<TABLE>
<CAPTION>
As filed with the Securities and Exchange Commission on March 29, 1994
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
HEALTH AND REHABILITATION PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
<S> <C>
MARYLAND 04-6558834
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
<CAPTION>
400 CENTRE STREET, NEWTON, MASSACHUSETTS 02158
(617) 332-3990
(Address, including zip code,
and telephone number, including area code,
of registrant's principal executive offices)
Mark J. Finkelstein
400 Centre Street
Newton, Massachusetts 02158
(617) 332-3990
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
____________________
Copies to:
<S> <C>
LENA G. GOLDBERG, ESQ. HOWARD G. GODWIN, JR., ESQ.
Sullivan & Worcester Brown & Wood
One Post Office Square One World Trade Center
Boston, Massachusetts 02109 New York, New York 10048
_________________________
</TABLE>
Approximate date of commencement
of proposed sale to the public:
As soon as practicable after the
effective date of this Registration Statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered
only in connection with dividend or reinvestment plans, please
check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Proposed MaximumProposed MaximumAmount of
Class of Securities AmountOffering PriceAggregateRegistration
to be Registered to Be RegisteredPer Unit(1)Offering Price(1)Fee
<S> <C> <C> <C> <C>
Common Shares of Beneficial
Interest, $.01 par value 11,500,000 $15.625$179,687,500 $61,961
</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for purposes of
determining the Registration Fee.
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 Commission, acting
pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This Registration Statement contains two forms of
prospectus, one to be used in connection with an offering in the
United States and Canada (the "U.S. Prospectus") and one to be
used in a concurrent offering outside the United States and
Canada (the "International Prospectus"). The two prospectuses
will be identical in all respects, except for the front cover
page, the section entitled "Federal Income Tax and ERISA
Considerations", the section entitled "Underwriting" and the
outside back cover page.
The form of the U.S. Prospectus is included herein and the
form of the front cover page, "Federal Income Tax and ERISA
Considerations" section, "Underwriting" section and outside back
cover page of the International Prospectus are included following
the back cover page of the U.S. Prospectus as pages X-1 through
X-7.
<PAGE>
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there by any
sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS, DATED MARCH 29, 1994
PROSPECTUS
10,000,000 Shares
HEALTH AND REHABILITATION PROPERTIES TRUST
Common Shares of Beneficial Interest
______________________
Health and Rehabilitation Properties Trust (the "Company" or
"HRP") is a real estate investment trust which invests primarily
in retirement communities, assisted living centers, nursing homes
and other long term care facilities. On March 25, 1994, the last
reported sale price for the Shares on the New York Stock Exchange
was $15 7/8.
Of the 10,000,000 Shares offered by the Company, 8,500,000
Shares are being offered in the United States and Canada by the
U.S. Underwriters and 1,500,000 Shares are being offered in a
concurrent offering outside the United States and Canada by the
International Managers (collectively, the "Offerings").
_________________________
THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
__________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Per Share. . . . $ $ $
Total(3) . . . . $ $ $
_________________________________________________________________________________________________________________________________
</TABLE>
(1) The Company has agreed to indemnify the several U.S.
Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933. See
"Underwriting".
(2) Before deducting expenses payable by the Company estimated at
$586,681.
(3) The Company has granted the U.S. Underwriters and the
International Managers an option, exercisable by the U.S.
Representatives for 30 days from the date of this Prospectus, to
purchase up to 1,500,000 additional Shares solely to cover over-
allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to
Company will be $__________, $__________ and $__________,
respectively. See "Underwriting".
The Shares offered hereby are offered by the several U.S.
Underwriters, subject to prior sale, when, as and if issued to
and accepted by them and subject to approval of certain legal
matters by Brown & Wood, counsel for the U.S. Underwriters, and
to certain other conditions. The U.S. Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject
orders in whole or in part. It is expected that delivery of the
Shares offered hereby will be made in New York, New York on or
about April __, 1994.
________________________
Merrill Lynch & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
PaineWebber Incorporated
Smith Barney Shearson Inc.
________________________
The date of this Prospectus is _____________, 1994
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "Commission") in Washington, D.C., a registration
statement on Form S-3 (together with all exhibits, schedules and
amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Common Shares of Beneficial Interest (the
"Shares") to be offered by the Company. This Prospectus, which is
a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement. For further
information concerning the Company and the Shares offered by the
Company, reference is made to the Registration Statement. Copies
of the Registration Statement may be obtained from the Commission
at its principal office in Washington, D.C. upon payment of the
prescribed fee.
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports and other
information with the Commission. Reports, proxy statements and
other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: Chicago Regional Office,
Suite 1400, 500 West Madison Street, Chicago, Illinois
60661-2511; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of
the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, reports, proxy material and
other information concerning the Company may be inspected at the
offices of The New York Stock Exchange ("NYSE"), 20 Broad Street,
New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed with the
Commission pursuant to the Exchange Act, are hereby incorporated
in this Prospectus and specifically made a part hereof by
reference: (i) the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, as amended; and (ii) the
Company's Registration Statement on Form 8-A dated November 8,
1986, as amended by Form 8 dated July 30, 1991. The consolidated
financial statements of Greenery Rehabilitation Group, Inc.
("Greenery") at and for the fiscal year ended September 30, 1993,
are incorporated herein by reference from Greenery's Annual
Report on Form 10-K for the fiscal year ended September 30, 1993;
the consolidated financial statements of Horizon Healthcare
Corporation ("Horizon") at and for the periods ended May 31, 1993
and November 30, 1993, are incorporated herein by reference from
Horizon's Annual Report on Form 10-K/A - Amendment No. 3 for the
fiscal year ended May 31, 1993, dated October 5, 1993, and
Quarterly Report on Form 10-Q for the quarter ended November 30,
1993; the consolidated financial statements of GranCare, Inc.
("GranCare") at and for the periods ended December 31, 1992 and
September 30, 1993, are incorporated herein by reference from
GranCare's Annual Report on Form 10-K for the year ended December
31, 1992 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993; and the consolidated financial statements of
Marriott International, Inc. ("Marriott") at and for the fiscal
year ended December 31, 1993 will be incorporated herein by
reference from Marriott's Annual Report on Form 10-K to be filed
for the year ended December 31, 1993. All documents filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Shares offered by the
Company shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of
filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated herein by
reference shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement
contained herein, or in any other subsequently filed document
that also is or is deemed to be incorporated herein by reference,
modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to
whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any and all of the information
that has been incorporated by reference in this Prospectus
(excluding exhibits unless such exhibits are specifically
incorporated by reference into the information that this
Prospectus incorporates). Requests for such copies should be made
to the Company at its principal executive offices, 400 Centre
Street, Newton, Massachusetts 02158, Attention: Investor
Relations, telephone (617) 332-3990.
------------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE COMMON SHARES OF BENEFICIAL INTEREST OF THE
COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW
YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.<PAGE>
SUMMARY
The following summary is qualified in its entirety by the
detailed information and financial statements appearing elsewhere
or incorporated by reference in this Prospectus. Unless otherwise
noted, all references to, and adjustments based upon, Shares
offered hereby include all Shares offered pursuant to the
Offerings but exclude the Shares subject to the over-allotment
option. Unless otherwise noted, all information presented herein
assumes completion of the transaction described in "The Company
- -- Recent Developments -- The Marriott Transaction".
THE COMPANY
The Company is a real estate investment trust ("REIT") which
invests primarily in retirement communities, assisted living
centers, nursing homes and other long term care facilities. The
Company recently agreed to acquire 14 retirement communities (the
"Marriott Properties") leased to and operated by a subsidiary of
Marriott International, Inc. (including its subsidiaries,
"Marriott") for $320 million (the "Marriott Transaction"). The
Marriott Properties will be acquired subject to the existing
leases which are fully guaranteed by Marriott. The Marriott
Properties contain a total of 3,932 residences or beds and are
located in seven states. Upon completion of the Marriott
Transaction: Marriott will be the Company's largest single tenant
and will operate 38% of the Company's investment portfolio of
properties; the Company will have gross real estate investments
totalling $834 million, in 154 properties, located in 29 states
and operated by 37 separate companies; approximately 70% of the
Company's total investments will be in properties operated by
seven NYSE listed companies; and 97% of the Company's investments
will be in retirement communities, assisted living centers,
nursing homes and other long term care facilities.
HRP LESSEES AND MORTGAGORS
[Pie chart-see appendix to electronic format document]
Since commencing operations seven years ago in December
1986, the Company has paid 28 consecutive quarterly dividends
and has increased its quarterly dividend eight times. The next
regular quarterly dividend of $.33 per Share for the period
ending March 31, 1994, is expected to be declared in April 1994
and paid in May 1994; purchasers of the Shares offered hereby who
hold such Shares as of the record date will receive that
dividend.
HRP DIVIDEND GROWTH
[Dividend chart-see appendix to electronic format document]
<PAGE>
<TABLE>
<CAPTION>
THE OFFERINGS
<S> <C>
Shares to be offered
U.S. Offering............................ 8,500,000
International Offering......................... 1,500,000
Total........................................10,000,000
Shares to be outstanding after the Offerings..........54,722,500
Use of Proceeds.......................................To fund the Marriott Transaction or to repay indebtedness and/or for
working capital and other general corporate purposes.
NYSE symbol...........................................HRP
</TABLE>
<TABLE>
<CAPTION>
SUMMARY HISTORICAL AND ADJUSTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, 1993
----------------------------------------------------------------------- AS ADJUSTED(1)
1989 1990 1991 19921993 --------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Total revenues.....................................$23,233$32,872$43,835$48,735$56,485$95,943
Net income...........................................7,90014,28022,07927,24333,417(2)55,185 (2)
Cash flow available for
distribution(3)....................................12,56119,46730,05936,85347,57878,041
Dividends(4).........................................13,13718,92727,17933,07944,869---
Per Share:
Net income.......................................76.891.011.02.97(2)1.01 (2)
Cash flow available for
distribution(3)...............................1.201.211.381.381.381.43
Dividends(4)....................................1.141.171.231.261.30---
Average Shares outstanding................10,42516,08821,83426,76034,40754,723
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------------
19891990 19911992 1993 DECEMBER 31, 1993
AS ADJUSTED(1)
BALANCE SHEET DATA: ___________________
<S> <C> <C> <C> <C> <C> <C>
Real estate properties, net....................$144,347$188,352$262,557$310,882$349,842$650,348
Real estate mortgages, net...................45,30487,06131,76047,173157,281158,241
Total assets............................................205,638290,099340,718374,468527,662826,826
Total borrowings...................................70,000125,500103,000138,50073,000214,008
Total shareholders' equity....................131,851147,760234,427228,301441,135603,791
</TABLE>
- ---------------
(1) Adjusted to give effect to the sale of the Shares offered
pursuant to the Offerings, the use of proceeds therefrom as
set forth in "Use of Proceeds", and the consummation of the
Marriott Transaction. See "Unaudited Adjusted Balance Sheet
and Unaudited Adjusted Statement of Income".
(2) Includes, as an extraordinary item, the write-off of $4.3
million in deferred finance charges (approximately $.13 per
Share) resulting from prepayment of debt with proceeds from
the Company's Share offerings in 1993.
(3) Cash flow available for distribution is income before
extraordinary item plus depreciation and amortization and
other non-cash items charged to operations. Distributions
in excess of net income generally constitute a return of
capital for income tax purposes.
(4) Amounts represent dividends declared with respect to the
periods shown.<PAGE>
RECENT DEVELOPMENTS
The Marriott Transaction. On March 17, 1994, the Company
agreed to acquire 14 retirement communities from affiliates of
Host Marriott Corporation ("HMT") for $320 million, subject to
adjustment. The Marriott Properties are presently leased to and
operated by Marriott and will be acquired by the Company subject
to the existing leases. The Marriott Properties are located in
the following seven states: Florida - five; Virginia - three;
Arizona - two; California - one; Illinois - one; Maryland - one;
and Texas - one. The retirement communities offer a continuum of
services including independent living residences, assisted living
and on-site skilled nursing facilities. The Marriott Properties
contain a total of 3,932 residences or beds and are triple net
leased to Marriott for initial terms expiring on December 31,
2013, with renewal options extending for an additional 20 years.
The leases provide for fixed rent aggregating approximately $28
million per year and additional rentals equal to 4.5% of annual
revenues from operations in excess of base amounts determined on
a facility by facility basis. All of the leases are subject to
cross default provisions. In addition to the 14 retirement
communities to be acquired by the Company, the Company and HMT
have agreed to negotiate for the possible assumption by the
Company of HMT's obligations to invest in additional retirement
and skilled nursing facility projects to be operated by Marriott;
however, there are presently no agreements or understandings
concerning assumption of the obligations relating to any specific
projects. Upon completion of the Marriott Transaction, Marriott
will become the Company's largest single tenant.
Management believes that the Marriott Transaction will
materially improve the diversity, security and growth potential
of the Company's investment portfolio for the following reasons:
- Approximately 38% of the Company's total investments
will be in properties leased to Marriott under 20 year
triple net, non-cancellable leases;
- Marriott has fully guaranteed the leases;
- Marriott is a public company with annual revenues of
approximately $8 billion, whose senior unsecured debt
obligations are rated A- by Standard and Poor's
Corporation and Baa-1 by Moody's Investors Service,
Inc.;
- The Company anticipates that it will receive
significant and increasing percentage rents under the
leases beginning in 1994 and continuing throughout the
lease term; the leases contain no cap or other
limitation on the amounts of percentage rents;
- Over 85% of Marriott's revenues from the Marriott
Properties have been derived from private as opposed to
governmental sources making such revenues less
susceptible to the uncertainties of governmental
funding and cost containment efforts;
- The Marriott Properties have attracted strong
occupancies and those open more than one year average
in excess of 90% occupancy;
- Ten of the 14 Marriott Properties have been constructed
and opened in the past four years and the Company
believes these properties represent state of the art in
construction quality;
- The Company's investment portfolio will be increased
from approximately $514 million to approximately $834
million;
- After completion of the Marriott Transaction,
approximately 81% of the Company's investments will be
in equity ownership of properties and 19% will be in
mortgages;
- Upon completion of the Marriott Transaction,
approximately 70% of the Company's investment portfolio
will be in properties leased to or operated by seven
NYSE listed companies; the balance of the Company's
investment portfolio is leased to or operated by a
diverse group of 30 separate private companies.
The Marriott Transaction is subject to conditions and
contingencies customary in transactions of this type, including
health care and other regulatory approvals, and although no
assurance can be given that the Marriott Transaction will be
consummated, the Company expects the Marriott Transaction to
close in June 1994. The Company intends to fund the Marriott
Transaction with the net proceeds of the Offerings, available
cash, funds available to be drawn under credit facilities, and
proceeds of future debt financing. See "Recent Developments -
New Revolving Credit Facility". To provide for the contingency
that the Marriott Transaction may close prior to completion of
the Offerings or the availability of other permanent funding, the
Company has had discussions with Merrill Lynch Mortgage Capital,
Inc. ("MLMCI") and others to provide an interim credit facility
(the "MLMCI Facility") to fund the acquisition of the Marriott
Properties. No assurance can be given that these discussions
will result in an agreement to provide interim funding or that
the required funding will be available in a timely manner to the
Company from other sources.
New Revolving Credit Facility. In February 1994, the
Company closed a new $110 million revolving credit facility from
a syndicate of banks (the "New Credit Facility"). The New Credit
Facility replaced the Company's $40 million revolving credit
facility which was scheduled to mature in January 1995. The New
Credit Facility will mature in 1997, unless extended by the
parties. Borrowings under the New Credit Facility bear interest,
at the Company's option, at prime or a spread over LIBOR. The
Company intends to draw on the New Credit Facility to repay the
Company's $33 million term loan and is presently discussing with
its lenders amendments to the New Credit Facility which would
increase the amount available thereunder, to lower the interest
rate charged on borrowings and otherwise to change certain terms.
No assurance can be given that these discussions will result in
any changes in the New Credit Facility.
Other Pending Transactions. In the ordinary course of its
business, the Company regularly evaluates investment
opportunities and enters into contracts to purchase and lease or
mortgage finance health care related real estate. Several such
possible investments are currently under consideration and at
various stages of the contractual process. Similarly, since
January 1, 1994, the Company has received principal prepayments
of outstanding mortgages totalling approximately $9.6 million and
the Company is now engaged in negotiations regarding the sale of
two properties subject to leases scheduled to expire during 1994.
The Company does not believe that consummation of any one or all
of these various pending transactions would have a material
impact upon its financial condition or operations.
<PAGE>
THE COMPANY
HRP invests in retirement communities, assisted living
centers, nursing homes and other income producing health care
related real estate. The Company, a Maryland real estate
investment trust, commenced operations in December 1986. The
Company's principal executive offices are located at 400 Centre
Street, Newton, Massachusetts 02158, and its telephone number is
(617) 332-3990.
At March 28, 1994, including the Marriott Transaction, the
Company had total real estate investments of approximately $834
million in 154 properties ("Properties") located in 29 states
operated by 37 separate companies.
LOCATION OF HRP PROPERTIES
(dollars in thousands)
[MAP-see appendix to electronic format document]
<TABLE>
<CAPTION>
No. of Total No. of Total
State PropertiesInvestment State PropertiesInvestment
<S> <C> <C> <C> <C> <C>
Alabama. . 2 $ 3,601 Michigan . . . . 2 $ 9,400
Arizona. . 5 25,377 Missouri . . . . 2 3,178
California 16 80,082 Nebraska . . . . 12 16,925
Colorado . 10 32,990 North Carolina . 9 20,761
Connecticut 9 83,802 Ohio . . . . . . 9 27,259
Florida. . 6 116,560 Pennsylvania . . 2 18,490
Georgia. . 5 8,053 South Carolina . 1 886
Illinois . 2 21,233 South Dakota . . 3 7,589
Indiana. . 7 19,965 Tennessee. . . . 1 1,077
Iowa . . . 10 14,175 Texas. . . . . . 8 21,000
Kansas . . 4 8,521 Virginia . . . . 3 67,336
Kentucky . 2 19,735 Washington . . . 1 5,125
Louisiana. 5 32,403 Wisconsin. . . . 9 33,260
Maryland . 1 46,928 Wyoming. . . . . 3 6,459
Massachusetts 5 82,058 154$834,228
</TABLE>
<PAGE>
DISTRIBUTIONS
The Company has paid 28 consecutive quarterly dividends
since its initial public offering in December 1986. Dividends for
1987, 1988, 1989, 1990, 1991, 1992 and 1993 totalled $1.06,
$1.12, $1.14, $1.17, $1.23, $1.26 and $1.30, respectively. The
next regular quarterly dividend of $.33 per Share for the period
ending March 31, 1994 will be declared in April 1994 and paid in
May 1994; purchasers of the Shares offered hereby who hold such
Shares as of the record date will receive that dividend.
The Company intends to continue to declare and pay future
dividends on a quarterly basis, but may, from time to time,
declare and pay special dividends. There can be no assurance that
the Company will be able to increase its quarterly dividend or
maintain it at the current level. Payment of dividends by the
Company is subject to continued compliance with certain
restrictions contained in the Company's loan agreements. In the
past, the Company's dividends have been based upon operating cash
flow, which has exceeded earnings. Management expects that the
Company will continue to pay dividends based upon operating cash
flow and that such dividends may exceed earnings. Accordingly,
the Company expects a portion of the Company's dividends may be
considered a return of capital which may not be subject to income
tax until the Shares are sold. See "Federal Income Tax and ERISA
Considerations". Information about dividends on a quarterly basis
is summarized in the following table:
<TABLE>
<CAPTION>
HRP DIVIDENDS PER SHARE(1)
1987 1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C> <C>
First Quarter.................$.275(2)$.28$.28$.29$.30 $.31 $.32
Second Quarter................ .26 .28 .28 .29 .31 .31 .32
Third Quarter................. .27 .28 .29 .29 .31 .32 .33
Fourth Quarter................ .28 .28 .29 .30 .31 .32 .33
</TABLE>
- ---------------
(1) Amounts represent dividends declared with respect to the
periods shown.
(2) Includes $.025 for the period from December 23, 1986
(commencement of the Company's operations) through December
31, 1986.
<PAGE>
CAPITALIZATION
The capitalization of the Company as of December 31, 1993
and as adjusted to give effect to the consummation of the
Marriott Transaction and the completion of the Offerings and the
use of the net proceeds therefrom, is as follows (see "Unaudited
Adjusted Balance Sheet"):
<TABLE>
<CAPTION>
DECEMBER 31, 1993
ActualAs Adjusted
(Dollars in thousands)
<S> <C> <C>
Borrowings . . . . . . . . . . . . . . . . . $73,000$214,008
Shareholders' equity:
Preferred Shares of Beneficial Interest, par value $.01 per
Share; 50,000,000 authorized, none issued. --- ---
Common Shares of Beneficial Interest, par value $.01 per
Share; 100,000,000 Shares authorized; 44,121,000 Shares and
54,722,500 Shares, as adjusted, issued and outstanding441547
Additional paid-in capital. . . . . . .470,572627,889
Cumulative net income . . . . . . . . .118,889124,122
Distributions of cash flow available from operations(148,767)(148,767)
Total shareholders' equity. . . . . 441,135 603,791
Total capitalization . . . . . . . . . . . .$514,135$817,799
</TABLE>
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are
estimated to be approximately $___ million ($___ million if the
over-allotment option is exercised in full). If the Offerings
are completed prior to the closing of the Marriott Transaction,
net proceeds of the Offerings will be used to fund the Marriott
Transaction. If the Marriott Transaction is consummated prior to
completion of the Offerings and the Company utilizes borrowings
to fund the Marriott Transaction, net proceeds of the Offerings
will be used to repay amounts outstanding under such borrowings,
and/or to reduce amounts outstanding under the Company's credit
facilities or for working capital and other general corporate
purposes. In the event that the Marriott Transaction is not
consummated by the Company, net proceeds of the Offerings will be
used to reduce amounts outstanding under the New Credit Facility
or for working capital or other general corporate purposes.
As described in "The Company -- Recent Developments", the
Company is presently negotiating the MLMCI Facility. In the
event that funds are drawn under the MLMCI Facility, interest on
such borrowings is expected to be based on LIBOR plus a premium.
Of the amounts outstanding under the New Credit Facility, $40
million was borrowed to repay all amounts outstanding under the
Company's prior revolving credit facility and it is expected that
$33 million will be borrowed to repay the amounts outstanding
under the Company's term loan. Amounts outstanding under the New
Credit Facility are due in 1997. The weighted average interest
rate on outstanding debt which may be repaid with proceeds of the
Offerings will be approximately 5.5%.
Pending utilization as set forth above, the proceeds from
the Offerings will be invested in short term investments,
including repurchase agreements. Such investments may not be
investment grade.
<PAGE>
INVESTMENT AND FINANCING POLICY
The population of the United States is aging. According to
information from the U.S. Census Bureau, the segment of the U.S.
population age 65 and over is increasing and will increase
sharply through the year 2020. The Company believes that the
demand for services provided at retirement communities, assisted
living centers and nursing homes should increase as the
population ages. Moreover, during the past ten years the
intensity of medical services offered in nursing homes has become
an important factor increasing nursing facility revenues and the
value of facilities. Recently proposed federal healthcare reform
legislation seeks, in part, to control future expenditures for
acute care hospitals by providing increased funding for subacute
care in nursing homes. For these reasons the Company has focused
its investments in retirement communities, assisted living
centers and nursing homes. Although the Company has and will in
the future invest in other types of health care real estate, the
Company expects to continue its focus on retirement communities,
assisted living centers and nursing homes.
The Company considers equity offerings when, in the
Company's judgment, doing so will improve the Company's capital
structure, while not materially adversely affecting the market
value of its Shares or impeding the Company's ability to increase
regularly its per Share dividend rate. In addition to the use of
equity, the Company utilizes short term and long term borrowings
to finance investments and to pay operating expenses. When
variable rate debt is utilized the Company regularly purchases
interest rate futures contracts to hedge against changes in
interest rates. At March 28, 1994, the Company had outstanding
term and revolving debt totalling $73 million. After this
offering and assuming the use of proceeds from this offering and
additional debt to fund the consummation of the Marriott
Transaction, the Company's total debt outstanding will be
approximately $214 million. The Company's borrowing guidelines
established in the New Credit Facility and by its Board of
Trustees prohibit the Company from maintaining a debt to equity
ratio of greater than 1 to 1, except in certain limited
circumstances. As of March 28, 1994, the Company's debt to
equity ratio was .16 to 1. After this offering and assuming the
use of proceeds described herein and consummation of the Marriott
Transaction, the Company's debt to equity ratio on a pro forma
basis will be approximately .35 to 1. The present debt to equity
limitations may be changed in the future. There can be no
assurance that equity or debt capital will be available in the
future on reasonable terms to fund the Company's operations or
growth.
HRP CAPITAL STRUCTURE
BEFORE SALE OF SHARES AFTER SALE OF SHARES
AND MARRIOTT TRANSACTION AND MARRIOTT TRANSACTION
[PIE CHARTS-see appendix to electronic format document.]
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are selected financial data for the Company
for the periods and dates indicated which have been derived from
audited and unaudited financial statements. This data should be
read in conjunction with, and is qualified in its entirety by
reference to, the financial statements and accompanying notes
incorporated by reference in this Prospectus and with
Management's Discussion and Analysis of Financial Condition and
Results of Operations in the Annual Report on Form 10-K for the
Company incorporated by reference in this Prospectus. Amounts are
in thousands, except per Share information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1989 1990 1991 1992 1993
OPERATING STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Total revenues................................$23,233$32,872$43,835$48,735$56,485
Income before extraordinary item..............7,90014,28022,07927,24337,738
Net income....................................7,90014,28022,07927,24333,417 (1)
Cash flow available for distribution(2).......12,56119,46730,05936,85347,578
Dividends(3)..................................13,13718,92727,17933,07944,869
Per Share:
Income before extraordinary item..........$ .76$ .89 $ 1.01$ 1.02$ 1.10
Net income.................................76.891.011.02.97 (1)
Cash flow available for distribution(2)...1.201.211.381.381.38
Dividends(3)..............................1.141.171.231.261.30
Average Shares outstanding....................10,42516,08821,83426,76034,407
<CAPTION>
DECEMBER 31,
1989 1990 1991 1992 1993
BALANCE SHEET DATA:
Real estate properties, net.........$144,347$188,352$262,557$310,882$349,842
Real estate mortgages, net..........45,30487,06131,76047,173157,281
Total assets........................205,638290,099340,718374,468527,662
Total borrowings....................70,000125,500103,000138,50073,000
Total shareholders' equity..........131,851147,760234,427228,301441,135
</TABLE>
<TABLE>
<CAPTION>
1993
FIRST SECONDTHIRD FOURTH
QUARTER QUARTERQUARTERQUARTER
SUPPLEMENTAL DATA:
<S> <C> <C> <C> <C>
Total revenues...........................$12,650$13,763$14,727$15,345
Income before extraordinary item.........8,4099,5369,73910,054
Net income(1)............................5,0179,5369,7399,125
Cash flow available for distribution(2)..10,73711,89512,18712,759
Dividends(3).............................10,80411,23611,23911,590
Per Share:
Income before extraordinary item.....$.27$.27$.28$.28
Net income(1).........................16.27.28.26
Cash flow available for
distribution(2).....................34.34.35.36
Dividends(3)..........................32.32.33.33
Average Shares outstanding...............31,73135,11435,12135,610
</TABLE>
- ---------------
(1) Includes, as an extraordinary item, the write-off of $4.3
million in deferred finance charges (approximately $.13 per
Share) resulting from prepayment of debt with proceeds from
the Share offerings in 1993.
(2) Cash flow available for distribution is income before
extraordinary item plus depreciation and amortization and
other non-cash items charged to operations. Distributions
in excess of net income generally constitute a return of
capital for income tax purposes.
(3) Amounts represent dividends declared with respect to the
periods shown.
<PAGE>
PROPERTIES
After the Marriott Transaction the Company will have gross
real estate investments totalling $834 million, in 154
Properties, located in 29 states and operated by 37 separate
companies. Ninety-seven percent of the Company's investments will
be in 152 retirement communities, assisted living centers,
nursing homes and other long term care facilities. Approximately
81% of the investments are in Properties owned by the Company and
leased to operators.
TYPE OF PROPERTIES TYPE OF INVESTMENTS
[PIE CHARTS-see appendix to electronic format document]
<PAGE>
THE LESSEES AND THE MORTGAGORS
The Company's financial condition depends in large part upon
the financial condition of the operators of the Company's
Properties. After the Marriott Transaction, approximately 70% of
the Company's total investments will be in Properties operated by
seven NYSE listed companies. In addition to these seven public
companies, the remaining HRP Properties are operated by 30
privately held companies. Certain information about publicly
owned operators of the Company's Properties contained in their
filings with the Commission or other public sources, or provided
by these companies is set forth in the chart below.
<TABLE>
<CAPTION>
HRP PUBLIC COMPANY FACILITY OPERATORS
(dollars in thousands)
TOTAL TOTAL SHARE- HRP HRP HRP
OPERATOR FACILITIESANNUALHOLDERSNET FACILITIESFACILITIESINVESTMENT
(STOCK SYMBOL)(BEDS) REVENUESEQUITYINCOME(BEDS) OCCUPANCY(% OF TOTAL)
<S> <C> <C> <C> <C> <C> <C> <C>
Marriott International......787$8,062,000$467,000$161,0001490% (3) $320,000
(NYSE:MAR)(174,951) (2) (3,932) (38.4%)
Horizon Healthcare(1)............104 307,796113,45812,6321291%147,011
(NYSE:HHC)(11,883) (1738) (17.6%)
GranCare.........................83507,97061,15710,8892791%86,628
(NYSE:GC)(11,300) (3908) (10.4%)
Sun Healthcare Group.............47191,71169,5869,749495% 20,617
(NYSE:SHG)(5,272) (605) (2.5%)
Beverly Enterprises..............8172,885,881739,00957,924392%13,211
(NYSE:BEV)(86,865) (321) (1.6%)
Integrated Health Services.......67282,160176,13315,471196% 2,891
(NYSE:IHS)(8,731) (120) (.4%)
Hillhaven(1).....................2841,432,482334,49965,792198%1,283
(NYSE:HIL)(35,149) (120) (.2%)
</TABLE>
- ---------------
(1) Annual revenues and net income for Horizon Healthcare and
Hillhaven are annualized from six-month data.
(2) Includes approximately 770 operated or franchised hotels
with more than 170,000 rooms and 17 retirement complexes
with 4,951 units, including independent and assisted living
apartments and beds for nursing homes.
(3) Occupancy is aggregate average occupancy for facilities
opened for more than one year.
Additional Security. In addition to fee ownership of the
leased properties and mortgage liens on the mortgaged properties,
certain of the Company's leases and mortgages contain additional
security features. Generally, with respect to investments
originated by the Company, each obligation of an operator to HRP
is subject to cross default provisions with respect to all other
obligations of that operator to HRP and any collateral pledged by
an operator to HRP constitutes collateral for all obligations of
that operator. Certain operators have pledged additional
collateral or provided corporate guarantees, security deposits,
or, in some cases, personal guarantees.<PAGE>
MANAGEMENT
The Trustees and executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Mark J. Finkelstein. . . 47 President and Chief Executive Officer
John L. Harrington . . . 58 Trustee
David J. Hegarty . . . . 37 Executive Vice President, Chief Financial Officer
and Secretary
Arthur G. Koumantzelis . 63 Trustee
Rev. Justinian Manning, C.P. 68 Trustee
Gerard M. Martin . . . . 59 Trustee
John G. Murray . . . . . 33 Treasurer
Barry M. Portnoy . . . . 48 Trustee
</TABLE>
Mark J. Finkelstein has been President and Chief Executive
Officer of the Company since its organization. Mr. Finkelstein is
a past President of the American College of Health Care
Administrators.
John L. Harrington has been the President of JRY Corporation
(the principal owner of the Boston Red Sox baseball club) and is
also Executive Director and Trustee of the Yawkey Foundation and
a trustee of the JRY Trust. Mr. Harrington is a Director of
Shawmut Bank, N.A.
David J. Hegarty, a certified public accountant, became
Executive Vice President of the Company in July 1993. He has been
the Chief Financial Officer of the Company since July 1987, when
he joined the Company as Treasurer and Secretary.
Arthur G. Koumantzelis is the Senior Vice President and
Chief Financial Officer of Cumberland Farms, Inc., a private
company engaged in the convenience store business in the
northeastern United States and Florida and, through its interest
in the partnership operating its Gulf Oil Division, in the
distribution and retail sale of gasoline in the northeastern
United States.
The Reverend Justinian Manning, C.P., is 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, and St. Elizabeth's Hospital Foundation. He
belongs to the Provincial Council of the Passionist Provincialate
and is the former Director of Consolidation for the Community.
Gerard M. Martin is a real estate investor. Prior to the
merger of Horizon Healthcare Corporation ("Horizon") and Greenery
Rehabilitation Group, Inc. ("Greenery") in February 1994, he had
been the Chairman and Chief Executive Officer of Greenery and its
predecessors since 1975. Mr. Martin is a Director of Horizon.
John G. Murray, a certified public accountant, joined the
Company in July 1993 as Treasurer. Mr. Murray was employed by
Fidelity Brokerage Services, Inc. prior to joining the Company,
most recently as Director of Finance, Business Analysis and
Planning.
Barry M. Portnoy has been a partner in the law firm of
Sullivan & Worcester, counsel to the Company, since 1978. Mr.
Portnoy was a Director of Greenery until February 1994 and is a
Director of Horizon.
Mr. Harrington, Mr. Koumantzelis and Fr. Manning are the
Company's Independent Trustees, that is Trustees who are not
affiliated with any of the Company's lessees or mortgagors or
with HRPT Advisors, Inc. (the "Advisor"). Under the Company's
Declaration of Trust, a majority of the Company's Trustees will
at all times consist of Independent Trustees. All investment and
policy decisions affecting the Company are made by its Board of
Trustees. All day to day operations of the Company are conducted
by the Advisor pursuant to an investment advisory contract. The
Advisor is owned by Messrs. Martin and Portnoy. Messrs.
Finkelstein, Hegarty and Murray, as well as all other personnel
involved in the Company's operations are employees of the
Advisor. The Advisor is paid an annual advisory fee calculated on
the basis of total assets under management (.7% of the first $250
million, plus .5% of additional assets) and an annual incentive
fee calculated on the basis of increases in operating cash flow
per Share above threshold amounts (15% of cash flow above the
threshold amount of $1.37/Share in 1994, which threshold
increases by $.05/Share annually thereafter) but no more than
$.01/Share. The Advisor currently owns approximately one million
Shares which were purchased in 1989. All incentive fees which may
be earned by the Advisor will be paid in Shares. The Company
believes that its total administrative costs, measured as a
percentage of assets under management, are below the average for
its industry.
FEDERAL INCOME TAX AND ERISA CONSIDERATIONS
The following description of certain Federal income tax
matters and Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), considerations relating to the Company is
qualified in its entirety by reference to the more detailed
description thereof contained in the Company's Annual Report on
Form 10-K, which is incorporated herein by reference. The opinion
of Sullivan & Worcester, Boston, Massachusetts, regarding such
matters has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Company is and intends to remain qualified as a REIT
under the Internal Revenue Code of 1986, as amended (the "Code").
As a REIT, the Company's net income which is distributed as
dividends to shareholders will be exempt from Federal taxation.
Distributions to the Company's shareholders generally will be
includable in their income; however, dividends distributed which
are in excess of current or accumulated earnings will be treated
for tax purposes as a return of capital to the extent of a
shareholder's basis, and will reduce the basis of shareholders'
Shares. Approximately 26% of dividends distributed in calendar
1993 were treated as a return of capital.
The Company intends to conduct its affairs so that the
assets of the Company will not be deemed to be "plan assets" of
any individual retirement account, employee benefit plan subject
to Title I of ERISA, or other qualified retirement plan subject
to Section 4975 of the Code which acquires its Shares. The
Company believes that, under present law, its distributions do
not create so called "unrelated business taxable income" to tax
exempt entities such as pension trusts, subject, however, to
certain new rules which apply to pension trusts holding more than
10% of the Shares.
EACH PROSPECTIVE PURCHASER OF THE SHARES OFFERED HEREBY IS
ADVISED TO CONSULT HIS OWN PROFESSIONAL ADVISOR REGARDING THE
SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX AND ERISA
CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND SALE OF THE
SHARES OFFERED HEREBY.
<PAGE>
UNDERWRITING
The Underwriters named below (the "U.S. Underwriters"), for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), Donaldson, Lufkin & Jenrette Securities Corporation,
PaineWebber Incorporated and Smith Barney Shearson Inc. are
acting as representatives (the "U.S. Representatives"), have
severally agreed, subject to the terms and conditions of the U.S.
Purchase Agreement (the "U.S. Purchase Agreement") with the
Company relating to 8,500,000 Shares offered in the United States
and Canada (the "U.S. Offering"), to purchase from the Company
the respective number of Shares set forth opposite their names
below.
<TABLE>
<CAPTION>
<S> <C>
Number
U.S. Underwriter of Shares
Merrill Lynch, Pierce, Fenner & Smith
Incorporated. . . . .
Donaldson, Lufkin & Jenrette Securities Corporation
PaineWebber Incorporated. . . . . . .
Smith Barney Shearson Inc.. . . . . .
Total . . . . . . . . . 8,500,000
</TABLE>
The Company has also entered into the International Purchase
Agreement (the "International Purchase Agreement") with certain
underwriters outside the United States and Canada (the
"International Managers"), for whom Merrill Lynch International
Limited, Donaldson, Lufkin & Jenrette Securities Corporation,
PaineWebber International (U.K.) Ltd. and Smith Barney Shearson
Inc. are acting as representatives (the "Lead Managers"),
relating to the Shares offered outside the United States and
Canada (the "International Offering"). Subject to the terms and
conditions of the International Purchase Agreement, the Company
has agreed to sell to the International Managers, and the
International Managers have severally agreed to purchase, an
aggregate of 1,500,000 Shares.
Under certain circumstances, the commitments of non-
defaulting U.S. Underwriters and International Managers may be
increased. The public offering price per Share and the
underwriting discount per Share are identical under the U.S.
Purchase Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement, the several U.S.
Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all of the Shares being sold pursuant
to such agreement if any of the Shares being sold pursuant to
such agreement are purchased and in the International Purchase
Agreement the several International Managers have agreed, subject
to the terms and conditions set forth therein, to purchase all of
the Shares being sold pursuant to such agreement if any of the
Shares being sold pursuant to such agreement are purchased. The
closings with respect to the sale of Shares to be purchased by
the U.S. Underwriters and the International Managers are
conditioned upon one another.
The U.S. Representatives have advised the Company that the
U.S. Underwriters propose to initally offer the Shares to the
public at the public offering price set forth on the cover page
of this Prospectus and to certain dealers at such price less a
concession not in excess of $__ per Share. The U.S. Underwriters
may allow, and such dealers may reallow, a discount not in excess
of $__ per Share to other dealers. After the initial public
offering, the public offering price, concession and discount may
be changed.
The Company has granted to the U.S. Underwriters and the
International Managers an option, exercisable by the U.S.
Representatives for 30 days from the date of this Prospectus, to
purchase up to an additional 1,500,000 Shares, solely to cover
over-allotments, if any, at a price per Share equal to the
initial public offering price less the underwriting discount set
forth on the cover page of this Prospectus, and, with respect to
any such Shares issued after the record date for the quarterly
dividend for the period ending March 31, 1994, less an amount
equal to such dividend. If the U.S. Representatives exercise
such option, each U.S. Underwriter and International Manager
will, subject to certain conditions, have a firm commitment to
purchase approximately the same percentage of such option Shares
which the number of Shares to be purchased initially by it bears
to 10,000,000 Shares.
The U.S. Underwriters and the International Managers have
entered into an Intersyndicate Agreement (the "Intersyndicate
Agreement") that provides for coordination of their activities.
Pursuant to the Intersyndicate Agreement, sales may be made
between the U.S. Underwriters and the International Managers of
such number of Shares as may be mutually agreed. The price of
any Shares so sold shall be the initial public offering price,
less an amount not greater than the selling concession.
Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell Shares will not
offer to sell or sell Shares to any non-U.S. or non-Canadian
person or to any person they believe intends to resell to any
non-U.S. or non-Canadian person, and the International Managers
and any dealer to whom they sell Shares will not offer to sell or
sell Shares to any U.S. or Canadian person or to any person they
believe intends to resell to any U.S. or Canadian person, except,
in each case, for transactions pursuant to the Intersyndicate
Agreement.
The Company has agreed to indemnify the several U.S.
Underwriters and the several International Managers against
certain liabilities, including liabilities under the Securities
Act.
The Company and the Advisor have each agreed that, for a
period of 90 days after the date of this Prospectus, it will not,
without the prior consent of MLPF&S, issue, sell, contract to
sell, grant any option for the sale of, or otherwise dispose of
any Shares, other than the Shares being sold in connection with
the transactions discussed herein, pursuant to the Company's 1992
Incentive Share Award Plan, and Shares issued upon exercise of
any outstanding options. The Company has agreed that, during such
90 day period, it will not, without the prior consent of MLPF&S,
terminate, modify or waive any provision in any agreement to
which it is a party that restricts or limits the transferability
of any Shares.
MLPF&S will be entitled to an advisory fee from the Company
in connection with consummation of the Marriott Transaction. As
described under "The Company -- Recent Developments -- The
Marriott Transaction", the Company is also negotiating with
MLMCI, a subsidiary of MLPF&S, for provision of the MLMCI
Facility which may be used in connection with the Company's
consummation of the Marriott Transaction. MLMCI will be entitled
to a fee upon consummation of the Marriott Transaction and
additional fees if the MLMCI Facility is consummated. In
addition, MLPF&S and MLMCI are both presently entitled to
reimbursement from the Company for their out-of-pocket expenses
incurred in advising and assisting the Company in connection with
the Marriott Transaction.
LEGAL MATTERS
Certain legal matters with respect to the Shares offered by
the Company will be passed upon for the Company by Sullivan &
Worcester, Boston, Massachusetts and for the Underwriters by
Brown & Wood, New York, New York. Sullivan & Worcester and Brown
& Wood will rely, as to all matters of Maryland law, upon the
opinion of Piper & Marbury, Baltimore, Maryland. Sullivan &
Worcester has also given its opinion as to certain Federal income
tax matters and certain ERISA considerations relating to the
Company. See "Federal Income Tax and ERISA Considerations". Barry
M. Portnoy, a partner in the firm of Sullivan & Worcester, is a
Trustee of the Company, a director and 50% shareholder of each of
the Advisor, Connecticut Subacute Corporation ("CSC"), and
Connecticut Subacute Corporation II ("CSCII") and a director of
Horizon. Sullivan & Worcester represents the Advisor, CSC, CSCII,
Gerard M. Martin and certain affiliates of each of the foregoing
on various matters. CSC, CSCII and Horizon are tenants of the
Company.
EXPERTS
The financial statements of the Company appearing in the
Company's Annual Report (Form 10-K) for the year ended December
31, 1993; the consolidated financial statements of Greenery
appearing in the Greenery Annual Report (Form 10-K) for the year
ended September 30, 1993; and the consolidated financial
statements of GranCare appearing in the GranCare Annual Report
(Form 10-K) for the year ended December 31, 1992, have been
audited by Ernst & Young, independent auditors, as set forth in
their reports thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
The audited consolidated financial statements and schedules
of Horizon incorporated by reference in this Prospectus and
elsewhere in the registration statement to the extent and for the
periods indicated in their reports, have been audited by Arthur
Andersen & Co. and KPMG Peat Marwick, independent public
accountants, and are included herein in reliance upon the
authority of said firms as experts in giving said reports.
THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED
OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND,
PROVIDES THAT THE NAME "HEALTH AND REHABILITATION 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 COMPANY
SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY,
FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS
DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
<PAGE>
HEALTH AND REHABILITATION PROPERTIES TRUST
UNAUDITED ADJUSTED BALANCE SHEET AND
UNAUDITED ADJUSTED STATEMENT OF INCOME
The following unaudited adjusted balance sheet at December
31, 1993 and the unaudited adjusted statement of income for the
year ended December 31, 1993 are intended to present the
financial position and results of operations of Health and
Rehabilitation Properties Trust as if the transactions described
in Note 1 were consummated on December 31, 1993 and January 1,
1993, respectively. The unaudited adjusted financial statements
should be read in conjunction with the separate financial
statements of Health and Rehabilitation Properties Trust for the
year ended December 31, 1993 which are incorporated herein by
reference. The unaudited adjusted financial statements are not
necessarily indicative of the expected financial position and
results of operations for any future period. Differences would
result from, but not be limited to, changes in the Company's
portfolio of real estate investments, changes in interest rates
and changes in the debt and/or equity structure of the Company.
<TABLE>
<CAPTION>
HEALTH AND REHABILITATION PROPERTIES TRUST
UNAUDITED ADJUSTED BALANCE SHEET
DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL ADJUSTMENTS
DECEMBER 31, 1993 (NOTES 1(a) TO (i)) AS ADJUSTED
ASSETS
<S> <C> <C> <C> <C>
Real estate properties, at cost:
Land $33,450 $30,694 (a),(f)$64,144
Buildings and improvements330,988250,682 (a),(f)581,670
Equipment 20,373 14,805 (a),(f) 35,178
384,811 296,181 680,992
Less accumulated depreciation 34,969(4,325) (f) 30,644
349,842 300,506 650,348
Real estate mortgages and notes, net157,281960 (b),(f),(i)158,241
Cash and cash equivalents13,887 (2,302) (a),(f),(h)11,585
Interest and rent receivable3,039 3,039
Deferred interest and finance costs,
net, and other assets 3,613 3,613
$527,662 $299,164 $826,826
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Borrowings $73,000 $141,008 (a),(b),(i)$214,008
Security deposits 8,300 (4,500) (f) 3,800
Due to affiliate 709 -- 709
Accounts payable and accrued
expenses 4,518 -- 4,518
Shareholders' equity:
Preferred shares of beneficial
interest, $.01 par value,
50,000,000 shares authorized,
none issued -- -- --
Common shares of beneficial
interest, $.01 par value;
100,000,000 Shares authorized;
44,121,000 and 54,722,500
Shares, as adjusted, issued and
outstanding 441 106 (a),(h) 547
Additional paid-in capital470,572157,317 (a),(h)627,889
Cumulative net income118,889 5,233 (b),(f),(i)124,122
Distributions of cash available
from operations(148,767) (148,767)
Total shareholders' equity 441,135 162,656 603,791
$527,662 $299,164 $826,826
</TABLE>
<TABLE>
<CAPTION>
HEALTH AND REHABILITATION PROPERTIES TRUST
UNAUDITED ADJUSTED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
DECEMBER 31, ADJUSTMENTS
1993 (NOTES 1(a) TO (i)) AS ADJUSTED
<S> <C> <C> <C>
REVENUES:
Rental income $46,069 $29,954 (a),(c),(d),(e),(f)$76,023
Interest income 10,416 9,504 (b),(c),(d),(e),(f),(h),(i) 19,920
Total revenues 56,485 39,458 95,943
EXPENSES:
Interest 6,217 6,894 (a),(b),(e),(f),(g),(h),(i)13,111
Advisory fees 2,591 2,101 (a),(b),(c),(d),(e),(f),(i)4,692
Depreciation and
amortization 9,087 8,695 (a),(c),(d),(e),(f),(i)17,782
General and administrative 852 852
Total expenses18,74717,690 36,437
Income before extraordinary item37,73821,768 59,506
Extraordinary item (4,321) -- (4,321)
Net income $33,417 $21,768 $55,185
Average shares outstanding 34,407 54,723
Per share amounts:
Income before extraordinary
item $1.10 $1.09
Net income $.97 $1.01
Cash flow available for
distribution $1.38 $1.43
Dividends $1.30 ---
CASH FLOW AVAILABLE FOR
DISTRIBUTION:
Income before extraordinary item$37,738 $59,506
Depreciation and amortization9,087 17,782
Other non-cash charges 753 753
Cash flow available for
distribution $47,578 $78,041
/TABLE
<PAGE>
HEALTH AND REHABILITATION PROPERTIES TRUST
NOTES TO UNAUDITED ADJUSTED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 -- BASES OF RECORDING THE ADJUSTMENTS
For the purposes of the unaudited adjusted balance sheet at
December 31, 1993 and the unaudited adjusted statement of income
for the year ended December 31, 1993, it has been assumed that
the following transactions took place on December 31, 1993 and
January 1, 1993, respectively:
(a) Marriott Transaction and Present Offering. On March 17,
1994, the Company entered into an agreement with Host Marriott
Corporation to acquire 14 retirement communities containing 3,932
residences or beds for $320,000, subject to adjustment. The
complexes are triple net leased through December 31, 2013 to a
wholly owned subsidiary of Marriott International, Inc.
(Marriott). For purposes of these unaudited adjusted financial
statements, minimum annual rent of $27,645 is used, which
represents a full year's rent for each facility whether or not
the facility was in operation for a full year during 1993.
Additional rent of $1,321 was calculated based on 4.5% of 1994's
budgeted revenues in excess of base amounts. The Company
anticipates incurring $5 million in fees and expenses related to
the Marriott Transaction. The leases are cross-defaulted and
guaranteed by Marriott. The acquisition is expected to close in
June 1994.
The Company has filed a Registration Statement with the
Securities and Exchange Commission relating to an offering of
10,000,000 Shares (plus a 1,500,000 Share underwriters' over-
allotment option). Upon consummation of the offering, the
Company will receive approximately $149.2 million net proceeds
($171.6 million, if the underwriters' over-allotment option is
exercised in full). The net proceeds have been applied in these
statements as funding for the Marriott Transaction. In
connection with the execution of the purchase and sale agreement
for the Marriott Transaction, the Company provided a $25 million
cash deposit. The remaining purchase price will be funded with
debt at an assumed interest rate of 6%. Adjustments to the
unaudited adjusted financial statements in respect of these
transactions are as follows:
<TABLE>
<CAPTION>
Balance Sheet: Income Statement:
<S> <C> <C> <C>
Land . . . . . . . . . $ 32,500 Rental income . .$28,966
Buildings and improvements 276,250 Interest expense. 9,531
Equipment. . . . . . . 16,250 Advisory fee. . . 1,625
Cash and cash equivalents (25,000) Depreciation and amortization 8,260
Borrowings . . . . . . 150,775
Common Shares. . . . . 100
Additional paid-in capital 149,125
</TABLE>
(b) Mortgage Portfolios. On May 20, 1993, the Company
acquired a portfolio of mortgage loans from the Resolution Trust
Corporation (RTC) for $72,411. The loans, which are secured by
first mortgages on 27 nursing homes, had a face value of
approximately $79,883 and have maturities ranging from 1996 to
2001. The acquisition was funded using approximately $18,411 of
cash with the balance from a $54,000 borrowing under a repurchase
facility. The repurchase facility accrued interest at a floating
rate based on LIBOR plus a premium and was repaid in full on
December 27, 1993. During March 1994, three of these loans with
a balance of $8,617 at March 1, 1994 and $8,662 at December 31,
1993 were paid in full.
On September 27, 1993, the Company acquired a portfolio of
mortgage loans from a group of institutional investors for
$16,000. The loans, which are secured by first mortgages on six
nursing homes, had a face value of approximately $18,200 and
have maturities ranging from 1994 to 1997. The acquisition was
funded using approximately $4,100 of cash with the balance
borrowed under the repurchase facility referred to above.
Adjustments to the unaudited adjusted financial statements
in respect of these transactions are as follows:
<TABLE>
<CAPTION>
Balance Sheet: Income Statement:
<S> <C> <C> <C>
Real estate mortgages.$(7,352) Interest income . . .$2,307
Borrowings . . . . .(8,662) Interest expense. . . 1,040
Cumulative net income1,310 Advisory fee. . . . . 112
</TABLE>
(c) SAFECO Portfolio. On June 4, 1993, the Company acquired
for cash, three long-term care facilities and related improvement
loans for $5,778. The facilities are subject to existing leases
with terms expiring between 1995 and 2001. Adjustments to the
unaudited adjusted financial statements in respect of these
transactions are as follows:
Income Statement:
Rental income. . . . . . . . .$313
Interest income. . . . . . . . (42)
Advisory fee . . . . . . . . . 12
Depreciation and amortization. 54
(d) Sun Healthcare. On November 1, 1993, the Company
purchased a 143 bed long-term care facility in Seattle,
Washington for $5,125 from Greenery Rehabilitation Group, Inc.
(Greenery) and simultaneously leased it to Sun Healthcare Group,
Inc. (Sun). In addition, the Company and Sun agreed to extend
the lease arrangements on three nursing facilities that had been
scheduled to expire in May, 1997, through December, 2005.
Minimum annual rent under the new lease for the four propertiesis
approximately $2,537. Adjustments to the unaudited adjusted
financial statements in respect of this transaction are as
follows:
Income Statement:
Rental income. . . . . . . . . . . . .$200
Interest income. . . . . . . . . . . .(137)
Advisory fee . . . . . . . . . . . . . 21
Depreciation and amortization. . . . . 109
(e) Community Care of America. On December 30, 1993, the
Company acquired 12 nursing homes and five retirement apartment
complexes for $33,400 and leased them to subsidiaries of
Community Care of America, Inc. (together with its subsidiaries,
CCA). In addition, the Company has agreed to provide improvement
financing of $7,300 to CCA. The acquired facilities have been
leased on a triple net basis. The minimum annual rent from this
transaction will be approximately $3,814.
Also, in connection with the CCA purchase-lease transaction
described above, the Company provided first mortgage financing on
14 nursing homes and one retirement apartment complex for $19,600
and a $7,000 note secured by a first lien on substantially all of
the assets of the borrower at a weighted average interest rate of
10.9%. The notes mature in December 2016. Minimum annual
interest from this transaction will be $2,909. Adjustments to
the unaudited adjusted financial statements in respect of these
transactions are as follows:
Income Statement:
Rental income. . . . . . . . . . . . .$3,814
Interest income. . . . . . . . . . . . 2,909
Interest expense . . . . . . . . . . . 3,243
Advisory fee . . . . . . . . . . . . . 300
Depreciation and amortization. . . . . 988
(f) Horizon/Greenery Merger. On February 11, 1994, in
connection with the merger of Greenery into Horizon Healthcare
Corporation (Horizon) the Company sold to Horizon for $28,400,
three facilities that had been leased to Greenery. The Company
realized a capital gain of approximately $3,906 on the sale of
these properties. In addition, Horizon has leased seven
facilities previously leased to Greenery, on substantially
similar terms except the leases were extended through 2005. The
Company has also granted Horizon a ten year option to buy, at the
rate of no more than one facility per year, the seven leased
facilities. Also, the Company leased the three remaining
Greenery facilities to a newly formed corporation, Connecticut
Subacute Corporation II (CSCII), an affiliate of HRPT Advisors,
Inc. (Advisor). Theses facilities are being managed by and the
lease payments are guaranteed by Horizon for a term of up to five
years. The terms of these lease arrangements are substantially
similar to the original lease arrangements. In addition, the
Company provided Horizon with $9,400 first mortgage financing for
two facilities. One of the facilities previously was owned by
the Company and leased to Greenery. The mortgage notes bear
interest at 11.5% per annum and will mature on December 31, 2000.
Adjustments to the unaudited adjusted financial statements
in respect of these transactions are as follows:
<TABLE>
<CAPTION>
Balance Sheet: Income Statement:
<S> <C> <C> <C>
Cash and cash equivalents$14,500
Land . . . . . . . . . (1,806) Rental income . .$(3,339)
Building and improvements (25,568) Interest income . 1,082
Equipment. . . . . . . (1,445) Interest expense. (524)
Accumulated depreciation (4,325) Advisory fee. . . (97)
Real estate mortgages and notes, net 9,400Depreciation and amortization (760)
Security deposits. . . (4,500)
Cumulative net income. 3,906
</TABLE>
(g) January 1993 Share Offering. On January 20, 1993, the
Company received approximately $107,315 net proceeds from the
public offering of 9,000,000 shares of the Company's stock. The
proceeds were used, in part, to repay outstanding borrowings of
$70,000 under the Company's term loans and $18,500 under the
Company's revolving line of credit. On February 17, 1993, the
Company received additional net proceeds of approximately $15,822
and issued 1,350,000 shares of the Company's stock in connection
with the exercise of the underwriters' over-allotment option.
Adjustments to the unaudited adjusted financial statements in
respect of these transactions are as follows:
Income Statement:
Interest expense $(401)
(h) December 1993 Share Offering. During the last quarter
of 1993, the Company raised approximately $121,655 net proceeds
from the public offering of 9,000,000 Shares. The net proceeds
were used to repay borrowings under the Company's repurchase
facility and to fund the Community Care of America transaction.
On January 19, 1994, the underwriters exercised their over-
allotment option for 601,500 additional Shares, resulting in
additional net proceeds to the Company of approximately $8.3
million. Adjustments to the unaudited adjusted financial
statements in respect of these transactions are as follows:
<TABLE>
<CAPTION>
Balance Sheet: Income Statement:
<S> <C> <C> <C>
Cash and cash equivalents$8,198 Interest income .$ 519
Additional paid-in capital 8,192 Interest expense.$(7,681)
Common Shares. . . . . 6
/TABLE
<PAGE>
(i) Goldome Mortgage Portfolio. On November 19, 1993, the
Company was selected as the winning bidder for a portfolio of
performing mortgage loans originated by Goldome Credit
Corporation. These loans have a combined principal balance of
approximately $29.2 million, mature between 1994 and 1999, and
are secured by mortgages on 18 nursing homes located in eight
states. The Company's bid was for approximately $27.8 million. On
December 10, 1993, the Company acquired for $26.6 million
mortgage loans with a combined principal balance of $27.9 million
secured by 17 nursing homes. In February 1994, the Company
acquired the remaining mortgage loan. Also in February 1994 one
loan with a balance of $2,275 at February 15, 1994 and December
31, 1993 was paid in full. Adjustments to the unaudited adjusted
financial statements in respect of these transactions are as
follows:
<TABLE>
<CAPTION>
Balance Sheet: Income Statement:
<S> <C> <C> <C>
Real estate mortgages. $(1,088) Interest income . .$2,866
Borrowings . . . . . . (1,105) Interest expense. . 1,686
Cumulative net income. 17 Advisory fee. . . . 128
Depreciation and amortization 44
/TABLE
<PAGE>
No dealer, salesperson or other
individual has been authorized to
give any information or make any
representations not contained in
this Prospectus in connection with
the offering covered by this
Prospectus. If given or made, such
information or representations must
not be relied upon as having been
authorized by the Company or the
U.S. Underwriters. This Prospectus
does not constitute an offer to
sell, or a solicitation of an offer
to buy, the Shares in any
jurisdiction where, or to any person
to whom, it is unlawful to make such
offer or solicitation. Neither the
delivery of this Prospectus or any
sale made hereunder shall, under any
circumstances, create an implication
that there has not been any change
in the facts set forth in this
Prospectus or in the affairs of the
Company since the date hereof.
TABLE OF CONTENTS
Additional Information . 2
Incorporation of Certain
Information by Reference 2
Summary. . . . . . . . . 3
Recent Developments. . . 5
The Company. . . . . . . 7
Distributions. . . . . . 8
Capitalization . . . . . 9
Use of Proceeds. . . . . 9
Investment and Financing Policy
10
Selected Financial Data. 11
Properties . . . . . . . 12
The Lessees and the Mortgagors13
Management . . . . . . . 14
Federal Income Tax and ERISA
Considerations . . . . 15
Underwriting . . . . . . 16
Legal Matters. . . . . . 17
Experts. . . . . . . . . 17
Unaudited Adjusted Financial
Statements . . . . . . F-1<PAGE>
10,000,000 Shares
HEALTH AND
REHABILITATION
PROPERTIES TRUST
Common Shares of Beneficial
Interest
____________________
PROSPECTUS
____________________
Merrill Lynch & Co.
Donaldson, Lufkin &
Jenrette
Securities Corporation
PaineWebber Incorporated
Smith Barney Shearson
Inc.
April __, 1994
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 29, 1994
PROSPECTUS
10,000,000 Shares
HEALTH AND REHABILITATION PROPERTIES TRUST
Common Shares of Beneficial Interest
______________________
Health and Rehabilitation Properties Trust (the "Company" or
"HRP") is a real estate investment trust which invests primarily
in retirement communities, assisted living centers, nursing homes
and other long term care facilities. On March 25, 1994, the last
reported sale price for the Shares on the New York Stock Exchange
was $15 7/8.
Of the 10,000,000 Shares offered by the Company, 1,500,000
Shares are being offered initially outside the United States and
Canada by the International Managers and 8,500,000 Shares are
being offered in a concurrent offering in the United States and
Canada by the U.S. Underwriters (collectively, the "Offerings").
See "Underwriting".
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
__________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Per Share. . . . $ $ $
Total(3) . . . . $ $ $
_________________________________________________________________________________________________________________________________
</TABLE>
(1) The Company has agreed to indemnify the several International
Managers against certain liabilities, including certain
liabilities under the Securities Act of 1933. See
"Underwriting".
(2) Before deducting expenses payable by the Company estimated at
$586,681.
(3) The Company has granted the International Managers and the
U.S. Underwriters an option, exercisable by the U. S.
Representatives for 30 days from the date of this Prospectus, to
purchase up to 1,500,000 additional Shares, solely to cover over-
allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to
Company will be $__________, $__________ and $__________,
respectively. See "Underwriting".
The Shares offered hereby are offered by the several
International Managers subject to prior sale, when, as and if
issued to and accepted by them and subject to approval of certain
legal matters by Brown & Wood, counsel for the International
Managers, and to certain other conditions. The International
Managers reserve the right to withdraw, cancel or modify such
offer and to reject orders in whole or in part. It is expected
that delivery of the Shares offered hereby will be made in New
York, New York on or about April __, 1994.
________________________
Merrill Lynch International Limited
Donaldson, Lufkin & Jenrette
Securities Corporation
PaineWebber International
Smith Barney Shearson Inc.
_________________________
The date of this Prospectus is ________, 1994<PAGE>
FEDERAL INCOME TAX AND ERISA CONSIDERATIONS
The following description of certain Federal income tax
matters and Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), considerations relating to the Company is
qualified in its entirety by reference to the more detailed
description thereof contained in the Company's Annual Report on
Form 10-K, which is incorporated herein by reference. The opinion
of Sullivan & Worcester, Boston, Massachusetts, regarding such
matters has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Company is and intends to remain qualified as a REIT
under the Internal Revenue Code of 1986, as amended (the "Code").
As a REIT, the Company's net income which is distributed as
dividends to shareholders will be exempt from Federal taxation.
Distributions to the Company's shareholders generally will be
includable in their income; however, dividends distributed which
are in excess of current or accumulated earnings will be treated
for tax purposes as a return of capital to the extent of a
shareholder's basis, and will reduce the basis of shareholders'
Shares. Approximately 26% of dividends distributed in calendar
1993 were treated as a return of capital.
The Company intends to conduct its affairs so that the
assets of the Company will not be deemed to be "plan assets" of
any individual retirement account, employee benefit plan subject
to Title I of ERISA, or other qualified retirement plan subject
to Section 4975 of the Code which acquires its Shares. The
Company believes that, under present law, its distributions do
not create so called "unrelated business taxable income" to tax
exempt entities such as pension trusts, subject, however, to
certain new rules which apply to pension trusts holding more than
10% of the Shares.
Special Tax Considerations for Foreign Shareholders
The rules governing United States income taxation of
nonresident alien individuals, foreign corporations, foreign
partnerships, and foreign trusts and estates (collectively, "Non-
U.S. Shareholders") are complex, and the following discussion is
intended only as a summary of such rules. Prospective Non-U.S.
Shareholders should consult with their own tax advisors to
determine the impact of Federal, state, and local income tax laws
on an investment in the Company, including any reporting
requirements.
In general, a Non-U.S. Shareholder will be subject to
regular United States income tax with respect to its investment
in the Company if such investment is "effectively connected" with
the Non-U.S. Shareholder's conduct of a trade or business in the
United States, or if the Non-U.S. Shareholder is a nonresident
alien individual who is present in the United States for 183 days
or more during the taxable year. A corporate Non-U.S.
Shareholder that receives income that is (or is treated as)
effectively connected with a U.S. trade or business may also be
subject to the branch profits tax under Section 884 of the Code,
which is payable in addition to regular United States corporate
income tax. The following discussion will apply to Non-U.S.
Shareholders whose investment in the Company is not so
effectively connected.
A distribution by the Company that is not attributable to
gain from the sale or exchange by the Company of a United States
real property interest and that is not designated by the Company
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. Generally, unless the dividend
is effectively connected with the Non-U.S. Shareholder's conduct
of a trade or business, such a dividend will be subject to a
United States withholding tax equal to 30% of the gross amount of
the dividend unless such withholding is reduced by an applicable
tax treaty (for example, the treaty between the United States and
the United Kingdom provides generally for a maximum rate of
withholding of 15% on dividends). A foreign governmental
entity,such as a governmental pension plan, may qualify for a
compete exemption from withholding on such dividends. A
distribution of cash in excess of the Company's earnings and
profits will be treated first as a nontaxable return of capital
that will reduce a Non-U.S. Shareholder's basis in its shares
(but not below zero) and then as gain from the disposition of
such shares, the tax treatment of which is described under the
rules discussed below with respect to disposition of shares. A
distribution in excess of the Company's earnings and profits may
be subject to 30% dividend withholding if at the time of the
distribution it cannot be determined whether the distribution
will be in an amount in excess of the Company's current and
accumulated earnings and profits. If its subsequently determined
that such distribution is, in fact, in excess of current and
accumulated earnings and profits, the Non-U.S. Shareholder may
seek a refund from the IRS. The Company expects to withhold
United States income tax at the rate of 30% on the gross amount
of any such distributions made to a Non-U.S. Shareholder unless
(i) a lower tax treaty applies and the required form evidencing
eligibility for that reduced rate is filed with the Company or
(ii) the Non-U.S. Shareholder files IRS Form 4224 with the
Company claiming that the distribution is "effectively connected"
income.
For any year in which the Company qualifies as a REIT,
distributions by the Company that are attributable to gain from
the sale or exchange of a United States real property interest
will be taxed to a Non-U.S. Shareholder in accordance with the
Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA").
Under FIRPTA, such distributions are taxed to a Non-U.S.
Shareholder as if such distributions were gains "effectively
connected" with a United States trade or business. Accordingly,
a Non-U.S. Shareholder will be taxed at the normal capital gain
rates applicable to a U.S. Shareholder (subject to any applicable
alternative minimum tax and a special alternative minimum tax in
the case of non-resident alien individuals). Distributions
subject to FIRPTA may also be subject to a 30% branch profits tax
in the hands of a foreign corporate shareholder that is not
entitled to treaty exemption. The Company will be required to
withhold from distributions to Non-U.S. Shareholders, and remit
to the IRS, 35% of the amount of any distribution that could be
designated as capital gain dividends.
Tax treaties may reduce the Company's withholding
obligations. If the amount of tax withheld by the Company with
respect to a distribution to a Non-U.S. Shareholder exceeds the
shareholder's United States liability with respect to such
distribution, the Non-U.S. Shareholder may file for a refund of
such excess from the IRS. It should be noted that the 35%
withholding tax rate on capital gain dividends corresponds to the
maximum income tax rate applicable to corporations but is higher
than the 28% maximum rate on capital gains of individuals.
If the Shares fail to constitute a "United States real
property interest" within the meaning of FIRPTA, a sale of the
Shares by a Non-U.S. Shareholder generally will not be subject to
United States taxation unless (i) investment in the Shares is
effectively connected with the Non-U.S. Shareholder's United
States trade or business, in which case, as discussed above, the
Non-U.S. Shareholder would be subject to the same treatment as
U.S. Shareholders on such gain or (ii) the Non-U.S. Shareholder
is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year, in which
case the nonresident alien individual will be subject to a 30%
tax on the individual's capital gains.
The Shares will not constitute a United States real property
interest if the Company is a "domestically controlled REIT". A
domestically controlled REIT is a REIT in which at all times
during a specified testing period less than 50% in value of its
shares is held directly or indirectly by Non-U.S. Shareholders.
It is currently anticipated that the Company will be a
domestically controlled REIT, and therefore that the sale of
Shares will not be subject to taxation under FIRPTA. However,
because the Shares will be publicly traded, no assurance can be
given that the Company will continue to be a domestically
controlled REIT. If the Company did not constitute a
domestically controlled REIT, whether a Non-U.S. Shareholder's
sale of Shares would be subject to tax under FIRPTA as a sale of
a United States real property interest would depend on whether
the Shares were "regularly traded" (as defined by applicable
Treasury Regulations) on an established securities market (e.g.,
the New York Stock Exchange, on which the Shares are listed) and
on the size of the selling shareholder's interest in the Company.
If the gain on the sale of the Shares were subject to taxation
under FIRPTA, the Non-U.S. Shareholder would be subject to the
same treatment as a U.S. Shareholder with respect to such gain
(subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien
individuals). In any event, a purchaser of Shares from a Non-
U.S. Shareholder will not be required under FIRPTA to withhold on
the purchase price if the purchased Shares are "regularly traded"
on an established securities market or if the Company is a
domestically controlled REIT. Otherwise, under FIRPTA, the
purchaser of Shares may be required to withhold 10% of the
purchase price and to remit such amount to the IRS.
Federal Estate Tax
Shares owned or treated as owned by an individual who is not
a citizen or resident (as defined for United States federal
estate tax purposes) of the United States at the time of death
will be includable in the individual's gross estate for United
States federal estate tax purposes unless an applicable estate
tax treaty provides otherwise.
Backup Withholding and Information Reporting Requirements
The Company must report annually to the IRS and to each Non-
U.S. Shareholder the amount of dividends paid to, and the tax
withheld with respect to such holder. These information
reporting requirements apply regardless of whether withholding
was reduced or eliminated by an applicable tax treaty. Copies of
these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax
authorities in the country in which the Non-U.S. Shareholder
resides. United States backup withholding tax (which generally
is a withholding tax imposed at the rate of 31% on certain
payments to persons that fail to furnish the information required
under the United States information reporting requirements) will
generally not apply to dividends paid on Shares to a Non-U.S.
Shareholder at an address outside the United States.
The payment of the proceeds from the disposition of Shares
to or through the United States office of a broker will be
subject to information reporting and backup withholding at a rate
of 31% unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Shareholder, or
otherwise establishes an exemption. The payment of the proceeds
from the disposition of Shares to or through a non-U.S. office of
a broker generally will not be subject to backup withholding and
information reporting. In the case of proceeds from a
disposition of Shares paid to or through a non-U.S. office of a
U.S. broker or paid to or through a non-U.S. office of a non-U.S.
broker that is (i) a "controlled foreign corporation" for United
States federal income tax purposes or (ii) a person 50% or more
of whose gross income from all sources for a certain three-year
period was effectively connected with a United States trade or
business, (a) backup withholding will not apply unless the broker
has actual knowledge that the owner is not a Non-U.S.
Shareholder, and (b) information reporting will not apply if the
broker has documentary evidence in its files that the owner is a
Non-U.S. Shareholder (unless the broker has actual knowledge to
the contrary).
Any amounts withheld under the backup withholding rules from
a payment to a Non-U.S. Shareholder will be refunded (or credited
against the Non-U.S. Shareholder's United States federal income
tax liability, if any), provided that the required information is
furnished to the IRS.
EACH PROSPECTIVE PURCHASER OF THE SHARES OFFERED HEREBY IS
ADVISED TO CONSULT HIS OWN PROFESSIONAL ADVISOR REGARDING THE
SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX AND ERISA
CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND SALE OF THE
SHARES OFFERED HEREBY.
<PAGE>
UNDERWRITING
The Managers named below (the "International Managers"), for
whom Merrill Lynch International Limited, Donaldson, Lufkin &
Jenrette Securities Corporation, PaineWebber International (U.K.)
Ltd. and Smith Barney Shearson Inc. are acting as representatives
(the "Lead Managers"), have severally agreed, subject to the
terms and conditions of the International Purchase Agreement (the
"International Purchase Agreement") with the Company relating to
1,500,000 Shares offered outside the United States and Canada
(the "International Offering"), to purchase from the Company the
respective number of Shares set forth opposite their names below.
<TABLE>
<CAPTION>
Number
International Manager of Shares
<S> <C>
Merrill Lynch International Limited .
Donaldson, Lufkin & Jenrette Securities Corporation
PaineWebber International (U.K.) Ltd.
Smith Barney Shearson Inc . . . . . .
Total . . . . . . . . 1,500,000
</TABLE>
The Company has also entered into the U.S. Purchase
Agreement (the "U.S. Purchase Agreement") with certain
underwriters in the United States and Canada (the "U.S.
Underwriters"), for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), Donaldson, Lufkin & Jenrette Securities
Corporation, PaineWebber Incorporated and Smith Barney Shearson
Inc. are acting as representatives (the "U.S. Representatives"),
relating to the Shares offered in the United States and Canada
(the "U.S. Offering"). Subject to the terms and conditions of
the U.S. Purchase Agreement, the Company has agreed to sell to
the U.S. Underwriters, and the U.S. Underwriters have severally
agreed to purchase, an aggregate of 8,500,000 Shares.
Under certain circumstances, the commitments of non-
defaulting International Managers and U.S. Underwriters may be
increased. The public offering price per Share and the
underwriting discount per Share are identical under the
International Purchase Agreement and the U.S. Purchase Agreement.
In the International Purchase Agreement, the several
International Managers have agreed, subject to the terms and
conditions set forth therein, to purchase all of the Shares being
sold pursuant to such agreement if any of the Shares being sold
pursuant to such agreement are purchased and in the U.S. Purchase
Agreement the several U.S. Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of
the Shares being sold pursuant to such agreement if any of the
Shares being sold pursuant to such agreement are purchased. The
closings with respect to the sale of Shares to be purchased by
the International Managers and the U.S. Underwriters are
conditioned upon one another.
The Lead Managers have advised the Company that the
International Managers propose to initially offer the Shares to
the public at the public offering price set forth on the cover
page of this Prospectus and to certain dealers at such price less
a concession not in excess of $__ per Share. The International
Managers may allow, and such dealers may reallow, a discount not
in excess of $__ per Share to other dealers. After the initial
public offering, the public offering price, concession and
discount may be changed.
The Company has granted to the International Managers and
the U.S. Underwriters an option, exercisable by the U.S.
Representatives for 30 days from the date of this Prospectus, to
purchase up to an additional 1,500,000 Shares, solely to cover
over-allotments, if any, at a price per Share equal to the
initial public offering price less the underwriting discount set
forth on the cover page of this Prospectus, and, with respect to
any such Shares issued after the record date for the quarterly
dividend for the period ending March 31, 1994, less an amount
equal to such dividend. If the U.S. Representatives exercise
such option, each International Manager and U.S. Underwriter
will, subject to certain conditions, have a firm commitment to
purchase approximately the same percentage of such option Shares
which the number of Shares to be purchased initially by it bears
to 10,000,000 Shares.
The International Managers and the U.S. Underwriters have
entered into an Intersyndicate Agreement (the "Intersyndicate
Agreement") that provides for coordination of their activities.
Pursuant to the Intersyndicate Agreement, sales may be made
between the International Managers and the U.S. Underwriters of
such number of Shares as may be mutually agreed. The price of
any Shares so sold shall be the initial public offering price,
less an amount not greater than the selling concession.
Under the terms of the Intersyndicate Agreement, the
International Managers and any dealer to whom they sell Shares
will not offer to sell or sell Shares to any U.S. or Canadian
person or to any person they believe intends to resell to any
U.S. or Canadian person, and the U.S. Underwriters and any dealer
to whom they sell Shares will not offer to sell or sell Shares to
any non-U.S. or non-Canadian person or to any person they believe
intends to resell to any non-U.S. or non-Canadian person, except,
in each case, for transactions pursuant to the Intersyndicate
Agreement.
Each International Manager has agreed that it has not
offered or sold and will not offer or sell in the United Kingdom,
by means of any document, any Shares offered by the Company other
than to persons whose ordinary business it is to buy or sell
shares or debentures, whether as principal or agent (except in
circumstances which do not constitute an offer to the public
within the meaning of the Companies Act 1985).
Each International Manager has further agreed that it has
complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it
in relation to the Shares offered by the Company in, from or
otherwise involving the United Kingdom. Each International
Manager has also agreed that it has only issued and passed on and
will only issue or pass on to any person in the United Kingdom
any document received by it in connection with the issue of the
Shares offered by the Company if that person is of a kind
described in Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1988.
The Company has agreed to indemnify the several
International Managers and the several U.S. Underwriters against
certain liabilities, including liabilities under the Securities
Act.
The Company and the Advisor have each agreed that, for a
period of 90 days after the date of this Prospectus, it will not,
without the prior consent of MLPF&S, issue, sell, contract to
sell, grant any option for the sale of, or otherwise dispose of
any Shares, other than the Shares being sold in connection with
the transactions discussed herein, pursuant to the Company's 1992
Incentive Share Award Plan, and Shares issued upon exercise of
any outstanding options. The Company has agreed that, during such
90 day period, it will not, without the prior consent of MLPF&S,
terminate, modify or waive any provision in any agreement to
which it is a party that restricts or limits the transferability
of any Shares.
MLPF&S will be entitled to an advisory fee from the Company
in connection with consummation of the Marriott Transaction. As
described under "The Company -- Recent Developments -- The
Marriott Transaction", the Company is also negotiating with
MLMCI, a subsidiary of MLPF&S, for provision of the MLMCI
Facility which may be used in connection with the Company's
consummation of the Marriott Transaction. MLMCI will be entitled
to a fee upon consummation of the Marriott Transaction and
additional fees if the MLMCI Facility is consummated. In
addition, MLPF&S and MLMCI are both presently entitled to
reimbursement from the Company for their respective out-of-pocket
expenses incurred in advising and assisting the Company in
connection with the Marriott Transaction.
<PAGE>
No dealer, salesperson or other
individual has been authorized to
give any information or make any
representations not contained in
this Prospectus in connection with
the offering covered by this
Prospectus. If given or made, such
information or representations must
not be relied upon as having been
authorized by the Company or the
International Managers. This
Prospectus does not constitute an
offer to sell, or a solicitation of
an offer to buy, the Shares in any
jurisdiction where, or to any person
to whom, it is unlawful to make such
offer or solicitation. Neither the
delivery of this Prospectus or any
sale made hereunder shall, under any
circumstances, create an implication
that there has not been any change
in the facts set forth in this
Prospectus or in the affairs of the
Company since the date hereof.
TABLE OF CONTENTS
Additional Information . 2
Incorporation of Certain
Information by Reference 2
Prospectus Summary . . . 3
Recent Developments. . . 5
The Company. . . . . . . 7
Distributions. . . . . . 8
Capitalization . . . . . 9
Use of Proceeds. . . . . 9
Investment and Financing
Policy . . . . . . . . . 10
Selected Financial Data. 11
Properties . . . . . . . 12
The Lessees and the Mortgagors13
Management . . . . . . . 14
Federal Income Tax and ERISA
Considerations . . . . 15
Underwriting . . . . . . 18
Legal Matters. . . . . . 19
Experts. . . . . . . . . 19
Unaudited Adjusted Financial
Statements . . . . . . F-1<PAGE>
10,000,000 Shares
HEALTH AND
REHABILITATION
PROPERTIES TRUST
Common Shares of Beneficial
Interest
____________________
PROSPECTUS
____________________
Merrill Lynch
International
Limited
Donaldson, Lufkin &
Jenrette
Securities Corporation
PaineWebber
International
Smith Barney Shearson
Inc.
April __, 1994
<PAGE>
APPENDIX TO ELECTRONIC FORMAT DOCUMENT
Page 3:
Pie chart
A pie chart depicting the percentage of the Company's
investments which will be in Properties operated by Marriott
International (38%); Other Public Companies (Horizon Healthcare,
GranCare, Sun Healthcare, Integrated Health, Beverly Enterprises
and Hillhaven) (32%); and 30 Private Companies (30%).
Dividend chart
A bar graph depicting HRP Dividend Growth: 1987 -
$1.06; 1988 - $1.12; 1989 - $1.14; 1990 - $1.17; 1991 - $1.23;
1992 - $1.26; 1993 - $1.30; Quarter ended March 31, 1994
annualized - $1.32.
Page 7:
Map
A map of the United States with the states listed
immediately below the map shaded and with stars indicating the
locations of the Marriott Properties (5 in Florida, 3 in
Virginia, 2 in Arizona, 1 each in California, Illinois, Maryland
and Texas).
Page 10:
Pie charts
Two pie charts depicting the HRP Capital Structure
before the sale of Shares and the Marriott Transaction: debt
(14%) and equity (86%); after the sale of Shares and Marriott
Transaction: debt (27%) and equity (73%).
Page 12:
Pie charts
Two pie charts depicting the division of HRP's
portfolio by type of property: Nursing homes, assisted living and
retirement communities (97%) and two psychiatric facilities (3%);
and by type of investment: purchase and lease (81%) and mortgages
(19%).
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Set forth below is an estimate of the amount of fees and
expenses to be incurred in connection with the issuance and
distribution of the Shares registered hereby, other than
underwriting discounts and commissions.
Registration Fee Under Securities Act . . $ 61,962
NASD Filing Fee . . . . . . . . . . . . . 18,469
Blue Sky Fees and Expenses. . . . . . . . 25,000
Legal Fees. . . . . . . . . . . . . . . . 200,000
Accounting Fees . . . . . . . . . . . . . 125,000
Printing and Engraving. . . . . . . . . . 75,000
Listing Application Fees. . . . . . . . . 40,250
Transfer Agent Fees . . . . . . . . . . . 1,000
Miscellaneous Fees. . . . . . . . . . . . 40,000
Total. . . . . . . . . . . . . . . . . $ 586,681
- ---------------
* All expenses are estimated except the SEC registration fee and
the NASD filing fee.
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS.
Section 7.4 of the Company's Declaration of Trust, filed as
Exhibit 3.1 to this Registration Statement, which provides for
indemnification of Trustees and officers of the Company, is
hereby incorporated by reference.
Reference is made to Section 7 of the Underwriting Agreement
(Exhibit 1.1 hereto) with respect to certain provisions for
indemnification by the Underwriters of the Company, Trustees,
officers and controlling persons under certain circumstances.
ITEM 16. EXHIBITS.
1.1 Form of U.S. Purchase Agreement.(*)
1.2 Form of International Purchase Agreement.(*)
3.1 Declaration of Trust, as amended.(1)
3.2 By-Laws.(2)
5.1 Opinion and Consent of Sullivan & Worcester regarding
legality.(**)
5.2 Opinion and Consent of Piper & Marbury.(**)
8.1 Opinion and Consent of Sullivan & Worcester regarding
tax matters.(**)
23.1 Consent of Sullivan & Worcester (included in their
opinions to be filed as Exhibits 5.1
and 8.1 to this Registration Statement).
23.2 Consent of Piper & Marbury (included in their opinion
to be filed as Exhibit 5.2 to this
Registration Statement).
23.3 Consent of Ernst & Young (included as page II-4 of
this Registration
Statement).(*)
23.4 Consent of Arthur Andersen & Co. (included as page
II-5 of this Registration
Statement).(*)
23.5 Consent of KPMG Peat Marwick (included as page II-6 of
this Registration
Statement.(*)
24 Powers of Attorney.(*)
- ---------------
(*) Filed herewith.
(**) To be filed by amendment.
(1) Incorporated by reference to the Company's Registration
Statement No 33-71422 on Form S-3 dated November 9, 1993 and
amendment thereto.
(2) Incorporated by reference to the Company's Registration
Statement No. 33-9412 on Form S-11 dated October 10, 1986 and
amendments thereto.
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(b)(1) For purposes of determining any liability under
the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of a 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 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, 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.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-3) and related
Prospectus of Health and Rehabilitation Properties Trust for the
registration of 11,500,000 of its common shares of beneficial
interest and to the incorporation by reference therein of (a) our
report dated February 11, 1994 with respect to the financial
statements and schedules of Health and Rehabilitation Properties
Trust included in its Annual Report (Form 10-K) for the year
ended December 31, 1993, (b) our report dated December 30, 1993
with respect to the consolidated financial statements and
schedules of Greenery Rehabilitation Group, Inc. included in
Greenery's Annual Report (Form 10-K) for the year ended September
30, 1993, and (c) our report dated February 19, 1993 with respect
to the consolidated financial statements and schedules of
GranCare, Inc. included in GranCare's Annual Report (Form 10-K)
for the year ended December 31, 1992, all filed with the
Securities and Exchange Commission.
ERNST & YOUNG
Boston, Massachusetts
March 29, 1994
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our
report dated July 23, 1993 (except with respect to the matters
discussed in Note 15, as to which the date is August 2, 1993),
included in Horizon Healthcare Corporation's Form 10-K/A -
Amendment No. 3 for the year ended May 31, 1993, dated October 5,
1993, and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN & CO.
Albuquerque, New Mexico
March 29, 1994
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Stockholders
Horizon Healthcare Corporation:
We consent to the use of our report incorporated herein by
reference and to the reference to our firm under the heading
"Experts" in the prospectus.
KPMG PEAT MARWICK
Albuquerque, New Mexico
March 29, 1994
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this to registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, Commonwealth of Massachusetts
on March 29, 1994.
HEALTH AND REHABILITATION PROPERTIES TRUST
By:_David J. Hegarty____________________
David J. Hegarty,
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement on Form S-3 has been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
____Mark J. Finkelstein_________ President and Chief March 29, 1994
Mark J. Finkelstein Executive Officer
____David J. Hegarty____________ Executive Vice PresidentMarch 29, 1994
David J. Hegarty and Chief Financial and
Accounting Officer
___John L. Harrington___________ Trustee March 29, 1994
John L. Harrington
___Arthur G. Koumantzelis______ Trustee March 29, 1994
Arthur G. Koumantzelis
___Rev. Justinian Manning, C.P.__ Trustee March 29, 1994
Rev. Justinian Manning, C.P.
____Barry M. Portnoy__________ Trustee March 29, 1994
Barry M. Portnoy
____Gerard M. Martin___________ Trustee March 29, 1994
Gerard M. Martin
</TABLE>
<PAGE>
POWER OF ATTORNEY
The undersigned Officers and Trustees of Health and
Rehabilitation Properties Trust hereby severally constitute Mark
J. Finkelstein, David J. Hegarty, Gerard M. Martin and Barry M.
Portnoy, and each of them, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-
3 herewith filed with the Securities and Exchange Commission, and
any and all amendments thereto, hereby ratifying and confirming
our signatures as they may be signed by our said attorneys to the
Registration Statement and any and all amendments to the
Registration Statement.
Witness our hands and seals on the dates set forth below.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
____Mark J. Finkelstein_________ President and Chief March 29, 1994
Mark J. Finkelstein Executive Officer
____David J. Hegarty____________ Executive Vice PresidentMarch 29, 1994
David J. Hegarty and Chief Financial and
Accounting Officer
___John L. Harrington___________ Trustee March 29, 1994
John L. Harrington
___Arthur G. Koumantzelis______ Trustee March 29, 1994
Arthur G. Koumantzelis
___Rev. Justinian Manning, C.P.__ Trustee March 29, 1994
Rev. Justinian Manning, C.P.
____Barry M. Portnoy__________ Trustee March 29, 1994
Barry M. Portnoy
____Gerard M. Martin___________ Trustee March 29, 1994
Gerard M. Martin
</TABLE>
Brown & Wood
Draft of 3/28/94
8,500,000 Shares
HEALTH AND REHABILITATION PROPERTIES TRUST
(a Maryland real estate investment trust)
Common Shares of Beneficial Interest
($.01 Par Value)
U.S. PURCHASE AGREEMENT
____________ __, 1994
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
As Representatives of the several U.S. Underwriters
named in Schedule A hereto
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Dear Sirs:
Health and Rehabilitation Properties Trust, a real estate
investment trust organized under the laws of the State of Maryland (the
"Company"), confirms its agreement with Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Donaldson,
Lufkin & Jenrette Securities Corporation ("Donaldson Lufkin"),
PaineWebber Incorporated ("PaineWebber") and Smith Barney Shearson Inc.
("Smith Barney") and each of the other Underwriters named in Schedule A
<PAGE>
hereto (collectively, the "U.S. Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section
10), for whom Merrill Lynch, Donaldson Lufkin, PaineWebber and Smith
Barney are acting as representatives (in such capacity, Merrill Lynch,
Donaldson Lufkin, PaineWebber and Smith Barney shall hereinafter be
referred to as the "U.S. Representatives"), with respect to the sale by
the Company and the purchase by the U.S. Underwriters, acting severally
and not jointly, of the number of common shares of beneficial interest,
$.01 par value, of the Company (the "Shares of Beneficial Interest") set
forth in said Schedule A, except as may otherwise be provided in the
U.S. Pricing Agreement, as hereinafter defined, and with respect to the
grant by the Company to the U.S. Underwriters of the option described in
Section 2 hereof to purchase all or any part of an additional 1,500,000
Shares of Beneficial Interest to cover over-allotments. The aforesaid
8,500,000 Shares of Beneficial Interest set forth in said Schedule A
(the "Initial U.S. Shares"), together with all or any part of the
1,500,000 Shares of Beneficial Interest subject to the option described
in Section 2 hereof (the "U.S. Option Shares"), are collectively
hereinafter called the "U.S. Shares".
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by the Company of 1,500,000 shares of
beneficial interest (the "Initial International Shares") through
arrangements with certain underwriters outside of the United States (the
"International Managers") for which Merrill Lynch International Limited,
("MLI") Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber
International (U.K.) Ltd. and Smith Barney Shearson Inc. are acting as
lead managers (the "Lead Managers") and the grant by the Company to the
International Managers of an option to purchase all or any part the
International Managers' pro rata portion of the option shares (the
"International Option Shares") to cover over-allotments. The Initial
International Shares and the International Option Shares are hereinafter
called the "International Shares". It is understood that the Company is
not obligated to sell, and the U.S. Underwriters are not obligated to
purchase, any Initial U.S. Shares unless all of the Initial
International Shares are contemporaneously purchased by the
International Managers.
The U.S. Underwriters and the International Managers are
hereinafter collectively called the "Underwriters", the Initial U.S.
Shares and the Initial International Shares are hereinafter collectively
called the "Initial Shares", the U.S. Option Shares and the
International Option Shares are hereinafter collectively called the
"Option Shares" and the U.S. Shares and the International Shares are
hereinafter collectively called the "Shares".
The Fund understands that the U.S. Underwriters and the
International Managers will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement")
-2-
<PAGE>
providing the coordination of certain transactions among the U.S.
Underwriters and the International Managers under the direction of
Merrill Lynch.
Prior to the purchase and public offering of the U.S. Shares by the
several U.S. Underwriters, the Company and the U.S. Representatives,
acting on behalf of the several U.S. Underwriters, shall enter into an
agreement substantially in the form of Exhibit A hereto (the "U.S.
Pricing Agreement"). The U.S. Pricing Agreement may take the form of an
exchange of any standard form of written telecommunication between the
Company and the U.S. Representatives and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the
U.S. Shares will be governed by this Agreement, as supplemented by the
U.S. Pricing Agreement. From and after the date of the execution and
delivery of the U.S. Pricing Agreement, this Agreement shall be deemed
to incorporate the U.S. Pricing Agreement. The initial public offering
price and purchase price with respect to the International Shares shall
be set forth in a separate instrument (the "International Pricing
Agreement"), the form of which is attached to the International Purchase
Agreement.
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (No. 33-_____)
and a related preliminary prospectus for the registration of the Shares
under the Securities Act of 1933, as amended (the "1933 Act"), and has
filed such amendments thereto, if any, and such amended preliminary
prospectuses as may have been required to the date hereof.1 Such
registration statement (as amended, if applicable) and the prospectus
constituting a part thereof (including, in each case, all documents
incorporated or deemed to be incorporated by reference therein and the
information, if any, deemed to be a part thereof pursuant to Rule
430A(b) of the rules and regulations under the 1933 Act (the "1933 Act
Regulations")), as from time to time amended or supplemented pursuant to
the 1933 Act, are hereinafter referred to as the "Registration
Statement" and the "Prospectus", respectively, except that if any
revised prospectus shall be provided to the Underwriters by the Company
for use in connection with the offering of the Shares which differs from
the Prospectus on file at the Commission at the time the Registration
Statement becomes effective (whether or not such revised prospectus is
required to be filed by the Company pursuant to Rule 424(b) of the 1933
Act Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the
Underwriters for such use. All references in this Agreement to
financial statements and schedules and other information which is
1 Two forms of prospectus are to be used in connection with
the offering and sale of the Shares: one relating to the U.S.
Shares (the "U.S. Prospectus"), and one relating to the
International Shares (the "International Prospectus").
-3-
<PAGE>
"contained," "included" or "stated" in the Registration Statement or the
Prospectus (and all other references of like import) shall be deemed to
mean and include all such financial statements and schedules and other
information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and
include the filing of any document under the Securities Exchange Act of
1934 (the "1934 Act") which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case
may be.
The Company understands that the Underwriters propose to make a
public offering of the Shares as soon as the U.S. Representatives and
the Lead Managers deem advisable after the Registration Statement
becomes effective and the U.S. and International Pricing Agreements have
been executed and delivered.
Section 1. Representations and Warranties.
(a) The Company represents and warrants to each U.S. Underwriter
as of the date hereof and as of the date of the U.S. Pricing Agreement
(such latter date being hereinafter referred to as the "U.S.
Representation Date") as follows:
(i) At the time the Registration Statement becomes effective
and at the U.S. Representation Date, the Registration Statement
will comply in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations and will not contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, at the U.S.
Representation Date (unless the term "Prospectus" refers to a
prospectus which has been provided to the U.S. Underwriters or the
International Managers, as the case may be, by the Company for use
in connection with the offering of the Shares which differs from
the Prospectus on file at the Commission at the time the
Registration Statement becomes effective, in which case at the time
it is first provided to the U.S. Underwriters or the International
Managers for such use) and at Closing Time referred to in Section 2
hereof, will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply
to those parts of the Registration Statement or Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any U.S. Underwriter through the U.S.
Representatives or any International Manager through the Lead
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Managers expressly for use in the Registration Statement or
Prospectus.
(ii) The documents incorporated or deemed to be incorporated
by reference in the Prospectus, at the time they were or hereafter
are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the
rules and regulations of the Commission under the 1934 Act (the
"1934 Act Regulations"), and, when read together with the other
information in the Prospectus, at the time the Registration
Statement becomes effective and at the Closing Time, will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
(iii) The Company is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization,
with trust power and authority to carry on its business and to own
or lease its properties as described in the Registration Statement,
and the Company owns or possesses all licenses and permits
necessary for the conduct of its business and the ownership,
leasing and operation of its properties, except such licenses and
permits as to which the failure to own or possess would not in the
aggregate have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or
business prospects of the Company; and the Company is duly
qualified and in good standing as a foreign entity authorized to do
business in each jurisdiction in which the nature of its business
or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would
not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects
of the Company. The Company has no subsidiaries. The Company
neither owns nor controls, directly or indirectly, any capital
stock or other equity interest in any corporation, partnership or
other entity.
(iv) The authorized, issued and outstanding capital stock of
the company is correctly set forth in the Registration Statement
under the caption "Capitalization"; all of the outstanding shares
of capital stock of the Company have been duly authorized and are
validly issued, fully paid, non-assessable (except as otherwise
described in the Registration Statement) and free of preemptive
rights or other rights to subscribe for or to purchase securities
provided for by law or by its Declaration of Trust or bylaws; all
of the outstanding shares of capital stock of the Company and
options to purchase shares of capital stock of the Company have
been issued in accordance with applicable federal and state
securities laws; the U.S. Shares to be issued and sold pursuant to
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this Agreement have been duly authorized and, when issued and
delivered to the U.S. Underwriters against payment therefor as
provided hereunder and in the U.S. Pricing Agreement, will have
been validly issued and will be fully paid, non-assessable (except
as otherwise described in the Registration Statement) and free of
preemptive rights; all outstanding Shares of Beneficial Interest
are listed on the New York Stock Exchange and the Company knows of
no reason or set of facts which is likely to result in the
delisting of such Shares or the inability to list the Shares; the
certificates for such Shares will be valid and in proper legal
form; and there are no rights of holders of securities of the
Company to the registration of Shares of Beneficial Interest or
other securities.
(v) The capital stock of the Company and the Shares conform to
the description thereof in the Registration Statement and the
Prospectus.
(vi) The accountants who have certified the financial
statements of the Company, and, to the Company's knowledge, of
Greenery Rehabilitation Group, Inc. and its subsidiaries
("Greenery") GranCare, Inc. and its subsidiaries ("Grancare"),
Horizon Healthcare Corporation ("Horizon") and its subsidiaries and
Marriott International, Inc. ("Marriott") filed with the Commission
the Registration Statement and the Prospectus are independent
certified accountants as required by the 1933 Act. The financial
statements of the Company, and, to the Company's knowledge, of
other entities, included in the Registration Statement present
fairly the financial position and results of operations of the
Company and the other entities purported to be shown thereby at the
respective dates and for the respective periods specified, and have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout such periods.
The pro forma financial statements of the Company as adjusted as
set forth therein and in the notes thereto included in the
Registration Statement and the Prospectus reflect all adjustments
necessary to summarize fairly the pro forma condensed combined
financial position of the Company at the dates indicated and the
pro forma results of their operations for the periods specified.
(vii) Except as disclosed in the Registration Statement and
Prospectus, there is not now pending or, to the knowledge of the
Company, threatened, any litigation, action, suit or proceeding to
which the Company or, to the best knowledge of the Company,
GranCare, Sun Healthcare Group, Inc. ("Sun"), Marriott, Beverly
Enterprises, Integrated Health Services and Hillhaven
(collectively, the "Operators") or HRPT Advisors, Inc. (the
"Advisor") is or will be a party before or by any court or
governmental agency or body, which (A) might result in any material
adverse change in the condition, financial or otherwise, or in the
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earnings, business affairs or business prospects of the Company or,
to the best knowledge the Company, of the Operators or the Advisor
or (B) might materially and adversely affect the property or assets
of the Company or, to the best knowledge of the Company, of the
Operators or the Advisor, or (C) relates to environmental matters
involving the Company or, to the best knowledge of the Company, of
the Operators or the Advisor, or (D) relates to discrimination on
the basis of age, sex, religion or race, relating to the Company
or, to the best knowledge of the Company, of the Operators or the
Advisor, or (E) concerns the Company or, to the best knowledge of
the Company, of the Operators or the Advisor, and is required to be
disclosed in the Prospectus.
(viii) Except as otherwise set forth in the Registration
Statement, the Company has good and marketable title or ground
leases, free and clear of all liens, claims, encumbrances and
restrictions, except liens for taxes not yet due and payable and
other liens and encumbrances which do not, either individually or
in the aggregate, adversely affect the current use or value
thereof, to all property and assets described in the Registration
Statement as being owned by it. All leases to which the Company is
a party relating to real property, and all other leases which are
material to the business of the Company, are valid and binding and
no default (to the Company's knowledge in the case of leases to
which the Company is a party as lessor) has occurred or is
continuing thereunder, and the Company enjoys peaceful and
undisturbed possession under all such leases to which it is a party
as lessee. With respect to the Properties (as such term is defined
in the Prospectus), the Company has such documents, instruments,
certificates, opinions and assurances, including without
limitation, fee, leasehold owners or mortgage title insurance
policies (disclosing no material encumbrances or title exceptions
except as otherwise set forth in the Registration Statement), legal
opinions and property insurance policies in each case in form and
substance as are usual and customary in transactions involving the
purchase of similar real estate and are appropriate for the Company
to have obtained. Each of the Company and, to the best knowledge
of the Company, the Operators and the Advisor has all governmental
licenses, certificates, permits, authorizations, approvals,
franchises or other rights necessary to engage in the business
currently conducted by it, except such licenses and permits as to
which the failure to own or possess will not in the aggregate have
a material adverse effect on the condition, financial or otherwise,
or the earnings, business affairs or business prospects of the
Company, or, to the best knowledge of the Company, the Operators or
the Advisor and neither the Company nor, to the best knowledge of
the Company, the Operators or the Advisor has any reason to believe
that any governmental body or agency is considering limiting,
suspending or revoking any such license, certificate, permit,
authorization, approval, franchise or right.
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(ix) The Company has filed all Federal, State and foreign income
tax returns which have been required to be filed and has paid all
taxes indicated by said returns and all assessments received by it
to the extent that such taxes have become due.
(x) Since the dates as of which information is given in the
Registration Statement, except as otherwise stated or contemplated
therein (i) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company or, to the knowledge
of the Company, of the Operators or the Advisor, whether or not
arising in the ordinary course of business, (ii) there have been no
material transactions entered into by the Company or, to the
knowledge of the Company, the Operators or the Advisor, other than
transactions in the ordinary course of business, that would, to the
Company's knowledge, be materially adverse to, or have a material
adverse effect on, the Company, (iii) neither the Company nor, to
the knowledge of the Company, the Operators or the Advisor has
incurred any obligation, contingent or otherwise, that would, to
the Company's knowledge, be materially adverse to, or have a
material adverse effect on, the Company, (iv) there has been no
change in the capital stock or debt of the Company and (v) there
has been no dividend or distribution of any kind declared, paid or
made by the Company on its capital stock.
(xi) Neither the Company nor, to the best knowledge of the
Company, the Operators or the Advisor is in violation of its
charter documents or bylaws or in default in the performance of any
obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any
indenture, instrument or agreement to which the Company or any of
its subsidiaries or, to the best knowledge of the Company, the
Operators or the Advisor is a party or by which any of their
respective properties may be bound or affected, except for any such
violation that would not have a material adverse effect on the
condition, financial or otherwise, or in the respective earnings,
business affairs or business prospects of any of them. Neither the
Company nor any of its subsidiaries nor, to the best knowledge of
the Company, the Operators or the Advisor is in violation of any
law, ordinance, governmental rule or regulation or court decree to
which it is subject, except for any such violation that would not
have a material adverse effect on the condition, financial or
otherwise, or in the respective earnings, business affairs or
business prospects of any of them. The execution, delivery and
performance of this Agreement, the International Purchase
Agreement, the U.S. Pricing Agreement and the International Pricing
Agreement, compliance by the Company with all provisions hereof,
and the consummation of the transactions contemplated hereby, will
not violate or conflict with or constitute a breach of any of the
terms or provisions of, or constitute a default under (i) the
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Declaration of Trust of the Company or, to the best knowledge of
the Company, the certificate of incorporation of the Operators or
the Advisor, or (ii) any bond, debenture, note or other evidence of
indebtedness or any material indenture, instrument or agreement to
which the Company or, to the best knowledge of the Company, the
Operators or the Advisor is a party or which binds the Company or
its properties or, to the best knowledge of the Company, the
Operators or the Advisor or any of their respective properties, or
(iii) (assuming compliance with all applicable state securities or
Blue Sky laws) any law, regulation or ruling or any order, judgment
or decree to which the Company or its properties or, to the best
knowledge of the Company, the Operators or the Advisor or any of
their respective properties may be subject.
(xii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body necessary in connection
with the execution and delivery by the Company of this Agreement,
International Purchase Agreement, the U.S. Pricing Agreement and
the International Pricing Agreement and the consummation of the
transactions herein and therein contemplated (except such
additional steps as may be required by the National Association of
Securities Dealers, Inc. (the "NASD") or may be necessary to
qualify the Shares for public offering by the U.S. Underwriters or
the International Managers under State securities or Blue Sky laws)
has been obtained or made and is in full force and effect.
(xiii) The Company owns or possesses adequate licenses or other
rights to use all patents, trademarks, service marks, trade names,
copyrights and know-how (including trade secrets, and other
proprietary and confidential information, systems or procedures)
necessary to conduct the businesses now operated by it as described
in the Prospectus, and, except as disclosed to the Representatives
in writing, the Company has not received any notice of infringement
of or conflict with (and no officer or trustee of the Company knows
of any such infringement of or conflict with) asserted rights of
others with respect to any patents, trademarks, service marks,
trade names, copyrights or know-how.
(xiv) The organization of the Company is in conformity with the
requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a real estate investment trust, and
the Company's present ownership, business and operations as
described in the Prospectus enable it to meet the present
requirements of the Code for such qualification for 1994 and
subsequent years. The Company qualified as a real estate
investment trust for its 1987, 1988, 1989, 1990, 1991, 1992 and
1993 taxable years.
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<PAGE>
(xv) The Company is not required to register as an "investment
company" within the meaning of the Investment Company Act of 1940,
as amended.
(xvi) Except with respect to the properties listed on the
schedule provided to the Underwriters at Closing Time (as defined
herein) which are not in compliance with this subsection (a)(xv),
but which non-compliance would not in the aggregate have a material
adverse effect in the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company, to
the Company's knowledge, after due investigation, and except for
Hazardous Materials or substances which are handled and/or disposed
of in compliance with all applicable federal, state and local
requirements, the real property owned, leased or otherwise utilized
by the Company in connection with the operation of its business,
including without limitation, any subsurface soils and ground water
(the "Realty"), is free of contamination from any Hazardous
Materials. To the Company's knowledge, after due investigation,
the Realty does not contain any underground storage or treatment
tanks, active or abandoned water, gas or oil wells, or any other
underground improvements or structures, other than the foundations,
footings or other supports for the improvements located thereon
which based on present knowledge could presently or at any time in
the future cause a material detriment to or materially impair the
beneficial use thereof by the Company or constitute or cause a
significant health, safety or other environmental hazard to
occupants or users thereof without regard to any special conditions
of such occupants or users. The Company represents that, after due
investigation, it has no knowledge of any material violation, with
respect to the Realty, of any Environmental Law, or of any material
liability on the part of the Company, with respect to the Realty,
resulting from the presence, use, release, threatened release,
emission, disposal, pumping, discharge, generation or processing of
any Hazardous Materials. As used herein, "Environmental Law" means
any federal, state or local statute, regulation, judgment, order,
or authorization relating to emissions, discharges, releases or
threatened releases of Hazardous Materials into ambient air,
surface water, ground water, publicly owned treatment works, septic
systems or land, or otherwise relating to the pollution or
protection of health or the environment. As used herein,
"Hazardous Materials" means any substance, material or waste which
is regulated by any federal, state or local governmental or quasi-
governmental authority, and includes, without limitation, (a) any
substance, material or waste defined, used or listed as a
"hazardous waste", "hazardous substance", "toxic substance",
"medical waste", "infectious waste" or other similar terms as
defined or used in any Environmental Law, as such Environmental Law
may from time to time be amended, and; (b) any petroleum products,
asbestos, lead-based paint, polychlorinated biphenyls, flammable
explosives or radioactive materials.
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<PAGE>
(xvii) The documents incorporated or deemed to be incorporated
by reference in the Prospectus, at the time they were or hereafter
are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the
rules and regulations of the Commission under the 1934 Act (the
"1934 Act Regulations"), and, when read together with the other
information in the Prospectus, at the time the Registration
Statement becomes effective and at the Closing time, will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
(xviii) The Advisory Agreement (as defined in the Prospectus)
has been duly authorized, executed and delivered by the parties
thereto and constitutes the valid agreement of the parties thereto,
enforceable in accordance with its terms, except as limited by (a)
the effect of bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights or remedies
of creditors or (b) the effect of general principles of equity,
whether enforcement is considered in a proceeding in equity or at
law, and the discretion of the court before which any proceeding
therefore may be brought.
(xix) The Company is in compliance with all of the provisions
of Section 517.075 of the Florida statutes, and all rules and
regulations promulgated thereunder relating to issuers doing
business in Cuba.
(b) Any certificate signed by any officer of the Company and
delivered to the U.S. Representatives or to counsel for the U.S.
Underwriters shall be deemed a representation and warranty by the
Company to each U.S. Underwriter as to the matters covered thereby.
Section 2. Sale and Delivery to Underwriters; Closing.
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each U.S. Underwriter, severally and not
jointly, and each U.S. Underwriter, severally and not jointly, agrees to
purchase from the Company, at the price per share set forth in the U.S.
Pricing Agreement, the number of U.S. Shares set forth in Schedule A
opposite the name of such U.S. Underwriter (except as otherwise provided
in the U.S. Pricing Agreement), plus any additional number of Shares
which such U.S. Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof.
(1) If the Company has elected not to rely upon Rule 430A
under the 1933 Act Regulations, the initial public offering price
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<PAGE>
and the purchase price per share to be paid by the several U.S.
Underwriters for the U.S. Shares have each been determined and set
forth in the U.S. Pricing Agreement, dated the date hereof, and an
amendment to the Registration Statement and the Prospectus will be
filed before the Registration Statement becomes effective.
(2) If the Company has elected to rely upon Rule 430A under
the 1933 Act Regulations, the purchase price per share to be paid
by the several U.S. Underwriters for the U.S. Shares shall be an
amount equal to the initial public offering price, less an amount
per share to be determined by agreement between the U.S.
Representatives and the Company. The initial public offering price
per share of the U.S. Shares shall be a fixed price to be
determined by agreement between the U.S. Representatives and the
Company. The initial public offering price per share of the U.S.
Shares shall not be higher than the last reported sale price
(regular way) or the last reported asked price, whichever is
higher, of the Shares of Beneficial Interest on the New York Stock
Exchange immediately prior to determination of the initial public
offering price. The initial public offering price and the purchase
price, when so determined, shall be set forth in the U.S. Pricing
Agreement. In the event that such prices have not been agreed upon
and the U.S. Pricing Agreement has not been executed and delivered
by all parties thereto by the close of business on the fourth
business day following the date of this Agreement, this Agreement
shall terminate forthwith, without liability of any party to any
other party, unless otherwise agreed to by the Company and the U.S.
Representatives.
(3) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions
herein set forth, the Company hereby grants an option to the U.S.
Underwriters, severally and not jointly, to purchase up to an
additional 1,500,000 Shares at the price per share set forth in the
U.S. Pricing Agreement less an amount equal to any dividend paid by
the Company and payable on any Initial Shares and not payable on
such Option Shares. The option hereby granted will expire 30 days
after the date the Registration Statement becomes effective and may
be exercised by the U.S. Representatives on behalf of both the U.S.
Underwriters and the International Managers, in whole or in part
from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution
of the Initial Shares upon notice by the U.S. Representatives to
the Company setting forth the number of Option Shares as to which
the several Underwriters are then exercising the option and the
time, date and place of payment and delivery for such Option
Shares. Any such time and date of delivery (a "Date of Delivery")
shall be determined by the U.S. Representatives but shall not be
later than seven full business days after the exercise of said
option, nor in any event prior to Closing Time, as hereinafter
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defined, unless otherwise agreed upon by the U.S. Representatives
and the Company. If the option is exercised as to all or any
portion of the Option Shares, the Option Shares shall be purchased
by the Underwriters, severally and not jointly, in proportion to
their respective Initial Share underwriting obligations as set
forth in Schedule A (except as otherwise provided in the U.S. and
International Pricing Agreements).
(b) Payment of the purchase price for and delivery of certificates
for the Initial U.S. Shares shall be made at the office of Sullivan &
Worcester, One Post Office Square, Boston, Massachusetts 02109, or at
such other place as shall be agreed upon by the U.S. Representatives and
the Company, at 10:00 A.M. on the fifth business day (unless postponed
in accordance with the provisions of Section 10) following the date the
Registration Statement becomes effective (or, if the Company has elected
to rely upon Rule 430A, the fifth business day after execution of the
U.S. Pricing Agreement), or such other time not later than ten business
days after such date as shall be agreed upon by the U.S. Representatives
and the Company (such time and date of payment and delivery being herein
called "Closing Time"). In addition, in the event that any or all of
the Option Shares are purchased by the U.S. Underwriters, payment of the
purchase price for and the delivery of certificates for such Option
Shares shall be made at the above-mentioned office of Sullivan &
Worcester, or at such other place as shall be mutually agreed upon by
the Representatives and the Company, on each Date of Delivery as
specified in the notice from the U.S. Representatives to the Company.
Payment shall be made by certified or official bank check or checks in
New York Clearing House or similar next day funds payable to the order
of the Company against delivery to the U.S. Representatives for the
respective accounts of the U.S. Underwriters of certificates for the
Shares to be purchased by them. The certificates for the Initial U.S.
Shares and the U.S. Option Shares shall be in such authorized
denominations and registered in such names as the U.S. Representatives
may request in writing at least two business days before Closing Time or
the Date of Delivery, as the case may be. It is understood that each
U.S. Underwriter has authorized the U.S. Representatives, for its
account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Shares which it has agreed to purchase. Merrill
Lynch, Donaldson Lufkin, PaineWebber or Smith Barney, individually and
not as representatives of the several U.S. Underwriters, may (but shall
not be obligated to) make payment of the purchase price for the U.S.
Shares to be purchased by any Underwriter whose check has not been
received by Closing Time, but any such payment shall not relieve such
U.S. Underwriter from its obligations hereunder. The certificates for
the Initial U.S. Shares and the U.S. Option Shares will be made
available for examination and packaging by the U.S. Representatives not
later than 10:00 A.M. on the last business day prior to Closing Time or
the Date of Delivery, as the case may be.
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Section 3. Covenants of the Company. The Company covenants with
each U.S. Underwriter as follows:
(a) The Company will notify the U.S. Representatives immediately,
and confirm the notice in writing, (i) of the effectiveness of the
Registration Statement and any amendment thereto (including any post-
effective amendment), (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or supplement to the
Prospectus or for additional information relating thereto, and (iv) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose. The Company will make every reasonable
effort to prevent the issuance of any such stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) The Company will give the U.S. Representatives notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement
to the Prospectus (including any revised prospectus which the Company
proposes for use by the Underwriters in connection with the offering of
the Shares which differs from the prospectus on file at the Commission
at the time the Registration Statement becomes effective, whether or not
such revised prospectus is required to be filed pursuant to Rule 424(b)
of the 1933 Act Regulations), will furnish the Representatives with
copies of any such amendment or supplement a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not
file any such amendment or supplement or use any such prospectus to
which counsel for the Underwriters shall reasonably object.
(c) The Company will deliver to the U.S. Representatives four
signed copies of the Registration Statement as originally filed
electronically and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and the documents
incorporated by reference into the Prospectus pursuant to Item 12 of
Form S-3) and will also deliver to the Representatives a conformed copy
of the Registration Statement as originally filed and of each amendment
thereto for each of the Underwriters.
(d) The Company will furnish to each U.S. Underwriter, from time
to time during the period when the Prospectus is required to be
delivered under the 1933 Act or the 1934 Act, such number of copies of
the Prospectus (as amended or supplemented) as such U.S. Underwriter may
reasonably request for the purposes contemplated by the 1933 Act, the
1933 Act Regulations, the 1934 Act or 1934 Act Regulations.
(e) If any event shall occur as a result of which it is necessary,
in the opinion of counsel for the U.S. Underwriters, to amend or
supplement the Prospectus in order to make the Prospectus not misleading
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in the light of the circumstances existing at the time it is delivered
to a purchaser, the Company will either (i) forthwith prepare and
furnish to the Underwriters a reasonable number of copies of an
amendment of or supplement to the Prospectus or (ii) make an appropriate
filing pursuant to Section 13, 14 or 15 of the 1934 Act, in form and
substance reasonably satisfactory to counsel for the U.S. Underwriters,
which will amend or supplement the Prospectus so that it will not
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a
purchaser, not misleading.
(f) The Company will endeavor in good faith, in cooperation with
the U.S. Underwriters, to qualify the U.S. Shares for offering and sale
under the applicable securities laws and real estate syndication laws of
such states and other jurisdictions of the United States as the
Representatives may designate provided that, in connection therewith,
the Company shall not be required to qualify as a foreign corporation or
trust or to file any general consent to service of process. In each
jurisdiction in which the U.S. Shares have been so qualified the Company
will file such statements and reports as may be required by the laws of
such jurisdiction to continue such qualification in effect for so long
as required for the distribution of the U.S. Shares.
(g) The Company will make generally available to its security
holders as soon as reasonably practicable, but not later than 60 days
after the close of the period covered thereby, an earning statement of
the Company (in form complying with the provisions of Rule 158 of the
1933 Act Regulations) covering a period of at least twelve months
beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
"Earning statement", "make generally available" and "effective date"
will have the meanings contained in Rule 158 of the 1933 Act
Regulations.
(h) The Company will use the net proceeds received by it from the
sale of the Shares in the manner specified in the Prospectus under the
caption "Use of Proceeds" in all material respects.
(i) The Company will use its best efforts to effect the listing of
the Shares on the New York Stock Exchange ("NYSE").
(j) The Company hereby agrees, concurrently with the execution of
this Agreement, to deliver an agreement executed by the Advisor pursuant
to which the Advisor agrees not to offer, sell, contract to sell, make
subject to any purchase option, or otherwise dispose of any Shares of
Beneficial Interest held for its own account, directly or indirectly, in
a public or private transaction and the Company and the Advisor each
agree not to terminate, modify or waive any provision in any agreement
to which the Company or the Advisor is a party that restricts or limits
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the transferability of Shares of Beneficial Interest, in each case for a
period of 90 days after the date of the Prospectus without the prior
written consent of Merrill Lynch. The Company further agrees that it
will not, without the prior written consent of Merrill Lynch, (x) offer,
sell, contract to sell, or otherwise dispose of any Shares of Beneficial
Interest or other securities convertible into or exercisable or
exchangeable for Shares of Beneficial Interest or (y) file any
registration statement (other than the Registration Statement) relating
to any such securities with the Commission or any other authority, in
each case for a period of 90 days after the date of the Prospectus;
provided, however, that the Company may issue Shares of Beneficial
Interest pursuant to the Company's existing Share Award Plan and issue
and sell Shares of Beneficial Interest to the Underwriters pursuant to
this Agreement.
(k) The Company currently intends to continue to elect to qualify
as a "real estate investment trust" under the Internal Revenue Code of
1986, as amended, and use its best efforts to continue to meet the
requirements to qualify as a "real estate investment trust".
(l) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance
upon Rule 430A of the 1933 Act Regulations, then immediately following
the execution of the Pricing Agreement, the Company will prepare, and
file or transmit for filing with the Commission in accordance with such
Rule 430A and Rule 424(b) of the 1933 Act Regulations, copies of an
amended Prospectus, or, if required by such Rule 430A, a post-effective
amendment to the Registration Statement (including an amended
Prospectus), containing all information so omitted.
Section 4. Payment of Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement,
including (i) the printing and filing of the Registration Statement as
originally filed and of each amendment thereto, (ii) the cost of
printing, or reproducing, and distributing to the Underwriters copies of
this Agreement and the U.S. Pricing Agreement, (iii) the preparation,
issuance and delivery of the certificates for the U.S. Shares to the
U.S. Underwriters, (iv) the fees and disbursements of counsel for the
Company, referred to in Section 5(b) hereof, (v) the fees and
disbursements of the Company's accountants, (vi) the qualification of
the U.S. Shares under securities laws and real estate syndication laws
in accordance with the provisions of Section 3(f), including filing fees
and the fee and disbursements of counsel for the Company in connection
therewith and in connection with the preparation of the Blue Sky Survey,
(vii) the printing and delivery to the U.S. Underwriters of copies of
the Registration Statement as originally filed and of each amendment
thereto, of the preliminary prospectuses, and of the Prospectus and any
amendments or supplements thereto, (viii) the cost of printing or
reproducing and delivering to the U.S. Underwriters copies of the Blue
Sky Survey, (ix) the fee of the NASD, (x) the fees and expenses incurred
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in connection with the listing of the U.S. Shares on the NYSE and (xi)
any transfer taxes imposed on the sale of the U.S. Shares to the several
U.S. Underwriters.
If this Agreement is terminated by the U.S. Representatives in
accordance with the provisions of Section 5 or Section 9(a)(i), the
Company shall reimburse the U.S. Underwriters for all of their out-of-
pocket expenses, including the reasonable fees and disbursements of
counsel for the U.S. Underwriters.
Section 5. Conditions of U.S. Underwriters' Obligations. The
obligations of the U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company herein
contained, to the performance by the Company of its obligations
hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date hereof, or, with the consent of the
U.S. Representatives, at a later time and date, not later, however, than
5:30 P.M. on the first business day following the date hereof or at such
later time and date as may be approved by a majority in interest of the
U.S. Underwriters; and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the
Commission. If the Company has elected to rely upon Rule 430A of the
1933 Act Regulations, the price of the Shares and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) of the 1933 Act Regulations within
the prescribed time period, and prior to Closing Time the Company shall
have provided evidence satisfactory to the Representatives of such
timely filing, or a post-effective amendment providing such information
shall have been promptly filed and declared effective in accordance with
the requirements of Rule 430A of the 1933 Act Regulations.
(b) At Closing Time the Representatives shall have received:
(1) The favorable opinion, dated as of Closing Time, of
Sullivan & Worcester, counsel for the Company, in form and
substance satisfactory to counsel for the U.S. Underwriters, to the
effect that:
(i) The Company has been duly organized and is validly
existing under the laws of its jurisdiction of organization and has
the trust power and authority to carry on its business and to own
or lease and operate its property as described in the Registration
Statement and the Prospectus.
(ii) The Company is duly qualified and in good standing and
authorized to do business in each jurisdiction in which the nature
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of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified or
in good standing would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company.
(iii) The Company has the requisite power and authority to
enter into and perform this Agreement and the U.S. Pricing
Agreement; the Company has the requisite power and authority to
issue and deliver the Shares.
(iv) This Agreement and the U.S. Pricing Agreement have been
duly authorized, executed and delivered by the Company.
(v) (A) The authorized and issued capital stock of the
Company is correctly set forth in the Registration Statement and
Prospectus under the caption "Capitalization"; (B) all of the
outstanding shares of capital stock of the Company have been duly
authorized and are validly issued, fully paid and non-assessable
(except as otherwise described in the Registration Statement) and
free of preemptive rights or other rights to subscribe for or to
purchase securities provided for by law or by its Declaration of
Trust or bylaws; (C) the U.S. Shares have been duly authorized and,
when issued and delivered in accordance with the terms of this
Agreement and in the U.S. Pricing Agreement, will be validly
issued, fully paid and, except as otherwise described in the
Registration Statement, non-assessable and the issuance of such
Shares is not subject to any preemptive or similar rights; (D) all
outstanding Shares of Beneficial Interest are listed on the New
York Stock Exchange and the Shares, upon notice of issuance, will
be so listed; (E) the certificates for the Shares are valid and in
proper legal form; and (F) to such counsel's knowledge, there are
no holders of securities of the Company entitled to the
registration of Shares of Beneficial Interest or other securities.
(vi) The Company is not required to register as an "investment
company" within the meaning of the Investment Company Act of 1940,
as amended.
(vii) To the extent required to be described therein, the
Shares and the rights related thereto conform in all material
respects to the descriptions in the Registration Statement and
Prospectus.
(viii) The Registration Statement has become effective under the
1933 Act, and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted by or
is pending before the Commission.
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(ix) To such counsel's knowledge, there is no legal or
governmental proceeding pending or threatened against the Company
or to which the Company is a party or to which any of the
properties of the Company is subject which is required to be
described in the Registration Statement or Prospectus and is not so
described, or any contract, lease or other document which is
required to be described in the Registration Statement or
Prospectus or is required to be filed as an exhibit to the
Registration Statement which is not described or filed as required;
the descriptions thereof or references thereto are accurate in all
material respects; and, to such counsel's knowledge, each contract,
lease or document so described is in full force and effect in
accordance with its terms.
(x) Neither the Company nor the Advisor is in violation of
its charter documents or bylaws or, to such counsel's knowledge, in
default in the performance of any material obligation, agreement or
condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any material indenture, instrument
or other agreement to which the Company or the Advisor is a party
or which binds the Company or the Advisor or any of their property;
to such counsel's knowledge, neither the Company nor the Advisor is
in violation of any law, ordinance, governmental rule or regulation
or court decree to which it is subject except where such violation
would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or
business prospects of the Company or the Advisor, as the case may
be.
(xi) The Company owns or possesses all licenses and permits
necessary for the conduct of its business and the ownership,
leasing and operation of its properties, except such licenses and
permits as to which the failure to own or possess will not in the
aggregate have a material adverse effect on the condition,
financial or otherwise, or in the earnings, business affairs or
business prospects of the Company.
(xii) The execution, delivery and performance of this Agreement
and the U.S. Pricing Agreement and the consummation of the
transactions contemplated hereby will not conflict with or
constitute a breach or violation of any of the terms or provisions
of, or constitute a default under, (A) any bond, debenture, note or
other evidence of indebtedness or any indenture, instrument or
agreement of which such counsel has knowledge to which the Company
or the Advisor is a party or which binds either of them or any of
their property, (B) the charter documents or bylaws of the Company
or the Advisor or (C) any law, regulation, ruling, judgment, decree
or order of which such counsel has knowledge to which the Company
or the Advisor or any of their properties may be subject.
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(xiii) Except with respect to state securities or blue sky laws
and regulations, all proceedings required in connection with the
authorization and issuance of the Shares have been taken and all
authorizations, consents, approvals, licenses or other orders of
any regulatory body, administrative agency or other governmental
body required for the valid issuance and delivery of the Shares
hereunder have been obtained.
(xiv) No consents or waivers from the holders of the Company's
capital stock are required to consummate the transactions
contemplated hereby other than such consents and waivers as have
been obtained.
(xv) At the time the Registration Statement became effective
and at the Representation Date, the Registration Statement and the
Prospectus and any supplement or amendment thereto (except for
financial statements and other financial and statistical data and
schedules contained therein as to which such counsel need not
express an opinion) complied as to form in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations.
(xvi) The investments of the Company described in the
Prospectus are permitted investments under the Declaration of Trust
of the Company.
(xvii) The Advisory Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and
legally binding agreement of the Company enforceable in accordance
with its terms, except (A) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (B) that the remedy of specific
performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought, and (C)
as any indemnification and contribution provisions thereunder may
be limited by applicable law and public policy.
(xviii) The Advisory Agreement has been duly authorized,
executed and delivered by the Advisor and constitutes the valid and
legally binding agreement of the Advisor, enforceable in accordance
with its terms except (A) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (B) that the remedy of specific
performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought, and (C)
as any indemnification and contribution provisions thereunder may
be limited by applicable law and public policy.
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(xix) The execution and delivery of the Advisory Agreement by
the Company and the Advisor and the performance by the Company and
the Advisor of the obligations contained therein and the compliance
with their terms did not conflict with or result in a breach of any
of the terms or provisions of, or constitute a default under the
charter documents or bylaws of the Company or the Advisor,
respectively, or any license, permit, material agreement, indenture
or other instrument known to such counsel to which the Company or
the Advisor, respectively, is bound, or any law, administrative
regulation or court or governmental decree known to such counsel
applicable to the Company or the Advisor.
(xx) The Advisor (A) is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, and (B) has requisite corporate power and authority to
conduct its business as described in the Prospectus and to own and
operate the properties used and useful in said business.
(xxi) No facts have come to such counsel's attention that lead
such counsel to believe that the Company does not have insurable
title to each item of real property owned by it subject to such
encumbrances and defects as set forth in the title policies
obtained in connection with the acquisition thereof (or as
otherwise described in the Registration Statement) or that the
Company leases are not valid.
(xxii) Each document filed pursuant to the 1934 Act (other than
the financial statements and supporting schedules included therein,
as to which no opinion need be rendered) and incorporated or deemed
to be incorporated by reference in the Prospectus complied when so
filed as to form in all material respects with the 1934 Act and the
1934 Act Regulations.
(xxiii) The Company has qualified to be taxed as a real estate
investment trust pursuant to Sections 856-860 of the Internal
Revenue Code, as amended, for the fiscal years ended December 31,
1987 through December 31, 1993, and the Company's present method of
operation and its assets and contemplated income are such that the
Company is in a position under present law to so qualify for the
fiscal year ended December 31, 1994 and in the future.
With respect to matters governed by Maryland law, such counsel may
rely upon an opinion, dated as of Closing Time, of Piper & Marbury, a
copy of which shall have been furnished to the Representatives at
Closing Time in form and substance satisfactory to counsel for the U.S.
Underwriters. In addition to the matters set forth above, such opinion
shall also include a statement to the effect that nothing has come to
the attention of such counsel which leads them to believe that the
Registration Statement, as of the time it became effective under the
1933 Act, contained an untrue statement of a material fact or omitted to
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state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus, at the
Representation Date (unless the term "Prospectus" refers to a prospectus
which has been provided to the Underwriters by the Company for use in
connection with the offering of the Shares which differs from the
Prospectus on file at the Commission at the Representation Date, in
which case at the time it is first provided to the U.S. Underwriters for
such use) or at Closing Time, contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading (except that such counsel need express no view
as to financial statements, schedules and other financial information
included therein). With respect to such statement, Sullivan & Worcester
may state that their belief is based upon the procedures set forth
therein, but is without independent check and verification.
(2) The favorable opinion, dated as of Closing Time, of Brown
& Wood, counsel for the U.S. Underwriters, with respect to the
matters set forth in (iv), (vii), (viii) and (xv) of subsection
(b)(1) of this Section. In addition to the matters set forth
above, such opinion shall also include a statement to the effect
that nothing has come to the attention of such counsel which leads
them to believe that the Registration Statement, as of the time it
became effective under the 1933 Act, contained in untrue statement
of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading or that the Prospectus, at the Representation Date
(unless the term "Prospectus" refers to a prospectus which has been
provided to the Underwriters by the Company for use in connection
with the offering of the Shares which differs from the Prospectus
on file at the Commission at the Representation Date, in which case
at the time it is first provided to the Underwriters for such use)
or at Closing Time, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading
(except that such counsel need express no view as to financial
statements, schedules and other financial information included).
With respect to such statement, Brown & Wood may state that their
belief is based upon the procedures set forth therein, but is
without independent check and verification.
(c) At Closing Time (i) the Registration Statement and the
Prospectus shall contain all statements which are required to be stated
therein in accordance with the 1933 Act and the 1933 Act Regulations and
in all material respects shall conform to the requirements of the 1933
Act and the 1933 Act Regulations, and neither the Registration Statement
nor the Prospectus shall contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and no action,
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suit or proceeding at law or in equity shall be pending or to the
knowledge of the Company threatened against the Company which would be
required to be set forth in the Prospectus other than as set forth
therein, (ii) there shall not have been, since the respective dates as
of which information is given in the Registration Statement and the
Prospectus, any material adverse change in the condition, financial or
otherwise, of the Company or in its earnings, business affairs or
business prospects, whether or not arising in the ordinary course of
business from that set forth in the Registration Statement, and (iii) no
proceedings shall be pending or, to the knowledge of the Company,
threatened against the Company before or by any Federal, state or other
commission, board or administrative agency wherein an unfavorable
decision, ruling or finding would materially and adversely affect the
business, property, financial condition or income of the Company other
than as set forth in the Prospectus; and the U.S. Representatives shall
have received, at Closing Time, a certificate of the President and Chief
Executive Officer and the chief financial officer of the Company, dated
as of Closing Time, evidencing compliance with the provisions of this
subsection (c) and stating that the representations and warranties set
forth in Section 1(a) hereof are accurate as though expressly made at
and as of Closing Time.
(d) At the time of execution of this Agreement, the U.S.
Representatives shall have received from Ernst & Young a letter dated
such date, in form and substance satisfactory to the Representatives, to
the effect that (i) they are independent public accountants as required
by the 1933 Act and the applicable published rules and regulations
thereunder with respect to the Company; (ii) it is their opinion that
the audited financial statements of the Company, Greenery, GranCare,
Horizon and Marriott included in the Registration Statement and covered
by their opinions therein comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the
related published rules and regulations thereunder; (iii) they have
performed limited procedures, not constituting an audit, including a
reading of the latest available interim financial statements of the
Company, a reading of the minute books of the Company since December 31,
1993, inquiries of officials of the Company responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, and on the basis of such limited review and
procedures nothing came to their attention that caused them to believe
that:
(A) at a specified date not more than five days prior to
the date of such letter, there was any decrease in the
shareholders' equity of the Company, any decrease in total
assets or any increase in total borrowings of the Company, as
compared with the amounts shown in the latest balance sheet
included in the Registration Statement; or
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(B) during the period from the date of the latest
balance sheet included in the Registration Statement, to a
specified date not more than five days prior to the date of
such letter, there were any decreases, as compared with the
corresponding period in the preceding year, in total revenues,
net income or income per share;
except in all cases for increases or decreases which the Registration
Statement discloses or contemplates have occurred or may occur; (iv) in
addition to the limited procedures referred to in clause (iii) above,
they have carried out certain specified procedures, not constituting an
audit, with respect to certain amounts, percentages and financial
information which are derived from the general accounting records of the
Company, which are included in the Registration Statement and which are
specified by the U.S. Representatives and the Lead Managers, and have
compared such amounts, percentages and financial information with the
accounting records of the Company and have found them to be in
agreement; and (v) they have read the unaudited pro forma financial
statements which are included in the Registration Statement and have
performed specified procedures set forth in detail in such letter and
found the amounts resulting from such procedures to be in agreement with
the amounts set forth in such unaudited pro forma financial statements
and nothing has come to their attention which causes them to believe
that the unaudited pro forma financial statements included in the
Registration Statement, which combine certain financial statements of
the Company with certain transactions set forth in the notes to such pro
forma statements, do not comply as to form in all material respects with
Article 11 of Regulation S-X under the 1933 Act.
(e) At Closing Time the U.S. Representatives shall have received
from Ernst & Young a letter dated as of Closing Time to the effect that
they reaffirm the statements made in the letter furnished pursuant to
subsection (d) of this Section, except that the "specified date"
referred to shall be a date not more than five days prior to Closing
Time, and, if the Company has elected to rely on Rule 430A of the 1933
Act Regulations, to the further effect that they have carried out
procedures as specified in clause (iv) of subsection (d) of this Section
with respect to certain amounts, percentages and financial information
deemed to be a part of the Registration Statement pursuant to Rule
430A(b).
(f) At Closing Time counsel for the U.S. Underwriters shall have
been furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the issuance and
sale of the Shares as herein contemplated and related proceedings, or in
order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein
contained; and all proceedings taken by the Company in connection with
the issuance and sale of the Shares as herein contemplated shall be
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reasonably satisfactory in form and substance to the U.S.
Representatives and counsel for the U.S. Underwriters.
(g) In the event the U.S. Representatives exercise their option
provided in Section 2 hereof to purchase all or any portion of the
Option Shares, the representations and warranties of the Company
contained herein and the statements in any certificates furnished by the
Company hereunder shall be true and correct as of each Date of Delivery,
and the U.S. Representatives shall have received:
(1) A certificate of the President and Chief Executive
Officer and the chief financial officer of the Company, dated such
Date of Delivery, confirming that their certificates delivered at
Closing Time pursuant to Section 5(c) hereof remain true as of such
Date of Delivery.
(2) The favorable opinion of Sullivan & Worcester, special
counsel for the Company, in form and substance satisfactory to
counsel for the U.S. Underwriters, dated such Date of Delivery,
relating to the Option Shares and otherwise to the same effect as
the opinion required by Section 5(b)(1) hereof.
(3) The favorable opinion of Brown & Wood, counsel for the
U.S. Underwriters, dated such Date of Delivery, relating to the
Option Shares and otherwise to the same effect as the opinion
required by Section 5(b)(2) hereof.
(4) A letter from Ernst & Young, in form and substance
satisfactory to the U.S. Representatives, dated such Date of
Delivery, substantially the same in scope and substance as the
letter furnished to the Representatives pursuant to Section 5(e)
hereof, except that the "specified date" in the letter furnished
pursuant to this Section 5(g)(4) shall be a date not more than five
days prior to such Date of Delivery.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the U.S. Representatives by notice to the Company at any
time at or prior to Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section
4 hereof.
Section 6. Indemnification. (a) The Company hereby agrees to
indemnify and hold harmless each U.S. Underwriter and each person, if
any, who controls any U.S. Underwriter within the meaning of Section 15
of the 1933 Act as follows:
(1) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained
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in the Registration Statement (or any amendment thereto), including
the information deemed to be part of the Registration Statement
pursuant to Rule 430A(b) of the 1933 Act Regulations, if
applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained
in any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto), or the omission, or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
(2) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent
of the Company; and
(3) against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the fees and
disbursements of counsel chosen by the Representatives), reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceedings by any governmental
agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such
expense is not paid under (1) or (2) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of
any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information
furnished to the Company by any U.S. Underwriter through the U.S.
Representatives expressly for use in the Registration Statement (or any
amendment thereto) or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto); and provided, further, that the
foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any U.S. Underwriter from whom the
person asserting any such loss, claim, damage or expense purchased U.S.
Shares, or any person controlling such U.S. Underwriter, if a copy of
the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto and excluding
documents incorporated or deemed to be incorporated by reference
therein) was not sent or given by or on behalf of such U.S. Underwriter
to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the U.S. Shares to such
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person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or expense.
(b) Each U.S. Underwriter severally agrees to indemnify and hold
harmless the Company, each of the Company's trustees, each of the
Company's officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of
this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to
the Company by such U.S. Underwriter through the U.S. Representatives
expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may have
otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action.
In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances.
Section 7. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 6 hereof is for any reason held to be
unenforceable by the indemnified parties although applicable in
accordance with its terms, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement incurred
by the Company and one or more of the Underwriters, as incurred, in such
proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing
on the cover page of the Prospectus bears to the initial public offering
price appearing thereon and the Company is responsible for the balance;
provided, however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 7, no
Underwriter shall be required to contribute any amount in excess of the
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<PAGE>
amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required
to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the 1933 Act
shall have the same rights to contribution as such Underwriter, and each
trustee of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act shall have the
same rights to contribution as the Company.
Section 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in
this Agreement and the U.S. Pricing Agreement, or contained in
certificates of officers of the Company submitted pursuant hereto, shall
remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any U.S. Underwriter or an
controlling person, or by or on behalf of the Company, and shall survive
delivery of the U.S. Shares to the U.S. Underwriters.
Section 9. Termination of Agreement. (a) The U.S.
Representatives may terminate this Agreement, by notice to the Company,
at any time at or prior to Closing Time (i) if there has been, since the
respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company, whether or not arising in the ordinary course of business,
or (ii) if there has occurred any material adverse change in the
financial markets in the United States or any outbreak of hostilities or
escalation of existing hostilities or other calamity or crisis the
effect of which on the financial markets of the United States is such as
to make it, in the U.S. Representatives' reasonable judgment,
impracticable to market the Shares or enforce contracts for the sale of
the Shares, or (iii) if trading in the Shares of Beneficial Interest of
the Company has been suspended by the Commission, or if trading
generally on either the New York Stock Exchange or the American Stock
Exchange has been suspended, or minimum or maximum prices for trading
have been fixed, or maximum ranges for prices for securities have been
required, by either of said exchanges or by order of the Commission or
any other governmental authority, or if a banking moratorium has been
declared by Federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party
except as provided in Section 4, and provided further that Sections 6
and 7 hereof shall survive such termination.
Section 10. Default by One or More of the U.S. Underwriters. If
one or more of the U.S. Underwriters shall fail at Closing Time to
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<PAGE>
purchase the Shares which it or they are obligated to purchase under
this Agreement and the U.S. Pricing Agreement (the "Defaulted Shares"),
the Representatives shall have the right, within 24 hours thereafter, to
make arrangements for one or more of the non-defaulting Underwriters, or
any other underwriters, to purchase all, but not less than all, of the
Defaulted Shares in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Shares does not exceed 10% of the
U.S. Shares, the non-defaulting U.S. Underwriters shall be obligated to
purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Shares exceeds 10% of the Shares,
this Agreement shall terminate without liability on the part of any
non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting U.S. Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the U.S. Representatives or the
Company shall have the right to postpone Closing Time for a period not
exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or
arrangements.
Section 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if mailed or transmitted by any standard form of tele-
communication. Notices to the Underwriters shall be directed to the
Representatives c/o Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated at Merrill Lynch World Headquarters, North Tower,
World Financial Center, New York, New York 10281-1305, attention of
Tjarda Clagett, Director Corporate Syndicate; and notices to the Company
shall be directed to it at 400 Center Street, Newton, Massachusetts
02158, Attention: Mark J. Finkelstein.
Section 12. Parties. This Agreement and the U.S. Pricing
Agreement shall each inure to the benefit of and be binding upon the
U.S. Underwriters and the Company and their respective successors.
Nothing expressed or mentioned in this Agreement or the Pricing
Agreement is intended or shall be construed to give any person, firm or
corporation, other than those referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or
claim under or in respect of this Agreement or the U.S. Pricing
Agreement or any provision herein or therein contained. This Agreement
and the U.S. Pricing Agreement and all conditions and provisions hereof
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<PAGE>
and thereof are intended to be for the sole and exclusive benefit of the
parties hereto and thereto and their respective successors and said
controlling persons and officers, trustees and directors and their heirs
and legal representatives, and for the benefit of no other person, firm
or corporation. No purchaser of U.S. Shares from any U.S. Underwriter
shall be deemed to be a successor by reason merely of such purchase.
Section 13. Governing Law and Time; Miscellaneous. This Agreement
and the Pricing Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State. Specified times of
day refer to New York City time.
THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED OCTOBER 9,
1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE
NAME "HEALTH AND REHABILITATION 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 COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL
PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding
agreement between the Underwriters and the Company in accordance with
its terms.
Very truly yours,
HEALTH AND REHABILITATION PROPERTIES TRUST
By
Authorized Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
Authorized Officer
For themselves and as Representatives
of the other Underwriters named
in Schedule A hereto.
-31-
<PAGE>
SCHEDULE A
Number of
Name of Underwriter Initial Shares
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .......................
Donaldson, Lufkin & Jenrette Securities
Corporation ..................................
PaineWebber Incorporated........................
Smith Barney Shearson Inc.......................
Total........................................... 8,500,000
<PAGE>
Exhibit A
8,500,000 Shares
HEALTH AND REHABILITATION PROPERTIES TRUST
(a Maryland real estate investment trust)
Common Shares of Beneficial Interest
($.01 Par Value)
PRICING AGREEMENT
__________ __, 1994
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
As Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Dear Sirs:
Reference is made to the Purchase Agreement, dated ___________ __,
1994 (the "Purchase Agreement"), relating to the purchase by the several
Underwriters named in Schedule A thereto, for whom Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation, PaineWebber Incorporated and Smith
Barney Shearson Inc. are acting as representatives (the
"Representatives"), of the above shares of beneficial interest (the
"Shares") of Health and Rehabilitation Properties Trust (the "Company").
Pursuant to Section 2 of the Purchase Agreement, the Company agrees
with each Underwriter as follows:
1. The initial public offering price per share for the
Shares, determined as provided in said Section 2, shall be
$ .
<PAGE>
2. The purchase price per share for the Shares to be paid by
the several Underwriters shall be $ , being an amount
equal to the initial public offering price set forth above less $
per share.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a
binding agreement between the Underwriters and the Company in accordance
with its terms.
Very truly yours,
HEALTH AND REHABILITATION PROPERTIES TRUST
By
Authorized Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
Director
For themselves and as Representatives
of the other Underwriters named in
Schedule A to the Purchase Agreement.
-2-
<PAGE>
Brown & Wood
Draft of 3/28/94
1,500,000 Shares
HEALTH AND REHABILITATION PROPERTIES TRUST
(a Maryland real estate investment trust)
Common Shares of Beneficial Interest
($.01 Par Value)
INTERNATIONAL PURCHASE AGREEMENT
____________ __, 1994
MERRILL LYNCH INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
SMITH BARNEY SHEARSON INC.
As Lead Managers of the several International Managers
c/o Merrill Lynch International Limited
Ropemaker Place
25 Ropemaker Street
London ECZY 9LY
England
Dear Sirs:
Health and Rehabilitation Properties Trust, a real estate investment
trust organized under the laws of the State of Maryland (the "Company"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch
International Limited ("MLI"), Donaldson, Lufkin & Jenrette Securities
Corporation ("Donaldson Lufkin"), PaineWebber International (U.K.) Ltd.
("PaineWebber") and Smith Barney Shearson Inc. ("Smith Barney") and each
of the other International Managers named in Schedule A hereto
(collectively, the "International Managers", which term shall also
include any International Manager substituted as hereinafter provided in
Section 10), for whom MLI, Donaldson Lufkin, PaineWebber and Smith
Barney are acting as lead managers (in such capacity, Merrill Lynch,
Donaldson Lufkin, PaineWebber and Smith Barney shall hereinafter be
referred to as the "Lead Managers"), with respect to the sale by the
Company and the purchase by the International Managers, acting severally
<PAGE>
and not jointly, of the number of common shares of beneficial interest,
$.01 par value, of the Company (the "Shares of Beneficial Interest") set
forth in said Schedule A, except as may otherwise be provided in the
International Pricing Agreement, as hereinafter defined, and with
respect to the grant by the Company to the International Managers of the
option described in Section 2 hereof to purchase all or any part of an
additional 1,500,000 Shares of Beneficial Interest to cover over-
allotments. The aforesaid 1,500,000 Shares of Beneficial Interest set
forth in said Schedule A (the "Initial International Shares"), together
with all or any part of the 1,500,000 Shares of Beneficial Interest
subject to the option described in Section 2 hereof (the "International
Option Shares"), are collectively hereinafter called the "International
Shares".
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement")
providing for the offering by the Company of 8,500,000 shares of
beneficial interest (the "Initial U.S. Shares") through arrangements
with certain underwriters in the United States (the "U.S. Underwriters")
for which Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Donaldson, Lufkin & Jenrette Securities
Corporation, PaineWebber Incorporated and Smith Barney Shearson Inc. are
acting as representatives (the "U.S. Representatives") and the grant by
the Company to the U.S. Underwriters of an option to purchase all or any
part of the U.S. Underwriters' pro rata portion of the option shares
(the "U.S. Option Shares") to cover over-allotments. The Initial U.S.
Shares and the U.S. Option Shares are hereinafter called the "U.S.
Shares". It is understood that the Company is not obligated to sell,
and the International Managers are not obligated to purchase, any
Initial International Shares unless all of the Initial U.S. Shares are
contemporaneously purchased by the U.S. Underwriters.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters", the Initial International Shares
and the Initial U.S. Shares are hereinafter collectively called the
"Initial Shares", the U.S. Option Shares and the International Option
Shares are hereinafter collectively called the "Option Shares" and the
International Shares and the U.S. Shares are hereinafter collectively
called the "Shares".
The Fund understands that the International Managers and the U.S.
Underwriters will concurrently enter into an Intersyndicate Agreement of
even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the International Managers
and the U.S. Underwriters under the direction of Merrill Lynch.
Prior to the purchase and public offering of the International Shares
by the several International Managers, the Company and the Lead
Managers, acting on behalf of the several International Managers, shall
enter into an agreement substantially in the form of Exhibit A hereto
2
<PAGE>
(the "International Pricing Agreement"). The International Pricing
Agreement may take the form of an exchange of any standard form of
written telecommunication between the Company and the International
Managers and shall specify such applicable information as is indicated
in Exhibit A hereto. The offering of the International Shares will be
governed by this Agreement, as supplemented by the International Pricing
Agreement. From and after the date of the execution and delivery of the
International Pricing Agreement, this Agreement shall be deemed to
incorporate the International Pricing Agreement. The initial public
offering price and purchase price with respect to the U.S. Shares shall
be set forth in a separate instrument (the "U.S. Pricing Agreement"),
the form of which is attached to the U.S. Purchase Agreement (the "U.S.
Purchase Agreement").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-_____) and a
related preliminary prospectus for the registration of the Shares under
the Securities Act of 1933, as amended (the "1933 Act"), and has filed
such amendments thereto, if any, and such amended preliminary
prospectuses as may have been required to the date hereof.1 Such
registration statement (as amended, if applicable) and the prospectus
constituting a part thereof (including, in each case, all documents
incorporated or deemed to be incorporated by reference therein and the
information, if any, deemed to be a part thereof pursuant to Rule
430A(b) of the rules and regulations under the 1933 Act (the "1933 Act
Regulations")), as from time to time amended or supplemented pursuant to
the 1933 Act, are hereinafter referred to as the "Registration
Statement" and the "Prospectus", respectively, except that if any
revised prospectus shall be provided to the Underwriters by the Company
for use in connection with the offering of the Shares which differs from
the Prospectus on file at the Commission at the time the Registration
Statement becomes effective (whether or not such revised prospectus is
required to be filed by the Company pursuant to Rule 424(b) of the 1933
Act Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the
Underwriters for such use. All references in this Agreement to
financial statements and schedules and other information which is
"contained," "included" or "stated" in the Registration Statement or the
Prospectus (and all other references of like import) shall be deemed to
mean and include all such financial statements and schedules and other
information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and
1 Two forms of prospectus are to be used in connection with
the offering and sale of the Shares: one relating to the
International Shares (the "International Prospectus"), and
one relating to the U.S. Shares (the "U.S. Prospectus").
3
<PAGE>
include the filing of any document under the Securities Exchange Act of
1934 (the "1934 Act") which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case
may be.
The Company understands that the Underwriters propose to make a public
offering of the Shares as soon as the U.S. Representatives and the Lead
Managers deem advisable after the Registration Statement becomes
effective and the U.S. and International Pricing Agreements have been
executed and delivered.
Section 1. Representations and Warranties.
(a) The Company represents and warrants to each International Manager
as of the date hereof and as of the date of International Pricing
Agreement (such latter date being hereinafter referred to as the
"Representation Date") as follows:
(i) At the time the Registration Statement becomes effective and
at the Representation Date, the Registration Statement will comply in
all material respects with the requirements of the 1933 Act and the
1933 Act Regulations and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
The Prospectus, at the Representation Date (unless the term
"Prospectus" refers to a prospectus which has been provided to the
International Managers or the U.S. Underwriters, as the case may be,
by the Company for use in connection with the offering of the Shares
which differs from the Prospectus on file at the Commission at the
time the Registration Statement becomes effective, in which case at
the time it is first provided to the International Managers or the
U.S. Underwriters for such use) and at Closing Time referred to in
Section 2 hereof, will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the representations
and warranties in this subsection shall not apply to those parts of
the Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
International Manager through the Lead Managers or any U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement or Prospectus.
(ii) The documents incorporated or deemed to be incorporated by
reference in the Prospectus, at the time they were or hereafter are
filed with the Commission, complied and will comply in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the Commission under the 1934 Act (the "1934 Act
Regulations"), and, when read together with the other information in
the Prospectus, at the time the Registration Statement becomes
4
<PAGE>
effective and at the Closing Time, will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(iii) The Company is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, with
trust power and authority to carry on its business and to own or lease
its properties as described in the Registration Statement, and the
Company owns or possesses all licenses and permits necessary for the
conduct of its business and the ownership, leasing and operation of
its properties, except such licenses and permits as to which the
failure to own or possess would not in the aggregate have a material
adverse effect on the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company; and
the Company is duly qualified and in good standing as a foreign entity
authorized to do business in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of
the Company. The Company has no subsidiaries. The Company neither
owns nor controls, directly or indirectly, any capital stock or other
equity interest in any corporation, partnership or other entity.
(iv) The authorized, issued and outstanding capital stock of the
company is correctly set forth in the Registration Statement under the
caption "Capitalization"; all of the outstanding shares of capital
stock of the Company have been duly authorized and are validly issued,
fully paid, non-assessable (except as otherwise described in the
Registration Statement) and free of preemptive rights or other rights
to subscribe for or to purchase securities provided for by law or by
its Declaration of Trust or bylaws; all of the outstanding shares of
capital stock of the Company and options to purchase shares of capital
stock of the Company have been issued in accordance with applicable
federal and state securities laws; the International Shares to be
issued and sold pursuant to this Agreement have been duly authorized
and, when issued and delivered to the International Managers against
payment therefor as provided hereunder and in the International
Pricing Agreement, will have been validly issued and will be fully
paid, non-assessable (except as otherwise described in the
Registration Statement) and free of preemptive rights; all outstanding
Shares of Beneficial Interest are listed on the New York Stock
Exchange and the Company knows of no reason or set of facts which is
likely to result in the delisting of such Shares or the inability to
list the Shares; the certificates for such International Shares will
be valid and in proper legal form; and there are no rights of holders
of securities of the Company to the registration of Shares of
Beneficial Interest or other securities.
5
<PAGE>
(v) The capital stock of the Company and the Shares conform to
the description thereof in the Registration Statement and the
Prospectus.
(vi) The accountants who have certified the financial statements
of the Company, and, to the Company's knowledge, of Greenery
Rehabilitation, Group, Inc. and its subsidiaries ("Greenery"),
GranCare, Inc. and its subsidiaries ("Grancare"), Horizon Healthcare
Corporation ("Horizon") and its subsidiaries and Marriott
International, Inc. ("Marriott") filed with the Commission the
Registration Statement and the Prospectus are independent certified
accountants as required by the 1933 Act. The financial statements of
the Company, and, to the Company's knowledge, of other entities,
included in the Registration Statement present fairly the financial
position and results of operations of the Company and the other
entities purported to be shown thereby at the respective dates and for
the respective periods specified, and have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis throughout such periods. The pro forma financial statements of
the Company as adjusted as set forth therein and in the notes thereto
included in the Registration Statement and the Prospectus reflect all
adjustments necessary to summarize fairly the pro forma condensed
combined financial position of the Company at the dates indicated and
the pro forma results of their operations for the periods specified.
(vii) Except as disclosed in the Registration Statement and
Prospectus, there is not now pending or, to the knowledge of the
Company, threatened, any litigation, action, suit or proceeding to
which the Company or, to the best knowledge of the Company, GranCare,
Sun Healthcare Group, Inc. ("Sun"), Marriott, Beverly Enterprises,
Integrated Health Services and Hillhaven (collectively, the
"Operators") or HRPT Advisors, Inc. (the "Advisor") is or will be a
party before or by any court or governmental agency or body, which (A)
might result in any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or
business prospects of the Company or, to the best knowledge the
Company, of the Operators or the Advisor or (B) might materially and
adversely affect the property or assets of the Company or, to the best
knowledge of the Company, of the Operators or the Advisor, or (C)
relates to environmental matters involving the Company or, to the best
knowledge of the Company, of the Operators or the Advisor, or (D)
relates to discrimination on the basis of age, sex, religion or race,
relating to the Company or, to the best knowledge of the Company, of
the Operators or the Advisor, or (E) concerns the Company or, to the
best knowledge of the Company, of the Operators or the Advisor, and is
required to be disclosed in the Prospectus.
(viii) Except as otherwise set forth in the Registration
Statement, the Company has good and marketable title or ground leases,
free and clear of all liens, claims, encumbrances and restrictions,
6
<PAGE>
except liens for taxes not yet due and payable and other liens and
encumbrances which do not, either individually or in the aggregate,
adversely affect the current use or value thereof, to all property and
assets described in the Registration Statement as being owned by it.
All leases to which the Company is a party relating to real property,
and all other leases which are material to the business of the
Company, are valid and binding and no default (to the Company's
knowledge in the case of leases to which the Company is a party as
lessor) has occurred or is continuing thereunder, and the Company
enjoys peaceful and undisturbed possession under all such leases to
which it is a party as lessee. With respect to the Properties (as
such term is defined in the Prospectus), the Company has such
documents, instruments, certificates, opinions and assurances,
including without limitation, fee, leasehold owners or mortgage title
insurance policies (disclosing no material encumbrances or title
exceptions except as otherwise set forth in the Registration
Statement), legal opinions and property insurance policies in each
case in form and substance as are usual and customary in transactions
involving the purchase of similar real estate and are appropriate for
the Company to have obtained. Each of the Company and, to the best
knowledge of the Company, the Operators and the Advisor has all
governmental licenses, certificates, permits, authorizations,
approvals, franchises or other rights necessary to engage in the
business currently conducted by it, except such licenses and permits
as to which the failure to own or possess will not in the aggregate
have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of
the Company, or, to the best knowledge of the Company, the Operators
or the Advisor and neither the Company nor, to the best knowledge of
the Company, the Operators or the Advisor has any reason to believe
that any governmental body or agency is considering limiting,
suspending or revoking any such license, certificate, permit,
authorization, approval, franchise or right.
(ix) The Company has filed all Federal, State and foreign income
tax returns which have been required to be filed and has paid all
taxes indicated by said returns and all assessments received by it to
the extent that such taxes have become due.
(x) Since the dates as of which information is given in the
Registration Statement, except as otherwise stated or contemplated
therein (i) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company or, to the knowledge of
the Company, of the Operators or the Advisor, whether or not arising
in the ordinary course of business, (ii) there have been no material
transactions entered into by the Company or, to the knowledge of the
Company, the Operators or the Advisor, other than transactions in the
ordinary course of business, that would, to the Company's knowledge,
be materially adverse to, or have a material adverse effect on, the
7
<PAGE>
Company, (iii) neither the Company nor, to the knowledge of the
Company, the Operators or the Advisor has incurred any obligation,
contingent or otherwise, that would, to the Company's knowledge, be
materially adverse to, or have a material adverse effect on, the
Company, (iv) there has been no change in the capital stock or debt of
the Company and (v) there has been no dividend or distribution of any
kind declared, paid or made by the Company on its capital stock.
(xi) Neither the Company nor, to the best knowledge of the
Company, the Operators or the Advisor is in violation of its charter
documents or bylaws or in default in the performance of any
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any indenture,
instrument or agreement to which the Company or any of its
subsidiaries or, to the best knowledge of the Company, the Operators
or the Advisor is a party or by which any of their respective
properties may be bound or affected, except for any such violation
that would not have a material adverse effect on the condition,
financial or otherwise, or in the respective earnings, business
affairs or business prospects of any of them. Neither the Company nor
any of its subsidiaries nor, to the best knowledge of the Company, the
Operators or the Advisor is in violation of any law, ordinance,
governmental rule or regulation or court decree to which it is
subject, except for any such violation that would not have a material
adverse effect on the condition, financial or otherwise, or in the
respective earnings, business affairs or business prospects of any of
them. The execution, delivery and performance of this Agreement, the
U.S. Purchase Agreement, the International Pricing Agreement and the
U.S. Pricing Agreement, compliance by the Company with all provisions
hereof, and the consummation of the transactions contemplated hereby,
will not violate or conflict with or constitute a breach of any of the
terms or provisions of, or constitute a default under (i) the
Declaration of Trust of the Company or, to the best knowledge of the
Company, the certificate of incorporation of the Operators or the
Advisor, or (ii) any bond, debenture, note or other evidence of
indebtedness or any material indenture, instrument or agreement to
which the Company or, to the best knowledge of the Company, the
Operators or the Advisor is a party or which binds the Company or its
properties or, to the best knowledge of the Company, the Operators or
the Advisor or any of their respective properties, or (iii) (assuming
compliance with all applicable state securities or Blue Sky laws) any
law, regulation or ruling or any order, judgment or decree to which
the Company or its properties or, to the best knowledge of the
Company, the Operators or the Advisor or any of their respective
properties may be subject.
(xii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company of this Agreement, the U.S. Purchase
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Agreement, the International Pricing Agreement and the U.S. Pricing
Agreement and the consummation of the transactions herein and therein
contemplated (except such additional steps as may be required by the
National Association of Securities Dealers, Inc. (the "NASD") or may
be necessary to qualify the Shares for public offering by the
International Managers or the U.S. Underwriters under State securities
or Blue Sky laws) has been obtained or made and is in full force and
effect.
(xiii) The Company owns or possesses adequate licenses or other
rights to use all patents, trademarks, service marks, trade names,
copyrights and know-how (including trade secrets, and other
proprietary and confidential information, systems or procedures)
necessary to conduct the businesses now operated by it as described in
the Prospectus, and, except as disclosed to the Representatives in
writing, the Company has not received any notice of infringement of or
conflict with (and no officer or trustee of the Company knows of any
such infringement of or conflict with) asserted rights of others with
respect to any patents, trademarks, service marks, trade names,
copyrights or know-how.
(xiv) The organization of the Company is in conformity with the
requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a real estate investment trust, and the
Company's present ownership, business and operations as described in
the Prospectus enable it to meet the present requirements of the Code
for such qualification for 1994 and subsequent years. The Company
qualified as a real estate investment trust for its 1987, 1988, 1989,
1990, 1991, 1992 and 1993 taxable years.
(xv) The Company is not required to register as an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(xvi) Except with respect to the properties listed on the
schedule provided to the Underwriters at Closing Time (as defined
herein) which are not in compliance with this subsection (a)(xv), but
which non-compliance would not in the aggregate have a material
adverse effect in the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company, to
the Company's knowledge, after due investigation, and except for
Hazardous Materials or substances which are handled and/or disposed of
in compliance with all applicable federal, state and local
requirements, the real property owned, leased or otherwise utilized by
the Company in connection with the operation of its business,
including without limitation, any subsurface soils and ground water
(the "Realty"), is free of contamination from any Hazardous Materials.
To the Company's knowledge, after due investigation, the Realty does
not contain any underground storage or treatment tanks, active or
abandoned water, gas or oil wells, or any other underground
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improvements or structures, other than the foundations, footings or
other supports for the improvements located thereon which based on
present knowledge could presently or at any time in the future cause a
material detriment to or materially impair the beneficial use thereof
by the Company or constitute or cause a significant health, safety or
other environmental hazard to occupants or users thereof without
regard to any special conditions of such occupants or users. The
Company represents that, after due investigation, it has no knowledge
of any material violation, with respect to the Realty, of any
Environmental Law, or of any material liability on the part of the
Company, with respect to the Realty, resulting from the presence, use,
release, threatened release, emission, disposal, pumping, discharge,
generation or processing of any Hazardous Materials. As used herein,
"Environmental Law" means any federal, state or local statute,
regulation, judgment, order, or authorization relating to emissions,
discharges, releases or threatened releases of Hazardous Materials
into ambient air, surface water, ground water, publicly owned
treatment works, septic systems or land, or otherwise relating to the
pollution or protection of health or the environment. As used herein,
"Hazardous Materials" means any substance, material or waste which is
regulated by any federal, state or local governmental or quasi-
governmental authority, and includes, without limitation, (a) any
substance, material or waste defined, used or listed as a "hazardous
waste", "hazardous substance", "toxic substance", "medical waste",
"infectious waste" or other similar terms as defined or used in any
Environmental Law, as such Environmental Law may from time to time be
amended, and; (b) any petroleum products, asbestos, lead-based paint,
polychlorinated biphenyls, flammable explosives or radioactive
materials.
(xvii) The documents incorporated or deemed to be incorporated by
reference in the Prospectus, at the time they were or hereafter are
filed with the Commission, complied and will comply in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the Commission under the 1934 Act (the "1934 Act
Regulations"), and, when read together with the other information in
the Prospectus, at the time the Registration Statement becomes
effective and at the Closing time, will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(xviii) The Advisory Agreement (as defined in the Prospectus) has
been duly authorized, executed and delivered by the parties thereto
and constitutes the valid agreement of the parties thereto,
enforceable in accordance with its terms, except as limited by (a) the
effect of bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights or remedies of
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creditors or (b) the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefore may be
brought.
(xix) The Company is in compliance with all of the provisions of
Section 517.075 of the Florida statutes, and all rules and regulations
promulgated thereunder relating to issuers doing business in Cuba.
(b) Any certificate signed by any officer of the Company and
delivered to the Lead Managers or to counsel for the International
Managers shall be deemed a representation and warranty by the Company to
each International Manager as to the matters covered thereby.
Section 2. Sale and Delivery to International Managers; Closing.
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each International Manager severally and not
jointly, and each International Manager, severally and not jointly,
agrees to purchase from the Company, at the price per share set forth in
the International Pricing Agreement, the number of International Shares
set forth in Schedule A opposite the name of such International Manager
(except as otherwise provided in the International Pricing Agreement),
plus any additional number of International Shares which such
International Manager may become obligated to purchase pursuant to the
provisions of Section 10 hereof.
(1) If the Company has elected not to rely upon Rule 430A under
the 1933 Act Regulations, the initial public offering price and the
purchase price per share to be paid by the several International
Managers for the International Shares have each been determined and
set forth in the International Pricing Agreement, dated the date
hereof, and an amendment to the Registration Statement and the
Prospectus will be filed before the Registration Statement becomes
effective.
(2) If the Company has elected to rely upon Rule 430A under the
1933 Act Regulations, the purchase price per share to be paid by the
several International Managers for the International Shares shall be
an amount equal to the initial public offering price, less an amount
per share to be determined by agreement between the Lead Managers and
the Company. The initial public offering price per share of the
International Shares shall be a fixed price to be determined by
agreement between the Lead Managers and the Company. The initial
public offering price per share of the International Shares shall not
be higher than the last reported sale price (regular way) or the last
reported asked price, whichever is higher, of the Shares of Beneficial
Interest on the New York Stock Exchange immediately prior to
determination of the initial public offering price. The initial
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public offering price and the purchase price, when so determined,
shall be set forth in the International Pricing Agreement. In the
event that such prices have not been agreed upon and the International
Pricing Agreement has not been executed and delivered by all parties
thereto by the close of business on the fourth business day following
the date of this Agreement, this Agreement shall terminate forthwith,
without liability of any party to any other party, unless otherwise
agreed to by the Company and the Lead Managers.
(3) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions
herein set forth, the Company hereby grants an option to the
International Managers, severally and not jointly, to purchase up to
an additional 1,500,000 Shares at the price per share set forth in the
International Pricing Agreement less an amount equal to any dividend
paid by the Company and payable on any Initial Shares and not payable
on such Option Shares. The option hereby granted will expire 30 days
after the date the Registration Statement becomes effective and may be
exercised by the U.S. Representatives on behalf of both the
International Managers and the U.S. Underwriters in whole or in part
from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of
the Initial Shares upon notice by the U.S. Representatives to the
Company setting forth the number of Option Shares as to which the
several Underwriters are then exercising the option and the time, date
and place of payment and delivery for such Option Shares. Any such
time and date of delivery (a "Date of Delivery") shall be determined
by the U.S. Representatives but shall not be later than seven full
business days after the exercise of said option, nor in any event
prior to Closing Time, as hereinafter defined, unless otherwise agreed
upon by the U.S. Representatives and the Company. If the option is
exercised as to all or any portion of the Option Shares, the Option
Shares shall be purchased by the Underwriters, severally and not
jointly, in proportion to their respective Initial Share underwriting
obligations as set forth in Schedule A (except as otherwise provided
in the International and U.S. Pricing Agreements).
(b) Payment of the purchase price for and delivery of certificates
for the Initial International Shares shall be made at the office of
Sullivan & Worcester, One Post Office Square, Boston, Massachusetts
02109, or at such other place as shall be agreed upon by the Lead
Managers and the Company, at 10:00 A.M. on the fifth business day
(unless postponed in accordance with the provisions of Section 10)
following the date the Registration Statement becomes effective (or, if
the Company has elected to rely upon Rule 430A, the fifth business day
after execution of the International Pricing Agreement), or such other
time not later than ten business days after such date as shall be agreed
upon by the Lead Managers and the Company (such time and date of payment
and delivery being herein called "Closing Time"). In addition, in the
event that any or all of the Option Shares are purchased by the
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<PAGE>
International Managers, payment of the purchase price for and the
delivery of certificates for such Option Shares shall be made at the
above-mentioned office of Sullivan & Worcester, or at such other place
as shall be mutually agreed upon by the U.S. Representatives and the
Company, on each Date of Delivery as specified in the notice from the
U.S. Representatives to the Company. Payment shall be made by certified
or official bank check or checks in New York Clearing House or similar
next day funds payable to the order of the Company against delivery to
the Lead Managers for the respective accounts of the International
Managers of certificates for the Shares to be purchased by them. The
certificates for the Shares shall be in such authorized denominations
and registered in such names as the Lead Managers may request in writing
at least two business days before Closing Time or the Date of Delivery,
as the case may be. It is understood that each International Manager
has authorized the Lead Managers, for its account, to accept delivery
of, receipt for, and make payment of the purchase price for, the
International Shares which it has agreed to purchase. MLI, Donaldson
Lufkin, PaineWebber or Smith Barney, individually and not as lead
managers of the several International Managers may (but shall not be
obligated to) make payment of the purchase price for the International
Shares to be purchased by any International Manager whose check has not
been received by Closing Time, but any such payment shall not relieve
such International Manager from its obligations hereunder. The
certificates for the Initial International Shares and the International
Option Shares will be made available for examination and packaging by
the Lead Managers not later than 10:00 A.M. on the last business day
prior to Closing Time or the Date of Delivery, as the case may be.
Section 3. Covenants of the Company. The Company covenants with each
International Manager as follows:
(a) The Company will notify the Lead Managers immediately, and
confirm the notice in writing, (i) of the effectiveness of the
Registration Statement and any amendment thereto (including any post-
effective amendment), (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or supplement to the
Prospectus or for additional information relating thereto, and (iv) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose. The Company will make every reasonable
effort to prevent the issuance of any such stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) The Company will give the Lead Managers notice of its intention
to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement
to the Prospectus (including any revised prospectus which the Company
proposes for use by the Underwriters in connection with the offering of
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<PAGE>
the Shares which differs from the prospectus on file at the Commission
at the time the Registration Statement becomes effective, whether or not
such revised prospectus is required to be filed pursuant to Rule 424(b)
of the 1933 Act Regulations), will furnish the Representatives with
copies of any such amendment or supplement a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not
file any such amendment or supplement or use any such prospectus to
which counsel for the Underwriters shall reasonably object.
(c) The Company will deliver to the Lead Managers four signed copies
of the Registration Statement as originally filed electronically and of
each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and the documents incorporated by
reference into the Prospectus pursuant to Item 12 of Form S-3) and will
also deliver to the Representatives a conformed copy of the Registration
Statement as originally filed and of each amendment thereto for each of
the Underwriters.
(d) The Company will furnish to each International Manager, from time
to time during the period when the Prospectus is required to be
delivered under the 1933 Act or the 1934 Act, such number of copies of
the Prospectus (as amended or supplemented) as such International
Manager may reasonably request for the purposes contemplated by the 1933
Act, the 1933 Act Regulations, the 1934 Act or 1934 Act Regulations.
(e) If any event shall occur as a result of which it is necessary, in
the opinion of counsel for the International Managers, to amend or
supplement the Prospectus in order to make the Prospectus not misleading
in the light of the circumstances existing at the time it is delivered
to a purchaser, the Company will either (i) forthwith prepare and
furnish to the Lead Managers a reasonable number of copies of an
amendment of or supplement to the Prospectus or (ii) make an appropriate
filing pursuant to Section 13, 14 or 15 of the 1934 Act, in form and
substance reasonably satisfactory to counsel for the International
Managers, which will amend or supplement the Prospectus so that it will
not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a
purchaser, not misleading.
(f) The Company will endeavor in good faith, in cooperation with the
International Managers, to qualify the International Shares for offering
and sale under the applicable securities laws and real estate
syndication laws of such states and other jurisdictions of the United
States as the Lead Managers may designate provided that, in connection
therewith, the Company shall not be required to qualify as a foreign
corporation or trust or to file any general consent to service of
process. In each jurisdiction in which the International Shares have
been so qualified the Company will file such statements and reports as
may be required by the laws of such jurisdiction to continue such
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<PAGE>
qualification in effect for so long as required for the distribution of
the International Shares.
(g) The Company will make generally available to its security holders
as soon as reasonably practicable, but not later than 60 days after the
close of the period covered thereby, an earning statement of the Company
(in form complying with the provisions of Rule 158 of the 1933 Act
Regulations) covering a period of at least twelve months beginning not
later than the first day of the Company's fiscal quarter next following
the effective date of the Registration Statement. "Earning statement",
"make generally available" and "effective date" will have the meanings
contained in Rule 158 of the 1933 Act Regulations.
(h) The Company will use the net proceeds received by it from the
sale of the Shares in the manner specified in the Prospectus under the
caption "Use of Proceeds" in all material respects.
(i) The Company will use its best efforts to effect the listing of
the Shares on the New York Stock Exchange ("NYSE").
(j) The Company hereby agrees, concurrently with the execution of
this Agreement, to deliver an agreement executed by the Advisor pursuant
to which the Advisor agrees not to offer, sell, contract to sell, make
subject to any purchase option, or otherwise dispose of any Shares of
Beneficial Interest held for its own account, directly or indirectly, in
a public or private transaction and the Company and the Advisor each
agree not to terminate, modify or waive any provision in any agreement
to which the Company or the Advisor is a party that restricts or limits
the transferability of Shares of Beneficial Interest, in each case for a
period of 90 days after the date of the Prospectus without the prior
written consent of MLI. The Company further agrees that it will not,
without the prior written consent of MLI, (x) offer, sell, contract to
sell, or otherwise dispose of any Shares of Beneficial Interest or other
securities convertible into or exercisable or exchangeable for Shares of
Beneficial Interest or (y) file any registration statement (other than
the Registration Statement) relating to any such securities with the
Commission or any other authority, in each case for a period of 90 days
after the date of the Prospectus; provided, however, that the Company
may issue Shares of Beneficial Interest pursuant to the Company's
existing Share Award Plan and issue and sell Shares of Beneficial
Interest to the Underwriters pursuant to this Agreement.
(k) The Company currently intends to continue to elect to qualify as
a "real estate investment trust" under the Internal Revenue Code of
1986, as amended, and use its best efforts to continue to meet the
requirements to qualify as a "real estate investment trust".
(l) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance
upon Rule 430A of the 1933 Act Regulations, then immediately following
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<PAGE>
the execution of the International Pricing Agreement, the Company will
prepare, and file or transmit for filing with the Commission in
accordance with such Rule 430A and Rule 424(b) of the 1933 Act
Regulations, copies of an amended Prospectus, or, if required by such
Rule 430A, a post-effective amendment to the Registration Statement
(including an amended Prospectus), containing all information so
omitted.
Section 4. Payment of Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement,
including (i) the printing and filing of the Registration Statement as
originally filed and of each amendment thereto, (ii) the cost of
printing, or reproducing, and distributing to the International Managers
copies of this Agreement and the International Pricing Agreement, (iii)
the preparation, issuance and delivery of the certificates for the
International Shares to the International Managers, (iv) the fees and
disbursements of counsel for the Company, referred to in Section 5(b)
hereof, (v) the fees and disbursements of the Company's accountants,
(vi) the qualification of the International Shares under securities laws
and real estate syndication laws in accordance with the provisions of
Section 3(f), including filing fees and the fee and disbursements of
counsel for the Company in connection therewith and in connection with
the preparation of the Blue Sky Survey, (vii) the printing and delivery
to the International Managers of copies of the Registration Statement as
originally filed and of each amendment thereto, of the preliminary
prospectuses, and of the Prospectus and any amendments or supplements
thereto, (viii) the cost of printing or reproducing and delivering to
the International Managers copies of the Blue Sky Survey, (ix) the fee
of the NASD, (x) the fees and expenses incurred in connection with the
listing of the Shares on the NYSE and (xi) any transfer taxes imposed on
the sale of the International Shares to the several International
Managers.
If this Agreement is terminated by the Lead Managers in accordance
with the provisions of Section 5 or Section 9(a)(i), the Company shall
reimburse the International Managers for all of their out-of-pocket
expenses, including the reasonable fees and disbursements of counsel for
the International Managers.
Section 5. Conditions of International Managers' Obligations. The
obligations of the International Managers hereunder are subject to the
accuracy of the representations and warranties of the Company herein
contained, to the performance by the Company of its obligations
hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M. on the date hereof, or, with the consent of the Lead
Managers, at a later time and date, not later, however, than 5:30 P.M.
on the first business day following the date hereof or at such later
time and date as may be approved by a majority in interest of the
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International Managers; and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the
Commission. If the Company has elected to rely upon Rule 430A of the
1933 Act Regulations, the price of the Shares and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) of the 1933 Act Regulations within
the prescribed time period, and prior to Closing Time the Company shall
have provided evidence satisfactory to the Lead Managers, of such timely
filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the 1933 Act Regulations.
(b) At Closing Time the Lead Managers shall have received:
(1) The favorable opinion, dated as of Closing Time, of Sullivan
& Worcester, counsel for the Company, in form and substance
satisfactory to counsel for the International Managers, to the effect
that:
(i) The Company has been duly organized and is validly existing
under the laws of its jurisdiction of organization and has the trust
power and authority to carry on its business and to own or lease and
operate its property as described in the Registration Statement and
the Prospectus.
(ii) The Company is duly qualified and in good standing and
authorized to do business in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified or in good
standing would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business
prospects of the Company.
(iii) The Company has the requisite power and authority to enter
into and perform this Agreement and the International Pricing
Agreement; the Company has the requisite power and authority to issue
and deliver the International Shares.
(iv) This Agreement and the International Pricing Agreement have
been duly authorized, executed and delivered by the Company.
(v) (A) The authorized and issued capital stock of the Company
is correctly set forth in the Registration Statement and Prospectus
under the caption "Capitalization"; (B) all of the outstanding shares
of capital stock of the Company have been duly authorized and are
validly issued, fully paid and non-assessable (except as otherwise
described in the Registration Statement) and free of preemptive rights
or other rights to subscribe for or to purchase securities provided
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for by law or by its Declaration of Trust or bylaws; (C) the Shares
have been duly authorized and, when issued and delivered in accordance
with the terms of this Agreement and in the International Pricing
Agreement, will be validly issued, fully paid and, except as otherwise
described in the Registration Statement, non-assessable and the
issuance of such Shares is not subject to any preemptive or similar
rights; (D) all outstanding Shares of Beneficial Interest are listed
on the New York Stock Exchange and the Shares, upon notice of
issuance, will be so listed; (E) the certificates for the Shares are
valid and in proper legal form; and (F) to such counsel's knowledge,
there are no holders of securities of the Company entitled to the
registration of Shares of Beneficial Interest or other securities.
(vi) The Company is not required to register as an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(vii) To the extent required to be described therein, the Shares
and the rights related thereto conform in all material respects to the
descriptions in the Registration Statement and Prospectus.
(viii) The Registration Statement has become effective under the
1933 Act, and, to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted by or is pending
before the Commission.
(ix) To such counsel's knowledge, there is no legal or
governmental proceeding pending or threatened against the Company or
to which the Company is a party or to which any of the properties of
the Company is subject which is required to be described in the
Registration Statement or Prospectus and is not so described, or any
contract, lease or other document which is required to be described in
the Registration Statement or Prospectus or is required to be filed as
an exhibit to the Registration Statement which is not described or
filed as required; the descriptions thereof or references thereto are
accurate in all material respects; and, to such counsel's knowledge,
each contract, lease or document so described is in full force and
effect in accordance with its terms.
(x) Neither the Company nor the Advisor is in violation of its
charter documents or bylaws or, to such counsel's knowledge, in
default in the performance of any material obligation, agreement or
condition contained in any bond, debenture, note or any other evidence
of indebtedness or in any material indenture, instrument or other
agreement to which the Company or the Advisor is a party or which
binds the Company or the Advisor or any of their property; to such
counsel's knowledge, neither the Company nor the Advisor is in
violation of any law, ordinance, governmental rule or regulation or
court decree to which it is subject except where such violation would
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not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of
the Company or the Advisor, as the case may be.
(xi) The Company owns or possesses all licenses and permits
necessary for the conduct of its business and the ownership, leasing
and operation of its properties, except such licenses and permits as
to which the failure to own or possess will not in the aggregate have
a material adverse effect on the condition, financial or otherwise, or
in the earnings, business affairs or business prospects of the
Company.
(xii) The execution, delivery and performance of this Agreement
and the International Pricing Agreement and the consummation of the
transactions contemplated hereby will not conflict with or constitute
a breach or violation of any of the terms or provisions of, or
constitute a default under, (A) any bond, debenture, note or other
evidence of indebtedness or any indenture, instrument or agreement of
which such counsel has knowledge to which the Company or the Advisor
is a party or which binds either of them or any of their property, (B)
the charter documents or bylaws of the Company or the Advisor or (C)
any law, regulation, ruling, judgment, decree or order of which such
counsel has knowledge to which the Company or the Advisor or any of
their properties may be subject.
(xiii) Except with respect to state securities or blue sky laws and
regulations, all proceedings required in connection with the
authorization and issuance of the Shares have been taken and all
authorizations, consents, approvals, licenses or other orders of any
regulatory body, administra-tive agency or other governmental body
required for the valid issuance and delivery of the Shares hereunder
have been obtained.
(xiv) No consents or waivers from the holders of the Company's
capital stock are required to consummate the transactions contemplated
hereby other than such consents and waivers as have been obtained.
(xv) At the time the Registration Statement became effective and
at the Representation Date, the Registration Statement and the
Prospectus and any supplement or amendment thereto (except for
financial statements and other financial and statistical data and
schedules contained therein as to which such counsel need not express
an opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(xvi) The investments of the Company described in the Prospectus
are permitted investments under the Declaration of Trust of the
Company.
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(xvii) The Advisory Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and legally
binding agreement of the Company enforceable in accordance with its
terms, except (A) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (B) that the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought, and (C) as any indemnification and
contribution provisions thereunder may be limited by applicable law
and public policy.
(xviii) The Advisory Agreement has been duly authorized, executed
and delivered by the Advisor and constitutes the valid and legally
binding agreement of the Advisor, enforceable in accordance with its
terms except (A) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (B) that the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought, and (C) as any indemnification and
contribution provisions thereunder may be limited by applicable law
and public policy.
(xix) The execution and delivery of the Advisory Agreement by the
Company and the Advisor and the performance by the Company and the
Advisor of the obligations contained therein and the compliance with
their terms did not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under the charter
documents or bylaws of the Company or the Advisor, respectively, or
any license, permit, material agreement, indenture or other instrument
known to such counsel to which the Company or the Advisor,
respectively, is bound, or any law, administrative regulation or court
or governmental decree known to such counsel applicable to the Company
or the Advisor.
(xx) The Advisor (A) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
and (B) has requisite corporate power and authority to conduct its
business as described in the Prospectus and to own and operate the
properties used and useful in said business.
(xxi) No facts have come to such counsel's attention that lead such
counsel to believe that the Company does not have insurable title to
each item of real property owned by it subject to such encumbrances
and defects as set forth in the title policies obtained in connection
with the acquisition thereof (or as otherwise described in the
Registration Statement) or that the Company leases are not valid.
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(xxii) Each document filed pursuant to the 1934 Act (other than the
financial statements and supporting schedules included therein, as to
which no opinion need be rendered) and incorporated or deemed to be
incorporated by reference in the Prospectus complied when so filed as
to form in all material respects with the 1934 Act and the 1934 Act
Regulations.
(xxiii) The Company has qualified to be taxed as a real estate
investment trust pursuant to Sections 856-860 of the Internal Revenue
Code, as amended, for the fiscal years ended December 31, 1987 through
December 31, 1993, and the Company's present method of operation and
its assets and contemplated income are such that the Company is in a
position under present law to so qualify for the fiscal year ended
December 31, 1994 and in the future.
With respect to matters governed by Maryland law, such counsel may
rely upon an opinion, dated as of Closing Time, of Piper & Marbury, a
copy of which shall have been furnished to the Representatives at
Closing Time in form and substance satisfactory to counsel for the
International Managers. In addition to the matters set forth above,
such opinion shall also include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe
that the Registration Statement, as of the time it became effective
under the 1933 Act, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus, at the Representation Date (unless the term "Prospectus"
refers to a prospectus which has been provided to the International
Managers by the Company for use in connection with the offering of the
Shares which differs from the Prospectus on file at the Commission at
the Representation Date, in which case at the time it is first provided
to the Underwriters for such use) or at Closing Time, contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that
such counsel need express no view as to financial statements, schedules
and other financial information included therein). With respect to such
statement, Sullivan & Worcester may state that their belief is based
upon the procedures set forth therein, but is without independent check
and verification.
(2) The favorable opinion, dated as of Closing Time, of Brown &
Wood, counsel for the International Managers, with respect to the
matters set forth in (iv), (vii), (viii) and (xv) of subsection (b)(1)
of this Section. In addition to the matters set forth above, such
opinion shall also include a statement to the effect that nothing has
come to the attention of such counsel which leads them to believe that
the Registration Statement, as of the time it became effective under
the 1933 Act, contained in untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
21
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necessary to make the statements therein not misleading or that the
Prospectus, at the Representation Date (unless the term "Prospectus"
refers to a prospectus which has been provided to the Underwriters by
the Company for use in connection with the offering of the Shares
which differs from the Prospectus on file at the Commission at the
Representation Date, in which case at the time it is first provided to
the Underwriters for such use) or at Closing Time, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading (except that such counsel need express no view as to
financial statements, schedules and other financial information
included). With respect to such statement, Brown & Wood may state
that their belief is based upon the procedures set forth therein, but
is without independent check and verification.
(c) At Closing Time (i) the Registration Statement and the Prospectus
shall contain all statements which are required to be stated therein in
accordance with the 1933 Act and the 1933 Act Regulations and in all
material respects shall conform to the requirements of the 1933 Act and
the 1933 Act Regulations, and neither the Registration Statement nor the
Prospectus shall contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and no action, suit or
proceeding at law or in equity shall be pending or to the knowledge of
the Company threatened against the Company which would be required to be
set forth in the Prospectus other than as set forth therein, (ii) there
shall not have been, since the respective dates as of which information
is given in the Registration Statement and the Prospectus, any material
adverse change in the condition, financial or otherwise, of the Company
or in its earnings, business affairs or business prospects, whether or
not arising in the ordinary course of business from that set forth in
the Registration Statement, and (iii) no proceedings shall be pending
or, to the knowledge of the Company, threatened against the Company
before or by any Federal, state or other commission, board or
administrative agency wherein an unfavorable decision, ruling or finding
would materially and adversely affect the business, property, financial
condition or income of the Company other than as set forth in the
Prospectus; and the Lead Managers shall have received, at Closing Time,
a certificate of the President and Chief Executive Officer and the chief
financial officer of the Company, dated as of Closing Time, evidencing
compliance with the provisions of this subsection (c) and stating that
the representations and warranties set forth in Section 1(a) hereof are
accurate as though expressly made at and as of Closing Time.
(d) At the time of execution of this Agreement, the Lead Managers
shall have received from Ernst & Young a letter dated such date, in form
and substance satisfactory to the Lead Managers, to the effect that (i)
they are independent public accountants as required by the 1933 Act and
the applicable published rules and regulations thereunder with respect
22
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to the Company; (ii) it is their opinion that the audited financial
statements of the Company, Greenery, GranCare, Horizon and Marriott
included in the Registration Statement and covered by their opinions
therein comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the related published rules
and regulations thereunder; (iii) they have performed limited
procedures, not constituting an audit, including a reading of the latest
available interim financial statements of the Company, a reading of the
minute books of the Company since December 31, 1993, inquiries of
officials of the Company responsible for financial and accounting
matters and such other inquiries and procedures as may be specified in
such letter, and on the basis of such limited review and procedures
nothing came to their attention that caused them to believe that:
(A) at a specified date not more than five days prior to
the date of such letter, there was any decrease in the
shareholders' equity of the Company, any decrease in total assets
or any increase in total borrowings of the Company, as compared
with the amounts shown in the latest balance sheet included in
the Registration Statement; or
(B) during the period from the date of the latest balance
sheet included in the Registration Statement, to a specified date
not more than five days prior to the date of such letter, there
were any decreases, as compared with the corresponding period in
the preceding year, in total revenues, net income or income per
share;
except in all cases for increases or decreases which the Registration
Statement discloses or contemplates have occurred or may occur; (iv) in
addition to the limited procedures referred to in clause (iii) above,
they have carried out certain specified procedures, not constituting an
audit, with respect to certain amounts, percentages and financial
information which are derived from the general accounting records of the
Company, which are included in the Registration Statement and which are
specified by the Lead Managers and the U.S. Representatives, and have
compared such amounts, percentages and financial information with the
accounting records of the Company and have found them to be in
agreement; and (v) they have read the unaudited pro forma financial
statements which are included in the Registration Statement and have
performed specified procedures set forth in detail in such letter and
found the amounts resulting from such procedures to be in agreement with
the amounts set forth in such unaudited pro forma financial statements
and nothing has come to their attention which causes them to believe
that the unaudited pro forma financial statements included in the
Registration Statement, which combine certain financial statements of
the Company with certain transactions set forth in the notes to such pro
forma statements, do not comply as to form in all material respects with
Article 11 of Regulation S-X under the 1933 Act.
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(e) At Closing Time the Lead Managers shall have received from Ernst
& Young a letter dated as of Closing Time to the effect that they
reaffirm the statements made in the letter furnished pursuant to
subsection (d) of this Section, except that the "specified date"
referred to shall be a date not more than five days prior to Closing
Time, and, if the Company has elected to rely on Rule 430A of the 1933
Act Regulations, to the further effect that they have carried out
procedures as specified in clause (iv) of subsection (d) of this Section
with respect to certain amounts, percentages and financial information
deemed to be a part of the Registration Statement pursuant to Rule
430A(b).
(f) At Closing Time counsel for the International Managers shall have
been furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the issuance and
sale of the International Shares as herein contemplated and related
proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
in connection with the issuance and sale of the International Shares as
herein contemplated shall be reasonably satisfactory in form and
substance to the Lead Managers and counsel for the International
Managers.
(g) In the event the U.S. Representatives exercise their option
provided in Section 2 hereof to purchase all or any portion of the
Option Shares, the representations and warranties of the Company
contained herein and the statements in any certificates furnished by the
Company hereunder shall be true and correct as of each Date of Delivery,
and the Lead Managers shall have received:
(1) A certificate of the President and Chief Executive Officer
and the chief financial officer of the Company, dated such Date of
Delivery, confirming that their certificates delivered at Closing Time
pursuant to Section 5(c) hereof remain true as of such Date of
Delivery.
(2) The favorable opinion of Sullivan & Worcester, special
counsel for the Company, in form and substance satisfactory to counsel
for the International Managers, dated such Date of Delivery, relating
to the Option Shares and otherwise to the same effect as the opinion
required by Section 5(b)(1) hereof.
(3) The favorable opinion of Brown & Wood, counsel for the
International Managers, dated such Date of Delivery, relating to the
Option Shares and otherwise to the same effect as the opinion required
by Section 5(b)(2) hereof.
(4) A letter from Ernst & Young, in form and substance
satisfactory to the Lead Managers, dated such Date of Delivery,
24
<PAGE>
substantially the same in scope and substance as the letter furnished
to the Representatives pursuant to Section 5(e) hereof, except that
the "specified date" in the letter furnished pursuant to this Section
5(g)(4) shall be a date not more than five days prior to such Date of
Delivery.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Lead Managers by notice to the Company at any time at
or prior to Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section
4 hereof.
Section 6. Indemnification. (a) The Company hereby agrees to
indemnify and hold harmless each International Manager and each person,
if any, who controls any International Manager within the meaning of
Section 15 of the 1933 Act as follows:
(1) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
information deemed to be part of the Registration Statement pursuant
to Rule 430A(b) of the 1933 Act Regulations, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto), or the
omission, or alleged omission therefrom of a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(2) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(3) against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the fees and disbursements
of counsel chosen by the Representatives), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceedings by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
25
<PAGE>
omission, to the extent that any such expense is not paid under (1) or
(2) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of
any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information
furnished to the Company by any International Manager through the Lead
Managers expressly for use in the Registration Statement (or any
amendment thereto) or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto); and provided, further, that the
foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter from whom the person
asserting any such loss, claim, damage or expense purchased
International Shares, or any person controlling such Underwriter, if a
copy of the Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto and excluding
documents incorporated or deemed to be incorporated by reference
therein) was not sent or given by or on behalf of such International
Manager to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or expense.
(b) Each International Manager severally agrees to indemnify and hold
harmless the Company, each of the Company's trustees, each of the
Company's officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of
this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to
the Company by such International Manager through the Lead Managers
expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may have
otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action.
In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in
26
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connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances.
Section 7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided
for in Section 6 hereof is for any reason held to be unenforceable by
the indemnified parties although applicable in accordance with its
terms, the Company and the International Managers shall contribute to
the aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by said indemnity agreement incurred by the Company
and one or more of the International Managers, as incurred, in such
proportions that the International Managers are responsible for that
portion represented by the percentage that the underwriting discount
appearing on the cover page of the Prospectus bears to the initial
public offering price appearing thereon and the Company is responsible
for the balance; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Notwithstanding the provisions of
this Section 7, no International Manager shall be required to contribute
any amount in excess of the amount by which the total price at which the
Shares underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such International
Manager has otherwise been required to pay in respect of such losses,
liabilities, claims, damages and expenses. For purposes of this
Section, each person, if any, who controls an International Manager
within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as such International Manager, and each trustee
of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.
Section 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in
this Agreement and the International Pricing Agreement, or contained in
certificates of officers of the Company submitted pursuant hereto, shall
remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any International Manager or an
controlling person, or by or on behalf of the Company, and shall survive
delivery of the International Shares to the International Managers.
Section 9. Termination of Agreement. (a) The Lead Managers may
terminate this Agreement, by notice to the Company, at any time at or
prior to Closing Time (i) if there has been, since the respective dates
as of which information is given in the Registration Statement, any
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company,
whether or not arising in the ordinary course of business, or (ii) if
27
<PAGE>
there has occurred any material adverse change in the financial markets
in the United States or any outbreak of hostilities or escalation of
existing hostilities or other calamity or crisis the effect of which on
the financial markets of the United States is such as to make it, in the
Lead Managers reasonable judgment, impracticable to market the Shares or
enforce contracts for the sale of the Shares, or (iii) if trading in the
Shares of Beneficial Interest of the Company has been suspended by the
Commission, or if trading generally on either the New York Stock
Exchange or the American Stock Exchange has been suspended, or minimum
or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said exchanges or
by order of the Commission or any other governmental authority, or if a
banking moratorium has been declared by Federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party
except as provided in Section 4, and provided further that Sections 6
and 7 hereof shall survive such termination.
Section 10. Default by One or More of the International Managers. If
one or more of the International Managers shall fail at Closing Time to
purchase the Shares which it or they are obligated to purchase under
this Agreement and the International Pricing Agreement (the "Defaulted
Shares"), the Lead Managers shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
International Managers, or any other international managers, to purchase
all, but not less than all, of the Defaulted Shares in such amounts as
may be agreed upon and upon the terms herein set forth; if, however, the
Lead Managers shall not have completed such arrangements within such
24-hour period, then:
(a) if the number of Defaulted Shares does not exceed 10% of the
Shares, the non-defaulting International Managers shall be obligated to
purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting International Managers, or
(b) if the number of Defaulted Shares exceeds 10% of the Shares, this
Agreement shall terminate without liability on the part of any
non-defaulting International Manager.
No action taken pursuant to this Section shall relieve any defaulting
International Manager from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Lead Managers or the Company
shall have the right to postpone Closing Time for a period not exceeding
seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements.
28
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Section 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication.
Notices to the International Managers shall be directed to the Lead
Managers c/o Merrill Lynch International Limited at Ropemaker Place, 25
Ropemaker Street, London ECZ 9LY, England, attention of
___________________, ___________________; and notices to the Company
shall be directed to it at 400 Center Street, Newton, Massachusetts
02158, Attention: Mark J. Finklestein.
Section 12. Parties. This Agreement and the International Pricing
Agreement shall each inure to the benefit of and be binding upon the
International Managers and the Company and their respective successors.
Nothing expressed or mentioned in this Agreement or the International
Pricing Agreement is intended or shall be construed to give any person,
firm or corporation, other than those referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or the
International Pricing Agreement or any provision herein or therein
contained. This Agreement and the Pricing Agreement and all conditions
and provisions hereof and thereof are intended to be for the sole and
exclusive benefit of the parties hereto and thereto and their respective
successors and said controlling persons and officers, trustees and
directors and their heirs and legal representatives, and for the benefit
of no other person, firm or corporation. No purchaser of International
Shares from any International Manager shall be deemed to be a successor
by reason merely of such purchase.
Section 13. Governing Law and Time; Miscellaneous. This Agreement
and the Pricing Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State. Specified times of
day refer to New York City time.
THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED OCTOBER 9,
1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE
NAME "HEALTH AND REHABILITATION 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 COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL
PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION.
29
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding
agreement between the Underwriters and the Company in accordance with
its terms.
Very truly yours,
HEALTH AND REHABILITATION PROPERTIES TRUST
By
Authorized Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
SMITH BARNEY SHEARSON INC.
By: Merrill Lynch International Limited
By
Authorized Officer
For themselves and as Lead Managers
of the other International Managers named
in Schedule A hereto.
30
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SCHEDULE A
Number of
Name of Underwriter Initial Shares
Merrill Lynch International Limited...........
Donaldson, Lufkin & Jenrette Securities
Corporation ................................
PaineWebber International (U.K.) Ltd...........
Smith Barney Shearson Inc.....................
Total......................................... 1,500,000
<PAGE>
Exhibit A
1,500,000 Shares
HEALTH AND REHABILITATION PROPERTIES TRUST
(a Maryland real estate investment trust)
Common Shares of Beneficial Interest
($.01 Par Value)
INTERNATIONAL PRICING AGREEMENT
__________ __, 1994
MERRILL LYNCH INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
SMITH BARNEY SHEARSON INC.
As Lead Managers of the several International Managers
c/o Merrill Lynch International Limited
Ropemaker Place
25 Ropemaker Street
London, ECZY 9LY
England
Dear Sirs:
Reference is made to the Purchase Agreement, dated ___________ __,
1994 (the "Purchase Agreement"), relating to the purchase by the several
International Managers named in Schedule A thereto, for whom Merrill
Lynch International Limited, Donaldson, Lufkin & Jenrette Securities
Corporation, PaineWebber International (U.K.) Ltd. and Smith Barney
Shearson Inc. are acting as lead managers (the "Lead Managers"), of the
above shares of beneficial interest (the "Shares") of Health and
Rehabilitation Properties Trust (the "Company").
Pursuant to Section 2 of the International Purchase Agreement, the
Company agrees with each International Manager as follows:
1. The initial public offering price per share for the Shares,
determined as provided in said Section 2, shall be
$ .
<PAGE>
2. The purchase price per share for the Shares to be paid by the
several International Managers shall be $ , being an amount
equal to the initial public offering price set forth above less $
per share.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a
binding agreement between the International Managers and the Company in
accordance with its terms.
Very truly yours,
HEALTH AND REHABILITATION PROPERTIES TRUST
By
Authorized Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
SMITH BARNEY SHEARSON INC.
By: Merrill Lynch International Limited
By
Director
For themselves and as Lead Managers
of the other International Managers named in
Schedule A to the International Purchase Agreement.
2
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