UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
HOSPITALITY PROPERTIES TRUST
(Name of Issuer)
COMMON SHARES OF BENEFICIAL INTEREST, $.01 PAR VALUE
(Title of Class of Securities)
44106M 10 2
(CUSIP Number)
David J. Hegarty
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
(617) 332-3990
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
August 22, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
Check the following box if a fee is being paid with the statement |X|. (A fee is
not required only if the reporting person (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
<PAGE>
SCHEDULE 13D
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CUSIP No. 44106M 10 2 Page 3 of 24 Pages
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
HEALTH AND RETIREMENT PROPERTIES TRUST I.R.S. ID No. 04-6558834
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
MARYLAND
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7 SOLE VOTING POWER
NUMBER OF
SHARES 4,000,000
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING -0-
PERSON ------------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
4,000,000
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10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,000,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
34.1%
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14 TYPE OF REPORTING PERSON
00
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<PAGE>
SCHEDULE 13D
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CUSIP No. 44106M 10 2 Page 4 of 24 Pages
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
HRPT ADVISORS, INC. I.R.S. ID No. 04-2932507
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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7 SOLE VOTING POWER
NUMBER OF
SHARES 250,000
BENEFICIALLY -------------------------------------------------------
8 SHARED VOTING POWER
-0-
-------------------------------------------------------
9 SOLE DISPOSITIVE POWER
250,000
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10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,250,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
36.2%
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14 TYPE OF REPORTING PERSON
CO
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<PAGE>
SCHEDULE 13D
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CUSIP No. 44106M 10 2 Page 5 of 24 Pages
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Item 1. Security and issuer.
The class of equity securities to which this statement relates is the
Common Shares of Beneficial Interest, par value $0.01 (the "Shares"), of
Hospitality Properties Trust, a Maryland real estate investment Trust ("HPT"),
with its principal executive offices located at 400 Centre Street, Newton,
Massachusetts 02158.
Item 2. Identify and background.
The persons filing this statement are Health and Retirement Properties
Trust, a Maryland real estate investment trust ("HRP"), and HRPT Advisors, Inc.,
a Delaware corporation ("Advisors").
HRP's principal business is to operate as a real estate investment trust.
The principal office of HRP is located at 400 Centre Street, Newton,
Massachusetts 02158. The Trustees of HRP are Rev. Justinian Manning, C.P., Barry
M. Portnoy and Gerard M. Martin. The executive officers of HRP are David J.
Hegarty, President, Chief Operating Officer and Secretary and Ajay Saini,
Treasurer and Chief Financial Officer.
Advisors' principal business is real estate investments, for its own
account or by providing management services and investment advice to investors
such as HRP and HPT. The principal office of Advisors is located at 400 Centre
Street, Newton, Massachusetts 02158. The Directors of Advisors are Barry M.
Portnoy, Gerard M. Martin and David J. Hegarty. The executive officers of
Advisors are David J. Hegarty, President, Chief Operating Officer and Secretary,
John G. Murray, Executive Vice President and Chief Financial Officer, and Ajay
Saini, Treasurer. Advisors is owned by Messrs. Portnoy and Martin.
Each of the individuals listed above (i) is, except for Ajay Saini, a
United States citizen, (ii) except for Rev. Manning, has a business address at
400 Centre Street, Newton, Massachusetts 02158 and (iii) except for Rev. Manning
and Messrs. Portnoy and Martin, is principally employed by Advisors in the
capacity specified above. Mr. Saini is a citizen of the Republic of India and a
resident of the United States. Mr. Murray also serves as the Treasurer, Chief
Financial Officer and Secretary of HPT. Mr. Martin is a private investor in real
estate and currently serves as the President of HPT and Mr. Portnoy is a partner
in the law firm of Sullivan & Worcester, One Post Office Square, Boston,
Massachusetts 02109. Rev. Manning is the pastor of St. Gabriel's parish at 201
Washington Street, Brighton, Massachusetts 02135.
Neither HRP, Advisors nor any of the individuals specified above has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), or been party to any civil
proceeding which resulted in a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
<PAGE>
SCHEDULE 13D
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CUSIP No. 44106M 10 2 Page 6 of 24 Pages
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Item 3. Source and amount of funds or other consideration.
HRP acquired 40,000 Shares in connection with the formation of HPT at an
effective price of $1.0 million. On August 22, 1995, HRP acquired an additional
3,960,000 Shares and paid the purchase price by canceling $99.0 million
principal amount of indebtedness of HPT due to HRP.
On August 22, 1995, Advisors acquired 250,000 Shares at a purchase
price of $6.25 million.
Item 4. Purpose of transaction.
The transactions requiring the filing of this statement are described
in Item 3 above. The transactions were entered into principally for investment
purposes.
Advisors is party to an agreement to provide advisory services to HPT
(the "Advisory Agreement"). Pursuant to the terms of the Advisory Agreement,
Advisors will be paid a base fee in cash and may earn an incentive fee payable
in Shares. Although HRP and Advisors have no present intention to do so, they
may make purchases of Shares from time to time, in the open market or in private
transactions, depending on their respective analysis of HPT's business,
prospects and financial condition, the market for such stock, other investment
and business opportunities available to them, general economic and stock market
conditions, proposals from time to time sought by or presented to them and other
factors. HRP and Advisors each intends to closely monitor their investments and
may from time to time take advantage of opportunities presented to them. HRP and
Advisors may in the future also formulate plans or proposals regarding HPT,
including possible future plans or proposals concerning events or transactions
of the kind described in paragraphs (a) through (j) below.
Depending upon HRP's and Advisors' continuing review of their
investments and various other factors, including those mentioned above, HRP
and/or Advisors may (subject to any applicable securities laws and lock-up
arrangements) decide to sell all or any part of the Shares, although they have
no current plans to do so.
Except as set forth in this Item 4, neither HRP nor Advisors has any
plans or proposals which would related to or result in:
(a) The acquisition by any person of additional securities of HPT, or the
disposition of securities of HPT;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving HPT or any of its subsidiaries;
<PAGE>
SCHEDULE 13D
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CUSIP No. 44106M 10 2 Page 7 of 24 Pages
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(c) A sale or transfer of a material amount of assets of HPT or any of its
subsidiaries;
(d) Any change in the present board of trustees or management of HPT
including any plans or proposals to change the number or terms of trustees or to
fill any existing vacancies on the board;
(e) Any material change in the present capitalization or distribution
policy of HPT;
(f) Any other material change in HPT's business or corporate structure;
(g) Changes in HPT's declaration of trust, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of HPT by any person;
(h) Causing a class of securities of HPT to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association;
(i) A class of equity securities of HPT becoming eligible for termination
of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of
1934; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in securities of the issuer.
(a) HRP currently holds 4,000,000 Shares, or 34.1% of the issued and
outstanding Shares. Advisors directly owns 250,000 Shares, or 2.1% of the issued
and outstanding Shares, and as HRP's investment advisor, may under applicable
regulatory definitions be deemed to beneficially own HRP's 4,000,000 Shares.
Advisors, however, expressly disclaims any beneficial ownership of HRP's
4,000,000 Shares.
(b) HRP has sole power to vote or dispose of its 4,000,000 Shares and
Advisors has sole power to vote or dispose of its 250,000 Shares.
(c) Other than as may be described in Item 3, no transactions in Shares
have been effected during the past sixty days by HRP or Advisors.
(d) No other person is known to have the right to receive or the power to
direct the receipt of distributions from, or the proceeds from the sale of
securities covered by this statement.
<PAGE>
SCHEDULE 13D
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CUSIP No. 44106M 10 2 Page 8 of 24 Pages
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Item 6. Contracts, arrangements, understandings or relationships
with respect to securities of the issuer.
Each of HRP and Advisors entered into a "lock-up agreement" with the
representative of the underwriters (the "Representative") of HPT's initial
public offering of Shares pursuant to which HRP and Advisors have agreed not to,
and have agreed to cause their respective officers, Trustees or Directors not
to, directly or indirectly, offer, sell, contract to sell, grant any option to
purchase or otherwise in any manner, transfer all or a portion of their Shares
until August 16, 1997, without the prior consent of the Representative.
The Advisory Agreement between HPT and Advisors requires Advisors to use
its best efforts to present to HPT a continuing and suitable investment program
consistent with the investment policies and objectives of HPT. The Advisory
Agreement provides for an annual advisory fee based upon HPT's average invested
capital, and an annual incentive fee based upon increases in HPT's cash
available for distribution to shareholders. The annual incentive fee, if any,
payable to Advisors will be paid in Shares.
The initial term of the Advisory Agreement expires on December 31, 1995 and
renewal or extension of the term thereof will be subject to the periodic
approval of a majority of the Trustees of HPT who are not officers or otherwise
affiliated with HPT, HRP or Advisors.
Item 7. Material to be filed as exhibits.
The following documents are filed as exhibits to this statement:
1. Joint Filing Agreement
2. HRP Lock-up Agreement
3. Advisors Lock-up Agreement
4. Advisory Agreement
<PAGE>
SCHEDULE 13D
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CUSIP No. 44106M 10 2 Page 9 of 24 Pages
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
current.
September 1, 1995
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ Ajay Saini
Title: Treasurer
September 1, 1995
HRP ADVISORS, INC.
By: David J. Hegarty
Title: President and Chief Operating Officer
AGREEMENT
Pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act of 1934, the
undersigned hereby agree that only one statement containing the information
required by Schedule 13D (or any amendment thereof) need be filed on their
behalf with respect to the beneficial ownership of any equity securities of HPT
or any subsequent acquisitions or dispositions of equity securities of HPT by
any of the undersigned.
Dated: September 1, 1995
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ Ajay Saini
Title: Treasurer
HRP ADVISORS, INC.
By: David J.Hegarty
Title: President and Chief Operating Officer
LOCK-UP AGREEMENT FOR HRPT
August 22, 1995
Donaldson, Lufkin & Jenrette
Securities Corporation
Dean Witter Reynolds Inc.
Prudential Securities Incorporated
Smith Barney Inc.
As Representatives of the
several Underwriters
described below
Dear Sirs:
The undersigned understands that Donaldson, Lufkin & Jenrette Securities
Corporation, Dean Witter Reynolds Inc., Prudential Securities Incorporated and
Smith Barney Inc., as representatives (the "Representatives") of the several
Underwriters, propose to enter into an Underwriting Agreement among Hospitality
Properties Trust ("HPT"), Health and Retirement Properties Trust and the several
Underwriters named in Schedule I thereto (the "Underwriters") providing for the
initial public offering by the Underwriters of up to 8,625,000 (including an
overallotment option) Common Shares of Beneficial Interest, par value $0.01 per
share (the "Common Shares") of HPT (the "Initial Public Offering").
In consideration of the Underwriters' agreement to purchase and undertake
the Initial Public Offering of Common Shares and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned agrees
that it will not, directly or indirectly, offer, sell, contract to sell, grant
any option to purchase or otherwise dispose of any Common Shares (including,
without limitation, Common Shares which may be deemed to be beneficially owned
by the undersigned in accordance with the rules and regulations of the
Securities and Exchange Commission and Common Shares which may be issued upon
exercise of a stock option or warrant) or any securities convertible into or
exercisable or exchangeable for Common Shares or, in any manner, transfer all or
any portion of the economic consequences associated with the ownership of Common
Shares, without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, for a period of two (2) years after the date of the
final prospectus relating to the Initial Public Offering.
In addition, the undersigned agrees that it will and HPT may (i) with
respect to any Common Shares for which the undersigned is a record holder, cause
the transfer agent for HPT to note stop transfer instructions with respect to
such Common Shares on the transfer books and records of HPT and (ii) with
respect to any Common Shares for which the undersigned is the beneficial holder
but not the record holder, cause the record holder of such Common Shares to
cause the transfer agent for HPT to note stop transfer instructions with respect
to such Common Shares on the transfer books and records of HPT.
<PAGE>
-2-
The undersigned hereby represents and warrants that (i) it has duly
authorized, executed and delivered this letter agreement, (ii) it has full power
and authority to enter into this letter agreement and (iii) upon request, it
will execute any additional documents necessary or desirable in connection with
the enforcement hereof. All authority herein conferred or agreed to be conferred
by the undersigned and all obligations of the undersigned hereunder shall be
binding upon the successors and assigns of the undersigned. In addition, the
undersigned hereby agrees to take all action necessary to cause its trustees,
directors or officers to comply with the terms of this letter agreement as if
such persons were parties hereto.
Very truly yours,
HEALTH AND RETIREMENT PROPERTIES TRUST
By /s/ John G. Murray
Name: John G. Murray
Title: Executive Vice President
Accepted and agreed as of the date above first written:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By /s/ Eric A. Anderson
Name: Eric A. Anderson
Title: Senior Vice President
LOCK-UP AGREEMENT FOR ADVISORS
August 22, 1995
Donaldson, Lufkin & Jenrette
Securities Corporation
Dean Witter Reynolds Inc.
Prudential Securities Incorporated
Smith Barney Inc.
As Representatives of the
several Underwriters
described below
Dear Sirs:
The undersigned understands that Donaldson, Lufkin & Jenrette Securities
Corporation, Dean Witter Reynolds Inc., Prudential Securities Incorporated and
Smith Barney Inc., as representatives (the "Representatives") of the several
Underwriters, propose to enter into an Underwriting Agreement among Hospitality
Properties Trust ("HPT"), Health and Retirement Properties Trust and the several
Underwriters named in Schedule I thereto (the "Underwriters") providing for the
initial public offering by the Underwriters of up to 8,625,000 (including an
overallotment option) Common Shares of Beneficial Interest, par value $0.01 per
share (the "Common Shares") of HPT (the "Initial Public Offering").
In consideration of the Underwriters' agreement to purchase and undertake
the Initial Public Offering of Common Shares and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned agrees
that it will not, directly or indirectly, offer, sell, contract to sell, grant
any option to purchase or otherwise dispose of any Common Shares (including,
without limitation, Common Shares which may be deemed to be beneficially owned
by the undersigned in accordance with the rules and regulations of the
Securities and Exchange Commission and Common Shares which may be issued upon
exercise of a stock option or warrant) or any securities convertible into or
exercisable or exchangeable for Common Shares or, in any manner, transfer all or
any portion of the economic consequences associated with the ownership of Common
Shares, without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, for a period of two (2) years after the date of the
final prospectus relating to the Initial Public Offering.
In addition, the undersigned agrees that it will and HPT may (i) with
respect to any Common Shares for which the undersigned is a record holder, cause
the transfer agent for HPT to note stop transfer instructions with respect to
such Common Shares on the transfer books and records of HPT and (ii) with
respect to any Common Shares for which the undersigned is the beneficial holder
but not the record holder, cause the record holder of such Common Shares to
cause the transfer agent for HPT to note stop transfer instructions with respect
to such Common Shares on the transfer books and records of HPT.
<PAGE>
-2-
The undersigned hereby represents and warrants that (i) it has duly
authorized, executed and delivered this letter agreement, (ii) it has full power
and authority to enter into this letter agreement and (iii) upon request, it
will execute any additional documents necessary or desirable in connection with
the enforcement hereof. All authority herein conferred or agreed to be conferred
by the undersigned and all obligations of the undersigned hereunder shall be
binding upon the successors and assigns of the undersigned. In addition, the
undersigned hereby agrees to take all action necessary to cause its trustees,
directors or officers to comply with the terms of this letter agreement as if
such persons were parties hereto.
Very truly yours,
HRPT ADVISORS, INC.
By:/s/ John G. Murray
Name: John G. Murray
Title: Executive Vice President
Accepted and agreed as of
the date above first written:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:/s/ Eric A. Anderson
Name: Eric A. Anderson
Title: Senior Vice President
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT (this "Agreement") is entered into as of August 21,
1995, by and between Hospitality Properties Trust, a Maryland real estate
investment trust (the "Company"), HRPT Advisors, Inc., a Delaware corporation
(the "Advisor") and, solely with respect to Section 15 of this Agreement with
respect to certain non-competition covenants, Barry M. Portnoy and Gerard M.
Martin.
WHEREAS, the Company was organized as a Delaware corporation pursuant to a
Certificate of Incorporation dated February 7, 1995 and reorganized as a
Maryland real estate investment trust pursuant to a Declaration of Trust
effective May 12, 1995 (the "Declaration") for the purpose of buying, selling,
leasing, holding and financing real and personal property and granting and
holding mortgages thereon; and
WHEREAS, the Advisor is a corporation organized for the purpose of
providing management and administrative services with respect to the ownership
of real property; and
WHEREAS, Barry M. Portnoy and Gerard M. Martin are both directors and 50%
shareholders of the Advisor; and
WHEREAS, in connection with its investments, the Company desires to make
use of the advice and assistance of the Advisor and certain sources of
information available to the Advisor, and to have the Advisor undertake the
duties and responsibilities hereinafter set forth, on behalf of and subject to
the supervision of the Company's Board of Trustees (the "Trustees"), all as
provided for herein; and
WHEREAS, the Advisor is willing to render such services, subject to the
supervision of the Trustees, on the terms and conditions hereinafter set forth;
and
WHEREAS, the Company intends to qualify as a real estate investment trust
as defined in the Internal Revenue Code of 1986, as amended, (said Code, as in
effect from time to time, together with any regulations and rulings thereunder,
being hereinafter referred to as the "Internal Revenue Code").
NOW, THEREFORE, in consideration of the mutual agreements herein set forth,
the parties hereto agree as follows:
1. General Duties of the Advisor. The Advisor shall use its best efforts to
present to the Company a continuing and suitable investment program consistent
with the investment policies and objectives of the Company. Subject to the
supervision of the Trustees and upon their direction, and consistent with the
provisions of the Declaration, the Advisor shall:
(a) serve as the Company's investment advisor, with its obligations
toinclude providing research and economic and statistical data in connection
with the Company's investments and recommending changes in the Company's
investment policies, when appropriate;
(b) investigate and evaluate investment opportunities and make
recommendations concerning such opportunities to the Trustees;
(c) manage the Company's short term investments including the
acquisition and sale of money market instruments in accordance with the
Company's policies;
<PAGE>
(d) administer the day to day operations of the Company;
(e) investigate, select and conduct relations and enter into
appropriate contracts on behalf of the Company with other individuals,
corporations and entities in furtherance of the investment activities of the
Company;
(f) upon request of the Trustees, act as attorney in fact or agent in
acquiring and disposing of investments and funds of the Company and in handling,
prosecuting and settling any claims of the Company;
(g) upon request of the Trustees, invest and reinvest any money of the
Company;
(h) obtain for the Company, when appropriate, the services of property
managers or management firms to perform customary property management services
with regard to the real estate properties owned by or in the possession of the
Company, and perform such supervisory or monitoring services on behalf of the
Company with respect to the activities of such property managers or management
firms as would be performed by a prudent owner, including but not limited to
closely supervising the activities of such property managers or management
firms, visiting the properties, participating in property management budgeting,
reviewing the accounting of property income and expenses, reporting on the
financial status of the properties and reviewing the accounting of property
income and expenses, reporting on the financial status of the properties and
reviewing and approving marketing plans, but excluding the actual on-site
property management functions performed by said property managers or management
firms;
(i) obtain for the Company such services as may be required for other
activities relating to the investment portfolio of the Company;
(j) administer such day-to-day bookkeeping and accounting functions as
are required for the proper management of the assets of the Company, contract
for audits and prepare or cause to be prepared such reports as may be required
by any governmental authority in connection with the ordinary conduct of the
Company's business, including without limitation, periodic reports, returns or
statements required under the Securities Exchange Act of 1934, as amended, the
Internal Revenue Code after, the securities and tax securities of any
jurisdiction in which the Company is obligated to file such reports, or the
rules and regulations promulgated under any of the foregoing;
(k) provide office space, office equipment and the use of accounting
or computing equipment when required, and provide personnel necessary for the
performance of the foregoing services; and
(l) from time to time, or at any time requested by the Trustees, make
reports thereto of its performance of the foregoing services to the Company.
In performing its services under this Agreement, the Advisor may utilize
facilities, personnel and support services of various of its Affiliates (as
defined below). The Advisor shall be responsible for paying such Affiliates for
their personnel and support services and facilities out of its own funds.
Notwithstanding the above, the Company may request, and will pay for the direct
costs of, services provided by Affiliates of the Advisor provided that such
request is approved by a majority vote of the Directors who are not Affiliates
of the Advisor and who do not perform any services for the Company except as
Trustee (the "Independent Trustees").
As used in this Agreement, the term "Affiliate" means, as to any Person,
(i) any other Person directly or indirectly controlling, controlled by or under
common control with such Person, (ii) any other Person that owns beneficially,
directly or indirectly, five percent (5%) or more of the outstanding capital
-2-
<PAGE>
stock, shares or equity interests of such Person, or (iii) any officer,
director, employee, general partner or trustee of such Person or of any Person
controlling, controlled by or under common control with such Person (excluding
Trustees who are not otherwise Affiliates of such Person). The term "Person"
means and includes individuals, corporations, limited partnerships, general
partnerships, joint stock companies or associations, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts, limited liability companies, and other entities.
2. Bank Accounts. The Advisor shall establish and maintain one or more bank
accounts in its own name or, at the direction of the Trustees, in the name of
the Company, and shall collect and deposit into such account or accounts and
disburse therefrom any monies on behalf of the Company, provided that no funds
in any such account shall be commingled with any funds of the Advisor or any
other Person. The Advisor shall from time to time render an appropriate
accounting of such collections and payments to the Trustees and to the auditors
of the Company.
3. Records. The Advisor shall maintain appropriate books of account and
records relating to services performed pursuant to this Agreement, which books
of account and records shall be available for inspection by representatives of
the Company upon reasonable notice during ordinary business hours.
4. Information Furnished Advisor. The Trustees shall at all times keep the
Advisor fully informed with regard to the investment policies of the Company,
the capitalization policy of the Company, and generally the Trustees'
then-current intentions as to the future of the Company. In particular, the
Trustees shall notify the Advisor promptly of their intention to sell or
otherwise dispose of any of the Company's investments or to make any new
investment. The Company shall furnish the Advisor with a certified copy of all
financial statements, a signed copy of each report prepared by independent
certified public accountants, and such other information with regard to its
affairs as the Advisor may from time to time reasonably request. The Company
shall retain legal counsel and accountants to provide such legal and accounting
advice and services as the Advisor or the Trustees shall deem necessary or
appropriate to adequately perform the functions of the Company.
5. REIT Qualification. Anything else in this Agreement to the contrary
notwithstanding, the Advisor shall refrain from any action (including, without
limitation, the furnishing or rendering of services to tenants of property or
managing real property) which, in its judgment made in good faith, or in the
judgement of the Trustees as transmitted to the Advisor in writing, would (a)
adversely affect the status of the Company as a real estate investment trust as
defined and limited in the Internal Revenue Code or which would make the Company
subject to the Investment Company Act of 1940, as amended, or (b) violate any
law, rule, regulation or statement of policy of any governmental body or agency
having jurisdiction over the Company or over its securities, or (c) otherwise
not be permitted by the Declaration or Bylaws of the Company, except if such
action shall be ordered by the Trustees, in which event the Advisor shall
promptly notify the Trustees of the Advisor's judgment that such action would
adversely affect such status or violate any such law, rule or regulation or the
Declaration or Bylaws of the Company and shall refrain from taking such action
pending further clarification or instructions from the Trustees. In addition,
the Advisor shall take such affirmative steps which, in its judgment made in
good faith, or in the judgment of the Trustees as transmitted to the Advisor in
writing, would prevent or cure any action described in (a), (b) or (c) above.
6. Self-Dealing. Neither the Advisor nor any Affiliate of the Advisor shall
sell any property or assets to the Company or purchase any property or assets
from the Company, directly or indirectly, except as approved by a majority of
the Independent Trustees. In addition, except as otherwise provided in Sections
1, 9, or 10 hereof, or except as approved by a majority of the Independent
Trustees, neither the Advisor nor any Affiliate of the Advisor shall receive any
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commission or other remuneration, directly or indirectly, in connection with the
activities of the Company or any joint venture or partnership in which the
Company is a party. Except for compensation received by the Advisor pursuant to
Section 9 hereof, all commissions or other remuneration received by the Advisor
or an Affiliate of the Advisor and not approved by the Independent Trustees
under Sections 1 or 10 hereof or this Section 6 shall be reported to the Company
annually within ninety (90) days following the end of the Company's fiscal year.
Upon request of any Trustee, the Advisor shall from time to time promptly
furnish the Company with information on a confidential basis as to any
investments within the Company's investment policies made by the Advisor for its
own account.
7. No Partnership or Joint Venture. The Company and the Advisor are not
partners or joint venturers with each other and neither the terms of this
Agreement nor the fact that the Company and the Advisor have joint interests in
any one or more investments shall be construed so as to make them such partners
or joint venturers or impose any liability as such on either of them.
8. Fidelity Bond. The Advisor shall not be required to obtain or maintain a
fidelity bond in connection with the performance of its services hereunder.
9. Compensation. The Advisor shall be paid, for the services rendered by it
to the Company pursuant to this Agreement, an annual advisory fee (the "Advisory
Fee") equal to 0.70 percent of the Average Invested Capital (as defined below)
computed as of the last day of the Company's fiscal year up to $250,000,000, and
0.50 percent of the Average Invested Capital equal to or exceeding $250,000,000.
In addition, beginning with the Company's fiscal year ending December 31, 1996,
the Advisor shall be paid an annual incentive fee (the "Incentive Fee"),
consisting of a number of shares of the Company's Common Shares of Beneficial
Interest ("Common Shares") with a value (determined as provided below) equal to
1% of the amount by which "Cash Available for Distribution to Shareholders" (as
defined below) for such fiscal year exceeds the Threshold Amount (as defined
below), but in no event shall the Incentive Fee payable in respect of any year
exceed $.02 multiplied by the weighted average number of Common Shares
outstanding during such year.
For purposes of this Agreement: The "Threshold Amount" in respect of any
year shall mean the product of (a) the weighted average number of shares of the
Company's Common Shares of Beneficial Interest outstanding during such year,
times (b) the Per Share Threshold Amount. The "Per Share Threshold Amount" shall
mean, for the fiscal year ending December 31, 1996, an amount equal to $_______,
and, for any fiscal year subsequent to 1996, the Per Share Threshold Amount for
the prior fiscal year, plus $.05.
Payment of the Incentive Fee shall be made by issuance of shares of Common
Shares, under the Company's 1995 Incentive Share Award Plan or otherwise. The
number of shares to be issued in payment of the Incentive Fee shall be the whole
number of shares (disregarding any fraction) equal to the value of the Incentive
Fee, as provided above, divided by the average closing price of the Common
Shares on the New York Stock Exchange during the month of December in the year
for which the computation is made. (The Advisory Fee and Incentive Fee are
hereinafter collectively referred to as the "Fees".)
For purposes of this Agreement: "Average Invested Capital" of the Company
shall mean the average of the aggregate book value of the assets of the Company
invested, directly or indirectly, in equity interests in and loans secured by
real estate and personal property owned in connection with such real estate
(collectively, "Properties"), before reserves for depreciation or bad debts or
other similar noncash reserves, computed by taking the average of such values at
the end of each month during such period. "Cash Available for Distribution to
Shareholders" shall mean funds from Operations less the amount, if any, included
in the calculation thereof which represents rental income recognized by the
Company in respect of amounts which, pursuant to leasing arrangement relating to
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any of the Properties, the Company is required to escrow or reserve for
renovations and refurbishments. "Funds From Operations" shall mean, for any
period, the net cash flow from operations of the Company's investments for such
period less preferred dividends, if any, and such amounts as the Trustees, in
their sole discretion, shall determine are necessary or appropriate to discharge
current debts and liabilities of the Company and to provide reasonable reserves
for the payment of non-current debts and liabilities of the Company and for the
operations of the Company, including reserves for replacements and capital
improvements and reserves, if any, required in connection with the ownership of
the Company's properties and investments. Calculation of Average Invested
Capital and Funds From Operations shall be made annually by the Company, Cash
Available for Distribution to Shareholders' independent certified public
accountants.
The Advisory Fee shall be computed and paid within thirty (30) days
following the end of each fiscal month by the Company, and the Incentive Fee
shall be computed and paid within thirty (30) days following the public
availability of the Company's annual audited financial statements for each
fiscal year. Such computations shall be based upon the Company's monthly or
annual financial statements, as the case may be, and shall be in reasonable
detail. A copy of such computations shall promptly be delivered to the Advisor
accompanied by payment of the Fees shown thereon to be due and payable.
The payment of the aggregate annual Fees paid for any fiscal year shall be
subject to adjustment as of the end of each fiscal year. On or before the 30th
day after public availability of the Company's annual audited financial
statements for each fiscal year, the Company shall deliver to the Advisor an
Officer's Certificate (a "Certificate") reasonably acceptable to the Advisor and
certified by an authorized officer of the Company setting forth (i) the Average
Invested Capital and Funds Form Operations for the Company's fiscal year ended
upon the immediately preceding December 31, and (ii) the Company's computation
of the Fees payable for said fiscal year.
If the aggregate annual Fees payable for said fiscal year as shown in such
Certificate exceed the aggregate amounts previously paid with respect thereto by
the Company, the Company shall include its check for such deficit and deliver
the same to the Advisor with such Certificate.
If the aggregate annual Fees payable for said fiscal year as shown in such
Certificate are less than the aggregate amounts previously paid with respect
thereto by the Company, the Company shall specify in such Certificate whether
the Advisor should (i) remit to the Company its check in an amount equal to such
difference or (ii) grant the Company a credit against the Fees next coming due
in the amount of such difference until such amount has been fully paid or
otherwise discharged.
10. Compensation for Additional Services. If, and to the extent that, the
Company shall request the Advisor to render services on behalf of the Company
other than those required to be rendered by the Advisor in accordance with the
terms of this Agreement, such additional services shall be compensated
separately on terms to be agreed upon between the Advisor and the Company from
time to time.
11. Expenses of the Advisor. Without regard to the compensation received by
the Advisor from the Company pursuant to this Agreement, the Advisor shall bear
the following expenses incurred in connection with the performance of its duties
under this Agreement:
(a) employment expenses of the personnel employed by the Advisor,
including but not limited to, salaries, wages, payroll taxes and the cost of
employee benefit plans;
(b) fees and travel and other expenses paid to directors, officers and
employees of the Advisor, except fees and travel and other expenses of such
persons who are Trustees or officers of the Company incurred in their capacities
as Trustees or officers of the Company;
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<PAGE>
(c) rent, telephone, utilities, office furniture, equipment and
machinery and other office expenses of the Advisor, except to the extent such
expenses relate solely to an office maintained by the Company separate from the
office of the Advisor; and
(d) miscellaneous administrative expenses incurred in supervising,
monitoring and inspecting real property and other investments of the Company or
relating to performance by the Advisor of its obligations hereunder.
12. Expenses of the Company. Except as expressly otherwise provided in this
Agreement, the Company shall pay all its expenses not payable by the Advisor,
and, without limiting the generality of the foregoing, it is specifically agreed
that the following expenses of the Company shall be paid by the Company and
shall not be paid by the Advisor:
(a) the cost of borrowed money;
(b) taxes on income and taxes and assessments on real property, if
any, and all other taxes applicable to the Company;
(c) legal, auditing, accounting, underwriting, brokerage, listing,
reporting, registration and other fees, and printing, engraving and other
expenses and taxes incurred in connection with the issuance, distribution,
transfer, trading, registration and stock exchange listing of the Company's
securities, including transfer agent's, registrar's and indenture trustee's fees
and charges;
(d) expenses of organizing, restructuring, reorganizing or terminating
the Company, or of revising, amending, converting or modifying the Company's
organizational documents;
(e) fees and travel and other expenses paid to Trustees and officers
of the Company in their capacities as such (but not in their capacities as
officers or employees of the Advisor) and fees and travel and other expenses
paid to advisors, contractors, mortgage services, consultants, and other agents
and independent contractors employed by or on behalf of the Company;
(f) Expenses directly connected with the acquisition, disposition or
ownership of real estate interests or other property (including the costs of
foreclosure, insurance premiums, legal services, brokerage and sales
commissions, maintenance, repair, improvement and local management or property),
other than expenses with respect thereto of employees of the Advisor, to the
extent that such expenses are to be borne by the Advisor pursuant to Section 11
above;
(g) all insurance costs incurred in connection with the Company
(including officer and trustee liability insurance) or in connection with any
officer and trustee indemnity agreement to which the Company is a party;
(h) expenses connected with payments of dividends or interest or
contributions in cash or any other form made or caused to be made by the
Trustees to holders of securities of the Company;
(i) all expenses connected with communications to holders of
securities of the Company and other bookkeeping and clerical work necessary to
maintaining relations with holders of securities, including the cost of printing
and mailing certificates for securities and proxy solicitation materials and
reports to holders of the Company's securities;
(j) legal, accounting and auditing fees and expenses, other than those
described in subsection (c) above; and
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<PAGE>
(k) expenses relating to any office or office facilities maintained by
the Company separate from the office of the Advisor.
13. Annual Operating Expenses Limitation Requiring Refunds by the Advisor.
There shall be a limitation (the "Limitation") on Operating Expenses (as defined
below) of the Company for each fiscal year which shall be the lower of the
following:
(a) the greater of (i) 2% of the Average Invested Capital of the
Company for such fiscal year; and (ii) 25% of the Net Income (as defined below)
of the Company for such fiscal year; or
(b) the lowest of any applicable operating expense limitations that
may be imposed by law or regulation in a state in which any securities of the
Company are or will be qualified for sale or by a national securities exchange
on which any securities of the Company are or may be listed, as such limitations
may be altered from time to time.
For purposes of this Agreement, "Operating Expenses" shall be calculated on
the basis of the Company's annual audited financial statements and shall be
deemed to mean the aggregate annual expenses regarded as ordinary operating
expenses in accordance with generally accepted accounting principles (including
the Fees), exclusive of the following:
(i) the expenses set forth in subsections (a) through (d), inclusive, and
(f) of Section 12 hereof;
(ii) non-cash expenditures, including provisions for depreciation,
depletion, bad debt reserve and amortization;
(iii) losses on the disposition of assets and provisions for such losses;
(iv) options granted to the Advisor; and
(v) other extraordinary charges including, without limitation, litigation
costs.
For purposes of this Agreement, "Net Income" for any period shall be
calculated on the basis of the Company's audited financial statements and shall
be deemed to mean total revenues applicable to such period, less the expenses
applicable to such period, including additions to reserves for depreciation or
bad debts or other similar noncash reserves, determined in accordance with
generally accepted accounting principles.
On or before the 30th day after public availability of the Company's annual
audited financial statements for each fiscal year, the Advisor shall refund (to
the extent of the aggregate Fees it has received with respect to such year) to
the Company the amount, if any, by which the Operating Expenses exceeded the
Limitation; provided however, that unless such action is prohibited by laws or
regulations, the Company may instead permit such refund to be effected by a
reduction in the amount of the Fees to be paid by the Company during the fiscal
years following the fiscal year with respect to which such refund is to be made
until such time as any such refund is fully paid and provided the Limitation
imposed by this Section 13 shall require that only so much of such excess need
be refunded as is conclusively determined by the Trustees, including a majority
of the Independent Trustees, to be unjustified.
14. Limits of Advisor Responsibility. The Advisor assumes no responsibility
other than to render the services described herein in good faith and shall not
be responsible for any action of the Trustees in following or declining to
follow any advice or recommendation of the Advisor. The Advisor, its
shareholders, directors, officers, employees and Affiliates will not be liable
to the
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Company, its shareholders, or others, except by reason of acts constituting bad
faith, willful or wanton misconduct or gross negligence. The Company shall
reimburse, indemnify and hold harmless the Advisor, its shareholders, directors,
officers and employees and its Affiliates for and from any and all expenses,
losses, damages, liabilities, demands, charges and claims of any nature
whatsoever in respect of or arising from any acts or omissions of the Advisor
undertaken in good faith and in accordance with the standard set forth above
pursuant to the authority granted to it by this Agreement.
15. Other Activities of Advisor. Neither the Advisor nor Gerard M. Martin
nor Barry M. Portnoy shall, without the consent of the Company's Independent
Trustees, (i) provide advisory services to, or serve as a director or officer
of, any other REIT which is principally engaged in the business of ownership of
hotel properties or (ii) make direct investments in hotel facilities. Nothing
herein shall prevent the Advisor from engaging in other activities or businesses
or from acting as advisor to any other Person (including other real estate
investment trusts) provided that no such activity shall conflict with the
Advisor's obligations under the immediately preceding sentence; provided,
further, however, that the Advisor shall notify the Company in writing in the
event that it does so act as an advisor to another real estate investment trust.
The Advisor shall be free from any obligation to present to the Company any
particular investment opportunity which comes to the Advisor. Without limiting
the foregoing provisions, the Advisor agrees, upon the request of any Trustee of
the Company, to disclose certain investment information concerning the Advisor
or certain of its Affiliates, provided, however, that such disclosure shall be
required only if it does not constitute a breach of any fiduciary duty or
obligation of Advisor.
Directors, officers, employees and agents of the Advisor or of its
Affiliates may serve as Trustees, officers, employees, agents, nominees or
signatories of the Company. When executing documents other otherwise acting in
such capacities for the Company, such persons shall use their respective titles
in the Company. Such persons shall receive no compensation from the Company for
their services to the Company in any such capacities.
16. Term, Termination. This Agreement shall continue in force and effect
until December 31, 1995 unless extended or sooner terminated in accordance with
the terms of this Section 16. The expiration date of the then current term of
this Agreement is referred to herein as the "Termination Date". The Company
shall give written notice to the Advisor prior to the Termination Date of its
intention to renew this Agreement and the period of such extension. Such renewal
shall be determined by a majority of the Independent Trustees of the Company.
Notwithstanding any other provision of this Agreement to the contrary, this
Agreement, or any extension hereof, may be terminated by either party hereto
upon sixty (60) days' written notice to the other party, pursuant to a majority
vote of the Independent Trustees; or, in the case of a termination by the
Advisor, by a majority vote of the directors of the Advisor.
Paragraph 19 hereof shall govern the rights, liabilities and obligations of
the parties upon termination of this Agreement; and, except as provided in
paragraph 20, such termination shall be without further liability of either
party to the other than for breach or violation of this Agreement prior to
termination.
17. Assignment. The Company may terminate this Agreement at any time in the
event of its assignment by the Advisor except an assignment to a corporation,
association, trust, or other successor organization which may take over the
property and carry on the affairs of the Advisor; provided that, following such
assignment, the persons who controlled the operations of the Advisor immediately
prior to the assignment shall control the operation of the successor
organization, including the performance of its duties under this Agreement, and
such successor organization shall be bound by the same restrictions by which the
Advisor was bound prior to such assignment. Such assignment or any other
assignment of this Agreement by the Advisor shall bind the assignee hereunder in
the same manner as the Advisor is bound hereunder. This Agreement shall not be
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<PAGE>
assignable by the Company without the prior written consent of the Advisor,
except in the case of any assignment by the Company to a corporation or other
organization which is the successor to the Company, in which case such successor
shall be bound hereby and by the terms of said assignment in the same manner and
to the same extent as the Company is bound hereby.
18. Default, Bankruptcy, Etc. of the Advisor. At the sole option of the
Company, this Agreement may be terminated immediately upon written notice of
such termination from the Trustees to the Advisor if any of the following events
shall have occurred:
(a) the Advisor shall have violated any provision of this Agreement
and, after written notice from the Trustees of such violation, shall have failed
to cure such default within thirty (30) days;
(b) a petition shall have been filed against the Advisor for an
involuntary proceeding under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, and such petition shall not have been
dismissed within ninety (90) days of filing; or a court having jurisdiction
shall have appointed a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Advisor for any substantial portion of
its property, or ordered the winding upon or liquidation of its affairs, and
such appointment or order shall not have been rescinded or vacated within ninety
(90) days of such appointment or order; or
(c) the Advisor shall have commenced a voluntary proceeding under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have made any general assignment for the benefit of creditors,
or shall have failed generally to pay its debts as they became due.
The Advisor agrees that, if any of the events specified in Paragraphs (b)
or (c) of this Section 18 shall occur, it will give written notice thereof to
the Trustees within seven (7) days following the occurrence of such event.
19. Action Upon Termination. From and after the effective date of any
termination of this Agreement pursuant to Sections 16, 17 or 18 hereof, the
Advisor shall be entitled to no compensation for services rendered hereunder for
the then-current term of this Agreement, but shall be paid, on a pro rata basis,
all compensation due for services performed prior to such termination (reduced
by the amount, if any, of the Fees to be refunded by the Advisor pursuant to
Section 13 hereof, which section shall apply pro rata to the applicable portion
of the fiscal year in which termination occurs in the event of a termination
occurring at other than the end of the Company's fiscal year. Upon such
termination, the Advisor immediately shall:
(a) pay over to the Company all monies collected and held for the
account of the Company by it pursuant to this Agreement, after deducting
therefrom any accrued Fees (reduced by amounts owed by the Advisor to the
Company pursuant to the last paragraph of Section 13 hereof) and reimbursements
for its expenses to which it is then entitled;
(b) deliver to the Trustees a full and complete accounting, including
a statement showing all sums collected by it and a statement of all sums held by
it for the period commencing with the date following the date on its last
accounting to the Trustees; and
(c) deliver to the Trustees all property and documents of the Company
then in its custody or possession.
The amount of Fees paid to the Advisor upon termination shall be subject to
adjustment pursuant to the following mechanism. On or before the 30th day after
public availability of the Company's annual audited financial statements for the
fiscal year in which termination occurs, the Company shall deliver to the
Advisor a Certificate reasonably acceptable to the Advisor and certified by an
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authorized officer of the Company setting forth (i) the Average Invested Real
Estate Assets, Cash Available for Distribution to Shareholders and Funds From
Operations for the Company's fiscal year ended upon the immediately preceding
December 30, and (ii) the Company's computation of the Fees payable upon the
date of termination (reduced by the aggregate amount of any excess expenses to
be refunded pursuant to Section 13 hereof, which Section shall apply to the
applicable portion of the fiscal year in which termination occurs in the event
of a termination occurring at other than the end of the Company's fiscal year.
If the annual Fees owed upon termination as shown in such Certificate
exceed the Fees paid by the Company upon termination, the Company shall include
its check for such deficit and deliver the same to the Advisor with such
Certificate.
If the Annual Fees owed upon termination as shown in such Certificate are
less than the Fees paid by the Company upon termination, the Advisor shall remit
to the Company its check in an amount equal to such difference.
20. Trustee Action. Wherever action on the part of the Trustees is
contemplated by this Agreement, action by a majority of the Trustees, including
a majority of the Independent Trustees, shall constitute the action provided for
herein.
21. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following
addresses to the parties hereto:
If to the Company:
Hospitality Properties Trust
400 Centre Street
Newton, MA 02158
Attention: President
If to the Advisor:
HRPT Advisors, Inc.
400 Centre Street
Newton, MA 02158
Attention: President
Whenever notice is given by either party to the other, notice shall also be
given in the same manner to:
Lena G. Goldberg, Esq.
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Such notice shall be effective upon its receipt by the party to whom it is
directed. Either party hereto may at any time given notice to the other party in
writing of a change of its address for purposes of this paragraph 21.
22. Amendments. The Agreement shall not be amended, changed, modified,
terminated, or discharged in whole or in part except by an instrument in writing
signed by each of the parties hereto, or by their respective successors or
assigns, or otherwise as provided herein.
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23. Successors and Assigns. This Agreement shall be binding upon any
successors or permitted assigns of the parties hereto as provided herein.
24. Governing Law. The provisions of this Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts.
25. Captions. The captions included herein have been inserted for ease of
reference only and shall not be construed to affect the meaning, construction or
effect of this Agreement.
26. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes and
cancels any pre-existing agreements with respect to such subject matter.
27. Attorneys' Fees. If any legal action is brought for the enforcement of
this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action in addition
to any other relief to which it or they may be entitled.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, under seal, as of the day and year
first above written.
HOSPITALITIES PROPERTIES TRUST
By: /s/ John G. Murray
Its Treasurer and Chief
Financial Officer
HRPT ADVISORS, INC.
By: Ajay Saini
Its Treasurer
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