property;
(k) AGREEMENTS. All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents,
now or hereafter entered
4
<PAGE>
into, and all rights therein and thereto, respecting or pertaining to the
use, occupation, construction, management or operation of the Land and any
part thereof and any Improvements or respecting any business or activity
conducted on the Land and any part thereof and all right, title and
interest of SPTBROOK therein and thereunder, including, without limitation,
the right, while an Event of Default remains uncured, to receive and
collect any sums payable to SPTBROOK thereunder;
(l) INTANGIBLES. All accounts, escrows, chattel paper, claims, deposits, trade
names, trademarks, servicemarks, logos, copyrights, goodwill, books and
records and all other general intangibles specific to or used in connection
with the operation of the Property, if any; and
(m) CONVERSION. All proceeds of the conversion, voluntary or involuntary, of
any of the foregoing including, without limitation, proceeds of insurance
and condemnation awards, into cash or liquidation claims;
(n) OTHER RIGHTS. Any and all other rights of SPTBROOK in and to the items set
forth in Subsections (a) through (m) above.
Section 1.2 ASSIGNMENT OF LEASES AND RENTS. SPTBROOK hereby absolutely and
unconditionally assigns to Lender SPTBROOK's right, title and interest in and to
all current and future Leases and Rents (including, without limitation, the
Brookdale Master Lease and the Brookdale Lease Guaranty and the rents and other
amounts payable thereunder in so far as they relate to the Property); it being
intended by SPTBROOK that this assignment constitutes a present, absolute
assignment and not an assignment for additional security only. Nevertheless,
subject to the terms of this Section 1.2 and Section 3.7, Lender grants to
SPTBROOK a revocable license to collect and receive the Rents. SPTBROOK shall
hold the Rents, or a portion thereof, sufficient to discharge all current sums
due on the Debt, for use in the payment of such sums.
Section 1.3 SECURITY AGREEMENT. This Security Instrument is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
SPTBROOK in the Property. By executing and delivering this Security Instrument,
SPTBROOK hereby grants to Lender, as security for the Obligations (defined in
Section 2.3), a security interest in the Property to the full extent that the
Property may be subject to the Uniform Commercial Code (such portion of the
Property so subject to the Uniform Commercial Code, the "COLLATERAL").
5
<PAGE>
Section 1.4 PLEDGE OF MONIES HELD. SPTBROOK hereby pledges to Lender, and
grants to Lender a security interest in, any and all monies now or hereafter
held by Lender, including, without limitation, the Net Proceeds (defined in
Section 4.2), as additional security for the Obligations until expended or
applied as provided in this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property unto and to
the use and benefit of Lender, and the successors and assigns of Lender,
forever;
PROVIDED, HOWEVER, these presents are upon the express condition that, if
all Commitments (as defined in the Loan Agreement) have terminated and the Loans
and all other amounts payable by SHPT under the Loan Agreement, the Notes and
the other Loan Documents have been paid in full, and if SHPT and SPTBROOK shall
well and truly pay to Lender the Debt at the time and in the manner provided in
the Loan Agreement, the Notes and the other Loan Documents and this Security
Instrument and the Other Security Documents (defined in Section 3.2), shall well
and truly perform the Other Obligations as set forth in this Security
Instrument, and shall well and truly abide by and comply with each and every
covenant and condition set forth herein and, to the extent applicable to SHPT or
SPTBROOK, in the Loan Agreement, the Notes and the other Loan Documents, these
presents and the estate hereby granted shall cease, terminate and be void; and
PROVIDED FURTHER, HOWEVER, these presents are, only to the extent the same
is required in order to trigger the subordination of the Brookdale Master Lease
to this Security Instrument as provided in Section 21.2 of the Brookdale Master
Lease, subject to the rights of the Brookdale Master Tenant under the Brookdale
Master Lease, including the rights of the Brookdale Master Tenant to acquire the
Collective Leased Properties (as such term is defined in the Brookdale Master
Lease) pursuant to the applicable provisions of the Brookdale Master Lease.
ARTICLE 2 - DEBT AND OBLIGATIONS SECURED
Section 2.1 DEBT. This Security Instrument and the grants, assignments and
transfers made in Article 1 are given for the purpose of securing the following,
in such order of priority as Lender may determine in its sole discretion (the
"DEBT"):
6
<PAGE>
(a) the payment of all sums payable by SPTBROOK under (i) the Loan Agreement,
including, without limitation, its guaranty and surety obligations under
Section 10 thereof, (ii) this Security Instrument and (iii) the Other
Security Documents;
(b) the payment of all sums payable by SHPT under the Loan Agreement, the Notes
and the other Loan Documents, including, without limitation, all principal
of and interest on the Loans and all fees payable to Lender pursuant to
Section 2.6 of the Loan Agreement;
(c) the payment of all sums advanced pursuant to this Security Instrument to
protect and preserve the Property and the lien and the security interest
created hereby; and
(d) the payment of all sums advanced and costs and expenses incurred by Lender
in connection with the Debt or any part thereof, any renewal, extension,
modification, consolidation, change, substitution, replacement, restatement
or increase of the Debt or any part thereof, or the acquisition or
perfection of the security therefor, whether made or incurred at the
request of SPTBROOK, SHPT or Lender.
Section 2.2 OTHER OBLIGATIONS. This Security Instrument and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "OTHER OBLIGATIONS"):
(a) the performance of all other obligations of SPTBROOK contained herein;
(b) the performance of each obligation of SPTBROOK and each obligation of SHPT
contained in the Loan Agreement or any other Loan Document, in addition to
the payment of the Debt, and of SPTBROOK contained in the Other Security
Documents.
Section 2.3 DEBT AND OTHER OBLIGATIONS. SPTBROOK's and SHPT's obligations
for the payment of the Debt and the performance of the Other Obligations shall
be referred to collectively below as the "OBLIGATIONS."
Section 2.4 PAYMENTS. Acceptance by Lender of any payment in an amount less
than the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default.
ARTICLE 3 - SPTBROOK COVENANTS
SPTBROOK covenants and agrees with Lender that:
Section 3.1 PAYMENT OF DEBT. SPTBROOK will pay the Debt owing by SPTBROOK
at the time and in the manner provided in the Loan
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Agreement, the Other Security Documents and in this Security Instrument.
Section 3.2 INCORPORATION BY REFERENCE. All the covenants, conditions and
agreements contained in (a) the Loan Agreement, and (b) all and any of the
documents other than the Loan Agreement or this Security Instrument now or
hereafter executed by SPTBROOK and by or in favor of Lender, which wholly or
partially secure or guaranty payment of the Debt (the "OTHER SECURITY
DOCUMENTS"), are hereby made a part of this Security Instrument to the same
extent and with the same force as if fully set forth herein.
Section 3.3 INSURANCE.
(a) SPTBROOK shall obtain and maintain, or cause to be maintained, insurance
for SPTBROOK and the Property providing at least the following coverages:
(i) PROPERTY INSURANCE. Insurance with respect to the Improvements and
building equipment insuring against any peril included within the
classification "All Risks of Physical Loss" in amounts at all times
sufficient to prevent Lender from becoming a co-insurer within the
terms of the applicable policies and under applicable law, but in any
event such insurance shall be maintained in an amount equal to the
full insurable value of the Improvements and building equipment, the
term "full insurable value" to mean the actual replacement cost of the
Improvements and building equipment (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping and paving) determined annually by an insurer, a
recognized independent insurance broker or an independent appraiser
selected and paid by SPTBROOK and in no event less than the coverage
required pursuant to the terms of any Lease. Absent such annual
adjustment, each policy shall contain inflation guard coverage
insuring that the policy limit will be increased over time to reflect
the effect of inflation. SPTBROOK shall also maintain insurance
against loss or damage to such furniture, furnishings, fixtures,
equipment and other items (whether personalty or fixtures) included in
the Property and owned by SPTBROOK from time to time, to the extent
applicable, in the amount of the cost of replacing the same, in each
case, with inflation guard coverage to reflect the effect of
inflation, or annual valuation. Each policy or policies shall contain
a replacement cost endorsement and either an agreed amount endorsement
(to avoid the operation of any co-insurance provisions) or a waiver of
any co-insurance provisions, all subject to Lender's approval. The
maximum deductible shall be $10,000.00;
(ii) LIABILITY INSURANCE. Commercial general liability insurance, including
personal injury, bodily injury, death and property damage liability,
insurance against any and all claims, including all legal liability to
the extent insurable and imposed upon Lender and all court costs and
attorneys' fees and expenses, arising out of or connected with the
possession, use, leasing, operation, maintenance or condition of
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the Property in such amounts as are generally available at
commercially reasonable premiums and are generally required by
institutional lenders for properties comparable to the Property but in
no event for a combined single limit of less than $5,000,000. During
any construction of the Property, Mortgagor's general contractor for
such construction shall also provide the insurance required in this
Subsection (a). Lender hereby retains the right to periodically review
the amount of said liability insurance being maintained by SPTBROOK
and to require an increase in the amount of said liability insurance
should Lender deem an increase to be reasonably prudent under then
existing circumstances;
(iii) WORKERS' COMPENSATION INSURANCE. Statutory workers' compensation
insurance with respect to any work on or about the Property covering
all persons subject to the workers' compensation laws of the state in
which the Property is located;
(iv) BUSINESS INTERRUPTION. Business interruption and/or loss of "rental
income" insurance in an amount sufficient to avoid any co-insurance
penalty and to provide proceeds which will cover a period of not less
than one (1) year from the date of casualty or loss, with a six month
extended period of indemnity, the term "rental income" to mean the sum
of (A) the total then ascertainable Rents payable under the Leases and
(B) the total ascertainable amount of all other amounts to be received
by SPTBROOK from third parties which are the legal obligation of the
tenants, reduced to the extent such amounts would not be received
because of operating expenses not incurred during a period of
non-occupancy of that portion of the Property then not being occupied.
The amount of coverage shall be adjusted annually to reflect the rents
payable during the succeeding eighteen (18) month period;
(v) BOILER AND MACHINERY INSURANCE. Broad form boiler and machinery
insurance (without exclusion for explosion) covering all boilers or
other pressure vessels, machinery, and equipment located in, on or
about the Property and insurance against loss of occupancy or use
arising from any breakdown in such amount per accident equal to the
replacement value of the improvements housing the machinery or
$2,000,000 or such other amount reasonably determined by Lender. If
one or more large HVAC units is in operation at the Property, "System
Breakdowns" coverage shall be required, as determined by Lender.
Minimum liability coverage per accident must equal the value of such
unit(s);
(vi) FLOOD INSURANCE. If required by Subsection 5.6(a) hereof, flood
insurance in an amount at least equal to the lesser of (A) the minimum
amount required, under the terms of coverage, to compensate for any
damage or loss on a replacement basis (or the unpaid balance of the
indebtedness secured hereby if replacement cost coverage is not
available for the type of building insured); or (B) the maximum
insurance available under the appropriate National Flood Insurance
Administration program. The deductible may not exceed $25,000.
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(vii) BUILDER'S RISK. During the period of any construction, renovation or
alteration of the Improvements which exceeds the lesser of 10% of the
principal amount of the Loan Agreement or $500,000, at Lender's
request, a completed value, "All Risk" Builder's Risk form, or "Course
of Construction" insurance policy in non-reporting form for any
Improvements under construction, renovation or alteration in an amount
approved by Lender may be required. During the period of any
construction of any addition to the existing Improvements, a completed
value, "All Risk" Builder's Risk form or "Course of Construction"
insurance policy in non-reporting form, in an amount approved by
Lender, shall be required.
(viii) OTHER INSURANCE. Such other insurance with respect to the Property
or on any replacements or substitutions thereof or additions thereto
as may from time to time be required by Lender against other insurable
hazards or casualties which at the time are commonly insured against
in the case of property similarly situated, including, without
limitation, sinkhole, mine subsidence, earthquake and environmental
insurance, due regard being given to the height and type of buildings,
their construction, location, use and occupancy.
(b) All insurance provided for in Subsection 3.3(a) hereof shall be obtained
under valid and enforceable policies (the "POLICIES" or in the singular,
the "POLICY"), and shall be issued by one or more domestic primary
insurer(s) having an investment grade rating of "A" or better ("AA" or
better for Loans of $25,000,000 or more), or a comparable claims paying
ability assigned by S & P or equivalent one or more credit rating agencies
approved by Lender (a "RATING AGENCY"), (each such insurer shall be
referred to below as a "QUALIFIED INSURER"). All insurers providing
insurance required by this Security Instrument shall be authorized to issue
insurance in the state in which the Property is located. The Policy
referred to in Subsection 3.3(a)(ii) above shall name Lender as an
additional named insured and the Policy referred to in Subsection
3.3(a)(i), (iv), (v) and (vi) above shall provide that all proceeds be
payable to Lender as set forth in Section 4.2 hereof. The Policies referred
to in Subsections 3.3(a)(i), (v) and (vi) shall also contain: (i) a
standard "non-contributory mortgagee" endorsement or its equivalent
relating, INTER ALIA, to recovery by Lender notwithstanding the negligent
or willful acts or omission of Lender, and (ii) to the extent available at
commercially reasonable rates, a waiver of subrogation endorsement as to
Lender. All Policies described in Subsection 3.3(a) above shall contain (i)
a provision that such Policies shall not be canceled or terminated, nor
shall they expire, without at least thirty (30) days' prior written notice
to Lender in each instance; and (ii) an effective waiver by the insurer of
all claims for Insurance Premiums (defined below) against any mortgagees,
loss payees, additional insureds and named insureds (other than SPTBROOK).
In the event that the Property or the Improvements constitutes a legal
non-conforming use under applicable building, zoning or land use laws or
ordinances, the policy shall include an ordinance or law coverage
endorsement which will contain Coverage A: "Loss Due to Operation of Law"
(with a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost
of Construction" coverages. Certificates of
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insurance with respect to all renewal and replacement Policies shall be
delivered to Lender not less than thirty (30) days prior to the expiration
date of any of the Policies required to be maintained hereunder which
certificates shall bear notations evidencing payment of applicable premiums
(the "INSURANCE PREMIUMS"). Originals or certificates of such replacement
Policies shall be delivered to Lender promptly after SPTBROOK's receipt
thereof but in any case within thirty (30) days after the effective date
thereof. If SPTBROOK fails to maintain and deliver to Lender the original
Policies or certificates of insurance required by this Security Instrument,
upon ten (10) days' prior notice to SPTBROOK, Lender may procure such
insurance at SPTBROOK's sole cost and expense.
(c) SPTBROOK shall comply with all insurance requirements and shall not bring
or keep or permit to be brought or kept any article upon any of the
Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by SPTBROOK on or with respect
to any part of the Property pursuant to this Section 3.3.
(d) If the Property shall be damaged or destroyed, in whole or in part, by fire
or other casualty, SPTBROOK shall give prompt notice of such damage to
Lender and provided that SPTBROOK shall have received the Net Proceeds,
SPTBROOK shall promptly commence or cause to be commenced and diligently
prosecute or cause to be prosecuted the completion of the repair and
restoration of the Property as nearly as possible to the condition the
Property was in immediately prior to such fire or other casualty, with such
alterations as may be approved by Lender (the "RESTORATION") and otherwise
in accordance with Section 4.2 of this Security Instrument.
(e) The insurance coverage required under Section 3.3(a) may be effected under
a blanket policy or policies covering the Property and other properties and
assets not constituting a part of the security hereunder; provided that any
such blanket policy shall specify, except in the case of commercial general
liability insurance, the portion of the total coverage of such policy that
is allocated to the Property, and any sublimit in such blanket policy
applicable to the Property, and shall in any case comply in all other
respects with the requirements of this Section 3.3.
(f) The insurance coverage required under Subsection 3.3(a)(ii) may be
satisfied by a layering of Commercial General Liability, Umbrella and
Excess Liability Policies, but in no event will the Commercial General
Liability policy be written for an amount less than $1,000,000 per
occurrences and $2,000,000 aggregate for bodily injury and property damage
liability.
(g) The delivery to Lender of the insurance policies or the certificates of
insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance as relating to the Property by SPTBROOK to
Lender as further security for the indebtedness secured hereby. In the
event of foreclosure of this Security
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Instrument, or other transfer of title to the Property in extinguishment in
whole or in part of the secured indebtedness, all right, title and interest
of SPTBROOK in and to all proceeds payable under such policies then in
force concerning the Property shall thereupon vest in the purchaser at such
foreclosure, or in Lender or other transferee in the event of such other
transfer of title. Approval of any insurance by Lender shall not be a
representation of the solvency of any insurer or the sufficiency of any
amount of insurance.
(h) Lender shall not be responsible for nor incur any liability for the
insolvency of the insurer or other failure of the insurer to perform, even
though Lender has caused the insurance to be placed with the insurer after
failure of SPTBROOK to furnish such insurance. SPTBROOK shall not obtain
insurance for the Property in addition to that required by Lender without
the prior written consent of Lender, which consent will not be unreasonably
withheld provided that (i) Lender is named insured on such insurance, (ii)
Lender receives complete copies of all policies evidencing such insurance,
and (iii) such insurance complies with all of the applicable requirements
set forth herein.
(i) Anything in Section 3.3 hereof to the contrary notwithstanding, during the
term of the Brookdale Master Lease and so long as the Brookdale Master
Lease is in full force and effect, in lieu of complying with the provisions
of Section 3.3 hereof, SPTBROOK shall comply with, and cause the Brookdale
Master Tenant to comply with, Article 10 and the other insurance provisions
of the Brookdale Master Lease, and Lender shall be a third party
beneficiary thereof; provided that Section 3.3(g) hereof shall continue to
apply as between SPTBROOK and Lender.
Section 3.4 PAYMENT OF TAXES, ETC.
(a) SPTBROOK shall pay or cause to be paid by their due date all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including, without limitation, vault charges and license fees for
the use of vaults, chutes and similar areas adjoining the Land, now or
hereafter levied or assessed or imposed against the Property or any part
thereof (the "TAXES"), all ground rents, maintenance charges and similar
charges, now or hereafter levied or assessed or imposed against the
Property or any part thereof (the "OTHER CHARGES"), and all charges for
utility services provided to the Property as same become due and payable.
SPTBROOK will deliver to Lender, promptly upon Lender's request, evidence
satisfactory to Lender that the Taxes, Other Charges and utility service
charges have been so paid or are not then delinquent. SPTBROOK shall not
suffer and shall promptly cause to be paid and discharged any lien or
charge whatsoever which may be or become a lien or charge against the
Property.
(b) After prior written notice to Lender, SPTBROOK, at its own expense, may
contest or permit to be contested by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the amount or
validity or application
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in whole or in part of any of the Taxes, provided that (i) no Event of
Default has occurred under the Loan Agreement, this Security Instrument or
any of the Other Security Documents, (ii) SPTBROOK is permitted to do so
under the provisions of any other mortgage, deed of trust or deed to secure
debt affecting the Property, (iii) such proceeding shall suspend the
collection of the Taxes from SPTBROOK and from the Property or SPTBROOK
shall have paid or caused to be paid all of the Taxes under protest, (iv)
such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which SPTBROOK is subject
and shall not constitute a default thereunder, (v) neither the Property nor
any part thereof or interest therein will be in danger of being sold,
forfeited, terminated, canceled or lost, (vi) SPTBROOK shall have set aside
adequate reserves for the payment of the Taxes, together with all interest
and penalties thereon, unless SPTBROOK has paid or caused to be paid all of
the Taxes under protest, and (vii) SPTBROOK shall have furnished the
security as may be required in the proceeding, or as may be reasonably
requested by Lender to insure the payment of any contested Taxes, together
with all interest and penalties thereon. Anything in this Section 3.4(b) to
the contrary notwithstanding, during the term of the Brookdale Master Lease
and so long as the Brookdale Master Lease is in full force and effect, the
Brookdale Master Tenant shall have the right to contest Taxes pursuant to
and in full compliance with Section 3.1.3 and Article 8 of the Brookdale
Master Lease, and in case of any such contest, SPTBROOK shall not be
required to comply with the provisions of this Section 3.4(b); provided
that SPTBROOK shall cause the Brookdale Master Tenant to comply with the
provisions of Section 3.1.3 and Article 8 of the Brookdale Master Lease in
any such contest.
Section 3.5 CONDEMNATION. SPTBROOK shall promptly give Lender notice of the
actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such proceedings
to the extent permitted by law. Upon an Event of Default, SPTBROOK shall deliver
to Lender all instruments requested by it to permit such participation. SPTBROOK
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. SPTBROOK shall not make any
agreement in lieu of condemnation of the Property or any portion thereof without
the prior written consent of Lender in each instance, which consent shall not be
unreasonably withheld or delayed in the case of a taking of an insubstantial
portion of the Property. If the Property or any portion thereof is taken by the
power of eminent domain, SPTBROOK shall promptly commence and diligently
prosecute the Restoration of the Property and otherwise comply with the
provisions of in accordance with Section 4.2 of this Security Instrument. If the
Property is sold,
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through foreclosure or otherwise, prior to the receipt by Lender of the award or
payment, Lender shall have the right, whether or not a deficiency judgment on
the Loan Agreement shall have been sought, recovered or denied, to receive the
award or payment, or a portion thereof sufficient to pay the Debt. The
provisions of this Section 3.5 are subject to the provisions of Article 11 of
the Brookdale Master Lease.
Section 3.6 LEASES AND RENTS. The Property is subject to the Brookdale
Master Lease. SPTBROOK shall not enter into any other Lease of the Property
without the prior written consent of Lender. As used herein, the term "TENANT"
shall mean and include the tenant and any guarantor of the tenant's obligations
under a Lease, including, without limitation, the Brookdale Master Tenant and
the Brookdale Lease Guarantors. SPTBROOK (i) shall observe and perform all the
obligations imposed upon the lessor under the Leases (including, without
limitation, the Brookdale Master Lease and the Brookdale Lease Guaranty) and
shall not do or permit to be done anything to impair the value of any Lease as
security for the Debt; (ii) shall promptly send copies to Lender of all notices
of default which SPTBROOK shall send or receive under any Lease; (iii) shall
enforce in a commercially reasonable manner all of the terms, covenants and
conditions contained in the Leases upon the part of the Tenant thereunder to be
observed or performed; (iv) shall not collect any of the Rents more than one (1)
month in advance (provided that a security deposit shall not be deemed rent
collected in advance); (v) shall not execute any other assignment of the
lessor's interest in any Lease or Rents; (vi) shall not (A) materially alter,
modify or change any of the terms of any Lease without the prior written consent
of Lender or (B) cancel or terminate any Lease (including any lease guaranty) or
transfer or suffer or permit a conveyance or transfer of the Land or of any
interest therein so as to effect a merger of the estates and rights of, or a
termination or diminution of the obligations of, Tenants thereunder; and (vii)
shall not consent to any assignment of or subletting under any Lease not in
accordance with the terms thereof, without the prior written consent of Lender.
In the event that the Brookdale Master Lease is replaced by another Lease which,
by express agreement of Lender, is superior to the lien of this Security
Instrument or with respect to which a subordination, non-disturbance and
attornment agreement is entered into by the Tenant under such Lease, SPTBROOK
and Lender, the express references to the Brookdale Master Lease (and specific
sections, articles and provisions thereof) and the Brookdale Master Tenant in
Sections 3.3(i), 3.4(b), 3.5, 3.11 and 4.3(d) hereof shall be deemed to refer to
such replacement Lease
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(and the corresponding sections, articles and provisions thereof) and the Tenant
thereunder to the extent and as the Lender may, at its option and in its
absolute discretion, so agrees with such Tenant and SPTBROOK.
Section 3.7 MAINTENANCE OF PROPERTY. Subject to the terms of the Brookdale
Master Lease, SPTBROOK shall cause the Property to be maintained in a good and
safe condition and repair. Except as expressly provided in the Brookdale Master
Lease, the Improvements and the Personal Property shall not be removed,
demolished or materially altered (except for normal replacement of the Personal
Property) without the consent of Lender. If any part of the Property is
destroyed by any casualty, or damaged, worn or dilapidated or affected by any
proceeding of the character referred to in Section 3.5 hereof, then, subject to
the terms of the Brookdale Master Lease, SPTBROOK shall, or shall cause the
Tenants to, promptly repair, replace or rebuild the same. SPTBROOK shall
complete and pay for, or cause the Tenants to complete and pay for, any
structure at any time in the process of construction or repair on the Land.
Except as set forth in the Brookdale Master Lease, SPTBROOK shall not initiate,
join in, acquiesce in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of the Property or any part thereof. If
under applicable zoning provisions the use of all or any portion of the Property
is or shall become a nonconforming use, SPTBROOK will not cause, or, subject to
the terms of the Brookdale Master Lease, permit, the nonconforming use or
Improvement to be discontinued or abandoned without the express written consent
of Lender.
Section 3.8 WASTE. SPTBROOK shall not commit or suffer any material waste
of the Property or make any change in the use of the Property which will in any
way materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that could reasonably be expected
to result in invalidation or cancellation of any Policy. SPTBROOK will not,
without the prior written consent of Lender, permit any drilling or exploration
for or extraction, removal, or production of any minerals from the surface or
the subsurface of the Land, regardless of the depth thereof or the method of
mining or extraction thereof.
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Section 3.9 COMPLIANCE WITH LAWS.
(a) SPTBROOK shall promptly comply, or cause the Tenants to comply, in all
material respects with all existing and future federal, state and local
laws, orders, ordinances, governmental rules and regulations or court
orders affecting the Property, or the use thereof including, but not
limited to, the Americans with Disabilities Act ("ADA") (collectively,
"APPLICABLE LAW").
(b) SPTBROOK shall from time to time, upon Lender's request, provide Lender
with evidence reasonably satisfactory to Lender that the Property complies
in all material respects with all Applicable Laws or is exempt from
compliance with Applicable Laws.
(c) Subject to the provisions of the Brookdale Master Lease, but otherwise
notwithstanding any provisions set forth herein or in any document
regarding Lender's approval of alterations of the Property, SPTBROOK shall
not alter, or permit any Tenant to alter, the Property in any manner which
would materially increase SPTBROOK's responsibilities for compliance with
Applicable Laws without the prior written approval of Lender. Lender's
approval of the plans, specifications, or working drawings for alterations
of the Property shall create no responsibility or liability on behalf of
Lender for their completeness, design, sufficiency or their compliance with
Applicable Laws. Lender may condition any such approval upon receipt of a
certificate of compliance with Applicable Laws from an independent
architect, engineer, or other person acceptable to Lender.
(d) SPTBROOK shall give prompt notice to Lender of the receipt by SPTBROOK of
any notice related to a violation of any Applicable Laws and of the
commencement of any proceedings or investigations which relate to
compliance with Applicable Laws.
(e) SPTBROOK, at its own expense, may contest or permit a Tenant in accordance
with its Lease to contest, by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the
Applicable Laws affecting the Property; provided that (i) no Event of
Default has occurred under this Security Instrument or any of the Other
Security Documents; (ii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to
which SPTBROOK is subject and shall not constitute a default thereunder;
(iii) neither the Property nor any part thereof or interest therein nor any
of Tenant thereof shall be affected in any material adverse way as a result
of such proceeding; and (iv) SPTBROOK shall have furnished to Lender all
other items reasonably requested by Lender; provided further that limits in
this Section 3.9(e) on the Brookdale Master Tenant's right to contest
Applicable Laws are subject to the Brookdale Master Tenant's rights under
the Brookdale Master Lease.
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Section 3.10 BOOKS AND RECORDS.
(a) SPTBROOK shall keep adequate books and records of account in accordance
with generally accepted accounting principles consistently applied.
(b) Upon reasonable request from Lender, SPTBROOK shall furnish to Lender an
accounting of any security deposits held in connection with any Lease of
any part of the Property, including the name and identification number of
the accounts in which such security deposits are held, the name and address
of the financial institutions in which such security deposits are held, and
the name of the person to contact at such financial institution, along with
any authority or release necessary for Lender to obtain information
regarding such accounts directly from such financial institutions.
(c) SPTBROOK shall furnish Lender with such financial, management information
or other with respect to the Property and the Tenants as may, from time to
time, be reasonably required by Lender in form and substance reasonably
satisfactory to Lender.
Section 3.11 PAYMENT FOR LABOR AND MATERIALS. SPTBROOK will promptly pay or
cause to be paid when due all bills and costs for labor, materials, and
specifically fabricated materials incurred in connection with the Property and
never permit to exist beyond the due date thereof in respect of the Property or
any part thereof any lien or security interest, even though inferior to the
liens and the security interests hereof, and in any event never permit to be
created or exist in respect of the Property or any part thereof any other or
additional lien or security interest other than the liens or security interests
hereof, except for the Permitted Exceptions (defined in Section 5.1), other
Permitted Exceptions (as defined in the Loan Agreement) with respect to the
Property, and liens permitted under Section 7.1 of the Brookdale Master Lease
other than clauses (b), (c) and (g) of such Section 7.1.
Section 3.12 PERFORMANCE OF OTHER AGREEMENTS. SPTBROOK shall observe and
perform or cause to be observed and performed in all material respects each and
every term to be observed or performed by SPTBROOK pursuant to the terms of any
agreement or recorded instrument affecting or pertaining to the Property.
Section 3.13 CHANGE OF NAME, IDENTITY OR STRUCTURE. SPTBROOK will not
change SPTBROOK's name, identity (including its trade name or names) or
SPTBROOK's organizational structure without notifying the Lender of such change
in writing at least thirty (30) days prior
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to the effective date of such change and, in the case of a change in SPTBROOK's
organizational structure, without first obtaining the prior written consent of
the Lender, which consent shall not be unreasonably withheld.
Section 3.14 EXISTENCE. SPTBROOK will continuously maintain (a) its
existence and shall not dissolve or permit its dissolution, (b) its rights to do
business in the state where the Property is located and (c) its franchises and
trade names, if any.
ARTICLE 4 - SPECIAL COVENANTS
SPTBROOK covenants and agrees with Lender that:
Section 4.1 PROPERTY USE. The Property shall be used only as an a
residential retirement community, including nursing care, congregate care, and
all other uses reasonably incidental thereto, and, except as otherwise expressly
provided in the Brookdale Master Lease, for no other use without the prior
written consent of Lender, which consent may be withheld in Lender's sole and
absolute discretion.
Section 4.2 RESTORATION AFTER CASUALTY/CONDEMNATION. In the event of a
casualty or a taking by eminent domain, the following provisions shall apply in
connection with the Restoration of the Property:
(a) If (i) the Net Proceeds (defined below) do not exceed $250,000 ("CASUALTY
AMOUNT"); (ii) the costs of completing the Restoration as reasonably
estimated by SPTBROOK shall be less than or equal to the Casualty Amount;
(iii) no Event of Default shall have occurred and be continuing under this
Security Instrument or any of the Other Security Documents; (iv) the
Property and the use thereof after the Restoration will be in compliance
with, and permitted under, all applicable zoning laws, ordinances, rules
and regulations (including, without limitation, all applicable
Environmental Laws (defined in Section 11.1); and (v) such fire or other
casualty or taking, as applicable, does not materially impair access to the
Property or the Improvements, then the Net Proceeds will be disbursed
directly to SPTBROOK and SPTBROOK shall commence and diligently prosecute
to completion, subject to Force Majeure (defined herein), the Restoration
of the Property to as nearly as possible the condition it was in
immediately prior to such fire or other casualty or to such taking. Except
upon the occurrence of an Event of Default, SPTBROOK shall settle any
insurance claims with respect to the Net Proceeds which in the aggregate
are less than or equal to the Casualty Amount. Lender shall have the right
to participate in and reasonably approve any settlement for insurance
claims with respect to the Net Proceeds which in the aggregate are equal to
or greater than the Casualty Amount. If an Event of Default shall have
occurred and be continuing, SPTBROOK hereby irrevocably empowers
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Lender, in the name of SPTBROOK as its true and lawful attorney-in-fact, to
file and prosecute such claim and to collect and to make receipt for any
such payment. If the Net Proceeds are received by SPTBROOK, such Net
Proceeds shall, until the completion of the related work, be held in trust
for Lender and shall be segregated from other funds of SPTBROOK to be used
to pay for the cost of the Restoration in accordance with the terms hereof.
(b) If the Net Proceeds are greater than the Casualty Amount, such Net Proceeds
shall be forthwith paid to Lender to be held by Lender in a segregated
account to be made available to SPTBROOK for the Restoration in accordance
with the provisions of this Subsection 4.2(b). SPTBROOK shall commence and
diligently prosecute to completion, subject to Force Majeure, the
Restoration (in the case of a taking, to the extent the Property is capable
of being restored). The term "NET PROCEEDS" for purposes of this Section
4.2 shall mean: (i) the net amount of all insurance proceeds received by
Lender under the Policies carried pursuant to Subsections 3.3(a)(i), (iv),
(v), (vi) and (vii) of this Security Instrument as a result of such damage
or destruction, after deduction of its reasonable costs and expenses
(including, but not limited to, reasonable counsel fees), if any, in
collecting the same, or (ii) the net amount of all awards and payments
received by Lender with respect to a taking referenced in Section 3.6 of
this Security Instrument, after deduction of its reasonable costs and
expenses (including, but not limited to reasonable counsel fees), if any,
in collecting the same, whichever the case may be. The term "FORCE MAJEURE"
for the purpose of this Section 4.2 shall have the following meaning:
SPTBROOK shall be excused for the period of any delay in the performance of
any obligations hereunder when prevented from so doing by cause or causes
beyond SPTBROOK's control such as, without limitation, all labor disputes,
civil commotion, war, war-like operations, invasion, rebellion,
hostilities, military or usurped power, sabotage, governmental regulations
or controls, fire or other casualty, inability to obtain any materials or
services, and acts of God.
(1) The Net Proceeds shall be made available to SPTBROOK for
payment of, or reimbursement of SPTBROOK's expenses in connection with, the
Restoration, subject to the following conditions:
(A) no Event of Default shall have occurred and be continuing under this
Security Instrument or any of the Other Security Documents;
(B) Lender shall, within a reasonable period of time prior to request for
initial disbursement, be furnished with an estimate of the cost of the
Restoration accompanied by an independent architect's certification as
to such costs and appropriate plans and specifications for the
Restoration;
(C) the Net Proceeds, together with any cash or cash equivalent deposited
by SPTBROOK with Lender, are sufficient to cover the cost of the
Restoration as such costs are certified by the independent architect;
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(D) (i) in the event that the Net Proceeds are insurance proceeds, less
than fifty percent (50%) of the total floor area of the Improvements
has been damaged or destroyed, or rendered unusable as a result of
such fire or other casualty; or (ii) in the event that the Net
Proceeds are condemnation awards, less than fifty percent (50%) of the
Land constituting the Property is taken, such Land that is taken is
located along the perimeter or periphery of the Property and no
portion of the Improvements is located in such Lands;
(E) Lender shall be satisfied that any operating deficits which will be
incurred with respect to the Property as a result of the occurrence of
any such fire or other casualty or taking, whichever the case may be,
will be covered out of (i) the Net Proceeds, or (ii) other funds of
SPTBROOK;
(F) Lender shall be satisfied that, upon the completion of the Restoration
and related lease-up, if applicable, the net cash flow of the Property
will be restored to a level sufficient to cover all carrying costs and
operating expenses of the Property;
(G) the Restoration can reasonably be completed on or before the earliest
to occur of (i) six (6) months prior to the Termination Date (as
defined in the Loan Agreement), (ii) the earliest date required for
such completion under the terms of any Lease and (iii) such time as
may be required under applicable zoning law, ordinance, rule or
regulation in order to repair and restore the Property to as nearly as
possible the condition it was in immediately prior to such fire or
other casualty or to such taking, as applicable;
(H) the Property and the use thereof after the Restoration will be in
compliance with, and permitted under, all applicable zoning laws,
ordinances, rules and regulations (including, without limitation, the
ADA and all applicable Environmental Laws (defined in Section 11.1);
and
(I) such fire or other casualty or taking, as applicable, does not
materially impair access to the Property or the Improvements.
(2) The Net Proceeds shall be held by Lender and, until disbursed
in accordance with the provisions of this Subsection 4.2(b), shall
constitute additional security for the Obligations. The Net Proceeds other
than the Net Proceeds paid under the Policy described in Subsection
3.3(a)(iv) shall be disbursed by Lender to, or as directed by, SPTBROOK
from time to time during the course of the Restoration, upon receipt of
evidence satisfactory to Lender that (A) all materials installed and work
and labor performed (except to the extent that they are to be paid for out
of the requested disbursement) in connection with the Restoration have been
paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or
any other liens or encumbrances of any nature whatsoever on the Property
arising out of the Restoration which have not either been fully bonded and
discharged of record or in the alternative fully insured to the
satisfaction of Lender by the title company insuring the lien of this
Security Instrument.
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(3) Lender shall have the use of the plans and specifications and
all permits, licenses and approvals required or obtained in connection with
the Restoration. The identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as well as the contracts under
which they have been engaged, shall be subject to prior review and
acceptance by Lender and an independent consulting engineer selected by
Lender (the "CASUALTY CONSULTANT"), such acceptance not to be unreasonably
withheld or delayed. All costs and expenses incurred by Lender in
connection with making the Net Proceeds available for the Restoration
including, without limitation, reasonable counsel fees and disbursements
and the Casualty Consultant's fees, shall be paid by SPTBROOK.
(4) In no event shall Lender be obligated to make disbursements
of the Net Proceeds in excess of an amount equal to the costs actually
incurred from time to time for work in place as part of the Restoration, as
certified by the Casualty Consultant, MINUS the Casualty Retainage. The
term "CASUALTY RETAINAGE" as used in this Subsection 4.2(b) shall mean an
amount equal to 10% of the costs actually incurred for work in place as
part of the Restoration, as certified by the Casualty Consultant, until
such time as the Casualty Consultant certifies to Lender that 50% of the
required Restoration has been completed. There shall be no Casualty
Retainage with respect to costs actually incurred by SPTBROOK for work in
place in completing the last 50% of the required Restoration. The Casualty
Retainage shall in no event, and notwithstanding anything to the contrary
set forth above in this Subsection 4.2(b), be less than the amount actually
held back by SPTBROOK from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released
until the Casualty Consultant certifies to Lender that the Restoration has
been completed in accordance with the provisions of this Subsection 4.2(b)
and that all approvals necessary for the re-occupancy and use of the
Property have been obtained from all appropriate governmental and
quasi-governmental authorities, and Lender receives evidence satisfactory
to Lender that the costs of the Restoration have been paid in full or will
be paid in full out of the Casualty Retainage, provided, however, that
Lender will release the portion of the Casualty Retainage being held with
respect to any contractor, subcontractor or materialman engaged in the
Restoration as of the date upon which the Casualty Consultant certifies to
Lender that the contractor, subcontractor or materialman has satisfactorily
completed all work and has supplied all materials in accordance with the
provisions of the contractor's, subcontractor's or materialman's contract,
and the contractor, subcontractor or materialman delivers the lien waivers
and evidence of payment in full of all sums due to the contractor,
subcontractor or materialman as may be reasonably requested by Lender or by
the title company insuring the lien of this Security Instrument. If
required by Lender, the release of any such portion of the Casualty
Retainage shall be approved by the surety company, if any, which has issued
a payment or performance bond with respect to the contractor, subcontractor
or materialman.
(5) Lender shall not be obligated to make disbursements of the
Net Proceeds more frequently than once every calendar month.
(6) If at any time the Net Proceeds or the undisbursed balance
thereof shall not, in the opinion of Lender, be sufficient to pay in full
the balance of the costs which are estimated by the Casualty Consultant to
be incurred in connection with the completion of the
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Restoration, SPTBROOK shall deposit the deficiency (the "NET PROCEEDS
DEFICIENCY") with Lender before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender
shall be held by Lender and shall be disbursed for costs actually incurred
in connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this
Subsection 4.2(b) shall constitute additional security for the Obligations.
(7) The excess, if any, of the Net Proceeds and the remaining
balance, if any, of the Net Proceeds Deficiency deposited with Lender after
the Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.2(b), and
the receipt by Lender of evidence satisfactory to Lender that all costs
incurred in connection with the Restoration have been paid in full, shall
be remitted by Lender to SPTBROOK, provided no Event of Default shall have
occurred and shall be continuing under the Loan Agreement, this Security
Instrument or any of the Other Security Documents.
(c) All Net Proceeds not required (i) to be made available for the Restoration
or (ii) to be returned to SPTBROOK as excess Net Proceeds pursuant to
Subsection 4.2(b)(vii) shall be retained and applied by Lender toward the
payment of the amount owing from SHPT to Lender under the Loan Agreement,
whether or not then due and payable, in such order, priority and
proportions as Lender in its discretion shall deem proper or, at the
discretion of Lender, the same shall be paid, either in whole or in part,
to SPTBROOK.
(d) Anything in Section 4.2 hereof to the contrary notwithstanding, during the
term of the Brookdale Master Lease and so long as the Brookdale Master
Lease is in full force and effect, the provisions of Section 4.2 hereof
shall be subject to the provisions of Articles 10 and 11 of the Brookdale
Master Lease. Without limiting the foregoing, SPTBROOK shall comply with
and cause the Brookdale Master Tenant to comply with such provisions of the
Brookdale Master Lease, and Lender shall be a third party beneficiary
thereof.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
SPTBROOK represents and warrants to Lender that:
Section 5.1 WARRANTY OF TITLE. SPTBROOK has good and marketable title to
the Property and has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the same and that SPTBROOK possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
that it owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "PERMITTED EXCEPTIONS"). The
Permitted Exceptions do not materially interfere with the security intended to
be provided by this Security Instrument or the use and operations of the
Property. SPTBROOK shall
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forever warrant, defend and preserve the title and the validity and priority of
the lien of this Security Instrument and shall forever warrant and defend the
same to Lender against the claims of all persons whomsoever. Upon the
recordation of this Security Instrument and the filing of a UCC Financing
Statement in the office of the Secretary of State for the state where the
Property is located, the Lender will have a first priority perfected security
interest in all personal property owned by SPTBROOK at the Property.
Section 5.2 AUTHORITY. SPTBROOK (and the undersigned officer of SPTBROOK)
has full power, authority and legal right to execute this Security Instrument,
and to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and
convey the Property pursuant to the terms hereof and to keep and observe all of
the terms of this Security Instrument on SPTBROOK's part to be performed.
Section 5.3 LEGAL STATUS AND AUTHORITY. SPTBROOK (a) is duly organized,
validly existing and in good standing as a real estate investment trust under
the laws of the State of Maryland; (b) is duly qualified to transact business
and is in good standing in the state where the Property is located; and (c) has
all necessary approvals, governmental and otherwise, and full power and
authority to own the Property. SPTBROOK now has and shall continue to have the
full right, power and authority to operate and lease the Property, to encumber
the Property as provided herein and to perform all of the other obligations to
be performed by SPTBROOK under this Security Instrument.
Section 5.4 VALIDITY. (a) The execution, delivery and performance of this
Security Instrument by SPTBROOK (i) are within the power and authority of
SPTBROOK; (ii) have been authorized by all requisite organizational action;
(iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) will not violate, conflict with, result in a
breach of or constitute (with notice or lapse of time, or both) a default under
any provision of law (including, without limitation, any usury laws), any order
or judgment of any court or governmental authority, the articles of
incorporation, by-laws, partnership or operating agreement, or other governing
instrument of SPTBROOK, or any indenture, agreement or other instrument to which
SPTBROOK is a party or by which it or any of its assets or the Property is or
may be bound or affected; (v) will not result in the creation or imposition of
any lien, charge or encumbrance whatsoever upon any of its assets, except the
lien and security interest created hereby; and (vi) will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this instrument in appropriate land records
in the state where the Property is located and except for Uniform Commercial
Code filings relating to the
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security interest created hereby), and (b) this Security Instrument constitutes
the legal, valid and binding obligation of SPTBROOK.
Section 5.5 LITIGATION. There is no action, suit or proceeding, judicial,
administrative or otherwise (including any condemnation or similar proceeding),
pending or, to the best of SPTBROOK's knowledge, threatened or contemplated
against SPTBROOK or against or affecting the Property that has not been
disclosed to Lender and, if determined adversely to SPTBROOK, would have a
material adverse effect on the Property or SPTBROOK's ability to perform its
obligations under the Loan Agreement, this Security Instrument or the Other
Security Documents.
Section 5.6 STATUS OF PROPERTY.
(a) Except as disclosed in the survey of the Property delivered to Lender
pursuant to Section 4.1 of the Loan Agreement, no portion of the
Improvements is located in an area identified by the Secretary of Housing
and Urban Development or any successor thereto as an area having special
flood hazards pursuant to the National Flood Insurance Act of 1968 or the
Flood Disaster Protection Act of 1973, or the National Flood Insurance
Reform Act of 1994, as each may be amended, or any successor law; and, if
any portion of the Improvements is now or at any time in the future located
within any such area, SPTBROOK has obtained or caused to be obtained and
will maintain or cause to be maintained the insurance prescribed in Section
3.3(a)(vi) hereof.
(b) As of the date hereof, the Property is free from damage caused by fire or
other casualty.
(c) The Tenants own or lease, or are acquiring by installment sale,
substantially all of the personal property used in connection with the
operation of the Property. Other than such property owned, leased or being
acquired by the Tenants, SPTBROOK is the owner of all furnishings, fixtures
and equipment used in connection with the operation of the Property, free
and clear of any and all security interests, liens or encumbrances, except
the lien and security interest created hereby.
(d) All security deposits required by the Leases have been collected and are
held by or on behalf of SPTBROOK.
(e) All the Improvements lie within the boundaries of the Property.
Section 5.7 NO FOREIGN PERSON. SPTBROOK is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as
amended and the related Treasury Department regulations, including temporary
regulations.
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Section 5.8 SEPARATE TAX LOT. The Property is assessed for real estate tax
purposes as one or more wholly independent tax lot or lots, separate from any
adjoining land or improvements not constituting a part of such lot or lots, and
no other land or improvements is assessed and taxed together with the Property
or any portion thereof.
Section 5.9 LEASES. (a) SPTBROOK is the sole owner of the entire lessor's
interest in the Leases, which as of the date hereof consists solely of the
Brookdale Lease and the Brookdale Lease Guaranty; (b) the Leases are valid and
enforceable; (c) SPTBROOK has delivered or caused to be delivered to Lender true
and complete copies of the Leases, including all amendments, modifications and
supplements thereto; (d) none of the Rents reserved in the Leases have been
assigned or otherwise pledged or hypothecated (except to Lender); (e) none of
the Rents have been collected for more than one (1) month in advance (provided
that a security deposit shall not be deemed rent collected in advance); (f) the
premises demised under the Leases have been completed and the Tenants under the
Leases have accepted the same and have taken possession of the same on a
rent-paying basis; (g) there exist no offsets or defenses to the payment of any
portion of the Rents; (h) SPTBROOK has received no notice from any Tenant
challenging the validity or enforceability of any Lease; (i) all payments due
under the Leases are current; (j) no Tenant under any Lease is in default
thereunder, or is a debtor in any bankruptcy, reorganization, insolvency or
similar proceeding, or has demonstrated a history of payment problems which
suggest financial difficulty; (k) there are no agreements with the Tenants with
respect to the Property other than as expressly set forth in the Leases; (l) no
person has any possessory interest in, or right to occupy, the Property except
under and pursuant to a Lease; and (m) no brokerage commissions or finders fees
are due and payable regarding any Lease.
Section 5.10 MAILING ADDRESS. SPTBROOK's mailing address, as set forth in
the opening paragraph hereof or as changed in accordance with Article 14, is
true and correct.
Section 5.11 ILLEGAL ACTIVITY. No portion of the Property has been or will
be purchased, improved, fixtured, equipped or furnished with proceeds of any
criminal or other illegal activity and to the best of SPTBROOK's knowledge,
there are no illegal activities or activities relating to controlled substance
at the Property.
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ARTICLE 6 - DEBTOR/CREDITOR RELATIONSHIP
Section 6.1 RELATIONSHIP OF SPTBROOK AND LENDER. The relationship between
SPTBROOK and Lender is solely that of guarantor and creditor, and Lender has no
fiduciary or other special relationship with SPTBROOK, and no term or condition
of any of the Loan Agreement, this Security Instrument and the Other Security
Documents shall be construed so as to deem the relationship between SPTBROOK and
Lender to be other than that of guarantor and creditor.
ARTICLE 7 - FURTHER ASSURANCES
Section 7.1 RECORDING OF SECURITY INSTRUMENT, ETC. SPTBROOK forthwith upon
the execution and delivery of this Security Instrument and thereafter, from time
to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. SPTBROOK will pay or cause to be paid all taxes, filing,
registration or recording fees, and all expenses incident to the preparation,
execution, acknowledgment and/or recording of this Security Instrument, the
Other Security Documents, any mortgage supplemental hereto, any security
instrument with respect to the Property and any instrument of further assurance,
and any modification or amendment of the foregoing documents, and all federal,
state, county and municipal taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this Security
Instrument, any mortgage supplemental hereto, any security instrument with
respect to the Property or any instrument of further assurance, and any
modification or amendment of the foregoing documents, except where prohibited by
law so to do.
Section 7.2 FURTHER ACTS, ETC. SPTBROOK will, at the cost of SPTBROOK, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Lender, the property and rights hereby mortgaged, granted,
bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which SPTBROOK may be or
may hereafter become bound to
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convey or assign to Lender, or for carrying out the intention or facilitating
the performance of the terms of this Security Instrument or for filing,
registering or recording this Security Instrument, or for complying with all
Applicable Laws. SPTBROOK, on demand, will execute and deliver and hereby
authorizes Lender to execute in the name of SPTBROOK or without the signature of
SPTBROOK to the extent Lender may lawfully do so, one or more financing
statements, chattel mortgages or other instruments, to evidence or perfect more
effectively the security interest of Lender in the Property. SPTBROOK grants to
Lender an irrevocable power of attorney coupled with an interest for the purpose
of exercising and perfecting any and all rights and remedies available to Lender
pursuant to this Section 7.2.
Section 7.3 CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP LAWS.
(a) If any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the
purpose of taxation or which imposes a tax, either directly or indirectly,
on the Debt or Lender's interest in the Property, SPTBROOK will pay the
tax, with interest and penalties thereon, if any. If Lender is advised by
counsel chosen by it that the payment of tax by SPTBROOK would be unlawful
or taxable to Lender or unenforceable or provide the basis for a defense of
usury, then Lender shall have the option by written notice of not less than
sixty (60) days to (i) exclude the Property for purposes of determining the
aggregate Appraised Value (as defined in the Loan Agreement) of the SPTMRT
Properties and the SPTBROOK Properties under Section 2.8(b) of the Loan
Agreement, which may give rise to a mandatory prepayment of the Loans under
such Section of the Loan Agreement, and (ii) thereafter release the
Security Instrument.
(b) SPTBROOK will not claim or demand or be entitled to any credit or credits
on account of the Debt for any part of the Taxes or Other Charges assessed
against the Property, or any part thereof, and no deduction shall otherwise
be made or claimed from the assessed value of the Property, or any part
thereof, for real estate tax purposes by reason of this Security Instrument
or the Debt. If such claim, credit or deduction shall be required by law,
Lender shall have the option by written notice of not less than sixty (60)
days to (i) exclude the Property for purposes of determining the aggregate
Appraised Value (as defined in the Loan Agreement) of the SPTMRT Properties
and the SPTBROOK Properties under Section 2.8(b) of the Loan Agreement,
which may give rise to a mandatory prepayment of the Loans under such
Section of the Loan Agreement, and (ii) thereafter release the Security
Instrument.
(c) If at any time the United States of America, any state thereof or any
subdivision of any such state shall require revenue or other stamps to be
affixed to the Loan Agreement, this Security Instrument, or any of the
Other Security Documents or impose any other tax or charge on the same,
SPTBROOK will pay for the same, with interest and penalties thereon, if
any.
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Section 7.4 ESTOPPEL CERTIFICATES.
(a) After request by Lender, SPTBROOK, within ten (10) business days, shall
furnish Lender or any proposed assignee with a statement, duly acknowledged
and certified, setting forth (i) that, except as provided in such
statement, there are no defaults or events which with the passage of time
or the giving of notice or both, would constitute an event of default under
this Security Instrument, (ii) that the Loan Agreement and this Security
Instrument are valid, legal and binding obligations of SPTBROOK and have
not been modified or if modified, giving particulars of such modification,
(iii) whether any offsets or defenses exist against the obligations secured
hereby and, if any are alleged to exist, a detailed description thereof,
(iv) that all Leases are in full force and effect and have not been
modified (or if modified, setting forth all modifications), (v) the date to
which the Rents thereunder have been paid pursuant to the Leases, (vi)
whether or not, to the best knowledge of SPTBROOK, any of the Tenants are
in default under the Leases, and, if any of the Tenants are in default,
setting forth the specific nature of all such defaults, (vii) the amount of
security deposits held by SPTBROOK under each Lease and that such amounts
are consistent with the amounts required under each Lease, and (viii) as to
any other matters reasonably requested by Lender and reasonably related to
the Leases, the obligations secured hereby, the Property or this Security
Instrument.
(b) SPTBROOK shall deliver to Lender, promptly upon request, duly executed
estoppel certificates from any one or more Tenants as required by Lender
attesting to such facts regarding the Leases as Lender may reasonably
require, including, but not limited to attestations that the Lease covered
thereby is in full force and effect with no defaults thereunder on the part
of any party, that none of the Rents have been paid more than one month in
advance, except as security, and that the lessee claims no defense or
offset against the full and timely performance of its obligations under
such Lease.
Section 7.5 FLOOD INSURANCE. After Lender's request, SPTBROOK shall deliver
evidence satisfactory to Lender that no portion of the Improvements is situated
in a federally designated "special flood hazard area" or, if it is, that
SPTBROOK has obtained insurance meeting the requirements of Section 3.3(a)(vi).
Section 7.6 AMENDED FINANCING STATEMENTS. SPTBROOK will execute and deliver
to the Lender, prior to or contemporaneously with the effective date of any such
change, any financing statement or financing statement change required by the
Lender to establish or maintain the validity, perfection and priority of the
security interest granted herein.
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ARTICLE 8 - DUE ON SALE/ENCUMBRANCE
Section 8.1 NO SALE/ENCUMBRANCE. SPTBROOK agrees that SPTBROOK shall not,
without the prior written consent of Lender, sell, convey, mortgage, grant,
bargain, encumber, pledge, assign or otherwise transfer the Property or any part
thereof or permit the Property or any part thereof to be sold, conveyed,
mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise
transferred.
Section 8.2 SALE/ENCUMBRANCE DEFINED. A sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment or transfer within the meaning of this
Article 8 shall be deemed to include, but not be limited to, any of the
following: (a) an installment sales agreement wherein SPTBROOK agrees to sell
the Property or any part thereof for a price to be paid in installments; (b) an
agreement by SPTBROOK leasing all or a substantial part of the Property for
other than actual occupancy by a space tenant thereunder or a sale, assignment
or other transfer of, or the grant of a security interest in, SPTBROOK's right,
title and interest in and to any Leases or any Rents (other than pursuant to the
Loan Documents); and (c) if SHPT ceases to be the owner of 100% of the issued
and outstanding shares of beneficial ownership of SPTBROOK.
Section 8.3 LENDER'S RIGHTS. Lender shall not be required to demonstrate
any actual impairment of its security or any increased risk of default hereunder
in order to declare the Debt immediately due and payable upon SPTBROOK's sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment or transfer of the
Property.
ARTICLE 9 - DEFAULT
Section 9.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT":
(a) an Event of Default as defined in the Loan Agreement;
(b) if any representation or warranty of SPTBROOK made herein or in any
environmental indemnity, or in any certificate, report, financial statement
or other
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instrument or document furnished to Lender shall have been false or
misleading in any material respect when made;
(c) if any default occurs under any environmental indemnity executed in
connection herewith and such default continues after the expiration of
applicable grace periods, if any;
(d) except for the specific defaults set forth in this Section 9.1, any other
default hereunder by SPTBROOK which default is not cured (i) in the case of
any default which can be cured by the payment of a sum of money, within
five (5) days after written notice from Lender to SPTBROOK or SHPT, or (ii)
in the case of any other default, within twenty (20) days after written
notice from Lender to SPTBROOK or SHPT;
(e) if the insurance required by Section 3.3 is not kept in full force and
effect, or SPTBROOK has not delivered or caused to be delivered to Lender
evidence of the renewal of the policies of such insurance prior to their
expiration; or
(f) if SPTBROOK defaults beyond the expiration of any applicable notice and
grace period under any of the Other Security Documents.
ARTICLE 10 - RIGHTS AND REMEDIES
Section 10.1 REMEDIES.
(a) Upon the occurrence of any Event of Default, SPTBROOK agrees that Lender
may take such action, without notice or demand, as it deems advisable to
protect and enforce the rights of Lender against SPTBROOK and in and to the
Property, including, but not limited to the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such
order as Lender may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Lender:
(i) institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision
of law in which case the Property or any interest therein may be sold
for cash or upon credit in one or more parcels or in several interests
or portions and in any order or manner;
(ii) with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the
partial foreclosure of this Security Instrument for the portion of the
Debt then due and payable, subject to the continuing lien and security
interest of this Security Instrument for the balance of the Debt not
then due, unimpaired and without loss of priority;
(iii) sell for cash or upon credit the Property or any part thereof and all
estate, claim, demand, right, title and interest of SPTBROOK therein
and rights of redemption thereof,
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pursuant to power of sale or otherwise, at one or more sales, as an
entirety or in parcels, at such time and place, upon such terms and
after such notice thereof as may be required or permitted by law;
(iv) institute an action, suit or proceeding in equity for the specific
performance of any covenant, condition or agreement contained herein,
in the Loan Agreement or in the Other Security Documents;
(v) recover judgment on the Debt either before, during or after any
proceedings for the enforcement of this Security Instrument or the
Other Security Documents;
(vi) apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the
adequacy of the security for the Debt and without regard for the
solvency of SPTBROOK or of any person liable for the payment of the
Debt;
(vii) subject to any applicable law, the license granted to SPTBROOK under
Section 1.2 shall automatically be revoked and Lender may enter into
or upon the Property, either personally or by its agents, nominees or
attorneys and dispossess SPTBROOK and its agents and servants
therefrom, without liability for trespass, damages or otherwise and
exclude SPTBROOK and its agents or servants wholly therefrom, and take
possession of all books, records and accounts relating thereto and
SPTBROOK agrees to surrender possession of the Property and of such
books, records and accounts to Lender upon demand, and thereupon
Lender may (A) use, operate, manage, control, insure, maintain,
repair, restore and otherwise deal with all and every part of the
Property and conduct the business thereat; (B) complete any
construction on the Property in such manner and form as Lender deems
advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Property; (D) exercise all rights and powers
of SPTBROOK with respect to the Property, whether in the name of
SPTBROOK or otherwise, including, without limitation, the right to
make, cancel, enforce or modify Leases, obtain and evict Tenants, and
demand, sue for, collect and receive all Rents of the Property and
every part thereof; (E) require SPTBROOK to pay monthly in advance to
Lender, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the
Property as may be occupied by SPTBROOK; (F) require SPTBROOK to
vacate and surrender possession of the Property to Lender or to such
receiver and, in default thereof, SPTBROOK may be evicted by summary
proceedings or otherwise; and (G) apply the receipts from the Property
to the payment of the Debt, in such order, priority and proportions as
Lender shall deem appropriate in its sole discretion after deducting
therefrom all expenses (including reasonable attorneys' fees) incurred
in connection with the aforesaid operations and all amounts necessary
to pay the Taxes, Other Charges, insurance and other expenses in
connection with the Property, as well as just and reasonable
compensation for the services of Lender, its counsel, agents and
employees;
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(viii) exercise any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including, without
limiting the generality of the foregoing: (A) the right to take
possession of the Collateral or any part thereof, and to take such
other measures as Lender may deem necessary for the care, protection
and preservation of the Collateral, and (B) request SPTBROOK at its
expense to assemble the Collateral and make it available to Lender at
a convenient place acceptable to Lender. Any notice of sale,
disposition or other intended action by Lender with respect to the
Collateral sent to SPTBROOK in accordance with the provisions hereof
at least five (5) days prior to such action, shall constitute
commercially reasonable notice to SPTBROOK;
(ix) apply any sums held in escrow or otherwise by Lender in accordance
with the terms of this Security Instrument or any Other Security
Document to the payment of the following items in any order in its
sole and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of the Debt;
(D) the unpaid principal balance of the Debt; and all other sums
payable by SPTBROOK pursuant to the Loan Agreement, the Notes, the Other Loan
Documents, this Security Instrument and the Other Security Documents, including,
without limitation, advances made by Lender pursuant to the terms of this
Security Instrument;
(x) surrender the Policies maintained pursuant to Article 3 hereof,
collect the unearned Insurance Premiums and apply such sums as a
credit on the Debt in such priority and proportion as Lender in its
discretion shall deem proper, and in connection therewith, SPTBROOK
hereby appoints Lender as agent and attorney-in-fact (which is coupled
with an interest and is therefore irrevocable) for SPTBROOK to collect
such Insurance Premiums;
(xi) apply the undisbursed balance of any Net Proceeds or any Net Proceeds
Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Lender shall deem
to be appropriate in its discretion;
(xii) prohibit SPTBROOK and anyone claiming on behalf of or through
SPTBROOK from making use of or withdrawing any sums from any lockbox
or similar account, if any;
(xiii) pursue such other remedies as Lender may have under applicable law.
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(b) In the event of a sale, by foreclosure, power of sale, or otherwise, of
less than all of the Property, this Security Instrument shall continue as a
lien and security interest on the remaining portion of the Property
unimpaired and without loss of priority.
(c) Lender may adjourn from time to time any sale by it to be made under or by
virtue of this Security Instrument by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Lender, without
further notice or publication, may make such sale at the time and place to
which the same shall be so adjourned.
(d) Upon any sale made under or by virtue of this Section 10.1, whether made
under a power of sale or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, Lender may bid for and acquire
the Property or any part thereof and in lieu of paying cash therefor may
make settlement for the purchase price by crediting upon the Debt the net
sales price after deducting therefrom the expenses of the sale and costs of
the action and any other sums which Lender is authorized to deduct under
this Security Instrument.
Section 10.2 APPLICATION OF PROCEEDS. The purchase money, proceeds and
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Loan Agreement, this Security
Instrument or the Other Security Documents, may be applied by Lender to the
payment of the Debt in such priority and proportions as Lender in its discretion
shall deem proper.
Section 10.3 RIGHT TO CURE DEFAULTS. Upon the occurrence and during the
continuance of any Event of Default, Lender may, but without any obligation to
do so and without notice to or demand on SPTBROOK and without releasing SPTBROOK
from any obligation hereunder, cure the same in such manner and to such extent
as Lender may deem necessary to protect the security hereof. Lender is
authorized to enter upon the Property for such purposes, or appear in, defend,
or bring any action or proceeding to protect its interest in the Property or to
foreclose this Security Instrument or collect the Debt, and the cost and expense
thereof (including reasonable attorneys' fees to the extent permitted by law),
with interest as provided in this Section 10.3, shall constitute a portion of
the Debt and shall be due and payable to Lender upon demand. All such costs and
expenses incurred by Lender in remedying such Event of Default or in appearing
in, defending, or bringing any such action or proceeding shall bear interest at
the Base Rate (as defined in the Loan Agreement) plus 2% (the "DEFAULT RATE")
for the period after notice from Lender that such cost or expense was incurred
to the date of payment to Lender. All such costs and expenses incurred by Lender
together with interest thereon calculated at the Default Rate shall be deemed to
constitute a portion of the Debt and be secured by this Security Instrument and
the Other Security Documents
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and shall be immediately due and payable upon demand by Lender therefor.
Section 10.4 ACTIONS AND PROCEEDINGS. After the occurrence of an Event of
Default, Lender has the right to appear in and defend any action or proceeding
brought with respect to the Property and to bring any action or proceeding, in
the name and on behalf of SPTBROOK, which Lender, in its discretion, decides
should be brought to protect its interest in the Property.
Section 10.5 RECOVERY OF SUMS REQUIRED TO BE PAID. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by SPTBROOK existing at the time such earlier action was
commenced.
Section 10.6 EXAMINATION OF BOOKS AND RECORDS. Lender, its agents,
accountants and attorneys shall have the right upon prior written notice to
examine the records, books, management and other papers of SPTBROOK which
reflect upon its financial condition, at the Property or at any office regularly
maintained by SPTBROOK where the books and records are located. Lender and its
agents shall have the right upon notice to make copies and extracts from the
foregoing records and other papers. In addition, Lender, its agents, accountants
and attorneys shall have the right to examine and audit the books and records of
SPTBROOK pertaining to the income, expenses and operation of the Property during
reasonable business hours at any office of SPTBROOK where the books and records
are located.
Section 10.7 OTHER RIGHTS, ETC.
(a) The failure of Lender to insist upon strict performance of any term hereof
shall not be deemed to be a waiver of any term of this Security Instrument.
SPTBROOK shall not be relieved of SPTBROOK's obligations hereunder by
reason of (i) the failure of Lender to comply with any request of SPTBROOK
to take any action to foreclose this Security Instrument or otherwise
enforce any of the provisions hereof or of the Loan Agreement, any other
Loan Document or the Other Security Documents, (ii) the release, regardless
of consideration, of the whole or any part of the Property, or of any
person liable for the Debt or any portion thereof, or (iii) any agreement
or stipulation by Lender extending the time of payment or otherwise
modifying or supplementing the terms of the Loan Agreement, any other Loan
Document, this Security Instrument or the Other Security Documents.
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(b) It is agreed that the risk of loss or damage to the Property is on
SPTBROOK, and Lender shall have no liability whatsoever for decline in
value of the Property, for failure to maintain the insurance required
pursuant to this Security Instrument, or for failure to determine whether
insurance in force is adequate as to the amount of risks insured.
Possession by Lender shall not be deemed an election of judicial relief, if
any such possession is requested or obtained, with respect to any Property
or collateral not in Lender's possession.
(c) Lender may resort for the payment of the Debt to any other security held by
Lender in such order and manner as Lender, in its discretion, may elect.
Lender may take action to recover the Debt, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Lender
thereafter to foreclose this Security Instrument. The rights of Lender
under this Security Instrument shall be separate, distinct and cumulative
and none shall be given effect to the exclusion of the others. No act of
Lender shall be construed as an election to proceed under any one provision
herein to the exclusion of any other provision. Lender shall be limited
exclusively to the rights and remedies herein stated but shall be entitled
to every right and remedy now or hereafter afforded at law or in equity.
Section 10.8 RIGHT TO RELEASE ANY PORTION OF THE PROPERTY. Lender, may
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.
Section 10.9 VIOLATION OF LAWS. If the Property is not in compliance with
Applicable Laws, Lender may impose additional requirements upon SPTBROOK in
connection herewith including, without limitation, monetary reserves or
financial equivalents.
Section 10.10 RIGHT OF ENTRY. Lender and its agents shall have the right
upon prior written notice to enter and inspect the Property at all reasonable
times upon not less than five (5) Business Days' notice (except in the case of
emergencies when no notice shall be required) to SPTBROOK. SPTBROOK shall
exercise its rights under Section 24.14 of the Brookdale Lease and under any
other Leases to provide such entry to Lender.
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ARTICLE 11 - ENVIRONMENTAL HAZARDS
Section 11.1 ENVIRONMENTAL COVENANTS. SPTBROOK covenants and agrees that so
long as SPTBROOK owns, manages, is in possession of or otherwise controls the
operation of the Property: (a) all uses and operations on or of the Property,
whether by SPTBROOK, any Tenant (including, without limitation, the Brookdale
Tenant) or any other person, shall be in compliance in all material respects
with all ENVIRONMENTAL LAWS (as such term is defined in the Loan Agreement) and
permits issued pursuant thereto; (b) there shall be no RELEASES (as such term is
defined in the Loan Agreement) of Hazardous Materials (as such term is defined
in the Loan Agreement) in, on, under or from the Property; (c) there shall be no
Hazardous Materials in, on, or under the Property, except those that are in
material compliance with all Environmental Laws and with permits issued pursuant
thereto, if and to the extent required; (d) SPTBROOK shall cause the Property to
be kept free and clear of all liens and other encumbrances imposed pursuant to
any Environmental Law, whether due to any act or omission of SPTBROOK, any
Tenant or any other person (the "ENVIRONMENTAL LIENS"); (e) SPTBROOK shall, at
its sole cost and expense, fully and expeditiously cooperate in all activities
pursuant to Section 11.2 hereof, including, but not limited to providing all
relevant information and making knowledgeable persons available for interviews;
(f) subject to the rights of the Brookdale Master Tenant under the Brookdale
Master Lease, SPTBROOK shall, at its or its Tenant's cost and expense, cause to
be performed any environmental site assessment or other investigation of
environmental conditions in connection with the Property, pursuant to any
reasonable request of Lender after Lender has reason to believe this Section
11.1 has been violated (including, but not limited to sampling, testing and
analysis of soil, water, air, building materials and other materials and
substances whether solid, liquid or gas), and share with Lender the reports and
other results thereof, and Lender and other Indemnified Parties (defined in
Section 12.1) shall be entitled to rely on such reports and other results
thereof; (g) SPTBROOK shall, at its or its Tenant's cost and expense, and
subject to the rights of the Brookdale Master Tenant under the Brookdale Master
Lease, comply with all reasonable requests of Lender to (i) reasonably
effectuate remediation of any condition (including, but not limited to a Release
of a Hazardous Materials) in, on, under or from the Property, (ii) comply with
any Environmental Law, (iii) comply with any directive from any governmental
authority, and (iv) take any other reasonable action necessary or appropriate
for protection of human health or the environment; (h) SPTBROOK shall not do or,
subject to the rights of the Brookdale Master Tenant under the Brookdale Master
Lease, allow any Tenant or other user of the Property to do any act that
materially increases the dangers to human health or the environment, poses an
unreasonable
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risk of harm to any person (whether on or off the Property), materially impairs
the value of the Property, is contrary to any requirement of any insurer,
constitutes a public or private nuisance, or violates any covenant, condition,
agreement or easement applicable to the Property; and (i) SPTBROOK shall
promptly notify Lender in writing promptly after it has become aware of (A) any
presence or Releases or threatened Releases of Hazardous Substances in, on,
under, from or migrating towards the Property which is required to be reported
to a governmental authority under any Environmental Law, (B) any actual
Environmental Lien affecting the Property, (C) any required remediation of
environmental conditions relating to the Property, and (D) any written or oral
notice or other communication of which SPTBROOK or any of its agents becomes
aware from any source whatsoever (including, but not limited to, a governmental
entity) relating in any way to Hazardous Materials or Remediation thereof,
possible liability of any person pursuant to any Environmental Law, other
environmental conditions in connection with the Property, or any actual or
threatened administrative or judicial proceedings in connection with anything
referred to in this Article 11.
Section 11.2 LENDER'S RIGHTS. Subject to the rights of the Brookdale Master
Tenant under the Brookdale Master Lease, Lender, its environmental consultant,
and any other person designated by Lender, including, but not limited to any
receiver and any representative of a governmental entity, shall have the right,
but not the obligation, at intervals of not less than one year, or more
frequently if the Lender reasonably believes that a Hazardous Material or other
environmental condition violates or threatens to violate any Environmental Law,
after notice to SPTBROOK and any Tenants, to enter upon the Property at all
reasonable times to assess any and all aspects of the environmental condition of
the Property and its use, including, but not limited to, conducting any
environmental assessment or audit of the Property or portions thereof to confirm
SPTBROOK's compliance with the provisions of this Article 11, and SPTBROOK shall
cooperate and cause its Tenants to cooperate in all reasonable ways with Lender
in connection with any such audit. Any such audit shall be performed in a manner
so as to minimize interference with the conduct of business by Tenants at the
Property. If any such audit discloses that a violation of or a liability under
any Environmental Law exists or if such audit was required or prescribed by law,
regulation or governmental or quasi-governmental authority, SPTBROOK shall pay
or cause to be paid all costs and expenses incurred in connection with such
audit; otherwise, the costs and expenses of such audit shall, notwithstanding
anything to the contrary set forth in this Section, be paid by Lender.
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ARTICLE 12 - INDEMNIFICATION
Section 12.1 GENERAL INDEMNIFICATION. SPTBROOK shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement, or
punitive damages, of whatever kind or nature (including, but not limited to,
reasonable attorneys' fees and other costs of defense) (the "LOSSES") imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, the Loan Agreement, any other Loan Document, this
Security Instrument or any Other Security Documents; (c) any and all lawful
action that may be taken by Lender in connection with the enforcement of the
provisions of this Security Instrument or the Loan Agreement, any other Loan
Document or any of the Other Security Documents, whether or not suit is filed in
connection with same, or in connection with SPTBROOK and/or any member, partner,
joint venturer or shareholder thereof becoming a party to a voluntary or
involuntary federal or state bankruptcy, insolvency or similar proceeding; (d)
any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(e) any use, nonuse or condition in, on or about the Property or any part
thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (f) any failure on the part of SPTBROOK to
perform or be in compliance with any of the terms of this Security Instrument or
the Other Security Documents; (g) performance of any labor or services or the
furnishing of any materials or other property in respect of the Property or any
part thereof; (h) the failure of any person to file timely with the Internal
Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds
from Real Estate, Broker and Barter Exchange Transactions, which may be required
in connection with this Security Instrument, or to supply a copy thereof in a
timely fashion to the recipient of the proceeds of the transaction in connection
with which this Security Instrument is made; (i) any failure of the Property to
be in compliance with any Applicable Laws; (j) the enforcement by any
Indemnified Party of the provisions of this Article 12; (k) any and all claims
and demands whatsoever which may be asserted against Lender by reason of any
alleged obligations or undertakings on its part to perform or discharge any of
the terms, covenants, or agreements
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contained in any Lease; (l) the payment of any commission, charge or brokerage
fee to anyone which may be payable in connection with the funding of the Loans;
or (m) any misrepresentation made by SPTBROOK in this Security Instrument, the
Other Security Documents, the Loan Agreement or any other documents or
information provided pursuant to the same. Any amounts payable to Lender by
reason of the application of this Section 12.1 shall become immediately due and
payable and shall bear interest at the Default Rate from the date loss or damage
is sustained by Lender until paid. For purposes of this Article 12, the term
"INDEMNIFIED PARTIES" means Lender, any person in whose name the encumbrance
created by this Security Instrument is or will have been recorded, persons who
may hold or acquire or will have held a full or partial interest in the Loans as
well as the respective directors, officers, shareholders, members, partners,
employees, agents, servants, representatives, contractors, subcontractors,
affiliates, subsidiaries, participants, successors and assigns of any and all of
the foregoing (including, but not limited to any other person who holds or
acquires or will have held a participation or other full or partial interest in
the Loans or the Property, whether during the term of the Loans and including,
but not limited to any successors by merger, consolidation or acquisition of all
or a substantial portion of Lender's assets and business).
Section 12.2 MORTGAGE AND/OR INTANGIBLE TAX. SPTBROOK shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording
of this Security Instrument, the Loan Agreement or any of the Other Security
Documents or in connection with a transfer of all or a portion of the Property
pursuant to a foreclosure, deed in lieu of foreclosure or otherwise.
Section 12.3 ENVIRONMENTAL INDEMNIFICATION. SPTBROOK shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses and costs of remediation
(whether or not performed voluntarily), engineers' fees, environmental
consultants' fees, and costs of investigation (including, but not limited to
sampling, testing and analysis of soil, water, air, building materials and other
materials and substances whether solid, liquid or gas) imposed upon or incurred
by or asserted against any Indemnified Parties, and arising out of or in any way
relating to any one or more of the following, unless caused by the gross
negligence or willful misconduct of any Indemnified Party: (a) any presence of
any Hazardous Materials in, on, above or under the Property; (b) any past,
present or threatened Release of Hazardous Materials in, on, above, under or
from the Property; (c) any
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activity by SPTBROOK, any person affiliated with SPTBROOK or any Tenant or other
user of the Property in connection with any actual, proposed or threatened use,
treatment, storage, holding, existence, disposition or other Release,
generation, production, manufacturing, processing, refining, control,
management, abatement, removal, handling, transfer or transportation to or from
the Property of any Hazardous Materials at any time located in, under, on or
above the Property; (d) any activity by SPTBROOK, any person affiliated with
SPTBROOK or any Tenant or other user of the Property in connection with any
actual or proposed Remediation of any Hazardous Materials at any time located
in, under, on or above the Property, whether or not such remediation is
voluntary or pursuant to court or administrative order, including, but not
limited to any removal, remedial or corrective action; (e) any past, present or
threatened violations of any Environmental Laws (or permits issued pursuant to
any Environmental Law) in connection with the Property or operations thereon,
including, but not limited to any failure by SPTBROOK, any person affiliated
with SPTBROOK or any Tenant or other user of the Property to comply with any
order of any governmental authority in connection with Environmental Laws; (f)
the imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 11 and
this Section 12.3; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of SPTBROOK, any affiliate of SPTBROOK or any Tenant or other
user of the Property in arranging for disposal or treatment, or arranging with a
transporter for transport for disposal or treatment, of Hazardous Materials
owned or possessed by such SPTBROOK, any affiliate of SPTBROOK or any Tenant or
other user, at any facility or incineration vessel owned or operated by another
person and containing such or similar Hazardous Material; (j) any acts of
SPTBROOK, any affiliate of SPTBROOK or any Tenant or other user of the Property,
in accepting any Hazardous Materials for transport to disposal or treatment
facilities, incineration vessels or sites selected by SPTBROOK or such other
users, from which there is a Release, or a threatened Release of any Hazardous
Material which causes the incurrence of costs for remediation; (k) any personal
injury, wrongful death, or property damage caused by Hazardous Materials arising
under any statutory or common law or tort law theory, including, but not limited
to, damages assessed for the maintenance of a private or public nuisance or for
the conducting of an abnormally dangerous activity on or near the Property; and
(l) any intentional misrepresentation in any representation or warranty or
material breach or failure to perform any covenants or other obligations
pursuant to Article 11.
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Section 12.4 DUTY TO DEFEND; ATTORNEYS' FEES AND OTHER FEES AND EXPENSES.
Upon written request by any Indemnified Party, SPTBROOK shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties, such approval not to be unreasonably withheld.
Notwithstanding the foregoing, any Indemnified Parties may, in their sole and
absolute discretion, engage their own attorneys and other professionals to
defend or assist them, and, at the option of Indemnified Parties, their
attorneys shall control the resolution of claim or proceeding. Upon demand,
SPTBROOK shall pay or, in the sole and absolute discretion of the Indemnified
Parties, reimburse, the Indemnified Parties for the payment of reasonable fees
and disbursements of attorneys, engineers, environmental consultants,
laboratories and other professionals in connection therewith.
ARTICLE 13 - WAIVERS
Section 13.1 WAIVER OF COUNTERCLAIM. SPTBROOK hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Security Instrument, the Loan Agreement, any other Loan
Document, any of the Other Security Documents, or the Obligations.
Section 13.2 MARSHALLING AND OTHER MATTERS. SPTBROOK hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, SPTBROOK hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of SPTBROOK, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by Applicable Law.
Section 13.3 WAIVER OF NOTICE. To the extent permitted by Applicable Law,
SPTBROOK shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Security Instrument or the
Loan Agreement specifically and expressly provides for the giving of notice by
Lender to SPTBROOK and except with respect to matters for which Lender is
required by Applicable Law to give notice, and SPTBROOK hereby expressly waives
the right to receive any notice
41
<PAGE>
from Lender with respect to any matter for which this Security Instrument or the
Loan Agreement does not specifically and expressly provide for the giving of
notice by Lender to SPTBROOK.
Section 13.4 WAIVER OF STATUTE OF LIMITATIONS. SPTBROOK hereby expressly
waives and releases, to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to payment of the Debt or performance of its
Other Obligations.
Section 13.5 SOLE DISCRETION OF LENDER. Wherever pursuant to this Security
Instrument (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove all decisions that arrangements or terms are satisfactory
or not satisfactory, and all other decisions and determinations made by Lender,
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.
Section 13.6 SURVIVAL. Except as hereinafter specifically set forth below,
the representations and warranties, covenants, and other obligations arising
under Article 11 and Section 12.3 shall in no way be impaired by: any
satisfaction or other termination of this Security Instrument, any assignment or
other transfer of all or any portion of this Security Instrument or Lender's
interest in the Property (but, in such case, shall benefit both Indemnified
Parties and any assignee or transferee), any exercise of Lender's rights and
remedies pursuant hereto including, but not limited to foreclosure or acceptance
of a deed in lieu of foreclosure, any exercise of any rights and remedies
pursuant to the Loan Agreement, any other Loan Document or any of the Other
Security Documents, any transfer of all or any portion of the Property (whether
by SPTBROOK, or by Lender, following foreclosure or acceptance of a deed in lieu
of foreclosure or at any other time), any amendment to this Security Instrument,
the Loan Agreement, any other Loan Document or the Other Security Documents, and
any act or omission that might otherwise be construed as a release or discharge
of SPTBROOK from the obligations pursuant hereto.
Section 13.7 WAIVER OF TRIAL BY JURY. SPTBROOK HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY, AND ANY RIGHT TO
CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN, OR IN ADDITION TO, DIRECT DAMAGES, IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
42
<PAGE>
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN AGREEMENT, THIS SECURITY
INSTRUMENT, ANY OTHER LOAN DOCUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS
OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN
CONNECTION THEREWITH.
ARTICLE 14 - NOTICES
Section 14.1 NOTICES. All notices, consents and other communications
hereunder to be effective shall be in writing and shall be deemed made (i) if by
mail or facsimile, when received, and (ii) if by courier, when receipted for, in
each case addressed as follows or at such other address as the respective party
may designate by written notice to the other:
If to SPTBROOK:
SPTBROOK Properties Trust
c/o Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attention: Messrs. David J. Hegarty and Ajay Saini
Telecopier: (617) 332-2261
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Jr.
Telecopier: (617) 338-2880
If to Lender:
Dresdner Bank AG
New York Branch
75 Wall Street
New York, NY 10005
Attention: Andrew P. Nesi, Vice President
Birgit Anderson, Assistant Treasurer
Telecopier: (212) 429-2129
43
<PAGE>
Any failure by Lender to provide a copy of any notice to the second address of
SPTBROOK shown above shall not effect the validity of such notice if delivered
to the first address of SPTBROOK shown above.
ARTICLE 15 - APPLICABLE LAW
Section 15.1 CHOICE OF LAW; CONSENT OF JURISDICTION. THIS SECURITY
INSTRUMENT SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO
AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK) (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES), EXCEPT TO THE EXTENT OF
PROCEDURAL MATTERS RELATING TO THE CREATION, PERFECTION AND FORECLOSURE OF LIENS
AND SECURITY INTERESTS, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE IN
WHICH THE LAND IS LOCATED.
Section 15.2 USURY LAWS. This Security Instrument and the Loan Agreement
are subject to the express condition that at no time shall SPTBROOK be obligated
or required to pay interest on the Debt at a rate which could subject the holder
of the Loan Agreement to either civil or criminal liability as a result of being
in excess of the maximum interest rate which SPTBROOK is permitted by applicable
law to contract or agree to pay. If by the terms of this Security Instrument,
the Loan Agreement or any other Loan Document, SPTBROOK is at any time required
or obligated to pay interest on the Debt at a rate in excess of such maximum
rate, the rate of interest under this Security Instrument, the Loan Agreement
and any such other Loan Document shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all prior interest payments in excess of such maximum rate shall be
applied and shall be deemed to have been payments in reduction of the principal
balance of the Debt. All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the Debt shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Loan Agreement until payment in full so that the rate or
amount of interest on account of the Debt does not exceed the maximum lawful
rate of interest from time to time in effect and applicable to the Debt for so
long as the Debt is outstanding.
Section 15.3 PROVISIONS SUBJECT TO APPLICABLE LAW. All rights, powers and
remedies provided in this Security Instrument may be exercised only to the
extent
44
<PAGE>
that the exercise thereof does not violate any applicable provisions of law and
are intended to be limited to the extent necessary so that they will not render
this Security Instrument invalid, unenforceable or not entitled to be recorded,
registered or filed under the provisions of any Applicable Law.
Section 15.4 INAPPLICABLE PROVISION. If any term of this Security
Instrument or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application of the term
shall not be affected thereby.
ARTICLE 16 - COSTS
Section 16.1 ATTORNEY'S FEES FOR ENFORCEMENT. SPTBROOK shall pay or cause
to be paid on demand all legal fees and expenses incurred by Lender, including
reasonable attorneys' fees and expenses, incurred or paid by Lender in
protecting its interest in the Property or the Collateral or in collecting any
amount payable hereunder or in enforcing its rights hereunder with respect to
the Property or the Collateral, whether or not any legal proceeding is commenced
hereunder or thereunder and whether or not any default or Event of Default shall
have occurred, together with interest thereon at the Default Rate from the date
paid or incurred by Lender until such expenses are paid by SPTBROOK.
ARTICLE 17 - DEFINITIONS
Section 17.1 GENERAL DEFINITIONS. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, (i) words used
in this Security Instrument may be used interchangeably in singular or plural
form, (ii) "SPTBROOK" shall mean SPTBROOK and any subsequent owner or owners of
the Property or any part thereof or any interest therein, (iii) "LENDER" shall
mean Dresdner Bank AG and its successors and assigns as Administrative Agent for
itself as Lender and for all other present and future Lenders under the Loan
Agreement and holders of the Loans and Notes from time to time under the Loan
Agreement, (iv) "PERSON" shall include an individual, corporation, limited
liability company, partnership, trust, unincorporated association, government,
governmental authority, and any other entity, (v) "Property" shall include any
portion of the Property and any interest therein, and (vi) "attorneys' fees" and
"counsel fees" shall include any and all attorneys', paralegal and law clerk
fees and disbursements, including, but not limited to fees and disbursements at
the pre-trial, trial and appellate levels incurred or paid by Lender in
protecting its interest in the Property, the Leases and the Rents and enforcing
its rights under this Security Instrument. In addition, any
45
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reference herein to the Loan Agreement, the Notes, the Other Loan Documents, the
other Security Documents or any other document or instrument shall include all
exhibits and schedules thereto, any and all modifications, amendments and
supplements thereto from time to time and any and all extensions, renewals,
restatements and replacements thereof and substitutions therefor.
Section 17.2 HEADINGS, ETC. The headings and captions of various Sections
of this Security Instrument are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
ARTICLE 18 - MISCELLANEOUS PROVISIONS
Section 18.1 NO ORAL CHANGE. This Security Instrument, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of SPTBROOK or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
Section 18.2 LIABILITY. If SPTBROOK consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of SPTBROOK and Lender and their respective successors and assigns forever.
Section 18.3 DUPLICATE ORIGINALS; COUNTERPARTS. This Security Instrument
may be executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Security Instrument may be executed in
several counterparts, each of which counterparts shall be deemed an original
instrument and all of which together shall constitute a single Security
Instrument. The failure of any party hereto to execute this Security Instrument,
or any counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.
Section 18.4 NUMBER AND GENDER. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
Section 18.5 ENTIRE AGREEMENT. The Loan Agreement, the other Loan
Documents, this Security Instrument and the Other Security Documents constitute
the
46
<PAGE>
entire understanding and agreement between SPTBROOK and Lender with respect to
the transactions arising in connection with the Debt and supersede all prior
written or oral understandings and agreements between SPTBROOK and Lender with
respect thereto.
Section 18.6 NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST
ESTABLISHING SPTBROOK, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO IS
DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME OF "SPTBROOK PROPERTIES TRUST" REFERS TO THE
TRUSTEES UNDER THE DECLARATION OF TRUST AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF
SPTBROOK SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, SPTBROOK.
ARTICLE 19 - LOCAL LAW PROVISIONS
Section 19.1 LOCAL LAW PROVISIONS. The provisions set forth on EXHIBIT B
annexed hereto are incorporated herein by reference as if fully set forth
herein.
47
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by SPTBROOK
as of the date first above written.
SPTBROOK:
SPTBROOK PROPERTIES TRUST, a Maryland
real estate investment trust
By: ___________________________________
Name:
Title:
48
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS:
COUNTY OF MIDDLESEX )
I, _________________________, a Notary Public, in and for said County, in
the State aforesaid, DO HEREBY CERTIFY that ______________________, the
__________ of SPTBROOK PROPERTIES TRUST is personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such
_________________, appeared before me this day in person and acknowledged that
he signed and delivered said instrument as his own free and voluntary act and as
the free and voluntary act of said entity, for the uses and purposes therein set
forth.
GIVEN under my hand and Notarial Seal, this _____ day of September, 1999.
___________________________________
Notary Public
My Commission expires:_____________
<PAGE>
EXHIBIT A
(Description of Land)
A-1
<PAGE>
EXHIBIT B
(Local Law Provisions)
1. Section 1.1 PROPERTY MORTGAGED. The following phrase in the first
sentence of Section 1.1 "does hereby irrevocably mortgage, grant, bargain, sell,
pledge, assign, warrant, transfer and convey" is hereby replaced with the
following: "DOES HEREBY IRREVOCABLY MORTGAGE AND CONVEY"
2. RECITAL B. The following words are inserted at the end of the first
sentence of Recital B immediately before the period:
, with a maturity date of such indebtedness of September __, 2002
3. SUBROGATION. If any part of the indebtedness secured hereby is used
directly or indirectly to satisfy, in whole or in part, any prior encumbrance
upon the Property or any part thereof, then Lender shall be subrogated to the
rights of the holder thereof in and to such other encumbrance and any additional
security held by such holder, and shall have the benefit of the priority of the
same.
4. FUTURE ADVANCES. At all times, regardless of whether any loan proceeds
have been disbursed, this Security Instrument secures as part of the
indebtedness the payment of all loan commissions, service charges, liquidated
damages, attorneys' fees, expenses and advances due to or incurred by Lender in
connection with the Obligations, all in accordance with the Notes, this Security
Instrument and the Loan Agreement; provided, however, that in no event shall the
total amount of the indebtedness secured hereby, including loan proceeds
disbursed plus any additional charges, exceed two hundred percent (200%) of the
face of the Notes. SPTBROOK acknowledges that Lender has bound itself to make
advances pursuant to the Loan Agreement and that all such future advances shall
be a lien from the time this Security Instrument is recorded, as provided in the
Illinois Mortgage Foreclosure Act, 735 ILCS 5/15- 1101 (1992), ET SEQ., as
amended.
5. BUSINESS LOAN. The proceeds of the Notes will ben used for the purposes
specified in 815 ILCS 205/4 (1992), and the principal obligation secured hereby
will each constitute a "business loan" coming within the definition and purview
of said section.
6. Provisions of the Loan Agreement related to advances, repayment and
readvances are incorporated herein by this reference.
7. Reduction of the indebtedness to a zero balance shall not cause the
mortgage to become extinguished by operation of law.
B-1
<PAGE>
When Recorded Return To:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attn: Alicia B. Clark, Esq.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPTMRT PROPERTIES TRUST, as TRUSTOR
to
LAWYERS TITLE OF ARIZONA, INC., as TRUSTEE
for the benefit of
DRESDNER BANK AG, Administrative Agent for itself as
a lender and for certain other lenders, as BENEFICIARY
-----------------------------------
DEED OF TRUST,
SECURITY AGREEMENT
AND FIXTURE FILING
-----------------------------------
Dated: September 15, 1999
Location: Scottsdale, Arizona
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Article 1 - GRANTS OF SECURITY...........................................................................2
Section 1.1 Property Mortgaged.................................................................2
Section 1.2 Assignment of Leases and Rents.....................................................5
Section 1.3 Security Agreement.................................................................5
Section 1.4 Pledge of Monies Held..............................................................5
Article 2 - DEBT AND OBLIGATIONS SECURED.................................................................6
Section 2.1 Debt...............................................................................6
Section 2.2 Other Obligations..................................................................6
Section 2.3 Debt and Other Obligations.........................................................6
Section 2.4 Payments...........................................................................6
Article 3 - SPTMRT COVENANTS.............................................................................7
Section 3.1 Payment of Debt....................................................................7
Section 3.2 Incorporation by Reference .......................................................7
Section 3.3 Insurance..........................................................................7
Section 3.4 Payment of Taxes, Etc.............................................................11
Section 3.5 Condemnation......................................................................12
Section 3.6 Leases and Rents ................................................................12
Section 3.7 Maintenance of Property...........................................................13
Section 3.8 Waste ............................................................................13
Section 3.9 Compliance With Laws..............................................................13
Section 3.10 Books and Records................................................................14
Section 3.11 Payment For Labor and Materials..................................................15
Section 3.12 Performance of Other Agreements..................................................15
Section 3.13 Change of Name, Identity or Structure............................................15
Section 3.14 Existence........................................................................15
Article 4 - SPECIAL COVENANTS...........................................................................16
Section 4.1 Property Use......................................................................16
Section 4.2 Restoration After Casualty/Condemnation...........................................16
Article 5 - REPRESENTATIONS AND WARRANTIES..............................................................20
Section 5.1 Warranty of Title.................................................................20
Section 5.2 Authority.........................................................................20
Section 5.3 Legal Status and Authority........................................................20
Section 5.4 Validity..........................................................................21
Section 5.5 Litigation........................................................................21
Section 5.6 Status of Property................................................................21
Section 5.7 No Foreign Person.................................................................22
Section 5.8 Separate Tax Lot..................................................................22
i
<PAGE>
Section 5.9 Leases............................................................................22
Section 5.10 Mailing Address..................................................................22
Section 5.11 Illegal Activity.................................................................23
Article 6 - DEBTOR/CREDITOR RELATIONSHIP................................................................23
Section 6.1 Relationship of SPTMRT and Lender.................................................23
Article 7 - FURTHER ASSURANCES..........................................................................23
Section 7.1 Recording of Security Instrument, Etc.............................................23
Section 7.2 Further Acts, Etc.................................................................23
Section 7.3 Changes in Tax, Debt Credit and Documentary Stamp Laws............................24
Section 7.4 Estoppel Certificates.............................................................25
Section 7.5 Flood Insurance...................................................................25
Section 7.6 Amended Financing Statements......................................................25
Article 8 - DUE ON SALE/ENCUMBRANCE.....................................................................25
Section 8.1 No Sale/Encumbrance...............................................................25
Section 8.2 Sale/Encumbrance Defined..........................................................26
Section 8.3 Lender's Rights...................................................................26
Article 9 - DEFAULT.....................................................................................26
Section 9.1 Events of Default.................................................................26
Article 10 - RIGHTS AND REMEDIES........................................................................27
Section 10.1 Remedies.........................................................................27
Section 10.2 Application of Proceeds..........................................................30
Section 10.3 Right to Cure Defaults...........................................................30
Section 10.4 Actions and Proceedings..........................................................30
Section 10.5 Recovery of Sums Required To Be Paid.............................................30
Section 10.6 Examination of Books and Records.................................................30
Section 10.7 Other Rights, Etc................................................................31
Section 10.8 Right to Release Any Portion of the Property.....................................31
Section 10.9 Violation of Laws................................................................32
Section 10.10 Right of Entry..................................................................32
Article 11 - ENVIRONMENTAL HAZARDS......................................................................32
Section 11.1 Environmental Covenants..........................................................32
Section 11.2 Lender's Rights..................................................................33
Article 12 - INDEMNIFICATION............................................................................33
Section 12.1 General Indemnification..........................................................33
Section 12.2 Mortgage and/or Intangible Tax...................................................35
Section 12.3 Environmental Indemnification....................................................35
Section 12.4 Duty to Defend; Attorneys' Fees and Other Fees and Expenses......................36
ii
<PAGE>
Article 13 - WAIVERS....................................................................................36
Section 13.1 Waiver of Counterclaim...........................................................36
Section 13.2 Marshalling and Other Matters....................................................36
Section 13.3 Waiver of Notice.................................................................36
Section 13.4 Waiver of Statute of Limitations. ...............................................37
Section 13.5 Sole Discretion of Lender........................................................37
Section 13.6 Survival.........................................................................37
Section 13.7 Waiver of Trial By Jury..........................................................37
Article 14 - NOTICES....................................................................................38
Section 14.1 Notices...........................................................................38
Article 15 - APPLICABLE LAW.............................................................................39
Section 15.1 CHOICE OF LAW; CONSENT OF JURISDICTION...........................................39
Section 15.2 Usury Laws.......................................................................39
Section 15.3 Provisions Subject to Applicable Law.............................................40
Section 15.4 Inapplicable Provision...........................................................40
Article 16 - COSTS......................................................................................40
Section 16.1...................................................................................40
Attorney's Fees for Enforcement..............................................................40
Article 17 - DEFINITIONS................................................................................40
Section 17.1 General Definitions..............................................................40
Section 17.2 Headings, Etc....................................................................40
Article 18 - MISCELLANEOUS PROVISIONS...................................................................41
Section 18.1 No Oral Change...................................................................41
Section 18.2 Liability........................................................................41
Section 18.3 Duplicate Originals; Counterparts................................................41
Section 18.4 Number and Gender................................................................41
Section 18.5 Entire Agreement.................................................................41
Section 18.6 Nonliability of Trustees.........................................................41
Article 19 - LOCAL LAW PROVISIONS.......................................................................42
Section 19.1 Local Law Provisions.................................................42
Article 20 - TRUSTEE PROVISIONS.........................................................................42
Section 20.1 The Trustee......................................................................42
</TABLE>
iii
<PAGE>
Exhibits -
Exhibit A - Description of Land
Exhibit B - Local Law Provisions
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument or in the Loan Agreement (defined in the Recitals):
ADA: Subsection 3.10(a)
Applicable Law: Subsection 3.10(a)
Attorneys' Fees/Counsel Fees: Section 17.1
Bankruptcy Code: Subsection 1.1(f)
Business Day: Section 14.1
Casualty Amount: Subsection 4.2(a)(i)
Casualty Consultant: Subsection 4.2(b)(iii)
Casualty Retainage: Subsection 4.2(b)(iv)
Collateral: Section 1.3
Debt: Section 2.1
Default Rate: Section 10.3
Environmental Law: Defined in the Loan Agreement
Environmental Liens: Section 11.2
ERISA: Subsection 4.2(a)
Escrow Fund: Section 3.5
Event of Default: Section 9.1
Force Majeure: Subsection 4.2(b)
Hazardous Material: Defined in the Loan Agreement
HRPT: Recitals
Improvements: Subsection 1.1(c)
Indemnified Parties: Section 12.1
Insurance Premiums: Subsection 3.3(b)
Land: Subsection 1.1(a)
Leases: Subsection 1.1(f)
Lender: Preamble
Loan Agreement: Recitals
Loan Documents: Recitals
Loans: Recitals
Losses: Section 12.1
Marriott: Recitals
Marriott Lease: Recitals
Marriott Lease Guaranty: Recitals
Marriott Tenant: Recitals
Net Proceeds: Subsection 4.2(b)
iv
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Net Proceeds Deficiency: Subsection 4.2(b)(vi)
Loan Agreement: Recitals
Losses: Section 12.1
Notes: Recitals
Obligations: Section 2.3
Other Charges: Subsection 3.4(a)
Other Obligations: Section 2.2
Other Security Documents: Section 3.2
Permitted Exceptions: Section 5.1
Person: Section 17.1
Personal Property: Subsection 1.1(e)
Policies/Policy: Subsection 3.3(b)
Property: Section 1.1
Qualified Insurer: Subsection 3.3(b)
Rating Agency: Subsection 3.3(b)
Release: Defined in the Loan Agreement
Remediation: Section 11.1
Rents: Subsection 1.1(f)
Restoration: Subsection 3.3(d)
Security Instrument: Preamble
SHPT: Recitals
SPTBROOK: Recitals
SPTMRT: Preamble
Taxes: Subsection 3.4(a)
Tenant: Section 3.6
Trustee: Recitals
Uniform Commercial Code: Subsection 1.1(e)
v
<PAGE>
THIS DEED OF TRUST AND SECURITY AGREEMENT (this "SECURITY INSTRUMENT") is
made as of September 15, 1999, by SPTMRT PROPERTIES TRUST, a Maryland real
estate investment trust with its principal place of business at 400 Centre
Street, Newton, Massachusetts 02458, as trustor ("SPTMRT"), to LAWYERS TITLE OF
ARIZONA, INC., an Arizona corporation with an address at 40 East Mitchell Drive,
Phoenix, Arizona 85012, as trustee ("TRUSTEE"), for the benefit of DRESDNER BANK
AG, a German banking corporation acting through its New York Branch, as
Administrative Agent for itself as a lender and for the other lenders under the
Loan Agreement described below, with an address at 75 Wall Street, New York, New
York 10005 ("LENDER").
RECITALS:
A. SPTMRT's affiliate, Senior Housing Properties Trust ("SHPT"), was organized
on December 16, 1998 as a wholly-owned subsidiary of HRPT Properties Trust,
a Maryland real estate investment trust ("HRPT"). Commencing with or
promptly following the execution and delivery of this Security Instrument,
SHPT is being spun off by HRPT. In anticipation of HRPT's spin-off of SHPT,
(1) HRPT formed other wholly-owned subsidiaries and transferred properties
to them, including, among others, the following: (i) HRPT formed SPTMRT and
transferred 14 properties (nine congregate care properties and five
assisted living properties) that are leased under 14 separate leases to
subsidiaries of Marriott International, Inc. (the "SPTMRT PROPERTIES") and
(ii) HRPT formed SPTBROOK Properties Trust, a Maryland real estate
investment trust ("SPTBROOK") and transferred four congregate care
properties master leased to a subsidiary of Brookdale Living Communities,
Inc. (the "SPTBROOK PROPERTIES"), and (2) HRPT transferred to SHPT all of
HRPT's capital shares of such subsidiaries (including both SPTMRT and
SPTBROOK). As part of HRPT's spin-off of SHPT, (a) HRPT is distributing
approximately one-half of its shares of SHPT to HRPT's shareholders and is
retaining in its portfolio the remainder of its shares of SHPT and (b) SHPT
is borrowing $200,000,000 from Lender and using the entire proceeds of such
borrowing to pay formation debt owing to HRPT by SPTMRT and SHPT.
B. SHPT, SPTMRT and SPTBROOK have asked Lender to make a $350,000,000 secured
revolving loan facility available to SHPT for the purpose of making loans
to SHPT from time to time up to an aggregate principal amount outstanding
of $350,000,000 (the "LOANS") for certain business purposes of SHPT and its
subsidiaries, including the initial $200,000,000 Loan described in
paragraph A above, pursuant to a Revolving Loan Agreement dated as of the
date hereof among SHPT, Lender, Dresdner Bank AG and the other lenders
party thereto from time to time, SPTMRT and SPTBROOK (as the same may be
amended, supplemented and modified from time to time, the "LOAN AGREEMENT")
under which SHPT is issuing notes to Lender in the aggregate principal
amount of $350,000,000 to evidence the Loans (as the same may be amended,
modified and replaced from time to time, the "NOTES"). One or more Notes
may be assigned in whole or in part by one lender to
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another lender from time to time under the Loan Agreement and thereupon
replaced with new Notes reflecting such assignments in accordance with the
terms of the Loan Agreement. Loans made under the Loan Agreement may be
advanced, repaid and readvanced in whole or in part from time to time
subject to the terms and conditions of the Loan Agreement. It is the intent
of SPTMRT and Lender that all such Notes and Loans outstanding from time to
time and SPTMRT's guaranty obligations in respect thereof shall be secured
by this Security Instrument. As used herein, depending on the context,
"LENDER" means (i) Dresdner Bank AG, as Administrative Agent (including any
successor Administrative Agent under the Loan Agreement) acting for and on
behalf of itself as a lender and for the other lenders under the Loan
Agreement or (ii) Dresdner Bank AG and the other lenders under the Loan
Agreement in their capacities as such lenders.
C. The payment of the Loans and Notes and all other amounts payable from time
to time under the Loan Agreement, the Notes and the other LOAN DOCUMENTS
(which term is used herein as defined in the Loan Agreement) and the
performance of SHPT's obligations thereunder are being (i) jointly and
severally guaranteed by SPTMRT and SPTBROOK under the Loan Agreement and
(ii) secured by mortgage and security agreements or deeds of trust and
security agreements on each of the SPTMRT Properties (including the
Property defined in Section 1.1) and the SPTBROOK Properties.
D. The Land and Improvements (defined below) are subject to a Facilities Lease
Agreement dated as of October 8, 1993, as amended (the "MARRIOTT LEASE")
between SPTMRT (as successor in interest to HMC Retirement Properties,
Inc.), as landlord, and Marriott Senior Living Services, Inc., as tenant
(the "MARRIOTT TENANT") with an initial term expiring December 31, 2013,
and the obligations of the Marriott Tenant under the Marriott Lease are
guaranteed by Marriott International, Inc. ("MARRIOTT") under a Guaranty of
Tenant Obligations dated as of October 8, 1993, as amended (the "MARRIOTT
LEASE GUARANTY").
E. SPTMRT desires to secure the payment of the Debt (defined in Section 2.1)
and the performance of all other obligations of SPTMRT and SHPT under the
Loan Agreement and the other Loan Documents.
ARTICLE 1 - GRANTS OF SECURITY
Section 1.1 PROPERTY MORTGAGED. SPTMRT does hereby irrevocably (i)
mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Trustee in trust with power of sale in accordance with the terms and conditions
hereof, for the use and benefit of Lender, and (ii) grant a security interest to
Trustee in trust with power of sale in accordance with the terms and conditions
hereof, for the use and benefit of Lender in, the following property, rights,
interests
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and estates now owned or hereafter acquired by SPTMRT (collectively, the
"PROPERTY"):
(a) LAND. The real property described in EXHIBIT A attached hereto and made a
part hereof (the "LAND");
(b) ADDITIONAL LAND. All additional lands, estates and development rights
hereafter acquired by SPTMRT for use in connection with the Land and the
development of the Land that may, from time to time, by supplemental
mortgage or otherwise be expressly made subject to the lien of this
Security Instrument;
(c) IMPROVEMENTS. The buildings, structures, fixtures, additions, enlargements,
extensions, modifications, repairs, replacements and improvements now or
hereafter erected or located on the Land (the "IMPROVEMENTS");
(d) EASEMENTS. All easements, rights-of-way or use, rights, strips and gores of
land, streets, ways, alleys, passages, sewer rights, water, water courses,
water rights and powers, air rights and development rights, and all
estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any
way now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land, to the center line thereof and
all the estates, rights, titles, interests, dower and rights of dower,
curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of SPTMRT of, in and to the Land and
the Improvements and every part and parcel thereof, with the appurtenances
thereto;
(e) FIXTURES AND PERSONAL PROPERTY. All machinery, equipment, furniture,
furnishings, fixtures (including, but not limited to all heating, air
conditioning, plumbing, lighting, communications and elevator fixtures) and
other property of every kind and nature whatsoever owned by SPTMRT, or in
which SPTMRT has or shall have an interest, now or hereafter located upon
the Land or the Improvements, or appurtenant thereto, and used in
connection with the present or future operation and occupancy of the Land
and the Improvements, and all building equipment, materials and supplies of
any nature whatsoever owned by SPTMRT, or in which SPTMRT has or shall have
an interest, now or hereafter located upon the Land and the Improvements,
or appurtenant thereto, or used in connection with the present or future
operation and occupancy of the Land and the Improvements, and the right,
title and interest of SPTMRT in and to any other tangible property which
may be subject to any security interests, as defined in the Uniform
Commercial Code, as adopted and enacted by the state or states where any of
the Property is located (the "UNIFORM COMMERCIAL CODE"), and all proceeds
and products of the above (collectively, the "PERSONAL PROPERTY");
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(f) LEASES AND RENTS. All leases (including master leases, leases and
subleases) and other agreements affecting the use, enjoyment or occupancy
of all or any part of the Land or the Improvements heretofore or hereafter
entered into whether before or after the filing by or against SPTMRT of any
petition for relief under 11 U.S.C. ss. 101 et seq. (the "BANKRUPTCY
CODE"), as the same may be amended from time to time, all lease guarantees,
other guarantees, letters of credit and any other credit support given by
any guarantor in connection therewith, and all cash or securities deposited
under leases to secure the performance by the lessees of their obligations
thereunder (collectively the "LEASES") and all right, title and interest of
SPTMRT, its successors and assigns therein and thereunder, including,
without limitation, the Marriott Lease and the Marriott Lease Guaranty; and
all rents, additional rents, revenues, issues and profits (including all
oil and gas or other mineral royalties and bonuses) from the Land, the
Improvements and the Leases whether paid or accruing before or after the
filing by or against SPTMRT of any petition for relief under the Bankruptcy
Code (collectively the "RENTS"); and all proceeds from the sale or other
disposition of the Leases and the right to receive and apply the Rents;
(g) CONDEMNATION AWARDS. All awards or payments, including interest thereon,
which may heretofore and hereafter be made with respect to the Property,
whether from the exercise of the right of eminent domain (including, but
not limited to any transfer made in lieu of or in anticipation of the
exercise of the right), or for a change of grade, or for any other injury
to or decrease in the value of the Property;
(h) INSURANCE PROCEEDS. All proceeds of and any unearned premiums on any
insurance policies covering the Property, including, without limitation,
the right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property;
(i) TAX CERTIORARI. All refunds, rebates or credits in connection with a
reduction in real estate taxes and assessments charged against the Property
as a result of tax certiorari or any applications or proceedings for
reduction;
(j) RIGHTS. The right, in the name and on behalf of SPTMRT, to commence any
action or proceeding to protect the interest of Lender or Trustee in the
Property and while an Event of Default (defined in Section 9.1) remains
uncured, to appear in and defend any action or proceeding brought with
respect to the Property;
(k) AGREEMENTS. All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents,
now or hereafter entered into, and all rights therein and thereto,
respecting or pertaining to the use, occupation, construction, management
or operation of the Land and any part thereof and any Improvements or
respecting any business or activity conducted on the Land and any part
thereof and all right, title and interest of SPTMRT therein and thereunder,
including, without limitation, the right, while an Event of Default remains
uncured, to receive and collect any sums payable to SPTMRT thereunder;
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(l) INTANGIBLES. All accounts, escrows, chattel paper, claims, deposits, trade
names, trademarks, servicemarks, logos, copyrights, goodwill, books and
records and all other general intangibles specific to or used in connection
with the operation of the Property, if any; and
(m) CONVERSION. All proceeds of the conversion, voluntary or involuntary, of
any of the foregoing including, without limitation, proceeds of insurance
and condemnation awards, into cash or liquidation claims;
(n) OTHER RIGHTS. Any and all other rights of SPTMRT in and to the items set
forth in Subsections (a) through (m) above.
Section 1.2 ASSIGNMENT OF LEASES AND RENTS. SPTMRT hereby absolutely and
unconditionally assigns to Lender SPTMRT's right, title and interest in and to
all current and future Leases and Rents (including, without limitation, the
Marriott Lease and the Marriott Lease Guaranty and the rents and other amounts
payable thereunder); it being intended by SPTMRT that this assignment
constitutes a present, absolute assignment and not an assignment for additional
security only. Nevertheless, subject to the terms of this Section 1.2 and
Section 3.7, Lender grants to SPTMRT a revocable license to collect and receive
the Rents. SPTMRT shall hold the Rents, or a portion thereof, sufficient to
discharge all current sums due on the Debt, for use in the payment of such sums.
Section 1.3 SECURITY AGREEMENT. This Security Instrument is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of SPTMRT
in the Property. By executing and delivering this Security Instrument, SPTMRT
hereby grants to Trustee in trust with power of sale in accordance with the
terms and conditions hereof, for the use and benefit of Lender, as security for
the Obligations (defined in Section 2.3), a security interest in the Property to
the full extent that the Property may be subject to the Uniform Commercial Code
(such portion of the Property so subject to the Uniform Commercial Code, the
"COLLATERAL").
Section 1.4 PLEDGE OF MONIES HELD. SPTMRT hereby pledges to Lender, and
grants to Lender a security interest in, any and all monies now or hereafter
held by Lender, including, without limitation, the Net Proceeds (defined in
Section 4.2), as additional security for the
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Obligations until expended or applied as provided in this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property unto Trustee
in trust with power of sale in accordance with the terms and conditions hereof,
for and to the use and benefit of Lender, and the successors and assigns of
Lender, forever;
PROVIDED, HOWEVER, these presents are upon the express condition that, if
all Commitments (as defined in the Loan Agreement) have terminated and the Loans
and all other amounts payable by SHPT under the Loan Agreement, the Notes and
the other Loan Documents have been paid in full, and if SHPT and SPTMRT shall
well and truly pay to Lender the Debt at the time and in the manner provided in
the Loan Agreement, the Notes and the other Loan Documents and this Security
Instrument and the Other Security Documents (defined in Section 3.2), shall well
and truly perform the Other Obligations as set forth in this Security
Instrument, and shall well and truly abide by and comply with each and every
covenant and condition set forth herein and, to the extent applicable to SHPT or
SPTMRT, in the Loan Agreement, the Notes and the other Loan Documents, these
presents and the estate hereby granted shall cease, terminate and be void.
ARTICLE 2 - DEBT AND OBLIGATIONS SECURED
Section 2.1 DEBT. This Security Instrument and the grants, assignments and
transfers made in Article 1 are given for the purpose of securing the following,
in such order of priority as Lender may determine in its sole discretion (the
"DEBT"):
(a) the payment of all sums payable by SPTMRT under (i) the Loan Agreement,
including, without limitation, its guaranty and surety obligations under
Section 10 thereof, (ii) this Security Instrument and (iii) the Other
Security Documents;
(b) the payment of all sums payable by SHPT under the Loan Agreement, the Notes
and the other Loan Documents, including, without limitation, all principal
of and interest on the Loans and all fees payable to Lender pursuant to
Section 2.6 of the Loan Agreement;
(c) the payment of all sums advanced pursuant to this Security Instrument to
protect and preserve the Property and the lien and the security interest
created hereby; and
(d) the payment of all sums advanced and costs and expenses incurred by Lender
or Trustee in connection with the Debt or any part thereof, any renewal,
extension,
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modification, consolidation, change, substitution, replacement, restatement
or increase of the Debt or any part thereof, or the acquisition or
perfection of the security therefor, whether made or incurred at the
request of SPTMRT, SHPT or Lender.
Section 2.2 OTHER OBLIGATIONS. This Security Instrument and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "OTHER OBLIGATIONS"):
(a) the performance of all other obligations of SPTMRT contained herein;
(b) the performance of each obligation of SPTMRT and each obligation of SHPT
contained in the Loan Agreement or any other Loan Document, in addition to
the payment of the Debt, and of SPTMRT contained in the Other Security
Documents.
Section 2.3 DEBT AND OTHER OBLIGATIONS. SPTMRT's and SHPT's obligations for
the payment of the Debt and the performance of the Other Obligations shall be
referred to collectively below as the "OBLIGATIONS."
Section 2.4 PAYMENTS. Acceptance by Lender of any payment in an amount less
than the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default.
ARTICLE 3 - SPTMRT COVENANTS
SPTMRT covenants and agrees with Trustee and Lender that:
Section 3.1 PAYMENT OF DEBT. SPTMRT will pay the Debt owing by SPTMRT at
the time and in the manner provided in the Loan Agreement, the Other Security
Documents and in this Security Instrument.
Section 3.2 INCORPORATION BY REFERENCE. All the covenants, conditions and
agreements contained in (a) the Loan Agreement, and (b) all and any of the
documents other than the Loan Agreement or this Security Instrument now or
hereafter executed by SPTMRT and by or in favor of Lender, which wholly or
partially secure or guaranty payment of the Debt (the "OTHER SECURITY
DOCUMENTS"), are hereby made a part of this Security Instrument to the same
extent and with the same force as if fully set forth herein.
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Section 3.3 INSURANCE.
(a) SPTMRT shall obtain and maintain, or cause to be maintained, insurance for
SPTMRT and the Property providing at least the following coverages:
(i) PROPERTY INSURANCE. Insurance with respect to the Improvements and
building equipment insuring against any peril included within the
classification "All Risks of Physical Loss" in amounts at all times
sufficient to prevent Lender from becoming a co-insurer within the
terms of the applicable policies and under applicable law, but in any
event such insurance shall be maintained in an amount equal to the
full insurable value of the Improvements and building equipment, the
term "full insurable value" to mean the actual replacement cost of the
Improvements and building equipment (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping and paving) determined annually by an insurer, a
recognized independent insurance broker or an independent appraiser
selected and paid by SPTMRT and in no event less than the coverage
required pursuant to the terms of any Lease. Absent such annual
adjustment, each policy shall contain inflation guard coverage
insuring that the policy limit will be increased over time to reflect
the effect of inflation. SPTMRT shall also maintain insurance against
loss or damage to such furniture, furnishings, fixtures, equipment and
other items (whether personalty or fixtures) included in the Property
and owned by SPTMRT from time to time, to the extent applicable, in
the amount of the cost of replacing the same, in each case, with
inflation guard coverage to reflect the effect of inflation, or annual
valuation. Each policy or policies shall contain a replacement cost
endorsement and either an agreed amount endorsement (to avoid the
operation of any co-insurance provisions) or a waiver of any
co-insurance provisions, all subject to Lender's approval. The maximum
deductible shall be $10,000.00;
(ii) LIABILITY INSURANCE. Commercial general liability insurance, including
personal injury, bodily injury, death and property damage liability,
insurance against any and all claims, including all legal liability to
the extent insurable and imposed upon Lender and all court costs and
attorneys' fees and expenses, arising out of or connected with the
possession, use, leasing, operation, maintenance or condition of the
Property in such amounts as are generally available at commercially
reasonable premiums and are generally required by institutional
lenders for properties comparable to the Property but in no event for
a combined single limit of less than $5,000,000. During any
construction of the Property, Mortgagor's general contractor for such
construction shall also provide the insurance required in this
Subsection (a). Lender hereby retains the right to periodically review
the amount of said liability insurance being maintained by SPTMRT and
to require an increase in the amount of said liability insurance
should Lender deem an increase to be reasonably prudent under then
existing circumstances;
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(iii) WORKERS' COMPENSATION INSURANCE. Statutory workers' compensation
insurance with respect to any work on or about the Property covering
all persons subject to the workers' compensation laws of the state in
which the Property is located;
(iv) BUSINESS INTERRUPTION. Business interruption and/or loss of "rental
income" insurance in an amount sufficient to avoid any co-insurance
penalty and to provide proceeds which will cover a period of not less
than one (1) year from the date of casualty or loss, with a six month
extended period of indemnity, the term "rental income" to mean the sum
of (A) the total then ascertainable Rents payable under the Leases and
(B) the total ascertainable amount of all other amounts to be received
by SPTMRT from third parties which are the legal obligation of the
tenants, reduced to the extent such amounts would not be received
because of operating expenses not incurred during a period of
non-occupancy of that portion of the Property then not being occupied.
The amount of coverage shall be adjusted annually to reflect the rents
payable during the succeeding eighteen (18) month period.
(v) BOILER AND MACHINERY INSURANCE. Broad form boiler and machinery
insurance (without exclusion for explosion) covering all boilers or
other pressure vessels, machinery, and equipment located in, on or
about the Property and insurance against loss of occupancy or use
arising from any breakdown in such amount per accident equal to the
replacement value of the improvements housing the machinery or
$2,000,000 or such other amount reasonably determined by Lender. If
one or more large HVAC units is in operation at the Property, "System
Breakdowns" coverage shall be required, as determined by Lender.
Minimum liability coverage per accident must equal the value of such
unit(s);
(vi) FLOOD INSURANCE. If required by Subsection 5.6(a) hereof, flood
insurance in an amount at least equal to the lesser of (A) the minimum
amount required, under the terms of coverage, to compensate for any
damage or loss on a replacement basis (or the unpaid balance of the
indebtedness secured hereby if replacement cost coverage is not
available for the type of building insured); or (B) the maximum
insurance available under the appropriate National Flood Insurance
Administration program. The deductible may not exceed $25,000.
(vii) BUILDER'S RISK. During the period of any construction, renovation or
alteration of the Improvements which exceeds the lesser of 10% of the
principal amount of the Loan Agreement or $500,000, at Lender's
request, a completed value, "All Risk" Builder's Risk form, or "Course
of Construction" insurance policy in non-reporting form for any
Improvements under construction, renovation or alteration in an amount
approved by Lender may be required. During the period of any
construction of any addition to the existing Improvements, a completed
value, "All Risk" Builder's Risk form or "Course of Construction"
insurance policy in non-reporting form, in an amount approved by
Lender, shall be required.
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(viii) OTHER INSURANCE. Such other insurance with respect to the Property
or on any replacements or substitutions thereof or additions thereto
as may from time to time be required by Lender against other insurable
hazards or casualties which at the time are commonly insured against
in the case of property similarly situated, including, without
limitation, sinkhole, mine subsidence, earthquake and environmental
insurance, due regard being given to the height and type of buildings,
their construction, location, use and occupancy.
(b) All insurance provided for in Subsection 3.3(a) hereof shall be obtained
under valid and enforceable policies (the "POLICIES" or in the singular,
the "POLICY"), and shall be issued by one or more domestic primary
insurer(s) having an investment grade rating of "A" or better ("AA" or
better for Loans of $25,000,000 or more), or a comparable claims paying
ability assigned by S & P or equivalent one or more credit rating agencies
approved by Lender (a "RATING AGENCY"), (each such insurer shall be
referred to below as a "QUALIFIED INSURER"). All insurers providing
insurance required by this Security Instrument shall be authorized to issue
insurance in the state in which the Property is located. The Policy
referred to in Subsection 3.3(a)(ii) above shall name Lender as an
additional named insured and the Policy referred to in Subsection
3.3(a)(i), (iv), (v) and (vi) above shall provide that all proceeds be
payable to Lender as set forth in Section 4.2 hereof. The Policies referred
to in Subsections 3.3(a)(i), (v) and (vi) shall also contain: (i) a
standard "non-contributory mortgagee" endorsement or its equivalent
relating, INTER ALIA, to recovery by Lender notwithstanding the negligent
or willful acts or omission of Lender, and (ii) to the extent available at
commercially reasonable rates, a waiver of subrogation endorsement as to
Lender. All Policies described in Subsection 3.3(a) above shall contain (i)
a provision that such Policies shall not be canceled or terminated, nor
shall they expire, without at least thirty (30) days' prior written notice
to Lender in each instance; and (ii) an effective waiver by the insurer of
all claims for Insurance Premiums (defined below) against any mortgagees,
loss payees, additional insureds and named insureds (other than SPTMRT). In
the event that the Property or the Improvements constitutes a legal
non-conforming use under applicable building, zoning or land use laws or
ordinances, the policy shall include an ordinance or law coverage
endorsement which will contain Coverage A: "Loss Due to Operation of Law"
(with a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost
of Construction" coverages. Certificates of insurance with respect to all
renewal and replacement Policies shall be delivered to Lender not less than
thirty (30) days prior to the expiration date of any of the Policies
required to be maintained hereunder which certificates shall bear notations
evidencing payment of applicable premiums (the "INSURANCE PREMIUMS").
Originals or certificates of such replacement Policies shall be delivered
to Lender promptly after SPTMRT's receipt thereof but in any case within
thirty (30) days after the effective date thereof. If SPTMRT fails to
maintain and deliver to Lender the original Policies or certificates of
insurance required by this Security Instrument, upon ten (10) days' prior
notice to SPTMRT, Lender may procure such insurance at SPTMRT's sole cost
and expense.
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(c) SPTMRT shall comply with all insurance requirements and shall not bring or
keep or permit to be brought or kept any article upon any of the Property
or cause or permit any condition to exist thereon which would be prohibited
by an insurance requirement, or would invalidate the insurance coverage
required hereunder to be maintained by SPTMRT on or with respect to any
part of the Property pursuant to this Section 3.3.
(d) If the Property shall be damaged or destroyed, in whole or in part, by fire
or other casualty, SPTMRT shall give prompt notice of such damage to Lender
and provided that SPTMRT shall have received the Net Proceeds, SPTMRT shall
promptly commence or cause to be commenced and diligently prosecute or
cause to be prosecuted the completion of the repair and restoration of the
Property as nearly as possible to the condition the Property was in
immediately prior to such fire or other casualty, with such alterations as
may be approved by Lender (the "RESTORATION") and otherwise in accordance
with Section 4.2 of this Security Instrument.
(e) The insurance coverage required under Section 3.3(a) may be effected under
a blanket policy or policies covering the Property and other properties and
assets not constituting a part of the security hereunder; provided that any
such blanket policy shall specify, except in the case of commercial general
liability insurance, the portion of the total coverage of such policy that
is allocated to the Property, and any sublimit in such blanket policy
applicable to the Property, and shall in any case comply in all other
respects with the requirements of this Section 3.3.
(f) The insurance coverage required under Subsection 3.3(a)(ii) may be
satisfied by a layering of Commercial General Liability, Umbrella and
Excess Liability Policies, but in no event will the Commercial General
Liability policy be written for an amount less than $1,000,000 per
occurrences and $2,000,000 aggregate for bodily injury and property damage
liability.
(g) The delivery to Lender of the insurance policies or the certificates of
insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance as relating to the Property by SPTMRT to
Lender as further security for the indebtedness secured hereby. In the
event of foreclosure of this Security Instrument, or other transfer of
title to the Property in extinguishment in whole or in part of the secured
indebtedness, all right, title and interest of SPTMRT in and to all
proceeds payable under such policies then in force concerning the Property
shall thereupon vest in the purchaser at such foreclosure, or in Lender or
other transferee in the event of such other transfer of title. Approval of
any insurance by Lender shall not be a representation of the solvency of
any insurer or the sufficiency of any amount of insurance.
(h) Lender shall not be responsible for nor incur any liability for the
insolvency of the insurer or other failure of the insurer to perform, even
though Lender has caused the
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insurance to be placed with the insurer after failure of SPTMRT to furnish
such insurance. SPTMRT shall not obtain insurance for the Property in
addition to that required by Lender without the prior written consent of
Lender, which consent will not be unreasonably withheld provided that (i)
Lender is named insured on such insurance, (ii) Lender receives complete
copies of all policies evidencing such insurance, and (iii) such insurance
complies with all of the applicable requirements set forth herein.
(i) Anything in Section 3.3 hereof to the contrary notwithstanding, during the
term of the Marriott Lease and so long as the Marriott Lease is in full
force and effect, in lieu of complying with the provisions of Section 3.3
hereof, SPTMRT shall comply with, and cause the Marriott Tenant to comply
with, Article 13 and the other insurance provisions of the Marriott Lease,
and Lender shall be a third party beneficiary thereof; provided that
Section 3.3(g) hereof shall continue to apply as between SPTMRT and Lender.
Section 3.4 PAYMENT OF TAXES, ETC.
(a) SPTMRT shall pay or cause to be paid by their due date all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including, without limitation, vault charges and license fees for
the use of vaults, chutes and similar areas adjoining the Land, now or
hereafter levied or assessed or imposed against the Property or any part
thereof (the "TAXES"), all ground rents, maintenance charges and similar
charges, now or hereafter levied or assessed or imposed against the
Property or any part thereof (the "OTHER CHARGES"), and all charges for
utility services provided to the Property as same become due and payable.
SPTMRT will deliver to Lender, promptly upon Lender's request, evidence
satisfactory to Lender that the Taxes, Other Charges and utility service
charges have been so paid or are not then delinquent. SPTMRT shall not
suffer and shall promptly cause to be paid and discharged any lien or
charge whatsoever which may be or become a lien or charge against the
Property.
(b) After prior written notice to Lender, SPTMRT, at its own expense, may
contest or permit to be contested by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the amount or
validity or application in whole or in part of any of the Taxes, provided
that (i) no Event of Default has occurred under the Loan Agreement, this
Security Instrument or any of the Other Security Documents, (ii) SPTMRT is
permitted to do so under the provisions of any other mortgage, deed of
trust or deed to secure debt affecting the Property, (iii) such proceeding
shall suspend the collection of the Taxes from SPTMRT and from the Property
or SPTMRT shall have paid or caused to be paid all of the Taxes under
protest, (iv) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which SPTMRT is
subject and shall not constitute a default thereunder, (v) neither the
Property nor any part thereof or interest therein will be in danger of
being sold, forfeited, terminated, canceled or lost,
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(vi) SPTMRT shall have set aside adequate reserves for the payment of the
Taxes, together with all interest and penalties thereon, unless SPTMRT has
paid or caused to be paid all of the Taxes under protest, and (vii) SPTMRT
shall have furnished the security as may be required in the proceeding, or
as may be reasonably requested by Lender to insure the payment of any
contested Taxes, together with all interest and penalties thereon. Anything
in this Section 3.4(b) to the contrary notwithstanding, during the term of
the Marriott Lease and so long as the Marriott Lease is in full force and
effect, the Marriott Tenant shall have the right to contest Taxes pursuant
to and in full compliance with Section 6.06 of the Marriott Lease, and in
case of any such contest, SPTMRT shall not be required to comply with the
provisions of this Section 3.4(b); provided that SPTMRT shall cause the
Marriott Tenant to comply with the provisions of Section 6.06 of the
Marriott Lease in any such contest.
Section 3.5 CONDEMNATION. SPTMRT shall promptly give Lender notice of the
actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such proceedings
to the extent permitted by law. Upon an Event of Default, SPTMRT shall deliver
to Lender all instruments requested by it to permit such participation. SPTMRT
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. SPTMRT shall not make any
agreement in lieu of condemnation of the Property or any portion thereof without
the prior written consent of Lender in each instance, which consent shall not be
unreasonably withheld or delayed in the case of a taking of an insubstantial
portion of the Property. If the Property or any portion thereof is taken by the
power of eminent domain, SPTMRT shall promptly commence and diligently prosecute
the Restoration of the Property and otherwise comply with the provisions of and
in accordance with Section 4.2 of this Security Instrument. If the Property is
sold, through foreclosure or otherwise, prior to the receipt by Lender of the
award or payment, Lender shall have the right, whether or not a deficiency
judgment on the Loan Agreement shall have been sought, recovered or denied, to
receive the award or payment, or a portion thereof sufficient to pay the Debt.
The provisions of this Section 3.5 are subject to the provisions of Article 15
of the Marriott Lease.
Section 3.6 LEASES AND RENTS. The Property is subject to the Marriott
Lease. SPTMRT shall not enter into any other Lease of the Property without the
prior written consent of Lender. As used herein, the term "TENANT" shall mean
and include the tenant and any guarantor of the tenant's obligations under a
Lease, including, without
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limitation, the Marriott Tenant and Marriott. SPTMRT (i) shall observe and
perform all the obligations imposed upon the lessor under the Leases (including,
without limitation, the Marriott Lease and the Marriott Lease Guaranty) and
shall not do or permit to be done anything to impair the value of any Lease as
security for the Debt; (ii) shall promptly send copies to Lender of all notices
of default which SPTMRT shall send or receive under any Lease; (iii) shall
enforce in a commercially reasonable manner all of the terms, covenants and
conditions contained in the Leases upon the part of the Tenant thereunder to be
observed or performed; (iv) shall not collect any of the Rents more than three
(3) months in advance (provided that a security deposit shall not be deemed rent
collected in advance); (v) shall not execute any other assignment of the
lessor's interest in any Lease or Rents; (vi) shall not (A) materially alter,
modify or change any of the terms of any Lease without the prior written consent
of Lender or (B) cancel or terminate any Lease (including any lease guaranty) or
transfer or suffer or permit a conveyance or transfer of the Land or of any
interest therein so as to effect a merger of the estates and rights of, or a
termination or diminution of the obligations of, Tenants thereunder; and (vii)
shall not consent to any assignment of or subletting under any Lease not in
accordance with the terms thereof, without the prior written consent of Lender.
In the event that the Marriott Lease is replaced by another Lease which, by
express agreement of Lender, is superior to the lien of this Security Instrument
or with respect to which a subordination, non-disturbance and attornment
agreement is entered into by the Tenant under such Lease, SPTMRT and Lender, the
express references to the Marriott Lease (and specific sections, articles and
provisions thereof) and the Marriott Tenant in Sections 3.3(i), 3.4(b), 3.5,
3.11 and 4.2(d) hereof shall be deemed to refer to such replacement Lease (and
the corresponding sections, articles and provisions thereof) and the Tenant
thereunder to the extent and as the Lender may, at its option and in its
absolute discretion, so agrees with such Tenant and SPTMRT.
Section 3.7 MAINTENANCE OF PROPERTY. Subject to the terms of the Marriott
Lease, SPTMRT shall cause the Property to be maintained in a good and safe
condition and repair. Except as expressly provided in the Marriott Lease, the
Improvements and the Personal Property shall not be removed, demolished or
materially altered (except for normal replacement of the Personal Property)
without the consent of Lender. If any part of the Property is destroyed by any
casualty, or damaged, worn or dilapidated or affected by any proceeding of the
character referred to in Section 3.5 hereof, then, subject to the terms of the
Marriott Lease, SPTMRT shall, or shall cause the
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Tenants to, promptly repair, replace or rebuild the same. SPTMRT shall complete
and pay for, or cause the Tenants to complete and pay for, any structure at any
time in the process of construction or repair on the Land. Except as required by
the Marriott Lease, SPTMRT shall not initiate, join in, acquiesce in, or consent
to any change in any private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Property or any part thereof. If under applicable zoning provisions the use of
all or any portion of the Property is or shall become a nonconforming use,
SPTMRT will not cause, or, subject to the terms of the Marriott Lease, permit,
the nonconforming use or Improvement to be discontinued or abandoned without the
express written consent of Lender.
Section 3.8 WASTE. SPTMRT shall not commit or suffer any material waste of
the Property or make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that could reasonably be expected
to result in invalidation or cancellation of any Policy. SPTMRT will not,
without the prior written consent of Lender, permit any drilling or exploration
for or extraction, removal, or production of any minerals from the surface or
the subsurface of the Land, regardless of the depth thereof or the method of
mining or extraction thereof.
Section 3.9 COMPLIANCE WITH LAWS.
(a) SPTMRT shall promptly comply, or cause the Tenants to comply, in all
material respects with all existing and future federal, state and local
laws, orders, ordinances, governmental rules and regulations or court
orders affecting the Property, or the use thereof including, but not
limited to, the Americans with Disabilities Act ("ADA") (collectively,
"APPLICABLE LAW").
(b) SPTMRT shall from time to time, upon Lender's request, provide Lender with
evidence reasonably satisfactory to Lender that the Property complies in
all material respects with all Applicable Laws or is exempt from compliance
with Applicable Laws.
(c) Subject to the provisions of the Marriott Lease, but otherwise
notwithstanding any provisions set forth herein or in any document
regarding Lender's approval of alterations of the Property, SPTMRT shall
not alter, or permit any Tenant to alter, the Property in any manner which
would materially increase SPTMRT's responsibilities for compliance with
Applicable Laws without the prior written approval of Lender. Lender's
approval of the plans, specifications, or working drawings for alterations
of the Property shall create no responsibility or liability on behalf of
Lender for their
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completeness, design, sufficiency or their compliance with Applicable Laws.
Lender may condition any such approval upon receipt of a certificate of
compliance with Applicable Laws from an independent architect, engineer, or
other person acceptable to Lender.
(d) SPTMRT shall give prompt notice to Lender of the receipt by SPTMRT of any
notice related to a violation of any Applicable Laws and of the
commencement of any proceedings or investigations which relate to
compliance with Applicable Laws.
(e) SPTMRT, at its own expense, may contest or permit a Tenant in accordance
with its Lease to contest, by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the
Applicable Laws affecting the Property; provided that (i) no Event of
Default has occurred under this Security Instrument or any of the Other
Security Documents; (ii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to
which SPTMRT is subject and shall not constitute a default thereunder;
(iii) neither the Property nor any part thereof or interest therein nor any
of Tenant thereof shall be affected in any material adverse way as a result
of such proceeding; and (iv) SPTMRT shall have furnished to Lender all
other items reasonably requested by Lender; provided further that the
limits in this Section 3.9(e) on the Marriott Tenant's right to contest
Applicable Laws are subject to the Marriott Tenant's rights under the
Marriott Lease.
Section 3.10 BOOKS AND RECORDS.
(a) SPTMRT shall keep adequate books and records of account in accordance with
generally accepted accounting principles consistently applied.
(b) Upon reasonable request from Lender, SPTMRT shall furnish to Lender an
accounting of any security deposits held in connection with any Lease of
any part of the Property, including the name and identification number of
the accounts in which such security deposits are held, the name and address
of the financial institutions in which such security deposits are held, and
the name of the person to contact at such financial institution, along with
any authority or release necessary for Lender to obtain information
regarding such accounts directly from such financial institutions.
(c) SPTMRT shall furnish Lender with such financial, management or other
information with respect to the Property and the Tenants as may, from time
to time, be reasonably required by Lender in form and substance reasonably
satisfactory to Lender.
Section 3.11 PAYMENT FOR LABOR AND MATERIALS. SPTMRT will promptly pay or
cause to be paid when due all bills and costs for labor, materials,
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and specifically fabricated materials incurred in connection with the Property
and never permit to exist beyond the due date thereof in respect of the Property
or any part thereof any lien or security interest, even though inferior to the
liens and the security interests hereof, and in any event never permit to be
created or exist in respect of the Property or any part thereof any other or
additional lien or security interest other than the liens or security interests
hereof, except for the Permitted Exceptions (as defined in Section 5.1), other
Permitted Exceptions (as defined in the Loan Agreement) with respect to the
Property, and liens permitted under Section 6.07 of the Marriott Lease.
Section 3.12 PERFORMANCE OF OTHER AGREEMENTS. SPTMRT shall observe and
perform or cause to be observed and performed in all material respects each and
every term to be observed or performed by SPTMRT pursuant to the terms of any
agreement or recorded instrument affecting or pertaining to the Property.
Section 3.13 CHANGE OF NAME, IDENTITY OR STRUCTURE. SPTMRT will not change
SPTMRT's name, identity (including its trade name or names) or SPTMRT's
organizational structure without notifying the Lender of such change in writing
at least thirty (30) days prior to the effective date of such change and, in the
case of a change in SPTMRT's organizational structure, without first obtaining
the prior written consent of the Lender, which consent shall not be unreasonably
withheld.
Section 3.14 EXISTENCE. SPTMRT will continuously maintain (a) its existence
and shall not dissolve or permit its dissolution, (b) its rights to do business
in the state where the Property is located and (c) its franchises and trade
names, if any.
ARTICLE 4 - SPECIAL COVENANTS
SPTMRT covenants and agrees with Trustee and Lender that:
Section 4.1 PROPERTY USE. The Property shall be used only as an a
residential retirement community, including nursing care, congregate care, and
all other uses reasonably incidental thereto, and, except as otherwise expressly
provided in the Marriott Lease, for no other use without the prior written
consent of Lender, which consent may be withheld in Lender's sole and absolute
discretion.
Section 4.2 RESTORATION AFTER CASUALTY/CONDEMNATION. In the event of a
casualty or a taking by eminent domain, the following provisions shall apply in
connection with the Restoration of the Property:
(a) If (i) the Net Proceeds (defined below) do not exceed $250,000 ("CASUALTY
AMOUNT"); (ii) the costs of completing the Restoration as reasonably
estimated by SPTMRT shall be less than or equal to the Casualty Amount;
(iii) no Event of Default shall have occurred and be continuing under this
Security Instrument or any of the Other Security Documents; (iv) the
Property and the use thereof after the Restoration will be in compliance
with, and permitted under, all applicable zoning laws, ordinances, rules
and regulations (including, without limitation, all applicable
Environmental Laws (defined in Section 11.1); and (v) such fire or other
casualty or taking, as applicable, does not materially impair access to the
Property or the Improvements, then the Net Proceeds will be disbursed
directly to SPTMRT and SPTMRT shall commence and diligently prosecute to
completion, subject to Force Majeure (defined herein), the Restoration of
the Property to as nearly as possible the condition it was in immediately
prior to such fire or other casualty or to such taking. Except upon the
occurrence of an Event of Default, SPTMRT shall settle any insurance claims
with respect to the Net Proceeds which in the aggregate are less than or
equal to the Casualty Amount. Lender shall have the right to participate in
and reasonably approve any settlement for insurance claims with respect to
the Net Proceeds which in the aggregate are equal to or greater than the
Casualty Amount. If an Event of Default shall have occurred and be
continuing, SPTMRT hereby irrevocably empowers Lender, in the name of
SPTMRT as its true and lawful attorney-in-fact, to file and prosecute such
claim and to collect and to make receipt for any such payment. If the Net
Proceeds are received by SPTMRT, such Net Proceeds shall, until the
completion of the related work, be held in trust for Lender and shall be
segregated from other funds of SPTMRT to be used to pay for the cost of the
Restoration in accordance with the terms hereof.
(b) If the Net Proceeds are greater than the Casualty Amount, such Net Proceeds
shall be forthwith paid to Lender to be held by Lender in a segregated
account to be made available to SPTMRT for the Restoration in accordance
with the provisions of this Subsection 4.2(b). SPTMRT shall commence and
diligently prosecute to completion, subject to Force Majeure, the
Restoration (in the case of a taking, to the extent the Property is capable
of being restored). The term "NET PROCEEDS" for purposes of this Section
4.2 shall mean: (i) the net amount of all insurance proceeds received by
Lender under the Policies carried pursuant to Subsections 3.3(a)(i), (iv),
(v), (vi) and (vii) of this Security Instrument as a result of such damage
or destruction, after deduction of its reasonable costs and expenses
(including, but not limited to, reasonable counsel fees), if any, in
collecting the same, or (ii) the net amount of all awards and payments
received by Lender with respect to a taking referenced in Section 3.6 of
this Security Instrument, after deduction of its reasonable costs and
expenses (including, but not limited to reasonable counsel fees), if any,
in collecting the same, whichever the case may be. The term "FORCE MAJEURE"
for the purpose of this Section 4.2 shall have the
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following meaning: SPTMRT shall be excused for the period of any delay in
the performance of any obligations hereunder when prevented from so doing
by cause or causes beyond SPTMRT's control such as, without limitation, all
labor disputes, civil commotion, war, war-like operations, invasion,
rebellion, hostilities, military or usurped power, sabotage, governmental
regulations or controls, fire or other casualty, inability to obtain any
materials or services, and acts of God.
(i) The Net Proceeds shall be made available to SPTMRT for payment of, or
reimbursement of SPTMRT's expenses in connection with, the
Restoration, subject to the following conditions:
(A) no Event of Default shall have occurred and be continuing under
this Security Instrument or any of the Other Security Documents;
(B) Lender shall, within a reasonable period of time prior to request
for initial disbursement, be furnished with an estimate of the
cost of the Restoration accompanied by an independent architect's
certification as to such costs and appropriate plans and
specifications for the Restoration;
(C) the Net Proceeds, together with any cash or cash equivalent
deposited by SPTMRT with Lender, are sufficient to cover the cost
of the Restoration as such costs are certified by the independent
architect;
(D) (1) in the event that the Net Proceeds are insurance proceeds,
less than fifty percent (50%) of the total floor area of the
Improvements has been damaged or destroyed, or rendered unusable
as a result of such fire or other casualty; or (2) in the event
that the Net Proceeds are condemnation awards, less than fifty
percent (50%) of the Land constituting the Property is taken,
such Land that is taken is located along the perimeter or
periphery of the Property and no portion of the Improvements is
located in such Lands;
(E) Lender shall be satisfied that any operating deficits which will
be incurred with respect to the Property as a result of the
occurrence of any such fire or other casualty or taking,
whichever the case may be, will be covered out of (i) the Net
Proceeds, or (ii) other funds of SPTMRT;
(F) Lender shall be satisfied that, upon the completion of the
Restoration and related lease-up, if applicable, the net cash
flow of the Property will be restored to a level sufficient to
cover all carrying costs and operating expenses of the Property;
(G) the Restoration can reasonably be completed on or before the
earliest to occur of (i) six (6) months prior to the Termination
Date (as defined in the Loan Agreement), (ii) the earliest date
required for such completion under the terms of any Lease and
(iii) such time as may be required under applicable zoning law,
ordinance, rule or regulation in order to repair and restore the
Property to as nearly as possible the condition it was in
immediately prior to such fire or other casualty or to such
taking, as applicable;
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(H) the Property and the use thereof after the Restoration will be in
compliance with, and permitted under, all applicable zoning laws,
ordinances, rules and regulations (including, without limitation,
the ADA and all applicable Environmental Laws (defined in Section
11.1); and
(I) such fire or other casualty or taking, as applicable, does not
materially impair access to the Property or the Improvements.
(ii) The Net Proceeds shall be held by Lender and, until disbursed in
accordance with the provisions of this Subsection 4.2(b), shall
constitute additional security for the Obligations. The Net Proceeds
other than the Net Proceeds paid under the Policy described in
Subsection 3.3(a)(iv) shall be disbursed by Lender to, or as directed
by, SPTMRT from time to time during the course of the Restoration,
upon receipt of evidence satisfactory to Lender that (A) all materials
installed and work and labor performed (except to the extent that they
are to be paid for out of the requested disbursement) in connection
with the Restoration have been paid for in full, and (B) there exist
no notices of pendency, stop orders, mechanic's or materialman's liens
or notices of intention to file same, or any other liens or
encumbrances of any nature whatsoever on the Property arising out of
the Restoration which have not either been fully bonded and discharged
of record or in the alternative fully insured to the satisfaction of
Lender by the title company insuring the lien of this Security
Instrument.
(iii) Lender shall have the use of the plans and specifications and all
permits, licenses and approvals required or obtained in connection
with the Restoration. The identity of the contractors, subcontractors
and materialmen engaged in the Restoration, as well as the contracts
under which they have been engaged, shall be subject to prior review
and acceptance by Lender and an independent consulting engineer
selected by Lender (the "CASUALTY CONSULTANT"), such acceptance not to
be unreasonably withheld or delayed. All costs and expenses incurred
by Lender in connection with making the Net Proceeds available for the
Restoration including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant's fees, shall be paid by
SPTMRT.
(iv) In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as
certified by the Casualty Consultant, MINUS the Casualty Retainage.
The term "CASUALTY RETAINAGE" as used in this Subsection 4.2(b) shall
mean an amount equal to 10% of the costs actually incurred for work in
place as part of the Restoration, as certified by the Casualty
Consultant, until such time as the Casualty Consultant certifies to
Lender that 50% of the required Restoration has been completed. There
shall be no Casualty Retainage with respect to costs actually incurred
by SPTMRT for work in place in completing the last 50% of the required
Restoration. The Casualty Retainage shall in no event, and
notwithstanding anything to the contrary set forth above in this
Subsection 4.2(b), be less than the amount actually held back by
SPTMRT from contractors, subcontractors and materialmen engaged in the
Restoration. The Casualty Retainage shall not be released until the
Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance
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with the provisions of this Subsection 4.2(b) and that all approvals
necessary for the re- occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental
authorities, and Lender receives evidence satisfactory to Lender that
the costs of the Restoration have been paid in full or will be paid in
full out of the Casualty Retainage, provided, however, that Lender
will release the portion of the Casualty Retainage being held with
respect to any contractor, subcontractor or materialman engaged in the
Restoration as of the date upon which the Casualty Consultant
certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials
in accordance with the provisions of the contractor's, subcontractor's
or materialman's contract, and the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment in full
of all sums due to the contractor, subcontractor or materialman as may
be reasonably requested by Lender or by the title company insuring the
lien of this Security Instrument. If required by Lender, the release
of any such portion of the Casualty Retainage shall be approved by the
surety company, if any, which has issued a payment or performance bond
with respect to the contractor, subcontractor or materialman.
(v) Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender, be sufficient to pay in full the
balance of the costs which are estimated by the Casualty Consultant to
be incurred in connection with the completion of the Restoration,
SPTMRT shall deposit the deficiency (the "NET PROCEEDS DEFICIENCY")
with Lender before any further disbursement of the Net Proceeds shall
be made. The Net Proceeds Deficiency deposited with Lender shall be
held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to
the disbursement of the Net Proceeds, and until so disbursed pursuant
to this Subsection 4.2(b) shall constitute additional security for the
Obligations.
(vii) The excess, if any, of the Net Proceeds and the remaining balance, if
any, of the Net Proceeds Deficiency deposited with Lender after the
Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.2(b),
and the receipt by Lender of evidence satisfactory to Lender that all
costs incurred in connection with the Restoration have been paid in
full, shall be remitted by Lender to SPTMRT, provided no Event of
Default shall have occurred and shall be continuing under the Loan
Agreement, this Security Instrument or any of the Other Security
Documents.
(c) All Net Proceeds not required (i) to be made available for the Restoration
or (ii) to be returned to SPTMRT as excess Net Proceeds pursuant to
Subsection 4.2(b)(vii) shall be retained and applied by Lender toward the
payment of the amount owing from SHPT to Lender under the Loan Agreement,
whether or not then due and payable, in such order, priority and
proportions as Lender in its discretion shall deem proper or, at the
discretion of Lender, the same shall be paid, either in whole or in part,
to SPTMRT.
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(d) Anything in Section 4.2 hereof to the contrary notwithstanding, during the
term of the Marriott Lease and so long as the Marriott Lease is in full
force and effect, the provisions of Section 4.2 hereof shall be subject to
the provisions of Sections 13.02 and 15.06 of the Marriott Lease. Without
limiting the foregoing, SPTMRT shall comply with and cause the Marriott
Tenant to comply with, such provisions of the Marriott Lease, and Lender
shall be a third party beneficiary thereof.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
SPTMRT represents and warrants to Trustee and Lender that:
Section 5.1 WARRANTY OF TITLE. SPTMRT has good and marketable title to the
Property and has the right to mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey the same and that SPTMRT possesses an unencumbered
fee simple absolute estate in the Land and the Improvements and that it owns the
Property free and clear of all liens, encumbrances and charges whatsoever except
for those exceptions shown in the title insurance policy insuring the lien of
this Security Instrument (the "PERMITTED EXCEPTIONS"). The Permitted Exceptions
do not materially interfere with the security intended to be provided by this
Security Instrument or the use and operations of the Property. SPTMRT shall
forever warrant, defend and preserve the title and the validity and priority of
the lien of this Security Instrument and shall forever warrant and defend the
same to Trustee and Lender against the claims of all persons whomsoever. Upon
the recordation of this Security Instrument and the filing of a UCC Financing
Statement in the office of the Secretary of State for the state where the
Property is located, the Lender will have a first priority perfected security
interest in all personal property owned by SPTMRT at the Property.
Section 5.2 AUTHORITY. SPTMRT (and the undersigned officer of SPTMRT) has
full power, authority and legal right to execute this Security Instrument, and
to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey
the Property pursuant to the terms hereof and to keep and observe all of the
terms of this Security Instrument on SPTMRT's part to be performed.
Section 5.3 LEGAL STATUS AND AUTHORITY. SPTMRT (a) is duly organized,
validly existing and in good standing as a real estate investment trust under
the laws of the State of Maryland; (b) is duly qualified to transact business
and is in good standing in the state where the Property is located; and (c) has
all necessary approvals, governmental and otherwise, and full power and
authority to own the Property. SPTMRT now has and shall continue to have the
full right, power and authority to lease the Property, to encumber
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the Property as provided herein and to perform all of the other obligations to
be performed by SPTMRT under this Security Instrument.
Section 5.4 VALIDITY. (a) The execution, delivery and performance of this
Security Instrument by SPTMRT (i) are within the power and authority of SPTMRT;
(ii) have been authorized by all requisite organizational action; (iii) have
received all necessary approvals and consents, corporate, governmental or
otherwise; (iv) will not violate, conflict with, result in a breach of or
constitute (with notice or lapse of time, or both) a default under any provision
of law (including, without limitation, any usury laws), any order or judgment of
any court or governmental authority, the articles of incorporation, by-laws,
partnership or operating agreement, or other governing instrument of SPTMRT, or
any indenture, agreement or other instrument to which SPTMRT is a party or by
which it or any of its assets or the Property is or may be bound or affected;
(v) will not result in the creation or imposition of any lien, charge or
encumbrance whatsoever upon any of its assets, except the lien and security
interest created hereby; and (vi) will not require any authorization or license
from, or any filing with, any governmental or other body (except for the
recordation of this instrument in appropriate land records in the state where
the Property is located and except for Uniform Commercial Code filings relating
to the security interest created hereby), and (b) this Security Instrument
constitutes the legal, valid and binding obligation of SPTMRT.
Section 5.5 LITIGATION. There is no action, suit or proceeding, judicial,
administrative or otherwise (including any condemnation or similar proceeding),
pending or, to the best of SPTMRT's knowledge, threatened or contemplated
against SPTMRT or against or affecting the Property that has not been disclosed
to Lender and, if determined adversely to SPTMRT, would have a material adverse
effect on the Property or SPTMRT's ability to perform its obligations under the
Loan Agreement, this Security Instrument or the Other Security Documents.
Section 5.6 STATUS OF PROPERTY.
(a) Except as disclosed in the survey of the Property delivered to Lender
pursuant to Section 4.1 of the Loan Agreement, no portion of the
Improvements is located in an area identified by the Secretary of Housing
and Urban Development or any successor thereto as an area having special
flood hazards pursuant to the National Flood Insurance Act of 1968 or the
Flood Disaster Protection Act of 1973, or the National Flood Insurance
Reform Act of 1994, as each may be amended, or any successor law; and, if
any portion of the Improvements is now or at any time in the future located
within any such area, SPTMRT has obtained or caused to be obtained and will
maintain or cause to be maintained the insurance prescribed in Section
3.3(a)(vi) hereof.
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(b) As of the date hereof, the Property is free from damage caused by fire or
other casualty.
(c) The Tenants own or lease, or are acquiring by installment sale,
substantially all of the personal property used in connection with the
operation of the Property. Other than such property owned, leased or being
acquired by the Tenants, SPTMRT is the owner of all furnishings, fixtures
and equipment used in connection with the operation of the Property, free
and clear of any and all security interests, liens or encumbrances, except
the lien and security interest created hereby.
(d) All security deposits required by the Leases have been collected and are
held by or on behalf of SPTMRT.
(e) All the Improvements lie within the boundaries of the Property.
(f) Each of the representations and warranties of SPTMRT set forth in Section 5
of the Loan Agreement are true and correct as they relate to SPTMRT, the
Property, the Leases (including the Marriott Lease and the Marriott Lease
Guaranty) and the tenants under and guarantors of the Leases (including the
Marriott Tenant and Marriott).
Section 5.7 NO FOREIGN PERSON. SPTMRT is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended
and the related Treasury Department regulations, including temporary
regulations.
Section 5.8 SEPARATE TAX LOT. The Property is assessed for real estate tax
purposes as one or more wholly independent tax lot or lots, separate from any
adjoining land or improvements not constituting a part of such lot or lots, and
no other land or improvements is assessed and taxed together with the Property
or any portion thereof.
Section 5.9 LEASES. (a) SPTMRT is the sole owner of the entire lessor's
interest in the Leases, which as of the date hereof consists solely of the
Marriott Lease and the Marriott Lease Guaranty; (b) the Leases are valid and
enforceable; (c) SPTMRT has delivered or caused to be delivered to Lender true
and complete copies of the Leases, including all amendments, modifications and
supplements thereto; (d) none of the Rents reserved in the Leases have been
assigned or otherwise pledged or hypothecated (except to Lender); (e) none of
the Rents have been collected for more than three (3) months in advance
(provided that a security deposit shall not be deemed rent collected in
advance); (f) the premises demised under the Leases have been completed and the
Tenants under the Leases have accepted the same and have taken possession of the
same on a rent-paying basis; (g) there exist no offsets or defenses to the
payment of any portion of the Rents; (h) SPTMRT has received no notice from any
Tenant challenging the validity or
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enforceability of any Lease; (i) all payments due under the Leases are current;
(j) no Tenant under any Lease is in default thereunder, or is a debtor in any
bankruptcy, reorganization, insolvency or similar proceeding, or has
demonstrated a history of payment problems which suggest financial difficulty;
(k) there are no agreements with the Tenants with respect to the Property other
than as expressly set forth in the Leases; (l) no person has any possessory
interest in, or right to occupy, the Property except under and pursuant to a
Lease; and (m) no brokerage commissions or finders fees are due and payable
regarding any Lease.
Section 5.10 MAILING ADDRESS. SPTMRT's mailing address, as set forth in the
opening paragraph hereof or as changed in accordance with Article 14, is true
and correct.
Section 5.11 ILLEGAL ACTIVITY. No portion of the Property has been or will
be purchased, improved, fixtured, equipped or furnished with proceeds of any
criminal or other illegal activity and to the best of SPTMRT's knowledge, there
are no illegal activities or activities relating to controlled substance at the
Property.
ARTICLE 6 - DEBTOR/CREDITOR RELATIONSHIP
Section 6.1 RELATIONSHIP OF SPTMRT AND LENDER. The relationship between
SPTMRT and Lender is solely that of guarantor and creditor, and Lender has no
fiduciary or other special relationship with SPTMRT, and no term or condition of
any of the Loan Agreement, this Security Instrument and the Other Security
Documents shall be construed so as to deem the relationship between SPTMRT and
Lender to be other than that of guarantor and creditor.
ARTICLE 7 - FURTHER ASSURANCES
Section 7.1 RECORDING OF SECURITY INSTRUMENT, ETC. SPTMRT forthwith upon
the execution and delivery of this Security Instrument and thereafter, from time
to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Trustee
and of Lender in, the Property. SPTMRT will pay or cause to be paid all taxes,
filing, registration or recording fees, and all
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expenses incident to the preparation, execution, acknowledgment and/or recording
of this Security Instrument, the Other Security Documents, any mortgage
supplemental hereto, any security instrument with respect to the Property and
any instrument of further assurance, and any modification or amendment of the
foregoing documents, and all federal, state, county and municipal taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Security Instrument, any mortgage supplemental
hereto, any security instrument with respect to the Property or any instrument
of further assurance, and any modification or amendment of the foregoing
documents, except where prohibited by law so to do.
Section 7.2 FURTHER ACTS, ETC. SPTMRT will, at the cost of SPTMRT, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Trustee (where appropriate) and to Lender, the property and
rights hereby mortgaged, granted, bargained, sold, conveyed, confirmed, pledged,
assigned, warranted and transferred or intended now or hereafter so to be, or
which SPTMRT may be or may hereafter become bound to convey or assign to Trustee
or to Lender, or for carrying out the intention or facilitating the performance
of the terms of this Security Instrument or for filing, registering or recording
this Security Instrument, or for complying with all Applicable Laws. SPTMRT, on
demand, will execute and deliver and hereby authorizes Trustee and Lender to
execute in the name of SPTMRT or without the signature of SPTMRT to the extent
Lender or Trustee may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence or perfect more effectively the
security interest of Trustee or Lender in the Property. SPTMRT grants to Lender
and Trustee an irrevocable power of attorney coupled with an interest for the
purpose of exercising and perfecting any and all rights and remedies available
to Trustee or Lender pursuant to this Section 7.2.
Section 7.3 CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP LAWS.
(a) If any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the
purpose of taxation or which imposes a tax, either directly or indirectly,
on the Debt or Lender's interest in the Property, SPTMRT will pay the tax,
with interest and penalties thereon, if any. If Lender is advised by
counsel chosen by it that the payment of tax by SPTMRT would be unlawful or
taxable to Lender or unenforceable or provide the basis for a defense of
usury, then Lender shall have the option by written notice of not less than
sixty (60) days to (i) exclude the Property for purposes of determining the
aggregate Appraised
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Value (as defined in the Loan Agreement) of the SPTMRT Properties and the
SPTBROOK Properties under Section 2.8(b) of the Loan Agreement, which may
give rise to a mandatory prepayment of the Loans under such Section of the
Loan Agreement, and (ii) thereafter release the Security Instrument.
(b) SPTMRT will not claim or demand or be entitled to any credit or credits on
account of the Debt for any part of the Taxes or Other Charges assessed
against the Property, or any part thereof, and no deduction shall otherwise
be made or claimed from the assessed value of the Property, or any part
thereof, for real estate tax purposes by reason of this Security Instrument
or the Debt. If such claim, credit or deduction shall be required by law,
Lender shall have the option by written notice of not less than sixty (60)
days to (i) exclude the Property for purposes of determining the aggregate
Appraised Value (as defined in the Loan Agreement) of the SPTMRT Properties
and the SPTBROOK Properties under Section 2.8(b) of the Loan Agreement,
which may give rise to a mandatory prepayment of the Loans under such
Section of the Loan Agreement, and (ii) thereafter release the Security
Instrument.
(c) If at any time the United States of America, any state thereof or any
subdivision of any such state shall require revenue or other stamps to be
affixed to the Loan Agreement, this Security Instrument, or any of the
Other Security Documents or impose any other tax or charge on the same,
SPTMRT will pay for the same, with interest and penalties thereon, if any.
Section 7.4 ESTOPPEL CERTIFICATES.
(a) After request by Lender, SPTMRT, within ten (10) business days, shall
furnish Lender or any proposed assignee with a statement, duly acknowledged
and certified, setting forth (i) that, except as provided in such
statement, there are no defaults or events which with the passage of time
or the giving of notice or both, would constitute an event of default under
this Security Instrument, (ii) that the Loan Agreement and this Security
Instrument are valid, legal and binding obligations of SPTMRT and have not
been modified or if modified, giving particulars of such modification,
(iii) whether any offsets or defenses exist against the obligations secured
hereby and, if any are alleged to exist, a detailed description thereof,
(iv) that all Leases are in full force and effect and have not been
modified (or if modified, setting forth all modifications), (v) the date to
which the Rents thereunder have been paid pursuant to the Leases, (vi)
whether or not, to the best knowledge of SPTMRT, any of the Tenants are in
default under the Leases, and, if any of the Tenants are in default,
setting forth the specific nature of all such defaults, (vii) the amount of
security deposits held by SPTMRT under each Lease and that such amounts are
consistent with the amounts required under each Lease, and (viii) as to any
other matters reasonably requested by Lender and reasonably related to the
Leases, the obligations secured hereby, the Property or this Security
Instrument.
(b) SPTMRT shall deliver to Lender, promptly upon request, duly executed
estoppel certificates from any one or more Tenants as required by Lender
attesting to such facts
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regarding the Leases as Lender may reasonably require, including, but not
limited to attestations that the Lease covered thereby is in full force and
effect with no defaults thereunder on the part of any party, that none of
the Rents have been paid more than three (3) months in advance, except as
security, and that the lessee claims no defense or offset against the full
and timely performance of its obligations under such Lease.
Section 7.5 FLOOD INSURANCE. After Lender's request, SPTMRT shall deliver
evidence satisfactory to Lender that no portion of the Improvements is situated
in a federally designated "special flood hazard area" or, if it is, that SPTMRT
has obtained insurance meeting the requirements of Section 3.3(a)(vi).
Section 7.6 AMENDED FINANCING STATEMENTS. SPTMRT will execute and deliver
to the Lender, prior to or contemporaneously with the effective date of any such
change, any financing statement or financing statement change required by the
Lender to establish or maintain the validity, perfection and priority of the
security interest granted herein.
ARTICLE 8 - DUE ON SALE/ENCUMBRANCE
Section 8.1 NO SALE/ENCUMBRANCE. SPTMRT agrees that SPTMRT shall not,
without the prior written consent of Lender, sell, convey, mortgage, grant,
bargain, encumber, pledge, assign or otherwise transfer the Property or any part
thereof or permit the Property or any part thereof to be sold, conveyed,
mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise
transferred.
Section 8.2 SALE/ENCUMBRANCE DEFINED. A sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment or transfer within the meaning of this
Article 8 shall be deemed to include, but not be limited to, any of the
following: (a) an installment sales agreement wherein SPTMRT agrees to sell the
Property or any part thereof for a price to be paid in installments; (b) an
agreement by SPTMRT leasing all or a substantial part of the Property for other
than actual occupancy by a space tenant thereunder or a sale, assignment or
other transfer of, or the grant of a security interest in, SPTMRT's right, title
and interest in and to any Leases or any Rents (other than pursuant to the Loan
Documents); and (c) if SHPT ceases to be the owner of 100% of the issued and
outstanding shares of beneficial ownership of SPTMRT.
Section 8.3 LENDER'S RIGHTS. Lender shall not be required to demonstrate
any actual impairment of its security or any increased risk of default hereunder
in order to declare the Debt immediately due and payable upon SPTMRT's
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sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment or transfer of the
Property.
ARTICLE 9 - DEFAULT
Section 9.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT":
(a) an Event of Default as defined in the Loan Agreement;
(b) if any representation or warranty of SPTMRT made herein or in any
environmental indemnity, or in any certificate, report, financial statement
or other instrument or document furnished to Lender shall have been false
or misleading in any material respect when made;
(c) if any default occurs under any environmental indemnity executed in
connection herewith and such default continues after the expiration of
applicable grace periods, if any;
(d) except for the specific defaults set forth in this Section 9.1, any other
default hereunder by SPTMRT which default is not cured (i) in the case of
any default which can be cured by the payment of a sum of money, within
five (5) days after written notice from Lender to SPTMRT or SHPT, or (ii)
in the case of any other default, within twenty (20) days after written
notice from Lender to SPTMRT or SHPT;
(e) if the insurance required by Section 3.3 is not kept in full force and
effect, or SPTMRT has not delivered or caused to be delivered to Lender
evidence of the renewal of the policies of such insurance prior to their
expiration; or
(f) if SPTMRT defaults beyond the expiration of any applicable notice and grace
period under any of the Other Security Documents.
ARTICLE 10 - RIGHTS AND REMEDIES
Section 10.1 REMEDIES.
(a) Upon the occurrence of any Event of Default, SPTMRT agrees that Lender, and
when requested to do so by Lender, Trustee, may take such action, without
notice or
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demand, as it deems advisable to protect and enforce the rights of Lender
and Trustee against SPTMRT and in and to the Property, including, but not
limited to the following actions, each of which may be pursued concurrently
or otherwise, at such time and in such order as Lender may determine, in
its sole discretion, without impairing or otherwise affecting the other
rights and remedies of Lender or Trustee:
(i) institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision
of law in which case the Property or any interest therein may be sold
for cash or upon credit in one or more parcels or in several interests
or portions and in any order or manner;
(ii) with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the
partial foreclosure of this Security Instrument for the portion of the
Debt then due and payable, subject to the continuing lien and security
interest of this Security Instrument for the balance of the Debt not
then due, unimpaired and without loss of priority;
(iii) sell for cash or upon credit the Property or any part thereof and all
estate, claim, demand, right, title and interest of SPTMRT therein and
rights of redemption thereof, pursuant to power of sale or otherwise,
at one or more sales, as an entirety or in parcels, at such time and
place, upon such terms and after such notice thereof as may be
required or permitted by law;
(iv) institute an action, suit or proceeding in equity for the specific
performance of any covenant, condition or agreement contained herein,
in the Loan Agreement or in the Other Security Documents;
(v) recover judgment on the Debt either before, during or after any
proceedings for the enforcement of this Security Instrument or the
Other Security Documents;
(vi) apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the
adequacy of the security for the Debt and without regard for the
solvency of SPTMRT or of any person liable for the payment of the
Debt;
(vii) subject to any applicable law, the license granted to SPTMRT under
Section 1.2 shall automatically be revoked and Lender may enter into
or upon the Property, either personally or by its agents, nominees or
attorneys and dispossess SPTMRT and its agents and servants therefrom,
without liability for trespass, damages or otherwise and exclude
SPTMRT and its agents or servants wholly therefrom, and take
possession of all books, records and accounts relating thereto and
SPTMRT agrees to surrender possession of the Property and of such
books, records and accounts to Lender upon demand, and thereupon
Lender may (A) use, operate, manage, control, insure, maintain,
repair, restore and otherwise deal with all and every part of the
Property and conduct the business thereat; (B) complete any
construction on the Property in such manner and form as Lender deems
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advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Property; (D) exercise all rights and powers
of SPTMRT with respect to the Property, whether in the name of SPTMRT
or otherwise, including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict Tenants, and
demand, sue for, collect and receive all Rents of the Property and
every part thereof; (E) require SPTMRT to pay monthly in advance to
Lender, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the
Property as may be occupied by SPTMRT; (F) require SPTMRT to vacate
and surrender possession of the Property to Lender or to such receiver
and, in default thereof, SPTMRT may be evicted by summary proceedings
or otherwise; and (G) apply the receipts from the Property to the
payment of the Debt, in such order, priority and proportions as Lender
shall deem appropriate in its sole discretion after deducting
therefrom all expenses (including reasonable attorneys' fees) incurred
in connection with the aforesaid operations and all amounts necessary
to pay the Taxes, Other Charges, insurance and other expenses in
connection with the Property, as well as just and reasonable
compensation for the services of Lender, its counsel, agents and
employees;
(viii) exercise any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including, without
limiting the generality of the foregoing: (A) the right to take
possession of the Collateral or any part thereof, and to take such
other measures as Lender or Trustee may deem necessary for the care,
protection and preservation of the Collateral, and (B) request SPTMRT
at its expense to assemble the Collateral and make it available to
Lender or Trustee at a convenient place acceptable to Lender or
Trustee. Any notice of sale, disposition or other intended action by
Lender or Trustee with respect to the Collateral sent to SPTMRT in
accordance with the provisions hereof at least five (5) days prior to
such action, shall constitute commercially reasonable notice to
SPTMRT;
(ix) apply any sums held in escrow or otherwise by Lender in accordance
with the terms of this Security Instrument or any Other Security
Document to the payment of the following items in any order in its
sole and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of the Debt;
(D) the unpaid principal balance of the Debt; and all other sums
payable by SPTMRT pursuant to the Loan Agreement, the Notes, the
Other Loan Documents, this Security Instrument and the Other
Security Documents, including, without limitation, advances made
by Lender pursuant to the terms of this Security Instrument;
(x) surrender the Policies maintained pursuant to Article 3 hereof,
collect the unearned Insurance Premiums and apply such sums as a
credit on the Debt in such
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priority and proportion as Lender in its discretion shall deem proper,
and in connection therewith, SPTMRT hereby appoints Lender as agent
and attorney-in-fact (which is coupled with an interest and is
therefore irrevocable) for SPTMRT to collect such Insurance Premiums;
(xi) apply the undisbursed balance of any Net Proceeds or any Net Proceeds
Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Lender shall deem
to be appropriate in its discretion;
(xii) prohibit SPTMRT and anyone claiming on behalf of or through SPTMRT
from making use of or withdrawing any sums from any lockbox or similar
account, if any;
(xiii) pursue such other remedies as Lender or Trustee may have under
applicable law.
(b) In the event of a sale, by foreclosure, power of sale, or otherwise, of
less than all of the Property, this Security Instrument shall continue as a
lien and security interest on the remaining portion of the Property
unimpaired and without loss of priority.
(c) Lender may adjourn from time to time any sale by it to be made under or by
virtue of this Security Instrument by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Lender, without
further notice or publication, may make such sale at the time and place to
which the same shall be so adjourned.
(d) Upon any sale made under or by virtue of this Section 10.1, whether made
under a power of sale or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, Lender may bid for and acquire
the Property or any part thereof and in lieu of paying cash therefor may
make settlement for the purchase price by crediting upon the Debt the net
sales price after deducting therefrom the expenses of the sale and costs of
the action and any other sums which Lender is authorized to deduct under
this Security Instrument.
Section 10.2 APPLICATION OF PROCEEDS. The purchase money, proceeds and
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Loan Agreement, this Security
Instrument or the Other Security Documents, may be applied by Lender to the
payment of the Debt in such priority and proportions as Lender in its discretion
shall deem proper.
Section 10.3 RIGHT TO CURE DEFAULTS. Upon the occurrence and during the
continuance of any Event of Default, Lender may, but without any obligation to
do so and without notice to or demand on SPTMRT and without releasing SPTMRT
from any obligation hereunder, cure the same in such manner and to such extent
as Lender may deem necessary to protect the security hereof. Lender is
authorized to enter upon the Property for such purposes,
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or appear in, defend, or bring any action or proceeding to protect its interest
in the Property or to foreclose this Security Instrument or collect the Debt,
and the cost and expense thereof (including reasonable attorneys' fees to the
extent permitted by law), with interest as provided in this Section 10.3, shall
constitute a portion of the Debt and shall be due and payable to Lender upon
demand. All such costs and expenses incurred by Lender in remedying such Event
of Default or in appearing in, defending, or bringing any such action or
proceeding shall bear interest at the Base Rate (as defined in the Loan
Agreement) plus 2% (the "DEFAULT RATE") for the period after notice from Lender
that such cost or expense was incurred to the date of payment to Lender. All
such costs and expenses incurred by Lender together with interest thereon
calculated at the Default Rate shall be deemed to constitute a portion of the
Debt and be secured by this Security Instrument and the Other Security Documents
and shall be immediately due and payable upon demand by Lender therefor.
Section 10.4 ACTIONS AND PROCEEDINGS. After the occurrence of an Event of
Default, Lender has the right to appear in and defend any action or proceeding
brought with respect to the Property and to bring any action or proceeding, in
the name and on behalf of SPTMRT, which Lender, in its discretion, decides
should be brought to protect its interest in the Property.
Section 10.5 RECOVERY OF SUMS REQUIRED TO BE PAID. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by SPTMRT existing at the time such earlier action was
commenced.
Section 10.6 EXAMINATION OF BOOKS AND RECORDS. Lender, its agents,
accountants and attorneys shall have the right upon prior written notice to
examine the records, books, management and other papers of SPTMRT which reflect
upon its financial condition, at the Property or at any office regularly
maintained by SPTMRT where the books and records are located. Lender and its
agents shall have the right upon notice to make copies and extracts from the
foregoing records and other papers. In addition, Lender, its agents, accountants
and attorneys shall have the right to examine and audit the books and records of
SPTMRT pertaining to the income, expenses and operation of the Property during
reasonable business hours at any office of SPTMRT where the books and records
are located.
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Section 10.7 OTHER RIGHTS, ETC.
(a) The failure of Lender to insist upon strict performance of any term hereof
shall not be deemed to be a waiver of any term of this Security Instrument.
SPTMRT shall not be relieved of SPTMRT's obligations hereunder by reason of
(i) the failure of Lender or Trustee to comply with any request of SPTMRT
to take any action to foreclose this Security Instrument or otherwise
enforce any of the provisions hereof or of the Loan Agreement, any other
Loan Document or the Other Security Documents, (ii) the release, regardless
of consideration, of the whole or any part of the Property, or of any
person liable for the Debt or any portion thereof, or (iii) any agreement
or stipulation by Lender extending the time of payment or otherwise
modifying or supplementing the terms of the Loan Agreement, any other Loan
Document, this Security Instrument or the Other Security Documents.
(b) It is agreed that the risk of loss or damage to the Property is on SPTMRT,
and Lender shall have no liability whatsoever for decline in value of the
Property, for failure to maintain the insurance required pursuant to this
Security Instrument, or for failure to determine whether insurance in force
is adequate as to the amount of risks insured. Possession by Lender shall
not be deemed an election of judicial relief, if any such possession is
requested or obtained, with respect to any Property or collateral not in
Lender's possession.
(c) Lender may resort for the payment of the Debt to any other security held by
Lender or Trustee in such order and manner as Lender, in its discretion,
may elect. Lender may take action to recover the Debt, or any portion
thereof, or to enforce any covenant hereof without prejudice to the right
of Lender and Trustee thereafter to foreclose this Security Instrument. The
rights of Lender or Trustee under this Security Instrument shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Lender or Trustee shall be construed as
an election to proceed under any one provision herein to the exclusion of
any other provision. Neither Lender nor Trustee shall be limited
exclusively to the rights and remedies herein stated but shall be entitled
to every right and remedy now or hereafter afforded at law or in equity.
Section 10.8 RIGHT TO RELEASE ANY PORTION OF THE PROPERTY. Trustee, at the
direction of Lender, may release any portion of the Property for such
consideration as Lender may require without, as to the remainder of the
Property, in any way impairing or affecting the lien or priority of this
Security Instrument, or improving the position of any subordinate lienholder
with respect thereto, except to the extent that the obligations hereunder shall
have been reduced by the actual monetary consideration, if any, received by
Lender for such release, and may accept by assignment, pledge or otherwise any
other property in place thereof as Lender may require without being accountable
for so doing to any other lienholder. This Security Instrument
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shall continue as a lien and security interest in the remaining portion of the
Property.
Section 10.9 VIOLATION OF LAWS. If the Property is not in compliance with
Applicable Laws, Lender may impose additional requirements upon SPTMRT in
connection herewith including, without limitation, monetary reserves or
financial equivalents.
Section 10.10 RIGHT OF ENTRY. Lender and its agents shall have the right
upon prior written notice to enter and inspect the Property at all reasonable
times upon not less than five (5) Business Days' notice (except in the case of
emergencies when no notice shall be required) to SPTMRT. SPTMRT shall exercise
its rights under ss. 24.14 of the Marriott Lease and under any other Leases to
provide such entry to Lender.
ARTICLE 11 - ENVIRONMENTAL HAZARDS
Section 11.1 ENVIRONMENTAL COVENANTS. SPTMRT covenants and agrees that so
long as SPTMRT owns, manages, is in possession of or otherwise controls the
operation of the Property: (a) all uses and operations on or of the Property,
whether by SPTMRT, any Tenant (including, without limitation, the Marriott
Tenant) or any other person, shall be in compliance in all material requests
with all ENVIRONMENTAL LAWS (as such term is defined in the Loan Agreement) and
permits issued pursuant thereto; (b) there shall be no RELEASES (as such term is
defined in the Loan Agreement) of Hazardous Materials (as such term is defined
in the Loan Agreement) in, on, under or from the Property (except to the limited
extent expressly permitted under the Marriott Lease); (c) there shall be no
Hazardous Materials in, on, or under the Property, except those that are in
compliance with all Environmental Laws and with permits issued pursuant thereto,
if and to the extent required, and except as otherwise expressly permitted under
the Marriott Lease; (d) SPTMRT shall cause the Property to be kept free and
clear of all liens and other encumbrances imposed pursuant to any Environmental
Law, whether due to any act or omission of SPTMRT, any Tenant or any other
person (the "ENVIRONMENTAL LIENS"); (e) SPTMRT shall, at its sole cost and
expense, fully and expeditiously cooperate in all activities pursuant to Section
11.2 hereof, including, but not limited to providing all relevant information
and making knowledgeable persons available for interviews; (f) subject to the
rights of the Marriott Tenant under the Marriott Lease, SPTMRT shall, at its or
its Tenant's cost and expense, cause to be performed any environmental site
assessment or other investigation of environmental conditions in connection with
the Property, pursuant to any reasonable request of Lender after Lender has
reason to believe this Section 11.1 has
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been violated (including, but not limited to sampling, testing and analysis of
soil, water, air, building materials and other materials and substances whether
solid, liquid or gas), and share with Lender the reports and other results
thereof, and Lender and other Indemnified Parties (defined in Section 12.1)
shall be entitled to rely on such reports and other results thereof; (g) SPTMRT
shall, at its or its Tenant's cost and expense, and subject to the rights of the
Marriott Tenant under the Marriott Lease, comply with all reasonable requests of
Lender to (i) reasonably effectuate remediation of any condition (including, but
not limited to a Release of a Hazardous Materials) in, on, under or from the
Property, (ii) comply with any Environmental Law, (iii) comply with any
directive from any governmental authority, and (iv) take any other reasonable
action necessary or appropriate for protection of human health or the
environment; (h) SPTMRT shall not do or, subject to the rights of the Marriott
Tenant under the Marriott Lease, allow any Tenant or other user of the Property
to do any act that materially increases the dangers to human health or the
environment, poses an unreasonable risk of harm to any person (whether on or off
the Property), materially impairs the value of the Property, is contrary to any
requirement of any insurer, constitutes a public or private nuisance, or
violates any covenant, condition, agreement or easement applicable to the
Property; and (i) SPTMRT shall promptly notify Lender in writing promptly after
it has become aware of (A) any presence or Releases or threatened Releases of
Hazardous Substances in, on, under, from or migrating towards the Property which
is required to be reported to a governmental authority under any Environmental
Law, (B) any actual Environmental Lien affecting the Property, (C) any required
remediation of environmental conditions relating to the Property, and (D) any
written or oral notice or other communication of which SPTMRT or any of its
agents becomes aware from any source whatsoever (including, but not limited to,
a governmental entity) relating in any way to Hazardous Materials or Remediation
thereof, possible liability of any person pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual or
threatened administrative or judicial proceedings in connection with anything
referred to in this Article 11.
Section 11.2 LENDER'S RIGHTS. Subject to the rights of the Marriott Tenant
under the Marriott Lease, Lender, its environmental consultant, and any other
person designated by Lender, including, but not limited to any receiver and any
representative of a governmental entity, shall have the right, but not the
obligation, at intervals of not less than one year, or more frequently if the
Lender reasonably believes that a Hazardous Material or other environmental
condition violates or threatens to violate any Environmental Law, after notice
to SPTMRT and any Tenants, to enter upon the Property at all reasonable times to
assess any and all aspects of the environmental condition of the Property and
its use, including, but not
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limited to, conducting any environmental assessment or audit of the Property or
portions thereof to confirm SPTMRT's compliance with the provisions of this
Article 11, and SPTMRT shall cooperate and cause its Tenants to cooperate in all
reasonable ways with Lender in connection with any such audit. Any such audit
shall be performed in a manner so as to minimize interference with the conduct
of business by Tenants at the Property. If any such audit discloses that a
violation of or a liability under any Environmental Law exists or if such audit
was required or prescribed by law, regulation or governmental or
quasi-governmental authority, SPTMRT shall pay or cause to be paid all costs and
expenses incurred in connection with such audit; otherwise, the costs and
expenses of such audit shall, notwithstanding anything to the contrary set forth
in this Section, be paid by Lender.
ARTICLE 12 - INDEMNIFICATION
Section 12.1 GENERAL INDEMNIFICATION. SPTMRT shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement, or
punitive damages, of whatever kind or nature (including, but not limited to,
reasonable attorneys' fees and other costs of defense) (the "LOSSES") imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, the Loan Agreement, any other Loan Document, this
Security Instrument or any Other Security Documents; (c) any and all lawful
action that may be taken by Lender or Trustee in connection with the enforcement
of the provisions of this Security Instrument or the Loan Agreement, any other
Loan Document or any of the Other Security Documents, whether or not suit is
filed in connection with same, or in connection with SPTMRT and/or any member,
partner, joint venturer or shareholder thereof becoming a party to a voluntary
or involuntary federal or state bankruptcy, insolvency or similar proceeding;
(d) any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(e) any use, nonuse or condition in, on or about the Property or any part
thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (f) any
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failure on the part of SPTMRT to perform or be in compliance with any of the
terms of this Security Instrument or the Other Security Documents; (g)
performance of any labor or services or the furnishing of any materials or other
property in respect of the Property or any part thereof; (h) the failure of any
person to file timely with the Internal Revenue Service an accurate Form 1099-B,
Statement for Recipients of Proceeds from Real Estate, Broker and Barter
Exchange Transactions, which may be required in connection with this Security
Instrument, or to supply a copy thereof in a timely fashion to the recipient of
the proceeds of the transaction in connection with which this Security
Instrument is made; (i) any failure of the Property to be in compliance with any
Applicable Laws; (j) the enforcement by any Indemnified Party of the provisions
of this Article 12; (k) any and all claims and demands whatsoever which may be
asserted against Lender by reason of any alleged obligations or undertakings on
its part to perform or discharge any of the terms, covenants, or agreements
contained in any Lease; (l) the payment of any commission, charge or brokerage
fee to anyone which may be payable in connection with the funding of the Loans;
or (m) any misrepresentation made by SPTMRT in this Security Instrument, the
Other Security Documents, the Loan Agreement or any other documents or
information provided pursuant to the same. Any amounts payable to Lender by
reason of the application of this Section 12.1 shall become immediately due and
payable and shall bear interest at the Default Rate from the date loss or damage
is sustained by Lender until paid. For purposes of this Article 12, the term
"INDEMNIFIED PARTIES" means Lender, any person, including Trustee, in whose name
the encumbrance created by this Security Instrument is or will have been
recorded, persons who may hold or acquire or will have held a full or partial
interest in the Loans as well as the respective directors, officers,
shareholders, members, partners, employees, agents, servants, representatives,
contractors, subcontractors, affiliates, subsidiaries, participants, successors
and assigns of any and all of the foregoing (including, but not limited to any
other person who holds or acquires or will have held a participation or other
full or partial interest in the Loans or the Property, whether during the term
of the Loans and including, but not limited to any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender's assets
and business).
Section 12.2 MORTGAGE AND/OR INTANGIBLE TAX. SPTMRT shall, at its sole cost
and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording
of this Security Instrument, the Loan Agreement or any of the Other Security
Documents or in connection with a transfer of all or
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a portion of the Property pursuant to a foreclosure, deed in lieu of foreclosure
or otherwise.
Section 12.3 ENVIRONMENTAL INDEMNIFICATION. SPTMRT shall, at its sole cost
and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses and costs of remediation
(whether or not performed voluntarily), engineers' fees, environmental
consultants' fees, and costs of investigation (including, but not limited to
sampling, testing and analysis of soil, water, air, building materials and other
materials and substances whether solid, liquid or gas) imposed upon or incurred
by or asserted against any Indemnified Parties, and arising out of or in any way
relating to any one or more of the following, unless caused by the gross
negligence or willful misconduct of any Indemnified Party: (a) any presence of
any Hazardous Materials in, on, above or under the Property; (b) any past,
present or threatened Release of Hazardous Materials in, on, above, under or
from the Property; (c) any activity by SPTMRT, any person affiliated with SPTMRT
or any Tenant or other user of the Property in connection with any actual,
proposed or threatened use, treatment, storage, holding, existence, disposition
or other Release, generation, production, manufacturing, processing, refining,
control, management, abatement, removal, handling, transfer or transportation to
or from the Property of any Hazardous Materials at any time located in, under,
on or above the Property; (d) any activity by SPTMRT, any person affiliated with
SPTMRT or any Tenant or other user of the Property in connection with any actual
or proposed Remediation of any Hazardous Materials at any time located in,
under, on or above the Property, whether or not such remediation is voluntary or
pursuant to court or administrative order, including, but not limited to any
removal, remedial or corrective action; (e) any past, present or threatened
violations of any Environmental Laws (or permits issued pursuant to any
Environmental Law) in connection with the Property or operations thereon,
including, but not limited to any failure by SPTMRT, any person affiliated with
SPTMRT or any Tenant or other user of the Property to comply with any order of
any governmental authority in connection with Environmental Laws; (f) the
imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 11 and
this Section 12.3; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of SPTMRT, any affiliate of SPTMRT or any Tenant or other
user of the Property in arranging for disposal or treatment, or arranging with a
transporter for transport for disposal or treatment, of Hazardous Materials
owned or possessed by such SPTMRT, any affiliate of SPTMRT or any
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Tenant or other user, at any facility or incineration vessel owned or operated
by another person and containing such or similar Hazardous Material; (j) any
acts of SPTMRT, any affiliate of SPTMRT or any Tenant or other user of the
Property, in accepting any Hazardous Materials for transport to disposal or
treatment facilities, incineration vessels or sites selected by SPTMRT or such
other users, from which there is a Release, or a threatened Release of any
Hazardous Material which causes the incurrence of costs for remediation; (k) any
personal injury, wrongful death, or property damage caused by Hazardous
Materials arising under any statutory or common law or tort law theory,
including, but not limited to, damages assessed for the maintenance of a private
or public nuisance or for the conducting of an abnormally dangerous activity on
or near the Property; and (l) any intentional misrepresentation in any
representation or warranty or material breach or failure to perform any
covenants or other obligations pursuant to Article 11.
Section 12.4 DUTY TO DEFEND; ATTORNEYS' FEES AND OTHER FEES AND EXPENSES.
Upon written request by any Indemnified Party, SPTMRT shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties, such approval not to be unreasonably withheld.
Notwithstanding the foregoing, any Indemnified Parties may, in their sole and
absolute discretion, engage their own attorneys and other professionals to
defend or assist them, and, at the option of Indemnified Parties, their
attorneys shall control the resolution of claim or proceeding. Upon demand,
SPTMRT shall pay or, in the sole and absolute discretion of the Indemnified
Parties, reimburse, the Indemnified Parties for the payment of reasonable fees
and disbursements of attorneys, engineers, environmental consultants,
laboratories and other professionals in connection therewith.
ARTICLE 13 - WAIVERS
Section 13.1 WAIVER OF COUNTERCLAIM. SPTMRT hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Trustee or Lender arising out of or
in any way connected with this Security Instrument, the Loan Agreement, any
other Loan Document, any of the Other Security Documents, or the Obligations.
Section 13.2 MARSHALLING AND OTHER MATTERS. SPTMRT hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the
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Property or any part thereof or any interest therein. Further, SPTMRT hereby
expressly waives any and all rights of redemption from sale under any order or
decree of foreclosure of this Security Instrument on behalf of SPTMRT, and on
behalf of each and every person acquiring any interest in or title to the
Property subsequent to the date of this Security Instrument and on behalf of all
persons to the extent permitted by Applicable Law.
Section 13.3 WAIVER OF NOTICE. To the extent permitted by Applicable Law,
SPTMRT shall not be entitled to any notices of any nature whatsoever from Lender
or Trustee except with respect to matters for which this Security Instrument or
the Loan Agreement specifically and expressly provides for the giving of notice
by Lender or Trustee to SPTMRT and except with respect to matters for which
Lender or Trustee is required by Applicable Law to give notice, and SPTMRT
hereby expressly waives the right to receive any notice from Lender or Trustee
with respect to any matter for which this Security Instrument or the Loan
Agreement does not specifically and expressly provide for the giving of notice
by Lender or Trustee to SPTMRT.
Section 13.4 WAIVER OF STATUTE OF LIMITATIONS. SPTMRT hereby expressly
waives and releases, to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to payment of the Debt or performance of its
Other Obligations.
Section 13.5 SOLE DISCRETION OF LENDER. Wherever pursuant to this Security
Instrument (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove all decisions that arrangements or terms are satisfactory
or not satisfactory, and all other decisions and determinations made by Lender,
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.
Section 13.6 SURVIVAL. Except as hereinafter specifically set forth below,
the representations and warranties, covenants, and other obligations arising
under Article 11 and Section 12.3 shall in no way be impaired by: any
satisfaction or other termination of this Security Instrument, any assignment or
other transfer of all or any portion of this Security Instrument or Lender's
interest in the Property (but, in such case, shall benefit both Indemnified
Parties and any assignee or transferee), any exercise of Lender's or Trustee's
rights and remedies pursuant hereto including, but not limited to foreclosure or
acceptance of a deed in lieu of foreclosure, any exercise of any rights and
remedies pursuant to the Loan Agreement, any other Loan Document or any of the
Other Security
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Documents, any transfer of all or any portion of the Property (whether by
SPTMRT, by Lender, or by Trustee at the request of Lender, following foreclosure
or acceptance of a deed in lieu of foreclosure or at any other time), any
amendment to this Security Instrument, the Loan Agreement, any other Loan
Document or the Other Security Documents, and any act or omission that might
otherwise be construed as a release or discharge of SPTMRT from the obligations
pursuant hereto.
Section 13.7 WAIVER OF TRIAL BY JURY. SPTMRT HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY, AND ANY RIGHT TO CLAIM OR
RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, DIRECT DAMAGES, IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THE LOAN AGREEMENT, THIS SECURITY INSTRUMENT, ANY OTHER LOAN
DOCUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
ARTICLE 14 - NOTICES
Section 14.1 NOTICES. All notices, consents and other communications
hereunder to be effective shall be in writing and shall be deemed made (i) if by
mail or facsimile, when received, and (ii) if by courier, when receipted for, in
each case addressed as follows or at such other address as the respective party
may designate by written notice to the other:
If to SPTMRT:
SPTMRT Properties Trust
c/o Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attention: Messrs. David J. Hegarty and Ajay Saini
Telecopier: (617) 332-2261
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with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Jr.
Telecopier: (617) 338-2880
If to Lender:
Dresdner Bank AG
New York Branch
75 Wall Street
New York, NY 10005
Attention: Andrew P. Nesi, Vice President
Birgit Anderson, Assistant Treasurer
Telecopier: (212) 429-2129
If to Trustee:
Lawyers Title of Arizona, Inc.
40 East Mitchell Drive
Phoenix, Arizona 85012
Attention: Sean Arnold
Telecopier: (602) 274-6306
Any failure by Lender to provide a copy of any notice to the second address of
SPTMRT shown above shall not effect the validity of such notice if delivered to
the first address of SPTMRT shown above.
ARTICLE 15 - APPLICABLE LAW
Section 15.1 CHOICE OF LAW; CONSENT OF JURISDICTION. THIS SECURITY
INSTRUMENT SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO
AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK) (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES), EXCEPT TO THE EXTENT OF
PROCEDURAL MATTERS RELATING TO THE CREATION, PERFECTION AND FORECLOSURE OF LIENS
AND SECURITY INTERESTS, WHICH
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SHALL BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE LAND IS LOCATED.
Section 15.2 USURY LAWS. This Security Instrument and the Loan Agreement
are subject to the express condition that at no time shall SPTMRT be obligated
or required to pay interest on the Debt at a rate which could subject the holder
of the Loan Agreement to either civil or criminal liability as a result of being
in excess of the maximum interest rate which SPTMRT is permitted by applicable
law to contract or agree to pay. If by the terms of this Security Instrument,
the Loan Agreement or any other Loan Document, SPTMRT is at any time required or
obligated to pay interest on the Debt at a rate in excess of such maximum rate,
the rate of interest under this Security Instrument, the Loan Agreement and any
such other Loan Document shall be deemed to be immediately reduced to such
maximum rate and the interest payable shall be computed at such maximum rate and
all prior interest payments in excess of such maximum rate shall be applied and
shall be deemed to have been payments in reduction of the principal balance of
the Debt. All sums paid or agreed to be paid to Lender for the use, forbearance
or detention of the Debt shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Loan Agreement until payment in full so that the rate or amount of interest
on account of the Debt does not exceed the maximum lawful rate of interest from
time to time in effect and applicable to the Debt for so long as the Debt is
outstanding.
Section 15.3 PROVISIONS SUBJECT TO APPLICABLE LAW. All rights, powers and
remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any Applicable Law.
Section 15.4 INAPPLICABLE PROVISION. If any term of this Security
Instrument or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application of the term
shall not be affected thereby.
ARTICLE 16 - COSTS
Section 16.1 ATTORNEY'S FEES FOR ENFORCEMENT. SPTMRT shall pay or cause to
be paid on demand all legal fees and expenses incurred by Lender, including
reasonable attorneys' fees and expenses, incurred or paid by Lender or Trustee
in protecting its interest in the Property or the Collateral or in
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collecting any amount payable hereunder or in enforcing its rights hereunder
with respect to the Property or the Collateral, whether or not any legal
proceeding is commenced hereunder or thereunder and whether or not any default
or Event of Default shall have occurred, together with interest thereon at the
Default Rate from the date paid or incurred by Lender or Trustee until such
expenses are paid by SPTMRT.
ARTICLE 17 - DEFINITIONS
Section 17.1 GENERAL DEFINITIONS. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, (i) words used
in this Security Instrument may be used interchangeably in singular or plural
form, (ii) "SPTMRT" shall mean SPTMRT and any subsequent owner or owners of the
Property or any part thereof or any interest therein, (iii) "LENDER" shall mean
Dresdner Bank AG and its successors and assigns as Administrative Agent for
itself as Lender and for all other present and future Lenders under the Loan
Agreement and holders of the Loans and Notes from time to time under the Loan
Agreement, (iv) "PERSON" shall include an individual, corporation, limited
liability company, partnership, trust, unincorporated association, government,
governmental authority, and any other entity, (v) "Property" shall include any
portion of the Property and any interest therein, (vi) "TRUSTEE" shall mean
Trustee and its successors and assigns, and (vii) "attorneys' fees" and "counsel
fees" shall include any and all attorneys', paralegal and law clerk fees and
disbursements, including, but not limited to fees and disbursements at the
pre-trial, trial and appellate levels incurred or paid by Lender in protecting
its interest in the Property, the Leases and the Rents and enforcing its rights
under this Security Instrument. In addition, any reference herein to the Loan
Agreement, the Notes, the Other Loan Documents, the other Security Documents or
any other document or instrument shall include all exhibits and schedules
thereto, any and all modifications, amendments and supplements thereto from time
to time and any and all extensions, renewals, restatements and replacements
thereof and substitutions therefor.
Section 17.2 HEADINGS, ETC. The headings and captions of various Sections
of this Security Instrument are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
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ARTICLE 18 - MISCELLANEOUS PROVISIONS
Section 18.1 NO ORAL CHANGE. This Security Instrument, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of SPTMRT, Lender
or Trustee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
Section 18.2 LIABILITY. If SPTMRT consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of SPTMRT and Lender and their respective successors and assigns forever.
Section 18.3 DUPLICATE ORIGINALS; COUNTERPARTS. This Security Instrument
may be executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Security Instrument may be executed in
several counterparts, each of which counterparts shall be deemed an original
instrument and all of which together shall constitute a single Security
Instrument. The failure of any party hereto to execute this Security Instrument,
or any counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.
Section 18.4 NUMBER AND GENDER. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
Section 18.5 ENTIRE AGREEMENT. The Loan Agreement, the other Loan
Documents, this Security Instrument and the Other Security Documents constitute
the entire understanding and agreement between SPTMRT, Lender and Trustee with
respect to the transactions arising in connection with the Debt and supersede
all prior written or oral understandings and agreements between SPTMRT and
Lender with respect thereto.
Section 18.6 NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST
ESTABLISHING SPTMRT, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO IS
DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME OF "SPTMRT PROPERTIES TRUST" REFERS TO THE
TRUSTEES UNDER THE DECLARATION OF TRUST AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF
SPTMRT
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SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, SPTMRT.
ARTICLE 19 - LOCAL LAW PROVISIONS
Section 19.1 LOCAL LAW PROVISIONS. The provisions set forth on EXHIBIT B
annexed hereto are incorporated herein by reference as if fully set forth
herein.
ARTICLE 20 - TRUSTEE PROVISIONS
Section 20.1 THE TRUSTEE.
(a) It shall be no part of the duty of Trustee to see to any recording, filing
or registration of this Security Instrument or any other instrument in
addition or supplemental hereto, or to give any notice thereof, or to see
to the payment of or be under any duty in respect of any tax or assessment
or other governmental charge which may be levied or assessed on the
Property, or any part thereof, or against SPTMRT or to see to the
performance or observance by SPTMRT of any of the covenants and agreements
contained herein. Trustee shall not be responsible for the execution,
acknowledgment or validity of this Security Instrument or of any instrument
in addition or supplemental hereto or for the sufficiency of the security
purported to be created hereby, and makes no representation in respect
thereof or in respect of the rights of Lender. Trustee shall have the right
to advice of counsel upon any matters arising hereunder and shall be fully
protected in relying as to legal matters on the advice of counsel. Trustee
shall not incur any personal liability hereunder except for Trustee's own
gross negligence or willful misconduct and Trustee shall have the right to
rely on any instrument, document or signature authorizing or supporting any
action taken or proposed to be taken by Trustee hereunder and believed by
Trustee in good faith to be genuine.
(b) Trustee may resign by an instrument in writing addressed to Lender, or
Trustee may be removed at any time with or without cause by an instrument
in writing executed by Lender, and without the consent of or prior notice
to SPTMRT. In case of the death, resignation, removal or disqualification
of Trustee, or if for any reason Lender shall deem it desirable to appoint
a substitute or successor trustee to act instead of the herein named
Trustee or any substitute or successor trustee, then Lender shall have the
right and is hereby authorized and empowered to appoint a substitute or
successor trustee, without other formality than appointment and designation
in writing executed by Lender, and without the consent of or prior notice
to SPTMRT, which substituted trustee may be Lender or an affiliate of
Lender, and the authority hereby conferred shall extend to the appointment
of other successor and substitute trustees successively until the Debt
secured hereby has been paid in full, or until the Property is fully and
finally sold hereunder. Such appointment and designation by Lender shall be
full evidence of the right and authority to make the same and of all facts
therein recited. If Lender is a corporation or
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association and such appointment is executed in its behalf by an officer of such
corporation or association, such appointment shall be conclusively presumed to
be executed with authority and shall be valid and sufficient without proof of
any action by the board of directors or any superior officer of the corporation
or association. Upon the making of any such appointment and designation, all of
the estate and title of Trustee in the Property shall vest in the named
successor or substitute trustee, and the named successor or substitute trustee
shall thereupon succeed to and shall hold, possess and execute all of the
rights, powers, privileges, immunities and duties herein conferred upon trustee;
but, nevertheless, upon the written request of Lender or of the successor or
substitute trustee, the Trustee ceasing to act shall execute and deliver an
instrument transferring to such successor or substitute trustee all of the
estate and title in the Property of the trustee so ceasing to act, together with
all the rights, powers, privileges, immunities and duties herein conferred upon
the Trustee, and shall duly assign, transfer and deliver any of the properties
and moneys held by said Trustee hereunder to said successor or substitute
trustee. All references herein to "Trustee" shall be deemed to refer to Trustee
(including any successor or substitute appointed and designated as herein
provided) from time to time acting hereunder.
(c) Trustee shall not be liable for any error of judgement or act done by
Trustee in good faith, or be otherwise responsible or accountable under any
circumstances whatsoever (including Trustee's negligence), except for
Trustee's gross negligence or willful misconduct. Trustee shall have the
right to rely on any instrument, document or signature authorizing or
supporting any action taken or proposed to be taken by Trustee hereunder,
believed by Trustee in good faith to be genuine. All moneys received by
Trustee shall, until used or applied as herein provided, be held in trust
for the purposes for which they were received, but need not be segregated
in any manner from any other moneys (except to the extent required by law),
and Trustee shall be under no liability for interest on any moneys received
by Trustee hereunder. SPTMRT hereby ratifies and confirms any and all acts
which the herein-named Trustee or its successor or successors, substitute
or substitutes, in this trust, shall do lawfully by virtue hereof. SPTMRT
will reimburse Trustee for, and save Trustee harmless against, any and all
liability and expenses which may be incurred by Trustee in the performance
of Trustee's duties. The foregoing indemnity shall not terminate upon
discharge of the secured Debt or foreclosure, or release or other
termination, of this Security Instrument.
[Remainder of page intentionally left blank]
48
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by SPTMRT as
of the date first above written.
SPTMRT:
SPTMRT PROPERTIES TRUST, a
Maryland real estate investment trust
By: ___________________________________
Name:
Title:
49
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF MIDDLESEX )
The foregoing instrument was acknowledged before me this _______ day of
September, 1999, by __________________________________________ , the
__________________________ of SPTMRT PROPERTIES TRUST, a Maryland real estate
investment trust, on behalf of that trust.
______________________________________
Notary Public
My commission expires:
___________________________
50
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EXHIBIT A
(Description of Land)
A-1
<PAGE>
EXHIBIT B
(Local Law Provisions)
1. FIXTURE FILING. Upon its recording in the real property records, this
Security Instrument shall be effective as a financing statement filed as a
fixture filing. In addition, a carbon, photographic or other reproduced copy of
this Security Instrument and/or any financing statement relating hereto shall be
sufficient filing and/or recording as a financing statement. The filing of any
other financing statement relating to any personal property, rights or interests
described herein shall not be construed to diminish any right or priority
hereunder.
2. Section 2.1 DEBT. The following provision is added to the end of Section
2.1(d) hereof:
The Notes bear interest at a variable rate in accordance with the terms
and provisions thereof which are by this reference incorporated herein.
3. COMMUNITY FACILITIES DISTRICT. Without obtaining the prior written
consent of Lender, SPTMRT shall not consent to, or vote in favor of, the
inclusion of all or any part of the Property in any Community Facilities
District formed pursuant to the Community Facilities District Act, A.R.S.
Section 48-701, ET SEQ., as amended from time to time. SPTMRT shall immediately
give notice to Lender of any notification or advice that SPTMRT may receive from
any municipality or other third party of any intent or proposal to include all
or any part of the Property in a Community Facilities District. Lender shall
have the right to file a written objection to the inclusion of all or any part
of the Property in a Community Facilities District, either in its own name or in
the name of SPTMRT, and to appear at, and participate in, any hearing with
respect to the formation of any such district.
4. NON-TRUSTOR BORROWER PROVISIONS.
(A) All advances of principal under the Notes shall be made to SHPT subject to
and in accordance with the terms thereof. If SPTMRT is a corporation,
limited liability company, partnership or trust, it is not necessary for
Lender or Trustee to inquire into the powers of SHPT or the officers,
directors, members, managers, partners, trustees or agents acting or
purporting to act on its behalf. SPTMRT is and shall continue to be fully
informed as to all aspects of the business affairs of SHPT that it deems
relevant to the risks it is assuming and hereby waives and fully discharges
Lender and Trustee from any and all obligations to communicate to SPTMRT
any facts of any nature whatsoever regarding SHPT and SHPT's business
affairs.
B-1
<PAGE>
(B) SPTMRT authorizes Lender, without notice or demand, without affecting the
obligations of SPTMRT hereunder or the personal liability of any person for
payment or performance of the Obligations and without affecting the lien or
the priority of the lien of this Security Instrument, from time to time, at
the request of any person primarily obligated therefor, to renew,
compromise, extend, accelerate or otherwise change the time for payment or
performance of, or otherwise change the terms of, all or any part of the
Obligations, including increase or decrease any rate of interest thereon.
SPTMRT waives and agrees not to assert: (i) any right to require Lender to
proceed against SHPT; (ii) the benefits of any statutory provision limiting
the liability of a surety, including without limitation, the benefit of
Section 12-1641, ET SEQ., of the Arizona Revised Statutes; and (iii) any
defense arising by reason of any disability or other defense of SHPT or by
reason of the cessation from any cause whatsoever of the liability of SHPT.
SPTMRT shall have no right of subrogation and hereby waives any right to
enforce any remedy which Lender now has, or may hereafter have, against
SHPT.
5. Section 15.1 CHOICE OF LAW; CONSENT OF JURISDICTION. The following
provision replaces all of the language in Section 15.1 hereof:
THIS SECURITY INSTRUMENT, THE OBLIGATIONS AND THE AGREEMENTS OF ANY
PERSON OR ENTITY TO PAY OR PERFORM THE OBLIGATIONS SHALL BE GOVERNED
BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF NEW YORK
(INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT GIVING EFFECT TO
CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE STATE IN
WHICH THE LAND IS LOCATED MAY REQUIRE THAT ITS LAWS BE APPLIED TO THE
CREATION AND PRIORITY OF LIENS, TO THE PERFECTION OF SECURITY
INTERESTS AND TO ANY FORECLOSURE, TRUSTEE'S SALE, APPOINTMENT OF
RECEIVER OR OTHER REMEDY WITH RESPECT TO THE PROPERTY. ANY PROCEDURES
PROVIDED HEREIN FOR SUCH REMEDIES SHALL BE MODIFIED BY AND REPLACED
WITH, WHERE INCONSISTENT WITH OR REQUIRED BY, ANY PROCEDURES OR
REQUIREMENTS OF THE LAWS OF THE STATE IN WHICH THE LAND IS LOCATED.
6. CONFLICT. If there is any conflict between any of the provisions of this
Security Instrument and the Assignment of Leases, Rents and Lease Guaranties
dated as of the date hereof between SPTMRT and the Lender, this Security
Instrument shall control.
7. Provisions of the Loan Agreement related to advances, repayment and
readvances are incorporated herein by this reference.
B-2
<PAGE>
8. Reduction of the indebtedness to a zero balance shall not cause the
mortgage to become extinguished by operation of law.
B-3
<PAGE>
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT") dated as
of September 15, 1999 is made by SENIOR HOUSING PROPERTIES TRUST, a Maryland
real estate investment trust (together with its successors and assigns, the
"PLEDGOR"), in favor of DRESDNER BANK AG, a German banking corporation acting
through its New York Branch, as Administrative Agent (including any successor
Administrative Agent under the Revolving Loan Agreement described below, the
"ADMINISTRATIVE AGENT") for itself as a lender and the other lenders now or
hereafter from time to time parties to the Revolving Loan Agreement described
below (collectively, the "LENDERS").
A. The Pledgor is the sole owner of (i) all of the shares of
beneficial ownership interests in SPTMRT Properties Trust, a Maryland real
estate investment trust ("SPTMRT") and (ii) all of the shares of beneficial
ownership interests in SPTBROOK Properties Trust, a Maryland real estate
investment trust ("SPTBROOK").
B. The Pledgor, SPTMRT and SPTBROOK have asked Lenders to make
a $350,000,000 secured revolving loan facility available to the Pledgor for the
purpose of making loans to the Pledgor from time to time up to an aggregate
principal amount outstanding of $350,000,000 (the "LOANS") for certain business
purposes of the Pledgor and its subsidiaries, including, without limitation,
SPTMRT and SPTBROOK, pursuant to a Revolving Loan Agreement dated as of
September XX, 1999 among the Pledgor, the Administrative Agent, the Lenders and
SPTMRT and SPTBROOK, as Guarantors (as amended, supplemented or otherwise
modified from time to time, the "REVOLVING LOAN AGREEMENT") under which the
Pledgor has issued notes to the Lenders in the aggregate principal amount of
$350,000,000 to evidence the Loans (as the same may be amended, modified and
replaced from time to time, the "NOTES"). One or more Notes may be assigned in
whole or in part by one Lender to another Lender from time to time under the
Revolving Loan Agreement and thereupon replaced with new Notes reflecting such
assignments in accordance with the terms of the Revolving Loan Agreement. Loans
made under the Revolving Loan Agreement may be advanced, repaid and readvanced
in whole or in part from time to time subject to the terms and conditions of the
Revolving Loan Agreement. It is the intent of the Pledgor, the Administrative
Agent and the Lenders that all such Notes and Loans outstanding from time to
time shall be secured by this Agreement.
C. The payment of the Loans and Notes and all other amounts
payable from time to time under the Revolving Loan Agreement, the Notes and the
other LOAN DOCUMENTS (which term is used herein as defined in the Revolving Loan
Agreement) and the performance of the Pledgor's obligations thereunder are (i)
jointly and severally guaranteed by SPTMRT and SPTBROOK under the Revolving Loan
Agreement and (ii) secured by mortgage and security agreements or deeds of trust
and security agreements on each of the properties of SPTMRT and SPTBROOK.
<PAGE>
D. The Lenders are willing to make the Loans upon the terms
and subject to the conditions set forth in the Revolving Loan Agreement, which
include, among other things, the execution and delivery of this Agreement to the
Administrative Agent for the Lenders.
E. The Pledgor will receive substantial benefit from the Loans
made under the Revolving Loan Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt of which is hereby acknowledged,
and intending to be legally bound, the Pledgor hereby agrees as follows:
1. DEFINED TERMS. In this Agreement, terms defined above shall
have the meanings set forth above. In addition, capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to such terms
in the Revolving Loan Agreement.
2. PLEDGE OF SHARES OF BENEFICIAL INTERESTS.
(a) In consideration of the Lenders' undertaking pursuant
to the Revolving Loan Agreement and the Loans actually made under the Revolving
Loan Agreement, and in order to secure the payment by the Pledgor, SPTMRT and
SPTBROOK of all sums due from time to time to the Lenders or the Administrative
Agent pursuant to the Notes, the Revolving Loan Agreement and the other Loan
Documents and the due performance by the Pledgor, SPTMRT and SPTBROOK of all of
the obligations, terms, covenants, representations, warranties and conditions
contained therein, the Pledgor hereby pledges, assigns and delivers to the
Administrative Agent and grants to the Administrative Agent a security interest
in (i) all shares of beneficial ownership in SPTMRT and SPTBROOK and all
certificates evidencing such shares (collectively, the "SHARES"), (ii) the
Pledgor's interests in profits, losses, allocations and distributions of and
from SPTMRT and SPTBROOK, (iii) the Pledgor's right to vote or grant or withhold
consents with respect to SPTMRT and SPTBROOK as provided in Title 8 of the
Corporations and Associations Article of the Annotated Code of Maryland (the
"MARYLAND REIT LAW"), and (iv) the Pledgor's other rights and privileges as
provided in SPTMRT's Declaration of Trust, SPTBROOK's Declaration of Trust and
the Maryland REIT Law, together with all additional interests in SPTMRT or
SPTBROOK which may hereafter be issued to the Pledgor, all proceeds and
substitutions of any thereof, all cash, shares and other monies and property
paid thereon, all rights to subscribe for securities declared or granted in
connection therewith, and all other cash and non-cash proceeds of the foregoing
(all of the foregoing collateral described in clauses (i) through (iv) being
herein collectively called the "PLEDGED COLLATERAL"), as security for the prompt
payment of the Notes, all obligations of the Pledgor pursuant to this Agreement
and all obligations of the Pledgor, SPTMRT and SPTBROOK pursuant to the
Revolving Loan Agreement, the other Loan Documents and any amendments, renewals
and extensions thereof (collectively, the "SECURED OBLIGATIONS"). The term
Pledged Collateral shall include the Shares and any other securities,
instruments or distributions of any kind issuable, issued or received by the
Pledgor upon conversion of, in respect of, on account of, or in exchange or
substitution for any other Pledged Collateral, including, but not limited to,
those arising from a dividend, reclassification, reorganization, merger,
consolidation, sale of assets or other exchange of
2
<PAGE>
securities or any dividends or other distributions of any kind upon or with
respect to the Pledged Collateral.
(b) The Shares and any other certificates for any securities
included in the Pledged Collateral, including any certificates evidencing the
Pledgor's beneficial ownership interests in SPTMRT or SPTBROOK, accompanied by
instruments of assignment duly executed in blank by the Pledgor, have been, or
will be immediately upon the subsequent receipt thereof by the Pledgor, accepted
by the Pledgor as the Administrative Agent's agent in trust for the
Administrative Agent and delivered by the Pledgor to the Administrative Agent.
The Administrative Agent may at any time after an Event of Default and during
the continuation thereof effect the transfer of the Shares and any other
certificates or securities included in the Pledged Collateral into the name of
the Administrative Agent or its nominee and cause new certificates or securities
to be issued in the name of the Administrative Agent or its nominee (or the
Lenders or their nominees). Prior to an Event of Default, the Administrative
Agent shall not effect the transfer of any such certificates or securities, but
shall hold such certificates or securities as evidence of the pledge and
security interest granted pursuant to this Agreement.
3. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants to the Administrative Agent and the Lenders and that:
(a) The Pledgor is a real estate investment trust duly
organized, validly existing and in good standing under the laws of the State of
Maryland.
(b) This Agreement has been duly authorized, executed and
delivered by the Pledgor and such execution and delivery and the performance by
the Pledgor of the Pledgor's obligations hereunder will not violate any
provision of law or any judgment, order or regulation of any court or of any
public or governmental agency or authority applicable to the Pledgor or of the
Declaration of Trust, bylaws or any other organizational documents of the
Pledgor and will not conflict with or constitute a breach of or a default under
any agreement, indenture or instrument to which the Pledgor is a party or by
which the Pledgor or any of the Pledgor's property is bound, and this Agreement
constitutes the legal, valid and binding obligation of the Pledgor enforceable
in accordance with its terms;
(c) All of the Pledged Collateral has been validly issued
and is fully paid and nonassessable and is owned by the Pledgor free and clear
of all security interests, liens, encumbrances or other restrictions except the
interest of the Administrative Agent pursuant to this Agreement and the
restrictions on transfer referred to in Section 7(b) hereof, and no disability
or contractual obligation exists which would prohibit the Pledgor from pledging
the Pledged Collateral pursuant to this Agreement;
(d) The Pledgor has full power and authority to create a
first lien on the Pledged Collateral in favor of the Administrative Agent and
upon delivery of the Pledged Collateral to the Administrative Agent, this
Agreement shall create a valid first lien upon and perfected security interest
in the Pledged Collateral subject to no prior security interest, lien,
encumbrance or other restriction;
3
<PAGE>
(e) The Pledged Collateral is not the subject of any
present suit, action, arbitration, administrative or other proceeding, and the
Pledgor knows of no such threatened proceedings nor any reasonable grounds for
the institution of any such proceedings;
(f) There are no outstanding securities convertible into,
or exchangeable for, beneficial or other ownership interests in either SPTMRT or
SPTBROOK, or any warrants, options, rights or other commitments entitling any
Person to purchase or otherwise acquire beneficial or other ownership interests
therein, or agreements of any kind to issue any additional beneficial or other
ownership interests in either SPTMRT or SPTBROOK;
(g) The chief executive office of the Pledgor is at the
address set forth in, or subsequently designated pursuant to, Section 10 hereof.
All the above representations and warranties shall survive the
making of this Agreement.
4. COVENANTS. The Pledgor hereby covenants that, until all
of the Secured Obligations have been satisfied in full, it will:
(a) Not sell, convey or otherwise dispose of any of the
Pledged Collateral or any interest therein or create, incur or permit to exist
any pledge, mortgage, lien, charge or encumbrance or any security interest
whatsoever in or with respect to any of the Pledged Collateral other than that
created hereby;
(b) Defend, at its own expense, the Administrative Agent's
right, title and security interest on behalf of the Lenders in and to the
Pledged Collateral against the claims of any and all Persons;
(c) Not consent to or approve the issuance of any
beneficial or other ownership interests in either SPTMRT or SPTBROOK; or any
securities convertible into, or exchangeable for, any such ownership interests;
or any warrants, options, rights or other commitments entitling any Person to
purchase or otherwise acquire any such ownership interests; and
(d) Provide the Administrative Agent with written notice of
any change in the location of the chief executive office of the Pledgor at least
30 days prior to such change.
5. VOTING AND CASH DIVIDENDS PRIOR TO DEFAULT. Unless an Event
of Default hereunder shall have occurred and be continuing, the Pledgor shall be
entitled to exercise any voting rights with respect to the Pledged Collateral,
to give consents, waivers and ratifications in respect thereof and to receive
and retain all dividends paid in respect of the Pledged Collateral; provided
that no vote shall be cast or consent, waiver or ratification given or action
taken which would be inconsistent with any of the terms of this Agreement, the
Revolving Loan Agreement, any other Loan Document or any instrument executed and
delivered pursuant thereto, or which
4
<PAGE>
would constitute or create any violation of any of such terms, or which would
otherwise cause a material decrease in the value of or other deterioration of
the Pledged Collateral. All such rights of the Pledgor to vote and give
consents, waivers and ratifications shall cease if an Event of Default shall
occur and be continuing in which event whether or not the Pledged Collateral
shall have been registered in the Administrative Agent's or its nominee's name,
the Administrative Agent or its nominee shall have the right to exercise all
voting rights with respect to the Pledged Collateral and any dividends or
distributions thereafter declared or paid shall be delivered to the
Administrative Agent and applied toward satisfaction of the Secured Obligations.
6. EVENTS OF DEFAULT. Each of the following shall constitute
an event of default ("EVENT OF DEFAULT") hereunder:
(a) The occurrence of an Event of Default (as such term is
defined in the Revolving Loan Agreement); or
(b) Failure by the Pledgor to observe or perform any of the
provisions of this Agreement and such failure shall continue unremedied for a
period of 30 days after the date the Administrative Agent notifies the Pledgor
in writing of such failure; or
(c) Any representation or warranty of the Pledgor made
herein proves to be false or misleading in any material respect on or as of the
date made or deemed made.
7. ADMINISTRATIVE AGENT'S REMEDIES UPON DEFAULT.
(a) Upon the occurrence of an Event of Default, the
Administrative Agent shall have the right to exercise all such rights as a
secured party under the Uniform Commercial Code of the State of New York or any
other applicable jurisdiction as it, in its sole judgment, shall deem necessary
or appropriate, without demand of performance or other demand, advertisement, or
notice of any kind (except the notice specified below of time and place of
public or private sale) to or upon the Pledgor or any other Person (all of which
are to the extent permitted by law, hereby expressly waived by the Pledgor),
including the right to sell all or any part of the Pledged Collateral at one or
more public or private sales at any exchange, broker's board or at any of the
Administrative Agent's offices or elsewhere; and any such sale or sales may be
made for cash, upon credit, or for future delivery, and in connection therewith,
the Administrative Agent may grant options, provided that any such terms or
options shall, in the best judgment of the Administrative Agent, be extended
only in order to obtain the best possible price. The Administrative Agent need
not give more than ten (10) days notice of the time and place of any public sale
or of the time after which a private sale or other disposition of the Pledged
Collateral may take place, which notice the Pledgor hereby deems reasonable. No
sale of any Pledged Collateral upon a generally recognized securities exchange
through a registered securities broker will give rise to a credit against the
Secured Obligations until such broker credits the Administrative Agent's account
with the sale proceeds. The Administrative Agent may resort first to the
security created by this Agreement or first to the security afforded by any
other Loan Document or any other instrument, in any such case without affecting
the Administrative Agent's or the Lenders' rights under this Agreement.
5
<PAGE>
(b) The Pledgor recognizes that the Administrative Agent
may be unable to effect a public sale of all or a part of the Pledged Collateral
by reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "ACT"), so that the Administrative Agent may be compelled to resort
to one or more private sales to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire the Pledged Collateral for
their own account, for investment and without a view to the distribution or
resale thereof. The Pledgor understands that private sales so made may be at
prices and on other terms less favorable to the seller than if the Pledged
Collateral were sold at public sales, and agrees that the Administrative Agent
has no obligation to delay the sale of any of the Pledged Collateral for the
period necessary to permit SPTMRT or SPTBROOK (even if it would agree) to
register such securities for sale under the Act. The Pledgor agrees that private
sales made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner. On any sale of the Pledged Collateral, the
Administrative Agent is hereby authorized to comply with any limitation or
restriction, compliance with which is necessary, in the view of the
Administrative Agent's counsel, in order to avoid any violation of applicable
law or in order to obtain any required approval of the purchaser by any
applicable governmental authority.
(c) After the sale of any of the Pledged Collateral, the
Administrative Agent may deduct all reasonable legal and other expenses and
attorney's fees for preserving, collecting, selling and delivering the Pledged
Collateral and for enforcing its rights with respect to the Secured Obligations,
and shall apply the residue of the proceeds to, or hold it as a reserve against,
the Secured Obligations in such manner as the Administrative Agent in its sole
discretion (after consultation with the Lenders) shall determine, and shall pay
the balance, if any, to the Pledgor. To facilitate the exercise of the
Administrative Agent's remedies following an Event of Default, the Pledgor
hereby appoints any officer of the Administrative Agent as its attorney-in-fact
to collect and receive all payments in respect of the Pledged Collateral, and to
endorse the name of the Pledgor thereto for such purpose, and to apply such
receipts to the Secured Obligations and to execute on behalf of the Pledgor all
financing statements and other documents necessary to perfect and maintain the
Administrative Agent's security interest in the Pledged Collateral. The remedies
provided herein in favor of the Administrative Agent shall not be deemed
exclusive, but shall be cumulative, and shall be in addition to all other legal
and equitable remedies which the Administrative Agent or the Lenders may have,
and no delay on the part of the Administrative Agent in exercising any of its
powers or rights, or any partial or single exercise thereof, shall constitute a
waiver thereof.
8. RELEASE OF PLEDGED COLLATERAL. Upon termination of all
Commitments and satisfaction in full of the Secured Obligations and of all
additional costs and expenses of the Administrative Agent and the Lenders as
provided herein and performance of all obligations of the Pledgor, SPTMRT and
SPTBROOK under the Revolving Loan Agreement, the Notes and the other Loan
Documents, and termination of all obligations of the Administrative Agent and
the Lenders under the Revolving Loan Agreement, this Agreement shall terminate
and the Administrative Agent shall deliver to the Pledgor, at the Pledgor's
expense, such of the Pledged Collateral as shall not have been sold or otherwise
applied pursuant to this Agreement.
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<PAGE>
9. PLEDGOR'S OBLIGATIONS ABSOLUTE. The obligations of the
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
discharged or in any way impaired by any circumstance whatsoever, including
without limitation: (a) any renewal, extension, refunding, amendment,
modification or replacement of or addition or supplement to or deletion from the
Revolving Loan Agreement, any Note, any other Loan Document or any other
instrument provided for in the Revolving Loan Agreement, or any assignment or
transfer of any thereof; (b) any waiver, consent, extension, indulgence or other
action or inaction under or in respect of any such instrument or any exercise or
non-exercise of any right, remedy, power or privilege under or in respect of any
such instrument or this Agreement; (c) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or similar
proceeding with respect to the Pledgor, SPTMRT or SPTBROOK or any of its or
their properties; or (d) any limitation on the liability or obligations of the
Pledgor, SPTMRT or SPTBROOK under any such instrument or any invalidity or
unenforceability, in whole or in part, of any such instrument or any term
thereof; whether or not the Pledgor shall have notice or knowledge of any of the
foregoing.
10. NOTICES. All notices, consents and other communications to
the Pledgor or the Administrative Agent and/or the Lenders relating hereto to be
effective shall be in writing and shall be deemed made (i) if by mail or
facsimile, when received, (ii) if by telex, when sent answerback received, and
(iii) if by courier, when receipted for, in each case addressed to them as
follows or at such other address as either of them may designate by written
notice to the other:
If to the Pledgor:
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attention: Messrs. David J. Hegarty and Ajay Saini
Telecopier: (617) 332-2261
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Jr.
Telecopier: (617) 338-2880
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If to the Administrative Agent and/or the Lenders:
Dresdner Bank AG
New York Branch
75 Wall Street
New York, NY 10005
Attention: Andrew P. Nesi, Vice President
Birgit Anderson, Assistant Treasurer
Telephone: (212) 429-2201/2747
Telecopier: (212) 429-2129
Any failure by the Administrative Agent to provide a copy of any notice to the
second address of the Pledgor shown above shall not effect the validity of such
notice if delivered to the first address of the Pledgor shown above.
11. EXPENSES. The Pledgor agrees to pay or cause to be paid
and to save the Administrative Agent and the Lenders harmless against liability
for the payment of all reasonable out-of-pocket expenses, including fees and
expenses of counsel for the Administrative Agent and the Lenders, incurred by
the Administrative Agent and the Lenders from time to time arising in connection
with the Administrative Agent's and the Lenders' enforcement or preservation of
rights under this Agreement with respect to the Pledgor, including, but not
limited to, such expenses as may be incurred by the Administrative Agent or any
Lender in connection with any default by the Pledgor of any of its obligations
hereunder.
12. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.
NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, THE PLEDGOR HEREBY
IRREVOCABLY (a) SUBMITS TO THE NON-EXCLUSIVE PERSONAL JURISDICTION OF ANY
STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN ANY SUIT, ACTION OR OTHER
LEGAL PROCEEDING RELATING TO THIS AGREEMENT; (b) AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH SUIT, ACTION OR OTHER LEGAL PROCEEDING MAY BE HEARD AND
DETERMINED IN, AND ENFORCED IN AND BY, ANY SUCH COURT; (c) WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO VENUE IN ANY SUCH COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM; (d) AGREES TO SERVICE OF PROCESS IN
ANY SUCH PROCEEDING BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, OR BY
TELEX, OR IN ANY OTHER MANNER PERMITTED BY LAW, TO ANY THEN DESIGNATED AGENT
FOR SERVICE OF PROCESS ("PROCESS AGENT") AT ANY SPECIFIED ADDRESS OR TO THE
PLEDGOR AT ITS ADDRESS SET FORTH HEREIN OR TO SUCH OTHER ADDRESS OF WHICH THE
ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED IN WRITING (SUCH SERVICE TO BE
EFFECTIVE ON THE EARLIER OF RECEIPT THEREOF OR, IN THE CASE OF SERVICE BY
MAIL, THE FIFTH DAY AFTER DEPOSIT OF SUCH SERVICE IN THE MAILS AS AFORESAID),
AND HEREBY WAIVES ANY CLAIM OF ERROR ARISING OUT OF SERVICE OF PROCESS BY ANY
METHOD PROVIDED FOR HEREIN OR ANY CLAIM THAT SUCH SERVICE WAS NOT EFFECTIVELY
MADE; (e) AGREES THAT THE FAILURE OF ITS PROCESS
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AGENT FOR SERVICE OF PROCESS TO GIVE ANY NOTICE OF ANY SUCH SERVICE OF
PROCESS TO IT SHALL NOT IMPAIR OR EFFECT THE VALIDITY OF SUCH SERVICE OR ANY
JUDGMENT BASED THEREON; (f) TO THE EXTENT THAT THE PLEDGOR HAS ACQUIRED, OR
HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY SUCH COURT OR
FROM LEGAL PROCESS THEREIN, WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, SUCH IMMUNITY; (g) WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, IN CONNECTION WITH, OR WITH RESPECT TO, ANY SUIT, ACTION OR
OTHER LEGAL PROCEEDING RELATING TO THIS AGREEMENT, (i) ANY CLAIM THAT IT IS
IMMUNE FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE)
WITH RESPECT TO IT OR ANY OF ITS PROPERTY, (ii) ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, (iii) ANY RIGHT TO
A JURY TRIAL, AND (iv) ANY RIGHT TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION
TO, DIRECT DAMAGES; AND (h) AGREES THAT THE ADMINISTRATIVE AGENT SHALL HAVE
THE, RIGHT TO BRING ANY LEGAL PROCEEDINGS (INCLUDING A PROCEEDING FOR
ENFORCEMENT OF A JUDGMENT ENTERED BY ANY OF THE AFOREMENTIONED COURTS)
AGAINST THE PLEDGOR IN ANY OTHER COURT OR JURISDICTION IN ACCORDANCE WITH
APPLICABLE LAW. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT IN THE COURTS OF ANY OTHER JURISDICTION
OR THE RIGHT, IN CONNECTION WITH ANY LEGAL ACTION OR PROCEEDING WHATSOEVER,
TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. THE PLEDGOR
HEREBY IRREVOCABLY DESIGNATES CORPORATION SERVICE COMPANY, WITH OFFICES AT 2
WORLD TRADE CENTER, SUITE 8746, NEW YORK, NEW YORK 10048, AS ITS PROCESS
AGENT TO RECEIVE SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS ON ITS BEHALF
IN ANY LEGAL PROCEEDING IN THE STATE OF NEW YORK, AND SUCH PROCESS AGENT, BY
SEPARATE INSTRUMENT, HAS AGREED TO SO ACT AS PROCESS AGENT FOR SERVICE OF
PROCESS. IF SUCH PROCESS AGENT SHALL FOR ANY REASON FAIL TO ACT, OR BE
PREVENTED FROM ACTING, AS SUCH PROCESS AGENT, NOTICE THEREOF SHALL
IMMEDIATELY BE GIVEN TO THE ADMINISTRATIVE AGENT BY REGISTERED OR CERTIFIED
MAIL AND THE PLEDGOR AGREES PROMPTLY TO DESIGNATE ANOTHER PROCESS AGENT IN
THE CITY OF NEW YORK, SATISFACTORY TO THE ADMINISTRATIVE AGENT TO SERVE IN
PLACE OF SUCH PROCESS AGENT AND DELIVER TO THE ADMINISTRATIVE AGENT WRITTEN
EVIDENCE OF SUCH SUBSTITUTE PROCESS AGENT'S ACCEPTANCE OF SUCH DESIGNATION.
SUCH ACTING PROCESS AGENT SHALL NEVERTHELESS CONTINUE TO SERVE AS PROCESS
AGENT UNTIL ITS SUCCESSOR IS DULY APPOINTED.
13. MISCELLANEOUS.
(a) Other than the exercise of reasonable care to assure
the safe physical custody of the Pledged Collateral while held by the
Administrative Agent hereunder,
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the Administrative Agent and the Lenders shall have no duty or liability,
including without limitation, any obligation or duty to collect any sums due in
respect thereof or to protect or preserve any rights against prior parties or
any other rights pertaining thereto and shall be relieved of all responsibility
for the Pledged Collateral upon surrendering it or tendering surrender of it to
the Pledgor.
(b) The Pledgor, at its expense, will execute, acknowledge
and deliver all such instruments in form satisfactory to the Administrative
Agent and take all such action as the Administrative Agent from time to time may
reasonably require in order further to effectuate the purposes of this Agreement
and to carry out the terms hereof, including without limitation, delivering to
the Administrative Agent upon the occurrence of an Event of Default irrevocable
proxies with respect to the Pledged Collateral. Until receipt thereof, this
Agreement shall constitute the Pledgor's proxy to the Administrative Agent or
its nominee to vote the Pledged Collateral then registered in the Pledgor's
name, subject to the terms of Section 5 of this Agreement.
(c) This Agreement shall inure to the benefit of and shall
be binding upon the successors and assigns of the parties hereto.
(d) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(e) The section headings used herein are for convenience
only and do not affect or modify the terms and conditions hereof.
(f) If any provision hereof is found by a court of
competent jurisdiction to be prohibited or unenforceable, it shall be
ineffective only to the extent of such prohibition or unenforceability, and such
prohibition or unenforceability shall not invalidate the balance of such
provision to the extent it is not prohibited or enforceable, nor invalidate the
other provisions hereof, all of which shall be liberally construed in favor of
the Administrative Agent in order to effect the provisions hereof.
14. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST
ESTABLISHING PLEDGOR, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "SENIOR HOUSING PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF PLEDGOR SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, PLEDGOR.
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IN WITNESS WHEREOF, the Pledgor has duly executed and
delivered this Agreement as of the date first above written.
SENIOR HOUSING PROPERTIES
TRUST, a Maryland real estate
investment trust
By:________________________________
Name:
Title:
This execution page is part of the Pledge and Security Agreement dated as of
September 15, 1999 delivered by Senior Housing Properties Trust to Dresdner Bank
AG, New York Branch, as the Administrative Agent.
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